<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[Amendment No. ]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[_] Definitive Additional Materials Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
PROLONG INTERNATIONAL CORPORATION
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[_] Fee paid previously by written preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PROLONG INTERNATIONAL CORPORATION
6 Thomas
Irvine, California 92618
May 12, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Prolong International Corporation (the "Company") to be
held at 10:00 A.M. on Wednesday, June 14, 2000 at the Atrium Hotel, located at
18700 MacArthur Blvd., Irvine, California 92612.
At the Annual Meeting you will be asked to elect two directors of the
Company and to approve the appointment of Deloitte & Touche, LLP as the
Company's independent public accountants for the fiscal year ending December
31, 2000. These matters are described in detail in the accompanying Notice of
Annual Meeting and Proxy Statement. In addition, we will be pleased to report
on the affairs of the Company and a discussion period will be provided for
questions and comments of general interest to stockholders.
We look forward to greeting personally those stockholders who are able to be
present at the Annual Meeting. However, whether or not you plan to be with us
at the Annual Meeting, it is important that your shares be represented.
Accordingly, you are requested to sign and date the enclosed proxy and mail it
in the envelope provided at your earliest convenience.
Very truly yours,
/s/ ELTON ALDERMAN
Elton Alderman
President, Chief Executive Officer and
Chairman of the Board of Directors
<PAGE>
PROLONG INTERNATIONAL CORPORATION
6 Thomas
Irvine, California 92618
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on June 14, 2000
----------------
TO THE STOCKHOLDERS OF PROLONG INTERNATIONAL CORPORATION:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of Prolong
International Corporation (the "Company") will be held at 10:00 A.M. on
Wednesday, June 14, 2000 at the Atrium Hotel, located at 18700 MacArthur
Blvd., Irvine, California 92612, for the following purposes as more fully
described in the accompanying Proxy Statement:
(1) To elect two (2) Class II directors to serve until the 2003 Annual
Meeting of Stockholders;
(2) To ratify the appointment of Deloitte & Touche, LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000; and
(3) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on April 28, 2000 will be
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. All stockholders are cordially invited to attend the
Annual Meeting in person. Stockholders who are unable to attend the Annual
Meeting in person are requested to complete and date the enclosed form of
proxy and return it promptly in the envelope provided. No postage is required
if mailed in the United States. Stockholders who attend the Annual Meeting in
person may revoke their proxy and vote their shares in person. Stockholders
attending the meeting whose shares are held in the name of a broker or other
nominee who desire to vote their shares at the meeting should bring with them
a proxy or letter from that firm confirming their ownership of shares.
By Order of the Board of Directors
/s/ THOMAS C. BILLSTEIN
Thomas C. Billstein
Secretary
Irvine, California
May 12, 2000
Please sign and return the enclosed proxy promptly.
<PAGE>
PROLONG INTERNATIONAL CORPORATION
6 Thomas
Irvine, California 92618
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 14, 2000
This Proxy Statement is furnished to the holders of Common Stock, par value
$.001 per share (the "Common Stock"), of Prolong International Corporation
(the "Company") in connection with the solicitation by the Board of Directors
of the Company of the enclosed proxy for use at the Annual Meeting of
Stockholders to be held on Wednesday, June 14, 2000 (the "Annual Meeting"), or
at any adjournment thereof. The purposes of the Annual Meeting and the matters
to be acted upon are set forth in the accompanying Notice of Annual Meeting of
Stockholders. As of the date of this Proxy Statement, the Board of Directors
is not aware of any other matters which will come before the Annual Meeting.
However, if any other matters properly come before the Annual Meeting, the
persons named as proxies will vote on them in accordance with their best
judgment.
Proxies for use at the Annual Meeting are being solicited by the Board of
Directors of the Company. Proxies will be mailed to stockholders on or about
May 12, 2000 and will be solicited chiefly by mail. The Company will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to the beneficial owners of
Common Stock and will reimburse them for their reasonable expenses in so
doing. Should it appear desirable to do so in order to ensure adequate
representation of shares at the Annual Meeting, officers, agents and employees
of the Company may communicate with stockholders, banks, brokerage houses and
others by telephone, facsimile or in person to request that proxies be
furnished. All expenses incurred in connection with this solicitation will be
borne by the Company. The Company has no present plans to hire special
employees or paid solicitors to assist in obtaining proxies, but reserves the
option of doing so if it should appear that a quorum at the Annual Meeting
otherwise might not be obtained.
Revocability and Voting of Proxy
A proxy for use at the Annual Meeting and a return envelope for the proxy
are enclosed. Any stockholder who gives a proxy may revoke it at any time
before it is voted by delivering to the Secretary of the Company a written
notice of revocation or a duly executed proxy bearing a later date. Attendance
and voting at the Annual Meeting in and of itself will not constitute a valid
revocation of a proxy. All proxies properly executed and returned will be
voted in accordance with the instructions specified thereon. If no
instructions are given, proxies will be voted FOR approval of Proposals Nos. 1
and 2 as set forth in the accompanying Notice of Annual Meeting of
Stockholders.
Record Date and Voting Rights
Only stockholders of record at the close of business on April 28, 2000 are
entitled to notice of and to vote at the Annual Meeting or at any adjournment
thereof. On April 28, 2000, there were 28,445,835 shares of Common Stock
outstanding; each such share is entitled to one vote on each of the matters to
be presented at the Annual Meeting. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy and entitled
to vote, will constitute a quorum at the Annual Meeting.
Proxies marked "withheld" as to any director nominee or "abstain" as to a
particular proposal and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum. "Broker non-votes" are shares
held by brokers or nominees which are present in person or represented by
proxy, but which are not voted on a particular matter because instructions
have not been received from the beneficial owner. The effect of
<PAGE>
proxies marked "withheld" as to any director nominee or "abstain" as to a
particular proposal and broker non-votes on Proposals Nos. 1 and 2 is
discussed under each respective Proposal.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of April 28, 2000 by (i) each stockholder who is
known by the Company to own beneficially more than five percent of the
Company's outstanding Common Stock, (ii) each director and nominee for
director of the Company, (iii) each of the Company's executive officers named
in the Summary Compensation Table (see "Executive Compensation") and (iv) by
all executive officers and directors of the Company as a group. The
information as to each person or entity has been furnished by such person or
group.
<TABLE>
<CAPTION>
Name and Address of Shares Beneficially Percent of
Beneficial Owner(1) Owned(2) Class
------------------- ------------------- ----------
<S> <C> <C>
Elton Alderman............................ 4,196,600(3) 14.6%
Carol A. Auld............................. 3,744,999(4) 13.2%
EPL Pro-Long, Inc......................... 2,981,035 10.5%
245 Fischer Avenue, Suite A-1
Costa Mesa, California 92626
Tom T. Kubota............................. 1,910,000(5) 6.7%
Thomas C. Billstein....................... 1,561,600(6) 5.5%
Nicholas M. Rosier........................ 22,000(7) *
R. Jack Aplin............................. 15,000 *
Bruce F. Barnes........................... 23,500(8) *
William J. Howell......................... 11,000(9) *
All officers and directors as a group
(5 persons)(10).......................... 5,814,700(11) 20.1%
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, the address of such beneficial owner is the
Company's principal executive offices, 6 Thomas, Irvine, California
92618.
(2) Beneficial ownership as reported in the table above has been determined
in accordance with Rule 13d-3 promulgated under the Securities Exchange
Act of 1934. Shares of Common Stock subject to options currently
exercisable, or exercisable within 60 days of April 28, 2000, are deemed
outstanding for computing the percentage of the person holding such
options but are not deemed outstanding for computing the percentage of
any other person. Except as indicated by footnote and subject to
community property laws where applicable, the persons named in the table
have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
(3) Includes 300,000 shares of Common Stock subject to options exercisable
within 60 days of April 28, 2000.
(4) Carol Auld obtained beneficial ownership of 3,744,999 shares following
the death of her husband, Edwin C. Auld Jr., on February 8, 1996 and as a
result of the subsequent settlement of his estate.
(5) Includes 120,000 shares of Common Stock subject to options exercisable
within 60 days of April 28, 2000.
(6) Includes 120,000 shares of Common Stock subject to options exercisable
within 60 days of April 28, 2000.
(7) Includes 12,000 shares of Common Stock subject to options exercisable
within 60 days of April 28, 2000.
(8) Includes 10,000 shares of Common Stock subject to options exercisable
within 60 days of April 28, 2000.
(9) Includes 10,000 shares of Common Stock subject to options exercisable
within 60 days of April 28, 2000.
(10) Includes shares held by Messrs. Alderman, Billstein, Barnes, Howell and
Rosier who collectively served as the Company's directors and executive
officers as of April 28, 2000.
(11) Includes 452,000 shares of Common Stock subject to options exercisable
within 60 days of April 28, 2000.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Bylaws (the "Bylaws") provide that the members of
the Company's Board of Directors be divided into three classes serving
staggered three-year terms, designated Class I, Class II and Class III,
respectively. Nevada law requires that at least one-fourth (1/4) of the Board
of Directors be elected annually. At each Annual Meeting, directors shall be
elected for a three-year term to succeed the directors of the class whose
terms then expire.
Pursuant to Nevada law and the Company's Bylaws, the number of directors
constituting each class shall be fixed from time to time by a resolution duly
adopted by the Board of Directors. The Company's Bylaws provide that the
aggregate number of directors shall be no less than three nor more than nine.
Currently, the Board of Directors has authorized two directors in each class,
or a total of six directors. At the 2000 Annual Meeting, two Class II
directors will be elected to hold office for a three-year term expiring at the
2003 Annual Meeting. Tom Kubota has informed the Company that he will retire
from the Board of Directors upon expiration of his term at the 2000 Annual
Meeting and will not stand for reelection to the Board of Directors.
Unless otherwise instructed, the proxy holders named in the enclosed proxy
will vote the proxies received by them for the two (2) nominees named below.
Mr. Barnes is currently a Class I director, serving for a term expiring at the
Annual Meeting in 2002. Upon his election as a Class II director, there will
be a vacancy in Class I and the Board of Directors is seeking candidates to
fill such vacancy. Such vacancy is not eligible to be filled at the 2000
Annual Meeting. The three remaining directors will continue in office in
accordance with their previous elections until the expirations of the terms of
the classes at the 2001 and 2002 Annual Meetings, as the case may be.
The nominees have indicated that they are willing and able to serve as
directors, if elected. If the nominees become unavailable for any reason
before the election, the enclosed proxy will be voted for the election of such
substitute nominee or nominees, if any, as shall be designated by the Board of
Directors. The Board of Directors has no reason to believe that the nominees
will be unavailable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF
THE NOMINEES NAMED BELOW.
Class II
(Directors nominated for office with terms expiring in 2003)
<TABLE>
<CAPTION>
Name Age Director Since
---- --- --------------
<S> <C> <C>
R. Jack Aplin........................................... 68 Nominee
Bruce F. Barnes......................................... 65 1999
</TABLE>
R. Jack Aplin has been an independent investor since 1989. From 1986 to
1989, Mr. Aplin was Chairman of the Board, President and Chief Executive
Officer of Spectramed, Inc., an international medical products company. Mr.
Aplin is currently a member of the Board of Directors of Newport Corporation,
a public company located in Irvine, California.
Bruce F. Barnes has served as a director since June 1999. He currently
serves as the President of Barnes Marketing, Inc., a sports marketing firm
that Mr. Barnes founded in 1974. Between 1969 and 1974, Mr. Barnes held the
position of Vice President at Sports Headliners, a sports marketing firm
located in Indianapolis, Indiana. Prior to 1969, Mr. Barnes was a Sales
Manager of the Dayton Division of Firestone Tire & Rubber Company. Mr. Barnes
received a Bachelors degree in business administration from the University of
Southern California in 1959.
3
<PAGE>
Biographical Information For Directors Continuing In Office
Set forth below is biographical information for each of the other directors
of the Company whose present terms of office will continue after the 2000
Annual Meeting.
Class III
(Directors continuing in office with terms expiring in 2001)
<TABLE>
<CAPTION>
Name Age Director Since
---- --- --------------
<S> <C> <C>
Elton Alderman.......................................... 61 1995
Thomas C. Billstein..................................... 47 1995
</TABLE>
Elton Alderman has served as the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since the Reorganization
in June 1995. Since December 1998, Mr. Alderman has served as a director of
Prolong International Holdings Ltd. and Prolong International Ltd. From
October 1993 to the present, Mr. Alderman has also served as a director,
President and Chief Executive Officer of PSL, the Company's wholly-owned
operating subsidiary. Prior to joining PSL, Mr. Alderman served as the
President and Chief Executive Officer of EPL Pro-Long, Inc., the holder of the
patent for the AFMT formula, from July 1988 until October 1993.
Thomas C. Billstein has served as a director of the Company since the
Reorganization in June 1995. Since December 1998, Mr. Billstein has served as
a director of Prolong International Holdings Ltd. and Prolong International
Ltd. Mr. Billstein has also served as the Company's Vice President and
Secretary since February 1996, and the Company's Chief Operating Officer since
April 1, 2000. From October 1993 to the present, Mr. Billstein has also served
as a director of PSL, and has served as PSL's Secretary since February 1996.
Prior to joining PSL, Mr. Billstein served as an independent financial and
legal consultant to EPL Pro-Long, Inc. from August 1992 until October 1993.
From November 1991 to August 1992, Mr. Billstein provided independent
financial and legal consulting services to various small companies located in
Southern California. Prior to commencing his employment with the Company and
PSL, Mr. Billstein served as an independent financial and legal consultant to
those entities as well. Mr. Billstein holds a Bachelor of Science degree in
Business Administration with an emphasis in Finance-Investments from
California State University, Long Beach. He attended Whittier College School
of Law, was awarded the American Jurisprudence Award for Agency Law, and
graduated with a Juris Doctorate degree in 1978. Mr. Billstein is a member of
the State Bar of California.
Class I
(Directors continuing in office with a term expiring in 2002)
<TABLE>
<CAPTION>
Name Age Director Since
---- --- --------------
<S> <C> <C>
William J. Howell....................................... 57 1999
</TABLE>
William J. Howell has served as a director since June 1999. Since April 1,
2000, he has served as the Company's Vice President and General Counsel. Prior
to April 1, 2000, Mr. Howell was an attorney who practiced business law in San
Diego, California. Mr. Howell's practice primarily focused on providing
consumer and small business financial services in the areas of bankruptcy,
reorganization and other workouts. Mr. Howell received a Bachelors degree in
comparative literature from California State University, Long Beach in 1970
and a Juris Doctorate degree in 1976 from the University of San Diego, School
of Law. Mr. Howell is a member of the State Bar of California.
Committees and Meetings of the Board of Directors
The Board of Directors of the Company held six (6) meetings during the
fiscal year ended December 31, 1999. The Board has an Audit Committee, a
Compensation Committee and a Nominating Committee.
The Audit Committee meets with the Company's independent auditors to
prepare for and to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent auditors to be
retained; and receives and considers the auditor's comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. During 1999, the Audit
4
<PAGE>
Committee consisted of Mr. Barnes, Mr. Billstein and Mr. Howell. Assuming the
election of Mr. Aplin, the composition of the Audit Committee of the Board of
Directors will be Mr. Aplin, Mr. Barnes and Mr. Billstein. Mr. Aplin and Mr.
Barnes are not employees of the Company. The Audit Committee met two (2) times
during 1999 to discuss the annual audit with the Company's independent
auditors.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants
under the Company's stock option plan and otherwise determines compensation
levels and performs such other functions regarding compensation as the Board
may delegate. During 1999, the Compensation Committee consisted of Mr. Barnes,
Mr. Billstein and Mr. Howell. Assuming the election of Mr. Aplin, the
composition of the Compensation Committee of the Board of Directors will be
Mr. Aplin and Mr. Barnes. The Compensation Committee met two (2) times during
1999.
The Nominating Committee identifies and screens candidates for membership
on the Company's Board of Directors. During 1999, the Nominating Committee
consisted of Mr. Alderman and Mr. Kubota. The Nominating Committee met one (1)
time during 1999. Following the 2000 Annual Meeting of Stockholders, the
Nominating Committee will be composed of Mr. Alderman and Mr. Howell.
During the fiscal year ended December 31, 1999, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the
committees on which he served, held during the period for which he was a
director or committee member, respectively.
Stockholders may recommend nominees for election as directors by writing to
the Chief Executive Officer of the Company.
Directors' Compensation
The Company's outside directors receive cash compensation of $1,000 for
each Annual Shareholders' meeting, and $750 for each Board meeting attended
and may be reimbursed for certain expenses in connection with attendance at
Board of Directors and committee meetings. Additionally, outside directors
receive an annual grant of 10,000 options to purchase shares of the Company's
common stock. Such options are exercisable at a minimum of the fair market
value of the Company's common stock on the date of grant and vest in equal
annual installments over a 4-year period.
Vote Required
The nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote for
them, a quorum being present, shall be elected as directors. Only votes cast
"FOR" a nominee will be counted, except that the accompanying proxy will be
voted for all nominees in the absence of instructions to the contrary. Broker
non-votes and proxies marked "withheld" as to one or more nominees will result
in the respective nominees receiving fewer votes. However, the number of votes
otherwise received by the nominees will not be reduced by such action.
5
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each of
the Company's executive officers as of April 28, 2000:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Elton Alderman..................... 61 President and Chief Executive Officer
Thomas C. Billstein................ 47 Chief Operating Officer and Secretary
William J. Howell.................. 57 Vice President and General Counsel
Nicholas M. Rosier................. 54 Chief Financial Officer
</TABLE>
Biographical summaries regarding Messrs. Alderman, Billstein and Howell
have been presented earlier.
Nicholas M. Rosier has served as Chief Financial Officer of the Company and
PSL since July 1997. From March 1997 through June 1997, Mr. Rosier served as
the Controller of PSL. For the four year period prior to his joining PSL, Mr.
Rosier was the Controller and Financial Accounting Manager of two divisions
for DePUY, Inc., a major public manufacturing company in the global orthopedic
industry. Prior to that position, Mr. Rosier was the Controller/Director of
Finance for thirteen years for Adams Rite Manufacturing Company, a privately
owned manufacturer of locks and automotive equipment. He holds a Bachelors
degree in accounting and finance from H.B.S. in Holland.
EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth the compensation paid in the years ended
December 31, 1999, 1998 and 1997 to the Company's Chief Executive Officer and
the Company's other executive officers (collectively, the "Named Executive
Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------- ---------------------------
Name and Restricted Stock Option All Other
Principal Position Year Salary ($) Bonus ($) Awards ($)(/1/) Grants (#) Compensation ($)
------------------ ---- ---------- --------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Elton Alderman.......... 1997 134,000 90,000(/2/)(/4/) -- 500,000 --
President and Chief 1998 161,144 60,000(/3/) -- -- --
Executive Officer 1999 162,058 -- -- -- --
Thomas C. Billstein..... 1997 120,000 60,000(/2/)(/5/) -- 200,000 --
Chief Operating Officer 1998 131,491 30,000(/3/) -- -- --
and Secretary 1999 145,530 -- -- -- --
Nicholas M. Rosier...... 1997 61,993 20,000(/6/) -- 20,000 --
Chief Financial Officer 1998 77,648 12,500(/3/) -- -- --
1999 83,513 -- -- 35,000 --
</TABLE>
- --------
(1) At December 31, 1999, the above-named individuals collectively held
approximately 5,348,200 shares of Common Stock with a value of $1,657,942
in the aggregate, based on the closing share price of $0.31 per share on
such date.
(2) Represents an amount paid to the named individual in 1998 for his
performance in 1997.
(3) Represents an amount paid to the named individual in 1999 for his
performance in 1998.
(4) In addition to the foregoing amount, Mr. Alderman received advances from
the Company on his annual bonus in the amount of $81,365. The balance of
such advances outstanding as of April 28, 2000 was $51,086. It is intended
that Mr. Alderman will reimburse the Company in payments during 2000. Any
remaining advance will be offset against bonuses to be paid in fiscal
2001.
6
<PAGE>
(5) In addition to the foregoing amount, Mr. Billstein received advances from
the Company on his annual bonus in the amount of $129,550. The balance of
such advances outstanding as of April 28, 2000 was $98,727. It is intended
that Mr. Billstein will reimburse the Company in payments during 2000. Any
remaining advance will be offset against bonuses to be paid in fiscal
2001.
(6) Includes $12,500 paid to Mr. Rosier in 1998 for his performance in 1997.
Option Grants in Last Fiscal Year
The following table sets forth information concerning stock options granted
to the Named Executive Officers during 1999. The hypothetical present values
of stock options granted in 1999 are calculated under a modified Black-Scholes
model, a mathematical formula used to value options. The actual amount, if
any, realized upon exercise of stock options will depend upon the amount by
which the market price of the Common Stock on the date of exercise exceeds the
exercise price. The individuals named below will not be able to realize a gain
from the stock options granted unless, during the exercise period, the market
price of the Common Stock is above the exercise price of the options. The
option holder would also benefit from an increase in the market price of
Common Stock.
<TABLE>
<CAPTION>
Hypothetical
% of Total Exercise or Present Value at
Number of Securities Options Granted To Base Price Expiration Date of Grant
Name Underlying Options Employees in Fiscal Year ($/sh) Date $(/1/)
---- -------------------- ------------------------ ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Elton Alderman.......... 0 0 -- -- --
Thomas C. Billstein..... 0 0 -- -- --
Nicholas R. Rosier...... 35,000 4.2% $0.44 11/25/09 $15,377
</TABLE>
- --------
(1) The modified Black-Scholes model used to calculate the hypothetical values
at date of grant considers a number of factors to estimate the option's
present value, including the stock's historic volatility calculated using
the closing price of Common Stock, the estimated average holding period of
the option, interest rates and the stock's expected dividend yield. The
assumptions used in the valuation of the options were: stock price
volatility range of 71.5%--253.8%, average holding period of 74 months,
interest rate of 6.0% and no dividend yield.
There is no assurance that the hypothetical present values of stock options
presented in the table above represent the actual values of the options, and
the hypothetical values shown should not be construed as predictions of the
future value of Common Stock
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth certain information regarding option
exercises during the fiscal year ended December 31, 1999 by each of the Named
Executive Officers:
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-The-Money Options
Unexercised Options at at Fiscal Year
Shares Value Fiscal Year-End (#) End($)(/1/)
Acquired on Realized ------------------------- -------------------------
Name Exercise # ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Elton Alderman.......... 0 0 200,000 300,000 0 0
Thomas C. Billstein..... 0 0 80,000 120,000 0 0
Nicholas M. Rosier...... 0 0 8,000 47,000 0 0
</TABLE>
- --------
(1) Value is based on the closing sales price for the Common Stock as reported
on the American Stock Exchange on December 31, 1999 (the "Fair Market
Value") minus the exercise price or base price of "in-the-money" options.
The Fair Market Value of the Common Stock as of December 31, 1999 was
$0.31 per share.
7
<PAGE>
Stock Option and Purchase Plans
1997 Stock Incentive Plan
The Company's 1997 Stock Incentive Plan (the "Plan") was adopted by the
Company's stockholders and the Board of Directors in June 1997. The Plan
provides for the granting of "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonqualified stock options and restricted stock. The Plan has authorized for
issuance up to 2,500,000 shares of Common Stock. Under the Plan, shares of
Common Stock may be granted to directors, officers, employees, consultants and
other service providers of the Company, except that incentive stock options
may not be granted to non-employee directors. The Plan is administered by the
Board of Directors or a committee appointed by the Board of Directors (the
"Committee"), which has sole discretion and authority, consistent with the
provisions of the Plan, to determine which eligible participants will receive
options, the time when options will be granted, the terms of options granted
and the number of shares which will be subject to options granted under the
Plan. Presently, the Compensation Committee administers the Plan. As of
December 31, 1999, there were 2,229,368 options outstanding under the Plan at
a weighted average exercise price of $1.55 per share. Officers and directors
hold options to purchase 815,000 shares of Common Stock, 288,000 of which were
exercisable as of December 31, 1999.
The exercise price under the Plan is determined by the Board of Directors,
provided that, generally in the case of an incentive stock option, the
exercise price shall be equal to the fair market value of the Common Stock as
of the date of grant, as determined by the Board of Directors. In the case of
an incentive stock option granted to an optionee who owns more than 10% of the
voting power of all classes of stock of the Company or any parent or
subsidiary of the Company (a "10% Holder"), the exercise price may be no less
than 110% of the fair market value of the Common Stock on the date the option
is granted. The Board of Directors has the authority to determine the time or
times at which options granted under the Plan become exercisable, provided
that incentive options must expire no later than ten years from the date of
grant, or five years in the case of a 10% Holder. Options are not assignable
and are nontransferable, other than upon death by will and the laws of descent
and distribution, and generally may be exercised only by an employee while
employed by the Company or within 30 days after termination of employment.
The Board of Directors may, in its discretion, amend or terminate the 1997
Stock Incentive Plan. However, no amendment or termination may adversely
affect a participant's rights as to prior grants. The Plan shall terminate in
any event in June 2007.
Employment Agreements
On January 21, 2000, the Company entered into an employment agreement with
Mr. Alderman for an initial term of 5 years with automatic renewal for
successive five-year periods unless either party gives written notice of the
non-renewal at least 180 days prior to the expiration of the then-current
term. The employment agreement provides for an annual base salary of $180,000
(with minimum annual increases in the base of 10%), an incentive bonus
determined in accordance with the Company's incentive compensation plan,
options to purchase 60,000 shares of Common Stock at an exercise price equal
to $0.69 per share granted under the Company's 1997 Stock Incentive Plan, an
automobile allowance of up to $1,000 per month and certain other incentives
set forth therein. Upon termination of Mr. Alderman's employment agreement by
the Company for reason other than "cause," as defined in the employment
agreement, or by Mr. Alderman for "good reason," as defined in the employment
agreement, Mr. Alderman will be entitled to receive, as severance pay, an
amount equal to Mr. Alderman's current monthly salary multiplied by thirty-six
months, plus the payment of certain additional benefits, such as health
insurance, for a period of twelve months. Severance pay shall be made fifty
percent (50%) in one lump sum with the balance payable in equal installments
over a twelve-month period following termination. Mr. Alderman's employment
agreement also contains confidentiality, proprietary rights and dispute
resolution provisions.
8
<PAGE>
On January 21, 2000, the Company entered into an employment agreement with
Mr. Billstein for an initial term of 4 years with automatic renewal for
successive four-year periods unless either party gives written notice of the
non-renewal at least 180 days prior to the expiration of the then-current
term. The employment agreement provides for an annual base salary of $143,000
(with minimum annual increases in the base of 5%), an incentive bonus
determined in accordance with the Company's incentive compensation plan,
options to purchase 45,000 shares of Common Stock at an exercise price equal
to $0.63 per share granted under the Company's 1997 Stock Incentive Plan, an
automobile allowance of up to $1,000 per month and certain other incentives
set forth therein. Upon termination of Mr. Billstein's employment agreement by
the Company for reason other than "cause," as defined in the employment
agreement, or by Mr. Billstein for "good reason," as defined in the employment
agreement, Mr. Billstein will be entitled to receive, as severance pay, an
amount equal to Mr. Billstein's current monthly salary multiplied by twenty-
four months, plus the payment of certain additional benefits, such as health
insurance, for a period of twelve months. Severance pay shall be made fifty
percent (50%) in one lump sum with the balance payable in equal installments
over a twelve-month period following termination. Mr. Billstein's employment
agreement also contains confidentiality, proprietary rights and dispute
resolution provisions.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of Mr.
Howell, Mr. Barnes and Mr. Billstein. The following report on executive
compensation is furnished by the Compensation Committee for the year ended
December 31, 1999.
General Compensation Policy
The Company's compensation policy is designed to attract and retain
qualified key executives critical to the Company's success and to provide such
executives with performance-based incentives tied to the achievement of
Company milestones. One of the primary objectives is to have a substantial
portion of each executive officer's total compensation contingent upon the
Company's performance as well as upon the individual's contribution to the
Company's success as measured by his personal performance. Accordingly, each
executive officer's compensation package is comprised primarily of three
elements: (i) base salary which reflects individual performance and expertise
and is designed to be competitive with salary levels in the industry; (ii)
variable performance awards payable in cash and tied to the Company's
achievement of certain goals; and (iii) long-term stock-based incentive awards
which strengthen the mutuality of interests between the executive officers and
the Company's stockholders.
Factors
The principal factors which the Compensation Committee and the Board of
Directors considered in establishing the components of each executive
officer's compensation package for the 1999 fiscal year are summarized below.
However, the Compensation Committee may in its discretion apply different
factors, particularly different measures of financial performance, in setting
executive compensation in future fiscal years.
Base Salary
The base salary levels for the executive officers were recommended by the
Compensation Committee and established by the Board of Directors for the 1999
fiscal year on the basis of the following factors: personal performance, the
estimated salary levels in effect for similar positions at a select group of
companies with which the Company competes for executive talent, and internal
comparability considerations. Although the Compensation Committee reviewed
various compensation surveys, the Compensation Committee did not rely upon any
specific survey for comparative compensation purposes. Instead, the
Compensation Committee made its decisions as to the appropriate market level
of base salary for each executive officer on the basis of its understanding of
the salary levels in effect for similar positions at those companies with
which the Company competes for executive talent. On January 21, 2000, the
Committee approved employment agreements for the Chief Executive Officer and
Vice President whereby the 2000 base salaries are $180,000 and $143,000,
respectively. The agreements are for five year and four year terms,
respectively. The Compensation Committee is required to review the base salary
on or before February 15 of each year to determine the increase in base salary
for the ensuing year. In any event, the increase shall be no less than 10% or
5%, respectively.
Annual Incentive Compensation
Executive officers have an opportunity to earn annual incentives based upon
performance targets. The Compensation Committee may also award bonuses in
cases where such performance targets are not met if it determines that the
circumstances warrant such action. For fiscal year 1999, the performance
targets for the executive officers included revenues, pre-tax profits and
earnings per share. The weight given to each factor varied from individual to
individual. Additionally, each executive officer has a discretionary portion
of the annual incentive linked to achievement of non-financial goals, which
differ depending upon the responsibilities of the executive officer in
question.
10
<PAGE>
Long-Term Incentive Compensation
The 1997 Stock Incentive Plan also provides the Compensation Committee with
the ability to align the interests of the executive officer with those of the
stockholders and provide each individual with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in
the business. The number of shares subject to each option grant is based upon
the executive officer's tenure, level of responsibility and relative position
in the Company. Stock options totaling 827,000 shares were granted to
employees and consultants, 35,000 of which were granted to the executive
officers during 1999. The exercise price for the stock options is the fair
market value of the stock on the date of the grant. Options generally vest at
a rate of 20% per year starting on the anniversary date of the option grant
and are contingent upon the officer's continued employment with the Company.
Accordingly, the option will provide a return to the executive officer only if
he or she remains in the Company's employ and the market price of the
Company's Common Stock appreciates over the option term.
CEO Compensation
The Chief Executive Officer participates in the compensation program
discussed above. The Compensation Committee set the base salary for Mr. Elton
Alderman, the Company's Chief Executive Officer for the 1999 fiscal year, at a
level which is designed to provide him with a salary competitive with salaries
paid to chief executive officers of similarly-sized companies in the industry
and commensurate with Mr. Alderman's experience. The Compensation Committee
did not award an incentive payment to Mr. Alderman in 1999. Mr. Alderman
received no option grants during the year ended December 31, 1999.
Respectfully submitted,
Bruce F. Barnes
Thomas C. Billstein
William J. Howell
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 1999, the Compensation Committee was
comprised of two (2) directors who were neither officers nor employees, Mr.
Barnes and Mr. Howell, and one (1) director, Mr. Billstein, who is the
Company's Chief Operating Officer and Secretary. As discussed more fully in
the sections entitled "EXECUTIVE COMPENSATION" and "CERTAIN TRANSACTIONS", Mr.
Billstein has outstanding advances from the Company in the amount of $98,727
as of April 28, 2000. Additionally, Mr. Billstein serves concurrently as an
officer and director of both the Company and PSL.
11
<PAGE>
CERTAIN TRANSACTIONS
In January 1997, Prolong Acquisition Corporation, a Delaware corporation
("PAC") owned by Elton Alderman and Thomas C. Billstein, acquired the
International Hot Rod Association, a sanctioning body for certain motorsports
competitions commonly known as drag races. Following the acquisition, PAC was
renamed the International Hot Rod Association, Inc. (the "IHRA"). It was
contemplated that the Company or its wholly-owned operating subsidiary,
Prolong Super Lubricants, Inc., a Nevada corporation ("PSL") would purchase an
equity interest in the IHRA. In February 1997, the Board of Directors formally
considered purchasing an equity interest in the IHRA but determined not to
make such an investment at that time. The proposed terms were substantially
the same as those terms at which Messrs. Alderman and Billstein made the
acquisition. Messrs. Alderman and Billstein abstained from voting on such
proposed transaction. During 1998, Messrs. Alderman and Billstein sold a
portion of their ownership interest in the IHRA and in January 1999, they sold
their remaining ownership interest.
Currently, the Company is a party to a sponsorship agreement with the IHRA.
During 1997, the Company paid the IHRA $50,000 for sponsorship of the Prolong
Super Lubricants Spring Nationals in Bristol, Tennessee and $35,000 for
sponsorship of the Prolong Super Lubricants--Ohio Lottery World Nationals in
Norwalk, Ohio. In addition to the above contemplated transaction with the
IHRA, the Company had advanced the IHRA approximately $280,000 in the
aggregate as a prepayment for sponsorship and title rights of nationally
televised national events. During 1998 and 1999, $117,428 and $83,931,
respectively, of the advance was applied to national event sponsorships and
advertising resulting in a remaining advance balance of $78,641 at
December 31, 1999 to be used for similar activities in 2000.
Messrs. Alderman, Billstein and Rosier all hold concurrent positions as
officers and/or directors of both the Company and PSL.
Messrs. Alderman and Billstein have outstanding balances from the Company
as of April 28, 2000 in the amounts of $51,086 and $98,727, respectively, for
advances against annual bonuses. It is intended that such advances will be
repaid to the Company during 2000 and 2001. Any remaining balance on such
advances will be offset against bonuses to be paid in fiscal 2001.
The Company is a party to three agreements with Barnes Marketing, Inc.
("BMI"), which serves as a representative for both Al Unser and Norris Racing,
Inc. Mr. Barnes currently serves as the President of BMI. BMI receives a
commission from its clients based on revenues generated by such agreements.
During fiscal 1999, the Company paid approximately $295,000 to Mr. Unser and
Norris Racing, Inc. under such agreements.
Other than the related transactions disclosed above, the Company is not
aware of any transactions or proposed transactions to which the Company or PSL
was or is to be a party, in which any director, executive officer, nominee for
election as a director, security holder or any member of the immediate family
of the persons named above had or is to have a direct or indirect material
interest.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Based solely upon its review of the copies of Forms 3 and 4 and amendments
thereto furnished to the Company, or written representations that no annual
Form 5 reports were required, the Company believes that all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") applicable to its directors, officers and any
persons holding ten percent (10%) or more of the Company's Common Stock were
made with respect to the Company's fiscal year ended December 31, 1999 with
the following exception: a Form 5 prepared on behalf of Bruce F. Barnes, a
director of the Company during such fiscal year, to report Mr. Barnes' stock
purchase in October 1999, was not filed timely. The delinquent form was
subsequently filed in March 2000.
12
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative stockholder return
on the Company's Common Stock with the cumulative total return of the Russell
2000 Index and an industry peer group identified by the Company (the "Peer
Group Index"). The Peer Group Index consists of WD-40 Company and Wynn's
International, Inc. The Peer Group Index returns consist of the weighted
returns of each component issuer according to such issuer's respective stock
market capitalization at the beginning of each period for which a return is
indicated.
The graph assumes an investment of $100 in the Company's Common Stock on
September 3, 1997, the date on which the Company's Common Stock was first
registered under the Exchange Act, and an investment in each of the Russell
2000 Index and the Peer Group Index of $100 on September 3, 1997. The graph
covers the period from September 3, 1997 through the fiscal year ended
December 31, 1999.
The calculation of cumulative stockholder return for the Russell 2000 Index
and the Peer Group Index includes reinvestment of dividends. The calculation
of cumulative stockholder return on the Company's Common Stock does not
include reinvestment of dividends because the Company did not pay dividends
during the measurement period. The performance shown is not necessarily an
indicator of future price performance.
<TABLE>
<CAPTION>
9/03/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99 6/30/99 9/30/99 12/31/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROLONG INTERNATIONAL 100.0 90.91 81.82 115.91 106.91 59.27 52.36 42.18 43.27 22.91 11.27
PEER GROUP INDEX 100.0 106.34 102.88 109.73 96.14 89.48 107.34 98.04 98.04 84.89 78.82
RUSSELL 2000 INDEX 100.0 107.32 103.72 114.16 108.83 86.91 100.82 95.02 95.02 102.17 120.57
</TABLE>
Notwithstanding anything to the contrary set forth in the Company's previous
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the Report of the
Compensation Committee of the Board of Directors On Executive Compensation and
the Stock Performance Graph shall not be incorporated by reference into any
such filings.
13
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche, LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 2000, and recommends that stockholders vote for
ratification of such appointment. In determining whether the proposal has been
approved, abstentions will be counted as votes against the proposal and broker
non-votes will not be counted as votes for or against the proposal or as votes
present and voting on the proposal. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Deloitte & Touche, LLP has audited the Company's financial statements
annually since its fiscal year ended December 31, 1996. Its representatives
are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond
to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 2001 Annual
Meeting of Stockholders and presentation in the Company's proxy statement with
respect to such meeting should arrange for such proposal to be delivered to
the Company at its principal place of business no later than January 11, 2001
in order to be considered for inclusion in the Company's proxy statement
relating to the meeting. Matters pertaining to such proposals, including the
number and length thereof, eligibility of persons entitled to have such
proposals included and other aspects are regulated by the Securities Exchange
Act of 1934, Rules and Regulations of the Securities and Exchange Commission
and other laws and regulations to which interested persons should refer.
On May 21, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act
of 1934, as amended. The amendment to Rule 14a-4(c)(1) governs the Company's
use of its discretionary proxy voting authority with respect to a stockholder
proposal which is not addressed in the Company's proxy statement. The new
amendment provides that if a proponent of a proposal fails to notify the
Company at least 45 days prior to the month and day of mailing of the prior
year's proxy statement, then the Company will be allowed to use its
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
With respect to the Company's 2001 Annual Meeting of Stockholders, if the
Company is not provided notice of a stockholder proposal, which the
stockholder has not previously sought to include in the Company's proxy
statement, by March 29, 2001, the Company will be allowed to use its voting
authority as outlined.
OTHER MATTERS
The Company has enclosed with this Proxy Statement a copy of Form 10-K for
the year ended December 31, 1999.
Management is not aware of any other matters to come before the meeting. If
any other matter not mentioned in this Proxy Statement is brought before the
meeting, the proxy holders named in the enclosed Proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
14
<PAGE>
Stockholders who do not expect to attend in person are urged to promptly
execute and return the enclosed Proxy.
By Order of the Board of Directors
/s/ THOMAS C. BILLSTEIN
Thomas C. Billstein
Secretary
Irvine, California
May 12, 2000
15
<PAGE>
PROXY
PROLONG INTERNATIONAL CORPORATION
Proxy Solicited by the Board of Directors
Annual Meeting of the Stockholders--June 14, 2000
The undersigned hereby nominates, constitutes and appoints Elton Alderman and
Nicholas M. Rosier, and each of them individually, the attorney, agent and
proxy of the undersigned, with full power of substitution, to vote all stock of
PROLONG INTERNATIONAL CORPORATION which the undersigned is entitled to
represent and vote at the 2000 Annual Meeting of Stockholders of the Company to
be held at the Atrium Hotel, located at 18700 MacArthur Blvd., Irvine,
California 92612, on June 14, 2000, at 10:00 A.M., and at any and all
adjournments or postponements thereof, as fully as if the undersigned were
present and voting at the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1 AND 2
1. Election of Directors
[_] FOR [_] WITHHOLD AUTHORITY
all nominees listed belowto vote for all nominees listed below
(except as marked to the contrary below)
Election of the following two (2) nominees to serve as Class II
directors:
R. Jack Aplin
Bruce F. Barnes
(Instructions: To withhold authority to vote for any nominee, print that
nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Ratification of Deloitte & Touche, LLP as independent auditors:
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, on such other business as may properly come before
the meeting or any adjournment thereof.
<PAGE>
IMPORTANT--PLEASE SIGN AND DATE AND RETURN PROMPTLY
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS PROXY AND "FOR"
RATIFICATION OF DELOITTE & TOUCHE, LLP AS INDEPENDENT AUDITORS.
Date ____, 2000
----------------------
(Signature of
stockholder)
Please sign your name
exactly as it appears
hereon. Executors,
administrators,
guardians, officers
of corporations and
others signing in a
fiduciary capacity
should state their
full titles as such.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND
RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
