Informatica DEF 14A 2005
Statement Pursuant to Section 14(a) of
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the Annual Meeting) of Informatica Corporation, a Delaware corporation (Informatica), will be held on Thursday, May 26, 2005 at 3:00 p.m., Pacific time, at Informaticas corporate headquarters, 100 Cardinal Way, Redwood City, CA 94063, for the following purposes:
These items of business are more fully described in the Proxy Statement accompanying this Notice of Annual Meeting.
Only holders of record of Informaticas common stock at the close of business on April 4, 2005, the record date, are entitled to vote on the matters listed in this Notice of Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in person. However, to ensure your representation at the Annual Meeting, please vote as soon as possible using one of the following methods: (1) by using the Internet as instructed on the enclosed proxy card, (2) by telephone by calling the toll-free number as instructed on the enclosed proxy card or (3) by mail by completing, signing, dating and returning the enclosed paper proxy card in the postage-prepaid envelope enclosed for such purpose. For further details, please see the section entitled Voting on page two of the accompanying Proxy Statement. Any stockholder attending the Annual Meeting may vote in person even if he or she has voted using the Internet, telephone or proxy card.
By Order of the Board of Directors
of Informatica Corporation
Chairman of the Board,
Chief Executive Officer and President
Redwood City, California
2005 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to holders of common stock, par value $0.001 per share (the Common Stock), of Informatica Corporation, a Delaware corporation (Informatica or the Company), in connection with the solicitation of proxies by the Board of Directors of Informatica for use at the Annual Meeting of Stockholders (the Annual Meeting) to be held on Thursday, May 26, 2005 at 3:00 p.m., Pacific time, and at any adjournment or postponement thereof for the purpose of considering and acting upon the matters set forth herein. The Annual Meeting will be held at Informaticas corporate offices, located at 100 Cardinal Way, Redwood City, CA 94063. The telephone number at that location is (650) 385-5000.
This Proxy Statement, the accompanying form of proxy card and the Companys Annual Report to Stockholders are first being mailed on or about April 14, 2005 to all stockholders entitled to vote at the Annual Meeting.
Stockholders Entitled to Vote; Record Date
Only holders of record of Informaticas Common Stock at the close of business on April 4, 2005 (the Record Date) are entitled to notice of and to vote at the Annual Meeting. Such stockholders are entitled to cast one vote for each share of Common Stock held as of the Record Date on all matters properly submitted for the vote of stockholders at the Annual Meeting. As of the record date, there were 87,124,934 shares of Common Stock outstanding and entitled to vote at the Annual Meeting. No shares of preferred stock were outstanding. For information regarding security ownership by management and by the beneficial owners of more than 5% of Informaticas Common Stock, see the section of this Proxy Statement entitled Share Ownership by Principal Stockholders and Management.
Quorum; Required Vote
The presence of the holders of a majority of the shares of Common Stock entitled to vote generally at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Stockholders are counted as present at the meeting if they (1) are present in person or (2) have properly submitted a proxy card or voted by telephone or by using the Internet.
A plurality of the votes duly cast is required for the election of directors. The affirmative vote of a majority of the votes duly cast is required to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company.
Under the General Corporation Law of the State of Delaware, an abstaining vote and a broker non-vote are counted as present and entitled to vote and are, therefore, included for purposes of determining whether a quorum is present at the Annual Meeting; however, broker non-votes are not deemed to be votes cast. As a result, broker non-votes are not included in the tabulation of the voting results on the election of directors or issues requiring approval of a majority of the votes cast and, therefore, do not have the effect of votes in opposition in such tabulations. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.
Voting by telephone or the Internet. A stockholder may vote his or her shares by calling the toll-free number indicated on the enclosed proxy card and following the recorded instructions or by accessing the website indicated on the enclosed proxy card and following the instructions provided. When a stockholder votes via the Internet or by telephone, his or her vote is recorded immediately. Informatica encourages its stockholders to vote using these methods whenever possible.
Voting by proxy card. All shares entitled to vote and represented by properly executed proxy cards received prior to the Annual Meeting, and not revoked, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxy cards. If no instructions are indicated on a properly executed proxy card, the shares represented by that proxy card will be voted as recommended by the Board of Directors. If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxies in the enclosed proxy card and acting thereunder will have discretion to vote on those matters in accordance with their best judgment. The Company does not currently anticipate that any other matters will be raised at the Annual Meeting.
Voting by attending the meeting. A stockholder may also vote his or her shares in person at the Annual Meeting. A stockholder planning to attend the Annual Meeting should bring proof of identification for entrance to the Annual Meeting. If a stockholder attends the Annual Meeting, he or she may also submit his or her vote in person, and any previous votes that were submitted by the stockholder, whether by Internet, telephone or mail, will be superseded by the vote that such stockholder casts at the Annual Meeting.
Changing vote; revocability of proxy. If a stockholder has voted by telephone or the Internet or by sending a proxy card, such stockholder may change his or her vote before the Annual Meeting.
A stockholder that has voted by telephone or the Internet may change his or her vote by making a timely and valid later telephone or Internet vote, as the case may be.
Any proxy card given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. A proxy card may be revoked by (1) filing with the Secretary of the Company, at or before the taking of the vote at the Annual Meeting, a written notice of revocation or a duly executed proxy card, in either case dated later than the prior proxy card relating to the same shares, or (2) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not of itself revoke a proxy). Any written notice of revocation or subsequent proxy card must be received by the Secretary of the Company prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card should be hand delivered to the Secretary of the Company or should be sent so as to be delivered to Informatica Corporation, 100 Cardinal Way, Redwood City, CA 94063, Attention: Corporate Secretary.
Expenses of Solicitation
Informatica will bear all expenses of this solicitation, including the cost of preparing and mailing this solicitation material. The Company may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of Common Stock for their reasonable expenses in forwarding solicitation material to such beneficial owners. Directors, officers and employees of the Company may also solicit proxies in person or by telephone, letter, e-mail, telegram, facsimile or other means of communication. Such directors, officers and employees will not be additionally compensated, but they may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. The Company may engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies from certain brokers, bank nominees and other institutional owners. The Companys costs for such services, if retained, will not be significant.
Procedure for Submitting Stockholder Proposals
Requirements for stockholder proposals to be considered for inclusion in the Companys proxy materials. Stockholders may present proper proposals for inclusion in the Companys proxy statement and for consideration at the next annual meeting of its stockholders by submitting their proposals in writing to the Secretary of the Company in a timely manner. In order to be included in the Companys proxy materials for the 2006 annual meeting of stockholders, stockholder proposals must be received by the Secretary of the Company no later than December 15, 2005 and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934 (the Exchange Act).
Requirements for stockholder proposals to be brought before an annual meeting. In addition, the Companys Bylaws establish an advance notice procedure for stockholders who wish to present certain matters before an annual meeting of stockholders. In general, nominations for the election of directors may be made by (1) the Board of Directors, (2) the Corporate Governance and Nominating Committee or (3) any stockholder entitled to vote who has delivered written notice to the Secretary of the Company within the Notice Period (as defined below), which notice must contain specified information concerning the nominees and concerning the stockholder proposing such nominations. However, if a stockholder wishes only to recommend a candidate for consideration by the Corporate Governance and Nominating Committee as a potential nominee for the Companys Board of Directors, see the procedures discussed in Proposal One: Election of Directors Corporate Governance Matters.
The Companys Bylaws also provide that the only business that may be conducted at an annual meeting is business that is (1) specified in the notice of meeting given by or at the direction of the Board of Directors, (2) properly brought before the meeting by or at the direction of the Board of Directors, or (3) properly brought before the meeting by any stockholder entitled to vote who has delivered written notice to the Secretary of the Company within the Notice Period (as defined below), which notice must contain specified information concerning the matters to be brought before such meeting and concerning the stockholder proposing such matters.
The Notice Period is defined as that period not less than 45 days nor more than 75 days prior to the anniversary of the date on which the Company first mailed its proxy materials for the previous years annual meeting of stockholders. As a result, the Notice Period for the 2006 annual stockholder meeting will start on January 30, 2006 and end on February 28, 2006.
If a stockholder who has notified the Company of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, the Company need not present the proposal for vote at such meeting.
A copy of the full text of the Bylaw provisions discussed above may be obtained by writing to the Secretary of the Company. All notices of proposals by stockholders, whether or not included in the Companys proxy materials, should be sent to Informatica Corporation, 100 Cardinal Way, Redwood City, CA 94063, Attention: Corporate Secretary.
ELECTION OF DIRECTORS
The Companys Board of Directors is currently comprised of six members who are divided into three classes with overlapping three-year terms. A director serves in office until his or her respective successor is duly elected and qualified or until his or her earlier death or resignation. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of an equal number of directors. Gaurav S. Dhillon resigned as a director of
the Company in July 2004, which created a vacancy on the Board of Directors. The Board has not nominated a successor for Mr. Dhillon, and no more than two directors shall be elected at the Annual Meeting.
Nominees for Class II Directors
Two Class II directors are to be elected at the Annual Meeting for a three-year term ending in 2008. Upon the recommendation of the Corporate Governance and Nominating Committee, the Board of Directors has nominated A. Brooke Seawell and Mark A. Bertelsen for re-election as Class II directors. Unless otherwise instructed, the proxyholders will vote the proxies received by them for the re-election of Mr. Seawell and Mr. Bertelsen. The Company expects that Mr. Seawell and Mr. Bertelsen will accept such nomination; however, in the event that either such nominee is unable or declines to serve as a director at the time of the meeting, the proxies will be voted for any nominee who shall be designated by the Board of Directors to fill the vacancy. The term of office of each person elected as a director will continue until such directors term expires in 2008 or until such directors successor has been elected and qualified.
The Board of Directors recommends a vote FOR the nominees listed above.
Information Regarding Nominees and Other Directors
Nominees for Class II Directors for a Term Expiring in 2008
Incumbent Class I Directors Whose Term Expires in 2007
Incumbent Class III Directors Whose Term Expires in 2006
Board Meetings and Committees
During 2004, the Board of Directors held 11 meetings (including regularly scheduled and special meetings), and no directors attended fewer than 75% of the total number of meetings of the Board of Directors and the committees of which he or she was a member.
The Board of Directors currently has three standing committees: an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee.
Audit Committee. The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act, currently consists of Ms. Chaffin and Messrs. Seawell and Yankowski, each of whom is independent, as such term is defined for audit committee members by the listing standards of The Nasdaq Stock Market. Mr. Seawell is the chairman of the Audit Committee, and the Board of Directors has determined that Mr. Seawell is an audit committee financial expert as defined under the rules of the Securities Exchange Commission (the SEC). The Audit Committee met six times in 2004. The Audit Committee (1) provides oversight of the Companys accounting and financial reporting processes and the audit of the Companys financial statements, (2) assists the Board of Directors in oversight of the integrity of the Companys financial statements, the Companys compliance with legal and regulatory requirements, the independent registered public accounting firms qualifications, independence and performance, and the Companys internal accounting and financial controls, and (3) provides to the Board of Directors such information and materials as it may deem necessary to make the Board of Directors aware of significant financial matters that require the attention of the Board of Directors. The Audit Committee acts pursuant to a written charter adopted by the Board of Directors, which is available in the Investors Relations section of our website at http://www.informatica.com.
Compensation Committee. The Compensation Committee currently consists of Messrs. Pidwell, Seawell and Yankowski, each of whom is independent as defined in the listing standards of The Nasdaq Stock Market. Mr. Pidwell is the chairman of the Compensation Committee. The Compensation Committee met thirteen times in 2004. In addition to holding regular meetings, the Compensation Committee took action by written consent at various times during the course of 2004. The Compensation Committee reviews and approves the compensation and benefits for the Companys executive officers, administers the Companys stock plans and performs such other duties as may from time to time be determined by the Board of Directors. The Compensation Committee Charter is available in the Investors Relations section of our website at http://www.informatica.com.
Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee currently consists of Ms. Chaffin and Messrs. Bertelsen and Pidwell, each of whom is independent as defined in the listing standards of The Nasdaq Stock Market. Mr. Bertelsen is the chairman of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee took action by written consent at various times during the course of 2004. This committee is responsible for developing general criteria regarding the qualifications and selection of Board members, recommending candidates for election to the Board of Directors, reviewing and making recommendations regarding the composition and mandate of Board committees, developing overall governance guidelines, and overseeing the performance and compensation of the Board of Directors. In 2004 a third party search firm engaged by the Company recommended Mr. Abbasi as a member of the Board of Directors. After conducting its evaluation, including interviews with Mr. Abbasi, the Corporate Governance and
Nominating Committee recommended his election to the Board of Directors. In February 2004 the Board of Directors appointed Mr. Abbasi as a director. It is the policy of the Corporate Governance and Nominating Committee to consider recommendations of candidates for the Board of Directors submitted by the stockholders of the Company; for more information see the discussion in Corporate Governance Matters. The Corporate Governance and Nominating Committee Charter is available in the Investors Relations section of our website at http://www.informatica.com.
Lead Independent Director. Mr. Pidwell was appointed Lead Independent Director in March 2005, whereby he serves as a liason between management and the other non-employee directors. As Lead Independent Director, Mr. Pidwell will, among other things, schedule and chair meetings of the independent directors. In addition, from time to time, the independent directors hold a closed session at regularly scheduled board meetings.
Cash Compensation. Non-employee members of the Board of Directors receive an annual retainer of (1) $25,000, paid quarterly at the rate of $6,250 per quarter and (2) $5,000 for each Board committee on which the member serves ($10,000 if such member is the chairperson).
Option Grants. Directors are eligible to receive options to purchase the Companys Common Stock pursuant to the Companys 1999 Non-Employee Director Stock Incentive Plan (the 1999 Director Plan), which provides for annual automatic grants of nonqualified stock options to continuing non-employee directors. Under the 1999 Director Plan, each non-employee director will automatically be granted a nonstatutory stock option grant of 60,000 shares of the Companys Common Stock upon his or her initial election to the Board of Directors (Initial Grant). Immediately following each annual stockholders meeting, each non-employee director who continues to serve as a non-employee director following such annual meeting will automatically be granted a nonstatutory stock option to purchase 25,000 shares of the Companys Common Stock (Subsequent Grant), as long as the director had been a non-employee director for at least six months prior to such annual meeting of stockholders. All options automatically granted to non-employee directors will have an exercise price equal to 100% of the fair market value on the date of grant. One third of the shares subject to the Initial Grant vests and becomes exercisable one year after the grant date and the remaining shares subject to the Initial Grant vest in equal monthly installments over the following 24-month period, such that the option is fully exercisable three years after its date of grant. Each Subsequent Grant vests and becomes 100% exercisable one year after the date such option is granted. In 2004, each of Ms. Chaffin and Messrs. Bertelsen, Pidwell, Seawell and Yankowski received Subsequent Grants. Mr. Abbasi received an Initial Grant in February 2004 as a non-employee director; he was appointed as the Companys Chief Executive Officer in July 2004.
Corporate Governance Matters
Independence of the Board of Directors. The Board of Directors has determined that, with the exception of Sohaib Abbasi, who is the Chief Executive Officer and President of Informatica, all of its members are independent directors as defined in the listing standards of The Nasdaq Stock Market.
Contacting the Board of Directors. Stockholders and other individuals may communicate with the Board of Directors by submitting either an e-mail to email@example.com or written communication addressed to the Board of Directors (or specific board member) Informatica Corporation, 100 Cardinal Way, Redwood City, California 94063. E-mail communications that are intended for a specific director should be sent to the e-mail address above to the attention of the applicable director.
Attendance at annual stockholder meetings by the Board of Directors. Although the Company does not have a formal policy regarding attendance by members of the Board of Directors at the Companys annual meeting of stockholders, the Company encourages, but does not require, directors to attend. One director attended the Companys 2004 annual meeting of stockholders.
Process for recommending candidates for election to the Board of Directors. The Corporate Governance and Nominating Committee is responsible for, among other things, determining the criteria for membership to the Board of Directors and recommending candidates for election to the Board of Directors. It is the policy of the Committee to consider recommendations for candidates to the Board of Directors from stockholders. Stockholder recommendations for candidates to the Board of Directors must be directed in writing to Informatica Corporation, Corporate Secretary, 100 Cardinal Way, Redwood City, CA 94063 and must include the candidates name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and the Company within the last three years, and evidence of the nominating persons ownership of the Companys Common Stock.
The Committees general criteria and process for evaluating and identifying the candidates that it recommends to the full Board of Directors for selection as director nominees, are as follows:
RATIFICATION OF APPOINTMENT OF
The Audit Committee has appointed Ernst & Young LLP (E&Y) as the independent registered public accounting firm of the Company. Although ratification by stockholders is not required by law, the Board has determined that it is desirable to request ratification of this selection by the stockholders. Notwithstanding its selection, the Audit Committee, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interest of the Company and its stockholders. If the stockholders do not ratify the appointment of E&Y, the Audit Committee may reconsider its selection.
E&Y has audited the Companys financial statements since the Companys inception. A representative of E&Y is expected to be present at the Annual Meeting with the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR this proposal.
The following table shows the fees paid or accrued by the Company for the audit and other services provided by E&Y for fiscal years 2003 and 2004.
Pre-Approval of Audit and Non-Audit Services
All audit and non-audit services provided by E&Y to the Company must be pre-approved by the Audit Committee. The Audit Committee utilizes the following procedures in pre-approving all audit and non-audit services provided by E&Y. At or before the first meeting of the Audit Committee each year, the Audit Committee is presented with a detailed listing of the individual audit and non-audit services and fees (separately describing audit-related services, tax services and other services) expected to be provided by E&Y during the year. Before each subsequent meeting, the Audit Committee is presented with an updated listing of approved services highlighting any new audit and non-audit services to be provided by E&Y. The Audit Committee reviews these listings and approves the services outlined therein if such services are acceptable to the Audit Committee.
To ensure prompt handling of unexpected matters, the Audit Committee delegates to the Chairman of the Audit Committee the authority to amend or modify the list of audit and non-audit services and fees; provided, however, that such additional or amended services may not affect E&Ys independence under applicable SEC rules. The Chairman reports any such action taken to the Audit Committee at the subsequent Audit Committee meeting.
All E&Y services and fees in 2003 and 2004 were pre-approved by the Audit Committee.
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial ownership of Informaticas Common Stock as of March 1, 2005 for the following: (1) each person or entity who is known by the Company to own beneficially more than 5% of the outstanding shares of the Companys Common Stock; (2) each of the Companys directors; (3) each of the executive officers named in the Summary Compensation Table; and (4) all directors and executive officers of the Company as a group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act (Section 16(a)) requires the Companys executive officers and directors, and certain persons who own more than 10% of a registered class of the Companys equity securities (10% Stockholders), to file reports of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. Such executive officers, directors and 10% Stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such reports furnished to the Company and written representations that no other reports were required to be filed during 2004, the Company believes that its executive officers, directors and 10% Stockholders have complied with all Section 16(a) filing requirements applicable to them.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Companys Compensation Committee is currently composed of Messrs. Pidwell, Seawell and Yankowski. No interlocking relationship exists between any member of the Companys Compensation Committee and any member of the compensation committee of any other company, nor has any such interlocking relationship existed in the past. No member of the Compensation Committee is or was formerly an officer or an employee of the Company.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2004 with respect to the shares of the Companys Common Stock that may be issued under the Companys existing equity compensation plans.
2000 Employee Stock Incentive Plan
In January 2000, the Board of Directors adopted the 2000 Employee Stock Incentive Plan (the 2000 Incentive Plan), under which 1,600,000 shares were reserved for issuance. The 2000 Incentive Plan is not subject to stockholder approval. Under the 2000 Incentive Plan, eligible employees and consultants may be awarded stock options, stock appreciation rights, restricted shares and stock units. No stock options, stock appreciation rights, restricted shares or stock units from the 2000 Incentive Plan may be granted to directors or executive officers of the Company. The 2000 Incentive Plan is intended to help the Company attract and retain outstanding individuals in order to promote the Companys success. The 2000 Incentive Plan does not provide for the grant of incentive stock options. The exercise price for non-qualified options may not be less than 85% of the fair value of the Common Stock at the option grant date. The 2000 Incentive Plan is administered by the Compensation Committee of the Board of Directors. Options granted are exercisable over a maximum term of ten years from the date of grant and generally vest over a period of four years from the date of grant.
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table sets forth information concerning compensation received by our Chief Executive Officer, former Chief Executive Officer and each of the four most highly compensated executive officers during the last fiscal year for services rendered to the Company in all capacities for the three years ended December 31, 2004 (the Named Executive Officers):
Option Grants in Last Fiscal Year
The following table sets forth, as to the Named Executive Officers, information concerning stock options granted during the year ended December 31, 2004.
Option Exercises and Holdings
The following table sets forth, as to the Named Executive Officers, certain information concerning the number of shares of the Companys Common Stock subject to both exercisable and unexercisable stock options as of December 31, 2004. Also reported are values for in-the-money options that represent the positive spread between the respective exercise prices of outstanding stock options and the fair market value of the Companys Common Stock as of December 31, 2004.
Employment Agreements and Change-in-Control Arrangements
Mr. Abbasi entered into an offer letter for employment effective July 19, 2004 which contains a severance arrangement, providing for certain severance payments and vesting acceleration as to unvested options in the event (1) Mr. Abbasis employment with the Company is terminated without cause or (2) Mr. Abbasi resigns from the Company for good reason. Upon the occurrence of (1) or (2) above, then Mr. Abbasi will receive (i) continued payment of his base salary for a period of 12 months (the Continuance Period), (ii) a lump-sum payment, paid at the time fiscal year bonuses are paid to other executives, equal to Mr. Abbasis then current target bonus, (iii) reimbursement for any applicable premiums Mr. Abbasi pays to continue coverage for Mr. Abbasi and his eligible dependents under the Companys benefit plans for the Continuance Period, or, if earlier, until Mr. Abbasi is eligible for similar benefits from another employer, and (iv) immediate vesting of all unvested equity awards that would have vested had Mr. Abbasi otherwise remained an employee for the Continuance Period. Notwithstanding clause (iv) above, if a termination described in (1) or (2) above occurs within the period beginning three months prior to a change of control and ending 12 months following a change of control, Mr. Abbasi will receive immediate vesting with respect to all unvested equity awards that would have vested had he otherwise remained an employee for an additional 24 months instead of 12 months.
The Company has entered into an Executive Severance Agreement (the Agreement) with each of Messrs. Fry and Pancha, and with John Entenmann and Paul Hoffman, each of whom are executive officers of the Company, which sets forth the severance terms and conditions for these executive officers in the event that their employment is terminated in connection with a Change of Control. The Agreement is offered to all Executive Vice Presidents of the Company. The following is a summary of the material terms and conditions of the Agreement:
Term of Agreement. Each Agreement has an initial term of two years, and provides that the initial term will be automatically extended each year for an additional one year term unless the Company informs the executive officer at least ninety days prior to the date of automatic renewal that it is electing not to extend the term.
Severance. In the event that the Company terminates the executive officers employment without Cause or the executive resigns for Good Reason, and such termination occurs within the time period beginning on the date three months preceding a Change of Control of the Company and ending on the date 12 months following a Change of Control, the executive officer will receive the following severance package: (1) continued payment of the executive officers base salary for twelve months; (2) continued benefits for twelve months; and (3) twelve months accelerated vesting for any equity awards that are outstanding as of the date that the executive officers employment is terminated.
The severance payments, continued benefits, and accelerated vesting will be subject to the executive officer entering into (and not subsequently revoking) a (1) separation agreement and release of claims in a form satisfactory to the Company and the executive officer, (2) a non-compete and non-solicitation agreement that would be in effect during the 12 month period in which the executive officer receives continuing salary from the Company and (3) a non-disparagement agreement.
The Company previously granted Mr. Fry certain severance and accelerated vesting rights in the event of a change of control and subsequent termination of employment. For Mr. Fry, the Agreements supersede such prior severance and accelerated vesting terms.
TRANSACTIONS WITH MANAGEMENT
Pursuant to a separation agreement between Gaurav Dhillon and Informatica dated July 21, 2004 (the Separation Date), the Company agreed to provide Mr. Dhillon the following severance benefits: (1) payments of $22,916.67 per month, less applicable withholding, for 12 months, which represents Mr. Dhillons base salary, for a total of $275,000; (2) payment of $275,000, less applicable withholding, which represents Mr. Dhillons expected future awards under the Companys bonus plans; and (3) the right to continued health insurance coverage reimbursement under COBRA for a period not to exceed twelve months. Furthermore, Mr. Dhillons outstanding options to purchase Common Stock were accelerated to provide for twelve additional months of vesting. In addition, with respect to vested option shares that were initially granted to Mr. Dhillon after January 1, 2000, all such vested option shares will remain exercisable for twelve months following Mr. Dhillons Separation Date.
Pursuant to a severance agreement between Clive Harrison and Informatica dated March 31, 2004, Mr. Harrison received payment of $83,333.33, less applicable withholding, representing four months of Mr. Harrisons base salary. In addition, Mr. Harrisons outstanding options to purchase Common Stock were accelerated to provide for six additional months of vesting.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
With respect to the Companys financial reporting process, the management of the Company is responsible for (1) establishing and maintaining internal controls and (2) preparing the Companys consolidated financial statements. The independent registered public accounting firm, E&Y, is responsible for auditing these financial statements and performing an attestation of the Companys internal controls. It is the responsibility of the Audit Committee to oversee these activities. In the performance of its oversight function, the Audit Committee has:
Based upon the reviews and discussions described in this Report, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2004 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
A. Brooke Seawell
Janice D. Chaffin
Carl J. Yankowski
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee was formed in March 1999 and currently consists of Messrs. Seawell, Pidwell and Yankowski. The Compensation Committee generally reviews and approves the Companys executive compensation policies, including the base salary levels and target incentives for the Companys executive officers at the beginning of each year, and approves the performance objectives of the executive officers in their areas of responsibility. The Compensation Committee also administers the Companys stock plans. No member of the Compensation Committee is a former or current officer or employee of Informatica or any of its subsidiaries. Certain meetings of the Compensation Committee are also attended by Messrs. Abbasi and Fry, who provide background and market information and make recommendations to the Compensation Committee on salary levels, officer performance objectives and corporate financial goals. However, Messrs. Abbasi and Fry are not entitled to vote on any actions taken by the Compensation Committee.
Executive Officer Compensation Programs
The objectives of the executive officer compensation program are to attract, retain, motivate and reward key personnel who possess the necessary leadership and management skills through competitive base salary, annual cash bonus incentives, long-term incentive compensation in the form of stock options and various benefits, including medical and life insurance plans. The executive compensation policies of the Compensation Committee are intended to combine competitive levels of compensation and rewards for above average performance and to align relative compensation with the achievements of key business objectives, optimal satisfaction of customers and maximization of stockholder value. The Compensation Committee believes that stock ownership by management is beneficial in aligning management and stockholder interests, thereby enhancing stockholder value.
Base Salaries. Salaries for the Companys executive officers are determined primarily on the basis of the executive officers level of responsibility, general salary practices of peer companies and the officers individual qualifications and experience. The base salaries are reviewed annually and may be adjusted by the Compensation Committee in accordance with certain criteria which include individual performance, the functions performed by the executive officer, the scope of the executive officers on-going duties, general changes in the compensation peer group in which the Company competes for executive talent, and the Companys financial performance generally. The weight given each such factor by the Compensation Committee may vary from individual to individual. For purposes of determining base salaries, the Company considers the following corporations to be in its primary peer group: Business Objects, Cognos, Tibco, WebMethods, Ascential Software and Sybase, and ten other companies in a secondary peer group.
Incentive Bonuses. The Compensation Committee believes that a cash incentive bonus plan can serve to motivate the Companys executive officers and management to address annual performance goals, using more immediate measures for performance than those reflected in the appreciation in value of stock options. The bonus amounts are based upon recommendations by management and a subjective consideration of factors including such officers level of responsibility, individual performance, contributions to the Companys success and the Companys general financial performance.
Stock Option Grants. Stock options may be granted to executive officers under the 1999 Stock Incentive Plan. Because of the direct relationship between the value of an option and the stock price, the Compensation Committee believes that options motivate executive officers to manage the Company in a manner that is consistent with stockholder interests. Stock option grants are intended to focus the attention of the recipient on the Companys long-term performance which the Company believes results in improved stockholder value, and to retain the services of the executive officers in a competitive job market by providing significant long-term earnings potential. To this end, stock options generally vest and become fully exercisable over a four-year period. The principal factors considered in granting stock options to executive officers of the Company are prior performance, level of responsibility, other compensation and the executive officers ability to influence the Companys long-term growth and profitability. However, the 1999 Stock Incentive Plan does not provide any quantitative method for weighting these factors, and a decision to grant an award is primarily
based upon a subjective evaluation of the past as well as future anticipated performance of the executive officer. Additionally, the Compensation Committee is currently evaluating other forms of long term-incentive compensation as an alternative to stock option grants.
Other Compensation Plans. The Company has adopted certain general employee benefit plans in which executive officers are permitted to participate on parity with other employees. The Company also provides a 401(k) deferred compensation plan.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code (IRC) disallows a deduction by the Company for compensation exceeding $1.0 million paid to certain executive officers, excluding, among other things, performance based compensation. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Company has not adopted a policy that all compensation must be deductible.
Chief Executive Officer Compensation
The compensation of the Chief Executive Officer is reviewed annually on the same basis as discussed above for all executive officers. Pursuant to Mr. Abbasis employment agreement, Mr. Abbasis base salary for the year ended December 31, 2004 was $100,000. Mr. Abbasis base salary was established in part by comparing the base salaries of chief executive officers of the Companys peer group. Mr. Abbasis base salary was below the median of the base salary range for chief executive officers of comparable companies. Also pursuant to his employment agreement, Mr. Abbasi received options to purchase 2,600,000 shares of the Companys Common Stock during the year ended December 31, 2004. Additionally, in 2004 Mr. Abbasi earned a bonus of $100,000 which was paid in 2005.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
David W. Pidwell
A. Brooke Seawell
Carl J. Yankowski
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders on the Companys Common Stock with the cumulative total return of the Nasdaq National Market (U.S. Companies) Index and the Nasdaq Computer and Data Processing Services Group Index. The graph assumes that $100 was invested on January 1, 2000 in the Companys Common Stock and in each of the indices discussed above, including reinvestment of dividends. No dividends have been declared or paid on the Company Common Stock. Note that historic stock price performance is not necessarily indicative of future stock price performance.
The Board of Directors does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote shares they represent in accordance with their own judgment on such matters.
It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided.
THE BOARD OF DIRECTORS
Redwood City, California
April 14, 2005
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time, May 25, 2005. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Informatica Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time, May 25, 2005. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postagepaid envelope we have provided or return it to Informatica Corporation, c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.