<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
/ / Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to
sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
PLATINUM SOFTWARE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form 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:
----------------------------------------------------------------------
<PAGE> 2
PLATINUM SOFTWARE CORPORATION
195 Technology Drive
Irvine, California 92618
[PLATINUM SOFTWARE LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------------
TO BE HELD OCTOBER 24, 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Platinum
Software Corporation (the "Company"), a Delaware corporation, will be held on
Thursday, October 24, 1996 at 10:00 a.m., Pacific time, at the offices of the
Company located at 195 Technology Drive, Irvine, California 92618, telephone
number (714) 453-4000, for the following purposes:
1. To elect eight (8) directors to serve until the next annual
meeting of stockholders or until their successors are elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending June 30, 1997.
3. To approve an amendment the Company's Certificate of
Incorporation to eliminate actions by written consent by common stockholders.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on September 10, 1996
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting. However, in
order to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors
L. George Klaus
Chief Executive Officer
Irvine, California
September 24, 1996
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any
stockholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting. Stockholders attending
the meeting whose shares are held in the name of a broker or other nominee who
desire to vote their shares at the meeting should bring with them a proxy or
letter from that firm confirming their ownership of shares.
<PAGE> 3
PLATINUM SOFTWARE CORPORATION
[PLATINUM SOFTWARE CORPORATION LOGO]
_______
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of
Directors (the "Board" or "Board of Directors") of PLATINUM SOFTWARE
CORPORATION (the "Company") for use at the Annual Meeting of Stockholders
(the"Annual Meeting of Stockholders") to be held on Thursday, October 24,
1996, at 10:00 a.m., Pacific Time, or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting of Stockholders will
be held at the offices of the Company located at 195 Technology Drive,
Irvine, California 92618. The telephone number at that location is (714)
453-4000.
These proxy solicitation materials and the Annual Report to
Stockholders for the fiscal year ended June 30, 1996, including financial
statements, were first mailed on or about September 24, 1996, to all
stockholders entitled to vote at the Annual Meeting of Stockholders.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT MEETING
Proposals that are intended to be presented by stockholders of
the Company at the Company's 1997 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices no later than May
24, 1997, in order to be considered for inclusion in the Company's proxy
statement relating to that meeting.
REVOCABILITY OF PROXIES; VOTING
Any proxy given pursuant to this solicitation may be revoked by
the person giving it at any time before its use by delivering to the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person. An automated
system administered by the Company's transfer agent will tabulate votes
cast at the Annual Meeting of Stockholders. A majority of the shares
entitled to vote, represented in person or by proxy,will constitute a
quorum at the Annual Meeting of Stockholders. Abstentions and broker
non-votes will be counted as present for purposes of determining the
existence of a quorum. Abstentions will be treated as shares present and
entitled to vote for purposes of any matter requiring the affirmative vote
of a majority or other proportion of the shares present and entitled to
vote. With respect to shares relating to any
1
<PAGE> 4
proxy as to which a broker non-vote is indicated on a proposal, those shares
will not be considered present and entitled to vote with respect to any such
proposal. Abstentions or broker non-votes or other failures to vote will have
no such effect in the election of directors, who will be elected by a plurality
of the affirmative votes cast. With respect to any matter brought before the
Annual Meeting requiring the affirmative vote of a majority or other proportion
of the outstanding shares, an abstention or broker non-vote or other failure to
vote will have the same effect as a vote against the matter being voted upon.
SOLICITATION
The Company will bear the entire cost of the solicitation of proxies,
including costs incurred in connection with the preparation, assembly, printing
and mailing of this proxy statement, the proxy and any additional information
furnished to the Company's stockholders in relation to the Annual Meeting of
Stockholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
Common Stock of the Company beneficially owned by others for forwarding to such
beneficial owners. The Company may reimburse persons representing beneficial
owners of Common Stock of the Company for their costs of forwarding solicitation
materials to such beneficial owners. Original solicitation of proxies by mail
may be supplemented by telephone, telegram or personal solicitation by
directors, officers or other regular employees of the Company. No additional
compensation will be paid to directors, officers or other regular employees for
such services. The Company has engaged Corporate Investor Communications, Inc.
to assist in the solicitation of proxies and anticipates paying such firm
approximately $5,000 plus costs for their services.
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on September 10, 1996
("Record Date") are entitled to notice of and to vote at the Annual Meeting of
Stockholders. The Company has three (3) classes of equity securities
outstanding, designated Common Stock, $.001 par value ("Common Stock" or the
"Company's Common Stock"), Series B Preferred Stock, $.001 par value ("Series B
Preferred Stock") and Series C Preferred Stock, $.001 par value ("Series C
Preferred Stock"). At the Record Date, ____________ shares of Common Stock,
2,490,000 shares of Series B Preferred Stock, and 231,598 shares of Series C
Preferred Stock were issued and outstanding. Each share of Common Stock
outstanding at the record date will be entitled to one (1) vote with respect to
each Proposal herein and any other matter that properly may come before the
Annual Meeting of Stockholders.
VOTING AND CONVERSION RIGHTS OF SERIES B PREFERRED STOCK AND SERIES C PREFERRED
STOCK
Each share of Series B Preferred Stock is convertible into one (1)
share of Common Stock, as adjusted for any stock dividends, combinations or
splits with respect to such shares, at any time at the option of the holder. In
addition, each share of Series B Preferred Stock automatically converts into one
(1) share of Common Stock, as adjusted as provided above, ten (10) days
following the date that the average closing price of the Common Stock for twenty
(20) consecutive days has exceeded $22.12 per share, as adjusted as provided
above. Each share of Series B Preferred Stock will be entitled to vote with the
holders of Common Stock on an as-converted basis on all matters presented for
stockholder approval and will be entitled to designate two (2) members of the
Board of Directors at each election of directors ("Series B Preferred
Directors").
Each share of Series C Preferred Stock is convertible into ten (10)
shares of Common Stock, as adjusted for any stock dividends, combinations or
splits with respect to such shares, at any time at the option of the holder. In
addition, each share of Series C Preferred Stock automatically converts into ten
(10) shares of Common Stock, as adjusted as provided above, ten (10) days
following the date that the average closing price of the Common Stock for twenty
(20) consecutive days has exceeded $25.00 per share, as adjusted as provided
above. Each share of Series C Preferred Stock will be entitled to vote with the
holders of Common Stock on an as-converted basis on all matters presented for
stockholder approval.
2
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting of Stockholders, eight (8) directors are to
be elected by the holders of Common Stock. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for Management's
eight (8) nominees named below. If any Management nominee is unable or
declines to serve as a director at the time of the Annual Meeting of
Stockholders, the proxies will be voted for a nominee designated by the
present Board of Directors to fill the vacancy. The Company is not aware
of any nominee who will be unable to or will decline to serve as a
director. The term of office for each person elected as a director will
continue until the next Annual Meeting of Stockholders or until his
successor has been elected and qualified. The holders of Series B
Preferred Stock have designated Arthur J. Marks and L. John Doerr as the
Series B Preferred Directors.
The names of the nominees and certain information about them are
set forth below:
<TABLE>
<S> <C> <C>
Carmelo J. Santoro . . . . . . . . . 55 Chairman of the Board of Directors
L. George Klaus . . . . . . . . . . 56 President, Chief Executive Officer
W. Douglas Hajjar . . . . . . . . . 49 Director
Richard J. Goeglein . . . . . . . . 62 Director
Waldo (Jay) J. Richards . . . . . . 56 Director
Charles V. Prothro . . . . . . . . . 54 Director
Robert Finzi . . . . . . . . . . . . 42 Director
Donald R. Dixon . . . . . . . . . . 49 Director
</TABLE>
The Board of Directors recommends a vote "FOR" the election of all of the
nominees listed above.
Mr. Santoro has been a Director of the Company since April 1993 and
was Chief Executive Officer of the Company from April 1994 through February
1996. Mr. Santoro served as Vice-Chairman of the Board of AST Research,
Inc., a manufacturer of personal computers and related products, from
January 1992 to July 1996. Mr. Santoro was Chairman of the Board of
AST Research, Inc. from June 1992 until January 1993. Mr. Santoro served as
President and Chief Executive Officer of Silicon Systems, Inc. from 1982
through 1991 and Chairman from 1984 through 1989 at which time Silicon
Systems, Inc. was acquired by TDK Corporation of Tokyo, Japan. From 1980
to 1982, Mr. Santoro served as Vice President of Integrated Circuits at
RCA. Mr. Santoro is currently on the Board of Directors of the following
publicly traded corporations: Dallas Semiconductor Corporation, S3, Inc.,
the Cerplex Group, and Techniclone International, Inc.
Mr. Klaus has been a Director of the Company and has served as
President and Chief Executive Officer of the Company since February 1996.
From July, 1993 to October, 1995, Mr. Klaus served as President, Chief
Executive Officer and Chairman of the Board of Frame Technology, Inc., a
publicly held software company which produced software tools for
authoring, managing and distributing business-critical documents. From
October, 1992 to July, 1993, Mr. Klaus was Chairman of the Board and President
at Integral Development Corporation, a software company that produces
software tools and applications for the financial services industry. From
December, 1991 to May, 1992, Mr. Klaus was Chief Operating Officer at Cadence
Design Systems, a publicly held software company. In addition, Mr. Klaus
was President and Chief Operating Officer at Valid Logic Systems, Inc., a
publicly held supplier of electronic design automation software tools from
October, 1989 to December, 1991.
Mr. Hajjar has been a Director of the Company since April 1996.
Mr. Hajjar has been Chairman of the Board of Control Data Systems, Inc., a
publicly held electronic commerce and systems integration company,
since August 1995. From December 1991 to May 1993, Mr. Hajjar
served as Vice Chairman of Cadence Design Systems, Inc., a publicly held
electronic design automation software company. From April 1987 until the
merger with Cadence in December 1991, Mr. Hajjar served as Chairman of the
Board and Chief Executive Officer of Valid Logic Systems, Inc., a publicly
held supplier of electronic design automation
3
<PAGE> 6
software tools. In addition, Mr. Hajjar served as Chairman and Chief Executive
Officer of Telesis Systems, a publicly held electronic design automation company
from September 1985 to April 1987. Mr. Hajjar serves on the board of the
following public corporations: Control Data Systems, Inc.
Mr. Goeglein has been a Director since October 1994. Mr. Goeglein is
founder and principal of Gaming Associates, a casino management company that
develops and operates hotels/casinos at selected locations in the United States.
Mr. Goeglein served as President and Chief Executive Officer of Dakin, Inc. from
April 1990 through September 1991. Since January 1988, Mr. Goeglein has also
been the Chairman of ConServ International, a consulting and real estate
development business. From 1984 to his retirement date of December 31, 1987,
Mr. Goeglein was the President and Chief Operating Officer of Holiday
Corporation, the holding company of Holiday Inns, Inc. Mr. Goeglein also served
on the Board of Directors of Holiday Corporation from 1978 to 1987. Mr.
Goeglein currently serves as a director of Boomtown Hotels and Casinos and AST
Research, Inc.
Mr. Richards has been a Director of the Company since October 1994.
Since June 1995, Mr. Richards has been President of Air Tec Equipment, Inc., a
privately held manufacturer of aerial lift trucks. Mr. Richards has served as
Senior Vice President of Product Operations for Mentor Graphics Corporation from
February 1993 through March 1995. From July 1989 to February 1993, Mr. Richards
was Chief Operations Officer of Sequent Computers, a computer hardware
manufacturer.
Mr. Prothro has been a Director of the Company since October 1994. Mr.
Prothro has served as Chairman of the Board of Directors of Dallas Semiconductor
Corporation, a manufacturer of semiconductor chips, since 1984 and Chief
Executive Officer since 1989.
Mr. Finzi has been a Director of the Company since September 1995.
Since May 1991, Mr. Finzi has been a Vice President of Sprout Group, a division
of DLJ Capital Corporation, which is the managing general partner of Sprout
Growth II, L.P. and an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Mr. Finzi is also a general partner of a series of investment
funds managed by Sprout Group and limited partner of the general partner of ML
Ventures II, L.P. From 1984 to 1991, Mr. Finzi was a Vice President of Merrill
Lynch Venture Capital. Mr. Finzi also serves as a director of the Cerplex Group
and four privately held companies.
Mr. Dixon has been a Director of the Company since September 1995. Mr.
Dixon has served as President of Trident Capital, Inc., a private investment
firm, since June 1993, and before that as Co-President of Partech International,
Inc., an international venture capital and money management firm, from June 1988
until June 1993. Mr. Dixon also is a director of Affiliated Computer Systems,
Inc., American Business Information, Inc., Unison Software, Inc. and several
private companies.
SERIES B PREFERRED DIRECTORS
The names of the Series B Preferred Directors and certain information
about them are set forth below:
L. John Doerr . . . . . . . . . . . 45 Director
Arthur J. Marks . . . . . . . . . . 51 Director
Mr. Doerr has been a Director of the Company since October 1994. Mr.
Doerr has served as a general partner of Kleiner, Perkins, Caufield & Byers, a
venture capital firm specializing in information and life science companies,
since 1980. Mr. Doerr is currently on the Board of Directors of the following
public companies: Intuit, Inc., Macromedia, Inc., Sun Microsystems and Netscape
Communications Corporation.
Mr. Marks has been a Director of the Company since October 1994. Mr.
Marks is presently a general partner of and is the manager of the Information
Technology Group at New Enterprise Associates, a venture capital firm
specializing in technology companies. Mr. Marks has been a general
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<PAGE> 7
partner of New Enterprise Associates since 1984. Mr. Marks is currently
on the Board of Directors of the following publicly traded corporations:
Amisys Managed Care Systems, Inc., Netrix Corporation, Object Design,
Inc., and Progress Software Corporation.
COMMITTEES
The Board of Directors has a standing Compensation Committee,
Audit Committee and Executive Committee. The functions of the
Compensation Committee include advising the Board of Directors on
officer compensation and on employee compensation generally and
administering the Company's stock option plans. See "Report of the
Compensation Committee on Executive Compensation" below. The Compensation
Committee, which presently consists of four (4) outside directors, Messrs.
Santoro, Goeglein, Doerr and Richards, held one meeting during fiscal
1996. The Audit Committee is responsible for recommending to the Board of
Directors the appointment of the Company's outside auditors, examining the
results of audits and reviewing internal accounting controls. The Audit
Committee, which presently consists of three (3) directors, Messrs.
Dixon, Prothro and Marks, held four (4) meetings during fiscal 1996. The
Executive Committee is empowered to take day-to-day board actions between
regularly scheduled board meetings, and is presently comprised of two (2)
directors, Messrs. Santoro and Klaus. During fiscal 1996 the Executive
Committee held no meetings, but acted by written consent on several
occasions. The Board of Directors has no nominating committee or any
committee performing the functions of such a committee.
BOARD MEETINGS
The Board of Directors held a total of five (5) meetings during
fiscal 1995. No member of the Board of Directors attended fewer than 75%
of the meetings of the Board of Directors, and no director attended fewer
than 75% of the meetings of committees upon which such director served.
OTHER EXECUTIVE OFFICERS
In addition to Mr. Klaus,the other current executive officers of
the Company are Michael J. Simmons, age 49, Chief Financial Officer, William
R. Pieser, age 43, Senior Vice President, Marketing and Business
Development and Ken Lally, age 53, Senior Vice President, Field
Operations. Mr. Simmons joined the Company in May 1994 as Chief Financial
Officer. Mr. Simmons served as Executive Vice President and Chief
Financial Officer of Dynasty Classics, a manufacturer of home lighting
products, from April 1991 through September 1993. From February 1990
through April 1991, Mr. Simmons served as Chief Executive Officer and
President of Pro-Tech Sports International,a manufacturer of recumbent
exercise bicycles. From August 1986 through May 1989, Mr. Simmons served
as Executive Vice President and Chief Financial Officer of CPG,
International, a privately held distributor of graphic and fine arts
supplies. From 1979 to 1986, Mr. Simmons was Chief Financial Officer and
Senior Vice President of Silicon Systems, Inc.
Mr. Pieser joined the Company in February 1996. Mr. Pieser
served as Vice president of Marketing at Frame Technology, Inc. from
October 1993 to October 1995. From to October 1991 to October 1993, Mr.
Pieser was Vice President of Marketing at Raima Corporation, a supplier of
development tools.
Mr. Lally joined the Company in April 1996. Mr. Lally served as
Vice President of Spectrum Services for Cadence Design Systems from January
1995 through April 1996. Mr. Lally was Vice President of North American
Sales at Cadence from December 1991 through January 1995. From December
1990 through December 1991, Mr. Lally was Vice President of North American
Sales at Valid Logic Systems, Inc. Prior to joining Valid, Mr. Lally was
employed at Prime Computer for ten years.
5
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION. The following table sets forth summary
information concerning compensation paid or accrued for services rendered to the
Company in all capacities during the fiscal year ended June 30, 1996 to the two
individuals who served as the Company's Chief Executive Officer during fiscal
1996 and to the Company's four (4) most highly-compensated executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------------------ -----------------------------
Other
Annual Restricted Securities All
Name and Compen- Stock Underlying Other
Principal Position Year Salary($) Bonus($) sation ($) Awards($) Options (#) Compensation($)
- ------------------ ---- --------- -------- ---------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carmelo J. Santoro 1996 - - 128,000 (1) - 60,000 -
Chairman of the 1995 - - 128,000 (2) - 200,000 -
Board (3) 1994 - - 48,000 - 300,000 -
L. George Klaus 1996 198,865 98,630 (6) 0 (4) - -
Chief Operating 1995 - - - - - -
Officer, President 1994 - - - - - -
David R. Proctor 1996 225,000(5) 0 (6) - - -
Chief Operating 1995 225,000 0 (6) - 200,000 -
Officer, President 1994 24,218 0 - - 250,000 -
Michael J. Simmons 1996 175,000 0 (6) - 140,000 -
Chief Financial 1995 175,000 0 (6) - 100,000 -
Officer 1994 36,090(7) 0 - - 100,000 -
Ken Lally 1996 34,848 17,260 - 0 (8) 25,000 -
Senior Vice President 1995 - - - - - -
Field Operations 1994 - - - - - -
William R. Pieser 1996 73,500 36,247 42,769 (9) 0 (10) 0 -
Senior Vice President 1995 - - - - - -
Marketing and 1994 - - - - - -
Business Development
</TABLE>
- ---------------
(1) Includes annual directors fee of $120,000 and $1,000 per month car
allowance.
(2) Includes annual directors fee of $120,000 and $1,000 per month car
allowance. The car allowance was paid for eight (8) months commencing
November 1994.
(3) Dr. Santoro became Acting Chief Executive Officer of the Company on April
17, 1994 and Chief Executive Officer in May 1994. Dr. Santoro received a
directors fee for service on the Board in lieu of salary. Dr. Santoro
resigned as Chief Executive Officer in February 1996, when Mr. Klaus
joined the Company.
(4) Mr. Klaus received a restricted stock grant of 2,000,000 shares in
connection with his joining the Company in February 1996. See "Employment
Agreements." Of the 2,000,000 shares, 350,000 vested on the grant date and
29,167 shares vest each month thereafter for 36 months. The remaining
600,000 shares vest based on the Company meeting operating revenue and
profit after tax thresholds for fiscal 1997, 1998 and 1999. If the
Company does not meet the thresholds, then the shares vest after 10 years.
The value of Mr. Klaus' restricted stock holdings at June 30, 1996 was
$7,500,000, which was determined by multiplying the number of restricted
shares times $7.25, the closing price of the Company's common stock on
June 30, 1996, net of the consideration paid for the restricted shares.
(5) Mr. Proctor's employment with the Company terminated in December 1995. Of
this amount, $112,500 was salary and $112,500 was salary continuation in
the nature of severance.
(6) Miscellaneous perquisites which, in the aggregate, are less than 10% of
base salary and bonus.
(7) Includes $6,923 in consulting fees paid to Mr. Simmons prior to becoming
an employee in May 1994.
(8) Mr. Lally received a restricted stock grant of 450,000 shares in
connection with his joining the Company in April 1996. See "Employment
Agreements." Of the 450,000 shares, 49,980 vested on the grant date and
6,945 shares vest each month thereafter for 36 months. The remaining
150,000 shares vest based on the Company meeting operating revenue and
profit after tax thresholds for fiscal 1997, 1998 and 1999. If the
Company does not meet the thresholds, then the shares vest after 10 years.
The value of Mr. Lally's restricted stock holdings at June 30, 1996 was
$450,000, which was determined by multiplying the number of restricted
shares times $7.25, the closing price of the Company's common stock on
June 30, 1996, net of the consideration paid for the restricted shares.
(9) Includes golf club membership of $22,500 and closing costs on purchase of
home of $22,269.
(10) Mr. Pieser received a restricted stock grant of 500,000 shares in
connection with his joining the Company in February 1996. See "Employment
Agreements." Of the 500,000 shares, 50,000 vested on the grant date and
8,334 shares vest each month thereafter for 36 months. The remaining
150,000 shares vest based on the Company meeting operating revenue and
profit after tax thresholds for fiscal 1997, 1998 and 1999. If the
Company does not meet the thresholds, then the shares vest after 10 years.
The value of Mr. Pieser's restricted stock holdings at June 30, 1996 was
$1,875,000, which was determined by multiplying the number of restricted
shares times $7.25, the closing price of the Company's common stock on
June 30, 1996, net of the consideration paid for the restricted shares
6
<PAGE> 9
Option Grants. The following table sets forth certain information
concerning grants of stock options to each of the persons named in the Summary
Compensation Table during the fiscal year ended June 30, 1996. In addition, in
accordance with the rules and regulations of the Securities and Exchange
Commission, the following table sets forth the hypothetical gains or "option
spreads" that would exist for the options. Such gains are based on assumed
rates of annual compound stock appreciation of 5% and 10% from the date on
which the options were granted over the full term of the options. No assurance
can be given that the rates of annual compound stock appreciation assumed for
the purposes of the following table will be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
- --------------------------------------------------------------------------- --------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date (1) 5% ($) 10% ($)
- ------------------ ---------- --------- ----------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Carmelo J. Santoro 60,000 (2) 3.18 - - - -
L. George Klaus - - - - - -
David R. Proctor - - - - - -
Michael J. Simmons 140,000 (2) 7.42 - - - -
Ken Lally 25,000 (3) 1.33 $6.25 04-10-06 124,928 288,866
William R. Pieser - - - - - -
</TABLE>
- ----------------
(1) Options granted have a term of ten (10) years, subject to earlier
termination in certain events related to termination of employment.
(2) Repriced stock option. See "Ten Year Option/SAR Repricings."
(3) Subject to continued employment with the Company or service as a
director, the option becomes exercisable with respect to 12,500 shares
based on fulfillment of certain performance criteria for the first
quarter of fiscal 1997 and an additional 12,500 shares vest and become
exercisable upon fulfillment of certain performance criteria for the
second quarter of fiscal 1997. If the performance criteria is not
satisfied, the shares vest ten years following the grant date.
Option Exercises. The following table sets forth certain
information concerning the exercise of options by each of the Company's
executive officers named in the Summary Compensation Table during the fiscal
year ended June 30, 1996, including the aggregate value of gains on the date of
exercise. In addition, the table includes the number of shares covered by both
exercisable and unexercisable stock options as of June 30, 1996. Also
reported are the values for "in the money" options that represent the positive
spread between the exercise prices of any of such existing stock options and the
closing sale price of the Company's Common Stock as of June 30, 1996.
AGGREGATED OPTION EXERCISE IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
-------------------------- -------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End (1)
- -------------------- --------------- ----------- -------------------------- --------------------------
Shares Acquired Value
on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
- -------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carmelo J. Santoro N/A N/A 398,000 (2) 162,000 (3) 90,000 0
Michael J. Simmons N/A N/A 65,000 (4) 75,000 (5) 92,500 0
L. George Klaus N/A N/A - - - -
David R. Proctor N/A N/A 300,000 (6) - 562,500 0
Ken Lally N/A N/A 0 25,000 0 25,000
William R. Pieser N/A N/A - - - -
</TABLE>
- ----------------
(1) Market value of underlying securities at exercise date or year-end, as
the case may be, minus the exercise or base price on "in-the-money"
options. The closing sale price for the Company's Common Stock as of
June 30, 1996 on the NASDAQ National Market System was $7.25.
(2) Includes 48,000 shares exercisable at $7.87 per share, 300,000 shares
exercisable at $4.25 per share and 50,000 exercisable at $7.35 per share.
(3) Includes 12,000 shares at an exercise price of $7.87 per share, and
150,000 shares at an exercise price of $7.375 per share.
(4) Includes 20,000 shares exercisable at $4.25 per share, 20,000 shares
exercisable at $5.625 per share and 25,000 exercisable at $7.375 per
share. Effective February 1, 1997, the exercise price of all shares will
be repriced to $3.50 per share.
(5) Includes 75,000 shares at an exercise price of $7.375 per share.
Effective February 1, 1997, the exercise price of all shares will be
repriced to $3.50 per share.
(6) Includes 250,000 shares exercisable at an exercise price of $5.00 per
share and 50,000 shares exercisable at an exercise price of $7.375 per
share.
7
<PAGE> 10
The following table sets forth certain information concerning the
repricing of stock options with respect to Company's executive officers named in
the Summary Compensation Table during the fiscal year ended June 30, 1996. See
"Report of Board of Directors on Repricing."
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Number of Exercise Length of
Securities Price at Original Option
Underlying Market Price Time of Term
Options/SARs of Stock at Repricing Remaining at
Repriced Time of or Date
or Amended Repricing or Amendment New Exercise of Repricing or
Name Date (#) Amendment ($) ($) Price ($) Amendment
- ---------- -------- ---------- ------------- --------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Carmelo J. Santoro 02-08-96 60,000 3.50 21.17 7.87 7 years, 2 months
Chairman of
the Board (1)
Michael J. Simmons 02-08-96 20,000 3.50 4.25 3.50 (2) 8 years, 2 months
Chief Financial 20,000 3.50 5.625 3.50 (2) 8 years, 3 months
Officer 100,000 3.50 7.375 3.50 (2) 8 years, 7 months
</TABLE>
(1) Mr. Santoro was the Chief Executive Officer of the Company during fiscal
year 1996 until February 8, 1996 when he resigned from such position.
(2) Repricing is effective February 1, 1997, provided Mr. Simmons is an
employee or service provider of the Company at such date.
Compensation of Directors. As Chairman of the Board of Directors, Dr.
Santoro received an annual retainer of $120,000 during fiscal 1996. Except for
the Series B Preferred Directors, each of the Company's non-employee directors
receives annual retainers of $24,000, of which $24,000 was paid during fiscal
1996.
Employment Agreements and Related Party Transactions. The Company
entered into an offer letter with L. George Klaus when he joined the Company as
President and Chief Executive Officer in February 1996. The offer letter
provides for a base salary of $500,000 together with an annual bonus on a fiscal
year basis of up to $250,000 based on a performance plan. Mr. Klaus can earn an
additional incentive bonus of up to $250,000 upon fulfillment of certain
performance criteria. In addition, Mr. Klaus purchased 2,000,000 shares of
restricted stock at a purchase price of $3.50, the then fair market value of the
Company's common stock. In payment of one half of the purchase price, Mr. Klaus
executed a secured five-year promissory note in the principal amount of
$3,500,000. The note bears simple interest at 6% per annum and is a recourse
promissory note. The Company retained a repurchase right with respect to the
restricted stock. The repurchase right lapsed with respect to 350,000 shares on
the date of the restricted stock grant, and lapses with respect to 29,167 shares
each month for 36 months so that after three years the repurchase right shall
not apply to 1,400,000 shares. The repurchase right with respect to the
remaining 600,000 shares lapses based on fulfillment of certain performance
criteria with respect to the Company's operating revenues and profit after taxes
for fiscal 1997, fiscal 1998 and fiscal 1999 years, or in any event after ten
years. In addition, the Company agreed to pay Mr. Klaus twelve months
severance, including salary and bonus in the event his employment is terminated
without cause or in the event that he is constructively terminated. In the
event of termination without cause or constructive termination, the Company's
repurchase right lapses with respect to the shares that would have vested
during the twelve month period following termination. Finally, the Company
agreed to provide a relocation package to Mr. Klaus to assist him to
relocate from northern California to Southern California. Such package
includes: (i) paying the shortfall on the sale of his primary residence; (ii)
reimbursing Mr. Klaus certain financing and closing costs in connection with the
purchase of a new home; (iii) providing temporary housing in Southern
California; and (iv) paying moving expenses. The Company has loaned to Mr.
Klaus $3,500,000 pursuant to an unsecured five-year recourse promissory note
which bears interest at the rate of 6% per annum. This loan was used to
fund Mr. Klaus' restricted stock purchase along with the secured note
referenced above.
The Company entered into an offer letter with William R. Pieser when he
joined the Company as Senior Vice President - Marketing and Business Development
in February 1996. The offer letter provides for a base salary of $210,000
together with an annual bonus on a fiscal year basis of up to $105,000 based on
a performance plan. Mr. Pieser can earn an additional incentive bonus of up to
$105,000 upon fulfillment of certain performance criteria. In addition, Mr.
Pieser purchased 500,000
8
<PAGE> 11
shares of restricted stock at a purchase price of $3.50, the then fair market
value of the Company's common stock. In payment of one half of the purchase
price, Mr. Pieser executed a secured five-year promissory note in the principal
amount of $875,000. The note bears simple interest at 6% per annum and is a
recourse promissory note. The Company retained a repurchase right with respect
to the restricted stock. The repurchase right lapsed with respect to 50,000
shares on the date of the restricted stock grant, and lapses with respect to
8,334 shares each month for 36 months, so that after three years the repurchase
right shall not apply to 350,000 shares. The repurchasing with respect to the
remaining 150,000 shares lapses based on fulfillment of certain performance
criteria with respect to the Company's operating revenues and profit after taxes
for fiscal 1997, fiscal 1998 and fiscal 1999, or in any event after ten years.
In addition, the Company agreed to pay Mr. Pieser six months severance,
including salary and bonus in the event his employment is terminated without
cause or in the event that he is constructively terminated. In the event of
termination without cause or constructive termination, the Company's repurchase
right lapses with respect to the shares that would have vested during the six
month period following termination. Finally, the Company agreed to provide a
relocation package to Mr. Pieser to assist him to relocate from northern
California to southern California In April 1996, the Company made abridge loan
to Mr. Pieser of $143,000 in connection with his relocation to Southern
California. The note bears 8% simple interest and was due on or before June
30,1996. This note was repaid as of June 30, 1996. The relocation package
includes: (i) paying the shortfall on the sale of his primary residence;(ii)
reimbursing Mr. Pieser certain financing and closing costs in connection with
the purchase of a new home, which totaled $22,269; (iii) providing temporary
housing in Southern California; and (iv) paying moving expenses. The Company
also has loaned to Mr. Pieser $875,000 pursuant to a five-year unsecured
recourse promissory note, which bears interest at the rate of 6% per annum.
This loan was used to fund Mr. Pieser's restricted stock purchase along with the
secured note referenced above.
The Company entered into an offer letter with Ken Lally when he
joined the Company as Senior Vice President - Worldwide Field Operations in
April 1996. The offer letter provides for a base salary of $200,000
together with an annual bonus on a fiscal year basis of up to $100,000
based on a performance plan. Mr. Lally can earn an additional incentive
bonus of up to $100,000 upon fulfillment of certain performance criteria.
In addition, Mr. Lally purchased 450,000 shares of restricted stock at a
purchase price of $6.25, the then fair market value of the Company's common
stock. In payment of one half of the purchase price, Mr. Lally executed a
secured five-year promissory note in the principal amount of $1,406,250.
The note bears simple interest at 6% per annum and is a recourse promissory
note. The Company retained a purchase right with respect to the restricted
stock. The repurchase right lapsed with respect to 49,980 shares on
the date of the restricted stock grant, and lapses with respect to 6,945
shares each month thereafter for 36 months, so that after three years the
repurchase right shall not apply to 300,000 shares. The repurchase right
with respect to the remaining 150,000 shares lapses based on fulfillment
of certain performance criteria with respect to the Company's operating
revenues and profit after taxes for fiscal 1997, fiscal 1998 and fiscal
1999, or in any event after ten years. In addition, the Company agreed to
pay Mr. Lally twelve months severance, including salary and bonus in the
event his employment is terminated without cause or in the event that he is
constructively terminated. In the event of termination without cause or
constructive termination, the Company's repurchase right lapses with respect to
the shares that would have vested during the six month period following
termination. Finally, the Company agreed to provide a
relocation package to Mr. Lally to assist him to relocate from northern
California to Southern California. Such package includes: (i) paying the
shortfall on the sale of his primary residence; (ii) reimbursing Mr. Lally
certain financing in closing costs in connection with the purchase of a
new home; (iii) providing temporary housing in Southern California; and (iv)
paying moving expenses. The Company also has loaned to Mr. Lally $1,406,250
pursuant to a five-year unsecured promissory note, which bears interest at
6% per annum. This loan was used to fund Mr. Lally's restricted
stock purchase along with the secured note referenced above.
In February 1996, the Company entered into an agreement with
Michael J. Simmons which provides that in the event Mr. Simmons'
employment with the Company is involuntarily terminated or constructively
terminated, all stock options held by Mr. Simmons shall vest and become
immediately exercisable. In addition, if the involuntary termination or
constructive termination occurs on or before February 8, 1997, the Company
is required to pay severance benefit equal to Mr. Simmons total
compensation for the prior twelve months. The February 1996 agreement is
in lieu of and not in addition to the severance benefits payable to Mr.
Simmons pursuant to an arrangement that he entered into when joining the
Company which provided for six months of severance if his employment was
terminated by the Company. If for any reason Mr. Simmons is not entitled
to the benefits described in the February 1996 agreement, then he shall
been titled to the benefits described above.
9
<PAGE> 12
In February 1996, the Company entered into an agreement with Carmelo J.
Santoro that provided that if he is involuntarily removed from the Board of
Directors or not included in management's slate of directors at any annual
meeting or removed from his position as Chairman of the Board, then all options
to purchase common stock held by Mr. Santoro shall accelerate and become
immediately exercisable.
In December 1995, the Company entered into an agreement with David R.
Proctor in connection with his leaving the Company. The agreement provided for
salary and health benefit continuation through September 30, 1996. In addition,
the period in which Mr. Proctor could exercise vested stock options was extended
through June 30, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Between May 1, 1996 and June 30, 1996, Carmelo J. Santoro, the former
Chief Executive Officer of the Company, served on the Company's compensation
committee.
REPORT OF BOARD OF DIRECTORS ON REPRICING OF STOCK OPTIONS
The following report is submitted by the Board of Directors of the
Company with respect to the repricing of stock options held by Carmelo J.
Santoro and Michael J. Simmons, during fiscal 1996. Although Mr. Santoro is the
Chairman of the Board of Directors, he did not participate in the deliberations
regarding the repricing of stock options held by him.
During the second quarter of fiscal 1996, the Company restructured its
business operations and terminated approximately 100 employees. In the third
quarter of fiscal 1996, the Company had another reduction in force of
approximately 40 employees. Following the two reductions in force, in order to
retain the key remaining employees of the Company, in February 1996, the Company
repriced the exercise price of all employee stock options to the then current
market value of $3.50. The repricing will be effective on February 1, 1997
provided the optionholder is still an employee of the Company on such date.
Michael J. Simmons, the Company's Chief Financial Officer, was included in this
repricing in order to retain his services as an employee of the Company.
Also in February 1996, the exercise price of a 60,000 share option held
by Carmelo J. Santoro was repriced from $21.17 to $7.87. This repricing was
done to provide continued incentive to Mr. Santoro to serve as Chairman of the
Board of the Company as well as reward Mr. Santoro for his efforts in securing a
new President and Chief Executive Officer of the Company.
BOARD OF DIRECTORS
Carmelo J. Santoro
L. George Klaus
Donald R. Dixon
L. John Doerr
Robert Finzi
Richard J. Goeglein
W. Douglas Hajjar
Arthur J. Marks
Charles V. Prothro
Waldo (Jay) J. Richards
10
<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is a standing committee of the Board
of Directors of the Company as constituted at June 30, 1996. The
Compensation Committee is responsible for establishing and evaluating the
effectiveness of compensation policies and programs for the Company and for
making determinations regarding the compensation of the Company's
executive officers.
The following report is submitted by the Compensation Committee
with respect to the executive compensation policies established by the
Committee and compensation paid or awarded to executive officers for the
fiscal year ended June 30, 1996.
COMPENSATION POLICIES AND OBJECTIVES
In establishing and evaluating the effectiveness of compensation
programs for executive officers, as well as other employees of the Company, the
Compensation Committee is guided by three basic principles:
The Company must offer competitive salaries to be able to attract
and retain highly-qualified and experienced executives and other
management personnel.
Annual executive compensation in excess of base salaries
primarily should be tied to the Company's performance.
The financial interests of the Company's executive officers
should be aligned with the financial interests of the stockholders,
primarily through stock option grants which reward executives for
improvements in the market performance of the Company's Common Stock.
Salaries and Employee Benefits Programs. In order to retain
executives and other key employees, and to be able to attract additional
well-qualified executives when the need arises, the Company strives to
offer salaries and health care and other employee benefit programs to its
executives and other key employees which are comparable to those offered to
persons with similar skills and responsibilities by competing businesses in
the local geographic area. In recommending salaries for executive officers,
the Committee (i) reviews the historical performance of the executives, and
(ii) informally reviews available information, including information
published in secondary sources, regarding prevailing salaries and
compensation programs offered by competing businesses which are comparable
to the Company in terms of size, revenue, financial performance and industry
group. Many, though not all, of these competing businesses whose shares
are publicly traded, are included in the Center for Research in
Securities Prices Index for NASDAQ Computer and Data Processing Stocks
included in the Performance Graph on page 14 of this Proxy Statement.
Another factor which is considered in establishing salaries of executive
officers is the cost-of-living in Southern California where the Company
and its executive offices are headquartered,as such cost generally is
higher than in other parts of the country.
Performance-Based Compensation. The Company has established a cash
bonus plan for executives and key employees. Payment of bonuses is dependent
on the Company's achieving specific performance criteria for the fiscal year.
The performance criteria includes a target and a Company earnings goal. No
bonuses are paid if the Company is not profitable for the fiscal year.
Potential cash bonuses under the plan range from 5% to 120% of an individual's
base salary.
The earnings and revenue targets are established on the basis of
annual budget and forecasts developed by management and approved by the
Compensation Committee. This operating plan, which is designed to maximize
profitability, is developed on the basis of (i) the Company's performance
for the prior fiscal year, (ii) estimates of sales revenue for the plan
year based upon recent market conditions, trends and competition and other
factors which, based on historical experience, are expected to affect
11
<PAGE> 14
the level of sales that can be achieved, (iii) historical operating costs and
cost savings that management believes can be realized, (iv) competitive
conditions faced by the Company, and (v) additional expenditures beyond prior
fiscal years. By taking all of these factors into account, including market
conditions, the earnings goal and revenue targets are determined.
As a result of this performance-based bonus program, executive
compensation, and the proportion of each executive's total cash compensation
that is represented by incentive or bonus income, may increase in those years in
which the Company's profitability increases.
Stock Options and Equity-Based Programs. The Compensation Committee
believes that the motivation of executives and key employees increases as the
market value of the Company's Common Stock increases. In order to align the
financial interests of executive officers and other key employees with those of
the stockholders, the Company grants stock options to its executive officers and
other key employees on a periodic basis, taking into account, among other
factors, the size and terms of previous grants of equity-based compensation and
stock holdings in determining awards. Stock option grants, in particular,
reward executive officers and other key employees for performance that results
in increases in the market price of the Company's Common Stock, which directly
benefits all stockholders, Moreover, the Compensation Committee generally has
followed the practice of granting options on terms that provide that the options
become exercisable in cumulative annual installments, generally over a two to
five-year period. The Compensation Committee believes that this feature of the
option grants not only provides an incentive for executive officers to remain in
the employ of the Company, but also makes longer term growth in share prices
important for the executives who receive stock options.
Other Matters. In August 1993, federal tax legislation was enacted
that, among other things, places a ceiling of $1 million on the amount of an
executive officer's annual compensation that may be deducted for federal income
tax purposes in any year (the "Deductibility Cap"). The legislation provides
that compensation paid under certain incentive compensation plans may be
excluded from the calculation of compensation that is subject to the
Deductibility Cap, provided the plans meet certain conditions, which are
contained in regulations that have been adopted by the Internal Revenue Service.
The Company currently intends to structure the performance-based portion of the
compensation of its executive officers in a manner that it believes will comply
with this statute.
FISCAL YEAR 1996 COMPENSATION
The principal components of compensation for executive officers for
fiscal 1996 included base salary, bonuses and restricted stock grants. Dr.
Santoro, who served as the Company's Chairman of the Board and Chief Executive
Officer until February 1996, does not receive a salary, but instead receives an
annual directors fee of $120,000. The size of the directors fee was increased
in April 1994 to the present amount to reflect the increased time commitment and
responsibilities of Dr. Santoro. Dr. Santoro does not participate in the
management cash bonus plan described above. L. George Klaus, who joined the
Company in February 1996 and has served as President and Chief Executive Officer
since February receives a base salary of $500,000, of which $198,865 was paid in
fiscal 1996. Mr. Klaus also received a bonus of $98,630 for fiscal 1996, which
was negotiated as part of his compensation package in joining the Company. Mr.
Klaus also received a restricted stock grant of 2,000,000 shares. See "Executive
Compensation - Employment Agreements." In evaluating the compensation for Mr.
Klaus, the Committee placed particular emphasis on securing a skilled senior
executive of the stature of Mr. Klaus who has a track record in
company-turnaround situations.
The base salary of Mr. Simmons was set in May 1994 when he joined the
Company following the announcement that the Company was restating financial
statements for prior periods and restructuring its operations. The base salary
of Mr. Lally and Mr. Pieser were set when they joined the Company in April 1996
and February 1996, respectively. The Company believes that the salaries are
comparable to those offered to persons of similar skills and experience in
competing businesses in Southern California. Mr. Pieser and Mr. Lally received
bonuses of $36,247 and $17,260, respectively in fiscal 1996, which were
negotiated as part of their compensation packages in joining the Company.
12
<PAGE> 15
Other than the bonuses paid to Messrs. Klaus, Pieser and Lally, no cash
bonuses were paid in fiscal 1996 to any executive officer since the
Company was not profitable in such fiscal year.
Compensation Committee
Richard J. Goeglein
L. John Doerr
Waldo (Jay) J. Richards
Carmelo J. Santoro
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS OR FUTURE FILING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("SECURITIES ACT"); OR THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED ("EXCHANGE ACT"), THAT MIGHT INCORPORATE BY REFERENCE PREVIOUS OR
FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE
PRECEDING REPORT AND THE PERFORMANCE GRAPH ON PAGE 14 SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY OF SUCH FILINGS.
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for
the Company, the Center for Research in Securities Prices Index for the NASDAQ
Stock Market (United States Companies) and the Center for Research in Securities
Prices Index for NASDAQ Computer and Data Processing Stocks (the "CRSP NASDAQ
Computer Index") for the period that commenced on October 22, 1992 (the date on
which the Company's Common Stock was first registered under the Exchange Act)
and ended on June 30, 1996. The graph assumes that all dividends have been
reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURNS
(PLATINUM SOFTWARE CORPORATION, CRSP NASDAQ INDEX, CRSP NASDAQ COMPUTER INDEX)
<TABLE>
<CAPTION>
NASDAQ COMPUTER
PLATINUM SOFTWARE NASDAQ STOCK AND DATA PROCESSING
MEASUREMENT PERIOD CORPORATION MARKET STOCKS
- ------------------ ---------------- ------------ -------------------
<S> <C> <C> <C>
06/28/91 78.0 62.6
06/30/92 93.7 86.1
06/30/93 117.4 117.8 109.7
06/30/94 44.0 119.0 109.9
06/30/95 104.2 158.8 179.4
06/28/96 52.1 203.9 238.5
</TABLE>
14
<PAGE> 17
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of September 10,
1996 regarding the beneficial ownership of Common Stock, Series B Preferred
Stock and Series C Preferred Stock of the Company by (i) each person known by
management to be the beneficial owner of more than 5% of any class of the
Company's capital stock (based upon reports filed by such persons with the
Securities and Exchange Commission), (ii) each director of the Company, (iii)
each of the executive officers named in the Summary Compensation Table, and (iv)
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Common Stock Series B Preferred Stock Series C Preferred Stock
-------------------------- ---------------------------- -----------------------------
Amount and Amount and Amount and
Name and Address Nature Nature Nature
of of Beneficial Percentage of Beneficial Percentage of Beneficial Percentage
Beneficial Owner Ownership (1) of Class Ownership of Class Ownership (1) of Class
- ------------------------- ------------- ---------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kleiner Perkins Caufield & Byers VII - - 1,168,502 (3) 46.9% 31,770 (4) 13.7%
KPCB VII Founders Fund
L. John Doerr (2)
2750 Sand Hill Road
Menlo Park, CA 94025
New Enterprise Associates VI - - 724,002 29.1% 38,120 16.5%
Limited Partnership
Arthur J. Marks (5)
1119 St. Paul Street
Baltimore, MD 21202
Trident Capital Partners 27,500 (7) * 271,248 (8) 10.9% 25,415 (9) 11.0%
Fund-I, L.P.
Trident Capital Partners Fund-I, C.V.
Donald R. Dixon (6)
One Bush Street, 15th Floor
San Francisco, CA 94104
Integral Capital Partners, L.P. - - 271,248 (10) 10.9% 25,415 (11) 11.0%
Integral Capital Partners II, L.P.
Integral Capital Partners Int. II, C.V.
Integral Capital Partners Int., C.V.
2750 Sand Hill Road
Menlo Park, CA 94025
Institutional Venture Partners VI - - - - 25,415 11.0%
Institutional Venture Management VI
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Sprout Growth II, L.P. - - - - 63,535 27.4%
DLJ Capital Corporation
Robert Finzi (12)
3000 Sand Hill Road
Building 4, Suite 2709
Menlo Park, CA 94025
Robertson Stephans Orphan Fund - - - - 12,170 5.3%
555 California Street
Suite 2600
San Francisco, CA 94104
Putnam Investments, Inc. (13) 1,593,900 - - - -
One Post Office Square
Boston, MA 02102
Putnam Investment Management (14) 1,426,000 - - - -
One Post Office Square
Boston, MA 02102
Carmelo J. Santoro (15) 481,334 - - - -
W. Douglas Hajjar (16) 29,000 - - - -
L. George Klaus 2,000,000 - - - -
</TABLE>
15
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Michael J. Simmons (15) 106,667 - - - -
Richard J. Goeglein (17) 17,000 - - 635 *
Charles V. Prothro (15) 14,000 * - - 317 *
Waldo (Jay) J. Richards (15) 14,000 * - - - -
William R. Pieser 500,000 - - - -
Ken Lally 450,000 - - - -
David R. Proctor (15) 300,000 - - - *
Directors and officers as 3,887,001 - - 952 -
a group (14 persons) (15) (18)
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the persons named in the table have sole
voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
(2) L. John Doerr, a director of the Company, is a general partner of KPCB
VII Associates, which is a general partner of each of Kleiner Perkins
Caufield & Byers VII and KPCB VII Founders Fund. Mr. Doerr disclaims
beneficial ownership of these shares other than to the extent of his
individual partnership interest.
(3) Includes 1,051,652 shares held by Kleiner Perkins Caufield & Byers VII
and 116,850 shares held by KPCB VII Founders Fund.
(4) Includes 28,593 shares held by Kleiner Perkins Caufield & Byers VII and
3,177 shares held by KPCB VII Founders Fund.
(5) Arthur J. Marks, a director of the Company, is a general partner of NEA
Partners VI, which is the general partner of New Enterprise Associates
VI, Limited Partnership. Mr. Marks disclaims beneficial ownership of
these shares other than to the extent of his individual partnership
interest.
(6) Donald R. Dixon, a director of the Company, is president of Trident
Capital Inc., which is the general partner of Trident Capital, L.P.
which is the general partner of Trident Capital Partners Fund-I, L.P.
and Trident Capital Partners Fund-I, C.V. Mr. Dixon disclaims
beneficial ownership of these shares, other than to the extent of his
stock ownership in Trident Capital, Inc.
(7) Includes 22,957 shares held by Trident Capital Partners Fund-I, L.P. and
4,543 shares held by Trident Capital Partners Fund-I, C.V.
(8) Includes 226,451 shares held by Trident Capital Partners Fund-I, L.P. and
44,797 shares held by Trident Capital Partners Fund-I, C.V.
(9) Includes 21,218 shares held by Trident Capital Partners Fund-I, L.P. and
4,197 shares held by Trident Capital Partners Fund-I, C.V.
(10) Includes 137,740 shares held by Integral Capital Partners, L.P., 86,338
shares held by Integral Capital Partners II, L.P., 32,712 shares held by
Integral Capital Partners Int. II, C.V. and 14,458 shares held by
Integral Capital Partners Int., C.V.
(11) Includes 12,490 shares held by Integral Capital Partners, L.P., 8,696
shares held by Integral Capital Partners II, L.P., 3,037 shares held by
Integral Capital Partners Int. II, C.V. and 1,192 shares held by
Integral Capital Partners Int. C.V.
(12) Robert Finzi, a director of the Company is a vice president of Sprout
Group, a division of DLJ Capital Corporation, which is the managing
general partner of Sprout Growth II, L.P. Mr. Finzi disclaims
beneficial ownership of these shares other than to the extent of his
stock ownership in DLJ Capital Corporation.
(13) Putnam Investments, Inc. has shared voting power with respect to 105,900
shares and shared dispositive power with respect to 1,593,900 shares.
(14) Putnam Investment Management, Inc. has no voting power and shared
dispositive power with respect to these shares.
(15) Issuable pursuant to options exercisable within sixty (60) days from the
date hereof.
(16) Includes 25,000 shares owned directly and 4,000 shares issuable pursuant
to options exercisable within sixty (60) days from the date hereof.
(17) Includes 3,000 shares owned directly through a family trust and 12,000
shares issuable pursuant to options exercisable within sixty (60) days
from the date hereof.
(18) Excludes all shares of common stock, Series B Preferred Stock and
Series C Preferred Stock owned by Kleiner Perkins Caufield & Byers VII,
KPCB VII Founders Fund and New Enterprise Associates, VI, Limited
Partnership, Trident Capital Partners and related entities, and Sprout
Growth II, L.P. as to which the respective affiliated directors
disclaim beneficial ownership other than to the extent of their
individual partnership interests.
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NATURE OF THE VOTE REQUIRED AND VOTING PROCEDURES
The affirmative vote of a plurality of the shares of the Company's
Common Stock present or represented and voting at the Annual Meeting
of Stockholders will be required to elect Management's eight (8) nominee
directors. Under applicable Delaware law, a broker non-vote will have no
effect on the outcome of the election of directors. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF MANAGEMENT'S EIGHT (8) NOMINEE DIRECTORS. Proxies solicited
by Management will be voted FOR the election of management's eight (8)
nominee directors.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young, LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending June 30, 1997, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Ernst & Young LLP was chosen by the Board on July 15, 1994 to
replace Arthur Andersen LLP which had audited the Company's financial
statements annually since fiscal year 1987. Representatives of Ernst &
Young LLP are expected to be present at the meeting with the opportunity
to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
In the Company's two most recent fiscal years there have been no
disagreements between the Company and Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
The audit report of Ernst & Young LLP on the Company's consolidated
financial statements for the fiscal years ended June 30, 1994, June 30, 1995
and June 30, 1996 contained no adverse opinion or disclaimer of opinion and
it was not qualified or modified as to uncertainty, audit scope or
accounting principles.
PROPOSAL THREE
AMENDMENT OF CERTIFICATE OF INCORPORATION TO ELIMINATE
WRITTEN CONSENT OF COMMON STOCKHOLDERS
The Board of Directors has directed that there be submitted to the
stockholders of the Company at the meeting a proposed amendment to the
Company's Second Restated Certificate of Incorporation to eliminate common
stockholder actions by written consent. As a result of this proposed
amendment, common stockholders of the Company will be able to take action
only at a duly called meeting of stockholders. This provision would give
all stockholders of the Company the opportunity to participate in
determining the new proposed stockholder action and would prevent the
holders of the majority of the voting power of the Company from using the
written consent procedure to take stockholder action. Persons attempting
unfriendly takeovers of corporations have attempted to use written consent
procedures in order to deal directly with a limited number of stockholders
and avoid a stockholder meeting and negotiations with the boards of
directors of such companies.
The elimination of written consents by common stockholders may
have the effect of delaying consideration of a stockholder proposal until
the next annual meeting unless a special meeting is called by the Board
of Directors This amendment make more difficult an attempt to obtain
control of the Company, and may have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control
of the Company. In addition, the elimination of written consent of common
stockholders procedure would mean that a meeting of stockholders is
required in order for the Company stockholders to replace the Board. This
provision will thus make the removal of directors more difficult. Since
this provision will increase the amount of time required for a takeover
bidder to obtain control of
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<PAGE> 20
the Company, this amendment could discourage certain tender offers and other
attempts to obtain control the Company even though such attempts may be
beneficial to the Company and its stockholders. Because tender offers for
control usually involve a purchase price higher than the prevailing market
price, this amendment could also discourage open market purchases by a
potential takeover bidder. Such tender offers or open market purchases could
increase the market price of the Company's Common Stock, enabling stockholders
to sell their shares at a price higher than that which would otherwise prevail.
In addition, this amendment could make the Company's Common Stock less
attractive to persons who invest in securities in anticipation of an increase
in price if a takeover attempt develops and could discourage accumulation of
large blocks of the Company's Common Stock, thus tending to reduce temporary
fluctuations in the market price of the Company's Common Stock which are caused
by such accumulations. Therefore, stockholders could be deprived of certain
opportunities to sell their shares at temporarily higher prices.
VOTE REQUIRED; BOARD OF DIRECTORS RECOMMENDATION
The affirmative vote of the holders of the majority of the outstanding
shares of Common Stock and Series B and Series C Preferred Stock voting as a
single class entitled to vote at the annual meeting is required to authorize the
proposed amendment to the Second Restated Certificate of Incorporation to
eliminate written consents of common stockholders. Since the amendment of the
Second Restated Certificate of Incorporation requires the approval of the
majority of the outstanding shares of Common Stock and Series B and Series C
Preferred Stock voting as a single class, abstentions, broker non-votes and
other failures to vote will have the same effect as votes against the proposal.
If the amendment is authorized, the text of the following paragraph will be
added as a new Article 10 to the Company's Second Restated Certificate of
Incorporation as follows:
"ARTICLE 10 - ACTION BY MEETINGS
Common stockholders of the Corporation may not take action by written
consent in lieu of a meeting. Any action contemplated by common stockholders
must be taken at a duly called annual or special meeting."
The Company's existing Certificate of Incorporation permits actions by written
consent of stockholders. In the context of a hostile tender offer or other
takeover bid, it is common for arbitrageurs to acquire large blocks of target
stock, often in excess of a majority of the outstanding shares, in anticipation
of a completion of the takeover. The Board of Directors believes that
arbitrageurs in these circumstances may not have the long-term best interests
of the Company or its stockholders as a primary objective. Moreover, the Board
of Directors believes that a more appropriate forum for consideration of
fundamental issues relating to the Company is at a duly called stockholders'
meeting preceded by a proxy statement that sets forth full and complete
disclosure concerning the matters to be considered. Finally, the Board of
Directors believes that the fiduciary duties and obligations of the Board under
Delaware law will protect the best interests of the stockholders and the
Company. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE PROPOSAL TO AMEND THE SECOND RESTATED CERTIFICATE OF INCORPORATION
TO ELIMINATE WRITTEN CONSENTS OF COMMON STOCKHOLDERS. Proxies solicited by
Management will be voted FOR the proposal unless a vote against the proposal or
abstention is specifically indicated.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10%
stockholders are required by regulations promulgated by the Securities and
Exchange Commission to furnish the Company with
18
<PAGE> 21
copies of all Section 16(a) reports they file. Based solely on the review
of copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes
that during the fiscal year ended June 30, 1996 the Company's officers,
directors and all persons who own more than 10% of a registered class of
the Company's equity securities complied with all Section 16(a) filing
requirements, with exception of Initial Statements of Beneficial Ownership
on Form 3 for Robert Finzi and Donald R. Dixon,newly elected directors,
which were inadvertently filed late.
OTHER MATTERS
The Company knows of no other matters to be submitted to the
Annual Meeting of Stockholders. If other matters properly come before the
meeting, it is the intention of the persons named in the enclosed form of
Proxy to vote the shares they represent as the Board of Directors may
recommend.
TRANSACTION OF OTHER BUSINESS
As of the date of the date of the Proxy Statement, the Board of
Directors is not aware of any other matters other than those set forth
herein and in the Notice or Annual Meeting of Stockholders that will come
before the Meeting Should any other matters requiring the vote of
stockholders arise, it is intended that proxies will be voted in respect
thereto in accordance with the best judgment of the person or persons
voting the proxies.
Please return your proxy as soon as possible. Unless a quorum
consisting of a majority of the outstanding shares entitled to vote is
represented at the meeting, no business can be transacted. Therefore,
please be sure to date and sign your proxy exactly as you name appears on
your stock certificate and return it in the enclosed postage prepaid
envelope.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S FISCAL YEAR ENDED JUNE 30, 1996,WILL BE FURNISHED
TO THE COMPANY'S STOCKHOLDERS AS OF THE RECORD DATE FOR THE ANNUAL MEETING OF
STOCKHOLDERS, WITHOUT CHARGE, UPON WRITTEN REQUEST. IF YOU DESIRE TO OBTAIN A
COPY OF SUCH ANNUAL REPORT ON FORM 10-K, PLEASE DIRECT SUCH WRITTEN REQUEST TO
PLATINUM SOFTWARE CORPORATION, ATTENTION: INVESTOR RELATIONS, 195 TECHNOLOGY
DRIVE, IRVINE, CALIFORNIA 92618.
THE BOARD OF DIRECTORS
Dated: September 24, 1996
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<PAGE> 22
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLATINUM SOFTWARE CORPORATION
The undersigned hereby appoints L. George Klaus and Michael J. Simmons proxies,
with power to act without the other and with power of substitution, and hereby
authorizes them to represent and vote, as designated on the other side, all the
shares of stock of Platinum Software Corporation standing in the name of the
undersigned with all powers which the undersigned would possess if present at
the Annual Meeting of Stockholders of the Company to be held October 24, 1996
or any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C>
Please mark
your votes as [ X ]
indicated in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ITEMS 1, 2, AND 3. WITHHELD
FOR FOR ALL FOR AGAINST ABSTAIN
Item 1 - ELECTION OF DIRECTORS [ ] [ ] Item 2 - APPOINTMENT OF ERNST [ ] [ ] [ ]
Carmelo J. Santoro Charles V. Prothro & YOUNG, L.L.P. AS INDEPENDENT
L. George Klaus Richard J. Goeglein ACCOUNTANTS
W. Douglas Hajjar Waldo (Jay) J. Richards FOR AGAINST ABSTAIN
Robert Finzi Donald Dixon Item 3 - APPROVAL OF AMENDMENT [ ] [ ] [ ]
TO THE CERTIFICATE OF INCORPORATION
WITHHELD FOR: (Write that nominee's name in TO ELIMINATE WRITTEN CONSENTS OF
the space provided below). COMMON STOCKHOLDERS
- -------------------------------------------------
Signature(s) Date
----------------------------------------------------------------------------------- ------------------------------
Note: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
- -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
