SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant: [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential for Use of the
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[_] 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.
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0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(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
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[_] 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:
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(4) Date Filed:
<PAGE>
M A T H S o f t
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, May 26, 2000 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 I 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 authorized for issuance under the plan from 3,900,000 shares to 4,650,000
shares.
3. To ratify the selection of Arthur Andersen LLP as auditors for the
fiscal year ending December 31, 2000.
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 March 29, 2000, the record date fixed by the Board of Directors
for such purpose.
By Order of the Board of Directors
Robert P. Orlando
Senior Vice President Finance and Administration,
Chief Financial Officer, Treasurer and Clerk
April 21, 2000
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>
M A T H S o f t
_______________
PROXY STATEMENT
_______________
APRIL 21, 2000
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 2000 Annual Meeting of Stockholders to be held on Friday, May 26,
2000 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 1999 Annual Report,
containing financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the fiscal year ended December
31, 1999, is 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 April 21, 2000.
The purpose of the Meeting is (1) to elect two Class I directors to the
Corporation's Board of Directors, to serve for a term of three years and until
his successor is elected and qualified, or until his 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 750,000 shares, (3) to
ratify the selection of Arthur Andersen LLP, independent public accountants as
auditors for the fiscal year ending December 31, 2000, and (4) to transact such
other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 29, 2000 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, 10,167,678 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.
<PAGE>
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. 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 (i) 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 3,900,000 shares to 4,650,000 shares,
and (ii) 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.
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP(1) PERCENT OF CLASS
- ----------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Samuel P. Meshberg and certain affiliates(2). . . . . 1,331,400 13.1%
c/o Financial Management Investment Services, Inc.
118 Burr Court
Bridgeport, CT 06605
Charles J. Digate**(3). . . . . . . . . . . . . . . . 927,848 8.5%
Cannell Capital Management(4) . . . . . . . . . . . . 520,000 5.1%
600 California Street
San Francisco, CA 94108
Shawn F. Javid**(5) . . . . . . . . . . . . . . . . . 209,358 2.0%
James Christian Randles**(6). . . . . . . . . . . . . 103,750 1.0%
Robert P. Orlando**(7). . . . . . . . . . . . . . . . 95,661 *
June L. Rokoff**(8) . . . . . . . . . . . . . . . . . 65,417 *
David D. Martin**(9). . . . . . . . . . . . . . . . . 43,750 *
Walter M. Pile, Jr.**(10) . . . . . . . . . . . . . . 25,000 *
Christopher H. Covington**(11). . . . . . . . . . . . 40,000 *
Sung Park**(12) . . . . . . . . . . . . . . . . . . . 20,000 *
All directors and executive officers as a group
(9 persons)(13) . . . . . . . . . . . . . . . . . . . 1,530,784 13.3%
____________________
<FN>
* 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 3,000 shares owned by Ron Meshberg, 69,500 shares owned by Ernie Meshberg
and 163,500 shares owned by Philip Meshberg. Mr. Meshberg disclaims beneficial
ownership of such shares.
(3) Includes 748,125 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
(4) Includes 220,000 shares owned by Tonga Partners, L.P., 27,500 shares owned by
Preiades Investment Partners; 10,000 shares owned by The George S. Sarlo 1995
Charitable Remainder Trust; 150,000 shares owned by The Cuttyhunk Fund Limited;
25,000 shares owned by Canal, Ltd.; 30,000 shares owned by GS Performance Partners
(Offshore), L.P.; 37,500 shares owned by GS Performance Partners, L.P.; and 20,000
shares owned by the Anegada Fund, Ltd.
(5) Includes 209,358 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
(6) Includes 103,750 shares issuable upon the exercise of outstanding stock options on
the Record Date or within 60 days thereafter.
(7) Includes 95,661 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
3
<PAGE>
(8) Includes 50,417 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
(9) Includes 33,750 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
(10) Includes 25,000 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
(11) Includes 20,000 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
(12) Includes 20,000 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
(13) Includes 1,306,061 shares issuable upon the exercise of outstanding stock options
exercisable on the Record Date or within 60 days thereafter.
</TABLE>
4
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met ten times, and took action by unanimous written
consent one time, during the fiscal year ended December 31, 1999.
The Audit Committee of the Board of Directors was established on December
2, 1992 and during the fiscal year ended December 31, 1999 was comprised of Mr.
Martin and Ms. Rokoff, each a non-employee director of the Corporation. Mr.
Federman had served on the Audit Committee until his resignation from the Board
of Directors on September 30, 1999. Ms. Rokoff replaced Mr. Federman as a
member of the Audit Committee. 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. The Audit Committee met once
during the fiscal year ended December 31, 1999.
The Compensation Committee of the Board of Directors during the fiscal year
ended December 31, 1999 was comprised of Mr. Martin and Ms. Rokoff, each a
non-employee director of the Corporation. Mr. Vana-Paxhia had served on the
Compensation Committee until his resignation from the Board of Directors on
February 26, 1999. Mr. Martin replaced Mr. Vana-Paxhia as a member of the
Compensation Committee. The Compensation Committee 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 during the fiscal year ended December 31, 1999.
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.
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. Walter M. Pile, Jr., was elected by the Board of
Directors as a Class I Director on February 28, 2000. Mr. Pile's term as a
Class I Director expires as of the date of the Annual Meeting of Stockholders to
be held in calendar year 2000. The other Class I Director, Mr. Christopher H.
Covington, was elected by the Board of Directors as a Class I Director on April
12, 2000. Mr. Covington's term expires as of the date of the Annual Meeting of
Stockholders to be held in calendar year 2000.
One Class II Director, Mr. Charles J. Digate, the current Chairman of the
Board, President and Chief Executive of the Corporation, was elected a Class II
Director at the Annual Meeting of Stockholders held on December 12, 1997. The
other Class II Director, Ms. June L. Rokoff, was elected by the Board of
Directors at the Annual Meeting of Stockholders held on December 12, 1997. 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 2001.
One Class III Director, Mr. David D. Martin, was elected a Class III
Director at the Annual Meeting of Stockholders held on May 27, 1999. Mr.
Martin's term as a Class III Director expires as of the date of the Annual
Meeting of Stockholders to be held in calendar year 2002. The other Class III
Director, Mr. Sung Park, was elected by the Board of Directors as a Class III
Director on April 12, 2000. Mr. Park's term as a Class III Director expires as
of the date of the Annual Meeting of Stockholders to be held in calendar year
2002.
5
<PAGE>
Two Class I Directors will be elected at the Meeting for a term of three
years. The Class I nominees, Walter M. Pile, Jr. and Mr. Christopher H.
Covington, 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 Mr. Pile and Mr. Covington will be voted
(unless Mr. Pile or Mr. Covington is unable or unwilling to serve) FOR the
election of Mr. Pile and Mr. Covington. The Board of Directors knows of no
reason why Mr. Pile or Mr. Covington 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>
Christopher H. Covington Director 2000 I
2000
Charles J. Digate Chairman of the Board of Directors,
1994 President and Chief Executive
Officer 2001 II
David D. Martin Director 2002 III
1998
Sung Park Director 2002 III
2000
Walter M. Pile, Jr. Director 2000 I
2000
June L. Rokoff Director 2001 II
1994
</TABLE>
6
<PAGE>
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Class I nominee 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>
Christopher H. Covington 54 Director
Charles J. Digate 46 Chairman of the Board of Directors, President and Chief
Executive Officer
Shawn F. Javid 38 Senior Vice President
David D. Martin 61 Director
Robert P. Orlando 42 Senior Vice President Finance and Administration, Chief
Financial Officer, Treasurer and Clerk
Sung Park 40 Director
Walter M. Pile, Jr 51 Director
James Christian Randles 42 Senior Vice President
June L. Rokoff 50 Director
</TABLE>
DIRECTORS TO BE ELECTED AT THE MEETING
Mr. Pile has been a director of the Corporation since February 2000. Mr.
Pile is the Chairman and Chief Executive Officer of Pile and Company, Inc., a
management consulting firm specializing in marketing communications; The
Communications Collaborative, Inc., an executive recruitment company; and Agency
ComPile, Inc., an Internet directory company. Mr. Pile is also a director of
Veridiem, Inc., a privately-held marketing performance management company, and
sits on the advisory boards of Eversave.com, Inc. and McDermott/O'Neil, Inc.
Mr. Covington has been a director of the Corporation since April 2000. Mr.
Covington is the General Partner of Covington Associates, an investment banking
firm. Previously, Mr. Covington was a founder of Volpe, Covington, and Welty,
and prior to that Head of the Investment Banking Operations of Robertson,
Coleman & Stephens, and prior to that Head of Industrial Investment Banking for
Shearson/American Express. He also serves on the boards of two privately-held
companies, Applied Business Technology Corporation and Cimlinc Corporation.
DIRECTORS WHOSE TERMS EXTEND BEYOND 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 boards of two
privately-held software companies, Live Vault, Inc. and Agency ComPile, Inc.
7
<PAGE>
Mr. Martin has been a director of the Corporation since April 1998. Mr.
Martin was an Executive Vice President of Texas Instruments, Inc. from 1993 to
1998. Texas Instruments, Inc. is a semiconductor company that specializes in
digital signal processing. Mr. Martin is also a director of Network Plus, Inc.,
a company that specializes in telecommunications. He also serves on the boards
of two privately held companies, NanoNexus, Inc. and RF-Code, Inc.
Mr. Park has been a director of the Corporation since April 2000. Mr. Park
is the Chief Executive Officer of Radio Active Media Partners, a provider of
personalized Internet radio services. Mr. Park was previously with Custom
Clothing Technology Corporation. Mr. Park is also a director of Send.com, Inc.,
Frictionless Commerce, Inc, Passkey.com, Inc., Fitness Sports Network, Inc. and
TrainingNet, Inc., all privately-held companies.
Ms. Rokoff has been a director of the Corporation since 1994. 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.
EXECUTIVE OFFICERS
Mr. Javid joined the Corporation in November, 1996 as Vice President of
Business Development. He has held increasing positions of responsibility within
the Corporation and was promoted to Senior Vice President in January 2000.
Prior to joining the Corporation, he was the President of AcroScience
Corporation.
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 and Senior Vice President Finance and Administration in April
1999. 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.
Mr. Randles joined the Corporation in April, 1995 as a Vice President of
the Corporation. He was named Senior Vice President in April 1999. Prior to
joining the Company, he was a Vice President of the Software Publishing
Corporation.
8
<PAGE>
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 December 31, 1999
by its Chief Executive Officer (the "CEO") and the other most highly compensated
executive officers other than the CEO, whose total salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 1999 (collectively with the
CEO, the "Named Executive Officers"). 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 December 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
------------------------------------- ---------------
SECURITIES
OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION OPTIONS/SARS(#)
- ----------------------------------- ------------ ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Charles J. Digate 1999 $ 250,000 $ 189,000 ----- 0
Chairman of the Board of 1998 $ 250,000 $ 180,000 ----- 100,000
Directors, President and Chief 1997(3) $ 125,000 $ 50,000 ----- 0
Executive Officer 1997(4) $ 250,000 $ 0 ----- 100,000
Shawn F. Javid 1999 $ 142,000 $ 105,746 ----- 80,000
Senior Vice President 1998 $ 121,000 $ 80,693 ----- 30,000
1997(3) $ 55,000 $ 37,904 20,000(5) 50,000
1997(4) $ 85,000 $ 0 ----- 153,358
Robert P. Orlando 1999 $ 150,000 $ 54,450 ----- 40,000
Vice President Finance and 1998 $ 140,000 $ 48,000 ----- 40,000
Administration, Chief Financial 1997(3) $ 64,000 $ 20,000 ----- 0
Officer, Treasurer and Clerk 1997(4) $ 128,000 $ 8,000 ----- 30,000
James Christian Randles 1999 $ 175,000 $ 93,891 ----- 60,000
Senior Vice President 1998 $ 165,000 $ 108,660 ----- 30,000
1997(3) $ 79,000 $ 26,600 ----- 0
1997(4) $ 158,000 $ 30,000 ----- 110,500
_____________
<FN>
(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 December 31,
1999, December 31, 1998, June 30, 1997 or the period of July 1 to December 31, 1997.
(2) Bonuses are reported in the year earned, even if actually paid in a subsequent year.
9
<PAGE>
(3) On December 12, 1997, the Corporation changed its fiscal year end from June 30 to December 31.
The footnoted period represents the period of July 1 to December 31, 1997.
(4) The footnoted period represents the fiscal year of July 1, 1996 to June 30, 1997.
(5) Consists of relocation expenses reimbursed to Mr. Javid.
</TABLE>
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 December 31, 1999 to the Named Executive Officers as reflected
in the Summary Compensation Table above.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
PERCENT OF POTENTIAL REALIZABLE VALUE
TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OR OF STOCK PRICE
SECURITIES SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED 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 0 N/A $0 N/A $0 $0
Shawn F. Javid 50,000(2) 6.85% $2.38 8/19/09 $74,681 $189,257
30,000(2) 4.10% $2.56 5/25/09 $48,356 $122,543
Robert P.
Orlando 40,000(3) 5.48% $3.50 4/14/09 $88,045 $223,124
James Christian 60,000(4) 8.22% $3.50 4/14/09 $132,068 $334,686
Randles
__________
<FN>
(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 equal quarterly installments (so long as Mr. Javid continues
to be an employee of the Corporation through each such date).
(3) Exercisable in sixteen equal quarterly installments (so long as Mr. Orlando continues
to be an employee of the Corporation through such date).
(4) Exercisable in sixteen equal quarterly installments (so long as Mr. Randles continues
to be an employee of the Corporation through such date).
</TABLE>
10
<PAGE>
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 December 31, 1999; (ii) the net value realized
upon such exercise; (iii) the number of unexercised options outstanding at
December 31, 1999; and (iv) the value of such unexercised options at December
31, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION / SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION / SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ACQUIRED OPTIONS/SARS AT FY-END AT FY-END(2)
ON VALUE ------------------------------ -------------------------------
NAME EXERCISE REALIZED(1) (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
- ----------------------- -------- ----------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Digate 0 0 726,251 123,749 $1,753,467 $164,108
Shawn F. Javid 0 0 187,483 125,876 407,085 260,612
Robert P. Orlando 0 0 74,786 83,500 107,038 106,410
James Christian Randles 40,000 121,660 67,625 132,375 121,174 218,926
__________
<FN>
(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.
(2) Value is based on the difference between the option exercise price and the fair market value at December
31, 1999, the fiscal year-end ($4.563 per share), multiplied by the number of shares underlying the
option.
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Corporation has entered into an amended and restated executive
agreement (the "Executive Agreement") with Charles J. Digate, the Corporation's
President and Chief Executive Officer. Pursuant to the Executive Agreement, Mr.
Digate will receive a base salary of $250,000 for the fiscal year ended December
31, 2000 and a bonus on plan of up to $160,000 based on the Corporation's
achievement of a certain corporate profitability objectives approved by the
Board of Directors, plus additional bonus payments based on other specific
objectives as may be agreed upon between Mr. Digate and the Board from time to
time.
If the Corporation terminates Mr. Digate's employment without cause,
Mr. Digate will receive severance benefits for eighteen months after such
termination equal to his base salary, and any options held by Mr. Digate which
are then exercisable and unexpired may be exercised for three years following
the date on which he also ceases to be a member of the Corporation's Board of
Directors. Upon a change of control of the Corporation, fifty percent (50%) of
the unexercisable and unexpired stock options held by Mr. Digate will become
exercisable and Mr. Digate will receive a one-time retention bonus of $250,000
if he remains employed by the Corporation for 90 days following the change in
control. Following a change of control, if the Corporation terminates Mr.
Digate without cause, Mr. Digate will receive severance benefits equal to his
base salary and his bonus paid ratably for a maximum of eighteen months after
such termination.
11
<PAGE>
The Corporation has an option acceleration agreement with Mr. Orlando that
provides that upon a change of control, (i) the Corporation will cause fifty
percent (50%) of any unexercisable, unexpired installments of stock options held
by Mr. Orlando at the time of the change of control to become exercisable and
(ii) the Corporation shall extend the period within which any option may be
exercised by Mr. Orlando after the termination of his employment to twelve
months. Upon a change in control, Mr. Orlando will receive a one-time retention
bonus of 125% of his base salary if he remains employed by the Corporation for
90 days following the change of control. If the Corporation terminates Mr.
Orlando's employment within twelve months of a change of control, Mr. Orlando
will receive severance benefits equal to his base salary and 100% of his bonus
for a maximum of twelve months after such termination.
The Corporation has an option acceleration agreement with Mr. Randles (the
"Randles Option Acceleration Agreement"), which provides that upon a change of
control, (i) the Corporation will cause fifty percent (50%) of any
unexercisable, unexpired installments of stock options held by Mr. Randles at
the time of the change of control to become exercisable and (ii) the Corporation
shall extend the period within which any option may be exercised by Mr. Randles
after the termination of his employment to twelve months. Upon a change in
control, Mr. Randles will receive a one-time retention bonus of 125% of his base
salary if he remains employed by the corporation for 180 days following the
change of control. If the Corporation terminates Mr. Randles' employment within
twelve months of a change of control, Mr. Randles will receive severance
benefits equal to nine months of his base salary and 75% of his bonus for a
maximum of nine months after such termination.
The Corporation has an option acceleration agreement with Mr. Javid (the
"Javid Option Acceleration Agreement"), which provides that upon a change of
control, (i) the Corporation will cause fifty percent (50%) of any
unexercisable, unexpired installments of stock options held by Mr. Javid at the
time of the change of control to become exercisable and (ii) the Corporation
shall extend the period within which any option may be exercised by Mr. Javid
after the termination of his employment to twelve months.
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 Amended Employee Stock Purchase Plan and 1992
Non-Employee Director Stock Option Plan.
During the fiscal year ended December 31, 1999, the Compensation Committee
was comprised of Mr. Martin and Ms. Rokoff , each a non-employee director of the
Corporation. Mr. Vana-Paxhia had served on the Compensation Committee until his
resignation from the Board of Directors on February 26, 1999. Mr. Martin
replaced Mr. Vana-Paxhia as a member of the Compensation Committee. The members
of the Compensation Committee bring expertise gained through their experience on
other Boards of Directors of public and private companies in matters relating to
executive compensation to their service on the Compensation Committee.
Procedure for Establishing Compensation
12
<PAGE>
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
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Corporation cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation
that constitutes "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder. The
Compensation Committee has considered the limitations on deductions imposed by
Section 162(m) of the Code, and it is the Compensation Committee's present
intention that, for so long as it is consistent with its overall compensation
objective, substantially all tax deductions attributable to executive
compensation will not be subject to the deduction limitations of Section 162(m)
of the Code.
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 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 Amended 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; and (iv) 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.
13
<PAGE>
In establishing performance-based compensation formulas for the fiscal
year ended December 31, 1999 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;
and (iv) the projected future performance of the Corporation; (v) the general
business environment. 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 December 31, 1999, 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 December 31, 1999, on which performance bonuses for
the fiscal year ended December 31, 1999 were based, was 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 the
Corporation's 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 December 31, 1999, Mr. Digate was not awarded a
stock option to purchase shares of Common Stock. Mr. Javid was awarded stock
options to purchase 80,000 shares, Mr. Orlando was awarded stock options to
purchase 40,000 shares, and Mr. Randles was awarded stock options to purchase
60,000 shares during the fiscal year ended December 31, 1999.
RESPECTFULLY SUBMITTED BY THE COMPENSATION COMMITTEE:
David D. Martin(1)
June L. Rokoff
(1) Mr. Martin became a member of the Compensation Committee on April 5, 1999.
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1999, Mr. Martin and Ms. Rokoff
served on the Compensation Committee. Mr. Vana-Paxhia had served on the
Compensation Committee until his resignation from the Board of Directors on
February 26, 1999. Mr. Martin replaced Mr. Vana-Paxhia as a member of the
Compensation Committee on April 5, 1999. Ms. Rokoff served on the Compensation
for the entire fiscal year ended December 31, 1999. 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
As compensation for serving on the Board of Directors, the Corporation pays
each non-employee director $1,000 for each meeting attended. Each non-employee
director who also serves on either the audit or compensation committee receives
an additional $2,000 annually.
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. Currently 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 10,000 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. Currently, 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 10,000. 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 400,000 shares, of which 109,584 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 date of grant. Options granted under the Director Plan
expire on the date which is ten years from the date of the option grant.
15
<PAGE>
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 five-year
period from January 1, 1995 through December 31, 1999, 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 January
1, 1995 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
12/94 12/95 12/96 12/97 12/98 12/99
MathSoft, Inc. $100.00 $242.11 $160.53 $115.79 $110.53 $ 192.13
Standard & Poor's $100.00 $140.30 $217.94 $303.51 $549.78 $1,016.63
NASDAQ $100.00 $141.50 $174.10 $213.32 $300.60 $ 543.07
</TABLE>
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.
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 3,900,000 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 4,650,000 shares.
16
<PAGE>
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 December 31, 1999, 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 December 31, 1999, the Compensation
Committee of the Board of Directors granted options to new employees. The
Corporation increased the number of shares available for future grants at the
1999 Annual Meeting of Stockholders. Option grants over the past twelve months
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 next annual meeting of stockholders.
DESCRIPTION OF THE 1992 PLAN
The purpose of the 1992 Plan is to provide incentives to officers and other
employees of the Corporation and any present or future subsidiaries of the
Corporation (collectively, "Related Corporations") by providing them with
opportunities to purchase stock of the Corporation pursuant to options which
qualify as incentive stock options ("ISO" or "ISOs") as defined in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). The 1992 Plan
also provides for the issuance of options to consultants, employees, officers
and directors of the Corporation and Related Corporations which do not qualify
as ISOs ("Non-Qualified Option" or "Non-Qualified Options"). Awards and
Purchases may also be granted to consultants, employees, officers and directors
of the Corporation and Related Corporations. ISOs, Non-Qualified Options,
Awards and Purchases are sometimes referred to collectively as "Stock Rights"
and ISOs and Non-Qualified Options are sometimes referred to individually as an
"Option" and collectively as "Options".
Administration
The Compensation Committee of the Board of Directors of the Corporation
administers the 1992 Plan. During the fiscal year ended December 31, 1999, the
Compensation Committee was comprised of Mr. Martin and Ms. Rokoff, each a
non-employee director of the Corporation. Mr. Vana-Paxhia had served on the
Compensation Committee until his resignation from the Board of Directors on
February 26, 1999. Mr. Martin replaced Mr. Vana-Paxhia as a member of the
Compensation Committee. Mr. Vana-Paxhia was, and Mr. Martin 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.
17
<PAGE>
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 any Related Corporation. Only
those officers and directors of the Corporation who are employees 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. As of the Record Date, 196 employees are
eligible to participate in the 1992 Plan.
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; provided, however,
that any non-qualified options with an exercise price less than the fair market
value per share of common stock on the date of grant will be granted in
accordance with the provisions of the 1992 Plan relating to Section 162(m).
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, not less than
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.
18
<PAGE>
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.
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, (a) 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, (b) by delivery of the optionee's personal recourse note, or (c) 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. Employment will be considered as continuing uninterrupted
during any 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 or by contract.
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
No option shall be assignable or transferable by an optionee except by will
or by the laws of descent and distribution, and during his or her lifetime only
the optionee may exercise an option.
19
<PAGE>
Changes in Stock; Recapitalization and Reorganization
Option holders are protected against dilution in the event of a stock
dividend, recapitalization, stock split, merger or similar transaction. 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 UNITED 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.
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, and the Corporation will not be entitled to a federal income tax
deduction upon either the grant or the exercise of an ISO.
2. 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 issued 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.
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3. 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 treated as
compensation to the optionee and will be taxed as ordinary income in the
year of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of shares acquired upon exercise of an ISO, the
Corporation generally should be entitled to a corresponding deduction for
federal income tax purposes.
5. 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.
6. 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.
7. 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 will apply.
8. 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 or her 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.
9. 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.
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 taxed 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.
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4. When an optionee recognizes ordinary income attributable to a
Non-Qualified Option, the Corporation generally should 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.
C. Stock Awards and Purchases. The following general rules are
applicable under current federal income tax law to Awards and Purchases under
the 1992 Plan:
Persons receiving Common Stock under the 1992 Plan pursuant to an
Award or Purchase generally will recognize ordinary income equal to the
fair market value of the shares received, reduced by any purchase price
paid. The Corporation generally should be entitled to a corresponding
federal income tax deduction. When such shares are sold, the seller
generally will recognize capital gain or loss. Special rules apply if the
shares acquired pursuant to an Award or Purchase 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, 794,655 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 3,102,116 shares of Common Stock were outstanding and 3,229
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 $5.28 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 December 31, 2000. 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
December 31, 1999 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 December 31, 1999, except Mr.
Bohdanowicz filed one late report.
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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 pursuant to Securities Exchange Act Rule 14a-8
must be received at the Corporation's principal executive offices not later than
December 21, 2000. In order to curtail controversy as to the date on which a
proposal was received by the Corporation, it is suggested that proponents submit
their proposals by Certified Mail, Return Receipt Requested.
Stockholders who wish to make a proposal at the 2001 Annual Meeting - other
than one that will be included in the Company's proxy materials - should notify
the Company no later than March 6, 2001. If a stockholder who wishes to present
a proposal fails to notify the Company by this date, the proxies that management
solicits for the meeting will have the discretionary authority to vote on the
stockholder's proposal if it is properly brought before the meeting. If a
stockholder makes a timely notification, the proxies may still exercise
discretionary voting authority under circumstances consistent with the SEC's
proxy rules.
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. The Company may, if appropriate,
retain an independent proxy solicitation firm to assist in soliciting proxies.
If the Company does so, it will pay such firm's customary fees and expenses.
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