SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
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Thinking Tools, Inc.
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Thinking Tools, Inc.
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<PAGE>
THINKING TOOLS, INC.
-------------------------
6541 Via Del Oro
San Jose, California 95119
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Thinking Tools, Inc.:
The Annual Meeting of Stockholders of Thinking Tools, Inc. (the "Company") will
be held at the offices of the Company at the address shown above, at 9:30 a.m.
Pacific Time, on Friday, December 5, 1997, for the following purposes:
1. To elect eight Directors of the Board of Directors;
2. To consider and act upon a proposal to adopt the Company's 1997 Stock
Option Plan;
3. To ratify the appointment of Deloitte & Touche, LLP as the independent
accountants for the Company for the year ending December 31, 1997; and
4. To transact such other business as may properly come before the meeting
and any adjournment thereof.
All stockholders are invited to attend the meeting. Stockholders of record at
the close of business on November 13, 1997, the record date fixed by the Board
of Directors, are entitled to notice of, and to vote at, the meeting. A
complete list of stockholders entitled to notice of, and vote at, the meeting
will be open to examination by the stockholders beginning ten days prior to the
meeting for any purpose germane to the meeting during normal business hours at
the office of the Company at 6541 Via Del Oro, San Jose, California 95119.
Whether or not you intended to be present at the meeting, please sign and date
the enclosed proxy and return it in the enclosed envelope.
By Order of the Board of Directors
John Hiles
Secretary
San Jose, California
November 13, 1997
<PAGE>
THINKING TOOLS, INC.
6541 Via Del Oro
San Jose, California 95119
-------------------------
PROXY STATEMENT
-------------------------
The accompanying proxy is solicited by the Board of Directors of Thinking
Tools, Inc. (the "Company") for use at the Annual Meeting of Stockholders to be
held at 9:30 a.m., Pacific Time, on Friday, December 5, 1997, and any
adjournment thereof (the "Annual Meeting"). This proxy material is being mailed
to stockholders commencing on or about November 14, 1997.
VOTING SECURITIES; PROXIES
A majority of the outstanding shares of Common Stock, par value $.001 per share
(the "Common Stock"), present in person or represented by proxy shall
constitute a quorum at the Annual Meeting. All shares of Common Stock
represented by properly executed proxies which are returned and not revoked
will be voted in accordance with the instructions, if any, given therein.
Regarding the election of eight Directors to serve until the Annual Meeting of
Stockholders in 1998, in voting by proxy, stockholders may vote in favor of all
nominees or withhold their votes as to specific nominees. With respect to the
other proposals to be voted upon, stockholders may vote in favor of a proposal,
against a proposal or may abstain from voting. Stockholders should specify
their choices on the enclosed form of proxy. If no specific instructions are
given with respect to the matters to be acted upon, the shares of Common Stock
represented by a signed proxy will be voted FOR all the Board's nominees for
Director, FOR the proposal to adopt the 1997 Stock Option Plan, FOR the
proposal to ratify the appointment of Deloitte & Touch LLP as independent
accountants and in accordance with the proxy holder's best judgement as to any
other matters raised at the Annual Meeting.
Directors will be elected by a plurality of the votes cast by the holders of
shares of Common Stock voting in person or by proxy at the Annual Meeting.
Accordingly, abstentions and broker nonvotes will not be included in vote
totals and will have no effect on the outcome of the vote. Adoption of the 1997
Stock Option Plan and ratification of the appointment of Deloitte & Touch LLP
as independent accountants will each require approval by a majority of the votes
cast by the holders of the shares of Common Stock voting on the proposal in
person or by proxy at the Annual Meeting. Thus, with respect to the adoption of
the 1997 Stock Option Plan and the ratification of the appointment of Deloitte
& Touch LLP, abstentions and broker nonvotes will not affect the outcome of the
election.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of such revocation to the Secretary of the
Company, executing and delivering to the Company a later dated proxy reflecting
contrary instructions or appearing at the Annual Meeting and taking appropriate
steps to vote in person.
At the close of business on November 13, 1997, 4,641,758 shares of Common Stock
were outstanding and eligible for voting at the meeting. Each stockholder of
record is entitled to one vote for each share of Common Stock held on all
matters that come before the meeting. Only stockholders of record at the close
of business on November 13, 1997 are entitled to notice of, and to vote at, the
meeting.
The Company will bear the cost of solicitation of proxies. In addition to the
solicitation of proxies by mail, certain officers and employees of the Company,
without additional remuneration, may also solicit proxies personally by telefax
and by telephone. In addition to mailing copies of this material to
stockholders, the Company may request persons, and reimburse them for their
expenses in connection therewith, who hold stock in their names or custody or
in the names of nominees for others to forward such material to those persons
for whom they hold stock of the Company to request their authority for
execution of the proxies.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide that each Director serves from the date of
his or her election until the annual meeting of stockholders held in the year
following the year of his or her election and until his or her successor is
elected and qualified or until his or her earlier death, resignation or
removal. The specific number of Directors is set by a resolution adopted by a
majority of the entire Board of Directors. The terms of all Directors extend
until the Annual Meeting of Stockholders in 1998. The Board of Directors has
nominated each of the current Directors for re-election to the Board of
Directors as Directors for one year terms expiring in 1998. Officers are
elected for one-year terms by the Board of Directors.
The persons named in the accompanying proxy intend to vote for the election as
Director of the nominees listed herein. Each nominee has consented to serve if
elected. The Board of Directors has no reason to believe that the nominees will
not serve if elected, but if any of them should become unavailable to serve as
a Director, and if the Board of Directors designates a substitute nominee or
nominees, the persons named as proxies will vote for the substitute nominee or
nominees designated by the Board of Directors.
The following table sets forth certain information with respect to each person
who is currently a Director or executive officer of the Company and the
individuals nominated and recommended to be elected by the Board of Directors
of the Company and is based on the records of the Company and information
furnished to it by such persons. Reference is made to "Security Ownership of
Certain Beneficial Owners and Management" for information pertaining to stock
ownership by each Director and executive officer of the Company, including the
nominees.
DIRECTORS AND OFFICERS OF THE COMPANY
The Directors, executive officers and key employees and consultants of the
Company, their positions held with the Company, their ages, and for Directors,
the year they were first elected as Directors are as follows:
<TABLE>
<CAPTION>
Name Age Position Year Elected As Director
- ---- --- -------- -------------------------
<S> <C> <C> <C>
Mr. Fred Knoll 42 Chairman of the Board, Director 1994
Mr. Phillip F. Whalen, Jr. 50 President, Chief Executive Officer, Director 1996
Mr. John Hiles 51 Founder, Chief Technology Officer, Secretary, 1994
Director
Mr. Marc Cooper (2) 36 Director 1997
Ms. Esther Dyson 45 Director 1994
Mr. Frederick Gluck (2) 62 Director 1994
Dr. Ted Prince (1) 50 Director 1994
Mr. Fran Saldutti (1) 50 Director 1994
Mr. Charles Isaacs 39 Vice President, Engineering
Mr. Rick Rosenbaum 50 Software Architect
Mr. Bruce Skidmore 39 Software Architect
Mr. Greg Rossi 42 Senior Software Engineer
Mr. Robert Stern 50 Director of Multimedia Production
Mr. Mort Meyerson 59 Advisory Committee Member
</TABLE>
- -----------
(1) Member of Compensation Committee.
(2) Member of Audit/Finance Committee.
2
<PAGE>
The following is a brief summary of the background of each Director and
executive officer, key employee and consultant of the Company:
Fred Knoll has been Chairman of the Board and a member of the Board of
Directors since September 1994. From 1987 to the present, Mr. Knoll has been
the principal of Knoll Capital Management, L.P., a venture capital firm
specializing in the information technology industry. From 1985 to 1987, Mr.
Knoll was an investment manager for General American Investors, responsible for
the technology portfolio, and served as the United States representative on
investments in leveraged buy-outs and venture capital for Murray Johnstone,
Ltd. of Glasgow, Scotland. From 1983 to 1985, Mr. Knoll served as
manager of venture investments for Robert Fleming, Inc., a U.K. merchant bank
in New York and was responsible for managing a venture capital fund as well as
managing a team whose responsibility was to identify public investment
opportunities. Mr. Knoll also held investment positions with the Capital Group
(Capital Research/Capital Guardian) from 1982 to 1983 and General American
Investors. During the 1970's, Mr. Knoll worked in sales and marketing
management for Data General and Wang Laboratories, Inc. Mr. Knoll is a director
of numerous companies, including Arthur Treachers, Inc., a company in the fast
service seafood restaurant business and Lamar Signal Processing, Ltd., a
digital processing company, and is a principal of Valor Capital Management,
L.P., a private investment limited partnership. Mr. Knoll holds a B.S. in
Computer Science from M.I.T. and an M.B.A. from Columbia University in Finance
and International Business.
Phillip F. Whalen, Jr. has been President, Chief Executive Officer and a
Director of the Company since December 1996. From June 1994 to November 1996,
Mr. Whalen was Vice President of the European operations of Digital Tools, Inc.
("Digital Tools"), where he established an independent business unit for this
leading project management software company. Prior to heading up Digital Tools'
European operation, Mr. Whalen was, from July 1992, to May 1994, Vice President
of Digital Tools' sales, marketing and services in the U.S. at Digital Tools'
headquarters in Cupertino, California. During his tenure, Mr. Whalen made the
Auto Plan project management software product the dominant one in its category.
From 1990 to 1992, Mr. Whalen was Vice President, Marketing and then Vice
President, Sales for Clarity Software, Inc. ("Clarity"), a UNIX business
software company he helped found. While at Clarity, Mr. Whalen was responsible
for establishing all marketing and sales functions. From 1985 to 1990, Mr.
Whalen was Vice President, Sales and Marketing for cc:Mail Inc., which in five
years grew to become the largest installed, LAN-based, electronic mail software
product before being acquired by Lotus Development Corp. in 1990. Mr. Whalen
received a B.A. in Chemistry from Denison University in 1969 and an M.B.A from
Stanford University Graduate School of Business in 1982.
John Hiles, the Founder and Chief Technology Officer, has been Secretary of the
Company and a member of its Board of Directors, since its inception. Mr. Hiles
served as the Company's President from its inception until November 30, 1996
(except during the period from March to August 1996). Mr. Hiles' career spans
24 years in the software industry. From 1992 to 1993, he served in various
positions with Maxis Business Simulations, including that of General Manager.
While with Maxis, Inc., Mr. Hiles directed the development of SimHealth, a
program which simulates the impact of various proposed reforms on the U.S.
health care system, and developed a means of transferring the key human
interface properties of entertainment games to business and government
simulations. From 1986 to 1992, Mr. Hiles was President and co-founder of Delta
Logic, Inc. From 1984 to 1986, Mr. Hiles served as Senior Vice President of
product development at Digital Research. From 1976 to 1983, Mr. Hiles was
employed by Amdahl where he lead the development of software products. In 1984,
Mr. Hiles was in charge of leading software development at Mead Data Central.
Two of the many products that have been produced by organizations that he
directed were GEM, one of the first graphical user interfaces for the PC, and
UTS, Amdahl's highly successful mainframe-compatible UNIX operating system
which foreshadowed the open systems movement by several years. Mr. Hiles holds
an A.B. from the University of California at Santa Barbara and took several
additional undergraduate and graduate courses in Computer Science at the
University of California at Los Angeles and the University of California at
Irvine.
Marc S. Cooper has been a member of the board of directors since January 1997.
Mr. Cooper is currently Vice-Chairman of Barington Capital Group, L.P. and
served as Executive Vice President--Director of Investment Banking and Research
from March 1992 until January 1997. From April 1989 to March 1992, Mr. Cooper
was a partner of Scharf Brothers, a private merchant bank involved in
acquisitions of domestic and international industrial and technology companies.
From April 1987 to April 1989, Mr. Cooper was a Vice President in the corporate
finance department of Kidder Peabody & Co., Inc., where he was involved in
structuring and negotiating a wide variety of merchant banking and merger and
acquisition transactions. From 1982 to 1987, Mr. Cooper was an associate in
investment banking at Dean Witter Reynolds, Inc. Mr. Cooper received an M.B.A.
from the New York University Graduate School of Business Administration, and a
B.S. in Management and Economics from New York University.
Esther Dyson has been a member of the Board of Directors since October 1994.
Ms. Dyson currently serves as chairman of EDventure Holdings, a diversified
company focusing on emerging information technology worldwide, and on the
emerging computer markets of Central and Eastern Europe. From 1983 to 1997, Ms.
Dyson served as President of EDventure Holdings. Since 1994, Ms. Dyson has been
chairman of the Electronic Frontier Foundation and has been a member of the US
Nation Information Infrastructure Advisory Council, where she co-chairs the
Information Privacy and Intellectual Property Subcommittee. Ms. Dyson is a
member of the board of directors of the Global Business Network, ComputerLand
Poland and Cygnus Support, and she is a member of the advisory board of Perot
Systems. She is a limited partner in the Maryland Software Fund. Ms. Dyson has
also written articles on industry topics for the Harvard Business Review, The
New York Times, The New York Times Magazine, WIRED Magazine and Forbes
Magazine, among others.
3
<PAGE>
Frederick W. Gluck has been a member of the Board of Directors since October
1994. Mr. Gluck has served as director and senior counselor of Bechtel Group,
Inc. since July 1997. Prior to such time and since 1995, he served as a member
of the board of directors of Bechtel Group, Inc. and Bechtel Enterprises, Inc.
He also serves as a member of both companies' executive committees. Prior to
joining Bechtel, Mr. Gluck spent more than 25 years with McKinsey & Company,
and was ultimately a managing director of the Company. Mr. Gluck serves on the
Harvard Business School board of directors of the Associates, the Management
Education Council of the Wharton School, the Council on Foreign Relations and
the Board of the International Executive Service Corps. Mr. Gluck is also a
member of the board of directors of ACT Networks, Inc.
Ted Prince has been a member of the Board of Directors since October 1994.
Since 1995, Dr. Prince has been the Chairman and CEO of INSCI Corporation.
Since 1992, Dr. Prince has been the President and founder of Perth Ventures,
Inc., an investment banking and public relations firm which specializes in the
emerging information technology area. Dr. Prince is also an author, publisher
and speaker in the area of emerging information technologies and market trends.
He is the author and publisher of The Technology Fundamentalist, a national
newsletter focusing on emerging computer technologies and market trends. Dr.
Prince has started up several information technology companies including CP
International, a company specializing in text retrieval software, and Harwell
Computer Power, a startup in the same field. From 1984 to 1992, he served as
President and CEO of several companies, including the national computer
services company, Computer Power Group. From 1979 to 1984, Dr. Prince was the
Chief Information Officer of the Australian Social Security Agency where he was
responsible for designing a new national social welfare system.
Fran Saldutti has been a member of the board of directors since October 1994.
Mr. Saldutti has been, since 1995, a managing general partner of Ardent
Research Partners, L.P., a limited partnership founded in 1992 to invest
exclusively in the information technology markets. From 1990 through February
1995, Mr. Saldutti served as senior technology analyst for Amerindo Investment
Advisors. From 1984 through 1986 he served as Senior Vice President and
Director of Research for Gartner Securities and from 1986 to 1988 as Director
of Technology Research for L.F. Rothschild. Mr. Saldutti moved to the buy side
in 1989 as senior technology analyst with Merrill Lynch Asset Management's
Sci/Tech Fund. From 1975 to 1989 Mr. Saldutti either produced, sold or directed
technology research for several leading technology brokerage firms. Mr.
Saldutti maintains board directorships in other technology companies, including
Kraft Kennedy, Lesser, a LAN industry systems integrator and Meta Group, a
market research firm specializing in information technology, on which he also
serves on the compensation committee. He is a member of the Software and
Services Splinter Group of the New York Society of Securities Analysts.
Charles Isaacs, Vice President, Engineering, has been employed by the Company
since July 1997. Mr. Isaacs has 17 years of experience in software engineering
and systems integration and more than 12 years of experience in leading complex
software development projects. From 1995 to 1997 he was employed by the Answer
Systems Division of Platinum Technology, Inc. where he served most recently as
Vice President and General Manager and prior thereto as Vice President,
Engineering. From 1980 to 1995, Mr. Isaacs held several positions at GTE
Government Systems, most recently as Vice President of Engineering and
Operations. Mr. Isaacs holds a B.S. in Electrical Engineering from the
University of California, Santa Barbara and an M.B.A. from California Lutheran
University.
Rick Rosenbaum, Software Architect, has been employed by the Company as an
applications engineer since its inception. Mr. Rosenbaum has 26 years of
experience in the software industry specializing in computer languages and
simulation applications. Prior to working at the Company, from 1992 to 1993, he
served as Senior Member of the Technical Staff of Maxis, Inc. and, in 1986, as
Manager of the Core Languages Group of Sun Microsystems, and from 1987 to 1992
as Project Manager of Digital Research and Bank of America. Mr. Rosenbaum holds
a B.S. in Electrical Engineering and an M.S. in computer science from the
Georgia Institute of Technology.
Bruce Skidmore, Software Architect, has been employed by the Company as a
senior engineering manager since 1993. Mr. Skidmore has 16 years of experience
in the software development industry as, among other things, a Project Manager,
Engineering Manager and Director of Engineering. His technical experience is in
the areas of operating system development and design, networks and application
architectures. From 1992 to 1993 he worked for Maxis, Inc. as Director of
Product Development. From 1986 through 1992, he worked for Poquet and Delta
Logic as Manager of Communications and Systems Software. From 1981 to 1986, he
worked for Digital Research as a Network Project Manager. Mr. Skidmore holds a
B.S. in Computer Science from California Polytechnic State University, San Luis
Obispo.
Greg Rossi, Senior Software Engineer and the architect of WHITEBOARD, has been
employed by the Company as a programmer since 1994. Mr. Rossi has 13 years of
experience in the software industry focusing on object data bases and graphic
user interfaces. From 1992 to 1993 he worked for Maxis, Inc. as Senior Member
of the Technical Staff. From 1986 to 1992
4
<PAGE>
he worked for Poquet and Delta Logic as principal programmer. From 1985 to 1988
he worked for Digital Research as a senior software engineer and from 1982 to
1984 for Dialogic Systems as programmer. Mr. Rossi has a B.A. in Chemistry and
Computer Science from the University of California at Santa Cruz.
Robert Stern has been Director of Multimedia Production for the Company since
February, 1997. Mr. Stern has 27 years of experience as a creator, developer,
and producer of a wide range of corporate design and interactive products. He
is the former Creative Director of Simply Interactive. Prior to that he was
President and Executive Producer at Technimation, Inc. a computer animation
company. He has worked on projects for Internal Business Machines, Inc., Apple
Computer, Inc., Advanced Micro Devices, Inc., and Acura, to name a few. Mr.
Stern holds a B.A. in graphic design and a M.F.A. in film production from the
University of Washington. He is a frequent lecturer on computer animation and
web design.
Morton Meyerson, the Chairman of the Advisory Committee, has been Chairman of
Perot Systems since 1992. From 1979 to 1986 he was President and Chief
Executive Officer of EDS Information Systems. Mr. Meyerson has had extensive
experience in the software industry, in running large technology companies and
in investing in, growing and capitalizing emerging technology companies.
Committees of the Board of Directors; Board Meetings
The Board of Directors has established an Audit/Finance and a Compensation
Committee to assist it in the discharge of its responsibilities. The principal
responsibilities of each committee and the members of each committee are
described in the succeeding paragraphs. Actions taken by any committee of the
Board are reported to the Board of Directors, usually at its next meeting or by
written report. The Company's Board of Directors held three meetings during the
fiscal year ended December 31, 1996. All Directors attended at least 75% of the
meetings held during the fiscal year ended December 31, 1996.
The Audit/Finance Committee currently consists of Messrs. Cooper and Gluck,
each of whom is an independent Director. The Audit/Finance Committee was formed
in October 1997. It recommends the appointment of a firm of independent public
accountants to examine the financial statements of the Company for the coming
year. In making this recommendation, it reviews the nature of audit services
rendered, or to be rendered, to the Company. It reviews with representatives of
the independent public accountants the auditing arrangements and scope of the
independent public accountants' examination of the financial statements,
results of those audits, and any problems identified by the independent public
accountants regarding internal accounting controls, together with their
recommendations.
The Compensation Committee currently consists of Messrs. Prince and Saldutti,
each of whom is an independent Director. The Compensation Committee was formed
in January 1997. This Committee reviews salaries of certain senior executives
and employees of the Company. The Committee is also charged with the
administration of the Company's stock option plans and incentive programs.
No member of the Compensation Committee has ever served as an executive officer
or an employee of the Company. In addition, no executive officer of the Company
has ever served as (i) a member of the compensation committee or equivalent of
another entity, one of those executive officers served on the Compensation
Committee, (ii) a director of another entity, one of whose executive officers
served on the Compensation Committee or (iii) a member of the compensation
committee or equivalent of another entity, one of whose executive officers
served as a Director of the Company.
Compensation of Directors
The Directors do no receive cash compensation for service on the Board of
Directors or on any of its Committees, but Directors may be reimbursed for
certain expenses in connection with attendance at Board of Directors' and
Committee meetings. During fiscal year ended December 31, 1996, the Company's
non-employee Directors were granted fully-vested options to purchase an
aggregate of 41,036 shares of Common Stock at a weighted average exercise price
of $1.00 per share.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation paid for the fiscal years ended
December 31, 1996, December 31, 1995, and December 31, 1994, to those persons
who were, at December 31, 1996, (i) the chief executive officer and (ii) the
one other most highly compensated executive officer of the Company, who was the
only other executive officer of the Company who received over $100,000 in
compensation in the form of salary and bonus (the "Named Executive Officer").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term
------------------------------------------- Compensation
Awards
Securities
Other Annual Underlying
Compensation Options/ All Other
Name and Principal Position Year Salary ($) Bonus ($) ($) SARs Compensation
- --------------------------- ---- ---------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Phillip F. Whalen, Jr. 1996(1) $ 14,584 -- -- 430,000 --
President and Chief
Executive Officer
John Hiles(2) 1996 $135,507 $25,000 -- -- --
Founder, Chief 1995 $132,000 -- -- -- --
Technology Officer 1994 $132,000 -- -- -- --
</TABLE>
- -----------
(1) Mr. Whalen joined the Company on December 1, 1996, and this amount
represents his salary from that date through December 31, 1996.
(2) Mr. Hiles was President of the Company until November 30, 1996.
1996 Stock Option Grants
The Company strives to distribute stock option awards broadly throughout the
organization. Stock option awards are based on the individual's position and
contribution to the Company. The Company's long term performance ultimately
determines compensation from stock options because stock option value is
entirely dependent on the long term growth of the Company's Common Stock price.
The following table sets forth certain information concerning options granted
to the Chief Executive Officer and the Named Executive Officer during the
fiscal year ended December 31, 1996.
Option Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Number of
Securities % of Total Options Market
Underlying Granted to Exercise or Base Price on
Options Granted Employees in Price Date of Expiration
Name (#) Fiscal Year ($/Sh) Grant Date
- ---- --------------- ------------------ ----------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Phillip F. Whalen, Jr. 230,000(1) 39.00% $7.65 $9.00 12/01/06
150,000(2) 25.40% $9.00 $9.00 12/01/06
50,000(3) 8.50% $9.00 $9.00 12/01/06
John Hiles -- -- -- -- --
</TABLE>
- -----------
(1) Options to purchase 76,667 shares of the Company's Common Stock shall
become exercisable commencing December 1, 1997, and options to purchase an
additional 6,388.875 shares of the Company's Common Stock shall become
exercisable in each of the succeeding months that Mr. Whalen is an
employee thereafter, until December 1, 1999, at which time all such
options shall become exercisable.
(2) Provided Mr. Whalen is still an employee of the Company at the time, such
options shall become exercisable upon the earlier of (i) December 1, 1999,
and (ii) such time as the market price of the Company's Common Stock is
$20.00 per share or higher for 20 consecutive days.
(3) Provided Mr. Whalen is still an employee of the Company at the time, such
options shall become exercisable upon the earlier of (i) December 1, 1999,
and (ii) such time as the market price of the Company's Common Stock is
$30.00 per share or higher for 20 consecutive days.
6
<PAGE>
AGGREGATE OPTION EXERCISES DURING THE
FISCAL YEAR ENDED DECEMBER 31, 1996
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number and
value of shares underlying exercisable and unexercisable stock options as of
the fiscal year ended December 31, 1996 by the Named Executive Officer. No
options were exercised by any of the Named Executive Officers during the fiscal
year ended December 31, 1996.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Security Underlying In-The-Money
Unexercised Options at Options at
Shares December 31, 1996 December 31, 1996(1)
Acquired ------------------------------- ------------------------------
on Exercise Value
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Phillip F. Whalen, Jr. N/A N/A -- 430,000 -- $253,000
John Hiles N/A N/A -- -- -- --
</TABLE>
- -----------
(1) These figures are based on a price of $8.75 per share, the closing price of
the Common Stock on December 31, 1996 as reported on the Nasdaq Small Cap
Market as of such date, less the exercise price of each option.
Arrangements with Directors and Executive Officers
Mr. Whalen's employment arrangements with the Company guarantee him an annual
base salary of $175,000 plus a minimum bonus of $75,000 for the fiscal year
ending December 31, 1997, provided the Company reaches certain milestones (to
be determined by the Compensation Committee). Mr. Whalen received a salary of
$14,584 fiscal 1996, representing his prorated salary for his one month of
employment during fiscal 1996. Additionally, in connection with his employment
by the Company, Mr. Whalen received (i) an option under the 1996 Stock Option
Plan to purchase 230,000 shares of Common Stock at $7.65 per share, 76,667 of
such options vesting on December 1, 1997, and 6,388.875 of such options vesting
in each of the succeeding months that Mr. Whalen is an employee thereafter,
until December 1, 1999, at which time all such options shall be exercisable;
(ii) an option outside of the Plan to purchase 150,000 shares of Common Stock
at $9.00 per share, such options vesting upon the earlier of (A) December 1,
1999, and (B) such time as the Common Stock is $20.00 per share or higher for
20 consecutive days; and (iii) an option outside of the Plan to purchase 50,000
shares of Common Stock, such options vesting upon the earlier of (A) December
1, 1999, and (B) such time as the Common Stock is $30.00 per share or higher
for 20 consecutive days.
John Hiles, the Founder, Chief Technology Officer, Secretary and former
President of the Company, is employed by the Company under an employment
agreement that is subject to automatic annual renewals unless terminated by the
Company or Mr. Hiles upon 90 days' prior written notice. Mr. Hiles currently
receives a salary of $160,000 per year and a minimum bonus of $50,000 for the
fiscal year ending December 31, 1997. Such salary may be increased at the
discretion of the board of directors, and may be supplemented by certain
bonuses at the discretion of the board of directors of the Company. The Company
believes the terms of the arrangement are no less favorable to the Company than
the terms that it could have obtained from an unaffiliated third party.
Fred Knoll, the Chairman of the Board of the Company, has provided, and
continues to provide certain executive and related consulting services to the
Company as requested by the Company, including, serving as Chairman of the
Board, consulting on various aspects of the Company's business and negotiating
certain contractual and employment arrangements. To date, Mr. Knoll has not
been compensated for such services, however, commencing October 1, 1997, Mr.
Knoll will be compensated for such services at an annual rate of $150,000.
Payment of Mr. Knoll's compensation will be deferred until the Board of
Directors determines to make payments in respect thereof. Mr. Knoll is also
entitled to reimbursement of any expenses which he incurs in connection with
providing services to the Company. Mr. Knoll, through certain affiliates,
controls Technologies.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company as of
November 13, 1997 with respect to the beneficial ownership of the Company's
voting securities by (i) each person who is known by the Company to own of
record or beneficially more than 5% of the outstanding Common Stock, (ii) each
of the Company's directors and Named Executive Officers, and (iii) all directors
and executive officers of the Company as a group. Except as otherwise indicated,
the stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percentage of Class(1)
- ------------------- -------------------- ----------------------
<S> <C> <C>
Thinking Technologies, L.P.(2) 2,579,573 49.0%
Mr. Fred Knoll(3) 2,579,573 49.0%
Mr. John Hiles(4) 1,076,677 23.2%
Mr. Phillip F. Whalen, Jr.(5) 83,055 --
Mr. Marc Cooper(6) -- --
Ms. Esther Dyson(7)(8) 25,000 *
Mr. Frederick Gluck(8)(9) 25,000 *
Dr. Ted Prince(8)(10) 25,000 *
Mr. Fran Saldutti(8)(11) 25,000 *
All directors and
executive officers as a group
(8 persons)(3)(4)(5)(6)(7)(9)(10)(11) 3,756,250 70.0%
</TABLE>
- -----------
* Less than one percent.
(1) Percentage of ownership is based on 4,641,758 shares of Common Stock
outstanding. For each beneficial owner, shares of Common Stock subject to
convertible securities exercisable within 60 days of the date of this
Proxy Statement are deemed outstanding for computing the percentage of
such beneficial owner.
(2) Includes 468,242 shares of Common Stock issuable upon the exercise of the
Technologies Warrants and 156,250 shares of Common Stock issuable upon
exercise of Bridge Warrants issued as part of the Bridge Units purchased
by Technologies. Does not include 75,454 shares of Common Stock which may
be purchased by Technologies from John Hiles upon the exercise of an
outstanding option for $5.00 per share. The address of Thinking
Technologies, L.P. is 200 Park Avenue, Suite 3900, New York, New York
10166.
(3) Includes 2,579,573 shares beneficially owned by Thinking Technologies,
L.P., a limited partnership indirectly controlled by Mr. Knoll. The
address of Mr. Knoll is c/o Knoll Capital Management, 200 Park Avenue,
Suite 3900, New York, New York 10166.
(4) Includes 75,454 shares of Common Stock which may be purchased by
Technologies from John Hiles upon the exercise of an outstanding option
for $5.00 per share. The address of Mr. Hiles is c/o Thinking Tools, Inc.,
6541 Via Del Oro, San Jose, California 95119.
(5) Consists of an aggregate of 83,055 shares of Common Stock which are
issuable upon exercise of options, of which options 76,667 vest December 1,
1997 and 6,388 vest January 1, 1998. The address of Mr. Whalen is c/o
Thinking Tools, Inc., 6541 Via Del Oro, San Jose, California 95119.
(6) The address of Mr. Cooper is c/o Barington Capital Group, 888 7th Avenue,
New York, NY 10019.
(7) The address of Ms. Dyson is c/o EDventure Holdings, Inc., 104 Fifth
Avenue, 20th Floor, New York, New York 10011-6987.
(8) Includes an aggregate of 25,000 shares of Common Stock issuable to each
non-affiliated director of the Company upon exercise of outstanding
options.
(9) The address of Mr. Gluck is c/o Bechtel, Inc., 50 Beal Street, San
Francisco, California 94105.
(10) The address of Dr. Prince is c/o Perth Ventures, 342 Madison Avenue, #716,
New York, New York 10173.
(11) The address of Mr. Saldutti is c/o Ardent Research Partners, 200 Park
Avenue, 39th Floor, New York, New York 10166.
8
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with its purchase of certain assets from Maxis, Inc., and in
order to fund its continuing operations, the Company entered into a stock
purchase and loan agreement, dated September 28, 1994, by and between
Technologies and the Company (the "Technologies Agreement"). Technologies was
formed by Knoll Capital Management, L.P. in order to purchase Common Stock of
the Company and to advance the funds provided for under the Technologies
Agreement. The general partner of Technologies is Knoll Capital Management,
L.P., an affiliate of Mr. Fred Knoll, the Company's Chairman of the Board. Mr.
Mort Meyerson, a member of the advisory committee of the Company, is a limited
partner in Technologies.
Pursuant to the Technologies Agreement, Technologies purchased 61.11% of the
Company's authorized and issued Common Stock, for the purchase price of
$100,000 and loaned to the Company $1,200,000 (the "Loan"). The Loan was
evidenced by a promissory note (the "Technologies Note") due and payable on
September 27, 1999. The Technologies Note provides for the semi-annual payment
of interest at ten percent (10%) per annum beginning when and if the Company
realized $2,000,000 in gross income during any fiscal year. In connection with
the Technologies Agreement, Mr. Hiles executed an irrevocable proxy authorizing
Knoll Capital Management, L.P. to vote his shares of Common Stock, which proxy
was effective until the Company (i) was acquired through a merger or
acquisition; or (ii) effects an initial public IPO in the aggregate amount of
$2,500,000. On and before July 29, 1996, Technologies made additional loans to
the Company in an aggregate principal amount of $502,000, with interest at a
rate of 10% per annum, which loans were due and payable on December 31, 1996
(the "Additional Loan"), but were repaid in connection with the Bridge
Financing. In connection with the Additional Loan, Technologies received
warrants to purchase 468,242 shares of Company Common Stock at an exercise
price of $1.07 per share. The loan was paid in full on December 31, 1996.
Pursuant to the Technologies Agreement, as long as Technologies owned 20% of
the Company's Common Stock, the Company could not take certain actions without
the approval of the Company's board of directors. Technologies entered into a
Consent, Waiver and Amendment dated as of August 28, 1996, as amended (the
"Consent & Waiver"), with the Company in connection with the Bridge Financing
pursuant to which such covenants terminated upon consummation of the IPO.
In connection with the Technologies Agreement, the Company and Mr. Hiles agreed
to certain co-sale rights and registration rights. Pursuant to the Consent and
Waiver, these rights terminated upon consummation of the IPO.
In addition, in connection with the Bridge Financing, pursuant to the Consent
and Waiver, the following transactions were consummated:
Thinking Tools, Inc., a California corporation ("TTI"), was merged with and
into its wholly-owned subsidiary Thinking Tools, Inc., a Delaware corporation.
Pursuant to the Merger, each share of common stock of TTI outstanding prior to
the Merger was exchanged for .7462 shares of Common Stock.
Pursuant to a plan of recapitalization adopted by the Company's board of
directors, Technologies converted $1,200,000 aggregate principal amount of
outstanding indebtedness and $120,310 of accrued interest into an aggregate of
263,158 shares of Common Stock issued to Technologies.
Technologies purchased $625,000 aggregate principal amount of Bridge Notes in
the Bridge Financing immediately following repayment by the Company of $502,000
aggregate principal amount of outstanding indebtedness and $123,000 of accrued
interest due to Technologies from the proceeds of the Bridge Financing.
9
<PAGE>
PROPOSAL 2
1997 STOCK OPTION PLAN
Approval of the 1997 Stock Option Plan
The Company's Board of Directors has adopted the 1997 Stock Option Plan (the
"1997 Stock Option Plan"), subject to the approval by the stockholders.
The purpose of the 1997 Stock Option Plan is (i) to align the interests of the
Company's stockholders with those of the Company's directors, officers and key
employees by providing recipients with a proprietary interest in the Company's
growth, profitability and success and (ii) to advance the interests of the
Company by attracting and retaining the services or advice of well-qualified
employees, officers, agents, consultants, independent contractors and directors
who are not officers or other salaried employees of the Company ("Non-Employee
Directors").
The Company's current stock-based incentive plan, the 1996 Stock Option Plan
("the 1996 Stock Option Plan"), provided for the grant of options to acquire a
maximum of 376,000 shares of Common Stock when it was established in 1996. As
of November 13, 1997, no shares remained available for grant. The Board
believes that it is in the best interest of the Company and its stockholders at
this time to adopt a new stock-based incentive plan in order to accomplish the
purposes set forth above.
Description of 1997 Stock Option Plan
The 1997 Stock Option Plan provides for the grant of options to acquire a
maximum of 600,000 shares of "Common Stock." The 1997 Stock Option Plan permits
the granting of qualified incentive stock options ("ISOs") or nonqualified
stock options ("NSOs"), at the discretion of the administrator of the 1997
Stock Option Plan (the "Plan Administrator"). The Board of Directors has
appointed the Compensation Committee of the Board, which consists of Messrs.
Prince and Saldutti, as the Plan Administrator. Subject to the terms of the
1997 Stock Option Plan, the Plan Administrator determines the terms and
conditions of options granted under the 1997 Stock Option Plan. Options granted
under the 1997 Stock Option Plan are evidenced by written agreements which
contain such terms, conditions, limitations and restrictions as the Plan
Administration deems advisable and which are not inconsistent with the 1997
Stock Option Plan.
ISOs may be granted to individuals who, at the time of grant, are employees of
the Company or its affiliates. NSOs may be granted to Directors, employees,
consultants and other agents of the Company or its affiliates.
The 1997 Stock Option Plan provides that the Plan Administrator must establish
an exercise price for ISOs that is not less than the fair market value per
share of the Common Stock at the date of grant and an exercise price for NSOs
of not less than the par value per share of the Common Stock at the time the
option is granted. Each ISO must expire within 10 years of the date of grant.
However, if ISOs are granted to persons owning more than 10% of the voting
stock of the Company, the 1997 Stock Option Plan provides that the exercise
price may not be less than 110% of the fair market value per share at the date
of grant and that the term of such ISOs may not exceed five years. The
aggregate number of options which may be granted under the 1997 Stock Option
Plan to any individual participant within any five-year period during the term
of the 1997 Stock Option Plan is limited to 500,000 shares (subject to
proportionate adjustment for changes in capitalization). Unless otherwise
provided by the Plan Administrator, options granted under the 1997 Stock Option
Plan vest at a rate of 25% per year over a four-year period; provided, that
commencing after one year, the options scheduled to vest at the end of each of
the next three years shall vest in equal monthly installments.
An optionee whose relationship with the Company or any related corporation
ceases for any reason (other than termination for cause, death or total
disability, as such terms are defined in the 1997 Stock Option Plan) may
exercise options that are then exercisable only within the three-month period
following such cessation (unless such options terminate or expire sooner by
their terms), or within such longer period as may be determined by the Plan
Administrator in the case of NSOs. Unexercised options granted under the 1997
Stock Option Plan terminate upon a merger (other than a stock merger),
reorganization or liquidation of the Company which results in the stockholders
of the Company receiving cash or property other than capital stock in exchange
for their shares of the Company's Common Stock; however, prior to such a
transaction, optionees may exercise such options without regard to whether the
vesting requirements have been satisfied.
Options granted under the 1997 Stock Option Plan convert into options to
purchase shares of another corporation that is the successor to the Company in
a stock merger with the Company, unless the Company and such other corporation,
in their sole discretion, determine that such options terminate. Such converted
options become fully vested without regard to whether the vesting requirements
in the option agreements for such options have been satisfied, unless the Board
of Directors determines otherwise.
The option exercise price must be paid in full at the time the notice of
exercise of the option is delivered to the Company and must be tendered in
cash, by bank certified or cashier's check or by personal check. Options may
also be exercised in "cashless exercises" (delivery of such shares of stock or
cancellation of such options of the Company having a fair market value equal to
the exercise price). Unless otherwise provided by the Plan Administrator,
options are nontransferable. The Board of Directors has certain rights to
suspend, amend or terminate the 1997 Stock Option Plan. Stockholder approval
must be obtained for certain amendments which will (i) increase the number of
shares which are to be reserved for the issuance of options under such plan or
(ii) permit the granting of stock options to a class of persons other than
those presently permitted to receive stock options under such plan.
Certain Federal Income Tax Consequences of the 1997 Stock Option Plan Under
Current Law
The following is a brief description of the federal income tax consequences of
stock options which may be granted under the 1997 Stock Option Plan under
present tax laws.
Incentive Stock Options. There will be no federal income tax consequences to
either the recipient or the Company upon the grant of an ISO. Except as
described below, the recipient will not have to recognize any income upon the
exercise of an ISO, and the Company will not be allowed any deduction, as long
as the recipient does not dispose of the shares within two years from the date
the ISO was granted or within one year from the date the shares were
transferred to the recipient (the "holding period requirement"). Upon a sale of
the shares after the holding period requirement is satisfied, the recipient
will recognize a long-term capital gain (or loss) measured by the excess (or
deficit) of the amount realized from such sale over the option price of such
shares, but no deduction will be allowed to the Company. If a recipient
disposes of shares before the holding period requirement is satisfied, the
recipient will recognize ordinary income in the year of disposition, and the
Company will be entitled to a corresponding deduction, in an amount equal to
the lesser of (a) the excess of the fair market value of the shares on the date
of exercise over the option price of the shares or (b) the excess of the amount
realized from such disposition over the option price of the shares. Where
shares are sold before the holding period requirement2 is satisfied, the
recipient will also recognize a capital gain to the extent that the amount
realized from the disposition of the shares exceeded the fair market value of
the shares on the date of exercise.
A recipient may under certain circumstances be permitted to pay all or a
portion of the option price of an ISO by delivering Common Stock of the
Company. If the Common Stock delivered by a recipient as payment of the option
price was acquired through a prior exercise of an ISO or an option granted
under an employee stock purchase plan, and if the holding period requirement
applicable to such Common Stock has not yet been met, the delivery of such
Common Stock to the Company could be treated as a taxable sale or disposition
of such stock. In general, where a recipient pays the option price of an ISO by
delivering Common Stock of the Company, the recipient will have a zero tax
basis in the shares received that are in excess of the number of shares of
Common delivered in payment of the option price.
For alternative minimum tax purposes, regardless of whether the recipient
satisfies the holding period requirement, the excess of the fair market value
of the shares on the exercise date over the option price will be treated as a
positive adjustment to the recipient's alternative minimum taxable income for
the year the ISO is exercised. If the shares are disposed of in the year the
ISO was exercised, however, the positive adjustment taken into account for
alternative minimum tax purposes will not exceed the gain realized on such
sale. Exercise of an ISO may thus result in liability for alternative minimum
tax.
An ISO will generally be treated as an NSO for federal income tax purposes if
it is exercised more than three months after the recipient terminates his or
her employment with the Company, provided that this three-month limitation will
not apply if the employment terminates by reason of the recipient's death.
Under the 1997 Stock Option Plan, an ISO will terminate 90 days after the
recipient terminates employment, except in the case of a termination resulting
from death or retirement. In the case of a recipient who retires, an option
will not be treated as an ISO for federal income tax purposes (and will instead
be treated as an NSO) if such option is exercised more than three months after
the termination of employment.
Non-Qualified Stock Options. There will be no federal income tax consequences
to either the recipient or the Company upon the grant of an NSO. Upon the
exercise of an NSO, the recipient will recognize ordinary compensation income
in an amount equal to the fair market value of each share on the date of
exercise over the option price, and the Company generally will be entitled to a
federal income tax deduction of the same amount.
If a recipient pays the option price of an NSO by surrendering Common Stock
held by the recipient, then, to the extent the shares received upon exercise of
the option do not exceed the number of shares delivered, the recipient will be
treated as making a tax-free exchange of stock and the new shares received will
have the same tax basis and holding period requirement as the shares given up.
In such case, the recipient will recognize ordinary compensation income in an
amount equal to the fair market value of the shares in excess of the shares
delivered in payment of the option price. The basis of such additional shares
will equal their fair market value on the date the option was exercised. If a
recipient exercises an NSO on a cashless basis as permitted under the 1997
Stock Option Plan, the recipient will recognize compensation income equal to
the fair market value of the shares received and the recipient's initial tax
basis in such shares will equal their fair market value.
The Board of Directors recommends a vote FOR the approval of the 1997 Stock
Option Plan, which is designated as Proposal 2 on the enclosed proxy card.
10
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed Deloitte & Touche LLP as
independent accountants for the 1997 fiscal year and to render other
professional services as required. The appointment of Deloitte & Touche LLP is
being submitted to stockholders for ratification.
Representatives of Deloitte & Touche LLP will be present at the Annual Meeting,
where they will have the opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of Deloitte &
Touche LLP as independent accountants of the Company, which is designated as
Proposal 3 on the enclosed proxy card.
ANNUAL REPORT
The Annual Report of the Company on Form 10-KSB for the fiscal year ended
December 31, 1996 is being mailed to stockholders with this proxy statement.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the Company's 1998 Annual Meeting of Stockholders
must be received at the Company's offices at 6541 Via Del Oro, San Jose,
California 95119 no later than March 31, 1998, for inclusion in the Company's
proxy statement and form of proxy relating to such meeting. All proposals must
comply with applicable Commission rules and regulations.
OTHER MATTERS
The Board of Directors is not aware of any other matter other than those set
forth in this proxy statement that will be presented for action at the meeting.
If other matters properly come before the meeting, the persons named as proxies
intend to vote the shares they represent in accordance with their best judgment
in the interest of the Company.
THE COMPANY UNDERTAKES TO PROVIDE ITS STOCKHOLDERS WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES FILED THEREWITH. WRITTEN REQUESTS FOR SUCH REPORT SHOULD BE ADDRESSED
TO THE OFFICE OF THE SECRETARY, THINKING TOOLS, INC., 6541 VIA DEL ORO, SAN
JOSE, CALIFORNIA 95119.
By Order of the Board of Directors
John Hiles
Secretary
November 13, 1997
11
<PAGE>
Annex A
THINKING TOOLS, INC.
1997 STOCK OPTION PLAN
SECTION 1. Purpose. The purpose of the Thinking Tools, Inc. 1997 Stock Option
Plan (this "Plan") is to provide a means whereby selected employees, officers,
directors, agents, consultants and independent contractors of Thinking Tools,
Inc. (the "Company") or of any parent or subsidiary (as defined in subsection
5.7 and referred to hereinafter as "related corporations") thereof, may be
granted incentive stock options and/or non-qualified stock options to purchase
the Common Stock (as defined in Section 3) of the Company, in order to attract
and retain the services or advice of such employees, officers, directors,
agents, consultants and independent contractors and to provide added incentive
to them by encouraging stock ownership in the Company.
SECTION 2. Administration.
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board"), except to the extent the Board delegates its authority
to a committee of the Board to administer this Plan. The administrator of this
Plan shall hereinafter be referred to as the "Plan Administrator."
(b) For so long as the Company's Common Stock is registered under Section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), no
Option shall be granted to a director or officer (subject to Section 16 of the
Exchange Act) of the Company by the Board unless (i) approved in advance by the
Board or the Plan Administrator in accordance with the provisions of Rule
16b-3(d)(1) under the Exchange Act (where the Plan Administrator, if not the
entire Board, is a committee of the Board composed solely of two or more
non-employee directors who satisfy the requirements of Rule 16b-3(b)(3) under
the Exchange Act), or (ii) approved in advance, or subsequently ratified by,
the stockholders in accordance with the provisions of Rule 16b-3(d)(2) under
the Exchange Act, except that an option may be granted absent such approval if
the option provides that no officer or director of the Company may sell shares
received upon the exercise of such option during the six-month period
immediately following the grant of such option.
2.1 Procedures. The Board shall designate one of the members of the Plan
Administrator as chairman. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the members
of the Plan Administrator present at meetings at which a quorum exists, or acts
reduced to or approved in writing by all Plan Administrator members, shall be
valid acts of the Plan Administrator.
2.2 Responsibilities. Except for the terms and conditions explicitly set forth
in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted
under this Plan, including selection of the individuals to be granted options,
the number of shares to be subject to each option, the exercise price, and all
other terms and conditions of the options, including the designation of such
options as an incentive stock option or non-qualified stock option. Grants
under this Plan need not be identical in any respect, even when made
simultaneously. The interpretation and construction by the Plan Administrator
of any terms or provisions of this Plan or any option issued hereunder, or of
any rule or regulation promulgated in connection herewith, shall be conclusive
and binding on all interested parties, so long as such interpretation and
construction with respect to incentive stock options corresponds to the
requirements of Internal Revenue Code (the "Code") Section 422, the regulations
thereunder, and any amendments thereto.
2.3 Section 16(b) Compliance and Bifurcation of Plan. It is the intention of
the Company that this Plan comply in all respects with Section 16(b) and Rule
16b-3 under the Exchange Act, to the extent applicable, and, if any Plan
provision is later found not to be in compliance with such Section or Rule, as
the case may be, the provision shall be deemed null and void, and in all events
the Plan shall be construed in favor of its meeting the requirements of Section
16(b) and Rule 16b-3 under the Exchange Act. Notwithstanding anything in the
Plan to the contrary, the Board, in its absolute discretion, may bifurcate the
Plan so as to restrict, limit or condition the use of any provision of the Plan
to participants who are officers and directors or other persons subject to
Section 16(b) of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other participants.
SECTION 3. Stock Subject to This Plan. The stock subject to this Plan shall be
the Company's Common Stock, par value $.001 per share (the "Common Stock"),
presently authorized but unissued or subsequently acquired by the Company.
Subject to adjustment as provided in Section 7 hereof, the aggregate amount of
Common Stock to be delivered upon the exercise of all options granted under
this Plan shall not exceed 600,000 shares as such Common Stock was constituted
on the effective date of this Plan
12
<PAGE>
or any amendment to this Section 3 of this Plan pursuant to which the number of
shares of Common Stock available for the granting of options under this Plan
shall be increased or decreased. If any option granted under this Plan shall
expire, be surrendered, exchanged for another option, canceled or terminated
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall thereupon again be available for purposes of this Plan,
including for replacement options which may be granted in exchange for such
surrendered, canceled or terminated options.
SECTION 4. Eligibility. An incentive stock option may be granted only to any
individual who, at the time the option is granted, is an employee of the
Company or any related corporation. A nonqualified stock option may be granted
to any director, employee, officer, agent, consultant or independent contractor
of the Company or any related corporation, whether an individual or an entity.
Any party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee".
SECTION 5. Terms and Conditions of Options. Options granted under this Plan
shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan (the "Option
Agreement"). Notwithstanding the foregoing, options shall include or
incorporate by reference the following terms and conditions:
5.1 Number of Shares and Price. The maximum number of shares that may be
purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the "exercise price") shall be as established
by the Plan Administrator, provided that the Plan Administrator shall act in
good faith to establish the exercise price which shall be not less than the
fair market value per share of the Common Stock at the time the option is
granted with respect to incentive stock options and not less than the par value
per share of the Common Stock at the time the option is granted with respect to
nonqualified stock options and also provided that, with respect to incentive
stock options granted to greater than 10% stockholders, the exercise price
shall be as required by Section 6. In addition, in any five-year period during
the term of the Plan, no individual may be granted options under the Plan to
purchase more than 500,000 shares of Common Stock, subject to proportionate
adjustments to reflect changes in capitalization, as set forth in Section 7
hereof.
5.2 Term and Maturity. Subject to the restrictions contained in Section 6 with
respect to granting incentive stock options to greater than 10% stockholders,
the term of each incentive stock option shall be as established by the Plan
Administrator and, if not so established, shall be 10 years from the date it is
granted but in no event shall the term of any incentive stock option exceed 10
years. The term of each nonqualified stock option shall be as established by
the Plan Administrator and, if not so established, shall be 10 years from the
date it is granted. To ensure that the Company or related corporation will
achieve the purpose and receive the benefits contemplated in this Plan, any
option granted to any Optionee hereunder shall, unless the condition of this
sentence is waived or modified in the agreement evidencing the option or by
resolution adopted by the Plan Administrator, be exercisable according to the
following vesting schedule:
Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option is Granted Which is Exercisable
- --------------------------- ------------------------
after 1 year 25%
after 2 years 50%
after 3 years 75%
after 4 years 100%
provided, that commencing after 1 year, the options scheduled to vest at the
end of each of the next three years shall vest in equal monthly installments.
5.3 Exercise. Subject to any vesting schedule described in subsection 5.2
above, each option may be exercised in whole or in part; provided, however,
that no fewer than 100 shares (or the remaining shares then purchasable under
the option, if less than 100 shares) may be purchased upon any exercise of an
option hereunder and that only whole shares will be issued pursuant to the
exercise of any option. Options shall be exercised by delivery to the Company
of notice of the number of shares with respect to which the option is
exercised, together with payment of the exercise price.
5.4 Payment of Exercise Price. Payment of the option exercise price shall be
made in full at the time the notice of exercise of the option is delivered to
the Company and shall be in cash, bank certified or cashier's check or personal
check (unless at the time of exercise the Plan Administrator in a particular
case determines not to accept a personal check) for the Common Stock being
purchased.
13
<PAGE>
The Plan Administrator can determine at the time the option is granted for
incentive stock options, or at any time before exercise for nonqualified stock
options, that additional forms of payment will be permitted. To the extent
permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
and state corporate law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an Optionee having
a fair market value equal to the exercise price, such fair market value to be
determined in good faith by the Plan Administrator;
(b) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of
sale or loan proceeds necessary to pay the exercise price and any federal,
state or local withholding tax obligations that may arise in connection with
the exercise; or
(c) delivery of a properly executed exercise notice together with
instructions to the Company to withhold from the shares that would otherwise be
issued upon exercise that number of shares having a fair market value equal to
the option exercise price.
5.5 Withholding Tax Requirement. The Company or any related corporation shall
have the right to retain and withhold from any payment of cash or Common Stock
under the Plan the amount of taxes required by any government to be withheld or
otherwise deducted and paid with respect to such payment. At its discretion,
the Company may require an Optionee receiving shares of Common Stock to
reimburse the Company for any such taxes required to be withheld by the Company
and withhold such shares in whole or in part until the Company is so
reimbursed. In lieu thereof, the Company, at its option in its sole discretion,
shall (a) have the right to withhold from any other cash amounts due or to
become due from the Company to the Optionee an amount equal to such taxes or
(b) retain and withhold a number of shares having a market value not less than
the amount of such taxes required to be withheld by the Company to reimburse
the Company for any such taxes and cancel (in whole or in part) any such shares
so withheld. If required by Section 16(b) of the Exchange Act, the election to
pay withholding taxes by delivery of shares held by any person who at the time
of exercise is subject to Section 16(b) of the Exchange Act, shall be made
either six months prior to the date the option exercise becomes taxable or at
such other times as the Company may determine as necessary to comply with
Section 16(b) of the Exchange Act.
5.6 Assignability and Transferability of Option. Options granted under this
Plan and the rights and privileges conferred hereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than (i) by will or by the applicable laws of descent and
distribution, (ii) pursuant to a qualified domestic relations order as defined
in Section 414(p) of the Code, or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder or (iii) as otherwise
determined by the Plan Administrator and set forth in the applicable Option
Agreement. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under this Plan or of any right or privilege conferred
hereby, contrary to the Code or to the provisions of this Plan, or the sale or
levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void. The designation by an Optionee of a
beneficiary does not, in and of itself, constitute an impermissible transfer
under this Section.
5.7 Termination of Relationship. If the Optionee's relationship with the
Company or any related corporation ceases for any reason other than termination
for cause, death or total disability, and unless by its terms the option sooner
terminates or expires, then the Optionee may exercise, for a three-month
period, that portion of the Optionee's option which is exercisable at the time
of such cessation, but the Optionee's option shall terminate at the end of the
three-month period following such cessation as to all shares for which it has
not theretofore been exercised, unless, in the case of a nonqualified stock
option, such provision is waived in the agreement evidencing the option or by
resolution adopted by the Plan Administrator within 90 days of such cessation.
If, in the case of an incentive stock option, an Optionee's relationship with
the Company or related corporation changes from employee to non-employee, such
as a consultant, such change shall constitute a termination of an Optionee's
employment with the Company or related corporation and the Optionee's incentive
stock option shall become a non-qualified stock option.
If an Optionee is terminated for cause, any option granted hereunder shall
automatically terminate as of the first discovery by the Company of any reason
for termination for cause, and such Optionee shall thereupon have no right to
purchase any shares pursuant to such option. "Termination for cause" shall mean
dismissal for dishonesty, conviction or confession of a crime punishable by law
(except minor violations), fraud, misconduct or disclosure of confidential
information. If an Optionee's relationship with the Company or any related
corporation is suspended pending an investigation of whether or not the
Optionee shall be terminated for cause, all Optionee's rights under any option
granted hereunder likewise shall be suspended during the period of
investigation.
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If an Optionee's relationship with the Company or any related corporation
ceases because of a total disability, the Optionee's option shall not terminate
or, in the case of an incentive stock option, cease to be treated as an
incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical
impairment of the Optionee which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or more and
which causes the Optionee to be unable, in the opinion of the Company and two
(if more than one is required by the Company in its sole discretion)
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed
to have occurred on the first day after the Company and the two (if more than
one is required by the Company in its sole discretion) independent physicians
have furnished their opinion of total disability to the Plan Administrator.
For purposes of this subsection 5.7, a transfer of relationship between or
among the Company and/or any related corporation shall not be deemed to
constitute a cessation of relationship with the Company or any of its related
corporations. For purposes of this subsection 5.7, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined
by the Plan Administrator). The foregoing notwithstanding, employment shall not
be deemed to continue beyond the first 90 days of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.
As used herein, the term "related corporation", when referring to a subsidiary
corporation, shall mean any corporation (other than the Company) or other
entity in, at the time of the granting of the option, an unbroken chain of
corporations or other entities ending with the Company, if stock or other
interests possessing 50% or more of the total combined voting power of all
classes of stock or other interests of each of the corporations or other
entities other than the Company is owned by one of the other corporations or
other entities in such chain. When referring to a parent corporation or other
entity, the term "related corporation" shall mean any corporation or other
entity in an unbroken chain of corporations or other entities ending with the
Company if, at the time of the granting of the option, each of the corporations
or other entities other than the Company owns stock or other interests
possessing 50% or more of the total combined voting power of all classes of
stock or other interests in one of the other corporations or other entities in
such chain.
5.8 Death of Optionee. If an Optionee dies while he or she has a relationship
with the Company or any related corporation or within the three-month period
(or 12-month period in the case of totally disabled Optionees) following
cessation of such relationship, any option held by such Optionee to the extent
that the Optionee would have been entitled to exercise such option, may be
exercised within one year after his or her death by the personal representative
of his or her estate or by the person or persons to whom the Optionee's rights
under the option shall pass by will or by the applicable laws of descent and
distribution.
5.9 Status of Stockholder. Neither the Optionee nor any party to which the
Optionee's rights and privileges under the option may pass shall be, or have
any of the rights or privileges of, a stockholder of the Company with respect
to any of the shares issuable upon the exercise of any option granted under
this Plan unless and until such option has been exercised.
5.10 Continuation of Employment. Nothing in this Plan or in any option granted
pursuant to this Plan shall confer upon any Optionee any right to continue in
the employ of the Company or of a related corporation, or to interfere in any
way with the right of the Company or of any such related corporation to
terminate his or her employment or other relationship with the Company at any
time.
5.11 Modification and Amendment of Option. Subject to the requirements of Code
Section 422 with respect to incentive stock options and to the terms and
conditions and within the limitations of this Plan, the Plan Administrator may
modify or amend outstanding options granted under this Plan. The modification
or amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the obligations
of the Company under such option. Except as otherwise provided in this Plan, no
outstanding option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding incentive stock options granted under this Plan shall be made in
such a manner so as not to constitute a "modification" as defined in Code
Section 424(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as
defined in Code Section 422(b).
5.12 Limitation on Value for Incentive Stock Options. As to all incentive stock
options granted under the terms of this Plan, to the extent that the aggregate
fair market value (determined at the time the incentive stock option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by the Optionee during any calendar year
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(under this Plan and all other incentive stock option plans of the Company, a
related corporation or a predecessor corporation) exceeds $100,000, such
options shall be treated as nonqualified stock options. The previous sentence
shall not apply if the Code is amended or if the Internal Revenue Service
publicly rules, issues a private ruling to the Company, any Optionee, or any
legatee, personal representative or distributee of an Optionee or issues
regulations, changing or eliminating such annual limit, in which case the
limitation shall be that provided by the Code or the Internal Revenue Service,
as the case may be.
5.13 Valuation of Common Stock Received Upon Exercise
5.13.1 Exercise of Options Under Sections 5.4(a) and (c). The value of
Common Stock received by the Optionee from an exercise under Sections 5.4(a)
and 5.4(c) hereof shall be the fair market value, which shall mean the last
reported sales price, regular way, of the Common Stock on the date of receipt
by the Company of the Optionee's delivery of shares under Section 5.4(a) hereof
or delivery of the exercise notice under Section 5.4(c) hereof (or, if no sale
takes place on any such day, the closing bid price of the Common Stock on such
day), on the principal securities exchange (including the National Association
of Securities Dealers, Inc. (the "NASD'S") National Market System) on which the
Common Stock is admitted or listed for trading, or, if the Common Stock is not
listed on any such exchange on any such day, the highest reported bid price for
the Common Stock as furnished by the NASD through NASDAQ, or a similar
organization if NASDAQ is no longer reporting such information, or, if the
Common Stock is not listed for trading on an exchange and is not quoted on
NASDAQ or any similar organization on any such day, the fair value of a share
of Common Stock on such day as determined by the Plan Administrator in good
faith.
5.13.2 Exercise of Option Under Section 5.4(b). The value of Common Stock
received by the Optionee from an exercise under Section 5.4(b) hereof (a) in
the case of the sale of the Common Stock received as a result of the exercise
by a broker on the date of receipt by the Company of the Optionee's exercise
notice, shall equal the sales price received for such shares; and (b) in all
other cases, shall be determined as provided in Section 5.13.1 hereof.
SECTION 6. Greater Than 10% Stockholders.
6.1 Exercise Price and Term of Incentive Stock Options. If incentive stock
options are granted under this Plan to employees who own more than 10% of the
total combined voting power of all classes of stock of the Company or any
related corporation, the term of such incentive stock options shall not exceed
five years and the exercise price shall be not less than 110% of the fair
market value of the Common Stock at the time the incentive stock option is
granted. This provision shall control notwithstanding any contrary terms
contained in an option agreement or any other document. The term and exercise
price limitations of this provision shall be amended to conform to any change
required (or, in the sole discretion of the Plan Administrator, permitted) by a
change in the Code or by a ruling or pronouncement of the Internal Revenue
Service.
6.2 Attribution Rule. For purposes of subsection 6.1, in determining stock
ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his or her brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. If an
employee or a person related to the employee owns an unexercised option or
warrant to purchase stock of the Company, the stock subject to that portion of
the option or warrant which is unexercised shall not be counted in determining
stock ownership. For purposes of this Section 6, stock owned by an employee
shall include all stock owned by him which is actually issued and outstanding
immediately before the grant of the incentive stock option to the employee.
SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate number and
class of shares for which options may be granted under this Plan, the number
and class of shares covered by each outstanding option, and the exercise price
per share thereof (but not the total price), shall all be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock of the Company resulting from a split-up or consolidation of shares or
any like capital adjustment, or the payment of any stock dividend.
7.1. Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property for Stock. Except as provided in
subsection 7.1.2, upon a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization (other than a mere reincorporation or the creation
of a holding company) or liquidation of the Company, as a result of which the
stockholders of the Company receive cash or property other than capital stock
in exchange for or in connection with their shares of Common Stock, any option
granted hereunder shall terminate, but the
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Optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise such Optionee's option in whole or in part whether or
not the vesting requirements set forth in the option agreement have been
satisfied.
7.1.2 Conversion of Options on Stock for Stock Exchange. If the
stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation or reorganization (other than a mere reincorporation or the creation
of a holding company), all options granted hereunder shall be converted into
options to purchase shares of Exchange Stock unless the Company and corporation
issuing the Exchange Stock, in their sole discretion, determine that any or all
such options granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of subsection 7.1.1. The amount and price of converted options shall
be determined by adjusting the amount and price of the options granted
hereunder in the same proportion as used for determining the number of shares
of Exchange Stock the holders of the Common Stock receive in such merger,
consolidation, acquisition of property or stock, separation or reorganization.
Unless the Board determines otherwise, the converted options shall be fully
vested whether or not the vesting requirements set forth in the option
agreement have been satisfied.
7.2 Fractional Shares. In the event of any adjustment in the number of shares
covered by an option, any fractional shares resulting from such adjustment
shall be disregarded and each such option shall cover only the number of full
shares resulting from such adjustment.
7.3 Determination of Board to Be Final. All Section 7 adjustments shall be made
by the Board, and its determination as to what adjustments shall be made, and
the extent thereof, shall be final, binding and conclusive. Unless an Optionee
agrees otherwise, any change or adjustment to an incentive stock option shall
be made in such a manner so as not to constitute a "modification" as defined in
Code Section 425(h) and so as not to cause his or her incentive stock option
issued hereunder to fail to continue to qualify as an incentive stock option as
defined in Code Section 422(b).
SECTION 8. Securities Regulation. Shares shall not be issued with respect to an
option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange or inter-dealer quotation system upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance, including the availability of an exemption
from registration for the issuance and sale of any shares hereunder. Inability
of the Company to obtain from any regulatory body having jurisdiction the
authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder or the unavailability of an exemption
from registration for the issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the nonissuance or sale of
such shares as to which such requisite authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on stock
certificates in order to assure exemption from registration. The Company may
also require such other action or agreement by the Optionees as it may from
time to time deem to be necessary or advisable. THE COMPANY SHALL NOT BE
OBLIGATED, BY REASON OF THIS PROVISION OR OTHERWISE, TO UNDERTAKE REGISTRATION
OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange or inter-dealer quotation system, all stock issued hereunder if not
previously listed on such exchange or inter-dealer quotation system shall be
authorized by that exchange or system for listing thereon prior to the issuance
thereof.
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SECTION 9. Amendment and Termination.
9.1 Board Action. The Board may at any time suspend, amend or terminate this
Plan, provided that except as set forth in Section 7, the approval of the
Company's stockholders acting by vote at a meeting, or written consent in lieu
thereof, in accordance with the Company's ByLaws is necessary for the adoption
by the Board of any amendment which will:
(a) increase the number of shares which are to be reserved for the
issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons other than
those presently permitted to receive stock options under this Plan; or
(c) require stockholder approval under applicable law.
9.2 Automatic Termination. Unless sooner terminated by the Board, this Plan
shall terminate ten years from the earlier of (a) the date on which this Plan
is adopted by the Board or (b) the date on which this Plan is approved by the
stockholders of the Company. No option may be granted after such termination or
during any suspension of this Plan. The amendment or termination of this Plan
shall not, without the consent of the option holder, alter or impair any rights
or obligations under any option theretofore granted under this Plan.
SECTION 10. Effectiveness of this Plan. This Plan shall become effective upon
adoption by the Board so long as it is approved by a vote of the Company's
stockholders at any meeting, or by written consent in lieu thereof, in
accordance with the Company's By-Laws at any time within 12 months before or
after the adoption of this Plan.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THINKING TOOLS, INC.
PROXY--Annual Meeting of Stockholders, December 5, 1997
The undersigned, a shareholder of Thinking Tools, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint Phillip F.
Whalen, Jr. and John Hiles and each of them, the true and lawful attorneys and
proxies with full power of substitution, for and in the name, place and stead
of the undersigned, to vote all of the shares of Common Stock of the Company
that the undersigned would be entitled to vote if personally present at the
1997 Annual Meeting of Stockholders of the Company to be held at 6541 Via Del
Oro, San Jose, California 95119 on December 5, 1997 at 9:30 a.m., local time,
or at any adjournment or adjournments thereof.
The undersigned hereby instructs said proxies of their substitutes as set
forth below.
1. ELECTION OF DIRECTORS:
The election of Phillip F. Whalen, Jr., John Hiles, Fred Knoll, Marc
Cooper, Esther Dyson, Frederick Gluck, Ted Prince and Fran Saldutti.
|_| FOR |_| TO WITHHOLD AUTHORITY to vote for all nominees.
TO WITHHOLD AUTHORITY to vote for any individual nominee(s), print
name(s) below:
-------------------------------------------------------------------------
2. TO ADOPT THE COMPANY'S 1997 STOCK OPTION PLAN.
|_| FOR |_| AGAINST |_| ABSTAIN
3. TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT
PUBLIC ACCOUNTS OF THE COMPANY.
|_| FOR |_| AGAINST |_| ABSTAIN
4. DISCRETIONARY AUTHORITY.
(Continued on the reverse side)
<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE
GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE
NOMINEES AS DIRECTORS, TO APPROVE THE ADOPTION OF THE COMPANY'S 1997 STOCK
OPTION PLAN, TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY AND IN ACCORDANCE WITH THE
DISCRETION OF THE PROXIES OR PROXY WITH RESPECT TO ANY OTHER BUSINESS
TRANSACTED AT THE ANNUAL MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given and
acknowledges receipt of a copy of the Notice of Annual Meeting and Proxy
Statement, both dated November 13, 1997, and a copy of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996.
Please mark, date, sign and mail
this proxy in the envelope provided
for this purpose. No postage is
required if mailed in the United
States.
-----------------------------, 1997
-----------------------------(L.S.)
-----------------------------(L.S.)
Signature
NOTE: Please sign exactly as your
name or names appear hereon. When
signing as attorney, executor,
administrator, trustee or guardian,
please indicate the capacity in
which signing. When signing as joint
tenants, all parties in the joint
tenancy must sign. When a proxy is
given by a corporation, it should be
signed with full corporate name by a
duly authorized officer.
