<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ ]
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 240.14a-11(c) or 240.14a-12
NOVADIGM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NOVADIGM, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
NOVADIGM, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 24, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NOVADIGM,
INC. (the "Company"), a Delaware corporation, will be held on Thursday,
September 24, 1998 at 9:00 a.m., local time, at The Mandarin Oriental Hotel, 222
Sansome Street, San Francisco, California, for the following purposes:
1. To elect four (4) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To amend the Company's 1992 Stock Option Plan to increase the number of
shares reserved for issuance thereunder by 500,000 shares.
3. To ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the fiscal year ending March 31, 1999.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on July 27, 1998 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a Proxy.
Sincerely,
Albion J. Fitzgerald
Chairman of the Board and
Chief Executive Officer
Mahwah, New Jersey
July 28, 1998
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
NOVADIGM, INC.
------------------------
PROXY STATEMENT
------------------------
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 24, 1998
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of NOVADIGM, INC. (the "Company")
for use at the Annual Meeting of Stockholders to be held Thursday, September 24,
1998 at 9:00 a.m., local time (the "Annual Meeting"), or at any adjournment
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 Mandarin
Oriental Hotel, 222 Sansome Street, San Francisco, California. The Company's
principal executive offices are located at One International Boulevard, Suite
200, Mahwah, New Jersey 07495 and its telephone number at that location is (201)
512-1000.
These proxy solicitation materials and the Annual Report to Stockholders
for the fiscal year ended March 31, 1998, including financial statements, will
be first mailed on or about July 28, 1998 to all stockholders entitled to vote
at the Annual Meeting.
PURPOSES OF THE ANNUAL MEETING
The purposes of the Annual Meeting are to (1) elect four (4) directors to
serve for the ensuing year and until their successors are duly elected and
qualified; (2) amend the Company's 1992 Stock Option Plan to increase the number
of shares reserved for issuance thereunder by 500,000 shares; (3) ratify the
appointment of Arthur Andersen LLP as independent auditors of the Company for
the fiscal year ending March 31, 1999; and (4) transact such other business as
may properly come before the meeting or any adjournment thereof.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on July 27, 1998 (the
"Record Date") are entitled to notice of and to vote at the meeting. The Company
has one authorized class of capital stock outstanding, designated Common Stock,
$.001 par value. At the Record Date, 17,501,535 shares of the Company's Common
Stock were issued and outstanding. For information regarding holders of more
than 5% of the outstanding Common Stock, see "Beneficial Security Ownership of
Management and Certain Beneficial Owners." The closing sale price of the
Company's Common Stock on the Nasdaq National Market on the Record Date was
$3.938 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
Each holder of Common Stock is entitled to one vote for each share held as
of the Record Date with respect to all matters that may be considered at the
Annual Meeting. The cost of soliciting votes will be borne by the Company.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees without additional compensation, personally or by mail,
telephone or telegram.
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QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company intends to include abstentions and broker non-votes as present
or represented for purpose of establishing a quorum for the transaction of
business, to include abstentions as shares entitled to vote and to exclude
broker non-votes from the calculation of shares entitled to vote with respect to
any proposal for which authorization to vote was withheld.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting of Stockholders must
be received by the secretary of the Company at the Company's principal executive
offices no later than March 17, 1999 in order to be considered for inclusion in
the proxy statement and form of proxy relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of four directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's four nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next Annual Meeting of
Stockholders or until a successor has been elected and qualified.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE FOUR NOMINEES
LISTED BELOW.
The name of and certain information regarding each nominee is set forth
below. There are no family relationships among directors or executive officers
of the Company, except as set forth below.
<TABLE>
<CAPTION>
NAME AGE(1) PRINCIPAL OCCUPATION
---- ------ --------------------
<S> <C> <C>
Albion J. Fitzgerald...................... 50 Chairman of the Board of Directors and Chief
Executive Officer of the Company
Robert B. Anderson........................ 43 Executive Vice President, Europe and Secretary of
the Company
H. Kent Petzold........................... 51 President and Chief Executive Officer, Cyclone
Software Corp.
Deborah Doyle McWhinney................... 43 Executive Vice President, Visa International,
Inc.
</TABLE>
- ---------------
(1) As of June 30, 1998
Mr. Fitzgerald co-founded the Company in February 1992, serving as Chairman
since that time, and currently as Chief Executive Officer. Mr. Fitzgerald has
previously served as Chief Technology Officer and as President. In May 1990, Mr.
Fitzgerald founded Fitzgerald Associates, the Company's predecessor, and served
as the chief architect in the development of EDM technology. From 1988 to 1990,
Mr. Fitzgerald was Director of Advanced Technology for Pansophic Systems, Inc.
("Pansophic"), a manufacturer of systems and applications software. Mr.
Fitzgerald founded and served as President of ASI/TeleMetrix. Inc. from 1985 to
1988, and was the chief architect of Teleview, a session manager product. Mr.
Fitzgerald's brother-in-law is Wallace D. Ruiz, the Company's Chief Financial
Officer, and Mr. Fitzgerald's brother is Joseph Fitzgerald, the Company's Vice
President, Development.
Mr. Anderson joined the Company in June 1992 and currently serves as
Executive Vice President, Europe and Secretary and as a director. From 1990 to
1992, Mr. Anderson served as Senior Vice President at Stratagem, an investment
banking firm specializing in mergers, acquisitions and divestitures in the
software
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industry. Prior to Stratagem, Mr. Anderson was employed as a Vice President in
the Corporate Finance Software Specialty Group at Sutro & Company, Inc., a
financial services firm.
Mr. Petzold has been a director of the Company since August 1992. From
August 1992 to May 1995, Mr. Petzold served as the President and Chief Executive
Officer of the Company. Mr. Petzold has been President and Chief Executive
Officer of Cyclone Software Corp. since April 1998 and was a consultant to the
software industry from June 1995 until April 1998. Prior to joining the Company,
Mr. Petzold served as Senior Vice President and General Manager, Software
Products Division of Pansophic from October 1990 to November 1991. From October
1985 to October 1990, Mr. Petzold was the President and Chief Executive Officer
of Viasoft, Inc. Mr. Petzold also serves as a director of several privately held
software companies.
Ms. McWhinney has been a director of the Company since September 1997.
Since December 1995, Ms. McWhinney has been an Executive Vice President of Visa
International, Inc., a financial services company. Prior to joining Visa, Ms.
McWhinney was with Bank of America Corporation, where she held several positions
including, from 1986 to 1995, Senior Vice President, Bank of America Consumer
Electronic Banking and Delivery. Ms. McWhinney is a director of the First Bank
of Idaho.
REQUIRED VOTE
The four nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but they have no legal effect under Delaware law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
the fiscal year ended March 31, 1998. No director, during the time he or she was
a member of the Board of Directors, attended fewer than 75% of the aggregate of
all meetings of the Board of Directors, or its committees on which he or she
served which occurred during fiscal 1998. The Board has an Audit Committee, a
Compensation Committee and a Stock Option Committee. It does not have a
nominating committee or a committee performing the functions of a nominating
committee.
The Audit Committee is responsible for (i) recommending engagement of the
Company's independent auditors, (ii) approving the services performed by such
auditors, (iii) consulting with such auditors and reviewing with them the
results of their examination, (iv) reviewing and approving any material
accounting policy changes affecting the Company's operating results, (v)
reviewing the Company's control procedures and personnel, and (vi) reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee held two meetings during fiscal 1998.
The Audit Committee currently consists of Directors McWhinney and Petzold.
The Compensation Committee is responsible for (i) reviewing and approving
the compensation and benefits for the Company's officers and other employees,
(ii) administering the Company's stock purchase and stock option plans, and
(iii) determining which eligible individuals (excluding nonemployee directors)
receive grants thereunder and the size of such grants. The Compensation
Committee held one meeting during fiscal 1998. The Compensation Committee
currently consists of Directors McWhinney and Petzold.
The Stock Option Committee is responsible for reviewing and approving
grants of options to employees under the Company's 1992 Stock Option Plan. The
Stock Option Committee acted 37 times by written consent during fiscal 1998. The
Stock Option Committee currently consists of Directors Fitzgerald, Anderson and
Petzold.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for their services as directors of the Company, but are reimbursed
for out-of-pocket expenses in connection with attendance at committee meetings.
Nonemployee members of the Board of Directors receive $500 for each Board
meeting
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attended and $500 for each meeting attended of a committee to the Board on which
such director serves, in addition to reimbursement of expenses.
PROPOSAL TWO
AMENDMENT TO 1992 STOCK OPTION PLAN
At the Annual Meeting, the stockholders are being asked to approve the
amendment of the Company's 1992 Stock Plan (the "Plan") to increase the number
of shares of Common Stock reserved for issuance thereunder by 500,000 shares.
The Board of Directors approved the amendment to the Plan in July 1998. As of
June 30, 1998, options to purchase an aggregate of 2,709,527 shares of the
Company's Common Stock were outstanding under the Plan with a weighted average
exercise price of $4.97 per share, and 1,291,565 shares (excluding the 500,000
shares subject to stockholder approval at this Annual Meeting) were available
for future grant. The Plan authorizes the Board of Directors to grant incentive
and nonstatutory stock options to eligible employees, directors and consultants
of the Company.
The Plan is structured to allow the Board of Directors broad discretion in
creating equity incentives in order to assist the Company in attracting,
retaining and motivating the best available personnel for the successful conduct
of the Company's business. Since inception, the Company has provided stock
options as an incentive to its key employees and executives as a means to
promote increased stockholder value. Management believes stock options are one
of the prime methods of attracting and retaining key personnel responsible for
the continued development and growth of the Company's business. In addition,
stock options are considered a competitive necessity in the high technology
industry.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Plan. For this purpose, the "Votes Cast" are
defined to be the shares of the Company's Common Stock represented and voting at
the Annual Meeting. In addition, the affirmative votes must constitute at least
a majority of the required quorum, which quorum is a majority of the shares
outstanding at the Record Date. Votes that are cast against the proposal will be
counted for purposes of determining both (i) the presence or absence of a quorum
and (ii) the total number of Votes Cast with respect to the proposal.
Abstentions will be counted for purposes of determining both (i) the presence or
absence of a quorum and (ii) the total number of Votes Cast with respect to the
proposal. Accordingly, abstentions will have the same effect as a vote against
the proposal. Broker non-votes, if any, will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but will not be counted for purposes of determining the number of Votes Cast
with respect to this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO
THE PLAN.
The essential terms of the Plan are summarized as follows:
Purpose
The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants of the Company and to promote
the success of the Company's business.
Administration
The Plan provides for administration by the Board of Directors of the
Company or by a Committee of the Board. The Board or the committee appointed to
administer the Plan are referred to in this description as the "Administrator."
The Administrator determines the terms and conditions of options granted,
including the exercise price, number of shares subject to the option and the
exercisability thereof. All questions of interpretation are determined by the
Administrator and its decisions are final and binding upon all
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<PAGE> 7
participants. Members of the Board receive no additional compensation for their
services in connection with the administration of the Plan.
Eligibility
The Plan provides that either incentive or nonstatutory stock options may
be granted to employees (including officers and employee directors) of the
Company or any of its designated subsidiaries. In addition, the Plan provides
that nonstatutory stock options may be granted to non-employee directors and
consultants of the Company or any of its designated subsidiaries. The
Administrator selects the optionees and determines the number of shares to be
subject to each option. In making such determination, the Administrator takes
into account the duties and responsibilities of the optionee, the value of the
optionee's services, the optionee's present and potential contribution to the
success of the Company and other relevant factors. The Plan provides a limit of
$100,000 on the aggregate fair market value of shares subject to all incentive
options that are exercisable for the first time in any one calendar year. The
Plan provides that a maximum of 500,000 shares may be granted to any one
employee during any fiscal year of the Company. The Plan does not provide for a
minimum number of option shares that may be granted to any one employee.
Terms of Options
Each option is evidenced by a stock option agreement between the Company
and the optionee to whom such option is granted and is subject to the following
additional terms and conditions:
(1) Exercise of the Option: The Administrator determines when options
granted under the Plan may be exercised. An option is exercised by giving
written notice of exercise to the Company, specifying the number of shares
of Common Stock to be purchased and tendering payment to the Company of the
purchase price. Payment for shares issued upon exercise of an option may
consist of (i) cash, (ii) check, (iii) promissory note, (iv) subject to
certain conditions, delivery of already-owned shares of the Company's
Common Stock, (v) authorization for the Company to retain that number of
shares being exercised having a fair market value equal to the exercise
price, (vi) pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes,
(vii) delivery of an irrevocable subscription agreement to take and pay for
the shares not later than 12 months after the date of delivery of the
subscription agreement, or (viii) any combination of the foregoing methods
or (ix) such other consideration as determined by the Administrator and as
permitted by applicable laws. Options may be exercised at any time on or
following the date the options are first exercisable. An option may not be
exercised for a fraction of a share.
(2) Option Price: The option price of all stock options under the Plan
may not be less than the fair market value of the Common Stock on the date
the option is granted; provided, however, that in the case of a stock
option granted to an optionee who at the time of grant owns stock
representing more than 10% of the voting power of all classes of stock of
the Company, the option price must be not less than 110% of the fair market
value on the date of grant. For purposes of the Plan, fair market value is
defined as the closing sale price per share of the Common Stock on the date
of grant as reported on the Nasdaq National Market.
(3) Termination of Employment or Consulting Relationship: The Plan
provides that if the optionee's employment or consulting relationship with
the Company is terminated for any reason, other than death, or disability,
the period of time during which an option may be exercised following such
termination is 30 days (or such other period as is determined by the Board,
with such determination in the case of an incentive stock option being made
at the time of grant and not exceeding 30 days). Options may be exercised
only to the extent the options were exercisable on the date of termination
and in no event later than the expiration of the term of the option.
(4) Death: If an optionee should die, options may be exercised at any
time within 12 months following the date of death (but in no event later
than the expiration date of the option) by the Optionee's
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<PAGE> 8
estate or by a person who acquired the right to exercise the option by
bequest or inheritance, but only to the extent the Optionee is entitled to
exercise the option on the date of death.
(5) Disability: If an optionee's employment is terminated due to a
disability, options may be exercised at any time within six months from the
date of such termination (but in no event later than the expiration date of
the option), but only to the extent that the options were exercisable on
the date of termination of employment.
(6) Termination of Options: On and after June 4, 1998, the term of
each option shall be the term stated in the option agreement or in an
amendment thereto, up to a maximum of 10 years from the date of grant (even
with respect to options granted prior to June 4, 1998 that are amended in
writing); provided, however, that with respect to options granted to
officers and directors, the option term shall be no more than five years
from the date of grant or such shorter term as may be provided in the
option agreement.
(7) Nontransferability of Options: An option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than
by will or by the laws of descent and distribution, and may be exercised,
during the lifetime of the optionee, only by the optionee.
Adjustment Upon Changes in Capitalization
In the event any change, such as a stock split, stock dividend,
reclassification or combination, is made in the Company's capitalization which
results in an increase or decrease in the number of outstanding shares of Common
Stock without receipt of consideration by the Company, an appropriate adjustment
shall be made in the option price and in the number of shares subject to each
option. In the event of a merger of the Company with or into another corporation
or the sale of substantially all of the assets of the Company, all outstanding
options may either be assumed or an equivalent option may be substituted by the
surviving entity or, if such options are not assumed or substituted, such
options shall terminate. In the event of a proposed dissolution or liquidation
of the Company, the Board shall notify optionees 15 days prior to such proposed
action. To the extent that an option has not been previously exercised it will
terminate immediately prior to the consummation of such proposed action.
Amendment and Termination
The Board of Directors may amend the Plan at any time or from time to time
or may terminate it without approval of the stockholders. However, no action by
the Board of Directors or stockholders may alter or impair any option previously
granted under the Plan without the consent of the optionee. In any event, the
Plan will terminate in June 2002. In addition, to the extent necessary and
desirable to comply with federal securities laws or tax laws (or any
requirements of the National Association of Securities Dealers, Inc. or an
established stock exchange), the Company must obtain stockholder approval of any
plan amendment.
Tax Information
Options granted under the Plan may be either "incentive stock options," as
defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% stockholder of the Company. Generally, the Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition
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<PAGE> 9
of the shares in excess of the amount treated as ordinary income will be
characterized as long-term or short-term capital gain or loss, depending on the
holding period.
All other options that do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize ordinary income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
Generally, the Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the optionee with respect to shares acquired
upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Plan, does not purport to be complete, and does not discuss
the tax consequences of the optionee's death or the income tax laws of any
municipality, state or foreign country in which an optionee may reside.
Participation in the Plan
The grant of options under the Plan to executive officers, including the
officers named in the Summary Compensation Table below, is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the Plan. Accordingly, future awards are not determinable.
The section entitled "Executive Compensation and Other Matters -- Option
Grants in Last Fiscal Year" provides information with respect to the grant of
options under the Plan to the Named Executive Officers during fiscal 1998.
During fiscal 1998, all current executive officers as a group and all other
employees as a group were granted options to purchase 400,000 shares and 874,750
shares, respectively, under the Plan. Non-employee directors as a group were
granted options to purchase 50,000 shares under the Plan in 1998.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending March 31, 1999 and recommends that stockholders vote for
ratification of such appointment. Notwithstanding the selection, the Board, in
its discretion, may direct the appointment of new independent auditors at any
time during the year, if the, Board feels that such a change would be in the
best interests of the Company and its stockholders. In the event of a negative
vote on ratification, the Board of Directors will reconsider its selection.
Arthur Andersen LLP has audited the Company's financial statements annually
since the Company's inception in 1992. Representatives of Arthur Andersen LLP
are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
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BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of June 30, 1998 for the following:
(i) each person or entity known by the Company to own beneficially more than 5%
of the outstanding shares of the Company's Common Stock, (ii) each director of
the Company, (iii) each of the Named Executive Officers (as defined below) and
(iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER(1) OWNED(2) BENEFICIALLY OWNED
------------------- ------------------- ---------------------
<S> <C> <C>
Albion J. Fitzgerald(3).......................... 3,581,250 20.5%
Joseph J. Fitzgerald............................. 1,439,717 8.2%
Robert B. Anderson............................... 655,069 3.7%
H. Kent Petzold(4)............................... 356,834 2.0%
Wallace D. Ruiz(5)............................... 137,123 *
Stuart A. Jacobson(6)............................ 37,131 *
Deborah Doyle McWhinney(7)....................... 27,500 *
All directors and executive officers as a group
(8 persons)(8)................................. 6,338,650 35.6%
</TABLE>
- ---------------
* Less than one percent.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock. Each
such person's address is c/o Novadigm, Inc., One International Blvd., Suite
200, Mahwah, NJ 07495.
(2) Includes shares which could be acquired upon exercise of options if such
options are exercisable within 60 days after June 30, 1998. Beneficial
ownership percentage is based on 17,470,823 shares outstanding as of June
30, 1998.
(3) Excludes 870,000 shares held by Shannon L. Ruiz, Albion J. Fitzgerald's
spouse, as to which Mr. Fitzgerald disclaims beneficial ownership.
(4) Includes options exercisable into an aggregate of 33,334 shares pursuant to
an option agreement between Mr. Petzold and a certain stockholder of the
Company.
(5) Includes 123,958 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of June 30, 1998 under the Company's 1992 Stock Option Plan.
(6) Mr. Jacobson resigned from the Company effective April 6, 1998.
(7) Includes 25,000 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of June 30, 1998 under the Company's 1992 Stock Option Plan.
(8) Includes options exercisable for 290,415 shares of Common Stock under the
Company's 1992 Stock Option Plan and options exercisable by H. Kent Petzold
for 33,334 shares of Common Stock pursuant to an agreement with a certain
stockholder of the Company.
8
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and each of
the other four most highly compensated executive officers who received in excess
of $100,000 during the last fiscal year (the "Named Executive Officers"),
information concerning compensation awarded to, earned by or paid for services
to the Company in all capacities during the fiscal years ended March 31, 1998,
1997 and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL -------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS OPTIONS ($)(1)
--------------------------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Albion J. Fitzgerald..................... 1998 $160,000 $ -- -- $ --
Chairman of the Board and 1997 160,000 -- -- --
Chief Executive Officer 1996 160,000 -- -- --
Robert Anderson.......................... 1998 160,000 150,000 -- --
Executive Vice President, Europe 1997 160,000 100,000 -- --
and Secretary 1996 139,167 -- -- --
Joseph J. Fitzgerald..................... 1998 160,000 -- -- --
Vice President, Development 1997 125,000 -- -- --
1996 125,000 -- -- --
Stuart A. Jacobson(2).................... 1998 179,167 150,000 -- --
Executive Vice President, North 1997 175,000 -- 260,000(3) --
America Operations 1996 120,000 150,000 100,000 --
Wallace D. Ruiz.......................... 1998 165,000 16,000 -- 1,038
Vice President, Chief Financial 1997 165,000 -- 175,000(4) 1,038
Officer and Treasurer 1996 146,875 -- 140,000 1,038
</TABLE>
- ---------------
(1) Represents term life insurance premiums paid by the Company.
(2) Mr. Jacobson resigned from the Company effective April 6, 1998.
(3) Includes options to purchase an aggregate of 200,000 shares of Common Stock
which were granted to Mr. Jacobson in connection with the Company's option
repricing program in exchange for options that had a higher exercise price.
(4) Includes options to purchase an aggregate of 140,000 shares of Common Stock
which were granted to Mr. Ruiz in connection with the Company's option
repricing program in exchange for options that had a higher exercise price.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant to the Named Executive Officers any options to
purchase the Company's Common Stock during the fiscal year ended March 31, 1998.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table shows stock options exercised by Named Executive
Officers during fiscal year 1998, including the aggregate value of gains on the
date of the exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options as of fiscal
year-end. Also reported are the values for "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock options and the year-end price of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT MARCH 31, 1998 AT MARCH 31, 1998(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albion J. Fitzgerald.......... -- -- -- -- -- --
Robert Anderson............... -- -- -- -- -- --
Joseph J. Fitzgerald.......... -- -- -- -- -- --
Stuart A. Jacobson(2)......... -- -- 154,999 210,001 -- --
Wallace D. Ruiz............... -- -- 105,730 69,270 -- --
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock on March 31, 1998
of $3.4375, less the exercise price of the option.
(2) Mr. Jacobson resigned from the Company effective April 6, 1998. All of Mr.
Jacobson's options terminated unexercised on May 6, 1998.
EMPLOYMENT CONTRACTS AND CHANGE-OF-CONTROL ARRANGEMENTS
In October 1996, the Company entered into a letter agreement with Stuart A.
Jacobson, Executive Vice President, North America Operations, pursuant to which
any unvested options held by Mr. Jacobson will accelerate and vest upon the
occurrence of a change in control. In February 1998, the Company and Mr.
Jacobson entered into an agreement pursuant to which the Company paid to Mr.
Jacobson $150,000 as an advance on his bonus for the fiscal year ending March
31, 1998. In connection with the termination of Mr. Jacobson's employment, in
April 1998, the Company and Mr. Jacobson entered into a Separation Agreement and
Mutual Release pursuant to which the Company agreed (i) to pay Mr. Jacobson his
base salary for a period of six months from the date of termination, (ii) to
extend and pay for, Mr. Jacobson (and his dependents) participation in the
Company's health insurance plan for a period of six months from the date of
termination, and (iii) to waive its rights to reimbursement of the bonus advance
in the amount of $150,000. Pursuant to the Separation Agreement and Mutual
Release, Mr. Jacobson agreed for a period of twelve months not to solicit
employees of the Company and not to contract with or be employed by any entity
that competes with the Company in the field of software development, sales and
distribution.
In February 1998, the Company entered into an offer letter with Michael
Carabetta, the Company's President and Chief Operating Officer, pursuant to
which, in the event the Company terminates Mr. Carabetta's employment without
cause, Mr. Carabetta will be entitled to receive an amount equal to 25% of the
bonus he would have earned had he been employed by the Company at the end of the
year for each completed quarter in which quarterly objectives were achieved. In
addition, if Mr. Carabetta's employment is terminated by the Company without
cause during the first three years of employment or Mr. Carabetta dies while
employed by the Company, Mr. Carabetta, or his survivors in the case of death,
will be entitled to exercise an option to purchase 100,000 shares plus up to
1/48 of the amount of the initial grant for each completed month of employment.
In addition in the event that Mr. Carabetta's employment is terminated as a
result of Involuntary or Constructive Termination other than for Cause at any
time during the period beginning 30 days before and ending 12 months after a
change of control, the vesting of Mr. Carabetta's stock options shall accelerate
in full.
In addition, in April 1997, the Company entered into employment agreement
with Wallace D. Ruiz, Chief Financial Officer and Treasurer, pursuant to which
Mr. Ruiz is entitled to receive an annual base salary
10
<PAGE> 13
of $165,000, subject to any increases as the Board of Directors shall authorize
from time to time in connection with an annual review, plus additional variable
compensation under the Company's executive compensation plan. Subject to certain
limitations, Mr. Ruiz's employment agreement provides that if he is terminated
at any time during the period beginning 90 days before and ending 12 months
after a Change of Control (the "Change of Control Period") then he shall be
entitled to receive, in the case of an Involuntary or Constructive Termination
other than for cause or as a result of his death or disability, severance pay in
an amount equal to 50% of his base compensation plus a pro rata share of the
bonus and commissions that he would have earned had he been employed by the
Company at the end of the year in which termination occurred and, in the case of
death or disability, such other benefits, if any, as may then be established
under the Company's then-existing benefit plans. In addition, any unvested
options held by him prior to termination shall (i) in the case of Involuntary or
Constructive Termination other than for cause, accelerate and become exercisable
in full or (ii) in the case of death or disability, accelerate and become
exercisable as to that number of additional shares that would have vested if he
had remained continuously employed for a period of six months following such
termination and shall remain exercisable for the period prescribed in the stock
option agreements. If Mr. Ruiz voluntarily resigns from the Company or if the
Company terminates Mr. Ruiz's employment for cause, he shall not be entitled to
receive severance or other benefits except for those, if any, as may be
established under the Company's benefit plans as existing at the time of
termination.
For the purposes of Mr. Ruiz's employment agreement and Mr. Carabetta's
offer letter, a Change of Control shall mean the occurrence of any of the
following: (i) any person becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the total voting power
represented by the Company's then outstanding voting securities; (ii) a merger
or consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent at least 50% of
the total voting power of the surviving entity immediately after such merger or
consolidation and, or (iii), in the case of Mr. Ruiz's agreement only, a change
in the composition of the Board of Directors occurring within a two-year period
as a result of which fewer than a majority of the directors are Incumbent
Directors (as defined in the employment agreement).
Involuntary or Constructive Termination is defined in Messrs. Carabetta's
and Ruiz's agreements to mean (i) without the executive's express written
consent, the assignment to the executive of any duties or the significant
reduction of the executive's duties, either of which is inconsistent with the
executive's position with the Company and responsibilities in effect immediately
prior to such assignment, or the removal of the executive from such position and
responsibilities; (ii) without the executive's express written consent, a
substantial reduction, without good business reasons, of the facilities and
perquisites available to the executive immediately prior to such reduction;
(iii) a reduction by the Company in the base compensation of the executive as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of employee benefits to which the executive is
entitled immediately prior to such reduction with the result that the
executive's overall benefits package is significantly reduced; (v) any purported
termination of the executive by the Company which is not effected for disability
or for cause, or any purported termination for which the grounds relied upon are
not valid; (vi) the failure of the Company to obtain the assumption of the
employment agreement by any successors; or (vii) without the executive's express
written consent, any relocation of his job or office more than 40 miles from the
then current job or office.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1997, the Company lent William Fitzgerald $94,717 evidenced by a
promissory note. Mr. Fitzgerald is an employee of the Company and the brother of
Albion Fitzgerald, the Chief Executive Officer of the Company. The promissory
note was due and is being repaid with scheduled payments and continues to bear
interest at a rate of 5.83%. The loan is secured by 35,000 shares of Common
Stock of the Company owned by Mr. Fitzgerald.
In July 1996, the Company loaned to Robert B. Anderson, the Company's
Executive Vice President and a director, the aggregate amount of $226,450. This
note bears interest at the rate of 6.04% per annum, is
11
<PAGE> 14
secured by shares of the Company's Common Stock and is due and payable July 21,
2000. In addition, in January 1997, the Company loaned Mr. Anderson $38,000.
This note also bears interest at a rate of 6.04% per annum and is due and
payable July 21, 2000.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers, Inc. Such officers, directors and ten-percent stockholders
are also required by SEC rules to furnish the Company with copies of all such
forms that they file. Based solely on its review of the copies of such forms
received by the Company, or written representations from certain reporting
persons that no Forms 5 were required for such persons, the Company believes
that during fiscal 1998 all Section 16(a) filing requirements applicable to its
officers, directors and ten-percent stockholders were complied with.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
INTRODUCTION
Prior to the Company's initial public offering that was completed in July
1995, the Board of Directors was primarily responsible for establishing and
administering the Company's compensation policies. In this role, and consistent
with the Company's status as a privately held corporation, the Board determined
the Chief Executive Officer's salary directly and reviewed and approved
employment compensation matters for other management personnel. The Board of
Directors, through a Stock Option Committee consisting at that time of two
directors who were also executive officers of the Company, also administered the
Company's 1992 Stock Option Plan.
The Compensation Committee of the Board of Directors (the "Committee") was
established in May 1995 and is composed only of outside directors. The
Compensation Committee currently consists of H. Kent Petzold and Deborah Doyle
McWhinney. In general, the Committee is responsible for reviewing and
recommending for approval by the Board of Directors the Company's compensation
practices, including executive salary levels and variable compensation programs.
With respect to the compensation of the Company's Chief Executive Officer, the
Committee reviews and submits to the Board for approval the various elements of
the Chief Executive Officer's compensation. With respect to other executive
officers, the Committee reviews the recommendations for such individuals
presented by the Chief Executive Officer and the basis therefor and approves or
modifies the compensation packages for such individuals. Base salary levels for
executive officers of the Company are generally established at or near the start
of each fiscal year, and final bonuses for executive officers are determined at
the end of each fiscal year based upon such individual's performance and the
performance of the Company.
EXECUTIVE COMPENSATION
The Company has a compensation program which consists of two principal
components: cash-based compensation, both fixed and variable, and equity-based
compensation. These two principal components are intended to attract, retain,
motivate and reward executives who are expected to manage both the short-term
and long-term success of the Company.
Cash-based compensation.
Base salary -- The salaries of each of the executive officers (other than
the Chief Executive Officer) for the year ended March 31, 1998 were approved by
the Board of Directors, upon the recommendation of the Chief Executive Officer.
12
<PAGE> 15
Bonuses -- The Company has a discretionary bonus pool pursuant to which
members of senior management, including the Company's executive officers, may
receive annual cash bonuses. The purpose of the bonuses is to motivate senior
management to perform to the best of their abilities in order to enhance
stockholder value through the achievement of corporate objectives. For the
fiscal year-ended March 31, 1998, the allocation of the bonus pool was
determined by the Chief Executive Officer, with the exception of his own bonus,
based upon subjective factors.
Equity-based compensation
Stock options -- Stock options are periodically granted to provide
additional incentive to executives and other key employees to maximize long-term
total return to the Company's stockholders. Options generally vest over a four
year period to encourage option holders to continue in the employ of the
Company. The exercise price of options is the market price on the date of grant,
ensuring that the option will acquire value only to the extent that the price of
the Company's Common Stock increases relative to the market price at the date of
grant.
Option grants to executive officers will be determined by the Compensation
Committee, in its discretion, or in some cases by the Stock Option Committee,
subject to the oversight of the Compensation Committee. In making its
determination, the Compensation Committee intends to consider the executive's
position at the Company, such executive's individual performance, the number of
options held (if any) and any other factors that the Compensation Committee may
deem relevant.
CHIEF EXECUTIVE OFFICER COMPENSATION
During the year ended March 31, 1998, Mr. Fitzgerald received a base salary
approved by the Board of Directors upon the recommendation of the Compensation
Committee. This salary represented no increase from the base salary received by
Mr. Fitzgerald for the prior fiscal year. The Compensation Committee recommended
that no bonus be awarded to the Chief Executive Officer for this fiscal year.
The Board believed that Mr. Fitzgerald, as Chief Executive Officer,
significantly and directly influenced the Company's overall performance.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162 of the Code limits the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly-compensated executive officers. The Company may deduct
such compensation only to the extent that during any fiscal year the
compensation paid to such individual does not exceed $1 million or meet certain
specified conditions (including stockholder approval). Based on the Company's
current compensation plans and policies and proposed regulations interpreting
this provision of the Code, the Company and the Committee believe that, for the
near future, there is little risk that the Company will lose any significant tax
deduction for executive compensation.
SUMMARY
The Compensation Committee of the Board of Directors intends that its
compensation program shall be fair and motivating and shall be successful in
attracting and retaining qualified employees and in linking compensation
directly to the Company's success. The Compensation Committee intends to review
this program on an ongoing basis to evaluate its continued effectiveness.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Deborah Doyle McWhinney
H. Kent Petzold
13
<PAGE> 16
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return with those of the Nasdaq Stock Market -- U.S. Index and the Hambrecht &
Quist Technology Index. The graph assumes that $100 was invested on July 14,
1995 (the effective date of the Company's initial public offering) in (i) the
Company's Common Stock, (ii) the Nasdaq Stock Market (U.S.) Index and (iii) the
Hambrecht & Quist Technology Index, including reinvestment of dividends. Note
that historic stock price performance is not necessarily indicative of future
stock price performance.
COMPARISON OF THIRTY-TWO MONTH CUMULATIVE TOTAL RETURN
AMONG NOVADIGM, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ STOCK
(FISCAL YEAR COVERED) NOVADIGM MARKET (U.S.) H&Q TECHNOLOGY
<S> <C> <C> <C>
7/14/95 100 100 100
3/31/96 101 111 99
3/31/97 28 123 116
3/31/98 23 187 172
</TABLE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: July 28, 1998
14
<PAGE> 17
NOVADIGM, INC.
1992 STOCK OPTION PLAN(1)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Outside Directors,
Consultants and Employees of the Company and its Subsidiaries and to promote the
success of the Company's business. Options granted under this Plan may be
incentive stock options (as defined under Section 422 of the Code) or
non-statutory stock options, as determined by the Administrator at the time of
grant of an option and subject to the applicable provisions of Section 422 of
the Code, as amended, and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Company" means Novadigm, Inc., a Delaware corporation.
(f) "Consultant" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services; the term
Consultant shall not include directors.
(g) "Continuous Status as an Employee, Consultant or Outside
Director" means the absence of any interruption or termination of the employment
relationship or status as an Employee, Consultant or Outside Director,
Consultant by the Company or any Subsidiary. Continuous Status as an Employee,
Consultant or Outside Director shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Board, including sick leave,
military leave, or any other
- --------
(1) As amended effective July 24, 1998.
<PAGE> 18
personal leave; provided, however, that for purposes of Incentive Stock Options,
such leave is for a period of not more than ninety (90) days, unless
reemployment, in the case of an Employee, upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (ii) in the case of transfers of an
Employee between locations of the Company or between the Company, its
Subsidiaries or its successor.
(h) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Exchange Act" means the United States Securities Exchange
Act of 1934, as amended.
(j) "Fair Market Value" means, as of any date, the value of
Stock determined as follows:
(i) If the Stock is listed on any established United
States 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, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange or the exchange with the greatest
volume of trading in Stock for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Stock;
(iii) If the Stock is listed on the Vancouver Stock
Exchange (but not on any established United States stock exchange or NASDAQ),
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported, as quoted on such system or exchange or
the exchange with the greatest volume of trading in Stock for the last market
trading day prior to the time of determination) as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;
(iv) In the absence of an established market for the
Stock, the Fair Market Value thereof shall be determined in
-2-
<PAGE> 19
good faith by the Administrator.
(k) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(l) "Insider" means
(i) director or executive or senior officer of the
Company,
(ii) a director or executive or senior officer of a
Subsidiary,
(iii) a person that has (A) direct or indirect beneficial
ownership of, (B) control or direction over, or (C) a combination of (A) and (B)
over securities of the Company carrying more than 10% of the voting rights
attached to all the issuer's outstanding voting securities, excluding, for the
purpose of the calculation of the percentage held, any securities held by the
person as underwriter in the course of a distribution, or
(iv) the Company itself where it has purchased, redeemed
or otherwise acquired any securities of its own issue, for so long as it
continues to hold those securities.
(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(n) "Officer" means an individual designated as an officer
pursuant to the Company's by-laws or is otherwise designated an officer by the
Company.
(o) "Option" means a stock option granted pursuant to the
Plan.
(p) "Optioned Stock" means the Stock subject to an Option.
(q) "Optionee" means an Outside Director or Employee who
receives an Option.
(r) "Outside Director" means a member of the Board of
Directors of the Company who is not an employee of the Company or a Subsidiary.
(s) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
-3-
<PAGE> 20
(t) "Plan" means this 1992 Stock Option Plan.
(u) "Share" means a share of the Stock, as adjusted in
accordance with Section 12 of the Plan.
(v) "Stock" means the Common Stock of the Company.
(w) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares of Stock which may be
optioned and sold under the Plan is 5,200,000. The shares may be authorized, but
unissued, or reacquired Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Administration With Respect to Directors and Officers.
With respect to grants of Options to Outside Directors and Employees who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or (B)
a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(b) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
-4-
<PAGE> 21
(c) Administration With Respect to Other Employees. With
respect to grants of Options to Consultants or Employees who are neither
directors nor officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the applicable legal requirements
relating to the administration of incentive stock option plans, if any, of
Delaware corporate and securities laws, the securities laws of British Columbia,
and of the Code (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws.
(d) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Stock, in
accordance with Section 2(i) of the Plan;
(ii) to select the Outside Directors, Consultants and
Employees to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the exercise price, any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or limitation regarding
any Option or other award and/or the shares of Stock relating thereto, based in
each case on such factors as the Administrator shall determine, in its sole
discretion);
(vii) to determine whether and under what circumstances an
Option may be bought-out for cash under subsection 9(e);
-5-
<PAGE> 22
(viii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period); and
(ix) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Stock covered by
such Option shall have declined since the date the Option was granted, provided
that if and for so long as the Stock is listed on the Vancouver Stock Exchange,
such reductions shall be approved in accordance with applicable policies of the
Vancouver Stock Exchange.
(e) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Outside
Directors, Consultants and Employees. Incentive Stock Options may be granted
only to Employees.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of Optionee's status as an Outside Director or
Consultant or of his employment relationship with the Company, as the case may
be, nor shall it interfere in any way with his right or the Company's right to
terminate his status as an Outside Director or Consultant or of his employment
relationship at any time, with or without cause.
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(e) The following limitations shall apply to grants of Options
to Employees:
(i) No Employee shall be granted, in any fiscal year of
the Company, Options to purchase more than 500,000 Shares.
(ii) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12(a).
(iii) If an Option is cancelled (other than in connection
with a transaction described in Section 12), the cancelled Option will be
counted against the limit set forth in Section 5(e)(i). For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect until June 9, 2002 unless sooner terminated under Section 14
of the Plan.
7. Term of Option. On and after June 4, 1998, the term of each Option
shall be the term stated in the Option Agreement or in amendments thereto, up to
a maximum of ten (10) years from the date of grant (even with respect to Options
granted prior to June 4, 1998 that are amended in writing); provided, however,
that with respect to all Options granted to Officers and Directors, the Option
term shall be no more than five (5) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) If granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) If granted to any other Employee, the per
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<PAGE> 24
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory notes, (4) other shares of the Company's capital stock
which (x) in the case of shares of the Company's capital stock acquired upon
exercise of an Option either have been owned by the Optionee for more than six
months on the date of surrender or were not acquired, directly or indirectly,
from the Company, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, (5) authorization from the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the
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<PAGE> 25
Plan. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised, and the
Optionee deemed to be a shareholder of the shares being purchased upon exercise,
when written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Relationship. In the event of termination
of an Optionee's Continuous Status as an Employee, Consultant or Outside
Director with the Company for any reason, such Optionee may, but only within
thirty (30) days (or such other period of time as is determined by the Board,
with such determination in the case of an Incentive Stock Option being made at
the time of grant of the Option and not exceeding thirty (30) days) after the
date of such termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise his Option
to the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee, Consultant or Outside Director as a
result of his or her disability, Optionee may, but only within six (6) months
from the date of such termination (and in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Nonstatutory Stock Option on the day three months and one day following
such termination. To the extent that Optionee is not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by
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<PAGE> 26
such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of death, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale. Subject to any required action by the shareholders of the Company,
the number of Shares covered by each outstanding Option, and the number of
Shares which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of Stock
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Stock resulting from
a stock split, reverse stock split, stock dividend, combination or
reclassification of the Stock, or any other increase or decrease in the number
of issued shares of Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by
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<PAGE> 27
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Stock subject to
an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent that an Option has not been previously
exercised, it will terminate immediately prior to the consummation of such
proposed action.
In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall be assumed or an equivalent Option substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
Option, the Option shall terminate.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Outside Director or Employee to whom
an Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
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<PAGE> 28
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, the Securities Act of British Columbia and the regulations
promulgated thereunder (if applicable), and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
16. Agreements. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
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<PAGE> 29
NOVADIGM, INC.
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of NOVADIGM, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated July 28, 1998, and hereby appoints Albion J.
Fitzgerald and Wallace D. Ruiz and each of them proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1998 Annual Meeting of
Stockholders of NOVADIGM, INC., to be held on Thursday, September 24, 1998 at
9:00 a.m., local time, at The Mandarin Oriental Hotel, 222 Sansome Street, San
Francisco, California, and any adjournment(s) thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side.
1. Election of directors:
Nominees: Albion J. Fitzgerald, Robert B. Anderson, H. Kent Petzold,
Deborah McWhinney
[ ] FOR all nominees listed (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above
_______________________________________________________________________
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee(s) name(s) on the line above.
2. Proposal to amend the Company's 1992 Stock Option Plan to increase the
number of shares reserved for issuance thereunder by 500,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of Arthur Anderson LLP as
independent auditors for the fiscal year ending March 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matter(s) that may properly come before the meeting and at any adjournment(s)
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO
THE COMPANY'S 1992 STOCK OPTION PLAN AND FOR THE RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSON LLP AS INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR.
Both of such attorneys or substitutes (if both are present and acting at said
meeting or any adjournment(s) thereof, or, if only one shall be present and
acting, then that one) shall have and may exercise all of the powers of said
attorneys-in-fact hereunder.
Dated: __________________________________
_________________________________________
Signature
_________________________________________
Signature
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.).
