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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 [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
HYPERION SOFTWARE CORPORATION
(Name of Registrant as Specified In Its Charter)
THE BOARD OF DIRECTORS OF REGISTRANT
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(3).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
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[HYPERION SOFTWARE LOGO]
October 8, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of Hyperion
Software Corporation to be held at 9:00 A.M., Wednesday, November 12, 1997 at
the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich,
Connecticut.
The notice of Meeting and proxy statement that follow describe the business
to be conducted at the Meeting. Whether or not you plan to attend this Meeting
in person, we urge you to sign and return the enclosed proxy so that your shares
will be represented and voted at the Meeting. If you so desire, you can withdraw
your proxy and vote in person at the Annual Meeting.
Cordially,
/s/ James A. Perakis
----------------------------
James A. Perakis
Chairman and CEO
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HYPERION SOFTWARE CORPORATION
900 LONG RIDGE ROAD
STAMFORD, CONNECTICUT 06902
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
================================================================================
TO THE STOCKHOLDERS OF HYPERION SOFTWARE CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Hyperion
Software Corporation, a Delaware corporation (the "Company"), will be held on
Wednesday, November 12, 1997 at 9:00 A.M., at the Hyatt Regency Greenwich, 1800
East Putnam Avenue, Old Greenwich, Connecticut, for the following purposes:
1. To elect two members to the Board of Directors to serve for a
three-year term as Class I Directors.
2. To consider and act upon an amendment to the Company's 1991 Stock Plan
to increase the number of shares of Common Stock authorized for
issuance under the plan from 4,000,000 to 7,000,000 shares.
3. To ratify the selection of the firm of Ernst & Young LLP as independent
auditors for the fiscal year ending June 30, 1998.
4. To transact such other business as may properly come before the Meeting
and any adjournments thereof.
Only stockholders of record at the close of business on September 30, 1997,
the record date fixed by the Board of Directors, are entitled to notice of and
to vote at the Meeting and any adjournment thereof.
By Order of the Board of Directors,
/s/ Craig M. Schiff
-------------------------------
Craig M. Schiff
Corporate Secretary
Stamford, Connecticut
October 8, 1997
------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED STAMPED ENVELOPE BY RETURN
MAIL.
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HYPERION SOFTWARE CORPORATION
900 LONG RIDGE ROAD
STAMFORD, CONNECTICUT 06902
PROXY STATEMENT
OCTOBER 8, 1997
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Hyperion Software Corporation (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held at 9:00 A.M., Wednesday, November 12, 1997 at the Hyatt Regency Greenwich,
1800 East Putnam Avenue, Old Greenwich, Connecticut, and any adjournments
thereof (the "Meeting").
Only stockholders of record at the close of business on September 30, 1997
will be entitled to notice of and to vote at the Meeting. As of that date,
18,589,948 shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") were outstanding and entitled to vote at the Meeting.
Stockholders are entitled to cast one vote for each share of Common Stock held
of record at the close of business on September 30, 1997 on each matter
submitted to a vote at the Meeting. Any stockholder may revoke a proxy at any
time prior to its exercise by filing a later-dated proxy or a written notice of
revocation with the Secretary of the Company, or by voting in person at the
Meeting. If a stockholder is not attending the Meeting, any proxy or notice
should be returned in time for receipt no later than the close of business on
the day preceding the Meeting.
At the Meeting, proposals to elect Messrs. Perakis and Greenfield as Class
I Directors, to amend the Company's 1991 Stock Plan to increase the number of
shares of Common Stock authorized for issuance under the plan to 7,000,000
shares and to ratify the selection of the firm of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending June 30, 1998 will be
subject to a vote of stockholders. 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 the
proposal if no specification is indicated. The persons named as attorneys in the
proxies are directors and/or officers of the Company.
The Board of Directors of the Company 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 in the proxies.
An Annual Report to Stockholders, containing audited financial statements
of the Company for the fiscal year ended June 30, 1997, is being mailed together
with this proxy statement to all stockholders entitled to vote. This proxy
statement and the accompanying notice and form of proxy were first sent or given
to stockholders on or about the date hereof.
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PRINCIPAL HOLDERS OF VOTING SECURITIES
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The following table sets forth, as of September 15, 1997, certain information
regarding beneficial ownership of the Company's Common Stock (i) by each person
who, to the knowledge of the Company, beneficially owned more than 5 percent of
the shares of Common Stock of the Company outstanding at such date; (ii) by each
director of the Company; (iii) by each Named Officer of the Company (as defined
below under the caption "COMPENSATION INFORMATION CONCERNING DIRECTORS AND
OFFICERS -- Executive Compensation Summary"); and (iv) by all current executive
officers and directors of the Company as a group.
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS OWNERSHIP(1) OF CLASS
- ------------------------------------------------------------------ ------------ --------
American Century Companies, Inc.(2)............................... 1,100,000 5.9%
4500 Main Street
Kansas City, MO 64141-9210
James A. Perakis(3)............................................... 726,241 3.9%
Marco Arese Lucini(4)............................................. 26,000 *
Gary G. Greenfield(5)............................................. 8,000 *
Harry S. Gruner(6)................................................ 46,000 *
Aldo Papone(7).................................................... 36,000 *
Robert W. Thomson(8).............................................. 26,000 *
Lucy Rae Ricciardi(9)............................................. 88,516 *
Craig M. Schiff(10)............................................... 205,000 1.1%
Anthony A. Colangelo(11).......................................... 13,523 *
W. Iain Kerr(12).................................................. 22,780 *
Peter F. DiGiammarino............................................. -- --
All current executive officers and directors as a group (10
persons)(13).................................................... 1,198,060 6.4%
- ---------------
* less than 1%.
(1) The persons and entities named in the table have sole voting and investment
power with respect to all shares shown as beneficially owned by them.
Beneficial ownership includes shares of Common Stock and options to
purchase shares of Common Stock which are exercisable as of September 15,
1997 and/or become exercisable within 60 days thereafter.
(2) With respect to information reported relating to American Century
Companies, Inc., the Company has relied upon information supplied by such
entity in a 13G filing dated February 5, 1997.
(3) Includes options to purchase 270,000 shares of Common Stock.
(4) Includes options to purchase 12,000 shares of Common Stock.
(5) Consists of options to purchase Common Stock.
(6) Includes options to purchase 28,000 shares of Common Stock.
(7) Includes options to purchase 32,000 shares of Common Stock.
(8) Includes options to purchase 22,000 shares of Common Stock.
(9) Includes options to purchase 70,000 shares of Common Stock.
(10) Includes options to purchase 169,000 shares of Common Stock.
(11) Includes options to purchase 10,750 shares of Common Stock.
(12) Includes options to purchase 15,000 shares of Common Stock.
(13) Includes options to purchase 636,750 shares of Common Stock.
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6
ELECTION OF DIRECTORS
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Pursuant to the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), the Company's Board of Directors is divided
into three classes -- Class I, II and III Directors. Each director is elected
for a three year term of office, with one class of directors being elected at
each annual meeting of stockholders. Each director holds office until his
successor is elected and qualified or until his earlier death, resignation or
removal.
The nominees for Class I Directors, Messrs. Perakis and Greenfield, are
presently serving as directors of the Company. Shares represented by all proxies
received by the Board of Directors and not so marked as to withhold authority to
vote for any individual director (by writing that individual director's name
where indicated on the proxy) or for all directors will be voted (unless one or
both nominees are unable or unwilling to serve) FOR the election of the nominees
for Class I Directors named below. The Board of Directors knows of no reason why
such nominees would be unable or unwilling to serve, but if such should be the
case, proxies may be voted for the election of some other person.
The information below sets forth the current members of the Board of
Directors, including the nominees for Class I Directors:
NOMINEES TO SERVE AS DIRECTORS FOR A TERM EXPIRING AT THE 2000 ANNUAL MEETING OF
STOCKHOLDERS
(CLASS I DIRECTORS):
James A. Perakis
Mr. Perakis, age 53, is Chairman of the Board of Directors (and a
member of the Compensation Committee), Chief Executive Officer and
President of the Company. Mr. Perakis has served as Chief Executive Officer
and as a director of the company since September 1985. From 1983 to
September 1985, Mr. Perakis served as Senior Vice President and General
Manager of Chase Decision Systems, a division of Interactive Data
Corporation, a developer and marketer of mainframe software for planning
and financial applications. From 1979 to 1983, Mr. Perakis was Chief
Financial Officer of Interactive Data Corporation, a supplier of data and
software to financial and corporate markets. Mr. Perakis is also a director
of MapInfo Corporation, a publicly held company which develops, markets and
supports desktop mapping software, mapping application development tools
and geographic and demographic information products.
Gary G. Greenfield
Mr. Greenfield, age 42, was elected to the Board in June 1992; he is a
member of the Audit Committee. He currently serves as President, Chief
Executive Officer and a director of INTERSOLV Inc., a publicly held company
which is a leader in application enablement software for the client/server,
Internet and Intranet worlds. Mr. Greenfield joined Sage Software (which
merged with INDEX Technology in 1991 to form INTERSOLV Inc.) in 1987 as
Vice President of Marketing. Prior to that he served as President of Frey
Associates Inc., a provider of artificial intelligence software and
services.
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7
DIRECTORS SERVING FOR A TERM EXPIRING AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS
(CLASS II DIRECTORS):
Marco Arese Lucini
Mr. Arese Lucini, age 47, served as Vice President - International
from June 1988 to December 1992 and has served as a director of the Company
since August 1985; he is a member of the Audit Committee. He has been an
Executive Vice President and Director of IDP, a multimedia company based in
France, since 1996. From 1979 to June 1988, Mr. Arese Lucini served as
Managing Director of Fienco S.p.A., a software company based in Milan,
Italy.
Aldo Papone
Mr. Papone, age 65, has served as a director of the Company since
April 1994; he is a member of the Compensation and Stock Option Committees.
He has been a Senior Advisor to the American Express Company since 1991.
During 1989 and 1990, he was Chairman and Chief Executive Officer of the
American Express Travel Related Services Company. Mr. Papone is currently a
director of the American Express Company, Springs Industries, Inc., Guess?,
Inc. and The Body Shop International plc.
DIRECTORS SERVING FOR A TERM EXPIRING AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS
(CLASS III DIRECTORS):
Harry S. Gruner
Mr. Gruner, age 38, has served as a director of the Company since
October 1989; he is a member of the Compensation and Stock Option
Committees. He has been a general partner of JMI Equity Fund, L.P., a
private equity investment partnership, since November 1992. From August
1986 to October 1992, Mr. Gruner was a principal of Alex. Brown & Sons
Incorporated, which firm served as the lead manager of the Company's
initial public offering in October 1991. Mr. Gruner is also a director of
Brock International, Inc., a developer, marketer and supporter of software
systems; Jackson Hewitt, Inc., an income tax processing company; the META
Group, Inc., a syndicated information technology research company; Optika
Imaging Systems, Inc., a developer and marketer of imaging software; V-One
Corporation, a developer, marketer and licensor of a comprehensive suite of
network security products; and several privately held companies.
Robert W. Thomson
Mr. Thomson, age 47, has served as a director of the Company since
1981. Mr. Thomson is the founder of the Company. He served as its Chief
Executive Officer until September 1985 and as President until December
1987. He has also served as a software consultant for International
Interactive Media, Ltd. ("IIM") since 1987. Mr. Thomson is the sole
stockholder of IIM. Since January 1988, Mr. Thomson has provided consulting
services to the Company pursuant to an agreement between the Company and
IIM.
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8
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company met four times during the fiscal year
ended June 30, 1997. The Board of Directors has standing Audit, Compensation and
Stock Option Committees. The Audit Committee, which oversees the accounting and
financial functions of the Company, including matters relating to the
appointment and activities of the Company's independent auditors, met twice
during fiscal year 1997. Messrs. Arese Lucini and Greenfield are the members of
the Audit Committee. The Compensation Committee of the Company, which
establishes and administers the Company's executive compensation programs, met
three times during fiscal year 1997. Messrs. Perakis, Gruner and Papone are the
members of the Compensation Committee. The Stock Option Committee, which
administers the Company's 1991 Stock Plan and 1991 Employee Stock Purchase Plan,
met three times during fiscal year 1997. Messrs. Gruner and Papone are the
members of the Stock Option Committee. The Company does not have a standing
Nominating Committee. Each of the directors attended at least 75 percent of the
aggregate of all meetings of the Board of Directors and of all committees on
which he serves.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Perakis, a member of the Compensation Committee, is also the Chief Executive
Officer of the Company (see Report on Executive Compensation on page 10).
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9
COMPENSATION INFORMATION CONCERNING DIRECTORS AND OFFICERS
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EXECUTIVE COMPENSATION SUMMARY
The following table sets forth information concerning the compensation for
services in all capacities to the Company, for the fiscal years ended June 30,
1997, 1996 and 1995, of those persons who were at June 30, 1997 (i) the Chief
Executive Officer; (ii) each of the four most highly compensated executive
officers of the Company, other than the Chief Executive Officer, who earned more
than $100,000 in salary and bonus in fiscal year 1997; and (iii) an additional
individual who would have been one of the four most highly compensated executive
officers of the Company, other than the Chief Executive Officer, but for the
fact that the individual was not serving as an executive officer of the Company
at the end of fiscal year 1997, (with the Chief Executive Officer, collectively,
the "Named Officers"):
LONG-TERM
COMPENSATION(2)
ANNUAL COMPENSATION(1) ---------------
------------------------- OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(3) AWARDS(#)
- ----------------------------------------------- ---- --------- ----------- ---------------
James A. Perakis 1997 $290,000 $145,000 150,000
Chairman and Chief Executive Officer 1996 270,000 100,000 --
1995 257,000 103,000 --
Lucy Rae Ricciardi 1997 $175,000 $ 87,500 30,000
Senior Vice President and Chief Financial 1996 165,000 55,000 20,000
Officer 1995 142,000 49,000 --
Craig M. Schiff 1997 $175,000 $ 87,500 30,000
Senior Vice President and Corporate Secretary 1996 154,000 40,000 18,000
1995 144,000 48,000 --
Anthony A. Colangelo 1997 $150,000 $187,617 10,000
Vice President -- Sales 1996 140,000 114,535 20,000
1995 105,000 135,179 10,000
W. Iain Kerr 1997 $150,000 $115,621 10,000
Vice President -- European Operations 1996 140,000 84,553 20,000
1995 105,000 135,179 10,000
Peter F. DiGiammarino(4) 1997 $236,000 $125,000 --
Former President and Chief Operating Officer 1996 15,000 250,000 325,000
1995 -- -- --
- ---------------
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer, with the exception of Mr. DiGiammarino,
was less than the lesser of $50,000 or 10 percent of the total of annual
salary and bonus reported. In accordance with his employment and separation
agreements, the Company paid Mr. DiGiammarino $293,329 for relocation
expenses, $290,000 for separation benefits, and $38,857 for other fringe
benefits.
(2) The Company did not grant any restricted stock awards or stock appreciation
rights or make any long term incentive plan payouts during fiscal 1997.
(3) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.
(4) From May 29, 1996 to May 31, 1997, Mr. DiGiammarino served as an executive
officer and a director of the Company.
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10
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In August 1993, the Company entered into an employment agreement with James
A. Perakis for the three-year period ended July 31, 1996. The agreement renews
automatically for additional one-year terms thereafter unless terminated by
either party upon advance notice. Pursuant to the agreement, Mr. Perakis serves
as the Chief Executive Officer of the Company and received an initial annual
base salary of $235,000, subject to annual increases made at the discretion of
the Board of Directors. In addition to his base salary and certain fringe
benefits, Mr. Perakis is eligible to receive an incentive bonus at the end of
each fiscal year during the term of the agreement. The bonus is based upon
several factors, including the achievement of certain agreed upon targets
relating to Mr. Perakis' individual performance and Company-wide performance.
Additionally, under certain employment termination events, Mr. Perakis shall
have the right to receive two years' base salary, and the pro rata portion of
any performance bonus earned.
In July 1994, the Company entered into an employment agreement with Lucy
Rae Ricciardi for the three-year period ended June 30, 1997. The agreement
renews automatically for additional one-year terms thereafter unless terminated
by either party upon advance notice. Pursuant to the agreement, Ms. Ricciardi
serves as the Chief Financial Officer of the Company and received an initial
annual base salary of $125,000, subject to annual increases made at the
discretion of the Board of Directors. In addition to her base salary and certain
fringe benefits, Ms. Ricciardi is eligible to receive an incentive bonus at the
end of each fiscal year during the term of the agreement at the discretion of
the Board of Directors. Additionally, under certain involuntary employment
termination events, or under certain voluntary employment termination events
following a change in control of the Company, Ms. Ricciardi shall have the right
to receive one year's base salary and certain fringe benefits. Ms. Ricciardi's
employment agreement was amended in December 1996 to provide that, upon the
retirement of Ms. Ricciardi from her position at the Company, she would
nevertheless, on a part-time basis, continue to serve the Company as a senior
advisor to the Chairman of the Board of Directors and shall be paid a customary
fee for such service.
In July 1994, the Company entered into an employment agreement with Craig
M. Schiff for the three-year period ended June 30, 1997. The agreement renews
automatically for additional one-year terms thereafter unless terminated by
either party upon advance notice. Pursuant to the agreement, Mr. Schiff serves
as a Senior Vice President of the Company and received an initial annual base
salary of $136,000, subject to annual increases made at the discretion of the
Board of Directors. In addition to his base salary and certain fringe benefits,
Mr. Schiff is eligible to receive an incentive bonus at the end of each fiscal
year during the term of the agreement at the discretion of the Board of
Directors. Additionally, under certain involuntary employment termination
events, or under certain voluntary employment termination events following a
change in control of the Company, Mr. Schiff shall have the right to receive one
year's base salary and certain fringe benefits.
In July 1996, the Company entered into an employment agreement with Anthony
A. Colangelo, which agreement is identical, in all material respects, to Mr.
Schiff's employment agreement, except that Mr. Colangelo received an initial
annual base salary of $150,000 and he serves as the Company's Vice President,
Sales.
In July 1996, the Company entered into an employment agreement with W. Iain
Kerr, which agreement is identical, in all material respects, to Mr. Schiff's
employment agreement, except that Mr. Kerr received an initial annual base
salary of $150,000 and he serves as the Company's Vice President, European
Operations.
Pursuant to an employment agreement, Peter F. DiGiammarino served as the
President, Chief Operating Officer and a director of the Company for a one-year
period ended in May 1997. Mr. DiGiammarino received compensation and benefits as
detailed on pages 6 and 9.
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11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted
during the fiscal year ended June 30, 1997 to the Named Officers as reflected in
the Executive Compensation Summary table above:
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT
PERCENT OF ASSUMED ANNUAL RATES
TOTAL OF STOCK PRICE
OPTIONS/SARS APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ------------------------ ------------ ------------ ----------- ---------- ---------- ----------
James A. Perakis(2)...... 150,000 13.12% $ 13.75 9/19/06 $1,297,095 $3,287,094
Lucy Rae Ricciardi(3).... 30,000 2.62% $ 12.25 7/30/06 $ 231,119 $ 585,700
Craig M. Schiff(3)....... 30,000 2.62% $ 12.25 7/30/06 $ 231,119 $ 585,700
Anthony A. Colangelo(3).. 10,000 .87% $ 12.25 7/30/06 $ 77,040 $ 195,233
W. Iain Kerr(3).......... 10,000 .87% $ 12.25 7/30/06 $ 77,040 $ 195,233
Peter F. DiGiammarino.... -- -- -- -- -- --
- ---------------
(1) Amounts reported in this column represent hypothetical amounts that may be
realized upon exercise of the options immediately prior to the expiration of
their term, assuming the specified compounded rates of appreciation of the
Company's Common Stock over the term of the options. These amounts are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and the future
performance of the Company's Common Stock. There can be no assurances that
the rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
(2) These options have terms of ten years from the date of grant and become
exercisable as to one-third of the shares covered thereby on each
anniversary of the date of grant until such options are fully exercisable.
These options do not qualify as incentive stock options under Section 422 of
the Internal Revenue Code.
(3) These options have terms of ten years from the date of grant and become
exercisable as to 25 percent of the shares covered thereby on each
anniversary of the date of grant until such options are fully exercisable.
These options do not qualify as incentive stock options under Section 422 of
the Internal Revenue Code.
8
12
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is further information with respect to options to purchase the
Company's Common Stock granted to the Named Officers, including (i) the number
of shares of Common Stock purchased upon exercise of options in fiscal year
1997; (ii) the net value realized upon such exercise; (iii) the number of
unexercised options outstanding at June 30, 1997; and (iv) the value of such
unexercised options at June 30, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES OF UNEXERCISED
OPTIONS
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT JUNE 30, 1997(#) AT JUNE 30, 1997($)(2)
SHARES ACQUIRED VALUE --------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
James A. Perakis........ 305,000(3) $5,468,750(3) 295,000 150,000 $ 4,411,598 $ 1,293,750
Lucy Rae Ricciardi...... 100,000 $1,729,375 57,500 52,500 $ 664,688 $ 389,063
Craig M. Schiff......... -- -- 177,000 51,000 $ 2,990,888 $ 389,063
Anthony A. Colangelo.... 15,250 $ 186,913 5,000 30,750 $ 41,575 $ 290,884
W. Iain Kerr............ 14,000 $ 251,788 12,250 30,750 $ 126,351 $ 290,884
Peter F. DiGiammarino... 175,000 $ 725,000 -- -- -- --
- ---------------
(1) Amounts disclosed in this column may not reflect amounts actually received
by the Named Officers but are calculated based on the difference between the
fair market value of the Company's Common Stock on the date of exercise and
the exercise price of the options. Named 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 Company's Common Stock at the time of such sale.
(2) Value is based on the difference between the option exercise price and the
fair market value at fiscal year-end 1997 ($22.38 per share) multiplied by
the number of shares underlying the option.
(3) Of the 305,000 shares acquired by Mr. Perakis, 25,000 shares were
subsequently sold for a gain of $577,500. Mr. Perakis continues to hold the
remaining 280,000 shares as part of his 3.9% beneficial ownership of the
Company (see "Principal Holders of Voting Securities" on page 2).
9
13
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION
AND STOCK OPTION COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
To Our Stockholders:
The Compensation and Stock Option Committees of the Board of Directors
(together, the "Committee") with the exception of Mr. Perakis, who is a member
of the Compensation Committee, are comprised of directors who are not employees
of the Company. The Committee is responsible for establishing and administering
the Company's executive compensation programs. The Committee, excluding Mr.
Perakis, develops annual and long-term objectives for Mr. Perakis and
establishes his compensation.
The philosophy underlying the development and administration of the
Company's executive compensation policies is the alignment of the interests of
executive management with those of the stockholders. Key elements of this
philosophy are:
- Providing the executive with a base salary that is competitive with
executive base salaries for comparable companies in its industry and
geographical area. This enables the Company to attract and retain highly
qualified executive officers.
- Establishing a discretionary incentive compensation program that
delivers bonus pay commensurate with (i) the Company's performance, as
measured by operating, financial and strategic objectives; and (ii) the
executive's performance, as measured against organizational and
management objectives and the degree to which teamwork and Company
values are fostered.
- Providing significant equity-based incentives for executives, in the
form of stock options, to ensure that they are motivated over the long
term to respond to the Company's business challenges and opportunities
from an ownership standpoint.
Base salaries of the six highest paid executives are listed on the
Executive Compensation Summary table found on page 6. Executive base salaries
were established in employment agreements between the Company and the executive
officer. On an annual basis, the Committee reviews these salaries and, while it
is not required to, it may in its discretion increase the base salaries.
Increases typically have been based on merit, and have also been made when
necessary so that base salaries remain competitive when compared to other
software companies of comparable size and relative geographical location. (In
the performance graph that follows this report, the Company's performance is
compared to that of companies classified under SIC Code 7372 -- prepackaged
software companies.) The amount of increases in base salaries also depends upon
the Committee's subjective judgment as to the executive's contribution to
Company performance, both in terms of performance against goals and changes in
job content and responsibilities. The Committee, from time to time, has used
outside compensation consultants regarding salary increases.
The incentive compensation program is a vehicle by which executives can
earn additional compensation, depending upon Company and individual performance
relative to specified annual objectives. Each year the CEO establishes, with the
approval of the Committee, a list of objectives for each department and for the
Company as a whole. The departmental objectives generally represent specific
tasks and qualitative objectives, such as the implementation of specified
programs, the timing and caliber of deliverables, or the strengthening of
specified aspects of department performance, rather than quantitative targets.
At the end of the year, a bonus may be paid to each executive officer depending
upon the relative success of their department in achieving its goals for that
year, and, more importantly, on Company-wide growth in revenues and net income,
as well as the Company's outlook for future financial growth. The Board of
Directors believes such growth is critical to the Company's fundamental goal of
building stockholder value. The amount of the bonus is not determined pursuant
to any formula, but rather is established subjectively by the Committee in its
discretion.
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The purpose of stock option grants is to align executives' interests with
stockholder goals -- to provide additional incentives to executive officers and
other key employees to work, not just for the near term but as well for the long
term, to maximize stockholder value. Accordingly, executives are considered each
year for stock option grants, and it is the Company's policy to weight total
compensation heavily toward equity compensation through stock options. Options
are granted at fair market value and become exercisable ratably over 3 to 4 year
periods. The actual number of stock options granted to executives is not
determined pursuant to any formula, but rather they are awarded subjectively by
the Committee in its discretion.
COMPANY PERFORMANCE AND CEO COMPENSATION
Mr. Perakis' base compensation was established pursuant to the terms of an
employment agreement which provides for annual increases in base salary, at the
discretion of the Committee, not to exceed 10 percent in any year. In 1996, the
Committee (without the participation of Mr. Perakis) increased Mr. Perakis' base
salary by approximately 5 percent, and in 1997 increased it by an additional 7
percent, pursuant to his current employment agreement. Mr. Perakis' employment
agreement also provides for the payment of an annual performance bonus, and
stipulates that, prior to September 30 of each year, Mr. Perakis must submit to
the independent members of the Committee for their approval a formula on which
Mr. Perakis' bonus, if any, for such fiscal year will be based. In approving any
formula, the Committee (without the participation of Mr. Perakis) must take into
account the Company's progress in meeting its business plan, including
profitability and revenue growth projections as well as the compensation
packages of chief executive officers of comparable companies of similar size in
the software industry. Mr. Perakis was awarded a bonus of 50 percent of his base
salary for fiscal 1997, because the Committee concluded that the Company
achieved the goals relating to the Company's business plan for 1997, including
operating, financial and strategic objectives.
Over the past five years the Company has realized significant year-to-year
growth in revenues and solid earnings. As a result of the Company's performance
and his individual contribution, Mr. Perakis was granted, at fair market value,
the stock options reflected in the Executive Compensation Summary table on page
6. The grant of options was not subject to a discrete weighting of specific
criteria.
TAX DEDUCTIBILITY LIMIT
The Omnibus Budget Reconciliation Act of 1993 added a new Section 162(m) to
the Internal Revenue Code of 1986, as amended. Section 162(m) generally provides
that certain compensation in excess of $1 million payable per year to a
company's chief executive officer or any of its four other highest paid
executive officers is no longer deductible unless the compensation qualifies for
an exception. This deduction limit generally applies only to compensation that
could otherwise be deducted by a company in a taxable year. The Compensation
Committee believes that the impact of Section 162(m) upon the Company will not
be significant for the next several years because no executive officer of the
Company is likely to be compensated in excess of the $1 million limitation. The
Compensation Committee fully intends to consider the effect of Section 162(m) in
authorizing or recommending future executive compensation arrangements.
MEMBERS OF THE COMMITTEE:
HARRY S. GRUNER (Compensation and Stock Option Committees)
ALDO PAPONE (Compensation and Stock Option Committees)
JAMES A. PERAKIS (Compensation Committee Only)
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DIRECTOR COMPENSATION
Each non-employee director (which excludes any director who personally
receives more than $100,000 annually, or who controls any entity which receives
more than $100,000 annually, for providing goods or services to the Company
under a separate agreement or retainer) is paid $10,000 per year and is also
being paid $1,250 for each meeting of the Board of Directors attended. In
addition, each member of the Board of Directors is reimbursed for expenses
incurred in connection with each Board or Committee meeting attended.
Non-employee Directors also receive stock options under the Company's 1991
Non-Employee Director Stock Plan (the "Director Plan"). See the section
below -- "Non-Employee Director Stock Options" for a discussion of the Director
Plan.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
Each non-employee director of the Company is eligible to participate in the
Company's 1991 Non-Employee Director Stock Option Plan. The Director Plan
authorizes the grant of options for a maximum of 200,000 shares of Common Stock.
The number of shares of Common Stock issuable under the Director Plan or subject
to outstanding options is subject to adjustment for changes in the Company's
Common Stock. Each non-employee director automatically receives a fully vested
option for 4,000 shares on his or her first anniversary date as a director of
the Company and a fully vested option for 4,000 shares on each successive
anniversary of such date. Additionally, once a non-employee director has served
as a director for a period of two years, he or she shall receive a one-time
grant of options to purchase 10,000 shares of Common Stock, subject to a
three-year, pro rata vesting schedule; provided that this provision shall not
apply to directors who: (a) once served as an officer of the Company; (b)
directly or indirectly beneficially own, or have or share voting or investment
power over, greater than one percent of the outstanding voting stock of the
Company; or (c) received, upon election to the Board of Directors of the Company
after November 1, 1991, a special one-time stock option grant.
The exercise price per share of options granted under the Director Plan is
100 percent of the fair market value of the Company's Common Stock on the date
the option is granted. Options expire on the tenth anniversary of the date of
the option grant. Options may not be assigned or transferred except by will or
by the laws of descent or distribution and are exercisable only while the
optionee is serving as a director of the Company or within 90 days after the
optionee ceases to serve as a director of the Company (except that if a director
dies or becomes disabled while serving as a director of the Company, the option
is exercisable until the scheduled expiration date of the option).
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PERFORMANCE GRAPH
The following graph compares the total return on $100 invested in the
Company's Common Stock for the five-year period ended June 30, 1997, with a
similar investment in the S&P 500 Stock Index and the Company's Peer Group.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG HYPERION SOFTWARE CORPORATION ("HYPERION"),
S&P 500 INDEX AND THE COMPANY'S PEER GROUP**
[LINE GRAPH]
----------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
Hyperion $100.00 $116.00 $128.00 $270.00 $148.00 $267.00
S&P 500 $100.00 $114.00 $115.00 $145.00 $183.00 $247.00
Peer Group $100.00 $132.00 $145.00 $247.00 $332.00 $450.00
----------------------------------------------------------------------
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* Cumulative Total Return assumes reinvestment of dividends.
** Peer Group is based on SIC Code 7372 -- prepackaged software companies.
The stock price performance shown on the graph above is not necessarily
indicative of future price performance. Information used in the graph was
obtained from Media General Financial Services, Inc., a source believed to be
reliable, however, the Company is not responsible for any errors or omissions in
such information.
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PROPOSAL TO AMEND THE 1991 STOCK PLAN
- --------------------------------------------------------------------------------
PROPOSAL TO AMEND PLAN TO INCREASE NUMBER OF SHARES RESERVED UNDER PLAN
The 1991 Stock Plan (the "1991 Plan") was adopted by the Board of Directors
of the Company and approved by the Company's stockholders in 1991. It is now
proposed to approve an amendment to increase the number of shares of Common
Stock authorized for issuance pursuant to the 1991 Plan from 4,000,000 shares to
7,000,000 shares. Management of the Company believes that this increase is
important to permit the Board of Directors to provide long-term incentives to
present and future key employees, particularly with respect to key technical
professionals who, in management's experience, tend to view equity-based
incentives as a standard component of total compensation. Further, the Board of
Directors is hereby proposing to amend the 1991 Plan such that (i) awards of
stock purchase and option rights resulting from the proposed increase in
available shares will be made at exercise prices equal to at least 85 percent of
the fair market value of the Company's Common Stock at the time of grant, and
(ii) awards of stock are no longer permitted.
DESCRIPTION OF THE 1991 PLAN
The purpose of the 1991 Plan is to provide incentives to officers and other
employees of the Company and any present or future subsidiaries (collectively,
"Related Corporations") by providing them with opportunities to purchase stock
of the Company pursuant to options which qualify as incentive stock options
("ISOs") as defined in Section 422(b) of the Code. The 1991 Plan also provides
for the issuance to officers, directors, employees and consultants of the
Company and Related Corporations of options which do not qualify as incentive
stock options ("non-qualified stock options"). Awards of stock and the
opportunity to make direct purchases of stock may be granted to directors,
consultants, employees and officers of the Company under the 1991 Plan. Stock
options, awards and opportunities to purchase stock are referred to collectively
as "Stock Rights." As of September 30, 1997, the closing price of the Company's
stock on The Nasdaq Stock Market was $31.19.
Administration. The 1991 Plan is administered by the Stock Option
Committee of the Board of Directors (the "Committee"), which consists of two
directors. Subject to the terms of the 1991 Plan, the Committee has the
authority to determine the persons to whom Stock Rights shall be granted
(subject to certain eligibility requirements for grants of ISOs) and the terms
of the Stock Rights granted, including (a) the number of shares subject to each
grant, (b) when the Stock Right becomes exercisable, (c) the per share exercise
or purchase price, (d) the duration of the Stock Right, (e) the time, manner and
form of payment upon the exercise of a Stock Right and (f) other terms and
provisions governing the Stock Rights.
Eligible Participants. Subject to certain limitations, ISOs under the 1991
Plan may be granted to any employee of the Company other than members of the
Committee. The 1991 Plan provides that each eligible employee may be granted
ISOs only to the extent that, in the aggregate under the 1991 Plan and all ISO
plans of the Company and any Related Corporation, such ISOs do not become
exercisable for the first time by such employee during any calendar year in a
manner which would entitle the employee to purchase more than $100,000 in fair
market value (determined at the time the ISOs were granted) of Common Stock in
that year. Any portion of an ISO grant that exceeds such $100,000 limit will be
treated for federal income tax purposes as a non-qualified stock option. There
is currently no other restriction as to the maximum or minimum number of options
an optionee maybe granted. As of September 30, 1997, there were approximately
1,300 officers and employees of Related Corporations that were eligible to
participate in the 1991 Plan.
Granting of Stock Rights, Prices and Duration. Stock Rights may be granted
under the 1991 Plan at any time prior to September 5, 2001. The exercise price
per share of non-qualified stock options granted under the 1991 Plan cannot be
less than the par value of Common Stock ($.01 per share). The exercise price per
share of ISOs cannot be less than the fair market value of the Common Stock on
the date of grant (or, in the case of
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ISOs granted to employees holding more than ten percent of the voting stock of
the Company, 110% of the fair market value of the Common Stock on the date of
grant). The 1991 Plan provides that each option shall expire on the date
specified by the Committee, but not more than ten years from its date of grant
in the case of ISOs, ten years and one day in the case of non-qualified stock
options, and five years in the case of ISOs granted to an employee or officer
holding more than ten percent of the voting stock of the Company.
Exercise of Options. Each option granted under the 1991 Plan is either
fully exercisable at the time of grant or becomes exercisable in such
installments as the Committee may specify, typically over 3 to 4 years. Each
option may be exercised at any time or from time to time, in whole or in part,
for up to the total number of shares with respect to which it is then
exercisable. The Committee has the right to accelerate the date of exercise of
any installment of any option, but the Committee may not, without the consent of
an optionee, accelerate the exercise date of any ISO if such acceleration would
violate the annual $100,000 limitation for ISOs.
Payment for exercise of an option under the 1991 Plan may be made in cash
or by check or, if authorized by the Committee in its discretion (in writing at
the time of grant with respect to ISOs), in full or in part by a personal
recourse, interest bearing note, by tendering shares of Common Stock of the
Company or by an assignment to the Company of the proceeds from the sale of the
Common Stock acquired upon exercise of the option and an authorization to the
broker or selling agent to pay that amount to the Company.
Effect of Termination of Employment, Disability or Death. If an ISO
optionee ceases to be employed by the Company and all Related Corporations other
than by reason of death or disability, no further installments of his or her
ISOs will become exercisable, and the ISOs will terminate after the passage of
90 days from the date of termination of employment (but no later than their
specified expiration dates), except to the extent that such ISOs will have been
converted by the Committee into non-qualified stock options. If an optionee is
disabled or dies, any ISO held by the optionee may be exercised, to the extent
exercisable on the date of disability or death, by the optionee or the
optionee's estate, personal representative or beneficiary, at any time within
180 days from the date of the optionee's disability or death (but not later than
the specified expiration date of the ISO). Non-qualified stock options are
subject to such termination and cancellation provisions as may be determined by
the Committee.
Non-Assignability of Options. Only the optionee may exercise an option; no
assignment or transfers are permitted except by will or by the laws of descent
and distribution.
Miscellaneous. Subject to the discretion of the Committee, option holders
are protected against dilution in the event of a stock dividend,
recapitalization, stock split, merger or similar transaction involving a change
in capital structure. The Board of Directors may terminate or amend the 1991
Plan in any respect at any time, except that, without the approval of the
holders of a majority of the outstanding shares of Common Stock, (a) the total
number of shares that may be issued under the 1991 Plan may not be increased
except as described under "Adjustments" in the 1991 Plan; (b) the provisions
regarding employees eligible for ISOs may not be modified; (c) the provisions
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment referred to above); and (d) the expiration
date of the 1991 Plan may not be extended. No action of the Board of Directors
or stockholders, however, may, without the consent of an optionee, alter or
impair any optionee's rights under any option previously granted to him. Any
shares subject to an option which for any reason expires or terminates
unexercised may again be available for option grants under the 1991 Plan. Unless
terminated sooner, the 1991 Plan will terminate on September 5, 2001.
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FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. The following general rules are applicable under
current federal income tax law to ISOs under the 1991 Plan:
1. In general, no taxable income results to the optionee upon the grant of
an ISO or upon the issuance of shares to him or her upon the exercise of
the ISO (but see alternative minimum tax discussion below), and no tax
deduction is allowed to the Company upon either grant or exercise of an
ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years following the date the option was granted and/or (ii) one
year following 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 before the
expiration of one or both of the requisite 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 treated as compensation to the optionee and will be taxed as
ordinary income in the year of such disposition.
4. In any year that an optionee recognizes compensation income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the
Company generally should be entitled to a corresponding deduction for
federal income tax purposes.
5. Any excess of the amount realized by the optionee as the result of a
Disqualifying Disposition over 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.
6. Capital gain or loss recognized 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 Company's Common Stock to the Company 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 will apply.
8. In addition to the ordinary income tax consequences described above, the
exercise of ISOs may result in a further "minimum tax" under the Code.
The Code provides that an "alternative minimum tax" 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 Common Stock received upon exercise of the ISO
exceeds the exercise price is included in the optionee's alternative
minimum taxable income for the year in which the optionee exercises the
ISO. A taxpayer is required to pay the higher of his or her regular tax
liability or the alternative minimum tax. A taxpayer who pays
alternative minimum tax may be entitled to a tax credit against his or
her regular tax liability in later years.
Non-Qualified Stock Options. The following general rules are applicable
under current federal income tax law to non-qualified stock options under the
1991 Plan:
1. The optionee generally does not realize any taxable income upon the
grant of an option, and the Company is not allowed a business expense
deduction by reason of such grant.
2. The optionee generally will recognize ordinary compensation income at
the time of exercise of the 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 Company may be required to withhold income tax
on this
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amount. The Company generally should be entitled to a tax deduction in
the year in which compensation income is recognized by the optionee.
3. When the optionee sells the shares, he or she generally will recognize a
capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in the
shares (generally, the exercise price plus the amount taxed to the
optionee as compensation income). If the optionee's holding period for
the shares exceeds one year, such gain or loss will be a long-term
capital gain or loss.
4. An optionee may be entitled to exercise a non-qualified stock option by
delivering shares of the Company's Common Stock to the Company in
payment of the exercise price. If an optionee exercises a non-qualified
stock option in such fashion, special rules will apply.
Awards and Purchases. Under current federal income tax law, persons
receiving Common Stock pursuant to an award of stock or a grant of an
opportunity to purchase stock will generally recognize ordinary compensation
income equal to the fair market value of the shares received, reduced by any
purchase price paid. The Company should generally be entitled to a corresponding
tax deduction. When such Common Stock is sold, the seller generally will
recognize capital gain or loss. Special rules apply if the stock acquired is
subject to vesting, or is subject to certain restrictions on resale under
federal securities laws applicable to directors, officers or 10% stockholders.
STOCK OPTION GRANTS UNDER THE 1991 PLAN TO DATE
Since the inception of the 1991 Plan, the following stock options have been
granted under it to the persons listed below.
NAME AND PRINCIPAL POSITION NUMBER OF OPTIONS(1)
--------------------------- --------------------
James A. Perakis.............................................. 470,000(2)
Chairman and Chief Executive Officer
Lucy Rae Ricciardi............................................ 140,000
Senior Vice President and Chief Financial Officer
Craig M. Schiff............................................... 138,000
Senior Vice President and Corporate Secretary
Anthony A. Colangelo.......................................... 51,000
Vice President -- Sales
W. Iain Kerr.................................................. 51,000
Vice President -- European Operations
All current executive officers as a group (6 persons)......... 850,000
All current directors who are not executive officers
as a group (5 persons)...................................... 151,000
All employees who are not executive officers as a group....... 2,935,179
- ---------------
(1) Options include all grants, net of cancellations, from adoption of the Plan
until June 30, 1997. Options granted pursuant to the Plan vest at varying
rates, but generally over 3 to 4 year periods. Options were granted at 100%
of the fair market value of the Common Stock as of the date of grant.
(2) Persons who have received five percent or greater of options granted under
the Plan.
The Board of Directors recommends a vote FOR the approval of the amendments to
the Company's 1991 Plan to increase the number of shares of Common Stock
authorized for issuance under the 1991 Plan from 4,000,000 to 7,000,000 shares.
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CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
The Company paid consulting fees of approximately $262,704 in fiscal 1997 to IIM
pursuant to a consulting agreement that expires on June 30, 1999. Robert W.
Thomson, a director of the Company, is the sole stockholder of IIM. The
consulting agreement provides that Mr. Thomson will carry out IIM's obligations
under the agreement. Such obligations include advisory functions related to
development of enhancements to existing software products of the Company, as
well as new product development. Under the agreement, Mr. Thomson is required to
devote up to 35 hours per week for no more than 46 weeks per year to the
performance of IIM's obligations. As a result of Mr. Thomson's individual
contribution to the Company, he was granted in fiscal 1997 options to purchase
up to 41,000 shares of Common Stock. The stock options were granted under the
1991 Plan at fair market value and vest over a period of four years.
The Company has adopted a policy whereby all transactions between the
Company and its principal officers, directors and affiliates must 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities (collectively "Reporting Persons"), to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than 10 percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain Reporting Persons that no Forms 5 were
required for those persons, the Company believes that during fiscal year 1997
all Reporting Persons complied with all Section 16(a) filing requirements.
RATIFICATION OF SELECTION OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors has selected the firm of Ernst & Young LLP to serve as
independent auditors for the fiscal year ending June 30, 1998. Ernst & Young LLP
has served as the Company's independent auditors since fiscal year 1985. It is
expected that a member of the firm 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 recommends a vote FOR the
ratification of this selection.
VOTE REQUIRED
- --------------------------------------------------------------------------------
Only stockholders of record as of September 30, 1997 will be entitled to vote at
the Meeting and any adjournments thereof. As of that date 18,589,948 shares of
Common Stock of the Company 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 stockholder giving a proxy has the right to revoke it by written
notice to the Secretary of the Company at anytime before it is exercised, or by
voting in person at the Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to constitute a quorum for the transaction of business. Votes withheld from any
nominee for election as a director, abstentions and broker "non-votes" are
counted as
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present or represented for purposes of determining the presence or absence of a
quorum for the Meeting. A "non-vote" occurs when a broker 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 broker does not have
discretionary voting power and has not received instructions from the beneficial
owner.
Voting at the Meeting shall be conducted as follows. 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 at the
Meeting and voting on each such matter is required for approval. Abstentions and
broker "non-votes" are not counted in determining whether a majority vote is
obtained on any proposal voted on at the Meeting. An automated system
administered by the Company's transfer agent tabulates the votes. The vote on
each matter submitted to stockholders is tabulated separately.
The persons named as attorneys in the proxies are directors and/or officers
of the Company. All properly executed proxies returned in time to be counted at
the Meeting will be voted as stated above under "Election of Directors." Any
stockholder giving a proxy has the right to withhold authority to vote for any
individual nominee to the Board of Directors by writing that nominee's name in
the space provided on the proxy. In addition to the election of directors, the
stockholders will consider and vote upon proposals to amend the 1991 Plan and to
ratify the selection of auditors, all as further described above. 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 of the Company 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.
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 Company must be received at the Company's principal
executive offices not later than June 17, 1998. In order to curtail controversy
as to the date on which a proposal was received by the Company, it is suggested
that proponents submit their proposals by Certified Mail -- Return Receipt
Requested.
EXPENSES AND SOLICITATION
- --------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company 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 Company may also be made of
some stockholders in person or by mail, telephone or telegraph following the
original solicitation. The Company may retain a proxy solicitation firm to
assist in the solicitation of proxies in connection with the Meeting. If the
Company retains a proxy solicitation firm, it will pay such firm customary fees,
expected to be approximately $15,000, plus expenses.
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Please Detach and Mail in the Envelope Provided
----------------------------------------------------------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] NOMINEES: James A. Parakis 2. To consider and act upon an amendment [ ] [ ] [ ]
Directors Gary G. Greenfield to the Company's 1991 Stock Plan to
increase the number of shares of
(Instruction: To vote against to serve for a three-year term Common Stock authorized for issuance
one of these nominees, check as Class I Directors. under the plan from 4,000,000 to
"For" and write the name of 7,000,000 shares.
the nominee being voted
against on the space provided 3. To ratify the selection of the firm of [ ] [ ] [ ]
below) Ernst & Young LLP as the independent
auditors of the Company for the
------------------------------- fiscal year ending June 30, 1998.
4. To transact such other business as may properly come before
the Annual Meeting and any adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED.
IF NO DIRECTION IS GIVEN, THEY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR PROPOSALS IN ITEMS 2 AND 3.
SIGNATURE(S):_____________________________________________________________________________________ DATE: ________________________
NOTE: Please sign exactly as name appears herein. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.