SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, For Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
COMPUTRON SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, If Other Than Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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COMPUTRON SOFTWARE, INC.
301 Route 17 North
Rutherford, New Jersey 07070
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 1998
TO OUR STOCKHOLDERS:
The annual meeting of stockholders (the "Annual Meeting") of Computron
Software, Inc. (the "Company") will be held at the Meadowlands Hilton, 2 Harmon
Plaza, Secaucus, New Jersey, telephone number (201) 348-6900 on June 10, 1998,
at 9:00 a.m. for the following purposes:
(1) To elect eight directors to serve until the next Annual Meeting or until their
respective successors shall have been duly elected and qualified;
(2) To approve the 1998 Stock Option Plan;
(3) To ratify the appointment of KPMG Peat Marwick LLP as the Company's independent auditors
for 1998; and
(4) To transact such other business as may properly come before the Annual Meeting.
Only stockholders of record at the close of business on May 5, 1998 are
entitled to notice of and to vote at the Annual Meeting. A list of stockholders
eligible to vote at the meeting will be available for inspection at the meeting
and for a period of ten days prior to the meeting during regular business hours
at the corporate headquarters at the address above.
Whether or not you expect to attend the Annual Meeting, your proxy vote is
important. To assure your representation at the Annual Meeting, please sign and
date the enclosed proxy card and return it promptly in the enclosed envelope,
which requires no additional postage if mailed in the United States. A copy of
the Company's Annual Report for the year 1997 is enclosed.
By Order of the Board of Directors,
John A. Rade
Chief Executive Officer and President
Rutherford, New Jersey
April 30, 1998
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD
BE COMPLETED AND RETURNED PROMPTLY
COMPUTRON SOFTWARE, INC.
PROXY STATEMENT FOR ANNUAL MEETING OF
STOCKHOLDERS
JUNE 10, 1998
This Proxy Statement is furnished to stockholders of record of Computron
Software, Inc. (the "Company") as of the close of business on May 5, 1998 in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors" or "Board") for use at the Annual Meeting of
Stockholders to be held on June 10, 1998 (the "Annual Meeting").
Shares cannot be voted at the meeting unless the owner is present in person
or by proxy. All properly executed and unrevoked proxies in the accompanying
form that are received in time for the meeting will be voted at the meeting or
any adjournment thereof in accordance with instructions thereon, or if no
instructions are given, will be voted "FOR" the election of the named nominees
as Directors of the Company, "FOR" the approval of the 1998 Stock Option Plan,
"FOR" the approval of the Company's independent public accountants, and will be
voted in accordance with the best judgment of the persons appointed as proxies
with respect to other matters which properly come before the Annual Meeting. Any
person giving a proxy may revoke it by written notice to the Company at any time
prior to exercise of the proxy. In addition, although mere attendance at the
Annual Meeting will not revoke the proxy, a stockholder who attends the meeting
may withdraw his or her proxy and vote in person. Abstentions and broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business at the Annual Meeting. Abstentions will
be counted as votes "AGAINST" in tabulations of the votes cast on each of the
proposals presented at the Annual Meeting, whereas broker non-votes will not be
counted and therefore will not affect the vote with respect to any such
proposal.
The Annual Report of the Company (which does not form a part of the proxy
solicitation materials), including the Annual Report on Form 10-K with the
financial statements of the Company for the fiscal year ended December 31, 1997,
is being distributed concurrently herewith to stockholders. The expense of this
proxy solicitation will be borne by the Company. In addition to solicitation by
mail, proxies may be solicited in person or by telephone, telegraph or other
means by directors or employees of the Company or its subsidiaries without
additional compensation. The Company will reimburse brokerage firms and other
nominees, custodians and fiduciaries for costs incurred by them in mailing proxy
materials to the beneficial owners of shares held of record by such persons.
The mailing address of the principal executive offices of the Company is 301
Route 17 North, Rutherford, New Jersey 07070. This Proxy Statement and the
accompanying form of proxy are being mailed to the stockholders of the Company
on or about May 7, 1998.
VOTING SECURITIES
The Company has only one class of voting securities, its common stock, par
value $0.01 per share (the "Common Stock"). At the Annual Meeting, each
stockholder of record at the close of business on May 5, 1998 will be entitled
to one vote for each share of Common Stock owned on that date as to each matter
presented at the Annual Meeting. On April 10, 1998, 23,778,980 shares of Common
Stock were outstanding. A list of stockholders eligible to vote at the Annual
Meeting will be available for inspection at the Annual Meeting and for a period
of ten days prior to the Annual Meeting during regular business hours at the
principal executive offices of the Company at the address specified above.
PROPOSAL 1
ELECTION OF DIRECTORS
Unless otherwise directed, the persons appointed in the accompanying form of
proxy intend to vote at the Annual Meeting for the election of the eight
nominees named below as Directors of the Company to serve until the next Annual
Meeting or until their successors are duly elected and qualified. If any nominee
is unable to be a candidate when the election takes place, the shares
represented by valid proxies will be voted in favor of the remaining nominees.
The Board of Directors does not currently anticipate that any nominee will be
unable to be a candidate for election.
The Board of Directors currently has eight members, all of whom were elected
to the Board of Directors by the stockholders at the 1997 annual stockholders
meeting, and are nominees for election. Each director shall serve until the next
Annual Meeting or until their respective successors shall have been duly elected
and qualified. The affirmative vote of a majority of the Company's outstanding
Common Stock represented and voting at the Annual Meeting is required to elect
the Directors.
NOMINEES FOR ELECTION AS DIRECTORS
The following information with respect to the principal occupation or
employment, other affiliations and business experience of each nominee during
the last five years has been furnished to the Company by such nominee. Except as
indicated, each of the nominees has had the same principal occupation for the
last five years.
ELIAS TYPALDOS, 47, a founder of the Company, has been Senior Vice
President, Research and Development and a director since the Company's formation
in 1978. He has served as Chairman of the Board of Directors since March 1997.
JOHN A. RADE, 63, joined the Company as a Director, President and Chief
Executive Officer in February 1997. Prior to joining the Company, Mr. Rade, was
from April 1995, a Vice President of American Management Systems, Inc., an
international consulting company, and was also still active at S-Cubed
International, a company in the client server system development and consulting
market, which he founded in February 1990.
GENNARO VENDOME, 51, a founder of the Company, has been a Vice President and
a director since the Company's formation in 1978. Mr. Vendome was Treasurer of
the Company from 1981 until 1991 and Secretary of the Company from 1982 until
1991.
GREGORY KOPCHINSKY, 46, has been a director since 1994. Mr. Kopchinsky is a
partner of the venture capital partnership Canaan Partners, which through its
affiliates is a principal stockholder of the Company. Mr. Kopchinsky joined
Canaan Partners as a General Partner in 1990. From 1984 to 1990, he was a Vice
President at J. P. Morgan with principal responsibility for private debt and
equity financings. Prior to joining J. P. Morgan, Mr. Kopchinsky was an attorney
with Davis Polk & Wardwell specializing in complex financing transactions.
ROBERT MIGLIORINO, 47, has been a director since 1991. Mr. Migliorino is a
founding partner of the venture capital partnership Canaan Partners, which
through its affiliates is a principal stockholder of the Company. Prior to
establishing Canaan Partners in 1987, he spent 15 years with General Electric
Co. in their Drive Systems, Industrial Control, Power Delivery, Information
Services and Venture Capital businesses.
2
MICHEL BERTY, 58, has been a director since August 1996. From September 1992
until March 1997, Mr. Berty was the Chairman and Chief Executive Officer of CAP
Gemini America (CGA), the U.S. subsidiary of the CAP Gemini Group, an
international information technology consulting organization. Prior to that, Mr.
Berty was General Secretary at Cap Gemini Sogeti Group, from 1986 to September
1992.
WILLIAM E. VOGEL, 60, has been a director since August 1996. Since 1971, Mr.
Vogel has been Chief Executive Officer of Centennial Financial Group, Inc.,
which is the parent of Centennial Life Insurance Company. Mr. Vogel has also
been the Chief Executive Officer of W.S. Vogel Agency, Inc. since 1961.
EDWIN T. BRONDO, 50, has been a director since May 1997. Mr. Brondo is
currently a management and financial consultant. Mr. Brondo was Chief
Administrative Officer and Senior Vice President of First Albany Companies,
Inc., an investment banking firm, from June 1993 until December 1997. From June
1992 to June 1993 he was a Financial Management Consultant at Comtex Information
Systems, Inc., a software consulting firm. Mr. Brondo also has held positions at
Goldman, Sachs & Co., Morgan Stanley & Co., Inc. and Bankers Trust Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors reviews, acts on and reports
to the Board of Directors with respect to various auditing and accounting
matters, including the selection of the Company's auditors, the scope of the
annual audits, fees to be paid to the auditors, the performance of the Company's
auditors and the accounting practices of the Company. The Audit Committee met
three times during 1997. Messrs. Migliorino, Berty and Brondo are the members of
the Audit Committee.
The Compensation Committee of the Board of Directors determines the salaries
and incentive compensation of the officers of the Company and provides
recommendations for the salaries and incentive compensation of the other
employees and the consultants of the Company. The Compensation Committee held
one formal meeting during 1997. The Compensation Committee also administers
various incentive compensation, stock and benefit plans. Messrs. Kopchinsky and
Vogel are the members of the Compensation Committee.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During fiscal year 1997, the Board of Directors held twelve meetings. During
fiscal year 1997, each incumbent Director attended at least 75% of the number of
meetings held of the Board of Directors and Committees on which he served. In
addition to formal meetings, the Board of Directors and the Audit and
Compensation Committees meet frequently on an informal basis.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. Directors do not receive a fee for attending Board of
Directors or committee meetings, but are reimbursed for expenses incurred in
connection with performing their respective duties as Directors of the Company.
STOCK OPTION GRANT. Under the Company's Amended and Restated 1995 Stock
Option Plan (the "Option Plan"), each non-employee Director first elected or
appointed to the Board of Directors after the date of the initial public
offering of the Company's Common Stock will automatically be granted an option
for 15,000 shares of Common Stock on the date of his or her election or
appointment to the Board of Directors, provided such individual has not
previously been in the employ of the Company. In addition, at
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each Annual Meeting of Stockholders, each individual granted an initial grant
under the Option Plan's Automatic Option Grant Program with at least six months
of service on the Board of Directors who will continue to serve as a
non-employee Director following the meeting will automatically be granted an
option for 3,000 shares of Common Stock, whether or not such individual has been
in the prior employ of the Company or joined the Board of Directors prior to the
effective date of the Option Plan. Each option granted under the automatic grant
program will have an exercise price equal to 100% of the fair market value of
the Common Stock on the automatic grant date and a maximum term of ten years,
subject to earlier termination upon the optionee's cessation of Board of
Director service. Each automatic option will be immediately exercisable;
however, any shares purchased upon exercise of the option will be subject to
repurchase by the Company should the optionee's service as a non-employee
Director cease prior to vesting in the shares. The initial 15,000 share grant
will vest in successive equal annual installments over the optionee's initial
four-year period of service on the Board of Directors. Each additional 3,000
share grant will vest upon the optionee's completion of one year of service on
the Board of Directors, as measured from the grant date. However, each
outstanding option will immediately vest upon (i) certain changes in the
ownership or control of the Company or (ii) the death or disability of the
optionee while serving on the Board of Directors. Pursuant to the Automatic
Option Grant Program, Messrs. Berty, Vogel and Brondo will receive a 3,000-share
option grant on the date of the Annual Meeting, if such individuals are
reelected, however, if the 1998 Stock Option Plan is approved at the Annual
Meeting such individuals will receive a 10,000 share option grant pursuant to
that plan.
EXECUTIVE OFFICERS AND INFORMATION
REGARDING EXECUTIVE OFFICER COMPENSATION
EXECUTIVE OFFICERS
The executive officers of the Company as of March 31, 1998 were as follows:
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
Elias Typaldos....................................... 47 Senior Vice President, Research and Development and
Chairman of the Board
John A. Rade......................................... 63 President, Chief Executive Officer and Director
Michael R. Jorgensen................................. 45 Executive Vice President, Chief Financial Officer and
Treasurer
Gregory Groom........................................ 49 Senior Vice President of Business Operations
Jean-Louis Nives..................................... 39 Senior Vice President, Sales and Marketing for North
America
Gennaro Vendome...................................... 51 Vice President, Eastern Region and Director
Robert T. Hewitt..................................... 50 Vice President, Product Development
Alex Plavocos........................................ 51 Vice President, Marketing
William H. Burke..................................... 36 Vice President, Finance and Administration
Robert Nishi......................................... 37 Vice President, Product Marketing
INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
MICHAEL R. JORGENSEN joined the Company as Executive Vice President, Chief
Financial Officer and Treasurer in February 1997. Prior to joining the Company,
from June 1993 to September 1996, Mr. Jorgensen was Senior Vice President and
Chief Financial Officer of Ground Round Restaurants, Inc.,
4
a publicly-held chain of family restaurants. Prior to that, from March 1992 to
April 1993, he was Vice President/Finance-Middle East of Alghanim Industries, a
consumer products company. Mr. Jorgensen was Chief Financial Officer of
International Proteins Corporation from May 1988 to September 1991.
GREGORY GROOM joined the Company in October 1997 as Senior Vice President of
Business Operations. Mr. Groom was in charge of Channel Marketing from October
1996 to September 1997 for Healtheon, Inc., an Internet solutions provider.
Prior to October 1996, Mr. Groom was the Technology and Administrative Systems
Practice Leader at Watson Wyatt Worldwide, a benefits consulting firm.
JEAN-LOUIS NIVES joined the Company in December 1997 as Senior Vice
President of Sales and Marketing for North America. Prior to joining the
Company, Mr. Nives held various executive positions at Information Resources,
Inc./IRI Software, and most recently served as Executive Vice President,
Software Product Management.
ALEX PLAVOCOS joined the Company in June 1994 as Vice President, Marketing.
From July 1991 to June 1994, Mr. Plavocos was Director of Corporate Marketing
for Information Builders Inc., a software company. Mr. Plavocos held various
marketing positions with Applied Data Research/Computer Associates, a software
company, from November 1983 to June 1991.
ROBERT T. HEWITT joined the Company as Vice President, Product Development
in April 1996. From June 1988 to April 1996, Mr. Hewitt was Senior Vice
President, Product Development at Financial Technologies International, Inc., a
software development company.
WILLIAM H. BURKE joined the Company as Vice President, Finance and
Administration in February 1997. Prior to joining the Company, Mr. Burke was a
Senior Manager with the international accounting firm of Arthur Andersen LLP,
specializing in technology related industries. Mr. Burke was employed by Arthur
Andersen LLP from January 1985 to February 1997, and is a Certified Public
Accountant.
ROBERT NISHI joined the Company in August 1986 as Manager of Consulting, was
promoted in 1991 to Director of National Sales Support, and became Vice
President, Product Marketing in January 1998.
5
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation
received for the three fiscal years ended December 31, 1997, by the Company's
Chief Executive Officers who served in such capacity in the fiscal year 1997 and
the four most highly compensated executive officers of the Company, other than
the CEO, whose total compensation during fiscal year 1997 exceeded $100,000 and
who were serving as executive officers as of fiscal year ended December 31, 1997
or served during fiscal year 1997 (collectively, the "Named Executive
Officers"):
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ----------------------------
------------------------------------- RESTRICTED SECURITIES ALL
FISCAL OTHER ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
- ----------------------------- ----------- --------- --------- --------------- --------------- ----------- -------------
John A. Rade(3).............. 1997 $ 229,174 $ 200,000 -- $ 25,000(1) 600,000 $ 4,393(4)
Chief Executive Officer
and President
Adrian A. Peters(2).......... 1997 18,750 -- -- -- -- --
Former Chief Executive 1996 93,750 -- -- -- -- --
Officer
Elias Typaldos............... 1997 264,224 -- -- -- -- 7,571(6)
Senior Vice President, 1996 222,557 -- -- -- -- 6,214(6)
Research and Development 1995 288,581 -- -- -- -- 7,694(6)
Joseph Esposito(7)........... 1997 65,384 50,000 -- -- -- 200,000(12)
Former President, 1996 200,000 20,645 -- -- -- 2,000(8)
Worldwide Operations 1995 200,000 62,500 -- -- -- 1,833(8)
Michael R. Jorgensen(13)..... 1997 147,548 85,000 -- -- 150,000 --
Executive Vice President,
Chief Financial Officer and
Treasurer
William H. Burke(9).......... 1997 175,000 50,000 -- -- 100,000 1,746(8)
Vice President Finance and
Administration
Gennaro Vendome.............. 1997 151,920 -- 39,678(11) -- -- 7,959(5)
Vice President Eastern 1996 126,920 -- 2,499(11) -- -- 10,177(5)
Region 1995 126,920 -- 51,194(11) -- -- 11,556(5)
Vincent M. Renz(10).......... 1997 126,416 63,705 -- -- 15,000 99,000(12)
Former Vice President, 1996 110,000 37,641 -- -- -- 2,000(8)
Client 1995 110,000 68,473 -- -- 3,750 1,166(8)
Services
- ------------------------
(1) Represents the fair value on the grant date of a restricted stock award of
25,000 shares of common stock. The fair value of such shares on December 31,
1997 was $59,375.
(2) Mr. Peters served as Chief Executive Officer of the Company from August 1996
to January 1997.
(3) Mr. Rade joined the company on February 1, 1997.
(4) Includes premiums on life and disability insurance and matching
contributions to the Company's 401(k) plan of $1,000.
(5) Includes for 1995, 1996 and 1997 respectively, premiums on life and
disability insurance for the benefit of the Named Executive Officer, and
matching contributions to the Company's 401(k) plan of $1,035 in 1997.
(6) Includes for 1995, 1996 and 1997, respectively, matching contributions to
the Company's 401(k) plan in the amount of $2,310, $2,375 and $1,071 and
premiums on life and disability insurance in the amounts of $5,384, $3,839
and $6,500, respectively.
(7) Mr. Esposito voluntarily resigned his position as President of the Company
on March 24, 1997.
(8) Represents a matching contribution to the Company's 401(k) plan.
(9) Mr. Burke joined the Company on February 17, 1997.
(10) Mr. Renz resigned his position as Vice President, Client Services on
November 3, 1997.
(11) Includes for 1995, 1996 and 1997 respectively, commissions of $48,771, $149
and $35,295 and amounts for auto allowances of $2,423, $2,350 and $4,383.
(12) Represents severance payments.
(13) Mr. Jorgensen joined the Company on February 10, 1997.
6
1995 STOCK OPTION PLAN
The 1995 Stock Option Plan was adopted by the Board of Directors and
approved by the Stockholders in June 1995. The Board of Directors and
Stockholders approved certain amendments to the Option Plan in 1997.
1998 STOCK OPTION PLAN
The Board of Directors approved the 1998 Stock Option Plan in April 1998.
The 1998 Stock Option Plan is discussed in detail at "Proposal 2 -- Approval of
the 1998 Stock Option Plan."
OPTION/SAR GRANTS IN LAST FISCAL YEAR
OPTION GRANTS IN FISCAL 1997
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% 10% ($)
- ------------------------------------ ----------- --------------- ------------- ----------- ---------- ----------
John A. Rade........................ 600,000(2) 18.7% $ 1.00 10 years $ 377,337 $ 956,246
Elias Typaldos...................... -- -- -- -- -- --
Michael R. Jorgensen................ 150,000(4) 4.7 1.00 10 years 94,335 239,061
William H. Burke.................... 100,000(3) 3.1 1.00 10 years 62,890 159,374
Genarro Vendome..................... -- -- -- -- -- --
Adrian A. Peters.................... -- -- -- -- -- --
Joseph Esposito..................... -- -- -- -- -- --
Vincent M. Renz..................... 15,000(4) 0.5 1.63 10 years 19,459 38,967
- ------------------------
(1) The dollar amounts under these columns are the result of calculations at the
hypothetical rates of appreciation of 5% and 10% as prescribed by the
Securities and Exchange Commission. The Company expresses no opinion
regarding whether future appreciation, if any, will be realized and
expressly disclaims any representations to that effect.
(2) Options to purchase 300,000 shares vest in three equal installments
commencing on February 1, 1998. Options to purchase 300,000 shares vest upon
the earlier to occur of the completion of seven years of service or the
achievement of certain milestones as measured by the performance of and
trading of the Company's common stock.
(3) Options are exercisable twenty five percent quarterly commencing March 3,
1997.
(4) Options are exercisable twenty five percent on each anniversary of the
original grant date.
7
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the Named
Executive Officers regarding stock option holdings as of December 31, 1997. No
stock options were exercised by such persons in fiscal year 1997. No stock
appreciation rights were exercised by any Named Executive Officer during fiscal
year 1997 and no stock appreciation rights were outstanding as of December 31,
1997.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ----------- ------------- ----------- -------------
John A. Rade..................................... -- 600,000 $ -- $ 825,000
Elias Typaldos................................... 11,250 3,750 5,344 1,781
Michael R. Jorgensen............................. -- 150,000 -- 206,250
William H. Burke................................. 75,000 25,000 103,125 34,375
Gennaro Vendome.................................. 11,250 3,750 5,344 1,781
- ------------------------
(1) Based on the fair market value of the Company's Common Stock using the
closing selling price on the American Stock Exchange of $2.375 per share of
Common Stock at December 31, 1997, less the exercise price payable for such
shares.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company and Mr. Rade are parties to an employment agreement dated as of
February 1, 1997. Pursuant to the terms of this agreement, Mr. Rade's base
salary for fiscal year 1997 is $250,000. During the first year of his employment
with the Company, Mr. Rade was guaranteed a bonus of $100,000, payable in four
equal installments, and received an additional bonus of $100,000 based on his
performance as measured by a business plan, which was submitted by Mr. Rade and
approved by the Board of Directors (the "Business Plan"). On subsequent
anniversaries of Mr. Rade's hire date, Mr. Rade may receive a bonus of up to
$200,000 based upon his performance as measured by the Business Plan. In the
event Mr. Rade's employment is terminated for any reason other than good cause,
the Company is required to provide him with severance payments equal to his base
compensation for one year from the date of termination.
The agreement also provides that Mr. Rade is entitled to receive 25,000
restricted shares of Common Stock and two stock grants. The first stock option
grant is for 300,000 shares of Common Stock, which shall vest in three equal
annual installments commencing on February 1, 1998. The other stock option grant
for 300,000 shares of Common stock, shall vest either upon the earlier to occur
of the completion of seven years of service with the Company or the achievement
of certain milestones as measured by the performance of and trading volume of
the Company's Common Stock. The Company may also be required to grant to Mr.
Rade additional options in the event of certain stock issuances by the Company.
Mr. Esposito resigned from the Company in March of 1997. Pursuant to a
severance agreement, Mr. Esposito received severance pay totaling $200,000 and a
previously earned bonus of $50,000. Under this agreement, Mr. Esposito has the
right to retain certain stock options granted to him in 1994. Also, Mr. Esposito
agreed to provide reasonable support to the Company for a certain period, to
refrain from
8
competing with the Company for a period of one year, and to refrain from
soliciting business and/or employees of the Company for a period of one year.
In connection with his resignation on November 3, 1997, Mr. Renz is entitled
to receive severance pay totaling approximately $100,000.
KEY-PERSON LIFE INSURANCE
The Company maintains a life insurance policy in the amount of $3.0 million
on the life of Elias Typaldos, Chairman of the Board of Directors and Senior
Vice President, Research and Development, with the Company as the beneficiary of
$2.0 million and Mr. Typaldos' spouse as the beneficiary of the other $1.0
million.
401(K) PLAN
The Company participates in a tax-qualified employee savings and retirement
plan (the "401(k) Plan") which covers all of the Company's employees with three
months of service who are at least 21 years of age. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit and have the amount of such reduction
contributed to the 401(k) Plan. The 401(k) Plan requires matching contributions
by the Company on behalf of all participants in the 401(k) Plan. During the
period January 1, 1997 through November 30, 1997, the Company made matching
contributions in the amount of 25% of the first six percent contributed by each
employee and contributed at the rate of 50% during December of 1997. The 401(k)
Plan is intended to qualify under Section 401 of the Internal Revenue Code of
1986, as amended, so that contributions by employees or by the Company to the
401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by the
Company, if any, will be deductible by the Company when made. The trustee under
the 401(k) Plan, at the direction of each participant, invests the assets of the
401(k) Plan in a number of investment options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1997, Messrs. Kopchinsky and Vogel served as members of
the Company's Compensation Committee.
9
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors advises the Chief
Executive Officer and the Board of Directors on matters of the Company's
compensation philosophy and the compensation of executive officers and other
individuals compensated by the Company. The Compensation Committee also is
responsible for the administration of the Company's Option Plans under which
option grants may be made to executive officers. The Compensation Committee has
reviewed and is in accord with the compensation paid to executive officers in
fiscal year 1997.
GENERAL COMPENSATION POLICY. The fundamental policy of the Compensation
Committee is to provide the Company's executive officers with competitive
compensation opportunities based upon their contribution to the development and
financial success of the Company and their personal performance. It is the
Compensation Committee's objective to have a portion of each executive officer's
compensation contingent upon the Company's performance as well as upon such
executive officer's own level of performance. Accordingly, the compensation
package for each executive officer is comprised of two elements: (i) base salary
which reflects individual performance and is designed primarily to be
competitive with salary levels in the industry and (ii) long-term stock-based
incentive awards which strengthen the mutuality of interests between the
executive officers and the Company's stockholders.
FACTORS. The principal factors which the Compensation Committee considered
with respect to each executive officer's compensation package for fiscal year
1997 are summarized below. The Compensation Committee may, however, in its
discretion apply entirely different factors in advising the Chief Executive
Officer and the Board of Directors with respect to executive compensation for
future years.
BASE SALARY. The suggested base salary for each executive officer is
determined on the basis of the following factors: experience, personal
performance, the salary levels in effect for comparable positions within and
without the industry and internal base salary comparability considerations. The
weight given to each of these factors differs from individual to individual, as
the Compensation Committee deems appropriate.
From time to time, the Compensation Committee may advocate cash bonuses when
such bonuses are deemed to be in the best interest of the Company.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentives are provided through
grants of stock options. The grants are designed to align the interests of each
executive officer with those of the stockholders and to provide each individual
with a significant incentive to manage the Company from the perspective of an
owner with an equity stake in the Company. Each option grant allows the
individual to acquire shares of the Company's Common Stock at a fixed price per
share (generally, the market price on the grant date) over a specified period of
time (up to ten years). Each option generally becomes exercisable in
installments over a five-year period, contingent upon the executive officer's
continued employment with the Company. Accordingly, the option grant will
provide a return to the executive officer only if the executive officer remains
employed by the Company during the vesting period, and then only if the market
price of the underlying shares appreciates.
The number of shares subject to each option grant is set at a level intended
to create a meaningful opportunity for stock ownership based on the executive
officer's current position with the Company, the base salary associated with
that position, the size of comparable awards made to individuals in similar
positions within the industry, the individual's potential for increased
responsibility and promotion over the option term and the individual's personal
performance in recent periods. The Compensation Committee
10
also considers the number of unvested options held by the executive officer in
order to maintain an appropriate level of equity incentive for that individual.
However, the Compensation Committee does not adhere to any specific guidelines
as to the relative option holdings of the Company's executive officers.
CEO COMPENSATION. In advising the Board of Directors with respect to the
compensation payable to the Company's Chief Executive Officer, the Compensation
Committee seeks to achieve two objectives: (i) establish a level of base salary
competitive with that paid by companies within the industry which are of
comparable size to the Company and by companies outside of the industry with
which the Company competes for executive talent and (ii) to make a significant
percentage of the total compensation package contingent upon the Company's
performance and stock price appreciation.
The suggested base salary established for Mr. Rade on the basis of the
foregoing criteria was intended to provide a level of stability and certainty
each year. Accordingly, this element of compensation was not affected to any
significant degree by Company performance factors. Mr. Rade also receives a
guaranteed bonus and is eligible to receive an additional performance-measured
bonus. Upon his employment by the Company, Mr. Rade was granted 25,000 shares of
restricted stock and two stock options. The first stock option for 300,000
shares shall vest in three equal annual installments, and the other stock option
for 300,000 shares shall vest either upon the earlier to occur of the completion
of seven years of service with the Company or the achievement of certain
performance-measured milestones. The Company may grant Mr. Rade additional
options in the event of certain stock issuances.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). As a result of
Section 162(m) of the Internal Revenue Code of 1986, as amended, which was
enacted into law in 1993, the Company will not be allowed a federal income tax
deduction for compensation paid to certain executive officers, to the extent
that compensation exceeds $1 million per officer in any one year. This
limitation will apply to all compensation paid to the covered executive officers
which is not considered to be performance based. Compensation which does qualify
as performance-based compensation will not have to be taken into account for
purposes of this limitation. The Option Plan contains certain provisions which
are intended to assure that any compensation deemed paid in connection with the
exercise of stock options granted under that plan with an exercise price equal
to the market price of the option shares on the grant date will qualify as
performance-based compensation.
The Compensation Committee does not expect that the compensation to be paid
to the Company's executive officers for the 1998 fiscal year will exceed the $1
million limit per officer. Because it is very unlikely that the cash
compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take any other action to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Compensation Committee will reconsider this decision should the
individual compensation of any executive officer ever approach the $1 million
level.
THE COMPENSATION COMMITTEE
Gregory Kopchinsky
William E. Vogel
April 29, 1998
11
PERFORMANCE GRAPH
Set forth below is a table comparing the annual percentage change in the
Company's cumulative total stockholder return on its Common Stock from August
24, 1995 (the date public trading of the Company's stock commenced) to the last
day of the Company's last completed fiscal year (as measured by dividing (i) the
sum of (A) the cumulative amount of dividends for the measurement period,
assuming dividend reinvestment, and (B) the excess of the Company's share price
at the end over the price at the beginning of the measurement period, by (ii)
the share price at the beginning of the measurement period) with the cumulative
total return so calculated of the Nasdaq Stock Market-US Index and a stock index
comprised of companies in a line of business similar to the Company during the
same period.
COMPARISON OF 28 MONTH CUMULATIVE TOTAL RETURN(1) AMONG COMPUTRON SOFTWARE,
INC., THE NASDAQ STOCK MARKET (US) INDEX, THE HAMBRECHT & QUIST COMPUTER
SOFTWARE INDEX AND THE AMEX MARKET VALUE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPUTRON SOFTWARE, INC. NASDAQ STOCK MARKET (U.S.) H&Q COMPUTER SOFTWARE AMEX MARKET VALUE INDEX
Symbol CTRN INAS IHCS AMX
8/95 100 100 100 100
9/95 99 104 103 104
12/95 103 106 103 105
3/96 34 111 112 109
6/96 28 120 122 110
9/96 20 124 126 109
12/96 9 130 125 111
3/97 15 123 114 111
6/97 9 145 136 122
9/97 8 170 163 138
12/97 14 159 151 135
- ------------------------
(1) $100 invested on 8/24/95 in Computron Software, Inc. Common Stock and on
7/31/95 in The Nasdaq Stock Market (US) Index, The Hambrecht & Quist
Computer Software Index and the Amex Market Value Index, including
reinvestment of dividends. Fiscal year ending December 31, 1997.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate future filings made by
the Company under those statutes, the preceding Compensation Committee Report on
Executive Compensation and the Company Stock Performance Graph will not be
incorporated by reference into any of those prior filings, nor will such report
or graph be incorporated by reference into any future filings made by the
Company under those statutes.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 10, 1998 by (i) each
Director and nominee for Director, (ii) each of the Named Executive Officers,
(iii) each person known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock and (iv) all executive officers and Directors
as a group. The information concerning beneficial owners of more than 5% of the
Company's Common Stock is based on filings with the Securities and Exchange
Commission on Schedules 13(D), 13(G) and on Forms 3, 4, and 5; and certain other
information obtained by the Company.
NUMBER OF SHARES OF COMMON STOCK PERCENTAGE OF SHARES OUTSTANDING
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) (1)
- ------------------------------------------- --------------------------------- -----------------------------------
Elias Typaldos............................. 3,276,423(2) 13.78%
John Rade.................................. 127,100(3) *
Gennaro Vendome............................ 1,578,998(4) 6.64
Gregory Kopchinsky......................... 3,238,110(5) 13.62
Robert Migliorino.......................... 3,234,110(6) 13.60
Michel Berty............................... 3,750(7) *
William Vogel.............................. 12,250(8) *
Edwin T. Brondo............................ 12,750(9) *
William H. Burke........................... 100,000 (10) *
Greg Groom................................. -- (11) *
Robert Hewitt.............................. -- *
Michael R. Jorgensen....................... 37,500 (12) *
Alex Plavocos.............................. 6,883 (13) *
Jean-Louis Nives........................... -- (14) *
Robert Nishi............................... 15,000 (15) *
Andreas Typaldos........................... 5,630,584 (16) 23.68
London Merchant Securities PLC............. 1,884,375 (17) 7.80
Lion Investments Limited................... 1,884,375 (17) 7.80
Westpool Investment Trust PLC.............. 1,884,375 (17) 7.80
The Weber Family Trust..................... 1,884,375 (17) 7.80
Eugene M. Weber............................ 1,884,375 (17) 7.80
Angela G. Weber............................ 1,884,375 (17) 7.80
Funds controlled by Canaan Partners (18)... 3,230,360 (19) 13.58
All Current Directors and Executive
Officers As a Group (15 persons)......... 8,412,514 (20) 34.98%
- ------------------------
* Represents beneficial ownership of less than one percent of the Common Stock
outstanding.
(1) Applicable percentage of ownership as of April 10, 1998 is based upon
23,778,980 shares of Common Stock outstanding. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission, and includes voting and investment power with respect to shares.
Gives effect to the shares of Common Stock issuable within 60 days of April
10, 1998 upon exercise of all options and other rights beneficially owned by
the indicated stockholders on that date.
13
(2) Includes (i) 374,205 shares owned by the Elias Typaldos Grantor Retained
Annuity Trust dated October 13, 1994, (ii) 1,147,750 shares held by the
Elias Typaldos Family Limited Partnership, (iii) 379,251 shares owned by the
Judith Typaldos Grantor Retained Annuity Trust dated October 13, 1994, and
(iv) 287,500 shares held by the Elias Typaldos Charitable Remainder Annuity
Trust dated December 21, 1995.
(3) Includes 100,000 shares of Common Stock which may be purchased within 60
days of April 10, 1998 upon the exercise of stock options granted on 3/3/97.
On 3/3/97, Mr. Rade also received a stock option grant for 300,000 shares,
which will vest upon the earlier to occur of the completion of seven years
of service with the Company or the achievement of certain milestones as
measured by the performance of and trading volume of the Company's Common
Stock.
(4) Includes (i) 160,000 shares held by the Vendome Charitable Remainder Annuity
Trust dated December 21, 1995, (ii) 240,704 shares held by the Vendome
Grantor Retained Annuity Trust dated January 24, 1995, (iii) 237,249 shares
held by the Carol Vendome Grantor Retained Annuity Trust dated January 24,
1995, (iv) 5,656 shares held by Carol Vendome as custodian for Laura
Vendome, and (v) 109,095 shares held by the Vendome Family Limited
Partnership.
(5) Includes (i) 2,884,714 shares of Common Stock directly held by Canaan
Capital Offshore Limited Partnership, C.V., (ii) 345,646 shares of Common
Stock directly held by Canaan Capital Limited Partnership, and (iii) 3,750
shares of Common Stock which may be purchased within 60 days of April 10,
1998 upon exercise of stock options. Mr. Kopchinsky is a general partner of
Canaan Capital Partners, L.P., the general partner of Canaan Capital
Management, L.P., which is the general partner of each of the entities
described in clauses (i) and (ii) above. In such capacity, Mr. Kopchinsky
may be deemed to be the beneficial owner of such shares, although he
disclaims such beneficial ownership except to the extent of his pecuniary
interest, if any.
(6) Includes (i) 2,884,714 shares of Common Stock directly held by Canaan
Capital Offshore Limited Partnership, C.V., (ii) 345,646 shares of Common
Stock directly held by Canaan Capital Limited Partnership, and (iii) 3,750
shares of Common Stock which may be purchased within 60 days of April 10,
1998 upon exercise of stock options. Mr. Migliorino is a general partner of
Canaan Capital Partners, L.P., the general partner of Canaan Capital
Management, L.P., which is the general partner of each of the entities
described in clauses (i) and (ii) above. In such capacity, Mr. Migliorino
may be deemed to be the beneficial owner of such shares, although he
disclaims such beneficial ownership except to the extent of his pecuniary
interest, if any.
(7) This number represents the number of shares of Common Stock which may be
purchased within 60 days of April 10, 1998 upon exercise of stock options.
(8) Includes (i) 4,000 shares held by the W.S. Vogel Agency, Inc. Profit Sharing
Plan and (ii) 3,750 shares of Common Stock which may be purchased within 60
days of April 10, 1998 upon exercise of stock options.
(9) Includes (i) 2,000 shares held by Pamela R. Brondo, Mr. Brondo's wife, as
custodian for Edwin T. Brondo, Jr. UTMA/NY and (ii) 3,750 shares of Common
Stock which may be purchased within 60 days of April 10, 1998 upon exercise
of stock options.
(10) This number represents the number of shares of Common Stock which may be
purchased by Mr. Burke within 60 days of April 10, 1998 upon the exercise of
stock options.
14
(11) On 11/7/97, Mr. Groom received a stock option that vests and may be
exercised upon the earlier of 8 years from the grant date, or when and if
the 30-day moving average of the common stock is equal to/ greater than
certain prices per share and the weekly trading volume is greater than
10,000 shares.
(12) This number represents the number of shares of Common Stock which may be
purchased by Mr. Jorgensen within 60 days of April 10, 1998 upon the
exercise of stock options.
(13) Includes 3,375 shares of Common Stock which may be purchased within 60 days
of April 10, 1998 upon exercise of stock options.
(14) On 11/24/97, Mr. Nives received a stock option that shall vest upon the
earlier to occur of eight (8) years from the date of the grant or when and
if the 30-day moving average is equal to/greater than the price/share as
follows: (i) shares vested: 33,334 (price per share $7.00); (ii) shares
vested: 33,333 (price per share, $11.00); (iii) shares vested: 33,333 (price
per share, $15.00). If prices per share are not met by 12/31/98, the options
will vest on the eighth year anniversary of the grant.
(15) Includes 14,000 shares of Common Stock which may be purchased within 60
days of April 10, 1998 upon exercise of stock options.
(16) Includes (i) 755,504 shares owned by the Andreas Typaldos GRAT dated
September 29, 1993; (ii) 11,047 shares owned by Renee Typaldos, Mr.
Typaldos' wife, (iii) 755,504 shares owned by the Renee Typaldos GRAT dated
September 29, 1993, (iv) 3,758,529 shares held by the Andreas Typaldos
Family Limited Partnership, and (v) 350,000 shares held by the Andreas
Typaldos Charitable Remainder Annuity Trust dated November 12, 1995.
(17) This number represents the number of shares benefically owned by London
Merchant Securities PLC; Lion Investments Limited; Westpool Investment Trust
PLC; the Weber Family Trust; Eugene M. Weber; and Angela G. Weber as a
"group" under Section 13(d) of the Securities Exchange Act of 1934. The
number includes 125,000 shares of Common Stock issuable upon exercise of
warrants by Lion Investments Limited; 250,000 shares of Common Stock
issuable upon exercise of warrants by Westpool Investment Trust PLC; and
1,875 shares of Common Stock issuable upon exercise of warrants by the Weber
Family Trust. Lion Investments Limited and Westpool Investment Trust PLC are
investment companies wholly-owned by London Merchant Securities PLC. Eugene
M. Weber and Angela G. Weber are trustees of the Weber Family Trust. Of the
total number of shares beneficially owned, Lion Investments Limited has sole
voting and sole dispositive power over 625,000 shares; Westpool Investment
Trust PLC has sole voting and sole dispositive power over 1,250,000 shares;
London Merchant Securities has shared voting and shared dispositive power
over 1,875,000 shares; and the Weber Family Trust, Eugene M. Weber, and
Angela G. Weber have sole voting and sole dispositive power over 9,375
shares. The address for London Merchant Securities PLC, Lion Investments
Limites and Westpool Investment Trust PLC is Carlton House, 33 Robert Adam
Street, London W1M 5AH England. The address for the Weber Family Trust is 50
California Street, Suite 3200, San Francisco, CA 94111. The address for
Eugene M. Weber and Angela G. Weber is 1806 Vallejo Street, San Francisco,
CA 94123.
(18) The address of Canaan Partners is 105 Rowayton Avenue, Rowayton, CT 06853.
The address of Canaan Capital Offshore Limited Partnership C.V. and Canaan
Capital Offshore Management, N.V. is: c/o ABN Trustcompany, Pietermaai 15,
Curacao, the Netherlands Antilles.
15
(19) Includes (i) 2,884,714 shares of Common Stock directly held by Canaan
Capital Offshore Limited Partnership, C.V. and (ii) 345,646 shares of Common
Stock directly held by Canaan Capital Limited Partnership.
(20) Includes 273,625 shares of Common Stock which may be purchased within 60
days of April 10, 1998 upon the exercise of stock options. Also includes (i)
2,884,714 shares of Common Stock directly held by Canaan Capital Offshore
Limited Partnership, C.V. and (ii) 345,646 shares of Common Stock directly
held by Canaan Capital Limited Partnership. Messrs. Kopchinsky and
Migliorino are general partners of Canaan Capital Partners, L.P., the
general partner of Canaan Capital Management, L.P., which is the general
partner of each of the entities described in clauses (i) and (ii) above. In
such capacity, Messrs. Kopchinsky and Migliorino may be deemed to be the
beneficial owners of such shares, although they each disclaim such
beneficial ownership except as to their pecuniary interest, if any. The
shares described in clauses (i) and (ii) of this footnote are included only
once in the total number of shares of common stock beneficially owned by all
directors and executive officers as a group. The Schedule 13(G) filing on
behalf of the above Canaan entities (and other related Canaan entities) and
Messrs. Kopchinsky and Migliorino reflects that James J. Fitzpatrick,
Stephen L. Green, Deepak Kamra, Harry T. Rein, and Eric A. Young have shared
voting power and shared dispositive power with respect to all of the shares
of Common Stock described in clauses (i) and (ii) of this note 20.
Accordingly, such individuals may also be deemed to be the beneficial owners
of such shares, although they each disclaim such beneficial ownership except
as to their pecuniary interest, if any.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's Directors,
Executive Officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their ownership of the Company's
Common Stock and any changes in that ownership to the Securities Exchange
Commission and the American Stock Exchange. Specific due dates for these reports
have been established and the Company is required to report in this Proxy
Statement any failure to file by these dates during fiscal year 1997. Based
solely on its review of such forms received by it from such persons for their
fiscal year 1997 transactions, the Company believes that all filing requirements
applicable to such officers, directors, and greater than ten percent beneficial
owners were complied with, except that the following filings were not timely
made but were filed in Fiscal Year 1997: Form 3 Initial Statement of Beneficial
Ownership forms for Michel Berty, Edwin T. Brondo, William H. Burke, Greg Groom,
Robert T. Hewitt, Alexander Plavocos, William E. Vogel, and Michael R.
Jorgensen; Form 4 Statement of Changes in Beneficial Ownership forms for
Alexander Plavocos (for 7/96 and 10/96) and William E. Vogel (for 6/97); and a
Form 5 Annual Statement of Changes in Beneficial Ownership for Elias Typaldos
(for 12/96). In March 1998, amended Form 5 Annual Statement of Changes in
Beneficial Ownership forms for Michel Berty, William Vogel , Gregory Kopchinsky,
and Robert Migliorino were filed to reflect additional stock options granted in
fiscal year 1997.
CERTAIN TRANSACTIONS
In January 1995, the Company entered into a consulting services and product
marketing agreement with S-Cubed International. Pursuant to this agreement,
S-Cubed International provides software and other technology to the Company, in
addition to certain offshore development services. Mr. Rade, who joined the
Company as Chief Executive Officer and President in February 1997, founded
S-Cubed International in February 1990 and owns 45% of its outstanding stock.
The Company believes that the
16
amounts paid to S-Cubed International are comparable to the amounts the Company
would have otherwise paid for comparable services from an unaffiliated party.
During the year ended December 31, 1997, the Company recorded as expense
approximately $641,000 related to work performed by S-Cubed International on
behalf of the Company.
The Company entered into a Consulting Agreement dated September 29, 1997
with Andreas Typaldos, the Company's former chairman and principal stockholder.
The Agreement provides for consulting services during the period of December 1,
1997 through November 30, 2000, in exchange for $300,000 for each of the first
two years and $250,000 for the third year.
On December 24, 1997, the Company loaned $175,000 to Mr. Vendome, a
significant stockholder and director of the Company. The loan was secured by
shares of the Company's common stock, and principal and interest at a per annum
rate of 8% were repaid in full in March of 1998.
17
PROPOSAL 2
APPROVAL OF THE 1998 STOCK OPTION PLAN
On April 21, 1998, the Board of Directors adopted the 1998 Stock Option Plan
(the "1998 Plan") effective immediately, subject to and conditioned upon
stockholder approval.
The affirmative vote of at least a majority of the shares of Common Stock
present in person or represented by proxy and entitled to vote on this matter at
the 1998 Annual Meeting is required for approval of the 1998 Plan. The following
description of the 1998 Plan is a summary and is qualified in its entirety by
reference to the 1998 Plan, a copy of which has been filed with the Securities
and Exchange Commission as an exhibit to this Proxy Statement, and which may be
obtained upon written request to the Corporate Secretary at the Company's
principal executive offices in Rutherford, New Jersey.
PURPOSE
The purpose of the 1998 Plan is to enhance the profitability and value of
the Company and its affiliates for the benefit of its stockholders by enabling
the Company to offer employees and consultants of the Company and its affiliates
stock based incentives and other equity interests in the Company and to make
equity based awards to non-employee directors of the Company in order to
attract, retain and reward such individuals and strengthen the mutuality of
interests between such individuals and the Company's stockholders.
ADMINISTRATION
The 1998 Plan will be administered and interpreted by a committee of the
Board of Directors consisting of two or more non-employee directors, each of
whom is intended to be, to the extent required by Rule 16b-3 under the
Securities Exchange Act of 1934 ("Rule 16b-3") and Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), a non-employee director
as defined in Rule 16b-3 and an outside director as defined under Section 162(m)
of the Code (the "Committee"). If no Committee exists which has the authority to
administer the 1998 Plan, the functions of the Committee will be exercised by
the Board of Directors. Except with regard to non-employee directors, the
Committee has the full authority and discretion, subject to the terms of the
1998 Plan, to grant awards under the 1998 Plan and to determine the persons to
whom awards will be granted. With regard to grants to non-employee directors,
the Board will administer and interpret the 1998 Plan.
ELIGIBILITY
All employees and consultants of the Company and its affiliates will be
eligible to receive grants of stock options and stock appreciation rights under
the 1998 Plan. Non-employee directors of the Company will automatically receive
grants of stock options under the 1998 Plan and are eligible to receive
discretionary grants of stock options under the 1998 Plan.
AVAILABLE SHARES
A maximum of 1,500,000 shares of Common Stock may be issued or used for
reference purposes under the 1998 Plan. The fair market value of the Company's
Common Stock (as determined under the 1998 Plan) was $2.25 per share on April
22, 1998.
18
The maximum number of shares of Common Stock subject to options or stock
appreciation rights which may be granted to any employee during any calendar
year will not exceed 200,000 shares, except that, for the calendar year in which
such individual commences his or her employment, the maximum grant will not
exceed 400,000 shares. If a tandem stock appreciation right or a limited stock
appreciation right is granted in tandem with a stock option, it will apply
against the individual limits for both stock options and stock appreciation
rights, but only once against the maximum number of shares available under the
1998 Plan. To the extent that shares of Common Stock for which options or stock
appreciation rights are permitted to be granted to an employee during a calendar
year of the Company are not covered by a grant during such calendar year, such
shares of Common Stock will be available for grant or issuance to the employee
in any subsequent calendar year during the term of the 1998 Plan.
The Committee or the Board, as applicable, may make appropriate adjustments
to the number of shares available for awards and the terms of outstanding awards
to reflect any change in the Company's capital structure or business by reason
of a stock dividend, extraordinary dividend, stock split, recapitalization,
reorganization, merger, consolidation or sale of all or substantially all the
assets of the Company (and certain other events).
TYPES OF AWARDS
STOCK OPTIONS. The 1998 Plan authorizes the Committee to grant stock
options to purchase shares of the Company's Common Stock to employees and
consultants of the Company and its affiliates. Options granted to employees of
the Company or any "subsidiary" or "parent" (within the meaning of Section 424
of the Code) may be in the form of incentive stock options ("ISOs") or
non-qualified stock options. Options granted to non-employee directors of the
Company, consultants of the Company and its affiliates and employees of
affiliates that do not qualify as "subsidiaries" or "parents" may only be
non-qualified stock options. The Committee will determine the number of shares
subject to each option, the term of each option (which may not exceed ten years
(or five years in the case of an ISO granted to a ten percent stockholder)), the
exercise price, the vesting schedule (if any), and the other material terms of
the option. No option may have an exercise price less than the fair market value
of the Common Stock at the time of grant (or, in the case of an ISO granted to a
ten percent stockholder, 110 percent of fair market value).
Options granted to employees and consultants will be exercisable at such
time or times and subject to such terms and conditions as determined by the
Committee at grant. All options granted to employees and consultants may be made
exercisable in installments, and the exercisability of such options may be
accelerated by the Committee. The exercise price of an option may be paid in
cash, by a cashless exercise procedure through a broker or by such other methods
approved by the Committee (which may include payment in shares of Common Stock
owned for at least six months).
STOCK APPRECIATION RIGHTS. The 1998 Plan authorizes the Committee to grant
stock appreciation rights ("SARs") to employees and consultants, either with a
stock option ("Tandem SARs") or independent of a stock option ("Non-Tandem
SARs"). A SAR is a right to receive a payment either in cash or Common Stock, as
the Committee may determine, equal in value to the excess of the fair market
value of one share of Common Stock on the date of exercise over the reference
price per share established in connection with the grant of the SAR. The
reference price per share covered by a SAR will be the per share exercise price
of the related option in the case of a Tandem SAR and will be the fair market
value of the Common Stock on the date of grant in the case of a Non-Tandem SAR.
19
A Tandem SAR may be granted at the time of the grant of the related stock
option or, if the related stock option is a non-qualified stock option, at any
time thereafter during the term of the related option. A Tandem SAR generally
may be exercised only at such times and to the extent the related option is
exercisable. A Tandem SAR is exercised by surrendering the same portion of the
related option. A Tandem SAR expires upon the termination of the related option.
A Non-Tandem SAR will be exercisable as provided by the Committee and will
have such other terms and conditions as the Committee may determine. A
Non-Tandem SAR may have a term no longer than ten years from its date of grant.
A Non-Tandem SAR is subject to acceleration of vesting or immediate termination
upon termination of employment in certain circumstances.
The Committee is also authorized to grant "limited SARs" to employees and
consultants, either as Tandem SARs or Non-Tandem SARs. Limited SARs become
exercisable only upon the occurrence of a change in control of the Company or
such other event as the Committee may, in its sole discretion, designate at the
time of grant or thereafter.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS. Under the 1998 Plan, each new
non-employee director of the Company will receive an automatic grant of options
to purchase 20,000 shares of Common Stock on the date he or she begins service
as a non-employee director. In addition, each non-employee director will receive
an automatic grant of options to purchase 10,000 shares of Common Stock on the
date of each annual meeting of stockholders, provided such individual has been a
non-employee director for the previous twelve months. The Board may also decide
to make discretionary grants of options to non-employee directors. The options
will have a ten year term and an exercise price equal to the fair market value
of the Common Stock at the time of grant. The automatic non-employee directors'
stock options will vest and become exercisable in four equal installments on
each of the first four anniversaries of the date of grant; discretionary
non-employee directors' stock options will vest and become exercisable in
accordance with the schedule set by the Board. Upon a change in control of the
Company, all then unvested options will fully vest and become exercisable in
their entirety. The exercise price may be paid in cash, by a cashless exercise
procedure through a broker or by such other methods approved by the Board of
Directors (which may include payment in shares of Common Stock owned for at
least six months).
CHANGE IN CONTROL
Upon a change in control of the Company (as defined in the 1998 Plan), all
unvested options and Tandem and Non-Tandem SARs of employees and consultants
will fully vest and become exercisable in their entirety, provided that, no
acceleration of vesting and exercisability will occur with regard to options
that the Committee determines in good faith prior to a change in control of the
Company will be honored or assumed or new rights substituted therefor by a
participant's employer immediately following the change in control of the
Company.
AMENDMENT AND TERMINATION
The 1998 Plan may be amended or terminated in its entirety by the Board of
Directors or the Committee, provided that the rights granted to an individual
prior to such amendment or termination may not be impaired without the consent
of such individual. In addition, no such amendment, without stockholder approval
to the extent such approval is required by the laws of the State of Delaware,
Rule 16b-3 or under Section 162(m) or 422 of the Code, may increase the
aggregate number of shares of Common Stock that may be issued under the 1998
Plan, increase the maximum individual award limits for
20
any calendar year, change the classification of employees and consultants
eligible to receive awards, decrease the minimum exercise price of any option or
SAR or extend the maximum option term under the 1998 Plan.
MISCELLANEOUS
Subject to limited post-service exercise periods and vesting in certain
instances, awards to participants under the 1998 Plan are generally forfeited
upon any termination of employment, consultancy or directorship. Awards will
have such terms and will terminate upon such conditions as may be contained in
the individual awards. Although awards will generally be nontransferable (except
by will or the laws of descent and distribution), the Committee may determine at
the time of grant or thereafter that a non-qualified option granted to an
employee or consultant that is otherwise nontransferable may be transferable in
whole or in part and in such circumstances, and under such conditions, as
specified by the Committee.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal U.S. federal income tax
consequences with respect to options under the 1998 Plan is based on statutory
authority and judicial and administrative interpretations as of the date of this
Proxy Statement, which are subject to change at any time (possibly with
retroactive effect) and may vary in individual circumstances. Therefore, the
following is designed to provide a general understanding of the federal income
tax consequences (state, local and other tax consequences are not addressed
below). This discussion is limited to the U.S. federal income tax consequences
to individuals who are citizens or residents of the U.S., other than those
individuals who are taxed on a residence basis in a foreign country.
Under current federal income tax laws, the grant of an ISO can be made
solely to employees and generally has no income tax consequences for the
optionee or the Company. In general, no taxable income results to the optionee
upon the exercise of an ISO. However, the amount by which the fair market value
of the stock acquired pursuant to the exercise of an ISO exceeds the exercise
price is an adjustment item for purposes of alternative minimum tax. If no
disposition of the shares is made within either two years from the date the ISO
was granted or one year from the date of exercise of the ISO, any gain or loss
realized upon disposition of the shares will be treated as a long-term capital
gain or loss to the optionee. If the disposition of the shares is made more than
18 months after the date of the exercise of the ISO, the optionee will be taxed
at the lowest rate applicable to capital gains for such individual. The Company
will not be entitled to a tax deduction upon the exercise of an ISO, nor upon a
subsequent disposition of the shares, unless the disposition occurs prior to the
expiration of the holding period described above. In general, if the optionee
does not satisfy these holding period requirements, any gain equal to the
difference between the exercise price and the fair market value of the Common
Stock at exercise (or, if a lesser amount, the amount realized on disposition
over the exercise price) will constitute ordinary income. In the event of such a
disposition before the expiration of either holding period described above, the
Company is entitled to a deduction at that time equal to the amount of ordinary
income recognized by the optionee. Any gain in excess of the amount recognized
by the optionee as ordinary income would be taxed to the optionee as short-term
or long-term capital gain (depending on the applicable holding period).
In general, an optionee will recognize no taxable income upon the grant of a
non-qualified stock option and the Company will not receive a deduction at the
time of such grant. Upon exercise of a non-qualified stock option, an optionee
generally will recognize ordinary income in an amount equal to the
21
excess of the fair market value of the Common Stock on the date of exercise over
the exercise price. Upon a subsequent sale of the Common Stock by the optionee,
the optionee will recognize short-term or long-term capital gain or loss,
depending upon his or her holding period for the Common Stock. Subject to the
possible application of Section 162(m) of the Code, the Company will generally
be allowed a deduction equal to the amount recognized by the optionee as
ordinary income.
In addition: (i) any officers and directors of the Company subject to
Section 16(b) of the Exchange Act may be subject to special tax rules regarding
the income tax consequences concerning their options; (ii) any entitlement to a
tax deduction on the part of the Company is subject to the applicable federal
tax rules, including, without limitation, Section 162(m) of the Code regarding
the $1 million annual limitation on deductible compensation; (iii) in the event
that the exercisability of an award is accelerated because of a change in
control of the Company, payments relating to the awards, either alone or
together with certain other payments may constitute parachute payments under
Section 280G of the Code, which excess amounts may be subject to excise taxes
and be nondeductible by the Company; and (iv) the exercise of an ISO may have
implications in the computation of alternative minimum taxable income.
In general, Section 162(m) of the Code denies a publicly held corporation a
deduction for federal income tax purposes for compensation in excess of $1
million per taxable year per person to its chief executive officer and the four
other officers whose compensation is disclosed in its proxy statement, subject
to certain exceptions. Options and SARs will generally qualify under one of
these exceptions if they are granted under a plan that states the maximum number
of shares which may be granted to any employee during a specified period, the
exercise price is not less than the fair market value of the Common Stock at the
time of grant, and the plan under which the options and SARs are granted is
approved by stockholders and is administered by a compensation committee
comprised of outside directors. The 1998 Plan is intended to satisfy these
requirements with respect to options and SARs granted to employees.
The 1998 Plan is not subject to any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended and is not, nor is it
intended to be, qualified under Section 401(a) of the Code.
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented, and entitled to vote at the Annual Meeting is
required for approval of the 1998 Stock Option Plan.
NEW PLAN BENEFITS
There have been no options granted to date under the 1998 Stock Option Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE 1998 PLAN.
22
PROPOSAL 3
PROPOSED RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP to serve as its
independent public accountant for fiscal year 1998. KPMG Peat Marwick LLP served
as the Company's independent public accountant and auditor during fiscal year
1997. In the event that ratification of this selection of auditors is not
approved by the affirmative vote of a majority of shares having voting power
present in person or represented by proxy at the meeting, the selection of
independent auditors will be reconsidered by the Board of Directors.
A member of KPMG Peat Marwick LLP is expected to be in attendance at the
Annual Meeting with the opportunity to make a statement and respond to
questions.
On July 23, 1997 at the recommendation of the Audit Committee, the Board of
Directors approved the dismissal and replacement of Arthur Andersen LLP ("AA")
as the Company's certifying independent accountant with KPMG Peat Marwick LLP
("KPMG").
Working in conjunction with AA, the Company restated its consolidated
financial statements for the year ended December 31, 1995, and certain unaudited
quarters therein, and for each of the three unaudited quarters ended September
30, 1996. In the opinion of management, all material adjustments necessary to
correct the financial statements have been recorded.
AA's audit report on the Company's restated financial statements for the
1995 fiscal year, and on the Company's financial statements for the 1996 fiscal
year, did not contain an adverse opinion or a disclaimer of opinion, nor was
such report qualified or modified as to uncertainty, audit scope or accounting
principles.
During the Company's 1995 and 1996 fiscal years, and thereafter, there was
no disagreement with AA on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of AA, would have caused AA to
make a reference to the subject matter of the disagreement in connection with
its reports.
Upon completion of each of the 1995 and 1996 audits, the Company received a
management letter from AA that identified material weaknesses in the Company's
financial and accounting processes, controls, reporting systems and procedures.
In its 1995 letter, AA (i) highlighted the Company's need for additional
financial and accounting personnel with software industry experience, (ii) noted
the need for uniformity in the language of its contracts and recommended that
the Company standardize the terms of its license agreements and expand its
internal contract review and approval procedures, (iii) noted deficiencies in
the organization of customer and contract files and recommended that the Company
improve and standardize record keeping, (iv) noted the need for expanded and
formalized accounts receivable collection procedures, (v) noted the need for
improved documentation and record keeping relating to consulting service
projects, (vi) noted the need to develop policies and procedures to accurately
identify the date when technological feasibility of developed software has been
attained, and to improve the documentation and record keeping for capitalized
software costs and to do so on a timely basis, and (vii) recommend that the
Company implement improved internal accounting control procedures approved by
the Audit Committee of the Board of Directors and reorganize and upgrade the
contracts administration processes, procedures and personnel to ensure proper
revenue recognition and financial reporting.
In its 1996 letter, AA (i) noted the continued turnover of the Company's
financial management, (ii) recommended that the Company continue to standardize
the terms of its license agreements and
23
expand its internal contract review and approval procedures on a worldwide
basis, (iii) noted the need for improved documentation and record keeping
relating to consulting service and maintenance projects, (iv) recommended that
the Company establish a formal list of products in general release, (v)
recommended that the Company establish written policies with regard to
activities in its foreign locations, and (vi) recommended that the Company
establish formal policies and procedures regarding the preparation and review of
the consolidation and reconciliation of inter-company accounts and foreign
subsidiaries.
The Company's senior executive officers and members of the Audit Committee
of the Company's Board of Directors have participated in discussions with AA
concerning the specific matters described above. The Company has hired senior
executives with software industry experience, including a Chief Executive
Officer, Chief Financial Officer, Vice President -- Finance and Administration,
Corporate Controller, several country Controllers and a Corporate Counsel. In
addition, the Company (1) has established a worldwide contract review and
administration process and is continuing to standardize the terms of its license
agreements, (2) has formalized the worldwide consolidation and reporting
process, (3) is formalizing policy with regard to activities in foreign
locations, (4) is formalizing the product release process, and (5) is
implementing the latest version of Computron financials as part of a plan to
improve record keeping relating to consulting service and maintenance
The Company has authorized AA to respond fully to any and all inquiries made
by KPMG concerning the subject matter of each of the matters described above.
The Company has provided AA with a copy of its Form 8-K, and has requested
AA to furnish a letter addressed to the Securities and Exchange Commission
stating whether it agrees with the above statements. A copy of AA's letter was
filed as an exhibit to the Company's Form 8-K pursuant to Item 304(a) (3) of
Regulation S-K.
On July 23, 1997, on the recommendation of its Audit Committee, the Board of
Directors of the Company engaged KPMG as the Company's certifying independent
accountant for the 1997 fiscal year. There were no material weaknesses
communicated to the Company upon completion of the 1997 audit. During the
Company's 1995 and 1996 fiscal years, and the subsequent interim period prior to
such engagement of KPMG, the Company did not consult with KPMG regarding either
(i) the application of accounting principles to a specified transaction, either
completed or proposed, (ii) the type of audit opinion that might be rendered on
the Company's financial statements, or (iii) items which concerned the subject
matter of any disagreement with AA or any reportable event, as described in Item
304(a) (2) of Regulation S-K.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
In accordance with regulations issued by the Securities and Exchange
Commission, stockholder proposals intended for presentation at the 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than January 1, 1999 if such proposals are to be considered for inclusion
in the Company's Proxy Statement.
24
OTHER MATTERS
Management knows of no matters that are to be presented for action at the
meeting other than those set forth above. If any other matters properly come
before the meeting, the persons named in the enclosed form of proxy will vote
the shares represented by proxies in accordance with their best judgment on such
matters.
Proxies will be solicited by mail and may also be solicited in person or by
telephone by some regular employees of the Company. The Company may also
consider the engagement of a proxy solicitation firm. Costs of the solicitation
will be borne by the Company.
By Order of the Board of Directors,
John A. Rade
President and Chief Executive Officer
Rutherford, New Jersey
April 30, 1998
25
EXHIBIT A
COMPUTRON SOFTWARE, INC.
1998 STOCK OPTION PLAN
ARTICLE I.
PURPOSE
The purpose of the Computron Software, Inc. 1998 Stock Option Plan (the
"Plan") is to enhance the profitability and value of Computron Software, Inc.
(the "Company") and its Affiliates for the benefit of the Company's stockholders
by enabling the Company: (i) to offer employees and Consultants of the Company
and its Affiliates, stock based incentives and other equity interests in the
Company, thereby creating a means to raise the level of stock ownership by
employees and Consultants in order to attract, retain and reward such
individuals and strengthen the mutuality of interests between such individuals
and the Company's stockholders, and (ii) to make equity based awards to
Non-Employee Directors of the Company thereby attracting, retaining and
rewarding such NonEmployee Directors and strengthening the mutuality of
interests between such individuals and the Company's stockholders.
ARTICLE II.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1. "Acquisition Events" shall have the meaning set forth in Section
4.2(d).
2.2. "Affiliate" shall mean other than the Company, (i) any Subsidiary;
(ii) any corporation in an unbroken chain of corporations beginning or ending
with the Company which owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain; (iii) any corporation, trade or business (including, without limitation,
a partnership or limited liability company) which is controlled 50% or more
(whether by ownership of stock, assets or an equivalent ownership interest or
voting interest) by the Company or one of its Affiliates; or (iv) any other
entity, approved by the Committee as an Affiliate under the Plan, in which the
Company or any of its Affiliates has a material equity interest.
2.3. "Award" shall mean any award under this Plan of any Stock Option or
Stock Appreciation Right. All Awards shall be confirmed by, and subject to the
terms of, a written agreement executed by the Company and the Participant.
2.4. "Board" shall mean the Board of Directors of the Company.
2.5. "Cause" shall mean, with respect to a Participant's Termination of
Employment or Termination of Consultancy: (i) in the case where there is no
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the relevant grant or Award, or where there is an
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect at the time of the relevant grant or Award but such
agreement does not define "cause" (or words of like import), termination due to
a Participant's dishonesty, fraud, insubordination, willful misconduct, refusal
to perform services (for any reason other than illness or incapacity) or
materially unsatisfactory performance of his or her duties for the Company or an
Affiliate; or (ii) in the case where there is an employment agreement,
consulting agreement, change in control agreement or similar agreement in effect
between the Company or an Affiliate and the Participant at the time of the
relevant grant or Award that defines "cause" (or words of like import);
provided, that with regard to any agreement that conditions "cause" on
occurrence of a change in control, such definition of "cause" shall not apply
until a change in control actually takes place and then only with regard to a
termination thereafter. A Participant shall be deemed to be terminated for
"cause" if the Participant, following his or her Termination of Employment or
Termination of Consultancy, engages in any "competitive activity" with the
Company or its Affiliates, as determined by the Committee, in its sole
discretion. With respect to a Participant's Termination of Directorship, "cause"
shall mean an act or failure to act that constitutes "cause" for removal of a
director under applicable Delaware law.
2.6. "Code" shall mean the Internal Revenue Code of 1986, as amended. Any
reference to any section of the Code shall also be a reference to any successor
provision.
2.7. "Committee" shall mean a committee or subcommittee of the Board
appointed from time to time by the Board, which committee or subcommittee shall
consist of two or more nonemployee directors, each of whom is intended to be, to
the extent required by Rule 16b3 and Section 162(m) of the Code, a "non-employee
director "as defined in Rule 16b3 and an "outside director"as defined under
Section 162(m) of the Code. Notwithstanding anything herein to the contrary,
the Board shall act as the Committee under this Plan with respect to any grants
of Non-Qualified Stock Options to Non-Employee Directors (whether discretionary
or automatic). To the extent that no Committee exists which has the authority
to administer this Plan, the functions of the Committee shall be exercised by
the Board. If for any reason the appointed Committee does not meet the
requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance
with the requirements of Rule 16b-3 and Section 162(m) of the Code shall not
affect the validity of Awards, grants, interpretations or other actions of the
Committee.
2.8. "Common Stock" shall mean the common stock, $.01 par value per share,
of the Company.
2
2.9. "Company" shall mean Computron Software, Inc., a Delaware
corporation.
2.10. "Consultant" shall mean any adviser or consultant to the Company or
its Affiliates who is eligible pursuant to Section 5.1 to be granted Stock
Options and Stock Appreciation Rights under this Plan.
2.11. "Disability" shall mean total and permanent disability, as defined
in Section 22(e)(3) of the Code.
2.12. "Effective Date" shall mean the effective date of this Plan as
defined in Article XIV.
2.13. "Eligible Employee" shall mean any employee of the Company or its
Affiliates who is eligible pursuant to Section 5.1 to be granted Stock Options
and Stock Appreciation Rights under this Plan. Notwithstanding the foregoing,
with respect to the grant of Incentive Stock Options, Eligible Employee shall
mean any employee of the Company or any Affiliate described in Section 2.2(i) or
(ii) who is eligible pursuant to Section 5.2 to be granted Incentive Stock
Options under this Plan.
2.14. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.15. "Fair Market Value" for purposes of this Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the last sales price reported for the
Common Stock on the applicable date: (i) as reported on the principal national
securities exchange on which it is then traded or the Nasdaq Stock Market, Inc.
or (ii) if not traded on any such national securities exchange or the Nasdaq
Stock Market, Inc., as quoted on an automated quotation system sponsored by the
National Association of Securities Dealers. If the Common Stock is not readily
tradable on a national securities exchange, the Nasdaq Stock Market, Inc., or
any automated quotation system sponsored by the National Association of
Securities Dealers, its Fair Market Value shall be set in good faith by the
Committee. For purposes of the exercise of any Stock Appreciation Right the
applicable date shall be the date a notice of exercise is received by the
Committee or, if not a day on which the applicable market is open, the next day
that it is open.
2.16. "Incentive Stock Option" shall mean any Stock Option awarded under
this Plan intended to be and designated as an "incentive stock option" within
the meaning of Section 422 of the Code.
3
2.17. "Limited Stock Appreciation Right" shall mean an Award made
pursuant to Section 7.5 of this Plan which may be a Tandem Stock Appreciation
Right or a Non-Tandem Stock Appreciation Right.
2.18. "Non-Employee Director" shall mean any director of the Company who
is not an employee of the Company or any Affiliate and who is eligible pursuant
to Section 5.3 to be granted Stock Options under Article VIII.
2.19. "Non-Qualified Stock Option" shall mean any Stock Option awarded
under this Plan that is not an Incentive Stock Option.
2.20. "Non-Tandem Stock Appreciation Right" shall mean a Stock
Appreciation Right entitling the holder to receive an amount in cash or stock
equal to the excess of: (i) the Fair Market Value of a share of Common Stock as
of the date such right is exercised, over (ii) the aggregate exercise price of
such right, otherwise than on surrender of a Stock Option.
2.21. "Participant" shall mean any Eligible Employee, Consultant or
Non-Employee Director to whom an Award has been made under this Plan.
2.22. "Reference Stock Option" shall have the meaning set forth in
Section 7.1.
2.23. "Retirement" with respect to a Participant's Termination of
Employment or Termination of Consultancy shall mean a Termination of Employment
or Termination of Consultancy without Cause from the Company and an Affiliate by
a Participant who has attained: (i) at least age 65; or (ii) such earlier date
after age 55 as approved by the Committee, in its sole discretion, with regard
to such Participant. With respect to a Participant's Termination of
Directorship, Retirement shall mean the failure to stand for reelection or the
failure to be reelected after a Participant has attained age 65.
2.24. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.25. "Section 162(m) of the Code" shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any Treasury
regulations thereunder.
2.26. "Stock Appreciation Right" or "SAR" shall mean the right pursuant
to an Award granted under Article VII.
2.27. "Stock Option" or "Option" shall mean any Option to purchase shares
of Common Stock granted to Eligible Employees or Consultants pursuant to Article
VI or granted to Non-Employee Directors pursuant to Article VI or VIII.
4
2.28. "Subsidiary" shall mean any subsidiary corporation of the
Company within the meaning of Section 424(f) of the Code.
2.29. "Tandem Stock Appreciation Right" shall mean a Stock
Appreciation Right entitling the holder to surrender to the Company all (or
a portion) of a Stock Option in exchange for an amount in cash or stock
equal to the excess of: (i) the Fair Market Value, on the date such Stock
Option (or such portion thereof) is surrendered, of the Common Stock
covered by such Stock Option (or such portion thereof), over (ii) the
aggregate exercise price of such Stock Option (or such portion thereof).
2.30. "Ten Percent Stockholder" shall mean a person owning stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or its Subsidiaries or its parent corporations, as
defined in Section 424(e) of the Code.
2.31. "Termination of Consultancy" shall mean, with respect to a
Consultant, that the Consultant is no longer acting as a Consultant to the
Company and its Affiliates. In the event an entity shall cease to be an
Affiliate, there shall be deemed a Termination of Consultancy of any
individual who is not otherwise a Consultant of the Company or another
Affiliate at the time the entity ceases to be an Affiliate.
2.32. "Termination of Directorship" shall mean, with respect to a
Non-Employee Director, that the Non-Employee Director has ceased to be a
director of the Company.
2.33. "Termination of Employment" shall mean: (i) a termination
of service of a Participant from the Company and its Affiliates; or
(ii) when an entity which is employing a Participant ceases to be an
Affiliate, unless the Participant thereupon becomes employed by the Company
or another Affiliate.
2.34. "Transfer" or "Transferred" shall mean anticipate, alienate,
attach, sell, assign, pledge, encumber, charge or otherwise transfer.
ARTICLE III.
ADMINISTRATION
3.1. THE COMMITTEE. This Plan shall be administered and interpreted by
the Committee. Notwithstanding anything herein to the contrary, the Board shall
act as the Committee under this Plan into respect to any discretionary grants of
Non-Qualified Stock Options to Non-Employee Directors.
5
3.2. AWARDS. The Committee or the Board, as applicable, shall have full
authority to grant, pursuant to the terms of this Plan (including Article V
hereof) Stock Options to Participants and Stock Appreciation Rights to Eligible
Employees and Consultants and to otherwise administer this Plan. In particular,
the Committee or the Board, as applicable, shall have the authority:
(a) to select the Participants to whom Stock Options may from time to
time be granted hereunder and the Eligible Employees and Consultants to
whom Stock Appreciation Rights may from time to time be granted hereunder;
(b) to determine whether and to what extent Stock Options are to be
granted hereunder to one or more Participants and Stock Appreciation Rights
are to be granted hereunder to one or more Eligible Employees or
Consultants;
(c) to determine, in accordance with the terms of this Plan, the
number of shares of Common Stock to be covered by each Award to a
Participant hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Award granted hereunder to a Participant
(including, but not limited to, the exercise or purchase price (if any),
any restriction or limitation, any vesting schedule or acceleration thereof
or any forfeiture restrictions or waiver thereof, regarding any Stock
Option or Stock Appreciation Right, and the shares of Common Stock relating
thereto, based on such factors, if any, as the Committee or the Board, as
applicable, shall determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash and/or Common Stock under Section 6.3(d);
(f) to determine whether, to what extent and under what circumstances
to provide loans (which may be on a recourse basis and shall bear interest
at the rate the Committee shall provide) to Eligible Employees and
Consultants in order to exercise Options under this Plan;
(g) to determine whether a Stock Appreciation Right shall be a Tandem
Stock Appreciation Right or Non-Tandem Stock Appreciation Right;
(h) to determine whether to require a Participant, as a condition of
the granting of any Award, to not sell or otherwise dispose of shares
acquired pursuant to the exercise of an Option or as an Award for a period
of time as determined by the Committee or the Board, as applicable, in its
sole discretion, following the date of the acquisition of such Option or
Award;
(i) to modify, extend or renew an Award, subject to Section 11.1
herein, provided, however, that if an Award is modified, extended or
renewed and thereby deemed to be the issuance of a new Award under the Code
or the applicable accounting
6
rules, the exercise price of an Award may continue to be the original
exercise price even if less than the Fair Market Value of the Common Stock
at the time of such modification, extension or renewal; and
(j) to offer to buy out an Option previously granted, based on such
terms and conditions as the Committee or the Board, as applicable, shall
establish and communicate to the Participant at the time such offer is
made.
3.3. GUIDELINES. Subject to Article XI hereof, the Committee or the Board,
as applicable, shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan and perform
all acts, including the delegation of its administrative responsibilities, as it
shall, from time to time, deem advisable; to construe and interpret the terms
and provisions of this Plan and any Award issued under this Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
this Plan. The Committee or the Board, as applicable, may correct any defect,
supply any omission or reconcile any inconsistency in this Plan or in any
agreement relating thereto in the manner and to the extent it shall deem
necessary to carry this Plan into effect, but only to the extent any such action
would be permitted under the applicable provisions of both Rule 16b3 and Section
162(m) of the Code. The Committee or the Board, as applicable, may adopt
special guidelines and provisions for persons who are residing in, or subject
to, the taxes of, countries other than the United States to comply with
applicable tax and securities laws. To the extent applicable, this Plan is
intended to comply with the applicable requirements of Rule 16b-3 and Section
162(m) of the Code and shall be limited, construed and interpreted in a manner
so as to comply therewith.
3.4. DECISIONS FINAL. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board, or the
Committee (or any of its members) arising out of or in connection with this Plan
shall be within the absolute discretion of the Company, the Board or the
Committee, as the case may be, and shall be final, binding and conclusive on the
Company and its Affiliates and all employees and Participants and their
respective heirs, executors, administrators, successors and assigns.
3.5. RELIANCE ON COUNSEL. The Company, the Board or the Committee may
consult with legal counsel, who may be counsel for the Company or other counsel,
with respect to its obligations or duties hereunder, or with respect to any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6. PROCEDURES. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee shall hold
meetings, subject to the ByLaws of the Company, at such times and places as the
Committee shall deem advisable. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all the Committee members in accordance with the ByLaws of the Company
shall be fully as effective as if it had been made by a vote at a meeting duly
7
called and held. The Committee may keep minutes of its meetings and may make
such rules and regulations for the conduct of its business as it shall deem
advisable.
8
3.7. DESIGNATION OF CONSULTANTS/LIABILITY.
(a) The Committee or the Board, as applicable, may designate employees of
the Company and professional advisors to assist the Committee or the Board, as
applicable, in the administration of this Plan and may grant authority to
employees to execute agreements or other documents on behalf of the Committee or
the Board, as applicable.
(b) The Committee or the Board, as applicable, may employ such legal
counsel, consultants and agents as it may deem desirable for the administration
of this Plan and may rely upon any opinion received from any such counsel or
consultant and any computation received from any such consultant or agent.
Expenses incurred by the Committee or Board in the engagement of any such
counsel, consultant or agent shall be paid by the Company. The Board, its
directors, the Committee, its members and any person designated pursuant to
Section 3.7(a) shall not be liable for any action or determination made in good
faith with respect to this Plan. To the maximum extent permitted by applicable
law, no officer of the Company or member or former member of the Committee or of
the Board shall be liable for any action or determination made in good faith
with respect to this Plan or any Award granted under it. To the maximum extent
permitted by applicable law and the Certificate of Incorporation and ByLaws of
the Company and to the extent not covered by insurance, each officer and member
or former member of the Committee or of the Board shall be indemnified and held
harmless by the Company against any cost or expense (including reasonable fees
of counsel reasonably acceptable to the Company) or liability (including any sum
paid in settlement of a claim with the approval of the Company), and advanced
amounts necessary to pay the foregoing at the earliest time and to the fullest
extent permitted, arising out of any act or omission to act in connection with
this Plan, except to the extent arising out of such officer's, member's or
former member's own fraud or bad faith. Such indemnification shall be in
addition to any rights of indemnification the officers, directors or members or
former officers, directors or members may have under applicable law or under the
Certificate of Incorporation or ByLaws of the Company or any Affiliate.
Notwithstanding anything else herein, this indemnification will not apply to the
actions or determinations made by an individual with regard to Awards granted to
him under this Plan.
ARTICLE IV.
SHARE AND OTHER LIMITATIONS
4.1. SHARES.
(a) GENERAL LIMITATION. The aggregate number of shares of Common Stock
which may be issued or used for reference purposes under this Plan shall not
exceed 1,500,000 shares (subject to any increase or decrease pursuant to Section
4.2) which
9
may be either authorized and unissued Common Stock or Common Stock held in or
acquired for the treasury of the Company. If any Option or Stock Appreciation
Right granted under this Plan expires, terminates or is canceled for any reason
without having been exercised in full, the number of shares of Common Stock
underlying any unexercised Stock Appreciation Right or Option shall again be
available for the purposes of Awards under this Plan. If a Tandem Stock
Appreciation Right or a Limited Stock Appreciation Right granted in tandem with
an Option is granted under this Plan, such grant shall only apply once against
the maximum number of shares of Common Stock which may be issued under this
Plan. In addition, in determining the number of shares of Common Stock
available for awards other than awards of Incentive Stock Options, if Common
Stock has been exchanged by a Participant as full or partial payment to the
Company, or for withholding, in connection with the exercise of a Stock Option
or the number shares of Common Stock otherwise deliverable has been reduced for
withholding, the number of shares of Common Stock exchanged as payment in
connection with the exercise or for withholding or reduced shall again be
available under this Plan. Any shares of Common Stock that are issued by the
Company, and any awards that are granted through the assumption of, or in
substitution for, outstanding awards previously granted by an acquired entity
shall not be counted against the shares of Common Stock available for issuance
under this Plan other than with regard to determining the number of shares
available for Incentive Stock Options.
(b) INDIVIDUAL PARTICIPANT LIMITATIONS. The maximum number of shares of
Common Stock subject to Awards which may be granted under this Plan during any
calendar year of the Company to each Eligible Employee shall be 200,000 shares
(subject to any increase or decrease pursuant to Section 4.2) other than with
regard to the calendar year in which an Eligible Employee initially commences
employment with the Company and its Affiliates. With respect to the calendar
year in which an Eligible Employee initially commences employment with the
Company and its Affiliates, but only with regard to such Eligible Employee, the
maximum number of shares of Common Stock subject to Awards which may be granted
under this Plan shall be 400,000 shares (subject to any increase or decrease
pursuant to Section 4.2). If a Tandem Stock Appreciation Right or Limited Stock
Appreciation Right is granted in tandem with an Option it shall apply against
the Eligible Employee's individual share limitations for both Stock Appreciation
Rights and Options. To the extent that shares of Common Stock for which Options
or Stock Appreciation Rights are permitted to be granted to a Participant
pursuant to Section 4.1(b) during a calendar year of the Company are not covered
by a grant of an Option or a Stock Appreciation Right in the Company's calendar
year, such shares of Common Stock shall be available for grant or issuance to
the Participant in any subsequent calendar year during the term of this Plan.
4.2. CHANGES.
(a) The existence of this Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company
10
to make or authorize any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger or
consolidation of the Company, or Affiliates, any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting Common Stock, the
authorization or issuance of additional shares of Common Stock, the dissolution
or liquidation of the Company or Affiliates, any sale or transfer of all or part
of its assets or business or any other corporate act or proceeding.
(b) In the event of any change in the capital structure or business of the
Company by reason of any stock dividend or extraordinary dividend, stock split
or reverse stock split, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, distribution with respect to its
outstanding Common Stock or capital stock other than Common Stock,
reclassification of its capital stock, any sale or transfer of all or part of
the Company's assets or business, or any similar change affecting the Company's
capital structure or business and the Committee or the Board, as applicable,
determines an adjustment is appropriate under this Plan, then the aggregate
number and kind of shares which thereafter may be issued under this Plan, the
number and kind of shares or other property (including cash) to be issued upon
exercise of an outstanding Option or other Awards granted under this Plan and
the purchase or exercise price thereof shall be appropriately adjusted
consistent with such change in such manner as the Committee or the Board, as
applicable, may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, Participants under this Plan or as
otherwise necessary to reflect the change, and any such adjustment determined by
the Committee or the Board, as applicable, in good faith shall be binding and
conclusive on the Company and all Participants and employees and their
respective heirs, executors, administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any adjustment in
Options or Awards pursuant to Section 4.2(a) or (b) shall be aggregated until,
and eliminated at, the time of exercise by roundingdown for fractions less than
onehalf and roundingup for fractions equal to or greater than onehalf. No cash
settlements shall be made with respect to fractional shares eliminated by
rounding. Notice of any adjustment shall be given by the Committee or the
Board, as applicable, to each Participant whose Option or Award has been
adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of this Plan.
(d) In the event of a merger or consolidation in which the Company is not
the surviving entity or in the event of any transaction that results in the
acquisition of all or substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (all of the foregoing being referred
to as "Acquisition Events"), then the Committee may, in its sole discretion,
terminate all outstanding Options and Stock Appreciation Rights of Eligible
Employees and Consultants, effective as of the date of the Acquisition Event,
11
by delivering notice of termination to each such Participant at least 30
days prior to the date of consummation of the Acquisition Event; provided,
that during the period from the date on which such notice of termination is
delivered to the consummation of the Acquisition Event, each such
Participant shall have the right to exercise in full all of his or her
Options and Stock Appreciation Rights that are then outstanding (whether
vested or not vested) but contingent on the occurrence of the Acquisition
Event, and, provided that, if the Acquisition Event does not take place
within a specified period after giving such notice for any reason
whatsoever, the notice and exercise shall be null and void. If an
Acquisition Event occurs, to the extent the Committee does not terminate
the outstanding Options and Stock Appreciation Rights pursuant to this
Section 4.2(d), then the provisions of Section 4.2(b) shall apply. This
provision shall not apply to any Options granted to Non-Employee Directors.
4.3. PURCHASE PRICE. Notwithstanding any provision of this Plan to the
contrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
ARTICLE V.
ELIGIBILITY
5.1. All employees and Consultants of the Company and its Affiliates are
eligible to be granted Non-Qualified Stock Options and Stock Appreciation Rights
under this Plan. Eligibility shall be determined by the Committee in its sole
discretion.
5.2. All employees of the Company and its Affiliates described in Section
2.2(i) or (ii) are eligible to be granted Incentive Stock Options under this
Plan. Eligibility shall be determined by the Committee in its sole discretion.
5.3. NonEmployee Directors of the Company are eligible to receive automatic
awards of Non-Qualified Stock Options in accordance with Article VIII of this
Plan and discretionary awards of Non-Qualified Stock Options under Article VI of
this Plan. Eligibility for discretionary awards of Non-Qualified Stock Options
shall be determined by the Board in its sole discretion.
ARTICLE VI.
STOCK OPTIONS
6.1. OPTIONS. Each Stock Option granted hereunder shall be one of two
types: (i) an Incentive Stock Option intended to satisfy the requirements of
Section 422 of the Code, or (ii) a Non-Qualified Stock Option.
12
6.2. GRANTS. The Committee shall have the authority to grant to any
Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not qualify as
an Incentive Stock Option (whether because of its provisions or the time or
manner of its exercise or otherwise), such Stock Option or the portion thereof
which does not so qualify, shall constitute a separate Non-Qualified Stock
Option. The Committee shall have the authority to grant to any Consultant one
or more Non-Qualified Stock Options (with or without Stock Appreciation Rights).
The Board shall have the authority to grant to any Non-Qualified Director a
Non-Qualified Stock Option. Notwithstanding any other provision of this Plan to
the contrary or any provision in an agreement evidencing the grant of an Option
to the contrary, any Option granted to an Employee of an Affiliate (other than
one described in Section 2.2(i) or (ii)), a Non-Employee Director or a
Consultant shall be a Non-Qualified Stock Option.
6.3. TERMS OF OPTIONS. Options granted under this Plan shall be subject to
the following terms and conditions, and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee or the Board, as applicable, shall deem desirable:
(a) OPTION EXERCISE PRICE. The exercise price per share of Common
Stock subject to a Stock Option granted under this Article VI shall be
determined by the Committee or the Board, as applicable, at the time of
grant but shall not be less than 100% of the Fair Market Value of a share
of Common Stock at the time of grant; provided, however, that if an
Incentive Stock Option is granted to a Ten Percent Stockholder, the
exercise price per share shall be no less than 110% of the Fair Market
Value of the Common Stock.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee or the Board, as applicable, but no Stock Option shall be
exercisable more than 10 years after the date the Option is granted,
provided, however, the term of an Incentive Stock Option granted to a Ten
Percent Stockholder may not exceed five years.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Committee or the Board, as applicable, at the time of grant. If the
Committee or the Board provides, in its discretion, that any Stock Option
is exercisable subject to certain limitations (including, without
limitation, that it is exercisable only in installments or within certain
time periods), the Committee or the Board, as applicable, may waive such
limitations on the exercisability at any time at or after the time of grant
in whole or in part (including, without limitation, that the Committee or
the Board, may waive the installment exercise provisions or accelerate the
time at which Options may be exercised), based on such factors, if any, as
the Committee or the Board shall determine, in its sole discretion.
13
(d) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions apply under Section 6.3(c), Stock Options may be
exercised in whole or in part at any time during the Option term, by giving
written notice of exercise to the Company specifying the number of shares
to be purchased. Common Stock purchased pursuant to the exercise of a
Stock Option shall be paid for at the time of exercise as follows: (i) in
cash or by check, bank draft or money order payable to the order of
Company; (ii) if the Common Stock is traded on a national securities
exchange, the Nasdaq Stock Market, Inc. or quoted on a national quotation
system sponsored by the National Association of Securities Dealers, through
the delivery of irrevocable instructions to a broker to deliver promptly to
the Company an amount equal to the purchase price; or (iii) on such other
terms and conditions as may be acceptable to the Committee or the Board, as
applicable, (which may include payment in full or part in the form of
Common Stock owned by the Participant for a period of at least 6 months
(and for which the Participant has good title free and clear of any liens
and encumbrances) based on the Fair Market Value of the Common Stock on the
payment date as determined by the Committee or the Board or the surrender
of vested Options owned by the Participant). No shares of Common Stock
shall be issued until payment therefor, as provided herein, has been made
or provided for.
(e) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Eligible Employee during any calendar year under
this Plan and/or any other stock option plan of the Company or any
Subsidiary or parent corporation (within the meaning of Section 424(e) of
the Code) exceeds $100,000, such Options shall be treated as Options which
are not Incentive Stock Options. In addition, if an Eligible Employee does
not remain employed by the Company, any Subsidiary or parent corporation
(within the meaning of Section 424(e) of the Code) at all times from the
time the Option is granted until 3 months prior to the date of exercise (or
such other period as required by applicable law), such Option shall be
treated as an Option which is not an Incentive Stock Option.
Should the foregoing provision not be necessary in order for the Stock
Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend this Plan accordingly,
without the necessity of obtaining the approval of the stockholders of the
Company.
(f) FORM, MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of this Plan, an Option
shall be evidenced by such form of agreement or grant as is approved by the
Committee or the Board, as applicable, and the Committee or the Board may
modify, extend or renew outstanding Options granted under this Plan
(provided that the rights of a Participant are not reduced without his
consent), or accept the surrender of outstanding Options (up to the extent
not theretofore exercised) and authorize the granting of new Options in
substitution therefor (to the extent not theretofore exercised).
14
(g) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms
of this Plan, as the Committee or the Board, as applicable, shall deem
appropriate including, without limitation, permitting "reloads" such that
the same number of Options are granted as the number of Options exercised,
shares used to pay for the exercise price of Options or shares used to pay
withholding taxes ("Reloads"). With respect to Reloads, the exercise price
of the new Stock Option shall be the Fair Market Value on the date of the
"reload" and the term of the Stock Option shall be the same as the
remaining term of the Options that are exercised, if applicable, or such
other exercise price and term as determined by the Committee or the Board,
as applicable.
ARTICLE VII.
STOCK APPRECIATION RIGHTS
7.1. TANDEM STOCK APPRECIATION RIGHTS. A Tandem Stock Appreciation Right
may be granted in conjunction with all or part of any Stock Option (a "Reference
Stock Option") granted under Article VI of this Plan. In the case of a Tandem
Stock Appreciation Right which is granted in conjunction with a Non-Qualified
Stock Option, such rights may be granted either at or after the time of the
grant of such Reference Stock Option. In the case of a Tandem Stock
Appreciation Right which is granted in conjunction with an Incentive Stock
Option, such rights may be granted only at the time of the grant of such
Reference Stock Option. Consultants shall not be eligible for a grant of Tandem
Stock Appreciation Rights granted in conjunction with all or part of an
Incentive Stock Option.
7.2. TERMS AND CONDITIONS OF TANDEM STOCK APPRECIATION RIGHTS. Tandem
Stock Appreciation Rights shall be subject to such terms and conditions, not
inconsistent with the provisions of this Plan, as shall be determined from time
to time by the Committee, including Article IX and the following:
(a) TERM. A Tandem Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Stock Option shall terminate
and no longer be exercisable upon the termination or exercise of the
Reference Stock Option, except that, unless otherwise determined by the
Committee, in its sole discretion, at the time of grant, a Tandem Stock
Appreciation Right granted with respect to less than the full number of
shares covered by the Reference Stock Option shall not be reduced until and
then only to the extent the exercise or termination of the Reference Stock
Option causes the number of shares covered by the Tandem Stock Appreciation
Right to exceed the number of shares remaining available and unexercised
under the Reference Stock Option.
(b) EXERCISABILITY. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Reference
Stock Options to which
15
they relate shall be exercisable in accordance with the provisions of
Article VI and this Article VII.
(c) METHOD OF EXERCISE. A Tandem Stock Appreciation Right may be
exercised by an optionee by surrendering the applicable portion of the
Reference Stock Option. Upon such exercise and surrender, the Participant
shall be entitled to receive an amount determined in the manner prescribed
in this Section 7.2 and the Reference Stock Option or part thereof to which
such Stock Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in Article IV of this
Plan on the number of shares of Common Stock to be issued under this Plan.
The Stock Options which have been so surrendered, in whole or in part,
shall no longer be exercisable to the extent the related Tandem Stock
Appreciation Rights have been exercised.
(d) PAYMENT. Upon the exercise of a Tandem Stock Appreciation Right
a Participant shall be entitled to receive an amount in cash and/or Common
Stock (as chosen by the Committee in its sole discretion) equal in value to
the excess of the Fair Market Value of one share of Common Stock over the
exercise price per share specified in the Reference Stock Option multiplied
by the number of shares in respect of which the Tandem Stock Appreciation
Right shall have been exercised, with the Committee having the right to
determine the form of payment.
7.3. NON-TANDEM STOCK APPRECIATION RIGHTS. Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Options granted under
Article VI of this Plan.
7.4. TERMS AND CONDITIONS OF NON-TANDEM STOCK APPRECIATION RIGHTS.
Non-Tandem Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by the Committee, including Article IX and the
following:
(a) TERM. The term of each Non-Tandem Stock Appreciation Right shall
be fixed by the Committee, but shall not be greater than 10 years after the
date the right is granted.
(b) EXERCISABILITY. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee at grant. If the Committee
provides, in its discretion, that any such right is exercisable subject to
certain limitations (including, without limitation, that it is exercisable
only in installments or within certain time periods), the Committee may
waive such limitation on the exercisability at any time at or after grant
in whole or in part (including, without limitation, that the Committee may
waive the installment exercise provisions or accelerate the time at which
rights may be exercised), based on such factors, if any, as the Committee
shall determine, in its sole discretion.
16
(c) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions apply under subsection (b) above, Non-Tandem
Stock Appreciation Rights may be exercised in whole or in part at any time
during its term, by giving written notice of exercise to the Company
specifying the number of Non-Tandem Stock Appreciation Rights to be
exercised.
(d) PAYMENT. Upon the exercise of a Non-Tandem Stock Appreciation
Right a Participant shall be entitled to receive, for each right exercised,
an amount in cash and/or Common Stock (as chosen by the Committee in its
sole discretion) equal in value to the excess of the Fair Market Value of
one share of Common Stock on the date the right is exercised over the Fair
Market Value of one share of Common Stock on the date the right was awarded
to the Participant.
7.5. LIMITED STOCK APPRECIATION RIGHTS. The Committee may, in its sole
discretion, grant Limited Stock Appreciation Rights. Limited Stock Appreciation
Rights may be exercised only upon the occurrence of a Change in Control or such
other event as the Committee may, in its sole discretion, designate at the time
of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights,
except as otherwise provided in an Award agreement, the Participant shall
receive in cash or Common Stock, as determined by the Committee, an amount equal
to the amount: (i) set forth in Section 7.2(d) with respect to Tandem Stock
Appreciation Rights, or (ii) set forth in Section 7.4(d) with respect to
Non-Tandem Stock Appreciation Rights.
ARTICLE VIII.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
8.1. OPTIONS. The terms of this Article VIII shall apply only to Options
granted to Non-Employee Directors.
8.2. GRANTS. Without further action by the Board or the stockholders of
the Company, each NonEmployee Director shall, subject to the terms of this Plan,
be granted:
(a) Options to purchase 20,000 shares of Common Stock as of the date
the NonEmployee Director begins service as a NonEmployee Director on the
Board on or after the Effective Date of this Plan, and
(b) Options to purchase 10,000 shares of Common Stock on the date of
each annual stockholders meeting of the Company, beginning with the 1998
annual stockholders meeting, provided such Non-Employee Director has, as of
each such annual stockholders meeting, been a Non-Employee Director for at
least 12 months and has not experienced a Termination of Directorship.
17
8.3. NON-QUALIFIED STOCK OPTIONS. Stock Options granted under this Article
VIII shall be Non-Qualified Stock Options.
8.4. TERMS OF OPTIONS. Options granted under this Article VIII shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with terms of
this Plan, as the Board shall deem desirable:
(a) OPTION EXERCISE PRICE. The Option exercise price per share of
Common Stock subject to an Option granted pursuant to Section 8.2(a)(1)
shall be equal to 100% of the Fair Market Value of the share of Common
Stock at the time of grant.
(b) EXERCISABILITY. Except as otherwise provided herein, 25% of any
Option granted under this Article VIII shall be exercisable on or after
each of the four anniversaries immediately following the date of grant.
Notwithstanding the foregoing, all Options shall fully vest and become
exercisable upon a Change in Control.
(c) METHOD OF EXERCISE. A Non-Employee Director electing to exercise
one or more Options shall give written notice of exercise to the Company
specifying the number of shares to be purchased. Common Stock purchased
pursuant to the exercise of a Stock Option shall be paid for at the time of
exercise as follows: (i) in cash or by check, bank draft or money order
payable to the order of Company; (ii) if the Common Stock is traded on a
national securities exchange, the Nasdaq Stock Market, Inc. or quoted on a
national quotation system sponsored by the National Association of
Securities Dealers, through the delivery of irrevocable instructions to a
broker to deliver promptly to the Company an amount equal to the purchase
price; or (iii) on such other terms and conditions as may be acceptable to
the Board (which may include payment in full or part in the form of Common
Stock owned by the Participant for a period of at least 6 months (and for
which the Participant has good title free and clear of any liens and
encumbrances) based on the Fair Market Value of the Common Stock on the
payment date as determined by the Board or the surrender of vested Options
owned by the Participant). No shares of Common Stock shall be issued until
payment therefore, as provided herein, has been made or provided for.
(d) OPTION TERM. Except as otherwise provided herein, if not
previously exercised each Option shall expire upon the tenth anniversary of
the date of the grant thereof.
8.5. TERMINATION OF DIRECTORSHIP. The following rules apply with regard to
Options (including Options granted under Articles VI and VIII) upon the
Termination of Directorship:
(a) TERMINATION OF DIRECTORSHIP BY REASON OF DEATH OR DISABILITY.
Except as otherwise provided herein, upon the Termination of Directorship,
on account of death or Disability, all then outstanding Options shall fully
vest and become exercisable and shall remain exercisable by the Participant
or, in the case of death, by the Participant's estate or by the person
given authority to exercise such Options by his or her will or by
18
operation of law, at any time within a period of one year from the date of
such Termination of Directorship, but in no event beyond the expiration of
the stated term of such Stock Option.
(b) OTHERWISE CEASING TO BE A DIRECTOR OTHER THAN FOR CAUSE. Except
as otherwise provided herein, upon the Termination of Directorship, on
account of Retirement, resignation, failure to stand for reelection or
failure to be reelected or otherwise other than as set forth in (b) below,
all outstanding Options then exercisable and not exercised by the
Participant prior to such Termination of Directorship shall remain
exercisable, to the extent exercisable at the Termination of Directorship,
at any time within a period of one year from the date of such Termination
of Directorship, but in no event beyond the expiration of the stated term
of such Stock Option.
(c) CAUSE. Upon removal, failure to stand for reelection or failure
to be renominated for Cause, or if the Company obtains or discovers
information after Termination of Directorship that such Participant had
engaged in conduct that would have justified a removal for Cause during
such directorship, all outstanding Options of such Participant shall
immediately terminate and shall be null and void.
(d) CANCELLATION OF OPTIONS. Except as provided in (a) above, no
Options that were not exercisable during the period such person serves as a
director shall thereafter become exercisable upon a Termination of
Directorship for any reason or no reason whatsoever, and such Options shall
terminate and become null and void upon a Termination of Directorship.
8.6. CHANGES.
(a) The Awards to a NonEmployee Director under Articles VI and VIII
shall be subject to Sections 4.2(a), (b) and (c) of this Plan and this
Section 8.6, but shall not be subject to Section 4.2(d).
(b) If the Company shall not be the surviving corporation in any
merger or consolidation, or if the Company is to be dissolved or
liquidated, then, unless the surviving corporation assumes the Options or
substitutes new Options which are determined by the Board in its sole
discretion to be substantially similar in nature and equivalent in terms
and value for Options then outstanding, upon the effective date of such
merger, consolidation, liquidation or dissolution, any unexercised Options
shall expire without additional compensation to the holder thereof;
provided, that, the Board shall deliver notice to each Non-Employee
Director at least 30 days prior to the date of consummation of such merger,
consolidation, dissolution or liquidation which would result in the
expiration of the Options and during the period from the date on which such
notice of termination is delivered to the consummation of the merger,
consolidation, dissolution or liquidation, such Participant shall have the
right to exercise in full effective as of such consummation all Options
that are then outstanding (without regard to limitations on exercise
otherwise contained in the Options) but
19
contingent on occurrence of the merger, consolidation, dissolution or
liquidation, and, provided that, if the contemplated transaction does not
take place within a 90 day period after giving such notice for any reason
whatsoever, the notice, accelerated vesting and exercise shall be null and
void and, if and when appropriate, new notice shall be given as aforesaid.
ARTICLE IX.
NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY PROVISIONS
9.1. Except as otherwise provided in this Section 9.1, no Stock Option or
Stock Appreciation Right shall be Transferred by the Participant otherwise than
by will or by the laws of descent and distribution. All Stock Options and all
Stock Appreciation Rights shall be exercisable, during the Participant's
lifetime, only by the Participant. Tandem Stock Appreciation Rights may be
Transferred, to the extent permitted above, only with the underlying Stock
Option. No Award shall, except as otherwise specifically provided by law or
herein, be Transferred in any manner, and any attempt to Transfer any such Award
shall be void, and no such Award shall in any manner be used for the payment of,
subject to, or otherwise encumbered by or hypothecated for the debts, contracts,
liabilities, engagements or torts of any person who shall be entitled to such
Award, nor shall it be subject to attachment or legal process for or against
such person. Notwithstanding the foregoing, the Committee may determine at the
time of grant or thereafter, that a Non-Qualified Stock Option granted pursuant
to Article VI (other than a Non-Qualified Stock Option granted to a Non-Employee
Director) that is otherwise not transferable pursuant to this Article IX is
transferable in whole or part and in such circumstances, and under such
conditions, as specified by the Committee.
9.2. TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY. The
following rules apply with regard to Options and SARs upon the Termination of
Employment or Termination of Consultancy of a Participant, unless otherwise
determined by the Committee at grant or, if no rights of the Participant (or his
estate in the event of death) are reduced, thereafter:
(a) TERMINATION BY REASON OF DEATH. If a Participant's Termination
of Employment or Termination of Consultancy is by reason of his death, any
Stock Option or SAR held by such Participant may be exercised, to the
extent exercisable at the Participant's Termination of Employment or
Termination of Consultancy, by the Participant's estate or by the person
given authority to exercise such Options by his or her will or by operation
of law, at any time within a period of one year from the date of such
death, but in no event beyond the expiration of the stated term of such
Stock Option or SAR.
(b) TERMINATION BY REASON OF DISABILITY OR RETIREMENT. If a
Participant's Termination of Employment or Termination of Consultancy is by
reason of his
20
Disability or Retirement, any Stock Option or SAR held by such Participant
may be exercised, to the extent exercisable at the Participant's
Termination of Employment or Termination of Consultancy, by the
Participant, at any time within a period of one year from the date of such
Termination of Employment or Termination of Consultancy, but in no event
beyond the expiration of the stated term of such Stock Option or SAR;
provided, however, that, if the Participant dies within such exercise
period, any unexercised Stock Option or SAR held by such Participant shall
thereafter be exercisable by the Participant's estate or by the person
given authority to exercise such Options by his or her will or by operation
of law, to the extent to which it was exercisable at the time of death, for
a period of one year (or such other period as the Committee may specify at
grant or, if no rights of the Participant's estate are reduced, thereafter)
from the date of such death, but in no event beyond the expiration of the
stated term of such Stock Option or SAR.
(c) INVOLUNTARY TERMINATION WITHOUT CAUSE. If a Participant's
Termination of Employment or Termination of Consultancy is by involuntary
termination without Cause, any Stock Option or SAR held by such Participant
may be exercised, to the extent exercisable at termination, by the
Participant at any time within a period of 90 days from the date of such
termination, but in no event beyond the expiration of the stated term of
such Stock Option or SAR.
(d) VOLUNTARY TERMINATION BY THE PARTICIPANT. If a Participant's
Termination of Employment or Termination of Consultancy is a voluntary
termination by the Participant and occurs prior to, or more than 90 days
after, the occurrence of an event which would be grounds for Termination of
Employment or Termination of Consultancy for Cause (without regard to any
notice or cure period requirements), any Stock Option or SAR held by such
Participant may be exercised, to the extent exercisable at termination, by
the Participant at any time within a period of 30 days from the date of
such termination, but in no event beyond the expiration of the stated term
of such Stock Option or SAR.
(e) TERMINATION FOR CAUSE. If a Participant's Termination of
Employment or Termination of Consultancy is: (i) for Cause, or (ii) a
voluntary termination (as provided in subsection (d) above) within 90 days
after an event which would be grounds for a Termination of Employment or
Termination of Consultancy for Cause, any Stock Option or SAR held by such
Participant shall thereupon terminate and expire as of the date of
termination.
9.3. TERMINATION REPAYMENT. Notwithstanding anything else in this Plan to
the contrary, in the event (i) a Participant's Termination of Employment or
Termination of Consultancy occurs not more than 3 months after the exercise of a
Stock Option or SAR, or (ii) a Participant engages in a competitive activity as
determined by the Committee in its sole discretion after the exercise of a Stock
Option or SAR, the Committee may, in its sole discretion, require the
Participant to pay the Company an amount in cash, for each share with respect to
which the Option or SAR was exercised, equal to the difference between: (i) the
21
Fair Market Value of the Common Stock on the date of such termination or
determination, as applicable, and (ii) the exercise price for each such share.
ARTICLE X.
CHANGE IN CONTROL PROVISIONS
10.1. BENEFITS. In the event of a Change in Control of the Company (as
defined below), except as otherwise provided by the Committee upon the grant of
an Option to an Eligible Employee or Consultant, the Participant shall be
entitled to the following benefits:
(a) Subject to paragraph (b) below with regard to Options
granted to Eligible Employees and Consultants, all outstanding Options and
the related Tandem Stock Appreciation Rights and Non-Tandem Stock
Appreciation Rights of such Participant granted prior to the Change in
Control shall be fully vested and immediately exercisable in their
entirety. The Committee or the Board (as applicable), in its sole
discretion, may provide for the purchase of any such Stock Options by the
Company for an amount of cash equal to the excess of the Change in Control
Price (as defined below) of the shares of Common Stock covered by such
Stock Options, over the aggregate exercise price of such Stock Options.
For purposes of this Section 10.1, Change in Control Price shall mean the
higher of: (i) the highest price per share of Common Stock paid in any
transaction related to the Change in Control of the Company, or (ii) the
highest Fair Market Value per share of Common Stock at any time during the
60 day period preceding the Change in Control.
(b) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise at the time an Option is granted to an
Eligible Employee or Consultant hereunder or thereafter, no acceleration of
exercisability shall occur with respect to such Option if the Committee
reasonably determines in good faith, prior to the occurrence of the Change
in Control, that the Options shall be honored or assumed, or new rights
substituted therefor (each such honored, assumed or substituted option
hereinafter called an "Alternative Option"), by a Participant's employer
(or the parent or an subsidiary of such employer), or, in the case of a
Consultant, by the entity (or its parent or subsidiary) which retains the
Consultant, immediately following the Change in Control, provided that any
such Alternative Option must meet the following criteria:
(i) the Alternative Option must be based on stock which is
traded on an established securities market, or which will be so traded
within 30 days of the Change in Control;
(ii) the Alternative Option must provide such Participant with
rights and entitlements substantially equivalent to or better than the
rights, terms and conditions applicable under such Option, including, but
not limited to, an identical or better exercise schedule; and
22
(iii) the Alternative Option must have economic value
substantially equivalent to the value of such Option (determined at the
time of the Change in Control).
For purposes of Incentive Stock Options, any assumed or substituted
Option shall comply with the requirements of Treasury regulation
Section 1.425-1 (and any amendments thereto).
(c) Notwithstanding anything else herein, the Committee may, in
its sole discretion, provide for accelerated vesting of an Option (other
than a grant to a Non-Employee Director pursuant to Article VIII hereof) or
Stock Appreciation Right, upon a Termination of Employment or Termination
of Consultancy during the Pre-Change in Control Period. Unless otherwise
determined by the Committee, the Pre-Change in Control Period shall be the
180 day period prior to a Change in Control.
10.2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred:
(a) upon any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the
Company, or any company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of
Common Stock of the Company), becoming the owner (as defined in Rule 13d3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities (including, without limitation,
securities owned at the time of any increase in ownership);
(b) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in paragraph
(a), (c), or (d) of this section) or a director whose initial assumption of
office occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least twothirds of the
directors then still in office who either were directors at the beginning
of the two year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a
majority of the Board;
(c) upon the merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to
23
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation,
provided, however, that a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control of the
Company; or
(d) upon the stockholder's of the Company approval of a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets other than the sale of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or
indirectly, at least 50% or more of the combined voting power of the
outstanding voting securities of the Company at the time of the sale.
ARTICLE XI.
TERMINATION OR AMENDMENT OF PLAN
11.1. TERMINATION OR AMENDMENT. Notwithstanding any other provision of
this Plan, the Board or the Committee may at any time, and from time to time,
amend, in whole or in part, any or all of the provisions of this Plan (including
any amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in this Article XI), or suspend or terminate
it entirely, retroactively or otherwise; provided, however, that, unless
otherwise required by law or specifically provided herein, the rights of a
Participant with respect to Awards granted prior to such amendment, suspension
or termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company in
accordance with the laws of the State of Delaware, to the extent required by the
applicable provisions of Rule 16b-3 or Section 162(m) of the Code, or with
respect to Incentive Stock Options, Section 422 of the Code, no amendment may be
made which would: (i) increase the aggregate number of shares of Common Stock
that may be issued under this Plan; (ii) increase the maximum individual
Participant limitations for a fiscal year under Section 4.1(b); (iii) change the
classification of employees and Consultants eligible to receive Awards under
this Plan; (iv) decrease the minimum exercise price of any Stock Option or SAR;
or (v) extend the maximum option term under Section 6.3(b). In no event may
this Plan be amended without the approval of the stockholders of the Company in
accordance with the applicable laws of the State of Delaware to increase the
aggregate number of shares of Common Stock that may be issued under this Plan
(subject to Section 4.2), decrease the minimum exercise price of any Stock
Option, or to make any other amendment that would require stockholder approval
under the rules of any exchange or system on which the Company's securities are
listed or traded at the request of the Company.
24
The Committee (and in the case of awards of Stock Options to Non-Employee
Directors, the Board) may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV or as otherwise
specifically provided herein, no such amendment or other action by the Committee
(or the Board) shall impair the rights of any Participant without the
Participant's consent.
ARTICLE XII.
UNFUNDED PLAN
12.1. UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE XIII.
GENERAL PROVISIONS
13.1. LEGEND. The Committee or the Board, as applicable, may require
each person receiving shares pursuant to an Award under this Plan to represent
to and agree with the Company in writing that the Participant is acquiring the
shares without a view to distribution thereof. In addition to any legend
required by this Plan, the certificates for such shares may include any legend
which the Committee or the Board, as applicable, deems appropriate to reflect
any restrictions on Transfer.
All certificates for shares of Common Stock delivered under this Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
or the Board, as applicable, may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed or any national securities association
system upon whose system the Common Stock is then quoted, any applicable Federal
or state securities law, and any applicable corporate law, and the Committee or
the Board, as applicable, may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
13.2. OTHER PLANS. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
13.3. NO RIGHT TO EMPLOYMENT/CONSULTANCY/DIRECTORSHIP. Neither this Plan
nor the grant of any Award hereunder shall give any Participant or other
employee or Consultant any
25
right with respect to continuance of employment or consultancy by the Company or
any Affiliate, nor shall they be a limitation in any way on the right of the
Company or any Affiliate by which an employee is employed or consultant retained
to terminate his employment or consultancy, as applicable, at any time. Neither
this Plan nor the grant of any Option hereunder shall impose any obligations on
the Company to retain any Participant as a director nor shall it impose on the
part of any Participant any obligation to remain as a director of the Company.
13.4. WITHHOLDING OF TAXES. The Company shall have the right to deduct
from any payment to be made to a Participant, or to otherwise require, prior to
the issuance or delivery of any shares of Common Stock or the payment of any
cash hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld.
The Committee shall permit any such withholding obligation with regard to
an Eligible Employee or Consultant to be satisfied by reducing the number of
shares of Common Stock otherwise deliverable or by delivering shares of Common
Stock already owned. Any fraction of a share of Common Stock required to
satisfy such tax obligations shall be disregarded and the amount due shall be
paid instead in cash by the Participant.
13.5. LISTING AND OTHER CONDITIONS.
(a) As long as the Common Stock is listed on a national
securities exchange or system sponsored by a national securities
association, the issue of any shares of Common Stock pursuant to an Award
shall be conditioned upon such shares being listed on such exchange or
system. Notwithstanding the foregoing, the grant of an Award hereunder is
not intended to be conditional and the Company shall have no obligation to
issue such shares unless and until such shares are so listed; provided,
however, that any delay in the issuance of such shares shall be based
solely on a reasonable business decision and the right to exercise any
Option with respect to such shares shall be suspended until such listing
has been effected.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common Stock pursuant to an
Award is or may in the circumstances be unlawful or result in the
imposition of excise taxes on the Company under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall have no
obligation to make such sale or delivery, or to make any application or to
effect or to maintain any qualification or registration under the
Securities Act of 1933, as amended, or otherwise with respect to shares of
Common Stock or Awards, and the right to exercise any Option shall be
suspended until, in the opinion of said counsel, such sale or delivery
shall be lawful or will not result in the imposition of excise taxes on the
Company.
(c) Upon termination of any period of suspension under this
Section 13.5, any Award affected by such suspension which shall not then
have expired or terminated shall be reinstated as to all shares available
before such suspension and as to shares
26
which would otherwise have become available during the period of such
suspension, but no such suspension shall extend the term of any Option.
13.6. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
13.7. CONSTRUCTION. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply. To the
extent applicable, this Plan shall be limited, construed and interpreted in a
manner so as to comply with Section 162(m) of the Code and the applicable
requirements of Rule 16b3; however, noncompliance with Section 162(m) of the
Code and Rule 16b3 shall have no impact on the effectiveness of an Award under
this Plan.
13.8. OTHER BENEFITS. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its subsidiaries or affiliates nor affect any benefits under any
other benefit plan now or subsequently in effect under which the availability or
amount of benefits is related to the level of compensation.
13.9. COSTS. The Company shall bear all expenses included in
administering this Plan, including expenses of issuing Common Stock pursuant to
any Awards hereunder.
13.10. NO RIGHT TO SAME BENEFITS. The provisions of Awards need not be
the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
13.11. DEATH/DISABILITY. The Committee or the Board, as applicable, may
in its discretion require the transferee of a Participant's Award to supply the
Company with written notice of the Participant's death or Disability and to
supply the Company with a copy of the will (in the case of the Participant's
death) or such other evidence as the Committee or the Board, as applicable,
deems necessary to establish the validity of the Transfer of an Award. The
Committee or the Board, as applicable, may also require that the transferee
agree in writing to be bound by all of the terms and conditions of this Plan.
13.12. SEVERABILITY OF PROVISIONS. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provisions had not been included.
13.13. HEADINGS AND CAPTIONS. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of
this Plan, and shall not be employed in the construction of this Plan.
27
ARTICLE XIV.
EFFECTIVE DATE OF PLAN
This Plan has been adopted by the Board effective as of April 21, 1998 (the
"Effective Date"), subject to and conditioned upon the approval of this Plan by
the stockholders of the Company in accordance with the requirements of the laws
of the State of Delaware and any applicable exchange requirements.
ARTICLE XV.
TERM OF PLAN
No Award shall be granted pursuant to this Plan on or after the tenth
anniversary of the Effective Date, but Awards granted prior to such tenth
anniversary may extend beyond that date.
ARTICLE XVI.
NAME OF PLAN
This Plan shall be known as the Computron Software, Inc. 1998 Stock Option
Plan.
COMPUTRON SOFTWARE, INC.
1998 STOCK OPTION PLAN
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV. SHARE AND OTHER LIMITATIONS . . . . . . . . . . . . . . . . . 9
ARTICLE V. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE VI. STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE VII. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . .14
ARTICLE VIII. NON-EMPLOYEE DIRECTOR STOCK OPTIONS . . . . . . . . . . . . .16
ARTICLE IX. NON-TRANSFERABILITY AND TERMINATION
OFEMPLOYMENT/CONSULTANCY PROVISIONS . . . . . . . . . . . . .19
ARTICLE X. CHANGE IN CONTROL PROVISIONS. . . . . . . . . . . . . . . . .21
ARTICLE XI. TERMINATION OR AMENDMENT OF PLAN. . . . . . . . . . . . . . .23
ARTICLE XII. UNFUNDED PLAN . . . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE XIII. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . .24
ARTICLE XIV. EFFECTIVE DATE OF PLAN. . . . . . . . . . . . . . . . . . . .27
ARTICLE XV. TERM OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE XVI. NAME OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . .27
ADDENDUM TO THE COMPUTRON SOFTWARE, INC.
1998 STOCK OPTION PLAN
FOR EMPLOYEES RESIDING IN FRANCE
The following provisions apply to awards under the Computron Software,
Inc. 1998 Stock Option Plan (the "Plan") to employees of the Corporation's
French subsidiary (the "French Subsidiary"):
1. Employees of the French Subsidiary are not eligible to receive awards of
tandem or limited stock appreciation rights under the Plan.
2. Consultants, independent advisors and non-employee members of the board of
directors of the French Subsidiary are not eligible to receive any awards
under the Plan.
3. Options may not be granted to employees of the French Subsidiary who hold
shares representing ten percent (10%) or more of the Corporation's share
capital and/or the French Subsidiary's share capital.
4. The exercise price of any option granted to an employee of the French
Subsidiary may not be less than one hundred percent (100%) of the average
of the market value of a share of Common Stock on the twenty (20) daily
sessions immediately preceding the option grant date.
5. Options to purchase authorized but unissued shares of Common Stock may not
be granted to employees of the French Subsidiary more than five (5) years
after the date on which the stockholders of the Corporation approved the
Plan.
6. The exercise price of any option granted to employees of the French
Subsidiary is intangible and shall be adjusted only upon the occurrence of
the events specified under the July 24, 1966 corporate law (section 208-5)
in accordance with French law.
7. Upon the death of an employee of the French Subsidiary, any outstanding
options shall remain exercisable, to the extent exercisable at the time of
death, for not more than six (6) months after the date of death (or, if
earlier, the expiration of the option term) .
8. The Plan Administrator shall not have the authority to grant transferable
options to employees of the French Subsidiary.
COMPUTRON SOFTWARE, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- June 10, 1998
(THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY)
P The undersigned stockholder of Computron Software, Inc. hereby appoints
John A. Rade, President and Chief Executive Officer and Michael R.
R Jorgensen, Executive Vice President, Chief Financial Officer and
Treasurer and each of them, with full power of substitution, proxies
O to vote the shares of stock which the undersigned could vote if
personally present at the Annual Meeting of Stockholders of Computron
X Software, Inc. to be held at the Meadowlands Hilton, 2 Harmon
Plaza, Secaucus, New Jersey 07094, telephone number (201) 348-6900
Y on June 10, 1998, at 9:00 A.M. or any adjournment thereof.
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD
below (except as AUTHORITY to
marked to the vote for all ABSTAIN
contrary) nominees below WITH
FOR AGAINST RESPECT TO
1. ELECTION OF / / / / 2. APPROVAL OF THE
DIRECTORS 1998 STOCK OPTION / / / / / /
PLAN
(for terms as described in the Proxy Statement) as described in the Proxy Statement.
ABSTAIN
(1) Elias Typaldos; WITH
(2) John A. Rade; FOR AGAINST RESPECT TO
(3) Gennaro Vendome; 3. APPROVAL OF KPMG / / / / / /
(4) Gregory Kopchinsky; PEAT MARWICK LLP AS
(5) Robert Migliorino; THE COMPANY'S
(6) Michel Berty; INDEPENDENT
(7) William Vogel; AUDITORS
and (8) Edwin T. Brondo.
INSTRUCTION: To withhold authority to vote as described in the Proxy Statement.
for an individual nominee, write the
nominee's name in the space provided below.
4. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE PERSONS
NOMINATED BY MANAGEMENT AS DIRECTORS AND
FOR PROPOSALS 2 AND 3.
Signature(s) of Stockholder___________________________ Dated:_______________
NOTE: Please date and sign exactly as your name appears on the envelope in
which this material was mailed. If shares are held jointly, each stockholder
should sign. Executors, administrators, trustees, etc. should use full title
and, if more than one, all should sign. If the stockholder is a corporation,
please sign full corporate name by an authorized officer. If the stockholder
is a partnership, please sign full partnership name by an authorized person.