<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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(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 21, 1998
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
Thursday, May 21, 1998 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 two directors to hold office until the Annual Meeting of
Stockholders in the year 2001.
2. To ratify the selection of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending December 31,
1998.
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 20, 1998 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
Gary Anderson
Secretary
Cupertino, California
April 9, 1998
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 Thursday, May 21, 1998 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 9, 1998 to all
stockholders entitled to vote at the Annual Meeting.
An annual report for the fiscal year ended December 31, 1997 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. 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
20, 1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 20, 1998, the Company had outstanding and entitled to
vote 43,896,096 shares of Common Stock. A majority, or 21,948,049 shares, of the
Common Stock will constitute a quorum for the transaction of business. Each
holder of record of Common Stock on March 20, 1998 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.
<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 1999 Annual Meeting of Stockholders must be received by the Company
not later than December 4, 1998 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 six members. There are
two directors in the class to be elected at this meeting, John Bosch and Dr.
Shelley Harrison, whose terms of office expire in 1998. Mr. Bosch is currently a
director of the Company who was previously elected by the stockholders. Dr.
Harrison was elected by the Board of Directors to fill a vacancy in July 1996.
If elected at the Annual Meeting, Mr. Bosch and Dr. Harrison would serve until
the 2001 annual meeting and until their successors are elected and have
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. Each of the persons nominated for election has agreed to serve if
elected, and the Company has no reason to believe that the nominees 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.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
The name of the nominees and certain information about them are set
forth below:
John Bosch, age 63, 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.
<PAGE> 5
Dr. Shelley Harrison, age 55, 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 directors of Globecomm
Systems, Inc. and 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR FOR THE NAMED NOMINEES.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Uzia Galil, age 72, 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 Ltd.
from 1967 to 1978. Mr. Galil also serves as Chairman of the Board of Directors
of Zoran Corporation, and as a director of Elscint Ltd., Elbit Systems Ltd.,
Elbit Medical Imaging Ltd., Orbotech Ltd., 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. Mr. Galil is the recipient of the Israel Prize 1997 for his special
contribution to the high technology industry in Israel. 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, the Chairman of
the Board of Directors of the Company and the Company's President and Chief
Executive Officer.
Darrell Miller, age 51, 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.
DIRECTOR CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
Zvi Alon, age 46, 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 33%-owned subsidiary of the Company.
Mr. Alon is the son-in-law of Uzia Galil, a director of the Company.
<PAGE> 6
Abraham Ostrovsky, age 55, joined the board of directors of the Company
in January 1998. Mr. Ostrovsky has served as Chairman of the Board of Jetform
Corporation, a provider of electronic forms and enterprise workflow products,
since January 1996 and served as its Chief Executive Officer from 1991 to 1995.
Mr. Ostrovsky also served as Chairman of the Board and Chief Executive Officer
of Compressent, a company which develops and licenses color facsimile and
communications software, from March 1996 to December 1997. Mr. Ostrovsky also
serves as a director of SEEC, Inc. and Indigo, Inc. Mr. Ostrovsky attended the
University of Miami.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 1998, 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.
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 four times during 1997.
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 eleven times during 1997 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, Mr. Alon confers with the Compensation Committee.
The Compensation Committee met twice during 1997.
During the fiscal year ended December 31, 1997, 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, 1998 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.
<PAGE> 7
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.
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 January 31, 1998 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) ................................. 8,906,204 20.4
Elron Electronic Industries, Ltd.(3) ......... 925,000 2.1
P.O. Box 1573
Haifa 31015, Israel
Uzia Galil (4) ............................... 1,547,500 3.5
Patricia Roboostoff (5) ...................... 55,778 *
John Bosch (6) ............................... 37,251 *
Darrell Miller (7) ........................... 25,001 *
Shelley Harrison (8) ......................... 16,667 *
D. Patrick Linehan ........................... 0 *
Walter Amaral ................................ 0
Abraham Ostrovsky ............................ 0 *
All executive officers and directors
as a group (9 persons)(9) 10,588,401 24.2
</TABLE>
- ----------------
* Less than one percent.
(1) Based on 43,679,669 shares of Common Stock outstanding as of January 31,
1998.
<PAGE> 8
(2) Includes (i) 8,868,204 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) 57,000 shares issuable upon
exercise of options that are exercisable within 60 days of January 31,
1998. 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 (i) 2,445 shares owned by the Splinter-Roboostoff Revocable Trust
and (ii) 53,333 shares issuable upon exercise of options that are
exercisable within 60 days of January 31, 1998.
(6) Includes 36,501 shares issuable upon exercise of options that are
exercisable within 60 days of January 31, 1998.
(7) Includes 25,001 shares issuable upon exercise of options that are
exercisable within 60 days of January 31, 1998.
(8) Includes 16,667 shares issuable upon exercise of options that are
exercisable within 60 days of January 31, 1998.
(9) Includes 188,502 shares issuable upon exercise of options that are
exercisable within 60 days of January 31, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997, 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 5 filed for Mr. Gary Anderson and one Form 5 for Mr. Patrick Linehan, both
relating to one option grant, were filed late.
<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. 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 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 1997 pursuant to the Directors' Plan, options to purchase 8,000
shares were granted on May 30, 1997 to each of Messrs. Bosch, Harrison, Galil
and Miller at an exercise price of $3.4375 per share. These options were
subsequently repriced to $3.0625 per share on September 5, 1997 (see "Report of
Board of Directors on Repricing of Options"). On January 27, 1998 an option to
purchase 40,000 shares was granted to Mr. Ostrovsky at a price of $2.6563.
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.
EMPLOYMENT CONTRACT
In July 1997, the Company entered into an employment contract with one
of its Named Executive Officers, Mr. Patrick Linehan. The employment contract
provides for the continuation of Mr. Linehan's current base salary f through
July 1998 in the event he is terminated without cause by the Company prior to
July 1998. The employment contract also contains a non-competition clause
whereby Mr. Linehan may not engage in any competition with the Company for a
two-year period commencing in July 1997.
<PAGE> 10
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 1995, 1996 and 1997 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 1997
whose total salary and bonus exceeded $100,000, and a former executive officer
who would have been among the Company's executive officers but for the fact that
the individual was not serving as an executive officer of the Company at the end
of 1997 (collectively, the "Named Executive Officers"). This information
includes the dollar values of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether paid or
deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------------------ ------------
SECURITIES
SALARY(1) UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($) BONUS($) OPTIONS
- --------------------------- ---- --------- -------- ----------
<S> <C> <C> <C> <C>
Zvi Alon ........................ 1997 302,500 45,375 -0-
Chairman of the Board and 1996 302,500 90,750 -0-
Chief Executive Officer 1995 275,000 151,250 -0-
Patricia Roboostoff ............. 1997 143,359 18,750 346,000(2)
Sr. Vice President, 1996 133,533 33,383 128,000(3)
Human Resources 1995 123,600 67,980 13,000
D. Patrick Linehan(4) ........... 1997 126,576 31,250 312,500
Sr. Vice President and General 1996 -- -- --
Manager, Core Products Division 1995 -- -- --
Walter Amaral(5) ................ 1997 134,277 - 215,000(6)
Sr. Vice President, Finance and 1996 192,400 48,100 140,000(7)
Chief Financial Officer 1995 127,187 93,625 100,000
</TABLE>
- --------------
(1) Includes amounts deferred pursuant to Section 401(k) of the Code, as
amended.
(2) Includes an original option grant of 75,000 shares and 271,000 of options
that were repriced in January and September 1997.
(3) Includes an original option grant of 35,000 shares and 93,000 of options
that were repriced in February 1996.
(4) Mr. Linehan joined the Company in July 1997.
(5) Mr. Amaral served as the Company's Sr. Vice President of Finance and Chief
Financial Officer until his resignation from the Company in August 1997.
(6) Includes an original option grant of 75,000 shares and 140,000 of options
that were repriced in January 1997.
(7) Includes an original option grant of 40,000 shares and 100,000 of options
that were repriced in February 1996.
<PAGE> 11
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers in 1997. The exercise price of
the options was set at the fair market value as of the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE GRANT DATE
OPTIONS IN PRICE EXPIRATION PRESENT VALUE
NAME GRANTED FISCAL YEAR ($/SHARE) DATE ($)(1)
---- -------- ----------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Zvi Alon -- -- -- -- --
Patricia Roboostoff 128,000(2) 1.7% $ 6.00 (2) $ 390,945
15,000(3) 0.2% $ 5.38 01/23/07 $ 76,489
60,000(4) 0.8% $ 2.81 04/15/07 $ 138,201
143,000(5) 1.9% $ 3.06 (5) $ 72,319
D. Patrick Linehan 312,500(6) 4.2% $ 3.06 09/05/07 $ 864,369
Walter Amaral 140,000(7) 1.9% $ 3.06 (7) $ 68,024
15,000(8) 0.2% $ 5.38 01/23/07 $ 76,489
60,000(9) 0.8% $ 2.81 04/15/07 $ 138,201
</TABLE>
- --------------------
1. 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 1.83, risk-free interest rates
ranging from 4.93 to 5.66 percent, no dividend yields, and an expected term
from vest date of approximately seven months.
2. This option grant represents the January 1997 reprice of options granted in
prior years. The number of shares, expiration dates and related vesting
terms are as follows: (i) 80,000 shares expiring on 12/13/04 and vesting
21,666 shares on 8/13/96 then the balance monthly thereafter; (ii) 13,000
shares expiring on 10/23/05 and vesting 417 shares on 7/1/99 then the
balance monthly thereafter; and (iii) 35,000 shares expiring on 7/18/06 and
vesting 8,000 shares monthly through 1999, 15,000 shares monthly through
2000 and 12,000 shares monthly through 2001. Prior to the repricing, the
exercise price on these options ranged from $10.375 to $11.125.
3. This option grant vests monthly throughout twelve months beginning 1/1/02.
This option was subsequently repriced to $3.06 in September 1997.
4. This option grant has a 50% cliff vesting on 4/15/98 and another 50% cliff
vesting on 4/15/99.
5. This option grant represents the September 1997 reprice of options
previously granted. For the terms of such repriced options, please see
footnotes (2) and (3) above.
6. This option grant has a 20% cliff vesting on 8/1/98 and then vests monthly
thereafter.
<PAGE> 12
7. This option grant represents the January 1997 reprice of options granted in
prior years. The number of shares, expiration dates and related vesting
terms are as follows: (i) 100,000 shares expiring on 4/25/05 and a 25%
cliff vesting on 11/1/96 then the balance monthly thereafter; and (ii)
40,000 shares expiring on 7/18/06 and vesting 20,000 shares monthly
throughout 2000 and 20,000 shares monthly throughout 2001. Prior to the
repricing, the exercise price on these options ranged from $10.375 to
$11.125.
8. This option grant vests monthly over twelve months beginning 1/1/02.
9. This option grant has a 50% cliff vesting on 4/15/98 and another 50% cliff
vesting on 4/15/99.
The following table sets forth certain information concerning the number
and value at December 31, 1997 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, 1997, which was $2.63 as reported by the
NASDAQ National Market.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
SHARES UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT FY-END FISCAL YEAR-END
NAME ON EXERCISE(#) VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Zvi Alon -- -- -0- -0-/-0-
Patricia Roboostoff -- -- 48,333/154,667 -0-/-0-
D. Patrick Linehan -- -- -0-/312,500 -0-/-0-
Walter Amaral(1) -- -- -0-/-0- -0-/-0-
</TABLE>
- -------------------
(1) Mr. Amaral was not employed at the Company as of 12/31/97 and therefore had
no outstanding options at the end of the year.
<PAGE> 13
TEN-YEAR OPTION REPRICINGS (1)
The following table sets forth certain information related to the
repricing of stock options to any executive officer since the Company's initial
public offering in 1993. 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 schedule on
these repriced options was delayed six months. All out-of-the-money options
previously granted to employees were subsequently repriced by the Company's
Board of Directors to per $6.00 per share in January 1997 and to $3.06 in
September 1997. There was no change in the vesting schedule for the options
repriced in 1997.
<TABLE>
<CAPTION>
Market Length
Number of Price of Exercise of Original
Securities Stock at Price at Option Term
Underlying Time of Time of New Remaining
Options Repricing Repricing Execise at Date of
Name Date Repriced ($) ($) Price($) Repricing
---- -------- ---------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Zvi Alon -- -0- -0- -0- -0- --
President & CEO
Patricia Roboostoff 2/13/96 80,000 $11.13 $12.63 $11.13 8.83 yrs
Sr. VP Human 2/13/96 13,000 $11.13 $19.81 $11.13 9.75 yrs
Resources 01/02/97 80,000 $ 6.00 $11.13 $ 6.00 7.95 yrs
01/02/97 13,000 $ 6.00 $11.13 $ 6.00 8.80 yrs
01/02/97 35,000 $ 6.00 $10.38 $ 6.00 9.54 yrs
09/05/97 13,000 $ 3.06 $ 6.00 $ 3.06 8.13 yrs
09/05/97 35,000 $ 3.06 $ 6.00 $ 3.06 8.86 yrs
09/05/97 80,000 $ 3.06 $ 6.00 $ 3.06 7.27 yrs
09/05/97 15,000 $ 3.06 $ 6.00 $ 3.06 9.38 yrs
D. Patrick Linehan -- -0- -0- -0- -0- --
Sr. VP & General
Manager
Walter Amaral 2/13/96 100,000 $11.13 $16.13 $11.13 9.25 yrs
Sr. VP & CFO 01/02/97 100,000 $ 6.00 $11.13 $ 3.06 8.31 yrs
01/02/97 40,000 $ 6.00 $10.38 $ 3.06 9.54 yrs
Robert Williams 2/13/96 10,500 $11.13 $19.81 $11.13 9.75 yrs
VP Business
Development
</TABLE>
REPORT OF THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS
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. The Company's stock price fell from $23.25 at the end of 1995 to
$10.88 at the end of the first quarter of 1996, then fell again to $6.00 at the
end of 1996 and to $3.72 at the end of the third quarter of 1997. 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 considered other alternatives such
as the issuance of more shares at the lower prices, but felt that the effects of
doing so would be too dilutive. As such, in
<PAGE> 14
February 1996 the Board repriced all options granted to employees in 1995 and
certain options granted in the last quarter of 1994 to $11.13; the vesting on
these repriced options was delayed six months. Due to the continued decline in
the stock price throughout 1996 and the 1997 the Board repriced all out-of-the
money options in January 1997 and September 1997, with no change in the current
vesting schedules. 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.
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
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 SALARIES
Of the Company's current officers other than the Chief Executive
Officer, two joined the Company in 1997 and one joined the Company in 1994. With
respect to the two officers hired in 1997, 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 obtained and reviewed 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 1997 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 1997 discretionary bonuses, the Compensation Committee
believed that only a portion of the Company's goals for the year were attained
and, accordingly, awarded only twenty-five percent (25%) of the bonus pool. This
belief was evidenced by a decrease in net revenues and net income in 1997 as
compared to 1996 and 1995, and the poor performance of the Company's Common
Stock.
<PAGE> 16
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 generally utilizes five-year vesting periods (increased in 1997
from the prior four-year practice) for options granted on date of hire. There is
a 20% cliff vesting at the end of the first year of the grant and then monthly
vesting thereafter to encourage key employees to continue in the employ of the
Company. Subsequent to an employee's date of hire, additional options may be
granted, generally with one- to two-year vesting schedules. 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 commencement date or closing date of the
relevant offering period.
In 1997, 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
1997 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 1996, the Company's overall 1996 performance, and pursuant to
discussions between the Compensation Committee and the Chief Executive Officer.
Although Mr. Alon's salary and targeted bonus potential was significantly less
than Chief Executive Officer compensation in other software and high technology
companies, the decision was made to not increase his targeted compensation
package for 1997 based on Mr. Alon's significant equity position in the Company
and the Company's overall 1996 performance.
Because of the Company's 1997 performance, Mr. Alon received less than
his targeted compensation ($347,875 versus $484,000) for fiscal 1997 and
substantially less than his actual 1996 compensation of $393,250 and 1995
compensation of $426,250. Because of his ownership position in the Company, no
options or shares were granted during 1997 to the Chief Executive Officer.
At the January 1998 meeting of the Compensation Committee, the decision
was made to not increase the Chief Executive Officer's targeted compensation
package for 1998 based on the Company's 1997 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
<PAGE> 17
PERFORMANCE MEASUREMENT COMPARISON (1) (2)
NETMANAGE, INC.
[OBJECT OMITTED]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------
9/21/93 12/93 12/94 12/95 12/96 12/97
------- ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
NetManage, Inc 100.00 151.55 334.02 383.51 98.97 46.39
NASDAQ Stock Market (U.S.) 100.00 106.48 104.08 147.20 181.05 222.17
Hambrecht & Quist Technology 100.00 109.73 131.81 197.08 244.94 287.17
</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.
<PAGE> 18
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
GARY ANDERSON
Secretary
April 9, 1998
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, 1997 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.
<PAGE> 19
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
The Board of Directors recommends a vote FOR the Election of Directors and FOR
Item 2.
1. Election of Directors.
Nominees: John Bosch and Dr. Shelley Harrison
FOR WITHHELD
[ ] BOTH [ ] FROM BOTH
NOMINEES NOMINEES
[ ] _______________________________________
For both nominees except as noted above
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: ____________________
<PAGE> 20
DETACH HERE
PROXY
NETMANAGE, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING MAY 21, 1998
Zvi Alon and Gary Anderson, 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 Thursday, May 21, 1998, 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 Directors and FOR Item 2.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
------------ ------------
SEE REVERSE SEE REVERSE
SIDE SIDE
------------ ------------
