<PAGE>
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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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Segue Software, Inc.
(Name of Registrant as Specified in its Charter)
(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)(1) and 0-11.
(1)Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2)Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form 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>
SEGUE SOFTWARE, INC.
201 Spring Street
Lexington, Massachusetts 02421
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1999
----------------
To the Stockholders of Segue Software, Inc.
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Segue Software, Inc., a Delaware corporation (the
"Company"), will be held on Friday, June 4, 1999 at 10:00 a.m. at the
Conference Center of Goodwin, Procter & Hoar LLP, Exchange Place, 53 State
Street, Boston, Massachusetts 02109 for the following purposes:
1. To elect six members to the Board of Directors to hold office until the
2000 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified;
2. To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP, as the Company's independent public
accountants for the fiscal year ending December 31, 1999; and
3. To consider and act upon any other matters that may be properly brought
before the Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or
later adjournment, the Annual Meeting may be adjourned, or to which the Annual
Meeting may be postponed.
The Board of Directors has fixed the close of business on April 9, 1999 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of the Company's common stock, par value $.01 per
share, at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting and at any adjournments or postponements
thereof. A complete list of the stockholders entitled to vote at the Annual
Meeting will be open to the examination of any stockholder, for any purpose
germane to the Annual Meeting, during ordinary business hours, for a period of
at least 10 days prior to the Annual Meeting at the offices of Goodwin,
Procter & Hoar LLP, Exchange Place, 53 State Street, Boston, Massachusetts
02109.
All stockholders are cordially invited to attend the Annual Meeting. Whether
you plan to attend the Annual Meeting or not, you are requested to complete,
sign, date and return the enclosed proxy card, which is being solicited by the
Board of Directors of the Company, and to mail it promptly in the enclosed
pre-addressed, postage-prepaid envelope. Any proxy may be revoked by delivery
of a later dated proxy. Stockholders of record who attend the Annual Meeting
may vote in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Jeffrey C. Hadden
Secretary
Lexington, Massachusetts
May 7, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
SEGUE SOFTWARE, INC.
201 Spring Street
Lexington, Massachusetts 02421
----------------
PROXY STATEMENT
----------------
FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 4, 1999
May 7, 1999
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Segue Software, Inc., a Delaware
corporation (the "Company"), of proxies, in the accompanying form, to be used
at its 1999 Annual Meeting of Stockholders to be held at the Conference Center
of Goodwin, Procter & Hoar LLP, Exchange Place, 53 State Street, Boston,
Massachusetts 02109 on Friday, June 4, 1999 at 10:00 a.m., and at any
adjournments or postponements thereof (the "Annual Meeting"). At the Annual
Meeting, stockholders will be asked to vote upon the election of six members
of the Board, to consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public accountants,
and to consider and act upon any other matters properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to the stockholders of the Company on or about May
7, 1999. The Board has fixed the close of business on April 9, 1999 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting (the "Record Date"). Only stockholders of record of
the Company's common stock, par value $.01 per share (the "Common Stock"), at
the close of business on the Record Date will be entitled to notice of and to
vote at the Annual Meeting. Holders of Common Stock outstanding as of the
close of business on the Record Date will be entitled to one vote for each
share held by them. As of the Record Date, there were 9,025,492 shares of
Common Stock outstanding and entitled to vote at the Annual Meeting.
The presence, in person or by proxy, of holders of at least a majority of
the total number of shares of Common Stock outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Both abstentions and broker votes (as defined below) will be counted
as present in determining the presence of a quorum. The affirmative vote of a
majority of the shares present or represented and entitled to vote at the
Annual Meeting is required to approve each proposal, other than the election
of directors, which requires a plurality of votes cast at the Annual Meeting.
Abstentions and broker non-votes will be disregarded in determining the "votes
cast" for purposes of electing directors and will not affect the election of
the candidates receiving a plurality of votes. A "broker non-vote" is a proxy
from a broker or other nominee indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote the
shares which are the subject of the proxy on a particular matter with respect
to which the broker or other nominee does not have discretionary voting power.
Stockholders of the Company are requested to complete, sign, date and
promptly return the accompanying Proxy Card in the enclosed, postage-prepaid
envelope. Shares represented by a properly executed proxy received prior to
the vote at the Annual Meeting and not revoked will be voted at the Annual
Meeting as directed on the proxy. If a properly executed proxy is submitted
and no instructions are given, the proxy will be voted FOR the election of the
six nominees for director of the Company named in this Proxy Statement and FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending December
31, 1999. It is not anticipated that any matters other than those set forth in
the Proxy Statement will be presented at the Annual Meeting. Unless other
matters are presented, proxies will be voted in accordance with the discretion
of the proxy holders.
<PAGE>
A stockholder of record may revoke his or her proxy 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. A stockholder of record who has executed
a proxy but is present at the Annual Meeting, and who wishes to vote in
person, may do so by revoking his or her proxy as described in the preceding
sentence. The presence (without further action) of a stockholder at the Annual
Meeting will not constitute a revocation of a previously given proxy.
The Company's 1998 Annual Report to Stockholders (the "Annual Report"),
including financial statements for the fiscal year ended December 31, 1998
("Fiscal 1998"), is being mailed to stockholders with this Proxy Statement,
but does not constitute a part hereof.
PROPOSAL 1:
ELECTION OF DIRECTORS
Introduction
The Company's By-Laws (the "By-laws") provide for the Company's business to
be managed by or under the direction of the Board. Directors serve in office
until the next annual meeting of stockholders and until their successors have
been elected and qualified. On March 8, 1999, in connection with the Annual
Meeting, the Board nominated James H. Simons, Stephen B. Butler, Leonard E.
Baum, Ronald D. Fisher, John R. Levine, and Howard L. Morgan to serve as
directors (the "Nominees"). Each of the Nominees is currently serving as a
director of the Company. The Board anticipates that each of the Nominees will
serve, if elected, as a director. However, if any person nominated by the
Board is unable to accept election, the proxies will be voted for the election
of such other person or persons as the Board may recommend. The Board will
consider a nominee for election to the Board recommended by a stockholder of
record if the stockholder submits the nomination in compliance with the
requirements of the By-laws. See "Other Matters--Stockholder Proposals" for a
summary of these requirements.
Vote Required For Approval
A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect a nominee as a director of the Company.
Recommendation
The Board unanimously recommends a vote FOR the Nominees.
Information Regarding the Nominees and Executive Officers
The following biographical descriptions set forth certain information with
respect to the Nominees for election as directors at the Annual Meeting and
the executive officers who are not directors, based on information furnished
to the Company by each director and officer. The following information is as
of April 1, 1999.
Nominees for Election as Directors
James H. Simons has been Chairman of the Board since 1992 and a director
since 1988. Since 1982, Dr. Simons has been the President and Chairman of
Renaissance Technologies Corp. Dr. Simons also is a member of the Board of
Directors of the following publicly field companies: Cylink Corp., Franklin
Electronic Publishers, Inc. and Kentek Information Systems, Inc. He is 60
years old.
Stephen B. Butler has served as Chief Executive Officer and as a director of
the Company since September 5, 1997. Mr. Butler was elected to the office of
President in January 1998. Prior to joining the Company, Mr. Butler served as
President and Chief Executive Officer of TriQuest Design Automation Inc., an
electronic design automation company, from October 1995 to July 1997. Prior to
that, Mr. Butler held senior management positions at Quickturn Design Systems,
Inc., an electronic design automation company where he
2
<PAGE>
served as Senior Vice President of Sales, Marketing and Support from May 1993
until July 1995, and as Vice President of Sales from July 1991 until May 1993.
He is 42 years old.
Leonard E. Baum has been a director of the Company since 1992. Dr. Baum is
currently an officer of three investment firms, Curfin International Ltd. and
Rieton Corporation, of which he has served as President since 1980 and 1993,
respectively, and Lebam Advisers, Inc., of which he has served as Vice
President and a director since 1979. In addition, Dr. Baum has been a
securities and commodities trader for Zeta Partners and a trustee of Lebam
Advisers Pension Plan and Trust since 1993. He is 67 years old.
Ronald D. Fisher has been a director of the Company since March 1997. Since
October 1995, Mr. Fisher has been the Vice Chairman of Softbank Holdings,
Inc., an investment firm. From January 1990 to September 1995, he was the
Chief Executive Officer of Phoenix Technologies Ltd., a software company. Mr.
Fisher also is a member of the Board of Directors of each of the following
publicly held companies: Phoenix Technologies Ltd. and Ziff-Davis, Inc. He is
51 years old.
John R. Levine has been a director of the Company since 1992. Since 1991,
Dr. Levine has been employed by I.E.C.C., an Internet and computer services
consulting company. He is 44 years old.
Howard L. Morgan has been a director of the Company since 1992. Since June
1989, Dr. Morgan has been the President of The Arca Group, Inc., a high
technology consulting and investment management firm and since January 1999 he
has also been a general partner of IdeaLabs, an Internet company incubator.
Dr. Morgan serves on the Board of Directors of the following publicly held
companies: Cylink Corp., Franklin Electronic Publishers, Inc., Infonautics
Inc. and Kentek Information Systems, Inc. He is 53 years old.
Executive Officers Who Are Not Directors
Carl D. Blandino has served as Chief Financial Officer and Senior Vice
President of Administration of the Company since July 1998. Prior to joining
the Company, Mr. Blandino served as Vice President, Finance and Chief
Financial Officer of Per-Se' Technologies, a division of Medaphis Corporation
from April 1997 until he joined the Company. Prior to that, Mr. Blandino
served as Senior Vice President and Chief Financial Officer from September
1992 until May 1997 at Online Resources and Communications Corporation. He is
49 years old.
Anthony G. Kolish joined the Company in September 1995 and has served as
Senior Vice President of Services since February 1998. Prior to that, Mr.
Kolish served as Vice President of Services, Director of Marketing Strategy
and Director of Product Management. Prior to joining the Company, Mr. Kolish
served as Senior Systems Manager at Fidelity Investments from January 1994
until August 1995. He is 39 years old.
Alexander M. Levi joined the Company in December 1997 as Senior Vice
President of International Operations and has served as Senior Vice President
of Worldwide Operations since October 1998. Prior to that, Mr. Levi served in
a variety of roles at Quickturn Design Systems, Inc., an electronic design
automation company, from February 1991 until he joined the Company. Mr. Levi's
most recent role at Quickturn Design Systems was that of Vice President of
Asia Pacific Operations, which he held from October 1996 until he joined the
Company. He is 41 years old.
Michael D. Maggio joined the Company in October 1991 and has served as
Senior Vice President of Marketing since February 1998 and as General Manager
since January 1999. He served as Vice President of Business Development for
the Company from January 1995 to January 1997. From June 1993 to December
1994, Mr. Maggio served as the Director, Eastern Region in the Company's sales
organization, and from 1991 to June 1993 as the Vice President of Development.
He is 37 years old.
3
<PAGE>
Meetings and Committees of the Board of Directors
Meeting Attendance. During Fiscal 1998, there were seven meetings of the
Board, and the various committees of the Board met a total of 11 times. No
director attended fewer than 75% of the total number of meetings of the Board
and of committees of the Board on which he or she served during Fiscal 1998.
Audit Committee. The Board has established an Audit Committee which met a
total of four times in Fiscal 1998. The current members of the Audit Committee
are Mr. Levine and Dr. Morgan. The Audit Committee reviews the engagement of
the Company's independent accountants, reviews annual financial statements,
considers matters relating to accounting policy and internal controls and
reviews the scope of annual audits.
Compensation Committee. The Board has also established a Compensation
Committee which met a total of seven times during Fiscal 1998. The current
members of the Compensation Committee are Dr. Simons and Dr. Morgan, who are
both non-employee directors. The Compensation Committee reviews, approves and
makes recommendations on the Company's compensation policies, practices and
procedures. The Compensation Committee also administers the Company's 1996
Amended and Restated Incentive and Non-Qualified Stock Option Plan (the "1996
Option Plan"), the Company's 1998 Employee Stock Option Plan (the "1998 Option
Plan," and together with the 1996 Option Plan, the "Option Plans") and the
Company's 1996 Employee Stock Purchase Plan. In administering the Option
Plans, the Compensation Committee determines the options to be issued to
eligible persons under the Option Plans and prescribes the terms and
provisions of such options. In addition, the Compensation Committee construes
and interprets the Option Plans and issuances thereunder, and establishes,
amends and revokes rules and regulations for administration of the Option
Plans.
The Board does not have a standing nominating committee. The full Board
performs the function of such a committee.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors. No directors of the Company receive compensation for their
services as directors or as members of any of the committees of the Board. All
non-employee directors are reimbursed for travel and other related expenses
incurred in attending meetings of the Board or meetings of any of the
committees of the Board. Pursuant to the 1996 Option Plan, each non-employee
director who becomes a member of the Board after April 2, 1996 receives a non-
qualified stock option to purchase up to 12,000 shares of Common Stock, which
option will vest over three years with 2,000 shares vesting after an initial
six months of service and 1,000 shares vesting every three months thereafter
assuming such non-employee director continues to serve on the Board. After
serving on the Board for three years, such director shall receive on each
anniversary of such director's appointment to the Board, a non-qualified stock
option to purchase up to 4,000 shares of Common Stock, with 2,000 shares
vesting after six months and 1,000 shares every three months thereafter
assuming continued Board membership.
Non-employee directors who were serving on the Board as of April 2, 1996
received, and will receive on each anniversary of such date, a non-qualified
stock option to purchase up to 4,000 shares of Common Stock, with 2,000 shares
vesting after six months and 1,000 shares every three months thereafter
assuming such non-employee director continues to serve on the Board. Non-
qualified stock options granted to non-employee directors pursuant to the 1996
Option Plan will have an exercise price equal to the fair market value of
shares of Common Stock on the date of grant and will have a ten-year term.
4
<PAGE>
Executive Officers. The following table provides certain information for the
fiscal years ended December 31, 1996, 1997 and 1998 concerning compensation
awarded to the Company's Chief Executive Officer and each of the four other
most highly compensated persons who were serving as executive officers of the
Company as of December 31, 1998 (collectively, the "Named Executive Officers")
for services rendered to the Company in all capacities.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------- ------------
Commissions Securities
and Underlying All Other
Name and Principal Position Year Salary Bonuses Options Compensation
- --------------------------- ---- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen B. Butler........ 1998 $212,500 $52,300 -- $--
President and Chief
Executive Officer 1997(1) 62,949 -- 400,000 --
1996 -- -- -- --
Stewart A. Bush(2)....... 1998 120,000 130,148 -- --
Vice President of North
American Sales 1997(3) 22,308 11,969 -- --
1996 -- -- -- --
Alexander M. Levi........ 1998(4) 148,962 71,359 -- --
Senior Vice President of
Worldwide 1997 -- -- -- --
Sales 1996 -- -- -- --
Michael D. Maggio........ 1998 137,500 14,414 20,000 --
Senior Vice President of
Marketing 1997 112,250 28,012 10,000 --
1996 110,000 24,038 10,000 --
Jeannine A. Bartlett(5).. 1998 151,250 14,414 25,000 --
Vice President of
Research and
Development 1997(6) 26,500 3,750 -- --
1996 -- -- -- --
</TABLE>
- --------
(1) Mr. Butler was appointed Chief Executive Officer of the Company on
September 5, 1997.
(2) Mr. Bush resigned from the Company in March 1999.
(3) Mr. Bush joined the Company in October 1997.
(4) Mr. Levi joined the Company in December 1997 as Senior Vice President of
International Operations, however, Mr. Levi did not receive any
compensation until January 1998. Mr. Levi has served as Senior Vice
President of Worldwide Operations since October 1998.
(5) Ms. Bartlett resigned from the Company in February 1999.
(6) Ms. Bartlett joined the Company in June 1997.
5
<PAGE>
Option Grants in Last Fiscal Year. The following table sets forth
information regarding each stock option granted during Fiscal 1998 to each of
the Named Executive Officers. The potential realizable values that would exist
for the respective options are based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date of grant over the full term of
the option. Actual gains, if any, on stock options, exercises and Common Stock
holdings are dependent on the future performance of the Common Stock.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual
Number of Percent of Total Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise for Option Term(2)
Options Employees in or Base Price Expiration ---------------------------
Granted(1) Fiscal Year Per Share Date 5% 10%
---------- ---------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen B. Butler....... 0 0 $ 0 0 $ 0 $ 0
Stewart A. Bush......... 0 0 0 0 0 0
Alexander M. Levi....... 0 0 0 0 0 0
Michael D. Maggio....... 20,000 1.8753 12.125 2/25/08 152,507 386,482
Jeannine A. Bartlett.... 25,000 2.3 10.50 2/23/08 165,085 418,357
</TABLE>
- --------
(1) Unless otherwise indicated, the options become exercisable in four equal
annual installments, commencing on the first anniversary of the grant
date. Options are subject to the employee's continued employment. The
options terminate ten years after the grant date, subject to earlier
termination in accordance with the Option Plans and the applicable option
agreement.
(2) The amounts shown as potential realizable value illustrate what might be
realized upon exercise immediately prior to expiration of the option term
using the 5% and 10% appreciation rates established in regulations of the
Securities and Exchange Commission, compounded annually. The potential
realizable value is not intended to predict future appreciation of the
price of the Company's Common Stock. The values shown do not consider
nontransferability, vesting or termination of the options upon termination
of employment.
6
<PAGE>
Option Exercises and Year-End Holdings. The following table sets forth the
shares of Common Stock acquired and the value realized upon exercise of stock
options during Fiscal 1998 by each of the Named Executive Officers and certain
information concerning stock options held by the Named Executive Officers as
of December 31, 1998.
Aggregate Option Exercises in Last Fiscal Year and
Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-The-Money Options
Shares at Fiscal Year-End(1) at Fiscal Year-End
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable/Unexercisable
---- ----------- -------- Exercisable/Unexercisable -------------------------
<S> <C> <C> <C> <C>
Stephen B. Butler....... 0 $ 0 100,000/300,000 $1,035,000/$3,105,000
Stewart A. Bush......... 0 0 12,501/ 37,499 135,948/ 407,802
Alexander M. Levi....... 0 0 15,625/ 46,875 150,391/ 451,172
Michael D. Maggio....... 10,500 138,750 44,125/ 40,000 421,875/ 726,313
Jeannine A. Bartlett.... 0 0 6,250/ 43,750 52,031/ 399,844
</TABLE>
- --------
(1) Based on the fair market value of the Common Stock of $20.25 per share,
the price of the last reported trade of the Common Stock on the Nasdaq
National Market on December 31, 1998, less the option exercise price per
share. Options are in-the-money if the fair market value of the shares
covered thereby is greater than the option exercise price.
Employment Contracts and Change of Contracts Arrangements
Each of the Named Executive Officers has entered into a non-competition,
non-solicitation, non-disclosure and assignment of inventions agreement with
the Company (the "Non-Compete Agreement"), which restricts such officer from
competing with the Company and from soliciting, diverting or attempting to
solicit or divert any customers or employees of the Company during the term of
the officer's employment and for one year after termination of such
employment. The Non-Compete Agreement also obliges the Named Executive Officer
not to reveal any trade secrets or confidential information of the Company
during the term of the officer's employment and for five years after
termination of such employment. The Non-Compete Agreement requires the Named
Executive Officers to assign to the Company all right and interest in any
intellectual property related to the business of the Company and developed by
the officer during the term of the officer's employment with the Company.
In February 1998, the Board adopted a policy that provides for the payment
of severance benefits to, and the acceleration of the vesting of stock options
held by, certain executive officers of the Company, including certain of the
Named Executive Officers, in the event that such officer's employment with the
Company or any successor entity is terminated either by the Company without
cause (as defined) or by the officer for good reason (as defined) within the
first year after a change in control (as defined) of the Company.
7
<PAGE>
Stock Performance Graph
The following graph provides a comparison of cumulative total stockholder
return for the period from March 28, 1996 (the date on which the Common Stock
was first publicly traded) through December 31, 1998, among the Company, the
Nasdaq National Market-US Companies Index (the "Nasdaq-US Index") and the
Center for Research in Security Prices ("CRSP") Computer and Data Processing
Stocks Index (the "Peer Group Index," an index of Nasdaq National Market
traded companies (both domestic and foreign) with Standard Industrial
Classification Code Numbers from 7370 to 7379). The Stock Performance Graph
assumes an investment of $100 in each of the Company and the two indices, and
the reinvestment of any dividends. The historical information set forth below
is not necessarily indicative of future performance. Data for the Nasdaq-US
Index and the Peer Group Index was provided to the Company by CRSP.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
06/28/96 12/31/96 06/30/97 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Segue Software, Inc. 100.0 84.9 50.6 94.2
Nasdaq Stock Market (US Companies) 100.0 118.3 145.1 204.4
Nasdaq Computer and Data Processing
Stocks 100.0 118.7 145.8 260.3
</TABLE>
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board consists of James H. Simons,
Chairman and Howard L. Morgan. Dr. Simons and Dr. Morgan are both non-employee
directors.
The Compensation Committee establishes salaries, incentives and other forms
of compensation for officers of the Company and administers the incentive
compensation and benefit plans of the Company. These plans include the Option
Plan and the Stock Purchase Plan. The members of the Compensation Committee
have prepared the following report on the Company's executive compensation
policies and philosophy for Fiscal 1998.
General
The Compensation Committee (the "Committee") of the Board is composed of two
independent outside directors. There are no insiders on the Committee and
there are no Committee members with interlocking relationships with the
Company. The Chief Executive Officer ("CEO") and the Chief Financial Officer
("CFO") of the Company are invited to attend and participate in Committee
meetings from time to time, except when their compensation is being discussed.
The CEO makes recommendations to the Committee regarding compensation for all
other executive officers and for any incentive bonuses for all other
employees. Base pay, discretionary year-end bonus payments and commission
payments to sales employees are determined by the CEO in conjunction with
other members of the management team. The Compensation Committee considers the
CEO's recommendations, approves or revises them, and submits its conclusions
to the Board. The Board has final authority regarding executive compensation
and any incentive bonus compensation for all other employees.
Compensation Philosophy
In recognition that the recruitment of personnel in the computer software
industry is highly competitive, the Company's compensation policies, both for
executive and non-executive employees, are structured to attract and retain
highly skilled technical, marketing, sales and management personnel. The
Committee and the Board believe that the compensation of the Company's
executive officers should be significantly influenced by the Company's
performance. Accordingly, the Company's practice has been to establish base
cash salaries at levels deemed appropriate by the Committee based on historic
Company compensation levels and the Committee's experience and knowledge as to
compensation levels at other companies. In assessing compensation levels, the
Committee has periodically reviewed industry specific compensation surveys and
consulted with the Company's Human Resources Department.
The Committee has established a formal bonus program for the executive
officers for the year ended December 31, 1999 ("Fiscal 1999"). Under the
program, each executive officer's individual potential bonus is initially
based on the Company achieving certain quarterly and annual revenue and
profitability goals. If such revenue and profitability goals are achieved by
the Company, then each executive officer's actual bonus is adjusted based on
the attainment of certain individually tailored goals. The total available
pool for the bonus program for the executive officers for Fiscal 1999 is
$650,000. The bonus pool allocated to the executive officers is based on the
Committee's evaluation of historical performance and discussions with the CEO.
The Company also maintains the Option Plan to provide long-term incentives
to maximize stockholder value by rewarding employees for the long-term
appreciation of the Company's share price. Stock options are typically subject
to four-year vesting. Generally, option grants are made to employees in
connection with their initial hire. The Board also approves option grants in
connection with a significant change in responsibilities, as a reward for
outstanding performance, and to provide incentives for continued employment.
The number of shares subject to each stock option granted is based on
anticipated future contribution and the ability of the individual to affect
corporate results.
The total compensation for the Named Executive Officers is described in this
Proxy Statement starting on page 4 and the compensation for Mr. Butler is also
discussed below.
9
<PAGE>
Compensation of the Chief Executive Officer
Stephen B. Butler. Mr. Butler was elected as CEO effective as of September
5, 1997 with an annual base salary of $200,000. This annual base salary was
determined by the Committee and was based on its review of competitive
compensation survey data and an evaluation of the Company's historical
practices and internal salary structures. Mr. Butler's annual base salary was
increased to $250,000 effective October 1, 1998. In addition, Mr. Butler was
awarded a $52,300 bonus for Fiscal 1998.
Mr. Butler was not awarded any stock options in Fiscal 1999.
Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
per-person limit of $1,000,000 on the amount of compensation that may be
deducted by the Company in any year with respect to certain of the Company's
most highly compensated officers. Section 162(m) does not, however, disallow a
deduction for the qualified "performance based compensation" the material
terms of which are disclosed to and approved by stockholders. The Company does
not anticipate that the compensation for any of the Named Executive Officers
will exceed $1,000,000 in the current taxable year, but intends to take
appropriate action to comply with such regulations, if applicable, in the
future.
James H. Simons
Howard L. Morgan
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION; CERTAIN TRANSACTIONS
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Board or the Committee.
10
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of April 1, 1999
concerning the ownership of Common Stock by (i) each person or "group" (as
that term is defined in Section 13(d)(3) of the Exchange Act) known by the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each of the Named Executive Officers, (iii) each director and nominee for
director of the Company and (iv) all directors and executive officers as a
group (10 persons). Except as otherwise indicated, each person listed below
has sole voting and investment power over the shares of Common Stock shown as
beneficially owned.
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)
-------------------------------
Name and Address** Number Percent
------------------ ---------------- --------------
<S> <C> <C>
James H. Simons(2)...................... 830,663 9.2 %
Renaissance Technology Corp.
800 Third Avenue
New York, New York 10022
BankAmerica Corporation(3).............. 534,400 5.9
100 North Tryon Street
Charlotte, NC 28255
Stephen B. Butler(4).................... 100,000 1.2
Leonard E. Baum(5)...................... 139,863 1.5
Ronald D. Fisher(6)..................... 40,425 *
John R. Levine(7)....................... 173,118 1.9
Howard L. Morgan(8)..................... 37,000 *
Stewart A. Bush(9)...................... 20,001 *
Alexander M. Levi(10)................... 15,625 *
Michael D. Maggio(11)................... 39,125 *
Jeanine A. Bartlett(12)................. 12,500 *
All Directors and Executive Officers as
a group (10 Persons)................... 1,408,320 15.2 %
</TABLE>
- --------
* Represents beneficial ownership of less than 1% of the Company's
outstanding shares of Common Stock.
** Addresses are given for beneficial owners of more than 5% of the
outstanding Common Stock only.
(1) The calculation of percentage ownership for each listed beneficial owner
is based upon the number of shares of Common Stock issued and outstanding
at April 1, 1999 (9,025,492 shares), plus shares of Common Stock subject
to stock options held by each listed beneficial owner that are currently
exercisable or exercisable within 60 days following April 1, 1999.
(2) Includes (i) 22,000 shares of Common Stock which may be purchased within
60 days of April 1, 1999 upon the exercise of stock options and (ii)
706,973 shares of Common Stock owned by Bermuda Trust Company, as Trustee
of the Lord Jim Trust (a trust of which Dr. Simons and the members of his
family are the beneficiaries) but as to which Dr. Simons disclaims
beneficial ownership.
(3) Based solely on a Schedule 13G filed on behalf of BankAmerica Corporation
("BankAmerica") with the Securities and Exchange Commission on February 1,
1999. According to such Schedule 13G, BankAmerica was the beneficial owner
of 534,400 shares of Common Stock.
(4) Shares of Common Stock which may be purchased within 60 days of April 1,
1999 upon the exercise of stock options.
(5) Includes (i) 22,000 shares of Common Stock which may be purchased within
60 days of April 1, 1999 upon the exercise of stock options and (ii)
87,836 shares of Common Stock held by Lebam Advisors Pension Plan, of
which Dr. Baum is one trustee of three trustees and shares voting and
investment power over such shares, but as to which Dr. Baum disclaims
beneficial ownership.
(6) Includes (i) 8,000 shares of Common Stock which may be purchased within 60
days of April 1, 1999, (ii) 5,000 shares of Common Stock held by Mr.
Fisher's spouse as to which Mr. Fisher disclaims beneficial
11
<PAGE>
ownership, (iii) 2,500 shares of Common Stock held by Mr. Fisher as
nominee for his brother as to which Mr. Fisher disclaims beneficial
ownership, and (iv) 11,500 shares of Common Stock held by the Fisher
Family Trust, of which Mr. Fisher's wife is the trustee, but as to which
Mr. Fisher also disclaims beneficial ownership.
(7) Includes 22,000 shares of Common Stock which may be purchased within 60
days of April 1, 1999 upon the exercise of stock options.
(8) Includes (i) 12,000 shares of Common Stock which may be purchased within
60 days of April 1, 1999 upon the exercise of stock options, and (ii)
5,000 shares of Common Stock held by the Eleanor Howard Morgan Family
Foundation, of which Mr. Morgan is a trustee and shares voting and
investment power over such shares, but as to which Mr. Morgan disclaims
beneficial ownership.
(9) Includes 11,501 shares of Common Stock which may be purchased within 60
days of April 1, 1999 upon the exercise of stock options.
(10) Shares of Common Stock which may be purchased within 60 days of April 1,
1999 upon the exercise of stock options.
(11) Shares of Common Stock which may be purchased within 60 days of April 1,
1999 upon the exercise of stock options.
(12) Shares of Common Stock which may be purchased within 60 days of April 1,
1999 upon the exercise of stock options.
PROPOSAL 2: APPROVAL OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Company has appointed the accounting firm of PricewaterhouseCoopers LLP
to serve as the Company's independent public accountants for the fiscal year
ending December 31, 1999. PricewaterhouseCoopers LLP has served the Company in
such capacity since 1992. The Company expects that representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting, with the
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
In the event that ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's independent public accountants is not obtained at the
Annual Meeting, the Board will reconsider its appointment.
Vote Required For Approval
A quorum being present, the affirmative vote of a majority of the votes cast
is necessary to ratify the appointment of the independent public accountants.
Recommendation
The Board unanimously recommends a vote FOR the appointment of
PricewaterhouseCoopers LLP as the Company's independent public accountants.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission (the "SEC") and the Nasdaq National
Market, Inc. officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely upon a review of copies of Forms 3 and 4
and amendments thereto furnished to the Company pursuant to Rule 16a-3(e) of
the Exchange Act during Fiscal 1997, Form 5 and amendments thereto furnished
to the Company with respect to Fiscal 1998 and written representations to the
Company that no other reports were required during, or with respect to, Fiscal
1998, all Section 16 filing requirements applicable to the Company's executive
officers and directors, and persons who are more than 10% of a registered
class of the Company's equity securities were satisfied.
12
<PAGE>
OTHER MATTERS
Expenses of Solicitation
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company. In
addition, the Company will reimburse brokerage firms and other persons
representing beneficial owners of Common Stock of the Company for their
expenses in forwarding proxy material to such beneficial owners. Solicitation
of proxies by mail may be supplemented by telephone, telegram, telex and
personal solicitation by the directors, officers or employees of the Company.
No additional compensation will be paid for such solicitation.
Stockholder Proposals
Any stockholder proposals submitted pursuant to Rule 14a-8 of the Exchange
Act and intended to be presented at the Company's 2000 Annual Meeting of
Stockholders must be received by the Company on or before January 6, 1999 to
be eligible for inclusion in the proxy statement and form of proxy to be
distributed by the Board in connection with such meeting.
Any stockholder proposals intended to be presented at the Company's 2000
Annual Meeting, other than a stockholder proposal submitted pursuant to Rule
14a-8 of the Exchange Act, must be received in writing by the Secretary of the
Company at the principal executive office of the Company no later than the
close of business on April 5, 2000, nor prior to March 6, 2000, together with
all supporting documentation required by the Company's By-laws.
Other Matters
The Board does not know of any matters other than those described in this
Proxy Statement which will be presented for action at the Annual Meeting. If
other matters are presented, proxies will be voted in accordance with the best
judgment of the proxy holders.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1998
(INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO), WHICH WAS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999, WILL BE PROVIDED
WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS MAILED UPON THE
WRITTEN REQUEST OF ANY SUCH PERSON TO CARL D. BLANDINO, VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, SEGUE SOFTWARE, INC., 201 SPRING STREET, LEXINGTON,
MASSACHUSETTS 02421.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY
CARD TODAY.
By order of the Board of Directors:
Jeffrey C. Hadden
Secretary
Lexington, Massachusetts
May 7, 1999
13
<PAGE>
SEGUE SOFTWARE, INC.
201 SPRING STREET
LEXINGTON, MASSACHUSETTS 02421
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen B. Butler, Carl D. Blandino and
Jeffrey C. Hadden, and each of them, as proxies of the undersigned (the
"Proxies"), with full power to substitute, and authorizes each of them to
represent and to vote all shares of common stock, par value $.01 per share,
(the "Common Stock") of Segue Software, Inc. (the "Company") held by the
undersigned at the close of business on April 9, 1999, at the 1999 Annual
Meeting of Stockholders of the Company (the "Annual Meeting"), to be held at
the offices of Goodwin, Procter & Hoar LLP at Exchange Place, 53 State Street,
Boston, Massachusetts 02109 on Friday, June 4, 1999 at 10:00 a.m., Boston time,
and at any adjournments or postponements thereof. The undersigned hereby
revokes any proxy previously given in connection with such meeting and
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement and the 1998 Annual Report to Stockholders.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THE UNDERSIGNED'S VOTE
WILL BE CAST "FOR" THE PROPOSALS IN PARAGRAPHS 1 AND 2. IN THEIR DISCRETION,
THE PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT OR POSTPONEMENT
THEREOF. A stockholder wishing to vote in accordance with the recommendation of
the Board of Directors of the Company need only sign and date this Proxy and
return it to the Company. PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
1. Proposal to elect James H. Simons, Stephen B. Butler, Leonard E. Baum,
Ronald D. Fisher, John R. Levine and Howard L. Morgan as directors of the
Company, to hold office until the 2000 Annual Meeting of Stockholders and until
their respective successors are duly elected and qualified.
[_] FOR ALL [_] WITHHELD FOR ALL ________________________________
Withheld as to the nominees noted above
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE
<PAGE>
2. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon any other
matter that may be properly brought before the Annual Meeting and at any
adjournments or postponements thereof.
___________________________________________
Signature
___________________________________________
Signature
___________________________________________
Date
For joint accounts, each owner should
sign. Executors, administrators, trustees,
corporate officers and others acting in a
representative capacity should give full
title or authority.
