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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 8, 2005
VA SOFTWARE CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 000-28369 77-0399299
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
46939 Bayside Parkway
Fremont, California 94538
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(Address, including zip code, of principal executive offices)
Registrant's telephone number, including area code:
(510) 687-7000
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(Former name or former address, if changed since last report)
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ITEM 1.01 Entry into a Material Definitive Agreement
1. Board Compensation
On June 8, 2005, the VA Software Corporation ("VA") board of directors (the
"Board") approved an updated policy for independent, non-employee Board member
compensation based on recommendations from VA's compensation committee of the
Board (the "Compensation Committee"). The new policy offers a total compensation
package that the Board believes is commensurate with other similarly-situated
public companies and aligns director and shareholder interests.
Effective August 1, 2005, each non-employee director will receive an annual
retainer of $12,000, $2,500 for in-person attendance throughout
regularly-scheduled Board meetings and $1,250 for telephonic participation
throughout regularly-scheduled Board meetings. The chair person of VA's audit
committee of the Board (the "Audit Committee") will receive an annual retainer
of $7,500, Audit Committee members will receive an annual retainer of $3,000 and
Audit Committee members will receive $1,500 for in-person attendance or
telephonic participation throughout regularly-scheduled Audit Committee
meetings. The chair person of VA's Compensation Committee will receive an annual
retainer of $5,000 and Compensation Committee members will receive an annual
retainer of $1,000. The chair person of VA's nominating committee of the Board
(the "Nominating Committee") will receive an annual retainer of $2,500 and
Nominating Committee members will receive an annual retainer of $500. The annual
equity grants pursuant to the Company's 1999 Director Option Plan (the "Director
Plan"), which are made on the date of VA's annual meeting of stockholders to
each non-employee director, will remain at 20,000 shares of VA's common stock.
The initial equity grant for non-employee Board members, which pursuant to the
Director Plan is granted to non-employee Board members on the date such person
becomes a Board member, will remain at 80,000 shares of VA's common stock.
2. Acceleration of Stock Options
The Financial Accounting Standards Board recently published Statement of
Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment
("SFAS 123R"). SFAS 123R, which is effective in the first quarter of VA's fiscal
year 2006, which begins on August 1, 2005, will require that compensation cost
related to share-based payment transactions, including stock options, be
recognized in the financial statements. Currently, VA accounts for its
share-based payment transactions under the provisions of APB 25, which does not
necessarily require the recognition of compensation cost in the statement of
operations of the financial statements.
On June 8, 2005, in response to SFAS 123R, and upon recommendation of the
Compensation Committee, the Board approved the acceleration of the vesting of
all of the out-of-the-money, unvested stock options, except for options held by
VA's non-employee directors. An option was considered out-of-the-money if the
stated option exercise price was greater than $1.67, the NASDAQ Official Closing
Price of VA's common stock on June 7, 2005, the last trading day before the
Board approved the acceleration in accordance with the Compensation Committee's
recommendation.
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As a result of the Board's decision to accelerate the vesting of all of the
out-of-the-money, unvested stock options, except for options held by VA's
non-employee directors, effective as of June 8, 2005, options to purchase
approximately 4,665,471 shares of VA common stock became immediately
exercisable, including options to purchase 2,145,473 shares held by VA's
executive officers. The weighted average exercise price per share of all of the
options accelerated was $2.66.
The decision to accelerate vesting of these options was made primarily to avoid
recognizing compensation cost in VA's consolidated statement of operations in
future financial statements upon the effectiveness of SFAS 123R. In addition,
because these options have exercise prices in excess of current market values
and are not fully achieving their original objectives of incentive compensation
and employee retention, the acceleration may have a positive effect on employee
morale and retention.
The future compensation expense that will be avoided, based on VA's
implementation date for SFAS 123R of August 1, 2005, is approximately $3,137,548
million, $3,053,332 million and $1,956,843 million in VA's fiscal years 2006,
2007 and 2008, respectively.
3. Termination of 1999 Employee Stock Purchase Plan
Under the Company's 1999 Employee Stock Purchase Plan (the "ESPP"), eligible
employees had the opportunity to purchase VA common stock at a discount from the
current market price through accumulated payroll deductions. The current
Offering Period (as defined in the ESPP) was scheduled to terminate on August
31, 2005. On June 8, 2005, in response to the potential unfavorable financial
accounting consequences that may result from the implementation of SFAS 123R,
the Board, pursuant to its authority under the ESPP, determined that it was in
the best interests of the Company and its stockholders to terminate the ESPP in
its entirety as of July 29, 2005 and to amend the current offering period under
the ESPP such that it will terminate contemporaneously with the ESPP on July 29,
2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VA SOFTWARE CORPORATION.
a Delaware corporation
Dated: June 14, 2005 By: /s/ Kathleen R. McElwee
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Kathleen R. McElwee
Senior Vice President
and Chief Financial Officer
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