UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO .
COMMISSION FILE NUMBER: 0-22667
TSI INTERNATIONAL SOFTWARE LTD.
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1132156
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
45 DANBURY ROAD
WILTON, CT 06897
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 761-8600
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this
Form 10-K. [_]
The aggregate market value of the voting and nonvoting common equity
held by non-affiliates of the Registrant, as of the close of business on March
23, 1998, was approximately $84,842,885.
As of that date, the Registrant had outstanding 9,211,380 shares of
Common Stock, $0.01 par value.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The executive officers, key employees and directors of the Company are as
follows:
NAME AGE POSITION WITH THE COMPANY
-------------------------------- --- ----------------------------------------
Constance F. Galley(1).......... 56 President and Chief Executive Officer
and Director
Eric A. Amster.................. 44 Vice President, Sales
Patricia T. Boggs............... 46 Vice President, Professional Services
Robert H. Bouton................ 57 Vice President, Marketing
Ira A. Gerard................... 50 Vice President, Finance and
Administration, Chief Financial Officer
and Secretary
James Monks..................... 42 Vice President, International Operations
David Raye...................... 37 Vice President, Operations
Edward J. Watson................ 60 Executive Vice President, Business
Development
Saydean Zeldin.................. 57 Vice President, Research and Development
Stewart K.P. Gross(1)(2)........ 38 Director
Ernest E. Keet(1)(2)............ 57 Director
John J. Pendray(1)(2)........... 58 Director
Dennis G. Sisco(1)(2)........... 51 Director
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Constance F. Galley has been President, Chief Executive Officer and a
director of the Company since 1985, when the Company commenced operating as an
independent entity. Prior to 1985, Ms. Galley directed the Company's Marketing
and Development Operations when the Company was part of the Dun & Bradstreet
Corporation. Ms. Galley is a member of the Board of Directors of the software
division of ITAA and is the Chairperson of SACIA, the Business Council of
Southwestern Connecticut. Ms. Galley holds a Bachelor of Arts degree in
Chemistry from Duke University.
Eric A. Amster has been Vice President, Sales since joining the Company in
December 1995. From February 1992 until December 1995, Mr. Amster was employed
by General DataComm Industries, Inc., a data communications company, where he
served most recently as Vice President of U.S. Federal and Commercial Sales.
Mr. Amster holds a Bachelor of Science degree in Computer Science from the
University of Maryland.
Patricia T. Boggs has been Vice President, Professional Services since
joining the Company in June 1997. From February 1991 to 1997, Ms. Boggs was
employed by Datalogix International Inc., where she served most recently as
Vice President, Client Services. Prior to 1991, Ms. Boggs was an Assistant
Professor at both John Carroll University in University Heights, Ohio and
Wright State University in Dayton, Ohio. Ms. Boggs holds a Masters degree in
Economics and a Doctorate in Operations Research/Statistics from Kent State
University.
Robert H. Bouton has been Vice President, Marketing since joining the
Company in March 1992. Prior to March 1992, Mr. Bouton served in various sales
and marketing capacities in the software industry, including Vice President,
Marketing for CGI Systems. Mr. Bouton holds a Bachelor of Science degree in
Electrical Engineering from Cornell University.
Ira A. Gerard has been Vice President, Finance and Administration, Chief
Financial Officer and Secretary since joining the Company in October 1995.
From March 1994 to October 1995, Mr. Gerard served as Vice President and Chief
Financial Officer of Adage Systems International, Inc., an ERP software
company.
2
From July 1993 to March 1994, Mr. Gerard was an independent consultant. From
December 1989 until July 1993, Mr. Gerard was employed by Gestetner PLC, a
photocopier and photographic equipment company, where he served most recently
as Vice President, Finance and Operations. Mr. Gerard holds a Bachelor of Arts
degree in Economics from Union College and a Master of Business Administration
from Harvard University.
James Monks has been Vice President, International Operations of the Company
since May 1997 and was Director, International Operations of the Company from
May 1992 until May 1997. From May 1989 until May 1992, Mr. Monks served as the
Company's Director of European Operations and from April 1985 until May 1989,
Mr. Monks served as the Company's U.K. Manager. Prior to April 1985, Mr. Monks
held various technical support and management positions with the Company when
the Company was a part of the Dun & Bradstreet Corporation. Mr. Monks holds an
Honours Degree in Sports Science and Geography from the Loughborough
University, U.K.
David Raye has been the Vice President, Operations of the Company since June
1994. From August 1992 until May 1994, Mr. Raye served as Vice President,
KEY/MASTER Operations. From August 1991 until July 1992, Mr. Raye served as
the Company's Director of Operations. Prior to August 1991, Mr. Raye served in
various management capacities in the software industry including Director of
Marketing for Information Sciences and Senior Product Marketing Manager for
On-Line Software, International. Mr. Raye holds a Bachelor of Science degree
in Marketing from Rutgers University and a Master of Business Administration
from St. John's University, New York.
Edward J. Watson has been Executive Vice President, Business Development of
the Company since June 1994. From January 1994 until June 1994, Mr. Watson
managed the Company's PC Division. From November 1990 until January 1994, Mr.
Watson was a consultant to the Company and a General Partner of DownEast
Partners, a consulting company. Prior to 1990, Mr. Watson served in various
management capacities in the software industry, including President of TSI
International (the predecessor of the Company) and Higher Order Software. Mr.
Watson is married to Ms. Saydean Zeldin, the Vice President, Research and
Development of the Company. Mr. Watson attended Oxford University.
Saydean Zeldin has been Vice President, Research and Development of the
Company since October 1994. From November 1990 to October 1994, Ms. Zeldin was
a consultant to the Company and a general partner at DownEast Partners, a
consulting company. Prior to 1990, Ms. Zeldin served in several senior
engineering positions in the software industry, including serving as Founder
and President of Touchstone Engineering, a software company that developed a
management planning system using artificial intelligence technology, and
Founder and Executive Vice President of Higher Order Software. Ms. Zeldin was
also responsible for the re-entry guidance development of the Apollo flight
software at the Instrumentation Laboratory, a laboratory of MIT. Ms. Zeldin is
married to Mr. Edward J. Watson, the Executive Vice President, Business
Development of the Company. Ms. Zeldin holds a Bachelor of Arts degree in
Physics from Temple University.
Stewart K.P. Gross has served as a director of the Company since April 1993.
Mr. Gross is a Managing Director of E.M. Warburg Pincus & Co., LLC and has
been employed by E.M. Warburg Pincus & Co., LLC since 1987. Prior to 1987, Mr.
Gross was employed at Morgan Stanley & Co. Mr. Gross is a director of Vanstar
Corporation, BEA Systems, IA Corporation and several privately-held companies.
Ernest E. Keet has served as a director of the Company since April 1985. Mr.
Keet has been the President and a member of the Board of Directors of Vanguard
Atlantic Ltd. since April 1984. Mr. Keet is the Chief Executive Officer and a
director of Axolotl Corp. and from May 1995 until December 1996, was the
President of Axolotl Corp. Mr. Keet also served as the Chairman and Chief
Executive Officer of ECsoft Ltd. from November 1989 to April 1994.
John J. Pendray has served as a director of the Company since April 1985.
Mr. Pendray has been an Executive in Residence at George Mason University
since November 1996. Prior to joining George Mason
3
University, Mr. Pendray was the President of the International Group at
Cincinnati Bell Information Systems from March 1993 to August 1996. From July
1992 to March 1993, Mr. Pendray was an independent consultant. From 1985 until
July 1992, Mr. Pendray was a senior partner at Vanguard Atlantic, Ltd.
Dennis G. Sisco has served as a director of the Company since January 1990.
Mr. Sisco is a partner with Behrman Capital. From December 1988 until February
1997, Mr. Sisco was the President of D&B Enterprises, Inc. (now Cognizant
Enterprises, Inc.). From December 1988 until February 1997, Mr. Sisco had also
been employed by Cognizant Corporation and its predecessor The Dun &
Bradstreet Corporation, most recently as an Executive Vice President. Mr.
Sisco is also a director of the Gartner Group, Inc., Oacis Healthcare Holdings
Corporation and Aspect Development, Inc.
Directors are elected by the stockholders at each annual meeting of
stockholders to serve until the next annual meeting of stockholders or until
their successors are duly elected and qualified. Executive officers are chosen
by, and serve at the discretion of, the Board of Directors. The current
directors were elected pursuant to a stockholders' agreement pursuant to which
certain stockholders agreed to vote their shares to elect Messrs. Gross, Keet,
Pendray and Sisco and Ms. Galley to the Board of Directors. This agreement
terminated in July 1997, upon the closing of the Company's initial public
offering. Except for Mr. Watson and Ms. Zeldin, there are no family
relationships among any of the Company's directors or executive officers.
DIRECTOR COMPENSATION
The Company reimburses the members of its Board for expenses associated with
their attendance at Board meetings and at Board Committee meetings. None of
the members of the Board is entitled to receive fees for attendance at Board
meetings or at Board Committee meetings.
In May 1997, the Board adopted and the Company's stockholders approved the
1997 Directors Stock Option Plan (the "Directors Plan") and reserved a total
of 225,000 shares of the Company's Common Stock for issuance thereunder.
Members of the Board who are not employees of the Company, or any parent or
subsidiary of the Company are eligible to receive stock options under the
Directors Plan. Each eligible director who is or becomes a member of the Board
on or after May 10, 1997 will automatically be granted an option for 15,000
shares. Accordingly, in May 1997, each of Messrs. Gross, Keet, Pendray and
Sisco received options to purchase 15,000 shares of Common Stock at an
exercise price of $6.67 per share. Upon each one-year anniversary of the date
such director is granted the 15,000 share option, he or she will receive an
additional option grant for 3,750 shares, provided such director has served
continuously as a member of the Board. Each 15,000 share option granted under
the Directors Plan will vest over four years as to 25% of the shares on the
last day of each twelve-month period following the date such 15,000 share
option was granted. Each 3,750 share option granted under the Directors Plan
will vest as to 100% of the shares on the last day of the twelve month period
following the date such 3,750 share option was granted. The per share exercise
price of each option granted under the Directors Plan prior to the Company's
initial public offering was the fair market value of a share of the Company's
Common Stock as determined by the Board. The per share exercise price of each
option granted after the Company's initial public offering will be equal to
the closing price of a share of the Company's Common Stock on the Nasdaq
National Market on the date of grant. Options granted under the Directors Plan
generally expire three months after the termination of the optionee's service
to the Company or a parent or subsidiary of the Company, except in the case of
death or disability, in which case the options may be exercised up to 12
months following the date of death or termination of service. In the event of
a merger, consolidation or certain other change of control transactions, the
vesting of all outstanding options granted pursuant to the Directors Plan will
accelerate and such options will become exercisable in full prior to the close
of such corporate transaction. The Directors Plan will terminate in May 2007,
unless terminated earlier in accordance with the provisions of the Directors
Plan.
4
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during 1995, 1996
and 1997 by (i) the Company's chief executive officer and (ii) the Company's
four other most highly compensated executive officers whose salary exceeded
$100,000 and who were serving as executive officers at the end of 1997
(together, the "Named Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION OPTIONS
- --------------------------- ---- --------- -------- ------------ ------------
Constance F. Galley.......... 1997 $203,538 $50,000 $ 4,952(3) 112,500
President, Chief Executive
Officer and Director 1996 $165,000 $50,000 $ 5,031(3) 18,000
1995 $161,133 $35,107 $ 144(3) --
Robert H. Bouton............. 1997 $164,000 $20,000 $ 4,952(3) --
Vice President, Marketing 1996 $158,704 $20,000 $ 4,900(3) --
1995 $142,795 $10,000 $ 225(3) --
Ira A. Gerard(4)............. 1997 $159,892 $26,667 $ 6,417(3) --
Vice President, Finance and
Administration, 1996 $146,000 $20,000 $ 6,516(3) --
Chief Financial Officer and
Secretary 1995 $ 34,442 -- $ 22(3) 144,000
Saydean Zeldin............... 1997 $154,808 $26,667 $ 2,889(3) --
Vice President, Research and
Development 1996 $130,000 $20,000 $ 2,922(3) 36,000
1995 $129,703 $15,000 $ 225(3) 45,000
Eric A. Amster............... 1997 $125,000 -- $184,918(5) --
Vice President, Sales 1996 $125,000 -- $ 85,951(5) 36,000
1995 $ 9,611 -- $ 3,920(5) 72,000
- --------
(1) See "-- Compensation Agreements."
(2) Bonus amounts are reported in the year paid.
(3) Represents the portion of health, life and disability insurance premiums
paid by the Company.
(4) Mr. Gerard joined the Company in October 1995.
(5) Includes sales commissions paid to Mr. Amster by the Company in the amount
of $3,916, $80,982 and $178,501 in 1995, 1996 and 1997, respectively, and
also includes $4, $4,918 and $6,417 for the portion of health, life and
disability insurance premiums paid by the Company in 1995, 1996 and 1997,
respectively. Mr. Amster joined the Company in December 1995.
The following table sets forth information regarding option grants during
1997 to each of the Named Officers.
OPTION GRANTS IN 1997
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED(1) 1997(2) PER SHARE(3) DATE 5% 10%
- ---- ---------- ------------- -------------- ---------- ----------- -----------
Constance F. Galley..... 112,500 21.4% $6.67 5/8/2007 $1,222,282 $1,946,279
Robert H. Bouton........ -- -- -- -- -- --
Ira A. Gerard........... -- -- -- -- -- --
Saydean Zeldin.......... -- -- -- -- -- --
Eric A. Amster.......... -- -- -- -- -- --
5
- --------
(1) Unless otherwise indicated below, all options granted in 1993 were granted
pursuant to the Company's 1993 Stock Option Plan (the "1993 Plan"), and
vest as to 25% of the shares covered by such option each year following
the date of grant, subject to acceleration under certain circumstances.
Under the 1997 Plan, the Board or a committee of the Board retains
discretion, subject to 1993 Plan limits, to modify the terms of
outstanding options. The options have a term of ten years if the grantee
is based in the United States and a term of seven years if the grantee is
based in the United Kingdom subject to earlier termination in certain
situations related to termination of employment. See "-- Employee Benefit
Plans."
(2) Based on a total of 525,700 options granted to all employees during 1997.
(3) All options were granted at an exercise price equal to the fair market
value of the Company's Common Stock.
(4) Potential realizable values are calculated based on the fair market value
of the Common Stock at the date of grant minus the exercise price. The 5%
and 10% assumed annual rates of compounded stock appreciation are mandated
by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
price. There can be no assurance provided to any executive officer or any
other holder of the Company's securities that the actual stock price
appreciation over the option term will be at the assumed 5% and 10% levels
or at any other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the executive officers.
The following table includes information concerning unexercised stock
options held by the Named Officers at December 31, 1997. No options were
exercised by the Named Officers during 1997.
AGGREGATE OPTION EXERCISES IN 1997 AND YEAR-END VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
END AT FISCAL YEAR-END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Constance F. Galley......... 161,961 121,500 $1,538,630 $1,344,250
Robert H. Bouton............ 63,000 -- $ 577,710 --
Ira A. Gerard............... 72,000 72,000 $ 660,240 $ 660,240
Saydean Zeldin.............. 75,000 49,000 $ 675,780 $ 418,005
Eric A. Amster.............. 45,000 63,000 $ 400,680 $ 541,800
- --------
(1) These values have not been, and may never be, realized and are based on
the positive spread between the respective exercise prices of outstanding
options and $9.50, which was the closing price of the Company's Common
Stock on December 31, 1997.
COMPENSATION AGREEMENTS
The Company has entered into agreements with the following executive
officers of the Company: Constance Galley, the Company's President and Chief
Executive Officer; Ira Gerard, the Company's Vice President, Finance and
Administration and Chief Financial Officer; Eric Amster, the Company's Vice
President, Sales; Edward Watson, the Company's Executive Vice President, New
Business Development; Saydean Zeldin, the Company's Vice President, Research
and Development and Robert H. Bouton, Vice President Marketing.
Ms. Galley's agreement provides for an annual base salary of $225,000. Ms.
Galley is also eligible to receive an annual bonus based upon the Company
achieving certain financial objectives for such year. This agreement may be
terminated by the Company at any time for any reason. If Ms. Galley is
terminated without cause, she will continue to receive her base salary for a
one-year period following such termination. In the event that the Company is
acquired by a company that does not continue to employ Ms. Galley, she will
continue to receive her base salary for a one-year period following such
termination.
Mr. Gerard's agreement provides for an initial annual base salary of
$146,000 and a grant of an option to purchase an aggregate of 144,000 shares
of Common Stock. Mr. Gerard currently receives a base salary of $160,000. Mr.
Gerard is eligible to receive a bonus of up to $25,000 per year for meeting
corporate objectives for such year. This agreement may be terminated by the
Company at any time for any reason. If Mr. Gerard is terminated without cause,
he will continue to receive his base salary for a six-month period following
such termination. In the event that the Company is acquired by a company that
does not continue to employ Mr. Gerard, he will continue to receive his base
salary for a six-month period following such termination.
6
Mr. Amster's agreement provides for an annual base salary of $125,000 and a
grant of an option to purchase an aggregate of 72,000 shares of Common Stock.
Mr. Amster is eligible to receive a bonus and commissions of up to $145,000
per year upon meeting revenue related goals for such year. This agreement may
be terminated by the Company at any time for any reason. If Mr. Amster is
terminated without cause, he will continue to receive his base salary for a
six-month period following such termination.
Mr. Watson's agreement provides for an initial annual base salary of
$150,000. Mr. Watson currently receives a base salary of $160,000. This
agreement may be terminated by the Company at any time for any reason. If Mr.
Watson is terminated without cause, he will continue to receive his base
salary for a six-month period following such termination. In the event that
the Company is acquired by a company that does not continue to employ Mr.
Watson, he will continue to receive his base salary for a one-year period
following such termination.
Ms. Zeldin's agreement provides for an initial annual base salary of
$130,000. Ms. Zeldin currently receives a base salary of $155,000. This
agreement may be terminated by the Company at any time for any reason. If Ms.
Zeldin is terminated without cause, she will continue to receive her base
salary for a six-month period following such termination. In the event that
the Company is acquired by a company that does not continue to employ Ms.
Zeldin, she will continue to receive her base salary for a one-year period
following such termination.
Mr. Bouton's agreement provides for an initial base salary of $135,000 and
an option to purchase an aggregate of 45,000 shares of Common Stock. Mr.
Bouton currently receives a base salary of $164,000. This agreement may be
terminated by the Company at any time for any reason.
EMPLOYEE BENEFIT PLANS
1997 Equity Incentive Plan. In May 1997, the Board adopted and the Company's
stockholders approved the 1997 Equity Incentive Plan (the "1997 Plan"), under
which 1,125,000 shares of the Company's Common Stock are reserved for
issuance. In addition to the 1,125,000 shares reserved for issuance
thereunder, shares that are reserved for issuance but that are not subject to
options under the Company's 1993 Stock Option Plan (the "1993 Plan") and
shares that are subject to outstanding options which either terminate without
being exercised or that are repurchased by the Company at the original issue
price will be available for issuance under the 1997 Plan. The 1997 Plan became
effective in July 1997 and will terminate in May 2007, unless terminated
earlier in accordance with the provisions of the 1997 Plan. The 1997 Plan
authorizes the award of options, opportunities to purchase restricted stock
and stock bonuses (an "Award"). The 1997 Plan is administered by a committee
appointed by the Board, currently the Compensation Committee, consisting of
Messrs. Keet, Sisco, Pendray and Gross, all of whom are non-employee directors
under applicable federal securities laws and "outside directors" as defined
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Compensation Committee has the authority to construe and
interpret the 1997 Plan and any agreement made thereunder, grant Awards and
make all other determinations necessary or advisable for the administration of
the 1997 Plan.
As of March 31, 1998, 396,200 shares of Common Stock were subject to
options outstanding under the 1997 Plan and 1,023,474 shares of Common Stock
were available for future distribution pursuant to the 1997 Plan, including
shares originally reserved for issuance under the 1993 Plan that have become
available for distribution under the 1997 Plan. Since the effectiveness of the
1997 Plan, the Company has issued 400 shares of Common Stock as Stock Bonuses.
The 1997 Plan provides for the grant of both incentive stock options ("ISOs")
that qualify under Section 422 of the Code and nonqualified stock options
("NQSOs"). ISOs may be granted only to employees of the Company or of a parent
or subsidiary of the Company. NQSOs may be granted to employees, officers,
directors, consultants, independent contractors and advisors of the Company or
any parent or subsidiary of the Company, provided such consultants,
independent contractors, and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction ("Eligible Service Providers"). The per share exercise price of
ISOs must be at least equal to the fair market value of a share of the
Company's Common Stock on the date of grant unless the option is an ISO
granted to
7
a stockholder owning 10% or more of the Company's capital stock in which case
the exercise price must be at least 110% of the fair market value of the
Company's Common Stock. The per share exercise price of NQSOs must be at least
85% of the fair market value of the Company's Common Stock. The maximum term
of options granted under the 1997 Plan is ten years if the grantee is based in
the United States and a maximum term of seven years if the grantee is based in
the United Kingdom, unless the option is an ISO granted to a stockholder
owning 10% or more of the Company's stock in which case the maximum term is
five years. Options granted under the 1997 Plan may not be transferred in any
manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of the optionee only by the optionee. Options
granted under the 1997 Plan generally expire three months after the
termination of the optionee's service to the Company or a parent or subsidiary
of the Company, except in the case of death or disability, in which case the
options may be exercised up to 12 months following the date of death or
termination of service. No person may receive more than 300,000 shares in any
calendar year pursuant to the grant of Awards under the 1997 Plan. New
employees, however, are eligible to receive Awards up to a total of 450,000
shares in the calendar year in which they are hired.
Opportunities to purchase shares of the Company's Common Stock ("Restricted
Stock Awards") and awards of shares of the Company's Common Stock ("Stock
Bonuses"), either of which may be subject to a right of repurchase in favor of
the Company or other restrictions on ownership or transfer, may be given to
Eligible Service Providers. The Compensation Committee, which is the
administrator of the 1997 Plan, has the authority to determine the
restrictions applicable to the stock. The purchase price of Common Stock sold
pursuant to a Restricted Stock Award must be at least 85% of the fair market
value of the shares on the date of grant. Awards that are granted below 100%
of fair market value are limited under the 1997 Plan. No Eligible Service
Provider may receive more than 150,000 shares pursuant to such Awards under
the 1997 Plan and no more than 300,000 shares may be issued pursuant to such
Awards for the term of the 1997 Plan.
In the event of a merger, consolidation or certain other change of control
transactions, any outstanding Awards will accelerate by one-year's vesting or
such additional acceleration of vesting as the Compensation Committee in its
discretion may decide, and may be assumed or replaced by the successor
corporation. In lieu of such assumption or replacement, but in addition to the
one-year's additional vesting or such additional acceleration of vesting, the
successor corporation may substitute equivalent Awards or provide
substantially similar consideration to Eligible Service Providers as is
provided to stockholders.
1993 Stock Option Plan. As of March 31, 1998, 1,194,581 shares of Common
Stock were subject to options outstanding under the 1993 Plan. No further
options will be granted under the 1993 Plan. However, all outstanding options
will remain outstanding until exercised or until they terminate or expire in
accordance with their terms. The terms of options granted under the 1993 Plan
and the administration of the 1993 Plan are substantially the same as those
that pertain to the 1997 Plan.
1997 Employee Stock Purchase Plan. In May 1997, the Board adopted and the
Company's stockholders approved the 1997 Employee Stock Purchase Plan (the
"Purchase Plan") and reserved a total of 750,000 shares of the Company's
Common Stock for issuance thereunder. As of April 30, 1998, 70,662 shares of
Common Stock had been issued pursuant to the Purchase Plan and 679,338 shares
remained available for future issuance under the Purchase Plan. The Purchase
Plan became effective in July 1997 and permits eligible employees to acquire
shares of the Company's Common Stock through payroll deductions. Eligible
employees may select a rate of payroll deduction between 2% and 15% of their
compensation and are subject to certain maximum purchase limitations described
in the Purchase Plan. Each offering under the Purchase Plan is for a period of
12 months (the "Offering Period") and consists of two six-month purchase
periods (each a "Purchase Period"). The purchase price for the Company's
Common Stock purchased under the Purchase Plan is 85% of the lesser of the
closing price of the Company's Common Stock on the first day of the applicable
Offering Period and the last day of the applicable Purchase Period. The first
Offering Period began on July 1, 1997 and will end on July 31, 1998. The Board
has the power to set the beginning of any Offering Period and to change the
duration of Offering and Purchase Periods. The Purchase Plan is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Code.
8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Until May 1997, the Company had no separate compensation or stock option
committee or other board committee performing equivalent functions, and these
functions were performed by the Company's Board of Directors of which
Constance F. Galley, President and Chief Executive Officer of the Company, was
and is a member. In May 1997, the Company's Board of Directors appointed a
Compensation Committee which currently consists of Stewart K.P. Gross, Ernest
E. Keet, John J. Pendray and Dennis G. Sisco, each a non-employee director of
the Company.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF
LIABILITY
As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Company provide that (i) the Company is required to indemnify
its directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law, (ii) to the fullest extent permitted by the
Delaware General Corporation Law, the Company is required to advance all
expenses, as incurred, to its directors and executive officers in connection
with a legal proceeding (subject to certain exceptions), (iii) the rights
conferred in the Bylaws are not exclusive, (iv) the Company may, in its
discretion indemnify or advance expenses to persons whom the Company is not
obligated to indemnify or advance expenses; (v) the Company is authorized to
enter into indemnification agreements with its directors, officers, employees
and agents or any person serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including employee benefit plans and (vi) the
Company may not retroactively amend the Bylaw provisions relating to
indemnification.
The Company has entered into Indemnification Agreements with each of its
current directors and executive officers to give such directors and officers
additional contractual assurances regarding the scope of the indemnification
set forth in the Company's Bylaws and to provide additional procedural
protections. At present, there is no pending litigation or proceeding
involving a director, officer or employee of the Company regarding which
indemnification is sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification.
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty
as a director to the fullest extent permitted by the Delaware General
Corporation Law.
As authorized by the Company's Bylaws, the Company, with approval of the
Board, has obtained directors' and officers' liability insurance.
In so far as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of TSI Software Common Stock as of April 24, 1998 by: (i)
each stockholder known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock; (ii) each director and nominee; (iii) each
Named Executive Officer set forth in the Summary Compensation Table below; and
(iv) all directors and executive officers as a group.
AMOUNT OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT(1)
- ------------------------ ------------ ----------
Stewart K.P. Gross.................................... 2,288,655 25.0%
Warburg, Pincus Capital Company, L.P.(2)
Ernest E. Keet........................................ 1,709,177 17.9
Vanguard Atlantic Ltd.(3)
Amerindo Investment Advisors Inc.(4).................. 1,168,000 12.2
Richard L. Chilton, Jr.(5)............................ 500,000 5.2
Constance F. Galley(6)................................ 518,832 5.3
Ira A. Gerard(7)...................................... 72,723 *
Eric A. Amster(8)..................................... 46,958 *
Robert H. Bouton(9)................................... 65,694 *
Saydean Zeldin(10).................................... 241,750 2.5
John J. Pendray(11)................................... 114,807 1.2
Dennis G. Sisco(12)................................... 5,750 *
All executive officers and directors as a group
(9 persons)(13)........................ ............. 5,178,896 50.1
- --------
*Less than 1%
(1) Based upon a total of 9,098,202 shares of Common Stock outstanding as of
April 24, 1998. Unless otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable. Shares of Common Stock subject to options
that are currently exercisable or exercisable within 60 days of April 24,
1998 are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Includes 382,281 shares of Common Stock issuable to Warburg, Pincus
Capital Company, L.P. ("Warburg") upon exercise of Warrants. Warburg,
Pincus & Co. is the sole General Partner of Warburg and has a 20%
interest in the profits of Warburg. E.M. Warburg, Pincus & Co., LLC, a
New York limited liability company, manages Warburg. Lionel I. Pincus is
the managing partner of Warburg, Pincus & Co. and the managing member of
E.M. Warburg, Pincus & Co., LLC and may be deemed to control both such
entities. The members of E.M. Warburg, Pincus & Co., LLC are
substantially the same as the partners of Warburg, Pincus & Co. Mr.
Gross, a director of the Company, is a Managing Director and member of
E.M. Warburg, Pincus & Co., LLC and a general partner of Warburg, Pincus
& Co. As such, Mr. Gross may be deemed to have an indirect pecuniary
interest (within the meaning of Rule 16a-1 under the Exchange Act) in an
indeterminate portion of the shares beneficially owned by Warburg. Mr.
Gross disclaims beneficial ownership of these shares within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934. Also includes
3,750 shares subject to stock options exercisable within 60 days of April
24, 1998. The address of Mr. Gross and Warburg is 466 Lexington Avenue,
New York, NY 10017.
(3) Based upon Schedules 13G dated February 2, 1998. Includes 1,559,325
shares of Common Stock held of record by Vanguard Atlantic Ltd.
("Vanguard") and 135,543 shares of Common Stock held of record by Mr.
Keet. Mr. Keet, a director of the Company, is the President of Vanguard
and may be deemed to beneficially own the shares owned by such entity.
Mr. Keet disclaims beneficial ownership of such shares except to the
extent of his indirect pecuniary interest therein. Also includes 3,750
shares subject to stock
10
options exercisable within 60 days of April 24, 1998. The address of
Vanguard is 304 Main Avenue, Suite 290, Norwalk, Connecticut 06851 and the
address of Mr. Keet is 619 Marina Boulevard, San Francisco, CA 94123.
(4) Based on a Schedule 13D, as amended through April 17, 1998. Amerindo
Investment Advisors Inc., a California corporation ("Amerindo") and
Amerindo Investment Advisors, Inc., a Panama cororation ("Amerindo
Panama") and together with Amerindo, the "Amerindo Companies"), are
registered investment advisors, and in this capacity may be deemed to be
the beneficial owners of the securities listed. Clients of the Amerindo
Companies have the right to receive and direct the receipt of dividends
and proceeds from sales of shares disposed of by the Amerindo Companies.
No single client of the Amerindo Companies owns more than 5% of the
shares reported. Amerindo has shared voting and dispostive power over
815,500 shares of TSI Software Common Stock, and Amerindo Panama has
shared voting and dispositive power over 342,500 shares of TSI Software
Common. Messrs. Alberto Vilar and Gary Tanaka, who are the sole
stockholders and directors of the Amerindo Companies, have shared voting
and dispositive power over all of the shares shown. The Amerindo
Investment Advisors Inc. Profit Sharing Trust (the "Trust") has sole
voting and dispositive power as to 10,000 shares of TSI Software Common
Stock. Each of the Amerindo Companies, the Trust and Messrs. Vilar and
Tanaka disclaim beneficial ownership of all of the shares reported.
(5) Based upon a Schedule 13G dated April 13, 1998. Mr. Chilton reported sole
voting and dispositive power with respect to these shares. The address of
Mr. Chilton is c/o Chilton Investment Co., Inc., 320 Park Avenue, 22nd
Floor, New York, NY 10022.
(6) Includes 194,586 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998, and 25,005 shares of Common Stock
issuable upon exercise of Warrants. This also includes 60,000 shares of
Common Stock owned by Saugatuck Partners ("Saugatuck"), the investment
advisor of which is the husband of Ms. Galley. Ms. Galley disclaims
beneficial ownership of shares owned by Saugatuck.
(7) Includes 72,000 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998.
(8) Includes 40,000 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998.
(9) Includes 63,000 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998.
(10) Represents 78,250 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998. Also includes 6,000 shares of Common
Stock, 151,500 shares of Common Stock subject to options exercisable
within 60 days of April 24, 1998 and 6,000 shares of Common Stock
issuable upon exercise of warrants, all of which are held by Ms. Zeldin's
husband, Edward J. Watson. Ms. Zeldin disclaims beneficial ownership of
the shares, options and warrants held by Mr. Watson.
(11) Includes 4,950 shares of Common Stock subject to options, 30,000 shares
of Common Stock held of record by his wife Linda L. Pendray and 6,000
shares of Common Stock held of record by his son, Michael D. Pendray. Mr.
Pendray disclaims beneficial ownership of the shares held by his son.
(12) Includes 3,750 shares of Common Stock subject to options exercisable of
April 24, 1998.
(13) Includes an aggregate of 704,786 shares of Common Stock subject to
options and 413,286 shares of Common Stock issuable upon exercise of
Warrants, including the options and Warrants described in footnotes (2),
(3) and (6) through (12).
11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since January 1, 1995, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or
is to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than 5% of any class of voting
securities of the Company or members of such person's immediate family had or
will have a direct or indirect material interest other than the compensation
agreements which are described in "Management."
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Amendment
to be signed on its behalf by the undersigned, thereunto duly authorized.
TSI INTERNATIONAL SOFTWARE LTD.
Date: May 6, 1998 By: /s/ Ira A. Gerard
-------------------------------------------
Ira A. Gerard
Vice President, Finance and Administration,
Chief Financial Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Amendment has been signed below by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
/s/ Constance F. Galley President, Chief Executive Officer May 6, 1998
- ------------------------------------------- and Director
Constance F. Galley
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
/s/ Ira A. Gerard Vice President, Finance and May 6, 1998
- ------------------------------------------- Administration, Chief Financial
Ira A. Gerard Officer and Secretary
ADDITIONAL DIRECTORS:
By: * Director May 6, 1998
- -------------------------------------------
Ernest E. Keet
By: * Director May 6, 1998
- -------------------------------------------
Stewart K.P. Gross
By: * Director May 6, 1998
- -------------------------------------------
John J. Pendray
By: * Director May 6, 1998
- -------------------------------------------
Dennis G. Sisco
*By: /s/ Ira A. Gerard Attorney-in-Fact May 6, 1998
- -------------------------------------------
Ira A. Gerard
13