Wonderware Corp – ‘DEF 14A’ for 12/31/96

As of:  Monday, 4/7/97   ·   For:  12/31/96   ·   Accession #:  906519-97-7   ·   File #:  0-22044

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Definitive Proxy Solicitation Material   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Proxy Statement for Wonderware Corporation            22    119K 

Document Table of Contents

DEF 14A
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant                              |X|                        
Filed by a Party other than the Registrant           | |                        

Check the appropriate box:                                                      

| |    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 ss. 240.14a-11(c) or ss. 240.14a-12      

WONDERWARE CORPORATION
------------------------------------------------------------------------------- 
(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)                               

|X|    $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)  
or Item 22(a)(2) of Schedule 14A.                                 
| |    $500 per each party to the controversy pursuant to Exchange Act Rule     
14a-6(i)(3).                                                      
| |    Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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.:            

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3.       Filing Party:                                            

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4.       Date Filed:                                              

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DEF 14A
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WONDERWARE CORPORATION
100 Technology Drive
Irvine, California 92618

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 12, 1997

TO THE STOCKHOLDERS OF WONDERWARE CORPORATION:                                  

         NOTICE IS HEREBY  GIVEN that the  Annual  Meeting  of  Stockholders  of
Wonderware Corporation, a Delaware corporation (the "Company"),  will be held on
Monday,  May 12, 1997 at 10:00 a.m.  local time at The Sutton Place Hotel,  4500
MacArthur Blvd., Newport Beach, California for the following purpose:           

1.   To elect directors to serve for the ensuing year and until their successors
are elected.                                                          

2.   To approve an amendment to the Company's  Employee  Stock Purchase Plan to,
     among other things, increase the aggregate number of shares of Common Stock
authorized for issuance under such plan to 700,000 shares.            

3.   To ratify the selection of Deloitte & Touche LLP as independent auditors of
the Company for its fiscal year ending December 31, 1997.             

4.   To transact such other  business as may properly come before the meeting or
any adjournment or postponement thereof.                              

         The foregoing  items of business are more fully  described in the Proxy
Statement accompanying this Notice.                                             

         The Board of  Directors  has fixed the close of  business  on March 17,
1997 as the record date for the determination of stockholders entitled to notice
of and to vote at this Annual  Meeting and at any  adjournment  or  postponement
thereof.                                                                        

                              By Order of the Board of Directors

               /s/ Sam M. Auriemma

           Sam M. Auriemma
     Secretary

Irvine, California                                                              
April 3, 1997                                                                   

         ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE  ENCLOSED  PROXY AS  PROMPTLY  AS  POSSIBLE  IN ORDER TO ENSURE  YOUR
REPRESENTATION  AT THE MEETING.  A RETURN  ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED  STATES) IS  ENCLOSED  FOR THAT  PURPOSE.  EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE  AND YOU WISH TO VOTE AT THE  MEETING,  YOU MUST  OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.                                             

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WONDERWARE CORPORATION
100 Technology Drive
Irvine, California 92618

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

MAY 12, 1997

INFORMATION CONCERNING SOLICITATION AND VOTING

General                                                                         

         The enclosed  proxy is solicited on behalf of the Board of Directors of
Wonderware Corporation,  a Delaware corporation (the "Company"),  for use at the
Annual Meeting of Stockholders to be held on Monday,  May 12, 1997 at 10:00 a.m.
local  time  (the  "Annual  Meeting"),  or at any  adjournment  or  postponement
thereof,  for the purposes set forth  herein and in the  accompanying  Notice of
Annual  Meeting of  Stockholders.  The Annual Meeting will be held at The Sutton
Place Hotel,  4500  MacArthur  Blvd.,  Newport  Beach,  California.  The Company
intends to mail this Proxy  Statement  and  accompanying  proxy card on or about
April 3, 1997 to all stockholders entitled to vote at the Annual Meeting.       

Solicitation                                                                    

         The  Company  will bear the entire  cost of  solicitation  of  proxies,
including preparation,  assembly,  printing and mailing of this Proxy Statement,
the proxy and any additional  information  furnished to stockholders.  Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians  holding in their names shares of Common Stock beneficially owned
by others to  forward to such  beneficial  owners.  The  Company  may  reimburse
persons  representing  beneficial  owners  of Common  Stock  for their  costs of
forwarding   solicitation   materials  to  such  beneficial   owners.   Original
solicitation of proxies by mail may be  supplemented  by telephone,  telegram or
personal  solicitation by directors,  officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.                                            

Voting Rights and Outstanding Shares                                            

         Only  holders  of record of Common  Stock at the close of  business  on
March 17, 1997 will be entitled to notice of and to vote at the Annual  Meeting.
At the close of business on March 17,  1997,  the  Company had  outstanding  and
entitled to vote 14,018,732 shares of Common Stock.                             

         Each holder of record of Common  Stock on such date will be entitled to
one vote for each  share  held on all  matters  to be voted  upon at the  Annual
Meeting.  All votes will be tabulated by the inspector of election appointed for
the meeting,  who will  separately  tabulate  affirmative  and  negative  votes,
abstentions  and  broker  non-votes.  Abstentions  will be counted  towards  the
tabulation  of votes cast on proposals  presented to the  stockholders  and will
have the same effect as negative votes.  Broker  non-votes are counted towards a
quorum but are not counted for any purpose in  determining  whether a matter has
been approved.                                                                  

Revocability of Proxies                                                         

         Any person giving a proxy pursuant to this  solicitation  has the power
to revoke it at any time  before it is voted.  It may be revoked by filing  with
the Secretary of the Company at the Company's  principal  executive office,  100
Technology Drive, Irvine,  California 92618, a written notice of revocation or a
duly executed  proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person.  Attendance  at the  meeting  will not, by itself,
revoke a proxy.                                                                 

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Stockholder Proposals                                                           

         Proposals  of  stockholders  that are  intended to be  presented at the
Company's  1998 Annual Meeting of  Stockholders  must be received by the Company
not later than December 4, 1997 to be included in the proxy  statement and proxy
relating to that Annual Meeting.                                                

PROPOSAL 1

 ELECTION OF DIRECTORS

         There  are  five  nominees  for  the  five  Board  positions  presently
authorized in the Company's Bylaws. Each director to be elected will hold office
until the next annual meeting of stockholders and until his successor is elected
and has  qualified,  or until such  director's  earlier  death,  resignation  or
removal.  Each  nominee  listed below is currently a director of the Company and
was elected by the stockholders at the 1996 Annual Meeting of Stockholders.     

         Shares  represented by executed  proxies will be voted, if authority to
do so is not withheld, for the election of the five nominees named below. In the
event that any  nominee  should be  unavailable  for  election as a result of an
unexpected  occurrence,  such  shares  will be voted  for the  election  of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any
nominee will be unable to serve.                                                

         Directors  are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.                                      

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.

Nominees                                                                        

         The names of the  nominees and certain  information  about them are set
forth below:                                                                    

Name                       Age              Principal Occupation    
     -------------------        ---     --------------------------------------
  Roy H. Slavin              51      Chairman of the Board of Directors,
                                       President and Chief Executive Officer
                of the Company

 F.  Rigdon Currie          66      Special Limited Partner, MK Global
          Ventures

Harvard H. Hill, Jr.       60      General Partner, Houston Venture 
                Partners, Ltd.

Jay L. Kear                59      Independent management consultant

   John E. Rehfeld            56      Former President and Chief Executive
                                Officer of Proxima Corporation

Mr.  Slavin  became a director  of the  Company in July 1995.  He  currently  is
Chairman of the Board,  President  and Chief  Executive  Officer of the Company.
From October 1993 to June 1995, he was President and Chief Executive  Officer of
Siemens Industrial  Automations,  Inc., a manufacturer of industrial  automation
components  and systems.  From January 1986 to September  1993, he was President
and Chief Executive  Officer of Potter & Brumfield Inc. (A Siemens  Company),  a
manufacturer of electronic components.                                          

Mr. Currie became a director of the Company in September  1989. He was a General
Partner of Pacific Venture  Partners,  a venture capital  investment  firm, from
July 1983 to December 1995 and has been a Special  Limited  Partner of MK Global
Ventures,  also a venture  capital  investment  firm,  since  February  1988. He
currently  serves on the Board of  Directors  of  Document  Technologies,  Inc.,
Document Imaging Systems Corp., QMS, Inc. and several privately held companies. 

Mr.  Hill  became a director of the  Company in  September  1989.  He has been a
General Partner of Houston Venture Partners,  Ltd., a venture capital investment
firm, since 1986 and is also the Managing  General Partner of Houston  Partners,
which is the General Partner of Private Equity Investments,  an                 

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investment  firm. He currently serves on the Board of Directors of Raymond James
Financial, Inc., and several privately held companies.                          

Mr.  Kear became a director of the Company in  September  1989.  Since  February
1993, he has been an independent management consultant  specializing in advising
high  technology  companies.  From February  1989 to January 1993,  Mr. Kear was
employed  by  the  Noorda  Family  Trust  to  assist  in the  management  of its
investment  portfolio.  Mr. Kear  currently  serves on the Board of Directors of
Javelin Systems.                                                                

Mr. Rehfeld became a director of the Company in April 1992. He was President and
Chief Executive Officer of Proxima Corporation, a supplier of desktop multimedia
computer projection systems, from February 1996 to March 1997 and also served as
a director of Proxima Corporation. From April 1993 to February 1996, Mr. Rehfeld
was President and Chief Executive  Officer of Etak,  Inc., a supplier of digital
mapping data and a subsidiary  of the News  Corporation.  From  February 1989 to
April  1993,  Mr.  Rehfeld  was  President  of Seiko  Instruments  USA  Inc.,  a
manufacturer of electronic instruments.                                         

Board Committees and Meetings                                                   

     During the fiscal year ended December 31, 1996, the Board of Directors held
six meetings.  The Board has an Audit Committee,  a Compensation Committee and a
Nominating Committee.                                                           

     The Audit Committee  recommends to the Board the independent auditors to be
retained by the Company, meets with the auditors at least annually to review the
results of the annual audit and discuss the financial  statements,  and receives
and  considers  the  auditors'  comments as to  controls,  adequacy of staff and
management  performance  and  procedures in connection  with audit and financial
controls.  The Audit  Committee is composed of two directors:  Messrs.  Hill and
Rehfeld. It met once during 1996.                                               

     The Compensation  Committee makes  recommendations  concerning salaries and
incentive compensation,  awards stock options to employees and consultants under
the Company's stock option plan and otherwise determines compensation levels and
performs such other functions regarding  compensation as the Board may delegate.
The Compensation Committee is composed of three directors:  Messrs. Currie, Kear
and Rehfeld. It met twice during 1996.                                          

     The  Nominating  Committee  develops  and  maintains a current  list of the
functional needs for directors, interviews,  evaluates, nominates and recommends
individuals for membership on the Company's Board and formally reviews with each
Board  member,  on an annual  basis,  whether it is desirable for such person to
continue  to serve on the  Board.  No  procedure  has been  established  for the
consideration of nominees recommended by stockholders.  The Nominating Committee
is composed of two directors:  Messrs. Currie and Kear. The Nominating Committee
did not meet formally during 1996.                                              

     During the fiscal year ended December 31, 1996,  each Board member attended
75% or more of the aggregate of the meetings of the Board and of the  committees
on which he served,  held  during  the  period  for which he was a  director  or
committee member, respectively.                                                 

PROPOSAL 2

APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED

     In May 1993,  the Board of Directors  adopted the Employee  Stock  Purchase
Plan (the  "Purchase  Plan")  authorizing  the issuance of 300,000 shares of the
Company's Common Stock. The stockholders of the Company approved the adoption of
the Purchase  Plan in June 1993.  At December 31, 1996,  an aggregate of 241,758
shares had been issued under the Purchase Plan and only 58,242  shares  remained
for the grant of future rights under the Plan. In March 1997,  the  Compensation
Committee  of the  Board of  Directors  of the  Company  adopted,  and the Board
ratified,  amendments  to the  Purchase  Plan to  increase  the number of shares
authorized  for  issuance  under  the  Purchase  Plan to  700,000  shares.  This
amendment  is intended to afford the Company  greater  flexibility  in providing
employees  with stock  incentives  and ensures  that the Company can continue to
provide such incentives at levels determined appropriate by the Board.          

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     Stockholders are requested in this Proposal 2 to approve the Purchase Plan,
as  amended.  The  affirmative  vote of the  holders of a majority of the shares
present in person or  represented  by proxy and  entitled to vote at the meeting
will be required to approve the Purchase Plan, as amended.  Abstentions  will be
counted  toward the  tabulation  of votes  cast on  proposals  presented  to the
stockholders  and will have the same effect as negative votes.  Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.                                          

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.

The essential features of the Purchase Plan, as amended, are outlined below:    

Purpose                                                                         

         The  purpose  of the  Purchase  Plan is to  provide  a means  by  which
employees of the Company (and any parent or subsidiary of the Company designated
by the Board of Directors to  participate  in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll  deductions,
to assist the Company in retaining the services of its employees,  to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum  efforts for the success of the Company.  Approximately  404 of
the Company's  approximately  410 employees are eligible to  participate  in the
Purchase Plan.                                                                  

         The rights to purchase Common Stock granted under the Purchase 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 Purchase Plan is administered by the Board of Directors,  which has
the final power to  construe  and  interpret  the  Purchase  Plan and the rights
granted  under it. The Board has the power,  subject  to the  provisions  of the
Purchase Plan, to determine when and how rights to purchase  Common Stock of the
Company will be granted,  the  provisions of each offering of such rights (which
need not be  identical),  and  whether any parent or  subsidiary  of the Company
shall be  eligible  to  participate  in such plan.  The Board is  authorized  to
delegate  administration  of such plan to a committee of not less than two Board
members.  The Board has  delegated  administration  of the Purchase  Plan to the
Compensation Committee of the Board. The Board may abolish any such committee at
any time and revest in the Board the  administration  of the Purchase  Plan.  As
used  herein  with  respect to the  Purchase  Plan,  the  "Board"  refers to the
Compensation Committee as well as to the Board of Directors itself.             

Offerings                                                                       

         The Purchase Plan is implemented by offerings of rights to all eligible
employees  from time to time by the Board.  Generally,  each such offering is of
six months' duration.                                                           

Eligibility                                                                     

         Any person who is  customarily  employed at least 20 hours per week and
five months per calendar  year by the Company (or by any parent or subsidiary of
the  Company  designated  from time to time by the Board) on the first day of an
offering  period is eligible to  participate in that offering under the Purchase
Plan,  provided such employee has been in the  continuous  employ of the Company
for such continuous period preceding the first day of the offering period as the
Board may require, which period shall not be equal to or greater than two years.
The Board may provide that officers of the Company who are "highly  compensated"
as defined in the Code are not eligible to be granted  rights under the Purchase
Plan.                                                                           

         Notwithstanding the foregoing, no employee is eligible for the grant of
any  rights  under the  Purchase  Plan if,  immediately  after such  grant,  the
employee would own,  directly or indirectly,  stock possessing 5% or more of the
total  combined  voting power or value of all classes of stock of the Company or
of any parent or                                                                

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subsidiary of the Company  (including any stock which such employee may purchase
under all  outstanding  rights and  options),  nor will any  employee be granted
rights that would permit him to buy more than $25,000 worth of stock (determined
at the fair  market  value of the shares at the time such  rights  are  granted)
under all employee stock purchase plans of the Company in any calendar year.    

Participation in the Plan                                                       

         Eligible  employees  become   participants  in  the  Purchase  Plan  by
delivering  to the  Company,  prior to the  date  selected  by the  Board as the
offering date for the offering,  an agreement  authorizing payroll deductions of
up to 15% of such employees' base total compensation during the purchase period.

Purchase Price                                                                  

         The  purchase  price per share at which  shares are sold in an offering
under the  Purchase  Plan is the lower of (a) 85% of the fair market  value of a
share of Common Stock on the date of commencement of the offering, or (b) 85% of
the fair market value of a share of Common Stock on the last day of the purchase
period.                                                                         

Payment of Purchase Price; Payroll Deductions                                   

         The purchase price of the shares is  accumulated by payroll  deductions
over the offering  period.  A participant may reduce,  increase or begin payroll
deductions  after the  beginning of any purchase  period only as provided for in
the offering. A participant may make additional payments into his or her account
only if  specifically  provided for in the offering and only if the  participant
has not had the maximum amount  withheld  during the purchase period All payroll
deductions  made for a participant  are credited to his or her account under the
Purchase Plan and deposited with the general funds of the Company.              

Purchase of Stock                                                               

         By  executing an agreement to  participate  in the Purchase  Plan,  the
employee is entitled to purchase  shares  under such plan.  In  connection  with
offerings made under the Purchase Plan, the Board  specifies a maximum number of
shares  any  employee  may be  granted  the right to  purchase  and the  maximum
aggregate  number of shares which may be purchased  pursuant to such offering by
all  participants.  If the  aggregate  number  of shares  to be  purchased  upon
exercise of rights  granted in the offering  would exceed the maximum  aggregate
number of shares  available  under the offering,  the Board will make a pro rata
allocation  of shares  available in a uniform and equitable  manner.  Unless the
employee's  participation  is  discontinued,  his  right to  purchase  shares is
exercised  automatically  at the end of the  purchase  period at the  applicable
price. See "Withdrawal" below.                                                  

Withdrawal                                                                      

         While each  participant  in the  Purchase  Plan is  required to sign an
agreement  authorizing payroll  deductions,  the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal  from the Purchase Plan.  Such withdrawal may
be elected at any time prior to the end of the applicable purchase period except
as otherwise provided by the Board in the offering.                             

         Upon any withdrawal from an offering by the employee,  the Company will
distribute to the employee his or her  accumulated  payroll  deductions  without
interest,  less any accumulated deductions previously applied to the purchase of
stock on the  employee's  behalf  during  such  offering,  and  such  employee's
interest in the offering will be automatically  terminated.  The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering  will  not  have  any  effect  upon  such  employee's   eligibility  to
participate in subsequent offerings under the Purchase Plan.                    

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Termination of Employment                                                       

         Rights  granted  pursuant  to any  offering  under  the  Purchase  Plan
terminate immediately upon cessation of an employee's employment for any reason,
and the Company will  distribute to such employee all of his or her  accumulated
payroll deductions, without interest.                                           

Restrictions on Transfer                                                        

         Rights granted under the Purchase Plan are not  transferable and may be
exercised only by the person to whom such rights are granted.                   

Duration, Amendment and Termination                                             

         The Board may  suspend  or  terminate  the  Purchase  Plan at any time.
Unless terminated earlier, such plan will terminate in May 2003.                

         The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase  Plan  must be  approved  by the  stockholders  within 12 months of its
adoption by the Board if the  amendment  would (a) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, or (b) modify the
requirements relating to eligibility for participation in the Purchase Plan.    

         Rights  granted  before  amendment or  termination of the Purchase Plan
will not be altered or impaired by any  amendment  or  termination  of such plan
without consent of the person to whom such rights were granted.                 

Effect of Certain Corporate Events                                              

         In the event of a dissolution,  liquidation or specified type of merger
of the Company,  (i) the surviving  corporation  may assume the rights under the
Purchase Plan or  substitute  similar  rights,  (ii) such rights may continue in
full force and effect,  or (iii) 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.                                   

Stock Subject to Purchase Plan                                                  

         If rights  granted under the Purchase  Plan expire,  lapse or otherwise
terminate  without being  exercised,  the Common Stock not purchased  under such
rights again becomes available for issuance under the Purchase Plan.            

Federal Income Tax Information                                                  

         Rights  granted under the Purchase Plan are intended to qualify for the
favorable federal income tax treatment accorded rights granted under an employee
stock  purchase plan which  qualifies  for such  treatment  under  provisions of
Section 423 of the Code.                                                        

         A  participant  will be taxed on amounts  withheld  for the purchase of
shares as if such amounts were  actually  received.  Other than this,  no income
will be taxable to a participant until  disposition of the shares acquired,  and
the method of taxation  will depend  upon the  holding  period of the  purchased
shares.                                                                         

         If the stock is disposed of at least two years after the  beginning  of
the offering  period and at least one year after the stock is transferred to the
participant,  then the lesser of (a) the excess of the fair market  value of the
stock at the time of such  disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price  (determined as of the beginning of the offering period)
will be treated as ordinary  income.  Any further gain or any loss will be taxed
as a long-term  capital gain or loss.  Capital  gains  currently  are  generally
subject to lower tax rates than ordinary income.  The maximum capital gains rate
for  federal  income tax  purposes  is 28% while the  maximum  ordinary  rate is
effectively 39.6% at the present time.                                          

         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 

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ordinary  income at the time of such  disposition,  and the Company  may, in the
future,  be required to withhold  income taxes relating to such ordinary  income
from other  payments  made to the  participant.  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 long-  or  short-term
depending on whether the stock has been held for more than one year.            

         There are no federal income tax  consequences  to the Company by reason
of the grant or  exercise  of rights  under the  Purchase  Plan.  The Company is
entitled to a deduction to the extent amounts are taxed as ordinary  income to a
participant  (subject to the  requirement of  reasonableness,  the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation). 

         The following table presents certain information with respect to shares
purchased under the Purchase Plan during the fiscal year ended December 31, 1996
by (i) the Named Executive Officers,  (ii) all executive officers as a group and
(iii) all non-executive officer employees as a group. Non-employee directors are
not eligible to purchase shares under the Purchase Plan.                        

 New Plan Benefits

                                              Employee Stock Purchase Plan
                                               ---------------------------------
  Name and Principal Position                  Dollar Value(1)  Number of Shares
                                                                 Purchased

Roy H. Slavin                                   $  19,995            1,289  
Chairman of the Board, President and                                    
Chief Executive Officer                                                 
Sam M. Auriemma                                        --               --  
Vice President, Finance, Chief Financial                                
Officer and Secretary                                                   
Joseph Cowan                                       20,694            1,604  
Vice President, Marketing                                               
Jeffrey Kissling                                    3,749              580  
Vice President, Development                                             
Lawrence T. Whelan                                 17,421            1,254  
Vice President, International Sales                                     
Ronald C. Mehaffey                                 12,662            1,138  
Vice President, Product Development                                     
Gary J. Wilson                                     20,324            1,561  
Vice President, North American Sales                                    
All Executive Officers as a Group                 100,957            7,909  
All Non-Executive Officer Employees as a                                    
Group                                         1,756,753          137,736

(1)      Fair market value on the date of purchase multiplied by the number of  
shares purchased.                                             

PROPOSAL 3

 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

     The Board of Directors has selected  Deloitte & Touche LLP as the Company's
independent  auditors  for the fiscal  year  ending  December  31,  1997 and has
further  directed that management  submit the selection of independent  auditors
for  ratification by the  stockholders at the Annual Meeting.  Deloitte & Touche
LLP  has  audited  the  Company's  financial  statements  since  December  1992.
Representatives  of  Deloitte  & Touche  LLP are  expected  to be present at the
Annual  Meeting,  will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.                      

     Stockholder  ratification  of the selection of Deloitte & Touche LLP as the
Company's  independent  auditors  is not  required  by the  Company's  Bylaws or
otherwise.  However,  the Board is submitting the selection of Deloitte & Touche
LLP to the stockholders for ratification as a matter of good corporate practice.
If the                                                                          

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stockholders  fail to ratify the selection,  the  Audit  Committee  and  the    
Board will  reconsider  whether to retain that firm.  Even if the  selection  is
ratified,  the Audit Committee and the Board in their  discretion may direct the
appointment of a different  independent  accounting  firm at any time during the
year if they  determine that such a change would be in the best interests of the
Company and its stockholders.                                                   

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information  regarding the ownership
of the Company's  Common Stock as of December 31, 1996 by: (i) each director and
nominee  for  director;  (ii) each of the Named  Executive  Officers;  (iii) all
executive  officers and directors of the Company as a group;  and (iv) all those
known by the Company to be  beneficial  owners of more than five  percent of its
Common Stock.                                                                   

                                                  Beneficial Ownership (1)
                                                  ----------------------------
                                                   Number of        Percent of
                    Beneficial Owner               Shares            Total
Jeffrey Kissling (2)                                  50,185              *     
Jay L. Kear (3)                                       46,000              *     
F. Rigdon Currie (4)                                  28,064              *     
John E. Rehfeld (5)                                   18,000              *     
Roy H. Slavin (6)                                     12,289              *     
Gary J. Wilson (7)                                    10,861              *     
Lawrence T. Whelan (8)                                 6,654              *     
Joseph Cowan (9)                                       4,540              *     
Ronald C. Mehaffey (10)                                2,588              *     
Harvard H. Hill, Jr. (11)                              2,500              *     

Sam M. Auriemma                                           --             --     
All executive officers and directors as a group                                 
(12 persons) (12)                                  172,263            1.2%  
----------------                                                                
*      Less than one percent.                                                   

(1)  This table is based upon  information  supplied by officers,  directors and
     principal  stockholders  and Schedules 13D and 13G, if any,  filed with the
     Securities and Exchange Commission (the "SEC").  Unless otherwise indicated
     in the footnotes to this table and subject to community property laws where
     applicable,  the Company  believes that each of the  stockholders  named in
     this table has sole voting and investment  power with respect to the shares
     indicated  as  beneficially  owned.  Applicable  percentages  are  based on
     13,865,966 shares outstanding on December 31, 1996, adjusted as required by
rules promulgated by the SEC.                                         

(2)  Includes 600 shares beneficially owned by Mr. Kissling's minor children.   

(3)  Includes  46,000 shares  subject to options  exercisable  within 60 days of
December 31, 1996.                                                    

(4)  Includes  5,564  shares  held in a trust of which Mr.  Currie and his wife,
     Patricia Johnson,  are trustees.  Includes 22,500 shares subject to options
exercisable within 60 days of December 31, 1996.                      

(5)  Includes  18,000 shares  subject to options  exercisable  within 60 days of
December 31, 1996.                                                    

(6)  Includes 1,000 shares held in a trust of which Mr. Slavin is a trustee and 
as to which Mr. Slavin has sole voting and investment power.          

(7)  Includes  9,300  shares  subject to options  exercisable  within 60 days of
December 31, 1996.                                                    

(8)  Includes  5,400  shares  subject to options  exercisable  within 60 days of
December 31, 1996.                                                    

(9)  Includes  2,608  shares  subject to options  exercisable  within 60 days of
December 31, 1996.                                                    

(10) Includes 1,450 shares held by Mr. Mehaffey's wife, Marva L. Mehaffey.      

(11) Includes  2,500  shares  subject to options  exercisable  within 60 days of
December 31, 1996.                                                    

(12) Includes  108,012  shares subject to options held by officers and directors
     and exercisable  within 60 days of December 31, 1996. See Notes (2) through
(5), (7) through (9) and (11).                                        

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Compliance with Section 16(a) of the Securities Exchange Act of 1934, As Amended

     Section  16(a) of the Exchange Act requires  the  Company's  directors  and
executive  officers,  and persons who own more than ten percent of a  registered
class of the Company's equity  securities,  to file with the SEC initial reports
of  ownership  and  reports of changes in  ownership  of Common  Stock and other
equity  securities  of the  Company.  Officers,  directors  and greater than ten
percent  stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.                                    

     To the Company's knowledge,  based solely on a review of the copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports were  required,  during the fiscal year ended  December  31,  1996,  all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater than ten percent  beneficial  owners were complied with; except that one
report,  covering  an  aggregate  of one  transaction,  was  filed  late  by Mr.
Mehaffey.                                                                       

EXECUTIVE COMPENSATION

Compensation of Directors                                                       

     Commencing in April 1994, each Non-Employee Director received a per-meeting
fee of $1,000 for attendance, in person or telephonicly,  at regularly scheduled
Board meetings;  no additional  compensation is paid for committee meetings.  In
addition,  one director,  Jay L. Kear,  receives $1,500 per day for service as a
consultant.  In the fiscal year ended  December 31,  1996,  $12,000 in aggregate
compensation  was paid by the Company to  directors  of the Company who were not
otherwise employed by the Company or any affiliate of the Company ("Non-Employee
Directors") for attendance at regularly scheduled  meetings.  The members of the
Board of Directors are eligible for reimbursement for their expenses incurred in
connection  with  attendance at Board and committee  meetings in accordance with
Company policy.                                                                 

     Non-Employee  Directors  are also  eligible for grants of options under the
1994  Non-Employee  Directors'  Stock Option Plan,  as amended (the  "Directors'
Plan").  The Directors'  Plan provides for the granting of stock options only to
Non-Employee Directors.  Option grants under the Directors' Plan are intended by
the Company not to qualify as  incentive  stock  options  under the Code and are
nondiscretionary.  Under the Directors' Plan, on the date of each annual meeting
of stockholders of the Company,  each Non-Employee Director is granted an option
to purchase  10,000  shares of Common Stock which vests 25% on the date one year
after the date of grant and 6.25% for each full three-month  period  thereafter,
provided that the optionee has, during the period beginning on the date of grant
for such  option  and  ending on such  vesting  date,  continuously  served as a
Non-Employee  Director or as an employee of or  consultant to the Company or any
affiliate of the Company.                                                       

    During 1996, the Company granted options  covering 10,000 shares of Common
Stock to each  eligible  Non-Employee  Director,  each at an exercise  price per
share of $21.125, the fair market value of the Common Stock on the date of grant
(based on the closing sales price reported on the NASDAQ National Market for the
date of grant).  As of January 31,  1997,  options to purchase an  aggregate  of
55,000 shares had been granted under the Directors'  Plan, and 2,500 options had
been exercised.                                                                 

         In November 1995, Mr. Kear entered into a consulting agreement with the
Company.  Pursuant to the agreement,  Mr. Kear provides  assistance to the Chief
Executive Officer in connection with management reorganization issues, for which
he  receives a  consulting  fee of $1,500 per day. In 1996,  Mr.  Kear  received
$4,708 in consulting fees for services performed for the Company.               

Compensation of Executive Officers                                              

        The  following  table  shows for the fiscal years ending  December 31,
1996, 1995 and 1994, compensation awarded or paid to, or earned by the Company's
Chief  Executive  Officer,  its other  four most  highly                        

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compensated executive officers at December 31, 1996,  and two former  executive 
officers who departed from the Company  during fiscal year 1996  (collectively, 
the "Named  Executive Officers"):                                               

                                                        [Enlarge/Download Table]


                           Summary Compensation Table                                                             

                                                                                                       Long-Term  
                                                                                                      Compensation
                                                                       Annual Compensation (1)         Awards (2) 
-------------------------------------------------           ----------------------------------------  ------------
                                                                                                         Shares   
                                                                                       Other Annual    Underlying 
          Name and Principal Position               Year      Salary        Bonus      Compensation    Options (3)
------------------------------------------------  --------  -----------  ----------   --------------  ------------
                                                                                                                  
Roy H. Slavin                                       1996      $320,600    $ 37,734     $ 50,000 (4)      400,000  
  Chairman of the Board, President                  1995      $103,000    $ 70,645     $450,501 (5)      200,000  
  and Chief Executive Officer                       1994            --          --           --               --  
Sam M. Auriemma                                     1996      $113,719    $ 14,880           --           45,000  
  Vice President, Finance, Chief                    1995            --          --           --               --  
  Financial Officer and Secretary                   1994            --          --           --               --  
Joseph Cowan                                        1996      $142,761    $ 13,440     $109,521 (6)       16,900  
  Vice President, Marketing                         1995      $ 77,147    $ 30,060           --           16,900  
                                                    1994      $ 72,100    $ 34,963           --            8,100  
Jeffrey Kissling                                    1996      $118,333    $ 13,440           --           35,000  
  Vice President, Development                       1995      $ 23,333    $    673           --               --  
                                                    1994            --          --           --               --  
Lawrence T. Whelan (7)                              1996      $140,600    $ 13,440           --           20,000  
  Former Vice President, International Sales        1995      $ 87,032    $ 44,461     $ 15,373 (8)       10,000  
                                                    1994      $ 34,125    $ 13,628           --           15,000  
Ronald C. Mehaffey (9 )                             1996      $131,730    $ 13,440     $ 48,892 (10)      45,000  
  Former Vice President, Product                    1995            --          --           --               --  
  Development                                       1994            --          --           --               --  
Gary J. Wilson (11)                                 1996      $144,107          --           --            5,000  
  Former Vice President, North American             1995      $ 91,699    $ 45,589           --               --  
  Sales                                             1994      $ 86,690    $ 53,325           --           15,000  

---------------                                                                                                   
<FN>                                                                                                              

(1)  Includes  amounts  earned but  deferred at the  election  of the  executive                                  
     officer.                                                                                                     

(2)  None of the Named Executive  Officers held restricted stock at December 31,                                  
     1996.                                                                                                        

(3)  Of the options to purchase an aggregate  of 566,900  shares of Common Stock                                  
     granted  to the Named  Executive  Officers  as a group in 1996,  options to                                  
     purchase only 185,000  shares of Common Stock were original  option grants,                                  
     and the  remaining  option  grants were  repricings  of options  previously                                  
     granted to such Named Executive  Officers.  See "REPORT OF THE COMPENSATION                                  
     COMMITTEE  OF THE  BOARD OF  DIRECTORS  ON  EXECUTIVE  COMPENSATION--Option                                  
     Repricing" and "Option Repricing Information."                                                               

(4)  Includes a signing bonus of $50,000.                                                                         

(5)  Includes a relocation  allowance of $56,081 and $394,420 in loans  forgiven                                  
     by the Company.                                                                                              

(6)  Includes a relocation allowance of $21,521 and $88,000 in loans forgiven by                                  
     the Company.                                                                                                 

(7)  Mr. Whelan's employment with the Company terminated on January 3, 1997.                                      

(8)  Includes a relocation allowance of $15,373.                                                                  

(9)  Mr. Mehaffey's employment with the Company terminated on December 6, 1996.                                   

(10) Includes a relocation allowance of $48,892.                                                                  

(11) Mr. Wilson's employment with the Company terminated on September 9, 1996.                                    

</FN>                                                                                                             

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 STOCK OPTION GRANTS AND EXERCISES

         The Company  grants  options to its executive  officers  under the 1989
Stock  Option  Plan,  as amended  (the "1989  Plan").  As of December  31, 1996,
options to purchase a total of 1,550,659 shares were outstanding  under the 1989
Plan and  options  to  purchase  903,382  shares  remained  available  for grant
thereunder.                                                                     

         The following  tables show for the fiscal year ended December 31, 1996,
certain information  regarding options granted to, exercised by and held at year
end by the Named Executive Officers:                                            

                                                        [Enlarge/Download Table]


                          Option Grants in Fiscal 1996*                                                  

                                        Individual Grants                                                
                       -----------------------------------------------------                             
                          Number      % of Total                                       Potential         
                         of Shares      Options                                   Realizable Value at    
                        Underlying    Granted to                                  Assumed Annual Rates   
                          Options      Employees    Exercise                  of Stock Price Appreciation
                          Granted      in Fiscal     Price      Expiration        for Option Term (4)    
Name                    (#) (1) (2)    1996 (3)      ($/sh)      Date (2)        5% ($)         10% ($)  
                        -----------   ----------    ---------   ----------    ---------------------------
                                                                                                         
Roy H. Slavin             100,000          7.6%        $15.25   cancelled              --              --
                          200,000         15.2%         $9.75     8/30/06      $1,226,345      $3,107,798
                          100,000          7.6%         $9.75     8/30/06      $  613,172      $1,553,899
Sam M. Auriemma            20,000          1.5%        $22.50   cancelled              --              --
                           20,000          1.5%         $9.75     8/30/06      $  122,634      $  310,780
                            5,000          0.4%         $9.75     8/30/06      $   30,658      $   77,695
Joseph Cowan               16,900          1.3%         $9.75     8/30/06      $  103,626      $  262,609
Jeffrey Kissling           10,000          0.8%       $21.125   cancelled              --              --
                           10,000          0.8%         $9.75     8/30/06      $   61,317      $  155,390
                           15,000          1.1%         $9.75     8/30/06      $   91,976      $  233,085
Lawrence T. Whelan (5)      5,000          0.4%       $21.125   cancelled              --              --
                           10,000          0.8%         $9.75     8/30/06      $   61,317      $  155,390
                            5,000          0.8%         $9.75     8/30/06      $   30,659      $   77,695
Ronald C. Mehaffey (6)     10,000          0.8%        $16.00   cancelled              --              --
                           10,000          0.8%       $21.125   cancelled              --              --
                           10,000          0.8%         $9.75   cancelled              --              --
                           10,000          0.8%         $9.75   cancelled              --              --
                            5,000          0.4%         $9.75   cancelled              --              --
Gary J. Wilson (7)          5,000          0.4%       $21.125     4/21/06      $   66,427      $  168,339
---------------                                                                                          
<FN>                                                                                                     

* Of the options to  purchase an  aggregate  of 566,900  shares of Common  Stock                         
granted to the Named Executive  Officers as a group in 1996, options to purchase                         
only  185,000  shares of Common  Stock  were  original  option  grants,  and the                         
remaining  option grants were  repricings  or  amendments of options  previously                         
granted to such  Named  Executive  Officers.  See  "REPORT  OF THE  COMPENSATION                         
COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION--Option Repricing"                         
and "Option Repricing Information."                                                                      

(1)  All  options  granted  to the Named  Executive  Officers  (or  repriced  or                         
     amended) in 1996 and  remaining  outstanding  at December 31, 1996 vest 50%                         
     two years  from the date of grant,  and 25% for each full year  thereafter.                         

(2)  The Board of Directors may reprice  outstanding  options under the terms of                         
     the 1989 Plan.                                                                                      

(3)  Based on options to purchase an aggregate of  1,313,100  shares  granted in                         
     1996.  (Includes  options to purchase  an  aggregate  of 566,900  shares of                         
     Common Stock granted to the Named Executive Officers as a group in 1996, of                         
     which options to purchase only 185,000 shares of Common Stock were original                         
     option  grants,  and and the remainder of which  represented  repricings or                         
     amendments of options  previously  granted to such Named Executive Officers                         
     in connection with the Company's option repricing  program.  See "REPORT OF                         
     THE  COMPENSATION   COMMITTEE  OF  THE  BOARD  OF  DIRECTORS  ON  EXECUTIVE                         
     COMPENSATION--Option  Repricing" and "Option Repricing  Information.") This                         
     number is not  necessarily  indicative  of the number of shares  subject to                         
     options to be granted in the future.                                                                

(4)  The  potential  realizable  value  is  calculated  based on the term of the                         
     option  (ten  years)  and the fair  market  value at the time of its  grant                         
     (which, in each case, is equal to the exercise price).                                              

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(5)  Mr. Whelan's options ceased vesting as of his  termination,  and the vested                         
     portion of his options will expire if unexercised by April 3, 1997.                                 

(6)  All of Mr. Mehaffey's options terminated unvested following the termination                         
     of his employment.                                                                                  

(7)  Mr.  Wilson's  options  ceased  vesting as of March 9, 1997, and the vested                         
     portion of his options will expire if unexercised by June 9, 1997.                                  
</FN>                                                                                                    
                                                        [Enlarge/Download Table]


 Aggregated Option Exercises in Fiscal 1996 and Value of Options at End of Fiscal 1996                       

                                                               Number of Shares         Value of Unexercised 
                                                             Underlying Unexercised         In-the-Money     
                                                                Options at End           Options at End of   
                       Shares Acquired   Value Realized       of Fiscal 1996 (#)        Fiscal 1996 ($) (2)  
Name                     on Exercise         ($) (1)      Exercisable/Unexercisable Exercisable/Unexercisable
-----                 ----------------- ---------------- -------------------------- -------------------------
                                                                                                             
Roy H. Slavin                --                  --               0/300,000                    $0/$0         
Sam M. Auriemma              --                  --                0/25,000                    $0/$0         
Joseph Cowan                 --                  --            2,284/19,816                    $0/$0         
Jeffrey Kissling             --                  --                0/25,000                    $0/$0         
Lawrence T. Whelan (3)       --                  --            4,800/21,600                    $0/$0         
Ronald C. Mehaffey (4)       --                  --                     0/0                    $0/$0         
Gary J. Wilson (5)           --                  --            8,100/12,800           $11,271/$6,069         

-------------------                                                                                          
<FN>                                                                                                         

(1)  Value  realized is based on the fair market value of the  Company's  Common                             
     Stock  on the  date of  exercise  minus  the  exercise  price  and does not                             
     necessarily indicate that the optionee sold such stock.                                                 

(2)  Fair  market  value of the  Company's  Common  Stock at  December  31, 1996                             
     ($8.89) minus the exercise price of the options.                                                        

(3)  Mr. Whelan's options ceased vesting as of his  termination,  and the vested                             
     portion of his options will expire if unexercised by April 3, 1997.                                     

(4)  All of Mr. Mehaffey's options terminated unvested.                                                      

(5)  Mr.  Wilson's  options  ceased  vesting as of March 9, 1997, and the vested                             
     portion of his options will expire if unexercised by June 9, 1997.                                      
</FN>                                                                                                        

 EMPLOYMENT AGREEMENTS

         Pursuant  to an  employment  agreement  between  the Company and Roy H.
Slavin entered into in November 1995, Mr.  Slavin's  annual salary and bonus are
determined by the  Compensation  Committee of the Board of Directors.  To assist
Mr.  Slavin in his  purchase  of a home in  connection  with his  relocation  to
Southern  California,  a loan by the  Company  to Mr.  Slavin  in the  amount of
$394,420 was made and  subsequently  forgiven by the Company in 1995. Mr. Slavin
also received a relocation allowance of $56,081 pursuant to the agreement. Under
the terms of the agreement,  options to purchase 200,000 shares of the Company's
Common Stock under the 1989 Plan were granted to Mr. Slavin at an exercise price
of  $37.75,  the  market  price of the Common  Stock as of July 31,  1995.  Such
options originally vested at the rate of 24% one year from the date of grant and
2 percent per month  thereafter.  On August 31, 1996, the terms of these options
were revised such that the exercise price was reduced to $9.75 (the market price
of the Common Stock on August 30, 1996) and the vesting  schedule was revised so
that 50  percent of the  options  vest two years  from  August  31,  1996 and 25
percent per year  thereafter.  See "Option  Repricing  Information."  Either Mr.
Slavin or the Company may terminate this employment relationship at will.       

         In August 1996,  the  Compensation  Committee of the Board of Directors
authorized severance protection agreements covering all officers of the Company.
Under the agreement  covering the Chief Executive  Officer of the Company,  such
officer  will  receive 2.5 times his annual  average  salary over the last three
years in the event  that he is either  terminated  other  than for  cause,  or a
change of control of the  Company  occurs and he  decides  not to  continue  his
employment  with the Company.  The agreements  covering  officers other than the
Chief  Executive  Officer have  essentially the same terms as the agreement with
the  Chief  Executive  Officer  except  that the  payment  will be one times the
officer's  average  annual  salary over the last three  years.  Under all of the

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severance  agreements,  in the event of a change of control of the Company,  all
unvested  stock options held by the officers shall  immediately  vest and become
exercisable.                                                                    

         Pursuant to an agreement between the Company and Gary J. Wilson entered
into in September 1996, Mr. Wilson  resigned as Vice  President,  North American
Sales as of September 9, 1996.  Pursuant to this agreement,  Mr. Wilson was paid
$11,667 per month, and Mr. Wilson's  unvested  options  continued to vest, until
March 9, 1997.                                                                  

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
 ON EXECUTIVE COMPENSATION

The Compensation  Committee of the Board of Directors (the  "Committee")  during
1997 was composed of Messrs.  Currie,  Kear and Rehfeld;  none of the members of
the  Committee is a current or former  officer or employee of the  Company.  The
Committee is responsible for setting and  administering  the Company's  policies
governing employee compensation and administering the Company's employee benefit
plans, including the 1989 Plan and the Employee Stock Purchase Plan.            

COMPENSATION COMMITTEE REPORT(1)

Compensation Philosophy                                                         

         The compensation  policies adopted by the Committee are designed to (i)
align  compensation  with business  objectives  and  performance;  (ii) attract,
retain and reward  executive  officers and other key employees who contribute to
the long-term success of the Company and (iii) motivate the Company's  executive
officers and other key employees to enhance  long-term  stockholder  value.  Key
elements of this philosophy are:                                                

         -        The  Company's  salaries  must  be  competitive  with  leading
                  software  companies with which the Company competes for highly
                  qualified and experienced  executives.  To date, the Committee
                  has relied on its  members'  experience  in working with other
                  comparable software companies to ensure executive salaries are
                  competitive. Since becoming a public company in July 1993, the
                  Company has retained the services of an executive compensation
                  consulting firm to regularly compare the Company's salaries to
                  these  companies  and assist the Company in setting its salary
parameters.                                 

         -        The Company maintains annual incentive programs  sufficient to
                  provide  motivation to achieve specific operating goals and to
                  generate rewards that bring total  compensation to competitive
levels.                                     

         -        The Company provides significant  equity-based  incentives for
                  executives  and other key  employees  to ensure  that they are
                  motivated  over  the long  term to  respond  to the  Company's
                  business  challenges and opportunities as stockholders as well
as employees.                               

         The  Committee's  objective is to set executive  compensation  within a
range  which the  Committee  believes  is  comparable  to the  average  range of
compensation set by companies of comparable size in the software  industry.  The
group of  comparable  companies  is not  necessarily  the same as the  companies
included in the market indices  included in the performance  graph on page 18 of
this Proxy Statement.  The primary components of executive compensation are base
salary,  short- and long-term cash incentives and long-term  equity  incentives.
Each year,  the  Compensation  Committee  reviews  the  criteria  upon which all
aspects of employee compensation are based.                                     

         Base Salary.  The Committee  annually reviews each executive  officer's
base salary.  When reviewing base salaries,  the Committee considers a number of
subjective criteria,  including  individual and Company  performance,  levels of
responsibility,  prior  experience and competitive pay practices.  The Committee
does not make individual  salary  decisions  according to specific  criteria and
does not ascribe specific weights to the factors it considers.                  

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         Annual Incentives. In fiscal 1996, the Company awarded year-end bonuses
to its executive officers,  non-executive  officers and certain other employees.
The actual  bonuses paid to each  individual  were  determined by  multiplying a
predetermined  amount (which is a graduated  percentage  of salary  dependent on
employee level,  typically 5-15%) by a percentage determined by the Compensation
Committee to be a fair  adjustment of the  predetermined  amount based on actual
Company  performance  during the year.  In addition,  selected  other  employees
received  "spot" bonus awards during the year based on  achievement  of specific
operational goals.                                                              

         Long-Term   Incentives.   The  Company's  long-term  incentive  program
consists of options  granted  under the 1989 Plan,  other stock  options and the
Purchase Plan.  Option grants include vesting periods to encourage key employees
to continue in the employ of the  Company.  Through  option  grants,  executives
receive  significant  equity  incentives to build long-term  stockholder  value.
Grants are generally made at 100% of fair market value on the date of grant.    

         Section  162(m) of the Code  limits  the  Company  to a  deduction  for
federal income tax purposes of no more than $1 million of  compensation  paid to
certain  officers  in a  taxable  year.  Compensation  above $1  million  may be
deducted  if it is  "performance-based  compensation"  within the meaning of the
Code. The Compensation Committee has determined that stock options granted under
the 1989 Plan with an exercise  price at least equal to the fair market value of
the  Common  Stock on the date of grant  will be  treated  as  performance-based
compensation  under the final  Treasury  regulations  promulgated  under Section
162(m) of the Code.                                                             

         Executive  officers  receive value from these grants only if the Common
Stock  appreciates over the long term. The amount of individual option grants is
determined  based  in part  on  competitive  practices  at  comparable  software
companies and on the Company's  philosophy of  significantly  linking  executive
compensation with stockholder  interests.  In determining the size of individual
grants,  the Committee  also  considers the number of shares  subject to options
previously  granted to each  executive  officer,  including the number of shares
that have vested and that remain  unvested.  The Committee  believes that option
grants by the Company to its executive  officers and employees are comparable to
the average range for  comparable  companies.  In 1996,  the  Committee  granted
options  to  purchase  575,900  shares of the  Company's  Common  Stock to eight
executive officer(s), of which options to purchase only 194,000 shares of Common
Stock were original option grants, and of which the remaining option grants were
repricings or amendments of options  previously  granted to such Named Executive
Officers. See "--Option Repricing" and "Option Repricing Information."          

Option Repricing                                                                

        In January 1996, the Company  implemented an option exchange program
applicable to all employees of the Company,  excluding  executive  officers.  In
August 1996, the Company  implemented an option exchange  program  applicable to
the  Company's  executive  officers  other  than  the  Chief Executive  Officer.
Concurrently   therewith,   the  Compensation  Committee  amended  Mr.  Slavin's
outstanding  option to purchase  200,000  shares of Common  Stock under the 1989
Plan and exchanged Mr. Slavin's outstanding option to purchase 100,000 shares of
Common Stock under the 1989 Plan to reduce,  in each case, the exercise price of
such  options to equal the fair market  value of the Common Stock on the date of
amendment  or  exchange.  As a result  of these  actions,  the  number of shares
subject to each exchanged or amended option  remained the same, but in each case
the exercise  price was reduced to equal the market price of the common stock on
the date of such exchange or amendment.  In addition, the vesting of the options
was  revised so that 50 percent of the  options  vest two years from the date of
the  exchange  or  amendment  of such  option  and 25  percent  vest  each  year
thereafter.  At the times these repricings were effected,  substantially  all of
the  options  then  outstanding  under the 1989  Plan,  including  those held by
executive officers,  had exercise prices  significantly above the current market
price of the Company's  Common  Stock.  In light of the decline in the Company's
Common  Stock Price and because  options are a key  component  of the  Company's
long-term incentive program,  the Committee determined that repricing of options
held by executive officers was necessary in order to retain such employees.  For
additional  details  regarding the effect of such repricing  programs on options
held by the Named Executive Officers, see "Option Repricing Information."       

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Corporate Performance and Chief Executive Officer Compensation                  

         Mr.  Slavin's  base salary for 1996 as  President  and Chief  Executive
Officer was $320,600.  In setting the base salary for Mr. Slavin,  the Committee
took into account (i) the terms of Mr.  Slavin's  employment  agreement with the
Company  which  stipulated an increase in his 1996 base salary over his starting
salary, (ii) the expanded scope of Mr. Slavin's responsibilities,  including his
duties as Chairman of the Board, and (iii) the Board's  confidence in Mr. Slavin
to lead the Company's  continued  development.  Mr.  Slavin's  annual salary was
estimated  to  provide  an annual  base  compensation  level at the  average  as
compared to a selected group of other software companies. Based on the Company's
performance,  Mr.  Slavin  also  received  annual  incentive  payments  totaling
$37,734.  This payment represented a significant reduction from the target bonus
to reflect the Company's  1996  financial  performance.  In addition,  in August
1996, the Committee amended Mr. Slavin's  outstanding option to purchase 200,000
shares of  Common Stock  under the  1989  Plan and  exchanged  Mr.  Slavin's    
outstanding  option to purchase 100,000 shares of Common  Stock under the  1989 
Plan to reduce, in each case,  the exercise price of such options to equal the  
fair market value of the  Common  Stock on the date of  amendment or  exchange. 
Other than such amended and repriced  options,  Mr. Slavin received no original 
options grants during 1996. See "--Option Repricing" above and "Option Repricing
Information."                                                                   

Conclusion                                                                      

         Through the programs  described  above,  a  significant  portion of the
Company's  compensation  program and the  compensation  of the  Company's  Chief
Executive  Officer are  contingent on Company  performance,  and  realization of
benefits is closely  linked to  increases in long-term  stockholder  value.  The
Company remains committed to this philosophy of pay for performance, recognizing
that the  competitive  market for talented  executives and the volatility of the
Company's  business may result in highly variable  compensation for a particular
time period.                                                                    

                            COMPENSATION COMMITTEE

                      F. Rigdon Currie
                 Jay L. Kear
                     John E. Rehfeld

(1)  The  material in this report is not  "soliciting  material,"  is not deemed
     filed with the SEC, and is not to be  incorporated  by  reference  into any
     filing of the Company  under the  Securities  Act of 1933,  as amended (the
     "Securities  Act") or Exchange  Act,  whether made before or after the date
     hereof and irrespective of any general incorporation  language contained in
such filing.                                                          

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OPTION REPRICING INFORMATION

         The following table shows certain information  concerning the repricing
of options received by the Named Executive  Officers since the Company's initial
public offering in July 1993. See also "REPORT OF THE COMPENSATION  COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION--Option Repricing."            

                                                        [Enlarge/Download Table]


                                                                                                         Length of   
                                            Number of       Market Price     Exercise                     Original   
                                           Securities       of Stock at    Price at Time                Option Term  
                                           Underlying         Time of      of Repricing                 Remaining at 
                                             Options        Repricing or        or                        Date of    
                                           Repriced or       Amendment      Amendment    New Exercise   Repricing or 
Name                          Date         Amended (#)         ($)             ($)         Price ($)      Amendment  
----                      ------------     -----------     ------------   -------------   ------------   ------------
                                                                                                                     
Roy H. Slavin                8/31/96          200,000         $9.75           $37.75          $9.75          9 years 
                             8/31/96          100,000         $9.75           $15.25          $9.75        9.5 years 
Sam M. Auriemma              8/31/96           20,000         $9.75            $22.50         $9.75        9.5 years 
Joseph Cowan                 8/31/96           16,900         $9.75           $17.125         $9.75       9.25 years 
Jeffrey Kissling             8/31/96           10,000         $9.75           $21.125         $9.75        9.5 years 
Lawrence T. Whelan (1)       8/31/96           10,000         $9.75           $27.00          $9.75        8.5 years 
                             8/31/96            5,000         $9.75           $21.125         $9.75        9.5 years 
Ronald C. Mehaffey (2)       8/31/96           10,000         $9.75           $16.00          $9.75        9.5 years 
                             8/31/96           10,000         $9.75           $21.125         $9.75        9.5 years 
Gary J. Wilson (3)                --               --            --                --            --               -- 
------------------                                                                                                   
<FN>                                                                                                                 
(1)  Mr. Whelan's options ceased vesting as of his  termination,  and the vested                                     
     portion of his options will expire if unexercised by April 3, 1997.                                             

(2)  All of Mr. Mehaffey's options were cancelled as of December 31, 1996.                                           

(3)  Mr.  Wilson's  options  ceased  vesting as of March 9, 1997, and the vested                                     
     portion of his options will expire if unexercised by June 9, 1997.                                              
</FN>                                                                                                                

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PERFORMANCE MEASUREMENT COMPARISON (1)

         The following  graph shows a comparison of cumulative  total returns of
an  investment  of $100 in cash for the  Company,  the  Center for  Research  in
Securities  Prices Index for the NASDAQ Stock Market (United  States  Companies)
(the "CRSP NASDAQ U.S. Index") and the Center for Research in Securities  Prices
Index for the NASDAQ  Computer  and Data  Processing  Stocks  (the "CRSP  NASDAQ
Computer  Index") for the period that commenced July 23, 1993 (the date on which
the Common  Stock was first  traded on the NASDAQ  National  Market  System) and
ended on December  31, 1996.  The graph  assumes  that all  dividends  have been
reinvested.                                                                     

COMPARISON OF CUMULATIVE TOTAL RETURNS

(Wonderware Corporation, CRSP NASDAQ U.S. Index, CRSP NASDAQ Computer Index)

 [GRAPHIC OMITTED, Illustration of returns listed below]

                                                        [Enlarge/Download Table]


----------------------------------------- --------- --------- --------- --------- ----------
             Index Description            7/23/93   12/31/93  12/31/94  12/31/95   12/31/96 
----------------------------------------- --------- --------- --------- --------- ----------
                                                                                            
Wonderware Corporation                    100.000   158.929   241.071   121.429      63.507 
CRSP Index for the NASDAQ Stock Market    100.000   110.427   107.943   152.532     187.753 
  (United States Companies)                                                                 
CRSP Index for the NASDAQ Computer and    100.000   109.824   133.338   203.394     250.746 
  Data Processing Stocks                                                                    
----------------------------------------- --------- --------- --------- --------- ----------

(1)  This  Section is not  "soliciting  material,"  is not deemed filed with the
     SEC,  and is not to be  incorporated  by  reference  into any filing of the
     Company under the Securities Act or the Exchange Act whether made before or
     after  the  date  hereof  and  irrespective  of any  general  incorporation
language in such filing.                                              

CERTAIN TRANSACTIONS

         The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein,  for expenses,  damages,  judgments,  fines and  settlements  he may be
required to pay in actions or proceedings  which he is or may be made a party by
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent  permitted  under  Delaware  law and the  Company's
Bylaws.                                                                         

         The Company has entered into certain  additional  transactions with its
directors and executive  officers,  as described  under the captions  "Executive
Compensation--Compensation of Directors" and "Executive Compensation--Employment
Agreements."                                                                    

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 OTHER MATTERS

         The Board of Directors knows of no other matters that will be presented
for  consideration  at the Annual  Meeting.  If any other  matters are  properly
brought  before the meeting,  it is the  intention  of the persons  named in the
accompanying  proxy  to vote on such  matters  in  accordance  with  their  best
judgment.                                                                       

                                      By Order of the Board of Directors

                       /s/ Sam M. Auriemma

                   Sam M. Auriemma
             Secretary

April 3, 1997                                                                   

A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE  COMMISSION
ON FORM 10-K FOR THE FISCAL YEAR ENDED  DECEMBER 31, 1996 IS  AVAILABLE  WITHOUT
CHARGE  UPON  WRITTEN  REQUEST  TO:  SAM  M.  AURIEMMA,  SECRETARY,   WONDERWARE
CORPORATION, 100 TECHNOLOGY DRIVE, IRVINE, CALIFORNIA 92618.                    

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PROXY           

WONDERWARE CORPORATION

 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
 FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 12, 1997

         The  undersigned  stockholder  of  Wonderware  Corporation,  a Delaware
corporation,  hereby acknowledges the receipt of the Notice of Annual Meeting of
Stockholders  and  Proxy  Statement  with  respect  to  the  Annual  Meeting  of
Stockholders  of Wonderware  Corporation to be held at the Sutton Place Hotel at
4500 MacArthur Blvd., Newport Beach, California on Monday, May 12, 1997 at 10:00
a.m. and hereby appoints Roy H. Slavin and Sam M. Auriemma, and each of them, as
attorneys and proxies of the  undersigned,  each with power of substitution  and
revocation,  and each with all  powers  that the  undersigned  would  possess if
personally  present to vote the shares of stock of Wonderware  Corporation which
the  undersigned  may be  entitled  to  vote  at  such  meeting  and any and all
continuations  and  adjournments  thereof,  as set  forth  below,  and in  their
discretion upon any other matters that may properly come before the meeting.    

         THIS PROXY WILL BE VOTED AS SPECIFIED OR IF NO CHOICE IS SPECIFIED, FOR
THE ELECTION OF THE  NOMINEES,  FOR  PROPOSALS 2 AND 3, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.        

(IMPORTANT - TO BE VOTED, SIGNED AND DATED ON REVERSE SIDE)  [SEE REVERSE SIDE] 

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[WONDERWARE CORPORATION LOGO]                                                   

April 3, 1997                                                                   

You are cordially  invited to attend the Annual  Meeting of  Stockholders  to be
held at 10:00 a.m.  on Monday,  May 12,  1997 at the Sutton  Place Hotel at 4500
MacArthur  Blvd.,  Newport  Beach,  California.  Detailed  information as to the
business to be transacted at the meeting is contained in the accompanying Notice
of Annual Meeting and Proxy Statement.                                          

Regardless of whether you plan to attend the meeting,  it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as soon
as  possible in the  envelope  provided.  If you do plan to attend the  meeting,
please mark the appropriate box on the proxy.                                   

                Sincerely,
                   Roy H. Slavin
                                          Chairman of the Board, President and
                             Chief Executive Officer

 DETACH HERE

[X] Please mark votes as in this example.                                       

1:           Election of  directors to hold office until the next Annual        
           Meeting of  Stockholders  and until their successors are elected.

Nominees:    F. Rigdon Currie, Harvard H. Hill, Jr., Jay L. Kear, John E.       
Rehfeld and Roy H. Slavin                             
[  ] FOR ALL NOMINEES                                 
[  ] WITHHELD FROM ALL NOMINEES                       
[  ]                                                  
For all nominees except as noted above      

2:           To approve the Employee Stock Purchase Plan, as amended.           
[  ] FOR                                              
[  ] AGAINST                                          
[  ] ABSTAIN                                          

2:           To ratify  selection  of  Deloitte & Touche LLP as  independent    
  auditors  for the fiscal  year ending December 31, 1997.
[  ] FOR                                              
[  ] AGAINST                                          
[  ] ABSTAIN                                          

[  ]         MARK HERE FOR CHANGE OF ADDRESS AND NOTE AT LEFT                   

[  ]         MARK HERE IF YOU PLAN TO ATTEND THE MEETING                        

                      PLEASE VOTE, SIGN, DATE AND PROMPTLY
   RETURN THIS CARD.

                   Please sign  exactly as your name
                   appears  hereon.  If the stock is
                   registered in the names of two or
                   more  persons,  each should sign.
                   Executors,        administrators,
                   trustees,      guardians      and
                   attorneys-in-fact    should   add
                   their  titles.  If  signer  is  a
                   corporation,   please  give  full
                   corporate  name  and  have a duly
                   authorized  officer sign, stating
                   title.    If    signer    is    a
                   partnership,   please   sign   in
                   partnership  name  by  authorized
person.       

Signature:_________________Date:_____ Signature:____________________Date:_____  

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘DEF 14A’ Filing		Date		First		Last			Other Filings
		12/31/97		2		22			10-K
		12/4/97		4
		6/9/97		14		18
		5/12/97		2		22
Filed on:		4/7/97
		4/3/97		2		22
		3/17/97		2		3
		3/9/97		14		18
		1/31/97		11
		1/3/97		12
For Period End:		12/31/96		5		20			10-K,  8-K
		12/6/96		12
		9/9/96		12		15
		8/31/96		14
		8/30/96		14
		12/31/95		11
		7/31/95		14
		12/31/94		11
		7/23/93		19
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