SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
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[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
EXCALIBUR TECHNOLOGIES CORPORATION
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(Name of Registrant as Specified in Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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EXCALIBUR TECHNOLOGIES CORPORATION,
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Excalibur Technologies Corporation, a Delaware corporation ("Excalibur" or the
"Company"), will be held at The McLean Hilton Hotel located at 7920 Jones Branch
Drive, McLean, Virginia 22102, at 10:00 a.m. on Wednesday, July 23, 1997, for
the following purposes:
Proposal 1. To elect eight directors of the Company for terms
expiring at the 1998 Annual Meeting;
and to transact such other business as may properly come before the meeting or
any adjournment thereof.
The close of business on May 29, 1997 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting.
PLEASE SIGN, DATE AND MAIL YOUR PROXY IN THE ENVELOPE PROVIDED FOR YOUR
CONVENIENCE. YOU MAY REVOKE THIS PROXY AT ANY TIME AND, IF YOU ATTEND THE
MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
James H. Buchanan
Secretary
Dated: May 29, 1997
EXCALIBUR TECHNOLOGIES CORPORATION
-----------------------------
Annual Meeting of Shareholders
-----------------------------
PROXY STATEMENT
This Proxy Statement is being mailed to shareholders on or about June 10,
1997 in connection with the solicitation of proxies for use at the 1997 Annual
Meeting of Shareholders of Excalibur Technologies Corporation, a Delaware
corporation (the "Company"), to be held at the time and place and for the
purposes set forth in the accompanying Notice of Meeting. The Company's
principal executive offices are located at 1921 Gallows Road, Suite 200, Vienna,
Virginia 22182.
On May 29, 1997, there were outstanding 13,006,335 shares of common stock,
par value $.01 per share, each entitled to one vote. The Board of Directors has
fixed May 29, 1997 as the record date for the determination of the shareholders
entitled to notice of and to vote at the Meeting.
A form of proxy is enclosed for use at the Meeting. The proxy may be
revoked by a shareholder at any time prior to the exercise thereof, and any
shareholder present at the meeting may revoke his proxy thereat and vote in
person if he or she so desires. When such proxy is properly executed and
returned, the shares it represents will be voted at the meeting in accordance
with any instructions noted thereon. If no direction is indicated, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked prior to exercise) will be voted for the election of the nominees for
directors named herein (unless authority to vote is withheld) and in favor of
all other proposals stated in the Notice of Meeting and described in this Proxy
Statement.
The Company's Annual Report for the fiscal year ended January 31, 1997 is
enclosed with this Proxy Statement for each shareholder.
PROPOSAL 1
- ----------
ELECTION OF DIRECTORS
General
Eight individuals, who are members of the present Board of Directors, have
been nominated for election as directors of the Company until the next annual
meeting and until their respective successors are elected and qualified.
The persons named in the proxy, who have been designated by the
management, intend, unless otherwise instructed on the proxy card, to vote for
the election to the Board of Directors of the persons named below. If any
nominee should become unavailable to serve, the proxy may be voted for the
election of another person designated by the Board of Directors. The Board has
no reason to believe any of the persons named will be unable to serve if
elected. The affirmative vote of the holders of a plurality of the shares of
common stock voting at the meeting is necessary for the election of directors.
Information Concerning Directors and Nominees
Information regarding each nominee for director is set forth in the
following table.
Name Age Position
- ---- --- --------
Donald R. Keough 70 Chairman of the Board of Directors
Patrick C. Condo 40 President and Chief Executive
Officer, Director
Richard M. Crooks, Jr. 57 Director
John S. Hendricks 45 Director
W. Frank King III 57 Director
John G. McMillian 70 Director
Philip J. O'Reilly 59 Director
Shaun C. Viguerie 66 Director
-2-
Donald R. Keough has been Chairman of the Board of Directors and a Director of
the Company since June 1996. Mr. Keough has been an advisor to the Board of
Directors of the Coca-Cola Company since April 15, 1993, and Chairman of the
Board of Allen & Company Incorporated, a New York investment banking firm that
is the Company's largest shareholder, since April 15, 1993. Mr. Keough retired
as President, Chief Operating Officer and a Director of the Coca-Cola Company on
April 15, 1993, where he had been employed since 1950. From 1986 to 1993, he
also served as Chairman of the Board of Coca-Cola Enterprises, Inc., the world's
largest bottling system. Mr. Keough serves on the Board of Directors of Allen &
Company Incorporated, H.J. Heinz Company, The Washington Post Company, Home
Depot, Inc. and McDonald's Corporation.
Patrick C. Condo was named President and Chief Executive Officer in November
1995, and a Director in January 1996. Mr. Condo was President from May 1995 to
November 1995. He became Executive Vice President in January 1995 after serving
as the Director of Business Development from November 1992. From October 1987 to
November 1992, Mr. Condo held several manager level positions for Digital
Equipment Corporation's Image, Video and Voice Business Unit and Software
Business Group in New Hampshire.
Richard M. Crooks, Jr. has been a Director of the Company since June 1990 and
was Chairman of the Board from June 1990 to June 1996. Mr. Crooks has been
President of RMC Consultants, a financial advisory services firm, since June
1990. Mr. Crooks is a director of and consultant to Allen & Company
Incorporated. Mr. Crooks served as a Managing Director of Allen & Company
Incorporated for more than five years prior to June 1990. Mr. Crooks is a
director of Cypress Bioscience Inc., a biotechnology company engaged in
developing, manufacturing and marketing products for the treatment of
immune-related diseases and cancers.
John S. Hendricks was appointed a Director of the Company in May 1997. He has
been Chairman and Chief Executive Officer of Discovery Communications, Inc., a
privately-held, diversified media company, since he founded the company in 1982
in order to develop a new cable television service. The effort resulted in the
launch of the Discovery Channel in 1985, which has become one of the world's
largest cable television networks. Mr. Hendricks is a member of the Boards of
various cable television industry groups, educational institutions and other
organizations promoting natural history and science. Mr. Hendricks is Chairman
of the Board of Governors of the National Acadamy of Cable Programming.
W. Frank King III was elected a Director of the Company in June 1992. He is
presently President, Chief Executive Officer, and a Director of PSW
Technologies, Inc., a leading provider of technology for open systems computing.
From 1988 to November 1991, Dr. King was a Senior Vice President of Development
of Lotus Development Corporation. Prior to joining Lotus, Dr. King held various
positions with IBM over 19 years, the most recent as Vice President of
Development in its Entry Systems Division. Dr. King is a director of State of
the Art, Inc., a developer of high-end microcomputer accounting software;
SystemSoft Corporation, a software engineering company; Auspex, Inc., a computer
server manufacturer; and Natural Microsystems, Inc., a developer of telephony
products.
-3-
John G. McMillian was elected a Director in June 1996. Mr. McMillian owns a half
interest in Peter Hughes Diving Company, a charter company and Contender Boats,
Inc., a boat manufacturer. He was Chairman and Chief Executive Officer of
Allegheny & Western Energy Corporation, a natural gas production and
distribution company, from July, 1987 until July 1995, when the company was
sold. In October, 1986, Mr. McMillian purchased Burger Boat Company, Inc., a
boat manufacturer and served as its Chairman and Chief Executive Officer until
March 1989, when the company was sold. He was the founder and served as Chairman
and Chief Executive Officer of Northwest Energy Company, a major supplier of
natural gas, from 1973 to 1983. Mr. McMillian serves on the Board of Directors
of Sun Trust Miami, N.A.
Philip J. O'Reilly has been a Director of the Company since April 1988. Mr.
O'Reilly is a partner in the law firm of O'Reilly, Marsh, Kearney & Corteselli
P.C., in Mineola, New York. Mr. O'Reilly has been in private practice for more
than the past five years. Mr. O'Reilly is a director of IMRE Corporation, a
biotechnology company engaged in developing, manufacturing and marketing
products for the treatment of immune-related diseases and cancers.
Shaun C. Viguerie was elected a Director in June 1996. Mr. Viguerie is First
Vice President - Investments with J.C. Bradford & Co. in New Orleans, Louisiana,
a securities brokerage firm, where he has been employed for more than the past
five years. Mr. Viguerie has been in the securities industry for forty years. He
has been a member of the New York Stock Exchange, the Chicago Board of Trade,
the Chicago Mercantile Exchange, and other commodity exchanges.
Information Concerning the Board of Directors and its Committees
The Board of Directors held 6 meetings during the fiscal year ended
January 31, 1997; the Committees of the Board of Directors held 8 meetings.
Each incumbent director attended more than 75% of the aggregate number of
meetings of the Board of Directors and appropriate Committees held during fiscal
year 1997 except as follows. Mr. Keough did not attend one, and Mr. McMillian
did not attend two, of the three meetings of the Board of Directors held since
their election in June, 1996. Mr. McMillian attended both meetings of the Audit
Committee held since June, 1996.
The Board of Directors has established a number of Committees. The Audit
Committee, consisting of three directors (Mr. McMillian, Chairman, Dr. King and
Mr. O'Reilly) meets with the Company's management, including its Chief Financial
Officer and its independent accountants several times a year to discuss internal
controls and accounting matters, the Company's financial statements, and the
scope and results of the auditing programs of the independent accountants. The
Audit Committee met four times during fiscal 1997. The Compensation Committee,
comprising three directors (Mr. Crooks, Chairman, Mr. O'Reilly and Mr. Viguerie)
administers management compensation and makes recommendations in that regard to
the Board. The Compensation Committee met one time during fiscal 1997. The Stock
Option Plan Administration Committee comprising two directors (Mr. Crooks and
Mr. O'Reilly) administers the Company's Stock Option Plans. The Stock Option
Plan Administration Committee met 3 times during fiscal 1997.
-4-
Each non-employee director, who is not an officer of the Company, is paid
$5,000 for each meeting of the Board or its Committees they attend, in person or
by telephone, up to a maximum of $20,000 per fiscal year. Mr. Keough and Mr.
Crooks are not paid the foregoing fees. All directors are reimbursed for their
expenses in attending meetings of the Board or of its Committees. Each
non-employee director receives options to purchase 25,000 shares of common stock
of Excalibur upon joining the Board and additional options to purchase 25,000
shares of common stock of Excalibur after each subsequent five-year period of
service as a member of the Board. The Chairman may be granted additional options
to purchase 25,000 shares of common stock of Excalibur upon being elected
Chairman and after each subsequent five-year period of service. Mr. Keough has
not been granted any stock options.
EXECUTIVE COMPENSATION
Identification of Executive Officers
Each year, the Board of Directors appoints the executive officers of the Company
to serve until the next Annual Meeting of Shareholders and until their
successors have been duly appointed and qualified. The following information
indicates the position and age of the current executive officers of the Company
and their business experience. There are no family relationships between any of
the executive officers of the Company.
Name Age Position
- ---- --- --------
Patrick C. Condo 40 President and Chief Executive
Officer
James H. Buchanan 41 Vice President, Chief Financial
Officer, Treasurer and Secretary
Daniel C. Agan 44 Vice President, Worldwide Marketing
Kamran Khan 33 Vice President, Worldwide Sales
Paul E. Nelson 34 Vice President, Text Products
Gordon K. Short 44 Vice President and General Manager,
Visual Business Group
-5-
See the discussion included in the preceding section for the business
experience of Mr. Condo.
James H. Buchanan joined the Company as Chief Financial Officer in September
1995. Mr. Buchanan was elected Secretary and Treasurer of the Company on
November 17, 1995. From March 1991 to August 1995, Mr. Buchanan was Vice
President, Controller and Treasurer of Legent Corporation, a software
development company. Prior to that, he held several financial management
positions with Norfolk Southern Corporation and PepsiCo. Mr. Buchanan is a
certified public accountant.
Daniel C. Agan joined the Company as Vice President, Worldwide Marketing, in
September 1996. From 1991 through 1996, Mr. Agan was president and chief
executive officer of Agan Associates, Limited, a marketing consulting firm with
experience providing executive-level service to a diverse range of clients in
the technology, on-line and broadcasting industries. Prior to this, Mr. Agan
spent fifteen years with the Public Broadcasting Service (PBS) where he served
in a variety of capacities, most notably as Senior Vice President for National
Programming and Promotion.
Kamran Khan has held several sales management positions since joining the
Company in September 1993. Since August 1995, Mr. Khan has served as general
manager of the Company's international sales operation and wholly-owned
subsidiary, Excalibur Technologies, Ltd., that is located in the United Kingdom.
In May 1997, Mr. Khan was appointed Vice President, Worldwide Sales. Prior to
joining the Company, Mr. Khan held various positions, including regional
business manager, with PAFEC Limited, a leading firm in the United Kingdom
involved with the development and implementation of computer-aided engineering
and engineering document management software systems.
Paul E. Nelson was named the Company's Vice President, Text Products, in July,
1995, in connection with the Company's acquisition of ConQuest Software, Inc.
("ConQuest"), a company that Mr. Nelson co-founded in 1990. Mr. Nelson was the
Senior Vice President of Product Development and a Director of ConQuest.
Gordon K. Short joined the Company in December 1996 as Vice President, Business
Development. In May 1997, he was named Vice President and General Manager of the
Company's newly-formed Visual Business Group. From 1990 to 1996, Mr. Short held
several marketing and business development positions with Hitachi, including
Senior Director of New Business Development from 1995 to 1996 responsible for
the creation and market introduction of a line of open system products. Prior to
Hitachi, Mr. Short held various engineering and executive-level positions with
several technology firms, including Sun Microsystems, where Mr. Short was
Manager of the Strategic Industry Partners Program from 1986 to 1990.
Summary Compensation Table
The following table presents the compensation paid by the Company, for
each of the three years in the period ended January 31, 1997, to (1) the Chief
Executive Officer, (2) the three executive officers at January 31, 1997 with
total compensation for fiscal 1997 in excess of $100,000, and (3) a former
executive officer of the Company who earned compensation in excess of $100,000
during fiscal 1997. Mr. Keough, the Chairman of the Company, does not receive a
salary or any cash compensation from the Company.
-6-
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities
Annual Restricted Under- Other
Compen- Stock lying LTIP Compen-
Name and Principal Fiscal sation Award Options/ Payouts sation
Position Year Salary ($) Bonus ($) ($) ($) SARs(#) ($) ($)
- -------- ---- ---------- --------- --- --- ------- --- ---
Patrick C. Condo 1997 200,000 46,200 -- -- -- -- --
Chief Executive 1996 145,833 74,250 -- -- 200,000 -- 131,862 (1)
Officer and President 1995 90,000 56,037 -- -- 75,000 -- --
Edwin R. Addison 1997 150,000 23,925 -- -- -- -- 1,317 (3)
Executive Vice 1996 86,250 76,250 -- -- 40,000 -- --
President (2)
James H. Buchanan 1997 155,688 34,650 -- -- -- -- 1,395 (5)
Vice President, Chief 1996 57,955 30,000 -- -- 100,000 -- 50,000 (5)
Financial Officer,
Secretary and
Treasurer (4)
John T. Cannington, Jr. 1997 107,955 89,166 -- -- 40,000 -- --
Vice President,
Worldwide Sales (6)
Paul E. Nelson 1997 150,000 34,650 -- -- -- -- --
Vice President, 1996 86,250 33,000 -- -- 84,750 -- --
Text Products (7)
<FN>
(1) This amount includes reimbursed relocation payments of $78,194 and
reimbursed taxes $53,668.
(2) Mr. Addison, who joined the Company on July 20, 1995 when the Company
acquired ConQuest Software, Inc., resigned from his positions as Executive
Vice President and Director, effective September 30, 1996.
(3) This amount represents the reported value of a quota club trip attended by
the officer's spouse.
(4) Mr. Buchanan joined the Company on September 13, 1995.
(5) Other compensation includes the reported value of a quota club trip
attended by the officer's spouse in 1997, and includes reimbursed
relocation costs in 1996.
(6) Mr. Cannington joined the Company on May 13, 1996, and resigned as an
employee on May 1, 1997.
(7) Mr. Nelson joined the Company on July 20, 1995 when the Company acquired
ConQuest Software, Inc.
</FN>
-7-
Option Grants in Last Fiscal Year
Potential Realizable
Individual Grants Value at Assumed
----------------- Annual Rates of
% of Total Stock Price
Options Appreciation for
Granted to Exercise Option Term
Options Employees in or Base Expiration -----------
Name Granted (#) Fiscal Year Price Date 5% ($) 10%($)
- ---- ----------- ----------- ----- ---- ------ ------
Patrick C. Condo -- -- -- -- -- --
Edwin R. Addison -- -- -- -- -- --
James H. Buchanan -- -- -- -- -- --
John T. Cannington, Jr.(2) 40,000 (1) 8.5% $20.00 5/12/06 503,200 1,274,800
Paul E. Nelson -- -- -- -- -- --
<FN>
(1) These options vest in equal 12-1/2% increments every six months.
(2) Mr. Cannington resigned as an employee of the Company on May 1, 1997.
</FN>
-8-
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the Money
Options/SARS Options/SARS
Shares at Fiscal at Fiscal
Name Acquired Year-End (#) Year-End ($)
---- on Value Exercisable/ Exercisable/
Exercise(#) Realized ($) Unexercisable Unexercisable(1)
----------- ------------ ------------- ----------------
Patrick C. Condo -- -- 300,000 $317,238/$317,662
121,250/178,750
Edwin R. Addison (2) -- -- 192,526 $1,814,014/$0
167,526/25,000
James H. Buchanan -- -- 100,000 $0/$0
25,000/75,000
John T. Cannington, Jr.(3) -- -- 40,000 $0/$0
5,000/35,000
Paul E. Nelson -- -- 187,557 $1,215,920/$0
134,588/52,969
<FN>
(1) The closing price of the Company's common stock on January 31, 1997, the
last trading day of the Company's fiscal year, was $13.25 per share.
(2) Mr. Addison resigned his positions as Executive Vice President and Director
on September 30, 1996.
(3) Mr. Cannington resigned as an employee on May 1, 1997.
</FN>
-9-
Report of the Compensation Committee
The following is the Report of the Compensation Committee of the Board of
Directors, describing the compensation policies and rationale applicable to the
Company's executive officers with respect to the compensation paid to such
executive officers for the fiscal year ended January 31, 1997 (the information
contained in the report shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission (SEC) nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the Securities Act), or the Securities
Exchange Act of 1934, as amended (the Exchange Act), except to the extent that
the Company specifically incorporates it by reference into such filing):
As members of Compensation Committee, it is our duty to set compensation
policies applicable to the Company's executive officers and to evaluate the
performance of the Company's executive officers.
The compensation policy of the Company is that a substantial portion of the
annual compensation of each executive officer should relate to and be contingent
upon the performance of the Company, as well as the individual contribution of
each executive officer. Under the Company's bonus scheme, bonuses are paid based
upon the Company attaining certain sales, expense and profitability goals and on
each officer's individual contribution to the Company's attainment of such
goals.
Mr. Condo's base salary for the fiscal year ended January 31, 1997 was
$200,000. Mr. Condo's salary was determined by negotiation between Mr. Condo and
the Company. Mr. Condo was paid $46,200 for the achievement of certain goals
during fiscal year 1997. Forty percent of Mr. Condo's potential bonus was based
on the achievement of quarterly revenue goals; twenty percent of his potential
bonus was based on the achievement of profitability goals and forty percent was
awarded at the discretion of the Compensation Committee of the Board of
Directors.
During fiscal 1997, the Committee also considered stock option grants to
each of the executive officers of the Company. If the officer received stock
options, it was based on his responsibilities and relative position in the
Company. These grants were approved by the Stock Option Plan Administration
Committee which includes Mr. Crooks and Mr. O'Reilly.
No member of the Compensation Committee is a former or current officer or
employee of the Company or any of its subsidiaries.
Compensation Committee: Richard M. Crooks, Jr., Chairman
Philip J. O'Reilly
Shaun C. Viguerie
-10-
Compensation Committee Interlocks and Insider Participation
Richard M. Crooks, Jr., is a director of and consultant to Allen & Company
Incorporated ("Allen"). In March, 1996, the Company completed a private
placement of 350,000 shares of its shares at a price of $25.00 per share. Allen
served as placement agent and was paid a fee of $350,000.
Jay H. Diamond, who resigned as a Director of the Company in October,
1996, served as Chairman of the Compensation Committee prior to his resignation.
Mr. Diamond was a member of the law firm of Tenzer Greenblatt LLP, New York, New
York ("Tenzer"), which performed legal services in the fiscal year ended January
31, 1997. The fees paid to Tenzer did not exceed 5% of such firm's gross
revenues for its last full fiscal year.
Employment Agreements
On July 20, 1995, the Company entered into Employment Agreements with
Edwin R. Addison and Paul E. Nelson, the co-founders of ConQuest Software, Inc.
("ConQuest"), in connection with the Company's acquisition of ConQuest. Each
Employment Agreement includes a two-year term that expires on July 20, 1997.
Pursuant to his Employment Agreement, Mr. Addison served as Executive Vice
President of the Company until he resigned his position on September 30, 1996,
at an annual salary of $150,000. In accordance with the requirements of
Amendment Number One to the Employment Agreement, the Company is continuing to
pay Mr. Addison his salary through July 20, 1997. Mr. Addison is eligible to
receive additional incentive compensation through July 20, 1997 upon the
achievement of certain goals by the Company. Mr. Addison was paid incentive
compensation of $23,925 for the fiscal year ended January 31, 1997. Pursuant to
his Employment Agreement Mr. Addison received options to purchase 40,000 shares
of common stock of the Company at an exercise price of $15.23 per share in July,
1995.
Mr. Nelson, Vice President, Text Products, is paid an annual salary of
$150,000 in accordance with the terms of his Employment Agreement. Mr. Nelson is
eligible to receive additional incentive compensation based on the achievement
of certain personal and Company goals. Mr. Nelson earned incentive compensation
of $34,650 during the fiscal year ended January 31, 1997. Pursuant to his
Employment Agreement, Mr. Nelson was awarded options to purchase 84,750 shares
of common stock of the Company in July, 1995 at an exercise price of $15.23 per
share.
-11-
Performance Graph
The following graph is a comparison of the cumulative total return to
shareholders of the Company's Common Stock at January 31, 1997 since February 1,
1992 to the cumulative total return over such period of (i) the NASDAQ Stock
Market-U.S., and (ii) the Standard & Poor's High Tech Composite, assuming an
investment in each of $100 on February 1, 1992 and the reinvestment of
dividends. The information contained in the Performance Graph shall not be
deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
(Cumulative Total Return graph appears here, plot points are as follows)
CUMULATIVE TOTAL RETURN
Fiscal Year Ended January 31,
--------------------------------------------
1992 1993 1994 1995 1996 1997
Excalibur Technologies
Corporation EXCA 100 74 68 44 165 78
NASDAQ Stock Market-US INAS 100 113 130 124 175 230
Standard & Poor's
Technology Sector ITES 100 105 129 143 212 329
-12-
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of April 30, 1997, information
concerning the ownership of Common Stock of the Company of all persons known to
the Company to beneficially own 5% or more of the Company's Common Stock, each
director of the Company, and all directors and executive officers of the Company
as a group.
Amount and Nature Percent
Name and Address of Beneficial of Class
of Beneficial Owner Ownership (1) Owned
- ------------------- ------------- -----
Allen & Company Incorporated 3,225,846 (2)(3) 24.8%
711 Fifth Avenue
New York, NY 10022
Husic Capital Management 1,009,992 (4) 7.9%
555 California Street, Suite 2900
San Francisco, California 94104
Donald R. Keough 30,000 (5) *
Patrick C. Condo 157,500 (6) 1.2%
Richard M. Crooks, Jr. 364,750 (7) 2.8%
John S. Hendricks -- (8) --
W. Frank King III 13,000 (9) *
John G. McMillian 40,000 (10) *
Philip J. O'Reilly 30,000 (11) *
Shaun C. Viguerie 52,710 (12) *
All directors and executive 1,079,809 (13) 8.2%
officers as a group (13 persons)
<FN>
* Represents less than one percent of the outstanding common stock.
(1) To the Company's knowledge, each person listed has sole voting and
investment power as to the shares indicated, except as described below.
(2) Does not include shares owned by persons, including Messrs. Keough and
Crooks and entities which, together with Allen & Company Incorporated, may
be considered a "group," as such term is defined by Section 13(d) of the
Securities Exchange Act of 1934, because many of these persons or entities
are Allen stockholders, officers, directors or relatives of the foregoing
(as reported on Schedule 13D filed with the SEC on April 8, 1994). No
person or entity included in this possible "group," with the exception of
Allen & Company Incorporated, owns 5% or more of the outstanding common
stock.
-13-
(3) Includes 271,800 shares of common stock issuable upon conversion of 27,180
shares of the Company's cumulative convertible preferred stock.
(4) Number of shares reported on Amendment #1 to Schedule 13G filed with the
SEC on February 5, 1997.
(5) Does not include shares owned by Allen & Company Incorporated, of which Mr.
Keough is Chairman of the Board, and as to which shares Mr. Keough
disclaims beneficial ownership.
(6) Includes (a) 10,000 shares of common stock owned beneficially but not of
record upon exercise of stock options at a price of $12.40 per share
expiring November 13, 2002; (b) 13,125 shares of common stock owned
beneficially but not of record upon exercise of stock options at a price of
$11.64 per share, expiring January 4, 2004; (c) 46,875 shares of common
stock owned beneficially but not of record upon exercise of stock options
at a price of $6.34 per share, expiring December 6, 2004; (d) 50,000 shares
of common stock owned beneficially but not of record, issuable upon
exercise of stock options at a price of $12.41 per share, expiring June 2,
2005; and (e) 37,500 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options at a price of $15.97 per
share expiring October 31, 2005.
(7) Includes (a) 50,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of the Company at a price
of $16.10 per share expiring June 28, 2000, and (b) 50,000 shares of common
stock issuable upon exercise of stock options of the Company at a price of
$20.56 per share expiring November 26, 2005. Does not include shares owned
by Allen & Company Incorporated, of which Mr. Crooks is a director and as
to which shares Mr. Crooks disclaims beneficial ownership.
(8) Mr. Hendricks was appointed as a Director of the Company in May 1997.
(9) Includes 13,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of the Company at a price
of $12.50 per share, expiring July 2, 2002.
(10) Includes (a) 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of the Company at a price
of $22.50 per share, expiring June 27, 2006, and (b) 10,000 shares of
common stock owned beneficially but not of record, issuable upon exercise
of stock options of the Company at a price of $14.00 per share, expiring
October 27, 2006.
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(11) Includes 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of the Company at a price
of $13.00 per share expiring March 12, 2003.
(12) Includes (a) 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of the Company at a price
of $22.50 per share expiring June 27, 2006, and (b) 510 shares owned
beneficially by Mr. Viguerie's spouse, as to which shares Mr.
Viguerie disclaims beneficial ownership.
(13) Includes 458,320 shares of common stock owned beneficially but not of
record, issuable upon the exercise of options to purchase common stock of
the Company.
</FN>
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Certain Relationships and Related Transactions.
Donald R. Keough, the Chairman of the Board of Directors of the Company,
is the Chairman of the Board of Allen & Company Incorporated ("Allen"). Richard
M. Crooks, Jr., a director of the Company, is a director of and consultant to
Allen.
In March, 1996 the Company completed a private placement of 350,000
shares of its common stock at a price of $25.00 per share. Allen served as
placement agent and was paid a fee of $350,000.
The Company's policy is that it will not make loans to, or enter into
other transactions with directors, officers or affiliates unless such loans or
transactions are approved by a majority of the Company's independent
disinterested directors, may reasonably be expected to benefit the Company, and
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties. The Company believes that the transactions set forth
herein were made on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties.
On January 11, 1992, the Company entered into an Employment Agreement with
J. M. Kennedy, which was subsequently amended in February 1993, September 1993,
and February 1995 (as amended, the Employment Agreement). The Employment
Agreement provided that Mr. Kennedy serve as Chief Executive Officer of the
Company until February 1, 1997 for which he would be paid an annual salary of
$200,000, and would be eligible to receive additional incentive compensation for
achieving performance goals set by the Compensation Committee of the Board of
Directors. Mr. Kennedy suffered a stroke in August, 1995, and as a consequence
his employment was terminated in November, 1995. Mr. Kennedy resigned as a
director of the Company in October 1996. Pursuant to the terms of his Employment
Agreement, Mr. Kennedy was paid $200,000 for the fiscal year ended January 31,
1997; he received no incentive compensation pay for this fiscal period.
See also "Compensation Committee Interlocks and Insider Participation" above.
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Description of the 1989 Incentive Plan
In September 1989, the Company adopted, and its shareholders approved,
the 1989 Incentive Plan (the "1989 Plan") which authorized the granting of
options to purchase shares of the Company's common stock, and other forms of
incentive compensation, in order to attract and retain personnel who possess a
high degree of competence, experience and motivation. At present, options to
purchase up to 3,450,000 shares may be granted pursuant to the 1989 Plan,
including the 1,000,000 shares authorized by the Company's shareholders in June,
1996.
The 1989 Plan provides for the issuance of incentive stock options within
the meaning of Section 422A of the Internal Revenue Code and non-qualified stock
options, as well as stock appreciation rights. All employees, including officers
and directors who are also employees, are eligible to be granted incentive stock
options under the 1989 Plan. Non-qualified stock options may be granted under
the 1989 Plan to employees or to other persons who perform substantial services
for or on behalf of the Company, including officers and directors who are not
members of the Stock Option Plan Administration Committee of the Board of
Directors (the "Committee"). Options are not transferable by the optionee, other
than by will or the laws of descent and distribution, and are exercisable during
the optionee's lifetime only by the optionee.
The 1989 Plan is currently administered by the Committee. Subject to the
terms of the 1989 Plan, the Committee has the authority to determine all terms
and provisions under which stock options are granted under the 1989 Plan,
including determining the individuals to whom options may be granted, the
exercise price and number of shares subject to each option, the time or times
during which all or a portion of each option may be exercised and certain other
terms of each option. The maximum term of options granted under the 1989 Plan is
ten years.
Under the Company's 1989 Plan, incentive stock options have been granted
to officers and key employees of the Company to purchase shares of the common
stock at a purchase price equal to the fair market value of the common stock on
the date of grant. The Committee has the power, when and to the extent it deems
appropriate and with the consent of optionees, to substitute outstanding options
with replacement options at a lower exercise price. Options granted and
outstanding under the 1989 Plan vest over a period of up to four years. The 1989
Plan provides that optionees may be granted stock appreciation rights ("SARs")
at the discretion of the Board of Directors. No SARs have been granted to date
under the 1989 Plan. The vesting schedule of outstanding options granted under
the 1989 Plan would accelerate in the event of the occurrence of certain events
constituting a change in control of the Company.
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Upon termination of an employee for cause, such employee's stock options
will terminate. If the employee is involuntarily terminated without cause, his
stock options will be exercisable for three months following termination or
until the end of the option period, whichever is shorter. Upon the disability or
retirement of the employee, stock options will be exercisable within the lesser
of the remainder of the option period or one year from the date of disability or
retirement. Upon the death of an employee, stock options will be exercisable by
the deceased employee's representative within the lesser of the remainder of the
option period or one year from the date of the employee's death. Unless
otherwise determined by the Committee, only options which are exercisable on the
date of termination, death, disability or retirement may be subsequently
exercised. Options granted to non-employees including directors do not terminate
upon termination of such persons' relationship with the Company.
The 1989 Plan may be amended by the Board of Directors, except that the
Board may not, without the approval of the Company's stockholders, increase the
number of shares available for distribution, decrease the option price of a
stock option below 100% of the fair market value at grant, change the pricing
rule applicable for stock purchase rights, change the class of employees
eligible to receive awards under the 1989 Plan or extend the term of any option
award.
Description of the 1995 Stock Option Plan
The 1995 Stock Option Plan authorizes the granting of stock options and
other forms of incentive compensation to purchase up to 400,000 shares of the
Company's common stock in order to attract and retain personnel who possess a
high degree of competence, experience and motivation. The terms of the 1995
Stock Option Plan are identical to the 1989 Stock Option Plan described above,
except that the 1995 Stock Option Plan does not provide that optionees may be
granted stock appreciation rights. The 1995 Stock Option Plan is administered by
the Committee.
Description of the Stock Purchase Plan
In June 1996, the shareholders approved the Stock Purchase Plan (the
"Stock Plan") for the purpose of encouraging eligible employees to acquire
shares of the Company's Common Stock. All active employees of the Company are
eligible to participate. The aggregate number of shares of Common Stock which
may be purchased under the Stock Plan shall not exceed 250,000, subject to
adjustment in the event of stock dividends, stock splits, combination of shares,
recapitalizations, or other changes in the outstanding Common Stock.
The Company makes grants of options on February 1 and/or August 1 of each
year the Stock Plan is in effect or on such other designated date. Each eligible
employee on a date of exercise is entitled to purchase shares of Common Stock at
a purchase price equal to 85% of the closing sale price of shares of Common
Stock in the over-the-counter market on the applicable date of exercise. Options
are exercised on April 30, July 31, October 31 and January 31 of each fiscal
year.
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Payment for shares of Common Stock purchased under the Stock Plan is made
by authorized payroll deductions from an eligible employees' eligible
compensation. Eligible employees who elect to participate in the Plan designate
that a stated whole percentage equaling at least 1%, but no more than 10% of
eligible compensation be deducted. No participant in the Stock Plan is permitted
to purchase Common Stock under the Stock Plan at a rate that exceeds $25,000 in
fair market value of Common Stock, determined at the time options are granted,
for each calendar year.
It is intended that the Stock Plan constitutes an "employee stock purchase
plan" under the provisions of Section 423 of the Code. No Federal income tax
liability results from the grant or exercise of an option to purchase shares of
Common Stock pursuant to the Stock Plan, although amounts deducted from payroll
are included in an employee's compensation as ordinary income.
The Board of Directors shall have the right to terminate the Stock Plan or
any offering at any time for any reason. The Stock Plan is anticipated to
continue in effect through July 31, 2001.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 and regulations of
the SEC thereunder require the Company's executive officers and directors, and
persons who own more that ten percent of a registered class of the Company's
equity securities, to file reports of initial ownership and changes in ownership
with the SEC. Based solely on its review of copies of such forms received by the
Company, or on written representations from certain reporting persons that no
other reports were required for such persons, the Company believes that, during
or with respect to the period from February 1, 1996 to January 31, 1997, all of
the Section 16(a) filing requirements applicable to its executive officers,
directors and ten percent shareholders were complied with on a timely basis.
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OTHER MATTERS
Expenses of Solicitation
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be borne
by the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers and employees of the Company, by personal interview,
telephone and telegraph. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material and annual reports to the beneficial owners of stock held of record by
such persons, and the Company will reimburse them for reasonable out-of-pocket
and clerical expenses incurred by them in connection therewith.
Discretionary Authority
The Annual Meeting is called for the specific purposes set forth in the
Notice of Meeting and discussed above, and also for the purpose of transacting
such other business as may properly come before the Meeting. At the date of this
Proxy Statement, the only matters which management intends to present, or is
informed or expects that others will present for action at the Meeting, are
those matters specifically referred to in such notice. As to any matters which
may come before the Meeting other than those specified above, the proxy holders
will be entitled to exercise discretionary authority.
By Order of the Board of Directors,
/s/James H. Buchanan
--------------------
James H. Buchanan
Secretary
Dated: Vienna, Virginia
May 29, 1997
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