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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Caere Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CAERE CORPORATION
100 COOPER COURT
LOS GATOS, CALIFORNIA 95030
April 15, 1996
Dear Stockholder:
On behalf of Caere Corporation (the "Company"), I cordially invite you
to attend the Annual Meeting of Stockholders to be held at 9:00 a.m. on Tuesday,
May 14, 1996, at The Toll House Hotel, 140 South Santa Cruz Avenue, Los Gatos,
California. At the meeting, stockholders will be asked to elect one person to
the Company's Board of Directors to serve for a three-year term expiring on the
date of the Company's 1999 Annual Meeting of Stockholders, to approve amendments
to the 1992 Non-Employee Directors' Stock Option Plan and the 1981 Incentive and
Supplemental Stock Option Plans and to ratify the selection of KPMG Peat Marwick
LLP as the Company's independent auditors for 1996. The accompanying Notice and
Proxy Statement describes these proposals. We urge you to read this information
carefully.
The Company's Board of Directors believes that a favorable vote on each
of the matters to be considered at the meeting is in the best interests of the
Company and its stockholders and unanimously recommends a vote "FOR" each such
matter. Accordingly, we urge you to review the accompanying material carefully
and to return the enclosed proxy card promptly.
The directors and officers of the Company hope that as many stockholders
as possible will be present at the meeting. Because the vote of each stockholder
is important, we ask that you sign, date and return the enclosed proxy card in
the envelope provided, whether or not you now plan to attend the meeting. This
will not limit your right to change your vote at the meeting or to attend the
meeting.
We appreciate your cooperation and interest in the Company. To assist us
in preparation for the meeting, please return your proxy card at your earliest
convenience.
Sincerely yours,
ROBERT G. TERESI
Chairman of the Board and
Chief Executive Officer
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CAERE CORPORATION
100 COOPER COURT
LOS GATOS, CALIFORNIA 95030
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TO BE HELD ON MAY 14, 1996
To the Stockholders of Caere Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Caere Corporation, a Delaware corporation (the "Company"),
will be held on Tuesday, May 14, 1996, at 9:00 a.m., local time, at The Toll
House Hotel, 140 South Santa Cruz Avenue, Los Gatos, California, for the
following purposes:
1. To elect one director of the Company to serve for the ensuing
three years until the Company's 1999 Annual Meeting of Stockholders and until
his successor is elected and qualified;
2. To approve the 1992 Non-Employee Directors' Stock Option Plan, as
amended, to (i) increase the number of shares that may be issued under the Plan
from 130,000 to 230,000, an increase of 100,000 shares; (ii) increase the size
of automatic grants made under the Plan; (iii) provide for full vesting of
options under certain circumstances; and (iv) make the change of control
definition in the Plan similar to that used in the Company's Executive Officers'
Change-of-Control Severance Plan;
3. To approve the 1981 Incentive and Supplemental Stock Option
Plans, as amended, to (i) increase the number of shares that may be issued under
the Plans from 3,520,000 to 3,595,000, an increase of 75,000 shares; and (ii)
add provisons with respect to Section 162(m) of the Internal Revenue Code of
1986, as amended.
4. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1996; and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors of the Company has fixed the close of business on
April 5, 1996, as the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting and at any adjournment thereof.
By order of the Board of Directors
Blanche M. Sutter, Secretary
Los Gatos, California
April 15, 1996
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE-PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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CAERE CORPORATION
100 COOPER COURT
LOS GATOS, CALIFORNIA 95030
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board of Directors" or the "Board") of Caere Corporation, a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to be
held on May 14, 1996, at 9:00 a.m., local time (the "Annual Meeting"), or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting. The Annual Meeting will be held at
The Toll House Hotel, 140 South Santa Cruz Avenue, Los Gatos, California.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. The Company
has engaged the firm of D. F. King & Co., Inc. to assist the Company in the
distribution and solicitation of proxies and has agreed to pay D. F. King & Co.,
Inc. a fee of $5,000 plus expenses for its services. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of the Company's common stock (the
"Common Stock") beneficially owned by others to forward to such beneficial
owners. The Company may reimburse persons representing beneficial owners of
Common Stock for their costs of forwarding solicitation materials to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram or personal solicitation by directors, officers or other
employees of the Company and by D. F. King & Co., Inc. No additional
compensation will be paid to directors, officers or other employees for such
services.
The Company intends to mail this proxy statement and accompanying proxy
on or about April 15, 1996, to all stockholders entitled to vote at the Annual
Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
5, 1996, will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 5, 1996, the Company had outstanding and entitled to
vote 13,323,432 shares of Common Stock. Each holder of record of Common Stock on
such date will be entitled to one vote for each share held on all matters to be
voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
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REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 100 Cooper
Court, Los Gatos, California 95030, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
Annual Meeting and voting in person. Attendance at the meeting will not, by
itself, revoke a proxy.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and Bylaws provide that the
Board of Directors shall be divided into three classes having staggered terms of
three years each, with each class consisting, as nearly as possible, of
one-third of the total number of directors. Vacancies on the Board may be filled
by persons elected by a majority of the remaining directors or by the
affirmative vote of the holders of a majority of the Company's outstanding
capital stock. A director elected to fill a vacancy (including a vacancy created
by an increase in the size of the Board of Directors) shall serve for the
remainder of the full term of the class of directors in which the vacancy
occurred and until such director's successor is elected and qualified.
The Company's Bylaws presently authorize a Board of Directors composed
of four directors. Thus, the Board is presently divided into three classes, two
of which have one director and one of which has two directors. The class whose
term of office expires at the Annual Meeting consists of one director. One of
the purposes of the Annual Meeting is the election of one director to this
class, such director to serve until the 1999 Annual Meeting of Stockholders and
until his successor is elected and had qualified, or until such director's
earlier death, resignation or removal. The nominee for election to this class is
currently a director of the Company whose term expires at the 1997 Annual
Meeting, but who has agreed to resign from such class, effective at the 1996
Annual Meeting, in order to be nominated for election to this class.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the nominee named below. In the event that the nominee should be unavailable
for election as a result of an unexpected occurrence, such shares will be voted
for the election of such substitute nominee as management may propose. The
individual nominated for election has agreed to serve if elected, and management
has no reason to believe that the nominee will be unable to serve.
Set forth below is biographical information for the individual nominated
and for each person whose term of office as a director will continue after the
Annual Meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 1999 ANNUAL MEETING
JAMES K. DUTTON
Mr. Dutton, age 63, has been a director of the Company since 1979. He is
currently a consultant and private investor. From 1991 to May 1994, Mr. Dutton
was a consultant to and President of Andor America Corporation, a distributor of
high end mainframe computer equipment and related software. From July 1988 to
February 1990, Mr. Dutton was President of ELXSI, a manufacturer of computers.
He was a director of System Industries Inc. from 1985 to July 1993 and served as
Chairman of the Board from March 1992 to July 1993. He is a director of ECCS,
Inc. and Network Equipment Technologies, Inc.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF THIS NOMINEE.
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DIRECTOR CONTINUING IN OFFICE UNTIL THE 1997 ANNUAL MEETING
FREDERICK W. ZUCKERMAN
Mr. Zuckerman, age 61, has been a director of the Company since March
1995. Mr. Zuckerman is a private investor and a partner in the firm of
Zuckerman, Firstenberg & Associates LLC, an investment banking and financial
advisory organization. Previously, he was Vice President and Treasurer of
International Business Machines Corp., a multinational corporation principally
engaged in the information technology business, from September 1993 to January
1995; Vice President and Treasurer of RJR Nabisco, Inc., a multinational
corporation principally engaged in the tobacco and food businesses, from
February 1991 to September 1993; and Corporate Vice President and Treasurer of
Chrysler Corp., a multinational corporation principally engaged in the
automotive business, from December 1981 to September 1990. He is a director of
Anacomp, Inc., Meditrust, Turner Corporation, NVR Corporation, Japan Equity
Fund, The Singapore Fund, Northeast Savings Bank, Olympic Financial, Ltd., and
Pantone, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
ROBERT G. TERESI
Mr. Teresi, age 54, has been with the Company since 1976 and has served
as Chief Executive Officer and a director of the Company since May 1985. Mr.
Teresi has served as President of the Company from May 1985 through May 1994 and
since February 1996. He was elected Chairman of the Board in October 1991.
WAYNE E. ROSING
Mr. Rosing, age 49, has been a director of the Company since June 1991.
Since September 1994, he has been President of The Remote Telescope Company,
Inc., a recently incorporated company that is developing automatic telescopes
with Internet access. From 1988 to 1994, he was an officer of Sun Microsystems,
Inc., a manufacturer of UNIX-based professional work stations and compatible
software, or President or Vice President of one of its subsidiaries, divisions,
or groups.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1995, the Board held nine
meetings. The Board has a standing Compensation and Option Committee, a standing
Audit Committee, and a standing Nominating Committee.
The Audit Committee meets with the Company's independent auditors at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent auditors to be
retained; and receives and considers the auditors' comments as to controls,
adequacy of staff, and management performance and procedures in connection with
audit and financial controls. The Audit Committee, which in 1995 consisted of
Messrs. Dutton, Rosing, Zuckerman, and Sidney S. Kahn, a former director of the
Company, met once during the fiscal year ended December 31, 1995. Currently, the
Audit Committee consists of Messrs. Dutton, Rosing, and Zuckerman.
The Compensation and Option Committee makes recommendations concerning
salaries, incentive compensation, and stock option grants to officers under the
Company's stock option plans and otherwise determines compensation levels and
performs such other functions regarding compensation as the Board may delegate.
The Compensation and Option Committee, which in 1995 consisted of Messrs.
Dutton, Kahn, Rosing and Zuckerman, met once during the fiscal year ended
December 31, 1995. Currently, the Compensation and Option Committee consists of
Messrs. Dutton, Rosing, and Zuckerman.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Company's Board of Directors and committees
thereof. No procedure has been established for the
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consideration of nominees recommended by stockholders. The Nominating Committee,
which in 1995 consisted of Messrs. Dutton, Kahn, Rosing and Zuckerman, did not
meet during the fiscal year ended December 31, 1995. Currently, the Nominating
Committee consists of Messrs. Dutton, Rosing, and Zuckerman.
During the fiscal year ended December 31, 1995, each Board member
attended seventy-five percent or more of the aggregate of the meetings of the
Board and of the committees on which he served, held during the period for which
he was a director or committee member, respectively.
Over the past three years, Sidney S. Kahn, a director of the Company
whose term expires at the 1996 Annual Meeting, wrote memoranda to Robert G.
Teresi, Chairman of the Board and Chief Executive Officer of the Company,
critical of management of the Company and of certain policies of the Company,
including new product introduction, provision for management succession,
structure and responsibility of the Board of Directors and profitability of the
Company. In February 1996, Mr. Teresi informed Mr. Kahn that, as Chairman of the
Board, Mr. Teresi had decided not to propose that the Nominating Committee of
the Board of Directors (consisting of all of the outside directors on the Board)
nominate Mr. Kahn for election to a new three-year term on the Board.
Subsequently, Mr. Kahn requested that Mr. Teresi inform the other directors that
Mr. Kahn would not seek re-election and Mr. Kahn resigned from the Board.
PROPOSAL 2
APPROVAL OF AMENDMENTS TO THE 1992
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
DESCRIPTION OF THE PROPOSED AMENDMENTS
The Company's 1992 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") was originally adopted by the Board in February 1992 and
approved by the stockholders in May 1992. In February 1996, the Board adopted,
subject to stockholder approval, amendments to the Directors' Plan to: (i)
increase the number of shares of Common Stock reserved under the Directors' Plan
from 130,000 shares to 230,000 shares; (ii) increase the size of automatic
option grants made to non-employee directors every three years from 20,000
shares to 30,000 shares, including implementing such increase with additional
grants covering a pro rata portion of the increase for the remainder of the
currently applicable three-year period; (iii) provide for full vesting of
options (including outstanding options) for a director who dies or voluntarily
resigns after five years of continuous service as a non-employee director and
for full vesting of options for all directors in the event of a change in
control, as defined in the Directors' Plan; and (iv) make the change of control
definition in the Directors' Plan similar to that utilized in the Company's
Executive Officers' Change-of-Control Severance Plan, all as more fully
described below. The Board adopted these amendments to facilitate the Company's
goals of increasing the compensation of its non-employee directors when
stockholder value (represented by the trading price of the Company's stock) is
increased and of attracting, over time, additional non-employee directors of the
Company.
As of March 29, 1996, and without taking into account the proposed
amendments to the Directors' Plan, the Company had granted options for an
aggregate of 80,000 shares of Common Stock pursuant to the Directors' Plan, all
of which were outstanding, with exercise prices ranging from $6.9375 to $9.75
per share. No options have been exercised under the Directors' Plan to date. As
of March 29, 1996, and without taking into account the proposed amendments to
the Directors' Plan, 50,000 shares remained available for future grant.
The affirmative vote of a majority of the shares of the Common Stock
present in person or represented by proxy and entitled to vote at the Annual
Meeting will be required for the approval of Proposal 2.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
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DESCRIPTION OF THE DIRECTORS' PLAN
The essential features of the Directors' Plan are outlined below.
GENERAL
The Directors' Plan, and the right of directors to receive options and
purchase stock thereunder, is intended to qualify as a formula award plan
satisfying the "disinterested administration" requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3"). The Directors' Plan provides for the nondiscretionary grant of
nonstatutory stock options. Nonstatutory stock options granted under the
Directors' Plan are intended not to qualify as incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). See "Federal Income Tax Information" below for a discussion of the tax
treatment of nonstatutory stock options. Without taking into account the
proposed amendments to the Directors' Plan, the maximum number of shares of
Common Stock that may be issued pursuant to options granted under the Directors'
Plan currently is 130,000. As amended, such maximum number of shares under the
Directors' Plan would increase to 230,000.
PURPOSE
The Company, by means of the Directors' Plan, seeks to attract and
retain the best available personnel for service as directors of the Company, to
provide additional incentive for such persons to exert maximum efforts to
promote the success of the Company, and to encourage their continued service on
the Board.
ADMINISTRATION
The Directors' Plan is administered by the Board, unless the Board
delegates administration to a committee composed of not fewer than two members
of the Board. As used herein with respect to the Directors' Plan, the term
"Board" refers to any committee to which the Board delegates administrative
authority with respect to the Directors' Plan, as well as to the Board of
Directors itself. Subject to the provisions of the Directors' Plan, the Board
has the power to construe and interpret the Directors' Plan and options granted
under it, to establish, amend and revoke rules and regulations for its
administration, to amend the Directors' Plan, and generally to exercise such
powers and to perform such acts as the Board deems necessary or expedient to
promote the best interests of the Company.
ELIGIBILITY
Options may be granted under the Directors' Plan only to non-employee
directors of the Company. A "non-employee director" is defined in the Directors'
Plan as a director of the Company who is not otherwise an employee of the
Company or of any affiliate of the Company. The term "affiliate" as used in the
Directors' Plan means any parent or subsidiary corporation of the Company as
those terms are defined in the Code. Three of the Company's four current
directors (all except Mr. Teresi) are eligible to participate in the Directors'
Plan.
The option grants under the Directors' Plan are nondiscretionary.
Pursuant to the Directors' Plan, each person who is elected for the first time
by the Board or stockholders of the Company to be a non-employee director of
the Company shall automatically be granted an option to purchase shares of
Common Stock (subject to adjustment as provided in the Directors' Plan) upon
the date of such election. Thereafter, so long as any such person remains a
non-employee director of the Company and the Directors' Plan remains in effect,
he or she shall, on each three-year anniversary of such initial grant,
automatically be granted an option to purchase shares of the Company's Common
Stock (subject to adjustment as provided in the Directors' Plan). Pursuant to
the amendments, the number of shares subject to each such automatic grant is
increased from 20,000 to 30,000 shares. Also, pursuant to the amendments, each
non-employee director who was a non-employee director on March 2, 1996, shall,
on each three-year anniversary of such non-employee director's most recent
receipt of an option grant (the "Prior Grant") under the Directors' Plan (prior
to the March 2, 1996 grant described below), automatically be granted an option
to
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purchase 30,000 shares of Common Stock (subject to adjustment as provided in the
Directors' Plan). Finally, pursuant to the amendments, on March 2, 1996, each
director who was then a non-employee director automatically was granted an
option to purchase an additional 3,333 shares (or a pro rata portion thereof)
for each year (or portion thereof) remaining until the third anniversary of such
director's Prior Grant. The purpose and effect of this additional grant is to
make the increase in the size of option grants take effect on March 2, 1996.
TERMS OF OPTIONS
Each option under the Directors' Plan is subject to the following terms
and conditions:
Exercise Price; Payment. The exercise price of each option granted under
the Directors' Plan shall be equal to 100% of the fair market value of the
Common Stock subject to such option on the date such option is granted. The
exercise price of options granted under the Directors' Plan must be paid either:
(i) in cash at the time the option is exercised, (ii) by delivery to the Company
of shares of Common Stock of the Company that have been held for the requisite
period necessary to avoid a charge to the Company's reported earnings and valued
at the fair market value on the date of exercise, or (iii) by a combination of
such methods of payment.
Option Vesting. Options granted under the Directors' Plan vest with
respect to each optionee in three equal annual installments commencing on the
date one year after the date of grant of the option, provided that the optionee
has, during the entire one-year period prior to such vesting date, continuously
served as a non-employee director of the Company. Each of the additional options
granted to non-employee directors on March 2, 1996 generally shall vest in
installments corresponding to the vesting of the remaining installments under
the Prior Grant as if the shares subject to such option had been included in the
Prior Grant. Pursuant to the amendments, the options (including options
outstanding at the time of amendment of the Directors' Plan) of a director who
dies or voluntarily resigns from the Board after five continuous years of
service as a non-employee director shall be fully vested.
Termination of Options. Currently no option granted under the Directors'
Plan is exercisable after the expiration of ten years from the date the option
was granted.
Nontransferability of Options. Options granted under the Directors' Plan
are not transferable except by will or by the laws of descent and distribution,
and are exercisable during the lifetime of the person to whom the option is
granted only by such person or by his or her guardian or legal representative.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted under the Directors' Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Directors' Plan and options outstanding will be adjusted appropriately as to the
class and maximum number of shares subject to the Directors' Plan and the class,
number of shares and price per share of stock subject to such outstanding
options.
EFFECT OF CERTAIN CORPORATE EVENTS
Pursuant to the amendments, options will be fully vested and will be
exercisable immediately in the event of: a dissolution or liquidation of the
Company or sale of all or substantially all of the assets of the Company; a
reorganization, merger or consolidation with respect to which persons who were
the stockholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power of the reorganized, merged or consolidated company's then
outstanding voting securities; the acquisition (other than from the Company) by
any person(s) of 50% or more of either the then outstanding shares of common
stock of the Company or the combined voting power of the resulting company's
then outstanding voting securities; or the date the incumbent board ceases for
any reason to constitute at least a majority of the Board. For this purpose, an
incumbent director includes certain persons approved by a majority of incumbent
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directors. In addition, in the case of certain forms of corporate transactions,
at the sole discretion of the Board and to the extent permitted by applicable
law, any surviving corporation other than the Company may elect to assume
outstanding options or may substitute similar options, and outstanding options
will terminate if not exercised or assumed prior to such event.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Directors' Plan at any time.
Unless sooner terminated, the Directors' Plan shall terminate on February 27,
2002.
The Board also may amend the Directors' Plan at any time and from time
to time, provided, however, that the Board shall not amend the Directors' Plan
more than once every six months, with respect to the provisions of the plan
which relate to the amount, price and timing of grants, other than to comport
with changes in the Code, the Employee Retirement Income Security Act, or the
rules thereunder. In addition, no amendment will be effective unless approved by
the stockholders of the Company within twelve months before or after the
adoption of the amendment, where the amendment would: (i) increase the number of
shares reserved for options under the Directors' Plan; (ii) modify the
requirements as to eligibility for participation in the Directors' Plan (to the
extent such modification requires stockholder approval in order for the
Directors' Plan to comply with the requirements of Rule 16b-3); or (iii) modify
the Directors' Plan in any other way if such modification requires stockholder
approval in order for the Directors' Plan to comply with the requirements of
Rule 16b-3.
FEDERAL INCOME TAX INFORMATION
Stock options granted under the Directors' Plan are subject to federal
income tax treatment pursuant to rules governing options that are not incentive
stock options.
The following is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors' Plan, does not purport to be complete, and does not
discuss the income tax laws of any state or foreign country in which an optionee
may reside.
Options granted under the Directors' Plan are nonstatutory options.
There are no tax consequences to the optionee or the Company by reason of the
grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee generally will recognize ordinary income for tax purposes
measured by the excess of the then fair market value of the shares over the
option price. Because the optionee is a director of the Company, under existing
laws the date of taxation (and the date of measurement of taxable ordinary
income) may in some instances be deferred unless the optionee files an election
under Section 83(b) of the Code. The filing of a Section 83(b) election with
respect to the exercise of an option may affect the time of taxation and the
amount of income recognized at each such time. At the time the optionee
recognizes ordinary income due to the exercise of the option, the Company
generally will be entitled to a business expense deduction equal to the taxable
ordinary income realized by the optionee. Upon resale of such shares by the
optionee, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, generally will be
treated as capital gain or loss, and will qualify for long-term capital gain or
loss treatment if the shares have been held for more than one year.
7.
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The following table presents certain information with respect to options
to be granted under the Directors' Plan in 1996, subject to the approval of this
Proposal 2, to (i) each non-employee director and (ii) all non-employee
directors as a group.
NEW PLAN BENEFITS
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
----------------------------------------------
NUMBER OF SHARES
SUBJECT TO OPTIONS
NAME AND POSITION(1) DOLLAR VALUE($)(2) GRANTED(#)
- ----------------- ----------------- ------------------
James K. Dutton, Director 37,774 4,444
Wayne E. Rosing, Director 37,774 4,444
Frederick W. Zuckerman, Director 56,661 6,666
All Non-Employee Directors as a Group 132,209 15,554
- -----------------------
(1) The grants are subject to stockholder approval of Proposal 2.
(2) Exercise price ($8.50) multiplied by the number of shares underlying the
option.
PROPOSAL 3
APPROVAL OF AMENDMENTS TO THE 1981 OPTION PLANS
DESCRIPTION OF THE PROPOSED AMENDMENTS
The total number of shares currently authorized for issuance under the
1981 Incentive Stock Option Plan and 1981 Supplemental Stock Option Plan
(collectively, the "1981 Option Plans") on a combined basis is 3,520,000 shares.
As of March 29, 1996, and without taking into account the proposed amendments to
the 1981 Option Plans, options (net of canceled or expired options) covering an
aggregate of 1,519,158 shares of the Company's Common Stock had been granted
under the 1981 Option Plans, and only 563,280 shares (plus any shares that might
in the future be returned to the 1981 Option Plans as a result of cancellations
or expiration of options) remained available for future grant under the 1981
Option Plans. In February 1996, the Board adopted, subject to stockholder
approval, a proposal to amend the 1981 Option Plans to: (i) increase the number
of shares authorized for issuance under the 1981 Option Plans on a combined
basis by 75,000 shares, to a total of 3,595,000 shares; and (ii) comply with the
performance-based pay requirements of Section 162(m) of the Code by adding
certain administrative provisions and limiting to 300,000 the number of shares
of Common Stock that can be made subject to options granted to any individual
under the 1981 Option Plans in a calendar year. The Board adopted these
amendments to ensure that the Company can continue to grant stock options to
employees at levels determined appropriate by the Board and the Compensation and
Option Committee of the Board.
The affirmative vote of a majority of the shares of the Common Stock
present in person or represented by proxy and entitled to vote at the Annual
Meeting will be required for the approval of Proposal 3.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
8.
12
DESCRIPTION OF THE 1981 OPTION PLANS
The essential features of the 1981 Option Plans are outlined below.
GENERAL
The 1981 Incentive Stock Option Plan (the "ISO Plan") provides for the
grant of incentive stock options. Incentive stock options granted under the ISO
Plan are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code (the "Code"). The 1981 Supplemental
Stock Option Plan (the "Supplemental Plan") provides for the grant of
nonqualified stock options. Nonqualified stock options granted under the
Supplemental Plan are intended not to qualify as incentive stock options under
the Code. See "Tax Information" for a discussion of the tax treatment of
incentive and nonqualified stock options.
PURPOSE
The 1981 Option Plans were adopted to provide a means by which selected
officers and employees of and consultants to the Company and its affiliates
could be given an opportunity to purchase stock in the Company, to assist in
retaining the services of employees holding key positions, to secure and retain
the services of persons capable of filling such positions, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
ADMINISTRATION
The 1981 Option Plans provide that they will be administered by the
Board of Directors of the Company and authorize the Board to delegate such
administration to a committee of not fewer than three members of the Board, each
of whom shall be disinterested within the meaning of Rule 16b-3 under the
Exchange Act. In the Board's discretion, directors serving on such committee may
also be "outside directors" within the meaning of Section 162(m) of the Code. If
administration is delegated to a committee, the committee has the power to
delegate administrative powers to a subcommittee of two or more outside
directors. As used herein with respect to the 1981 Option Plans, the "Board"
refers to the Compensation and Option Committee or, as applicable, the
subcommittee, as well as the Board of Directors itself. The Board has the power
to construe and interpret the 1981 Option Plans and, subject to the provisions
of the 1981 Option Plans, to determine the persons to whom and the dates on
which options will be granted, the number of shares to be subject to each
option, the time or times during the term of each option within which all or a
portion of such option may be exercised, the exercise price, the type of
consideration, and other terms of the option. The Board has delegated such
administration to the Compensation and Option Committee. The Compensation and
Option Committee has authorized a subcommittee to establish and administer
grants of options under the Option Plans to officers or other key employees of
the Company, subject to ratification by the Compensation and Option Committee.
ELIGIBILITY
Incentive stock options may be granted under the ISO Plan only to
selected key employees (including officers) of the Company and its affiliates.
Options may be granted to directors of the Company under the ISO Plan only if
such directors are also key employees of the Company or of any of its
affiliates. Nonqualified stock options may be granted under the Supplemental
Plan only to key employees (including officers) of, directors of, or consultants
to, the Company or its affiliates.
No option may be granted under the ISO Plan to any person who, at the
time of the grant, owns (or is deemed to own) stock possessing more than 10% of
the total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant, and the term of the option
does not exceed five years from the date of grant. An option may be granted to
an eligible person under the ISO Plan only if the aggregate fair market value of
the stock with respect to which incentive stock options granted after 1986 are
exercisable for the first time by such person
9.
13
during any calendar year under all incentive stock option plans of the Company
and its affiliates does not exceed $100,000. Pursuant to the amendments, the
1981 Option Plans provide that the number of shares that can be made subject to
options granted to any individual under the 1981 Option Plans in a calendar year
is limited to 300,000. The principal purpose for such a per-employee limitation
is to comply with IRS regulations that permit certain performance-based
compensation, including compensation attributable to stock options that meet
specified criteria, to be exempt from the $1.0 million limitation under Section
162(m) of the Code on the amount that may be deducted by publicly held
corporations for compensation paid to certain employees. See "Federal Income Tax
Information."
During the last fiscal year, under the 1981 Option Plans, the Company
granted to all executive officers as a group options to purchase 293,000 shares
at exercise prices of $8.75 to $9.75 per share and to all employees (excluding
executive officers) as a group options to purchase 123,500 shares at exercise
prices of $8.00 to $18.125 per share. No non-employee director was granted an
option under the 1981 Option Plans in 1996.
STOCK SUBJECT TO THE 1981 OPTION PLANS
If options granted under the 1981 Option Plans expire or otherwise
terminate without being exercised, the Common Stock not purchased pursuant to
such options again becomes available for issuance under the 1981 Option Plans.
Pursuant to the amendments, the number of shares authorized for issuance under
the 1981 Option Plans would be increased from 3,520,000 to 3,595,000.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the 1981 Option Plans. Individual option grants may be more restrictive as to
any or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the ISO Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonqualified options under the Supplemental Plan may not
be less than 85% of the fair market value of the Common Stock subject to the
option on the date of the option grant. In the event of a decline in the value
of the Company's Common Stock, the Board has the authority to offer employees
the opportunity to replace outstanding higher-priced options, whether incentive
or nonqualified, with new lower-priced options.
The exercise price of options granted under the 1981 Option Plans must
be paid either: (i) in cash at the time the option is exercised; or (ii) at the
discretion of the Board, (a) by delivery of other Common Stock of the Company,
(b) pursuant to a deferred payment arrangement, or (c) in any other form of
legal consideration acceptable to the Board.
Option Exercise. Options granted under the 1981 Option Plans may become
exercisable in cumulative increments ("vest") as determined by the Board. Shares
covered by options may be subject to different vesting terms. The Board has the
power to accelerate the time during which an option may be exercised. In
addition, options granted under the 1981 Option Plans may permit exercise prior
to vesting, but in such event the optionee may be required to enter into an
early exercise stock purchase agreement that allows the Company to repurchase
shares not yet vested should the optionee leave the employ of the Company before
vesting.
Term. The maximum term of options granted under the 1981 Option Plans is
ten years, except that in certain cases (see "Eligibility") the maximum term is
five years. Options granted under the 1981 Option Plans terminate three months
after the optionee ceases to be employed by the Company or any affiliate of the
Company, unless (a) the termination of employment is due to such person's
permanent and total disability (as defined in the Code), in which case the
option may, but need not, provide that it may be exercised at any time within
one year of such termination; (b) the optionee dies while employed by the
Company or any affiliate of the Company, or within three months after
termination of such employment, in which case the option may, but need not,
provide that it may be
10.
14
exercised (to the extent the option was exercisable at the time of the
optionee's death) within 18 months of the optionee's death by the person or
persons to whom the rights to such option pass by will or by the laws of descent
and distribution; or (c) the option by its terms specifically provides
otherwise. Individual options by their terms may provide for exercise within a
longer or shorter period of time following termination of employment or the
consulting relationship.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1981 Option Plans or
subject to any option granted under the 1981 Option Plans (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
1981 Option Plans and options outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to such plan
and the class, number of shares, and price per share of stock subject to such
outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1981 Option Plans provide that, in the event of a dissolution or
liquidation of the Company, specified type of merger, or other corporate
reorganization, the Board of Directors may, at its sole discretion to the extent
permitted by law, (i) require any surviving corporation to either assume options
outstanding under the 1981 Option Plans or substitute similar options for those
outstanding, (ii) accelerate the time during which such options may be exercised
and terminate all options not exercised during that time, or (iii) continue
outstanding options in full force and effect.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1981 Option Plans without
stockholder approval or ratification at any time or from time to time. Unless
sooner terminated, the 1981 Option Plans currently will terminate on January 31,
2000.
The Board also may amend the 1981 Option Plans at any time or from time
to time. However, no amendment will be effective unless approved by the
stockholders of the Company within twelve months before or after its adoption by
the Board if the amendment would: (i) increase the number of shares reserved for
issuance under the 1981 Option Plans; (ii) materially modify the requirements as
to eligibility for participation in the 1981 Option Plans to the extent such
modification requires stockholder approval in order for the ISO Plan to satisfy
the requirements of Section 422(b) of the Code; or (iii) modify the 1981 Option
Plans in any other way if such modification requires stockholder approval in
order for the 1981 Option Plans to comply with the requirements of Rule 16b-3
under the Exchange Act or to satisfy the requirements of Section 422(b) of the
Code. The Board may submit any other amendment to the 1981 Option Plans for
stockholder approval, including, but not limited to, amendments intended to
satisfy the requirements of Section 162(m) of the Code regarding the exclusion
of performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees. The ISO Plan expressly contemplates that
the Board may adopt amendments in any respect to provide optionees with the
maximum benefits under the Code relating to incentive stock options or to bring
the ISO Plan into compliance with the Code.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the ISO Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee
or the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
11.
15
If an optionee holds stock acquired through exercise of an incentive
stock option for more than two years from the date on which the option is
granted and more than one year from the date on which the shares are transferred
to the optionee upon exercise of the option, any gain or loss on a disposition
of such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (i) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition will
be a capital gain or loss which will be long-term or short-term depending on
whether the stock was held for more than one year. Slightly different rules may
apply to optionees who acquire stock subject to certain repurchase options or
who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company generally will be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
Nonqualified Stock Options. Nonqualified stock options granted under the
Supplemental Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of the
grant of a nonqualified stock option. Upon exercise of a nonqualified stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long-
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
Potential Limitation on Company Deductions. Code Section 162(m) denies a
deduction to any publicly held corporation for compensation paid to certain
employees in a taxable year to the extent that compensation exceeds $1.0 million
for a covered employee. It is possible that compensation attributable to awards
under the 1981 Option Plans, when combined with all other types of compensation
received by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m) of the Code,
compensation attributable to stock options will qualify as performance-based
compensation, provided that: (i) the stock option plan contains a per-employee
limitation on the number of shares for which stock options may be granted during
a specified period; (ii) the per-employee limitation is approved by the
stockholders; (iii) the award is granted by a compensation committee comprised
solely of "outside directors"; and (iv) the exercise price of the option is no
less than the fair market value of the stock on the date of grant. Following
approval of Proposal 3, options granted under the 1981 Option Plans that have an
exercise price at least equal to the fair market value of the Company's Common
Stock on the date of grant should qualify as performance-based compensation that
is exempt from the $1.0 million deduction limitation.
12.
16
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") as
the Company's independent auditors for the fiscal year ending December 31, 1996,
and has further directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting. KPMG has
audited the Company's financial statements since 1976. Representatives of KPMG
are expected to be present at the Annual Meeting, will have an opportunity to
make a statement if they so desire, and will be available to respond to
appropriate questions.
Stockholder ratification of the selection of KPMG as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection, the Board will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Board in its discretion may direct
the appointment of a different auditing firm at any time during the year if the
Board determines that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares of the
Common Stock present in person or represented by proxy and entitled to vote at
the Annual Meeting will be required to ratify the selection of KPMG.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
13.
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of March 29, 1996, by: (i) each
director and nominee for director, (ii) each of the executive officers named in
the Summary Compensation Table employed by the Company in that capacity on March
29, 1996; (iii) all officers and directors of the Company as a group; and (iv)
all those known by the Company to be beneficial owners of more than five percent
of its Common Stock.
BENEFICIAL OWNERSHIP(1)
BENEFICIAL OWNER NUMBER OF SHARES(2) PERCENT OF TOTAL
- ----------------
Wisconsin Investment Board 1,250,000 9.4%
P.O. Box 7842
Madison, WI 53707
Robert G. Teresi 261,992 1.94%
Sidney S. Kahn 47,392 *
James K. Dutton 76,666 *
Wayne E. Rosing 31,166 *
Frederick W. Zuckerman 6,666 *
Blanche M. Sutter 98,832 *
Lawrence F. Lunetta 27,627 *
All executive officers and directors as 691,319 5.0%
a group (10 persons)
- -------------
* Less than 1%
(1) This table is based upon information supplied by executive officers,
directors, and principal stockholders and Schedule 13G filed with the SEC.
Unless otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
13,321,608 shares outstanding on March 29, 1996, adjusted as required by
rules promulgated by the SEC.
(2) Includes shares which certain executive officers and directors of the
Company have the right to acquire within 60 days after the date of this
table pursuant to outstanding options as follows: Robert G. Teresi, 175,650
shares; Sidney S. Kahn, 46,666 shares; James K. Dutton, 46,666 shares;
Wayne E. Rosing, 6,666; Frederick W. Zuckerman, 6,666; Blanche M. Sutter,
78,832 shares; and Lawrence F. Lunetta, 27,627 shares; and all executive
officers and directors as a group, 487,047 shares.
14.
18
ADDITIONAL INFORMATION
MANAGEMENT
Executive officers are elected annually by the Board and serve at the
discretion of the Board. Set forth below is information regarding executive
officers of the Company who are not directors of the Company.
NAME AGE POSITION
---- --- --------
Blanche M. Sutter .......... 49 Senior Vice President, Chief Financial
Officer and Secretary
Serge L. Blanc ............. 58 Vice President, Business Products
Dan D. Borozan ............. 59 Vice President, Operations
Dean A. Hovey .............. 41 Vice President and General Manager,
Imaging Products
Chad B. Kinzelberg ......... 28 Vice President, Marketing
Lawrence F. Lunetta ........ 44 Vice President and General Manager,
Desktop Products
Ms. Sutter became Senior Vice President in February 1996. She has been
the Company's Vice President, Finance, and Chief Financial Officer since April
1986. In June 1989 she was also appointed as the Company's Secretary. She is a
director of ZyLab International, Inc., a company in which Caere has a minority
interest.
Mr. Blanc joined the Company in May 1977 as Vice President, Engineering.
In August 1994, he became Vice President, Business Products.
Mr. Borozan joined the Company in January 1991 as Vice President,
Operations. Prior to joining the Company, he was Director of Materials at Hughes
LAN Systems, a manufacturer of local area network products.
Mr. Hovey became the Company's Vice President and General Manager,
Imaging Products, in February 1996. Previously, he was Vice President, Business
Development from August 1994 to February 1996. Prior to joining the Company,
from 1989 to 1994, he was a General Partner of Avalon Ventures, a venture
capital fund.
Mr. Kinzelberg joined the Company in September 1994 as Vice President,
Marketing. Prior to that, he was Senior Director, Marketing, from 1992 to 1994,
and Senior Director, Fax and Messaging Software in 1994 at Delrina Corporation,
a designer and manufacturer of fax, forms, and content-based software. From May
1990 to June 1992, he was Director of Marketing for Polaris Software, a
developer of personal information management software.
Mr. Lunetta became the Company's Vice President and General Manager,
Desktop Products, in February 1996. Previously, he was Vice President, Sales and
Service since April 1995; Vice President, Strategic Relations from November 1994
to April 1995, and Vice President, Worldwide Marketing from 1993 to August 1994.
From 1992 to 1993, he was Director of International Markets. From 1989 to 1991,
he was Vice President, Marketing and Sales for Advanced Vision Research, a
manufacturer of desktop scanners.
15.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives an annual retainer of
$8,000 and a per meeting fee of $2,000 (plus $2,000 for each committee meeting
attended by committee members, if held on days other than Board meeting dates).
No compensation is paid for participation in telephone meetings. In the fiscal
year ended December 31, 1995, the total compensation paid to non-employee
directors as a group was $47,000.
Each non-employee director of the Company also receives stock option
grants under the Directors' Plan. Only non-employee directors of the Company are
eligible to receive options under the Directors' Plan. See Proposal 2.
16.
20
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ending December 31, 1995,
1994 and 1993, compensation awarded or paid to, or earned by the Company's Chief
Executive Officer and its other four most highly compensated executive officers
at December 31, 1995 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
AWARDS
------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS(#) COMPENSATION($)(2)
- --------------------------- ---- ------------ --------- ---------- ------------------
Mr. Robert G. Teresi 1995 250,000 14,664 40,000 6,105
President and 1994 250,000 250,000 0 3,115
Chief Executive Officer 1993 250,000 0 69,000 2,007
Mr. Steven Humphreys(3) 1995 190,000 11,181 15,000 62,130(4)
President 1994 97,494 95,000 200,000 35,679(4)
1993 -- -- -- --
Ms. Blanche M. Sutter 1995 144,628 8,889 13,000 3,119
Senior Vice President, 1994 136,000 136,000 54,000 1,824
Chief Financial Officer 1993 136,000 0 36,000 1,536
and Secretary
Mr. Lawrence F. Lunetta 1995 130,300 46,917 22,000 2,779
Vice President and General 1994 110,038 110,000 0 1,138
Manager, Desktop Products 1993 121,152 0 27,000 1,632
Mr. Cary H. Masatsugu(5) 1995 134,616 62,774 60,000 634
Vice President, Engineering 1994 -- -- -- --
1993 -- -- -- --
- ----------------
(1) Includes amounts earned but deferred at the election of the executive
officer.
(2) Includes the Company's matching payments for Messrs. Teresi and Lunetta and
Ms. Sutter under its 401(k) plan and term life insurance premiums paid by
the Company for each officer.
(3) Mr. Humphreys terminated his employment in February 1996, and Mr. Teresi
was elected President of the Company.
(4) Includes relocation expenses paid by the Company.
(5) Mr. Masatsugu terminated his employment in March 1996.
17.
21
STOCK OPTION GRANTS AND EXERCISES
The following tables show for the fiscal year ended December 31, 1995,
certain information regarding options granted to, exercised by, and held at year
end by the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
---------------------------- --------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTION GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(2) FISCAL YEAR(%)(3) ($/SH) DATE 5% ($) 10% ($)
- ---- ------------- ---------------- ------------- ---------- ------- -------
Mr. Teresi 40,000 9.6 8.75 05/04/05 220,500 556,500
Mr. Humphreys 15,000 3.6 8.75 05/04/05 82,688 208,688
Ms. Sutter 13,000 3.1 8.75 05/04/05 71,663 180,863
Mr. Lunetta 22,000 5.3 8.75 05/04/05 121,275 306,075
Mr. Masatsugu 60,000 14.4 8.75 05/04/05 330,750 834,750
- --------------------
(1) The potential realizable value is based on the ten-year term of the option
at its time of grant. It is calculated by assuming that the stock price on
the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is exercised
and sold on the last day of its term for the appreciated stock price. No
gain to the optionee is possible unless the stock price increases over the
option term, which will benefit all stockholders.
(2) Options generally vest over a four-year period, 25% per year, with a
ten-year term. The options will fully vest upon a change of control, as
defined in the Company's 1981 Option Plans, unless the acquiring company
assumes the options or substitutes similar options.
(3) Based on 416,500 options granted in fiscal year ended December 31, 1995.
18.
22
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995 AND DECEMBER 31, 1995 OPTION
VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/95(#) 12/31/95($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($)(1) Unexercisable Unexercisable(2)
- ---- --------------- --------------- ------------- -----------------
Mr. Teresi 21,000 151,875 152,400/105,000 26,400/0
Mr. Humphreys 15,000 64,625 35,000/165,000 8,750/37,500
Ms. Sutter 0 -- 70,832/87,500 0/0
Mr. Lunetta 0 -- 22,127/40,000 0/0
Mr. Masatsugu 4,281 21,020 1,224/69,175 3,715/27,846
- ------------------
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) Fair market value of the Company's Common Stock at December 31, 1995
($7.125) minus the exercise price of the options.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In February 1991, the Board adopted the Company's Executive Officers'
Change-of-Control Severance Plan for its executive officers designated by the
Compensation and Option Committee (the "Severance Plan"). The Severance Plan
provides that, in the event, within 36 months of a change of control, the
participant is involuntarily terminated, other than for death, disability or
cause, or the participant voluntarily terminates his or her employment for good
reason, the terminated participant will be entitled to (i) a lump sum severance
payment equal to two times annual compensation if termination occurs within one
year of a change of control, or two times annual compensation, less 1/24 of such
amount for each full month which has passed since such anniversary of the change
of control if termination occurs beyond the one-year anniversary of a change of
control, (ii) continuation of health insurance benefits for up to 18 months at
Company expense, and (iii) acceleration of vesting of stock options ranging from
25% to 100% of unvested stock options, depending upon length of service with the
Company. The Severance Plan provides for a reduction in the benefits otherwise
payable to the extent the payment would result in an "excess parachute payment"
under the Code's golden parachute provisions.
A "change of control" includes (i) acquisition by a person or group of
50% or more of the voting power of the Company, (ii) individuals who constitute
the incumbent board cease to constitute a majority of the Board of Directors,
(iii) consummation of certain business combinations following which the
Company's stockholders immediately prior to the transaction do not own more than
50% of the voting power of the surviving company, and (iv) any other event the
incumbent board determines constitutes a change of control. For purposes of the
Severance Plan, the incumbent board is defined to include not only the present
directors but subsequently elected directors,
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so long as their election or nomination for election by the Company's
stockholders was approved by a majority of the then incumbent board (other than
an approval in connection with an actual or threatened election contest).
"Good reason" includes (i) reduction of compensation, (ii) failure to
provide a substantially similar welfare benefit package, (iii) change in the
participant's responsibilities, authority, titles or offices, resulting in
diminution of position, (iv) a material reduction in duties, (v) request that
the participant relocate to a worksite that is more than 35 miles from his or
her prior worksite, (vi) failure or refusal of the successor company to assume
the Severance Plan, or (vii) material breach of material provisions of the
Severance Plan.
The Severance Plan has automatically been extended for a one-year term
on each December 31 since December 31, 1991, and automatically will be extended
for additional one-year periods unless the Board takes action not to extend it.
The Severance Plan may not be amended or terminated with respect to any
participant without the consent of such participant.
In February 1991, the Company also adopted a severance policy for
executive officers designated by the Compensation and Option Committee in the
event of involuntary termination (the "Standard Policy"). The Standard Policy
provides that, in the event that the participant is involuntarily terminated
other than for death, disability or cause, the terminated participant will be
entitled to (i) a lump sum severance payment equal to one half of each
participant's current annual compensation and (ii) continuation of health
insurance benefits for up to six months at Company expense.
The Standard Policy has been automatically extended for a one-year term
on each December 31 since December 31, 1991, and automatically will be extended
for additional one-year periods unless the Board takes action not to extend it.
The Standard Policy may not be amended or terminated with respect to any
participant without the consent of such participant.
In December 1994, the Company entered into an Executive Compensation and
Benefits Continuation Agreement with Robert Teresi, the Company's President and
Chief Executive Officer, which remains in effect during the duration of Mr.
Teresi's employment by the Company. In the event of (i) the involuntary
termination of Mr. Teresi without cause, as defined in the agreement, or due to
the death or disability of Mr. Teresi; (ii) the voluntary termination of Mr.
Teresi for good cause, as defined in the agreement, or (iii) the part-time
employment of Mr. Teresi at the Company as a non-officer in certain
circumstances after voluntary termination of employment, then the agreement
provides that Mr. Teresi will be paid salary continuation benefits equal to
three years of his base salary, to be paid in equal monthly installments over a
period of five years. The Company also will continue Mr. Teresi's health
insurance benefits, including any medical, vision care or dental insurance
coverage then in effect, for a period of up to five years, and will continue
medical benefits for Mr. Teresi's spouse and daughter for up to five years. In
addition, any outstanding unvested stock options held by Mr. Teresi at the
termination date of his employment will be subject to continued or accelerated
vesting, subject to certain criteria as set forth in the agreement. All the
benefits payable by the Company under the agreement cease immediately upon the
happening of certain events specified in the agreement, including in the event
that Mr. Teresi becomes employed by or provides consulting services to an entity
which is engaged in a business in which the Company is also engaged.
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COMPENSATION AND OPTION COMMITTEE REPORT(1)
In 1995, the Compensation and Option Committee of the Board of Directors
(the "Committee") consisted of James K. Dutton, Sidney S. Kahn, Wayne E. Rosing
and Frederick W. Zuckerman, none of whom are currently officers or employees of
the Company. The Committee is responsible for setting and administering the
Company's policies governing employee compensation and administering the
Company's employee benefit plans, including its 1981 Stock Option Plans, the
Caere Savings and Retirement 401(k) Plan and the 1990 Employee Stock Purchase
Plan. Currently, the Compensation and Option Committee consists of Messrs.
Dutton, Rosing and Zuckerman.
General
The Company's executive compensation programs are designed to attract
and retain executives capable of leading the Company to meet its business
objectives and thereby enhance long-term stockholder value. Annual compensation
for the Company's executive officers consists of three elements: a cash salary,
a cash incentive bonus, and stock option grants.
The Committee evaluates the performance of management and determines
compensation policies, plans, and programs which seek to enhance the performance
of the Company, and thus stockholder value, by aligning closely the financial
interests of the Company's senior management with those of its stockholders.
In its review of management performance and compensation, the Committee
also takes into account management's commitment to the long-term success of the
Company through development of new products and enhanced versions of current
products, as evidenced by the Company's significant investments in research and
development. Over the last three years, Caere's expenditures on research and
development have been $7.9 million in 1995, $9.1 million in 1994, and $8.7
million in 1993. The Committee recognizes that while these expenditures reduce
current reported earnings, they provide the basis for helping to achieve
management's objective of sustained significant long-term earnings growth.
In establishing compensation levels for 1995, the Committee considered
management's significant accomplishments during the year, including (i)
increasing the Company's software unit volume shipments by over 110% and
expanding both the retail and direct distribution channels; (ii) successfully
integrating Calera Recognition Systems, Inc., which the Company acquired in
December 1994, and realizing significant cost synergies from the acquisition;
(iii) maintaining profitability while managing a change in the Company's
fundamental business model for desktop products to a "bundle and upgrade"
strategy, with higher volume but significantly lower average selling prices; and
(iv) successfully introducing the Company's OmniForm product through the
Company's Caere Affiliated Label program. Additionally, the Committee evaluated
the year's specific accomplishments in light of the Company's long term
objectives of maintaining its position as the technology- and market-leading
provider of OCR products and of driving OCR into mainstream markets. The
Committee also looked at the challenges for 1995 and the need to motivate and
retain its executive officers in a manner consistent with the Company's
compensation philosophy.
Executive Officer Compensation
At its May 1995 meeting, the Committee reviewed the results of two
salary surveys which provided information on the compensation of management at
similarly-sized software and technology companies, detailed by position. Based
on this survey information and on the structure of the Company's salary and
bonus plan, the Committee set base salaries for executive officers in 1995 at
the same level as 1994 base salaries, with the exception
- -------------------
(1) The material in this report is not soliciting material, is not deemed filed
with the SEC, and is not incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date of
this proxy statement and irrespective of any general incorporation language
in such filing.
21.
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of two executive officers. These salary levels are comparable to the mid-range
of competitive companies of comparable size in similar industries. Those
companies include some, but not all, of the companies included in the Hambrecht
& Quist Technology Stock Index used in the performance measurement comparison
graph.
The Company's cash bonus plan is tied to financial performance versus
plan and the profitability of the Company. The total size of the bonus pool is
calculated using a formula based upon the Company's operating earnings as a
percentage of revenues. Performance is measured and bonus is determined each
quarter independently in order to encourage meeting plan objectives on a
quarterly basis. The salary and bonus plans are structured in a highly leveraged
manner, e.g., potential bonus as a percentage of total compensation, to provide
a strong incentive for achieving short-term annual performance objectives. Bonus
amounts are allocated among the executive officers based upon the individual's
base salary as a percentage of the entire group's base salaries. The maximum
bonus allowable for an executive in any period is 100% of that person's base
salary for the period. Since management's financial goals for 1995 were not
entirely met, cash bonuses ranging from 5% to 6% of base compensation were
awarded to executive officers in 1995 for 1995 performance. This represents a
significant decrease in bonus pay from 1994, when management's financial goals
were significantly exceeded and management received 100% of base compensation as
cash bonuses.
The Company uses its stock option program as a long-term incentive to
further align the interests of stockholders and management by creating common
incentives related to the possession by management of a substantial economic
interest in the long-term appreciation of the Company's Common Stock. Options
have been granted to existing members of management based on a plan of achieving
certain levels of predetermined ownership participation. Because these
objectives have been long-term in nature, they have not been significantly
increased when annual performance goals have been exceeded, as they were in 1992
and 1994, nor decreased when annual performance goals have not been met, as in
1993. Options are granted at the then fair market value of the Company's Common
Stock, are subject to four-year vesting, and have a term of either five or ten
years. In August 1994, the Committee authorized the extension of the term of all
outstanding stock options from five to ten years. In May 1995, the Compensation
and Option Committee awarded stock option grants under the Company's 1981 Option
Plans to all executive officers of the Company. The size of individual option
grants generally is intended to reflect the officer's position with the Company
and his or her contributions to the Company. The Compensation and Option
Committee did consider the number of options held by executive officers when
awarding stock options grants in 1995 under the 1981 Option Plans.
The Company believes this combination of short- and long-term incentives
in the form of salary and bonus plus stock option grants will focus the
Company's officers on the optimum balance of achieving short-term annual
objectives while building long-term stockholder value and will achieve the
Company's goals of properly motivating and retaining officers.
Limitation on Deduction of Compensation Paid to Certain Executive Officers
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1.0 million of compensation paid to certain
executive officers in a taxable year. Compensation above $1.0 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The Compensation and Option Committee has determined that, following the
approval of Proposal 3, stock options granted under the 1981 Option Plans with
an exercise price at least equal to the fair market value of the Company's
Common Stock on the date of grant should be treated as "performance-based
compensation." To achieve this result, the amendments to the 1981 Option Plans
submitted for approval in Proposal 3 include certain administrative provisions
and a per-employee, per-year limitation on the size of stock option grants.
In addition, the Compensation and Option Committee has established a
subcommittee consisting of two outside directors that is authorized to establish
and administer performance-based compensation awards to officers or other key
employees, including grants of stock options under the 1981 Option Plans,
subject to ratification by the Compensation and Option Committee.
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The Compensation and Option Committee intends to continue to evaluate
the effects of Code Section 162(m) and to comply with the requirements of that
statute in the future to the extent consistent with the best interest of the
Company.
Chief Executive Compensation
In accordance with the compensation policies described above, the Chief
Executive Officer received a base salary of $250,000 in 1995, which did not
reflect any increase from his 1993 and 1994 base salaries. Consistent with the
Company's philosophy of rewarding and motivating its executive officers, the
Chief Executive Officer received a cash bonus of $14,664 for 1995 performance,
which did not meet management's financial goals, compared to a cash bonus of
$250,000 for 1994, in which such financial goals were significantly exceeded. A
stock option grant of 40,000 shares of Common Stock was awarded to Mr. Teresi in
1995 under the Company's 1981 Option Plans.
By the Compensation and Option Committee
James K. Dutton
Wayne E. Rosing
Frederick W. Zuckerman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation and Option Committee in 1995
consisted of Messrs. Dutton, Kahn, Rosing, and Zuckerman. Mr. Dutton was an
executive officer of the Company from 1979 to 1985.
PERFORMANCE MEASUREMENT COMPARISON(1)
The following chart shows the value of an investment of $100 on December
31, 1990, in cash of (i) the Company's Common Stock, (ii) the H&Q Technology
Stock Index, and (iii) the Nasdaq Market Index.
FIVE YEAR TOTAL RETURN CHART
H&Q Technology NASDAQ Market
Caere Stock Index Index
12/31/90 100 100 100
12/91 103.45 147.83 160.55
12/92 248.28 170.04 186.85
12/93 132.76 185.56 214.5
12/94 250 215.39 209.67
12/95 98.28 323.4 296.51
(1) The material in this performance graph is not soliciting material, is not
deemed filed with the SEC, and is not incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the date of this proxy statement and irrespective of any general
incorporation language in such filing.
23.
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CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he or she may
be required to pay in actions or proceedings in which he or she is or may be
made a party by reason of his or her position as a director, officer or other
agent of the Company, and otherwise to the full extent permitted under Delaware
law and the Company's Bylaws.
OTHER MATTERS
The Board does not know of any other matters which may come before the
Annual Meeting. If any other matters are properly presented at the meeting, it
is the intention of the persons named in the accompanying proxy to vote, or
otherwise to act, in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1997 Annual Meeting of Stockholders must be received by the Company no
later than December 17, 1996, in order to be included in the proxy statement and
proxy relating to, and in order to be presented at, that Annual Meeting.
The Board hopes that stockholders will attend the Annual Meeting.
Whether or not you plan to attend, you are urged to complete, sign and return
the enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the Annual Meeting, and your cooperation will be
appreciated. Stockholders who attend the Annual Meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors
BLANCHE M. SUTTER, Secretary
Los Gatos, California
April 15, 1996
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CAERE CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1996
The undersigned hereby appoints Robert G. Teresi and Blanche M. Sutter,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Caere Corporation (the
"Company") which the undersigned may be entitled to vote at the annual Meeting
of Stockholders of the Company to be held at the Toll House Hotel, 140 South
Santa Cruz Avenue, Los Gatos, California, on Tuesday, May 14, 1996, at 9:00
a.m., and at any and all continuations and adjournments thereof, with all
powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
THE NOMINEE NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, AND 4 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
(Continued and to be signed on other side)
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEE FOR DIRECTOR NAMED BELOW.
1. To elect one director of the Company to serve for the ensuing three
years until the Company's 1999 Annual Meeting of Stockholders and until his
successor is elected and qualified.
Nominee: James K. Dutton
FOR the nominee listed above (except as marked to the contrary below) ____
WITHHOLD AUTHORITY to vote for the nominee listed above ____
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2, 3, AND 4.
2. To approve the 1992 Non-Employee Directors' Stock Option Plan, as
amended, to (i) increase the number of shares which may be issued from 130,000
to 230,000, an increase of 100,000 shares; (ii) increase the size of automatic
grants made under the Plan; (iii) provide for full vesting of options under
certain circumstances; and (iv) make the change of control definition in the
Plan similar so that used in the Company's Executive Officers'
Change-of-Control Severance Plan.
3. To approve the 1981 Incentive and Supplemental Stock Option Plans, as
amended, to (i) increase the number of shares that may be issued under the
Plans from 3,520,000 to 3,595,000, an increase of 75,000 shares; and (ii) add
provisions with respect to Section 162(m) of the Internal Revenue Code of 1986,
as amended.
4. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1996.
Please sign exactly as your name appears hereon. If the stock is
registered in the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians, and attorneys-in-fact should add their
titles. If signer is a corporation, please give full corporate name and have a
duly authorized officer sign, stating title. If signer is a partnership, please
sign in partnership name by authorized person.
Please vote, date, and promptly return this proxy in the enclosed
return envelope, which is postage prepaid if mailed in the United States.
Signature: __________________________________ Date: __________________
Signature: __________________________________ Date: __________________