<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
XCELLENET, INC.
-------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 Act Rule 0-11:
---------------------------------------------------------------------
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:
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<PAGE>
XCELLENET, INC.
5 Concourse Parkway, Suite 850
ATLANTA, GEORGIA 30328
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1998
--------------------
TO THE SHAREHOLDERS OF XCELLENET, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of
XcelleNet, Inc. (the "Company") will be held at the The Westin Atlanta North at
Perimeter Hotel, 7 Concourse Parkway, Atlanta, Georgia, on the 28th day of
April, 1998, at 9:00 a.m., for the following purposes:
(1) To elect nine directors to constitute the Board of Directors to
serve until the next Annual Meeting or until their successors are
elected and qualify;
(2) To consider and vote upon a proposal to ratify the selection of
Arthur Andersen LLP as independent auditors of the Company for the
year ending December 31, 1998; and
(3) To act upon such other matters as may properly come before the
meeting or any reconvened meeting following any adjournment
thereof.
Only holders of record of Common Stock at the close of business on
March 9, 1998 will be entitled to vote at the meeting. The transfer books will
not be closed. A complete list of the shareholders entitled to vote at the
meeting will be available for inspection by shareholders at the offices of the
Company immediately prior to the meeting.
The Annual Meeting may be adjourned from time to time without notice
other than announcement at the Annual Meeting, and any business for which notice
of the Annual Meeting is hereby given may be transacted at a reconvened meeting
following such adjournment.
By Order of the Board of Directors,
/s/ Jeanne N. Bateman
-------------------------------
JEANNE N. BATEMAN
Secretary
Atlanta, Georgia
April 6, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON,
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON.
<PAGE>
XCELLENET, INC.
5 Concourse Parkway, Suite 850
Atlanta, Georgia 30328
PROXY STATEMENT
ANNUAL MEETING - APRIL 28, 1998
This Proxy Statement is being furnished to the shareholders of XcelleNet,
Inc. (the "Company") in connection with the solicitation of proxies by the
Company for use at its Annual Meeting of Shareholders to be held on April 28,
1998 at 9:00 a.m. local time, and at any reconvened meeting following any
adjournment thereof. This proxy statement and the accompanying proxy are first
being mailed to shareholders on or about April 6, 1998.
All proxies received by the Company will be voted in accordance with
instructions appearing on such proxies. A shareholder who submits a proxy
pursuant to this solicitation may revoke it at any time prior to its exercise at
the Annual Meeting. Such revocation may be by delivery of written notice to the
Secretary of the Company, by delivery of a proxy bearing a later date, or by
voting in person at the meeting. The mailing address of the executive offices
of the Company is 5 Concourse Parkway, Suite 850, Atlanta, Georgia 30328. An
annual report to the shareholders, including financial statements for the year
ended December 31, 1997, is enclosed herewith.
At the close of business on the record date for the Annual Meeting, which
was March 9, 1998, the Company had outstanding and entitled to vote at the
Annual Meeting 8,372,670 shares of Common Stock. Each shareholder is entitled
to one vote on each proposal per share of Common Stock held as of the record
date. A quorum for the purposes of all matters to be voted on shall consist of
the presence, in person or by proxy, of a majority of the outstanding shares of
Common Stock entitled to vote at the Annual Meeting. Once a share is
represented for any purpose at the Annual Meeting, other than solely to object
to holding the Annual Meeting or to transact business at the Annual Meeting, it
will be deemed present for quorum purposes for the remainder of the Annual
Meeting and for any adjournment of the Annual Meeting unless a new record date
is set or must be set for the adjourned meeting pursuant to the Company's
Bylaws, as amended and restated.
The vote required for the election of directors is a plurality of the votes
cast by the shares entitled to vote in the election, provided a quorum is
present. Consequently, with respect to the proposal for the election of
directors, withholding authority to vote with respect to one or more nominees
and broker "non-votes" will have no effect on the outcome of the election,
although such shares would be counted as present for purposes of determining the
existence of a quorum. With respect to the other proposals to be voted on at
the Annual Meeting, the required vote is for the number of votes cast for a
proposal to exceed the votes cast against a proposal. Consequently, with
respect to the proposal to ratify the selection of independent auditors,
abstentions and broker "non-votes" will have no effect on the adoption or
rejection of the proposal, although such shares would be counted as present for
purposes of determining the existence of a quorum. A broker "non-vote" occurs
when a nominee holding shares for a beneficial owner votes with respect to at
least one proposal but does not vote on other proposal(s) because the nominee
does not have discretionary voting power with respect to such other proposal(s)
and has not received voting instructions from the beneficial owner.
PROPOSAL ONE -
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of nine directors.
The term of office of each director is until the next annual meeting or until a
successor is elected and qualifies. The shareholders are being asked to vote on
the election of the nine nominees for director set forth below. All of the
nominees are presently directors. In the absence of contrary instructions, the
proxy will be voted for the election of the nine nominees whose names appear
below. In the event that any nominee is unable to serve (which is not
anticipated), the persons designated as proxies will cast votes for the election
of the remaining nominees and for the election of such other person(s) as they
may select.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION
OF ALL OF THE NOMINEES. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
<PAGE>
The table and information below set forth the name of each nominee, their
ages, principal occupations and the year each of them first joined the Board.
For information concerning membership on committees of the Board of Directors,
see "Other Information About the Board and its Committees" below.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR
Year First
Name Age Position with the Company Elected Director
---- --- ------------------------- ----------------
<S> <C> <C> <C>
Stephen P. Bradley 56 Director 1995
Dennis M. Crumpler 45 Chairman of the Board, Chief Executive 1986
Officer and Director
Donald L. House 56 Director 1992
Richard C. Marcus 59 Director 1990
Geoffrey A. Moore 51 Director 1996
Shereef W. Nawar 38 Chief Technical Officer and Director 1987
Richard L. Nolan 57 Director 1995
Jeffrey P. Parker 54 Director 1990
Corey M. Smith 41 President and Director 1998
</TABLE>
Mr. Bradley is currently a professor at the Harvard Business School, a
position he has held since 1968. He also serves as the Chairman of the Harvard
Business School's Program for Management Development. From September 1993 to
January 1996, Mr. Bradley served as the Senior Associate Dean for Faculty
Development at the Harvard Business School. Mr. Bradley is a director of Ciena
Corporation, a supplier of fiber optic multi-channel transmission enhancement
systems for the telecommunications industry.
Mr. Crumpler is a co-founder of the Company and has served as Chairman of
the Board, a director and Chief Executive Officer of the Company since its
inception in 1986. Mr. Crumpler also served as the President of the Company from
September 1986 to October 1992 and from September 1996 to January 1997.
Mr. House is a private investor and consultant to high technology
companies. He served as the Chairman of the Board of SQL Financials
International, Inc., an application software company, from January 1993 until
December 1997 and continues to serve as one of its directors. From September
1991 until December 1992, he was President of Prentice Hall Professional
Software, a subsidiary of Simon and Schuster, Inc. Since 1988, he has been a
consultant to and investor in a number of early-stage technology firms,
including the Company. Mr. House is a director of Melita International, Inc., a
developer of call center management software and a member of its compensation
committee.
Mr. Marcus is a Senior Advisor at the investment banking firm of Peter J.
Solomon Company, a position he has held since January 1997. Mr. Marcus was a
principal of InterSolve Group Inc., a firm that provides management consulting
services to companies in several industries, from its inception in 1991 until
January 1997. From December 1994 until December 1995, Mr. Marcus was also the
Chief Executive Officer of Plaid Clothing Group, Inc., a manufacturer of
tailored clothing. Plaid Clothing Group filed a voluntary federal bankruptcy
petition in July 1995. From January 1989 to January 1992, Mr. Marcus was a
principal of RCM Consulting, a provider of consulting services to the retail
industry. From 1979 until 1988, Mr. Marcus was Chief Executive Officer of
Neiman-Marcus, a department store retailer. Mr. Marcus is a director of Zale
Corporation, a specialty retailer of fine jewelry, and a member of its
compensation committee.
Mr. Moore is a founder of The Chasm Group, a firm that provides marketing
strategy and organizational consulting to high-technology companies. He has
served as President of that firm since it was founded in 1992. From 1987 until
1992, Mr. Moore was a principal and partner of Regis McKenna, Inc., a high-
technology marketing and communications company. Mr. Moore is a director
Documentum, Inc., a document management software company.
2
<PAGE>
Mr. Nawar, a co-founder of the Company, has served as the Company's Chief
Technical Officer since October 1992. Mr. Nawar served as the Company's Vice
President of Development from 1987 until October 1992.
Mr. Nolan is currently a professor at the Harvard Business School, a
position he has held since July 1991. From 1977 to July 1991, Mr. Nolan served
as a principal of KPMG Peat Marwick LLP, and as Chairman of the Board of Nolan,
Norton & Co., a technology-strategy consulting firm. Mr. Nolan was a general
partner of Lincoln North Associates Limited Partnership ("Lincoln") from 1986 to
1994. Lincoln owned office buildings in Massachusetts. Lincoln filed a voluntary
federal bankruptcy petition in May 1993. Mr. Nolan is a director of H.F.
Ahmanson & Company, a bank holding company.
Mr. Parker is Chairman and Chief Executive Officer of CCBN, an Internet
service company. He has served in that capacity since January 1997. From 1990
until 1997, Mr. Parker was a private investor focusing on start-up and early-
stage investments. From October 1986 until December 1990, Mr. Parker was the
Chief Executive Officer of Thomson Financial Services ("Thomson"), and from
October 1986 to December 1991, Mr. Parker was also Chairman of the Board and
Chief Executive Officer of First Call Corporation ("First Call"). Both Thomson
and First Call are financial information service companies.
Mr. Smith is President of the Company, a position he has held since January
1997. He joined the Company in September 1996 as its Executive Vice President
responsible for marketing. Prior to joining the Company, Mr. Smith was the
President of Decision Point Data, a human resources decision support software
company, from October 1995 until September 1996. He served as President and
Chief Executive Officer of Creative Multimedia, Inc., a consumer CD-ROM
multimedia company, from December 1993 until September 1995. In July 1992, Mr.
Smith founded Legacy Venture Capital and served as its President and General
Partner from July 1992 until September 1994 and continues to serve as General
Partner. From 1988 until May 1992, Mr. Smith was the President and Chief
Executive Officer of Central Point Software, Inc., a personal computer utilities
software company.
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
During 1997, the Board of Directors held seventeen meetings. All of the
directors attended at least 75% of the aggregate number of meetings of the Board
of Directors and the committees of the Board of Directors of which he was a
member, except for Mr. Moore. Certain information regarding the functions of
the Board's committees, their present membership and the number of meetings held
by each committee during 1997 is described below:
Audit Committee. The Audit Committee is responsible for reviewing and
---------------
making recommendations regarding the Company's independent auditors, the annual
audit of the Company's financial statements and the Company's internal
accounting practices and policies. The current members of the Audit Committee
are Donald L. House and Richard C. Marcus. During 1997, the Audit Committee
held two meetings.
Compensation and Stock Option Committee. The Compensation and Stock Option
---------------------------------------
Committee is responsible for making recommendations to the Board of Directors
regarding compensation arrangements for senior management of the Company and for
administering the Company's 1987 Stock Option Plan, 1995 Employee Stock Purchase
Plan and 1996 Long-Term Incentive Plan, including granting stock options under
those plans to employees of the Company. The current members of the
Compensation and Stock Option Committee are Stephen P. Bradley, Richard C.
Marcus and Jeffrey P. Parker. The Compensation and Stock Option Committee held
nine meetings during 1997.
Strategic Oversight Committee. The Strategic Oversight Committee is
-----------------------------
responsible for making recommendations to the Board of Directors regarding the
Company's strategic initiatives. The current members of the Strategic Oversight
Committee are Stephen P. Bradley, Dennis M. Crumpler, Geoffrey A. Moore, Shereef
W. Nawar and Richard L. Nolan. The Strategic Oversight Committee held two
meetings in 1997.
Nominating Committee. The Nominating Committee is responsible for
--------------------
producing recommendations for the composition of the Company's Board of
Directors. The Nominating Committee is an informal committee currently
consisting of Dennis M. Crumpler, Donald L. House and Richard C. Marcus. The
Nominating Committee operates by informal exchanges among the members, often
outside the context of an official meeting. There were no meetings of the
Nominating Committee during 1997. The Nominating Committee does not consider
nominees recommended by the Company's shareholders.
3
<PAGE>
COMPENSATION OF DIRECTORS
In 1997, the Company reimbursed directors for travel and other out-of-
pocket expenses incurred in connection with their services as directors. In
addition, upon the later of April 1994 or election to the Board of Directors,
each non-employee director received an option to purchase 40,000 shares of the
Company's Common Stock pursuant to the Company's 1994 Stock Option Plan for
Outside Directors (the "Director Plan"). The Director Plan was adopted by the
Board of Directors in March 1994, amended by the Board of Directors in March
1995, and approved by the Company's shareholders at the Company's 1995 Annual
Meeting. Pursuant to the Director Plan, the Company automatically grants
nonqualified options to each non-employee member of the Company's Board of
Directors who is not prohibited by his employer from receiving options under the
Director Plan (an "Outside Director"). All of the Company's six current Outside
Directors have received options under the Director Plan. Each option granted
under the Director Plan vests in four installments of 10,000 shares on each of
the first four anniversaries of the first day of the first fiscal quarter of the
Company beginning after the date of grant. If, during the year prior to any
vesting date, any Outside Director fails to attend any regular meeting of the
Board of Directors, then, on the day prior to such vesting, the option will
terminate as to that number of shares equal to 10,000 multiplied by the
percentage of such meetings not attended by the Outside Director.
In 1997 each of the Company's six current Outside Directors received
options under the Company's 1996 Long-Term Incentive Plan (the "LTIP"). Each
option granted under the LTIP vests in four installments of 5,000 shares on each
of the first four anniversaries of the date of grant. If, during the year prior
to any vesting date, any Outside Director fails to attend any regular meeting of
the Board of Directors, then, on the day prior to such vesting, the option will
terminate as to the number of shares equal to 5,000 multiplied by the percentage
of such meetings not attended by the Outside Director.
4
<PAGE>
COMMON STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Based on available information, the Company believes that set forth in the
table below is information in connection with the beneficial ownership of Common
Stock of the Company as of March 9, 1998 by the Company's directors, the Named
Executive Officers (as defined herein), the directors and executive officers of
the Company as a group (15 persons) and certain persons known to the Company to
be beneficial owners of more than five percent of the outstanding Common Stock
of the Company:
<TABLE>
<CAPTION>
Name of Five Percent
Beneficial Owner, Director Shares of Common Stock Percentage of Common
Title of Class or Named Executive Officer Beneficially Owned (1) Stock Outstanding
-------------- -------------------------- ---------------------- --------------------
<S> <C> <C> <C>
Common Stock, Five Percent Beneficial Owners:
$0.01 par value -------------------------------
Franklin Advisors, Inc. (2) 804,400 9.6
777 Mariners Island Boulevard
San Mateo, California 94404
GeoCapital, LLC (3) 992,390 11.9
767 Fifth Avenue, 45th Floor
New York, New York 10153-4590
State of Wisconsin Investment Board (4) 656,200 7.8
P.O. Box 7842
Madison, Wisconsin 53707
Directors and Named Executive Officers:
---------------------------------------
Stephen P. Bradley (5) 20,000 *
Stefanus F. Coetzee (6) 73,028 *
Dennis M. Crumpler (7) 1,391,831 16.6
Jethro J. Felton, III (8) 12,315 *
Donald L. House (9) 46,599 *
Richard C. Marcus (10) 58,380 *
Geoffrey A. Moore (11) 17,500 *
Shereef W. Nawar (12) 196,759 2.3
Richard L. Nolan (13) 30,000 *
W. Michael Parham (14) 105,478 1.3
Jeffrey P. Parker (15) 121,751 1.4
Corey M. Smith (16) 44,665 *
Directors and Executive Officers as a 2,157,919 24.3
Group (17)
</TABLE>
____________________
* Less than 1%.
(1) Information relating to the beneficial ownership of Common Stock by
directors and Named Executive Officers is based upon information furnished
by each such individual using "beneficial ownership" concepts set forth in
rules promulgated by the Securities and Exchange Commission ("SEC") under
Section 13(d) of the Securities Exchange Act of 1934. Except as indicated
in other footnotes to this table, directors and Named Executive Officers
possessed sole voting and investment power with respect to all shares set
forth by their names. The table includes, in some instances, shares in
which members of a director's or executive officer's immediate family have
a beneficial interest. At the close of business on March 9, 1998, the
Company had 8,372,670 shares of Common Stock outstanding.
(2) The information herein regarding the stock ownership of Franklin Advisors,
Inc. ("Franklin") was obtained from a Schedule 13G filed by Franklin with
the SEC and received by the Company on February 17, 1998 (the "Franklin
13G"). The Company makes no representation as to the accuracy or
completeness of the information reported regarding Franklin. According to
the Franklin 13G, Franklin has sole investment power and sole voting power
with respect to all of these shares.
5
<PAGE>
(3) The information herein regarding the stock ownership of GeoCapital, LLC
("GeoCapital") was obtained from a Schedule 13G filed by GeoCapital with
the SEC and received by the Company on March 4, 1998 (the "GeoCapital
13G"). The Company makes no representation as to the accuracy or
completeness of the information reported regarding GeoCapital. According
to the GeoCapital 13G, GeoCapital has sole investment power with respect to
all of these shares and voting power with respect to none of these shares.
(4) The information herein regarding the stock ownership of the State of
Wisconsin Investment Board ("Wisconsin Investment Board") was obtained from
a Schedule 13G filed by Wisconsin Investment Board with the SEC and
received by the Company on February 6, 1998 (the "Wisconsin 13G"). The
Company makes no representation as to the accuracy or completeness of the
information reported regarding Wisconsin Investment Board. According to
the Wisconsin 13G, Wisconsin Investment Board has sole investment power and
sole voting power with respect to all of these shares.
(5) Consists of 20,000 shares subject to stock options that are currently
exercisable.
(6) Includes 900 shares held by Mr. Coetzee's spouse. Also includes 70,566
shares subject to stock options that are currently exercisable or will
become exercisable within 60 days of March 9, 1998.
(7) Includes 1,200,000 shares held by a limited partnership, the general
partner of which is a limited liability company of which Mr. Crumpler is
the controlling manager. As such, Mr. Crumpler has voting and investment
power over these shares. Also includes 104,800 shares owned by Mr.
Crumpler's spouse. In November 1989, Mr. Crumpler entered into an
agreement with his spouse that provides that Mr. Crumpler has sole voting
power with respect to the shares of Common Stock presently held, or
acquired in the future, by her. This agreement also places certain
restrictions on the ability of Mr. Crumpler's spouse to transfer her shares
of Common Stock and provides Mr. Crumpler a right of first refusal in
connection with such shares. Also includes 3,800 shares held by Mr.
Crumpler as trustee of a trust for the benefit of his mother, as to which
he retains sole voting and investment power. Also includes 3,000 shares
held by Mr. Crumpler as custodian for his minor children and as to which he
retains sole voting and investment power.
(8) Includes 11,102 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days of March 9, 1998.
(9) Includes 40,350 shares subject to stock options that are currently
exercisable.
(10) Consists of 58,380 shares subject to stock options that are currently
exercisable.
(11) Consists of 17,500 shares subject to stock options that are currently
exercisable.
(12) Includes 106,922 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days of March 9, 1998.
(13) Consists of 30,000 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days of March 9, 1998.
(14) Includes 61,946 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days of March 9, 1998.
(15) Includes 90,701 shares held by a limited partnership, the general partner
of which is a limited liability company of which Mr. Parker is the owner.
As such, Mr. Parker has sole voting and investment power over these shares.
Also includes 31,050 shares subject to stock options that are currently
exercisable.
(16) Consists of 44,665 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days of March 9, 1998.
(17) Includes 516,087 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days of March 9, 1998.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER BENEFITS
The following table presents certain summary information concerning
compensation earned for services rendered in all capacities to the Company by
the Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company other than the Chief Executive
Officer during 1997 (collectively, the "Named Executive Officers") for the years
ended December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------
----------------------------- SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- - -------------------- ------ ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Dennis M. Crumpler 1997 193,333 40,000 - 2,375 (2)
Chairman, 1996 176,667 13,250 120,000 (1) 2,375 (2)
Chief Executive 1995 160,000 16,320 - 2,234 (2)
Officer and Director
Stefanus F. Coetzee 1997 150,000 33,750 15,000 22,647 (3)
Senior Vice President-- 1996 147,500 7,375 50,000 -
North American 1995 94,585 95,790 10,000 102,054 (4)
Customer Operations
Jethro J. Felton, III 1997 117,770 103,055 35,000 1,720 (2)
Vice President-- 1996 95,000 88,469 12,752 1,822 (2)
North American Sales 1995 87,500 94,241 8,000 1,796 (2)
W. Michael Parham 1997 121,664 63,909 25,000 960 (2)
Senior Vice President-- 1996 114,996 75,300 40,000 1,155 (2)
Business Development 1995 117,491 93,896 10,000 1,304 (2)
Corey M. Smith 1997 167,500 35,000 95,000 1,200 (2)
President and Director 1996 46,667 123,750 (5) 155,000 50,000 (6)
</TABLE>
____________________
(1) Cancelled in 1997 due to voluntary forfeiture by Mr. Crumpler.
(2) Includes premiums paid by the Company for term life insurance for Mr.
Parham in 1996 of $204 and in 1995 of $300. Also includes matching
contributions under the Company's qualified salary deferral plan under
Section 401(k) of the Internal Revenue Code for Messrs. Crumpler, Felton,
Parham, and Smith in 1997 of $2,375, $1,720, $960 and $1,200, respectively,
for Messrs. Crumpler, Felton and Parham in 1996 of $2,375, $1,822 and $951,
respectively, and for Messrs. Crumpler, Felton, and Parham in 1995 of
$2,234, $1,796 and $1,004, respectively.
(3) Relocation expenses from the Company's U.K. Customer Operations Center to
Atlanta.
(4) Includes $97,079 of estimated relocation expenses from the Company's U.K.
Customer Operations Center to Atlanta, $1,490 related to a Company supplied
automobile, and $3,485 of matching contributions under the Company's U.K.
subsidiary's retirement benefit program.
(5) Fair market value of restricted stock granted to Mr. Smith in connection
with his joining the Company.
(6) Relocation expenses from Portland, Oregon to Atlanta.
7
<PAGE>
Option Grants in 1997
The following table presents further information on grants of stock options
pursuant the Company's 1996 Long-Term Incentive Plan during the year ended
December 31, 1997 to the Named Executive Officers. Such grants are reflected in
the Summary Compensation Table above.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------- Potential Realizable
% of Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for
Underlying Employees or Base Option Term (1)
Options in Price Expiration -------------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- - ---- ----------- ----------- ------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dennis M. Crumpler - - - - - -
Stefanus F. Coetzee 15,000 (2) 1.47% $ 8.875 7/09/07 $ 83,722 $ 212,167
Jethro J. Felton, III 7,500 (3) .74% $20.500 1/27/07 $ 96,693 $ 245,038
7,500 (3) .74% $12.625 4/27/07 $ 59,548 $ 150,907
10,000 (4) .98% $ 8.875 7/09/07 $ 55,815 $ 141,445
10,000 (2) .98% $11.250 10/27/07 $ 70,751 $ 179,296
W. Michael Parham 25,000 (2) 2.45% $ 8.875 7/09/07 $139,536 $ 353,612
.
Corey M. Smith 35,000 (2) 3.43% $20.500 3/11/07 $451,232 $1,143,510
60,000 (2) 5.89% $ 8.875 7/09/07 $334,886 $ 848,668
</TABLE>
___________________
(1) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the option term, which is ten years for
all options listed. The assumed 5% and 10% rates of stock appreciation are
mandated by the rules of the SEC and may not accurately reflect the
appreciation of the price of the Common Stock from the grant date until the
end of the option term. These assumptions are not intended to forecast
future price appreciation of the Company's Common Stock.
(2) Nonqualified stock option granted at the fair market value of a share of
the Company's Common Stock on the date of grant that will become
exercisable on the first anniversary of the grant date, with 1/3 of the
underlying shares becoming exercisable at that time, and an additional 1/3
becoming exercisable on each successive anniversary date until fully vested
on the third anniversary date. The vesting of this option may be
accelerated at the discretion of the Compensation and Stock Option
Committee.
(3) Incentive stock option granted at the fair market value of a share of the
Company's Common Stock on the date of grant that will become exercisable on
the first anniversary of the grant date, with 1/5 of the underlying shares
becoming exercisable at that time, and additional 1/5 becoming exercisable
on each successive anniversary date until fully vested on the fifth
anniversary date. The vesting of this option may be accelerated at the
discretion of the Compensation and Stock Option Committee.
(4) The option to acquire 108 shares is an incentive stock option, and the
option to acquire 9,892 shares is a nonqualified stock option. Each of
these options was granted at the fair market value of a share of the
Company's Common Stock on the date of grant. The incentive stock option
will become exercisable as to 36 shares on the first anniversary date, and
additional 36 shares becoming exercisable on each two successive
anniversary date, at which time the option will be fully exercisable. The
nonqualified stock option will become exercisable as to 3,297 shares on the
first anniversary, 3,297 shares on the second anniversary, and 3,298 shares
on the third anniversary, at which time the option will be fully
exercisable. The vesting of this option may be accelerated at the
discretion of the Compensation and Stock Option Committee.
8
<PAGE>
Aggregated Option Exercises in 1997
and Year-End Option Values
The following table presents information with respect to options exercised
by the Named Executive Officers during 1997 and the unexercised options to
purchase the Company's Common Stock granted in 1997 and prior years under the
1987 Stock Option Plan and the 1996 Long-Term Incentive Plan and held by them as
of December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End (#) at Fiscal Year-End ($)(2)
Shares Acquired Value ------------------------------ ---------------------------
Name on Exercise (#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis M. Crumpler - - - - - -
Stefanus F. Coetzee - - 61,566 68,184 $521,057 $126,600
Jethro J. Felton, III 2,499 $33,425 5,552 51,701 $ 26,000 $135,230
W. Michael Parham - - 53,279 64,051 $446,326 $154,874
Corey M. Smith - - 32,999 217,001 $ 18,500 $334,001
</TABLE>
___________________
(1) "Value Realized" represents the amount equal to the excess of the aggregate
fair market value of the shares purchased at the time of exercise over the
aggregate exercise price paid.
(2) Represents the aggregate fair market value as of December 31, 1997 ($13.125
per share closing stock price) of the option shares less the aggregate
exercise price of the options.
9
<PAGE>
Employment Arrangements
In March 1994, the Company entered into an agreement with Mr. Crumpler (the
"Crumpler Agreement"), which provides that in the event that Mr. Crumpler's
employment with the Company, any subsidiary of the Company or any forty percent
(40%) shareholder of the Company is terminated other than for cause, or in the
event that Mr. Crumpler resigns from employment following a "change in control"
(as defined in the Crumpler Agreement) of the Company, Mr. Crumpler may obtain,
at no cost, a license to use the full range of the Company's RemoteWare products
at one central site and on up to 250 nodes for his own business, charitable or
educational purposes. In addition, under such circumstances, a business of
which Mr. Crumpler owns at least twenty percent (20%) and in which he is
actively involved in managing has the right to obtain licenses to use the
Company's RemoteWare products on terms that are no less favorable than any
granted to a licensee of similar size within the 18 months prior to the grant of
the license to this business. Each of these licenses will be granted pursuant
to the Company's then standard software license agreement for its products, and
Mr. Crumpler or the related business will be entitled to the Company's standard
software support and maintenance agreements. The Crumpler Agreement has a term
of twenty (20) years following the termination of Mr. Crumpler's employment as
described above.
In July 1997, two executive officers of the Company resigned. The Company
entered into separation agreements with them that included payments of $173,337.
The Company entered into Change in Control Employment Agreements (each, an
"Agreement") with Messrs. Crumpler, Nawar and Smith in February 1997, and
Messrs. Coetzee and Parham in July 1997. Each Agreement will become effective
if and when a Change in Control (as defined therein) occurs during the three-
year period following the date of the Agreement or during any of the one-year
annual renewal periods (the "Change of Control Period"), or if the employee's
employment is terminated in connection with or in anticipation of a Change of
Control (in either case, the "Effective Date"). The employee's employment
period under the Agreement begins on the Effective Date and continues for three
years. During the employment period following the Change of Control, the
employee will (i) receive a monthly base salary equal to or greater than the
highest monthly base salary paid to him by the Company during the previous 12
months; (ii) an annual cash bonus at least equal to the highest bonus paid to
him in any of the three fiscal years prior to the Effective Date, and (iii) the
ability to participate in all incentive, savings, welfare benefit, fringe
benefit and retirement plans of the Company. If the employee's employment
terminates during the employment period he will receive certain severance
benefits under the Agreement. If employment terminates for cause (as defined in
the Agreement) or the employee voluntarily resigns without good reason (as
defined in the Agreement) other than during the 30-day period beginning on the
first anniversary of the Effective Date, the employee will receive only accrued
benefits, if applicable. If the employee (i) is terminated by the Company
without cause, (ii) resigns voluntarily for good reason, or (iii) resigns for
any reason during the 30-day period beginning on the first anniversary of the
Effective Date, the employee would receive a lump sum cash payment equal to: (a)
base salary through the date of termination, (b) a prorata bonus for the year of
termination, based upon the greater of one-half of the then-current base salary
or the highest of actual bonuses earned in the prior three years ("Bonus"), (c)
the product of two and the sum of base salary and Bonus, (d) unpaid deferred
compensation and vacation pay, and (e) a contingent payment based upon 1.2 times
the difference between the fair market value of the securities issuable upon
exercise of certain of the employee's unvested stock options at the date of
termination that would have become vested within three years after the date of
termination and the aggregate exercise price of such options; provided that this
last amount will not be payable if the vesting of those unvested options is
accelerated to a date not later than the date of termination. In addition, the
employee would be entitled to certain continued employee benefits. In the event
that payments to the employee are subject to excise tax under Section 4999 of
the Internal Revenue Code, the Company will make an additional payment in an
amount such that after the payment of all income and excise taxes, the employee
will be in the same after-tax position as if no excise tax had been imposed.
The Company entered into a Change in Control Employment Agreement
("Agreement") with Mr. Felton in July 1997. The Agreement will become effective
if and when a Change in Control (as defined therein) occurs during the two-year
period following the date of the Agreement or during any of the one-year annual
renewal periods (the "Change of Control Period"), or if the employee's
employment is terminated in connection with or in anticipation of a Change of
Control (in either case, the "Effective Date"). The employee's employment
period under the Agreement begins on the Effective Date and continues for two
years. During the employment period following the Change of Control, the
employee will (i) receive a monthly base salary equal to or greater than the
highest monthly base salary paid to him by the Company during the previous 12
months; (ii) an annual cash bonus at least equal to the highest bonus paid to
him in any of the three fiscal years prior to the Effective Date, and (iii) the
ability to participate in all incentive, savings, welfare benefit, fringe
benefit and retirement plans of the Company. If the employee's employment
terminates during the employment period he will receive certain severance
benefits under the Agreement. If his employment terminates for cause (as
defined in the Agreement) or he voluntarily resigns without good reason (as
10
<PAGE>
defined in the Agreement) other than during the 30-day period beginning on the
first anniversary of the Effective Date, he will receive only his accrued
benefits, if applicable. If he (i) is terminated by the Company without cause,
(ii) resigns voluntarily for good reason, or (iii) resigns for any reason during
the 30-day period beginning on the first anniversary of the Effective Date, he
would receive a lump sum cash payment equal to: (a) his base salary through the
date of termination, (b) a prorata bonus for the year of termination, based upon
the greater of 40 percent of his then-current base salary or the highest of his
actual bonuses earned in the prior three years ("Bonus"), (c) the sum of his
base salary and Bonus, (d) unpaid deferred compensation and vacation pay, and
(e) a contingent payment based upon 1.2 times the difference between the fair
market value of the securities issuable upon exercise of certain of the
employee's unvested stock options at the date of termination that would have
become vested within 18 months after the date of termination and the aggregate
exercise price of such options; provided that this last amount will not be
payable if the vesting of those unvested options is accelerated to a date not
later than the date of termination. In addition, the employee would be entitled
to certain continued employee benefits. In the event that payments to the
employee are subject to excise tax under Section 4999 of the Internal Revenue
Code, the Company will make an additional payment in an amount such that after
the payment of all income and excise taxes, the employee will be in the same
after-tax position as if no excise tax had been imposed.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Overview
The Compensation and Stock Option Committee of the Company's Board of
Directors (the "Compensation and Stock Option Committee") is responsible for
making decisions with respect to the Company's executive compensation policies.
In making decisions regarding executive compensation, the Compensation and Stock
Option Committee has attempted to provide incentives to executive officers that
also enhance the interests of the Company and its shareholders. The
Compensation and Stock Option Committee has not yet adopted a comprehensive
policy responding to Section 162(m) of the Internal Revenue Code, which
disallows the deduction for certain annual compensation in excess of $1,000,000
paid to certain executive officers of the Company, since no executive officers
are expected to have compensation that exceeds the applicable cap in 1998.
Elements of Executive Compensation
The Company's executive officers receive compensation comprised of base
salaries, bonuses, long-term incentive compensation in the form of stock
options, and various miscellaneous benefits.
Base Salary
The Compensation and Stock Option Committee sets the base salary of the
Chief Executive Officer based on (i) the Chief Executive Officer's base salary
in the prior year; (ii) levels of compensation granted by other companies in the
Company's industry and/or the Atlanta area; (iii) increased responsibilities;
and (iv) the past performance (including the achievement in the prior year of
certain performance goals, as described below), specific skills and experience
of the Chief Executive Officer as they relate to the needs of the Company. The
Compensation and Stock Option Committee's review of the foregoing factors was
subjective and the Compensation and Stock Option Committee assigned no fixed
value or weight to any of the factors when making its decisions regarding base
salary. The Compensation and Stock Option Committee and the Chief Executive
Officer set the base salary of every other executive officer of the Company
based upon the same criteria.
Bonuses
In order to serve the interests of the Company's shareholders and its
management, the Compensation and Stock Option Committee makes extensive use of
bonuses based on Company and executive officer performance.
Beginning July 1, 1994, the Compensation and Stock Option Committee
approved executive officers' participation in the Company's Performance
Compensation Program (the "Program"), which is applicable to all U.S. employees
of the Company except certain employees and officers in the sales organization
(including certain executive officers) who are eligible for specific revenue-
based bonuses. The Program ties executive officers' bonuses to specific
performance goals of the Company, and for most executive officers other than the
Chief Executive Officer, also to specific performance expectations for the
individual.
11
<PAGE>
Company performance goals are based on the Company attaining or exceeding
certain specified annual business plan targets, and they are recommended by the
Company's executive officers and approved by the Compensation and Stock Option
Committee. Company performance goals are established for the year, and
performance goal attainment evaluation and bonus payouts are made upon
completion of the year. Individual performance goals are based upon the
individual's achievement of specific objectives and are set by the executive
officer's manager. Individual performance goals are established for each
quarter, and performance goal attainment evaluation and bonus payouts are made
upon completion of each quarter.
For 1997, the Compensation and Stock Option Committee set the participation
rates for each executive officer in the Program based upon its subjective review
of several factors, including the level of such executive officer's
responsibility and the Compensation and Stock Option Committee's perception of
the compensation paid to executive officers of other corporations similar to the
Company in terms of size and industry. At the participation rates set for 1997,
the Chief Executive Officer's and certain other executive officers' total
bonuses, assuming the Company achieved all of its specified performance goals,
would have been 50% of each such executive officer's base salary. At the
participation rates set for 1997, each remaining executive officer's total
bonuses, assuming the individual and the Company achieved all of the specified
performance goals, would have been 40% of his or her base salary. However, if
the Company did not achieve all of its performance goals, or, for executive
officers with individual performance goals, if the individual's performance did
not warrant individual bonus compensation, the executive officer's bonuses could
be significantly lower or even reduced to zero depending upon the extent to
which the Company's performance goals and/or the individual's performance
expectations were not met.
Company performance goals were based on operating revenues and earnings per
share. These goals and participation rates were revised in the second half of
the year as a result of the Company's performance in the first half of the year.
No payout was earned or made based on first half results. Participation rates
based on Company performance were reduced by 60%. For the second half of the
year, the Company achieved 100% of its revenue and earnings per share goals (on
a pro forma basis excluding nonrecurring charges). Based on these results, the
Company paid Mr. Crumpler a $40,000 bonus. For all executive officers
participating in the Program during 1997, Company and individual bonuses totaled
approximately $194,000 and were 19% of total salaries paid to such executive
officers as a group.
Stock Options
During 1997, the Compensation and Stock Option Committee provided long-term
compensation to the Company's executive officers in the form of stock options
granted under the 1996 Long-Term Incentive Plan (the "LTIP"). The Compensation
and Stock Option Committee believes that stock option grants are an effective
way for the Company to align the interests of the Company's executives with the
interests of its shareholders.
In granting stock options to executive officers under the LTIP, the
Compensation and Stock Option Committee considered (i) the recipient's level of
responsibility; (ii) the recipient's specific function within the Company's
overall organization; (iii) the value of the recipient to the Company's future
growth and profitability; and (iv) the amount of options and stock currently
held by the recipient. The Compensation and Stock Option Committee's review of
the foregoing factors was subjective and the Compensation and Stock Option
Committee assigned no fixed value or weight to any of the factors when making
its decisions regarding stock option grants. In 1997, the Compensation and
Stock Option Committee granted options under the LTIP to purchase an aggregate
of 1,018,700 shares of Common Stock at fair market value on the date of grant to
223 key employees, including all nine executive officers.
Benefits
The Company provides medical and other similar benefits to its executive
officers that are also generally available to the Company's employees.
Members of the Compensation and Stock Option Committee
Stephen P. Bradley
Richard C. Marcus
Jeffrey P. Parker
12
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Since April 1996, Messrs. Bradley, Marcus and Parker have served on the
Compensation and Stock Option Committee.
From time to time, certain members of the Company's Board of
Directors, including members of the Compensation and Stock Option Committee,
have provided, and been compensated for, consulting services to the Company. As
consideration for past services rendered to the Company, in July 1992 the Board
of Directors resolved to provide Mr. Marcus a license, at no cost, to use the
RemoteWare product suite for his own purposes to create an information system
with up to 250 node sites. The Company has not yet provided any software or
services to Mr. Marcus in connection with that resolution.
13
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock
("shareholder return"), assuming reinvestment of any dividends, on the Company's
Common Stock against the cumulative total return of the Nasdaq Stock Market
(U.S. Companies) and the Index for Nasdaq Computer and Data Processing Stocks
(the "Nasdaq Computer Index") for the period commencing April 14, 1994 and
ending December 31, 1997.
COMPARISON OF CUMULATIVE TOTAL RETURN
XcelleNet, Inc., Nasdaq Stock Market & Nasdaq Computer Index
[GRAPH APPEARS HERE]
Shareholder Return ($) vs. Return of Nasdaq Stock Market and the Nasdaq Computer
Index
<TABLE>
<S> <C> <C> <C> <C> <C>
4/14/94 12/30/94 12/29/95 12/31/96 12/31/97
- - -------------------------------------------------------------------------
XcelleNet, Inc. 100.0 112.7 108.2 117.3 95.5
Nasdaq Stock Market 100.0 104.3 147.5 181.5 222.7
Nasdaq Computer Index 100.0 124.5 189.6 234.0 287.4
</TABLE>
Assumes $100 invested at the closing price on April 14, 1994 in XcelleNet, Inc.,
the Nasdaq Stock Market (U.S. Companies), and the Nasdaq Computer Index. The
Company's stock is quoted on the Nasdaq Stock Market and included in the Nasdaq
Computer Index, and its individual shareholder return went into calculating the
Nasdaq Stock Market and Nasdaq Computer Index results set forth in this
performance graph.
Total shareholder return calculations for the Company, the Nasdaq
Stock Market (U.S. Companies) and the Index for Nasdaq Computer and Data
Processing Stocks were prepared by the Center for Research and Security Prices,
The University of Chicago.
14
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Directors, executive officers and
greater than ten percent shareholders are required by Securities and Exchange
Commission regulation to furnish the Company with copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the year ended December 31, 1997, all
Section 16(a) filing requirements applicable to directors, executive officers
and greater than ten percent beneficial owners were complied with by such
persons.
Certain Relationships and Related Transactions
Mr. Crumpler is the Chairman of the Board and Chief Executive Officer
of the Company. Prior to January 2, 1997, Electronic Commerce, Inc. ("E-Comm"),
a Solution Partner that remarkets the Company's software to end-user customers,
was partially owned by Mr. Crumpler's brother. On January 2, 1997 the Company
acquired all the outstanding shares of E-Comm for a total consideration
comprising cash and stock of approximately $2,675,000.
The Company is a party to change in control employment agreements with
certain of its executive officers and separation agreements with certain of its
former executive officers. See "Employment Arrangements" above.
15
<PAGE>
PROPOSAL TWO -
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Arthur Andersen LLP as auditors
for the Company for the current year ending December 31, 1998, subject to
ratification by the shareholders. Arthur Andersen LLP served as independent
auditors for the Company for the year ended December 31, 1997, and
representatives of that firm of independent accountants are expected to be
present at the 1998 Annual Meeting of Shareholders. Representatives of Arthur
Andersen LLP will have an opportunity to make a statement at the 1998 Annual
Meeting of Shareholders if they desire to do so and to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS AUDITORS FOR THE YEAR ENDING DECEMBER 31,
1998. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company.
Officers, directors and regular employees of the Company, at no additional
compensation, will assist in the solicitation. Solicitation will be by mail,
telephone or personal contact.
OTHER MATTERS
Management does not know of any matters to be brought before the
meeting other than those referred to above. If any matters that are not
specifically set forth in the form of proxy and this proxy statement properly
come before the meeting, the persons designated as proxies will vote thereon in
accordance with their best judgment.
Whether or not you expect to be present at the meeting in person,
please vote, sign, date and return the enclosed proxy promptly in the enclosed
business reply envelope. No postage is necessary if mailed in the United
States.
Shareholder Proposals
Proposals of shareholders of the Company intended to be presented for
consideration at the 1999 Annual Meeting of Shareholders of the Company must be
received by the Company at its principal executive offices on or before December
7, 1998, in order to be included in the Company's proxy statement and form of
proxy relating to the 1999 Annual Meeting of Shareholders.
16
<PAGE>
XCELLENET, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF XCELLENET, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 28, 1998
The undersigned hereby appoints DENNIS M. CRUMPLER AND SHEREEF W. NAWAR, or
either of them, with the individual power of substitution, proxies to vote all
shares of Common Stock of XcelleNet, Inc. that the undersigned may be entitled
to vote at the Annual Meeting of Shareholders to be held in Atlanta, Georgia on
April 28, 1998, and at any reconvened meeting following any adjournment
thereof. Said proxies will vote on the proposals set forth in the Notice of
Annual Meeting and Proxy Statement as specified on this card, and are
authorized to vote in their discretion as to any other matters that may
properly come before the meeting.
1. Election of the following nine nominees as directors of XcelleNet, Inc.:
<TABLE>
<S> <C> <C> <C> <C>
FOR (except as indicated WITHHOLD Stephen P. Bradley Richard C. Marcus Richard L. Nolan
to the contrary to right) AUTHORITY Dennis M. Crumpler Geoffrey A. Moore Jeffrey P. Parker
[ ] [ ] Donald L. House Shereef W. Nawar Corey M. Smith
</TABLE>
To withhold authority for any individual nominee(s), write the nominee(s)
name(s) on the following line.
---------------------------------------------------------------------------
IF A VOTE IS NOT SPECIFIED, THE PROXIES WILL VOTE "FOR" PROPOSAL 1.
(Continued and to be signed on the reverse side.)
<PAGE>
2. Ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 1998. IF A VOTE IS NOT
SPECIFIED, THE PROXIES WILL VOTE "FOR" PROPOSAL 2.
FOR AGAINST ABSTAIN
[_] [_] [_]
IMPORTANT: Please sign this Proxy
exactly as your name or names ap-
pear to the left. When shares are
held by joint tenants, both
should sign. When signing as at-
torney, executor, administrator,
trustee or guardian, please give
full title as such. If a corpora-
tion, please sign in full corpo-
rate name by President or other
authorized officer. If a partner-
ship, please sign in partnership
name by authorized person.
SHARES:___________________________
Signature(s) _____________________
Signature(s) _____________________
Date: ____________________________
PLEASE VOTE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
