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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
</Table>
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMSHARE, INCORPORATED
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(Name of Registrant as Specified in Its Charter)
COMSHARE, INCORPORATED
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] 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.:
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(3) Filing party:
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(4) Date filed:
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COMSHARE, INCORPORATED
555 Briarwood Circle
Ann Arbor, Michigan 48108
(734) 994-4800
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 25, 2002
The Annual Meeting of Shareholders of Comshare, Incorporated, a Michigan
corporation, will be held at the Comshare Training Center, 555 Briarwood Circle,
Ann Arbor, Michigan 48108 on Monday, November 25, 2002 at 11:00 a.m., for the
following purposes:
1. To elect eight directors.
2. To consider and act upon a proposal to amend the 1998 Global
Employee Stock Option Plan to increase the number of shares of Common Stock
of the Company to be reserved for issuance under the 1998 Plan by 400,000
shares.
3. To consider and act upon a proposal to amend the Directors Stock
Option Plan to increase the number of shares of Common Stock of the Company
reserved for issuance under the Directors Plan by 100,000 shares.
4. If properly presented at the Annual Meeting, to consider and act on
a shareholder proposal concerning executive officer compensation.
5. To vote upon such other matters as may properly come before the
meeting or any adjournment or adjournments thereof.
The determination of shareholders entitled to notice of and to vote at the
meeting was made as of the close of business on October 8, 2002, the record date
fixed by the Board of Directors for such purpose.
You are invited to attend the meeting. Whether or not you expect to be
present, please execute and return the enclosed proxy, which is solicited by the
Board of Directors of the Company. The proxy is revocable and will not affect
your right to vote in person if you attend the meeting.
By Order of the Board of Directors
JANET L. NEARY
Secretary
October 18, 2002
Ann Arbor, Michigan
COMSHARE, INCORPORATED
-------------------------
PROXY STATEMENT
2002 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is provided in connection with the solicitation of
proxies by the Board of Directors of Comshare, Incorporated, a Michigan
corporation (the "Company"), to be used at the Annual Meeting of Shareholders of
the Company to be held on Monday, November 25, 2002 or at any adjournment or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders and in this Proxy Statement. In addition to the
solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or facsimile by officers, directors and employees. The Company's
officers, directors and employees will not be additionally compensated, but may
be reimbursed for out-of-pocket expenses in connection with such solicitation.
The cost of soliciting proxies will be borne by the Company. The principal
executive offices of the Company are located at 555 Briarwood Circle, Ann Arbor,
Michigan 48108. This Proxy Statement and the accompanying form of proxy were
first given or sent to shareholders on or about October 21, 2002.
The Company's Annual Report to Shareholders for the year ended June 30,
2002 is enclosed with this Proxy Statement.
Shareholders are urged to read this Proxy Statement carefully and vote
their shares on each matter by returning their signed proxy cards before the
close of business on November 22, 2002. United States and Canadian shareholders
of record may vote their shares either by calling a toll-free telephone number
or by mailing their signed proxy cards. Shareholders who vote by telephone do
not need to mail their proxy cards. The telephone voting procedures are designed
to authenticate shareholders' identities, allow shareholders to give their
voting instructions and confirm that shareholders' instructions have been
recorded properly. Specific instructions for shareholders of record that wish to
use the telephone voting procedures are included on the enclosed proxy card. A
proxy may be revoked at any time prior to the voting at the 2002 Annual Meeting
by submitting a later-dated proxy (including a proxy by telephone), by giving
written notice of such revocation to the Corporate Secretary of the Company, or
by voting in person at the 2002 Annual Meeting.
Only holders of record of Common Stock of the Company at the close of
business on October 8, 2002 (the "Record Date") are entitled to vote at the
meeting or any adjournment or adjournments thereof. On that date, 10,485,278
shares of Common Stock were issued and outstanding. Each shareholder is entitled
to one vote for each share of Common Stock held of record on the Record Date.
Shares cannot be voted at the meeting unless the holder is present in person or
by telephone or represented by proxy. Shares may not be voted cumulatively for
the election of directors.
If no specific instructions are given and a proxy is properly given
(including a proxy by telephone), all shares covered by the proxy will be voted
by Dennis G. Ganster and Brian J. Jarzynski (i) for the election of all of the
Board's nominees for director; (ii) for approval of the amendment to the 1998
Global Employee Stock Option Plan; (iii) for approval of the amendment to the
Directors Stock Option Plan; and (iv) against approval of the shareholder
proposal. Unless otherwise indicated by the shareholder, a proxy (including a
proxy by telephone) also gives Mr. Ganster and Mr. Jarzynski discretionary
authority to vote all shares of Common Stock represented by the proxy on any
other matter that is properly presented for action at the meeting. The Board of
Directors does not intend to present any other matters at the Annual Meeting.
Abstentions, and withheld votes with respect to the election of directors,
are counted only for purposes of determining whether a quorum is present at the
2002 Annual Meeting. Broker non-votes are not counted for any purpose. Directors
are elected by a plurality of the votes cast, so that only votes cast "for"
directors are counted in determining which directors are elected. Approval of
the other matters specified in the Notice of Annual Meeting of Shareholders
requires a majority of the votes cast on the matter. For purposes of determining
the number of votes cast with respect to such other matters, only those cast
"for" or "against" are included, and abstentions and broker non-votes are not
counted for this purpose.
MATTERS TO COME BEFORE THE MEETING
(1) ELECTION OF DIRECTORS
Eight directors will be elected, each to hold office until the next Annual
Meeting of Shareholders and until his or her successor is elected and qualified,
or until the director's resignation or removal. The individuals who will be
nominated by the Board of Directors for election at the Annual Meeting are
listed in the table below. Each of the nominees for election is presently a
director of the Company.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINATED DIRECTORS.
Shares represented by proxies in the form accompanying this Proxy Statement
or by telephone vote will be voted for the election of the nominees listed below
unless the proxy is marked (in accordance with the instructions thereon) to
indicate that authority to do so is withheld. If, as a result of circumstances
not now known or foreseen, any of the nominees shall be unavailable to serve as
a director, proxies will be voted for the election of such other person or
persons as the Board of Directors may select. Each shareholder is entitled to
one vote for each share of Common Stock held.
<Table>
<Caption>
YEAR FIRST
ELECTED OR
APPOINTED
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION DIRECTOR
---- --- ------------------------------------------ ----------
Geoffrey B. Bloom........... 61 Chairman of the Board, Wolverine World Wide, Inc., a 1995
manufacturer and seller of footwear, Rockford,
Michigan.
Richard L. Crandall......... 59 Managing Partner, Aspen Partners, a private equity 1968
firm based in Aspen, Colorado; Founding Partner,
Arbor Partners LLC, a venture capital firm, Ann
Arbor, Michigan
Dennis G. Ganster........... 51 Chairman of the Board, President and Chief Executive 1997
Officer of the Company
Kathryn A. Jehle............ 50 Partner, Tatum CFO Partners, LLC, a provider of chief 1998
financial officer services, Charlotte, North
Carolina
John H. MacKinnon........... 62 Retired Partner, PricewaterhouseCoopers LLP; 2002
Consultant
Alan G. Merten.............. 60 President, George Mason University, Fairfax, Virginia 1985
John F. Rockart............. 71 Senior Lecturer Emeritus, Sloan School of Management, 1989
Massachusetts Institute of Technology, Cambridge,
Massachusetts
Anthony G. Stafford......... 60 Chairman of the Board and Chief Executive Officer, 2002
Codec Systems Limited ("Codec"), a computer hardware
reseller and software distributor, Dublin, Ireland
</Table>
Mr. Bloom assumed the position of Chairman of the Board of Wolverine World
Wide, Inc. in April 2000, after having served as its Chairman and CEO from 1996
to 2000, President and Chief Executive Officer from 1993 to April 1996 and as
its Chief Operating Officer from 1987 to 1993. Mr. Bloom also serves as a
director of Coachmen Industries, Inc.
Mr. Crandall assumed the position of Founding Partner of Arbor Partners,
LLC in November 1997 and Managing Partner of Aspen Partners in 2001. Mr.
Crandall served as Chairman of the Board of the Company from April 1994 to March
1997 and served as President and Chief Executive Officer of the Company from
1970 to 1994. Mr. Crandall also serves as a director of Diebold, Incorporated,
and Giga Information Group, Inc.
Mr. Ganster assumed the position of Chairman of the Board of the Company in
August 2001. Mr. Ganster was appointed President and Chief Executive Officer of
the Company in August 1997, after having served as Senior Vice President of the
Company since July 1994. He had previously served as Vice President and Chief
Technology Officer of the Company from April 1993 to July 1994, and Vice
President of
2
Product Management from July 1988 to April 1993. Mr. Ganster has been with the
Company in various positions since 1972, with positions of responsibility in
sales, marketing and product development.
Ms. Jehle joined Tatum CFO Partners, LLC, as a partner in the Charlotte,
North Carolina region in February 2001. Prior to joining Tatum, Ms. Jehle was
Senior Vice President and Chief Financial Officer of the Company from 1994
through February 2001.
Mr. MacKinnon joined PricewaterhouseCoopers LLP in 1968 and was a partner
from 1978 until his retirement in 1999. Mr. MacKinnon also serves as director of
LoJack Corporation. Pursuant to a Standstill Agreement among Mr. Stafford, Codec
and the Company, dated August 15, 2002, Mr. MacKinnon was initially appointed to
the Board effective October 16, 2002, and the Board of Directors has agreed to
recommend that the Company's shareholders elect Mr. MacKinnon to serve as a
director of the Company at both the 2002 and 2003 annual meetings.
Dr. Merten became the President of George Mason University on July 1, 1996.
Dr. Merten also serves as a trustee for Citigroup Mutual Fund Trust.
Dr. Rockart assumed the position of Senior Lecturer Emeritus, Sloan School
of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts
in July 2002, and served as Senior Lecturer from July 2000 to July 2002. Dr.
Rockart served as Senior Lecturer and Director for the Center for Information
Systems Research from July 1996 to July 2000. Dr. Rockart also serves as a
director of Keane, Inc. and Selective Insurance Company.
Mr. Stafford has served as the Chairman and Chief Executive Officer of
Codec since its formation in 1985. Pursuant to a Standstill Agreement among Mr.
Stafford, Codec and the Company, dated August 15, 2002, Mr. Stafford was
initially appointed to the Board, and the Board of Directors has agreed to
recommend that the Company's shareholders elect Mr. Stafford to serve as a
director of the Company at both the 2002 and 2003 annual meetings.
MEETINGS AND COMMITTEES OF THE BOARD
During the Company's fiscal year ended June 30, 2002, the Board of
Directors held six meetings. All of the Directors attended at least 75% of the
total number of meetings of the Board, and of any committees on which they
served, held during the period in which they served as Directors or members of
any such committees. The Company anticipates that regardless of the schedule
chosen for its regular meetings, there will be occasions on which not all
Directors are available. Furthermore, special meetings of the Board are
sometimes held on relatively short notice and Directors, particularly those
located outside the Detroit-Ann Arbor area, may sometimes be unable to attend
such meetings because of prior commitments.
The Compensation Committee of the Board met six times during the Company's
last fiscal year. The Compensation Committee is responsible for determining or
approving the salaries or range of salaries, bonus compensation and other
compensation arrangements for officers of the Company, and performing such
functions as may be delegated to it under the provisions of any bonus, stock
option or other compensation plans adopted by the Company. The members of the
Compensation Committee are Mr. Bloom, and Drs. Merten and Rockart.
During fiscal year 2002, the Nominating Committee was active in pursuing
candidates to replace one retiring Board member and to add to the Board. Several
candidates were discussed. In early fiscal 2003, Messrs. MacKinnon and Stafford
were elected to the Board. The Nominating Committee of the Board did not hold
any formal committee meetings during the Company's last fiscal year. The
Nominating Committee conducted its activities through less formal in person,
telephonic and electronic discussions between and among the members of the
Committee. The Nominating Committee is responsible for identifying and
recommending to the Board qualified candidates for election as Directors of the
Company. In carrying out its responsibilities, the Nominating Committee will
consider candidates suggested by other Directors, employees and shareholders.
Suggestions for candidates, accompanied by biographical material for evaluation,
may be sent to the Secretary of the Company at the Company's principal executive
offices. The members of the Nominating Committee are Messrs. Carroll, Crandall
and Stafford, and Dr. Rockart. (Mr. Carroll is retiring from the Board of
Directors effective November 25, 2002. Mr. Stafford was appointed to the
Nominating Committee effective August 15, 2002.)
3
The Audit Committee of the Board met six times during the Company's last
fiscal year. The Audit Committee's responsibilities, as set forth in its charter
adopted by the Board, include the following: approve the independent auditors to
be selected to audit the financial statements of the Company; meet with the
independent auditors and financial management of the Company to review the scope
of the Company's audit and quarterly financial reviews, including the procedures
to be utilized, appropriateness of the auditor's compensation and, at the
conclusion thereof, review the findings of the audit or review, including
comments or recommendations of the auditors; report the results of the Company's
annual audit to the Board; annually obtain from the independent auditors a
written delineation of their relationships and professional services and take,
or recommend that the Board take, appropriate action to ensure the continuing
independence of the auditors; review with the independent auditors and the
Company's financial and accounting personnel the adequacy and effectiveness of
the Company's accounting and financial controls, and elicit recommendations for
improvements; inquire of management and the independent auditors about
significant risks and exposures to the Company and assess steps management can
take to minimize such risks; review quarterly and annual financial statements of
the Company to determine that the independent auditors do not take exception to
the disclosure and content of the quarterly financial statements, and that they
are satisfied with the disclosure and content of the annual financial
statements; review with financial management of the Company and the independent
auditors the results of their timely analysis of significant financial reporting
issues and practices, and the quality, not just acceptability, of accounting
principles and the clarity of the financial disclosure practices used or
proposed to be used; review reports received from regulators and other legal and
regulatory matters that may have a material effect on the financial statements
or related Company compliance policies; investigate any matter related to the
scope of the Committee's duties; appraise, at least annually, the performance of
the Company's Chief Financial Officer and report the results to the Board;
review the adequacy of resources and quality of the Company's accounting and
financial human resources; and annually review a summary of the expenses of
senior management. Members of the Audit Committee are Mr. Carroll, and Drs.
Merten and Rockart. (Mr. Carroll is retiring from the Board of Directors
effective November 25, 2002.)
AUDIT COMMITTEE REPORT
In accordance with its charter, the Audit Committee provides assistance to
the Board in fulfilling its responsibility to the shareholders, potential
shareholders and investment community relating to corporate accounting,
reporting practices of the Company and the quality and integrity of the
financial reports of the Company. In doing so, it is the responsibility of the
Audit Committee to maintain free and open communication between the Board, the
Company's independent auditors, the internal auditors and the financial
management of the Company. Each Audit Committee member is "independent," as
defined in Rule 4200(a)(14) of the National Association of Securities Dealers
Listing Standards.
The Audit Committee received from the independent auditors and reviewed a
formal written statement describing all relationships between the auditors and
the Company that might bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditors'
independence.
The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee reviewed and discussed with management and the
independent auditors the audited financial statements of the Company as of and
for the fiscal year ended June 30, 2002, including the quality of accounting
principles and significant judgments affecting the financial statements.
The Audit Committee has fulfilled its responsibilities under its charter
for the year ended June 30, 2002 and, based on the above-mentioned reviews and
discussions with management and the independent auditors, recommended to the
Board of Directors that the Company's audited financial statements be included
in its
4
Annual Report on Form 10-K for the year ended June 30, 2002 for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE: ALAN G. MERTEN, CHAIR
DANIEL T. CARROLL
JOHN F. ROCKART
(2) PROPOSAL TO AMEND THE COMPANY'S 1998 GLOBAL EMPLOYEE STOCK OPTION PLAN
The 1998 Global Employee Stock Option Plan (the "1998 Plan") was approved
by the shareholders of the Company at the Annual Meeting of Shareholders held on
November 23, 1998, and has been amended several times since its adoption. The
1998 Plan provides for the issuance of options to purchase up to 1,400,000
shares of the Company's Common Stock to employees. The 1998 Plan was adopted to
assist the Company in its efforts to attract and retain qualified employees and
to provide incentives for employees to promote the success of the Company.
PROPOSED AMENDMENT
AMENDMENT TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY
RESERVED FOR ISSUANCE UNDER THE 1998 PLAN
At the September 4, 2002 meeting of the Board of Directors, the Board
authorized management of the Company to seek approval from the shareholders of
the Company of an amendment to the 1998 Plan to increase the number of shares of
the Company's Common Stock reserved for issuance under the 1998 Plan by 400,000
shares. This will increase the total number of authorized shares of Common Stock
of the Company to be reserved for issuance under the 1998 Plan to 1,800,000
shares.
As of October 8, 2002, options to purchase 1,162,300 shares of Common Stock
of the Company were outstanding under the 1998 Plan. Without taking into account
the proposed amendment to the 1998 Plan, 227,800 shares remained available for
future grants as of October 8, 2002, which the Board believes is insufficient to
support the Company's ongoing activities.
Stock option grants are of significant importance to the Company in
attracting and retaining high-quality executives and other key employees and are
an important element of a competitive recruitment process. Under the Company's
overall compensation policy, particularly for executives, a substantial portion
of an employee's compensation is linked to Company performance through stock
options. The Company has historically used stock-based compensation incentives
for the following reasons:
- Since stock options gain value only if the price of the Common Stock
increases above the exercise price of the option, stock option grants are
an effective means of closely linking employee compensation to Company
performance.
- Stock options, by tying employees' economic incentives to increases in
the value of the Common Stock, further align the employee's interests to
those of the Company's shareholders.
- The Company's stock options include a vesting period before the employee
can realize the benefit of the stock option. This feature assists in the
long-term retention of employees and requires these employees to
contribute to the Company over an extended period in order to benefit
from the options.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSED AMENDMENT TO THE 1998 PLAN.
TERMS OF THE 1998 PLAN
The following is a summary of the principal provisions of the 1998 Plan,
but it is not intended to be a complete description of all of the terms and
provisions of the 1998 Plan. A copy of the 1998 Plan along with
5
the proposed amendment will be furnished to any shareholder upon written request
to the Secretary of the Company at the executive offices of the Company in Ann
Arbor, Michigan.
The 1998 Plan is administered by the Compensation Committee of the Board of
Directors. The Committee is authorized to adopt such rules and regulations as
are necessary to administer the 1998 Plan. Options may be granted to such
employees as the Committee may select. As of October 8, 2002, there were 331
employees of the Company eligible to receive stock option grants under the 1998
Plan. Options granted under the 1998 Plan may be incentive stock options
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonqualified options that do not meet the
requirements of ISOs ("nonqualified stock options"). Under the terms of the 1998
Plan, the Committee may designate a portion of an option as an ISO or a
nonqualified stock option. Stock released from an option upon the termination,
cancellation, expiration, forfeiture or surrender of any option prior to
complete exercise of the option may again be subjected to options under the 1998
Plan.
Unless the exercise price for the ISO is at least 110% of the fair market
value of the shares subject to the option (measured at the time of grant), and
the option, by its terms, is not exercisable more than five years after the date
of grant, no ISO may be granted to any participant who possesses more than 10%
of the total combined voting power of all classes of stock of the Company or a
subsidiary. In addition, the Committee cannot grant an ISO if, as a result of
the grant, the optionee would have the right in any calendar year to exercise
for the first time, one or more ISOs for shares having an aggregate fair market
value (under all plans of the Company and determined for each share as of the
date the option to purchase the share was granted) in excess of $100,000.
The 1998 Plan provides that the option price for each share of stock for
which an option is granted under the 1998 Plan shall not be less than 100% of
the fair market value of the stock on the Nasdaq Stock Market(R) (as reported in
The Wall Street Journal) on the date the option is granted. As of the close of
business on October 8, 2002, the price per share of Common Stock as quoted on
the Nasdaq Stock Market(R) was $1.99. Options granted under the 1998 Plan are
exercisable at such times and on such terms as the Committee may determine, but
no options may be exercised before one year from the date of grant (except in
the event of a "change in control" as defined below) nor more than 10 years
after the date of grant. Unless the option agreement between the optionee and
the Company provides otherwise, an option granted shall vest 25% annually over
four consecutive years commencing on the first anniversary of the grant date and
shall not be exercisable after the tenth anniversary of the grant date.
In the event of any dividend or subdivision or combination of shares,
reclassification or merger or consolidation in which the Company is the
surviving corporation, the aggregate number of shares of stock for which options
may be granted and the number of shares subject to each outstanding option and
the stated option price shall be proportionately adjusted. After any merger of
one or more corporations into the Company, or after any consolidation of the
Company and one or more corporations in which the Company shall be the surviving
corporation, each optionee shall, at no additional cost, be entitled upon any
exercise of his or her option, to receive, in lieu of the number of shares as to
which such option shall then be exercised, the number and class of shares or
other securities to which such optionee would have been entitled pursuant to the
terms of the agreement of merger or consolidation if at the time of such merger
or consolidation such optionee had been a holder of record of a number of shares
of stock of the Company equal to the number of shares as to which such option
shall then be so exercised. Anything to the contrary notwithstanding, upon the
dissolution or liquidation of the Company or upon any merger or consolidation in
which the Company is not the surviving corporation, any option granted under the
1998 Plan shall terminate.
The 1998 Plan provides that the portion of any outstanding option
(including any option that has not been outstanding for one year) that has not
expired or been exercised, terminated, canceled, forfeited or surrendered shall
become exercisable in full in the event of a "change in control." A change in
control is generally deemed to have occurred upon the happening of any of the
following events: (i) the election of a Board of Directors of the Company, a
majority of the members of whom were nominees of a person, other than persons
who were members of the Board of Directors or officers of the Company as of
certain specified dates, following the acquisition by such person(s) of
twenty-five percent, or more, of the outstanding Common
6
Stock, (ii) the acquisition of ownership by a person or group of persons
described in (i) above of fifty-one percent, or more, of the Company's
outstanding Common Stock, (iii) a sale of all or substantially all of the assets
of the Company to any entity not controlled by persons who were members of the
Board of Directors or officers of the Company as of certain specified dates or
any Employee Stock Ownership Plan for the benefit of employees of the Company,
or (iv) a merger, consolidation or similar transaction between the Company and
another entity if a majority of the members of the Board of Directors of the
surviving corporation are not persons who were members of the Board of Directors
of the Company as of certain specified dates.
The option exercise price is payable in cash, by personal check (certified
or bank cashier's check), or by surrendering to the Company certain shares of
the Company's Common Stock, duly endorsed for transfer or with duly executed
stock powers attached, or in any combination of the foregoing. At the discretion
of the Committee, as set forth in an optionee's option agreement with the
Company, an option may also be exercised by delivery of an exercise notice
together with irrevocable instructions to the optionee's broker to deliver to
the Company sufficient cash to pay the exercise price and applicable taxes in
accordance with a written agreement between the Company and the brokerage firm
("cashless exercise procedure"). For purposes of the cashless exercise
procedure, the fair market value of the Company's stock on the date of exercise
shall be the per share amount actually paid to the optionee by the brokerage
house upon the sale of stock used to satisfy the option exercise price.
Under Section 162(m) of the Code, the Company may deduct compensation paid
to the Company's chief executive officer and to each of its four most highly
compensated executive officers only to the extent that it does not exceed
$1,000,000 during any fiscal year, unless the compensation constitutes
"performance-based" compensation. In general, compensation attributable to a
stock option or stock appreciation right is deemed to be based on performance if
(i) the grant is made by the corporation's compensation committee; (ii) the plan
under which the grant is made includes a limit on the number of shares with
respect to which options may be granted per employee during a specified period;
and (iii) the amount of compensation that an employee may receive under the
terms of the option is based solely on the increase in value of the stock after
the date of grant.
The 1998 Plan provides that no employee shall be eligible to receive
aggregate option grants under the 1998 Plan in any one fiscal year to purchase
more than 100,000 shares of the Company's stock. In addition, as described
above, grants under the 1998 Plan may only be made by the Compensation Committee
and the option price may not be less than fair market value.
Unless previously terminated, the 1998 Plan will terminate on August 14,
2008. The Board may, at any time prior to that date, terminate or discontinue
the 1998 Plan or from time to time alter, amend or modify the 1998 Plan, but no
such amendment or modification, without the approval of the Company's
shareholders, shall (a) change the eligibility requirements to participate in
the 1998 Plan, (b) increase the amount of stock on which options may be granted
(except as provided above), (c) change the manner of determining the option
price, or (d) permit repricing transactions under the 1998 Plan. No such
amendment or modification shall affect the rights of the holder of any option
theretofore granted and then outstanding without the consent of optionee or the
consent of the transferee of the option or right.
Options granted under the 1998 Plan are not transferable except by will or
by the laws of descent and distribution, and may be exercised during an
optionee's lifetime only by such optionee.
In the event an optionee's employment with the Company is terminated, an
exercisable stock option may remain exercisable for up to ninety days after
termination of employment. The Committee may determine, however, that the option
will terminate at a time prior to the expiration of such ninety-day period.
The following table sets forth information with respect to options granted
under the 1998 Plan during fiscal year 2002 by each person or group of persons
listed in the table. None of the company's non-employee directors or director
nominees participated in the 1998 Plan during fiscal year 2002. No associates of
the directors, executive officers or director nominees received options under
the 1998 Plan in fiscal year 2002. No
7
other person other than those listed in the table received more than 5% of the
options granted under the 1998 Plan in fiscal year 2002.
<Table>
<Caption>
WEIGHTED AVERAGE OPTIONS
IDENTITY OF PERSON OR GROUP EXERCISE PRICE GRANTED
- --------------------------- ---------------- -------
Dennis G. Ganster,.......................................... $2.40 20,000
Chairman of the Board, President and Chief Executive
Officer
Brian Hartlen,.............................................. $2.40 10,000
Senior Vice President, Marketing
Brian Jarzynski,............................................ $2.40 20,000
Senior Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary
Kenneth Kane,............................................... $2.69 40,000
Senior Vice President, Direct Operations
David King,................................................. $2.40 10,000
Senior Vice President, Product Development and Chief
Technology Officer
All current executive officers
as a group (5 persons).................................... $2.52 100,000
All other employees as a group
(approximately 342 persons)............................... $2.90 284,150
</Table>
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. The optionee generally will not be deemed to
recognize income at the time an ISO is granted or exercised. The spread between
the exercise price and the fair market value of the Company's Common Stock on
the date of exercise, however, is an item of tax preference that may subject the
optionee to the alternative minimum tax.
Upon disposition of shares acquired upon exercise of an ISO, an optionee
will be accorded long-term capital gain or loss treatment on the difference
between the option exercise price and the disposition price; provided that the
disposition occurs more than two years from the date of grant and one year from
the date of exercise. An optionee who disposes of shares acquired upon exercise
of an ISO prior to the expiration of the foregoing holding periods recognizes
ordinary income upon the disqualifying disposition equal to the difference
between the option exercise price and the lesser of the fair market value of the
shares on the date of exercise or the date of disposition. Any appreciation
between the date of exercise and the date of disposition is taxed as long- or
short-term capital gain, depending upon the holding period of the shares.
The Company is generally not entitled to a compensation deduction in
connection with the grant to, or the exercise by, an optionee of an ISO. In the
event of a disqualifying disposition, the Company is entitled to a compensation
deduction to the extent ordinary income is recognized by the optionee.
Nonqualified Stock Options. An optionee recognizes ordinary income upon
the exercise of a nonqualified option equal to the spread between the option
exercise price and the fair market value of the Company's Common Stock on the
date of exercise. Upon disposition of the shares acquired upon exercise of the
option, the optionee will be accorded capital gain or loss treatment on the
difference between the fair market value of the Company's Common Stock on the
date of disposition and the fair market value of the Company's Common Stock on
the date of exercise of the option.
When an optionee exercises a nonqualified option, the Company withholds
FICA and income taxes on the spread between the option exercise price and the
fair market value of the Company's Common Stock on the date of exercise, and is
entitled to a compensation deduction in the amount of ordinary income recognized
by the optionee upon exercise of the option.
8
(3) PROPOSAL TO AMEND THE COMPANY'S DIRECTORS STOCK OPTION PLAN
The Directors Stock Option Plan (the "Directors Plan") was initially
approved by the shareholders of the Company at the 1994 Annual Meeting of
Shareholders held on November 17, 1994, and has been amended several times since
then. The Directors Plan was adopted to encourage increased ownership of the
Company's Common Stock by the Company's non-employee directors, and to provide
such directors with incentive-based compensation so as to further align their
interests with the interests of the Company's shareholders.
PROPOSED AMENDMENT
The Directors Plan provides for the issuance of options to purchase up to
200,000 shares of the Common Stock of the Company to non-employee directors of
the Company. Non-employee directors are granted options under the Directors Plan
in addition to their annual retainers and meeting fees.
AMENDMENT TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY
RESERVED FOR ISSUANCE UNDER THE DIRECTORS PLAN
At the September 4, 2002 meeting of the Board of Directors, the Board
authorized the management of the Company to seek approval from the shareholders
of the Company of an amendment to the Directors Plan to increase the number of
shares of the Company's Common Stock reserved for issuance under the Directors
Plan by 100,000 shares.
Currently there are 200,000 shares of Common Stock of the Company reserved
for issuance under the Directors Plan. As of October 8, 2002, options to
purchase 141,500 shares of Common Stock of the Company were outstanding under
the Directors Plan and, without taking into account the proposed amendment to
the Directors Plan, 54,750 shares remain available for future option grants. The
proposed increase in the number of shares of Common Stock of the Company
reserved for issuance under the Directors Plan will allow the Company to
continue to award grants of options to purchase shares of Common Stock of the
Company to its non-employee directors.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
AMENDMENTS TO THE DIRECTORS PLAN.
TERMS OF THE DIRECTORS PLAN
The following is a summary of the principal provisions of the Directors
Plan, but it is not intended to be a complete description of all of the terms
and provisions of the Directors Plan. A copy of the Directors Plan along with
the proposed amendment will be furnished to any shareholder upon written request
to the Secretary of the Company at the executive offices of the Company in Ann
Arbor, Michigan.
Only directors who are not employees of the Company or any subsidiary of
the Company are eligible to participate in the Directors Plan. There are
currently eight directors eligible to participate in the Directors Plan. Neither
the Named Officers, nor any other executives or employees of the Company, are
eligible to participate in the Directors Plan.
Under the Directors Plan, each non-employee director who is first elected
or appointed after November 19, 1994 to the Board of Directors will receive an
option to purchase 15,000 shares of Common Stock ("Initial Option") on the date
of the first Board of Directors meeting following his or her election or
appointment; provided that he or she is still serving on the Board at the time
of such Board meeting. In addition, each non-employee director who has been a
director for six months before January 1 following the date of each Annual
Meeting of Shareholders held during the term of the Directors Plan,
automatically shall be granted, as of January 1 following each such Annual
Meeting, an option to purchase an additional 10,000 shares of Common Stock
("Annual Option") if he or she is still serving on the Board as of each January
1.
Grants of options under the Directors Plan shall be at exercise prices
equal to the last sale price per share of the Company's Common Stock on the
Nasdaq National Market(R), as reported in The Wall Street Journal
9
on the date of grant. As of the close of business on October 8, 2002, the price
per share of Common Stock as quoted on the Nasdaq National Market(R) was $1.99.
Each option granted under the Directors Plan becomes exercisable in four
annual increments of 25% of the shares subject to the option, and expires five
years from the date of grant, unless earlier terminated (the "Option Period").
If a non-employee director's service terminates for any reason prior to the date
the option or portion thereof becomes exercisable, such option or portion
thereof shall terminate. To the extent that an option is exercisable and is
unexercised on the date the non-employee director's service terminates, the
option shall terminate on the earlier of (i) the expiration date of the option
or (ii) two months after such non-employee director's termination; provided,
however, that the exercise period in clause (ii) shall be extended to one year
after termination if termination is due to the non-employee director's death or
disability. During the period from the non-employee director's termination until
the termination of the option, the non-employee director or the person or
persons to whom the option shall have been transferred by will or the laws of
descent and distribution, may exercise the option only to the extent that such
option was exercisable on the date of the non-employee director's termination.
The option exercise price is payable in cash, by certified check, bank
draft or money order, in Common Stock having a fair market value equal to the
option exercise price, or by any combination of the foregoing.
The Directors Plan provides that in the event of any merger or
consolidation in which the Company is the surviving corporation, the
non-employee director will be entitled to receive, upon the exercise of their
option, the number and class of shares of stock or other securities which the
non-employee director would have been entitled to receive if, at the time of
such merger or consolidation, the non-employee director had been a record holder
of the number of shares of Common Stock underlying the option. In addition,
options granted under the Directors Plan become immediately exercisable, if not
otherwise exercisable, upon the dissolution or liquidation of the Company or
upon any merger or consolidation in which the Company is not the surviving
corporation, provided that a period of twelve months from the date of grant has
expired.
The Directors Plan provides that the portion of any outstanding option
(including any option that has not been outstanding for one year) that has not
expired or been exercised, terminated, canceled, forfeited or surrendered shall
become exercisable in full in the event of a "change in control." A change in
control is generally deemed to have occurred upon the happening of any of the
following events: (i) the election of a Board of Directors of the Company, a
majority of the members of whom were nominees of a person, other than persons
who were members of the Board of Directors or officers of the Company as of
certain specified dates, following the acquisition by such person(s) of
twenty-five percent, or more, of the outstanding Common Stock, (ii) the
acquisition of ownership by a person or group of persons described in (i) above
of fifty-one percent, or more, of the Company's outstanding Common Stock, (iii)
a sale of all or substantially all of the assets of the Company to any entity
not controlled by persons who were members of the Board of Directors or officers
of the Company as of certain specified dates or any Employee Stock Ownership
Plan for the benefit of employees of the Company, or (iv) a merger,
consolidation or similar transaction between the Company and another entity if a
majority of the members of the Board of Directors of the surviving corporation
are not persons who were members of the Board of Directors of the Company as of
certain specified dates.
In the event of any dividend or subdivision or combination of shares,
reclassification or merger or consolidation in which the Company is the
surviving corporation, the aggregate number of shares of stock for which options
may be granted and the number of shares subject to each outstanding option and
the stated option price shall be appropriately adjusted; provided, however, that
no adjustment shall be made to the extent such adjustment would cause the
non-employee director to no longer be deemed "disinterested" for purposes of
Securities and Exchange Commission Rule 16b-3.
Options granted under the Directors Plan are not transferable except by
will or by the laws of descent and distribution, and may be exercised during a
non-employee director's lifetime only by such non-employee director.
10
The Directors Plan is administered by the Compensation Committee. The
Committee is authorized to construe the provisions of the Directors Plan, but
shall have no discretion with respect to the terms of grants made automatically
under the Directors Plan, except to the extent such discretion would not result
in the Directors Plan failing to qualify for the exemption provided under the
Securities and Exchange Commission Rule 16b-3.
Unless previously terminated, the Directors Plan will terminate on July 31,
2004. The Board may at any time prior to that date terminate or discontinue the
Directors Plan or from time to time alter, amend or modify the Directors Plan;
provided, however, that unless otherwise permitted under Securities and Exchange
Commission Rule 16b-3 without shareholder approval, no amendment or
modification, without the approval of the shareholders of the Company, shall (i)
materially increase the benefits accruing to non-employee directors under the
Directors Plan; (ii) increase the amount of Common Stock for which grants may be
made under the Directors Plan (other than as permitted under the Directors Plan
for anti-dilution purposes); or (iii) change the provisions relating to
eligibility of individuals to whom grants may be made under the Directors Plan.
No amendment or termination shall affect any option previously granted to a
non-employee director without the consent of such non-employee director.
The following table sets forth information with respect to options granted
under the Directors Plan during fiscal year 2002, and options that would be
granted under the Directors Plan in fiscal year 2003 if the current director
nominees serve as members of the Board of Directors of the Company through
January 1, 2004, to each person or group of persons listed in the table. None of
the Company's executive officers or other employees participate in the Directors
Plan. No associates of the directors, executive officers or other employees
participate in the Directors Plan.
<Table>
<Caption>
FISCAL YEAR 2002 FISCAL YEAR 2003
--------------------------------- ----------------
WEIGHTED AVERAGE
IDENTITY OF PERSON OR GROUP EXERCISE PRICE OPTION GRANTS OPTION GRANTS
--------------------------- ---------------- ------------- ----------------
Geoffrey B. Bloom, Director........................ $2.91 10,000 10,000
Daniel T. Carroll, Director........................ $2.91 10,000 --(1)
Richard L. Crandall, Director...................... $2.91 10,000 10,000
Kathryn A. Jehle, Director......................... $2.91 10,000 10,000
John H. MacKinnon, Director........................ -- -- 15,000(2)
Alan G. Merten, Director........................... $2.91 10,000 10,000
John F. Rockart, Director.......................... $2.91 10,000 10,000
Anthony G. Stafford, Director...................... -- -- 15,000(3)
All current non-employee directors who are not
executive officers as a group (8 persons)........ $2.91 60,000 80,000
</Table>
- -------------------------
(1) Mr. Carroll is retiring from the Board of Directors effective November 25,
2002 and will not be eligible for the Fiscal Year 2003 Annual Option grant.
(2) Pursuant to the Directors Plan, Mr. MacKinnon will receive his Initial
Option grant to purchase 15,000 shares at the first Board of Directors
meeting following his election to office.
(3) Pursuant to the Directors Plan, Mr. Stafford received his Initial Option
grant to purchase 15,000 shares at an exercise price of $2.20 per share on
September 4, 2002.
FEDERAL INCOME TAX CONSEQUENCES
Upon the exercise of an option granted under the Directors Plan, a
non-employee director will recognize ordinary income equal to the difference
between the option price and the fair market value of the Common Stock at the
time of exercise, and the Company will receive a corresponding compensation tax
deduction. Upon disposition of the shares acquired upon exercise of the option,
the optionee will be accorded capital gain or loss treatment on the difference
between the fair market value of the Company's Common Stock on the date of the
disposition and the fair market value of the Company's Common Stock on the
option exercise date.
11
(4) SHAREHOLDER PROPOSAL CONCERNING EXECUTIVE OFFICER COMPENSATION
Allied Owners Action Fund, c/o Privateer Asset Management Inc., P.O. Box
20170, Park West Station, New York, New York 10025, whom, as of October 2, 2002,
owned 54,900 shares of common stock, has given notice that it intends to present
the following resolution at the Annual Meeting for the reasons stated:
SHAREHOLDER PROPOSAL
MEANINGFUL COMPUTATION OF MANAGEMENT INCENTIVE COMPENSATION PROPOSAL
The shareholders of Comshare urge our Board of Directors to determine
future awards of performance-based compensation for top executive officers
excluding from consideration income on short-term investments and changes in
deferred tax assets and liabilities. Without limiting the flexibility of the
Board to consider other factors, shareholders believe that the economic cost of
stock options granted, pension promises and foreign currency translation should
influence top executive management bonuses.
PROPONENT'S SUPPORTING STATEMENT
In answer to a question at last year's annual meeting, CEO Dennis Ganster
explained that top executive bonuses are awarded based on success in meeting
Revenue Growth and Net Income targets. While Revenue Growth is fundamentally
important to shareholder value, we believe Net Income as computed by Comshare in
the past is not a good measure of management performance. Operating income or
loss before Interest, Taxes and Restructuring Charges better reflects
shareholder interests.
<Table>
<Caption>
NUMBERS IN THOUSANDS
------------------------------
FISCAL YEAR ENDING JUNE 30, 2001 JUNE 30, 2000
------------------ ------------- -------------
Operating Loss before Interest, Taxes and Restructuring
Charge.................................................... $ (224) $ (363)
Interest Income............................................. 1,364 1,530
Increase in Net Deferred Tax Asset.......................... 1,518 883
Net other adjustments (primarily cash paid for taxes and
restructuring charge)..................................... (1,683) (1,371)
Net Income.................................................. 83 679
Bonuses paid to top five executives......................... 277 291
Stock options granted to top five executives................ 30 55
</Table>
Consistent losses in the business are offset by interest income from
short-term investments and non-cash increases in the deferred tax asset. The
short-term interest income does not require significant management time and
attention, and the level does not reflect management skill as much as the amount
of cash held and the general level of interest rates. Including it for bonus
computation purposes gives management a perverse incentive to hold too much
cash.
The deferred tax asset is highly uncertain and dependent on subjective
management estimates. In fact, the entire asset was written off by management,
two weeks after filing the 2001 annual report showing it worth over $8 million.
Had management changed its opinion before the 2001 financial statements were
finalized, Net Income would have been negative and management would have missed
that bonus target. Including the deferred tax asset in the bonus calculation
gives management a perverse incentive to make optimistic estimates.
In fiscal 2001, Comshare incurred $850,000 in economic value of obligations
not included in the Net Income figure for employee stock options, employee
pension liabilities and foreign currency translation losses. The previous year
the figure was $2,651,000. While Generally Accepted Accounting Principles allow
employee stock option expense to be excluded from Net Income, and require that
the other two items be excluded, we believe the Board should consider them among
other factors in setting top executive management incentive compensation. They
represent real economic value to shareholders and should not be ignored just
because they are omitted from the Income Statement.
12
RECOMMENDATION OF BOARD OF DIRECTORS AGAINST SHAREHOLDER PROPOSAL
The Board of Directors believes that the shareholder proposal is not in the
best interests of the Company and its shareholders and unanimously recommends a
vote "AGAINST" the proposal.
The proposal attempts to limit the flexibility of the Compensation
Committee and Board of Directors in developing executive officer bonus plans,
and consequently their ability to exercise their best judgment in representing
the interests of shareholders. The proposal also places undue emphasis and
attention on factors that are largely not within the control of executive
officers and do not meaningfully affect the performance factors most vital to
increasing shareholder value -- improved earnings per share and growth in
revenues.
As an important part of its responsibilities, the Compensation Committee of
the Board of Directors adopts a new executive bonus plan each year and
recommends it to the Board of Directors for approval. The Compensation Committee
consists of members of the Board of Directors who are not officers or employees
of the Company and do not receive compensation from the Company other than in
their capacity as directors. The executive bonus plan is one element of an
overall executive compensation program designed to attract and retain good
executives and motivate them to increase shareholder value.
The Compensation Committee and Board of Directors need to have flexibility
in the design of the Company's executive officer bonus plans to allow for the
inclusion of specific criteria encouraging achievement of goals established for
the Company by the Board of Directors. The proposal, however, seeks to limit
that flexibility by causing the Compensation Committee and Board of Directors to
treat certain factors in a specific manner set forth in the proposal, whether or
not such treatment will motivate the executive officers to achieve Company
goals.
In recent years, the Company has designed its executive bonus plans to
focus the executive officers on achieving Company goals in two vital
areas -- increasing revenues and improving earnings per share. To keep the bonus
calculation simple and understandable for executives, and consistent with the
focus of the public markets on earnings per share as calculated in accordance
with generally accepted accounting principles, the only adjustment to the
calculation of earnings per share for bonus purposes has been the elimination of
nonrecurring income and charges. Projected levels of interest income and changes
in deferred tax assets and liabilities were considered in determining the target
levels of earnings per share that must be achieved to earn a bonus. As a result,
adjusting the executive officer bonus plan for these items as suggested by the
proposal would not have materially affected the level of bonus pay-outs. The
other factors that the proposal recommends be considered in calculating
executive officer bonuses are less meaningful to the Company at this time and
far less controllable by the Company's executive officers than the factors
currently used by the Company in such calculations. Accordingly, the use of the
factors advocated by the proposal will only complicate the calculation of
executive officer bonuses, potentially making them less understandable and less
motivating to the executive officers.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE AGAINST THE SHAREHOLDER
PROPOSAL.
13
FURTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The Common Stock is the only voting security of the Company. The following
table sets forth information with respect to beneficial ownership of the Common
Stock by each person known by management of the Company to be the beneficial
owner of more than five percent of its outstanding Common Stock. The number of
shares reported is as of the date indicated in the footnote below. The
percentage of class is based on 10,485,278 shares of Common Stock outstanding on
October 8, 2002. Except as where otherwise indicated, each person has sole
voting power and sole investment power with respect to all shares beneficially
owned by such person.
<Table>
<Caption>
AMOUNT AND NATURE OF NAME AND ADDRESS PERCENT
BENEFICIAL OWNERSHIP OF BENEFICIAL OWNER OF CLASS
- -------------------- ------------------- --------
798,300(1) Benson Associates, LLC 7.61
111 S.W. Fifth Avenue
Suite 2130
Portland, Oregon 97204
1,441,882(2) Codec Systems Limited 13.75
Hyde House, Adelaide Road
Dublin 2, Ireland(3)
666,550(4) Dimensional Fund Advisors Inc. 6.36
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</Table>
- -------------------------
(1) Based upon information contained in a Schedule 13G/A filed on February 14,
2002.
(2) Based upon information contained in a Schedule 13D/A filed on August 15,
2002.
(3) Anthony G. Stafford is the Chairman of the Board and Chief Executive Officer
of Codec and owns 90 percent of Codec's issued and outstanding voting stock.
He currently serves on the Board of Directors of the Company. Pursuant to a
Standstill Agreement, dated August 15, 2002, among the Company, Codec and
Mr. Stafford, Codec and Mr. Stafford have agreed, among other things, to
vote, and use their best efforts to cause their officers, directors,
managing personnel, affiliates, associates and immediate family to vote all
of the shares of the Company's Common Stock owned by them for each of the
Company's nominees for election to the Board and, in other matters, in
accordance with the recommendation of the Company's Board, or, if so
directed by the Board, pro rata with all other shareholders. For a copy of
the Standstill Agreement, see Exhibit 10.01 to the Company's Form 8-K Report
filed on August 19, 2002. The Standstill Agreement terminates the day
following the Company's 2003 Annual Meeting of Shareholders.
(4) Based upon information contained in a Schedule 13G/A filed on February 12,
2002. Dimensional Fund Advisors Inc. ("Dimensional") furnishes investment
advice to four investment companies registered under the Investment Company
Act of 1940, and serves as investment manager to certain other commingled
group trusts and separate accounts (the "Funds") and possesses sole voting
and/or investment power over the securities of the Company described in the
schedule that are owned by the Funds. All securities reported in the
schedule are owned by the Funds, none of which, to the knowledge of
Dimensional, individually owns more than five percent of the shares of
Common Stock. Dimensional disclaims beneficial ownership of such securities.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of shares of the
Company's Common Stock by each of the Company's directors, Named Officers (as
defined below) and by all executive officers and
14
directors of the Company as a group. The percentage of class is based on
10,485,278 shares of Common Stock outstanding on October 8, 2002.
<Table>
<Caption>
COMMON STOCK OF THE
COMPANY OWNED PERCENT OF
NAME BENEFICIALLY (1) CLASS
---- ------------------- ----------
Geoffrey B. Bloom(2)........................................ 42,221 *
Daniel T. Carroll(3)........................................ 29,426 *
Richard. L. Crandall(4)..................................... 83,076 *
Dennis G. Ganster(5)........................................ 242,213 2.29
Brian Hartlen(6)............................................ 23,230 *
Brian Jarzynski(7).......................................... 16,508 *
Kathryn A. Jehle (8)........................................ 80,122 *
Kenneth Kane(9)............................................. 39,073 *
David King(10).............................................. 61,572 *
John H. MacKinnon(11)....................................... 500 *
Alan G. Merten(12).......................................... 31,146 *
John F. Rockart(13)......................................... 50,221 *
Anthony G. Stafford(14)..................................... 1,441,882 13.75
Stanley R. Starkey.......................................... -- *
All executive officers and directors as a group (13
persons)(15).............................................. 2,140,690 19.86
</Table>
- -------------------------
(1) To the best of the Company's knowledge, based on information reported by
such directors and officers or contained in the Company's shareholder
records. Unless otherwise indicated by any additional information included
in the footnotes to the table, each of the named persons is presumed to
have sole voting and investment power with respect to all shares shown.
(2) Includes 7,625 shares that Mr. Bloom has, or within 60 days of October 8,
2002 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Directors Plan.
(3) Includes 7,625 shares that Mr. Carroll has, or within 60 days of October 8,
2002 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Company's Directors Plan.
(4) Includes 7,625 shares that Mr. Crandall has, or within 60 days of October
8, 2002 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Company's Directors Plan.
(5) Includes 112,500 shares that Mr. Ganster has, or within 60 days of October
8, 2002 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Company's Expired 1988
Stock Option Plan and the Company's 1998 Plan (collectively, the "Option
Plans"). Mr. Ganster disclaims beneficial ownership of 5,000 shares
reflected in the table that are owned by his spouse.
(6) Includes 18,000 shares that Mr. Hartlen has, or within 60 days of October
8, 2002 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Company's Option Plans.
(7) Includes 8,626 shares that Mr. Jarzynski has, or within 60 days of October
8, 2002 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Company's 1998 Stock
Option Plan.
(8) Includes 55,250 shares that Ms. Jehle has, or within 60 days of October 8,
2002 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Company's Option Plans.
(9) Includes 21,250 shares that Mr. Kane has, or within 60 days of October 8,
2002 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Company's Option Plans.
15
(10) Includes 39,000 shares that Dr. King has, or within 60 days of October 8,
2002 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Company's Option Plans and 1,500
shares reflected in the table that are owned by his daughter.
(11) Pursuant to an Agreement effective October 16, 2002, among the Company,
Codec and Mr. MacKinnon, Mr. MacKinnon has agreed, among other things, to
vote, and use his best efforts to cause his affiliates, associates and
immediate family to vote, all of the shares of the Company's Common Stock
owned by him for each of the Company's nominees for election to the Board
and, in other matters, in accordance with the recommendation of the
Company's Board, or, if so directed by the Board, pro rata with all other
shareholders.
(12) Includes 7,625 shares that Dr. Merten has, or within 60 days of October 8,
2002 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Company's Directors Plan.
(13) Includes 7,625 shares that Dr. Rockart has, or within 60 days of October 8,
2002 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Company's Directors Plan and 8,000
shares reflected in the table that are owned by his spouse.
(14) All of the 1,441,882 shares of stock are owned by Codec. Due to his
ownership of 90% of the voting stock of Codec, Mr. Stafford may be
considered the beneficial owner of those shares; however, Mr. Stafford has
disclaimed beneficial ownership of the shares reflected in the table. See
footnote 3 to "Principal Shareholders" for further information concerning
shares owned by Codec.
(15) Includes 292,751 shares that certain directors and executive officers have,
or within 60 days of October 8, 2002 will have, the right to acquire
pursuant to the presently exercisable portion of options granted under the
Company's Directors Plan and Option Plans; and 5,000 shares referred to in
Note (5) and 1,441,882 shares referred to in Note (14) above under "Stock
Ownership of Management" as to which beneficial ownership is disclaimed.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information with respect to equity
compensation plans approved by security holders and equity compensation plans
not approved by security holders as of June 30, 2002. The table does not include
additional shares to be reserved for issuance under the 1998 Plan or the
Directors Plan upon approval of amendments to those plans at the November 25,
2002 Annual Meeting.
<Table>
<Caption>
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED WEIGHTED-AVERAGED FUTURE ISSUANCE UNDER
UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN(A))
------------- -------------------- -------------------- -------------------------
(A) (B) (C)
Equity compensation plans approved by
security holders.................... 1,695,464(1) $5.25 758,260
Equity compensation plans not approved
by security holders................. -- -- --
--------- -------
Total................................. 1,695,464 $5.25 758,260
========= =======
</Table>
- -------------------------
(1) Does not include any securities to be purchased under the Company's Employee
Stock Purchase Plan after June 30, 2002.
16
EXECUTIVE OFFICERS
The persons listed below currently are the executive officers of the
Company.
<Table>
<Caption>
NAME OFFICER(S) AGE
---- ---------- ---
Dennis G. Ganster.................... Chairman of the Board, President and Chief Executive
Officer 51
Brian Hartlen........................ Senior Vice President, Marketing 44
Brian J. Jarzynski................... Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary 35
Kenneth Kane......................... Senior Vice President, Direct Operations 50
David King........................... Senior Vice President, Product Development and Chief
Technology Officer 58
</Table>
Mr. Ganster was named President and Chief Executive Officer of the Company
in August 1997, and assumed the position of Chairman of the Board of the Company
in August 2001. See "Election of Directors" for further information concerning
Mr. Ganster.
Mr. Hartlen was named Senior Vice President, Marketing of the Company in
February 2001. He has been with the Company in various marketing, customer
support and customer relations positions since 1976.
Mr. Jarzynski was named Senior Vice President in June 2002, after serving
as Vice President, Chief Financial Officer and Treasurer of the Company since
February 2001. From August 1999 until February 2001, Mr. Jarzynski served as the
Company's Controller and Chief Accounting Officer. From 1989 until he joined the
Company in August 1999, Mr. Jarzynski held various positions at Ernst & Young
LLP.
Mr. Kane was named Senior Vice President, Direct Operations, in January
2002, after having served as the Company's Vice President, Eastern U.S. Region,
from October 2000 until January 2002. From January 1978 through October 2000, he
was employed by the Company in various positions including Vice President,
Consulting.
Dr. King was named Senior Vice President, Product Development and Chief
Technology Officer of the Company in August 1997, after having served as
Director of Research and Innovation of the Company since July 1995. He has been
with the Company in various positions since March 1991 when the Company
purchased the operating assets of Execucom Systems Corporation. Prior to the
acquisition, Dr. King held various positions with Execucom Systems Corporation,
including Director of Research and Development, from 1982 through 1991.
The executive officers of the Company serve at the pleasure of the Board of
Directors.
17
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides summary information concerning compensation
paid by the Company and its subsidiaries to (or accrued on behalf of) (i) the
Company's Chief Executive Officer, (ii) the four other most highly compensated
executive officers who were serving as executive officers at the end of fiscal
year 2002, and (iii) an individual who served as an executive officer in fiscal
year 2002 and from whom disclosures would have been provided but for the fact
that the individual was not serving as an executive officer of the Company at
the end of fiscal year 2002 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
---------------------------- UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
--------------------------- ------ ------ ----- ---------- ------------
Dennis G. Ganster................................. 2002 348,100 -- 20,000 8,820
President and Chief Executive Officer 2001 300,000 100,000 20,000 14,386
2000 300,000 90,000 20,000 12,759
Brian Hartlen(2).................................. 2002 158,900 -- 10,000 10,914
Senior Vice President, Marketing 2001 135,169 35,300 20,000 8,901
2000 117,700 39,000 -- 7,680
Brian J. Jarzynski(3)............................. 2002 152,700 -- 20,000 10,681
Senior Vice President, Chief Financial Officer 2001 122,023 23,200 15,000 5,158
and Treasurer 2000 85,385 24,500 9,750 --
Kenneth Kane(4)................................... 2002 188,800 87,700 40,000 6,972
Senior Vice President, Direct Operations 2001 165,000 79,100 5,000 10,938
2000 132,000 58,000 -- 7,171
David King........................................ 2002 215,400 -- 10,000 12,447
Senior Vice President, Product Development 2001 200,000 54,600 -- 12,713
and Chief Technology Officer 2000 187,000 44,880 -- 10,712
Stanley R. Starkey(5)............................. 2002 249,600 -- -- 5,850
Former Senior Vice President, Field Operations 2001 240,000 64,000 -- 13,218
2000 225,000 54,000 -- 10,777
</Table>
- -------------------------
(1) "All Other Compensation" for fiscal year 2002 is comprised of: (i)
contributions made by the Company to the accounts (or accrued by the Company
on behalf) of each of the Named Officers for each period presented under the
Company's and its subsidiaries' defined contribution plans as follows: Mr.
Ganster $7,617, Mr. Hartlen $10,419, Mr. Jarzynski $10,681, Mr. Kane $6,642,
Dr. King $11,097, and Mr. Starkey $4,500, and (ii) the dollar value of any
premiums paid by the Company during each period presented with respect to
term life insurance for the benefit of each of the Named Officers (other
than group life plans that do not discriminate in scope or terms of
operations in favor of the executive officers, and are generally available
to all salaried employees) as follows: Mr. Ganster $1,203, Mr. Hartlen $495,
Mr. Kane $330, Dr. King $1,350, and Mr. Starkey $1,350.
(2) The amounts indicated for Mr. Hartlen reflect compensation paid to him in
his capacity as Vice President of Marketing through February 2001 and Senior
Vice President, Marketing for the remainder of fiscal year 2001.
(3) The amounts indicated for Mr. Jarzynski reflect compensation paid to him in
his capacity as Corporate Controller and Chief Accounting Officer of the
Company from August 1999, when he was hired by the
18
Company, through February 2001, and Vice President, Chief Financial Officer
and Treasurer of the Company for the remainder of fiscal year 2001. Mr.
Jarzynski was promoted to Senior Vice President effective July 2002.
(4) The amounts indicated for Mr. Kane reflect compensation paid to him in his
capacity as Vice President, Eastern U.S. Region through January 6, 2002 and
Senior Vice President -- Direct Operations for the balance of fiscal year
2002.
(5) The amounts indicated for Mr. Starkey reflect compensation paid to him in
his capacity as Senior Vice President, Field Operations of the Company
through December 2001. In addition, the amounts indicated for Mr. Starkey
under the heading "Annual Compensation -- Salary" for fiscal year 2002
include salary continuation payments of $122,115 paid to Mr. Starkey after
his termination of employment with the Company.
OPTION GRANTS AND RELATED INFORMATION
The following table provides information with respect to options granted to
the Named Officers during fiscal year 2002.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH.) DATE 5%($) 10%($)
---- ------------- ------------ ----------- ---------- ----- ------
Dennis G. Ganster.......... 20,000 5.20 2.40 6/12/2007 13,262 29,304
Brian Hartlen.............. 10,000 2.60 2.40 6/12/2007 6,631 14,652
Brian J. Jarzynski......... 20,000 5.20 2.40 6/12/2007 13,262 29,304
Kenneth Kane............... 10,000 2.62 3.15 7/23/2006 8,703 19,231
20,000 5.20 2.60 2/07/2007 14,367 31,747
10,000 2.60 2.40 6/12/2007 6,631 14,652
David King................. 10,000 2.60 2.40 6/12/2007 6,631 14,652
Stanley R. Starkey......... -- -- -- -- -- --
</Table>
- -------------------------
(1) All of these options, which were granted pursuant to the Company's 1998
Global Employee Stock Option Plan (the "1998 Plan"), were granted at market
value on the date of grant, become exercisable annually in 25% increments
beginning one year after the grant date and have a term of five years. The
exercisability of certain of these options may be accelerated in the event
of a change in control of the Company. See "Employment Agreements and
Termination/Change in Control Agreements."
(2) Represents value of option at the end of a five-year term, assuming the
market price of the Company's Common Stock appreciates at an annually
compounded rate of 5% or 10%. These amounts represent assumed rates of
appreciation only. Actual gains, if any, will be dependent on overall market
conditions and on future performance of the Company's Common Stock. There
can be no assurance that the amounts reflected in the table will be
achieved.
19
OPTION EXERCISES AND HOLDINGS
The following table contains information regarding options exercised by the
Named Officers during fiscal year 2002, and the value of options held by such
officers as of June 30, 2002 measured in terms of the closing price of the
Company's Common Stock on June 30, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR END(#) FISCAL YEAR END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Dennis G. Ganster........... 0 0 157,500 62,500 0 0
Brian Hartlen............... 0 0 23,000 27,500 0 0
Brian J. Jarzynski.......... 0 0 8,626 36,124 0 0
Kenneth Kane................ 0 0 21,250 46,250 0 0
David King.................. 0 0 69,000 18,000 0 0
Stanley R. Starkey.......... 0 0 0 0 0 0
</Table>
- -------------------------
(1) Calculated on the basis of the number of shares subject to each such option
multiplied by the excess of the fair market value of a share of Common Stock
at June 30, 2002 over the exercise price of such option.
EMPLOYMENT AGREEMENTS AND TERMINATION/CHANGE IN CONTROL ARRANGEMENTS
Under the Company's expired 1988 Stock Option Plan (the "Expired 1988
Plan"), incentive stock options were granted to key employees (including the
Named Officers) and such stock options become fully exercisable, even if not
otherwise exercisable, upon the dissolution or liquidation of the Company or
upon any merger or consolidation in which the Company is not the surviving
corporation, if a period of twelve months from the date of grant has expired. No
further options (or SARs) may be granted under the Expired 1988 Plan as it
expired June 1998. As of October 8, 2002, 161,500 shares of the Company's Common
Stock were still subject to outstanding options under the Expired 1988 Plan.
Under the 1998 Plan, stock options were granted to employees (including the
Named Officers) and such stock options become fully exercisable, even if not
otherwise exercisable, in the event of a change in control. As of October 8,
2002, 1,162,300 shares of the Company's Common Stock were subject to outstanding
options under the 1998 Plan.
As of June 1, 1998, the Company entered into Change in Control Severance
Agreements with the following officers: Dennis G. Ganster, Dr. David R. King and
Stanley R. Starkey. The Change in Control Severance Agreements were amended as
of November 30, 1999. The Change in Control Severance Agreement with Mr. Starkey
terminated upon the termination of his employment with the Company in November
2001. The Company entered into a Change in Control Severance Agreements with
Brian Hartlen and Brian J. Jarzynski as of February 9 and February 16, 2001,
respectively. The Company entered into a Change in Control Severance Agreement
with Kenneth Kane as of January 7, 2002. The Change in Control Severance
Agreements that the Company has entered into with its officers are collectively
referred to as the "Change in Control Agreements."
The Change in Control Agreement between Mr. Ganster, the Chairman,
President and Chief Executive Officer, and the Company generally provides that
in the event of termination of Mr. Ganster's employment within two years
following a change in control of the Company, Mr. Ganster will be entitled to a
cash severance benefit equal to three times his annual base salary as in effect
at the time of the change in control, plus an amount equal to three times the
average of his incentive bonus (excluding any special bonus payments) paid for
the three fiscal years immediately preceding the fiscal year of the change in
control. This severance payment is to be paid in a lump sum cash payment within
ten days following Mr. Ganster's termination of employment. Payments made later
than this ten-day period will be subject to interest at the prime rate plus two
percent, which begins to accrue on the tenth day following the termination of
employment.
20
The Change in Control Agreements between the Company and each of Messrs.
Hartlen, Jarzynski and Kane and Dr. King are substantially similar. The
Agreements each generally provide that in the event of termination of such
officers' employment within two years following a change in control of the
Company, such officer will be entitled to a cash severance benefit equal to two
times such officer's annual base salary, as in effect at the time of the change
in control, plus an amount equal to two times the average of their annual
incentive bonus paid for the immediately preceding three fiscal years and
bonuses paid for a period of time during which they were not senior executives
reporting to the President of the Company (excluding any special bonus
payments). Bonuses paid for a partial fiscal year of service shall be
proportionately increased so as to give the bonuses the effect of an amount for
a full fiscal year. Such severance payments are to be paid in a lump sum cash
payment within ten days following such officer's termination of employment.
Payments made later than this ten-day period will be subject to interest at the
prime rate plus two percent, which begins to accrue on the tenth day following
the termination of employment.
Each of the Change in Control Agreements provides that payments under this
Agreement or any other plans, agreements or policies of the Company shall not be
subject to the golden parachute cap under Sections 280G and 4999 of the Code. To
the extent that the aggregate parachute payments equal or exceed the golden
parachute cap set forth in Sections 280G and 4999 of the Code, the Company shall
pay the executive an amount equal to a portion of the excise taxes owed by the
executive on behalf of payments under the Change in Control Agreements or other
golden parachute amounts.
For purposes of the 1998 Plan and each of the Change in Control Agreements,
the term "change in control" means (a) the election of a Board of Directors of
the Company, a majority of the members of which were nominees of a person
(including an individual, a corporation, partnership, joint venture, trust or
other entity) or a group of persons acting together (other than persons who were
members of the Board of Directors or officers of the Company as of August 14,
1998 for the 1998 Plan and as of June 1, 1998 for the Change in Control
Agreements, or certain tax-qualified retirement plans of the Company
(collectively, the "Exempted Persons")), following the acquisition by such
person of twenty-five percent, or more, of the outstanding Common Stock of the
Company; (b) the acquisition of ownership by a person (other than Exempted
Persons) of fifty-one percent or more of the outstanding Common Stock of the
Company; (c) a sale of all or substantially all of the assets of the Company to
any entity not controlled by persons who were members of the Board of Directors
or officers of the Company as of August 14, 1998 for the 1998 Plan and as of
June 1, 1998 for the Change in Control Agreements, or by any tax-qualified
retirement plan for the benefit of employees of the Company; or (d) a merger,
consolidation or other similar transaction between the Company and another
entity if a majority of the members of the Board of Directors of the surviving
company were not Continuing Directors. Continuing Directors means persons (x)
who were members of the Board of Directors of the Company immediately before the
change in control, and (y) who also were members of the Board of Directors of
the Company as of August 14, 1998 for the 1998 Plan and as of June 1, 1998 for
the Change in Control Agreements, or are new directors whose election by the
Board of Directors, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors in office at the
time of such election or nomination who either were directors as of August 14,
1998 for the 1998 Plan and as of June 1, 1998 for the Change in Control
Agreements or whose election or nomination for election was previously approved
as provided above.
For purposes of each of the Change in Control Agreements, the term
"termination of employment" is defined as (a) the officer's involuntary
termination by the Company for any reason other than death, disability,
retirement or cause; or (b) the officer's termination for (i) any reassignment
or change in the identity or corporate position to whom the officer reports, or
a change in title (other than a promotion); (ii) any reduction in the officer's
base salary or failure by the Company to continue any bonus, stock or incentive
plans; (iii) the discontinuance or reduction in benefits to the officer of any
qualified or nonqualified retirement or welfare plan or the discontinuance of
any fringe benefits or other perquisites; (iv) the required relocation of the
officer's principal place of employment by more than fifty miles or more
frequent and/or longer required business traveling (other than on account of a
promotion); or (v) the Company's breach of any provision of the Change in
Control Agreement.
In connection with Stanley Starkey's separation from the Company, the
Company agreed to pay Mr. Starkey bi-weekly salary continuation payments of
$9,615.38 until December 18, 2003, and a car
21
allowance of $945 per month until December 18, 2002; to continue his health
insurance coverage until December 18, 2003, or until he is eligible for group
health insurance coverage from another employer and to allow him to exercise his
rights under the Company's Benefit Adjustment Plan.
DIRECTOR COMPENSATION
In fiscal year 2002 each director who was not an officer or employee of the
Company received for his or her services as such a semi-annual retainer of
$4,000, plus $1,000 for each Board or committee meeting attended. In addition,
the Chairman of each standing committee received a semi-annual retainer of
$2,500 for serving as such.
Non-employee directors may make semi-annual elections, prior to the end of
each December and June of each calendar year, to purchase shares of Common Stock
of the Company instead of receiving all or a portion of his or her base cash
compensation. In fiscal year 2002, Messrs. Bloom, Carroll, and Crandall and Drs.
Merten and Rockart, non-employee directors of the Company, elected to purchase a
total of 28,515 shares of Common Stock of the Company at a weighted average
purchase price of $3.00 per share in lieu of compensation.
Directors who are officers or employees of the Company receive no
compensation (beyond their compensation for services as an officer or employee)
for serving as directors.
The Company's Directors Plan provides for the issuance of options to
purchase up to 200,000 shares (proposed to be increased to 300,000 shares) of
the Company's Common Stock to non-employee directors of the Company. Under the
Directors Plan, each non-employee director serving on the Board of Directors on
November 17, 1994 was granted an option to purchase 7,500 shares of the
Company's Common Stock at an exercise price of $8.33 per share. Any non-employee
director who is first elected or appointed to the Board of Directors after
November 19, 2001 will receive an option to purchase 15,000 shares of the
Company's Common Stock on the date of the first Board of Directors meeting
following his or her election or appointment. In addition, each non-employee
director who has been a director for six months before the January 1 following
the date of each Annual Meeting of Shareholders held during the term of the
Directors Plan automatically shall be granted, as of the January 1 following
each such Annual Meeting, an option to purchase an additional 10,000 shares of
Common Stock. Options under the Directors Plan are granted at the last sale
price per share of the Company's Common Stock on the Nasdaq National Market(R)
on the date of grant, are exercisable at a rate of 25% per year beginning one
year from the date of grant and have a term of five years. Options granted under
the Directors Plan become immediately exercisable, if not otherwise exercisable,
upon the dissolution or liquidation of the Company or upon any merger or
consolidation in which the Company is not the surviving corporation, provided
that a period of twelve months from the date of grant has elapsed. On January 1,
2002, options to purchase 10,000 shares at an exercise price of $2.91 were
granted to each of Messrs. Bloom, Carroll and Crandall, Ms. Jehle, and Drs.
Merten and Rockart, and on September 4, 2002, an option to purchase 15,000
shares at an exercise price of $2.20 was granted to Mr. Stafford as an Initial
Option. As of October 8, 2002, 141,500 options were outstanding under the
Directors Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Mr. Bloom, and Drs. Merten
and Rockart. During fiscal year 2002, no member of the Compensation Committee
served as an officer or employee of the Company or any of its subsidiaries nor
had any member of the Compensation Committee formerly served as an officer of
the Company or any of its subsidiaries. During fiscal year 2002, none of the
executive officers of the Company served on the board of directors or on the
compensation committee of any other entity, any of whose executive officers
served either on the Board of Directors or on the Compensation Committee of the
Company.
COMPENSATION COMMITTEE REPORT
The responsibilities of the Compensation Committee include recommending to
the Board of Directors the compensation for the executive officers of the
Company, who during all or part of fiscal year 2002 were Mr. Ganster, Mr.
Hartlen, Mr. Jarzynski, Mr. Kane, Dr. King and Mr. Starkey. The Committee also
considers recommendations from the Chief Executive Officer for compensation of
other officers of the Company and recommends to the Board of Directors approval
or changes in those recommendations. The Committee also grants stock options to
officers and employees under the 1998 Plan.
22
The Committee met six times in fiscal year 2002. Executive officers were
not present during the Committee's consideration of their individual
compensation.
The Company's executive compensation program is designed to give executives
a balanced incentive package that encourages the achievement of both short-term
and long-term performance goals and that rewards improvement in shareholder
value. The Committee believes that the compensation program is essential to the
Company's effort to attract and retain key executives. The Committee also
believes that the Company's compensation program should encourage the executive
officers to align their interests with the shareholders by conditioning a
significant portion of executive compensation on increases in shareholder value.
The executive compensation program consists of three main components: base
salary, performance bonuses and stock-based incentives. In addition, the
executive officers participate in the Company's employee benefit plans generally
on the same terms as other Company employees.
BASE SALARY
The base compensation of Mr. Ganster as the chief executive officer of the
Company had been established at $300,000 when he was appointed to that position
in August 1997, and at his request that amount remained the same each year
through fiscal year 2001. In recognition of Mr. Ganster's outstanding efforts
during that period, the Committee increased his base compensation for fiscal
year 2002 to $350,000. The four senior vice presidents in office at the
beginning of fiscal year 2002 were given raises of between 2.1% and 11.6% in
recognition of their performance. During the fiscal year Mr. Starkey left office
and was replaced through the internal promotion of Mr. Kane, who was given an
increase in base salary of 17.7% to reflect his increased responsibility in
senior management.
PERFORMANCE BONUSES
The Committee adopted an incentive plan for executive officers for fiscal
year 2002 that called for payments equal to 60% of base salary for the Chief
Executive Officer, 50% of base salary for Mr. Starkey, and 40% of base salary
for the other executive officers if the Company achieved specific revenue growth
and earnings per share targets (after allowance for nonrecurring charges and
events). The incentive payment target amounts for fiscal year 2002 were based
50% on revenue growth targets and 50% on earnings per share targets. Mr. Kane,
however, was guaranteed a minimum bonus of $50,000 in his Senior Vice President
position to ensure that his total compensation in his new position in fiscal
year 2002 would not be less than his expected compensation in his former sales
position. The remainder of Mr. Kane's bonus for fiscal year 2002 related to his
activities as a sales executive prior to his appointment as an executive
officer. The Company did not achieve the fiscal year 2002 incentive payment
targets so, with the exception of Mr. Kane's guaranteed bonus, the executive
officers received no target performance bonuses.
STOCK OPTION AWARDS
Stock option awards are an important means by which the Committee directly
links executive officers' compensation to the appreciation in value realized by
all of the Company's shareholders. Under the Company's stock option plans,
options are granted at exercise prices equal to the market price on the date of
grant and therefore have no value to the executive unless the Company's stock
appreciates. In making awards, the Committee considers each executive's
responsibilities and performance as well as the existing level of stock options
held by each executive.
During fiscal year 2002 the Committee granted stock options to each of Mr.
Ganster and Mr. Jarzynski in the amount of 20,000 shares, to each of Mr. Hartlen
and Mr. King in the amount of 10,000 shares, and to Mr. Kane in the amount of
40,000 shares. The grant to Mr. Jarzynski reflected his promotion to Senior Vice
President. The total amount granted to Mr. Kane included an earlier grant in his
capacity as a sales executive as well as his initial and annual grants as Senior
Vice President. The remainder of the grants reflected annual grants to the
executive officers designed to increase their incentive to continue to work to
improve the Company's performance.
23
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company from time to time reviews the extent to which its executive
compensation arrangements are subject to the provisions of the Code and related
regulations limiting the deductibility of executive compensation in excess of
$1,000,000 paid to any of the five most highly compensated executive officers of
the Company in any fiscal year which does not qualify for an exemption under the
statute or proposed regulations. The Expired 1988 Plan and the 1998 Plan include
restrictions required by the Code to except option grants under these plans from
the limit on deductibility. The Committee does not presently believe that the
other components of the Company's compensation program are likely to result in
payments to any executive officer in any year in excess of $1,000,000, other
than the Company's severance arrangements following certain changes in control
of the Company, and therefore has concluded that no further action with respect
to qualifying such compensation for deductibility is necessary at this time.
COMPENSATION COMMITTEE: GEOFFREY B. BLOOM, CHAIR
ALAN G. MERTEN
JOHN F. ROCKART
SHAREHOLDER RETURN
Set forth below is a graph comparing the cumulative total return on the
Company's Common Stock from July 1, 1997 through June 30, 2002 with the Standard
and Poor's Application Software Index (the "S&P Application Software Index") and
The Nasdaq Stock Market (U.S.) Index (the "Nasdaq US Index"). The graph assumes
that the value of the investment in the Company's Common Stock, the S&P
Application Software Index and the Nasdaq US Index was $100 on July 1, 1997 and
that all dividends were reinvested.
The graph displayed below is presented in accordance with Securities and
Exchange Commission requirements. Shareholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance. This graph in no way reflects the Company's
forecast of future financial performance.
[PERFORMANCE CHART]
<Table>
<Caption>
COMSHARE, NASDAQ STOCK S & P APPLICATION
INCORPORATED MARKET (U.S.) SOFTWARE
------------ ------------- -----------------
6/97 100.00 100.00 100.00
6/98 63.13 131.62 120.78
6/99 24.75 189.31 40.38
6/00 38.38 279.93 42.49
6/01 25.94 151.75 39.82
6/02 17.78 103.40 16.68
</Table>
* $100 invested on 6/30/97 in stock or index -- including reinvestment of
dividends. Fiscal year ending June 30.
<Table>
<Caption>
------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------------------------------------------
6/97 6/98 6/99 6/00 6/01 6/02
- --------------------------------------------------------------------------------------------------------------------
COMSHARE, INCORPORATED 100.00 63.13 24.75 38.38 25.94 17.78
- --------------------------------------------------------------------------------------------------------------------
NASDAQ STOCK MARKET (U.S.) 100.00 131.62 189.31 279.93 151.75 103.40
- --------------------------------------------------------------------------------------------------------------------
S & P APPLICATION SOFTWARE 100.00 120.78 40.38 42.49 39.82 16.68
- --------------------------------------------------------------------------------------------------------------------
</Table>
24
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's combined consolidated financial statements for the fiscal
year ending June 30, 2002 have been examined by Ernst & Young, LLP ("E&Y"). A
representative of E&Y is expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they wish, and will be available to
respond to appropriate questions. In accordance with the Company's past
practice, the selection of independent public accountants to audit the financial
statements of the Company for the fiscal year ending June 30, 2003 will be made
by the Board of Directors at a later date.
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
Effective June 12, 2002, the Company, upon the approval of the Audit
Committee, dismissed Arthur Andersen LLP ("Andersen") as the independent public
accountants for the Company and engaged E&Y as independent public accountants
for the Company for the fiscal year ending June 30, 2002. Andersen had audited
the financial statements of the Company since 1972. The Company reported this
change in independent accountants on a Current Report on Form 8-K that was filed
with the Securities and Exchange Commission on June 12, 2002.
Andersen's reports on the Company's consolidated financial statements for
each of the years ended June 30, 2000 and 2001 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. In connection with its audits
for the Company's fiscal years ended June 30, 2000 and 2001 and through June 12,
2002, there were no disagreements between the Company and Arthur Andersen on any
matter of accounting principle or practice, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Andersen's satisfaction,
would have caused Andersen to make reference to the subject matter in connection
with Andersen's report on the Company's consolidated financial statements for
such years; and there were no reportable events as defined in Item 304(a)(1)(v)
of Regulation S-K. The Company provided Andersen with a copy of the foregoing
disclosures. Attached as Exhibit 16.1 to the Company's Current Report on Form
8-K was a copy of Andersen's letter, dated June 12, 2002, stating its agreement
with such statements.
During the fiscal years ended June 30, 2000 and 2001 and through June 12,
2002, the Company did not consult E&Y with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or reportable events
listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.
FEES PAID TO INDEPENDENT PUBLIC ACCOUNTANTS
AUDIT FEES. E&Y billed the Company $119,873 for professional services in
connection with the audit of the Company's fiscal year 2002 financial
statements.
Andersen billed the Company $25,000 for professional services in connection
with its review of the Company's financial statements during fiscal year 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. Neither E&Y
nor Andersen billed the Company for operating, designing or supervising the
Company's computer, financial or information systems during fiscal year 2002.
ALL OTHER FEES. E&Y did not bill the Company for other services rendered
during fiscal year 2002. Andersen billed the Company $48,200 for other services
rendered during fiscal year 2002. These fees were for assistance in tax matters
and professional services in connection with the Company's fiscal year 2001
financial statements.
The Audit Committee of the Board does not consider the provision of the
services described above by either E&Y or Andersen to be incompatible with the
maintenance of independence by either firm.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than 10 percent of a registered class of the Company's equity
securities, to file reports of their ownership with the Securities and Exchange
Commission
25
(the "SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) reports they file. Specific due dates for these reports have been
established and the Company is required to report in this proxy statement any
delinquent filings and failures to file such reports.
Based solely on its review of the copies of such reports received by it and
written representations of its incumbent directors and officers, the Company
believes that, during the period from July 1, 2001 to June 30, 2002, all of
these applicable requirements were complied with by each of its directors,
officers and greater than ten percent beneficial owners, except for Forms 3 that
were filed one day late for each of Codec and Anthony G. Stafford and one Form 4
that each of Codec and Anthony G. Stafford filed ten days late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Codec is one of the Company's principal shareholders and distributors.
Anthony G. Stafford, a member of the Company's Board of Directors, is the Chief
Executive Officer of Codec and owns 90% of Codec's issued and outstanding voting
stock. Software revenue of $1.2 million was received by the Company from Codec
in fiscal year 2002. Codec's contractual terms and conditions are not materially
different from those of the Company's other distributors. In connection with its
relationship as a distributor for the Company, Codec had outstanding accounts
receivable due the Company during fiscal year 2002 for amounts up to $380,583.
As of September 30, 2002 Codec's accounts receivable due the Company was
$292,800. Interest on delinquent amounts owed by Codec accrues at the rate of
1.5 percent per month, or the maximum rate permitted by applicable law,
whichever is less.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2003 Annual Meeting
that are eligible for inclusion in the Company's Proxy Statement for that
meeting under Rule 14a-8 promulgated under the Exchange Act must be received by
the Company not later than June 23, 2003 if they are to be included in the
Company's Proxy Statement relating to that meeting. Such proposals should be
addressed to the Secretary at the Company's principal executive offices and
should satisfy the requirements applicable to shareholder proposals contained in
the Company's bylaws. Shareholder proposals intended to be presented at the 2003
Annual Meeting that are not eligible for inclusion in the Company's Proxy
Statement for that meeting under Rule 14a-8 promulgated under the Exchange Act
must satisfy the requirements applicable to shareholder proposals contained in
the Company's bylaws. Such proposals must be addressed to the Secretary at the
Company's principal executive offices and must be received at the Company's
principal executive offices not less than ninety days prior to the anniversary
of the preceding year's annual meeting, which date will be August 27, 2003. The
Company also expects the persons named as proxies for the 2003 annual meeting to
use their discretionary voting authority with respect to any proposal presented
or offered to be presented at that meeting by a shareholder who does not provide
the Company with written notice of such proposal during the period provided in
the Company's bylaws.
GENERAL
The Board does not intend to present any matters at the Annual Meeting
other than those described above. However, if any other matters should properly
come before the meeting, including any shareholder proposal that has been
omitted from this Proxy Statement in accordance with the rules of the Securities
and Exchange Commission, or any matter which the Company did not have notice of
prior to August 21, 2002, it is the intention of the persons named in the
accompanying proxy to vote in accordance with their judgment on such matters. No
shareholder proposals, other than as contained in this Proxy Statement, were
submitted in fiscal year 2002 prior to August 21, 2002. Consequently, no such
proposals are permitted to be proposed at the Annual Meeting.
October 18, 2002
Ann Arbor, Michigan
26
- --------------------------------------------------------------------------------
PROXY - COMSHARE, INCORPORATED
- --------------------------------------------------------------------------------
555 Briarwood Circle, Ann Arbor, Michigan 48108
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS ON
NOVEMBER 25, 2002
The undersigned hereby appoints Dennis G. Ganster and Brian J. Jarzynski, or any
one of them, proxies with full power of substitution to vote, as designated on
the reverse side, all shares of Common Stock that the undersigned is entitled to
vote at the Annual Meeting of Shareholders of Comshare, Incorporated to be held
on Monday, November 25, 2002 or at any adjournment or adjournments thereof.
When properly executed, this proxy will be voted in the manner directed. If no
direction is given, this proxy will be voted FOR all nominees for election as
directors, and FOR Proposals 2 and 3 and AGAINST Proposal 4.
Discretionary authority is hereby conferred as to any other matters as may
properly come before the Annual Meeting. The undersigned acknowledges receipt of
the Notice of Annual Meeting, the Proxy Statement and the Annual Report of
Shareholders of Comshare, Incorporated for the year ending June 30, 2002. The
undersigned ratifies all that the proxies or any of them or their substitutes
may lawfully do or cause to be done by virtue hereof and revokes all former
proxies.
Please mark, date, sign and return this proxy card promptly, using the enclosed
envelope. No postage is required if mailed in the United States.
SEE REVERSE SIDE
INSTRUCTIONS FOR VOTING BY TELEPHONE
Comshare, Incorporated encourages you to take advantage of the convenient
telephone voting method to vote your shares for the proposals to be covered at
the Annual Meeting of Shareholders. Voting by telephone confers discretionary
authority as to any other matters as may properly come before the meeting.
Please take the opportunity to use this voting method as outlined below to cast
your ballot.
[PHONE] To vote using the Telephone (within U.S. and Canada)
- Call toll free 1-800-816-9050 in the United States or Canada any time
on a touch tone telephone. There is NO CHARGE to you for the call.
Have your proxy card in hand when you call.
- Enter the Holder Account Number (excluding the letter "C") and Proxy
Access Number located below.
- Follow the simple recorded instructions.
Option 1: To vote as the Board of Directors recommends on ALL
proposals: Press 1.
When asked, please confirm your vote by pressing 1.
Option 2: If you choose to vote on EACH proposal separately, press 0
and follow the simple recorded instructions.
HOLDER ACCOUNT NUMBER C0123456789 PROXY ACCESS NUMBER 12345
If you vote by telephone, DO NOT mail back the proxy card.
THANK YOU FOR VOTING
+
000000 0000000000 0 0000
COMSHARE, INCORPORATED 000000000.000 ext
000000000.000 ext
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1 000000000.000 ext
ADD 2 000000000.000 ext
ADD 3
ADD 4 HOLDER ACCOUNT NUMBER
ADD 5
ADD 6 C 1234567890 J N T
Use a black pen. Mark with
an X inside the grey areas [X] [ ] Mark this box with an X if you have made
as shown in this example. changes to your name or address details above.
- --------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
- --------------------------------------------------------------------------------
[A] ELECTION OF DIRECTORS PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE VOTING INSTRUCTIONS.
1. The Board of Directors Recommends a Vote FOR the listed nominees.
FOR WITHHOLD FOR WITHHOLD
01 - Geoffrey B. Bloom 05 - John H. MacKinnon
02 - Richard L. Crandall 06 - Alan G. Merten
03 - Dennis G. Ganster 07 - John F. Rockart
04 - Kathryn A. Jehle 08 - Anthony G. Stafford
[B] ISSUES
The Board of Directors Recommends a The Board of Directors Recommends
Vote FOR the following proposals. a Vote AGAINST the following proposal.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
2. Approval of the Amendment 4. Shareholder Proposal concerning
to the 1998 Global Employee Executive Officer Compensation.
Stock Option Plan to increase
the number of shares reserved
for issuance by 400,000
shares.
3. Approval of the Amendment
to the Directors Stock Option
Plan to increase the number of
shares reserved for issuance
by 100,000 shares.
[C] AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign exactly as your name appears hereon. Joint owners should each sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
[ ] [ ] [ / / ]
Appendix 1
COMSHARE, INCORPORATED
1998 GLOBAL EMPLOYEE STOCK OPTION PLAN
1. Purpose. This Stock Option Plan, which shall be known as the "1998
Global Employee Stock Option Plan" (the "Plan"), provides for the granting to
such employees of Comshare, Incorporated (the "Company") and its subsidiaries as
may be selected by the Compensation Committee of the Board of Directors of the
Company (the "Committee"), options to purchase Common Stock of the Company. The
word "Company" when used in this Plan with reference to employment shall include
subsidiaries of the Company. The word "subsidiary" when used in this Plan shall
mean any corporation a majority of the voting stock of which is owned or
controlled, directly or indirectly, by the Company.
2. Administration. The Committee shall administer the Plan. Subject to
the provisions of the Plan, the Committee may adopt rules and regulations for
the administration of the Plan and may make such interpretations of and
determinations under, and take such action in connection with, the Plan or the
options granted hereunder as it deems necessary or advisable. Each
interpretation, determination or other action made or taken pursuant to the Plan
by the Committee shall be final and conclusive for all purposes and upon all
persons.
3. Stock. The stock to be issued under the Plan shall be authorized and
unissued shares of Common Stock of the Company, par value $1.00 per share (the
"Stock"). The total amount of Stock on which options may be granted under the
Plan shall not exceed 900,000 shares, subject to adjustment as provided in
Paragraph 13 hereof. Stock released from option upon the termination,
cancellation, expiration, forfeiture or surrender of any option prior to
complete exercise of the option may again be subjected to options under the
Plan.
4. Grant of Options. The Committee, at any time and from time to time
prior to the termination of the Plan as provided in Paragraph 15 hereof, may
grant options to such employees of the Company and its subsidiaries, as the
Committee may select and for such number of shares as the Committee shall
designate, subject to the provisions of this Paragraph and Paragraphs 2 and 3
hereof. Provided, however, that no employee shall be eligible to receive
aggregate option grants under this Plan in any one fiscal year to purchase more
than 100,000 shares of Stock. The Committee may designate any option granted
hereunder as either an incentive stock option or a nonqualified stock option, or
the Committee may designate a portion of an option as an incentive stock option
or a nonqualified stock option. An incentive stock option is an option intended
to meet the requirements of Section 422 of the Internal Revenue Code of 1986
(the "Code"). A nonqualified stock option is an option granted under the Plan
other than an incentive stock option. Each option granted under the Plan shall
meet all of the terms and conditions of the Plan, except that an incentive stock
option shall comply with the additional provisions of Paragraph 5 hereof. The
date on which an option shall be granted shall be the date of the Committee's
authorization of the option or such later date as may be determined by the
Committee at the time the option is authorized. Any individual may hold more
than one (1) option under this Plan. No
individual shall be ineligible for an option under this Plan because he has
received or is eligible to receive an option under any other plan or arrangement
of the Company. Each option shall be evidenced by a stock option agreement in
such form and containing such provisions not inconsistent with the Plan as the
Committee shall approve ("Stock Option Agreement").
5. Incentive Stock Options. Any option intended to constitute an
incentive stock option shall comply with the requirements of this Paragraph 5.
No incentive stock option shall be granted to any participant who owns (within
the meaning of Section 424(d) of the Code) stock of the Company or any
subsidiary possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or a subsidiary unless, at the date
of grant, the exercise price for the option is at least one hundred and ten
percent (110%) of the fair market value of the shares subject to the option and
the option, by its terms, is not exercisable more than five (5) years after the
date of grant. The aggregate fair market value of the underlying Stock
(determined as of the time the options are granted) to which incentive stock
options under the Plan (and a plan of a subsidiary corporation) may first be
exercised by a participant in any one (1) calendar year shall not exceed one
hundred thousand dollars ($100,000).
6. Option Price. The option price for each share of stock for which an
option is granted under the Plan shall not be less than one hundred percent
(100%) of the fair market value of the Stock on the date the option is granted.
Unless determined otherwise by the Committee, the fair market value shall be the
last sale price of the Company's Stock on the NASDAQ National Marketing System,
as reported in The Wall Street Journal for the grant date. In the absence of any
trading on the grant date, unless determined otherwise by the Committee, the
fair market value shall be the last sale price of the Company's Stock on the
NASDAQ National Market System for the immediately preceding date on which there
was trading, as reported in The Wall Street Journal. The Committee may not
reprice an outstanding option granted under the Plan or cancel an outstanding
option followed by the grant of a replacement option having the same effect as a
repricing, without the consent of shareholders.
7. Term of Options and Rights. Except in the event of a Change in
Control, as set forth in Section 10, no option granted under this Plan may be
exercised prior to the date twelve (12) months from the date of grant of such
option. The Committee may determine with respect to each option granted under
the Plan the time or times when the option may be exercised, and may require
that the exercise of an option shall be subject to the satisfaction of
conditions relating to the optionee's position and duties with the Company and
the performance thereof. Unless specified otherwise in an optionee's Stock
Option Agreement, options granted hereunder shall vest twenty-five percent (25%)
annually over four (4) consecutive years commencing on the first (1st)
anniversary of the grant date and shall not be exercisable after the tenth
(10th) anniversary of the grant date. Any provision of the Plan notwithstanding,
no option shall be exercised on or after the date ten (10) years from the date
of grant of such option.
8. Termination of Employment. Upon the expiration of a period of ninety
(90) days after the termination of the employment of an optionee for any reason
other than death or disability as defined in Section 22(e) of the Code, all
rights to purchase shares pursuant to an exercisable option shall expire and
terminate. The Committee may determine, however, with
respect to any option granted under the Plan, that the option shall terminate at
a time prior to the expiration of such ninety (90) day period. Termination of
employment shall be defined as the last day on which an optionee performs
services for the Company and shall not include severance pay periods, paid
vacation periods or periods during which compensation in lieu of notice is paid
following an optionee's actual termination of employment. Absence from the
Company or a subsidiary as a result of authorized leaves of absence for military
or government service or for other special purposes approved by the Committee
shall not constitute a termination of employment under this Paragraph.
9. Death or Disability of an Option Holder. In the event of an option
holder's (a) termination of employment due to disability, as defined in Section
22(e) of the Code, or (b) the death of an option holder while an employee of the
Company or within any period not exceeding the one (1) month period following
his termination of employment during which his option may be exercised, such
option may, subject to the terms thereof and the other terms of the Plan
(specifically including Section 7 hereof), be exercised by the option holder or
the legal representative of such holder's estate (on behalf of his estate or the
person or persons to whom the option passed by will or by the laws of descent
and distribution) at any time prior to the first (1st) anniversary of the option
holder's termination of employment due to disability or the death of such
holder, but only to the extent that such holder was entitled to exercise such
option at the date of his death or termination of employment due to disability.
10. Change in Control. The portion of any outstanding option (including
any option that has not been outstanding for twelve (12) months) that has not
expired or been exercised, terminated, canceled, forfeited or surrendered shall
become exercisable in full in the event of a Change in Control. For this
purpose, Change in Control shall be defined as the occurrence of any of the
following events:
(a) the election of a Board of Directors of the Company, a
majority of the members of which were nominees of a person (including an
individual, a corporation, partnership, joint venture, trust or other entity) or
a group of persons acting together (other than persons who were members of the
Board of Directors or officers of the Company as of August 14, 1998 or a
tax-qualified retirement plan approved by the Board of Directors of the Company
(including at least a majority of the Incumbent Directors ("Exempted Persons")),
following the acquisition by such person, group of persons or plan of ownership
(directly or indirectly, beneficially or of record) of twenty-five (25%)
percent, or more, of the outstanding Common Stock of the Company;
(b) the acquisition of ownership by a person or group of
persons described in subparagraph (a) above (other than Exempted Persons) of
fifty-one (51%) percent, or more of the outstanding Common Stock of the Company;
(c) a sale of all or substantially all of the assets of the
Company to any entity not controlled by persons who were members of the Board of
Directors or officers of the Company as of August 14, 1998 or by any
tax-qualified retirement plan for the benefit of employees of the Company; or
(d) a merger, consolidation or other similar transaction
between the Company and another entity if a majority of the members of the Board
of Directors of the surviving company are not Continuing Members.
The term "Incumbent Directors" means members of the Board of Directors of the
Company as of August 14, 1998 or new directors whose election by the Board of
Directors, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors in office at the time
of such election or nomination, who either were directors as of August 14, 1998,
or whose election or nomination was previously approved as provided above. In
the event that a majority of the Incumbent Directors do not approve the
tax-qualified retirement plan or there are no Incumbent Directors, the
tax-qualified retirement plan shall not be an Exempted Person. The term
"Continuing Directors" means persons (A) who are members of the Board of
Directors immediately before the change in control and (B) who also were members
of the Board of Directors of the Company as of August 14, 1998 or are new
directors whose election by the Board of Directors, or nomination for election
by the Company's shareholders, was approved by a vote of at least a majority of
the directors in office at the time of such election or nomination who either
were directors as of August 14, 1998 or whose election or nomination for
election was previously approved as provided above.
11. Exercise of Options.
(a) Full payment for shares purchased pursuant to options
granted under the Plan shall be made at the time of exercise of the options,
unless the exercise is pursuant to the cashless exercise procedure described
herein. Options may be exercised in whole or in part.
(b) Payment for shares being purchased upon the exercise of
options granted under the Plan may be made in cash or by personal check,
certified or bank cashier's check, or by surrendering to the Company Permitted
Shares, duly endorsed for transfer (or with duly executed stock powers
attached), or in any combination of cash, personal check, certified or bank
cashier's checks, or Permitted Shares. Payment by check from an optionee who has
terminated employment with the Company shall be in the form of a certified or
bank cashier's check and not by a personal check. Permitted Shares surrendered
as payment for shares purchased pursuant to the exercise of options granted
under the Plan shall be valued, for such purpose, at the last sale price of the
Company's Stock on the NASDAQ National Market System, as reported in The Wall
Street Journal for the close of business on the last trading day preceding the
date on which the certificate(s) for such shares, duly endorsed for transfer or
accompanied by appropriate stock powers, are surrendered for such purpose to the
Company.
(c) At the discretion of the Committee, as set forth in an
optionee's Stock Option Agreement, any option granted under the Plan may be
deemed exercised by delivery to the Company of a properly executed exercise
notice, acceptable to the Company, together with irrevocable instructions to the
optionee's broker to deliver to the Company sufficient cash to pay the exercise
price and any applicable income and employment withholding taxes, in accordance
with a written agreement between the Company and the brokerage firm ("cashless
exercise
procedure"). For purposes of the cashless exercise procedure, fair market value
of the Company's Stock on the date of exercise shall be the per share amount
actually paid to the optionee by the brokerage house (before application of
brokerage commissions and other applicable fees) upon the sale of the Stock used
to satisfy the exercise price.
(d) A person exercising an option shall reimburse the Company
for any income or employment tax withholding requirements and provide the
Company with such information and data as the Company may deem necessary. To
satisfy the applicable withholding requirements, prior to the date on which an
exercise becomes taxable, an optionee may make a written irrevocable election to
tender Permitted Shares, provided that the shares have an aggregate fair market
value sufficient to satisfy in whole or in part the applicable withholding
taxes. For purposes of this Paragraph, the term fair market value shall mean the
last sale price of the Company's Stock on the NASDAQ National Market System, as
reported in The Wall Street Journal for the close of business on the last
trading date preceding the date on which the exercise becomes taxable. An
optionee subject to Section 16 of the Securities Exchange Act of 1934, as
amended, may be subject to special notice and timing requirements in connection
with the tender of Permitted Shares to satisfy withholding requirements.
(e) The Company may require an employee, as a condition of
exercise, to establish to the satisfaction of the Company that all shares
acquired upon the exercise of an option shall be acquired for investment and not
for resale. The Company may permit the subsequent sale or other disposition of
any Stock so acquired if it is satisfied that such sale or other disposition
would not contravene applicable securities law. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver Stock pursuant to
the exercise of an option is subject to such compliance with federal and state
laws, rules and regulations applying to the authorization, issuance or sale of
securities as the Company deems necessary or advisable. The Company shall not be
required to sell and deliver stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares will not violate any of
the provisions of the Securities Act of 1933 or the Securities Exchange Act of
1934, or the rules and regulations of the Securities Exchange Commission
promulgated thereunder or those of any stock exchange or nationally-recognized
trading market on which the Stock may be listed or traded, the provisions of any
state laws governing the sale of securities, or that there has been compliance
with the provisions of such acts, rules, regulations and laws. No Stock shall be
issued until counsel for the Company has determined that the Company has
complied with all requirements under applicable securities laws.
(f) "Permitted Shares" are shares of the Company's Stock to be
delivered to pay the exercise price of the option or satisfy applicable income
or employment tax withholding requirements (the "Delivered Shares"):
(i) which have been owned by the optionee for at
least six (6) months prior to the date of delivery, or
(ii) if they have not been owned by the optionee for
at least six (6) months prior to the date of delivery, the optionee then owns,
and has owned for at least six
months prior thereto, a number of shares of the Company's Stock at least equal
in number to the Delivered Shares.
Shares of the Company's Stock which have been treated during the prior six (6)
months as owned by the optionee for purposes of determining whether shares of
the Company's Stock constitute Delivered Shares as provided in (ii) above:
(i) may not be used as Delivered Shares, and
(ii) may not be counted as owned by the optionee in
determining whether shares of the Company's Stock are Permitted Shares.
12. Options Not Transferable. No option granted under the Plan shall be
transferable by the optionee other than by will or the laws of descent and
distribution, and an option may be exercised during an optionee's lifetime only
by the optionee.
13. Adjustments.
(a) In the event of any stock dividend on the Stock,
subdivision or combination of shares of the Stock, reclassification of the
Stock, and (in accordance with the provisions of the next Paragraph of this
Paragraph 13) in the event of a merger or consolidation in which the Company
shall be the surviving corporation, the aggregate number and class of shares
available for the granting of options under the Plan, the number and class of
shares subject to each outstanding option and the option prices shall be
proportionately adjusted.
(b) After any merger of one or more corporations into the
Company, or after any consolidation of the Company and one or more corporations
in which the Company shall be the surviving corporation, each optionee shall, at
no additional cost, be entitled upon any exercise of his option, to receive
(subject to any required action by shareholders), in lieu of the number of
shares as to which such option shall then be so exercised, the number and class
of shares of stock or other securities to which such optionee would have been
entitled pursuant to the terms of the agreement of merger or consolidation if at
the time of such merger or consolidation such optionee had been a holder of
record of a number of shares of Stock of the Company equal to the number of
shares as to which such option shall then be so exercised. Comparable rights
shall accrue to each optionee in the event of successive mergers or
consolidations of the character described above. Anything contained herein to
the contrary notwithstanding, upon the dissolution or liquidation of the Company
or upon any merger or consolidation in which the Company is not the surviving
corporation, any option granted under this Plan shall terminate.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Board of Directors of the
Company (the "Board") in its sole discretion. Any such adjustment may provide
for the elimination of any fractional share which might otherwise become subject
to an option.
14. No Rights as Shareholder. The holder of an option shall not have
any rights as a shareholder of the Company with respect to any of the shares
covered by such option until issuance of a stock certificate or certificates
upon the exercise of such option in full or in part and then only with respect
to the shares represented by such certificate or certificates. No adjustment
shall be made for dividends or other rights with respect to such shares for
which the record date is prior to the date the certificate is issued.
15. Termination and Amendment of Plan. The Board may terminate the Plan
at any time, but the Plan shall in any event terminate on the date ten (10)
years after the earlier of approval by the Board or the Company's shareholders.
No option may be granted after the termination of the Plan, but the termination
of the Plan shall not affect the rights of the holders of any option theretofore
granted and then outstanding. The Board may amend or modify the Plan at any
time, but no such amendment or modification, without the approval of the
shareholders, shall (a) change the eligibility requirements to participate in
the Plan, (b) increase the amount of Stock on which options may be granted,
except as permitted under Paragraph 13, (c) change the manner of determining the
option price, or (d) permit repricing transactions under the Plan. No such
amendment or modification shall affect the rights of the holder of any option
theretofore granted and then outstanding without the optionee's consent or the
consent of the transferee of the option or right.
16. Effect of Plan on Employment. Neither the adoption of the Plan nor
the granting of any option pursuant to it shall be deemed to create any right in
any individual to be retained or continued in the employment of the Company or
any of its subsidiaries.
17. Use of Proceeds. The proceeds received from the sale of stock
pursuant to the Plan shall be used for general corporate purposes.
18. Shareholder Approval. This Plan shall be submitted to the
shareholders for their approval within twelve (12) months after the date of
adoption of the Plan by the Board. Any option granted hereunder prior to such
approval shall be subject to the condition that this Plan be approved by the
shareholders of the Company. If such approval is not obtained, options granted
hereunder shall terminate.
BOARD APPROVAL: 8/14/98
SHAREHOLDER APPROVAL: 11/23/98
ADDENDUM FOR UK EMPLOYEES
1. Purpose
This addendum to the Comshare, Incorporated 1998 Global Employee Stock
Option Plan ("the Plan") is for the benefit of United Kingdom resident employees
of Comshare, Incorporated, a Michigan corporation ("Comshare") and of companies
of which it has control (as defined in Section 187(2) of the Income and
Corporation Taxes Act 1988 ("ICTA")) including, without limitation, its United
Kingdom subsidiary, Comshare, Limited. The terms and conditions of this Addendum
are established in order to render the Plan capable of approval as an approved
share option scheme under Schedule 9 of ICTA ("Schedule 9").
This Addendum to the Plan should be read in conjunction with the Plan
and is subject to the terms and conditions of the Plan except to the extent that
the terms and conditions of the Plan differ from or conflict with the terms set
out hereunder.
The terms and conditions set out in this Addendum apply to any grant of
options under the Plan to individuals who are resident in the United Kingdom for
United Kingdom tax purposes ("U.K. Individuals") if, at the date of grant, such
options are specified as having been granted subject to the terms and conditions
of this Addendum.
2. Group Scheme and Eligibility
A U.K. Individual shall not be entitled to be granted options under the
Plan unless he is a full-time director or "qualifying employee" (as defined in
paragraph 27(4) of Schedule 9) of Comshare or a company under the control (as
defined in Section 187(2) of ICTA) of Comshare. A director is deemed to work
full time if he is employed on terms which require him to devote not less than
twenty-five hours a week (exclusive of permitted breaks) to his duties.
A U.K. Individual may not be granted and may not exercise an option if
his participation is excluded by paragraph 8 of Schedule 9.
3. Stock Subject to the Plan
No option may be granted to a U.K. Individual over Stock which does not
satisfy the requirements of paragraphs 10 to 14 of Schedule 9. Options over
Stock granted under this Addendum may not be exercised at a time when, upon
exercise, the Stock would fail to satisfy the requirements of paragraphs 10 to
14 of Schedule 9.
4. Limitation of Rights
No U.K. Individual shall be granted options under the Plan which would,
at the time they are obtained, cause the aggregate market value (as defined in
paragraph 28 of Schedule 9) of the shares which he may acquire in pursuance of
rights obtained under the Plan or under any other plans approved under Schedule
9 (not being a savings-related share option scheme approved
under Schedule 9) and established by Comshare or by any associated company (as
defined in Section 840 of ICTA) of Comshare (and not exercised) to exceed or
further exceed pound sterling 30,000 and for these purposes if the market values
of the shares are expressed in a currency other than pounds sterling such market
values will be converted into pounds sterling at the appropriate exchange rate
for that currency at the close of business the date on which the relevant
options are granted as published by The Wall Street Journal.
5. Share Price
The price at which an option will be exercisable will not be manifestly
less than the fair market value of the shares obtainable under the Plan at the
date of the grant of the option. For these purposes, "market value" of the
shares will be their market value as determined in accordance with the
provisions of Part VIII of the Taxation of Chargeable Gains Act 1992 and will be
agreed in advance of each grant of options with the Inland Revenue Share
Valuation Division. In any event the price will be such that the approved status
of the Plan is retained.
6. Capital Adjustments
The price at which stock may be acquired on the exercise of any option
and the number of shares thereunder may be adjusted as described under Section
13 of the Plan, entitled "Adjustments", only in the event of a variation in the
share capital of Comshare within the meaning of Paragraph 29 of Schedule 9 and
only if the prior approval of the Inland Revenue has been obtained for such
adjustment. Section 13(b) of the Plan does not apply to options granted under
this Addendum.
7. Exercise of Options
The option price may be paid by cash or cash equivalent only and,
therefore, neither by surrender of Permitted Shares as described under Section
11(b) of the Plan nor by the "cashless exercise procedure" as described in
Section 10(c) of the Plan.
8. Amendment of the Scheme
The terms of this Addendum shall not be amended, nor shall any
amendment to the Plan extend to that is governed by this Addendum, except to the
extent that such amendments have been approved by the Board of Inland Revenue.
9. Exercisability of Terms of Options
A U.K. Individual may exercise his option from time to time in
accordance with the terms of the option. Shares will be allotted or transferred
within thirty days after notice of exercise is given in accordance with the
procedure described under Section 11 of the Plan, entitled "Exercise of
Options".
10. Definitions
For the above purposes the following terms shall have the meaning
listed below:
a. "Individual" shall mean an employee of Comshare or any company
under the control (as defined in Clause 1) of Comshare who is
eligible to receive options under this Addendum.
b. The "Plan" shall mean the Comshare, Incorporated 1998 Global
Employee Stock Option Plan.
ADDENDUM FOR EMPLOYEES OF
COMSHARE SA SUBSIDIARY IN FRANCE
1. Purpose
This Addendum to the Comshare, Incorporated 1998 Global Employee Stock
Option Plan ("the Plan") applies to Comshare SA employees residing in France.
2. Effective Date
The terms and conditions set out in this Addendum apply to any grant of
options under the Plan to individuals who are residents in France and employees
of the subsidiary Comshare SA.
3. Term of Options and Rights
No option granted under this Plan may be exercised prior to the date
five (5) years from the date of grant of such option. The Committee may
determine with respect to each option granted under the Plan the time or times
when the option may be exercised, and may require that the exercise of the
option shall be subject to the satisfaction of conditions relating to the
optionee's position and duties with the Company and the performance thereof.
Unless otherwise specified in an optionee's Stock Option Agreement,
options granted to employees of the subsidiary Comshare SA residing in France
shall not vest until the satisfaction of a five (5) year period from the date of
grant. Upon the completion of the five year period from the date of grant, the
options will be 100% vested and may be exercised. The options shall not be
exercisable after the tenth (10th) anniversary of the grant date.
FIRST AMENDMENT TO THE
COMSHARE, INCORPORATED
1998 GLOBAL EMPLOYEE STOCK OPTION PLAN
Pursuant to resolutions adopted by the Board of Directors of Comshare,
Incorporated on June 24, 1999 and subject to shareholder approval at the Annual
Meeting of Shareholders on November 22, 1999, the 1998 Global Employee Stock
Option Plan (the "Plan") is hereby amended as set forth below.
Effective November 22, 1999, the second sentence in Paragraph 3 of the
Plan is amended and restated in its entirety to read as follows:
The total amount of stock on which options may be granted
under the Plan shall not exceed 1,400,000 shares, subject to
adjustment as provided in Paragraph 13 hereof.
THIS FIRST AMENDMENT to the Comshare, Incorporated 1998 Global Employee
Stock Option Plan is hereby executed on this the 14th day of October, 1999.
COMSHARE, INCORPORATED
By: /s/ KATHRYN A. JEHLE
--------------------
Kathryn A. Jehle
Senior Vice President and
Chief Financial Officer
SECOND AMENDMENT TO THE
COMSHARE, INCORPORATED
1998 GLOBAL EMPLOYEE STOCK OPTION PLAN
Pursuant to resolutions adopted by the Board of Directors of Comshare,
Incorporated on February 16, 2001, the 1998 Global Employee Stock Option Plan
(the "Plan") is hereby amended as set forth below.
Effective February 16, 2001, the first two sentences in Section 8
"Termination of Employment" shall be amended and restated in their entirety to
read as follows:
Upon the expiration of a period of ninety (90) days after the
termination of employment of an optionee for any reason other
than death or disability as defined in Section 22(e) of the
Code, all rights to purchase shares pursuant to an exercisable
option shall expire and terminate; provided, however, that the
Committee, in its sole discretion, may permit an option to
continue to vest and/or expire later than ninety (90) days
following an optionee's termination of employment but not
later than the original expiration date of the option. The
Committee also may determine that an option granted under the
Plan shall terminate at a time prior to ninety (90) days
following termination of employment.
THIS SECOND AMENDMENT to the Comshare, Incorporated 1998 Global
Employee Stock Option Plan is hereby executed as of February 16, 2001.
COMSHARE, INCORPORATED
By: /s/ Brian Jarzynski
-------------------
Brian Jarzynski
Vice President and Chief Financial Officer
THIRD AMENDMENT TO THE
COMSHARE, INCORPORATED
1998 GLOBAL EMPLOYEE STOCK OPTION PLAN
Pursuant to resolutions adopted by the Board of Directors of Comshare,
Incorporated on September 4, 2002 and subject to shareholder approval at the
Annual Meeting of Shareholders on November 25, 2002, the 1998 Global Employee
Stock Option Plan (the "Plan") is hereby amended as set forth below.
Effective November 25, 2002, the second sentence in Paragraph 3 of the
Plan is amended and restated in its entirety to read as follows:
The total amount of stock on which options may be granted
under the Plan shall not exceed 1,800,000 shares, subject to
adjustment as provided in Paragraph 13 hereof.
THIS THIRD AMENDMENT to the Comshare, Incorporated 1998 Global Employee
Stock Option Plan is hereby executed on this 18th day of October, 2002.
COMSHARE, INCORPORATED
By: /s/ Brian J. Jarzynski
-------------------------
Brian J. Jarzynski
Senior Vice President and
Chief Financial Officer
Appendix 2
COMSHARE, INCORPORATED
DIRECTORS' STOCK OPTION PLAN
I. GENERAL PROVISIONS
1.1 PURPOSE. The purpose of the Comshare, Incorporated Directors' Stock
Option Plan ("Plan") is to promote the best interests of the Company and its
stockholders by attracting and motivating highly qualified individuals to serve
as Directors and to encourage Directors to acquire an ownership interest in the
Company, thus identifying their interests with those of shareholders.
1.2 DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:
(a) "AGREEMENT" means the written agreement that sets forth
the terms of a Participant's Option.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(d) "COMMITTEE" means the Compensation Committee of the
Company, which shall be comprised of two or more disinterested members of the
Board, as defined in Rule 16b-3.
(e) "COMMON STOCK" means shares of the Company's authorized
Common Stock.
(f) "COMPANY" means Comshare, Incorporated.
(g) "DIRECTOR" means a member of the Company's Board of
Directors.
(h) "DISABILITY" means total and permanent disability, as
defined in Code Section 22(e).
(i) "EFFECTIVE DATE" means November 17, 1994.
(j) "EMPLOYEE" means a salaried employee of the Company or its
Subsidiaries, who has an "employment relationship" with the Company or its
Subsidiaries, as defined in Treasury Regulation 1.421-7(h), and the term
"employment" means employment with the Company or its subsidiaries.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time and any successor thereto.
(l) "EXPIRATION DATE" means the date set forth in the
Agreement relating to an Option on which the right to exercise such Option shall
expire absent a termination of the Participant's term of office as a Nonemployee
Director. Unless otherwise provided in the Agreement, the Expiration Date for an
Option shall be the fifth anniversary of its Grant Date.
(m) "FAIR MARKET VALUE" means, for purposes of determining the
value of Common Stock on the Grant Date, the last sale price on the NASDAQ
National Market, as reported in The Wall Street Journal for the Grant Date. In
the event that there were no Common Stock transactions on such date, the Fair
Market Value shall be determined as of the immediately preceding date on which
there were Common Stock transactions.
(n) "GRANT DATE" means the date on which the Option was
automatically awarded pursuant to Section 2.1.
(o) "NONEMPLOYEE DIRECTOR" means a Director who is not an
Employee.
(p) "NONQUALIFIED STOCK OPTION" means an Option that is not
intended to meet the requirements of Section 422 of the Code.
(q) "OPTION" means a Nonqualified Stock Option to purchase
Common Stock granted under this Plan.
(r) "PARTICIPANT" means each of the Nonemployee Directors of
the Company serving from time to time.
(s) "PLAN" means the Comshare, Incorporated Directors' Stock
Option Plan, the terms of which are set forth herein, and any amendments hereto.
(t) "RULE 16B-3" means Rule 16b-3 under the Exchange Act, as
in effect from time to time.
1.3 ADMINISTRATION. To the extent permitted by Rule 16b-3, the Plan
shall be administered by the Committee. The Committee shall interpret the Plan,
prescribe, amend, and rescind rules and regulations relating to the Plan, and
make all other determinations necessary or advisable for its administration. The
decision of the Committee on any question concerning the interpretation of the
Plan or its administration with respect to any Option granted under the Plan
shall be final and binding upon all Participants.
1.4 STOCK. The total number of shares of Common Stock available for
grants under the Plan shall not, in the aggregate, exceed 100,000 shares of
Common Stock, as adjusted from time to time in accordance with Article IV.
Shares subject to any unexercised portion of a terminated, forfeited, cancelled
or expired Option granted hereunder shall be available for subsequent grants
under the Plan to the extent permitted under Rule 16b-3.
1.5 AGREEMENT. No person shall have any rights under any grant made
pursuant to the Plan unless and until the Company and the recipient of the grant
have executed and delivered an agreement expressly granting benefits to such
person pursuant to the Plan and containing the provisions required under the
Plan to be set forth in the Agreement. The terms of the Plan shall
govern in the event any provision of any Agreement conflicts with any term in
this Plan as constituted on the Grant Date.
II. STOCK OPTIONS FOR NONEMPLOYEE DIRECTORS
2.1 Automatic Grants of Options.
(a) INITIAL GRANT. Each Nonemployee Director who is serving on
the Board on the Effective Date of the Plan shall be granted an Option to
purchase 5,000 shares of the Company's Common Stock on the Effective Date. Any
Nonemployee Director who is first elected or appointed after the Effective Date
shall receive an Option to purchase 5,000 shares of the Company's Common Stock
on the date of the first Directors meeting following his or her election or
appointment, provided that such Nonemployee Director is still serving on the
Board as of such date.
(b) SUBSEQUENT GRANTS. After the initial grant and during the
term of the Plan, a Nonemployee Director who has been a Director for six months
before the January 1 following the date of an Annual Meeting of Stockholders
(not including the Annual Meeting on November 17, 1994) and who has not received
his or her initial grant within six months before the January 1 following the
Annual Meeting, automatically shall be granted, as of the January 1 following
the Annual Meeting, an additional Option to purchase 1,000 shares of the
Company's Common Stock, provided that the Nonemployee Director is still serving
on the Board as of such January 1. A Participant may hold more than one Option
under the Plan.
2.2 OPTION AGREEMENT. Each Option granted pursuant to this Article II
shall be evidenced by an Agreement that shall specify the exercise price, the
term of the Option, date or dates on which the Option becomes exercisable, the
number of shares to which the Option relates, and other such provisions as the
Committee shall determine.
2.3 OPTION PRICE. The purchase price per share of Common Stock for an
Option granted pursuant to this Article II shall be equal to the Fair Market
Value per share of Common Stock on the Grant Date.
2.4 DURATION OF OPTIONS. The Expiration Date of each Option granted
pursuant to this Article II shall be the fifth anniversary of its Grant Date.
2.5 EXERCISE OF SHARES SUBJECT TO OPTION. Options granted under this
Article II shall become exercisable according to the following schedule:
one-fourth of the Option shall become exercisable on the first anniversary of
the Grant Date, and one-fourth of the Option shall become exercisable on each of
the second, third, and fourth anniversaries of the Grant Date of each Option.
Once exercisable, such Options may be exercised at any time and from time to
time until the Expiration Date of such Options, unless earlier terminated
pursuant to Sections 3.1.
2.6 PAYMENT FOR OPTION SHARES. The purchase price for shares of Common
Stock to be acquired upon exercise of an Option granted hereunder shall be paid
in full at the time of exercise in any of the following ways: (a) in cash, (b)
by certified check, bank draft or money order, (c) by delivery to the Company of
previously-acquired shares of the Company's Common
Stock with a Fair Market Value (determined on the last trading date immediately
preceding the date of exercise) equal to the exercise price; or (d) by any
combination of the foregoing.
2.7 NO DISCRETION. Notwithstanding any provision in the Plan to the
contrary, the Committee shall have no discretion with respect to the terms of
grants made pursuant to this Article II, except to the extent such discretion
would not result in the grant or the Plan failing to qualify for the exemption
provided under Rule 16b-3.
III. TERMINATION
3.1. PRIOR TO EXERCISABILITY. If a Participant's term of office as a
Nonemployee Director is terminated for any reason prior to the date that an
Option or a portion thereof first becomes exercisable, such Option or portion
thereof shall terminate and all rights thereunder shall cease.
3.2 AFTER EXERCISABILITY. To the extent an Option is exercisable and
unexercised on the date a Participant's term of office as a Nonemployee Director
is terminated for any reason, the Option shall terminate on the earlier of (i)
the Expiration Date of the Option, and (ii) two months after such Participant's
termination; provided, however, that the exercise period in clause (ii) shall be
extended to one year after termination if the termination is due to the
Participant's death or Disability.
3.3 POST-TERMINATION EXERCISE. During the period from the Participant's
termination until the termination of the Option, the Participant, or the person
or persons to whom the Option shall have been transferred by will or by the laws
of descent and distribution, may exercise the Option only to the extent that
such Option was exercisable on the date of the Participant's termination.
IV. ADJUSTMENTS AND CHANGE IN CONTROL
4.1 ADJUSTMENTS AND CHANGE IN CONTROL. In the event of any stock
dividend on the Common Stock, subdivision or combination of shares of the Common
Stock, reclassification of the Common Stock, and (in accordance with the
provisions of the next Paragraph of this Section 4.1) in the event of a merger
or consolidation in which the Company shall be the surviving corporation, the
aggregate number and class of shares available for the granting of Options under
the Plan, the number and class of shares subject to each outstanding Option and
the Option prices, shall be proportionately adjusted.
After any merger of one or more corporations into the Company, or after
any consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Participant shall, at no
additional cost, be entitled upon any exercise of his Option, to receive
(subject to any required action by stockholders), in lieu of the number of
shares as to which such Option shall then be so exercised, the number and class
of shares of stock or other securities to which such Participant would have been
entitled pursuant to the terms of the agreement of merger or consolidation if at
the time of such merger or consolidation such Participant had been a holder of
record of a number of shares of Stock of the Company equal to the number of
shares as to which such Option shall then be so exercised. Comparable rights
shall accrue to each Participant in the event of successive mergers or
consolidations of the
character described above. Anything contained herein to the contrary
notwithstanding, upon the dissolution or liquidation of the Company or upon any
merger or consolidation in which the Company is not the surviving corporation,
any Option granted under this Plan shall terminate; but if a period of twelve
(12) months from the date of the grant of any such Option shall have expired,
each Participant who is then a Nonemployee Director of the Company shall have
the right, immediately prior to such dissolution, liquidation, merger or
consolidation, to exercise this Option in full to the extent not theretofore
exercised regardless of any installment provision applicable to his Option.
Any foregoing adjustment may provide for the elimination of any
fractional share which might otherwise become subject to any Option and no
adjustment shall be made to the extent such adjustment would cause the
Nonemployee Director to no longer be deemed "disinterested" for purposes of Rule
16b-3.
V. MISCELLANEOUS
5.1 PARTIAL EXERCISE. The Committee shall permit, and shall establish
procedures for, the partial exercise of Options under the Plan.
5.2 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option as
may be required to satisfy the requirements of Rule 16b-3.
5.3 RIGHTS PRIOR TO ISSUANCE OF SHARES. No Participant shall have any
rights as a stockholder with respect to shares covered by an Option until and
only to the extent that the Option is exercised.
5.4 NON-ASSIGNABILITY. No Option shall be transferable by a Participant
except by will or the laws of descent and distribution. During the lifetime of a
Participant, an Option shall be exercised only by the Participant. No transfer
of an Option by will or the laws of descent and distribution shall be effective
to bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of the will or such evidence as the Company may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee of the terms and conditions of the Option.
5.5. SECURITIES LAWS.
(a) Anything to the contrary herein notwithstanding, the
Company's obligation to sell and deliver Common Stock pursuant to the exercise
of an Option is subject to such compliance with federal and state laws, rules
and regulations applying to the authorization, issuance or sale of securities as
the Company deems necessary or advisable. The Company shall not be required to
sell and deliver Common Stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares shall not violate any of
the provisions of the Securities Act of 1933 or the Exchange Act, or the rules
and regulations of the Securities and Exchange Commission promulgated thereunder
or those of the National Association of Securities Dealers, Inc. or any stock
exchange on which the Common Stock may be listed, the provisions of any state
laws governing the sale of securities, or that there has been compliance with
the provisions of such acts, rules, regulations and laws.
(b) The Committee may impose such restrictions on any shares
of Common Stock acquired pursuant to the exercise of an Option as it may deem
advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) required by the NASDAQ Stock Market (including,
without limitation, with respect to securities traded on the NASDAQ National
Market or the NASDAQ Small Cap Market) or any stock exchange or other recognized
trading market upon which such shares of Common Stock are then listed or traded,
and (iii) under any blue sky or state securities laws applicable to such shares.
No shares shall be issued until counsel for the Company has determined that the
Company has complied with all requirements under appropriate securities laws.
5.6 TERMINATION AND AMENDMENT.
(a) The Board may terminate the Plan, or the granting of
Options under the Plan, at any time. No new grants shall be made under the Plan
after July 31, 2004.
(b) The Board may amend or modify the Plan at any time and
from time to time, but, unless otherwise permitted under Rule 16b-3 without
shareholder approval, no amendment or modification, without the approval of the
shareholders of the Company, shall (i) materially increase the benefits accruing
to Participants under the Plan, (ii) increase the amount of Common Stock for
which grants may be made under the Plan, except as permitted under Sections 1.4
and 4.1, or (iii) change the provisions relating to the eligibility of
individuals to whom grants may be made under the Plan. Unless otherwise
permitted under Rule 16b-3, this Plan shall not be amended more than once in any
six month period other than to comply with changes in the Code.
(c) No amendment, modification or termination of the Plan
shall adversely affect any Option granted under the Plan without the consent of
the Participant holding the Option.
5.8 EFFECT ON SERVICES. Neither the adoption of the Plan nor the
granting of any Option pursuant to the Plan shall be deemed to create any right
in any individual to be retained as a Nonemployee Director.
5.9 USE OF PROCEEDS. The proceeds received from the sale of Common
Stock pursuant to the Plan shall be used for general corporate purposes of the
Company.
5.10 APPROVAL OF PLAN. The Plan shall be subject to the approval of the
holders of at least a majority of the shares of Common Stock of the Company
present and entitled to vote at a meeting of Shareholders of the Company held
within 12 months after adoption of the Plan by the Board. Any Option granted
under the Plan prior to such stockholder approval, shall be conditioned upon
receipt of such approval, and may not be exercised in whole or in part unless
the Plan has been approved by the stockholders as provided herein. If not
approved by stockholders within 12 months after approval by the Board, the Plan
shall be rescinded, and any Options granted under the Plan shall be void
retroactive to the Grant Date.
THIS DIRECTORS' STOCK OPTION PLAN is hereby executed on this the 13th
day of October, 1994.
COMSHARE, INCORPORATED
By: /s/ KATHRYN A. JEHLE
---------------------------------------
Kathryn A. Jehle
Senior Vice President and Chief Financial
Officer
BOARD APPROVAL: 8/1/94
SHAREHOLDER APPROVAL: 11/17/94
FIRST AMENDMENT TO THE
COMSHARE, INCORPORATED
DIRECTORS' STOCK OPTION PLAN
Pursuant to resolutions adopted by the Board of Directors of
Comshare, Incorporated on June 24, 1999 and subject to shareholder approval at
the Annual Meeting of Shareholders on November 22, 1999, the Comshare,
Incorporated Directors' Stock Option Plan (the "Plan") is hereby amended as set
forth below.
1. Effective November 22, 1999, the first sentence in Section 1.4 of
the Plan ("Stock") is amended and restated in its entirety to read as follows:
The total number of shares of Common Stock available for
grants under the Plan shall not, in the aggregate, exceed
200,000 shares of Common Stock, as adjusted from time to time
in accordance with Article IV.
2. Effective November 22, 1999, paragraph (b) ("Subsequent Grants") of
Section 2.1 ("Automatic Grants of Options") shall be amended and restated in its
entirety to read as follows:
(b) SUBSEQUENT GRANTS. After the initial grant and during
the term of the Plan, a Nonemployee Director who has been a
Director for six months before the January 1 following the
date of an Annual Meeting of Stockholders, automatically shall
be granted, as of the January 1 following the Annual Meeting,
an additional Option to purchase 5,000 shares of the Company's
Common Stock, provided that the Nonemployee Director is still
serving on the Board as of such January 1. Notwithstanding the
foregoing, a Nonemployee Director is elected at the 1999
Annual Meeting shall receive a one-time accelerated grant of
10,000 shares on the first business day after the 1999 Annual
Meeting, representing the January 1, 2000 and January 1, 2001
grants. A Nonemployee Director who first becomes eligible for
Option grants after January 1, 2000 shall receive Option
grants in accordance with the regular terms of the Plan. A
Participant may hold more than one Option under the Plan.
THIS FIRST AMENDMENT to the Comshare, Incorporated Directors' Stock
Option Plan is executed on this the 14th day of October, 1999.
COMSHARE, INCORPORATED
By:/s/ KATHRYN A. JEHLE
---------------------
Kathryn A. Jehle
Senior Vice President and
Chief Financial Officer
SECOND AMENDMENT TO THE
COMSHARE, INCORPORATED
DIRECTORS' STOCK OPTION PLAN
Pursuant to approval of the Board of Directors on February 16, 2001,
the Comshare Incorporated Directors' Stock Option Plan (the "Plan") is hereby
amended, effective February 16, 2001, by the addition of a new Section 4.2 to
read as follows:
4.2. Change in Control Acceleration. The portion of any
outstanding option (including any option that has not been
outstanding for twelve (12) months) that has not expired or
been exercised, terminated, canceled, forfeited or surrendered
shall become exercisable in full in the event of a Change in
Control. For this purpose, Change in Control shall be defined
as the occurrence of any of the following events:
(a) the election of a Board of Directors of the
Company, a majority of the members of which were nominees of a
person (including an individual, a corporation, partnership,
joint venture, trust or other entity) or a group of persons
acting together (other than persons who were members of the
Board of Directors or officers of the Company as of August 14,
1998 or a tax-qualified retirement plan approved by the Board
of Directors of the Company (including at least a majority of
the Incumbent Directors ("Exempted Persons")), following the
acquisition by such person, group of persons or plan of
ownership (directly or indirectly, beneficially or of record)
of twenty-five (25%) percent, or more, of the outstanding
Common Stock of the Company;
(b) the acquisition of ownership by a person or group
of persons described in subparagraph (a) above (other than
Exempted Persons) of fifty-one (51%) percent, or more of the
outstanding Common Stock of the Company;
(c) a sale of all or substantially all of the assets
of the Company to any entity not controlled by persons who
were members of the Board of Directors or officers of the
Company as of August 14, 1998 or by any tax-qualified
retirement plan for the benefit of employees of the Company;
or
(d) a merger, consolidation or other similar
transaction between the Company and another entity if a
majority of the members of the Board of Directors of the
surviving company are not Continuing Members.
The term "Incumbent Directors" means members of the Board of
Directors of the Company as of August 14, 1998 or new
directors
whose election by the Board of Directors, or nomination for
election by the Company's shareholders, was approved by a vote
of at least a majority of the directors in office at the time
of such election or nomination, who either were directors as
of August 14, 1998, or whose election or nomination was
previously approved as provided above. In the event that a
majority of the Incumbent Directors do not approve the
tax-qualified retirement plan or there are no Incumbent
Directors, the tax-qualified retirement plan shall not be an
Exempted Person. The term "Continuing Directors" means persons
(A) who are members of the Board of Directors immediately
before the change in control and (B) who also were members of
the Board of Directors of the Company as of August 14, 1998 or
are new directors whose election by the Board of Directors, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors in
office at the time of such election or nomination who either
were directors as of August 14, 1998 or whose election or
nomination for election was previously approved as provided
above.
THIS SECOND AMENDMENT to the Comshare, Incorporated Directors' Stock
Option Plan is hereby executed as of February 16, 2001.
COMSHARE, INCORPORATED
By: /s/ Brian Jarzynski
-------------------
Brian Jarzynski
Vice President and Chief Financial Officer
THIRD AMENDMENT TO THE
COMSHARE, INCORPORATED
DIRECTORS' STOCK OPTION PLAN
Pursuant to resolutions adopted by the Board of Directors of Comshare,
Incorporated on August 14, 2001 and subject to shareholder approval at the
Annual Meeting of Shareholders on November 19, 2001, the Comshare, Incorporated
Directors' Stock Option Plan (the "Plan") is hereby amended as set forth below.
1. Effective November 19, 2001, the second sentence in Section 2.1(a)
of the Plan ("Initial Grant") is amended and restated in its entirety to read as
follows:
Any Nonemployee Director who is first elected or appointed
after the Effective Date shall receive an Option to purchase
15,000 shares of the Company's Common Stock on the date of the
first Directors meeting following his or her election or
appointment, provided that such Nonemployee Director is still
serving on the Board as of such date.
2. Effective November 19, 2001, the first sentence in Section 2.1(b) of
the Plan ("Subsequent Grants") shall be amended and restated in its entirety to
read as follows:
After the initial grant and during the term of the Plan, a
Nonemployee Director who has been a Director for six months
before the January 1 following the date of an Annual Meeting
of Stockholders, automatically shall be granted, as of the
January 1 following the Annual Meeting, an additional Option
to purchase 10,000 shares of the Company's Common Stock,
provided that the Nonemployee Director is still serving on the
Board as of such January 1.
THIS THIRD AMENDMENT to the Comshare, Incorporated Directors' Stock
Option Plan is executed on this 18th day of October, 2001.
COMSHARE, INCORPORATED
By: /s/ Brian J. Jarzynski
----------------------
Vice President, Chief Financial
Officer and Treasurer
FOURTH AMENDMENT TO THE
COMSHARE, INCORPORATED
DIRECTORS' STOCK OPTION PLAN
Pursuant to resolutions adopted by the Board of Directors of Comshare,
Incorporated on September 4, 2002 and subject to shareholder approval at the
Annual Meeting of Shareholders on November 25, 2002, the Comshare, Incorporated
Directors' Stock Option Plan (the "Plan") is hereby amended as set forth below.
1. Effective November 25, 2002, the first sentence in Section 1.4 of
the Plan ("Stock") is amended and restated in its entirety to read as follows:
The total number of shares of Common Stock available for
grants under the Plan shall not, in the aggregate, exceed
300,000 shares of Common Stock, as adjusted from time to time
in accordance with Article IV.
THIS FOURTH AMENDMENT to the Comshare, Incorporated Directors' Stock
Option Plan is executed on this 18th day of October, 2002.
COMSHARE, INCORPORATED
By: /s/ Brian J. Jarzynski
-----------------------
Brian J. Jarzynski
Senior Vice President and
Chief Financial Officer