SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under
Rule 14a-12
INFINIUM SOFTWARE, INC.
(Name of Registrant as Specified in Its Charter)
N/A
------------------------------------------------------------------------
(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 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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.:
3) Filing Party:
4) Date Filed:
INFINIUM SOFTWARE, INC.
25 COMMUNICATIONS WAY
HYANNIS, MASSACHUSETTS 02601
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, FEBRUARY 8, 2002
------------------------
The Annual Meeting of Stockholders of Infinium Software, Inc. (the
"Company"), will be held on Friday, February 8, 2002, at 9:30 a.m., Boston time,
at the Boston Marriott Copley Place, 110 Huntington Avenue, Boston,
Massachusetts 02116, to consider and act upon the following matters:
1. To elect two (2) Class III directors to serve for the ensuing
three years;
2. To ratify the selection of PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year ending September
30, 2002; and
3. To transact such other business as may properly come before the
meeting or any adjournment of the meeting.
Only stockholders of record at the close of business on December 21, 2001
will be 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
ANNE MARIE MONK,
Clerk
Hyannis, Massachusetts
January 7, 2002
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL 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
THE PROXY IS MAILED IN THE UNITED STATES.
INFINIUM SOFTWARE, INC.
25 COMMUNICATIONS WAY
HYANNIS, MASSACHUSETTS 02601
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, FEBRUARY 8, 2002
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors") of Infinium
Software, Inc. (the "Company") for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on Friday, February 8, 2002, and at any
adjournment of that 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 accompanying 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 Clerk of the
Company.
The Board of Directors has fixed December 21, 2001 as the record date for
determining stockholders who are entitled to vote at the Annual Meeting. At the
close of business on December 21, 2001, there were outstanding and entitled to
vote 13,483,602 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of the Company. Each share of Common Stock is entitled to one vote.
THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2001 IS BEING
MAILED TO THE COMPANY'S STOCKHOLDERS WITH THIS NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT ON OR ABOUT JANUARY 7, 2002. THE COMPANY WILL, UPON WRITTEN
REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE AN ADDITIONAL COPY OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 2001, AS FILED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), WITHOUT
EXHIBITS. Please address all such requests to the Company, Attention: William B.
Gerraughty, Jr., Chief Financial Officer, 25 Communications Way, Hyannis,
Massachusetts 02601. Exhibits will be provided upon written request and payment
of an appropriate processing fee.
As used in this Proxy Statement, the terms "Infinium" and the "Company"
refer to Infinium Software, Inc. and its wholly-owned and majority-owned
subsidiaries, unless the context otherwise requires.
QUORUM REQUIREMENT
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Annual Meeting shall constitute a quorum
for the transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy (including shares which abstain or otherwise
do not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum is
present at the Annual Meeting.
At the close of business on December 21, 2001, the record date for the
determination of the stockholders entitled to notice of and to vote at the
Annual Meeting, there were outstanding and entitled to vote an aggregate of
13,483,602 shares of Common Stock of the Company, constituting all of the issued
and outstanding voting stock of the Company. Holders of Common Stock are
entitled to one vote per share.
VOTES REQUIRED
The affirmative vote of the holders of Common Stock representing a
plurality of the votes cast at the Annual Meeting by such stockholders is
required for the election of directors. The affirmative vote of the
holders of Common Stock representing a majority of the votes cast at the Annual
Meeting by such stockholders is required to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending September 30, 2002.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by a broker or nominee who indicates on a proxy that it does
not have discretionary authority to vote as to a particular matter, will not be
voted in favor of such matter, and also will not be counted as votes cast on
such matter. Accordingly, abstentions and "broker non-votes" will have no effect
on the election of directors or the ratification of the selection of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending September 30, 2002.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 2001, the beneficial
ownership of the Company's outstanding Common Stock of (i) each person known by
the Company to own beneficially more than 5% of the Company's outstanding Common
Stock, (ii) all directors, (iii) each current and former executive officer named
in the Summary Compensation Table under the heading "Executive Compensation"
below and (iv) all current directors and executive officers as a group.
<Table>
<Caption>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
- ------------------------ ----------------------- -----------
5% STOCKHOLDER
Robert A. Pemberton(3)...................................... 2,252,620 17.0%
DIRECTORS AND EXECUTIVE OFFICERS
Manuel Correia(4)........................................... 79,522 *
Michael A. Cusumano(5)...................................... 18,000 *
William B. Gerraughty, Jr................................... -- --
David J. Gutch.............................................. -- --
Fred L. Luconi(6)........................................... 33,000 *
James E. McGowan............................................ -- --
Anne Marie Monk(7).......................................... 251,675 1.9
Roland D. Pampel(8)......................................... 39,000 *
Keith Phillips(9)........................................... -- --
Marc Planquart(10).......................................... 5,571 *
Robert P. Schechter(11)..................................... 39,000 *
John J. Whyte(12)........................................... 205,000 1.5
All current executive officers and directors as a group (11
persons)(13).............................................. 2,769,791 20.3
</Table>
- ---------------
* Represents less than 1% of the aggregate voting power.
(1) The number of shares beneficially owned by each director and current and
former executive officer is determined under rules promulgated by the SEC,
and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership includes any
shares as to which the individual has sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days of September 30, 2001 through the exercise of stock
options or other rights. The inclusion herein of such shares, however, does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated, to
the knowledge of the Company based upon information provided by such
persons, each person named in the table above has sole voting power and
investment power (or shares such power with his or her spouse or sibling)
with respect to all shares of Common Stock listed as owned by such person.
The address of each beneficial owner is c/o Infinium Software, Inc., 25
Communications Way, Hyannis, Massachusetts 02601.
2
(2) Applicable percentage of ownership as of September 30, 2001 is based upon
13,193,804 shares of Common Stock outstanding on such date. Shares of
Common Stock subject to options currently exercisable or exercisable within
60 days of September 30, 2001 are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
(3) Mr. Pemberton currently serves as Chairman of the Company and ceased
serving as the Company's Chief Executive Officer in February 2001. Mr.
Pemberton's share amount includes 45,857 shares of Common Stock issuable
pursuant to outstanding stock options exercisable within 60 days of
September 30, 2001 and 175,000 shares of Common Stock held by the Pemberton
Family Foundation, Inc., a not-for-profit organization (as to which Mr.
Pemberton disclaims beneficial ownership) exempt from tax under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, and the
directors and officers of which are Mr. Pemberton and his spouse. His share
amount also includes 2,031,763 shares of Common Stock held by The Robert A.
Pemberton Family Trust, dated December 30, 1988, of which Mr. Pemberton is
a trustee.
(4) Includes 60,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of September 30, 2001 and 6,000
shares of Common Stock held jointly by Mr. Correia and his spouse. Also
includes 7,522 shares of Common Stock held jointly by Mr. Correia and his
brother.
(5) Includes 8,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of September 30, 2001.
(6) Includes 8,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of September 30, 2001.
(7) Includes 183,313 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of September 30, 2001.
(8) Includes 1,000 shares of Common Stock held jointly by Mr. Pampel and his
spouse and 38,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of September 30, 2001.
(9) Mr. Phillips ceased to serve as an executive officer in April 2001.
(10) Mr. Planquart ceased to serve as an executive officer in December 2001. Mr.
Planquart's share amount includes 5,071 shares of Common Stock issuable
pursuant to outstanding stock options exercisable within 60 days of
September 30, 2001.
(11) Consists of 1,000 shares of Common Stock held jointly by Mr. Schechter and
his spouse and 38,000 shares of Common Stock issuable pursuant to
outstanding stock options exercisable within 60 days of September 30, 2001.
(12) Mr. Whyte ceased to serve as an executive officer in April 2001. Mr.
Whyte's share amount includes 200,000 shares of Common Stock issuable
pursuant to outstanding stock options exercisable within 60 days of
September 30, 2001.
(13) Includes 433,406 shares of Common Stock issuable to all executive officers
and directors pursuant to outstanding stock options exercisable within 60
days of September 30, 2001.
PROPOSAL 1
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors the
two nominees named below, unless authority to vote for the election of either
director is withheld by marking the proxy to that effect. The proxy may not be
voted for more than two directors.
The Board of Directors currently consists of seven members and is divided
into three classes, with members of each class holding staggered three-year
terms. Classes I and III consist of two directors, and Class II consists of
three directors. The term of the Class III directors will expire at this Annual
Meeting. All
3
directors hold office until their successors have been duly elected and
qualified or until their earlier resignation or removal. Manuel Correia and Fred
L. Luconi are the Class I directors; James E. McGowan, Robert A. Pemberton and
Robert P. Schechter are the Class II directors; and Michael A. Cusumano and
Roland D. Pampel are the Class III directors.
The Board of Directors has nominated and recommended that Michael A.
Cusumano and Roland D. Pampel, who currently serve as Class III members of the
Board of Directors, each be elected as a Class III director, to hold office
until the Annual Meeting of Stockholders to be held in 2005 or until their
respective successor has been duly elected and qualified or until their earlier
resignation or removal. Each of the Class III directors have indicated their
willingness to serve another term, if elected, but if they should be unable or
unwilling to stand for election, proxies may be voted for substitute nominees
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will be unable or unwilling to serve if
elected.
DIRECTORS AND NOMINEES FOR DIRECTOR
The following table sets forth the name of each nominee for director and
each current director, the positions and offices with the Company held by the
nominee or director, the age of the nominee or director, the year in which each
nominee or director became a director of the Company, the business experience of
the nominee or director for at least the past five years, the names of other
publicly held corporations of which each nominee or director is a director, the
calendar year in which the term of each nominee or director will expire and the
class of each nominee or director. There are no family relationships among or
between the directors and the nominees for director.
<Table>
<Caption>
CALENDAR
NAME, BUSINESS EXPERIENCE AND YEAR IN WHICH NOMINEE OR POSITION(s) WITH YEAR TERM CLASS OF
DIRECTOR FIRST BECAME A DIRECTOR, AND BUSINESS EXPERIENCE AGE THE COMPANY WILL EXPIRE DIRECTOR
- --------------------------------------------------------- --- ----------------------- ----------- --------
NOMINEES FOR A THREE-YEAR TERM:
Michael A. Cusumano............................... 47 Director 2002 III
Mr. Cusumano has been a director of the Company since
February 2000. Mr. Cusumano has been a professor at the
Massachusetts Institute of Technology Sloan School of
Management since July 1986.
Roland D. Pampel.................................. 67 Director 2002 III
Mr. Pampel has been a director of the Company since
1995. Mr. Pampel was the President and Chief Operating
Officer of Microcom, Inc. from March 1994 until his
retirement in January 1997 and a director of Microcom
from March 1994 until May 1997, when Microcom was
acquired. Mr. Pampel is also a director of Othnet, Inc.
CONTINUING DIRECTORS:
Manuel Correia.................................... 67 Director 2003 I
Mr. Correia has been a director of the Company since
1993. He has been a consultant since July 2001. From
May 1997 until July 2001 Mr. Correia was the Chief
Operating Officer of CoWare, Inc., a provider of
system-level design software solutions. From 1988 to
1997, Mr. Correia held various management positions,
including Vice President of Technical Operations, for
Cadence Design Systems, Inc., an electronic design
automation firm. Mr. Correia is also a director of
Averant Software.
</Table>
4
<Table>
<Caption>
CALENDAR
NAME, BUSINESS EXPERIENCE AND YEAR IN WHICH NOMINEE OR POSITION(s) WITH YEAR TERM CLASS OF
DIRECTOR FIRST BECAME A DIRECTOR, AND BUSINESS EXPERIENCE AGE THE COMPANY WILL EXPIRE DIRECTOR
- --------------------------------------------------------- --- ----------------------- ----------- --------
Fred L. Luconi.................................... 59 Director 2003 I
Mr. Luconi has been a director of the Company since
February 2000. Mr. Luconi served as director of
Microcom, Inc., a provider of central site and remote
access solutions, from 1992 until 1997, when Microcom
was acquired. Mr. Luconi also served as Vice-Chairman
of Microcom from 1994 until 1997. Mr. Luconi has been a
visiting faculty member at the Massachusetts Institute
of Technology and a private investor since 1992.
James E. McGowan.................................. 58 Director, President and
Mr. McGowan has served as a director and as the Chief Executive Officer 2004 II
Company's President and Chief Executive Officer since
February 2001. From April 1996 to December 2000, Mr.
McGowan served as Chief Executive Officer of EIS
International, Inc. (later known as Portal Connect,
Inc. and n/k/a SER Solutions, Inc.), a provider of
telephony-based contact center technology and from 1993
to 1995 he served as President and Chief Executive
Officer of Deluxe Data, a provider of electronic funds
transfer processing and software. He also served as
President and Chief Executive Officer of Xerox Imaging
Systems, a provider of optical character recognition
software, from 1990 to 1993.
Robert A. Pemberton............................... 60 Chairman of the Board 2004 II
Mr. Pemberton founded the Company and has served as
Chairman of the Board and a director since 1981. He
served as Chief Executive Officer from 1981 to December
1996, and from July 1999 to February 2001. He served as
President from 1981 to 1990, from 1993 to February 1996
and from July 1999 to February 2001.
Robert P. Schechter............................... 53 Director 2004 II
Mr. Schechter has been a director of the Company since
July 1995. Mr. Schechter has also been the President,
Chief Executive Officer and a director of NMS
Communications, a telecommunications enabling
technology company, since April 1995 and Chairman since
March 1996. Mr Schechter has served as a director of
Moldflow Corporation since January 2000.
</Table>
The Board of Directors met five times during the fiscal year ended
September 30, 2001. Each director attended at least 75% of the total number of
meetings of the Board of Directors (and of the committees on which he then
served) during fiscal 2001.
The Company has a standing Audit Committee, currently comprised of Messrs.
Schechter, Pampel and Luconi. The Audit Committee consists entirely of
non-employee directors who are independent, as defined in Rule 4200(a)(15) of
the National Association of Securities Dealers' listing standards. The Audit
Committee, which held four meetings during the fiscal year ended September 30,
2001, makes recommendations to the Board of Directors relative to the
appointment of independent auditors, reviews the Company's financial
5
statements and the scope and results of the independent audit, reviews and
approves the Company's internal accounting controls and monitors the
independence of the Company's auditors.
The Company has a standing Compensation Committee, comprised of three
non-employee directors, Messrs. Correia, Cusumano and Pampel, which held eight
meetings during the year ended September 30, 2001. The Compensation Committee
annually reviews and approves the compensation of the Company's senior
executives and administers the Company's 1989 Stock Option Plan, 1995 Stock
Plan, 1995 Employee Stock Purchase Plan and 1995 Non-Employee Director Stock
Option Plan (the "Director Plan").
The Company does not have a standing Nominating Committee of the Board of
Directors.
DIRECTORS' COMPENSATION
Each non-employee director of the Company receives $15,000 annually (paid
at the rate of $3,750 per quarter) for serving as a director and an additional
$1,000 for each board and committee meeting attended. Mr. Correia receives
$1,000 for travel time associated with his attendance at board meetings in
Massachusetts. The non-employee directors of the Company are Messrs. Correia,
Cusumano, Luconi, Pampel, Pemberton and Schechter. The Company also reimburses
non-employee directors for expenses incurred in attending board meetings. No
other compensation is paid to directors for attending board or committee
meetings.
Under the Company's Director Plan, at each annual meeting, each
non-employee director of the Company is granted an option to purchase 4,000
shares of Common Stock, which will be exercisable in four equal annual
installments beginning on the first anniversary of the grant date. In addition,
any person shall, upon first becoming a non-employee director, receive an option
to purchase 28,000 shares of Common Stock, which will also be exercisable in
four equal annual installments beginning on the first anniversary of the grant
date. The exercise price per share for all options granted under the Director
Plan will be equal to the fair market value of the Common Stock on the date of
grant. During fiscal 2001, each non-employee director was granted an option to
purchase 4,000 shares of Common Stock at $1.94 per share, the fair market value
of the Company's Common Stock on the date of grant as reported by Nasdaq.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Correia, Pampel and
Cusumano. No person who served as a member of the Compensation Committee was,
during the past fiscal year, an officer or employee of the Company or any of its
subsidiaries, a former officer of the Company or any of its subsidiaries, or had
any relationship requiring disclosure herein. No executive officer of the
Company served as a member of the compensation committee of another entity (or
other committee of the Board of Directors performing equivalent functions or, in
the absence of any such committee, the entire Board of Directors), one of whose
executive officers served as a director of the Company.
EXECUTIVE OFFICERS
The following table sets forth the current executive officers of the
Company as of December 31, 2001, their ages and their positions and offices with
the Company.
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
James E. McGowan.......................... 58 Director and President and Chief Executive
Officer
William B. Gerraughty, Jr. ............... 37 Chief Financial Officer; Senior Vice
President and Treasurer
David J. Gutch............................ 44 Senior Vice President
Anne Marie Monk........................... 43 Senior Vice President; General Counsel and
Clerk
David C. Weyher........................... 41 Senior Vice President
</Table>
Each executive officer serves until his or her successor is chosen or
appointed by the Board of Directors and qualified or until his or her earlier
resignation, death or removal. Mr. Gutch, a Senior Vice President of the
Company, is the brother-in-law of the Company's President and Chief Executive
Officer, Mr. McGowan.
6
James E. McGowan. Mr. McGowan joined the Company in February 2001 and has
since served as a director and as the Company's President and Chief Executive
Officer. Prior to joining the Company, from April 1996 to December 2000, Mr.
McGowan served briefly as Chief Operating Officer, then as Chief Executive
Officer, of EIS International, Inc. (later known as Portal Connect, Inc. and
n/k/a SER Solutions, Inc.), a provider of telephony-based contact center
technology. From 1993 to 1995 he served as President and Chief Executive Officer
of Deluxe Data, a provider of electronic funds transfer processing and software.
He also served as President and Chief Executive Officer of Xerox Imaging
Systems, a provider of optical character recognition software, from 1990 to
1993. Mr. McGowan is responsible for the day-to-day operation and general
strategic planning of the Company.
William B. Gerraughty, Jr. Mr. Gerraughty joined the Company in April 2001
and has since served as the Company's Chief Financial Officer, Senior Vice
President and Treasurer. Prior to joining the Company, from February 1993 to
December 2000, Mr. Gerraughty served in various capacities, including President,
Chief Financial Officer and Chief Operating Officer, for Intellution, Inc., a
PC-based software developer for the industrial automation marketplace. Mr.
Gerraughty is responsible for the financial operations of the Company.
David J. Gutch. Mr. Gutch joined the Company in April 2001 and has since
served as a Senior Vice President of the Company. Prior to joining the Company,
from March 1999 to April 2001, Mr. Gutch served as Director of New Business
Sales and then as Vice President of Sales for EIS International, Inc. (later
known as Portal Connect, Inc. and n/k/a SER Solutions, Inc.) and from October
1994 to March 1999 he served as Director of Sales of Deluxe Data. Mr. Gutch is
responsible for the sale of products and services in the Americas and for
world-wide marketing.
Anne Marie Monk. Ms. Monk joined the Company in October 1991 as General
Counsel and served as General Counsel and Vice President from February 1993
until October 2000. From October 2000 to February 2001, Ms. Monk has served as
General Counsel and Executive Vice President. Since February 2001, Ms. Monk has
served as Senior Vice President, General Counsel and Clerk. Ms. Monk's
responsibilities include oversight of the Company's administration area
(comprised primarily of legal, human resources, facilities and information
systems functions) and acting as general manager for the AdvaNTage and ASP
business units.
David C. Weyher. Mr. Weyher joined the Company in August 2001 and has
since served as a Senior Vice President of the Company. In May 2000, prior to
joining the Company, Mr. Weyher founded Digital Atoms, Inc., a management
collaboration software vendor, and served as its Chief Executive Officer until
August 2001. From May 1994 until May 2000, Mr. Weyher served in various
capacities, including Senior Vice President, Global Professional Services and
Vice President, Eastern Region, for Computer Associates International, an
enterprise software vendor and REALOGIC, Inc., a technology consulting firm,
which was acquired by Computer Associates in August 1998. Mr. Weyher is
responsible for professional services and customer training for the Americas.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's (i) Chief Executive Officer,
(ii) the individual who held the position of Chief Executive Officer until
February 2001, (iii) the other four most highly compensated executive officers
of the Company who were serving as executive officers as of September 30, 2001,
and (iv) two former executive officers (such executive officers are sometimes
collectively referred to herein as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION (3)
AWARDS
ANNUAL -------------------------
COMPENSATION (2) RESTRICTED SECURITIES
FISCAL ------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(s) (1) YEAR SALARY BONUS AWARDS ($) OPTIONS (#) COMPENSATION
- ---------------------------------- ------ -------- -------- ---------- ----------- ------------
James E. McGowan...................... 2001 $211,875 $147,840 -- 700,000 $ 7,789(4)
President and Chief Executive 2000 -- -- -- -- --
Officer; Director 1999 -- -- -- -- --
William B. Gerraughty, Jr............. 2001 88,718 64,200 -- 195,000 2,250(5)
Chief Financial Officer; Senior Vice 2000 -- -- -- -- --
President; Treasurer 1999 -- -- -- -- --
David J. Gutch........................ 2001 91,666 71,680 -- 195,000 2,500(5)
Senior Vice President 2000 -- -- -- -- --
1999 -- -- -- -- --
Anne Marie Monk....................... 2001 200,000 81,106 $145,500(6) -- 3,960(5)
Senior Vice President; General 2000 185,000 150,426 -- 25,000 3,388(5)
Counsel; Secretary; Clerk 1999 140,000 14,254 -- 15,000 2,533(5)
Marc Planquart........................ 2001 147,500 44,676 -- -- --
Former Executive Officer 2000 109,375 19,813 -- 10,000 --
1999 -- -- -- -- --
Robert A. Pemberton................... 2001 241,667 15,000 -- -- 8,729(7)
Former executive officer 2000 300,000 86,563 -- 30,000 12,655(8)
1999 160,000 11,878 -- -- 8,729(7)
Keith Phillips........................ 2001 135,417 76,883 145,500(9) -- 292,200(10)
Former executive officer 2000 206,250 193,954 -- 85,000 3,641(5)
1999 -- -- -- -- --
John J. Whyte......................... 2001 75,000 50,000 -- 200,000 158,860(11)
Former executive officer 2000 158,077 40,000 -- -- 5,942(5)
1999 -- -- -- -- --
</Table>
- ---------------
(1) Principal positions shown for the current executive officers are those held
as of September 30, 2001.
(2) Other compensation in the form of perquisites and other personal benefits
have been omitted in instances where such perquisites and other personal
benefits constituted less than the lesser of $50,000 or 10% of the total of
annual salary and bonuses for each Named Executive Officer for each year.
(3) Represents stock options granted during fiscal 1999, 2000 and 2001 under
the Company's 1995 Stock Plan. Except as noted for Ms. Monk and Mr.
Phillips, the Company did not make any restricted stock awards, grant any
stock appreciation rights ("SARs") or make any long-term incentive plan
payouts during fiscal 1999, 2000 or 2001.
(4) Represents Company paid car allowance.
(5) Represents Company contributions under the 401(k) Plan.
(6) Represents 75,000 shares of restricted Common Stock granted to Ms. Monk in
February 2001 having a fair market value of $1.94 per share on the date of
grant which represents the then fair market value of the Company's
unrestricted Common Stock on the Nasdaq National Market. As of September
30,
8
2001, the Company's fiscal year end, Ms. Monk held 68,632 shares of
restricted Common Stock having an aggregate fair market value on such date
equal to $51,474. These shares of restricted Common Stock are entitled to
receive dividends as, if and when declared by the Board of Directors with
respect to the Company's Common Stock. Of the remaining 68,632 shares of
restricted Common Stock, 12,382 shares vested on July 30, 2001 and the
remaining shares will vest in installments of 18,750 shares on each of
January 31, 2002, July 30, 2002 and January 31, 2003. In the event Ms.
Monk's employment is terminated without cause (and she executes and
delivers a one-year noncompetition agreement) or in the event of a change
in control of the Company, Mr. Monk's restricted Common Stock will fully
vest.
(7) Represents (a) disability insurance premiums of $950 paid on policies
maintained by the Company for the benefit of Mr. Pemberton's family members
(the "Pemberton Family"); (b) Company contributions under the 401(k) Plan
of $3,902 for Mr. Pemberton and (c) life insurance premiums paid of $3,877
on a universal life insurance policy maintained by the Company for Mr.
Pemberton.
(8) Represents (a) disability insurance premiums of $950 paid on policies
maintained by the Company for the benefit of the Pemberton Family; (b)
Company contributions under the 401(k) Plan of $7,828 for Mr. Pemberton;
and (c) life insurance premiums of $3,877 paid on universal life insurance
policies maintained by the Company for Mr. Pemberton.
(9) Represents 75,000 shares of restricted Common Stock granted to Mr. Phillips
in February 2001 having a fair market value of $1.94 per share on the date
of grant which represents the then fair market value of the Company's
unrestricted Common Stock on the Nasdaq National Market. The Company
repurchased these shares for an aggregate purchase price of $750 in July
2001 and, as a result of such repurchase, these shares of restricted Common
Stock were canceled and accordingly had no value as of the Company's fiscal
year end.
(10) Represents severance in the amount of $250,000, accrued vacation pay of
$9,615 and forgiveness by the Company of a loan in the amount of $29,029
each in connection with the termination of Mr. Phillips's employment in
April 2001 and Company contributions under the 401(k) Plan of $3,556.
(11) Represents severance in the amount of $150,000 and accrued vacation pay of
$6,923 each in connection with the termination of Mr. Whyte's employment in
April 2000 and Company contributions under the 401(k) Plan of $1,937.
9
OPTION GRANTS
The following table sets forth the number of shares of the Company's Common
Stock underlying options granted, the exercise price per share and the
expiration date of all options granted to each of the Named Executive Officers
during 2001.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE AT
SECURITIES TOTAL OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE MARKET PRICE APPRECIATION FOR OPTION
OPTION EMPLOYEES IN PRICE PER PRICE ON TERM($)(3)
GRANTED FISCAL YEAR SHARE DATE OF EXPIRATION -----------------------------
NAME (#) (%)(1) (2) GRANT DATE 0% 5% 10%
- ---- ---------- ------------- --------- -------- ---------- ------- -------- --------
James E. McGowan.......... 700,000(4) 40% $1.75 $1.75 02/07/07 -- $420,000 $945,000
William B. Gerraughty,
Jr...................... 195,000(5) 11 1.30 1.30 04/20/08 -- 103,350 240,500
David J. Gutch............ 195,000(5) 11 1.30 1.30 04/20/08 -- 103,350 240,500
Anne Marie Monk........... -- -- -- -- -- -- -- --
Marc Planquart............ -- -- -- -- -- -- -- --
Robert A. Pemberton....... -- -- -- -- -- -- -- --
Keith Phillips............ -- -- -- -- -- -- -- --
John J. Whyte............. 200,000(6) 11 2.25(7) 2.56 10/04/04 $62,000 70,920 96,000
</Table>
- ---------------
(1) Based on an aggregate of 1,766,750 shares subject to options granted to
employees of the Company in fiscal 2001.
(2) Except as noted for Mr. Whyte, the exercise price per share of each option
was equal to the fair market value of the Common Stock on the date of grant,
as determined by the Compensation Committee of the Board of Directors and as
reported on The Nasdaq National Market.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 0%, 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date and are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. The gains shown are
net of the option exercise price, but do not include deductions for taxes or
other expenses associated with the exercise of the options or the sale of
the underlying shares. The actual gains, if any, on the stock option
exercises will depend on the future performance of the Common Stock, the
optionholder's continued employment through the option vesting period and
the date on which the options are exercised.
(4) This option vests in five equal annual installments, with the first
installment vesting on the first anniversary of the grant date. In the event
the Company's stock price exceeds $8 and/or $10 for any consecutive three
month period, the vesting of a portion of Mr. McGowan's options will
accelerate.
(5) One-third of the shares subject to this option will vest on April 20, 2001
and the remaining two-thirds of the shares will vest in 24 equal monthly
installments thereafter.
(6) This option is fully vested and, unless earlier exercised, it will expire on
October 4, 2004.
(7) This option was granted at an exercise price that was below the fair market
value of the Company's Common Stock on the date of grant.
10
OPTION EXERCISES
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted to the Named Executive Officers,
including (i) the number of shares of Common Stock purchased upon exercise of
options during the fiscal year ended September 30, 2001; (ii) the net value
realized upon such exercise; (iii) the number of unexercised options outstanding
as of September 30, 2001; and (iv) the value of such unexercised options as of
September 30, 2001.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES (1)
<Table>
<Caption>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(3)
ACQUIRED ON VALUE ---------------------------- -------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ---------------------------- -------------------------
James E. McGowan............ -- -- 0/700,000 $0/0
William B. Gerraughty,
Jr........................ -- -- 0/195,000 $0/0
David J. Gutch.............. -- -- 0/195,000 $0/0
Anne Marie Monk............. -- -- 166,405/16,908 $0/0
Marc Planquart.............. -- -- 4,643/6,357 $0/0
Robert A. Pemberton......... -- -- 43,933/16,007 $0/0
Keith Phillips.............. -- -- -- --
John J. Whyte............... -- -- 200,000/0 $0/0
</Table>
- ---------------
(1) The Company has not granted SARs. There have been no option exercises by
Named Executive Officers for the fiscal year ended September 30, 2001.
EMPLOYMENT ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
James E. McGowan. Effective February 7, 2001, the Company and Mr. McGowan,
the Company's President and Chief Executive Officer, entered into an employment
agreement which provides for (i) a base salary of $325,000 per year, (ii) a
monthly car allowance of $750 and (iii) a yearly executive bonus that may be
achieved based on the attainment of certain Company goals set by the Board of
Directors. The executive bonus has been set at $132,000 for fiscal year 2001,
$200,000 for fiscal year 2002 and $245,000 for each of fiscal years 2003 and
2004. If Mr. McGowan exceeds the Company goals set by the Board of Directors, he
may be eligible for an additional bonus in excess of the executive bonus at the
Board's discretion.
The employment agreement further provides that the Company's employment of
Mr. McGowan is "at will," and that either party may terminate the employment
relationship at any time, with or without cause, subject to the following
termination provisions. If Mr. McGowan is terminated by the Company without
cause, and he resigns from the Board of Directors and executes a one year
non-competition and non-solicitation agreement in a form satisfactory to the
Company, the Company will continue to pay Mr. McGowan his annual base salary and
target executive bonus, if any, due during the eighteen-month period following
his termination date and allow Mr. McGowan to participate in the Company's
benefit plans during such period (to the extent allowed by such plans). If,
however, the Board of Directors determines that Mr. McGowan's termination is
primarily connected to the location of his residence then, following reasonable
notice and an opportunity to resolve with the Board of Directors the issues
relating to the location of his residence, the eighteen-month period noted in
the preceding sentence will be reduced to twelve months.
If Mr. McGowan's employment is terminated in connection with a change in
control or, if following a change in control Mr. McGowan is removed from his
positions as President and Chief Executive Officer and Director, the Company
will continue to pay Mr. McGowan his annual base salary and target executive
bonus, if any, due during the twelve month period following his termination date
and allow Mr. McGowan to participate in the Company's benefit plans during such
period (to the extent allowed by such plans). In
11
addition, all of Mr. McGowan's outstanding and unvested stock options will
immediately vest upon a change in control.
In connection with his employment letter, Mr. McGowan was granted a stock
option to acquire 700,000 shares of Common Stock at an exercise price of $1.75.
This option vests in five equal annual installments, with the first installment
vesting on the first anniversary of the grant date, provided that between 20%
and 40% of Mr. McGowan's options will accelerate if the Company's stock price
exceeds $8.00 and/or $10.00, respectively, for any consecutive three month
period.
William B. Gerraughty, Jr. Effective April 20, 2001, the Company and Mr.
Gerraughty, the Company's Chief Financial Officer, entered into an employment
letter which provides that if Mr. Gerraughty's employment is terminated by the
Company without cause, he will receive, subject to the terms of an executive
severance agreement (which as of the date hereof has not been entered into) his
annual base salary for the twelve-month period following his termination date
and the ability to participate in the Company's group medical and dental
programs (to the extent allowed by such programs) during such twelve-month
period.
David J. Gutch. Effective April 16, 2001, the Company entered into an
executive severance agreement with Mr. Gutch, a Senior Vice President of the
Company. Under this agreement, if Mr. Gutch is terminated by the Company without
cause, and he executes a one year non-competition agreement and release in form
satisfactory to the Company, the Company will continue to pay Mr. Gutch his
annual base salary for the twelve-month period following his termination date
and will allow Mr. Gutch to participate in the Company's employee benefit
programs (to the extent allowed by such programs) during such twelve-month
period.
If Mr. Gutch's employment is terminated in connection with a change in
control or if he is not offered a position which is comparable both in level and
total compensation to the position he occupied immediately prior to the change
in control, the Company will continue to pay Mr. Gutch his annual base salary
during the twelve-month period following his termination date and allow Mr.
Gutch to participate in the Company's benefit programs during such period (to
the extent allowed by such programs). All of Mr. Gutch's outstanding and
unvested stock options will immediately vest upon a change in control.
Anne Marie Monk. Effective July 15, 1999, the Company entered into an
executive severance agreement with Ms. Monk, the Company's General Counsel,
Senior Vice President and Clerk. Under this agreement, if Ms. Monk is terminated
by the Company without cause, and she executes a one year non-competition
agreement and release in form satisfactory to the Company, the Company will pay
Ms. Monk a lump sum equal to her annual base salary and target executive bonus
and will allow Ms. Monk to participate in the Company's employee benefit
programs (to the extent allowed by such programs) for the twelve-month period
following her termination. In addition, all of Ms. Monk's outstanding and
unvested stock options will immediately vest.
If Ms. Monk's employment is terminated in connection with a change in
control the Company will pay to Ms. Monk a lump sum equal to her annual base
salary and target executive bonus and allow Ms. Monk to participate in the
Company's benefits programs (to the extent allowed by such programs) for the
twelve-month period following her termination. If following a change in control
Ms. Monk is not offered a position which is comparable in both level and
compensation to the position she occupied immediately prior to the change in
control Ms. Monk will have been deemed terminated without cause and the terms of
the immediately preceding paragraph regarding without cause termination shall
apply. All of Ms. Monk's outstanding and unvested stock options will immediately
vest upon a change in control.
In addition, Ms. Monk entered into a restricted stock agreement with the
Company on February 9, 2001 pursuant to which she was granted 75,000 shares of
restricted Common Stock which vest in 25% installments on each of July 30, 2001,
January 31, 2002, July 30, 2002 and January 31, 2003. In the event Ms. Monk
ceases to be employed by the Company for any reason, the Company has a
repurchase right with respect to her unvested shares of restricted Common Stock
at a repurchase price per share equal to $0.01. However, if Ms. Monk's
employment is terminated without cause (and subject to the execution of a
one-year noncompete agreement) or in the event of a change in control of the
Company, Mr. Monk's restricted Common Stock will immediately vest in full.
12
Keith C. Phillips. Effective April 16, 2001, the Company entered into a
severance agreement with Mr. Phillips, the Company's former Executive Vice
President of Sales, providing for a severance payment by the Company of
$250,000, the opportunity to participate in the Company's employment benefit
programs (to the extent allowed by such programs) until April 16, 2002 and
forgiveness of a loan in the amount of $29,029. In addition, in connection with
his termination of employment, Mr. Phillips signed a one year non-competition
and non-solicitation agreement effective until April 16, 2002.
Marc Planquart. Effective December 5, 2001 the Company and Mr. Planquart,
a former Senior Vice President of the Company, entered into a separation
agreement providing for a severance payment of $85,673 and the opportunity to
participate in the Company's employee benefit plans (subject to certain
restrictions) until June 30, 2002.
John J. Whyte. Effective April 2, 2001, the Company entered into a
severance agreement with Mr. Whyte, the Company's former Executive Vice
President and Chief Operating Officer, providing for a severance payment by the
Company of $300,000 (50% of which was paid in fiscal 2001 and 50% of which will
be paid in fiscal 2002), the opportunity to participate in the Company's
employee benefit programs (to the extent allowed by such programs) until April
2, 2002, a housing allowance until May 31, 2001 and, at Mr. Whyte's option on
fifteen days prior notice, the Company will assume the remaining lease payments
for (thereby having full use of) an apartment located in Waltham, Massachusetts,
through February 28, 2002. In addition, in connection with the termination of
his employment, Mr. Whyte signed a one year non-competition and non-solicitation
agreement effective until April 2, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by "reporting
persons" of the Company under Section 16(a) of the Securities Exchange Act of
1934, as amended, and written representations from such reporting persons,
except as follows, the Company is not aware of any executive officer, director
or principal stockholder who failed to comply with filing requirements under
Section 16(a) during the fiscal year ended September 30, 2001, except as
follows: (1) on June 7, 2001, Fred Luconi filed two reports on Form 4, one of
which was required to be filed no later than December 10, 2000 and the other of
which was required to be filed not later than March 10, 2001, and (2) on January
3, 2002, Anne Marie Monk filed a report on Form 4 that was required to be filed
no later than August 10, 2001.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is comprised of three
non-employee directors: Messrs. Correia, Pampel and Cusumano. From time to time,
the Company's Chief Executive Officer (Mr. McGowan), General Counsel (Ms. Monk)
and Chief Financial Officer (Mr. Gerraughty) may attend meetings of the
Compensation Committee. In addition, the Company's former Chief Executive
Officer (Mr. Pemberton) and former Chief Operating Officer (Mr. Whyte) also
attended meetings from time to time while holding those offices in the Company.
Pursuant to authority delegated by the Board of Directors, the Compensation
Committee is responsible for establishing, amending, terminating and making
grants under the Company's stock and stock option plans and reviewing and
approving cash and non-cash compensation matters concerning the executive
officers of the Company. The Compensation Committee's objective is to establish
compensation programs designed to (a) attract, retain and reward executives who
will lead the Company in achieving its business goals and (b) align the
financial interests of the Company's executives with those of the Company's
long-term investors.
Overview
Compensation under the executive compensation program is comprised of cash
compensation in the form of salary, incentive bonuses, and long-term incentive
awards in the form of stock option grants. In the case of three executive
officers, fiscal 2001 compensation also included awards of restricted stock.
Through the second quarter of fiscal 2001, incentive compensation was based on
quarterly and annual performance. Beginning in
13
the third quarter of fiscal 2001, incentive compensation was based only on
semi-annual performance. In addition, the compensation program is comprised of
various benefits, including medical, disability and life insurance plans,
financial planning assistance, the 1995 Employee Stock Purchase Plan, a
401(k)-qualified savings and profit-sharing plan and retirement plans for
non-U.S. employees. All of these plans, other than the financial planning
assistance, are generally available to all employees of the Company, depending
on the country in which they work.
Annually, the Company reviews proxy information from comparable companies
and data from a number of surveys, including nationally recognized surveys, to
determine the compensation of its executives. The Compensation Committee
believes that each executive's total annual target compensation (that is, annual
base salary plus incentive compensation) is set within the range of compensation
for executives in comparable companies.
Base Salary
Base salary levels for each of the Company's executive officers, including
the Chief Executive Officer, are generally set within the range of base salaries
that the Compensation Committee believes are paid to similar executive officers
at comparable companies selected on the basis of similarity in revenue level,
industry segment and competitive employment market to the Company. In addition,
the Compensation Committee generally takes into account the Company's past
financial performance and future expectations, as well as the performance of the
executives, in determining base salary.
Base salary levels for fiscal year 2001 for each of the Company's executive
officers, including the Chief Executive Officer, were determined based on the
data described above. Fiscal year 2001 base salary levels for each of the
executive officers generally were at or near the seventy-fifth percentile of
salaries for the comparable positions at comparable companies.
Incentive Compensation
Except for Messrs. Whyte, Phillips, and Pemberton, and for Messrs. Joint,
Weyher and Kinion (each of whom served as executive officers in fiscal 2001 but
are not "named executive officers") as provided herein each of the executive
officers were eligible to receive cash bonuses at the end of the second half of
the fiscal year based upon the Company's performance and the executive officer's
attainment of objectives in support of the Company's strategic plan. Ms. Monk
and Mr. Planquart were also eligible to receive cash bonuses at the end of the
first and second quarters based on the Company's performance and the attainment
of objectives in support of the Company's strategic plan. Mr. Weyher was not
eligible to receive any cash bonus because he joined the Company after the
beginning of the fourth quarter of fiscal 2001. Mr. Whyte would have been
eligible to receive bonuses only if he had remained employed by the Company
through the end of the fiscal year. Mr. Phillips was eligible to receive a bonus
for the first and second quarter based on the Company's achievement of revenue
and EBITDA (earnings before interest, taxes, depreciation and amortization)
performance targets. Mr. Kinion was eligible to receive a bonus for the first
and second quarter based on the Company's achievement of revenue and operating
income targets from the AdvaNTage business unit, as well as the Company's
achievement of EBITDA performance targets. Mr. Joint was eligible to receive a
quarterly bonus, only while he was an executive officer, based on the attainment
of certain individual objectives. Mr. Pemberton was also eligible to receive a
quarterly bonus, only while he was the Chief Executive Officer, based on the
attainment of certain individual objectives. Generally, quarterly, semi-annual
and annual bonuses earned are based upon the Company's performance in comparison
to the quarterly, semi-annual and annual financial targets, and the attainment
by the executive officer of certain objectives. The Compensation Committee
believes that, although the ratio of bonus to base salary varies significantly,
the annual bonus amounts for fiscal year 2001 for each of the Company's
executive officers, including the Chief Executive Officer, were generally set
within the range of incentive compensation levels for comparable executives at
comparable companies.
The Company assigned each executive officer a target bonus amount, which
amounts range from $57,750 to $250,000 ($200,000 for Mr. McGowan), on an
annualized basis. The Company then determined fiscal year
14
2001 bonuses by analyzing achievement of financial targets, as well as
individual objectives, and awarded each executive officer a percentage of his or
her target bonus amount. Although the Company did not meet all of its financial
goals in the first half of the fiscal year, it exceeded its financial goals in
the second half of the fiscal year. Additionally, each executive achieved his or
her individual objectives, at least in part. Further, some of the executives
left their executive positions (or the Company) before the end of the fiscal
year. As a result, the bonuses received by six of the nine executive officers
were less than his or her target annual bonus amount. The bonuses received by
three of the nine executive officers were greater than his or her target annual
bonus amount because of the Company's over-achievement of its financial targets
in the second half of the fiscal year and achievement of individual objectives.
The percentage of target bonus earned by the executive officers also varied
because (i) performance goals varied among executive officers, (ii) some
executive officers were hired by the Company during the fiscal year and (iii)
some incentive compensation changed during the year. The percentage of target
bonus earned by the executive officers ranged from a low of 22% of target bonus
to a high of 112% of target bonus (112% for Mr. McGowan). For purposes of these
percentages, the target bonus amount used was the target amount in effect for
each executive officer as of the end of fiscal year 2001 and the percentage used
is based on actual bonus paid for the period served in the position.
In addition, if the Company's performance was substantially greater or less
than its performance targets in any period, actual bonuses paid to two
executives would have been greater or less than the target bonus by an
accelerated or decelerated factor, as the case may be.
In addition to the incentive compensation described above, Messrs. Whyte
and Gerraughty and Ms. Monk received special bonuses in the amounts of $50,000,
$25,000 and $25,000, respectively, for the achievement of strategic initiatives.
In general, for Messrs. McGowan and Gerraughty and Ms. Monk, for the second
half of fiscal 2001, 75% of their second half bonus amounts were based upon
semi-annual financial performance of the Company and 25% of their bonus amounts
were based on individual objectives. For Mr. Gutch, for the second half of the
year, 80% of his second half bonus amount was based upon semi-annual revenue
performance of the Company and 20% was based on individual objectives. For the
first half of the year, for Ms. Monk and Messrs. Joint and Planquart, 48% was
based on financial performance of the Company and 52% was based on individual
objectives; and for Mr. Phillips and Mr. Kinion, 100% was based on financial
objectives of the Company.
Quarterly, semi-annual and special bonuses totaling $586,436 were awarded
to the Company's executive officers, of which Mr. McGowan received $147,840.
Messrs. Gerraughty and Gutch, and Ms. Monk collectively received $216,986.
Stock Options and Other Stock Based Awards
Stock options are the principal vehicle used by the Company for the payment
of long-term compensation, to provide a stock-based incentive to improve the
Company's financial performance and to assist in the recruitment, retention and
motivation of professional, managerial and other personnel. The Company's stock
plans are administered by the Compensation Committee. As of the end of fiscal
2001, the Compensation Committee has not granted stock options at less than fair
market value, other than an option granted to Mr. Whyte which had an exercise
price below the fair market value of the Company's Common Stock on the grant
date.
Generally, stock options are granted to eligible employees from time to
time based primarily upon the individual's actual and/or potential contributions
to the Company and the Company's financial performance. Stock options are
designed to align the interests of the Company's executive officers with those
of its stockholders by encouraging executive officers to enhance the value of
the Company, the price of the Common Stock, and hence, the stockholders' return.
In addition, the vesting of stock options over a period of time is designed to
create an incentive for the individual to remain with the Company. Accordingly,
the Company grants new options to the executives, including the Chief Executive
Officer, on an ongoing basis to provide continuing incentives to the executives
for future performance and to incentivize them to remain with the Company.
15
In addition, the Company granted to each of Ms. Monk and Messrs. Phillips
and Joint a restricted stock award of 75,000 shares of Common Stock (all of such
shares were repurchased from Messrs. Phillips and Joint upon their respective
termination from the Company). Each of these grants were made at a price of
$0.01 per share. The grant of these awards was based on the factors described
above.
During the fiscal year ended September 30, 2001, options to purchase an
aggregate of 1,510,000 shares of Common Stock were awarded to the Company's
executive officers. Of these options, 700,000 were granted to Mr. McGowan.
Other Benefits
The Company also has various broad-based employee benefit plans. Executive
officers participate in these plans on the same terms as eligible, non-executive
employees, subject to any legal limits on the amounts that may be contributed or
paid to executive officers under these plans. The Company offers an employee
stock purchase plan, under which employees may purchase Common Stock at a
discount, and a 401(k) profit-sharing plan, which permits employees to invest in
a wide variety of funds on a pre-tax basis. The Company also maintains medical,
disability and life insurance plans and other benefit plans for its employees.
The Company also provides financial planning assistance for executive officers
of the Company.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for certain compensation in excess
of $1 million paid to the Company's Chief Executive Officer and the four other
most highly compensated executive officers. Certain compensation, including
qualified performance-based compensation, will not be subject to the deduction
limit if certain requirements are met. In general, the Company structures and
administers its 1995 Plan in a manner intended to comply with the
performance-based exception to Section 162(m). Nevertheless, the Compensation
Committee reserves the right to use its judgment to authorize compensation
payments that may be in excess of the limit when the Compensation Committee
believes such payments are appropriate and in the best interests of its
stockholders, after taking into consideration changing business conditions and
the performance of its employees.
The CEO'S Compensation
Consistent with the executive compensation policies described above of
providing salaries and target incentive compensation based on survey and proxy
data for comparable positions in comparable companies, the Compensation
Committee determined the base salary and target incentive compensation for Mr.
McGowan, the Company's Chief Executive Officer.
Mr. McGowan became the Chief Executive Officer of the Company in February
2001. Mr. McGowan's incentive compensation for fiscal 2001 was 112% of his
target incentive compensation due to his exceeding the financial performance
goals and meeting strategic goals, both set by the Board of Directors. For
fiscal 2001, Mr. McGowan received $211,875 in base salary and was awarded
bonuses totaling $147,840 based upon corporate financial and strategic
performance. Mr. McGowan's bonus compensation for fiscal 2001 was approximately
70% of his base salary. Mr. McGowan was also granted options to purchase 700,000
shares of Common Stock in fiscal 2001 in connection with his appointment as the
Company's Chief Executive Officer in February 2001.
RESPECTFULLY SUBMITTED BY THE
COMPENSATION COMMITTEE
Manuel Correia
Michael A. Cusumano
Roland D. Pampel
16
STOCK PERFORMANCE CHART
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the period
beginning September 30, 1996 and ending September 30, 2001, with the cumulative
total return for The Nasdaq Stock Market (U.S. companies) and the JP Morgan H&Q
Computer Software Index (f/k/a the Chase H&Q Computer Software Index ). The
comparison assumes $100 was invested on September 30, 1996 in the Company's
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends, if any.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG INFINIUM SOFTWARE, INC.
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE JP MORGAN H&Q COMPUTER SOFTWARE INDEX
<Table>
<Caption>
NASDAQ STOCK MARKET JP MORGAN H & Q
INFINIUM SOFTWARE, INC. (U.S.) COMPUTER INDEX
----------------------- ------------------- ---------------
9/96 100.00 100.00 100.00
9/97 151.92 137.27 129.07
9/98 96.15 139.44 134.78
9/99 51.28 227.82 198.79
9/00 27.57 302.47 386.00
9/01 7.69 386.00 115.89
</Table>
* $100 INVESTED ON 11/17/95 IN STOCK OR INDEX, INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30(TH.)
AUDIT COMMITTEE REPORT
The Company established an Audit Committee in 1995 and adopted its Audit
Committee Charter in April 2000.
The Audit Committee reviewed and discussed the Company's audited
Consolidated Financial Statements for the fiscal years ended September 30, 1999,
2000 and 2001 with the Company's management. The Audit Committee also discussed
with PricewaterhouseCoopers LLP, the Company's independent accountants, the
matters required to be discussed by SAS 61.
17
The Audit Committee received the written disclosures and the letter from
the independent accountants required by Independence Standards Board Standard
No. 1, and discussed with them their independence. The Audit Committee also
considered whether the provision of non-audit services to the Company is
compatible with maintaining the accountant's independence.
Based on its review and the discussions noted above, the Audit Committee
recommended to the Board of Directors that the Company's Consolidated Financial
Statements for the fiscal years ended September 30, 1999, 2000 and 2001 be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2001 for filing with the SEC.
RESPECTFULLY SUBMITTED BY THE
AUDIT COMMITTEE
Robert P. Schechter
Roland D. Pampel
Fred L. Luconi
CERTAIN RELATED PARTY TRANSACTIONS
The Company has adopted a policy whereby all transactions between the
Company and its officers, directors and affiliates will be on terms no less
favorable to the Company than could be obtained from unrelated third parties and
will be approved by a majority of the disinterested members of the Company's
Board of Directors.
During fiscal 2000, the Company entered into a consulting agreement with
Wianno Ventures, a business controlled by a member of Mr. Pemberton's family. In
fiscal 2001, the Company paid an aggregate of $53,000 in fees for services
rendered by Wianno Ventures. The Company believes the services rendered and fees
incurred are based on terms and conditions no less favorable to the Company than
could be obtained from unrelated third parties.
PROPOSAL 2
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of PricewaterhouseCoopers LLP ("PwC") as the Company's
independent accountants for the fiscal year ending September 30, 2002. PwC has
served as the Company's independent accountants since 1994. Although stockholder
approval of the Audit Committee's selection of PwC is not required by law, the
Board of Directors believes that it is advisable to give stockholders the
opportunity to ratify this selection. If this proposal is not approved at the
Annual Meeting, the Audit Committee will reconsider its selection of PwC.
Representatives of PwC are expected to be present at the Annual Meeting. They
will have the opportunity to make a statement if they desire to do so and will
also be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS BELIEVES THAT THE RATIFICATION OF THE SELECTION OF
PWC AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING
SEPTEMBER 30, 2002 IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS
AND RECOMMENDS A VOTE FOR THIS PROPOSAL.
AUDIT FEES
PwC billed the Company an aggregate of $176,800 in fees for professional
services rendered in connection with the audit of the Company's financial
statements and the review of the financial statements included in each of the
Company's Quarterly Reports on Form 10-Q during the fiscal year ended September
30, 2001.
18
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PwC did not perform any professional services for the Company and its
affiliates during the fiscal year ended September 30, 2001, in connection with
financial information systems design or implementation, the operation of the
Company's information systems or the management of its local area network.
ALL OTHER FEES
PwC billed the Company an aggregate of $69,388 in fees for other services
rendered to the Company and its affiliates for the fiscal year ended September
30, 2001, consisting of fees and expenses for statutory audits, accounting
consultations and registration statements filed with the SEC.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
at the 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.
All costs of 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,
telegraph and personal interviews. The Company reserves the right to retain
outside agencies for purposes of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and the Company will reimburse them for reasonable
out-of-pocket expenses in connection with the distribution of proxy solicitation
material.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders to take place in 2003 must be received by the Company at its
principal office in Hyannis, Massachusetts no later than September 9, 2002 for
inclusion in the proxy statement for that meeting.
Proposals of stockholders submitted outside the processes of Rule 14a-8 of
the Exchange Act (relating to proposals to be presented at the 2003 Annual
Meeting but not included in the Company's proxy statement and form of proxy)
must be received by the Company at its principal office in Hyannis,
Massachusetts between October 11, 2002 and November 12, 2002 in order to be
considered timely for purposes of Rule 14a-4 under the Exchange Act. The persons
designated in the Company's proxy card will be granted discretionary authority
with respect to any stockholder proposal with respect to which the Company does
not receive timely notice. If a shareholder proposal is received by the Company
in a timely manner, the persons designated in the Company's proxy card may still
exercise discretionary authority under circumstances consistent with the SEC's
proxy rules.
By order of the Board of Directors,
ANNE MARIE MONK,
Clerk
Hyannis, Massachusetts
January 7, 2002
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. YOUR PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING, AND WE
APPRECIATE YOUR COOPERATION.
19
1452-PS-02
PROXY INFINIUM SOFTWARE, INC. PROXY
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 8, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoint(s) James E.
McGowan and Anne Marie Monk, and each of them, with full power of substitution,
as proxies to represent and vote, as designated herein, all shares of Common
Stock of Infinium Software, Inc. (the "Corporation") which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Stockholders
of the Corporation to be held on Friday, February 8, 2002 at 9:30 a.m., Boston
time, at the Boston Marriott Copley Place, 110 Huntington Avenue, Boston,
Massachusetts 02116, and at any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting or any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
IN FAVOR OF ALL PROPOSALS.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
1. To elect two (2) Class III directors to serve for a three-year term or until
their successors are elected and qualified.
Class III Director Nominees: Michael A. Cusumano and Roland D. Pampel.
[ ] FOR the nominees [ ] WITHOLD authority to vote for
(except as marked below) all nominees
FOR all nominees, except authority withheld
to vote for the following nominee: _________________________________
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending September 30, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: Please sign your name exactly as it appears on your stock certificate(s),
write in the date and return this proxy as soon as possible in the enclosed
envelope. If the stock is registered in more than one name, each joint owner
should sign. If signing as attorney, executor, trustee, administrator or
guardian, please give full title as such. Only authorized officers should sign
for corporations.
Date: ________________________ Date: ________________________
______________________________ ______________________________
Signature Signature (if held jointly)