The Board of Directors is divided into three classes, one of which is
elected each year at the annual meeting of stockholders for a three-year term of
office. All Directors hold office until the date of the third annual meeting
following their election and thereafter until their successor is elected and
qualified or until such director sooner dies, resigns, is removed, or becomes
disqualified. The terms of the Company's Class III Directors (currently Robert
N. Goldman and Kevin J. Burns) will expire immediately following the Annual
Meeting. Class II Directors (currently Arthur J. Marks and Justin J. Perreault)
will serve until 2001, and Class I Directors (currently Gerald B. Bay and David
A. Litwack) will serve until 2000.
The Board of Directors has nominated Robert N. Goldman and Kevin J. Burns
for re-election as Class III Directors of the Company. If re-elected, Messrs.
Goldman and Burns will serve until the annual meeting of stockholders to be held
in 2002, and until their successors have been duly elected and qualified.
Messrs. Goldman and Burns have agreed to serve if elected, and the Company has
no reason to believe that either will be unable to serve. In the event that
either Mr. Goldman or Mr. Burns 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 of Directors.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the executive
officers and Directors of the Company:
Director Term
Name Age Position Since Expires Class
---- --- -------- -------- ------- -----
Robert N. Goldman ............. 49 Chairman of the Board of Directors 1995 1999 III
Justin J. Perreault ........... 36 President and Chief Executive Officer, Director 1999 2001 II
Lacey P. Brandt ............... 41 Chief Financial Officer and Treasurer -------- -------- -----
Lawrence E. Alston, Jr ........ 37 Vice President, Marketing -------- -------- -----
Kirk D. Bowman ................ 33 Senior Vice President, Worldwide Sales and Services -------- -------- -----
Brian W. Otis ................. 40 Senior Vice President, Product Development -------- -------- -----
Gerald B. Bay (1), (2) ........ 59 Director 1988 2000 I
Kevin J. Burns (1)............. 49 Director 1997 1999 III
David A. Litwack (2)........... 52 Director 1997 2000 I
Arthur J. Marks (1), (2)....... 54 Director 1990 2001 II
- ----------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
2
Mr. Goldman was elected Chairman of the Board of the Company and resigned as
President and Chief Executive Officer in January 1999. He was the President and
Chief Executive Officer of the Company since he joined Object Design in November
1995 and a Director of the Company since August 1995. Prior to joining the
Company, Mr. Goldman was Chairman of Trinzic Corporation from 1992 to 1995. Mr.
Goldman is a member of the Board of Directors of Citrix Systems, Inc.,
Net.Genesis Corp., Parametric Technology Corporation and Systemsoft Corporation.
Mr. Perreault was elected President and Chief Executive Officer of the
Company in January 1999. He was elected to the Board of Directors in February
1999. He was the Executive Vice President and Chief Operating Officer of the
Company since November 1995. Prior to joining the Company, Mr. Perreault was a
Vice President with the Harvard Private Capital Group, Inc., from 1992 to 1995.
From May 1995 to December 1995, he served on the Board of Directors of the
Company as the representative of the Harvard Private Capital Group, Inc. Mr.
Perreault is a member of the Board of Directors of Kentek Information Systems,
Inc.
Ms. Brandt has been the Chief Financial Officer of the Company since April
1996. Prior to joining the Company, Ms. Brandt served as Director of Finance,
Controller and Treasurer of International Integration Incorporated from
September 1995 to April 1996. Ms. Brandt was Director of Investor Relations at
Proteon, Inc. from 1993 to September 1995.
Mr. Alston has been the Vice President of Marketing of the Company since May
1998 and was Director of Product Management for the Company from November 1996
to May 1998, and a Product Manager for the Company from November 1993 to
November 1996.
Mr. Bowman has been Senior Vice President of Worldwide Sales and Services
for the Company since July 1998 and Vice President, Worldwide Sales of the
Company since April 1997. Prior to joining the Company, Mr. Bowman was employed
in various management and sales positions at Parametric Technology Corporation
from 1990 to April 1997.
Mr. Otis has been Senior Vice President of Product Development for the
Company since July 1998 and had served as Vice President Professional Services
of the Company from June 1995 to July 1998 and as a Consulting Manager, Eastern
Region for the Company from 1993 to June 1995.
Mr. Bay has been a Director of the Company since 1988. Since 1980, Mr. Bay
has been a Managing Partner of The Vista Group. Mr. Bay served as interim
President of the Company from August to November 1995.
Mr. Burns has been a Director of the Company since October 1997. Mr. Burns
has been Managing Principal of Lazard Technology Partners since July 1998. From
1990 until July 1998, Mr. Burns was Chairman of the Board of INTERSOLV, Inc. Mr.
Burns was the Chief Executive Officer of INTERSOLV, Inc. from 1986 to 1996.
Mr. Litwack has been a Director of the Company since December 1997. Since
May 1997, Mr. Litwack has been President and Chief Executive Officer of
SilverStream Software, Inc. Mr. Litwack was Vice President of Product
Development of Powersoft Corporation from 1988 until 1992, and then served as
President of Powersoft from 1992 until the company's merger with Sybase Inc. in
December, 1994. From the time of the merger until May 1997, Mr. Litwack was
Executive Vice President of Sybase Inc.
Mr. Marks has been a Director of the Company since 1990. Since 1984, Mr.
Marks has been a General Partner of New Enterprise Associates. Mr. Marks is a
Director of AMISYS Managed Care Systems, Inc., Platinum Software, Inc., NETRIX
Corporation, and Progress Software Corporation.
3
Executive officers of the Company are elected annually by the Board of
Directors and serve until the first meeting of the Directors following the next
annual meeting of stockholders and until their respective successors are duly
elected and qualified. There are no family relationships among the Directors and
executive officers of the Company.
COMMITTEES AND MEETINGS OF THE BOARD
During the fiscal year ended December 31, 1998 ("fiscal 1998"), the Board of
Directors met five times and acted by unanimous written consent five times. No
incumbent Director attended fewer than 75% of the total number of meetings held
by the Board of Directors and Committees of the Board of Directors on which he
served.
The Company has a Compensation Committee and an Audit Committee but does not
have a nominating committee or other committee performing similar functions. The
Compensation Committee makes recommendations concerning salaries and incentive
compensation for employees of and consultants to the Company and administers the
Company's stock option plans, its Employee Stock Purchase Plan and the 401(k)
Plan. The members of the Compensation Committee currently are Messrs. Bay,
Litwack and Marks. The Compensation Committee held one meeting during fiscal
1998 and acted fourteen times by unanimous written consent during the year. The
Audit Committee reviews the results and scope of the audit and other services
provided by the Company's independent accountants. The members of the Audit
Committee currently are Messrs. Bay, Burns and Marks. The Audit Committee met
four times during fiscal 1998.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Each non-employee Director of the Company receives $2,500 for each Board of
Directors meeting attended and $500 for each Committee meeting attended and is
reimbursed, upon request, for expenses incurred in attending such meetings.
Directors who are employees of the Company are not paid any separate fees for
serving as Directors.
Prior to February 23, 1999, non-employee Directors ("Outside Directors") of
the Company received automatic formula grants of nonqualified options pursuant
to the 1996 Stock Option Plan. Each new Outside Director elected to the Board
was automatically granted, upon his or her initial election, a nonqualified
option to purchase 25,000 shares of Common Stock of the Company, vesting in
equal installments on the first three anniversaries of the date of grant
(provided that he or she then remained a Director of the Company). No new
Directors were named during 1998, and, therefore, no such grants were given out
under this plan. Immediately following each annual meeting of stockholders of
the Company or special meeting in lieu thereof, there was automatically granted
to each Outside Director re-elected at or remaining in office after such meeting
a fully-vested non-qualified option to purchase 5,000 shares of Common Stock. No
such option to purchase 5,000 shares of Common Stock would be granted to any
Outside Director who at the time of the meeting held any outstanding unvested
option granted pursuant to the provisions of the 1996 Stock Option Plan, unless
at least two annual meetings of stockholders of the Company or special meetings
in lieu thereof had taken place between the closing of the Company's initial
public offering in July 1996 (or, if later, the date of the initial election of
such Outside Director) and the meeting following which such automatic grant
would occur. Each additional nonqualified option granted to an Outside Director
pursuant to this provision of the 1996 Stock Option Plan will expire on the
tenth anniversary of the date of grant. The exercise price of each such
nonqualified option was equal to the fair market value of the Common Stock on
the date the nonqualified option was granted.
4
At a meeting of the Board of Directors held on February 23, 1999, the Board
voted to replace the compensation arrangement for members of the Board of
Directors with regards to option grants. Under the new plan, which will be in
effect after February 23, 1999, each new Outside Director elected to the Board
will be automatically granted, upon his or her initial election, a fully-vested
nonqualified option to purchase 15,000 shares of Common Stock of the Company. In
addition, it was voted that immediately following each annual meeting of
stockholders of the Company or special meeting in lieu thereof, there is
automatically granted to each Outside Director re-elected at or remaining in
office after such meeting a fully-vested non-qualified option to purchase 5,000
shares of Common Stock. Each additional nonqualified option granted to an
Outside Director pursuant to this provision of the 1996 Stock Option Plan will
expire on the tenth anniversary of the date of grant. The exercise of each such
nonqualified option will be equal to the fair market value of the Common Stock
on the date the nonqualified option is granted.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides certain information
for the years ended December 31, 1998, 1997 and 1996 concerning compensation
paid to or accrued for the Company's Chief Executive Officer and the other four
most highly compensated executive officers who were serving as executive
officers of the Company on December 31, 1998 and whose annual compensation for
fiscal year 1998 exceeded $100,000. The table also includes two additional
individuals who would have been included among the Company's four most highly
compensated executive officers, but were not serving as executive officers of
the Company at the end of fiscal 1998.
5
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
Other Annual Securities
Compen- Underlying
Name and Principal Position Year Salary ($) Bonus ($) sation ($)(1) Options (#)
--------------------------- ---- ---------- --------- ------------- --------------
Robert N. Goldman ........... 1998 $210,000 -- -- 300,000
Chairman of the 1997 200,000 -- -- --
Board of Directors (2) 1996 176,700 131,650 -- --
Justin J. Perreault ......... 1998 168,000 -- -- --
President and 1997 160,000 -- -- 50,000
Chief Executive Officer (3) 1996 148,800 30,600 -- 50,000
Lacey P. Brandt 1998 120,750 -- -- 20,000
Chief Financial Officer 1997 115,000 -- -- --
and Treasurer 1996 70,086 15,000 -- 130,000
Lawrence E. Alston, Jr. 1998 108,000 -- -- 130,000
Vice President 1997 95,283 -- -- 10,000
Marketing 1996 76,680 -- -- 22,500
Kirk D. Bowman ................. 1998 223,242 -- -- 100,000
Senior Vice President, Worldwide 1997 177,138 -- -- 250,000
Sales and Services (4), (5)
Brian W. Otis ............... 1998 174,004 -- -- 120,000
Vice President, 1997 140,330 -- -- 25,000
Professional Services (6) 1996 160,984 29,725 -- 100,000
Gregory A. Baryza .......... 1998 129,653 -- -- 20,000
Vice President, Product 1997 114,157 -- -- 20,000
Development (7) 1996 107,470 19,044 -- 65,000
(1) Other annual compensation in the form of perquisites and other personal
benefits has been omitted because in each case the aggregate amount of such
perquisites and other personal benefits was less than $50,000 and constituted
less than 10% of the executive's total annual salary and bonus.
(2) Mr. Goldman was elected Chairman of the Board of Directors and resigned as
President and Chief Executive Officer effective January 8, 1999.
(3) Mr. Perreault was elected President and Chief Executive Officer effective
January 8, 1999.
(4) Mr. Bowman's amount shown as salary for 1998 includes $110,740 of
sales-based commissions.
(5) Reflects compensation from April 21, 1997 to December 31, 1997. Mr. Bowman's
employment commenced on November 21, 1997. Mr. Bowman worked for the Company on
a contract basis from April 21, 1997 to November 21, 1997.
(6) Mr. Otis's amounts shown as salary for 1996, 1997 and 1998 include $35,185,
$5,372 and $36,087 of sales-based commissions, respectively.
(7) Mr. Baryza resigned as Vice President, Product Development, effective July
31, 1998.
6
Option Grants in Last Fiscal Year. The following table sets forth for each
of the Named Executive Officers certain information concerning stock options
granted by the Company during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
---------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Options Annual Rate of
Securities Granted to Stock Price
Underlying Employees Exercise Appreciation
Options in Fiscal Price Expiration For Option Term (1)
-------------------
Name Granted (#)(2) Year (3) ($/sh) (4) Date 5% ($) 10% ($)
---- --------------- -------- ---------- ---- ------ -------
Robert N. Goldman.......... 275,000 7.75% $ 6.13 April 1, 2008 $ 1,059,294 $ 2,684,460
25,000 0.70% 5.88 May 22, 2008 92,369 234,081
Justin J. Perreault........ 50,000 1.41% 6.13 April 1, 2008 192,599 488,084
Lacey P. Brandt............ 20,000 0.56% 6.63 February 6, 2008 83,329 211,171
Lawrence E. Alston Jr...... 100,000 2.82% 7.13 May 6, 2008 448,087 1,135,542
30,000 0.85% 3.94 October 28, 2008 74,298 188,285
Kirk D. Bowman............. 40,000 1.13% 6.63 February 6, 2008 166,657 422,342
60,000 1.69% 5.88 May 22, 2008 221,685 561,794
Brian W. Otis.............. 20,000 0.56% 6.63 February 6, 2008 83,329 211,171
100,000 2.82% 6.19 July 31, 2008 389,160 986,208
Gregory A. Baryza.......... 20,000 0.56% 6.63 February 6, 2008 83,329 211,171
------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% appreciation rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if any, in
the price of the Common Stock. No gain to the optionees is possible without an
increase in the price of the Common Stock, which will benefit all stockholders
proportionately.
(2) Represents shares of Common Stock issuable upon exercise of stock options
granted under the 1996 Stock Option Plan. Such options were granted during
fiscal 1998 and vest as follows: 25% of the total number of shares one year
after their date of grant and an additional 6.25% at the end of each three-month
period thereafter until the options are fully vested.
(3) The Company granted to employees options to purchase an aggregate of
3,548,150 shares of Common Stock in fiscal 1998 pursuant to the following plans:
869,950 options pursuant to the 1996 Stock Option Plan and 2,678,200 options
pursuant to the 1997 Nonqualified Stock Option Plan.
(4) All options were granted at fair market value as determined by the
Compensation Committee on the date of grant.
7
Option Exercises and Fiscal Year-End Values. The following table sets forth
certain information concerning stock options exercised during fiscal 1998 and
stock options held as of December 31, 1998 by each of the Named Executive
Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercisable in-the- Money
Acquired Options At Options at Fiscal
On Value Fiscal Year-End Year-End ($), (2)
Exercise Realized ------- --------
Name (#) ($)(1) Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
---- --------- --------- --------------- ----------------- --------------- -----------------
Robert N. Goldman ............. -- -- -- 300,000 $ -- $ 154,750
Justin J. Perreault ........... -- -- 12,500 87,500 -- 24,750
Lacey P. Brandt................ -- -- 81,250 68,750 289,063 173,438
Lawrence E. Alston, Jr......... 3,375 $17,676 13,471 147,382 16,341 109,860
Kirk D. Bowman ................ -- -- 93,750 256,250 105,469 220,481
Brian W. Otis ................. -- -- 99,896 180,686 466,763 266,976
Gregory A. Baryza ............. -- -- 99,813 70,187 513,391 197,609
(1) Value is based on the difference between the fair market value of the Common
Stock on the date of exercise of the applicable option and the exercise price of
such option. These values may never be realized. Actual gains, if any, will
depend on the value of the Common Stock on the date of the sale of the shares.
(2) Value is based on the last sale price of the Common Stock ($6.63 per share)
on December 31, 1998 as reported by the Nasdaq National Market, 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.
EMPLOYMENT AGREEMENTS
In November, 1995, the Company executed employment agreements with Robert N.
Goldman and Justin J. Perreault (the "1995 Employment Agreements"). The Company
agreed to employ Messrs. Goldman and Perreault as President and Chief Executive
Officer of the Company and Executive Vice President and Chief Operating Officer
of the Company respectively, at annual salaries of at least $190,000 and
$160,000 respectively. Under these agreements, if the employment of the officer
was terminated by the Company for any reason other than just cause, death or
permanent disability, the agreements required the Company to continue to pay the
officer's salary for a period of twelve months, in the case of Mr. Goldman, and
six months in the case of Mr. Perreault, after such termination, offset by any
amounts received by the officer from subsequent employment during such period.
In November, 1998, the 1995 Employment Agreements for Messrs. Perreault and
Goldman were amended and new agreements were approved for Ms. Brandt, Mr.
Bowman, Mr. Otis and Mr. Alston. The agreement entered into with Mr. Goldman
provided for his salary for twelve months and 100% of on target bonus for the
year in which such termination occurs to be paid by the Company in the event of
termination for any reason other than "cause" as defined in the agreement.
Furthermore, under the agreement, and only in the event of a "change of control"
as
8
defined in the agreement, the Company would pay Mr. Goldman twenty-four months
of salary and 100% of target bonus for the year in which such termination
occurs, and any outstanding options held by Mr. Goldman would become fully
vested. The Company entered into a similar agreement with Mr. Perreault in
November, 1998 except that in the event of termination for reasons other than
"cause" he would receive six months salary and 100% of on target bonus for the
year in which such termination occurs, and in the event of a "change in control"
he would receive twelve months salary and 100% of on target bonus for the year
in which such termination occurs, and any outstanding options held by Mr.
Perreault would become fully vested. The Company has entered into agreements
with Ms. Brandt and Messrs. Bowman, Alston and Otis which provide for, in the
event of a "change in control", twelve months salary and 100% of on target bonus
for the year in which such termination occurs, and any outstanding options held
by such individuals shall become fully vested. In February, 1999, Mr. Goldman's
agreement was amended to reflect the fact that he is now Chairman of the Board
of Directors of the Company. Also in February, 1999, Mr. Perreault's agreement
was amended to reflect that he is now CEO and President of the Company, and as
such, the terms of his agreement were amended to reflect twelve months salary
paid in the event of termination for reasons other than "cause" and twenty-four
months salary to be paid by the Company in the event of a "change in control".
In connection with their employment, these officers have also executed the
Company's standard Non-Competition, Non-Disclosure and Developments Agreement
(the "Non-Competition Agreement"). These agreements contain covenants
prohibiting the improper disclosure of confidential information at any time, as
well as provisions assigning to the Company all inventions made or conceived by
the officer during his employment with the Company. Each officer agreed with the
Company that, with certain exceptions, until one year after the termination of
his employment with the Company, he would not participate in any capacity in any
business activities competitive with those of the Company. Each officer further
agreed not to participate in any capacity in soliciting the business of any
customers or the services of any employees of the Company during such one-year
period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee (the "Committee") established by the Board of
Directors is currently composed of three non-employee Directors; Arthur J.
Marks, Gerald B. Bay and David A. Litwack. During fiscal 1998, the Compensation
Committee consisted of three non-employee Directors. Except as set forth below,
no executive officer of the Company served during 1998 on the Board of Directors
or compensation committee of any entity, one of whose executive officers also
served on the Board of Directors or Compensation Committee of the Company.
During 1998, Mr. Goldman, the Company's Chairman of the Board, President and
Chief Executive Officer, served as a Director of Parametric Technology
Corporation, of which Steven C. Walske, a former Director of the Company, who
resigned February 23, 1999 is Chairman of the Board and Chief Executive Officer.
Mr. Goldman also served as a member of the compensation committee of Parametric
Technology Corporation during 1998.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
remuneration and benefits of the Company's executive officers and other senior
management, administers the Company's stock option plans and Employee Stock
Purchase Plan and makes determinations with respect to the granting of stock
options, and acts in an advisory capacity to the Board of Directors concerning
other compensation issues.
COMPENSATION POLICY
The Compensation Committee's policy with respect to compensation of the
Company's Chief Executive Officer and other executive officers includes several
elements: (i) the payment of competitive base salaries to attract and
9
retain highly qualified personnel, (ii) the use of incentive compensation in the
form of cash bonuses to reward the achievement of Company financial objectives
such as achievement of budgeted expense and profitability levels, as well as
technical and market development goals, (iii) in appropriate instances, the
payment of sales-based commissions to reward contributions to revenue growth,
(iv) the granting of stock options to maintain competitive levels of total
compensation to assist the Company in recruiting and retaining personnel, as
well as to align management's interests with those of shareholders and to
motivate executives to pursue the long-term success of the Company, and (v) the
implementation and execution of severance terms and conditions within executive
employment agreements in order to attract and retain highly qualified personnel.
The Committee intends that the Company's executive compensation policies be
straightforward, easily communicated to and understood by employees and
shareholders, and structured so that the achievement of Company and individual
goals can be readily measured.
BASE SALARIES
Competitive base salaries are established through the use of published
industry surveys and targeted peer company surveys that examine the compensation
practices of other companies in the software industry as well as of other high
technology companies in the relevant geographic area that might compete with the
Company in hiring or retaining strong performers. The Committee, utilizing the
collected data and applying the members' collective experience in recruiting and
managing in a technical environment, seeks to establish base salaries that take
into account not only competitive factors but also the breadth of experience and
recent individual performance of the executive. The Committee's objective is not
to determine compensation levels, in general or for specific positions, by
seeking to achieve a specific percentile rank in comparison to competitors or
peers, but rather to fix compensation levels on a case-by-case basis guided by
management's recommendations and the Committee members' experience and judgment.
In 1998, the Company's President and Chief Executive Officer, Robert N. Goldman,
and its Executive Vice President and Chief Operating Officer, Justin J.
Perreault, were paid base salaries of $210,000 and $168,000, respectively,
representing a 5% increase over prior year's salaries.
INCENTIVE COMPENSATION
In establishing executive bonus levels, the Compensation Committee begins by
reviewing management's annual strategic and financial plan, as approved by the
Board of Directors at the beginning of the year, including Company financial
goals and individual performance goals, proposed by the Company's Chief
Executive Officer. The bonus for which an executive officer (other than the
Chief Executive Officer) is eligible is established at this time, and is a
percentage, generally ranging from 0% to 50%, of his annual base salary. The
percentage of this amount, if any, awarded as a bonus at the end of the year is
determined by reference to both the Company's and the executive's performance.
The Chief Executive Officer's bonus is determined based on the attainment of
goals jointly developed and agreed upon between the Chief Executive Officer and
the Committee and is not fixed as a specific percentage of his or her base
salary. At the beginning of the year, the Chief Executive Officer presents to
the Committee an analysis of the performance of the individual executives
against the overall corporate financial goals and then personal goals, together
with his recommendations concerning specific management bonuses. After reviewing
these recommendations, the Committee determines whether, and in what amounts, to
award bonuses for the Chief Executive Officer and other executive officers. For
1998, neither Mr. Goldman nor any other executive officer received any cash
bonus, as a result of the Company's failure to achieve its targeted financial
results. In 1999, in recognition of his new position as Chief Executive Officer,
Mr. Perreault will be under a new bonus plan similar to Mr. Goldman's while he
was in that role and not specifically targeted at a percentage of base salary.
In Mr. Goldman's new role as Chairman, Mr. Goldman will continue to be under a
bonus plan in 1999.
10
STOCK OPTIONS
The Compensation Committee believes that stock option grants are an
important element of the Company's executive compensation program, not only to
enable the Company to compete effectively in recruiting and retaining employees
but also in order to align the interests of management with those of the
Company's stockholders. In granting options, the Committee considers, among
other factors, competitive conditions, the executive's experience,
responsibilities and performance, the sizes of other individual grants and the
total number of options outstanding. Option grants are awarded to all executive
officers at the time they are hired, and additional options may be granted
thereafter based upon specific individual or corporate achievements.
For fiscal year 1998, Mr. Goldman was granted 275,000 options at an exercise
price of $6.13 and 25,000 options at an exercise price of $5.88; Mr. Perreault
was granted 50,000 options at an exercise price of $6.13; Ms. Brandt was granted
20,000 options at an exercise price of $6.63; Mr. Alston was granted 100,000
options at an exercise price of $7.13 and 30,000 options at an exercise price of
$3.94; Mr. Bowman was granted 40,000 options at an exercise price of $6.63 and
60,000 options at an exercise price of $5.88; Mr. Otis was granted 20,000
options at an exercise price of $6.63 and 100,000 options at an exercise price
of $6.19; and Mr. Baryza was granted 20,000 options at an exercise price of
$6.63.
POLICY REGARDING SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
deductibility of compensation in excess of $1.0 million paid to the Chief
Executive Officer and the four most highly compensated officers of the Company
(other than the Chief Executive Officer) in any fiscal year, unless the
compensation qualifies as "performance-based compensation." The Compensation
Committee's policy with respect of 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 base salaries and bonuses of the Company's
individual executive officers have not historically exceeded, and are not in the
foreseeable future expected to exceed, the $1.0 million limit, and options
received by executive officers under the Company's 1996 Stock Option Plan are
intended to qualify as performance-based compensation.
The Compensation Committee
Gerald B. Bay
David A. Litwack
Arthur J. Marks
11
PERFORMANCE GRAPH
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index, the Nasdaq
Stock Market Index for U.S. Companies, and a published industry index, the
Hambrecht & Quist Technology Index. The cumulative stockholder returns for
shares of the Company's Common Stock and for the securities included in the
market and industry indexes are calculated assuming $100 was invested at their
last sale prices on July 23, 1996, the date on which the Company's Common Stock
commenced trading on the Nasdaq National Market. The Company paid no cash
dividends during the periods shown. The performance of the market and industry
indexes is shown on a total return (dividends reinvested) basis.
COMPARISON OF TWO YEAR CUMULATIVE TOTAL RETURN IN SIX MONTH INTERVALS*
AMONG OBJECT DESIGN, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
*$100 INVESTED ON 7/23/96 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
12
PROPOSAL TWO
AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN
TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK available for grant thereunder
The Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan")
provides that the total number of shares of Common Stock that are available for
grant thereunder shall not exceed 300,000. On February 23, 1999, the Board voted
to adopt, and to submit to the stockholders of the Company for their approval,
an amendment to the Stock Purchase Plan to increase by 200,000 the number of
shares of Common Stock available under the Stock Purchase Plan, such that the
total number of shares of Common Stock available under the Stock Purchase Plan
be 500,000. See "1996 Employee Stock Purchase Plan" for a description of the
material features of the Stock Purchase Plan, as amended, the classes of persons
eligible to participate therein, the basis of such participation, and the
reasons for the amendment.
The Board recommends that you vote FOR the proposal to approve the
amendment of the Employee Stock Purchase Plan
1996 EMPLOYEE STOCK PURCHASE PLAN
In 1996, the Board of Directors adopted, and the Company's stockholders
approved, the 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan"). The
Stock Purchase Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
and as such, to provide a method whereby employees of the Company will have an
opportunity to acquire an, or increase an existing, ownership interest in the
Company through the purchase of shares of the Common Stock of the Company.
The Stock Purchase Plan, as initially adopted and approved by the
stockholders of the Company on May 23, 1996 (the "Adoption Date"), fixed the
maximum number of shares of Common Stock of the Company available for issuance
and purchase by employees under the Stock Purchase Plan at 300,000. On April 7,
1999, the maximum number of shares of Common Stock available for issuance and
purchase under the Stock Purchase Plan was only 90,015.
AMENDMENT OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN
On February 23, 1999, the Board of Directors voted to adopt, and to submit
to the stockholders of the Company for their approval, an amendment to the Stock
Purchase Plan to increase by 200,000 the number of shares of Common Stock
available under the Stock Purchase Plan, such that the total number of shares of
Common Stock available under the Stock Purchase Plan be 500,000. If approved at
the Annual Meeting, the additional 200,000 shares will be added to the maximum
number available, such that the maximum number of shares available for issuance
and purchase as of the date of the Annual Meeting will be 500,000 rather than
300,000 as originally provided in the Stock Purchase Plan.
The Company believes that the availability of an employee stock purchase
plan is important to the Company's ability to recruit and retain qualified
employees, as well as provide employees with the opportunity to increase their
respective ownership interest in the Company. Currently, only 90,015 shares of
Common Stock are available for purchase and issuance under the Company's Stock
Purchase Plan. This number will likely decrease over the following year and if
the total number of shares for which options are exercised on any offering
termination date exceeds the
13
number of shares that remain available for issuance and purchase by employees
under the Stock Purchase Plan, the Company must make a pro rata allocation of
the shares available for delivery and distribution in an equitable manner, and
return to each participant of the Stock Purchase Plan any balance of payroll
deductions credited to the account of each such participant. In 1998 and 1997,
the Company issued 104,835 and 105,150 shares respectively. Without the proposed
amendment, the number of shares available under the Stock Purchase Plan will
eventually be completely depleted. The Board of Directors believes that in the
current competitive environment for highly-skilled employees, the amendment of
the Stock Purchase Plan to increase the maximum number of shares issuable
thereunder by 200,000 shares is necessary to enable the Company to provide
appropriate long-term incentives to its employees and to recruit and retain
additional highly-skilled employees to support the growth of the Company's
business. The Board of Directors therefore recommends that stockholders vote FOR
the proposed amendment to the Stock Purchase Plan.
DESCRIPTION OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The Stock Purchase Plan is administered by the Compensation Committee of the
Board of Directors consisting of two or more non-employee Directors (the "Plan
Administrator"). Under the Stock Purchase Plan up to 300,000 shares of our
Common Stock may purchased at 85% of the lower of the fair market value of the
stock on the first or the last day of each six-month offering period. Employees
may elect to have up to 6% of their base pay withheld and applied toward the
purchase of shares in each offering, up to a maximum of $25,000 withheld in any
year.
Participation in the Stock Purchase Plan is completely voluntary.
Participation in any one or more of the offerings under the Stock Purchase Plan
shall neither limit, nor require, participation in any other offering. Each
employee of the Company whose service with the Company commences on or after
November 1, 1996 is eligible to participate in the Stock Purchase Plan on the
first offering commencement date, following the completion of six months of
continuous service with the Company. Each employee of the Company whose service
with the Company commenced prior to November 1, 1996 is eligible to participate
in the Stock Purchase Plan on the first offering commencement date following the
commencement of service with the Company. As of April 7, 1999, approximately 231
employees of the Company and its subsidiaries were eligible to participate in
the Stock Purchase Plan.
Notwithstanding the foregoing, no employee will be granted an option under
the Plan: (i) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
any subsidiary of the Company, as determined pursuant to the rules of Section
424(d) of the Code, or (ii) which permits such employees rights to purchase
stock under all Section 423 employee stock purchase plans of the Company and its
subsidiaries to exceed $25,000 of the fair market value of the stock (determined
at the time such option is granted) for each calendar year in which such option
is outstanding, as determined pursuant to the rules of Section 423(b)(8) of the
Code.
Any eligible employee may become a participant by completing a payroll
deduction authorization form provided by the Company and filing it with the
Company's Treasurer 20 days prior to each applicable offering commencement date,
as determined by the Compensation Committee. At the time a participant files an
authorization for a payroll deduction, the participant shall elect to have
deductions made from his or her pay on each payday during any offering in which
he or she is a participant, at a specified percentage of his or her Compensation
as determined on the applicable offering commencement date. Each employee's
specified percentage must be in increments of 1% but in no event can any
employee's specified percentage exceed a maximum percentage of 6%. Payroll
deductions for a participant shall commence on the offering commencement date
when the applicable authorization for a payroll deduction becomes effective and
shall end on the offering termination date of the offering to which such
authorization is applicable, unless sooner terminated by the participant. All
payroll deductions made for a participant shall be credited to his or her
account under the Stock Purchase Plan. A participant may not make any separate
cash
14
payment into such account. A participant may withdraw from the Stock Purchase
Plan at any time during the applicable offering period. No interest will be paid
or allowed on any money paid into the Stock Purchase Plan or credited to the
account of any participating employee.
Prior to the offering termination date for an offering, any participant may
withdraw the payroll deductions credited to his or her account under the Stock
Purchase Plan for such offering by giving written notice to the Treasurer of the
Company. All of the participant's payroll deductions credited to such account
will be paid to the participant promptly after receipt of notice of withdrawal,
without interest, and no future payroll deductions will be made from his or her
pay during such offering. The Company will treat any attempt to borrow by a
participant on the security of accumulated payroll deductions as an election to
withdraw such deductions. A participant's election not to participate in, or
withdrawal from, any offering will not have any effect upon his or her
eligibility to participate in any succeeding offering or in any similar plan
which may hereafter be adopted by the Company. Upon termination of the
participant's employment for any reason, including retirement but excluding
death, the payroll deductions credited to his or her account will be returned to
the participant, or, in the case of his or her death, to the person or persons
entitled thereto. Upon termination of the participant's employment because of
death, his or her beneficiary shall have the right to elect, by written notice
given to the Company's Treasurer prior to the expiration of a period of 90 days
commencing with the date of the death of the participant, either: (i) to
withdraw all of the payroll deductions credited to the participant's account
under the Stock Purchase Plan; or (ii) to exercise the participant's option for
the purchase of stock on the offering termination date next following the date
of the participant's death for the purchase of the number of full shares which
the accumulated payroll deductions in the participant's account at the date of
the participant's death will purchase at the applicable option price, and any
excess in such account will be returned to said beneficiary. In the event that
no such written notice of election shall be duly received by the office of the
Company's Treasurer, the beneficiary shall automatically be deemed to have
elected to withdraw the payroll deductions credited to the participant's account
at the date of the participant's death and the same will be paid promptly to
said beneficiary.
On the offering commencement date of each offering, a participating employee
shall be deemed to have been granted an option to purchase a maximum number of
shares of the Common Stock equal to an amount determined as follows: (i) 85% of
the market value per share of the Common Stock on the applicable offering
commencement date shall be divided into an amount equal to the sum of (x) the
percentage of the employee's compensation which he or she has elected to have
withheld (multiplied by the employee's compensation over the offering period)
plus (y) any amounts in the employee's account on the offering commencement date
that have been carried forward from prior offerings; multiplied by (2) two. The
option price of the Common Stock purchased with payroll deductions made during
each such offering for a participant therein shall be the lower of: (i) 85% of
the average of the bid and the asked prices as reported by Nasdaq in the Wall
Street Journal, or, if the Common Stock is designated as a national market
security by the National Association of Securities Dealers, Inc. ("NASD"), the
last trading price of the Common Stock as reported by the Nasdaq National Market
System in the Wall Street Journal, or, if the Common Stock is listed on an
exchange, the closing price of the Common Stock on the exchange on the offering
commencement date applicable to such offering (or on the next regular business
date on which shares of the Common Stock shall be traded, in the event that no
shares of the Common Stock have been traded on the offering commencement date);
or if the Common Stock is not quoted on Nasdaq, not designated as a Nasdaq
national market security and not listed on an exchange, 85% of the fair market
value on the offering commencement date as determined by the Compensation
Committee; and (ii) 85% of the average of the bid and the asked prices as
reported by Nasdaq in the Wall Street Journal, or, if the Common Stock is
designated as a national market security by the NASD, the last trading price of
the Common Stock as reported by the Nasdaq National Market System in the Wall
Street Journal, or, if the Common Stock is listed on an exchange, the closing
price of the Common Stock on the exchange on the Offering Termination Date
applicable to such Offering (or on the next regular business date on which
shares of the Common Stock shall be traded, in the event that no shares of the
Common Stock shall have been traded on the offering termination date;
15
or if the Common Stock is not quoted on Nasdaq, not designated as a Nasdaq
national market security and not listed on an exchange, 85% of the fair market
value on the offering termination date as determined by the Committee.
Unless a participant gives written notice to the Treasurer of the Company,
his or her option for the purchase of Common Stock with payroll deductions made
during any offering will be deemed to have been exercised automatically on the
offering termination date applicable to such offering for the purchase of the
number of full shares of Common Stock which the accumulated payroll deductions
in his or her account at that time (plus any amounts in his or her account that
have been carried forward from prior offerings) will purchase at the applicable
option price, and any excess in his/her account at that time will be
automatically carried forward to the next offering unless the participant
elects, by written notice to the Treasurer of the Company, to have the excess
returned to the participant. The participant will have no interest in the stock
covered by his or her option until such option has been exercised.
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND THE PARTICIPANTS
There are no Federal income tax consequences to the Company or the
participant upon the grant or exercise of an option acquired under the Stock
Purchase Plan. The participant's basis in the stock purchased is equal to the
option exercise price. If the participant holds shares of Common Stock purchased
pursuant to the exercise of a Stock Purchase Plan option for at least two years
after the date the option was granted and at least one year after the exercise
of the option, (i) the subsequent sale of the shares of Common Stock will give
rise to ordinary income in an amount equal to the 15% discount, (ii) the
participant's basis in the shares of Common Stock will be increased by the
amount recognized as ordinary income, (iii) the participant will recognize a
long-term capital gain or loss equal to the difference between the adjusted
basis and the sale price, and (iv) no deduction will be available to the
Company. If the participant sells the shares of Common Stock within two years
after the date the option was granted or within one year after the exercise of
the option, (a) the participant will recognize ordinary income in an amount
equal to the difference between the fair market value on the date of exercise
and the option exercise price, (b) the Company will be entitled to an equivalent
deduction, (c) the participant's basis in such shares of Common Stock will be
increased by the amount recognized as ordinary income, and (d) the participant
will recognize a capital gain or loss equal to the difference between the
adjusted basis and the sale price.
Although the foregoing summarizes the essential features of the Stock
Purchase Plan, it is qualified in its entirety by reference to the full text of
the Stock Purchase Plan as amended, which is attached as Exhibit 1 to this proxy
statement.
REGISTRATION OF SHARES AVAILABLE UNDER THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The Company has filed a registration statement on Form S-8 under the
Securities Act of 1933 to register the 300,000 shares of the Company's Common
Stock that were originally reserved for issuance under the 1996 Employee Stock
Purchase Plan. If the proposed amendment is approved by the stockholders, the
Company intends to file, as soon as practicable, a registration statement on
Form S-8 under the Securities Act of 1933 covering the additional shares of
Common Stock issuable under the 1996 Employee Stock Purchase Plan, as amended.
The Board of Directors has not determined what action it will take in the event
that the stockholders do not approve the proposal.
SHARES PURCHASED UNDER THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The following table sets forth the number of shares of Common Stock
purchased under Company's Employee Stock Purchase Plan on or prior to March 31,
1999 to each of (i) the officers listed in the Summary Compensation Table, (ii)
each of the nominees for election as a director, (iii) all current executive
officers of the Company as a group, (iv) all directors of the Company who are
not executive officers of the Company as a group, and (v) all employees of the
Company, including all other current officers, as a group:
16
Employee(1) Number of Shares
----------- ----------------
Justin J. Perreault........................................... 1,208
Lacey P. Brandt............................................... 3,386
Lawrence E. Alston, Jr........................................ 882
Kirk D. Bowman................................................ 2,087
Brian W. Otis................................................. 4,644
Gregory A. Baryza............................................. 2,080
All current executive officers of the Company as a group...... 12,207
All employees of the Company, including all other
current officers, as a group.................................. 209,985
-----------------------------
(1) Does not include officers who have not purchased shares of Common Stock
under the Stock Purchase Plan, and non-employee directors are not
eligible to participate in the Stock Purchase Plan.
CERTAIN TRANSACTIONS
RELATIONSHIP WITH INTERNATIONAL BUSINESS MACHINES CORPORATION
International Business Machines Corporation ("IBM") is the beneficial owner
of approximately 9% of the Company's outstanding Common Stock as of April 7,
1999. In 1993, the Company entered into agreements with IBM providing for
certain joint development and marketing activities by the two companies, which
agreements were terminated in 1996. Revenues from products and services provided
by the Company to IBM during 1998 were $308,000 and constituted 0.5% of the
Company's total revenues for fiscal year 1998.
LOANS TO EXECUTIVE OFFICERS
In 1996, in connection with the exercise by Robert N. Goldman, the Chairman
of the Board of the Company and by Justin J. Perreault, the President and Chief
Executive Officer of the Company, of stock options granted to them under the
Company's 1995 Nonqualified Stock Option Plan, to purchase 2,300,000 and 460,000
shares of Common Stock, respectively, the Company loaned to Mr. Goldman and to
Mr. Perreault $572,700 and $114,540, respectively. The loan to each executive
was at an interest rate of 7.0% per annum and was pursuant to a full recourse
promissory note due upon the earlier of (i) April 1, 2001 and (ii) the date the
executive's employment with the Company terminates for any reason. Each loan was
originally secured by a pledge to the Company of all the shares of Common Stock
acquired upon exercise of the option. On January 29, 1997 the Company released
2,048,950 and 409,790 shares from Messrs. Goldman's and Perreault's pledges,
respectively, with 251,050 shares and 50,210 shares, respectively, remaining
pledged to secure the outstanding amount of principal and interest of the loans
to Messrs. Goldman and Perreault, respectively.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 31, 1999 by (i)
each person or group known to the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock; (ii) each of the Company's
Directors and Director nominees; (iii) the Named Executive Officers and (iv) all
Directors, Director nominees and executive officers of the Company as a group.
The information as to each person has been furnished by such person.
17
Shares Beneficially Owned (1),(2)
Name and Address of Beneficial Owners Number Percent
------------------------------------- ------ -------
International Business Machines Corporation 2,644,246 9.4%
Old Orchard Road
Armonk, NY 10504
Aeneas Venture Corporation (3) 2,707,526 9.6%
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, MA 02210
Robert N. Goldman 2,275,001 8.1%
Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Gerald B. Bay (4) 1,615,119 5.7%
Vista Management
27 Newport Street
Jamestown, RI 02385
Arthur J. Marks (5) 878,047 3.1%
New Enterprise Associates
11911 Freedom Drive
One Fountain Square, Suite 580
Reston, VA 20190
Justin J. Perreault 391,250 1.4%
Lacey P. Brandt 109,262 *
Lawrence E. Alston, Jr. 39,870 *
Kirk D. Bowman 196,488 *
Brian W. Otis 131,001 *
Gregory A. Baryza (6) 126,396 *
Kevin Burns 11,834 *
Steven C. Walske (7) *
David A. Litwack 11,834 *
All Directors and executive officers as a group (12 persons) 5,786,102 20.6%
* Less than one percent.
(1) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock shown
as beneficially owned by them, subject to community property laws where
applicable and subject to the information contained in the footnotes to this
table. Amounts shown for each stockholder include shares subject to stock
options exercisable within 60 days of the date of this table. Shares not
outstanding but deemed beneficially owned by virtue of the right of a person
or group to acquire them within 60 days are treated as outstanding only for
purposes of determining the number of and percent owned by such person or
group. As of March 31, 1999, the date of this table, there were 28,117,730
shares of Common Stock outstanding.
18
(2) The amounts listed include the following shares of Common Stock that may be
acquired on or prior to May 30, 1999 through the exercise of options: Mr.
Alston, 39,855 shares; Mr. Baryza, 115,835 shares; Mr. Bay 120,166 shares,
Mr. Bowman, 152,501 shares; Ms. Brandt, 101,876 shares, Mr. Burns, 11,834
shares, Mr. Goldman, 75,001 shares; Mr. Litwack 11,834 shares, Mr. Marks
20,166 shares, Mr. Otis 117,939 shares, and Mr. Perreault 31,250 shares:
and all directors and executive officers as a group, 798,257 shares.
(3) Includes 2,475,552 shares of Common Stock owned of record by Aeneas Venture
Corporation ("Aeneas") and 186,962 and 45,012 shares of Common Stock owned
of record by Phemus Corporation and Harvard Private Capital Holdings, Inc.,
affiliates of Aeneas, respectively.
(4) Represents 156,507 shares of Common Stock owned of record by Mr. Bay,
120,166 shares that may be acquired on or prior to May 30, 1999 through the
exercise of options held by Mr. Bay, 1,074,971 of shares owned of record by
Vista III LP ("Vista") and 263,475 shares owned of record by Philips
Venture Fund ("Philips"). As a general partner of Vista who is the general
partner of the Philips, Mr. Bay may be deemed to have beneficial ownership
of the Vista and Philips shares. However, Mr. Bay disclaims beneficial
ownership of shares owned by Vista and Philips.
(5) Represents 20,166 shares that may be acquired on or prior to May 30, 1999
through the exercise of options held by Mr. Marks, 461,799 of shares owned
of record by New Enterprise Associates V, Limited Partnership, 387,500
shares owned of record by New Enterprise Associates VII, Limited
Partnership, 8,000 shares owned of record by The Silverado Fund I Limited
Partnership, and 582 shares owned of record by The NEA Silverado Partners
Limited Partnership Shares. As a general partner of New Enterprise
Associates ("NEA"), which is the general partner of the aforementioned
limited partnerships, Mr. Marks may be deemed to share beneficial ownership
of such shares. However, Mr. Marks disclaims beneficial ownership of all
aforementioned shares associated with NEA.
(6) Mr. Baryza resigned as a corporate officer effective July 31, 1998.
(7) Mr. Walske resigned as a member of the board of directors effective February
23, 1999.
ACCOUNTANTS
The Company has appointed ('PricewaterhouseCoopers") LLP
("PricewaterhouseCoopers") as independent accountants to audit the financial
statements of the Company for the fiscal year ending December 31, 1999.
Representatives of PricewaterhouseCoopers are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they desire to
do so, and are expected to be available to respond to appropriate questions from
stockholders.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who beneficially 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 Securities and Exchange Commission
(the "SEC"). Officers, Directors and greater-than-10% stockholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during fiscal 1998 and Forms 5 and amendments thereto
furnished to the Company with respect to fiscal 1998, or written
19
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-10% stockholders were fulfilled in a timely manner, except that
each of Robert N. Goldman, Justin J. Perreault, Kirk D. Bowman and Lawrence E.
Alston inadvertently failed to timely file a Notice on Form 4, in Mr. Goldman's
case with respect to a single transaction for April, 1998 and four transactions
for May, 1998; in Mr. Perreault's case with respect to a single transaction for
April, 1998 and three transactions for May, 1998; in Mr. Bowman's case with
respect to two transactions for May, 1998; and in Mr. Alston's case with respect
to two transactions for May, 1998.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials related to the
2000 Annual Meeting of Stockholders or special meeting in lieu thereof must be
received by the Company at its executive offices no later than Wednesday,
December 22, 1999. In addition, the Company's By-Laws provide that a stockholder
must give written notice to the Company 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. Such notice requirements are set forth in
Section 3 of the Company's By-Laws. To bring an item of business before the 2000
Annual Meeting, a stockholder must deliver the requisite notice of such item to
the Secretary of the Company no later than Friday, March 24, 2000.
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 stockholders, of any
other business which properly may be presented for action at the Annual Meeting.
If any other business should come before the Annual Meeting, the persons present
will have discretionary authority to vote the shares they own or represent by
proxy in accordance with their judgment.
AVAILABLE INFORMATION
Stockholders of record on April 7, 1999 will receive, in addition to this
Proxy Statement, the Company's Annual Report to Stockholders for the year ended
December 31, 1999, which contains detailed financial information concerning the
Company. The Company will mail, without charge, a copy of the Company's Annual
Report on Form 10-K (excluding exhibits) to any stockholder solicited hereby who
requests it in writing. Please submit any such written request to Investor
Relations, Object Design, Inc., 25 Mall Road, Burlington, Massachusetts 01803.
20
EXHIBIT 1
OBJECT DESIGN, INC. 1996 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The Object Design, Inc. 1996 Employee Stock Purchase Plan (the "Plan") is
intended to provide a method whereby employees of Object Design, Inc. (the
"Company") will have an opportunity to acquire an ownership interest (or
increase an existing ownership interest) in the Company through the purchase of
shares of the Common Stock of the Company. It is the intention of the Company
that the Plan qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" shall have the meaning set forth in Paragraph 1.
(c) "Committee" means the Compensation Committee of the Board.
(d) "Common Stock" means the common stock, par value $.001 per share,
of the Company.
(e) "Company" shall also include any Subsidiary (as hereinafter
defined) of Object Design, Inc. designated as a participant in the Plan
by the Board, unless the context otherwise requires.
(f) "Compensation" means, for the purpose of any Offering pursuant to
this Plan, base pay in effect as of the Offering Commencement Date (as
hereinafter defined). Compensation shall not include any deferred
compensation other than contributions by an individual through a salary
reduction agreement to a cash or deferred plan pursuant to Section
401(k) of the Code or to a cafeteria plan pursuant to Section 125 of
the Code.
(g) "Employee" means any person who is customarily employed by the
Company for more than 20 hours per week and more than five months in
any calendar year.
(h) "Offering" shall have the meaning set forth in Paragraph 4.
(i) "Offering Commencement Date" shall have the meaning set forth in
Paragraph 4.
(j) "Offering Termination Date" shall have the meaning set forth in
Paragraph 4.
(k) "Plan" shall have the meaning set forth in Paragraph 1.
(l) "Subsidiary" shall mean any present or future corporation which is
or would constitute a "subsidiary corporation" as that term is defined
in Section 425 of the Code.
3. ELIGIBILITY.
(a) Participation in the Plan is completely voluntary. Participation in
any one or more of the Offerings under the Plan shall neither limit,
nor require, participation in any other Offering (as hereinafter
defined).
(b) Each employee of the Company whose service with the Company
commences on or after November 1, 1996 shall be eligible to participate
in the Plan on the first Offering Commencement Date, as hereinafter
defined, following the completion of six months of continuous service
with the Company. Each employee of the Company whose service with the
Company commenced prior to November 1, 1996 shall be eligible to
participate in the Plan on the first Offering Commencement Date
following the commencement of service with the Company. Notwithstanding
the foregoing, no employee shall be granted an option under the Plan:
(i) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or
more of the total combined voting power or value of all classes of
stock of the Company or any Subsidiary; for purposes of this Paragraph,
the rules of Section 424(d) of the Code shall apply in determining the
stock ownership of any employee; or
(ii) which permits his rights to purchase stock under all Section 423
employee stock purchase plans of the Company and its Subsidiaries to
exceed $25,000 of the fair market value of the stock (determined at the
time such option is granted) for each calendar year in which such
option is outstanding; for purposes of this Paragraph, the rules of
Section 423(b)(8) of the Code shall apply.
4. OFFERING DATES.
The right to purchase stock hereunder shall be made available by a series
of six-month offerings (the "Offering" or "Offerings") to employees
eligible in accordance with Paragraph 3 hereof. The Committee will, in its
discretion, determine the applicable date of commencement ("Offering
Commencement Date") and termination date ("Offering Termination Date") for
each Offering. Participation in any one or more of the Offerings under the
Plan shall neither limit, nor require, participation in any other Offering.
5. PARTICIPATION.
Any eligible employee may become a participant by completing a payroll
deduction authorization form provided by the Company and filing it with the
Company's Treasurer 20 days prior to each applicable Offering Commencement
Date, as determined by the Committee pursuant to Paragraph 4.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files an authorization for a payroll
deduction, the participant shall elect to have deductions made from his
or her pay on each payday during any Offering in which he or she is a
participant, at a specified percentage of his or her Compensation as
determined on the applicable Offering Commencement Date; said
percentage shall be in increments of one percent up to a maximum
percentage of six percent.
(b) Payroll deductions for a participant shall commence on the Offering
Commencement Date when the applicable authorization for a payroll
deduction becomes effective and shall end on the Offering Termination
Date of the Offering to which such authorization is applicable, unless
sooner terminated by the participant as provided in Paragraph 9.
(c) All payroll deductions made for a participant shall be credited to
his or her account under the Plan. A participant may not make any
separate cash payment into such account.
(d) A participant may withdraw from the Plan at any time during the
applicable Offering period.
7. GRANTING OF OPTION.
(a) On the Offering Commencement Date of each Offering, a participating
employee shall be deemed to have been granted an option to purchase a
maximum number of shares of the Common Stock equal to an amount
determined as follows: (i) 85% of the market value per share of the
Common Stock on the applicable Offering Commencement Date shall be
divided into an amount equal to the sum of (x) the percentage of the
employee's Compensation which he or she has elected to have withheld
(multiplied by the employee's Compensation over the Offering period)
plus (y) any amounts in the employee's account on the Offering
Commencement Date that have been carried forward from prior Offerings;
multiplied by (ii) two. Such market value per share of the Common Stock
shall be determined as provided in clause (i) of Paragraph 7(b).
(b) The option price of the Common Stock purchased with payroll
deductions made during each such Offering for a participant therein
shall be the lower of:
(i) 85% of the average of the bid and the asked prices as
reported by Nasdaq in the Wall Street Journal, or, if the
Common Stock is designated as a national market security by
the National Association of Securities Dealers, Inc. ("NASD"),
the last trading price of the Common Stock as reported by the
Nasdaq National Market System in the Wall Street Journal, or,
if the Common Stock is listed on an exchange, the closing
price of the Common Stock on the exchange on the Offering
Commencement Date applicable to such Offering (or on the next
regular business date on which shares of the Common Stock
shall be traded, in the event that no shares of the Common
Stock have been traded on the Offering Commencement Date); or
if the Common Stock is not quoted on Nasdaq, not designated as
a Nasdaq national market security and not listed on an
exchange, 85% of the fair market value on the Offering
Commencement Date as determined by the Committee; and
(ii) 85% of the average of the bid and the asked prices as
reported by Nasdaq in the Wall Street Journal, or, if the
Common Stock is designated as a national market security by
the NASD, the last trading price of the Common Stock as
reported by the Nasdaq National Market System in the Wall
Street Journal, or, if the Common Stock is listed on an
exchange, the closing price of the Common Stock on the
exchange on the Offering Termination Date applicable to such
Offering (or on the next regular business date on which shares
of the Common Stock shall be traded, in the event that no
shares of the Common Stock shall have been traded on the
Offering Termination Date); or if the Common Stock is not
quoted on Nasdaq, not designated as a Nasdaq national market
security and not listed on an exchange, 85% of the fair market
value on the Offering Termination Date as determined by the
Committee.
8. EXERCISE OF OPTION.
(a) Unless a participant gives written notice to the Treasurer of the
Company as hereinafter provided, his or her option for the purchase of
Common Stock with payroll deductions made during any Offering will be
deemed to have been exercised automatically on the Offering Termination
Date applicable to such Offering for the purchase of the number of full
shares of Common Stock which the accumulated payroll deductions in his
or her account at that time (plus any amounts in his or her account
that have been carried forward from prior Offerings) will purchase at
the applicable option price (but not in excess of the number of shares
for which options have been granted to the employee, pursuant to
Paragraph 7(a)), and any excess in his account at that time will be
automatically carried forward to the next Offering unless the
participant elects, by written notice to the Treasurer of the Company,
to have the excess returned to the participant.
(b) Fractional shares will not be issued under the Plan and any
accumulated payroll deductions which would have been used to purchase
fractional shares shall be automatically carried forward to the next
Offering unless the participant elects, by written notice to the
Treasurer of the Company, to have the excess cash returned to the
participant.
9. WITHDRAWAL AND TERMINATION.
(a) Prior to the Offering Termination Date for an Offering, any
participant may withdraw the payroll deductions credited to his or her
account under the Plan for such Offering by giving written notice to
the Treasurer of the Company. All of the participant's payroll
deductions credited to such account will be paid to the participant
promptly after receipt of notice of withdrawal, without interest, and
no future payroll deductions will be made from his or her pay during
such Offering. The Company will treat any attempt to borrow by a
participant on the security of accumulated payroll deductions as an
election to withdraw such deductions.
(b) A participant's election not to participate in, or withdrawal from,
any Offering will not have any effect upon his or her eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death, the payroll deductions
credited to his or her account will be returned to the participant, or,
in the case of his or her death, to the person or persons entitled
thereto under Paragraph 13.
(d) Upon termination of the participant's employment because of death,
his or her beneficiary (as defined in Paragraph 13) shall have the
right to elect, by written notice given to the Company's Treasurer
prior to the expiration of a period of 90 days commencing with the date
of the death of the participant, either:
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or
(ii) to exercise the participant's option for the purchase of
stock on the Offering Termination Date next following the date
of the participant's death for the purchase of the number of
full shares which the accumulated payroll deductions in the
participant's account at the date of the participant's death
will purchase at the applicable option price, and any excess
in such account will be returned to said beneficiary. In the
event that no such written notice of election shall be duly
received by the office of the Company's Treasurer, the
beneficiary shall automatically be deemed to have elected to
withdraw the payroll deductions credited to the participant's
account at the date of the participant's death and the same
will be paid promptly to said beneficiary.
10. INTEREST.
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participating employee.
11. STOCK.
(a) The maximum number of shares of Common Stock available for issuance
and purchase by employees under the Plan, subject to adjustment upon
changes in capitalization of the Company as provided in Paragraph 16,
shall be 300,000 shares of Common Stock, $.001 par value per share, of
the Company. If the total number of shares for which options are
exercised on any Offering Termination Date in accordance
with Paragraph 8 exceeds the number of shares that remain available for
issuance and purchase by employees under the Plan, the Company shall
make a pro rata allocation of the shares available for delivery and
distribution in an equitable manner, with the balances of payroll
deductions credited to the account of each participant under the Plan
returned to each participant.
(b) The participant will have no interest in the stock covered by his
or her option until such option has been exercised.
12. ADMINISTRATION.
The Plan shall be administered by the Committee. The interpretation and
construction of any provision of the Plan and adoption of rules and
regulations for administering the Plan shall be made by the Committee.
Determinations made by the Committee with respect to any matter or
provision contained in the Plan shall be final, conclusive and binding upon
the Company and upon all participants, their heirs or legal
representatives. Any rule or regulation adopted by the Committee shall
remain in full force and effect unless and until altered, amended, or
repealed by the Committee.
13. DESIGNATION OF BENEFICIARY.
A participant shall file with the Treasurer of the Company a written
designation of a beneficiary who is to receive any Common Stock and/or cash
under the Plan. Such designation of beneficiary may be changed by the
participant at any time by written notice. Upon the death of a participant
and upon receipt by the Company of proof of the identity and existence of a
beneficiary validly designated by the participant under the Plan, the
Company shall deliver such Common Stock and/or cash to such beneficiary. 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 Common Stock and/or
cash to the executor or administrator of the estate of the participant. No
beneficiary shall, prior to the death of the participant by whom he or she
has been designated, acquire any interest in the Common Stock and/or cash
credited to the participant under the Plan.
14. TRANSFERABILITY.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive Common Stock
under the Plan may be assigned, transferred, pledged, or otherwise disposed
of in any way by the participant other than by will or the laws of descent
and distribution. Any such attempted assignment, transfer, pledge, or other
disposition shall be without effect, except that the Company may treat such
act as an election to withdraw funds in accordance with Paragraph 8(b).
15. USE OF FUNDS.
All payroll deductions received or held by the Company under this Plan may
be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions.
16. EFFECT OF CHANGES OF COMMON STOCK.
If the Company shall subdivide or reclassify the Common Stock which has
been or may be optioned under this Plan, or shall declare thereon any
dividend payable in shares of such Common Stock, or shall take any other
action of a similar nature affecting such Common Stock, then the number and
class of shares of Common Stock which may thereafter be optioned (in the
aggregate and to any participant) shall be adjusted accordingly and in the
case of each option outstanding at the time of any such action, the number
and class of shares which may
thereafter be purchased pursuant to such option and the option price per
share shall be adjusted to such extent as may be determined by the
Committee, following consultation with the Company's independent public
accountants and counsel, to be necessary to preserve the rights of the
holder of such option.
17. AMENDMENT OR TERMINATION.
The Board may at any time terminate or amend the Plan. No such termination
shall affect options previously granted, nor may an amendment make any
change in any option theretofore granted which would adversely affect the
rights of any participant holding options under the Plan.
18. NOTICES.
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received by the Treasurer of the Company.
19. MERGER OR CONSOLIDATION.
If the Company shall at any time merge into or consolidate with another
corporation, the holder of each option then outstanding will thereafter be
entitled to receive at the next Offering Termination Date, upon the
exercise of such option and for each share as to which such option shall be
exercised, the securities or property which a holder of one share of the
Common Stock was entitled to upon and at the time of such merger or
consolidation. In accordance with this Paragraph and Paragraph 16, the
Committee shall determine the kind and amount of such securities or
property which such holder of an option shall be entitled to receive. A
sale of all or substantially all of the assets of the Company shall be
deemed a merger or consolidation for the foregoing purposes.
20. APPROVAL OF STOCKHOLDERS.
The Plan is subject to the approval of the stockholders of the Company by
written consent or at their next annual meeting or at any special meeting
of the stockholders for which one of the purposes of such a special meeting
shall be to act upon the Plan.
21. GOVERNMENTAL AND OTHER REGULATIONS.
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and the Company's obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all applicable
federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion
of counsel for the Company, be required. The Plan shall be governed by, and
construed and enforced in accordance with, the provisions of Sections 421,
423 and 424 of the Code and the substantive laws of The Commonwealth of
Massachusetts. In the event of any inconsistency between such provisions of
the Code and any such laws, said provisions of the Code shall govern to the
extent necessary to preserve the favorable federal income tax treatment
afforded employee stock purchase plans under Section 423 of the Code.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF OBJECT DESIGN, INC.
A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH
THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS
NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED ENVELOPE.
Please complete and return the proxy card below.
DETACH HERE
OBJF
PROXY
OBJECT DESIGN, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
The undersigned stockholder of Object Design, Inc. (the "Company"), revoking all
prior proxies, hereby appoints Justin J. Perreault and Lacey P. Brandt, or any
of them acting singly, 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 Annual meeting of Stockholders to be held at the offices of the Company,
25 Mall Road, Burlington, Massachusetts 01803, on Wednesday, May 26, 1999,
beginning at 10:00 a.m., local time, and at any adjournments thereof, upon
matters set forth in the Notice of Annual Meeting dated April 23, 1999 and the
related Proxy Statement, copies of which have been received by the undersigned,
and in their discretion upon any business that may properly come before the
Annual Meeting or any adjournments thereof. Attendance of the undersigned at the
Annual Meeting or any adjournment 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.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO THE PROPOSALS SET FORTH ON THE REVERSE SIDE,
WILL BE VOTED FOR SUCH PROPOSALS OR OTHERWISE IN ACCORDANCE WITH THE
RECOMMENDATION OF THE BOARD OF DIRECTORS.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
DETACH HERE
[x] Please mark
votes as in
this example.
1. Proposal to elect the following nominees as Class III directors of the
Company:
Nominees: Robert N. Goldman and Kevin J. Burns
FOR ALL WITHHOLD
NOMINEES
[ ] [ ]
2. Proposal to approve the amendment FOR AGAINST ABSTAIN
of the Company's 1996 Employee [ ] [ ] [ ]
Stock Purchase Plan to increase the
number of shares available for grant
thereunder by 200,000.
FOR ALL
EXCEPT
[ ] ---------------------------------------------
INSTRUCTION: To withhold authority to vote for any
individual nominee, mark the "For All Except" box
and write in that nominee's name.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please promptly date and sign this proxy and mail it
in the enclosed envelope to assure representation of
your shares. No postage need be affixed if mailed in
the United States.
Please sign exactly as name(s) appear(s) on stock
certificate. If shares are held by joint tenants,
both should sign. If stockholder is a corporation,
please sign full corporate name by president or
other authorized officer and, if a partnership,
please sign full partnership name by an authorized
partner or other authorized person. If signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
Next Section
Previous Section