1
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
(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 under Rule 14a-12
QUEST 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 Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
2
[QUEST SOFTWARE LOGO]
May 3, 2001
To our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Quest Software, Inc. The Annual Meeting will be held on Wednesday, May 30, 2001,
at 10:00 a.m. Pacific time at our principal executive offices located at 8001
Irvine Center Drive, Irvine, California 92618.
The actions to be taken at the Annual Meeting are described in detail in
the enclosed Proxy Statement and Notice of Annual Meeting. Included with these
proxy materials is a copy of our Annual Report on Form 10-K for 2000. We
encourage you to read all of these materials.
Please use this opportunity to take part in the affairs of your Company by
voting on the business to come before the meeting. Whether or not you plan to
attend the meeting, please complete, sign, date and return the accompanying
proxy in the enclosed postage-prepaid envelope. You can also vote by telephone
or via the Internet. See "Internet and Telephone Voting" in the Proxy Statement
for more details and follow the instructions on your proxy card.
We look forward to seeing you at our Annual Meeting.
Sincerely,
Vincent C. Smith,
Chairman of the Board
and Chief Executive Officer
3
[QUEST SOFTWARE LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 2001
The Annual Meeting of Shareholders of Quest Software, Inc. will be held on
Wednesday, May 30, 2001 at 10:00 a.m., Pacific time, at the Company's principal
executive offices located at 8001 Irvine Center Drive, Irvine, California 92618,
for the following purposes:
1. To elect five directors;
2. To approve an amendment to our Bylaws to increase the minimum number of
directors to four from three, so that the authorized number of directors
will be a range of four to seven;
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of Quest for the year ending December 31, 2001; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record as of the close
of business on April 4, 2001 are entitled to notice of and to vote at the Annual
Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the envelope provided for that purpose, or to vote electronically
via the Internet or by telephone. Any shareholder attending the Annual Meeting
may vote in person even if he or she has previously returned a proxy card.
By order of the Board of Directors,
David M. Doyle,
President and Secretary
Irvine, California
May 3, 2001
4
[QUEST SOFTWARE LOGO]
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 30, 2001
The enclosed Proxy is solicited on behalf of the Board of Directors of
Quest Software, Inc., a California corporation ("Quest" or the "Company"), for
use at the Company's annual meeting of shareholders (the "Annual Meeting") to be
held on Wednesday, May 30, 2001 at 10:00 a.m., Pacific time, and at any
adjournment thereof. The purposes of the Annual Meeting are set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the Company's principal
executive offices, located at 8001 Irvine Center Drive, Irvine, California
92618, and the telephone number at that location is (949) 754-8000.
These proxy solicitation materials were first mailed on or about May 3,
2001 to all Quest shareholders entitled to vote at the Annual Meeting.
PROCEDURAL MATTERS
Shareholders of record as of the close of business on April 4, 2001 ("the
Record Date"), are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 87,265,706 shares of Common Stock issued and
outstanding. Each shareholder is entitled to one vote for each share of Common
Stock held on the Record Date on each of the matters presented at the Annual
Meeting. Shareholders do not have the right to cumulate their votes in the
election of directors.
All shares entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting, and not revoked, will be voted at the
Annual Meeting in accordance with the instructions indicated on those proxies.
If no instructions are indicated on a properly executed proxy, the shares
represented by that proxy will be voted as recommended by the Board of
Directors. If any other matters are properly presented for consideration at the
Annual Meeting, the persons named in the enclosed proxy will have discretion to
vote on those matters in accordance with their best judgment. Quest does not
currently anticipate that any other matters will be raised at the Annual
Meeting.
A shareholder may revoke any proxy given pursuant to this solicitation at
any time before it is voted by attending the Annual Meeting and voting in
person, or by delivering to Quest's Corporate Secretary, at the principal
executive offices of Quest referred to above, a written notice of revocation or
a duly executed proxy bearing a date later than that of the previously submitted
proxy.
Quest will bear the cost of this solicitation. Quest has retained the
services of MacKenzie Partners, Inc. to assist in obtaining proxies from brokers
and nominees of shareholders for the Annual Meeting. The estimated cost of such
services is $5,000 plus out-of-pocket expenses. In addition, Quest will
reimburse brokerage firms and other persons representing beneficial owners of
shares for their reasonable expenses in forwarding solicitation material to such
beneficial owners. Certain of Quest's directors, officers and regular employees
may solicit proxies personally or by telephone, facsimile or telegram, without
additional compensation.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The presence at the Annual Meeting, either in person or by proxy, of the
holders of a majority of the outstanding shares of Common stock entitled to vote
at the Annual Meeting shall constitute a quorum for the transaction of business.
Quest intends to include abstentions and broker non-votes as present or
represented
5
for purposes of establishing a quorum, but to exclude abstentions and broker
non-votes from the calculation of the shares represented and voting with respect
to any proposal. Accordingly, abstentions and broker non-votes will not have an
effect on the election of directors or the proposal to ratify the selection of
our independent auditors, and will have the effect of a "NO" vote on our
proposal to approve an amendment to our bylaws.
INTERNET AND TELEPHONE VOTING
Shareholders whose shares are registered in the name of a bank or brokerage
firm may be eligible to vote electronically through the Internet or by
telephone. A large number of banks and brokerage firms are participating in the
ADP Investor Communication Services online program. This program provides
eligible shareholders the opportunity to vote via the Internet or by telephone.
Voting forms will provide instructions for shareholders whose bank or brokerage
firm is participating in ADP's program.
Registered shareholders may vote electronically through the Internet by
following the instructions included with their proxy card. Shareholders not
wishing to vote electronically through the Internet or whose form does not
reference Internet or telephone voting information should complete and return
the enclosed paper proxy card. Signing and returning the proxy card or
submitting the proxy via the Internet or by telephone does not affect the right
to vote in person at the Annual Meeting.
The deadline for voting through the Internet or by telephone is 12:00
midnight Eastern time on May 29, 2001.
DIRECTORS
Listed below are the five directors nominated for election at the Annual
Meeting. All of the directors elected at the Annual Meeting will serve a
one-year term expiring at the next annual meeting of shareholders.
NAME AGE POSITION WITH QUEST
---- --- -------------------
Vincent C. Smith....................... 37 Chairman of the Board and Chief Executive Officer
David M. Doyle......................... 40 President, Secretary and Director
Doran G. Machin(1)(2).................. 46 Director
Jerry Murdock, Jr.(1)(2)............... 42 Director
Raymond J. Lane(2)..................... 56 Director
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Vincent C. Smith has served as our Chief Executive Officer since 1997 and a
director since 1995. Mr. Smith became Chairman of the Board in 1998. In 1994,
Mr. Smith was Director of Open Systems at BMC Software, where he managed its
sales operations. From 1992 to 1994, Mr. Smith co-founded Patrol Software North
America and served as its Vice President of Worldwide Sales and Marketing.
Patrol Software merged with BMC in 1994. Mr. Smith worked at Oracle Corporation
from 1987 to 1992 in a variety of sales management positions. Mr. Smith is a
director of Emergent Information Technologies, Inc.
David M. Doyle is our President, Secretary, founder and a director. Mr.
Doyle has been President and a director since the formation of Quest in 1987 and
has been our Secretary since June 1999. Mr. Doyle was the primary designer and
developer of our products during the initial four years after the founding of
Quest. Prior to the founding of Quest, Mr. Doyle served as a consultant to a
variety of industries, specializing in the areas of system design and
application performance and co-founded American Data Industries.
Doran G. Machin has served as a director since 1987. Mr. Machin was also
our Secretary and Executive Vice President from 1987 through April 1999. Prior
to 1987, Mr. Machin was employed as an independent computer consultant and
worked for Hewlett-Packard and American Data Industries.
Jerry Murdock, Jr. has served as a member of our board since April 1999.
Since 1995, Mr. Murdock has been employed by InSight Capital Partners, an
investment firm, which he co-founded in that year. From 1987 to 1995, Mr.
Murdock was President of Aspen Technology Group, a consulting firm that he
founded in 1987.
2
6
Mr. Murdock is a member of the boards of directors of Click Commerce, Inc. and
several private technology companies.
Raymond J. Lane is a General Partner of Kleiner Perkins Caufield & Byers, a
venture capital firm. Prior to joining Kleiner Perkins, Mr. Lane was President
and Chief Operating Officers and a Director of Oracle, where he served in
various executive management positions since 1992. Before joining Oracle in
1992, Mr. Lane was a senior partner with Booz-Allen & Hamilton, where he led the
information Systems Group. He also served on Booz-Allen's Board of Directors and
Executive Management Committee. Currently, Mr. Lane is a member of the Board of
Trustees of Carnegie-Mellon University and serves on the Boards of Directors of
Special Olympics International, Marimba, Inc., Sheer Networks, SeeBeyond,
FreeMarkets, Asera, and C-bridge Internet Solutions, Inc.
BOARD OF DIRECTORS AND COMMITTEES
During 2000, the Board met twice and acted by unanimous written consent
nine times during 2000. No director attended fewer than 75% of the aggregate
number of all meetings of the Board and the committees, if any, upon which such
director served and which were held during the period of time that such person
served on the Board or such committee.
Our Audit Committee, presently composed of Messrs. Lane, Machin, Murdock
and Doyle assists the Board of Directors in monitoring the quality and integrity
of Quest's financial statements and financial reporting practices and Quest's
independent auditors. Our audit committee held three meetings in 2000.
Mr. Machin is not an "independent" director, by reason of Mr. Machin's
prior employment with Quest and the nature of the agreements under which he
continues to receive compensation from Quest. Consistent with the new Nasdaq
audit committee structure and membership requirements, the Board has determined
that it is in the best interest of the Company and its shareholders that Mr.
Machin continue to serve as a member of the Audit Committee until a third
independent director is elected. The Board is actively considering candidates
for election to the Board who would qualify to serve on the Audit Committee.
Both Mr. Murdock and Mr. Lane are independent directors.
The Board has adopted a charter for the Audit Committee, a copy of which is
attached to this Proxy Statement as Appendix A.
We have established a Compensation Committee, which reviews and approves
the compensation and benefits for our executive officers, administers our stock
plans and performs other duties as may from time to time be determined by the
Board. The compensation committee is currently comprised of Messrs. Murdock and
Machin. Our compensation committee held no formal meetings in 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between any of our executive officers
or any member of our compensation committee and any member of any other
company's board of directors or compensation committee. For additional
information concerning transactions involving other members of the Board, see
"Related Party Transactions."
DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS
Directors receive no cash remuneration for serving on the board of
directors or any committee thereof. Non-employee directors are reimbursed for
reasonable expenses incurred by them in attending board and committee meetings.
Non-employee board members are also eligible for option grants pursuant to the
provisions of the automatic option grant program under our 1999 Stock Incentive
Plan. On the date of the Annual Meeting, each of Messrs. Lane, Murdock and
Machin will receive an automatic grant of options to purchase 15,000 shares of
Quest Common stock pursuant to this plan at an exercise price equal to the fair
market value of such shares as of the same date.
3
7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person the Company believes beneficially holds more than 5% of the
outstanding shares of Common Stock; (ii) each director; (iii) each Named
Executive Officer and (iv) all directors and executive officers as a group.
Unless otherwise indicated, all persons named as beneficial owners of Common
Stock have sole voting power and sole investment power with respect to the
shares indicated as beneficially owned, and beneficial ownership includes shares
issuable upon exercise of stock options that are exercisable or will become
exercisable within 60 days after the Record Date. Unless otherwise indicated,
the principal address of each of the shareholders below is c/o Quest Software,
Inc., 8001 Irvine Center Drive, Irvine, California 92618.
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY SHARES
NAME OF BENEFICIAL OWNER OWNED OUTSTANDING
------------------------ ------------ -----------
Vincent C. Smith(1)......................................... 34,802,288 39.9%
David M. Doyle(2)........................................... 13,195,054 15.1%
Eyal M. Aronoff(3).......................................... 4,939,876 5.7%
Pilgrim Baxter & Associates, Ltd.(4)........................ 4,704,200 5.4%
825 Duportail Road
Wayne, PA 19087
Douglas F. Garn(5).......................................... 486,680 *
Jerry Murdock, Jr.(6)....................................... 510,124 *
Raymond J. Lane(7).......................................... 402,113 *
Doran G. Machin(8).......................................... 15,000 *
All executive officers and directors as a group (8
persons).................................................. 54,694,385 62.3%
- ---------------
* Less than 1%.
(1) Includes an aggregate of 152,400 shares held in the names of Mr. Smith's
minor children and 1,040 shares held by Mr. Smith as custodian for his minor
children. Also includes 47,060 shares held by the Vincent C. Smith
Charitable Remainder Trust, of which Mr. Smith is the trustee.
(2) Includes 134,740 shares held by the Doyle Charitable Remainder Trust, of
which Mr. Doyle is the trustee, and 327,552 shares owned by DMD Partnership.
(3) Includes an aggregate of 42,894 shares held in the names of Mr. Aronoff's
minor children and 1,040 shares held by Mr. Aronoff as custodian for his
minor children. Also includes 20,280 shares issuable upon exercise of stock
options and 375,000 shares held by the EYA Limited Partnership, of which Mr.
Aronoff and his wife are general partners and of which limited partners
include charitable remainder trusts of which Mr. and Mrs. Aronoff are
beneficiaries. Mr. Aronoff disclaims beneficial ownership of the shares held
by this entity except to the extent of his pecuniary interest therein.
(4) According to a Schedule 13G dated February 14, 2001, filed with the SEC by
Pilgrim Baxter & Associates, Inc.
(5) Includes 471,680 shares issuable upon exercise of stock options.
(6) Includes 310,274 shares owned by Insight Venture Associates II, LLC, of
which Mr. Murdock is a managing member. Mr. Murdock disclaims beneficial
ownership of such securities, except to the extent of his pecuniary interest
therein, which may not be readily determinable. Also includes 15,000 shares
issuable upon exercise of stock options.
(7) Includes 65,000 shares issuable upon exercise of stock options.
(8) Includes 15,000 shares issuable upon exercise of stock options.
4
8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission. Executive officers, directors and greater
than ten percent shareholders also are required by rules promulgated by the SEC
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company, the absence of a Form 3, Form 4 or Form 5 or written representations
that no Forms 4 or 5 were required, the Company believes that, during 2000, its
officers, directors and greater than ten percent beneficial owners complied with
all applicable Section 16(a) filing requirements, except that Mr. Murdock filed
a late report for four transactions, Mr. Doyle filed a late report for five
transactions, Mr. Garn filed a late report for six transactions and Mr. Aronoff
filed a late report for one transaction.
REPORTS OF COMPENSATION AND AUDIT COMMITTEES AND PERFORMANCE GRAPH
The following reports of the Compensation Committee and Audit Committee,
and the information below relating to the performance of our Common Stock, are
not be deemed to be "soliciting material" or to be "filed" with the SEC, except
to the extent we specifically request that it be treated as soliciting material
or specifically incorporate it by reference into a document filed with the SEC.
REPORT OF THE COMPENSATION COMMITTEE
The role of the Compensation Committee of the Board is to review and
recommend or approve the base salaries, bonuses, stock options and other
compensation of the executive officers of Quest. The Committee also administers
the Company's 1999 Stock Incentive Plan (the "1999 Plan").
Quest's executive compensation program utilizes Company performance,
individual performance and an increase in shareholder value over time as
determinants of executive pay levels. These principles are intended to motivate
executive officers to improve the financial position of Quest, to hold
executives accountable for the performance of the organizations for which they
are responsible, to attract key executives into the service of Quest and to
create value for our shareholders. The compensation for executive officers is
based on two elements: cash compensation and equity-based compensation.
Cash Compensation
Quest reviews its executive compensation programs to ensure that the total
cash compensation provided to executive officers and senior management remains
at a competitive level to enable Quest to attract and retain management
personnel with the talents and skills required to meet the challenges of a
highly competitive industry. The compensation of executive officers is expected
to be reviewed annually by the Compensation Committee.
Equity-Based Compensation
Stock option grants are designed to align the interests of an executive
officer with those of our shareholders and provide each individual with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. Each grant allows the officer to acquire
shares of our Common Stock at a fixed price per share over a specified period of
time up to ten years, unless sooner terminated in accordance with the provisions
of the 1999 Plan. Each option generally becomes exercisable in a series of
installments over a four-year or five-year period, contingent upon the officer's
continued employment with Quest. Accordingly, the option will provide a return
to the executive officer only if he or she remains employed by Quest during the
vesting period, and then only if the market price of the shares appreciates over
the option term. The size of the option grant to each executive officer is set
at a level that is intended to create a meaningful opportunity for stock
ownership based upon the individual's current position with Quest, the
individual's personal performance in recent periods and his or her potential for
future responsibility and
5
9
promotion over the option term. Other factors include the number of unvested
options held by the executive officer in order to maintain an appropriate level
of equity incentive for that individual. The relevant weight given to each of
these factors varies from individual to individual.
Compensation of the Chief Executive Officer
The base salary of Vincent C. Smith, our Chairman of the Board and Chief
Executive Officer, has been set at a level that the Compensation Committee
believes is below the median of base salary levels of chief executive officers
of those companies with which Quest competes for executive talent, due to Mr.
Smith's substantial equity ownership interest in the Company.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code disallows a Federal income tax
deduction to publicly held companies for compensation paid to certain of their
executive officers, to the extent that compensation exceeds $1.0 million per
covered officer in any fiscal year. This limitation applies only to compensation
that is not considered to be performance-based. None of our executive officers
received non-performance-based compensation in 2000 in an amount exceeding the
limit, and the Compensation Committee does not anticipate that
non-performance-based compensation to be paid to our executive officers in 2001
will exceed that limit. Our 1999 Plan has been structured so that any
compensation deemed paid in connection with the exercise of option grants made
under that plan with an exercise price equal to the fair market value of the
option shares on the grant date will qualify as performance-based compensation
that will not be subject to the limitation. The Compensation Committee has
decided at this time not to take any action to limit or restructure the elements
of cash compensation payable to the Company's executive officers.
Submitted by the Compensation Committee of the Board of Directors:
Doran G. Machin
Jerry Murdock, Jr.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the audited financial
statements for the year ended December 31, 2000 with the Company's management
and with Deloitte & Touche LLP, the Company's independent auditors. The Audit
Committee has also discussed with Deloitte & Touche the matters required to be
discussed by Statement on Auditing Standards No. 61, "Communicating with Audit
Committee".
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the financial statements referred to
above be included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000.
Submitted by the Audit Committee of the Board of Directors:
Doran G. Machin
Jerry Murdock, Jr.
Raymond J. Lane
6
10
COMPANY STOCK PERFORMANCE
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, for the Company, the Nasdaq
Stock Market (U.S.) Index (the "Nasdaq Index") and the S&P Computers-Software &
Services Index (the "Industry Index"). The graph assumes $100 was invested in
each of the Common Stock, the Nasdaq Index and the Industry Index on August 13,
1999 (the date on which we completed our initial public offering). Note that
historic stock price performance is not necessarily indicative of future stock
price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG QUEST SOFTWARE, INC.
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P COMPUTERS -- SOFTWARE & SERVICES INDEX
[PERFORMANCE GRAPH]
- ----------------------------------------------------------------------------------------
8/31/1999 12/31/1999 12/31/2000
- ----------------------------------------------------------------------------------------
QUEST SOFTWARE, INC. 100.00 782.57 400.90
- ----------------------------------------------------------------------------------------
NASDAQ STOCK MARKET (U.S.) 100.00 154.27 92.84
- ----------------------------------------------------------------------------------------
S&P COMPUTERS - SOFTWARE & SERVICES 100.00 153.41 72.48
- ----------------------------------------------------------------------------------------
* $100 INVESTED ON 8/13/99 IN STOCK OR ON 7/31/99
IN INDEX-INCLUDING REINVESTMENT OF DIVIDENDS
FISCAL YEAR ENDING DECEMBER 31.
7
11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the years ended December 31, 1998, 1999
and 2000 all compensation received for services rendered to Quest in all
capacities by our chief executive officer and each of the other four most highly
compensated executive officers whose salary and bonus exceeded $100,000 in 2000.
These officers are referred to in this Proxy Statement as the "Named Executive
Officers."
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
--------------------------- ---- --------- -------- ------------ ------------------
Vincent C. Smith................ 2000 $275,000 -- -- $23,306
Chief Executive Officer 1999 246,875 -- -- --
1998 191,666 $175,000 -- --
David M. Doyle.................. 2000 275,000 -- -- 25,758
President 1999 246,875 -- -- 25,758
1998 200,000 175,000 -- --
Douglas F. Garn................. 2000 194,500 125,000 80,000 13,776
Vice President, 1999 194,500 125,000 -- --
Worldwide Sales 1998 184,510 125,000 1,152,000 --
Eyal M. Aronoff................. 2000 230,000 -- -- 16,378
Chief Technical Officer, 1999 212,946 -- -- --
DB Tools 1998 195,445 -- 78,000 --
John J. Laskey(2)............... 2000 155,000 -- -- --
Chief Financial Officer 1999 155,000 15,000 45,000 --
1998 -- -- 360,000 --
- ---------------
(1) All Other Compensation includes matching contributions of $2,500 under our
401(k) Plan and automobile expenses paid by us.
(2) Mr. Laskey resigned as of February 2, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers in 2000, including the
potential realizable value over the ten-year term of the options, based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
assumed rates of appreciation comply with the rules of the SEC and do not
represent our estimate of future stock price. Actual gains, if any, on stock
option exercises will be dependent on the future performance of our Common
Stock. No stock appreciation rights were granted during 2000.
OPTIONS GRANTS IN 2000
--------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(#) 2000(%) ($/SHARE) DATE 5% 10%
---- ---------- ------------- --------- ---------- ------------ ------------
Douglas F. Garn............... 80,000(1) 2.0% $26.50 4/14/10 $1,333,600 $3,378,734
- ---------------
(1) The options were granted at an exercise price equal to the fair market value
of Quest Common Stock on the grant date. These options vest as follows:
options to purchase 16,000 shares become exercisable on each of April 1,
2002, 2003 and 2004, and options to purchase the remaining 32,000 shares
become exercisable on April 1, 2005.
8
12
The potential realizable value is calculated based on the ten-year term of
the option at its time of grant. It is calculated based on the assumption that
the market value of our common stock appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock price.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall stock market conditions.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth, for the year ending December 31, 2000,
certain information regarding options exercised by, and held at year-end by, the
Named Executive Officers.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE DECEMBER 31, 2000(#) DECEMBER 31, 2000($)(2)
UPON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
Douglas F. Garn....... 325,000 $17,984,591 321,920 585,080 $8,843,947 $13,875,810
Eyal M. Aronoff....... 31,980 1,167,501 10,140 35,880 278,571 985,713
John J. Laskey........ 165,600 9,079,974 45,000 194,400 -- 5,340,654
- ---------------
(1) Calculated on the basis of the fair market value of our Common Stock on the
exercise date, less the applicable exercise price per share, multiplied by
the number of shares exercised.
(2) Calculated on the basis of the fair market value of our Common Stock on
December 29, 2000 ($28.06 per share), less the applicable exercise price per
share, multiplied by the number of shares underlying the options.
RELATED PARTY TRANSACTIONS
In March 1996, we acquired R*Tech Systems, Inc., the sole shareholder of
which was Mr. Aronoff, our current Vice President, Engineering and Technology,
through a merger of R*Tech with and into Quest. In the merger Quest issued
3,900,000 shares of Common Stock to Mr. Aronoff. Mr. Aronoff also entered into
an employment agreement with us for a term of 24 months, under which he received
an annual salary of $85,000, the right to receive commissions on the sale of
certain products, the right to receive bonus payments of up to $400,000 upon the
achievement of specified performance milestones, and an option to purchase up to
2.5% of our outstanding capital stock. In April 1998, Mr. Aronoff purchased
1,950,000 shares of Common Stock under the option for a total purchase price of
$750,000, for which Mr. Aronoff executed a promissory note. The note has a term
of four years, bears interest at the rate of 5.7% per annum, and up to 25% of
the original principal amount of the note may be prepaid in each year of the
four-year term. The entire amount due under the note may be prepaid upon a sale
or merger of Quest or at any time Mr. Smith no longer serves as our chief
executive officer. No payments were received on the note in 2000. Interest in
the amount of $35,065 was accrued on this note in 2000.
In October 1997, we sold to Mr. Smith, our Chairman of the Board and Chief
Executive Officer, 7,800,000 shares of Common Stock for aggregate consideration
of $2.2 million. Mr. Smith executed a promissory note for the purchase price,
the entire original principal amount of which remains outstanding as of the date
of this Proxy Statement. The note is secured in part by the 7,800,000 shares of
Common Stock. This note will become due and payable on April 1, 2002 and bears
an annual interest rate of 6.2%. The entire principal amount of this note
remains outstanding, and interest in the amount of $160,164 accrued on this note
in 2000.
On August 1, 2000, we issued an aggregate of 339,000 shares of Common Stock
to Marshall Senk, our Vice President, Marketing, for an aggregate purchase price
of $15.8 million, which was paid by Mr. Senk's delivery of a five-year full
recourse promissory note bearing interest at 6.33% per annum. The note becomes
due and payable on August 1, 2007. The entire principal amount of this note is
still outstanding, and interest in the amount of $416,008 accrued on this note
in 2000.
9
13
We have entered into an indemnification agreement with certain of our
executive officers and our directors containing provisions that may require us,
among other things, to indemnify our officers and our directors against certain
liabilities that may arise by reason of their status or service as officers or
directors, other than liabilities arising from willful misconduct of a culpable
nature, and to advance expenses incurred as a result of any proceeding against
them as to which they could be indemnified.
We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been otherwise obtained from
unaffiliated third parties.
OVERVIEW OF PROPOSALS
This Proxy Statement contains three proposals requiring shareholder action.
Proposal No. 1 relates to the election of five directors to our Board of
Directors. Proposal No. 2 requests approval an amendment to our bylaws to
increase the minimum number of authorized directors to four from three. Proposal
No. 3 requests ratification of the selection of our independent auditors. Each
of the proposals is discussed in more detail in the pages that follow.
Quest has been advised by Messrs. Smith and Doyle, who collectively, own
more than 50% of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting, that they intend to vote for management's nominees to the Board,
for the proposed amendment to Quest's Bylaws and for the ratification of the
Board's selection of Deloitte & Touche as Quest's independent auditors.
Accordingly, the re-election of management's nominees and approval of Proposal
Nos. 2 and 3 are assured.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board is currently comprised of five members, Messrs. Smith, Doyle,
Murdock, Machin and Lane. Upon the approval of the amendment to Quest's Bylaws
at the Annual Meeting (see Proposal 2 below), the size of the Board will be
increased to six. As a result of the amendment, there will be one vacancy
created on the Board, which the Board intends to fill on or before June 14, 2001
to satisfy Nasdaq and SEC requirements for the composition of the Board's Audit
Committee.
The Board has nominated the current five directors to be re-elected to
serve for a one-year term and until their successors are duly elected and
qualified. Holders of proxies solicited by this Proxy Statement will vote the
proxies received by them as directed on the proxy card or, if no direction is
made, for the election of the Board's five nominees below. Proxies cannot be
voted for more than the five named nominees.
If any nominee is unable or declines to serve as a director at the time of
the Annual Meeting, the proxy holders will vote for a nominee designated by the
present Board to fill the vacancy. It is not presently expected that any nominee
will be unable or will decline to serve as a director.
VOTE REQUIRED
The five nominees for director receiving the highest number of affirmative
votes of the shares entitle to vote for them shall be elected as directors.
Votes withheld from any director are counted for purposes of determining the
presence or absence of the Quorum, but have no other legal effect under
California law.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RE-ELECTION
OF MESSRS. SMITH, DOYLE, MURDOCK, MACHIN AND LANE.
10
14
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO BYLAWS
GENERAL
The Company's Bylaws currently provide that the authorized number of
directors shall be a minimum of three (3) and a maximum of seven (7), with the
exact number of directors to be fixed from time to time within such range by the
Board of Directors or the shareholders. The Board of Directors has adopted,
subject to shareholder approval, an amendment to the Bylaws that would increase
the minimum authorized number of directors to four (4). The Board has also
determined that the exact number of directors will be increased to six from
five, once this Bylaw amendment is approved and until changed within the range
by the Board or the shareholders.
The purpose of the amendment is to correct this Bylaw provision in order to
comply with applicable provisions of California law, which permit Bylaw
provisions authorizing a variable number of directors but require that the
maximum number of directors is not more than two times the stated minimum less
one. Upon the effectiveness of the amendment, the Board will have the ability to
add additional directors up to a maximum of seven without shareholder approval.
The Board of Directors believes that this proposed Bylaw amendment will
enable the Board to take timely advantage of the availability of well-qualified
candidates for appointment to the Board, in particular, candidates from outside
the Company whose skills and experience will benefit the Company.
AMENDMENT TO BYLAWS
Once the amendment is approved at the Annual Meeting, Section 3.2 of the
Quest Bylaws would be amended to read as follows:
"3.2. Number of Directors. The authorized number of directors of the
corporation shall be not less than four (4) nor more than seven (7) and the
exact number of directors shall be set by a resolution duly adopted by the
Board of Directors or by the shareholders. The minimum and maximum number
of directors may be changed, or a definite number may be fixed without
provision for an indefinite number, by a duly adopted amendment to the
Articles of Incorporation or by an amendment to this Bylaw duly adopted by
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed
number or minimum number of directors to a number less than five (5) cannot
be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the case of an action by written consent, are
equal to more than sixteen and two-thirds percent (16 2/3%) of the
outstanding shares entitled to vote thereon. No reduction of the authorized
number of directors shall have the effect of removing any director before
that director's term of office expires."
VOTE REQUIRED
The affirmative vote of a the holders of majority of the outstanding voting
shares of Common Stock entitled to vote at the Annual Meeting is required to
approve the amendment to the Bylaws.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO QUEST'S BYLAWS.
11
15
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Deloitte & Touche LLP, independent auditors, to
audit the financial statements of Quest for the year ending December 31, 2001.
Deloitte & Touche served as Quest's independent auditors for the year ended
December 31, 2000. Shareholders are being asked to ratify the appointment of
Deloitte & Touche as the Company's independent auditors at the Annual Meeting. A
representative of Deloitte & Touche is expected to be present at the Annual
Meeting and to be available to respond to appropriate questions, and will have
the opportunity to make a statement.
FEES PAID TO THE INDEPENDENT AUDITORS
Audit Fees
Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and
their respective affiliates (collectively, "Deloitte") billed Quest aggregate
fees of $216,924 for professional services rendered for the audit of the
Company's annual financial statements for 2000 and for reviews of the Company's
quarterly financial statements.
Financial Information Systems Design and Implementation
Deloitte did not bill Quest for financial information systems design and
implementation fees for 2000.
All Other Fees
Deloitte billed Quest aggregate fees of $536,441 for other professional
services rendered in 2000, including professional services in connection with
our secondary public offering, tax preparation, tax consultation, statutory
filings and other consulting services.
The Audit Committee of the Board of Directors has considered whether the
provision by Deloitte of the non-audit services listed above is compatible with
maintaining Deloitte's independence.
VOTE REQUIRED
The affirmative vote of a majority of the shares represented and voting and
a majority of the quorum will be required to approve this proposal.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE SELECTION OF DELOITTE & TOUCHE AS THE COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS
Quest knows of no other matters to be submitted to the shareholders at the
Annual Meeting. If any other matters properly come before the shareholders at
the Annual Meeting, it is the intention of the persons named on the enclosed
proxy card to vote the shares they represent as Quest may recommend. The
accompanying proxy confers discretionary authority to vote on any such other
matters as may properly come before the Annual Meeting.
12
16
SHAREHOLDER PROPOSALS
Shareholders who intend to present proposals at the next annual meeting of
shareholders must send such proposals to Quest for receipt no later than January
2, 2002 in order for such proposals to be considered for inclusion in the proxy
statement and form of proxy relating to such meeting.
In addition, the proxies solicited by the Board for the 2002 annual meeting
of shareholders will confer discretionary authority to vote on any shareholder
proposal presented at that meeting, unless the Company is provided with notice
of such proposal no later than March 15, 2002.
May 3, 2001
Irvine, California
13
17
APPENDIX A
QUEST SOFTWARE, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Adopted by the Board of Directors on June 12, 2000
I. PURPOSE
The primary purpose of the Audit Committee of the Board of Directors of
Quest Software, Inc. ("Quest") is to assist the Board of Directors of Quest (the
"Board") in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing, internal control and financial reporting
practices of Quest. The Committee and the Board shall have the ultimate
authority and responsibility to select, evaluate and, where appropriate, replace
the independent auditors (or to nominate the independent auditors to be proposed
for shareholder approval in any proxy statement).
II. RESPONSIBILITIES
The Audit Committee shall be responsible for and perform the following
functions:
1. Independent Accountants. Recommend to the Board the independent
auditors to be retained by Quest to audit its financial statements, which
independent auditors shall be ultimately accountable to the Board and the
Committee as representatives of shareholders.
2. Plan of Audit. Consult with the independent auditors regarding the
plan of audit. The Committee also shall review with the independent
auditors their report on the audit and review with management changes or
improvements in Quest's accounting practices or controls that are suggested
by the independent auditors.
3. Internal Accounting Controls. Review and consult with management
and the independent auditors regarding the quality and adequacy of, and
compliance with, Quest's internal accounting controls, systems intended to
ensure the reliability of financial reporting and compliance with
applicable codes of conduct, laws and regulations. The review shall include
any significant problems and regulatory concerns. The Committee also shall
review internal audit plans in significant compliance areas.
4. Financial Disclosure Documents. Review with management and the
independent auditors Quest's financial disclosure documents, including all
financial statements and reports filed with the Securities and Exchange
Commission ("Commission") or sent to shareholders and, prior to release, if
practicable, all announcements of Quest's earnings. Following the
satisfactory completion of each year-end review recommend to the Board the
inclusion of the audited financial statements in Quest's Annual Report on
Form 10-K to be filed with the Commission. The review shall include any
significant problems and material disputes between management and the
independent auditors and a discussion with the independent auditors, out of
management's presence, of the quality of Quest's accounting principles as
applied in its financial reporting, the clarity of Quest's financial
disclosures and degree of aggressiveness or conservatism of Quest's
accounting principles and underlying estimates, and a frank and open
discussion of other significant decisions made by management in preparing
the financial disclosure documents.
5. Oversight of Executive Officers and Directors and Conflicts of
Interest. Review significant conflicts of interest involving directors or
executive officers. The Committee shall review compliance with Quest
policies and procedures with respect to officers' expense accounts and
perquisites, including their use of corporate assets, and consider the
results of any review of these areas by the internal auditor or the
independent auditors. The Committee also shall review significant
questionable or illegal payments.
A-1
18
6. Oversight of Independent Accountants. Evaluate the independent
auditors on an annual basis and where appropriate recommend a replacement
for the independent auditors. In such evaluation, the Committee shall
ensure that the independent auditors deliver to the Committee a formal
written statement delineating all relationships between the auditors and
Quest consistent with Independence Standards Board Standard 1. The
Committee also shall engage in a dialogue with the auditors with respect to
any disclosed relationships or services that may impact the objectivity and
independence of the independent auditors and, in response to the
independent auditor's report take, or recommend that the Board take,
appropriate action to satisfy itself of the independence of the auditors.
7. Charter Amendments. Review this Charter annually, assess its
adequacy and propose appropriate amendments to the Board.
The Committee's function is one of oversight. Management is responsible for
the preparation of Quest's financial statements and the independent auditors are
responsible for auditing those financial statements. The Committee is not
expected to audit Quest, to define the scope of any audit, to control Quest's
accounting practices, or to define the standards to be used in preparation of
Quest's financial statements, and the Committee's oversight role does not
provide any expert or special assurance as to the financial statements and other
financial information provided by Quest to its shareholders and others.
III. COMPOSITION & INDEPENDENCE
The Committee shall consist of not less than three members of the Board,
each of whom shall be appointed by the Board and shall be free of any
relationship that, in the opinion of the Board, may interfere with such member's
individual exercise of independent judgment. Each member shall also satisfy the
independence and financial literacy requirements for serving on audit
committees, and at least one member shall have accounting or related financial
management expertise, all as set forth in the applicable rules of the Commission
and Nasdaq.
One member of the Committee shall be appointed as Chairman, and shall be
responsible for leadership of the Committee, including scheduling and presiding
over meetings, preparing agendas, making regular reports to the Board, and
maintaining communications with the Chief Executive Officer, President, Chief
Financial Officer and other executive officers of Quest and its independent
auditors.
In the event that a Committee member faces a potential or actual conflict
of interest with respect to a matter before the Committee, that Committee member
shall be responsible for alerting the Committee Chairman, and in the case where
the Committee Chairman faces a potential or actual conflict of interest, the
Committee Chairman shall advise the Chairman of the Board of Directors. In the
event that the Committee Chairman, or the Chairman of the Board of Directors,
concurs that a potential or actual conflict of interest exists, an independent
substitute Director shall be appointed as a Committee member until the matter,
posing the potential or actual conflict of interest, is resolved.
IV. QUORUM AND MEETINGS
A quorum of the Committee shall be declared when a majority of the
appointed members of the Committee are in attendance. The Committee shall meet
on a regular basis. Meetings shall be scheduled at the discretion of the
Chairman. Notice of the meetings shall be provided at least ten days in advance.
The Committee may ask members of management or others to attend the meeting and
provide pertinent information as necessary.
A-2
19
V. REPORTS
The Committee will report to the Board from time to time with respect to
its activities and its recommendations. When presenting any recommendation or
advice to the Board, the Committee will provide such background and supporting
information as may be necessary for the Board to make an informed decision. The
Committee will keep minutes of its meetings and will make such minutes available
to the full Board for its review.
The Committee shall report to shareholders in Quest's proxy statement for
its annual meeting of shareholders as required by the rules of the Commission.
VI. OTHER AUTHORITY
The Committee is authorized to confer with Quest management and other
employees to the extent it may deem necessary or appropriate to fulfill its
duties. The Committee is authorized to conduct or authorize investigations into
any matters within the Committee's scope of responsibilities. The Committee also
is authorized to seek outside legal or other advice to the extent it deems
necessary or appropriate, provided it shall keep the Board advised as to the
nature and extent of such outside advice.
The Committee will perform such other functions as are authorized for this
Committee by the Board of Directors.
A-3
20
QUEST SOFTWARE, INC
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 2001
You may vote by telephone toll-free or on the internet, or complete, sign
and date and mail the form below. Your vote must be received prior to 12:00
midnight Pacific time on May 29, 2001.
[Name and address of shareholder]
TO VOTE BY TELEPHONE OR ON THE INTERNET, USE THE CONTROL NUMBER BELOW
YOUR CONTROL NUMBER ___________________
Call Toll-free
On a Touch-Tone Phone:
24 hours a day, 7 days a week
1-888-216-1316
Have this form available when you call the toll-free number. Then, enter
your control number and follow the prompts.
TO VOTE BY INTERNET, HAVE THIS FORM AVAILABLE AND FOLLOW THE DIRECTIONS
WHEN YOU VISIT: WWW.DIRECTVOTE.COM/QSFT
DO NOT RETURN THE FORM BELOW IF YOU VOTE BY TELEPHONE OR THE INTERNET.
------------
21
QUEST SOFTWARE, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 2001
YOUR CONTROL NUMBER ___________________
The undersigned shareholder of Quest Software, Inc. (the "Company"), hereby
acknowledges receipt of the Notice of Annual meeting of Shareholders and Proxy
Statement with respect to the Annual Meeting of Shareholders of Quest Software,
Inc. to be held at the Company's principal executive offices, located at 8001
Irvine Center Drive, Irvine, California 92618 on Wednesday, May 30, 2001 at
10:00 a.m. Pacific time, and hereby appoints Vincent C. Smith, David M. Doyle
and M. Brinkley Morse, and each of them, proxies and attorneys-in-fact, each
with power of substitution and revocation, and each with all powers that the
undersigned would possess if personally present, to vote the Company's Common
Stock which the undersigned is entitled to vote at such meeting and any
adjournments of such meeting, as set forth below, and in their discretion upon
any other business that may properly come before the meeting (and any such
adjournment).
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR
THE ELECTION OF THE BOARD'S NOMINEES, FOR PROPOSALS 1 AND 3 AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND
ANY ADJOURNMENT THEREOF.
IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE
Attendance at the Annual Meeting is limited to shareholders. Admission to
the meeting will be on a first-come, first-served basis.
DETACH AT THE PERFORATION BELOW.
DO NOT RETURN THIS CARD IF
YOU HAVE VOTED BY TELEPHONE OR INTERNET.
[X] Please mark in dark ink in the manner shown
1. TO ELECT THE COMPANY'S BOARD OF DIRECTORS
FOR
ALL NOMINEES LISTED BELOW [ ]
(EXCEPT AS MARKED IN THE
CONTRARY BELOW)
WITHHOLD AUTHORITY [ ]
TO VOTE FOR ALL NOMINEES
LISTED BELOW
22
NOMINEES: (01) Vincent C. Smith, (02) David M. Doyle, (03) Doran G. Machin
(04) Jerry Murdock, Jr. and (05) Raymond J. Lane
- --------------------------------------------------------------------------------
(INSTRUCTION: To withhold authority to vote for any nominee, print that
nominee's name in the space provided above.)
2. To approve an amendment to Company's Bylaws to increase the minimum
number of authorized directors to four.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
This proxy card should be signed by the shareholder(s) exactly as his or
her name(s) appear(s) hereon, dated and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both persons should sign.
Signature ____________________________ Date: ____________, 2001
Signature ____________________________ Date: ____________, 2001
UNLESS YOU HAVE VOTED BY TELEPHONE OR ON THE INTERNET, PLEASE VOTE, SIGN,
DATE AND RETURN THIS CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.