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 |_|
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):
x No fee required.
o Fee computed on table below per Exchange Act Rules
14a-6(i)(1) 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: August 13, 1998
Expert Software, Inc.
800 Douglas Road, North Tower, Sixth Floor
Coral Gables, FL 33134
August 14, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Expert Software, Inc. (the "Company") to be held
on Tuesday, September 15, 1998, 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 III 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 1998, 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 July
31, 1998, 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 and the selection of Arthur
Andersen LLP as the Company's independent auditors for 1998.
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, North Tower, Sixth Floor
Coral Gables, FL 33134
(305) 567-9990
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Tuesday, September 15, 1998
Notice Is Hereby Given that the Annual Meeting of Stockholders of
Expert Software, Inc. (the "Company") will be held on Tuesday,
September 15, 1998, 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 Susan A. Currier and William H. Lane III as
Class III Directors to serve until the year 2001 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 1998; and
3. 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 July 31,
1998 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. This
list of stockholders will also be available at the Annual Meeting and
may be inspected by any stockholder present at that time.
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
August 14, 1998
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, North Tower, Sixth Floor
Coral Gables, FL 33134
(305) 567-9990
____________
PROXY STATEMENT
____________
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Tuesday, September 15, 1998
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 Tuesday, September 15, 1998, 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 August
14, 1998 in connection with the solicitation of proxies for the
Annual Meeting. The Board of Directors has fixed the close of
business on July 31, 1998, 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 7,607,631 shares of the Company's common stock, par value
$.01 per share ("Common Stock"), outstanding and entitled to vote at
the Annual Meeting and approximately 100 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 $3.50. 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, 1997, 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.
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 and the
ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors 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 III Directors will be elected to
serve until the year 2001 annual meeting and until their successors
are duly elected and qualified. The Board of Directors has nominated
Susan A. Currier and William H. Lane III for election as Class III
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 election of Ms.
Currier and Mr. Lane as Directors. Each of the nominees has agreed
to stand for election and to serve if elected as a Director.
However, if any of the persons nominated by the Board of Directors
fails to stand for election or is unable to accept 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 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 III Directors who have been
nominated by the Board of Directors for 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.................. 49 1992
A. Bruce Johnston................... 38 1992
Class II-Term Expires 2000
Stephen J. Clearman................. 47 1992
Charles E. Noell III................ 46 1992
Class III-Term Expires 1998
Susan A. Currier*................... 48 1992
William H. Lane III*................ 59 1997
- -------------------------------------
* Nominee for 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 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 the 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 World Access, Inc., a provider of telecommunications
equipment and services, Memberworks, Inc., a provider of
membership-based consumer services, and SeaMED, Corp., an outsourced
designer 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 infrastructure and network 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 MetaCreations Corporation, a visual
computing software publisher, Quarterdeck Corp., a PC utility
software company, and Storm Technology, Inc., a scanner device and
software company.
The Board of Directors of the Company held seven meetings during
1997. During 1997, each of the incumbent Directors 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. 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 1997 were Charles E. Noell III and
William H. Lane III. The Audit Committee meets periodically with
management and the independent auditors. The Audit Committee held
five meetings during 1997.
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 once during 1997.
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.
The compensation plan for non-employee directors was amended by the
Board on February 3, 1997. In accordance with the plan, such outside
directors receive an annual retainer of $5,000, $1,500 per Board
meeting except for telephonic meetings, $250 per each telephonic
Board meeting, and 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.
All directors are reimbursed for expenses incurred in connection with
attendance at meetings.
The Company 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. Although the
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.
The Company also has the 1997 Stock Option Plan for Directors (the
"1997 Directors Plan") pursuant to which eligible non-employee
directors receive non-qualified options to purchase 30,000 shares of
Common Stock upon their election or appointment as a director, which
options shall vest in calendar quarterly installments over four
years; and options to purchase 5,000 shares of Common Stock each
January 1 during his/her service as a director, which options shall
vest in quarterly installments over one year. All options granted
under the 1997 Directors Plan have a per share exercise price equal
to the per share fair market value of the Common Stock on the date of
grant.
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......... 49 Chief Executive Officer and
Secretary
Susan A. Currier .......... 48 President
Charles H. Murphy.......... 53 Chief Financial Officer
and Treasurer
Timothy R. Leary........... 46 Executive Vice President
of Sales
Michael A. Appel........... 53 Vice President of
Operations
Anne E. Aitken............. 39 Vice President of
Marketing
David R. Turner............ 32 Vice President of
Development
Katherine A. Brunn......... 50 Vice President of North
American Sales
- -----------------------------
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 Executive Vice President of Sales of
the Company since January 1998, and as Vice President of Sales of the
Company from its formation in October 1992 until December 1997.
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.
David R. Turner has served as Vice President of Development of the
Company since December 1997. Prior to that, Mr. Turner was Director,
External Applications Engineering for Walt Disney Interactive from
April 1995 to December 1997. Prior to Disney, Mr. Turner was Vice
President and Director of Development for IntraCorp, Inc., from
October 1987 to March 1995.
Katherine A. Brunn has served as Vice President of North American
Sales of the Company since January 1998. Prior to that, Ms. Brunn
was the President and Chief Executive Officer of MicroTech Marketing
Services, Inc. ("MicroTech"), a sales, marketing and consulting firm
serving the computer industry, since June 1984, and retains her
interest and position in that firm. MicroTech has provided sales and
marketing services to the Company in each of the last five years, and
continues to provide such services.
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 $100,000
during the year ended December 31, 1997 (collectively, the "Named
Executives").
Summary Compensation Table
The following table shows for the fiscal years ended December 31,
1997, 1996, and 1995 compensation paid by the Company to the Named
Executives.
Long Term Compensation
-----------------------
Annual Compensation Awards Payouts
-------------------- ------------- ------
Restri-
Other cted All
Name and Annual Stock Securities Other
Principal Sal- Bon- Compen- Stock Underlying LTIP Compen-
ary us sation Awards Options Payout sation
Position Year ($) ($) ($) ($) (#) ($) ($) (4)
- -------------- ----- ------ ---- ----------- ------ -------- ------ -------
Kenneth P. 1997 170,000 -- -- -- 70,000 -- 5,579
Currier 1996 170,000 -- -- -- 130,000(1) -- --
Chief 1995 125,000 50,000 -- -- -- -- --
Executive
Officer
and Secretary
Susan A. 1997 170,000 -- -- -- 70,000 -- 5,579
Currier 1996 170,000 -- -- -- 130,000(1) -- --
President 1995 125,000 50,000 -- -- -- -- --
Charles H. 1997 143,333 26,509 -- -- 50,000 -- 4,536
Murphy 1996 90,167 20,000 48,122 (2) -- 50,000 -- --
Chief
Financial
Officer
and Treasurer
Timothy R. 1997 100,000 7,551 -- -- 65,000 -- --
Leary 1996 100,000 26,332 -- -- 10,000 -- --
Executive 1995 90,000 71,820 -- -- 5,000 -- --
Vice President
of Sales
Michael A. 1997 110,000 19,176 -- -- 25,000 -- 3,900
Appel 1996 85,297 17,750 14,876 (3) -- 25,000 -- --
Vice
President of
Operations
- ----------------
(1) The options granted to Mr. and Mrs. Currier during 1996 were
canceled by the Board of Directors in April 1997.
(2) For 1996, consists of reimbursed moving costs paid upon Mr.
Murphy's relocation in connection with beginning employment with the
Company in April 1996.
(3) For 1996, consists of reimbursed moving costs paid upon Mr. Appel's
relocation in connection with beginning employment with the Company
in March 1996.
(4) Represents matching contributions to the accounts of each Named
Executives participating under the Company's 401(k) savings plan,
which was implemented January 1, 1997.
Option Grants in Last Fiscal Year
The following table sets forth each grant of stock options during 1997
to the Named Executives. No stock appreciation rights ("SARs") have
been granted.
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price
Appreciation
for Option
Individual Grants Term (3)
----------------------------------- ----------------
% of
Total
Options
Number /SARs
of Granted
Securities to Emp- Exer-
Underlying loyees cise
Options in or Base Expir-
Granted Fiscal Price ation
Name (#) (1) Year (2) ($/Sh) Date 5% ($) 10% ($)
- ------------- ---------- -------- -------- -------- ------- --------
Kenneth P. 70,000 15.2% 2.000 01/01/07 105,340 266,952
Currier --3.375 --04/17/97
Susan A. 70,000 15.2 2.000 01/01/07 105,340 266,952
Currier --3.375 --04/17/97
Charles H. 50,000 10.8 2.000 04/17/07 62,889 159,374
Murphy
Timothy R. 65,000 14.1 2.000 04/17/07 125,386 317,752
Leary --4.100 --11/07/97
Michael A. 25,000 5.4 2.000 04/17/07 31,445 79,687
Appel
- --------------
(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. Unvested shares
accelerate and become vested upon a change of control of the
Company.
(2) Percentages are based on a total of shares of Common Stock
underlying all options granted to employees of the Company in 1997.
(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.
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 1997 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 ($) (1)
----------------- -------------------
Shares
Name Acquired
on Value
Exercise Realized Exercis- Unexer- Exercis- Unexer-
(#) ($) able cisable able cisable
- ------------- --------- -------- --------- ------- --------- ---------
Kenneth P. -- -- 214,624 74,126 633,099 112,682
Currier
Susan A. -- -- 214,624 74,126 633,099 112,682
Currier
Charles H. 26,200 62,519 91 41,209 142 64,410
Murphy
Timothy R. -- -- 57,849 64,721 161,160 64,410
Leary
Michael A. 14,742 37,066 -- 35,258 -- 29,710
Appel
- ---------------
(1) Based on the fair market value of the Common Stock on December 31,
1997 ($3.563 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.
Compensation Committee Interlocks and Insider Participation
During 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 associated with different investment
partnerships which own 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 Stock Option Plan and the 1997 Stock 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 7 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 1997, 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 were increased to $200,000 effective January
1, 1998.
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 1997, 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.
[GRAPHIC OMITTED]
---------------------------------------------------------------
4/95 12/95 12/96 12/97
---------------------------------------------------------------
Expert Software, Inc. $100.00 $94.92 $22.88 $24.15
---------------------------------------------------------------
Nasdaq Stock Market (US
Companies) $100.00 $128.56 $158.12 $194.04
---------------------------------------------------------------
Nasdaq Computer and Data
Processing Stocks $100.00 $136.31 $168.27 $206.63
---------------------------------------------------------------
Peer Group $100.00 $105.54 $ 69.59 $ 76.39
---------------------------------------------------------------
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., The Learning Company Inc.,
Maxis Inc., MySoftware Company, 7th Level Inc., Spectrum Holobyte Inc.,
and THQ Inc.
Employment Agreements and Change-in-Control Arrangements
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, 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. On February 25, 1998, the
Compensation Committee also approved a bonus equal to one-year's salary
to each of the Curriers in the event the Company is sold during 1998,
and the transaction closes at terms acceptable to the Board of
Directors.
Effective February 18, 1998, all employees of the Company qualify
under a program which entitles any employee who might lose their
employment as a result of a change in control to receive three months
base compensation at the time of separation, provided the employee
has performed their duties to the date of separation. This policy is
in effect for all employees until February 17, 1999. Under the terms
of his employment, Mr. Murphy would receive one-year's salary in the
event his employment is terminated due to change of control.
Since April 1997, options granted to officers, employees and
directors under the Company's stock option plans have provided for
acceleration of unvested shares in the event of a change of control
of the Company (as defined in the option plans). At July 31, 1998,
there were options to purchase approximately 668,000 shares of the
Company's common stock that would become vested in the event of such
a change in control of the Company.
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
1998. 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,
1997 have been audited and reported upon by Arthur Andersen. Arthur
Andersen also performed tax services in 1997.
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 1998. 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 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.
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.
Katherine A. Brunn, Vice President of North American Sales since
January 1998, was the President and Chief Executive Officer of
MicroTech Marketing Services, Inc. Ms. Brunn has retained her interest
and position in MicroTech. This firm provided sales and marketing
services to the Company in each of the last five years, and continues
to provide such services. During 1997, the Company paid MicroTech
commissions totaling $221,000 for services performed on its behalf.
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 July 31, 1998 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.................... 2,241,91(3) 29.5%
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Geocapital II, L.P..................... 691,545 9.1%
One Bridge Plaza
Fort Lee, NJ 07024
Waddell & Reed, Inc.................... 640,000 (4) 8.4%
2001 Third Avenue South
Birmingham, AL 35233
Kenneth P. Currier..................... 761,894 (5) 9.4%
Susan A. Currier....................... 761,894 (6) 9.4%
A. Bruce Johnston...................... 16,517 (7) *
Stephen J. Clearman.................... 704,945 (8) 9.2%
William H. Lane III.................... 17,400 (9) *
Charles E. Noell III................... 44,563 (10) *
Charles H. Murphy...................... 21,880 (11) *
Timothy R. Leary....................... 113,318 (12) 1.5%
Michael A. Appel....................... 10,210 (13) *
All directors and executive officers
as a group (13 persons)................ 1,739,27(14) 20.9%
----------------------------------------
* Represents less than 1% of the outstanding shares.
(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 July 31, 1998 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 7,607,631 shares of
Common Stock outstanding as of July 31, 1998 together with
applicable options for each stockholder.
(3) Includes 1,121,304 shares of Common Stock held by Advent VI L.P.,
503,329 shares held by Advent Atlantic and Pacific II L.P., 181,759
shares held by Advent Industrial II L.P., 139,814 shares held by
Advent New York L.P., 197,138 shares held by Chestnut II Limited
Partnership, 81,792 shares held by Chestnut Capital International
III L.P., and 16,778 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.,
Chestnut III Limited Partnership, Chestnut Capital International
III 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 30, 1998 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) Includes 345,297 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 243,097 shares which Mr. Currier may
acquire upon the exercise of stock options within 60 days of July
31, 1998.
(6) Includes 340,597 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 243,097 shares which Ms. Currier
may acquire upon the exercise of stock options within 60 days of
July 31, 1998.
(7) Includes 3,117 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 (3) 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. Also includes 13,400 shares of
Common Stock which Mr. Johnston may acquire upon the exercise of
stock options within 60 days of July 31, 1998.
(8) 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. Also includes
13,400 shares of Common Stock which Mr. Clearman may acquire upon
the exercise of stock options within 60 days of July 31, 1998.
(9) Includes 13,400 shares of Common Stock which Mr. Lane may acquire
upon the exercise of stock options within 60 days of July 31, 1998,
and 4,000 shares of Common Stock owned by Mr. Lane's wife and
grandchildren.
(10)Includes 13,400 shares of Common Stock which Mr. Noell may acquire upon the
exercise of stock options within 60 days of July 31, 1998.
(11)Consists of 21,880 shares of Common Stock which Mr. Murphy may acquire upon
the exercise of stock options within 60 days of July 31, 1998.
(12)Includes 75,888 shares which Mr. Leary may acquire upon the exercise of
stock options within 60 days of July 31, 1998.
(13)Consists of 10,210 shares of Common Stock which Mr. Appel may acquire upon
the exercise of stock options within 60 days of July 31, 1998.
(14)Includes approximately 696,322 shares which may be acquired upon the
exercise of stock options within 60 days of July 31, 1998.
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, 1997, 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 1999 ANNUAL MEETING
Because this year's annual meeting has been changed more than 30 days
from the 1997 annual meeting and the Company intends to return to its
customary scheduling of annual meetings in June, the Company has
calculated the 1999 deadlines for stockholder proposals using an
assumed 1999 annual meeting date of June 12, 1999. Stockholder
proposals intended to be presented at the 1999 annual meeting of
stockholders must be received by the Company on January 30, 1999, 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 between January 22, 1999 and March 12, 1999.
Any such proposal should be mailed to: Secretary, Expert Software,
Inc., 800 Douglas Road, North Tower, Sixth Floor, 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, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES
THERETO, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1997 BY WRITING TO EXPERT SOFTWARE,
INC., ATTENTION: CHIEF FINANCIAL OFFICER, 800 DOUGLAS ROAD, NORTH
TOWER, SIXTH FLOOR, 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.