<PAGE>
SCHEDULE 14A
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 Rule 14a-11(c) or Rule 14a-12
Banyan Systems Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
________________________________________________________________________________
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total Fee Paid:
________________________________________________________________________________
[_] Fee Paid Previously with Preliminary Materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form of schedule and the
date of its filing.
(1) Amount previously paid:
________________________________________________________________________________
(2) Form, schedule or registration statement no.:
________________________________________________________________________________
(3) Filing party:
________________________________________________________________________________
(4) Date filed:
________________________________________________________________________________
<PAGE>
BANYAN SYSTEMS INCORPORATED
120 FLANDERS ROAD
WESTBORO, MASSACHUSETTS 01581
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON MONDAY, MAY 12, 1997
The Annual Meeting of Stockholders of Banyan Systems Incorporated (the
"Company") will be held at the Westboro Marriott, 5400 Computer Drive,
Westboro, Massachusetts on Monday, May 12, 1997, at 3:00 p.m., local time, to
consider and act upon the following matters:
1. To elect two Class II Directors to serve for the ensuing three years.
2. To ratify and approve an amendment to the Company's 1992 Director
Stock Option Plan increasing from 100,000 to 200,000 the number of shares
of Common Stock of the Company authorized for issuance under such plan.
3. To ratify and approve an amendment to the Company's 1995 Employee
Stock Purchase Plan increasing from 450,000 to 750,000 the number of shares
of Common Stock of the Company authorized for issuance under such plan.
4. To ratify the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as the Company's independent accountants for the current fiscal
year.
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on March 24, 1997 will be
entitled to notice of and to vote at the meeting or any adjournment or
adjournments thereof. The stock transfer books of the Company remain open.
All Stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
RICHARD M. SPAULDING, Vice
President, Finance, Treasurer and
Assistant Clerk
Westboro, Massachusetts
April 10, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
BANYAN SYSTEMS INCORPORATED
120 FLANDERS ROAD
WESTBORO, MASSACHUSETTS 01581
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, MAY 12, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Banyan Systems Incorporated (the
"Company") for use at the Annual Meeting of Stockholders to be held at the
Westboro Marriott, 5400 Computer Drive, Westboro, Massachusetts on Monday, May
12, 1997 at 3:00 p.m., local time, and at any adjournment or adjournments of
the meeting. All proxies will be voted in accordance with the stockholders'
instructions, and if no choice is specified, the proxies will be voted in
favor of the matters set forth in the accompanying Notice of Meeting. Any
proxy may be revoked by a stockholder at any time before its exercise by
delivery of written revocation or a subsequently dated proxy to the Clerk of
the Company or by voting in person at the Annual Meeting.
At the close of business on March 24, 1997, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there
were outstanding and entitled to vote an aggregate of 19,353,029 shares of
common stock, $.01 par value per share, of the Company (the "Common Stock").
Stockholders are entitled to one vote per share.
The Company's Annual Report for 1996 was mailed to stockholders, along with
these proxy materials, on or about April 10, 1997.
THE COMPANY WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, PROVIDE WITHOUT
CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. REQUESTS SHOULD BE ADDRESSED TO INVESTOR RELATIONS,
BANYAN SYSTEMS INCORPORATED, 120 FLANDERS ROAD, WESTBORO, MASSACHUSETTS 01581.
VOTES REQUIRED
Under the Company's Amended and Restated By-laws (the "By-laws"), the
holders of a majority of the number of shares of Common Stock issued,
outstanding and entitled to vote on any matter shall constitute a quorum with
respect to that matter at the Annual Meeting. Shares of Common Stock present
in person or represented by proxy (including shares which abstain or do not
vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum is
present.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the
election of directors. The affirmative vote of the holders of a majority of
the shares of Common Stock present or represented and voting on the matter is
required for the approval of all other matters being presented for stockholder
approval at the Annual Meeting.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be voted in favor of such matter, and will also
not be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on the
matters being presented for stockholder approval at the Annual Meeting.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of January 31, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company during 1996 named in the Summary
Compensation Table set forth under the caption "Executive Compensation" below
and (iv) all directors and executive officers of the Company as of January 31,
1997 as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
---------------- ---------------- --------------
<S> <C> <C>
Pioneering Management Corporation(3)........... 1,691,500 9.9%
G. Leonard Baker(4)............................ 229,689 1.3%
John F. Burton(5).............................. 32,000 *
Jeffrey D. Glidden(6).......................... 108,077 *
A. Peter Hamilton.............................. 72,368 *
David C. Mahoney(7)............................ 583,680 3.4%
John M. Paul................................... 25,462 *
Fontaine K. Richardson(8)...................... 38,944 *
Ann C. Smith(9)................................ 2,500 *
Richard M. Spaulding(10)....................... 15,317 *
David N. Strohm(11)............................ 58,000 *
All directors and executive officers as a group
(9 persons)(12)............................... 1,140,575 6.5%
</TABLE>
- --------
* Less than 1%
(1) The inclusion herein of any shares of Common Stock deemed beneficially
owned does not constitute an admission of beneficial ownership of those
shares. Unless otherwise indicated, each person listed above has sole
voting and investment power with respect to the shares listed. For
purposes of this table, each person is deemed to beneficially own any
shares subject to stock options held by such person which are currently
exercisable or exercisable within 60 days after January 31, 1997.
(2) Number of shares deemed outstanding includes 17,303,719 shares issued and
outstanding as of January 31, 1997 plus any shares subject to options
held by the beneficial owners.
(3) Pioneering Management Corporation, investment adviser to The Pioneer
Group, Inc., has filed a Schedule 13G/A reporting beneficial ownership of
Common Stock as of January 9, 1997, and the foregoing information is
derived from such filing. Such stockholder reported that it shares
dispositive power with respect to 1,608,500 of such shares and that
Pioneering Management Corporation exercises sole dispositive power over
the remainder of the shares and exercises sole voting power over all of
such shares. The address of Pioneering Management Corporation is 60 State
Street, Boston, Massachusetts 02109.
(4) Includes 8,890 shares held of record by a limited partnership of which
Mr. Baker is a general partner and with respect to which Mr. Baker
exercises shared voting and dispositive power. Mr. Baker disclaims
beneficial ownership of such shares except as to his proportionate
pecuniary interest therein. Also includes 12,000 shares subject to stock
options held by Mr. Baker.
(5) Consists of 32,000 shares subject to stock options held by Mr. Burton.
(6) Includes 104,195 shares subject to stock options held by Mr. Glidden.
(7) Includes 186,083 shares subject to stock options held by Mr. Mahoney.
Also includes 30,000 shares held by Mr. Mahoney's wife, as to which
shares Mr. Mahoney disclaims beneficial ownership.
2
<PAGE>
(8) Includes 12,000 shares subject to stock options held by Mr. Richardson.
(9) Includes 2,500 shares subject to stock options held by Ms. Smith.
(10) Includes 13,133 shares subject to stock options held by Mr. Spaulding.
(11) Includes 12,000 shares subject to stock options held by Mr. Strohm.
(12) Includes the shares and shares subject to stock options listed in Notes
(4)-(11) above.
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors is classified into
three classes (designated Class I Directors, Class II Directors and Class III
Directors), with members of each class holding office for staggered three-year
terms. There are currently three Class I Directors, whose terms expire at the
1999 Annual Meeting of Stockholders, two Class II Directors, whose terms
expire at the 1997 Annual Meeting of Stockholders, and two Class III
Directors, whose terms expire at the 1998 Annual Meeting of Stockholders (in
all cases subject to the election and qualification of their successors and to
their earlier death, resignation or removal).
The persons named in the enclosed proxy will vote to elect John F. Burton
and Fontaine K. Richardson as Class II Directors, unless authority to vote for
the election of either or both of them is withheld by marking the proxy to
that effect. Both of the nominees are currently Class II Directors of the
Company. Each of the nominees has indicated his willingness to serve, if
elected, but if either should be unable or unwilling to serve, proxies may be
voted for a substitute nominee designated by the Board of Directors.
DIRECTORS AND NOMINEES
The following discussion sets forth, for each director of the Company
(including the two nominees for Class II Director), his name and age, his
positions with the Company, his principal occupation and business experience
during the past five years, the names of the other publicly held corporations
of which he serves as a director and the year during which he first became a
director of the Company:
NOMINEES FOR CLASS II DIRECTORS
JOHN F. BURTON, 45, has been a director of the Company since 1991 and
Chairman of the Board since November 1996. Mr. Burton has been the President
of Burton Technology Partners, Ltd., an investment and strategic planning
company since 1996. From 1995 until 1996 he served as the President and Chief
Executive Officer of NatSystems International, Inc., a software company. From
1989 until 1995, he was the President, Chief Executive Officer and a director
of LEGENT Corporation, a public systems management software company. He is a
director of MapInfo Corporation, Netrix, Inc. and Network Imaging Corp.
FONTAINE K. RICHARDSON, 55, has been a director of the Company since 1984.
He has been a General Partner of Eastech Management Company, a private venture
capital firm, since 1983. He is a director of Mentor Graphics Corporation.
3
<PAGE>
CLASS I DIRECTORS (TERMS EXPIRE AT 1999 ANNUAL MEETING)
G. LEONARD BAKER, JR., 54, has been a director of the Company since its
inception in 1983. He has been a General Partner of Sutter Hill Ventures, A
California Limited Partnership, a venture capital firm, since 1974.
WILLIAM P. FERRY, 44, has been a director of the Company and served as
President and Chief Executive Officer since February 1997. From August 1990 to
February 1997 he served in various management capacities at Wang Laboratories,
Inc., including President, Services Division from July 1994 until February
1997 and Senior Vice President and General Manager, North American Operations
from January 1993 until July 1994.
DAVID C. MAHONEY, 52, a founder of the Company, has been a director of the
Company since the Company's inception in 1983. He served as Chairman of the
Board and Chief Executive Officer from inception until November 1996 and
served as President from inception until April 1987, from May 1989 until June
1992 and from January 1995 to February 1997. He is a director of Applix, Inc.
CLASS III DIRECTORS (TERMS EXPIRE AT 1998 ANNUAL MEETING)
A. PETER HAMILTON, 57, has been a director of the Company since July 1992.
Mr. Hamilton served as President and Chief Operating Officer of the Company
from June 1992 until December 1994 and, in 1995, temporarily served the
Company in a business development role. From April 1974 until June 1992, he
served in various management roles at Hewlett Packard Company, a manufacturer
of computer hardware, including General Manager, Colorado Network
Division/System Management Division from November 1988 until June 1992 and
General Manager, Technical Computer Group Marketing from July 1987 until
November 1988.
DAVID N. STROHM, 48, has been a director of the Company since its inception
in 1983. He has been a General Partner of Greylock Ventures Limited
Partnership, Greylock Investments Limited Partnership, Greylock Capital
Limited Partnership, Greylock Limited Partnership and Greylock Equity Limited
Partnership, each a venture capital fund, since 1983, 1985, 1987, 1990 and
1994, respectively. He has been employed by Greylock Management Corporation, a
venture capital management company, since 1980. He is a director of MDL
Information Systems, Inc., Forte Software, Inc. and Legato Systems, Inc.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
reviews the Company's internal accounting control policies and procedures,
considers and recommends the selection of the Company's independent
accountants, reviews and approves any major accounting policy changes
affecting the Company's operating results and provides the opportunity for
direct contact between the Company's independent accountants and the Board.
The Audit Committee met four times during 1996. The current Audit Committee
members are Messrs. Baker and Richardson.
The Company has a standing Compensation Committee of the Board of Directors,
which provides recommendations to the Board regarding compensation programs of
the Company and administers the Company's employee benefit plans. The
Compensation Committee met eight times during 1996. The current members of the
Compensation Committee are Messrs. Burton, Richardson and Strohm.
The Board of Directors met seven times during the 1996 fiscal year. Each
director attended at least 75% of the aggregate of the number of Board
meetings and the number of meetings held by all committees on which he then
served.
4
<PAGE>
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company are
paid a retainer of $4,000 per year. In addition, the Company reimburses all of
its directors for their out-of-pocket expenses in connection with performing
their duties as directors of the Company.
Under the terms of the Company's 1992 Director Stock Option Plan, as amended
(the "Director Plan"), directors of the Company who are not officers or
employees of the Company or of any subsidiary of the Company are entitled to
receive nonstatutory options to purchase shares of Common Stock. During 1996,
Messrs. Baker, Burton, Hamilton, Richardson and Strohm were each granted an
annual option for 3,000 shares of Common Stock at an exercise price of $8.50
per share. On the date of the 1997 Annual Meeting of Stockholders, each of the
Company's non-employee directors will receive an annual option with an
exercise price equal to the then fair market value of the Common Stock to
purchase 3,000 shares of Common Stock. For further information concerning the
Director Plan, see "Ratification and Approval of Amendment to 1992 Director
Stock Option Plan" below.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer, the Company's three
other executive officers during the year ended December 31, 1996 who were
serving as executive officers of the Company on December 31, 1996 and one
former executive officer (the "Named Executive Officers"):
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(2) AWARDS
---------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OPTIONS COMPENSATION
POSITION(1) YEAR ($) ($)(3) (#)(4) (#)(5)
------------------ ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David C. Mahoney........... 1996 $250,000 $ 0 30,000 $ 1,333
Vice Chairman and Chief
Executive Officer 1995 $258,278 $ 0 40,000 $ 1,250
1994 $225,000 $79,584 0 $ 1,220
Jeffrey D. Glidden......... 1996 $200,000 $50,000 125,000 $ 2,706
Senior Vice President,
Administration, 1995 $188,086 $ 0 10,000 $ 2,893
Chief Financial Officer
and acting President 1994 $150,000 $80,000 25,000 $ 2,970
and Chief Operating
Officer
Ann C. Smith(6)............ 1996 $130,000 $38,395 35,000 $ 2,689
Vice President, Human
Resources 1995 $ 67,610 $26,000 30,000 $ 0
Richard M. Spaulding(7).... 1996 $120,000 $19,680 5,000 $ 954
Vice President, Finance,
and Treasurer 1995 $104,423 $10,500 20,500 $ 920
John M. Paul(8)............ 1996 $253,413 $ 514 20,000 $67,174(9)
Former Senior Vice
President, Coordinate.com 1995 $219,234 $25,000 50,000 $ 3,354
1994 $ 80,769 $66,875(10) 100,000 $ 1,857
</TABLE>
- --------
(1) Lists principal position with the Company as of December 31, 1996.
(2) Excludes perquisites and other personal benefits because the aggregate
amount of such compensation was in all cases less than the lesser of
either $50,000 or 10% of the total of annual salary and bonus for the
Named Executive Officer in question.
(3) Unless otherwise noted, represents amounts earned under the Company's
bonus or profit-sharing programs.
(4) Reflects the grant of options to purchase Common Stock. The Company has
never granted stock appreciation rights.
(5) Represents Company contributions to the Company's 401(k) Plan.
(6) Ms. Smith joined the Company as an executive officer in July 1995.
(7) Mr. Spaulding became an executive officer in December 1995.
(8) Mr. Paul served as an executive officer of the Company from August 1994 to
October 1996.
(9) In addition to Company contributions to the Company's 401(k) Plan,
includes $56,250 in severance payments and $7,788 in vacation pay.
(10) In July 1994, the Company granted to Mr. Paul an option to purchase
25,000 shares of Common Stock at an exercise price of $2.00 per share, of
which 5,000 shares were fully vested. The amount shown consists of the
difference between the exercise price and the fair market value of the
Common Stock on the date of grant ($15.375) with respect to the fully
vested shares.
6
<PAGE>
Option Grants, Exercises and Year-End Values
The following tables set forth certain information concerning option grants
and exercises during the fiscal year ended December 31, 1996 to or by the
Named Executive Officers and the number and value of the unexercised options
held by such persons on December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
-------------------------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION -----------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% ($) 10% ($)
---- ---------- ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David C. Mahoney........ 30,000 2.7% $ 8.00 3/18/06 $150,935 $382,498
Jeffrey D. Glidden...... 125,000(4) 11.1% $ 3.75 11/6/06 $307,520 $767,330
Ann C. Smith............ 5,000 0.4% $6.875 7/19/06 $ 21,618 $ 54,785
30,000 2.7% $ 3.75 11/6/06 $ 82,968 $198,749
Richard M. Spaulding.... 5,000 0.4% $6.875 7/19/06 $ 21,618 $ 54,785
John M. Paul............ 20,000 1.8% $ 8.00 3/18/06(5) $100,623 $254,999
</TABLE>
- --------
(1) Unless otherwise indicated, each option vests in four equal annual
installments beginning one year after the date of grant. Vesting of
certain of the options is accelerated under specified circumstances. See
"Other Matters," below.
(2) Represents the fair market value on the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised.
(4) Vests in four equal annual installments beginning on November 6, 1997,
provided that the vesting of the November 1999 installment of this option
will be immediately accelerated on the date the closing price of the
Common Stock on the Nasdaq National Market is at least $8.00 per share and
the vesting of the November 2000 installment will be immediately
accelerated on the date such closing price is at least $12.00 per share.
(5) This option was amended subsequent to grant to provide for expiration on
June 30, 1997. See "Other Matters," below.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
EXERCISE REALIZED ------------------------------ -------------------------
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------------ -------------------------
<S> <C> <C> <C> <C>
David C. Mahoney........ 0 $ 0 175,000/ 60,000 $159,000/$ 0
Jeffrey D. Glidden...... 0 $ 0 104,195/127,625 $ 35,660/$93,751
Ann C. Smith............ 0 $ 0 2,500/ 42,500 $ 0/$22,500
Richard M. Spaulding.... 0 $ 0 15,363/ 22,216 $ 833/$ 0
John M. Paul............ 20,000 $85,940 0/ 50,000 $ 0/$ 0
</TABLE>
- --------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Based on the fair market value of the Common Stock on December 31, 1996
($4.50), less the option exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Burton, Richardson and Strohm served as members of the Compensation
Committee during the Company's last fiscal year. In consideration of the
active operational involvement of Mr. Burton as Chairman of the Board of the
Company, in November 1996 the Company entered into an agreement with Burton
Technology Partners, Ltd. ("BTP"), a company wholly-owned by Mr. Burton.
Pursuant to this agreement, BTP agreed to provide consulting and related
services to the Company at a cost to the Company of $2,000 per day of service
plus reasonable expenses. Such services are to be performed by Mr. Burton
unless otherwise agreed by the parties. The agreement is for a term of six
month beginning October 21, 1996, and automatically renews for successive
three-month periods unless terminated by either party. During 1996, no
payments were made by the Company to BTP. In addition, on November 6, 1996,
the Company granted to Mr. Burton an option to purchase 100,000 shares of
Common Stock at an exercise price of $3.75 per share, representing the fair
market value on the date of grant. The option vests eighteen months subsequent
to the date of grant, subject to acceleration under certain conditions based
upon a change in control of the Company, and expires ten years from the date
of grant.
OTHER MATTERS
In November 1996, the Company entered into a Retention and Severance
Agreement with Mr. Glidden. Pursuant to the terms of the Retention and
Severance Agreement, the Company canceled certain stock options held by Mr.
Glidden and issued to him an option, which is intended to be an incentive
stock option to the extent permitted by the Internal Revenue Code of 1986, as
amended (the "Code"), to purchase 125,500 shares of Common Stock of the
Company at a per share exercise price of $3.75 per share (the fair market
value of the Common Stock on the date of grant), cumulatively exercisable with
respect to 31,250 shares on November 6 of each of 1997, 1998, 1999 and 2000 or
earlier if the trading price of the Company's Common Stock meets specified
targets. The Retention and Severance Agreement also provides for bonus
payments to Mr. Glidden on December 31, 1996 and March 31, 1997, each in the
amount of $25,000. Pursuant to the terms of the Retention and Severance
Agreement, in the event of Mr. Glidden's involuntary termination or a change
in control of the Company causing a material reduction in his
responsibilities, Mr. Glidden will receive from the Company an amount equal to
his then current annual salary, bonuses and other benefits plus any then
accrued bonus amounts. In such event, 62,500 of the options granted to Mr.
Glidden under the Retention and Severance Agreement shall become immediately
vested and will remain exercisable for a period of twelve months.
8
<PAGE>
In January 1997, each of Ms. Smith and Mr. Spaulding entered into a Senior
Executive Termination Benefits Agreement, pursuant to which the executive
agreed to remain employed with the Company during any specified change in
control of the Company. In the event of a termination of the executive within
one year of such a change in control of the Company, other than for cause,
death or disability, the Company will pay certain compensation to the
executives and accelerate the vesting of certain options, as follows. In the
case of Ms. Smith, the Company will (i) pay the sum of six months salary and
bonuses, plus up to an additional six months salary and bonuses in the event
Ms. Smith has not accepted other employment within six months of termination,
(ii) continue certain insurance benefits and (iii) accelerate the vesting of
15,000 shares subject to Ms. Smith's November 6, 1996 option grant, which
options will remain exercisable for 12 months following termination. In the
case of Mr. Spaulding, the Company will (i) pay the sum of three months
salary, plus up to an additional three months salary in the event Mr.
Spaulding has not accepted other employment or assumes independent contractor
status within three months of termination, (ii) continue certain insurance
benefits and (iii) accelerate the vesting of all incentive stock options that
would have vested within six months of the termination date.
In October 1996, the Company entered into a Separation Agreement and Release
and Waiver of Claims with Mr. Paul in connection with Mr. Paul's resignation
from his position with the Company as Senior Vice President, Coordinate.com,
effective November 1, 1996. Under the Separation Agreement, the Company agreed
to pay Mr. Paul an amount equal to $56,250 and, if Mr. Paul did not accept
other employment as of February 1, 1997, to pay him his regular salary until
the earlier of his re-employment or June 30, 1997. The Company also agreed to
release Mr. Paul from a $125,000 relocation repayment obligation if he
complies with the terms of the Separation Agreement. The Separation Agreement
also provided for the acceleration of the vesting on November 30, 1996 of
10,000 shares of nonstatutory stock options held by Mr. Paul and the
expiration on February 1, 1997 of the other nonstatutory stock options held by
Mr. Paul. All other vested stock options held by Mr. Paul shall be exercisable
during the period of June 1, 1997 through June 30, 1997 and will terminate
thereafter.
9
<PAGE>
REPRICING OF OPTIONS
The following table sets forth certain information concerning options
granted to the Company's executive officers that were repriced from the time
of the Company's initial public offering in August 1992 through December 31,
1996.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF NUMBER OF ORIGINAL
SECURITIES SHARES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING UNDERLYING OF STOCK AT PRICE AT TIME NEW REMAINING AT
OPTIONS OPTIONS AFTER TIME OF OF EXERCISE DATE OF
NAME DATE REPRICED (#) REPRICING (#) REPRICING ($) REPRICING ($) PRICE ($) REPRICING(1)
---- -------- ------------ ------------- ------------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey D. Glidden...... 11/6/96 70,000 125,000 $3.75 $ 8.00 $3.75 112
25,000 $15.37 92
10,000 $17.37 99
Ann C. Smith............ 11/6/96 10,000 30,000 $3.75 $12.44 $3.75 106
10,000 $10.88 108
Richard M. Spaulding.... 10/25/95 2,000 2,000 $7.00 $20.75 $7.00 85
5,000 5,000 $7.00 $14.50 $7.00 92
2,500 2,500 $7.00 $14.25 $7.00 104
7,000 7,000 $7.00 $14.13 $7.00 116
10,000 10,000 $7.00 $10.88 $7.00 121
</TABLE>
- --------
(1) Data is presented in terms of months.
COMPENSATION COMMITTEE REPORT ON REPRICING OF OPTIONS
On November 6, 1996, in consideration of Mr. Glidden's service as the acting
President and Chief Operating Officer of the Company, the Board of Directors
of the Company approved the Retention and Severance Agreement with Mr. Glidden
discussed above, pursuant to which the Company granted Mr. Glidden new options
to purchase 125,000 shares of Common Stock at $3.75 per share in exchange for
the cancellation of options to purchase 105,000 shares of Common Stock ranging
in exercise price from $8.00 to $17.37. In addition, the Board of Directors
approved a repricing of certain options held by Ms. Smith, the Company's Vice
President, Human Resources.
Because of a decline in market value of the Company's Common Stock, Mr.
Glidden's and Ms. Smith's outstanding options were exercisable at prices that
exceeded the market value of the Common Stock. In view of this decline, in
keeping with the Company's philosophy of utilizing equity incentives to
motivate and retain qualified employees, and as a result of Mr. Glidden's
service as acting President and Chief Operating Officer and the contributions
of Mr. Glidden and Ms. Smith in managing the human resource and other
components of the Company's 1996 restructuring, the Compensation Committee
felt that it was important to regain the incentive intended to be provided by
Mr. Glidden's and Ms. Smith's options.
John F. Burton
Fontaine K. Richardson
David N. Strohm
10
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by persons required to
file reports ("Reporting Persons") pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, ("Exchange Act") or written representations
from certain Reporting Persons that no Form 5 filing was required for such
person, the Company believes that during 1996, all filings required to be made
by its Reporting Persons were timely made in accordance with the requirements
of the Exchange Act, except as follows: Messrs. Hamilton, Richardson and
Strohm each filed a late Form 5 reporting their April 1996 stock options
granted under the Director Plan; Mr. Burton filed a late Form 5 reporting his
April and November 1996 stock option grants; Mr. Glidden filed a late Form 5
reporting his November 1996 option repricings; Ms. Smith filed a late Form 5
reporting her November 1996 option repricings and July option grant; and
Messrs. Mahoney and Spaulding each filed a late Form 5 reporting their 1996
stock option grants.
11
<PAGE>
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, which is currently comprised of three Directors who
are not employees of the Company. The Compensation Committee is responsible
for determining the compensation of each executive officer and recommending
such compensation to the Board of Directors.
The Company's executive compensation program is designed to align executive
compensation with the Company's business objectives and individual performance
and to enable the Company to attract, retain and reward executive officers who
contribute, and are expected to continue to contribute, to the Company's long-
term success. In establishing executive compensation, the Compensation
Committee is generally guided by the following principles: (i) the total
compensation payable to executive officers should be competitive with the
compensation paid by comparable companies for officers in comparable
positions; (ii) individual compensation should include components that reflect
the performance of the individual, teamwork and the achievement of corporate
objectives; and (iii) the Company should strive to achieve equitable
relationships both between the compensation of individual officers and between
the compensation of officers and other employees throughout the organization.
The compensation of the Company's executive officers, including the Chief
Executive Officer and the other Named Executive Officers, consists of a
combination of base salary, merit and other bonuses, profit bonuses and
equity-based compensation.
Base Salary. The Compensation Committee subjectively determines the base
salary for all executives, including the Chief Executive Officer, by reviewing
the salaries for competitive positions in the Company's industry, the
historical compensation levels of the executives and the individual
performance of the executives in the preceding year. In addition, officers
whose primary responsibilities are in the areas of sales and marketing are
entitled to receive commissions based on sales. In fixing the base salary of
all executive officers in 1996, the Compensation Committee reviewed a survey
prepared for the Company by an outside consultant showing salary data for
companies with revenues comparable to those of the Company. The survey
contained information obtained from a broad set of participating companies,
including certain companies contained in the CRSP Nasdaq Total Return Index
for Nasdaq Computer & Data Processing Service Stocks. The Compensation
Committee considered the data in such survey as a basis for its subjective
assessment that the salaries established by it for 1996, including the base
salary of Mr. Mahoney (which was decreased from $258,278 to $250,000), were
comparable to the median salaries of executive officers of companies with
revenues similar to those of the Company.
Merit and Other Bonuses. In 1996, the Compensation Committee determined to
continue to implement the Company's Officer Merit Program in order to provide
specific incentives for the individual accomplishment of management
objectives. Under this program, at the beginning of the fiscal year, specific
objectives for each executive officer are established based on discussions
between the President of the Company and such individual officer. On an annual
basis, the President and the officer meet and, based on a discussion of the
individual's performance during the preceding year, the President makes a
subjective determination as to the extent to which the individual has
accomplished his specific objectives and presents this determination to the
Compensation Committee for review. In the case of Mr. Mahoney, such
determination is made on an annual basis by the Compensation Committee. Under
the program, each individual executive officer would receive, on an annual
basis, targeted merit bonuses totalling approximately 15% of his or her base
salary (or 10% in the case of Mr. Mahoney) if the officer achieved his or her
individual performance objectives. The specific goals
12
<PAGE>
established for Mr. Mahoney in 1996 under this program included the further
development of the Company's business strategy, target markets, product vision
and strategic alliances and the expansion of the Company's customer service
and support business. In fiscal 1996, Ms. Smith and Mr. Spaulding received
bonuses aggregating approximately 16.6% of their aggregate base salaries. In
addition, Mr. Glidden received a $50,000 bonus pursuant to the terms of his
November 1996 Retention and Severance Agreement with the Company. See "Other
Matters" and "Compensation Committee Report on Repricing of Options," above.
Officer Revenue and Profit Sharing Program. In 1996, the Compensation
Committee redesigned the Company's Officer Profit Sharing Program to include a
revenue achievement component, reflecting the belief of the Compensation
Committee that a portion of each executive officer's compensation should be
tied to the achievement by the Company of its revenue and operating profit
goals. Bonuses under this program are calculated as a percentage of base
salary and are paid semiannually based upon the achievement of the revenue and
operating profit objectives set forth in the operating plan approved by the
Board of Directors for 1996. Under this program, each officer would receive a
bonus of up to 35% of his or her base salary (or 50% in the case of Mr.
Mahoney) if the Company achieved its revenue and operating profit goals for
1996. In fiscal 1996, Ms. Smith and Mr. Spaulding received bonuses aggregating
approximately 6.7% of their aggregate base salaries.
Stock-Based Compensation. Awards of stock options under the Company's stock
option plans are designed to more fully align the long-term interests of the
Company's executives and its stockholders and to assist in the retention of
executives. The Compensation Committee selects the executive officers, if any,
to receive stock options and subjectively determines the number of shares
subject to each option. The size of option grants is generally intended by the
Compensation Committee to reflect the executive's position with the Company
and his contributions to the Company. The Compensation Committee considered
options awarded in prior years when determining options for 1996. The option
program generally uses a four-year vesting period to encourage key employees
to continue in the employ of the Company. Options are generally granted at
market value and thus will have value to an executive only if the Company's
stock price increases. Options to purchase an aggregate of 210,000 shares of
Common Stock were awarded to the Company's executive officers (other than Mr.
Mahoney) in 1996. Options to purchase 30,000 shares, which vest over a nine-
year period, subject to acceleration of vesting upon the satisfaction of
certain performance criteria relating to the Company's stock price, were
granted to Mr. Mahoney. The grant of these options to Mr. Mahoney reflects his
contributions to the Company in 1996, including management of the Company's
restructuring.
The Company has also adopted the 1995 Employee Stock Purchase Plan, which is
available to all eligible employees of the Company, including executive
officers. This Plan generally permits employees to purchase shares of Common
Stock, through payroll deductions, at a price equal to 85% of the fair market
value of the Common Stock at the beginning or end of the applicable purchase
period, whichever is lower.
Compliance with Internal Revenue Code Section 162(m). The Company does not
believe that Section 162(m) of the Code, which disallows a tax deduction to
public companies for certain compensation in excess of $1 million paid to the
company's Chief Executive Officer and four other most highly compensated
executive officers, will generally have an effect on the Company. The
Committee intends to periodically review the potential consequences of Section
162(m) and may structure the performance-based portion of its executive
compensation to comply with certain exemptions in Section 162(m).
John F. Burton
Fontaine K. Richardson
David N. Strohm
13
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative return of (i) the CRSP Total Return
Index for the Nasdaq National Market (U.S.) (the "CRSP Nasdaq Index") and (ii)
the CRSP Nasdaq Total Return Industry Index for Nasdaq Computer & Data
Processing Service Stocks (the "CRSP Computer & Data Index"). This graph
assumes the investment of $100 on August 7, 1992, the date on which the
Company's Common Stock was first publicly traded, in the Company's Common
Stock, the CRSP Nasdaq Index and the CRSP Computer & Data Index and assumes
dividends are reinvested. Measurement points are August 7, 1992 and the last
trading days for the fiscal years ending December 31, 1992, 1993, 1994, 1995
and 1996.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/7/92(1) 12/31/92 12/31/93 12/30/94 12/29/95 12/29/96
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Banyan Systems Incorporated $100.0 $168.0 $120.0 $143.0 $ 82.0 $ 36.0
CRSP Nasdaq Index $100.0 $118.0 $136.6 $133.5 $186.1 $227.8
CRSP Computer & Data Index $100.0 $123.1 $130.2 $158.1 $240.8 $297.2
</TABLE>
- --------
(1) The Company's Common Stock was first registered under Section 12 of the
Exchange Act on August 6, 1992. Public trading of the Common Stock
commenced on August 7, 1992.
14
<PAGE>
RATIFICATION AND APPROVAL OF AMENDMENT
TO 1992 DIRECTOR STOCK OPTION PLAN
The Company's 1992 Director Stock Option Plan (the "Director Plan") was
adopted by the Board of Directors on June 23, 1992 and approved by the
stockholders of the Company on July 24, 1992. The purpose of the Director Plan
is to align the interests of the directors of the Company with the overall
long term success of the Company by providing the Company's directors who are
not employees of the Company with an economic incentive tied to the Company's
equity performance. Currently, a total of 100,000 shares of Common Stock may
be issued under the Director Plan. As of February 1, 1997, the number of
shares available for future grant and not subject to outstanding options under
the Director Plan was 28,000 and will be reduced to 13,000 following the
Annual Meeting. Accordingly, on February 27, 1997, the Board of Directors
adopted, subject to stockholder approval, an amendment to the Director Plan
increasing the number of shares of Common Stock available for issuance under
the Director Plan from 100,000 to 200,000 shares (subject to adjustment for
certain changes in the Company's capitalization).
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT TO THE DIRECTOR PLAN IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A
VOTE FOR THIS PROPOSAL.
The following is a brief summary of the provisions of the Director Plan.
This summary is qualified in all respects by reference to the full text of the
Director Plan, copies of which are available upon request to the Treasurer of
the Company.
Description of Awards
The Director Plan provides that initial options are granted to each eligible
Director upon his or her initial election as a Director. Each initial option
covers 15,000 shares of Common Stock and vests in four equal installments
beginning on the first anniversary of the date of grant. Annual options are
also granted to each eligible Director on the date of each Annual Meeting of
Stockholders of the Company. Each annual option covers 3,000 shares of Common
Stock and vests twelve months after the date of grant (or, if earlier, the day
prior to the first Annual Meeting of Stockholders of the Company following the
date of grant). The exercise price of options granted upon the Director Plan
equals the fair market value of the Common Stock on the date of grant. On
March 17, 1997, the closing price of the Common Stock on the Nasdaq National
Market was $2.938 per share.
Administration
The Director Plan is administered by the Company's Board of Directors. The
Board of Directors may suspend or discontinue the Director Plan or review or
amend it in any respect whatsoever; provided, however, that no amendment may
be effected without approval of the stockholders of the Company if such
approval is required under any applicable listing, tax or regulatory
requirement.
Eligibility
Pursuant to the terms of the Director Plan, Directors of the Company who are
not officers or employees of the Company or of any subsidiary of the Company
are entitled to receive nonstatutory options to purchase shares of Common
Stock. The following table sets forth the benefits to be received under the
Director Plan during 1997.
15
<PAGE>
NEW PLAN BENEFITS
PLAN BENEFITS IN 1997 UNDER THE DIRECTOR PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE NUMBER OF
NAME AND POSITION(1) ($)(2) SHARES
-------------------- ------------ ---------
<S> <C> <C>
David C. Mahoney........................................
Vice Chairman and Chief Executive Officer -- --
Jeffrey D. Glidden......................................
Senior Vice President, Administration, Chief Financial
Officer and acting President and Chief Operating
Officer -- --
Ann C. Smith............................................
Vice President, Human Resources -- --
Richard M. Spaulding....................................
Vice President, Finance, and Treasurer -- --
John M. Paul............................................
Former Senior Vice President, Coordinate.com -- --
Executive Group......................................... -- --
Non-Executive Director Group............................ $ 0 15,000
Non-Executive Officer Employee Group.................... -- --
</TABLE>
- --------
(1) Lists principal position with the Company as of December 31, 1996.
(2) Represents the difference between the exercise price of the options and
the fair market value of the underlying shares of Common Stock on the date
of grant.
Under the Director Plan, since its adoption, (i) Messrs. Burton, Richardson,
Baker, Hamilton and Strohm have received options to purchase an aggregate of
15,000, 15,000, 15,000, 3,000 and 15,000 shares, respectively, (ii) John
Shane, a former non-employee director of the Company, has received options to
purchase an aggregate of 9,000 shares, (iii) the current directors who are not
executive officers as a group have received options to purchase an aggregate
of 63,000 shares and (iv) no options have been granted to any Named Executive
Officer, any current executive officer, any associate of any director or
executive officer or any current employee of the Company.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to the stock options
granted under the Director Plan and with respect to the sale of Common Stock
acquired under the Director Plan.
Non-Statutory Options. A Director will not recognize taxable income upon the
grant of a non-statutory option. However, a Director who exercises a non-
statutory option generally will recognize ordinary compensation income in an
amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option (the "NSO Stock") on the Exercise
Date over the exercise price. With respect to any NSO Stock, a Director will
have a tax basis equal to the exercise price plus any income recognized upon
the exercise of the option. Upon selling NSO Stock, a Director generally will
recognize capital gain or loss in an
16
<PAGE>
amount equal to the excess of the sale price of the NSO Stock over the
Director's tax basis in the NSO Stock. This capital gain or loss will be a
long-term capital gain or loss if the Director has held the NSO Stock for more
than one year prior to the date of the sale.
Tax Consequences to the Company. The grant of a stock option under the
Director Plan will have no tax consequences to the Company. Moreover, in
general, the sale of any Common Stock acquired under the Director Plan will
have no tax consequences to the Company. The Company generally will be
entitled to a business-expense deduction, however, with respect to any
ordinary compensation income recognized by a Director under the Director Plan.
Any such deduction will be subject to the limitations of Section 162(m) of the
Code.
RATIFICATION AND APPROVAL OF AMENDMENT
TO 1995 EMPLOYEE STOCK PURCHASE PLAN
The 1995 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Board of Directors on July 21, 1995 and approved by the stockholders on
April 29, 1996. The purpose of the Purchase Plan is to provide to employees of
the Company an opportunity to acquire a proprietary interest in the Company
through the purchase of Common Stock, which the Board of Directors believes
will help the Company in attracting, retaining and motivating qualified
employees. The Company is currently authorized to issue under the Purchase
Plan a total of 450,000 shares of Common Stock. As of February 1, 1997, the
number of shares available for future issuance under the Purchase Plan was
32,644. Accordingly, on February 27, 1997, the Board of Directors adopted,
subject to stockholder approval, an amendment to the Purchase Plan increasing
the number of shares of Common Stock available for issuance under the Purchase
Plan from 450,000 to 750,000 shares.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE AMENDMENT TO THE
PURCHASE PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE FOR THIS PROPOSAL.
The following is a brief summary of the provisions of the Purchase Plan.
This summary is qualified in all respects by reference to the full text of the
Purchase Plan, copies of which are available upon request to the Treasurer of
the Company.
Description of Offerings
The Purchase Plan is implemented through a series of offerings. The maximum
number of shares available in each offering is 225,000 shares. If less than
225,000 shares are purchased during an offering, the amount not purchased may
be carried over and made available during any subsequent offering. Offering
periods generally commence on each February 1 and August 1 and terminate on
the following July 31 and January 31, respectively, or on such other dates as
may be determined by the Board. To date, two offerings under the Purchase Plan
have been completed, in which the Company issued an aggregate of 417,356
shares of Common Stock. The Purchase Plan will terminate when the maximum
number of shares issuable under the Purchase Plan have been purchased by
participating employees.
The price at which employees may purchase Common Stock in an offering is 85%
of the closing price of the Common Stock on the Nasdaq National Market on the
day the offering commences or on the day the offering terminates, whichever is
lower. An employee may elect to have up to 10% of his or her qualifying
compensation withheld for the purpose of purchasing stock under the Purchase
Plan. On the date an offering commences, each participating employee is deemed
to be granted an option to purchase up to the number of shares determined by
17
<PAGE>
dividing 6% of such employee's annualized compensation for the immediately
prior six-month period by 85% of the fair market value of the Common Stock on
the date the offering commences. Unless the participant elects to withdraw
from the offering, each participant who continues to be employed by the
Company on the date such offering terminates is deemed to have exercised the
option and purchased on such date such number of shares (subject to the
maximum number covered by his or her option) as may be purchased with the
amount of his or her payroll deductions at the offering price. If the total
number of shares of Common Stock that would otherwise be purchased in the
offering with accumulated payroll deductions exceeds the number of shares
available during the offering, the available shares will be allocated on a pro
rata basis to participating employees. The maximum number of shares issuable
under the Purchase Plan and in each offering under the Purchase Plan will be
proportionately adjusted upon certain changes in the Company's capitalization,
such as a stock split or stock dividend.
Administration
Administrative authority over the Purchase Plan is vested in the Company's
Board of Directors, which may delegate such power to its Compensation
Committee. The Board of Directors has complete and final authority to make
rules and regulations for the administration of the Purchase Plan. The Board
of Directors of the Company may at any time terminate or amend the Purchase
Plan, except that no such amendment shall be made without approval of the
stockholders of the Company if such approval is required by Section 423 of the
Code or by Rule 16b-3 under the Exchange Act, and in no event may any
amendment be made that would cause the Purchase Plan to fail to comply with
Section 16 under the Exchange Act or Section 423 of the Code.
Eligibility
Any employee, including a director, is eligible to participate in an
offering if he or she is regularly employed by the Company or a designated
subsidiary for more than 20 hours a week and for more than five months in a
calendar year and is employed by the Company or a designated subsidiary on the
first day of the applicable offering. As of February 1, 1997, a total of
approximately 629 of the Company's employees were eligible to participate in
the Purchase Plan. The purchase of shares under the Purchase Plan is
discretionary, and the Company cannot now determine the number of shares to be
purchased in the future by any particular person or group.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to participation in the
Purchase Plan and with respect to the sale of Common Stock acquired under the
Purchase Plan. The Plan is intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Section 423 of the Code. The Plan is not a
qualified plan under Section 401(a) of the Code.
Tax Consequences to Participants. In general, a participant will not
recognize taxable income upon enrolling in the Purchase Plan or upon
purchasing shares of Common Stock at the end of an Offering. Instead, if a
participant sells Common Stock acquired under the Purchase Plan at a sale
price that exceeds the price at which the participant purchased the Common
Stock, then the participant will recognize taxable income. A portion of that
taxable income will be ordinary income, and a portion may be capital gain.
If the participant sells the Common Stock more than one year after acquiring
it and more than two years after the date on which the Offering commenced (the
"Grant Date"), then the participant will be taxed as follows. If the sale
price of the Common Stock is higher than the price at which the participant
purchased the
18
<PAGE>
Common Stock, then the participant will recognize ordinary compensation income
in an amount equal to the lesser of:
(i) the excess of the fair market value of the Common Stock on the Grant
Date over the price at which the participant purchased the Common Stock;
and
(ii) the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income in an amount equal
to the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the participant purchased the Common
Stock. The participant will also recognize capital gain in an amount equal to
the excess of the sale price of the Common Stock over the fair market value of
the Common Stock on the date that it was purchased, or capital loss in an
amount equal to the excess of the fair market value of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the
participant has held the Common Stock for more than one year prior to the date
of the sale and will be a short-term capital gain or loss if the participant
has held the Common Stock for a shorter period.
Tax Consequences to the Company. The offering of Common Stock under the Plan
will have no tax consequences to the Company. Moreover, in general, neither
the purchase nor the sale of Common Stock acquired under the Plan will have
any tax consequences to the Company except that the Company will be entitled
to a business-expense deduction with respect to any ordinary compensation
income recognized by a participant upon making a Disqualifying Disposition.
Any such deduction will be subject to the limitations of Section 162(m) of the
Code.
Withholding. The amount that a participant elects to have deducted from his
or her base pay for the purchase of Common Stock under the Plan constitutes
taxable wages and is subject to withholding. Moreover, the Company will have a
withholding obligation with respect to ordinary compensation income recognized
by a participant upon making a Disqualifying Disposition. The Company will
require any affected participant to make arrangements to satisfy this
withholding obligation.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of Coopers & Lybrand L.L.P. as the Company's independent
accountants for the current fiscal year. Coopers & Lybrand L.L.P. has served
as the Company's independent accountants since inception. Although stockholder
approval of the Board of Directors' selection of Coopers & Lybrand L.L.P. is
not required by law, the Board of Directors believes that it is advisable to
give stockholders an opportunity to ratify this selection. If this proposal is
not approved at the Annual Meeting, the Board of Directors will reconsider its
selection of Coopers & Lybrand L.L.P.
19
<PAGE>
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THE RATIFICATION OF COOPERS &
LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR 1997
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A
VOTE FOR THIS PROPOSAL.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Westboro, Massachusetts not later than December 11, 1997 for
inclusion in the proxy statement for that meeting.
ADDITIONAL MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. In addition, the Company retains
the right to engage outside agencies to assist in the solicitation of proxies
for the 1997 Annual Meeting of Stockholders. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and, as required by law, the Company
will, at their request, reimburse them for their out-of-pocket expenses in
this regard.
By Order of the Board of Directors,
RICHARD M. SPAULDING, Vice
President, Finance, Treasurer and
Assistant Clerk
April 10, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO
ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT
IN THEIR PROXIES.
20
<PAGE>
BANYAN SYSTEMS INCORPORATED
1992 DIRECTOR STOCK OPTION PLAN
1. Purpose
-------
The purpose of this 1992 Director Stock Option Plan (the "Plan") of
Banyan Systems Incorporated (the "Company") is to encourage ownership in the
Company by outside directors of the Company whose continued services are
considered essential to the Company's future progress and to provide them with a
further incentive to remain as directors of the Company.
2. Administration
--------------
The Board of Directors shall supervise and administer the Plan. Grants
of stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic in accordance with Section 5. However, all questions
of interpretation of the Plan or of any options issued under it shall be
determined by the Board of Directors and such determination shall be final and
binding upon all persons having an interest in the Plan.
3. Participation in the Plan
-------------------------
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. Stock Subject to the Plan
-------------------------
(a) The maximum number of shares which may be issued under the Plan
shall be 100,000 shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), subject to adjustment as provided in Section 9 of the Plan.
(b) If any outstanding option under the Plan for any reason expires
or is terminated without having been exercised in full, the shares allocable to
the unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be non-statutory options
not entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended to date and as it may be amended from time to time (the
"Code").
<PAGE>
5. Terms, Conditions and Form of Options
-------------------------------------
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) Option Grant Dates.
------------------
(i) Upon the closing of the initial public offering of Common
Stock of the Company, and on the date of each annual meeting of stockholders of
the Company, and on the date of each annual meeting of stockholders of the
Company thereafter, the Company shall grant to each eligible director an option
for 3,000 shares of Common Stock (the "Annual Option").
(ii) Upon the initial election of any eligible director as a
director of the Company, the Company shall grant to such director an option for
15,000 shares of Common Stock (the "Initial Option"), provided that no person
--------
serving as a director upon the adoption of this Plan shall receive such an
option.
(b) Option Exercise Price. The option exercise price per share for
---------------------
each option granted under the Plan shall equal (i) the last reported sales price
per share of the Company's Common Stock on the NASDAQ National Market System
(or, if the Company is traded on a nationally recognized securities exchange on
the date of grant, the reported closing sales price per share of the Company's
Common Stock by such exchange) on the date of grant (or if no such price is
reported on such date such price as reported on the nearest preceding day) or
(ii) if the Common Stock is not traded on NASDAQ or an exchange, the fair market
value per share on the date of grant as determined by the Board of Directors.
(c) Options Non-Transferable. Each option granted under the Plan by
------------------------
its terms shall not be transferable by the optionee otherwise than by will, or
by the laws of descent and distribution, and shall be exercised during the
lifetime of the optionee only by him. No option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
(d) Exercise Period. Each Initial Option shall become exercisable on
---------------
a cumulative basis as to one-fourth of the shares subject to the option on each
of the first, second, third and fourth anniversaries of the date of grant of
such option. Each
-2-
<PAGE>
Annual Option shall become exercisable 12 months after the date of grant of such
option (or, if earlier, the day prior to the first Annual Meeting of
Stockholders of the Company following the date of grant). In the event an
optionee ceases to serve as a director, each such option may be exercised by the
optionee (or, in the event of his death, by his administrator, executor or
heirs), at any time within 12 months after the optionee ceases to serve as a
director, to the extent such option was exercisable at the time of such
cessation of service. Notwithstanding the foregoing, no option shall be
exercisable after the expiration of ten years from the date of grant.
(e) Exercise Procedure. Options may be exercised only by written
------------------
notice to the Company at its principal office accompanied by (i) payment in cash
of the full consideration for the shares as to which they are exercised or (ii)
an irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price or delivery of irrevocable
instructions to a broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price.
6. Assignments
-----------
The rights and benefits of participants under the Plan may not be
assigned, whether voluntarily or by operation of law, except as provided in
Section 5(d).
7. Effective Date
--------------
The Plan shall become effective immediately upon its adoption by the
Board of Directors, but all grants of options shall be conditional upon the
approval of the Plan by the stockholders of the Company within 12 months after
adoption of the Plan by the Board of Directors.
8. Limitation of Rights
--------------------
(a) No Right to Continue as a Director. Neither the Plan, nor the
----------------------------------
granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no
-----------------------------------
rights as a stockholder with respect to the shares covered by his options until
the date of the issuance to him of a
-3-
<PAGE>
stock certificate therefor, and no adjustment will be made for dividends or
other rights (except as provided in Section 9) for which the record date is
prior to the date such certificate is issued.
9. Changes in Common Stock
-----------------------
(a) If the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other distribution with
respect to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment will be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, (ii) the number and kind of shares
or other securities subject to then outstanding options under the Plan and (iii)
the price for each share subject to any then outstanding options under the Plan,
without changing the aggregate purchase price as to which such options remain
exercisable. No fractional shares will be issued under the Plan on account of
any such adjustments.
(b) In the event that the Company is merged or consolidated into or
with another corporation (in which consolidation or merger the stockholders of
the Company receive distributions of cash or securities of another issuer as a
result thereof), or in the event that all or substantially all of the assets of
the Company are acquired by any other person or entity, or in the event of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall, as to outstanding options, either (i) provide that such
options shall be assumed, or equivalent options shall be substituted, by the
acquiring or successor corporation (or an affiliate thereof), or (ii) upon
written notice to the optionees, provide that all unexercised options will
terminate immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization or liquidations unless exercised by the optionee
within a specified number of days following the date of such notice.
-4-
<PAGE>
10. Amendment of the Plan
---------------------
The Board of Directors may suspend or discontinue the Plan or review
or amend it in any respect whatsoever; provided, however, that without approval
of the stockholders of the Company no revision or amendment shall change the
number of shares subject to the Plan (except as provided in Section 9), change
the designation of the class of directors eligible to receive options, or
materially increase the benefits accruing to participants under the Plan. The
Plan may not be amended more than once in any six-month period.
11. Notice
------
Any written notice to the Company required by any of the provisions of
the Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
12. Governing Law
-------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the Commonwealth of Massachusetts.
Adopted by the Board of Directors
on June 23, 1992.
Approved by the stockholders
on July 24, 1992.
-5-
<PAGE>
AMENDMENT NO. 1 TO THE 1992 DIRECTOR STOCK OPTION PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(c) of the 1992 Director Stock Option Plan (the "Plan") of
Banyan Systems Incorporated is hereby amended and restated in its entirety to
read as follows:
"(c) Options Non-Transferrable. Except as otherwise provided in the option
-------------------------
agreement evidencing the option grant, each option granted under the Plan shall
not be transferrable by the optionee otherwise than by will, or by the laws of
descent and distribution, and shall be exercised during the lifetime of the
optionee only by the optionee."
Subsection 10 of the Plan is hereby amended and restated in its entirety to
read as follows:
"10. Amendment of the Plan. The Board of Directors may at any time, and
---------------------
from time to time, modify, terminate or amend the Plan in any respect, except
that if at any time the approval of the stockholders of the Company is required
as to such modification or amendment under any applicable listing requirement or
any applicable tax or regulatory requirement, the Board of Directors may not
effect such modification or amendment without such approval."
Adopted by the Board of
Directors on January 16, 1997
<PAGE>
AMENDMENT NO. 2 TO THE 1992 DIRECTOR STOCK OPTION PLAN
OF BANYAN SYSTEMS INCORPORATED
Section 4(a) of the 1992 Director Stock Option Plan (the "Plan") of Banyan
Systems Incorporated is hereby amended, subject to stockholder approval, to
increase from 100,000 to 200,000 the number of shares of Common Stock authorized
for issuance under the Plan.
Adopted by the Board of
Directors on February 27, 1997
Subject to Stockholder Approval
<PAGE>
BANYAN SYSTEMS INCORPORATED
1995 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Banyan
Systems Incorporated (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par value
(the "Common Stock"), commencing on August 1, 1995. Four hundred and fifty
thousand (450,000) shares of Common Stock in the aggregate have been approved
for this purpose.
1. Administration. The Plan will be administered by the Company's Board
--------------
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
-----------
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:
(a) they are regularly employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code
<PAGE>
shall apply in determining the stock ownership of an employee, and all stock
which the employee has a contractual right to purchase shall be treated as stock
owned by the employee.
3. Offerings.
---------
(a) The Company will make one or more offerings ("Offerings") to employees
to purchase stock under this Plan. The first Offering under this Plan will
begin on August 1, 1995 and terminate on July 31, 1996, and subsequent Offerings
will begin on each August 1 and February 1, or the first business day thereafter
(the "Offering Commencement Dates"), the first such subsequent Offering
Commencement Date being August 1, 1996. Each Offering Commencement Date will
begin a six month period (a "Plan Period") during which payroll deductions will
be made and held for the purchase of Common Stock at the end of the Plan Period
(provided, however, that the first Offering Commencement Date will begin a
twelve month Plan Period). The Board or the Committee may, at its discretion,
choose a different Plan Period of twelve (12) months or less for subsequent
Offerings.
(b) The maximum number of shares of Common Stock that shall be made
available for sale under the Plan during any Offering under the Plan shall be
225,000 shares, subject to adjustment upon changes in the capitalization of the
Company as provided in Section 15 below. If the total number of shares for which
Options are exercised on any Exercise Date in accordance with Section 9 below
exceeds 225,000, the Company shall make a pro rata allocation of the shares
available for delivery and distribution, and the balance of payroll deductions
credited to the account of each participant under the Plan shall be returned to
the participant. If less than 225,000 shares are purchased during an Offering,
the amount not purchased may be carried over to and made available during any
subsequent Offering.
4. Participation. An employee eligible on the Offering Commencement Date
-------------
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least seven (7) days prior to the applicable Offering Commencement
Date. The form will authorize a regular payroll deduction from the Compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money
-2-
<PAGE>
reportable on the employee's Federal Income Tax Withholding Statement, excluding
overtime, shift premium, incentive or bonus awards, allowances and
reimbursements for expenses such as relocation allowances for travel expenses,
income or gains on the exercise of Company stock options or stock appreciation
rights, and similar items, whether or not shown on the employee's Federal Income
Tax Withholding Statement, but including, in the case of salespersons, sales
commissions to the extent determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
----------
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction in any dollar amount up to a
maximum of 10% of the Compensation he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made. Payroll
deductions may be at the rate of 1, 2, 3, 4, 5, 6, 7, 8, 9, or 10% of
Compensation with any change in compensation during the Plan Period to result
in an automatic corresponding change in the dollar amount withheld.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other stock
purchase plan of the Company and its subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such Common Stock (determined at
the Offering Commencement Date of the Plan Period) for each calender year in
which the Option is outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his
-----------------
payroll deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except
--------
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
-3-
<PAGE>
8. Withdrawal of Funds. An employee may at any time prior to the close
-------------------
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not being participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee,
except that employees who are also directors or officers of the Company within
the meaning of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules promulgated there under may not participate again for a
period of at least six months as provided in Rule 16b-3(d)(2)(i) or any
successor provision.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
------------------
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing 6% of such employee's annualized Compensation for the
immediately prior six-month period by the price determined in accordance with
the formula set forth in the following paragraph but using the closing price on
the Offering Commencement Date of such Plan Period.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
- -----------------------
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common
-4-
<PAGE>
Stock reserved for the purpose of the Plan that his accumulated payroll
deductions on such date will pay for pursuant to the formula set forth above
(but not in excess of the maximum number determined in the manner set forth
above).
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
-------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a brokerage firm, bank or other nominee holder designated by the
employee.
11. Rights on Retirement, Death or Termination of Employment. In the
--------------------------------------------------------
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
-5-
<PAGE>
12. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
------
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Committee shall take such steps in
connection with such merger as the Committee shall deem necessary to assure that
the provisions of Paragraph 15 shall thereafter be applicable, as nearly as
reasonably may be, in relation to the said securities or property as to which
such holder of such Option might thereafter be entitled to receive thereunder.
-6-
<PAGE>
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any
such transaction and all payroll deductions shall be paid out to the
participating employees; or (c) all outstanding Options may be cancelled by the
Board or the Committee as of the effective date of any such transaction,
provided that notice of such cancellation shall be given to each holder of an
Option, and each holder of an Option shall have the right to exercise such
Option in full based on payroll deductions then credited to his account as of a
date determined by the Board or the Committee, which date shall not be less than
ten (10) days proceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be
effected without such approval, and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
-----------------------
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
-7-
<PAGE>
20. Governmental Regulations. the Company's obligation to sell and deliver
------------------------
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
The Plan shall be governed by Massachusetts law except to the extent that
such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. Any provision
inconsistent with such Rule shall to that extent be inoperative and shall not
affect the validity of the Plan.
21. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Notification upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
23. Effective Date and Approval of Shareholders. The Plan shall take
-------------------------------------------
effect on July 21, 1995 subject to approval by the shareholders of the Company
as required by Rule 16b-3 under the Exchange Act and by Section 423 of the Code,
which approval must occur within twelve months of the adoption of the Plan by
the Board.
Adopted by the Board of Directors
on July 21, 1995
Approved by the stockholders on
April 29, 1996
-8-
<PAGE>
AMENDMENT NO. 1 TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
OF BANYAN SYSTEMS INCORPORATED
Section 8 of the 1995 Employee Stock Purchase Plan (the "Plan") of Banyan
Systems Incorporated is hereby amended and restated in its entirety to read as
follows:
"8. Withdrawal of Funds. An employee may at any time prior to the close
-------------------
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee."
Adopted by the Board of
Directors on January 16, 1997
<PAGE>
AMENDMENT NO. 2 TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
OF BANYAN SYSTEMS INCORPORATED
The first paragraph of the 1995 Employee Stock Purchase Plan (the "Plan")
of Banyan Systems Incorporated is hereby amended, subject to stockholder
approval, to increase from 450,000 to 750,000 the number of shares of Common
Stock authorized for issuance under the Plan.
Adopted by the Board of
Directors on February 27, 1997
Subject to Stockholder Approval
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ----------------------------
BANYAN SYSTEMS INCORPORATED
- ---------------------------
RECORD DATE SHARES:
1. Election of Class II Directors.
With For All
For hold Except
JOHN F. BURTON [_] [_] [_]
FONTAINE K. RICHARDSON
If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the nominee's name. Your
shares will be voted for the remaining nominee.
For Against Abstain
2. Ratification and Approval of the Amendment to [_] [_] [_]
the Company's 1992 Director Stock Option Plan.
3. Ratification and Approval of the Amendment to
the Company's 1995 Employee Stock Purchase Plan. [_] [_] [_]
4. Ratification of Appointment of Independent
Public Accountants. [_] [_] [_]
PLEASE READ THE REVERSE SIDE OF THIS CARD.
A VOTE FOR EACH PROPOSAL
IS RECOMMENDED BY THE BOARD OF DIRECTORS.
Mark box at right if an address change or comment has been
noted on the reverse side of this card. [_]
Please be sure to sign and date this Proxy. Date________________
______________________________ ______________________________
Stockholder sign here Co-owner sign here
DETACH CARD DETACH CARD
BANYAN SYSTEMS INCORPORATED
Dear Stockholder:
Please take note of the important information enclosed with this Proxy
Ballot. There are a number of issues related to the management and
operation of your Corporation that require your immediate attention
and approval. These are discussed in detail in the enclosed proxy
materials.
Your vote counts, and you are strongly encouraged to exercise your
right to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares
will be voted. Then sign the card, detach it and return your proxy
vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders
to be held on May 12, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Banyan Systems Incorporated
<PAGE>
BANYAN SYSTEMS INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - MAY 12, 1997
The undersigned, revoking all prior proxies, hereby appoint(s) Jeffrey D.
Glidden and Richard M. Spaulding, or each or either of them, with full power of
substitution, as proxies for the undersigned to act and to vote at the 1997
Annual Meeting of Stockholders of Banyan Systems Incorporated and at any
adjournments thereof as indicated upon all matters referred to on the reverse
side and as described in the Proxy Statement for the Meeting and, in their
discretion, upon any other matters that may properly come before the Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THE PROXIES WILL VOTE FOR
THE ELECTION OF THE DIRECTOR NOMINEES AND FOR PROPOSALS 2, 3, AND 4.
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PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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Please sign exactly as name(s) appear(s) hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation or a partnership, please sign by
authorizing person.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
