<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
C*ATS SOFTWARE INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
C*ATS SOFTWARE INC.
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
-------------------
TO THE SHAREHOLDERS OF C*ATS SOFTWARE INC.
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of C*ATS
Software Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 20, 1998 at 1:00 p.m., local time, at the offices of the
Company, 1870 Embarcadero Road, Palo Alto, California 94303, telephone (650)
321-3000 for the following purposes:
1. To elect six (6) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31,
1998.
3. To transact such other business as may properly come before the
meeting and at any and all continuations or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 31, 1998
are entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof.
By Order of the Board of Directors
Rod A. Beckstrom,
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
Palo Alto, California
April 15, 1998
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED
TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN
THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. RETURNING YOUR PROXY
WILL HELP THE COMPANY ENSURE A QUORUM AND AVOID THE ADDITIONAL EXPENSE OF
DUPLICATE PROXY SOLICITATIONS. ANY STOCKHOLDER ATTENDING THE MEETING MAY
VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED THE PROXY.
- -------------------------------------------------------------------------------
<PAGE>
C*ATS SOFTWARE INC.
1870 EMBARCADERO ROAD
PALO ALTO, CALIFORNIA 94303
-------------------
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
-------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of C*ATS Software Inc. (the
"Company") for the 1998 Annual Meeting of Stockholders to be held on
Wednesday, May 20, 1998, at 1:00 p.m., local time (the "Annual Meeting"), and
at any and all continuations or adjournments thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at the principal executive
offices of the Company, 1870 Embarcadero Road, Palo Alto, California 94303.
The telephone number at this address is (650) 321-3000.
These proxy solicitation materials were mailed on or about April 15,
1998 to all stockholders entitled to vote at the Annual Meeting.
PURPOSES OF THE ANNUAL MEETING
The purposes of the Annual Meeting are to (1) elect six directors to
serve for the ensuing year and until their successors are duly elected and
qualified, (2) ratify the appointment of Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998 and (3)
transact such other business as may properly come before the meeting and at
any and all continuations or adjournments thereof.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on March 31, 1998
(the "Record Date") are entitled to receive notice of and to vote at the
Annual Meeting. As of March 31, 1998 the Company had outstanding 6,855,874
shares of Common Stock. For information regarding holders of more than 5% of
the outstanding Common Stock, see "Share Ownership of Directors, Officers and
Certain Beneficial Owners." The closing price of the Company's Common Stock
on the Record Date, as reported by the Nasdaq National Market, was $5.50 per
share.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this statement has
the power to revoke it at any time before it is voted by delivering to the
Secretary of the Company at the Company's principal executive office, 1870
Embarcadero Road, Palo Alto, California 94303, a written notice of revocation
or a duly executed proxy bearing a later date, or by attending the meeting
and voting in person.
-2-
<PAGE>
VOTING AND PROXY SOLICITATION
Each stockholder voting for the election of directors may cumulate his
or her votes, giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares which the
stockholder is entitled to vote, or distributing the stockholder's votes
under the same principle among as many candidates as the stockholder chooses,
provided that votes may not be cast for more than six (6) candidates.
However, no stockholder shall be entitled to cumulate votes for any candidate
unless the candidate's name has been placed in nomination prior to the
voting. On all other matters, each share has one vote.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the Inspector of Elections (the "Inspector") with the assistance of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. Except with respect to the election of directors where
cumulative voting is involved and except in certain other specific
circumstances, the affirmative vote of a majority of shares present in person
or represented by proxy at a duly held meeting at which a quorum is present
is required under Delaware law for approval of proposals presented to
stockholders. In general, Delaware law also provides that a quorum consists
of a majority of the shares entitled to vote and present or represented by
proxy at the meeting. The Inspector will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of
a quorum but will not treat abstentions as votes in favor of approving any
matter submitted to the stockholders for a vote. Any proxy which is returned
using the form of proxy enclosed and which is not marked as to a particular
item will be voted for the election of directors, for ratification of the
appointment of the designated independent auditors and as the proxy holders
deem advisable on other matters that may come before the meeting. If a
broker indicates on the enclosed proxy or its substitute that it does not
have discretionary authority as to certain shares to vote on a particular
matter ("broker non-votes"), those shares will not be considered as present
with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector are consistent with the general
statutory requirements in Delaware concerning voting of shares and
determination of a quorum.
The cost of soliciting proxies will be borne by the Company. The
Company has retained the services of Skinner & Company to aid in the
solicitation of proxies from bankers, bank nominees and other institutional
owners. The Company estimates that it will pay Skinner & Co. a fee not to
exceed $3,500.00 for its services and will reimburse Skinner & Co. for
certain out-of-pocket expenses. The Company also may reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation materials to such beneficial owners. In
addition, the Company's directors, officers and employees, without receiving
any additional compensation, may solicit proxies personally or by telephone,
telegraph or facsimile copy.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1999 Annual Meeting of
Stockholders must be received by the Company no later than December 31, 1998,
in order that they may be considered for inclusion in the proxy statement and
form of proxy relating to that meeting.
SHAREHOLDER INFORMATION
IN COMPLIANCE WITH RULE 14A-3 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT
OF 1934, THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH
PERSON UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES THERETO.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO C*ATS SOFTWARE INC., 1870
EMBARCADERO ROAD, PALO ALTO, CA 94303, ATTENTION: INVESTOR RELATIONS.
-3-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
A board of six directors is to be elected at the Annual Meeting. Unless
otherwise instructed by the stockholder, the proxy holders will vote the
proxies received by them for the Company's nominees named below. All
nominees are currently directors of the Company. Mr. Andrew Rachleff and Mr.
Robert Geske are not standing for re-election. Each nominee has consented to
be named a nominee in this Proxy Statement and to continue to serve as a
director if elected. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee
will be unable or will decline to serve as a director. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner and in
accordance with cumulative voting as will assure the election of as many of
the nominees listed below as possible, and in such event the specific
nominees to be voted for will be determined by the proxy holders. The term
of office of each person elected as a director will continue until the next
Annual Meeting of Stockholders or until a successor has been duly elected and
qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE NOMINEES LISTED BELOW.
NOMINEES FOR DIRECTOR
The names of the nominees, each of whom is currently a director of the
Company, and certain information about them is set forth below, including
information furnished by them as to their principal occupation for the last
five years, certain other directorships held by them and their ages as of
March 31, 1998:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
- ---------------------- --- ----------------------------------------------- --------
<S> <C> <C> <C>
Rod A. Beckstrom 37 Chief Executive Officer and Chairman 1988
David Gilbert 52 President, Chief Operating Officer and Director 1997
Manuel Correia (2) 63 Director 1995
Mark P. Kalkus (1) 35 Director 1990
Dale Prouty (2) 45 Director 1997
Mario M. Rosati (1) 51 Director and Secretary 1989
</TABLE>
- --------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Rod A. Beckstrom was a founder of the Company and has been Chief
Executive Officer and Chairman since 1988. Before founding the Company, Mr.
Beckstrom worked at Morgan Stanley International in London as a swaps trader.
Mr. Beckstrom received a B.A. in Economics and an M.B.A. from Stanford
University.
David Gilbert became a Director of the Company in November 1997. Dr.
Gilbert has served as President and Chief Operating Officer of the Company
since September 1996. In 1979, he founded Banking Decision Systems, Inc.,
which was acquired in 1988 by Logica, Inc. ("Logica"). At Logica he served
as Senior Vice President and International Director of Logica's global risk
management business. Until its recent acquisition by First Nationwide
Holdings, Inc., Dr. Gilbert was also Chairman of the Board of
-4-
<PAGE>
Directors at California Federal before its merger with First Nationwide
Holdings, Inc. Dr. Gilbert received a Ph.D. in Economics from Harvard
University.
Dale Prouty became a Director of the Company in August 1997. From May
1991 until his retirement in April 1997, he served as Executive Vice
President of Investment Technology Group, Inc. ("ITG"). Dr. Prouty now
serves as executive consultant for ITG. Prior to this, Dr. Prouty founded
and served as chief executive officer of Integrated Analytics Corporation
("IAC"), a provider of real-time intelligent systems for the securities
industry, which was ultimately acquired by ITG. Prior to this, Dr. Prouty
developed analytic software systems for Inference Corporation and NASA
Project Galileo. Dr. Prouty is also a director of Investment Technology
Group, Inc. and Sqribe Technology. He received a Ph.D. in Applied Physics
from California Institute of Technology.
Mark P. Kalkus became a Director of the Company in 1990. Mr. Kalkus has
been President and Chief Operating Officer of Lamar Companies, a real estate
investment concern, since 1992. From 1988 to 1992, Mr. Kalkus was Vice
President of Lamar Companies. Mr. Kalkus received a B.A. degree from
Stanford University and a J.D. from Stanford Law School.
Mario M. Rosati has been a Director of the Company since 1989 and
Secretary since 1988. Mr. Rosati is a member of the law firm of Wilson
Sonsini Goodrich & Rosati. Mr. Rosati received a B.A. degree from the
University of California at Los Angeles and a J.D. from the Boalt Hall School
of Law at the University of California at Berkeley. Mr. Rosati is also a
director of Aehr Test Systems, Inc., Genus, Inc., LECG, Inc., Meridian Data,
Inc., Ross Systems, Inc., Sanmina Corporation and several privately held
companies.
Manuel Correia became a Director of the Company in January 1995. Since
May of 1997, he has been the Executive Vice President and Chief Operating
Officer of CoWare, Inc. CoWare, Inc. is a start-up company in the EDA
business. From November 1988 to May 1997, Mr. Correia was Vice President of
Technical Services for Cadence Design Systems, Inc., one of the world's
largest CAD firms. Prior to this, Mr. Correia was Vice President of
Marketing and Customer Service for Gateway Design Automation. Mr. Correia
received a B.S. degree in Electrical Engineering from Northeastern University
and an M.S. degree in Management Sciences from State University of New York.
Mr. Correia is also a director of Infinium Software, Inc.
There are no family relationships between any of the foregoing nominees
or between any of such nominees and any of the Company's executive officers.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1997 (the "Last Fiscal Year"),
the Board of Directors held a total of four (4) meetings. Each of the
incumbent directors attended at least 75% of all meetings of the Board of
Directors and of the committees, if any, upon which such director served.
The Audit Committee, which currently consists of directors Manuel
Correia and Dale Prouty, was established to review, in consultation with the
independent accountants, the Company's financial statements, accounting and
other policies, accounting systems and system of internal controls. The
Audit Committee also recommends the engagement of the Company's independent
accountants and reviews other matters relating to the relationship of the
Company with its accountants. The Audit Committee met three (3) times during
the Last Fiscal Year.
The Compensation Committee, which currently consists of directors Mark
P. Kalkus, Andrew S. Rachleff and Mario M. Rosati, was established to review
and act on matters relating to compensation levels and benefit plans for key
executives of the Company, among other things. The Compensation Committee
-5-
<PAGE>
met four (4) times during the Last Fiscal Year. The Board of Directors
currently has no nominating committee or a committee performing a similar
function.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors for the Last Fiscal
Year consisted of directors Mark P. Kalkus, Andrew S. Rachleff and Mario M.
Rosati. No interlocking relationship exists between the Company's Board of
Directors or Compensation Committee and the Board of Directors or
compensation committee of any other company.
COMPENSATION OF DIRECTORS
In 1997, non-employee Directors were compensated $2,500 per quarter for
their services. Directors are also reimbursed for their expenses incurred in
attending Board meetings. Non-employee directors participate in the 1995
Director Option Plan (the "Director Plan"). Under the Director Plan, each
current non-employee director has been granted, on the later of January 6,
1995 or the date on which such individual first became a director, a
non-statutory option to purchase 15,000 shares of Common Stock which has a
term of ten years and which vests or will vest and become exercisable as to
one-twelfth (1/12) of the shares at the end of each three month period from
its date of grant, such that each option shall be fully exercisable three
years following its date of grant, based on continued service as a director.
In 1998, for each subsequent year after three years of continued service as a
Director, each non-employee director shall be permitted to choose from either
of two compensation plans. Under the terms of the first plan, a non-employee
Director will receive $2,500 per quarter and a non-statutory option to
purchase 7,500 shares of Common Stock which will vest as to 25% of the shares
at the end of each three-month period. Under the terms of the second plan, a
non-employee Director will receive no cash compensation and a non-statutory
option to purchase 10,000 shares of Common Stock which will vest as to 25% of
the shares at the end of each three-month period. Such options shall have a
term of ten years and shall have an exercise price of 100% of the fair market
value of the Common Stock on the date of the grant. During the fiscal year
ended December 31, 1997, options to purchase an aggregate of 100,000 shares
of the Company's Common Stock were granted to Rod A. Beckstrom pursuant to
the company's 1995 Stock Plan. Of such grant, options to purchase 50,000
shares have an exercise price of $6.50 per share and options to purchase
50,000 shares have an exercise price of $8.00 per share. These options are
exercisable over four years with 25% of the shares subject to the option
vesting 12 months after the vesting commencement date, and 1/48th of the
shares subject to the option vesting each month thereafter.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of
the shares present or represented by proxy and entitled to be voted for them
shall be elected as directors. Votes withheld from any director are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business, but have no other legal effect under Delaware law.
-6-
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP, independent
accountants, to audit the financial statements of the Company for the current
fiscal year ending December 31, 1998. Arthur Andersen LLP has audited the
Company's financial statements annually since 1993. In the event that a
majority of the Votes Cast are against the ratification, the Board of
Directors will reconsider its selection.
A representative of Arthur Andersen LLP will be present at the meeting
to make a statement if such representative desires to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
-7-
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date by
(i) each stockholder known to the Company to be a beneficial owner of more
than 5% of the Company's Common Stock; (ii) each director and nominee for
director; (iii) each of the Company's executive officers named in the Summary
Compensation Table appearing herein (the "Named Officers"); and (iv) all
current executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
------------------------------
BENEFICIAL OWNER NUMBER PERCENT (2)
- ---------------- --------- -----------
<S> <C> <C>
Rod A. Beckstrom (3)................................ 1,106,434 15.9%
David L. Babson and Company Incorporated (4)........ 732,800 10.7%
One Memorial Drive
Cambridge, MA 02142
Merrill, Pickard, Anderson & Eyre V, L.P. (5)(6).... 679,015 9.9%
(Andrew Rachleff)
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94205
State of Wisconsin Investment Board (7)............. 463,700 6.8%
P.O. Box 7842
Madison, WI 53707
Robert Geske........................................ 289,325 4.2%
Jerome Bock......................................... 289,325 4.2%
Manuel Correia (8).................................. 15,000 *
Mark P. Kalkus (9).................................. 53,100 *
Amos Barzilay (10).................................. 48,376 *
Mario M. Rosati (11)................................ 17,997 *
Andrew Rachleff (5)(6).............................. 679,015 9.9%
Finn Christensen (12)............................... 45,626 *
David Gilbert (13).................................. 92,626 1.3%
James Graber........................................ -- *
Jill Kulick......................................... -- *
All Directors and Executive Officers as a group
(12 persons) (14)................................. 2,636,824 36.7%
</TABLE>
- ----------------------------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise indicated in the
footnotes to this table, the persons and entities named in the table
have represented to the Company that they have sole voting and sole
investment power with respect to all shares beneficially owned, subject
to community property laws where applicable. Unless otherwise
indicated, the address of each of the beneficial owners listed in the
table is c/o C*ATS Software Inc., 1870 Embarcadero Road, Palo Alto, CA
94303.
(2) Percent ownership is based on 6,855,874 shares of Common Stock
outstanding. Shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of the Record Date
are deemed to be outstanding and to be beneficially owned by the person
holding such options or warrants for the purpose of computing the
percentage ownership of such person but are not treated as outstanding
for the purpose of computing the percentage ownership of any other
person.
(3) Includes (i) 97,500 shares issuable upon exercise of options held by Mr.
Beckstrom exercisable within 60 days of the Record Date and (ii) 6,000
shares held by family members and trusts for the benefit of family
members to which Mr. Beckstrom disclaims beneficial ownership.
-8-
<PAGE>
(4) Based on Amendment Number 1 to Schedule 13G filed in January 1998 by
David L. Babson and Company Incorporated which has sole voting power
over 732,800 shares.
(5) Based on Amendment Number 1 to Schedule 13G filed in January 1998 by
Merrill, Pickard, Anderson & Eyre V, L.P. on behalf of itself, Andrew
Rachleff, Bruce Dunlevie, James Anderson and Steven Merrill.
(6) Includes 10,000 shares owned by Mr. Rachleff and 669,015 shares owned
beneficially by Merrill, Pickard, Anderson & Eyre V, L.P., of which
Merrill, Pickard, Anderson & Eyre V Management Co., L.P. is a general
partner. Mr. Rachleff is a general partner of Merrill, Pickard,
Anderson & Eyre V Management Co., L.P. and in such capacity, Mr.
Rachleff may be deemed to share voting and investment power with respect
to such shares, although he disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein. In
addition to Mr. Rachleff, there are three other general partners of
Merrill, Pickard, Anderson & Eyre V Management Co., L.P., James C.
Anderson, Bruce W. Dunlevie and Steven L. Merrill, each of whom may be
deemed to share voting and investment power with respect to such shares.
Each disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein.
(7) Based on Amendment Number 2 to Schedule 13G filed in January 1998 by
State of Wisconsin Investment Board which has sole voting power over
463,700 shares.
(8) Includes 15,000 shares issuable upon exercise of options held by Mr.
Correia exercisable within 60 days of the Record Date.
(9) Includes (i) 15,000 shares issuable upon exercise of options held by Mr.
Kalkus exercisable within 60 days of the Record Date and (ii) 16,000
shares held by family members and trusts for the benefit of family
members to which Mr. Kalkus disclaims beneficial ownership.
(10) Includes 44,376 shares issuable upon exercise of options held by Mr.
Barzilay exercisable within 60 days of the Record Date.
(11) Includes 15,000 shares issuable upon exercise of options held by Mr.
Rosati exercisable within 60 days of the Record Date.
(12) Includes 45,626 shares issuable upon exercise of options held by Mr.
Christensen exercisable within 60 days of the Record Date.
(13) Includes 90,626 shares issuable upon exercise of options held by Dr.
Gilbert exercisable within 60 days of the Record Date.
(14) Includes 323,128 shares issuable upon exercise of options held by
Directors and Executive Officers as a group exercisable within 60 days
of the Record Date.
-9-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four other most highly paid executive
officers (the "Named Officers") during the three fiscal years ended December
31, 1997, 1996, and 1995.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------- SECURITIES
SALARY BONUS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) OPTIONS (#) COMPENSATION ($)(2)
- --------------------------- ---- ------- ------ ----------- -------------------
<S> <C> <C> <C> <C> <C>
Rod A. Beckstrom........... 1997 192,725 28,875 100,000 1,200
Chief Executive 1996 191,540 28,875 50,000 --
Officer 1995 160,209 -- -- --
David Gilbert (4).......... 1997 192,637 28,875 -- 1,200
President and Chief 1996 179,823 28,875 200,000 30,000(3)
Operating Officer 1995 -- -- -- --
Finn Christensen (5)....... 1997 151,750 20,250 -- --
Vice President of 1996 132,250 20,250 90,000 --
Marketing 1995 -- -- -- --
Robert L. Geske (6)........ 1997 144,000 21,600 -- 1,200
Vice President of 1996 132,000 21,600 -- --
Research and Development 1995 -- -- -- --
Amos Barzilay (7).......... 1997 152,682 21,750 -- 1,200
Vice President Capital 1996 115,202 21,750 90,000 --
Markets and Treasury 1995 -- -- -- --
</TABLE>
- ---------------
(1) Amounts shown are before salary reductions resulting from contributions
to the Company's 401(k) Profit Sharing Plan (the "401(k) Plan").
(2) Includes matching contributions of $1,200 each paid by the Company under
the 401(k) Plan.
(3) Amount shown is a relocation expense reimbursement.
(4) Dr. Gilbert joined the Company in January 1996.
(5) Mr. Christensen joined the Company in February 1996.
(6) Mr. Geske joined the Company in January 1996.
(7) Mr. Barzilay joined the Company in March 1996.
-----------------------
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
In connection with the February 13, 1996 acquisition of LOR/Geske Bock
Associates, Inc., by C*ATS Sub, Inc. a wholly-owned subsidiary of the
Company, Robert Geske entered into an employment agreement, dated January 30
1996, wherein Mr. Geske agreed to serve as a Vice President of the Company.
In consideration for his services, Mr. Geske receives an annual base salary
of $144,000 and is eligible to participate in any of the Company's executive
bonus plans. The term of Mr. Geske's agreement is four years, and after the
four year period, Mr. Geske's employment is to be extended for successive
six-month periods. Further, under the agreement, Mr. Geske is to receive
certain severance benefits should his employment with the Company terminate
for any reason other than for cause.
-10-
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth the number and terms of options granted
to the Named Officers during the last fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED YEAR (1) ($/SHARE) DATE 5% 10%
- ------------------------- ---------- ----------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Rod A. Beckstrom......... 50,000 7.7% $6.50 8/13/07 $204,391 $517,966
50,000 7.7% $8.00 8/13/07 $129,391 $442,966
David Gilbert............ -- -- -- -- -- --
Finn Christensen......... -- -- -- -- -- --
Robert L. Geske.......... -- -- -- -- -- --
Amos Barzilay............ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Based on 650,000 total options granted to employees during the Last
Fiscal Year.
(2) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange
Commission. There can be no assurance that the actual stock price
appreciation over the option term will be at the assumed 5% and 10%
levels or any other defined level. Actual gains, if any, on stock
option exercises are dependent on the future performance of the Common
Stock, overall market conditions and the option holders' continued
employment through the vesting period. The amounts reflected in the
table may not be achieved and do not reflect the Company's estimate of
future stock price growth. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the Named Officers.
The following table provides information with respect to option
exercises by the Named Officers during the fiscal year ended December 31,
1997 and the value of their unexercised options at December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END ($)(2)
ON EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- -------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Rod A. Beckstrom....... -- -- 81,876 128,124 248,010 13,523
David Gilbert.......... -- -- 69,793 130,207 25,823 48,177
Finn Christensen....... -- -- 35,625 54,375 13,181 20,119
Robert L. Geske........ -- -- -- -- -- --
Amos Barzilay.......... -- -- 34,375 55,625 12,719 20,581
</TABLE>
- ------------------
(1) Calculated as the fair market value of the shares on the date of
exercise less the exercise price of the options.
(2) Calculated as the fair market value of the securities underlying the
options at the fiscal year end ($5.063 per share on December 31, 1997)
less the exercise price of the options.
-11-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL
In its ordinary course of business, the Company enters into transactions
with certain of its directors and officers. The Company believes that each
such transaction has been on terms no less favorable for the Company than
could have been obtained in a transaction with an independent third party.
STOCK OPTIONS
During the Last Fiscal Year, options to purchase an aggregate of 100,000
shares of the Company's Common Stock were granted to Rod A. Beckstrom
pursuant to the company's 1995 Stock Plan. Of such grant, options to
purchase 50,000 shares have an exercise price of $6.50 per share and options
to purchase 50,000 shares have an exercise price of $8.00 per share. These
options are exercisable over four years with 25% of the shares subject to the
option vesting 12 months after the vesting commencement date, and 1/48th of
the shares subject to the option vesting each month thereafter.
COMPENSATION OF DIRECTORS
In 1997, non-employee Directors were compensated $2,500 per quarter for
their services. Directors are also reimbursed for their expenses incurred in
attending Board meetings. Non-employee directors participate in the 1995
Director Plan. Under the Director Plan, each current non-employee director
has been granted, on the later of January 6, 1995 or the date on which such
individual first became a director, a non-statutory option to purchase 15,000
shares of Common Stock which has a term of ten years and which vests or will
vest and become exercisable as to one-twelfth (1/12) of the shares at the end
of each three month period from its date of grant, such that each option
shall be fully exercisable three years following its date of grant, based on
continued service as a director. In 1998, for each subsequent year after
three years of continued service as a Director, each non-employee director
shall be permitted to choose from either of two compensation plans. Under
the terms of the first plan, a non-employee Director will receive $2,500 per
quarter and a non-statutory option to purchase 7,500 shares of Common Stock
which will vest as to 25% of the shares at the end of each three-month
period. Under the terms of the second plan, a non-employee Director will
receive no cash compensation and a non-statutory option to purchase 10,000
shares of Common Stock which will vest as to 25% of the shares at the end of
each three-month period. Such options shall have a term of ten years and
shall have an exercise price of 100% of the fair market value of the Common
Stock on the date of the grant.
LEGAL COUNSEL
During the Last Fiscal Year, Mario M. Rosati, a member of the Board of
Directors of the Company, was also a member of the law firm of Wilson Sonsini
Goodrich & Rosati. The Company continued to retain WSGR as its legal counsel
during the fiscal year. The Company plans to retain WSGR as its legal
counsel again during fiscal 1998.
-12-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Decisions on compensation of the Company's executive officers are made
by the Compensation Committee of the Board of Directors. The members of the
Compensation Committee, Messrs. Kalkus, Rachleff and Rosati are non-employee
directors. Decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reviewed by the full
Board (which did not modify or reject any Compensation Committee decisions
during 1997), except for decisions about awards under the Company's Stock
Plan, which decisions must be made solely by the committee in order for the
grants under such Stock Plan to satisfy Rule 16b-3.
COMPENSATION PHILOSOPHY AND RELATIONSHIP OF PERFORMANCE. This report
reflects the Compensation Committee's executive officer compensation
philosophy for the year ended December 31, 1997 as endorsed by the Board of
Directors. The resulting actions taken by the Company are shown in the
compensation tables supporting this report. The Compensation Committee
either approves or recommends to the Board of Directors compensation levels
and compensation components for the executive officers. With regard to
compensation actions affecting the Chief Executive Officer, all of the
non-employee members of the Board of Directors acted as the approving body.
The Compensation Committee's executive compensation policies are
designed to enhance the financial performance of the Company, and thus
stockholder value, by aligning the financial interests of the key executives
with those of stockholders.
The executive compensation program (the "Program") is viewed in total
considering all of the component parts: base salary, annual performance
bonus, benefits and long-term incentive opportunity in the form of stock
options and stock ownership. The annual compensation components consist
generally of equal or lower base salaries than those of companies within the
industry combined with incentive plans based on the Company's financial
performance that can result in total compensation generally in line with
those at comparable companies. Long-term incentives are tied to stock
performance through the use of stock options. The Compensation Committee's
position is that stock ownership by management is beneficial in aligning
management's and stockholders' interests in the enhancement of stockholder
value. Overall, the intent is to have more significant emphasis on variable
compensation components and less on fixed cost components. The Committee
believes this philosophy and structure are in the best interests of the
stockholders.
Executive compensation for fiscal 1997 primarily consisted of base
salary and performance incentives awarded in the form of stock options for
such period.
ANNUAL INCENTIVE ARRANGEMENTS. The Company has adopted a Program which
provides annual incentive compensation in the form of cash bonuses to key
employees, including the Named Officers, who by the nature of their positions
are deemed sufficiently accountable to impact directly the financial results
of the Company. The Program is approved by the Compensation Committee, whose
members are not eligible to participate in the Program.
The Committee believes that key executives should have a significant
proportion of total cash compensation subject to specific strategic and
financial measurements. At the beginning of each fiscal year, or upon an
individual being appointed an executive officer, the Committee sets a target
bonus range (0-60%) in 1998 for each executive officer expressed as a
percentage of the executive's base salary. Performance goals for purposes of
determining annual incentive compensation are established, which include
sales, profitability and other strategic and financial measurements. Senior
management, including the Named
-13-
<PAGE>
Officers, have the potential to earn significantly higher levels of incentive
compensation if the Company exceeds its targets. The target incentive
compensation levels established by the Compensation Committee for 1997
expressed as a percentage of base salary were approximately 30%.
The performance goals established at the beginning of 1997 were based on
several strategic and financial measurements including a target level of
profitability and sales and attainment of certain other objectives. Based on
evaluation of the above criteria, the Compensation Committee chose to award
incentive payments for 1997 averaging approximately 15% in amounts listed
below under the "Executive Compensation--Summary Compensation Table."
STOCK OPTIONS. The Compensation Committee of the Board of Directors
generally determines stock option grants to eligible employees including the
Named Officers. The Committee believes that options granted to management
reinforce the Compensation Committee's philosophy that management
compensation should be closely linked with stockholder value. Stock options
have been granted to all of the Company's management and key employees.
OTHER COMPENSATION PLANS. The Company has adopted certain broad-based
employee benefit plans in which all employees, including the Named Officers,
are permitted to participate on the same terms and conditions relating to
eligibility and generally subject to the same limitations on the amounts that
may be contributed or the benefits payable under those plans. Under the
Company's 401(k) Plan, which is a defined contribution plan qualified under
Sections 401(a) and 401(k) of the Code, participants, including the Named
Officers, can contribute a percentage of their annual compensation. The
401(k) Plan allows for the Company to make matching contributions. In 1997,
the Company made a matching contribution for participants of $1,200 or 25% of
the individual's contribution, whichever was less.
MR. BECKSTROM'S 1997 COMPENSATION. Compensation for the Chief Executive
Officer aligns with the philosophies and practices discussed above for
executive officers in general. All compensation determinations and stock
option grants to the Chief Executive Officer are reviewed by the Compensation
Committee with the Board of Directors. Mr. Beckstrom is not eligible to
participate in the Employee Stock Purchase Plan.
At the beginning of each fiscal year, the Compensation Committee sets a
target bonus amount for the Chief Executive Officer. The target incentive
compensation level established for Mr. Beckstrom for 1997, expressed as a
percentage of his base salary, was 30%.
For 1997, the Chief Executive Officer's performance goals were
established based on strategic and financial measurements, including a target
level of sales and profitability. In evaluating, Mr. Beckstrom's performance
for the purpose of determining his incentive compensation for such period,
the Compensation Committee considered the Company's performance against its
financial and strategic objectives. Based on the evaluation, the Compensation
Committee decided that Mr. Beckstrom's performance qualified him to receive a
15% bonus award. For specific data regarding Mr. Beckstrom's 1997
compensation, see "Executive Compensation--Summary Compensation Table."
Compensation Committee
Mario Rosati
Mark Kalkus
Andrew S. Rachleff
-14-
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return, calculated on a dividend reinvested basis, from the date of the final
prospectus for the initial public offering of the Company's Common Stock on
March 21, 1995 through 1997 fiscal year end (December 31, 1997) for C*ATS
Software Inc., the Standard and Poor's 500 Composite Index (the "S&P 500")
and the Pacific Stock Exchange Technology Index (the "PSE High Tech Index").
The graph assumes that $100 was invested in the Company's Common Stock on
March 21, 1995 at the initial public offering price and in the S&P 500 and
the PSE High Tech Index. The stock price performance shown on the graph below
is not necessarily indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG C*ATS SOFTWARE INC.,
STANDARD & POOR'S 500 COMPOSITE INDEX,
AND THE PACIFIC STOCK EXCHANGE TECHNOLOGY INDEX
<TABLE>
<CAPTION>
PSE NASDAQ
C*ATS TECHNOLOGY S&P 500 COMPUTER
SOFTWARE INDEX INDEX INDEX
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
21-Mar-95................ $100.000 $100.000 $100.000 $100.000
31-Mar-95................ $107.143 $ 99.797 $100.916 $100.276
30-Jun-95................ $ 78.571 $121.321 $109.794 $126.123
29-Sep-95................ $ 60.714 $ 67.995 $117.787 $138.346
29-Dec-95................ $ 50.893 $ 67.364 $124.142 $137.367
29-Mar-95................ $ 50.893 $ 67.166 $130.100 $142.543
28-Jun-95................ $ 42.857 $ 69.451 $135.523 $161.783
30-Sep-96................ $ 34.821 $ 74.120 $138.527 $175.531
31-Dec-96................ $ 31.250 $ 80.860 $149.295 $194.648
31-Mar-97................ $ 35.268 $ 80.781 $152.598 $182.976
30-Jun-97................ $ 32.143 $ 94.235 $178.400 $222.676
30-Sep-97................ $ 42.857 $112.244 $190.924 $263.724
31-Dec-97................ $ 36.161 $ 97.011 $195.591 $232.091
31-Mar-98................ $ 39.286 $115.515 $222.057 $289.987
</TABLE>
-15-
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors, certain
officers of the Company and ten percent stockholders file reports of
ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC") as to the Company's securities beneficially owned by
them. Such persons are also required by SEC rules to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any written representations referred to in Item 405(b)(2)(i)
of Regulation S-K stating that no Forms 5 were required, the Company believes
that, during the Last Fiscal Year, all Section 16(a) filing requirements
applicable to the Company's officers, directors and ten percent stockholders
were complied with.
FINANCIAL STATEMENTS
The Company's Annual Report to Stockholders for the last fiscal year is
being mailed with this proxy statement to stockholders entitled to notice of
the meeting. The Annual Report includes the consolidated financial
statements, unaudited selected financial data and management's discussion and
analysis of financial condition and results of operations.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the accompanying proxy to vote the shares represented
thereby on such matters as the Board of Directors may recommend.
By Order of the Board of Directors
Rod A. Beckstrom,
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
OF THE BOARD
Palo Alto, California
April 15, 1998
-16-
<PAGE>
DETACH HERE
PROXY
C*ATS SOFTWARE INC.
1870 EMBARCADERO ROAD
PALO ALTO, CALIFORNIA 94303
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The enclosed proxy is solicited on behalf of the Board of Directors of C*ATS
Software Inc. (the "Company") for use at the 1998 Annual Meeting of
Stockholders to be held on Wednesday, May 20, 1998, at 1:00 p.m. local time
(the "Annual Meeting"), and at any and all continuations or adjournments
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Company's offices at 1870 Embarcadero Road, Palo Alto, California 94303.
THESE PROXY SOLICITATION MATERIALS WERE MAILED ON OR ABOUT APRIL 15, 1998 TO
ALL STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE>
DETACH HERE
/x/ Please mark
votes as in
this example.
1. To elect (6) directors to serve for the ensuing year and until their
successors are duly elected and qualified.
Nominees: Rod A. Beckstrom, Dr. David Gilbert, Manuel Correia,
Mark P. Kalkus, Dale Prouty, and Mario M. Rosati
FOR WITHHELD
/ / / /
/ /
------------------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To ratify the appointment of Arthur Andersen LLP as / / / / / /
independent auditors of the Company for the fiscal
year ending December 31, 1998.
FOR AGAINST ABSTAIN
3. To transact such other business as may properly / / / / / /
come before the meeting and at any and all
continuations or adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
This Proxy is being solicited by the Board of Directors of C*ATS Software
Inc.
This Proxy should be marked, dated and signed exactly as name appears hereon.
Joint owners should each sign. Persons signing as attorney, executor,
adminstrator, trustee or guardian should give full title as such.
Signature: ____________________________ Date:_______________________
Signature: ____________________________ Date:_______________________
