<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___________)
Filed by the Registrant: [X]
Filed by a party other than the Registrant: [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MATHSOFT, INC.
------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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.:
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(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
MathSoft Logo
101 MAIN STREET
CAMBRIDGE, MASSACHUSETTS 02142
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders:
The Annual Meeting of Stockholders of MathSoft, Inc., a Massachusetts
corporation, will be held on Friday, December 12, 1997 at 10:00 a.m., Boston
time, at Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street,
Boston, Massachusetts 02110, for the following purposes:
1. To elect two Class II Directors to serve for a three-year term.
2. To consider and act upon a proposal to approve an amendment to the
Amended and Restated 1992 Stock Plan to increase the number of shares of
Common Stock available for issuance under the plan from 2,550,000 shares to
3,150,000 shares.
3. To ratify the selection of Arthur Andersen LLP as auditors for the
fiscal year ending June 30, 1998.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of October 16, 1997, the record date fixed by the Board of
Directors for such purpose.
By Order of the Board of Directors
Robert P. Orlando
Vice President Finance and
Administration,
Chief Financial Officer, Treasurer and
Clerk
October 22, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL
PRIOR TO THE DATE OF THE ANNUAL MEETING OF STOCKHOLDERS.
<PAGE> 3
MATHSOFT LOGO
------------------------
PROXY STATEMENT
------------------------
OCTOBER 22, 1997
This Proxy Statement is being furnished to holders of Common Stock, $.01
par value per share (the "Common Stock") of MathSoft, Inc., a Massachusetts
corporation with offices at 101 Main Street, Cambridge, Massachusetts 02142
("MathSoft" or the "Corporation"), in connection with the solicitation of
proxies in the form enclosed by the Board of Directors of the Corporation for
use at the 1997 Annual Meeting of Stockholders to be held on Friday, December
12, 1997 at 10:00 a.m., Boston time, at Testa, Hurwitz & Thibeault, LLP, High
Street Tower, 125 High Street, Boston, Massachusetts 02110, and any adjournments
or postponements thereof (the "Meeting"). The Corporation's 1997 Annual Report,
containing financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the fiscal year ended June 30,
1997, are being mailed contemporaneously with this Proxy Statement to all
stockholders entitled to vote at the Meeting. This Proxy Statement and the form
of proxy were first mailed to stockholders on or about October 22, 1997.
The purpose of the Meeting is (1) to elect two Class II directors to the
Corporation's Board of Directors, to serve for a term of three years and until
their successors are elected and qualified, or until their earlier resignation
or removal, (2) to consider and vote upon a proposal to amend the Corporation's
Amended and Restated 1992 Stock Plan (the "Plan") to increase the number of
shares currently reserved for issuance under the Plan by 600,000 shares, (3) to
ratify the selection of Arthur Andersen LLP, independent public accountants as
auditors for the fiscal year ending June 30, 1998.
The Board of Directors has fixed the close of business on October 16, 1997
as the record date (the "Record Date") for the determination of the
Corporation's stockholders who will be entitled to notice of and to vote, at the
Meeting. Accordingly, only holders of record of Common Stock as of the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Meeting or an adjournment thereof. As of the Record Date, 9,043,215 shares of
Common Stock were issued and outstanding. The holders of Common Stock are
entitled to one vote per share on any proposal presented at the Meeting.
Stockholders may vote in person or by proxy. Execution of a proxy will not in
any way affect a stockholder's right to attend the Meeting and vote in person.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (1) filing
with the Clerk of the Corporation, before the taking of the vote at the Meeting,
a written notice of revocation bearing a later date than the proxy, (2) duly
executing a later dated proxy relating to the same shares and delivering it to
the Clerk of the Corporation before the taking of the vote at the Meeting or (3)
attending the Meeting and voting in person (although attendance at the Meeting
will not in and of itself constitute a revocation of a proxy). Any written
notice of revocation or subsequent proxy should be sent so as to be delivered to
MathSoft, Inc., 101 Main Street, Cambridge, Massachusetts 02142, Attention:
Clerk, at or before the taking of the vote at the Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to constitute a quorum for the transaction of business at the Meeting. Votes
withheld from any nominee, abstentions and broker non-votes are counted as
present or represented for purposes of determining the presence or absence of a
quorum for the Meeting. A "non-vote" occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because, in respect of such other proposal, the nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner.
Directors are elected by a plurality of the votes cast by stockholders
entitled to vote at the Meeting. In the election of directors, the nominees
receiving the highest number of affirmative votes of the shares present or
represented and entitled to vote at the Meeting shall be elected as directors.
All other matters being submitted to stockholders require the affirmative vote
of a majority of the shares present or represented and voting on each such
matter. An automated system administered by the Corporation's transfer agent
tabulates the votes.
<PAGE> 4
The vote on each matter submitted to stockholders is tabulated separately.
Abstentions are included in the number of shares present or represented and
voting on each matter and, therefore, with respect to votes on specific
proposal, will have the affect of negative votes. Broker "non-votes" are not so
included.
The persons named as attorneys in the proxies are officers of the
Corporation. All properly executed proxies returned in time to be counted at the
Meeting will be voted. Any stockholder giving a proxy has the right to withhold
authority to vote for any individual nominee to the Board of Directors. In
addition to the election of the directors, the stockholders will consider and
vote upon proposals to amend the Corporation's Amended and Restated 1992 Stock
Plan to increase the number of shares of Common Stock of the Corporation
authorized to be issued thereunder from 2,550,000 shares to 3,150,000 shares,
and to ratify the selection of auditors, all as further described in this proxy
statement. Where a choice has been specified on the proxy with respect to the
foregoing matters, the shares represented by the proxy will be voted in
accordance with the specifications and will be voted FOR if no specification is
indicated.
The Board of Directors of the Corporation knows of no other matters to be
presented at the Meeting. If any other matter should be presented at the Meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as attorneys in the proxies.
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of the Record Date (unless otherwise
indicated): (i) the name of each person who, to the knowledge of the
Corporation, owned beneficially more than 5% of the shares of Common Stock of
the Corporation outstanding at such date; (ii) the name of each director; and
(iii) the name of each executive officer identified in the Summary Compensation
Table set forth below under the heading "COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS," the number of shares owned by each of such
persons and the percentage of the outstanding shares represented thereby, and
also sets forth such information for all current directors and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP(1) PERCENT OF CLASS
- --------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Richard A. D'Amore(2).................................... 144,414 1.6%
c/o North Bridge Venture Partners
404 Wyman Street, Suite 365
Waltham, MA 02154
Charles J. Digate**(3)................................... 729,064 7.6%
Charles H. Federman(4)................................... 40,417 *
c/o Broadview Associates LLC
One Bridge Plaza, Suite 500
Fort Lee, NJ 07024
J.P. Morgan & Co. Incorporated(5)........................ 703,650 7.8%
60 Wall Street
New York, NY 10260
Samuel P. Meshberg and certain affiliates(6)............. 1,188,500 13.1%
c/o Financial Management Investment Services, Inc.
118 Burr Court
Bridgeport, CT 06605
Robert P. Orlando**(7)................................... 62,086 *
June L. Rokoff**(8)...................................... 46,417 *
Steven R. Vana-Paxhia(9)................................. 22,500 *
c/o Inso Corporation
31 St. James Avenue
Boston, MA 02116
All directors and executive officers as a group (6
persons)(10)........................................... 1,044,898 10.7%
</TABLE>
2
<PAGE> 5
- ---------------
* Less than 1%
** c/o MathSoft, Inc., 101 Main Street, Cambridge, MA 02142.
(1) Except as otherwise noted, to the knowledge of the Corporation, each person
named in the table has sole voting and investment power with respect to
their shares of Common Stock, except to the extent authority is shared by
spouses under applicable law.
(2) Includes 41,000 shares issuable upon the exercise of outstanding stock
options exercisable on the Record Date or within 60 days thereafter.
(3) Includes 554,064 shares issuable upon the exercise of outstanding stock
options exercisable on the Record Date or within 60 days thereafter.
(4) Includes 30,417 shares issuable upon the exercise of outstanding stock
options exercisable on the Record Date or within 60 days thereafter.
(5) Includes 75,350 shares as to which J.P. Morgan & Co. Incorporated does not
have voting power.
(6) Includes 3,000 shares owned by Ron Meshberg and Mr. Meshberg disclaims
beneficial ownership of such shares.
(7) Includes 52,086 shares issuable upon the exercise of outstanding stock
options exercisable on the Record Date or within 60 days thereafter.
(8) Includes 30,417 shares issuable upon the exercise of outstanding stock
options exercisable on the Record Date or within 60 days thereafter.
Includes 1,000 shares owned by David Rokoff, spouse of Ms. Rokoff, as
custodian for Sam Rokoff, a minor child of Ms. Rokoff. Ms. Rokoff disclaims
beneficial ownership of these 1,000 shares.
(9) Includes 22,500 shares issuable upon the exercise of stock options
exercisable on the Record Date or within 60 days thereafter.
(10) Includes 730,484 shares issuable upon the exercise of outstanding stock
options exercisable on the Record Date or within 60 days thereafter.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met four times, and took action by unanimous written
consent five times, during the fiscal year ended June 30, 1997.
The Audit Committee of the Board of Directors was established on December
2, 1992 and is comprised of Messrs. D'Amore and Federman, two non-employee
directors of the Corporation. The Audit Committee oversees the accounting and
tax functions of the Corporation, including matters relating to the appointment
and activities of the Corporation's auditors. During the fiscal year ended June
30, 1997, the Audit Committee met once.
The Compensation Committee of the Board of Directors, presently comprised
of Ms. Rokoff and Mr. D'Amore, two non-employee two directors of the
Corporation, reviews and makes recommendations concerning executive
compensation, oversees the administration of the Corporation's 401(k) plan and
administers the Corporation's 1996 Non-Qualified, Non-Officer Stock Plan,
Amended and Restated 1992 Stock Plan, 1987 Combination Stock Option Plan, 1992
Employee Stock Purchase Plan and 1992 Non-Employee Director Stock Option Plan.
The Compensation Committee met six times, and took action by unanimous written
consent five times, during the fiscal year ended June 30, 1997.
The Board of Directors does not currently have a standing nominating
committee. Each of the directors attended at least 75% of the aggregate of all
meetings of the Board of Directors and of all Committees on which he or she
serves.
3
<PAGE> 6
ELECTION OF DIRECTORS
In accordance with the Corporation's Third Restated Articles of
Organization, the Corporation's Board of Directors is divided into three
classes.
One Class I Director, Mr. Charles H. Federman, was elected by the Board of
Directors as a Class I Director at the Annual Meeting of Stockholders on
December 13, 1994. Mr. Federman's term as a Class I Director expires as of the
date of the Annual Meeting of Stockholders to be held in calendar year 1999.
One Class II Director, Mr. Charles J. Digate, the current Chairman of the
Board, President and Chief Executive Officer of the Corporation, was elected a
Class II Director at the Annual Meeting of Stockholders on December 13, 1994.
The other Class II Director, June L. Rokoff, was elected by the Board of
Directors as a Class II Director at the Annual Meeting of Stockholders on
December 13, 1994. Mr. Digate's and Ms. Rokoff's terms as Class II Directors
will expire as of the date of the Annual Meeting of Stockholders to be held in
calendar year 1997.
One Class III Director, Mr. Richard A. D'Amore, was elected at the Annual
Meeting of Stockholders on November 9, 1995 for a three-year term expiring as of
the date of the Annual Meeting of Stockholders to be held in calendar year 1998.
One Class III Director, Mr. Steven R. Vana-Paxhia, was elected by the Board
of Directors on July 18, 1996 to replace Mr. Razdow, who resigned as a Class III
Director on July 18, 1996. Mr. Vana-Paxhia's term as a Class III Director
expires as of the date of the Annual Meeting of Stockholders to be held in
calendar year 1998.
Two Class II Directors will be elected at the Meeting for a term of three
years. The Class II nominees, Ms. Rokoff and Mr. Digate, are currently serving
as directors of the Corporation. Shares represented by all proxies received by
the Board of Directors and not so marked to withhold authority to vote for Ms.
Rokoff and Mr. Digate will be voted (unless Ms. Rokoff or Mr. Digate is unable
or unwilling to serve) FOR the election of Ms. Rokoff and Mr. Digate. The Board
of Directors knows of no reason why Ms. Rokoff or Mr. Digate should be unable or
unwilling to serve, but if such should be the case, proxies may be voted for the
election of one or more other persons or for fixing the number of directors at a
lesser number.
The following table sets forth for the nominees to be elected at the
Meeting and for each director whose term of office will extend beyond the
Meeting, the year each such nominee or director was first elected a director,
the positions currently held by each nominee or director with the Corporation,
the year each nominee's or director's term will expire and the class of director
of each nominee or director.
<TABLE>
<CAPTION>
DIRECTOR'S OR NOMINEE'S NAME
AND YEAR DIRECTOR OR NOMINEE YEAR TERM CLASS OF
FIRST BECAME A DIRECTOR POSITION(S) HELD WILL EXPIRE DIRECTOR
- ---------------------------------------------- ------------------------- ----------- --------
<S> <C> <C> <C>
Richard A. D'Amore............................ Director 1998 III
1987
Charles J. Digate............................. Chairman of the Board of 1997 II
1994 Directors, President and
Chief Executive Officer
Charles H. Federman........................... Director 1999 I
1994
Steven R. Vana-Paxhia......................... Director 1998 III
1996
June L. Rokoff................................ Director 1997 II
1994
</TABLE>
4
<PAGE> 7
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Class II nominees to be elected at the
Meeting, the current directors who will continue to serve as directors beyond
the Meeting, and the current executive officers of the Corporation, their ages,
and the positions currently held by each such person with the Corporation.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Richard A. D'Amore................ 44 Director
Charles J. Digate................. 43 Chairman of the Board of Directors, President
and Chief Executive Officer
Charles H. Federman............... 40 Director
Robert P. Orlando................. 39 Vice President Finance and Administration,
Chief Financial Officer, Treasurer and Clerk
Steven R. Vana-Paxhia............. 50 Director
June L. Rokoff.................... 48 Director
</TABLE>
DIRECTORS TO BE ELECTED AT THE MEETING
Mr. Digate has been a director and an executive officer of the Corporation
since September 1994. Mr. Digate founded Beyond Incorporated, a developer and
publisher of enterprise messaging systems, in 1988 and served as its Chairman,
Chief Executive Officer and President until February 1994 when Beyond was
acquired. Prior to founding Beyond, Mr. Digate spent more than four years at
Lotus Development Corp., where his posts included Senior Vice President,
Analytical Software Products and Vice-President, International Operations and
Corporate Marketing. Mr. Digate also served approximately seven years at Texas
Instruments, primarily focusing on its consumer electronics products, including
calculators and home computers. He also serves on the board of two privately
held software companies, Centra Software, Inc. and Network Integrity, Inc.
Ms. Rokoff has been a director of the Corporation since 1994. Ms. Rokoff is
also a director of Desktop Data, Inc., a public company that provides customized
real-time news and information. Until December 1995, Ms. Rokoff was a Senior
Vice President, Worldwide Services Group, at Lotus Development Corp., where she
had spent ten years in management. Lotus, a wholly owned subsidiary of
International Business Machines, is a provider of software and support services
for businesses and individuals. Prior management positions at Lotus included
Senior Vice President, Development, Vice President, Graphics and Information
Management Division, and General Manager, Lotus 1-2-3 Release 3.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE MEETING
Mr. D'Amore has been a director of the Corporation since October 1987. Mr.
D'Amore has been a general partner of various venture capital funds affiliated
with Hambro International Venture Funds since 1982 and is currently also a
general partner of the venture capital fund North Bridge Venture Partners. Mr.
D'Amore is also a director of Solectron Corporation, a provider of customized
manufacturing services to original equipment manufacturers in the electronics
industry, Veeco Instruments, Inc., a designer, manufacturer and servicer of
precision ion beam etching and surface measurement systems, and Xionics Document
Technologies, a manufacturer of computer hardware and software for personal
computer document image processing.
Mr. Federman is the Chairman of Broadview Associates LLC, an investment
banking firm specializing in information technology mergers and acquisitions.
Mr. Federman is also a director of Logic Works, Inc., SQRibe Technologies, Inc.,
Phoenix Technologies Ltd., International Micro Software, Inc. and Backweb
Technologies, Inc. Logic Works, Inc. develops and publishes computer aided
software engineering (CASE) software. SQRibe Technologies, Inc. develops
off-the-shelf database enhancement and optimization tools. Phoenix Technologies
Ltd. designs, develops and markets systems software compatibility products for
personal computers, workstations and peripheral devices. International Micro
Software, Inc. develops and publishes PC based productivity applications.
Backweb Technologies, Inc. develops intranet software tools.
5
<PAGE> 8
Mr. Vana-Paxhia has been the President and Chief Executive Officer of Inso
Corporation since the time of its initial public offering in March 1994. Inso
Corporation provides multilingual software products to software developers,
leading corporations and consumers across all industries. Inso Corporation was
formerly the Software Division of Houghton Mifflin Company. From November 1990
to March 1994, Mr. Vana-Paxhia was Vice President of the Software Division of
Houghton Mifflin Company. Mr. Vana-Paxhia is also a director of Spyglass, Inc.
EXECUTIVE OFFICERS
Mr. Orlando joined the Corporation in December 1991 as Vice President
Finance and Administration and Chief Financial Officer. He was named Treasurer
in November, 1994. From May 1987 to November 1991, Mr. Orlando was employed by
Bitstream, Inc., most recently as Vice President of Finance and Treasurer.
Before that he served as Controller of Unicco Service Co. from 1986 to 1987, as
General Accounting Manager of Orion Research from 1985 to 1986 and as a
certified public accountant with Arthur Andersen LLP from 1980 to 1985.
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth certain information with respect to the
annual compensation paid or accrued by the Corporation for services rendered to
the Corporation, in all capacities, for the fiscal year ended June 30, 1997 by
its Chief Executive Officer (the "CEO") and the other most highly compensated
executive officer other than the CEO, whose total salary and bonus exceeded
$100,000 during the fiscal year ended June 30, 1997 (collectively with the CEO,
the "Named Executive Officer"). The Corporation did not grant any restricted
stock awards or stock appreciation rights or make any long-term incentive plan
payouts during the fiscal year ended June 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
AWARDS
ANNUAL ---------------
COMPENSATION(1) SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS/SARS(#)
- ---------------------------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Charles J. Digate............................. 1997 $250,000 0 100,000
Chairman of the Board of Directors, 1996 250,000 $100,000 75,000
President and Chief Executive Officer 1995 134,600 0 625,000
Robert P. Orlando............................. 1997 $128,000 $ 8,000 30,000
Vice President Finance and Administration, 1996 125,000 35,000 35,000
Chief Financial Officer, Treasurer and Clerk 1995 117,077 0 7,000
</TABLE>
- ---------------
(1) Excludes perquisites and other personal benefits, if any, the aggregate
annual amount of which for each officer was less than the lesser of $50,000
or 10% of the total of annual salary and bonus reported. The Corporation did
not grant any restricted stock awards or stock appreciation rights or make
any long term incentive plan payouts during the fiscal years ended June 30,
1997, 1996 or 1995.
(2) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.
6
<PAGE> 9
OPTION GRANTS
The following table sets forth information concerning options granted
pursuant to the Corporation's Amended and Restated 1992 Stock Plan during the
fiscal year ended June 30, 1997 to the Named Officers as reflected in the
Summary Compensation Table above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS OR ANNUAL RATES
NUMBER OF SARS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(1)
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION ---------------------
NAME GRANTED YEAR PER SHARE DATE 5% 10%
- -------------------- ----------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Digate... 100,000(2) 7.75 $ 3.00 6/11/03 $ 102,000 $ 231,000
Robert P. Orlando... 30,000(3) 2.33 $2.3125 4/25/03 $ 23,588 $ 53,419
</TABLE>
- ---------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation of the
Corporation's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission (the "Commission") and do not reflect the Corporation's estimate
of future stock price growth. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the timing of such
exercises and the future performance of the Corporation's Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by the
individuals.
(2) Exercisable in sixteen quarterly installments (so long as Mr. Digate
continues to be an employee of the Corporation through each such date).
(3) Exercisable in five annual installments on each anniversary of the date of
grant (April 25, 1997) (so long as Mr. Orlando continues to be an employee
of the Corporation through each such date).
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to options to purchase the
Corporation's Common Stock granted under the Corporation's stock plans,
including: (i) the number of shares of Common Stock purchased upon exercise of
options in the fiscal year ending June 30, 1997; (ii) the net value realized
upon such exercise; (iii) the number of unexercised options outstanding at June
30, 1997; and (iv) the value of such unexercised options at June 30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END(2)
ON VALUE ------------------------------- -------------------------------
NAME EXERCISE REALIZED(1) (EXERCISBLE) (UNEXERCISABLE) (EXERCISBLE) (UNEXERCISABLE)
- ------------------------ -------- ----------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Digate....... 0 $ 0 475,938 324,062(3) $ 618,555 $ 197,070
Robert P. Orlando....... 0 0 52,086 56,200 93,575 22,125
</TABLE>
- ---------------
(1) Amounts disclosed in this column do not reflect amounts actually received by
the Named Executive Officers but are calculated based on the difference
between the fair market value of Common Stock on the date of exercise and
exercise price of the options. Named Executive Officers will receive cash
only if and when they sell the Common Stock issued upon exercise of the
options and the amount of cash, if any, received by such individuals is
dependent on the price of the Corporation's Common Stock at the time of such
sale.
7
<PAGE> 10
(2) Value is based on the difference between the option exercise price and the
fair market value at June 30, 1997, the fiscal year-end ($3.125 per share),
multiplied by the number of shares underlying the option.
(3) Upon a change of control, the entire unexercisable portion of the 525,000
stock options granted to Mr. Digate on September 8, 1994 will be immediately
exercisable. Within sixty (60) days of the Record Date, 98,437 shares of
this grant will be unexercisable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview
The Corporation's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Compensation Committee").
Pursuant to authority delegated by the Board of Directors, the Compensation
Committee establishes each year the compensation of senior management. The
Compensation Committee also reviews, as appropriate, other compensation
standards of the Corporation, administers the Corporation's 401(k) Savings and
Retirement Plan, and administers the Corporation's 1996 Non-Qualified,
Non-Officer Stock Plan, Amended and Restated 1992 Stock Plan, 1987 Combination
Stock Option Plan, 1992 Employee Stock Purchase Plan and 1992 Non-Employee
Director Stock Option Plan.
The present members of the Compensation Committee, who are non-employee
directors, bring expertise in matters relating to executive compensation to
their service on the Compensation Committee gained through their experience on
other Boards of Directors of public and private companies.
Procedure for Establishing Compensation
At the beginning of each fiscal year the Compensation Committee establishes
the annual salary for the Corporation's executive officers based on
recommendations of the Corporation's Chief Executive Officer. The Board reviews
the recommendations taking into account the following factors: (i) external
market data; (ii) the Corporation's performance; (iii) the individual's
contribution to the Corporation's success; and (iv) the internal equity of
compensation levels among executive officers.
Tax Considerations
The Corporation does not believe Section 162(m) of the Code, which
generally disallows a tax deduction for compensation in excess of $1 million to
any of the executive officers appearing in the Summary Compensation Table above,
will have an effect on the Corporation in the near term. However, the
Compensation Committee has considered the requirements of Section 162(m) of the
Code and the related regulations and has made certain modifications to the
Amended and Restated 1992 Stock Plan to permit grants thereunder to comply with
Section 162(m) of the Code. It is the Compensation Committee's present intention
that, so long as it is consistent with its overall compensation objectives,
substantially all executive compensation will be deductible for federal income
tax purposes.
Elements of Executive Compensation
The Corporation's compensation policy for executive officers is designed to
achieve the following objectives: (i) to enhance profitability of the
Corporation and increase stockholder value; (ii) to reward executives consistent
with the Corporation's annual and long-term performance goals; (iii) to
recognize individual initiative and achievement; and (iv) to provide competitive
compensation that will attract and retain qualified executives. Compensation
under the executive compensation program is comprised of cash compensation in
the form of salary and performance-based compensation in the form of cash
bonuses, long-term incentive opportunities in the form of stock options and
various benefits, including medical, savings and insurance plans available to
all employees of the Corporation.
An executive officer's compensation package includes: (i) base salary,
which is based upon the overall performance of the Corporation and external
market data, (ii) annual performance-based compensation, which is based upon
achievement of pre-determined financial objectives of the Corporation and
individual objectives, and (iii) long-term incentive compensation, in the form
of stock options, granted with the objective
8
<PAGE> 11
of aligning executive officers' long-term interests with those of the
stockholders and encouraging the achievement of superior results over an
extended period. In addition, the compensation program is comprised of various
benefits, including medical, savings and insurance plans, and the Corporation's
1992 Employee Stock Purchase Plan, which are generally available to all
employees of the Corporation.
Base Compensation
Base salaries for executive officers are targeted at competitive market
levels for their respective positions, levels of responsibility and experience.
In setting base cash compensation levels for executive officers, the
Compensation Committee generally takes into account such factors as: (i) the
Corporation's past financial performance and future expectations; (ii) the
general and industry-specific business environment; (iii) the individual
executive officer's base compensation in the prior year; (iv) periodic published
surveys of base compensation at comparable companies, including the 1997 Annual
Survey of Compensation in the Software Industry published by the Massachusetts
Computer Software Council, Inc. and Coopers & Lybrand, the Software Compensation
Report 1997 published by The Survey Group and the 1997 Officer Compensation
Report for Small to Medium-Sized Businesses in Technological Services; and (v)
corporate and individual performance. The Committee's review of the foregoing
factors is subjective and the Committee assigns no fixed value or weight to any
specific factors when making its decisions regarding the salary of executive
officers.
Performance-Based Compensation
The Corporation's performance-based compensation policies are designed to
reward executive officers when the Corporation meets or exceeds pre-determined
financial goals and are also based on various non-financial objectives such as
the ability to motivate others, to recognize and pursue new business
opportunities and to initiate programs to enhance the Corporation's growth and
success. Performance-based cash compensation is generally awarded based on
formulas established by the Compensation Committee at the time salaries are
fixed.
In establishing performance-based compensation formulas for the fiscal year
ended June 30, 1997 for the executive officers, the Compensation Committee
considered: (i) the annual base compensation of each individual; (ii) individual
performance; (iii) the actual performance of the Corporation as compared to
projected performance under the Corporation's annual operating plan; (iv) the
projected future performance of the Corporation; (v) the general business
environment; and (vi) periodically published surveys of performance compensation
at comparable companies, including the 1997 Annual Survey of Compensation in the
Software Industry published by the Massachusetts Computer Software Council, Inc.
and Coopers & Lybrand, the Software Compensation Report 1997 published by The
Survey Group and the 1997 Officer Compensation Report for Small to Medium-Sized
Businesses in Technological Services. The Committee's review of the foregoing
factors is subjective and the Committee assigns no fixed value or weight to any
specific factors when making its decisions regarding the salary of executive
officers.
Pursuant to the performance bonus formulas established by the Compensation
Committee in the fiscal year ended June 30, 1997, bonus formulas for each
executive officer, other than the Chief Executive Officer, were based on the
Corporation's achieving a pre-determined post-bonus net income as set forth in
the Corporation's annual operating plan and on the executive officer's achieving
specified individual objectives. The bonus formula for the Chief Executive
Officer is based on the Corporation's achieving a pre-determined post-bonus net
income as set forth in the Corporation's annual operating plan. The maximum
attainable bonus amounts varied depending on how the Corporation's actual
post-bonus net income compared to the pre-determined post-bonus net income set
forth in the Corporation's annual operating plan. For executive officers other
than the Chief Executive Officer, the maximum bonus was payable if the
Corporation achieved 200% of its pre-determined post-bonus net income and the
executive officer achieved all of his or her individual performance goals. The
maximum bonus was payable to the Chief Executive Officer if the Corporation
achieved 200% of its pre-determined post-bonus net income. The Operating Plan
for the fiscal year ended June 30, 1997, on which performance bonuses for the
fiscal year ended June 30, 1997 were based, was
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<PAGE> 12
reviewed and approved by the Board of Directors prior to the Compensation
Committee's action to establish bonus formulas.
Stock Options
Long-term incentive compensation, in the form of stock options, allows the
executive officers to share in any appreciation in the value of the
Corporation's Common Stock. The Board of Directors believes that stock option
participation aligns executive officers' interests with those of its
stockholders. When establishing stock option grant levels for executive
officers, the Compensation Committee considered the existing levels of stock
ownership, previous grants of stock options, vesting schedules of outstanding
options, the current stock price, individual performance during the fiscal year
in question; and past financial performance and future expectations. Stock
options granted under the Corporation's Amended and Restated 1992 Stock Plan
generally have an exercise price equal to the fair market value of the
Corporation's Common Stock on the date of grant and generally vest over a four
or five year period. The Corporation attempts to ensure that its executive
officers are granted stock options in numbers comparable to or slightly above
industry standards.
In the fiscal year ended June 30, 1997, Mr. Digate was awarded stock
options to purchase 100,000 shares of Common Stock. Mr. Orlando was awarded a
stock option to purchase 30,000 shares during the fiscal year ended June 30,
1997.
RESPECTFULLY SUBMITTED BY THE
COMPENSATION COMMITTEE:
Richard A. D'Amore
June Rokoff
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1997, Mr. D'Amore and Ms. Rokoff
served on the Compensation Committee. No person who served as a member of the
Compensation Committee was, during the past fiscal year, an officer or employee
of the Corporation or any of its subsidiaries, was formerly an officer of the
Corporation or any of its subsidiaries, or had any relationship requiring
disclosure herein. No executive officer of the Corporation served as a member of
the Compensation Committee (or other Board committee performing equivalent
functions or, in the absence of any such committee, the entire Board of
Directors) of another entity, one of whose executive officers served as a
director of the Corporation.
COMPENSATION OF DIRECTORS
Each non-employee director of the Corporation is entitled to participate in
the Corporation's 1992 Non-Employee Director Stock Option Plan (the "Director
Plan"). The Director Plan authorizes the grant of stock options only to members
of the Corporation's Board of Directors who are neither employees nor officers
of the Corporation. Under the Director Plan, each non-employee director who has
served as a member of the Board for at least one year on February 3rd of each
year receives automatically, on such date, an option to purchase 5,000 shares of
Common Stock at an exercise price equal to 100% of the fair market value of a
share of Common Stock on such date. Each non-employee director who has served
for less than an entire year on February 3rd receives automatically an option to
purchase the number of shares of Common Stock equal to the number of full months
he has served on the Board during the prior year, divided by 12 and multiplied
by 5,000. In addition, each non-employee director first elected to the Board of
Directors after February 3, 1993 will receive automatically on the date of his
or her election an option to purchase 20,000 shares of the Common Stock of the
Corporation at an exercise price equal to 100% of the fair market value of a
share of Common Stock on such date. Currently, the number of shares of Common
Stock authorized for issuance under the Director Plan is 160,000 shares, of
which 104,334 shares were outstanding as of the Record Date.
Options granted under the Director Plan may not be exercised until they
become vested. Each option granted under the Director Plan becomes exercisable
in one installment on the earlier of: (i) the first anniversary of the date of
grant; or (ii) the first Annual Meeting of Stockholders following the date of
grant at
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<PAGE> 13
which members of the Board of Directors are elected, provided that the optionee
has continuously served as a member of the Board of Directors through such date.
Options granted under the Director Plan expire on the date which is ten years
from the date of the option grant.
In addition, on August 16, 1996, Mr. D'Amore was granted an immediately
exercisable stock option to purchase 20,000 shares of Common Stock at an
exercise price of $6.00 per share.
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Corporation's Common Stock during the period
from the Corporation's initial public offering through June 30, 1997, with the
cumulative total return on the Nasdaq Composite Index (Total Return) and the S&P
Computer Software and Services Index. The comparison assumes $100 was invested
on February 3, 1993 in the Corporation's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends, if any.
COMPARISON OF FIVE YEAR* CUMULATIVE TOTAL RETURN AMONG
MATHSOFT, INC., NASDAQ COMPOSITE INDEX (TOTAL RETURN)
AND S&P COMPUTER SOFTWARE & SERVICES INDEX
[MathSoft, Inc., NASDAQ Composit Index]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
2/3/93 3/93 6/93 9/93 12/93 3/94 6/94 9/94 12/94 3/95
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MathSoft, Inc. $100.00 $109.62 $ 57.69 $ 51.92 $ 52.88 $ 37.50 $ 28.85 $ 21.15 $ 18.27 $ 23.08
Standard & Poor's $100.00 $101.30 $103.76 $106.37 $114.99 $113.23 $117.16 $126.02 $135.59 $152.42
NASDAQ $100.00 $ 99.06 $100.96 $109.47 $111.62 $106.93 $101.93 $110.37 $109.11 $118.94
- ------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MathSoft, Inc. $ 37.50 $ 50.96 $ 44.23 $ 46.15 $ 45.19 $ 40.38 $ 29.33 $ 27.40 $ 24.04
Standard & Poor's $182.05 $183.41 $190.24 $215.13 $242.13 $265.55 $295.51 $301.76 $402.27
NASDAQ $136.05 $152.44 $154.30 $161.50 $174.68 $180.89 $189.78 $179.51 $212.42
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Prior to February 3, 1993, the Corporation's Common Stock was not publicly
traded. Comparative data is provided only for the period since that date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation has adopted a policy that all transactions between the
Corporation and its officers, directors, principal stockholders and their
affiliates be on terms no less favorable to the Corporation than could be
obtained from unrelated third parties and must be approved by a majority of the
non-employee independent and disinterested directors.
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<PAGE> 14
PROPOSAL TO AMEND THE AMENDED AND RESTATED 1992 STOCK PLAN
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES UNDER THE AMENDED AND
RESTATED 1992 STOCK PLAN
The Amended and Restated 1992 Stock Plan (the "1992 Plan") was adopted by
the Board of Directors of the Corporation on January 28, 1992 and received
stockholder approval on March 6, 1992. Currently, the number of shares of Common
Stock authorized for issuance under the 1992 Plan is 2,550,000 shares. It is now
proposed to approve an amendment to increase the number of shares of Common
Stock authorized for issuance pursuant to the 1992 Plan to 3,150,000 shares.
Management of the Corporation believes that this increase is important to
permit the Board of Directors to provide incentives to present employees, to
attract and retain qualified candidates for future positions, and to replenish
the available stock option pool after option grants were issued, during the
fiscal year ended June 30, 1997, to current and new employees.
It is management's philosophy to grant options to all employees of the
Corporation, allowing each employee to have an equity interest in the
Corporation. Management believes that this policy provides better performance
incentives to employees than cash compensation alone. In furtherance of this
policy, during the fiscal year ended June 30, 1997, the Compensation Committee
of the Board of Directors granted options to new employees, as well as made
significant grants to attract and retain key vice presidents of the Corporation,
including vice presidents of sales, marketing and development. These option
grants have depleted the available pool of options under the 1992 Plan such
that, as of the date hereof, there is an inadequate number of shares available
for future option grants under the 1992 Plan to new or existing employees of the
Corporation.
The additional shares proposed to be authorized under the 1992 Plan will
allow management of the Corporation to make grants to key management and other
employees in the future, consistent with the corporate policy of granting
options to all employees, as well as allow the Corporation to meet its stock
option grant needs at least through the fiscal year ended June 30, 1998.
DESCRIPTION OF THE 1992 PLAN
Administration
The Compensation Committee of the Board of Directors of the Corporation
administers the 1992 Plan. The Compensation Committee currently consists of Mr.
D'Amore and Ms. Rokoff, two of the non-employee directors of the Corporation.
Mr. D'Amore and Ms. Rokoff are "outside directors", as defined in the
regulations issued under Section 162(m) of the Code.
Subject to the terms of the 1992 Plan, the Compensation Committee has the
authority to determine to whom Options may be granted (subject to certain
eligibility requirements for grants of ISOs), the number of shares covered by
each such grant, the exercise or purchase price per share, the time or times at
which Options will be granted, and other terms and provisions governing the
Options, as well as the restrictions, if any, applicable to shares of Common
Stock issuable upon exercise of Options; provided, however, that the 1992 Plan
shall be administered so that stock options or awards granted under the 1992
Plan will qualify for the benefits provided by Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and by Section 162(m) of the Code, or any
successor rules to each of these. The interpretation or construction by the
Compensation Committee of the 1992 Plan or any Option granted under it will be
final.
The Compensation Committee determines the number of shares of the
Corporation's Common Stock covered by any grant that may be made to an executive
officer under the 1992 Plan. Because such number, if any, is entirely in the
discretion of the Compensation Committee, the benefits or amounts to be received
by or allocated to the executive officers are not determinable.
Eligible Employees and Others
Subject to the above mentioned limitations, ISOs under the 1992 Plan may be
granted to any employee of the Corporation or its subsidiaries. Only those
officers and directors of the Corporation who are employees
12
<PAGE> 15
may be granted ISOs under the 1992 Plan. In no event may the aggregate fair
market value (determined on the date of grant of an ISO) of Common Stock for
which ISOs granted to any employee are exercisable for the first time by such
employee during any calendar year (under all stock option plans of the
Corporation) exceed $100,000. Non-Qualified Options may be granted to any
director, officer, employee or consultant of the Corporation or its
subsidiaries. No employee of the Corporation or its subsidiaries shall be
granted Options to acquire, in the aggregate, more than 1,785,000 shares of
Common Stock under the 1992 Plan during any fiscal year of the Corporation.
Outstanding Options are subject to adjustment as described hereinafter
under "Changes in Stock; Recapitalization and Reorganization." Pursuant to the
terms of the 1992 Plan, shares subject to Options which for any reason expire or
are terminated unexercised as to such shares may again be the subject of a grant
under the 1992 Plan. Such shares, however, will be included in the determination
of the aggregate number of shares of Common Stock deemed to have been granted to
a particular employee under the Plan for purposes of the Section 162(m) limit.
Granting of Options
Options may be granted under the 1992 Plan at any time after January 28,
1992 and prior to January 28, 2002. The Compensation Committee may, with the
consent of the holder of an ISO, convert an ISO granted under the 1992 Plan to a
Non-Qualified Option.
Non-Qualified Option Price
The exercise price per share of Non-Qualified Options granted under the
1992 Plan cannot be less than the lesser of the book value per share of Common
Stock as of the end of the preceding fiscal year or fifty percent of the fair
market value per share of Common Stock on the date of grant.
ISO Price
The exercise price per share of ISOs granted under the 1992 Plan cannot be
less than the fair market value of the Common Stock on the date of grant, or, in
the case of ISOs granted to employees holding more than ten percent of the total
combined voting power of all classes of stock of the Corporation, 110% of the
fair market value of the Common Stock on the date of grant.
Option Duration
The 1992 Plan requires that each Option expire on the date specified by the
Compensation Committee, but not more than ten years from its date of grant in
the case of ISOs and ten years and one day in the case of Non-Qualified Options.
However, in the case of any ISO granted to an employee owning more than ten
percent of the total combined voting power of all classes of stock of the
Corporation, such ISO will expire on the date specified by the Compensation
Committee, but not more than five years from its date of grant. As a general
matter, stock options granted under the 1992 Plan expire six years after the
date of grant.
Exercise of Options and Payment for Stock
Each Option granted under the 1992 Plan is exercisable as follows:
A. The Option is either fully exercisable at the time of grant or
becomes exercisable in such installments as the Compensation Committee may
specify.
B. Once an installment becomes exercisable it remains exercisable
until expiration or termination of the Option, unless otherwise specified
by the Compensation Committee.
C. Each Option may be exercised from time to time, in whole or in
part, up to the total number of shares with respect to which it is then
exercisable.
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<PAGE> 16
D. The Compensation Committee has the right to accelerate the date of
exercise of any installment (subject to the $100,000 per year limit on the
fair market value of Common Stock subject to ISOs granted to any employee
that become exercisable in any calendar year).
Exercise of an Option under the 1992 Plan is effected by a written notice
of exercise delivered to the Corporation at its principal office together with
payment for the shares in full in cash or by check, or at the discretion of the
Compensation Committee through delivery of shares of Common Stock having fair
market value equal as of the date of exercise to the cash exercise price of the
Option, or at the discretion of the Committee, by delivery of the optionee's
personal recourse note or by delivery of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the option by the
optionee's broker or selling agent. Such written notice will also identify the
Option being exercised and specify the number of shares as to which the Option
is being exercised.
Effect of Termination of Employment, Death or Disability
If an ISO optionee ceases to be employed by the Corporation other than by
reason of death or disability, no further installments of his or her ISOs will
become exercisable, and the ISOs will terminate after the passage of 90 days
from the date of termination of employment (but not later than their specified
expiration dates), except to the extent that such ISOs have been converted into
Non-Qualified Options. Leave of absence with the written approval of the
Compensation Committee will not constitute an interruption of employment
provided that such approval contractually requires the Corporation to continue
the employment of the employee after the leave of absence. Employment will also
be considered as continuing uninterrupted during any other bona fide leave of
absence (including illness, military obligations or governmental service)
provided that such leave does not exceed 90 days or, if longer, any period
during which the employee's right to re-employment is guaranteed by statute.
Nothing in the 1992 Plan is deemed to give any optionee the right to be retained
in employment by the Corporation for any period of time. Options granted under
the 1992 Plan are not affected by any change of employment among the Corporation
and its subsidiaries so long as the optionee continues to be an employee of the
Corporation or a subsidiary.
If an optionee dies, any ISO held by the optionee may be exercised, to the
extent exercisable on the date of death, by the optionee's estate, personal
representative or beneficiary who acquires the ISO by will or by the laws of
descent and distribution, at any time within 180 days from the date of the
optionee's death (but not later than the specified expiration date of the ISO).
If an ISO optionee ceases to be employed by the Corporation by reason of his or
her disability (as defined in Section 22(e)(3) of the Code), the optionee may
exercise any ISO held by him or her on the date of termination of employment, to
the extent exercisable on that date, at any time within 180 days from the date
of termination of employment (but not later than the specified expiration date
of the ISO).
Non-Qualified Options are subject to such termination and cancellation
provisions as may be determined by the Compensation Committee.
Non-Assignability of Options
Only the optionee may exercise an Option; no assignments or transfers are
permitted, except that an Option may be transferred by will or by the laws of
descent and distribution.
Changes in Stock; Recapitalization and Reorganization
In the event shares of Common Stock of the Corporation are subdivided or
combined into a greater or smaller number of shares or if, upon a merger,
consolidation, reorganization, split-up, liquidation, combination,
recapitalization or the like of the Corporation, the shares of the Corporation's
Common Stock are exchanged for other securities of the Corporation of another
corporation, each optionee will be entitled to purchase such number of shares of
Common Stock or amount of other securities of the Corporation or such other
corporation as were exchangeable for the number of shares of Common Stock of the
Corporation which such optionee would have been entitled to purchase except for
such action, and appropriate adjustments will be made in the purchase price per
share to reflect such subdivision, combination, or exchange. If any person
14
<PAGE> 17
holding restricted Common Stock obtained by the exercise of an Option receives
new, additional or different securities in connection with any corporate
transaction described in this paragraph, such new securities will be subject to
all of the conditions and restrictions applicable to the Common Stock with
respect to which the new securities were issued.
In the event the Corporation issues any of its shares as a stock dividend
upon or with respect to the shares of stock of the class which at the time are
subject to any Options, each optionee upon exercising such an Option will be
entitled to receive (for the purchase price paid upon such exercise) the shares
as to which he or she is exercising his or her Option and, in addition thereto
(at no additional cost), such number of shares of the class or classes in which
such stock dividend or dividends were declared or paid, and such amount of cash
in lieu of fractional shares, as he or she would have received if he or she had
been the holder of the shares as to which he or she is exercising his or her
Option at all times between the date of grant of such Option and the date of its
exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares reserved for issuance upon the exercise of Options under the
1992 Plan will also be appropriately adjusted to reflect the events described
above. Notwithstanding the foregoing, with respect to ISOs, the adjustments
described above will be made only after the Compensation Committee, in
consultation with legal counsel, has determined whether such adjustments would
constitute a modification of such ISOs and will not cause adverse tax
consequences to the holders of ISOs.
Amendment, Suspension and Termination
The Board of Directors may terminate or amend the 1992 Plan in any respect
at any time, except that, without the approval of the stockholders within twelve
(12) months before or after the Board of Directors adopts a resolution
authorizing any of the following actions: (a) the total number of shares that
may be issued under the 1992 Plan may not be increased except as previously
described under "Changes in Stock; Recapitalization and Reorganization"; (b) the
provisions regarding eligible employees may not be modified; (c) the provisions
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment referred to above); and (d) the expiration
date of the 1992 Plan may not be extended. No action of the Board of Directors
or stockholders, however, may, without the consent of an optionee, alter or
impair his or her rights under any Option previously granted to him or her.
Miscellaneous
The proceeds received by the Corporation from the sale of shares pursuant
to the 1992 Plan are to be used for general corporate purposes. The
Corporation's obligation to deliver shares is subject to the approval of any
governmental authority required in connection with the sale or issuance of such
shares. The exercise of Non-Qualified Options for less than fair market value
may require the holder to recognize ordinary income and pay additional
withholding taxes in respect of such income, and the Compensation Committee may
condition the grant or exercise of an Option on the payment to the Corporation
of such taxes. An employee is required to notify the Corporation in the event
that he or she disposes of shares acquired on the exercise of an ISO prior to
the later of two years from the date of grant or one year from the date of
exercise of the ISO. Unless terminated earlier by the Compensation Committee,
the 1992 Plan will expire on January 28, 2002.
Federal Income Tax Consequences
THE FOLLOWING DISCUSSION OF UNTIED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE ISSUANCE AND EXERCISE OF OPTIONS GRANTED UNDER THE 1992 PLAN, AND OF
CERTAIN OTHER RIGHTS GRANTED UNDER THE 1992 PLAN, IS BASED UPON THE PROVISIONS
OF THE CODE AS IN EFFECT ON THE DATE OF THIS PROXY STATEMENT, CURRENT
REGULATIONS, AND EXISTING ADMINISTRATIVE RULINGS OF THE INTERNAL REVENUE
SERVICE. IT IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF ALL OF THE FEDERAL
INCOME TAX CONSEQUENCES OF THE 1992 PLAN OR OF THE REQUIREMENTS THAT MUST BE MET
IN ORDER TO QUALIFY FOR THE DESCRIBED TAX TREATMENT.
15
<PAGE> 18
A. Incentive Stock Options. The following general rules are applicable
for federal income tax purposes under existing law to ISOs granted under the
1992 Plan:
1. Generally, an optionee will not recognize any income upon the grant
of an ISO or upon the issuance of shares to him or her upon exercise of an
ISO.
2. Generally, the Corporation will not be entitled to a federal income
tax deduction upon either grant or exercise of an ISO under the 1992 Plan.
3. If shares acquired upon exercise of an ISO are not disposed of
within: (i) two years from the date the ISO was granted; or (ii) one year
from the date the shares are transferred to the optionee pursuant to the
exercise of the ISO (the "Holding Periods"), the difference between the
amount realized on any subsequent disposition of the shares and the
exercise price will generally be treated as capital gain or loss to the
optionee.
4. If shares acquired upon exercise of an ISO are disposed of and the
optionee does not satisfy the Holding Periods (a "Disqualifying
Disposition"), then in most cases the lesser of: (i) any excess of the fair
market value of the shares at the time of exercise of the ISO over the
exercise price; or (ii) the actual gain on disposition, will be taxed to
the optionee as ordinary income in the year of such disposition.
5. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of shares acquired upon exercise of an ISO, the
Corporation generally will be entitled to a corresponding deduction for
federal income tax purposes.
6. The difference between the amount realized by the optionee as the
result of a Disqualifying Disposition and the sum of: (i) the exercise
price; and (ii) the amount of ordinary income recognized under the above
rules generally will be treated as capital gain or loss.
7. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year.
8. An optionee may be entitled to exercise an ISO by delivering shares
of the Corporation's Common Stock to the Corporation in payment of the
exercise price, if the optionee's ISO agreement so provides. If an optionee
exercises an ISO in such fashion, special rules apply.
9. In addition to the tax consequences described above, the exercise
of an ISO may result in an "alternative minimum tax." The alternative
minimum tax (at a maximum rate of 28%) will be applied against a taxable
base which is equal to "alternative minimum taxable income," reduced by a
statutory exemption. In general, the amount by which the value of the
shares received upon exercise of the ISO exceeds the exercise price is
included in the optionee's alternative minimum taxable income. A taxpayer
is required to pay the higher of his regular tax liability or the
alternative minimum tax. A taxpayer who pays alternative minimum tax
attributable to the exercise of an ISO may be entitled to a tax credit
against his or her regular tax liability in later years.
10. Special rules apply if the shares acquired upon the exercise of an
ISO are subject to vesting, or are subject to certain restrictions on
resale under federal securities laws applicable to directors, officers or
10% stockholders.
B. Non-Qualified Options. The following general rules are applicable
under current federal income tax law to options granted under the 1992 Plan
which do not qualify as ISOs ("Non-Qualified Options"):
1. In general, an optionee will not recognize any income upon the
grant of a Non-Qualified Option, and the Corporation will not be entitled
to a federal income tax deduction upon such grant.
2. An optionee generally will recognize ordinary income at the time of
exercise of a Non-Qualified Option in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over
the exercise price. The Corporation will require the optionee to make
appropriate arrangements for the withholding of taxes on this amount.
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<PAGE> 19
3. When an optionee sells the shares acquired upon the exercise of a
Non-Qualified Option, he or she generally will recognize capital gain or
loss in an amount equal to the difference between the amount realized upon
the sale of the shares and his or her tax basis in the shares (generally,
the exercise price plus the amount previously taxable to the optionee as
ordinary income). If the optionee's holding period for the shares exceeds
one year, this gain or loss will be long-term capital gain or loss.
4. When an optionee recognizes ordinary income attributable to a
Non-Qualified Option, the Corporation generally will be entitled to a
corresponding federal income tax deduction.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of the Corporation's Common Stock to the Corporation in
payment of the exercise price. If an optionee exercises a Non-Qualified
Option in such fashion, special rules will apply.
6. Special rules apply if the shares acquired upon the exercise of a
Non-Qualified Option are subject to vesting, or are subject to certain
restrictions on resale under federal securities laws applicable to
directors, officers or 10% stockholders.
Options Outstanding
As of the Record Date, 288,157 shares of Common Stock had been issued upon
the exercise of stock options granted under the 1992 Plan. As of that date,
options to purchase 2,361,884 shares of Common Stock were outstanding and 31,971
shares of Common Stock were available under the 1992 Plan for additional option
grants. The closing price of the Corporation's Common Stock on the Record Date
was $3.6875 per share.
Approval of the amendments to the 1992 Plan will require the affirmative
vote of a majority of the outstanding shares of Common Stock of the Corporation
eligible to vote and present and voting on this matter. The Board of Directors
recommends a vote FOR the approval of the amendments to the 1992 Plan.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending June 30, 1998. Arthur Andersen LLP has served as the Corporation's
auditors since 1984. It is expected that a member of the firm will be present at
the meeting with the opportunity to make a statement if so desired and will be
available to respond to appropriate questions. The Board of Directors recommends
a vote FOR the ratification of this selection.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's directors,
executive officers and holders of more than 10% of the Corporation's Common
Stock (collectively, "Reporting Persons") to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock of the
Corporation. Such persons are required by regulations of the Commission to
furnish the Corporation with copies of all such filings. Based on its review of
the copies of such filings received by it with respect to the fiscal year ended
June 30, 1997 and written representations from certain Reporting Persons, the
Corporation believes that all Reporting Persons complied with all Section 16(a)
filing requirements in the fiscal year ended June 30, 1997, with the following
exception: Mr. Vana-Paxhia filed one report late which reported one transaction.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to
be furnished to all stockholders entitled to vote at the next Annual Meeting of
Stockholders of the Corporation must be received at the Corporation's principal
executive offices not later than June 15, 1998. In order to curtail controversy
as to the
17
<PAGE> 20
date on which a proposal was received by the Corporation, it is suggested that
proponents submit their proposals by Certified Mail, Return Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation, and,
in addition to soliciting stockholders by mail through its regular employees,
the Corporation may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Corporation
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Corporation
may also be made of some stockholders in person or by mail, telephone or
telegraph following the original solicitation.
1168-PS-97
18
<PAGE> 21
MATHSOFT, INC.
AMENDED AND RESTATED
1992 STOCK PLAN
1. PURPOSE. This 1992 Stock Plan (the "Plan") is intended to provide
incentives: (a) to the officers and other employees of MathSoft, Inc. (the
"Company"), its parent (if any) and any present or future subsidiaries of the
Company (collectively, "Related Corporations") by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder which qualify as "incentive stock options" under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or "ISOs"); (b) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to purchase stock in the
Company pursuant to options granted hereunder which do not qualify as ISOs
("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors, officers,
employees and consultants of the Company and Related Corporations by providing
them with awards of stock in the Company ("Awards"); and (d) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with opportunities to make direct purchases of stock in the
Company ("Purchases"). Both ISOs and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options". Options,
Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights". As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
by the Board of Directors of the Company (the "Board"). Subject to
paragraph 2D, relating to compliance with Section 162(m) of the Code, the
Board may appoint a Stock Plan Committee (the "Committee") of two or more
of its members to administer this Plan; provided that, to the extent
required by Rule 16b-3 promulgated under the Securities Exchange Act of
1934 or any successor provision ("Rule 16b-3"), with respect to specific
grants of Stock Rights, the Plan shall be administered by a disinterested
administrator or administrators within the meaning of Rule 16b-3.
Hereinafter, all references in this Plan to the "Committee" shall mean the
Board if no Committee has been appointed. Subject to ratification of the
grant or authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine the employees of the Company and
Related Corporations (from among the class of employees eligible under
paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine
(from among the class of individuals and entities eligible under paragraph
3 to receive Non-Qualified Options and Awards and to make Purchases) to
whom Non-Qualified Options, Awards and authorizations to make Purchases may
be granted; (ii) determine the time or times at which Options or Awards may
be granted or Purchases made; (iii) determine the option price of shares
subject to each Option, which price shall not be less than the minimum
price specified in paragraph 6, and the purchase
<PAGE> 22
-2-
price of shares subject to each Purchase; (iv) determine whether each
Option granted shall be an ISO or a Non-Qualified Option; (v) determine
(subject to paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) determine whether
restrictions such as repurchase options are to be imposed on shares subject
to Options, Awards and Purchases and the nature of such restrictions, if
any, and (vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the Committee determines to issue a
Non-Qualified Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated thereunder,
to ensure that such Option is not treated as an ISO. The interpretation and
construction by the Committee of any provisions of the Plan or of any Stock
Right granted under it shall be final unless otherwise determined by the
Board. The Committee may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem best. No member of the Board or
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Stock Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be
the valid acts of the Committee. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the
Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be
granted to members of the Board consistent with the provisions of the
second sentence of paragraph 2(A) above, if applicable. All grants of Stock
Rights to members of the Board shall in all other respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Consistent with the provisions of the second sentence of paragraph
2(A) above, members of the Board who are either (i) eligible for Stock
Rights pursuant to the Plan or (ii) have been granted Stock Rights may vote
on any matters affecting the administration of the Plan or the grant of any
Stock Rights pursuant to the Plan, except that no such member shall act
upon the granting to himself of Stock Rights, but any such member may be
counted in determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the granting to him of
Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may
take such action as may be necessary to ensure that Stock Rights granted
under the Plan qualify as "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the following (i) if the
Board determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be administered,
to the extent required for such Stock Rights to constitute
Performance-Based Compensation, by a Committee consisting solely of two or
more "outside directors" (as defined in applicable
<PAGE> 23
-3-
regulations promulgated under Section 162(m) of the Code), (ii) if any
Non-Qualified Options with an exercise price less than the fair market
value per share of Common Stock are granted under the Plan and the Board
determines that such Options should constitute Performance-Based
Compensation, such options shall be made exercisable only upon the
attainment of a pre-established, objective performance goal established by
the Committee, and such grant shall be submitted for, and shall be
contingent upon shareholder approval and (iii) Stock Rights granted under
the Plan may be subject to such other terms and conditions as are necessary
for compensation recognized in connection with the exercise or disposition
of such Stock Right or the disposition of Common Stock acquired pursuant to
such Stock Right, to constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any employee, officer or director (whether or not also an employee)
or consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an ISO, a Non-Qualified Option, an Award or an authorization to make a
Purchase. Granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 2,550,000, subject to adjustment as provided in
paragraph 13; provided; that no such adjustment shall be made with respect to
the 1-for-2.5 reverse stock split effected on December 10, 1992. Any such shares
may be issued as ISOs, Non-Qualified Options or Awards, or to persons or
entities making Purchases, so long as the number of shares so issued does not
exceed such number, as adjusted. If any Option granted under the Plan shall
expire or terminate for any reason without having been exercised in full or
shall cease for any reason to be exercisable in whole or in part, the
unpurchased shares subject to such Options shall again be available for grants
of Stock Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 1,785,000 of shares of Common
Stock under the Plan during any fiscal year of the Company. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of shares
of Common Stock deemed to have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time after January 28, 1992 and prior to January 28, 2002. The date of
grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to
<PAGE> 24
-4-
approve the grant. The Committee shall have the right, with the consent of the
optionee, to convert an ISO granted under the Plan to a Non-Qualified Option
pursuant to paragraph 16.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share
specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the lesser of (i) the book
value per share of Common Stock as of the end of the fiscal year of the
Company immediately preceding the date of such grant, or (ii) fifty percent
(50%) of the fair market value per share of Common Stock on the date of
such grant.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant.
C. $100,000 ANNUAL LIMITATION ON ISOS. Each eligible employee may be
granted ISOs only to the extent that, in the aggregate under this Plan and
all incentive stock option plans of the Company and any Related
Corporation, such ISOs do not become exercisable for the first time by such
employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the ISOs were granted) of Common Stock in that year. Any options
granted to an employee in excess of such amount will be granted as
Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior
to the date such Option is granted and shall mean (i) the average (on that
date) of the high and low prices of the Common Stock on the principal
national securities exchange on which the Common stock is traded, if the
Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
NASDAQ National Market List. However, if the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall be deemed to be the fair value of the Common Stock as determined by
the Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of
the Common Stock in private transactions negotiated at arm's length.
<PAGE> 25
-5-
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Related Corporation. Subject to earlier termination as provided in
paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date
of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not, without the consent of an optionee,
accelerate the exercise date of any installment of any Option granted to
any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. If an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of ninety
(90) days from the date of termination of his employment, but in no event later
than on their specified expiration dates, except to the extent that such ISOs
(or unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to reemployment is guaranteed by statute. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of
<PAGE> 26
-6-
employment within or among the Company and Related Corporations, so long as the
optionee continues to be an employee of the Company or any Related Corporation.
Nothing in the Plan shall be deemed to give any grantee of any Stock Right the
right to be retained in employment or other service by the Company or any
Related Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his death, any ISO of his may be
exercised, to the extent of the number of shares with respect to which he
could have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the
laws of descent and distribution, at any time prior to the earlier of the
specified expiration date of the ISO or 180 days from the date of the
optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his disability, he shall
have the right to exercise any ISO held by him on the date of termination
of employment, to the extent of the number of shares with respect to which
he could have exercised it on that date, at any time prior to the earlier
of the specified expiration date of the ISO or 180 days from the date of
the termination of the optionee's employment. For the purposes of the Plan,
the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee each Option shall be exercisable only by him.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
<PAGE> 27
-7-
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for the
shares then subject to such Options the consideration payable with respect
to the outstanding shares of Common Stock in connection with the
Acquisition; or (ii) upon written notice to the optionees, provide that all
Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which
period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of
the shares subject to such Options (to the extent then exercisable) over
the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the
Company or of another corporation are issued with respect to the
outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise
the securities he would have received if he had exercised his Option prior
to such recapitalization or reorganization.
D. MODIFICATION OF ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such
other time and subject to such other conditions as shall be determined by
the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of
<PAGE> 28
-8-
any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No
adjustments shall be made for dividends paid in cash or in property other
than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise
of a Stock Right made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, or (c) at the discretion of the Committee, by delivery
of the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as defined
in Section 1274(d) of the Code, or (d) at the discretion of the Committee and
consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the Option and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise, or (e) at the discretion of the
Committee, by any combination of (a), (b), (c) and (d) above. If the Committee
exercises its discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clauses (b), (c), (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of a Stock Right shall not have the rights of
a shareholder with respect to the shares covered by his Stock Right until the
date of issuance of a stock certificate to him for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for
<PAGE> 29
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dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
January 28, 1992, subject (with respect to the validation of ISOs granted under
the Plan) to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to January 28, 1993, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on January 28, 2002 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Stock Rights may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a grantee,
without his consent, under any Stock Right previously granted to him.
16. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
The Committee, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such ISOs. At the
time of such conversion, the Committee (with the consent of the optionee) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
17. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
18. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 19) or the
<PAGE> 30
-10-
vesting of restricted Common Stock acquired on the exercise of a Stock Right
hereunder, the Company, in accordance with Section 3402(a) of the Code, may
require the optionee, Award recipient or purchaser to pay additional withholding
taxes in respect of the amount that is considered compensation includible in
such person's gross income. The Committee in its discretion may condition (i)
the exercise of an Option, (ii) the grant of an Award, (iii) the making of a
Purchase of Common Stock for less than its fair market value, or (iv) the
vesting of restricted Common Stock acquired by exercising a Stock Right, on the
grantee's payment of such additional withholding taxes.
19. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
20. GOVERNING LAW; CONSTRUCTION. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
Commonwealth of Massachusetts, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized. In construing this Plan,
the singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.
<PAGE> 31
MATHSOFT, INC.
PROXY FOR 1997 ANNUAL MEETING OF STOCKHOLDERS -- DECEMBER 12, 1997
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned Stockholder of MathSoft, Inc., a Massachusetts corporation,
revoking all prior proxies, hereby appoints Charles J. Digate, Robert P. Orlando
and Gordon H. Hayes, and each of them, proxies, with full power of substitution,
to vote all shares of Common Stock of MathSoft, Inc. which the undersigned is
entitled to vote at the 1997 Annual Meeting of Stockholders of the Corporation
to be held at the offices of Testa, Hurwitz & Thibeault, LLP, High Street Tower,
125 High Street, Boston, Massachusetts on December 12, 1997 at 10:00 a.m., local
time, and at any adjournments thereof, upon matters set forth in the Notice of
Annual Meeting of Stockholders and Proxy Statement dated October 22, 1997, a
copy of which has been received by the undersigned, and in their discretion upon
any other business that may properly come before the meeting or any adjournments
thereof. Attendance of the undersigned at the meeting or at any adjourned
session thereof will not be deemed to revoke this proxy unless the undersigned
shall affirmatively indicate thereat the intention of the undersigned to vote
said shares in person.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE
PROPOSALS IN ITEMS 2 AND 3.
<TABLE>
<S> <C> <C>
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. To elect two (2) Class II Directors to serve
For a three year term. For Against Witheld
NOMINEES: June L. Rokoff, Charles J. Digate 2. To approve a proposal to amend the Amended [ ] [ ] [ ]
and Restated 1992 Stock Plan to increase the
For Withheld number of shares of Common Stock available for
[ ] [ ] issuance under the plan from 2,550,000 shares to
3,150,000 shares.
3. To ratify the selection of the firm of [ ] [ ] [ ]
Arthur Andersen LLP as auditors for
the fiscal year ending June 30,1998.
[ ]___________________________________ MARK HERE [ ]
For both nominees except as noted above FOR ADDRESS
CHANGE AND
NOTE AT LEFT
THIS PROXY SHOULD BE DATED AND SIGNED BY THE STOCKHOLDER(S) EXACTLY AS HIS OR HER
NAME APPEARS HEREON AND RETURNED PROMPTLY IN THE ENCLOSED ENVELOPE. PERSONS
SIGNING IN A FIDUCIARY CAPACITY SHALL SO INDICATE. IF SHARES ARE HELD BY JOINT
TENANTS OR AS COMMUNITY PROPERTY, BOTH SHOULD SIGN.
Signature:________________________________ Date______________ Signature:________________________________ Date______________
</TABLE>
