<PAGE> 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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PHOENIX INTERNATIONAL LTD., 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.
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
[ ] 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.
<PAGE> 2
PHOENIX INTERNATIONAL LTD., INC.
500 INTERNATIONAL PARKWAY
HEATHROW, FLORIDA 32746
March 27, 1998
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders (the "Annual Meeting") of Phoenix International Ltd., Inc. (the
"Company"). The Annual Meeting will be held at the Company's Corporate
Headquarters located at 500 International Parkway, Heathrow, Florida 32746 on
Friday, May 8, 1998, at 10:00 a.m., local time. The attached Notice of Annual
Meeting and Proxy Statement describe the formal business expected to be
transacted at the Annual Meeting. In addition to the specific matters to be
acted upon, there also will be a report on the operations of the Company, and
directors and officers of the Company will be present to respond to your
questions.
Included with the Proxy Statement is a copy of the Company's Annual
Report to Shareholders. We encourage you to read the Annual Report. It includes
the Company's audited financial statements for the year ended December 31, 1997
as well as information on the Company's operations, markets, products and
services.
Please use this opportunity to take part in the affairs of the Company
by voting on the business to come before this Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO MARK, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. Returning the proxy
does NOT deprive you of your right to attend the Annual Meeting and to vote your
shares in person for the matters acted upon at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Bahram Yusefzadeh
Bahram Yusefzadeh
Chairman of the Board of Directors and
Chief Executive Officer
<PAGE> 3
PHOENIX INTERNATIONAL LTD., INC.
500 INTERNATIONAL PARKWAY
HEATHROW, FLORIDA 32746
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, MAY 8, 1998
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN THAT the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Phoenix International Ltd., Inc., a Florida
corporation (the "Company"), will be held at the Company's Corporate
Headquarters located at 500 International Parkway, Heathrow, Florida 32746 on
Friday, May 8, 1998, at 10:00 a.m., local time, for the following purposes:
1. to elect three Class II directors to serve for three-year
terms and to elect one Class III director to serve for a
one-year term;
2. to consider and act upon the proposal to amend the Company's
1995 Stock Option Plan, effective as of October 21, 1995, to
increase the shares reserved for issuance thereunder and other
matters therein;
3. to consider and act upon the proposal to amend the Company's
1996 Director Stock Option Plan to increase the shares
reserved for issuance thereunder and other matters therein;
4. to consider and act upon the proposal to adopt the Company's
1998 Employee Stock Purchase Plan; and
5. to transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 16, 1998
are entitled to notice of, and to vote at, the Annual Meeting and at any
continuation or adjournment thereof. In accordance with the Florida Business
Corporation Act (the "Florida Law"), a list of shareholders entitled to vote at
the Annual Meeting shall be open to the examination of any shareholder, his
agent or attorney for any purpose germane to the Annual Meeting upon written
notice, all as provided by the Florida Law, during regular business hours at the
Company's Corporate Headquarters located at 500 International Parkway, Heathrow,
Florida 32746, from April 29, 1998 to May 8, 1998, and the list shall be
available for inspection at the Annual Meeting by any shareholder that is
present.
By Order of the Board of Directors,
/s/ GLENN W. STURM
GLENN W. STURM
GENERAL COUNSEL AND SECRETARY
Heathrow, Florida
March 27, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS
PROMPTLY AS POSSIBLE.
<PAGE> 4
PHOENIX INTERNATIONAL LTD., INC.
500 INTERNATIONAL PARKWAY
HEATHROW, FLORIDA 32746
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON FRIDAY, MAY 8, 1998
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are being furnished to the shareholders of Phoenix International
Ltd., Inc., a Florida corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors (the "Board") of the Company
for use at the 1998 Annual Meeting of Shareholders (the "Annual Meeting"). The
Annual Meeting will be held on Friday, May 8, 1998 at 10:00 a.m., local time, at
the Company's Corporate Headquarters located at 500 International Parkway,
Heathrow, Florida 32746.
VOTING RIGHTS AND VOTES REQUIRED
All shareholders of record of the Company's common stock, par value
$0.01 per share (the "Common Stock"), on March 16, 1998, the record date, will
be entitled to vote at the Annual Meeting or any continuation or adjournment
thereof. At the close of business on the record date, the Company had 5,557,879
shares of Common Stock outstanding and entitled to vote. A majority of the
outstanding shares of Common Stock will constitute a quorum for the transaction
of business at the Annual Meeting. Each holder of record of Common Stock on the
record date is entitled to one vote for each share of Common Stock so held on
each matter to be voted upon at the Annual Meeting. This Proxy Statement and the
accompanying Notice of Annual Meeting, Proxy Card and the Company's Annual
Report to Shareholders were first mailed to the shareholders on or about March
27, 1997.
The directors to be elected at the Annual Meeting will be elected by
the affirmative vote of the holders of a plurality of the shares of Common Stock
represented at the Annual Meeting in person or by proxy. Because the directors
will be elected by a plurality vote and assuming such election is uncontested,
votes withheld from any one or more nominees will not have any effect on the
outcome of the election of directors.
Approval and ratification of the amendments to the Company's 1995 Stock
Option Plan, effective as of October 21, 1995 (the "October Plan") and the
Company's 1998 Director Stock Option Plan (the "1996 Director Plan") and
approval and ratification of the adoption of the Company's 1998 Employee Stock
Purchase Plan (the "Purchase Plan"), and actions with respect to any other
matter that may properly come before the Annual Meeting will require the
affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Annual Meeting in person or by proxy and entitled to vote on
the matter. Abstentions will be counted in determining the total number of
shares present and entitled to vote on each such proposal. Accordingly, although
not counted as a vote "for" or "against" a proposal, an abstention on any such
proposal will have the same effect as a vote "against" that proposal.
<PAGE> 5
APPOINTMENT AND REVOCATION OF PROXIES
The Board has designated Bahram Yusefzadeh and Raju M. Shivdasani, and
each or either of them, as proxies to vote the shares of Common Stock solicited
on its behalf. If the Proxy Card is executed and returned, it may nevertheless
be revoked at any time before it has been exercised by: (i) giving written
notice to the Secretary of the Company; (ii) delivery of a properly completed
later dated proxy; or (iii) attending the Annual Meeting and voting in person.
Such notice or later proxy will not affect a vote on any matter taken prior to
the receipt thereof by the Company or its transfer agent. The mere presence at
the Annual Meeting of the shareholder who has appointed a proxy will not revoke
the prior appointment. If not revoked, the proxy will be voted at the Annual
Meeting in accordance with the instructions indicated on the Proxy Card by the
shareholder or, if no instructions are indicated, will be voted FOR the slate of
directors described herein, FOR the proposal to amend the October Plan, FOR the
proposal to amend the 1996 Director Plan, FOR the proposal to adopt the Purchase
Plan, and as to any other matter that may be properly brought before the Annual
Meeting, in accordance with the judgment of the proxy holders.
EXPENSES OF SOLICITATION
The expense of soliciting proxies will be borne by the Company. The
Company does not expect to pay any compensation for the solicitation of proxies
but may reimburse brokers and other persons holding stock in their names, or in
the names of nominees, for their expenses for sending proxy material to
principals and obtaining their proxies. Certain directors, officers and other
employees of the Company, without additional compensation, may use their
personal efforts, by personal interview, telephone, facsimile or otherwise, to
obtain proxies in addition to solicitation by mail.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect three Class II
directors to hold office for three-year terms and one Class III director to hold
office for a one-year term or until successors have been elected and qualified
or until any such director's earlier resignation or removal. Mr. Shivdasani was
appointed by the Board to fill an unexpired Class III term and under Florida law
the term of a director appointed to fill an unexpired term expires at the next
annual meeting of shareholders. Each nominee is presently available for election
and is a member of the Board. If any nominee should become unavailable, which is
not now anticipated, the persons voting the accompanying proxy may in their
discretion vote for a substitute. The following table sets forth the name and
age of each person nominated for election as a director; the principal
occupation, business or employment of the nominee during the last five years,
all other positions with the Company now held by the nominee and the name of any
publicly-traded corporation of which the nominee is a director; and the date on
which the nominee first became a director of the Company.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINATED
DIRECTORS.
2
<PAGE> 6
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY;
PRINCIPAL OCCUPATIONS DURING DIRECTOR OF THE
NAME (AGE) PAST FIVE YEARS; OTHER DIRECTORSHIPS COMPANY SINCE CLASS
- ---------- ------------------------------------ ------------- -----
<S> <C> <C> <C>
Paul A. Jones (43) Chief Executive Officer (since 1996), President (from 1995 II
1986 to 1996) and director (since 1990) of Glenview
State Bank; director of Cummins-American Corp. and
Cummins-Allison Corp.
J. Michael Murphy (57) Division President, Palex, Inc. since 1998; President 1993 II
of Drum Service Co. of Florida from 1977 until its
merger in February 1998 with Palex, Inc.; Director of
Lochaven Federal Savings and Loan Association,
Orlando, Florida since 1988 (Chairman of the Board
1995-1996).
Glenn W. Sturm (44) Partner, Corporate Chairman and member of the 1996 II
Executive Committee in the law firm of Nelson Mullins
Riley & Scarborough, L.L.P., Atlanta, Georgia since
1992.
Raju M. Shivdasani (47) President, Chief Operating Officer and Director 1998 III
(since January 1998); Senior Vice President and
Division President of International Sales (from July
1996 to January 1998); Group Executive Vice President
of the bank services sector for Fiserv, Inc. and
President of CBS Worldwide, a banking software
division of Fiserv, Inc. (from 1990 to 1996)
</TABLE>
DIRECTOR COMPENSATION
In June 1996, the Company adopted and the shareholders approved the
Phoenix International Ltd., Inc. 1996 Director Stock Option Plan (the "1996
Director Plan"). The 1996 Director Plan provides for the granting of
non-qualified stock options to the directors of the Company. The 1996 Director
Plan originally authorized the issuance of up to 99,000 shares of Common Stock
pursuant to options having an exercise price equal to the fair market value of
the Common Stock on the date of grant. The 1996 Director Plan contains
provisions providing for adjustment of the number of shares available for option
and subject to unexercised options in the event of stock splits, dividends
payable in Common Stock, business combinations or certain other events affecting
the Common Stock. The Board administers the 1996 Director Plan subject to
certain limitations.
At its meeting on January 30, 1998, the Board approved certain
amendments to the 1996 Director Plan. These amendments increased the number of
shares reserved for issuance under the 1996 Director Plan to 200,000 and revised
the issuance under the 1996 Director Plan to provide for the grant of an
increased number of options thereunder. As of February 28, 1998, options to
acquire 61,000 shares of Common Stock were outstanding under the 1996 Director
Plan. For a more detailed description of the 1996 Director Plan, see "Proposal
No. 3: Approval and Ratification of the Amendments to the 1996 Director Plan."
3
<PAGE> 7
In addition, the Company has paid all travel expenses and reimbursed
the directors for their out of pocket expenses related to their services as
directors. Directors do not receive cash fees for their services as directors of
the Company.
BOARD MEETINGS AND COMMITTEES
The Board met or acted by written consent seven times during the fiscal
year ended December 31, 1997. Standing committees of the Board currently
include: an Executive Committee, an Audit Committee, and a Compensation and
Stock Option Committee. Each director attended at least 75% of all Board and
relevant committee meetings during the year ended December 31, 1997.
Messrs. Fenton, Holly, Murphy and Yusefzadeh (Chairman) are presently
the members of the Executive Committee. The Executive Committee met or acted by
written consent four times during the year ended December 31, 1997. The
Executive Committee is vested with all the powers of the Board, except that the
Executive Committee cannot take action to: (i) approve or recommend to
shareholders actions or proposals required by the Florida Business Corporation
Act (the "Florida Law") to be approved by the shareholders; (ii) fill vacancies
on the Board or any committee thereof; (iii) adopt, amend or repeal the Amended
and Restated Bylaws (the "Bylaws"); (iv) authorize or approve the reacquisition
of shares; (v) authorize or approve the issuance or sale or contract for the
sale of shares, or determine the designation and relative rights, preferences
and limitations of a voting group; and (vi) take any other action not permitted
to be delegated to a committee under the Florida Law or the Bylaws.
The Executive Committee also acts as the nominating committee of the
Board. The Executive Committee recommends qualified candidates for election as
officers and directors of the Company. Shareholders who wish to recommend
candidates for consideration by the Board may do so by writing to the Secretary
of the Company, which notice must be received by the Company not less than 90
days prior to the anniversary of the previous year's annual meeting and must
provide the candidate's name, biographical data and qualifications in accordance
with the Bylaws.
Messrs. Fenton (Chairman), Hess and Sturm are presently the members of
the Audit Committee. The Audit Committee met once during the year ended December
31, 1997. The principal functions of the Audit Committee are reviewing the
Company's internal controls and the objectivity of its financial reporting,
making recommendations regarding the Company's employment of independent
auditors and reviewing the annual audit with the auditors.
Ms. Ernst and Messrs. Holly (Chairman), Jones and Yusefzadeh
(non-voting member) are presently the members of the Compensation and Stock
Option Committee. Neither Ms. Ernst nor Messrs. Holly or Jones have been an
officer or an employee of the Company at any time. The Compensation and Stock
Option Committee met or acted by written consent four times during the year
ended December 31, 1997. The functions of the Compensation and Stock Option
Committee are to review and set the compensation of the Company's Chief
Executive Officer and certain of its most highly compensated officers, including
salaries, bonuses and other incentive plans, stock options and other forms of
compensation, and to administer the Phoenix International Ltd., Inc. 1995
Employee Stock Option Plan, effective as of March 18, 1995 (the "March Plan"),
and the October Plan. Mr. Yusefzadeh does not vote on any matter placed before
the Compensation and Stock Option Committee. See "Report of the Compensation and
Stock Option Committee on Executive Compensation."
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of February 28,
1998 with respect to the beneficial ownership of the Common Stock by: (i) each
director; (ii) each executive officer named in the Summary Compensation Table;
(iii) each shareholder known by the Company to be a beneficial owner of more
than 5% of the Common Stock; and (iv) all executive officers and directors as a
group. Unless otherwise indicated, each of the shareholders listed below
exercises sole voting and dispositive power over the shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
-----------------------
NUMBER PERCENT
-----------------------
<S> <C> <C>
Bahram Yusefzadeh(2)..................... 909,101 16.2%
SAFECO Corporation(3).................... 725,000 13.1%
Robert Fleming Inc.(4)................... 480,895 8.7%
The Crown Trust(4)....................... 291,600 5.3%
Ronald E. Fenton(5)...................... 225,071 4.0%
James C. Holly(6)........................ 206,120 3.7%
Michael R. Newes(7)...................... 141,232 2.5%
William C. Hess(8)....................... 127,735 2.3%
Ralph H. Reichard(9)..................... 114,723 2.1%
Glenn W. Sturm(10)....................... 92,609 1.7%
Paul A. Jones(11)........................ 72,943 1.3%
Raju M. Shivdasani(12)................... 45,500 *
O. Jay Tomson(13)........................ 33,431 *
J. Michael Murphy(14).................... 37,859 *
Ruann F. Ernst(15)....................... 5,000 *
All directors and executive
officers as a group (15 persons)....... 2,041,785 34.6%
</TABLE>
- ---------------------------
* Indicates less than 1%.
(1) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares that such person or group has
the right to acquire within 60 days after February 28, 1998 or with
respect to which such person otherwise has or shares voting or
investment power. For purposes of computing the percentages of
outstanding shares held by each person or group of persons on a given
date, shares which such person or group has the right to acquire within
60 days after such date are deemed to be outstanding for purposes of
computing the percentage for such person or group but are not deemed to
be outstanding for the purpose of computing the percentage of any other
person or group.
(2) Mr. Yusefzadeh's address is c/o Phoenix International Ltd., Inc., 500
International Parkway, Heathrow, Florida 32746. Includes: (i) 612,184
shares held in his name; (ii) 194,361 held by the Yusefzadeh Family
Limited Partnership (the "Yusefzadeh Partnership") of which Mr.
Yusefzadeh is the general partner; (iii) 36,762 shares held by the
Bahram and Laury Yusefzadeh
5
<PAGE> 9
Charitable Remainder Trust (the "Trust"), of which Mr. Yusefzadeh is a
director; (iv) options to acquire 61,562, 2,000 and 2,000 shares that
are currently exercisable at exercise prices of $4.74, $12.00 and
$21.13, respectively, per share; and (v) 232 shares held by his
daughter. Mr. Yusefzadeh disclaims beneficial ownership with respect to
his daughter's shares.
(3) As reported by SAFECO Corporation ("Safeco") in a Statement on Schedule
13G filed with the Securities and Exchange Commission (the
"Commission") as of December 31, 1997. In its Statement on Schedule
13G, Safeco reports that it is a holding company for SAFECO Asset
Management Company ("Safeco Management"), a registered investment
advisor to several investment companies and sponsor of SAFECO Common
Stock Trust ("Safeco Trust"), an employee benefit plan. As a result of
its ownership of Safeco Management and sponsorship of Safeco Trust,
Safeco may be deemed to be the beneficial owner of the shares of the
Company's Common Stock managed by Safeco Management and owned by Safeco
Trust. Safeco specifically disclaims ownership over these shares of
Common Stock. Safeco's address is SAFECO Plaza, Seattle, Washington
98185.
(4) As reported by such shareholder, a New York Trust, in a Statement on
Schedule 13G filed with the Commission dated February 19, 1998.
Pursuant to such Statement on Schedule 13G, such holder owns 170,500
shares in its name and is affiliated with certain entities and/or
individuals that own an aggregate of 121,100 shares, which shares it
may be deemed to be the beneficial owner. The Crown Trusts' address is
67 East Park Place, 8th Floor, Morristown, New Jersey 07960.
(5) Mr. Fenton's address is c/o Security Bank, 11 North First Avenue,
Marshalltown, Iowa 50158. Includes: (i) 7,940 shares held by Mr. Fenton
and his wife, as joint tenants; (ii) 3,838 shares held by his
individual retirement account; (iii) options to acquire 2,000, 3,000
and 4,000 shares that are currently exercisable at exercise prices of
$12.00, $15.25 and $21.13, respectively, per share; and (iv) 204,293
shares held in the name of BancSecurity Corporation. Mr. Fenton is the
president, chief executive officer and a director of BancSecurity
Corporation. Mr. Fenton disclaims beneficial ownership of the shares
held by BancSecurity Corporation.
(6) Mr. Holly's address is c/o Bank of the Sierra, 86 North Main Street,
Porterville, California 93258. Includes: (i) 11,062 shares held in his
name; (ii) options to acquire 2,000, 3,000 and 4,000 shares that are
currently exercisable at exercise prices of $12.00, $15.25, and $21.13,
respectively, per share; and (iii) 186,058 shares held in the name of
Sierra Phoenix, Inc., a related company to Bank of the Sierra. Mr.
Holly is the president, chief executive officer and a director of Bank
of the Sierra. Mr. Holly disclaims beneficial ownership of the shares
held by Sierra Phoenix, Inc.
(7) Includes: (i) 98,952 shares held in Mr. Newes' name; (ii) 26,019 shares
held by his individual retirement account; and (iii) options to acquire
16,261 shares that are currently exercisable at an exercise price of
$4.30 per share.
(8) Includes: (i) 20,196 shares held in Mr. Hess' name; (ii) 5,111 shares
held by his individual retirement account; (iii) options to acquire
9,292, 2,000 and 3,000 shares held in his name that are currently
exercisable at exercise prices of $4.30, $12.00, and $21.13,
respectively, per share; (iv) 64,286 shares held in the name of
Community Grain Corporation, of which he is secretary and treasurer and
over which he shares voting and dispositive power; (v) 2,950 shares
held in the name of Raccoon Valley State Bank Charitable Fund, of which
he is an officer and director; (vi) 2,950 shares held in the name of
Perry State Bank Charitable Fund, of which he is an officer and
director; (vii) 2,950 shares held in the name of Sac City State Bank
Charitable Fund, of which he is an officer and director; and (viii)
15,000 shares held in the name of Iowa Savings Bank Charitable
Foundation, of which he is an officer and director. Mr. Hess is the
president of Iowa Savings Bank and chairman of the board of Sac City
Sate Bank. Mr. Hess disclaims beneficial ownership of the shares of
Common Stock described in clauses (iv) - (viii) above.
6
<PAGE> 10
(9) Includes: (i) 64,681 shares held in Mr. Reichard's name; (ii) options
to acquire 26,717, 2,000 and 2,000 shares that are currently
exercisable at exercise prices of $4.30, $12.00, and $21.13,
respectively, per share; and (iv) 19,325 shares held by his wife. Mr.
Reichard disclaims beneficial ownership with respect to his wife's
shares.
(10) Includes: (i) 11,616 shares held in Mr. Sturm's name; (ii) options to
acquire 23,231, 2,000, 1,000, and 3,000 shares that are currently
exercisable at exercise prices of $4.30, $12.00, $15.25, and $21.13,
respectively, per share; (iii) options to acquire 15,000 shares from
Mr. Yusefzadeh that are currently exercisable at an exercise price of
$17.00 per share; and (iv) 36,762 shares held by the Trust, of which
Mr. Sturm is a director. Mr. Sturm disclaims beneficial ownership with
respect to the shares of Common Stock held by the Trust.
(11) Includes: (i) options to acquire 9,292, 2,000, and 3,000 shares held by
Mr. Jones that are currently exercisable at exercise prices of $4.30,
$12.00, and $21.13, respectively, per share; and (ii) 58,651 shares
held in the name of Cummins-American Corporation. Mr. Jones is a
director of Cummins-American Corporation, and he and his immediate
family control 94% of the voting stock of Cummins-American Corporation.
Mr. Jones disclaims beneficial ownership of the shares held by
Cummins-American Corporation.
(12) Includes options to acquire 29,000, 4,000 and 12,500 shares that are
currently exercisable at $12.00, $17.75 and $20.63, respectively, per
share.
(13) Includes: (i) 2,000 shares held in Mr. Tomson's name; (ii) options to
acquire 2,000 and 2,000 shares that are currently exercisable at
exercise prices of $12.00 and $21.13, respectively, per share; (iii)
23,431 shares held in the name of the First Citizens National Bank
Charitable Foundation, Inc.; and (iv) 4,000 shares held in the name of
Kanabec Credit Corporation. Mr. Tomson is a director of First Citizens
Financial Corporation and First Citizens National Bank Charitable
Foundation, Inc. and owns a controlling interest in Kanabec Credit
Corporation. Mr. Tomson disclaims beneficial ownership of the shares
held by these entities.
(14) Includes: (i) 22,567 shares held in the name of Murphy Family Partners,
Ltd.; and (ii) options to acquire 9,292, 2,000, 1,000 and 3,000 shares
that are currently exercisable at exercise prices of $4.30, $12.00,
$15.25, and $21.13, respectively, per share. Mr. Murphy is the general
partner of Murphy Family Partners, Ltd. and exercises sole voting and
dispositive power over the shares held by Murphy Family Partners, Ltd.
(15) Includes options to acquire 2,000 and 3,000 shares that are currently
exercisable at exercise prices of $12.75 and $21.13, respectively, per
share.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company for services rendered during the years indicated to the Company's Chief
Executive Officer and the four most highly compensated executive officers whose
total salary and bonus exceeded $100,000 (collectively, the "Named Executive
Officers") during the year ended December 31, 1997. The Company did not grant
any stock appreciation rights or make any long-term incentive plan payouts
during the periods shown.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ---------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
YEAR(1) SALARY($) BONUS($)(2) COMPENSATION OPTIONS/SARS(3) COMPENSATION($)
------- --------- ----------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Bahram Yusefzadeh 1997 210,800 -- 14,826(4) 2,000 11,397(5)
Chairman of the Board and 1996 196,544 100,000 10,656(4) 2,000 14,045(6)
Chief Executive Officer......... 1995 194,795 19,000 -- 78,985 7,538(7)
Raju M. Shivdasani
President and Chief 1997 120,000 54,100(9) -- 50,000 --
Operating Officer(8)............ 1996 55,385 36,667 -- 58,000 --
Ralph H. Reichard
President and Chief 1997 155,000 -- -- 2,000 1,716(11)
Operating Officer(10)........... 1996 150,000 80,000 -- 2,000 4,951(12)
1995 140,000 -- -- 90,601 --
Michael R. Newes 1997 110,000 114,484(13) -- -- --
Senior Vice President, 1996 110,000 15,819(14) -- -- 2,554(15)
International Marketing......... 1995 107,436 36,474(16) -- 18,584 --
Harold C. Boughton
Senior Vice President, 1997 100,000 80,083(18) -- -- --
USA Business Development(17).... 1996 58,333 39,860(19) -- 58,125 --
</TABLE>
- --------------------
(1) During 1995, the Company changed its fiscal year end from January 31 to
December 31. Accordingly, the information reported for 1995 is for the
eleven months ended December 31, 1995.
(2) Includes bonuses and commissions. Bonuses and commissions for each year
include amounts earned for that year, even if paid in the subsequent
year, and exclude bonuses paid during that year but earned for a prior
year.
(3) All figures in this column reflect options to purchase shares of Common
Stock.
(4) Represents automobile lease payments and expenses paid by the Company
for Mr. Yusefzadeh.
(5) Includes $6,241 for long-term disability premiums paid by the Company,
$2,035 for term life insurance paid by the Company for Mr. Yusefzadeh's
beneficiaries and $3,121 for health insurance premiums paid by the
Company for Mr. Yusefzadeh's dependents.
(6) Includes $6,076 for long-term disability premiums paid by the Company,
$1,584 for term life insurance paid by the Company for Mr. Yusefzadeh's
beneficiaries, $3,211 for health insurance premiums paid by the Company
for Mr. Yusefzadeh's dependents, and $3,174 from a 1996 profit
sharing/401(k) award.
8
<PAGE> 12
(7) Includes $2,887 for long-term disability premiums paid by the Company,
$1,824 for term life insurance premiums paid by the Company for Mr.
Yusefzadeh's beneficiaries and $2,827 for health insurance premiums
paid by the Company for Mr. Yusefzadeh's dependents.
(8) Mr. Shivdasani served as the Company's Senior Vice President and
President of International Division during the year ended December 31,
1997. Mr. Shivdasani's employment with the Company commenced in July
1996.
(9) Includes $19,637 earned and paid in 1997 and $34,463 earned in 1997 and
paid in 1998.
(10) Mr. Reichard served as the Company's President and Chief Operating
Officer during the year ended December 31, 1997 and resigned from such
position in January 1998.
(11) Represents health insurance premiums paid by the Company for Mr.
Reichard's dependent.
(12) Represents $1,777 for health insurance premiums paid by the Company for
Mr. Reichard's dependent and $3,174 from a 1996 profit sharing/401(k)
award.
(13) Represents an incentive-based commission of which $53,344 was earned
and paid in 1997 and $61,140 was earned in 1997 and paid in 1998.
(14) Reflects an incentive-based commission of which $10,725 was earned and
paid in 1996 and $5,094 was earned in 1996 and paid in 1997.
(15) Represents a 1996 profit sharing/401(k) award. (16) Reflects an
incentive-based commission paid for fiscal 1995. (17) Mr. Boughton's
employment with the Company commenced in May 1996. (18) Represents an
incentive-based commission, including draws, of which $54,252 was
earned and paid in 1997 and $25,831 was earned in 1997 and paid in
1998.
(19) Represents an incentive-based commission, including draws, of which
$36,904 was earned and paid in 1996 and $2,956 was earned in 1996 and
paid in 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning each grant of
stock options to each of the Named Executive Officers during the year ended
December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS EXERCISE ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO OR BASE PRICE APPRECIATION FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------------
GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---------- ------------ -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bahram Yusefzadeh........... 2,000(2) 0.7% $21.13 2002 $11,661 $ 25,815
Raju M. Shivdasani.......... 4,848(3) 1.8 20.63 2007 62,684 159,354
45,152(4) 16.6 20.63 2007 585,669 1,484,149
Ralph H. Reichard........... 2,000(2) 0.7 21.13 2002 11,661 25,815
</TABLE>
- --------------------
(1) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Commission. There can be no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
term will be at the assumed 5% and 10% levels or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option term, no value will be realized from the option grants made to
the Named Executive Officers.
(2) Options were granted at the fair market value of the Common Stock on
the date of grant as determined by the Board. Represents director stock
options that are fully vested.
9
<PAGE> 13
(3) Options were granted at the fair market value of the Common Stock on
the date of grant as determined by the Board. Represents incentive
stock options which were granted on July 14, 1997 and vests on July 1,
2000.
(4) Options were granted at the fair market value of the Common Stock on
the date of grant as determined by the Board. Represents non-qualified
stock options which were granted on July 14, 1997 and vest as to 12,500
shares on July 14, 1997, 12,500 shares on each of July 1, 1998 and 1999
and 7,652 shares on July 1, 2000.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth the number of options and the value of
options held by the Named Executive Officers as of December 31, 1997.
AGGREGATE OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED SECURITIES VALUE OF UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS AT FISCAL YEAR END(#) OPTIONS AT FISCAL YEAR END($)(1)
---------------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bahram Yusefzadeh.............. 48,139 34,846 $ 447,547 $348,980
Raju M. Shivdasani............. 41,500 66,500 79,750 79,750
Ralph H. Reichard.............. 100,410 29,038 1,012,543 303,315
Michael R. Newes............... 13,938 4,646 145,586 48,530
Harold C. Boughton............. 23,250 34,875 63,938 95,906
</TABLE>
(1) The closing price of the Common Stock on the Nasdaq National Market on
December 31, 1997 was $14.75 per share.
EMPLOYMENT AGREEMENTS
On December 28, 1995, Bahram Yusefzadeh and the Company entered into an
employment agreement (the "Yusefzadeh Agreement") pursuant to which he serves as
the Company's Chief Executive Officer. Mr. Yusefzadeh's current annual base
salary is $240,000, plus incentive compensation as determined by the
Compensation and Stock Option Committee based upon achievement of targeted
levels of performance and such other criteria as such Committee shall establish
from time to time, and an additional bonus as determined by such Committee. In
addition, the Yusefzadeh Agreement provides that he may participate in the
October Plan and for him to receive health insurance for himself and his
dependents, long term disability insurance, civic and social club dues and use
of an automobile owned or leased by the Company. If Mr. Yusefzadeh's employment
is terminated by the Company in breach of the Yusefzadeh Agreement or if Mr.
Yusefzadeh terminates the Yusefzadeh Agreement within certain dates after a
change in control (as defined therein), the Company must pay Mr. Yusefzadeh
one-twelfth of his annual base salary and bonus for each of the 36 consecutive
30-day periods following the termination and must continue Mr. Yusefzadeh's life
and health insurance until he reaches age 65. In such case of termination, Mr.
Yusefzadeh's outstanding options to purchase Common Stock would vest and become
immediately exercisable. The Yusefzadeh Agreement has a term of three years and
renews daily until either party fixes the remaining term at three years by
giving written notice.
10
<PAGE> 14
On March 20, 1998, Raju M. Shivdasani and the Company entered into an
amended and restated employment agreement (the "Shivdasani Agreement") pursuant
to which he serves as the Chief Operating Officer and President of the Company.
Mr. Shivdasani's current annual base salary is $175,000, plus incentive
compensation as determined by the Compensation and Stock Option Committee based
upon achievement of targeted levels of performance and such other criteria as
such Committee shall establish from time to time, and an additional bonus as
determined by such Committee. In addition, the Shivdasani Agreement provides for
Mr. Shivdasani to receive health insurance for himself and his dependents, civic
and social club dues and use of an automobile owned or leased by the Company. If
Mr. Shivdasani's employment is terminated by the Company in breach of the
Shivdasani Agreement or if Mr. Shivdasani terminates the Shivdasani Agreement
within certain dates after a change in control (as defined therein), the Company
must pay Mr. Shivdasani one-twelfth of his annual base salary and bonus for each
of the 36 consecutive 30-day periods following the termination and must continue
Mr. Shivdasani's life and health insurance until he reaches age 65. In such case
of termination, Mr. Shivdasani's outstanding options to purchase Common Stock
would vest and become immediately exercisable. The Shivdasani Agreement has a
term of three years and renews daily until either party fixes the remaining term
at three years by giving written notice.
The Company has entered into employment agreements with Messrs.
Boughton, Newes, Scarborough and Daniel P. Baker (Senior Vice President,
Research and Development) (collectively, the "Other Agreements"). Generally the
Other Agreements provide for a minimum base salary per year, and a bonus as
determined by the Chief Executive Officer and President based upon achievement
of targeted levels of performance and such other criteria as they shall
establish from time to time. The Other Agreements contain a provision that
provides that the employee will receive insurance. Each of the Other Agreements,
except for Mr. Scarborough's, have a term of one year and renews daily until
either party fixes the remaining term at one year by giving written notice. The
term of Mr. Scarborough's agreement is 18 months. Except for Mr. Baker's
agreement which does not contain the following provision, if the employee's
employment is terminated by the Company for any reason within one year after a
change in control or if the employee terminates the agreement with adequate
justification, the Company must pay the employee one-twelfth of his annual base
salary and bonus for each of 12 (18 in the case of Mr. Scarborough) consecutive
30-day periods following the termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board was formed on
March 18, 1995. The current members of the Compensation and Stock Option
Committee are Messrs. Holly (Chairman) and Jones and Ms. Ernst, and Mr.
Yusefzadeh is a non-voting member. Ronald E. Fenton was a member of the
Compensation and Stock Option Committee during the year ended December 31, 1997.
Neither Messrs. Holly, Jones or Fenton, nor Ms. Ernst has been an officer or
employee of the Company at any time.
Transactions with James C. Holly and Affiliates. James C. Holly, the president,
chief executive officer and director of Bank of the Sierra, is a director of the
Company, Chairman of the Compensation and Stock Option Committee and a member of
the Executive Committee. In March 1994, the Company licensed the Phoenix System
to Bank of the Sierra. Pursuant to the U.S. Bank Partners' Discount Program and
because Bank of the Sierra was the second commercial installation site for
Phoenix System, Bank of the Sierra was given a discount with an aggregate value
of approximately $354,000 on the customer and software support fees. During the
years ended December 31, 1996 and 1997, the Company recognized revenues from
Bank of the Sierra of approximately $50,000 and $328,000 and received from Bank
of the Sierra an aggregate of approximately $136,000 and $68,000 (not including
taxes or reimbursable expenses), respectively, pursuant to its licensing
arrangement with Bank of the
11
<PAGE> 15
Sierra. See "Certain Transactions." As of February 28, 1998, Mr. Holly held
outstanding options to purchase 2,000, 3,000 and 4,000 shares of Common Stock
that are currently exercisable at exercise prices of $12.00, $15.25 and $21.13,
respectively, per share.
Transactions with Paul A. Jones and Affiliates. Paul A. Jones, the president of
Glenview State Bank, is a director of the Company and member of the Compensation
and Stock Option Committee. In January 1995, the Company licensed the Phoenix
System to Glenview State Bank. Pursuant to the U.S. Bank Partners' Discount
Program, Glenview State Bank was given a discount with an aggregate value of
approximately $164,000 on the initial license fee. During the years ended
December 31, 1996 and 1997, the Company recognized revenues from Glenview State
Bank of approximately $776,000 and $359,000 and received from Glenview State
Bank an aggregate of approximately $430,000 and $379,000 (not including taxes or
reimbursable expenses), respectively, pursuant to its licensing arrangement with
the Company. As of February 28, 1998, Mr. Jones held outstanding options to
purchase 9,292, 2,000 and 3,000 shares of Common Stock that are currently
exercisable at exercise prices of $4.30, $12.00 and $21.13, respectively, per
share.
Transactions with Ronald E. Fenton and Affiliates. Ronald E. Fenton, the
president, chief executive officer and a director of BancSecurity Corporation
("BancSecurity"), is a director of the Company, Chairman of the Audit Committee
and a member of the Executive Committee. Mr. Fenton was a member of the
Compensation and Stock Option Committee from its inception until the annual
meeting of the Board of Directors in May 1997. In February 1996, the Company
licensed the Phoenix System to BancSecurity. During the years ended December 31,
1996 and 1997, the Company recognized revenues from BancSecurity of
approximately $521,000 and $136,000 and received from BancSecurity an aggregate
of approximately $514,000 and $60,000 (not including taxes or reimbursable
expenses), respectively, pursuant to its licensing arrangement with
BancSecurity. Pursuant to the U.S. Bank Partners' Discount Program (as defined
hereafter), BancSecurity was given a discount with an aggregate value of
approximately $299,000 on the license and service fees. See "Certain
Transactions." As of February 28, 1998, Mr. Fenton held outstanding options to
purchase 2,000, 3,000 and 4,000 shares of Common Stock that are currently
exercisable at exercise prices of $12.00, $15.25 and $21.13, respectively, per
share.
CERTAIN TRANSACTIONS
As an incentive to provide initial capital for the Company, the Company
agreed to give certain pricing discounts to a consortium of financial
institutions (the "U.S. Bank Partners") on their initial contract with the
Company if they licensed the Phoenix System for use in their banks (the "U.S.
Bank Partners' Discount Program"). Pursuant to the U.S. Bank Partners' Discount
Program, the Company agreed to provide two types of discounts: (i) a credit
against the initial license fee equal to the amount of each U.S. Bank Partner's
investment in the Company's capital stock; and (ii) a 15% credit on the first
five years of customer and software support fees. The Company has offered
discounts on license fees totaling $855,000 in connection with the U.S. Bank
Partner's investment in the Company's capital stock since its inception no
discounts were used in 1997, $450,000 were used in 1996 and $300,000 were used
in 1995, leaving a balance of $105,000 of available discounts at December 31,
1997 and as of February 28, 1998. The following are a list of transactions where
discounts have been given pursuant to the U.S. Bank Partners' Discount Program
to U.S. Bank Partners that have an affiliate serving as a member of the Board.
See "Compensation Committee Interlocks and Insider Participation" for a
discussion of the transactions with BancSecurity, Glenview State Bank and Bank
of the Sierra.
In February 1994, the Company licensed the Phoenix System to First
Citizens Financial Corporation ("FCFC"). Pursuant to the U.S. Bank Partners'
Discount Program and because FCFC agreed
12
<PAGE> 16
for one of its banks to serve as the first commercial installation site of the
Phoenix System, FCFC was given pricing concessions with an aggregate value of
approximately $477,000 on license fees, implementation fees and customer and
software support fees. During the years ended December 31, 1996 and 1997, the
Company reorganized revenues from FCFC of approximately $314,000 and $93,000 and
received from FCFC an aggregate of approximately $203,000 and $99,000 (not
including taxes or reimbursable expenses), respectively, pursuant to its
licensing arrangement with the Company. O. Jay Tomson, the chairman of the board
and chief executive officer of First Citizens National Bank, the holding company
for FCFC, is a director of the Company.
In December 1995, the Company licensed the Phoenix System to Iowa
Savings Bank. Pursuant to the U.S. Bank Partners' Discount Program, Iowa Savings
Bank was given a discount with an aggregate value of approximately $123,000 on
the initial license fee. During the years ended December 31, 1996 and 1997, the
Company recognized revenues from Iowa Savings Bank of approximately $102,000 and
$200,000 and received from Iowa Savings Bank an aggregate of approximately
$47,000 and $38,000 (not including taxes or reimbursable expenses),
respectively, pursuant to its licensing arrangements with the Company. William
C. Hess, the president of Iowa Savings Bank, is a director of the Company.
On March 5, 1997, the Company entered into a stock purchase agreement
with Dyad whereby the Company purchased a minimal equity interest in Dyad. Dyad
is in the process of developing automated loan and mortgage products. Pursuant
to the Company's agreement with Dyad, the Company in September 1997 exercised an
option to increase its equity interest in Dyad to no more than 10% of the
outstanding shares of Dyad. As part of this transaction, the Company and Dyad
entered into a license and distribution agreement (the "License Agreement")
whereby the Company obtained the domestic rights to market, sell and license (on
an exclusive basis to the Company's customers and on a non-exclusive basis to
others) Dyad's products. In addition, the Company obtained the exclusive right
to market, sell and license Dyad's products worldwide (outside the U.S.), which
exclusivity is contingent upon the Company satisfying certain specific revenue
targets. The Company has paid Dyad a total of $1.5 million pursuant to these
agreements. Initially, the Company will keep all of the license fees generated
from the Company's sale of Dyad's products; eventually, however, the Company
will retain only a portion of such fees. Glenn W. Sturm, director, Secretary and
General Counsel of the Company, is a shareholder and director of Dyad. Bahram
Yusefzadeh, Chairman of the Board and Chief Executive Office of the Company, is
a director of Dyad.
The transactions under the U.S. Bank Partners' Discount Program are on
terms more favorable to officers, directors and principal shareholders of the
Company than they could obtain in a transaction with an unaffiliated third
party. Each of the transactions under the U.S. Bank Partners' Discount Program
and with Dyad was approved by a majority of the independent directors of the
Company, and any additional contracts under the U.S. Bank Partners' Discount
Program or between the Company and Dyad will be approved by a majority of the
independent directors of the Company. All future transactions, except for
contracts pursuant to the U.S. Bank Partners' Discount Program, between the
Company and its officers, directors, principal shareholders and their affiliates
will be approved by a majority of independent directors of the Company and will
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
13
<PAGE> 17
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "Exchange Act")
that might incorporate this Proxy Statement or future filings with the
Commission, in whole or in part, the following report and the Stock Performance
Chart which follows shall not be deemed to be incorporated by reference into any
such filing.
The Compensation and Stock Option Committee (the "Committee") consists
of the following members of the Board: Ruann F. Ernst; James C. Holly (Chairman)
and Paul A. Jones; and Bahram Yusefzadeh (non-voting member). The Committee
reviews and determines the Company's executive compensation objectives and
policies and administers the March Plan and October Plan. The Committee reviews
and sets the compensation of the Company's Chief Executive Officer and certain
other highly compensated executive officers.
The objectives of the Company's executive compensation program are to:
(i) attract, retain and motivate highly talented and productive executives; (ii)
provide incentives for superior performance by paying above-average
compensation; and (iii) align the interests of the executive officers with the
interests of the Company's shareholders by basing a significant portion of
compensation upon the Company's performance. The Company's executive
compensation program combines the following three components, in addition to the
benefit plans offered to all employees: base salary (including cash provided for
automobile allowances); bonus; and long-term incentive compensation consisting
of stock option grants. Each component of the Company's executive compensation
program serves a specific purpose in meeting the Company's objectives.
It is the Company's policy to set base salary levels, bonuses and
long-term incentive compensation above an average of select corporations to
which the Company compares its executive compensation. The Company selects such
corporations on the basis of a number of factors, such as their size and
complexity, the nature of their businesses, the regions in which they operate,
the structure of their compensation programs (including the extent to which they
rely on bonuses and other contingent compensation) and the availability of
compensating information. The corporations with which the Company compares its
compensation are not necessarily those included in the indices used to compare
the shareholder return in the Stock Performance Graph. Further, the corporations
selected for such comparison may vary from year to year based upon market
conditions and changes in both the Company's and the corporations' businesses
over time. The Company believes that above-average compensation levels are
necessary to attract and retain high caliber executives necessary for the
successful conduct of the Company's business.
Base salary. The Committee annually reviews the salaries of the
Company's executives. When setting base salary levels, in a manner consistent
with the objectives outlined above, the Committee considers competitive market
conditions for executive compensation, Company performance and individual
performance.
The measures of individual performance considered in setting 1997
salaries included, to the extent applicable to an individual executive officer,
a number of quantitative and qualitative factors such as the Company's
historical and recent financial performance in the principal area of
responsibility of the officer (including such measures as gross margin, net
income, sales, customer count and market share), the individual's progress
toward non-financial goals within his area of responsibility, individual
performance, experience and level of responsibility and other contributions made
to the Company's success. The
14
<PAGE> 18
Committee has not found it practicable, nor has it attempted, to assign relative
weights to the specific factors used in determining base salary levels, and the
specific factors used may vary among individual officers. As is typical for most
corporations, payment of base salary is not conditioned upon the achievement of
any specific, pre-determined performance targets.
Bonus. The Company's cash bonus program seeks to motivate executives to
work effectively to achieve the Company's financial performance objectives and
to reward them when those objectives are met. Executives bonus payments are
based upon the overall profitability of the Company.
Long-term incentive compensation. The Company believes that option
grants: (i) align executives interests with shareholder interests by creating a
direct link between compensation and shareholder return; (ii) give executives a
significant, long-term interest in the Company's success; and (iii) help retain
key executives in a competitive market for executive talent.
The October Plan authorizes the Committee to grant stock options to
executives. Option grants are made from time to time to executives whose
contributions have or will have a significant impact on the Company's long-term
performance. The Company's determination of whether option grants are
appropriate each year is based upon individual performance measures established
for each individual. Options are not necessarily granted to each executive
during each year. Generally, options granted to executive officers vest in equal
annual installments over a period of three to four years and expire ten years
from the date of grant.
Benefits. The Company believes that it must offer a competitive benefit
program to attract and retain key executives. During 1997, the Company provided
medical and other benefits to its executive officers that are generally
available to the Company's other employees.
Compensation of the Chief Executive Officer.
The Chief Executive Officer's compensation plan includes the same
elements and performance measures as the plans of the Company's other executive
officers. The Compensation and Stock Option Committee believes that Mr.
Yusefzadeh's total compensation reflects the unique contributions that he makes
to the Company's long-term strategic performance as one of the leading
innovators of the financial services technology industry. Mr. Yusefzadeh's
salary for the year ended December 31, 1997 did not increase from the prior year
and he was not awarded a bonus for such year. For the year ended December 31,
1998, the Committee decided to increase Mr. Yusefzadeh's base salary to
$240,000. The Committee believes that such increase is appropriate based upon
the Company's financial performance, including earnings per share, revenue
growth and cash flow from operations.
Submitted by: James C. Holly (Chairman)
Ruann F. Ernst
Paul A. Jones
Bahram Yusefzadeh (non-voting member)
15
<PAGE> 19
STOCK PERFORMANCE GRAPH
The chart below compares the cumulative total shareholder return on the
Common Stock with the cumulative total return on the Nasdaq (U.S. Companies)
Index and the Nasdaq Computer and Data Processing Services Index for the period
commencing July 2, 1996 (the first day of trading of the Common Stock as a
result of the Company's initial public offering) and ending December 31, 1997,
assuming an investment of $100 and the reinvestment of any dividends. The base
price for the Company's stock is the initial public offering price of $12.00 per
share. The comparisons in the graph below are based upon historical data and are
not indicative of, nor intended to forecast, future performance of the Common
Stock.
<TABLE>
<CAPTION>
7/2/96 12/31/96 12/31/97
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Phoenix International Ltd., Inc. 100 144 123
Nasdaq (U.S. Companies) 100 108 133
Nasdaq (Computer & Data Processing Services) 100 106 130
</TABLE>
16
<PAGE> 20
PROPOSAL NO. 2: APPROVAL AND RATIFICATION OF
THE AMENDMENTS TO THE OCTOBER PLAN
On January 30, 1998, the Board approved an amendment to the October
Plan to increase the number of shares available for issuance as incentive stock
options or non-qualified options under the October Plan from 500,000 to 700,000.
In addition, the October Plan was amended to provide that the number of shares
of Common Stock available for issuance thereunder shall be automatically
increased on the first trading day of each calendar year by three percent of the
number of shares outstanding on the preceding trading day. Finally, the October
Plan was amended to change the amendment requirements to the October Plan. The
October Plan formerly required shareholder approval of all increases in options
available for grant under the October Plan. As amended, the October Plan
provides that shareholder approval is only required for increases of shares
issuable pursuant to incentive stock options ("ISOs") (other than increases
pursuant to the automatic increase described above) and for changes in the class
of employees eligible to receive ISOs under the October Plan. At the Annual
Meeting, the shareholders are being asked to approve and ratify such increase in
shares available for issuance under the October Plan and the other amendments.
The Board believes that the adoption of the amendments to the October Plan will
foster good employee relations and encourage and assist employees of the Company
to acquire an equity interest in the Company, as well as simplify the procedure
of amending the October Plan, saving the Company the time and expenses involved
with obtaining routine shareholder approval. The amendment procedure under the
October Plan as modified reflects the requirements of current federal tax and
securities laws. In addition, the Board believes the utilization of the October
Plan helps align employee interest with other shareholders and helps provide for
the future financial security of the Company's employees. The October Plan
should thereby be helpful in attracting, retaining and motivating employees. The
details of the October Plan are described below. A copy of the amendments to the
October Plan is attached to this Proxy Statement as Exhibit A.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE OCTOBER
PLAN.
DESCRIPTION OF THE OCTOBER PLAN, AS AMENDED
Effective October 21, 1995, the Board adopted, and the Company's
shareholders approved, the October Plan. The October Plan originally provided
for the issuance of 50,000 shares of the Common Stock upon the exercise of
options and upon awards of restricted stock of the Company. During the 1997
Annual Meeting of Shareholders, the shareholders approved an amendment to the
October Plan which increased the number of authorized shares to 500,000. As of
February 28, 1998, options to acquire approximately 450,241 shares were
outstanding under the October Plan. Of the Named Executive Officers, only Mr.
Shivdasani holds options under the October Plan to purchase 50,000 shares of
Common Stock. No director who is not also an executive officer of the Company
holds options under the October Plan.
The purpose of the October Plan is to advance the interests of the
Company, its subsidiaries and its shareholders by affording certain employees of
the Company and its subsidiaries and other key persons an opportunity to acquire
or increase their proprietary interests in the Company. The objective of the
issuance of the options and restricted stock awards is to promote the growth and
profitability of the Company and its subsidiaries because the recipients of
options or restricted stock awards will have an additional incentive to achieve
the Company's objectives through participation in its success and growth and by
encouraging their continued association with or service to the Company. Persons
eligible to participate in the October Plan consist of all employees of the
Company or any subsidiary and other key
17
<PAGE> 21
persons whose participation in the October Plan the Committee determines to be
in the best interests of the Company.
Options granted under the October Plan may be ISOs, which are intended
to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified options, which are not intended to meet
such requirements ("Non-Qualified Options"). ISOs must have terms of ten years
or less from the date of grant and the fair market value of grants of ISOs
during any year on the date of grant may not exceed $100,000. The October Plan
is administered by the Compensation and Stock Option Committee (the
"Committee"), having the duties and authorities set forth in such Plan in
addition to any other authority granted by the Board. The Committee has the full
power and authority, in its discretion, subject to the provisions of the October
Plan, to interpret such Plan, to prescribe, amend, and rescind rules and
regulations relating to them, to determine the details and provisions of each
stock option agreement and restriction agreement, and to make all other
determinations necessary or advisable for the administration of such Plan,
including, without limitation, the amending or altering of such Plan and any
options or restricted stock awards granted thereunder, as may be required to
comply with or to conform to any federal, state, or local laws or regulations.
The Committee, in its discretion, selects the recipients of awards and the
number of shares or options granted thereunder and determines other matters such
as (i) vesting schedules, (ii) the exercise price of options (which cannot be
less than 100% of the fair market value of the Common Stock on the date of grant
for ISOs) and (iii) the duration of awards (which cannot exceed ten years from
the date of grant or modification of the option).
Subject to shareholder approval, the aggregate number of shares of
Common Stock reserved for the issuance of options and restricted stock awards
under the October Plan will be 700,000 shares, subject to adjustment in
accordance with the October Plan. Any or all shares of Common Stock subject to
the October Plan may be issued in any combination of ISOs, Non-Qualified Options
or restricted stock awards, and the amount of Common Stock subject to the
October Plan may be increased from time to time. Shares subject to an option or
issued as a restricted stock award may be either authorized and unissued shares
or shares issued and later reacquired by the Company. The shares covered by any
unexercised portion of an option that has terminated for any reason, or any
forfeited portion of a restricted stock award, may again be optioned or awarded
under the October Plan, and such shares shall not be considered as having been
optioned or issued in computing the number of shares of Common Stock remaining
available for options or restricted stock awards under the October Plan.
CERTAIN FEDERAL INCOME TAX EFFECTS
The following discussion of the federal income tax consequences of the
October Plan is intended to be a summary of applicable federal income tax law.
State and local tax consequences may differ.
ISOs. A participant is not taxed on the grant or exercise of an ISO.
However, the difference between the fair market value of the shares on the
exercise date and the exercise price will be a preference item for purposes of
the alternative minimum tax. If a participant holds the shares acquired upon
exercise of an ISO for at least two years following grant and at least one year
following exercise, the participant's gain, if any, by a subsequent disposition
of such shares will be treated as long term capital gain for federal income tax
purposes. The measure of the gain is the difference between the proceeds
received on disposition and the participant's basis in the shares (which
generally equals the exercise price). If the participant disposes of stock
acquired pursuant to exercise of an ISO before satisfying the one and two year
holding periods described above, the participant will recognize both ordinary
income and capital gain in the year of disposition. The amount of the ordinary
income will be the lesser of (i) the amount realized on disposition less the
participant's adjusted basis in the stock (usually the option exercise price) or
(ii) the difference between the fair market value of the stock on the option
exercise date and the option price.
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The balance of the consideration received on such disposition will be long term
capital gain if the stock had been held for at least one year following exercise
of the ISO. The Company is not entitled to an income tax deduction on the grant
or the exercise of an ISO or on the participant's disposition of the shares
after satisfying the holding period requirement described above. If the holding
periods are not satisfied, the Company will be entitled to an income tax
deduction in the year the participant disposes of the shares, in an amount equal
to the ordinary income recognized by the participant.
Non-Qualified Options. Generally, a participant is not taxed on the
grant of a Non-Qualified Option. Upon exercise, however, the participant
recognizes ordinary income equal to the difference between the option exercise
price and the fair market value of the shares on the date of the exercise. The
Company is entitled to an income tax deduction in the year of exercise in the
amount recognized by the participant as ordinary income. Any gain on subsequent
disposition of the shares is long term capital gain if the shares are held for
at least one year following exercise. The Company does not receive an income tax
deduction for this gain.
Restricted Stock. Generally, and except as noted below, the grant of
restricted stock is not taxable at the time of the grant. Instead, at the time
restricted stock vests or becomes transferable, an employee will recognize
ordinary income equal to (i) the excess of the fair market value of such
restricted stock on the date the shares vest over (ii) the price, if any, paid
for such restricted stock. An employee may, however, elect to recognize income
as of the date of grant of the restricted stock, in an amount equal to (i) the
excess of the fair market value of the restricted stock on the date of grant
over (ii) the price, if any, paid for the restricted stock. If such an election
is made, no additional income will be recognized at the time the stock vests or
becomes transferable. In the event of a subsequent forfeiture of the shares, an
employee making such an election may be able to recognize a capital loss with
respect to the amount, if any, paid for such restricted stock, but only to the
extent such amount exceeds the amount realized by such employee on such
forfeiture. The employee will not be able to recognize a loss for tax purposes
with respect to the excess of fair market value over the purchase price which
was previously included in income. Dividends paid on the shares of restricted
stock before they vest will be taxed to the employee either as additional
compensation or, if the employee has made the election described above, as
dividend income.
PROPOSAL NO. 3: APPROVAL AND RATIFICATION OF THE
AMENDMENTS TO THE 1996 DIRECTOR PLAN
On January 30, 1998, the Board approved an amendment to the 1996
Director Plan to increase the number of shares available for issuance as
nonqualified options thereunder from 99,000 to 150,000. In addition, the 1996
Director Plan was amended to provide that the number of shares of Common Stock
available for issuance thereunder shall be automatically increased on the first
trading day of each calendar year by one and one-half percent (1.5%) of the
number of shares outstanding on the preceding trading day. The Board also
amended the number of shares and timing of grants and the amendment procedure
under the 1996 Director Plan. At the Annual Meeting, the shareholders are being
asked to approve and ratify such increase in shares available for issuance under
the 1996 Director Plan and the other amendments. The Board believes that the
adoption of these amendments will assist in attracting and retaining directors
and encourage such directors to acquire an equity interest in the Company as
well as simplify the procedure amending the 1996 Director Plan, saving the
Company the time and expense involved in obtaining routine shareholder approval.
The details of the 1996 Director Plan are described below. A copy of the
amendments to the 1996 Director Plan is attached to the Proxy Statement as
Exhibit B.
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THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE 1996 DIRECTOR PLAN.
DESCRIPTION OF 1996 DIRECTOR PLAN, AS AMENDED
The 1996 Director Plan provides for the grant of Non-Qualified Options
to directors of the Company. Currently, all of the directors of the Company are
eligible to participate in the 1996 Director Plan. The Board of Directors
believes that stock options are an important component of compensation as a
long-term incentive that aligns the interest of directors with the Company's
shareholders. The Board believes the 1996 Director Plan benefits the Company by
assisting in recruiting and retaining directors with ability and initiative,
providing greater incentive for directors of the Company, and associating the
interests of directors with those of the Company and its shareholders through
opportunities for increased stock ownership.
As amended, the 1996 Director Plan provides that (i) each eligible
director first elected or appointed to the Board of Directors subsequent to the
effective date of the 1996 Director Plan will be granted an option to purchase
4,000 shares of Common Stock upon the date of his election or appointment to the
Board and (ii) on the date of this Annual Meeting and on each January 1
(beginning on January 1, 1999) thereafter, each eligible director will be
granted an option to purchase 4,000 shares of Common Stock, provided that such
eligible director shall not have been granted a Director Option under clause (i)
above during the same calendar year. The 1996 Director Plan also provides that
directors of the Company will receive on the date of this Annual Meeting and on
each date of appointment thereafter, the following number of options if such
director serves on a Board committee on such date: options for 4,000 shares for
service on the Executive Committee, options for 2,000 shares for service on the
Compensation and Stock Option Committee and options for 1,000 shares for service
on the Audit Committee. The option exercise price is fixed at the time the
option is granted at fair market value on the date of grant as determined by the
closing sales price of the Company's shares on the Nasdaq Stock Market on the
business day immediately preceding such date. The option exercise price may be
paid in cash or with shares of Common Stock or a combination of cash and Common
Stock.
All awards made under the 1996 Director Plan are evidenced by written
agreements between the Company and the holder. No option shall be exercisable
(i) 180 days after the date of termination if the optionee's position as a
Director terminates other than by reason of the optionee's death or disability,
(ii) one year after the death or disability of optionee, or (iii) after the
expiration of five years from the date the option was granted.
A maximum of 150,000 shares of Common Stock may be issued upon the
exercise of options subject to the annual automatic increase described above.
Currently, no options may be granted pursuant to the 1996 Director Plan
after May 24, 2006. The Board of Directors may, without further action by the
shareholders, terminate, suspend or amend the Director Plan in whole or part,
not more than once every six months, except that the Board may amend or
terminate the 1996 Director Plan at any time to comply with changes in the Code
or ERISA.
Federal Income Tax Consequences of Non-Qualified Options
Generally, an optionee will not be subject to tax at the time a
Non-Qualified Option is granted; however, an optionee who exercises a
Non-Qualified Option will include in income as of the date of exercise the
difference between (a) the fair market value of the Common Stock as of the date
of exercise and (b) the amount paid for Common Stock upon exercise of such
option. The optionee's federal income
20
<PAGE> 24
tax cost basis for the Common Stock will be the amount paid for the Common Stock
plus the income recognized. If the optionee uses Common Stock in full or partial
payment of the exercise price of a nonqualified option, then the exchange should
not affect the federal income tax treatment of the exercise. The net additional
shares of Common Stock received upon such exercise by the optionee will have a
federal income tax cost basis equal to the ordinary income recognized as a
result of the option exercise (plus the amount of any cash used in the option
exercise) and a holding period commencing upon the date such income is
recognized. Subsequent sale of such Common Stock will result in a capital gain
or loss equal to the difference between the optionee's federal income tax cost
basis for the Common Stock and the sale price. The Company will be entitled to
federal income tax deduction as of the date the optionee recognizes ordinary
income in the amount of ordinary income recognized by the optionee. In addition,
the Company may be required to withhold income tax and employment tax with
respect to the ordinary income recognized by the optionee at the time of
exercise.
The approval of the amendments the 1996 Director Plan requires the
affirmative vote of a majority of the shares present or represented by properly
executed and delivered proxies and entitled to vote at the meeting.
PROPOSAL NO. 4: APPROVAL OF THE
1998 EMPLOYEE STOCK PURCHASE PLAN
At a meeting of the Board of Directors of the Company on January 30,
1998, the Board of Directors unanimously approved and recommended to the
shareholders the adoption of the 1998 Employee Stock Purchase Plan for employees
of the Company and its subsidiaries (the "Purchase Plan"). The Purchase Plan was
established pursuant to the provisions of Section 423 of the Code and the
principle features of the Purchase Plan are summarized below. All statements
made in the following summary of the Purchase Plan are qualified by reference to
the full text of the Purchase Plan attached to this Proxy Statement as Exhibit
C.
Purpose
The purpose of the Purchase Plan is to provide a method whereby all
eligible employees of the Company may acquire a proprietary interest in the
Company through the purchase of Common Stock. Under the Purchase Plan, payroll
deductions are used to purchase the Company's Common Stock.
Reservations of Shares
An aggregate of 100,000 shares of Common Stock of the Company will be
reserved for issuance under the Purchase Plan. In the event of corporate changes
affecting the Company's Common Stock, such as reorganizations, share splits,
share dividends, mergers, consolidations or otherwise, the Company will make
appropriate adjustments in the number of shares reserved under the Purchase
Plan. The Board of Directors believes that the Purchase Plan will serve as an
incentive for the Company to retain employees of training, experience and
ability, to encourage a sense of proprietorship of such persons and to stimulate
the active interests of such persons in the development and financial success of
the Company.
Administration
The Purchase Plan is administered by the Compensation and Stock Option
Committee of the Board of Directors (the "Committee"). All determinations by the
Committee are final and conclusive.
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Eligibility
All employees (including officers of the Company) who have been
continuously employed for 180 days or more by the Company or its subsidiaries
(during which such employee's worked 1,000 or more hours) as of the commencement
of any offering period under the Purchase Plan, are eligible to participate in
the Purchase Plan. All employees of the Company on the effective date of the
Purchase Plan are eligible to participate. The employee must enroll in the
Purchase Plan prior to the commencement of any such offering periods by
authorizing payroll deductions of any whole percentage from one percent (1%) to
ten percent (10%) of such participant's compensation (as defined to include
without limitation overtime, commissions and bonuses) to be applied toward the
purchase of the Company's Common Stock, which may not be increased or decreased
during any offering period unless otherwise allowed by the Committee. No
employee shall be eligible to enroll under the Purchase Plan who, at the time of
enrollment, owns stock possessing 5% or more of the total combined voting power
of the Company. The Company estimates that approximately 140 employees are
eligible to participate in the Purchase Plan. Mr. Yusefzadeh is not eligible to
participate in the Purchase Plan due to his greater than 5% ownership of Common
Stock. All other executives officers and eligible employees of the Company are
entitled to participate in the Purchase Plan.
Purchase Terms
An employee electing to participate in the Purchase Plan must authorize
a whole percentage (not less than 1% nor more than 10%) of the employee's
compensation to be deducted by the Company from the employee's pay during any
pay period included within the offering periods (the "Offering Periods"). Unless
otherwise determined by the Committee, the Offering Periods commence on January
1 of each year and terminate on December 31 of such year (except that the first
Offering Period is expected to be for a period from July 1, 1998 to December 31,
1998). On the first business day of each of the Offering Periods, the Company
will grant to each participant an option to purchase shares of Common Stock of
the Company. On the last day of each of the Offering Periods, the employee will
be deemed to have exercised this option, at the option price, to the extent of
such employee's accumulated payroll deductions. In no event, however, may the
employee purchase Common Stock having a fair market value (measured at the
commencement of the Offering) in excess of $25,000. The option price under the
Purchase Plan is equal to the lesser of 85% of the fair market value of the
Common Stock on either the first or last day of business of the applicable
Offering Period. No interest will be paid on amounts deducted from an employee's
pay and used to purchase Common Stock under the Purchase Plan.
A participant may voluntarily withdraw from the Purchase Plan at any
time by giving at least 30 days notice to the Company prior to the end of the
Offering Period and shall receive on withdrawal the cash balance (without
interest) then held in the participant's account. Upon termination of employment
for any reason, including resignation, discharge, disability or retirement, or
upon death of a participant, the balance of the participant's account (without
interest) shall be paid to the participant or his or her designated beneficiary.
However, in the event of the participant's death, the participant's beneficiary
may elect to exercise the participant's option to purchase such number of full
shares which such participant's accumulated payroll deductions will purchase at
the applicable price.
Amendment or Termination
The Board of Directors may, at any time, amend, suspend or discontinue
the Purchase Plan provided no such suspension or discontinuance may adversely
affect any outstanding options. The Purchase Plan provides that, without
shareholder approval, no amendment may (i) increase materially the maximum
number of shares issuable under the Stock Purchase Plan (except for adjustments
as a
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result of corporate changes affecting the Company's Common Stock specifically
authorized in the Purchase Plan), (ii) increase materially the benefits accruing
to participants under the Purchase Plan or (iii) modify materially the
requirements as to the eligibility for participation in the Plan. The Purchase
Plan will terminate on its own terms on December 31, 2008.
Miscellaneous
The proceeds received by the Company from its sale of Common Stock
pursuant to the Purchase Plan will be used for general corporate purposes. The
Company is not obligated to hold the accrued payroll deductions in a segregated
account. The Purchase Plan will be effective as of the latter to occur of (a)
July 1, 1998 or (b) the date on which each of the following shall have occurred:
(i) the Purchase Plan shall have been approved by the shareholders of the
Company and (ii) a registration statement for the Purchase Plan shall have
become effective under the Securities Act of 1933, as amended.
Certain Federal Income Tax Consequences
The following general description of federal tax consequences is based
on current statutes, regulations and interpretations, and does not include
possible state or local income tax consequences. The Purchase Plan is intended
to qualify as an "Employee Stock Purchase Plan" within the meaning of Section
423 of the Code with the following principle tax consequences.
Amounts deducted from a participant's pay under the Purchase Plan are
included in the participant's compensation subject to federal income and
employment taxes. The Company will withhold taxes on these amounts.
The purchase of Common Stock under the Purchase Plan will not result in
an employee's realization of taxable income, thus permitting employees to
acquire stock in the Company without immediate tax consequences. An employee who
does not dispose of Common Stock so purchased until at least two years after the
date of enrollment and 12 months after the date of purchase will also receive
long-term capital gain treatment for any appreciation in value of such
employee's Common Stock over the fair market value at the time of enrollment for
the calendar year such purchase is effective. Such capital gain treatment is
not, however, available for the 15% discount at which the Common Stock is
initially purchased, and an employee who meets the holding requirements above is
required to include as ordinary income at the time of such employee's death or
disposition of such employee's Common Stock the lesser of (i) the excesses of
its fair market value over the price at the time enrollment is effective or (ii)
the excesses of its fair market value at the time of disposition or death over
the amount such employee actually paid for such shares. If an employee sells
such employee's Common Stock under such circumstances for less than such
employee paid for such shares, there is no ordinary income and such employee
will realize a long-term capital loss on the difference. Any ordinary income
realized by an employee will increase the basis of such employee's Common Stock
for purposes of determining the amount of any gain or loss realized upon its
disposition.
With limited exceptions, an employee who fails to retain Common Stock
purchased under the Purchase Plan until at least two years after the effective
date of enrollment and 12 months after the date of purchase is considered to
have made a "disqualifying disposition" and forfeits the special tax treatment
extended under Section 423 of the Code. In general, such an employee recognizes
ordinary income at the time of such disposition equal to the excess of market
value of the Common Stock at the exercise date over the purchase price paid.
Such fair market value as of the exercise date becomes the tax basis for
determining any further gain or loss at the time of disposition of the Common
Stock. In
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determining whether that gain or loss is short-term or long-term, the holding
period is calculated from the date of purchase. A capital gain or loss is
long-term if the shares have been held for more than 12 months.
The Company is entitled to a deduction equal to the amount of ordinary
income realized by an employee who makes a disqualifying disposition. Otherwise,
the Company is not entitled to any deduction on account of the purchase of
Common Stock under the Purchase Plan.
The approval of the adoption of the Purchase Plan requires the
affirmative vote of a majority of the shares of Common Stock outstanding. A copy
of the Purchase Plan is attached to this Proxy Statement as Exhibit C.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO ADOPT THE PURCHASE
PLAN.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors and persons who beneficially own more than 10% of a
registered class of the Company's equity securities to file reports of
securities ownership and changes in such ownership with the SEC and Nasdaq.
Officers, directors and greater than 10% beneficial owners 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 on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, the Company believes that, during the year ended December 31, 1997,
its executive officers, directors and greater than 10% beneficial owners
complied with all applicable Section 16(a) filing requirements.
INDEPENDENT AUDITORS
The Company selected the firm of Ernst & Young LLP to serve as the
independent auditors for the Company for the year ended December 31, 1997. That
firm has served as the auditors for the Company since 1995. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting and will be
accorded the opportunity to make a statement, if they so desire, and to respond
to appropriate questions.
OTHER MATTERS
The Board knows of no amendment or variation of the matters referred to
in the Notice of the Annual Meeting and of no other business to be brought
before the Annual Meeting. However, if any amendment, variation or other matter
is properly brought before the Annual Meeting, it is the intention of the
persons designated as proxies to vote in accordance with their best judgment on
such matters. If any other matter should come before the Annual Meeting, action
on such matter will be approved if the number of votes cast in favor of the
matter exceeds the number opposed.
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SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
Regulations of the Commission require Proxy Statements to disclose the
date by which shareholder proposals must be received by the Company in order to
be included in the Company's proxy materials for the next annual meeting. In
accordance with these regulations, shareholders are hereby notified that if they
wish a proposal to be included in the Company's Proxy Statement and form of
proxy relating to the 1999 annual meeting, a written copy of their proposal must
be received at the principal executive offices of the Company no later than
January 7, 1999. To ensure prompt receipt by the Company, proposals should be
sent certified mail return receipt requested. Proposals must comply with the
proxy rules relating to stockholder proposals in order to be included in the
Company's proxy materials.
ANNUAL REPORT
The Company's 1997 Annual Report to Shareholders is concurrently being
mailed to shareholders. The Annual Report contains consolidated financial
statements of the Company and the report thereon of Ernst & Young LLP,
independent auditors.
DATED: MARCH 27, 1998
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, POSTAGE FOR WHICH HAS BEEN
PROVIDED. YOUR PROMPT RESPONSE WILL BE APPRECIATED.
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EXHIBIT A
THIRD AMENDMENT TO THE
PHOENIX INTERNATIONAL LTD., INC.
1995 STOCK OPTION PLAN, EFFECTIVE AS OF OCTOBER 21, 1995
WHEREAS, the Board of Directors of Phoenix International Ltd., Inc., a
Florida corporation (the "Company"), adopted the Phoenix International Ltd.,
Inc. 1995 Stock Option Plan (the "October Plan"), effective as of October 21,
1995, and recommended that it be approved by the shareholders; and
WHEREAS, the shareholders adopted the October Plan pursuant to written
consents dated on or before December 31, 1995; and
WHEREAS, the purpose of the October Plan is to advance the interests of
the Company, its subsidiaries and its shareholders by affording certain
employees of the Company and its subsidiaries and other key persons an
opportunity to acquire or increase their proprietary interests in the Company;
and
WHEREAS, effective May 24, 1996, the Board of Directors approved and
the shareholders ratified certain amendments to the October Plan and on May 16,
1997, the Board of Directors approved and the shareholders ratified certain
further amendments to the October Plan; and
WHEREAS, on January 30, 1998, the Board of Directors approved the
following further amendments to the October Plan and recommended that such
amendments be approved by the shareholders;
NOW, THEREFORE, the October Plan is hereby amended as follows:
1. Defined Terms. Initially capitalized terms used in this
Amendment, which are not otherwise defined by this Amendment, are used with the
same meaning ascribed to such terms in the October Plan.
2. Amendments.
a. Section 4.1 of the October Plan is amended to read as
follows:
4.1 Limitations. Subject to any antidilution
adjustment pursuant to the provisions of Section 4.2 hereof,
the maximum number of shares of Stock that may be issued
hereunder shall be 700,000, and not more than 200,000 shares
of Stock may be made subject to Options to any individual in
the aggregate in any one fiscal year of the Company, such
limitation to be applied in a manner consistent with the
requirements of, and only to the extent required for
compliance with, the exclusion from the limitation on
deductibility of compensation under Section 162(m) of the
Code. The number of shares of Stock available for issuance
hereunder shall automatically increase on the first trading
day each calendar year beginning January 1, 1999, by an amount
equal to three percent (3%) of the shares of Stock outstanding
on the trading day immediately preceding January 1. Any or all
shares of Stock subject to the Plan may be issued in any
combination of Incentive Stock Options or non-Incentive Stock
Options, and the amount of Stock subject to the Plan may be
increased from time to time in accordance with Article VIII.
Shares subject to an Option may be either authorized and
unissued shares or shares issued and later acquired by the
Company. The shares covered by any unexercised portion of an
Option that has terminated for any reason (except as set forth
in the following
A-1
<PAGE> 30
paragraph) may again be optioned under the Plan, and such
shares shall not be considered as having been optioned or
issued in computing the number of shares of Stock remaining
available for option hereunder.
If Options are issued in respect of options to
acquire stock of any entity acquired, by merger or otherwise,
by the Company (or any Subsidiary of the Company), to the
extent that such issuance shall not be inconsistent with the
terms, limitations and conditions of Code Section 422 or Rule
16b-3 under the Exchange Act, the aggregate number of shares
of Stock for which Options may be granted hereunder shall
automatically be increased by the number of shares subject to
the Options so issued; provided, however, that the aggregate
number of shares of Stock for which Options may be granted
hereunder shall automatically be decreased by the number of
shares covered by any unexercised portion of an Option so
issued that has terminated for any reason, and the shares
subject to any such unexercised portion may not be optioned to
any other person.
b. Article VIII of the October Plan is replaced in its
entirety by the following:
8.1 Termination and Amendment. The Board may
at any time amend or terminate the Plan; provided, however,
that the Board (unless its actions are approved or ratified by
the shareholders of the Company within twelve months of the
date that the Board amends the Plan) may not amend the Plan
to:
(a) Increase the total number of shares of
Stock issuable pursuant to Incentive Stock Options under the
Plan, except as contemplated in Sections 4.1 and 4.2 hereof;
or
(b) Change the class of employees eligible
to receive Incentive Stock Options that may participate in the
Plan.
8.2 Effect on Optionee's Rights. No termination,
amendment, or modification of the Plan shall affect adversely
an Optionee's rights under a Stock Option Agreement without
the consent of the Optionee or his legal representative.
3. Effectiveness. This Amendment shall not become effective
unless and until such provisions are approved by at least a majority vote of the
holders of the outstanding capital stock of the Company present, or represented,
and entitled to vote on such matter at a meeting of shareholders duly called and
convened within one year following the date hereof.
4. Approval. Except as hereinabove amended and modified, the
October Plan is approved, ratified and affirmed without further modification or
amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed as of January 30, 1998, in accordance with the authority provided by
the Board of Directors.
PHOENIX INTERNATIONAL LTD., INC.
By: /s/ Bahram Yusefzadeh
-----------------------------------------
Name: Bahram Yusefzadeh
Title: Chief Executive Officer
A-2
<PAGE> 31
EXHIBIT B
FIRST AMENDMENT TO THE
PHOENIX INTERNATIONAL LTD., INC.
1996 DIRECTOR STOCK OPTION PLAN
WHEREAS, the Board of Directors of Phoenix International Ltd., Inc., a
Florida corporation (the "Company"), adopted the Phoenix International Ltd.,
Inc. 1996 Director Stock Option Plan (the "Director Plan"), on May 24, 1996, and
recommended that it be approved by the shareholders; and
WHEREAS, the shareholders adopted the Director Plan pursuant to written
consents dated on or before December 31, 1996; and
WHEREAS, the purpose of the Director Plan is to advance the interests
of the Company, its subsidiaries and its shareholders by affording the directors
of the Company an opportunity to acquire or increase their proprietary interests
in the Company; and
WHEREAS, on January 30, 1998, the Board of Directors approved the
following amendments to the Director Plan;
NOW, THEREFORE, the Director Plan is hereby amended as follows:
1. Defined Terms. Initially capitalized terms used in this
Amendment, which are not otherwise defined by this Amendment, are used with the
same meaning ascribed to such terms in the Director Plan.
2. Amendments.
a. Section 3 of the Director Plan is amended to read as
follows:
3. Total Aggregate Shares. Subject to adjustments
provided in Section 11 hereof, a total of 150,000 Shares shall
be subject to the Plan. The number of Shares available for
issuance shall automatically increase on the first day of each
calendar year beginning January 1, 1999, by an amount equal to
one and one-half percent (1.5%) of the shares of the Company's
Common Stock outstanding on the trading day immediately
preceding January 1. The issued Shares reacquired and held by
the Company, or any Subsidiary, and such number of Shares
shall be and hereby is reserved for sale for such purpose. Any
of such Shares that may remain unsold and that are not subject
to outstanding Options at the termination of the Plan shall
cease to be reserved for the purpose of the Plan, but until
termination of the Plan, the Company shall at all times
reserve a sufficient number of Shares to meet the requirements
of the Plan. Should any Option expire or be canceled prior to
its exercise in full, the Shares theretofore subject to such
Option may again be the subject of any Option under the Plan.
b. Section 6 (c) of the Director Plan is replaced in its
entirety by the following:
(c) Options shall automatically be granted to each
Eligible Person as follows:
(i) on the date an Eligible Person is first
elected or appointed as a Director and
during the existence of the Plan, such
Eligible Person shall automatically be
granted an Option to acquire 4,000 shares of
Common Stock for his service as a Director;
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(ii) on each January 1st (beginning January 1,
1999) for an Eligible Person during the
existence of the Plan, such Eligible Person
shall automatically be granted an Option to
acquire 4,000 shares of Common Stock for his
service as a Director; provided, however,
that during 1998, an Eligible Person shall
automatically be granted an Option to
acquire 4,000 shares of Common Stock on the
date of the annual meeting of shareholders
of the Company; provided, further however,
that any Eligible Person who received a
grant pursuant to Section 6(c)(i) shall not
receive a grant under this subsection during
the year of such Eligible Person's initial
election or appointment; and
(iii) on each January 1st (beginning January 1,
1999), each Eligible Person serving as a
Committee Member shall automatically be
granted an Option to acquire 4,000 shares of
Common Stock if such Eligible Person serves
on the Executive Committee of the Board on
such January 1, 2,000 shares of Common Stock
if such Eligible Person serves on the
Compensation and Stock Option Committee of
the Board on such January 1 and 1,000 shares
of Common Stock if such Eligible Person
serves on the Audit Committee of the Board
on such January 1; provided, however, that
during 1998, an Eligible Person shall
automatically be granted an Option to
acquire the number of shares provided above
on the date of the annual meeting of
shareholders of the Company.
(c) Section 13 of the Director Plan is replaced in its
entirety by the following:
13. Amendments, Modifications, Suspension or
Discontinuance of this Plan. For purposes of
complying with changes in the Code or ERISA, the
Board may amend, modify, suspend or terminate the
Plan at any time. For the purpose of meeting or
addressing any other changes in legal requirements or
any other purpose, the Board may amend, modify,
suspend or terminate the Plan only once every six
months.
3. Effectiveness. This Amendment shall not become effective
unless and until such provisions are approved by at least a majority vote of the
holders of the outstanding capital stock of the Company present, or represented,
and entitled to vote on such matter at a meeting of shareholders duly called and
convened within one year following the date hereof.
4. Approval. Except as hereinabove amended and modified, the
Director Plan is approved, ratified and affirmed without further modification or
amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed as of January 30, 1998, in accordance with the authority provided by
the Board of Directors.
PHOENIX INTERNATIONAL LTD., INC.
By: /s/ Bahram Yusefzadeh
-----------------------------------------
Name: Bahram Yusefzadeh
Title: Chief Executive Officer
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EXHIBIT C
PHOENIX INTERNATIONAL LTD.,
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
This Phoenix International Ltd., Inc. 1998 Employee Stock Purchase Plan
(the "Plan") is being established for the benefit of employees of Phoenix
International Ltd., Inc., a Florida corporation (the "Company"), its wholly
owned subsidiaries and any subsequently designated subsidiaries of the Company.
The Plan is intended to provide the employees of the Employer with an
opportunity to purchase Common Stock, $0.01 par value per share, of the Company
(the "Shares"), through accumulated payroll deductions. It is the intention of
the Company that the Plan qualify as an "employee stock purchase plan" within
the meaning of Section 423 of the Code, and the provisions of the Plan shall be
construed in a manner consistent with the requirements of such Section of the
Code.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Capitalization" shall mean any increase, reduction,
or change or exchange of Shares for a different number or kind
of shares or other securities of the Company by reason of a
reclassification, recapitalization, merger, consolidation,
reorganization, share dividend, share split or reverse share
split, combination or exchange of shares, repurchase of
Shares, change incorporate structure or otherwise.
(c) "Change in Control" of the Company shall have the meaning
given in Section 16(b) hereof.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" shall mean the Compensation and Stock Option
Committee or any other committee of members of the Board
appointed by the Board to administer the Plan and to perform
the functions set forth herein. No Board member will be
eligible to serve on such Committee if that Board member has
within the twelve (12) month period preceding the date of his
or her initial appointment to the Committee participated in
the Plan.
(f) "Company" shall mean Phoenix International Ltd., Inc., a
corporation organized under the laws of the State of Florida,
or any successor corporation.
(g) "Compensation" shall mean the fixed salary, wages,
commissions, overtime pay and bonuses paid by an Employer to
an Employee as reported by the Employer to the United States
government for federal income tax purposes, including an
Employee's portion of compensation deferral contributions
pursuant to Section 401(k) of the Code, any amount excludable
pursuant to Section 125 of the Code and/or any non-qualified
compensation deferral, but excluding any foreign service
allowance, severance pay, expenses or any benefit paid by a
third-party payer under any employee plan maintained by the
Employer.
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(h) "Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee.
Continuous Status as an Employee shall not be considered
interrupted in the case of a leave of absence agreed to in
writing by the Employee's Employer, if such leave is for a
continuous period of not more than one year or reemployment
upon the expiration of such leave is guaranteed by contract or
statute.
(i) "Designated Subsidiaries" shall mean the Subsidiaries of the
Company which have been designated by the Board from time to
time in its sole discretion as eligible to participate in the
Plan, which may include corporations which become Subsidiaries
of the Company after the adoption of the Plan.
(j) "Effective Date" shall have the meaning set forth in Section
22 hereof.
(k) "Employee" shall mean any person, including an officer, who as
of an Offering Date is regularly employed by the Company, a
wholly owned Subsidiary of the Company or a Designated
Subsidiary of the Company and who has completed 180 days of a
Year of Service. Notwithstanding the requirement of a Year of
Service, all persons employed by the Company on the Effective
Date shall be considered "Employees" for purposes of the Plan.
(l) "Employer" shall mean, as to any particular Employee, the
corporation which employs such Employee, whether it is the
Company, a wholly-owned Subsidiary of the Company or a
Designated Subsidiary of the Company.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(n) "Exercise Date" shall mean the last business day of each
Offering Period, except as the Committee may otherwise
provide. For purposes of the Plan, the term "business day"
means a day on which there is permitted trading of the Shares
on the Nasdaq National Market or on a national securities
exchange, whichever is applicable; and if neither is
applicable, a day that is not a Saturday, Sunday or legal
holiday in the State of Florida.
(o) "Fair Market Value" per Share as of a particular date shall
mean:
(i) the closing sales price, regular way for the Shares
on any national securities exchange on which the
Shares are actively traded on such date (or if such
exchange was not open for trading on such date, the
next preceding date on which it was open); or
(ii) if there is no price as specified in (i), the mean of
the last reported bid-and-asked quotations regular
way, for the Shares on such exchange on such date (or
if there was no such quotations on such date, the
next preceding date); or
(iii) if there also is no price as specified in (ii), the
closing sales price, regular way, or in the absence
thereof the mean of the last reported bid-and-asked
quotations, for the Shares on the other exchange on
which the Shares are permitted to trade having the
greatest volume of trading in the Shares during
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the 30-day period preceding such date, on such date
(or if there were no such quotations on such date,
the next preceding date); or
(iv) if there also is no price as specified in (iii), the
final reported sales price, or if not reported in the
following manner, the highest bid quotation, in the
over-the-counter market for the Shares as reported by
Nasdaq, or if not so reported, then as reported by
the National Quotation Bureau Incorporated, or if
such organization is not in existence, by an
organization providing similar services, on such date
(or if such date is not a date for which such system
or organization generally provides reports, then on
the next preceding date for which it does so); or
(v) if there also is no price as specified in (iv), the
price determined by the Committee by reference to the
bid-and-asked quotations for the Shares provided by
members of an association of brokers and dealers
registered pursuant to subsection 15(b) of the
Exchange Act, which members make a market in the
Shares, for such recent dates as the Committee shall
determine to be appropriate for fairly determining
current fair market value; or
(vi) if there also is no price as specified in (v), the
price determined by the Committee for the date in
question.
(p) "Offering Date" shall mean the first business day of each
Offering Period. The Offering Date of an Offering Period is
the grant date for the options offered in such Offering
Period. Notwithstanding the foregoing, the first Offering Date
following adoption of the Plan shall be the first business day
on or after the Effective Date.
(q) "Offering Period" shall mean each twelve (12) month period
commencing January 1 and ending December 31 during the term of
the Plan, and except that the Committee shall have the power
to change the duration of Offering Periods; however, no option
granted under the Plan shall be exercisable more than
twenty-seven (27) months from its date of grant.
Notwithstanding the foregoing, the first Offering Period
following the adoption of the Plan shall begin on the
Effective Date and end on December 31, 1998.
(r) "Parent" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company
if, at the time of granting an option, each of the
corporations other than the Company owns shares possessing
fifty percent (50%) or more of the total combined voting power
of all classes of shares in one of the other corporations in
such chain.
(s) "Participant" shall mean an Employee who participates in the
Plan.
(t) "Plan" shall mean Phoenix International Ltd., Inc. 1998
Employee Stock Purchase Plan, as amended from time to time.
(u) "Plan Year" shall mean the calendar year, except that the
Committee shall have the power to change the Plan Year.
(v) "Shares" shall mean the Common Stock, $0.01 par value per
share, of the Company.
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(w) "Subsidiary" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with
the Company if, at the time of granting an option, each of the
corporations other than the last corporation in the unbroken
chain owns shares possessing fifty percent (50%) or more of
the total combined voting power of all classes of shares in
one of the other corporations in such chain.
(x) "Year of Service" shall mean each successive period of twelve
consecutive months (from an Employee's original employment
date) during which the Employee's hours of employment are
1,000 hours or more.
3. ELIGIBILITY.
Subject to the requirements of Sections 4(b) and 20(d) hereof, any
person who is an Employee as of an Offering Date shall be eligible to
participate in the Plan and be granted an option for the Offering Period
commencing on such Offering Date.
Notwithstanding any provisions of the Plan to the contrary, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee (or any other person whose shares would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own shares and/or hold
outstanding options to purchase shares possessing five percent (5%) or more of
the total combined voting power or value of all classes of shares of the Company
or of any Subsidiary or Parent of the Company, or (ii) which permits such
Employee's right to purchase shares under all employee stock purchase plans (as
described in Section 423 of the Code) of the Company and any Subsidiary or
Parent of the Company to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) of Fair Market Value of such shares (determined at the time
such option is granted) for any calendar year in which such option would be
outstanding at any time. The purpose of the limitation in the preceding sentence
is to comply with Section 423(b)(8) of the Code. If the Employee's accumulated
payroll deductions on the last day of the Offering Period would otherwise enable
the Employee to purchase Shares in excess of the Section 423(b)(8) limitation
described in this Section, the excess of the amount of the accumulated payroll
deductions over the aggregate purchase price of the Shares actually purchased
shall be credited towards the next Offering Period. In the event the Employee
elects to discontinue participation in the Plan, such amount shall be promptly
refunded to the Employee by the Company, without interest.
4. GRANT OF OPTION; PARTICIPATION; PRICE.
(a) On each Offering Date the Company shall commence an offering
by granting each eligible Employee an option to purchase
Shares, subject to the limitations set forth in Section 3(b)
and Section 10 hereof.
(b) Each eligible Employee may elect to become a Participant in
the Plan with respect to an Offering Period, by filing an
agreement with his or her Employer authorizing payroll
deductions in accordance with Section 5 hereof. Such
authorization will remain in effect for subsequent Offering
Periods, until modified or terminated by the Participant by
giving written notice to his or her Employer prior to the next
occurring Exercise Date. Such authorization to make payroll
deductions must be received by the Company at least twenty
(20) days before the next succeeding Offering Date.
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(c) The option price per Share subject to an offering shall be the
lesser of (i) 85% of the Fair Market Value of the Shares or
the Offering Date of reference or (ii) 85% of the Fair Market
Value of the Shares on the Exercise Date of reference; and,
provided further that the option price per Share shall never
be less than the par value per Share.
5. PAYROLL DEDUCTIONS.
Subject to Section 4(b) hereof, a Participant may, in accordance with
rules and procedures adopted by the Committee, authorize a payroll deduction of
any whole percentage from 1% to 10% of such Participant's Compensation each pay
period (the permissible range and any other limitation applicable to
Participants as a whole within such percentages to be determined by the
Committee from time to time). A Participant may not increase or decrease such
payroll deduction (provided that a Participant may withdraw from the Plan under
Section 8) during each Offering Period (unless otherwise allowed by the
Committee in its sole discretion). All payroll deductions made by a Participant
shall be credited to such Participant's account under the Plan.
6. EXERCISE OF OPTION.
(a) Unless a Participant withdraws from the Plan as provided in
Section 8 hereof, or unless the Committee otherwise provides,
such Participant's election to purchase Shares shall be
exercised automatically on the Exercise Date, and the maximum
number of Shares (excluding any fractional Share, for which
purposes the purchase amount shall be rounded to the next
lower whole number of Shares) subject to such option will be
purchased for such Participant at the applicable option price
with the accumulated payroll deductions.
(b) Any cash balance remaining in a Participant's account after
the termination of an Offering Period will be carried forward
to the Participant's account for the purchase of Shares during
the next Offering Period if the Participant has elected to
continue to participate in the Plan. Otherwise the Participant
will receive a cash payment equal to the cash balance of his
or her account.
(c) The Shares purchased upon exercise of an option hereunder
shall be credited to the Participant's account under the Plan
within ten (10) business days after the Exercise Date and
shall be deemed to be transferred to the Participant as of
such crediting date. Except as otherwise provided herein, the
Participant shall have all rights of a shareholder with
respect to credited Shares.
7. DELIVERY OF SHARES.
(a) As promptly as practicable after receipt by the Company of a
written request for withdrawal of Shares from any
Participant's account (or, in the discretion of the Committee,
at any time after the termination of employment of any
Participant), subject to Section 20(d) hereof, the Company
shall arrange the delivery to such Participant of a share
certificate representing the whole Shares credited to the
Participant's account which the Participant requests to
withdraw. Subject to Section 7(b) hereof, withdrawals may be
made no more frequently than once each Offering Period. Shares
received upon share dividends or share splits shall be treated
as having been purchased on the Exercise Date of the Shares to
which they relate.
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<PAGE> 38
(b) Notwithstanding anything in Section 7(a) hereof to the
contrary, Shares may be withdrawn by a Participant more than
once during an Offering Period under the following
circumstances: (i) within sixty (60) days following a Change
in Control of the Company or (ii) upon the approval of the
Committee, in its sole discretion.
8. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A Participant may withdraw at any time all, but not less than
all, cash amounts in his or her account under the Plan that
have not been used to purchase Shares by giving written notice
to the Company at least thirty (30) days prior to the next
occurring Exercise Date or otherwise as may be approved by the
Committee in its sole discretion. All such payroll deductions
credited to such Participant's account shall be paid to such
Participant promptly after receipt of such Participant's
notice of withdrawal and such Participant's option for the
Offering Period in which the withdrawal occurs shall be
automatically terminated. No further payroll deductions for
the purchase of Shares will be made for such Participant
during such Offering Period.
(b) Upon termination of a Participant's Continuous Status as an
Employee during an Offering Period for any reason, including
voluntary termination, retirement or death, the payroll
deductions credited to such Participant's account that have
not been used to purchase Shares shall be returned to such
Participant or, in the case of such Participant's death, to
the person or persons entitled thereto under Section 12
hereof, and such Participant's option will be automatically
terminated. Notwithstanding the foregoing, upon the
termination of a Participant's employment because of the
Participant's death, the Participant's beneficiary (designated
by the Participant in accordance with Section 12 hereof) shall
have the right to elect, by written notice given to the
Company prior to the earlier of thirty (30) days prior to the
next occurring Exercise Date (or otherwise as may be
determined by the Committee in its sole discretion) under the
Plan or the sixtieth (60th) day after the Participant's death,
to exercise the Participant's option for the purchase of
Shares on such Exercise Date for the purchase of the number of
full Shares which the accumulated payroll deductions in the
Participant's account at the date of the Participant's death
will purchase at the applicable option price, and any excess
in such account will be paid to such beneficiary. If no such
written notice of election is duly received by the Company,
the first sentence of this Section 8(b) shall control.
(c) Except as provided in Section 20(d) hereof, a Participant's
withdrawal from an offering will not have any effect upon such
Participant's eligibility to participate in a succeeding
offering or in any similar plan which may hereafter be adopted
by the Company.
9. INTEREST.
No interest shall accrue on or be payable with respect to the payroll
deductions of a Participant in the Plan.
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<PAGE> 39
10. SHARES.
(a) The maximum number of Shares which shall be reserved for sale
under the Plan shall be 100,000 Shares, which number shall be
subject to adjustment upon Changes in Capitalization of the
Company as provided in Section 16 hereof. Such Shares shall be
either authorized and unissued Shares or Shares which have
been reacquired by the Company. If the total number of Shares
which would otherwise be subject to options granted pursuant
to Section 4 hereof on an Offering Date exceeds the number of
Shares then available under the Plan (after deduction of all
Shares for which options have been exercised or are then
outstanding), the Committee shall make a pro rata allocation
of the Shares remaining available for option grant in as
uniform a manner as shall be practicable and as it shall
determine to be equitable. In such event, the Committee shall
give written notice to each Participant of such reduction of
the number of option Shares affected thereby and shall
similarly reduce the rate of payroll deductions, if necessary.
(b) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or, at the election
of the Participant, in the name of the Participant and another
person as joint tenants with rights of survivorship.
(c) Until Shares shall have been credited to a Participant's
account in accordance with Section 6(c) hereof, the
Participant shall not have any rights or privileges of a
shareholder with respect to any Shares purchasable hereunder.
11. ADMINISTRATION.
The Plan shall be administered by the Committee, and the Committee may
select administrator(s) to whom its duties and responsibilities hereunder may be
delegated. The Committee shall have full power and authority, subject to the
provisions of the Plan, to promulgate such rules and regulations as it deems
necessary for the proper administration of the Plan, to interpret the provisions
and supervise the administration of the Plan, and to take all action in
connection therewith or in relation thereto as it deems necessary or advisable.
Any decision evidenced by the unanimous written consent of the members of the
Committee shall be fully effective as if it had been made at a meeting duly
held. Except as otherwise provided by the Committee, each Employer shall be
charged with all expenses incurred in the administration of the Plan with
respect to such Employer's Employees. No member of the Committee shall be
personally liable for any action, determination, or interpretation made in good
faith with respect to the Plan, and all members of the Committee shall be fully
indemnified by the Company with respect to any such action, determination or
interpretation. All decisions, determinations and interpretations of the
Committee shall be final and binding on all persons, including the Company, the
Participant (or any person claiming any rights under the Plan from or through
any Participant) and any shareholder.
12. DESIGNATION OF BENEFICIARY.
(a) A Participant may file with the Company, on forms supplied by
the Company, a written designation of a beneficiary who is to receive any Shares
and cash remaining in such Participant's account under the Plan in the event of
the Participant's death.
(b) Such designation of beneficiary may be changed by the
Participant at any time by written notice to the Company, on forms supplied by
the Company. In the event of the death of a
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<PAGE> 40
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such Shares and/or cash to the spouse or to any one or more dependents
or relatives of the Participant in accordance with the applicable laws of
descent and distribution, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
13. TRANSFERABILITY.
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of an option or to receive Shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
by the Participant (other than by will, the laws of descent and distribution or
as provided in Section 12 hereof). Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds in accordance with Section 8
hereof.
14. USE OF FUNDS.
All payroll deductions received or held by the Company under the Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such funds.
15. REPORTS.
Individual accounts will be maintained for each Participant in the
Plan. Statements of account will be given to Participants as soon as practicable
following each Offering Period, which statements will set forth the amounts of
payroll deductions, dividends, dividend reinvestments and additional cash
payments, the per Share purchase price, the number of shares purchased, the
aggregate Shares in the Participant's account and the remaining cash balance, if
any.
16. EFFECT OF CERTAIN CHANGES.
(a) In the event of a Change in Capitalization or the distribution
of an extraordinary dividend, the Committee shall conclusively
determine the appropriate equitable adjustments, if any, to be
made under the Plan, including without limitation adjustments
to the number of Shares which have been authorized for
issuance under the Plan but have not yet been placed under
option, as well as the price per Share covered by each option
under the Plan which has not yet been exercised. In the event
of a Change in Control of the Company, the Offering Period
shall terminate unless otherwise provided by the Committee.
For purposes of the preceding sentence, (i) the Committee may
establish the date of the event constituting the Change of
Control and such date shall be the Exercise Date for such
Offering Period, or (ii) the Committee may terminate the Plan
in which case all Shares and cash amounts in a Participant's
account shall be refunded as elsewhere provided herein.
(b) "Change of Control" shall be deemed to have occurred if (i) a
tender offer shall be made and consummated for the ownership
of 25% or more of the outstanding voting securities of the
Company, (ii) the Company shall be merged or consolidated with
another corporation and as a result of such merger or
consolidation less than 50% of the outstanding voting
securities of the surviving or resulting corporation shall be
owned in
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the aggregate by the former shareholders of the Company, (iii)
the Company shall sell at least 75% of its assets by value in
a single transaction or in a series of transactions to another
corporation which is not a wholly owned subsidiary of the
Company, or (iv) a person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) (as in effect on the date
hereof) of the Exchange Act, shall acquire 50% or more of the
outstanding voting securities of the Company (whether
directly, indirectly, beneficially or of record). For purposes
hereof, ownership of voting securities shall take into account
and shall include ownership as determined by applying the
provisions of Rule 13d-3(d)(1)(i) (as in effect on the date
hereof) pursuant to the Exchange Act.
17. TERM OF PLAN.
Subject to the Board's right to discontinue the Plan (and thereby end
its Term) pursuant to Section 18 hereof, the Term of the Plan (and its last
Offering Period) shall end on December 31, 2008. Upon any discontinuance of the
Plan, unless the Committee shall determine otherwise, any assets remaining in
the Participants' accounts under the Plan shall be delivered to the respective
Participant (or the Participant's legal representative) as soon as practicable.
18. AMENDMENT TO AND DISCONTINUANCE OF PLAN.
(a) Subject to Section 18(b) hereof, the Board may at any time
amend, suspend or discontinue the Plan. Except as provided in
Section 16 hereof, no such suspension or discontinuance may
adversely affect options previously granted and no amendment
may make any change in any option theretofore granted which
adversely affects the rights of any Participant which accrued
prior to the date of effectiveness of such amendment without
the consent of such Participant. No amendment shall be
effective unless it receives the requisite approval of the
shareholders of the Company if such shareholder approval of
such amendment is required to comply with Rule 16b-3 under the
Exchange Act or Section 423 of the Code or to comply with any
other applicable law, regulation or stock exchange rule.
(b) For the purpose of complying with changes in the Code or
ERISA, the Board may amend, modify, suspend or terminate the
Plan at any time. For the purpose of meeting or addressing any
other changes in legal requirements or any other purpose, the
Board may amend, modify, suspend or terminate the Plan only
once every six months. Subject to changes in law or other
legal requirements, including any provisions of Rule 16b-3
under the Exchange Act that would permit otherwise, the Plan
may not be amended without the consent of the holders of a
majority of the shares of Common Stock then outstanding or the
vote of the shareholders of the Company as provided in Section
20(c) hereof, to (i) increase materially the aggregate number
of shares that may be issued under the Plan (except for
adjustments pursuant to Section 16 of the Plan); (ii) increase
materially the benefits accruing to Participants under the
Plan; or (iii) modify materially the requirements as to
eligibility for participation in the Plan.
19. NOTICES.
All notices or other communications by a Participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.
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20. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW; SECTION 16 COMPLIANCE.
(a) This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws
of the State of Florida without giving effect to the choice of
law principles thereof, except to the extent that such law is
preempted by federal law.
(b) The obligation of the Company to sell or deliver Shares with
respect to options granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all
applicable federal and state securities laws, and the
obtaining of all such approvals by governmental agencies as
may be deemed necessary or appropriate by the Committee.
(c) To the extent applicable hereto, the Plan is intended to
comply with Rule 16b-3 under the Exchange Act, and the
Committee shall interpret and administer the provisions of the
Plan in a manner consistent therewith. Any provisions
inconsistent with such Rule shall be inoperative and shall not
affect the validity of the Plan. This Plan shall be subject to
approval by shareholders of the Company owning a majority of
the issued outstanding shares of common stock present or
represented and entitled to vote at a meeting duly held in
accordance with applicable law.
(d) For any Participants subject to Section 16 of the Exchange
Act, (i) such Participants who cease participation in the Plan
may not participate again for at least six (6) months, and
(ii) unless the Committee otherwise determines after due
regard for Rule 16b-3(d)(2)(i), any Shares purchased by such
Participant shall remain in such Participant's account for six
(6) months from the Exercise Date for such Shares.
(e) Shares shall not be issued unless such issuance and delivery
shall comply with all applicable provisions of law, domestic
or foreign, and the requirements of any stock exchange upon
which the Shares may then be listed, including, in each case
the rules and regulations promulgated thereunder, and shall be
further subject to the approval of counsel for the Company
with respect to such compliance, which may include a
representation and warranty from the Participant that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares.
(f) Nothing contained in this Plan, or any modification or
amendment to the Plan, or in the creation of any account, or
the execution of any subscription agreement, or the issuance
of any Shares under the Plan, shall give any Employee any
right to continue employment or any legal or equitable right
against the Company or any Subsidiary, or any officer,
director, or employee thereof, except as expressly provided by
the Plan.
21. WITHHOLDING OF TAXES.
By electing to participate in the Plan, each Employee acknowledges that
the Company and its participating Subsidiaries are required to withhold taxes
with respect to the amounts deducted from the Employee's Compensation and
accumulated for the benefit of the Employee under the Plan, and each Employee
agrees that the Company and its participating Subsidiaries may deduct additional
amounts
C-10
<PAGE> 43
from the Employee's Compensation, when amounts are added to the Employee's
Account, used to purchase common stock or refunded, in order to satisfy such
withholding obligations. If the Participant makes a disposition, within the
meaning of Section 424(c) of the Code and regulations promulgated thereunder, of
any Share or Shares issued to such Participant pursuant to such Participant's
exercise of an option, and such disposition occurs within the two-year period
commencing on the day after the Offering Date or within the one-year period
commencing on the day after the Exercise Date, such Participant shall, within
ten (10) days of such disposition, notify the Company thereof and thereafter
immediately deliver to the Participant's Employer any amount of federal, state
or local income taxes and other amounts which the Company informs the
Participant the Company is required to withhold. The Participant's Employer may
also satisfy any applicable withholding amounts by deducting the necessary
amounts of withholding from the Participant's wages and, in the Committee's sole
discretion, any other amounts owed to or held for the account of the
Participant.
22. EFFECTIVE DATE.
The Plan shall be effective (the "Effective Date") as of the latter to
occur of (a) July 1, 1998 or (b) the date on which each of the following shall
have occurred: (i) this Plan shall have been approved by the shareholders as set
forth in Section 20(c) hereof and (ii) a registration statement for the Plan
shall have become effective under the Securities Act of 1933, as amended.
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<PAGE> 44
APPENDIX D
PROXY SOLICITED FOR ANNUAL MEETING
OF SHAREHOLDERS OF
PHOENIX INTERNATIONAL LTD., INC.
TO BE HELD MAY 8, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Bahram Yusefzadeh and Raju
M. Shivdasani and each of them, his true and lawful agents and proxies with
full power of substitution in each, to represent and vote, as indicated on the
reverse, all of the shares of Common Stock of Phoenix International Ltd., Inc.
("Phoenix") that the undersigned would be entitled to vote at the 1998 Annual
Meeting of Shareholders of Phoenix to be held at the Corporate Headquarters, 500
International Parkway, Heathrow, Florida on Friday, May 8, 1998 at 10:00 a.m.
local time, and at any adjournment, upon the matters described in the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement,
receipt of which is acknowledged, and upon any other business that may
properly come before the meeting or any adjournment. Said proxies are directed
to vote on the matters described in the Notice of Annual Meeting of
Shareholders and Proxy Statement as follows, and otherwise in their discretion
upon such other business as may properly come before the meeting or any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS. FOR THE PROPOSAL TO AMEND THE
COMPANY'S 1995 STOCK OPTION PLAN (OCTOBER), FOR THE PROPOSAL TO AMEND THE
COMPANY'S 1996 DIRECTOR STOCK OPTION PLAN, FOR THE PROPOSAL TO ADOPT THE
COMPANY'S 1998 EMPLOYEE STOCK PURCHASE PLAN AND AS THE PROXY HOLDER MAY
DETERMINE IN HIS DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY BROUGHT
BEFORE THE MEETING.
PLEASE MARK, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
<PAGE> 45
<TABLE>
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
FOR all nominees WITHHOLD AUTHORITY
listed at right to vote for
(except as marked all nominees
marked to the listed at right
contrary)
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Election of Nominees: Class II 2. Proposal to amend the Company's [ ] [ ] [ ]
Directors: [ ] [ ] Nominees 1995 Stock Option Plan, effective
(for a three as of October 21, 1995, to
-year term) increase the shares reserved
Paul A. Jones for issuance thereunder and
(INSTRUCTION: To withhold authority to vote for J. Michael Murphy other matters therein;
any individual nominee(s) write that nominee's Glenn W. Sturm
name(s) in the space provided below. 3. Proposal to amend the Company's [ ] [ ] [ ]
1996 Director Stock Option Plan
Class III Nominee to increase the shares reserved
_______________________________________________ (for a one-year for issuance thereunder and
term) and other matters therein;
Raju M. Shivdasani
4. Proposal to adopt the Company's [ ] [ ] [ ]
1998 Employee Stock Purchase
Plan; and
5. To transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS
PROMPTLY AS POSSIBLE.
Signature of Shareholder(s)____________________________Signature of Shareholder(s)__________________________ Dated_________1998
Note: Please sign exactly as name or names appear hereon. When more than one owner is shown, each should sign. Persons signing
in a fiduciary or representative capacity shall give full title. If a corporation, please sign in full corporate name by
authorized officer. If a partnership, please name by authorized person.
</TABLE>
