SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EXPERT SOFTWARE, 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):
o $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
o $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
o Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Expert Software, Inc.
800 Douglas Road, Suite 750
Coral Gables, FL 33134
May 22, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Expert Software, Inc. (the "Company") to be held
on Thursday, June 12, 1997, at 9:30 a.m., local time, at The Arch
Room, 800 Douglas Road, Coral Gables, FL 33134 (the "Annual
Meeting").
The Annual Meeting has been called for the purpose of
electing two Class II Directors for a three-year term each,
ratifying the selection by the Board of Directors of Arthur
Andersen LLP as the Company's independent auditors for 1997,
approving the Company's 1997 Stock Option Plan for Directors and
1997 Stock Option Plan for Officers and Employees, and
considering and voting upon such other business as may properly
come before the meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on
April 21, 1997, as the record date for determining stockholders
entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
The Board of Directors of the Company recommends that you
carefully review the enclosed Proxy Statement and recommends that
you vote "FOR" the election of the two nominees of the Board of
Directors as Directors of the Company, the selection of Arthur
Andersen LLP as the Company's independent auditors for 1997, and
the approval of the Company's 1997 Stock Option Plan for
Directors, and 1997 Stock Option Plan for Officers and Employees.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.
Very truly yours,
/s/ KENNETH P. CURRIER
Kenneth P. Currier
Chief Executive Officer
and Secretary
EXPERT SOFTWARE, INC.
800 Douglas Road, Suite 750
Coral Gables, FL 33134
(305) 567-9990
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, June 12, 1997
Notice Is Hereby Given that the Annual Meeting of Stockholders
of Expert Software, Inc. (the "Company") will be held on Thursday,
June 12, 1997, at 9:30 a.m., local time, at The Arch Room, 800
Douglas Road, Coral Gables, FL 33134 (the "Annual Meeting") for the
purpose of considering and voting upon:
1. The election of Stephen J. Clearman and Charles E. Noell
III as Class II Directors to serve until the year 2000
Annual Meeting of Stockholders and until their successors
are duly elected and qualified;
2. The ratification of the selection by the Board of Directors
of Arthur Andersen LLP as the Company's independent
auditors for 1997;
3. The approval of the Company's 1997 Stock Option Plan for
Directors, and 1997 Stock Option Plan for Officers and
Employees; and
4. Such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April
21, 1997 as the record date for determination of stockholders
entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof. Only holders of common stock
of record at the close of business on that date will be entitled to
notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof.
A list of the stockholders of the Company as of the record date
will be available during ordinary business hours at the offices of
the Company for inspection by any stockholder for any purpose germane
to the Annual Meeting for the ten days prior to the Annual Meeting.
In the event there are not sufficient votes with respect to the
foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of
proxies.
By Order of the Board of Directors
/s/ KENNETH P. CURRIER
Kenneth P. Currier
Chief Executive Officer
and Secretary
Coral Gables, Florida
May 22, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU
MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED
YOUR PROXY CARD.
EXPERT SOFTWARE, INC.
800 Douglas Road, Suite 750
Coral Gables, FL 33134
(305) 567-9990
____________
PROXY STATEMENT
____________
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, June 12, 1997
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Expert Software,
Inc. (the "Company") for use at the Annual Meeting of Stockholders of
the Company to be held on Thursday, June 12, 1997, at 9:30 a.m.,
local time, at The Arch Room, 800 Douglas Road, Coral Gables, FL
33134, and any adjournments or postponements thereof (the "Annual
Meeting") for the purposes set forth in the accompanying Notice of
Annual Meeting.
The Notice of Annual Meeting, Proxy Statement and Proxy Card are
first being mailed to stockholders of the Company on or about May 22,
1997 in connection with the solicitation of proxies for the Annual
Meeting. The Board of Directors has fixed the close of business on
April 21, 1997, as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting
(the "Record Date"). Only holders of common stock of record at the
close of business on the Record Date will be entitled to notice of
and to vote at the Annual Meeting. As of the Record Date, there were
7,514,679 shares of the Company's common stock, par value $.01 per
share ("Common Stock"), outstanding and entitled to vote at the
Annual Meeting and 83 stockholders of record. As of the Record Date,
the closing price of a share of the Company's Common Stock on The
Nasdaq Stock Market ("Nasdaq") was $2.50. Each holder of a share of
Common Stock outstanding as of the close of business on the Record
Date will be entitled to one vote for each share held of record for
each matter properly submitted at the Annual Meeting.
The Annual Report of the Company, including financial statements
for the fiscal year ended December 31, 1996, is being mailed to
stockholders concurrently with this Proxy Statement. The Annual
Report, however, is not part of the proxy solicitation materials.
The presence, in person or by proxy, of a majority of the total
number of outstanding shares issued, outstanding and entitled to vote
at a meeting of stockholders of Common Stock is necessary to
constitute a quorum for the transaction of business at the Annual
Meeting. Abstentions and "broker non-votes" will be counted as
present for determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. A "broker non-vote"
is a proxy from a broker or other nominee indicating that such person
has not received instructions from the beneficial owner or other
person entitled to vote the shares on a particular matter with
respect to which the broker or other nominee does not have
discretionary voting power.
A quorum being present, the affirmative vote of a plurality of
the votes cast is necessary to elect a nominee as a Director of the
Company. Abstentions and broker non-votes will not be counted as
voting with respect to the election of Directors and therefore, will
not have an effect on the election of Directors. With respect to the
election of Directors, votes may only be cast in favor of or withheld
from the nominee.
A quorum being present, the affirmative vote of a majority of
the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote is required to ratify the selection of
Arthur Andersen LLP as the independent auditors of the Company.
Accordingly, abstentions will be counted as votes against the
ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors but broker non-votes will have no effect on such
ratification.
A quorum being present, the affirmative vote of a majority of
the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote is required to approve the Company's
1997 Stock Option Plan for Directors, and 1997 Stock Option Plan for
Officers and Employees (the "1997 Plans"). Accordingly, abstentions
will be counted as votes against the 1997 Plans but broker non-votes
will have no effect on such ratification.
Stockholders of the Company are requested to complete, date,
sign and return the accompanying Proxy Card in the enclosed
envelope. Common Stock represented by properly executed proxies
received by the Company and not revoked will be voted at the Annual
Meeting in accordance with the instructions contained therein. If no
instructions are made on the accompanying Proxy Card then the proxy
will be voted in favor of the proposal set forth herein. If other
matters are presented, proxies will be voted in accordance with the
discretion of the proxy holders. The Board of Directors is not aware
of any matters other than the election of Directors, the
ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors and approval of the Company's 1997 Stock Option
Plan for Directors and 1997 Stock Option Plan for Officers and
Employees that will be presented at the Annual Meeting.
Any properly completed proxy may be revoked at any time before
it is voted on any matter (without, however, affecting any vote taken
prior to such revocation) by giving written notice of such revocation
to the Secretary of the Company, or by signing and duly delivering a
proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Any stockholder of record as of the Record Date
attending the Annual Meeting may vote in person whether or not a
proxy has been previously given, but the presence, without further
action, of a stockholder at the Annual Meeting will not constitute a
revocation of a previously given proxy.
PROPOSAL NUMBER I - ELECTION OF DIRECTORS
The Board of Directors of the Company consists of six members
and is divided into three classes, with two Directors in each class.
Directors serve for three-year terms with one class of Directors
being elected by the Company's stockholders at each annual meeting.
At the Annual Meeting, two Class II Directors will be elected to
serve until the year 2000 annual meeting and until their successors
are duly elected and qualified. The Board of Directors has nominated
Stephen J. Clearman and Charles E. Noell III for re-election as
Class II Directors. Unless otherwise specified in the proxy, it is
the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the re-election of
Messrs. Clearman and Noell as Directors. Each of the nominees has
agreed to stand for re-election and to serve if re-elected as a
Director. However, if any of the persons nominated by the Board of
Directors fails to stand for re-election or is unable to accept
re-election, the proxies will be voted for the election of such other
person or persons as the Board of Directors may recommend.
Vote Required For Approval
A quorum being present, the affirmative vote of a plurality of
the votes cast is necessary to elect a nominee as a Director of the
Company.
The Board of Directors of the Company recommends that the
Company's stockholders vote "FOR" the re-election of the two nominees
of the Board of Directors as Directors of the Company.
INFORMATION REGARDING DIRECTORS
Set forth below is certain information regarding the Directors of the
Company, including the two Class II Directors who have been nominated
by the Board of Directors for re-election at the Annual Meeting,
based on information furnished by them to the Company.
Director
Name Age Since
Class I-Term Expires 1999
Kenneth P. Currier..................... 48 1992
A. Bruce Johnston...................... 37 1992
Class II-Term Expires 1997
Stephen J. Clearman*................... 46 1992
Charles E. Noell III*.................. 45 1992
Class III-Term Expires 1998
Susan A. Currier....................... 47 1992
William H. Lane III.................... 58 1997
_______________________________
* Nominee for re-election.
The principal occupation and business experience during at least
the last five years for each Director of the Company is set forth
below.
Kenneth P. Currier, a co-founder of the Company, has served as a
Director, Chief Executive Officer and Secretary of the Company since
its inception in October 1992. Mr. Currier also co-founded the
Company's predecessor, Softsync, Inc. ("Softsync") a publisher of
consumer software, in 1982, and served as President of Softsync from
1990 until formation of the Company in 1992. Mr. Currier is the
spouse of Susan A. Currier, President and a Director of the Company.
A. Bruce Johnston has served as a Director of the Company since
October 1992. Mr. Johnston has been a Principal of TA Associates, a
private equity investor, since January 1996 and was a Vice President
of TA Associates from June 1992 to December 1995. Prior to that, Mr.
Johnston was a General Manager of Lotus Development Corporation, a
software publisher, from June 1988 to June 1992. Mr. Johnston serves
as a director of Trident International, Inc., a manufacturer of
higher performance printing systems, Restrac, Inc., a client-server
application company, as well as a number of privately-held companies.
Stephen J. Clearman has served as a Director of the Company
since October 1992. Mr. Clearman has been a general partner of
Geocapital Partners, a venture capital management firm, since he
co-founded that firm in 1984. Mr. Clearman also serves as a director
of Word Access, Inc., a repair and manufacturing services provider to
the telecommunications industry, Memberworks, Inc., a consumer credit
card membership services company, and Seamed, Corp., a designed and
manufacturer of medical instruments. Mr. Clearman also serves as a
director of a number of privately-held companies.
Charles E. Noell III has served as a Director of the Company
since October 1992. Mr. Noell has been President and Chief Executive
Officer of JMI, Inc., a private holding company, since January 1992.
Prior to that, Mr. Noell was a Managing Director of Alex. Brown &
Sons Incorporated from 1981 to 1992. Mr. Noell also serves as a
director of Transaction Systems Architects, Inc., an electronic funds
transfer software company, Homegate Hospitality, Inc., a provider of
services to the hotel industry, Peregrine Systems Inc., a developer
of systems management software, and a number of privately-held
companies.
Susan A. Currier, a co-founder of the Company, has served as a
Director and President of the Company since its inception in October
1992. Ms. Currier also co-founded the Company's predecessor,
Softsync, in 1982, and served as Vice President responsible for sales
and marketing of Softsync from 1990 until formation of the Company in
1992. Ms. Currier is the spouse of Kenneth P. Currier, Chief
Executive Officer and a Director of the Company.
William H. Lane III has served as a Director of the Company
since his appointment by the Board of Directors on January 29, 1997.
Mr. Lane retired as Vice President, Chief Financial Officer,
Secretary and Treasurer of Intuit, Inc. a software publisher, in July
1996. He held the same positions at ChipSoft, Inc. from July 1991
until Intuit acquired ChipSoft in December 1993. He also served as
Vice President, Finance and Administration for Honeywell Information
Systems. Mr. Lane also serves as a director of MetaTools, Inc., a
visual computing software publisher, and Quarterdeck Corp., a PC
utility software company.
The Board of Directors of the Company held ten meetings during
1996. During 1996, each of the incumbent Directors except for
Douglas G. Carlston attended at least 75% of the total number of
meetings of the Board and of the committees of which he or she was a
member during the term of his or her service as Director. Mr.
Carlston resigned from the Board of Directors on September 11, 1996.
The Board of Directors has established an Audit Committee and a
Compensation Committee.
Audit Committee. The Audit Committee reviews the adequacy of
internal controls, the results and scope of annual audits, and other
services provided by the Company's independent auditors. The members
of the Audit Committee during 1996 were Douglas G. Carlston until his
resignation from the Board of Directors and Charles E. Noell III. The
members of the Audit Committee currently are Charles E. Noell III and
William H. Lane III. The Audit Committee meets periodically with
management and the independent auditors. The Audit Committee met one
time during 1996.
Compensation Committee. The Compensation Committee establishes
salaries, incentives and other forms of compensation for officers of
the Company and administers the incentive compensation and benefit
plans of the Company. The members of the Compensation Committee are
Stephen J. Clearman and A. Bruce Johnston. The Compensation Committee
met one time during 1996.
The Board of Directors does not have a standing nominating
committee or a committee performing such functions. The full Board
of Directors performs the function of such a committee. A
compensation plan for non-employee directors was adopted by the Board
on March 12, 1996. The compensation plan applies to directors having
no previous financial interest in the Company. In accordance with
the plan, such outside directors receive an annual retainer of
$5,000, $1,500 per Board meeting except for telephonic meetings, and
$250 per each telephonic Board meeting. All Directors are reimbursed
for expenses incurred in connection with attendance at meetings. On
February 3, 1997 the Board amended the compensation plan for
directors to include all non-employee directors, and to provide
additional compensation to members of the Audit and Compensation
Committees in the amount of $500 per meeting attended in person, and
$250 per each telephonic committee meeting.
The Company also has an Amended and Restated 1992 Stock Option
Plan (the "1992 Option Plan") pursuant to which eligible non-employee
Directors are entitled to receive options to purchase shares of
Common Stock in accordance with the formula provisions thereof. On
December 9, 1993, Douglas Carlston was also granted a nonqualified
option to purchase 30,000 shares of Common Stock at $.85 per share,
which vested in ratable monthly installments on the first day of each
month over a 48-month period Through the ninety day period
following Mr. Carlston's resignation from the Board of Directors,
20,625 shares vested and were exercised by Mr. Carlston in November
1996. Although the other non-employee Directors are eligible to
receive options pursuant to certain formula provisions of the 1992
Option Plan, no options have been granted to date pursuant to such
formula provisions.
EXECUTIVE OFFICERS
The names and ages of all current executive officers of the
Company and the principal occupation and business experience during
at least the last five years for each are set forth below.
Name Age Position
Kenneth P. Currier............. 48 Chief Executive Officer and
Secretary
Susan A. Currier .............. 47 President
Charles H. Murphy.............. 52 Chief Financial Officer and
Treasurer
Timothy R. Leary............... 45 Vice President of Sales
Michael A. Appel............... 52 Vice President of Operations
Anne E. Aitken................. 38 Vice President of Marketing
Mr. Currier has held the positions of Chief Executive Officer
and Secretary of the Company since the Company's inception in October
1992. Mr. Currier has also been a Director of the Company since
1992. See "Information Regarding Directors" above.
Ms. Currier has held the position of President of the Company
since the Company's inception in October 1992. Ms. Currier has also
been a Director of the Company since 1992. See "Information
Regarding Directors" above.
Charles H. Murphy has served as Chief Financial Officer of the
Company since April 1996. Prior to that, Mr. Murphy was Chief
Financial Officer at Mergent International, Inc., a company which
specializes in desktop and enterprise security software applications,
from 1995 to 1996. Prior to Mergent, Mr. Murphy was Vice President
of Finance, Secretary and Director at Package Machinery Company, a
manufacturer of specialty machinery, from 1986 to 1995.
Timothy R. Leary has served as Vice President of Sales of the
Company from its formation in October 1992. Mr. Leary was the Vice
President of Sales at Softsync from April 1992 through October 1992.
Prior to that, Mr. Leary was Vice President of Sales of Aapps
Corporation, a computer hardware and software manufacturer, from
April 1989 to March 1992.
Michael A. Appel has served as Vice President of Operations of
the Company since March 1996. Prior to that, Mr. Appel was Director
of Manufacturing for Bleyer Industries from January 1992 through
February 1996. Prior to that, Mr. Appel was Vice President of
Operations for Superior Toy from June 1990 through December 1991.
Anne E. Aitken has served as Vice President of Marketing of the
Company since March 1997. Prior to that, Ms. Aitken served as Senior
Director of Marketing at Blockbuster Entertainment Inc. from
September 1995 to January 1997. Prior to Blockbuster, Ms. Aitken was
Director of Advertising with Burger King Corporation from September
1992 to September 1995.
Each of the officers holds his respective office until the
regular annual meeting of the Board of Directors following the annual
meeting of stockholders and until his successor is duly elected and
qualified or until his earlier resignation or removal.
EXECUTIVE COMPENSATION
The following sections of this Proxy Statement set forth and
discuss the compensation paid or awarded during the last two years to
the Company's Chief Executive Officer and the four other most highly
compensated executive officers who earned in excess of $100,000
during the year ended December 31, 1996 (collectively, the "Named
Executives").
Summary Compensation Table
The following table shows for the fiscal years ended
December 31, 1994, 1995, and 1996 compensation paid by the Company to
the Named Executives.
Long Term
Compensation
Annual Compensation Awards Payouts
-----------------------------------------
Other Restric- Securities All
Annual ted Stock Underlying LTIP Other
Name and Year Salary Bonus Compen- Awards Option Payouts Compen-
Principal sation sation
Position ($) ($) ($) ($) (#) ($) ($)
- -------------------------------------------------------------------------------
Kenneth P. 1996 170,000 -- -- -- 130,000 -- --
Currier 1995 125,00 50,000 -- -- -- -- --
Chief 1994 110,00 86,188 -- -- 125,000 -- --
Executive
Officer and
Secretary
Susan A. 1996 170,000 -- -- -- 130,000 -- --
Currier 1995 125,00 50,000 -- -- -- -- --
President 1994 110,00 86,188 -- -- 125,000 -- --
Charles H. 1996 90,167 20,000 48,122(2) -- 50,000 -- --
Murphy
Chief Financial
Officer and
Treasurer
Timothy R. 1996 100,000 26,332 -- -- 10,000 -- --
Leary 1995 90,000 71,820 -- -- 5,000 -- --
Vice 1994 80,000 73,992 -- -- -- -- --
President of
Sales
Kenneth J. 1996 123,333 8,125 -- -- 20,000 -- --
Tarolla 1995 110,000 21,502 -- -- -- -- --
Vice 1994 9,275 -- -- -- 30,000 -- --
President of
Development(1)
- ----------------
<FN>
(1) Mr. Tarolla resigned from the Company on March 28, 1997.
(2) Consists of reimbursed moving costs paid upon Mr. Murphy's relocation
in connection with beginning employment with the Company in April 1996.
Mr. Murphy would receive six months' severance pay in the event his
employment is terminated without cause, or due to change of control.
</FN>
Option Grants in Last Fiscal Year
The following table sets forth each grant of stock options during
1996 to the Named Executives. No stock appreciation rights ("SARs")
have been granted.
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
for Option
Individual Grants Term (3)
------------------------------------------ ---------------
% of
Number Total
of Options/SARs
Securities Granted
Underlying to Exercise
Options Employees or Base Expir-
Granted in Fiscal Price ation
Name (#) (1) Year (2) ($/Sh) Date 5%($) 10% ($)
- -------------------------------------------------------- ---------------
Kenneth P.
Currier (4)... 130,000 24.3% $13.250 n/a -- --
Susan A.
Currier (4)... 130,000 24.3 13.250 n/a -- --
Charles H.
Murphy........ 50,000 9.3 5.375 7/15/06-
10/17/06 169,015 428,318
Timothy R.
Leary......... 10,000 1.9 5.375 10/17/06 33,803 85,664
Kenneth J.
Tarolla (5)... 20,000 3.7 5.375 06/28/97 -- --
- --------------
<FN>
(1) All options were granted pursuant to the Amended and Restated 1992
Stock Option Plan (the "1992 Option Plan") and vest in equal quarterly
increments over a four year period.
(2) Percentages are based on a total of shares of Common Stock underlying
all options granted to employees of the Company in 1996.
(3) This column shows the hypothetical gains or option spreads of the
options granted based on assumed annual compound stock appreciation
rates of 5% and 10% over the full 10-year terms of the options. The
5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future Common Stock prices.
(4) The options granted to Mr. and Mrs. Currier during 1996 were canceled
in April 1997.
(5) Mr. Tarolla resigned from the Company on March 28, 1997. Pursuant to
the Amended and Restated 1992 Option Plan, vested options not
exercised upon termination expire three months after the date of
termination.
</FN>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Values
The following table sets forth the shares acquired and the value
realized upon exercise of stock options during 1996 by the Named
Executives and certain information concerning the number and value of
unexercised options.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($) (1)
--------------------------------------
Shares
Acquired
on Value
Exercise Realized Exercis- Unexer- Exercis- Unexer-
Name (#) ($) able cisable able cisable
- -----------------------------------------------------------------------
Kenneth P.
Currier (2).. -- -- 189,583 29,167 549,010 73,647
Susan A.
Currier (2).. -- -- 189,583 29,167 549,010 73,647
Charles H.
Murphy........ -- -- 5,000 45,000 -- --
Timothy R.
Leary......... -- -- 28,925 28,645 87,564 51,853
Kenneth J.
Tarolla....... -- -- 15,313 34,687 7,688 10,763
- ---------------
<FN>
(1) Based on the fair market value of the Common Stock on December 31,
1996 ($3.375 per share), less the aggregate option exercise price.
Options are in-the-money if the market value of the shares covered
thereby is greater than the option exercise price.
(2) Options granted to Kenneth P. Currier and Susan A. Currier during 1996
were canceled in April 1997 and are therefore excluded from this table.
Information regarding these grants, however, is provided in the table
entitled "Option Grants in Last Fiscal Year".
</FN>
Compensation Committee Interlocks and Insider Participation
As of April 21, 1997, the members of the Compensation Committee of
the Board of Directors were Stephen J. Clearman and A. Bruce Johnston.
Messrs. Clearman and Johnston are each associated with an investment
partnership which owns Common Stock and which previously held shares of
preferred stock of the Company and subordinated notes issued by the
Company. During 1995, the Company redeemed all of the outstanding
preferred stock and repaid all of its subordinated indebtedness. See
"Certain Relationships and Related Transactions". No executive officers
of the Company serve on the Compensation Committee.
Report of the Compensation Committee of the Board of Directors on
Executive Compensation
The Compensation Committee establishes salaries, incentives and
other forms of compensation for officers of the Company and administers
the incentive compensation and benefit plans of the Company, including
the 1992 Option Plan. The members of the Compensation Committee have
prepared the following report on the Company's executive compensation
policies and philosophy for 1997.
General
The Compensation Committee (the "Committee") of the Board of
Directors of the Company is composed of two independent outside
Directors. There are no insiders on the Committee and there are no
Committee members with interlocking relationships with the Company or
any of its affiliates. The Chief Executive Officer ("CEO") and the
President of the Company are invited to attend and participate in
Committee meetings, except when their compensation is being discussed.
The CEO and President make recommendations to the Committee regarding
compensation for all other officers and employees of the Company. The
Compensation Committee considers the CEO and President's
recommendations, approves or revises them, and submits its conclusions
to the Board. The Board of Directors has final authority regarding
executive compensation and establishes compensation guidelines for
other employees.
Compensation Philosophy
It is the Company's philosophy and practice to pay fair and
competitive wages and salaries to its employees and executive officers
in order to attract and retain highly-qualified employees. The
Committee and the Board believe that the compensation of the Company's
executive officers should be significantly influenced by the Company's
performance. Accordingly, the Company's practice has been to establish
base cash salaries at levels deemed appropriate by the Committee based
on historic Company compensation levels and the Committee's experience
and knowledge as to compensation levels at other companies, and to
designate an additional portion of the compensation of each officer
that is contingent upon corporate performance. In assessing
compensation levels, the Committee has periodically reviewed
industry-specific compensation surveys and has retained the services of
an independent compensation consulting organization.
The executive group participates in a management incentive (bonus)
program. The bonus pool is available to the extent that the Company
meets or exceeds financial or other performance goals. The
Compensation Committee establishes the financial performance goals and
objectives for the Chief Executive Officer and the President based on
the Company's historical performance and discussions with management.
The Company also maintains a stock option plan to provide long-term
incentives to maximize shareholder value by rewarding employees for the
long-term appreciation of the Company's share price. Options are
typically subject to four-year vesting. Generally, option grants are
made to executives in connection with their initial hire. The Board
has also approved grants in connection with a significant change in
responsibilities, as a reward for outstanding performance, and to
provide incentives for continued employment. The number of shares
subject to each stock option granted, is based on anticipated future
contribution and the ability of the individual to affect corporate
results.
The total compensation for the five most highly-compensated
executives is described in this proxy statement starting on page 6 and
the compensation for the CEO and President is also discussed below.
Compensation of the Chief Executive Officer and President
Each of the CEO and President of the Company had a base salary of
$170,000 in fiscal year 1996, which was determined by reference to
competitive compensation survey data as well as the Company's
historical practices and internal salary structures. The base salaries
for the CEO and President will remain at $170,000 each for 1997.
Each of the CEO's and President's performance bonus is tied
directly to the Company's achievement of financial goals. The
Compensation Committee reserves the right to adjust these targets based
on unusual or one-time events which affect net income to the extent
such events are approved by the Board of Directors. In 1996, the CEO
and President did not receive cash bonuses.
Federal Tax Regulations
As a result of new Section 162(m) of the Internal Revenue Code (the
"Code"), the Company's deduction of executive compensation may be
limited to the extent that a "covered employee" (i.e., a Named
Executive who is employed on the last day of the Company's taxable year
and whose compensation is reported in the summary compensation table in
the Company's proxy statement) receives compensation in excess of
$1,000,000 in such taxable year of the Company (other than
performance-based compensation that otherwise meets the requirements of
Section 162(m) of the Code). The Company does not anticipate that the
compensation for any of the Named Executives will exceed $1,000,000 in
the current taxable year, but intends to take appropriate action to
comply with such regulations, if applicable, in the future.
Stephen J. Clearman A. Bruce Johnston
Shareholder Return Performance Graph
The following stock performance graph compares the cumulative
total return of the Company's Common Stock from April 11, 1995, the
date the Company's initial public offering became effective, to the
cumulative total return for the same period of the Nasdaq Stock Market
Index, the index of Nasdaq Computer and Data Processing Stocks, and a
Peer Group of companies. The graph assumes that the value of the
investment in the Company and each index at April 11, 1995 was $100 and
that all dividends were reinvested.
EXPERT SOFTWARE, INC.
Performance Comparison
[GRAPHIC OMITTED]
-------------------------------------------------------
4/95 12/95/ 12/96
-------------------------------------------------------
-------------------------------------------------------
Expert Software, Inc. $100.00 $94.92 $22.88
-------------------------------------------------------
-------------------------------------------------------
Nasdaq Stock Market (US $100.00 $128.56 $158.12
Companies)
-------------------------------------------------------
-------------------------------------------------------
Nasdaq Computer and Data $100.00 $136.31 $168.27
Processing Stocks
-------------------------------------------------------
-------------------------------------------------------
Peer Group $100.00 $105.54 $ 69.59
-------------------------------------------------------
The Peer Group consists of 12 companies with the same SIC code as
the Company, each of which is traded on the Nasdaq National Market.
The Company believes that it competes directly with these peers with
respect to product offerings and price points. The peer companies
selected are: Acclaim Entertainment Inc., Activision Inc., Broderbund
Software Inc., Electronic Arts Inc., GT Interactive Software Corp.,
International Microcomputer Software Inc., Learning Company Inc., Maxis
Inc., MySoftware Company, 7th Level Inc., Spectrum Holobyte Inc., and
THQ Inc.
Employment Agreements
As of February 23, 1995, the Company entered into employment
agreements with each of Kenneth P. Currier and Susan A. Currier
pursuant to which they are employed as Chief Executive Officer and
President of the Company, respectively. These employment agreements
currently provide for the payment of an annual salary to each of the
Curriers in 1996, which is subject to change by the Compensation
Committee of the Board of Directors.
These employment agreements also entitle each of the Curriers to
receive annual cash bonuses in amounts, and based upon the achievement
of Company objectives, established from year-to-year by the
Compensation Committee. These agreements are subject to automatic
one-year extensions on each December 31st unless earlier terminated by
either the executive or the Company. Under the employment agreements,
each of the Curriers is entitled to severance benefits equal to six
months salary and benefits plus a pro rated cash bonus in the event of
either a termination of their employment by the Company without cause
or a termination by the executive in response to certain changes in the
executive's employment circumstances, subject to increase to one-year's
salary and benefits plus a pro rated cash bonus after a change in
control of the Company (as defined in the agreements) in the event of
either a termination of employment by the Company without cause or a
termination by the executive in response to certain changes in the
executive's employment circumstances.
PROPOSAL II - RATIFICATION OF THE SELECTION OF
ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP ("Arthur Andersen") has been
selected by the Board of Directors to be the Company's independent
auditors for 1997. Arthur Andersen has served as independent auditors
of the Company and its subsidiaries since November 1993.
The financial statements of the Company for the year ended
December 31, 1996 have been audited and reported upon by Arthur
Andersen. Arthur Andersen also performed tax services in 1996.
Vote Required for Approval
The affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting is
necessary to ratify the selection of Arthur Andersen as the independent
auditors of the Company. The Board of Directors recommends that you
vote FOR the ratification of the selection of Arthur Andersen as the
Company's independent auditors for 1997. Should the selection of
Arthur Andersen as independent auditors of the Company not be ratified
by the shareholders, the Board of Directors will reconsider the
matter. A representative of Arthur Andersen LLP will be present at the
Annual Meeting and will be given the opportunity to make a statement if
he or she so desires. The representative will be available to respond
to appropriate questions.
PROPOSAL III - APPROVAL OF 1997 STOCK OPTION PLAN FOR
DIRECTORS AND 1997 STOCK OPTION PLAN FOR OFFICERS AND EMPLOYEES
The Board of Directors, on April 17, 1997, unanimously adopted a
1997 Stock Option Plan for Directors and a 1997 Stock Option Plan for
Officers and Employees (the "1997 Plans"). The Board believes that the
1997 Plans will be an important incentive in attracting, maintaining,
and motivating Directors, and officers and employees to focus their
work efforts on increasing stockholder value. The 1997 Plans were
adopted by the Board subject to the approval of the stockholders. The
following discussion of the 1997 Plans does not purport to be complete
and is qualified in its entirety by reference to the Plans themselves,
which are attached as Appendix A and Appendix B.
Nature of Options
The 1997 Stock Option Plan for Directors provides for the granting
of "nonqualified options" (as defined in Section 422 of the Code to
Directors. Two hundred fifty thousand (250,000) shares of Common Stock
have been reserved for this purpose.
The 1997 Stock Option Plan for Officers and Employees provides for
the granting of "incentive options" (as defined in Section 422 of the
Code to officers and employees. One million (1,000,000) shares of
Common Stock have been reserved for this purpose.
Each of the 1997 Plans provide for the acceleration of vesting on
change of control of the Company.
Eligibility
All Directors of the Company are eligible to participate in the
1997 Stock Option Plan for Directors. These stock options are designed
to attract and retain directors who make significant contributions to
the Company's success, and give the Directors a longer term incentive
to increase stockholder value. The Director Plan provides for an
initial grant of 30,000 shares, with additional annual grants of 5,000
shares to each sitting Director.
All current and future officers and employees of the Company are
eligible to participate in the 1997 Stock Option Plan for Officers and
Employees. The type and amount of awards are determined by the
Compensation Committee based on a variety of factors, including an
individual's position and performance. These stock options are designed
to attract and retain officers and employees who make significant
contributions to the Company's success; reward officers and employees
for individual performance; and give officers and employees an
incentive to increase stockholder value.
Exercise Price
The exercise price of all nonqualified options under the Director
Plan must be at least equal to the fair market value of the Common
Stock of the Company on the date of grant. Initial grants are
effective April 17, 1997, subject to approval of the Director Plan by
the Stockholders.
The exercise price of all incentive options under the Officers and
Employee Plan must be at least equal to the fair market value of the
Common Stock of the Company on the date of grant. In order to qualify
as "incentive options", the aggregate fair market value of Common Stock
(determined at the time of grant) with respect to which incentive stock
options are first exercisable by an individual in any calendar year may
not exceed $100,000. Payment of the exercise price for any options
granted under the Officers and Employees Plan may be made in cash or,
if authorized, by the applicable option agreement, and if permitted by
law, shares of Common Stock. Initial grants under the Officer and
Employee Plan are subject to the approval of the Stockholders.
Amendments and Termination
The Director Plan and the Officer and Employee Plan each terminate
in the year 2007. The Board has the authority to amend or terminate
these Plans, although stockholder approval is required for any
amendments if necessary to insure that options granted under these
Plans are exempt under Rule 16b-3 of the Exchange Act or that incentive
options are qualified under Section 422 of the Code, and no such action
may adversely affect any outstanding option without such holder's
consent.
Federal Income Tax Consequences
The following is a summary of the principal federal income tax
consequences pertaining to options granted under the Director Plan and
the Officer and Employee Plan. It does not describe all federal tax
consequences under these Plans, nor does it describe state or local tax
consequences.
Nonqualified Stock Options. No income is realized by the optionee
at the time a nonqualified stock option is granted. Generally, (a) at
exercise, ordinary income is realized by the optionee in an amount
equal to the difference between the option price and the fair market
value of the shares of Common Stock underlying such option (the
"Shares") on the date of exercise, and the Company receives a tax
deduction for the same amount, and (b) upon sale of the Shares,
appreciation or depreciation after the date of exercise is treated as
either short-term or long-term capital gain or loss depending on how
long the Shares have been held. Special rules may apply where the
optionee is subject to Section 16(b) of the Exchange Act or where all
or a portion of the exercise price is paid by tendering Shares.
Incentive Stock Options. In general, no taxable income is realized
by the optionee upon the grant or exercise of an incentive stock
option. For purposes of calculating alternative minimum taxable income,
however, incentive stock options are generally treated in the same
manner as nonqualified stock options described above. Thus, the
difference between the exercise price and the fair market value of the
Shares underlying such option on the date of exercise is generally
included in the calculation of alternative minimum taxable income, so
that the exercise of an incentive stock option may result in
alternative minimum tax liability for the optionee.
If the Shares issued to an optionee pursuant to the exercise of an
incentive stock option are not disposed of within two years from the
date of grant or within one year after the date of exercise, then (a)
in general, upon sale of such Shares, any amount realized in excess of
the option exercise price will be treated as long-term capital gain and
any loss sustained will be treated as long-term capital loss, and (b)
there will be no deduction for the Company for federal income tax
purposes.
If Shares acquired upon the exercise of an incentive stock option
are disposed of prior to the expiration of the two year and one year
holding periods described above, (a "disqualifying disposition"),
generally, (a) the optionee will realized ordinary income in the year
of disposition in an amount equal to the excess if any of the fair
market value of the Shares at exercise (or, if less, the amount
realized on a sale of such Shares) over the option price thereof, and
(b) the Company will be entitled to deduct such amount
Special rules may apply where the optionee is subject to Section
16(b) of the Exchange Act or where all or a portion of the exercise
price of the incentive stock option is paid by tendering Shares.
Vote Required for Approval
The affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting is
necessary to approve the Company's 1997 Directors Stock Option Plan,
and 1997 Officers and Employees Stock Option Plan. The Board of
Directors recommends that you vote FOR the approval of the 1997
Directors Stock Option Plan and 1997 Officers and Employees Stock
Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. Bruce Johnston, a Director of the Company, is a Principal of TA
Associates. Stephen J. Clearman, a Director of the Company, is a
general partner of the general partner of Geocapital II, L.P. Charles
E. Noell III, a Director of the Company, is a general partner of the
general partner of JMI Equity Fund, L.P. Kenneth and Susan Currier,
who are married to one another, are Directors and the Chief Executive
Officer and President of the Company, respectively.
The Company has a policy whereby all transactions between the
Company and its officers, directors and affiliates (other than
employment and compensation matters) will be reviewed by the Audit
Committee of the Company's Board of Directors or a comparable committee.
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth, to the best knowledge and belief
of the Company, certain information regarding the beneficial ownership
of the Company's Common Stock as of April 21, 1997 by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each of the Company's Directors,
(iii) each of the Named Executive Officers and (iv) all of the Company's
executive officers and Directors as a group.
Shares Percent
Directors, Executive Officers Beneficially of
and 5% Stockholders Owned(1) Class(2)
TA Associates Group....................... 1,989,252 (3) 26.5%
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Geocapital II, L.P........................ 691,545 9.2%
One Bridge Plaza
Fort Lee, NJ 07024
JMI Equity Fund, L.P...................... 470,287 6.3%
1414 South West Freeway, Suite 6200
Sugarland, TX 77478
Waddell & Reed, Inc....................... 564,000 (4) 7.5%
2001 Third Avenue South
Birmingham, AL 35233
Granahan Investment Management, Inc....... 525,750 (5) 7.0%
275 Wyman Street, Suite 270
Waltham, MA 02154
Putnam Investments, Inc................... 455,300 (6) 6.1%
One Post Office Square
Boston, MA 02109
Hambrecht & Quist Group................... 452,242 (7) 6.0%
One Bush Street
San Francisco, CA 94104
T. Rowe Price Associates, Inc............. 382,500 (8) 5.1%
100 East Pratt Street
Baltimore, MD 21202
Kenneth P. Currier........................ 725,166 (9) 9.2%
Susan A. Currier.......................... 725,166(10) 9.2%
A. Bruce Johnston......................... 3,213(11) *
Stephen J. Clearman....................... 691,545(12) 9.2%
Charles E. Noell III...................... 470,287(13) 6.3%
William H. Lane III....................... -- --
Charles H. Murphy......................... 11,250(14) *
Kenneth J. Tarolla........................ 18,063(15) *
Timothy R. Leary.......................... 64,063(16) *
Michael A. Appel.......................... 6,563(17) *
Anne E. Aitken............................ -- --
All directors and executive officers as
a group (11 persons)..................... 1,990,150(18) 24.9%
_____________________________
* Represents less than 1% of the outstanding shares.
<FN>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options that are currently exercisable or exercisable
within 60 days of March 31, 1997 are deemed to be beneficially owned
by the person holding such options for the purpose of computing the
percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the purpose of an other
person.
(2) Applicable percentage of ownership is based on 7,514,679 shares of
Common Stock outstanding as of March 31, 1997 together with applicable
options for each stockholder.
(3) Includes 1,136,310 shares of Common Stock held by Advent VI L.P.,
510,064 shares held by Advent Atlantic and Pacific II L.P., 184,181
shares held by Advent Industrial II L.P., 141,685 shares held by
Advent New York L.P., and 17,002 shares held by TA Venture Investors,
L.P. The respective general partners of Advent VI L.P., Advent
Atlantic and Pacific II L.P., Advent Industrial II L.P., Advent New
York L.P. and TA Venture Investors L.P. (collectively, the "TA
Associates Group") exercise sole investment and voting power with
respect to shares of Common Stock held by such entities. A. Bruce
Johnston, a Director of the Company, is a Principal of TA Associates.
(4) As reported in a Schedule 13G dated January 31, 1997 and filed with
the Securities and Exchange Commission jointly by Waddell & Reed,
Inc., Waddell & Reed Investment Management Company, Waddell & Reed
Asset Management Company, Waddell & Reed Financial Services, Inc.,
Torchmark Corporation, United Investors Management Company, and
Liberty National Life Insurance Company.
(5) As reported in a Schedule 13G dated January 31, 1997 and filed with
the Securities and Exchange Commission, these securities are owned by
various individual and institutional investors (including Vanguard
Explorer Fund, Inc., which owns 445,500 of such shares) for which
Granahan Investment Management, Inc. serves as investment adviser with
power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Securities Exchange
Act of 1934, Granahan Investment Management, Inc. is deemed to be a
beneficial owner of such securities; however, Granahan Investment
Management, Inc. expressly disclaims that it is, in fact, the
beneficial owner of such securities.
(6) As reported in a Schedule 13G dated January 27, 1997 and filed with
the Securities and Exchange Commission, these securities are owned by
various individual and institutional investors for which Putnam
Investments, Inc. serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of
the reporting requirements of the Securities Exchange Act of 1934,
Putnam Investments, Inc. is deemed to be a beneficial owner of such
securities; however, Putnam Investments, Inc. expressly disclaims that
it is, in fact, the beneficial owner of such securities.
(7) As reported in a Schedule 13D dated April 7, 1997 and filed with the
Securities and Exchange Commission jointly by Hambrecht & Quist Group,
Hambrecht & Quist California, Hambrecht & Quist L.L.C. and Daniel H.
Case III.
(8) As reported in a Schedule 13G dated February 14, 1997 and filed with
the Securities and Exchange Commission, these securities are owned by
various individual and institutional investors for which T. Rowe Price
Associates, Inc. serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of
the reporting requirements of the Securities Exchange Act of 1934, T.
Rowe Price Associates, Inc. is deemed to be a beneficial owner of such
securities; however, T. Rowe Price Associates, Inc. expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(9) Includes 362,583 shares of Common Stock beneficially owned by Mr.
Currier's wife, Susan A. Currier, as to which Mr. Currier disclaims
beneficial ownership, 76,000 shares beneficially owned by Mr. and Ms.
Currier jointly and 197,083 shares which Mr. Currier may acquire upon
the exercise of stock options within 60 days of March 31, 1997.
(10)Includes 362,583 shares of Common Stock beneficially owned by Ms. Currier's
husband, Kenneth P. Currier, as to which Ms. Currier disclaims beneficial
ownership, 76,000 shares beneficially owned by Mr. and Ms. Currier
jointly and 197,083 shares which Ms. Currier may acquire upon the
exercise of stock options within 60 days of March 31, 1997.
(11)Represents 3,213 shares of Common Stock beneficially owned by A. Bruce
Johnston through TA Venture Investors L.P. which are included in the
17,002 shares described in footnote (2) above as being owned by TA Venture
Investors L.P. Does not include any shares beneficially owed by
Advent VI L.P., Advent Atlantic and Pacific II L.P., Advent Industrial
II L.P. or Advent New York L.P., or the remainder of the shares
described in footnote (2) above as being owned by TA Venture Investors
L.P., as to which Mr. Johnston disclaims beneficial ownership.
(12)Includes 691,545 shares of Common Stock held by Geocapital II, L.P. Stephen
J. Clearman, BVA Associates, James Harrison and Irwin Lieber are the
general partners (the "Geocapital General Partners") of Softven
Management which is the sole general partner of Geocapital II, L.P.,
and share voting and investment power with respect to these shares.
The Geocapital General Partners disclaim beneficial ownership of such
shares, except to the extent of each partner's proportionate pecuniary
interest therein.
(13)Includes 470,287 shares of Common Stock held by JMI Equity Fund, L.P.
Charles E. Noell III, Harry S. Gruner, Anthony Moores and Norris van den
Berg are the general partners (the "JMI General Partners") of JMI Partners,
L.P., which is the sole general partner of JMI Equity Fund, L.P., and
share voting and investment power with respect to such shares. The
JMI General Partners disclaim beneficial ownership of such shares,
except to the extent of each partner's proportionate pecuniary
interest therein.
(14)Consists of 11,250 shares of Common Stock which Mr. Murphy may acquire upon
the exercise of stock options within 60 days of March 31, 1997.
(15)Consists of 18,063 shares of Common Stock which Mr.Tarolla may acquire upon
the exercise of stock options within three months of March 28, 1997,
the date of Mr. Tarolla's resignation from the Company.
(16)Includes 46,633 shares which Mr. Leary may acquire upon the exercise of
stock options within 60 days of March 31, 1997.
(17)Consists of 2,500 shares of Common Stock which Mr. Appel may acquire upon
the exercise of stock options within 60 days of March 31, 1997.
(18)Includes approximately 475,737 shares which may be acquired upon the
exercise of stock options within 60 days of March 31, 1997.
</FN>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of
the Company's outstanding shares of Common Stock, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission and Nasdaq. Officers, directors and greater than ten
percent stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons that no
Section 16(a) reports were required for those persons, the Company
believes that during the fiscal year ended December 31, 1996, all
filing requirements were complied with, except in the case of Susan A.
Currier who failed to timely file one report regarding a scheduled sale
of the Common Stock.
EXPENSES OF SOLICITATION
The Company will pay the entire expense of soliciting proxies for
the Annual Meeting. In addition to solicitations by mail, certain
Directors, officers and regular employees of the Company (who will
receive no compensation for their services other than their regular
compensation) may solicit proxies by telephone, telegram or personal
interview. Banks, brokerage houses, custodians, nominees and other
fiduciaries have been requested to forward proxy materials to the
beneficial owners of shares of Common Stock held of record by them and
such custodians will be reimbursed for their expenses.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 annual
meeting of stockholders must be received by the Company on January 30,
1998 in order to be considered for inclusion in the Company's proxy
statement and form of proxy for that meeting. Such a proposal must
also comply with the requirements as to form and substance established
by applicable laws and regulations in order to be included in the proxy
statement.
The Company's By-laws provide that any stockholder of record
wishing to have a stockholder proposal considered at an annual meeting
must provide written notice of such proposal and appropriate supporting
documentation, as set forth in the By-laws, to the Company at its
principal executive office not less than 75 days nor more 120 days
prior to the first anniversary of the date of the preceding year's
annual meeting; provided, however, that in the event the annual meeting
is scheduled to be held on a date more than 30 days before the
anniversary of the date of the preceding year's annual meeting, a
stockholder's notice shall be timely if delivered to, or mailed to and
received by, the Company on the later of the 75th day prior to the
scheduled date of such annual meeting or the 15th day following the day
on which public announcement of the date of such annual meeting is
first made by the Company.
Any such proposal should be mailed to: Secretary, Expert Software,
Inc., 800 Douglas Road, Suite 750, Coral Gables, Florida 33134.
OTHER MATTERS
The Board of Directors does not know of any matters other than
those described in this Proxy Statement which will be presented for
action at the Annual Meeting. If other matters are duly presented,
proxies will be voted in accordance with the best judgment of the proxy
holders.
STOCKHOLDERS MAY OBTAIN, WITHOUT CHARGE, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K AS AMENDED BY FORM 10-K/A, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 BY
WRITING TO EXPERT SOFTWARE, INC., 800 DOUGLAS ROAD, SUITE 750, CORAL
GABLES, FLORIDA 33134.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU
ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
APPENDIX A
EXPERT SOFTWARE, INC.
1997 Stock Option Plan for Directors
1. PURPOSE:
This 1997 Stock Option Plan for Directors (the "Plan") is intended
to serve as a means to compensate the Directors of Expert Software,
Inc., (the "Company") or its subsidiaries (as hereafter defined) and
to enable the individuals to whom options are granted (the
"Optionees") to acquire or increase a proprietary interest in the
success of the Company. The Company intends that this purpose will
be effected by granting nonqualified stock options ("Nonqualified
Options") to Directors who are not employed by the Company ("Outside
Directors") respectively as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The term
"subsidiaries" includes any corporations in which stock possessing
FIFTY (50) PERCENT or more of the total combined voting power of all
classes of stock is owned directly or indirectly by the Company.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan shall be Nonqualified
Options and shall be designated as such at the time of grant.
(b) The Plan shall be administered by either the entire Board
of Directors or a committee of the Board of Directors of the
Company (the "Committee") of not less than TWO (2) Directors of
the Company appointed by the Board of Directors; provided that,
to the extent required by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 as amended (the "Act") or any
successor provision ("Rule 16b-3") or Section 162(m) of the
Code, with respect to specific grants of options, each member
of the Committee shall be a "Non-Employee Director" within the
meaning of Rule 16b-3, and an "outside director" within the
meaning of Section 162(m) of the Code. Action by the Committee
shall require the affirmative vote of a majority of all its
members.
(c) Subject to the terms and conditions of the Plan, the
Committee shall have the full and complete authority in its
discretion, consistent with and subject to the express
provisions of the Plan:
(i)To determine from time to time the options to be granted to
eligible individuals under the Plan and to prescribe the terms
and provisions (which need not be identical) of options granted
under the Plan to such individuals, including but not limited
to, the time or times of grant, the individuals to whom options
may be granted, the number of shares to be covered by any
option, the vesting schedule, the exercise price of shares
covered by any option, the power to accelerate vesting of
options or to extend the exercise period.
(ii) To construe and interpret the Plan and any grants
thereunder and to establish, amend, and revoke rules and
regulations for administration of the Plan. In this connection,
the Committee may correct any defect or supply any omission, or
reconcile any inconsistency in the Plan, in any option
agreement, or in any related agreements, in the manner and to
the extent it shall deem necessary or expedient to make the
Plan fully effective. All decisions and determinations by the
Committee in the exercise of this power shall be final and
binding upon the Company and the Optionees; and
(iii)Generally, to exercise such powers and to perform such
acts as are deemed necessary or desirable to promote the best
interests of the Company with respect to the Plan.
3. STOCK
(a) The stock subject to the options granted under the Plan
shall be shares of the Company's authorized but unissued Common
Stock, par value $.01 per share (the "Common Stock"). The total
number of shares for which options may be granted under the
Plan shall not exceed an aggregate of TWO HUNDRED FIFTY
THOUSAND (250,000) shares of Common Stock. Such number shall be
subject to adjustment as provided in Section 7 hereof.
(b) Whenever any outstanding option under the Plan expires, is
canceled or is otherwise terminated (other than by exercise)
the shares of Common Stock allocable to the unexercised portion
of such option may again be the subject of options under the
Plan.
4. ELIGIBILITY
(a) Nonqualified Options may be granted to all Outside
Directors of the Company or its Subsidiaries, but only to the
extent provided in Section 4(b) below.
(b) Notwithstanding any other provision of the Plan, each
member of the Board of Directors shall be granted options only
in accordance with, and subject to the provisions of this
Section 4(b):
(i)Each individual who shall be elected by the stockholders of
the Company to the Board of Directors, or appointed by the
Board of Directors as a Director, after the Plan Date, shall
automatically be granted, effective upon such election or
appointment, a Nonqualified Option to purchase THIRTY THOUSAND
(30,000) shares of Common Stock. All options granted under this
Section shall vest in calendar quarterly installments over FOUR
(4) years, and shall have a per share exercise price which is
equal to the per share fair market value of the Common Stock on
the date of grant.
(ii) Each individual who is serving as a Director on January 1,
1998, or on any January 1st thereafter, shall be automatically
granted, effective upon each January 1st during his/her
service as Director, a Nonqualified Option to purchase FIVE
THOUSAND (5,000) shares of Common Stock. All options granted
under this Section shall vest in calendar quarterly
installments over ONE (1) year, and shall have a per share
exercise price which is equal to the per share fair market
value of the Common Stock on the date of grant. Since January
1st is a national holiday, the per share fair market value of
the Common Stock on the last business day preceding January 1st
shall apply.
(iii)Each Director may elect not to receive the options granted
under this Section 4(b) by written notice delivered to the
Committee prior to the date such options would otherwise be
granted hereunder.
5. TERMS OF THE OPTION AGREEMENTS
Subject to the terms and conditions of the Plan, each option
agreement shall contain such provisions as the Committee shall, from
time to time, deem appropriate. Option agreements need not be
identical, but each option agreement by appropriate language shall
include the substance of all of the following provisions:
(a) Expiration; Termination of Services as Director
(i)Notwithstanding any other provisions of the Plan or of any
option agreement, each option shall expire on the date
specified in the option agreement, but not later than the TENTH
(10th ) anniversary of the date on which the option was granted.
(ii) If an Optionee's service as a Director with the Company
and its subsidiaries is terminated by resignation, expiration
of term without re-election, or for any other reason, any
outstanding Nonqualified Option granted to such Optionee under
the Plan shall be exercisable, to the extent vested at that
time, only for a period of NINETY (90) days following such
event, subject to the expiration date of such option, provided
however, that the Committee may, in its sole discretion, extend
the exercise period for any such options.
(b) Minimum Shares Exercisable. The minimum number of shares
with respect to which an option may be exercised at any one
time shall be ONE HUNDRED (100) shares, or such lesser number
as is subject to exercise under the option at the time.
(c) Exercise. Each option shall be exercisable in such
installments (which need not be equal) and at such times as may
be designated by the Committee. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or
in part, at any time after becoming exercisable, but not later
than the date the option expires.
(d) Purchase Price. The purchase price per share of Common
Stock subject to each option shall be determined by the
Committee; provided however, that the purchase price per share
of Common Stock subject to each Nonqualified Option shall not
be less than the fair market value of the Common Stock on the
date such Nonqualifed Option is granted. For the purposes of
the Plan, the fair market value of the Common Stock shall be
determined in good faith by the committee; provided however,
that (i) if the Common Stock is quoted on the Nasdaq Stock
Market, Inc. ("Nasdaq") on the date the option is granted, the
fair market value shall not be less than the average of the
highest bid and lowest asked prices of the Common Stock on
Nasdaq reported for that date, or (ii) if the Common Stock is
admitted to trading on a national securities exchange or the
Nasdaq Stock Market, Inc. on the date the option is granted,
the fair market value shall not be less than the closing price
reported for the Common Stock on such exchange or system for
such date, or, if no sales were reported for such date, for the
last date preceding such date for which a sale was reported.
(e) Rights of Optionees. No Optionee shall be deemed for any
purpose to be an owner of any shares of Common Stock subject to
any option unless and until (i) the option shall have been
exercised pursuant to the terms thereof, (ii) all requirements
under applicable law and regulations shall have been complied
with to the satisfaction of the Company, (iii) the Company
shall have issued and delivered the shares to the Optionee, and
(iv) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full voting, dividend and other
ownership rights with respect to such shares of Common Stock.
(f) Transfer. No option granted hereunder shall be
transferable by the Optionee other than by will or by the laws
of descent and distribution, and such option may be exercised
during the Optionee's lifetime only by the Optionee, or his or
her guardian or legal representative. Notwithstanding the
foregoing, the Committee may permit the Optionee to transfer,
without consideration for the transfer, his or her Nonqualified
Options to members of his, or her immediate family, to trusts
for the benefit of such family members, or to partnerships in
which such family members are the only partners, provided that
the transferee agrees in writing with the Company to be bound
by all of the terms and conditions of this Plan and the
applicable Option.
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE.
(a) Any option granted under the Plan, to the extent then
exercisable, may be exercised by the Optionee in whole or
subject to Section 5(b) hereof in part by delivering to the
Company on any business day a written notice specifying the
number of shares of Common Stock the Optionee then desires to
purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant
to the exercise of an option shall be made either: (i) in cash,
or by certified or bank check or other payment acceptable to
the Company equal to the option exercise price for the number
of shares specified in the Notice (the "Total Option Price"),
(ii) if authorized by the applicable option agreement and if
permitted by law, by delivery of shares of Common Stock which
have been held by the Optionee for at least six months that the
Optionee may freely transfer having a fair market value,
determined by reference to the provisions of Section 5(d)
hereof, equal to or less than the Total Option Price, plus cash
in an amount equal to the excess, if any, of the Total Option
Price over the fair market value of such shares of Common
Stock, or (iii) if authorized by the applicable option
agreement, by the Optionee delivering the Notice to the Company
together with irrevocable instructions to a broker to promptly
deliver the Total Option Price to the Company in cash or by
other method of payment acceptable to the Company; provided,
however, that the Optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity or
other agreements as the Company shall prescribe as a condition
of payment under this Clause (iii).
(c) The delivery of certificates representing shares of Common
Stock to be purchased pursuant to the exercise of an option
will be contingent upon the Company's receipt of the Total
Option Price and of any written representations from the
Optionee required by the Committee, and the fulfillment of any
other requirements contained in the option agreement or
applicable provision of law.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of the Company's Common Stock as a whole are
increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company, whether
through merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and
proportionate adjustment shall be made in the number and kind
of shares subject to the Plan, and in the number, kind, and per
share exercise price of shares subject to unexercised options
or portions thereof granted prior to any such change. In the
event of any such adjustment in an outstanding option, the
Optionee thereafter shall have the right to purchase the number
of shares under such option at the per share price, as so
adjusted, which the Optionee could purchase at the total
purchase price applicable to the option immediately prior to
such adjustment.
(b) Adjustments under this Section 7 shall be determined by the
Committee and such determinations shall be final, binding and
conclusive. The Committee shall have the discretion and power
in connection with such adjustments or otherwise to determine
and to make effective provisions for acceleration of the time
or times at which any option or portion thereof shall become
exercisable under this Section. No fractional shares of Common
Stock shall be issued under the Plan on account of any such
adjustments or otherwise.
8. CHANGE OF CONTROL PROVISIONS.
(a) Impact of Event. Notwithstanding any other provision of
the Plan to the contrary,
in the event of a Change in Control:
(i)All Options outstanding as of the date such Change of
Control occurs, shall become fully vested and exercisable.
(b) Definition of Change of Control. A "Change of Control"
means the happening of any of the following events:
(i)Any "person" as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, any of its
Subsidiaries, or any trustee, fiduciary or other person, shall
become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly of securities of
the Company representing FIFTY-ONE (51%) PERCENT or more of the
combined voting power of the Company's then outstanding
securities having the right to vote in an election of the
Company's Board of Directors ("Voting Securities") (in such
case other than as a result of an acquisition of securities
directly from the Company); or
(ii) Persons who, as of the effective date of Change of
Control, constitute the Company's Board of Directors (the
"Incumbent Directors") cease for any reason, including without
limitation, as a result of a tender offer, proxy contest,
merger, or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a
director of the Company subsequent to the Effective Date whose
election was approved by a vote of at least a majority of the
Incumbent Directors or whose nomination for election was
approved by the Incumbent Directors shall, for purposes of this
Plan, be considered an Incumbent Director; or
(iii)The stockholders of the Company shall approve (a) any
consolidation or merger of the Company, or any Subsidiary where
the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own ( as such term is
defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate FIFTY-ONE (51%) PERCENT or
more of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (b) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all
of the assets of the Company, or (c) any plan or proposal for
the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i)
solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of voting securities
outstanding, increase the proportionate number of shares of voting
securities beneficially owned by any person to FIFTY-ONE (51%)
PERCENT or more of the combined voting power of all then outstanding
voting securities, provided however, that if any person referred to
in this sentence shall thereafter become the beneficial owner of any
additional shares of voting securities (other than pursuant to a
stock split, stock dividend, or similar transaction or as a result
of an acquisition of securities directly from the Company), then a
"Change of Control" shall be deemed to have occurred for purposes of
the foregoing clause (i).
9. TAX WITHHOLDING
Each Optionee shall, no later than the date as of which the value
of any option granted hereunder or of any Common Stock issued upon
the exercise of such option first becomes includable in the gross
income of the Optionee for Federal income tax purposes (the "Tax
Date") pay to the Company, or make arrangements satisfactory to the
Company regarding payment of any Federal, State, or local taxes of
any kind required by law to be withheld with respect to such income.
10. AMENDMENT OF THE PLAN
The Board of Directors may, at any time, amend or discontinue the
Plan and the Committee may, at any time, amend or cancel any
outstanding Options (or provide substitute options at the same or
reduced exercise or purchase price or with no exercise or purchase
price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Option if it were then
initially granted under this Plan) for the purpose of satisfying
changes in law or for any other lawful purpose, but no such action
shall adversely affect rights under any outstanding Option without
the holder's consent. Plan amendments shall be ratified by the
stockholders.
11. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power
of the Board of Directors to adopt such other incentive arrangements
as it may deem desirable, including without limitation, the granting
of stock or stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific
cases. Neither the Plan nor any option granted hereunder shall be
deemed to confer upon any member of the Board of Directors any
right to continued directorship of the Company or its Subsidiaries.
12. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) The obligation of the Company to sell and deliver shares of
Common Stock with respect to options granted under the Plan
shall be subject to all applicable laws, rules, and
regulations, including all applicable Federal and State
securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate
by the Committee.
(b) The Plan shall be governed by Delaware law, except to the
extent such law is preempted by Federal law.
13. EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL
The Plan shall become effective upon the date it is approved by
the Board of Directors of the Company; provided however, that the
Plan shall be subject to the approval of the Company's stockholders
in accordance with applicable laws and regulations at an annual or
special meeting held within TWELVE (12) months of such effective
date. No options granted under the Plan prior to such stockholder
approval may be exercised until such approval has been obtained. No
options may be granted under the Plan after the TENTH (10th)
anniversary of the effective date of the Plan.
Approved and adopted by the Board of Directors on April 17, 1997.
APPENDIX B
EXPERT SOFTWARE, INC.
1997 Stock Option Plan for Officers and Employees
1. PURPOSE:
This 1997 Stock Option Plan for Officers and Employees (the
"Plan") is intended to serve as a performance incentive for officers
and employees of Expert Software, Inc., (the "Company") or its
subsidiaries (as hereafter defined) to whom options are granted (the
"Optionees") to acquire or increase a proprietary interest in the
success of the Company. The Company intends that this purpose will
be effected by granting of "incentive stock options" ("Incentive
Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and options that do not so qualify
("Nonqualified Options"). The term "subsidiaries" includes any
corporations in which stock possessing FIFTY (50) PERCENT or more
of the total combined voting power of all classes of stock is owned
directly or indirectly by the Company.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive
Options or Nonqualified Options and shall be designated as
such at the time of grant to the extent that any option
intended to be an Incentive Option shall fail to qualify as an
"incentive stock option" under the Code, such option shall be
deemed to be a Nonqualified Option.
(b) The Plan shall be administered by either the entire Board of
Directors or a committee of the Board of Directors of the
Company (the "Committee") of not less than TWO (2) Directors
of the Company appointed by the Board of Directors; provided
that, to the extent required by Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 as amended (the "Act") or
any successor provision ("Rule 16b-3"), or Section 162(m) of
the Code, with respect to specific grants of options, each
member of the Committee shall be a "Non-Employee Director"
within the meaning of Rule 16b-3 and an "outside director"
within the meaning of Section 162(m) of the Code. Action by the
Committee shall require the affirmative vote of a majority of
all its members.
(c) Subject to the terms and conditions of the Plan, the
Committee shall have the full and complete authority in its
discretion, consistent with and subject to the express
provisions of the Plan:
(i)To determine from time to time the options to be granted to
eligible individuals under the Plan and to prescribe the terms
and provisions (which need not be identical) of options
granted under the Plan to such individuals, including but not
limited to, the time or times of grant, the individuals to whom
options may be granted, the number of shares to be covered by
any option, the vesting schedule, the exercise price of shares
covered by any option, the power to accelerate vesting of
options or to extend the exercise period.
(ii)To construe and interpret the Plan and grants thereunder
and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Committee
may correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, in any option agreement, or in any
related agreements, in the manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
All decisions and determinations by the Committee in the
exercise of this power shall be final and binding upon the
Company and the Optionees; and
(iii)Generally, to exercise such powers and to perform such
acts as are deemed necessary or desirable to promote the best
interests of the Company with respect to the Plan.
3. STOCK
(a) The stock subject to the options granted under the Plan
shall be shares of the Company's authorized but unissued Common
Stock, par value $.01 per share (the "Common Stock"). The total
number of shares for which options may be granted under the
Plan shall not exceed an aggregate of ONE MILLION (1,000,000)
shares of Common Stock. Such number shall be subject to
adjustment as provided in Section 7 hereof.
(b) Whenever any outstanding option under the Plan expires, is
canceled or is otherwise terminated (other than by exercise)
the shares of Common Stock allocable to the unexercised portion
of such option may again be the subject of options under the
Plan.
4. ELIGIBILITY
(a) Incentive Options may be granted only to officers and other
employees of the Company or its Subsidiaries, including members
of the Board of Directors who are also employees of the Company
or its Subsidiaries. Nonqualified Options may be granted to
officers and other employees of the Company or its
Subsidiaries, including members of the Board of Directors
described above, and to consultants and other key persons who
provide services to the Company, or its Subsidiaries
(regardless of whether they are also employees).
(b) No individual shall be eligible to receive any Incentive
Option under the Plan if, at the date of grant, such individual
owns stock representing in excess of TEN (10%) PERCENT of the
voting power of all outstanding capital stock of the Company,
unless notwithstanding anything in this Plan to the contrary
(i) the purchase price for stock subject to such option is at
least ONE HUNDRED TEN (110%) PERCENT of the fair market value
of such stock at the time of the grant, and (ii) the option by
its terms is not exercisable more than FIVE (5) years from the
date of grant thereof.
(c) Notwithstanding any other provision of the Plan, the
aggregate fair market value (determined as of the time the
option is granted) of the stock with respect to which Incentive
Options are exercisable for the first time by an individual
during any calendar year (under all plans of the Company and
its Subsidiaries) shall not exceed ONE HUNDRED THOUSAND
($100,000) DOLLARS, except as otherwise provided below.
5. TERMS OF THE OPTION AGREEMENTS
Subject to the terms and conditions of the Plan, each option
agreement shall contain such provisions as the Committee shall, from
time to time, deem appropriate. Option agreements need not be
identical, but each option agreement by appropriate language shall
include the substance of all of the following provisions:
(a) Expiration; Termination of Employment.
(i) Notwithstanding any other provisions of the Plan or of any
option agreement, each option shall expire on the date
specified in the option agreement, which date in the case of
any option granted hereunder shall not be later than the TENTH
(10th) anniversary of the date on which the option was granted.
(ii) If an Optionee's employment with the Company and its
Subsidiaries is terminated for any reason not involving
termination for cause, any outstanding Incentive Option granted
to such Optionee under the Plan shall be exercisable, to the
extent vested at that time, only for a period of NINETY (90)
days following termination of employment, subject to the
expiration date of such option; provided however, that the
Committee may, in its sole discretion, extend the exercise
period for any such options subject to the conditions that
those options will thereafter constitute Nonqualified Options.
In the event of termination for cause, any outstanding options
granted to such Optionee under the Plan shall terminate
immediately.
(b) Minimum Shares Exercisable. The minimum number of shares
with respect to which an option may be exercised at any one
time shall be ONE HUNDRED (100) shares, or such lesser number
as is subject to exercise under the option at the time.
(c) Exercise. Each option shall be exercisable in such
installments (which need not be equal) and at such times as may
be designated by the Committee. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or
in part, at any time after becoming exercisable, but not later
than the date the option expires.
(d) Purchase Price. The purchase price per share of Common
Stock subject to each option shall be determined by the
Committee; provided however, that the purchase price per share
of Common Stock subject to each Incentive Option shall be not
less than the fair market value of the Common Stock on the date
such Incentive Option is granted. For the purposes of the Plan,
the fair market value of the Common Stock shall be determined
in good faith by the committee; provided however, that (i) if
the Common Stock is admitted to quotation on the Nasdaq Stock
Market, Inc. ("Nasdaq") on the date the option is granted, the
fair market value shall not be less than the average of the
highest bid and lowest asked prices of the Common Stock on
Nasdaq reported for that date, or (ii) if the Common Stock is
admitted to trading on a national securities exchange or the
Nasdaq Stock Market, Inc. on the date the option is granted,
the fair market value shall not be less than the closing price
reported for the Common Stock on such exchange or system for
such date, or, if no sales were reported for such date, for the
last date preceding such date for which a sale was reported.
(e) Rights of Optionees. No Optionee shall be deemed for any
purpose to be an owner of any shares of Common Stock subject to
any option unless and until (i) the option shall have been
exercised pursuant to the terms thereof, (ii) all requirements
under applicable law and regulations shall have been complied
with to the satisfaction of the Company, (iii) the Company
shall have issued and delivered the shares to the Optionee, and
(iv) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full voting, dividend and other
ownership rights with respect to such shares of Common Stock.
(f) Transfer. No option granted hereunder shall be transferable
by the Optionee other than by will or by the laws of descent
and distribution, and such option may be exercised during the
Optionee's lifetime only by the Optionee, or his or her
guardian or legal representative. Notwithstanding the
foregoing, the Committee may permit the Optionee to transfer,
without consideration for the transfer, his or her Incentive
Options to members of his, or her immediate family, to trusts
for the benefit of such family members, or to partnerships in
which such family members are the only partners, provided that
the transferee agrees in writing with the Company to be bound
by all of the terms and conditions of this Plan and the
applicable Option.
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE.
(a) Any option granted under the Plan, to the extent then
exercisable, may be exercised by the Optionee in whole or
subject to Section 5(b) hereof in part by delivering to the
Company on any business day a written notice specifying the
number of shares of Common Stock the Optionee then desires to
purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant to
the exercise of an option shall be made either: (i) in cash, or
by certified or bank check or other payment acceptable to the
Company equal to the option exercise price for the number of
shares specified in the Notice (the "Total Option Price"), (ii)
if authorized by the applicable option agreement and if
permitted by law, by delivery of shares of Common Stock which
have been held by the Optionee for at least six months that the
Optionee may freely transfer having a fair market value,
determined by reference to the provisions of Section 5(d)
hereof, equal to or less than the Total Option Price, plus cash
in an amount equal to the excess, if any, of the Total Option
Price over the fair market value of such shares of Common
Stock, or (iii) if authorized by the applicable option
agreement, by the Optionee delivering the Notice to the Company
together with irrevocable instructions to a broker to promptly
deliver the Total Option Price to the Company in cash or by
other method of payment acceptable to the Company; provided,
however, that the Optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity or
other agreements as the Company shall prescribe as a condition
of payment under this Clause (iii).
(c) The delivery of certificates representing shares of Common
Stock to be purchased pursuant to the exercise of an option
will be contingent upon the Company's receipt of the Total
Option Price and of any written representations from the
Optionee required by the Committee, and the fulfillment of any
other requirements contained in the option agreement or
applicable provision of law.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of the Company's Common Stock as a whole are
increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company, whether
through merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and
proportionate adjustment shall be made in the number and kind
of shares subject to the Plan, and in the number, kind, and per
share exercise price of shares subject to unexercised options
or portions thereof granted prior to any such change. In the
event of any such adjustment in an outstanding option, the
Optionee thereafter shall have the right to purchase the number
of shares under such option at the per share price, as so
adjusted, which the Optionee could purchase at the total
purchase price applicable to the option immediately prior to
such adjustment.
(b) Adjustments under this Section 7 shall be determined by the
Committee and such determinations shall be final, binding and
conclusive. The Committee shall have the discretion and power
in connection with such adjustments or otherwise to determine
and to make effective provisions for acceleration of the time
or times at which any option or portion thereof shall become
exercisable. No fractional shares of Common Stock shall be
issued under the Plan on account of any such adjustments or
otherwise.
8. CHANGE OF CONTROL PROVISIONS
(a) Impact of Event. Notwithstanding any other provision of the
Plan to the contrary,
in the event of a Change in Control:
(i)All options outstanding as of the date such Change of
Control occurs, shall become fully vested and exercisable.
(b) Definition of Change of Control. A "Change of Control"
means the happening of any of the following events:
(i)Any "person" as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, any of its
Subsidiaries, or any trustee, fiduciary or other person, shall
become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly of securities of
the Company representing FIFTY-ONE (51%) PERCENT or more of the
combined voting power of the Company's then outstanding
securities having the right to vote in an election of the
Company's Board of Directors ("Voting Securities") (in such
case other than as a result of an acquisition of securities
directly from the Company); or
(ii)Persons who, as of the effective date of Change of Control,
constitute the Company's Board of Directors (the "Incumbent
Directors") cease for any reason, including without
limitation, as a result of a tender offer, proxy contest,
merger, or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a
director of the Company subsequent to the Effective Date whose
election was approved by a vote of at least a majority of the
Incumbent Directors or whose nomination for election was
approved by the Incumbent Directors shall, for purposes of this
Plan, be considered an Incumbent Director; or
(iii)The stockholders of the Company shall approve (a) any
consolidation or merger of the Company, or any Subsidiary where
the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own ( as such term is
defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate FIFTY-ONE (51%) PERCENT or
more of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (b) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all
of the assets of the Company, or (c) any plan or proposal for
the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i)
solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of voting securities
outstanding, increase the proportionate number of shares of voting
securities beneficially owned by any person to FIFTY-ONE (51%)
PERCENT or more of the combined voting power of all then outstanding
voting securities, provided however, that if any person referred to
in this sentence shall thereafter become the beneficial owner of any
additional shares of voting securities (other than pursuant to a
stock split, stock dividend, or similar transaction or as a result
of an acquisition of securities directly from the Company, then a
"Change of Control" shall be deemed to have occurred for purposes of
the foregoing clause (i).
9. EFFECT OF CERTAIN TRANSACTIONS
In the event of (i) the dissolution or liquidation of the Company,
(ii) a reorganization, merger. consolidation or other business
combination in which the Company is acquired by another entity
(other than a holding company formed by the Company) or in which the
Company is not the surviving entity, or (iii) the sale of all or
substantially all of the assets of the Company to another entity,
the Plan and the options issued hereunder shall terminate upon the
effectiveness of such transaction or event, unless provision is made
in connection with such transaction for the assumption of options
theretofore granted, or the substitution for such options of new
options of the successor entity or parent thereof, with appropriate
adjustment as to the number and kind of shares and the per share
exercise prices, as provided in Section 7. In the event of such
termination, each Optionee shall be permitted to exercise for a
period of at least FIFTEEN (15) days prior to the date of such
termination (I) all options held by such Optionee which are then
vested and exercisable.
10. TAX WITHHOLDING
Each Optionee shall, no later than the date as of which the value
of any option granted hereunder or of any Common Stock issued upon
the exercise of such option first becomes includable in the gross
income of the Optionee for Federal income tax purposes (the "Tax
Date") pay to the Company, or make arrangements satisfactory to the
Company regarding payment of any Federal, State, or local taxes of
any kind required by law to be withheld with respect to such income.
11. AMENDMENT OF THE PLAN
The Board of Directors may, at any time, amend or discontinue the
Plan and the Committee may, at any time, amend or cancel any
outstanding Options (or provide substitute options at the same or
reduced exercise or purchase price or with no exercise or purchase
price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Option if it were then
initially granted under this Plan) for the purpose of satisfying
changes in law or for any other lawful purpose, but no such action
shall adversely affect rights under any outstanding Option without
the holder's consent. If and to the extent determined by the
Committee to be required by the Act to ensure that Incentive Options
granted under the Plan are qualified under Section 422 of the Code.
Plan amendments shall be ratified by the stockholders.
12. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power
of the Board of Directors to adopt such other incentive arrangements
as it may deem desirable, including without limitation, the granting
of stock or stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific
cases. Neither the Plan nor any option granted hereunder shall be
deemed to confer upon any member of the Board of Directors any
right to continued directorship of the Company or its Subsidiaries.
13. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) The obligation of the Company to sell and deliver shares of
Common Stock with respect to options granted under the Plan
shall be subject to all applicable laws, rules, and
regulations, including all applicable Federal and State
securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate
by the Committee.
(b) The Plan shall be governed by Delaware law, except to the
extent such law is preempted by Federal law.
14. EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL
The Plan shall become effective upon the date it is approved by
the Board of Directors of the Company; provided however, that the
Plan shall be subject to the approval of the Company's stockholders
in accordance with applicable laws and regulations at an annual or
special meeting held within TWELVE (12) months of such effective
date. No options granted under the Plan prior to such stockholder
approval may be exercised until such approval has been obtained. No
options may be granted under the Plan after the TENTH (10th)
anniversary of the effective date of the Plan.
Approved and adopted by the Board of Directors on April 17, 1997.