1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X][ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ][X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
2
[ENLIGHT LOGO]
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 30, 2000
TO THE SHAREHOLDERS:
Please take notice that the annual meeting of the shareholders of Enlighten
Software Solutions, Inc., a California corporation (the "Company"), will be held
on August 30, 2000, at 3:00 p.m., local time, at Enlighten's offices, located at
999 Baker Way, Fifth Floor, San Mateo, California 94404, for the following
purposes:
1. To elect five (5) Directors to hold office until the 2001 Annual Meeting
of Shareholders and until their respective successors are elected and
qualified;
2. To consider, approve and ratify an amendment to Enlighten's Restated
Articles of Incorporation to increase the number of authorized shares of
Common Stock from 10,000,000 shares to 20,000,000 shares;
3. To consider, approve and ratify the adoption of an increase in aggregate
the maximum number of shares of Enlighten's Common Stock issuable under
its 1992 Stock Option Plan by 1,000,000 shares, from 2,000,000 shares to
3,000,000 shares.
4. To consider, approve and ratify the adoption of an increase in aggregate
the maximum number of shares of Enlighten's Common Stock issuable under
its 1994 Employee Stock Purchase Plan by 100,000 shares, from 200,000
shares to 300,000 shares.
5. To consider, approve and ratify the appointment of KPMG LLP as
Enlighten's independent public accountants for the year ending December
31, 2000; and
6. To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on June 30,July 21, 2000, are
entitled to notice of, and to vote at, this meeting and any adjournment or
postponement thereof. For ten days prior to the meeting, a complete list of
shareholders entitled to vote at the meeting will be available for examination
by any shareholder, for any purpose relating to the meeting at the principal
office of Enlighten Software Solutions, Inc. located at 999 Baker Way, Fifth
Floor, San Mateo, California, 94404.
By order of the Board of Directors
LOGO
Michael A. Morgan
Secretary
San Mateo, California
July 31, 2000
IMPORTANT: Please fill in, date, sign, and promptly mail the enclosed proxy card
in the accompanying post-paid envelope to assure that your shares are
represented at the meeting. If you attend the meeting, you may choose to vote in
person even if you have previously sent in your proxy card.
3
TABLE OF CONTENTS
PAGE
----
SOLICITATION AND VOTING OF PROXIES.......................... 1
INFORMATION ABOUT ENLIGHTEN SOFTWARE SOLUTIONS, INC......... 1
Stock Ownership of Certain Beneficial Owners and
Management............................................ 1
Directors and Executive Officers....................... 42
EXECUTIVE COMPENSATION AND OTHER MATTERS.................... 5
Summary Compensation Table............................. 5
Stock Options Granted in 1999.......................... 6
Aggregate Option Exercises and 1999 Year-End Values.... 6
Compensation of Directors.............................. 7
Employment Contracts and Termination of Employment and
Change of Control Arrangements........................ 7
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 7
Certain Relationships and Related Transactions......... 8
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION.............................................. 8
COMPARISON OF SHAREHOLDER RETURN............................ 10
ELECTION OF DIRECTORS....................................... 11
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE
THE TOTAL AUTHORIZED SHARES TO 20,000,000................. 11
PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN................ 12
PROPOSAL TO AMEND THE 1994 EMPLOYEE STOCK OWNERSHIP PLAN.... 16
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS............................................... 20
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL
MEETING................................................... 20
TRANSACTION OF OTHER BUSINESS............................... 21
i
4
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
OF ENLIGHTEN SOFTWARE SOLUTIONS, INC.
The accompanying proxy is solicited by the Board of Directors of Enlighten
Software Solutions, Inc., a California corporation (the "Company"), for use at
its 2000 annual meeting of shareholders to be held on August 30, 2000, or any
adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The date of this Proxy
Statement is July 31, 2000, the approximate date on which this Proxy Statement
and the accompanying form of proxy were first sent or given to shareholders.
SOLICITATION AND VOTING OF PROXIES
The cost of soliciting proxies will be borne by Enlighten. In addition to
soliciting shareholders by mail through its regular employees, Enlighten may
request banks, brokers and other custodians, and nominees and fiduciaries to
solicit their customers who have stock of Enlighten registered in the names of
such persons and will reimburse them for their reasonable, out-of-pocket costs.
Enlighten may use the services of its officers, directors, and others to solicit
proxies, personally or by telephone, without additional compensation.
Only shareholders of record on the close of business on June 30, 2000 will
be entitled to vote at the meeting and any adjournment or postponement thereof.
On June 30, 2000, there were 4,953,789 shares of Enlighten's Common Stock issued
and outstanding. Enlighten's Bylaws provide that a majority of all of the shares
of the stock entitled to vote, whether present in person or represented by
proxy, shall constitute a quorum for the transaction of business at the meeting.
Votes for and against, abstentions and "broker non-votes" will each be counted
as present for purposes of determining the presence of a quorum.
Each share of Common Stock is entitled to one vote, except that in the
election of directors each shareholder has cumulative voting rights and is
entitled to as many votes as is equal to the number of shares held multiplied by
the number of directors to be elected (five), which votes may be cast for a
single candidate or distributed among any or all of the candidates. No
shareholder is entitled to cumulate votes with respect to a candidate unless the
candidate's name has been placed in nomination prior to the voting and the
shareholder or any other shareholder has given notice, at the meeting and prior
to the voting, of his or her intention to cumulate his or her votes. If any
shareholder gives such notice, all shareholders may then cumulate their votes.
Management is hereby solicitation discretionary authority to cumulate votes
represented by proxies if cumulative voting is invoked.
The persons authorized to vote shares represented by executed proxies (if
authority to vote for the election of directors is not withheld) will have full
discretion and authority to vote cumulatively and to allocate votes among any
and all nominees as they may determine or, if authority to vote for a specified
candidate or candidates has been withheld, among those candidates for whom
authority to vote has not been withheld. If an executed proxy is submitted
without any instruction for the voting of such proxy, the proxy will be voted in
favor of the proposals described, but votes may be cumulated for less than all
of the nominees for director.
All valid proxies received before the meeting will be exercised. All shares
represented by a proxy will be voted. A shareholder giving a proxy has the power
to revoke his or her proxy at any time before the time it is exercised by
delivering to the Secretary of Enlighten a written instrument revoking the proxy
or a duly executed proxy with a later date, or by attending the meeting and
voting in person.
INFORMATION ABOUT ENLIGHTEN SOFTWARE SOLUTIONS, INC.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 30, 2000, certain information
with respect to the beneficial ownership of Enlighten's common stock by (i) all
persons known by Enlighten to be the beneficial owners of more than 5% of the
outstanding common stock of Enlighten, (ii) each director and director-nominee
of
5
Enlighten, (iii) each Named Executive Officer, and (iv) all executive officers
and directors of Enlighten as a group.
NUMBER OF
SHARES OF PERCENTAGE
COMMON OF
STOCK COMMON
BENEFICIALLY STOCK
BENEFICIAL OWNER(1) OWNED(1)(2) OUTSTANDING
------------------- ------------ -----------
Peter J. McDonald(3)................................. 465,554 9%
Michael Seashols(4).................................. 405,910 8%
David D. Parker(5)................................... 255,376 5%
Bill Bradley(6)...................................... 105,472 2%
Peter J Sprague(7)................................... 46,665 1%
Michael A. Morgan(8)................................. 40,102 1%
Executive officers and directors as a group (7
persons)(9)........................................ 1,339,316 27%
- ---------------
(1) 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 to the information
contained in the footnotes to this table.
(2) Shares beneficially owned and percentages of ownership are based on
4,953,789 shares of common stock outstanding. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or disposition power with respect
to such shares.
(3) Includes 7,500 shares subject to options which are exercisable as of August
29, 2000. Also includes 10,800 shares held by Mr. McDonald's children.
(4) Includes 195,910 shares subject to options which are exercisable as of
August 29, 2000.
(5) Includes 193,376 shares subject to options which are exercisable as of
August 29, 2000.
(6) Consists of shares subject to options which are exercisable as of August 29,
2000.
(7) Consists of shares subject to options which are exercisable as of August 29,
2000.
(8) Consists of shares subject to options which are exercisable as of August 29,
2000.
(9) Includes shares described in Notes 3, 4, 5, 6, 7, and 8.
DIRECTORS AND EXECUTIVE OFFICERS
As of June 30, 2000 Enlighten's directors, all of whom are nominees to be
elected at this meeting, and its executive officers were as follows:
DIRECTOR
NAME AGE POSITION WITH ENLIGHTEN SINCE
---- --- ----------------------- --------
Michael Seashols(1)(2)......... 54 Co-Chairman of the Board of Directors 1997
David D. Parker................ 44 Co-Chairman of the Board of Directors 1997
Bill Bradley................... 44 President and Chief Executive Officer --
Stephen E. Giusti.............. 33 Vice President, Finance and --
Administration and Chief Financial
Officer
Peter J. McDonald.............. 52 Director 1986
Peter J. Sprague(1)(2)......... 61 Director 1994
Michael A. Morgan.............. 37 Director 1991
Mr. Seashols joined Enlighten in July 1997 as Chairman of the Board and
Director. From 1994 through 1997, Mr. Seashols served as Chief Executive Officer
of Usoft, Inc., a wholly-owned software subsidiary of Unysis, Inc. that provides
development and maintenance tools for client/server and Internet based computer
applications. From 1988 through 1993, he served as Chief Executive Officer and
was a founder of Versant Object Technology Corporation, a provider of enterprise
component management software systems for commercial applications in distributed
computing environments. Previously, Mr. Seashols was a founder and
2
6
the original Chief Executive Officer of Documentum, Inc., as well as vice
president of sales for several software companies, including Oracle Corporation
and Ingres. He also currently serves as Chairman of the Board of Evolve
Corporation, a provider of Services Resource Management (SRM) applications
designed to manage mission-critical processes for services organizations, as
well as a consultant to several software companies.
Mr. Parker was elected to the Board of Directors in March 1999 and in
December 1999, became Co-Chairman of the Board of Directors. Mr. Parker served
as President and Chief Executive Officer from August 1997 through December 1999.
From November 1996 through August 1997, Mr. Parker served as President of Web
Logic, a software company developing enterprise Java server components. From
July 1993 through October 1996, Mr. Parker served in various sales management
positions, most recently as Vice President, Indirect Sales of Quintus
Corporation, which markets and develops software and services for use in call
center operations. Mr. Parker has over nineteen years of experience in the
software industry, including senior sales and management positions at Versant
Object Technology Corporation and IBM.
Mr. Bradley was promoted to Chief Executive Officer in December 1999 after
joining Enlighten in August 1998 as Vice President of Business Development and
in September 1999 becoming President and Chief Operating Officer. From October
1997 through August 1998, Mr. Bradley served as a consultant to Enlighten
focusing on business development, strategic planning, and marketing. Mr. Bradley
served as President of Design Technology, Inc. a software development and
consulting firm in Denver, Colorado, from July 1995 through October 1997. He
started his career at IBM in the Data Processing Division and is a graduate of
Colorado College.
Mr. Giusti was promoted to Vice President, Finance and Administration and
Chief Financial Officer in December 1999 after joining Enlighten in August 1999
as Controller. From January 1998 to August 1999, Mr. Giusti served as Accounting
and Financial Reporting Supervisor at Cadence Design Systems, Inc. From January
1991 to December 1997, Mr. Giusti served various positions at the public
accounting firm of Meredith, Cardozo, and Lanz, LLP most recently as Manager.
Mr. Giusti is a Certified Public Accountant in the State of California.
Mr. McDonald founded Enlighten in June 1986 and served as Chairman of the
Board, Director, President, and Chief Executive Officer from that date through
July 1997. Since July 1997, Mr. McDonald has been employed as a strategic
advisor to Enlighten.
Mr. Sprague has served as a Director of Enlighten since February 1994. From
1965 through 1995, Mr. Sprague served as Chairman of the Board of National
Semiconductor Corporation, a leading manufacturer of semiconductor components
and integrated circuits. In May 1988, Mr. Sprague founded Wave Systems Corp., an
electronic information company, for which he currently serves as Chairman.
Mr. Morgan has served as a Director since October 1991. Mr. Morgan is
currently Vice President, Finance and Administration and Chief Financial Officer
of Talarian, Inc. From October 1991 through July 1999, Mr. Morgan served as Vice
President, Finance and Administration, Chief Financial Officer, and Secretary of
Enlighten after joining in May 1991 as Controller.
Meetings of the Board of Directors. During the fiscal year ended December
31, 1999, the Board of Directors of Enlighten held three meetings. No director
attended fewer than 75% of the total number of meetings of the Board of
Directors and of the committees of the Board on which such director served
during fiscal year 1999, other than Mr. Sprague who attended two of the three
Board of Directors meetings.
During fiscal year 1999, Enlighten's Audit Committee was comprised of
Michael Seashols and Peter J. Sprague. The functions of the Audit Committee
include recommending to the Board the retention of independent public
accountants, reviewing and approving the planned scope of the annual audit,
proposed fee arrangements and the results of the annual audit, reviewing the
adequacy of accounting and financial controls, and reviewing the independence of
Enlighten's independent public accountants. The Audit Committee of the Board of
Directors held one meeting during 1999.
3
7
During fiscal year 1999, Enlighten's Compensation Committee was comprised
of Michael Seashols and Peter J. Sprague. The Compensation Committee reviews and
determines compensation criteria for executive officers, including the Chief
Executive Officer, and grants all stock options. The Compensation Committee of
the Board of Directors held one meeting during fiscal year 1999. For additional
information about the Compensation Committee, see "EXECUTIVE COMPENSATION AND
OTHER MATTERS," and "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION," included herein.
Enlighten has no standing nominating committee of the Board.
4
8
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation paid
during the years ended December 31, 1999, 1998 and 1997 of the persons who
served as Chief Executive Officer during 1999 and the other most highly
compensated executive officers of Enlighten in 1999 and two former executive
officers (including the former Chief Executive Officer) who would have been
among the most highly compensated executive officers in 1999 but who were not
executive officers at December 31, 1999 (the "Named Executive Officers"):
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
YEAR SALARY BONUS COMPENSATION OPTIONS
---- -------- ------- ------------ ------------
(SHARES)
Bill Bradley............................ 1999 $143,900 $25,000 $ -- 230,000
President and Chief Executive
Officer(1) 1998 $ 35,700 $ 7,500 $48,700 60,000
1997 $ -- $ -- $24,400 10,000
David D. Parker......................... 1999 $180,000 $30,000 $ -- 100,000
Former President and Chief 1998 $180,000 $45,000 $ -- --
Executive Officer(2) 1997 $ 40,900 $20,000 $ -- 200,000
Michael A. Morgan....................... 1999 $ 81,400 $10,000 $ -- 50,000
Former Vice President, Finance 1998 $120,000 $28,700 $ -- --
and Administration and 1997 $110,000 $23,800 $ -- 50,352(4)
Chief Financial Officer(3)
- ---------------
(1) Mr. Bradley was named President and Chief Operating Officer in September
1999 and Chief Executive Officer in December 1999.
(2) Mr. Parker resigned as an executive officer of Enlighten in December 1999.
(3) Mr. Morgan resigned as an executive officer of Enlighten in July 1999.
(4) Includes options to purchase an aggregate of 15,875 shares granted on June
19, 1997 replacing an option to purchase 3,375 shares granted on September
15, 1993, an option to purchase 5,000 shares granted on July 15, 1994, and
an option to purchase 7,500 shares granted in August 30, 1995. Options to
purchase 15,875 shares were canceled in connection with a repricing in 1997.
5
9
STOCK OPTIONS GRANTED IN 1999
The following table provides the specified information concerning grants of
options to purchase Enlighten's Common Stock made during the fiscal year ended
December 31, 1999 to the Named Executive Officers.
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED(2) FISCAL YEAR SHARE(3) DATE 5% 10%
---- ---------- ------------ --------- ---------- ---------- ----------
Bill Bradley................ 30,000 4% $2.8100 03/04/09 $ 53,000 $134,400
100,000 14% $3.1875 09/20/09 $200,500 $508,000
20,000 3% $3.5000 11/22/09 $ 44,000 $111,600
80,000(4) 11% $3.5000 11/22/09 $176,100 $446,200
David D. Parker............. 100,000 14% $2.8100 03/04/09 $176,700 $447,800
Michael A. Morgan........... 30,000 4% $2.8100 12/31/00 $ 8,600 $ 17,700
20,000 3% $3.6880 07/30/09 $ 57,500 $128,700
- ---------------
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
Enlighten's Common Stock, overall market conditions, and the option holder's
continued employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved.
(2) Options granted were granted pursuant to Enlighten's 1992 Stock Option Plan.
These options, except as noted, vest and become exercisable at the rate of
one-seventh six months from the date of grant and 1/42 per month thereafter
for each full month of the optionee's continuous employment by Enlighten.
Under Enlighten's 1992 Stock Option Plan, the Board retains discretion to
modify the terms, including the price, of the outstanding options. See
"Employee Contracts and Termination of Employment and Change of Control
Agreements."
(3) All options were granted at market value on the date of grant.
(4) Represents a non-qualified stock option. These options vest and become
exercisable at the rate of one-seventh six months from the date of grant and
1/42 per month thereafter for each full month of the optionee's continuous
employment by Enlighten.
AGGREGATE OPTION EXERCISES AND FISCAL 1999 YEAR-END VALUES
The following table provides the specified information concerning exercises
of options to purchase Enlighten's common stock in the fiscal year ended
December 31, 1999 and unexercised options held as of December 31, 1999 by the
Named Executive Officers.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1999(1) AT DECEMBER 31, 1999(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Bill Bradley............ -- $ -- 40,713 259,287 $106,375 $577,875
David D. Parker......... 9,000 $ 48,938 136,234 154,766 $477,895 $484,895
Michael A. Morgan....... 100,000 $436,555 35,102 18,334 $122,026 $ 33,221
- ---------------
(1) Enlighten stock options generally vest one-seventh six months from the date
of grant and 1/42 per month thereafter for each full month of the optionee's
continuous employment by Enlighten. Options are exercisable only to the
extent vested. Directors stock options generally vest 1/12 each quarter.
6
10
(2) The value of the unexercised in-the-money options is based on the closing
price of Enlighten's common stock ($5.50 per share as reported on the Nasdaq
Stock Market) on December 31, 1999, and is net of the exercise price of such
options.
COMPENSATION OF DIRECTORS
Directors who are employees of Enlighten do not receive any compensation
for their services as directors. Directors who are not employees of Enlighten
receive between $500 and $750 for attendance at each Board Meeting.
Additionally, Enlighten's 1992 Stock Option Plan (the "Option Plan") provides
that the Board has no authority, discretion, or power to grant options to any
independent directors. Instead, each nonemployee director is automatically
granted a nonqualified stock option to purchase 5,000 shares of common stock
upon initial appointment or election and, for each year that a nonemployee
director continues to serve on the Board, options to purchase 5,000 shares of
common stock on the anniversary date of such initial appointment or election.
Such options vest quarterly over a three-year period. Options to purchase 5,000
shares at an exercise price of $3.23 per share were granted to Mr. Sprague in
February 1999 and options to purchase 5,000 shares at an exercise price of $3.13
per share were granted to Mr. Morgan in July 1999.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Enlighten has entered into an agreement with its Chief Executive Officer
("CEO") providing for benefits upon termination. The agreement provides that in
the event the CEO's employment is terminated by Enlighten, other than for
"Cause," or if the CEO terminates his employment with Enlighten for "Good
Reason" (as those terms are defined in the agreement), the CEO shall be entitled
to the following: (i) a severance payment equal to six (6) months of his
then-current base salary; and (ii) accelerated vesting equal to six (6) months
of normal vesting in all stock options granted prior to the date of termination.
Enlighten has also entered into an agreement with its Chief Financial
Officer ("CFO"), providing for benefits upon termination and in the event of a
"Change of Control" (as defined in the agreement). The agreement provides that
in the event of a Change of Control, if the CFO's employment is terminated by
Enlighten or its successor within ninety (90) days of a Change of Control, other
than for cause, or if the CFO terminates his employment because of a change in
duties, or in certain other circumstances, the CFO shall be entitled to the
following: (i) a one-time payment equal to six (6) months of his then-current
base salary; (ii) full vesting in all stock options.
The Option Plan provides that in the event of certain mergers, sales of
assets, or sales by the shareholders of substantially all of their voting stock
in Enlighten constituting a "Transfer of Control," as defined in the Option
Plan, the Board may, in its sole discretion, arrange for the surviving,
continuing, successor, or purchasing corporation or a parent corporation
thereof, as the case may be (the "Acquiring Corporation"), to either assume
Enlighten's rights and obligations under outstanding stock option agreements
under the Option Plan (the "Options") or substitute options for the Acquiring
Corporation's stock for such outstanding Options. The Board may also provide
that any options that are not assumed or substituted for by the Acquiring
Corporation will be fully vested and exercisable as of a date prior to the
Transfer of Control. An Option will terminate effective as of the date of the
Transfer of Control to the extent that the Option is neither assumed by the
Acquiring Corporation, nor exercised as of the date of the Transfer of Control.
Enlighten's 1994 Employee Stock Purchase Plan (the "Purchase Plan")
provides that in the event of a "Transfer of Control," as defined in the
Purchase Plan, the Board may, in its sole discretion, arrange for the assumption
of Enlighten's rights and obligations under the Purchase Plan by the acquiring
or successor corporation. All purchase rights shall terminate if no assumption
occurs.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Enlighten's
executive officers, directors, and persons who beneficially own more than 10% of
Enlighten's common stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC").
7
11
Such persons are required by SEC regulations to furnish Enlighten with copies of
all Section 16(a) forms filed by such persons.
Based solely on Enlighten's review of such forms furnished to Enlighten and
written representations from certain reporting persons, Enlighten believes that
all filing requirements applicable to Enlighten's executive officers, directors,
and persons who beneficially own more than 10% of Enlighten's common stock were
complied with in 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For transactions between Enlighten and its officers, directors, and holders
of more than 5% of its outstanding common stock, see "Summary Compensation
Table," "Stock Options Granted in 1999," "Option Exercises and 1999 Year-End
Values," and "Compensation of Directors."
All future transactions, including loans, between Enlighten and its
officers, directors, principal shareholders, and their affiliates will continue
to be approved by the Board, including a majority of the disinterested
directors.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
OVERVIEW AND POLICIES FOR 1999
During the fiscal year ended December 31, 1999, the Compensation Committee
(the "Committee") of the Board of Directors was comprised of two outside
directors of Enlighten, Michael Seashols and Peter Sprague. No member of the
Committee is a current or former officer or employee of Enlighten. The Committee
is responsible for setting and administering the policies governing compensation
of Enlighten's employees, including its executive officers. The Committee
reviews the performance and compensation levels for the executive officers and
sets salary levels. The objectives of Enlighten's executive officer compensation
policy are to attract, retain, and reward executive officers who contribute to
Enlighten's success and to motivate these executives to achieve Enlighten's
business objectives.
The Committee's overall policy is to offer Enlighten's executive officers
competitive compensation opportunities based upon their personal performance,
the financial performance of Enlighten, and their contribution to that
performance. It is a policy of the Committee that a portion of each officer's
compensation be contingent upon Enlighten's performance as well as individual
level of performance. Each executive officer's compensation package is comprised
of three elements: (i) base salary which reflects individual performance and is
designed primarily to be competitive with salary levels in the industry, (ii)
quarterly and/or annual variable performance awards payable in cash and tied to
the achievement of quarterly and/or annual financial or other performance goals
established by the Committee, and (iii) long-term stock-based incentive awards
designed to strengthen the mutuality of interests among the executive officers
and Enlighten's shareholders. The Committee also compares aggregate executive
compensation as well as compensation for each executive with similarly-sized
high technology companies in Enlighten's geographic location.
The Committee strongly believes that employee compensation should be based
in part on Enlighten's performance and utilizes stock options and incentive
bonuses to accomplish this goal. The Committee believes that equity ownership by
employees, including executive officers, serves to align their interests with
the interests of shareholders by providing the employees with incentive to build
shareholder value.
Quarterly and annual bonuses are earned by each executive officer on the
basis of Enlighten's achievement of corporate and business unit performance
targets established by the Committee at the start of the year. The individual
bonus targets for 1999 were based on attainment of predetermined financial
targets, as well as other strategic management objectives.
8
12
Generally, stock option grants are reviewed annually by the Committee.
Grants are designed to align the interests of the executive officer with those
of the shareholders and provide each individual with a significant incentive to
manage Enlighten from the perspective of an owner with an equity stake in the
business. The size of the option grant to each executive officer is set at a
level which is intended to create a meaningful opportunity for stock ownership
based upon the individual's current position with Enlighten and the base salary
associated with that position, the size of comparable grants made to individuals
in similar positions in the industry, the individual's potential for future
responsibility and promotion over the option term, the individual's personal
performance in recent periods, and the number of options held by the individual
at the time of grant. The relative weight given to these factors varies with
each individual in the sole discretion of the Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee annually reviews the performance and compensation of the
President and Chief Executive Officer based on the assessment of his past
performance and its expectation of his future contributions to Enlighten's
performance.
David D. Parker served as Chief Executive Officer in 1999 and President
through September 22, 1999. Mr. Parker's base salary was $180,000 during 1999
and was eligible to receive an additional $60,000 in annual cash bonus
compensation in quarterly increments provided Enlighten met certain operational
targets established by the Board of Directors, as well as other discretionary
bonuses determined by the Compensation Committee. During 1999, Mr. Parker was
paid two quarterly bonuses of $15,000 each for attaining certain operational and
strategic targets established by the Compensation Committee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Enlighten has considered the amendments to the Internal Revenue Code and
related regulations of the Internal Revenue Service which restrict deductibility
of executive compensation paid to each of the most highly compensated executive
officers at the end of any fiscal year to the extent such compensation exceeds
$1,000,000 for any such officers in any year and does not qualify for an
exception under the statute or proposed regulations. The Committee does not
believe that other components of Enlighten's compensation will be likely to
exceed $1,000,000 for any executive officer in the foreseeable future and
therefore concluded that no other action with respect to qualifying such
compensation for deductibility was necessary at this time. In the future, the
Committee will continue to evaluate the advisability of qualifying its executive
compensation for deductibility of such compensation. The Committee's policy is
to qualify its executive compensation for deductibility under applicable tax
laws as practicable.
COMPENSATION COMMITTEE
Michael Seashols
Peter J. Sprague
9
13
COMPARISON OF SHAREHOLDER RETURN
Set forth below is a line graph comparing the percentage change in the
cumulative total return on Enlighten's Common Stock with the cumulative total
return of the Nasdaq Computer and Data Processing Stocks Index and The Nasdaq
Stock Market (U.S.) Index for the period commencing on December 31, 1994, and
ending on December 31, 1999.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 31, 1994
THROUGH DECEMBER 31, 1999(1)
ENLIGHTEN SOFTWARE SOLUTIONS, INC., THE NASDAQ COMPUTER AND DATA
PROCESSING STOCKS INDEX, AND THE NASDAQ STOCK MARKET (U.S.) INDEX
COMPARISON CHART
ENLIGHTEN NASDAQ COMPUTER &
SOFTWARE DATA PROCESSING NASDAQ STOCK
SOLUTIONS, INC. STOCKS INDEX MARKET (U.S.)
--------------- ----------------- -------------
December 31, 1994.............. $100.00 $100.00 $100.00
December 31, 1995.............. $ 54.48 $152.28 $141.33
December 31, 1996.............. $ 84.75 $187.95 $173.89
December 31, 1997.............. $ 57.51 $230.90 $213.07
December 31, 1998.............. $ 55.93 $412.23 $300.25
December 31, 1999.............. $133.17 $871.27 $542.43
- ---------------
(1) Assumes that $100.00 was invested on December 31, 1994 in Enlighten's Common
Stock, at the closing sales price, and in each index and that all dividends
were reinvested. No cash dividends have been declared on Enlighten's Common
Stock. Shareholder returns over the indicated period should not be
considered indicative of future shareholder returns.
10
14
ELECTION OF DIRECTORS
Five (5) directors of Enlighten are to be elected for the ensuing year or
until their successors are elected and qualified. Proxies cannot be voted for a
greater number of persons than the number of nominees named. If elected, each
nominee will hold office until the next Annual Meeting of Shareholders or until
his successor is elected and qualified, unless he resigns or his office becomes
vacant by death, removal, or other cause in accordance with the Bylaws of
Enlighten. The persons named in the accompanying form of proxy will vote the
shares represented thereby for the five nominees but may cumulate the votes for
less than all of the nominees, as permitted by the laws of the State of
California, unless otherwise instructed. The five nominees are Michael Seashols,
David D. Parker, Michael A. Morgan, Peter J. McDonald and Peter J. Sprague.
Please see "Information About Enlighten Software Solutions, Inc. -- Directors
and Executive Officers" above for information concerning the nominees. Enlighten
knows of no reason why any of these nominees should be unable or unwilling to
serve. However, if any nominee(s) should for any reason be unable or unwilling
to serve, the proxies will be voted for the election of such other person(s) for
the office of director as the Board may recommend in the place of such
nominee(s).
If a quorum is present and voting, the five nominees receiving the highest
number of votes will be elected directors. Votes for and against, abstentions,
and "broker non-votes" will each be counted as present for purposes of
determining the presence of a quorum. Abstentions and "broker non-votes" will
have no effect on the outcome of this vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES
NAMED ABOVE.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE
TOTAL AUTHORIZED SHARES TO 20,000,000
PROPOSED ACTION
The Board is proposing an amendment to Enlighten's Amended and Restated
Articles of Incorporation (the "Restated Articles") to increase the number of
authorized shares of Common Stock from 10,000,000 shares to 20,000,000 shares of
Common Stock.
DESCRIPTION OF PROPOSAL
Article III, Section 1 of the Restated Articles currently authorizes
Enlighten to issue 10,000,000 shares of Common Stock. As of June 30, 2000,
approximately 4,953,789 shares of Common Stock were outstanding. Of the
remaining authorized but unissued shares, approximately 1,506,100 shares were
reserved for issuance under Enlighten's stock option and employee stock purchase
plans and 899,063 were reserved for issuance from warrants to purchase shares of
Common Stock. Accordingly, Enlighten has approximately 2,641,048 shares
remaining available for issuance.
If the proposed amendment were approved, 10,000,000 additional shares of
Common Stock would be authorized but unissued. These additional authorized
shares of Common Stock would be available for various business purposes such as
financings, acquisitions, employee benefit plans, stock splits and stock
dividends.
The issuance of additional shares of Common Stock, other than in connection
with stock splits and stock dividends, could have the effect of diluting
earnings per share, voting power and shareholdings of stockholders. It could
also have the effect of making it more difficult for a third party to acquire
control of Enlighten. Other than in connection with Enlighten's existing
employee stock option and stock purchase plans and warrants, Enlighten has no
present intent to issue any shares of Common Stock.
11
15
Upon approval by the shareholders, Article III, Section 1 of the Restated
Articles will be amended to read in its entirety as follows:
"ARTICLE III
CAPITAL STOCK
SECTION 1. This corporation is authorized to issue two classes of shares
designated respectively "Common Stock" and "Preferred Stock", and referred to
herein either as Common Stock or Common shares and Preferred Stock or Preferred
shares, respectively. The number of shares of Common Stock is 20,000,000 and the
number of shares of Preferred Stock is 1,000,000."
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the outstanding shares in accordance
with sections 902 and 903 of the California Corporations Code is required for
approval of this proposal. Votes for and against, abstentions, and "broker
non-votes" will each be counted as present for purposes of determining the
presence of a quorum. Abstentions and "broker non-votes" will have no effect on
the outcome of this vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL TO
AMEND THE ARTICLES OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK FROM 10,000,000 SHARES TO 20,000,000 SHARES OF COMMON STOCK.
PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN
The Board of Directors and Enlighten's sole shareholder initially approved
the adoption of the 1992 Stock Option Plan (the "Option Plan") on October 30,
1992 and September 10, 1993, respectively. On February 14, 1994 and February 15,
1994, respectively, the Board of Directors and the sole shareholder approved
amendments to the Option Plan to provide for the automatic grant of options to
nonemployee directors of Enlighten. On May 15, 1995, Enlighten's shareholders
approved an amendment to the Option Plan to increase the aggregate maximum
number of shares of Enlighten's Common Stock issuable under the Option Plan by
590,000 shares, from 410,000 shares to 1,000,000 shares. On May 20, 1996,
Enlighten's shareholders approved an amendment to the Option Plan to increase
the aggregate maximum number of shares of Enlighten's Common Stock issuable
under the Option Plan by 500,000 shares, from 1,000,000 shares to 1,500,000
shares. On May 20, 1999, Enlighten's shareholders approved an amendment to the
Option Plan to increase the aggregate maximum number of shares of Enlighten's
Common Stock issuable under the Option Plan by 500,000 shares, from 1,500,000
shares to 2,000,000 shares. As of June 30, 2000, 269,110 shares remained
available for future stock option grants. On July 17, 2000, the Board of
Directors amended the Option Plan, subject to shareholder approval, to increase
the total number of shares reserved for issuance under the Option Plan to
3,000,000 shares.
The rapid increase in the competitive environment for employees in
Enlighten's industry and geographic region, and Enlighten's need to attract,
hire and retain high caliber employees, including at the executive management
level, has made it incumbent on Enlighten to issue more options than originally
planned for, both in aggregate as well as to individuals. Due to the limited
number of remaining shares, the Board of Directors believes it appropriate at
this time to seek shareholder approval of an amendment to the Option Plan,
authorizing an increase of an additional 1,000,000 shares for future stock
option awards.
SUMMARY OF THE PROVISIONS OF THE OPTION PLAN AS AMENDED
The following summary of the Option Plan as amended is qualified in its
entirety by the specific language of the Option Plan, a copy of which is
available to any shareholder upon request.
General. The Option Plan provides for the grant of incentive stock options
within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), and nonstatutory stock options. Currently, a maximum of
2,000,000 of the authorized but unissued shares of Enlighten's Common
12
16
Stock may be issued upon the exercise of options under the Option Plan. The
Board has amended the Option Plan, subject to shareholder approval, to increase
by 1,000,000 to 3,000,000 the aggregate maximum number of shares that may be
issued thereunder. In the event of any stock dividend, stock split, reverse
stock split, recapitalization, combination, reclassification, or similar change
in the capital structure of Enlighten, appropriate adjustments will be made to
the shares subject to the Option Plan, to the Employee Option Limit (as defined
below), and to outstanding options. To the extent any outstanding option under
the Option Plan expires or terminates prior to exercise in full, the shares for
which the option has not been exercised are returned to the Option Plan and
become available for future grant.
Administration. The Option Plan is administered by the Board or a duly
appointed committee of the Board (together, the "Administrator"). However, with
respect to the participation of individuals who are subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
Plan must be administered in compliance with the requirements of Rule 16b-3
under the Exchange Act. Subject to the provisions of the Option Plan and
limitations on the exercise of discretion with respect to Director Options, the
Administrator determines the persons to whom options are to be granted, the
number of shares to be covered by each option, whether an option is to be an
incentive stock option or a nonstatutory stock option, the terms of vesting and
exercisability of each option, the type of consideration to be paid to Enlighten
upon exercise of an option, the duration of each option, and all other terms and
conditions of the options. The Administrator will interpret the Option Plan and
options granted under the Option Plan, and all determinations of the
Administrator will be final and binding on all persons having an interest in the
Option Plan or any option.
Employee Options. All employees (including officers and directors who are
also employees), consultants, advisors or other independent contractors of
Enlighten or of any present or future parent or subsidiary corporations of
Enlighten are eligible to receive Employee Options under the Option Plan.
Employee Options may also be granted to prospective employees or consultants in
connection with written offers of employment. As of June 30, 2000, Enlighten had
approximately 36 employees, including three executive officers. Only employees
may be granted incentive stock options.
Currently, the Option Plan limits the number of shares for which Employee
Options may be granted to any person within any fiscal year of Enlighten to
150,000 (the "Employee Option Limit"). Enlighten intends that compensation
related to Employee Options granted under the Option Plan qualify for the
"performance-based compensation" exemption under Section 162(m) of the Code.
Section 162(m) generally limits the deductibility by Enlighten for federal
income tax purposes of compensation paid to certain executive officers.
Each Employee Option is evidenced by a written agreement between Enlighten
and the optionee specifying the number of shares subject to the option and the
other terms and conditions of the option, consistent with the requirements of
the Option Plan. The per share exercise price of an incentive stock option must
equal at least the fair market value of a share of Enlighten's Common Stock on
the date of grant. However, the per share exercise price of any Employee Option
granted to a person who at the time of grant owns stock possessing more than 10%
of the total combined voting power of all classes of stock of Enlighten or any
parent or subsidiary corporation of Enlighten must be at least 110% of the fair
market value of a share of Enlighten's Common Stock on the date of grant, and
the term of any such option cannot exceed five years. The per share exercise
price of a nonstatutory stock option may be no less than 85% of the fair market
value of a share of the Common Stock on the date of grant. On June 30, 2000, the
closing price of Enlighten's Common Stock, as reported by The Nasdaq SmallCap
Market, was $3.75 per share.
Generally, Employee Options may be exercised by payment of the exercise
price in cash, by check, or in cash equivalent, by tender of shares of
Enlighten's Common Stock owned by the optionee having a fair market value not
less than the exercise price, by the assignment of the proceeds of a sale of
some or all of the shares of Common Stock being acquired upon the exercise of
the option, or by any combination of these. However, the Administrator may
restrict the forms of payment permitted in connection with any option grant or
may grant options permitting payment of the exercise price with a recourse
promissory note in a form approved by Enlighten.
13
17
Employee Options become exercisable and vested at such times as specified
by the Administrator. Generally, Employee Options become exercisable in
installments, subject to the optionee's continued employment or service. The
maximum term of Employee Options is ten years. Employee Options are
nontransferable by the optionee other than by will or by the laws of descent and
distribution, and are exercisable during the optionee's lifetime only by the
optionee.
Director Options. Only members of the Board of Directors who are not
employees of Enlighten or any parent or subsidiary corporation of Enlighten
("Outside Directors") are eligible to receive Director Options under the Option
Plan. As of June 30, 2000, Enlighten had three Outside Directors. Director
Options are nonstatutory stock options.
The Director Option component of the Option Plan is intended to constitute
a "formula plan" within the meaning of Rule 16b-3 under the Exchange Act.
Accordingly, Director Options are granted automatically and without the
Administrator's discretion as to eligibility to receive Director Options or the
amount, price and timing of Director Options. The Option Plan provides that on
the first anniversary of the effective date (February 14, 1994) of the amendment
to the Option Plan authorizing the grant of Directors Options (the "Effective
Date"), each Outside Director who held office on the Effective Date is
automatically granted a Director Option for 5,000 shares of Enlighten's Common
Stock. Each new Outside Director first appointed or elected to the Board after
the Effective Date will automatically receive a Director Option for 5,000 shares
on the date of such appointment or election. In addition, each Outside Director
will automatically receive an annual grant of a Director Option for 5,000
shares. The annual grant will be made on the anniversary of the Effective Date
for each Outside Director holding office on the Effective Date or on the
anniversary of an Outside Director's initial Director Option grant for all other
Outside Directors.
Each Director Option is evidenced by a written agreement between Enlighten
and the Outside Director specifying the number of shares subject to the option
and the other terms and conditions of the option, consistent with the
requirements of the Option Plan. The per share exercise price of each Director
Option is the fair market value of a share of Enlighten's Common Stock on the
date of grant. Director Options may be exercised by payment of the exercise
price in cash, by check, or in cash equivalent, by tender of shares of
Enlighten's Common Stock owned by the optionee having a fair market value not
less than the exercise price, by the assignment of the proceeds of a sale of
some or all of the shares of Common Stock being acquired upon the exercise of
the option, or by any combination of these.
Director Options become exercisable in twelve approximately equal quarterly
installments, subject to the Outside Director's continued service on the Board,
and terminate ten years after the date of grant. Director Options are
nontransferable by the optionee other than by will or by the laws of descent and
distribution, and are exercisable during the optionee's lifetime only by the
optionee.
Transfer of Control. A "Transfer of Control" will be deemed to occur upon
any of the following events in which the shareholders of Enlighten do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of Enlighten or its successor: (i) the direct or indirect
sale or exchange by the shareholders of Enlighten of all or substantially all of
the stock of Enlighten, or (ii) a merger in which Enlighten is a party. A
Transfer of Control will also occur in the event of the sale, exchange or
transfer (other than to a subsidiary of Enlighten) of all or substantially all
of the assets of Enlighten or a liquidation or dissolution of Enlighten. If a
Transfer of Control occurs, the Board of Directors may arrange with the
surviving, continuing, successor, or purchasing corporation or parent
corporation thereof (the "Acquiring Corporation") to either assume outstanding
options or substitute options for the Acquiring Corporation's stock for the
outstanding options. However, if the Acquiring Corporation does not assume or
substitute for outstanding options in connection with a Transfer of Control, the
Board of Directors may provide that any unexercisable portion of the outstanding
options will be fully exercisable as of a date prior to the Transfer of Control.
Any options which are neither assumed nor substituted for by the Acquiring
Corporation nor exercised as of the date of the Transfer of Control will
terminate effective as of such date.
Termination or Amendment. Unless sooner terminated, no options may be
granted under the Option Plan after February 14, 2004. The Administrator may
terminate or amend the Option Plan at any time, but, without shareholder
approval, the Administrator may not amend the Option Plan to increase the total
number
14
18
of shares of Common Stock reserved for issuance thereunder, change the class of
persons eligible to receive incentive stock options, or expand the class of
persons eligible to receive nonstatutory stock options. No amendment may
adversely affect an outstanding option without the consent of the optionee,
unless the amendment is intended to preserve the option's status as an incentive
stock option.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE OPTION PLAN
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law with respect to
participation in the Option Plan and does not attempt to describe all possible
federal or other tax consequences of such participation or tax consequences
based on particular circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under Section 422. Optionees who do not
dispose of their shares for two years following the date the option was granted
nor within one year following the exercise of the option will normally recognize
a long-term capital gain or loss equal to the difference, if any, between the
sale price and the purchase price of the shares. If an optionee satisfies such
holding periods upon a sale of the shares, Enlighten will not be entitled to any
deduction for federal income tax purposes. If an optionee disposes of shares
within two years after the date of grant or within one year from the date of
exercise (a "disqualifying disposition"), the difference between the fair market
value of the shares on the determination date (see discussion under
"Nonstatutory Stock Options" below) and the option exercise price (not to exceed
the gain realized on the sale if the disposition is a transaction with respect
to which a loss, if sustained, would be recognized) will be taxed as ordinary
income at the time of disposition. Any gain in excess of that amount will be a
capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period is more than 12 months. Any ordinary income
recognized by the optionee upon the disqualifying disposition of the shares
generally should be deductible by Enlighten for federal income tax purposes,
except to the extent such deduction is limited by Section 162(m) of the Code.
The difference between the option exercise price and the fair market value
of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain subsequent sales
of the shares in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory stock
options have no special tax status. An optionee generally recognizes no taxable
income as the result of the grant of such an option. Upon exercise of a
nonstatutory stock option, the optionee normally recognizes ordinary income in
the amount of the difference between the option exercise price and the fair
market value of the shares on the determination date (as defined below). If the
optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. The "determination date" is the date
on which the option is exercised unless the shares are subject to a substantial
risk of forfeiture and are not transferable, in which case the determination
date is the earlier of (i) the date on which the shares are transferable or (ii)
the date on which the shares are not subject to a substantial risk of
forfeiture. If the determination date is after the exercise date, the optionee
may elect, pursuant to Section 83(b) of the Code, to have the exercise date be
the determination date by filing an election with the Internal Revenue Service
not later than 30 days after the date the option is exercised. Upon the sale of
stock acquired by the exercise of a nonstatutory stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
date of recognition of income, will be taxed as capital gain or loss. A capital
gain or loss will be long-term if the optionee's holding period is more than 12
months. No tax deduction is available to Enlighten with respect to the grant of
a nonstatutory option or the sale of the stock acquired pursuant to such grant.
Enlighten generally should be entitled to a deduction equal
15
19
to the amount of ordinary income recognized by the optionee as a result of the
exercise of a nonstatutory option, except to the extent such deduction is
limited by Section 162(m) of the Code, as described above.
AMENDED PLAN BENEFITS AND ADDITIONAL INFORMATION
With the exception of the automatic grant of options to non-employee
directors, future grants under the Option Plan will be made at the discretion of
the Compensation Committee, and, accordingly, are not yet determinable. In
addition, the benefits under the Option Plan will depend on a number of factors,
including the fair market value of Enlighten's common stock on future dates and
the exercise decisions made by the optionees. Consequently, it is not possible
to determine the benefits that might be received by optionees receiving
discretionary grants under the Option Plan.
In calendar year 2000, options for an aggregate of 10,000 shares will be
granted automatically under the Option Plan to the current non-employee
directors of Enlighten provided that the nominees are elected. The numbers of
shares of common stock subject to options granted to certain persons under the
Option Plan from its inception through December 31, 1999, are as follows:
Messrs. Seashols, Parker, Bradley and Morgan were granted options to purchase
250,000 shares, 250,000 shares, 220,000 shares and 135,000 shares, respectively;
all current executive officers as a group were granted options to purchase an
aggregate of 280,000 shares; all current directors who are not executive
officers as a group were granted options to purchase an aggregate of 708,750
shares; and all employees, including all current officers who are not executive
officers, as a group were granted options to purchase an aggregate of 1,719,905
shares. Since the inception of the Option Plan, no person other than those
individuals set forth above was granted five percent or more of the total amount
of options granted under the Option Plan since its inception.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes present and voting at the
annual meeting of shareholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of Enlighten entitled to vote is present,
either in person or by proxy, is required for approval of this proposal. Votes
for and against, abstentions, and "broker non-votes" will each be counted as
present for purposes of determining the presence of a quorum. Abstentions and
"broker non-votes" will have no effect on the outcome of this vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF AN
INCREASE IN THE AGGREGATE MAXIMUM NUMBER OF SHARES OF ENLIGHTEN'S COMMON STOCK
ISSUABLE UNDER ITS 1992 STOCK OPTION PLAN BY 1,000,000 SHARES, FROM 2,000,000
SHARES TO 3,000,000 SHARES.
PROPOSAL TO AMEND THE 1994 EMPLOYEE STOCK OWNERSHIP PLAN
In February 1994, the Board and shareholders adopted, Enlighten's 1994
Employee Stock Purchase Plan (the "Employee Plan"). The aggregate number of
shares of Common Stock authorized for issuance under the Employee Plan is
200,000 shares. As of June 30, 2000, 55,668 shares of Common Stock remained
available under the Employee Plan.
On July 17, 2000, the Board approved the amendment of the Employee Plan,
subject to shareholder ratification, to increase the number of shares of Common
Stock authorized for issuance under the Employee Plan to a total of 300,000
shares. The Board adopted this amendment in order to ensure that Enlighten can
continue to grant purchase rights at levels determined appropriate by the Board.
The following summary of the main features of the Employee Plan is
qualified in its entirety by the complete text of the Employee Plan, a copy of
which may be obtained upon request from the Corporate Secretary of Enlighten.
PURPOSE
The purpose of the Employee Plan is to provide a means by which employees
of Enlighten may be given an opportunity to purchase Common Stock of Enlighten
through payroll deductions, to assist Enlighten in
16
20
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 Enlighten.
The rights to purchase Common Stock granted under the Employee Plan 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 Board administers the Employee Plan and has the final power to construe
and interpret both the Employee Plan and the rights granted under it. The Board
has the power, subject to the provisions of the Employee Plan, to determine when
and how rights to purchase Common Stock of Enlighten will be granted, the
provisions of each offering of such rights (which need not be identical), and
whether employees of any parent or subsidiary of Enlighten will be eligible to
participate in the Employee Plan.
The Board has the power to delegate administration of the Employee Plan to
a committee composed of not fewer than two members of the Board. The Board has
delegated administration of the Employee Plan to the Compensation Committee of
the Board. As used herein with respect to the Employee Plan, the "Board" refers
to any committee the Board appoints to administer the Employee Plan as well as
to the Board itself.
STOCK SUBJECT TO EMPLOYEE PLAN
Subject to this Proposal, the Board has reserved an aggregate of 300,000
shares of Common Stock for issuance under the Employee Plan. If rights granted
under the Employee Plan expire, lapse or otherwise terminate without being
exercised, the shares of Common Stock not purchased under such rights again
become available for issuance under the Employee Plan.
OFFERINGS
The Board implements the Employee Plan by offerings of rights to all
eligible employees from time to time. Currently each Offering Period is 12
months long and is divided into two shorter "purchase periods," each
approximately six months long. A new Offering Period begins on each August 1 and
February 1. However, an eligible employee may not participate in more than one
Offering at a time. Rights granted under the Employee Plan are not transferable
and may be exercised only by the person to whom such rights are granted.
If on any purchase date during an Offering the fair market value of the
shares of Common Stock of Enlighten is less than it was on the offering date for
that Offering, on the day after such purchase date (i.e., the next February 1 or
August 1) that offering shall immediately terminate and the participants in the
terminated offering automatically will be enrolled in the new Offering
commencing that day.
In addition, if the terms of an Offering would, as a result of a change to
applicable accounting standards, generate a charge to earnings for Enlighten,
that Offering will terminate effective as of the day prior to the date such
change to accounting standards would otherwise first apply to the offering, and
that date will be the final purchase date for that offering. A new Offering will
start on a date and on the terms as provided by the Board.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by Enlighten on the first day of an offering is
eligible to participate in that Offering if such employee was employed by
Enlighten for three months of continuous employment with Enlighten as of the
commencement of an Offering Period.
However, no employee is eligible to participate in the Employee Plan if,
immediately after the grant of purchase rights, 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 Enlighten (including any stock which such
employee
17
21
may purchase under all outstanding rights and options). In addition, no employee
may accrue the right to purchase shares under the Employee Plan and any other
employee stock purchase plans of Enlighten at a rate that exceeds $25,000 worth
of Common Stock (determined at the fair market value of the shares at the time
such right is granted) for each Offering Period in which such right is
outstanding at any time, provided that such number shall not exceed 1,500
shares.
Rights granted pursuant to any offering under the Employee Plan terminate
immediately upon cessation of an employee's employment for any reason, and
Enlighten will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
PARTICIPATION IN THE PLAN
Eligible employees enroll in the Employee Plan by delivering to Enlighten,
prior to the date selected by the Board as the offering date for the offering,
an agreement authorizing payroll deductions of from 1% to 10% of such employees'
compensation (as defined for the Offering) during the purchase period.
A participant may terminate payroll deductions and withdraw from a given
Offering by delivering to Enlighten a notice of withdrawal from the Employee
Plan. The participant may elect such withdrawal at any time up to the 15th day
of the last month of a purchase period.
Upon an employee's withdrawal from an offering, Enlighten will distribute
to the employee his or her accumulated payroll deductions without interest, less
any accumulated deductions previously applied to the purchase of shares of
Common Stock on the employee's behalf during such offering.
PURCHASE PRICE
The purchase price per share at which shares of Common Stock are sold in an
offering under the Employee Plan is the lower of (i) 85% of the fair market
value of a share of Common Stock on the first day of the offering or (ii) 85% of
the fair market value of a share of Common Stock on the last day of the
applicable purchase period.
PURCHASE OF STOCK
A participant accumulates the purchase price of the shares by payroll
deductions over the course of the offering. At any time during the offering, a
participant may reduce or terminate his or her payroll deductions as the Board
provides in the offering. If the Board so provides with respect to a particular
offering, an employee who first becomes eligible to participate after the
offering starts may enroll as of the date specified during the purchase period.
Enlighten will credit all payroll deductions made for a participant to the
participant's account under the Employee Plan and will deposit the payroll
deductions with the general funds of Enlighten. A participant may not make
additional payments into such account.
In connection with offerings made under the Employee Plan, the Board
specifies a maximum number of shares of Common Stock an employee may be granted
the right to purchase and the maximum aggregate number of shares of Common Stock
that 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 of shares of Common Stock
available, the Board would make a pro rata allocation of available shares in a
uniform and equitable manner. Unless the employee's participation is
discontinued, his or her right to purchase shares is exercised automatically at
the end of the purchase period at the applicable price.
In addition, if the purchase price of the shares on any purchase date is
less than 85% of the fair market value of the shares on the offering date for
that offering, then no more than 200% of the number of shares that could have
been purchased with the payroll deductions authorized by a participant and
actually withheld during that purchase period at a price equal to 85% of the
fair market value of the shares on the offering date may be purchased by the
participant on that purchase date.
18
22
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Employee Plan at any time. Unless
terminated earlier, the Employee Plan will terminate at the time that all of the
shares subject to the Employee Plan's reserve, as increased and/or adjusted from
time to time, have been issued under the terms of the Employee Plan.
The Board may amend the Employee Plan at any time. Any amendment of the
Employee Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (i) increase the number of shares
of Common Stock reserved for issuance under the Employee Plan, (ii) modify the
requirements relating to eligibility for participation in the Employee Plan, or
(iii) modify any other provision of the Employee Plan if such approval is
required in order to comply with the requirements of Rule 16b-3 under the
Exchange Act or under any Nasdaq or other securities exchange listing
requirements.
Rights granted before amendment or termination of the Employee Plan will
not be altered or impaired by any amendment or termination of the Employee Plan
without the consent of the employee to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger of
Enlighten, the surviving corporation either will assume the rights under the
Employee Plan or substitute similar rights, or, at the Board's discretion, the
exercise date of any ongoing offering will be accelerated such that the
outstanding rights may be exercised immediately prior to, or concurrent with,
any such event. The amendments to the Employee Plan clarify that this provision
applies in the case of consolidations and reverse mergers. The Board must notify
the participants that their rights under the Employee Plan will be fully
exercisable for 20 days from the date of such notice (or such other period of
time as the Board determines).
FEDERAL INCOME TAX INFORMATION
Rights granted under the Employee 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
of Common Stock as if such amounts were actually received. Other than this, no
income will be taxable to a participant until disposition of the acquired
shares, and the method of taxation will depend upon the holding period of the
acquired 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 (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) 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. Any further gain or any loss will be taxed
as a long-term capital gain or loss. Such 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. 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. Any capital gain or loss will be short-term or long-term,
depending on how long the stock has been held.
There are no federal income tax consequences to Enlighten by reason of the
grant or exercise of rights under the Employee Plan. Enlighten is entitled to a
deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness and the satisfaction of tax
reporting obligations).
19
23
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes present and voting at the
annual meeting of shareholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of Enlighten entitled to vote is present,
either in person or by proxy, is required for approval of this proposal. Votes
for and against, abstentions, and "broker non-votes" will each be counted as
present for purposes of determining the presence of a quorum. Abstentions and
"broker non-votes" will have no effect on the outcome of this vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF AN
INCREASE IN THE AGGREGATE MAXIMUM NUMBER OF SHARES OF ENLIGHTEN'S COMMON STOCK
ISSUABLE UNDER ITS 1992 STOCK OPTION PLAN BY 1,000,000 SHARES, FROM 2,000,000
SHARES TO 3,000,000 SHARES.
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of Enlighten has selected KPMG LLP as independent
public accountants to audit the financial statements of Enlighten for the year
ending December 31, 2000. KPMG LLP has acted in such capacity since its
appointment in 1991. A representative of KPMG LLP is expected to be present at
the annual meeting with the opportunity to make a statement if the
representative desires to do so, and is expected to be available to respond to
appropriate questions.
The affirmative vote of a majority of the votes present and voting at the
annual meeting of shareholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of Enlighten entitled to vote is present,
either in person or by proxy, is required for approval of this proposal. Votes
for and against, abstentions, and "broker non-votes" will each be counted as
present for purposes of determining the presence of a quorum. Abstentions and
"broker non-votes" will have no effect on the outcome of this vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT
OF KPMG LLP AS ENLIGHTEN'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR ENDING
DECEMBER 31, 2000.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
In connection with Enlighten's next annual meeting of shareholders, under
Securities and Exchange Commission Rule 14a-4, management may solicit proxies
that confer discretionary authority to vote with respect to any non-management
proposal unless Enlighten has received notice of the proposal not later than
June 16, 2001.
In order for proposals of shareholders to be properly brought before a
regularly scheduled annual meeting of the shareholders, proposals must be
received at Enlighten's principal executive offices not less than 120 calendar
days in advance of the one year anniversary of the date Enlighten's proxy
statement was released to shareholders in connection with the previous year's
annual meeting of shareholders; except if no annual meeting was held in the
previous year or if the date of the annual meeting has been changed by more than
thirty calendars from the date contemplated at the time of the previous year's
proxy statement, then notice must be received a reasonable time before Enlighten
begins to print and mail its proxy statements. Proposals of shareholders
intended to be presented at the next annual meeting of the shareholders of
Enlighten must be received by Enlighten at its offices at 999 Baker Way, Fifth
Floor, San Mateo, California 94404, no later than April 3, 2001, and satisfy the
conditions established by the Securities and Exchange Commission for shareholder
proposals to be included in Enlighten's proxy statement for that meeting.
20
24
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the Board of Directors knows of no
other business that will be conducted at the 2000 annual meeting of shareholders
of Enlighten Software Solutions, Inc. other than as described in this Proxy
Statement. If any other matter or matters are properly brought before the
meeting, or any adjournment or postponement thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
By Orderorder of the Board of Directors
/s/ Michael A. Morgan
Michael A. Morgan
Secretary
July 31, 2000
21
25
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael Seashols and Michael A. Morgan
and each of them, with full power of substitution to represent the undersigned
and to vote all the shares of the stock of Enlighten Software Solutions, Inc.
which the undersigned is entitled to vote at the annual meeting of shareholders
of Enlighten to be held at 999 Baker Way, Fifth Floor, San Mateo, California on
Wednesday, August 30, 2000, at 3:00 p.m. Pacific Daylight Time, and at any
adjournment or postponement thereof: (1) as hereinafter specified upon the
proposals listed below and as more particularly described in Enlighten's Proxy
Statement dated July 31, 2000, and (2) in their discretion upon such other
matters as may properly come before the meeting.
The undersigned hereby acknowledges receipt of (1) Notice of Annual
Meeting of Shareholders of Enlighten, (2) accompanying Proxy Statement dated
July 31, 2000, and (3) Annual Report of Enlighten on Form 10-KSB for the year
ended December 31, 1999.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
26
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ENLIGHTEN
A vote FOR the following proposals is recommended by the Board of Directors
1. Election of the following directors:
[ ] FOR the nominees [ ] WITHHOLD AUTHORITY to
listed below vote for the nominees listed
(except as marked below.
to the contrary
below).
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR A NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME.)
Michael Seashols Peter J. McDonald
David D. Parker Peter J. Sprague
Michael A. Morgan
2. To approve an amendment to the Enlighten Software Solutions, Inc. Restated
Articles of Incorporation to increase the number of authorized shares of Common
Stock from 10,000,000 shares to 20,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve an amendment to the Enlighten Software Solutions, Inc. 1992
Stock Option Plan to increase the aggregate maximum number of shares of Common
Stock which may be issued thereunder by 1,000,000 shares, from 2,000,000 shares
to 3,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve an amendment to the Enlighten Software Solutions, Inc. 1994
Employee Stock Purchase Plan to increase the aggregate maximum number of shares
of Common Stock which may be issued thereunder by 100,000 shares, from 200,000
shares to 300,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve the appointment of KPMG LLP as independent accountants of
Enlighten for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Whether or not you plan to attend the meeting in person, you are urged to sign
and promptly mail this proxy in the return envelope so that your stock may be
represented at the meeting.
The shares represented hereby shall be voted as specified. If no specification
is made, such shares shall be voted FOR proposals 1, 2, 3, 4 and 5.
[ ] Check here for address change and note at right.
[ ] Check here if you plan to attend the annual meeting.
Signatures(s):____________________________________________________ Dated: , 2000
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the Proxy. If shares of stock are held of record by a
corporation, the Proxy should be executed by the President or Vice President and
the Secretary or Assistant Secretary, and the corporate seal should be affixed
thereto. Executors or administrators or other fiduciaries who execute the above
Proxy for a deceased stockholder should give their full title. Please date the
Proxy.