<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
[_]CONFIDENTIAL, FOR USE OF THE
Check the appropriate box: COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
BANYAN SYSTEMS INCORPORATED
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BANYAN SYSTEMS INCORPORATED
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 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 or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------
(3) Filing Party:
------------------------------------------------------
(4) Date Filed:
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<PAGE>
Preliminary Copy
Filed on March 17, 1998
BANYAN SYSTEMS INCORPORATED
120 FLANDERS ROAD
WESTBORO, MASSACHUSETTS 01581
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON TUESDAY, MAY 12, 1998
The Annual Meeting of Stockholders of Banyan Systems Incorporated (the
"Company") will be held at the Westboro Marriott, 5400 Computer Drive,
Westboro, Massachusetts on Tuesday, May 12, 1998, at 3:00 p.m., local time, to
consider and act upon the following matters:
1. To elect two Class III Directors to serve for the ensuing three years.
2. To ratify and approve, conditioned upon stockholder approval of
Proposal 4 below, an amendment to the Company's 1992 Stock Incentive Plan,
as amended, increasing from 2,700,000 to 3,500,000 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, as amended, increasing from 750,000 to 1,050,000 the
number of shares of Common Stock of the Company authorized for issuance
under such plan.
4. To approve an amendment to the Company's Second Restated Articles of
Organization, as amended, increasing from 25,000,000 to 35,000,000 the
number of shares of Common Stock of the Company authorized for issuance by
the Company.
5. 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.
6. 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 April 1, 1998 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
and Chief Financial Officer,
Treasurer and Clerk
Westboro, Massachusetts
April 6, 1998
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>
Preliminary Copy
Filed on March 17, 1998
BANYAN SYSTEMS INCORPORATED
120 FLANDERS ROAD
WESTBORO, MASSACHUSETTS 01581
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 12, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") 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
Tuesday, May 12, 1998 at 3:00 p.m., local time, and at any adjournment or
adjournments of the meeting (the "Annual 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 April 1, 1998, 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 shares of
Common Stock, $0.01 par value per share (the "Common Stock"), and 263,158
shares of Series A Convertible Preferred Stock, $0.01 par value per share (the
"Series A Preferred"). Holders of shares of Common Stock are entitled to one
vote per share. Holders of shares of Series A Preferred are entitled to one
vote for each share of Common Stock issuable as of the date of such vote upon
conversion of each share of Preferred Stock held (currently, ten votes per
share of Series A Preferred). The holders of Series A Preferred will vote
separately as a class for purposes of electing the Series A Preferred
Director. On all other matters submitted to the holders of shares of Common
Stock, such holders and the holders of shares of Series A Preferred vote
together as one class.
The Company's Annual Report for 1997 was mailed to stockholders, along with
these proxy materials, on or about April 6, 1998.
THE COMPANY WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDERS, 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 ON MARCH 31, 1998. REQUESTS SHOULD BE ADDRESSED TO THE
TREASURER OF THE COMPANY, 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 votes represented by shares of capital
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 capital
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; provided that the holders of a majority of the shares
of Series A Preferred, voting as a separate class, are entitled pursuant to
the Company's Second Restated Articles of Organization, as amended (the
"Second Restated Articles"), to elect one director of the Company. The
<PAGE>
affirmative vote of the holders of a majority of the shares of Common Stock
and the shares of Series A Preferred outstanding and entitled to vote on the
matter is required for the approval of the amendment to the Second Restated
Articles. The affirmative vote of the holders of a majority of the shares of
capital 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 the same effect as a vote against
the proposed amendment to the Second Restated Articles, but will have no
effect on the voting on the other matters being presented for stockholder
approval at the Annual Meeting.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of January 31, 1998
(except as otherwise specified), 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 and nominee for director of the Company, (iii) each executive
officer of the Company during 1997 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, 1998 as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
COMMON STOCK COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING(2)
---------------- --------------------- --------------
<S> <C> <C>
Dimensional Fund Advisors Inc.(3)
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401........... 977,000 5.5%
G. Leonard Baker(4)....................... 232,689 1.3%
Robert D. Burke(5)........................ 57,500 *
John F. Burton(6)......................... 35,000 *
William P. Ferry(7)....................... 430,829 2.4%
A. Peter Hamilton(8)...................... 76,865 *
David C. Mahoney(9)....................... 559,097 3.1%
Fontaine K. Richardson(10)................ 41,944 *
Richard M. Spaulding(11).................. 26,941 *
David N. Strohm(12)....................... 111,000 *
Robert M. Wadsworth....................... 0(13) *
William E. Warner, Jr.(14)................ 24,000 *
All directors and executive officers as a
group (11 persons)(15)................... 1,605,865 8.7%
</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, 1998.
2
<PAGE>
(2) Number of shares deemed outstanding includes 17,869,405 shares issued and
outstanding as of January 31, 1998 plus any shares subject to options
held by the referenced beneficial owner(s).
(3) Based on information provided to the Company by Dimensional Fund Advisors
Inc. ("Dimensional"), all shares of Common Stock beneficially owned by
Dimensional, a registered investment advisor, are held in portfolios of
DFA Investment Dimensions Group Inc., a registered open-end investment
company ("DFA Group Inc."), or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust ("DFA Group Trust") investment vehicles for
qualified employee benefit plans, for all of which Dimensional serves as
investment manager. Dimensional filed a Schedule 13G with the Securities
and Exchange Commission on February 9, 1998 reporting beneficial
ownership of 977,000 shares of Common Stock as of December 31, 1997 and
the following information is derived from such filing. Dimensional
reported that it exercises sole voting power over 657,100 shares of
Common Stock. Certain officers of Dimensional who also serve as officers
of DFA Group Inc. and DFA Group Trust exercise voting power over an
aggregate of 319,900 shares of Common Stock in their respective
capacities as officers of DFA Group Inc. and DFA Group Trust. Dimensional
reports sole dispositive power over 977,000 shares of Common Stock.
Dimensional disclaims beneficial ownership of all shares reported herein.
(4) Includes 8,890 shares held of record by Saunders Holdings, L.P. 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 15,000 shares
subject to stock options held by Mr. Baker.
(5) Consists of 57,500 shares subject to stock options held by Mr. Burke.
(6) Consists of 35,000 shares subject to stock options held by Mr. Burton.
(7) Includes 270,829 shares subject to stock options held by Mr. Ferry.
(8) Includes 36,000 shares held by a relative of Mr. Hamilton. Also includes
3,000 shares subject to stock options held by Mr. Hamilton. Mr. Hamilton
will cease to be a director of the Company effective May 12, 1998.
(9) Includes 162,500 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.
(10) Includes 15,000 shares subject to stock options held by Mr. Richardson.
(11) Includes 24,757 shares subject to stock options held by Mr. Spaulding.
(12) Includes 96,000 shares held by a trust of which Mr. Strohm is a
beneficiary. Also includes 15,000 shares subject to stock options held by
Mr. Strohm.
(13) On March 5, 1998 HarbourVest Partners V-Direct Fund, L.P. ("HarbourVest
Fund") purchased from the Company 263,158 shares of the Company's Series
A Preferred, warrants to purchase 65,790 shares of the Company's Series B
Convertible Preferred Stock, $0.01 par value per share, and warrants to
purchase 65,790 shares of the Company's Series C Convertible Preferred
Stock, $0.01 par value per share. Upon conversion of all of such shares
of preferred stock (assuming the exercise in full of all of such
warrants), HarbourVest Fund would own 3,947,380 shares of Common Stock,
representing an approximately 18% ownership interest in the Company. Mr.
Wadsworth is a managing director of HarbourVest Partners, LLC, which is
the managing member of HVP V-Direct Associates, L.L.C., a general partner
of HarbourVest Fund.
(14) Includes 20,000 shares subject to stock options held by Mr. Warner.
(15) Includes the shares and shares subject to stock options listed in Notes
(4)-(12) and (14) above. In addition, includes 10,000 shares subject to
stock options held by one other executive officer of the Company.
Excludes shares beneficially owned by Mr. Wadsworth, who became a
Director of the Company on March 5, 1998.
3
<PAGE>
1. 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 2000 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 David N. Strohm
and Robert M. Wadsworth as Class III Directors to serve for the ensuing three
years, 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 III 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.
DIRECTORS AND NOMINEES
The following table sets forth, for each director of the Company (including
the two nominees for Class III 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 public reporting corporations for which he
serves as a director and the year during which he first became a director of
the Company:
NOMINEES FOR CLASS III DIRECTORS
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.
Series A Preferred Director (to be elected only by holders of Series A
Preferred):
ROBERT M. WADSWORTH, 37, has been a director of the Company since March
1998. He has been a managing director of HarbourVest Partners, LLC, a venture
capital management company, since December 1988. He joined Hancock Venture
Partners, the predecessor of HarbourVest Partners, LLC, in July 1986. He is a
director of Concord Communications, Inc. and Gulf States Steel, Inc. of
Alabama.
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 managing director of Sutter Hill Ventures, a
venture capital firm, since 1974.
WILLIAM P. FERRY, 45, has been Chairman of the Board since October 1997. He
has been a director of the Company and served as President and Chief Executive
Officer since February 1997. From August 1990 to
4
<PAGE>
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 II DIRECTORS (TERMS EXPIRE AT 2000 ANNUAL MEETING)
JOHN F. BURTON, 46, has been a director of the Company since 1991. From
November 1996 to October 1997 he served as Chairman of the Board. 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 AXENT Technologies, Inc., MapInfo
Corporation, Netrix, Inc. and Network Imaging Corp.
FONTAINE K. RICHARDSON, 56, 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.
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 five times during 1997. 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 three times during 1997. The current members of the
Compensation Committee are Messrs. Burton, Richardson and Strohm.
In January 1998, the Board of Directors established a Nominating Committee
of the Board, which provides recommendations to the Board with respect to
candidates for directors of the Company. The Nominating Committee considers
nominees recommended by stockholders of the Company. Any stockholder may
submit such a recommendation in writing to the Nominating Committee by
addressing it to the attention of the Clerk of the Company. The current
members of the Nominating Committee are Messrs. Burton, Ferry and Richardson.
The Board of Directors met nine times during the 1997 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.
5
<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 receive
nonstatutory options to purchase shares of Common Stock. During 1997, 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 $2.00 per
share. On March 5, 1998, in connection with his initial election as a
Director, Mr. Wadsworth received an option to purchase 15,000 shares of Common
Stock at an exercise price of $4.00 per share. On the date of the 1998 Annual
Meeting of Stockholders, each of the Company's non-employee directors will
receive an annual option to purchase 3,000 shares of Common Stock at an
exercise price equal to the fair market value on the date of grant.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation of the Company's Chief Executive Officer and the Company's three
other executive officers during the year ended December 31, 1997 who were
serving as executive officers of the Company on December 31, 1997 and whose
individual total salary and bonus exceeded $100,000 during such year (the
"Named Executive Officers").
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(2) AWARDS
----------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OPTIONS COMPENSATION
POSITION(1) YEAR ($) ($)(3) (#)(4) (#)(5)
------------------ ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
William P. Ferry(6)........ 1997 $286,731 $700,000(7) 1,000,000 $1,066
Chairman of the Board,
President
and Chief Executive
Officer
Robert D. Burke(8)......... 1997 $178,154 $120,000 120,000 $1,003
Senior Vice President,
Worldwide Sales and
Service
Richard M. Spaulding(9).... 1997 $136,769 $ 70,000 30,000 $ 953
Vice President and 1996 $120,000 $ 19,680 5,000 $ 954
Chief Financial Officer, 1995 $104,423 $ 10,500 20,500 $ 920
Treasurer and Clerk
William E. Warner, Jr.(10). 1997 $111,154 $ 50,000 130,000 $1,623
Senior Vice President,
Product
Management and Development
</TABLE>
- --------
(1) Lists principal position with the Company as of December 31, 1997.
(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.
(3) Unless otherwise noted, represents amounts awarded as annual incentive
bonuses.
(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) Mr. Ferry joined the Company as an executive officer in February 1997.
(7) Includes a $400,000 sign-on bonus granted pursuant to Mr. Ferry's
Employment Agreement with the Company, as amended. In February 1997, Mr.
Ferry was granted a stock bonus of 200,000 shares pursuant to the terms of
the Employment Agreement. Pursuant to the Amendment to the Employment
Agreement, the Company rescinded such shares in June 1997 and agreed to
issue 160,000 shares to Mr. Ferry in January 1998. See "Certain
Relationships and Related Transactions."
(8) Mr. Burke joined the Company as an executive officer in March 1997.
(9) Mr. Spaulding became an executive officer in December 1995.
(10) Mr. Warner joined the Company as an executive officer in April 1997.
7
<PAGE>
Option Grants, Exercises and Year-End Values
The following tables set forth certain information concerning option grants
and exercises during the fiscal year ended December 31, 1997 to or by the
Named Executive Officers and the number and value of the unexercised options
held by such persons on December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES OR BASE FOR OPTION TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% ($) 10% ($)
---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William P. Ferry........ 1,000,000(4) 43.6% $ 2.25(5) 02/04/07 $1,415,013 $3,585,921
Robert D. Burke......... 120,000(6) 5.2% $ 2.25(7) 03/20/07 $ 169,802 $ 430,311
Richard M. Spaulding.... 30,000 1.3% $1,938 5/23/07 $ 36,564 $ 92,660
William E. Warner, Jr... 130,000(8) 5.7% $ 2.25(7) 03/20/07 $ 183,952 $ 466,170
</TABLE>
- --------
(1) Unless otherwise indicated, each option grants a right to purchase shares
of Common Stock which 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 "Certain Relationships and
Related Transactions."
(2) Represents the fair market value of the underlying shares of Common Stock
on the date of grant, unless otherwise indicated.
(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 48 equal monthly installments concluding on February 4, 2001.
(5) The exercise price on February 4, 1997, the date of grant, was $4.00 per
share, reflecting the fair market value on such date. Effective June 11,
1997 the option price was adjusted to $2.25 per share, reflecting a 14%
premium over the fair market value on such date. See "Repricing of
Options."
(6) Options to purchase 20,000 shares vested on March 20, 1997. Options to
purchase the remaining 100,000 shares vest according to the following
schedule; 37,500 shares, 37,500 shares, 12,500 shares and 12,500 shares on
March 20 of each of 1998, 1999, 2000 and 2001, respectively.
(7) The exercise price on March 20, 1997, the date of grant, was $2.688 per
share, reflecting the fair market value of the underlying shares of Common
Stock on such date. Effective May 9, 1997, the option price was adjusted
to $2.25 per share, reflecting a 20% premium over the fair market value of
the underlying shares of Common Stock on such date. See "Repricing of
Options."
(8) Options to purchase 20,000 shares vested on April 17, 1997. Options to
purchase the remaining 110,000 shares vest according to the following
schedule; 40,000 shares, 40,000 shares, 15,000 shares and 15,000 shares on
April 17 of each of 1998, 1999, 2000 and 2001, respectively.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
EXERCISE REALIZED ------------------------------ -------------------------
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------------ -------------------------
<S> <C> <C> <C> <C>
William P. Ferry........ 0 $ 0 208,330/791,670 $143,331/$544,669
Robert D. Burke......... 0 $ 0 0(3)/120,000 $ 0/$ 82,560
Richard M. Spaulding.... 0 $ 0 0/ 67,579 $ 0/$ 55,854
William E. Warner, Jr... 0 $ 0 0(3)/130,000 $ 0/$ 89,440
</TABLE>
- --------
(1) Represents the difference between the fair market value of the underlying
shares of Common Stock on the date of exercise and the exercise price.
(2) Based on the fair market value of the underlying shares of Common Stock on
December 31, 1997 ($2.938), less the option exercise price.
(3) As of December 31, 1997, the executive officer held vested options to
purchase 20,000 shares. In connection with the repricing of such options
in May 1997, the executive officer agreed not to exercise such options
until January 1, 1998. See "Repricing of Options" and "Compensation
Committee Report on Repricing of Options."
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
months beginning October 21, 1996, and automatically renews for successive
three-month periods unless terminated by either party. No such termination has
yet to be effected. During 1997, payments from the Company to BTP totalled
$77,138.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Ferry's Employment Agreement
In February 1997, the Company entered into an Employment Agreement with Mr.
Ferry pursuant to which the Company and Mr. Ferry agreed that Mr. Ferry would
be employed by the Company as its President and Chief Executive Officer. The
Employment Agreement sets Mr. Ferry's compensation at a minimum of $350,000
per year with a minimum annual bonus of $150,000 based upon the achievement of
certain performance objectives determined by the Board of Directors. Under the
Employment Agreement, Mr. Ferry is also eligible to receive an additional
bonus of a minimum of $150,000 based upon the achievement of specified
financial goals detailed in the Employment Agreement. The terms of the
Employment Agreement also include a grant of a nonstatutory stock option to
purchase 1,000,000 shares of Common Stock at a per share exercise price of
$4.00 and an award of 200,000 shares of Common Stock at par value. In
addition, the Employment Agreement contains confidentiality and noncompetition
provisions.
9
<PAGE>
The Company may terminate the Employment Agreement upon six months written
notice to Mr. Ferry. If such termination occurs on or before February 4, 1999,
Mr. Ferry will receive a cash payment from the Company equal to the sum of
$500,000 plus the amount by which $925,000 exceeds the aggregate of salary and
bonuses paid to Mr. Ferry under the Employment Agreement. If such termination
occurs subsequent to February 4, 1999, Mr. Ferry will receive a cash payment
from the Company equal to the greater of $500,000 or the sum of salary and
bonus which would have been paid to Mr. Ferry if all performance related
criteria to his bonus payments had been met. Mr. Ferry may terminate the
Employment Agreement for good reason upon notice given within 60 days of the
occurrence of certain specified events generally relating to diminished
responsibility with the Company (or notice given within one year if such
events occur due to a change in control of the Company). Upon a change in
control of the Company, 50% of the unvested portion of the stock option
granted to Mr. Ferry under the Employment Agreement immediately becomes
vested.
In June 1997, the Company and Mr. Ferry entered into an Amendment to the
Employment Agreement. Pursuant to the Amendment, the Company (i) accelerated
the schedule of payment of certain bonuses under the Employment Agreement,
(ii) reduced the per share exercise price of the stock option granted under
the Employment Agreement from $4.00 to $2.25, (iii) rescinded the 200,000
share Common Stock Award under the Employment Agreement and (iv) paid to Mr.
Ferry a cash bonus of $400,000. Additionally under the Amendment, the Company
agreed to grant an award of 160,000 shares of Common Stock at par value
subject to the condition that such issuance shall not be effected unless Mr.
Ferry remained in continuous employment at the Company through and including
January 2, 1998 and subject to the further condition that Mr. Ferry not, as of
such date, announce his intention to terminate his employment at the Company.
Other
In March 1997, the Company entered into Employment Letters with Messrs.
Burke and Warner, pursuant to which Employment Letters the Company agreed to
employ Messrs. Burke and Warner as its Senior Vice President, Worldwide Sales
and Service, and Senior Vice President, Product Management and Development,
respectively. These Employment Letters provide for salaries per annum and
stock options to purchase shares of Common Stock for Messrs. Burke and Warner,
respectively, as follows: $240,000 and 120,000 shares and $170,000 and 130,000
shares. Messrs. Burke and Warner's stock options were granted with a per share
exercise price of $2.688, which exercise price was adjusted to $2.25 in May
1997. See "Repricing of Options" and "Compensation Committee Report on
Repricing of Options." In the event of a change in control of the Company, 50%
of all unvested stock options under the Employment Letters immediately become
exercisable. In addition, the termination of Mr. Burke by the Company for any
reason except for cause accelerates the vesting of all of Mr. Burke's stock
options granted pursuant to his Employment Letter which would have become
fully vested in the subsequent nine months but for such termination. The
Employment Letters also contemplate annual bonus targets for Messrs. Burke and
Warner in the amounts of $160,000 and $70,000, respectively. Mr. Burke's
Employment Letter guarantees him a minimum bonus in his first year of
employment of $90,000. The Employment Letters all provide for the payment by
the Company of the difference between any outside earnings and the salary
formerly paid by the Company upon termination of the executive (i) by the
Company for any reason, except cause, or (ii) voluntarily by the executive
upon a material reduction in responsibilities. Such payments continue for a
period of nine months for Mr. Burke and for a period of six months for Mr.
Warner.
In September 1997, Mr. Spaulding entered into a Senior Executive Termination
Benefits Agreement superseding a prior agreement which became effective in
January 1997. Pursuant to the September Agreement, Mr. Spaulding agreed to
remain employed with the Company during any specified change in control of the
10
<PAGE>
Company, and the Company agreed to provide certain severance benefits to Mr.
Spaulding in the event his employment at the Company is terminated within one
year following a change in control of the Company or if his employment is
terminated for certain other reasons. In the event (i) Mr. Spaulding's
employment is terminated by the Company for any reason, including a change in
control, except for cause, or (ii) Mr. Spaulding voluntarily terminates his
employment at the Company within 60 days from the occurrence of a change in
control or a material reduction of responsibilities and after 60 days' prior
written notice to the Company of his intention to terminate his employment,
the Company will pay Mr. Spaulding for six months the difference between his
outside earnings, if any, and his base salary at the Company. In addition, in
the event of a change in control, 50% of all unvested stock options held by
Mr. Spaulding will become fully vested.
In March 1998, HarbourVest Partners V-Direct Fund, L.P. ("Harbour Vest
Fund") purchased from the Company 263,158 shares of the Company's Series A
Preferred, warrants to purchase 65,790 shares of the Company's Series B
Convertible Preferred Stock and warrants to purchase 65,790 shares of the
Company's Series C Convertible Preferred Stock, for an aggregate purchase
price of $10,000,000. As of March 30, 1998, such shares of Series A Preferred
and the shares of Series B and Series C Convertible Preferred Stock issuable
upon exercise of such warrants were convertible into 3,947,380 shares of
Common Stock. Mr. Wadsworth is a managing director of HarbourVest Partners,
LLC, which is the managing member of HVP V-Direct Associates, L.L.C., a
general partner of HarbourVest Fund. See "Proposal 4. Approval of Amendment to
Second Restated Articles of Organization."
11
<PAGE>
REPRICING OF OPTIONS
The following table sets forth certain information concerning the repricing
of options of the Company held by executive officers since the Company's
initial public offering in August 1992.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF NUMBER OF ORIGINAL
SECURITIES SHARES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING UNDERLYING OF STOCK AT PRICE AT TIME NEW REMAINING AT
OPTIONS OPTIONS AFTER TIME OF OF EXERCISE DATE OF
NAME DATE REPRICED (#) REPRICING (#) REPRICING ($) REPRICING ($) PRICE ($) REPRICING(1)
---- -------- ------------ ------------- ------------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William P. Ferry........ 6/11/97 1,000,000 1,000,000 $ 2.00 $ 4.00 $2.25 115
Robert D. Burke......... 5/9/97 120,000 120,000 $1.875 $2.655 $2.25 118
Richard M. Spaulding.... 5/9/97 171 171 $1.875 $ 2.50 $2.25 43
501 501 $1.875 $ 3.80 $2.25 65
2,500 2,500 $1.875 $ 3.80 $2.25 75
1,875 1,875 $1.875 $ 3.80 $2.25 87
7,000 7,000 $1.875 $ 3.80 $2.25 98
10,000 10,000 $1.875 $3.80 $2.25 108
4,626 4,626 $1.875 $3.80 $2.25 104
3,500 3,500 $1.875 $3.80 $2.25 106
3,000 3,000 $1.875 $3.80 $2.25 113
982 982 $1.875 $3.80 $2.25 117
1,426 1,426 $1.875 $3.80 $2.25 117
2/27/97 501 501 $3.438 $7.00 $3.80 68
5,000 5,000 $3.438 $7.00 $3.80 75
2,500 2,500 $3.438 $7.00 $3.80 89
7,000 7,000 $3.438 $7.00 $3.80 98
10,000 10,000 $3.438 $7.00 $3.80 103
4,624 4,624 $3.438 $7.00 $3.80 104
3.500 3,500 $3.438 $10.00 $3.80 106
3,000 5,000 $3.438 $ 6.88 $3.80 113
982 982 $3.438 $ 4.00 $3.80 56
1,426 1,426 $3.438 $ 4.00 $3.80 63
10/25/95 2,000 2,000 $7.00 $20.75 $7.00 85
3,000 3,000 $7.00 $14.30 $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
William E. Warner, Jr... 5/9/97 130,000 130,000 $1.875 $2.688 $2.25 118
Jeffrey D. Glidden(2)... 12/6/96 70,000 125,000 $9.75 $ 8.00 $3.75 112
25,000 15.37 92
10,000 17.37 99
Ann C. Smith(3)......... 11/6/96 10,000 30,000 $3.75 $12.44 $3.75 106
10,000 $10.88 108
</TABLE>
- --------
(1) Data is presented in terms of months.
(2) Mr. Glidden served as an executive officer from July 1991 to May 1997.
(3) Ms. Smith served as an executive officer of the Company from June 1995 to
June 1997.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON REPRICING OF OPTIONS
Effective February 27, 1997, as part of an initiative to increase employee
support, recognition and reward, the Board of Directors approved a repricing
of all outstanding employee stock options granted from August 1992 through
April 1997 (other than a total of 316,820 options held by Messrs. Glidden and
Mahoney and Ms. Smith) to $3.80 per share, a 10% premium over the then fair
market value of the Common Stock. The Board felt that this repricing would
foster a work environment that encourages and motivates employees to perform
to their utmost potential. Recognizing that these considerations apply equally
to executive officers as to employees, and in appreciation of Mr. Spaulding's
contributions as Vice President, Finance, in facilitating the transition of
executive management, certain options held by Mr. Spaulding were included on
this repricing.
Effective May 9, 1997, the Board approved an additional stock option
repricing to $2.25 per share, a 20% premium over the then fair market value of
the Common Stock, applicable to all outstanding employee stock options.
Appreciating the need to similarly provide incentives to the Company's
executive officers, options held by executive officers were also repriced. The
Board considered this repricing to be consistent with the Company's philosophy
of utilizing equity incentives to motivate and retain qualified employees and
felt the repricing was an important sign of appreciation for the efforts of
the employees through the Company's restructuring. The Board required
employees to remain employed at the Company until January 1, 1998 in order to
benefit from this repricing. Certain options held by Messrs. Burke, Spaulding
and Warner were included in this repricing.
Effective June 13, 1997, the Board approved an amendment to the Employment
Agreement between Mr. Ferry and the Company. Pursuant to such amendment, the
stock options held by Mr. Ferry were repriced from $4.00 per share to $2.25
per share, a 14% premium over the then fair market value of the Common Stock.
Because of a decline in market value of the Common Stock, Mr. Ferry's
outstanding options were exercisable at a price that exceeded the market value
of the Common Stock. In view of this decline, and recognizing the vital
contributions of Mr. Ferry as President and Chief Executive Officer, including
leading the Company's restructuring efforts, the Compensation Committee
believed that it was important to regain the incentive intended to be provided
by Mr. Ferry's options.
John F. Burton
Fontaine K. Richardson
David N. Strohm
SECTION 16(B) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by reporting persons
of the Company ("Reporting Persons") pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or written
representations from certain Reporting Persons that no Form 5 filing was
required for such person, the Company believes that during 1997, 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. Mahoney
and Strohm each filed a late Form 5 reporting his May 1997 stock option grant
under the Company's 1992 Director Stock Option Plan, as amended.
13
<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, annual incentive 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, the individual performance
of the executives in the preceding year and salary levels required by any
applicable employment agreements. 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 1997, 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 1997, including the base salary of Mr. Ferry, were
comparable to the median salaries of executive officers of companies with
revenues similar to those of the Company.
Annual Incentive Awards. During 1997, all of the Company's executive
officers were newly appointed to their positions with the Company. In
consideration of this, the Compensation Committee deemed it appropriate to
award executive bonuses outside of the Company's traditional bonus plans.
Bonuses payable to executives were determined by negotiations between the
particular executive and the Company during the appointment process and were
paid as a percentage of annualized base wages earned during the year. A
significant portion of all bonuses were based upon the achievement of Company
financial goals, in light of the Company's restructuring, as determined by the
Compensation Committee. The balance was based upon achievement of personal and
team objectives, as determined by the Compensation Committee or such person
designated by the Compensation Committee. The specific objectives established
for Mr. Ferry in 1997 included financial targets set by the Compensation
Committee for operating profit and cash balances. The weighting between total
14
<PAGE>
Company financial goals versus personal and team goals varied by position at
the sole discretion of the Compensation Committee.
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 1997. Options are
generally granted at market value and thus will have value to an executive
only if the Company's stock price increases.
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, including executive officers,
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
15
<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 December 31, 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 the last trading days for the
fiscal years ending December 31, 1992, 1993, 1994, 1995, 1996 and 1997.
[PERFORMANCE GRAPH APPEARS HERE]
1992 1993 1994 1995 1996 1997
------ ------- ------- ------- ------- -------
Banyan Systems Incorporated $100.0 $ 71.43 $ 85.12 $ 48.81 $ 21.43 $ 13.99
CRSP Nasdaq Index $100.0 $119.95 $125.94 $163.35 $202.99 $248.30
CRSP Computer & Data Index $100.0 $105.83 $128.53 $195.74 $241.54 $296.70
16
<PAGE>
2. RATIFICATION AND APPROVAL OF AMENDMENT
TO 1992 STOCK INCENTIVE PLAN
The Board of Directors believes that the continued growth and profitability
of the Company depends, in large part, upon the ability of the Company to
maintain a competitive position in attracting and retaining key personnel.
Pursuant to an amendment adopted at the 1995 Annual Meeting of Stockholders,
the Company is currently authorized to issue under its 1992 Stock Incentive
Plan, as amended (the "1992 Plan"), a total of 2,700,000 shares of Common
Stock (subject to adjustment for certain changes in the Company's
capitalization). As of December 31, 1997, the number of shares available for
future grant under the 1992 Plan was 802,256. Accordingly, on February 11,
1998 the Board adopted, subject to stockholder ratification and approval, an
amendment to the 1992 Plan increasing the number of shares of Common Stock
available for issuance under the 1992 Plan from 2,700,000 to 3,500,000 shares
(subject to adjustment for certain changes in the Company's capitalization).
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT TO THE 1992 PLAN IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
FOR THIS PROPOSAL.
Ratification and approval of the amendment to the 1992 Plan is conditioned
upon approval of Proposal 4, relating to an amendment to the Company's Second
Restated Articles increasing from 25,000,000 to 35,000,000 the number of
shares of Common Stock authorized for issuance by the Company. See "Proposal
4. Approval of Amendment to Second Restated Articles of Organization."
The following is a brief summary of the provisions of the 1992 Plan. This
summary is qualified in all respects by reference to the full text of the 1992
Plan, copies of which are available upon request to the Treasurer of the
Company.
On June 23, 1992, the Board of Directors adopted, and on July 24, 1992 the
stockholders approved, the 1992 Plan. The 1992 Plan provides for the grant of
incentive stock options, nonstatutory stock options, stock appreciation
rights, performance shares and awards of restricted stock and unrestricted
stock ("Awards"). No Awards other than incentive stock options and
nonstatutory stock options have been granted under the 1992 Plan. No Award may
be made under the 1992 Plan after June 23, 2002, but Awards previously granted
may extend beyond that date. The 1992 Plan may be sooner terminated by the
Board of Directors, which has the power to amend or terminate the 1992 Plan.
Administration
The 1992 Plan is administered by the Board of Directors of the Company and
the Compensation Committee of the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1992 Plan and to interpret the provisions of the
1992 Plan. Pursuant to the terms of the 1992 Plan, the Board has appointed the
Compensation Committee to administer certain aspects of the 1992 Plan. No
amendment to the 1992 Plan may be made without stockholder approval if such
approval is necessary to comply with any applicable tax or regulatory
requirement, including any requirements for compliance with Rule 16b-3
promulgated under the Exchange Act.
Incentive Stock Options and Nonstatutory Options.
Optionees receive the right to purchase a specified number of shares of
Common Stock at some time in the future at an option price and subject to such
terms and conditions as are specified at the time of the grant. The
17
<PAGE>
1992 Plan provides that the number of shares of Common Stock with respect to
which options may be granted to any employee may not exceed 300,000 during any
two consecutive calendar year period. Incentive stock options and options
which the Board or Compensation Committee intends to qualify as performance-
based compensation under Section 162(m) of the Code may not be granted at an
exercise price less than the fair market value of the Common Stock on the date
of grant (or less than 110% of the fair market value in the case of incentive
stock options granted to optionees holding 10% or more of the voting stock of
the Company). All other options may be granted at an exercise price which may
be less than, equal to or greater than the fair market value of the Common
Stock on the date of grant.
Eligibility.
All of the employees, officers, directors, consultants and advisors of the
Company and its subsidiaries who are expected to contribute to the Company's
future growth and success are eligible to participate in the 1992 Plan.
Incentive stock options, however, may only be granted to persons eligible to
receive incentive stock options under the Code. As of December 31, 1997, the
Company had 410 employees. On April 1, 1998, the closing sale price of the
Company's Common Stock on the Nasdaq National Market was $ .
The granting of Awards under the 1992 Plan is discretionary, and the Company
cannot now determine the number or type of Awards to be granted in the future
to any particular person or group. The following table, however, sets forth
the benefits received under the 1992 Plan during 1997 by (i) the Named
Executive Officers, individually, (ii) all current executive officers, as a
group (the "Executive Group"), (iii) all current directors who are not
executive officers, as a group (the "Non-Executive Director Group"), and (iv)
all employees, including all current officers who are not executive officers,
as a group (the "Non-Executive Officer Employee Group").
NEW PLAN BENEFITS
PLAN BENEFITS IN 1997 UNDER THE 1992 PLAN
<TABLE>
<CAPTION>
NAME AND POSITION(1) DOLLAR VALUE($)(2) NUMBER OF SHARES
- -------------------- ------------------ ----------------
<S> <C> <C>
William P. Ferry(3)........................ $ 0 0
Chairman of the Board, President
and Chief Executive Officer
Robert D. Burke(3)......................... $ 0 0
Senior Vice President,
Worldwide Sales and Service
Richard M. Spaulding....................... $ 0 69,987
Vice President and
Chief Financial Officer,
Treasurer and Clerk
William R. Warner, Jr.(3).................. $ 0 0
Senior Vice President, Product
Management and Development
Executive Group(3)......................... $ 0 69,987
Non-Executive Director Group............... $ 0 0
Non-Executive Officer Employee Group....... $ 0 1,794,184
</TABLE>
18
<PAGE>
- --------
(1) Lists principal position with the Company as of December 31, 1997.
(2) Represents the difference between the fair market value of the underlying
shares of Common Stock on the date of grant and the exercise price of the
options. Certain options granted in 1997 in connection with the repricing
of prior options were granted at an exercise price in excess of the fair
market value of the underlying shares of Common Stock on the date of
grant. In such cases, a dollar value of zero, in lieu of a negative dollar
value, is included in the individual and group totals in the above table.
(3) During 1997, Messrs. Ferry, Burke and Warner received options to purchase
1,000,000, 120,000 and 130,000 shares, respectively. In addition, one
other executive officer was granted options to purchase 50,000 shares.
Such options were not granted under the 1992 Plan and, accordingly, are
not included in this table.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to stock options granted
under the Plan and with respect to the sale of Common Stock acquired under the
Plan. As no Awards other than incentive stock options and nonstatutory stock
options have been granted under the 1992 Plan, a discussion of the United
States federal income tax consequences of other types of Awards is not
included. Moreover, the following discussion does not address the tax
consequences that may arise with respect to any gift or disposition other than
by sale of Common Stock acquired under the Plan. For precise advice as to any
specific transaction or set of circumstances, participants should consult with
their own tax advisors. Participants should also consult with their own tax
advisors regarding the application of any state, local, and foreign taxes and
any federal gift, estate, and inheritance taxes. The Plan is not a qualified
plan under Section 401(a) of the Code.
Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option.
Instead, a participant will recognize taxable income with respect to an
incentive stock option only upon the sale of Common Stock acquired through the
exercise of the option ("ISO Stock"). Nevertheless, in the case of a
participant who has not been an employee of the Company at all times
commencing on the date on which a particular option was granted (the "Grant
Date") and ending on the date that is three months before the date on which
the option is exercised (the "Exercise Date"), an option generally will be
treated as though it were a nonstatutory option and taxed as described below
under "Nonstatutory Options." Similarly, options will be treated as
nonstatutory options for purposes of the alternative minimum tax. While a
participant will pay alternative minimum tax only to the extent of the excess
of that tax over the participant's regular tax, the treatment of an option as
a nonstatutory option for purposes of the alternative minimum tax could create
such an excess.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least
two years from the Grant Date and one year from the Exercise Date, then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock prior to having owned it for at least two
years from the Grant Date and one year from the Exercise Date (a
"Disqualifying Disposition"), then the participant generally will recognize
ordinary compensation income in an amount equal to the lesser of (i) the
excess of the fair market value of the ISO Stock on the Exercise Date over the
exercise price and (ii) the excess of the sale price of the ISO Stock over the
exercise price.
19
<PAGE>
A participant making a Disqualifying Disposition will also recognize capital
gain in an amount equal to any excess of the sale price of the ISO Stock over
the fair market value of the ISO Stock on the Exercise Date. This capital gain
will be a long-term capital gain if the participant has held the ISO Stock for
more than one year prior to the date of the sale and will be a short-term
capital gain if the participant has held the ISO Stock for a shorter period.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a long-
term capital loss if the participant has held the ISO Stock for more than one
year prior to the date of the sale and will be a short-term capital loss if
the participant has held the ISO Stock for a shorter period.
Nonstatutory Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
option. However, a participant generally will recognize ordinary compensation
income upon the exercise of a nonstatutory option 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.
A participant will have a tax basis for any NSO Stock equal to the exercise
price plus any income recognized upon the exercise of the option. Upon selling
NSO Stock, a participant generally will recognize capital gain or loss in an
amount equal to the difference between the sale price of the NSO Stock and the
participant's tax basis in the NSO Stock. This capital gain or loss will be a
long-term capital gain or loss if the participant has held the NSO 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 NSO Stock for a shorter
period.
Delivery of Common Stock Upon Exercise of Stock Options. Under certain
circumstances, the Plan permits a participant to exercise a stock option by
delivering to the Company Common Stock having a fair market value equal in
amount to the exercise price. The use of this method of exercise generally
will not alter the tax consequences described above, and it may enable a
participant to dispose of appreciated Common Stock without immediately
recognizing capital gain on the disposition. The participant's tax basis in
any shares of Common Stock delivered to the Company to exercise an option
generally will be carried over to an equal number of shares of Common Stock
acquired upon exercising the option. Nevertheless, participants should
consider that the delivery to the Company of ISO Stock or stock acquired
pursuant to the Company's employee stock purchase plan will constitute a
Disqualifying Disposition, having all of the adverse tax consequences
described above, if the holding period requirements described above are not
satisfied with respect to that stock.
Maximum Income Tax Rates on Capital Gain and Ordinary Income. Long-term
capital gain will be taxable at a maximum rate of 20% if attributable to
Common Stock held for more than eighteen months and at a maximum rate of 28%
if attributable to Common Stock held for more than one year but not more than
eighteen months. Short-term capital gain and ordinary income will be taxable
at a maximum rate of 39.6%. Phaseouts of personal exemptions and reductions of
allowable itemized deductions at higher levels of income may result in
slightly higher marginal tax rates. Ordinary compensation income will also be
subject to a medicare tax and, under certain circumstances, a social security
tax.
Tax Consequences to the Company. The grant of a stock option (absent a
Section 83(b) Election by the participant) under the Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of an
incentive stock option acquired under the Plan nor the sale of any Common
Stock acquired under the Plan will have any tax consequences to the Company.
However, the Company generally will be entitled to a
20
<PAGE>
business-expense deduction with respect to any ordinary compensation income
recognized by a participant under the Plan. Any such deduction will be subject
to the limitations of Section 162(m) of the Code.
Withholding. Although a participant's Disqualifying Disposition of ISO Stock
will result in the recognition of ordinary compensation income, the Company
will have no withholding obligation with respect to that income. In contrast,
the Company will have a withholding obligation with respect to ordinary
compensation income recognized with respect to a nonstatutory option by a
participant who has been employed by the Company. The Company will require any
such participant to make arrangements to satisfy this withholding obligation.
3. RATIFICATION AND APPROVAL OF AMENDMENT
TO 1995 EMPLOYEE STOCK PURCHASE PLAN
The 1995 Employee Stock Purchase Plan, as amended (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 750,000 shares of Common Stock. As of
February 1, 1998, there were 53 shares available for future issuance under the
Purchase Plan. Accordingly, on February 11, 1998, 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 750,000 to 1,050,000 shares.
THE BOARD OF DIRECTORS 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, four offerings under the Purchase
Plan have been completed, in which the Company issued an aggregate of 749,947
shares of Common Stock. Subject to the ratification and approval by the
stockholders of this proposal, a new offering under the Purchase Plan
commenced on February 1, 1997. 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
21
<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, 1998, a total of 399
of the Company's employees were eligible to participate in the Purchase Plan.
22
<PAGE>
The purchase of shares under the Purchase Plan is discretionary, and the
Company can not now determine the number of shares to be purchased in the
future by any particular person or group. The following table, however, sets
forth the benefits received under the Purchase Plan during 1997 by (i) the
Named Executive Officers, individually, (ii) the Executive Group, (iii) the
Non-Executive Director Group and (iv) the Non-Executive Officer Employee
Group.
NEW PLAN BENEFITS
PLAN BENEFITS IN 1997 UNDER THE PURCHASE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION(1) DOLLAR VALUE($)(2) NUMBER OF SHARES
- -------------------- ------------------ ----------------
<S> <C> <C>
William P. Ferry(3)........................ $ 0 0
Chairman of the Board, President
and Chief Executive Officer
Robert D. Burke(3)......................... $ 0 0
Senior Vice President,
Worldwide Sales and Service
Richard M. Spaulding....................... $ 1,282 1,926
Vice President and
Chief Financial Officer,
Treasurer and Clerk
William R. Warner, Jr.(3).................. $ 0 0
Senior Vice President, Product
Management and Development
Executive Group............................ $ 1,282 1,926
Non-Executive Director Group............... $ 0 0
Non-Executive Officer Employee Group....... $153,210 316,655
</TABLE>
- --------
(1) Lists principal position with the Company as of December 31, 1997.
(2) Represents the difference between the fair market value of the underlying
shares of Common Stock on the date of purchase and the purchase price of
shares purchased in 1997.
Federal Income Tax Consequences
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 in an amount equal
to the excess of the sale price of the Common Stock over the price at which
the participant purchased the Common Stock. 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 Common
23
<PAGE>
Stock, then the participant will recognize ordinary compensation income in an
amount equal to the lesser of (i) fifteen percent of the fair market value of
the Common Stock on the Grant Date 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 on the
date that it was purchased over the sale price 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
Purchase Plan will have no tax consequences to the Company. Moreover, in
general, neither the purchase nor the sale of Common Stock acquired under the
Purchase 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 Purchase 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.
4. APPROVAL OF AMENDMENT TO SECOND RESTATED ARTICLES OF ORGANIZATION
On February 11, 1998, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Company's Second Restated Articles providing for
an increase in the authorized number of shares of Common Stock from 25,000,000
shares to 35,000,000 shares (the "Charter Amendment"). As of January 31, 1998,
the Company had a total of 17,869,405 shares of Common Stock outstanding,
4,394,823 shares reserved for future issuance under the 1992 Plan, the
Purchase Plan, its 1992 Director Stock Option Plan, as amended, and other
stock option and warrant grants (collectively, the "Stock Plans").
On March 5, 1998, the Company entered into a Preferred Stock and Warrant
Purchase Agreement (the "Purchase Agreement") with HarbourVest Fund pursuant
to which the Company issued and sold to HarbourVest Fund (i) 263,158 shares of
Series A Preferred for $9,900,000 and (ii) warrants to purchase up to 65,790
shares of its Series B Convertible Preferred Stock, $0.01 par value per share
(the "Series B Preferred"), with an exercise price of $45.00 per share, and up
to 65,790 shares of its Series C Convertible Preferred Stock $0.01 par
24
<PAGE>
value per share (the "Series C Preferred"), with an exercise price of $50.00
per share, for an aggregate purchase price of $100,000. Each share of the
Company's Series A Preferred, Series B Preferred and Series C Preferred
presently is convertible at any time into ten shares of Common Stock. Without
stockholder approval of the Charter Amendment, the Company will not have a
sufficient number of shares of Common Stock to maintain reserves for the
shares of Common Stock issuable upon conversion of presently outstanding
shares of Series A Preferred and for the shares of Series B Preferred and
Series C Preferred issuable upon exercise of presently outstanding warrants.
Accordingly, in the event the Charter Amendment is not approved, the Company
will be required to redeem 40% of the 263,158 shares of the Series A Preferred
and 40% of each of the warrants issued to HarbourVest Fund, for an aggregate
redemption price of $4,000,000.
If the Charter Amendment is approved, the additional authorized shares of
Common Stock would be available for issuance in the future for corporate
purposes, including without limitation, the aforementioned HarbourVest Fund
preferred stock financing and other financings, acquisitions, stock splits,
stock dividends and management incentive and employee benefit plans, as the
Board may deem advisable, without the necessity of further stockholder action.
The issuance of additional shares of Common Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, would have the effect of diluting the Company's current stockholders
and could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control
of the Company. Other than in connection with the Stock Plans and the
HarbourVest Fund preferred stock financing, the Company has no present
intention or plans to issue any shares of Common Stock. The Company is not
aware of any attempts on the part of a third party to effect a change in
control of the Company, and the Charter Amendment has been proposed by the
Company for the reasons stated above and not for any possible anti-takeover
effects it may have.
THE BOARD OF DIRECTORS BELIEVES THAT THE CHARTER AMENDMENT IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THIS
PROPOSAL.
Approval of the Charter Amendment is a condition to ratification and
approval of Proposal 2, relating to an increase from 2,700,000 to 3,500,000 of
the number of shares of Common Stock authorized for issuance under the 1992
Plan. See "Proposal 2. Ratification and Approval of Amendment to 1992 Stock
Incentive Plan".
5. 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.
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 BELIEVES THAT THE RATIFICATION OF COOPERS & LYBRAND
L.L.P. AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR 1998 IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
FOR THIS PROPOSAL.
25
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Westboro, Massachusetts not later than December 7, 1998 for
inclusion in the proxy statement for that meeting.
OTHER 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 Annual Meeting. 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
and Chief Financial Officer,
Treasurer and Clerk
April 6, 1998
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.
26
<PAGE>
APPENDIX A
PRELIMINARY COPY
FILED ON MARCH 17, 1998
PLEASE MARK VOTES
[X] AS IN THIS EXAMPLE
- --------------------------------------------------------------------------------
BANYAN SYSTEMS INCORPORATED
- --------------------------------------------------------------------------------
RECORD DATE SHARES:
------------------------------------------------------
Please be sure to sign Date
and date this Proxy.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stockholder sign here Co-owner sign here
- --------------------------------------------------------------------------------
WITH-
1. Election of FOR HOLD
Class III Directors. [_] [_]
David N. Strohm
Series A Preferred Director (to
be elected only by holders of
the Company's Series A
Convertible Preferred Stock):
WITH-
FOR HOLD
Robert M. Wadsworth [_] [_]
FOR AGAINST ABSTAIN
2. Ratification and [_] [_] [_]
Approval, condi-
tioned upon
stockholder ap-
proval of Pro-
posal 4 below,
of the Amendment
to the Company's
1992 Stock In-
centive Plan.
FOR AGAINST ABSTAIN
3. Ratification and [_] [_] [_]
Approval of the
Amendment to the
Company's 1995
Employee Stock
Purchase Plan.
FOR AGAINST ABSTAIN
4. Approval of the [_] [_] [_]
Amendment to the
Company's Second
Restated
Articles of
Organization.
FOR AGAINST ABSTAIN
5. Ratification of [_] [_] [_]
Selection 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.
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, 1998.
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, 1998
The undersigned, revoking all prior proxies, hereby appoint(s) William P. Ferry
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 1998
Annual Meeting of Stockholders of Banyan Systems Incorporated and at any
adjournment or adjournments thereof as designated herein 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 STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THE PROXIES WILL VOTE FOR
THE ELECTION OF THE DIRECTOR NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_______________________________ _________________________________________
_______________________________ _________________________________________
_______________________________ _________________________________________
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
<PAGE>
APPENDIX B
BANYAN SYSTEMS INCORPORATED
1992 STOCK INCENTIVE PLAN
Section 1. Purpose
The purpose of this Stock Incentive Plan (the "Plan") is to advance the
interests of Banyan Systems Incorporated by enhancing its ability to attract
and retain key employees, consultants and others who are in a position to
contribute to the Company's future growth and success.
Section 2. Definitions
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Unrestricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, provided that if and when the
Common Stock is registered under Section 12 of the Securities Exchange Act of
1934, each member of the Committee shall be a "disinterested person" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 ("Rule
16b-3").
"Common Stock" or "Stock" means the Common Stock, $.01 par value per share,
of the Company.
"Company" means Banyan Systems Incorporated and, except where the content
otherwise requires, all present and future subsidiaries of the Company as
defined in Sections 424(f) of the Code.
"Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Board, to receive amounts due or exercise rights
of the Participant in the event of the Participant's death. In the absence of
an effective designation by a Participant, Designated Beneficiary shall mean
the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Board in
good faith or in the manner established by the Board from time to time.
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is not intended to be an
Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
B-1
<PAGE>
"Participant" means a person selected by the Board to receive an Award under
the Plan.
"Performance Shares" mean shares of Common Stock which may be earned by the
achievement of performance goals awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the Board during
which shares subject to a Restricted Stock Award may be repurchased by or
forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
Fair Market Value of shares of Common Stock over the exercise price awarded to
a Participant under Section 7.
"Unrestricted Stock" means shares of Common Stock awarded to a Participant
under Section 9(c).
Section 3. Administration
The Plan will be administered by the Board. The Board shall have authority
to make Awards and to adopt, amend and repeal such administrative rules,
guidelines and practices relating to the Plan as it shall deem advisable from
time to time, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. No member of the Board shall be liable
for any action or determination relating to the Plan made in good faith. To
the extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and all determinations under the Plan with respect
thereto, provided that the Board shall fix the maximum amount of such Awards
to be made by such executive officers and a maximum amount for any one
Participant. To the extent permitted by applicable law, the Board may appoint
a Committee to administer the Plan and, in such event, all references to the
Board in the Plan shall mean such Committee or the Board. All decisions by the
Board or the Committee pursuant to the Plan shall be final and binding on all
persons having or claiming any interest in the Plan or in any Award.
Section 4. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors who are expected to contribute to the Company's future growth and
success, other than persons who have irrevocably elected not to be eligible,
are eligible to be Participants in the Plan. Incentive Stock Options may be
awarded only to persons eligible to receive Incentive Stock Options under the
Code.
Section 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b) below, Awards may be made
under the Plan for up to 1,000,000 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, the shares subject to such Award or
so surrendered, as the case may be, to the extent of such expiration,
termination, forfeiture or decrease, shall again be available for award under
the Plan, subject, however, in the case of Incentive Stock Options, to any
limitation required under the Code. Shares issued under the Plan may consist
in whole or in part of authorized but unissued shares or treasury shares.
B-2
<PAGE>
(b) In the event that the Board, in its sole discretion, determines that any
stock dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably
adjust any or all of (i) the number and kind of shares in respect of which
Awards may be made under the Plan, (ii) the number and kind of shares subject
to outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Board may
make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a
whole number.
(c) The Board may grant Awards under the Plan in substitution for stock and
stock based awards held by employees of another corporation who concurrently
become employees of the Company as a result of a merger or consolidation of
the employing corporation with the Company or a Subsidiary or the acquisition
by the Company or a subsidiary of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate in the circumstances. The shares
which may be delivered under such substitute Awards shall be in addition to
the maximum number of shares provided for in Section 5(a) only to the extent
that the substitute Awards are both (i) granted to persons whose relationship
to the Company does not make (and is not expected to make) them Reporting
Persons; and (ii) granted in substitution for awards issued under a plan
approved, to the extent then required under Rule 16b-3, by the stockholders of
the entity which issued such predecessor awards.
Section 6. Stock Options
(a) General.
(i) Subject to the provisions of the Plan, the Board may award Incentive
Stock Options and Nonstatutory Stock Options, and determine the number of
shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The
terms and conditions of Incentive Stock Options shall be subject to and
comply with Section 422 of the Code, or any successor provision, and any
regulations thereunder.
(ii) The Board shall establish the exercise price at the time each Option
is awarded. In the case of Incentive Stock Options, such price shall not be
less than 100% of the Fair Market Value of the Common Stock on the date of
award.
(iii) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Board may specify in the applicable Award or
thereafter. The Board may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(iv) Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or check in an amount equal to the
exercise price of such Options or, to the extent permitted by the Board at
or after the award of the Option, by (A) delivery of shares of Common Stock
owned by the optionee for at least six months (or such shorter period as is
approved by the Board), valued at their Fair Market Value, (B) delivery of
a promissory note of the optionee to the Company on terms determined by the
Board, (C) delivery of 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, (D) payment
of such other lawful consideration as the Board may determine, or (E) any
combination of the foregoing.
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(v) The Board may provide for the automatic award of an Option upon the
delivery of shares to the Company in payment of the exercise price of an
Option for up to the number of shares so delivered.
(vi) The Board may at any time accelerate the time at which all or any
part of an Option may be exercised.
(b) Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(i) All Incentive Stock Options granted under the Plan shall, at the time
of grant, be specifically designated as such in the option agreement
covering such Incentive Stock Options. The Option exercise period shall not
exceed ten years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is to be granted
under the Plan is, at the time of the grant of such option, the owner of
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company (after taking into account the attribution
of stock ownership rule of Section 424(b) and of the Code), then the
following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(x) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the Fair Market
Value of one share of Common Stock at the time of grant; and
(y) The option exercise period shall not exceed five years from the
date of grant.
(iii) For so long as the Code shall so provide, options granted to any
employee under the Plan (and any other incentive stock option plans of the
Company) which are intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such options, in the
aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate Fair Market Value (determined
as of the respective date or dates of grant) of more than $100,000.
(iv) No Incentive Stock Option may be exercised unless, at the time of
such exercise, the Participant is, and has been continuously since the date
of grant of his or her Option, employed by the Company, except that:
(x) an Incentive Stock Option may be exercised within the period of
three months after the date the Participant ceases to be an employee of
the Company (or within such lesser period as may be specified in the
applicable option agreement), provided, that the agreement with respect
to such Option may designate a longer exercise period and that the
exercise after such three-month period shall be treated as the exercise
of a Nonstatutory Stock Option under the Plan;
(y) if the Participant dies while in the employ of the Company, or
within three months after the Participant ceases to be such an
employee, the Incentive Stock Option may be exercised by the
Participant's Designated Beneficiary within the period of one year
after the date of death (or within such lesser period as may be
specified in the applicable Option agreement); and
(z) if the Participant becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while
in the employ of the Company, the Incentive Stock Option may be
exercised within the period of one year after the date of death (or
within such lesser period as may be specified in the Option agreement).
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For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of
the Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
Section 7. Stock Appreciation Rights
(a) The Board may grant Stock Appreciation Rights entitling recipients on
exercise of the SAR to receive an amount, in cash or Stock or a combination
thereof (such form to be determined by the Board), determined in whole or in
part by reference to appreciation in the Fair Market Value of the Stock
between the date of the Award and the exercise of the Award. A Stock
Appreciation Right shall entitle the Participant to receive, with respect to
each share of Stock as to which the SAR is exercised, the excess of the
share's Fair Market Value on the date of exercise over its Fair Market Value
on the date the SAR was granted. The Board may also grant Stock Appreciation
Rights that provide that, following a change in control of the Company (as
defined by the Board at the time of the Award), the holder of such SAR will be
entitled to receive, with respect to each share of Stock subject to the SAR,
an amount equal to the excess of a specified value (which may include an
average of values) for a share of Stock during a period preceding such change
in control over the Fair Market Value of a share of Stock on the date the SAR
was granted.
(b) Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan. A Stock Appreciation Right
granted in tandem with an Option which is not an Incentive Stock Option may be
granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an Incentive Stock Option may be
granted only at the time the Option is granted.
(c) When Stock Appreciation Rights are granted in tandem with Options, the
following provisions will apply:
(i) The Stock Appreciation Right will be exercisable only at such time or
times, and to the extent, that the related Option is exercisable and will
be exercisable in accordance with the procedure required for exercise of
the related Option.
(ii) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(iii) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(iv) The Stock Appreciation Right will be transferable only with the
related Option.
(v) A Stock Appreciation Right granted in tandem with an Incentive Stock
Option may be exercised only when the market price of the Stock subject to
the Option exceeds the exercise price of such option.
(d) A Stock Appreciation Right not granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as the Board
may specify.
(e) The Board may at any time accelerate the time at which all or any part
of the SAR may be exercised.
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Section 8. Performance Shares
(a) The Board may make Performance Share Awards entitling recipients to
acquire shares of Stock upon the attainment of specified performance goals.
The Board may make Performance Share Awards independent of or in connection
with the granting of any other Award under the Plan. The Board in its sole
discretion shall determine the performance goals applicable under each such
Award, the periods during which performance is to be measured, and all other
limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Board may rely on the performance goals and other
standards applicable to other performance plans of the Company in setting the
standards for Performance Share Awards under the Plan.
(b) Performance Share Awards and all rights with respect to such Awards may
not be sold, assigned, transferred, pledged or otherwise encumbered.
(c) A Participant receiving a Performance Share Award shall have the rights
of a stockholder only as to shares actually received by the Participant under
the Plan and not with respect to shares subject to an Award but not actually
received by the Participant. A Participant shall be entitled to receive a
stock certificate evidencing the acquisition of shares of Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the agreement evidencing the Performance Share Award.
(d) The Board may at any time accelerate or waive any or all of the goals,
restrictions or conditions imposed under any Performance Share Award.
Section 9. Restricted and Unrestricted Stock
(a) The Board may grant Restricted Stock Awards entitling recipients to
acquire shares of Stock, subject to the right of the Company to repurchase all
or part of such shares at their purchase price (or to require forfeiture of
such shares if purchased at no cost) from the recipient in the event that
conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable Restricted Period or Restricted Periods
established by the Board for such Award. Conditions for repurchase (or
forfeiture) may be based on continuing employment or service or achievement of
pre-established performance or other goals and objectives.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Board, during the
applicable Restricted Period. Shares of Restricted Stock shall be evidenced in
such manner as the Board may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and, unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company (or its
designee). At the expiration of the Restricted Period, the Company (or such
designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
(c) The Board may, in its sole discretion, grant (or sell at a purchase
price determined by the Board, which shall not be lower than 85% of Fair
Market Value on the date of sale) to Participants shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock").
(d) The purchase price for each share of Restricted Stock and Unrestricted
Stock shall be determined by the Board of Directors and may not be less than
the par value of the Common Stock. Such purchase price may be paid in the form
of past services or such other lawful consideration as is determined by the
Board.
(e) The Board may at any time accelerate the expiration of the Restricted
Period applicable to all, or any particular, outstanding shares of Restricted
Stock.
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Section 10. General Provisions Applicable to Awards
(a) Applicability of Rule 16b-3. Those provisions of the Plan which make an
express reference to Rule 16b-3 shall apply to the Company only at such time
as the Company's Common Stock is registered under the Securities Exchange Act
of 1934, or any successor provision, and then only to Reporting Persons.
(b) Reporting Person Limitations. Notwithstanding any other provision of the
Plan, to the extent required to qualify for the exemption provided by Rule
16b-3, (i) any Option, SAR, Performance Share Award or other similar right
related to an equity security issued under the Plan to a Reporting Person
shall not be transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I or the Employee Retirement Income Security Act ("ERISA"),
or the rules thereunder, and shall be exercisable during the Participant's
lifetime only by the Participant or the Participant's guardian or legal
representative, and (ii) the selection of a Reporting Person as a Participant
and the terms of his or her Award shall be determined only in accordance with
the applicable provisions of Rule 16b-3.
(c) Documentation. Each Award under the Plan shall be evidenced by an
instrument delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with
the provisions of the Plan as the Board considers necessary or advisable. Such
instruments may be in the form of agreements to be executed by both the
Company and the Participant, or certificates, letters or similar documents,
acceptance of which will evidence agreement to the terms thereof and of this
Plan.
(d) Board Discretion. Each type of Award may be made alone, in addition to
or in relation to any other type of Award. The terms of each type of Award
need not be identical, and the Board need not treat Participants uniformly.
Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Board at the time of
award or at any time thereafter.
(e) Termination of Status. Subject to the provisions of Section 6(b)(iv),
the Committee shall determine the effect on an Award of the disability, death,
retirement, authorized leave of absence or other termination of employment or
other status of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may exercise rights under such Award.
(f) Mergers, Etc. In the event of a consolidation, merger or other
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (as "Acquisition") or in the event of a 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, may, in its
discretion, take any one or more of the following actions as to outstanding
Awards: (i) provide that such Awards shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof) on such terms as the Board determines to
be appropriate, (ii) upon written notice to Participants, provide that all
unexercised Options or SARs will terminate immediately prior to the
consummation of such transaction unless exercised by the Participant within a
specified period following the date of such notice, (iii) in the event of an
Acquisition under the terms of which holders of the Common Stock of the
Company will receive upon consummation thereof a cash payment for each share
surrendered in the Acquisition (the "Acquisition Price"), make or provide for
a cash payment to Participants equal to the difference between (A) the
Acquisition Price times the number of shares of Common Stock subject to
outstanding Options or SARs (to the extent then exercisable at prices not in
excess of the Acquisition Price) and (B) the aggregate exercise price of all
such outstanding Options or SARs in exchange for the termination of such
Options and SARs, and (iv) provide that all or any outstanding Awards shall
become exercisable or realizable in full prior to the effective date of such
Acquisition.
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(g) Withholding. The Participant shall pay to the Company, or make provision
satisfactory to the Board for payment of, any taxes required by law to be
withheld in respect of Awards under the Plan no later than the date of the
event creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may be paid
in whole or in part in shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.
(h) Foreign Nationals. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Board considers necessary or
advisable to achieve the purposes of the Plan or comply with applicable laws.
(i) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the Participant's consent to such action shall be required unless the
Board determines that the action, taking into account any related action,
would not materially and adversely affect the Participant.
(j) Cancellation and New Grant of Options. The Board of Directors shall have
the authority to effect, at any time and from time to time, with the consent
of the affected optionees, (i) the cancellation of any or all outstanding
Options under the Plan and the grant in substitution therefor of new Options
under the Plan covering the same or different numbers of shares of Common
Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the cancelled Options or (ii) the
amendment of the terms of any and all outstanding Options under the Plan to
provide an option exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Options.
(k) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Stock pursuant to the Plan or to remove restrictions
from shares previously delivered under the Plan (i) until all conditions of
the Award have been satisfied or removed, (ii) until, in the opinion of the
Company's counsel, all applicable federal and state laws and regulations have
been complied with, (iii) if the outstanding Stock is at the time listed on
any stock exchange, until the shares to be delivered have been listed or
authorized to be listed on such exchange upon official notice of notice of
issuance, and (iv) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of
the Award, such representations or agreements as the Company may consider
appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
Section 11. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or service
for the Company. The Company expressly reserves the right at any time to
dismiss a Participant free from any liability or claim under the Plan, except
as expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the record holder thereof.
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(c) Exclusion from Benefit Computations. No amounts payable upon exercise of
Awards granted under the Plan shall be considered salary, wages or
compensation to Participants for purposes of determining the amount or nature
of benefits that Participants are entitled to under any insurance, retirement
or other benefit plans or programs of the Company.
(d) Effective Date and Term. Subject to the approval of the stockholders of
the Company, the Plan shall be effective on June 23, 1992. Prior to such
approval, Awards may be made under the Plan expressly subject to such
approval. No Award may be made under the Plan after June 23, 2002, but Awards
previously granted may extend beyond that date.
(e) Amendment of Plan. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirements for
compliance with Rule 16b-3. Prior to any such approval, Awards may be made
under the Plan expressly subject to such approval.
(f) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with 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
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AMENDMENTS TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan (the "Plan") of Banyan
Systems Incorporated is hereby amended, subject to stockholder approval, to
increase from 1,000,000 to 1,850,000 the number of shares of Common Stock
authorized for issuance under the Plan.
Subsection 6(a)(i) of the Plan is hereby amended and restated in its
entirety, subject to stockholder approval, to provide as follows:
(i) Subject to the provisions of the Plan, the Board may award Incentive
Stock Options and Nonstatutory Stock Options, and determine the number of
shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The
terms and conditions of Incentive Stock Options shall be subject to and
comply with Section 422 of the Code, or any successor provisions, and any
regulations thereunder. Subject to adjustment as provided in Subsection
5(b) above, the maximum number of shares with respect to which Options may
be granted to any employee under the Plan shall not exceed 300,000 shares
of Common Stock during any two consecutive calendar year period. For
purposes of calculating such maximum number, (a) an Option shall continue
to be treated as outstanding notwithstanding its repricing, cancellation or
expiration and (b) the repricing of an outstanding Option or the issuance
of a new Option in substitution for a cancelled Option shall be deemed to
constitute the grant of a new additional Option separate from the original
grant of the Option that is repriced or cancelled.
Adopted by the Board of Directors on
March 28, 1994
Approved by the Stockholders on May
9, 1994
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AMENDMENT NO. 2 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan (the "Plan") of Banyan
Systems Incorporated is hereby amended, subject to stockholder approval, to
increase from 1,850,000 to 2,700,000 the number of shares of Common Stock
authorized for issuance under the Plan.
Adopted by the Board of
Directors on February 2, 1995
Approved by the Stockholders on
May 9, 1995
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AMENDMENT NO. 3 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
The definition of "Committee" contained in Subsection 2 of the 1992 Stock
Incentive Plan (the "Plan") of Banyan Systems Incorporated is hereby amended
and restated in its entirety to read as follows:
" "Committee' means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, provided that if and when the
Common Stock is registered under the Section 12 of the Securities Exchange Act
of 1934, each member of the Committee shall be a "Non-Employee Director,' as
such term is defined in Rule 16b-3 under the Securities Act of 1934 ("Rule
16b-3"), and an "Outside Director,' as such term is defined in the Code."
Adopted by the Board of Directors on
January 17, 1997
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AMENDMENT NO. 4 TO THE 1992 STOCK INCENTIVE PLAN
OF BANYAN SYSTEMS INCORPORATED
Subsection 5(a) of the 1992 Stock Incentive Plan, as amended (the "Plan"),
of Banyan Systems Incorporated is hereby amended, subject to stockholder
approval, to increase from 2,700,000 to 3,500,000 the number of shares of
Common Stock, $.01 par value per share, authorized for issuance under the
Plan.
Adopted by the Board of Directors on
February 11, 1998
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APPENDIX C
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
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
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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 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 calendar 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.
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, 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.
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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 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.
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.
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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.
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 preceding 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
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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.
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
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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 17, 1997
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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
Approved by the Stockholders on
May 12, 1997
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<PAGE>
AMENDMENT NO. 3 TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
OF BANYAN SYSTEMS INCORPORATED
The first paragraph of the 1995 Employee Stock Purchase Plan, as amended
(the "Plan"), of Banyan Systems Incorporated is hereby amended, subject to
stockholder approval, to increase from 750,000 to 1,050,000 the number of
shares of Common Stock, $.01 par value per share, authorized for issuance
under the Plan.
Adopted by the Board of Directors on
February 11, 1998
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