<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
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
MAXIS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
R.R. DONNELLEY FINANCIAL
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF MAXIS]
MAXIS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
TO BE HELD AUGUST 21, 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Maxis,
Inc., a Delaware corporation (the "Company"), will be held on Wednesday,
August 21, 1996, at 10:00 a.m., local time, at the Dean Lesher Regional Center
for the Arts, 1601 Civic Drive, Walnut Creek, California 94596, for the
following purposes:
1. To elect eight (8) directors of the Company to serve until the next
annual meeting of stockholders and until their respective successors
have been elected and qualified or until their earlier resignation or
removal. The Board of Directors intends to nominate the following
individuals for election to the Board: Jeffrey B. Braun, William R.
Wright, William H. Janeway, Dr. Henry Kressel, Avram C. Miller, Samuel
L. Poole, Charles H. Gaylord Jr. and Eric C.W. Dunn.
2. To approve amendments to the Company's 1995 Stock Plan to (i) increase
the number of shares of the Company's Common Stock reserved for issuance
under such plan by 1,200,000 shares from a total of 575,000 shares to a
total of 1,775,000 shares, and (ii) make directors of the Company
eligible to participate in such plan.
3. To approve an amendment to the Company's 1995 Employee Stock Purchase
Plan to increase the number of shares of the Company's Common Stock
reserved for issuance under such plan by 100,000 shares from a total of
100,000 shares to a total of 200,000 shares.
4. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company for the fiscal year ending March 31, 1997.
5. To transact such other business as may properly come before the meeting
or any adjournment 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 June 28, 1996, are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are invited to attend the meeting in person. However, to
assure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed proxy card as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person even if he or she has returned a proxy.
Sincerely,
Samuel L. Poole
President
---------
Walnut Creek, California
July 22, 1996
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
MAXIS, INC.
----------------
PROXY STATEMENT FOR 1996 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Maxis, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to
be held on Wednesday, August 21, 1996, at 10:00 a.m., local time, or at any
adjournment 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 Dean Lesher Regional Center for the Arts, 1601 Civic Drive, Walnut Creek,
California, 94596. The Company's telephone number is (510) 933-5630.
These proxy solicitation materials were mailed on or about July 22, 1996,
together with the Company's 1996 Annual Report to Stockholders, to all
stockholders entitled to vote at the meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on June 28, 1996 (the
"Record Date"), are entitled to notice of and to vote at the meeting. On that
date, 11,076,528 shares of the Company's Common Stock were issued and
outstanding. The following table sets forth the beneficial ownership of the
Company's Common Stock as of the Rocord Date, with respect to (i) each person
who is known by the Company to own beneficially more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each director and each
nominee for director of the Company, (iii) each of the executive officers
named in the Summary Compensation Table below and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES APPROXIMATE
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OWNED
------------------------------------ ------------ -----------
<S> <C> <C>
Jeffrey B. Braun (1).................................. 3,209,600 29.0%
2121 N. California Blvd., Suite 600
Walnut Creek, CA 94596
Warburg, Pincus Investors, L.P. (2)................... 1,593,750 14.4
466 Lexington Avenue
New York, NY 10017
William H. Janeway(3)................................. 1,593,750 14.4
Dr. Henry Kressel(3).................................. 1,593,750 14.4
William R. Wright(4).................................. 1,323,400 11.9
2121 N. California Blvd., Suite 600
Walnut Creek, CA 94596
Samuel L. Poole....................................... 228,815 2.1
Avram C. Miller(5).................................... 24,000 *
Charles H. Gaylord Jr.(6)............................. 20,000 *
Eric C.W. Dunn........................................ 0 --
OTHER OFFICERS
Fred M. Gerson(7)..................................... 120,664 1.1
Joseph M. Scirica..................................... 89,123 *
Douglas B. Litke...................................... 57,746 *
All Directors and Executive Officers as a Group
(16 Persons)(8)...................................... 6,827,826 61.5
</TABLE>
<PAGE>
- - --------
* Less than 1%.
(1) Shares held of record by a trust for the benefit of Mr. Braun.
(2) The sole General Partner of Warburg, Pincus, Investors, L.P. ("Warburg")
is Warburg, Pincus & Co., a New York general partnership ("WP"). Lionel I.
Pincus is the Managing Partner of WP and may be deemed to control WP. E.M.
Warburg, a New York general partnership ("EMW") that has the same general
partners as WP, manages Warburg. WP has a 20% interest in the profits of
Warburg and, through its wholly owned subsidiary, EMW owns 1.13% of the
limited partnership interests in Warburg. Mr. Janeway and Dr. Kressel,
directors of the Company, are Managing Directors of EMW and General
Partners of WP and EMW. As such, Mr. Janeway and Dr. Kressel may be deemed
to have an indirect pecuniary interest (within the meaning of Rule 16a-1
under the Securities and Exchange Act of 1934, as amended (the "Exchange
Act")), in an indeterminate portion of the shares beneficially owned by
Warburg, EMW and WP.
(3) All of the shares indicated as owned by Mr. Janeway and Dr. Kressel are
owned directly by Warburg and are included because of their affiliation
with Warburg. Mr. Janeway and Dr. Kressel disclaim "beneficial ownership"
of these shares within the meaning of Rule 13d-3 under the Exchange Act.
(4) Includes 1,223,400 shares held of record by a trust for the benefit of Mr.
Wright and his family. Also includes 100,000 shares held by a trust for
the benefit of a child of Mr. Wright, as to which trust Mr. Wright is not
a trustee, and as to which shares Mr. Wright disclaims beneficial
ownership.
(5) Includes 20,000 shares subject to a stock option exercisable within 60
days of the Record Date.
(6) Shares held of record by a trust for the benefit of Mr. Gaylord.
(7) Includes 664 shares held by the children of Mr. Gerson, as to which shares
Mr. Gerson disclaims beneficial ownership.
(8) Includes 20,625 shares subject to stock options, exercisable within 60
days of the Record Date.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Every stockholder voting for the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares held by
such stockholder or distribute the stockholder's votes on the same principle
among as many candidates as the stockholder may select, provided that votes
cannot be cast for more than eight candidates. However, no stockholder shall
be entitled to cumulate votes unless the candidate's name has been placed in
nomination prior to the voting and the stockholder, or any other stockholder,
has given notice at the meeting prior to the voting of the intention to
cumulate the stockholder's votes. On all other matters, each share has one
vote.
The cost of soliciting proxies will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
2
<PAGE>
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of a controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
--------------------------
Court held that, while broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of
business, broker non-votes should not be counted for purposes of determining
the number of Votes Cast with respect to the particular proposal on which the
broker has expressly not voted. Accordingly, the Company intends to treat
broker non-votes in this manner. Thus, a broker non-vote will not have any
effect on the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at next year's Annual Meeting must be received by the
Company no later than March 31, 1997, in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
A Board of eight directors is to be elected at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's eight nominees named below, all of whom are presently directors of
the Company. 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. 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, 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 Company is not aware of any nominee who
will be unable or will decline to serve as a director. 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 elected and qualified. There are
no family relationships among any directors or executive officers of the
Company.
The names of the nominees and certain information about them are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<C> <C> <S> <C>
Jeffrey B. Braun 40 Co-founder, Chief Executive Officer and 1990
Chairman of the Board of Directors of the Company
William R. Wright 36 Co-founder, Chief Technical Designer and 1990
Director of the Company
William H. Janeway 53 Managing Director, E. M. Warburg, Pincus 1992
and Co., Inc.
Dr. Henry Kressel 62 Managing Director, E.M. Warburg, Pincus 1992
and Co., Inc.
Avram C. Miller 51 Vice President, Corporate Business 1995
Development, Intel Corporation
Samuel L. Poole 48 President and Director of the Company 1994
Charles H. Gaylord, Jr. 51 Consultant 1994
Eric C.W. Dunn 38 Senior Vice President, 1996
Consumer/International Division, Intuit, Inc.
</TABLE>
Mr. Braun is a co-founder of the Company and has served as Chief Executive
Officer of the Company since November 1993. From 1987 to November 1993, Mr.
Braun served as President of the Company and, from September 1990 to the
present, as Chairman of the Board. Mr. Braun has over 13 years of experience
in the software industry.
Mr. Wright is a co-founder of the Company, has served as Chief Technical
Designer since the Company began business in 1987, and as a Director of the
Company since September 1990. Mr. Wright is the designer of SimCity, SimCity
------- -------
2000, SimEarth and SimAnt.
- - ---- -------- ------
Mr. Janeway has served as a Director of the Company since June 1992. Since
1988, Mr. Janeway has served as a Managing Director and Head of the Venture
Capital High Technology Team of E.M. Warburg Pincus and Co., Inc. Mr. Janeway
serves as a director of Zilog, Inc., Vanstar Corporation, OpenVision
Technologies, Inc. and several privately held companies.
Dr. Kressel has served as a Director of the Company since June 1992. Since
1985, Dr. Kressel has served as a Managing Director of E.M. Warburg, Pincus
and Co., Inc. Dr. Kressel serves as a director of Level One Communications,
Inc., Zilog, Inc., Nova Corporation, Tres Com International, and several
privately held companies.
Mr. Miller has served as a Director of the Company since April 1995. Since
1984, Mr. Miller has held various positions at Intel Corporation, a
semiconductor manufacturer, most recently as Vice President, Corporate
Business Development.
4
<PAGE>
Mr. Poole has served as President of the Company since November 1993 and as
a Director since April 1994. Mr. Poole joined the Company in August 1992 as
Vice President, Sales. From January 1991 to August 1992, he was employed by
Disney Software, Inc. as Director of Sales. From January 1989 to January 1991,
Mr. Poole was employed by Cinemaware Corporation, a software publisher, as
Vice President of Marketing and Sales. From 1984 to 1989, he served as
President of IntelliCreations, Inc., a software publisher. Mr. Poole holds an
M.B.A. degree from Kent State University and a B.A. degree from Thiel College.
Mr. Gaylord has served as a Director of the Company since April 1994. Mr.
Gaylord is currently working as an independent technology investor. From
December 1993 until September 1994, Mr. Gaylord was Executive Vice President
for Intuit, Inc. and Chairman of the Board of Chipsoft, Inc. From 1990, until
the acquisition of Chipsoft by Intuit in December 1993, he was employed by
Chipsoft, initially as President and Chief Executive Officer. For the
preceding seventeen years, he held various positions at Transworld Oil
International Group of Companies, including servicing as President of
Transworld Oil America, Inc., a privately-held oil trading and marketing
company.
Mr. Dunn was appointed to the Company's Board of Directors in March of 1996.
Mr. Dunn is the Vice President and General Manager of Intuit's Personal
Finance Group and was the primary architect of the Quicken family of products.
He served as Intuit's Chief Financial Officer from the time he joined Intuit
in September 1986 throughout the end of 1993. Before joining Intuit, Mr. Dunn
spent three years as a consultant with Bain & Company, a corporate strategy
consulting firm. From 1979 to 1981, Mr. Dunn worked as an analyst at IBM. Mr.
Dunn graduated summa cum laude from Harvard College with a B.A. degree in
physics. He also earned an M.B.A. from Harvard Business School, graduating as
a Baker Scholar.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The eight nominees receiving the highest number of affirmative Votes Cast
shall be elected as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES
LISTED ABOVE.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eleven meetings and
took no action by written consent during the fiscal year ended March 31, 1996.
No director participated in fewer than 75% of the aggregate number of meetings
of the Board of Directors and meetings of the committees of the Board on which
he served.
The Board of Directors has standing Compensation and Audit Committees. It
does not have a Nominating Committee or any committees performing the
functions of a Nominating Committee.
The Compensation Committee of the Board of Directors, currently consisting
of Messrs. Gaylord, Kressel and Miller, held a total of six meetings and took
no action by written consent during the fiscal year ended March 31, 1996. The
Compensation Committee reviews and approves the Company's executive
compensation strategy and stock option grants to employees and executive
officers, including the Chief Executive Officer and the President. The
Committee also approves general guidelines for the compensation of all Company
employees and provides recommendations to the Board for the compensation of
the Chief Executive Officer.
The Audit Committee of the Board of Directors met four times during the
fiscal year ended March 31, 1996. This Committee reviews and approves the
scope of the annual audit; recommends to the Board the appointment of the
independent public accountants; interviews the independent public accountants
for review and analysis of the Company's financial staff, systems, and
adequacy of controls; and reviews any non-audit services of the independent
public accountants. Current members of the Audit Committee are Messrs. Dunn,
Gaylord and Miller. Messr. Janeway served as an Audit Committee member until
March 1996, when Mr. Dunn joined the Committee.
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee has no member who is or has been an officer or
employee of the Company. 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, and no such
interlocking relationship existed in the past.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October and December 1993, the Company loaned $24,000 and $48,000,
respectively, to Samuel L. Poole, an executive officer and Director of the
Company, in connection with the exercise of nonqualified stock options to
purchase 80,000 and 160,000 shares of Common Stock, respectively, at $.30 per
share, with interest payable at rates of 3.69% and 5.97%, respectively,
compounded annually and with terms of three and nine years, respectively. Mr.
Poole repaid both notes, in full, on December 12, 1995. In November 1994, the
Company loaned $87,000 to Fred M. Gerson, an executive officer of the Company,
in connection with the exercise of a nonqualified stock option to purchase
120,000 shares of Common Stock at $.725 per share, with interest payable at a
rate of 6.24%, compounded annually, and for a term of three (3) years. The
foregoing loan is secured by the Common Stock purchased by Mr. Gerson. As of
March 31, 1995, the total outstanding balance on Mr. Gerson's note was
$89,027. As of March 31, 1996, the total oustanding balance was $89,262. The
loan is currently in good standing with the Company.
The Company and William R. Wright, a Director and Co-founder of the Company,
are parties to three Software Development License Agreements dated November
25, 1991 relating to the development of SimAnt, SimEarth, SimCity and SimCity
------ -------- ------- -------
Terrain Editor. Mr. Wright has received royalties from the Company in the
- - --------------
aggregate amount of $223,951 from March 31, 1995 through March 31, 1996, for
fiscal year 1996, pursuant to these agreements.
The Company believes that the transactions set forth above were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. These transactions were, and all future
transactions, between the Company and its officers, directors, principal
stockholders and their affiliates will be, approved by a majority of the Board
of Directors, including a majority of the independent and disinterested
outside directors on the Board of Directors, and will continue to be on terms
no less favorable to the Company than could be obtained from unaffiliated
third parties.
EMPLOYEE BENEFIT PLANS
The following is a brief summary of plans in effect during the fiscal year
ended March 31, 1996 under which officers, directors and employees of the
Company received benefits. The closing price of the Company's Common Stock
reported on the Nasdaq National Market on the Record Date was $19.75 per
share.
401(k) PLAN
The Company maintains the Maxis, Inc., 401(k) Savings and Retirement Plan
(the "401(k) Plan"), a defined contribution retirement plan with a cash or
deferred arrangement as described in Section 401(k) of the Internal Revenue
Code of 1986 as amended (the "Code"). The 401(k) Plan is intended to be
qualified under Section 401(a) of the Code. All regular employees of the
Company may participate in the 401(k) Plan after 90 days of employment with
the Company. Participants may contribute from 1% to 15% of their compensation
to the 401(k) plan, subject to statutory limits. The Company provides a 100%
matching contribution, up to 5% of an employee's compensation, also subject to
statutory limits. The Company limits the matching contribution to a maximum
dollar amount of $5,000 for any year. Allocation of the matching contribution
is integrated with Social Security in accordance with applicable
nondiscrimination rules under the Code.
6
<PAGE>
1995 EMPLOYEE STOCK PURCHASE PLAN
The Company has reserved an aggregate of 100,000 shares of Common Stock for
issuance under its 1995 Employee Stock Purchase Plan (the "ESPP"). See
Proposal No. 3 for the proposed addition of 100,000 shares to the ESPP. The
ESPP was adopted by the Board of Directors in March 1995 and approved by the
Company's stockholders in May 1995. The ESPP is intended to qualify under
Section 423 of the Code, and permits eligible employees of the Company to
purchase Common Stock through payroll deductions of up to 10% of their
compensation. For a more detailed discussion of the ESPP, see Proposal No. 3.
The following table sets forth as to the Named Executive Officers, all
current executive officers as a group and all other employees as a group (i)
the number of shares of the Company's Common Stock purchased under the ESPP
during the period from its inception until March 31, 1996; (ii) the aggregate
purchase price thereof and (iii) the fair value of stock purchased through
March 31, 1996 under the ESPP:
<TABLE>
<CAPTION>
NUMBER AGGREGATE FAIR VALUE OF
NAME OF INDIVIDUAL OR OF SHARES PURCHASE STOCK
IDENTITY OF GROUP PURCHASED PRICE PURCHASED
--------------------- --------- --------- -------------
<S> <C> <C> <C>
Jeffrey B. Braun............................. -0- $ -0- $ -0-
Samuel L. Poole.............................. 815 11,084 30,766
Fred M. Gerson............................... 664 9,030 25,066
Joseph M. Scirica............................ 423 5,753 15,968
Douglas B. Litke............................. 246 3,346 9,287
All current executive officers as a group
(10 persons)................................ 3,965 53,924 149,679
All employees as a group (including current
officers who are not executive officers).... 18,205 247,588 687,239
</TABLE>
INCENTIVE PROGRAM
The Compensation Committee establishes, on an annual basis, a cash incentive
program for all of the Company's executive officers, except for the Chief
Executive Officer. The Chief Executive Officer's cash incentive program is set
by the Board of Directors, who are under advisement of the Compensation
Committee. The incentive program is performance based related to overall
Company performance and executive team and individual goals and objectives.
1993 STOCK OPTION PLAN
The Company maintained a stock compensation plan to provide continuing long-
term incentives to all employees, to provide a means of rewarding outstanding
performance by individuals, and to enable the Company to attract and retain
key personnel necessary for the continued long-term growth of the Company. No
further options will be granted under the Company's 1993 Stock Option Plan
(the "1993 Plan"). The Company intends to provide long-term incentives to
employees by granting options pursuant to its 1995 Stock Plan described below.
Outstanding options of the 1993 Plan are administered by the Compensation
Committee. The Board may interpret the 1993 Plan and, subject to its
provisions, may prescribe, amend and rescind rules and make all other
determinations necessary or desirable for the administration of the 1993 Plan.
Subject to certain limits set forth in the 1993 Plan, the Board has complete
discretion to select the participants, establish the manner in which options
are granted and exercised, cancel or modify options in certain situations,
impose restrictions on transferability or repurchase rights on shares of
Common Stock issued thereunder, and otherwise prescribe all terms and
provisions of options granted under the 1993 Plan. As of the Record Date,
options for 288,529 shares of Common Stock remained outstanding at a weighted
average exercise price of $2.74 per share and options for 1,143,753 shares of
Common Stock had been exercised.
7
<PAGE>
1995 STOCK PLAN
The Company has reserved an aggregate of 575,000 shares of Common Stock for
issuance under its 1995 Stock Plan (the "1995 Plan"). The 1995 Plan was
adopted by the Board of Directors in March 1995 and approved by the Company's
stockholders in May 1995. The 1995 Plan is currently administered by the
Compensation Committee of the Board of Directors. As of the Record Date,
options to purchase 377,052 shares of Common Stock were outstanding at a
weighted average exercise price of $26.64 per share, options for 0 shares had
been exercised and 197,948 shares were available for future option grant or
direct sale under the 1995 Plan. For a more detailed discussion, please see
Proposal No. 2. During fiscal 1996, options to purchase 32,500 shares at a
weighted average exercise price of $38.67 per share were granted to executive
officers of the Company and options to purchase 201,650 shares at a weighted
average exercise price of $29.13 per share were granted to other employees of
the Company.
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO
1995 STOCK PLAN
At the Annual Meeting, stockholders will be asked to approve amendments to
the Company's 1995 Plan to (i) increase the number of shares of the Company's
Common Stock reserved for issuance under the 1995 Plan by 1,200,000 shares
from a total of 575,000 shares to a total of 1,775,000 shares and (ii) make
directors of the Company eligible to participate in the 1995 Plan. The 1995
Plan is described in more detail below. Since each executive officer and
director of the Company is eligible to receive options under the 1995 Plan, as
amended, each such executive officer and director has a personal interest in
the proposed amendments to the 1995 Plan.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of Votes Cast is required to ratify and
approve the proposed amendment to the 1995 Stock Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1995 PLAN.
TERMS OF THE 1995 STOCK PLAN
General. The 1995 Plan was adopted by the Board of Directors in March of
1995 and approved by the Company's stockholders in May of 1995. The Company
has currently reserved an aggregate of 575,000 shares of Common Stock for
issuance under the 1995 Plan. Set forth below is a summary of the principal
features of the 1995 Plan, which summary is qualified in its entirety by
reference to the terms and conditions of the 1995 Plan. In addition, the
Company will provide, without charge, to each person to whom a proxy statement
is delivered, upon request of such person and by first class mail within one
business day of receipt of such request, a copy of the 1995 Plan. Any such
request should be directed as follows: Stock Administration Department, Maxis,
Inc., 2121 N. California Blvd., Suite 600, Walnut Creek, CA 94596; telephone
number (510) 933-5630.
Purposes. The purposes of the 1995 Plan are to attract and retain the best
available personnel for the positions of substantial responsibility, to
provide additional incentive to employees and consultants of the Company and
to promote the success of the Company's business. In order to provide a
flexible vehicle under which appropriate incentives can be awarded, the 1995
Plan permits the granting of incentive stock options, nonstatutory stock
options and stock purchase rights.
Administration. The 1995 Plan may be administered by the Board or a
Committee appointed by the Board (the "Administrator"). The 1995 Plan is
administered so as to satisfy certain requirements under the federal
securities laws, including the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), applicable Delaware corporate law and the Internal
Revenue Code of 1986, as amended (the "Code").
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<PAGE>
Currently, the 1995 Plan is administered by the Compensation Committee of
the Board of Directors, all of whose members are non-employees. Subject to the
terms of the 1995 Plan, the Administrator determines the optionees, the number
of shares subject to each option, the exercise prices, the exercise periods
and the dates of grants. The Administrator also has the authority to construe
and interpret any of the provisions of the 1995 Plan or any options granted
thereunder. Such interpretations are binding on the Company and on the
optionees.
Neither the members of the Board nor the members of the Compensation
Committee received any compensation for administering the 1995 Plan other than
expenses incurred in connection with meeting attendance. The Company bears all
expenses in connection with administration of the 1995 Plan and has agreed to
indemnify members of the Administrator in connection with their administration
of the 1995 Plan.
Eligibility. The 1995 Plan, as amended, provides for grants of options to
employees and consultants (including directors) of the Company and its
subsidiaries; provided, however, that no employee may be granted an option for
more than 500,000 shares in any one fiscal year. Incentive stock options may
be granted only to employees (including officers and employee directors). The
Administrator selects the recipients of awards under the 1995 Plan and
determines the number of shares to be subject to each option. An optionee may
hold more than one option granted under the 1995 Plan. Both incentive stock
options ("ISOs"), as defined in Section 422 of the Code and nonqualified stock
options may be granted under the 1995 Plan.
Terms of Options Granted Under the 1995 Plan. The exercise price of options
granted under the 1995 Plan is determined by the Administrator. With respect
to incentive stock options granted under the 1995 Plan, the exercise price
must be at least equal to 100% of the fair market value per share of the
Common Stock on the date of grant, and the exercise price of any incentive
stock option granted to a participant who owns more than 10% of the voting
power of all classes of the Company's outstanding capital stock must be equal
to at least 110% of the fair market value of the Common Stock on the date of
grant. The maximum term of an option granted under the 1995 Plan may not
exceed ten years from the date of grant (five years in the case of a
participant who owns more than 10% of the voting power of all classes of the
Company's outstanding capital stock).
Options outstanding under the 1995 Plan generally vest and become
exercisable, assuming continued service as an employee or consultant, at the
rate of 25% of the shares subject to an option on the first anniversary of the
commencement of vesting date and 25% of the shares each year thereafter, such
that all shares under an option vest in full four years from the commencement
of vesting date and assuming continued service as an employee or consultant
throughout this time. Options outstanding under the 1995 Plan generally have a
term of ten years, except for employees of the United Kingdom subsidiary of
the Company, whose options have a term of 6 years and 11 months.
To exercise an option, the optionee must deliver to the Company an executed
exercise notice and full payment for the shares being purchased. Shares being
purchased under the 1995 Plan may be paid for in cash or by other specified
forms of payment.
Termination of Options. In the event of termination of an optionee's
employment or consulting arrangement, options may only be exercised to the
extent vested as of the date of termination, for a period not to exceed three
months (12 months, in the case of termination as a result of death or
disability) following the date of termination. Options may not be sold or
transferred other than by will or the laws of descent and distribution and may
be exercised during the life of the optionee only by the optionee.
Stock Purchase Rights. The 1995 Plan permits the Company to grant stock
purchase rights that allow the optionee the opportunity, during a specified
period of time not exceeding six months, to purchase Common Stock of the
Company on the terms specified by the Administrator. The Administrator
notifies the optionee in writing of the terms, conditions and restrictions
related to the offer, including the number of shares of Common Stock that the
optionee will be entitled to purchase, the price to be paid and the time
within which the optionee must accept such offer (which will in no event
exceed six months from the date upon which the Administrator made the
determination to grant the Purchase Rights). Offers may be accepted by
execution of the restricted stock purchase agreement between the Company and
the optionee and payment of the purchase price.
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Unless the Administrator determines otherwise, the restricted stock purchase
agreement will grant the Company a repurchase option at the original price
paid by the purchaser exercisable upon the termination of the purchaser's
employment or consulting relationship with the Company for any reason. The
purchase price per share upon repurchase by the Company upon exercise of its
repurchases option may be paid in cash or by cancellation of indebtedness of
the purchaser to the Company. The repurchase option will lapse at such rate as
the administrator may determine.
Adjustment Upon Changes in Capitalization. In the event any change, such as
a stock split or dividend, is made in the Company's capitalization that
results in an increase or decrease in the number of outstanding shares of
Common Stock without receipt of consideration by the Company, an appropriate
adjustment shall be made to the exercise price and number of shares subject to
each outstanding option and stock purchase right and to the number of shares
which have been reserved for issuance under the 1995 Plan. In the event of the
proposed dissolution or liquidation of the Company, all outstanding options
and stock purchase rights automatically terminate unless otherwise provided by
the Board. The Board of Directors may in such event and in its sole discretion
declare that any option or stock purchase right shall terminate as of a fixed
date and give each participant the right to exercise his or her option or
stock purchase right as to all or any part of the optioned stock, including
shares as to which the option would not otherwise be exercisable. In the event
of a merger of the Company with another corporation, or the sale of
substantially all of the assets of the Company, the 1995 Plan provides that
each outstanding option and stock purchase right may be assumed or an
equivalent option or stock purchase right may be substituted by the successor
corporation. The Administrator may, in lieu of such assumption or
substitution, provide for the participant to have the right to exercise the
option or stock purchase right as to all of the optioned stock, including
shares as to which the option or stock purchase right would not otherwise be
exercisable.
Amendment and Termination. The Board of Directors may amend, alter, suspend
or terminate the 1995 Plan at any time or from time to time, but any such
amendment, alteration, suspension or termination shall not adversely affect
any option then outstanding under the 1995 Plan, without the consent of the
holder of the option. In any event, the 1995 Plan will terminate in 2005.
In addition, to the extent necessary to comply with Rule 16b-3 under the
Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation), the Company shall obtain stockholder approval of any amendment of
the 1995 Plan in such a manner and to such a degree as required.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the federal income tax consequences of
transactions under the 1995 Plan based on federal securities and income tax
laws in effect on January 1, 1996. This summary is not intended to be
exhaustive and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or foreign
country in which an optionee may reside.
Incentive Stock Options. No taxable income is recognized by the optionee
upon grant or exercise of an incentive stock option unless the alternative
minimum tax rules apply. If Common Stock is issued to an optionee pursuant to
the exercise of an incentive stock option, and if no disqualifying disposition
of such shares is made by such optionee within two years after the date of
grant or within one year after the transfer of such shares to such optionee,
then (i) upon the resale of such shares, any amount realized in excess of the
option exercise price will be treated as a long-term capital gain and any loss
sustained will be a long-term capital loss, and (ii) no deduction will be
allowed to the Company for federal income tax purposes. The exercise of an
incentive stock option may result in alternative minimum tax liability for the
optionee.
If Common Stock acquired upon the exercise of an incentive stock option is
disposed of before the expiration of either holding period described above,
generally (i) the optionee will recognize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of the shares at exercise
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(or, if less, the amount realized on the disposition of the shares) over the
option exercise price paid for such shares, and (ii) the Company is entitled
to a tax deduction in the same amount. Any further gain or loss realized by
the participant will be taxed as short-term or long-term capital gain or loss,
as the case may be, and will not result in any deduction by the Company.
Different rules may apply if shares are purchased by an optionee who is also
subject to Section 16 of the Exchange Act (an "Insider"). See the discussion
below under "Special Rules Applicable to Corporate Insiders and Restricted
Stock Purchasers."
Nonstatutory Stock Options. Except as noted below, with respect to
nonstatutory stock options, (i) no income is recognized by the optionee at the
time the option is granted; (ii) generally, at exercise, ordinary income is
recognized by the optionee in an amount equal to the difference between the
option exercise price paid for the shares and the fair market value of the
shares on the date of exercise, and the Company is entitled to a tax deduction
in the same amount; and (iii) at disposition, any gain or loss is treated as
capital gain or loss. In the case of an optionee who is also an employee, any
income recognized upon exercise of a nonstatutory stock option will constitute
wages for which withholding will be required. However, different rules may
apply if shares subject to a repurchase option of the Company ("Restricted
Shares") are purchased or if shares are purchased by an optionee who is also
an Insider. See discussion below of "Special Rules Applicable to Corporate
Insiders and Restricted Stock Purchasers."
Stock Purchase Rights. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options.
Special Rules Applicable to Corporate Insiders and Restricted Stock
Purchasers. Generally, Insiders (who are subject to Section 16 of the Exchange
Act) and individuals who purchase Restricted Stock may have their recognition
of compensation income at the beginning of their capital gains holding period
deferred until the date that is up to six months after the option exercise
(for Insiders) or until the date that the restrictions lapse (for restricted
stock purchasers) (the "Deferral Date"). The excess of the fair market value
of the stock determined as of the Deferral Date over the purchase price will
be taxed as ordinary income, and the tax holding period for any subsequent
gain or loss will begin on the Deferral Date. However, an Insider or
restricted stock purchaser who so elects under Code Section 83(b) on a timely
basis may instead be taxed on the difference between the excess of the fair
market value on the date of transfer over the purchase price, with the tax
holding period beginning on such date. Similar rules apply for alternative
minimum tax purposes with respect to the exercise of an Incentive Stock Option
by an Insider.
THE FOREGOING BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE PARTICIPANT AND THE COMPANY WITH RESPECT TO SHARES PURCHASED UNDER THE
1995 PLAN DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO THE
APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS
THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
PARTICIPANT MAY RESIDE.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO
EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, stockholders will be asked to approve an amendment to
the Company's 1995 Employee Stock Purchase Plan (the "ESPP") to increase the
number of shares of the Company's common stock reserved for issuance under the
ESPP by 100,000 shares, from a total of 100,000 shares to a total of 200,000
shares. Since each executive officer, other than Jeffrey B. Braun and William
R. Wright, is eligible to participate in the ESPP, each such officer has a
personal interest in this proposed amendment to the ESPP.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of Votes Cast is required to ratify and
approve the proposed amendment to the 1995 Employee Stock Purchase Plan.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE AMENDMENT TO THE
PURCHASE PLAN.
TERMS OF THE ESPP
General. The Company has currently reserved an aggregate of 100,000 shares
of Common Stock for issuance under the ESPP. The ESPP was adopted by the Board
of Directors in March 1995 and approved by the Company's stockholders in May
1995. Set forth below is a summary of the principal features of the ESPP,
which summary is qualified in its entirety by reference to the terms and
conditions of the ESPP. In addition, the Company will provide, without charge,
to each person to whom a proxy statement is delivered, upon request of such
person and by first class mail within one business day of receipt of such
request, a copy of the ESPP. Any such request should be directed as follows:
Stock Administration Department, Maxis, Inc., 2121 N. California Blvd., Suite
600, Walnut Creek, CA 94596; telephone number (510) 933-5630.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company who participate in the plan with an opportunity to purchase Common
Stock of the Company at a discount through payroll deductions.
Administration. The ESPP is administered by the Board or by a committee
appointed by the Board. References herein to the "Committee" shall refer to
the Board or the committee, as applicable, unless the context otherwise
requires. The ESPP is currently administered by the Compensation Committee.
The interpretation or construction by the Committee of any provision of the
Purchase Plan or of any award granted under it is final and binding on all
participating employees.
Eligibility. All employees of the Company (including directors who are
employees), or any parent or subsidiary thereof (as defined in the ESPP), are
eligible to participate in the ESPP except the following: (i) employees who
customarily work less than 20 hours per week, or five months per year, and
(ii) employees who, pursuant to Section 424(d) of the Code, own or hold
options to purchase or who, as a result of participation in the ESPP, would
own stock or hold options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or any
parent or subsidiary.
Participation. Each offering of Common Stock under the ESPP is for a period
of two years (the "Offering Period"). New Offering Periods commence on the
first business day of January and July. The first day of each Offering Period
is the "Offering Date" for such Offering Period. An employee cannot
participate simultaneously in more than one Offering Period. Each Offering
Period consists of four six-month purchase periods (each a "Purchase Period")
commencing on the first business day of January and July. The last day of each
Purchase Period is a "Purchase Date."
Employees participate in the ESPP during each pay period through payroll
deductions. An employee sets the rate of such payroll deductions, which may
not be more than 10% of the employee's base salary, wages, commissions, and
overtime. Eligible employees may elect to participate in any Offering Period
by enrolling as provided under the terms of the ESPP. Once enrolled, a
participating employee will automatically participate in successive Offering
Periods unless the employee withdraws from the Offering Period. After the rate
of payroll deductions for an Offering Period has been set by an employee, that
rate continues to be effective for the remainder of the Offering Period (and
for all subsequent Offering Periods in which the employee is automatically
enrolled) unless otherwise changed by the employee. The employee may increase
or lower the rate of payroll deductions once each calendar quarter. Not more
than one change may be made effective during any one Purchase Period. No
employee may purchase more than $25,000 worth of stock in any calendar year
under the program.
Purchase Price. The price of Common Stock purchased under the ESPP is 85% of
the lower of, the fair market value of the Common Stock on (i) the first day
of the Offering Period in which the employee is participating or (ii) the last
day of the Purchase Period. The fair market value of the common stock on a
given
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<PAGE>
date is the closing bid price of the common stock on the immediately preceding
business day as quoted on the Nasdaq National Market quotation system. On the
Record Date, the closing bid price of the Company's common stock was $19.75.
Purchase of Stock. The number of whole shares an employee may purchase in
any Purchase Period is determined by dividing the total amount of payroll
deductions withheld from the employee during the Purchase Period pursuant to
the ESPP by the price per share determined as described above, subject to the
limitations described above. The purchase takes place automatically on the
last day of the Purchase Period.
Withdrawal. An employee may withdraw from any Offering Period at any time
prior to the end of an Offering Period. No further payroll deductions for the
purchase of shares will be made for the succeeding Offering Period unless the
employee enrolls in the new Offering Period in the same manner as for initial
participation in the ESPP. The failure to remain in the continuous employ of
the Company or its majority owned subsidiaries for at least 20 hours per week
during an offering period will be deemed to be a withdrawal from that
offering.
Termination of Employment. Termination of an employee's employment for any
reason, including retirement or death, immediately cancels the employee's
participation in the ESPP. In such event, the payroll deductions credited to
the employee's account are returned to the employee or, in case of death, to
the employee's legal representative.
Shares Purchased. As of March 31, 1996, a total of 22,170 shares of Common
Stock had been purchased by employees at an aggregate purchase price of
$301,512 and a weighted average purchase price of $13.60 per share pursuant to
offerings under the ESPP and 77,830 shares remained available for future
issuance under the ESPP.
Capital Changes. In the event any change is made in the Company's
capitalization, such as a stock split or stock dividend, which results in an
increase or decrease in the number of outstanding shares of Common Stock
without receipt of consideration by the Company, appropriate adjustments will
be made by the Administrator to the shares subject to purchase under the ESPP
and in the purchase price per share.
Nonassignability. No rights or accumulated payroll deductions of a
participant under the ESPP may be pledged, assigned or transferred for any
reason and any such attempt may be treated by the Company as an election to
withdraw from the ESPP.
Amendment and Termination of the Plan. The Board of Directors may at any
time amend or terminate the ESPP, except that no such amendment or termination
shall affect options previously granted if it would adversely affect the
rights of any participant. No amendment may be made to the ESPP without prior
approval of the stockholders of the Company if such amendment would increase
the number of shares reserved under the plan, permit payroll deductions in
excess of 10% of the participant's compensation, materially modify the
eligibility requirements or materially increase the benefits which may accrue
under the plan.
Tax Information
The ESPP, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Code.
Under these provisions, no income will be taxable to a participant at the time
of grant of the option or purchase of the shares. Upon disposition of the
shares, the participant will generally be subject to tax and the amount of the
tax will depend upon the participant's holding period. If the shares have been
held by the participant for more than two years after the date of option
grant, the lesser of (a) the excess of the fair market value of the shares at
the time of such disposition over the purchase price or (b) an amount computed
as 15% of the fair market value of the shares as of the grant date will be
treated as ordinary income, and any further gain or loss will be treated as
long-term capital gain or loss. If the shares are
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disposed of before the expiration of this holding period, the excess of the
fair market value of the shares on the purchase date over the purchase price
will be treated as ordinary income, and any further gain or loss on such
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. Different rules may apply with respect to optionee subject
to Section 16 of the Exchange Act. The Company is not entitled to a deduction
for amounts taxed as ordinary income or capital gain to a participant except
to the extent of ordinary income reported by participants upon disposition of
shares within two years from date of grant.
THE FOREGOING BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE PARTICIPANT AND THE COMPANY WITH RESPECT TO SHARES PURCHASED UNDER THE
ESPP DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO THE
APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS
THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
PARTICIPANT MAY RESIDE.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the fiscal year ending
March 31, 1997, and recommends that stockholders vote "FOR" ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements since the
inception of the Company. Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting, to respond to appropriate questions.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
Although not required to be submitted for stockholder approval, the Board of
Directors has conditioned its appointment of auditors upon the receipt of the
affirmative vote of a majority of the Votes Cast. In the event the
stockholders do not approve the selection of Ernst & Young LLP, the
appointment of independent auditors will be reconsidered by the Board of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
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EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company during
each of the last two fiscal years ended March 31, 1996, to the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company during fiscal 1996 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
LONG TERM
COMPENSATION
------------
OTHER AWARDS
------------ ------------
SECURITIES
FISCAL ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
------ -------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey B. Braun............... 1996 $225,000 $75,600 -- -- $4,927
Chief Executive Officer...... 1995 225,000 36,017 -- -- 9,240
Samuel L. Poole................ 1996 183,905 50,400 $3,906(2) -- 5,388
President.................... 1995 150,000 24,011 5,019(2) -- 8,156
Fred M. Gerson................. 1996 150,000 47,925 -- -- 5,625
Vice President, Chief........ 1995 59,135(3) 7,789(3) -- -- 1,250
Financial Officer
Joseph M. Scirica.............. 1996 135,000 43,133 -- -- 5,188
Vice President,.............. 1995 120,000 19,209 -- 40,000 6,121
Product Development
Douglas B. Litke............... 1996 111,300 49,195 -- -- 5,516
Vice President,.............. 1995 105,000 29,408 26,672(4) 80,000 875
Business Development
</TABLE>
- - --------
(1) Represents matching contributions under the Company's 401(k) Plan.
(2) Represents automobile reimbursement.
(3) Fred M. Gerson joined the Company in November 1994, five months prior to
the beginning of the 1996 fiscal year.
(4) Represents relocation reimbursement.
OPTION GRANTS AND EXERCISES IN FISCAL 1996
No options were granted to, or exercised by, any Named Executive Officer
during fiscal 1996.
COMPENSATION OF DIRECTORS
Other than reimbursement for certain expenses incurred in connection with
attendance at board and committee meetings, the directors of the Company did
not receive any cash compensation for services provided as directors during
fiscal 1996. Outside directors may be granted nonstatutory stock options from
time to time at the discretion of the Board of Directors. Eric C.W. Dunn was
granted an option to purchase 20,000 shares of Common Stock at an exercise
price of $25.25 on March 7, 1996, in conjunction with his joining the Board of
Directors. Currently, there are five Outside Directors. Please see "Employee
Benefit Plans -- 1995 Stock Plan" for information with respect to the 1995
Stock Plan.
EMPLOYMENT CONTRACTS, TERMINATION AND CHANGE OF CONTROL ARRANGEMENTS
Messrs. Braun and Wright have employment agreements with the Company. The
agreements fix their base compensation, provide for their participation in
such employee benefit plans as the Company may adopt from time to time for its
management and supervisory personnel generally, and, in certain circumstances,
allow for
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<PAGE>
severance payments of up to six months' salary. The agreements are
automatically renewed annually unless terminated by either party on 90 days'
notice. The agreements also contain confidentiality, proprietary rights and
dispute resolution provisions.
In the event of a change of control of the Company, including a liquidation,
merger or sale of substantially all of the Company's assets, all outstanding
options may be assumed or an equivalent option substituted by the successor
corporation or its parent or subsidiary or, in the absence of such assumption
or substitution, any options not exercised as of the date of the change of
control may be accelerated or terminated upon such change of control.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors serves as an
administrative arm of the Board to make decisions regarding executive and
employee compensation and to make recommendations to the Board on compensation
matters concerning the Chief Executive Officer. The following is the report of
the Compensation Committee describing compensation policies and rationales
applicable to the Company's executive officers with respect to the
compensation paid to such executive officers for the fiscal year ended March
31, 1996. The information contained in such report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission ("SEC"), nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933 or the Securities and
Exchange Act of 1934, except to the extent that the Company specifically
incorporates it by reference into such filing.
The Compensation Committee of the Board of Directors establishes the general
compensation policies of the Company as well as the compensation plans and
specific compensation levels for executive officers. The Compensation
Committee seeks to provide the executive officers of the Company with
competitive compensation that enables the Company to attract and retain
employees who contribute to the success of the Company and maximize
stockholder value. Specifically for executive officers, compensation is
determined according to the criteria described below.
Compensation
The Compensation Committee establishes the salaries of the executive
officers by considering (i) the salaries of executive officers in similar
positions at comparably-sized peer companies, (ii) the Company's financial
performance over the past year based upon revenues and operating results and
(iii) the achievement of individual performance goals related to each
executive officer's duties and area of responsibility.
Equity-Based Compensation
The Compensation Committee views stock options as an important part of its
long-term, performance-based compensation program. The Compensation Committee
bases grants of stock options to the Executive Officers of the Company under
the Company's 1995 Plan upon the Committee's estimation of each executive's
contribution to the long-term growth and profitability of the Company. The
stock plans are intended to provide additional incentives to the executive
officers to maximize stockholder value. Options are granted under the stock
plans at no less than 85% of the then-current market price and are generally
subject to four-year vesting periods to encourage key employees to remain with
the Company.
Compensation of the Chief Executive Officer
The compensation of the Company's Chief Executive Officer for fiscal 1996
was based upon the same criteria described above. The compensation of the
Chief Executive Officer is set by the Board, after taking under consideration
the recommendations of the Compensation Committee. The Board considered
several factors as important in determining the Chief Executive Officer's
compensation for fiscal 1996. These factors included the attainment of
corporate revenue and operating results goals for the fiscal year, Company
progress in new product development and the contribution of the Chief
Executive Officer to the Company's strategic focus, market
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<PAGE>
position and brand development. No set formula is used in this determination,
and no particular function is weighted greater or lesser than the other.
Compensation levels for other Chief Executive Officers are also reviewed to
determine an appropriate compensation level.
Summary
The Compensation Committee believes that the Company's compensation policies
have been successful in attracting and retaining qualified employees and in
linking compensation directly to corporate performance relative to the
Company's goals. The Company's compensation policies will evolve over time as
the Company moves to attain the near-term goals it has set for itself while
maintaining its focus on building long-term stockholder value.
MEMBERS OF THE COMPENSATION
COMMITTEE:
CHARLES H. GAYLORD
DR. HENRY KRESSEL
AVRAM C. MILLER
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of the Company's Common Stock with
the cumulative return of the CRSP Index for the Nasdaq Stock Market (U.S.
Index) and the Hambrecht & Quist Technology Stocks for the period commencing
May 25, 1995, (the date of the Company's initial public offering), and ending
on March 31, 1996. The graph assumes that $100 was invested on May 25, 1995
for the Nasdaq and Hambrecht & Quist indexes and $100 was invested on May 25,
1995 in the Company's Common Stock, and that all dividends were reinvested. No
dividends have been declared or paid on the Company's Common Stock.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
The information contained in the performance graph shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
COMPARISON OF 10 MONTH CUMULATIVE TOTAL RETURN
AMONG MAXIS INC., NASDAQ AND H & Q TECHNOLOGY
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MAXIS INC. NASDAQ H&Q TECHNOLOGY
- - ------------------- ---------- ------- --------------
<S> <C> <C> <C>
Measurement Pt-05/25/95 $100 $100 $100
FYE 06/95 $166 $111 $114
FYE 09/95 $275 $124 $130
FYE 12/95 $238 $126 $127
FYE 03/96 $155 $132 $129
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission ("SEC") and Nasdaq.
Executive officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that during fiscal 1996 all filing requirements applicable to
its executive officers and directors and greater than 10% stockholders were
complied with, except that Robin Harper filed one Form 3 late with respect to
one transaction.
18
<PAGE>
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 enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are therefore urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
THE BOARD OF DIRECTORS
Dated: July 22, 1996
19
<PAGE>
PROXY PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
MAXIS, INC.
ANNUAL MEETING OF STOCKHOLDERS--AUGUST 21, 1996
The undersigned Stockholder(s) of Maxis, Inc., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated July 22, 1996, and hereby
appoints, jointly and severally, Fred M. Gerson and Deborah L. Gross , each
with full power of substitution, as proxy and attorney-in-fact of the
undersigned to attend the Annual Meeting of Stockholders of the Company to be
held on August 21, 1996 at 10:00 a.m., and any adjournment thereof, and to vote
all shares of Common Stock the undersigned would be entitled to vote if then
and there personally present on the matters set forth below:
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE EIGHT DESIGNATED DIRECTORS,
FOR PROPOSALS 2, 3 AND 4 AND AS THE PROXIES MAY DECIDE ON ANY OTHER BUSINESS
THAT MAY PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN THIS PROXY PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
MAXIS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
FOR ALL
FOR WITHHELD EXCEPT
1. Election of Directors [_] [_] [_]
Nominees: Jeffrey B. Braun, Samuel L. Poole,
Charles H. Gaylord, Jr., William H. Janeway,
Dr. Henry Kressel, Avram C. Miller,
William R. Wright, Eric C.W. Dunn
------------------------------
(Except nominee(s) written above.)
FOR AGAINST ABSTAIN
2. To approve amendments to the Company's [_] [_] [_]
1995 Stock Plan to (i) increase the
number of shares of Common Stock reserved
for issuance thereunder by 1,200,000 shares
and (ii) make directors of the Company
eligible to participate in such plan.
FOR AGAINST ABSTAIN
3. To approve an amendment to the Company's [_] [_] [_]
1995 Employee Stock Purchase Plan
to increase the number of shares of
Common Stock reserved for issuance
thereunder by 100,000 shares.
FOR AGAINST ABSTAIN
4. To ratify the appointment of Ernst & [_] [_] [_]
Young LLP as independent auditors for
the Company for the fiscal year ending
March 31, 1997.
FOR AGAINST ABSTAIN
5. To vote or otherwise represent the shares [_] [_] [_]
of any other business that may properly
come before the meeting or any adjournments
thereof, according to their decision and in
their discretion.
I plan to attend the Meeting: Yes ___ No ____
Dated: _____________________________________________________________ , 1996
Signature of Stockholder________________________________________________________
Print name______________________________________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS ON YOUR STOCK CERTIFICATES. A
CORPORATION IS REQUESTED TO SIGN ITS NAME BY ITS PRESIDENT OR OTHER AUTHORIZED
OFFICER, WITH THE OFFICE HELD DESIGNATED. EXECUTORS, ADMINISTRATORS, TRUSTEES,
ETC. ARE REQUESTED TO SO INDICATE WHEN SIGNING. IF STOCK IS REGISTERED IN TWO
NAMES, BOTH SHOULD SIGN.
