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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
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/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
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(Name of Registrant as Specified in Its Charter)
Intersolv, Inc.
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[INTERSOLV LOGO]
9420 KEY WEST AVENUE
ROCKVILLE, MARYLAND 20850
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 1996
The Annual Meeting of Stockholders of INTERSOLV, Inc. (the "Company" or
"INTERSOLV") will be held at the Company's headquarters, at 9420 Key West
Avenue, Rockville, Maryland, at 10:30 a.m., Eastern Daylight Savings Time, to
consider and act upon the following matters:
1. To elect three directors;
2. To approve an increase in the common stock subject to the Company's
1992 Employee Stock Purchase Plan from 340,000 to 640,000 shares;
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for fiscal year 1997; and
4. To transact such other business as may properly come before the meeting
or any adjournments of the meeting.
The Board of Directors fixed the close of business on July 31, 1996, as the
record date for determination of stockholders entitled to notice of and to vote
at the meeting or any adjournment thereof.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ JOSEPH T. RUBLE
JOSEPH T. RUBLE,
Secretary
August 26, 1996
REGARDLESS OF WHETHER YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
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INTERSOLV, INC.
9420 KEY WEST AVENUE
ROCKVILLE, MARYLAND 20850
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 25, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of INTERSOLV, Inc. (the "Company" or
"INTERSOLV") for the Annual Meeting of Stockholders (the "Annual Meeting") to be
held at the Company's headquarters, on Wednesday, September 25, 1996, at 10:30
a.m., Eastern Daylight Savings Time, and at any adjournments of the Annual
Meeting. All proxies will be voted in accordance with the instructions contained
therein, and if no choice is specified, the proxies will be voted in favor of
the proposals set forth in the Notice of Annual Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by giving written
notice to that effect to the Secretary of the Company, by delivering to the
Company a duly executed proxy bearing a later date or by attending the Annual
Meeting and voting in person.
The Board of Directors has fixed July 31, 1996, as the record date for
determining stockholders who are entitled to notice of and to vote at the Annual
Meeting. At the close of business on July 31, 1996, there were outstanding and
entitled to vote 19,961,605 shares of common stock of the Company, par value
$.01 per share ("Common Stock"). Each share is entitled to one vote.
All costs of this solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
facsimile and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names. The Company will reimburse banks and brokers for their reasonable
out-of-pocket expenses incurred in connection with the distribution of proxy
material. The Company has retained Morrow & Company, 909 Third Avenue, New York,
New York 10022-4799, to assist in soliciting proxies, for which services they
will be paid a fee of $3,500, plus handling, postage and out-of-pocket expenses.
In addition, proxies may be solicited by employees of the Company personally, by
telephone, telegram or mail.
The Company's Annual Report for the fiscal year ended April 30, 1996, is
being mailed to stockholders with this Proxy Statement and the accompanying
proxy on or about August 26, 1996.
VOTES REQUIRED
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented by proxy at the Annual Meeting is required for the
election of directors. The affirmative vote of a majority of the shares of
Common Stock present or represented by proxy at the Annual Meeting is required
for the approval of each of the other matters to be voted upon at the Annual
Meeting. A majority of the shares of Common Stock outstanding is required to be
present or represented by proxy at the Annual Meeting in order to have the
quorum necessary to take action at the Annual Meeting.
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Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the judge of elections appointed for the Annual Meeting. The judge of elections
will treat abstentions as Common Stock that is present and entitled to vote for
purposes of determining the presence of a quorum, but as not voted for purposes
of determining the approval of any matter submitted to stockholders for a vote.
If a broker indicates on a proxy that such broker does not have discretionary
authority as to certain Common Stock to vote on a particular matter, such shares
will not be considered as present and entitled to vote with respect to that
matter.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The first table sets forth each person known by the Company to own
beneficially more than 5% of the outstanding Common Stock. The second table sets
forth to the Company's knowledge the beneficial ownership by each director,
nominee and certain executive officers, individually, and all directors and
executive officers as a group, of Common Stock as of June 30, 1996.
PRINCIPAL STOCKHOLDERS
PERCENTAGE
SHARES OF OF
NAME AND ADDRESS COMMON STOCK COMMON STOCK
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING
-------------------- ------------------ ------------
Emerging Growth Management Co. (1)..................... 1,481,424 7.4%
One Bush Street, 13th Floor
San Francisco, CA 94104
United States Trust Company............................ 1,029,198 5.2%
114 West 47th Street
New York, New York 10036
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DIRECTORS AND EXECUTIVE OFFICERS
SHARES OF PERCENTAGE
COMMON STOCK OF
NAME OF BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED (2)(3) OUTSTANDING
----------------- ------------ ------------
Panos Anastassiadis....................................... 91,139 0.5%
Kevin J. Burns............................................ 270,292(4) 1.4%
Norman A. Bolz............................................ 23,666 0.1%
Richard A. Carpenter...................................... 240,851 1.2%
Robert N. Goldman......................................... 22,666 0.1%
Gary G. Greenfield........................................ 161,763 0.8%
Russell E. Planitzer...................................... 21,666 0.1%
Charles O. Rossotti....................................... 21,138 0.1%
Kenneth A. Sexton......................................... 71,913 0.4%
Frank A. Sola............................................. 5,333 0%
All directors and executive officers as a group (10
persons)................................................ 930,427 4.6%
- ---------------
(1) Based upon a Schedule 13D filed June 16, 1996. Represents shares owned by a
group of two entities and five persons, only one of which (Emerging Growth
Management Co.) individually directly owns more than 5% of the outstanding
Common Stock. The other two entities, Adit Partners and Henwood Capital
Partners, have shared voting and dispositive power over 195,000 shares.
Three individuals, Michael T. Jackson, Thomas D. Henwood and Christopher F.
Jackson, have sole voting and dispositive powers over 26,500, 1,400 and
1,300 shares, respectively.
(2) Except as otherwise specifically noted, the number of shares stated as being
owned beneficially includes shares believed to be held beneficially by
spouses, minor children and grandchildren. The inclusion of shares deemed
beneficially owned in this Proxy Statement, however, does not constitute an
admission that the named stockholders are direct or indirect beneficial
owners of such shares.
(3) Includes 89,375, 58,760, 16,666, 10,666, 22,666, 160,280, 21,666, 12,666,
70,000, 5,333 and 468,078 shares subject to option which are held by
Messrs. Anasstasiadis, Burns, Bolz, Carpenter, Goldman, Greenfield,
Planitzer, Rossotti, Sexton, Sola and all directors and executive officers
as a group, respectively, and are exercisable within 60 days after June 30,
1996.
(4) Includes 56,484 shares held by Mr. Burns' wife, 21,484 of such shares are
held as custodian for his children, as to which shares Mr. Burns disclaims
beneficial ownership.
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ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three Class A
directors, two Class B directors and three Class C directors, who will serve
until the Annual Meetings of Stockholders to be held in 1996, 1997 and 1998,
respectively, and until their respective successors are elected and qualified.
At each Annual Meeting, directors are elected for a full term of three years to
succeed those directors whose terms expire at the Annual Meeting date.
The persons named in the proxy will vote, unless the proxy is marked
otherwise, to elect as Class A directors Messrs. Burns, Carpenter and Sola. The
proxy may not be voted for more than three directors. If a nominee is unable to
serve, the person acting under the proxy may vote the proxy for the election of
a substitute. It is not presently contemplated that any nominee will be unable
to serve. The terms of Class A directors elected at the Annual Meeting will
expire in 1999.
The following information relates to the nominees listed above and to the
other directors of the Company whose terms of office will extend beyond the
Annual Meeting.
NOMINEES
CLASS A DIRECTORS WITH TERMS EXPIRING IN 1999:
KEVIN J. BURNS DIRECTOR SINCE 1986
Mr. Burns, 47, was elected Chief Executive Officer of the Company in 1986,
and Chairman of the Board in 1990. From 1986 to 1995 Mr. Burns also served as
President of the Company. From 1984 to 1986 he was Executive Vice President and
Chief Operating Officer, and from 1982 to 1984, he was Executive Vice President
of the Software Products Division of the Company. Mr. Burns is also a director
of Computervision Corporation.
RICHARD A. CARPENTER DIRECTOR SINCE 1991
Mr. Carpenter, 53, served as Vice Chairman of the Board from March to
October, 1991. In October 1991, he became President of Carpenter Associates, a
consulting firm. He served as Chief Executive Officer of Index Technology
Corporation ("Index") from 1983 to 1991, and Chairman of the Board of Index from
1990 to 1991.
FRANK A. SOLA DIRECTOR SINCE 1994
Mr. Sola, 52, is President and owner of The Syndetics Corporation, Inc., a
consulting firm specializing in services and integration strategies. Mr. Sola
started the firm in 1987. Mr. Sola was a Vice President of Cullinet Software,
Inc. in 1986. From 1976 to 1985, Mr. Sola served as President and Chief
Operating Officer of Computer Partners, Inc.
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OTHER DIRECTORS
CLASS B DIRECTORS WITH TERMS TO EXPIRE IN 1997:
NORMAN A. BOLZ DIRECTOR SINCE 1990
Mr. Bolz, 76, previously served as Associate Commissioner, Policy and
Management of the Internal Revenue Service and as Vice Chairman, International
Operations of Coopers & Lybrand. Subsequently he was Director of Finance and
Administration of Special Olympics International, Inc. Mr. Bolz is also a
director of Computervision Corporation.
RUSSELL E. PLANITZER DIRECTOR SINCE 1982
Mr. Planitzer, 52, was elected Chief Executive Officer of Computervision
Corporation in 1993 and has been Chairman of its board since 1989. He was a
partner of J.H. Whitney & Co., a venture capital firm, from 1981 to 1991.
CLASS C DIRECTORS WITH TERMS EXPIRING IN 1998:
ROBERT N. GOLDMAN DIRECTOR SINCE 1986
Mr. Goldman, 47, was elected President and Chief Executive Officer of
Object Design, Inc. in November, 1995. He has been a director of Object Design
since August, 1995. Prior to joining Object Design, Mr. Goldman was Chairman of
Trinzic Corporation from 1992 to 1995. Trinzic was formed by the merger of Aion
Corporation and AICorp in 1992. From 1986 to 1992, Mr. Goldman served as
President and Chief Operating Officer of AICorp, a supplier of artificial
intelligence software. From 1983 to 1986, Mr. Goldman served as President and
Chief Operating Officer of Cullinet Software. Mr. Goldman is a member of the
Board of Directors of Citrix Systems, Inc., Parametric Technology Corporation
and Systemsoft Corporation.
GARY G. GREENFIELD DIRECTOR SINCE 1992
Mr. Greenfield, 41, was elected Chief Operating Officer in 1992 and
President in 1995. From 1989 to 1992 he was Executive Vice President, Product
Operations. He served as Vice President, Marketing from 1987 to 1988, served as
Senior Vice President, Product Services and Operations from 1988 to 1989 and
briefly served as Chief Financial Officer in 1991. Mr. Greenfield is also a
director of Hyperion Software, a manufacturer of financial application software
products, and Amisys Managed Care Systems, Inc., a developer of information
systems for the managed healthcare industry.
CHARLES O. ROSSOTTI DIRECTOR SINCE 1991
Mr. Rossotti, 55, has served as Chairman of American Management Systems,
Inc., a software and services company, since 1981. From 1981 to 1993, he was
also its Chief Executive Officer.
There is no family relationship between any of the directors or officers.
There are no arrangements between any director or officer and any other person
pursuant to which he was selected as a director or officer.
The Board of Directors has a standing Audit Committee, composed of Messrs.
Bolz and Rossotti, which held four meetings during the fiscal year ended April
30, 1996. The principal functions of the Audit Committee are to make
recommendations to the Board of Directors regarding the engagement of the
Company's independent auditors, review and approve any major accounting policy
changes affecting the Company's operating results, review the arrangements for
and scope of the independent audit and results of the audit and assure that the
auditors are in fact independent.
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The Board of Directors has a standing Management Development and
Compensation Committee, composed of Messrs. Goldman, Planitzer and Rossotti,
which held five meetings during the fiscal year ended April 30, 1996. The
principal function of the Management Development and Compensation Committee is
to make recommendations to the Board of Directors as to compensation
arrangements, including the granting of stock options.
The Company does not have a nominating committee.
During the fiscal year ended April 30, 1996, the Board of Directors held
six meetings. All directors attended at least 75% of the meetings which occurred
while they served on the Board of Directors. All directors attended at least 75%
of the meetings of committees on which they served.
During the fiscal year ended April 30, 1996, Mr. Carpenter was late in
filing with the Securities and Exchange Commission one Form 4, reporting one
transaction. The filing was made within seven days of its due date.
DIRECTOR COMPENSATION
The Company pays each non-management Board member an annual retainer of
$15,000, plus $1,500 and out-of-pocket expenses for attendance at each Board
meeting. Non-management directors also receive $1,500 for attendance at each
Board committee meeting if such meeting is not held on the day of a Board
meeting. Further, should any non-management director be requested by the Company
to perform consulting services on the Company's behalf, then such director shall
be entitled to receive a fee equal to $1,500 per day for such services.
The Company's Stock Option Plan provides that each non-management director
shall be granted an option to purchase 3,333 shares of Common Stock at fair
market value as of the date of the first meeting of directors following each
election or appointment of the director, and at each subsequent first meeting of
directors following each Annual Meeting of Stockholders during such director's
term. Each such option shall vest immediately upon its being granted.
Directors who are officers or employees of the Company do not receive
additional compensation for serving as a director or committee member.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to the compensation
paid by the Company to each of the executive officers during the past three
fiscal years, ending April 30.
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SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND FISCAL ------------------------------- STOCK OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARDED (1)
- -------------------------------------------- ------ -------- ------- -------- -------------
($) ($) ($) (#)
Kevin J. Burns.............................. 1996 275,000 89,238 130,000
Chairman of the Board, and Chief Executive 1995 250,000 300,000 105,000
Officer 1994 220,000 112,615 87,040
Gary G. Greenfield.......................... 1996 265,000 85,993 130,000
President and Chief Operating Officer 1995 215,000 258,000 105,000
1994 200,000 101,476 202,400
Kenneth A. Sexton........................... 1996 175,000 32,450 20,000
Senior Vice President, Finance & 1995 160,000 96,000 15,000
Administration and Chief Financial Officer 1994 160,000 32,667 15,000
Panos Anastassiadis......................... 1996 166,000 86,362 80,000
Senior Vice President, Worldwide 1995 135,000 113,600 20,000
Distribution 1994 120,000 20,000 32,500
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(1) See also the Option Repricing discussion in the Report of the Management
Development and Compensation Committee for a discussion of additional
options that were granted and then canceled during the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the stock options granted to the Company's
executive officers during the fiscal year ended April 30, 1996.
INDIVIDUAL GRANTS
----------------------------
OPTIONS % OF TOTAL GRANT
GRANTED ON OPTIONS GRANTED EXERCISE DATE
COMMON TO EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME STOCK (1) FISCAL 1996 SHARE (3) DATE VALUE (4)
- ------------------------------------- ---------- --------------- --------- ---------- ----------
# (%) ($/SHARE) ($)
Kevin J. Burns....................... 130,000 10 11.875 (2) $1,025,700
Gary G. Greenfield................... 130,000 10 11.875 (2) $1,025,700
Kenneth A. Sexton.................... 20,000 1.6 11.875 (2) $157,800
Panos Anastassiadis.................. 80,000 6.3 11.875 (2) $631,200
- ------------------------------
(1) See also the Option Repricing discussion in the Report of the Management
Development and Compensation Committee for a discussion of additional
options that were granted and then canceled during the fiscal year.
(2) These grants consisted of a combination of both Incentive and Non-Qualified
stock options, and were made on February 15, 1996. Incentive Stock Options
expire ten years from their date of grant, while Non-Qualified Stock Options
expire ten years and one month from their date of grant. All options granted
become exercisable in equal, quarterly installments, commencing with the
first anniversary of the grant date.
(3) The exercise price is the market price on the date the options were granted.
(4) Grant date present value is determined using a modified Black-Scholes option
pricing model. The estimated values under the model are based on
assumptions, including an expected volatility of 61.9%, a risk-free rate of
return of 5.5%, no dividend yield and a time to exercise of seven years, and
may not be indicative of actual value. The actual value, if any, the option
holder may realize will depend on the excess of the actual market price of
the stock over the exercise price on the date the option is exercised. There
is no assurance that the value that may be realized by the option holder
will be at or near the value estimated by the modified Black-Scholes model.
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AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding the exercise
of stock options during the last fiscal year by the Company's executive
officers.
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS AT FISCAL
SHARES OPTIONS AT FISCAL YEAR END YEAR END (2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ------------ ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
Kevin J. Burns........... 275,270 3,778,660 37,000 252,270 47,031 33,652
Gary G. Greenfield....... 80,000 1,217,250 103,520 323,520 111,279 443,525
Kenneth A. Sexton........ 20,000 232,500 66,250 38,750 32,812 32,812
Panos Anastassiadis...... -- -- 81,250 111,250 209,687 --
- ------------------------------
(1) The amount "realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date of
exercise over the exercise price). However, because the executive officers
may keep the shares they acquired upon the exercise of the options (or sell
them at a different price), these amounts do not necessarily reflect cash
realized upon the sale of those shares.
(2) "In-the-Money Options" are options outstanding at the end of the last fiscal
year for which the fair market value of the Common Stock at the end of the
last fiscal year ($10.875 per share) exceeded the exercise price of the
options.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into executive employment agreements with Messrs.
Burns, Greenfield, and Sexton providing for (i) annual base salaries, (ii)
participation in bonus plans, stock options and stock incentive plans as adopted
by the Company, and (iii) other customary benefits, including death and
disability payments. Following is a summary of the pertinent provisions of the
agreements.
The terms are for three years expiring July 31, 1999, and are automatically
extended for one year each August 1 after July 31, 1997, unless either the
Company or the executive gives notice that the agreement is not to be extended.
If there is a change of control of the Company, as defined in the agreements,
the agreements shall be automatically extended for a three year term commencing
on the effective date of the change of control. At any time, the Company may
terminate the executive for cause, as defined in the agreements. If the
executive is terminated other than for cause or disability, or if the executive
terminates employment during the first 12 months after a change of control or
for good reason, the Company shall be obligated to make a lump sum payment to
the executive based on a multiple (the "Multiple") of their monthly base salary
and bonus (as defined in the agreements) computed on a monthly basis. The
Multiple for calculating the lump sum payments for Messrs. Burns, Greenfield and
Sexton is eighteen, eighteen, and six, respectively. In addition, if the
executive's employment is so terminated or if there is a change of control, all
outstanding stock options held by the executive shall vest. If payments to the
executive would subject the executive to an excise tax under the Internal
Revenue Code relating to payments after a change of control, the payments shall
be grossed up so that the Company will make additional payments to the executive
equal to the amount of the excise tax.
During the 18 months following termination of employment by the Company
other than for cause or disability, termination by the executive for good reason
or during the first year following a change of control, then the executive shall
provide consulting services to the Company and be subject to certain
non-competition
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covenants. For such consulting services and non-competition agreement, the
Company shall pay the executive a lump sum equal to eighteen times his monthly
base salary and bonus (as defined in the agreements) computed on a monthly
basis.
The annual compensation and target incentive compensation for each affected
officer for fiscal 1997 is as follows: Mr. Burns and Mr. Greenfield each have a
base salary of $275,000, with a target incentive compensation amount for each
equal to their base salary. Mr. Sexton has a base salary of $175,000, and a
target incentive compensation of $125,000. The annual base salary may be
increased from time to time as determined by the Board of Directors, in its
discretion, upon a review that shall take place at least annually.
REPORT OF THE MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Management Development and Compensation Committee of the Board of
Directors (the "Committee"), consisting entirely of non-management directors,
approves all policies under which compensation is paid or awarded to the
Company's executive officers. The Committee is composed of Messrs. Robert N.
Goldman, Russell E. Planitzer and Charles O. Rossotti.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is premised on the belief that
the interest of executives should be closely aligned with those of INTERSOLV's
stockholders. INTERSOLV's executive management compensation program is also
designed to attract and retain superior executive talent. Based on this
philosophy, a significant portion of each executive's total compensation is
placed at-risk and linked to the accomplishment of specific annual and long-term
financial and strategic results and to appreciation in the Common Stock. The
portion of compensation at-risk for the Company's executives is intended to be
greater than the portion at-risk for executive officers at comparable companies
in the industry.
COMPENSATION PLAN
Each year the Committee conducts a review of the Company's executive
compensation program. This review includes a consideration of reports based on
independent compensation consultants' assessment of the competitiveness of the
Company's executive compensation, and a comparison of the Company's executive
compensation to a peer group of the Company's most direct competitors for
executive talent. The Committee reviews the selection of peer companies used for
compensation analysis. The compensation review permits an ongoing evaluation of
the link between the Company's performance and its executive compensation in the
context of the compensation programs of other public companies.
The Committee approves the compensation of the executive officers,
including the Chief Executive Officer and other individuals whose compensation
is detailed in this proxy statement, and sets policies with respect to the
executive compensation program. This is intended to ensure consistency
throughout the executive compensation program.
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The key elements of the Company's executive compensation program consist
of:
1. base annual salary,
2. incentive compensation,
3. stock options, and
4. supplemental executive benefits
The Committee's policies with respect to each of these elements, including
the basis for the compensation paid Mr. Burns, are discussed below.
BASE ANNUAL SALARIES
Base annual salaries for executive officers are initially determined by
evaluating the responsibilities of the position, the experience and knowledge of
the individual, and the competitive marketplace for executive talent, including
a comparison to base annual salaries for comparable positions at peer companies.
Annual salary adjustments are determined by evaluating the performance of
each executive officer, taking into account new responsibilities. Individual
performance ratings take into account such factors as achievement of the
Company's strategic plan and attainment of specific individual objectives.
In determining Mr. Burns' base salary for fiscal 1996, the Committee did
not employ a formula or other mathematical calculation, but based its
determination upon a subjective evaluation of base salaries of chief executive
officers of peer companies, the Company's performance in fiscal 1995, and the
assessment by the Committee of Mr. Burns individual performance. Based upon this
evaluation, the Committee increased Mr. Burns' base salary 10% from $250,000 to
$275,000, as of May 1, 1995.
INCENTIVE COMPENSATION
The Company maintains an Incentive Compensation Plan (the "IC Plan"), which
provides for the payment of incentive compensation to most employees of the
Company not receiving sales commissions. Executive officers participate in the
IC Plan, which is a pay-for-performance plan designed to compensate participants
for achieving certain levels of performance for key objectives established in
the Company's annual financial plan. The maximum incentive compensation for
executive officers ranges from approximately 50% to 120% of base salary,
depending upon the executive officer's position.
Annually, the Committee approves targeted levels and minimum threshold
levels of performance for key objectives affecting the executive officers'
incentive compensation. No incentive compensation is paid when results are below
the threshold level. As actual results approach targeted levels, the incentive
compensation payout increases at an accelerated rate. For executive officers,
the incentive compensation objectives are based primarily on revenue and
earnings of the Company and their operating unit. Incentive compensation payouts
are paid quarterly based on results compared with quarterly, six month and
annual objectives.
Mr. Burns' incentive compensation is based on the Company's overall revenue
and earnings performance. Mr. Burns received incentive compensation of $89,238
in fiscal 1996, which constituted 32% of his targeted incentive compensation, as
compared with $300,000 in fiscal 1995. The formulas for fiscal 1995 and 1996
were materially the same.
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STOCK OPTIONS
The third component of executive officers' compensation is the Company's
1992 Stock Option Plan, pursuant to which the Company has granted to executive
officers options to purchase shares of Common Stock.
Stock options are designed to align the interests of executives with those
of the stockholders. Stock options are granted at an exercise price equal to the
market price of the Common Stock on the date of grant, vest in equal
installments over four years and are exercisable within ten years from the date
of grant. This plan is designed to provide incentives for the creation of value
for the Company's stockholders over the long term because the full benefit of
the compensation package cannot be realized unless stock price appreciation
occurs over a number of years.
During fiscal 1994, the Committee adopted a formal framework to govern the
granting of stock options. The framework adopted was based on the result of a
comprehensive evaluation of the Company's stock option program compared with
other public companies in the industry. An independent compensation consultant
assisted the Committee in this evaluation process.
Under the framework adopted, targeted ownership levels were specified for
approximately 75 employees in the Company, including executive officers, who are
expected to have an impact on long-term stockholder value. The framework
provides for key employees to achieve targeted ownership percentages over a
ten-year period through a series of option grants. The framework calls for
option grants for 33% of the target in the first year and the remainder in five
equal annual grants thereafter. Under the framework, executive officers and key
employees could acquire up to approximately 20% of the Common Stock over a ten
year period. Fiscal 1996 grants under the program took into consideration
options granted under the previous program for the prior five years.
For the fiscal year ended April 30, 1996, Mr. Burns was granted options for
130,000 shares. Under the framework, Mr. Burns' targeted ownership is 4% of the
Common Stock.
OPTION REPRICINGS
In February 1996, the Committee decided to offer all employees that were
granted options in May 1995 through November 1995, including executive officers
("1995 Options"), the opportunity to exchange their 1995 Options for new
options, granted on February 15, 1996 ("February Options"). Optionees accepting
the offer agreed to cancel their 1995 Options in their entirety, and the
February Options were priced at the fair market value of the stock on the date
of grant, and contained a new, four-year vesting schedule commencing on the date
of grant. Options granted to the directors in September 1995, were not subject
to the option exchange offer.
After careful consideration by the Committee it was determined that, since
the 1995 Options were significantly out-of-the-money, those options therefore
were no longer effective in either aligning the interests of the Company's
employees with those of its shareholders, or encouraging option holders to
remain in the employ of the Company.
In deciding to offer the option exchange, the Committee also carefully
considered the fairness of such exchange in relation to the Company's other
shareholders. The Committee concluded that, instead of issuing additional new
options at the current fair market value, and thereby causing further
shareholder dilution, the important objectives of motivating and retaining key
employees and officers was furthered best by the exchange offer.
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In November 1987, the Company offered employees, including certain
executive officers, a similar stock option exchange program. The repricing in
February 1996 and November 1987 are the only instances during the last ten
fiscal years in which the exercise price of any options granted by the Company
to any of its executive officers has been repriced.
TEN YEAR OPTION REPRICINGS
The following table summarizes all repricing of stock options granted to
executive officers of the Company during the past 10 years.
TERM
STOCK EXERCISE REMAINING
NUMBER OF ICE AT PRICE AT NEW AT TIME
SECURITIES TIME OF TIME OF EXERCISE OF
NAME DATE REPRICED EPRICING REPRICING PRICE REPRICING
- ------------------------------------- ------- ---------- --------- --------- -------- ---------
(#) ($) ($) ($)
Kevin J. Burns....................... 2/15/96 130,000 11.875 21.00 11.875 9.5 years
Gary G. Greenfield................... 2/15/96 130,000 11.875 21.00 11.875 9.5 years
Gary G. Greenfield................... 11/23/87 50,000 5.06 17.75 5.06 9.5 years
Kenneth A. Sexton.................... 2/15/96 20,000 11.875 21.00 11.875 9.5 years
Panos Anastassiadis.................. 2/15/96 30,000 11.875 21.00 11.875 9.5 years
SUPPLEMENTAL EXECUTIVE BENEFITS
The Company provides to selected senior executives a supplemental executive
benefits spending allowance equivalent to 10 percent of base annual salary. This
allowance is to be applied towards the selection of four benefits options:
financial/estate planning and tax preparation services, retirement supplement,
supplemental health and welfare insurance and/or legal services. Depending upon
whether the particular executive chooses to spend these funds for supplemental
retirement savings, he may be eligible for a tax deferred election.
CONCLUSION
Through these programs, a significant portion of the Company's executive
compensation is linked directly to individual and Company performance in
furtherance of strategic goals, as well as stock price appreciation. The
Committee intends to continue the policy of linking executive compensation to
Company performance and stockholder return.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
Russell E. Planitzer, Chairman of
Committee
Robert N. Goldman
Charles O. Rossotti
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STOCK PRICE PERFORMANCE
The following graph assumes $100 invested on April 30, 1991 (the end of the
fiscal year) in the Common Stock, in the S&P 500 Index and the S&P Computer
Software & Services Index.
Measurement Period
(Fiscal Year Covered) Intersolv S&P Computer S&P 500
30-Apr-91 100.00 100.00 100.00
30-Apr-92 166.25 114.03 120.74
30-Apr-93 72.50 124.56 152.71
30-Apr-94 107.50 131.19 179.58
30-Apr-95 137.50 154.10 266.43
30-Apr-96 108.75 200.66 373.78
30-Jul-96 91.25 197.49 384.82
PROPOSAL TO AUTHORIZE AN INCREASE IN THE
COMMON STOCK SUBJECT TO THE COMPANY'S
1992 EMPLOYEE STOCK PURCHASE PLAN
The 1992 Employee Stock Purchase Plan (the "Purchase Plan") fosters the
Company's goal of recruiting and retaining key employees in the highly
competitive software industry. The Company believes that participation in the
Purchase Plan by all employees fosters commitment and more closely ties
compensation and stockholder objectives by focusing employees on stockholder
return.
The Purchase Plan authorizes the grant of rights to purchase a maximum of
340,000 shares of Common Stock (subject to adjustment for stock splits and
similar capital changes) to eligible employees. Each employee of the Company, or
of a subsidiary of the Company, having at least three months of continuous
service on the date of grant of a right is eligible to participate in the
Purchase Plan. Any employee who, immediately after the grant of a right, is
determined to own 5% or more of the Common Stock, however, would not be eligible
to participate. The Purchase Plan is administered by the Management Development
and Compensation Committee of the Board of Directors.
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16
Rights are granted twice yearly, on January 1 and July 1, and are
exercisable effective on the succeeding June 30 or December 31. Eligible
employees may purchase shares of Common Stock through accumulation of payroll
deductions (of not less than 1% nor more than 10% of compensation, as defined in
the Purchase Plan) at a purchase price which is 85% of fair market value at the
beginning or end of each six-month offering period, whichever is lower. Of the
approximately 892 eligible employees, 392 participants were enrolled in the
Purchase Plan as of July 1, 1996. On July 1, 1996, the closing price for the
Common Stock was $9.3125. The Purchase Plan has a term of ten years.
The Board of Directors may at any time amend or terminate the Purchase Plan
except that no such amendment may be made without the approval of the holders of
a majority of the Company's outstanding Common Stock, if such amendment would
(i) materially increase the benefits accruing to participants under such plan,
(ii) materially increase the number of shares which may be issued under such
plan, or (iii) materially modify the requirements as to eligibility for
participation under such plan.
The following table shows certain information regarding the purchase of
Common Stock during the last fiscal year pursuant to the Company's 1992 Employee
Stock Purchase Plan:
NAME SHARES ACQUIRED
---------------------------------------------------------------------- ---------------
Kevin J. Burns........................................................ 1,694
Gary G. Greenfield.................................................... 604
Kenneth A. Sexton..................................................... 1,383
Panos Anastassiadis................................................... 509
All current executive officers as a group............................. 4,190
All employees, including all current officers who are not executive
officers............................................................ 103,300
As of June 30, 1996, all Common Stock available under the Purchase Plan has
been issued. Under the Purchase Plan, the last granting period for 1996 was
required to begin on July 1, 1996, and unless additional shares of Common Stock
were added to the Purchase Plan, the operation of the Purchase Plan would have
been interrupted. Because of the important part that the Purchase Plan plays in
recruiting and retaining key employees, the Board of Directors determined that
the operation of the Purchase Plan should not be interrupted, and authorized the
addition of 300,000 shares of Common Stock to the Purchase Plan effective July
1, 1996. The Board of Directors believes that the additional shares should be
sufficient to meet foreseeable demand for several years.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" as defined in Section 423 of the Internal Revenue Code. Under such a plan,
an employee is not required to pay any federal income tax when the employee
joins the plan, or when an offering of rights ends and the employee purchases
shares of Common Stock. The employee is, however, required to pay federal income
tax on the difference, if any, between the price at which the employee sells the
shares and the price the employee paid for them. In order for transactions
pursuant to the Purchase Plan to continue to be entitled to the tax treatment
described above, the addition of Common Stock to the Purchase Plan must be
approved by the stockholders of the Company within 12 months after the date of
the approval of the addition of shares to the Purchase Plan by the Board of
Directors.
The Board of Directors has determined that the Purchase Plan should be
amended to authorize the issuance of an additional 300,000 shares. The Board
believes that the additional shares will be sufficient to meet foreseeable
demand for several years.
The Board of Directors recommends that stockholders vote FOR the adoption
of the proposal.
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PROPOSAL TO RATIFY SELECTION OF
THE COMPANY'S AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
determined that the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the fiscal year ending April 30, 1997, is in the best
interest of the Company and recommends that stockholders ratify the selection at
the Annual Meeting. If such selection is not so ratified, it will be
reconsidered by the Audit Committee and the Board. Coopers & Lybrand L.L.P.
acted as the Company's auditors for the fiscal year ended April 30, 1996.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting and will have the opportunity to make a statement and is
expected to be available to respond to questions from stockholders.
The Board of Directors recommends that stockholders vote FOR the approval
of Coopers & Lybrand as the Company's independent auditors for the fiscal year
ending April 30, 1997.
OTHER MATTERS
The Board of Directors does not know of any other matters that may come
before the Annual Meeting; however, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Rockville, Maryland, not later than May 28, 1997 for inclusion in the proxy
statement for that meeting.
By Order of the Board of Directors
/s/ JOSEPH T. RUBLE
JOSEPH T. RUBLE,
Secretary
August 26, 1996
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL
MEETING. REGARDLESS OF WHETHER YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING, AND YOUR
COOPERATION WILL BE APPRECIATED. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY
VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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DETACH HERE
INTERSOLV, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 25, 1996
PROXY
The undersigned, a stockholder of Intersolv, Inc., a Delaware
corporation (the "Company"), hereby appoints as his or her proxies with power
of substitution and revocation Joseph T. Ruble and Kenneth A. Sexton or either
of them, to vote all Company stock registered in the name of the undersigned at
the Company's Annual Meeting of Stockholders to be held at the Company's
headquarters located at 9420 Key West Avenue, Rockville, Maryland 20850 on
Wednesday, September 25, 1996 at 10:30 a.m. and at any adjournments of said
meeting, on the matters set forth on the notice of said meeting and as stated
hereon. The proxies are further authorized to vote at their discretion upon
such other business as may properly come before the meeting or any adjournments
thereof.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
19
DETACH HERE
/X/ Please make
votes as in
this example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN FOR A PROPOSAL SET
FORTH BELOW, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3.
1. Vote FOR all nominees listed below (except where indicated to the contrary
below.)
NOMINEES: Kevin J. Burns, Richard A. Carpenter, Frank A. Sola
FOR WITHHELD
/ / / /
/ /
- -----------------------------------------------------------
INSTRUCTION To withhold authority to vote for any indi-
vidual nominee, print the nominee's name on
the above line.
MAKE HERE
FOR ADDRESS / /
CHANGE AND
NOTE BELOW
2. To approve an increase in the common stock subject to the Company's 1992
Employee Stock Purchase Plan from 340,000 to 640,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the selection of Coopers & Lybrand LLP as the Company's
independent auditor for the 1997 fiscal year.
FOR AGAINST ABSTAIN
/ / / / / /
4. In connection with all other business as may properly come before the
meeting or any adjournments of the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Please mark, sign and date the proxy and return it promptly using the enclosed
reply envelope. Please sign your name exactly as your name appears hereon.
When shares are held by joint tenants, both should sign. When signing as a
corporate officer, please give your full title and the full name of the
corporation.
Signature: Date: Signature: Date: