<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Applix, Inc.
(Name of Registrant as Specified In Its Charter)
---------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
APPLIX, INC.
112 TURNPIKE ROAD
WESTBORO, MASSACHUSETTS 01581-2831
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON FRIDAY, MAY 8, 1998
The Annual Meeting of Stockholders of Applix, Inc. (the "Company") will be
held at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
on Friday, May 8, 1998 at 10:00 a.m., local time, to consider and act upon the
following matters:
1. To elect two Class I Directors for terms of three years.
2. To approve an amendment to the Company's 1994 Equity Incentive
Plan, providing for an increase from 2,490,157 to 2,990,157 in the number
of shares of Common Stock issuable thereunder.
3. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 18, 1998 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
Patrick J. Rondeau, Clerk
Westboro, Massachusetts
March 27, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS
MAILED IN THE UNITED STATES.
<PAGE> 3
APPLIX, INC.
112 TURNPIKE ROAD
WESTBORO, MASSACHUSETTS 01581-2831
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 8, 1998
INTRODUCTION
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Applix, Inc. (the "Company") for use at the
Annual Meeting of Stockholders to be held on May 8, 1998, and at any adjournment
of that meeting. All proxies will be voted in accordance with the stockholders'
instructions, and if no choice is specified, the proxies will be voted in favor
of the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of written
revocation or a subsequently dated proxy to the Clerk of the Company or by
voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended December 31, 1997 is
being mailed to stockholders, along with these proxy materials, on or about
April 3, 1998.
The share numbers presented in this Proxy Statement have been adjusted to
give effect to the two-for-one split of the Common Stock effected in the form of
a stock dividend on December 26, 1995.
QUORUM REQUIREMENT
At the close of business on March 18, 1998, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of 10,146,401
shares of Common Stock of the Company, constituting all of the outstanding
voting stock of the Company. Holders of Common Stock are entitled to one vote
per share.
The holders of a majority of the number of shares of Common Stock issued,
outstanding and entitled to vote at the Annual Meeting shall constitute a quorum
for the transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy (including shares which abstain or otherwise
do not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum is
present at the Annual Meeting.
VOTES REQUIRED
The affirmative vote of the holders of a plurality of the votes cast by the
holders of Common Stock is required for the election of directors. The
affirmative vote of the holders of a majority of the votes represented by the
shares of Common Stock present and voting on the matter is required for the
approval of the amendment to the 1994 Equity Incentive Plan and the ratification
of the selection of Coopers & Lybrand L.L.P. as the Company's independent
auditors for the current fiscal year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by a broker or nominee who indicates on a proxy that it does
not have discretionary authority to vote as to a particular matter, will not be
voted in favor of such matter, and also will not be counted as shares voting on
such matter. Accordingly, abstentions and "broker non-votes" will have no effect
on the voting on a matter that requires the
<PAGE> 4
affirmative vote of a certain percentage of the votes cast or the shares voting
on that matter (such as the election of the Class I Directors, the approval of
the amendment to the 1994 Equity Incentive Plan, and the ratification of the
selection of independent auditors).
BENEFICIAL OWNERSHIP OF VOTING STOCK
The following table sets forth the beneficial ownership of the Company's
Common Stock as of December 31, 1997 (i) by each person who is known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) by each director, (iii) by each of the executive officers named in
the Summary Compensation Table set forth below (the "Named Executive Officers"),
and (iv) by all directors and executive officers as of December 31, 1997 as a
group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED(1) COMMON STOCK(2)
---------------- ---------------
<S> <C> <C>
5% Stockholders
Pilgrim, Baxter & Associates(3)............................. 1,072,200 10.7%
1255 Drummers Lane
Wayne, PA 19087
Directors
Jitendra S. Saxena(4)....................................... 304,148 3.0%
Richard J. Davis............................................ 51,819 *
Paul J. Ferri(5)............................................ 22,840 *
Alain J. Hanover(6)......................................... 11,168 *
David C. Mahoney(7)......................................... 12,834 *
Jay Waldron(8).............................................. 9,831 *
Other Named Executive Officers
Barry Zane(9)............................................... 50,796 *
Patrick J. Scannell, Jr.(10)................................ 51,934 *
Craig Cervo(11)............................................. 39,614 *
All directors and executive officers as a group (9
persons)(12).............................................. 554,984 5.4%
</TABLE>
- ---------------
* Less than 1%
(1) Each person has sole investment and voting power with respect to the
shares indicated as beneficially owned, except as otherwise noted. The
inclusion herein of any shares as beneficially owned does not constitute
an admission of beneficial ownership. In accordance with Securities and
Exchange Commission ("SEC") rules, each person listed is deemed to
beneficially own any shares issuable upon the exercise of stock options
held by him or her that are currently exercisable or exercisable within 60
days after December 31, 1997; and any reference in these footnotes to
options refers only to such options.
(2) Number of shares deemed outstanding includes 10,062,997 shares outstanding
as of December 31, 1997, plus any shares subject to outstanding stock
options held by the person in question.
(3) Based on a Schedule 13G/A filed with the Securities and Exchange
Commission (the "SEC") by Pilgrim, Baxter & Associates on March 12, 1997.
(4) Includes 80,134 shares subject to stock options and 6,000 shares held by
Mr. Saxena's daughter.
(5) Includes 15,834 shares subject to stock options.
2
<PAGE> 5
(6) Includes 2,500 shares subject to stock options.
(7) Comprised of 12,834 shares subject to stock options.
(8) Includes 9,600 shares subject to stock options.
(9) Includes 44,796 shares subject to stock options.
(10) Comprised of 51,934 shares subject to stock options.
(11) Comprised of 39,614 shares subject to stock options.
(12) Includes a total of 257,246 shares subject to stock options.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. There are
currently two Class I Directors, whose terms expire at this Annual Meeting of
Stockholders, two Class II Directors, whose terms expire at the 1999 Annual
Meeting of Stockholders, and two Class III Directors, whose terms expire at the
2000 Annual Meeting of Stockholders (in all cases subject to the election and
qualification of their successors or to their earlier death, resignation or
removal).
The persons named in the enclosed proxy will vote to elect Paul J. Ferri
and Jitendra Saxena as Class I Directors, unless authority to vote for the
election of the nominees is withheld by marking the proxy to that effect.
Messrs. Ferri and Saxena are currently Class I Directors of the Company. The
nominees have indicated their willingness to serve, if elected, but if either or
both of them should be unable or unwilling to stand for election, proxies may be
voted for a substitute nominee designated by the Board of Directors.
Set forth below are the names and certain information with respect to each
director of the Company, including the nominees for Class I Directors.
Nominees for Class I Directors (holding office for a term expiring at this
Annual Meeting; nominated for a term expiring at the 2001 Annual Meeting):
Mr. Ferri, age 59, has been a director of the Company since its inception
in 1983. He has been the managing general partner of Matrix Partners, a venture
capital firm, since 1982. Mr. Ferri also serves as a director of Stratus
Computer Inc., BancTec, Inc., TechForce Corp. and VideoServer, Inc.
Mr. Saxena, age 52, is a founder of the Company and has been a director and
Chief Executive Officer of the Company since its inception in 1983. Mr. Saxena
has served as Chairman of the Company since April 1997, and served as its
President from its inception until April 1997.
Class II Directors (holding office for a term expiring at the 1999 Annual
Meeting):
Mr. Davis, age 54, has been a director of the Company since March 1989. Mr.
Davis is currently a private investor. He served as President and Chief
Executive Officer of Nabnasset Corporation, a developer of computer telephony
integration solutions, from March 1997 to November 1997. Mr. Davis served as the
Company's Executive Vice President, Customer Operations from January 1989 until
October 1994, and served as Executive Vice President, Sales and Service from
October 1994 until March 1997.
Mr. Hanover, age 49, has been a director of the Company since July 1992. He
has been the President and Chief Executive Officer of InCert Software Corp., a
computer software development and distribution company, since October 1997. Mr.
Hanover served as Chairman of the Board of Directors and Chief Executive of
Viewlogic Systems, Inc., an engineering software company, from 1984 until May
1997.
3
<PAGE> 6
Class III Directors (holding office for a term expiring at the 2000 Annual
Meeting):
Mr. Mahoney, age 53, has been a director of the Company since October 1992.
He has been a director of Banyan Systems, Inc., a networking software company,
since 1983, and a director of Switchboard Incorporated, its subsidiary, since
1997; he served as Banyan's Chairman of the Board and Chief Executive Officer
from 1983 until May 1997. Mr. Mahoney has been President and Chief Executive
Officer of Sovereign Hill Software, Inc., since January 1998.
Mr. Waldron, age 40, has been a director of the Company since 1997; he has
served as President and Chief Operating Officer of the Company since April 1997.
Mr. Waldron served as Executive Vice President, Product and Market Development
from January 1997 to April 1997, and as Vice President of International Sales
from November 1995 to January 1997. Mr. Waldron was employed from November 1993
to September 1995 by MicroTouch Systems, Inc., a touchscreen devices and
software development company, most recently as Vice President of New Business
Development; and was employed from June 1986 to November 1993 by Visage, Inc., a
multimedia and touch input systems company, most recently as President and CEO.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
is responsible for reviewing financial reports, accounting procedures and the
scope and results of the annual audit of the Company's financial statements. The
Audit Committee met once during 1997. The current members of the Audit Committee
are Messrs. Saxena, Ferri and Hanover.
The Company has a standing Compensation Committee of the Board of
Directors, which is responsible for reviewing compensation issues and making
decisions concerning the compensation (including stock option grants) of the
Company's executive officers. The Compensation Committee met five times during
1997, and acted once by written consent in lieu of a meeting. The current
members of the Compensation Committee are Messrs. Ferri and Mahoney.
The Board of Directors met nine times during 1997, and acted once by
written consent in lieu of a meeting. Each director attended at least 75% of the
aggregate of the number of Board meetings and the number of meetings held by all
committees on which he then served.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive compensation for their services as
directors, but outside directors are reimbursed for expenses incurred in
connection with attendance at Board of Directors meetings. The Company may in
the future adopt a compensation policy for outside directors.
Each director of the Company who is not an employee of the Company is
eligible to receive options pursuant to the 1996 Director Stock Option Plan (the
"1996 Director Plan"). Pursuant to the 1996 Director Plan, (i) each outside
director received an option to purchase 2,500 shares of Common Stock on May 10,
1996, the date of approval of the 1996 Director Plan by the stockholders of the
Company, (ii) each outside director initially elected to the Board in the future
will receive an option to purchase 5,000 shares of Common Stock upon such
director's initial election to the Board and (iii) each outside director
receives an option to purchase 2,500 shares of Common Stock on February 15th of
each year so long as he or she continues to serve as a director. Such options
have an exercise price equal to the fair market value of the Common Stock on the
date of grant; become exercisable on the first anniversary of the date of grant
(or upon an earlier change in control of the Company), provided the optionee
continues to serve as a director of the Company on such date; and expire seven
years from the date of grant or 90 days after the optionee ceases to serve as a
director.
4
<PAGE> 7
In April 1997, each outside director also received a one-time grant under
the Company's 1994 Equity Incentive Plan of an option to buy 5,000 shares of
Common Stock. Such options also have an exercise price equal to the fair market
value of the Common Stock on the date of grant; become exercisable on the first
anniversary of the date of grant (or upon an earlier change in control of the
Company), provided the optionee continues to serve as a director of the Company
on such date; and expire seven years from the date of grant or 90 days after the
optionee ceases to serve as a director.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation for each of the last three fiscal years of the CEO
of the Company and of the four most highly compensated executive officers other
than the CEO during 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(2)
ANNUAL COMPENSATION(1) ----------------
------------------------------ NUMBER OF SHARES
FISCAL UNDERLYING STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(3)
--------------------------- ------ -------- -------- ----------------
<S> <C> <C> <C> <C>
Jitendra S. Saxena............................ 1997 $205,000 $ 0 254,000(4)
Chairman and Chief Executive 1996 $195,000 $202,832 0
Officer 1995 $182,000 $158,687 242,000
Jay Waldron................................... 1997 $150,000 $ 0 196,000(5)
President and Chief 1996 N/A N/A N/A
Operating Officer 1995 N/A N/A N/A
Craig Cervo................................... 1997 $143,000 $ 0 97,800(6)
Vice President, 1996 $136,000 $ 67,611 0
Product Development 1995 $127,000 $ 63,475 76,000
Patrick J. Scannell, Jr....................... 1997 $143,000 $ 0 126,000(7)
Executive Vice President, 1996 $136,000 $ 67,611 0
Finance and Administration, Chief 1995 $127,000 $ 63,475 76,000
Financial Officer and Treasurer
Barry M. Zane................................. 1997 $143,000 $ 0 91,000(8)
Vice President, 1996 $136,000 $ 67,611 0
Technology 1995 $127,000 $ 31,737 76,000
</TABLE>
- ---------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted, in accordance with the rules of the SEC, as the aggregate
amount of such perquisites and other personal benefits constituted less than
the lesser of $50,000 or 10% of the total annual salary and bonus for each
executive officer in each fiscal year covered.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payouts during any
fiscal year covered.
(3) The option grants for 1995 include grants in January 1995, intended to
comprise part of the executive officers' overall compensation package for
1995, and grants in December 1995, intended to comprise part of the
executive officers' overall compensation package for 1996. The option grants
for 1997 include options originally granted in January 1997, intended to
comprise part of the executive officers' overall compensation package for
1997, and grants in December 1997, intended to comprise part of the
executive officers' overall compensation package for 1998.
5
<PAGE> 8
(4) Includes options to purchase an aggregate of 204,000 shares of Common Stock
that were granted in April 1997 in replacement of an option for 50,000
shares granted in January 1997 and options for a total of 154,000 shares
granted in prior years. See "Executive Compensation -- Option Repricing" and
"Compensation Committee Report on Executive Compensation -- Option
Repricing."
(5) Includes options to purchase an aggregate of 96,000 shares of Common Stock
that were granted in April 1997 in replacement of an option for 70,000
shares granted in January 1997 and options for a total of 26,000 shares
granted in prior years. See "Executive Compensation -- Option Repricing" and
"Compensation Committee Report on Executive Compensation -- Option
Repricing."
(6) Includes options to purchase an aggregate of 72,800 shares of Common Stock
that were granted in April 1997 in replacement of an option for 5,000 shares
granted in January 1997 and options for a total of 67,800 shares granted in
prior years. See "Executive Compensation -- Option Repricing" and
"Compensation Committee Report on Executive Compensation -- Option
Repricing."
(7) Includes options to purchase an aggregate of 96,000 shares of Common Stock
that were granted in April 1997 in replacement of an option for 20,000
shares granted in January 1997 and options for a total of 76,000 shares
granted in prior years. See "Executive Compensation -- Option Repricing" and
"Compensation Committee Report on Executive Compensation -- Option
Repricing."
(8) Includes options to purchase an aggregate of 66,000 shares of Common Stock
that were granted in April 1997 in replacement of an option for 10,000
shares granted in January 1997 and options for a total of 56,000 shares
granted in prior years. See "Executive Compensation -- Option Repricing" and
"Compensation Committee Report on Executive Compensation -- Option
Repricing."
OPTION GRANTS
The following table sets forth information regarding the granting of
options during 1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES OF
SHARES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------------
EXECUTIVE OFFICER GRANTED(1) IN FY SHARE(2) DATE 0% 5% 10%
----------------- ---------- ---------- --------- ---------- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Jitendra S. Saxena.... 50,000 2.2% $ 3.25 4/29/04 $ 0 $ 66,154 $154,165
70,000 3.1% $ 3.25 4/29/04 $ 0 $ 92,615 $215,831
84,000 3.7% $ 3.25 4/29/04 $ 0 $111,138 $258,997
50,000 2.2% $5.125 1/01/05 $ 0 $104,320 $243,110
Jay Waldron........... 70,000 3.1% $ 3.25 4/29/04 $ 0 $ 92,615 $215,831
50,000 2.2% $ 6.13 10/1/04 $ 0 $124,776 $290,780
24,000 1.1% $ 3.25 4/29/04 $ 0 $ 31,754 $ 73,999
2,000 0.1% $ 3.25 4/29/04 $ 0 $ 2,646 $ 6,167
50,000 2.2% $5.125 1/01/05 $ 0 $104,320 $243,110
Craig Cervo........... 5,000 0.2% $ 3.25 4/29/04 $ 0 $ 6,616 $ 15,417
20,800 0.9% $ 3.25 4/29/04 $ 0 $ 27,521 $ 64,133
27,000 1.2% $ 3.25 4/29/04 $ 0 $ 35,724 $ 83,249
20,000 0.9% $ 3.25 4/29/04 $ 0 $ 26,462 $ 61,666
25,000 1.1% $5.125 1/01/05 $ 0 $ 52,160 $121,555
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES OF
SHARES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------------
EXECUTIVE OFFICER GRANTED(1) IN FY SHARE(2) DATE 0% 5% 10%
----------------- ---------- ---------- --------- ---------- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Patrick J. Scannell,
Jr.................. 20,000 0.9% $ 3.25 4/29/04 $ 0 $ 26,462 $ 61,666
26,000 1.1% $ 3.25 4/29/04 $ 0 $ 34,401 $ 80,166
30,000 1.3% $ 3.25 4/29/04 $ 0 $ 39,693 $ 92,499
20,000 0.9% $ 3.25 4/29/04 $ 0 $ 26,462 $ 61,666
30,000 1.3% $5.125 1/01/05 $ 0 $ 62,592 $145,866
Barry M. Zane......... 10,000 0.4% $ 3.25 4/29/04 $ 0 $ 13,231 $ 30,833
20,000 0.9% $ 3.25 4/29/04 $ 0 $ 26,462 $ 61,666
36,000 1.6% $ 3.25 4/29/04 $ 0 $ 47,632 $110,999
25,000 1.1% $5.125 1/01/05 $ 0 $ 52,160 $121,555
</TABLE>
- ---------------
(1) The option grants include options originally granted in February 1997,
intended to comprise part of the executive officers' overall compensation
package for 1997, and grants in December 1997, intended to comprise part of
the executive officers' overall compensation package for 1998.
(2) Options are incentive stock options (except as noted below for repriced
options), become exercisable over a five-year period and generally terminate
three months following termination of the executive officer's employment
with the Company or on the expiration date, whichever occurs earlier. The
exercise price of each option is equal to the fair market value per share of
the Common Stock on the date of grant. Repriced options are treated as new
options and are incentive stock options except that, to the extent the
aggregate fair market value of stock with respect to which such options are
exercisable by an individual for the first time during any calendar year
exceeds $100,000, such options are nonqualified stock options.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 0%, 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The grants shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise of the option or the sale of the underlying shares. The
actual gains, if any, on the exercises of stock options will depend on the
future performance of the Common Stock, the optionholder's continued
employment through the option period, and the date on which the options are
exercised.
7
<PAGE> 10
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning each exercise
of a stock option during 1997 by the Named Executive Officers and the number and
value of unexercised options held by each of the Named Executive Officers on
December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END: FISCAL YEAR-END(2):
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Jitendra S. Saxena........ 0 $ 0 80,134 279,468 $163,429 $408,894
Jay Waldron............... 0 $ 0 9,600 186,400 $ 19,200 $179,050
Craig Cervo............... 0 $ 0 39,614 94,520 $142,909 $147,825
Patrick J. Scannell,
Jr...................... 0 $ 0 51,934 120,400 $182,599 $190,210
Barry Zane................ 10,000 $83,894 44,796 100,070 $ 98,626 $147,317
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Represents the fair market value of the Common Stock on December 31, 1997
($5.25), less the option exercise price.
OPTION REPRICING
The following table sets forth certain information concerning all
repricings of options held by any executive officer of the Company since
December 8, 1994 (the date on which the Company became a reporting company under
the Securities Exchange Act of 1934 (the "Exchange Act")).
<TABLE>
<CAPTION>
NUMBER OF NEW
SHARES EXERCISE PRICE EXERCISE LENGTH OF ORIGINAL
SUBJECT TO PER SHARE AT PRICE OPTION TERM
DATE OF OPTION TIME OF PER REMAINING AT
NAME OF EXECUTIVE OFFICER REPRICING REPRICED REPRICING SHARE(1) DATE OF REPRICING
- ------------------------- --------- ---------- -------------- --------- ------------------
<S> <C> <C> <C> <C> <C>
Jitendra S. Saxena................ 4/29/97 70,000 $13.12 $3.25 5 yrs. 4 mos.
4/29/97 84,000 $23.25 $3.25 5 yrs. 8 mos.
4/29/97 50,000 $12.13 $3.25 6 yrs. 10 mos.
Jay Waldron....................... 4/29/97 24,000 $18.56 $3.25 6 yrs. 8 mos.
4/29/97 2,000 $23.25 $3.25 6 yrs. 8 mos.
4/29/97 70,000 $12.13 $3.25 6 yrs. 10 mos.
Craig Cervo....................... 4/29/97 20,800 $ 7.00 $3.25 4 yrs. 9 mos.
4/29/97 27,000 $13.12 $3.25 5 yrs. 4 mos.
4/29/97 20,000 $23.25 $3.25 5 yrs. 8 mos.
4/29/97 5,000 $12.13 $3.25 6 yrs. 10 mos.
Patrick J. Scannell, Jr. ......... 4/29/97 26,000 $ 7.00 $3.25 4 yrs. 9 mos.
4/29/97 30,000 $13.12 $3.25 5 yrs. 4 mos.
4/29/97 20,000 $23.25 $3.25 5 yrs. 8 mos.
4/29/97 20,000 $12.13 $3.25 6 yrs. 10 mos.
Barry M. Zane..................... 4/29/97 20,000 $13.12 $3.25 5 yrs. 4 mos.
4/29/97 36,000 $23.25 $3.25 5 yrs. 8 mos.
4/29/97 10,000 $12.13 $3.25 6 yrs. 10 mos.
</TABLE>
- ---------------
(1) The exercise price of each option was determined to be equal to the fair
market value per share of the Common Stock on the date of grant.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"), which
throughout 1997 was comprised of two non-employee directors (Messrs. Ferri and
Mahoney). The Committee is responsible for determining the salaries of,
establishing bonus programs for, and granting stock options to, the Company's
executive officers. In making decisions regarding executive compensation, the
Committee receives and considers input from the Company's Chief Executive
Officer.
The Committee has three general goals in determining executive
compensation. First, the Committee seeks to provide incentive for, and to
reward, the attainment of objectives that inure to the benefit of the Company
and its stockholders. Second, the Committee seeks to compensate executives in a
manner that enables the Company to attract and retain talented executives who
can contribute to the success of the Company. Third, the Committee seeks to set
the compensation of each executive at a level that it believes is fair, based on
both the executive's relative contribution to the Company and the compensation
levels of similarly situated executives in comparable companies.
The Company's executive compensation consists of three principal elements:
salary, bonuses and stock option grants.
In establishing base salaries for executive officers, the Committee
considers numerous factors such as the executive's responsibilities, the
executive's importance to the Company, the executive's performance in the prior
year, historical salary levels of the executive, and the salaries of executives
at certain other companies whose business and/or financial situation is similar
to that of the Company. To the extent it deems it appropriate, the Committee
also considers general economic conditions within the area and within the
industry. The base salaries of each of the Company's five executive officers for
1997 represented an approximately 5% increase over their base salaries for 1996.
The Committee believes that it is important to tie a significant portion of
the compensation of executive officers to the attainment of corporate success,
thus aligning the objectives and rewards of Company executives with those of the
stockholders of the Company. For 1997, the Committee established a bonus program
for executive officers that was based entirely on the Company's operating income
(except that 75% of Mr. Zane's target bonus was tied to the achievement of
certain technological milestones and 75% of Mr. Cervo's target bonus was tied to
revenue objectives for specific products). Under this program, each executive
officer was assigned a target bonus, which ranged from $50,000 to $150,000 (in
the case of Mr. Saxena). If the Company's operating income for 1997 was less
than 80% of the net income in the Company's 1997 operating plan, no bonus would
be paid to any executive. If the Company's operating income for 1997 was at
least 80% of its targeted operating income, each executive officer would receive
such percentage of his target bonus as was equal to the Company's operating
income as a percentage of target operating income (e.g., if the Company's
operating income was 105% of target operating income, each executive would
receive 105% of his target bonus). Based on 1997 performance, no bonuses were
paid to any executive officer.
The Committee also uses stock options as a significant element of the
compensation package of executive officers, because it believes options provide
an incentive to executives to maximize stockholder value and because they
compensate executives only to the extent that the Company's stockholders receive
a return on their investment. Moreover, because options granted to executive
officers generally become exercisable over a five-year period and terminate upon
or shortly after the termination of the executive's employment with the Company,
stock options serve as a means of retaining these executives. In determining the
total number of
9
<PAGE> 12
shares of Common Stock to be covered by option grants to executive officers in a
given year, the Committee takes into account the number of outstanding shares of
Common Stock, the number of shares reserved for issuance under the Company's
option plan, recommendations of management concerning option grants to employees
below executive level, the Company's projected hiring needs for the coming year
and the recent performance of the Company. In making individual stock option
grants to executives, the Committee considers the same factors considered in the
determination of base salary levels, as well as the stock and option holdings of
each executive and the remaining vesting schedule of such executive's options.
OPTION REPRICING
As noted above, the Committee uses stock options as a significant element
of the compensation package of executive officers, because they align the
motivations and rewards of executive officers with those of the Company's
stockholders and because of the important retentive value served by the vesting
schedule of the options. The Committee believes that for these same reasons,
stock options are a critical component of the compensation package of all key
employees of the Company. Moreover, in light of the intense competition among
software companies in the Greater Boston area for highly skilled engineering,
sales and managerial personnel, the Committee believes that it is virtually
impossible to attract and retain high quality employees without a meaningful
stock option package to offer such employees.
The market value of the Common Stock of the Company, which was above $20.00
per share for virtually all of 1996, steadily decreased during the first several
months of 1997, and generally hovered between $3.00 and $5.00 per share from
late March through early June 1997. As a result of this significant decline,
virtually all of the outstanding stock options of the Company had exercise
prices in excess (and in many cases significantly in excess) of the market value
of the Common Stock. After several meetings, discussions with members of
management and discussions with other members of the Board of Directors, the
Committee concluded that the motivational and retentive value of the outstanding
stock options of the Company had been significantly diminished, and that it was
critical for the Company to restore the value of outstanding stock options as a
means of motivating and retaining employees in order to promote the successful
implementation of the Company's growth strategies.
Accordingly, on April 29, 1997, the Committee approved a stock option
exchange program, pursuant to which employees of the Company holding stock
options issued in 1995, 1996 or 1997 under the Company's 1994 Equity Incentive
Plan with an exercise price of $7.00 or more per share were given the
opportunity to exchange the unexercised portion of such options for new options
covering an equal number of shares and having an exercise price of $3.25 per
share (the fair market value of the Common Stock on such date). These new
options had substantially the same terms as the options cancelled in exchange
therefor, except that employees participating in the exchange were required to
forfeit all vesting and the five-year vesting schedule applicable to options of
the Company was restarted as of the date of grant of such new options.
In its deliberations over whether to authorize this stock option exchange
program, the Committee considered at length the potential disadvantages of such
an exchange program, including its dilutive effect on, and possible negative
reactions among, the existing stockholders of the Company. While fully cognizant
of the potential disadvantages of the stock option exchange program, it was the
conclusion of the Committee that, given the dependence of a software enterprise
such as the Company on skilled employees and the intense competition in the
Company's geographic region for such employees, the Company could not
realistically hope to implement its new business strategies and return to
profitability unless the stock option exchange program were implemented.
10
<PAGE> 13
SECTION 162(m)
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), certain executive compensation in excess of $1 million paid to the five
most highly-paid executives of the Company will not be deductible by the Company
for federal income tax purposes unless the compensation is awarded under a
performance-based plan approved by the stockholders of the Company. In general,
the Company's stock option plans are structured and administered in a manner
intended to comply with the performance-based exception to Section 162(m), thus
excluding from the Section 162(m) compensation limitation that income recognized
by executives pursuant to stock options. The Committee intends to periodically
review the potential effect of Section 162(m) and may in the future decide to
structure certain other executive compensation programs so that they comply with
the performance-based requirements of Section 162(m).
Compensation Committee
Paul J. Ferri
David C. Mahoney
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company between December 9, 1994 (the date the Company's
Common Stock commenced public trading) and December 31, 1997 with the cumulative
total return of (i) the CRSP Total Return Index for the Nasdaq Stock Market
(U.S.) (the "Nasdaq Composite Index") and (ii) the Standard and Poor's Computer
(Software & Services) Index (the "S&P Computer Index"), over the same period.
This graph assumes the investment of $100.00 on December 9, 1994 in the
Company's Common Stock, the Nasdaq Composite Index and the S&P Computer Index,
and assumes any dividends are reinvested.
<TABLE>
<CAPTION>
NASDAQ
Measurement Period COMPOSITE S&P COMPUTER
(Fiscal Year Covered) 'APPLIX, INC.' INDEX INDEX
<S> <C> <C> <C>
9-Dec-94 100 100 100
30-Dec-94 130 100 100
29-Dec-95 545 142 140
31-Dec-96 438 174 218
31-Dec-97 105 214 304
</TABLE>
12
<PAGE> 15
PROPOSAL TO APPROVE AN AMENDMENT TO THE
1994 EQUITY INCENTIVE PLAN OF THE COMPANY
The Company's 1994 Equity Incentive Plan (the "Plan") currently authorizes
awards of restricted stock and grants of incentive and non-statutory options to
employees, officers and employee directors of, and consultants and advisors to,
the Company and its subsidiaries to purchase up to 2,490,157 shares of the
Company's Common Stock. On March 23, 1998, the Board of Directors of the Company
adopted, subject to stockholder approval, an amendment (the "Amendment") to the
Plan, providing for an increase from 2,490,157 to 2,990,157 in the number of
shares of the Company's Common Stock available for issuance under the Plan. The
Board of Directors believes that awards under the Plan, including stock options,
have been and will continue to be an important compensation element in
attracting and retaining key employees who are expected to contribute to the
Company's growth and success. THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES
THAT THE AMENDMENT IS IN THE BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS,
AND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
SUMMARY OF THE PLAN
The Plan was adopted by the Company's Board of Directors on April 11, 1994
and approved by its stockholders on May 20, 1994, and will terminate on April
10, 2004, unless earlier terminated according to the terms of the Plan.
Stock options entitle the optionee to purchase Common Stock from the
Company for a specified exercise price during a period specified in the
applicable option agreement. Restricted stock awards under the Plan entitle the
recipient to purchase Common Stock from the Company under terms which provide
for vesting over a period of time and a right of repurchase in favor of the
Company of the unvested portion of the Common Stock subject to the award upon
the termination of the recipient's employment or other relationship with the
Company. As option grants and stock awards under the Plan are discretionary, the
Company cannot now determine the number of options to be granted or awards to be
made to any particular executive officer, executive officers as a group, or
non-executive officers and employees as a group. The maximum number of shares
with respect to which options or restricted stock awards may be granted to any
employee under the Plan in one calendar year may not exceed 250,000 shares of
Common Stock.
The Plan is administered by both the Board of Directors and its
Compensation Committee, which select the persons to whom restricted stock awards
and stock options are granted and determine the number of shares of Common Stock
covered by each award or option, its purchase price or exercise price, its
vesting schedule and (in the case of stock options) its expiration date.
As of February 28, 1998, 2,206,543 shares of Common Stock were issuable
pursuant to stock options outstanding under the Plan and 152,988 additional
shares remained available for future option grants or restricted stock awards
under the Plan. The outstanding stock options generally become exercisable over
a five-year period, are nontransferable, and expire either seven or 10 years
after the date of grant (subject to earlier termination in the event of the
termination of the optionee's employment with the Company). To date, no
restricted stock awards have been made under the Plan. As of February 28, 1998,
306 employees of the Company were eligible to receive options or restricted
stock awards under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to awards granted under the
Plan and with respect to the sale of Common Stock acquired under the Plan.
13
<PAGE> 16
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option may, however, subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises of a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO stock for more than
one year prior to the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary income, for the year in which the award is
granted, in an amount equal to the difference between the fair market value of
the Common Stock at the time the award is granted and the purchase price paid
for the Common Stock. If a Section 83(b) Election is not made, the participant
will recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The participant will have a basis in
the Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and
14
<PAGE> 17
the participant's basis in the Common Stock. The gain or loss will be a
long-term gain or loss if the shares are held for more than one year. For this
purpose, the holding period shall begin just after the date on which the
forfeiture provisions or restrictions lapse if a Section 83(b) Election is not
made, or just after the award is granted if a Section 83(b) Election is made.
OTHER STOCK-BASED AWARDS
The tax consequences associated with any other stock-based award granted
under the Plan will vary depending on the specific terms of such award,
including, whether or not the award has a readily ascertainable fair market
value, whether or not the award is subject to forfeiture provisions or
restrictions on transfer, the nature of the property to be received by the
participant under the award, the applicable holding period and the participant's
tax basis.
TAX CONSEQUENCES TO THE COMPANY
The grant of an award under the Plan will have no tax consequences to the
Company. Moreover, in general, neither the exercise of an incentive stock option
nor the sale of any Common Stock acquired under the Plan will have any tax
consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the Plan, including as a result of the
exercise of a nonstatutory stock option, a Disqualifying Disposition or a
Section 83(b) Election. Any such deduction will be subject to the limitations of
Section 162(m) of the Code. The Company will have a withholding obligation with
respect to any ordinary compensation income recognized by participants under the
Plan who are employees or otherwise subject to withholding.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand L.L.P. as
the Company's independent auditors for the current fiscal year. Coopers &
Lybrand L.L.P. has served as the Company's independent auditors since 1993.
Although stockholder approval of the Board of Directors' selection of Coopers &
Lybrand L.L.P. is not required by law, the Board of Directors believes that it
is advisable to give stockholders an opportunity to ratify this selection. If
this proposal is not approved at the Annual Meeting, the Board of Directors may
reconsider its selection.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
OTHER MATTERS
MATTERS TO BE CONSIDERED AT THE MEETING
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
15
<PAGE> 18
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and, as required by law, the Company will
reimburse them for their out-of-pocket expenses in this regard.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
not later than December 4, 1998 for inclusion in the proxy statement for that
meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by the directors and
executive officers of the Company pursuant to Section 16(a) of the Exchange Act
or written representations from certain persons required to file reports under
Section 16(a) of the Exchange Act that no Form 5 filing was required for such
person, the Company believes that during 1997 all filings required to be made by
its Reporting Persons were timely made in accordance with the requirements of
the Exchange Act.
By Order of the Board of Directors,
Patrick J. Rondeau, Clerk
March 27, 1998
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
16
<PAGE> 19
PROXY PROXY
APPLIX, INC.
ANNUAL MEETING OF STOCKHOLDERS -- May 8, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
The undersigned, having received notice of the meeting and management's
Proxy Statement therefor, and revoking all prior proxies, hereby appoint(s)
Patrick J. Scannell, Jr. and Patrick J. Rondeau, and each of them (with full
power of substitution), as proxies of the undersigned to attend the Annual
Meeting of Stockholders of Applix, Inc. (the "Company") to be held on Friday,
May 8, 1998 and any adjourned sessions thereof, and there to vote and act upon
the following matters in respect of all shares of Common Stock of the Company
which the undersigned would be entitled to vote or act upon, with all powers the
undersigned would possess if personally present.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company in
a fiduciary, custodial or joint capacity or capacities, this proxy is signed by
the undersigned in every such capacity as well as individually.
In their discretion, the named Proxies are authorized to vote upon such
other matters as may properly come before the meeting, or any adjournment
thereof.
1. To elect the following individuals as Class I Directors:
Paul J. Ferri FOR _ WITHHOLD AUTHORITY _
Jitendra S. Saxena FOR _ WITHHOLD AUTHORITY _
2. To approve an amendment to the Company's 1994 Equity Incentive Plan.
FOR ____ AGAINST ____ ABSTAIN ____
-2-
<PAGE> 20
PROXY PROXY
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the current fiscal year.
FOR _ AGAINST _ ABSTAIN _
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO OFFICE OR
PROPOSAL SPECIFIED ABOVE, THIS PROXY WILL BE VOTED FOR SUCH ELECTION TO OFFICE
OR PROPOSAL.
Signature(s)
Dated:
Please sign name(s) exactly as appearing hereon. When signing as attorney,
executor, administrator or other fiduciary, please give your full title as such.
Joint owners should each sign personally. If a corporation, sign in full
corporate name, by authorized officer. If a partnership, please sign in
partnership name, by authorized person.
-3-
