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:
______________________________________________________________________
Perunitprice 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:
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_____ 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:
______________________________________________________________________
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______________________________________________________________________
Date Filed:
______________________________________________________________________
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Walker Interactive Systems, Inc.
303 Second Street, Three North
San Francisco, California 94107
April 16, 1999
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 20, 1999, at the Company's headquarters
located at 303 Second Street, San Francisco, California. At the meeting,
stockholders will be asked to (i) elect three individuals to the Company's Board
of Directors to serve a three-year term expiring on the date of the Company's
2002 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
1993 Non-Employee Directors' Stock Option 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 20, 1999
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 20, 1999 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 three directors to hold office until the 2002 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 950,000 shares to
1,500,000 shares, an increase of 550,000 shares.
3. To approve the Company's 1993 Non-Employee Directors' Stock Option
Plan, as amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan from 250,000 shares to
350,000, an increase of 100,000 shares.
4. To ratify the selection of Deloitte & Touche LLP as independent
auditors of the Company for its fiscal year ending December 31, 1999.
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, 1999 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/ BARBARA M. HUBBARD
----------------------------
BARBARA M. HUBBARD
Vice President, Finance,
and Assistant Secretary
San Francisco, California
April 16, 1999
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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 20, 1999, 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 16, 1999, 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, 1999 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 31, 1999, the Company had outstanding and entitled to
vote 13,949,833 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.
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 2000 annual meeting of stockholders must be received by the Company
not later than December 18, 1999 in order to be included in the proxy statement
and proxy relating to that annual meeting. Pursuant to the Company's Bylaws,
stockholders who wish to bring matters before, or propose nominees for director
at, the Company's 2000 annual meeting of stockholders that are not to be
included in such proxy statement and proxy must provide specified information to
the Company not later than the close of business on the sixtieth (60th) day nor
earlier than the close of business on the ninetieth (90th) day prior to the
first anniversary of the 1999 annual meeting (or May 20, 2000). 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 are
three directors being nominated for election as Class I Directors. Each of the
nominees for election to this class is currently a director of the Company. If
elected at the Annual Meeting, each of the nominees would serve until the 2002
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 thethree nominees named below. In the event that any 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. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
Class I Directors
Mr. Leonard Y. Liu, age 57, 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. In addition to Cadence, Mr.
Liu is currently a director of Advanced Semiconductor Engineering Inc.
2.
<PAGE>
Mr. David C. Wetmore, age 50, 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, Career Builder, Inc., Profit Management Group, Inc., Technology
Builders, Inc. and Nationwide Investing Foundation, Plc., a registered
investment company.
Mr. William A. Hasler, age 57, has served as a director of the Company
since February 1996. Since July 1998, Mr. Hasler has been the Co-Chief Executive
Officer of Aphton Corporation, a bio-pharmaceutical company. From August 1991 to
July 1998, Mr. Hasler was 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 Solectron
Corporation, Tenera Corporation, TCSI Corporation, Aphton Corporation and Asia
Pacific Wire & Cable Corporation Limited.
MANAGEMENT RECOMMENDS
A VOTE IN FAVOR OF THE NAMED NOMINEES.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
Class II Directors
Ms. Tania Amochaev, age 49, 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 62, has served as a director of the Company since
July 1996. Since July 1998, Mr. Lillie has been President of Sequoia Associates,
a private investment firm. From 1996 to 1998, he served as Chairman of the Board
of The Epic Team, Inc., a manufacturer of bicycles and bicycle accessories. Mr.
Lillie served as Chairman of the Board and Chief Executive Officer of APL, Ltd.
from 1991 to 1995. Mr. Lillie is currently a director of The Gap, Inc.,
Consolidated Freightways and Circle International, Inc.
3.
<PAGE>
DIRECTOR CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
Class III Director
Mr. Richard C. Alberding, age 68, 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. and JLK
Direct Distribution, Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1998, the Board of Directors held
seven 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, 1998. It is currently composed of three
non-employee directors, Ms. Amochaev and Messrs. Lillie and Wetmore.
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 nine times during the
fiscal year ended December 31, 1998.
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 forty times during the fiscal year ended December 31, 1998.
During the fiscal year ended December 31, 1998, each incumbent Board member
attended at least 75% of the aggregate of the meetings of the Board and each
incumbent Board member, except for Mr. Lillie, attended at least 75% of the
aggregate of the meetings 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.
Mr. Lillie attended six of the seven meetings of the Board held during the
fiscal year ended December 31, 1998. Mr. Lillie was absent for three meetings
each of the Audit Committee and Compensation Committee. However, because
meetings of both such Committees were conducted simultaneously on two occasions,
Mr. Lillie was unable to attend one meeting of each such Committee.
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, March 1995 and February 1998,
the Board adopted, and the stockholders subsequently approved, amendments to the
Purchase Plan to increase the number of
4.
<PAGE>
shares authorized for issuance thereunder to an aggregate of 350,000, 650,000
and 950,000 shares respectively. At January 31, 1999, an aggregate of 760,243
shares had been issued under the Purchase Plan and only 189,757 shares remained
available for the grant of future rights under the Purchase Plan.
In February 1999, 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 950,000 shares to a total of
1,500,000 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 at least a two-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, 1,784 shares ($7.78); all current
executive officers as a group, 1,784 shares ($7.78); and all employees
(excluding executive officers), 160,703 shares ($7.53).
The Board also amended the Purchase Plan to modify the permissible effect
of an amendment to the Purchase Plan upon rights granted prior to such Purchase
Plan amendments. Purchase Plan amendments will be permitted to alter rights
granted under the Purchase Plan so long as such amendments do not impair such
rights. Notwithstanding the foregoing, amendments may impair rights granted
under the Purchase Plan if such amendments are necessary to ensure that the
Purchase Plan will remain qualified under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code").
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.
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 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.
5.
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Stock Subject to Purchase Plan
Subject to approval of this proposal, 1,500,000 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. Currently, each such offering has a
24-month duration. However, the Board has discretion to change the length of
offerings under the Purchase Plan. Prior to July 1, 1998, each such offering had
a 12-month duration.
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
PurchasePlan. The Board may impose a requirement for future offerings that an
employee be in the continuous employ of the Company for a certain period
designated by the Board to be eligible to participate in the offering. 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. The number of shares of Common Stock that an eligible
employee can purchase in any calendar year is limited to 10,000 shares,
aggregating purchases from all Offerings during such year. At February 28, 1999,
approximately 534 of the Company's approximately 545 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.
6.
<PAGE>
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.
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.
7.
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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 Securities Exchange Act of 1934, as amended (the "Exchange
Act") or with any Nasdaq or securities exchange listing requirements.
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, unless such amendment is
necessary to comply with any laws or governmental regulations or to ensure that
the Purchase Plan will remain qualified under Section 423 of the Code.
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 acquired 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. Such capital gains are generally subject to lower
tax rates than ordinary income.
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
8.
<PAGE>
(subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of tax reporting obligations).
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 1993 NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN, AS AMENDED
In January 1993, the Board adopted, and the stockholders subsequently
approved, the Company's 1993 Non-Employee Directors' Stock Option Plan, as
amended (the "Directors' Plan"). As a result of a series of amendments, a total
of 250,000 shares of Common Stock has been authorized for issuance under the
Directors' Plan.
As of March 31, 1999, options (net of canceled or expired options) covering
an aggregate of 204,000 shares of the Company's Common Stock had been granted
under the Directors' Plan. Only 46,000 shares of Common Stock (plus any shares
that might in the future be returned to the Directors' Plan as a result of
cancellations or expiration of options) remained available for future grant
under the Directors' Plan. During the last fiscal year, all current non-employee
directors, as a group, received options to purchase 60,000 shares at a
weighted-average exercise price of approximately $9.97 per share. See "Executive
Compensation-Compensation of Directors."
In March 1999, the Board amended the Directors' Plan, subject to
stockholder approval, to increase the number of shares of Common Stock
authorized for issuance under the Directors' Plan from a total of 250,000 shares
to a total of 350,000 shares. The Board adopted this amendment to ensure that
the Company can continue to grant stock options at levels prescribed by the
terms of the Directors' Plan.
Stockholders are requested in this Proposal 3 to approve the Directors'
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 Directors' 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 Directors' Plan are outlined below:
General
The Directors' Plan provides for the non-discretionary grant of
nonstatutory stock options to members of the Company's Board who are not
employees of theCompany or any affiliate of the Company. Options granted under
the Directors' Plan are not intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of nonstatutory stock
options.
9.
<PAGE>
Purpose
The Board adopted the Directors' Plan to provide a means by which
non-employee directors of the Company may be given an opportunity to purchase
stock in the Company, to assist in retaining the services of such persons, to
secure and retain the services of persons capable of filling such positions and
to provide incentives for such persons to exert maximum efforts for the success
of the Company. Five of the current directors of the Company are eligible to
participate in the Directors' Plan.
Administration
The Board administers the Directors' Plan. The Board has the power to
construe and interpret the Directors' Plan but not to determine the persons to
whom or the dates on which options will be granted, the number of shares to be
subject to each option, the time or times during the term of each option within
which all or a portion of such option may be exercised, the exercise price, the
type of consideration or the other terms of the options.
The Board has the power, which it has not yet exercised, to delegate
administration of the Directors' Plan to a committee composed of not fewer than
two members of the Board. As used herein with respect to the Directors' Plan,
the "Board" refers to any committee the Board appoints as well as to the Board
itself.
Eligibility
The Directors' Plan provides that options may be granted only to
non-employee directors of the Company. A "non-employee director" is defined in
the Directors' Plan as a director of the Company who is not otherwise an
employee of the Company or any affiliate.
Stock Subject to the Directors' Plan
Subject to this Proposal, an aggregate of 350,000 shares of Common Stock is
reserved for issuance under the Directors' Plan. If options granted under the
Directors' Plan expire or otherwise terminate without being exercised, the
shares of Common Stock not acquired pursuant to such options again become
available for issuance under the Directors' Plan.
Terms of Options
The following is a description of the terms of options under the Directors'
Plan. Each option granted under the Directors' Plan is non-discretionary and
must be made in accordance with the terms described below.
Automatic Grants. The Directors' Plan provides for the automatic,
non-discretionary grant of options to purchase 6,000 shares of the Company's
Common Stock, on January 2 of each year, to each non-employee director in
service as of such date. However, the automatic grant scheduled to be made on
January 2, 1999 was made on December 15, 1998. In addition, each new member of
the Board is granted options to purchase 15,000 shares of the Company's Common
Stock as of the date of his or her initial election to the Board.
Exercise Price; Payment. The exercise price of options may not be less than
100% of the fair market value of the stock subject to the option on the date of
the grant. At March 31, 1999, the closing price of the Company's Common Stock as
reported on the Nasdaq National Market System was $4.25 per share.
The exercise price of options granted under the Directors' Plan must be
paid: (i) in cash at the time the option is exercised; (ii) by delivery of other
Common Stock of the Company; or (iii) by a combination of such methods of
payment.
10.
<PAGE>
Option Exercise. Options granted under the Directors' Plan upona person's
initial election as a director become exercisable ("vest") in three equal annual
installments commencing on the first anniversary after the date of the option
grant provided that the optionholder has, during the entire annual period prior
to such vesting date, continuously served as a non-employee director. Other
options granted under the Directors' Plan vest in four equal quarterly
installments commencing on the date three months after the date of the option
grant, provided that the optionholder has, during the entire quarterly period
prior to such vesting date, continuously served as a non-employee director.
Options granted under the Directors' Plan do not permit exercise prior to
vesting. To the extent provided by the terms of an option, an optionholder may
satisfy any federal, state or local tax withholding obligation 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
optionholder, by delivering already-owned Common Stock of the Company or by a
combination of these means.
Term. The maximum term of options under the Directors' Plan is 10 years.
Restrictions on Transfer
The optionholder may not transfer an option otherwise than by will or by
the laws of descent and distribution. During the lifetime of the optionholder,
an option may be exercised only by the optionholder or his or her guardian or
legal representative.
Adjustment Provisions
Certain transactions, such as a 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, may change the class and number of shares
of Common Stock subject to the Directors' Plan and outstanding options. In that
event, the Directors' Plan will be appropriately adjusted as to the class and
the maximum number of shares of Common Stock subject to the Directors' Plan, and
outstanding options will be adjusted as to the class, number of shares and price
per share of Common Stock subject to such options.
Effect of Certain Corporate Events
The Directors' Plan provides that, in the event of specified types of
merger or other corporate reorganization ("change in control"), the time during
which outstanding options may be exercised will be accelerated to permit the
optionee to exercise all options prior to such change in control. An outstanding
option will terminate if the optionholder does not exercise it before a change
in control. The acceleration of an option in the event of an acquisition or
similar corporate event may be viewed as an anti-takeover provision, which may
have the effect of discouraging a proposal to acquire or otherwise obtain
control of the Company.
Duration, Amendment and Termination
The Board may suspend or terminate the Directors' Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Directors' Plan will terminate on January 28, 2003.
The Board may also amend the Directors' Plan at any time or from time to
time. However, the Board may not amend the Plan more than once every six months
with respect to the provisions of the Plan that relate to the amount, price and
timing of grants, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules
thereunder. No amendment will be effective unless approved by the stockholders
of the Company within twelve months before or after its adoption by the Board if
the amendment would (i) increase the number of shares reserved for issuance upon
exercise of options; (ii) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval in
order forthe Directors' Plan to satisfy Section 422 of the Code, if applicable,
or Rule 16b-3 promulgated under the Exchange Act; or (iii) change any other
provision of the Directors' Plan in any other way if such modification requires
stockholder approval in order
11.
<PAGE>
to comply with Rule 16b-3 promulgated under the Exchange Act. The Board may
submit any other amendment to the Directors' Plan for stockholder approval.
Federal Income Tax Information
Long-term capital gains currently are generally subject to lower tax rates
than ordinary income or short-term capital gains. The maximum long-term capital
gains rate for federal income tax purposes is currently 20% while the maximum
ordinary income rate and short-term capital gains rate is effectively 39.6%.
Slightly different rules may apply to optionholders who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Directors' Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionholder or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionholder 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. If the optionholder becomes an employee, 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 provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionholder.
Upon disposition of the stock, the optionholder 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 or short-term
depending on whether the stock was held for more than one year. Slightly
different rules may apply to optionholders who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
In the event that there is a change in control of the Company, payments
received by certain optionees that are contingent upon the change in control may
constitute "parachute payments." If, by reason of such change in control, the
exercisability of outstanding options is accelerated, the value of the
acceleration is added to other contingent payments, if any, in determining
whether the optionee has received "excess parachute payments." In general, if an
optionee receives excess parachute payments, an excise tax equal to 20% of the
amount of parachute payments is imposed on the optionee, and the Company does
not receive a deduction for such amount.
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, 1999 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
12.
<PAGE>
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.
13.
<PAGE>
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 57 Chairman, President and Chief Executive Officer
Barbara M. Hubbard 47 Vice President, Finance, Chief Accounting Officer,
Assistant Treasurer and Assistant Secretary
Ms. Hubbard has served as the Company's Vice President, Finance since
November 1998 and Chief Accounting Officer, Assistant Treasurer and Assistant
Secretary since May 1996. Ms. Hubbard served as the Company's Vice President and
Corporate Controller from April 1996 to November 1998. 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.
14.
<PAGE>
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, 1999 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.
Beneficial Ownership(1)
------------------------------
Number of Percent of
Beneficial Owner Shares Total (%)
---------------- ---------- ----------
Pequot Capital Management, Inc.................. 1,399,100 (2) 9.9
500 Nyala Farm Road
Westport, CT 06880
Thomson Horstmann & Bryant, Inc................. 1,014,900 (3) 7.2
Park 80 West, Plaza One
Saddlebrook, NJ 07663
Rainier Investment Management, Inc.............. 845,250 (4) 6.0
Two Union Square
601 Union Street, Suite 2801
Seattle, WA 98101
Leonard Y. Liu.................................. 750,001 (5)(6) 5.1
Bruce C. Pollock................................ 121,375 (5)(7) *
Thomas W. Hubbs................................. 5,000 *
Barbara M. Hubbard.............................. 34,947 (5)(8) *
Richard C. Alberding............................ 31,500 (5) *
Tania Amochaev.................................. 31,500 (5) *
William A. Hasler............................... 28,000 (5) *
John M. Lillie.................................. 28,500 (5) *
David C. Wetmore ............................... 41,500 (5) *
All directors and executive officers
as a group (9 persons)....................... 1,072,323 7.2
- ----------
* 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
14,135,478 shares outstanding on January 31, 1999, adjusted as required by
rules promulgated by the SEC.
(2) Pequot Capital Management, Inc., is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940.
(3) Thomson Horstmann & Bryant, Inc., is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940.
(4) Rainier Investment Management, Inc., is an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940.
15.
<PAGE>
(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, 480,001
shares; Bruce C. Pollock, 112,375 shares; Barbara M. Hubbard, 32,500
shares; Richard C. Alberding, 25,500 shares; Tania Amochaev, 31,500 shares;
William A. Hasler, 23,000 shares; John M. Lillie, 23,500 shares; David C.
Wetmore, 34,500 shares; and all directors and executive officers as a
group, 762,876 shares.
(6) Does not include 2,630 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 2,447 shares acquired through the 1992 Employee Stock Purchase
Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange 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 bythe 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, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with; except that two
reports regarding two transactions effected by Updata Cpaital, Inc., an
investment banking organization of which Mr. Wetmore is Managing Director, were
filed late.
16.
<PAGE>
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, 1998, the total cash compensation earned by
non-employee directors was $77,000. 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 Directors' Plan. See "Stockholder Proposals-Proposal 3-Approval of
1993 Non-Employee Directors' Stock OptionPlan, as amended".
On January 2, 1998, the Company granted options covering 6,000 shares to
each of Messrs. Alberding, Hasler, Lillie and Wetmore and Ms. Amochaev at an
exercise price of $13.5625 per share under the Directors' Plan. The fair market
value of such Common Stock on the date of such grant was $13.5625 per share
(based on the closing sales price reported in the Nasdaq National Market for the
date of grant). On December 14, 1998, the Company granted options covering 6,000
shares to each of Messrs. Alberding, Hasler, Lillie and Wetmore and Ms. Amochaev
at an exercise price of $6.3750 per share under the Directors' Plan for 1999
service. The fair market value of such Common Stock on the date of such grant
was $6.3750 per share (based on the closing sales price reported in the Nasdaq
National Market for the date of grant). As of March 31, 1999, Mr. Hasler had
exercised options for 2,500 shares under the Directors' Plan; no other options
had been exercised under the Directors' Plan.
17.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Compensation
The following table shows for the fiscal years ended December 31, 1998,
1997 and 1996, compensation awarded, paid to, or earned by the Company's Chief
Executive Officer, its other most highly compensated executive officer at
December 31, 1998 and two former executive officers who departed from the
Company during fiscal year 1998 (the "Named Executive Officers"):
Summary Compensation Table
Long-Term
Annual Compensation
Compensation Awards
----------------- ----------
All Other
Securities Compen-
Name and Principal Salary Bonus Underlying sation
Position Year ($) ($) Options (#) ($)
------------------ ---- ------- ------- ---------- ---------
Leonard Y. Liu 1998 375,000 99,120 475,000 7,070 (1)
Chairman, President and 1997 375,000 170,894 -- 7,070 (1)
Chief Executive Officer 1996 375,000 283,190 75,000 4,555 (1)
Thomas W. Hubbs (3) 1998 110,913 30,873 120,000 607 (2)
Senior Vice President and
Chief Financial Officer
Bruce C. Pollock (4) 1998 107,500 3,263 -- 6,035 (1)
Senior Vice President and 1997 200,000 36,472 -- 6,325 (1)
Chief Financial Officer 1996 200,000 70,287 -- 5,538 (1)
Barbara M. Hubbard (5) 1998 155,000 18,098 10,000 5,630 (1)
Vice President, Finance 1997 145,000 16,785 10,000 5,585 (1)
and Chief Accounting Officer 1996 105,000 29,825 40,000 328 (2)
- ----------
(1) Consists of matching contributions pursuant to the Company's 401(k) Plan
and, in some cases, term life insurance premiums paid by the Company.
(2) Consists of term life insurance premiums paid by the Company.
(3) Mr. Hubbs joined the Company in April 1998 and left the Company in October
1998. Prior to the occurrence of any vesting, stock options granted to Mr.
Hubbs terminated at the time he left the Company.
(4) Mr. Pollock left the Company in June 1998.
(5) Ms. Hubbard joined the Company in April 1996.
18.
<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, 1999, options to purchase a total of 1,945,085 shares were
outstanding under the Plans and options to purchase 486,206 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 2,500,000 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 options 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 April 15,
1999, options to purchase a total of 1,706,442 shares were outstanding under the
Nonstatutory Plan and options to purchase 691,687 shares remained available for
grant thereunder.
The following tables show for the fiscal year ended December 31, 1998,
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
Value at Assumed
Number of % of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Appreciation for
Options Employees in Exercise or Option
Granted Fiscal Base Price Expiration Term(1)
Name (#) Year(2) ($/Sh)(3) Date 5% ($) 10% ($)
----- ----------- ------------ ----------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leonard Y. Liu 300,000 (5) 10.9% 9.13 8/5/08 1,722,542 4,365,261
100,000 (4) 3.6% 9.13 8/5/08 574,181 1,455,087
75,000 (4) 2.7% 16.00 3/5/08 754,674 1,912,491
Thomas W. Hubbs 120,000 (4) 4.4% 14.88 5/21/08 (6) -- --
Bruce C. Pollock -- -- -- -- -- --
Barbara M. Hubbard 10,000 (4) 0.4% 4.75 10/23/08 29,872 75,703
</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 2,741,000 shares of the Company's Common Stock
granted in 1998.
(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.
(5) Option will vest on the earlier of the following occurrences: (i) entirely
on June 25, 2003; or (ii) in the amount of 75,000 shares upon completion of
each of the Company's fiscal years 1998 through 2001, if
19.
<PAGE>
certain Company performance goals are met.
(6) Mr. Hubbs left the Company in October 1998, and consequently his stock
option terminated prior to the first vesting date of such option.
Fiscal Year-End Option Values (1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options at FY-End (#) Options at FY-End($)(2)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Leonard Y. Liu 430,000 675,000 539,688 223,438
Thomas W. Hubbs -- -- -- --
Bruce C. Pollock 108,250 16,750 0 0
Barbara M. Hubbard 22,500 37,500 0 0
</TABLE>
- ----------
(1) No Named Executive Officers exercised stock options during the fiscal year
ended December 31, 1998.
(2) Fair market value of the Company's Common Stock at December 31, 1998
($6.75) minus the exercise price of the options.
EMPLOYMENT AGREEMENTS
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 on the open market. As
of March 15, 1999, Mr. Liu had not drawn upon the line of credit. In addition,
the employment agreement, as amended, provides that, 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 upon
such event 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,a bonus payment in the amount
of twice the average bonus that Mr.Liu received for the Company's prior two
fiscal years, 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.
20.
<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 1998, 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 Exchange Act whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
21.
<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 for 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 1998 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 1998 operating plan, as well as achievement of
other objectives in the 1998 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 if it 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."
22.
<PAGE>
CEO COMPENSATION
During the fiscal year ended December 31, 1998, 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 1998 was $375,000; see "Summary Compensation Table." This amount,
together with a potential annual incentive tied to the achievement of 1998
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 1998, Mr. Liu earned an incentive bonus of
$99,120. Mr. Liu's total cash compensation in 1998 was $481,190. As part of its
annual review of senior executive compensation, the Compensation Committee, at
its meeting on February 10, 1999, increased Mr. Liu's annual incentive bonus at
achievement of 100% of plan to $300,000 per year from $250,000 per year.
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
23.
<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 December 31, 1993 through
the Company's fiscal year ended December 31, 1998. This graph assumes that the
value of the investment in the Company's Common Stock and each of the comparison
groups was $100 on December 31, 1993.
COMPARISON OF CUMULATIVE
TOTAL RETURN ON INVESTMENT
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------
NASDAQ 100.00 97.75 138.28 170.01 208.58 293.21
Walker 100.00 71.05 78.29 142.76 144.74 71.05
S&P 500 100.00 101.37 139.51 170.02 229.80 303.18
- --------------------------------------------------------------------------------
- ----------
(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 Exchange Act whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
24.
<PAGE>
CERTAIN TRANSACTIONS
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/ BARBARA M. HUBBARD
----------------------------
BARBARA M. HUBBARD
Vice President, Finance
and Assistant Secretary
April 16, 1999
25.
<PAGE>
SKU-1101-PS-99
26.
<PAGE>
[GRAPHIC OMITTED]
Walker Interactive Systems, Inc.
303 Second Street, Three North
San Francisco, California 94107
April 16, 1999
You are cordially invited to attend the Annual Meeting of Stockholders of Walker
Interactive Systems, Inc., which will be held on Thursday, May 20, 1999 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,
LEONARD Y. LIU
---------------------
LEONARD Y. LIU
Chairman, President and
Chief Executive Officer
DETACH HERE
<PAGE>
Please mark
__X__ votes as in
this example.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW AND FOR
PROPOSALS 2, 3 AND 4.
1. To elect three directors to hold office until the 2002 Annual Meeting of
Stockholders.
Nominees: William A. Hasler, Leonard Y. Liu and David C. Wetmore
FOR WITHHELD
[_] [_]
[_] ________________________________________
For all nominees except as noted above
2. To approve the Company's 1992 FOR AGAINST ABSTAIN
Employee Stock Purchase Plan, as
amended, to increase the aggregate [_] [_] [_]
number of shares of Common Stock
authorized for issuance under such
plan from 950,000 shares to
1,500,000, an increase of 550,000
shares.
3. To approve the Company's 1993 FOR AGAINST ABSTAIN
Non-Employee Directors' Stock
Option Plan, as amended, to [_] [_] [_]
increase the aggregate number of
shares of Common Stock authorized
for issuance under such plan from
250,000 shares to 350,000, an
increase of 100,000 shares.
4. To ratify the selection of Deloitte FOR AGAINST ABSTAIN
& Touche LLP as independent
auditors of the Company for its [_] [_] [_]
fiscal year ending December 31,
1999.
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, please sign in
partnership name by authorized person.
Signature:_________________ Date:______ Signature:_________________ Date:______
