<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDLMENT NO. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Confidential, for Use of the
[_]Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[ ]Definitive Proxy Statement
[X]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TEMPLATE SOFTWARE, INC.
-----------------------------------------------------
(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]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
TEMPLATE SOFTWARE, INC.
45365 Vintage Park Plaza
Dulles, Virginia 20166
March 20, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of Template Software, Inc. (the "Company"), which will be held at 10:00 a.m.
Eastern Time on Tuesday, April 28, 1998, at the Company's headquarters at
45365 Vintage Park Plaza, Dulles, Virginia 20166 (the "Annual Meeting").
The principal business of the meeting will be: (i) to elect the Class II
directors; (ii) to vote on a proposed amendment to the 1996 Equity Incentive
Plan (the "1996 Plan") that would increase the number of authorized shares
under the 1996 Plan from one million (1,000,000) to two million five hundred
thousand (2,500,000); (iii) to ratify the appointment of Coopers & Lybrand
L.L.P., as recommended by the Audit Committee of the Board of Directors of the
Company, as the Company's independent auditors for the fiscal year ending
November 30, 1998; and (iv) to transact such other business as may properly
come before the meeting. During the meeting, we will also review the results
of the past fiscal year and report on significant aspects of our operations
during the first quarter of fiscal year 1998.
Whether or not you plan to attend the Annual Meeting, please complete, sign,
date and return the enclosed proxy card in the postage prepaid envelope
provided so that your shares will be voted at the meeting. If you decide to
attend the meeting, you may, of course, revoke your proxy and personally cast
your votes.
Sincerely yours,
/s/ E. Linwood Pearce
E. Linwood Pearce
Chief Executive Officer
<PAGE>
TEMPLATE SOFTWARE, INC.
45365 Vintage Park Plaza
Dulles, Virginia 20166
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 28, 1998
Notice is hereby given that the Annual Meeting of Shareholders of Template
Software, Inc. (the "Company") will be held at the Company's headquarters
located at 45365 Vintage Park Plaza, Dulles, Virginia on April 28, 1998, at
10:00 a.m. (the "Annual Meeting"), for the following purposes:
1. To elect two Class II directors, the names of candidates for such
offices being set forth in the accompanying Proxy Statement, to serve
until the 2001 Annual Meeting;
2. To vote on a proposed amendment to the 1996 Equity Incentive Plan (the
"1996 Plan") that would increase the number of authorized shares under
the 1996 Plan from one million (1,000,000) to two million five hundred
thousand (2,500,000);
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the fiscal year ending November 30, 1998; and
4. To transact such other business which may properly be brought before the
meeting.
The Board of Directors has fixed the close of business on March 6, 1998 as
the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting of Shareholders.
By Order of the Board of Directors
LOGO
Joseph M. Fox
Chairman
Dulles, Virginia
March 20, 1998
IMPORTANT
Whether or not you plan to attend the Annual Meeting, please complete, sign,
date, and return the enclosed proxy in the enclosed postage pre-paid envelope
as promptly as possible. If you attend the meeting, you may vote your shares
in person, even though you have previously signed and returned your proxy.
<PAGE>
TEMPLATE SOFTWARE, INC.
45365 VINTAGE PARK PLAZA
DULLES, VIRGINIA 20166
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of the Company (the "Board") for
use at the Annual Meeting to be held on April 28, 1998, or at any adjournment
thereof, as set forth in the accompanying notice. A shareholder giving a proxy
may revoke it at any time before it is exercised at the Annual Meeting by so
notifying the Secretary of the Company in writing or in person; any such
revocation must be received, if in writing, or acknowledged, if oral, by the
Secretary prior to the Annual Meeting. Any proxy which is not revoked in
accordance with the previous sentence will be voted in accordance with the
terms thereof at the Annual Meeting. This Proxy Statement, and the annual
report for the year ended November 30, 1997, are being mailed on or about
March 20, 1998 to shareholders entitled to vote at the Annual Meeting.
On March 6, 1998, the record date for determination of shareholders entitled
to notice of and to vote at the Annual Meeting, there were 4,953,475 shares of
the Company's Common Stock outstanding (the "Shares"). On all matters being
voted upon at the Annual Meeting, each Share is entitled to one vote.
The cost of soliciting proxies will be borne by the Company. Following the
original mailing of the proxy soliciting material, regular employees of the
Company may solicit proxies by mail, telephone, telecopy and personal
interview. Proxy cards and materials will also be distributed to beneficial
owners of stock, through brokers, custodians, nominees and other like parties,
and the Company expects to reimburse such parties for their charges and
expenses connected therewith.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the inspector or inspectors appointed by the Company in advance of the Annual
Meeting. Shares represented by proxies that reflect abstentions will be
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum and for purposes of determining the
outcome of any matter submitted to the shareholders for a vote. Abstentions,
however, do not constitute a vote "for" or "against" any matter, and thus will
be disregarded in the calculation of a plurality or of "votes cast."
Shares referred to as "broker non-votes" (i.e., shares held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares that the broker or nominee has
the discretionary authority to vote on a particular matter) will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum of shareholders. However, for purposes of determining the
outcome of any matter as to which any broker or nominee has indicated on the
proxy form that it does not have discretionary authority to vote upon, those
shares will be treated as not present and not entitled to vote with respect to
that matter at the Annual Meeting (even though those holders of those shares
will be considered entitled to vote for quorum purposes and may be entitled to
vote on other matters).
In the election of directors, shares present but not voting will be
disregarded (except for quorum purposes), and the candidates for election
receiving the highest number of affirmative votes of the shares entitled to
vote for them, up to the number of directors to be elected by those shares,
will be elected. Votes cast against a candidate or votes withheld will have no
legal effect.
QUORUM REQUIRED
According to the Company's Bylaws, the holders of a majority of the Shares
entitled to vote must be present or represented by proxy to constitute a
quorum.
<PAGE>
SHAREHOLDERS' PROPOSALS FOR ANNUAL MEETING
According to the Company's Bylaws, a proper proposal submitted in writing by
a Company shareholder for consideration at the Company's Annual Meeting and
received by the Secretary of the Company at the Company's executive offices no
later than 90 days in advance of the Annual Meeting may, in the discretion of
the Board of Directors, be included in the Company's Proxy Statement and form
of Proxy relating to such Annual Meeting. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the Annual Meeting (i) a brief description of the business desired to
be brought before the Annual Meeting (including the specific proposal to be
presented) and the reasons for conducting such business at the annual meeting,
(ii) the name and record address of the shareholder proposing such business,
(iii) the class and number of shares of the Company that are beneficially
owned by the shareholder, and (iv) any material interest of the shareholder in
the proposed business. The deadline for shareholder proposals for this Annual
Meeting was January 28, 1998.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
The Company's Board is divided into three (3) classes of directors serving
three-year terms. Currently, the Board consists of two Class I Directors (Mr.
Joseph M. Fox and Dr. Alan B. Salisbury), two Class II Directors (Mr. Andrew
B. Ferrentino and Dr. Gerhard Barth) and two Class III Directors (Mr. E.
Linwood Pearce and Dr. Duane A. Adams).
At each annual meeting of shareholders, a class of directors will be elected
for a three-year term to succeed the directors of the same class whose terms
are expiring. The directors in Class I and Class III are serving terms that
expire at the Annual Meeting of Shareholders in 2000 and 1999 respectively. At
the Company's upcoming Annual Meeting, the Class II Directors will be elected
for a term expiring at the 2001 Annual Meeting of Shareholders and upon the
election and qualification of their successors. The Board has nominated Mr.
Andrew B. Ferrentino and Dr. Gerhard Barth for election as Class II Directors
at the Annual Meeting.
All Shares represented by properly executed proxies received in response to
this solicitation will be counted in the election of directors as specified
therein by the shareholders. Unless otherwise specified in the proxy, it is
the intention of the persons named on the enclosed proxy card to vote FOR the
election of the nominees listed in this Proxy Statement. Each nominee has
consented to serve as a director of the Company if elected. If at the time of
the Annual Meeting a nominee is unable or declines to serve as a director, the
discretionary authority provided in the enclosed proxy card may be exercised
to vote for a substitute candidate designated by the Board. The Board has no
reason to believe that any nominee will be unable or will decline to serve as
a director.
Shareholders may withhold their votes from the entire slate of nominees or
from any particular nominee by so indicating in the space provided on the
enclosed proxy card.
Set forth below is certain biographical information furnished to the Company
by each director nominee. All of the nominees currently serve as directors of
the Company. For summary of stock ownership information concerning the
director nominees, see "Beneficial Ownership of Common Stock."
INFORMATION REGARDING NOMINEES FOR CLASS II DIRECTORS
Andrew B. Ferrentino
Age: 57
Andrew B. Ferrentino joined the Company in April, 1979 as Vice President and
in 1984 was appointed President and a director. From November 1977 until April
1979, Mr. Ferrentino served as a Senior Technical Consultant to Satellite
Business Systems, Inc., a satellite communications company, where he was
responsible for new business development. From 1966 to November 1977, Mr.
Ferrentino served in various management capacities for IBM's Federal Systems
Division, most recently as a Manager of Advanced Technology.
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DR. GERHARD BARTH
Age: 47
Dr. Gerhard Barth has served as director of the Company since November 1997.
Since October 1996, Dr. Barth has served as a member of the Board of
Management of Alcatel SEL AG, Stuggart and Director of Software Technology of
Alcatel Telecom. From November 1992 until September 1996, Dr. Barth served as
Director of Information Technology of Daimler-Benz AG Ulm. From 1988 to 1992,
Dr. Barth served as full professor at the University of Kaiserslautern, where
he was Director of the German Research Center for Artificial Intelligence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
ELECTION AS DIRECTORS OF THE NOMINEES NAMED ABOVE.
INFORMATION REGARDING DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
JOSEPH M. FOX
Age: 63
Class I Director: Term expires at2000 Annual Meeting
Joseph M. Fox is founder of the Company and has served as Chairman since
1978. From 1956 until 1977, he was employed by IBM, the last seven years as
Vice President of its Federal Systems Division, where he oversaw a software
development unit comprised of over 4,000 employees and was responsible for
many major projects, including the automation of the Air Traffic Control
System in the Untied States and the United Kingdom and the automation of the
ground and on-board NASA Shuttle control system.
DR. ALAN B. SALISBURY
Age: 61
Class I Director: Term expires at2000 Annual Meeting
Dr. Alan B. Salisbury has served as director of the Company since January
28, 1997. Since 1993, Dr. Salisbury has served as the President of Learning
Tree International USA, Inc. From 1991 to 1993, Dr., Salisbury served as
Executive Vice President and Chief Operating Officer of the Microelectronics
and Computer Technology Corporation, a research and development consortium
owned by 22 companies. From 1987 to 1991, he served as President of Contel
Technology Center, the advanced research and development organization serving
Contel Corporation. Prior to that time, Dr. Salisbury served in the United
States Army as a Major General where he commanded the United States Army
Information Systems Engineering Command. Dr. Salisbury serves on the Board of
Directors of the Learning Tree International, Inc., Sybase, Inc. and TelePad
Corporation.
E. LINWOOD PEARCE
Age: 52
Class III Director: Term expires at1999 Annual Meeting
E. Linwood Pearce joined the Company in November, 1991 and since that time
has served as its Chief Executive Officer and as a director. From July 1988 to
April 1991, Mr. Pearce was Executive Vice President of Sales, Marketing and
Business Development for Sage Software, Inc. (the predecessor to Intersolv,
Inc.). From October 1985 to May 1988, Mr. Pearce was Executive Vice President
and Chief Operating Officer of Software AG of North America.
3
<PAGE>
From 1967 to September 1985, Mr. Pearce was employed by Applied Data
Research, a software products and services company, most recently as Vice
President of Field Operations.
DR. DUANE A. ADAMS
Age: 59
Class III Director: Term expires at
1999 Annual Meeting
Dr. Duane A. Adams has served as director of the Company since January 28,
1997. Dr. Adams is the Vice Provost for Research at Carnegie Mellon
University. From 1992 to 1996, Dr. Adams was the Deputy Director of the
Department of Defense's Advanced Research Projects Agency. Prior to that time,
Dr. Adams was an Associate Dean for Research at Carnegie Mellon University's
School of Computer Science.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Company's Board held three regular meetings in 1997. The Board has an
Audit Committee and a Compensation Committee. No director attended less than
75% of the aggregate number of meetings of the Board and the committees of the
Board on which he served that were held during his term as a director of the
Company.
Committees of the Board of Directors. The Compensation Committee of the
Board consists of Drs. Salisbury and Adams, with Dr. Adams serving as
Chairman. Drs. Salisbury and Adams are both non-employee directors of the
Company. The purpose of the Compensation Committee is to administer the
Company's 1996 Equity Incentive Plan and any other stock benefit plan, to
establish remuneration levels for officers of the Company and to establish and
administer executive compensation programs, including an annual review of the
compensation of the Chief Executive Officer. The Compensation Committee held
three meetings in 1997.
The Audit Committee of the Board consists of Drs. Salisbury and Adams, with
Dr. Salisbury serving as chairman. The Audit Committee recommends to the Board
the independent public accountants to be selected to audit the Company's
annual financial statements and approves any special assignments given to such
accountants. The Audit Committee also reviews the planned scope of the annual
audit, any changes in accounting principles and the effectiveness and
efficiency of the Company's internal accounting staff. The Audit Committee
held one meeting in 1997.
Director Compensation. Except for ownership of stock options, directors of
the Company generally do not receive compensation for services rendered as a
director. The Company also does not provide compensation for committee
participation or special assignments of the Board. The Company does however
reimburse its directors for reasonable travel expenses to and from Board
meetings. Management believes that focusing director compensation on equity
rather than cash reflects the Company's efforts to more closely align director
compensation with total shareholder return.
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the Board
and presently include: Joseph M. Fox, Chairman of the Board; E. Linwood
Pearce, Chief Executive Officer; Andrew B. Ferrentino, President and
Secretary; Kimberly E. Osgood, Chief Financial Officer; David L. Kiker, Vice
President of Technology; J. Kelly Brown, Vice President of Federal Operations;
Benjamin J. Martindale, II, Vice President of Marketing; Richard H. Collard,
Vice President of European Operations; and Michael C. Master, Vice President
of North American Operations.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers and persons who own
beneficially more than 10% of the Company's Common Stock to file reports of
ownership and changes in ownership of such stock with the Securities and
Exchange
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Commission (the "SEC") and the Nasdaq Stock Market. Directors, executive
officers and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all such 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,
all directors, executive officers and greater than 10% shareholders complied
with all applicable Section 16(a) filing requirements.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning (i) those persons
known by management of the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) the directors of the Company, (iii)
the executive officers named in the Summary Compensation Table included
elsewhere herein, and (iv) all current directors and executive officers of the
Company as a group. Except as otherwise indicated in the footnotes below, such
information is provided as of January 8, 1998. According to rules adopted by
the SEC, a person is the "beneficial owner" of securities if he or she has or
shares the power to vote them or to direct their investment or has the right
to acquire beneficial ownership of such securities within 60 days through the
exercise of an option, warrant or right, the conversion of a security or
otherwise. Except as otherwise noted, the indicated owners have sole voting
and investment power with respect to shares beneficially owned. An asterisk in
the percent of class column indicates beneficial ownership of less than 1% of
the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(/1/)
- ------------------------ -------------------- ---------------------
<S> <C> <C>
Executive Officers and Directors
Joseph M. Fox(2)................... 701,667 14.8%
Andrew B. Ferrentino(3)............ 474,857 10.0%
E. Linwood Pearce(4)............... 396,144 7.8%
David L. Kiker(5).................. 100,000 2.1%
Richard H. Collard(6).............. 48,250 1.0%
Benjamin J. Martindale, II(7)...... 25,000 *
Dr. Duane A. Adams(8).............. 26,100 *
Dr. Alan B. Salisbury(9)........... 25,000 *
Dr. Gerhard Barth(10).............. 0 0
All current directors and executive
officers as a group
(12 persons)(11).................. 1,895,818 35.2%
Other Shareholders Alcatel(12)..... 500,000 10.6%
</TABLE>
- --------
* Less Than 1%
(1) The number of shares of Common Stock outstanding used in calculating the
percentage for each listed person includes the shares of Common Stock
underlying the options held by such person or entity that are
exercisable within 60 days of January 8, 1998, but excludes shares of
Common Stock underlying options held by any other person.
(2) Mr. Fox's shares include 22,200 shares held by Mr. Fox's spouse.
Pursuant to the Exchange Act rules, Mr. Fox may be deemed to share
voting and investment power with respect to these 22,200 shares;
however, Mr. Fox disclaims beneficial ownership of all such shares. Mr.
Fox is the Chairman of the Board of the Company. His address is 45365
Vintage Park Plaza, Dulles, Virginia 20166.
(3) Mr. Ferrentino's shares include 20,000 shares held by Mr. Ferrentino's
spouse, 25,000 shares held by Mr. Ferrentino's brother, as trustee for
the benefit of Mr. Ferrentino's daughter and 25,000 shares held by Mr.
Ferrentino's daughter. Mr. Ferrentino disclaims beneficial ownership of
all 70,000 such shares. Mr. Ferrentino is the President and Secretary of
the Company. His address is 45365 Vintage Park Plaza, Dulles, Virginia
20166.
(4) Mr. Pearce's shares include 349,680 shares of Common Stock subject to
options exercisable by or within 60 days of January 8, 1998, and 9,000
shares held by Mr. Pearce's two children. Mr. Pearce disclaims
beneficial ownership of all 9,000 such shares. Mr. Pearce is the Chief
Executive Officer of the Company. His address is 45365 Vintage Park
Plaza, Dulles, Virginia 20166.
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(5) Mr. Kiker's shares include 85,000 shares of Common Stock subject to
options exercisable by or within 60 days of January 8, 1998. Mr. Kiker
is the Vice President of Technology of the Company. His address is 45365
Vintage Park Plaza, Dulles, Virginia 20166.
(6) All of Mr. Collard's shares are shares of Common Stock subject to
options exercisable by or within 60 days of January 8, 1998. Mr. Collard
is the Vice President of European Operations. His address is 45365
Vintage Park Plaza, Dulles, Virginia 20166.
(7) All of Mr. Martindale's shares are shares of Common Stock subject to
options exercisable by or within 60 days of January 8, 1998. Mr.
Martindale is the Vice President of Marketing. His address is 45365
Vintage Park Plaza, Dulles, Virginia 20166.
(8) Dr. Adams' shares include 550 shares held by Dr. Adams' spouse and
25,000 shares of Common Stock subject to options exercisable by or
within 60 days of January 8, 1998. Dr. Adams disclaims beneficial
ownership of all 550 shares held by his spouse. Dr. Adams became a
director of the Company on January 28, 1998.
(9) All of Dr. Salisbury's shares are shares of Common Stock subject to
options exercisable by or within 60 days of January 8, 1998. Dr.
Salisbury became a director of the Company on January 28, 1998.
(10) Dr. Barth became a director of the Company in November, 1997. See
"Certain Relationships and Related Transactions." He holds no shares of
Common Stock and no options exercisable within 60 days of January 8,
1998.
(11) Includes all shares stated to be included in the notes above.
(12) Consists of shares converted from Preferred Stock to common Stock. See
"Certain Relationships and Related Transactions."
EXECUTIVE COMPENSATION
Pursuant to the Securities and Exchange Commission rules for proxy statement
disclosure of executive compensation, the Compensation Committee of the Board
of the Company has prepared the following Report on Executive Compensation.
The Committee considers this report to clearly describe the current executive
compensation program of the Company, including the underlying philosophy of
the program and the specific performance criteria on which executive
compensation is based. This report also discusses in detail the compensation
paid to the Company's Chief Executive Officer, Mr. E. Linwood Pearce, during
1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee of the Board (the "Committee")
discusses the Committee's compensation objectives and policies applicable to
the Company's executive officers. The report reviews the Committee's policy
generally with respect to the compensation of all executive officers as a
group for fiscal 1997 and specifically reviews the compensation established
for the Company's Chief Executive Officer as reported in the Summary
Compensation Table. The Committee is composed of independent, non-employee
directors of the Company.
COMPENSATION PHILOSOPHY
The Company's executive compensation program has three objectives: (1) to
align the interests of the executive officers with the interests of the
Company's shareholders by basing a significant portion of an executive's
compensation on the Company's performance; (2) to attract and retain highly
talented and productive executives; and (3) to provide incentives for superior
performance by the Company's executives. To achieve these objectives, the
Committee has crafted a program that consists of base salary, short-term
incentive compensation in the form of a cash bonus, and long-term incentive
compensation in the form of stock options.
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The Company's primary goal is to provide for a reasonable base salary
component while also providing for higher short-term and long-term incentive
rewards and bonuses based on the Company's performance. These compensation
elements are in addition to the general benefit programs which are offered to
all of the Company's employees.
Each year, the Committee reviews the Company's executive compensation
program. In its review, the Committee studies the compensation packages for
executives in comparable roles performing at comparable levels at other
companies in the same or related industries, competitiveness of the Company's
executive compensation program and the Company's financial performance for the
previous fiscal year. The Committee also gauges the success of the
compensation program in achieving its objectives in the previous year and
considers the Company's overall performance objectives.
Each element of the Company's executive compensation program is discussed
below.
BASE SALARIES
The Committee annually reviews the base salaries of the Company's executive
officers. The base salaries for the Company's executive officers for fiscal
1997 were established by the Board at the beginning of that fiscal year. The
base salaries for fiscal 1998 were established by the Committee at the
beginning of this fiscal year. In addition to considering the factors listed
in the foregoing section that support the Company's executive compensation
program generally, the Committee reviews the responsibilities of the specific
executive position and the experience and knowledge of the individual in that
position. The Committee also measures individual performance based upon a
number of factors, including a measurement of the Company's historic and
recent financial performance, the individual's contribution to that
performance, the individual's performance on non-financial goals and other
contributions of the individual to the Company's success, and gives each of
these factors relatively equal weight without confining its analysis to a
rigorous formula. As is typical of most corporations, the actual payment of
base salary is not strictly conditioned upon the achievement of any
predetermined performance targets.
INCENTIVE COMPENSATION
Cash bonuses established for executive officers are intended to motivate an
individual to strive to achieve the Company's financial and operational
performance goals or to otherwise incent an individual to aim for a high level
of achievement on behalf of the Company in the coming year. The Committee does
not have a formula for determining bonus payments, but establishes general
target bonus levels for executive officers at the beginning of the fiscal year
based in relatively equal measures upon the Committee's subjective assessment
of the Company's projected revenues and other operational and individual
performance factors and may adjust these targets during the year.
LONG-TERM INCENTIVE COMPENSATION
The Company's long-term incentive compensation plan for its executive
officers is based upon the Company's 1996 Equity Incentive Plan. The Company
believes that placing a substantial portion of its executives' total
compensation in the form of stock options achieves three objectives: (1) it
aligns the interests of the Company's executives directly with those of the
Company's shareholders; (2) it gives executives a significant long-term
interest in the Company's success; and (3) it helps the Company retain key
executives. Each option grant allows an executive to acquire shares of the
Company's Common Stock at a fixed price per share (the market price on the
grant date) over a specified period of time. The option vests in periodic
installments over a three or four year period, contingent upon the executive's
continued employment with the Company. Accordingly, the option grants will
provide a return to the executive only if he or she remains in the Company's
employ, and then only if the market price of the Company's Common Stock
appreciates over the option term.
In establishing this long-term compensation plan in the form of stock option
grants, in fiscal 1997 the Board primarily considered the executives' past
performance and the degree to which an incentive for long-term performance
would benefit the Company. All options were granted at fair market value in
fiscal 1997, and it is the Committee's policy to continue to do so unless
particular circumstances warrant a below-market grant.
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BENEFITS
The Company believes that it must offer a competitive benefits program to
attract and retain all of its full-time employees. Accordingly, the Company
provides the same medical and other benefits to its executive officers that
are generally available to its other employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's compensation is reviewed on an annual basis
and based on the same elements and measures of performance as is the
compensation for the Company's other executive officers. The Board approved a
base salary for Mr. Pearce for fiscal 1998 of $210,000 based on the same
factors underlying the base salaries of the other executive officers. Mr.
Pearce's salary for fiscal 1997 was $185,000. In structuring the remainder of
Mr. Pearce's fiscal 1998 compensation, the Committee will consider as
essential the alignment of his compensation package with the financial
performance of the Company and the Committee's philosophy of basing a larger
portion of executive compensation on incentive bonuses and awards. For fiscal
1997, the Company awarded Mr. Pearce a bonus of $78,950. The bonus was based
in part on meeting certain profit and revenue goals set by the Board for
fiscal year 1997. Mr. Pearce also received 125,000 options (which vest over a
three year period) to purchase shares of the Company's Common Stock in fiscal
year 1997. See "Executive Officer Compensation--Option Grants in Fiscal 1997"
for a description of option grants to Mr. Pearce in 1997.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
It is the responsibility of the Committee to address the issues raised by
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The revisions to this Code section made certain non-performance based
compensation in excess of $1,000,000 to executives of public companies non-
deductible to such companies beginning in 1994. The Committee has reviewed
these issues and has determined that it is not necessary for the Company to
take any action at this time with regard to these issues.
Submitted by: THE COMPENSATION COMMITTEE
Duane A. Adams - Chairman
Alan B. Salisbury
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the following members served on the Company's Compensation
Committee: Dr. Salisbury and Dr. Adams. None of these individuals was at any
time during fiscal 1997, or at any other time, an officer or employee of the
Company. No executive officer of the Company served as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board or Compensation
Committee; accordingly there were no interlocks with other companies within
the meaning of the SEC's proxy rules during 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 28, 1997, Dr. Adams purchased 550 shares of the Company's Common
Stock in his name and 550 shares of the Company's Common Stock in his wife's
name. See "Beneficial Ownership of Common Stock."
In November 1996, Alcatel purchased 500,000 shares of Preferred Stock of the
Company which converted automatically into 500,000 shares of Common Stock upon
the consummation of the Company's initial public offering on January 28, 1997.
As a result of this conversion, Alcatel became a beneficial owner of more than
5% of the Company's outstanding Common Stock. Under agreements entered into in
connection with this investment, the Company granted Alcatel certain
registration rights with respect to sales of securities of the
8
<PAGE>
Company held by Alcatel. Alcatel also agreed to a "standstill" provision
whereby Alcatel and any of its affiliates would not acquire beneficial
ownership of Common Stock or any securities convertible into, or exchangeable
or exercisable for, shares of Common Stock, that when added to the Common
Stock beneficially owned by Alcatel or its affiliates would exceed 19.9% of
the then outstanding shares of Common Stock. In addition, the Company and
certain principal shareholders of the Company also entered into a
Shareholders' Agreement with Alcatel. Pursuant to this Agreement, the Company
nominated Dr. Gerhard Barth for election to the Company's Board, (See
"Election of Directors--Information Regarding Nominees for Class II
Directors), and certain principal shareholders of the Company agreed to vote
all beneficially owned shares in support of Dr. Barth's election to the
Company's Board. The Company and the principal shareholders also agreed to
give Alcatel prior notice in the event the Company plans to sell certain
assets or capital stock of the Company. Specifically, the Company and such
principal shareholders agreed to give Alcatel written and oral notice prior to
soliciting any proposal, or participating in any negotiations, regarding a
sale of any significant portion of the Company's assets or any sale of Common
Stock representing 5% more of the Common Stock of the Company issued and
outstanding immediately prior to such sale. The Company and such principal
shareholders also agreed to promptly advise Alcatel of any request for
information or any proposal by a third party with respect to the foregoing.
These principal shareholders also granted to Alcatel the right to join in
certain sales of Common Stock held by such shareholders. The Company also
granted to Alcatel the right to appoint an observer to attend meetings of the
Company's Board in the event a representative designated by Alcatel is not
then serving on the Company's Board. All rights and obligations under the
terms of the agreement with Alcatel (except registration rights with respect
to Alcatel's Common Stock) will terminate if Alcatel ceases to own in the
aggregate at least 3% of the Company's fully-diluted Common Stock.
9
<PAGE>
EXECUTIVE OFFICER COMPENSATION
TABLE I -- SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation earned
for the three fiscal years ended November 30, 1995, November 30, 1996 and
November 30, 1997, by the Company's Chief Executive Officer and the four other
most highly compensated executive officers (collectively, the "Named Executive
Officers"), each of whose aggregate compensation for fiscal 1997 exceeded
$100,000 for services rendered in all capacities to the Company and its
subsidiaries for that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION(1) SECURITIES
-------------------------------- UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER
POSITION(S) YEAR SALARY BONUS COMPENSATION (# OF SHARES) COMPENSATION
- ------------------ ---- -------- ------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
E. Linwood Pearce........ 1997 $183,125 $78,950 -- 125,000 --
Chief Executive Officer 1996 $170,000 $57,500 -- 100,000 --
1995 $150,000 $20,000 -- -- --
Andrew B. Ferrentino..... 1997 $170,000 $53,030 -- -- --
President and Secretary 1996 $170,000 $57,500 -- -- --
1995 $150,000 $20,000 -- -- --
Richard H. Collard....... 1997 $114,742 $77,703 -- -- --
Vice President of European 1996 $ 87,312 $13,000 -- 25,000 --
Operations 1995 -- -- -- -- --
David L. Kiker........... 1997 $138,000 $25,919 -- -- --
Chief Technology Officer 1996 $128,000 $13,000 -- 50,000 --
1995 $122,250 $ 4,000 -- -- --
Benjamin J. Martindale... 1997 $109,542 $38,434 -- 65,000 --
Vice President of Marketing 1996 -- -- -- -- --
1995 -- -- -- -- --
</TABLE>
- --------
(1) In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted in those
instances where the aggregate amount of such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of
the total of annual salary and bonus for the Named Executive Officer for
such year.
10
<PAGE>
TABLE II -- OPTION GRANTS IN FISCAL 1997
This table presents information regarding options granted to the Company's
Named Executive Officers during fiscal 1997 to purchase shares of the
Company's Common Stock. The Company has no outstanding stock appreciation
rights ("SARs") outstanding and granted no SARs during fiscal 1997. In
accordance with SEC rules, the table shows the hypothetical "gains" or "option
spreads" that would exist for the respective options based on assumed rates of
annual compound stock price of 5% and 10% from the date the options were
granted over the full option term.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NO. OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL EXERCISE PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED OR BASE FOR THE OPTION TERM(4)
OPTIONS TO EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED(1) DURING YEAR(2) ($/SHARE)(3) DATE 5% 10%
- ---- ---------- --------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
E. Linwood Pearce....... 125,000 10.5% $10.125 11/10/07 $ 795,944 $ 2,017,080
Andrew B. Ferrentino.... -- -- -- -- -- --
Richard H. Collard...... -- -- -- -- -- --
David L. Kiker.......... -- -- -- -- -- --
Benjamin J. Martindale.. 50,000 4.2% $ 16.00 12/17/06 $ 503,115 $ 1,274,994
15,000 1.3% $10.125 11/10/07 $ 95,513 $ 242,050
</TABLE>
- --------
(1) The options granted are incentive stock options that become exercisable
in increments of 25% per year for Mr. Martindale and 33% per year for Mr.
Pearce beginning on the first anniversary of the date of grant.
(2) Based on an aggregate of 1,190,712 options granted to employees during the
fiscal year ended November 30, 1997.
(3) The exercise price per share equaled the fair market value of the Common
Stock on the date of grant, as determined by the Board prior to the
Company's initial public offering on January 28, 1997 and as reported on
the Nasdaq Stock Market, Inc. after January 28, 1997.
(4) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the SEC. There can be no assurance
provided to any executive officer or any other holder of the Company's
securities that the actual stock price appreciation over the 10-year
option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates
over the option term, no value will be realized from the option grants
made to the Named Executive Officers.
11
<PAGE>
TABLE III -- OPTION EXERCISES IN FISCAL 1997 AND FISCAL 1997 YEAR-END
OPTION VALUES
The following table shows the number of shares of Common Stock subject to
exercisable and unexercisable stock options held by each of the Named
Executive Officers as of November 30, 1997. The table also reflects the values
of such options based on the positive spread between the exercise price of
such options and the price of the Common Stock as of November 28, 1997, as
reported by the Nasdaq Stock Market, Inc.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
11/30/97(#) OPTIONS AT 11/30/97(1)
------------------------- ----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
E. Linwood Pearce....... -- -- 349,680 200,000 $3,161,107 $434,000
Andrew B. Ferrentino.... -- -- -- -- -- --
Richard H. Collard...... -- -- 48,250 18,750 $ 398,063 $ 89,063
David L. Kiker.......... 27,500 $316,800(2) 85,000 52,500 $ 695,300 $309,750
Benjamin J. Martindale.. -- -- 25,000 40,000 -- (3) -- (3)
</TABLE>
- --------
(1) Value of unexercised, in-the-money options is based on a fair market
value of $10.75 per share of Common Stock, as reported by the Nasdaq
Stock Market, Inc. on November 28, 1997.
(2) Calculated as the difference between the exercise price and the fair
market value of the underlying security at the exercise date of the
underlying option.
(3) The weighted average exercise price of Mr. Martindale's options exceeded
the fair market value of the underlying securities; hence, these options
were not in "in-the-money" as of November 28, 1997.
EMPLOYMENT AND NON-COMPETITION AGREEMENTS
E. Linwood Pearce. As of October 14, 1997, the Company and Mr. Pearce
entered into an amendment to Mr. Pearce's original employment agreement, dated
October 24, 1996. The amendment provides that Mr. Pearce will continue to
serve as the Company's Chief Executive Officer until October 23, 1999. The
amendment also increased Mr. Pearce's base salary from $185,000 per year to
$210,000 per year, with bonuses and future salary increases to be determined
from time to time by the Board. The amendment did not alter any of the
termination provisions that existed in Mr. Pearce's original employment
agreement. The Company still may terminate the employment agreement upon Mr.
Pearce's death, disability or for cause. If the Board terminates Mr. Pearce
for cause, Mr. Pearce is not entitled to severance pay. If the Board
terminates Mr. Pearce without cause, Mr. Pearce is entitled to receive
compensation equal to the greater of (i) the compensation due to Mr. Pearce
through the end of the employment agreement; or (ii) 12 months of salary and
bonus. Mr. Pearce may terminate the agreement himself upon 30 days written
notice to the Board.
The amendment also provides for accelerated vesting of all options held by
Mr. Pearce in the event of a "change in control" of the Company. Pursuant to
the amendment, a "change in control" is deemed to occur when there is: (i) any
direct or indirect sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the assets
of the Company to any unrelated third party person, entity or group of persons
or entities acting in concert ("Group") (within the meaning of Section 13(d)
of the Exchange Act), together with any affiliates of such person or Group; or
(ii) an acquisition, in one or more transactions, of "beneficial ownership"
(within the meaning of Rule 13d-3 and rule 13d-5 under the Exchange Act
whether or not applicable), by any unrelated third party person, entity or
Group together with its or their affiliates, in either case, of any securities
of the Company such that, as a result of such acquisition such person, entity
or Group beneficially owns, directly or indirectly, on a fully diluted basis,
at least a 51% equity ownership interest, on a fully diluted basis, in the
Company.
12
<PAGE>
Joseph M. Fox. As of October 14, 1997, the Company and Mr. Fox entered into
an amendment to Mr. Fox's original employment agreement, dated October 24,
1996, which provides that Mr. Fox will serve as the Company's Chairman of the
Board until October 23, 1998. The amendment grants Mr. Fox flexibility with
respect to his work schedule. The amendment also provides that Mr. Fox's
salary ($170,000 base salary per year), bonuses and benefits will be based on
the number of hours worked by Mr. Fox each pay period. The amendment did not
alter any of the termination provisions that existed in Mr. Fox's original
employment agreement. The Company still may terminate the employment agreement
upon Mr. Fox's death, disability or for cause. If the Board terminates Mr. Fox
for cause, Mr. Fox is not entitled to severance pay. If the Board terminates
Mr. Fox without cause, Mr. Fox is entitled to receive compensation equal to
the greater of (i) the compensation due to Mr. Fox through the end of the
employment agreement; or (ii) 12 months of salary and bonus. Mr. Fox himself
may terminate the agreement upon 30 days written notice to the Board.
Andrew B. Ferrentino. As of October 24, 1996, the Company entered into an
employment agreement with Mr. Andrew B. Ferrentino that provides that Mr.
Ferrentino will serve as the Company's President until October 23, 1998. Mr.
Ferrentino is entitled to a base salary of $170,000 per year, with bonuses and
salary increases to be determined from time to time by the Board. The Company
may terminate the employment agreement upon Mr. Ferrentino's death, disability
or for cause. If the Board terminates Mr. Ferrentino for cause, Mr. Ferrentino
is not entitled to severance pay. If the Board terminates Mr. Ferrentino
without cause, Mr. Ferrentino is entitled to receive compensation equal to the
greater of (i) the compensation due to Mr. Ferrentino through the end of the
employment agreement; or (ii) 12 months of salary and bonus. Mr. Ferrentino
may terminate the agreement upon 30 days written notice to the Board.
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total shareholder return
on the Company's Common Stock between January 29, 1997 (the date the Company's
Common Stock began trading on the Nasdaq Stock Market) and December 31, 1997
with the cumulative total return of (i) the Nasdaq Stock Market-U.S. Companies
Index (the "Nasdaq Stock Market-U.S. Index") and (ii) the Nasdaq Stock Market
Computer & Data Processing Index (the "Nasdaq Computer & Data Processing
Index"), over the same period. This graph assumes the investment of $100.00 on
January 29, 1997 in the Company's Common Stock, the Nasdaq Stock Market-U.S.
Index and the Nasdaq Computer & Data Processing Index, and assumes the
reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data and
the Company cautions that the stock price performance shown in the graph below
is not indicative of, nor intended to forecast, the potential future
performance of the Company's Common Stock. Information used in the graph was
obtained from the Nasdaq Stock Market, a source believed to be reliable, but
the Company is not responsible for any errors or omissions in such
information.
13
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG TEMPLATE SOFTWARE, INC., THE
NASDAQ STOCK MARKET-U.S. INDEX AND THE NASDAQ COMPUTER& DATA PROCESSING INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1/29/97 3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Template Software, Inc............ $100 $63 $100 $ 90 $102
Nasdaq Stock Market--US Index..... $100 $88 $105 $122 $114
Nasdaq Computer & Data Processing
Index............................ $100 $85 $109 $119 $113
</TABLE>
The graph above commences with January 29, 1997, the date on which the
Company's stock first began trading on the Nasdaq Stock Market.
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate this
Proxy Statement or future filings made by the Company under those statutes,
the Compensation Committee Report and Stock Performance Graph are not deemed
filed with the Securities and Exchange Commission and shall not be deemed
incorporated by reference into any of those prior filings or into any future
filings made by or on behalf of the Company under those statutes.
14
<PAGE>
PROPOSAL 2 -- AMENDMENT TO THE 1996 EQUITY INCENTIVE PLAN
The 1996 Equity Incentive Plan (the"1996 Plan") is the principal component of
the Company's executive and employee compensation program. Stock options tie
executive compensation directly to an increase in shareholder value,
specifically the market price of the Common Stock. See "Executive
Compensation--Compensation Committee Report on Executive Compensation." In
this way, options further align the interests of executives and shareholders
and provide a meaningful incentive for management to maximize shareholder
value. Options granted under the 1996 Plan generally vest over a three or four
year period and are exercisable at the fair market value of the Company's
Common Stock on the date of grant.
The Board of Directors of the Company, following a recommendation of the
Board's Compensation Committee, deemed it advisable and in the best interests
of the Company and its shareholders to amend the 1996 Plan by increasing the
maximum number of shares of Common Stock authorized by the 1996 Plan from one
million (1,000,000) to two million five hundred thousand (2,500,000). Article
XIII of the 1996 Plan requires shareholder approval for such an amendment.
Accordingly, the Board submits this proposal for shareholder approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE AMENDMENT TO THE 1996 EQUITY INCENTIVE PLAN.
PROPOSAL 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company, following a recommendation of the
Board's Audit Committee, has appointed the firm of Coopers & Lybrand L.L.P. to
serve as independent auditors of the Company for the fiscal year ending
November 30, 1998, and has directed that such appointment be submitted to
shareholders of the Company for ratification at the Annual Meeting. Coopers &
Lybrand L.L.P. has served as independent auditors of the Company since 1996
and is considered by management of the Company to be well qualified. If the
shareholders do not ratify the appointment of Coopers & Lybrand L.L.P., the
Board will reconsider the appointment.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. They also will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE
INDEPENDENT AUDITORS OF THE COMPANY.
OTHER MATTERS
Neither management nor the Board knows of any matter to be acted upon at the
meeting other than the matters described above. If any other matter properly
comes before the Annual Meeting, however, the proxy holders will vote thereon
in accordance with their best judgment.
By Order of the Board of Directors,
LOGO
Joseph M. Fox
Chairman
Dulles, Virginia
March 20, 1998
15
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TEMPLATE
SOFTWARE, INC.
The undersigned shareholder(s) of Template Software, Inc., a Virginia
corporation (the "Company"), hereby acknowledge(s) receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement, each dated March 20, 1998,
and hereby appoints Mr. E. Linwood Pearce and Mr. Joseph M. Fox, or either of
them, proxies and attorneys-in-fact, with full power of substitution, on behalf
and in the name of the undersigned, to represent the undersigned at the 1998
Annual Meeting of Shareholders of the Company to be held at 10:00 a.m. Eastern
Standard Time on April 28, 1998 at the Company's headquarters at 45365 Vintage
Park Plaza, Dulles, Virginia 20166 and at any adjournment(s) thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote
if then and there personally present, on the matters set forth below:
(1) To elect the nominees listed below to serve as Class II Directors of the
Company until the 2001 Annual Meeting of Shareholders:
(a) Mr. Andrew B. Ferrentino
[_] FOR [_] WITHHOLD
(b) Dr. Gerhard Barth
[_] FOR [_] WITHHOLD
(2) To vote on a proposed amendment to the 1996 Equity Incentive Plan (the
"1996 Plan") that would increase the number of authorized shares under the
1996 Plan from one million (1,000,000) to two million five hundred
thousand (2,500,000).
[_] FOR [_] WITHHOLD [_] ABSTAIN
(3) To ratify the appointment of Coopers & Lybrand L.L.P. as the independent
auditors of the Company for the fiscal year ended November 30, 1998.
[_] FOR [_] WITHHOLD [_] ABSTAIN
(4) In their discretion, upon such other matter or matters that may properly
come before the meeting or any adjournment(s) or postponement(s) thereof.
<PAGE>
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR THE
DIRECTOR NOMINEES NAMED IN PROPOSAL (1) ABOVE, FOR PROPOSAL (2) AND PROPOSAL
(3) ABOVE AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING.
Dated ______________________ , 1998
-----------------------------------
Signature
-----------------------------------
Signature (if held jointly) Title
or authority (if applicable)
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. IF SHARES ARE REGISTERED IN
MORE THAN ONE NAME, THE SIGNATURE OF ALL SUCH PERSONS ARE REQUIRED. A
CORPORATION SHOULD SIGN IN ITS FULL CORPORATE NAME BY A DULY AUTHORIZED
OFFICER, STATING HIS OR HER TITLE. TRUSTEES, GUARDIANS, EXECUTORS AND
ADMINISTRATORS SHOULD SIGN IN THEIR OFFICIAL CAPACITY, GIVING THEIR FULL TITLE
AS SUCH. IF A PARTNERSHIP, PLEASE SIGN IN THE PARTNERSHIP NAME BY AN AUTHORIZED
PERSON.
