<PAGE>
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 ss.240.14a-11(c) or ss.240.14a-12
VISIGENIC SOFTWARE, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
VISIGENIC SOFTWARE, INC.
951 MARINER'S ISLAND BOULEVARD, SUITE 120
SAN MATEO, CALIFORNIA 94404
July 1, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
of Visigenic Software, Inc. on July 30, 1997 at Hotel Sofitel at 223 Twin
Dolphin Drive, Redwood City, California 94065 at 4:30 p.m., Pacific Daylight
Savings Time.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement. Also enclosed is a copy of the 1997 Visigenic Software, Inc. Annual
Report, which includes audited financial statements and certain other
information.
It is important that you use this opportunity to take part in the
affairs of VISIGENIC SOFTWARE, INC. by voting on the business to come before
this meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. Returning the proxy does not deprive you of your right to
attend the meeting and vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
/s/ ROGER J. SIPPL
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Roger J. Sippl
Chairman and Chief Executive Officer
<PAGE>
VISIGENIC SOFTWARE, INC.
951 MARINER'S ISLAND BOULEVARD, SUITE 120
SAN MATEO, CALIFORNIA 94404
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of
Visigenic Software, Inc. (the "Company"), which will be held on July 30, 1997,
at 4:30 p.m. Pacific Daylight Savings Time at Hotel Sofitel at 223 Twin Dolphin
Drive, Redwood City, California 94065, for the following purposes:
1. To elect two (2) Class I directors to hold office for a
three-year term and until their successors are elected and
qualified.
2. To vote upon a proposal to amend the Company's 1995 Stock
Option Plan to increase the aggregate maximum number of shares
issuable thereunder by 1,500,000 shares from 2,500,000 to
4,000,000 shares, and to approve the Section 162(m) grant
limit of 300,000 shares per employee per fiscal year.
3. To vote upon a proposal to ratify the appointment of Arthur
Andersen LLP as the independent auditors of the Company for
the fiscal year ending March 31, 1998.
4. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on June 20, 1997, are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose relating to the meeting during ordinary business
hours at the concierge desk at Hotel Sofitel.
By Order of the Board of Directors,
/s/ KEVIN C. EICHLER
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KEVIN C. EICHLER
Secretary
San Mateo, California
July 1, 1997
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. PROXIES ARE REVOCABLE, AND
ANY STOCKHOLDER MAY WITHDRAW HIS OR HER PROXY PRIOR TO THE TIME IT IS VOTED, OR
BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
VISIGENIC SOFTWARE, INC.
951 MARINER'S ISLAND BOULEVARD, SUITE 120
SAN MATEO, CALIFORNIA 94404
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors of
Visigenic Software, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held July 30, 1997, or any adjournment
thereof for the purposes set forth in the accompanying Notice of Annual Meeting.
The date of this Proxy Statement is July 1, 1997, the approximate date on which
this Proxy Statement and the accompanying form of proxy were first sent or given
to stockholders.
GENERAL INFORMATION
Annual Report. An annual report for the year ended March 31, 1997, is
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enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of
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business on June 20, 1997, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 14,023,160 shares of Common
Stock of the Company, par value $.001 per share, issued and outstanding.
Stockholders may vote in person or by proxy. Each holder of shares of Common
Stock is entitled to one vote for each share of stock held on the proposals
presented in this Proxy Statement. The Company's bylaws provide that a majority
of all of the shares of the stock entitled to vote, whether present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the meeting.
Solicitation of Proxies. The cost of soliciting proxies will be borne
-----------------------
by the Company. The Company will solicit stockholders by mail through its
regular employees, and will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors, and others to solicit proxies, personally or by telephone,
without additional compensation.
Voting of Proxies. All valid proxies received prior to the meeting
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will be voted. All shares represented by a proxy will be voted, and where a
stockholder specifies by means of the proxy a choice with respect to any matter
to be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposal. A stockholder giving a proxy has the power to revoke his
or her proxy, at any time prior to the time it is voted, by delivery to the
Secretary of the Company at the Company's principal office, 951 Mariner's Island
Boulevard, Suite 120, San Mateo, California 94404, of a written instrument
revoking the proxy or a duly executed proxy with a later date, or by attending
the meeting and voting in person.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company has a classified Board of Directors which currently
consists of seven (7) directors, three (3) of whom are Class I directors, two
(2) of whom are Class II directors, with one vacancy, and two (2) of whom are
Class III directors. However, effective as of this meeting, the Company's
classified Board of Directors will be reduced to six (6) directors, with two (2)
Class I directors, two (2) Class II directors, and two (2) Class III directors.
Class I, Class II and Class III directors serve until the Annual Meetings of
Stockholders to be held in 1997, 1998 and 1999, respectively, and until their
respective successors are duly elected and qualified. Directors in a class are
elected for a term of three years to succeed the directors in such class whose
terms expire at such annual meeting.
Management's nominees for election at the 1997 Annual Meeting of
Stockholders to Class I of the Board of Directors are Howard H. Graham and J.
Sidney Webb. If elected, the nominees will serve as directors until the
Company's Annual Meeting of Stockholders in 2000, and until their successors are
elected and qualified. If the nominees decline to serve or become unavailable
for any reason, or if a vacancy occurs before the election (although management
knows of no reason to anticipate that this will occur), the proxies may be voted
for substitute nominees as the Board of Directors may designate.
If a quorum is present and voting, the two (2) nominees for the
position as Class I directors receiving the highest number of votes will be
elected. Abstentions will have no effect on the vote.
The table below sets forth, for the Company's directors, including the
Class I nominees to be elected at this meeting, certain information with respect
to age and background.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class I nominees to be elected at the 1997 Annual Meeting of Stockholders:
Howard H. Graham Director 50 1997
J. Sidney Webb Director 77 1993
Class II directors whose terms expire at the 1998 Annual Meeting of Stockholders:
Gill Cogan Director 44 1994
Eric Young Director 40 1995
Class III directors whose terms expire at the 1999 Annual Meeting of Stockholders:
Roger J. Sippl Chairman of the Board of Directors and Chief 41 1993
Executive Officer
Jens Christensen Director and Chief Technical Officer 33 1996
</TABLE>
Howard H. Graham has served as the Senior Vice President, Finance and
----------------
Administration and the Chief Financial Officer of Siebel Systems, Inc., a
provider of sales and marketing information systems, since January 1997. From
February 1990 to December 1996, Mr. Graham served as Senior Vice President and
Chief Financial Officer of Informix Software, a database software company
("Informix").
J. Sidney Webb has served as a Director of the Company since March
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1993. Since May 1984, Mr. Webb has served as director and Chairman of the Board
of The Titan Corporation, a consulting company. Mr. Webb also serves as a
director of Amdahl Corporation, EIP Microwave, Inc. and Plantronics, Inc.
2
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Gill Cogan has served as a Director of the Company since January 1994.
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Since October 1991, Mr. Cogan has been a partner at Weiss, Peck & Greer Venture
Partners. Mr. Cogan serves as a director for Electronics for Imaging, Inc.,
Integrated Packaging Assembly Corporation, Number Nine Visual Technology and
P-Com Inc.
Eric Young has served as a Director of the Company since July 1995. Mr.
----------
Young is a general partner of Canaan Capital Partners, a venture capital
company, where he has been employed since October 1987. Mr. Young also serves as
a director for Spectrian Corporation and Integrated Packaging Assembly
Corporation.
Roger J. Sippl is the founder of the Company and has served as a
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Director and the Chief Executive Officer since February 1993. Mr. Sippl is a
co-founder of The Vantive Corporation, a customer interaction applications
software company ("Vantive") and has served as its Chairman of the Board since
December 1996. Mr. Sippl has served as a director of Vantive since December
1990. Prior to his relationship with Vantive, Mr. Sippl founded Informix in 1980
and served as that company's President and Chief Executive Officer until 1989,
and as its Chairman of the Board until December 1992.
Jens Christensen has served as Vice President, Chief Technical Officer
----------------
and a Director of the Company since May 1996. From November 1991 to May 1996,
Mr. Christensen served as President and Chief Executive Officer of PostModern
Computing Technologies Inc., a software company he founded in 1991. From October
1990 to September 1991, Mr. Christensen was employed as a software engineer for
Teknekron, a software company.
BOARD OF DIRECTOR'S COMMITTEES AND MEETINGS
During the year ended March 31, 1997, the Board of Directors held 7
meetings. Each incumbent director attended at least 75% of the aggregate of such
meetings of the Board and any Committee of the Board on which he served.
The Company does not have a standing Nominating Committee, but does
have an Audit Committee and a Compensation Committee.
The Audit Committee's function is to review with the Company's
independent auditors and management the annual financial statements and
independent auditors' opinion, review the scope and results of the examination
of the Company's financial statements by the independent auditors, approve all
professional services and related fees performed by the independent auditors,
recommend the retention of the independent auditors to the Board, subject to
ratification by the stockholders, and periodically review the Company's
accounting policies and internal accounting and financial controls. The members
of the Audit Committee during fiscal 1997 were Mr. Cogan and Mr. van Bronkhorst.
However, in December 1996, Mr. van Bronkhorst resigned from the Audit Committee
as well as the Board of Directors. During the year ended March 31, 1997, the
Audit Committee held 2 meeting.
The Compensation Committee's function is to review and approve salary
levels and stock option grants for employees of the Company. The members of the
Compensation Committee during fiscal 1997 were Messrs. Sippl, Webb and Young.
During the year ended March 31, 1997, the Compensation Committee held 2
meetings. For additional information concerning the Compensation Committee, see
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION."
3
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF 1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "Option Plan") was adopted by
the Board of Directors on April 18, 1995. As of April 23, 1997, only 65,191
shares remained available for future option grants under the Option Plan, which
amount the Board of Directors believes to be insufficient to satisfy the
Company's anticipated equity incentive objectives. Accordingly, on April 23,
1997, the Board of Directors approved, subject to stockholder approval, the
reservation of an additional 1,500,000 shares for issuance under the Option
Plan.
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
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 amended the Option
Plan, subject to stockholder approval, to limit to 300,000 the maximum number of
shares for which options may be granted to any employee in any fiscal year (the
"Grant Limit"). However, the Company's stock option grants typically do not
approach this limit.
The stockholders are now being asked to approve the increase from
2,500,000 to 4,000,000 in the maximum aggregate number of shares that may be
issued under the Option Plan and the establishment of the Grant Limit. The Board
of Directors believes that approval of these amendments is in the best interests
of the Company and its stockholders because 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, 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. As of June 20, 1997, the Company had outstanding options to purchase an
aggregate of 2,095,298 shares at a weighted average exercise price of $7.49 per
share. The exercise price of all 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 as determined in good faith by the Board of Directors. As of June
20, 1997, options to purchase 306,873 shares of Common Stock granted pursuant to
the Option Plan had been exercised, and 1,597,829 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 approved by the Board of Directors in April 1997.
Shares Subject to Plan. The Board has amended the Option Plan, subject
----------------------
to stockholder approval, to increase by 1,500,000 the maximum number of
authorized but unissued or reacquired shares of the Company's Common Stock
issuable thereunder to an aggregate of 4,000,000. 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 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
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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
4
<PAGE>
(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 permits the Board to delegate to proper officers of
the Company the authority to grant options to persons who are not officers or
directors of the Company within guidelines established from time to time by the
Board. The Option Plan authorizes the Board to amend, modify, extend or renew,
or grant a new option in substitution for, any option, to waive any restrictions
or conditions applicable to any option or any shares acquired upon the exercise
thereof. Subject to certain limitations, the Option Plan provides 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, 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 June 20, 1997, the
Company had approximately 167 employees, including 9 executive officers, 5
directors and approximately 8 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
incentive stock 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 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 loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, by means
of a promissory note, by any other lawful consideration approved by the Board or
by any combination of these. The Board may restrict the forms of payment
permitted in connection with any option grant.
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. Consistent with the Code, the Option Plan does not limit
the term of nonstatutory stock options granted under the Option Plan.
5
<PAGE>
Incentive stock 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. However, under the Option Plan, a
nonstatutory stock option may be assignable or transferable to the extent
permitted by the Board and set forth in the option agreement.
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 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. Furthermore, the Unvested Share
Repurchase Option will generally terminate if, within 12 months after a Transfer
of Control, the optionee is terminated without cause or resigns following the
optionee's "constructive termination" (as defined in the option agreement) by
the Company.
Termination or Amendment. Unless sooner terminated, no options may be
------------------------
granted under the Option Plan after April 18, 2005. 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 Plan may
adversely affect an outstanding option without the consent of the optionee,
unless necessary to comply with any applicable law.
SUMMARY OF 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 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
6
<PAGE>
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 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 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, 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, but will not be counted as
having been voted on the proposal.
The Board of Directors believes that approval of the increase in the
number of shares issuable under the Option Plan and the establishment of the
Grant Limit is in the best interests of the Company and the stockholders and for
the reasons stated above. THEREFORE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF AN INCREASE BY 1,500,000 IN THE AGGREGATE MAXIMUM NUMBER OF
SHARES ISSUABLE UNDER THE OPTION PLAN AND THE ESTABLISHMENT OF THE GRANT LIMIT.
7
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Arthur Andersen LLP
as independent auditors to audit the financial statements of the Company for the
fiscal year ending March 31, 1998. Arthur Andersen LLP has acted in such
capacity since its appointment during the fiscal year ended March 31, 1994. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if the representative desires
to do so, and is expected to be available to respond to appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast 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, but will not be counted as having been voted on the
proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING MARCH 31, 1998.
8
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 31,
1997, with respect to the beneficial ownership of the Company's Common Stock by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director and director nominee of the
Company, (iii) the Chief Executive Officer, the three other highest compensated
executive officers of the Company whose salary and bonus for the year ended
March 31, 1997 exceeded $100,000, and two former executive officers of the
Company whose salary and bonus for the year ended March 31, 1997 exceeded
$100,000 but who were not executive officers at March 31, 1997 (the "Named
Executive Officers"), and (iv) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS SHARES OWNED(1)
- -------------------------------------------------------------------------------- ----------------------------
NUMBER OF PERCENTAGE OF
SHARES CLASS
--------- --------------
<S> <C> <C>
5% STOCKHOLDERS(2)
Elizabeth Salmon(3) ............................................................ 2,468,750 17.6%
Neguine Navab(4) ............................................................... 1,463,102 10.5
Prasad Mokkapati(5) ............................................................ 731,735 5.2
EXECUTIVE OFFICERS AND DIRECTORS
Roger J. Sippl(6) .............................................................. 2,468,750 17.6
Mark D. Hanson(7) .............................................................. 291,176 2.0
Jens Christensen, Ph.D(8) ...................................................... 1,463,102 10.5
Robert Perreault(9) ............................................................ 88,178 *
Richard L. Gerould(10) ......................................................... 91,227 *
David T. Shewmake(11) .......................................................... 45,795 *
Gill Cogan(12) ................................................................. 557,500 4.0
Cristina M. Morgan(13) ......................................................... 109,374 *
Michael Moritz(14) ............................................................. 684,963 4.9
J. Sidney Webb(15) ............................................................. 70,000 *
Eric Young(16) ................................................................. 450,000 3.2
Executive officers and directors as a group (13 persons) (17)................... 6,715,892 47.9
</TABLE>
- ------------------
* Less than 1%
(1) Except as indicated in the footnotes to this table, the Company
believes that the persons named in the table have sole voting and
dispositive power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws, where
applicable.
(2) The address of each 5% stockholder owner is in care of the Company at
951 Mariner's Island Boulevard, Suite 120, San Mateo, California
94404.
(3) Includes 2,055,000 shares held by Roger J. Sippl, Ms. Salmon's spouse
and 20,000 shares held by Nelson D. Salmon and Elizabeth G. Salmon,
Trustees of the Nelson D. Salmon Trust dated October 14, 1994. See
footnote 6.
(4) Includes 67,494 shares issuable upon exercise of options. Also
includes 724,801 shares held by Mr. Christensen, Ms. Navab's spouse.
Ms. Navab is Director of Object Technologies for the Company. Ms. Navab
acquired her shares and options in the Company in connection with the
Company's acquisition of PostModern Computing Technologies Inc.
("PostModern"). See footnote 8 below and "Certain Relationships and
Related Transactions."
(5) Mr. Mokkapati is Senior Architect for Distributed Objects for the
Company. Mr. Mokkapati acquired his shares in connection with the
Company's acquisition of PostModern. See "Certain Relationships and
Related Transactions."
(6) Includes 393,750 shares held by Elizabeth G. Salmon, Mr. Sippl's
spouse, as separate property and 20,000 shares held by Nelson D. Salmon
and Elizabeth G. Salmon, Trustees of the Nelson D. Salmon Trust dated
October 14, 1994.
9
<PAGE>
Mr. Sippl disclaims beneficial ownership of all such shares. See
footnote 3. Mr. Sippl is Chairman of the Board of Directors and Chief
Executive Officer of the Company.
(7) Includes 118,908 shares subject to a right of repurchase in favor of
the Company which lapses over time. Also includes 45,000 shares
issuable upon exercise of options. Mr. Hanson is President and Chief
Operating Officer of the Company.
(8) Includes 670,807 shares held by Neguine Navab, Mr. Christensen's
spouse, and 67,494 shares issuable upon exercise of options held by Ms.
Navab. Mr. Christensen acquired his shares in the Company in connection
with the Company's acquisition of PostModern. Mr. Christensen is Vice
President, Chief Technical Officer and Director for the Company. See
footnote 4 and "Certain Relationships and Related Transactions."
(9) Includes 72,000 shares issuable upon exercise of options. Mr.
Perreault is Vice President, Professional Services for the Company.
(10) Includes 29,543 shares subject to a right of repurchase in favor of
the Company which lapses over time. Mr. Gerould is Vice President,
Business Development for the Company.
(11) Includes 9,334 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 10,000 shares issuable
upon exercise of options. Mr. Shewmake is Director of Information
Technology for the Company.
(12) Represents all shares held by entities affiliated with Weiss, Peck &
Greer Venture Partners. Mr. Cogan, as a general partner of Weiss, Peck
& Greer Venture Partners, may be deemed to beneficially own shares, but
Mr. Cogan disclaims beneficial ownership of all such shares except to
the extent of his proportional interest therein. Represents 46,941
shares held by Weiss, Peck & Greer Venture Associates II (Overseas),
Ltd., 214,191 shares held by Weiss, Peck & Greer Venture Associates II,
L.P. and 296,367 shares held by WPG Enterprise fund. Mr. Cogan, a
Director of the Company, is a general partner of Weiss, Peck & Greer
Venture Partners.
(13) Includes 2,292 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 84,374 shares issued to
Hambrecht & Quist LLC ("H&Q") for financial advisory services rendered
to PostModern in connection with the Company's acquisition of
PostModern. Ms. Morgan is Managing Director of H&Q. Ms. Morgan
disclaims beneficial ownership of all such shares except to the extent
of her proportional interest therein. Effective immediately prior to
the Company's 1997 Annual Meeting of Stockholders, Ms. Morgan will no
longer serve as a director of the Company
(14) Represents all shares held by entities affiliated with Sequoia Capital.
Mr. Moritz, as a general partner of Sequoia Capital, may be deemed to
beneficially own shares, but Mr. Moritz disclaims beneficial ownership
of all such shares except to the extent of his proportional interest
therein. Represents 623,316 shares held by Sequoia Capital VI, 34,249
shares held by Sequoia Technology Partners VI, 17,408 shares held by
Sequoia XXIII and 9,990 shares held by Sequoia XXIV. Mr. Moritz is a
general partner of Sequoia Capital. Effective immediately prior to the
Company's 1997 Annual Meeting of Stockholders, Mr. Moritz will no
longer serve as a director of the Company.
(15) Includes 2,292 shares subject to a right of repurchase in favor of the
Company which lapses over time.
(16) Represents all shares held by entities affiliated with Canaan Capital
Partners. Mr. Young, as a general partner of Canaan Capital Partners,
may be deemed to beneficially own shares, but Mr. Young disclaims
beneficial ownership of all such shares except to the extent of his
proportional interest therein. Represents 357,200 shares held by Canaan
Capital Offshore Limited Partnership C.V., ("Offshore") 42,800 shares
held by Canaan Capital Limited Partnership ("CCLP") and 50,000 shares
held by Quai Limited ("Quai"). Eric Young is a Director of the Company
and is a general partner of Offshore and CCLP. Quai is a limited
partner of Canaan Partners. Mr. Young holds no voting or dispositive
control over shares held by Quai, and he disclaims beneficial ownership
of such shares.
(17) Includes 148,993 shares subject to rights of repurchase in favor of
the Company which lapse over time.
10
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the total
compensation of the Named Executive Officers for the fiscal years ended March
31, 1997 and 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Roger J. Sippl..................... 1997 $1(1) -- -- --
Chairman of the Board of 1996 $90,001 -- -- --
Directors and Chief Executive
Officer
Mark D. Hanson..................... 1997 $150,000 -- 45,000 --
President and Chief Operating 1996 $140,000 -- 62,500 --
Officer
Jens Christensen, Ph.D(2).......... 1997 $100,000 $15,000 -- $400,000(3)
Vice President, Chief
Technical Officer and Director
Robert Perreault(4)................ 1997 $130,000 $10,000 -- --
Vice President, Professional 1996 $90,000 -- 82,500 --
Services
Former Executive Officers:
- --------------------------
Richard L. Gerould(5).............. 1997 $130,060 -- -- --
Vice President, Business 1996 $115,000 -- 15,000 --
Development
David T. Shewmake(6)............... 1997 $115,000 $7,500 -- --
Director of Information 1996 $115,000 $15,000 10,000 --
Technology
</TABLE>
- ------------------
(1) Mr. Sippl elected to waive his salary for the fiscal year ended
March 31, 1997.
(2) Mr. Christensen joined the Company in May 1996 in connection with the
merger of PostModern Computing Technologies, Inc. ("PostModern") with
and into the Company.
(3) Represents amount paid to Mr. Christensen by the Company at the
closing of the merger of PostModern with and into the Company. See
"Certain Relationships and Related Transactions."
(4) Mr. Perreault was a former shareholder of Data Accessibility
Solutions, Inc., which merged with the Company in May 1996. See
"Certain Relationships and Related Transactions."
(5) In October 1996, Mr. Gerould assumed the responsibilities of Vice
President, Business Development, reporting to Mr. Chalmers, the
Company's Vice President, Worldwide Sales. Prior to that, Mr. Gerould
served on the Company's executive staff as Vice President, Corporate
Development and General Counsel.
(6) In October 1996, Mr. Shewmake assumed the responsibilities of Director
of Information Technology, reporting to Mr. Eichler, the Company's Vice
President, Operations, Chief Financial Officer, Treasurer and
Secretary. Prior to that, Mr. Shewmake served on the Company's
executive staff as Vice President, Technical Services.
11
<PAGE>
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the year
ended March 31, 1997 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN FISCAL 1997
--------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE
GRANTED TO APPRECIATION FOR
EMPLOYEES OPTION TERM(3)
OPTIONS IN FISCAL EXERCISE EXPIRATION --------------------------
NAME GRANTED(1) YEAR PRICE(2) DATE 5% 10%
- ----------------------------- ---------- ---------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Roger J. Sippl............. -- -- -- -- -- --
Mark D. Hanson............. 30,000 1.9% $4.00 05/17/06 $75,467.36 $191,249.10
5,000 0.3% $8.00 07/23/06 $25,155.79 $63,749.70
5,000 0.3% $11.50 10/23/06 $36,161.44 $91,640.19
5,000 0.3% $15.50 01/16/07 $48,739.33 $123,515.04
Jens Christensen, Ph.D..... -- -- -- -- -- --
Robert Perreault........... -- -- -- -- -- --
Former Executive Officers:
- -------------------------
Richard L. Gerould......... -- -- -- -- -- --
David T. Shewmake.......... -- -- -- -- -- --
</TABLE>
- ------------------
(1) Generally, grants of options granted in fiscal 1997 under the Company's
1995 Stock Option Plan (the "Option Plan") are immediately exercisable
and generally vest over four years, with 12.5% of the option shares
becoming fully vested six months from the initial vesting date and
1/48th of the option shares vesting each successive month, with full
vesting occurring on the fourth anniversary of the initial vesting
date. The Company has a repurchase right for shares not vested. Under
the Option Plan, the Board retains discretion to modify the terms of
outstanding options. For additional information regarding options, see
"PROPOSAL NO. 2: AMENDMENT OF 1995 STOCK OPTION PLAN."
(2) All options were granted at an exercise price equal to the fair
market value of the Common Stock on the date of grant.
(3) Potential gains are net of exercise price, but before taxes associated
with the exercise. These amounts represent certain hypothetical gains
based on assumed rates of appreciation, based on the Securities and
Exchange Commission's rules, and do not represent the Company's
estimate or projection of future Common Stock prices. Actual gains, if
any, on stock option exercises are dependent on the future performance
of the Company, overall market conditions and the optionees' continued
employment through the vesting period. The amounts reflected in this
table may not be achieved.
12
<PAGE>
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock during the year
ended March 31, 1997, and unexercised options held as March 31, 1997, by the
Named Executive Officers:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 3/31/97 OPTIONS AT 3/31/97(1)
SHARES -------------------------------- ----------------------
ACQUIRED ON VALUE
NAME EXERCISE REALIZED(2) EXERCISABLE(3) UNEXERCISABLE(3) EXERCISABLE(4) UNEXERCISABLE(4)
- ----------------------------- ----------- ----------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Roger J. Sippl............. -- -- -- -- -- --
Mark D. Hanson............. 62,500 $225,000.00 7,083 37,917 $35,624.50 $136,875.50
Jens Christensen, Ph.D..... -- -- -- -- -- --
Robert Perreault........... 10,500 $41,925.00 13,875 58,125 $126,262.50 $528,937.50
Former Executive Officers:
- -------------------------
Richard L. Gerould......... 15,000 $54,000.00 -- -- -- --
David T. Shewmake.......... -- -- -- -- -- --
</TABLE>
- ------------------
(1) Based on the per share closing price of $9.50, as reported on the Nasdaq
National Market, on March 31, 1997, less exercise price.
(2) Fair market price on date of exercise, less exercise price.
(3) Includes options granted at an exercise price greater than the per share
closing price of $9.50, as reported on the Nasdaq National Market, on March
31, 1997.
(4) Does not include options that had an exercise price greater than the per
share closing price of $9.50, as reported on the Nasdaq National Market, on
March 31, 1997.
13
<PAGE>
COMPENSATION OF DIRECTORS
The directors of the Company did not receive any cash compensation for
their services as members of the Board of Directors of the Company in the year
ended March 31, 1997. The Company's 1996 Outside Directors Stock Option Plan
(the "Directors Plan") provides for initial and annual automatic grants of
nonqualified stock options to each new director, when such individual becomes a
director, and to each current director, on the date following this first annual
stockholders meeting of the Company, so long as the director is not a employee
of the Company or of any affiliated corporation. However, any nonemployee
director will be ineligible to participate in the Directors Plan if the
director's employer is a stockholder of the Company or an affiliated corporation
of a stockholder of the Company, or if the director's employer holds a
technology license from the Company or is an affiliated corporation of such
license holder.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
See "Proposal No. 2 - Amendment of 1995 Stock Option Plan" and
"Certain Relationships and Related Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
The Compensation Committee was formed in April 1996, and is composed of
Roger J. Sippl, J. Sidney Webb and Eric Young. No interlocking relationships
exist between any member of the Company's Compensation Committee and any member
of any other company's board of directors or compensation committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 24, 1996, the Company sold an aggregate of 444,444 shares of
Series C Preferred Stock at a price of $9.00 per share, and shortly thereafter
issued convertible notes in the aggregate principal amount of $2.00 million.
Cisco Systems purchased 222,222 of these shares, and a note in the principal
amount of $1.0 million. Upon the consummation of the Company's initial public
offering in August 1996, all outstanding shares of Series C Preferred Stock
converted into shares of Common Stock on a one-for-one basis, and the amount
borrowed by the Company pursuant to the convertible notes converted into shares
of the Company's Common Stock at a conversion price equal to $7.50 per share.
In connection with the merger of PostModern Computing Technologies,
Inc. ("PostModern") with and into the Company in May 1996, the Company issued an
aggregate of 3,099,821 shares of its Common Stock to the former shareholders of
PostModern, including 844,486 shares to Jens Christensen, 851,235 to Neguine
Navab, 844,486 to Prasad Mokkapati and 426,507 shares to Suresh Challa, and
options to purchase an aggregate of 361,785 shares of its Common Stock,
including options to purchase 67,494 shares of the Company's Common Stock issued
to Neguine Navab. Also in connection with the merger, the Company paid an
aggregate of $1,500,000 to certain former employees of PostModern, including
$400,000 to each of Messrs. Christensen and Mokkapati and $400,000 to Ms. Navab,
and $2,307,152 to former shareholders of PostModern, including $750,655 to each
of Messrs. Christensen and Mokkapati, $183,000 to Mr. Challa and $696,659 to Ms.
Navab. Upon the closing of the merger, Hambrecht & Quist LLC, of which Cristina
M. Morgan, a Director of the Company at the time of the merger, is a Managing
Director, received shares of PostModern common stock for financial advisory
services rendered to PostModern in connection with the Company's acquisition of
PostModern, which shares were immediately converted into 84,374 shares of the
Company's Common Stock. The consideration issued by the Company in the merger
was determined through negotiations between the managements of the Company and
PostModern.
In connection with the merger of Data Accessibility Solutions, Inc.
("Data Accessibility") with and into the Company in May 1996, the Company issued
an aggregate of 12,500 shares of its Common Stock to the former shareholders of
Data Accessibility, including 6,250 shares to Robert Perreault, the Company's
Vice President, Professional Services.
14
<PAGE>
Mr. Sippl, the Company's founder and Chief Executive Officer and
Chairman of the Board of Directors of the Company, formed RogerLabs, Inc.
("RLI") in February 1996, in order to pursue technology research and development
projects of interest to him. Mr. Sippl is the sole owner, director and officer
of RLI. In June 1996, the Company acquired certain technology and other assets
being developed by RLI that the Company expects it may use in a future product
or products. The Company paid Mr. Sippl $40,000 to acquire these assets. RLI's
cost of development of the technology, consisting chiefly of salaries of RLI
employees and fees paid to consultants, exceeded the price paid by the Company.
In connection with the asset sale, five employees of RLI became employees of
Visigenic.
The Company entered into non-compete agreements with certain employees
who joined the Company in connection with the PostModern merger. The Company has
entered into indemnification agreements with each of its directors and executive
officers. Such indemnification agreements require the Company to indemnify such
individuals to the fullest extent permitted by Delaware law.
In January 1997, the Board of Directors established a Special Committee
of Disinterested Directors (the "Special Committee") to negotiate on behalf of
the Company the leasing of certain office facilities currently being planned by
Mr. Sippl. Mr. Young is the sole member of the Special Committee.
The Company's policy is that all transactions between the Company and
its officers, directors and other affiliates must (i) be approved by a majority
of the member of the Company's Board of Directors and a majority of the
disinterested members of the Company's Board of Directors and (ii) be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties. In addition, the policy requires that any loans by the Company to its
officers, directors or other affiliates be for bona fide business purposes only.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who
beneficially own more than 10% of the Company's Common Stock to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission ("SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with, except
that one statement of change in beneficial ownership for director Michael Moritz
was not timely filed reporting an aggregate of four transactions, and one
statement of change in beneficial ownership for Therese H. Langlais, Vice
President, Business Development, was not timely filed reporting one transaction.
CHANGES TO BENEFIT PLAN
The Board of Directors has amended the 1995 Stock Option Plan (the
"Option Plan"), subject to stockholder approval, to increase the maximum
aggregate number of the Company's shares that may be issued under the Option
Plan from 2,500,000 shares of Common Stock to 4,000,000 shares. Future grants
under the Option Plan will be made at the discretion of the Board, and,
accordingly, are not yet determinable. In addition, benefits under the Option
Plan will depend on a number of factors, including the fair market value of the
Company's Common Stock on future dates and, in the case of stock options, the
exercise decisions made by the optionees. Consequently, it is not possible to
determine the benefits that might be received by participants in the Option
Plan.
Since the inception of the Option Plan in April 1995, (i) Roger J.
Sippl, Chairman of the Board of Directors and Chief Executive Officer, received
no option grants to purchase shares of Common Stock; (ii) Mark D. Hanson,
President and Chief Operating Officer, received option grants to purchase
107,500 shares of Common Stock; (iii) Jens Christensen, Ph.D., Vice President,
Chief Technical Officer and Director, received no
15
<PAGE>
option grants to purchase shares of Common Stock; (iv) Robert Perreault, Vice
President, Professional Services, received option grants to purchase 82,500
shares of Common Stock; (v) Richard L. Gerould, Vice President, Business
Development, received option grants to purchase 15,000 shares of Common Stock;
(vi) David T. Shewmake, Director of Information Technology, received option
grants to purchase 10,000 shares of Common Stock; (vii) all current executive
officers as a group received option grants to purchase 747,500 shares of Common
Stock under the Option Plan; (viii) all current directors who are not executive
officers as a group received no option grants to purchase shares of Common Stock
under the Option Plan; (ix) no associate of any director, executive officer or
nominee received any option grants to purchase shares of Common Stock under the
Option Plan; (x) except for Scott Chalmers and Robert Macdonald, who received
grants to purchase 150,000 and 165,000 shares, or 6.2% and 6.8%, respectively,
no person has been granted 5% or more of the total options granted under the
Option Plan; and (xi) all employees, including all current officers who are not
executive officers, as a group received option grants to purchase 1,763,500
shares of Common Stock under the Option Plan. See "PROPOSAL No. 2 - AMENDMENT OF
1995 STOCK OPTION PLAN."
16
<PAGE>
ADDITIONAL EMPLOYEE BENEFIT PLANS
The following summaries of the Visigenic Software, Inc. Executive
Performance Incentive Plan, the 1996 Employee Stock Purchase Plan and the 1996
Outside Directors Stock Option Plan as in effect as of the date of this Proxy
Statement are provided solely for informational purposes for the benefit of the
stockholders of the Company in accordance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.
DESCRIPTION OF EXECUTIVE PERFORMANCE INCENTIVE PLAN
The Company's Executive Performance Incentive Plan (the "Performance
Plan") was adopted by the Board of Directors of the Company in April 24, 1996
and approved by the stockholders of the Company in August 1996. As of March 31,
1997, a total of 100,000 shares of Common Stock were authorized for issuance
under the Performance Plan, of which 98,695 shares remained available for future
grants.
SUMMARY OF THE PROVISIONS OF THE PERFORMANCE PLAN
The following summary of the Performance Plan is qualified in its
entirety by the specific language of the Performance Plan, a copy of which is
available to any stockholder upon request.
General. The Performance Plan provides for the grant of performance
-------
unit awards to executives and other key employees of the Company, subject to the
limitations of the plan. At any time that the Company is a "publicly held
corporation" within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended ("Section 162(m)"), all awards granted under the Performance
Plan are intended to qualify as "performance-based compensation" under Section
162(m). Section 162(m) generally limits the amount of compensation paid to
certain executive officers of a publicly held corporation that is deductible by
the corporation for federal income tax purposes. However, compensation
qualifying as "performance-based compensation" is exempt from the deduction
limit.
Administration. The Performance Plan is administered by the
--------------
Compensation Committee or other committee of the Board of Directors duly
appointed to administer the plan. If no such committee has been appointed to
administer the Performance Plan, it will be administered by the Board of
Directors. (All references herein to the "Committee" mean the committee or the
Board of Directors, whichever is administering the Performance Plan.) Subject to
the terms of the Performance Plan, the Committee will have the authority to
select the persons to receive awards, determine the amount of each award, and
establish all of the other the terms and conditions of each award. The
Performance Plan provides, subject to certain limitations, for indemnification
by the Company of any Committee member, 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 Performance Plan. The Committee will interpret the Performance
Plan and the awards granted under the plan, and all determinations of the
Committee will be final and binding on all persons having an interest in the
Performance Plan or any award.
Eligibility. Participation in the Performance Plan is limited to
-----------
executives and other key employees of the Company selected by the Committee.
Awards. The Performance Plan authorizes the Committee to grant awards
------
consisting of a number of performance units specified by the Committee. A
performance unit is a bookkeeping unit denominated in dollars that is used to
account for the award until its is paid to the participant, canceled, forfeited
or terminated. At the time it grants an award, the Committee specifies the value
of each performance unit. Performance units subject to an award will vest and
become payable if one or more pre-established performance goals are attained
during a specified performance period and the participant remains an employee of
the Company or of any parent or subsidiary corporation of the Company.
17
<PAGE>
At any time the Company is a "publicly held corporation" within the
meaning of Section 162(m), the Committee must establish the performance goals
applicable to each award no later than 90 days after the commencement of the
performance period for the award, provided that no more than 25% of the
performance period has elapsed and the outcome of the performance goals remains
uncertain. The performance period applicable to an award is determined by the
Committee and may be one or more fiscal quarters or fiscal years of the Company.
Performance periods for different awards, including awards made to the same
participant, need not be consecutive. In no event while the Company is subject
to Section 162(m) is the Committee permitted to grant any award under the
Performance Plan which could result in a participant receiving more than
$1,000,000 upon payment of the award for each fiscal year of the Company
contained in the performance period applicable to the award. This limit is pro
rated for performance periods of less than one full fiscal year.
The performance goals established by the Committee in granting an award
will represent one or more target levels of achievement of certain measures of
business performance as specified by the Committee. The Performance Plan limits
the measures from which the Committee may select to revenue, operating income,
net income, earnings per share, and Company department expenses. These measures
will determined on a consolidated, divisional or other business unit basis, as
determined by the Committee, before the effect of accounting changes,
restructuring charges, and similar extraordinary items, determined according to
criteria established by the Committee. They may be either absolute measures or
relative measures determined with reference to an index or other standard
selected by the Committee.
Following completion of the performance period applicable to an award,
the Committee will certify in writing the extent to which the performance goals
have been attained, the value of the performance units that have been earned,
and the date of payment of the earned award. The Performance Plan authorizes the
Committee to reduce or eliminate (but not to increase) the payment of an award
if, in the Committee's sole judgment, such reduction or elimination is
appropriate. The Committee is not permitted to waive the attainment of the
applicable performance goals as a condition to payment of an award or to
increase the amount payable in excess of the amount called for by the terms of
the award as a result of the degree of attainment of the performance goals
certified by the Committee. Participants may elect to receive payment of their
earned awards either in cash or in shares of the Company's common stock having a
fair market value on the date of payment equal to the dollar value of the earned
award.
Transfer of Control. The Performance Plan defines a "Transfer of
-------------------
Control" as (i) a sale or exchange by the stockholders of more than 50% of the
Company's voting stock, (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,
wherein the stockholders of the Company immediately before 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. In the event of
a Transfer of Control, each participant granted an award for a performance
period that will not be completed as of the date of the Transfer of Control will
be paid the value of the award that would have been earned had the performance
goals been attained at the 100% level, prorated, however, for the portion of the
performance period elapsed prior to the Transfer of Control.
Termination or Amendment. The Performance Plan will continue until
------------------------
terminated by the Committee. The Committee may terminate or amend the
Performance Plan or any award under the Performance Plan at any time. However,
no such termination or amendment may adversely affect any outstanding award
without the participant's consent, unless necessary to comply with any law or
government regulation.
18
<PAGE>
DESCRIPTION OF 1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors of the Company on April 24, 1996 and
approved by the stockholders of the Company in August 1996. As of March 31,
1997, a total of 450,000 shares of Common Stock were authorized for issuance
under the Purchase Plan, of which 60,782 shares have been issued and remain
outstanding following purchases by participants in the Purchase Plan.
SUMMARY OF THE PROVISIONS OF THE PURCHASE PLAN
The following is a brief summary of the Purchase Plan as in effect as
of the date of this Proxy Statement. This summary is qualified in its entirety
by the specific language of the Purchase Plan, a copy of which is available to
any stockholder upon request.
General. The Purchase Plan is intended to qualify as an "employee
-------
stock purchase plan" under Section 423 of the Code. Each participant in the
Purchase Plan is granted at the beginning of each offering under the plan (an
"Offering") the right to purchase through accumulated payroll deductions up to a
number of shares of the Common Stock of the Company (a "Purchase Right")
determined on the first day of the Offering. The Purchase Right is automatically
exercised on the last day of the Offering unless the participant has withdrawn
from participation in the Offering or in the Purchase Plan prior to such date.
Shares Subject to Plan. A maximum of 450,000 shares of the Company's
----------------------
authorized but unissued or reacquired shares of Common Stock may be issued under
the Purchase Plan, subject to appropriate adjustment in the event of a stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the Company's capital structure or in the
event of any merger, sale of assets or other reorganization of the Company. If
any Purchase Right expires or terminates, the shares subject to the unexercised
portion of such Purchase Right are returned to the plan and may again be
subjected to a Purchase Right.
Administration. The Purchase Plan is administered by the Board of
--------------
Directors or a duly appointed committee of the Board (hereinafter referred to as
the "Board"). Subject to the provisions of the Purchase Plan, the Board
determines the terms and conditions of Purchase Rights granted under the plan.
The Board will interpret the Purchase Plan and Purchase Rights granted
thereunder, and all determinations of the Board will be final and binding on all
persons having an interest in the Purchase Plan or any Purchase Rights.
Eligibility. Any employee of the Company or of any present or future
-----------
parent or subsidiary corporation of the Company designated by the Board for
inclusion in the Purchase Plan is eligible to participate in an Offering under
the plan so long as the employee is customarily employed for more than 20 hours
per week and more than five months in any calendar year. However, no employee
who owns or holds options to purchase, or as a result of participation in the
Purchase Plan would own or hold options to purchase, five percent or more of the
total combined voting power or value of all classes of stock of the Company or
of any parent or subsidiary corporation of the Company is entitled to
participate in the Purchase Plan. As of June 20, 1997, approximately 163
employees were eligible to participate in the Purchase Plan.
Offerings. Generally, each Offering of Common Stock under the Purchase
---------
Plan is for a period of approximately six months (an "Offering Period").
Offering Periods under the Purchase Plan will generally commence on the first
days of February and August of each year (an "Offering Date") and end on the
last days of the next following July and January, respectively. However, the
first Offering Period will commence on the Effective Date and end on January 31,
1997. The Board may establish a different term, not to exceed 27 months, for one
or more Offerings or different commencement or ending dates. Generally, shares
are purchased on the last day of the Offering Period (a "Purchase Date"). The
Purchase Plan also authorizes the Board to establish one or more additional
Purchase Dates during an Offering Period.
19
<PAGE>
Participation and Purchase of Shares. Participation in the Purchase
------------------------------------
Plan is limited to eligible employees who authorize payroll deductions prior to
the Offering Date. Payroll deductions may not exceed 10% (or such other rate as
the Board determines) of an employee's base salary, bonus and commissions on any
payday during the Offering Period. Once an employee becomes a participant in the
Purchase Plan, the employee will automatically participate in each successive
Offering Period until such time as the employee withdraws from the Purchase
Plan, becomes ineligible to participate in the Purchase Plan, or terminates
employment.
Subject to certain limitations, each participant in an Offering has a
Purchase Right equal to the lesser of that number of whole shares determined by
dividing $12,500 by the fair market value of a share of Common Stock on the
Offering Date or 1,500 shares, provided that these dollar and share amounts will
be prorated for any Offering Period that is less than five and one-half or more
than six and one-half months in duration. No participant may purchase under the
Purchase Plan shares of the Company's Common Stock having a fair market value
exceeding $25,000 in any calendar year (measured by the fair market value of the
Company's Common Stock on the first day of the Offering Period in which the
shares are purchased).
On each Purchase Date, the Company issues to each participant in the
Offering the number of shares of the Company's Common Stock determined by
dividing the amount of payroll deductions accumulated for the participant during
the Offering Period by the purchase price, limited in any case by the number of
shares subject to the participant's Purchase Right for that Offering. The price
per share at which shares are sold under the Purchase Plan is established by the
Board but may not be less than 85% of the lesser of the fair market value per
share of the Company's Common Stock on the Offering Date or on the Purchase
Date. The fair market value of the Common Stock on any relevant date generally
will be the closing price per share on such date as reported on the Nasdaq
National Market. However, the fair market value of the Common Stock on the
Effective Date will be deemed to be the public offering price as set forth in
the final prospectus filed with the Securities and Exchange Commission in
connection with the initial public offering of the Company's Common Stock. Any
payroll deductions under the Purchase Plan not applied to the purchase of shares
will be returned to the participant, unless the amount remaining is less than
the amount necessary to purchase a whole share of Common Stock, in which case
the remaining amount may be applied to the next Offering Period.
A participant may withdraw from an Offering at any time without
affecting his or her eligibility to participate in future Offerings. However,
once a participant withdraws from an Offering, that participant may not again
participate in the same Offering.
Transfer of Control. The Purchase 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 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, wherein the
stockholders of the Company immediately before 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
surviving, continuing, purchasing or successor corporation or parent corporation
thereof (the "Acquiring Corporation") may assume the Company's rights and
obligations under the Purchase Plan or substitute substantially equivalent
Purchase Rights for such corporation's stock. If the acquiring or successor
corporation elects not to assume or replace the outstanding Purchase Rights, the
Board may adjust the Purchase Date of the current Offering Period to a date on
or before the date of the Transfer of Control. Any Purchase Rights that are not
assumed, replaced, or exercised prior to the Transfer of Control will terminate.
Termination or Amendment. The Purchase Plan will continue until
------------------------
terminated by the Board or until all of the shares reserved for issuance under
the plan have been issued. The Board may at any time amend or terminate the
Purchase Plan, except that the approval of the Company's stockholders is
required within twelve months of the adoption of any amendment increasing the
number of shares authorized for issuance under the Purchase Plan, or changing
the definition of the corporations which may be designated by the Board as
corporations the employees of which may participate in the Purchase Plan.
20
<PAGE>
Summary of Federal Income Tax Consequences of the Purchase 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
Purchase Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Generally, there are no tax consequences to an employee of either
becoming a participant in the Purchase Plan or purchasing shares under the
Purchase Plan. The tax consequences of a disposition of shares vary depending on
the period such stock is held before its disposition. If a participant disposes
of shares within two years after the Offering Date or within one year after the
Purchase Date on which the shares are acquired (a "disqualifying disposition"),
the participant recognizes ordinary income in the year of disposition in an
amount equal to the difference between the fair market value of the shares on
the Purchase Date and the purchase price. Such income may be subject to
withholding of tax. Any additional gain or resulting loss recognized by the
participant from the disposition of the shares is a capital gain or loss. If the
participant disposes of shares at least two years after the Offering Date and at
least one year after the Purchase Date on which the shares are acquired, the
participant recognizes ordinary income in the year of disposition in an amount
equal to the lesser of (i) the difference between the fair market value of the
shares on the date of disposition and the purchase price or (ii) 15% of the fair
market value of the shares on the Offering Date. Any additional gain recognized
by the participant on the disposition of the shares is a capital gain. If the
fair market value of the shares on the date of disposition is less than the
purchase price, there is no ordinary income, and the loss recognized is a
capital loss. If the participant owns the shares at the time of the
participant's death, the lesser of (i) the difference between the fair market
value of the shares on the date of death and the purchase price or (ii) 15% of
the fair market value of the shares on the Offering Date is recognized as
ordinary income in the year of the participant's death.
If the exercise of a Purchase Right does not constitute an exercise
pursuant to an "employee stock purchase plan" under section 423 of the Code, the
exercise of the Purchase Right will be treated as the exercise of a nonstatutory
stock option. The participant would therefore recognize ordinary income on the
Purchase Date equal to the excess of the fair market value of the shares
acquired over the purchase price. Such income is subject to withholding of
income and employment taxes. Any gain or loss recognized on a subsequent sale of
the shares, as measured by the difference between the sale proceeds and the sum
of (i) the purchase price for such shares and (ii) the amount of ordinary income
recognized on the exercise of the Purchase Right, will be treated as a capital
gain or loss, as the case may be.
A capital gain or loss will be long-term if the participant holds the
shares for more than 12 months and short-term if the participant holds the
shares for 12 months or less. Both long-term and short-term capital gains are at
present generally subject to the same tax rates as ordinary income, except that
long-term capital gains are currently subject to a maximum tax rate of 28%.
If the participant disposes of the shares in a disqualifying
disposition the Company should be entitled to a deduction equal to the amount of
ordinary income recognized by the participant as a result of the disposition,
except to the extent such deduction is limited by applicable provisions of the
Code or the regulations thereunder. In all other cases, no deduction is allowed
the Company.
DESCRIPTION OF 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
The Company's 1996 Outside Directors Stock Option Plan (the "Directors
Plan") was adopted by the Board of Directors of the Company on April 24, 1996,
and approved by the stockholders of the Company in August 1996. As of March 31,
1997, 200,000 shares of Common Stock were authorized for issuance under the
Directors Plan, of which 200,000 shares remained available for future grants.
21
<PAGE>
SUMMARY OF THE PROVISIONS OF THE DIRECTORS PLAN
The following is a brief summary of the Directors Plan as in effect as
of the date of this Proxy Statement. This summary is qualified in its entirety
by the specific language of the Directors Plan, a copy of which is available to
any stockholder upon request.
General. The Directors Plan provides for the automatic grant of
-------
nonstatutory stock options to nonemployee directors of the Company.
Shares Subject to Plan. A maximum of 200,000 shares of the authorized
----------------------
but unissued or reacquired shares of the Common Stock of the Company may be
issued upon the exercise of options granted pursuant to the Directors Plan. 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 Directors Plan, to the terms of automatic option grants
under the plan, and to outstanding options. To the extent that any outstanding
option under the Directors Plan expires or terminates prior to exercise in full
or if shares issued upon the 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 plan and become available for future
grants.
Administration. The Directors Plan is administered by the Board of
--------------
Directors or a duly appointed committee of the Board (hereinafter referred to as
the "Board"). However, the Board has no discretion to select the nonemployee
directors of the Company who are granted options under the Directors Plan, to
set the exercise price of such options, to determine the number of shares for
which or the time at which particular options are granted or to establish the
duration of such options. The Directors Plan provides, 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 Directors Plan. The Board is authorized to interpret
the Directors Plan and options granted thereunder, and all determinations of the
Board will be final and binding on all persons having an interest in the
Directors Plan or any option.
Eligibility. Only directors of the Company who are not at the time of
-----------
option grant employees of the Company or of any parent or subsidiary corporation
of the Company ("Outside Directors") are eligible to participate in the
Directors Plan. Currently, the Company has five (5) Outside Directors.
Automatic Grant of Options. The Directors Plan provides that each
--------------------------
Outside Director who was an Outside Director on August 7, 1996 (the "Effective
Date") automatically will be granted an option to purchase 15,000 shares of
Common Stock on the day following the first annual meeting of the Company's
stockholders which occurs after the Effective Date. Each person who is first
elected or appointed as an Outside Director after the Effective Date
automatically will be granted an option to purchase 15,000 share of Common Stock
on the day of such initial election or appointment. The Directors Plan also
provides for the automatic grant annually of an additional option to purchase
5,000 shares of Common Stock to each Outside Director holding office on the
anniversary date of his or her initial option grant.
Terms and Conditions of Options. Each option granted under the
-------------------------------
Directors Plan will be evidenced by a written agreement between the Company and
the Outside Director specifying the number of shares subject to the option and
the other terms and conditions of the option, consistent with the requirements
of the Directors Plan. The exercise price of any option granted under the
Directors Plan must equal the fair market value of a share of the Company's
Common Stock on the date of grant. Generally, the fair market value of the
Common Stock will be the closing price per share on the date of grant as
reported on the Nasdaq National Market. No option granted under the Directors
Plan is exercisable after the expiration of 10 years after the date such option
is granted, subject to earlier termination in the event the optionee's service
with the Company ceases or in the event of a Transfer of Control of the Company,
as discussed below. Initial options granted under the Directors Plan will become
vested and exercisable in installments, with 1/8 of the shares subject to the
option becoming exercisable six months after the date of grant, and the
remainder of the shares becoming exercisable in equal monthly installments over
the
22
<PAGE>
following 42 months. Annual options will become vested and exercisable in 12
monthly installments, with the first such installment becoming exercisable on
the date 37 months after the date of grant.
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 loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, or by any
combination of these.
With the Company's consent and if not required for compliance with Rule
16b-3 or any other law or regulation, an option granted under the Directors Plan
may be transferred by the optionee without receipt of any consideration to the
optionee's immediate family, a trust for the benefit of the optionee or the
optionee's immediate family, or a partnership in which only the optionee and the
optionee's immediate family are partners. Otherwise, during the lifetime of the
optionee, the option may be exercised only by the optionee and may not be
transferred or assigned, except by will or the laws of descent and distribution.
Transfer of Control. The Directors 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 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, wherein the
stockholders of the Company immediately before 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"), all
options outstanding under the Directors Plan will become immediately exercisable
and vested in full as of the date ten days prior to the Transfer of Control. In
addition, the surviving, continuing, purchasing or successor corporation or
parent corporation thereof (the "Acquiring Corporation") may assume or
substitute substantially equivalent options for the options outstanding under
the Directors Plan. To the extent that the options outstanding under the
Directors Plan are not assumed, replaced, or exercised prior to the Transfer of
Control, they will terminate.
Termination or Amendment. The Directors Plan will continue until
------------------------
terminated by the Board or until all of the shares reserved for issuance under
the plan have been issued. The Board may terminate or amend the Directors Plan
at any time, but, without stockholder approval, the Board may not amend the
Directors Plan to increase the total number of shares of Common Stock reserved
for issuance thereunder or expand the class of persons eligible to receive
options. If required for compliance with Rule 16b-3, the Directors Plan provides
that provisions addressing eligibility to participate in the plan and the
amount, price and time of the grant of options may not be amended more than once
every six months, other than to comport to changes in the Code, the Employee
Retirement Income Security Act of 1974, or the rules thereunder. No termination
or amendment of the Directors Plan may adversely affect an outstanding option
without the consent of the optionee, unless such termination or amendment is
necessary to comply with any applicable law or regulation.
Summary of Federal Income Tax Consequences of the Directors Plan. The
----------------------------------------------------------------
federal income tax consequences of the options granted under the Directors Plan
are the same as the federal income tax consequences described for nonstatutory
stock options granted pursuant to the 1995 Stock Option Plan set forth above.
See "PROPOSAL No.2 -- AMENDMENT OF 1995 STOCK OPTION PLAN -- Summary of Federal
Income Tax Consequences of the Option Plan."
23
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of
one employee director, Mr. Sippl, and two non-employee directors, Messrs. Webb
and Young. Mr. Sippl is also the Company's Chief Executive Officer. The
Compensation Committee is responsible for setting and administering policies
governing compensation of executive officers of the Company, including cash
compensation, the annual Executive Performance Incentive Plan and the 1995 Stock
Option Plan (the "Option Plan"). In addition, the Compensation Committee reviews
compensation levels of other management level employees, evaluates the
performance of management and reviews other compensation-related issues. Mr.
Sippl did not participate in any deliberations regarding compensation for
himself.
COMPENSATION PHILOSOPHY
The Company applies a consistent compensation philosophy for all its
employees, including its executive officers. The Company's compensation policy
is designed to enable the Company to attract, retain and reward executive
officers who are likely to contribute to the long-term success of the Company.
The Compensation Committee also believes that a strong correlation should exist
between executive compensation, business objectives and overall Company
performance, and seeks to design its total compensation package to elicit the
highest degree of productivity and commitment from all executive officers.
COMPONENTS OF COMPENSATION
There are three components of the Company's executive compensation
program which support the goal of aligning compensation with the value created
for the Company's stockholders while providing incentives to further the
Company's strategic objectives: base salary, performance based bonuses and stock
options.
Base Salary.
-----------
The Compensation Committee strives to offer salaries to its executive
officers which are competitive with salaries offered by companies of similar
size and capitalization in the computer software industry. Base salaries are
reviewed on an annual basis and are subject to adjustment based upon the
individual's contribution to the Company and changes in salary levels offered by
comparable companies. In determining the salaries of the executive officers, the
Compensation Committee considers information provided by the Company's Chief
Financial Officer and Director of Human Resources, as well as salary surveys and
similar data available from independent sources.
Roger J. Sippl founded the Company and has served as Chief Executive
Officer from the Company's inception in February 1993. Mr. Sippl's fiscal 1997
compensation, including a base salary of $1, was set by the Compensation
Committee in fiscal 1996 upon notice that Mr. Sippl waived his right to receive
a salary. Mark D. Hanson has served as President and Chief Operating Officer of
the Company since January 1995. Mr. Hanson's fiscal 1997 compensation, including
a base salary of $150,000, was set by the Compensation Committee in fiscal 1996
and was not adjusted in fiscal 1997. The Compensation Committee reviewed Mr.
Hanson's performance with regard to quarterly performance objectives, weighted
among specific personal and corporate objectives, in determining his eligibility
for bonus compensation.
The President and Chief Operating Officer is responsible for evaluating
the performance of all other executive officers and recommends salary
adjustments which are reviewed and approved by the Compensation Committee.
Performance evaluations for individual executive officers in fiscal 1997 were
based on predetermined individual goals approved by the President and Chief
Operating Officer. In addition to considering the results of the performance
evaluations and information concerning competitive salaries, the Compensation
Committee and the President and Chief Operating Officer placed significant
weight on the financial condition of the Company in considering salary
adjustments.
24
<PAGE>
Bonuses.
-------
Beginning in fiscal 1997, target amounts of cash bonuses for each
executive officer under the Company's Executive Performance Incentive Plan (the
"Incentive Plan") are set annually by the Compensation Committee and are
specifically weighted for identified financial, management, strategic and
operational goals. Performance against the established goals is determined
annually by the Compensation Committee and, based on such determination, the
Committee approves payment of appropriate bonuses. No bonuses were awarded to
either Mr. Sippl or Mr. Hanson in fiscal 1997.
Bonuses accrued in fiscal 1997 under the Incentive Plan for other
executive officers, as of the end year, represented between zero and 15% of the
total compensation of such officers.
Equity Incentives.
-----------------
The Compensation Committee believes that employee equity ownership is
highly motivating, provides a major incentive to employees in building
stockholder value and serves to align the interests of employees with the
interests of the Company's stockholders. In determining the amount of equity
compensation to be awarded to executive officers in any fiscal year, the
Committee considers the position of the officer, the current stock ownership of
the officer, the stock ownership of other officers of the Company, the number of
shares which continue to be subject to vesting under outstanding options, the
compensation paid by other similarly situated companies to their executive
officers and the expected future contribution of the officer to the Company's
performance. The Committee gives primary weight to the officer's position and
expected future contributions.
In fiscal 1997, the Compensation Committee recommended to the Board of
Directors, and the Board of Directors approved, stock option grants to certain
of the executive officers. The Committee did not recommend any grant of options
to Mr. Sippl who had waived his right to any stock options. The Committee
granted Mr. Hanson options to purchase an aggregate of 45,000 shares based on
attainment of predetermined financial and other goals. Option grants during
fiscal 1997 are described under the heading "EXECUTIVE COMPENSATION AND OTHER
MATTERS" in the table entitled "OPTION GRANTS IN LAST FISCAL YEAR."
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company has considered the amendments to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and related regulations
of the Internal Revenue Service that restrict the deductibility for federal
income tax purposes of executive compensation paid to the chief executive
officer and each of the four other most highly compensated executive officers at
the end of any fiscal year to the extent such compensation exceeds $1,000,000
for any of such officers in any year and does not qualify for an exception under
the statute or regulations. Qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are satisfied. On April
23, 1997, the Board of Directors amended the Option Plan, subject to stockholder
approval, to provide a limit on the number of shares for which options may be
granted to any employee in a fiscal year. As amended, compensation recognized in
connection with options granted under the Option Plan will qualify for an
exception from the deduction limit. The Compensation Committee does not believe
that other components of the Company's compensation will be likely to exceed
$1,000,000 annually for any executive officer in the foreseeable future and,
therefore, concluded that no further action with respect to qualifying such
compensation for federal income tax deductibility was necessary at this time. In
the future, the Committee will continue to evaluate the advisability of
qualifying its executive compensation for such deductibility. The Committee's
policy is to qualify its executive compensation for deductibility under
applicable tax laws as practicable.
COMPENSATION COMMITTEE
Roger J. Sippl
J. Sidney Webb
Eric Young
25
<PAGE>
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Company's Common Stock with the cumulative
total return of the CRSP Total Return Index for the Nasdaq Stock Market (U.S.
Companies) ("Nasdaq US") and the H&Q Total Return Software Index ("H&Q Index")
for the period commencing on August 7, 1996(1) and ending on March 31, 1997.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM AUGUST 7, 1996
THROUGH MARCH 31, 1997(2)
VISIGENIC SOFTWARE, INC., NASDAQ US AND H&Q INDEX
[PERFORMANCE GRAPH APPEARS HERE]
August 7, 1996 March 31, 1997
-------------- --------------
Visigenic Software, Inc. $100.00 $126.67
Nasdaq US $100.00 $106.71
H&Q Index $100.00 $94.88
- ------------------
(1) The Company's initial public offering commenced on August 8, 1996. For
purposes of this presentation, the Company has assumed that its initial
offering price of $7.50 would have been the closing sales price on
August 7, 1996, the day prior to commencement of trading.
(2) Assumes that $100.00 was invested on August 7, 1996 in the Company's
Common Stock at the Company's initial offering price of $7.50 and at
the closing sales price for each index on that date and that all
dividends were reinvested. No dividends have been declared on the
Company's Common Stock. Stockholder returns over the indicated period
should not be considered indicative of future stockholder returns.
26
<PAGE>
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next Annual
Meeting of the Stockholders of the Company must be received by the Company at
its offices at 951 Mariner's Island Boulevard, Suite 120, San Mateo, California
94404, not later than March 3, 1998, and satisfy the conditions established by
the Securities and Exchange Commission for stockholder proposals to be included
in the Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the meeting
is as set forth above. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ KEVIN C. EICHLER
------------------------------------
KEVIN C. EICHLER
Secretary
July 1, 1997
27
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VISIGENIC SOFTWARE, INC.
P 951 Mariner's Island Boulevard, Suite 120
San Mateo, California 94404
R
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X The undersigned hereby appoints Mark D. Hanson and Kevin C. Eichler, and
each or either of them, as Proxies of the undersigned, with full power of
Y substitution, and hereby authorizes them to represent and to vote, as
designated in this proxy, all of the shares of Common Stock of Visigenic
Software, Inc., held of record by the undersigned at the Annual Meeting of
Stockholders of Visigenic Software, Inc. to be held July 30, 1997, or at any
adjournment or postponement thereof.
The Board of Directors recommends a vote FOR Proposal Numbers 1, 2 and
3. This Proxy, when properly executed, will be voted as specified on the
reverse side. This Proxy will be voted FOR Proposal Numbers 1, 2 and 3 if no
specification is made.
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SEE REVERSE
SIDE
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CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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[X] Please mark
votes as in
this example.
1. To elect (2) Class I directors to hold office for a three-year term and
until their successors are elected and qualified.
NOMINEES: Howard H. Graham, J. Sidney Webb
FOR WITHHELD
[_] [_] MARK HERE [_]
IF YOU PLAN
TO ATTEND
THE MEETING
[_] MARK HERE [_]
--------------------------------------------- FOR ADDRESS
For both nominees except as noted above CHANGE AND
NOTE BELOW
FOR AGAINST WITHHELD
2. To vote upon a proposal to amend the [_] [_] [_]
Company's 1995 Stock Option Plan to
increase the aggregate maximum number of
shares issuable thereunder by 1,500,000
shares from 2,500,000 to 4,000,000 shares,
and to approve the Section 162(m) grant
limit of 300,000 shares per employee per
fiscal year.
3. To vote upon a proposal to ratify the FOR AGAINST WITHHELD
appointment of Arthur Andersen LLP as the [_] [_] [_]
independent auditors of the Company for
the fiscal year ending March 31, 1998.
4. To transact such other business as may properly come before the meeting.
PLEASE SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature: Date: Signature: Date:
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