1
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
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Software 2000, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
The Board of Directors of Software 2000, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
- --------------------------------------------------------------------------------
2
SOFTWARE 2000, INC.
25 COMMUNICATIONS WAY
HYANNIS, MASSACHUSETTS 02601
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Software 2000, Inc.:
The Annual Meeting of Stockholders of Software 2000, Inc. (the
"Corporation"), a Massachusetts corporation, will be held on Friday, February
14, 1997 at 4:30 p.m., local time, at The Cape Codder Hotel located at Route 132
and Bearses Way, Hyannis, Massachusetts 02601, for the following purposes:
1. To elect two (2) Class I directors to serve for a three-year term
or until their successors are elected and qualified.
2. To amend the Corporation's Second Restated Articles of
Organization, to change the corporate name to "Infinium Software, Inc."
3. To ratify the selection of the firm of Price Waterhouse LLP as
independent auditors for the fiscal year ending September 30, 1997.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on January 7, 1997 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
By Order of the Board of Directors
ANNE MARIE MONK
Clerk
Hyannis, Massachusetts
January 13, 1997
3
SOFTWARE 2000, INC.
25 COMMUNICATIONS WAY
HYANNIS, MASSACHUSETTS 02601
------------------------
PROXY STATEMENT
------------------------
JANUARY 13, 1997
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of Software 2000, Inc., a Massachusetts corporation (the
"Corporation"), for use at the Annual Meeting of Stockholders to be held on
Friday, February 14, 1997, at 4:30 p.m., local time, at The Cape Codder Hotel,
Route 132 and Bearses Way, Hyannis, Massachusetts 02601.
Only stockholders of record at the close of business on January 7, 1996
(the "Record Date") will be entitled to receive notice of and to vote at the
meeting and any adjournments thereof. As of that date, 11,886,612 shares of
common stock, $.01 par value per share (the "Common Stock"), of the Corporation
were issued and outstanding. The holders of Common Stock are entitled to one
vote per share on any proposal presented at the meeting. Stockholders may vote
in person or by proxy. Execution of a proxy will not in any way affect a
stockholder's right to attend the meeting and vote in person. Any proxy may be
revoked by a stockholder at any time before its exercise by: (i) delivering
written revocation or a later dated proxy to the Clerk of the Corporation; or
(ii) attending the Annual Meeting and voting in person.
The representation in person or by proxy of at least a majority of the
outstanding Common Stock entitled to vote at the meeting is necessary to
constitute a quorum for the transaction of business. Votes withheld from any
nominee, abstentions and broker "non-votes" are counted as present or
represented for purposes of determining the presence or absence of a quorum for
the meeting. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because, in
respect of such other proposal, the nominee does not have discretionary voting
power and has not received instructions from the beneficial owner.
In the election of directors, the nominees receiving the highest number of
affirmative votes of the shares present or represented and entitled to vote at
the meeting shall be elected as directors. On all other matters being submitted
to stockholders, an affirmative vote of a majority of the shares present or
represented and voting on each such matter is required for approval. An
automated system administered by the Corporation's transfer agent tabulates the
votes on each matter submitted to stockholders. Abstentions are included in the
number of shares present or represented and voting on each matter. Broker
"non-votes" are not so included.
The persons named as attorneys-in-fact in the proxies are officers and/or
directors of the Corporation. All properly executed proxies returned in time to
be counted at the meeting will be voted. In addition to the election of
directors, the stockholders will consider and vote upon a proposal to ratify the
selection of auditors and approve an amendment to the Corporation's Second
Restated Articles to change the name of the Corporation, as further described in
this proxy statement. Where a choice has been specified on the proxy with
respect to the foregoing matters, the shares represented by the proxy will be
voted in accordance with the specifications and will be voted FOR if no
specification is indicated.
The Board of Directors knows of no other matters to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote properly may be taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as attorneys in the proxies.
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended September 30, 1996, is being mailed together with this proxy
statement to all stockholders entitled to vote. This proxy statement and the
form of proxy were first mailed to stockholders on or about January 13, 1997.
4
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of the Record Date: (i) the name of each
person who, to the knowledge of the Corporation, owned beneficially more than 5%
of the Common Stock of the Corporation outstanding at such date; (ii) the name
of each director or nominee; and (iii) the name of each executive officer
identified in the Summary Compensation Table set forth below under "Compensation
and Other Information Concerning Directors and Officers," the number of shares
owned by each of such persons and the percentage of the outstanding shares
represented thereby, and also sets forth such information for all executive
officers, directors and nominees as a group.
AMOUNT AND
NAME AND ADDRESS NATURE PERCENT
OF BENEFICIAL OWNER OF OWNERSHIP(1) OF CLASS(2)
------------------- --------------- -----------
Robert A. Pemberton(3)............................................ 2,676,463 22.52%
c/o Software 2000, Inc.
25 Communications Way
Hyannis, MA 02601
Kopp Investment Advisors, Inc.(4)................................. 1,811,470 15.24%
6600 France Avenue South, Suite 672
Edina, Minnesota 55435
Frederick J. Lizza(5)............................................. 123,946 1.04%
John W. Baumstark(6).............................................. 120,600 1.01%
Daniel J. Kossman(7).............................................. 141,600 1.19%
Anne Marie Monk(8)................................................ 80,500 *
R. Stephen Cheheyl(9)............................................. 12,000 *
Manuel Correia(10)................................................ 29,000 *
Roland D. Pampel(11).............................................. 8,000 *
Robert P. Schechter(12)........................................... 8,000 *
All Executive Officers and Directors as a group (nine persons)(13) 3,114,163 26.20%
- ---------------
<FN>
* Less than 1%
(1) Except as otherwise noted, each person or entity named in the table has
sole voting and investment power with respect to the shares. The inclusion
herein of any shares of Common Stock deemed beneficially owned does not
constitute an admission of beneficial ownership of those shares.
(2) Applicable percentage of ownership as of the Record Date is based upon
11,886,612 shares of Common Stock outstanding on such date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "Commission"), and includes voting and investment
power with respect to shares. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days of the Record Date 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) Includes 3,000 shares held by one of Mr. Pemberton's children and as to
which he disclaims beneficial ownership. Also includes 186,400 shares to be
held by the Pemberton Family Foundation, Inc., a not-for-profit
organization exempt from tax under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, the directors and officers of which are
Robert A. Pemberton and his wife, Patricia Pemberton.
(4) According to filings made by Kopp Investment Advisors, Inc, ("Kopp") with
the Commission, (a) although Kopp exercises investment discretion as to
these shares, it does not vote the shares and is not the record owner of
them and (b) Kopp is an investment adviser registered under the Investment
Advisers Act of 1940.
(5) Includes 94,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
2
5
(6) Includes 102,600 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(7) Includes 111,600 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(8) Consists of Common Stock beneficially owned pursuant to stock options
exercisable within 60 days of the Record Date.
(9) Includes 7,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(10) Includes 28,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(11) Includes 7,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date. The remaining
1,000 shares of Common Stock are held jointly by Mr. Pampel and his wife.
(12) Includes 7,000 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
(13) Includes 437,700 shares of Common Stock issuable pursuant to outstanding
stock options exercisable within 60 days of the Record Date.
3
6
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is currently fixed at six members. The Board of
Directors is divided into three classes, each of which consists of two
directors. Each director serves for a three-year term. However, each Class II
and Class III director will serve for an initial term ending at the 1997 and
1998 Annual Meeting of Stockholders to be held in 1998 and 1999, respectively.
The term of the Class I directors will expire at this Meeting. All directors
will hold office until their successors have been duly elected and qualified or
until their earlier resignation or removal. Manuel Correia and Frederick J.
Lizza are the Class I directors; Robert A. Pemberton and Robert P. Schechter are
the Class II directors; and Roland D. Pampel and R. Stephen Cheheyl are the
Class III directors.
The Board of Directors has nominated and recommended that Messrs. Correia
and Lizza, who are currently members of the Board of Directors, be elected Class
I directors, to hold office until the 1999 Annual Meeting of Stockholders or
until their successors have been duly elected and qualified or until their
earlier resignation or removal. The Board of Directors knows of no reason why
the nominees should be unable or unwilling to serve, but if any nominee should
for any reason be unable or unwilling to serve, the proxies will be voted for
the election of such other person for the office of director as the Board of
Directors may recommend in the place of such nominee. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for
nominees named below. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE NOMINEES LISTED BELOW.
The following table sets forth the nominees to be elected at the meeting
and, for each director whose term of office will extend beyond the meeting, the
year such nominee or director was first elected a director, the positions
currently held by the nominees and each director with the Corporation, the year
the nominee's or director's term will expire and class of director of each
nominee and each director:
NOMINEE'S OR DIRECTOR'S
NAME AND YEAR NOMINEE OR DIRECTOR POSITION(S) WITH YEAR TERM CLASS OF
FIRST BECAME A DIRECTOR THE CORPORATION WILL EXPIRE DIRECTOR
- --------------------------------- ---------------- ----------- --------
NOMINEES:
Manuel Correia................................ Director 1997 I
1993
Frederick J. Lizza............................ Director, President and 1997 I
1996 Chief Executive Officer
CONTINUING DIRECTORS:
Robert A. Pemberton........................... Director and Chairman of 1998 II
1981 the Board
Robert P. Schechter........................... Director 1998 II
1995
Roland Pampel................................. Director 1999 III
1995
R. Stephen Cheheyl............................ Director 1999 III
1995
4
7
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the director nominees to be elected at the
meeting, the directors and the executive officers of the Corporation, their
ages, and the positions currently held by each such person with the Corporation.
NAME AGE POSITION
---- --- --------
Robert A. Pemberton............. 55 Director and Chairman of the Board
Frederick J. Lizza.............. 42 Director, President and Chief Executive
Officer
John W. Baumstark............... 34 Senior Vice President, Field Operations
Daniel J. Kossmann.............. 40 Chief Financial Officer, Vice President
and Treasurer
Anne Marie Monk................. 38 General Counsel, Vice President, Secretary
and Clerk
Francis J. Torbey............... 39 Vice President, Application Development
R. Stephen Cheheyl (1).......... 51 Director
Manuel Correia (2).............. 62 Director
Roland D. Pampel (2)............ 62 Director
Robert P. Schechter (1)......... 48 Director
- ---------------
<FN>
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Robert A. Pemberton founded the Corporation 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 as President from 1981 to 1990 and from 1993 to
February 1996. Prior to founding the Corporation, Mr. Pemberton held management
positions at State Street Bank in Boston and was a Vice President at Boston Safe
Deposit and Trust Company.
Frederick J. Lizza joined the Corporation in January 1995 as Executive Vice
President, Product Development and Marketing and assumed responsibility for
Customer Support in September 1995. From February to December 1996, Mr. Lizza
has served as President and Chief Operating Officer of the Corporation. He was
elected as a Director of the Corporation in April 1996 and became Chief
Executive Officer in December 1996. Prior to joining the Corporation, Mr. Lizza
held various executive positions at Trinzic Corporation from 1986 to January
1995, most recently as Vice President and General Manager, Data Access Product
Group. Previously, Mr. Lizza held various marketing management positions at
Software International (a subsidiary of General Electric Information Services)
and at Arthur Andersen & Company.
John W. Baumstark joined the Corporation in April 1989 and has been Senior
Vice President, Field Operations since July 1995, after having served as Vice
President, Worldwide Sales and Service Operations from October 1994 to July
1995, Vice President, North American Operations from September 1993 to October
1994 and Regional Sales Manager from December 1991 to September 1993. Prior to
joining the Corporation, Mr. Baumstark held various sales and marketing
positions at NCR from June 1984 to March 1986 and at Management Science America
from March 1986 to April 1989.
Daniel J. Kossman joined the Corporation in June 1992 as Chief Financial
Officer and Vice President. He is responsible for the Finance, Information
Systems, Human Resources and Operations functions. Prior to joining the
Corporation, Mr. Kossmann was Vice President, Finance and Administration and
Chief Financial Officer of Datalogix International from 1989 to June 1992, and
held various management positions at National Education Corporation from 1981 to
1988. From 1978 to 1981, Mr. Kossmann was employed by Price Waterhouse LLP.
Anne Marie Monk joined the Corporation in October 1991 as General Counsel
and has served as General Counsel and Vice President since February 1993. She is
responsible for the Legal, Contracts Administration, Customer Relations and
Quality functions. Prior to joining the Corporation, Ms. Monk was associated
with the Boston law firms of Csaplar & Bok and Gaston & Snow from 1985 to 1991.
5
8
Francis J. Torbey joined the Corporation in June 1996 as Vice President,
Application Development and became an executive officer of the Corporation in
October 1996. He is responsible for all application development and research
groups. Prior to joining the Corporation, Mr. Torbey was an executive of
Landmark Systems Corporation from 1993 to 1996, most recently as Vice President
of Distributed Products. From 1990 to 1993, Mr. Torbey was Director of Research
& Development for Intersolv Inc. and held various management positions at Air
Products & Chemicals from 1979 to 1990.
R. Stephen Cheheyl has been a Director of the Corporation since July 1995.
From October 1994 until he retired in December 1995, Mr. Cheheyl served as an
Executive Vice President of Bay Networks, Inc., when Bay Networks was formed
though the merger of Wellfleet Communications, Inc. ("Wellfleet") and Synoptics
Communications Inc. From December 1990 to October 1994, Mr. Cheheyl served as
Senior Vice President, Finance and Administration, of Wellfleet. He also serves
as a director of Auspex Systems, Inc., ON Technology Corporation and Sapient
Corporation.
Manuel Correia joined the Corporation's Board of Directors in September
1993. Mr. Correia has served as Vice President, Technical Services of Cadence
Design Systems since 1994, Vice President, Applications Engineering Operations
of Cadence Design Systems from 1993 to 1994 and as Vice President, Customer
Service from 1991 to 1993. Mr. Correia is also a director of C.ATS.
Roland D. Pampel joined the Corporation's Board of Directors in July 1995.
Mr. Pampel has been the President, Chief Executive Officer and a director of
Microcom since March 1994. Prior to joining Microcom, Mr. Pampel served as the
President, Chief Executive Officer and a director of Nicolet Instrument
Corporation from October 1991 to December 1993, and as President, Chief
Executive Officer and a director of Bull HN Information Systems from January
1988 to July 1990. Mr. Pampel is also a director of Cayenne Software.
Robert P. Schechter joined the Corporation's Board of Directors in July
1995. Mr. Schechter has been the President, Chief Executive Officer and a
director of Natural MicroSystems Corporation since May 1995 and Chairman since
March 1996. From 1987 to 1994, Mr. Schechter held various senior executive
positions at Lotus Development Corporation and from 1980 to 1987 was a partner
of Coopers & Lybrand L.L.P. Mr. Schechter is also a director of MRS Technology,
Fluor Daniel GTI and Raptor Systems.
Executive officers of the Corporation are elected by the Board of Directors
on an annual basis and serve until the next annual meeting of the Board of
Directors and until their successors have been duly elected and qualified.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met four (4) times during the fiscal year ended
September 30, 1996. No director, during fiscal 1996, attended less than
seventy-five percent of the aggregate of all meetings of the Board of Directors
and of the Board committee on which he serves. The Corporation has an Audit
Committee and a Compensation Committee. The Audit Committee of the Board of
Directors, of which Messrs. Cheheyl and Schechter are currently members, is
responsible for reviewing the scope, results and costs of the audit with the
Corporation's independent accountants; and reviewing the financial statements
and audit practices of the Corporation. The Audit Committee met five (5) times
during the last fiscal year. The Compensation Committee, whose members currently
are Messrs. Correia and Pampel, is responsible for recommending compensation and
benefits for the executive officers of the Corporation to the Board of Directors
and for administering the Corporation's 1984 Incentive Stock Option Plan, as
amended (the "1984 Plan"), the 1989 Stock Option Plan (the "1989 Plan"), the
1995 Stock Plan (the "1995 Plan"), the 1995 Employee Stock Purchase Plan (the
"Purchase Plan") and the 1995 Non-Employee Director Stock Option Plan (the
"Director Plan"). The Compensation Committee met three (3) times during fiscal
1996. The Board of Directors does not currently have a nominating committee.
6
9
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth summary information concerning the
compensation earned for services rendered to the Corporation in all capacities
during the fiscal years ended September 30, 1996 and 1995 to (i) the
Corporation's Chief Executive Officer and (ii) each of the other four most
highly compensated executive officers of the Corporation who received total
annual salary and bonus in excess of $100,000 in fiscal 1996 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION(3)
---------------
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
------------------------------------ UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/ ALL OTHER
POSITION(1) YEAR SALARY BONUS COMPENSATION(2) SARS(#) COMPENSATION
- ---------------------------- ---- -------- ------- --------------- --------------- ------------
Robert A. Pemberton......... 1996 $242,000 $59,423 -- -- $127,554(4)
Chief Executive Officer 1995 242,000 27,316 -- -- 127,989(4)
Frederick J. Lizza(5)....... 1996 190,625 50,311 -- 180,000 5,292(9)
President 1995 124,744 39,507 -- 196,000 63,181(6)
John W. Baumstark........... 1996 160,000 46,719 41,651(7) 28,000 6,100(9)
Senior Vice President 1995 160,000 46,894 57,742(7) 84,000 3,200(8)
Daniel J. Kossmann.......... 1996 152,000 39,299 -- 28,000 5,540(9)
Chief Financial Officer 1995 152,000 39,507 -- 56,000 3,040(8)
Anne Marie Monk............. 1996 125,000 25,904 -- 28,000 4,375(9)
General Counsel........... 1995 100,000 33,863 -- 42,000 2,000(8)
- ---------------
<FN>
(1) Principal positions shown are those held as of September 30, 1996, the end
of fiscal year 1996. In December 1996, Mr. Pemberton became Chairman and Mr.
Lizza became Chief Executive Officer of the Corporation.
(2) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where the aggregate amount of 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 the Named
Executive Officer for such year.
(3) Represents stock options granted during fiscal 1995 and 1996, respectively,
under the Corporation's 1989 Plan and 1995 Plan. The Corporation did not
make any restricted stock awards, grant any stock appreciation rights or
make any long-term incentive plan payouts during fiscal 1995 or 1996.
(4) Represents (a) disability insurance premiums paid on policies maintained by
the Corporation, (b) the Corporation matching contributions under the 401(k)
Plan, (c) life insurance premiums paid on universal life policy maintained
by the Corporation, and (d) the dollar value of the benefit to Mr. Pemberton
of split-dollar life insurance premiums paid on policies maintained by the
Corporation, determined on an actuarial basis. See "Certain Relationships
and Related Transactions."
(5) Mr. Lizza, who joined the Corporation in January 1995, received an annual
salary of $175,000 in fiscal 1995.
(6) Represents a $15,000 signing bonus and $48,181 paid for relocation expenses.
(7) Represents sales commissions for the fiscal year.
(8) Represents Corporation matching contributions under the 401(k) Plan.
7
10
(9) Represents Corporation matching contributions under the 401(k) Plan and
payments related to the financial planning assistance benefit.
EXECUTIVE COMPENSATION PLAN
For fiscal 1995 and 1996, each of the executive officers of the Company
participated in an incentive bonus plan which provided cash bonuses based upon
the attainment of certain corporate quarterly and annual performance goals. The
amounts of these bonuses earned in fiscal year 1996 are included in the
compensation table set forth above.
The executive bonus plan for fiscal 1996 contains substantially the same
terms as the 1995 plan. In addition, the plan provides that, in the event the
executive is terminated without cause, he or she will be entitled to receive (i)
severance pay from the Company in a lump sum equal to the total annual target
compensation for the year (salary, commissions and bonuses), (ii) employee
benefits for one year following the date of termination and (iii) acceleration
of the vesting of all outstanding options.
OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during fiscal 1996 to the Named Executive Officers. No stock
appreciation rights ("SARs") were granted during fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------------ REALIZABLE VALUE
PERCENT OF TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED PRICE APPRECIATION
UNDERLYING TO EMPLOYEES EXERCISE OR FOR OPTION TERM (4)
OPTIONS IN BASE PRICE PER EXPIRATION -----------------------
NAME GRANTED (1) FISCAL YEAR (2) SHARE (3) DATE 5% 10%
---- ----------- ---------------- -------------- ---------- ---------- ----------
Robert A. Pemberton..... -- -- -- -- -- --
Frederick J. Lizza...... 152,000 24.95% $11.3750 2/16/06 $1,087,359 $2,755,581
28,000 11.00 10/18/05 193,700 490,873
John W. Baumstark....... 28,000 3.88% 11.00 10/18/05 193,700 490,873
Daniel J. Kossmann...... 28,000 3.88% 11.00 10/18/05 193,700 490,873
Anne Marie Monk......... 28,000 3.88% 11.00 10/18/05 193,700 490,873
- ---------------
<FN>
(1) Options granted become exercisable at the rate of 25% annually over four
years from the date of grant.
(2) Based on an aggregate of 721,560 shares subject to options granted to
employees of the Company in fiscal 1996.
(3) The exercise or base 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.
(4) 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 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.
8
11
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to options to
purchase the Corporation's Common Stock granted under the Corporation's 1989
Plan and 1995 Plan to the Named Executive Officers who are listed in the Summary
Compensation Table above, including (i) the number of shares of Common Stock
purchased upon exercise of options in the fiscal year ended September 30, 1996;
(ii) the net value realized upon such exercise; (iii) the number of unexercised
options outstanding at September 30, 1996; and (iv) the value of such
unexercised options at September 30, 1996:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES(1)
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED VALUE OPTIONS AT FISCAL THE-MONEY OPTIONS AT FISCAL
ON REALIZED YEAR-END YEAR-END ($)(3)
NAME EXERCISE(#) ($)(2) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- ---------------------------
Robert A. Pemberton........... -- -- --/-- --/--
Frederick J. Lizza............ 49,000 $681,254 0/327,000 0/$738,675
John W. Baumstark............. 43,000 480,836 53,600/127,400 $286,618/522,809
Daniel J. Kossmann............ 55,000 669,499 76,601/120,399 460,511/507,145
Anne Marie Monk............... 11,200 175,280 45,500/83,300 263,315/268,561
- ---------------
<FN>
(1) The Company has not granted SARs.
(2) Amounts disclosed in this column do not reflect amounts actually received by
the Named Executive Officers, but are calculated based on the difference
between the fair market value of the Corporation's Common Stock on the date
of exercise and the exercise price of the options. The actual value realized
by each of Messrs. Lizza, Baumstark and Kossmann and Ms. Monk was
approximately $262,565, $291,596, $279,999 and $133,280, respectively. The
difference between the amounts in this column and the amounts actually
realized by such officers reflects the difference between the fair market
value of the Corporation's Common Stock on the date of exercise and the
proceeds received by such officers as Selling Stockholders in connection
with sales of Common Stock in the Corporation's secondary public offering.
Furthermore, Messrs. Lizza, Baumstark and Kossmann have not sold all of
their exercised options. Named Executive Officers will receive cash only if
and when they sell the Common Stock issued upon exercise of the options and
the amount of cash received by such individuals is dependent on the price of
the Corporation's Common Stock at the time of such sale.
(3) Value is based on the difference between the option exercise price and the
fair market value at September 30, 1996, the fiscal year-end ($9.125 per
share as quoted on the Nasdaq National Market), multiplied by the number of
shares underlying the option.
STOCK PLANS
The Corporation currently has five stock ownership plans: the 1984 Plan;
the 1989 Plan; the 1995 Plan; the Purchase Plan; and the Director Plan.
Following is a summary of the material features of the 1984 Plan, the 1989 Plan,
the 1995 Plan, the Purchase Plan and the Director Plan.
1984 INCENTIVE STOCK OPTION PLAN. The Corporation's 1984 Plan provides for
the issuance of a maximum of 1,400,000 shares of Common Stock pursuant to the
exercise of incentive stock options granted to employees of the Corporation.
The 1984 Plan is administered by the Compensation Committee of the Board of
Directors, which has the authority to select the optionees and determine the
terms of the options granted, including (i) the number of shares subject to each
option, (ii) option exercise terms, (iii) the exercise price of the option,
which cannot be less than the market price of the Common Stock as of the date of
grant and (iv) the duration of the option. An option is not transferable by the
optionholder except by will or by the laws of descent and distribution.
Generally, no incentive stock option may be exercised more than three months
following termination of
9
12
employment unless the termination is due to death or disability, in which case
the option is exercisable for a maximum of one year after such termination.
As of January 7, 1997, options to purchase 1,312,500 shares of Common Stock
at a weighted average exercise price of $0.41 were granted and exercised under
the 1984 Plan. Authority to grant additional options under the 1984 Plan has
expired.
1989 STOCK OPTION PLAN. The Corporation's 1989 Plan provides for the
issuance of a maximum of 2,800,000 shares of Common Stock pursuant to the
exercise of incentive stock options granted to employees and nonqualified stock
options granted to employees, consultants, directors and key advisers of the
Corporation.
The 1989 Plan is administered by the Compensation Committee of the Board of
Directors, which has the authority to select the optionees and determine the
terms of the options granted, including (i) the number of shares subject to each
option, (ii) option exercise terms, (iii) the exercise price of the option
(which in the case of an incentive stock option cannot be less than the market
price of the Common Stock as of the date of grant) and (iv) the duration of the
option. An option is not transferable by the optionholder except by will or by
the laws of descent and distribution. Generally, no options may be exercised
more than three months following termination of employment or more than one year
following retirement. If, however, an option is exercised more than three months
following retirement (unless such retirement is due to disability), it will be
treated as a nonqualified stock option rather than an incentive stock option.
Generally, vested options which are transferred by will or by the laws of
descent and distribution may be exercised within three months of the original
optionholder's death.
As of January 7, 1997, options to purchase 1,267,201 shares of Common Stock
at a weighted average exercise price of $3.88 were outstanding under the 1989
Plan, of which 697,081 shares were exercisable within 60 days and options to
purchase 801,867 shares had been exercised at a weighted average exercise price
of $3.70 per share. Authority to grant additional options under the 1989 Plan
was terminated as of October 2, 1995.
1995 STOCK PLAN. On October 2, 1995, the Board of Directors adopted, and on
October 20, 1995 the stockholders approved, the Corporation's 1995 Plan. The
Plan provides for the issuance of a maximum of 3,500,000 shares of Common Stock
pursuant to the exercise of incentive stock options and nonqualified stock
options, stock awards or purchase rights granted to employees, consultants,
directors and officers of the Corporation.
The 1995 Plan is administrated by the Compensation Committee of the Board
of Directors. Subject to the provisions of the 1995 Plan, the Compensation
Committee has the authority to select the optionees or stock recipients and
determine the terms of the options or restricted stock granted, including (i)
the number of shares, (ii) option exercise terms, (iii) the exercise or purchase
price (which in the case of an incentive stock option cannot be less than the
market price of the Common Stock as of the date of grant), (iv) the duration of
the option and (v) the time, manner and form of payment for restricted stock and
upon exercise of an option. An option is not transferable by the optionholder
except by will or by the laws of descent and distribution, or, in the case of
nonqualified options only, pursuant to a valid domestic relations order.
Generally, no incentive stock option may be exercised more than three months
following termination of employment unless the termination is due to death or
disability, in which case the option is exercisable for a maximum of 180 days
after such termination.
As of January 7, 1997, options to purchase 1,212,510 shares of Common Stock
at a weighted average exercise price of $8.42 were outstanding under the 1995
Plan, of which 105,164 shares were exercisable within 60 days and options to
purchase 525 shares had been exercised at a weighted average exercise price of
$8.75 per share.
1995 EMPLOYEE STOCK PURCHASE PLAN. On October 2, 1995, the Board of
Directors adopted, and on October 20, 1995 the stockholders approved, the
Purchase Plan, which provides for the issuance of a maximum of 1,400,000 shares
of Common Stock pursuant to the exercise of nontransferable options granted to
participating employees.
10
13
The Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Corporation (except employees who own
five percent or more of the Corporation's stock) whose customary employment is
more than 20 hours per week and more than five months per calendar year are
eligible to participate in the Purchase Plan. To participate in the Purchase
Plan, an employee must authorize the Corporation to deduct an amount (not less
than one percent nor more than ten percent of a participant's regular pay) from
his or her pay during six-month periods (each a "Payment Period"). The first
such period commenced on November 17, 1995 and ended on June 30, 1996. The
maximum number of shares of Common Stock that an employee may purchase in any
Payment Period is 500 shares. The exercise price for the option for each Payment
Period is 85% of the lesser of the market price of the Corporation's Common
Stock on the first or last business day of the Payment Period. An employee's
rights under the Purchase Plan terminate upon his or her voluntary withdrawal
from the plan at any time or upon termination of employment.
As of January 7, 1997, the Corporation had issued 87,582 shares of Common
Stock under the Purchase Plan at a weighted average price of $8.34.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. On October 2, 1995, the Board
of Directors adopted, and on October 20, 1995 the stockholders approved, the
Director Plan, which provides for the issuance of a maximum of 210,000 shares of
Common Stock of the Corporation pursuant to the exercise of options granted to
non-employee directors of the Corporation.
The Director Plan is administrated by the Compensation Committee of the
Board of Directors. Each person who becomes a director of the Corporation after
the effective date of the Corporation's initial public offering and who is not
also an employee or officer of the Corporation shall be granted, on the date on
which he or she becomes a director, an option to purchase 28,000 shares of
Common Stock, which will be exercisable over a period of four years at the rate
of 25% per year. In addition, beginning at the Corporation's annual meeting of
stockholders for the fiscal year ended September 30, 1996 and at each successive
annual meeting, each non-employee director will receive an option to purchase
4,000 shares of Common Stock, which will also be exercisable over a period of
four years at the rate 25% per year. The exercise price per share for all
options granted under the Director Plan will be equal to the market price of the
Common Stock on the date of grant. The term of each option will be for a period
of ten years from the date of grant. Options may not be assigned or transferred
except by will or by the laws of descent and distribution, or pursuant to a
domestic relations order, and are exercisable to the extent vested only while
the optionee is serving as a director or consultant of the Corporation or within
90 days after the optionee ceases to serve as a director or consultant of the
Corporation, subject to limited extension (except that if a director dies or
becomes disabled while he or she is serving as a director or consultant of the
Corporation, the option is exercisable until the scheduled expiration date of
the option).
As of January 7, 1997, no options to purchase shares of Common Stock were
outstanding under the Director Plan.
Certain Federal Income Tax Information. The following discussion of United
States federal income tax consequences of the issuance and exercise of options
granted under the 1984 Plan, the 1989 Plan, the 1995 Plan, the Purchase Plan and
the Director Plan, and of certain other rights granted under the 1995 Plan, is
based upon the provisions of the Internal Revenue Code of 1986, as amended, as
in effect on the date of this Proxy Statement, current regulations, and existing
administrative rulings of the Internal Revenue Service. It is not intended to be
a complete discussion of all of the federal income tax consequences of these
plans or of the requirements that must be met in order to qualify for the
described tax treatment. In addition, there may be foreign, state or local tax
consequences that are not discussed herein.
A. Incentive Stock Options (individually, an "ISO," and collectively,
"ISOs"). The following general rules are applicable under current United States
federal income tax law to ISOs granted under the 1984 Plan, the 1989 Plan and
the 1995 Plan:
1. In general, an optionee will not recognize any income upon the
grant of an ISO or upon the issuance of shares to him or her upon the
exercise of an ISO, and the Corporation will not be entitled to a federal
income tax deduction upon either the grant or the exercise of an ISO.
11
14
2. If shares acquired upon exercise of an ISO are not disposed of
within (i) two years from the date the ISO was granted or (ii) one year
after the date the shares are issued to the optionee pursuant to the ISO
exercise (the "Holding Periods"), the difference between the amount
realized on any subsequent disposition of the shares and the exercise price
will generally be treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of and the
optionee does not satisfy the Holding Periods (a "Disqualifying
Disposition"), then in most cases the lesser of (i) any excess of the fair
market value of the shares at the time of exercise of the ISO over the
exercise price or (ii) the actual gain on disposition, will be taxed to the
optionee as ordinary income in the year of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of shares acquired upon exercise of an ISO, the
Corporation generally will be entitled to a corresponding federal income
tax deduction.
5. The difference between the amount realized by an optionee as the
result of a Disqualifying Disposition and the sum of (i) the exercise price
and (ii) the amount of ordinary income recognized under the above rules
generally will be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares
of the Corporation's Common Stock to the Corporation in payment of the
exercise price, if the optionee's ISO agreement so provides. If an optionee
exercises an ISO in such fashion, special rules apply.
8. In addition to the tax consequences described above, the exercise
of an ISO may result in an "alternative minimum tax." The alternative
minimum tax rate (the maximum rate is 28%) will be applied against a
taxable base which is equal to "alternative minimum taxable income,"
reduced by a statutory exemption. In general, the amount by which the value
of the shares received upon exercise of the ISO exceeds the exercise price
is included in the optionee's alternative minimum taxable income. A
taxpayer is required to pay the higher of his regular tax liability or the
alternative minimum tax. A taxpayer who pays alternative minimum tax
attributable to the exercise of an ISO may be entitled to a tax credit
against his or her regular tax liability in later years.
9. Special rules apply if the shares acquired upon the exercise of an
ISO are subject to vesting, or are subject to certain restrictions on
resale under federal securities laws applicable to directors, officers or
10% stockholders.
B. Nonqualified Stock Options. The following general rules are applicable
under current federal income tax law to options granted under the 1984 Plan, the
1989 Plan or the 1995 Plan which do not qualify as ISOs, and to all options
granted under the Director Plan (individually, a "Nonqualified Option", and
collectively, "Nonqualified Options"):
1. In general, an optionee will not recognize any income upon the
grant of a Nonqualified Option, and the Corporation will not be entitled to
a federal income tax deduction upon such grant.
2. An optionee generally will recognize ordinary income at the time of
exercise of the Nonqualified Option in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over
the exercise price. The Corporation may be required to withhold income tax
on this amount.
3. When an optionee sells the shares acquired upon the exercise of a
Nonqualified Option, he or she generally will recognize capital gain or
loss in an amount equal to the difference between the amount realized upon
the sale of the shares and the optionee's basis in the shares (generally,
the exercise price plus the amount taxed to the optionee as ordinary
income). If the optionee's holding period for the shares exceeds one year,
such gain or loss will be long-term capital gain or loss.
4. When an optionee recognizes ordinary income attributable to a
Nonqualified Option, the Corporation generally will be entitled to a
corresponding federal income tax deduction.
12
15
5. An optionee may be entitled to exercise a Nonqualified Option by
delivering shares of the Corporation's Common Stock to the Corporation in
payment of the exercise price. If an optionee exercises a Nonqualified
Option in such fashion, special rules apply.
6. Special rules apply if the shares acquired upon the exercise of a
Nonqualified Option are subject to vesting, or are subject to certain
restrictions on resale under federal securities laws applicable to
directors, officers or 10% stockholders.
C. Stock Awards and Purchases. The following general rules are applicable
under current federal income tax law to Awards and Purchases (each as defined
below) under the 1995 Plan:
Under current federal income tax law, persons receiving shares
pursuant to a stock award (an "Award") or a purchase right (a "Purchase")
under the 1995 Plan generally will recognize ordinary income equal to the
fair market value of the shares received reduced by any purchase price
paid. The Corporation generally will be entitled to a corresponding federal
income tax deduction. When such shares are sold, the grantee generally will
recognize capital gain or loss. Special rules apply if the shares acquired
are subject to vesting, or are subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
D. Options Granted under the Purchase Plan. The following general rules are
applicable under current federal income tax law to options granted under the
Purchase Plan:
1. The amounts deducted from an employee's pay under the Purchase Plan
will be included in the employee's compensation subject to federal income
tax. In general, no additional income will be recognized by the employee
either at the time options are granted pursuant to the Purchase Plan or at
the time the employee purchases shares pursuant to the Purchase Plan.
2. If the employee disposes of shares purchased pursuant to the
Purchase Plan more than two years after the first business day of the
Payment Period in which the employee acquired the shares, then upon such
disposition the employee will recognize ordinary income in an amount equal
to the lesser of:
(a) the excess, if any, of the fair market value of the shares at
the time of disposition over the amount the employee paid for the
shares, or
(b) the excess of the fair market value of the shares on the first
business day of the Payment Period over the option price.
In addition, the employee generally will recognize capital gain or loss in
an amount equal to the difference between the amount realized upon the sale of
shares and the employee's tax basis in the shares (generally, the amount the
employee paid for the shares plus the amount, if any, taxed as ordinary income).
If the employee's holding period for the shares is more than one year, such gain
or loss will be long-term capital gain or loss.
3. If the employee disposes of shares purchased pursuant to the
Purchase Plan within two years after the first business day of the Payment
Period in which the employee acquired the shares, then upon disposition the
employee will recognize ordinary income in an amount equal to the excess,
if any, of the fair market value of the shares on the last business day of
the Payment Period over the amount the employee paid for the shares.
In addition, the employee generally will recognize capital gain or loss in
an amount equal to the difference between the amount realized upon the sale of
shares and the employee's tax basis in the shares (generally, the amount the
employee paid for the shares plus the amount, if any, taxed as ordinary income).
If the employee's holding period for the shares is more than one year, such gain
or loss will be long-term capital gain or loss.
4. If the employee disposes of shares purchased pursuant to the
Purchase Plan more than two years after the first business day of the
Payment Period, the Corporation will not be entitled to any federal income
tax deduction with respect to the options or the shares issued upon their
exercise. If the employee disposes of such shares prior to the expiration
of this two-year holding period, the Corporation generally will be entitled
to a federal income tax deduction in the amount which is treated as
ordinary income to the employee as a result of such disposition.
13
16
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is comprised of two
non-employee directors: Mr. Correia and Mr. Pampel. From time to time, Mr.
Pemberton (the Chief Executive Officer in fiscal year 1996), Mr. Kossmann (the
Chief Financial Officer) and Ms. Monk (the General Counsel) may attend meetings
of the Compensation Committee but they are not in attendance at the time any
decision regarding their own compensation is made.
Pursuant to authority delegated by the Board of Directors, the Compensation
Committee is responsible for establishing, amending, terminating and making
grants under the Corporation's stock and stock option plans and reviewing and
approving cash and noncash compensation matters concerning the executive
officers of the Corporation. The Compensation Committee's objective is to
establish compensation programs designed to (a) attract, retain and reward
executives who will lead the Corporation in achieving its business goals and (b)
align the financial interests of the Corporation's executives with those of its
long-term investors.
OVERVIEW
Compensation under the executive compensation program is comprised of cash
compensation in the form of salary, quarterly and annual incentive bonuses and
commissions, and long-term incentive awards in the form of stock option grants.
In addition, the compensation program is comprised of various benefits,
including medical, disability and life insurance plans, a dependent care voucher
plan, financial planning assistance , the 1995 Employee Stock Purchase Plan and
a 401(k)-qualified savings and profit-sharing plan. All of these plans, other
than the financial planning assistance, are generally available to all employees
of the Corporation.
In the first half of the 1996 fiscal year, the Corporation commissioned an
independent outside consulting firm to conduct a total compensation survey of
the compensation of certain executive positions in a group of comparable
companies selected on the basis of similarity in revenue level, industry segment
and competitive employment market to the Corporation. On the basis of the
results of that commissioned survey, a review of proxy information from
comparable companies and data from nationally recognized surveys, the
compensation of certain executives was adjusted as of the beginning of the
second half of the fiscal year so that each executive's total annual target
compensation (that is, annual base salary plus incentive compensation) would be
at the mid-point of the range of compensation for executives in comparable
companies. Some of the companies included in the survey data were also included
in the indices used for comparison in the Corporation's Stock Performance Graph.
BASE SALARY
Base salary levels for each of the Corporation's executive officers,
including the Chief Executive Officer, are generally set within the range of
base salaries that the Compensation Committee believes are paid similar
executive officers at comparable companies selected on the basis of similarity
in revenue level, industry segment and competitive employment market to the
Corporation. In addition, the Compensation Committee generally takes into
account the Corporation's past financial performance and future expectations.
Base salary levels for fiscal year 1996 for each of the Corporation's
executive officers, including the Chief Executive Officer, were determined based
on the results of the commissioned survey described above, a review of proxy
information from comparable companies and data from nationally recognized
surveys. Fiscal year 1996 base salary levels for each of the executives
generally were slightly below the median salary levels for the comparable
positions at the companies included in those surveys.
INCENTIVE COMPENSATION
Each executive officer is eligible to receive cash bonuses at the end of
each fiscal quarter and at the end of the fiscal year based upon the
Corporation's performance. In addition, Mr. Baumstark is eligible to receive
commissions at the end of each fiscal month based upon the Corporation's
worldwide bookings during the month.
14
17
Target annual bonus and commission amounts for fiscal year 1996 for each of
the Corporation's executive officers, including the Chief Executive Officer,
were determined based on the results of the commissioned survey referred to
above, a review of proxy information from comparable companies and data from
nationally recognized surveys. Fiscal year 1996 target annual bonus and
commission amounts for each of the executives generally were not less than
slightly below nor more than slightly above the median incentive compensation
levels for the comparable positions at the companies included in those surveys.
Actual quarterly and annual bonuses earned are based on the Corporation's
performance in comparison to the quarterly and annual profit targets and annual
revenue and bookings targets set by the executive officers and the Board of
Directors at the beginning of the fiscal year. In the event that the Corporation
meets all of the performance targets set at the beginning of the fiscal year,
each executive officer will receive 140% of their respective target quarterly
and annual bonus amount. If the Corporation's performance is greater or less
than its performance targets, actual quarterly and annual bonuses paid will be
greater or less than the target annual bonus by an accelerated or decelerated
factor, as the case may be. In general, forty percent of the target annual bonus
amount is based on quarterly performance and sixty percent is based on annual
performance.
The bonuses and commissions that each executive officer received in fiscal
year 1996 were significantly lower than the target annual bonus and commission
amount set for each executive officer and significantly lower than the median
incentive compensation levels for the comparable positions at the companies
included in the surveys referred to above because the Corporation did not meet
all of the performance goals set for it by the executive officers and the Board
of Directors at the beginning of the fiscal year. Quarterly and annual bonuses
totaling $221,656 were awarded to the Corporation's executive officers, of which
Mr. Pemberton received $59,423 and Messrs. Lizza, Kossmann and Baumstark and Ms.
Monk, collectively, received $162,233. Monthly commissions totaling $41,651 were
paid to Mr. Baumstark.
STOCK OPTIONS
Stock options are the principal vehicle used by the Corporation for the
payment of long-term compensation, to provide a stock-based incentive to improve
the Corporation's financial performance and to assist in the recruitment,
retention and motivation of key professional and managerial personnel. The
Corporation's stock option plans are administered by the Compensation Committee.
To date, the Compensation Committee has not granted stock options at less than
fair market value.
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 Corporation and the Corporation's financial performance. Stock options
are designed to align the interests of the Corporation's executive officers with
those of its stockholders by encouraging executive officers to enhance the value
of the Corporation, 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
Corporation. The Corporation typically grants new options on an annual basis to
provide continuing incentives for future performance.
During the fiscal year ended September 30, 1996, options to purchase an
aggregate of 264,000 shares of Common Stock were awarded to the Corporation's
executive officers. Of such options, none were granted to Mr. Pemberton.
OTHER BENEFITS
The Corporation 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 Corporation
offers a 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 Corporation also maintains
medical, disability and life insurance plans, a dependent care voucher plan, and
other benefit plans for its employees. The Corporation also provides financial
planning assistance for executive officers of the Corporation.
15
18
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code generally limits to $1 million the tax deduction
for compensation paid to any of the executive officers unless certain
requirements are met. The Compensation Committee has considered these
requirements and the related regulations. It is the Compensation Committee's
present intention that, so long as it is consistent with its overall
compensation objectives, substantially all executive compensation shall be
deductible for federal income tax purposes.
MR. PEMBERTON'S COMPENSATION
Consistent with the executive compensation policies described above of
providing salaries and target incentive compensation based on the results of the
commissioned survey referred to above, a review of proxy information from
comparable companies and data from nationally recognized surveys, the
Compensation Committee determined the base salary and target incentive
compensation for Mr. Pemberton, the Corporation's Chief Executive Officer, for
fiscal 1996. The incentive compensation that Mr. Pemberton received for fiscal
1996 was significantly lower than the target incentive compensation set for Mr.
Pemberton and significantly lower than the median incentive compensation levels
for the comparable positions at the companies included in the surveys referred
to above because the Corporation did not meet all of the performance goals set
for it by the executive officers and the Board of Directors at the beginning of
the fiscal year. For the fiscal year, Mr. Pemberton received $242,000 in base
salary and was awarded bonuses totalling $59,423 based upon corporate
performance. Mr. Pemberton's bonus compensation for fiscal 1996 was
approximately 25% of his base salary. Mr. Pemberton, who owned, as of September
30, 1996, 2,676,463 shares of common stock in the Corporation, was not granted
any options in fiscal 1996 to purchase shares of Common Stock.
RESPECTFULLY SUBMITTED BY THE
COMPENSATION COMMITTEE
Manuel Correia
Roland D. Pampel
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Correia and Pampel. No
person who served as a member of the Compensation Committee was, during the past
fiscal year, an officer or employee of the Corporation or any of its
subsidiaries, was formerly an officer of the Corporation or any of its
subsidiaries, or had any relationship requiring disclosure herein. No executive
officer of the Corporation 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
Corporation.
COMPENSATION OF DIRECTORS
Each non-employee director of the Corporation receives $10,000 annually
(paid at the rate of $2,500 per quarter) for serving as a director and an
additional $1,000 for each Board meeting attended. The non-employee directors of
the Corporation are Messrs. Cheheyl, Correia, Pampel and Schechter. The
Corporation also reimburses non-employee directors for expenses incurred in
attending Board meetings. No additional compensation is paid to directors for
attending Board or committee meetings.
Under the Corporation's Director Plan, beginning at the Corporation's
annual meeting of stockholders for the fiscal year ending September 30, 1996 and
at each successive annual meeting, each non-employee director of the Corporation
will receive an option to purchase 4,000 shares of Common Stock, which will be
exercisable over a four-year period at the rate of 25% per year. In addition,
any person who first becomes a non-employee director on or after October 2, 1995
shall receive an option to purchase 28,000 shares, which will also be
16
19
exercisable over a four-year period at the rate of 25% per year. The exercise
price per share for all options granted under the Director Plan will be equal to
the market price of the Common Stock on the date of grant. See "Stock
Plans -- 1995 Non-Employee Director Stock Option Plan."
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
stockholder return on the Corporation's Common Stock during the period from the
Corporation's initial public offering on November 17, 1995 through September 30,
1996, with the cumulative total return for The Nasdaq Stock Market (U.S.
companies) and the Hambrecht & Quist Computer Software Index (the "H & Q
Computer Index"). The comparison assumes $100 were invested on November 17, 1995
in the Corporation's Common Stock at the $11.00 initial offering price and in
each of the foregoing indices and assumes reinvestment of dividends, if any.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG SOFTWARE 2000, INC., THE NASDAQ STOCK MARKET -- US INDEX
AND THE H & Q COMPUTER INDEX(1)(2)
[LINE CHART]
H & Q
MEASUREMENT PERIOD SOFTWARE 2000 NASDAQ STOCK COMPUTER
(FISCAL YEAR COVERED) INC. MARKET-US SOFTWARE
11/17/95 100 100 100
9/30/96 91 118 117
- ---------------
<FN>
* $100 invested on November 17, 1995 in Common Stock or the appropriate Index,
including reinvestment of dividends, through fiscal year ending September
30, 1996.
(1) Prior to November 17, 1995 the Corporation's Common Stock was not publicly
traded. Comparative data is provided only for the period since that date.
This chart is not "soliciting material", is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filings of the Corporation under the Securities Act of
1933, as amended or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
(2) The stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used on this graph was obtained
from the Nasdaq Stock Market and the Nasdaq Stock Market -- US Index was
prepared by Nasdaq by the Center for Research in Security Prices at the
University of Chicago and the H & Q Computer Index was prepared by Research,
an independent company, such sources believed to be reliable, although the
Corporation is not responsible for any errors or omissions in such
information.
17
20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation has adopted a policy whereby all future transactions
between the Corporation and its officers, directors and affiliates will be on
terms no less favorable to the Corporation than could be obtained from unrelated
third parties and will be approved by a majority of the disinterested members of
the Corporation's Board of Directors.
Mr. Pemberton, as a principal stockholder of the Corporation, has various
life insurance and disability insurance policies which are maintained by the
Corporation, including split-dollar life insurance policies. These policies and
the split dollar arrangement were established in 1989. The split-dollar life
insurance policies are owned by separate trusts for the benefit of Mr.
Pemberton's family members. The split-dollar life insurance policies provide
total coverage of $10,000,000 for Mr. Pemberton. In addition to the split-dollar
life insurance policies, the Corporation maintains a universal life insurance
policy on the life and for the benefit of Mr. Pemberton in the amount of
$1,000,000 and a disability policy which provides each with $2,000 monthly
disability income. The Corporation pays the annual premiums on all policies. The
premium payments made by the Corporation under the split-dollar life insurance
policies are advances for the benefit of the trusts which are secured by
assignments of the related insurance policies. In October 1994, Mr. Pemberton
and two other principal stockholders of the Corporation waived their right to
the cash surrender value of the policies through that date, which had a value of
$1,275,000 and was recorded as a noncash capital contribution. In fiscal 1995,
two of Mr. Pemberton's trusts borrowed $600,000 against the cash surrender value
of certain of the policies which the trusts then loaned to Mr. Pemberton. His
obligation to repay those loans to the trusts was secured by a pledge of stock
in the Corporation. The trusts had assigned their interest in the pledges to the
Corporation as replacement collateral for the cash surrender value that was
borrowed. Mr. Pemberton repaid those loans in full in fiscal 1996. The premium
advances made by the Corporation under the split-dollar plans will be repaid
(without interest) out of the death benefits payable under the policies.
The Corporation has adopted a policy whereby all future transactions
between the Corporation and its officers, directors and affiliates will be on
terms no less favorable to the Corporation than could be obtained from unrelated
third parties and will be approved by a majority of the disinterested members of
the Corporation's Board of Directors.
Three members of Mr. Pemberton's family are employed by the Corporation in
non-managerial, non-executive positions. The Corporation believes that the
compensation paid by the Corporation to those family members are on terms no
less favorable to the Corporation than could be obtained from unrelated third
parties. Additionally, one member of Mr. Pemberton's family subleases a small
business condominium from the Corporation and is obligated to reimburse the
Corporation for all rental and other costs related to that condominium. Finally,
in fiscal year 1996, the Corporation purchased approximately $940,000 in
personal computers and peripherals from a company in which Mr. Pemberton's
daughter-in-law is employed as a sales representative. The Corporation believes
that the amounts paid by the Corporation to that company were generally on terms
no less favorable to the Corporation than could be obtained from unrelated third
parties.
PROPOSAL 2
APPROVAL OF AMENDMENT TO SECOND RESTATED
ARTICLES OF ORGANIZATION
PROPOSED CHANGE OF CORPORATE NAME
The Board of Directors of the Corporation has approved, and recommends to
the stockholders of the Corporation, the authorization of an amendment to
Article I of the Corporation's Second Restated Articles of Organization to
change the corporate name from "Software 2000, Inc." to "Infinium Software,
Inc.," so that as amended, Article I would read in its entirety as follows: "1.
The name by which the corporation shall be known is: Infinium Software, Inc."
18
21
The Board of Directors has proposed that the name of the Corporation be
changed to a name that is more strategically appropriate and appealing to
prospects, customers and others and will serve as an umbrella identity for the
Corporation's products as it prepares to distribute products on Microsoft
Windows NT Server and other platforms. The name change to Infinium Software,
Inc. should better reflect the Corporation's image as a forward-thinking,
business-oriented company in the minds of both the investment community and the
business applications software market. As a result, the Board believes that even
with the change, the general public will continue to distinctively identify the
Corporation.
If the proposed amendment to the Corporation's Second Restated Articles of
Organization is authorized by the stockholders, the change will become effective
when articles of amendment are filed with the Secretary of State of The
Commonwealth of Massachusetts, which would be expected to occur shortly after
stockholder approval of the amendment. Stock certificates of Common Stock would
be retained by stockholders and would not need to be exchanged for certificates
containing the Corporation's new name. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PROPOSAL TO AMEND THE CORPORATION'S
NAME.
PROPOSAL 3
APPOINTMENT OF AUDITORS
The Board of Directors proposes that the firm of Price Waterhouse LLP
("Price Waterhouse"), independent certified public accountants, be appointed to
serve as auditors for the fiscal year ending September 30, 1997. The
ratification of this selection is not required under the laws of the
Commonwealth of Massachusetts, where the Corporation is incorporated, but the
results of this vote will be considered by the Board of Directors in selecting
auditors for future fiscal years. Price Waterhouse has served as the
Corporation's accountants since 1994. It is expected that a member of Price
Waterhouse will be present at the meeting with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THIS SELECTION.
STOCK OWNERSHIP REPORTING
Section 16(a) of the Exchange Act, requires the Corporation's directors,
executive officers and holders of more than 10% of the Corporation's Common
Stock (collectively, "Reporting Persons") to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock of the
Corporation. Such persons are required by regulations of the Commission to
furnish the Corporation with copies of all such filings. Based on its review of
the copies of such filings received by it with respect to the fiscal year ended
September 30, 1996 and written representations from certain Reporting Persons,
the Corporation believes that all Reporting Persons complied with all Section
16(a) filing requirements in the fiscal year ended September 30, 1996, except
that Mr. Pemberton filed one late Form 4.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended for inclusion in the proxy statement to
be furnished to all Stockholders entitled to vote at the next Annual Meeting of
Stockholders of the Corporation must be received at the Corporation's principal
executive offices not later than September 15, 1997. In order to curtail
controversy as to the date on which a proposal was received by the Corporation,
it is suggested that proponents submit their proposals by Certified Mail, Return
Receipt Requested to Software 2000, Inc., 25 Communications Way, Hyannis,
Massachusetts 02601, attention: Secretary and Clerk.
19
22
INCORPORATION BY REFERENCE
To the extent that this proxy statement has been or will be specifically
incorporated by reference into any filing by the Corporation under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, the sections of the proxy statement entitled "Compensation Committee
Report on Executive Compensation" and "Stock Performance Graph" shall not be
deemed to be so incorporated, unless specifically otherwise provided in any such
filing.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation, and
in addition to soliciting Stockholders by mail through its regular employees,
the Corporation may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Corporation
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Corporation
may also be made of some Stockholders in person or by mail, telephone or
telegraph following the original solicitation.
The contents and the sending of this proxy statement has been approved by
the Board of Directors of the Corporation.
20
23
SOFTWARE 2000, INC.
Proxy for Annual Meeting of Stockholders, February 14, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert A. Pemberton and Daniel J.
Kossmann, and each of them with full power of substitution to vote all shares of
stock of SOFTWARE 2000, INC. (the "Corporation") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Corporation to be
held on Friday, February 14, 1997, at 4:30 p.m. local time at The Cape Codder
Hotel located at Route 132 and Bearses Way, Hyannis, Massachusetts 02601, and at
any adjournment thereof, upon matters set forth in the Notice of Annual Meeting
and Proxy Statement dated January 13, 1997, a copy of which has been received by
the undersigned.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED. IF NO
CHOICE IS SPECIFIED, THEN THIS PROXY WILL BE VOTED IN FAVOR OF ELECTING THE
NOMINEES, OR ANY NOMINEE FOR WHICH APPROVAL HAS NOT BEEN WITHHELD, IN FAVOR OF
AMENDING THE CORPORATION'S SECOND RESTATED ARTICLES OF ORGANIZATION TO CHANGE
THE CORPORATION'S NAME TO "INFINIUM SOFTWARE, INC." AND IN FAVOR OF SELECTION OF
PRICE WATERHOUSE LLP AS AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1997.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
*********************
/X/ PLEASE MARK
VOTES AS IN THIS
EXAMPLE
The Board of Directors recommends a vote for the following proposals:
1. To elect two (2) Class I directors to serve for a three-year term
except as marked to the contrary below:
NOMINEES: Manuel Correia and Frederick J. Lizza,
/ / FOR / / WITHHELD / / ______________
ALL FROM ALL FOR ALL NOMINEES
NOMINEES NOMINEES EXCEPT AS NOTED ABOVE
2. To approve an amendment to the Corporation's Second Restated Articles
of Organization, to change the corporate name to "Infinium Software,
Inc."
/ / FOR / / AGAINST / / ABSTAIN
24
3. To ratify the selection of the firm of Price Waterhouse LLP as auditors
for the Corporation for the fiscal year ending September 30, 1997.
/ / FOR / / AGAINST / / ABSTAIN
4. To transact such other business as may properly come before the meeting
and any adjournments thereof.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
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.
Signature________________________________ Date________________
Signature________________________________ Date________________