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 Section 240.14a-11(c) or Section
240.14a-12
HOGAN SYSTEMS, INC.
- - --------------------------------------------------------------------------------
(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):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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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.
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HOGAN SYSTEMS, INC.
5080 SPECTRUM DRIVE
SUITE 400E
DALLAS, TEXAS 75248
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 13, 1995
To The Shareholders of Hogan Systems, Inc.:
Notice Is Hereby Given that the Annual Meeting of Shareholders of Hogan
Systems, Inc. ("Hogan"), a Delaware corporation, will be held on Wednesday,
December 13, 1995, at 10:00 a.m., local time, at the Westin Hotel-Galleria,
13340 Dallas Parkway, Dallas, Texas 75240, for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected and have qualified.
2. To approve an amendment to the Hogan Systems, Inc. 1985 Nonstatutory
Stock Option Plan to increase the number of shares reserved thereunder by a
total of 700,000 shares.
3. To ratify the appointment of Price Waterhouse as independent
accountants of Hogan for the fiscal year ending March 31, 1996.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on October 24, 1995 are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting and
any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting. If you
do not expect to attend the Annual Meeting in person, it is urged that you sign,
date and return the enclosed proxy in the accompanying postage prepaid envelope.
The proxy may be revoked at any time before it is voted, and shareholders who
execute proxies may nevertheless attend the Annual Meeting and vote their shares
in person.
By Order of the Board of Directors,
R. EDWIN PEARCE
SECRETARY
Dallas, Texas
November 7, 1995
HOGAN SYSTEMS, INC.
5080 SPECTRUM DRIVE
SUITE 400E
DALLAS, TEXAS 75248
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 13, 1995
INTRODUCTION
THIS PROXY STATEMENT IS BEING FURNISHED TO SHAREHOLDERS OF HOGAN SYSTEMS,
INC. ("HOGAN" OR THE "COMPANY"), A DELAWARE CORPORATION, IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS OF HOGAN FOR USE AT THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD AT THE WESTIN HOTEL-GALLERIA, 13340 DALLAS
PARKWAY, DALLAS, TEXAS 75240, AT 10:00 A.M., LOCAL TIME, ON WEDNESDAY, DECEMBER
13, 1995 AND AT ANY ADJOURNMENT THEREOF (THE "ANNUAL MEETING"). THE FIRST DATE
ON WHICH THIS PROXY STATEMENT AND ENCLOSED FORM OF PROXY ARE BEING SENT TO HOGAN
SHAREHOLDERS IS ON OR ABOUT NOVEMBER 7, 1995.
PURPOSE OF THE ANNUAL MEETING
The purpose of the Annual Meeting is (i) to elect five directors to serve
until the next Annual Meeting of Shareholders and until their successors are
elected and have qualified, (ii) to approve an amendment to the Hogan Systems,
Inc. 1985 Nonstatutory Stock Option Plan to increase the number of shares
reserved thereunder by a total of 700,000 shares, (iii) to ratify the
appointment of Price Waterhouse as independent accountants of Hogan for the
fiscal year ending March 31, 1996, and (iv) to transact such other business as
may properly come before the meeting or any adjournment thereof.
VOTING
SHARES ELIGIBLE TO VOTE; VOTING
Only holders of record of Hogan Common Stock at the close of business on
October 24, 1995 are entitled to vote at the Annual Meeting. On that date there
were 14,509,415 shares of Hogan Common Stock outstanding. Each share of Hogan
Common Stock is entitled to one vote per share, except that holders of Hogan
Common Stock have cumulative voting rights with respect to the election of
directors. Cumulative voting permits a shareholder to multiply the number of
shares which he/she is entitled to vote at the meeting by the number of
directors to be elected and, at such shareholder's option, to cast the number of
votes so determined for one nominee or to distribute them to any two or more
nominees.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect on the election of directors. Abstentions may be specified
on the proposal to approve the amendment to the 1985 Nonstatutory Stock Option
Plan and the ratification of the appointment of independent accountants (but not
for the election of directors). Abstentions, if recorded, will be considered
present and entitled to vote at the meeting and will have the effect of a
negative vote because such proposals require the affirmative vote of a majority
of the shares present in person or represented by proxy at the meeting and
entitled to vote.
Brokers that are member firms of the New York Stock Exchange ("NYSE") and
who hold shares in street name for customers have the authority under the rules
of the NYSE to vote those shares with respect to the election of directors and
the ratification of the appointment of independent accountants if they have not
received instructions from a beneficial owner. A failure by brokers to vote
those shares will have no effect in the outcome of the election of directors or
the proposal to ratify the appointment of the independent accountants because
such shares will not be considered shares present and entitled to vote with
respect to such matters.
PROXIES
If a proxy in the accompanying form is properly executed, returned to Hogan
or its agent and not revoked, the shares represented by such proxy will be voted
in accordance with the instructions set forth thereon or, if no directions are
indicated, the proxy will be voted (i) for each nominee for election as a
director, subject to the discretion of the holder or holders of the proxy to
cumulate votes for one or more nominee, (ii) to approve an amendment to the
Hogan Systems, Inc. 1985 Nonstatutory Stock Option Plan to increase the number
of shares reserved thereunder by a total of 700,000 shares, (iii) to ratify the
appointment of Price Waterhouse as independent accountants of Hogan for the
fiscal year ending March 31, 1996, and (iv) to transact such other business as
may properly come before the meeting or any adjournment thereof. If any other
matter should be presented at the Annual Meeting upon which a vote may properly
be taken, the shares represented by the proxy will be voted with respect thereto
in accordance with the discretion of the person or persons holding such proxy.
Hogan will bear all of the costs of the solicitation of proxies for use at
the Annual Meeting. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and telegram by directors, officers,
employees and agents of Hogan, who will undertake such activities without
additional compensation, or by agents of Hogan, the cost of which will be borne
by Hogan. Hogan has retained D. F. King & Co., Inc. to solicit proxies for the
approximate cost of $4,500. Banks, brokerage houses and other institutions,
nominees or fiduciaries will be requested to forward the proxy materials to the
beneficial owners of Hogan Common Stock held of record by such persons and
entities and will be reimbursed for their reasonable expenses in forwarding such
material.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of Hogan a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
OWNERSHIP OF SHARES
The following table presents information provided to Hogan as to the
beneficial ownership of Hogan Common Stock by persons holding approximately 5
percent or more of the outstanding shares of Hogan Common Stock and known
significant shareholders as of October 24, 1995. Information as to the number of
shares of Common Stock owned and the nature of ownership has been provided by
these individuals or derived from Schedule 13D or 13G filings and is not within
the direct knowledge of the Company. Unless otherwise indicated, the named
individuals possess sole voting and investment power with respect to the shares
listed.
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED OF TOTAL
- - --------------------------------------------------------------------------- ----------------- -----------
Gregor G. Peterson (1) .................................................... 1,303,804 8.99%
904 Lakeshore Drive
P.O. Box 4450
Incline Village, NV 89450
Charles J. Brooks ......................................................... 1,016,356 7.00%
Suite 2
2016 Forest Avenue
San Jose, CA 95128
ICM Asset Management, Inc. (2) ............................................ 1,183,050 8.15%
601 W. Main Avenue
Suite 917
Spokane, WA 99201
<FN>
- - ------------------------
(1) Represents: (a) 2,920 shares held directly by Mr. Peterson, (b) 1,000,268
shares held by a trust for the benefit of Mr. Peterson and his wife, (c)
240,616 shares owned by trusts of which
2
Mr. Peterson's wife is trustee or co-trustee with respect to which Mr.
Peterson disclaims beneficial ownership, and (d) 60,000 shares issuable
upon exercise of outstanding options granted by Hogan which are presently
exercisable.
(2) As reflected in Schedule 13G dated December 31, 1994. Represents: (a)
39,300 shares on which ICM has sole voting power, (b) 364,700 shares on
which ICM has shared voting power, and (c) 1,183,500 shares on which ICM
has shared dispositive power.
The following table sets forth the beneficial ownership of Hogan Common
Stock as of October 24, 1995 by each director and nominee for director, by
Hogan's Chief Executive Officer and next four most highly compensated executive
officers, and by all of Hogan's directors and executive officers as a group.
Information as to the number of shares of Common Stock owned and the nature of
ownership has been provided by these individuals' filings and is not within the
direct knowledge of the Company. Unless otherwise indicated, the named
individuals possess sole voting and investment power with respect to the shares
listed.
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENT OF
NAME OWNED TOTAL
- - --------------------------------------------------------------------------- ----------------- -----------
William H. Dougherty (1)................................................... 106,000 *
Carol F. Dressler (2)...................................................... 18,100 *
William O. Hunt (3)........................................................ 96,200 *
Paul J. Palmer (4)......................................................... 17,000 *
Michael H. Anderson (5).................................................... 403,000 2.78%
James J. Dellamore (6)..................................................... 70,000 *
W. Daniel Johnson (6)...................................................... 77,500 *
R. Edwin Pearce (7)........................................................ 127,123 *
Paul J. Zoukis (6)......................................................... 90,000 *
All directors and current executive officers as a group (11 individuals)
(8)....................................................................... 1,052,534 7.25%
<FN>
- - ------------------------
* Represents less than one percent (1%) of the total number of shares
outstanding.
(1) Includes 6,000 shares issuable upon the exercise of options granted by
Hogan which were exercisable at October 24, 1995, or within 60 days
thereafter.
(2) Includes 18,000 shares issuable upon the exercise of options granted by
Hogan which were exercisable at October 24, 1995, or within 60 days
thereafter.
(3) Includes 60,000 shares issuable upon exercise of options granted by Hogan
which were exercisable at October 24, 1995, or within 60 days thereafter.
(4) Includes 12,000 shares issuable upon the exercise of options granted by
Hogan which were exercisable at October 24, 1995, or within 60 days
thereafter.
(5) Includes 400,000 shares issuable upon the exercise of options granted by
Hogan which were exercisable at October 24, 1995, or within 60 days
thereafter.
(6) Represents shares issuable upon the exercise of options granted by Hogan
which were exercisable at October 24, 1995, or within 60 days thereafter.
(7) Includes 111,000 shares issuable upon the exercise of options granted by
Hogan which were exercisable at October 24, 1995, or within 60 days
thereafter.
(8) Includes 892,000 shares issuable upon the exercise of options granted by
Hogan which were exercisable at October 24, 1995, or within 60 days
thereafter.
3
ELECTION OF DIRECTORS
NOMINEES
Five directors, constituting the entire Board of Directors of Hogan, are to
be elected at the Annual Meeting. The nominees are MICHAEL H. ANDERSON, WILLIAM
H. DOUGHERTY, CAROL F. DRESSLER, WILLIAM O. HUNT AND PAUL J. PALMER. All of the
Directors have previously been elected directors of Hogan by the shareholders.
All of the nominees have consented to be named and to serve if elected. In
the event that any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, which is not expected, the proxies will be voted
with discretionary authority for a substitute designated by the present Board of
Directors.
The five directors are to be elected by a plurality of the shares voted. The
Board of Directors unanimously recommends a vote FOR each of the nominees.
The table below sets forth information about each director/nominee of the
Company:
NAME AGE POSITION WITH THE COMPANY
- - -------------------------------- --- ----------------------------------------------------------------
Michael H. Anderson............. 56 Chairman of the Board of Directors, President and Chief
Executive Officer
William H. Dougherty............ 64 Director
Carol F. Dressler............... 49 Director
William O. Hunt................. 61 Vice Chairman of the Board of Directors
Paul J. Palmer.................. 64 Director
Mr. Anderson has been Chairman of the Board, President and Chief Executive
Officer of Hogan since August 1993. He was president and chief executive officer
of Hogan from June 1992 to August 1993. Prior to joining Hogan, Mr. Anderson
served as executive vice president of NEC Technologies, Inc. (March 1989 to
February 1992) and president of Nixdorf Computer Corp. (February 1982 to March
1989).
Mr. Dougherty has been a director of Hogan since 1994 and currently serves
as Chair of the Compensation Committee. A private investor since January 1994,
he was Group Executive Vice President and Chief Financial Officer of KeyCorp
from March 1989 to December 1993. Prior to joining KeyCorp, Mr. Dougherty served
in various positions with banking organizations, including President of NCNB
Corp. and Vice Chairman of Southeast Bank, N.A. He has also served as Vice
Chairman and Chief Financial Officer of Coca-Cola Bottling Co. Consolidated, and
as a director of NCNB Corp., North Carolina National Bank, Southeast Bancorp,
Southeast Bank, N.A., and Coca-Cola Bottling Co. Consolidated.
Ms. Dressler has been a director of Hogan since 1992 and currently serves as
Chair of the Options Committee. She is Executive Director, Executive Education,
for the Graduate School of Business of Stanford University. Prior to assuming
this position, she was Associate Vice President of the Stanford University
Office of Development from July 1988 to October 1993.
Mr. Hunt has been a director of Hogan since 1982, has served as Vice
Chairman of the Board since August 1993 and is Chair of the Audit Committee. He
was Chairman of the Board of Hogan from August 1990 to August 1993. From
December 1992 to the present, he has served as Chairman of the Board, President
and Chief Executive Officer of Intellicall, Inc. a company engaged in the
business of providing products and services to pay telephone networks on a
worldwide basis. Prior to joining Intellicall, from July 1989 to July 1992, he
was Chief Executive Officer of Alliance Telecommuni-cations Corporation, a
company engaged in the manufacture and service of wireless communications
systems. Mr. Hunt also serves as a director of The Allen Group, Inc., Dr Pepper
Bottling Company of Texas, and American Homestar Corporation.
4
Mr. Palmer has been a director of Hogan since 1993. An Executive Consultant
since June 1992, he was Vice President of International Business Machines
Corporation from March 1982 to June 1992. He serves as Chairman of the Board of
Novasoft Systems, Inc., and as a director of XLI, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of eight (8) meetings during the fiscal
year ended March 31, 1995. Each director attended at least 87.5 percent of the
combined number of meetings of the Board of Directors and of each committee on
which he or she served.
The Board of Directors has an Audit Committee, an Options Committee, and a
Compensation Committee. There is no nominating committee or committee performing
the functions of a nominating committee.
The Audit Committee, which consists of Ms. Dressler and Messrs. Dougherty,
Hunt, and Palmer, met five (5) times during fiscal year 1995. This Committee
recommends engagement of Hogan's independent accountants and reviews internal
accounting procedures and internal controls with Hogan's financial and
accounting staff.
The Options Committee met one (1) time during fiscal year 1995, and acted by
consent in making option grants to certain key employees during the year. The
Committee consists of Ms. Dressler, Mr. Palmer and Mr. William M. Doran. Mr.
Doran, a partner with the law firm of Morgan, Lewis & Bockius, also serves as an
Assistant Secretary of Hogan. The purpose of the Options Committee is to
consider and approve stock option grants under Hogan's incentive and
nonstatutory stock option plans.
The Compensation Committee presently consists of Messrs. Dougherty, Palmer
and Hunt and reviews and approves Hogan's executive compensation policy and
distributions to officers thereunder. In fiscal year 1995 two (2) meetings of
the Compensation Committee were held.
Directors of Hogan who are not employees of Hogan are paid an annual
retainer of $12,000 and a fee of $950 for each meeting of the Board and $250 for
each committee meeting attended.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee and the Options Committee (the "Committees")
collectively are responsible for structuring the Company's executive
compensation program. The Committees' primary mission is to structure an
executive compensation strategy and administer a range of policies and programs
designed to reflect the Company's fundamental philosophy of aligning the
interests of executives with the interests of shareholders by creating a
performance-oriented environment that rewards performance that is related to the
goals of the Company. The program is also designed to ensure the competitiveness
of executive compensation so that the Company can attract, motivate, and retain
executive talent with outstanding qualifications and experience in the highly
competitive software, data processing and services marketplace. Recommendations
of the Compensation Committee are ultimately considered and approved by the
Board of Directors. No member of the Committees, composed of the individuals
listed below this report, is an employee of the Company. The Company has, from
time to time, retained independent compensation consultants to advise the
Company on various compensation matters.
The Committees periodically meet throughout the year as necessary. The
Compensation Committee annually evaluates the competitiveness of the executive
compensation program, taking into consideration the individual performance of
the Company's executives, the operating results of the Company and external
sources of compensation information.
In their considerations, the Committees do not assign quantitative relative
weights to different factors or follow mathematical formulae. Rather, the
Committees exercise discretion and judgment after considering factors deemed
relevant.
5
The key components of the executive compensation program are:
- base salary;
- executive bonus (in years when the Company's performance warrants such an
award); and
- stock option grants.
BASE SALARY
The Compensation Committee's policy is to establish base salary levels that
are intended to be consistent with (i) competitive practice, (ii) skills and
experience required, and (iii) the level of responsibility and the performance
of the individual executive.
The Compensation Committee reviews executive base salaries annually and
makes adjustment based on competitive trends and the performance of the
individual executive.
EXECUTIVE BONUS
The purpose of the executive bonus program is to provide a link between
executive compensation and the attainment of annually defined Company and
individual objectives. As a result, bonus awards are made when the Company's and
the individual's performance warrants an award.
In the past, the Company has set various performance goals and revenue
targets that varied from year to year. For fiscal year 1995, these goals were
the attainment of operating income targets and designated earnings per share
levels. Executive bonus payments are dependent upon the Company's attainment of
such performance goals. A target award opportunity is established for each
executive based on the executive's level of responsibility, position, salary
level and potential contribution to the success of the Company, and
considerations of competitive compensation. The executive's actual award
opportunity is determined by the Board of Directors on recommendation by the
Compensation Committee at the end of the fiscal year based on the Company's
operating income. Payments are a percentage of base salary paid from a bonus
pool.
Typically at the beginning of each fiscal year, the Board of Directors,
acting on the recommendation of the Compensation Committee, and in consultation
with management of the Company, establishes target levels of earnings per share
and qualitative performance for the Company as a whole for the current fiscal
year. These targets are based on selected levels of earnings per share, giving
consideration to the historical results for the Company, as well as a percentage
growth in operating income over the prior year's actual performance. These
targets reflect external standards of financial performance that are related to
the annual business plans of the operating groups or the Company as a whole.
Threshold and maximum levels of operating income are then established around
these targets in order to create a range of operating income that will be used
to measure the potential award opportunity under the annual incentive award
plan.
To determine the actual award to be granted to an executive, an assessment
is then made of the executive's position, salary level and individual
performance, including contributions in a number of specific areas, such as
creativity, leadership, decision making and financial and general management.
This assessment ensures that individual awards reflect an executive's specific
contributions to the success of the Company. Actual awards made to executives
are based upon recommendations made by the Compensation Committee, subject to
the approval of the Board of Directors, which may revise the Compensation
Committee's award recommendations at its discretion.
STOCK OPTION GRANTS
Stock option grants are administered by the Options Committee. Stock option
grants constitute the Company's principal long-term incentive vehicle.
6
The Company has periodically granted stock options in order to provide
certain of its executives with a competitive total compensation package and
reward them for their contribution to the Company's long-term performance. These
grants are designed to align the executive's interest with that of the
shareholders and to strengthen the link between executive compensation and
long-term Company performance.
All options granted have an option price that is not less than 100 percent
of the fair market value of the stock on the date of grant. The term of the
options, vesting increments, and the dates after which they become exercisable
are established by the Options Committee of the Company, subject to the terms of
the Company's stock option plans. The Options Committee works with the Board and
Compensation Committee to grant options which are consistent with the principles
of the Company's compensation guidelines and practices.
In determining the number of shares to be granted to an executive, the
Options Committee considers recommended grants from management, and makes an
assessment of the executive's position, salary level and individual performance,
including contributions in a number of specific areas, such as creativity,
leadership, decision making and financial and general management. This
assessment ensures that individual grants reflect an executive's specific
contributions to the success of the Company. All grants made to executives must
be approved by the Options Committee.
FISCAL YEAR 1995 EXECUTIVE COMPENSATION
Michael H. Anderson was hired as the Company's President and Chief Executive
Officer in June 1992 with a three-year employment contract, which established a
minimum base salary level subject to annual increases as determined in the
discretion of the Board of Directors of the Company. In July 1994, the agreement
was amended to provide for a new three-year term with automatic renewals. See
"EMPLOYMENT AGREEMENTS." After consideration of the factors described above
under "Base Salary," the Board of Directors established a base annual salary of
$298,750 for Mr. Anderson for the 1995 fiscal year.
For the 1995 fiscal year, Mr. Anderson received an annual bonus award of
$223,000, which was made on the basis of the compensation philosophy described
above under "Executive Bonus" and reflects (i) fiscal year 1995 performance that
was consistent with operating income targets and (ii) qualitative factors such
as leadership and team building. The other executive officers' annual bonus
awards were based upon the same considerations applicable to Mr. Anderson, as
described above. With respect to each of the executive officers noted in the
Summary Compensation Table, option awards were granted during the 1995 fiscal
year.
The base salaries of Messrs. Dellamore, Johnson, Pearce, and Zoukis for the
1995 fiscal year were determined based upon the factors described above in "Base
Salary." See "Summary Compensation Table."
SUMMARY
The Compensation Committee, in its judgment, has set compensation levels
that reflect each executive's contribution toward the Company's fiscal year 1996
objectives and believes that the executive compensation program, as implemented,
aligns the financial opportunity for the executive with increased value to
shareholders.
COMPENSATION COMMITTEE
William H. Dougherty, Chair
William O. Hunt
Paul J. Palmer
OPTIONS COMMITTEE
Carol F. Dressler, Chair
William M. Doran
Paul J. Palmer
7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From August 9, 1990 to August 1993, William O. Hunt effectively served in an
executive officer capacity in connection with his service as Chairman of the
Board of Directors. William M. Doran is a partner with the firm of Morgan, Lewis
& Bockius, counsel to Hogan. No other member of the Committee has any
interlocking relationship with any other corporation that requires specific
disclosure under this heading.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation for the
past three years paid to each of the five most highly compensated directors or
executive officers of the Company whose aggregate current remuneration exceeded
$100,000 (the "named executive officers").
ANNUAL COMPENSATION
(A) (B)
OTHER ANNUAL ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- - ----------------------------------- --------- ----------- ----------- ----------------- ----------- -------------
Michael H. Anderson ............... 1995 $ 298,750 $ 223,000 -- 75,000 $ 10,489
Chairman of the Board, 1994 $ 285,000 $ 223,000 -- -- 13,391
President and Chief 1993 $ 195,102 $ 128,750 -- 500,000 43,874
Executive Officer
James J. Dellamore ................ 1995 $ 148,750 $ 75,000 -- 75,000 $ 6,380
Senior Vice President 1994 $ 135,000 $ 75,000 -- -- 6,922
Development and 1993 $ 107,500 $ 37,500 -- 71,000 4,300
Services
W. Daniel Johnson ................. 1995 $ 156,875 $ 75,000 -- 40,000 $ 6,237
Senior Vice President 1994 $ 150,000 $ 75,000 -- -- 2,674
Corporate Development 1993 $ 133,500 $ 65,400 -- 100,000 --
R. Edwin Pearce ................... 1995 $ 156,875 $ 80,000 -- 40,000 $ 6,886
Senior Vice President, 1994 $ 150,000 $ 80,000 -- -- 7,932
Secretary and General 1993 $ 145,002 $ 52,000 -- 72,000 5,800
Counsel
Paul J. Zoukis .................... 1995 $ 159,167 $ 90,000 -- 75,000 $ 6,916
Senior Vice President 1994 $ 150,000 $ 90,000 -- -- 13,861
Marketing and Sales 1993 $ 128,583 $ 65,000 -- 150,000 103,631
<FN>
- - ------------------------
(A) Does not include amounts expended by Company that may have a value as a
personal benefit to the named executive officer. The value of such benefits
with respect to each executive officer named is less than 10% of his total
salary and bonus reported herein.
(B) The Company contributed the following amounts, during the 1995 fiscal year,
under the Savings and Profit Sharing Plan with respect to the following
named executive officers: Michael H. Anderson $6,310.32, James J. Dellamore
$5,950.00, W. Daniel Johnson $4,725.24, R. Edwin Pearce $6,247.83, and Paul
J. Zoukis $6,276.99. The Company contributed the following amounts, during
the 1995 fiscal year, under Split Dollar Insurance policies with respect to
the following senior executive officers: Michael H. Anderson, $4,179.00,
James J. Dellamore, $430.00, W. Daniel Johnson, $1,512.00, R. Edwin Pearce,
$639.00, and Paul J. Zoukis, $639.00. Such amounts represent the actuarial
value of the benefit to the employee of the current year's insurance
premium paid by the Company in excess of that required to fund the death
benefit under the policy. Cumulative net life insurance premiums paid are
recovered by the Company at death or cancellation of the policy.
8
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the details regarding the stock options
granted to the named executive officers in fiscal year 1995. In addition, there
are shown hypothetical gains that would exist for the respective options.
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------- VALUE AT ASSUMED RATES
NUMBER OF OF STOCK PRICE
SHARES OF PERCENT OF TOTAL APPRECIATION FOR OPTION
COMMON STOCK OPTIONS GRANTED EXERCISE TERM(2)
UNDERLYING TO EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME OPTIONS GRANTED FISCAL YEAR 1995 PER SHARE DATE 5% 10%
- - ----------------------------- --------------- ----------------- ----------- ---------- ----------- -----------
Michael H. Anderson.......... 75,000 12.4 $ 5.50 03/22/05 $ 259,419 $ 657,419
James J. Dellamore........... 75,000 12.4 $ 5.50 03/22/05 $ 259,419 $ 657,419
W. Daniel Johnson............ 40,000 6.6 $ 5.50 03/22/05 $ 138,357 $ 350,623
R. Edwin Pearce.............. 40,000 6.6 $ 5.50 03/22/05 $ 138,357 $ 350,623
Paul J. Zoukis............... 75,000 12.4 $ 5.50 03/22/05 $ 259,419 $ 657,419
<FN>
- - ------------------------
(1) All options disclosed in this table vest in equal annual installments for
each individual or grant on the first through the fourth anniversary of
such grants.
(2) The dollar amounts under these columns assume 5% and 10% compounded annual
appreciation in Hogan Common Stock relative to the exercise price for each
option specified. These calculations and assumed realizable values are
required to be disclosed under Securities and Exchange Commission rules
and, therefore, are not intended to forecast possible future appreciation
of Hogan Common Stock or amounts that may be ultimately realized upon
exercise. Hogan did not use an alternate formula for the valuation of such
options because it is not aware of any formula which will determine with
reasonable accuracy a present value of options based upon future, unknown
or volatile factors.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the named
executive officers concerning exercise of options during fiscal year 1995, and
the value of unexercised options held as of March 31, 1995.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES MARCH 31, 1995 MARCH 31, 1995(1)
ACQUIRED ON VALUE -------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------ ----------- ----------- ----------- ------------- -------------- --------------
Michael H. Anderson........... 0 $ 0.00 300,000 275,000 $ 500,000.00 $ 306,250.00
James J. Dellamore............ 0 $ 0.00 60,999 114,001 $ 40,582.12 $ 70,667.88
W. Daniel Johnson............. 0 $ 0.00 69,166 105,834 $ 41,665.75 $ 66,459.25
R. Edwin Pearce............... 4,000 $ 0.00 103,666 82,334 $ 58,915.75 $ 38,584.25
Paul J. Zoukis................ 0 $ 0.00 73,333 151,667 $ 48,332.87 $ 110,417.13
<FN>
- - ------------------------
(1) Based on a share price of $6.25 at March 31, 1995.
9
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
shareholder return on its common stock for the last five fiscal years with the
cumulative total return of The Nasdaq Stock Market U.S. Companies Index and the
Standard and Poor's Software and Services Index for the same period.
COMPARISON OF CUMULATIVE TOTAL RETURN*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HOGAN SYSTEMS NASDAQ U.S. S&P SOFTWARE
1990 100.00 100.00 100.00
1991 124.24 114.21 91.23
1992 124.76 145.58 118.11
1993 177.42 167.28 156.05
1994 214.14 179.82 175.09
1995 167.67 200.44 236.18
ASSUMES INITIAL INVESTMENT OF $100
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
AND IS BASED ON MARKET CAPITALIZATION
FOR FISCAL YEAR ENDED MARCH 31, 1995
As of September 29, 1995, the cumulative total returns of the above indices
would be as follows: Hogan Systems $215.93; NASDAQ U.S. $256.84; and S&P
Software $311.75.
EMPLOYMENT AGREEMENTS
In connection with his employment as President and Chief Executive Officer
of Hogan, on June 29, 1992, Michael H. Anderson entered into an employment
agreement with Hogan with a three (3) year term ending June 28, 1995 (the
"Agreement"). The Agreement originally provided for a minimum base salary of
$257,500 and for payment of an equal or greater amount of base salary as
determined in the discretion of the Board. The Agreement provided for a
discretionary performance bonus of up to 50 percent of his base salary in effect
at the end of each fiscal year. In addition, Mr. Anderson was granted on June
28, 1992, nonstatutory options to purchase 300,000 shares of Hogan stock at an
exercise price equal to the fair market value of the stock on the date of grant.
These 300,000 options vest in three annual installments of 100,000 shares per
year commencing one year
10
from the date of grant. Mr. Anderson was also granted nonstatutory options to
purchase (i) 200,000 shares of Hogan stock on March 25, 1993, which vest in four
annual installments of 50,000 shares per year commencing one year from the date
of grant and (ii) 75,000 shares of Hogan stock on March 22, 1995, which vest in
four annual installments of 18,750 shares per year commencing one year from the
date of grant. These options all vest immediately in the event of a change in
control of the Company. In July 1994, the Agreement was amended (the "1994
Amendment") to provide (i) for a new three-year term commencing on the date of
signing of the 1994 Amendment, with automatic renewals of such three-year term
scheduled to occur on each anniversary of the 1994 Amendment, (ii) for a new
minimum base salary of $300,000 and for payment of equal or greater amount of
base salary as determined in the discretion of the Board, (iii) for a
discretionary performance bonus of up to 80 percent of his base salary in effect
at the end of each fiscal year, (iv) for the right to participate in any
supplemental retirement plans that are established by the Company in the future,
and (v) for a right to payment, in the event that Mr. Anderson's employment
relationship is terminated for reasons other than cause or voluntary
termination, of an amount equal to the then current annual base salary being
paid to Mr. Anderson at the time of termination for a period of three years. The
1994 Amendment or subsequent amendments also provide Mr. Anderson with a minimum
base salary of $315,000 and following a change in control of the Company, the
contractual right to (A) payment of any executive incentive bonus for which Mr.
Anderson would have been otherwise entitled either on a pro rata basis in the
event of his involuntary termination or according to a formula which considers
the transaction price and an earnings per share trading multiple, (B) the
acceleration of any options granted to him during the term of the 1994 Amendment
or future amendments and the ability to exercise such nonqualified options for a
period of three (3) years following involuntary termination, but not beyond the
term of the option, and (C) the continuation of certain health insurance
benefits and other emoluments of employment for a three (3) year period
following such termination.
In addition, in July 1994, the Company entered into agreements with each of
its senior vice presidents to accelerate the vesting provisions of stock options
in the event of a change in control of the Company and to pay an amount of
severance equal to one year's base salary and a bonus payment on a pro rata
basis in the event of termination. Subsequent amendments provide in the event of
a change in control of the Company for payment of bonus for which such executive
officer would have been otherwise entitled according to a formula which
considers the transaction price and an earnings per share trading multiple, the
ability to exercise nonqualified options for a period of three (3) years
following involuntary termination, but not beyond the term of the option, and
the continuation of certain health insurance benefits and other emoluments of
employment for a one year period following such termination.
CERTAIN TRANSACTIONS
The Company is party to an agreement with Xycor, Inc. ("Xycor"), a privately
held provider of data processing or software for the credit life insurance
industry, pursuant to which Hogan will sell excess computer time to Xycor for a
negotiated fee based on the amount of usage by Xycor. Gregor G. Peterson, the
beneficial owner of 8.99 percent of the Company's common stock, has a minority
ownership interest in Xycor and has an indirect material interest in this
transaction. Revenue to Hogan from this agreement during the 1995 fiscal year
equalled approximately $1.5 million, and it is anticipated that such revenues
for the 1996 fiscal year could be approximately $1.32 million. While a director
of the Company, Mr. Peterson abstained from the vote of the Board of Directors
approving this agreement.
APPROVAL OF AMENDMENT TO THE 1985 NONQUALIFIED STOCK OPTION PLAN
At the Annual Meeting, there will be presented to shareholders a proposal to
approve the adoption by the Board of Directors of an amendment to the 1985
Nonqualified Stock Option Plan, as amended (the "1985 Plan"). The 1985 Plan is
intended to provide an incentive to employees and non-employee directors through
the issuance of options to purchase common stock of the Company.
GENERAL DESCRIPTION OF THE 1985 PLAN
The 1985 Plan was adopted by the Board of Directors on May 8, 1985 and
approved by the shareholders in September 1985. A total of 700,000 shares was
originally reserved for issuance under
11
the 1985 Plan. Through Board of Director and shareholder action prior to the
1995 fiscal year, the number of shares originally reserved for issuance under
the 1985 Plan was increased to 2,150,000 shares. At October 24, 1995 options to
purchase 284,837 shares had been exercised, options to purchase 1,842,900 shares
were outstanding at exercise prices ranging from $3.75 to $11.125 per share, and
22,263 shares were available for future grant under the 1985 Plan.
PROPOSED AMENDMENT
On June 28, 1995 the Board of Directors adopted an amendment to the 1985
Plan which is subject to shareholder approval at the Annual Meeting. The
amendment will not be effective unless shareholder approval is obtained.
The amendment would increase the maximum number of shares of common stock
currently available for issuance under the 1985 Plan by a total of 700,000
shares, thereby increasing the total number of shares authorized under the 1985
Plan to 2,850,000. Taking into account shares currently available for option
grants under the 1985 Plan and assuming approval of the proposed amendment,
722,263 shares would be available for option grants under the 1985 Plan. The
Board of Directors believes that the Company's ability to grant options under
the 1985 Plan is a necessary compensation tool since it is Hogan's principal
long-term incentive compensation device and motivates employees and non-employee
directors in direct correlation with the financial interest of Hogan's
shareholders.
At the Annual Meeting, the shareholders will vote to approve the proposed
amendment to the 1985 Plan. This proposal requires the affirmative votes of the
holders of a majority of the shares of Hogan common stock present, or
represented, and entitled to vote at the Annual Meeting. Unless otherwise
directed by the shareholders, proxies will be voted FOR the approval of the
amendment to the 1985 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE 1985 PLAN.
The 1985 Plan is administered by the Options Committee and provides for the
grant of nonstatutory stock options. Options may be granted under the 1985 Plan
to certain employees of Hogan and its subsidiaries in amounts determined at the
discretion of the Options Committee and non-employee directors of Hogan in
amounts prescribed by the 1985 Plan. Non-employee directors, defined as
directors of Hogan, excluding directors who are paid consultants or employees of
Hogan, receive a program grant of options to purchase 30,000 shares at the time
of election to the Board under the 1985 Plan, and may receive additional options
during any period of service as a non-employee director thereafter, provided
that no non-employee director may be granted an option or options to purchase in
excess of 30,000 shares of common stock during any five-year period.
Approximately 25 employees are considered by the Company to be eligible and
all non-employee directors (as defined above) are eligible to receive option
grants under the 1985 Plan. The number of option grants that will be allocated
under the 1985 Plan to executive officers, employees who are not executive
officers and non-employee directors cannot be estimated. For information
concerning past option grants during the past three fiscal years for current
executive officers, see "Option Grants in the Last Fiscal Year" and
"Compensation Committee Report on Executive Compensation."
The exercise price at which shares may be purchased may not be less than 100
percent of the fair market value of the shares on the date that the option is
granted. Options may be for a period of not more than ten years from the date of
grant, subject to earlier termination on the optionee's death, disability or
termination of employment. Options granted under the 1985 Plan vest in equal
installments commencing on the first anniversary of the date of grant and
historically become fully vested within two to five years after the date of
grant.
The consideration payable for Hogan Common Stock issued upon exercise of
options granted under the 1985 Plan may be paid in cash, by check, by delivery
of shares of Hogan Common Stock having a fair market value equal to the option
price or by delivery of the optionee's promissory note as approved by the Board
of Directors. Under the terms of a Stock Option Exercise Assistance Program,
adopted by the Board of Directors on July 30, 1987, executive officers of Hogan
are permitted to exercise vested options granted under the 1985 Plan by
obtaining a loan from Hogan in the full
12
amount of the exercise price which is secured by a pledge of the Common Stock
obtained upon exercise of the option. The benefits or amounts to be received by
or allocated to executive officers, non-executive officer directors and
employees who are not executive officers under the 1985 Plan, as amended, which
is being acted upon at the Annual Meeting, have not been determined by the
Company.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse as independent
accountants of Hogan for the fiscal year ending March 31, 1996 and recommends
that shareholders vote for ratification of such appointment. That firm has acted
as Hogan's independent accountants since fiscal 1978. A member of the firm is
expected to attend the Annual Meeting and will have the opportunity to make a
statement if he or she desires to do so and to respond to appropriate questions
of the shareholders.
The affirmative vote of holders of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting is required
for ratification of the appointment of Price Waterhouse. Unless otherwise
directed by the shareholders, proxies will be voted for ratification of the
appointment of Price Waterhouse. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth herein that
may come before the meeting. If, however, further business properly comes before
the meeting, the persons named in the proxies will vote the shares represented
thereby in accordance with their judgment.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the directors and certain officers of the Company, and persons who own more than
10 percent of the Company's Common Stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. Such directors, officers and more than
ten percent shareholders are required by 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, all fiscal year
1995 Section 16(a) filing requirements applicable to its directors, officers and
more than 10 percent shareholders were complied with.
NEXT ANNUAL MEETING
Appropriate proposals of shareholders which are intended to be presented by
such shareholders at the 1996 Annual Meeting must be received by Hogan for
inclusion in Hogan's proxy statement and form of proxy relating to that meeting
by March 13, 1996.
ANNUAL REPORT
THE ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED MARCH 31, 1995
WAS PREVIOUSLY MAILED AND DOES NOT CONSTITUTE A PART OF THIS PROXY STATEMENT.
ADDITIONAL COPIES OF THE ANNUAL REPORT ARE AVAILABLE TO ANY SHAREHOLDER UPON
REQUEST DIRECTED TO INVESTOR RELATIONS, HOGAN SYSTEMS, INC., 5080 SPECTRUM
DRIVE, SUITE 400E, DALLAS, TEXAS 75248. A COPY OF HOGAN'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1995 WILL BE SUPPLIED WITHOUT CHARGE
UPON REQUEST SIMILARLY DIRECTED.
Shareholders who do not expect to attend in person are urged to sign, date
and return the accompanying proxy in the envelope provided. In order to avoid
unnecessary expense, we ask your cooperation in mailing in your proxy promptly.
By order of the Board of Directors,
R. Edwin Pearce
SECRETARY
13
HOGAN SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS - AUGUST 10, 1995
P
R
O
X
Y
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND
WILL BE VOTED "FOR" THE PROPOSALS UNLESS OTHERWISE DIRECTED.
The undersigned, revoking all prior proxies,
hereby appoint(s) Michael H. Anderson and William O.
Hunt, and each of them, with full power of substitution,
as proxies to represent and vote as designated hereon,
all shares of Common Stock of Hogan Systems, Inc. which
the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of Hogan to
be held at The Westin Hotel - Galleria, 13340 Dallas
Parkway, Dallas, Texas 75240, on Thursday, August 10,
1995, at 10:00 a.m., local time, and at any adjournments
thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
SEE REVERSE SIDE
/ X / Please mark your SHARES IN YOUR NAME
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election / / / / NOMINEES: Michael H. Anderson, William H. 2. Approve an amendment to the Hogan / / / / / /
of Directors Dougherty, Carol F. Dressler, William O. Systems, Inc. 1985 Nonstatutory
Hunt and Paul J. Palmer. Stock Option Plan to increase the
number of shares reserved thereunder
For, except vote withheld from the following nominee(s): by a total of 700,000 shares.
________________________________________________________
FOR AGAINST ABSTAIN
3. Ratify the selection of Price / / / / / /
Waterhouse as independent account-
ants for the fiscal year ending
March 31, 1996.
_______________________________________________________
*THIS APPLIES TO 1 ONLY.
(INSTRUCTION: To cumulate votes, write the name of the
nominee or nominees in the space provided below, fol-
lowed by "Cumulate for." Except as otherwise directed,
the proxies will have discretion to cumulate votes in
such manner as they may determine.)
SIGNATURE(S)____________________________________ DATE____________
SIGNATURE(S)____________________________________ DATE____________
Please sign exactly as your name appears. If signing as attorney,
executor, trustee or in any other capacity, sign name and title.