SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VIASOFT, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration No.
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3) Filing party:
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4) Date filed:
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[VIASOFT LOGO]
Managing the Business of Information Technology
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders of VIASOFT,
Inc. (the "Company") will be held at the Arizona Biltmore, 24th Street and
Missouri, Phoenix, Arizona on Friday, November 15, 1996 at 10:00 a.m. for the
following purposes:
1. To elect eight directors, each to serve until the next Annual Meeting
of Stockholders and until his successor has been elected and qualified;
2. To approve an amendment to the VIASOFT, Inc. Employee Stock Purchase
Plan, providing for an additional 400,000 shares for issuance under the
Plan;
3. To ratify the selection of Arthur Andersen LLP as independent auditors
of the Company for its fiscal year ending June 30, 1997;
4. Such other business as may properly come before the Annual Meeting.
Only stockholders of record at the close of business on September 20,
1996 are entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof. The Company shall make available an alphabetical list of
stockholders entitled to vote at the Annual Meeting for examination by any
stockholder. The stockholder list will be available for inspection at the
Company's principal office from November 4, 1996 until the Annual Meeting, and
at the Annual Meeting on November 15, 1996.
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended June 30, 1996 accompanies this Notice.
By Order of the Board of Directors
Catherine R. Hardwick
General Counsel and Secretary
Phoenix, Arizona
October 11, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES
MAY BE REPRESENTED AT THE MEETING.
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VIASOFT, Inc.
3033 North 44th Street
Phoenix, Arizona 85018
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PROXY STATEMENT
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For the 1996 Annual Meeting of Stockholders
November 15, 1996
This Proxy Statement is being first mailed on or about October 11, 1996
to stockholders of VIASOFT, Inc. (the "Company" or "VIASOFT") by the Board of
Directors (the "Board") to solicit proxies for use at the 1996 Annual Meeting of
Stockholders (the "Meeting") to be held at the Arizona Biltmore, 24th Street and
Missouri, Phoenix, Arizona on Friday, November 15, 1996, at 10:00 a.m., local
time, or at such other time and place to which the Meeting may be adjourned.
The only items of business which management currently intends to
present at the Meeting are listed in the preceding Notice of Annual Meeting of
Stockholders and are explained in more detail on the following pages.
Record Date and Voting Securities
The record date for determining the stockholders entitled to notice of
and to vote at the Meeting was the close of business on September 20, 1996 (the
"Record Date"), at which time the Company had issued and outstanding 16,793,124
shares of Common Stock, $0.001 par value ("Common Stock"). The Common Stock
constitutes the only class of outstanding voting shares of the Company.
Quorum, Proxies and Counting Votes
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the outstanding Common Stock entitled to vote is necessary to
constitute a quorum. Each stockholder of record on the Record Date is entitled
to one vote on each proposal or item that comes before the Meeting for each
share then held. Shares represented by proxies pursuant to which votes have been
withheld from any nominee for director, or which contain one or more
abstentions, are counted as present or represented for purposes of determining
the presence or absence of a quorum for the Meeting.
An inspector of elections appointed by the Board shall determine the
shares represented at the Meeting and the validity of proxies and shall count
all votes. The vote on each matter submitted to stockholders is tabulated
separately. If a stockholder marks "Abstain" with respect
<PAGE>
to any proposal on his proxy, his shares will be counted in the number of votes
cast, but will not be counted as a vote for or against the proposal. A "broker
non-vote" occurs when a broker or other nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because, with
respect to such other proposal, the broker does not have discretionary voting
power and has not received instructions from the beneficial owner. In the event
of a broker non-vote, those shares will be counted as present for purposes of
determining the presence or absence of a quorum. However, those shares will not
be considered present and entitled to vote with respect to the matter for which
the broker does not have discretionary authority.
All shares represented by valid proxies will be voted in accordance
with the directions specified on each proxy. Any proxy on which no direction is
specified will be voted FOR Proposals 1, 2 and 3. By returning the proxy, a
stockholder also authorizes management to vote his shares in accordance with
management's best judgment in response to other proposals that properly come
before the Meeting.
Revocation of Proxies
A stockholder may revoke his signed proxy at any time before it is
exercised at the Meeting. A stockholder may do this by advising the transfer
agent in writing of his desire to revoke his proxy, by submitting a duly
executed proxy dated subsequent to the original proxy, or by attending the
Meeting and voting in person. Please note, however, that if a stockholder's
shares are held of record by a broker, bank or other nominee and that
stockholder wishes to vote at the Meeting, the stockholder must bring to the
Meeting a letter from the broker, bank or other nominee confirming that
stockholder's beneficial ownership of the shares. Written notification to the
transfer agent, Harris Trust and Savings Bank, must be delivered to Shareholder
Services, 311 West Monroe Street, 11th Floor, Chicago, IL 60606.
Soliciting Proxies
The expenses of soliciting proxies to be voted at the Meeting,
including the cost of preparing, printing, and mailing the Notice of Annual
Meeting of Stockholders, this Proxy Statement and the accompanying proxy card,
will be paid by the Company. Following the original mailing of the proxies and
other soliciting materials, the Company and/or its agents may also solicit
proxies by mail, telephone, facsimile, telegraph or in person. The Company has
also retained Corporate Investor Communications, Inc., 111 Commerce Road,
Carlstadt, NJ 07072, to assist in the solicitation of proxies, for an
approximate cost of $2,250, plus reasonable expenses. Brokers and other persons
holding stock in their names, or in the names of nominees, will be requested to
forward proxy material to the beneficial owners of the stock and to obtain
proxies, and the Company will defray reasonable expenses incurred in forwarding
such material.
2
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Proposal No. 1
ELECTION OF DIRECTORS
Each of the persons named below has been nominated for election as a
director of the Company until the 1997 Annual Meeting of Stockholders or until
his successor has been duly elected and qualified. Each of the nominees listed
below was elected by the stockholders at the last annual meeting and is
currently a director. All of the nominees have agreed to serve if elected. The
Board knows of no reason why any such nominee should be unable to serve, but if
such should be the case, the shares represented by duly executed proxies
received by the Company will be voted for the election of a substitute nominee
selected by the Board.
Directors are elected by a plurality of the shares present, in person
or by proxy, and entitled to vote at the Meeting, provided that a quorum is
present. Votes may be cast FOR the nominees or WITHHELD. In addition, a
stockholder may indicate that he or she is voting FOR the nominees except for
nominees specified in writing on the proxy card. The eight nominees who receive
the greatest number of votes cast FOR the election of such nominees shall be
elected as Directors. As a result, any vote other than a vote FOR the nominee
will have the practical effect of voting AGAINST the nominee.
Nominees
The names of the nominees and certain information about them, as of
August 30, 1996, are set forth below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Position Since
- --------------- --- -------- -----
<S> <C> <C> <C>
A. LeRoy Ellison 59 Chairman of the Board and Director 1984
Steven D. Whiteman 45 Chief Executive Officer, President and Director 1994
Michael A. Wolf 44 Executive Vice President, Chief Technology Officer 1994
and Director
John J. Barry III(1) 56 Director 1991
Robert C. Kagle(1)(2) 40 Director 1986
Alexander S. Kuli 51 Director 1994
J. David Parrish 54 Director 1994
Arthur C. Patterson(1)(2) 52 Director 1984
</TABLE>
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(1) Member of Compensation Committee
(2) Member of Audit and Finance Committee
A. LeRoy Ellison has served as a director of the Company since March
1984 and has been Chairman of the Board since June 1984. Mr. Ellison served as
President for the period October 1990 to May 1993 and Chief Executive Officer of
the Company for the period October 1990 to January 1994. Mr. Ellison is also a
director of Syntellect, Inc., an interactive voice response systems company, and
several privately held companies.
3
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Steven D. Whiteman has served as President of the Company since May
1993 and Chief Executive Officer and a director since January 1994. Prior to
holding these offices, Mr. Whiteman served as Vice President of Sales and
Marketing of the Company from December 1990.
Michael A. Wolf has served as Chief Technology Officer of the Company
since October 1993, Executive Vice President since May 1993 and a director since
January 1994. Mr. Wolf served as Vice President of Development of the Company
from November 1984 to May 1993, and Secretary from March 1986 to April 1994.
John J. Barry III has served as a director of the Company since August
1991. Mr. Barry is the Chairman, President and Chief Executive Officer of
Petroleum Information Corporation, an energy industry information solutions
company, in Houston, Texas, a position held since May 1991. Mr. Barry serves on
the boards of directors of several privately held companies.
Robert C. Kagle has served as a director of the Company since April
1986. Mr. Kagle is a general partner of Benchmark Capital, a venture capital
firm. In addition, he has been a general partner of various TVI Management
partnerships which are general partners of Technology Venture Investors
partnerships, private venture capital investment funds, since 1986. Mr. Kagle
also serves on the board of directors of Avant! Corporation, as well as the
boards of several other privately held technology companies.
Alexander S. Kuli has served as a director of the Company since January
1994. Mr. Kuli is currently Vice President, Worldwide Sales for Tivoli Systems,
Inc., a vendor of distributed software products, a position held since January
1993. Prior to joining Tivoli, Mr. Kuli served as Vice President, Worldwide
Sales for Candle Corporation, a vendor of mainframe systems performance
management software, from October 1985 through December 1992.
J. David Parrish has served as a director of the Company since January
1994. Mr. Parrish is currently the Senior Vice President, North America Region
for Walker Interactive Systems, Inc., a financial application software company,
a position held since November 1989.
Arthur C. Patterson has served as a director of the Company since
September 1984. He served as President of the Company from October 1984 to June
1985. Mr. Patterson is a founder and Managing Partner of Accel Partners, a
venture capital firm. Mr. Patterson also serves on the board of directors of
G.T. Global Group of Investment Companies, PageMart Wireless, Inc. AXENT
Technologies, Inc., and Unify Corporation, as well as several other privately
held technology companies.
4
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Board of Directors Meetings and Committees
Board Committees
The Board is responsible for the overall affairs of the Company. To
assist it in carrying out this responsibility, the Board has delegated certain
authority to designated committees, the current membership and duties of which
are as follows:
Audit & Finance Committee Compensation Committee
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Arthur C. Patterson, Chair John J. Barry III, Chair
Robert C. Kagle Robert C. Kagle
Arthur C. Patterson
Audit and Finance Committee. The Audit and Finance Committee of the
Board reviews the internal accounting procedures of the Company and consults
with and reviews the services provided by the Company's independent public
accountants. This Committee met twice during the last fiscal year.
Compensation Committee. The Compensation Committee of the Board reviews
and recommends to the Board the compensation and benefits of all executive
officers of the Company and reviews general policy relating to compensation and
benefits of employees of the Company. The Compensation Committee also
administers the issuance of stock options and other awards under the Company's
stock plans. The Compensation Committee met once during the last fiscal year.
Nominations. The Company does not have a standing nominating committee.
The function of nominating directors is carried out by the entire Board.
Pursuant to the Company's Bylaws, a stockholder may nominate persons for
election as director, provided that the stockholder (a) is a stockholder of
record at the time of the nomination and is entitled to vote at the meeting of
stockholders to which the nomination relates, and (b) complies with the notice
procedures of Article III of the Bylaws. That section provides that the
nominating stockholders must deliver written notice of the nomination to the
Company's Secretary not earlier than the 90th day nor later than the 60th day
prior to the first anniversary of the preceding year's annual meeting. The
required notice must contain certain information, including information about
the nominee, as prescribed in the Bylaws. The deadline for a stockholder to
deliver notice of a nomination for the election of directors at the 1996 Annual
Meeting of Stockholders was September 16, 1996. No nominations were received
from any stockholder for the Meeting.
Board Meetings
The Board met six times during the fiscal year ended June 30, 1996. All
directors attended more than 75% of the aggregate of the total number of
meetings of the Board except Directors Kuli and Parrish.
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Director Compensation
In accordance with the Company's policy, non-employee directors receive
a $500.00 fee for each Board and Committee meeting attended plus reasonable,
out-of-pocket expenses incurred in attending such meetings. Directors who are
employees of the Company do not receive additional compensation for serving as a
director or committee member. In addition, at each annual meeting of
stockholders of the Company beginning with the Company's 1996 annual meeting,
each non-employee director who is re-elected to the Board shall be automatically
granted an option to purchase 10,000 shares of Common Stock under the terms and
conditions of the Company's Outside Director Stock Option Plan (the "Director
Plan"). The exercise price for such options shall be the closing price of Common
Stock on that date. Each person who in the future is elected for the first time
to be a non-employee director of the Company shall be automatically granted an
option to purchase 20,000 shares of Common Stock, at the closing price of the
Common Stock on the grant date, under the terms and conditions of the Director
Plan.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE NOMINATED DIRECTORS
6
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Proposal No. 2
APPROVAL OF INCREASE IN NUMBER OF SHARES FOR THE
VIASOFT, INC. EMPLOYEE STOCK PURCHASE PLAN
On September 25, 1996, the Board adopted, subject to stockholder
approval, an amendment to the Company's Employee Stock Purchase Plan (the
"Purchase Plan") to increase the number of shares of Common Stock available for
issuance under the Purchase Plan by 400,000 shares. The Purchase Plan was
adopted by the Board in August 1994 and approved by the stockholders in November
1994 as a qualified employee stock purchase plan under Section 423 of the Code.
Currently, the total number of shares reserved for issuance under the Purchase
Plan is 400,000. To date, 214,722 shares of Common Stock have been issued under
the Purchase Plan and the Company estimates that up to an additional 140,000
shares will be issued on the next purchase date, October 31, 1996, for a total
of approximately 354,722 shares issued under the Purchase Plan. With stockholder
approval of the amendment adopted by the Board, the total number of shares of
Common Stock available for issuance under the Purchase Plan (including shares
previously issued) will increase from 400,000 to 800,000 shares. The additional
shares of Common Stock will be made available either from the authorized but
unissued shares of the Company's Common Stock or from shares of Common Stock
reacquired by the Company, including shares repurchased on the open market.
Approval of the amendment to the Purchase Plan requires the affirmative
vote of a majority of the shares present, in person or by proxy, and entitled to
vote at the Meeting, provided that a quorum is present. Votes may be cast FOR or
AGAINST the proposal, and stockholders may also ABSTAIN from voting on the
proposal. Abstentions on the proposal will be counted toward a quorum and will
have the same effect as a vote AGAINST the proposal. Broker "non-votes" are
counted toward a quorum, but are not considered present with respect to this
proposal and have the practical effect of reducing the number of affirmative
votes required to achieve a majority for the proposal by reducing the total
number of shares from which the majority is calculated.
The essential features of the Purchase Plan, none of which are affected
by the proposed amendment, are summarized below:
Purpose
The Purchase Plan is designed to allow eligible employees to purchase
shares of Common Stock, at semi-annual intervals, through periodic payroll
deductions.
7
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Administration
The Purchase Plan became effective February 28, 1995. The Compensation
Committee of the Board is responsible for plan administration.
Eligible Employees
Each full-time employee who is customarily employed by the Company or
any participating subsidiary for more than five months per calendar year and
more than 20 hours per week is eligible to participate in the Purchase Plan. As
of June 30, 1996, approximately 198 of the 216 eligible employees of the Company
were enrolled in the Purchase Plan, at varying payroll deduction amounts and
percentages of salary.
Option Terms
Offering Periods
----------------
The Purchase Plan is implemented in a series of successive offering
periods, each with a duration of up to twenty-seven (27) months. However, the
initial offering period will end on the last business day in April 1997. An
individual who is an eligible employee on the first day of a particular offering
period must join that offering period on the starting date; otherwise, he or she
will not be eligible to join that offering period at a later date. Individuals
who first become eligible employees after the start of a particular offering
period may join that offering period on the first semi-annual entry date
thereafter (November 1 or May 1). At the time the participant joins the offering
period, he or she will be granted a purchase right to acquire shares of Common
Stock at semi-annual intervals over the remainder of that offering period. The
purchase dates will occur on the last business day in April and October each
year, and all payroll deductions collected from the participant for the
semi-annual period of participation ending with such purchase date will
automatically be applied to the purchase of Common Stock.
Purchase Price
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The purchase price per share under the Purchase Plan will be
eighty-five percent (85%) of the lower of (i) the fair market value of the
Common Stock on the participant's entry date into the offering period or (ii)
the fair market value on the semi-annual purchase date. For any participant who
first joins the offering period after the start date, the clause (i) amount will
not be less than the fair market value of the Common Stock on such start date.
The fair market value on the first entry date under the Purchase Plan, as
adjusted for the Company's 1996 two-for-one stock split in the form of a stock
dividend, was $4.00. The fair market value on any subsequent date will be the
closing selling price of the Common Stock on the date in question, as quoted on
The Nasdaq Stock Market (or principal stock exchange if then so traded).
8
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Purchase Limitations
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The purchase price is to be paid through periodic payroll deductions
not to exceed 10% of the participant's total compensation (as defined in the
Purchase Plan) during each semi-annual period of participation within the
offering period, but in no event more than $7,500 per semi-annual period.
However, no participant may purchase more than 2,000 shares on any semi-annual
purchase date nor more than $25,000 worth of Common Stock (based on the fair
market value of the Common Stock on his or her entry date into the offering
period) in any one calendar year. In addition, not more than 200,000 shares in
the aggregate may be purchased by all participants on any one semi-annual
purchase date.
Restrictions on Transfer
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Options received under the Purchase Plan, as well as payroll deductions
credited to a participant's account, may not be sold, assigned or otherwise
transferred, other than by will or the laws of descent and distribution and
other limited statutory rights. Any attempted transfer shall be without effect,
except that the Company may treat such an act as an election to terminate
participation in an offering period.
Duration, Termination of the Purchase Plan
The Company shall have the right, exercisable in the sole discretion of
the Committee, to terminate all outstanding purchase rights under the Purchase
Plan immediately following the close of any semi-annual period. If the Company
elects to exercise this right, the plan shall terminate in its entirety. If not
terminated sooner, the Purchase Plan shall terminate upon the earlier of: (a)
December 31, 2003 or (b) the date on which all shares available for issuance
under the Purchase Plan shall have been issued.
Federal Income Tax Information
Options and shares purchased by participants under the Employee Stock
Purchase Plan are subject to certain federal income tax consequences pursuant to
Section 423 of the Code. No taxable income is recognized by a participant upon
the grant of a right to purchase, or upon the purchase of shares, under the
Purchase Plan. The amount of a participant's payroll contributions under the
Purchase Plan, however, remains taxable as ordinary income to the participant at
the time of the payroll deduction. Additionally, there are no federal tax
consequences to the Company upon the grant of a right to purchase to a
participant, or upon a participant's purchase of shares, under the Purchase
Plan.
If the shares of Common Stock are sold or disposed of at least two
years after the first day of a subscription period with respect to which the
participant purchases the shares and at least one year after the date of
purchase, then the participant will recognize ordinary income equal to the
lesser of (a) the excess of the fair market value of the shares at the time of
such disposition over the purchase price of the shares, or (b) the excess of the
fair market value of the shares on the date of grant of purchase rights over the
purchase price. Any further gain upon such disposition
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will be taxed as a long-term capital gain at the income tax rate then in effect.
If the shares are sold and the sale price is less than the purchase price, then
there is no ordinary income, and the participant will have a long-term capital
loss equal to the difference between the sale price and the purchase price. The
ability of a participant to utilize such a capital loss will depend upon the
participant's other tax attributes and other statutory limitations.
If a participant sells or otherwise transfers shares less than two
years after the first day of a subscription period with respect to which he or
she purchases the shares or within one year after the date of purchase (a
"disqualifying disposition"), then at that time the participant will realize
ordinary income in an amount equal to the fair market value of the shares on the
date of purchase minus the purchase price of the shares. This excess will
constitute ordinary income for the year of sale or other disposition even if no
gain is realized on the sale or a gratuitous transfer of shares is made. The
balance of the gain will be taxed as a capital gain at the rate then in effect.
If the shares of Common Stock are sold for less than their fair market value on
the date of purchase, then the same amount or ordinary income will be attributed
to the participant and a capital loss will be recognized equal to the difference
between the sale price and the fair market value of the shares on the date of
purchase. The ability of a participant to utilize such a capital loss will
depend upon the participant's other tax attributes and other statutory
limitations.
In the event of a disqualifying disposition, the Company will recognize
a tax deduction in an amount equal to the fair market value of the shares on the
date of sale minus the participant's purchase price. If a participant does not
make a disqualifying disposition, then the Company will have no federal tax
consequences.
Amendment
The Board of Directors may alter, amend, suspend or discontinue the
plan following the close of any semi-annual period. However, the Board may not,
without the approval of the Company's stockholders, materially increase the
number of shares issuable under the plan or the maximum number of shares which
may be purchased per participant or in the aggregate during any one semi-annual
period, except that the Committee shall have the authority, exercisable without
such stockholder approval, to effect adjustment to the extent necessary to
reflect changes in the Company's capital structure. In addition, the Board may
not alter the exercise price formula so as to reduce the exercise price payable
for the shares usable under the plan, or materially increase the benefits
accruing to participants under the plan or materially modify the requirements
for eligibility to participate in the plan, without approval of the Company's
stockholders.
Market Price
The market price of the Company's Common Stock as of August 30, 1996,
was $29.75, based on the closing price as reported by The Nasdaq Stock Market,
and as adjusted for the Company's two-for-one stock split.
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The following table sets forth shares acquired under the Purchase Plan
during the fiscal year ended June 30, 1996 by (i) each Named Executive Officer
(defined below); (ii) all current executive officers as a group; (iii) all
current directors who are not executive officers as a group; and (iv) all
employees, including all officers who are not executive officers, as a group.
Purchases by no person represented more than 5% of all purchases under the
Purchase Plan. Participation in the Purchase Plan is voluntary and is dependent
on each eligible employee's election to participate and his or her determination
as to the level of payroll deductions. Accordingly, future purchases and pricing
information under the Purchase Plan are not yet determinable.
New Plan Benefits
- --------------------------------------------------------------------------------
Employee
Stock Purchase Plan
- --------------------------------------------------------------------------------
Name and Position Purchase Price Number of Shares
(Per Share)(1)
- --------------------------------------------------------------------------------
Steven D. Whiteman $3.40 3,758
President and Chief
Executive Officer
Michael A. Wolf $3.40 4,000
Executive Vice President and
Chief Technology Officer
Kevin M. Hickey $3.40 3,912
Senior Vice President, Sales
and Marketing - Americas
Colin J. Reardon -------(2) -------(2)
Vice President, International
Operations
Catherine R. Hardwick $3.40 3,600
General Counsel and Secretary
Executive Group (7 persons) $3.40 15,270
Non-executive Director -------(3) -------(3)
Group (6 persons)
Non-executive Officer $3.40 - $5.79 199,452
Employee Group
(1) The purchase price for each participant was eighty-five percent (85%) of
the fair market value of the Common Stock on such participant's entry date.
(2) Mr. Reardon was not eligible to participate in the Purchase Plan.
(3) Non-employee directors are not eligible to participate in the Purchase
Plan.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 2
11
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Proposal No. 3
RATIFICATION OF INDEPENDENT AUDITORS
The Board, upon the recommendation of its Audit and Finance Committee,
has selected Arthur Andersen LLP as the Company's independent auditors for the
fiscal year ending June 30, 1997, and has further directed that management
submit the selection of independent auditors for ratification by the
stockholders at the Meeting. Arthur Andersen LLP began auditing the Company's
financial statements with the fiscal year ended June 30, 1984. Representatives
of Arthur Andersen LLP are expected to be present at the Meeting, will have the
opportunity to make a statement if they wish to do so and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Arthur Andersen LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Arthur Andersen LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the election, the Audit and Finance Committee
and the Board will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit and Finance Committee and the Board in their
discretion may direct the appointment of different independent auditors at any
time during the year if they determine that such an appointment would be in the
best interests of the Company and its stockholders.
Ratification of Arthur Andersen LLP as the Company's independent
auditors for the current fiscal year requires the affirmative vote of a majority
of the shares present, in person or by proxy, and entitled to vote at the
Meeting, provided that a quorum is present. Votes may be cast FOR or AGAINST the
proposal, and stockholders may also ABSTAIN from voting on the proposal.
Abstentions on the proposal will be counted toward a quorum and will have the
same effect as a vote AGAINST the proposal. Broker "non-votes" are counted
toward a quorum, but are not considered present with respect to this proposal
and have the practical effect of reducing the number of affirmative votes
required to achieve a majority for the proposal by reducing the total number of
shares from which the majority is calculated.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 3
12
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Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of August 30, 1996, by (a) each
stockholder who is known by the Company to own beneficially more than 5% of the
Common Stock, (b) each Named Executive Officer (defined below) of the Company,
(c) each director of the Company, and (d) all directors and executive officers
of the Company as a group. The shares as listed below are adjusted for the
Company's two-for-one stock split in the form of a stock dividend to holders of
record on August 30, 1996.
Amount and Nature
of Beneficial
Name and Address of Beneficial Owner Ownership(1) Percent
- ------------------------------------------------- ------------ -------
Putnam Investments, Inc. (2) 2,216,000 13.2%
One Post Office Square
Boston, Massachusetts 02109
A. LeRoy Ellison (3) 612,564 3.6%
Arthur C. Patterson(4) 337,519 2.0%
Steven D. Whiteman (5) 320,509 1.9%
Michael A. Wolf (6) 264,865 1.6%
Robert C. Kagle(7) 78,357 *
John J. Barry III 56,412 *
J. David Parrish (8) 18,447 *
Colin J. Reardon (9) 18,336 *
Alexander S. Kuli (10) 17,779 *
Kevin M. Hickey (11) 10,162 *
Catherine R. Hardwick(12) 5,600 *
All Executive Officers and Directors as a Group (13) 1,740,550 10.3%
(12 persons)
- ------------------------
* Represents beneficial ownership of less than 1%.
13
<PAGE>
(1) Except as otherwise noted, and subject to community property laws where
applicable, each of the stockholders named in the table has sole voting
and investment power with respect to all shares shown as beneficially
owned by the stockholder. Applicable percentages are based on
16,793,124 shares of Common Stock outstanding as of August 30, 1996,
adjusted as required by rules promulgated by the SEC.
(2) Represents (a) 2,058,800 held by Putnam Investment Management, Inc.
("PIM") and (b) 157,200 shares held by The Putnam Advisory Company,
Inc. ("PAC"), each a registered investment adviser under the Investment
Advisers Act of 1940. PIM and PAC are deemed to be beneficial owners of
the shares held by their respective investment advisory clients. Putnam
Investment, Inc. ("PI"), a wholly owned subsidiary of Marsh & McLennan
Company, Inc. ("M&McL"), is the sole owner of PIM and PAC. PI and M&McL
disclaim the power to vote or dispose of, or to direct the voting or
disposition of, any of the securities owned by PIM and PAC.
(3) Represents shares held by the Allen LeRoy Ellison Family Trust, of
which Mr. Ellison is trustee and a beneficiary.
(4) Represents (a) 64,952 shares held by Accel Capital L.P.; (b) 43,318
shares held by Accel Capital (International) L.P.; (c) 59,784 shares
held by Ellmore C. Patterson Partners; (d) 396 shares held by Hamilton
Assets Ltd., a Bermuda corporation of which Mr. Patterson owns one-half
of the voting shares; and (e) 169,069 shares held by Mr. Patterson
individually, including 7,500 shares held by Mr. Patterson's spouse and
two minor children, and 17,779 shares that Mr. Patterson may acquire
upon the exercise of options exercisable within 60 days of August 30,
1996. Accel Associates L.P. is the general partner of Accel Capital
L.P. and has sole voting and investment power over the shares held by
Accel Capital L.P. Accel Associates (International) L.P. is the general
partner of Accel Capital (International) L.P. and has sole voting and
investment power over the shares held by Accel Capital (International)
L.P. The general partners of Accel Associates L.P. and Accel Associates
(International) L.P. are James R. Swartz, Arthur C. Patterson and Paul
H. Klingenstein. Mr. Patterson, a director of the Company, is the sole
general partner of Ellmore C. Patterson Partners. Mr. Patterson, Mr.
Klingenstein and Mr. Swartz disclaim beneficial ownership in the shares
held by these entities except to the extent of their respective
pecuniary interests therein arising from their general partnership
interests in the entities.
(5) Includes 80,000 shares held by a trust for the benefit of Steven D. and
Beverly C. Whiteman, of which Mr. Whiteman is trustee, and 48,751
shares that Mr. Whiteman may acquire upon the exercise of options
exercisable within 60 days of August 30, 1996.
(6) Includes shares held by a trust of which Mr. Wolf is trustee and
beneficiary, and 37,501 shares that Mr. Wolf may acquire upon the
exercise of options exercisable within 60 days of August 30, 1996.
(7) Represents 60,578 shares held by Mr. Kagle in trust and 17,779 shares
that Mr. Kagle may acquire individually upon the exercise of options
exercisable within 60 days of August 30, 1996.
(8) Includes 17,779 shares that Mr. Parrish may acquire upon the exercise
of options exercisable within 60 days of August 30, 1996.
14
<PAGE>
(9) Represents 18,336 shares that Mr. Reardon may acquire upon the exercise
of options exercisable within 60 days of August 30, 1996.
(10) Represents 17,779 shares that Mr. Kuli may acquire upon the exercise of
options exercisable within 60 days of August 30, 1996.
(11) Includes 6,250 shares that Mr. Hickey may acquire upon the exercise of
options exercisable within 60 days of August 30, 1996.
(12) Includes 2,000 shares that Ms. Hardwick may acquire upon the exercise
of options exercisable within 60 days of August 30, 1996.
(13) Includes 183,954 shares that such executive officers and directors may
acquire upon the exercise of options exercisable within 60 days of
August 30, 1996.
Management
Executive Officers
The executive officers of the Company are elected to serve annual terms
at the first Board meeting following the Meeting. Certain information concerning
the Company's executive officers is set forth below:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Steven D. Whiteman 45 Chief Executive Officer, President and Director
Michael A. Wolf 44 Executive Vice President, Chief Technology Officer
and Director
Mark R. Schonau 40 Vice President, Finance and Administration; Chief Financial
Officer; Treasurer
Catherine R. Hardwick 37 General Counsel and Secretary
Kevin M. Hickey 38 Senior Vice President, Americas Operations
Colin J. Reardon 43 Vice President, International Operations
Jean-Luc G. Valente 36 Vice President, Marketing
</TABLE>
Executive Compensation
The following table sets forth all compensation received for services
rendered to the Company in all capacities during the fiscal years ended June 30,
1996, 1995 and 1994 by the Company's Chief Executive Officer and each of the
Company's four other most highly compensated executive officers, which ranking
is based on salary and bonus earned during the fiscal year ended June 30, 1996
(together, the "Named Executive Officers").
15
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation Awards(1)
----------------------- ------------------------
Restricted Securities All
Fiscal Stock Underlying Other
Name and Principal Position Year Salary Bonus Award(s)(2) Options Compensation
- ------------------------------------------- ---- ------ ----- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven D. Whiteman 1996 $186,000 $ 81,500 --- --- $1,954(6)
President and Chief Executive Officer 1995 $175,000 $ 84,000 --- 130,000 ---
1994 $160,000 $ 96,725 $0(3) --- ---
Michael A. Wolf 1996 $169,000 $ 47,250 --- --- $1,468(6)
Executive Vice President and Chief 1995 $160,000 $ 63,350 --- 100,000 ---
Technology Officer 1994 $151,875 $ 64,945 $0(4) --- ---
Kevin M. Hickey 1996 $132,000 $ 151,003 --- --- $2,110(6)
Senior Vice President, Sales and 1995 $120,000 $ 97,681 --- 100,000 ---
Marketing -- Americas 1994 $110,016 $ 122,703 --- 30,000 ---
Colin J. Reardon 1996 $148,530 $ 80,872 --- --- $6,967(7)
Vice President, International Operations 1995(5) $133,211 $ 113,270 --- 146,668 $1,219(7)
Catherine R. Hardwick 1996(8) $104,000 $ 14,875 --- 15,000 $1,563(6)
General Counsel and Secretary
</TABLE>
(1) All references to numbers of shares in this table and the corresponding
footnotes have been adjusted to account for the Company's two-for-one
stock split, in the form of a stock dividend to record holders on
August 30, 1996.
(2) Prior to the Company's initial public offering in March 1995, the
Common Stock of the Company had not been publicly traded. The Board, in
connection with sales of restricted stock to officers and directors
from time to time, determined the fair market value of the Common Stock
as of the sale date. For the purpose of calculating the value of
restricted stock acquisitions on the date of purchase, the Company has
used the Boards' determination of fair market value made on the date of
purchase. All restricted stock purchased by the Named Executive
Officers is subject to the Company's option to repurchase such shares
upon termination of employment and certain other events. The Company's
repurchase option expires as to an equal portion of the restricted
stock annually over periods from four to five years. Holders of
restricted stock are entitled to receive any dividends declared on the
Company's Common Stock.
(3) Mr. Whiteman purchased 100,000 shares of restricted stock on January
18, 1994 and 66,668 shares of restricted stock on October 12, 1993 at
the then current fair market value as determined by the Board. The
purchase price for these shares was paid through cash payments and
execution of full-recourse promissory notes. Mr. Whiteman's aggregate
restricted stock holdings as of June 30, 1996 were 300,000 shares,
valued (net of the purchase prices paid) at $9,603,749. Restricted
stock is entitled to full voting and dividend rights.
(4) Mr. Wolf purchased 40,000 shares of restricted stock on October 12,
1993 at the then current fair market value as determined by the Board.
The purchase price of these shares was paid through a cash payment and
execution of a full-recourse promissory note. Mr. Wolf's aggregate
restricted stock holdings as of June 30, 1996, were 89,576 shares,
valued (net of the purchase prices paid) at $2,870,140. Restricted
stock is entitled to full voting and dividend rights.
(5) Mr. Reardon commenced his employment with the Company on August 1,
1994.
16
<PAGE>
(6) Amounts represent Company matching contributions under the 401(k)
Profit Sharing Plan and Trust.
(7) The Company provides a contribution to Mr. Reardon's private pension
plan that matches his private contributions, up to a maximum of 5% of
his base salary per year. The Company's matching contribution is paid
directly to the pension company administering Mr. Reardon's account, on
a monthly basis. The contribution obligation began on May 1, 1995.
(8) Ms. Hardwick was elected to the position of General Counsel and
Secretary on January 24, 1996.
Option Grants, Exercises And Fiscal Year-End Values
The following table sets forth certain information regarding stock
option grants to the Named Executive Officers during the fiscal year ended June
30, 1996. The number of shares and the exercise prices have been adjusted for
the two-for-one stock split, in the form of a stock dividend to holders of
record on August 30, 1996.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(4)
--------------------------------------------------------- -------------------------
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees in Exercise or
Options Fiscal Base Price Expiration
Name Granted Year(2) ($/Share)(3) Date 5% 10%
- ---- ------- ------- ----------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Steven D. Whiteman --
Michael A. Wolf --
Kevin M. Hickey --
Colin J. Reardon --
Catherine R. Hardwick 15,000(1) 3.36% $ 11.0625 4/11/2002 $ 56,434.62 $128,030.90
</TABLE>
(1) The options granted are incentive stock options issued under the
Company's 1994 Equity Incentive Plan. Twenty-five percent of these
options become exercisable on April 11, 1997 and cumulatively
thereafter, 6.25% of the shares shall become exercisable at the end of
each three-month period.
(2) Based on an aggregate of 446,800 shares subject to options granted to
employees in the fiscal year ended June 30, 1996.
17
<PAGE>
(3) The exercise price per share under each option was equal to the fair
market value of the Common Stock on the date of grant.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options were granted
to their expiration date and are not presented to forecast possible
future appreciation, if any, in the price of the Common Stock. The
gains shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise of
the options or the sale of the underlying shares. The actual gains, if
any, on the stock option exercises will depend on the future
performance of the Common Stock, the optionee's continued employment
through applicable vesting periods and the date on which the options
are exercised.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Fiscal 1996
and Fiscal Year-End Option Values
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options
Name Exercise Realized(1) Options at Fiscal Year End (#) At Fiscal Year End ($)(2)
- ---- -------- ----------- ------------------------------ -------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Steven D. Whiteman -- -- 40,627/89,373 $1,150,251.94/$2,530,373.06
Michael A. Wolf 8,534 62,724.90 31,252/68,748 $884,822.25/$1,946,427.75
Kevin M. Hickey 44,000 424,400.00 49,253/120,081 $1,459,729.19/$3,566,975.44
Colin J. Reardon 25,332 263,325.00 13,004/108,332 $368,177.00/$3,100,483.50
Catherine R. Hardwick -- -- 2,000/23,000 $56,625.00/$545,250.00
</TABLE>
(1) The "Value Realized" reflects the appreciation on the date of exercise,
based on the excess of the fair market value of the shares on the date
of exercise over the exercise price. These amounts do not necessarily
reflect cash realized upon the sale of those shares, as an executive
officer may keep the shares exercised, or sell them at a different time
and price.
(2) The "Value" set forth in this column is based on the difference between
the fair market value at June 30, 1996 ($32.3125 per share as quoted on
The Nasdaq Stock Market and as adjusted for the Company's subsequent
two-for-one stock split), and the option exercise price, multiplied by
the number of shares underlying the option
Employment Agreements
Mr. Colin Reardon was employed by the Company effective August 1, 1994.
At that time, the Company entered into an employment agreement with Mr. Reardon
which sets forth the basic terms of his employment, including salary, working
hours and holidays, vacation and sick time and a car allowance. In addition, the
agreement provides that it is terminable by either party upon six months written
notice and that the Company may pay Mr. Reardon his salary and contractual
benefits for the six month period in lieu of notice.
18
<PAGE>
Mr. Hickey has an agreement with the Company that in the event of his
termination, without cause, the Company will continue to pay his base salary and
health benefits for a period of six months after the termination.
Pursuant to the terms of various purchase agreements between the
Company and each of the executive officers relating to stock options and
restricted stock, the Company has agreed to accelerate the vesting of options,
or waive its right of repurchase, in the case of restricted stock, in the event
of a change of control of the Company (as defined in the applicable agreement).
Restricted stock agreements and stock options granted under the 1986 Stock
Option Plan provide that one-half of the shares subject to the agreement would
automatically vest if the executive officer's employment is terminated or if he
suffers a material reduction in his level of responsibility and authority within
six months after a change of control of the Company. The 1994 Equity Incentive
Plan provides that all outstanding options and other awards granted thereunder
vest automatically upon a change in control.
Report of the Compensation Committee
The Compensation Committee of the Board (the "Committee") is made up of
three non-management directors. Working with the chief executive officer, the
Committee is responsible for developing and implementing compensation policies
and programs for the executive officers of the Company.
Compensation Philosophy and Objectives
The guiding principle behind the Committee's compensation programs is
to align compensation of executive officers of the Company with the Company's
business objectives, desired corporate performance, Company values and
stockholder interests. Supporting this philosophy, the objectives of the
compensation program are to:
- - provide rewards that are closely linked to Company and individual
performance;
- - provide incentives to achieve long-term corporate goals and enhance
stockholder value; and
- - ensure that executive compensation is at levels which enable the
Company to attract and retain the highly qualified and productive
people critical to the long-term success of the Company.
The key elements of the Company's executive compensation program include a base
salary and certain employee benefits, short term performance incentives and
long-term equity incentives.
19
<PAGE>
Base Salaries and Employee Benefits
Base salaries for executive officers are initially determined by
evaluating the responsibilities of the position, the experience and knowledge of
the individual and the competitive marketplace for executive talent. Annual
salary adjustments, if any, are determined by evaluating the performance of each
executive officer. Individual performance reviews take into account such factors
as achievement of the Company's strategic plan, additional responsibilities and
attainment of specific individual objectives.
Certain employee benefits are also provided to executive officers,
including life and health insurance, long-term disability insurance and the
right to participate in the Company's 401(k) plan and the Employee Stock
Purchase Plan.
Short Term Performance Incentives
Revenue Commissions. A key component of compensation for executive
officers responsible for the sales of products and services of the Company is
payment of commissions. Commissions are set at a percentage of revenue derived
from the officer's territorial area of responsibility. Both the Senior Vice
President, Americas Operations and the Vice President, International Operations
have compensation plans in which they are assigned revenue quotas that support
the Company's objectives and which provide a set percentage as a commission for
revenue received from the license of products and the provision of professional
services within their respective territories. The commission rate increases for
revenue generated over the assigned quotas. As a result, a significant portion
of the compensation of the executive officers who are directly responsible for
sales of the Company's products and services is dependent on achieving specified
revenue goals.
Executive Bonus Plan. All of the executive officers participated in the
VIASOFT Executive Bonus Plan for fiscal year 1996 (the "Bonus Plan"). The Bonus
Plan is designed to reward all executive officers for the Company's financial
performance above certain set targets. The Committee set annual "Income Before
Taxes" goals and annual target bonuses for each executive officer, based
primarily on the degree of responsibility of the officer for the overall
achievement of the Company's pre-tax income goals, taking into consideration
other incentive compensation. If the Company achieved at least 85% but no more
than 95% of the annual goal, one-half of the target bonus would have been paid.
If the Company achieved over 95% of the annual goal, target bonuses were based
on the percent of the goal achieved, with additional incentives if income before
taxes surpassed the annual goal by ten percent or more. The Compensation
Committee designed the Bonus Plan to pay bonuses only for performance
substantially over actual performance for the previous fiscal year. For example,
performance at 85% of the annual goal constituted an increase of approximately
25% over the prior fiscal year's actual Income Before Taxes. The annual bonus
potential for the Senior Vice President, Americas Operations and Vice President,
International Operations were substantially lower than the other executive
officers in light of the commission compensation and quarterly bonuses available
for successful performance. For fiscal 1996, the Company achieved its annual
Income Before Taxes
20
<PAGE>
goal, resulting in annual bonuses paid under the Bonus Plan totaling $124,282.
These annual bonuses for executive officers ranged from $6,000 to $64,000. See
"Executive Compensation - Summary Compensation Table."
In addition to annual goals and target bonuses, the Committee also set
quarterly goals and target bonuses. Similar to the annual target bonuses, the
quarterly target bonuses are based primarily on the degree of responsibility of
the officer for the overall achievement of the quarterly goals, taking into
consideration other incentive compensation. For all executive officers other
than the Senior Vice President, Americas Operations and the Vice President,
International Operations, the Committee set a quarterly "Income Before Taxes"
goal. If the Company did not achieve the set quarterly pre-tax income goal, no
target bonus would have been paid for that quarter, and the target bonus would
not be recoverable in subsequent quarters. The quarterly Income Before Taxes
goals were met in all quarters in fiscal 1996 except for the third quarter. As a
result, quarterly bonuses paid under the Bonus Plan totaled an aggregate of
$16,750 per quarter for each of the first two quarters, representing bonuses
paid to four officers, and no bonuses were paid for the third quarter. Although
the quarterly Income Before Taxes goal was met in the fourth quarter, those
officers subject to the quarterly pre-tax income bonus plan were not satisfied
with certain operational aspects of the Company's performance in the fourth
quarter, and as a result voluntarily agreed to receive one-half of the scheduled
bonus for a total of $6,625, representing bonuses paid to three officers.
Profit Bonuses. In addition to revenue commissions, the Senior Vice
President, Americas Operations and the Vice President, International Operations
were also paid quarterly bonuses based on the achievement of budgeted profit
objectives for their respective departments. For these officers, the Committee
set quarterly "Operations Profitability" goals. If such officer's respective
department did not achieve at least 75% of the set quarterly profitability goal,
no target bonus would have been paid for that quarter, and the target bonus
would not be recoverable in subsequent quarters. If the officer's respective
department achieved at least 75% but no more than 90% of the quarterly
profitability goal, one-half of the target bonus would have been paid. If the
officer's respective department achieved over 90% of the quarterly profitability
goal, target bonuses were based on the percent of the goal achieved, with
additional incentives if the officer's respective department surpassed the
quarterly profitability goal by fifteen percent or more. This profitability
component was designed to provide significant incentives for the participants to
achieve performance at or above the Operations Profitability goals. Both
officers achieved more than 75% of the quarterly Operations Profitability goals
in all quarters in fiscal 1996, except that the Vice President, International
Operations, did not achieve 75% of his quarterly profitability goal for the
fourth quarter. As a result, quarterly bonuses paid under the Bonus Plan to
these officers totaled on average $13,549 for the first three quarters, and
totaled $8,794 for the fourth quarter.
Long Term Equity Incentives
Long-term incentive compensation, in the form of stock options or
restricted stock, vesting over a period of years, allows the executive officers
to share in any appreciation in value of the Company's Common Stock and directly
aligns the officers' interests with those of its
21
<PAGE>
stockholders. This strategy encourages creation of stockholder value over the
long term because the full benefit of the compensation cannot be realized unless
stock price appreciation occurs over several years. The Committee frequently
awards stock options to employees appointed as officers of the Company, either
upon employment or upon appointment as an officer. Ms. Hardwick, General Counsel
and Secretary, received additional options shortly after being appointed an
officer and Mr. Valente, Vice President of Marketing, joined the Company in
April 1996 and was awarded stock options upon his employment. Additional grants
of options are made at various times, taking into consideration the existing
levels of stock ownership, previous grants of stock options, job
responsibilities and individual performance.
Compensation of the Chief Executive Officer
The compensation for the Company's President and Chief Executive
Officer, Steven D. Whiteman, was determined based on the same policies and
criteria as the compensation of the other executive officers, as discussed
above. During fiscal 1996, Mr. Whiteman's compensation included a base salary
and cash bonuses. Mr. Whiteman's salary was set at $186,000, an increase of
$11,000, or approximately 6.3% from the prior fiscal year. This increase was due
to the Committee's subjective evaluation of Mr. Whiteman's performance and his
increased responsibilities as the President and Chief Executive Officer of a
public company. A significant portion of Mr. Whiteman's total compensation was
in the form of cash bonuses under the Executive Bonus Plan, which tied his
compensation to the achievement of financial performance objectives;
specifically, budgeted pre-tax income goals. Mr. Whiteman's performance bonuses
under the Executive Bonus Plan during fiscal 1996 totaled $81,500, or
approximately 31% of his total cash compensation. The Committee determined that
this mix of compensation properly rewards and provides incentives to Mr.
Whiteman for his overall responsibility for the performance of the Company.
Tax Considerations
In August 1993, as part of the Omnibus Budget Reconciliation act of
1993, new Section 162(m) of the Internal Revenue Code was enacted, which
provides for an annual one million dollar limitation on the deduction that an
employer may claim for compensation of certain executives. New Section 162(m) of
the Code provides exceptions to the deduction limitation, and it is the intent
of the Committee, in the future, to qualify for such exceptions, when needed, to
the extent feasible and in the best interests of the Company.
This report is submitted by the members of the Compensation Committee
Robert C. Kagle John J. Barry III, Chair Arthur C. Patterson
22
<PAGE>
Section 16(a) Compliance
In accordance with Section 16(a) of the Securities Exchange Act of 1934
and the regulations of the Securities and Exchange Commission, the Company's
directors, executive officers and certain other 10% stockholders are required to
file reports of ownership and changes in ownership with the SEC and The Nasdaq
Stock Market and to furnish the Company with copies of all such reports they
file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that during fiscal 1996 all filings required under Section 16(a)
applicable to its directors, executive officers and 10% stockholders were
satisfied, except for one late Form 3 report filed by the Trust for Benefit of
Steven D. and Beverly C. Whiteman (Mr. Whiteman is the President and CEO of the
Company) and one late Form 4 filing by Robert C. Kagle (reporting the
distribution of shares held by six affiliated limited partnerships and his
related acquisitions as a result of those distributions). The Company believes
that Alvin E. Holland, Jr., the former Chief Financial Officer, Vice President,
Finance & Administration and Treasurer of the Company, was subject to such
filing requirements with respect to a purchase and subsequent sale of certain
securities but the Company did not receive copies of any such reports, if filed.
Certain Transactions
Mr. Whiteman, the Company's President and Chief Executive Officer,
purchased an aggregate of 380,000 shares of Common Stock pursuant to four
restricted stock agreements between December 1991 and January 1994, at prices
ranging from $0.3750 per share to $0.75 per share, the fair market value of such
shares at the time of purchase as determined by the Board of Directors. Under
the agreements, the Company has the right to repurchase the shares upon
termination of Mr. Whiteman's employment and certain other events. The Company's
repurchase rights expire as to an equal portion of the shares subject to each
agreement annually, over periods of four to five years. Mr. Whiteman is indebted
to the Company pursuant to four promissory notes executed in connection with
such Common Stock purchases. The notes are full recourse obligations and bear
interest at rates ranging from 5.00% to 7.25%. As of August 30, 1996, Mr.
Whiteman had reduced his indebtedness to the Company from an aggregate total of
$190,024 principal and interest on all four notes to an aggregate total of
$69,341.
Company Stock Performance Graph
The Company Stock Performance Graph below compares the cumulative total
stockholder return on the Common Stock of the Company, on a quarterly basis,
from March 1, 1995 (the date of its initial public offering) to June 30, 1996
(the last day of the Company's most recent fiscal year) with the cumulative
total return on The Nasdaq Stock Market for United States companies ("Nasdaq
Stock Market Index") and the Nasdaq Computer and Data Processing Stocks ("Nasdaq
23
<PAGE>
Computer Index") over the same period. This graph assumes a $100 investment at
March 1, 1995 in the Company's Common Stock and in each of the indexes and
reinvestment of all dividends, if any.
The graph displayed below is presented in accordance with Securities
and Exchange Commission requirements. Stockholders are cautioned against drawing
any conclusions from the data contained therein, as past results are not
necessarily indicative of future performance. This graph is not intended to
reflect the Company's forecast of future financial performance.
Performance Graph
3/1/95 3/31/95 6/30/95 9/29/95 12/29/95 3/29/96 6/28/96
VIASOFT 100 108 164 163 148 352 805
NASDAQ U.S. 100 103 118 132 134 140 152
NASDAQ COMP. & DP 100 106 126 138 144 151 168
24
<PAGE>
Stockholder Proposals
Stockholders may submit proposals to be considered for stockholder
action at the 1997 Annual Meeting of Stockholders if they do so in accordance
with the appropriate regulations of the Securities and Exchange Commission. For
such proposals to be considered for inclusion in the Proxy Statement and form of
proxy for the 1997 Annual Meeting of Stockholders, proposals must be received by
the Company no later than June 3, 1997. Such proposals should be directed to
VIASOFT, Inc., 3033 North 44th Street, Phoenix, Arizona 85018 to the attention
of the Secretary. The Company received no such proposals for the 1996 Annual
Meeting of Stockholders.
If a stockholder desires to bring proper business before an annual
meeting of stockholders which is not the subject of a proposal timely submitted
for inclusion in the proxy statement as described above, the stockholder must
follow procedures outlined in the Company's Bylaws. Pursuant to the Company's
Bylaws, a stockholder may propose business to be considered at an annual meeting
of the Stockholders, provided that the stockholder (a) is a stockholder of
record at the time of giving notice to the Company of the proposal and is
entitled to vote at the annual meeting of stockholders where the proposal will
be considered, and (b) complies with the notice procedures of Article III of the
Bylaws. That section provides that the proposing stockholder must deliver
written notice of the proposal to the Company's Secretary not earlier than the
90th day nor later than the 60th day prior to the first anniversary of the
preceding year's annual meeting. The deadline for a stockholder to deliver
notice of a proposal for consideration at the 1996 Annual Meeting of
Stockholders was September 16, 1996. The required notice must contain certain
information, including information about the stockholder, as prescribed by the
Bylaws. The Company did not receive any notices from stockholders for business
to be conducted at the Meeting.
The Bylaws also provide procedures for stockholders to nominate
directors for election at an annual meeting of stockholders. These procedures
were previously discussed in this Proxy Statement. See "Board of Directors
Meetings and Committees."
25
<PAGE>
Other Business
The Board of Directors knows of no matter other than those described in
this Proxy Statement that will be presented for consideration at the Meeting.
However, should any other matters properly come before the Meeting or any
adjournment thereof, it is the intention of the persons named in the
accompanying proxy to vote in accordance with their best judgment in the
interest of the Company.
Additional Information
The Company's Annual Report to Stockholders for the fiscal year ended
June 30, 1996, which includes consolidated financial statements of the Company,
accompanies this Proxy Statement. The Annual Report is not to be deemed part of
this Proxy Statement.
A COPY OF THE COMPANY'S FORM 10-K ANNUAL REPORT REQUIRED TO BE FILED
WITH THE SEC, INCLUDING FINANCIAL STATEMENTS BUT NOT INCLUDING EXHIBITS, WILL BE
FURNISHED AT NO CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS DELIVERED
UPON RECEIPT OF A WRITTEN REQUEST OF SUCH PERSON ADDRESSED TO VIASOFT, INC.,
3033 NORTH 44TH STREET, PHOENIX, ARIZONA 85018 TO THE ATTENTION OF THE
SECRETARY.
By Order of the Board of Directors
Catherine R. Hardwick
General Counsel and Secretary
The Board of Directors hopes that Stockholders will attend the Annual Meeting.
Regardless of whether you plan to attend, please complete, date, sign and return
the enclosed Proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the Annual Meeting and your cooperation will be
appreciated.
26
<PAGE>
APPENDIX A
Stockholder's Proxy Card
1996 Annual Meeting of Stockholders - Friday, November 15, 1996
The undersigned hereby appoints Steven D. Whiteman, Michael A. Wolf and
Catherine R. Hardwick, and each of them, as proxies to attend the 1996 Annual
Meeting of Stockholders of the Company to be held on Friday, November 15, 1996
at 10:00 a.m., mountain standard time, in Phoenix, Arizona and any adjournment
thereof and vote shares of Common Stock held by the undersigned as indicated on
the reverse side of this card; for the election of Directors, approval of an
additional 400,000 shares for issuance under the VIASOFT, Inc., Employee Stock
Purchase Plan, ratification of the Company's selection of independent auditors
and upon such other matters as may properly come before the meeting.
This Proxy is solicited by the Board of Directors of VIASOFT, Inc. pursuant to a
separate Notice of Annual Meeting and Proxy Statement, receipt of which is
hereby acknowledged. This card should be mailed in the enclosed envelope in time
to reach the Company's proxy tabulator, Harris Trust and Savings Bank, 311 West
Monroe Street, 11th Floor, Chicago, IL 60606, by 9:00 a.m., mountain standard
time, on Friday, November 15, 1996.
ELECTION OF DIRECTORS
Nominees: John J. Barry III, A. LeRoy Ellison, Robert C. Kagle, Alexander S.
Kuli, J. David Parrish, Arthur C. Patterson, Steven D. Whiteman,
Michael A. Wolf
FOR* WITHHELD *Except: ______________________________________
______________________________________
APPROVE AN ADDITIONAL 400,000 SHARES FOR ISSUANCE UNDER THE VIASOFT,
INC., EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
RATIFY SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
FOR AGAINST ABSTAIN
The Board of Directors recommends a vote FOR the above actions, which are
proposed by the Board (as described in the accompanying Proxy Statement). If you
sign and return this card without marking, the proxy card will be treated as
being FOR each item.
Dated:_______________________, 1996
Signature(s)_______________________
___________________________________
Please sign here exactly as your name(s)
appear on this proxy card. Give title if you
sign as trustee, corporate officer, executor,
administrator or guardian.
<PAGE>
APPENDIX B
-----------------------------------------------------
AMENDMENT TO
VIASOFT, INC.
EMPLOYEE STOCK PURCHASE PLAN
(Effective as of November 15, 1996, subject to stockholder approval)
--------------------------------------------------------------------
The following constitutes an amendment to the VIASOFT, Inc. Employee
Stock Purchase Plan (the "Plan"):
The number of shares available for issuance under the Plan shall be
increased by 400,000 shares. The total number of shares which may be issued
under the Plan shall not exceed 800,000 shares (subject to adustment as provided
for in the Plan).
<PAGE>
---------------------------------
VIASOFT, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As amended January 30, 1995)
---------------------------------
The following constitute the provisions of the VIASOFT, Inc. Employee
Stock Purchase Plan.
1. Purpose. The VIASOFT, Inc. Employee Stock Purchase Plan (the
"Plan") is intended to provide Eligible Employees of the Company and one or more
of its Affiliates with the opportunity to acquire an equity interest in the
Company through periodic payroll deductions. The Plan is designed to qualify as
an employee stock purchase plan under Code Section 423.
2. Definitions. For purposes of the Plan, the following terms
shall have the meanings indicated:
(a) "Affiliate" shall mean any company which is a parent
or subsidiary corporation of the Company (as determined in accordance with Code
Section 424), including any parent or subsidiary corporation which becomes such
after the Effective Time.
(b) "Base Salary" shall mean the regular W-2 earnings
paid to a Participant by one or more Participating Companies, including all
overtime payments, bonuses, commissions, profit sharing distributions and other
incentive-type payments, plus any pre-tax contributions made by the Participant
to any Code Section 401(k) salary deferral plan or any Code Section 125
cafeteria benefit program now or hereafter established by the Company or any
Corporate Affiliate.
(c) "Board" shall mean the Company's Board of Directors.
(d) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(e) "Company" shall mean VIASOFT, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of VIASOFT, Inc. which shall by appropriate action adopt
the Plan.
(f) "Commencement Date" shall mean the first day of an
Offering Period.
<PAGE>
(g) "Common Stock" shall mean shares of the Company's
common stock.
(h) "Effective Time" shall mean the time at which the
underwriting agreement for the initial public offering of the Common Stock is
executed and finally priced. The initial Offering Period shall start at the time
of such execution and pricing of the underwriting agreement. However, for any
Affiliate which becomes a Participating Company in the Plan after the Effective
Time, a subsequent Effective Time shall be designated by the Board with respect
to participation by its Eligible Employees.
(i) "Eligible Employee" shall mean any individual who is
an employee of the Company for purposes of tax withholding under Section 3401 of
the Code whose customary employment with the Company or any Participating
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
(j) "Entry Date" shall mean the date established pursuant
to Section 5(a) by an Eligible Employee first electing to participate in the
Plan for the Offering Period in effect under the Plan. The earliest Entry Date
under the Plan shall be the date of the Effective Time.
(k) "Offering Period" shall mean the periods during which
Options are granted and exercisable under the Plan as defined in Section 4.
(l) "Option" shall mean an option to purchase Common
Stock granted to a Participant under the Plan.
(m) "Participant" shall mean any Eligible Employee of a
Participating Company who is participating in the Plan.
(n) "Participating Company" shall mean the Company and
such Affiliate or Affiliates as may be designated from time to time by the
Board.
(o) "Semi-Annual Entry Date(s)" shall mean the first
business day of May and the first business day of November during each calendar
year within an Offering Period in effect under the Plan. The earliest
Semi-Annual Entry Date under the Plan shall be November 1, 1995.
(p) "Semi-Annual Period of Participation" shall mean each
semi-annual period for which the Participant actually participates in an
Offering Period in effect under the Plan. There shall be a maximum of four (4)
semi-annual periods of participation within each Offering Period. Except as
otherwise designated by the Committee, the first such semi-annual period (which
may actually be less than or in excess of six (6) months for the initial
Offering Period) shall be measured from the Commencement Date of the Offering
Period until the last business day in the following October; the next such
semi-annual period shall then be measured from the first
<PAGE>
business day in November to the last business day in the following April, the
third semi-annual period shall then begin on the first business day in May, and
end on the last business day in the following October; and the final semi-annual
period within the Offering Period shall begin on the first business day of the
next November and end on the last business day of the following April.
(q) "Semi-Annual Exercise Date(s)" shall mean the last
business day of April and October each year on which Options to purchase shares
of Common Stock are automatically exercised for Participants under the Plan.
3. Administration. The Plan shall be administered by a committee (the
"Committee") comprised of two or more non-employee Board members appointed from
time to time by the Board. The Committee shall have full authority to administer
the Plan, including authority to interpret and construe any provision of the
Plan and to adopt such rules and regulations for administering the Plan,
including such as it may deem advisable to comply with applicable law. The
Committee may correct any defect or omission or reconcile any inconsistency in
the Plan, in the manner and to the extent it shall deem desirable. Decisions of
the Committee shall be final and binding on all parties who have an interest in
the Plan.
4. Offering Periods.
(a) The Plan shall be implemented in a series of
successive Offering Periods, each to be of a duration of twenty-seven (27)
months or less as designated by the Committee prior to the Commencement Date.
However, the initial Offering Period will begin upon the Effective Time and will
end on the last business day in April 1997. The next Offering Period shall
commence on the first business day in May 1997, and subsequent Offering Periods
shall commence as designated by the Committee.
(b) The Committee shall establish a series of successive
Offering Periods until such time as (i) the maximum number of shares of Common
Stock available for issuance under the Plan shall have been issued or (ii) the
Plan shall have been sooner terminated in accordance with Sections 9 or 10(b).
Under no circumstances shall any Options granted under the Plan be exercised,
nor shall any shares of Common Stock be issued hereunder, until such time as (i)
the Plan shall have been approved by the Company's stockholders and (ii) the
Company shall have complied with all applicable requirements of the Securities
Act of 1933 (as amended), all applicable listing requirements of any securities
exchange on which shares of the Common Stock are listed and all other applicable
statutory and regulatory requirements.
(c) Each Participant shall be granted a separate Option
for each Offering Period in which he/she participates. The Option shall be
granted on the Entry Date on which such individual first joins the Offering
Period in effect under the Plan and shall be automatically exercised in
successive semi-annual installments on the Semi-Annual Exercise Date in each
year.
(d) Subject to the limitations set forth in the Plan,
including without limitation Sections 7(c) and 8 herein, the acquisition of
Common Stock through participation in the Plan for
<PAGE>
any Offering Period shall neither limit nor require the acquisition of Common
Stock by the Participant in any subsequent Offering Period.
5. Eligibility and Participation.
(a) Each Eligible Employee shall be eligible to
participate in the Plan in accordance with the following provisions:
(i) An individual who is an Eligible Employee on
the Commencement Date of the Offering Period may participate in the
Plan for such Offering Period on such Commencement Date, which shall be
such Participant's Entry Date, provided he/she enrolls in the Offering
Period on or before such date in accordance with the Plan. Should such
Eligible Employee not so enroll prior to the Commencement Date, then
he/she may not subsequently join that particular Offering Period on any
later date.
(ii) An individual who is not an Eligible
Employee on the Commencement Date of an Offering Period may
subsequently enter that Offering Period on the first Semi-Annual Entry
Date on which he/she is an Eligible Employee, which shall be such
Participant's Entry Date, provided he/she enrolls in the Offering
Period on or before such date in accordance with the Plan. Should such
Eligible Employee not so enroll prior to such Semi-Annual Entry Date,
then he/she may not subsequently join that particular Offering Period
on any later date.
(b) To elect to participate for a particular Offering
Period, the Eligible Employee must complete the enrollment forms prescribed by
the Committee (including the purchase agreement and payroll deduction
authorization) and file such forms with the Company on or before his/her
scheduled Entry Date. Once properly made, an Eligible Employee's election to
participate shall be automatically renewed for each subsequent Offering Period,
subject to any termination or withdrawal as provided in Section 7(e).
(c) The payroll deduction authorized by the Participant
for purposes of acquiring shares of Common Stock under the Plan may be any
multiple of one percent (1%) of the Base Salary paid to the Participant during
each Semi-Annual Period of Participation within the Offering Period, up to a
maximum of ten percent (10%) of such Base Salary. The deduction rate so
authorized shall continue in effect for the remainder of the Offering Period and
each subsequent Offering Period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the
Semi-Annual Period of Participation, reduce his/her rate of payroll
deduction. Such reduction shall become effective as soon as possible
after filing of the requisite reduction form with the Committee (or its
designee), but the Participant may not effect more than one such
reduction during the same Semi-Annual Period of Participation.
<PAGE>
(ii) The Participant may, prior to the
commencement of any new Semi-Annual Period of Participation within the
Offering Period or any new Offering Period, increase or decrease the
rate of his/her payroll deduction by filing the appropriate form with
the Committee (or its designee). The new rate (which shall not exceed
the ten percent maximum) shall become effective as of the first date of
the first Semi-Annual Period of Participation following the filing of
such form.
Payroll deductions will automatically cease upon the termination of the
Participant's Option in accordance with the applicable provisions of Section 7
below.
(d) In no event may any Participant's payroll deductions
for any one Semi-Annual Period of Participation exceed Seven Thousand Five
Hundred Dollars ($7,500.00).
(e) At the time the Option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the Participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the Option or the disposition of the Common Stock. At
any time, the Company may, but will not be obligated to, withhold from the
Participant's Base Salary the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the employee.
6. Stock Subject to Plan.
(a) The Common Stock purchasable by Participants under
the Plan shall, solely in the discretion of the Committee, be made available
from either authorized but unissued shares of Common Stock or from shares of
Common Stock reacquired by the Company, including shares of Common Stock
purchased on the open market. The total number of shares which may be issued
under the Plan shall not exceed 200,000 shares (subject to adjustment as
provided herein).
(b) In the event any change is made to the Company's
outstanding Common Stock by reason of any stock dividend, stock split,
combination of shares or other change affecting such outstanding Common Stock as
a class without receipt of consideration, then appropriate adjustments shall be
made by the Committee to (i) the class and maximum number of shares issuable
over the term of the Plan, (ii) the class and maximum number of shares
purchasable per Participant during each Semi-Annual Period of Participation,
(iii) the class and maximum number of shares purchasable in the aggregate by all
Participants on any one purchase date under the Plan and (iv) the class and
number of shares and the price per share of the Common Stock subject to each
Option at the time outstanding under the Plan. Such adjustments shall be
designed to preclude the dilution or enlargement of rights and benefits under
the Plan.
7. Terms of Options. An Eligible Employee who participates in the
Plan for a particular Offering Period shall have an Option to purchase shares of
Common Stock, in a series of successive semi-annual installments during such
Offering Period, upon the terms and conditions
<PAGE>
set forth below and shall execute a purchase agreement embodying such terms and
conditions and such other provisions (not inconsistent with the Plan) as the
Committee may deem advisable.
(a) Exercise Price. Options to purchase Common Stock
shall be automatically exercised at the end of each Semi-Annual Period of
Participation at a purchase price equal to eighty-five percent (85%) of the
lower of (i) the fair market value per share on the Participant's Entry Date
into the Offering Period or (ii) the fair market value per share on the
Semi-Annual Exercise Date on which such Semi-Annual Period of Participation
ends. However, for each Participant whose Entry Date is other than the
Commencement Date of the Offering Period in effect under the Plan, the clause
(i) amount shall in no event be less than the fair market value of the Common
Stock on the Commencement Date of such Offering Period.
(b) Valuation. For purposes of determining the fair
market value per share of Common Stock on any relevant date, the following
procedures shall be in effect:
(i) For the Effective Time at which the initial
Offering Period under the Plan commences, such fair market value shall
be the price per share at which the Common Stock is sold under the
underwriting agreement in connection with the initial public offering
of the Common Stock.
(ii) For any subsequent date under the Plan on
which the Common Stock is registered under Section 12(g) of the
Securities Exchange Act of 1934, then the fair market value shall be
the closing selling price on that date, as officially quoted on the
principal exchange on which the Common Stock is then traded, or if not
so traded, the closing selling price on that date on the NASDAQ
National Market System. If there is no quoted selling price for such
date, then the closing selling price on the next preceding day for
which there does exist such a quotation shall be determinative of fair
market value.
(iii) If the Common Stock is not then traded on an
exchange or on the NASDAQ National Market System, then the fair market
value of the Common Stock on such date shall be determined by the
Committee, after taking into account such factors as the Committee
deems appropriate.
(c) Number of Purchasable Shares. The number of shares
purchasable per Participant for each Semi-Annual Period of Participation shall
be the number of whole shares obtained by dividing the amount collected from the
Participant through payroll deductions during such Semi-Annual Period of
Participation by the purchase price in effect for the Semi-Annual Exercise Date
on which such Semi-Annual Period of Participation ends. However, no Participant
may, during any one Semi-Annual Purchase Period, purchase more than 1,000 shares
of Common Stock, subject to periodic adjustment under Section 6(b).
Under no circumstances shall an Option be granted under the Plan to any
Eligible Employee if such individual would, immediately after the grant, own
(within the meaning of Code Section 424(d)) or hold outstanding options or other
rights to purchase, stock possessing five
<PAGE>
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or any of its Affiliates.
(d) Payroll Deductions. Payment for the Common Stock
purchased under the Plan shall be effected by means of the Participant's
authorized payroll deductions. Such deductions shall begin on the first payday
coincident with or immediately following the Participant's Entry Date into the
Offering Period and shall (unless sooner terminated by the Participant) continue
through the payday ending with or immediately prior to the last day of the
Offering Period. The amounts so collected shall be credited to the Participant's
book account under the Plan, but no interest shall be paid on the balance from
time to time outstanding in such account, except where otherwise required by
local law. The amounts collected from a Participant may be commingled with the
general assets of the Company and may be used for general corporate purposes,
except where otherwise required by local law.
(e) Termination of Option. The following provisions shall
govern the termination of outstanding Options:
(i) A Participant may, at any time prior to the
last five (5) business days of a Semi-Annual Period of Participation,
terminate his/her outstanding Option under the Plan by filing the
prescribed notification form with the Committee (or its designate). No
further payroll deductions shall be collected from the Participant with
respect to the terminated Option, and any payroll deductions collected
for the Semi-Annual Period of Participation in which such termination
occurs shall be promptly refunded.
(ii) The termination of such Option shall be
irrevocable, and the Participant may not subsequently rejoin the
Offering Period for which such terminated Option was granted. In order
to resume participation in any subsequent Offering Period, such
individual must re-enroll in the Plan (by making a timely filing of a
new purchase agreement and payroll deduction authorization) on or
before the date he/she is first eligible to join the new Offering
Period.
(iii) If the Participant ceases to remain an
Eligible Employee for any reason including without limitation death or
disability, while his/her Option remains outstanding, then all of the
Participant's payroll deductions shall be promptly refunded, without
interest, to the Participant or, in the case of his or her death, as
provided in Section 7(i).
In no event may any payroll deductions be made on the Participant's
behalf following his/her cessation of Eligible Employee status.
(f) Exercise. Options to purchase shares of Common Stock
under the Plan shall automatically be exercised on behalf of each Participant
(other than Participants whose payroll deductions have previously been refunded
in accordance with the Plan) on each Semi-Annual Exercise Date. The purchase
shall be effected by applying each Participant's payroll
<PAGE>
deductions for the Semi-Annual Period of Participation ending on such
Semi-Annual Exercise Date (together with any carryover deductions from the
preceding Semi-Annual Period of Participation) to the purchase of whole shares
of Common stock (subject to the limitation on the maximum number of purchasable
shares set forth herein) at the purchase price in effect for such Semi-Annual
Period of Participation. Any payroll deductions not applied to such purchase
because they are not sufficient to purchase a whole share shall be held for the
purchase of Common Stock in the next Semi-Annual Period of Participation.
However, any payroll deductions not applied to the purchase of Common Stock by
reason of the limitation on the maximum number of shares purchasable by the
Participant for that Semi-Annual Period of Participation shall be promptly
refunded to the Participant.
(g) Proration of Purchase Rights. Not more than 100,000
shares of Common stock, subject to periodic adjustment under Section 6(b), may
be purchased in the aggregate by all Participants on any one Semi-Annual
Exercise Date under the Plan. Should the total number of shares of Common Stock
which are to be purchased pursuant to outstanding purchase rights on any
particular date exceed either (i) the maximum limitation on the number of shares
purchasable in the aggregate on such date or (ii) the number of shares then
available for issuance under the Plan, the Committee shall make a pro rata
allocation of the available shares on a uniform and nondiscriminatory basis, and
the payroll deductions of each Participant, to the extent in excess of the
aggregate purchase price payable for the Common Stock pro rated to such
individual, shall be promptly refunded to such Participant.
(h) Rights as Stockholder. A Participant shall have no
stockholder rights with respect to the shares subject to his/her outstanding
Option until the shares are actually purchased on the Participant's behalf in
accordance with the applicable provisions of the Plan. No adjustments shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as practicable
after each Semi-Annual Exercise Date, a stock certificate for the number of
shares purchased on the Participant's behalf. Such certificate may, upon the
Participant's request, be issued in the names of the Participant and his/her
spouse as community property or as joint tenants with right of survivorship.
(i) Designation of Beneficiary.
(i) A Participant may file a written designation
of a beneficiary who is to receive any shares and cash, if any, from
the Participant's account under the Plan in the event of such
Participant's death subsequent to a Semi-Annual Exercise Date on which
the Option is exercised but prior to delivery to such Participant of
such shares and cash. In addition, a Participant may file a written
designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of such Participant's
death prior to exercise of the Option.
<PAGE>
(ii) Such designation of beneficiary may be
changed by the Participant at any time by written notice. In the event
of the death of a Participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
Participant's death, the Company shall deliver such shares and/or cash
to the executor or administrator of the estate of the Participant, or
if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents
or relatives of the Participant, or if no spouse, dependent or relative
is known to the Company, then to such other person as the Company may
designate.
(j) Transferability. Neither payroll deductions credited
to a Participant's account nor any rights with regard to the exercise of an
Option or to receive shares under the Plan may be assigned, transferred, pledged
or otherwise disposed of in any way (other than by will or the laws of descent
and distribution, or as provided in Section 7(i) hereof) by the Participant, and
during the Participant's lifetime the Option shall be exercisable only by the
Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to terminate participation in an Offering Period in accordance
with Section 7(e).
(k) Change in Ownership; Dissolution. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each Option under the
Plan shall be assumed or an equivalent Option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Committee determines, in the exercise of its sole discretion and in
lieu of such assumption or substitution, to shorten the Offering Period then in
progress by setting a new Semi-Annual Exercise Date (the "New Exercise Date").
If the Committee shortens the Offering Period then in progress in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Committee shall notify each participant in writing, at least thirty (30) days
prior to the New Exercise Date, that the Semi-Annual Exercise Date for his/her
Option has been changed to the New Exercise Date and that his/her Option will be
exercised automatically on the New Exercise Date, unless prior to such date
he/she has terminated his/her participation in the Offering Period as provided
in Section 7(e). For purposes of this paragraph, an Option granted under the
Plan shall be deemed to be assumed if, following the sale of assets or merger,
the Option confers the right to purchase, for each share of Common Stock subject
to the Option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 425(e) of the Code), the Committee may, with the consent of the
successor corporation and the Participant, provide for the consideration to be
received upon exercise of the Option to be solely common stock of the successor
corporation or its parent equal in fair market
<PAGE>
value to the per share consideration received by holders of Common Stock in the
sale of assets or merger.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee.
8. Accrual Limitations.
(a) No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any Option outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other Option outstanding under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Section 423 of the Code) of the Company or its Affiliates, would
otherwise permit such Participant to purchase more than $25,000 worth of stock
of the Company or any Affiliate (determined on the basis of the fair market
value of such stock on the date or dates such rights are granted to the
Participant) for each calendar year such rights are at any time outstanding.
(b) For purposes of applying such accrual limitations,
the right to acquire Common Stock pursuant to each Option outstanding under the
Plan shall accrue as follows:
(i) The right to acquire Common Stock under each such
Option shall accrue in a series of successive semi-annual installments
as and when the Option first becomes exercisable for each semi-annual
installment on the last business day of each Semi-Annual Period of
Participation for which the Option remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding Option shall accrue to the extent the Participant has
already accrued in the same calendar year the right to acquire $25,000
worth of Common Stock (determined on the basis of the fair market value
on the date or dates of grant) pursuant to one or more rights held by
the Participant during such calendar year.
(iii) If by reason of such accrual limitations, any
Option of a Participant does not accrue for a particular Semi-Annual
Period of Participation, then the payroll deductions which the
Participant made during the Semi-Annual Period of Participation with
respect to such Option shall be promptly refunded.
(c) In the event there is any conflict between the
provisions of this Section 8 and one or more provisions of the Plan or any
instrument issued thereunder, the provisions of this Section 8 shall be
controlling.
<PAGE>
9. Amendment and Termination of Plan.
(a) The Board may alter, amend, suspend or discontinue
the Plan following the close of any Semi-Annual Period of Participation.
However, the Board may not, without the approval of the Company's stockholders:
(i) materially increase the number of shares issuable
under the Plan or the maximum number of shares which may be purchased
per Participant or in the aggregate during any one Semi-Annual Period
of Participation under the Plan, except that the Committee shall have
the authority, exercisable without such stockholder approval, to effect
adjustments to the extent necessary to reflect changes in the Company's
capital structure pursuant to the Plan;
(ii) alter the exercise price formula so as to
reduce the exercise price payable for the shares issuable under the
Plan; or
(iii) materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility to participate in the Plan.
(b) The Company shall have the right, exercisable in the
sole discretion of the Committee, to terminate all outstanding Options under the
Plan immediately following the close of any Semi-Annual Period of Participation.
Should the Company elect to exercise such right, then the Plan shall terminate
in its entirety. No further Options shall thereafter be granted or exercised,
and no further payroll deductions shall thereafter be collected, under the Plan.
10. General Provisions.
(a) The Plan shall become effective at the Effective
Time, provided that no Options granted under the Plan shall be exercised, and no
shares of Common Stock shall be issued hereunder, until (i) the Plan shall have
been approved by the stockholders and (ii) the Company shall have complied with
all applicable requirements of the Securities Act of 1933 (as amended), all
applicable listing requirements of any securities exchange on which shares of
the Common Stock are listed and all other applicable requirements established by
law or regulation. In the event such stockholder approval is not obtained, or
such Company compliance is not effected, within twelve (12) months after the
date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect and all payroll deductions collected hereunder
shall be refunded.
(b) Unless otherwise terminated as provided in Section 9,
the Plan shall terminate upon the earlier of (i) December 31, 2003 or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to Options exercised under the Plan.
(c) All costs and expenses incurred in the administration
of the Plan shall be paid by the Company.
<PAGE>
(d) Neither the action of the Company in establishing the
Plan, nor any action taken under the Plan by the Board or the Committee, nor any
provision of the Plan itself shall be construed so as to create any right for
the benefit of any employee or class of employees to purchase any shares under
the Plan, or to create in any employee or class of employees any right with
respect to continuation of employment by the Company or any of its Affiliates,
or to interfere in any way with the Company's or any Affiliate's right to
terminate, or otherwise modify, an employee's employment at any time.
(e) The provisions of the Plan shall be governed by the
laws of the State of Delaware without resort to that State's conflict-of-laws
rules.
(f) The Committee may adopt rules or procedures relating
to the operation and administration of the Plan in non-United States
jurisdictions to accommodate the specific requirements of local laws and
procedures. Without limiting the generality of the foregoing, the Committee is
specifically authorized to adopt rules and procedures regarding handling of
payroll deductions, conversion of local currency, withholding procedures and
handling of stock certificates which vary with local requirements.
