<PAGE> 1
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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:
[_] 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 Section 240.14a-11(c) or Section
240.14a-12
STARBASE CORPORATION
- ------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- ------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- ------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- ------------------------------------------------------------------------
(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):
N/A
- ------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- ------------------------------------------------------------------------
(5) Total fee paid:
N/A
- ------------------------------------------------------------------------
[_] 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:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE> 2
StarBase Corporation
18872 MacArthur Boulevard
Irvine, California 92612
(714) 442-4400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 1996
To Our Stockholders:
You are invited to attend the 1996 Annual Meeting of Stockholders of
StarBase Corporation ("StarBase" or the "Company"). The meeting will be
held in the Newport Bay Meeting Room of the Sheraton Newport Beach Hotel
at 4545 MacArthur Boulevard, Newport Beach, CA 92660 at 10:00 a.m. on
Wednesday, September 25, 1996, for the following purposes:
(1) To elect eight directors;
(2) To vote on the approval of an amendment and restatement of the
Company's Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan - 1992 (the "1992 Stock Option Plan");
(3) To vote on the approval of the addition of 1,500,000 shares of
common stock to the Company's 1992 Stock Option Plan;
(4) To vote on the approval of the selection of Price Waterhouse LLP
as the Company's independent auditors; and
(5) To consider any other matters that may properly come before the
meeting or any adjournment of the meeting.
WILLIAM R. STOW III
CO-CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE
OFFICER
August 26, 1996
TO ENSURE THAT YOUR SHARES ARE VOTED AT THE MEETING, PLEASE VOTE, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY FORM IN THE ENVELOPE
PROVIDED. PROXIES MAY BE REVOKED AT ANY TIME PRIOR TO THE MEETING BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE COMPANY'S SECRETARY, BY GIVING
A LATER DATED PROXY, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE> 3
STARBASE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 25, 1996
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of StarBase Corporation
"StarBase" or the "Company") for use at the Annual Meeting of
Stockholders to be held at 10:00 a.m. on Wednesday, September 25, 1996,
and any adjournment of the meeting. This Proxy Statement, the proxy form
and the Company's 1996 Annual Report to Stockholders are being mailed to
stockholders on or about August 26, 1996. At the Annual Meeting,
stockholders will be asked to elect eight directors and to transact any
other business that may properly come before the meeting and any
adjournment of the meeting.
VOTING AT THE MEETING
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company for use at the annual meeting of stockholders to be held on
Wednesday, September 25, 1996. The Company will bear the cost of
preparing and mailing the proxy, proxy statement and any other material
furnished to the stockholders by the Company in connection with the
annual meeting. Proxies will be solicited by use of the mails. Officers
and employees of the Company may also solicit proxies by telephone or
personal contact. Copies of solicitation materials will be furnished to
fiduciaries, custodians and brokerage houses for forwarding to beneficial
owners of the stock held in their names.
Any person giving a proxy in the form accompanying this proxy statement
has the power to revoke it at any time before its exercise. The proxy
may be revoked by filing with the Secretary of the Company an
instrument of revocation or a duly executed proxy bearing a later date.
The proxy may also be revoked by affirmatively electing to vote in
person while in attendance at the meeting. However, a stockholder who
attends the meeting need not revoke his proxy and vote in person unless
he wishes to do so. All valid, unrevoked proxies will be voted at the
annual meeting.
VOTING SECURITIES OUTSTANDING
As of August 23, 1996, the record date for determining stockholders
entitled to notice of and to vote at the meeting (the "Record Date"),
the Company has one class of voting securities outstanding consisting
of 12,640,454 shares of Common Stock, $.01 par value ("Common Stock").
Except as otherwise provided by law, the holders of the Series C Preferred
Stock are not entitled to vote upon any matter relating to the business
or affairs of the Company or for any other purpose. A holder of Common
Stock is entitled to one vote on each matter submitted to the meeting
for each share of Common Stock held of record by such holder as of the
Record Date.
<PAGE> 4
PROXIES AND VOTING
Stockholders may vote in person or by proxy at the meeting. Proxies given
may be revoked at any time before they are voted at the meeting by filing
with the Company either a written revocation or a duly executed proxy
bearing a later date, or by appearing at the meeting and voting in person.
Unless a contrary direction is indicated, a properly executed proxy form
will be voted "FOR": (1) the election of the nominees proposed by the
Board of Directors; (2) the approval of an amendment and restatement of
the Company's 1992 Stock Option Plan; (3) the approval of the addition
of 1,500,000 shares of common stock to the Company's 1992 Stock Option
Plan; and (4) the approval of the selection of Price Waterhouse LLP as
the Company's independent auditors. The management of StarBase is not
aware of any business to be acted upon at this meeting other than as is
described in this Proxy Statement, but in the event any other business
should properly come before the meeting, the proxy holders (as indicated
on the proxy form) will vote the proxies according to their judgment as
to the best interests of the Company.
PRINCIPAL STOCKHOLDERS
BENEFICIAL OWNERSHIP
The following table sets forth at June 30, 1996 certain information
regarding the ownership of each class of the Company's voting securities
by each person known by the Company to be the beneficial owner of more
than five percent of each class of the Company's outstanding voting
securities.
- ------------------------------------------------------------------------
Number of Percentage
Shares of of Common
Name (1) Common Stock Stock
- ------------------------------------------------------------------------
Amerindo Technology 1,018,256 7.9
Growth Fund, Ltd. II (2)
c/o Amerindo Investment
Advisers, Inc.
One Embarcadero, Suite 2300
San Francisco, California
94111-3162
The Board of Pension 959,593 7.5
Commissioners of the
City of Los Angeles
c/o Amerindo Investment
Advisers, Inc.
One Embarcadero, Suite 2300
San Francisco, California
94111-3162
Estate of 709,608 5.5
Michael K. Benson (3)
c/o StarBase Corporation
18872 MacArthur Boulevard
Irvine, California 92612
Storie Partners, L.P. (4) 750,000 5.7
One Bush St. #1350
San Francisco, CA 94104
- ------------
<PAGE> 5
(1) Except as otherwise noted, the persons named in the above table
have sole voting and investment power with respect to all shares shown
as beneficially owned by them, subject to community property laws
where applicable.
(2) Includes 125,291 shares of Common Stock issuable upon the
exercise of warrants by Amerindo Technology Growth Fund, Ltd. II.
(3) All shares are held by the Benson Trust. Includes 568,123
shares subject to the Performance Escrow Agreement and 50,078 shares
of Common Stock issuable upon the exercise of warrants.
(4) Includes 375,000 shares of Common Stock issuable upon the
exercise of warrants by Storie Partners, L.P.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth at June 30, 1996 certain information
regarding the ownership of each class of the Company's voting securities
by (i) each of the Company's Directors, (ii) each of the Named Executive
Officers, and (iii) all officers and Directors of the Company as a
group.
Number of Percentage
Shares of of
Common Common
Name (1) Stock Stock
- ---------------------- --------- ----------
Alan M. Davis (2)(4) 185,000 1.4%
Roger C. Ferguson (2)(4) 25,000 *
Gary E. Gratny (2)(5) 213,000 1.6
Alan D. Kucheck (3)(4) 110,000 *
Gayle M. Johnson (3)(4) 2,847 *
Michael G. Lyons (2)(6) 170,607 1.3
Phillip E. Pearce (2)(4) 25,000 *
Kenneth A. Sexton (2)(7) 525,000 4.0
John R. Snedegar (2)(8) 135,530 1.1
William R. Stow III(2)(3)(9) 623,416 4.8
All directors and executive
officers as a group
(11 persons) (10) 2,165,400 15.7
- ------------
<PAGE> 6
(1) Except as otherwise noted, the persons named in the above table have
sole voting and investment power with respect to all shares shown
as beneficially owned by them, subject to community property laws where
applicable. Unless otherwise indicated, the address of each person named
in the above table is in care of StarBase Corporation, 18872
MacArthur Boulevard, Irvine, California 92612.
(2) Director.
(3) Named Executive Officer.
(4) Represents shares of Common Stock issuable upon the exercise of
stock options that are exercisable or will be exercisable by
August 29, 1996.
(5) Includes 65,500 shares of Common Stock, held by multiple entities,
which are managed by Whelan and Gratny Capital Management in which
Mr. Gratny is a principal and has voting and dispositive power over
such securities pursuant to the terms of an investment management
agreement with the holder as well as 67,500 shares owned by
multiple entities where Mr. Gratny has voting and dispositive power
over such securities pursuant to the terms of an investment
management agreement with the holder. Also includes 80,000 shares
of Common Stock issuable upon the exercise of warrants, of which
67,500 shares are owned by multiple entities and Mr. Gratny has
voting and dispositive power over such securities pursuant to
the terms of an investment management agreement with the holder and
12,500 are held by Whelan and Gratny Capital Management.
(6) Includes 89,376 shares of Common Stock, of which 17,115 shares are
subject to a Performance Escrow Agreement. Also includes 20,832
shares of Common Stock issuable upon the exercise of stock options
that are exercisable or will be exercisable by August 29, 1996 and
46,451 shares of Common Stock issuable upon the exercise of
warrants held by Mr. Lyons.
(7) Includes 250,000 shares of Common Stock and 250,000 shares of
Common Stock issuable upon the exercise of warrants held by Intersolv,
Inc. in which Mr. Sexton is a corporate officer, as well as 25,000
shares of common stock issuable upon the exercise of stock options
by Mr. Sexton that are exercisable or will be exercisable by
August 29, 1996.
(8) Includes 13,332 shares of Common Stock issuable upon the exercise
of stock options by Mr. Snedegar that are exercisable or will be
exercisable by August 29,1996. Also includes 3,892 shares held by
Mr. Snedegar as trustee of the Snedegar Revocable Living Trust,
8,333 shares held by Mr. Snedegar in trust for his minor son and
daughter.
(9) Includes 573,119 shares of Common Stock held by Mr. Stow as trustee
of the Stow Family Trust, of which, 568,124 shares are subject to a
Performance Escrow Agreement. Also includes an aggregate of 1,749
shares of Common Stock held by Mr. Stow in trust for his daughter
and minor son. Also includes 6,666 shares of Common Stock and
8,000 shares of Common Stock issuable upon the exercise of stock
options by Mr. Stow and Mrs. Stow, respectively, that are exercisable
or will be exercisable by August 29, 1996. Mr. Stow disclaims
beneficial ownership of the shares exercisable by Mrs. Stow.
(10) Includes a total of 571,677 shares of Common Stock issuable upon
exercise of stock options and 376,451 shares of Common Stock issuable
upon the exercise of warrants held by all directors and executive
officers of the Company as a group.
* Less than 1%.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has nominated eight directors for election to hold
office until the next Annual Meeting and until their successors are
elected and qualified. If any nominee should become unable to serve as a
director, the proxies will be voted for any substitute nominee designated
by the Board of Directors. No proxy may be voted for more than eight nominees.
NOMINEES FOR DIRECTOR
The nominees for election as a director are Alan M. Davis, Roger C.
Ferguson, Gary E. Gratny, Michael G. Lyons, Phillip E. Pearce, Kenneth
A. Sexton, John R. Snedegar, and William R. Stow III.
The following biographical information has been furnished by the nominees.
<PAGE> 7
Alan M. Davis has served as a Director since February 1996 and Chief
Operating Officer of the Company since January 1996. Mr. Davis has
also been serving as the President of San Juan Building Supply, since
1990, and partner in Potrero Management Partners, a high technology
venture and consulting firm, since 1995. From 1989 through 1990, he
served as Director of Software Technology Development and Marketing of
MIPS Computer Systems. Prior to 1989, he served as General Manager of
the Systems Division of Integrated Automation and held various senior
management positions at Bell & Howell and Intel Corporation over a
period of eight years. Age 52.
Roger C. Ferguson has been President and CEO of DataTools, Inc., a
privately held supplier of database administration tools for
client/server databases since 1993. For six years prior to joining
DataTools, Mr. Ferguson was with Network General, Inc., a publicly
traded supplier of network analysis equipment, where he was Chief
Operating Officer and a member of the Board of Directors. Prior to
Network General he held executive positions at Sytek, Inc., General
Instrument and IBM. He is also currently Chairman of the Board of
Directors of Microtest, Inc., a publicly traded network tools company.
Age 53, director since 1996.
Gary E. Gratny is senior portfolio manager for Whelan & Gratny Capital
Management, Inc., an investment advisor that concentrates on growth
equity investing. Prior to Whelan & Gratny, Mr. Gratny was Vice
President of Marketing and Business Development at Focus Graphics, Inc.,
a graphics and medical imaging company, and held marketing and
engineering positions at Hewlett Packard and Rockwell International.
Age 36, director since 1996.
Michael G. Lyons has served as a Director of the Company since June 1992
and as Co-Chairman of the Board of the Company since October 1994. From
June 1992 until October 1994, Mr. Lyons served as Chairman of the Board.
Since October 1991, Mr. Lyons has served as President and Chief
Executive Officer of Technology Management, a management consulting
group primarily serving high-technology clients. He is partner in
Potrero Management Partners, a high technology venture and consulting
firm. From June 1981 to October 1991, Mr. Lyons was a founder, Vice
President and Director of Integrated Systems, Inc. Age 53.
Phillip E. Pearce was Senior Vice President and a member of the Board of
Directors of E.F. Hutton & Co, a member of the Board of Governors of the
New York Stock Exchange, and Chairman of the Board of governors of the
NASD. Mr. Pearce is a member of the Board of RX Medical Services
Corporation, a reporting company. Age 67, director since 1996.
Kenneth A. Sexton is Vice President, Finance and Administration of
Intersolv, Inc., a leading provider of open client/server solutions.
Prior to joining Intersolv, Inc. in 1991, Mr. Sexton held several senior
level positions at Life Technologies., a biotechnology company, and
Coopers & Lybrand, a big six accounting firm. Age 42, director since 1996.
John R. Snedegar has served as a Director of the Company since October
1992. Since May 1990, Mr. Snedegar has served as President, Director
and Chief Executive Officer of UniDex Communications Corp., a
diversified telecommunications provider based in Arlington, Texas. From
March 1981 to May 1992, Mr. Snedegar served as President and Chief
Executive Officer of AmeriTel Management, Inc., currently known as WCT
Communications, Inc. Age 46.
<PAGE> 8
William R. Stow III has served as Chief Executive Officer of the Company
since September 1991. Mr. Stow has also served as President of the
Company since September 1991, exclusive of the period from April 1994
through July 1995. Mr. Stow has served as a Director of the Company
since September 1991 and as Co-Chairman of the Board of the Company
since October 1994. From February 1986 to October 1991, Mr. Stow held
various senior-level positions at Ashton-Tate Corporation, including
Vice President of Advanced Development. Age 51.
REQUIRED VOTE
The eight nominees receiving the highest number of votes will be elected
as directors. Abstentions (including instructions to withhold authority
to vote for one or more nominees) and broker non-votes will be counted
for purposes of determining a quorum but will not be counted as votes
cast in the election of directors. There is no provision for cumulative
voting in the election of directors.
THE BOARD OF DIRECTORS
During fiscal 1996, StarBase's Board of Directors held ten meetings and
took action by unanimous written consent twice. Each incumbent director
attended at least 75% of the aggregate of the total number of meetings
of the Board and of the committees on which he served during 1996.
COMMITTEES OF THE BOARD
StarBase's Board of Directors has two standing committees: an Audit
Committee and a Compensation Committee. The Board does not have a
Nominating Committee. Due to resignations of Board members who were not
replaced till February 1996, the functions of the Audit and Compensation
Committees were performed by the full board. The new members of the
Company's Audit and Compensation Committees were elected in February
1996. Messrs. Gratny, Sexton and Snedegar are the members of the Audit
Committee. The members of the Compensation Committee are Messrs.
Ferguson, Lyons, and Sexton. The Audit Committee recommends selection
of independent accountants to the Board of Directors and reviews the
scope and results of audits. An Audit Committee meeting was held on
July 26, 1996. The Compensation Committee, reviews and establishes
compensation for executive officers and considers incentive compensation
alternatives for the Company's employees
BOARD COMPENSATION
Directors who are not employees of the Company are not compensated,
except for reimbursement of travel expenses. Pursuant to the Company's
1992 Stock Option Plan, non-employee directors may receive non-qualified
stock option grants for shares of the Company's Common Stock . All
options awarded to non-employee directors have an exercise price per
share equal to the market price of the Common Stock on the date of
grant. The options have a 10-year term. The Company entered into a two
year agreement with John Snedegar, a director, which was terminated
through mutual consent by the parties on March 31, 1996, subject to
payment of $280,000 to Mr. Snedegar for services performed by him. As
of March 31, 1996, Mr. Snedegar had received no payment connected with
this agreement. In anticipation of the payment to Mr. Snedegar, the
Company accrued $280,000 at March 31, 1996. On April 22, 1996, the
Company paid Mr. Snedegar $75,000 followed by $205,000 on June 6, 1996.
<PAGE> 9
EXECUTIVE OFFICERS
Principal Occupation
Name Age For the Past Five Years
- ------------------------------ ------ -----------------------------
William R. Stow III 51 Founder; Chief Executive
Officer of StarBase
President, Chief Executive Corporation since September
Officer, Co-Chairman of the 1991. President of the
Board Company since September 1991,
exclusive of the period from
April 1994 to July 1995.Vice
President-Architect at
Ashton-Tate from 1986 to 1991
Alan M. Davis 52 Chief Operating Officer of
StarBase Corporation since
Chief Operating Officer, January 1996. President of
Director San Juan Building Supply
Since 1990. Partner in
Potrero Management Partners
since 1995. Director of
Software Technology
Development and Marketing of
MIPS Computer Systems from
1989 through 1990.
Alan D. Kucheck 44 Vice President, Engineering
of StarBase since January
Vice President, Engineering 1995. From July 1993 to
January 1995 served as a
Project Director for the
Company. From August 1990 to
March 1993 was Manager,
Software Development for IMI,
Inc.
Donald R. Farrow 50 Vice President, Sales and
Support of StarBase since
Vice President, Sales and May 1996. Management
Support consultant since December
1994. From October 1993
to December 1994 served as
Vice President of Sales and
Marketing for CommVision
Corporation. Regional Sales
Manager for Novell
from June 1987 to January
1993.
Robert W. Leimena 53 Chief Financial Officer of
StarBase since January 1996.
Chief Financial Officer Entrepreneur and management
consultant since October
1987. Partner in Potrero
Management Partners since
1995. From July 1981 through
September 1987 was Senior
Vice President and CFO of
View-Master Ideal Group, Inc.
Executive officers of the Company are appointed by the Board of
Directors to serve until their removal by the Board of Directors or
resignation.
No director or officer of the Company has within the last five years
prior to the date hereof, been subject to any penalties or sanctions
imposed by a court or securities regulatory authority relating to
trading in securities, promotion or management of a publicly traded
issuer, theft or fraud.
No director or officer of the Company has within the last five years
prior to the date hereof, been declared bankrupt or made a voluntary
assignment in bankruptcy, nor made a proposal or been subject to any
proceedings under any legislation relating to bankruptcy or insolvency,
except for Alan D. Kucheck who on February 18, 1993 filed for protection
under Chapter 7 of the United States Bankruptcy Code.
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY INFORMATION
The following table sets forth certain summary information regarding
compensation paid or accrued by the Company to, or on behalf of, the
Company's Chief Executive Officer and each of the two other most highly
compensated executive officers of the Company (the "Named Executive
Officers"), for services rendered in all capacities to the Company
during the fiscal years ended March 31, 1994, 1995, and 1996. Except as
otherwise noted, no Named Executive Officer received any restricted
stock award, stock appreciation right or payment under any long-term
incentive plan.
SUMMARY COMPENSATION TABLE (1)
Long-Term
Annual Compensation Compensation
------------------------- -------------------
All
Other Securities Other
Annual Underlying Compen-
Name and Compen- Options sation
Principal Position Year Salary Bonus sation (2) (5)
- ---------------------- ----- -------- ------ ------- ---------- -------
William R. Stow III 1996 $115,000 $ -- $ -- -- $ --
President, Chief 1995 115,000 -- -- 6,666 --
Executive Officer, 1994 111,244 -- -- -- --
Co-Chairman of the
Board and Director
Gayle M. Johnson 1996 100,833 12,500 -- 70,000 15,354
Vice President, 1995 71,710 -- -- 3,333 18,886
Sales(3) 1994 4,801 -- -- 3,333 417
Alan D. Kucheck 1996 110,000 6,358 -- 110,000 --
Vice President, 1995 110,000 -- -- -- --
Engineering (4) 1994 87,212 -- -- 59,000 --
- --------------
(1) Certain columns have been omitted if they do not apply to any of
the Named Executive Officers. Only those executive officers whose total
annual salary and bonus exceeded $100,000 during the last fiscal year
have been included in the summary.
(2) Amounts represent stock options granted and/or repriced for the
period shown.
(3) Ms. Johnson assumed responsibility as Vice President, Sales in
September 1995. Ms. Johnson's employment terminated in April 1996.
Options granted during fiscal year 1996 includes options to purchase
6,666 shares of the Company's common stock, originally granted in a prior
year, that were repriced.
(4) Mr. Kucheck assumed responsibility as Vice President, Engineering
in January 1995. During calendar year 1994, Mr. Kucheck served as the
Company's project director. Options granted during fiscal year 1996
includes options to purchase 59,000 shares of the Company's common stock,
originally granted in a prior year, that were repriced.
(5) Amounts listed as All Other Compensation represent commissions earned.
<PAGE> 11
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made during the fiscal year ended March 31, 1996 under the Company's
Incentive Stock Option, Non-Qualified Stock Option and Restricted Stock
Purchase Plan - 1992 to Mr. Kucheck and Ms. Johnson. No stock
appreciation rights were granted to such individuals during the fiscal year.
OPTION/SAR GRANTS IN YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term (4)
- ------------------------------------------------------------- --------------------
Number of Percent
Securities of Total
Underlying Options
Options Granted Exercise
Granted to or Base
(# of Employees Price Expir-
Shares) for 1996 (CDN$/Sh) ation 5% 10%
Name (1) (2) (3) Date (CDN$) (CDN)
- ------------------ --------- ---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Gayle M. Johnson 3,333 -- $ 3.25 03/20/04 $ 5,166 12,365
3,333 -- 3.25 10/24/04 5,666 13,765
25,000 1 3.25 09/11/05 48,000 120,000
38,334 2 3.17 12/07/05 73,218 185,537
Alan D. Kucheck 59,000 3 3.00 04/22/98 18,880 38,350
6,000 -- 3.00 08/11/05 10,560 26,040
45,000 2 3.17 12/07/05 85,950 217,800
</TABLE>
- -------------
(1) Options granted in fiscal 1996 include options to purchase
65,666 shares of the Company's common stock, granted in previous
years, for which the Company amended the exercise price during the
year. Twenty five percent of the shares granted vest one year from
the date of grant with the remaining shares vesting equally over
the following thirty six months. All of the options shown in the
above table are incentive stock options and have a maximum term of
five or ten years, subject to earlier termination following the
optionee's cessation of service with the Company. The Company's
Option Plan also provides for the grant of non-qualified stock
options.
(2) The Company granted options to purchase a total of 1,900,347
shares of Common Stock to employees during the year ended March 31,
1996 and amended the exercise price of options to purchase 316,982
shares of the Company's common stock.
(3) The exercise price may be paid in cash or in shares of
Common Stock valued at fair market value on the exercise date. The
exercise price is stated in Canadian dollars. As of March 31,
1996, the conversion price of Canadian dollars to United States
dollars was approximately US$.74 to CDN$1.00.
(4) There is no assurance provided to any executive officer or
any other holder of the Company's securities that the actual stock
price appreciation over the 5-year or 10-year option term will be
at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of the Common Stock does in fact appreciate
over the option term, no value will be realized from the option
grants. Potential realizable values are stated in Canadian
dollars.
<PAGE> 12
OPTION REPRICING
The following table provides information relating to the repricing of
certain options held by the executive officers of the Company named in
the Summary Compensation table that occurred during the fiscal year ended
March 31, 1996. Such repricings are the only instances during the last ten
fiscal years in which the exercise price of any option granted by the
Company to any of its executive officers were repriced.
Option/SAR Repricings
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Market Length of
Price of Original
Number of Stock Option
Securities at Time Exercise Term
Underlying of Price at Remaining
Options Repricing Time of at
Repriced or Repricing New Date of
or Amendment or Exercise Repricing
Amended (CND$/Sh) Amendment Price or
Name Date (#) (3) (CDN$/Sh) (CDN$/Sh) Amendment
- ------------------ -------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gayle M.Johnson, 09/11/95 3,333 $ 3.25 $ 7.38 $ 3.25 8.5 yrs.
Vice President, 09/11/95 3,333 3.25 8.22 3.25 8.1 yrs.
Sales
Alan D. Kucheck, 08/11/95 59,000 2.35 7.14 3.00 2.6 yrs.
Vice President,
Engineering
</TABLE>
- -----------
REPORT ON REPRICING OF OPTIONS
In August and September 1995 the Board of Directors reviewed the grant
prices of stock options to determine if the options were still effective
as long-term financial incentives to encourage commitment to the Company.
Because the exercise price of most stock options had been above the
market price of the Company's stock for some time, the Board of Directors
decided to reprice certain outstanding stock options. As a result of the
review the Board of Directors offered to option holders, except the
members of the Board of Directors, an opportunity to terminate their
existing options in exchange for the grant of new options at the current
market price of the Company's stock. All other terms of the stock option
grants remained the same.
The Board of Directors
D. Patrick Linehan
Michael G. Lyons
John R. Snedegar
William R. Stow III
(Comprising the entire Board of directors,
prior to February 1996)
<PAGE> 13
OPTION EXERCISES, HOLDINGS AND FISCAL YEAR-END VALUES
The following table sets forth information concerning the number of
shares covered by both exercisable and unexercisable options held by each
of the Named Executive Officers as of March 31, 1996. No options were
exercised during the fiscal year ended March 31, 1996 by any of the Named
Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND OPTION VALUES AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares March 31, 1996 March 31, 1996
Aquired (# of shares) (CDN$) (1)
On Value ------------------ ---------------------
Exercise Realized Exer- Unexer- Exer- Unexer-
Name (#) ($) cisable cisable cisable cisable
- -------------------- --------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William R. Stow III -- $ -- 6,666 -- $ -- $ --
Gayle M. Johnson -- -- 70,000 -- 152,167 --
Alan D. Kucheck -- -- 110,000 -- 254,150 --
</TABLE>
- ------------
(1) Calculated based on the closing price of the Company's Common Stock
as reported on the Vancouver Stock Exchange on March 31, 1996 of CDN$5.38
per share, less the applicable exercise price. All values are stated in
Canadian dollars.
CERTAIN TRANSACTIONS
William R. Stow III, a director, sold 33,333 shares of the Company's Common
Stock in the open market and lent the proceeds of this sale to the Company.
The proceeds were used by the Company for general corporate purposes. Mr.
Stow has agreed to accept restricted stock in repayment of the loan, which
shares have not been issued as of July 29, 1996.
In fiscal 1995, the Board of Directors authorized the Company to loan
William Stow III, President and CEO of StarBase, the sum of $126,000. At
March 31, 1996, the principal and accrued interest amounts were $76,153
and $3,286, respectively. The loan is evidenced by a promissory note and
is secured by a deed of trust on real property owned by Mr. Stow. The
note is payable on November 4, 1998 and bears interest at a rate of 6.34%
per annum, payable at maturity.
The Company entered into a two year agreement with John Snedegar, a
director, which was terminated through mutual consent by the parties on
March 31, 1996, subject to payment of $280,000 to Mr. Snedegar for
services performed by him. As of March 31, 1996, Mr. Snedegar had
received no payment connected with this agreement. The Company paid Mr.
Snedegar $75,000 on April 22, 1996, followed by $205,000 on June 6, 1996
in connection with the Termination Agreement and General release of
Claims.
<PAGE> 14
PROPOSAL 2
APPROVAL OF AMENDMENT AND RESTATEMENT OF
INCENTIVE STOCK OPTION, NONQUALIFIED STOCK OPTION,
AND RESTRICTED STOCK PURCHASE PLAN - 1992
Subject to stockholder approval, in May 1996 the Board of Directors
amended and restated the StarBase Corporation Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan - 1992 as
the StarBase Corporation 1996 Stock Option Plan (the "Option Plan") and
increased the maximum number of shares of the Company's Common Stock
that may be issued under the Option Plan by 1,500,000 shares from
1,333,333 shares to 2,833,333 shares.
Effective January 1, 1994, the Internal Revenue Code of 1986, as amended
(the "Code") was amended to limit the amount of compensation paid to a
publicly held corporation's chief executive officer and four other most
highly compensated officers that the corporation may deduct as an
expense for federal income tax purposes. To enable the Company to
continue to deduct in full all amounts of ordinary income recognized by
its executive officers in connection with options granted under the
Option Plan, the Board of Directors has limited to 350,000, the maximum
number of shares for which options may be granted under the Option Plan
to any employee in any fiscal year (the "Section 162(m) Grant Limit").
However, the Company's stock option grants will typically not approach
this limit.
The stockholders are now being asked to approve the Option Plan in the
form described below, including the establishment of the Section 162(m)
Grant Limit, the increase in the shares subject to the Option Plan and
the elimination of the restricted stock element of the Option Plan. The
Board of Directors believes that the availability of an adequate stock
option program is an important factor in attracting, motivating and
retaining qualified officers, employees and consultants essential to the
success of the Company and in aligning their long-term interests with
those of the stockholders.
DESCRIPTION OF THE OPTION PLAN
The following summary of the Option Plan as amended and restated is
qualified in its entirety by the specific language of the Option Plan, a
copy of which is available to any stockholder upon request.
GENERAL. The Option Plan provides for the grant of incentive stock
options within the meaning of section 422 of the Code and nonstatutory
stock options. The Board has amended the Option Plan to eliminate the
Board's authority to grant, in addition to options, rights to purchase
restricted shares within a 90-day period. As of March 31, 1996, the
Company had outstanding options to purchase an aggregate of 1,637,395
shares at a exercise price range of CDN$3.00 - 13.44 per share. The
exercise price is stated in Canadian dollars; the exchange rate for the
Canadian dollar in effect at March 31, 1996 was approximately US$0.74 to
CDN$1.00. The exercise price of all incentive stock options granted
under the Option Plan has been at least equal to the fair market value
per share of the Common Stock on the date of grant, and the exercise
price of all nonstatutory stock options granted under the Option Plan
<PAGE> 15
has been at least equal to 85% of the fair market value per share of the
Common Stock on the date of grant. As of March 31, 1996, options to
purchase 125,985 shares of Common Stock granted pursuant to the Option
Plan had been exercised, and 1,195,938 shares of Common Stock remained
available for future grants under the Option Plan, provided that the
stockholders approve the increase in the number of shares authorized
under the Option Plan.
SHARES SUBJECT TO OPTION PLAN. The Board has amended the Option Plan,
subject to stockholder approval, to increase by 1,500,000 shares the
maximum number of authorized but unissued or reacquired shares of the
Company's Common Stock issuable thereunder to an aggregate of 2,833,333
shares, to impose a Section 162(m) Grant Limit under which no employee
may receive in any fiscal year options to purchase in excess of 350,000
shares and to eliminate the requirement that no optionee may receive in
the aggregate options exercisable for more than 5% of the outstanding
Common Stock of the Company, determined on a fully-diluted basis. In
the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in
the capital structure of the Company, appropriate adjustments will be
made to the shares subject to the Option Plan, to the Section 162(m)
Grant Limit, and to outstanding options. To the extent any outstanding
option under the Option Plan expires or terminates prior to exercise in
full or if shares issued upon exercise of an option are repurchased by
the Company, the shares of Common Stock for which such option is not
exercised or the repurchased shares are returned to the Option Plan and
become available for future grant.
ADMINISTRATION. The Option Plan is administered by the Board of
Directors or a duly appointed committee of the Board (hereinafter
referred to as the "Board"). With respect to the participation of
individuals whose transactions in the Company's equity securities are
subject to Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Option Plan must be administered in compliance with
the requirements, if any, of Rule 16b-3 under the Exchange Act. Subject
to the provisions of the Option Plan, the Board determines the persons
to whom options are to be granted, the number of shares to be covered by
each option, whether an option is to be an incentive stock option or a
nonstatutory stock option, the terms of exercisability of each option
and the vesting of the shares acquired, including the effect thereon of
an optionee's termination of service, the exercise price and type of
consideration to be paid to the Company upon exercise of an option, the
duration of each option, and all other terms and conditions of the
options.
The Option Plan authorizes the Board to amend, modify, extend or renew,
or grant a new option in substitution for, any option and to waive any
restrictions or conditions applicable to any option or any shares
acquired upon the exercise thereof. The Board has amended the Option
Plan to provide, subject to certain limitations, for indemnification by
the Company of any director, officer or employee against all reasonable
expenses, including attorneys' fees, incurred in connection with any
legal action arising from such person's action or failure to act in
administering the Option Plan. The Board will interpret the Option Plan
and options granted thereunder, and all determinations of the Board will
be final and binding on all persons having an interest in the Option
Plan or any option.
ELIGIBILITY. All employees, directors and consultants of the Company or
of any present or future parent or subsidiary corporations of the
Company are eligible to participate in the Option Plan. In addition,
<PAGE> 16
subject to stockholder approval, options may be granted to prospective
employees and consultants in connection with written offers of
employment or engagement. However, any such options may not become
exercisable prior to such individual's commencement of service. As of
March 31, 1996, the Company had approximately 31 employees, including 5
executive officers, 8 directors and approximately 3 consultants. Any
person eligible under the Option Plan may be granted a nonstatutory
option. However, only employees may be granted incentive stock options.
TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Option
Plan is evidenced by a written agreement between the Company and the
optionee specifying the number of shares subject to the option and the
other terms and conditions of the option, consistent with the
requirements of the Option Plan. The exercise price per share must
equal at least the fair market value of a share of the Company's Common
Stock on the date of grant of an incentive stock option and at least 85%
of the fair market value of a share of the Common Stock on the date of
grant of a nonstatutory stock option. The exercise price of any option
granted to a person who at the time of grant owns stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation of the Company (a
"Ten Percent Stockholder") must be at least 110% of the fair market
value of a share of the Company's Common Stock on the date of grant.
The Board has amended the Option Plan to provide that the Board
determines the fair market value of the Company's Common Stock in its
sole discretion.
Generally, the exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of the Company's Common Stock owned by
the optionee having a fair market value not less than the exercise
price, by the assignment of the proceeds of a sale or a loan with
respect to some or all of the shares of Common Stock being acquired upon
the exercise of the option, by means of the optionee's promissory note,
by any other lawful consideration approved by the Board, or by any
combination of these. Nevertheless, the Board may restrict the forms of
payment permitted in connection with any option grant. The Option Plan
authorizes the Company to withhold from shares otherwise issuable upon
the exercise of an option or to accept the tender of shares of the
Company's Common Stock in full or partial payment of any optionee's tax
withholding obligations.
Options granted under the Option Plan will become exercisable and vested
at such times and subject to such conditions as specified by the Board.
Generally, options granted under the Option Plan are exercisable on and
after the date of grant, subject to the right of the Company to
reacquire at the optionee's exercise price any unvested shares held by
the optionee upon termination of employment or service with the Company
or if the optionee attempts to transfer any unvested shares (the
"Unvested Share Repurchase Option"). Shares subject to options
generally vest in installments subject to the optionee's continued
employment or service. The maximum term of incentive stock options
granted under the Option Plan is ten years, except that an incentive
stock option granted to a Ten Percent Stockholder may not have a term
longer than five years.
Options are nontransferable by the optionee other than by will or by the
laws of descent and distribution, and are exercisable during the
optionee's lifetime only by the optionee.
<PAGE> 17
Transfer of Control. The Option Plan provides that in the event of (i)
a sale or exchange by the stockholders of more than 50% of the Company's
voting stock, (ii) a merger or consolidation to which the Company is a
party, (iii) the sale, exchange or transfer of all or substantially all
of the assets of the Company, or (iv) a liquidation or dissolution of
the Company, wherein the stockholders of the Company immediately before
any such event do not retain direct or indirect beneficial ownership of
more than 50% of the total combined voting power of the voting stock of
the Company, its successor, or the corporation to which the assets of
the Company were transferred (a "Transfer of Control"), the Board of
Directors may arrange with the surviving, continuing, purchasing or
successor corporation or parent corporation thereof (the "Acquiring
Corporation") to assume or substitute substantially equivalent new
options for the options outstanding under the Option Plan. To the
extent that the options outstanding under the Option Plan are not
assumed, replaced, or exercised prior to such event, they will
terminate. However, options granted under the Option Plan generally
provide that if Acquiring Corporation does not assume or replace the
outstanding options, the Company's Unvested Share Repurchase Option will
terminate upon the Transfer of Control as to a stated number of shares.
Termination or Amendment. Unless sooner terminated, no options may be
granted under the Option Plan after September 2, 2002. The Board may
terminate or amend the Option Plan at any time, but, without stockholder
approval, the Board may not amend the Option Plan to increase the total
number of shares of Common Stock reserved for issuance thereunder,
change the class of persons eligible to receive incentive stock options,
or expand the class of persons eligible to receive nonstatutory stock
options. No amendment or termination of the Option Plan may adversely
affect an outstanding option without the consent of the optionee, unless
necessary to comply with any applicable law.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OPTION
PLAN
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of
participation in the Option Plan and does not attempt to describe all
possible federal or other tax consequences of such participation or tax
consequences based on particular circumstances.
INCENTIVE STOCK OPTIONS. An optionee recognizes no taxable income for
regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under section 422 of the Code.
Optionees who do not dispose of their shares for two years following the
date the option was granted nor within one year following the exercise
of the option will normally recognize a long-term capital gain or loss
equal to the difference, if any, between the sale price and the purchase
price of the shares. If an optionee satisfies such holding periods upon
a sale of the shares, the Company will not be entitled to any deduction
for federal income tax purposes. If an optionee disposes of shares
within two years after the date of grant or within one year from the
date of exercise (a "disqualifying disposition"), the difference between
the fair market value of the shares on the determination date (see
discussion under "Nonstatutory Stock Options" below) and the option
exercise price (not to exceed the gain realized on the sale if the
disposition is a transaction with respect to which a loss, if sustained,
would be recognized) will be taxed as ordinary income at the time of
disposition. Any gain in excess of that amount will be a capital gain.
If a loss is recognized, there will be no ordinary income, and such loss
will be a capital loss. A capital gain or loss will be long-term if the
<PAGE> 18
optionee's holding period is more than 12 months. Any ordinary income
recognized by the optionee upon the disqualifying disposition of the
shares generally should be deductible by the Company for federal income
tax purposes, except to the extent such deduction is limited by
applicable provisions of the Code or the regulations thereunder.
The difference between the option exercise price and the fair market
value of the shares on the determination date of an incentive stock
option (see discussion under "Nonstatutory Stock Options" below) is an
adjustment in computing the optionee's alternative minimum taxable
income and may be subject to an alternative minimum tax which is paid if
such tax exceeds the regular tax for the year. Special rules may apply
with respect to certain subsequent sales of the shares in a
disqualifying disposition, certain basis adjustments for purposes of
computing the alternative minimum taxable income on a subsequent sale of
the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
NONSTATUTORY STOCK OPTIONS. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options.
Nonstatutory stock options have no special tax status. An optionee
generally recognizes no taxable income as the result of the grant of
such an option. Upon exercise of a nonstatutory stock option, the
optionee normally recognizes ordinary income in the amount of the
difference between the option exercise price and the fair market value
of the shares on the determination date (as defined below). If the
optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. The "determination date" is
the date on which the option is exercised unless the shares are subject
to a substantial risk of forfeiture and are not transferable, in which
case the determination date is the earlier of (i) the date on which the
shares are transferable or (ii) the date on which the shares are not
subject to a substantial risk of forfeiture. If the determination date
is after the exercise date, the optionee may elect, pursuant to
Section 83(b) of the Code, to have the exercise date be the
determination date by filing an election with the Internal Revenue
Service not later than 30 days after the date the option is exercised.
Upon the sale of stock acquired by the exercise of a nonstatutory stock
option, any gain or loss, based on the difference between the sale price
and the fair market value on the determination date, will be taxed as
capital gain or loss. A capital gain or loss will be long-term if the
optionee's holding period is more than 12 months. No tax deduction is
available to the Company with respect to the grant of a nonstatutory
stock option or the sale of the stock acquired pursuant to such grant.
The Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result of the
exercise of a nonstatutory stock option, except to the extent such
deduction is limited by applicable provisions of the Code or the
regulations thereunder.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the Annual Meeting of Stockholders, at
which a quorum representing a majority of all outstanding shares of
Common Stock of the Company is present and voting, either in person or
by proxy, is required for approval of this proposal. Abstentions and
broker non-votes will each be counted as present for purposes of
determining the presence of a quorum. Abstentions will have the same
<PAGE> 19
effect as a negative vote on this proposal. Broker non-votes will have
no effect on the outcome of this vote.
The Board of Directors believes that the proposed 1996 Stock Option
Plan, including the increase of the maximum number of shares of the
Company's Common Stock that may be issued under the Option Plan by
1,500,000 shares to 2,833,333 shares and the establishment of the
Section 162(m) Grant Limit described above, is in the best interests of
the Company and the stockholders for the reasons stated above.
THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE PROPOSAL TO APPROVE THE 1996 STOCK OPTION PLAN, TO INCREASE THE
MAXIMUM NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK THAT MAY BE
ISSUED UNDER THE 1996 STOCK OPTION PLAN BY 1,500,000 SHARES TO 2,833,333
SHARES AND TO ESTABLISH THE SECTION 162(M) GRANT LIMIT.
PROPOSAL 3
PROPOSAL TO RESERVE ADDITIONAL SHARES OF COMMON STOCK
FOR THE STOCK OPTION PLAN
In the event that the stockholders of the Company do not vote to approve
Proposal 2 above, the stockholders are being asked to approve an
increase in the maximum number of shares that may be issued under the
StarBase Corporation Incentive Stock Option, Nonqualified Stock Option,
and Restricted Stock Purchase Plan - 1992 (the "1992 Plan").
A total of 1,333,333 shares of Common Stock have been reserved for the
1992 Plan. As of March 31, 1996, no shares remained available for grant
under the 1992 Plan. The Board of Directors believes that it is
desirable for the Company to continue to provide the opportunity for
employees to acquire Common Stock. Accordingly, subject to stockholder
approval, the Board of Directors has adopted an amendment to the 1992
Plan reserving an additional 1,500,000 shares for issuance under the
1992 Plan, resulting in a total reserve of 2,833,333 shares.
The Board of Directors believes that even if the stockholders do not
approve the amendments described in Proposal 2 above, the availability
of an adequate stock option program is an important factor in
attracting, motivating, and retaining qualified officers, employees, and
consultants essential to the success of the Company and in aligning
their long-term interests with those of the stockholders.
PROPOSAL 4
INDEPENDENT AUDITORS
The accounting firm of Price Waterhouse LLP served as the Company's
independent auditors for 1996. One or more representatives of that firm
will attend the Annual Meeting and will be given the opportunity to
comment, if they desire, and to respond to appropriate questions that may
be asked by stockholders. No auditor has yet been selected for the
current year, since it is StarBase's practice not to select independent
auditors prior to the Annual Meeting.
<PAGE> 20
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially
own more than ten percent of the Company's equity securities, to file
reports of security ownership and changes in such ownership with the
Securities and Exchange Commission. Officers, directors and beneficial
owners of more than ten percent also are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of copies of such forms and written representations
from its executive officers and directors, the Company believes that all
Section 16(a) filing requirements were complied with during and for
fiscal 1996, except for Forms 5 for the year ended March 31, 1996 for
stock option grants to certain directors and officers which were
inadvertently filed after the due date. The Forms 5 reported the
following grants of stock options: Alan M. Davis, 25,000 shares (granted
December 7, 1995) and 160,000 shares (granted January 16, 1996); Roger C.
Ferguson 25,000 shares (granted December 7, 1995); Phillip E. Pearce
25,000 shares (granted December 7, 1995); Kenneth A. Sexton, 25,000
shares (granted December 7, 1995); Robert W. Leimena, 150,000 shares
(granted January 16, 1996); and Alan D. Kucheck, 45,000 shares (granted
December 7, 1995).
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition,
the Company will reimburse brokers, custodians, nominees and fiduciaries
for their charges and expenses in forwarding proxies and proxy material
to the beneficial owners of shares held of record by such persons.
Solicitation of proxies will be made by management of the Company,
without additional compensation, through the mail, in person, or by
telephone, or facsimile.
ANNUAL REPORT
The Company's annual report on Form 10-K, including financial statements,
for the fiscal year ended March 31, 1996 is being mailed with this Proxy
Statement.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholder proposals for the 1997 Annual Meeting of Stockholders must be
received in writing by the Secretary of the Company at the Company's
executive offices by March 30, 1997 in order to be considered for
inclusion in the proxy materials.
<PAGE> 21
MISCELLANEOUS
The Company will send, without charge, a copy of the Company's current
annual report on Form 10-K to any holder of Common Stock who makes a
request in writing to Stockholders' Relations, StarBase Corporation,
18872 MacArthur Boulevard, Irvine, CA 92612.
By order of the Board of Directors,
/s/ William R. Stow III
---------------------------
William R. Stow III
Assistant Secretary
Irvine, California
August 26, 1996
<PAGE> 22
APPENDIX A
STARBASE CORPORATION
PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 25, 1996
AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STARBASE
CORPORATION
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of StarBase Corporation (the "Company") to be
held on September 25, 1996 and the related Proxy Statement; (b) appoints
William R. Stow III and Michael G. Lyons or either of them, as Proxies,
each with the power to appoint a substitute; (c) authorizes the Proxies
to represent and vote, as designated below, all the shares of the
Company's common stock, par value $.01 per share (the "Common Stock"),
held of record by the undersigned on August 23, 1996 at such Annual
Meeting and any adjournments or postponements thereof; and (d) revokes
any proxies previously given.
[X] Please mark votes as in this example.
1. Election of directors. Nominees are: Alan M. Davis, Roger C.
Ferguson, Gary E. Gratny, Michael G. Lyons, Phillip E. Pearce, Kenneth A.
Sexton, John R. Snedegar, and William R. Stow III.
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY TO VOTE
FOR ALL NOMINEES
To vote for fewer than all nominees, print the names of the nominees
you wish to vote FOR in the following space:
- ------------------------------------------------------------------------
2. A proposal to amend and restate the StarBase Corporation Incentive
Stock Option, Nonqualified Stock Option, and Restricted Stock
Purchase Plan - 1992.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. A proposal to reserve an additional 1,500,000 shares of common stock
for the stock option plans.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. A proposal to ratify the selection of Price Waterhouse LLP as the
Company's Independent Accountants for fiscal 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote on such
other business as may properly come before the meeting or any
adjournment(s) thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTORS, THE RATIFICATION
OF THE AMENDMENT AND RESTATEMENT OF THE STOCK OPTION PLANS, THE RATIFICATION
OF THE INCREASE IN THE STOCK OPTION COMMON STOCK RESERVE AND FOR THE
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS. THE PROXIES
WILL USE THEIR DISCRETION WITH REGARD TO ANY MATTER REFERRED TO IN ITEM 5
ABOVE.
<PAGE> 23
Please sign, date and return this proxy as promptly as possible in the
envelope provided.
Dated:
- --------------------------------------------------------------------------
Signature(s) of Stockholder(s)
Name:
- --------------------------------------------------------------------------
Signature(s) of Stockholder(s)
Address:
EACH JOINT OWNER SHOULD SIGN.
- ----------------------------------- SIGNATURES SHOULD CORRESPOND WITH
THE NAMES PRINTED ON THIS PROXY.
ATTORNEYS, EXECUTORS, GUARDIANS,
- ----------------------------------- ADMINISTRATORS, TRUSTEES,
CORPORATE OFFICERS OR OTHERS
SIGNING IN A REPRESENTATIVE CAPACITY
Number of shares held: SHOULD GIVE FULL TITLE.
-------------
<PAGE> 24
APPENDIX B
STARBASE CORPORATION
1996 STOCK OPTION PLAN
(As Amended and Restated May 6, 1996)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 Establishment. The StarBase Corporation Incentive
Stock Option, Nonqualified Stock Option and Restricted Stock Purchase
Plan - 1992 (the "Initial Plan") was established on September 2, 1992.
The Initial Plan is hereby amended and restated in its entirety as the
StarBase Corporation 1996 Stock Option Plan (the "Plan") effective as of
May 6, 1996.
1.2 Purpose. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by
providing an incentive to attract, retain and reward persons performing
services for the Participating Company Group and by motivating such
persons to contribute to the growth and profitability of the
Participating Company Group.
1.3 Term of Plan. The Plan shall continue in effect until
the earlier of its termination by the Board, the date on which all of the
shares of Stock available for issuance under the Plan have been issued
and all restrictions on such shares under the terms of the Plan and the
agreements evidencing Options granted under the Plan have lapsed, or ten
(10) years from the date the Plan was adopted by the Board. However, all
Options shall be granted, if at all, within ten (10) years from the
earlier of the date the Plan is adopted by the Board or the date the Plan
is duly approved by the stockholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "Board" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "Code" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(c) "Committee" means the Compensation Committee or
other committee of the Board duly appointed to administer the Plan and
<PAGE> 25
having such powers as shall be specified by the Board. Unless the powers
of the Committee have been specifically limited, the Committee shall have
all of the powers of the Board granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject
to the terms of the Plan and any applicable limitations imposed by law.
(d) "Company" means StarBase Corporation, a Delaware
corporation, or any successor corporation thereto.
(e) "Consultant" means any person, including an
advisor, engaged by a Participating Company to render services other than
as an Employee or a Director.
(f) "Director" means a member of the Board or of the
board of directors of any other Participating Company.
(g) "Employee" means any person treated as an
employee (including an officer or a Director who is also treated as an
employee) in the records of a Participating Company; provided, however,
that neither service as a Director nor payment of a director's fee shall
be sufficient to constitute employment for purposes of the Plan.
(h) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(i) "Fair Market Value" means, as of any date, the
value of a share of stock or other property as determined by the Board,
in its sole discretion, or by the Company, in its sole discretion, if
such determination is expressly allocated to the Company herein.
(j) "Incentive Stock Option" means an Option intended
to be (as set forth in the Option Agreement) and which qualifies as an
incentive stock option within the meaning of Section 422(b) of the Code.
(k) "Insider" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to
Section 16 of the Exchange Act.
(l) "Nonstatutory Stock Option" means an Option not
intended to be (as set forth in the Option Agreement) or which does not
qualify as an Incentive Stock Option.
(m) "Option" means a right to purchase Stock (subject
to adjustment as provided in Section 4.2) pursuant to the terms and
conditions of the Plan. An Option may be either an Incentive Stock
Option or a Nonstatutory Stock Option.
(n) "Option Agreement" means a written agreement
between the Company and an Optionee setting forth the terms, conditions
and restrictions of the Option granted to the Optionee and any shares
acquired upon the exercise thereof.
(o) "Optionee" means a person who has been granted
one or more Options.
<PAGE> 26
(p) "Parent Corporation" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the
Code.
(q) "Participating Company" means the Company or any
Parent Corporation or Subsidiary Corporation.
(r) "Participating Company Group" means, at any point
in time, all corporations collectively which are then Participating
Companies.
(s) "Rule 16b-3" means Rule 16b-3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.
(t) "Section 162(m)" means Section 162(m) of the
Code, as amended by the Revenue Reconciliation Act of 1993 (P.L. 103-66).
(u) "Stock" means the common stock, $0.01 par value,
of the Company, as adjusted from time to time in accordance with Section
4.2.
(v) "Subsidiary Corporation" means any present or
future "subsidiary corporation" of the Company, as defined in Section
424(f) of the Code.
(w) "Ten Percent Owner Optionee" means an Optionee
who, at the time an Option is granted to the Optionee, owns stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company within the meaning of
Section 422(b)(6) of the Code.
2.2 Construction. Captions and titles contained herein are
for convenience only and shall not affect the meaning or interpretation
of any provision of the Plan. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include
the singular, and the term "or" shall include the conjunctive as well as
the disjunctive.
3. ADMINISTRATION.
3.1 Administration by the Board. The Plan shall be
administered by the Board, including any duly appointed Committee of the
Board. All questions of interpretation of the Plan or of any Option
shall be determined by the Board, and such determinations shall be final
and binding upon all persons having an interest in the Plan or such
Option. Any officer of a Participating Company shall have the authority
to act on behalf of the Company with respect to any matter, right,
obligation, determination or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation,
determination or election.
3.2 Powers of the Board. In addition to any other powers
set forth in the Plan and subject to the provisions of the Plan, the
Board shall have the full and final power and authority, in its sole
discretion:
<PAGE> 27
(a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of
Stock to be subject to each Option;
(b) to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of
Stock or other property;
(d) to determine the terms, conditions and
restrictions applicable to each Option (which need not be identical) and
any shares acquired upon the exercise thereof, including, without
limitation, (i) the exercise price of the Option, (ii) the method of
payment for shares purchased upon the exercise of the Option, (iii) the
method for satisfaction of any tax withholding obligation arising in
connection with the Option or such shares, including by the withholding
or delivery of shares of stock, (iv) the timing, terms and conditions of
the exercisability of the Option or the vesting of any shares acquired
upon the exercise thereof, (v) the time of the expiration of the Option,
(vi) the effect of the Optionee's termination of employment or service
with the Participating Company Group on any of the foregoing, and (vii)
all other terms, conditions and restrictions applicable to the Option or
such shares not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, or renew, or grant a
new Option in substitution for, any Option or to waive any restrictions
or conditions applicable to any Option or any shares acquired upon the
exercise thereof;
(g) to prescribe, amend or rescind rules, guidelines
and policies relating to the Plan, or to adopt supplements to, or
alternative versions of, the Plan, including, without limitation, as the
Board deems necessary or desirable to comply with the laws of, or to
accommodate the tax policy or custom of, foreign jurisdictions whose
citizens may be granted Options; and
(h) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to
make all other determinations and take such other actions with respect to
the Plan or any Option as the Board may deem advisable to the extent
consistent with the Plan and applicable law.
3.3 Committee Complying with Section 162(m). If a
Participating Company is a "publicly held corporation" within the meaning
of Section 162(m), the Board may establish a Committee of "outside
directors" within the meaning of Section 162(m) to approve the grant of
any Option which might reasonably be anticipated to result in the payment
of employee remuneration that would otherwise exceed the limit on
employee remuneration deductible for income tax purposes pursuant to
Section 162(m).
<PAGE> 28
4. SHARES SUBJECT TO PLAN.
4.1 Maximum Number of Shares Issuable. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of
shares of Stock that may be issued under the Plan shall be two million
eight hundred thirty-three thousand three hundred thirty-three
(2,833,333) shares and shall consist of authorized but unissued or
reacquired shares of Stock or any combination thereof. If an outstanding
Option for any reason expires or is terminated or canceled or shares of
Stock acquired, subject to repurchase, upon the exercise of an Option are
repurchased by the Company, the shares of Stock allocable to the
unexercised portion of such Option, or such repurchased shares of Stock,
shall again be available for issuance under the Plan.
4.2 Adjustments for Changes in Capital Structure. In the
event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change in the
capital structure of the Company, appropriate adjustments shall be made
in the number and class of shares subject to the Plan and to any
outstanding Options, in the Section 162(m) Grant Limit set forth in
Section 5.5, and in the exercise price per share of any outstanding
Options. If a majority of the shares which are of the same class as the
shares that are subject to outstanding Options are exchanged for,
converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in Section 8.1) shares of another
corporation (the "New Shares"), the Board may unilaterally amend the
outstanding Options to provide that such Options are exercisable for New
Shares. In the event of any such amendment, the number of shares subject
to, and the exercise price per share of, the outstanding Options shall be
adjusted in a fair and equitable manner as determined by the Board, in
its sole discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be
rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased
to an amount less than the par value, if any, of the stock subject to the
Option. The adjustments determined by the Board pursuant to this Section
4.2 shall be final, binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 Persons Eligible for Options. Options may be granted
only to Employees, Consultants, and Directors. For purposes of the
foregoing sentence, "Employees" shall include prospective Employees to
whom Options are granted in connection with written offers of employment
with the Participating Company Group, and "Consultants" shall include
prospective Consultants to whom Options are granted in connection with
written offers of engagement with the Participating Company Group.
Eligible persons may be granted more than one (1) Option.
5.2 Option Grant Restrictions. Any person who is not an
Employee on the effective date of the grant of an Option to such person
may be granted only a Nonstatutory Stock Option. An Incentive Stock
Option granted to a prospective Employee upon the condition that such
person become an Employee shall be deemed granted effective on the date
such person commences service with a Participating Company, with an
exercise price determined as of such date in accordance with Section 6.1.
<PAGE> 29
5.3 Fair Market Value Limitation. To the extent that the
aggregate Fair Market Value of stock with respect to which options
designated as Incentive Stock Options are exercisable by an Optionee for
the first time during any calendar year (under all stock option plans of
the Participating Company Group, including the Plan) exceeds One Hundred
Thousand Dollars ($100,000), the portion of such options which exceeds
such amount shall be treated as Nonstatutory Stock Options. For purposes
of this Section 5.4, options designated as Incentive Stock Options shall
be taken into account in the order in which they were granted, and the
Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide
for a different limitation from that set forth in this Section 5.4, such
different limitation shall be deemed incorporated herein effective as of
the date and with respect to such Options as required or permitted by
such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason
of the limitation set forth in this Section 5.4, the Optionee may
designate which portion of such Option the Optionee is exercising and may
request that separate certificates representing each such portion be
issued upon the exercise of the Option. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive
Stock Option portion of the Option first.
5.4 Section 162(m) Grant Limit. Subject to adjustment as
provided in Section 4.2, at any such time as a Participating Company is a
"publicly held corporation" within the meaning of Section 162(m), no
Employee shall be granted one or more Options within any fiscal year of
the Company which in the aggregate are for the purchase of more than
three hundred fifty thousand (350,000) shares (the "Section 162(m) Grant
Limit"). An Option which is canceled in the same fiscal year of the
Company in which it was granted shall continue to be counted against the
Section 162(m) Grant Limit for such period.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced
by Option Agreements specifying the number of shares of Stock covered
thereby, in such form as the Board shall from time to time establish.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
6.1 Exercise Price. The exercise price for each Option
shall be established in the sole discretion of the Board; provided,
however, that (a) the exercise price per share for an Incentive Stock
Option shall be not less than the Fair Market Value of a share of Stock
on the effective date of grant of the Option, (b) the exercise price per
share for a Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option, and (c) no Option granted to a Ten
Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory
Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if (a) such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code, or (b)
such Option is deemed to have been granted as a consequence of an
amendment (other than an amendment of the exercise price) made to an
<PAGE> 30
outstanding Option, the exercise price of which is less than the minimum
exercise price set forth above on the date of such deemed option grant.
6.2 Exercise Period. Options shall be exercisable at such
time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria, and restrictions as shall be determined
by the Board and set forth in the Option Agreement evidencing such
Option; provided, however, that (a) no Option shall be exercisable after
the expiration of ten (10) years after the effective date of grant of
such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner
Optionee shall be exercisable after the expiration of five (5) years
after the effective date of grant of such Option, and (c) no Option
granted to a prospective Employee or prospective Consultant may become
exercisable prior to the date on which such person commences service with
a Participating Company.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as
otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company
of shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not
less than the exercise price, (iii) by the assignment of the proceeds of
a sale or loan with respect to some or all of the shares being acquired
upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated
from time to time by the Board of Governors of the Federal Reserve
System) (a "Cashless Exercise"), (iv) by the Optionee's promissory note
in a form approved by the Company, (v) by such other consideration as may
be approved by the Board from time to time to the extent permitted by
applicable law, or (vi) by any combination thereof. The Board may at any
time or from time to time, by adoption of or by amendment to the standard
forms of Option Agreement described in Section 7, or by other means,
grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration.
(b) Tender of Stock. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company of shares of
Stock to the extent such tender of Stock would constitute a violation of
the provisions of any law, regulation or agreement restricting the
redemption of the Company's stock. Unless otherwise provided by the
Board, an Option may not be exercised by tender to the Company of shares
of Stock unless such shares either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly,
from the Company.
(c) Cashless Exercise. The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion,
to establish, decline to approve or terminate any program or procedures
for the exercise of Options by means of a Cashless Exercise.
<PAGE> 31
(d) Payment by Promissory Note. No promissory note
shall be permitted if the exercise of an Option using a promissory note
would be a violation of any law. Any permitted promissory note shall be
on such terms as the Board shall determine at the time the Option is
granted. The Board shall have the authority to permit or require the
Optionee to secure any promissory note used to exercise an Option with
the shares of Stock acquired upon the exercise of the Option or with
other collateral acceptable to the Company. Unless otherwise provided by
the Board, if the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or
any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the
unpaid principal and accrued interest, if any, to the extent necessary to
comply with such applicable regulations.
6.4 Tax Withholding. The Company shall have the right, but
not the obligation, to deduct from the shares of Stock issuable upon the
exercise of an Option, or to accept from the Optionee the tender of, a
number of whole shares of Stock having a Fair Market Value, as determined
by the Company, equal to all or any part of the federal, state, local and
foreign taxes, if any, required by law to be withheld by the
Participating Company Group with respect to such Option or the shares
acquired upon the exercise thereof. Alternatively or in addition, in its
sole discretion, the Company shall have the right to require the
Optionee, through payroll withholding, cash payment or otherwise,
including by means of a Cashless Exercise, to make adequate provision for
any such tax withholding obligations of the Participating Company Group
arising in connection with the Option or the shares acquired upon the
exercise thereof. The Company shall have no obligation to deliver shares
of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group's
tax withholding obligations have been satisfied by the Optionee.
6.5 Repurchase Rights. Shares issued under the Plan may be
subject to a right of first refusal, one or more repurchase options, or
other conditions and restrictions as determined by the Board in its sole
discretion at the time the Option is granted. The Company shall have the
right to assign at any time any repurchase right it may have, whether or
not such right is then exercisable, to one or more persons as may be
selected by the Company. Upon request by the Company, each Optionee
shall execute any agreement evidencing such transfer restrictions prior
to the receipt of shares of Stock hereunder and shall promptly present to
the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 Incentive Stock Options. Unless otherwise provided by
the Board at the time the Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms
and conditions set forth in the form of Immediately Exercisable Incentive
Stock Option Agreement adopted by the Board concurrently with its
adoption of the Plan and as amended from time to time.
<PAGE> 32
7.2 Nonstatutory Stock Options. Unless otherwise provided
by the Board at the time the Option is granted, an Option designated as a
"Nonstatutory Stock Option" shall comply with and be subject to the terms
and conditions set forth in the form of Immediately Exercisable
Nonstatutory Stock Option Agreement adopted by the Board concurrently
with its adoption of the Plan and as amended from time to time.
7.3 Standard Term of Options. Except as otherwise provided
in Section 6.2 or by the Board in the grant of an Option, any Option
granted hereunder shall have a term of ten (10) years from the effective
date of grant of the Option.
7.4 Authority to Vary Terms. The Board shall have the
authority from time to time to vary the terms of any of the standard
forms of Option Agreement described in this Section 7 either in
connection with the grant or amendment of an individual Option or in
connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised
or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan. Such authority shall include,
but not by way of limitation, the authority to grant Options which are
not immediately exercisable.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "Ownership Change Event" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in
a single or series of related transactions by the stockholders of the
Company of more than fifty percent (50%) of the voting stock of the
Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "Transfer of Control" shall mean an Ownership
Change Event or a series of related Ownership Change Events
(collectively, the "Transaction") wherein the stockholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership of
shares of the Company's voting stock immediately before the Transaction,
direct or indirect beneficial ownership of more than fifty percent (50%)
of the total combined voting power of the outstanding voting stock of the
Company or the corporation or corporations to which the assets of the
Company were transferred (the "Transferee Corporation(s)"), as the case
may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from
ownership of the voting stock of one or more corporations which, as a
result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or
<PAGE> 33
more subsidiary corporations. The Board shall have the right to
determine whether multiple sales or exchanges of the voting stock of the
Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
8.2 Effect of Transfer of Control on Options. In the event
of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be
(the "Acquiring Corporation"), may either assume the Company's rights and
obligations under outstanding Options or substitute for outstanding
Options substantially equivalent options for the Acquiring Corporation's
stock. Any Options which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control shall terminate and
cease to be outstanding effective as of the date of the Transfer of
Control. Notwithstanding the foregoing, shares acquired upon exercise of
an Option prior to the Transfer of Control and any consideration received
pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option
Agreement evidencing such Option except as otherwise provided in such
Option Agreement. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding Options
immediately prior to an Ownership Change Event described in Section
8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event
less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that
are members of an affiliated group within the meaning of Section 1504(a)
of the Code without regard to the provisions of Section 1504(b) of the
Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its sole discretion.
9. PROVISION OF INFORMATION. At least annually, copies of the
Company's balance sheet and income statement for the just completed
fiscal year shall be made available to each Optionee and purchaser of
shares of Stock upon the exercise of an Option. The Company shall not be
required to provide such information to persons whose duties in
connection with the Company assure them access to equivalent information.
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws
of descent and distribution.
11. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating
Company assigns, other than by operation of law, to a third person, other
than another Participating Company, any of the Participating Company's
rights to repurchase any shares of Stock acquired upon the exercise of an
Option, the assignee shall pay to the assigning Participating Company the
value of such right as determined by the Company in the Company's sole
discretion. Such consideration shall be paid in cash. In the event such
repurchase right is exercisable at the time of such assignment, the value
of such right shall be not less than the Fair Market Value of the shares
of Stock which may be repurchased under such right (as determined by the
Company) minus the repurchase price of such shares. The requirements of
this Section 11 regarding the minimum consideration to be received by the
assigning Participating Company shall not inure to the benefit of the
<PAGE> 34
Optionee whose shares of Stock are being repurchased. Failure of a
Participating Company to comply with the provisions of this Section 11
shall not constitute a defense or otherwise prevent the exercise of the
repurchase right by the assignee of such right.
12. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and
any officers or employees of the Participating Company Group to whom
authority to act for the Board is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional
misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person
shall offer to the Company, in writing, the opportunity at its own
expense to handle and defend the same.
13. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or
amend the Plan at any time. However, subject to changes in the law or
other legal requirements that would permit otherwise, without the
approval of the Company's stockholders, there shall be (a) no increase in
the maximum aggregate number of shares of Stock that may be issued under
the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock
Options, and (c) no expansion in the class of persons eligible to receive
Nonstatutory Stock Options. In any event, no termination or amendment of
the Plan may adversely affect any then outstanding Option or any
unexercised portion thereof, without the consent of the Optionee, unless
such termination or amendment is required to enable an Option designated
as an Incentive Stock Option to qualify as an Incentive Stock Option or
is necessary to comply with any applicable law or government regulation.
14. STOCKHOLDER APPROVAL. The Plan or any increase in the
maximum number of shares of Stock issuable thereunder as provided in
Section 4.1 (the "Maximum Shares") shall be approved by the stockholders
of the Company within twelve (12) months of the date of adoption thereof
by the Board. Options granted prior to stockholder approval of the Plan
or in excess of the Maximum Shares previously approved by the
stockholders shall become exercisable no earlier than the date of
stockholder approval of the Plan or such increase in the Maximum Shares,
as the case may be.
15. CONTINUATION OF INITIAL PLAN AS TO OUTSTANDING OPTIONS. Any
other provision of the Plan to the contrary notwithstanding, the terms of
the Initial Plan shall remain in effect and apply to all Options granted
pursuant to the Initial Plan.
<PAGE> 35
IN WITNESS WHEREOF, the undersigned Secretary of the Company
certifies that the foregoing StarBase Corporation 1996 Stock Option Plan
was duly adopted by the Board on May 6, 1996.
----------------------------
Secretary
