<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PROJECT SOFTWARE & DEVELOPMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
PROJECT SOFTWARE & DEVELOPMENT, INC.
------------------------
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 2000
------------------------
Notice is hereby given that a Special Meeting in Lieu of Annual Meeting of
Stockholders of Project Software & Development, Inc. (the "Company") will be
held at the offices of the Company, 100 Crosby Drive, Bedford, Massachusetts on
Tuesday, April 25, 2000, beginning at 10:00 A.M., local time, for the following
purposes:
1. To elect two Class I Directors for a three-year term;
2. To approve the Company's Amended and Restated 1999 Equity Incentive
Plan;
3. To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers L.L.P. as the Company's independent public
accountants for the current fiscal year; and
4. To transact such further business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Wednesday, March
15, 2000, as the record date for the determination of the stockholders of the
Company entitled to notice of, and to vote at, said Meeting and any adjournment
thereof. Only stockholders of record on such date are entitled to notice of, and
to vote at, said Meeting or any adjournment thereof.
By Order of the Board of Directors,
CAROLE A. TYNER
Clerk
Bedford, Massachusetts
March 28, 2000
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
<PAGE> 3
PROJECT SOFTWARE & DEVELOPMENT, INC.
100 CROSBY DRIVE
BEDFORD, MASSACHUSETTS 01730
(781) 280-2000
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 2000
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about March 28, 2000 in connection with the solicitation by
the Board of Directors of Project Software & Development, Inc. (the "Company")
of proxies to be used at a Special Meeting in Lieu of Annual Meeting of
Stockholders of the Company, to be held on Tuesday, April 25, 2000, and at any
and all adjournments thereof (the "Annual Meeting"). When proxies are returned
properly executed, the shares represented will be voted in accordance with the
stockholders' directions. Stockholders are encouraged to vote on the matters to
be considered. If no choice has been specified by a stockholder with respect to
a proposal as to which the Board of Directors has made a recommendation,
however, the shares covered by any executed proxy will be voted as indicated in
this proxy statement. Any stockholder may revoke his proxy at any time before it
has been exercised.
The Board of Directors of the Company has fixed the close of business on
Wednesday, March 15, 2000, as the record date for the determination of the
stockholders of the Company entitled to notice of, and to vote at, the Annual
Meeting. Only stockholders of record on such date are entitled to notice of, and
to vote at, the Annual Meeting. At the close of business on the record date,
there were issued and outstanding 21,791,881 shares of the Company's Common
Stock, $.01 par value (the "Common Stock"). Each share of Common Stock
outstanding on the record date will be entitled to cast one vote.
QUORUM AND TABULATION OF VOTES
The By-Laws of the Company provide that the holders of a majority of shares
of Common Stock issued and outstanding and entitled to vote thereat will
constitute a quorum at the Annual Meeting. Shares of Common Stock represented by
a properly signed and returned proxy will be treated as present at the Annual
Meeting for purposes of determining a quorum. In general, votes withheld from
any nominee for election as director, abstentions (if applicable) and broker
"non-votes" (if applicable) are counted as present or represented for purposes
of determining the presence or absence of a quorum for the Annual Meeting. A
"non-vote" occurs when a broker or nominee holding shares for a beneficial owner
votes on one proposal, but does not vote on another proposal because, in respect
of such other proposal, the broker or nominee does not have discretionary voting
power and has not received instructions from the beneficial owner.
The affirmative vote of a plurality of the shares of Common Stock properly
cast at the Annual Meeting will be necessary to elect the Class I Directors
(Proposal One). The affirmative vote of a majority of the shares of Common Stock
properly cast at the Annual Meeting will be necessary to approve the Amended and
Restated 1999 Equity Incentive Plan and to approve the Company's independent
accountants (Proposals Two and Three). Abstentions, votes "withheld" from
director-nominees, and broker "non-votes" will not be included in calculating
the number of votes cast on such Proposals.
Votes will be tabulated by the Company's transfer agent, Boston Equiserve
Limited Partnership. The vote on each matter submitted to stockholders will be
tabulated separately.
<PAGE> 4
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company, as a Massachusetts corporation with a class of voting stock
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which elected in 1996 to be subject to relevant provisions of
Massachusetts law, has a Board of Directors consisting of six directors, divided
into three classes, as nearly equal in size as practicable, referred to as Class
I, Class II and Class III.
The terms of the Company's Class I Directors, Robert L. Daniels and Paul D.
Birch, will expire at the Annual Meeting to be held on April 25, 2000. Mr. Birch
has advised the Company that he does not intend to stand for reelection. The
terms of the Company's Class II Directors, Alan L. Stanzler and Stephen B.
Sayre, expire at the annual meeting to be held with respect to the Company's
2000 fiscal year. Mr. Stanzler consented to be named as a nominee of Robert L.
Daniels and Susan H. Daniels for election as a director of the Company at its
Special Meeting in Lieu of Annual Meeting held on May 28, 1998 and was elected
as a director at that meeting. The terms of the Company's Class III Directors,
Norman E. Drapeau, Jr. and Richard P. Fishman, will expire at the annual meeting
to be held with respect to the Company's 2001 fiscal year. Mr. Drapeau and Mr.
Fishman were elected to the Board of Directors at the Company's Special Meeting
in Lieu of Annual Meeting held on March 24, 1999. Mr. Birch and Mr. Sayre were
each elected to the Board of Directors by the members of the then existing Board
to fill vacancies on the Board. The Directors in each Class serve for a term of
three years and until their successors are duly elected and qualified. As the
term of one Class expires, a successor director or directors for that Class are
elected at the annual meeting of stockholders for that year.
The Board of Directors has recommended that Mr. Daniels be nominated to an
additional three year term and that John A. McMullen be nominated to fill the
seat being vacated by Mr. Birch. Mr. Daniels and Mr. McMullen have each agreed
to serve if elected, and the Company has no reason to believe that either of
them will be unable to serve. In the event that Mr. Daniels or Mr. McMullen is
unable or declines to serve as a director at the time of the Annual Meeting,
proxies will be voted for such other nominee as is then designated by the Board.
Unless authority to do so has been limited in a proxy, it is the intention
of the persons named as proxies to vote the shares represented by the proxy FOR
the election of Mr. Daniels and Mr. McMullen as Class I Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF MR.
DANIELS AND MR. MCMULLEN AS CLASS I DIRECTORS.
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<PAGE> 5
DIRECTORS AND EXECUTIVE OFFICERS
The directors, expected nominees for director and executive officers of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Norman E. Drapeau, Jr..................... 39 President and Chief Executive Officer and
Director - Class III
Robert L. Daniels......................... 58 Executive Chairman of the Board - Class I
William J. Sawyer......................... 54 Executive Vice President - Operations
Ted D. Williams........................... 51 Executive Vice President - Worldwide Sales
John W. Young............................. 47 Executive Vice President - Products and
Technology
Richard P. Fishman........................ 53 Director - Class III
Stephen B. Sayre(1)(2).................... 48 Director - Class II
Alan L. Stanzler(1)(2).................... 57 Director - Class II
John A. McMullen.......................... 58 Nominee as Class I Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
NORMAN E. DRAPEAU, JR. joined the Company in 1982 as an applications
analyst. Since that time, he has held various positions with the Company,
including, from 1984 to 1987, that of Manager of Customer Support and from 1989
through 1991, that of Director, Product Marketing. In 1991, Mr. Drapeau was
appointed Vice President, Corporate Marketing, in 1992 was appointed Vice
President -- Americas and in July 1996 was appointed Executive Vice President --
Worldwide Sales and Marketing, serving in that capacity until January 1998. In
January 1998, Mr. Drapeau was appointed Executive Vice President and Chief
Operating Officer and was also elected a director of the Company. In May 1998,
Mr. Drapeau was elected President and Chief Executive Officer.
ROBERT L. DANIELS founded the Company in 1968 and has been a director since
that time. Mr. Daniels served as Chairman of the Board and Chief Executive
Officer from 1968 to 1996 and as President from 1968 to 1995. Mr. Daniels
resigned as Chairman of the Board in August 1996 and as an employee of the
Company in December 1996. Mr. Daniels acted as an executive consultant to the
Company from this time until August 1997. In May 1998, Mr. Daniels rejoined the
Company and was elected Executive Chairman of the Board.
WILLIAM J. SAWYER joined the Company in 1978 as an applications consultant
and served in various sales and services positions from 1978 to 1984. Mr. Sawyer
was a Vice President of the Company from 1984 to 1990 and Executive Vice
President from 1990 until November 1997. In November 1997, Mr. Sawyer left the
Company and joined Peritus Software Services, Inc., a software application
company, as Vice President, Operations. Mr. Sawyer rejoined the Company in
October 1998 as Executive Vice President of Operations.
TED D. WILLIAMS originally joined the Company in 1984 and served as
Director, MAXIMO until 1988. From 1988 to 1993, Mr. Williams was President and
Chief Operating Officer of Comac Systems Corporation, a software application
company. In 1993, Mr. Williams rejoined the Company as Director, Eastern
Regional Sales. He was appointed Vice President -- North American Sales in 1996
and Vice President -- Worldwide Sales in January 1998. In October, 1998, Mr.
Williams was appointed Executive Vice President -- Worldwide Sales.
JOHN W. YOUNG originally joined the Company in 1985 and served until 1988
as MAXIMO Product Manager. From 1988 to 1992, Mr. Young was Vice President of
Sales of Comac Systems Corporation, a software application company. In 1992 he
rejoined the Company as Director of MAXIMO Product Design, was appointed Vice
President -- Research and Development of the Company in 1995 and was appointed
Executive Vice President -- Products and Technology of the Company in 1998.
RICHARD P. FISHMAN was elected as a director in March 1999. Mr. Fishman is
currently Senior Vice President at MacAndrews & Forbes Group, Inc., where he is
responsible for venture capital investing. From
3
<PAGE> 6
1995 through 1998, Mr. Fishman served as Managing Director of GeoPartners
Research, Inc., a strategy and management consulting firm, where he headed the
firm's venture capital activities. From 1995 to 1997, Mr. Fishman was also Of
Counsel at the law firm of Akin, Gump, Strauss, Hauer & Feld L.L.P. Mr. Fishman
served as President and Chief Executive Officer of Thinking Machines Corporation
from 1993 to 1994 and was a partner at the law firm of Milbank, Tweed, Hadley &
McCloy from 1987 until 1993.
STEPHEN B. SAYRE was elected as a director in September 1998. Mr. Sayre is
currently the Senior Vice President of Marketing at Lotus Development
Corporation, a subsidiary of IBM Corporation. Prior to joining Lotus in 1994,
Mr. Sayre was President of Boston Treasury Systems and has held other senior
executive level positions with Cullinet Software and Easel Corporation.
ALAN L. STANZLER was elected as a director in May 1998. Mr. Stanzler served
as a director of the Company from 1992 to 1994, and as Clerk of the Company from
1990 to 1996. Mr. Stanzler is a member of the law firm of Maselan Jones &
Stanzler, P.C. From 1995 to 1998, Mr. Stanzler was a member of the law firm of
Davis, Malm & D'Agostine, P.C. and from 1978 to 1995 he was a partner in the law
firm of Finnegan & Stanzler, P.C.
JOHN A. MCMULLEN has been nominated for election as a Class I Director. Mr.
McMullen is the Managing Principal of Cambridge Meridian Group, Inc. a
strategy-consulting firm that serves Fortune 500 and technology-based companies
with which he has been employed since 1985. Mr. McMullen taught business
strategy at Harvard Law School from the mid 1980's to 1990 and, as one of the
original members of CMGI's Board of Directors, served on that Board from 1988
through 1999. He currently serves on the Board of Ezenia!, Inc., a Nasdaq listed
company, in a term that began this year. In addition, he serves, or has served,
on the Boards of twelve other private, chiefly technology-oriented companies.
From 1993 to 1997 he was an informal advisor to Senator Bill Bradley (NJ). In
1998 he ran for the United States Senate from Vermont.
All directors hold office until the expiration of their respective terms as
described above and until their respective successors are duly elected and
qualified. Executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors.
COMMITTEES AND MEETINGS OF THE BOARD
During the fiscal year ended September 30, 1999 ("fiscal 1999"), the Board
met thirteen times. No incumbent director attended fewer than 75% of the total
number of meetings held by the Board and Committees of the Board on which he
served.
The Board of Directors has an Audit Committee and a Compensation Committee,
but does not have a nominating committee or other committee performing similar
function. The Audit Committee (currently composed of Messrs. Sayre and Stanzler)
reviews the internal accounting procedures of the Company and consults with and
reviews the services provided by the Company's independent auditors. The Audit
Committee met six times during fiscal 1999. The Compensation Committee
(currently composed of Messrs. Sayre and Stanzler) has general responsibility
for the Company's executive compensation policies and practices, including
making specific recommendations to the Board concerning compensation for the
Company's executive officers and administering the Company's 1999 Equity
Incentive Plan (the "1999 Equity Incentive Plan"), 1994 Incentive and
Nonqualified Stock Option Plan (the "1994 Stock Option Plan") and 1994 Employee
Stock Purchase Plan (the "Stock Purchase Plan"). The Compensation Committee met
six times during fiscal 1999.
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
DIRECTORS' COMPENSATION
Members of the Board of Directors who are not employees of the Company or
one of the Company's subsidiaries ("Non-Employee Directors") receive a quarterly
fee of $2,500. Non-Employee Directors also receive fees of $1,000 for each
meeting of the Board of Directors and $750 for each meeting of a committee of
the Board which they attend, provided that no fee is paid with respect to a
committee meeting if the committee meeting is held on the same date as a Board
meeting. Non-Employee Directors receive $500 for
4
<PAGE> 7
participating in a telephonic Board or committee meeting. Non-Employee Directors
are reimbursed for out-of-pocket expenses incurred in the performance of their
duties as directors of the Company. Directors who are employees of the Company
are not paid any separate fees for serving as directors. Mr. Stanzler was also
paid $10,200 in fiscal 1999 for providing consulting services to the Company.
Pursuant to the Company's 1999 Equity Incentive Plan, each Non-Employee
Director, upon first joining the Board, is automatically granted an option to
purchase 9,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock (determined in accordance with the terms of the
1999 Equity Incentive Plan) on the date of the grant. In addition, each
Non-Employee Director who continues to serve as a director following any annual
meeting of stockholders of the Company or special meeting in lieu thereof is
automatically granted, immediately following such meeting of stockholders, an
option to purchase 9,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock (determined in accordance with the
terms of the 1999 Equity Incentive Plan) on the date of grant. However, in the
event a Non-Employee Director joins the Board after the second Tuesday in
February in a given year such Non-Employee Director will receive an option for a
number of shares equal to 9,000 multiplied by N/12 where "N" is the number of
months remaining between the date of election of such Non-Employee Director and
the next second Tuesday in February.
The Board of Directors has adopted an Amended and Restated 1999 Equity
Incentive Plan, subject to shareholder approval, which changes the formula for
granting options to Non-Employee Directors (see Proposal Two for detailed
information).
Options granted to Non-Employee Directors are subject to acceleration of
vesting in certain circumstances (see Proposal Two for detailed information).
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information concerning the compensation earned by the Company's Chief Executive
Officer and the four other most highly paid executive officers of the Company
(collectively, the "named executive officers") for services rendered in all
capacities to the Company during fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ SECURITIES ALL OTHER
FISCAL OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS(#)(1) ($)(2)
--------------------------- ------ --------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Drapeau, Jr............ 1999 $295,000 $375,414(3) -- 200,000 $ 2,500
President and 1998 224,375 -- 30,241(4) 60,000 2,375
Chief Executive Officer 1997 152,500 -- 95,885(4) 49,998 2,250
Robert L. Daniels................ 1999 $295,000 $375,414(3) -- -- --
Executive Chairman of the 1998 110,625 -- -- -- --
Board and Former Chief 1997 64,773 -- -- -- $29,167(5)
Executive Officer and President
Paul D. Birch.................... 1999 $207,750 $144,416(3) -- 40,000 $ 2,500
Executive Vice-President 1998 188,250 -- -- 40,000 2,375
Chief Financial Officer, 1997 166,500 13,655(6) -- 40,000 2,250
and Treasurer (10)
John W. Young.................... 1999 $185,000 $ 88,166(3) -- 90,000 $ 2,500
Executive Vice-President 1998 160,000 -- -- 40,000 2,375
Products and Technology 1997 135,000 7,686(6) -- 19,998 2,250
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ SECURITIES ALL OTHER
FISCAL OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS(#)(1) ($)(2)
--------------------------- ------ --------- -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
William J. Sawyer................ 1999 $172,591 $ 88,166(3) $30,000(7) 90,000 $ 2,500
Executive Vice President 1998 18,750(8) -- 6,154(9) -- --
of Operations 1997 147,500 8,086(6) -- -- 2,250
</TABLE>
- ---------------
(1) Represents shares of Common Stock issuable upon exercise of stock options
granted under the Company's 1994 Stock Option Plan. All share numbers in
this Proxy Statement have been adjusted to reflect the Company's
two-for-one stock split effected by means of a stock dividend on December
15, 1999.
(2) The amounts reported represent contributions made by the Company pursuant
to the Company's 401(k) Plan and Trust for fiscal 1999 and for the fiscal
years ended September 30, 1998 and 1997 ("fiscal 1998 and "fiscal 1997,"
respectively).
(3) Represents bonuses paid under the Company's 1999 Executive Bonus Plan.
(4) Represents commissions paid under Mr. Drapeau's individual incentive
compensation plan as Executive Vice President Worldwide Sales designed to
reward him for achievement of quarterly and annual revenue and contribution
targets.
(5) Represents fees related to an executive consulting agreement.
(6) Represents bonuses paid under the Company's 1997 Executive Bonus Plan.
(7) Represents a bonus paid when Mr. Sawyer was rehired.
(8) Mr. Sawyer left the Company in November 1997 and returned in October 1998.
(9) Represents payment for unused vacation time in connection with Mr. Sawyer's
departure from the Company.
(10) Mr. Birch resigned from all of his positions with the Company, other than
his position as a director, effective February 29, 2000.
Option Grants in Last Fiscal Year. The following table sets forth certain
information regarding stock options granted during fiscal 1999 by the Company to
the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATE OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OPTION TERM(4)
GRANTED FISCAL PRICE EXPIRATION -----------------------
NAME (#)(1) YEAR(%)(2) ($/SH)(3) DATE 5%($) 10%($)
---- ---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Drapeau, Jr.... 200,000(5) 18.9% $9.0625 10/28/08 $1,140,000 $2,896,000
Robert L. Daniels........ -- -- -- -- -- --
Paul D. Birch............ 40,000(5) 3.8% $9.0625 10/28/08 $ 228,000 $ 579,200
Jack W. Young............ 90,000(5) 8.5% $9.0625 10/28/08 $ 513,000 $1,303,200
William J. Sawyer........ 90,000(5) 8.5% $9.8125 11/04/08 $ 557,100 $1,407,600
</TABLE>
- ---------------
(1) Represents shares of Common Stock issuable upon exercise of incentive stock
options granted under the Company's 1994 Stock Option Plan. All share
numbers in this Proxy Statement have been adjusted to reflect the Company's
two-for-one stock split effected by means of a stock dividend on December
15, 1999.
(2) The Company granted to employees options for the purchase of an aggregate of
1,061,000 shares of Common Stock in fiscal 1999 pursuant to the 1994 Stock
Option Plan.
6
<PAGE> 9
(3) All options were granted at exercise prices not less than the fair market
value of the Common Stock on the date of grant.
(4) Potential realizable value means the value of the shares of Common Stock
underlying the option, at the specified assumed annual rates of stock price
appreciation, compounded over the option term (10 years). Actual gains, if
any, realized on stock option exercises are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the values reflected in this table will be
realized.
(5) All such options expire ten years after the date of grant, and first become
exercisable as to 25% of the shares covered on the first anniversary of the
date of grant and as to a further 25% annually thereafter, subject to
acceleration in certain circumstances.
Option Exercises and Fiscal Year-End Values. The following table sets
forth certain information concerning stock options exercised during fiscal 1999
and stock options held as of September 30, 1999 by each of the named executive
officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE FISCAL YEAR-END AT FISCAL YEAR END($)(2)
ON REALIZED --------------------------------- ---------------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- ---- ----------- ---------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Drapeau,
Jr................. -- -- 101,998 257,500 $1,831,569 $4,361,906
Robert L. Daniels.... -- -- -- -- -- --
Paul D. Birch........ 65,000 $1,240,362 90,000 80,000 $1,511,250 $1,283,750
John W. Young........ 6,000 $ 117,990 42,998 125,000 $ 700,405 $2,087,187
William J. Sawyer.... -- -- 0 90,000 0 $1,524,375
</TABLE>
- ---------------
(1) Value is based on the last sale price of the Common Stock on the exercise
date, as reported by the Nasdaq Stock Market, or the price at which shares
acquired upon exercise of the option were actually sold (in the event of a
concurrent exercise and sale), less the applicable option exercise price.
All share numbers in this Proxy Statement have been adjusted to reflect the
Company's two-for-one stock split effected by means of a stock dividend on
December 15, 1999.
(2) Value is based on the last sale price of the Common Stock on September 30,
1999, as reported by the Nasdaq Stock Market ($26.75 per share), less the
applicable option exercise price. These values have not been and may never
be realized. Actual gains, if any, on exercise will depend on the value of
the Common Stock on the date of the sale of the shares.
Stock Option Repricings. The following table sets forth all stock option
repricings during fiscal 1999 and during the Company's last ten (10) fiscal
years relating to the executive officers listed in the Summary Compensation
Table.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF LENGTH OF
SECURITIES SECURITIES EXERCISE MARKET ORIGINAL
UNDERLYING UNDERLYING PRICE AT PRICE NEW OPTION TERM
OPTIONS OPTIONS TIME OF AT TIME EXERCISE REMAINING
PRIOR TO AFTER REPRICING OF REPRICING PRICE AT DATE OF
NAME DATE REPRICING(1) REPRICING ($) ($) ($) REPRICING
- ---- ------- ------------ ---------- --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Norman E. Drapeau, Jr.......... 7/31/97 15,846 7,922 16.50 10.5625 10.5625 8/14/06
President and Chief.......... 7/31/97 84,154 42,076 16.50 10.5625 10.5625 8/14/06
Executive Officer
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF LENGTH OF
SECURITIES SECURITIES EXERCISE MARKET ORIGINAL
UNDERLYING UNDERLYING PRICE AT PRICE NEW OPTION TERM
OPTIONS OPTIONS TIME OF AT TIME EXERCISE REMAINING
PRIOR TO AFTER REPRICING OF REPRICING PRICE AT DATE OF
NAME DATE REPRICING(1) REPRICING ($) ($) ($) REPRICING
- ---- ------- ------------ ---------- --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul D. Birch.................. 7/31/97 12,900 6,450 16.50 10.5625 10.5625 8/14/06
Executive Vice-President,.... 7/31/97 67,100 33,550 16.50 10.5625 10.5625 8/14/06
Chief Financial Officer and
Treasurer
William J. Sawyer.............. -- -- -- -- -- -- --
Executive Vice-President --
Operations
John W. Young.................. 7/31/97 19,446 9,722 16.50 10.5625 10.5625 8/14/06
Executive Vice-President,.... 7/31/97 20,554 10,276 16.50 10.5625 10.5625 8/14/06
Products and Technology
Robert L. Daniels.............. -- -- -- -- -- -- --
Executive Chairman of the
Board and Former Chief
Executive Officer and
President
Ted D. Williams................ 7/31/97 20,000 10,000 16.50 10.5625 10.5625 8/14/06
Executive Vice President --
Worldwide Sales
</TABLE>
- ---------------
(1) All share numbers in this Proxy Statement have been adjusted to reflect the
Company's two-for-one stock split effected by means of a stock dividend on
December 15, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Alan L. Stanzler and Stephen B. Sayre served on the Compensation Committee
during fiscal 1999. Neither Mr. Stanzler nor Mr. Sayre, nor any executive
officer of the Company, has any relationship requiring disclosure by the Company
pursuant to item 402(j) of Regulation S-K promulgated by the SEC.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee established by the Board of Directors is
composed of two non-employee directors of the Company, currently Mr. Sayre and
Mr. Stanzler. The Compensation Committee has general responsibility for the
Company's executive compensation policies and practices, including making
specific recommendations to the Board concerning compensation for the Company's
executive officers. The following report is made by Messrs. Sayre and Stanzler,
as the members of the Compensation Committee during fiscal 1999, and summarizes
the Company's executive officer compensation policies for fiscal 1999.
Compensation Objectives
The Company's executive compensation programs are generally designed to
relate a substantial part of executive compensation to improvements in the
Company's financial performance and corresponding increases in stockholder
value. Decisions concerning executive compensation are guided by the following
underlying principles:
- to establish incentives that will link executive officer compensation to
the Company's financial performance and will motivate executives to
attain the Company's quarterly and annual financial targets; and
- to provide a total compensation package which is competitive within the
software industry and will assist the Company in attracting and retaining
executives who will contribute to the long term financial success of the
Company.
8
<PAGE> 11
In connection with establishing base salaries for executive officers and
the Company's other cash compensation programs for fiscal 1999 the Compensation
Committee reviewed a professionally-prepared analysis which included surveys of
comparable software companies.
The Securities and Exchange Commission requires that this Report comment
upon the Compensation Committee's policy with respect to Section 162(m) of the
Internal Revenue Code of 1986, as amended, which limits the Company's tax
deduction with regard to compensation in excess of $1 million paid to the chief
executive officer and the four most highly compensated officers (other than the
chief executive officer) at the end of any fiscal year unless the compensation
qualifies as "performance-based compensation." The Compensation Committee's
policy with respect to Section 162(m) is to make every reasonable effort to
cause compensation to be deductible by the Company while simultaneously
providing executive officers of the Company with appropriate rewards for their
performance.
Executive Compensation Programs
The Company's compensation package normally consists of three principal
components: (1) salary; (2) bonuses tied to quarterly and annual earnings
performance; and (3) where appropriate to provide longer-term incentive to
executive officers, stock options. The Company's executive officers are also
eligible to participate in other employee benefit plans, including health and
life insurance plans, a 401(k) retirement plan and a stock purchase plan, on
substantially the same terms as other employees who meet applicable eligibility
criteria, subject to any legal limitations on the amounts that may be
contributed or the benefits that may be payable under these Company plans.
The Company's executive officer compensation policy emphasizes bonuses and
stock options which align the interests of management with the stockholders'
interest in the financial performance of the Company for fiscal quarters, the
fiscal year and the longer term. Consistent with this approach, in fiscal 1999 a
substantial part of potential cash compensation for all executives was tied to
the Company's performance. In setting salaries, primary consideration was given
to the executive officers' salaries for the previous fiscal year, with
adjustments for certain officers in light of promotions within the Company,
industry conditions, individual contributions and the improved financial
performance of the Company.
In fiscal 1999, the Company maintained an Executive Bonus Plan (the "1999
Bonus Plan") intended by the Compensation Committee to align the interests of
its participants with those of the stockholders and provide additional incentive
to executives to enhance Company performance. The participants in the 1999 Bonus
Plan were Messrs. Drapeau, Daniels, Birch, Young and Sawyer. Under the 1999
Bonus Plan a participant's bonus was based eighty percent on the Company
achieving certain quarterly and annual revenue goals and twenty percent on
achievement of certain individual performance goals established by the Company's
Chief Executive Officer. The revenue target was reached for the quarter ended
December 31, 1998.
Starting in the quarter ended March 31, 1999 the Company's executive team
began building the Company's e-commerce operations through the Company's
wholly-owned subsidiary MRO.com, Inc. The Compensation Committee believed it was
appropriate to reward the executive team for successfully launching this new
e-commerce strategy while minimizing negative financial impact on the Company's
core business. Due to this change in strategy, the Compensation Committee
decided to revise the Company's bonus policy to the extent that it was based on
the Company achieving certain quarterly and annual revenue goals as described
above. With respect to the eighty percent of the bonus that was tied to Company
revenue goals, the Compensation Committee decided to award executive bonuses for
fiscal 1999 as follows: (1) one-fourth of the eighty percent was to be earned
based on the Compensation Committee's qualitative assessment of the successful
development of the new e-commerce business and (2) three-fourths of the eighty
percent was to be earned based on the overall corporate financial performance
for fiscal 1999 as measured by actual earnings-per-share ("EPS") achievement as
compared to the highest total year EPS estimate for the Company by investment
analysts covering the Company. The Compensation Committee reviewed the EPS
estimates and noted the high end estimate to be $0.84. The Compensation
Committee decided that if the Company met or exceeded that estimate, it would
award bonuses based on the extent to which the EPS target was exceeded. The
Company exceeded the EPS estimate of $0.84 by $0.01.
9
<PAGE> 12
The Company paid $1,071,576 in bonuses in fiscal 1999. Mr. Williams, as a
sales executive, earned sales commissions under his personal plan and did not
participate in the 1999 Bonus Plan.
In fiscal 1999, stock options were a component of the Company's approach to
compensation for its executive officers. Options under the Company's 1994 Stock
Option Plan were granted to Messrs. Drapeau, Birch, Sawyer, Williams and Young
in order to provide them additional long term incentives to act on behalf of the
Company. See "Option Grants in Last Fiscal Year". In determining the size of
stock option grants to executive officers, the Compensation Committee emphasized
the seniority, responsibilities and performance of the executive and the number
of options previously granted to the executive officers. The Compensation
Committee believes that stock options with future vesting dates provide a
significant incentive to executive officers to continue their employment with
the Company and create long term value for its stockholders.
Chief Executive Officer Compensation
Consistent with the overall executive officer compensation policy, the
Company's approach to the Chief Executive Officer's compensation package in
fiscal 1999 was to be competitive with other high growth companies in the
software industry and to tie a large percentage of the Chief Executive Officer's
total compensation package to Company performance. The Compensation Committee
believes that this approach provides additional inc performance goals and
enhance stockholder value.
Salary for the Company's Chief Executive Officer was designed to give him
assurance of a base level of compensation commensurate with his position and
duration of employment with the Company and competitive with salaries for
officers holding comparable positions in the software industry. Mr. Drapeau was
Chief Executive Officer of the Company during fiscal 1999.
The Compensation Committee
Stephen B. Sayre
Alan L. Stanzler
10
<PAGE> 13
PERFORMANCE GRAPH
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index, the Nasdaq
Stock Market Index for U.S. Companies and a published industry index, the Nasdaq
Computer & Data Processing Index. The cumulative stockholder returns for shares
of the Company's Common Stock and for the market and industry indexes are
calculated assuming $100 was invested on April 21, 1994, the date on which the
Company's Common Stock commenced trading on the Nasdaq National Market. The
Company paid no cash dividends during the periods shown. The performance of the
market and industry indexes is shown on a total return (dividends reinvested)
basis.
<TABLE>
<CAPTION>
PROJECT SOFTWARE & NASDAQ STOCK MARKET NASDAQ COMPUTER & DATA
DEVELOPMENT, INC. (U.S.) PROCESSING
------------------ ------------------- ----------------------
<S> <C> <C> <C>
9/95 100.00 100.00 100.00
9/96 163.00 119.00 124.00
9/97 88.00 163.00 168.00
9/98 50.00 166.00 218.00
9/99 206.00 269.00 366.00
12/99 427.00 388.00 598.00
</TABLE>
11
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 9, 2000 by (i)
each person known by the Company to own beneficially more than five percent of
the Common Stock as of such date, (ii) each director of the Company, (iii) each
named executive officer, (iv) each expected nominee as a director of the Company
and (v) all executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
Robert L. Daniels(2)(3)..................................... 5,030,520 23.1%
100 Crosby Drive
Bedford, MA 01730
Kopp Investment Advisors, Inc.(4)........................... 1,787,958 8.2%
6600 France Avenue South
Edina, MN 55435
Susan H. Daniels(2)(3)(5)................................... 1,464,258 6.7%
100 Crosby Drive
Bedford, MA 01730
Fidelity Management & Research Company (6).................. 1,282,166 5.9%
82 Devonshire Street
Boston, MA 02109
Norman E. Drapeau, Jr.(7)................................... 146,997 *
Paul D. Birch............................................... 22,750 *
John W. Young (7)........................................... 52,497 *
Ted D. Williams(7).......................................... 13,356 *
William J. Sawyer(8)........................................ 10,628 *
Alan L. Stanzler(9)......................................... 38,500 *
Stephen B. Sayre(7)......................................... 12,000 *
Richard P. Fishman(10)...................................... 20,600 *
John A. McMullen............................................ 0 *
All directors and executive officers as a group
(9 persons)(2)(3)(7)(8)(9)(10)............................ 5,347,848 24.2%
</TABLE>
- ---------------
* Less than one percent.
(1) The persons named in this table have sole voting and investment power with
respect to the shares listed, except as otherwise indicated. The inclusion
herein of shares listed as beneficially owned does not constitute an
admission of beneficial ownership.
(2) Excludes 204,580 shares held in three trusts for the benefit of Mr.
Daniels' children and 1,700 shares held by Mr. Daniels as custodian for the
benefit of a minor child. Each of Robert L. Daniels and Susan H. Daniels
disclaims beneficial ownership of these shares.
(3) Includes shares held by Robert L. Daniels as sole Trustee of the 1996
Daniels Voting Trust (the "Voting Trust"). Of the 2,516,516 shares subject
to the Voting Trust, 1,258,258 are owned beneficially by Mr. Daniels and
1,258,258 are owned beneficially by Susan H. Daniels. Mr. Daniels, as
Trustee, has sole voting power with respect to the shares subject to the
Voting Trust. Mr. Daniels also owns 2,570,204 shares free of the Voting
Trust, and Susan Daniels also owns 261,000 shares free of the Voting Trust.
The Voting Trust will terminate upon the written agreement of the parties
or the fifth anniversary of the creation of the Voting Trust, whichever
comes first. Each of Mr. Daniels and Susan Daniels disclaims
12
<PAGE> 15
beneficial ownership of the shares beneficially owned by the other. Robert
and Susan Daniels are divorced.
(4) This information is as of December 31, 1999 and is based upon a report on
Schedule 13G/A filed by Kopp Investment Advisors, Inc. with the Securities
and Exchange Commission on February 7, 2000.
(5) Excludes 10,500 shares held by Susan H. Daniels as Trustee of the Susan
Daniels Family Charitable Foundation. Susan H. Daniels disclaims ownership
of these shares.
(6) This information is as of December 31, 1999 and is based upon a report on
Schedule 13G/A filed by FMR Corporation with the Securities and Exchange
Commission on February 14, 2000.
(7) Represents shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(8) Includes 7,500 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(9) Includes 25,000 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(10) Includes 15,000 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
CHANGE-IN-CONTROL ARRANGEMENTS
Under a policy adopted by the Company's Board of Directors, each of the
Company's executive officers will receive a payment equal to (i) such officer's
base salary for the current year plus (ii) one times the average of the
officer's bonuses for the three most recent years in the event that such officer
is terminated or terminates his employment for Good Reason in connection with a
change-in-control. Good Reason for termination by an executive of his employment
will exist if (i) within two years after the change-in-control the Company, or
any successor entity then employing the executive, materially diminishes the
responsibilities and authority of the executive or materially reduces the rate
of compensation of the executive (including by way of determining the
eligibility of such executive to earn bonus or incentive compensation), in
either case compared with his responsibilities and authority or rate of
compensation, as the case may be, in effect immediately prior to such
change-in-control and (ii) within 30 days following such diminution or reduction
the executive resigns from his employment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Norman E. Drapeau, Jr., the Company's President and Chief Executive
Officer, received an interest free loan from the Company during fiscal 1999 in
the amount of $150,000, which was the largest aggregate amount of indebtedness
owed by Mr. Drapeau to the Company during fiscal 1999. The loan was intended as
an advance against Mr. Drapeau's future bonuses. The loan has been repaid in
full.
SUMMARY OF THE 1999 EQUITY INCENTIVE PLAN
The Board of Directors adopted the Amended and Restated 1999 Equity
Incentive Plan on March 16, 2000 subject to approval by the stockholders. Nasdaq
rules require stockholder approval of the Amended and Restated 1999 Equity
Incentive Plan. The affirmative vote of a majority of the shares of Common Stock
properly cast at the Annual Meeting will be necessary to approve the Amended and
Restated 1999 Equity Incentive Plan. Set forth below is a summary description of
the Amended and Restated 1999 Equity Incentive Plan, which includes a summary of
the amendments to the current 1999 Equity Incentive Plan.
General Information; Number of Shares Issuable. The Board of Directors of
the Company adopted the 1999 Equity Incentive Plan and the stockholders approved
it in March 1999. The 1999 Equity Incentive Plan authorizes the grant of (i)
options to purchase Common Stock intended to qualify as incentive stock options
("Incentive Options"), as defined in Section 422 of the Code, (ii) options that
do not so qualify ("Nonstatutory Stock Options", and together with Incentive
Options, "Options"), (iii) stock bonuses, the terms and conditions of which are
determined by the Committee (as defined below), (iv) rights to purchase
restricted stock, the terms and conditions of which are determined by the
Committee (v) rights to receive
13
<PAGE> 16
cash payments based on or measured by appreciation in the market price of the
Common Stock ("Stock Appreciation Rights") and (vi) other awards based upon the
Company's Common Stock on such terms and conditions as the Committee may
determine (together with Incentive Options, Nonstatutory Stock Options, stock
bonuses, restricted stock and Stock Appreciation Rights, "Stock Awards"). Up to
1,850,000 shares of Common Stock (subject to adjustment upon certain changes in
the capitalization of the Company) may be issued in total pursuant to Stock
Awards granted under the 1999 Equity Incentive Plan.
The last sales price of the Common Stock on March 1, 2000, as reported by
Nasdaq, was $79.875. Accordingly, the market value of the 1,850,000 shares
available for issuance under the 1999 Equity Incentive Plan as of March 1, 2000
was $147,768,750.
Administration of the 1999 Equity Incentive Plan. The 1999 Equity
Incentive Plan is administered by a committee (the "Committee") of the Board of
Directors consisting of at least two (2) members who qualify as "Non-Employee
Directors" within the meaning of Section 16b-3 under the Exchange Act and as
"outside directors" under Section 162(m) of the Code. Currently the Company's
Compensation Committee is acting as the Committee. The Committee selects the
individuals to whom Stock Awards are granted and determines the terms of each
Stock Award, subject to the provisions of the 1999 Equity Incentive Plan. Stock
Awards may be granted under the 1999 Equity Incentive Plan to officers,
directors, employees and consultants. As of March 1, 2000, four Directors
(excluding Messrs. Drapeau and Daniels, who are also employees of the Company)
and approximately four officers and 904 non-officer employees were eligible to
participate in the 1999 Equity Incentive Plan.
Incentive Options and Nonstatutory Stock Options. Awards of Options under
the 1999 Equity Incentive Plan may be made until March 4, 2009. No Incentive
Options may extend for more than ten years from the date of grant (five years in
the case of an optionee who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary ("greater-than-ten-percent-stockholders")). The exercise price of
Incentive Options granted under the 1999 Equity Incentive Plan must be at least
equal to the fair market value of the Common Stock on the date of grant (110% of
fair market value in the case of a greater-than-ten-percent-stockholder). The
aggregate fair market value (determined at the time of grant) of shares issuable
pursuant to Incentive Options which first become exercisable by an employee or
officer in any calendar year may not exceed one hundred thousand dollars
($100,000). Incentive Options are non-transferable except by will or by the laws
of descent or distribution and are exercisable, during the optionee's lifetime,
only by the optionee.
The exercise price for Nonstatutory Stock Options will be set by the
Committee at the time of grant. A Nonstatutory Stock Option will be transferable
to the extent permitted under the option agreement governing such Nonstatutory
Stock Option. No Nonstatutory Stock Options may extend for more than ten years
from the date of grant.
Options held by employees generally expire (i) three months after
termination of the optionee's employment with the Company for any reason other
than death or disability or (ii) one year following the optionee's termination
of employment with the Company by reason of death or disability. In all other
cases, the Committee has the discretion to establish the expiration date.
Payment of the exercise price of the shares subject to the Option may be made
(i) in cash at the time the Option is exercised or (ii) at the discretion of the
Committee, either at the time of grant or exercise of the Option (a) by delivery
to the Company of shares of Common Stock of the Company, (b) according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock of the Company) with
the person to whom the Option is granted or to whom the Option is transferred or
(c) in any other form of legal consideration that may be acceptable to the
Committee on terms determined by the Committee.
At the discretion of the Committee, Options may include a so-called
"reload" feature pursuant to which an optionee exercising an Option by the
delivery of a number of shares of Common Stock would automatically be granted an
additional Option (with an exercise price equal to the fair market value of the
Common Stock on the date the additional Option is granted, with the same
expiration date as the original option being exercised, and with such other
terms as the Committee may provide) to purchase that number of shares of Common
Stock equal to the number delivered to exercise the original Option.
14
<PAGE> 17
Options for Non-Employee Directors under the 1999 Equity Incentive Plan as
currently in effect. Under the 1999 Equity Incentive Plan as currently in
effect, each Non-Employee Director, upon first joining the Board of Directors,
is automatically granted a Nonstatutory Stock Option to purchase 9,000 shares of
Common Stock with an exercise price equal to the fair market value of the Common
Stock on the date of grant. However, in the event a Non-Employee Director joins
the Board after the second Tuesday in February in a given year such Non-Employee
Director will receive a Nonstatutory Stock Option for a number of shares equal
to 9,000 multiplied by N/12 where "N" is the number of months remaining between
the date of election of such Non-Employee Director and the next second Tuesday
in February. In addition, each Non-Employee Director who continues to serve as a
director following any annual meeting of stockholders of the Company or special
meeting in lieu thereof at which Directors are elected is automatically granted,
immediately following such meeting of stockholders, a Nonstatutory Stock Option
to purchase 9,000 shares of Common Stock at an exercise price equal to the Fair
Market Value of the Common Stock on the date of grant. All Options granted to
Non-Employee Directors are vested in full at the time of grant and expire on the
date which is five years from the date of grant.
Options for Non-Employee Directors under the Amended and Restated 1999
Equity Incentive Plan. Under the Amended and Restated 1999 Equity Incentive
Plan, each Non-Employee Director elected or appointed to the Board at the time
of an annual meeting of stockholders or special meeting in lieu thereof,
including Non-Employee Directors elected to the Board at this Annual Meeting,
upon first joining the Board, will automatically be granted an option to
purchase 27,000 shares of Common Stock (each an "Initial Option"). Each
Non-Employee Director will be eligible to receive an additional option to
purchase 27,000 shares of Common Stock (each an "Additional Option") as follows:
(i) each Class II and Class III Non-Employee Director in office on the date of
this Annual Meeting will automatically be granted an Additional Option and (ii)
upon the Final Vesting Date, as defined below, of any Initial Option or
Additional Option held by a Non-Employee Director whose term in office will
continue after such Final Vesting Date, or who has been nominated by the Board
of Directors for election to a term that will continue after such date, such
Non-Employee Director will automatically be granted an Additional Option.
In lieu of a grant of an Initial Option as described above, in the event
that a Non-Employee Director is first elected or appointed to the Board at any
time other than at an annual meeting of stockholders or special meeting in lieu
thereof, such Non-Employee Director upon first being so elected or appointed
will automatically be granted an option for a number of shares of Common Stock
equal to the sum of (i) 18,000 plus (ii) 9,000 multiplied by N/365 where "N" is
the number of days remaining between the date of such election or appointment of
such Non-Employee Director and the first anniversary of the date of the
Company's most recent annual meeting of stockholders or special meeting in lieu
thereof (the "Prorated Shares").
Each Initial Option and each Additional Option will have an exercise price
equal to the fair market value of the Common Stock on the date of grant. All
Initial Options granted to Non-Employee Directors elected or appointed to the
Board at the time of an annual meeting of stockholders or special meeting in
lieu thereof, and all Additional Options, will vest in three equal installments
immediately before each of the first three annual meetings of stockholders or
special meetings in lieu thereof following the date of grant of such option,
provided in each case that at such time the Non-Employee Director is then in
office as a director. With respect to an Initial Option granted to a
Non-Employee Director who is elected or appointed to the Board at any time other
than at an annual meeting of stockholders or special meeting in lieu thereof,
the option shall vest as to the Prorated Shares immediately before the first
annual meeting of stockholders or special meeting in lieu thereof following the
date of grant of such Initial Option and as to the remaining 18,000 shares in
two equal installments immediately before each of the second and third annual
meetings of stockholders or special meetings in lieu thereof following the date
of grant of such Initial Option, provided in each case that at such time the
Non-Employee Director is then in office as a director. The date on which the
last such installment of any option vests is herein referred to as its "Final
Vesting Date." All options granted to Non-Employee Directors will expire on the
date which is five years from the date of grant.
Stock Bonuses. Each Stock Bonus will be in such form and will contain such
terms and conditions as the Committee shall deem appropriate. A Stock Bonus may,
in the discretion of the Committee, be granted in consideration for past
services actually rendered to the Company for its benefit. Except as otherwise
provided
15
<PAGE> 18
elsewhere in the 1999 Equity Incentive Plan, no rights under a Stock Bonus
agreement shall be assignable by any participant under the 1999 Equity Incentive
Plan, either voluntarily or by operation of law, except by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of the
person to whom the rights are granted only by such person.
Restricted Stock. Employees and consultants may be granted the right to
purchase restricted stock from the Company under the 1999 Equity Incentive Plan.
Any restricted stock purchase agreement shall be in such form and shall contain
such terms and conditions as the Committee shall deem appropriate. The purchase
price under each restricted stock purchase agreement shall be such amount as the
Committee shall determine and designate in such agreement. Except as otherwise
provided in the 1999 Equity Incentive Plan, no rights under a restricted stock
purchase agreement shall be assignable by any participant under the 1999 Equity
Incentive Plan, either voluntarily or by operation of law, except by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the rights are granted only by such person. The
purchase price of stock acquired pursuant to a restricted stock purchase
agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the
discretion of the Committee, according to a deferred payment or other
arrangement with the person to whom the stock is sold; or (iii) in any other
form of legal consideration that may be acceptable to the Committee in its
discretion on terms determined by the Committee. Shares of Common Stock sold or
awarded under the 1999 Equity Incentive Plan may, but need not, be subject to a
repurchase option in favor of the Company in accordance with a vesting schedule
to be determined by the Committee.
Stock Appreciation Rights. Each Stock Appreciation Right shall entitle the
holder to a distribution based on the appreciation in the fair market value per
share of a designated amount of the Company's Common Stock. Three types of Stock
Appreciation Rights are authorized for issuance under the Plan:
Tandem Stock Appreciation Rights. Tandem Rights may be granted
appurtenant to an Option and will require the holder to elect between the
exercise of the underlying Option for shares of Common Stock and the
surrender, in whole or in part, of such Option for an appreciation
distribution equal to the excess of (A) the fair market value (on the date
of Option surrender) of vested shares of Common Stock purchasable under the
surrendered Option over (B) the aggregate exercise price payable for such
shares. Tandem Rights may be tied to either Incentive Stock Options or
Nonstatutory Stock Options. Each such right shall generally be subject to
the same terms and conditions applicable to the particular Option to which
it pertains. If Tandem Rights are granted appurtenant to an Incentive Stock
Option, they must satisfy any applicable Treasury Regulations so as not to
disqualify such Option as an Incentive Stock Option under the Code.
Concurrent Stock Appreciation Rights. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of Common Stock subject to the underlying Option and will be
exercised automatically at the same time the Option is exercised for those
shares. The appreciation distribution to which the holder of such
concurrent right shall be entitled upon exercise of the underlying Option
shall be in an amount equal to such portion as shall be determined by the
Board or the Committee at the time of grant of the excess of (A) the
aggregate fair market value (at date of exercise) of the vested shares
purchased under the underlying Option with such concurrent rights over (B)
the aggregate exercise price paid for those shares. Concurrent Rights may
be tied to any or all of the shares of Common Stock subject to any
Incentive Stock Option or Nonstatutory Stock Option grant made under the
1999 Equity Incentive Plan. A Concurrent Right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular option grant to which it pertains.
Independent Stock Appreciation Rights. Independent Rights may be
granted independently of any Option and will entitle the holder upon
exercise to an appreciation distribution equal in amount to the excess of
(A) the aggregate fair market value (at date of exercise) of a number of
shares of Common Stock equal to the number of vested share equivalents
exercised at such time over (B) the aggregate fair market value of such
number of shares of Common Stock at the date of grant. Independent Rights
will generally be subject to the same terms and conditions applicable to
Nonstatutory Stock Options. They will be denominated in share equivalents.
16
<PAGE> 19
Change In Control. The 1999 Equity Incentive Plan provides for accelerated
vesting in the event the Company undergoes a Change in Control (as defined
below). Upon and following the occurrence of a Change of Control, the time for
exercise of each unvested installment of any then outstanding Option or Stock
Appreciation Right will be accelerated, so that:
(i) immediately upon such Change of Control, if the holder is then an
employee or consultant of the Company twenty-five percent (25%) of any such
unvested installment shall be exercisable;
(ii) on the date that is nine months after such Change in Control, if
the holder is then an employee or consultant of the Company one-third
(33 1/3%) of any installment of such Option or Stock Appreciation Right
that has not yet vested in accordance with its original terms or by virtue
of the 1999 Equity Incentive Plan's change in control provisions shall
become exercisable;
(iii) on the date that is eighteen months after such Change in
Control, if the holder is then an employee or consultant of the Company
fifty percent (50%) of any installment of such Option or Stock Appreciation
Right that has not yet vested in accordance with its original terms or the
1999 Equity Incentive Plan's change in control provisions shall become
exercisable; and
(iv) on the second anniversary of such Change in Control, if the
holder is then an employee or consultant of the Company any remaining
installment of such Option or Stock Appreciation Right that has not yet
vested in accordance with its original terms or the 1999 Equity Incentive
Plan's change in control provisions shall become exercisable.
The foregoing clauses (i) through (iv) provide for vesting that is in
addition to, and not in lieu of, the vesting schedule originally provided in any
Option or Stock Appreciation Right outstanding at the time of a Change in
Control, and, except to the extent accelerated by such clauses, each such Option
or Stock Appreciation Right shall continue to vest in accordance with its
original terms.
Upon the occurrence of a Change of Control, the restrictions and conditions
contained in any Stock Bonus or restricted stock purchase agreement under the
1999 Equity Incentive Plan shall automatically be appropriately modified so that
under its terms additional shares of Common Stock vest in a manner essentially
equivalent to the additional vesting described above for Options and Stock
Appreciation Rights. The determination of the Committee as to such modifications
will be final, binding and conclusive.
If the Company is merged with or into or consolidated with another
corporation, other than 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 fifty percent (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
if the Company is liquidated, or sells or otherwise disposes of substantially
all of its assets to another corporation while unexercised Options remain
outstanding under the 1999 Equity Incentive Plan, then in such event either:
(i) subject to the provisions of clause (iii) below, after the
effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, each holder of an outstanding Option will
be entitled, upon exercise of such Option, to receive, in lieu of the
shares of Common Stock as to which such Option was exercisable immediately
prior to such event, the number and class of shares of stock or other
securities, cash or property (including, without limitation, shares of
stock or other securities of another corporation or common stock) to which
such holder would have been entitled pursuant to the terms of the merger,
consolidation, liquidation, sale or disposition if, immediately prior to
such event, such holder had been the holder of a number of shares of Common
Stock equal to the number of shares as to which such Option shall be so
exercised; or
(ii) the Committee may accelerate the time for exercise of some or all
unexercised and unexpired Options or Stock Appreciation Rights so that from
and after a date prior to the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, specified by the
Committee such accelerated Options or Stock Appreciation Rights shall be
exercisable in full.
17
<PAGE> 20
Under the 1999 Equity Incentive Plan as currently in effect, all
outstanding Options and Stock Appreciation Rights, respectively, may be canceled
by the Committee as of the effective date of any such merger, consolidation,
liquidation, sale or disposition provided that (x) notice of such cancellation
shall be given to each holder of an Option or Stock Appreciation Right, and (y)
each holder of an Option or Stock Appreciation Right will have the right to
exercise such Option or Stock Appreciation Right to the extent that the same is
then exercisable or, if the Committee shall have accelerated the time for
exercise of all unexercised and unexpired Options or Stock Appreciation Rights,
respectively, in full during the 10-day period preceding the effective date of
such merger, consolidation, liquidation, sale or disposition. Under the Amended
and Restated 1999 Equity Incentive Plan this provision has been eliminated.
If, within two years following a Change in Control, the employment of any
optionee who immediately prior to such Change in Control was employed by the
Company as an officer within the meaning of Section 16 of the Exchange Act (each
such optionee being hereafter referred to as a "Designated Executive") is
terminated by the Company other than for cause, or is terminated by the
Designated Executive for Good Reason (as defined below), then in such event all
unvested Options Stock Appreciation Rights, Stock Bonuses and other Stock Awards
held by such Designated Executive at the date of such termination shall
thereupon immediately become exercisable in full. "Good Reason" for termination
by a Designated Executive of his employment will be deemed to have existed only
if (i) within two years after a Change in Control, the Company, or any successor
entity then employing the Designated Executive, materially diminishes the
responsibilities and authority of the Designated Executive or materially reduces
the rate of compensation of the Designated Executive (including by way of a
change in the method of determining the eligibility of such Designated Executive
to earn bonus or incentive compensation), in either case as compared with his
responsibilities and authority or rate of compensation, as the case may be, in
effect immediately prior to such Change in Control, and (ii) within thirty (30)
days following such diminution or reduction the Designated Executive resigns
from his employment by the Company or such successor entity.
If, within two years following a Change in Control, a Non-Employee Director
is terminated or resigns from the Board of Directors for Good Reason, then in
such event all unvested Options held by such Non-Employee Director at the date
of such resignation shall thereupon immediately become exercisable in full. For
purposes of this paragraph, "Good Reason" for resignation by a Non-Employee
Director shall be deemed to have existed only if (i) within two years after a
Change in Control, the Company, or any successor entity, shall materially
diminish the responsibilities and authority of the Non-Employee Director or
shall materially reduce the rate of compensation of the Non-Employee Director,
in either case as compared with his responsibilities and authority or rate of
compensation, as the case may be, in effect immediately prior to such Change in
Control, and (ii) within thirty (30) days following such diminution or reduction
the Non-Employee Director shall resign from his position as a Director.
Under the 1999 Equity Incentive Plan, "Change in Control" means the
occurrence of any one of the following events:
(a) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) becomes a "beneficial owner" (as such term is defined
in Rule 13d-3 promulgated under the Exchange Act) (other than the Company,
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, or any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities; or
(b) persons who constitute the Company's Board immediately prior to
any tender offer, proxy contest, consent solicitation, business
combination, merger or similar transaction cease to constitute at least a
majority of the Board as a result of such tender offer, proxy contest,
merger or similar transaction; or
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation or other entity, other than 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 fifty
18
<PAGE> 21
percent (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
(d) 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.
Amendments to the 1999 Equity Incentive Plan. The Board may amend the 1999
Equity Incentive Plan at any time, provided that no amendment shall be effective
unless approved by the stockholders of the Company to the extent stockholder
approval is necessary for the 1999 Equity Incentive Plan to satisfy the
requirements of Section 422 of the Code, Section 16b-3 of the Securities Act of
1933, as amended, and the listing or eligibility for quotation requirements of
the Nasdaq or any similar organization or of any national securities exchange
upon which shares of the Company's Common Stock are listed or eligible for
trading. The Board of Directors may terminate or suspend the 1999 Equity
Incentive Plan at any time. Unless sooner terminated, the 1999 Equity Incentive
Plan shall terminate on March 4, 2009.
Norman E. Drapeau, Jr., the Company's President and Chief Executive
Officer, has received options exercisable for 80,000 shares under the 1999
Equity Incentive Plan. Robert L. Daniels, the Executive Chairman of the Board
and former Chief Executive Officer and President, has not received any options
under the 1999 Equity Incentive Plan. Paul D. Birch, the Company's former
Executive Vice-President, Chief Financial Officer and Treasurer, received
options exercisable for 20,000 shares under the 1999 Equity Incentive Plan. John
W. Young, the Company's Executive Vice-President Products and Technology, has
received options exercisable for 30,000 shares under the 1999 Equity Incentive
Plan. William J. Sawyer, the Company's Executive Vice President of Operations,
has received options exercisable for 25,000 shares under the 1999 Equity
Incentive Plan. All current executive officers of the Company as a group have
received options exercisable for 180,000 shares under the 1999 Equity Incentive
Plan. The current Directors who are not also executive officers have received
options exercisable for 51,000 shares under the 1999 Equity Incentive Plan. John
A. McMullen has not received any options under the 1999 Equity Incentive Plan.
Employees of the Company who are not executive officers have received options
exercisable for 673,000 shares under the 1999 Equity Incentive Plan. At March 1,
2000, 878,000 shares were subject to outstanding options granted under the 1999
Equity Incentive Plan, 6,000 shares had been purchased upon exercises of options
granted thereunder and 966,000 shares remained available for future grants. As
of March 1, 2000, option prices and expiration dates for outstanding options
granted under the 1999 Equity Incentive Plan ranged from $10.875 to $85.00 per
share and from March 23, 2004 to February 17, 2010, respectively.
NEW PLAN BENEFITS
Except as set forth below, the Company is unable to determine the dollar
value and number of options which will be received by or allocated to (i) any of
the executive officers, (ii) the current executive officers, as a group, (iii)
the current directors who are not executive officers, as a group, (iv) each
nominee for election as a director and (v) the employees who are not executive
officers, as a group, as a result of the adoption of the amendments to the 1999
Equity Incentive Plan because, except for the non-discretionary formula grants
to Non-Employee Directors described above, options are granted by the Committee
on a discretionary basis.
19
<PAGE> 22
The following table sets forth information concerning the benefits that
will in fiscal 2000 be received by or allocated to the persons specified,
assuming that Proposal Two, the proposal to approve the Amended and Restated
1999 Equity Incentive Plan, is approved:
<TABLE>
<CAPTION>
NUMBER OF
DOLLAR SECURITIES UNDERLYING
NAME AND POSITION VALUE($) OPTIONS GRANTED
- ----------------- -------- ---------------------
<S> <C> <C>
John A. McMullen............................................ (1) 27,000
Nominee as Director
Stephen B. Sayre............................................ (1) 27,000
Director
Alan L. Stanzler............................................ (1) 27,000
Director
Richard P. Fishman.......................................... (1) 27,000
Director
Directors who are not executive officers (as a group)....... (1) 108,000
</TABLE>
- ---------------
(1) The dollar value of the options to be granted is not determinable at this
time. Each such option will be granted at an exercise price equal to the
fair market value of the Common Stock on the date of option grant.
Federal Income Tax Information with Respect to the 1999 Equity Incentive
Plan. The grantee of a Nonstatutory Stock Option ordinarily recognizes no
income for federal income tax purposes on the grant thereof. On the exercise of
a Nonstatutory Stock Option, the difference between the fair market value of the
underlying shares of Common Stock on the exercise date and the option exercise
price is treated as compensation to the holder of the option taxable as ordinary
income in the year of exercise, and such fair market value becomes the basis for
the underlying shares which will be used in computing any capital gain or loss
upon disposition of such shares. Subject to certain limitations, the Corporation
may deduct for the year of exercise an amount equal to the amount recognized by
the option holder as ordinary income upon exercise of a Nonstatutory Stock
Option.
The grantee of an Incentive Stock Option recognizes no income for federal
income tax purposes on the grant thereof. Except as described below with respect
to the alternative minimum tax, there is no tax upon exercise of an Incentive
Option. If no disposition of shares acquired upon exercise of the Incentive
Stock Option is made by the option holder within two years from the date of the
grant of the Incentive Stock Option or within one year after exercise of the
Incentive Option, any gain realized by the option holder on the subsequent sale
of such shares is treated as a long-term capital gain for federal income tax
purposes. If the shares are sold prior to the expiration of such periods, the
difference between the lesser of the value of the shares at the date of exercise
or at the date of sale and the exercise price of the Incentive Stock Option is
treated as compensation to the employee taxable as ordinary income and the
excess gain, if any, is treated as capital gain (which will be long-term capital
gain if the shares are held for more than one year). The excess of the fair
market value of the underlying time of exercise of an Incentive Stock Option
will constitute an item of tax preference for purposes of the alternative
minimum tax. Taxpayers who incur the alternative minimum tax are allowed a
credit which may be carried forward indefinitely to be used as a credit against
the regular tax liability in a later year; however, the alternative minimum tax
credit can not reduce the regular tax below the alternative minimum tax for that
carryover year. In connection with the sale of the shares covered by Incentive
Options, the Corporation is allowed a deduction for tax purposes only to the
extent, and at the time, the option holder receives ordinary income (for
example, by reason of the sale of shares by the holder of an Incentive Stock
Option within two years after the date of the granting of the Incentive Stock
Option or one year after the exercise of the Incentive Option), subject to
certain limitations on the deductibility of compensation paid to executives.
Full Text of the Amended and Restated 1999 Equity Incentive Plan. The full
text of the Amended and Restated 1999 Equity Incentive Plan is printed as
Appendix A, beginning on page A-1.
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<PAGE> 23
PROPOSAL TWO
APPROVAL OF AMENDED AND RESTATED 1999 EQUITY INCENTIVE PLAN
The Company is proposing to amend and restate the 1999 Equity Incentive
Plan to change the formula by which Options are granted to Non-Employee
Directors and to make certain other immaterial changes.
Under the 1999 Equity Incentive Plan as currently in effect, each
Non-Employee Director, upon first joining the Board of Directors, is
automatically granted a Nonstatutory Stock Option to purchase 9,000 shares of
Common Stock with an exercise price equal to the fair market value of the Common
Stock on the date of grant. However, in the event a Non-Employee Director joins
the Board after the second Tuesday in February in a given year such Non-Employee
Director will receive a Nonstatutory Stock Option for a number of shares equal
to 9,000 multiplied by N/12 where "N" is the number of months remaining between
the date of election of such Non-Employee Director and the next second Tuesday
in February. In addition, each Non-Employee Director who continues to serve as a
director following any annual meeting of stockholders of the Company or special
meeting in lieu thereof at which Directors are elected is automatically granted,
immediately following such meeting of stockholders, a Nonstatutory Stock Option
to purchase 9,000 shares of Common Stock at an exercise price equal to the Fair
Market Value of the Common Stock on the date of grant. All Options granted to
Non-Employee Directors are vested in full at the time of grant and expire on the
date which is five years from the date of grant.
Under the Amended and Restated 1999 Equity Incentive Plan, each
Non-Employee Director elected or appointed to the Board at the time of an annual
meeting of stockholders or special meeting in lieu thereof, including
Non-Employee Directors elected to the Board at this Annual Meeting, upon first
joining the Board, will automatically be granted an option to purchase 27,000
shares of Common Stock (each an "Initial Option"). Each Non-Employee Director
will be eligible to receive an additional option to purchase 27,000 shares of
Common Stock (each an "Additional Option") as follows: (i) each Class II and
Class III Non-Employee Director in office on the date of this Annual Meeting
will automatically be granted an Additional Option and (ii) upon the Final
Vesting Date, as defined below, of any Initial Option or Additional Option held
by a Non-Employee Director whose term in office will continue after such Final
Vesting Date, or who has been nominated by the Board of Directors for election
to a term that will continue after such date, such Non-Employee Director will
automatically be granted an Additional Option.
In lieu of a grant of an Initial Option as described above, in the event
that a Non-Employee Director is first elected or appointed to the Board at any
time other than at an annual meeting of stockholders or special meeting in lieu
thereof, such Non-Employee Director upon first being so elected or appointed
will automatically be granted an option for a number of shares of Common Stock
equal to the sum of (i) 18,000 plus (ii) 9,000 multiplied by N/365 where "N" is
the number of days remaining between the date of such election or appointment of
such Non-Employee Director and the first anniversary of the date of the
Company's most recent annual meeting of stockholders or special meeting in lieu
thereof (the "Prorated Shares").
Each Initial Option and each Additional Option will have an exercise price
equal to the fair market value of the Common Stock on the date of grant. All
Initial Options granted to Non-Employee Directors elected or appointed to the
Board at the time of an annual meeting of stockholders or special meeting in
lieu thereof, and all Additional Options, will vest in three equal installments
immediately before each of the first three annual meetings of stockholders or
special meetings in lieu thereof following the date of grant of such option,
provided in each case that at such time the Non-Employee Director is then in
office as a director. With respect to an Initial Option granted to a
Non-Employee Director who is elected or appointed to the Board at any time other
than at an annual meeting of stockholders or special meeting in lieu thereof,
the option shall vest as to the Prorated Shares immediately before the first
annual meeting of stockholders or special meeting in lieu thereof following the
date of grant of such Initial Option and as to the remaining 18,000 shares in
two equal installments immediately before each of the second and third annual
meetings of stockholders or special meetings in lieu thereof following the date
of grant of such Initial Option, provided in each case that at such time the
Non-Employee Director is then in office as a director. The date on which the
last such installment of any option vests is herein referred to as its "Final
Vesting Date." All such options will expire on the date which is five years from
the date of grant.
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<PAGE> 24
Under the 1999 Equity Plan as currently in effect, option grants are made
to Non-Employee Directors on a year-by-year basis, whereas under the Amended and
Restated Plan the full option grant is made at the start of the Non-Employee
Director's term. The Company believes that granting the full option at the start
of the term is more equitable to Non-Employee Directors and will assist the
Company in attracting qualified candidates to its Board.
Unless authority to do so has been limited in a proxy, it is the intention
of the persons named as proxies to vote the shares represented by the proxy FOR
the approval of the Amended and Restated 1999 Equity Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE AMENDED AND RESTATED 1999 EQUITY INCENTIVE PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Although Massachusetts law does not require that the selection by the Board
of Directors of the Company's accountants be approved each year by the
stockholders, the Board believes it is appropriate to submit its selection to
the stockholders for their approval and to abide by the result of the
stockholders' vote. The Board of Directors recommends that the stockholders
ratify the appointment of PricewaterhouseCoopers L.L.P. ("Price") as independent
accountants to audit the financial statements of the Company for the fiscal year
ending September 30, 2000.
Representatives of Price will be present at the Annual Meeting, will have
an opportunity to make a statement if they wish, and will be available to
respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS L.L.P. AS INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater-than-10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon review of Forms 3 and 4 and amendments thereto furnished
to the Company during fiscal 1999 and Forms 5 and amendments thereto furnished
to the Company with respect to fiscal 1999, or written representations that Form
5 was not required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater-than-10%
stockholders were fulfilled in a timely manner, with the exception of one late
Form 4 by Mr. Daniels (relating to certain sales of shares and a non-taxable
disposition to a limited partnership) and one late Form 3 by Mr. Williams. After
investigating these matters, the Company has concluded that any omissions were
inadvertent, and that none of the transactions gave rise to liability under
Section 16(b) of the Exchange Act for recapture of short-swing profits.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses incurred
in obtaining instructions from beneficial owners of the Common Stock. In
addition to the solicitation by mail, special solicitation of proxies may, in
certain instances, be made personally or by telephone by directors, officers and
certain employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
22
<PAGE> 25
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials related to the
2001 Annual Meeting of Stockholders or Special Meeting in lieu thereof must be
received by the Company at its Executive Offices no later than November 28, 2000
or, if the date of such meeting is more than 30 calendar days before or after
April 25, 2001, a reasonable time before the solicitation of proxies by the
Company with respect to such meeting is made.
In addition, the Company's By-Laws provide that a stockholder must give
written notice to the Company of any business to be conducted at any meeting of
stockholders in accordance with the procedural requirements fully set forth in
Article III of the Company's By-Laws. In the case of a regularly scheduled
annual meeting, such notice must be given not less than sixty days prior to the
scheduled annual meeting describing any proposal to be brought before such
meeting, even if such item is not to be included in the Company's proxy
statement relating to such meeting. To bring an item of business before the 2001
Annual Meeting, a stockholder must deliver the requisite notice of such item to
the Company no later than December 8, 2000.
MISCELLANEOUS
The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this Proxy Statement to stockholders, of any
other business which properly may be presented for action at the Annual Meeting.
If any other business should come before the Annual Meeting, the persons present
will have discretionary authority to vote the shares they own or represent by
proxy in accordance with their judgment.
AVAILABLE INFORMATION
Stockholders of record on March 15, 2000 will receive a Proxy Statement and
the Company's Annual Report to Stockholders, which contains detailed financial
information concerning the Company. The Annual Report is not incorporated herein
and is not deemed a part hereof.
23
<PAGE> 26
APPENDIX A
PROJECT SOFTWARE & DEVELOPMENT, INC.
AMENDED AND RESTATED 1999 EQUITY INCENTIVE PLAN
1. INTRODUCTION: PURPOSES
(a) This Amended and Restated 1999 Equity Incentive Plan (the "1999 Plan"
or "the Plan") amends and restates the 1999 Equity Incentive Plan of Project
Software & Development, Inc. (the "Company") adopted on March 24, 1999. Options
granted under the 1994 Incentive and Nonqualified Stock Option Plan shall
continue to be governed by the terms of the 1994 Incentive and Nonqualified
Stock Option Plan, as amended to date.
(b) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) Stock Bonuses, (iv) rights to purchase
Restricted Stock, (v) Stock Appreciation Rights, and (vi) other awards based
upon the Company's Common Stock on such terms and conditions as the Board of
Directors of the Company (the "Board") may determine.
(c) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
(d) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c)
hereof, be either (i) Options granted pursuant to Sections 6 and 7 hereof,
including Incentive Stock Options and Nonstatutory Stock Options, (ii) Stock
Bonuses or rights to purchase restricted stock granted pursuant to Section 8
hereof, (iii) Stock Appreciation Rights granted pursuant to Section 9 hereof or
(iv) other stock based awards granted pursuant to Section 10 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and shall be in such form as required pursuant to
Sections 6 and 7 hereof, and a separate certificate will be issued for shares
purchased upon exercise of each type of Option.
2. DEFINITIONS AND RULES OF INTERPRETATION
(a) Definitions.
For the purposes of the Plan, in addition to the definitions set forth
above, the following terms shall have the respective meanings set forth below:
(i) "Affiliate" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined
in Sections 424(e) and (f) respectively, of the Code.
(ii) "Board" means the Board of Directors of the Company.
(iii) "Change in Control" means the occurrence of any one of the
following events:
(a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) becomes a "beneficial owner" (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act) (other than
the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), directly
or indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
A-1
<PAGE> 27
(b) persons who constitute the Company's Board immediately prior to
any tender offer, proxy contest, consent solicitation, business
combination, merger or similar transaction cease to constitute at least
a majority of the Board as a result of such tender offer, proxy contest,
merger or similar transaction; or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or other entity,
other than 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
fifty percent (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
(d) 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.
(iv) "Change in Stock" means any change in the Company Common Stock
subject to the Plan, or subject to any Stock Award, without receipt of
consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, stock
split, spin-off, split-up, spin-out, dividend in property other than cash,
liquidating dividend, combination of shares, exchange of shares, change in
corporate structure or other transaction not involving the receipt of
consideration by the Company); provided however, that the conversion of any
convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company."
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(vi) "Committee" means the Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(vii) "Company" means Project Software & Development, Inc. a
corporation organized under the laws of Massachusetts.
(viii) "Company Common Stock" means the common stock of the Company,
par value $.01 per share
(ix) "Concurrent Stock Appreciation Right" or "Concurrent Right" means
a right granted pursuant to subsection 9(b)(ii) hereof.
(x) "Consultant" means any person, including an advisor, engaged by
the Company, or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant" shall
not include a Director acting solely in his capacity as such.
(xi) "Continuous Status as an Employee or Consultant" means the
employment or relationship as Consultant is not interrupted or terminated
by the Company or any Affiliate. The Committee, in its sole discretion, may
determine whether Continuous Status as an Employee, or Consultant shall be
considered interrupted in the case of any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave;
provided, however, that for purposes of Incentive Stock Options and Stock
Appreciation Rights appurtenant thereto, any such leave may not exceed
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(xii) "Director" means a member of the Board.
(xiii) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(xiv) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as
a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(xv) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
A-2
<PAGE> 28
(xvi) "Fair Market Value" means, the closing sales price as of the
date of grant for Company Common Stock (or the closing bid, if no sales
were reported) as quoted on the Nasdaq National Market or any similar
organization or if Company Common Stock is listed on any national
securities exchange, as quoted on such national securities exchange, as
applicable, as reported in the Wall Street Journal or other source as the
Board deems reliable, and if Company Common Stock is not traded on the
Nasdaq National Market or any similar organization or on any national
securities exchange, the value as determined in good faith by the
Committee, based on the information available to it.
(xvii) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(xviii) "Independent Stock Appreciation Right" or "Independent Right"
means a right granted under subsection 9(b)(iii) hereof.
(xix) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary,
does not receive compensation (directly or indirectly) from the Company or
its parent or subsidiary for services rendered as a Consultant or in any
capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K (or
any successor regulation of similar import) promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any
other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K (or any successor regulation of similar import),
and is not engaged in a business relationship as to which disclosure would
be required under Item 404(b) of Regulation S-K (or any successor
regulation of similar import); or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3 of the Exchange Act.
(xx) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(xxi) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(xxii) "Option" means a stock option granted pursuant to the Plan.
(xxiii) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an
individual Option grant. Each Option Agreement shall be subject to the
terms and conditions of the Plan.
(xxiv) "Optionee" means an Employee, Director or Consultant who holds
an outstanding Option.
(xxv) "Outside Director" means for any given date of grant a Director
who either (i) is not then a current employee of the Company or an
"affiliated corporation" (within the meaning of Treasury regulations
promulgated under Section 162(m) of the Code), is not a former employee of
the Company or an "affiliated corporation" receiving compensation from the
Company or such affiliated corporation for prior services (other than
benefits under a tax qualified pension plan) during the then current
taxable year, was not an officer of the Company or an "affiliated
corporation" at any time (other than as its Clerk or Assistant Clerk), and
is not then currently receiving direct or indirect remuneration from the
Company or an "affiliated corporation" for services in any capacity other
than as a Director, and (ii) is otherwise considered an "outside director"
for purposes of Section 162(m) of the Code.
(xxvi) "Plan" or "1999 Plan" mean this 1999 Equity Incentive Plan.
(xxvii) "Plan Year" means the calendar year.
(xxiii) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3.
(xxix) "Securities Act" means the Securities Act of 1933, as amended.
(xxx) "Stock Appreciation Right" means any of the various types of
rights which may be granted under Section 9 hereof.
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(xxxi) "Stock Award" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and
any Stock Appreciation Right.
(xxxii)"Stock Award Agreement" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions
of an individual Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(xxxiii) "Stock Bonus" means any stock bonus of the type which may be
granted under Section 8 hereof.
(xxxiv) "Tandem Stock Appreciation Right" or "Tandem Right" means a
right granted under subsection 9(b)(i) hereof.
The foregoing terms are not the exclusive definitions as used in the Plan
and reference is made to other capitalized terms defined in the context of their
first use herein.
(b) Rules of Interpretation.
(i) The headings and subheadings used herein or in any Option or other
instrument evidencing a Stock Award are solely for convenience of reference
and shall not constitute a part of the Plan or such document or affect the
meaning, construction or effect of any provision thereof.
(ii) All definitions set forth herein shall apply to the singular as
well as the plural form of such defined term, and all references to the
masculine gender shall include reference to the feminine or neuter gender
and visa versa, as the context may require. (iii) References to "including"
means including without limiting the generality of any description
preceding such term.
(iv) Unless otherwise expressly stipulated, any reference in the Plan to
any statute, act, regulation or specific provision thereof shall also extend to
any amendment, restatement or other modification to such statute, act,
regulation or specific provision thereof or any successor statute, act,
regulation or provision of similar import.
(v) Unless otherwise expressly provided, any reference in the Plan to any
specific provision of any statute or act shall include any regulations
promulgated thereunder from time to time and interpretations thereof as may be
applicable to the Plan.
3. ADMINISTRATION
(a) Administration of the Plan shall be delegated to a committee composed
of not fewer than two (2) members (the "Committee"), all of the members of which
Committee shall be Non-Employee Directors and Outside Directors. The Committee
shall have, in connection with the administration of the Plan, the powers set
forth in the Plan, subject, however, to such resolutions, not inconsistent with
the provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revisit in the Board the
administration of the Plan. The Board shall have the authority to correct any
defect, omission or inconsistency in the Plan and to amend the Plan as provided
in Section 16. The Board shall have the authority to appoint the Committee and
to fill any vacancy created on the Committee by reason of the death, resignation
or removal of any member thereof by appointing an eligible successor.
Notwithstanding anything in this Section 3 to the contrary, at any time the
Board or the Committee may delegate to a committee of one or more members of the
Board the authority to grant Stock Awards to eligible persons who are not then
subject to Section 16 of the Exchange Act and to eligible persons with respect
to whom the Company does not wish to comply with Section 162(m) of the Code.
(b) The Committee shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a Stock Bonus, a right to purchase restricted
stock, a Stock Appreciation Right, another stock-based award or a
combination of the foregoing; the provisions
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of each Stock Award granted (which need not be identical), including the
time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number of
shares with respect to which Stock Awards shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Committee, in the exercise of this power, may correct
any defect, omission or inconsistency in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the
Stock Award Agreement fully effective.
(iii) To amend any Stock Award.
(iv) Generally, to exercise such powers and to perform such acts as
the Committee deems necessary or expedient to promote the best interests of
the Company and which are not in conflict with the provisions of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 15 hereof relating to adjustments
upon Changes in Stock, the number of shares of stock that may be issued pursuant
to Stock Awards under the Plan shall be equal to 1,850,000 shares of Company
Common Stock (which reflects the stock split effected by means of a stock
dividend on December 15, 1999). If any Stock Award shall for any reason expire
or otherwise terminate without having been exercised in full, the Company Common
Stock not purchased shall again become available for issuance under the Plan.
Notwithstanding the foregoing, shares of Company Common Stock subject to Stock
Appreciation Rights exercised in accordance with Section 8 hereof shall not be
available for subsequent issuance under the Plan.
(b) The Company Common Stock subject to the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares. Subject to Section
4(a) hereof, no more than two hundred thousand (200,000) shares of Company
Common Stock may be subject to Stock Bonus or restricted stock purchase.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Other Stock Awards may be granted to
Employees, Directors or Consultants, provided, however, that Stock Awards may be
granted to Non-Employee Directors only as provided in Section 7(a).
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) Company Common Stock possessing more than ten
percent (10%) of the total combined voting power of all classes of capital stock
of the Company or of any of its Affiliates unless the exercise price of such
Incentive Stock Option is at least one hundred ten percent (110%) of the Fair
Market Value of such Company Common Stock at the date of grant and the Incentive
Stock Option is not exercisable after the expiration of five (5) years from the
date of grant.
(c) No person shall be eligible to be granted Stock Awards covering more
than two hundred thousand (200,000) shares of Company Common Stock in any Plan
Year.
6. OPTION PROVISIONS.
Each Option Agreement shall be in such form and shall contain such terms
and conditions as the Committee shall deem appropriate. The provisions of
separate Option Agreements need not be identical, but each Option Agreement
shall include (through incorporation of provisions hereof by reference in the
Option Agreement or otherwise) the substance of each of the following provisions
except as otherwise specifically provided elsewhere in the Plan:
(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
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(b) Price. Subject to subsection 5(b) hereof, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Company Common Stock subject to the
Option on the date the Option is granted. The exercise price of each
Nonstatutory Stock Option shall be set by the Committee at the time each
Option is granted.
(c) Consideration. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either: (i) in cash at the time the Option is exercised, or
(ii) at the discretion of the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other Common
Stock of the Company owned by the Optionee for a period of at least six
months, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
Common Stock of the Company) with the person to whom the Option is granted
or to whom the Option is transferred pursuant to subsection 6(d) hereof, or
(C) in any other form of legal consideration that may be acceptable to the
Committee on terms determined by the Committee.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the
Incentive Stock Option is granted only by such person. A Nonstatutory Stock
Option may be transferable to the extent specified in the Option Agreement,
in which case the Option may be transferred upon such terms and conditions
as are set forth in the Option Agreement, as the Committee shall determine
in its sole discretion, including (without limitation) pursuant to a
"domestic relations order" within the meaning of such rules, regulations or
interpretation of the Securities and Exchange Commission as are applicable
for purposes of Section 16 of the Exchange Act, or to family members, or to
trusts or other entities maintained for the benefit of family members.
Notwithstanding the foregoing, the person to whom an Option is granted may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to
time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to
that period, and may be exercised with respect to some or all of the shares
allotted to such period and/or any prior period as to which the Option
became vested but was not fully exercised. The Option may be subject to
such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the
Committee may deem appropriate. During the remainder of the term of the
Option (if its term extends beyond the end of the installment periods), the
Option may be exercised from time to time with respect to any shares then
remaining subject to the Option. The provisions of this subsection 6(e) are
subject to any Option provisions governing the minimum number of shares as
to which an Option may be exercised.
(f) Termination of Employment or Relationship as A Consultant. In the
event an Optionee's Continuous Status as an Employee or Consultant
terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of
time ending on the earlier of (i) the date three (3) months after
termination of the Optionee's Continuous Status as an Employee or
Consultant (or such longer (but only in the case of a Nonstatutory Stock
Option) or shorter period of time specified in the Option Agreement), or
(ii) the expiration of the Option's term, and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in no
event later than the expiration of the term of such Option as set forth in
the Option Agreement). If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become
available for issuance under the
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Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(g) Disability of Optionee. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option, but
only within such period of time ending on the earlier of (i) the date
twelve (12) months following such termination (or such longer or shorter
period of time as specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement).
If, at the date of termination, the Optionee is not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion
of the Option shall revert to the Plan. If, after termination, the Optionee
does not exercise his or her Option within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee
during, or within a period specified in the Option Agreement after the
termination of, the Optionee's Continuous Status as an Employee or
Consultant, the Option may be exercised by the Optionee's estate, by a
person who acquired the right to exercise the Option by bequest or
inheritance, or by a person designated to exercise the Option upon the
Optionee's death pursuant to subsection 6(d) hereof, but only within the
period ending on the earlier of (i) the date twelve (12) months following
the date of death (or such longer or shorter period specified in the Option
Agreement) or (ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become
available under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available
for issuance under the Plan.
(i) Early Exercise. The Option Agreement may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee,
Director or Consultant to exercise the Option as to any part or all of the
shares subject to the Option prior to the full vesting of the Option. If
such a provision is included in an Option Agreement, the Option Agreement
shall also contain provisions establishing a vesting schedule for the
purchased shares and a right of the Company to repurchase any unvested
shares or, as a condition to the exercise of the relevant Option, requiring
the Optionee to enter into an agreement with the Company establishing such
vesting and such rights.
(j) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any required minimum federal, state or
local tax withholding obligation relating to the exercise of such Option by
any of the following means or by a combination of such means: (1) tendering
a cash payment; (2) authorizing the Company to withhold shares from the
shares of the Common Stock otherwise issuable to the participant as a
result of the exercise of the Option; or (3) delivering to the Company
owned and unencumbered shares of the Common Stock of the Company.
(k) Re-Load Options. Without in any way limiting the authority of the
Committee to make or not to make grants of Options hereunder, the Committee
shall have the authority (but not an obligation) to include as part of any
Option Agreement a provision entitling the Optionee to a further Option (a
"Re-Load Option") in the event the Optionee exercises the Option evidenced
by the Option Agreement, in whole or in part, by surrendering other shares
of Company Common Stock in accordance with the Plan and the terms and
conditions of the Option Agreement. Any such Re-Load Option (i) shall be
for a number of shares equal to the number of shares surrendered as part or
all of the exercise price of such Option, (ii) shall have an expiration
date which is the same as the expiration date of the Option the exercise of
which gave rise to such Re-Load Option; and (iii) shall have an exercise
price which is equal to one hundred percent (100%) of the Fair Market Value
of the Company Common Stock subject to the Re-Load Option on the date of
exercise of the original Option or, in the case of a Re-Load Option which
is an Incentive Stock Option and which is granted to a 10% stockholder (as
described in subsection 5(c) hereof), shall have an exercise price which is
equal to one hundred ten percent (110%) of the Fair
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Market Value of the Company Common Stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is
no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Committee may designate at the time of the grant of the
original Option, provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand dollar
($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 13(d) hereof and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) hereof
and shall be subject to such other terms and conditions as the Committee may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of the Options.
7. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.
(a) Each Non-Employee Director elected or appointed to the Board at the
time of an annual meeting of stockholders or special meeting in lieu thereof,
including Non-Employee Directors elected to the Board at the meeting of the
Company's stockholders at which this amended and restated Plan is approved (the
"Approval Meeting"), upon first being so elected or appointed, shall
automatically be granted a Nonstatutory Stock Option to purchase 27,000 shares
of Company Common Stock.
(b) Notwithstanding the preceding section 7(a), in the event that a
Non-Employee Director is first elected or appointed to the Board at any time
other than at an annual meeting of stockholders or special meeting in lieu
thereof, such Non-Employee Director upon first being so elected or appointed
shall automatically be granted a Nonstatutory Stock Option for a number of
shares of Company Common Stock equal to the sum of (i) 18,000 plus (ii) 9,000
multiplied by N/365 where "N" is the number of days remaining between the date
of such election or appointment of such Non-Employee Director and the first
anniversary of the date of the Company's most recent annual meeting of
stockholders or special meeting in lieu thereof. The shares purchasable pursuant
to Section 7(b)(ii) above are referred to as the "Prorated Shares". Each option
granted under Section 7(a) or Section 7(b) is referred to herein as an "Initial
Option".
(c) Each Non-Employee Director shall be eligible to receive an additional
Nonstatutory Stock Option to purchase 27,000 shares of Company Common Stock
(each an "Additional Option") as follows: (i) each Class II and Class III
Non-Employee Director in office on the date of the Approval Meeting shall
automatically be granted an Additional Option and (ii) upon the Final Vesting
Date, as defined below, of any Initial Option or Additional Option held by a
Non-Employee Director whose term in office will continue after such Final
Vesting Date, or who has been nominated by the Board of Directors for election
to a term that will continue after such date, such Non-Employee Director shall
automatically be granted an Additional Option.
(d) Each Initial Option and each Additional Option shall have an exercise
price equal to the Fair Market Value of the Common Stock on the date of grant.
All Options granted under this Section 7 shall vest in three equal installments
immediately before each of the first three annual meetings of stockholders or
special meetings in lieu thereof following the date of grant of such Initial
Option or Additional Option, as the case may be, provided in each case that at
such time the Non-Employee Director is then in office as a director.
Notwithstanding the preceding sentence, with respect to an Initial Option
granted under Section 7(b) the option shall vest as to the Prorated Shares
immediately before the first annual meeting of stockholders or special meeting
in lieu thereof following the date of grant of such Initial Option and as to the
remaining 18,000 shares in two equal installments immediately before each of the
second and third annual meetings of stockholders or special meetings in lieu
thereof following the date of grant of such Initial Option, provided that in
each case at such time the Non-Employee Director is then in office as a
director. The date on which the last such installment of any option granted
under this Section 7 vests is herein referred to as its "Final Vesting Date."
All options granted under this Section 7 shall expire on the date which is five
years from the date of grant.
(e) The Committee shall adopt such provisions, in its sole discretion, as
to the time, any limitations or restrictions and the manner of the exercise or
vesting of Nonstatutory Stock Options granted under this Section 7 in respect of
the matters set forth under the provisions of Subsections 6(d), (j) and (k)
hereof.
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8. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each Stock Bonus or restricted stock purchase agreement related to a Stock
Award shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of Stock Bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each Stock
Bonus or restricted stock purchase agreement shall include (through
incorporation of provisions herein by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Committee shall determine
and designate in such agreement. Notwithstanding the foregoing, the
Committee may determine that eligible participants in the Plan may be
granted a Stock Award pursuant to a Stock Bonus agreement in consideration
for past services actually rendered to the Company for its benefit.
(b) Transferability. Except as otherwise provided elsewhere in the
Plan, no rights under a Stock Bonus or restricted stock purchase agreement
shall be assignable by any participant under the Plan, either voluntarily
or by operation of law, except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to
whom the rights are granted only by such person. The person to whom the
Stock Award is granted, may, by delivering written notice to the Company,
in a form satisfactory to the Company, designate a third party who, in the
event of the death of such person, shall thereafter be entitled to exercise
the rights held by such person under the Stock Bonus or restricted stock
purchase agreement.
(c) Consideration. The purchase price of stock acquired pursuant to
a Stock Award in the form of a stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Committee, according to a deferred payment or other arrangement with the
person to whom the stock is sold; or (iii) in any other form of legal
consideration that may be acceptable to the Committee in its discretion;
including delivery of a promissory note of the Optionee to the Company on
terms determined by the Committee. Notwithstanding the foregoing, the
Committee may grant a Stock Award pursuant to a Stock Bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(d) Vesting. Shares of Company Common Stock sold or awarded under
the Plan may, but need not, be subject to a repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the
Committee.
(e) Termination of Employment or Relationship as a Consultant. In
the event a Participant's Continuous Status as an Employee or Consultant
terminates, the Company may repurchase or otherwise reacquire any or all of
the shares of Company Common Stock held by that person which have not
vested as of the date of termination under the terms of the Stock Bonus or
restricted stock purchase agreement between the Company and such person.
9. STOCK APPRECIATION RIGHTS.
(a) The Committee shall have full power and authority, exercisable in its
sole discretion, to grant Stock Appreciation Rights to Employees or Consultants
to the Company or its Affiliates under the Plan. Each such right shall entitle
the holder to a distribution based on the appreciation in the Fair Market Value
per share of a designated amount of Company Common Stock.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(i) Tandem Stock Appreciation Rights. Tandem Rights will be granted
appurtenant to an Option and will require the holder to elect between the
exercise of the underlying Option for shares of Company Common Stock and
the surrender, in whole or in part, of such Option for an appreciation
distribution equal to the excess of (A) the Fair Market Value (on the date
of Option surrender) of vested shares of Company Common Stock purchasable
under the surrendered Option over (B) the aggregate exercise price payable
for such shares.
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(ii) Concurrent Stock Appreciation Rights. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of Company Common Stock subject to the underlying Option and will be
exercised automatically at the same time the Option is exercised for those
shares. The appreciation distribution to which the holder of such
concurrent right shall be entitled upon exercise of the underlying Option
shall be in an amount equal to such portion as shall be determined by the
Board or the Committee at the time of grant of the excess of (A) the
aggregate Fair Market Value (at date of exercise) of the vested shares
purchased under the underlying Option with such concurrent rights over (B)
the aggregate exercise price paid for those shares.
(iii) Independent Stock Appreciation Rights. Independent Rights may
be granted independently of any Option and will entitle the holder upon
exercise to an appreciation distribution equal in amount to the excess of
(A) the aggregate Fair Market Value (at date of exercise) of a number of
shares of Company Common Stock equal to the number of vested share
equivalents exercised at such time (as described in subsection 8(c)(iii))
hereof over (B) the aggregate Fair Market Value of such number of shares of
Company Common Stock at the date of grant.
(c) The terms and conditions applicable to each Tandem Right, Concurrent
Right and Independent Right shall be as follows:
(i) TANDEM RIGHTS:
A. Tandem Rights may be tied to either Incentive Stock Options or
Nonstatutory Stock Options. Each such right shall, except as
specifically set forth below, be subject to the same terms and
conditions applicable to the particular Option to which it pertains. If
Tandem Rights are granted appurtenant to an Incentive Stock Option, they
shall satisfy any applicable Treasury Regulations so as not to
disqualify such Option as an Incentive Stock Option under the Code.
B. The appreciation distribution payable on the exercised Tandem
Right shall be in cash in an amount equal to the excess of (i) the Fair
Market Value (on the date of the Option surrender) of the number of
shares of Company Common Stock covered by that portion of the
surrendered Option in which the Optionee is vested over (ii) the
aggregate exercise price payable for such vested shares.
(ii) CONCURRENT RIGHTS:
A. Concurrent Rights may be tied to any or all of the shares of
Company Common Stock subject to any Incentive Stock Option or
Nonstatutory Stock Option grant made under the Plan. A Concurrent Right
shall, except as specifically set forth below, be subject to the same
terms and conditions applicable to the particular option grant to which
it pertains.
B. A Concurrent Right shall be automatically exercised at the same
time as the underlying Option is exercised with respect to the
particular shares of Company Common Stock to which the Concurrent Right
pertains.
C. The appreciation distribution payable on an exercised
Concurrent Right shall be in cash in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of grant
of the excess of (i) the aggregate Fair Market Value (on the date the
Option is exercised) of the vested shares of Company Common Stock
purchased under the underlying Option which have Concurrent Rights
appurtenant to them over (ii) the aggregate exercise price paid for such
shares.
(iii) INDEPENDENT RIGHTS:
A. Independent Rights shall, except as specifically set forth
below, be subject to the same terms and conditions applicable to
Nonstatutory Stock Options as set forth in Section 6 hereof. They shall
be denominated in share equivalents.
B. The appreciation distribution payable on the exercised
Independent Right shall be in cash in an amount equal to the excess of
(I) the aggregate Fair Market Value (on the date of the exercise of the
Independent Right) of a number of shares of Company Common Stock equal
to the number of share equivalents in which the holder is vested under
such Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (II) the aggregate
Fair
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Market Value (on the date of the grant of the Independent Right) of such
number of shares of Company Common Stock.
(iv) TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT RIGHTS AND
INDEPENDENT RIGHTS:
A. To exercise any outstanding Tandem, Concurrent or Independent
Right, the holder must provide written notice of exercise to the Company
in compliance with the provisions of the instrument evidencing such
right.
B. If a Tandem, Concurrent, or Independent Right is granted to an
individual who is at the time subject to Section 16(b) of the Exchange
Act (a "Section 16(b) Insider"), then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to assure
that the subsequent exercise of such right shall qualify for the
safe-harbor exemption from short-swing profit liability provided by Rule
16b-3.
C. Except as otherwise provided in this Section 9, no limitation
shall exist on the aggregate amount of cash payments the Company may
make under the Plan in connection with the exercise of Tandem,
Concurrent or Independent Rights.
10. OTHER STOCK-BASED AWARDS.
The Committee shall have the right to grant other Awards based upon Company
Common Stock having such terms and conditions as the Committee may determine,
including the grant of shares based upon certain conditions and grant of
securities convertible into Company Common Stock.
11. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and the grant in
substitution therefor of new Options and/or Stock Appreciation Rights under the
Plan covering the same or different numbers of shares of Company Common Stock,
but having an exercise price per share not less than eighty five percent (85%)
of the Fair Market Value (one hundred percent (100%)) of the Fair Market Value
in the case of an Incentive Stock Option or, in the case of an Incentive Stock
Option granted to a 10% stockholder (as described in subsection 5(c) hereof, not
less than one hundred ten percent (110%) of the Fair Market Value) per share of
Company Common Stock on the new grant date.
(b) Shares of Company Common Stock subject to an Option or Stock
Appreciation Right canceled under this Section 11 shall continue to be counted
against the maximum award of Options and Stock Appreciation Rights permitted to
be granted to a person pursuant to subsection 5(c) hereof. The repricing of an
Option and/or Stock Appreciation Right under this Section 11, resulting in a
reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such repricing, both the
original and the substituted Options and Stock Appreciation Rights shall be
counted against the maximum awards of Options and Stock Appreciation Rights
permitted to be granted to a person pursuant to subsection 5(c) hereof. The
provisions of this subsection 11(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
12. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of Company Common Stock required to satisfy
such Stock Awards up to the number of shares of Company Common Stock authorized
under the Plan.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of Company Common Stock under the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under
the
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Securities Act or any securities law of any state either the Plan, any Stock
Award or any stock issued or issuable pursuant to any such Stock Award. The
Company shall not be required to sell or issue any shares under any Stock Award
if the issuance of such shares shall constitute a violation by the holder of the
Stock Award or by the Company of any provision of any law or regulation of any
governmental authority. In the event the shares of Company Common Stock issuable
on exercise of Stock Award are not registered under the Securities Act, the
Company may imprint upon any certificate representing shares so issued any
legend which counsel for the Company considers necessary or advisable to comply
with the Securities Act and with applicable state securities laws. The Company
may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act; and in the event any shares are so
registered the Company may remove any legend on certificates representing such
shares.
13. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Company Common Stock pursuant to Stock Awards
shall constitute general funds of the Company.
14. MISCELLANEOUS.
(a) The Committee shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) hereof shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Company Common Stock
subject to such Option unless and until such person has satisfied all
requirements for exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant, Optionee,
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant) or
shall affect the right of the Company or any Affiliate to terminate the
employment or relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee, with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of Company Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year under all plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
15. ADJUSTMENTS UPON CHANGE IN STOCK.
In the event of any Change in Stock, the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan
pursuant to subsection 4(a) hereof and the maximum number of shares subject to
Options and Stock Awards pursuant to subsection 5(c) hereof, and the outstanding
Stock Awards will be appropriately adjusted in the class(es) and number of
shares and price per share of stock subject to such outstanding Stock Awards.
Such adjustments shall be made by the Committee, the determination of which
shall be final, binding and conclusive.
16. VESTING AND PAYMENT UPON CHANGE IN CONTROL.
(a) After a merger of one or more corporations with or into the Company or
after a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, each holder of an outstanding Option shall, at
no additional cost, be entitled upon exercise of such Option to receive in lieu
of the shares of Company Common Stock as to which such Option was exercisable
immediately prior to such event, the number and class of shares of stock or
other securities, cash or property (including, without
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<PAGE> 38
limitation, shares of stock or other securities of another corporation or
Company Common Stock) to which such holder would have been entitled pursuant to
the terms of the agreement of merger or consolidation if, immediately prior to
such merger or consolidation, such holder had been the holder of record of a
number of shares of Company Common Stock equal to the number of shares for which
such Option shall be so exercised.
(b) Upon and following the occurrence of a Change of Control, the time for
exercise of each unvested installment of any then outstanding Option or Stock
Appreciation Right shall be accelerated, so that:
(i) immediately upon such Change of Control, if the holder or optionee
is then an employee or consultant of the Company, twenty-five percent (25%)
of any such unvested installment shall be exercisable;
(ii) on the date that is nine months after such Change in Control, if
the holder or optionee is then an employee or consultant of the Company,
one third (33 1/3%) of any installment of such Option or Stock Appreciation
Right that has not yet vested in accordance with its original terms or by
virtue of this Section 16 shall become exercisable;
(iii) on the date that is eighteen months after such Change in
Control, if the holder or optionee is then an employee or consultant of the
Company, fifty percent (50%) of any installment of such Option or Stock
Appreciation Right that has not yet vested in accordance with its original
terms or by virtue of this Section 16 shall become exercisable; and
(iv) on the second anniversary of such Change in Control, if the
holder or optionee is then an employee or consultant of the Company, any
remaining installment of such Option or Stock Appreciation Right that has
not yet vested in accordance with its original terms or by virtue of this
Section 16 shall become exercisable.
The foregoing clauses (i) through (iv) are intended to provide for vesting
that is in addition to, and not in lieu of, the vesting schedule originally
provided in any Option or Stock Appreciation Right outstanding at the time of a
Change in Control, and, except to the extent accelerated by such clauses, each
such Option or Stock Appreciation Right shall continue to vest in accordance
with its original terms.
(c) Upon the occurrence of a Change of Control, the restrictions and
conditions contained in any Stock Bonus granted to a then current Employee or
Consultant or restricted stock purchase agreement related to a Stock Award to
which a then current Employee or Consultant is a party shall automatically be
appropriately modified so that under the terms thereof additional shares of
Company Common Stock vest in a manner essentially equivalent to the additional
vesting provided for in Section 16(b) for Options and Stock Appreciation Rights.
The determination of the Committee as to such modifications shall be final,
binding and conclusive.
The foregoing subparagraph (c) is intended to provide for vesting that is
in addition to, and not in lieu of, the vesting schedule originally provided in
any Stock Bonus or restricted stock purchase agreement related to a Stock Award
outstanding at the time of a Change in Control, and, except to the extent
accelerated by such clauses, each such Stock Bonus or restricted stock purchase
agreement related to a Stock Award shall continue to vest in accordance with its
original terms.
(d) If the Company is merged with or into or consolidated with another
corporation, other than 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 fifty percent (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
if the Company is liquidated, or sells or otherwise disposes of substantially
all of its assets to another corporation while unexercised Options remain
outstanding under the Plan, then either in such event:
(i) subject to the provisions of clause (iii) below, after the
effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, each holder of an outstanding Option shall
be entitled, upon exercise of such Option, to receive, in lieu of the
shares of Company Common Stock as to which such Option was exercisable
immediately prior to such event, the number and class of shares of stock or
other securities, cash or property (including, without limitation, shares
of stock or other
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<PAGE> 39
securities of another corporation or common stock) to which such holder
would have been entitled pursuant to the terms of the merger,
consolidation, liquidation, sale or disposition if, immediately prior to
such event, such holder had been the holder of a number of shares of
Company Common Stock equal to the number of shares as to which such Option
shall be so exercised; or
(ii) the Committee may accelerate the time for exercise of some or all
unexercised and unexpired Options or Stock Appreciation Rights so that from
and after a date prior to the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, specified by the
Committee such accelerated Options or Stock Appreciation Rights shall be
exercisable in full.
(e) If, within two years following a Change in Control, the employment of
any Optionee who immediately prior to such Change in Control was employed by the
Company as an Officer (each such Optionee being hereafter referred to as a
"Designated Executive") shall be terminated by the Company other than for cause,
or shall be terminated by the Designated Executive for Good Reason, then in such
event all unvested Options, Stock Appreciation Rights, Stock Bonuses and other
Stock Awards held by such Designated Executive at the date of such termination
shall thereupon immediately become exercisable in full. For purposes of this
paragraph, "Good Reason" for termination by a Designated Executive of his
employment shall be deemed to have existed only if (i) within two years after a
Change in Control, the Company, or any successor entity then employing the
Designated Executive, shall materially diminish the responsibilities and
authority of the Designated Executive or, shall materially reduce the rate of
compensation of the Designated Executive (including by way of a change in the
method of determining the eligibility of such Designated Executive to earn bonus
or incentive compensation), in either case as compared with his responsibilities
and authority or rate of compensation, as the case may be, in effect immediately
prior to such Change in Control, and (ii) within thirty (30) days following such
diminution or reduction the Designated Executive shall resign from his
employment by the Company or such successor entity.
(f) If, within two years following a Change in Control, a Non-Employee
Director is terminated or resigns from the Board of Directors for Good Reason,
then in such event all unvested Options held by such Non-Employee Director at
the date of such termination or resignation shall thereupon immediately become
exercisable in full. For purposes of this paragraph, "Good Reason" for
resignation by a Non-Employee Director shall be deemed to have existed only if
(i) within two years after a Change in Control, the Company, or any successor
entity, shall materially diminish the responsibilities and authority of the
Non-Employee Director or shall materially reduce the rate of compensation of the
Non-Employee Director, in either case as compared with his responsibilities and
authority or rate of compensation, as the case may be, in effect immediately
prior to such Change in Control, and (ii) within thirty (30) days following such
diminution or reduction the Non-Employee Director shall resign from his position
as a Director.
17. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 hereof relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3, or
the listing or eligibility for quotation requirements of the Nasdaq National
Market or any similar organization or of any national securities exchange upon
which shares of Company Common Stock are listed or eligible for trading.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
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<PAGE> 40
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Committee at any time, and from time to time, may amend the terms
of any one or more Stock Awards; provided, however, that the rights and
obligations under any Stock Award shall not be altered or impaired by any such
amendment unless (i) the Company requests the consent of the person to whom the
Stock Award was granted and (ii) such person consents in writing.
18. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on March 4, 2009. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with consent of the person to whom the Stock Award was granted.
19. LOCK-UP AGREEMENT.
The Committee may in its discretion specify upon granting an Option that
upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities, the Optionee shall agree in writing that
for a period of time (not to exceed 180 days) from the effective date of any
registration of securities of the Company, the Optionee will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares issued pursuant to the exercise of such Option, without the prior
written consent of the Company or such underwriters, as the case may be.
20. GOVERNING LAW.
The provisions of the Plan and all Stock Awards made hereunder shall be
governed by and interpreted in accordance with the internal laws of the
Commonwealth of Massachusetts without regard to any applicable conflicts of law
principles thereof.
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1286-PS-00
<PAGE> 42
PJS99B DETACH HERE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PROJECT SOFTWARE & DEVELOPMENT, INC. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ALL PROPOSALS.
PROJECT SOFTWARE & DEVELOPMENT, INC.
PROXY FOR SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 2000
The undersigned stockholder of Project Software & Development, Inc. (the
"Company"), revoking all prior proxies, hereby appoints Norman E. Drapeau, Jr.
and Robert L. Daniels, and each of them acting singly, proxies, with full power
of substitution, to vote all shares of capital stock of the Company which the
undersigned is entitled to vote at the Special Meeting of Stockholders to be
held at the offices of the Company, 100 Crosby Drive, Bedford, Massachusetts, on
Tuesday, April 25, 2000, beginning at 10:00 A.M., local time, and at any
adjournments thereof, upon matters set forth in the Notice of Special Meeting in
Lieu of Annual Meeting dated March 28, 2000 and the related Proxy Statement,
copies of which have been received by the undersigned, and in their discretion
upon any business that may properly come before the meeting or any adjournments
thereof. Attendance of the undersigned at the meeting or any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate the intention of the undersigned to vote the shares
represented hereby in person prior to the exercise of this proxy.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 43
PJS99A DETACH HERE
<TABLE>
<S> <C>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN WITH RESPECT TO THE PROPOSALS BELOW, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
FOR AGAINST ABSTAIN
1. To elect Robert L. Daniels and John A. McMullen as Class I 2. To approve the Company's Amended and [ ] [ ] [ ]
Directors of the Company for a term of three years; Restated 1999 Equity Incentive Plan;
FOR WITHHELD 3. To ratify the appointment by the Board of
[ ] [ ] Directors of PdcewaterhouseCoopers L.L.P.
as the Company's independent public
accountants for the current fiscal year;
and
[ ] ______________________________________ 4. To transact such further business as may
For all nominees except as noted above properly come before the Meeting or any
adjournment thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please promptly date and sign this proxy and mail it in the
enclosed envelope to assure representation of your shares. No
postage need be affixed if mailed in the United States.
Please sign exactly as name(s) appear(s) on stock certificate. If
stockholder is a corporation, please sign full corporate name by
president or other authorized officer and, if a partnership,
please sign full partnership name by an authorized partner or
other person.
Signature: _______________________________ Date: _____________ Signature: ___________________________________ Date: _______________
</TABLE>
