<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only [as permitted by Exchange
Act Rule 14(a)-6(e)(2)]
[X] Definitive Proxy Statement
[ ] Definitive Additional Material
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TIMELINE, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee:
[X] No fee required.
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2),
or Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11:
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which filing
fee is calculated and how determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with written 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 number:
(3) Filing party:
(4) Date filed:
<PAGE> 2
[LOGO]
June 16, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Timeline, Inc. to be held on Thursday, July 16, 1998, at 4:00 P.M., PDT, at
Timeline, Inc., 3055 112th Avenue N.E., Ste. 106, Bellevue, Washington 98004.
The accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement describe the matters to be presented at the meeting. In addition to
the formal business to be transacted, management will make a presentation on
developments of the past year and respond to comments and questions of general
interest to shareholders. I personally look forward to greeting those Timeline
shareholders able to attend the meeting.
Whether or not you plan to attend the Annual Meeting, it is important
that your shares be represented and voted. THEREFORE, PLEASE SIGN, DATE AND
PROMPTLY MAIL AS SOON AS POSSIBLE THE ENCLOSED PROXY IN THE PREPAID ENVELOPE
PROVIDED.
Thank you.
Sincerely,
/s/ Charles R. Osenbaugh
Charles R. Osenbaugh
President, Chief Executive Officer & Director
<PAGE> 3
TIMELINE, INC.
3055 112TH AVENUE N.E., SUITE 106
BELLEVUE, WASHINGTON 98004
----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 16, 1998
----------------------
TO THE SHAREHOLDERS OF TIMELINE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Timeline, Inc., a Washington corporation (the "Company"), will be held on
Thursday, July 16, 1998, at 4:00 P.M., PDT, at Timeline, Inc., 3055 112th Avenue
N.E., Ste. 106, Bellevue, Washington 98004, for the following purposes:
1. To elect one director to hold a three-year term expiring in 2001;
2. To ratify the selection of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending March 31, 1999;
and
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 22, 1998
as the record date for the determination of shareholders entitled to notice of
and to vote at this Annual Meeting and at any continuation or adjournment
thereof.
By Order of the Board of Directors
/s/ Paula H. McGee
Paula H. McGee
Secretary
Bellevue, Washington
June 16, 1998
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND
THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO ATTEND AND VOTE AT THE MEETING,
YOU MUST OBTAIN FROM SUCH BROKER, BANK OR OTHER NOMINEE, A PROXY ISSUED IN YOUR
NAME.
<PAGE> 4
3
TIMELINE, INC.
3055 112TH AVENUE N.E., SUITE 106
BELLEVUE, WASHINGTON 98004
--------------------
PROXY STATEMENT
--------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board of Directors") of Timeline, Inc., a Washington corporation (the
"Company"), for use at the Annual Meeting of Shareholders to be held on
Thursday, July 16, 1998, at 4:00 P.M., PDT, or at any continuation or
adjournment thereof (the "Annual Meeting"), for the purposes set forth herein
and in the accompanying Notice of Annual Meeting. The Annual Meeting will be
held at Timeline, Inc., 3055 112th Avenue N.E., Ste. 106, Bellevue, Washington
98004.
VOTING AND OUTSTANDING SHARES
Only holders of record of the Company's common stock (the "Common
Stock") at the close of business on May 22, 1998, are entitled to notice of and
to vote at the Annual Meeting. At the close of business on May 22, 1998, there
were 3,214,640 shares of Common Stock outstanding and entitled to vote.
Shareholders of record on such date are entitled to one vote for each share of
Common Stock held on all matters to be voted upon at the Annual Meeting. All
votes will be tabulated by the inspector of election appointed for the Annual
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
The presence in person or by proxy of holders of record of a majority of
the outstanding shares of Common Stock constitutes a quorum at the Annual
Meeting. Under Washington law and the Company's Restated Articles of
Incorporation (the "Articles"), assuming the presence of a quorum, the election
of the Company's directors requires a plurality of votes cast, and each of the
other proposals described in the accompanying Notice to Shareholders requires
that the votes cast in favor exceed the votes cast against the proposal.
A shareholder who abstains from voting on any or all proposals will be
included in the number of shareholders present at the Annual Meeting for the
purpose of determining the presence of a quorum. Abstentions will not be counted
either in favor of or against the election of the nominees or other proposals.
Brokers holding stock for the accounts of their clients who have not been given
specific voting instructions as to a matter by their clients may vote their
clients' proxies in their own discretion, to the extent permitted under the
rules of the National Association of Securities Dealers. Broker non-votes will
be included in determining the presence of a quorum, but will not be counted in
determining whether a matter has been approved.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly and mailing of this Proxy Statement, the proxy
and any additional information furnished to shareholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding shares of the Common Stock in their names which are
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners for their costs of
forwarding the solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
The Company intends to mail this Proxy Statement and accompanying proxy
card on or about June 18, 1998, to all shareholders entitled to vote at the
Annual Meeting.
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<PAGE> 5
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the
Company's 1999 Annual Meeting of Shareholders (the "1999 Annual Meeting") must
be received by the Company not later than February 3, 1999 in order to be
included in the proxy statement and form of proxy relating to the 1999 Annual
Meeting. In addition, any proposals to be brought before the shareholders must
comply with the procedural requirements contained in the Company's Bylaws.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 3055 112th
Avenue N.E., Suite 106, Bellevue, Washington 98004, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, by itself, revoke a proxy.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Articles divide the Board of Directors into three classes,
each class consisting, as nearly as possible, of one-third of the total number
of directors. The Articles further provide that at each annual meeting of the
shareholders, directors will be elected for a three-year term to succeed those
directors in the class whose term has so expired. Vacancies on the Board may be
filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board of Directors) will serve for the remainder of the full
term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified, or until such directors' earlier
death, resignation or removal.
The Board of Directors is presently composed of five members. Michael R.
Hallman, a current director of the Company, has elected not to run for
re-election to the Board at the expiration of his term in office at the Annual
Meeting. Accordingly, effective immediately prior to the Annual Meeting, the
Board of Directors intends to amend the Company's Bylaws to reduce the size of
the Board to four members. The director nominee, Mr. Frederick W. Dean, is the
nominee for the class of directors to be elected at the Annual Meeting for a
three-year term expiring at the 2001 annual meeting of shareholders. If elected
at the Annual Meeting, the director nominee would serve until his successor is
elected and qualified, or until his earlier death, resignation or removal.
Directors are elected by a plurality of the shares voted at the Annual
Meeting. It is the intention of the persons named in the enclosed proxy, unless
authorization to do so is withheld, to vote the proxies received by them for the
election of the nominee named below. If, prior to the Annual Meeting, such
nominee should become unavailable for election, an event which currently is not
anticipated by the Board, the proxies will be voted for the election of such
substitute nominee as the Board of Directors may propose. Mr. Dean has agreed to
serve if elected and management has no reason to believe that he will be unable
to serve.
Set forth below is biographical information for Mr. Dean:
FREDERICK W. DEAN serves as Executive Vice President - Operations and
has been a Vice President since the Company's inception in April 1993. From 1979
to April 1993, Mr. Dean served as Vice President at Timeline Services, Inc. He
practiced public accounting at Calahan, Reed & Gunn from 1978 to 1979, and at
Arthur Andersen & Co. from 1973 to 1977. From 1977 to 1978, Mr. Dean was the
Controller of the Seattle Mariners Baseball Club. Mr. Dean holds a B.A. degree
in accounting from the University of Washington.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF MR. DEAN
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<PAGE> 6
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names and certain biographical information for
directors whose terms continue after the Annual Meeting and the executive
officers of the Company.
DIRECTOR WITH TERM EXPIRING AT THE 1999 ANNUAL MEETING
CHARLES R. OSENBAUGH has served as Chief Financial Officer, Treasurer,
Secretary and a Director since the Company's inception in April 1993, and has
held the position of President and Chief Executive Officer since November 1996.
From April 1988 to April 1993, Mr. Osenbaugh served as Executive Vice President,
Chief Executive Officer and a Director, and from April 1993 to July 1994 as
President and a Director, of Timeline Services, Inc. From 1975 to 1988, Mr.
Osenbaugh was a partner of Lasher & Johnson, a Seattle law firm. From 1973 to
1975, Mr. Osenbaugh practiced public accounting with Arthur Andersen & Co. He
holds a B.B.A. degree in economics and a J.D. degree, both from the University
of Iowa, and received his CPA certificate in 1974.
DIRECTORS WITH TERMS EXPIRING AT THE 2000 ANNUAL MEETING
DONALD K. BABCOCK is a founder of the Company and has served as a
Director since its inception in April 1993. Mr. Babcock left his position as
Senior Technologist with the Company in April 1998, and is currently employed by
Seagate Software, Inc. He previously was Senior Vice President of Research &
Development and Chief Technologist for Timeline, Inc. He was also a founder of
Timeline Services, Inc. and served as a director from its inception in 1977
until its merger into the Company in July 1994. From 1977 to April 1993, Mr.
Babcock also served as Senior Vice President and Chief Technologist of Timeline
Services, Inc. From 1970 to 1977, he was a consultant with Riggs, Babcock &
Mishko, a Tacoma, Washington-based data processing and consulting firm to the
property and casualty insurance industry. Mr. Babcock was Manager of Systems
Programming at United Pacific Insurance Company from 1965 to 1970, and a data
processor in the U.S. Air Force from 1955 to 1965.
KENT L. JOHNSON has been a Director of the Company since its inception.
He is President of Alexander Hutton Capital, L.L.C., a Seattle-based investment
banking firm that he co-founded in October 1994 and that specializes in equity
capital formation for emerging growth companies. From April 1989 to June 1994,
he served as Senior Vice President and Chief Operating Officer of Brazier Forest
Industries, Inc., a Seattle-based forest products company. From 1987 to 1989, he
was President and Chief Executive Officer of OverDrive Systems, Inc., an
electronic publishing software company based in Cleveland, Ohio, and from 1982
to 1987, was President and Chief Executive Officer of Microrim, Inc., a database
software company located in Bellevue, Washington. Prior to entering the software
industry, Mr. Johnson was Chief Financial Officer of Fiberchem, Inc., a
wholesale distributor, from 1977 to 1982. Following his military career as an
officer in the U.S. Army, Mr. Johnson began his professional career as a
management consultant with Arthur Andersen & Co., where he was employed from
1970 to 1977. Mr. Johnson currently serves as a director of several private
companies, and devotes considerable time to private investment activities. Mr.
Johnson has a B.B.A. degree in Business Administration from the University of
Washington and an M.B.A. degree from Seattle University, where he serves on the
Business Advisory Board. He received his CPA certificate in 1970.
EXECUTIVE OFFICERS
Other than Messrs. Osenbaugh and Dean, there are no executive officers
of the Company.
BOARD COMMITTEES AND MEETINGS
The Board of Directors, which held 14 meetings during the fiscal year
ended March 31, 1998, has an Audit Committee and a Compensation Committee. The
Board of Directors does not have a Nominating Committee. Messrs. Hallman and
Johnson served as members of each of the Audit Committee and the Compensation
Committee for the 1998 fiscal year.
The Audit Committee makes recommendations to the Board of Directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by the Company's
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<PAGE> 7
independent auditors, and reviews and evaluates the Company's internal control
functions. During the 1998 fiscal year, the Audit Committee met one time.
The Compensation Committee administers the Company's stock option plans
and makes recommendations to the Board of Directors concerning compensation for
executive officers and consultants of the Company. During the 1998 fiscal year,
the Compensation Committee met two times.
During the 1998 fiscal year, all of the directors attended at least 75%
of the total number of meetings of the Board of Directors and committees on
which they served.
PROPOSAL 2: RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent auditors for the year ending March 31, 1999, and has further
directed that management submit the selection of independent auditors for
ratification by the shareholders at the Annual Meeting. Arthur Andersen LLP has
audited the Company's financial statements since the Company's inception in
1993. Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Shareholder ratification of the selection of Arthur Andersen LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Arthur Andersen LLP
to the shareholders for ratification as a matter of good corporate practice. If
the shareholders fail to ratify the selection, the Board will reconsider whether
to retain that firm. Even if the selection were ratified, the Board in its
discretion may direct the appointment of a different independent accounting firm
at any time during the year if the Board determines that such a change would be
in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of May 22, 1998 by: (i) each current
director and nominee for election as director; (ii) the Company's Chief
Executive Officer and each of the executive officers identified in the Summary
Compensation Table (collectively, the "Named Executive Officers"); (iii) all
directors and executive officers of the Company as a group; and (iv) each person
known by the Company to beneficially own more than 5% of its Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF TOTAL
---------------- --------- --------
<S> <C> <C>
Charles R. Osenbaugh(2) 426,287 13.3%
John W. Calahan(3) 357,876 11.1%
c/o CFOsoft, Inc.
P.O. Box 881056
Steilacoom, WA 98388
Donald K. Babcock 187,175 6.0%
Frederick W. Dean(4) 158,550 5.0%
Michael R. Hallman(5) 87,274 2.7%
Kent L. Johnson(6) 66,649 2.1%
All directors and executive officers as a group 1,283,811 39.9%
(six persons)(7)
</TABLE>
(1) This table is based upon information supplied by executive officers,
directors and principal shareholders. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the shareholders named in this table has sole voting
and investment power with respect to the shares shown as beneficially
owned by him.
(2) Includes (i) 15,526 shares issuable under stock options held by Mr.
Osenbaugh which are exercisable within 60 days of May 22, 1998, (ii)
75,000 shares issuable under performance-based stock options held by Mr.
Osenbaugh 50% of which vest and become exercisable when the Company's
stock closes trading at $3.00 or more per share for 10 consecutive days
and the remainder of which vest and become exercisable when the
Company's stock closes trading at $5.00 or more per share for 10
consecutive days; and (iii) 17,325 shares issuable upon exercise of
warrants granted to Mr. Osenbaugh in connection with certain Company
loan guarantees. Does not include 15,015 shares held in an individual
retirement account belonging to Mr. Osenbaugh's spouse, for which shares
Mr. Osenbaugh disclaims beneficial interest.
(3) Includes (i) 13,776 shares issuable under stock options held by Mr.
Calahan which are currently exercisable within 60 days of May 22, 1998,
and (iii) 6,600 shares issuable upon exercise of warrants granted to Mr.
Calahan in connection with certain Company loan guarantees.
(4) Includes (i) 13,550 shares issuable under stock options held by Mr. Dean
which are exercisable within 60 days of May 22, 1998, and (ii) 6,600
shares issuable upon exercise of warrants granted to Mr. Dean in
connection with certain Company loan guarantees.
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(5) Includes (i) 44,098 shares issuable under stock options held by Mr.
Hallman which are exercisable within 60 days of May 22, 1998, and (ii)
4,125 shares issuable upon exercise of warrants granted to Mr. Hallman
in connection with a loan he made to the Company.
(6) Includes 44,098 shares issuable under stock options held by Mr. Johnson
which are exercisable within 60 days of May 22, 1998.
(7) Consists of Messrs. Osenbaugh, Calahan, Babcock, Dean, Hallman, and
Johnson. Includes an aggregate of 240,322 shares issuable under stock
options held by such persons which are exercisable within 60 days of May
22, 1998.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the three fiscal years ended March 31,
1998, 1997 and 1996, respectively, certain compensation awarded or paid to, or
earned by, the Named Executive Officers. Other than the Named Executive Officers
listed below, no executive officer of the Company earned more than $100,000 in
salary and bonus for the 1998 fiscal year:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
------ ------------ ALL OTHER
FISCAL COMPENSATION SECURITIES COMPENSATION
------ ------------ UNDERLYING ------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) OPTION (1) ($)(2)
- - --------------------------- ---- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Charles R. Osenbaugh, 1998 $ 70,670 86,000(3) $ 6,000
President, Chief 1997 115,000 75,000(4) 6,000
Executive Officer, Chief 1996 145,030 9,000 6,000
Financial Officer
John W. Calahan, Executive 1998 115,687(5) 12,000(3) 11,294
Vice President - Business 1997 119,776(5) -- 10,082
Development(6) 1996 183,035 10,000 10,515
Donald K. Babcock, Senior 1998 141,667(5) 2,000 --
Technologist(6) 1997 104,766(5) -- 5,857
1996 124,390 -- 2,613
Frederick W. Dean, Vice 1998 108,109(5) 19,000(3) --
President - Product 1997 84,269 5,000 4,549
Management 1996 106,869 12,000 4,549
</TABLE>
(1) All referenced options granted are exercisable at prices equal to the
fair market value of the Common Stock on the respective dates of grant.
Certain options were repriced in November 1997. See Option Repricing.
(2) Represents dollar value of medical, disability, and life insurance
premiums paid by the Company for the benefit of the respective Named
Executive Officers.
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(3) For each of Messrs. Osenbaugh, Calahan and Dean, includes 9,000 shares,
10,000 shares and 17,000 shares, respectively, underlying options
granted in fiscal 1996 and in fiscal 1997 that were repriced in fiscal
1998. See "Option Repricing."
(4) Represents warrants to purchase the indicated number of shares of Common
Stock, at the fair market value at the date of grant, as consideration
for certain personal guarantees of loans incurred by the Company.
(5) Includes $11,167 and $32,083 of deferred salary earned in fiscal 1998
and 1997, respectively, by Mr. Calahan; $57,000 and $29,024 of deferred
salary earned in fiscal 1998 and 1997, respectively, by Mr. Babcock; and
$19,125 of deferred salary earned in fiscal 1998 by Mr. Dean.
(6) Messrs. Calahan and Babcock resigned from the Company effective April 1,
1998.
STOCK OPTION GRANTS AND EXERCISES
The following table shows certain information regarding options granted
to the Named Executive Officers during the 1998 fiscal year:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL
SHARES PERCENTAGE OF RATES OF STOCK PRICE
UNDERLYING TOTAL OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO PRICE PER EXPIRATION OPTION TERM (2)
NAME GRANTED(1) EMPLOYEES SHARE DATE 5% 10%
- - ---- ---------- ----------- --------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Osenbaugh 9,000(3) 3.3% $1.00 4/30/2005 $ 5,660 $ 23,342
2,000 0.7 1.00 9/30/2007 1,258 5,187
75,000(4) 27.8 1.00 10/31/2007 47,167 194,531
John W. Calahan 10,000(3) 3.7 1.00 4/30/2005 6,290 25,935
2,000(5) 0.7 1.00 9/30/2007 1,258 5,187
Donald K. Babcock 2,000 0.7 1.00 9/30/2007 1,258 5,187
Frederick W. Dean 12,000(3) 4.5 1.00 4/30/2005 7,548 31,122
5,000(3) 1.9 1.00 11/30/2006 3,145 12,968
2,000 0.7 1.00 9/30/2007 1,258 5,187
</TABLE>
(1) Except as otherwise disclosed in the footnotes, options become fully vested
and exercisable four years from the date of grant, with 25% of the total
option vesting on each anniversary date of the grant for the four year
vesting period. The exercise price for the options is the closing trading
price of the Common Stock on the day prior to the grant.
(2) These assumed rates of appreciation are provided in order to comply with the
requirements of the SEC and do not represent the Company's expectation as to
the actual rate of appreciation of the Common Stock. These gains are based
on assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the options were granted over the full option term. The actual
value of the options will depend on the performance of the Common Stock and
may be greater or less than the amounts shown.
(3) These options, originally granted in fiscal 1996 and 1997, were repriced in
November 1997. See "Option Repricing."
(4) Mr. Osenbaugh received a grant of a performance-based option to purchase
75,000 shares of Common Stock on November 1, 1997. This option will vest 50%
when the Company's stock closes trading at $3.00 or more per share for 10
consecutive days and the remaining 50% will vest when the Company's stock
closes trading at $5.00 or more per share for 10 consecutive days.
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<PAGE> 11
(5) The option for 2,000 shares was unvested and expired by its terms upon
termination of Mr. Calahan's employment on April 1, 1998.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END 1998 OPTION VALUES
The following table shows certain information regarding the exercise of
stock options during the 1998 fiscal year and the value of unexercised options
held at fiscal year end by each of the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
-------------------------- ----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles R. Osenbaugh 30,601 81,500 $6,909 $81,594
John W. Calahan 20,376 7,000 7,441 7,438
Donald K. Babcock -- 2,000 -- 2,125
Frederick W. Dean 17,150 11,750 7,703 12,484
</TABLE>
OPTION REPRICING
The following table sets forth information regarding stock options held
by any Named Executive Officer that were repriced during the 1998 fiscal year:
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price New Remaining at
Date of Options Time of at Time of Exercise Date of
Name Repricing Repriced(#) Repricing($)(1) Repricing($) Price($/Sh) Repricing(2)
---- --------------------- --------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Osenbaugh 10/1/97 9,000 $1.00 $3.57 $1.00 5/95
John W. Calahan 10/1/97 10,000 1.00 3.93 1.00 5/95
Frederick W. Dean 10/1/97 12,000 1.00 3.57 1.00 5/95
10/1/97 5,000 1.00 2.19 1.00 12/96
</TABLE>
(1) Options were restated to the fair market value price on October 1, 1997,
based on the closing price of the Common Stock on September 30, 1997, as
quoted on the Nasdaq SmallCap Market.
(2) The repriced options were amended only as to exercise price and continue at
the same terms of the original option including the vesting schedule and
expiration date.
REPORT ON OPTION REPRICING
In July 1997, the Compensation Committee of the Board of Directors
approved a plan pursuant to which options granted under the 1994 Stock Option
Plan prior to October 1, 1997, to all officers and employees currently employed
with the Company, would be repriced to an exercise price equal to the fair
market value of the Common Stock on September 30, 1997, which was $1.00 per
share. Grantees of the repriced options received credit for vesting from the
original date of each grant.
Stock options are intended to provide incentives to the Company's
officers and employees. The Compensation Committee believes that such equity
incentives are a significant factor in the Company's ability to attract, retain
and motivate key employees who are critical to the Company's long-term success.
The Compensation Committee further believes that, at their original exercise
prices, the disparity between the exercise price of these
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options and recent market prices for the Common Stock did not provide meaningful
incentives to the employees holding the options. The Company believes that
certain other companies in the software industry have been confronted with this
problem and have made similar adjustments in option prices to motivate their
employees.
The Compensation Committee approved the repricing of options as a means
of ensuring the officers and employees will continue to have meaningful equity
incentives to work toward the Company's success. The adjustment was deemed by
the Compensation Committee to be in the best interests of the Company and its
shareholders.
The Compensation Committee
Michael R. Hallman
Kent L. Johnson
COMPENSATION OF DIRECTORS
During the fiscal year ended March 31, 1998, the Company did not
compensate its directors for their service as directors. Pursuant to the terms
of the Directors' Nonqualified Stock Option Plan, the non-employee directors of
the Company were each granted options to purchase 3,000 shares of Common Stock
on May 1, 1995. In addition, under the terms of the Directors' Plan, each new
non-employee director will receive an automatic one-time grant of options to
purchase 3,000 shares of Common Stock 90 days after he or she becomes a
director.
EMPLOYMENT AND TERMINATION AGREEMENTS
In connection with Mr. Calahan's resignation from the Company, effective
April 1, 1998, the Company and Mr. Calahan entered into a termination agreement,
which replaced Mr. Calahan's prior employment agreement with the Company.
Pursuant to such termination agreement, the Company agreed to pay Mr. Calahan
his deferred salary and other accrued and unpaid amounts owing to him, and
agreed to continue coverage under the Company's directors' and officers'
insurance policy for Mr. Calahan. In addition, Mr. Calahan agreed to provide
certain consulting services to the Company. See "Certain Transactions." In
addition, Mr. Calahan entered into an Amended and Restated Noncompetition
Agreement under which he has agreed to not compete with the Company for a period
of 18 months from April 1, 1998.
Mr. Babcock resigned from the Company effective April 1, 1998, pursuant
to the Company's development and licensing agreement with Seagate Software, and
began employment with Seagate Software on April 15, 1998. In connection with
such resignation, Mr. Babcock's employment agreement with the Company was
terminated and neither the Company nor Mr. Babcock has any continuing obligation
under such agreement. The Company has agreed to continue the vesting on Mr.
Babcock's stock options for Company Common Stock while employed at Seagate
Software. In addition, in the event Mr. Babcock voluntarily terminates his
employment with Seagate Software prior to March 31, 2000, the Company has agreed
to pay a fee to Seagate Software of up to $100,000. The Company waived Mr.
Babcock's prior noncompetition agreement only to the extent necessary for him to
fulfill his employment obligations to Seagate Software.
CERTAIN TRANSACTIONS
Mr. Osenbaugh is a 50% shareholder of SoftForce Inc., an Iowa-based
distributor of software which currently employs five persons. The remaining
shares of SoftForce Inc. are owned by a brother of Mr. Osenbaugh. SoftForce Inc.
distributes Company products pursuant to a standard Company distribution
agreement. The Company believes its distribution agreement with SoftForce Inc.
was made on terms no less favorable to the Company than could have been obtained
from unaffiliated third party distributors.
In November 1997, the Company granted a performance-based stock option
to Mr. Osenbaugh to purchase 75,000 shares of common stock, at an exercise price
of $1.00 per share, as part of his compensation for employment as President and
CEO of the Company. The closing trading price of the common stock on such date
was $0.88. Under the terms of the grant, the option will vest 50% when the
Company's stock closes trading at $3.00 or more
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per share for 10 consecutive days and the remaining 50% will vest when the
Company's stock closes trading at $5.00 or more per share for 10 consecutive
days.
In December 1996, the Company granted a warrant to Mr. Osenbaugh to
purchase 75,000 shares of common stock, at an exercise price of $1.63 per share,
as consideration for personally guaranteeing certain loans incurred by the
Company. Mr. Osenbaugh exercised the warrant in full in March 1997. The closing
trading price of the common stock on such date was $1.19. In connection with the
exercise of the warrant, Mr. Osenbaugh executed a promissory note for $95,603 in
favor of the Company.
On March 31, 1998, the Company entered into a Distributorship Agreement
and Software License with John W. Calahan, under which Mr. Calahan can license
and distribute the Company's products. The Company believes this agreement with
Mr. Calahan was made on terms no less favorable to the Company than could have
been obtained from unaffiliated third party distributors. In addition, under the
terms of the termination agreement between the Company and Mr. Calahan in
connection with his resignation from the Company, Mr. Calahan has agreed to
provide certain consulting services to the Company at a billable rate of $100
per hour. The Company has agreed to offer a minimum of 600 hours of consulting
services to Mr. Calahan in 1998.
On March 31, 1998, the Company entered into a Development and License
Agreement with Seagate Software, Inc., pursuant to which the Company released
Donald K. Babcock from his obligations under his employment agreement with the
Company and Mr. Babcock accepted employment with Seagate Software as a Program
Manager, effective April 15, 1998. The Company has agreed with Seagate Software
that, in the event Mr. Babcock voluntarily terminates his employment with
Seagate Software prior to March 31, 2000, the Company will pay a fee to Seagate
Software of up to $100,000.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of the Company's Common Stock, to
file reports of ownership and change in ownership with the SEC and with the
National Association of Securities Dealers, Inc. Officers, directors and greater
than 10% shareholders are required by SEC regulations to furnish the Company
with copies of all forms they file pursuant to Section 16(a).
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that, during the fiscal year ended March 31, 1998, all such filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors knows of
no other business that will be presented for consideration at the Annual
Meeting. If other matters are properly brought before the Annual Meeting, it is
the intention of the persons named in the accompanying proxy to vote the shares
represented thereby on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Charles R. Osenbaugh
Charles R. Osenbaugh
President and Chief Executive Officer
June 16, 1998
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TIMELINE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Timeline, Inc., a Washington corporation (the
"Company"), hereby appoints Charles R. Osenbaugh and Frederick W. Dean, or
either of them, with full power of substitution in each, as proxies to cast all
votes which the undersigned shareholder is entitled to cast at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on Thursday, July 16,
1998, at 4:00 P.M., PDT, at Timeline, Inc., 3055 112th Avenue N.E., Ste. 106,
Bellevue, Washington 98004 and any adjournments or postponements thereof upon
the matters set forth on the reverse side of this Proxy Card.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. UNLESS DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEE LISTED IN PROPOSAL 1, AND "FOR" PROPOSAL
2, AND IN ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF
DIRECTORS AS TO OTHER MATTERS. The undersigned hereby acknowledges receipt of
the Company's Proxy Statement and hereby revokes any proxy or proxies previously
given.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE> 15
DIRECTORS
1. Directors Recommend: A vote for election of the following Director
Frederick W. Dean
Mark X for only one box:
[ ] FOR THE NOMINEE
[ ] WITHHOLD THE NOMINEE
PROPOSALS
For Against Abstain.
[ ] [ ] [ ] 2. Ratification of the selection
of Arthur Andersen LLP as
independent auditors of the
Company for the year ending
March 31, 1999.
3. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments or
postponements thereof.
I PLAN TO ATTEND THE MEETING
Please sign below exactly as your name appears on this Proxy Card. If shares are
registered in more than one name, the signature of all such persons are
required. A corporation should sign in its full corporate name by a duly
authorized officer, stating his/her title. Trustees, guardians, executors and
administrators should sign in their official capacity, giving their full title
as such. If a partnership, please sign in the partnership name by authorized
person(s).
If you receive more than one Proxy Card, please sign and return all such cards
in the accompanying envelope.
Signature(s)___________________________________________ Date___________________
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD TODAY, USING THE ENCLOSED ENVELOPE.
