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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT
OF 1934
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
VISIO CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
CALCULATION OF FILING FEE
<TABLE>
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<CAPTION>
PER UNIT PRICE OR OTHER
UNDERLYING VALUE OF
TITLE OF EACH CLASS OF AGGREGATE NUMBER OF TRANSACTION COMPUTED PROPOSED MAXIMUM
SECURITIES TO WHICH SECURITIES TO WHICH PURSUANT TO EXCHANGE AGGREGATE VALUE OF
TRANSACTION APPLIES: TRANSACTION APPLIES: ACT RULE 0-11: TRANSACTION: TOTAL FEE PAID:
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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</TABLE>
[_] 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.
Amount Previously Paid:______________ Filing Party:__________________________
Form, Schedule or
Registration Statement no.:__________ Date Filed:____________________________
================================================================================
<PAGE>
[LOGO OF VISIO]
January 9, 1998
Dear Shareholder:
On behalf of Visio Corporation, I cordially invite you to attend our Annual
Meeting of Shareholders to be held on Wednesday, February 25, 1998, at 10:00
a.m., at the Four Seasons Olympic Hotel, 411 University Street, Seattle,
Washington.
This year you are asked to (1) elect seven directors to the Company's Board, (2)
vote on a proposal to approve an amendment to the Visio Corporation 1995 Long-
term Incentive Compensation Plan, as amended and restated, to increase by
3,000,000 the number of shares of common stock which may be issued thereunder,
and (3) ratify the appointment of Ernst & Young LLP as the Company's independent
public auditors for fiscal year 1998. Additional details regarding these issues
are provided in the attached Notice of Annual Meeting and Proxy Statement.
As the Company's Chairman, I urge you to vote "For" all three proposals. In
particular, I would like to draw your attention to Proposal (2). Stock options
are an important component of compensation for every employee at the Company and
we would like to continue to offer this benefit to our employees. We believe
equity compensation contributes to high levels of performance and recognizes
contributions to the Company's success.
It is important that your shares be represented, whether or not you plan to
attend the meeting. Therefore, please complete, sign, date, and promptly return
the enclosed proxy in the enclosed postage-paid envelope. This will not limit
your right to attend the annual meeting and vote in person, but will assist us
in our preparations for the meeting.
On behalf of the Board of Directors, I would like to express our appreciation
for your support of the Company. We look forward to seeing you at the meeting.
Sincerely,
/s/ Jeremy Jaech
Jeremy Jaech
President, Chief Executive Officer and
Chairman of the Board
<PAGE>
VISIO CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 25, 1998
To The Shareholders of Visio Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Visio
Corporation, a Washington corporation (the "Company"), will be held at the Four
Seasons Olympic Hotel, 411 University Street, Seattle, Washington, on Wednesday,
February 25, 1998, at 10:00 a.m., local time, for the following purposes:
1. To elect seven directors of the Company to serve for the ensuing year
until the Company's 1999 annual meeting of shareholders and until their
successors are elected and qualified.
2. To approve an amendment to the Company's 1995 Long-Term Incentive
Compensation Plan, as amended and restated, to increase by 3,000,000 the
number of shares of common stock which may be issued thereunder.
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent public auditors for the fiscal year ending September 30,
1998.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on December 26, 1997 are
entitled to notice of, and to vote at, this meeting or any adjournment or
postponement thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Wm. Kenneth McGraw
Wm. Kenneth McGraw
Corporate Counsel and Secretary
Seattle, Washington
January 9, 1998
IMPORTANT
All shareholders are cordially invited to attend the meeting in person. Whether
or not you expect to attend the meeting in person, we urge you to complete,
sign, date and return the enclosed proxy as promptly as possible to ensure your
representation at the meeting. PROMPTLY COMPLETING, SIGNING, DATING AND
RETURNING THE PROXY WILL SAVE THE COMPANY THE EXPENSES AND EXTRA WORK OF
ADDITIONAL SOLICITATION. An addressed envelope for which no postage is required
if mailed in the United States is enclosed for that purpose. Sending in your
proxy will not prevent you from voting your shares at the meeting if you desire
to do so, as your proxy is revocable at your option. Please note, however, that
if your shares are held of record by a broker, bank or other nominee and you
wish to vote at the meeting, you must obtain from the record holder a proxy
issued in your name.
<PAGE>
VISIO CORPORATION
520 PIKE STREET
SEATTLE, WASHINGTON 98101
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD FEBRUARY 25, 1998
This Proxy Statement, which was first mailed to shareholders on January 9,
1998, is furnished in connection with the solicitation of proxies by the Board
of Directors of Visio Corporation (the "Company") to be voted at the annual
meeting of the shareholders of the Company, which will be held at 10:00 a.m. on
Wednesday, February 25, 1998, at the Four Seasons Olympic Hotel, 411 University
Street, Seattle, Washington, or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting
of Shareholders.
The principal executive offices of the Company are at 520 Pike Street, Suite
1800, Seattle, Washington 98101, and its telephone number at that location is
(206) 521-4500.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on December 26, 1997, are
entitled to notice of and to vote at the annual meeting. On December 26, 1997,
there were 28,453,193 shares of common stock outstanding, held of record by
120 shareholders. All share numbers in this Proxy Statement reflect a
two-for-one split effective August 8, 1997.
VOTING TABULATION
Voting; Quorum: Every shareholder voting for the election of directors is
entitled to one vote for each share of common stock held. Shareholders do not
have the right to cumulate their votes in the election of directors. On all
other matters, each share is likewise entitled to one vote on each proposal or
item that comes before the annual meeting. The Company's Bylaws provide that a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum for the transaction of business.
Vote Required: Under the Washington Business Corporation Act, the election of
the Company's Directors requires a plurality of the votes represented in person
or by proxy at the meeting, and the other proposals described in the
accompanying Notice to Shareholders, including the approval of the amendment to
the 1995 Long-Term Incentive Compensation Plan, as amended and restated, require
that the votes in favor exceed the votes against the proposal. Votes cast by
proxy or in person at the meeting will be tabulated by ChaseMellon Shareholder
Services.
Effect of an Abstention and Broker Nonvotes: A shareholder who abstains from
voting on any or all proposals will be included in the number of shareholders
present at the meeting for the purpose of determining the presence of a quorum.
Abstentions will not be counted either in favor of or against the election of
the nominees for director or other proposals. Under the rules of the National
Association of Securities Dealers, brokers holding stock for the accounts of
their clients who have not been given specific voting instructions as to a
matter by their clients may vote their clients' proxies in their own discretion
except as to Proposal 2, relating to the amendment to the 1995 Long-Term
Incentive Compensation Plan.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. The cost of solicitation of proxies is to be borne by
the Company. Proxies may be solicited by officers, directors, and regular
supervisory and executive employees of the Company, none of whom will receive
any additional compensation for
1
<PAGE>
their services. Also, ChaseMellon Shareholder Services may solicit proxies at an
approximate cost of $4,500 plus reasonable expenses. Such solicitations may be
made personally or by mail, facsimile, telephone, telegraph, or messenger. The
Company will pay persons holding shares of Common Stock in their names or in the
names of nominees, but not owning such shares beneficially, such as brokerage
houses, banks, and other fiduciaries, for reasonable out-of-pocket and clerical
expenses of forwarding solicitation materials to their principals. All the costs
of solicitation of proxies will be paid by the Company.
REVOCABILITY OF PROXIES
Shareholders who execute proxies retain the right to revoke them at any time
prior to the exercise of the powers conferred thereby, by delivering a signed
statement to the Secretary of the Company at or prior to the annual meeting or
by executing another proxy dated as of a later date.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1999 annual meeting
of shareholders must be received by the Company no later than September 11,
1998, to be included in the Company's Proxy Statement and form of proxy related
to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven directors are to be elected at the annual meeting, to hold office until
the next annual meeting of shareholders and until their successors are elected
and qualified. It is intended that the accompanying proxy will be voted in
favor of the following persons to serve as directors unless the shareholder
indicates to the contrary on the proxy. Management expects that each of the
nominees will be available for election, but if any of them is not a candidate
at the time the election occurs, it is intended that such proxy will be voted
for the election of another nominee to be designated by the Board of Directors
to fill any such vacancy.
NOMINEES
Jeremy A. Jaech, age 43, is a founder of the Company and has been its
President, Chief Executive Officer and Chairman of the Board since 1990. Before
founding the Company, Mr. Jaech co-founded Aldus Corporation ("Aldus"), a
software development company that was acquired by Adobe Systems Inc., where he
was the technical leader for the original development of PageMaker from April
1984 to July 1985. Mr. Jaech managed Aldus' product development as Vice
President of Engineering from July 1985 to March 1989. Mr. Jaech is also a
director of Global Village Communications, Inc.
Theodore C. Johnson, age 41, is a founder of the Company and has been its
Executive Vice President since September 1996, its Chief Technology Officer
since April 1997, and a Director since September 1990. From September 1990 to
September 1996, he served as the Company's Vice President, Product Development.
Mr. Johnson also served as the Company's Treasurer from September 1990 to August
1995 and as the Company's Secretary from September 1990 to September 1996. From
May 1985 to September 1990, Mr. Johnson was employed at Aldus in various
development roles.
Tom A. Alberg, age 57, has been a Director of the Company since June 1995.
Since January 1996, Mr. Alberg has been a principal of Madrona Investment Group
LLC, a private merchant banking firm. Mr. Alberg was the President, Chief
Operating Officer and a Director of LIN Broadcasting Corporation, a cellular
telephone company, from April 1991 to October 1995, and the Executive Vice
President of AT&T Wireless Services, formerly McCaw Cellular Communications,
Inc., from July 1990 to October 1995. Prior to July 1990, Mr. Alberg was
Chairman of the Executive Committee and a partner in the law firm of Perkins
Coie, Seattle, Washington. Mr. Alberg is also a director of Active Voice
Corporation, Amazon.com, Inc., Emeritus Corporation and MOSAIX, Inc.
2
<PAGE>
Tom Byers, Ph.D., age 44, has been a Director of the Company since May 1995.
Since July 1995, Dr. Byers has been an associate professor at Stanford
University and director of the Stanford Technology Ventures Program. Also at
Stanford University, Dr. Byers is the academic director of two professional
education programs for high technology executives. From January 1994 to June
1995, Dr. Byers was a lecturer in technology entrepreneurship and marketing at
both the University of California, Berkeley and Stanford University. Dr. Byers
was the co-founder of Slate Corporation, a software development company, its
President from February 1990 to May 1993 and a consultant from June 1993 to
December 1993.
John R. Johnston, age 45, has been a Director of the Company since June 1991.
Since September 1988, Mr. Johnston has been a general partner of various
Technology Venture Investors entities, which are private venture capital limited
partnerships. Such partnerships include TVI Management 4, LP and Technology
Venture Investors 4. Mr. Johnston is also a director of Insignia Solutions,
Inc. Since August 1995, Mr. Johnston has been a general partner of August
Capital, a private venture capital limited partnership. Mr. Johnston was
initially elected to the Board of Directors pursuant to the provisions of a
stock purchase agreement.
Douglas J. Mackenzie, age 38, has been a Director of the Company since March
1992. Mr. Mackenzie has served with certain venture capital partnerships
organized under the Kleiner Perkins Caufield & Byers name since June 1989, most
recently as a general partner of Kleiner Perkins Caufield & Byers VIII, LP. Mr.
Mackenzie is also a director of Preview Travel, Inc. Mr. Mackenzie was
initially elected to the Board of Directors pursuant to the provisions of a
stock purchase agreement.
Scott Oki, age 49, has been a Director of the Company since February 1992.
Mr. Oki retired from Microsoft in 1992, where he was head of its International
Operations from March 1982 to September 1986 and Senior Vice President of Sales,
Marketing and Services from September 1986 until his retirement. Mr. Oki has
been the Chairman and Chief Executive Officer of Oki Developments, Inc. since
1992 and is the Chief Volunteer of The Oki Foundation, a nonprofit organization.
Mr. Oki is a past President of the Board of Regents of the University of
Washington.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THESE NOMINEES.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
The Company's Board of Directors has an Audit Committee and a Compensation
Committee. There is no standing nominating committee. Messrs. Alberg, Johnston
and Oki serve on the Audit Committee, which meets with financial management, the
internal auditors, and the Company's independent public auditors to review
internal accounting controls and accounting, auditing, and financial reporting
matters. Messrs. Byers, Johnston and Mackenzie serve on the Compensation
Committee, which reviews the compensation of the Chief Executive Officer and
other officers of the Company, reviews executive bonus plan allocations, and
grants stock options to officers and employees of the Company under the
Company's long-term incentive compensation plan.
The Audit Committee met four times during fiscal year 1997. The Compensation
Committee met eight times. The entire Board of Directors met seven times. Each
director attended 75% or more of the aggregate number of Board meetings and
committee meetings.
None of the Directors received any cash compensation during fiscal year 1997
for serving on the Board or on any committees of the Board, except for
reimbursement of reasonable expenses incurred in attending meetings. Messrs.
Alberg, Byers, Johnston, Mackenzie and Oki each received an option to purchase
9,000 shares of the Company's Common Stock pursuant to the terms of the
Company's 1995 Stock Option Plan for Nonemployee Directors.
3
<PAGE>
ADDITIONAL INFORMATION
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS, DIRECTORS,
AND MANAGEMENT
Except as noted, the following table sets forth information regarding the
beneficial ownership of the Company's Common Stock as of November 28, 1997 by
(a) each person known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (b) the Chief Executive Officer of the
Company and each of the four other most highly compensated executive officers of
the Company (the "Named Executive Officers"); (c) each director of the Company;
and (d) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNERSHIP (1) STOCK OUTSTANDING
------------------------ -----------------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS
Pilgrim Baxter & Associates (2)...................... 2,172,000 7.7%
Nicholas-Applegate Capital Management (3)............ 1,989,300 7.0%
DIRECTORS
Tom A. Alberg (4).................................... 42,875 *
Tom Byers (5)........................................ 46,875 *
Jeremy A. Jaech (6)(7)............................... 2,043,814 7.2%
Theodore C. Johnson (7)(8)........................... 1,882,750 6.7%
John R. Johnston (9)................................. 220,729 *
Doug J. Mackenzie (10)............................... 78,690 *
Scott Oki (11)....................................... 260,134 *
OFFICERS
Timothy J. Buckley (12).............................. 218,484 *
Gary E. Gigot (13)................................... 882,749 3.1%
Steve M. Gordon...................................... 0 *
All Directors and Executive Officers
as a group (14 persons).............................. 6,217,126 22.0%
</TABLE>
- ----------------------
* Less than 1.0%
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to the table. As to any shares issuable upon
exercise of outstanding options identified in the footnotes to the table,
those shares exercisable on November 28, 1997 or within sixty days
thereafter are included.
(2) The business address for Pilgrim Baxter & Associates is: 1255 Drummers
Lane, Suite 300, Wayne, Pennsylvania 19087.
(3) As of September 30, 1997. The business address for Nicholas-Applegate
Capital Management is: 600 West Broadway, 29th Floor, San Diego, California
92101.
(4) Includes 40,875 shares issuable pursuant to stock options.
(5) Includes 46, 875 shares issuable pursuant to stock options.
(6) Includes an aggregate of 120,000 shares over which Mr. Jaech has voting
control with respect to the Ryan Philip Johnson Trust of 1995 (60,000
shares) and the Matthew Tyler Johnson Trust of 1995 (60,000 shares), trusts
created for the benefit of Mr. Johnson's children. Mr. Johnson has not
retained any control over the trusts. Mr. Johnson's father, Vernon D.
Johnson, as trustee, has investment power with respect to such shares.
Does not include an aggregate of 370,000 shares held by three trusts
established for the benefit of Mr. Jaech's children and other relatives.
Mr. Jaech is neither a trustee nor a beneficiary of these trusts and
disclaims any beneficial ownership of the Common Stock held directly.
(7) The business address for Messrs. Jaech and Johnson is: Visio Corporation,
520 Pike Street, Suite 1800, Seattle, Washington 98101.
(8) Includes an aggregate of 370,000 shares over which Mr. Johnson has voting
control with respect to the Christopher Leo Jaech Trust of 1993 (180,000
shares), the Elisabeth Anna Jaech Trust of 1991 (180,000 shares) and the
Jeremy and Linda Jaech Educational Trust (10,000 shares), trusts created
for the benefit of Mr. Jaech's children and other relatives. Mr. Jaech has
not retained any control over the trusts. Seattle-First National Bank, NA,
as trustee, has investment power with respect to such shares. Also
includes 60,000 shares held by Mr. Johnson's spouse. Does not include an
aggregate of 120,000 shares held by two trusts established for the benefit
of Mr. Johnson's children. Mr. Johnson is neither a trustee nor a
beneficiary of these trusts and disclaims any beneficial ownership of the
Common Stock held directly.
(9) Includes 20,250 shares issuable pursuant to stock options.
(10) Includes 14,250 shares issuable pursuant to stock options.
(11) Includes 80,250 shares issuable pursuant to stock options.
(12) Includes 13,124 shares issuable pursuant to stock options.
(13) Includes 84,375 shares issuable pursuant to warrants exercisable on
November 28, 1997 or within 60 days thereafter and 28,125 shares subject to
repurchase by the Company, which number declines over time.
4
<PAGE>
MANAGEMENT
Executive officers are elected by the Board of Directors and serve at the
discretion of the Board. Set forth below is information regarding executive
officers of the Company who are not Directors of the Company.
Steve M. Gordon, age 38, joined the Company in February 1997 as Chief
Financial Officer, and Vice President, Finance and Operations, and in October
1997 was elected Senior Vice President, Finance and Operations. Mr. Gordon also
served as Treasurer of the Company from February 1997 to July 1997 and has been
Assistant Secretary since February 1997. From April 1989 until February 1997,
Mr. Gordon was employed by Data I/O Corporation, a software and hardware tools
manufacturer for semiconductor use, where he served as Corporate Controller from
April 1989 to May 1992, Vice President, Finance from May 1992 to October 1993
and Chief Financial Officer and Vice President, Finance and Administration from
October 1993 to February 1997.
Timothy J. Buckley, age 46, joined the Company in November 1993 as Vice
President, Sales, in September 1996 became Vice President, Worldwide Sales and
in October 1997 was elected Senior Vice President, Worldwide Sales. From
February 1992 to November 1993, Mr. Buckley was Vice President, Sales at
Approach Software, a software development company that was acquired by Lotus
Development Corporation. From January 1987 to January 1992, Mr. Buckley was
Director of Sales of Aldus.
Gary E. Gigot, age 47, joined the Company in February 1994 as Vice President,
Marketing, in September 1996 became Vice President, Worldwide Products and in
October 1997 was elected Senior Vice President, Worldwide Products. Mr. Gigot
was employed at Microsoft from July 1990 to February 1994, where he was in
Advanced Consumer Technology from July 1993 to February 1994, served as Vice
President, Marketing from January 1991 to July 1993 and served as Director, US
Marketing from July 1990 to January 1991.
Kevin Brown, age 40, joined the Company in August 1993 as Managing Director,
European Sales and Marketing, in August 1993 became Managing Director, Asia
Pacific and Latin America Sales and Marketing and in October 1997 was elected
Vice President and Managing Director, Asia/Pacific and Latin America. From
January 1991 to July 1993, Mr. Brown was the Director, Strategic Sales at
Corporate Software Incorporated, a worldwide reseller of personal computer
software and services to large enterprises.
John Forbes, age 39, joined the Company in May 1994 as Director of Product
Marketing, in January 1997 became General Manager, Technical Products and in
October 1997 was elected Vice President and General Manager, Visio Technical
Products. From November 1993 to May 1994, Mr. Forbes was the President of
Workgroup Software, a software consulting firm, and from November 1991 to
November 1993 was the Senior Manager, Technical Marketing of Autodesk, Inc., a
software development company.
Jim Horsburgh, age 45, joined the Company in July 1994 as Managing Director
for Northern Europe, in July 1995 became Managing Director for Europe (Sales and
Marketing) and in October 1997 was elected Vice President and Managing Director,
European Sales and Marketing. From January 1990 to June 1994, Mr. Horsburgh was
Managing Director at Central Point Software International, a software
development company that was acquired by Symantec Corp.
Peter Mullen, age 41, joined the Company in January 1991 to become the lead
developer for the Visio software product, in September 1996 became General
Manager, Business Products and in October 1997 was elected Vice President and
General Manager, Visio Business Products. From March 1987 to December 1989, Mr.
Mullen was employed by Aldus, where he was a software developer working on
PageMaker 3.0 and Persuasion 1.0 and 2.0 for the Apple Macintosh. In January
1990, Mr. Mullen founded Elseware Corporation, a software development company
providing add-on software for Aldus products. Mr. Mullen holds a master's
degree in geophysics from the University of Washington.
5
<PAGE>
Executive Compensation
The following table discloses compensation received by the Named Executive
Officers for the fiscal years ended October 3, 1997, September 27, 1996, and
September 29, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
---------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS (#) COMPENSATION($)(2)
--------------------------- ---- --------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Jeremy A. Jaech..................... 1997 $130,000 $90,000 0 $ 5,377
President and Chief Executive 1996 126,667 97,500 0 4,682
Officer 1995 115,417 0 0 5,364
Theodore C. Johnson................. 1997 150,250 90,000 0 5,256
Executive Vice President and 1996 126,667 58,500 0 5,079
Chief Technology Officer 1995 115,417 0 0 4,340
Timothy J. Buckley.................. 1997 143,333 54,000 30,000 5,552
Senior Vice President, 1996 126,667 48,750 30,000 5,217
Worldwide Sales 1995 120,000 39,500 0 12,162
Gary E. Gigot....................... 1997 143,333 45,000 0 5,588
Senior Vice President, 1996 126,667 48,750 0 5,308
Worldwide Products 1995 120,000 37,500 0 12,048
Steve M. Gordon (3)................. 1997 96,410 25,276 260,000 3,018
Chief Financial Officer and 1996 0 0 0 0
Senior Vice President, 1995 0 0 0 0
Finance and Operations
</TABLE>
(1) Amounts in 1997 and 1996 were awarded under the Company's Management
Incentive Bonus Plan. Amount in 1995 represent bonuses awarded to Messrs.
Buckley and Gigot for meeting marketing and sales milestones.
(2) Amounts in 1997 represent matching contributions under the Company's 401(k)
savings plan in the amount of $4,723, $4,602, $4,394, $4,430 and $2,892 for
Messrs. Jaech, Johnson, Buckley, Gigot and Gordon, respectively, and life
insurance premiums paid by the Company for the benefit of Messrs. Jaech,
Johnson, Buckley, Gigot and Gordon in the amount of $654, $654, $1,158,
$1,158 and $126, respectively. Amounts in 1996 represent matching
contributions under the Company's 401(k) savings plan in the amount of
$3,831, $4,515, $4,564 and $4,581 for Messrs. Jaech, Johnson, Buckley and
Gigot, respectively, and life insurance premiums paid by the Company for
the benefit of Messrs. Jaech, Johnson, Buckley and Gigot in the amount of
$851, $564, $653 and $727, respectively. Amounts in 1995 represent
matching contributions under the Company's 401(k) savings plan in the
amount of $3,386, $3,355, $4,677 and $4,215 for Messrs. Jaech, Johnson,
Buckley and Gigot, respectively, life insurance premiums paid by the
Company for the benefit of Messrs. Jaech, Johnson, Buckley and Gigot in the
amount of $1,978, $985, $313 and $534, respectively, and $7,172 paid to Mr.
Buckley as reimbursement for moving and relocation expenses. With respect
to Mr. Gigot, this amount also includes $7,299 of imputed interest with
respect to an interest-free loan to Mr. Gigot from the Company, which loan
has been repaid in full.
(3) Mr. Gordon joined the Company on February 24, 1997.
6
<PAGE>
STOCK OPTIONS
The following table sets forth certain information on option grants in fiscal
year 1997 to the Named Executive Officers. In addition, in accordance with the
Securities and Exchange Commission ("SEC") rules, the hypothetical gains or
"option spreads" that would exist for the respective options are shown. The
gains are based on assumed rates of annual compound stock price appreciation of
5% and 10% from the date the options were granted over the full option term.
The actual value, if any, a Named Executive Officer may realize will depend on
the spread between the market price and the exercise price on the date the
option is exercised. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent upon the future performance of the Company and
overall stock market conditions. There can be no assurance that the amounts
reflected in this table will be achieved.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE)(1) DATE 5% ($) 10% ($)
---- ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeremy A. Jaech....... 0 0 0
Theodore C. Johnson... 0 0 0
Timothy J. Buckley.... 30,000(2) 1.77 $19.84 3/10/07 $ 374,390 $ 948,777
Gary E. Gigot......... 0 0 0
Steve M. Gordon....... 260,000(3) 15.30 $20.88 2/26/07 $3,413,326 $8,650,037
</TABLE>
(1) The exercise price is equal to the average of the high and low trades as
reported on the Nasdaq National Market on the date of grant. The exercise
price may be paid in cash, by delivery of already-owned shares subject to
certain conditions, or pursuant to a cashless exercise procedure under
which the optionee provides irrevocable instructions to a brokerage firm to
sell the purchased shares and to remit to the Company, out of sale
proceeds, an amount equal to the exercise price plus all applicable
withholding taxes.
(2) The options were granted March 10, 1997. One-quarter of the options vest
on the first anniversary of the grant date and the remainder vest in equal
three-month increments thereafter over the succeeding three years. The
options expire 10 years from the date of grant, subject to certain
exceptions.
(3) The options were granted February 26, 1997. One-quarter of the options
vest on the first anniversary of the grant date and the remainder vest in
equal three-month increments thereafter over the succeeding three years.
The options expire 10 years from the date of grant, subject to certain
exceptions.
7
<PAGE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table provides information on option exercises in fiscal 1997,
including the aggregate value of gains on the date of exercise, by the Named
Executive Officers. In addition, this table includes the number of shares
covered by both exercisable and unexercisable stock options as of fiscal-year
end. Also reported are the values for the "in-the-money" options, which
represent the positive spread between the exercise price of any such existing
stock options and the year-end price of the Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
# OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
SHARES UNEXERCISED OPTION/SARS AT THE-MONEY OPTIONS/SARS AT
ACQUIRED ON VALUE FISCAL YEAR END (#)(1) FISCAL YEAR END ($)(1)
EXERCISE Realized ----------------------------- ------------------------------
NAME (#) ($) EXERCISABLE UN-EXERCISABLE EXERCISABLE UN-EXERCISABLE
---- ----------- ---------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jeremy A. Jaech............... 0 $ 0 0 0 $ 0 $ 0
Theodore C. Johnson........... 0 $ 0 0 0 $ 0 $ 0
Timothy J. Buckley............ 0 $ 0 11,249 48,751 $ 290,365 $1,081,196
Gary E. Gigot................. 112,500 $1,987,313 56,250 56,250 $2,048,344 $2,048,344
Steve M. Gordon............... 0 $ 0 0 260,000 $ 0 $4,907,500
</TABLE>
(1) For the fiscal year ended October 3, 1997. The closing market price on
that date for the Company's Common Stock was $39.75 per share.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Compensation Philosophy
The Compensation Committee of the Board of Directors (the "Committee")
consists of three non-employee directors. The Committee acts on behalf of the
Board to establish the general compensation policies and programs for the
Company's executive officers, including the determination of salaries, the
establishment of bonus programs and the granting of stock options. When
creating policies and programs, the Committee's goals are to (i) ensure that
each executive officer has clear goals and accountability with regard to
corporate performance; (ii) establish pay opportunities that are competitive
based on prevailing practices for the industry, the stage of growth and the
markets in which the Company operates; (iii) independently assess operating
results on a regular basis in light of expected Company performance; and (iv)
align pay incentives with the long-term interests of the Company's shareholders.
The Committee believes that the compensation of the Chief Executive Officer
and the Company's other executive officers should be based to a substantial
extent on the Company's performance. Consistent with this philosophy, a
designated portion of the compensation of each executive officer is contingent
upon corporate performance and is adjusted, where appropriate, based on actual
performance measured against performance objectives. Each executive officer's
performance for the past fiscal year and objectives for the current year are
reviewed, together with the executive officer's responsibility level and the
Company's fiscal performance versus objectives and potential performance targets
for the current year. When establishing salaries, bonus levels and stock option
awards for executive officers, the Committee considers (i) the Company's
financial performance during the past year and recent quarters; (ii) the
individual's performance during the past year and recent quarters; and (iii) the
salaries of executive officers in similar positions of companies of comparable
size and other companies within the computer software industry. With respect to
executive officers other than the Chief Executive Officer, the Committee takes
into consideration the recommendations of the Chief Executive Officer. The
method for determining compensation varies from case to case based on a
discretionary and subjective determination of what is appropriate at the time.
8
<PAGE>
The Company's Human Resources department obtains executive compensation data
from salary surveys that reflect a peer group of other high technology
companies, including high technology companies of different sizes, and provides
this data to the Committee for its consideration in connection with the
determination of levels of compensation and stock option awards. To the extent
it deems appropriate, the Committee also considers general economic conditions
within the area and within the industry. The companies in the sample from which
this data was derived include some but not all of the companies in the industry
comparison group in the performance graph found in "Company Stock Price
Performance," since this group includes additional companies that the Company
competes with for people and talent, in addition to industry-product
competitors.
Components of Compensation
The key elements of the Company's executive compensation program are base
salary, short-term (annual) incentive compensation and long-term incentive
compensation. These elements are addressed separately.
The Committee does not exclusively use quantitative methods or mathematical
formulas in setting any element of compensation. In determining each component
of compensation, the Committee considers all elements of an executive officer's
total compensation package, including insurance and other benefits.
Base Salaries. Base salaries are targeted at levels slightly below the median
for the peer group of companies and are adjusted by the Committee to recognize
various levels of responsibility, individual performance and internal equity
issues, as well as external pay practices. The Committee reviews each
executive's base salary annually.
Overall, executive salaries were increased in fiscal year 1997 at rates
comparable to the increases provided in the peer group of high technology
companies, and the salaries are near median levels for that peer group.
Short-Term Incentives. The Management Incentive Bonus Plan promotes the
Company's pay-for-performance philosophy by providing executives with direct
financial incentives in the form of annual cash bonuses to achieve corporate and
individual performance goals.
Each year, the Committee establishes specific corporate and individual
performance goals relating to each executive's bonus opportunity. For fiscal
year 1997, performance was based on the Company's revenue and pre-bonus
operating income and on a subjective evaluation of individual performance.
Fiscal year 1997 target bonus awards for each of the executives were set
slightly above market levels, but required above-average performance from each
of the executives to be achievable. For the Company's executive officers, the
targets ranged from 17% to 30% of base salaries. The actual percentage to be
paid was subject to adjustment above or below the target, based on the Company's
performance. The Company's performance in fiscal year 1997 exceeded the
performance levels as specified in the Management Incentive Bonus Plan, and
bonuses were paid to the Named Executive Officers as shown in the Summary
Compensation Table. The payouts ranged from 26% to 60% of the base salaries for
each of such executive officers, other than the Chief Executive Officer.
Long-Term Incentives. In keeping with the Company's philosophy of providing a
total compensation package that includes at-risk components of pay, long-term
incentives consisting of stock option grants comprise a component of an
executive's total compensation package. These incentives are designed to
motivate and reward executives for maximizing shareholder value and encourage
the long-term employment of key employees.
When granting stock options, the Committee considers executives' levels of
responsibility, prior experience, individual performance criteria, previous
stock option grants and compensation practices at the peer group of companies
used to evaluate total compensation. The size of stock option grants is based
primarily on current industry practice and on individual factors. As a result,
the number of shares underlying stock option awards varies.
Because all of the above grants were made at option prices equal to the fair
market value of the Common Stock on the dates of grant, the stock options have
value only if the stock price appreciates from the value on the date the
9
<PAGE>
options were granted. The use of stock options is intended to focus executives
on the enhancement of shareholder value over the long-term and to encourage
equity ownership in the Company.
Other Executive Compensation
Subject to certain restrictions, the Company provides programs to executive
officers that are also available to other Company employees, including a 401(k)
plan with certain Company matching, an employee stock purchase program
permitting employees to purchase Company stock at a discount, certain health
club and transportation subsidies, medical, dental and vision benefits, and a
Section 125 plan.
Compensation of the Chief Executive Officer
In fiscal year 1997 and consistent with the general procedures described
above, Mr. Jaech's annualized base salary was increased to $150,000 to reflect
the Company's outstanding performance, resulting in a base pay closer to median
base salary earnings for chief executive officers of peer group companies.
For the Company's Chief Executive Officer, the target bonus award was 30% of
base salary. The actual percentage to be paid was subject to adjustment above
or below the target, based on both Company and individual performance.
Consistent with the Company's philosophy of providing incentives for and
rewarding exceptional performance, Mr. Jaech also received a bonus payment under
the Management Incentive Bonus Plan equal to 69% of his base salary because the
Company's performance in fiscal year 1997 exceeded the target performance levels
specified in the plan and Mr. Jaech's performance exceeded expectations.
The Committee recognizes that Mr. Jaech is one of the Company's founders and
is also one of its largest shareholders. Because of his large share ownership,
to date Mr. Jaech has declined any stock option grants, although he may receive
stock option grants in the future.
Policy With Respect to the $1 Million Deduction Limit
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
generally limits the federal corporate income tax deduction for compensation
paid to executive officers named in the summary compensation table in the proxy
statement of a public company to $1 million, unless the compensation is
"performance-based compensation" or qualifies under certain other exceptions.
The Committee intends to qualify executive compensation for deductibility under
Section 162(m) to the extent consistent with the best interests of the Company.
Since corporate objectives may not always be consistent with the requirements
for full deductibility, it is conceivable that the Company may enter into
compensation arrangements in the future under which payments are not deductible
under Section 162(m); deductibility will not be the sole factor used by the
Committee in ascertaining appropriate levels or modes of compensation.
Conclusion
The Committee believes these executive compensation policies and programs
serve the interests of shareholders and the Company effectively. The various
pay vehicles offered are appropriately balanced to provide increased motivation
for executives to contribute to the Company's overall future success, thereby
enhancing the value of the Company for the shareholders' benefit.
The Compensation Committee of the Board of Directors
Tom Byers, Ph.D.
John R. Johnston
Douglas J. Mackenzie
10
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
In accordance with SEC rules, the following performance graph compares the
cumulative total shareholder return on the Company's Common Stock between
November 10, 1995 (the date the Company's Common Stock commenced public trading)
and October 3, 1997 (the end of the Company's 1997 fiscal year) with the
cumulative total return of a broad equity market index and either a nationally
recognized industry standard or an index of peer companies selected by the
Company over the same period. The Company has selected the Nasdaq Stock Market
(US) Index for the broad equity index and the Hambrecht & Quist Computer
Software Index as an industry standard. The stock price information shown on the
graph below is not necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG VISIO CORPORATION,
NASDAQ STOCK MARKET (US) INDEX, AND H&Q COMPUTER SOFTWARE INDEX
[PERFORMANCE GRAPH APPEARS HERE.]
<TABLE>
<CAPTION> NOVEMBER 10, 1995 SEPTEMBER 27, 1996 OCTOBER 3, 1997
----------------- ------------------ ---------------
<S> <C> <C> <C>
Visio Corporation........................... $100 $270 $497
Nasdaq Stock Market (US) Index.............. 100 116 159
H&Q Computer Software Index................. 100 117 152
</TABLE>
Notes:
(1) The performance graph assumes that $100 was invested in the Company's
Common Stock and in each Index on November 10, 1995.
(2) The total return for each of the Company's Common Stock, the Nasdaq Stock
Market (US) Index and the H&Q Computer Software Index assumes the
reinvestment of dividends, although dividends have not been declared on the
Company's Common Stock. Historical returns are not necessarily indicative
of future performance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was or is an officer or employee of
the Company or any of its subsidiaries.
11
<PAGE>
CHANGE-IN-CONTROL ARRANGEMENTS
In the event of a "Corporate Transaction" as defined in the Company's 1995
Long-Term Incentive Compensation Plan in which Mr. Gordon's employment is
terminated without cause within 12 months of such Corporate Transaction or is
continued in a position other than Chief Financial Officer, then that number of
the stock options initially granted to Mr. Gordon such that 130,000 of such
options would have been fully vested as of the effective date of such Corporate
Transaction shall automatically accelerate and become exercisable in full
immediately prior to such Corporate Transaction. There are no such acceleration
provisions in any other awards to the Named Executive Officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or 5 with the SEC and the National Association of Securities Dealers.
Such officers, directors and 10% shareholders 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 such reports received or written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and 10%
shareholders during the 1997 fiscal year were timely made.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE 1995 LONG-TERM INCENTIVE COMPENSATION
PLAN, AS AMENDED AND RESTATED
In 1995, the shareholders approved the 1995 Long-Term Incentive Compensation
Plan (as amended and restated, the "1995 Plan"). The Company is presently
authorized to issue 900,000 shares of Common Stock upon the exercise of options
granted under the 1995 Plan. The shareholders will be requested at the annual
meeting to approve an amendment to the 1995 Plan, which will increase by
3,000,000 the number of shares that may be issued under the 1995 Plan. The
purpose of the 1995 Plan is to promote the Company's success by aligning
employee financial interests with long-term shareholder value. The Board
believes that the number of shares remaining available for issuance will be
insufficient to achieve the purpose of the 1995 Plan over the term of such plan
unless the additional shares are authorized. A copy of the proposed 1995 Plan,
as amended, may be obtained upon written request to the Company's Investor
Relations Department at the address listed on page 18.
DESCRIPTION OF THE AMENDED AND RESTATED 1995 PLAN
The following is a summary of the principal provisions of the proposed 1995
Plan, and is subject to and qualified by reference to the 1995 Plan.
Purpose. The purpose of the 1995 Plan is to enhance the long-term
profitability and shareholder value of the Company by offering stock-based
incentives and rewards (the "Awards") to those employees, officers, consultants
and agents of the Company and its subsidiaries who are key to the growth and
success of the Company, to encourage them to continue to provide services to the
Company and its subsidiaries and to encourage them to acquire and maintain stock
ownership in the Company.
Administration. The 1995 Plan is administered by a committee or committees
of the Board of Directors (the "Plan Administrator") that has been authorized by
the Board of Directors to do so. All members of the Plan Administrator serve
for such terms as the Board of Directors determines and are appointed and may be
removed by the Board of Directors. In addition to the power with respect to the
grant of Awards described elsewhere hereunder, the Plan Administrator is
authorized to administer and interpret the 1995 Plan, subject to its express
provisions and to make all determinations necessary or advisable for the
administration of the 1995 Plan.
12
<PAGE>
Shares Subject to the 1995 Plan. The number of shares of Common Stock subject
to the 1995 Plan as of December 31, 1997 (assuming the increase of 3,000,000
shares and including the number of shares which become available for issuance
under the 1990 Stock Option Plan (the "1990 Plan")) was 6,081,451 except that
any shares of Common Stock that, subsequent to December 31, 1997, become
available for issuance under the 1990 Plan in accordance with its terms as in
effect on such date and that are not issued under the 1990 Plan shall be added
to the aggregate number of shares available for issuance under the 1995 Plan.
Any unpurchased shares of Common Stock subject to Awards granted under the 1995
Plan that expire or terminate without shares of Common Stock having been issued
in connection therewith may be used for subsequent grants under the 1995 Plan.
As of December 31, 1997, 2,548,011 shares of Common Stock were issuable pursuant
to stock options outstanding under the 1995 Plan and 533,440 shares of Common
Stock were available for grant. To date, no stock appreciation rights, stock
awards or performance awards have been granted under the 1995 Plan.
Limitations. Subject to adjustment from time to time, not more than an
aggregate of 420,000 shares of Common Stock shall be available for issuance
pursuant to grants of stock awards, performance awards or other stock-based
awards under the 1995 Plan. Subject to adjustment from time to time, not more
than 150,000 shares of Common Stock may be made subject to Awards under the 1995
Plan to any individual participant in the aggregate in any one fiscal year of
the Company, except that the Company may make additional one-time grants of up
to 400,000 shares to newly hired participants, such limitation to be applied in
a manner consistent with the requirements of, and only to the extent for
compliance with, the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code. No performance awards having an
aggregate maximum dollar value in excess of $300,000 shall be granted to any
individual participant in any one fiscal year of the Company, such limitations
to be applied in a manner consistent with the requirements of, and to the extent
required for compliance with, the exclusion from the limitation on deductibility
of compensation under Section 162(m).
Persons Who May Participate. Awards may be granted under the 1995 Plan to
those officers, directors and key employees of the Company and its subsidiaries
as the Plan Administrator from time to time selects; provided, however, that
directors who are not also employees may not be awarded incentive stock options.
Awards may also be made to consultants and agents who provide services to the
Company and its subsidiaries.
Types of Awards. Awards granted under the 1995 Plan may include, but are not
limited to, incentive stock options ("ISOs") intended to meet all of the
requirements of an "Incentive Stock Option" as defined in Section 422 of the
Code, nonqualified stock options ("NSOs"), stock appreciation rights ("SARs"),
stock awards (including restricted stock), performance awards, and other stock-
based awards. Awards may be made singly, in combination or in tandem so that
the settlement or payment of one automatically reduces or cancels the other.
Awards may also be made in combination or in tandem with, in replacement of, as
alternatives to, or as the payment form for, grants or rights under any other
employee or compensation plan of the Company or in substitution for, or by the
assumption of, awards issued under plans of an acquired entity. Each Award
granted under the 1995 Plan must be evidenced by an agreement (an "Agreement")
duly executed on behalf of the Company. Each Agreement will comply with and be
subject to the terms and conditions of the 1995 Plan. Any Agreement may contain
such other terms, provisions and conditions not inconsistent with the 1995 Plan
as may be determined by the Plan Administrator.
Terms and Conditions of Awards.
Stock Option Grants. The option price for each option granted under the 1995
Plan will be determined by the Plan Administrator, but will be not less than
100% of the Common Stock's fair market value on the date of grant with respect
to ISOs and not less than 85% of fair market value with respect to NSOs. For
purposes of the 1995 Plan, "fair market value" means the average of the high and
low per share trading prices for the Common Stock as reported by the Nasdaq
National Market for a single trading day. As of December 26, 1997, the closing
market price for the Company's Common Stock as reported by the Nasdaq National
Market was $36.75 per share. The exercise price for shares purchased under
options must be paid in cash, except that the Plan Administrator may authorize
payment in cash and/or already owned Common Stock, a promissory note, delivery
of a properly executed exercise notice, together with irrevocable instructions
to a broker, or such other consideration as the Plan
13
<PAGE>
Administrator may specify. The optionee must pay to the Company applicable
withholding taxes upon exercise of the option as a condition to receiving the
stock certificates. The option term will be fixed by the Plan Administrator.
Each option will be exercisable pursuant to a vesting schedule determined by the
Plan Administrator. The Plan Administrator will also determine the circumstances
under which an option will be exercisable in the event the optionee ceases to
provide services to the Company or one of its subsidiaries. If not so
established, options generally will be exercisable for three years after
termination of services as a result of retirement, early retirement at the
Company's request, disability or death and for three months after all other
terminations. An option will not be exercisable if the optionee's services are
terminated for cause, as defined in the 1995 Plan.
SARs. A SAR gives its holder the right to receive an appreciation
distribution from the Company equal to the difference between the value of the
Common Stock subject to the right at the time of exercise and the exercise price
of the right. For SARs granted in tandem with options, the exercise price will
be the same as the option exercise price. For other SARs, the exercise price
will be as determined by the Plan Administrator, but will not be less than 85%
of the fair market value of the Common Stock on the date the SAR was granted.
The appreciation distribution will be paid in shares of Common Stock or cash or
any combination of shares and cash, as the Plan Administrator may determine.
Unless otherwise provided by the Plan Administrator, the provisions of the 1995
Plan regarding exercisability of options after the termination of services shall
apply equally, to the extent applicable, to SARs.
Stock Awards. The Plan Administrator is authorized to make awards of Common
Stock on such terms and conditions and subject to such restrictions, if any
(whether based on performance standards, periods of service or otherwise), as
the Plan Administrator may determine. Restrictions may include repurchase or
forfeiture rights in favor of the Company.
Performance Awards. Performance awards may be denominated in cash, shares of
Common Stock or any combination thereof. The Plan Administrator is authorized
to determine the nature, length and starting date of the performance period for
each performance award and the performance objectives to be used in valuing
performance awards and determining the extent to which such performance awards
have been earned. Performance objectives and other terms may vary from person
to person and between groups of persons. Performance objectives will be based
on profits, profit growth, profit-related return ratios, cash flow or total
shareholder return, whether applicable to the Company or any relevant subsidiary
or business unit, comparisons with competitor companies or groups and with stock
market indices, or any combination thereof, as the Plan Administrator may deem
appropriate. Additional performance measures may be used to the extent their
use would comply with the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code. The Plan Administrator will
determine for each performance award the range of dollar values or number of
shares of Common Stock, or a combination thereof, to be received at the end of
the performance period if and to the extent the relevant measures of performance
for the performance awards are met. The earned portion of a performance award
may be paid currently or on a deferred basis with such interest or earnings
equivalent as may be determined by the Plan Administrator. The Plan
Administrator may adjust the performance goals and measurements applicable to
performance awards to take into account changes in law and accounting and tax
rules and to make such adjustments as the Plan Administrator deems necessary or
appropriate to reflect the inclusion or exclusion of the impact of extraordinary
or unusual items, events or circumstances, except that, to the extent required
for compliance with the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code, no adjustment may be made that
would result in an increase in the compensation of any person whose compensation
is subject to such limitation for the applicable year. The Plan Administrator
also may adjust the performance goals and measurements applicable to performance
awards and thereby reduce the amount to be received by any holder pursuant to
such awards if and to the extent the Plan Administrator deems it appropriate.
The Plan Administrator will determine the circumstances under which a
performance award will be payable if a person ceases to provide services to the
Company. If not so established, a pro rata payment will be made at the end of
the performance period if the termination of services is a result of retirement,
early retirement at the Company's request, disability or death. A termination
of services for any other reason will result in forfeiture of the performance
award unless otherwise determined by the Plan Administrator.
Other Stock-Based Awards. The Plan Administrator may grant other stock-based
Awards under the 1995 Plan pursuant to which shares of Common Stock are or may
in the future be acquired, or Awards denominated in stock units, including
Awards valued using measures other than market value. Such other stock-based
Awards may be
14
<PAGE>
granted alone or in addition to or in tandem with any Award of any type granted
under the 1995 Plan and must be consistent with the 1995 Plan's purpose.
Loans, Loan Guarantees and Installment Payments. To assist a person
(including a person who is an officer or director of the Company) in acquiring
shares of Common Stock pursuant to an Award granted under the 1995 Plan, the
Plan Administrator may authorize (a) the extension of a loan to the person by
the Company, (b) the payment by the person of the purchase price, if any, of the
Common Stock in installments, or (c) the guarantee by the Company of a loan
obtained by the person from a third party. The terms of any loans, installment
payments or guarantees, including the interest rate and terms of repayment, will
be subject to the Plan Administrator's discretion, and may be granted with or
without security.
Transferability. No option, SAR, performance award, or other stock-based
award will be assignable or otherwise transferable other than by will or the
laws of descent and distribution and, during the person's lifetime, may be
exercised only by the person, except, in the Plan Administrator's sole
discretion, to the extent permitted by Section 422 of the Code.
Amendment and Termination of the 1995 Plan. The 1995 Plan may be terminated,
modified or amended by the shareholders of the Company. The Company's Board of
Directors may also terminate the 1995 Plan, or modify or amend it, subject to
shareholder approval in certain instances, as set forth in the 1995 Plan. No
ISOs may be granted under the 1995 Plan 10 years after the date the 1995 Plan is
adopted by the Board of Directors.
Capital Adjustments.
Adjustment of Shares. In the event of any changes in the outstanding stock
of the Company by reason of stock dividends, stock splits, spin-offs,
combinations or exchanges of shares, recapitalizations, mergers, consolidations,
distributions to shareholders other than a normal cash dividend, or other
changes in the Company's corporate or capital structure, the Plan Administrator,
in its sole discretion, shall make any equitable adjustments as it deems
appropriate in (a) the maximum number and class of securities subject to the
1995 Plan, and (b) the number and class of securities subject to any outstanding
Award and the per share price of such securities, without any change in the
aggregate price to be paid therefor.
Corporate Transaction. In the event of certain mergers or consolidations or
a sale of substantially all the assets or a liquidation of the Company, each
option, SAR or stock Award that is at the time outstanding will automatically
accelerate so that each such Award shall, immediately prior to such corporate
transaction, become 100% vested, except that such Award will not so accelerate
if and to the extent: (a) such Award is, in connection with the corporate
transaction, either to be assumed by the successor corporation or parent thereof
or to be replaced with a comparable Award for the purchase of shares of the
capital stock of the successor corporation or its parent corporation, (b) such
Award is to be replaced with a cash incentive program of the successor
corporation that preserves the spread existing at the time of the corporate
transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to such Award, or (c) the acceleration of such Award
is subject to other limitations imposed by the instrument evidencing the Award.
Any such Awards that are assumed or replaced in the corporate transaction and do
not otherwise accelerate at that time shall be accelerated in the event the
Participant's employment or services should subsequently terminate within two
years following such corporate transaction, unless such employment or services
are terminated by the Company for cause or by the Participant voluntarily
without good reason.
Further Adjustment of Awards. The Plan Administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Plan Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to Participants, with respect to
Awards. Such authorized action may include (but is not limited to)
establishing, amending or waiving the type, terms, conditions or duration of, or
restrictions on, Awards so as to provide for earlier, later, extended or
additional time for exercise, payment or settlement or lifting restrictions,
differing methods for calculating payments or settlements, alternate forms and
amounts of payments and settlements and other modifications, and the Plan
Administrator may take such actions with respect to all Participants, to certain
15
<PAGE>
categories of participants or only to individual participants. The Plan
Administrator may take such actions before or after granting Awards to which the
action relates and before or after any public announcement with respect to such
sale, merger, consolidation, reorganization, liquidation or change in control
that is the reason for such action.
Federal Income Tax Consequences. The federal income tax consequences to the
Company and to any person granted an Award under the 1995 Plan under the
existing applicable provisions of the Code and the regulations thereunder are
substantially as follows.
NSOs. No income will be recognized by a Participant upon the grant of an
NSO. On the exercise of an NSO, the optionee will recognize taxable ordinary
income in an amount equal to the excess of the fair market value of the shares
acquired over the option price. Upon a later sale of those shares, the optionee
will have short-term or long-term capital gain or loss, as the case may be, in
an amount equal to the difference between the amount realized on such sale and
the tax basis of the shares sold. If payment of the option price is made
entirely in cash, the tax basis of the shares will be equal to their fair market
value on the exercise date (but not less than the option price), and the shares'
holding period will begin on the day after the exercise date. If the optionee
uses already-owned shares to exercise an option in whole or in part, the
transaction will not be considered to be a taxable disposition of the already-
owned shares. The optionee's tax basis and holding period of the already-owned
shares will be carried over to the equivalent number of shares received upon
exercise. The tax basis of the additional shares received upon exercise will be
the fair market value of the shares on the exercise date (but not less than the
amount of cash, if any, used in payment), and the holding period for such
additional shares will begin on the day after the exercise date.
ISOs. The same rules apply to an ISO that is exercised more than three
months after the optionee's termination of employment (or more than 12 months
thereafter in the case of permanent and total disability, as defined in the
Code). Upon the exercise of an ISO during employment or within three months
after the optionee's termination of employment (or within 12 months thereafter
in the case of permanent and total disability, as defined in the Code), for
regular tax purposes the optionee will recognize no income at the time of
exercise (although the optionee will have income for alternative minimum income
tax purposes at that time as if the option were an NSO) and no deduction will be
allowed to the Company for federal income tax purposes in connection with the
grant or exercise of the option. If the acquired shares are sold or exchanged
after the later of (a) one year from the date of exercise of the option and (b)
two years from the date of grant of the option, the difference between the
amount realized by the optionee on that sale or exchange and the option price
will be taxed to the optionee as a long-term capital gain or loss. If the shares
are disposed of before such holding period requirements are satisfied, then the
optionee will recognize taxable ordinary income in the year of disposition in an
amount equal to the excess, on the date of exercise of the option, of the fair
market value of the shares received over the option price paid (or generally, if
less, the excess of the amount realized on the sale of the shares over the
option price), and the optionee will have capital gain or loss, long-term or
short-term, as the case may be, in an amount equal to the difference between (i)
the amount realized by the optionee upon that disposition of the shares and (ii)
the option price paid by the optionee increased by the amount of ordinary
income, if any, so recognized by the optionee.
SARs. A participant will not be deemed to receive any income at the time a
SAR is granted. When any part of a SAR is exercised, the participant will be
deemed to have received ordinary income at the time of exercise in an amount
equal to the then fair market value of the shares and any cash received for the
surrender of the SAR.
Stock Awards. Upon the receipt of shares under stock awards subject to
vesting and similar restrictions, a participant will generally recognize taxable
ordinary income when the shares cease to be subject to such restrictions under
the 1995 Plan in an amount equal to the excess of the fair market value of the
shares at that time over the amount, if any, paid for such shares. However,
within 30 days after the date the shares are received, a participant may elect
under Section 83(b) of the Code to recognize taxable ordinary income at the time
of transfer in an amount equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such shares. In that case
no additional income will be recognized by a participant upon the lapse of
restrictions on the shares, but, if the shares are subsequently forfeited, a
participant may not deduct the income recognized at the time of receipt of the
shares, and the participant will have a capital loss equal to the amount, if
any, paid for such shares. Upon the receipt of shares under stock awards that
are not subject to restrictions, other than restrictions on transfer, a
participant will generally recognize taxable ordinary income at the time of such
receipt. The participant's holding
16
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period for the shares will begin at the time taxable income is recognized under
these rules, and the tax basis in the shares will be the amount of ordinary
income so recognized plus the amount, if any, paid for the shares. Any dividends
received on the restricted shares prior to the date the participant recognizes
income as described above will be taxable ordinary income when received.
Performance Share Awards. Upon payment to a participant in settlement
pursuant to a performance share award, the participant will be deemed to have
received ordinary income in an amount equal to the cash and/or the fair market
value of Common Stock received. Special rules apply to a director or officer
subject to liability under Section 16(b) of the Exchange Act. In all the
foregoing cases the Company will be entitled to a deduction at the same time and
in the same amount as the participant recognizes ordinary income, subject to the
following limitations. Under Section 162(m) of the Code, certain compensation
payments in excess of $1 million are subject to a limitation on deductibility
for the Company. The limitation on deductibility applies with respect to that
portion of a compensation payment for a taxable year in excess of $1 million to
either the Company's Chief Executive Officer or any one of the other four most
highly compensated executive officers. Certain performance-based compensation
is not subject to the limitation on deductibility. Options and SARs can qualify
for this performance-based exception, but only if they are granted at fair
market value, the total number of shares that can be granted to an executive for
any period is stated, and shareholder and Board approval is obtained.
Restricted stock does not satisfy the definition of performance-based
compensation unless the lapse of the restriction period is based on the
attainment of specified performance goals approved by a company's shareholders.
Restricted stock grants under the 1995 Plan will not satisfy the performance-
based criteria. The option, SAR and performance award portions of the 1995 Plan
have been drafted to allow compliance with those performance-based criteria.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the independent
public auditors for the Company for fiscal year 1998, and recommends that the
shareholders vote for ratification of such appointment. Ernst & Young LLP has
audited the Company's financial statements since fiscal year 1993.
Shareholder ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the appointment of Ernst & Young
LLP for shareholder ratification as a matter of good corporate practice. If the
shareholders fail to ratify the appointment, the Board will reconsider whether
or not to retain that firm. Even if the appointment is ratified, the Board, in
its discretion, may direct the appointment of a new independent accounting firm
at any time during the fiscal year if the Board feels that such a change would
be in the best interests of the Company and its shareholders.
Representatives of Ernst & Young LLP are expected to be present at the annual
meeting, will have an opportunity to make a statement, and will be available to
respond to appropriate questions.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3.
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OTHER BUSINESS
The Board of Directors does not intend to bring any other business before the
meeting, and so far as is known to the Board, no matters are to be brought
before the meeting except as specified in the Notice of Annual Meeting of
Shareholders. However, as to any other business which may properly come before
the meeting, it is intended that proxies, in the form enclosed, will be voted in
respect thereof in accordance with the judgment of the persons voting such
proxies.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Wm. Kenneth McGraw
Wm. Kenneth McGraw
Corporate Counsel and Secretary
Seattle, Washington
January 9, 1998.
A COPY OF THE COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 1997, CONTAINING
INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, IS AVAILABLE UPON REQUEST. PLEASE WRITE TO:
INVESTOR RELATIONS DEPARTMENT
VISIO CORPORATION
520 PIKE STREET
SUITE 1800
SEATTLE, WASHINGTON 98101
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PROXY
VISIO CORPORATION
520 PIKE STREET, SUITE 1800, SEATTLE, WASHINGTON 98101
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeremy A. Jaech and Theodore C. Johnson as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of Visio Corporation held of record by the undersigned at the close of
business on December 26, 1997 at the Annual Meeting of Shareholders to be held
on February 25, 1998, or any adjournment or postponement thereof.
(Continued and to be signed on the reverse side)
<PAGE>
Please mark
your votes [X]
as indicated
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, AND 3.
1. ELECTION OF DIRECTORS:
FOR all nominees listed below (except as marked to the contrary below) [ ]
WITHHOLD AUTHORITY to vote for all nominees listed below [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below)
J. Jaech T. Johnson
T. Alberg T. Byers
J. Johnston D. Mackenzie
S. Oki
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE 1995 LONG-TERM INCENTIVE
COMPENSATION PLAN, AS AMENDED AND RESTATED, TO INCREASE BY 3,000,000 THE
NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE ISSUED THEREUNDER.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP as the Company's
independent public auditors for the fiscal year ending September 30, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Date: _____________________, 1998
_________________________________
Signature
_________________________________
Signature if held jointly
