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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))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CENTURA 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/ 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:
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(4) Date Filed:
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[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 24, 1997
------------------------
TO THE SHAREHOLDERS OF CENTURA SOFTWARE CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Centura
Software Corporation (the "Company") will be held on Tuesday, June 24, 1997, at
1:30 p.m., local time, at Hotel Sofitel in Redwood Shores, located at 223 Twin
Dolphin Drive, Redwood Shores, California 94065 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected and qualified;
2. To approve an amendment to the Company's 1995 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 750,000 shares to an aggregate of 2,750,000 shares;
3. To approve an amendment to the Company's 1992 Employee Stock Purchase
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 150,000 shares to an aggregate of 550,000 shares;
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1997; and
5. To transact such other business as may properly come before the meeting
or any postponement or adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 29, 1997 are
entitled to notice of and to vote at the meeting and any adjournment(s) thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if such shareholder returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
CRAIG W. JOHNSON
SECRETARY
Menlo Park, California
April 30, 1997
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[LOGO]
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 24, 1997
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Centura Software Corporation (the "Company"), a California corporation, for use
at the Annual Meeting of Shareholders to be held on Tuesday, June 24, 1997 at
1:30 p.m., local time, or at any postponement or adjournment(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at Hotel Sofitel in Redwood
Shores, located at 223 Twin Dolphin Drive, Redwood Shores, California 94065. The
telephone number at that location is (415) 598-9000.
The Company's principal executive offices are located at 1060 Marsh Road,
Menlo Park, California 94025. The Company's telephone number at that location is
(415) 321-9500.
This Proxy contains information that was also included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 31, 1997.
SOLICITATION
These proxy solicitation materials were mailed on or about May 5, 1997 to
all shareholders entitled to vote at the meeting. The costs of soliciting these
proxies will be borne by the Company. These costs will include the expenses of
preparing and mailing proxy materials for the Annual Meeting and reimbursement
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and regular
employees, none of whom will receive additional compensation for assisting with
the solicitation.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Asa Drew, Inspector of Elections) a written notice of revocation or a duly
executed proxy bearing a later date or by attending the meeting of shareholders
and voting in person.
VOTING
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such
shareholder, or distribute the shareholder's votes on the same principle among
as many candidates as the shareholder thinks fit, provided that votes cannot be
cast for more than four candidates. However, no shareholder shall be entitled to
cumulate votes unless the candidate's name has
<PAGE>
been placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate the shareholder's votes. On all other matters, each share
has one vote.
Votes cast in person or by proxy at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. Except with respect to the election of directors where cumulative
voting is invoked and except in certain other specific circumstances, the
affirmative vote of a majority of shares REPRESENTED AND VOTING at a duly held
meeting at which a quorum is present is required under California law for
approval of proposals presented to shareholders. In general, California law also
provides that a quorum consists of a majority of the shares ENTITLED TO VOTE,
represented either in person or by proxy. The Inspector of Elections will treat
abstentions as shares that are present and ENTITLED TO VOTE for purposes of
determining the presence of a quorum but as not VOTING for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
Any proxy which is returned using the form of proxy enclosed and which is not
marked as to a particular item will be voted for the election of directors, for
approval of the amendment to the Company's 1995 Stock Option Plan to increase
the number of shares of Common Stock reserved for issuance thereunder by 750,000
shares to an aggregate of 2,750,000 shares, for approval of the amendment to the
Company's 1992 Employee Stock Purchase Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 150,000 shares to an aggregate
of 550,000 shares, and for ratification of the appointment of the designated
independent auditors and as the proxy holders deem advisable on other matters
that may come before the meeting, as the case may be, with respect to the item
not marked. If a broker indicates on the enclosed proxy or its substitute that
it does not have discretionary authority as to certain shares to vote on a
particular matter ("broker non-votes"), those shares will not be considered as
VOTING with respect to that matter. While there is no definitive specific
statutory or case law authority in California concerning the proper treatment of
abstentions and broker non-votes, the Company believes that the tabulation
procedures to be followed by the Inspector of Elections are consistent with the
general statutory requirements in California concerning voting of shares and
determination of a quorum.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on April 29, 1997 are
entitled to notice of and to vote at the meeting. As of the record date,
15,290,495 shares of the Company's Common Stock, par value $0.01 per share, were
issued and outstanding.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting of Shareholders must
be received by the Company no later than March 15, 1998 in order that they may
be considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's bylaws currently provide for five directors. At the Annual
Meeting, the Board of Directors has nominated four directors to be elected to
serve until the next Annual Meeting and until their successors are elected and
qualified at the meeting. The Company's Board of Directors proposes to fill the
remaining seat at such time as it has identified a qualified candidate. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's four nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee
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who shall be designated by the present Board of Directors to fill the vacancy.
In the event that additional persons are nominated for election as directors,
the proxy holders intend to vote all proxies received by them in such a manner
in accordance with cumulative voting as will assure the election of as many of
the nominees listed below as possible, and, in such event, the specific nominees
to be voted for will be determined by the proxy holders. Assuming a quorum is
present, the four nominees for director receiving the greatest number of votes
cast at the Annual Meeting will be elected. The term of office of each person
elected as a director will continue until the next Annual Meeting of
Shareholders or until his or her successor has been elected and qualified.
The names of the nominees and certain other information about them as of
April 29, 1997 are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR
- ------------------------------------------------ --- ------------------------------------------------ -----------
<S> <C> <C> <C>
Samuel M. Inman................................. 46 President and Chief Executive Officer (Principal 1996
Executive Officer), Chairman of the Board of
Directors
D. Bruce Scott.................................. 43 Co-founder of inquiry.com inc. 1984
William O. Grabe................................ 58 General Partner of General Atlantic Partners, an 1992
investment firm
Max D. Hopper................................... 62 Principal and Chief Executive Officer of Max D. 1995
Hopper Associates, Inc.; retired Senior Vice
President of AMR Corporation and retired
Chairman of The SABRE Group
</TABLE>
Except as set forth below, each of the nominees has been engaged in the
principal occupation set forth next to his name above during the past five
years. There is no family relationship between any director or executive officer
of the Company.
Mr. Inman has served as Chairman of the Board of Directors since September
1996, President and Chief Executive Officer (Principal Executive Officer) since
December 1995, and President and Chief Operating Officer since April 1995. Prior
to joining the Company, Mr. Inman served as President and Chief Operating
Officer of Ingram Micro Inc., the largest microcomputer products distributor
worldwide, where he was responsible for overseeing and managing Ingram's U.S.
operations. Prior to joining Ingram, Mr. Inman, a 21-year veteran of IBM, served
as President of IBM's Personal Computer Company for the Americas. He is a
graduate of Purdue University, where he earned his B.S. degree in mathematics.
Mr. Scott has served as a director since November 1984. In May 1995, Mr.
Scott co-founded inquiry.com Inc., an Internet company. Effective April 30,
1995, Mr. Scott resigned as Senior Vice President of Database Products, in which
position he had served since January 1994. From July 1993 to January 1994, Mr.
Scott served as Senior Vice President, Research and Development, Database and
Connectivity Products for the Company. Prior to assuming this position, Mr.
Scott was Senior Vice President and General Manager of Database Server Products
from July 1992 to June 1993, Senior Vice President, Research and Development
from January 1989 to June 1992, and Vice President from December 1984 to January
1989. Prior to joining the Company, Mr. Scott served as Manager of Database
Development at Victor Technologies, a computer manufacturer corporation, from
1982 to 1983. Mr. Scott served as Senior Member of Technical Staff at Oracle
Corporation from 1977 to 1982.
Mr. Grabe has served as a director since July 1992. He has been a General
Partner of General Atlantic Partners, an investment firm, since April 1992. From
February 1984 until March 1992, Mr. Grabe was a Vice President at IBM. Mr. Grabe
is a director of Compuware Corporation, a computer systems software corporation.
Mr. Grabe is also a director of Baan N.V., an enterprise solutions planning
software company, CODA Plc, a financial accounting software company, Gartner
Group, an information systems consulting
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company and Marcam Corporation, an enterprise resource planning software
company. He is also a director of several other privately held companies in the
computer software and services industry.
Mr. Hopper has served as a director since April 1995. Mr. Hopper has been
Principal and Chief Executive Officer of Max D. Hopper Associates, Inc., a
consulting firm specializing in creating benefits from the strategic use of
advanced information technologies, since January 1995. Prior to forming Max D.
Hopper Associates, Inc., Mr. Hopper served at AMR Corporation, an air
transportation company and provider of information services to the travel and
transportation industry, as Senior Vice President from 1985 through January
1995, as well as Chairman of The SABRE Group from April 1993 through January
1995. Mr. Hopper served as Executive Vice President for Bank of America from
1982 through 1985. Mr. Hopper is also a director of the Gartner Group, Computer
Language Research, Inc., Bolt Beranek & Newman, Inc., VTEL Corporation, Scopus
Technology Corporation, USData Corporation, BBN Corporation and Worldtalk
Communications Corporation.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held a total of six meetings during the fiscal year
ended December 31, 1996. The Board of Directors has an Audit Committee and a
Compensation Committee. It does not have a nominating committee or a committee
performing the functions of a nominating committee.
The Audit Committee of the Board of Directors currently consists of
directors Grabe and Hopper, and held one meeting during 1996. The Audit
Committee recommends engagement of the Company's independent auditors, and is
primarily responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the Company's accounting
principles and its system of internal accounting controls.
The Compensation Committee of the Board of Directors currently consists of
directors Grabe and Hopper, and held six meetings during 1996. The Compensation
Committee establishes the compensation for the Company's executive officers,
including the Company's Chief Executive Officer.
No incumbent director, other than Bruce Scott, attended fewer than 75% of
the aggregate number of meetings of the Board of Directors and meetings of the
committees of the Board of Directors that he was eligible to attend.
COMPENSATION OF DIRECTORS
Directors are reimbursed for out-of-pocket travel expenses associated with
their attendance at Board meetings. Directors received no cash compensation for
their services on the Board of Directors. Nonemployee directors of the Company
are automatically granted options to purchase shares of the Company's Common
Stock pursuant to the terms of the Company's 1996 Directors' Stock Option Plan
(the "Directors' Option Plan") provided that such nonemployee director agrees to
cancel all options granted to such director from the Company's 1995 Directors'
Stock Option Plan, except that each affected director will retain certain
options to purchase 20,000 shares of the Company's Common Stock granted to the
director under the Company's 1986 Incentive Stock Option Plan. Under the
Directors' Option Plan, each nonemployee director receives an option to purchase
50,000 shares of Common Stock on the date on which the later of the following
events occur: the effective date of the Directors' Option Plan or the date on
which such person first becomes a nonemployee director of the Company. Each
option granted under the Directors' Option Plan becomes exercisable in
installments of 1/48th of the shares subject to such option on each of the first
forty-eight (48) monthly anniversaries of the date of grant of the option and
each option granted under the 1986 Incentive Stock Option Plan becomes
exercisable in installments of 25% of the shares subject to such option on each
of the first, second, third and fourth anniversaries of the date of grant of the
option. Options granted under the Directors' Option Plan and the 1986 Incentive
Stock Option Plan have an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant, and a term of ten years.
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REQUIRED VOTE
The four nominees receiving the highest number of affirmative votes of
shares of the Company's Common Stock present at the Annual Meeting in person or
by proxy and entitled to vote shall be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT TO THE 1995 STOCK OPTION PLAN
At the Annual Meeting, shareholders are being asked to approve an amendment
to the 1995 Stock Option Plan (the "1995 Option Plan") to increase the number of
shares of Common Stock reserved for issuance thereunder by 750,000 shares to an
aggregate of 2,750,000 shares.
GENERAL
The Company's 1995 Option Plan was adopted by the Board of Directors in
March 1995 to replace the 1986 Incentive Stock Option Plan which had 160,970
shares available for grant thereunder as of April 19, 1995 and which expired in
accordance with its terms in July 1996. The Board of Directors initially
reserved 1,000,000 shares of Common Stock for issuance under the 1995 Option
Plan and obtained shareholder approval on September 24, 1996 to a proposed
amendment to increase the number of shares reserved for issuance under the 1995
Option Plan by 1,000,000. On April 17, 1997, the Board of Directors approved a
further amendment to increase the number of shares reserved for issuance under
the 1995 Option Plan by 750,000 shares to a total of 2,750,000 shares, for which
shareholder approval is being requested. The Board of Directors believes that,
in order to attract qualified employees to the Company and to provide incentives
to its current employees, it is necessary to grant options to purchase Common
Stock to such employees pursuant to the 1995 Option Plan. Accordingly,
shareholders are being asked to approve the proposed amendment to the 1995
Option Plan.
The 1995 Option Plan provides for the granting to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and for the granting of nonstatutory stock
options to employees and consultants. See "United States Federal Income Tax
Information" below for information concerning the tax treatment of both
incentive stock options and nonstatutory stock options.
As of March 31, 1997, no shares had been issued upon exercise of options
granted under the 1995 Option Plan, options to purchase 1,318,999 shares were
outstanding and 681,001 shares remained available for future grant (not
including the additional 500,000 shares reserved by the Board of Directors, for
which shareholder approval is being requested). As of March 31, 1997, the fair
market value of all shares of Common Stock subject to outstanding options was
$5,275,996 based on the closing sale price of $4.00 for the Company's Common
Stock as reported on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System on such date.
As of March 31, 1997, (i) options to purchase 697,999 shares of Common Stock
were outstanding under the 1995 Option Plan and held by all current executive
officers as a group (8 persons), (ii) no options were outstanding and held by
current directors who are not executive officers (3 persons) and (iii) options
to purchase 621,000 shares of Common Stock were outstanding and held by all
employees, including current officers who are not executive officers, as a group
(262 persons as of March 31, 1997). For information with respect to options to
purchase Common Stock of the Company granted in 1996 under the 1995 Option Plan
and under the Company's 1986 Incentive Stock Option Plan to the Company's Chief
Executive Officer and the four most highly compensated executive officers of the
Company whose annual salary and bonus exceeded $100,000 for 1996, and to
additional executive officers with respect to option repricings, see
"Compensation of Executive Officers--Stock Option Grants in 1995" and "Report of
the Compensation Committee."
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The 1995 Option Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
AMENDMENT TO INCREASE NUMBER OF RESERVED SHARES
The Board of Directors believes that in order to attract and retain highly
qualified employees and consultants and to provide such employees and
consultants with adequate incentive through their proprietary interest in the
Company, it is necessary to amend the 1995 Option Plan to reserve an additional
500,000 shares of Common Stock for issuance thereunder. At the Annual Meeting of
Shareholders, the shareholders are being asked to approve the above amendment to
the 1995 Option Plan.
PURPOSE
The purposes of the 1995 Option Plan are to attract and retain the best
available personnel for the Company, to give employees, officers, directors and
consultants of the Company or its subsidiary a greater personal stake in the
success of the business, and to provide such persons with added incentive to
continue and advance in their employment or services to the Company.
ADMINISTRATION
The 1995 Option Plan may be administered by the Board of Directors or a
committee designated by the Board (the "Administrator"). The 1995 Option Plan is
currently being administered by the Board of Directors and the Compensation
Committee of the Board. The Compensation Committee has the exclusive authority
to grant stock options and otherwise administer the 1995 Option Plan with
respect to the Company's directors and officers eligible to participate in the
1995 Option Plan. Members of the Board of Directors receive no additional
compensation for their services in connection with the administration of the
1995 Option Plan. All questions of interpretation of the 1995 Option Plan are
determined by the Administrator and decisions of the Administrator are final and
binding upon all participants.
ELIGIBILITY
The 1995 Option Plan provides that options may be granted to employees
(including officers and directors who are also employees) and consultants of the
Company. Incentive stock options may be granted only to employees. The
Administrator selects the optionees and determines the number of shares and the
exercise price to be associated with each option (except in the case of an
optionee-employee who is also a director or an executive officer, in which case
the Compensation Committee alone determines the number of shares and the
exercise price to be associated with each option). In making such determination,
there are taken into account the duties and responsibilities of the optionee,
the value of the optionee's services, the optionee's present and potential
contribution to the success of the Company, and other relevant factors. As of
March 31, 1997 there are approximately 255 employees eligible to participate in
the 1995 Option Plan.
The 1995 Option Plan provides that the maximum number of shares of Common
Stock which may be granted under options to any one employee during any fiscal
year shall be 250,000, subject to adjustment as provided in the 1995 Option
Plan. There is also a limit on the aggregate market value of shares subject to
all incentive stock options that may be granted to an optionee during any
calendar year.
TERMS OF OPTIONS
The terms of options granted under the 1995 Option Plan are determined by
the Administrator. Each option is evidenced by a stock option agreement between
the Company and the optionee and is subject to the following additional terms
and conditions:
(a) EXERCISE OF THE OPTION. The optionee must earn the right to exercise
the option by continuing to work for the Company. The Administrator determines
when options are exercisable. An option is exercised
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by giving written notice of exercise to the Company specifying the number of
full shares of Common Stock to be purchased, and by tendering payment of the
purchase price to the Company. The method of payment of the exercise price of
the shares purchased upon exercise of an option is determined by the
Administrator.
(b) EXERCISE PRICE. The exercise price of options granted under the 1995
Option Plan is determined by the Administrator, and must be at least equal to
the fair market value of the shares on the date of the first grant, in the case
of incentive stock options, and 85% of the fair market value of the shares on
the date of the grant, in the case of nonstatutory stock options, as determined
by the Administrator, based upon the closing price on the NASDAQ National Market
on the date of grant. Incentive stock options granted to shareholders owning
more than 10% of the Company's outstanding stock are subject to the additional
restriction that the exercise price on such options must be at least 110% of the
fair market value on the date of the grant. Nonstatutory stock options granted
to a covered employee under Section 162(m) of the Code are subject to the
additional restriction that the exercise price on such options must be at least
100% of the fair market value on the date of grant.
(c) TERMINATION OF EMPLOYMENT. If the optionee's employment or consulting
relationship with the Company is terminated for any reason other than death or
total and permanent disability, options under the 1995 Option Plan may be
exercised not later than ninety days after the date of such termination to the
extent the option was exercisable on the date of such termination. In no event
may an option be exercised by any person after the expiration of its term.
(d) DISABILITY. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of his total and
permanent disability, options may be exercised within six months (or such other
period of time not exceeding twelve months as is determined by the
Administrator) after the date of termination and may be exercised only to the
extent the option was exercisable on the date of termination, but in no event
may the option be exercised after its termination date.
(e) DEATH. If an optionee should die while employed or retained by the
Company, and such optionee has been continuously employed or retained by the
Company since the date of grant of the option, the option may be exercised
within six months after the date of death (or such other period of time, not
exceeding six months, as is determined by the Administrator) by the optionee's
estate or by a person who acquired the right to exercise the option by bequest
or inheritance to the extent the optionee would have been entitled to exercise
the option had the optionee continued living and remained employed or retained
by the Company for three months after the date of death, but in no event may the
option be exercised after its termination date.
If an optionee should die within one month (or such other period of time not
exceeding three months as is determined by the Administrator) after the optionee
has ceased to be continuously employed or retained by the Company, the option
may be exercised within three months after the date of death by the optionee's
estate or by a person who acquired the right to exercise the option by bequest
or inheritance to the extent that the optionee was entitled to exercise the
option at the date of termination, but in no event may the option be exercised
after its termination date.
(f) TERMINATION OF OPTIONS: Incentive stock options granted under the 1995
Option Plan expire ten years from the date of grant unless a shorter period is
provided in the option agreement. Incentive stock options and nonstatutory stock
options granted to shareholders owning more than 10% of the Company's
outstanding stock may not have a term of more than five years and five years and
one day, respectively.
(g) NONTRANSFERABILITY OF OPTIONS: Options are nontransferable by the
optionee, other than by will or the laws of descent and distribution, and are
exercisable only by the optionee during his or her lifetime or, in the event of
death, by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
(h) ACCELERATION OF OPTION: In the event of a merger of the Company with
or into another corporation or sale of substantially all of the Company's
assets, the Administrator shall either accomplish a substitution or assumption
of options or give written notice of the acceleration of the optionee's right to
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exercise his or her outstanding options in full at any time within thirty days
of such notice. The Administrator may, in its discretion, make provisions for
the acceleration of the optionee's right to exercise his or her outstanding
options in full.
Effective July 14, 1995, the Board adopted a resolution amending the Option
Plan such that each employee stock option issued under the Option Plan is to
accelerate by 50% of the unvested portion of such option upon an acquisition of
the Company in which the employee-optionee is not offered a comparable position
with the successor company.
(i) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1995 Option Plan as may be
determined by the Administrator.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization, such as a
stock split or dividend, that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the option price, the number of
shares subject to each option, the annual limitation of grants to employees, as
well as the number of shares available for issuance under the 1995 Option Plan.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding options automatically terminate unless otherwise provided by the
Administrator.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1995 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders; provided,
however, that shareholder approval is required for any amendment to the 1995
Option Plan that: (i) increases the number of shares that may be issued under
the 1995 Option Plan, (ii) modifies the standards of eligibility, (iii) modifies
the limitation on grants to employees described in the 1995 Option Plan or
results in other changes which would require shareholder approval to qualify
options granted under the 1995 Option Plan as performance-based compensation
under Section 162(m) of the Code, or (iv) so long as the Company has a class of
equity securities registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), materially increases the benefits to
participants that may accrue under the 1995 Option Plan. However, no action by
the Board of Directors or shareholders may alter or impair any option previously
granted under the 1995 Option Plan. The 1995 Option Plan shall terminate in
March 2005, provided that any options then outstanding under the 1995 Option
Plan shall remain outstanding until they expire by their terms.
UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the U.S. federal income tax consequences
of transactions under the 1995 Option Plan based on federal income tax laws in
effect on the date of this Proxy Statement. This summary is not intended to be
exhaustive and does not address all matters which may be relevant to a
particular optionee based on his or her specific circumstances. The summary
addresses only current U.S. federal income tax law and expressly does not
discuss the income tax laws of any state, municipality, non-U.S. taxing
jurisdiction or gift, estate or other tax laws other than federal income tax
law. The Company advises all optionees to consult their own tax advisor
concerning tax implication of option grants and exercises and the disposition of
stock acquired upon such exercises, under the 1995 Stock Option Plan.
Options granted under the 1995 Option Plan may be either incentive stock
options, which are intended to qualify for the special tax treatment provided by
Section 422 of the Code, or nonstatutory stock options, which will not so
qualify. If an option granted under the 1995 Option Plan is an incentive stock
option, the optionee will recognize no income upon grant of the incentive stock
option and will incur no tax liability due to the exercise except to the extent
that such exercise causes the optionee to incur alternative minimum tax. (See
discussion below). The Company will not be allowed a deduction for federal
income tax purposes as a result of the exercise of an incentive stock option
regardless of the applicability of
8
<PAGE>
the alternative minimum tax. Upon the sale or exchange of the shares more than
two years after grant of the option and one year after exercise of the option by
the optionee, any gain will be treated as a long-term capital gain. If both of
these holding periods are not satisfied, the optionee will recognize ordinary
income equal to the difference between the exercise price and the lower of the
fair market value of the Common Stock at the date of the option exercise or the
sale price of the Common Stock. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Any gain or
loss recognized on a disposition of the shares prior to completion of both of
the above holding periods in excess of the amount treated as ordinary income
will be characterized as long-term capital gain if the sale occurs more than one
year after exercise of the option or as short-term capital gain if the sale is
made earlier. For individual taxpayers, the current U.S. federal income tax rate
on long-term capital gains is capped at 28%, whereas the maximum rate on other
income is 39.6%. Capital losses for individual taxpayers are allowed in full
against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income at the time he or she is granted a nonstatutory option. However,
upon its exercise, the optionee will recognize ordinary income for tax purposes
measured by the excess of the fair market value of the shares over the exercise
price. The income recognized by an optionee who is also an employee of the
Company will be subject to income and employment tax withholding by the Company
by payment in cash by the optionee or out of the optionee's current earnings.
The Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Upon the sale of such shares by the optionee,
any difference between the sale price and the fair market value of the shares as
of the date of exercise of the option will be treated as capital gain or loss,
and will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year.
ALTERNATIVE MINIMUM TAX
The exercise of an incentive stock option may subject the optionee to the
alternative minimum tax under Section 55 of the Code. The alternative minimum
tax is calculated by applying a tax rate of 26% to alternative minimum taxable
income of joint filers up to $175,000 ($87,500 for married taxpayers filing
separately) and 28% to alternative minimum taxable income above that amount.
Alternative minimum taxable income is equal to (i) taxable income adjusted for
certain items, plus (ii) items of tax preference less (iii) an exemption amount
of $45,000 for joint returns, $33,750 for unmarried individual returns and
$22,500 in the case of married taxpayers filing separately (which exemption
amounts are phased out for upper income taxpayers). Alternative minimum tax will
be due if the tax determined under the foregoing formula exceeds the regular tax
of the taxpayer for the year.
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to exercise of a nonstatutory stock option. As a
result, the optionee recognizes alternative minimum taxable income equal to the
excess of the fair market value of the Common Stock on the date of exercise over
the option exercise price. Because the alternative minimum tax calculation may
be complex, the Company advises all optionees to consult their own tax advisors
prior to exercising incentive stock options.
If an optionee pays alternative minimum tax, the amount of such tax may be
carried forward as a credit against any subsequent year's regular tax in excess
of the alternative minimum tax for such year.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote is required to approve the amendment to the 1995 Option Plan
and the reservation of an additional 750,000 shares of Common Stock for issuance
thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT
TO THE 1995 OPTION PLAN AND THE RESERVATION OF AN ADDITIONAL 750,000 SHARES OF
COMMON STOCK FOR ISSUANCE THEREUNDER.
9
<PAGE>
PROPOSAL NO. 3
APPROVAL OF THE AMENDMENT
TO THE 1992 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, shareholders are being asked to approve an amendment
to the 1992 Employee Stock Purchase Plan (the "Purchase Plan") to increase the
number of shares of Common Stock reserved for issuance thereunder by 150,000
shares to an aggregate of 550,000 shares. The Purchase Plan provides for
employee purchases of the Company's Common Stock through accumulated payroll
deductions. Employees make such purchases by participation in regular offering
periods from which they may withdraw at any time. The amendment will provide
sufficient additional stock to continue the Company's policy of equity ownership
by employees as an incentive for employees to exert maximum efforts for the
success of the Company.
GENERAL
The Purchase Plan was adopted by the Board of Directors in October 1992 and
was approved by the shareholders in January 1993. A total of 300,000 shares of
Common Stock were initially reserved for issuance thereunder and an amendment to
increase the number of shares reserved for issuance under the Purchase Plan by
100,000 shares, subsequently adopted by the Board of Directors, was approved by
the shareholders on September 24, 1996. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to qualify under the
provisions of Section 423 of the Code. The Purchase Plan is not a qualified
deferred compensation plan under Section 401(a) of the Code, and is not subject
to the provisions of ERISA.
As of March 31, 1997, a total of 330,516 shares had been issued to the
Company's employees under the Purchase Plan and 69,484 shares remain available
for future issuance. The average per share issuance price for shares purchased
by employees under the Purchase Plan to date was approximately $6.8043 and the
total net value realized by employees as a group from the purchase of such
shares was $2,248,930. As of March 31, 1997, approximately 270 employees were
eligible to participate in the Purchase Plan, of which 60 were participating.
AMENDMENT TO INCREASE NUMBER OF RESERVED SHARES
The Board of Directors believes that in order to attract and retain highly
qualified employees and consultants and to provide such employees and
consultants with adequate incentive through their proprietary interest in the
Company, it is necessary to amend the Purchase Plan to reserve an additional
150,000 shares of Common Stock for issuance thereunder. At the Annual Meeting of
Shareholders, the shareholders are being asked to approve the above amendment to
the Purchase Plan.
PURPOSE
The purpose of the Purchase Plan is to provide employees of the Company (and
any of its subsidiaries designated by the Board of Directors) who participate in
the Purchase Plan with an opportunity to purchase Common Stock of the Company
through payroll deductions.
ADMINISTRATION
The Purchase Plan may be administered by the Board of Directors or a
committee appointed by the Board of Directors. The Purchase Plan is currently
being administered by a committee appointed by the Board. All questions of
interpretation of the Purchase Plan are determined by the Board of Directors or
its committee, and its decisions are final and binding upon all participants.
Members of the Board of Directors or its committee who are eligible employees
are permitted to participate in the Purchase Plan, provided that any such
eligible member may not vote on any matter affecting the administration of the
10
<PAGE>
Purchase Plan or the grant of any option pursuant to it, or serve on a committee
appointed to administer the Purchase Plan. No charges for administrative or
other costs may be made against the payroll deductions of a participant in the
Purchase Plan. Members of the Board of Directors receive no additional
compensation for their services in connection with the administration of the
Purchase Plan.
ELIGIBILITY
Any person who is customarily employed by the Company (or any of its
designated subsidiaries) for at least 20 hours per week and more than five
months in any calendar year is eligible to participate in the Purchase Plan
after being employed by the Company for at least three months, provided that the
employee was not eligible to participate during the offering period on any prior
offering date and subject to certain limitations imposed by Section 423(b) of
the Code and limitations on stock ownership as set forth in the Purchase Plan.
See "Purchase of Stock; Exercise of Option."
OFFERING DATES
In general, the Purchase Plan is implemented by a series of six-month
offering periods commencing on or about February 1 and August 1 of each year.
The Board of Directors has the power to change the duration and/or frequency of
the offering periods with respect to future offerings without shareholder
approval if such change is announced at least fifteen (15) days prior to the
scheduled beginning of the first offering period to be affected.
PARTICIPATION IN THE PLAN
Eligible employees may participate in the Plan by completing a subscription
agreement on the form provided by the Company and filing it with the Company
prior to the applicable offering date, unless a later time for filing the
subscription agreement is set by the Board for all eligible employees with
respect to a given offering. The subscription agreement currently authorizes
payroll deductions of up to ten percent of the participant's eligible
compensation on the date of the purchase.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Purchase
Plan is 85 percent of the lower of the fair market value of the Common Stock on
the offering date or on the applicable exercise date. The fair market value
shall be the closing price of the Common Stock on the NASDAQ National Market as
of such date or, if such price is not reported, the mean of the bid and asked
prices per share reported by NASDAQ, or if listed on a stock exchange, the
closing price on such exchange as reported in THE WALL STREET JOURNAL.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions during
the six-month offering period. The deductions may be up to ten percent of a
participant's eligible compensation received on each payday during the offering
period. Eligible compensation is defined in the Purchase Plan to include the
regular straight time gross earnings excluding payments for overtime, shift
premium, incentive compensation, bonuses and commissions. A participant may
discontinue his or her participation in the Purchase Plan at any time during the
offering period prior to an exercise date, and may decrease or increase the rate
of his or her payroll deductions once during the offering period by completing
and filing a new subscription agreement. Payroll deductions shall commence on
the first payroll following the offering date and shall continue until his or
her participation is terminated as provided in the Purchase Plan. No interest
accrues on the payroll deductions of a participant in the Purchase Plan.
11
<PAGE>
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Purchase Plan,
the participant is entitled to have shares placed under option. The maximum
number of shares placed under option to a participant in an offering period is
the number determined by dividing $12,500 by the fair market value of one share
of the Company's Common Stock on the offering date. Within this limit, the
number of shares purchased by a participant will be determined by dividing the
amount of the participant's total payroll deductions accumulated during each
exercise period by the lower of (i) 85% of the fair market value of the Common
Stock on the offering date, or (ii) 85% of the fair market value of the Common
Stock on the applicable exercise date. See "Payment of Purchase Price; Payroll
Deductions" for additional limitations on payroll deductions. Unless the
participant's participation is discontinued, each participant's option for the
purchase of shares will be exercised automatically at the end of each offering
period at the applicable price. See "Withdrawal." Notwithstanding the foregoing,
no participant shall be permitted to subscribe for shares under the Purchase
Plan if immediately after the grant of the option he or she would own 5% or more
of the voting power or value of all classes of stock of the Company or of any of
its subsidiaries (including stock which may be purchased under the Purchase Plan
or pursuant to any other options), nor shall any participant be granted an
option which would permit the participant to buy pursuant to all employee stock
purchase plans of the Company more than $25,000 worth of stock (determined at
the fair market value of the shares at the time the option is granted) in any
calendar year. Furthermore, if the number of shares which would otherwise be
placed under option at the beginning of an offering period exceeds the number of
shares then available under the Purchase Plan, a pro rata allocation of the
available shares shall be made in as equitable a manner as is practicable.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest may be increased or decreased once during any given offering period by
completing and filing a new subscription agreement with the Company. In
addition, a participant's interest may be terminated in whole, but not in part,
by delivering written notice of such withdrawal to the Company. Such withdrawal
may be elected at any time prior to the end of the applicable three-month period
prior to an exercise date under the Purchase Plan. Any withdrawal by the
participant of accumulated payroll deductions for a given offering period
automatically terminates the participant's interest in that offering period.
A participant's withdrawal from an offering period does not have an effect
upon such participant's eligibility to participate in subsequent offering
periods under the Purchase Plan; however, the participant may not re-enroll in
the same offering period after withdrawal.
TERMINATION OF EMPLOYMENT
Upon termination of the participant's continuous status as an employee prior
to the exercise date of an offering period for any reason, including retirement
or death, the contributions credited to his or her account will be returned to
him or her, without interest, or, in the case of his or her death, to the person
or persons entitled thereto, and his or her option will be automatically
terminated.
In the event an employee fails to remain in continuous status as an employee
of the Company for at least twenty (20) hours per week during the offering
period in which the employee is a participant, he or she will be deemed to have
elected to withdraw from the Purchase Plan and the contributions credited to his
or her account will be returned to him or her, without interest, and his or her
option terminated.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or stock dividend, is made in
the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of Common
12
<PAGE>
Stock without receipt of consideration by the Company, appropriate adjustments
will be made in the shares subject to purchase and in the purchase price per
share, as well as in the number of shares available for issuance under the
Purchase Plan. In the event of the proposed dissolution or liquidation of the
Company, the offering period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board of
Directors or its committee.
NONTRANSFERABILITY
No rights or accumulated payroll deductions of a participant under the
Purchase Plan may be pledged, assigned or transferred for any reason and any
such attempt may be treated by the Company as an election to withdraw from the
Purchase Plan.
REPORTS
Individual accounts will be maintained for each participant in the Purchase
Plan. Each participant shall receive promptly after each exercise date a report
of such participant's account setting forth the total amount of the
participant's contributions, the per share purchase price and the number of
shares purchased and the remaining cash balance, if any, to be returned or
carried over to the next offering period.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend or terminate the Purchase Plan,
except that such termination shall not affect options previously granted nor may
any amendment make any change in any option granted prior thereto which
adversely affects the rights of any participant. No amendment may be made to the
Purchase Plan without prior shareholder approval with respect to any change for
which shareholder approval is required to comply with the rules regarding
"discretionary plans" under Section 16 of the Exchange Act and Rule 16b-3 or
under Section 423 of the Code (or any successor provisions thereto).
FEDERAL INCOME TAX ASPECTS OF THE PURCHASE PLAN
The following is a brief summary of the U.S. federal income tax consequences
of transactions under the 1992 Employee Stock Purchase Plan based on federal
income tax laws in effect on the date of this Proxy Statement. This summary is
not intended to be exhaustive and does not address all matters which may be
relevant to a particular participant based on his or her specific circumstances.
The summary addresses only current U.S. federal income tax law and expressly
does not discuss the income tax laws of any state, municipality, non-U.S. taxing
jurisdiction or gift, estate or other tax laws other than federal income tax
laws. The Company advises all participants to consult their own tax advisor
concerning tax implication of purchases and the disposition of stock acquired
pursuant to the 1992 Employee Stock Purchase Plan.
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify for the federal income tax treatment provided
to employee stock purchase plans and their participants under the provisions of
Sections 421 and 423 of the Code. Under these provisions, no income will be
taxable to a participant until the shares purchased under the Purchase Plan are
sold or otherwise disposed of. Upon sale or other disposition of the shares, the
participant will generally be subject to tax in an amount which depends upon the
holding period of the shares. If the shares are sold or otherwise disposed of
more than two years from the first day of the offering period and one year from
the date the shares are purchased, the participant will recognize ordinary
income measured as the lesser of (a) the excess of the fair market value of the
shares at the time of such sale or disposition over the purchase price, or (b)
an amount equal to 15 percent of the fair market value of the shares as of the
first day of the offering period. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of
13
<PAGE>
before the expiration of either of these holding periods, the participant will
recognize ordinary income generally measured as the excess of the fair market
value of the shares on the date the shares are purchased over the purchase
price. Any additional gain or loss on such sale or disposition will be long-term
or short-term capital gain or loss, depending on whether or not the disposition
occurs more than one year after the date the shares are purchased. The Company
is not entitled to a deduction for amounts taxed as ordinary income or capital
gain to a participant except to the extent of ordinary income recognized by a
participant upon a sale or disposition of shares prior to the expiration of the
holding periods described above. Capital losses are allowed in full against
capital gains plus $3,000 of other income.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares for
the purpose of determining capital gain or loss on a sale or exchange of the
shares.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote is required to approve the amendment to the 1992 Purchase Plan
and the reservation of an additional 150,000 shares of Common Stock for issuance
thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT
TO THE 1992 PURCHASE PLAN AND THE RESERVATION OF AN ADDITIONAL 150,000 SHARES OF
COMMON STOCK FOR ISSUANCE THEREUNDER.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Price Waterhouse LLP,
independent public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1997, and recommends that the
shareholders vote for ratification of this appointment. In the event the
shareholders do not ratify such appointment, the Board of Directors will
reconsider its selection. Price Waterhouse LLP has also audited the Company's
financial statements for the fiscal years ending December 31, 1993, 1994, 1995
and 1996. Representatives of Price Waterhouse 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.
On October 4, 1995, Arthur Andersen LLP resigned as independent accountants
to audit the financial statements of the Company for the 1995 fiscal year.
Subsequent to such resignation, the Company received a letter dated January 2,
1996 from Arthur Andersen advising the Company that it had withdrawn its reports
issued with respect to its audits of the Company's December 31, 1993 and 1994
financial statements. Disagreement between the Company and Arthur Andersen
regarding restatement of the Company's financial results for its quarter ended
March 31, 1994 and the timing of revenue recognition for certain transactions
reported in that quarter are described in detail in the Company's report on Form
8-K filed with the Securities and Exchange Commission (the "Commission") on
October 11, 1995, as amended by Form 8-K/A (Amendment No. 1) filed with the
Commission on October 26, 1995 (the "Form 8-K/A").
During the two most recent fiscal years and subsequent interim periods prior
to October 4, 1995, there were no disagreements with Arthur Andersen LLP on any
matter of accounting principles or practices, financial statement disclosure,
auditing scope or procedure, or any reportable events, except the Company's
disagreement with Arthur Andersen regarding the Company's restatement of its
financial results for the quarter ended March 31, 1994, as described in the Form
8K/A. The reports of Arthur Andersen LLP on the financial statements of the
Registrant for the years ended December 31, 1993 and December 31,
14
<PAGE>
1994 contained no adverse opinion or other disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
Effective January 2, 1996, the Board of Directors of the Company engaged the
accounting firm of Price Waterhouse LLP ("Price Waterhouse") as independent
accountants to audit the Company's financial statements for the fiscal years
ended December 31, 1993, December 31, 1994, and December 31, 1995. The Company's
audit committee of its Board of Directors approved these actions.
The Company has not consulted with the independent accounting and audit
group at Price Waterhouse LLP responsible for performing future independent
accounting work during the preceding two years or subsequent interim periods
through September 31, 1995 on (i) either the application of accounting
principles or type of opinion Price Waterhouse might issue on the Company's
financial statements or (ii) the Company's disagreement with Arthur Andersen
regarding the Company's restatement of its financial results for its quarter
ended March 31, 1994 as described in the Form 8-K/A. Through its outside
litigation counsel the Company previously engaged the Dispute Analysis and
Corporate Recovery Consulting Unit of Price Waterhouse as litigation consultants
to provide expert witness testimony in connection with the securities class
action litigation filed against the Company and various of its officers and
directors in May 1994, as described in the Company's report on the Form 8-K
filed with the Commission on January 11, 1996.
The Company requested that Arthur Andersen furnish a letter addressed to the
SEC stating whether Arthur Andersen LLP agrees with the above statements.
REQUIRED VOTE
The ratification of the appointment of Price Waterhouse LLP as the Company's
independent public accountants requires the affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present at the Annual
Meeting in person or by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PRICE
WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1997.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 31, 1997 as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers named in the Summary Compensation Table beginning on page 20 and (iv)
all directors and
15
<PAGE>
executive officers as a group. The number of shares of the Company common stock
outstanding as of March 31, 1997 was 15,238,244.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
5% SHAREHOLDERS, DIRECTORS, OWNED(1)
NAMED EXECUTIVE OFFICERS, -----------------------
AND DIRECTORS AND EXECUTIVE OFFICERS PERCENT OF
AS A GROUP NUMBER(2) TOTAL
- ---------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Umang P. Gupta........................................................ 1,614,358 10.59
Novell, Inc. (3)...................................................... 1,057,500 6.94
2180 Fortune Drive
San Jose, CA 95131
D. Bruce Scott (4).................................................... 624,344 4.09
William O. Grabe (5).................................................. 43,667 *
Max D. Hopper......................................................... 16,667 *
Anthony Sun........................................................... 78,412 *
Samuel M. Inman III (6)............................................... 225,000 1.46
Richard A. Gelhaus.................................................... 44,500 *
Earl M. Stahl......................................................... 106,772 *
Michael K. Keddington................................................. 46,004 *
Helmut G. Wilke....................................................... 96,211 *
All directors and executive officers as group (12 persons)
(4)(5)(6)(7)........................................................ 1,405,469 8.83
</TABLE>
- ------------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person
that are exercisable on or before May 30, 1997, are deemed outstanding. Such
shares, however, are not deemed outstanding for purposes of computing the
ownership of each other person. Except as indicated in the footnotes to this
table and pursuant to applicable community property laws, the shareholder
named in the table has sole voting and investment power with respect to the
shares set forth opposite such shareholder's name.
(2) Includes with respect to each named person the following shares subject to
stock options exercisable within 60 days of March 31, 1997: Mr.
Scott-16,667; Mr. Grabe-41,667; Mr. Hopper-16,667; Mr. Sun-36,667; Mr.
Inman-210,000; Mr. Gelhaus-42,500; Mr. Stahl-101,772; Mr. Keddington-40,208;
and Mr. Wilke-73,125.
(3) Novell, Inc. and the Company were parties to a marketing agreement to
promote the sale of the Company's products through Novell's authorized
resellers that expired in 1996. See "Certain Relationships and Related
Transactions."
(4) Includes 6,000 shares held for the benefit of Mr. Scott's children. Excludes
4,500 shares held by members of Mr. Scott's family, as to which Mr. Scott
disclaims beneficial ownership. Excludes 477,758 shares transferred to Mr.
Scott's ex-wife pursuant to a final divorce decree dated March 1, 1996, as
to which Mr. Scott disclaims beneficial ownership. Mr. Scott resigned his
position as an executive officer in April 1995 and has been on leave from
the Company since January 1995.
(5) Includes 2,000 shares held for the benefit for Mr. Grabe's children.
(6) Mr. Inman has served as Chairman of the Board, President and Chief Executive
Officer since September 1996, President and Chief Executive Officer
(Principal Executive Officer) since December 1995, and he served as
President and Chief Operating Officer from April 1995 to December 1995.
16
<PAGE>
(7) Includes 676,392 shares subject to options held by directors and officers
that are exercisable within 60 days of March 31, 1997.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 30 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
The Company's executive compensation policies are determined by the
Compensation Committee of the Board of Directors. The Compensation Committee
(the "Committee") is composed of two nonemployee directors. The Chairman of the
Board of Directors served on the Committee during the formative years of the
Company, but resigned his membership on the Committee during 1994.
The objective of the Company's executive compensation program is to align
executive compensation with the Company's business objectives and performance,
and to enable the Company to attract, retain and reward executives who
contribute to the long-term business success of the Company. The Company's
executive compensation program is based on the same four basic principles that
guide compensation decisions for all employees of the Company:
- The Company compensates for demonstrated and sustained performance.
- The Company compensates competitively.
- The Company strives for equity and fairness in the administration of
compensation.
- The Company believes that each employee should understand how his or her
compensation is determined.
The Company believes in compensating its executives for demonstrated and
sustained levels of performance in their individual jobs. The achievement of
higher levels of performance and contribution are rewarded by higher levels of
compensation. In order to ensure that it compensates its executives
competitively, the Company regularly compares its compensation practices to
those of other companies of comparable size within similar industries. Through
the use of independent compensation surveys and analysis, employee compensation
training, and periodic pay reviews, the Company strives to ensure that
compensation is administered equitably and fairly and that a balance is
maintained between how executives are paid relative to other employees and
relative to executives with similar responsibilities in comparable companies.
The Committee meets at least twice annually: once late in the year to
establish the compensation program for the next fiscal year and once, mid-year,
to evaluate how effectively the program is meeting its objectives. Additionally,
the Committee may hold special meetings to approve the compensation program of a
newly hired executive or an executive whose scope of responsibility has
significantly changed. Each year, the Committee meets with the CEO and the
Director, Human Resources regarding executive compensation projections for the
next three years and proposals for executive compensation for the next operating
year. Compensation plans are based on compensation surveys and assessments as to
the demonstrated and sustained performance of the individual executives. The
Committee then independently reviews the performance of the CEO and the Company,
and develops the annual compensation plan for the CEO based on competitive
compensation data and the Committee's evaluation of the CEO's demonstrated and
sustained performance and its expectation as to his future contributions in
leading the Company. The Committee presents for adoption its findings on the
compensation of each individual executive at a subsequent meeting of the full
Board of Directors.
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COMPENSATION OF EXECUTIVE OFFICERS
During 1996, the Company's executive compensation program was comprised of
the following key components:
BASE SALARY. The Company sets the base salaries of its executives at the
levels of comparably sized companies engaged in similar industries.
CASH-BASED INCENTIVES. The Company's executives participate in a cash
incentive program. The program includes all of the Company's executives and is
contingent on the achievement of specific Company-wide goals in the areas of
customer satisfaction, operating profit, revenue performance, asset management
and the achievement of specific individual performance goals that are measured
objectively, as well as individual performance goals that are measured
subjectively. Participants in this program include the CEO and vice presidents.
The Company's cash incentives are structured so that the total of base salary
and cash incentives when taken together, will compensate executives at market
levels when company-wide and individual goals are achieved. The cash incentive
elements are sensitive to performance achievement versus plan, and payment of
these cash bonuses ranges from no bonus payment when performance is below
established targets, to bonus amounts somewhat above market levels when
performance targets are exceeded.
EQUITY-BASED INCENTIVES. Stock options are an important component of the
total compensation of executives, and are designed to align the interests of
each executive with those of the shareholders. Each year the Committee considers
the grant to executives of stock option awards under the Company's 1995 Stock
Option Plan. The Committee believes that stock options provide added incentive
for the executives to influence the strategic direction of the Company, and to
create and increase value for customers, shareholders and employees. The option
grants typically utilize four-year vesting periods to encourage executives to
continue contributing to the Company. The number of stock option shares that are
granted to individual executives is, in part, based on independent survey data
reflecting competitive stock option practices.
The CEO's base salary for 1996 was established by the Committee at levels
somewhat comparably to the base salaries of comparably sized companies engaged
in similar industries.
REPORT ON REPRICED OPTIONS
In January 1996, July 1995 and June 1994, the Committee determined that it
was in the best interests of the Company to offer to reprice the then-existing
stock option grants of the Company with exercise prices in excess of the
then-current fair market value of the Company's common stock. Excluded from the
repricing actions were the CEO and two senior vice presidents.
The objectives of the Company's Stock Option Plans (the "Stock Option
Plans") are to promote the interests of the Company by providing employees and
certain consultants or independent contractors an incentive to acquire a
proprietary interest in the Company and to continue to render services to the
Company. It was the view of the Committee that stock options with exercise
prices substantially above the current market price of the Company's common
stock were viewed negatively by most employees of the Company, and provided
little, if any, equity incentive to the optionees. The Committee thus concluded
that such option grants seriously undermined the specific objectives of the
Stock Option Plans and should properly be repriced. In making this decision, the
Committee also considered the fairness of such a determination in relation to
other shareholders. In the opinion of the Committee, the shareholders' long-term
best interests were clearly served by the retention and motivation of optionees.
In this context, the Committee decided that effective June 14, 1994, July
27, 1995 and January 5, 1996 (the "Grant Date") all Company employees (except
executive officers) holding stock options with exercise prices in excess of the
fair market value of the Company's common stock could receive a one-for-one
18
<PAGE>
repricing of their then-existing unexercised stock options with a new exercise
price set at $10.75 per share, the fair market value of the Company's common
stock on the first Grant Date (June 14, 1994). The second repricing allowed
employees to receive a one-for-one repricing of their then-existing unexercised
stock options with a new exercise price set at $9.00 per share, the fair market
value of the Company's common stock on the second Grant Date (July 27, 1995).
The third repricing allowed employees to receive a one-for-one repricing of
their then-existing unexercised stock options with a new exercise price set at
$5.9375 per share, the fair market value of the Company's common stock on the
third Grant Date (January 5, 1996).
None of the Company's non-employee members of the Board of Directors
received any repriced stock options. It is the opinion of the Committee that
this program succeeded in its objectives of building employee morale and
providing new incentives for the Company's employees and management.
COMPENSATION COMMITTEE
William Grabe
Max Hopper
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Grabe and Sun comprised the Compensation Committee of the Board of
Directors during 1996. None of these persons has ever been an officer or
employee of the Company or any of its subsidiaries, nor were there any
compensation committee interlocks or other relationships during 1996 requiring
disclosure under item 402(j) of Regulation S-K of the Securities and Exchange
Commission.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation received by (a) the individual
who served as the Company's Chief Executive Officer ("CEO') during 1996; (b) the
four most highly compensated executive officers other than the CEO who were
serving as executive officers of the Company at December 31, 1996, and (c) the
compensation received by each such individual for the Company's two preceding
fiscal years.
19
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS OTHER ANNUAL
SALARY BONUS SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($)(1)(3) ($)(2) OPTIONS OPTIONS
- ----------------------------------------------- --------- --------- --------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Samuel M. Inman III............................ 1996 400,000 190,000 -- --
President and Chief Executive 1995 182,693 112,500 -- 479,999
Officer (Principle Executive Officer) 1994 -- -- -- --
Richard A. Gelhaus............................. 1996 172,500 40,000 -- 120,000
Senior Vice President, Finance 1995 -- -- -- --
and Operations and Chief 1994 -- -- -- --
Financial Officer (Principal Financial and
Accounting Officer)
Earl M. Stahl.................................. 1996 160,000 60,000 -- --
Senior Vice President, 1995 154,167 9,000 -- 85,000
Engineering and Chief Technical Officer 1994 134,750 23,500 -- 40,000
Helmut G. Wilke................................ 1996 272,110 -- -- --
Vice President European Division............... 1995 200,536 -- -- 60,000
1994 227,719 2,372 -- 40,000
Michael K. Keddington.......................... 1996 200,600 17,375 -- 10,000
Vice President North America Sales 1995 68,750 16,250 -- 90,000
1994 -- -- -- --
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(4)
- ----------------------------------------------- -----------------
<S> <C>
Samuel M. Inman III............................ 468
President and Chief Executive --
Officer (Principle Executive Officer) --
Richard A. Gelhaus............................. 343
Senior Vice President, Finance --
and Operations and Chief --
Financial Officer (Principal Financial and
Accounting Officer)
Earl M. Stahl.................................. 281
Senior Vice President, 205
Engineering and Chief Technical Officer 184
Helmut G. Wilke................................ --
Vice President European Division............... --
--
Michael K. Keddington.......................... 412
Vice President North America Sales --
--
</TABLE>
- ------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes bonus earned in the indicated year. Excludes bonuses earned in the
indicated year but paid in the subsequent year except for Sam Inman in 1996.
Sam Inman's 1996 bonus includes $150,000 bonus approved on March 3, 1997, by
the Compensation Committee of the Board of Directors and paid March 6, 1997
plus a $40,000 moving allowance paid in 1996.
(3) Includes commissions paid in the indicated year. Helmut Wilke received
$93,387, $70,556 and $104,238 in 1996, 1995 and 1994, respectively. Michael
Keddington received $39,600 in 1996.
(4) Comprised of premiums paid by the Company under the Company's group term
life insurance policy.
20
<PAGE>
STOCK OPTION GRANTS IN 1996
The following table sets forth information for the Named Executive Officers
with respect to options to purchase common stock of the Company held as of
December 31, 1996. No executive officer exercised any stock options during the
fiscal year ended December 31, 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
% OF TOTAL OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM (2)
OPTIONS IN FISCAL EXPIRATION ---------------------
NAME GRANTED (#) YEAR(1) EXERCISE PRICE DATE 5% ($) 10% ($)
- ---------------------------------------------- ----------- ------------- --------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Samuel M. Inman III........................... -- -- -- -- -- --
Richard A. Gelhaus............................ 120,000 13.8 6.625 1/23/06 499,971 1,267,025
Earl M. Stahl................................. -- -- -- -- -- --
Helmut G. Wilke............................... -- -- -- -- -- --
Michael K. Keddington......................... 10,000 1.1 4.375 7/23/96 27,514 69,726
</TABLE>
- ------------------------
(1) Options to purchase a total of 2,886,000 shares of common stock were granted
under the Company's 1995 Stock Option Plan during the fiscal year ended
December 31, 1996, including 2,337,000 options issued in connection with a
repricing upon which an equivalent number of previously issued options were
canceled. These options vest over a period of four years, provided however,
that the stock options of the officers listed vest automatically in the
event of any sale of all or substantially all of the Company's assets or any
merger, consolidation or stock sale which results in the holders of the
Company's common stock immediately prior to such transaction owning less
than 50% of the voting power of the Company's common stock immediately after
such transaction.
(2) Potential realizable values are reported net of the option exercise price
but before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual realized gains, if any, on stock
option exercises are dependent on future performance of the Company's common
stock, as well as the optionee's continued employment through the vesting
period.
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
The following table sets forth information for the Named Executive Officers
with respect to options to purchase common stock of the Company held as of
December 31, 1996. No executive officer exercised any stock options during the
fiscal year ended December 31, 1996.
21
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT 12/31/96 THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE (#)(2) 12/31/96 ($)(3)
NAME ON EXERCISE (#) REALIZED ($)(1) (EXERCISABLE/UNEXERCISABLE (EXERCISABLE/UNEXERCISABLE
- ---------------------------- ------------------- ----------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Samuel M. Inman III......... -- -- 159,999/320,000 -/-
Richard A. Gelhaus.......... -- -- -/120,000 -/-
Earl M. Stahl............... -- -- 88,750/71,250 18,750/-
Helmut G. Wilke............. -- -- 81,667/58,333 30,000/-
Michael K. Keddington....... -- -- 30,833/69,167 -/-
</TABLE>
- ------------------------
(1) Value realized is calculated based on the closing price of the Company's
common stock as reported in the NASDAQ National Market on the date of
exercise minus the exercise price of the option, and does not necessarily
indicate that the optionee sold such stock.
(2) No stock appreciation rights (SARs) were outstanding during 1996.
(3) The fair market value of the Company's common stock at the close of business
on December 31, 1996 was $2.75 per share.
22
<PAGE>
REPRICING OF OPTIONS
The following table provides information regarding the repricing of certain
options held by the Company's executive officers during the year ended December
31, 1996:
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET PRICE
SECURITIES OF STOCK AT EXERCISE EXPIRATION
UNDERLYING TIME OF PRICE DATE OF
DATE OF OPTIONS REPRICING AT TIME OF NEW EXERCISE ORIGINAL
NAME REPRICING REPRICED (#) ($) REPRICING ($) PRICE ($) OPTION
- ----------------------------------------- ----------- ------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Samuel M. Inman III...................... 1/5/96 239,999 5.9375 6.6250 5.9375 12/14/05
President and Chief Executive 1/5/96 240,000 5.9375 10.7500 5.9375 4/3/05
Officer
(Principal Executive Officer)
Earl M. Stahl............................ 1/5/96 45,000 5.9375 6.6250 5.9375 12/14/05
Senior Vice President, 1/5/96 40,000 5.9375 10.7500 5.9375 3/14/05
Engineering 1/5/96 25,000 5.9375 10.7500 5.9375 6/14/04
and Chief Technical Officer
Richard J. Heaps......................... 1/5/96 65,000 5.9375 6.6250 5.9375 12/14/05
Senior Vice President, Business 1/5/96 20,000 5.9375 9.7500 5.9375 7/14/05
Development and General 1/5/96 25,000 5.9375 9.0000 5.9375 6/14/04
Counsel 7/27/95 40,000 9.0000 10.7500 9.0000 6/14/04
Helmut G. Wilke.......................... 1/5/96 20,000 5.9375 6.6250 5.9375 12/14/05
Vice President, European Division 1/5/96 40,000 5.9375 9.7500 5.9375 7/14/05
1/5/96 25,000 5.9375 9.0000 5.9375 6/14/04
1/5/96 5,000 5.9375 9.0000 5.9375 12/17/03
1/5/96 2,292 5.9375 8.8000 5.9375 12/1/02
7/27/95 40,000 9.0000 10.7500 9.0000 6/14/04
7/27/95 10,000 9.0000 10.7500 9.0000 12/17/03
6/14/94 10,000 10.7500 16.8750 10.7500 12/17/03
Michael K. Keddington.................... 1/5/96 10,000 5.9375 6.6250 5.9375 12/14/05
Vice President, North America 1/5/96 80,000 5.9375 9.0000 5.9375 7/14/05
Sales 7/27/95 80,000 9.0000 9.7500 9.0000 7/14/05
Robert Bramley........................... 1/5/96 40,000 5.9375 6.6250 5.9375 12/14/05
Vice President Technical Services 1/5/96 5,000 5.9375 10.7500 5.9375 3/14/05
1/5/96 5,000 5.9375 9.0000 5.9375 12/17/03
7/27/95 10,000 9.0000 10.7500 9.0000 12/17/03
6/14/96 10,000 10.7500 16.8750 10.7500 12/17/03
John G. McAughtry........................ 1/5/96 50,000 5.9375 6.6250 5.9375 12/14/05
Vice President, Asia Pacific and 1/5/96 5,000 5.9375 9.0000 5.9375 12/17/03
Latin America 1/5/96 11,875 5.9375 9.0000 5.9375 7/21/03
7/27/95 10,000 9.0000 10.7500 9.0000 12/17/03
7/27/95 30,000 9.0000 10.7500 9.0000 7/21/03
6/14/94 10,000 10.7500 16.8750 10.7500 12/17/03
6/14/94 30,000 10.7500 20.0000 10.7500 7/21/03
</TABLE>
23
<PAGE>
PERFORMANCE GRAPH
The following graph and table summarizes cumulative total shareholder return
data (assuming reinvestment of dividends) for the period since the Company's
common stock was first registered under Section 12 of the Securities Exchange
Act of 1934 (February 4, 1993). The graph assumes that $100 was invested (i) on
February 4, 1993 in the Company's common stock at a price of $18.00 per share,
the price at which such stock was first offered to the public on that date, (ii)
on January 31, 1993 in the Standard & Poor's 500 Stock Index and (iii) on
January 31, 1993 in the Standard & Poor's High Technology Composite Index. The
stock price performance on the following graph and table is not necessarily
indicative of future stock price performance.
COMPARISON OF 46 MONTH CUMULATIVE TOTAL RETURN* AMONG CENTURA SOFTWARE
CORPORATION, THE S & P 500 INDEX AND S & P HIGH TECH COMPOSITE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD &
<S> <C> <C> <C>
Standard & Poor's High
Centura Poor's 500 Technology
Software Stock Composite
Corporation Index Index
2/5/1997 100 100 100
1/1/1998 109 109 117
1/1/1999 63 111 137
1/1/2000 28 152 197
1/1/2001 15 187 279
</TABLE>
- ------------------------
* $100 INVESTED ON 2/4/93 IN STOCK OR ON 1/31/93 IN INDICES INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
2/4/93 12/31/93 12/31/94 12/31/95 12/31/96
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Centura Software Corporation.................................... 100 109 63 28 15
Standard & Poor's 500 Stock Index............................... 100 109 111 152 187
Standard & Poor's High Technology Composite Index............... 100 117 137 197 279
</TABLE>
24
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1992, the Company and Novell, which owns 7.70% at December 31,
1996, of the Company's common stock, entered into a reseller agreement under
which the Company agreed to pay Novell certain quarterly sales commissions and
trademark license fees. In 1993, this agreement was extended until September
1996. The commissions and fees prepaid under this agreement at December 31, 1994
and 1993 were $666,000 and $625,000, respectively. Amounts accrued at December
31, 1993 were $750,000 and there were no outstanding balances at December 31,
1995 and 1994. In the fourth quarter of 1995, the Company as a result of its
restructuring plan, wrote off the remaining prepaid balance of $338,000 which is
included in restructuring charges described in Note 4 of Notes to Consolidated
Financial Statements included in its Annual Report on Form 10-K. The amounts
expensed during the years ended December 31, 1996, 1995 and 1994 were
approximately $0, $666,000 and $209,000, respectively.
The Company has the option to acquire 100% of the outstanding stock of one
of its foreign distributors, using a purchase price formula based on net profits
and revenues. At December 31, 1996, 1995 and 1994 the Company had no outstanding
receivables from this distributor. The Company recognized revenue of $1,783,000,
$2,007,000, and $0 for the years ended December 31, 1996, 1995 and 1994,
respectively, from this distributor.
The Company has entered into indemnification agreements with each of its
directors and executive officers, which may require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers, to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
The Company entered into an employment agreement with Sam Inman dated April
10, 1995 with respect to Mr. Inman's employment as President and Chief Executive
Officer of the Company. Pursuant to this agreement, Mr. Inman was to receive a
base salary of not less than $250,000 per year and was entitled to earn a target
bonus of $150,000 per year, based upon achievement of financial and other goals,
provided, however, that Mr. Inman was guaranteed a minimum bonus of $150,000
during the initial year of this agreement. In addition, pursuant to the
agreement, Mr. Inman was granted an option to acquire up to 240,000 shares of
the Company's common stock at an exercise price of $10.25 per share, which
shares vest at the rate of 12,000 shares per quarter commencing July 1, 1995,
and of which 48,000 shares will be considered by the Board of Directors for
certain accelerated vesting on the basis of Mr. Inman's job performance.
Effective January 1, 1996, Mr. Inman's annual base salary was increased to
$400,000 and his target bonus was increased to $200,000. Also in January 1996,
as part of the Company's repricing of employee stock options, shares awarded Mr.
Inman were priced at $5.94. On March 3, 1997, Mr. Inman was granted an option to
acquire up to an additional 120,000 shares of the Company's common stock at an
exercise price of $4.25 per share, which shares will vest ratably during the
fourth year after the date of grant. All shares subject to the options will vest
on acquisition or change of control of the Company. Pursuant to the employment
agreement, upon termination of Mr. Inman's employment without cause, Mr. Inman
is entitled to severance in the amount of his base salary and any additional
benefits provided under the agreement for a period of one year.
The Company and Earl Stahl entered into a loan agreement dated August 31,
1995 pursuant to which Mr. Stahl borrowed $300,000 in connection with his
purchase of a new home. This loan will be forgiven at the rate of $40,000 of
principal on each yearly anniversary of the loan, provided, for such date, Mr.
Stahl is employed by the Company on such date. As of March 31, 1997, principal
and interest totaling $287,281 was outstanding under this loan and the largest
aggregate amount outstanding under this loan in 1996 was $318,120. The loan is
due in August, 1999, or earlier, within six months after termination of Mr.
Stahl's employment with the Company for cause.
25
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission (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 holders of more than
ten percent of the Company's Common Stock are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996 all
Section 16(a) filing requirements applicable to the Company's officers,
directors and holders of more than ten percent of the Company's Common Stock
were complied with.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the persons
named in the enclosed form of proxy will vote the shares they represent in such
manner as the Board may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
CRAIG W. JOHNSON
SECRETARY
Dated: April 30, 1997
26
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CENTURA SOFTWARE CORPORATION FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 24, 1997
The undersigned shareholder of Centura Software Corporation, a
California corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated April 30, 1997, and
hereby appoints Sam Inman and Richard Heaps or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Annual
Meeting of Shareholders of Centura Software Corporation to be held on
Tuesday, June 24, 1997 at 1:30 p.m., local time, at Hotel Sofitel in Redwood
Shores, located at 223 Twin Dolphin Drive, Redwood Shores, California 94065
and at any adjournment or postponement thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and
there personally present, on the matters set forth.
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark your votes as indicated in this example / x /
FOR all nominees WITHHOLD AUTHORITY
listed below to vote for all nominees
1. Election of Directors. (except as indicated). listed below.
/ / / /
If you wish to withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list below:
Samuel M. Inman,
D. Bruce Scott,
William O. Grabe,
Max D. Hopper
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE AMENDMENT / / / / / /
TO THE COMPANYS 1995 STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK FOR ISSUANCE
THEREUNDER BY 750,000 SHARES TO AN
AGGREGATE OF 2,750,000 SHARES:
3. PROPOSAL TO APPROVE THE AMENDMENT / / / / / /
TO THE COMPANY'S 1992 EMPLOYEE STOCK
PURCHASE PLAN TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK FOR
ISSUANCE THEREUNDER BY 150,000 SHARES
TO AN AGGREGATE OF 550,000 SHARES.
4. PROPOSAL TO RATIFY THE APPOINTMENT / / / / / /
OF PRICE WATERHOUSE LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1997:
and, in their discretion, upon such other matter or matters that may properly
come before the meeting and any postponement(s) or adjournment(s) thereof.
This Proxy will be voted as directed or, if no contrary
direction is indicated, will be voted as follows: (1) for
the election of directors; (2) for approval of the
amendment to the Company's 1995 Stock Option Plan to
increase the number of shares of Common Stock reserved
for issuance thereunder by 750,000 shares to an aggregate
of 2,750,000 shares; (3) for approval of the amendment to
the Company's 1992 Employee Stock Purchase Plan to
increase the number of shares of Common Stock reserved
for issuance thereunder by 150,000 shares to an aggregate
of 550,000 shares; (4) for ratification of the
appointment of Price Waterhouse LLP as the Companys
independent public accountants, and as said proxies deem
advisable on such other matters as may come before the
meeting.
Signature(s) Date:
------------------------------------------ ----------
(This Proxy should be marked, dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
