UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
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14a-11(c) or Rule 14a-12
MRO SOFTWARE, INC.
(Name of Registrant as Specified In Its Charter)
Not Applicable
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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* * * * *
MRO SOFTWARE, INC.
Special Meeting in Lieu of Annual Meeting of Shareholders
March 14, 2006
Notice is hereby given that a Special Meeting in Lieu of Annual Meeting
of Shareholders of MRO Software, Inc. (the "Company") will be held at the
offices of the Company, 100 Crosby Drive, Bedford, Massachusetts 01730 on
Tuesday, March 14, 2006, beginning at 10:00 A.M., local time, for the following
purposes:
1. To elect Robert L. Daniels and John A. McMullen as Class I
Directors of the Company for a term of three years;
2. To approve an amendment to the Company's 2002 Employee Stock
Purchase Plan to increase the number of shares issuable
thereunder by an additional 500,000 shares; and
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for
the current fiscal year ending September 30, 2006.
The Board of Directors has fixed the close of business on Tuesday,
January 24, 2006 as the record date for the determination of the shareholders of
the Company entitled to notice of, and to vote at, said Meeting and any
adjournment thereof. Only shareholders of record on such date are entitled to
notice of, and to vote at, said Meeting or any adjournment thereof.
By Order of the Board of Directors,
/s/ Craig Newfield
Craig Newfield
Vice President, General Counsel & Secretary
Bedford, Massachusetts
January 26, 2006
YOUR VOTE IS IMPORTANT
Please sign and return the enclosed proxy, whether or not you
plan to attend the Meeting.
MRO SOFTWARE, INC.
100 Crosby Drive
Bedford, Massachusetts 01730
(781) 280-2000
PROXY STATEMENT
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
March 14, 2006
This Proxy Statement and the enclosed form of proxy are being mailed to
shareholders on or about January 26, 2006 in connection with the solicitation by
the Board of Directors of MRO Software, Inc., a Massachusetts corporation (the
"Company"), of proxies to be used at the Special Meeting in Lieu of Annual
Meeting of Shareholders of the Company, to be held on Tuesday, March 14, 2006 at
10:00 a.m. local time, and at any and all adjournments thereof (the "Annual
Meeting"). When proxies are returned properly executed, the shares represented
will be voted in accordance with the shareholders' directions. Shareholders are
encouraged to vote on the matters to be considered. If no choice has been
specified by a shareholder with respect to a proposal as to which the Board of
Directors has made a recommendation, however, the shares covered by any executed
proxy will be voted as indicated in this proxy statement. Any shareholder may
revoke his proxy at any time before it has been exercised. In order to revoke
your proxy, you must either: (i) sign and return another proxy card with a later
date, (ii) provide written notice of the revocation of your proxy to the
secretary of the Company, or (iii) attend the meeting and vote in person.
The Board of Directors of the Company has fixed the close of business
on Tuesday, January 24, 2006 as the record date for the determination of the
shareholders of the Company entitled to notice of, and to vote at, the Annual
Meeting. Only shareholders of record on such date are entitled to notice of, and
to vote at, the Annual Meeting. At the close of business on the record date,
there were issued and outstanding 25,874,692 shares of the Company's Common
Stock, $.01 par value per share ("Common Stock"). Each share of Common Stock
outstanding on the record date will be entitled to cast one vote on each
proposal.
QUORUM AND TABULATION OF VOTES
The By-Laws of the Company provide that the holders of a majority of
shares of Common Stock issued and outstanding and entitled to vote will
constitute a quorum at the Annual Meeting. Shares of Common Stock represented by
a properly signed and returned proxy will be treated as present at the Annual
Meeting for purposes of determining a quorum. In general, votes withheld from
any nominee for election as director, abstentions (if applicable) and broker
"non-votes" (if applicable) are counted as present or represented for purposes
of determining the presence or absence of a quorum for the Annual Meeting. A
"non-vote" occurs when a broker or nominee holding shares for a beneficial owner
votes on one proposal, but does not vote on another proposal.
The affirmative vote of a plurality of the shares of Common Stock
properly cast at the Annual Meeting will be necessary to elect each Class I
Director (Proposal One). Votes "withheld" from director-nominees, and broker
"non-votes" will not be included in calculating the number of votes cast for
election of the Class I Directors. The affirmative vote of a majority of the
shares of Common Stock properly cast at the Annual Meeting will be necessary to
approve the increase in the number of shares authorized for issuance under the
Company's 2002 Employee Stock Purchase Plan
(Proposal Two), and to ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for the fiscal year
ending September 30, 2006 (Proposal Three). Abstentions and broker "non-votes"
will not be included in calculating the number of votes cast on Proposals Two
and Three.
Votes will be tabulated by the Company's transfer agent, American Stock
Transfer & Trust Company. The vote on each matter submitted to shareholders will
be tabulated separately.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company has a Board of Directors consisting of seven directors,
divided into three classes, as nearly equal in size as practicable, referred to
as Class I, Class II and Class III.
The terms of the Company's Class I Directors, Robert L. Daniels and
John A. McMullen, will expire at the Annual Meeting. Mr. Daniels and Mr.
McMullen were most recently re-elected in March 2003. The terms of the Company's
Class II Directors, Stephen B. Sayre and Alan L. Stanzler, will expire at the
annual meeting of shareholders to be held in March 2007. Mr. Sayre and Mr.
Stanzler were most recently re-elected in March 2004. The terms of the Company's
Class III Directors, Norman E. Drapeau, Jr., Richard P. Fishman and David N.
Campbell, will expire at the annual meeting of shareholders to be held in March
2008. Mr. Drapeau and Mr. Fishman were most recently re-elected, and Mr.
Campbell was first elected, to the Board in March 2005. The Directors in each
Class serve for a term of three years and until their successors are duly
elected and qualified. As the term of one Class expires, a successor director or
directors for that Class are elected at the annual meeting of shareholders for
that year.
The full Board of Directors has nominated each of Messrs. Daniels and
McMullen for election to an additional three-year term as a Class I Director.
Messrs. Daniels and McMullen have each agreed to serve if elected, and the
Company has no reason to believe that either of them will be unable to serve. In
the event that either Mr.. Daniels or Mr. McMullen is unable or declines to
serve as a director at the time of the Annual Meeting, proxies will be voted for
such other nominee as is then designated by the Board.
Unless authority to do so has been limited in a proxy, it is the
intention of the persons named as proxies to vote the shares represented by the
proxy FOR the election of Mr. Daniels and Mr. McMullen as Class I Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF MR. DANIELS AND MR. MCMULLEN AS CLASS I DIRECTORS.
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DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position
- ---- --- --------
Norman E. Drapeau, Jr. 45 President, Chief Executive Officer
and Director - Class III
Robert L. Daniels 63 Chairman of the Board - Class I
Peter J. Rice 53 Executive Vice President - Finance and Administration,
Chief Financial Officer and Treasurer
Richard A. Cahill (1) 50 Executive Vice President - Worldwide Sales
Patricia C. Foye 50 Executive Vice President - Global Marketing & Strategic Alliances
William J. Sawyer 59 Executive Vice President- Operations
John W. Young 53 Executive Vice President - Products and Technology
Craig Newfield 46 Vice President, General Counsel and Secretary
David N. Campbell (2)(4) 64 Director - Class III
Richard P. Fishman (2)(3) 59 Director - Class III
John A. McMullen (2)(3) 64 Director - Class I
Stephen B. Sayre (3)(4) 54 Director - Class II
Alan L. Stanzler (3)(4) 62 Director - Class II
- -------------------
(1) Mr. Cahill's employment commenced in January, 2005.
(2) Member of the Compensation Committee
(3) Member of the Nominating and Corporate Governance Committee
(4) Member of the Audit Committee
Norman E. Drapeau, Jr. has served as President and Chief Executive
Officer since May 1998, and as a member of the Board of Directors since January
1998. He first joined the Company in 1982 as an applications analyst. Since that
time, he has held various positions with the Company, including, from 1984 to
1987, that of Manager of Customer Support, and from 1989 through 1991, that of
Director, Product Marketing. In 1991, Mr. Drapeau was appointed Vice President,
Corporate Marketing, in 1992 he was appointed Vice President - Americas, and in
July 1996 he was appointed Executive Vice President - Worldwide Sales and
Marketing, serving in that capacity until January 1998. In January 1998, Mr.
Drapeau was appointed Executive Vice President and Chief Operating Officer. Mr.
Drapeau serves on the Board of Directors of Authoria, Inc, a provider of
strategic human capital management solutions.
Peter J. Rice joined the Company in 2000 as Executive Vice President of
Finance and Administration, Chief Financial Officer, and Treasurer. From 1998 to
2000, Mr. Rice was Vice President of Finance and Administration, Chief Financial
Officer, and Treasurer of Interleaf, Inc., a developer of e-publishing and
e-content software products. Interleaf was sold to Broadvision, Inc. in 2000.
From 1995 to 1998, Mr. Rice was Vice President, Chief Financial Officer and
Treasurer for Media 100, Inc., a provider of digital media and content design,
and creation and delivery tools. From 1990 to 1995, Mr. Rice was Vice President,
Corporate Controller and Chief Accounting
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Officer of M/A Com, Inc. Prior thereto, Mr. Rice held senior financial
management positions at Apollo Computer and Atex, Inc.
Richard A. Cahill joined the Company in January 2005 as Executive Vice
President of Worldwide Sales. From August 1998 until January 2005, Mr. Cahill
held a series of senior management positions at Remedy Corporation and its
successors in interest. Remedy Corporation was sold to Peregrine Systems in June
2001. Following Peregrine's bankruptcy in December 2001, Remedy's assets were
purchased by BMC Software, Inc. in late 2002. From the fourth calendar quarter
of 2003 to the present Mr. Cahill served as Vice President of Worldwide Sales
and Services for the Remedy business. Prior thereto, from 2002 to 2003 he served
as Vice President and General Manager for Europe, Middle East & Africa; from
2001 to 2002 he served as Vice President of European Operations; from 2000 to
2001 he served as Vice President of Worldwide Professional Services; and from
1998 to 2000 he served as Director of EMEA Operations.
Patricia C. Foye joined the Company in July 2001 as Executive Vice
President, Global Marketing and Strategic Alliances. From September 2000 to June
2001, Ms. Foye was Vice President, Worldwide Sales and Marketing for HMS
Software, Inc., an application software company focused in the aerospace defense
markets. From May 1999 to May 2000, Ms. Foye was President of Allenbrook, Inc.,
a private firm focused on the development of policy management system for
insurance and financial markets. From 1998 to 1999, Ms. Foye was Vice President
and General Manager of QAD, Inc., leading its Electronics and Industrial
business segment. From 1994 to 1998, Ms. Foye held senior management positions
at Digital Equipment Corporation, a hardware, software and services vendor, and
Marcam Corporation, an ERP software applications vendor.
William J. Sawyer has served as Executive Vice President, Operations
since October 1998. He first joined the Company in 1978 as an applications
consultant and served in various sales and services positions from 1978 to 1984.
Mr. Sawyer was a Vice President of the Company from 1984 to 1990 and Executive
Vice President from 1990 until November 1997. In November 1997, Mr. Sawyer left
the Company and joined Peritus Software Services, Inc., a software application
company, as Vice President, Operations.
John W. Young has served as Executive Vice President - Products and
Technology since 1998. He first joined the Company in 1985 and served until 1988
as MAXIMO Product Manager. From 1988 to 1992, Mr. Young was Vice President of
Sales of Comac Systems Corporation, a software application company. In 1992 he
rejoined the Company as Director of MAXIMO Product Design, was in 1995 he was
appointed Vice President - Research and Development. Mr. Young serves on the
Board of Directors of NSI Software, Inc., a vendor of data protections software.
Craig Newfield joined the Company as Vice President, General Counsel
and Secretary in September 2000. From October 1997 through August 2000, Mr.
Newfield was Vice President, General Counsel and Secretary of Interleaf, Inc., a
developer of e-publishing and e-content software products. Interleaf was sold to
Broadvision, Inc. in 2000. From April 1996 through September 1997, Mr. Newfield
was General Counsel and Secretary of OneWave, Inc., an IT service provider. From
February 1993 to April 1996, Mr. Newfield served as in-house counsel for Marcam
Corporation.
Robert L. Daniels founded the Company in 1968 and has been a director
since that time. Commencing in 1968, Mr. Daniels served as Executive Chairman of
the Board, Chief Executive Officer, and President. He relinquished the title of
President in 1995, and resigned as CEO and Chairman in August 1996. From May
1998 to March 2004, Mr. Daniels served as Executive Chairman, and since March
2004, he has served as Chairman of the Board. He resigned as an employee of the
Company in November 2004.
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David N. Campbell has served as a director since December 2004. Mr.
Campbell is currently Managing Director of Innovation Advisors, Inc., an
investment bank serving middle market technology companies. Mr. Campbell served
as Chairman and Chief Executive Officer of Xpedior from September 1999 through
November 2000. A majority interest in Xpedior was acquired by PSINet, Inc. in
June 2000 and both PSINet and Xpedior filed for bankruptcy protection in April
2001. From January 1999 to September 1999, Mr. Campbell was President of GTE
Technology Organization, the centralized technology unit of GTE Incorporated.
From 1995 to January 1999, Mr. Campbell served as President of BBN Technologies,
the internet technology development and services organization of BBN
Corporation, which was acquired by GTE in 1997. Mr. Campbell is also a director
of Tektronix, Inc., Gibraltar Industries, Inc., Apropos Technology, and
Powersteering Software.
Richard P. Fishman has served as a director since March 1999. Mr.
Fishman is currently Managing General Partner of RSSI Investors, a venture
capital firm. From 2002 to 2005, Mr. Fishman was Senior Managing Partner of MAF
Capital Partners, a venture capital firm. From 1998 to 2002, Mr. Fishman was
Executive Vice President at MacAndrews & Forbes Group, Inc., where he was
responsible for venture capital investing. From 1995 to 1997, Mr. Fishman served
as Managing Director of GeoPartners Research, Inc., a strategy and
management-consulting firm, where he headed the firm's venture capital
activities. Mr. Fishman served as President and Chief Executive Officer of
Thinking Machines Corporation from 1993 to 1994 and was a partner at the law
firm of Milbank, Tweed, Hadley & McCoy from 1987 until 1993.
John A. McMullen has served as a director since April 2000. Mr.
McMullen is the Managing Principal of Cambridge Meridian Group, Inc., a
strategy-consulting firm that serves Fortune 500 and technology-based companies,
with which he has been employed since 1985. Mr. McMullen taught business
strategy at Harvard Law School from the mid 1980's to 1990 and, as one of the
original members of CMGI's Board of Directors, served on that Board from 1988
through 1999. In addition, he currently serves on the board of Ezenia! Inc. and
on the boards of two private technology-oriented companies, and is advisor to
two others. From 1993 to 1997, he was an informal advisor to former Senator Bill
Bradley (NJ). He ran for the United States Senate from Vermont in 2004.
Stephen B. Sayre has served as a director since September 1998. Mr.
Sayre is an independent marketing consultant. From 2000 until 2005, Mr. Sayre
served as Vice President of Marketing for Watchfire Corporation, a provider of
online regulatory compliance solutions; Endeca Technologies, a provider of
search and analysis software; and Idiom, Inc., an enterprise software provider.
From 1994 to 2000, he was the Senior Vice President of Marketing at Lotus
Development Corporation, a subsidiary of IBM Corporation. Prior to 1994, Mr.
Sayre served in other senior executive level positions with companies in the
software industry.
Alan L. Stanzler has served as a director since May 1998. Previously,
Mr. Stanzler served as a director of the Company from 1992 to 1994, and as Clerk
of the Company from 1990 to 1996. Mr. Stanzler is Of Counsel at the law firm of
Stanzler, Funderburk & Castellon, L.L.P. From 1998 to September 2001, Mr.
Stanzler was a partner of the law firm of Maselan Jones & Stanzler, P.C. Mr.
Stanzler is a Trustee of Emerson College.
Executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors.
5
CORPORATE GOVERNANCE
Independent Directors
The Board has determined that Messrs. Campbell, Fishman, McMullen,
Sayre and Stanzler are all "independent" directors, as that term is currently
defined in Rule 4200(a)(15) of the National Association of Securities Dealers'
("NASD") listing standards, Section 301 of the Sarbanes-Oxley Act and Rule 10A-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, the Board of Directors is comprised of a majority of independent
directors.
During the fiscal year ended September 30, 2005 ("fiscal 2005"), the
Board met 15 times. No incumbent director attended fewer than 75% of the total
number of meetings held by the Board and Committees of the Board on which he
served.
It is the policy of the Board that each member of the Board shall
attend the Company's annual meetings of shareholders whenever practical, and
that at least one member of the Board shall attend each other special meeting of
shareholders. All of the seven directors then in office attended the Annual
Meeting of Shareholders held in March 2005.
The Board has undertaken a program of continuing education on matters
of corporate governance and other matters relevant to directors, and has
prohibited the extension of loans to executive officers and directors, except as
specifically permitted under the Sarbanes-Oxley Act.
Committees of the Board
The Board of Directors has an Audit Committee, a Compensation
Committee, and a Nominating and Corporate Governance Committee. The Board has
resolved that each of these committees shall each be composed entirely of
"independent" directors, as defined above.
The Audit Committee (currently composed of Messrs. Campbell, Sayre and
Stanzler) reviews the internal accounting procedures of the Company and consults
with and reviews the services provided by the Company's independent registered
public accounting firm. The Audit Committee met six times during fiscal 2005.
See Report of the Audit Committee for further information regarding this
committee and its operations.
The Compensation Committee (currently composed of Messrs. Campbell,
Fishman and McMullen) has general responsibility for the Company's executive
compensation policies and practices, including making specific recommendations
to the Board concerning compensation for the Company's executive officers and
administering the Company's Amended and Restated 1999 Equity Incentive Plan (the
"1999 Equity Plan"), 1994 Incentive and Nonqualified Stock Option Plan (the
"1994 Stock Option Plan") and 2002 Employee Stock Purchase Plan (the "Stock
Purchase Plan"). The Compensation Committee met seven times during fiscal 2005.
See Report of the Compensation Committee for further information regarding this
committee and its operations.
The Nominating and Corporate Governance Committee (currently composed
of Messrs. McMullen (Chairman), Fishman, Sayre and Stanzler) is responsible for
making recommendations to the full Board regarding candidates for election to
the Board of Directors, and regarding matters of corporate governance. The
Nominating and Corporate Governance Committee met six times during fiscal 2005.
The full Board of Directors considered and nominated the candidates proposed for
election as directors at the Annual Meeting.
6
The Charters for the Audit and Compensation Committees were attached to
the Proxy Statement distributed in connection with the Company's 2004 annual
meeting of shareholders. The Charters for the Audit, Compensation and Nominating
and Corporate Governance Committees are all available on the Company's website
at http://www.mro.com (currently accessible by selecting "Company", "Investor
Relations" and then "Corporate Governance").
Executive Sessions of the Board
The Board has formally adopted a policy of meeting in executive
session, with only independent directors being present, on a regular basis and
at least two times each year. In practice, and during fiscal 2005, the Board met
in executive session on a quarterly basis.
Code of Conduct
The Board has approved and the Company has adopted a Code of Business
Conduct and Ethics, applicable to all directors, officers and employees of the
Company, and it is the Company's practice for to have this Code, together with
the Company's Policy on Insider Trading, acknowledged on an annual basis by
Company directors, officers and certain other senior management personnel. This
Code is available on the Company's website, at http://www.mro.com (currently
accessible by selecting "Company", "Investor Relations" and then "Corporate
Governance"). The Audit Committee is responsible for reviewing and approving or
rejecting all requested waivers to the Code, as such waiver(s) may apply to the
Company's Chief Executive Officer, Chairman, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
Qualifications of Candidates for Election to the Board
Our Directors take a critical role in guiding the Company's strategic
direction, and oversee the management of the Company. Board candidates are
considered based upon various criteria, such as their broad-based business and
professional skills and experiences, a global business and social perspective,
concern for the long-term interests of the shareholders, and personal integrity
and judgment. In addition, directors must have time available to devote to Board
activities and to enhance their knowledge of the global software industry.
Accordingly, the Board seeks to attract and retain highly qualified directors
who have sufficient time to attend to their substantial duties and
responsibilities to the Company. The Nominating and Corporate Governance
Committee has established the following minimum requirements: being able to read
and understand fundamental financial statements, having at least ten years of
relevant business experience, having no identified conflicts of interest as a
prospective director of the Company, having not been convicted in a criminal
proceeding aside from traffic violations during the five years prior to the date
of selection, and being willing to execute and comply with the Company's Code of
Business Conduct and Ethics. The Nominating and Corporate Governance Committee
retains the right to modify these minimum qualifications from time to time.
Exceptional candidates who do not meet all of these criteria may still be
considered.
Process for Identifying and Evaluating Candidates for Election to
the Board
The Nominating and Corporate Governance Committee will review the
qualifications and backgrounds of the Directors, as well as the overall
composition of the Board, and recommend to the full Board the slate of Directors
to be nominated for election at the annual meeting of shareholders.
7
In the case of incumbent directors whose terms of office are set to expire, the
Nominating and Corporate Governance Committee reviews such directors' overall
service to the Company during their term, including the number of meetings
attended, level of participation, quality of performance, and whether the
director continues to meet the independence standards set forth in the
Sarbanes-Oxley Act, SEC rules and regulations and the NASD rules. In the case of
new director candidates, the questions of independence and financial expertise
are important to determine what roles can be performed by the candidate, and the
Nominating and Corporate Governance Committee determines whether the candidate
meets the independence standards set forth in the Sarbanes-Oxley Act, SEC rules
and regulations and the NASD Rules, and the level of the candidate's financial
expertise. The candidate(s) will be interviewed by the Nominating and Corporate
Governance Committee, and if approved, then by all other members of the Board.
The full Board will approve the final nomination(s). The Chairman of the Board
and the Chairman of the Nominating and Corporate Governance Committee, acting on
behalf of the full Board, will extend the formal invitation to become a nominee
of the Board of Directors. Qualified candidates for membership on the Board will
be considered without regard to race, color, religion, sex, ancestry, national
origin or disability. The full Board of Directors considered and nominated the
candidates proposed for election as directors at the Annual Meeting.
Shareholder Nominations
Shareholders may nominate Director candidates for consideration by the
Nominating and Corporate Governance Committee by writing to Craig Newfield,
General Counsel, MRO Software, Inc., 100 Crosby Drive, Bedford, MA 01730 and
providing the candidate's name, biographical data and qualifications including
age, five-year employment history with employer names and a description of the
employer's business, whether such individual can read and understand fundamental
financial statements, other board memberships (if any), and such other
information as reasonably available and sufficient to enable the Nominating and
Corporate Governance Committee to evaluate the minimum qualifications stated
above under Qualifications of Candidates for Election to the Board. The
submission must be accompanied by a written consent of the individual to stand
for election if nominated by the Board of Directors and to serve if elected by
the shareholders. Written notice must be given at least 60 days prior to the
date of the next annual meeting of shareholders, including such additional
information as required under the Company's By-Laws. If a shareholder nominee is
eligible, and if the nomination is proper, the Nominating and Corporate
Governance Committee will then deliberate and make its recommendation to the
Board of Directors.
The Nominating and Corporate Governance Committee will not alter the
manner in which it evaluates candidates, including the minimum criteria set
forth above, based on whether the candidate was recommended by a shareholder or
not.
Communications with the Board
Shareholders may communicate directly with the Board, or with any
committee of the Board, by writing to Craig Newfield, General Counsel, MRO
Software, Inc., 100 Crosby Drive, Bedford, MA 01730, by calling Mr. Newfield at
+1 781-280-2042, or via e-mail at directors@mro.com. All communications will be
reviewed by management and forwarded to the appropriate director(s), in their
entirety.
8
REPORT OF THE AUDIT COMMITTEE
The Board of Directors has appointed an Audit Committee consisting of
Messrs. Stanzler (Chairman), Campbell and Sayre. All members of the Audit
Committee are "independent" as that term is currently defined in Rule
4200(a)(15) of the NASD listing standards, Section 301 of the Sarbanes-Oxley Act
and Rule 10A-3 under the Exchange Act.
Under the Sarbanes-Oxley Act, the Audit Committee is directly
responsible for the selection, appointment, retention, compensation and
oversight of the Company's independent registered public accounting firm,
including the pre-approval of both audit and non-audit services (including fees
and other terms), and the resolution of disagreements between management and the
auditors regarding financial reporting, accounting, internal controls, auditing
or other matters.
In carrying out its role, the Audit Committee (i) makes such
examinations as are necessary to monitor the Company's financial reporting, its
external audits and its process for compliance with laws and regulations, (ii)
provides to the Board of Directors the results of its examinations and
recommendations derived therefrom, (iii) reviews with management and with the
Company's independent registered public accounting firm the Company's internal
accounting controls, and considers (and if appropriate proposes to the Board of
Directors) improvements in internal accounting controls that may be appropriate
in light of such review, (iv) reviews the results and scope of the annual audit
of the Company's consolidated financial statements and internal control over
financial reporting conducted by the Company's independent registered public
accounting firm, (v) reviews and approves the scope of other services provided
by the Company's independent registered public accounting firm, and (vi)
provides to the Board of Directors such additional information and materials as
it may deem necessary to make the Board aware of significant financial matters
that require Board attention.
The Audit Committee also maintains a telephone "hotline" by which it
can directly receive, on an anonymous and confidential basis, complaints
regarding accounting, internal accounting controls and other auditing matters,
including any concerns regarding questionable accounting, auditing or other
matters that the Company's employees, and non-employees, may have.
The Audit Committee is responsible for reviewing all related party
transactions for potential conflicts of interest, and for approving such
transactions. The Audit Committee is responsible for reviewing and making
determinations regarding any proposed waiver of the Company's Code of Business
Conduct and Ethics as applicable to the Company's Chief Executive Officer,
Chairman, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. See Corporate Governance -
Code of Conduct for detailed information.
Management has the primary responsibility for the Company's financial
statements and the reporting process, including the systems of internal control
over financial reporting and for the preparation of financial statements in
accordance with generally accepted accounting principles in the United States of
America. The Company's independent registered public accounting firm is
responsible for auditing (1) the Company's consolidated financial statements and
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, (2) management's assessment of
internal control over financial reporting, and (3) the Company's internal
control over financial reporting, all in accordance with the standards of the
Public Company Accounting Oversight Board. The Audit Committee monitors and
reviews these
9
processes, and reviews the Company's periodic reports and quarterly earning
releases before they are filed with the SEC, but is not responsible for the
preparation of the Company's financial statements.
Audit Committee members are not professionally engaged in the practice
of accounting or auditing and are not experts in the fields of accounting or
auditing, including with respect to auditors' independence. Our Board of
Directors has determined that Mr. Campbell is an "audit committee financial
expert," as defined in the rules adopted by the SEC and as that term is
currently used in the Nasdaq Marketplace Rules, and that Mr. Campbell is an
"independent" director, as that term is currently defined in Rule 4200(a)(15) of
the NASD listing standards, Section 301 of the Sarbanes-Oxley Act and Rule 10A-3
under the Exchange Act.
The Audit Committee is authorized to engage at Company expense
independent counsel and other advisors it determines necessary to carry out its
duties.
In fulfilling its oversight responsibilities, the Audit Committee
discussed with representatives of PricewaterhouseCoopers LLP, the Company's
independent registered public accounting firm for fiscal 2005, the overall scope
and plans for PricewaterhouseCoopers LLP's audit of the Company's consolidated
financial statements and internal control over financial reporting for fiscal
2005. The Audit Committee met with PricewaterhouseCoopers LLP, with and without
Company management present, to discuss the overall quality of the Company's
financial reporting.
During fiscal 2005, the Chairman of the Audit Committee met with the
Company's Chief Executive Officer and Chief Financial Officer to discuss their
review of the Company's disclosure controls and procedures and internal controls
in connection with the filing of periodic reports with the SEC.
The Audit Committee reviewed and discussed the Company's audited
consolidated financial statements for fiscal 2005 with management and
PricewaterhouseCoopers LLP. The Audit Committee discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement of
Auditing Standards No. 61 "Communications with Audit Committees," as amended,
including a discussion of PricewaterhouseCoopers LLP's judgments as to the
quality, not just the acceptability, of the Company's financial statements,
changes in accounting policies, sensitive accounting estimates, accounting
principles and such other matters as are required to be discussed with audit
committees under generally accepted auditing standards.
In addition, the Audit Committee received from and discussed with
PricewaterhouseCoopers LLP the written disclosures and the letter required by
Independence Standards Board Standard No. 1 "Independence Discussions with Audit
Committees" and discussed the disclosures with PricewaterhouseCoopers LLP, as
well as other matters relevant to PricewaterhouseCoopers LLP's independence from
management and the Company. The Audit Committee considered, among other things,
whether the services PricewaterhouseCoopers LLP provided to the Company beyond
their audit of the Company's consolidated financial statements were compatible
with maintaining PricewaterhouseCoopers LLP's independence. The Audit Committee
also considered the amount of fees PricewaterhouseCoopers LLP received for audit
and non-audit services. See Proposal Three for detailed information regarding
audit and non-audit fees.
Based on the Audit Committee's reviews, meetings and discussions
referred to above, the Audit Committee recommended to the Board of Directors,
and the Board directed, that the Company's audited financial statements be
included in its Annual Report on Form 10-K for the year
10
ended September 30, 2005 for filing with the SEC. The Audit Committee and the
Board of Directors also have recommended that the selection of
PricewaterhouseCoopers LLP as the Company's independent registered public
accounting firm for the Company's fiscal year ending September 30, 2006 ("fiscal
2006") be ratified. See Proposal Three for detailed information.
The Audit Committee is governed by a written charter, adopted by the
Board of Directors, a copy of which was attached to the Proxy Statement
distributed in connection with the Company's 2004 annual meeting of
stockholders, and is available on the Company's website at http://www.mro.com
(currently accessible by selecting "Company", "Investor Relations" and then
"Corporate Governance").
The Audit Committee
Alan L. Stanzler, Chairman
David N. Campbell
Stephen B. Sayre
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
Directors' Compensation
Members of the Board of Directors who are not employees of the Company
or any of its subsidiaries ("Non-Employee Directors") receive a quarterly
stipend of $10,000, plus a quarterly stipend of $2,500 for each active committee
of which they are a member, except that the chairman of the Audit Committee
receives a quarterly stipend of $7,500, and the chairman of the Compensation
Committee and the chairman of the Nominating and Corporate Governance Committee
each receives a quarterly stipend of $6,250. No additional fees are payable for
attendance at Board or committee meetings, and Non-Employee Directors are also
reimbursed for out-of-pocket expenses incurred in the performance of their
duties as directors of the Company. Directors who are employees of the Company
are not paid any separate fees for serving as directors.
Mr. Daniels served as Chairman of the Board during fiscal 2005, and is
compensated in the same manner as the Company's other Non-Employee Directors,
except that (i) he receives a quarterly stipend of $25,000, and (ii) through
August 18, 2005 he continued to receive his employee benefits at the same levels
as provided prior to the termination of his employment (consisting of medical
and dental insurance coverage), and (iii) from August 19, 2005 and through age
65 he will be reimbursed for the cost of continuing medical and dental insurance
coverage via COBRA.
Non-Employee Directors are eligible to receive equity-based incentive
awards under the 1999 Equity Plan in the same manner and to the same degree as
all other eligible persons, as determined by the Board of Directors on a
discretionary basis. Options and restricted stock granted to Non-Employee
Directors are subject to acceleration of vesting under certain circumstances. On
May 10, 2005 the Board approved a grant to each Non-Employee Director (including
the Chairman) of 6,250 shares of restricted stock under the terms of the 1999
Equity Plan, vesting on a quarterly basis over three years, with twelve equal
installments vesting on the 15th day of the second month of each quarter,
subject to 100% acceleration under certain circumstances.
11
Executive Compensation
Summary Compensation Table. The following table sets forth certain
information concerning the compensation earned by the Chief Executive Officer
and four other most highly paid executive officers of the Company (collectively,
the "named executive officers") for services rendered in all capacities to the
Company during fiscal 2003, 2004 and 2005.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation Awards
---------------------- -------------------------------
Securities
Fiscal Restricted Stock Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Awards ($) Options(#) Compensation (1)
- ------------------------------------------------------------------------------------------------------------------------
Norman E. Drapeau, Jr. 2005 $350,000 $360,279 $818,565 (2) 90,750 $3,250
President and Chief 2004 $350,000 $340,987 (3) $ 43,791 (4) 90,750 $3,000
Executive Officer 2003 $350,000 $262,406 ----- 165,000 $3,000
- ------------------------------------------------------------------------------------------------------------------------
Peter J. Rice 2005 $250,000 $180,665 $272,860 (2) 30,248 $3,250
Executive Vice President 2004 $250,000 $170,990 (3) $ 21,959 (4) 30,250 -----
Finance & Administration, 2003 $241,250 $128,954 ----- 55,000 -----
Chief Financial Officer
and Treasurer
- ------------------------------------------------------------------------------------------------------------------------
Patricia C. Foye 2005 $215,000 $180,665 $163,713 (2) ----- $3,250
Executive Vice President 2004 $215,000 $170,990 (3) $ 21,959 (4) 36,300 $3,000
Global Marketing and 2003 $215,000 $128,954 ----- 33,000 -----
Strategic Alliances
- ------------------------------------------------------------------------------------------------------------------------
William J. Sawyer 2005 $215,000 $180,665 $163,713 (2) ----- $3,250
Executive Vice President 2004 $215,000 $170,990 (3) $21,959 (4) 36,300 $3,000
Operations 2003 $215,000 $128,954 ----- 33,000 $3,000
- ------------------------------------------------------------------------------------------------------------------------
John W. Young 2005 $215,000 $180,665 $163,713 (2) ----- $3,250
Executive Vice President 2004 $215,000 $170,990 (3) $ 21,959 (4) 36,300 $3,000
Products and Technology 2003 $215,000 $128,954 ----- 33,000 $3,000
- ------------------------------------------------------------------------------------------------------------------------
(1) The amounts reported represent contributions made by the Company pursuant
to the Company's 401(k) Plan and Trust.
(2) Represents shares of restricted stock granted on May 10, 2005 under the
1999 Equity Plan valued on the date of grant ($13.35 per share); these
shares are subject to forfeiture pursuant to restrictions that lapse over a
four year period from the date of grant. None of these shares were vested
as of the end of fiscal 2005.
(3) Includes tax withholding amounts in respect of Restricted Stock Awards (see
note 4 below).
(4) Twenty five (25%) percent of the annual portion of each executive's bonus
was paid in the form of shares of Company Common Stock, granted in November
2005 and valued on the date of grant ($12.25 per share), reduced by tax
withholdings, and granted subject to the agreement of each recipient to
hold the stock for at least two years, under and subject to the terms of
the 1999 Equity Plan.
12
Option Grants in Last Fiscal Year. The following table sets forth
certain information regarding stock options granted during fiscal 2005 by the
Company to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Number of Assumed Annual Rates of Stock
Securities % of Total Price Appreciation for Option
Underlying Options Granted Term (2)
Options to Employees in Exercise Expiration -------
Name Granted (#)(1) Fiscal Year Price ($/Sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------
Norman E. Drapeau, Jr . 90,750 16.2% $12.25 11/09/14 $697,868 $1,772,348
- ----------------------------------------------------------------------------------------------------------------------
Peter J. Rice 30,248 5.4% $12.25 11/09/14 $232,607 $590,743
- -----------------------------------------------------------------------------------------------------------------------
Patricia J. Foye ----- ----- ----- ----- ----- -----
- ----------------------------------------------------------------------------------------------------------------------
William J. Sawyer ----- ----- ----- ----- ----- -----
- ----------------------------------------------------------------------------------------------------------------------
John W. Young ----- ----- ----- ----- ----- -----
- ----------------------------------------------------------------------------------------------------------------------
(1) Represents shares of Common Stock issuable upon exercise of incentive and
non-qualified stock options granted under the Company's 1999 Equity Plan.
All such options vest over four years, first becoming exercisable as to 25%
of the shares covered on the first anniversary of the date of grant, and as
to a further 2.08% each month thereafter, subject to acceleration in
certain circumstances. These options were accelerated by the Compensation
Committee, subject to the executive officer's agreement to not exercise
such options prior to the time at which they would otherwise have vested.
(2) Potential realizable value means the value of the shares of Common Stock
underlying the option, at the specified assumed annual rates of stock price
appreciation, compounded over the option term (10 years). Actual gains, if
any, realized on stock option exercises are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the values reflected in this table will be
realized.
Option Exercises and Fiscal Year-End Values. The following table sets
forth certain information concerning stock options exercised during fiscal 2005
and stock options held as of September 30, 2005 by each of the named executive
officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
- -------------------------------------------------------------------------------
Number of Unexercised Value of Unexercised
Options at In-The-Money Options
Fiscal Year-End at Fiscal Year End ($) (2)
Name Exercisable (#) (3) Exercisable ($) (3)
- -------------------------------------------------------------------------------
Norman E. Drapeau, Jr. 940,998 $ 4,565,874
- -------------------------------------------------------------------------------
Peter J. Rice 237,498 $ 736,426
- -------------------------------------------------------------------------------
Patricia C. Foye 144,300 $ 426,315
- -------------------------------------------------------------------------------
William J. Sawyer 219,300 $ 1,055,303
- -------------------------------------------------------------------------------
John W. Young 194,298 $ 831,962
- -------------------------------------------------------------------------------
(1) During fiscal 2005 named executive officers did not acquire any shares of
Company Common Stock on exercise of stock options, or realize any value
from such exercise.
(2) Value is based on the last sale price of the Common Stock on September 30,
2005, as reported by the Nasdaq National Market ($16.84 per share), less
the applicable option exercise price. These values have not been and may
never be realized. Actual gains, if any, on exercise will depend on the
value of the Common Stock on the date of the sale of the shares.
(3) During fiscal 2005, all employee stock options were accelerated by the
Compensation Committee subject to, in the case of executive officers, the
requirement that each executive officer agree to not sell any shares
issuable under his or her stock options until the option would otherwise
have vested; see "Compensation Committee Report - Executive Compensation
Program - Equity Incentives."
13
Equity Compensation Plan Information. The equity compensation plans
approved by our shareholders are the 1999 Equity Plan, the 1994 Stock Option
Plan, and the Stock Purchase Plan. The equity compensation plans not approved by
our stockholders include 25,000 shares of restricted stock issued in 2001 to the
non-employee directors then in office (vesting in equal quarterly installments
over three years), and 15,000 shares of restricted stock issued in 2000 to an
employee hired in connection with an acquisition (vesting in equal annual
installments over two years).
The following table provides information as of the end of fiscal 2005
regarding shares authorized for issuance pursuant to equity compensation plans,
including individual compensation arrangements.
EQUITY COMPENSATION PLAN INFORMATION
- --------------------------------------------------------------------------------------------------------------------------------
Number of securities to be Weighted-average Number of securities remaining
issued upon exercise of out- exercise price of out- available for future issuance under
standing options, standing options, equity compensation plans (excluding
Plan Category warrants and rights warrants and rights securities reflected in column (a))
- --------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 5,029,076 (1) $17.14 1,631,434 (2)
Equity compensation plans
not approved by security holders 40,000 (3) ----- -----
Total 5,069,076 $17.14 1,631,454
- --------------------------------------------------------------------------------------------------------------------------------
(1) Does not include restricted stock awards issued uer the 1999 Equity Plan
and previously approved by shareholders.
(2) Includes 89,465 shares of common stock reserved for future issuance under
the 2002 Employee Stock Purchase Plan. No more than 454,441 shares may be
issued in the form of restricted stock under the 1999 Equity Plan.
Compensation Committee Interlocks and Insider Participation
David N. Campbell, John A. McMullen and Richard P. Fishman served on
the Compensation Committee during fiscal 2005. None of them, nor any executive
officer of the Company, has any relationship requiring disclosure by the Company
pursuant to item 402(j) of Regulation S-K promulgated by the SEC.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee established by the Board of Directors is
comprised of Messrs. Fishman (Chairman), Campbell and McMullen, each of whom is
"independent", as currently defined in Rule 4200(a)(15) of the NASD listing
standards, Section 301 of the Sarbanes-Oxley Act and Rule 10A-3 under the
Exchange Act. The Compensation Committee has general responsibility for the
Company's executive compensation policies and practices, including making
specific recommendations to the Board concerning compensation for the Company's
executive officers. In connection with its evaluation and structuring of the
Company's executive compensation program, the Compensation Committee consults
with independent experts in such matters. The following report is made by
Messrs. Fishman, Campbell and McMullen, and summarizes the Company's executive
officer compensation policies for fiscal 2005.
14
Overall Compensation Objectives
The Company's executive compensation programs are generally designed to
relate a substantial part of executive compensation to attainment of the
Company's internal goals for financial performance and corresponding increases
in shareholder value. Decisions concerning executive compensation are guided by
the following underlying principles:
o to establish incentives which will link executive officer
compensation to the Company's financial performance and will
motivate executives to attain the Company's quarterly and annual
financial targets; and
o to provide a total compensation package that is competitive within
the software industry and which will assist the Company in
attracting and retaining executives who will contribute to the
long-term financial success of the Company.
Executive Compensation Program
The Company's executive compensation package consists of three
principal components: (1) salary; (2) bonuses tied to quarterly and annual
revenue and earnings; and (3) where appropriate to provide longer-term incentive
to executive officers, equity-based incentives such as stock options and
restricted stock. The Company's executive officers are also eligible to
participate in other employee benefit plans, including health and life insurance
plans, a 401(k) retirement plan and the Stock Purchase Plan, on substantially
the same terms as other employees who meet applicable eligibility criteria,
subject to any legal limitations on the amounts that may be contributed or the
benefits that may be payable under these plans.
Salaries
Executive officers' salaries for fiscal 2005 were maintained at the
same levels as such salaries for the previous two fiscal years (see Summary
Compensation Table), in light of general economic conditions and consistent with
the Company's overall cost control initiatives.
Bonuses
As noted above, the Company's executive officer compensation policy
emphasizes bonuses and equity-based awards, which align the interests of
management with the shareholders' interest in the financial performance of the
Company for fiscal quarters, the fiscal year and the longer term. Consistent
with this approach, in fiscal 2005, the Company maintained an Executive Bonus
Plan (the "2005 Executive Bonus Plan"), under which the potential bonuses for
executives were directly tied to the Company's quarterly and annual financial
performance. The participants in the 2005 Executive Bonus Plan were Ms. Foye and
Messrs. Drapeau, Rice, Sawyer, Young, Newfield and Mr. Richard Cahill (who
joined the Company as Executive Vice President, Worldwide Sales in January,
2005). Under the 2005 Executive Bonus Plan a participant's bonus was determined
as follows:
o Quarterly Performance. Forty (40%) percent of the total bonus was
measured and paid quarterly, based on the Company's quarterly revenue
and earnings-per-share ("EPS") performance. Payment for revenue
performance started at 97.5% of goal attainment, and payment for EPS
performance occurred at 100% of goal attainment; no incremental bonus
above the targeted amount was payable for over-achievement of quarterly
goals.
15
o Annual Performance. Sixty (60%) percent of the total bonus was based on
the Company's annual revenue and EPS performance, with payment for
revenue performance starting at 95.1% of goal attainment, and payment
for EPS performance starting at 91.67% of goal attainment. No annual
bonus was payable unless 91.67% of the EPS goal was achieved. In the
event that the annual goals were exceeded, payment would be made over
and above the 60% target, not to exceed 70% of the total bonus amount
targeted under the plan.
During fiscal 2005, the Company's quarterly revenues met or exceeded
97.5% of the revenue goals for three quarters, and 100% of the EPS goals for two
quarters, as established under the plan. The Company's annual revenues exceeded
101.8% of the annual revenue goal, and EPS exceeded 98% of the annual EPS goal,
as established under the plan. As a result, the Company paid $1,330,006 in cash
bonuses under the 2005 Executive Bonus Plan to its seven executive officers.
Revenue attainment was determined in accordance with GAAP, and EPS attainment
was based on a non-GAAP financial measure that adjusted GAAP EPS on a
tax-effected basis for certain expenses that were not within management's
ability to control during the periods being measured.
Equity Incentives
Having consulted with independent experts in these matters, the
Compensation Committee believes that stock options and restricted stock with
future vesting dates provide significant incentives to executive officers to
continue their employment with the Company and create long term value for its
shareholders, and intends to include such equity incentives as part of the
Company's executive compensation package.
In fiscal 2003 and 2004, the Company granted stock options to its
executive officers to purchase a number of shares that increased 10% year over
year. During fiscal 2005, the Compensation Committee undertook a comprehensive
review of the equity-based incentives provided Company-wide and to executive
officers, in light of the Company's adoption of new accounting rules for the
recognition of expenses related to equity-based incentives (Statement of
Financial Accounting Standards No. 123(R)), and in keeping with best practices
in the industry. As a result of this review, the Compensation Committee took the
following actions in fiscal 2005:
o Changed the nature of the equity-based incentives granted to executive
officers from stock options to restricted stock, issuing one-third the
number of shares in the form of restricted stock as had been covered by
stock options granted in fiscal 2004.
o Adopted stock ownership guidelines calling for each executive officer
to acquire over a period of several years Common Stock having a value
at least equal to his or her base salary.
o Cut roughly in half the number of shares to be allocated to option
grants issued to employees other than executive officers during fiscal
2005 as compared to prior years.
o Accelerated all outstanding stock options, other than those held by
outside directors, subject to the requirement that each executive
officer agree to not sell any shares issuable under his or her stock
options until the options would otherwise have vested.
16
o Changed the offerings being implemented under the Stock Purchase Plan
by providing that participants could purchase shares of Company Common
Stock at a 15% discount from fair market value measured as of the end
of each six month offering period, and thus eliminating the "look back"
feature of prior offerings under which employees could purchase shares
at a 15% discount from the lowest value measured at the end of each
month during the six month period (the Stock Purchase Plan itself was
not amended).
Chief Executive Officer Compensation
Consistent with the overall executive officer compensation policy, the
Company's approach to the Chief Executive Officer's compensation package in
fiscal 2005 was to be competitive with other successful companies in the
software industry and to tie a substantial portion of the Chief Executive's
total compensation to Company performance. The Compensation Committee believes
that this approach provides meaningful and effective incentives to the Chief
Executive Officer to achieve the Company's performance goals and enhance
shareholder value. The Chief Executive Officer's salary was designed to give him
assurance of a base level of compensation commensurate with his position and
duration of employment with the Company, and to be competitive with salaries for
officers holding comparable positions in the software industry. The Chief
Executive Officer participated in the 2005 Executive Bonus Plan, and his bonus
for fiscal 2005 was based on the factors and criteria discussed above. The Chief
Executive Officer also received equity-based incentives during fiscal 2005 in
the same manner as provided to other executive officers as described above,
consisting of a grant of such number of shares of restricted stock as equaled
one-third the number of shares of stock covered by stock options issued to him
in fiscal 2004.
Compliance with Internal Revenue Code Section 162(m)
The SEC requires that this Report comment upon the Compensation
Committee's policy with respect to Section 162(m) of the Internal Revenue Code
of 1986, as amended, which limits the Company's tax deduction with regard to
compensation in excess of $1 million paid to the chief executive officer and the
four most highly compensated officers (other than the chief executive officer)
at the end of any fiscal year unless the compensation qualifies as
"performance-based compensation." The Compensation Committee's policy with
respect to Section 162(m) is to make every reasonable effort to cause
compensation to be deductible by the Company while simultaneously providing
executive officers of the Company with appropriate rewards for their
performance.
The Compensation Committee is governed by a written charter, adopted by
the Board of Directors, a copy of which was attached to the Proxy Statement
distributed in connection with the Company's 2004 annual meeting of
shareholders, and is available on the Company's website at http://www.mro.com
(currently accessible by selecting "Company", "Investor Relations" and then
"Corporate Governance").
The Compensation Committee
Richard P. Fishman, Chairman
David N. Campbell
John A. McMullen
17
Performance Graph
The following Performance Graph compares the performance of the
Company's cumulative shareholder return with that of a broad market index, the
Nasdaq Stock Market Composite Index for U.S. Companies, and a published industry
index, the Nasdaq Computer & Data Processing Index. The cumulative shareholder
returns for shares of the Company's Common Stock and for the market and industry
indices are calculated through September 30, 2005 (the last trading day of
fiscal 2005), assuming $100 was invested on September 30, 2000 (the last trading
day preceding the Company's 2000 fiscal year). The Company paid no cash
dividends during the periods shown. The performance of the market and industry
indices is shown on a total return (dividends reinvested) basis.
Comparison of Five-Year Cumulative Return (1)
Among MRO Software, Inc., The Nasdaq Stock Market (U.S.) Composite Index
And the Nasdaq Computer & Data Processing Index
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
9/29/200 9/28/001 9/30/2002 9/30/2003 9/30/2004 9/30/2005
- -------------------------------------------------------------------------------------------------------------
MRO Software, Inc. 100 66 56 88 64 108
- -------------------------------------------------------------------------------------------------------------
Nasdaq Computer and
Data Processing 100 36 28 42 43 49
- -------------------------------------------------------------------------------------------------------------
Nasdaq Composite 100 41 32 49 52 59
(1) $100 invested on 9/30/2000 in index - including reinvestment of
dividends.
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 24, 2006 by (i)
each person known by the Company to own beneficially more than five percent of
the Common Stock as of such date, (ii) each director of the Company, (iii) each
named executive officer, (iv) each nominee as a director of the Company, and (v)
all executive officers and directors of the Company as a group. The address of
each officer and director is c/o MRO Software, Inc., 100 Crosby Drive, Bedford,
Massachusetts 01730.
Shares Beneficially
Owned (1)
---------
Name Number Percent
- ---- ------ -------
Robert L. Daniels (2)(5) 3,628,784 14.4%
100 Crosby Drive
Bedford, MA 01730
Columbia Wanger Asset Management, L.P. (3) 3,435,399 13.6%
227 West Monroe Street, Suite 3000
Chicago, IL 60606-5016
Kopp Investment Advisors, Inc. (4) 1,903,375 7.5%
7701 France Avenue South, Suite 500
Edina, MN 55435
Norman E. Drapeau, Jr. (5) 1,005,072 3.8%
Peter J. Rice (5) 266,775 1.0%
William J. Sawyer (5) 236,779 *
John W. Young (5) 208,188 *
Patricia C. Foye (5) 159,526 *
Alan L. Stanzler (5) 113.050 *
Richard P. Fishman (5) 82,100 *
Stephen B. Sayre (5) 80,350 *
John A. McMullen (5) 63,850 *
David N. Campbell 6,250 *
All directors and executive officers as a group 6,108,226 22.3%
(13 persons) (2)(5)(6)
- -------------------------
* Less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to the shares listed, except as otherwise indicated. The inclusion
herein of shares listed as beneficially owned does not constitute an
admission of beneficial ownership.
(2) Includes 798,777 shares owned by Susan H. Daniels, over which Robert L.
Daniels has voting control pursuant to a Shareholders' Agreement dated as
of August 1, 2001 (the "Voting Agreement"). Robert and Susan Daniels are
divorced. Mr. Daniels also directly owns 2,750,605 shares apart from the
Voting Agreement. Excludes shares owned by Mr. Daniels' three adult
children; each of Robert L. Daniels and Susan H. Daniels disclaims
beneficial ownership of these shares. Includes 28,800 shares held by Mr.
Daniels as custodian for the benefit of three minor children, and includes
41,700 shares held by Anja Eckbo, Robert L. Daniels' spouse; Mr. Daniels
disclaims beneficial ownership of these shares.
19
(3) Information is based on a Schedule 13G/A filed by Columbia Wanger Asset
Management, L.P. ("Columbia Wanger"), WAM Acquisition GP, Inc., the
general partner of Columbia Wanger ("WAM"), and Columbia Acorn Trust.
("Columbia Acorn") with the Securities and Exchange Commission on February
7, 2005. The Schedule 13G/A states that Columbia Wanger and WAM have
shared voting and dispositive power with respect to 3,435,399 shares and
that Acorn has shared voting and dispositive power with respect to
2,473,500 shares. The Schedule 13G/A also states that the shares have been
acquired on behalf of discretionary clients of WAM, including Acorn.
(4) Information is based on a Schedule 13G/A filed by Kopp Investment
Advisors, LLC ("KIA"), Kopp Holding Company, LLC, Kopp Holding Company and
LeRoy C. Kopp with the Securities Exchange Commission on January 24, 2005.
The Schedule 13G/A states that each of the filers beneficially owns
1,903,375 shares.
(5) Includes shares issuable pursuant to outstanding stock options exercisable
within 60 days of the date of this table as follows:
Name Option Shares
---- -------------
Robert L. Daniels 8,902
Norman E. Drapeau, Jr. 940,998
Peter J. Rice 237,498
William J. Sawyer 219,300
John W. Young 194,298
Patricia C. Foye 144,300
Alan L. Stanzler 76,000
Richard P. Fishman 51,000
Stephen B. Sayre 63,000
John A. McMullen 51,000
(6) Includes 258,138 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table held by two executive
officers who are not named executive officers.
Employment Arrangements with Executive Officers
Each of the Company's executive officers was hired under terms
contained in a letter from the Company setting forth his or her position and
compensation. Under a plan adopted by the Company's Board of Directors, each of
the Company's executive officers who is involuntarily terminated except for
"cause" will receive a payment equal to (i) such officer's base salary for the
current year plus (ii) one times the average of the officer's bonuses for the
three most recent years in the event that such officer is terminated (or such
shorter number of full years as he or she may have worked for the Company). For
the purpose of this plan, "cause" is defined as (a) any act or omission by
executive which has an adverse effect on the Company's business or on the
executive's ability to perform services for the Company, including, without
limitation, the commission of any crime (other than ordinary traffic
violations), or (b) serious misconduct, refusal or failure to perform assigned
duties, or excessive absenteeism, all of which is determined in the sole
discretion of management.
Change-in-Control Arrangements
Under a plan adopted by the Company's Board of Directors, each of the
Company's executive officers will receive a payment equal to (i) such officer's
base salary for the current year plus (ii) one times the average of the
officer's bonuses for the three most recent years (or such shorter number of
full years as he or she may have worked for the Company) in the event that such
officer is involuntarily terminated or terminates his or her employment for Good
Reason in connection with a change-in-control. Good Reason for termination by an
executive of his or her employment will exist if (i) within two years after the
change-in-control the Company, or any
20
successor entity then employing the executive, materially diminishes the
responsibilities and authority of the executive or materially reduces the rate
of compensation of the executive (including by way of determining the
eligibility of such executive to earn bonus or incentive compensation), in
either case compared with his or her responsibilities and authority or rate of
compensation, as the case may be, in effect immediately prior to such
change-in-control and (ii) within 30 days following such diminution or reduction
the executive resigns from his employment. The 1999 Equity Plan provides for the
acceleration of equity-based incentives to the extent of 50% of the shares
unvested at the time of a change-in-control of the Company, and for acceleration
of the remainder of the unvested shares within two years thereafter and, in the
case of executive officers, for acceleration in full in the event that such
officer is involuntarily terminated or terminates his or her employment for Good
Reason in connection with a change-in-control.
Certain Relationships and Related Transactions
Marc Daniels, 31, was employed by the Company from 1999 through fiscal
2005 in various capacities until he resigned at the end of December 2005 from
his position as Senior Product Manager with compensation (at market rates) in
the amount of $87,917 during fiscal 2005. Marc Daniels is Robert L. Daniels'
son.
PROPOSAL TWO
INCREASE IN THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER THE STOCK PURCHASE PLAN
Summary of the Stock Purchase Plan
On January 16, 2002, the Board of Directors adopted the 2002 Employee
Stock Purchase Plan authorizing the issuance of up to 750,000 shares of the
Company's Common Stock. The full text of the 2002 Employee Stock Purchase Plan
as proposed is attached as Appendix A to this Proxy Statement. The affirmative
vote of a majority of the shares of Common Stock properly cast at the Annual
Meeting will be necessary to approve the proposed amendment to the Plan. Set
forth below is a summary description of the Plan.
Amendment to be Approved
The Board of Directors voted on January 9, 2006 to increase the number of shares
of Common Stock that may be issued under the Plan by an additional 500,000
shares, subject to approval of the Company's shareholders. If this amendment is
approved by shareholders, the total number of shares authorized for issuance
would be increased to 1,250,000 shares. A total of 660,535 shares have been
purchased by participants, leaving 89,465 shares currently available for
issuance, and as a result if Proposal Two is approved by shareholders there will
be 589,465 shares authorized and available for issuance.
The last sale price of the Common Stock on January 20, 2005, as reported by the
Nasdaq national Market, was $15.00. Accordingly, the market value of the 750,000
shares originally authorized for issuance as of January 24, 2005 was
$11,250,000, the market value of the 89,465 shares remaining available for
issuance was $1,341,975, and the market value of the 500,000 additional shares
that will be authorized for issuance if Proposal Two is approved by shareholders
was $8,841,975.
21
New Plan Benefits
Since participation in the Plan and the rate of withholding is voluntary and
determined by each eligible person in his or her sole discretion, the Company is
unable to determine the dollar value and number of any additional plan benefits
which will be received by or allocated to (i) the named executive officers
(Messrs. Drapeau, Rice, Foye, Sawyer and Young), (ii) the current executive
officers as a group, or (iii) all current directors who are not executive
officers as a group, or (iii) all employees, including all current officers who
are not executive officers, as a group. The adoption of the proposed amendment
to the Plan will not result in any new benefits to the current directors who are
not executive officers, as a group, including nominees for election as a
director, because such persons are not eligible to participate.
Purpose
The purpose of the Plan is to provide a means by which all full-time employees
of the Company (and any parent or subsidiary of the Company designated by the
Board of Directors to participate) may be given an opportunity to purchase
Common Stock of the Company through payroll deductions, to assist the Company in
retaining the services of its employees, to secure and retain the services of
new employees, and to provide incentives for such persons to exert maximum
efforts for the success of the Company. The rights to purchase Common Stock are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
Administration
The Plan is administered by the Board of Directors, which has the power to
delegate administration to a committee of not less than two (2) members who
qualify as "Non-Employee Directors" under Section 16b-3 of the Exchange Act and
as "outside directors" under Section 162(m) of the Tax Code. The Board may
terminate any such delegation at any time and revest in itself the such
administrative power. The Board has delegated responsibility for administration
to the Compensation Committee. The Board has the power, subject to the
provisions of the Plan, to determine when and how rights to purchase Common
Stock of the Company will be granted, the provisions of each offering of such
rights (which need not be identical), and whether any parent or subsidiary of
the Company shall be eligible to participate in such plan.
Offerings
The Compensation Committee has broad discretion to structure offerings under the
Plan, including the determination of the period and the purchase date(s) under
each Offering and the maximum percentage that participants may withhold from
their compensation. As currently implemented, the offerings are six months in
duration with purchase dates occurring on a monthly basis, and a contribution
limit of ten (10%) of participants' eligible compensation.
Purchase Price
The purchase price per share at which shares are sold under the offerings as
currently administered is 85% of the closing price of Common Stock on the last
day of the Offering.
Eligibility
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the
22
Plan. All of the Company's approximately 923 employees (as of December 31, 1005)
are eligible to participate in the Plan. As implemented by the Compensation
Committee, any eligible employee, including an employee who is first hired
during an offering period, is eligible to participate in the Plan as of the
first business day of the month following the date of hire.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Stock Purchase Plan if, immediately after such grant, the
employee would own, directly or indirectly, stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
of any parent or subsidiary of the Company (including any stock which such
employee may purchase under all outstanding rights and options), nor will any
employee be granted rights that would permit him to buy more than $25,000 worth
of stock (determined at the fair market value of the shares at the time such
rights are granted) under all employee stock purchase plans of the Company in
any calendar year.
Participation in the Plan
Eligible employees become participants in the Plan by delivering to the Company,
prior to the date selected by the Board as the offering date for the offering,
or as determined by the Board for new employees, an agreement authorizing
payroll deductions of up to a percentage determined by the Board of such
employees' total compensation during the purchase period.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions over the
offering period. At any time during the purchase period, a participant may
reduce or terminate his or her payroll deductions. A participant may increase or
begin such payroll deductions after the beginning of any purchase period, but
only on specified dates. All payroll deductions made for a participant are
credited to his or her account under the Plan and deposited with the general
funds of the Company. A participant may not make any additional payments into
such account.
Purchase of Stock
By executing an agreement to participate in the Plan, the employee is entitled
to purchase shares under such plan. In connection with offerings, the Plan
specifies a maximum number of shares any employee may be granted the right to
purchase and the maximum aggregate number of shares which may be purchased
pursuant to such offering by all participants. If the aggregate number of shares
to be purchased upon exercise of rights granted in the offering would exceed the
maximum aggregate number, the Board would make a pro rata allocation of shares
available in a uniform and equitable manner. Unless the employee's participation
is discontinued, his right to purchase shares is exercised automatically at the
end of the purchase period at the applicable price.
23
Withdrawal
While each participant in the Plan is required to sign an agreement authorizing
payroll deductions, the participant may withdraw from a given offering by
terminating his or her payroll deductions and by delivering to the Company a
notice of withdrawal from the Plan. A participant may withdraw at any time prior
to the end of the applicable offering period.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Plan.
Termination of Employment
Rights granted pursuant to any offering under the Plan terminate immediately
upon cessation of an employee's employment for any reason, and the Company will
distribute to such employee all of his or her accumulated payroll deductions,
without interest.
Restrictions on Transfer
Rights granted under the Plan are not transferable and may be exercised only by
the person to whom such rights are granted.
Duration, Amendment and Termination
The Board may suspend, terminate or amend the Plan at any time. Any amendment of
the Plan must be approved by the stockholders within 12 months of its adoption
by the Board if the amendment would (a) increase the number of shares of Common
Stock reserved for issuance under the Plan, or (b) modify the provisions as to
eligibility for participation or any other provision of the Plan in a manner
that would require shareholder approval in order to comply with the requirements
of Rule 16b-3 under the Exchange Act, and Section 423 of the Tax Code.
Rights granted before amendment or termination of the Plan will not be altered
or impaired by any amendment or termination made without consent of the person
to whom such rights were granted.
Effect of Certain Corporate Events
In the event of a dissolution, liquidation or specified type of merger of the
Company, the surviving corporation either will assume the rights under the Plan
or substitute similar rights, or the exercise date of any ongoing offering will
be accelerated such that the outstanding rights may be exercised immediately
prior to any such event.
Stock Subject to the Plan
If rights granted under the Plan expire, lapse or otherwise terminate without
being exercised, the Common Stock not purchased under such rights again becomes
available for issuance under such plan.
24
Federal Income Tax Information
The following discussion is intended only as a brief overview of certain of the
current federal income tax laws applicable to employee stock purchase plans.
Employees should consult their tax advisers concerning their own income tax
situations, as well as concerning state tax aspects of the acquisition of shares
of common stock pursuant to the Plan. No state tax matters are addressed in the
following discussion.
Rights granted under the Plan are intended to qualify for favorable federal
income tax treatment associated with rights granted under an employee stock
purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares as if
such amounts withheld were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. There is no corresponding deduction to the
Company. Any further gain or any loss will be taxed as a capital gain or loss.
Capital gains currently are generally subject to lower tax rates than ordinary
income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition. In this event, the Company may deduct
from its gross income an amount treated as ordinary income to each employee. The
balance of any gain will be treated as capital gain. Even if the stock is later
disposed of for less than its fair market value on the exercise date, the same
amount of ordinary income is attributed to the participant, and a capital loss
is recognized equal to the difference between the sales price and the fair
market value of the stock on such exercise date.
There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Plan.
Full Text of the Plan. The full text of the Plan, as amended, is
attached as Appendix A.
Unless authority to do so has been limited in a proxy, it is the
intention of the persons named as proxies to vote the shares represented by the
proxy FOR the approval of the amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR
ISSUANCE THEREUNDER BY AN ADDITIONAL 500,000 SHARES.
25
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers LLP currently serves as the Company's
independent registered public accounting firm, and that firm conducted audits of
the Company's consolidated financial statements, of management's assessment of
internal control over financial reporting, and of the Company's internal control
over financial reporting, for the fiscal year ended September 30, 2005. The
Audit Committee has appointed PricewaterhouseCoopers LLP to serve as the
Company's independent registered public accounting firm for the fiscal year
ending September 30, 2006, and to conduct audits of the Company's consolidated
financial statements, of management's assessment of internal control over
financial reporting, and of the Company's internal control over financial
reporting, for the fiscal year ending September 30, 2006.
Appointment of the Company's independent registered public accounting
firm is not required to be submitted to a vote of the shareholders of the
Company for ratification. However, the Audit Committee has recommended that the
Board of Directors submit this matter to the shareholders as a matter of good
corporate practice, which the Board of Directors is doing.
If the shareholders fail to ratify the appointment, the Audit Committee
will reconsider whether to retain PricewaterhouseCoopers LLP, and may retain
that firm or another without re-submitting the matter to the Company's
shareholders. Even if the appointment is ratified, the Audit Committee may, in
its discretion, direct the appointment of a different independent registered
public accounting firm at any time during the year if it determines that such a
change would be in the best interests of the Company and the shareholders.
Audit Fees. The following table presents fees for professional audit
services rendered by PricewaterhouseCoopers LLP for the audit of the Company's
annual financial statements for the fiscal years ended September 30, 2004 and
2005, respectively and fees billed for other services rendered by
PricewaterhouseCoopers LLP during those periods:
Fiscal 2004 Fiscal 2005
----------- -----------
Audit Fees: (1) $ 323,913 $1,014,923
Audit related fees: (2) $ 31,600 $ 18,250
Tax fees: (3) $ 19,355 $ 12,177
All other fees: (4) $ 3,186 $ 4,500
--------- ----------
Totals: $ 378,054 $1,049,850
----------------------
(1) The audit fees listed for the years ended September 30, 2005 and 2004 were
for professional services rendered in connection with the audits of the
consolidated financial statements (including the effects of acquisitions)
included in the Company's Annual Report on Form 10-K, reviews of the
consolidated financial statements included in the Company's Quarterly
Reports on Form 10-Q, and statutory and subsidiary audits, consents, and
assistance with the review of documents filed with the Securities and
Exchange Commission. In addition, audit fees for the year ended September
30, 2005 include the initial audits of Company management's assessment of
internal control over financial reporting and of the Company's internal
control over financial reporting.
(2) Audit related fees consisted principally of assurance related services such
as employee benefit plan audits, due diligence related to mergers and
acquisitions and financial accounting consultations.
(3) Tax fees consisted principally of assistance with matters related to tax
compliance and reporting, including tax return preparation, refund claims
and tax planning.
(4) All other fees include assistance with miscellaneous reporting requirements
and interpretation of technical issues.
26
Representatives of PricewaterhouseCoopers LLP will be present at the
Annual Meeting, will have an opportunity to make a statement if they wish, and
will be available to respond to appropriate questions from shareholders.
Pre-approval policies and procedures. The Audit Committee reviews each
engagement for audit or non-audit services before it engages
PricewaterhouseCoopers LLP to provide those services. It is the practice of the
Audit Committee to pre-approve each category of services to be procured from
PricewaterhouseCoopers LLP up to a certain dollar amount, and to require that
management obtain prior approval from the Audit Committee of any additional
services that may be required. The Audit Committee has not established any
pre-approval policies or procedures that would allow management to engage
PricewaterhouseCoopers LLP to provide any specified services with only an
obligation to notify the Audit Committee of the engagement for those services.
None of the services provided by PricewaterhouseCoopers LLP for fiscal 2005 was
obtained in reliance on the waiver of the pre-approval requirement afforded in
SEC regulations.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2006.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater-than-ten-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely upon review of Forms 3 and 4 and amendments thereto
furnished to the Company during fiscal 2005, and Forms 5 and amendments thereto
furnished to the Company with respect to fiscal 2005, or representations that
Form 5 was not required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater-than-ten percent
shareholders were fulfilled in a timely manner, except that Mr. Newfield
inadvertently reported one purchase of shares two days after the deadline for
filing the appropriate Form 4.
SOLICITATION
Brokers, banks and other nominees will be reimbursed for their
out-of-pocket expenses and other reasonable clerical expenses incurred in
obtaining instructions from beneficial owners of the Common Stock. In addition
to the solicitation by mail, directors, officers and certain employees of the
Company may in certain instances, make special solicitation of proxies
personally or by telephone, without extra compensation; it is expected that the
expense of such special solicitation will be nominal. In addition, the Company
may engage an independent solicitor to make solicitation in person or by
telephone. All expenses incurred in connection with any such solicitation will
be borne by the Company.
27
STOCKHOLDER PROPOSALS
Shareholder proposals for inclusion in the proxy materials related to
the 2007 Annual Meeting of Shareholders or Special Meeting in lieu thereof must
be received by the Company at its Executive Offices no later than September 28,
2006 or, if the date of such meeting is more than 30 calendar days before or
after March 14, 2007, a reasonable time before the solicitation of proxies by
the Company with respect to such meeting is made.
In addition, the Company's By-Laws provide that a shareholder must give
written notice to the Company of any business to be conducted at any meeting of
shareholders in accordance with the procedural requirements fully set forth in
Article III of the Company's By-Laws. In the case of a regularly scheduled
annual meeting, such notice must be given not less than sixty days prior to the
scheduled annual meeting describing any proposal to be brought before such
meeting, even if such item is not to be included in the Company's proxy
statement relating to such meeting. To bring an item of business before the next
regularly scheduled annual meeting of shareholders, a shareholder must deliver
the requisite notice of such item to the Company no later than January 5, 2007.
The Nominating and Corporate Governance Committee will consider any
proposal properly presented by a shareholder for inclusion in the Company's
annual proxy statement. In considering the proposal, the Committee may seek
input from an independent advisor and/or legal counsel, as appropriate, and will
reach a conclusion and report to the full Board for its consideration. After
full consideration by the Board of Directors, the shareholder proponent will be
notified of the conclusion of the Board.
MISCELLANEOUS
The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this Proxy Statement to shareholders, of any
other business, which properly may be presented for action at the Annual
Meeting.
AVAILABLE INFORMATION
Shareholders of record on January 24, 2006 will receive a Proxy
Statement and the Company's Annual Report to Shareholders, which contains
detailed financial information concerning the Company. The Annual Report is not
incorporated herein and is not deemed a part hereof.
28
Appendix A
- ----------
MRO SOFTWARE, INC.
2002 EMPLOYEE STOCK PURCHASE PLAN
(As amended January 9, 2006)
1. PURPOSE.
(a) The purpose of the 2002 Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of MRO Software, Inc., a
Massachusetts corporation (the "Company"), and its Affiliates, as
defined in subparagraph 1(b), which are designated as provided in
subparagraph 2(b), may be given an opportunity to purchase stock of the
Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in
Sections 424(e) and (f), respectively, of the Internal Revenue Code of
1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the
success of the Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the
Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board
has delegated administration, the Board shall have the final power to
determine all questions of policy and expediency that may arise in the
administration of the Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering
of such rights (which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations
for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in
the Plan, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
Page A-1
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out
the intent that the Plan be treated as an "employee stock
purchase plan" within the meaning of Section 423 of the Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the
"Committee") constituted in accordance with the requirements of Rule
16b-3 under the Securities Exchange Act of 1934. If administration is
delegated to a Committee, the Committee shall have, in connection with
the administration of the Plan, the powers theretofore possessed by the
Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate one million two
hundred and fifty (1,250,000) thousand shares of the Company's common
stock (the "Common Stock"). If any right granted under the Plan shall
for any reason terminate without having been exercised, the Common
Stock not purchased under such right shall again become available for
the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for the grant
of rights to purchase Common Stock of the Company under the Plan to eligible
employees (an "Offering") on a date or dates (the "Offering Date(s)") selected
by the Board or the Committee. Each Offering shall be in such form and shall
contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in
subparagraph 5(b), an employee of the Company or any Affiliate shall
not be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee has been in the employ of the Company or
any Affiliate for such continuous period preceding such grant as the
Board or the Committee may require, but in no
MRO Software, Inc. Appendix A - 2002 Employee Stock Purchase Plan Page A-2
event shall the required period of continuous employment equal or
exceed two (2) years. In addition, unless otherwise determined by the
Board or the Committee and set forth in the terms of the applicable
Offering, no employee of the Company or any Affiliate shall be eligible
to be granted rights under the Plan, unless, on the Offering Date, such
employee's customary employment with the Company or such Affiliate is
for at least twenty (20) hours per week and at least five (5) months
per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in
the Offering which coincides with the day on which such person becomes
an eligible employee or occurs thereafter, receive a right under that
Offering, which right shall thereafter be deemed to be a part of that
Offering. Such right shall have the same characteristics as any rights
originally granted under that Offering, as described herein, except
that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination
of the exercise price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of
such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period
of time before the end of the Offering, he or she will not
receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee
owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any
Affiliate. For purposes of this subparagraph 5(c), the rules of Section
424(d) of the Code shall apply in determining the stock ownership of
any employee, and stock which such employee may purchase under all
outstanding rights and options shall be treated as stock owned by such
employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by
Section 423(b)(8) of the Code, do not permit such employee's rights to
purchase stock of the Company or any Affiliate to accrue at a rate
which exceeds twenty five thousand dollars ($25,000) of fair market
value of such stock (determined at the time such rights are granted)
for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the
Code shall not be eligible to participate.
MRO Software, Inc. Appendix A - 2002 Employee Stock Purchase Plan Page A-3
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company: (i) purchasable with a
percentage designated by the Board or the Committee not exceeding ten
(10%) percent of such employee's Earnings (as defined by the Board or
the Committee in each Offering) during the period which begins on the
Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the
Offering, or (ii) designated by the Board or the Committee. The Board
or the Committee shall establish one or more dates during an Offering
(the "Purchase Date(s)") on which rights granted under the Plan shall
be exercised and purchases of Common Stock carried out in accordance
with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased
by any employee as well as a maximum aggregate number of shares that
may be purchased by all eligible employees pursuant to such Offering.
In addition, in connection with each Offering that contains more than
one Purchase Date, the Board or the Committee may specify a maximum
aggregate number of shares which may be purchased by all eligible
employees on any given Purchase Date under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the
Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available
in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company
within the time specified in the Offering, in such form as the Company
provides. Each such agreement shall authorize payroll deductions of up
to the maximum percentage specified by the Board or the Committee of
such employee's Earnings during the Offering (as defined by the Board
or Committee in each Offering). The payroll deductions made for each
participant shall be credited to an account for such participant under
the Plan and shall be deposited with the general funds of the Company.
A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions,
after the beginning of any Offering only as provided for in the
Offering. A participant may make additional payments into his or her
account only if specifically provided for in the Offering and only if
the participant has not had the maximum amount withheld during the
Offering.
MRO Software, Inc. Appendix A - 2002 Employee Stock Purchase Plan Page A-4
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the
Company provides. Such withdrawal may be elected at any time prior to
the end of the Offering except as provided by the Board or the
Committee in the Offering. Upon such withdrawal from the Offering by a
participant, the Company shall distribute to such participant all of
his or her accumulated payroll deductions (reduced to the extent, if
any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such
participant's interest in that Offering shall be automatically
terminated. A participant's withdrawal from an Offering will have no
effect upon such participant's eligibility to participate in any other
Offerings under the Plan but such participant will be required to
deliver a new participation agreement in order to participate in
subsequent Offerings under the Plan.
(c) Notwithstanding (a) and (b) above, an eligible employee may also become
a participant pursuant to an Offering without delivering a
participation agreement if the terms of the Offering so provide.
(d) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the
Company shall distribute to such terminated employee all of his or her
accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire stock for the terminated employee)
under the Offering, without interest.
(e) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and
distribution, or by a beneficiary designation as provided in paragraph
14 and, otherwise during his or her lifetime, shall be exercisable only
by the person to whom such rights are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares
of stock of the Company, up to the maximum number of shares permitted
pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional shares shall be
issued upon the exercise of rights granted under the Plan. The amount,
if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than
the amount required to purchase one share of stock on the final
Purchase Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the
Plan, unless such participant withdraws from such next Offering, as
provided in subparagraph 7(b), or is no longer eligible to be granted
rights under the Plan, as provided in paragraph 5, in which case such
amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated
payroll deductions remaining in any participant's account after the
purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Purchase Date of an Offering shall
be distributed in full to the participant after such Purchase Date,
without interest. For an Offering in which
MRO Software, Inc. Appendix A - 2002 Employee Stock Purchase Plan Page A-5
no payroll deductions are required, a participant's rights shall be
exercised as provided in the Offering.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration
statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act") and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws
applicable to the Plan. If on a Purchase Date in any Offering hereunder
the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase
Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except
that the Purchase Date shall not be delayed more than twelve (12)
months and the Purchase Date shall in no event be more than
twenty-seven (27) months from the Offering Date. If on the Purchase
Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no
rights granted under the Plan or any Offering shall be exercised and
all payroll deductions accumulated during the Offering (reduced to the
extent, if any, such deductions have been used to acquire stock) shall
be distributed to the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock
required to satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to issue and sell shares of stock
upon exercise of the rights granted under the Plan. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure
to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan shall
constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to rights granted under
the Plan unless and until the participant's shareholdings acquired upon exercise
of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend,
dividend in property other than cash, stock split, liquidating
dividend,
MRO Software, Inc. Appendix A - 2002 Employee Stock Purchase Plan Page A-6
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), the Plan and outstanding rights will be
appropriately adjusted in the class(es) and maximum number of shares
subject to the Plan and the class(es) and number of shares and price
per share of stock subject to outstanding rights. Such adjustments
shall be made by the Board or the Committee, the determination of which
shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the
Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger
into other property, whether in the form of securities, cash or
otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act or any
comparable successor provisions (excluding any employee benefit plan,
or related trust, sponsored or maintained by the Company or any
Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in
the election of directors, then, as determined by the Board in its sole
discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the
Plan, (ii) such rights may continue in full force and effect, or (iii)
participants' accumulated payroll deductions may be used to purchase
Common Stock immediately prior to the transaction described above and
the participants' rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved
by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3 promulgated under
the Exchange Act as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or
to comply with the requirements of rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible
employees with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated
MRO Software, Inc. Appendix A - 2002 Employee Stock Purchase Plan Page A-7
thereunder relating to employee stock purchase plans and/or to bring
the Plan and/or rights granted under it into compliance therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except
as necessary to comply with any laws or governmental regulations, or
except as necessary to ensure that the Plan and/or rights granted under
the Plan comply with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to
the end of an Offering but prior to delivery to the participant of such
shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's
death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan
who is living at the time of such participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the
Company, in its sole discretion, may deliver such shares and/or cash to
the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan,
except as expressly provided in the Plan or with the consent of the
person to whom such rights were granted, or except as necessary to
comply with any laws or governmental regulation, or except as necessary
to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on June 1, 2002 (the "Effective Date"), but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board or the Committee,
which date may be prior to the Effective Date.
MRO Software, Inc. Appendix A - 2002 Employee Stock Purchase Plan Page A-8
MRO SOFTWARE, INC.
PROXY FOR SPECIAL MEETING IN LIEU OF ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of MRO Software, Inc. (the "Company"),
revoking all prior proxies, hereby appoints Norman E. Drapeau, Jr., Peter J.
Rice and Craig Newfield, and each of them acting singly, as proxies, with full
power of substitution, to vote all shares of capital stock of the Company which
the undersigned is entitled to vote at the Special Meeting of Shareholders to be
held at the offices of the Company, 100 Crosby Drive, Bedford, Massachusetts,
01730 beginning at 10:00 a.m., local time, and any adjouornment thereof, on the
matters set forth in the Notice of Special Meeting dated Tuesday, March 14,
2006, and the related Proxy Statement, copies of which have been received by the
undersigned. Attendance of the undersigned at the meeting or any adjourned
session thereof will not be deemed to revoke this proxy unless the undersigned
shall affirmatively indicate the intention of the undersigned to vote the shares
represented hereby in person prior to the exercise of this proxy.
(Continued and to be signed on the reverse side)
14475
SPECIAL MEETING IN LIEU OF THE ANNUAL MEETING OF SHAREHOLDERS OF
MRO SOFTWARE, INC
March 14, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
- --------------------------------------------------------------------------------
1. Election of Class I Directors of the Company for a term of three years:
NOMINEES:
[ ] FOR ALL NOMINEES ( ) Robert L. Daniels
( ) John A. McMullen
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: (*)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To change the address on your account, please check the box at right [ ]
and indicate your new address in the address space above. Please note
that changes to the registered name(s) on the account may not be
submitted via this method.
- --------------------------------------------------------------------------------
2. To approve an amendment to the Company's 2002 FOR AGAINST ABSTAIN
Employee Stock Purchase Plan to increase the [ ] [ ] [ ]
number of shares issuable thereunder by an
additional 500,000 shares; and
3. To ratify the appointment to
PricewaterhouseCoopers LLP as the Company's
independent registered public accounting firm [ ] [ ] [ ]
for the current fiscal year ending September
30, 2006.
The shares represented by this proxy will be voted as directed. If no direction
is given with respect to the Proposals above, the shares represented by
this proxy will be voted FOR all Proposals.
Mark here if you plan to attend the Meeting. [ ]
------------------------------------- ----------
Signature of Stockholder Date:
------------------------------------- ----------
------------------------------------- ----------
Signature of Stockholder Date:
------------------------------------- ----------
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.