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Daegis Inc.
1420 Rocky Ridge Drive, Suite 380
Roseville, CA 95661
August 27, 2012
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Daegis Inc. to be held on September 27, 2012 at 9:00 a.m., Pacific Time, at Daegis Inc., 1420 Rocky Ridge Drive, Suite 380, Roseville, California 95661.
At the meeting, stockholders will vote on two proposals: (1) the election of six members to the board of directors; and (2) to ratify the appointment of Grant Thornton LLP as Daegis’ independent auditors for fiscal 2013. Your board of directors recommends a vote “FOR” both of these proposals.
Your vote is important and we encourage you to vote promptly. After reading the proxy statement, please promptly mark, sign and date the enclosed proxy card and return it in the prepaid envelope provided. Alternatively, you may vote your shares via a toll-free telephone number or via the Internet. Instructions regarding all three methods of voting are provided on the proxy card.
The board of directors has fixed the close of business on August, 8, 2012 as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting and to any adjournment or postponement thereof.
If you plan to attend the Annual Meeting and wish to vote your shares personally, please RSVP to lkw@daegis.com. Thank you for your participation and we ask for your support of our proposals.
I look forward to seeing you at our Annual Meeting.
Sincerely, | |
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Todd E. Wille | |
President and Chief Executive Officer |
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Daegis Inc.
1420 Rocky Ridge Drive, Suite 380, Roseville, California 95661
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
September 27, 2012
Dear Stockholder:
You are cordially invited to attend the 2012 Annual Meeting of Stockholders of Daegis Inc. to be held on September 27, 2012, at 9:00 a.m., Pacific Time, at Daegis Inc., 1420 Rocky Ridge Drive, Suite 380, Roseville, California 95661, for the following purposes:
1. | To elect six (6) members of the board of directors to hold office until the 2013 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified. | ||
2. | To ratify the appointment of Grant Thornton LLP as Daegis’s independent auditors for the fiscal year ending April 30, 2013. | ||
3. | To transact such other business as may properly come before the meeting. |
These items of business are more fully described in the Proxy Statement that accompanies this Notice.
Stockholders of record at the close of business on August 8, 2012, are entitled to notice of, and to vote at, this meeting and any adjournments or postponements thereof. For ten days prior to the meeting, a complete list of the stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose relating to the meeting during ordinary business hours at our principal offices located at 1420 Rocky Ridge Drive, Suite 380, Roseville, California, 95661.
Sincerely, | |
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Steven D. Bonham | |
Secretary |
Roseville, California
August 27, 2012
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. ALTERNATIVELY, YOU MAY VOTE YOUR SHARES VIA TELEPHONE OR THE INTERNET, AS DESCRIBED IN THE ACCOMPANYING MATERIALS. IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME. PROXIES ARE REVOCABLE, AND IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY VOTED YOUR SHARES. |
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 27, 2012:Our Proxy Statement is attached. Financial and other information concerning Daegis Inc. is contained in our Annual Report to Stockholders for the fiscal year ended April 30, 2012. A complete set of proxy materials relating to our Annual Meeting is available on the Internet. These materials, consisting of the Notice of Annual Meeting, Proxy Statement, Proxy Card and Annual Report to Stockholders, may be viewed atwww.proxyvote.com. |
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DAEGIS INC.
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the board of directors (the “Board”) of Daegis Inc. (“Daegis,” “Company,” “we,” “us” or “our”), a Delaware corporation, for use at our Annual Meeting of Stockholders to be held on September 27, 2012 (the “Annual Meeting”), or any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting. The date of this Proxy Statement is August 27, 2012, the approximate date on which this Proxy Statement and the accompanying form of proxy were first sent or given to stockholders.
GENERAL INFORMATION
Annual Report. Our Annual Report on Form 10-K for the fiscal year ended April 30, 2012, is enclosed along with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of business on August 8, 2012 will be entitled to vote at the meeting and any adjournment thereof. As of that date, there were 16,385,826 shares of Daegis common stock, par value $0.001 per share, and also 1,666,667 shares of Daegis preferred stock, par value $0.001 per share, issued and outstanding. Stockholders may vote in person or by proxy. Each stockholder of record as of that date is entitled to one vote for each share of common or preferred stock held on each of the proposals presented in this Proxy Statement. Our bylaws provide that a majority of all of the shares of the stock entitled to vote, whether present in person or represented by proxy, shall constitute a quorum for the transaction of business at the Annual Meeting. Votes for and against, abstentions and “broker non-votes” will each be counted as present for purposes of determining the presence of a quorum.
Solicitation of Proxies. We will solicit stockholders by mail through our regular employees, and will request banks and brokers, and other custodians, nominees and fiduciaries, to solicit their customers who have Daegis stock registered in the names of such persons and will reimburse them for their reasonable out-of-pocket costs. We may also use the services of directors, officers and others to solicit proxies, personally or by telephone, without additional compensation.
Voting of Proxies. Except as described below, (i) All valid proxies received prior to the Annual Meeting will be voted; (ii) All shares represented by a proxy will be voted, and where a stockholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the specification so made; and (iii) If no choice is indicated, shares represented by signed proxy cards will be voted FOR each director nominee and IN FAVOR of proposal no. 2. A stockholder giving a proxy has the power to revoke his or her proxy at any time prior to the time it is voted at the Annual Meeting by delivering to the secretary of the Company a written instrument revoking the previously delivered proxy or by delivering a duly executed proxy with a later date, or by attending the Annual Meeting and voting in person.
Stockholders whose shares are registered in their own names may vote: (1) by returning a proxy card; (2) via the Internet; or (3) by telephone. Specific instructions to be followed by any registered stockholder interested in voting via the Internet or by telephone are set forth on the enclosed proxy card. The Internet and telephone voting procedures are designed to authenticate the stockholder’s identity and to allow the stockholders to vote his or her shares and confirm that his or her voting instructions have been properly recorded. If you do not wish to vote via the Internet or telephone, please complete, sign and return the proxy card in the self-addressed, postage paid envelope provided.
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PROPOSAL NO. 1
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ELECTION OF DIRECTORS
Daegis Inc. has a board of directors consisting of six (6) members who will serve until the next Annual Meeting of Stockholders and until their respective successors are duly elected and qualified.
Our nominees for election to the Board of Directors (the “Board”) and information with respect to their ages as of June 30, 2012, and their positions and offices held with the Company are set forth below. The proxy holders intend to vote all proxies received by them in the accompanying form FOR the nominees listed below unless otherwise instructed. Proxies may not be voted for a greater number of persons than the number of nominees named. We know of no reason why any nominee should be unable or unwilling to serve as a director. However, if any nominee(s) should for any reason be unable or unwilling to serve, the proxies will be voted for such substitute nominees as management may designate.
If a quorum is present and voting, the nominees for director receiving the highest number of votes will be elected as directors of the Company to serve until the next annual meeting of stockholders and until their successors have been duly elected and qualified. Abstentions and shares held by brokers that are present but not voted because the brokers were prohibited from exercising discretionary authority, i.e. “broker non-votes,” will be counted as present for purposes of determining if a quorum is present.
Nominees for election to the Board are as follows:
Director | ||||||
Name | Current Position with Company | Age | Since | |||
Steven D. Whiteman | Chairman of Board and Nominating and Governance Committee Chair | 61 | 1997 | |||
Timothy P. Bacci | Director | 53 | 2009 | |||
Robert M. Bozeman | Director and Capital Markets/Mergers and Acquisition Committee Chair | 63 | 2008 | |||
Richard M. Brooks | Director and Audit Committee Chair | 58 | 2005 | |||
Tery R. Larrew | Director and Compensation Committee Chair | 58 | 2002 | |||
Todd E. Wille | President and Chief Executive Officer | 49 | 2000 |
The following table details the Board’s committee structure and committee membership information as of April 30, 2012.
Nominating and | Capital Markets/Mergers | |||||||
Audit | Compensation | Governance | & Acquisition | |||||
Name of Director (1) | Committee | Committee | Committee | Committee | ||||
Timothy P. Bacci | Member | Member | ||||||
Robert M. Bozeman | Member | Member | Chairperson | |||||
Richard M. Brooks | Chairperson | |||||||
Tery R. Larrew | Member | Chairperson | ||||||
Steven D. Whiteman | Member | Member | Chairperson |
(1) With the exception of Mr. Wille, the company’s CEO, all other Board members are non-employees.
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Steven D. Whiteman has served as a Director of the Company since May 1997. In August 2004, he was appointed Chairman of the Board. Mr. Whiteman previously served as the President and Chief Executive Officer of Intesource, an Internet based e-procurement company. From June 2000 to May 2002, he worked as an independent consultant. From May 1993 until June 2000, Mr. Whiteman served as President of Viasoft, Inc. (“Viasoft”), a publicly-traded software products and services company. From February 1994 to June 2000, Mr. Whiteman also served as Chief Executive Officer and Director of Viasoft, and from April 1997 to June 2000, he served as Chairman of the Board of Directors. Mr. Whiteman is also a Director of Intesource, Actuate Corporation, and Trax Technology. Mr. Whiteman holds a B.A. degree in Business Administration from Taylor University and an M.B.A. from the University of Cincinnati.
Mr. Whiteman’s qualifications to serve on our Board of Directors include, among other skills and qualifications, his prior experience as a chief executive officer of technology companies, his service on other corporate boards, as well as his extensive knowledge about the Company gained from his tenure as a board member dating back to 1997.
Timothy P. Baccijoined our Board of Directors on August 20, 2009 following our acquisition of AXS-One Inc. on June 30, 2009. Prior to joining our Board of Directors, Mr. Bacci had been a board member of AXS-One. Mr. Bacci is the co-founder of BlueLine Partners, a strategic opportunities fund with more than $100 million in assets invested in small, publicly-traded, and undervalued healthcare and IT companies. Prior to BlueLine, he spent 15 years in executive positions for software companies, including serving as Chairman and interim CEO of Instant802 Networks and CEO of siteROCK Corp. He was a co-founder of Vicinity Corporation, which was acquired by Microsoft in 2002. Additionally, he has served as a consultant to several early stage technology companies addressing areas relating to corporate strategy and executive recruiting. Mr. Bacci holds a B.S. in Engineering from the United States Naval Academy and served as an officer on active duty in the U.S. Navy as a fighter pilot.
Mr. Bacci’s qualifications to serve on our Board of Directors include, among other skills and qualifications, his significant management and executive experience in the software industry, his experience in providing consulting services relating to corporate strategy and executive recruiting, his experience gained in evaluating and investing in healthcare and IT companies as a co-founder of BlueLine Partners and his service on other corporate boards.
Robert M. Bozeman was appointed Director in January of 2008. Mr. Bozeman currently serves as an investor and/or advisor to companies in Silicon Valley. His experience includes business operations, venture capital investment, and Capital Markets and Mergers and Acquisitions. He previously served in the capacities of CEO and board member for a variety of software, information services and computer supplier companies. Mr. Bozeman's last operating role was as CEO for Bricsnet from July 2003 through November 2004; prior to that - from November 1997 through December 2003, Mr. Bozeman was General Partner of Angel Investors LP for both its Fund I and Fund II. Investments by the firm included Ask Jeeves, Brightmail, Google, Opsware, and PayPal. In addition, many of Angel Investors LP investments became successful acquisitions, including AOL’s acquisition of Spinner, Microsoft’s acquisitions of eQuil, MongoMusic and Vacation Spot and Sybase’s acquisition of AvantGo!. Mr. Bozeman is currently on the board and/or is an advisor to Become.com, Decooda, DocBox, Pow Wow, Nantero, and Ramidi. In this capacity, Mr. Bozeman generally operates through Eastlake Ventures, LLC (his family office).
Mr. Bozeman’s qualifications to serve on our Board of Directors include, among other skills and qualifications, his significant management and executive experience in a variety of technology companies, his service on other corporate boards and his extensive experience gained in evaluating and investing in companies as a General Partner of Angel Investors.
Richard M. Brooks has served as a Director of the Company since August 2005. Since January 2011, Mr. Brooks has been the Executive Vice President and Chief Financial Officer of Composite Technology International, Inc., a manufacturer of building products. From September 2006 to December 2010, Mr. Brooks was a partner with Tatum, a national Executive Services consulting company, which is a wholly-owned subsidiary of SFN Group. With Tatum, Mr. Brooks acted as the project lead on a variety of consulting assignments, including acting as the interim CFO for Pixelworks, a publicly-traded semi-conductor company. Mr. Brooks previously served as Chief Executive Officer for VantageMed, a public company, from April 2002 to December 2004. In addition, Mr. Brooks served as a director of VantageMed Corporation from March 2001 to January 2005 and was appointed Chairman of that board in May of 2002. Mr. Brooks received a B.S. in Business Administration from Oregon State University.
Mr. Brooks’ qualifications to serve on our Board of Directors include, among other skills and qualifications, his significant management and executive experience with public companies and his extensive experience in providing financial consulting services to a variety of companies, including publicly-traded companies.
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Tery R. Larrew has served as a Director of the Company since May 2002. Mr. Larrew is the founding and managing partner of Caddis Capital LLC, a private equity firm that specializes in income oriented investments with strong equity appreciation including International Gaming and Entertainment; Energy – Oil & Gas Exploration and Production; Real Estate - Mobile Home Communities, Apartment Complexes, Self Storage Units and Unimproved Land; Natural Resources – Water and Secured Debt/Hard Asset financing. Until 2005, Mr. Larrew served as the President and CEO of Vericept Corporation, a provider of network-based early warning and misuse prevention solutions, headquartered in Denver, Colorado. Prior to joining Vericept in 2002, Mr. Larrew co-founded IQ3G, a mobile services company, in 2000. From 1999 to 2000, Mr. Larrew was the Chairman and Chief Executive Officer of a start-up e-communication company, UPDATE Systems, Inc. From 1989 to 1998, Mr. Larrew served as President of the Database Marketing Services Division of Metromail/CIC. He is a graduate of Colorado State University with a B.S. degree in Business Administration and serves on the Global Leadership Council for the Colorado State University School of Business.
Mr. Larrew’s qualifications to serve on our Board of Directors include, among other skills and qualifications, his significant management and executive experience in the technology industry, his broad range of management experiences, as well as his extensive knowledge about the Company gained from his tenure as a board member dating back to 2002.
Todd E. Wille has served as our President and Chief Executive Officer since November 2000. He rejoined the Company in October 2000 as the Chief Operating Officer and acting Chief Financial Officer. Mr. Wille originally joined us in August 1995 as the Corporate Controller. In September 1997, Mr. Wille was promoted to Vice President, Finance and Chief Financial Officer. In March 1998, Mr. Wille left the Company and joined FRx Software Corporation as the Vice President of Finance and Chief Financial Officer. Subsequently, Mr. Wille was promoted to Senior Vice President of Operations. Mr. Wille received a B.A. degree in Business Administration with concentrations in accounting and finance and management information systems from Wartburg College.
Mr. Wille’s qualifications to serve on our Board of Directors include, among other skills and qualifications, his extensive management, financial and operation experience and his experience with our Company.
No nominee has any family relationship with any other nominee or with any of the Company’s executive officers.
Information About the Board of Directors and Committees of the Board
The Board has determined that the positions of Chairman of the Board and Chief Executive Officer should be held by different persons. In addition, the Board believes that the Chairman should not be an employee of the Company. Since August 2004, the Board has been led by Mr. Steven D. Whiteman, an independent non-executive chairman. The Chairman of the Board is responsible for coordinating the Board’s activities, including the scheduling of meetings of the full Board, scheduling executive sessions of the non-employee directors and setting relevant items on the agenda (in consultation with the CEO as necessary or appropriate). The CEO is responsible for setting the strategic direction for the Company and the day to day leadership and performance of the Company. The Board believes this leadership structure has enhanced the Board’s oversight of, and independence from, Company management, the ability of the Board to carry out its roles and responsibilities on behalf of our stockholders, and our overall corporate governance.
The Company has a Nominating and Corporate Governance Committee of which the primary responsibilities are to: (i) identify individuals qualified to become Board members; (ii) select, or recommend to the Board, director nominees for each election of directors; (iii) develop and recommend to the Board criteria for selecting qualified director candidates; (iv) consider committee member qualifications, appointment and removal; (v) recommend corporate governance principles, codes of conduct and compliance mechanisms applicable to the Company; and (vi) provide oversight in the evaluation of the Board and each committee. Subject to the advance notice provision of Daegis’s bylaws, as described below, the Nominating and Corporate Governance Committee will consider nominees recommended by stockholders. Stockholders who wish to recommend nominees for director should submit such recommendations to the Secretary of Daegis at our corporate office located at 1420 Rocky Ridge Drive, Suite 380, Roseville, CA 95661. Nominee recommendations to the Board from stockholders are considered under the same criteria as a nominee recommended by the Board.
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In identifying candidates for membership on the Board of Directors, the Nominating and Governance Committee takes into account all factors it considers appropriate, which may include strength of character, conflict of interest, maturity of judgment, career specialization, relevant skills, diversity and the extent to which a particular candidate would fill a present need on the Board of Directors. The Nominating and Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director nominees. When identifying director nominees, the committee considers general principles of diversity, and does so in the broadest sense. At a minimum, director candidates must have unimpeachable character and integrity, sufficient time to carry out their duties, the ability to read and understand financial statements, experience at senior levels in areas relevant to the Company and consistent with the objective of having a diverse and experienced Board, the ability and willingness to exercise sound business judgment, the ability to work well with others and the willingness to assume the responsibilities required of a director of the Company.
In addition, this committee is charged with developing corporate governance practices to fulfill its responsibility to our stockholders.
Each nominee for director named herein was recommended to the Company by the Nominating and Corporate Governance Committee.
Each person who was a member of the Board during our last fiscal year attended at least 75% of both the aggregate meetings of the Board and committees of the Board for which they are members. During our last fiscal year, a total of six meetings of the Board of Directors were held. We do not require Board members to attend our annual meeting of stockholders.
Stockholders who wish to communicate with our Board of Directors or an individual director may send a written communication to the Board or such director c/o Daegis Inc., 1420 Rocky Ridge Drive, Suite 380, Roseville, California 95661, Attn: Secretary. Each communication must set forth the name and address of the stockholder on whose behalf the communication is sent and the number of Daegis shares that are owned beneficially by such stockholder as of the date of the communication. Each communication will be reviewed by our Secretary to determine whether it is appropriate for presentation to the Board or such director. Examples of inappropriate communications include advertisements, solicitations or hostile communications. Communications determined by the Secretary to be appropriate for presentation to the Board or such director will be submitted to the Board or such director on a periodic basis.
Role of Board of Directors in Risk Oversight
The Board of Directors oversees our processes to manage risk at the Board and senior management levels. The Board of Directors delegates much of this responsibility to the Audit Committee. Under its charter, the Audit Committee shall discuss with management the Company’s major financial risk exposures and steps management has taken to limit, monitor or control such exposure. While the Board of Directors and Audit Committee oversee our Company’s risk management, our senior management is responsible for the development, implementation, and maintenance of our risk management processes and provides periodic reports to the Board of Directors and its committees, as appropriate, on its assessment of strategic, operational, legal and compliance, and financial reporting risks to the Company. The Board of Directors and its committees, as appropriate, review and consider the management reports provided on the Company’s enterprise risk and risk management strategy.
Audit Committee
We have established an Audit Committee (the “Audit Committee”), the primary responsibilities of which are to oversee the accounting and financial reporting processes of our company as well as our affiliated and subsidiary companies, and to oversee the internal and external audit processes. The Audit Committee also assists the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information that is provided to stockholders and others, and the system of internal controls that management and the Board of Directors have established. The Audit Committee oversees the independent auditors, including their independence and objectivity. However, the committee members are not acting as professional accountants or auditors, and their functions are not intended to duplicate or substitute for the activities of management and the independent auditors. The Audit Committee is empowered to retain independent legal counsel and other advisors as it deems necessary or appropriate to assist the Audit Committee in fulfilling its responsibilities, and to approve the fees and other retention terms of the advisors.
The Audit Committee is comprised of three members, each of whom was selected by the Board of Directors. Richard Brooks, Tery Larrew, and Steven Whiteman currently serve as our Audit Committee members. Our Board of Directors has determined that each of the members of our Audit Committee is “independent,” as defined under and required by the federal securities laws and the rules of the NASDAQ. Our Board of Directors has determined that Mr. Brooks qualifies as an “audit committee financial expert” under the federal securities laws and that each member of the Audit Committee has the “financial sophistication” required under the rules of the NASDAQ. Mr. Brooks is the Chairperson of the Audit Committee.
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Compensation Committee
We have established a Compensation Committee (the “Compensation Committee”), the primary responsibilities of which are to periodically review and approve the compensation and other benefits for our employees, officers and independent directors, including reviewing and approving corporate goals and objectives relevant to the compensation of our executive officers in light of those goals and objectives, and setting compensation for these officers based on those evaluations. Our Compensation Committee also administers and has discretionary authority over the issuance of stock awards under our stock compensation plans.
The Compensation Committee has in the past, and may in the future, delegate authority to review and approve the compensation of our employees to certain of our executive officers, including with respect to stock option grants issued under our Stock Option Plan. Even where the Compensation Committee has not delegated authority, our executive officers typically make recommendations to the Compensation Committee regarding compensation to be paid to our employees and the size of stock options and stock grants.
The Compensation Committee engaged Compensia, Inc. to conduct an executive total compensation analysis and to review and provide recommendations with respect to director compensation.
The Compensation Committee is comprised of three members, each of whom was elected by the Board. Tery Larrew (Chairperson), Robert Bozeman and Steven Whiteman currently serve on our Compensation Committee.
Capital Markets and Mergers and Acquisition Committee
We have established the Capital Markets and Mergers and Acquisition Committee (“the Capital Markets/M&A Committee”), the primary responsibilities of which are to assist management with the execution of the Company’s capital markets and mergers and acquisition strategies. The Capital Markets/M&A Committee has the authority to obtain advice or assistance from consultants, legal counsel, accounting or other advisors as appropriate.
Relative to capital markets, the Capital Markets/M&A Committee provides support and advice to the CEO regarding: (i) the selection of an outside investor relations firm; (ii) the development of and implementation of a capital market strategy regarding new investor outreach and communications; (iii) the Company’s responses to financial analysts; and (iv) the financial communication with investors, including annual guidance, quarterly earnings calls and other related activities.
With regard to mergers and acquisitions, the Capital Markets/M&A Committee provides support and advice to the CEO relative to: (i) the selection of an outside investment banker; (ii) the review of strategic criteria used to filter potential M&A opportunities (iii) the consummation of transactions, including full Board parameters for initiating the transaction, financial negotiations and problem solving until the transaction is agreed and legally completed; and (iv) all factors related to the success of the transaction once concluded, including possible organization structural changes and broader problem identification and resolution until satisfactory operating integration is concluded.
Our Capital Markets/M&A Committee is comprised of two members, each of whom was selected by the Board of Directors. Robert Bozeman and Timothy Bacci currently serve as our Capital Markets/M&A Committee members. Mr. Bozeman is the Chairperson of the committee.
Code of Conduct and Ethics
Our Board of Directors has adopted a code of conduct and ethics (the “Code”) that establishes the standards of ethical conduct applicable to all directors, officers and employees of our company. The Code addresses, among other things, conflicts of interest, compliance with disclosure controls and procedures and internal control over financial reporting, corporate opportunities and confidentiality requirements. The Audit Committee is responsible for applying and interpreting the Code in situations where questions are presented to it. The Board has adopted a code of business conduct that applies to all our employees, officers and directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES LISTED ABOVE.
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Executive Officers
The following table sets forth certain information concerning our executive officers as of April 30, 2012.
Executive | ||||||
Officer | ||||||
Name | Current Position with Company | Age | Since | |||
Todd E. Wille | President and Chief Executive Officer | 49 | 2000 | |||
Steven D. Bonham | Vice President, Finance and Administration and CFO | 55 | 2005 | |||
Mark T. Bygraves | Division General Manager | 55 | 2007 | |||
Duane V. George | Vice President, Product Development and CTO | 54 | 2007 | |||
Judson Holt | Senior Vice President - Client Services and Operations | 40 | 2011 | |||
Kurt Jensen | Division President | 46 | 2010 | |||
Frank Verardi | Division General Manager | 63 | 2001 |
Todd E. Wille has served as our President and Chief Executive Officer since November 2000. He rejoined the Company in October 2000 as the Chief Operating Officer and acting Chief Financial Officer. Mr. Wille originally joined us in August 1995 as the Corporate Controller. In September 1997, Mr. Wille was promoted to Vice President, Finance and Chief Financial Officer. In March 1998, Mr. Wille left the Company and joined FRx Software Corporation as the Vice President of Finance and Chief Financial Officer. Subsequently, Mr. Wille was promoted to Senior Vice President of Operations. Mr. Wille received a B.A. degree in Business Administration with concentrations in accounting and finance and management information systems from Wartburg College.
Steven D. Bonham joined the Company in June 2005, as Vice President of Finance and Administration and Chief Financial Officer. Previously, Mr. Bonham was the Chief Financial Officer for LexisNexis/Examen, a subsidiary of LexisNexis, from 1997-2005. Prior to LexisNexis/Examen, Mr. Bonham spent nine years with Foundation Health Corporation, a former Fortune 500 publicly-traded managed care insurance company, most recently serving as the Vice President of Finance for Foundation’s California Heath Plan. Mr. Bonham, a licensed Certified Public Accountant, has a B.S. degree in Accounting from California State University, Sacramento.
Mark T. Bygraves joined the Company in November 2006 as part of the acquisition of Gupta Technologies, where he had served since February 2002, most recently as Managing Director. Mr. Bygraves was appointed as an officer on May 1, 2007 and is currently Division General Manager and is responsible for driving the worldwide archive business. Mr. Bygraves has worked in the IT industry for over 25 years, holding a number of senior positions, most recently from January 1999 to January 2002 as Director of Channels at Hitachi Data Systems. Prior to Hitachi Data Systems, Mr. Bygraves was the Sales Director of Transformation Software.
Duane V. Georgehas served as Vice President of Product Development and CTO since July 2006. Mr. George is responsible for product development, training, documentation, quality control and assurance. Mr. George provides the technical vision, leads all aspects of the Company’s technology development and plays an integral role in shaping the Company’s strategic direction, development and future growth. Mr. George began his career as an engineer with the Department of Defense managing the acquisition and implementation of Computer Aided Design and Manufacturing (CAD/CAM) systems. Subsequently, Mr. George joined the US Space Command to manage strategic space defense initiatives and satellite Command Control and Communication (C3) programs. He eventually moved into software development, customer support and project management with an emphasis on customer satisfaction and joined us in 1995. He earned his B.S. in Engineering from Brigham Young University in Provo, Utah.
Judson L. Holt became an officer on May 1, 2011. As co-founder of Strategic Office Solutions, Inc. (dba Daegis), Jud has many years of diverse litigation support and eDiscovery experience. As Senior Vice President - Client Services and Operations, Mr. Holt is responsible for the teams that deliver client success, including operations, client services, IT and data collections. His efforts are focused on the continued development and implementation of quality processes throughout the organization to ensure successful project outcomes. Before joining Daegis, Jud served as a consultant/project manager at ZIA Information Analysis Group and DeNovo. He specialized in managing multiple vendors and large-scale coding and imaging projects for major class-action cases. He received a bachelor’s degree in psychology from the University of Colorado. Mr. Holt’s last day as an employee of the Company was June 25, 2012. He currently does not provide any services to the Company.
Kurt A. Jensen joined the Company as Executive Vice President and Chief Operating Officer through the acquisition of Strategic Office Solutions, Inc. in June 2010. Mr. Jensen had served as President and Chief Executive Officer of Strategic Office Solutions, Inc. (dba Daegis) since its founding in 1999. Prior to founding Strategic Office Solutions, Mr. Jensen held various positions of increasing responsibility at Researchers, a privately-owned company with offices throughout the western United States. Mr. Jensen received a B.S. degree in Business Administration and Marketing from University of California, Berkley, CA. Mr. Jensen’s last day as Executive Vice President and Chief Operating Officer was May 17, 2012. Since that time he has acted as the eDiscovery Divisions Founder and Advisor and in this capacity Mr. Jensen is instrumental in steering Daegis’ future strategy and mission to provide the industry’s best eDiscovery experience. In this position, Mr. Jensen is no longer an Executive Officer of the Company.
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Frank Verardi has served as an executive officer since 2000. Mr. Verardi is currently Division General Manager responsible for driving worldwide sales and the day to day operational responsibilities for the application development, database and migration business. From 2007 through April 2011, Mr. Verardi was the Vice President of Sales for the Americas and Asia Pacific regions. From May 2005 to April 2007, he served as Vice President and General Manager where he oversaw the sales and marketing for the Company’s technology products. From June 2003 to April 2005, he served as Vice President of Technical Services, and from May 2001 to May 2003, he served as Vice President of Worldwide Sales and Marketing. Prior to these positions, Mr. Verardi served in various management positions, including Vice President of Worldwide Professional Services, Vice President of Worldwide Product Delivery and Customer Support, and Director of Client Services. Mr. Verardi joined the Company in August 1988. Prior to that, Mr. Verardi held various positions with Computer Sciences Corporation, including Director of Commercial Professional Services. Mr. Verardi received a B.S. degree in Computer Science from California State University, Chico.
There are no family relationships among any of the Company’s executive officers and directors.
EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is a current or former officer or employee of the Company.
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COMPENSATION OVERVIEW
The Compensation Committee does not believe that any of the Company’s compensation policies or practices creates risks that are reasonably likely to have a material adverse effect on the Company. This Compensation Overview section describes generally our compensation policies and practices that are applicable for executive and management employees.
We provide what we believe is a competitive total compensation package to our executive management team through a combination of base salary, an annual cash incentive plan, a long-term equity incentive compensation plan (“LTI”) and broad-based benefits programs. We place emphasis on pay for performance-based incentive compensation programs, which make payments when certain company or revenue goals are achieved. This Compensation Overview explains our compensation philosophy, policies and practices with respect to our CEO, and our four most highly compensated officers as of our fiscal year end other than our CEO.
The Objectives of Our Executive Compensation Program
Our Compensation Committee is responsible for establishing and administering our policies governing the compensation for our executive officers. Our Compensation Committee is composed entirely of non-employee independent directors. The primary goals of the Compensation Committee with respect to executive compensation are to attract and retain the most talented and dedicated executives possible, to tie annual and long-term cash and equity incentives to achievement of specified performance objectives, and to align executives’ incentives with stockholder value creation. To achieve these goals, the Compensation Committee intends to implement and maintain compensation plans that tie a substantial portion of the executives’ overall compensation to our financial and operational performance, as measured by metrics such as total revenue, revenue growth and profitability. The Compensation Committee evaluates individual executive performance with a goal of setting compensation at levels the Compensation Committee believes are comparable with executives in other companies of similar size and stage of development operating in the software industry while taking into account our relative performance and strategic goals.
We use the following principles to guide our decisions regarding executive compensation:
Allocation between long-term and currently paid out compensation.
The compensation we currently pay consists of base salary and annual cash bonus incentive compensation. The long-term compensation consists entirely of stock awards or stock options pursuant to our 2010 Stock Option Plan. The allocation between long-term and currently paid out compensation is based on an analysis of how the enterprise software industry and companies of similar size in the general technology market use long-term incentives and currently paid cash compensation to pay their executive officers.
Allocation between cash and non-cash compensation.
It is our intent to allocate all currently paid compensation and annual bonus incentive pay in the form of cash and all long-term compensation in the form of stock awards and/or stock options to purchase our common stock. We consider competitive market analyses when determining the allocation between cash and non-cash compensation.
Provide compensation opportunities targeted at market median levels.
To attract and retain executives with the ability and the experience necessary to lead us and deliver strong performance to our stockholders, we strive to provide a total compensation package that is competitive with total compensation provided by our industry peer group. We benchmark our salary and target incentive levels and practices as well as our performance results in relation to other comparable general technology and enterprise software companies of similar size in terms of revenue and market capitalization. In fiscal 2012, we engaged a compensation consultant, Compensia Inc., to provide us with a comprehensive evaluation of our executive compensation program. The consultant used multiple data sources, including confidential market compensation surveys and public survey data and the publicly disclosed compensation information from fifteen comparable companies with similar attributes.
We target base salaries and target total cash compensation to equal the market median (50th percentile) compensation level. We believe our executive compensation packages are reasonable when considering our business strategy, our compensation philosophy and the competitive market pay data.
Require performance goals to be substantially achieved in order for the majority of the target pay levels to be earned.
Our executive compensation program emphasizes pay for performance. Performance is measured based on theachievement of company financial and operational performance goals established by our Board of Directors relative to our Board of Director approved annual business plan. Our financial and operational goals are established so the attainment of these goals is not assured and will require significant effort on the part of our executives.
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Offer a comprehensive benefits package to all full-time employees.
We provide a competitive benefits package to all full-time employees which include health and welfare benefits, such as medical, dental, vision care, disability insurance, life insurance benefits, and a 401(k) savings plan. We have no structured executive perquisite benefits (e.g., club memberships or company vehicles) for executive officers, including the named executive officers, and we currently do not provide any deferred compensation programs or supplemental pensions to any executive officer, including the named executive officers. As part of our Daegis acquisition, we pay an additional amount toward healthcare benefits to certain employees. In addition, we pay an additional amount for car reimbursement to two of our executive officers as well as for supplemental life insurance coverage for one of our executive officers as detailed in the Summary Compensation Table.
Provide fair and equitable compensation.
We provide a total compensation program that we believe will be perceived by both our executive officers and our stockholders as fair and equitable. In addition to conducting analyses of market pay levels and considering individual circumstances related to each executive officer, we also consider the pay of each executive officer relative to each of the other executive officers and relative to other members of the management team. We have designed our total compensation programs to be fair to our executive management team.
Annual Market Assessment of Executive Compensation
On an annual basis, our Compensation Committee meets outside the presence of all of our executive officers, including the named executive officers, to consider appropriate compensation for our CEO. For all other named executive officers, the Compensation Committee meets outside the presence of all executive officers except our CEO, Mr. Wille, who reviews each other named executive officer’s performance with the Compensation Committee and makes recommendations to the Compensation Committee with respect to any proposed changes to the executive’s base salary, cash bonus incentives and equity incentives. The Compensation Committee considers the Company’s corporate strategy, the annual performance of the executive officer, the importance of the executive position to the Company, the existing salary and awards of the executive officer, the expected contributions to be made by the executive officer in the upcoming fiscal year and any other factors the committee deems appropriate. The Compensation Committee also reviews the analyses and recommendations of the executive compensation consultant retained by the Compensation Committee. After considering the relevant information, the Compensation Committee establishes the annual compensation package for our executive officers.
In February 2011, the Compensation Committee hired Compensia, Inc., an executive compensation advisory services firm, to provide guidance on current industry best practices and compensation market data from comparable companies. The data provided by Compensia included executive compensation information for similar positions as our executive management team from a list of fifteen comparable, publicly-traded general technology and enterprise software companies of similar size in terms of revenue and market capitalization and a proprietary compensation database compiled by Compensia that included a combination of small public companies and late stage pre-IPO companies. Compensia reviewed the total compensation package (including base salary, bonus methodology and target amount, and other short and long-term equity incentives) paid to our executive officers as compared to the total compensation package paid to executive officers in similar positions at the comparable companies. Based on this comparison, Compensia prepared an assessment of each of our executive management team’s total compensation package for the Compensation Committee including advice on interpreting the market data and any recommended changes to executive compensation. The compensation market data was summarized at the 25% market percentile, 50% market percentile and 75% market percentiles. The Compensation Committee decided to use the 50% market percentile of the compensation market data since it believed that it was the best representative of a guideline to ensure that our executive compensation is competitive with similar positions of other companies.
The Compensation Committee used the results of the consultant’s analysis to evaluate the appropriateness of compensation levels for each member of our executive management team. Prior to the beginning of the fiscal year, with the aid of the Compensia analysis, the Compensation Committee designs the annual executive compensation package based on the Committee’s above stated philosophy, the compensation market data along with other factors including the executive’s and Company’s performance in the prior year, the difficulty of attaining the financial and operational goals created by the Committee, and equity ownership level of each executive for setting the LTI award. The annual executive compensation elements include base salary, plus performance bonuses based on the attainment of financial and operational goals and LTI stock option grants.
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As an example, the Compensation Committee had adopted the following for Mr. Wille:
Cash Bonus | |||
($’s rounded to nearest thousands) | Base Salary | Incentive | LTI Award(2) |
Market data (50% percentile guideline) | $345,000 | $219,000 | $318,800 |
FY12 Compensation Package (1) | $350,000 | $227,500 | $209,260 |
This example reflects the manner in which the Compensation Committee approaches the design of the performance based elements.
(1) | The market data amount includes all compensation which would be paid on a cash basis comprised of base salary and a bonus incentive plan. Mr. Wille’s cash compensation for fiscal 2012 was unchanged from fiscal 2011 and approximates the fiscal 2012 market data 50% percentile guideline. | |
(2) | Comprised of both stock options and market performance based stock options. If certain performance metrics are not achieved, the market performance based options would be forfeited. |
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Our Executive Compensation Program Elements
Overall, our executive compensation programs are designed to be consistent with the objectives and principles set forth above. For each fiscal year, the Compensation Committee will select, in its discretion, the executive officers of the Company or its subsidiaries who are to participate in the Company’s incentive plans. The Compensation Committee will establish the terms and conditions applicable to any award granted under the plan and a participant will be eligible to receive an award under the plan in accordance with such terms and conditions. Awards will be paid in whole or in part in cash, common stock or other property and will generally be paid in the first quarter following completion of a given fiscal year. The actual amount of any discretionary bonus payment will be determined following a review of each executive’s individual performance and contribution to our strategic goals. The plan does not fix a maximum payout for any officer’s annual discretionary incentive payment. With the exception of the Messrs. Wille, Jensen and Bygraves, no other executive officers have an employment agreement. The basic elements of our executive compensation programs are summarized below:
Base Salary. Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies for similar positions. Generally, we believe that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions with similar responsibilities at comparable companies, in line with our compensation philosophy. Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. For fiscal 2012, this review occurred prior to the beginning of the first quarter.
Management Incentive Plan. The Company, through the Compensation Committee, maintains an annual Management Incentive Plan (“MIP”) such that executives of the Company can receive an incentive bonus payment based on the achievement of pre-defined objectives. The primary objective of the MIP is to compensate executives for achieving company financial goals. In addition, the annual MIP can be expanded to include the payment of incentive bonuses based on the attainment of certain strategic goals as determined by the Compensation Committee. The total potential MIP bonus amount is set at approximately 100% of market median levels. For fiscal 2012, the MIP financial goal performance targets were based on the Adjusted EBITDA for the three business divisions: eDiscovery, Unify and Corporate. The term Adjusted EBITDA was defined as “Earnings before interest, taxes, depreciation, amortization and stock compensation expense”.
Long-Term Equity Incentive Program. We believe that long-term performance is achieved through an ownership culture that encourages such performance by our executive officers through the use of stock and stock-based awards. Our stock compensation guidelines have been established to provide certain of our employees, including our executive officers, with incentives to help align those employees’ interests with the interests of stockholders. The Compensation Committee believes that the use of stock and stock-based awards is a significant component in enabling the company to achieve its compensation goals. We do maintain stock award guidelines and all stock awards are made at the direction of the Compensation Committee. The Compensation Committee determined the aggregate equity ownership levels for our executive officers should be set at approximately 100% of market median levels as determined by our compensation consultant.
Options and Stock Awards. Our 2010 Stock Plan authorizes us to grant options to purchase shares of common stock to our employees, directors and consultants. Our Compensation Committee is the administrator of the stock option plan. Stock option grants are made at the commencement of employment and, occasionally, following a significant change in job responsibilities or to meet other special retention or performance objectives. Stock option grants also make up part of the annual compensation package for our named executive officers. The Compensation Committee reviews and approves stock option awards to executive officers based upon a review of competitive compensation data, its assessment of individual performance, a review of each executive’s existing long-term incentives, and retention considerations. Periodic stock option grants are made at the discretion of the Compensation Committee to eligible employees and, in appropriate circumstances, the Compensation Committee considers the recommendations of members of management, such as Mr. Wille, our Chief Executive Officer. In fiscal 2012, certain named executive officers were awarded stock options in the amounts indicated in the section entitled “Grants of Plan Based Awards.” These grants included stock option grants made in May 2011 and July 2011.
Other Compensation. In accordance with our compensation philosophy, the Compensation Committee may, in its discretion, revise, amend or authorize any changes to the executive officer’s compensation or benefits as deemednecessary. A discretionary incentive award was made to Mr. Jensen in the amount of $43,000. Payments were made to some executive officers based on our merger agreement with Strategic Office Solutions. Certain individuals are eligible for incentive compensation under a Sales Commission Plan. The Company did make payments during fiscal 2012 under these plans. The Summary Compensation Table details the amount of the Sales Commission paid to certain named executive officers.
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Retirement Savings Opportunity.The Company maintains a 401(k) employee retirement savings plan. Eligible employees may contribute up to 100% of their pre-tax salary, but not more than statutory limits. We match a portion of employee contributions, currently 50% of the first 6% of compensation deferred. We do not provide an option for our employees to invest in our common stock in the 401(k) plan.
Health and Welfare Benefits. All full-time employees, including our named executive officers, may participate in our health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance. The Company pays an additional amount for Mr. Jensen’s and Mr. Holt’s health benefits and for Mr. Wille’s supplemental life insurance coverage and automobile expenses. These amounts are detailed in the Summary Compensation Table.
Tax Deductibility of Executive Compensation
Limitations on deductibility of compensation may occur under Section 162(m) of the Internal Revenue Code which generally limits the tax deductibility of compensation paid by a public company to its chief executive officer and certain other highly compensated executive officers to $1 million in the year the compensation becomes taxable to the executive officer. There is an exception to the limit on deductibility for performance-based compensation that meets certain requirements. It is the policy of the Compensation Committee to periodically evaluate the qualification of compensation for exclusion from the $1 million deduction limit under Section 162(m) of the Internal Revenue Code, as well as other sections of the Code, while maintaining flexibility to take actions with respect to compensation that it deems to be in the interest of the Company and its stockholders which may not qualify for tax deductibility.
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SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation earned during the fiscal years ended April 30, 2012 and 2011 by our President and Chief Executive Officer and our four other most highly compensated executive officers for the last two (2) fiscal years:
Stock | Option | Nonequity Incentive | All Other | |||||||||||||
Name and Principal | Salary | Bonus | Awards | Awards | Plan Compensation | Compensation | Total | |||||||||
Position | Year | $ (1) | $ (2) | $ (3) | $ (4) | $ (5) | $ | $ | ||||||||
Todd E. Wille | 2012 | 350,000 | 209,264 | (6) | 30,172 | (7) | 589,436 | |||||||||
President and CEO | 2011 | 337,500 | 157,909 | (8) | 40,000 | (9) | 15,551 | (10) | 550,960 | |||||||
Steven D. Bonham | 2012 | 225,000 | 85,607 | (11) | 6,750 | (12) | 310,607 | |||||||||
Chief Financial Officer | 2011 | 218,750 | 55,733 | (13) | 26,000 | (14) | 300,483 | |||||||||
Duane V. George | 2012 | 200,000 | 68,669 | (15) | 6,432 | (16) | 5,143 | (17) | 268,669 | |||||||
Chief Technical Officer | 2011 | 195,000 | 15,000 | (18) | 74,310 | (19) | 284,310 | |||||||||
Judson L. Holt (20) | 2012 | 225,000 | 232,500 | (21) | 64,957 | (22) | 9,112 | (23) | 24,945 | (24) | 522,457 | |||||
Sr. VP Client Services/Ops | ||||||||||||||||
Kurt A. Jensen | 2012 | 287,083 | 229,208 | (25) | 256,948 | (26) | 5,360 | (27) | 20,824 | (28) | 794,063 | |||||
Division President | 2011 | 298,820 | 123,958 | (29) | 15,157 | (30) | 437,935 |
(1) | Includes amounts, if any, deferred at the named executive officer’s option under our 401(k) plan. | |
(2) | Includes amounts paid as discretionary bonus. | |
(3) | No stock awards have been granted in the last two fiscal years. | |
(4) | The amounts in this column equal the grant date fair value of each award as computed in accordance with FASB Accounting Standards Codification Topic 718 – Stock Compensation. A discussion of the assumptions used in calculating the grant date fair value of these stock options can be found in Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2012 under the heading “Stock-Based Compensation”. Amounts shown reflect accounting expenses and do not reflect whether the recipient has actually realized a financial benefit from the awards. | |
(5) | Represents commissions earned and paid pursuant to the Company’s sales commission plans and includes amounts, if any, paid under the Company’s Management Incentive Plan (“MIP”). | |
(6) | Relates to stock option grants of 66,000 shares of common stock on May 2, 2011 and 99,000 shares of common stock on July 1, 2011, of which 24,750 are market performance based, to Mr. Wille. | |
(7) | Represents the amount paid by the company for supplemental life insurance benefits, automobile expenses, and matching contributions received under the 401(k) Plan for Mr. Wille. | |
(8) | Relates to stock option grant of 63,750 shares of common stock to Mr. Wille on May 4, 2010. | |
(9) | Represents a performance bonus awarded by the Compensation Committee under the Management Incentive Plan relative to the attainment of the Company’s strategic goal regarding acquisitions upon the closing of the Daegis acquisition in June 2010. | |
(10) | Represents the amount paid by the company for supplemental life insurance benefits and automobile expenses for Mr. Wille. |
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(11) | Relates to stock option grants of 27,000 shares of common stock on May 2, 2011 and 40,500 shares of common stock on July 1, 2011, of which 10,125 shares are market performance based, to Mr. Bonham. | |
(12) | Represents matching contributions received under the 401(k) Plan for Mr. Bonham. | |
(13) | Relates to a stock option grant of 22,500 shares of common stock to Mr. Bonham on May 4, 2010. | |
(14) | Represents a performance bonus awarded by the Compensation Committee under the Management Incentive Plan relative to the attainment of the Company’s strategic goal regarding acquisitions upon the closing of the Daegis acquisition in June 2010. | |
(15) | Relates to stock option grants of 22,000 shares of common stock on May 2, 2011 and 32,000 shares of common stock on July 1, 2011, of which 8,000 are market performance based, to Mr. George. | |
(16) | Represents a bonus paid under the Management Incentive Plan relative to the attainment of the eDiscovery Divisions achievement of financial goals for the first quarter of fiscal year 2012. | |
(17) | Represents matching contributions received under the 401(k) Plan for Mr. George. | |
(18) | Represents a discretionary bonus awarded to Mr. George for the successful delivery of key technical projects. | |
(19) | Relates to stock option grant of 30,000 shares of common stock to Mr. George on May 4, 2010. | |
(20) | Mr. Holt joined the Company in June 2010 upon the merger with Strategic Office Solutions Inc. (dba Daegis) and became an officer on May 1, 2011. | |
(21) | Represents incentive payments made to Mr. Holt in accordance with our merger agreement with Strategic Office Solutions. | |
(22) | Relates to stock option grants of 21,000 shares of common stock on May 2, 2011 and 30,000 shares of common stock on July 1, 2011, of which 7,500 are market performance based, to Mr. Holt. | |
(23) | Represents a bonus paid under the Management Incentive Plan relative to the attainment of the eDiscovery Divisions achievement of financial goals for the first quarter of fiscal year 2012. | |
(24) | Represents the additional amount paid by the company for health insurance benefits and matching contributions received under the 401(k) Plan for Mr. Holt. | |
(25) | Represents incentive payments made to Mr. Jensen in accordance with his employment agreement as well as a discretionary bonus in the amount of $24,758. | |
(26) | Relates to stock option grants of 125,000 shares of common stock on May 2, 2011 and 59,000 shares of common stock on July 1, 2011, of which 14,250 are market performance based, to Mr. Jensen. | |
(27) | Represents a bonus paid under the Management Incentive Plan relative to the attainment of the eDiscovery Divisions achievement of financial goals for the first quarter of fiscal year 2012. | |
(28) | Represents the additional amount paid by the company for health insurance benefits and matching contributions received under the 401(k) Plan for Mr. Jensen. | |
(29) | Represents incentive payments made to Mr. Jensen in accordance with his employment agreement. | |
(30) | Represents the additional amount paid by the company for health insurance benefits for Mr. Jensen. |
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Management Incentive Plan
As mentioned earlier for fiscal 2012, the MIP financial goal performance targets were based on the Adjusted EBITDA for the three business divisions: Corporate, Unify and eDiscovery. The term Adjusted EBITDA was defined as “Earnings before interest, taxes, depreciation, amortization and stock compensation expense”. The following tables provide information regarding the range of the Adjusted EBITDA performance target, threshold and maximum along with the potential payments associated with each such metric for each division.
CORPORATE DIVISION | ||
Adjusted | Pay out % of | |
EBITDA * | % of Adjusted | MIP Bonus |
(thousands) | EBITDA Target | Target |
> $9.45M | 82% | 25% |
> $9.877M | 86% | 50% |
> $10.337M | 90% | 75% |
> $10.910M | 95% | 90% |
> $11.485M | 100% | 100% |
* Including the accrued cost of any earned MIP bonuses |
The Corporate Division plan is paid on a semi-annual basis. As the Corporate Division did not achieve its Adjusted EBITDA financial goal for fiscal 2012, there was no financial goal performance bonuses paid to any of the Corporate Division MIP participants.
UNIFY DIVISION | ||
Adjusted | Pay out % of | |
EBITDA * | % of Adjusted | MIP Bonus |
(thousands) | EBITDA Target | Target |
> $7.7M | 86% | 25% |
> $8.078M | 90% | 50% |
> $8.437M | 94% | 75% |
> $8.706M | 97% | 90% |
> $8.975M | 100% | 100% |
* Including the accrued cost of any earned MIP bonuses |
The Unify Division plan is paid on a semi-annual basis.The Unify Division reached 94% of the Adjusted EBITDA target for the first half of the fiscal year and over 97% of the Adjusted EBIDTA target for the second half. Therefore, participants of this Plan were paid at 75% and 90% of the MIP Bonus Target for the first and second half of the fiscal year respectively.
eDISCOVERY DIVISION | ||
Adjusted | Pay out % of | |
EBITDA * | % of Adjusted | MIP Bonus |
(thousands) | EBITDA Target | Target |
> $6.3M | 86% | 25% |
> $6.570M | 90% | 50% |
> $6.862M | 94% | 75% |
> $7.3M | 100% | 100% |
* Including the accrued cost of any earned MIP bonuses |
The eDiscovery Division Plan is paid on a quarterly basis. The eDiscovery Division reached 87% of the Adjusted EBITDA target for the first quarter of the fiscal year and therefore participants of this Plan were paid at 25% of the MIP Bonus Target for the first quarter. The EBITDA target was not achieved for the following three quarters and therefore no bonuses were paid under this plan for those quarters.
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Long-Term Equity Incentive Program
For fiscal 2012, the Compensation Committee chose to grant LTI awards in the form of stock options, 25% of which are performance based and earned upon the appreciation in the Company’s stock price measured over a two year period and vest over a three year period. Following is a table that provides the percentage of performance based stock option shares earned based on the appreciation of the price of the Company’s common stock:
DAEG Stock Price Target by | ||
Appreciation in DAEG | 4/30/13 based on % increased | % Option Shares Earned based |
Stock Price of $3.00 | from 5/1/11 | on Stock Price Appreciation |
50% | >$4.50 | 75% |
60% | >$4.80 | 100% |
80% | >$5.40 | 125% |
100% | >$6.00 | 150% |
A Stock Price Threshold of $4.50 must be achieved before any incentive award can be paid under this Plan. The Stock Price Threshold represents a minimum appreciation of 50% from the weighted average stock price of $3.00 for the period of January 1 to April 30, 2011. If the Company’s stock price does not exceed $4.50 during the 2 year period, there will be no performance based option shares earned. The performance based stock options will be earned during the two year period ended April 30, 2013. The highest stock price maintained for a period of twenty (20) business days out of thirty (30) business days during the two year period will be used for calculating the % of option shares earned as compared to the price targets in the middle column above. Any earned performance based options will vest over a three year period with sixty-seven (67%) percent vesting on April 30, 2013 and the remainder will vest evenly as to 1/12th per month until the option is fully vested on April 30, 2014.
The remaining 75% of the 2012 LTI award is retention based and is earned ratably over 48 months. When determining award sizes for each executive officer, the Compensation Committee also considered the executive’s opportunities under the long-term cash incentive plans in order to assess the executive’s aggregate equity and cash long-term incentive opportunity and the executive’s ownership of the Company’s stock. For fiscal 2012, this review occurred prior to the beginning of the first quarter.
Employment Agreements and Termination and Change of Control Agreements
We have an employment agreement with Mr. Wille, our President and CEO, which became effective October 1, 2000. Under the agreement, he receives an annual salary of $350,000, subject to Board adjustment, and is eligible to receive bonuses upon Daegis achieving certain benchmarks in its business plan. Following a merger of the Company or sale of substantially all of its assets, the unvested portion of all options held by Mr. Wille as of the date of the transaction will automatically vest. Should Mr. Wille be terminated without cause or resign for good reason, all options held by Mr. Wille will have the benefit of 12 additional months of vesting and he will receive an amount equal to 12 months’ salary and the continuation of health benefits for 12 months following termination.
We also have an employment agreement with Mr. Jensen, our Executive Vice President and COO, which became effective June 30, 2010. The agreement has a three-year term, which may be extended year to year upon expiration. Under the agreement, Mr. Jensen is entitled to a base salary of $325,000 with a performance bonus up to 55% of base salary, and guaranteed additional payments of $175,000 and $87,500 for the first and second years, respectively, of his employment with the Company. Mr. Jensen will also be eligible to participate in the Company’s employee benefit programs, including the Company’s stock option plans. If the Company terminates Mr. Jensen’s employment for any reason, other than cause, or if Mr. Jensen terminates his employment for good reason, Mr. Jensen shall receive his base salary, bonus, and benefits for the twelve months following termination. Mr. Jensen’s agreement was amended, effective June 4, 2012, based on a change of position to eDiscovery Founder and Advisor. With this amendment, Mr. Jensen is entitled to a base salary of $195,000 but is no longer eligible for any performance bonus or additional payments.
Change in Control
Under our 2001 and 2010 Stock Option Plans, should we merge with or otherwise be acquired by another company in a transaction where our stockholders do not retain a majority of the voting stock, such event would constitute a “Change of Control.” If there is a Change of Control and the successor company fails to either assume the outstanding options or substitute substantially equivalent options for its own stock, the vesting of all our outstanding options shall accelerate to become fully vested and immediately exercisable. Any outstanding options will terminate if they are not exercised upon consummation of the merger or assumed or replaced by the successor corporation.
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Outstanding Equity Awards at April 30, 2012
The following table summarizes the outstanding equity award holdings by our named executive officers.
Equity Incentive | ||||||||||
Number of | Plan | |||||||||
Securities | Awards: Number of | |||||||||
Underlying | Securities | |||||||||
Number of Securities | Unexercised | Underlying | ||||||||
Underlying | Options | Unexercised | ||||||||
Unexercised Options | Unexercisable (#) | Unearned Options | Option Exercise | Option | ||||||
Name | Exercisable (#) | (1) | (#) (2) | Price ($) | Expiration Date | |||||
Todd E. Wille | 30,000 | 2.75 | 5/9/2012 | |||||||
54,000 | 2.55 | 5/1/2017 | ||||||||
60,000 | 5.20 | 11/27/2017 | ||||||||
73,437 | 1,563 | 6.40 | 5/2/2018 | |||||||
63,802 | 23,698 | 2.60 | 5/5/2019 | |||||||
30,546 | 33,204 | 3.56 | 5/4/2020 | |||||||
15,125 | 50,875 | 2.90 | 5/2/2021 | |||||||
13,921 | 60,329 | 1.92 | 7/1/2021 | |||||||
24,750 | 1.92 | 7/1/2021 | ||||||||
Steven D. Bonham | 40,000 | 1.85 | 6/27/2015 | |||||||
14,400 | 2.55 | 5/1/2017 | ||||||||
6,000 | 5.20 | 11/27/2017 | ||||||||
14,687 | 313 | 6.40 | 5/2/2018 | |||||||
25,520 | 9,480 | 2.60 | 5/5/2019 | |||||||
10,781 | 11,719 | 3.56 | 5/4/2020 | |||||||
6,187 | 20,813 | 2.90 | 5/2/2021 | |||||||
5,695 | 24,680 | 1.92 | 7/1/2021 | |||||||
10,125 | 1.92 | 7/1/2021 | ||||||||
Mark T. Bygraves | 20,000 | 2.55 | 5/1/2017 | |||||||
20,000 | 5.20 | 11/27/2017 | ||||||||
24,479 | 521 | 6.40 | 5/2/2018 | |||||||
38,281 | 14,219 | 2.60 | 5/5/2019 | |||||||
7,187 | 7,813 | 3.56 | 5/4/2020 | |||||||
Duane V. George | 2,000 | 2.75 | 5/9/2012 | |||||||
2,000 | 3.35 | 11/3/2013 | ||||||||
3,000 | 4.70 | 5/3/2014 | ||||||||
1,400 | 2.05 | 12/10/2014 | ||||||||
15,000 | 1.10 | 11/16/2016 | ||||||||
17,400 | 2.55 | 5/1/2017 | ||||||||
10,000 | 5.20 | 11/27/2017 | ||||||||
14,687 | 313 | 6.40 | 5/2/2018 | |||||||
27,343 | 10,157 | 2.60 | 5/5/2019 | |||||||
14,375 | 15,625 | 3.56 | 5/4/2020 | |||||||
5,041 | 16,959 | 2.90 | 5/2/2021 | |||||||
4,500 | 19,500 | 1.92 | 7/1/2021 | |||||||
8,000 | 1.92 | 7/1/2021 | ||||||||
Judson L. Holt | 15,833 | 24,167 | 3.06 | 9/23/2020 | ||||||
4,812 | 16,188 | 2.90 | 5/2/2021 | |||||||
4,218 | 18,282 | 1.92 | 7/1/2021 | |||||||
7,500 | 1.92 | 7/1/2021 | ||||||||
Kurt A. Jensen | 54,152 | 30,848 | 2.90 | 5/2/2021 | ||||||
9,166 | 30,834 | 2.90 | 5/2/2021 | |||||||
8,296 | 35,954 | 1.92 | 7/1/2021 | |||||||
14,750 | 1.92 | 7/1/2021 | ||||||||
Frank Verardi | 15,000 | 2.75 | 5/9/2012 | |||||||
4,000 | 2.30 | 2/2/2015 | ||||||||
16,406 | 6,094 | 2.60 | 5/5/2019 | |||||||
10,781 | 11,719 | 3.56 | 5/4/2020 | |||||||
2,062 | 6,938 | 2.90 | 5/2/2021 | |||||||
1,898 | 8,227 | 1.92 | 7/1/2021 | |||||||
3,375 | 1.92 | 7/1/2021 |
(1) | Stock Option grants vest monthly over a forty-eight month period. | |
(2) | Represents market performance based options for which a Stock Price Threshold must be achieved before any incentive award will be earned. Any earned performance based options will vest over a three year period with sixty-seven (67%) percent vesting on April 30, 2013 and the remainder will vest evenly as to 1/12th per month until the option is fully vested on April 30, 2014. |
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Compensation of Directors
The compensation for each individual non-employee (“Independent”) Director is assessed by the other members of the Board and is generally based upon the degree and quality of his/her participation in Board activities. Directors receive an annual cash retainer and an annual stock option grant. For the year ended April 30, 2012 each director was awarded an option to purchase 12,500 shares of our common stock. The Company reimburses expenses for the directors' attendance at board and committee meetings. A summary of the compensation for each independent director is included on the following table.
Based Upon | Annual Maximum | How Paid | ||||
Annual Cash Retainer (1) | Board participation | $25,000 in cash | $6,250 per quarter | |||
Annual Stock Option Grant (2) | Board determination of award to | Up to 12,500 shares of | An option to purchase the | |||
be made pursuant to the 2010 and | common stock | Company's common stock at | ||||
2001 Stock Option Plans | FMV at the date of grant with a | |||||
one-year vesting period |
(1) | We pay non-employee directors an annual cash retainer fee of $25,000 which is paid in four quarterly payments of $6,250 each. Payments are to be made in the middle of each fiscal quarter. Directors also receive compensation for their participation or chairing of committees. These payments are paid in four quarterly payments in the middle of each fiscal quarter. The Chairman of the Board is paid $15,000 annually. The Chairman of the Audit Committee is paid $12,000 annually. The Chairman of the Capital Markets/M&A Committee is paid $10,000 annually. The Chairman of the Compensation Committee is paid an annual fee of $8,000. An annual fee of $4,000 is paid for participation in the Compensation Committee and Capital Markets/M&A Committee and an annual fee of $6,000 is paid for participation on the Audit Committee. | |
(2) | Directors can receive an annual stock option grant of up to 12,500 shares of Daegis common stock. Eligibility is determined by the Board and is based on several factors, including the financial performance of the Company, the Director’s personal contribution to the Company and any other relevant factors or events. The stock option grant, if any, is generally made in May of each year and the exercise price shall be equivalent to the fair market value of the stock at the time of the option grant. Any such option grant will vest monthly over a period of 12 months. |
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The following table sets forth certain information with respect to our non-employee director compensation during the fiscal year ended April 30, 2012.
Director Compensation Table
Fees Earned or | Stock | Option | |||||
Paid in Cash | Awards | Awards | |||||
Name | ($) | ($) | ($) | ||||
Steven D. Whiteman (1) | 50,000 | 9,160 | (2) | ||||
Timothy P. Bacci (3) | 29,000 | 9,160 | (2) | ||||
Robert M. Bozeman (4) | 35,000 | 9,160 | (2) | ||||
Richard M. Brooks (5) | 37,000 | 9,160 | (2) | ||||
Tery R. Larrew (6) | 39,000 | 9,160 | (2) |
(1) | Mr. Whiteman has 55,000 shares of stock option awards outstanding as of April 30, 2012. | |
(2) | Represents the aggregate grant date fair value of options to purchase 5,000 shares of common stock granted on May 2, 2011 with an exercise price of $2.90 per share and options to purchase 7,500 shares of common stock granted on July 1, 2011 with an exercise price of $1.92 calculated in accordance with FASB Accounting Standards Codification Topic 718 – Stock Compensation. | |
(3) | Mr. Bacci has 30,500 shares of stock option awards outstanding as of April 30, 2012. | |
(4) | Mr. Bozeman has 38,000 shares of stock option awards outstanding as of April 30, 2012. | |
(5) | Mr. Brooks has 41,000 shares of stock option awards outstanding as of April 30, 2012. | |
(6) | Mr. Larrew has 48,000 shares of stock option awards outstanding as of April 30, 2012. |
Indemnification of Officer and Directors
Our Certificate of Incorporation (the “Certificate”) limits the liability of our directors to the maximum extent permitted by Delaware law. Delaware law provides that a corporation’s certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director for monetary damages for breach of their fiduciary duties as directors, except for liability for: (i) any breach of their duty of loyalty to the corporation or its stockholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or (iv) any transactions from which the director derived an improper personal benefit. Our bylaws call for us to indemnify our directors, executive officers, and trustees to the fullest extent permitted by law. We believe that such indemnification covers negligence and gross negligence. Our bylaws also permit us to secure insurance on behalf of any executive officer, director, employee or other agent for any liability arising out of his or her actions in such capacity (subject to certain exclusions), regardless of whether the bylaws permit indemnification.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, directors and persons who beneficially own more than ten percent (10%) of Daegis’s equity securities to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (“SEC”). Such persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports filed by them.
With the exception of a late Form 4 filing for Todd E. Wille and Mark Bygraves and based solely upon our review of such reports furnished to us and written representations from certain reporting persons, we believe that all other filing requirements applicable to our executive officers, directors and more than ten percent (10%) stockholders for the fiscal year ended April 30, 2012, were met.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 30, 2012 with respect to the beneficial ownership of our common stock by: (i) each member of our Board of Directors; (ii) each of our named executives; (iii) all of our directors and executive officers as a group; and (iv) each stockholder who is known to us to own beneficially more than 5% of our outstanding common stock.
Fully Diluted | ||||||||||||
Common Shares Owned (1) | Preferred Shares Owned (2) | (As Converted) (3) | ||||||||||
Number of | Percentage of | Number of | Percentage of | Number of | Fully Diluted | |||||||
Name of Beneficial Owner | Shares | Class | Shares | Class | Shares | Percentage | ||||||
Directors | ||||||||||||
Steven D. Whiteman (4) | 72,773 | * | * | 72,773 | * | |||||||
Timothy P. Bacci (5) (17) | 1,532,537 | 10.39% | 1,666,667 | 100% | 3,199,204 | 17.69% | ||||||
Robert M. Bozeman (6) | 41,125 | * | * | 41,125 | * | |||||||
Richard M. Brooks (7) | 47,825 | * | * | 47,825 | * | |||||||
Tery R. Larrew (8) | 73,623 | * | * | 73,623 | * | |||||||
Executive Officers | ||||||||||||
Todd E. Wille (9) | 482,790 | 3.21% | * | 482,790 | 2.89% | |||||||
Steven D. Bonham (10) | 141,781 | * | * | 141,781 | * | |||||||
Mark T. Bygraves (11) | 132,343 | * | * | 132,343 | * | |||||||
Duane V. George (12) | 131,861 | * | * | 131,861 | * | |||||||
Judson L. Holt (13) | 300,400 | 2.04% | * | 300,400 | 1.83% | |||||||
Kurt A. Jensen (14) | 2,023,043 | 13.66% | * | 2,023,043 | 12.28% | |||||||
Frank Verardi (15) | 94,255 | * | * | 94,255 | * | |||||||
All Directors and Executive Officers | ||||||||||||
as a group (12 persons) (16) | 5,074,356 | 32.11% | 1,666,667 | 100% | 6,741,023 | 35.23% | ||||||
5% Stockholders | ||||||||||||
BlueLine Partners, LLC (5) (17) | 1,532,537 | 10.39% | 1,666,667 | 100% | 3,199,204 | 17.69% | ||||||
319 Diablo Road, Suite 200 | ||||||||||||
Danville, CA 94526 | ||||||||||||
AWM Investment Company, Inc. (18) | 2,424,252 | 15.99% | * | 2,424,252 | 14.40% | |||||||
c/o Special Situations Funds | ||||||||||||
153 East 53rd St., 55th Floor | ||||||||||||
New York, NY 10022-4611 | ||||||||||||
The Jensen Revocable Trust (14) | 2,023,043 | 13.66% | * | 2,023,043 | 12.28% | |||||||
1420 Rocky Ridge Drive, Suite 380 | ||||||||||||
Roseville, CA 95661 | ||||||||||||
Don R. Carmignani (19) | 1,275,344 | 8.67% | * | 1,275,344 | 7.78% | |||||||
37 Magnolia Street | ||||||||||||
San Francisco, CA 94123 | ||||||||||||
Jurika Family Trust (20) | 1,153,934 | 7.84% | * | 1,153,934 | 7.04% | |||||||
42 Glen Alpine Rd. | ||||||||||||
Piedmont, CA 94611 |
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* | Less than 1% | |
(1) | Number of shares beneficially owned and the percentage of shares beneficially owned are based on 16,384,444 shares which is comprised of 14,717,777 shares of the Company’s common stock and 1,666,667 shares of the Company’s preferred stock outstanding as of June 30, 2012. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable, or will become exercisable within 60 days of June 30, 2012, are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table, 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. Unless otherwise indicated, the individuals in the table may be contacted in care of Daegis Inc., 1420 Rocky Ridge Drive, Suite 380, Roseville, CA 95661. | |
(2) | On June 30, 2011, the Company completed a $4.0 million private placement which included the issuance of 1,666,667 shares of preferred stock to BlueLine Capital, LLC. The preferred stock will automatically convert on a 1-for-1 basis into shares of common stock of the Company upon the earlier of the second anniversary of the financing, June 30, 2013, or the date on which the Company’s common stock has an average closing price above $4.00 per share during the preceding 30 trading days. The preferred stock includes an annual dividend of 10% payable in cash or stock at the Company’s option. The preferred stock has no other preferences. | |
(3) | The total number of shares that would be outstanding if all preferred shares were converted into common stock of the Company. See footnote 2. | |
(4) | Includes 48,125 shares subject to options held by Mr. Whiteman exercisable within 60 days of June 30, 2012. | |
(5) | Includes 33,625 shares subject to options held by Mr. Bacci exercisable within 60 days of June 30, 2012. Mr. Bacci also indirectly owns 1,495,025 as a managing director of BlueLine Capital, LLC. See note (17) below. | |
(6) | Includes 41,125 shares subject to options held by Mr. Bozeman exercisable within 60 days of June 30, 2012. | |
(7) | Includes 44,125 shares subject to options held by Mr. Brooks exercisable within 60 days of June 30, 2012. | |
(8) | Includes 41,125 shares subject to options held by Mr. Larrew exercisable within 60 days of June 30, 2012. | |
(9) | Includes 339,811 shares subject to options held by Mr. Wille exercisable within 60 days of June 30, 2012. | |
(10) | Includes 133,781 shares subject to options held by Mr. Bonham exercisable within 60 days of June 30, 2012. | |
(11) | Includes 117,343 shares subject to options held by Mr. Bygraves exercisable within 60 days of June 30, 2012. | |
(12) | Includes 124,518 shares subject to options held by Mr. George exercisable within 60 days of June 30, 2012. | |
(13) | Includes 28,343 shares subject to options held by Mr. Holt exercisable within 60 days of June 30, 2012. | |
(14) | Includes 88,127 shares subject to options held by Mr. Jensen exercisable within 60 days of June 30, 2012. Kurt A. Jensen, the Company’s eDiscovery Division President, beneficially owns The Jensen Revocable Trust along with his wife, Carolyn L. Jensen, who collectively are co-settlors, co-trustees, and co-beneficiaries of The Jensen Revocable Trust. Kurt A. Jensen and Carolyn L. Jensen share sole voting and investment power over all the foregoing shares. These shares were issued as part of the Company’s acquisition of Daegis in June 2010. Mr. Jensen had been the president and chief executive officer of Strategic Office Solutions, Inc. (dba Daegis). |
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(15) | Includes 44,866 shares subject to options held by Mr. Verardi exercisable within 60 days of June 30, 2012. | |
(16) | Includes 2,751,581 shares subject to warrants and options and exercisable within 60 days of June 30, 2012. | |
(17) | BlueLine Capital, LLC is the investment manager for a variety of private investment funds and is based in California. Timothy Bacci and Scott Shuda are the Managing Directors of BlueLine Partners, LLC and they manage BlueLine Capital Partners, L.P., BlueLine Capital Partners II, L.P., BlueLine Capital Partners III, L.P., BlueLine Capital Partners L.L.C., and BlueLine Capital Partners II, L.L.C. Mr. Bacci also directly owns 3,887 shares. See note (5) above. | |
(18) | AWM Investment Company, Inc. is a hedge fund management firm based in New York. The firm is owned by David Greenhouse and Austin Marxe. They manage the Special Situations Fund III, L.P., Special Situations Cayman Fund L.P., Special Situations Private Equity Fund, L.P., and Special Situations Tech. Fund, L.P. | |
(19) | Don R. Carmignani is a private investor and has sole voting and dispositive power over all the foregoing shares. | |
(20) | Consists of: (i) 1,098,934 shares of common stock held by Jurika Family Trust U/A 3/17/1989; and (ii) 55,000 shares of common stock held by William K. Jurika IRA. Mr. Jurika is a private investor and has sole voting and dispositive power over all the foregoing shares. |
27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Amounts Due from Officers, Directors and Principal Stockholders. Except for advances of reimbursable expenses, we have made no other loans to executive officers, directors, stockholders or other affiliates. Any such loan must be approved by a majority of those Board members who are independent of and have no interest in the transaction.
On June 30, 2011, the Company issued, through a $4.0 million private placement, 1,666,667 shares of Series G preferred stock to BlueLine Partners. The preferred stock will automatically convert on a 1-for-1 basis into shares of common stock of the Company upon the earlier of the second anniversary of the financing, June 30, 2013, or the date on which the Company’s common stock has an average closing price of $4.00 per share during the preceding 30 trading days. The preferred stock includes an annual dividend of 10% payable in cash or stock at the Company’s option. The preferred stock has no other preferences. One of the Company’s board members, Timothy P. Bacci, is a managing director of BlueLine Partners.
During fiscal 2012 the Company’s Board of Directors asked Mr. Timothy P. Bacci to review various operational, sales and marketing functions within the Company and to provide related recommendations to the Company based on the results of this review. For his services, Mr. Bacci earned $120,000 in fiscal 2012. Mr. Bacci is a member of the Company’s Board of Directors.
Director Independence. Four of our six directors are independent under the rules of the NASDAQ Marketplace. Only our CEO, Mr. Wille and Mr. Bacci, are not considered independent under such rules.
28
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
GRANT THORNTON LLP AS INDEPENDENT AUDITOR
FOR FISCAL YEAR 2013
The Company’s Audit Committee has appointed Grant Thornton LLP as the Company’s independent auditors for the fiscal year 2013. An affirmative vote of a majority of the outstanding shares of the Company present or represented by proxy and entitled to vote at the Annual Meeting, at which a quorum is present, will ratify the appointment of Grant Thornton as our independent auditors for the fiscal year 2013.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
Fees billed by our principal accountant, Grant Thornton LLP, for fiscal year 2012 and fiscal year 2011 audit services totaled approximately $270,000 and $342,000, respectively. The audit fees for fiscal year 2012 represent the amount billed to the Company as of the date of this Proxy Statement and are not inclusive of amounts that have not been settled and approved by the Audit Committee, which we expect to occur following the date of this Proxy Statement. In accordance with the SEC’s definitions and rules, audit fees represent fees for professional services for the audit of the Company’s consolidated financial statements included in our Annual Report on Form 10-K, for the review of the Company’s unaudited consolidated financial statements included in our quarterly reports on Form 10-Q, and for the review of registration statements and issuance of consents for services that are normally provided by the accountant in connection with statutory and regulatory filings, including the fiscal 2011 statutory audit required for our French subsidiary.
Audit-Related Fees
Our principal accountant, Grant Thornton LLP, had no other audit-related fees for fiscal year 2012 and fiscal year 2011. Audit-related fees are fees for assurance and related services that were reasonably related to the performance of the audit or review of our consolidated financial statements, including attestation services that are not required by statute or regulation.
Tax Fees
Our principal accountant, Grant Thornton LLP, had no tax fees for fiscal year 2012 and fiscal year 2011.
Other Fees
Our principal accountant, Grant Thornton LLP, had no other fees for fiscal year 2012 and fiscal year 2011. All other fees are fees for any services not included in the first two categories.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax services, and other services performed by the independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. All of the services provided by the independent auditor in fiscal 2012 and 2011 were pre-approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY’S INDEPENDENT AUDITOR.
29
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Any proposal to conduct business (other than nominations) at a meeting of stockholders that a stockholder desires to have included in our proxy materials for the 2013 annual meeting of stockholders must comply with the applicable rules and regulations of the SEC, including that any such proposal must be received by our Secretary at our principal office no later than May 1, 2013 and must otherwise comply with Rule 14a-8 under the Exchange Act and the applicable procedures set forth in our bylaws.
Our bylaws require a stockholder to give advance notice of any proposal to conduct business, or to present a nomination of one or more candidates for election to the Board of Directors, that the stockholder wishes to bring before a meeting of our stockholders. In general, for business proposals or nominations to be brought before an annual meeting by a stockholder, written notice of the stockholder proposal or nomination must be received by our Secretary during the period beginning 120 days and ending 90 days before the anniversary of the last annual meeting. However, if the date of the upcoming annual meeting is more than 30 days before or more than 60 days after the anniversary of the last annual meeting, notice must be received by the Secretary during the period beginning 120 days before the upcoming annual meeting and ending on the later of 90 days before the upcoming annual meeting or 10 days after the first public announcement of such meeting date.
If a stockholder desires to have a proposal to conduct business (other than nominations) included in our proxy materials for the 2013 annual meeting of our stockholders and desires to have such proposal brought before the same annual meeting, the stockholder must comply with the applicable rules and regulations of the SEC and the applicable procedures set forth in our bylaws. Any stockholder proposals should be sent to: Nominating and Governance Committee, c/o Secretary, 1420 Rocky Ridge Drive, Suite 380, Roseville, California, 95661.
Director Nominations
Under our bylaws, stockholder recommendations of nominees to the Board of Directors must also comply with the advance notice requirements in our bylaws, including the requirement that a stockholder notice must be delivered to or mailed and received by the Company not later than thirty (30) days prior to the annual meeting. To submit such recommendations not later than thirty (30) days prior to such meeting; however, in the event that less than forty (40) days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the date on which such notice of the date of such meeting was mailed or such public disclosure was made.
Any such recommendation must include the following information:
- the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated;
- a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;
- a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;
- such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board of Directors; and
- the consent of each nominee to serve as a director of the corporation if so elected.
Recommendations for director candidates should be sent to: Nominating and Governance Committee, c/o Secretary, 1420 Rocky Ridge Drive, Suite 380, Roseville, California, 95661.
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TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board of Directors intends to present or knows that others will present at this Annual Meeting is as set forth above. If any other matter or matters are properly brought before the meeting, or any adjournment thereof, it is the intention of the persons named in the accompanying form of proxy to vote the proxy on such matters in accordance with their best judgment.
Sincerely, | |
![]() | |
Todd E. Wille | |
Roseville, California | President and Chief Executive Officer |
August 27, 2012 |
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DIRECTIONS TO THE LOCATION OF THE MEETING
The meeting will be held at our corporate headquarters which is located at 1420 Rocky Ridge Drive, Suite 380, Roseville, CA 95661.
From Bay Area (heading east)
Take I-80 towards Reno (east).
Exit at Eureka Road in Roseville.
Turn right onto Eureka Road.
Turn left onto Rocky Ridge Drive.
From Sacramento Metropolitan Field (SMF) Airport
Exit the airport onto I-5 South.
Take I-80 exit towards Reno (east).
Exit at Eureka Road in Roseville.
Turn right onto Eureka Road.
Turn left onto Rocky Ridge Drive.
From Reno (heading west)
Take I-80 towards Sacramento (west).
Exit at Eureka Road/Taylor Road in Roseville.
Turn right onto Eureka Road.
Turn left onto Rocky Ridge Drive.
32
DAEGIS INC ATTN: Lisa Waddell 1420 ROCKY RIDGE DRIVE SUITE 380 ROSEVILLE, CA 95661 |
VOTE BY INTERNET - www.proxyvote.com |
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. |
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS |
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. |
VOTE BY PHONE - 1-800-690-6903 |
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. |
VOTE BY MAIL |
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
KEEP THIS PORTION FOR YOUR RECORDS |
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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For | Withhold | For All | |||
All | All | Except | |||
The Board of Directors recommends you vote FOR the following: | ¨ | ¨ | ¨ | ||
1. | Election of Directors | ||||
Nominees |
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | |
01 Steven D. Whiteman | 02 | Timothy P. Bacci | 03 | Robert M. Bozeman | 04 | Richard M. Brooks | 05 | Tery R. Larrew | |
06 Todd E. Wille |
The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | |||
2 | To ratify the appointment of Grant Thornton LLP as the Company's independent auditors for the fiscal year ending April 30, 2013. | ¨ | ¨ | ¨ | ||
NOTE: With discretionary authority, upon such other matters as may properly come before the Annual Meeting. At this time, the Board knows of no other matters to be presented at the meeting. |
For address change/comments, mark here. (see reverse for instructions) | ¨ | |||||
Yes | No | |||||
Please indicate if you plan to attend this meeting | ¨ | ¨ |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. |
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Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/are available at www.proxyvote.com. |
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Annual Meeting of Shareholders
September 27, 2012 9:00 AM
This proxy is solicited by the Board of Directors