<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
NETMANAGE, 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):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NETMANAGE, INC.
10725 North De Anza Boulevard
Cupertino, California 95014
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 30, 1997
TO THE STOCKHOLDERS OF NETMANAGE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
NetManage, Inc., a Delaware corporation (the "Company"), will be held on
Friday, May 30, 1997 at 9:00 a.m. local time at the offices of the Company at
10725 North De Anza Boulevard, Cupertino, California 95014 for the following
purposes:
1. To elect one director to hold office until the Annual Meeting
of Stockholders in the year 2000.
2. To ratify the selection of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending December 31,
1997.
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 March 28, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
Walter D. Amaral
Secretary
Cupertino, California
April 18, 1997
ALL STOCKHOLDERS 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 RETURN ENVELOPE (WHICH IS POSTAGE
PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF
YOU HAVE GIVEN 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 VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
NETMANAGE, INC.
10725 North De Anza Boulevard
Cupertino, California 95014
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
NetManage, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on Friday, May 30, 1997 at 9:00 a.m., local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at the offices of the Company at 10725 North De
Anza Boulevard, Cupertino, California 95014. The Company intends to mail this
proxy statement and accompanying proxy card on or about April 18, 1997 to all
stockholders entitled to vote at the Annual Meeting.
An annual report for the fiscal year ended December 31, 1996 is
enclosed with this Proxy Statement.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy card and any additional information furnished to stockholders.
Copies of solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. The
Company has retained Corporate Investor Communications, Inc. to assist in the
solicitation and distribution of proxies for which it will receive a fee from
the Company of approximately $3,200, plus out-of-pocket expenses. Original
solicitation of proxies by mail may be supplemented by telephone or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to these individuals for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
March 28, 1997 will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on March 28, 1997, the Company had outstanding and
entitled to vote 43,211,888 shares of Common Stock. A majority, or 21,605,945
shares, of the Common Stock will constitute a quorum for the transaction of
business. Each holder of record of Common Stock on March 28, 1997 will be
entitled to one vote for each share held on all matters to be voted upon at the
Annual Meeting.
Stockholders of Common Stock are entitled to one vote for each share
held. Shares of stock may not be voted cumulatively with respect to the
election of directors. All votes will be tabulated by the inspector of
election appointed for the meeting, who will separately tabulate affirmative
and negative votes, abstentions and broker non-votes. Abstentions will be
counted towards the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in
determining whether a matter has been approved.
1
<PAGE> 4
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. A proxy may be revoked by filing
with the Secretary of the Company at the Company's principal executive office,
10725 North De Anza Boulevard, Cupertino, California 95014, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than December 13, 1997 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and Bylaws provide that the
Board of Directors shall be divided into three classes, each class consisting,
as nearly as possible, of one-third of the total number of directors, with each
class having a three-year term. 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) shall 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.
The Board of Directors is presently composed of five members. There
is one director in the class, Zvi Alon, whose term of office expires in 1997.
Mr. Alon is currently a director of the Company who was previously elected by
the stockholders. If elected at the Annual Meeting, Mr. Alon would serve until
the 2000 annual meeting and until his successor is elected and has qualified,
or until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for
the election of the nominee named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such
shares will be voted for the election of such substitute nominee as the Company
may propose. The person nominated for election has agreed to serve if elected,
and the Company has no reason to believe that the nominee will be unable to
serve.
Set forth below is biographical information for each person nominated
and each person whose term of office as a director will continue after the
Annual Meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
The name of the nominee and certain information about him is set forth
below:
Zvi Alon, age 45, is the founder of the Company and has served as its
Chairman of the Board, President and Chief Executive Officer since the
Company's formation. From 1986 to 1989, Mr. Alon was the President of Halley
Systems, a manufacturer of networking equipment including bridges and routers.
He also has served as Manager, Standard Product Line at Sytek, Inc., a
networking company, and Manager of the Strategic Business Group for
Architecture, Graphics and Data Communications at Intel Corporation, a
semiconductor manufacturer. Mr. Alon received a B.S. degree in electrical
engineering from the Technion-Israel Institute of Technology in Haifa, Israel
(the "Technion"). He is a member of the board of directors of NetVision, Ltd.,
a 50%-owned subsidiary of the Company. Mr. Alon is the son-in-law of Uzia
Galil, a director of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR FOR THE NAMED NOMINEE.
2
<PAGE> 5
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
John Bosch, age 61, has served as a director of the Company since
December 1991. Since 1981, Mr. Bosch has been a general partner of Bay
Partners, a venture capital firm. In 1976 he co-founded Cronus Precision
Products, Inc., a digital timing company, and he served as its President and
Chief Executive Officer until 1981. In 1970 Mr. Bosch co-founded Anixter,
Bosch and Russell, a consulting firm specializing in marketing and sales
consulting for high technology companies and in technical venture analysis for
the venture capital community. Mr. Bosch is currently a director of five
portfolio companies. He is a graduate of the University of Southern California
where he received a B.S. degree in mechanical engineering and an M.B.A. in
marketing.
Dr. Shelley Harrison, age 54, has served as a director the Company
since July 1996, filling an open vacancy on the Board. Dr. Harrison has served
as Chairman of the Board of Directors since 1993 and Chief Executive Officer
since April 1996 of Spacehab, Inc., a company which develops, owns and operates
habitable modules and logistics supply services for the manned U.S. Space
Shuttle missions. In addition, Dr. Harrison is a managing general partner of
PolyVentures L.P. and PolyVentures II, L.P., which are high technology venture
capital firms. Dr. Harrison also serves on the board of trustees of
Polytechnic University in New York. He received his B.S. in electrical
engineering from New York University and received an M.S. and PhD in
electrophysics from Polytechnic University.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Uzia Galil, age 71, has served as a director of the Company since
December 1991. Mr. Galil is the Chairman of the Board of Directors of Elron
Electronic Industries, Ltd. ("Elron"), its founder and also has been its
President and Chief Executive Officer since its formation. Mr. Galil has been
Chairman of the Board of Directors of Elbit Ltd., an affiliate of Elron, since
January 1981, having been President and Chief Executive Officer of Elbit from
1967 to 1978. Mr. Galil also serves as director of Elscint Ltd., Elbit Systems
Ltd., Elbit Medical Imaging Ltd., Orbotech Ltd., Zoran Corporation, Opal Inc.,
and most of the private companies of the Elron Group. Mr. Galil received a
B.S. degree from the Technion and an M.S. in electrical engineering from Purdue
University, Lafayette, Indiana. An honorary doctorate in technical sciences
was granted to him by the Technion in 1977 in recognition of his contribution
to the development of science-based industries in Israel, an honorary doctorate
in philosophy was granted to him by the Weizman Institute of Science in 1991
and an honorary doctorate in engineering was granted to him in 1995 by the
Polytechnic University in New York. From 1980 through mid-1990, Mr. Galil
served as Chairman of the International Board of Governors of the Technion.
Mr. Galil is the father-in-law of Mr. Zvi Alon, a director of the Company and
the Company's President and Chief Executive Officer.
Darrell Miller, age 50, has served as a director of the Company since
February 1994 and served as Executive Vice President, Corporate Strategic
Marketing for the Company from December 1994 to February 1996. From 1987 to
1993, Mr. Miller was at Novell, Inc., a computer network company, in numerous
positions including Executive Vice President responsible for strategic and
marketing operations and Executive Vice President responsible for product
development. From 1984 to 1987, Mr. Miller acted as the Director of Marketing
for Ungermann-Bass, a manufacturer of networking equipment. Since 1994, Mr.
Miller has served on the board of directors of Xpoint Technologies, Inc., a
switched ethernet company. Mr. Miller is a graduate of the University of
Denver where he received a B.S. in business administration.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 1996, the Board of Directors
held seven meetings, including telephone meetings. Standing committees of the
Board include an Audit Committee, an Option Committee, and a Compensation
Committee.
3
<PAGE> 6
The Audit Committee meets with the Company's independent auditors at
least quarterly to review the results of the quarterly reviews or annual audit
and discuss the financial statements; makes recommendations to the Board
regarding the retention of independent auditors; and receives and considers
the accountants' comments as to controls, adequacy of staff and management
performance and procedures in connection with audit and financial controls.
The Audit Committee is composed of four non-employee directors: Messrs. Bosch,
Galil, Harrison and Miller. The Audit Committee met five times during 1996.
The functions of the Option Committee are to review and approve awards
of stock options under the Company's stock option plans to employees and
consultants who are not subject to Section 16 of the Securities Exchange Act of
1934 (the "Exchange Act"), and to recommend any changes or amendments to the
stock option plans. The Option Committee met eight times during 1996 and
consists of Messrs. Bosch and Miller.
The Compensation Committee reviews and approves specific compensation
matters for the Chief Executive Officer and all executive staff who report
directly to the Chief Executive Officer and otherwise performs such other
functions regarding compensation as the Board may delegate. The Compensation
Committee is composed of two non-employee directors: Messrs. Bosch and Galil.
For purposes of grants and purchases under the Company's stock option and
purchase plans to officers subject to Section 16 of the Exchange Act other than
the Chief Executive Officer, the Compensation Committee was also comprised of
Mr. Alon during 1996. The Compensation Committee met once during 1996.
During the fiscal year ended December 31, 1996, each Board member
attended 75% or more of the meetings of the Board and of the committees on
which he served that were held during the period for which he was a director or
committee member.
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 fiscal year ending December 31, 1997 and
has further directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting. Arthur
Andersen LLP has audited the Company's financial statements since its inception
in 1990. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting, will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Stockholder 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 stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent auditors at any
time during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the Annual
Meeting will be required to ratify the selection of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
4
<PAGE> 7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of February 28, 1997 by: (i) each
director and nominee for director; (ii) each of the executive officers named in
the Summary Compensation Table; (iii) all executive officers and directors of
the Company as a group; and (iv) all those known by the Company to be
beneficial owners of more than five percent of its Common Stock. The
information as to each person has been furnished by such person, and each
person has sole voting power and sole investment power with respect to all
shares beneficially owned by such persons except as otherwise indicated and
subject to community property laws where applicable. Except as set forth
below, the address of each named individual is the address of the Company as
set forth herein.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
--------------------
NUMBER
OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL(%)(1)
- ---------------- ---------- -----------
<S> <C> <C>
Zvi Alon (2) . . . . . . . . . . . . . . . . . . . . . . . . 8,856,204 20.5
Elron Electronic Industries, Ltd. (3) . . . . . . . . . . . . 925,000 2.1
P.O. Box 1573
Haifa 31015, Israel
Uzia Galil (4) . . . . . . . . . . . . . . . . . . . . . . . 1,535,666 3.6
Robert Williams (5) . . . . . . . . . . . . . . . . . . . . 206,962 *
Patricia Roboostoff (6) . . . . . . . . . . . . . . . . . . . 37,444 *
Walter Amaral (7) . . . . . . . . . . . . . . . . . . . . . . 36,941 *
John Bosch (8) . . . . . . . . . . . . . . . . . . . . . . . 24,667 *
Darrell Miller (9) . . . . . . . . . . . . . . . . . . . . . 11,000 *
Shelley Harrison . . . . . . . . . . . . . . . . . . . . . . 0 *
All executive officers and directors
as a group (9 persons) (2),(3),(10) 10,711,884 24.8
</TABLE>
_________________
* Less than one percent.
(1) Based on 43,193,840 shares of Common Stock outstanding as of February
28, 1997.
(2) Includes (i) 8,818,204 shares held by the Zvi and Ruth Alon Living
Trust (the "Living Trust") and (ii) 38,000 shares held by the Zvi Alon
Family Foundation (the "Foundation"). Mr. Alon and his wife, Ruth
Alon, are the trustees of the Living Trust and the Foundation.
Excludes 990,500 shares held by the Zvi and Ruth Alon 1993 Children's
Trust (the "Children's Trust"), of which Mr. Uzia Galil is sole
trustee.
(3) These shares are owned by Elron Electronic Industries, Ltd. (the
"Elron Shares"). Mr. Galil is Chairman of the Board of Directors,
President and Chief Executive Officer of Elron. Mr. Galil disclaims
beneficial ownership of the Elron Shares.
(4) Includes (i) 500,000 shares owned by Uzia and Ella Galil , (ii)
990,500 shares held by the Children's Trust, and (iii) 45,166 shares
issuable upon exercise of options that are exercisable within 60 days
of February 28, 1997. Mr. Galil is the sole trustee of the
Children's Trust however he disclaims beneficial ownership of the
shares that are held in the Children's Trust. The number of shares
also excludes the Elron Shares for which Mr. Galil disclaims
beneficial ownership. Mr. Galil is the Chairman of the Board of
Directors, President and Chief Executive Officer of Elron.
(5) Includes 204,654 shares issuable upon exercise of options that are
exercisable within 60 days of February 28, 1997.
5
<PAGE> 8
(6) Includes 34,999 shares issuable upon exercise of options that are
exercisable within 60 days of February 28, 1997.
(7) Includes 35,417 shares issuable upon exercise of options that are
exercisable within 60 days of February 28, 1997.
(8) Includes 24,667 shares issuable upon exercise of options that are
exercisable within 60 days of February 28, 1997.
(9) Includes 11,000 shares issuable upon exercise of options that are
exercisable within 60 days of February 28, 1997.
(10) Includes 355,903 shares issuable upon exercise of options that are
exercisable within 60 days of February 28, 1997.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(a)
Section 16(a) of the Exchange Act requires that the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent stockholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with except that one
Form 4 filed for Mr. Williams and two Form 4s filed for Mr. Miller were filed
late related to changes in beneficial ownership, and a Form 5 for Mr. Amaral
related to an option repricing and a Form 5 filed for Mr. Lawton related to an
option grant were filed late. In addition, an amended Form 4 will be filed for
Mr. Harrison reflecting additional options granted upon his election to the
Board of Directors in 1996.
6
<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's non-employee directors currently receive a fixed sum of
twelve thousand dollars ($12,000) in cash compensation per annum, payable
quarterly, for service on the Board of Directors or any Committee thereof. In
addition, non-employee directors may be reimbursed for certain expenses in
connection with attendance at Board and Committee meetings. Employee directors
do not receive separate compensation for their services on the Board of
Directors, although service on the Board may be considered when establishing
their compensation as employees.
DIRECTORS' PLAN
Non-employee directors of the Company are eligible to receive options
under the 1993 Directors' Stock Option Plan (the "Directors' Plan"). Option
grants under the Directors' Plan are non-discretionary. A total of 800,000
shares of Common Stock has been reserved for issuance under the Directors'
Plan. Pursuant to the terms of the Directors' Plan, each person that is
elected for the first time as a director of the Company and who is not
otherwise employed by the Company or an affiliate of the Company (a
"Non-Employee Director") automatically will be granted an option to purchase
40,000 shares of Common Stock (subject to adjustment as provided in the
Directors' Plan) upon the date of his or her election to the Board. At the
Annual Meeting of Stockholders of each year, each person who is then a
Non-Employee Director and has been a Non-Employee Director for at least three
months shall be granted an option to purchase 8,000 shares of Common Stock
(subject to adjustment as provided in the Directors' Plan).
In 1996 pursuant to the Directors' Plan, options to purchase 8,000
shares were granted on May 29, 1996 to each of Messrs. Bosch, Galil and Miller
at an exercise price of $16.625 per share, and an option to purchase 40,000
shares was granted to Mr. Harrison on July 18, 1996 at an exercise price of
$10.375 per share. All of these options were subsequently repriced to $6.00
per share on January 2, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of Zvi Alon, the Company's President, Chief Executive Officer and
the Chairman of the Board of Directors, and Uzia Galil, a director and the
father-in-law of Zvi Alon, participated in the deliberations of the
Compensation Committee concerning executive officer compensation. Mr. Galil
abstained from voting on Mr. Alon's compensation, and although Mr. Alon attends
meetings of the Committee, he does not participate in deliberations that relate
to his own compensation.
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table sets forth all compensation awarded, earned or
paid for services rendered in all capacities to the Company and its
subsidiaries during each of 1994, 1995 and 1996 to the Company's Chief
Executive Officer, the Company's two most highly compensated executive officers
other than the Chief Executive Officer who were serving as executive officers
at the end of 1996, and an individual for whom disclosure would have been
provided but for the fact that the individual was not serving as an executive
officer of the Company at the end of 1996 (collectively, the "Named Executive
Officers"). This information includes the dollar values of base salaries,
bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
----------------------------------- ---------------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY (1)($) BONUS ($) OPTIONS
--------------------------- ---- ------------ --------- --------------------
<S> <C> <C> <C> <C>
Zvi Alon . . . . . . . . . . . . . . 1996 302,500 90,750 --
Chairman of the Board and 1995 275,000 151,250 --
Chief Executive Officer 1994 191,000 130,098 --
Walter Amaral . . . . . . . . . . . . 1996 192,400 48,100 140,000 (2)
Sr. Vice President, Finance and 1995 127,187 93,625 100,000
Chief Financial Officer 1994 N/A N/A --
Patricia Roboostoff . . . . . . . . . 1996 133,533 33,383 128,000 (3)
Sr. Vice President, 1995 123,600 67,980 13,000
Human Resources 1994 8,182 -0- 80,000
Robert Williams . . . . . . . . . . . 1996 119,760 29,867 14,500 (4)
Vice President, Business Development 1995 117,700 64,735 10,500
and Corporate Marketing 1994 105,000 71,515 --
</TABLE>
_________________
(1) Includes amounts deferred pursuant to Section 401(k) of the Code, as
amended.
(2) Includes an original option grant of 40,000 shares and 100,000 of options
that were repriced in 1996.
(3) Includes an original option grant of 35,000 shares and 93,000 of options
that were repriced in 1996.
(4) Includes an original option grant of 4,000 shares and 10,500 of options
that were repriced in 1996.
8
<PAGE> 11
STOCK OPTION GRANTS AND EXERCISES
The Company has granted 582,500 options to its current executive
officers under its 1992 Employee Stock Option Plan (the "Option Plan"). As of
December 31, 1996, options to purchase a total of 4,093,612 shares were
outstanding under the Option Plan and options to purchase 3,674,480 shares
remained available for grant thereunder.
The following table sets forth certain information with respect to
stock options granted to the Named Executive Officers. The exercise price of
the options was set at the fair market value as of the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS
GRANTED TO
NUMBER OF EMPLOYEES EXERCISE
OPTIONS IN PRICE EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR ($/SHARE)(1) DATE PRESENT VALUE ($)(2)
---- -------- ----------- ------------ ---- --------------------
<S> <C> <C> <C> <C> <C>
Zvi Alon -- -- -- -- --
Walter Amaral 100,000 (3) 2.4% $11.13 04/24/05 $1,141,825
40,000 1.0% $10.38 07/17/06 $289,624
Patricia Roboostoff 80,000 (3) 2.0% $11.13 12/12/04 $634,917
13,000 (3) 0.3% $11.13 10/22/05 $210,459
35,000 0.9% $10.38 07/17/06 $246,453
Robert Williams 10,500 (3) 0.3% $11.13 10/22/05 $165,429
4,000 0.1% $10.38 07/17/06 $ 29,858
</TABLE>
____________________
1. On January 2, 1997, all options with an exercise price greater than $6.00
granted to Named Executive Officers, as well as to all other employees and
directors, were repriced to $6.00. There was no change in the vesting
schedules.
2. In determining the grant date present value of options, the Black-Scholes
valuation method was used. The assumptions used in this valuation included
an expected volatility of approximately .78, risk-free interest rates
ranging from 5.35 to 6.44 percent, no dividend yields, and terms ranging
from approximately 26 to 77 months.
3. These options grants to Named Executive Officers represent options that
were repriced to $11.13 on February 13, 1996, as were all options granted
to employees in 1995 and certain options granted in the fourth quarter of
1994 under the Option Plan. In addition, the vesting on the repriced
options was delayed six months.
9
<PAGE> 12
The following table sets forth certain information concerning the
number and value at December 31, 1996 of unexercised "in the money" options
held by the Named Executive Officers. The values set forth below have not
been, and may never be realized, and are based on the positive spread between
the respective exercise prices of outstanding stock options and the closing
price of the Company's Common Stock on December 31, 1996, which was $6.00.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
SHARES ACQUIRED OPTIONS AT FY-END FISCAL YEAR-END
NAME ON EXERCISE (#) VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Zvi Alon -- -- -- --
Walter Amaral -- -- 27,083 / 112,917 -0- / -0-
Patricia Roboostoff -- -- 28,333 / 99,667 -0- / -0-
Robert Williams 20,000 $314,375 179,654 / 58,250 $853,357 / $207,813
</TABLE>
10
<PAGE> 13
TEN-YEAR OPTION REPRICINGS (1)
The following table sets forth certain information related to the
repricing of stock options to Named Executive Officers during 1996. In
February 1996, all options granted to employees in 1995 and certain options
granted in the last quarter of 1994 were repriced to $11.13 per share by the
Company's Board of Directors. The vesting of all repriced options was delayed
six months.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
OPTION
EXERCISE TERM
NUMBER OF SECURITIES MARKET PRICE OF PRICE NEW REMAINING
UNDERLYING OPTIONS STOCK AT AT TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED TIME OF REPRICING($) REPRICING($) PRICE($) REPRICING
----- ---- -------------------- -------------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Zvi Alon -- -- -- -- -- --
Walter Amaral 2/13/96 100,000 $11.13 $16.13 $11.13 91 yrs
Patricia Roboostoff 2/13/96 80,000 $11.13 $12.63 $11.13 81 yrs
2/13/96 13,000 $11.13 $19.81 $11.13 91 yrs
Robert Williams 2/13/96 10,500 $11.13 $19.81 $11.13 9.75 yrs
</TABLE>
The Board of Directors determined that as a result of declines in the
price of the Company's stock, the incentive provided by the options previously
granted to all employees was insufficient to assist the Company in retaining
its employees. Employee retention had become a significant challenge for the
Company due to the extremely competitive nature of the employment marketplace,
which, combined with the Company's performance and declining stock price, had
lead to substantial turnover. To assist the Company in retaining its employees
by providing additional incentive to remain with the Company over the
long-term, the Board of Directors decided to reprice outstanding options,
including the options held by the executives in the table above. The Board
believed that the factors affecting the decision as to whether to reprice the
options held by officers were identical to those for all other employees, and
that it was in the interests of the Company to provide adequate incentive to
assist in employee, including executive officer, retention.
Zvi Alon
John Bosch
Uzia Galil
Darrell Miller
_________________________
(1) The material under this caption is not "soliciting material", is not deemed
filed with the Securities and Exchange Commission and is not to be incorporated
by reference in any filing of the Company under the Securities Act or the
Exchange Act, whether made before or after the date hereof and irrespective of
any general incorporation language in such filing.
11
<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION (1)
COMPENSATION PHILOSOPHY
The primary goal of the Company is to align compensation with the
Company's business objectives and performance. The Company's aim is to
attract, retain and reward executive officers and other key employees who
contribute to the long-term success of the Company and to motivate those
individuals to enhance long-term stockholder value. To establish this
relationship between executive compensation and the creation of stockholder
value, the Compensation Committee has adopted a total compensation package
comprised of base salary, bonus and stock option awards. Key elements of this
compensation package are:
o The Company pays competitively with leading software and high
technology companies with which the Company competes for talent.
o The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to
generate rewards that bring total compensation to competitive
levels.
o The Company provides significant equity-based incentives for
executives and other key employees to ensure that individuals are
motivated over the long term to respond to the Company's business
challenges and opportunities as owners and not just as employees.
EXECUTIVE OFFICER SALARY
Of the Company's current officers other than the Chief Executive
Officer, two joined the Company in 1996, one joined the Company in 1995, and
one joined the Company in 1994. With respect to the two officers hired in
1996, salary, potential bonus and stock option grants were determined on the
basis of negotiations between the Company and the officer with due regard to
the officers' experience, prevailing market conditions and internal equity.
Similarly, the Company negotiated with each of the other officers at the time
of their hiring and reached a level of compensation that the Company believed
was reasonably required to obtain the services of such officer.
In addition to reviewing the above considerations, the Compensation
Committee annually obtains and reviews salary surveys, including the Radford
Management and the SC/CHiPs Executive and Senior Management Surveys, for
similar positions in the software and high technology sectors in establishing
the annual executive officer compensation.
ANNUAL INCENTIVE COMPENSATION
A substantial portion of the cash compensation paid to the Company's
officers, including the Chief Executive Officer, is in the form of
discretionary bonus payments payable on a quarterly basis. The Compensation
Committee believes that the bonus compensation of the Chief Executive Officer
and the Company's other executive officers should be expressly linked to the
Company's performance. Consistent with this philosophy, a designated portion
of the bonus compensation is contingent upon corporate profits, the attainment
of specific business objectives and performance against personal performance
objectives. Bonus payments are based on a target bonus pool established at the
beginning of the year for each officer.
In awarding 1996 discretionary bonuses, the Compensation Committee
believed that only a portion of the Company's goals for the year were attained
and, accordingly, awarded only fifty percent of the bonus pool. This belief
was evidenced by a decrease in net revenues and net income in 1996 as compared
to 1995, and the poor performance of the Company's Common Stock.
_______________
(1) The material in this report is not "soliciting material", is not deemed
filed with the Securities and Exchange Commission and is not to be
incorporated by reference in any filing of the Company under the Securities
Act or the Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in such filing.
12
<PAGE> 15
LONG-TERM INCENTIVES
The Company's primary long-term incentive program presently consists
of the Option Plan and the 1993 Employee Stock Purchase Plan (the "Purchase
Plan"). The Option Plan utilizes vesting periods (generally four years) to
encourage key employees to continue in the employ of the Company. Through
option grants, executives receive significant equity incentives to build
long-term stockholder value. The exercise price of options granted under the
Option Plan generally is 100% of the fair market value of the underlying stock
on the date of grant. Employees receive value from these grants only if the
Company's Common Stock appreciates in the long term.
The Company established the Purchase Plan both to encourage employees
to continue in the employ of the Company and to motivate employees through
ownership interest in the Company. Under the Purchase Plan, employees,
including officers, may have up to 15% of their earnings withheld for purchases
of Common Stock on certain dates specified by the Compensation Committee. The
price of Common Stock purchased will be equal to 85% of the lower of the fair
market value of the Common Stock on the purchase date of the commencement date
or closing date of the relevant offering period.
In 1996, the Compensation Committee granted stock options to two of
the Company's officers in connection with the commencement of employment. For
certain of the continuing officers, additional stock options were granted in
1996 in order to encourage their continued employ and to align their interests
to those of the stockholders. Mr. Alon participated with the Compensation
Committee in awarding these grants. Mr. Alon was not eligible to receive
option grants under the Option Plan or to purchase stock under the Purchase
Plan.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The salary and potential bonus of the Chief Executive Officer also
were established by the Compensation Committee primarily on the basis of the
salary received by him in 1995, the Company's overall 1995 performance, and
pursuant to discussions between the Compensation Committee and the Chief
Executive Officer. In establishing compensation, the Compensation Committee
was mindful of the dependence on the Chief Executive Officer for the success
and direction of the Company. Accordingly, in 1996, Mr. Alon's base
compensation was increased from $275,000 to $302,500, an increase of 10%. His
bonus target was increased from 50% to 60% to further emphasize the correlation
between his potential compensation and the Company's overall performance.
While the salary and potential bonus established by the Compensation Committee
was significantly less than Chief Executive Officer compensation in other
software and high technology companies of a similar size, it was deemed
appropriate based on Mr. Alon's significant equity position in the Company.
Because of the Company's 1996 performance, Mr. Alon received less than
his targeted compensation ($393,250 versus $484,000) for fiscal 1996 and
substantially less than his actual 1995 compensation of $426,250. Because of
his ownership position in the Company, no options or shares were granted during
1996 to the Chief Executive Officer.
At the January 1997 meeting of the Compensation Committee, the
decision was made to not increase the Chief Executive Officer's targeted
compensation package for 1997 based on the Company's 1996 performance.
CERTAIN TAX CONSIDERATIONS
The Company does not believe that its compensation plans will result
in any limitations on its ability to deduct compensation under Section 162(m)
of the Code.
From the members of the Compensation Committee:
John Bosch
Uzia Galil
13
<PAGE> 16
PERFORMANCE MEASUREMENT COMPARISON (1) (2)
NETMANAGE, INC.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
INDEX 9/21/93 12/93 12/94 12/95 12/96
----- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
NetManage, Inc. 100 152 334 384 99
NASDAQ Stock Market - US 100 106 104 147 181
Hambrecht & Quist Technology 100 111 129 193 232
</TABLE>
(1) The total return on investment (change in year end stock price plus
reinvested dividends) for the Company, the NASDAQ Stock Market- US
Index (the "NASDAQ Index") and the Hambrecht and Quist Technology
Index (the "H&Q Technology Index"), based on September 21, 1993 = 100,
the day of the Company's Initial Public Offering. The performance of
the Company's stock over the period shown is not necessarily
indicative of future performance.
(2) The material under this caption is not "soliciting material," is not
deemed filed with the Securities and Exchange Commission and is not to
be incorporated by reference in any filing of the Company under the
Securities Act or the Exchange Act, whether made before or after the
date hereof and irrespective of any general incorporation language in
such filing.
14
<PAGE> 17
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain
officers and directors which provide, among other things, that the Company will
indemnify such officer or director, under the circumstances and to the extent
provided for therein, for expenses, damages, judgments, fines and settlements
he may be required to pay in actions or proceedings which he is or may be made
a party by reason of his position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be
presented for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the persons named
in the accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
WALTER D. AMARAL
Secretary
April 18, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS,
NETMANAGE, INC., 10725 NORTH DE ANZA BOULEVARD, CUPERTINO, CALIFORNIA 95014 OR
THROUGH THE COMPANY'S WORLDWIDE WEB PAGE AT http://www.netmanage.com.
15
<PAGE> 18
DETACH HERE NTM F
P NETMANAGE, INC.
R PROXY SOLICITED BY BOARD OF DIRECTORS
O FOR ANNUAL MEETING MAY 30, 1997
X
Y
Zvi Alon and Walter Amaral, or either of them, each with the power
of substitution, hereby are authorized to represent and vote as designated
on the reverse side the shares of the undersigned at the Annual Meeting of
Stockholders of NetManage, Inc. to be held Friday, May 30, 1997, at 9:00
a.m., local time, at the Company's offices located at 10725 North De Anza
Boulevard, Cupertino, California, or at any adjournment of the Annual
Meeting.
Shares represented by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the proxies will have
authority to vote FOR the Election of Director and FOR Item 2.
-----------
SEE REVERSE
SIDE
------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 19
DETACH HERE NTM F
Please mark
[X] votes as in
this example.
The Board of Directors recommends a vote FOR the Election of Director
and FOR Item 2.
1. Election of Director
Nominee: Zvi Alon
FOR WITHHELD
[ ] [ ]
2. Ratification of the appointment of FOR AGAINST ABSTAIN
Arthur Andersen LLP as the Company's
independent auditors for the current [ ] [ ] [ ]
fiscal year.
3. Upon any other matters which may properly come before the meeting.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
PLEASE MARK, DATE, SIGN AND RETURN.
Please sign exactly as your name appears on this proxy. If signing for estates,
trusts or corporations, title or capacity should be stated. If shares are held
jointly, each holder should sign.
Signature ___________ Date: __________ Signature ___________ Date: __________
