<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 27, 1999
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 27, 1999 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 2002.
2. To ratify the selection of Arthur Andersen LLP as independent auditors
of the Company for its fiscal year ending December 31, 1999.
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 April 1, 1999 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 R. Anderson
Secretary
Cupertino, California
April 22, 1999
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 1999 ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1999
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 of the Company to be held on Thursday, May 27, 1999 at
9:00 a.m., local time (the "Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Meeting will be held at the offices of the Company at 10725
North De Anza Boulevard, Cupertino, California 95014. This proxy statement and
the accompanying proxy card are first being mailed to all stockholders entitled
to vote at the Meeting on or about April 22, 1999.
An annual report for the year ended December 31, 1998 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 the Company's Common Stock, par
value $0.01 per share ("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 those 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 those services, but they may be reimbursed for
their out-of-pocket expenses. The Company has retained a proxy solicitation
firm, Morrow & Company, to aid it in the solicitation process, at a cost to the
Company of approximately $7,000 plus reimbursement of reasonable expenses.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of the Common Stock at the close of business on
April 1, 1999 (the "Record Date") will be entitled to notice of and to vote at
the Meeting. At the close of business on the Record Date, the Company had
outstanding and entitled to vote 65,705,665 shares of Common Stock. A majority
of such shares present at the Meeting, in person or by proxy, will constitute a
quorum for the transaction of business. Abstentions and broker non-votes will be
counted in determining whether a quorum is present.
Each holder of record of Common Stock at the close of business on the
Record Date will be entitled to one vote for each share held on all matters to
be voted upon at the Meeting. All votes cast at the Meeting, in person or by
proxy, 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.
As of the Record Date, the directors and executive officers of the Company
as a group beneficially owned 11,650,484 shares (approximately 17.73%) of the
outstanding Common Stock and have indicated their intention to vote all of their
shares over which they have voting control in favor of the proposals described
in the accompanying Notice of Annual Meeting.
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 stockholder may revoke a proxy by
(a) 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
(b) attending the Meeting and informing the Secretary in writing that such
stockholder wishes to vote 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 2000 Annual Meeting of Stockholders (the "2000 Annual Meeting") must
be received by Secretary of the Company at its principal executive offices,
10725 North De Anza Boulevard, Cupertino 95014, no later than December 24, 1999
in order to be considered for possible inclusion in the proxy statement and form
of proxy relating to the 2000 Annual Meeting.
In addition, proposals of the Company's stockholders that such stockholders
intend to present at the 2000 Annual Meeting, but not include in the Company's
proxy statement and form of proxy relating to the 2000 Annual Meeting (a
"Non-Rule 14a-8 Proposal"), must be received by Secretary of the Company at its
principal executive officers no later than March 28, 2000 and no earlier than
February 27, 2000. In the event that the Company does not receive timely notice
with respect to a Non-Rule 14a-8 Proposal, management of the Company would use
its discretionary authority to vote the shares it represents as the Board of
Directors may recommend.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and Bylaws provide that the
Company's Board of Directors (the "Board of Directors" or the "Board") shall be
divided into three classes, with each class consisting, as nearly as possible,
of one-third of the total number of directors and 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, Uzia Galil and Darrell
Miller (the "Nominees"), each of whom is an existing director whose term of
office expires at the Meeting. If elected at the Meeting, Messrs. Galil and
Miller would each serve until the 2002 Annual Meeting of Stockholders and until
his successor is elected and has qualified, or until his 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. Accordingly, the
nominees for election as directors at the Meeting who receive the greatest
number of votes properly cast for the election of directors shall be elected
directors; abstentions and broker non-votes will not have any effect on the
outcome of the vote on the election of directors. Shares of Common Stock may not
be voted cumulatively with respect to the election of directors.
IF NO INSTRUCTIONS ARE INDICATED IN THE PROXIES, SHARES OF COMMON STOCK
REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED, IF AUTHORITY TO DO SO IS
NOT WITHHELD, FOR THE ELECTION OF THE NOMINEES. If either 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 Nominees has agreed to serve if elected, and the Company
has no reason to believe that the Nominees will be unable to serve.
2
<PAGE> 5
Set forth below is biographical information for each Nominee and each
person whose term of office as a director will continue after the Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
Uzia Galil, age 73, has served as a director of the Company since December
1991. Mr. Galil is the founder and Chairman of the Board of Directors of Elron
Electronic Industries, Ltd. ("Elron"), and also has been its President and Chief
Executive Officer since its formation. Mr. Galil has also 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-Israel Institute
of Technology in Haifa, Israel (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 52, 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 with 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
THE NAMED NOMINEES.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
Zvi Alon, age 47, 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. Mr. Alon is
the son-in-law of Uzia Galil, a director of the Company and a Nominee.
Abraham Ostrovsky, age 56, was appointed to the Board of Directors of the
Company in January 1998, filling an open vacancy on the Board resulting from an
increase in the authorized number of directors. 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 IMSI.
Mr. Ostrovsky attended the University of Miami.
3
<PAGE> 6
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
John Bosch, age 64, 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 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 56, has served as a director the Company since
July 1996. 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.
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 three times during 1998.
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 six times during 1998 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 once during 1998.
During the fiscal year ended December 31, 1998, 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, 1999 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Meeting. Arthur Andersen LLP has
audited
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<PAGE> 7
the Company's financial statements since its inception in 1990. Representatives
of Arthur Andersen LLP are expected to be present at the 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 of Common
Stock present, in person or by proxy, and entitled to vote at the Meeting will
be required to ratify the selection of Arthur Andersen LLP. Accordingly,
abstentions will have the same effect as negative votes on this proposal, but
broker non-votes will not counted for any purpose in determining whether this
proposal has been approved. IF NO INSTRUCTIONS ARE INDICATED IN THE PROXIES,
SHARES OF COMMON STOCK REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED,
IF AUTHORITY TO DO SO IS NOT WITHHELD, IN FAVOR OF THIS PROPOSAL.
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 March 25, 1999 by: (i) each director of the
Company, including each Nominee; (ii) each of the Named Executive Officers, as
defined under "Executive Compensation -- Summary Compensation" below; (iii) all
executive officers and directors of the Company as a group; and (iv) all those
known by the Company to be the beneficial owners of more than 5% of the
outstanding Common Stock. Except as otherwise indicated below, 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 person, except as otherwise indicated and subject to community
property laws where applicable. Except as otherwise 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)................................................. 9,056,204 13.78 %
Elron Electronic Industries, Ltd.(3)........................ 925,000 1.41
P.O. Box 1573
Haifa 31015, Israel
Gary R. Anderson............................................ -0- *
John Bosch(4)............................................... 750 *
Uzia Galil(5)............................................... 1,490,500 2.27 %
Shelley Harrison............................................ -0- *
D. Patrick Linehan.......................................... 17,476 *
Darrell Miller.............................................. -0- *
Abraham Ostrovsky........................................... 50,000 *
Patricia Roboostoff(6)...................................... 110,554 *
All executive officers and directors as a group (9
persons)(7)............................................... 11,650,484 17.73 %
</TABLE>
<TABLE>
<CAPTION>
OTHER 5% BENEFICIAL OWNERS
--------------------------
<S> <C> <C>
LeRoy C. Kopp(8)............................................ 4,088,442 6.22 %
Kopp Holding Company
Kopp Investment Advisors, Inc.
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
</TABLE>
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<PAGE> 8
- ---------------
* Less than 1%.
(1) Based on 66,366,649 shares of Common Stock outstanding as of February 26,
1999.
(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 (the "Elron Shares") are owned by Elron Electronic Industries,
Ltd., of which Mr. Galil is Chairman of the Board, President and Chief
Executive Officer. Mr. Galil disclaims beneficial ownership of these shares.
(4) Such shares are held by Mr. Bosch's spouse. Mr. Bosch disclaims beneficial
ownership of these shares.
(5) Includes (i) 500,000 shares owned by Uzia and Ella Galil and (ii) 990,500
shares held by the Children's Trust. 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. See
note (3) above.
(6) Includes (i) 2,445 shares owned by the Splinter-Roboostoff Revocable Trust
and (ii) 102,945 shares issuable upon exercise of options that are
exercisable within 60 days of March 25, 1999. Ms. Roboostoff ceased to be an
executive officer of the Company in September 1998, and her employment with
the Company terminated on February 19, 1999.
(7) Includes 102,945 shares issuable upon exercise of options that are
exercisable within 60 days of March 25, 1999.
(8) Based on Amendment No. 1 to Schedule 13G dated February 2, 1999 filed by
such persons as a group: (i) Kopp Investment Advisors, Inc. ("KIA")
beneficially owns 3,286,425 shares, has sole voting power with respect to
574,964 shares, has sole dispositive power with respect to 241,427 shares
and has shared dispositive power with respect to 3,044,998 shares; (ii) Kopp
Holding Company ("KHC") beneficially owns the 3,044,998 shares that are
beneficially owned by KIA, a wholly-owned subsidiary of KHC, but does not
have sole or shared voting or dispositive power with respect to any of such
shares; and (iii) LeRoy C. Kopp, who holds all of the outstanding capital
stock of KHC, beneficially owns and has sole voting and sole dispositive
power with respect to 802,017 shares. In addition, according to such
Amendment, (i) each such person disclaims beneficial ownership of the shares
owned by the other such persons and (ii) 3,077,015 of such shares are held
in a fiduciary or representative capacity and none of KIA, KHC or LeRoy C.
Kopp has the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, such shares.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Exchange Act requires that the Company's directors and
executive officers and persons who beneficially own more than 10% of a
registered class of the Company's equity securities file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of the Common Stock and other equity securities of the
Company. Officers, directors and greater than 10% beneficial owners 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 year ended December 31, 1998, all Section
16(a) filing requirements applicable to its executive officers, directors and
greater than 10% beneficial owners were complied with except that Ms. Roboostoff
neither filed a Form 5 to report an option grant nor delivered to the Company a
written representation that no other reports were required.
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<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's non-employee directors currently receive a fixed sum of
$12,000 in cash compensation per year, 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.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Non-employee directors of the Company are eligible to receive options under
the 1993 Non-Employee 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. Under 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") is 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 each Annual Meeting of Stockholders, each person who is then a
Non-Employee Director and has been a Non-Employee Director for at least three
months is granted an option to purchase 8,000 shares of Common Stock (subject to
adjustment as provided in the Directors' Plan).
Pursuant to the Directors' Plan, options to purchase 8,000 shares were
granted on May 21, 1998, the date of the Company's 1998 Annual Meeting of
Stockholders, to each of Messrs. Bosch, Harrison, Galil, Miller and Ostrovsky at
an exercise price of $3.53125 per share. On October 7, 1998, pursuant to the
Option Exchange Program described below and under "Ten-Year Option Repricings"
(the "Option Exchange Program"), each such person exchanged such option for a
new option to purchase 6,349 shares at a price of $1.00 per share, which new
options were granted under the Company's 1992 Stock Option Plan. On January 27,
1998, in connection with his initial appointment to the Board and pursuant to
the Directors' Plan, an option to purchase 40,000 shares was granted to Mr.
Ostrovsky at a price of $2.65625 per share, which Mr. Ostrovsky exchanged on
October 7, 1998 for an option to purchase 31,746 shares at a price of $1.00 per
share pursuant to the Option Exchange Program. Under the Option Exchange
Program, all employees and directors of the Company were given the opportunity
to exchange any or all of their existing options for new options covering a
number of shares determined under a formula that took into account the original
number of shares, term and vesting schedule of the existing option, at an
exercise price of $1.00 per share, the fair market value of the Common Stock on
the exchange date of October 7, 1998. Each such option vests as to 25% of the
shares subject to the option on the first anniversary of the grant date and as
to 1/36th of the remaining shares each month thereafter, so that the option is
vested in full on the fourth anniversary of the grant date; each such option has
a term of 10 years.
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 during 1998 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.
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<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 1996, 1997 and 1998 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 1998
whose total salary and bonus exceeded $100,000, and a former executive officer
who would have been among the Company's most highly compensated executive
officers for 1998 but for the fact that the individual was not serving as an
executive officer of the Company at the end of 1998 (collectively, the "Named
Executive Officers"). This information includes the dollar values of base
salaries, bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- -----------------
SECURITIES UNDER- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1)($) BONUS($) LYING OPTIONS COMPENSATION
--------------------------- ---- ------------ -------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Zvi Alon................................ 1998 302,500 45,375 325,000 --
Chairman of the Board and 1997 302,500 45,375 -- --
Chief Executive Officer 1996 302,500 90,750 -- --
Gary R. Anderson(2)..................... 1998 180,000 22,500 150,000(3) --
Sr. Vice President, Finance and 1997 5,074 -- 90,000(4) --
Chief Financial Officer 1996 -- -- -- --
D. Patrick Linehan(5)................... 1998 250,000 31,250 248,015(6) --
Sr. Vice President and General 1997 126,576 31,250 312,500(6) --
Manager, Core Business Unit 1996 -- -- -- --
Patricia Roboostoff(7).................. 1998 165,000 -- 15,000 35,796(8)
Former Sr. Vice President, 1997 143,359 18,750 346,000(9)
Human Resources 1996 133,533 33,383 128,000(10)
</TABLE>
- ---------------
(1) Includes amounts deferred pursuant to Section 401(k) of the Tax Reform Act
of 1986, as amended.
(2) Mr. Anderson joined the Company in December 1997.
(3) Includes (i) an option for 71,428 shares granted in October 1998, pursuant
to the Option Exchange Program, in exchange for the 1997 original option
grant for 90,000 shares and (ii) an option for 78,572 shares granted in
December 1998.
(4) In October 1998, this option was exchanged for a new option as described in
note (3) above.
(5) Mr. Linehan joined the Company in July 1997.
(6) The option for 248,015 shares was granted in October 1998, pursuant to the
Option Exchange Program, in exchange for the 1997 option for 312,500
shares.
(7) Ms. Roboostoff ceased to be an executive officer of the Company in
September 1998, and her employment with the Company terminated in February
1999.
(8) Amount consists of (i) $15,865 in vacation accrued and paid in 1998 and
(ii) $19,931 in salary for the period from January 1 through February 19,
1999, Ms. Roboostoff's termination date, paid in 1998.
(9) Includes an original option grant of 75,000 shares and 271,000 of options
that were repriced in January and September 1997.
(10) Includes an original option grant of 35,000 shares and 93,000 of options
that were repriced in February 1996.
8
<PAGE> 11
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers in 1998. Except as otherwise
indicated below, the exercise price of the options was set at the fair market
value as of the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER
OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE VALUE($)(1)
---- ---------- ------------ --------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Zvi Alon..................... 325,000(2) 6.21% $ 1.891(3) 12/24/08 $495,316
Gary R. Anderson............. 71,428(2)(4) 1.37% $ 1.00 10/07/08 $ 68,914
78,572(2) 1.50% $1.71875 12/24/08 $130,359
D. Patrick Linehan........... 248,015(2)(5) 4.74% $ 1.00 10/07/08 $239,285
Patricia Roboostoff.......... 15,000(6) 0.29% $2.65625 1/27/08(6) $ 39,426
</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 2.07, risk-free interest rates
ranging from 4.23% to 5.83%, no dividend yields, and an expected term from
vest date of approximately 0.28 months.
(2) This option vests as to 25% of the shares on the first anniversary of the
date of grant and as to 1/36 of the remaining shares monthly thereafter, so
that the option is vested in full on the fourth anniversary of the date of
grant.
(3) The exercise price is equal to 110% of the fair market value of the Common
Stock on the date of grant, as required by the terms of the Company's 1992
Stock Option Plan for incentive stock options (as defined in Section 422 of
the Internal Revenue Code) granted to holders of more than 10% of the
outstanding Common Stock.
(4) This option was granted, pursuant to the Option Exchange Prorgram, in
exchange for an option for 90,000 shares granted in 1997.
(5) This option was granted, pursuant to the Option Exchange Program, in
exchange for an option for 312,500 shares granted in 1997.
(6) This option vested as to 25% of the shares on the first anniversary of the
date of grant and was scheduled to vest at to 1/60 of the total shares
monthly thereafter, so that the option would have been vested in full on
the fifth anniversary of the date of grant. This option expired as to
115,055 shares in February 1999, when Ms. Roboostoff's employment with the
Company terminated, and will expire as to the remaining 102,945 shares, to
the extent not previously exercised, in May 1999.
9
<PAGE> 12
The following table sets forth certain information concerning the number
and value at December 31, 1998 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 Common
Stock on December 31, 1998 of $1.84375, as reported on the Nasdaq National
Market. No options were exercised during 1998 by any of the Named Executive
Officers.
AGGREGATED OPTION EXERCISES IN FY 1998 AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END AT FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Zvi Alon................................... -0-/-0- -0-/-0-
Gary R. Anderson........................... -0-/150,000 -0-/$ 70,084
D. Patrick Linehan......................... -0-/248,015 -0-/$209,262
Patricia Roboostoff........................ -0-/-0- -0-/-0-
</TABLE>
10
<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 Board of Directors to
$6.00 per share in January 1997 and to $3.06 per share in September 1997. There
was no change in the vesting schedule for the options repriced in 1997. In 1998,
the Board of Directors approved an Option Exchange Program pursuant to which all
employees of the Company, including executive officers, were given the
opportunity to exchange any or all of their existing options for new options
covering a number of shares determined under a formula that took into account
the original number of shares, term and vesting schedule of the existing option,
at an exercise price of $1.00 per share, the fair market value of the Common
Stock on the exchange date of October 7, 1998. Each such option vests as to 25%
of the shares subject to the option on the first anniversary of the grant date
and as to 1/36th of the remaining shares each month thereafter, so that the
option is vested in full on the fourth anniversary of the grant date; each such
option has a term of 10 years.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET ORIGINAL OPTION
SECURITIES PRICE OF TERM
UNDERLYING STOCK AT EXERCISE PRICE NEW REMAINING AT
OPTIONS TIME OF AT TIME OF EXERCISE DATE OF
NAME DATE REPRICED REPRICING($) REPRICING($) PRICE($) REPRICING
---- -------- ------------- ---------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Zvi Alon....................... -- -- -- -- -- --
President & CEO
Walter Amaral.................. 02/13/96 100,000 $11.13 $16.13 $11.13 9.25 yrs
Former 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
Gary R. Anderson............... 10/07/98 90,000 $ 1.00 $ 2.63 $ 1.00 9.25 yrs
Sr. VP & CFO
D. Patrick Linehan............. 10/07/98 312,500 $ 1.00 $ 3.06 $ 1.00 8.92 yrs
Sr. VP & General Manager
Patricia Roboostoff............ 02/13/96 80,000 $11.13 $12.63 $11.13 8.83 yrs
Former Sr. VP................ 02/13/96 13,000 $11.13 $19.81 $11.13 9.75 yrs
Human 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
Robert Williams................ 02/13/96 10,500 $11.13 $19.81 $11.13 9.75 yrs
Former VP, Business
Development
</TABLE>
REPORT OF THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS(1)
The Board of Directors determined that as a result of declines in the price
of the Company's common 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, and fell again
to $0.97 during the third and fourth quarters of 1998. Employee retention has
been a significant challenge for the Company over the past two years due to the
extremely competitive nature of the employment marketplace and the Company's
performance and declining stock price over this period, which has 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 has repriced outstanding options, including the options
held by the executives in the table above. The Board has considered
11
<PAGE> 14
other alternatives such as the issuance of additional options at lower exercise
prices, but felt that the effects of doing so would be too dilutive. As such, in
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 1997, the Board repriced all out-of-the
money options in January 1997 and September 1997, with no change in the current
vesting schedules. For the same reasons, following the Company's August 1998
acquisition of FTP Software, Inc. (the employees of which held options with
exercise prices ranging from $1.00 to $43.64 per share, the Board of Directors
approved an option exchange program pursuant to which all directors and
employees of the Company, including executive officers, were given the
opportunity to exchange any or all of their existing options for new options
covering a number of shares determined under a formula that took into account
the original number of shares, term and vesting schedule of the existing option,
at an exercise price of $1.00 per share, the fair market value of the common
stock on the exchange date of October 7, 1998. Each such option vests as to 25%
of the shares subject to the option on the first anniversary of the grant date
and as to 1/36 of the remaining shares each month thereafter, so that the option
is vested in full on the fourth anniversary of the grant date; each such option
has a term of 10 years. The terms of the Option Exchange Program were based upon
the recommendation of an independent compensation advisor retained by the
Company following the acquisition of FTP. The Board believed that the factors
affecting the decision as to whether to reprice the options held by officers in
each case 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.
<TABLE>
<S> <C>
Zvi Alon John Bosch
Uzia Galil Dr. Shelley Harrison
Darrell Miller Abraham Ostrovsky
</TABLE>
- ---------------
(1) The material under this caption is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933 (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.
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:
- The Company pays competitively with leading software and high technology
companies with which the Company competes for talent.
- 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.
- 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.
12
<PAGE> 15
EXECUTIVE OFFICER SALARIES
Of the Company's 1998 executive officers other than the Chief Executive
Officer, one joined the Company in July 1997 and one joined the Company in
December 1997, and a former such officer joined the Company in 1994. With
respect to the two executive 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 officer's experience, prevailing
market conditions and internal equity. Similarly, the Company negotiated with
the former executive officer at the time of such officer's hiring and reached a
level of compensation that the Company believed was reasonably required to
obtain the services of such officer. In addition, 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 1997 executive officer
compensation.
For 1998, it was determined to grant a $15,000 salary increase to the
former executive officer of the Company but not to increase the salaries of any
other executive officer due to the recent hiring of such officers and the
Company's financial performance during 1997.
ANNUAL INCENTIVE COMPENSATION
Historically, a substantial portion of the cash compensation paid to the
Company's executive officers, including the Chief Executive Officer, has been in
the form of discretionary cash bonuses 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 1998 discretionary bonuses, the Compensation Committee
determined that the Company's goals were attained for the fourth quarter of 1998
but not for prior quarters, and, accordingly, awarded 25% of the bonus pool.
LONG-TERM INCENTIVES
The Company's primary long-term incentive program presently consists of the
1992 Stock Option Plan (the "Option Plan") and the 1993 Employee Stock Purchase
Plan (the "Purchase Plan"). The Option Plan generally utilizes four-year vesting
periods (decreased from five-year vesting periods for options granted in 1997)
for options granted on date of hire. There is a 25% 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. 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 Company's Common Stock on the date of
grant. As a result, employees receive value from these grants only if the
Company's Common Stock appreciates in the long term.
During the fall of 1998, the Company retained an independent compensation
advisor to review the Company's stock option program in comparison to stock
option programs maintained by software companies of comparable size (in terms of
revenue). Following review of the results of such study and the option holdings
of its executive officers, the Compensation Committee determined to grant
options or additional options to its executive officers but at levels below the
levels recommended by such advisor in light of the Company's financial
performance during 1998. As a result, in December 1998, the Compensation
Committee granted the stock options to Mr. Alon described below, and granted an
additional stock option to one other executive officer of the Company. Mr. Alon
participated with the Compensation Committee in the consideration of the grant
of options to executive officers other than Mr. Alon, but did not participate
with the Compensation Committee with respect to the grant of options to Mr.
Alon.
13
<PAGE> 16
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 fifteen percent (15%) of their earnings withheld for
purchases of Common Stock on certain dates specified by the Compensation
Committee. The price of Common Stock purchased is equal to 85% of the lower of
the fair market value of the Common Stock on the commencement date or the
closing date of the relevant offering period. Two annual six-month offering
periods have been fixed under the Purchase Plan. Mr. Alon was not eligible to
purchase stock under the Purchase Plan during 1998.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The 1998 salary and potential bonus of the Chief Executive Officer were
established by the Compensation Committee primarily on the basis of the salary
received by him in 1997 and the Company's overall 1997 performance, and pursuant
to discussions between the Compensation Committee and the Chief Executive
Officer. Although the total of Mr. Alon's salary and 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 cash
compensation package for 1998 based on his significant equity position in the
Company and the Company's overall 1997 performance.
As described above, in awarding 1998 discretionary bonuses, the
Compensation Committee determined that the Company's goals were attained for the
fourth quarter of 1998 but not for prior quarters, and, accordingly, awarded 25%
of the bonus pool. As a result, Mr. Alon received less than his potential cash
compensation ($347,875 versus $484,000) for 1998; this amount was the same as
the cash compensation paid to him in 1997 and substantially less than his 1996
compensation of $393,250 and 1995 compensation of $426,250.
As noted above, in December 1998, the Compensation Committee granted stock
options to Mr. Alon based upon a study commissioned by the Company from an
independent compensation advisor, but at a level below that recommended by such
advisor in light of the Company's 1998 financial performance. Mr. Alon was
granted an option to purchase 325,000 shares as an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code and, in accordance with
the terms of the Option Plan with respect to the grant of incentive stock
options to holders of more than 10% of the outstanding Common Stock, was granted
at an exercise price equal to 110% of the fair market value of the Common Stock
on the date of grant.
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
14
<PAGE> 17
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG NETMANAGE, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX(1)(2)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NASDAQ STOCK HAMBRECHT & QUIST
NETMANAGE, INC. MARKET (U.S.) TECHNOLOGY
--------------- ------------- -----------------
<S> <C> <C> <C>
12/93 100.00 100.00 100.00
12/94 220.00 98.00 120.00
12/95 253.00 138.00 180.00
12/96 65.00 170.00 223.00
12/97 31.00 208.00 262.00
12/98 20.00 294.00 407.00
</TABLE>
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
- ---------------
(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 SEC 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.
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 or she may
be required to pay in actions or proceedings to which he or she is or may be
made a party by reason of his or her 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. The Company and certain of its officers and
directors are subject to several lawsuits, which if successful may give rise to
indemnity claims.
In December 1998, the Company agreed to sell all of its interest in
NetVision, Ltd. ("NetVision"), an internet service provider in Israel, to a
company jointly owned by three parties unrelated to the Company (the
"Purchasers"). Ruth Alon is the Chief Executive Officer of NetVision and holds
options to purchase stock of
15
<PAGE> 18
NetVision. She is also the wife of Zvi Alon, Chairman of the Board of Directors,
President and Chief Executive Officer of the Company, and the daughter of Uzia
Galil, a member of the Board of Directors of the Company. The transaction closed
in escrow in December 30, 1998, subject to release from the escrow upon approval
of Israeli governmental authorities. In the event that approval is not obtained,
Elron and Tevel Israel International Communications Ltd., have agreed to
purchase any shares which were prohibited from being transferred to the
Purchasers. The Board of Directors of the Company unanimously approved the
transaction. Elron currently holds a substantial equity interest in NetVision;
Mr. Galil is Chairman of the Board of Directors of Elron.
Abraham Ostrovsky, a member of the Board of Directors of the Company,
performed management and business consulting services to the Company during 1998
and received aggregate fees of $100,000 in connection with such consulting.
The Company believes that all transactions set forth above were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. Any future transactions between the Company and any
of its officers, directors, affiliates and principal stockholders will be on
terms no less favorable to the Company than can be obtained from unaffiliated
third parties. Any such transactions will be subject to approval of a majority
of the Company's, including a majority of the independent, disinterested
directors.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the 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 R. Anderson
Secretary
April 22, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998 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.
16
<PAGE> 19
1227-PS-99
<PAGE> 20
[1227 - NETMANAGE, INC.] [FILE NAME: NET91B.ELX] [VERSION-4] [4/15/99]
DETACH HERE
- --------------------------------------------------------------------------------
PROXY
NETMANAGE, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING MAY 27, 1999
The undersigned hereby constitutes and appoints Zvi Alon and Gary Anderson,
and each of them singly, with full power of substitution, as proxies to vote and
act at the NetManage, Inc. 1999 Annual Meeting of Stockholders to be held on May
27, 1999 at 9:00 a.m., local time, and at any and all postponements and
adjournments thereof (the "Meeting"), upon and with respect to the number of
shares of the common stock of NetManage, Inc., $.01 par value per share ("Common
Stock"), as to which the undersigned may be entitled to vote or act. The
undersigned instructs such proxies, or their substitutes, to vote as designated
on the reverse side and in favor of the recommendations of management on any
other matters which may come before the Meeting, all as further described in the
accompanying Notice of 1999 Annual Meeting of Stockholders and Proxy Statement.
If no such directions are indicated, the proxies or their substitutes, will have
authority to vote FOR the Election of Directors and FOR Item 2.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE> 21
NetManage, Inc.
Dear Stockholder;
Please take note of the important information enclosed with this proxy card.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach and return it in the enclosed postage paid
envelope.
Your vote must be received prior to the 1999 Annual Meeting of Stockholders,
May 27, 1999. Whether or not you plan to be personally present at the Meeting,
please complete, date and sign the enclosed proxy and return it promptly in he
enclosed envelope. If you later desire to revoke your proxy, you may do so at
any time before it is exercised by following the instructions on page two of
the accompanying proxy statement. Thank you in advance for your prompt
consideration.
Sincerely,
NetManage, Inc.
[1227 - NETMANAGE, INC.] [FILE NAME: NET91A.ELX] [VERSION-5] [4/15/99]
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: Uzia Galil and Darrell Miller
FOR WITHHELD
BOTH [ ] [ ] FROM BOTH
NOMINEES NOMINEES
[ ]
---------------------------------------
For both nominees except as noted above
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Arthur Andersen [ ] [ ] [ ]
LLP as the Company's independent auditors for the
current fiscal year ending December 31, 1999.
3. Upon any other matters which may properly come
before the Meeting.
Receipt of the Notice of 1999 Annual Meeting of
Stockholders and Proxy Statement dated April 22,
1999 relating to the Meeting is hereby
acknowledged.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE MARK, DATE, SIGN AND RETURN.
Please sign exactly as your name(s) appear(s)
hereon. Joint owners should each sign. If a
corporation, sign in full corporate name by
president or authorized officer. If a
partnership, sign in partnership name by an
authorized person. When signing as attorney,
executor, administrator, trustee or guardian,
please give your full title as such.
Signature: Date:
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Signature: Date:
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