<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
INSO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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>
[LOGO OF INSO CORPORATION(R)]
April 28, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Inso Corporation, a Delaware corporation (the "Company"), to be held at
eBusiness Technologies, 299 Promenade Street, Providence, Rhode Island at 9:00
a.m. on Thursday, June 1, 2000.
At the Annual Meeting, stockholders will be asked to elect two Class I
directors, to consider and vote upon proposals to approve amendments to the
Company's 1996 Non-employee Director Plan and the Company's 1993 Stock
Purchase Plan, and to ratify the selection of Ernst & Young LLP as Inso's
independent auditors.
It is important that your shares be represented at the Annual Meeting
whether or not you are able to attend personally. Please make sure your views
are considered by completing, signing and returning the enclosed proxy card
promptly.
Sincerely,
/s/ James Ringrose
James Ringrose
Chief Executive Officer
<PAGE>
Notice of Annual Meeting of Stockholders
June 1, 2000
Notice is hereby given that the Annual Meeting of Stockholders of Inso
Corporation, a Delaware corporation (the "Company"), will be held at eBusiness
Technologies, 299 Promenade Street, Providence, Rhode Island at 9:00 a.m. on
Thursday, June 1, 2000, to consider and act on the following matters:
1. Election of two Class I directors to serve until the Company's annual
meeting of stockholders to be held in 2003 and until their successors are
elected and qualified;
2. Approval of an amendment to the Company's 1993 Stock Purchase Plan (the
"1993 Purchase Plan") that would increase the number of shares of the
Company's common stock, par value $.01 per share ("Common Stock"), which
are authorized to be issued by the Company under the 1993 Purchase Plan
from 450,000 to 700,000;
3. Approval of and ratification of amendments to the Company's 1996 Non-
employee Director Plan that would (i) eliminate the annual grant of 1,000
shares of Common Stock; (ii) reduce the initial option grant to new
directors to 7,500, but to have such initial grant vest immediately, (iii)
increase the number of options to be granted annually to non-employee
directors to 7,500 and to have such options vest immediately, and (iv) set
the date of January 27 as the date upon which such annual option grant will
be made;
4. Ratification of the selection of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending January 31, 2001; and
5. Any other matter that may properly come before the meeting or any
postponement or adjournment thereof.
Stockholders of record at the close of business on April 14, 2000, will be
entitled to vote at the Annual Meeting of Stockholders and any postponement or
adjournment thereof.
By Order of the Board of Directors,
/s/ Jonathan P. Levitt
Jonathan P. Levitt
Secretary
April 28, 2000
IMPORTANT
Whether or not you plan to attend the meeting in person, you are urged to
complete, date and sign the enclosed proxy card and return it promptly in the
enclosed reply envelope. This will assure representation of your shares and a
quorum for the transaction of business at the meeting. If you attend the
meeting, you may, of course, vote your shares in person even though you have
sent in your proxy.
<PAGE>
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
to be held June 1, 2000
GENERAL INFORMATION
Solicitation and Revocation of Proxies
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Inso Corporation, a Delaware corporation
(the "Company"), of proxies to be voted at the Annual Meeting of Stockholders
of the Company to be held at eBusiness Technologies, 299 Promenade Street,
Providence, Rhode Island at 9:00 a.m. on Thursday, June 1, 2000, and at any
postponement or adjournment thereof (the "Meeting"). The solicitation of
proxies by mail may be followed by personal solicitation of certain
stockholders by officers or employees of the Company. Any proxy given pursuant
to this solicitation may be revoked in writing (including by delivery of a
later dated proxy) or in person by notifying the Secretary of the meeting, in
writing, at any time prior to the voting of the proxy. This Proxy Statement
and the accompanying proxy card are being mailed on or about April 28, 2000,
to stockholders of record as of the close of business on April 14, 2000 (the
"Record Date").
At the Meeting, the stockholders of the Company will vote (i) to elect two
Class I directors to serve until the Company's annual meeting of stockholders
to be held in 2003 and until their successors are duly elected and qualified,
(ii) to approve an amendment to the Company's 1993 Stock Purchase Plan (the
"1993 Purchase Plan") that would increase the number of shares of the
Company's common stock, par value $.01 per share ("Common Stock"), which are
authorized to be issued by the Company under the 1993 Purchase Plan from
450,000 to 700,000, (iii) to approve and ratify amendments to the Company's
1996 Non-employee Director Plan (the "1996 Director Plan") that would (a)
eliminate the annual grant of 1,000 shares of Common Stock; (b) reduce the
initial option grant to new directors to 7,500, but to have such initial grant
vest immediately, (c) increase the number of options to be granted annually to
non-employee directors to 7,500 and to have such options vest immediately, and
(d) set the date of January 27 as the date upon which such annual option grant
will be made, (iv) to ratify the Board's selection of Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending January 31,
2001, and (v) to transact such other business as may properly come before the
Meeting, as set forth in the preceding Notice of Meeting.
If any other business is properly presented for action by the stockholders
of the Company at the Meeting, shares represented by proxies received by the
Board will be voted in accordance with the judgment of the persons named in
the proxy. If the enclosed proxy card is properly executed and returned to the
Company, all shares represented thereby will be voted as indicated therein. If
a proxy is returned without instructions it will be voted FOR the two nominees
named herein, FOR the proposal to approve the amendment to the 1993 Purchase
Plan, FOR the proposal to approve and ratify the amendments to the 1996
Director Plan, and FOR the ratification of Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending January 31,
2001.
The address of the Company's principal executive offices is 31 St. James
Avenue, Boston, Massachusetts 02116-4101, USA, and the Company's telephone
number is (617) 753-6500.
Voting Securities
On the Record Date, there were 16,609,048 outstanding shares of Common
Stock, which is the only class of stock outstanding and therefore entitled to
vote at the Meeting. The holders of such shares will be entitled to cast one
vote for each share held of record as of the Record Date. On the Record Date,
the closing sales price of the Common Stock on the Nasdaq National Market was
$4.00 per share.
<PAGE>
The presence of the holders of a majority of the shares of Common Stock
issued, outstanding and entitled to vote at the Meeting shall constitute a
quorum for the transaction of business at the Meeting. Shares of Common Stock
held by those present in person or represented by proxy (including shares that
abstain or do not vote with respect to one or more of the matters presented
for stockholder approval) will be counted for purposes of determining whether
a quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting on the matter is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, and entitled to vote is required to approve
the amendment to the 1993 Purchase Plan, approve and ratify the amendments to
the 1996 Director Plan, and ratify the selection of Ernst & Young LLP as the
Company's independent auditors.
Shares that abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter and
also will not be counted as shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on a
matter that requires the affirmative vote of a certain percentage of the
shares voting on the matter.
Abstentions will be treated as shares that are present, or represented, and
entitled to vote for purposes of determining the number of shares that are
present, or represented, and entitled to vote with respect to any particular
matter, but will not be counted as votes in favor of such matter. Accordingly,
an abstention with respect to a matter requiring the vote of a certain
percentage of the shares held by those present, or represented by proxy, and
entitled to vote has the same effect as a vote against such matter. Broker
non-votes will not be considered as present and entitled to vote with respect
to such matter and will thus have no effect on the voting on such matter.
Other Matters
The Board of Directors knows of no business that will be presented for
consideration at the Annual Meeting other than as shown above. However, if any
such other business should come before the Annual Meeting, it is the intention
of the persons named in the enclosed proxy to vote the proxies in respect of
any such business in accordance with their best judgement. Proxies solicited
by the Board of Directors confer discretionary authority to vote on any matter
to come before the Annual Meeting with respect to which the Company did not
receive notice prior to March 14, 2000.
The cost of preparing, assembling and mailing this proxy material will be
borne by the Company. The Company may solicit proxies otherwise than by use of
the mail, in that certain officers and regular employees of the Company,
without additional compensation, may use their personal efforts, by telephone
or otherwise, to obtain proxies. Such assistance may take the form of
personal, telephonic or written solicitation or any combination thereof. The
Company will also request persons, firms and corporations holding shares in
their names, or in the names of their nominees, which shares are beneficially
owned by others, to send this proxy material to and obtain proxies from such
beneficial owners and will reimburse such holders for their reasonable
expenses in doing so.
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<PAGE>
SECURITY OWNERSHIP
Five Percent Beneficial Owners
The following table sets forth information relating to the beneficial
ownership of Common Stock by each person known by the Company to own
beneficially more than 5% of the Company's Common Stock as of the Record Date:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership(1) Common Stock(2)
- ------------------------------------ ----------------------- ---------------
<S> <C> <C>
Farhad Fred Ebrahimi................... 1,143,900(3) 6.88%
475 Circle Drive
Denver, CO 80206
Dawson Giammalva Capital Management.... 1,548,900 9.33%
354 Pequot Ave.
Southport, CT 06490
Dimensional Fund Advisors Inc.......... 848,700(4) 5.11%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
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(1) Unless otherwise noted, the nature of beneficial ownership is sole voting
and investment power. The information herein is based on reports of
beneficial ownership on Schedules 13D and 13G delivered to the Company
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(2) Percentage based upon 16,609,048 shares of the common stock of the
Company outstanding as of April 5, 2000.
(3) Shared power to vote and dispose as to 1,143,900 shares for all members
of the Ebrahimi family. The members of the Ebrahimi family have
dispositive power over the total number of shares as follows: Farhad Fred
Ebrahimi has shared dispositive power with Farhad Alexander Ebrahimi over
155,000 shares; shared dispositive power with Mary Wilkie Ebrahimi over
808,900 shares; and shared dispositive power with Farah Alexandra
Ebrahimi over 180,000 shares. Mary Wilkie Ebrahimi has shared dispositive
power with Farad Fred Ebrahimi over 808,900 shares. Farad Alexander
Ebrahimi has shared dispositive power with Farad Fred Ebrahimi over
155,000 shares. Farah Alexandra Ebrahimi has shared dispositive power
with Farad Fred Ebrahimi over 180,000 shares.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940 and serves as investment manager to
certain other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are the "Funds." In its role as
investment adviser or manager, Dimensional possesses voting and/or
investment power over the securities of the Company that are owned by the
Funds. All securities reported in this table are owned by the Funds.
Dimensional has disclaimed beneficial ownership of such securities.
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<PAGE>
Management's Stock Ownership
The following table sets forth information relating to the beneficial
ownership of Common Stock, as of the Record Date, by (i) each director of the
Company, (ii) the Named Executive Officers (as defined under "Executive
Compensation" below), and (iii) the directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Amount of Percent of
Name of Beneficial Owner Beneficial Ownership(1) Common Stock(2)
- ------------------------ ----------------------- ---------------
<S> <C> <C>
Joseph A. Baute....................... 54,750 *
Samuel H. Fuller...................... 35,250 *
Stephen O. Jaeger..................... 87,083 *
Joanna T. Lau......................... 48,250 *
Kirby A. Mansfield(3)................. 179,700 *
Edward Terino......................... 16,200 *
Steven R. Vana-Paxhia(4).............. 183,525 *
William J. Wisneski................... 56,250 *
Paul Anderson(5)...................... 4,826 *
Jonathan P. Levitt.................... 7,917 *
Scott D. Norder....................... 80,933 *
James Ringrose........................ 23,334 *
All directors and executive officers
as a group (15 persons).............. 962,371 5.79%
</TABLE>
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(*) Less than 1%.
(1) Includes shares over which the directors, the Named Executive Officers
and all directors and executive officers as a group are deemed to
beneficially own by reason of options granted to them which will be
exercisable within 60 days of the Record Date, as follows: Joseph A.
Baute--46,250; Samuel H. Fuller-- 31,250; Stephen O. Jaeger--77,083;
Joanna T. Lau--46,250; Kirby A. Mansfield--167,479; Edward Terino--5,000;
Steven R. Vana-Paxhia--165,525; William J. Wisneski--46,250; Paul
Anderson--0; Jonathan P. Levitt--7,917; Scott D. Norder--75,584; and
James Ringrose--23,334; and all directors and executive officers as a
group--848,339.
(2) Percentage based upon 16,609,048 shares of the Common Stock outstanding
as of April 5, 2000.
(3) Mr. Mansfield resigned as President, Chief Operating Officer and director
of the Company as of April 11, 2000.
(4) Mr. Vana-Paxhia resigned as President, Chief Executive Officer and
director of the Company as of March 25, 1999. The information included is
based upon representations made by Mr. Vana-Paxhia on March 24, 2000.
(5) Mr. Anderson resigned as President, Product Data Management Division of
the Company as of January 5, 2000. The information included is based upon
representations made by Mr. Anderson on March 31, 2000.
Election of Directors
The Company has a classified Board of Directors currently consisting of
three Class I directors, one Class II director and two Class III directors.
The Class I, Class II and Class III directors are elected to serve until the
annual meetings of stockholders to be held in 2003, 2001 and 2002,
respectively, and until their respective successors are elected and qualified.
At each annual meeting of stockholders, directors are elected for a full term
of three years to succeed those whose terms are expiring.
The persons named in the enclosed proxy will vote to elect as directors
Samuel H. Fuller and Edward Terino, the two Class I director nominees named
below, unless the proxy is marked otherwise. Dr. Fuller and Mr. Terino are
currently directors of the Company. Mr. Terino was duly elected by the Board
of Directors on
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<PAGE>
September 15, 1999 to serve as a Class I director until the Meeting. The Class
I directors formerly included Messrs. Shepard and Stata. Mr. Shepard resigned
as a Class I director of the Company as of September 15, 1999. Mr. Stata
resigned as a Class I director of the Company as of January 31, 2000. Mr.
Wisneski will not stand for re-election at the Meeting. Pursuant to the
Company's Corporate Governance Guidelines and Procedures, which were adopted
by the Board of Directors during 1999, Mr. Baute, who is 72, will retire at
the Meeting.
Each Class I director will be elected to hold office until the Annual
Meeting of Stockholders to be held in 2003 and until his successor is elected
and qualified. Each of the nominees has indicated his willingness to serve, if
elected; however, if any nominee should be unable to serve, the proxies may be
voted for a substitute nominee designated by the Board of Directors, unless
the Board of Directors acts to reduce the number of directors.
On December 2, 1999, Dr. John Guttag resigned from the Board of Directors,
and Kirby A. Mansfield was duly elected by the Board of Directors on that date
to serve as a Class II director until the Annual Meeting of Stockholders to be
held in 2001. Mr. Mansfield resigned as a director of the Company on April 11,
2000.
For each member of the Board of Directors, including those who are nominees
for election as Class I directors, there follows information given by each
concerning his or her principal occupation and business experience for the
past five years, the names of other publicly-held companies of which he or she
serves as a director, his or her age and length of service as a director of
the Company.
<TABLE>
<CAPTION>
Nominees for Election as
Class I Directors
(Terms Expiring at the Annual
Meeting to be held in 2003) Age Principal Occupation
- -------------------------------------------------------------------------------
<C> <C> <S>
Samuel H. Fuller............ 53 Dr. Fuller has been a director of the
Company since May 1996. Dr. Fuller is
currently Vice President, Research and
Development, Analog Devices, Inc. Prior to
joining Analog Devices, Inc. in February
1998, Dr. Fuller served as Vice President,
Corporate Technology Strategy and Chief
Scientist for Digital Equipment Corporation.
Dr. Fuller has held various other positions
with Digital Equipment Corporation since
1978, and served as its Vice President of
Research from 1983 to January, 1996. Dr.
Fuller is also a director of the Corporation
for National Research Initiatives.
Edward Terino............... 46 Mr. Terino has been a director of the
Company since September 1999. Mr. Terino has
been the Chief Financial Officer at Applix,
Inc. since April 1999. Prior to joining
Applix, Inc., Mr. Terino served as Chief
Financial Officer for Celerity Solutions
from November 1996 through March 1999. From
July 1995 through November 1996, Mr. Terino
served as Vice President, Finance Planning
and Operations for the Educational
Publishing Division of Houghton Mifflin
Company.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Incumbent Class II Director
(Term Expiring at the Annual
Meeting to be held in 2001) Age Principal Occupation
- -------------------------------------------------------------------------------
<C> <C> <S>
Stephen O. Jaeger........... 55 Mr. Jaeger served as Chief Executive Officer
of the Company from the end of March 1999 to
April 11, 2000, and has been a director of
the Company since its inception in November
1993. In mid-March 1999, Mr. Jaeger was
elected Chairman of the Board of Directors
and continues to serve in that capacity.
After serving as an independent consultant,
Mr. Jaeger joined privately-held PharmaCom
Group, Inc. in February 1999 as a principal,
director and officer. From December 1997 to
October 1998, Mr. Jaeger was Executive Vice
President and Chief Financial Officer and a
director at Clinical Communications Group,
Inc. From March 1995 until September 1997,
Mr. Jaeger served as Vice President and
Chief Financial Officer and Treasurer of The
Perkin-Elmer Corporation. Mr. Jaeger was
Chief Financial Officer of Houghton Mifflin
from 1988 until March 1995. Mr. Jaeger is
also a director of Strategic Diagnostics,
Inc.
<CAPTION>
Incumbent Class III Directors
(Terms Expiring at the Annual
Meeting to be held in 2002)
- -------------------------------------------------------------------------------
<C> <C> <S>
Joseph A. Baute............. 72 Mr. Baute has served as a director of the
Company since its inception in November,
1993. Mr. Baute has been a principal in
Baute & Baute, a consulting firm for family
businesses, since 1993. Mr. Baute has been a
consultant for Markem Corporation, which
provides systems, supplies, and services to
mark customers' products, since 1994. Mr.
Baute had been Chairman and Chief Executive
of Markem Corporation from 1979 until his
retirement in June 1993. Mr. Baute is also a
director of Houghton Mifflin, The Thermo
Spectra, and Metrika Systems Corporation.
Joanna T. Lau............... 41 Ms. Lau has been a director of the Company
since March 8, 1994. Ms. Lau has been
President and Chairman of the Board of Lau
Technologies, Inc., which provides
manufacturing services for electronic
systems and produces digitized imaging
identification systems, since March 1990.
Ms. Lau held various management positions
with Digital Equipment Corporation and
General Electric Company from 1981 until
1990.
</TABLE>
The Board of Directors met 14 times during the fiscal year ended January 31,
2000. In 1999, the Board of Directors adopted the Inso Corporation Corporate
Governance Guidelines and Procedures. These guidelines and procedures mandate
the rules governing Board composition and selection, roles, independence,
relationship with management, mandatory retirement at age 72, term of service
and annual review.
Committees of the Board of Directors
The Board of Directors currently has two standing committees: the
Compensation Committee and the Audit Committee. During the fiscal year ended
January 31, 2000, the Board of Directors dissolved the Governance and
Technology and Strategy Committees, and the duties of those committees were
subsumed by the full Board of Directors. Prior to dissolution, the Governance
Committee, which served to nominate directors and evaluate the
6
<PAGE>
effectiveness of the Board, met five times, and the Technology and Strategy
Committee, which served to advise the Board on issues and trends in the
software industry, met once, during fiscal 2000.
The Compensation Committee
The duties of the Compensation Committee are to oversee the compensation and
benefit programs and policies for the Company, to make recommendations to the
Board of Directors regarding the granting of stock options and other equity
incentive compensation and to determine the compensation of the directors and
executive officers of the Company. The Compensation Committee met seven times
during the fiscal year ended January 31, 2000. The members of the Compensation
Committee are Mr. Baute, Chairman, and Mr. Terino.
The Audit Committee
The duty of the Audit Committee, which is composed entirely of independent
directors, is to review the integrity of the Company's financial statements,
including quarterly financial statements. The Company's accounting staff and
its independent auditors have direct access to the Audit Committee. The Audit
Committee also reviews the qualifications of the Company's independent
auditors and makes recommendations to the Board of Directors regarding the
selection of the independent auditors, the scope of their audit and other
services and their fees. The Audit Committee is empowered to investigate any
matter concerning the integrity of reported facts, figures, ethical conduct
and appropriate disclosure. The Audit Committee met eleven times during the
fiscal year ended January 31, 2000. The current members of the Audit Committee
are Mr. Terino, Chairman, Dr. Fuller, Mr. Wisneski and Ms. Lau. Mr. Jaeger
served as Chairman of the Audit Committee until March 25, 1999, and served as
acting Chairman of the Audit Committee until Mr. Terino's appointment as
Chairman on December 31, 1999. The Audit Committee adopted a charter in April
2000. The charter sets out in detail the roles and responsibilities of the
Audit Committee, and requires that the charter be reviewed and reassessed
annually by the Committee and submitted annually to the Board of Directors for
approval.
Directors' Compensation
Currently, directors are compensated as follows: Each director who is not an
employee of the Company receives $2,500 per quarter for Board of Directors and
committee meetings held during such quarter, up to a maximum of $10,000 per
year (subject to adjustment by the Board of Directors in the event that the
number of meetings in any year is extraordinary). Each director who is not an
employee of the Company also receives 1,000 shares of Common Stock on an
annual basis. Non-employee directors are also reimbursed for out-of-pocket
expenses incurred in attending meetings of the Board of Directors and
committees on which they serve. In addition, each non-employee director
received options to purchase 20,000 shares of Common Stock at the time of the
initial public offering of the Common Stock or, if not a director at the time
of the initial public offering, upon the commencement of his or her service as
a director, and each such director receives options to purchase an additional
5,000 shares of Common Stock on an annual basis thereafter.
At the Meeting, the stockholders will be asked to consider and vote on
proposals to approve amendments to the 1996 Director Plan, which amendments
will, if approved, significantly modify director compensation (see "Amendment
of the 1996 Non-employee Director Plan" below).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock
(collectively, "Reporting Persons") to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock of
the Company. Based on its review of the copies of such filings during the
fiscal year ended January 31, 2000, the Company believes that all Reporting
Persons complied with all Section 16(a) filing requirements in fiscal 2000
with the following exceptions: Mr. JP Barger, Mr. Joseph Baute, Dr. Samuel
Fuller, Dr. John Guttag, Mr. Stephen O. Jaeger, Ms. Joanna T. Lau, Mr. Ray
Shepard, Mr. Ray Stata and Mr. William Wisneski, each a non-employee director
of
7
<PAGE>
the Company during the fiscal year ended January 31, 1999, did not file a
timely Annual Statement of Changes in Beneficial Ownership of Securities on
Form 5 with respect to the acquisition of 1,000 shares of Common Stock
pursuant to the 1996 Non-employee Director Plan. Such Form 5 for the one-month
transitional fiscal year ended January 31, 1999 was required to be filed on
March 15, 1999 and was filed on March 16, 2000, with the exception of Mr. Ray
Stata, who reported the transaction on a Form 4 filed in July, 1999 and Mr. JP
Barger who will file the form as soon as practicable. Mr. Jonathan P. Levitt,
an officer of the Company, did not timely file an Initial Statement of
Beneficial Ownership of Securities on Form 3. Such Form 3 was required to be
filed on March 11, 1999 and was filed on June 2, 1999.
8
<PAGE>
EXECUTIVE COMPENSATION
Report of Compensation Committee on Executive Compensation
The Company's executive compensation program is determined by the
Compensation Committee of the Board of Directors, which is composed of non-
employee directors. The Compensation Committee approves the compensation plans
for the executive officers of the Company and oversees the general
compensation policy of the Company. On February 14, 2000, the Compensation
Committee adopted a charter which sets forth in detail the responsibilities of
the Committee. The Compensation Committee has furnished the following report.
The goals of the Company's executive compensation program are to attract,
motivate and retain talented senior management by providing compensation at
competitive levels based on the long-term performance of the Company. The
Company's executive compensation program includes base salary, annual cash
incentive compensation and long-term equity incentives, primarily awards of
stock options and secondarily awards of restricted stock under the Company's
incentive compensation plans. The Company's philosophy is that short-term cash
bonus compensation should be primarily tied to the Company's annual financial
performance. The Company's executive compensation program is weighted toward
long-term equity incentives for the Company's executive officers, including
its Chief Executive Officer.
Base salaries are based on median salaries for similar positions for
comparable companies in the computer software industry, as recommended by an
independent compensation consultant. In general, base salaries are designed to
be at or slightly below the comparable-company median, based upon the
Compensation Committee's assessment of the relative importance and
responsibilities of the position and, in all cases except Mr. Jaeger's, upon
Mr. Jaeger's recommendation. During fiscal year 2000, the Compensation
Committee approved increases of 7.2 percent to 12.5 percent in the base
salaries of executive officers of the Company. Such increases were effective
as of April 1, 1999. The Compensation Committee has decided that, for fiscal
year 2001, no increases in the base salaries of executive officers shall be
immediately implemented; rather, increases shall be made retroactively
following conclusion of the Company's 2001 fiscal year only if the Company has
achieved its annual financial and operational goals for such fiscal year.
The Company entered into an Employment Agreement with its then current Chief
Executive Officer, Stephen O. Jaeger, effective April 1, 1999 (see "Employment
Agreements" below). In reviewing Mr. Jaeger's base salary for fiscal year
2000, the Compensation Committee reviewed information regarding the salaries
of chief executive officers at the comparable companies described above, and
Mr. Jaeger's expected responsibilities at the Company. After review of these
factors, the Compensation Committee determined to set Mr. Jaeger's base salary
at $260,000 per year.
On April 16, August 24 and September 15, 1999, the Compensation Committee
awarded options to purchase shares of Common Stock at $5.875, $5.50 and $8.375
per share, respectively, vesting in 33.3% annual increments beginning on the
first anniversary of the date of grant to the following executive officers:
Paul Anderson--40,000 shares on April 16, 1999; Bruce G. Hill--25,000 shares
on April 16, 1999; 20,000 shares on August 24, 1999 and 15,000 shares on
September 15, 1999; Jonathan P. Levitt--20,000 shares on April 16, 1999; and
30,000 shares on August 24, 1999; Kirby A. Mansfield--100,000 shares on April
16, 1999 and 50,000 shares on September 15, 1999; Patricia Michaels--15,000
shares on April 16, 1999; 10,000 shares on August 24, 1999; and 10,000 shares
on September 15, 1999; Scott D. Norder--40,000 shares on April 16, 1999 and
40,000 on September 15, 1999; Elaine Ouellette--25,000 shares on April 16,
1999; 5,000 shares on August 24, 1999 and 10,000 shares on September 15, 1999;
and James Ringrose--40,000 shares on April 16, 1999 and 40,000 shares on
August 24, 1999. On August 2, 1999, the Compensation Committee awarded options
to purchase shares of Common Stock at $5.75 per shares, vesting in 33.3%
annual increments beginning on the first anniversary of the date of grant, to
Robert Dudley. The Compensation Committee believes that the Company's policy
toward equity grants to executive officers should reflect the Company's
performance in relation to the comparable companies considered by the
Compensation Committee.
9
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to publicly held companies for
compensation in excess of $1,000,000 paid to the chief executive officer and
the four other most highly compensated executive officers. Compensation based
on performance is not subject to this deduction limit, if certain requirements
are met. Based on the compensation awarded to Mr. Jaeger and the other
executive officers of the Company, it does not appear that the Section 162(m)
limitation will have a significant impact on the Company in the near term.
While the Compensation Committee does not currently intend to qualify its
annual cash incentive awards as a performance-based plan, it will continue to
monitor the impact of Section 162(m) on the Company.
Joseph A. Baute, Chairman
Edward Terino, Member
10
<PAGE>
Stock Performance Graph
The line graph below compares the percentage change in cumulative total
stockholder return on the Common Stock assuming an investment of $100 on March
1, 1994, the date on which the Common Stock was first publicly traded, with
the total cumulative return of the Total Return Index for the Nasdaq Stock
Market (US) and the Nasdaq Computer & Data Processing Services Stock Index for
the period from January 1, 1994 to January 31, 2000. The Common Stock was sold
in its initial public offering at a price of $7.50, and the closing price of
the Common Stock on the Nasdaq National Market on January 31, 2000 was
$38.375.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 1/31/99 1/31/00
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INSO CORPORATION 100.00 241.99 226.33 65.84 142.35 142.35 218.51
NASDAQ DATA &
PROCESSING INDEX 100.00 152.28 187.94 230.88 411.99 498.35 799.11
NASDAQ NATIONAL
MARKET INDEX 100.00 129.71 161.18 197.16 278.08 317.84 475.46
</TABLE>
11
<PAGE>
Summary Compensation Table
The following table sets forth information with respect to the compensation,
for the last three fiscal years, of (i) each individual who served as Chief
Executive Officer of the Company during the fiscal year ended January 31,
2000, (ii) each of the four most highly compensated executive officers of the
Company (other than the Chief Executive Officer) who were serving as executive
officers on January 31, 2000, and (iii) two former executive officers,
employed by the Company during the last fiscal year, but who were not serving
as executive officers on January 31, 2000 (collectively, the "Named Executive
Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------- ------------
Securities All other
Name and Principal Fiscal Underlying Compensation
Position in Fiscal 2000 Year Salary ($) Bonus ($) Options (#) ($)(1)
----------------------- ------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen O. Jaeger....... 2000 217,000(3) -- 100,000 --
Chief Executive
Officer(2) 1998 -- -- 5,000 --
1997 -- -- 5,000 --
Steven R. Vana-Paxhia... 2000 258,000 -- -- 2,792
President and Chief
Executive Officer(5) 1998 263,077 -- 60,000 6,700
1997 232,502 -- 138,000(4) 6,365
Kirby A. Mansfield...... 2000 230,076 -- 150,000 6,139
President and Chief
Operating Officer(6) 1998 184,231 25,000 40,000 6,700
1997 165,002 -- 92,000(4) 6,552
Paul Anderson........... 2000 191,778 98,000 40,000 140
President, Product Data
Management Division(7) 1998 28,461 40,000 60,000 --
1997 n/a n/a n/a n/a
Jonathan P. Levitt...... 2000 133,346 45,875 50,000 6,335
Vice President, General
Counsel and Secretary 1998 98,615 9,200 5,000 2,880
1997 42,667 -- 7,500 --
Scott D. Norder......... 2000 176,692 -- 80,000 6,668
President, Information
Exchange Division 1998 158,750 25,000 25,000 6,581
1997 128,126 59,239 92,000(8) 5,772
James Ringrose.......... 2000 172,557 75,000 80,000 --
President, eBusiness
Technologies
Division(9) 1998 108,365 -- 20,000 --
1997 n/a n/a n/a n/a
</TABLE>
- --------
(1) Represents matching contributions by the Company to the Company's 401(k)
Plan.
(2) Mr. Jaeger resigned as Chief Executive Officer as of April 11, 2000.
(3) Mr. Jaeger received $20,500 for Board service during 1999 prior to being
appointed Chief Executive Officer on March 25, 1999, which amount is not
included in the table above.
(4) Granted as a result of an option repricing program under which previously
granted options were exchanged for such options on a four-for-five basis
("1997 Option Repricing").
(5) Mr. Vana-Paxhia resigned as President and Chief Executive Officer and
director of the Company as of March 25, 1999.
(6) Mr. Mansfield resigned as President and Chief Operating Officer and
director of the Company as of April 11, 2000.
(7) Mr. Anderson resigned as President, Product Data Management Division of
the Company as of January 5, 2000.
(8) Of such option grants, on November 6, 1997 options to purchase 20,000
shares were granted to Mr. Norder, and options to purchase 72,000 shares
were granted to Mr. Norder as a result of the 1997 Option Repricing.
(9) Mr. Ringrose was appointed President and Chief Executive Officer of the
Company as of April 11, 2000.
12
<PAGE>
Stock Option Grants
The following table shows information with respect to stock options granted
to the Named Executive Officers during the year ended January 31, 2000. The
Company granted no stock appreciation rights ("SARs") during fiscal year 2000.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Appreciation for
Individual Grants Option Term(1)
Number of -------------------------------------- -----------------
Securities % of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted Fiscal Year ($/share) Date 5% ($) 10% ($)
- ---- ---------- --------------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen O. Jaeger....... 100,000(2) 2.8% $ 6.75 5/6/09 424,504 1,075,776
Steven R. Vana-Paxhia... n/a n/a n/a n/a n/a n/a
Kirby A. Mansfield...... 100,000(3) 2.8% $5.875 4/16/09 369,476 936,324
50,000(3) 1.4% $8.375 9/15/09 263,350 667,324
Paul Anderson........... 40,000(3) 1.14% $5.875 4/16/09 147,790 374,529
Jonathan P. Levitt...... 20,000(3) .57% $5.875 4/16/09 73,895 187,265
30,000(3) .86% $ 5.50 8/24/09 103,768 262,968
Scott D. Norder......... 40,000(3) 1.14% $5.875 4/16/09 147,790 374,529
40,000(3) 1.14% $8.375 9/15/09 210,800 534,000
James Ringrose.......... 40,000(3) 1.14% $5.875 4/16/09 147,790 374,529
40,000(3) 1.14% $ 5.50 8/24/09 138,357 350,623
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the dates the respective options were granted to
their expiration dates.
(2) Option vests as follows: Under Mr. Jaeger's original agreement, 33.3% on
the earlier of (i) January 31, 2000 and (ii) date of Optionee's
termination as CEO; 33.3% on the earlier of (i) 3/31/01 and (ii) the date
of the Optionee's termination as CEO; and 33.3% on the earlier of (i)
3/31/02 and (ii) the date of the Optionee's termination as CEO. Pursuant
to the amendment of Mr. Jaeger's agreement, the final 33.3% of the options
will vest on the earlier of 1/31/02 and 2) the date of the Mr. Jaeger's
termination as Chairman of the Board.
(3) Option vests as follows: 33.3% on each of the first, second, and third
anniversaries of the date of grant.
13
<PAGE>
Aggregated Option Exercises and Year-End Option Table
The following table shows information with respect to options exercised
during fiscal 2000 and held as of January 31, 2000 by the Named Executive
Officers. No SARs were held or exercised during fiscal year 2000.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options at FY-End (#) Options at FY-End ($)
Name Exercise (#) Realized($)(1) (Exercisable/Unexercisable) (Exercisable/Unexercisable)(2)
- ---- ------------ -------------- --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Stephen O. Jaeger....... n/a n/a 41,250/103,750 920,937/3,236,000
Steven R. Vana-Paxhia... 10,000 236,250 165,525/ 96,001 4,229,929/2,248,479
18,000 396,000
Kirby A. Mansfield...... n/a n/a 134,145/214,001 3,038,866/6,249,020
Paul Anderson........... 15,000 141,562 0/ 0 0/ 0
13,333 393,323
Jonathan P. Levitt...... 1,875 39,140 1,250/ 59,375 33,593/1,896,640
Scott D. Norder......... n/a n/a 57,249/139,751 1,199,825/3,888,080
James Ringrose.......... n/a n/a 5,000/ 95,000 127,187/2,996,562
</TABLE>
- --------
(1) Value based on the closing price per share of the Common Stock on the
date of exercise, less the exercise price.
(2) Value based on the closing sales price per share ($38.375) of the Common
Stock on January 31, 2000, less the exercise price.
Employment Agreements
Effective April 1, 1999, the Company entered into an Employment Agreement
with its then-Chief Executive Officer, Stephen O. Jaeger. The agreement
provided for an annual base salary of $260,000, a target bonus equal to 60% of
base salary based upon achievement by the Company of certain financial
objectives and options to purchase 100,000 shares of Common Stock at $6.75 per
share vesting in three equal annual installments beginning on the anniversary
of the grant date. Under the agreement, if Mr. Jaeger were terminated other
than for cause, he would receive six months of base salary, a bonus equal to
the greater of $100,000 or his pro-rated annual target bonus for the
applicable fiscal year and the ability to participate in the Company's benefit
plans for twelve months. If Mr. Jaeger were terminated other than for cause,
but remained Chairman of the Board or continued to serve in a similar
strategic role, the agreement provided for an annual base salary of $120,000,
continued participation in Company benefit plans, plus annual grants of non-
qualified stock options to purchase 10,000 shares of Common Stock at then-
market price. Were he terminated for cause, Mr. Jaeger would not be entitled
to any severance payment should his employment be terminated for cause.
Mr. Jaeger's employment agreement was amended effective April 13, 2000 to
provide that, notwithstanding his resignation as Chief Executive Officer
effective April 11, 2000, unless the Company's Board of Directors shall
otherwise determine, Mr. Jaeger's annual base salary remains $260,000 until
such time as the Company divests itself of its Information Exchange business.
Upon that divestiture, Mr. Jaeger's annual base salary would be reduced to
$120,000. Under the amended agreement, Mr. Jaeger received options (of which
4,939 are incentive stock options and 28,395 are non-qualified stock options)
to purchase 33,334 shares of Common Stock with an exercise price of $6.75 per
share. The options vest on the earlier to occur of March 31, 2002, and the
date of the Company's termination of Mr. Jaeger's service as Chairman of the
Board of the Company other than for cause, so long as such date is between
April 1, 2001 and March 30, 2002.
The Company also entered into an agreement with Mr. Jaeger, effective
February 15, 2000, pursuant to which Mr. Jaeger would be paid a one-time
transaction bonus of $150,000 upon consummation of a transaction in which a
change of control of the Company occurs, provided that Mr. Jaeger is employed
as either the
14
<PAGE>
Chairman or Chief Executive Officer at the time of the execution of a
definitive agreement of a transaction which will result in a change of control
of the Company. For purposes of his agreement, a "change of control" means:
(1) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation or other legal entity, other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no person other than a person holding more than 50% of the combined
voting power of the Company's then outstanding securities immediately prior to
such recapitalization, acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or (2) the stockholders of the
Company approve an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets. The Agreement was subsequently
amended effective April 13, 2000 to provide for payment of the transaction
bonus to Mr. Jaeger upon the earlier to occur of (a) a change of control of
the Company; and (b) the sale by the Company of its Information Exchange
business.
Retention Agreements
The Company has entered into Management Retention Agreements (the "Retention
Agreements") with Messrs. Ringrose, Mansfield, Norder and Levitt. The Company
has also entered into Retention Agreements with Bruce Hill, Robert Dudley and
Elaine Ouellette. The Retention Agreements expire on December 31, 2000 and
will automatically renew for additional one-year terms unless the Company or
the executive gives written notice of termination not less than one month
prior to the original expiration date or the expiration date of any subsequent
renewal term. The Retention Agreements provide that if a change in control in
the Company occurs, and, within 36 months thereafter the executive's
employment is terminated by the Company (other than for cause or by reason of
his or her death or disability) or by the executive for Good Reason (as
defined in the Retention Agreements), the executive is entitled to receive (i)
a lump-sum payment equal to (a) three times the higher of the executive's
annual base salary at the time of the change in control or at the time of
termination plus (b) one and one half times the higher of the executive's
annual target incentive bonus in the year the change in control occurs or in
the year of termination and (ii) continuation of insurance benefits for a
period of 24 months following the change in control. In addition, options to
purchase shares of Common Stock granted and restricted stock awarded under the
1993 Stock Incentive Plan and the 1996 Stock Incentive Plan would vest
immediately. For purposes of the Retention Agreements "change in control"
means that (i) a person other than the Company or Houghton Mifflin (unless a
change in control of Houghton Mifflin shall have occurred) becomes (other than
as the result of the acquisition of such securities directly from the Company)
the beneficial owner of 33 1/3% or more of the combined voting power of the
Company, (ii) over any two-year period the members of the Board of Directors
at the beginning of such period, and any director nominated or approved by at
least two-thirds of such members, cease to constitute a majority of the Board,
(iii) the stockholders of the Company approve a merger or consolidation, other
than a merger or consolidation (a) in which the voting securities of the
Company prior to the transaction represent more than 50% of the voting
securities of the surviving entity or (b) effected to implement a
recapitalization of the Company in which no person (other than a person
holding more than 50% of the Company's then outstanding securities immediately
prior to such recapitalization) acquires more than 50% of the voting
securities of the Company or (iv) the stockholders of the Company approve a
plan of liquidation or a sale of substantially all of the Company's assets.
To the extent that payments or other benefits to an executive pursuant to
the Retention Agreements (together with any other payments or benefits, stock
awards received by the executive in connection with a change in control) would
result in triggering the provisions of the Sections 280G and 4999 of the Code,
the Retention Agreements provide for the payment of an additional amount such
that the executive receives, net of excise taxes, the amount he or she would
have been entitled to receive in the absence of the excise tax provided in
Section 4999 of the Code.
15
<PAGE>
Separation/Severance Agreements
The Company entered into a Separation Agreement and Release dated September
28, 1999, with Steven R. Vana-Paxhia ("Separation Agreement"), who resigned as
an officer of the Company effective April 1, 1999. Under the Separation
Agreement, in exchange for performing any special assignments reasonably
requested by the Chief Executive Officer or the Chief Operating Officer, the
Company agreed to pay Mr. Vana-Paxhia at the annualized rate of $258,000--his
base salary in effect on April 1, 1999--for the period April 1, 1999 through
April 1, 2001, less applicable tax withholding obligations. The Separation
Agreement also provides for continued participation in the Company's benefit
plans and 401(k) plan (including employer match) until April 1, 2001. In
addition, Mr. Vana-Paxhia's previously granted, but unexercised, stock options
and restricted shares continue to vest until April 1, 2001.
The Company entered into an Agreement and Release dated January 14, 2000,
with Paul R. Anderson ("Severance Agreement"), whose employment by the Company
was terminated effective January 5, 2000, with the sale of Sherpa Systems
Corporation, a division of the Company, to Structural Dynamics Research
Corporation ("SDRC"). Under the Severance Agreement, in order to resolve and
compromise all issues and claims relating to Mr. Anderson's employment and
termination, the Company agreed to pay to Mr. Anderson $294,000 ("Severance
Payment")--equal to his base salary for eighteen (18) months--less applicable
tax withholding obligations, in bi-weekly installments beginning with the
first payroll period after January 5, 2000 and continuing until July 4, 2001.
The Company agreed to continue Mr. Anderson's coverage under its medical,
dental and vision care programs until the end of July 2001. In addition, the
Company agreed to pay to Mr. Anderson a transaction bonus of $98,000, less
applicable withholding obligations, in consideration of his assistance in the
disposition of Sherpa Systems Corporation. Also pursuant to the Severance
Agreement, Mr. Anderson's stock options that remained unvested as of January
5, 2000, and would have vested within in one year of that date, will vest on
January 5, 2000. If Mr. Anderson is re-employed by the Company or employed by
SDRC in the same or a substantially equivalent position on or before July 4,
2001, the Company's obligations to make the Severance Payment, pay the
transaction bonus, and continue benefits coverage will cease, provided that
the total monies payable to Mr. Anderson under the Severance Agreement will be
not less than the gross amount of $200,000, less applicable taxes and
deductions.
16
<PAGE>
AMENDMENT OF THE 1993 STOCK PURCHASE PLAN
Description of the 1993 Stock Purchase Plan
In December 1993, the Board of Directors adopted the Company's 1993 Stock
Purchase Plan (the "1993 Purchase Plan"), which was, in turn, approved by
stockholders on August 4, 1994. Under the 1993 Purchase Plan, the Board of
Directors may authorize participation by eligible employees, including
officers, numbering approximately 300 individuals, in periodic offerings.
Offerings begin on June 1 and December 1 of each year (or the first business
day thereafter) and conclude on November 30 and May 31, respectively.
During each offering, the maximum number of shares which may be purchased by
a participating employee will be determined on the first day of the offering
period pursuant to a formula under which an amount equal to 15% of the
employee's projected base pay for the offering period is divided by 85% of the
market value of a share of Common Stock on the first day of the offering
period. An employee may elect to purchase shares under the 1993 Purchase Plan
either through payroll deduction or through direct payment in cash or by
certified check. During each offering period, the price at which the employee
may purchase the Common Stock is 85% of the last reported sale price of the
Common Stock on the Nasdaq National Market on the date that the offering
period commences or the date of purchase, whichever is lower. On December 1,
1999, the last sales price of the Common Stock on the Nasdaq National Market
was $24.00 per share.
The 1993 Purchase Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"). All employees who are customarily
employed by the Company or a subsidiary of the Company designated by the
Committee for more than 20 hours per week for at least five months per
calendar year and are employed by the Company on the first day of the
applicable offering period are eligible to participate in the 1993 Purchase
Plan. No employee may purchase shares pursuant to the 1993 Purchase Plan if
after such purchase such employee would own 5% or more of the total combined
voting power or value of the stock of the Company.
In the event of a merger, reorganization, consolidation, or liquidation
involving the Company, the Committee has discretion to provide that each right
to purchase Common Stock will be assumed or an equivalent right substituted by
the successor corporation, or the Committee may shorten the offering period
and provide for all sums collected to be applied to purchase stock immediately
prior to such merger or other transaction. The Board of Directors has
authority to amend or terminate the 1993 Purchase Plan, subject to the
limitation that no such action may adversely affect any outstanding rights to
purchase Common Stock.
The price at which shares of Common Stock may be purchased under the 1993
Purchase Plan in respect of the offering period commencing on December 1, 1999
and ending May 31, 2000 will not be greater than $20.40 (85% of last reported
sale price of the Common Stock on the Nasdaq National Market on December 1,
1999).
During the fiscal year ended January 31, 2000, the Named Executive Officers
of the Company have purchased an aggregate of 6,374 shares of Common Stock. A
total of 10,704 shares have been issued to the current executive officers of
the Company as a group and a total of 184,323 shares have been issued to all
other participants of the 1993 Purchase Plan during the fiscal year ended
January 31, 2000.
Proposed Amendment to 1993 Purchase Plan
On April 7, 2000, the Board of Directors voted to amend the 1993 Purchase
Plan, subject to stockholder approval, to increase the number of shares of
Common Stock that are authorized for issuance under the 1993 Purchase Plan
from 450,000 to 700,000 shares. The purpose of the 1993 Purchase Plan is to
provide eligible employees of the Company with opportunities to purchase
shares of Common Stock.
The Board of Directors believes that the proposed amendment to the 1993
Purchase Plan is in the best interests of the Company and its stockholders and
recommends a vote FOR the approval of the proposed amendment to the 1993
Purchase Plan.
17
<PAGE>
AMENDMENT OF THE 1996 NON-EMPLOYEE DIRECTOR PLAN
On March 7, 1996, the Board of Directors adopted, subject to stockholder
approval, the 1996 Director Plan, which provides for the automatic grant of
non-qualified stock options ("NQSOs") and awards of Unrestricted Stock to
members of the Board of Directors who are not employees of the Company ("Non-
employee Directors"). The 1996 Director Plan was approved by the stockholders
on May 2, 1996. The 1996 Director Plan provides that up to 415,000 shares of
Common Stock (subject to adjustment as provided in the 1996 Director Plan) may
be issued pursuant to the 1996 Director Plan.
The 1996 Director Plan currently provides that each Non-employee Director
will be (i) granted an NQSO to purchase 20,000 shares of Common Stock at the
fair market value on the date that such Non-employee Director first becomes a
director of the Company, (ii) granted an NQSO to purchase 5,000 shares of
Common Stock at the fair market value on the date of Corporation's annual
meeting, and (iii) awarded 1,000 shares of Common Stock on January 27th of
each year (or, if such day is not a business day, the next succeeding business
day). As used in the 1996 Director Plan, "fair market value" means (i) the
last reported sales price per share of the Common Stock on the Nasdaq National
Market (or, if the Common Stock is traded on a national securities exchange,
the reported closing sales price per share of Common Stock on such exchange)
or if is no such price is reported, such price as reported on the nearest
preceding day or (ii) if the Common Stock is not traded on the Nasdaq National
Market or a national securities exchange, the fair market value as determined
by the Board of Directors.
For the fiscal year ended January 31, 2001, non-employee directors other
than Mr. Jaeger will receive options to purchase an aggregate of 22,500 shares
of Common Stock under the 1996 Director Plan, as amended with an exercise
price equal to the fair market value of the Common Stock on the date of the
annual meeting. NQSOs granted under the 1996 Director Plan vest in four equal
annual installments beginning on the date of grant. NQSOs may be exercised
either by payment of cash or by tendering shares of Common Stock already owned
or by a combination of cash and Common Stock. NQSOs granted under the 1996
Director Plan are not transferable by the option holder except by will or by
the laws of descent and distribution and are exercisable during the lifetime
of the option holder only by him or her. No NQSO granted under the 1996
Director Plan is exercisable more than 10 years after the date of grant. Upon
termination of an option holder's service as a director of the Company, each
NQSO held by him or her may be exercised during the three-month period
following such termination of service as to the vested portion of such NQSO as
of the date of termination. If an option holder under the 1996 Director Plan
dies or becomes disabled while he or she is serving as a director of the
Company, the NQSO is exercisable for 180 days thereafter.
The Board of Directors has the authority to adopt, amend and rescind the
rules and regulations relating to the 1996 Director Plan and to interpret the
provisions of the 1996 Director Plan. The Board of Directors may suspend or
discontinue the 1996 Director Plan or amend it in any respect; provided,
however, that without the approval of the stockholders, no amendment may
change the number of shares of Common Stock subject to the 1996 Director Plan,
change the designation of the class of directors eligible to receive options,
or materially increase the benefits accruing to participants under the 1996
Director Plan, and the 1996 Director Plan may not be amended more than once in
any six-month period.
The 1996 Director Plan also provides that upon a change in control (as
defined above under "Amendment of the 1993 Stock Incentive Plan"), all NQSOs
under the 1996 Director Plan shall become exercisable in full, whether or not
exercisable in accordance with their terms.
Federal Income Tax Consequences of the 1996 Non-employee Director Plan
The following is a brief summary of certain United States federal income tax
consequences under current federal income tax laws relating to awards of
options under the 1996 Director Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
18
<PAGE>
A recipient will not be subject to tax upon the grant of an NQSO. Unless the
recipient of the NQSO (referred to herein as the "Option Holder" or
"Optionee") is an officer, director or a 10% holder subject to Rule 16b-3 of
the Securities Exchange Act of 1934 (an "Insider"), an Option Holder will
realize ordinary income in the year in which he exercises an NQSO in an amount
equal to the excess of the fair market value of the Common Stock on the date
of exercise over the exercise price, and the Company will be entitled to a
corresponding deduction at such time, subject to the limitation imposed by
Section 162(m) of the Code. The holding period for the Common Stock will begin
on the exercise date and the Option Holder's basis in the Common Stock will
equal the sum of the exercise price and any income recognized upon exercise.
Upon disposition of the Common Stock acquired upon exercise of an NQSO, any
subsequent gain or loss will generally be treated as capital gain or loss to
the Option Holder.
Except as noted below, an Option Holder who is an Insider will generally not
be taxed upon exercise, but, instead, will realize ordinary income in the year
(the "Insider Vesting Year") that includes the date the Insider would no
longer be subject to liability under Rule 16b-3 were such Insider to sell the
Common Stock at a profit (the "Insider Vesting Date"). On the Insider Vesting
Date, an Insider will realize ordinary income in an amount equal to the excess
of the fair market value of the Common Stock on the Insider Vesting Date over
the exercise price, and the Company will be entitled to deduct such amount in
the year that includes the Insider Vesting Date. An Insider's holding period
for capital gain purposes will commence on the Insider Vesting Date. An
Insider may, however, elect pursuant to Section 83(b) of the Code to be taxed
as if he or she were not subject to Rule 16b-3 and, hence, the tax results to
both the Insider and the Company will be in accordance with the rules
described in the immediately preceding paragraph.
If an Option Holder pays the exercise price of an NQSO, in full or in part,
with shares of previously acquired Common Stock, this should not affect the
tax treatment of the exercise. Upon such exchange, and except as otherwise
described herein, no gain or loss is recognized upon the delivery of the
previously acquired shares of Common Stock to the Company, and the shares of
Common Stock received by the Optionee, equal in number to the previously
acquired shares of Common Stock exchanged therefore, will have the same basis
for gain or loss purposes as the previously acquired shares of Common Stock.
Shares of Common Stock received by the Optionee in excess of the number of
previously acquired shares of Common Stock will have a basis equal to the fair
market value of such additional shares of Common Stock as of the date ordinary
income is recognized by the Option Holder.
Proposed Amendment to 1996 Director Plan
On April 7, 2000, the Board of Directors voted to amend the 1996 Director
Plan, retroactive to February 1, 2000, subject to shareholder approval, to (a)
reduce the initial option grant to new directors to 7,500, but to have such
initial grant vest immediately, (b) increase the number of options to be
granted annually (the "Annual Option Grant") to non-employee directors to
7,500 and to have such options vest immediately, (c) set the date of January
27 as the date upon which the Annual Option Grant will be made, and (d)
eliminate the annual stock award of 1,000 shares of Common Stock in its
entirety.
The Board of Directors believes that the proposed amendment to the 1996
Director Plan is in the best interests of the Company and its stockholders and
recommends a vote FOR the approval of the proposed amendment to the 1996
Director Plan.
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RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY
The Board of Directors has selected the firm of Ernst & Young LLP,
independent public accountants, to serve as independent auditors of the
Company for the fiscal year ending January 31, 2001. Ernst & Young LLP has
served as the Company's independent auditors since the Company's inception. It
is expected that a member of the firm will be present at the Meeting with the
opportunity to make a statement, if so desired, and will be available to
respond to appropriate questions. Although approval of the Board of Directors'
selection of Ernst & Young LLP is not required by law, the Board of Directors
believes that it is advisable to give stockholders an opportunity to ratify
this selection. If this proposal is not approved at the Meeting, the Board of
Directors will reconsider this selection.
The Board of Directors recommends a vote FOR the ratification of Ernst &
Young LLP as the independent auditors of the Company.
PROPOSALS OF STOCKHOLDERS FOR CONSIDERATION AT THE 2001 ANNUAL
MEETING OF STOCKHOLDERS
Pursuant to the rules of the Exchange Act, a stockholder owning of record or
being the beneficial owner of at least the lesser of one percent or $2,000 in
market value of the Common Stock may present a proposal to be voted on at the
Company's Annual Meeting of Stockholders in 2001; provided such proposal meets
all legal requirements and is received at the Company's executive offices at
299 Promenade Street, Providence, Rhode Island no later than January 6, 2001,
it will be included in the proxy statement and proxy card relating to such
meeting.
Stockholders wishing to present business for action (other than proposals
included in the Board of Directors' proxy statement as set forth in the
preceding paragraph) or to nominate candidates for election as directors at a
meeting of the Company's stockholders, must do so in accordance with the
Company's By-laws. The By-laws provide that, in order to be presented at the
2001 Annual Meeting, such stockholder proposals or nominations may be made
only by a stockholder of record who shall have given notice of the proposed
business or nomination to the Company not less than 75 days nor more than 120
days prior to the anniversary date of this year's Annual Meeting, or, if the
2001 Annual Meeting is called for a date more than seven days prior to such
anniversary date, not later than the 20th day (or, if not a business day, the
next succeeding business day) following the first date on which the date of
the 2001 Annual Meeting is publicly disclosed, or, if such public disclosure
occurs more than 75 days prior to such scheduled date, then the later of the
20th day (or, if not a business day, the next succeeding business day)
following the first date of public disclosure or the 75th day prior to such
scheduled date (or, if not a business day, the next succeeding business day).
The notice must also contain, among other things, background information
concerning the stockholder making the proposal or nomination, the
stockholder's ownership of the Company's capital stock and, in the case of
nominations, background and stock ownership information with respect to each
nominee.
By Order of the Board of Directors,
/s/ Jonathan P. Levitt
Jonathan P. Levitt
Secretary
April 28, 2000
The Board of Directors hopes that stockholders will attend the meeting.
Whether or not you plan to attend, you are urged to complete, date, sign and
return the enclosed proxy in the accompanying envelope. Prompt response will
greatly facilitate arrangements for the meeting and your cooperation will be
appreciated.
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<PAGE>
INSO CORPORATION
AMENDED AND RESTATED 1996 NON-EMPLOYEE DIRECTOR PLAN
(As proposed to the Company's Stockholder on June 1, 2000)
1. Purpose
The purpose of this 1996 Non-Employee Director Plan (the "Plan") of
INSO Corporation, a Delaware corporation (the "Company"), is to encourage
ownership in the Company by outside directors of the Company whose continued
services are considered essential to the Company's future progress and to
provide them with a further incentive to remain as directors of the Company.
2. Administration
The Board of Directors shall supervise and administer the Plan. Grants
of stock options and awards under the Plan and the amount and nature of the
options and awards to be granted shall be automatic in accordance with Section
5. However, all questions of interpretation of the Plan or of any options issued
under it shall be determined by the Board of Directors and such determination
shall be final and binding upon all persons having an interest in the Plan.
3. Participation in the Plan
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. Stock Subject to the Plan
(a) The maximum number of shares which may be issued under the Plan
shall be 415,000 shares of the Company's Common Stock, $.01 par value per share
(the "Common Stock").
(b) If any outstanding option under the Plan for any reason expires or
is terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be nonstatutory options
not entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended to date and as it may be amended from time to time
(the "Code").
5. Terms, Conditions and Form of Options
(a) Option Grants. Options will be granted in accordance with the
following:
(i) Initial Grants. An option for 7,500 shares of Common Stock
shall automatically be granted to each non-employee director of the Company
elected to the Board of Directors after the Company's Annual Meeting of
Shareholders held in June 2000, such option to be granted upon his or her
initial election to the Board of Directors. Each such option shall be fully
vested on the date of grant.
(ii) Annual Grants. An option for 7,500 shares shall automatically
be granted on January 27 of each year to each non-employee director of the
Company, provided that he or she was elected to serve as a director of the
Company at least three months prior to the date of such meeting. Each such
option shall be fully vested on the date of grant.
<PAGE>
(b) Option Exercise Price. The option exercise price per share for
each option granted under the Plan shall be equal to the Fair Market Value per
share of Common Stock on the date of grant. "Fair Market Value" shall be (i) the
last reported sales price per share of the Company's Common Stock on the Nasdaq
National Market (or, if the Common Stock is traded on a national securities
exchange, the reported closing sales price per share of the Common Stock on such
exchange) or if no such price is reported, such price as reported on the nearest
preceding day or (ii) if the Common Stock is not traded on the Nasdaq National
Market or a national securities exchange, the fair market value per share as
determined by the Board of Directors.
(c) Options Non-Transferable. Each option granted under the Plan by
its terms shall not be transferable by the optionee otherwise than by will, or
by the laws of descent and distribution, and shall be exercised during the
lifetime of the optionee only by him or her. No option or interest therein may
be transferred, assigned, pledged or hypothecated by the optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
(d) Termination. Upon termination of an optionee's service as a
director of the Company, each option held by him or her may be exercised during
the three month period following such termination of service, as to the vested
portion of such option as of the date of termination, provided that (i) no
option may be exercised more than ten (10) years after the date of grant, and
(ii) in the event an optionee ceases to serve as a director due to his death or
disability (within the meaning of Section 22(e)(3) of the Code or any successor
provision), each option may be exercised, within the period of 180 days
following the date the optionee ceases to serve as a director, by the optionee
or by the person to whom the option is transferred by will, by the laws of
descent and distribution, or by written notice, as to the total number of shares
subject to such option, whether or not then vested.
(e) Exercise Procedure. Options may be exercised only by written
notice to the Company at its principal office accompanied by (i) payment in cash
of the full consideration for the shares as to which they are exercised or
(ii) an irrevocable undertaking, in form and substance satisfactory to the
Company, by a broker to deliver promptly to the Company sufficient funds to pay
the exercise price or delivery of irrevocable instructions, in form and
substance satisfactory to the Company, to a broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price.
(f) Exercise by Representative Following Death of Director. An
optionee, by written notice to the Company, may designate one or more persons
(and from time to time change such designation), including his or her legal
representative, who, by reason of the director's death, shall acquire the right
to exercise all or a portion of the option. If the person or persons so
designated wish to exercise any portion of the option, they must do so within
the term of the option as provided herein. Any exercise by a representative
shall be subject to the provisions of the Plan.
(g) Form of Agreement. Each option granted under the Plan shall be
evidenced by a written agreement in such form as the Board of Directors shall
from time to time approve, which agreements shall comply with and be subject to
the terms and conditions of this Plan.
6. Assignments
The rights and benefits of participants under the Plan may not be
assigned, whether voluntarily or by operation of law, except as provided in
Section 5(f).
7. Effective Date
The Plan shall become effective immediately upon its adoption by the
Board of Directors, but all grants of options shall be conditional upon the
approval of the Plan by the stockholders of the Company within 12 months after
adoption of the Plan by the Board of Directors.
2
<PAGE>
8. Limitation of Rights
(a) No Right to Continue as a Director. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain the optionee as a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no
rights as a stockholder with respect to the shares covered by his or her options
until the date of the issuance to him or her of a stock certificate therefor,
and no adjustment will be made for dividends or other rights (except as provided
in Section 9) for which the record date is prior to the date such certificate is
issued.
9. Changes in Common Stock. If the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other distribution with
respect to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment will be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, (ii) the number and kind of shares
or other securities subject to then outstanding options under the Plan and
(iii) the price for each share subject to any then outstanding options under the
Plan, without changing the aggregate purchase price as to which such options
remain exercisable. No fractional shares will be issued under the Plan on
account of any such adjustments.
10. Change in Control.
(a) Upon the occurrence of a Change in Control, all options
outstanding under the Plan immediately prior to the effective date of such
Change in Control shall become automatically exercisable in full.
(b) A "Change in Control" shall be deemed to have occurred only upon
the occurrence of any of the following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company or an Exempt Person) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 33 1/3% or more of the
combined voting power of the Company's then outstanding securities (other than
as a result of the acquisition of such securities directly from the Company);
(ii) during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the beginning of
such period constitute the Board of Directors of the Company (the "Board"), and
any new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
paragraph (i), (iii) or (iv) of this Subsection) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved cease for any reason to constitute at least
a majority thereof; or
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person (as
hereinabove defined), other
3
<PAGE>
than a person holding more than 50% of the combined voting power of the
Company's then outstanding securities immediately prior to such
recapitalization, acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
(c) "Exempt Person" means Houghton Mifflin Company ("HMC"), provided
that HMC shall cease to be an Exempt Person if and when, following a Change in
Control (as defined above but substituting "Houghton Mifflin Company" for the
"Company" as used therein) of HMC, HMC, directly or indirectly, acquires
beneficial ownership of any additional shares of the Company's capital stock.
11. Amendment of the Plan
The Board of Directors may suspend or discontinue the Plan or revise
or amend it in any respect whatsoever; provided, however, that without approval
of the stockholders of the Company no revision or amendment shall change the
number of shares subject to the Plan (except as provided in Section 10), or
materially increase the benefits accruing to participants under the Plan. The
provisions of Sections 5(a)(i) and 5(a)(ii) of the Plan may not be amended more
than once in any six-month period.
12. Notice
Any written notice to the Company required by any of the provisions of
the Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
13. Governing Law
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
Adopted by the Board of Directors
on April 7, 2000.
Approved by the stockholders
on ______________, 2000.
4
<PAGE>
INFOSOFT INTERNATIONAL, INC.
1993 Stock Purchase Plan
The purpose of this Plan is to provide eligible employees of
InfoSoft International, Inc. (the "Company") with opportunities to purchase
shares of the Company's common stock, $0.01 par value (the "Common Stock"). One
hundred thousand (100,000) shares of Common Stock in the aggregate have been
approved for this purpose.
1. Administration. The Plan shall be administered by the
Company's Board of Directors or by a Committee appointed by the Board of
Directors (the "Committee"). The Board of Directors or the Committee has
authority to make rules and regulations for the administration of the Plan, and
its interpretations and decisions with regard thereto shall be final and
conclusive.
2. Eligibility. All employees of the Company, including
Directors who are employees, are eligible to participate in any one or more of
the offerings of Options (as defined in Section 9) to purchase Common Stock
under the Plan provided that:
(a) they are regularly employed by the Company or a subsidiary of the
Company designated by the Committee (a "Designated
Subsidiary") more than 20 hours a week for at least five months per calendar
year; and
(b) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
Participation in the Plan will be neither permitted nor denied
contrary to the requirements of the Internal Revenue Code of 1986, as
amended(the "Code"). No employee may purchase shares pursuant to the Plan if
such employee, immediately after such purchase, owns 5% or more of the total
combined voting power or value of the stock of the Company.
3. Offerings. The Company will make one or more
offerings("Offerings") to employees to purchase Common Stock under this Plan.
The initial Offering will begin on the effective date of the Company's initial
public offering and end on the following June 30 (the "Initial Offering"). All
subsequent Offerings shall begin on each January 1 or July 1, or the first
business day thereafter. The first day of each Offering shall be known as the
"Offering Date". Except for the Initial Offering, each Offering Date will begin
a six-month period (a "Plan Period").
4. Participation. An employee eligible on the Offering Date of
any Offering may participate in such Offering by completing and forwarding an
enrollment form to the employee's appropriate payroll location. The form will(a)
state the amount to be deducted from his Compensation per pay period,
(b)authorize the purchase of Common Stock for him in each Offering in accordance
with the terms of the Plan and
<PAGE>
(c) specify the exact name or names in which shares of Common Stock purchased
for him are to be issued pursuant to Section 10 hereof. Unless an employee files
a new form or withdraws from the Plan, his deductions and purchases will
continue at the same dollar amount for future Offerings under the Plan as long
as the Plan remains in effect.
5. Employee Contributions. Each eligible employee may authorize
payroll deductions at a minimum of $6.00 for each weekly pay period or $25.00
for each monthly pay period up to a maximum of 15% of such employee's
Compensation for each such pay period. The Company shall maintain book accounts
showing the amount of payroll deductions made by each eligible employee for each
Plan Period.
6. Deduction Changes. An employee may not increase or decrease
his or her payroll deduction during any Plan Period, but may increase or
decrease his or her payroll deduction with respect to the next Plan Period by
filing a new payroll deduction authorization form in advance of the next
Offering Date.
7. Interest. No interest will be paid on employee accounts;
however, the Board of Directors or its Committee may, in its sole discretion,
elect to credit employee accounts with interest at such per annum rate as the
Board of Directors or the Committee may from time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to
the close of business on the last business day in a Plan Period, and for any
reason, permanently withdraw the entire balance accumulated in the employee's
account and thereby withdraw from participation in an Offering. Partial
withdrawals are not permitted. The employee may not begin participation again
during the remainder of the Plan Period. The employee may participate in any
subsequent Offering in accordance with terms and conditions established by the
Board of Directors or the Committee.
9. Purchase of Shares. On each Offering Date of a Plan Period,
the Company will grant to each eligible employee who is then a participant in
the Plan an option ("Option") to purchase on the last business day of such Plan
Period (the "Exercise Date"), at the Option Price hereinafter provided for, such
number of whole shares of Common Stock of the Company reserved for the purposes
of the Plan as does not exceed the number of shares equal in value to 15% of
such employee's projected Compensation for the Plan Period divided by, with
respect to the Initial Offering, 85% of the offering price to the public of the
Common Stock on the date of the initial public offering of the Common Stock, or,
with respect to each Offering other than the Initial Offering, 85% of the last
reported sale price of the Common Stock on the Nasdaq National Market (the
"National Market") on the Offering Date.
With respect to the Initial Offering, the purchase price for each
share purchased under the Plan will be 85% of the offering price to the public
of the Common Stock on the date of the initial public offering of the Common
Stock, or 85% of the last reported sale price of the Common Stock on the
National Market on the Exercise
<PAGE>
Date, whichever price shall be less, rounded up to avoid fractions other than
1/4, 1/2 and 3/4. With respect to each Offering other than the Initial Offering,
the purchase price for each share purchased under the Plan will be 85% of the
last reported sale price of the Common Stock on the National Market on the
Offering Date or the Exercise Date, whichever last reported sale price shall be
less, rounded up to avoid fractions other than 1/4, 1/2 and 3/4. The purchase
price determined by reference to either of the two preceding sentences shall be
referred to herein as the "Option Price".
No employee may be granted an Option permitting rights to
purchase Common Stock under this Plan and rights under any other stock purchase
plan of the Company to accrue at a rate which in the aggregate exceeds $25,000
of the fair market value of such Common Stock (determined at the Offering Date
of the Plan Period) for each calendar year in which the Option is outstanding at
any time. The purpose of the limitation in the preceding sentence is to comply
with Section 423(b)(8) of the Code.
Each employee who continues to be a participant in the Plan on
the Exercise Date shall be deemed to have exercised such employee's Option at
the Option Price on such date and shall be deemed to have purchased from the
Company such number of full shares of Common Stock reserved for purposes of the
Plan as such employee's accumulated payroll deductions on such date will pay for
pursuant to the formula set forth above. Any balance remaining in an employee's
account at the end of a Plan Period will be refunded to the employee promptly.
10. Issuance of Certificates. Certificates representing shares
of Common Stock purchased under the Plan may be issued only in the name of the
employee, or in the name of the employee and another person of legal age as
joint tenants with rights of survivorship.
11. Definitions. The phrase "last reported sale price" means the
last reported sale price of the Common Stock on the Exchange on a given day or,
if no sales of Common Stock were made on that day, the last reported sale price
of the Common Stock on the next preceding day on which sales were made.
The term "Compensation" means the amount of base pay reportable
on the employee's Federal Income Tax Withholding Statement, excluding overtime,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation expenses or travel expenses, income or gains on the exercise of
Company stock options, and similar items, whether or not shown on the employee's
Federal Income Tax Withholding Statement.
12. Rights on Retirement Death, or Termination of Employment. In
the event of a participating employee's termination of employment prior to the
last business day of a Plan Period, no payroll deduction shall be taken from any
pay due and owing to the employee and the balance in the employee's account
shall be paid to the employee or, in the event of the employee's death, to the
employ1ee's designated beneficiary. If, prior to the last business day of the
Plan Period, the Subsidiary by which an employee is employed shall cease to be a
Designated Subsidiary of the Company, or if the employee is
<PAGE>
transferred to a Subsidiary of the Company that is not a Designated Subsidiary,
it shall be deemed that the employee has terminated employment for the purposes
of this Plan.
13. Optionees not Stockholders. Neither the granting of an
Option to an employee nor the deductions from an employee's pay shall constitute
such employee a stockholder of the shares of Common Stock covered by an Option
under this Plan until such shares have been purchased by and issued to such
employee.
14. Rights Not Transferable. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee.
15. Application of Funds. All funds received or held by the
Company under this Plan may be combined with other corporate funds and may be
used for any corporate purpose.
16. Adjustment in Case of Changes Affecting Common Stock. In the
event of a subdivision of outstanding shares of Common Stock, or the payment of
a dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board of
Directors or the Committee. In the event of any other change affecting the
Common Stock, such adjustment shall be made as may be deemed equitable by the
Board of Directors or the Committee to give proper effect to such event.
17. Amendment of the Plan. The Board of Directors may at any
time and from time to time, amend this Plan in any respect, except that without
approval by a majority of the votes cast at a duly held stockholders' meeting at
which a quorum representing a majority of all outstanding Common Stock is,
either in person or by proxy, present, no amendment shall be made (a) increasing
or decreasing the number of shares approved for this Plan or (b) changing the
class of employees eligible to receive Options under the Plan.
18. Merger, Reorganization, etc. In the event of a merger,
reorganization, consolidation, or liquidation involving the Company, the
Committee has discretion to provide that all outstanding obligations of the
Company under the Plan will be assumed or equivalent rights substituted by the
successor corporation, or the Committee may shorten the offering period and
provide for all sums collected to be applied to purchase stock immediately prior
to such merger or other transaction.
19. Insufficient Shares. In the event that the total number of
shares of Common Stock specified in elections to be purchased under any Offering
plus the number of shares purchased under previous Offerings under this Plan
exceeds the maximum number of shares issuable under this Plan, the Board of
Directors or the Committee shall allot, in such manner as it may determine, the
shares then available.
20. Termination of the Plan. This Plan may be terminated at any
time by the Company's Board of Directors, subject to
<PAGE>
the limitation that no such action may adversely affect any outstanding rights
to purchase Common Stock.
21. Governmental Regulations. The Company's obligation to sell
and deliver Common Stock under this Plan is subject to listing on the National
Market and obtaining all governmental approvals required in connection with the
authorization, issuance, or sale of such stock.
The Plan shall be governed by Delaware law except to the extent
that such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Any provision
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.
22. Issuance of Shares. Shares may be issued upon exercise of an
Option from authorized but unissued Common Stock, from shares held in the
treasury of the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by
entering the Plan, to give the Company prompt notice of any disposition of
shares purchased under the Plan where such disposition occurs within two years
after the date of grant of the Option pursuant to which such shares were
purchased.
24. Effective Date and Approval of Shareholders. The Plan shall
take effect on the first day of the Company's initial public offering (the
"Effective Date") subject to closing of the offering and approval by a majority
of the votes cast at a duly held shareholders' meeting at which a quorum
representing a majority of all outstanding Common Stock is, either in person or
by proxy, present, which approval must occur within twelve months of the
adoption of the Plan by the Board of Directors.
AMENDMENT NO. 1
TO
1993 STOCK PURCHASE PLAN
OF
INSO CORPORATION
The 1993 Stock Purchase Plan (the "Plan") of Inso Corporation,
formerly known as InfoSoft International, Inc. is hereby amended as follows
(capitalized terms used herein and not defined herein shall have the respective
meaning ascribed to such terms in the Plan):
The first paragraph of the Plan shall be deleted in its entirety and
replaced with the following:
"The purpose of this Plan is to provide eligible employees of Inso
Corporation (the "Company") with opportunities to purchase shares of the
Company's common stock, $0.01 par value (the "Common Stock").
<PAGE>
Four hundred and fifty thousand (450,000) shares of Common Stock in the
aggregate have been approved for this purpose."
The third sentence of Section 3 of the Plan shall be deleted in its entirety and
replaced with the following:
"Offerings on or before January 1, 1999 shall begin on each January 1
or July 1, or the first business day thereafter, subsequent offerings shall
begin on each June 1 or December 1, or the first business day thereafter."
Except as aforesaid, the Plan shall remain in full force and effect.
Adopted by the
Board of Directors
March 9, 1998
<PAGE>
AMENDMENT NO. 2
TO
1993 STOCK PURCHASE PLAN
OF
INSO CORPORATION
The 1993 Stock Purchase Plan (the "Plan") of Inso Corporation,
formerly known as InfoSoft International, Inc. is hereby amended as follows
(capitalized terms used herein and not defined herein shall have the respective
meaning ascribed to such terms in the Plan):
The first paragraph of the Plan shall be deleted in its entirety and
replaced with the following:
"The purpose of this Plan is to provide eligible employees of Inso
Corporation (the "Company") with opportunities to purchase shares of the
Company's common stock, $0.01 par value (the "Common Stock"). Seven hundred
thousand (700,000) shares of Common Stock in the aggregate have been approved
for this purpose."
Except as aforesaid, the Plan shall remain in full force and effect.
Adopted by the
Board of Directors
April 7, 2000
<PAGE>
INSO CORPORATION
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, June 1,
2000.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Inso Corporation
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------------------------------------------------------------
INSO CORPORATION
- --------------------------------------------------------------------------------
Mark box at right if an address change or comment has been noted on
the reverse side of this card. / /
CONTROL NUMBER:
RECORD DATE SHARES:
1. To elect the following persons as Class I directors
(except as marked below):
For All With- For All
Nominees held Except
(01) Samuel H. Fuller / / / / / /
(02) Edward Terino / / / / / /
NOTE: If you do not wish your shares voted "for" a particular nominee, mark the
"For All Except" box and strike a line through the name of the nominee. Your
shares will be voted for the remaining nominee.
For Against Abstain
2. To approve an amendment to the Company's / / / / / /
1993 Stock Purchase Plan to increase
the number of shares authorized for
issuance under the plan to 700,000 shares.
3. To approve and ratify amendments to / / / / / /
the Company's 1996 Non-employee
Director Plan.
4. To ratify the selection of Ernst & Young / / / / / /
LLP as the Company's independent auditors
for the 2001 fiscal year.
In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
Please be sure to sign and date this Proxy. Date
Stockholder sign here Co-owner sign here
DETACH CARD DETACH CARD
<PAGE>
INSO CORPORATION
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints James Ringrose, Christopher Burns and
Jonathan P. Levitt and each of them, as proxies, each with the power of
substitution and resubstitution and hereby authorizes any of them to represent
and to vote as designated below, all the shares of common stock, par value $.01
per share, of Inso Corporation (the "Company"), held of record by the
undersigned on April 14, 2000 at the Annual Meeting of Stockholders to be held
on June 1, 2000 at eBusiness Technologies, 299 Promenade Street, Providence, RI
at 9:00 a.m. local time, or any postponement or adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein by
the stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR THE PROPOSAL DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT.
PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) hereon. When shares are held by
joint tenants, both should sign. When signing as 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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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