<PAGE> 1
PHOENIX INTERNATIONAL LTD., INC.
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
[X] Filed by the registrant
[ ] 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
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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.
[ ] 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 30, 1999
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1999 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 7, 1999, at 9:00 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 1998
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, 1998 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 7, 1999
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN THAT the 1999 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 7, 1999, at 9:00 a.m., local time, for the following purposes:
1. to elect three Class III directors to serve for three-year
terms; and
2. 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 15, 1999
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 relevant 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 28, 1999 to May 7, 1999, 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 30, 1999
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 7, 1999
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 1999 Annual Meeting of Shareholders (the "Annual Meeting"). The
Annual Meeting will be held on Friday, May 7, 1999 at 9:00 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 15, 1999, 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 8,504,989
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
30, 1999.
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.
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. Broker non-votes will be deemed not
entitled to vote on such proposals and, therefore, will have no legal effect on
the vote on such proposals.
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
<PAGE> 5
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, 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.
2
<PAGE> 6
PROPOSAL NO. 1: ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect three Class III
directors to hold office for three-year terms or until successors have been
elected and qualified or until any such director's earlier resignation or
removal. 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.
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY; PRINCIPAL OCCUPATIONS DIRECTOR OF THE
NAME (AGE) DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS COMPANY SINCE CLASS
------------------------------ ------------------------------------------------------ ------------------ -----------
<S> <C> <C> <C>
Bahram Yusefzadeh (52) Chairman of the Board, President and Chief Executive 1993 III
Officer of the Company. Director of Towne Services,
Inc.
Raju M. Shivdasani (48) 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)
Ronald E. Fenton (70) Director of the Company since 1993; member of the 1993 III
Executive Committee and Chairman of the Audit
Committee; Chairman of the Board of BancSecurity
Corporation; Chairman of the Board of F&M Bank -
Iowa Central and member of the Board of F&M Bank -
Iowa Story County and F&M Bank - Iowa South Central.
</TABLE>
3
<PAGE> 7
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 148,500 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 225,000 (including
a provision for an annual increase in the number of shares reserved for
issuance under the Director Plan by 1.5% of the number of shares of the
Company's Common Stock outstanding on the last trading day of December) and
revised the issuance under the 1996 Director Plan to provide for the grant of
an increased number of options thereunder. The Company's shareholders ratified
these amendments at the 1998 Annual Meeting of Shareholders on May 8, 1998. As
of January 1, 1999, the number of shares reserved for issuance under the
Director Plan automatically increased to 352,480. As of March 15, 1999, options
to acquire 237,500 shares of Common Stock were outstanding under the 1996
Director Plan.
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 four times during the fiscal year ended December 31,
1998. 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, 1998.
Messrs. Fenton, Murphy and Yusefzadeh (Chairman) and Ms. Ernst are
presently the members of the Executive Committee. The Executive Committee met
twice during the year ended December 31, 1998. 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
4
<PAGE> 8
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, Sturm and Tomson are presently the
members of the Audit Committee. The Audit Committee met twice during the year
ended December 31, 1998. 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, 1998. 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 Phoenix International 1995 Stock Option Plan, effective as of
October 21, 1995 ("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."
5
<PAGE> 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 15,
1999 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) ..................................................... 1,407,286 16.3%
SAFECO Corporation(3) .................................................... 1,630,000 19.2%
Robert Fleming Inc.(4) ................................................... 625,566 7.4%
Entities and individuals affiliated with Crown-Glynn Advisors, Ltd.
and Crown Capital Management, Ltd. (5) .............................. 530,200 6.2%
Ronald E. Fenton(6) ...................................................... 354,106 4.1%
James C. Holly(7) ........................................................ 279,180 3.3%
William C. Hess(8) ....................................................... 207,527 2.4%
Raju M. Shivdasani(9) .................................................... 207,001 2.4%
Glenn W. Sturm(10) ....................................................... 154,414 1.8%
Paul A. Jones(11) ........................................................ 124,414 1.5%
J. Michael Murphy(12) .................................................... 76,788 *
Harold C. Boughton(13) ................................................... 58,940 *
O. Jay Tomson(14) ........................................................ 56,646 *
Ruann F. Ernst(15) ....................................................... 32,500 *
Daniel P. Baker(16) ...................................................... 25,000 *
Brian J. Morgan (17) ..................................................... 9,125 *
All directors and executive officers as a group (17 persons)............. 2,966,784 32.0%
</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 March 15, 1999 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) 918,276
shares held in his name; (ii) 291,541 held by
6
<PAGE> 10
the Yusefzadeh Family Limited Partnership (the "Yusefzadeh
Partnership") of which Mr. Yusefzadeh is the general partner; (iii)
55,143 shares held by the Bahram and Laury Yusefzadeh Charitable
Remainder Trust (the "Trust"), of which Mr. Yusefzadeh is a director;
(iv) options to acquire 141,978 shares that are currently exercisable
at exercise prices ranging from of $3.16 to $18.50 per share; and (v)
348 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/A filed with the Securities and Exchange Commission (the
"Commission") as of March 10, 1999. In its Statement on Schedule
13G/A, 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 10, 1999.
Pursuant to such Statement on Schedule 13G, such holder owns 625,566
shares in its name. Robert Fleming Inc.'s address is 320 Park Avenue,
11th Floor, New York, New York 10022.
(5) Based on a filing in a Statement on Schedule 13G/A with the Commission
on March 3, 1999, indicating beneficial ownership as of such date.
Includes 94,600 shares owned directly by Crown Associates III, L.P.,
45,400 shares owned directly by Crown-Glynn Associates, L.P., and
339,950 shares owned directly by The Crown Trust. The foregoing
entities share voting and dispositive power with respect to such shares
with one or more of the following affiliated entities, each of which
may be deemed to beneficially own such shares: Crown Capital
Management, Ltd., Crown-Glynn Advisors, Ltd., Crown Partners III, L.P.
and Crown-Glynn Partners, L.P. and with one or more of the following
individuals, who are affiliated with one or more of the entities listed
above: David F. Bellet, John W. Glynn, Jr., Jeffrey S. Hamren, Margaret
S. McNamara, Steven Rosston and Chester A. Siuda. Also includes 50,250
shares owned directly by Mr. Bellet, which shares Mr. Bellet has sole
voting and dispositive power. The address for all the above entities
and individuals, except for Messrs. Bellet, Glynn, Jr. and Rosston, is
67 East Park Place, 8th Floor, Morristown, New Jersey 07960. Mr.
Bellet's address is 60 East 42nd Street, Suite 3405, New York, New York
10165. Messrs. Glynn, Jr. and Rosston's address is 3000 Sand Hill Road,
Building 4, Suite 235, Menlo Park, California 94025.
(6) Mr. Fenton's address is c/o Security Bank, 11 North First Avenue,
Marshalltown, Iowa 50158. Includes: (i) 5,910 shares held by Mr.
Fenton and his wife, as joint tenants; (ii) 5,757 shares held by his
individual retirement account; (iii) options to acquire 36,000 shares
that are currently exercisable at exercise prices ranging from $8.00
to $18.50 per share; and (iv) 306,439 shares held in the name of
BancSecurity Corporation. Mr. Fenton is the chairman of the board of
directors of BancSecurity Corporation. Mr. Fenton disclaims beneficial
ownership of the shares held by BancSecurity Corporation.
(7) Mr. Holly's address is c/o Bank of the Sierra, 86 North Main Street,
Porterville, California 93258. Includes: (i) 11,593 shares held in his
name; (ii) options to acquire 28,500 shares that are currently
exercisable at exercise prices ranging from $8.00 to $18.50 per share;
and (iii) 239,087 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
<PAGE> 11
(8) Includes: (i) 30,294 shares held in Mr. Hess' name; (ii) 7,666 shares
held by his individual retirement account; (iii) options to acquire
32,938 shares that are currently exercisable at exercise prices
ranging from $2.87 to $18.50 per share; (iv) 96,429 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)
4,425 shares held in the name of Raccoon Valley State Bank Charitable
Foundation, of which he is an officer and director; (vi) 4,425 shares
held in the name of Perry State Bank Charitable Foundation, of which
he is an officer and director; (vii) 4,425 shares held in the name of
Sac City State Bank Charitable Foundation, of which he is an officer
and director; (viii) 22,500 shares held in the name of Iowa Savings
Bank Charitable Foundation, of which he is an officer and director;
and (ix) 4,425 shares held in the name of Audubon State Bank
Charitable Foundation. 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) - (ix) above.
(9) Includes options to acquire 207,001 shares that are currently
exercisable at exercise prices ranging from $6.13 to $14.75 per share.
(10) Includes: (i) 17,424 shares held in Mr. Sturm's name; (ii) options to
acquire 59,347 shares that are currently exercisable at exercise
prices ranging from $2.87 to $18.50 per share; (iii) options to
acquire 22,500 shares from Mr. Yusefzadeh that are currently
exercisable at an exercise price of $11.33 per share; and (iv) 55,143
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 36,438 shares that are currently
exercisable at exercise prices ranging from $2.87 to $18.50 per share;
and (ii) 87,976 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: (i) 33,850 shares held in the name of Murphy Family
Partners, Ltd.; and (ii) options to acquire 42,938 shares that are
currently exercisable at exercise prices ranging from $2.87 to $18.50
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.
(13) Includes options to acquire 58,940 shares that are currently
exercisable at exercise prices ranging from $6.13 to $8.00 per share.
(14) Includes: (i) 3,000 shares held in Mr. Tomson's name; (ii) options to
acquire 18,500 shares that are currently exercisable at exercise
prices ranging from $6.13 to $18.50 per share; (iii) 29,146 shares
held in the name of the First Citizens National Bank Charitable
Foundation, Inc.; and (iv) 6,000 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.
8
<PAGE> 12
(15) Includes options to acquire 32,500 shares that are currently
exercisable at exercise prices ranging from $8.50 to $18.50 per share.
(16) Includes options to acquire 25,000 shares that are currently
exercisable at exercise prices ranging from $6.13 to $18.33 per share.
(17) Includes options to acquire 9,125 shares that are currently
exercisable at exercise prices ranging from $6.13 to $15.00 per share.
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 $100,000 (collectively, the "Named Executive
Officers") during the year ended December 31, 1998. The Company did not grant
any stock appreciation rights or make any long-term incentive plan payouts
during the periods shown.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------- -------------------------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/ ALL OTHER
YEAR SALARY ($) BONUS($)(1) COMPENSATION SARS(2) COMPENSATION
--------- ------------ ------------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bahram Yusefzadeh 1998 240,000 -- 12,159(3) 36,000 12,347(4)
Chairman of the Board and 1997 210,800 -- 14,826(3) 3,000 11,397(5)
Chief Executive Officer ...... 1996 196,544 100,000 10,656(6) 3,000 14,045(7)
Raju M. Shivdasani 1998 175,000 1,667(8) 6,783(9) 86,000 --
President and Chief 1997 120,000 54,100(10) -- 75,000 --
Operating Officer ............ 1996 55,385 36,667 -- 87,000 --
Brian J. Morgan
Senior Vice President,
International Business
Development(11) ............ 1998 51,562 43,540(12) 68,120(13) 30,000 6,014(14)
Harold C. Boughton 1998 120,000 42,358(15) -- -- --
Senior Vice President, 1997 100,000 80,083(16) -- -- --
USA Business Development ..... 1996 58,333 39,860(17) -- 87,187 --
Daniel P. Baker
Senior Vice President of
Research and
Development(18)............. 1998 114,987 -- -- 45,000 --
</TABLE>
(1) Bonuses and commissions for each year include amounts earned for that
year, even if paid in a subsequent year, and exclude bonuses paid
during that year but earned for a prior year.
(2) All figures in this column reflect options to purchase shares of
Common Stock.
9
<PAGE> 13
(3) Represents automobile lease payments and automobile expenses paid by
the Company for Mr. Yusefzadeh.
(4) Includes $6,410 for long-term disability premiums paid by the Company,
$2,681 for term life insurance paid by the Company for Mr.
Yusefzadeh's beneficiaries and $3,256 for health insurance premiums
paid by the Company for Mr. Yusefzadeh's dependents.
(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) Represents automobile lease payments paid by the Company for Mr.
Yusefzadeh.
(7) 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) Represents an incentive-based commission which was earned and paid in
1998.
(9) Represents automobile lease payments paid by the Company for Mr.
Shivdasani.
(10) Includes $19,637 earned and paid in 1997 and $34,463 earned in 1997
and paid in 1998.
(11) Mr. Morgan's employment with the Company commenced in August 1998.
(12) Includes an incentive-based commission of $41,937 earned as an
employee in 1998 and paid in 1999 and an incentive-based commission of
$1,603 earned as a contractor in 1998 and paid in 1999.
(13) Includes $49,777 paid for services as a contractor in 1998, $16,380
paid for apartment rental and $1,963 paid for automobile lease
payments by the Company.
(14) Includes health insurance payments of $858 and pension payments of
$5,156 paid by the Company.
(15) Represents an incentive-based commission, including draws, all of
which was earned and paid in 1998.
(16) 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.
(17) Represents an incentive-based commission, including draws, of which
$36,904 was earned and paid in 1996 and $2,956 was earned in 1996 and
paid in 1997.
(18) Mr. Baker's employment with the Company commenced in February 1998.
10
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning each grant of
stock options to each of the Named Executive Officers during the year ended
December 31, 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bahram Yusefzadeh........ 30,000(2) 5.4% 9.83 2007 185,459 469,953
6,000(3) 1.1% 18.50 2003 29,372 66,109
Raju M. Shivdasani....... 15,000(4) 2.7% 9.83 2007 92,730 234,976
15,000(5) 2.7% 9.83 2007 92,730 234,976
6,000(6) 1.1% 11.83 2003 23,432 48,147
50,000(7) 9.0% 13.38 2008 420,573 1,065,815
Brian J. Morgan.......... 30,000(8) 5.4% 15.00 2004 153,043 347,202
Daniel P. Baker.......... 30,000(9) 5.4% 13.00 2008 245,184 621,295
7,800(10) 1.4% 18.33 2008 89,932 227,905
7,200(11) 1.3% 18.33 2008 83,014 210,374
</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 non-qualified
stock options which were granted on January 1, 1998 and vest as to
7,500 shares on January 1, 1999, 7,500 shares on January 1, 2000,
7,500 shares on January 1, 2001 and 7,500 shares on January 1, 2002.
(3) 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.
(4) 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 that vest as to 7,500 shares on January 1, 2001 and
7,500 shares on January 1, 2002.
(5) 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 that vest as to 7,500 shares on January 1, 1999 and
7,500 shares on January 1, 2000.
(6) 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 that are fully vested.
11
<PAGE> 15
(7) 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 that vest as to 25,000 shares on August 27, 1998 and
25,000 shares on January 1, 1999.
(8) 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 that vest as to 6,000 shares on August 1, 1998, 6,000
shares on August 1, 1999, 6,000 shares on August 1, 2000, 6,000 shares
on August 1, 2001 and 6,000 shares on August 1, 2002.
(9) 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 that vest as to 6,000 shares on February 3, 1998, 6,000
shares on February 3, 1999, 6,000 shares on February 3, 2000, 6,000
shares on February 3, 2001 an 6,000 shares on February 3, 2002.
(10) 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 that vest as to 1,200 shares on January 1, 1999, 1,200
shares on January 1, 2000, 1,200 shares on January 1, 2001, 1,200
shares on January 1, 2002 and 3,000 shares on January 1, 2003.
(11) 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 that vest as to 1,800 shares on January 1, 1999, 1,800
shares on January 1, 2000, 1,800 shares on January 1, 2001 and 1,800
shares on January 1, 2002.
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, 1998.
AGGREGATE OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
NUMBER OF UNEXERCISED SECURITIES VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
UNDERLYING OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
----------------------------------------- ---------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------ ----------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Bahram Yusefzadeh......... 104,343 56,135 $1,092,809 $450,492
Raju M. Shivdasani........ 133,751 114,249 529,819 366,182
Brian J. Morgan........... 6,000 24,000 -- --
Harold C. Boughton........ 50,377 29,061 340,045 196,162
Daniel P. Baker........... 6,000 39,000 10,500 42,000
</TABLE>
- --------------------
(1) The closing price of the Common Stock on the Nasdaq National Market
on December 31, 1998 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
12
<PAGE> 16
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.
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, Baker, Burns and Morgan, Ms. Brescia and Ms. Ruggiero (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 have a term of one year and renews daily until
either party fixes the remaining term at one year by giving written notice.
Certain of the Other Agreements provide that if the employee's employment is
terminated by the Company without cause, the Company must pay the employee
one-twelfth of his annual base salary and bonus for each of six 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. Neither Messrs. Holly or Jones, nor Ms.
Ernst has been an officer or employee of the Company at any time.
13
<PAGE> 17
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 and member of the Compensation and Stock Option
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 the 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
year ended December 31, 1998, the Company recognized revenues from Bank of the
Sierra of approximately $95,000 and received from Bank of the Sierra an
aggregate of approximately $208,000 (not including taxes or reimbursable
expenses) pursuant to its licensing arrangement with Bank of the Sierra. See
"Certain Transactions." As of March 15, 1999, Mr. Holly held outstanding
options to purchase 28,500 shares of Common Stock that are currently
exercisable at exercise prices ranging from $8.00 to $18.50 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 year ended December 31, 1998, the Company recognized revenues from Glenview
State Bank of approximately $53,000 and received from Glenview State Bank an
aggregate of approximately $5,000 (not including taxes or reimbursable
expenses) pursuant to its licensing arrangement with the Company. See "Certain
Transactions." As of March 15, 1999, Mr. Jones held outstanding options to
purchase 36,438 shares of Common Stock that are currently exercisable at
exercise prices ranging from $2.87 to $18.50 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 $896,250 in connection with the U.S. Bank
Partner's investment in the Company's capital stock since its inception.
Discounts of $41,250 were used in 1998 leaving a balance of $105,000 of
available discounts at December 31, 1998 and as of March 15, 1999. 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 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 year ended December 31, 1998, the Company recognized revenues from
FCFC of approximately $20,000 and received from FCFC an aggregate of
approximately $22,000 (not including taxes or reimbursable expenses),
respectively, pursuant to its licensing arrangement with the Company. O. Jay
Tomson, the
14
<PAGE> 18
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 year ended December 31, 1998,
the Company recognized revenues from Iowa Savings Bank of approximately $58,000
and received from Iowa Savings Bank an aggregate of approximately $225,000 (not
including taxes or reimbursable expenses) 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 Corporation 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.
In December 1998, the Company entered into a service agreement with
Towne Services, Inc. ("Towne"). Also in December 1998, the Company entered into
a marketing agent agreement with Towne. The agreement allows the Company
exclusive marketing and distribution rights, in various regions of the world,
of a Towne software product. The agreement is effective for 1999 and the
Company will pay $485,000 for this right. The Company's Chief Executive Officer
is also a director of Towne and another shareholder and director of the Company
is also a shareholder and director of Towne.
The Company and The InterCept Group, Inc. ("InterCept") have entered
into Software License and Development Agreements dated December 31, 1997 (the
"December Agreement"). Under the December Agreement, InterCept licensed ATM and
voice response software from the Company and obtained the rights to develop the
software and integrate it with InterCept's existing software programs. On
January 15, 1998, the Company and InterCept entered into an agreement whereby
the Company licensed EFT software from InterCept and obtained the rights to
develop the software and integrate it with the Company's existing programs.
Glenn W. Sturm, a director of the Company, is also a director of InterCept.
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
15
<PAGE> 19
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.
16
<PAGE> 20
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), 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 1998
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
17
<PAGE> 21
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 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.
Benefits. The Company believes that it must offer a competitive
benefit program to attract and retain key executives. During 1998, the Company
provided medical and other benefits to its executive officers that are
generally available to the Company's other employees.
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.
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. For the year ended December 31, 1998, Mr.
Yusefzadeh's base salary was $240,000 and he was not awarded a bonus for the
year. The Committee believes that, based upon the Company's financial
performance, including earnings per share, revenue growth and cash flow from
operations, it is appropriate for his base salary to remain the same for 1999.
Submitted by: James C. Holly (Chairman)
Ruann F. Ernst
Paul A. Jones
Bahram Yusefzadeh (non-voting
member)
18
<PAGE> 22
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, 1998, 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
$8.00 per share (adjusted to reflect stock split in May 1998). 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>
Nasdaq
(Computer &
Phoenix Data
Measurement Period International Nasdaq (U.S. Processing
(Fiscal Year Covered) Ltd., Inc. Companies) Services)
<S> <C> <C> <C>
7/2/96 100 100 100
12/31/96 144 108 106
12/31/97 123 133 130
12/31/98 184 186 232
</TABLE>
19
<PAGE> 23
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, 1998, its executive
officers, directors and greater than 10% beneficial owners complied with all
applicable Section 16(a) filing requirements except for James C. Holly, Harold
C. Boughton, Michael R. Newes, Brian J. Morgan, Barbara A. Brescia and John F.
Winstanley. Mr. Holly had one transaction which should have been reported on a
Form 4 which was reported late. Mr. Boughton had four transactions which should
have been reported on a Form 4 which were reported late on a Form 5. Mr. Newes
had several transactions which should have been reported on Form 4 which were
reported late. Mr. Morgan, Ms. Brescia and Mr. Winstanley failed to timely file
Form 3s, which filings have now been made.
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, 1998. 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.
SHAREHOLDER PROPOSALS FOR THE
2000 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 2000 annual meeting, a written copy of their proposal
must be received at the principal executive offices of the Company no later
than January 7, 2000. 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.
20
<PAGE> 24
ANNUAL REPORT
The Company's 1998 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 30, 1999
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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PROXY SOLICITED FOR ANNUAL MEETING
OF SHAREHOLDERS OF
PHOENIX INTERNATIONAL LTD., INC.
TO BE HELD MAY 7, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints BAHRAM YUSEFZADEH and
RAJU M. SHIVDASANI each of them, his true and lawful agents and proxies with
full power of substitution in each, to represent and vote, as indicated below,
all of the shares of Common Stock of Phoenix International Ltd., Inc.
("Phoenix") that the undersigned would be entitled to vote at the 1999 Annual
Meeting of Shareholders of Phoenix to be held at our Corporate Headquarters,
500 International Parkway, Heathrow, Florida on Friday, May 7, 1999 at 9:00
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 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.
1. Election of Directors:
Class III Nominees (terms expire 2002):
Bahram Yusefzadeh
Raju M. Shivdasani
Ronald E. Fenton
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY to
listed (except vote for all nominees voted
as marked to
the contrary)
<PAGE> 26
(INSTRUCTION: To withhold authority to vote for any
individual nominee(s), write that nominee's name(s) in the
space provided below.)
2. IN THEIR DISCRETION, to act upon such other business as may properly
come before the meeting or any adjournment thereof.
Dated: ____________________, 1999
- --------------------------------------------
Signature of Shareholder(s)
- --------------------------------------------
Signature of Shareholder(s)
Note: Please sign exactly as name or names
appear hereon. Where 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 sign in partnership name by
authorized person.
