SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
------------------------------------------------
APPLIED INTELLIGENCE GROUP, INC.
-----------------_------------------------------
(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 14a6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 9, 1998
The 1998 Annual Meeting of Shareholders (the
"Meeting") of Applied Intelligence Group, Inc., an
Oklahoma corporation (the "Company"), will be held on
Tuesday, June 9, 1998 at 10:00 a.m. at the Harvey
Business Center, Room 104, on the campus of Oklahoma
Christian University of Science & Arts, 2501 East
Memorial Road, Oklahoma City, Oklahoma 73134 for the
following purposes:
1. To elect two Class II Directors to the Board of
Directors for a term expiring in 2001.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
independent public accountants of the Company for the fiscal year
ending December 31, 1998.
3. To transact such other business as may come before
the Meeting or any adjournment thereof.
The foregoing items of business are more fully described in
the Proxy Statement accompanying this Notice. Only shareholders of
record at the close of business on April 17, 1998, are entitled to
notice of and to vote at the Meeting.
All shareholders are cordially invited to attend the Meeting in person.
To assure your representation at the Meeting, however, you are urged to
mark, sign, date and return the enclosed proxy as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. Any shareholder
attending the Meeting may vote in person even if he or she previously has
returned a proxy.
The Proxy Statement which accompanies this Notice contains additional
information regarding the proposals to be considered and voted upon at the
Meeting, and shareholders are encouraged to read it in its entirety.
BY ORDER OF THE BOARD OF DIRECTORS
________________________________
Robert N. Baker
Secretary
Edmond, Oklahoma
April 27, 1998
APPLIED INTELLIGENCE GROUP, INC.
13800 BENSON ROAD
EDMOND, OKLAHOMA 73013
______________________________
PROXY STATEMENT
___________________________________
1998 ANNUAL MEETING OF SHAREHOLDERS
JUNE 9, 1998
_______________________________
VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Applied
Intelligence Group, Inc., an Oklahoma Corporation
(the "Company"), by the Company's Board of Directors
(the "Board") for use at the Annual Meeting of
Shareholders (the "Meeting") to be held at the Harvey
Business Center, Room 104, on the campus of Oklahoma
Christian University of Science & Arts, 2501 East
Memorial Road, Oklahoma City, Oklahoma 73134, on
Tuesday, June 9, 1998 at 10:00 a.m., and at any
adjournments thereof, for the purposes set forth in
this Proxy Statement and in the accompanying Notice
of Annual Meeting of Shareholders.
These proxy solicitation materials were first
mailed on or about April 27, 1998, to all
shareholders entitled to vote at the Meeting.
Voting Securities and Voting Rights
Shareholders of record at the close of business
on April 17, 1998 (the "Record Date") are entitled to
notice of and to vote at the Meeting. On the Record
Date, there were issued and outstanding 2,730,548 of
the Company's Common Stock, $.001 par value per share
(the "Common Stock"), of which 1,500,243 (54.9
percent) are held by the executive officers and
directors of the Company.
The presence, in person or by proxy, of the holders of a
majority of the total number of shares of Common
Stock outstanding constitutes a quorum for the
transaction of business at the Meeting. Each
shareholder voting at the Meeting, either in person
or by proxy, may cast one vote per share of Common
Stock held on all matters to be voted on at the
Meeting.
Assuming that a quorum is present, the affirmative
vote of a majority of the shares of Common Stock of
the Company present in person or represented by proxy
at the Meeting and entitled to vote is required: (i)
to elect two Class II Directors for terms expiring in
2001; (ii) to ratify the appointment of Coopers &
Lybrand L.L.P. as the independent public accountants
of the Company for the fiscal year ending December
31, 1998, and (iii) to transact such other business
as may properly come before the Meeting.
Votes cast by proxy or in person at the Meeting
will be tabulated by the election inspectors
appointed for the Meeting and will determine whether
a quorum is present. The election inspectors will
treat abstentions as shares that are present and
entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of
determining the approval of any matter submitted to
the shareholders for a vote. If a broker indicates
on the proxy that it does not have discretionary
authority as to certain shares to vote on a
particular matter, those shares will not be
considered as present and entitled to vote with
respect to that matter.
Voting of Proxies
When a proxy is properly executed and returned,
the shares it represents will be voted at the Meeting
as directed. If no specification is indicated, the
shares will be voted (i) "for" the election of the
nominees as set forth in the Proxy Statement and (ii)
"for" the ratification of the appointment of Coopers
& Lybrand L.L.P. as the independent public
accountants of the Company for the fiscal year ending
December 31, 1998.
Revocability of Proxies
Any person giving a proxy may revoke the proxy
at any time before its use by delivering to the
Company written notice of revocation or a duly
executed proxy bearing a later date or by attending
the Meeting and voting in person.
Expenses of Solicitation
The cost of soliciting proxies, including
expenses in connection with preparing and mailing
this Proxy Statement, will be borne by the Company.
In addition, the Company will reimburse brokerage
firms and other persons representing beneficial
owners of Common Stock of the Company for their
expenses in forwarding proxy material to such
beneficial owners. Solicitation of proxies by mail
may be supplemented by telephone, telegram, telex and
personal solicitation by the directors, officers or
employees of the Company. No additional compensation
will be paid for such solicitation.
Annual Report
The Company's 1997 Annual Report to Shareholders
(the "Annual Report"), which includes the Company's
Annual Report on Form 10-KSB and financial and other
information about the Company's activities for the
fiscal year ended December 31, 1997, is being mailed
to shareholders with this Proxy Statement, but is not
incorporated into this Proxy Statement.
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS, DIRECTORS AND OFFICERS
The following table sets forth certain
information as to the beneficial ownership of the
Common Stock of the Company as of April 17, 1998, by
(i) each director, including the nominee for
director, (ii) each executive officer named in the
Summary Compensation Table under the section entitled
"EXECUTIVE COMPENSATION" and (iii) all current
executive officers and directors of the Company as a
group, and (iv) each person known by the Company to
be the beneficial owner of more than five percent of
the Common Stock.
<TABLE>
<CAPTION>
Shares Percent of
Beneficially Outstanding
Name (and Address) of Beneficial Owned Shares
Owner
<S> <C> <C>
Robert L. Barcum(1) 554,616 20.3%
Robert N. Baker(1) 554,529 20.3%
Russell L. Reinhardt(1) 316,081 11.6%
David B. North(1) 89,861 3.3%
Executive Officers and Directors 1,520,299 54.8%
As a group (five persons)(2)
</TABLE>
_________________________________________
(1) The business address of the named person is 13800 Benson
Road, Edmond, Oklahoma 73013-6417.
(2) The number of shares and percent after this offering include
5,212 shares of Common Stock owned pursuant to the Employee Stock
Purchase Plan and issuable pursuant to exercisable stock options held
by an executive officer.
PROPOSAL TO ELECT DIRECTORS
Nominees
The Company's Certificate of Incorporation
provides that the number of directors shall be fixed
from time to time by resolution of the Board of Directors or
shareholders. Currently, the number of directors is fixed at five
and that number is divided into three classes, with one class
standing for election each year for three-year terms.
The Board of Directors has nominated Robert L. Barcum and
Robert N. Baker for re-election as a Class II Directors, each for a
three-year term expiring in 2001 or until his successor is elected
and qualified. Accordingly, after the election of directors, the Board
will consist of five directors, and if any vacancies occur, such vacancies
may be filled by a vote of a majority of the directors then in office.
Unless otherwise instructed, the proxy holders
will vote the proxies received by them for the re-
election of Messrs. Barcum and Baker as Class II
Directors. In the event that Messrs. Barcum or Baker
are unable or decline to serve as directors at the
time of the Meeting, the proxies will be voted for a
nominee, if any, designated by the current Board of
Directors to fill the vacancy. It is not expected
that Messrs. Barcum or Baker will be unable or will
decline to serve as a director.
The Board of Directors recommends a vote "For" Messrs.
Barcum and Baker.
The following table sets forth information regarding the
directors and nominees for director of the Company:
<TABLE>
<CAPTION>
Name Age Position Term
Expires
<S> <C> <C> <C>
Robert L. Barcum(1) 49 President, CEO and 1998
Chairman of the Board
Robert N. Baker(1) 46 Vice President-Network 1998
Services, Secretary
and Director
Russell L. Reinhardt 51 Vice President and 2000
Director
Lewis B. Kilbourne, Ph.D. 51 Director 2000
(2)(3)
Jimmy M. Wright(2)(3) 44 Director 1999
</TABLE>
___________________
(1) Member of Stock Option Committee of the Applied
Intelligence Group, Inc. 1995 Stock Option Plan.
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
The following is a brief description of the business background
of the directors and executive officers of the Company:
Robert L. Barcum, as a cofounder, has served as
a director and as an executive officer of the Company
since its formation in 1985 and currently serves as
Chairman of the Board, President and Chief Executive
Officer. Mr. Barcum is responsible for developing
the Company's national retail practice, including
product and services planning, marketing and business
alliances. Mr. Barcum has more than 25 years of
experience in management information systems for
retail organizations. He is active in the National
Retail Federation. Since 1991 he has served as an
outside director of Duckwall-ALCO Stores, Inc., a
publicly-held retailer and a Company customer. Since
1993, he has served as an outside director of
Commercial Distributing Inc., a distributor of
automotive products in the automobile after-market
and also a Company customer. Since 1995, he has
served on the Business Advisory Council of Oklahoma
Christian University of Science and Arts (formerly
Oklahoma Christian College), and since 1996 has
served as a member of the Advisory Board of Kent
State University.
Robert N. Baker, as a cofounder, has served as a
director and Vice President of the Company since its
formation in 1985 and currently serves as Vice
President-Network Services and Corporate Secretary.
Mr. Baker is responsible for developing the viaLink
services as well as managing the Network Services
business area. Mr. Baker has over 20 years of
experience in management, technical support and
systems development within the retail industry. He
graduated magna cum laude from Oklahoma Christian
University of Science and Arts with a Bachelor of
Science in Mathematics.
Russell L. Reinhardt has served as a director,
Vice President and Secretary since joining the
Company in 1986 and currently services as a director
and Vice President. Mr. Reinhardt is responsible for
large account management and assists on product
development. Mr. Reinhardt has 20 years experience
with the IBM Corporation during which time he held a
range of staff and management positions. Mr.
Reinhardt is a graduate of the University of Michigan
with a B.S.E. in Science Engineering.
David B. North has served as Vice President since
joining the Company in 1985 and currently serves as Vice
PresidentConsulting Services and Assistant Secretary.
Mr. North is the Company's chief computer scientist,
manages the Retail and Store Systems Consulting
business area, and serves as a system designer and
technical consultant. Mr. North was an instructor of
computer science at the University of Oklahoma for
two years and also an instructor, systems analyst and
program developer at Oklahoma Christian University of
Science and Arts. Mr. North is a graduate of
Oklahoma Christian University of Science and Arts
with a Bachelor of Science in Chemistry. He was
awarded a Masters of Science in Computer Science from
the University of Oklahoma and has completed further
graduate studies in Artificial Intelligence at the
University of Oklahoma.
John M. Duck joined the Company as Director of
Finance and Administration in 1991 and currently
serves as Vice President, Treasurer and Chief
Financial Officer. Mr. Duck is responsible for all
financial and tax reporting and compliance as well as
for overall direction of the Finance Department of
the Company. Prior to joining the Company, Mr. Duck served as
Chief Financial Officer of Griffin Entities, Inc. as
well as Mr. Rooter Corporation. Mr. Duck currently
serves on the Board of Directors of the Edmond
Chamber of Commerce and is a member of the Oklahoma
County Workforce Development Board. Mr. Duck is a
certified public accountant and holds a Bachelor of
Science in Economics from Oklahoma City University.
Larry R. Davenport has served as Vice President
of Sales and Marketing since joining the Company in
January 1998. Mr. Davenport is responsible for all
aspects of sales and marketing activities of the
Company. Mr. Davenport is a seasoned veteran with
over 17 years of managerial experience in sales and
marketing. He previously held the position of
Director of Sales and Marketing with Inacom
Information Systems of Atlanta and was Vice President
of Sales and Marketing at SDS, Inc. in Atlanta.
He also played an integral sales and marketing role
at Coin Financial Systems, Inc. and Automatic Data
Processing. Mr. Davenport has received over 30
industry awards for outstanding performance and
contributions. Mr. Davenport attended Central State
University (Oklahoma) with a major in Business
Administration/Marketing.
Lewis B. "Bucky" Kilbourne, Ph.D. has served as
director since December 1997. Dr. Kilbourne has 20 years of
financial experience in the retail, restaurant, and
banking business. Dr. Kilbourne is a Professor of
Finance and Economics at Oklahoma City University and
former Chief Financial Officer of Sonic Corp., a
public company. Dr. Kilbourne is also President of
Kilbourne and Associates, Inc., a management
consulting firm located in Oklahoma City that works
with regional firms experiencing earnings and cash
flow problems in the retail and restaurant industry.
Dr. Kilbourne received a BA from Louisiana State
University and a MA and Ph.D. from the University of
Pennsylvania.
Jimmy M. Wright has served as director since
February 1998. Mr. Wright recently retired as Vice
President of Distribution for Wal*Mart Stores, Inc.,
a public company, and has been actively involved in
Logistics for more than 25 years. During his 13 year
tenure at Wal*Mart Stores, Inc., he was involved in
all facets of strategic planning including supply
chain management, personnel, site selection, and
building design. Mr. Wright has served as an invited
advisor to the Defense Logistics Agency and has been
a multi-year participant in the U.S. Army's Wise
Person summits, which advise the Deputy Chief of
Staff Logistics on strategic logistics issues and
trends. Mr. Wright is currently with Diversified
Retail Solutions, L.L.C. Mr. Wright received his BBA
from the University of Texas Permian Basin.
Directors hold office until their successors
have been elected and qualified. All officers serve
at the pleasure of the Board of Directors. There are
no family relationships among any of the Company's
directors or executive officers of the Company.
Meetings and Committees of the Board of Directors
The Company's Bylaws authorize the Board of Directors
to appoint among its members one or more committees
composed in whole or in part by one or more directors. In
December 1997, the Board established two committees -- the
Audit Committee and the Compensation Committee, in addition
to the standing Stock Option Committee. The Board of Directors does
not have any other standing committees.
The Board of Directors of the Company held five
meetings during the fiscal year ended December 31,
1997, all of which were attended by all members of
the Board of Directors of the Company.
Board Committees
Audit Committee. The Audit Committee members
are Lewis B. Kilbourne, Ph.D. and Jimmy M. Wright.
The Committee, among other things, makes
recommendations to the Board regarding the
independent auditors to be nominated for ratification
by shareholders, reviews the services rendered by
such auditors and the related fees charged, reviews
with such auditors the scope of the annual audit and
the results thereof, and makes recommendations to the
Board regarding the same, assists the Board in
fulfilling its responsibilities relating to the
Company's accounting, financial reporting and
internal auditing policies and procedures, and
assists the Board and makes recommendations with
respect to the Company's budgets and longrange
financial planning.
Compensation Committee. The Compensation
Committee members are Lewis B. Kilbourne, Ph.D.,
Jimmy M. Wright, Kay Titchenal, Director of Human
Resources of the Company, and Robert N. Baker, Vice
President of the Company and an ex-officio member of
the Committee. The Committee is responsible for all
aspects of the Company's executive compensation
policies. The Compensation Committee has not issued
any reports on Executive Compensation.
Stock Option Committee
Mr. Barcum and Mr. Baker, members of the
Board of Directors, and Ms. Kay Titchenal, the
Director of Human Resources of the Company, serve on
the Stock Option Committee. The Stock Option
Committee's principal functions are to determine
individuals to whom stock options will be granted
under the Company's 1995 Stock Option Plan, the terms
on which such options will be granted, and to
administer and interpret the Plan. The Stock Option
Committee held two meetings during the fiscal year
ended December 31, 1997.
Director Compensation
All present directors who are executive officers
of the Company receive no additional compensation for
their services as directors or as members of the
Board Committees upon which they serve. In 1998, the
Board of Directors adopted the Applied Intelligence
Group, Inc. 1998 Non-Qualified Stock Option Plan to
attract, retain and motivate directors, executive
officers, key employees and independent contractors
of the Company and its subsidiaries by way of
granting non-qualified stock options with stock
appreciation rights attached. In addition to the
grant of non-qualified stock, directors who are not
officers or employees of, or consultants to, the
Company receive $2,500 cash compensation per quarter
regardless of the number of Board of Directors'
meetings at which they are present and for each
Committee meeting at which they are present not held
in conjunction with a meeting of the Board of
Directors. Outside directors are also reimbursed for
their expenses for each Board and committee meeting
attended.
As of March 23, 1998, the Company had granted
77,500 stock options to two outside directors. Each
of these stock options is exercisable for the
purchase of one share of Common Stock for $3.125 per
share. Furthermore, these stock options are only
exercisable while the option holder is serving as a
member of the Board of Directors during the period
commencing December 31, 1998 through December 31,
2000.
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The following table sets forth the total compensation
received for services rendered in all capacities to the Company
for the years ended December 31, 1995, 1996 and 1997, by the Company's
President and it executive officers whose aggregate cash compensation
exceeded $100,000 (together the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1)
Name and Principal Position Year Salary(2) Bonus(3)
<S> <C> <C> <C>
Robert L. Barcum(3) 1997 $169,716 $ -
President and Chief Executive 1996 169,150 -
Officer 1995 170,710 -
Robert N. Baker(3) 1997 $169,940 $ -
Vice President-Network Services, 1996 169,159 -
Secretary 1995 170,389 -
Russell L. Reinhardt(3) 1997 $171,774 $ -
Vice President 1996 171,840 -
1995 171,256 -
David B. North(4) 1997 $125,817 $ -
Vice President-Consulting 1996 116,248 -
Services, 1995 109,194 -
Assistant Secretary
</TABLE>
___________________________
(1) The named executive officer received additional
non-cash compensation, perquisites and other
personal benefits; however, the aggregate amount and
value thereof did not exceed 10 percent of the total
annual salary and bonus paid to and accrued for the
named executive officer during the year.
(2) Dollar value of base salary (both cash and non-
cash) earned during the year.
(3) During the years 1997, 1996 and 1995, Robert L.
Barcum, Robert N. Baker and Russell L. Reinhardt
each were paid the same annual base salary of
$175,127. The differences in the amounts presented
above are due to different levels of participation
of each individual in the Section 125 Cafeteria Plan
offered by the Company to all employees on a non-
discriminatory basis.
(4) Mr. North was granted a total of 35,000 stock
options under the 1995 Stock Option Plan, of which
15,000 options are exercisable as of December 31,
1997 and the remaining 20,000 options will become
exercisable at December 31, 1998.
Stock Option Plan
The Company established the Applied Intelligence Group,
Inc.1995 Stock Option Plan (the "Stock Option Plan" or the
"Plan") in March 1995, and amended the Plan on April 29, 1996.
The Plan provides for the issuance of incentive stock options
("ISO Options") and non-incentive stock options ("NSO Options") to key
management, directors, key professional employees and
key professional non-employee service providers of
the Company. The number of shares of Common Stock
authorized and reserved for issuance under the Plan
is 300,000. Under the Plan, as of December 31, 1997
and April 17, 1998, options to purchase a total of
173,078 shares of Common Stock at prices ranging from
$.63 to $3.88, with a weighted average exercise price
of $2.71 per share, were outstanding, of which
112,328 were exercisable at an average exercise price
of $2.08.
The Stock Option Committee, which is currently
comprised of Ms. Kay H. Titchenal and Messrs. Barcum
and Baker, administers and interpret the Plan and has
authority to grant options to all
eligible participants and determine the types of
options granted, the terms, restrictions and
conditions of the options at the time of grant.
The option price of the Common Stock is
determined by the Stock Option Committee. The option
price of NSO Options may not be less than 75 percent
of the fair market value of the shares on the grant
date of the option. In the case of an ISO Option,
the option price may not be less than the fair market
value of the Common Stock on the date of the grant of
the ISO Option. The fair market value of a share of
the Common Stock is determined by the Stock Option
Committee. Upon the exercise of an option, the
option price must be paid in full, in cash, Common
Stock (at the fair market value thereof) or a
combination thereof. For a period of two years
ending November 21, 1998, the Company has agreed with
Barron Chase Securities, Inc., the underwriter of the
Company's initial public offering not to grant more
than 25,000 NSO Options having an option price of
less than fair market value of the shares on the date
of grant of the option, without written consent of
the Underwriter.
Options are exercisable during employment and
for a period of three months after the participant
ceases to be an employee, a director, or non-employee
service provider of the Company; however, in the
event of death or disability of the participant, the
ISO Options are exercisable for a period of one year
following death or disability. In any event, options
may not be exercised beyond the expiration date of
the option. NSO Options may be granted to key
management employees, directors, key professional
employees or key professional non-employee service
providers of the Company, while ISO Options may only
be granted to key management or key professional non-
employee service providers of the Company. No option
may be granted after February 28, 2005. Options are
not transferable except by will or by the laws of
descent and distribution.
All outstanding options granted pursuant to the Plan
will become fully vested and immediately exercisable in
the event that, following any stock option grant, (i)
within any 12-month period, the Company sells an
amount of Common Stock that exceeds 50 percent of the
number of shares of Common Stock outstanding
immediately prior to such 12-month period, or (ii) a
"change of control" occurs. For purposes of the
Plan, a "change of control" is defined as the
acquisition in a transaction or series of
transactions by any person, entity or group (two or
more persons acting as a partnership, limited
partnership, syndicate or other group for the purpose
of acquiring securities of the Company) of beneficial
ownership of 50 percent or more (or less than 50
percent as determined by a majority of the directors
of the Company) of either the then outstanding shares
of Common Stock or the combined voting power of the
Company's then outstanding voting securities.
Non-Qualified Stock Option Plan
On February 9, 1998, the Board of Directors of
the Company adopted the 1998 Non-Qualified Stock
Option Plan (the "NonQualified Stock Plan" or
"Plan"), to attract, retain and motivate directors,
executive officers, key employees and independent
contractors of the Company and its subsidiaries by
way of granting non-qualified stock options with
stock appreciation rights attached. The Non-
Qualified Stock Plan authorizes and reserves up to
300,000 shares of Common Stock for issuance and
options under the Plan. The option price shall not
be less than 85 percent of the fair market value of
the Common Stock on the date of grant. The Board of
Directors has the discretion to fix the period and
the time at which any options granted under the
Plan may be exercised; provided however, that all
options granted pursuant to the Plan expire after ten
years after the date of grant.
As of March 23, 1998 and April 17, 1998, the Company
had granted 87,500 stock options to two outside directors
and one independent contractor. Each of these stock
options is exercisable for the purchase of one share
of Common Stock for $3.125 per share. Furthermore,
these stock options are only exercisable while the
option holder is serving as a member of the Board of
Directors or as an independent contractor, during the
period commencing December 31, 1998 through December
31, 2000.
Stock Grant Plan
On February 10, 1998, the Board of Directors of
the Company adopted the 1998 Stock Grant Plan (the
"Stock Grant Plan" or "Plan") to attract, retain and
motivate consultants, independent contractors and key
employees of the Company and its subsidiaries by way
of granting shares of stock in the Company. The
Stock Grant Plan authorizes and reserves up to
150,000 shares of Common Stock of the Company for
issuance under the Plan. Shares of Common Stock
received pursuant to the Stock Grant Plan restrict
the sale, transfer or other disposal of said shares
for a period of one year. As of March 23, 1998 and
April 17, 1998, no shares of Common Stock had been
issued under the Stock Grant Plan.
Employee Stock Purchase Plan
The Company established the Applied Intelligence
Group, Inc. Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan" or "Plan" in April
1997, and it was approved by the shareholders at the
Annual Meeting of Shareholders on June 3, 1997. The
Employee Stock Purchase Plan provides the opportunity
for employees to purchase the Company's Stock through
payroll deductions, to encourage participation in the
ownership and economic progress of the Company. The
number of shares of Common Stock authorized and
reserved for issuance under the Plan is 100,000
shares. As of April 17, 1998, employees of the
Company have purchased 3,009 shares of Common Stock
at an average price of $2.81.
The Plan provides for the granting of stock
options to eligible employees of the Company. It is
intended that the Plan and the stock options granted
under the Plan will meet the qualification
requirements set forth in the Internal Revenue Code
of 1986, as amended (the "Code"). The Plan is
administered by the Board of Directors. The Board
administers and interprets the Plan and has the
authority to establish, adopt or revise rules and
regulations with respect to the Plan. The
interpretation of the Plan by the Board is final,
binding, and conclusive on all employees and
participants.
All full-time employees (i.e., whose customary
employment is 20 hours or more per week and more than
five months in any calendar year), who have been
continuously employed more than six months are
eligible to participate in the Plan by entering into
an option agreement to purchase shares of Common
Stock of the Company. Provided, however, the
employees who own or would own five percent or more
of the Company's Common Stock, including shares owned
by family members and indirectly through a
corporation, partnership or trust, immediately after
the options are granted in accordance with the option
agreement after giving effect to and assuming
exercise of such options and any other stock options
held by the employee-participant, are not eligible to
participate in the Plan.
The total number of shares of Common Stock authorized
and reserved for issuance under the Plan is 100,000. The
number of shares of Common Stock is subject to
appropriate adjustment in the event of any merger,
consolidation, recapitalization, reclassification,
stock dividend, stock split or similar transaction.
Plan participants may contribute up to $20 per pay
period into their account to purchase whole shares of
the Common Stock of the Company at pre-determined
calendar quarter grant dates or exercise dates. The
option price will be 85 percent of the per share fair
market value on the granting date or the exercise
date, whichever is the lesser, of the purchase
period. During each quarterly purchase period, a
participant will not be permitted to purchase more
than 50 shares of Common Stock. Any remaining
balance in the Participants' accounts after the
purchase of shares during a quarterly purchase period
will be carried over to the next quarterly purchase
period and exercise date. The stock options may not
be assigned, encumbered or otherwise transferred by
the participants, except by will or under laws of
inheritance.
The Plan will remain in force until March 31,
2002. The Board of Directors may amend the Plan in
any respect consistent with Sections 421 and 423 of
the Code, except that, without approval of the
shareholders, no amendment shall (i) increase the
maximum number of shares of Common Stock reserved
under the Plan other than in connection with a
merger, consolidation, recapitalization,
reclassification, stock split, combination of shares,
stock dividend or (ii) make the Plan available to any
person who is not an employee of the Company.
Other Stock Options
In connection with the transaction with Vantage
Capital Resources, Inc., (see Certain Relationships and
Related Transactions-Vantage Capital Resources, Inc.)
the Company issued 360,000 stock options at an
exercise price of $5.00 per share. Furthermore, in
connection with the transaction with ijob, Inc., the
Company issued 50,000 stock options at an exercise
price of $3.50 per share. As of December 31, 1997,
under all stock options granted by the Company,
options to purchase a total of 583,078 shares of
Common Stock ranging in price from $.63 to $5.00,
with a weighted average exercise price of $4.19 per
share were outstanding, of which, 522,328 were
exercisable at a weighted average exercise price of
$4.23. As of April 17, 1998, including the 87,500
non-qualified stock options granted to two outside
directors and an independent contractor, under all
stock options granted by the Company, options to
purchase a total of 670,578 shares of Common Stock
ranging in price from $.63 to $5.00, with a weighted
average exercise price of $4.05 per share were
outstanding, of which, 522,328 were exercisable at a
weighted average exercise price of $4.23.
Profit Sharing Plan
In 1987, the Company adopted the Applied
Intelligence Group, Inc. Profit Sharing Plan (the
"Profit Sharing Plan"). The Profit Sharing Plan
covers all employees of the Company who have
completed at least one year of service with the
Company as of the enrollment date under the Profit
Sharing Plan. The Company may make an annual
contribution to the Profit Sharing Plan on behalf of
employees which, if made, begins to vest for each
employee's account after the employee has completed two years of
service with the Company. Thereafter, each employee's account
vests ratably as to 20 percent of the employee's account following
each subsequent year of completed service with the Company. Vested
contributions will normally be distributed to an employee upon
(i) the employee's retirement, (ii) the employee's death or disability,
(iii) the termination of the employee's employment with the Company or
(iv) the termination of the Profit Sharing Plan. The Company did not
make any contributions to the Profit Sharing Plan for the fiscal years
ended December 31, 1995, 1996 and 1997.
In 1995, the Company amended the Profit Sharing
Plan to include a 401(k) deferred compensation
feature, whereby eligible participants may elect to
defer up to 15 percent of their salaries, not to
exceed the annual statutory limits, pursuant to a
voluntary salary reduction agreement. The Company
may determine matching levels of contributions from
time to time, at the discretion of the administrative
committee. No matching contributions were made by
the Company during 1995, 1996 and 1997. All employee
contributions under the 401(k) feature are fully
vested at all times.
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of
1934, as amended, requires the company's directors
and officers, and persons who own more than 10
percent of a registered class of the Company's equity
securities, to file reports of ownership and changes
in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater
than 10 percent shareholders are required by SEC
regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on the Company's review of the
copies of such forms received by it during the year
ended December 31, 1997, and written representations
that no other reports were required, the Company
believes that each person who, at any time during
such year, was a director, officer or beneficial
owner of more than 10 percent of the Company's Common
Stock complied with all Section 16(a) filing
requirements during such fiscal year. The directors,
officers and greater than 10 percent shareholders did
not become subject to the requirements of Section
16(a) until November 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Vantage Capital Resources, Inc.
On June 12, 1996, Vantage Capital Resources,
Inc., an Oklahoma corporation ("VCRI"), merged with
and into the Company (the "Merger"). VCRI was
organized on March 28, 1996, by John Simonelli and
Larry E. Howell with an initial capitalization of
$360. On June 5, 1996, VCRI completed a private
placement offering of 250,000 shares of VCRI Common
Stock at an offering price of $1.75 per share, with
net proceeds to VCRI of $394,567 (the "VCRI Private
Placement Offering"). Pursuant to the VCRI Private
Placement Offering, David B. North, an executive
officer of the Company, purchased 22,500 shares of
VCRI Common Stock, and James R. Stepp, a former
executive officer of the Company, purchased 1,000
shares of VCRI Common Stock; however, all of such
shares were subsequently redeemed by the Company, as
described below. In consummation of the Merger, the Company
issued 610,000 shares of its Common Stock, on a one-
for-one basis, for the outstanding Common Stock of
VCRI.
In connection with the organization of VCRI,
each of Messrs. Simonelli and Howell were issued
180,000 shares of VCRI Common Stock for $.001 per
share. Prior to the Merger, VCRI had not engaged in
any operations other than the negotiation of the
Merger and the offering of its Common Stock pursuant
to a private placement offering. Upon consummation of
the Merger, each of Messrs. Simonelli and Howell, as
well as the other shareholders of VCRI, exchanged
their shares of VCRI Common Stock, on a onefor-one
basis, for the Company's Common Stock. Furthermore,
upon closing of the Merger, Messrs. Simonelli and
Howell entered into three-year employment agreements
with the Company and were elected to the Board of
Directors and appointed executive officers of the
Company. In connection with the Merger and the
transactions related thereto, an independent
determination of fairness and reasonableness of the
terms of the transactions was not obtained; however,
the transactions were negotiated on an arm's-length
basis by the respective parties (which included all
of the shareholders of the Company) and are believed
by respective parties and management of the Company
to have been fair.
In connection with the Company's application
with The Nasdaq Stock Market, Inc. ("Nasdaq") for
listing of the Common Stock and Warrants on the
Nasdaq SmallCap Market, the staff of Nasdaq raised
investor protection concerns regarding (i) the
360,000 shares of Common Stock received by Messrs.
Simonelli and Howell in consummation of the Merger
and their employment with the Company pursuant to
certain three-year employment agreements, and (ii)
the VCRI Private Placement of the VCRI Common Stock
at $1.75 per share followed by the exchange of such
shares for the Common Stock of the Company. In
addition, the staff of Nasdaq orally expressed
concerns regarding the purchase of the shares of VCRI
Common Stock by Messrs. North and Stepp. Initially
the staff of Nasdaq denied listing of the Company's
securities on the Nasdaq SmallCap Market, and the
Company appealed the staff's decision to the Nasdaq
appeal panel (the "Panel"). In an effort to alleviate
the concerns of the staff of Nasdaq and obtain the
listing on appeal, the Company, pursuant to
agreements with Messrs. Simonelli and Howell, North
and Stepp completed the transactions described below,
including the redemption of the shares of Common
Stock received by Messrs. North and Stepp in
consummation of the Merger. However, the Panel in its
written appeal decision of October 28, 1996, did not
require such redemption.
Pursuant to an Exchange Agreement dated October
14, 1996 (the "Exchange Agreement"), each of Messrs.
Simonelli and Howell exchanged 180,000 shares of
Common Stock for stock options exercisable on or
after November 30, 1998 and on or before November 30,
2001 for the purchase of 180,000 shares of Common
Stock for $5.00 per share. The stock options and the
Common Stock or other securities issuable under the
stock options may not be offered for sale except in
compliance with the applicable provisions of the
Securities Act of 1933, as amended. The Company has
agreed that if it files with the Securities and
Exchange Commission a post-effective amendment to the
registration statement, a new registration statement,
or similar offering document, Messrs. Simonelli and
Howell (or other holders of the stock options) shall
have the right through December 31, 2001, to include
in such registration statement or offering statement
the Common Stock or other securities issuable upon
exercise of the stock options at no expense to
Messrs. Simonelli and Howell. In addition, pursuant
to the Exchange Agreement, Messrs. Simonelli
and Howell resigned as executive officers and
directors of the Company, and their employment
agreements were terminated effective April 1, 1996,
without any payment of or continuing right to receive
compensation under such employment agreements.
Although not required pursuant to the Panel's
written appeal decision, on October 14, 1996, the
Company redeemed the shares of Common Stock issued to
James R. Stepp, a former executive officer of the
Company, in exchange for the 1,000 shares of VCRI
Common Stock that he purchased in connection with the
VCRI Private Placement Offering, for $1.75 per share
and for an aggregate amount of $1,750. Also, on
October 15, 1996, the Company redeemed the shares of
Common Stock issued to David B. North in exchange for
the 22,500 shares of VCRI Common Stock that he
purchased in connection with the VCRI Private
Placement Offering for $1.75 per share for an
aggregate amount of $39,375. In redemption of the
shares, the Company issued to Mr. North a promissory
note in the principal amount of $39,375, bearing
interest at the rate of 10 percent per annum (payable
at maturity), with a maturity date of November 15,
1997. This note has been extended to November 15,
2000. Management of the Company believes that the
terms of the promissory note were at least as
favorable as could be obtained from unaffiliated
third-party lenders. These redemptions were completed
based solely in reliance upon the oral concerns
expressed by the Nasdaq staff and were completed in
anticipation that the Panel's appeal decision would
require such redemptions. The Company does not intend
to redeem any of the remaining outstanding shares of
Common Stock of the Company issued to the
shareholders of VCRI in consummation of the Merger.
Notes Payable to Shareholders
Pursuant to ten separate promissory notes,
Robert L. Barcum, Robert N. Baker and Russell L.
Reinhardt have loaned to the Company, in the
aggregate, $443,455 (the "Shareholders' Loans"). The
Shareholders' Loans are each evidenced by a
promissory note, bearing interest at rates of 8.5
percent to 11.5 percent per annum, with maturity
dates commencing March 18, 1999 through December 21,
2001. In addition, on October 15, 1996, the Company
issued a promissory note to David B. North, a
shareholder and executive officer of the Company, in
redemption of 22,500 shares of Common Stock of the
Company issued to Mr. North in connection with the
merger of VCRI, in the principal amount of $39,375,
bearing interest at the rate of 10 percent per annum,
with a maturity date of November 15, 1997. This note
has been extended to November 15, 2000. With respect
to the Shareholders' Loans, the interest paid or
accrued for payment to each of Robert L. Barcum,
Robert N. Baker, Russell L. Reinhardt, and David B.
North was $13,288, $14,045, $15,202, and $3,938,
respectively, for 1997 and $13,055, $13,900, $16,600
and $820, respectively, for 1996. Management of the
Company believes that the terms of the Shareholders'
Loans were at least as favorable as could be obtained
from unaffiliated third-party lenders.
Affiliate Transaction Policies
The Company has adopted policies that any loans
to officers, directors and five percent or more
shareholders ("affiliates") and any future
transactions between the Company and any affiliates
will be subject to approval by a majority of the
disinterested independent directors of the Company
and will be on terms no less favorable than could be
obtained from unaffiliated parties. As of March 23,
1998, the Board of Directors is comprised of five
members, two of whom are independent directors.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand L.L.P.,
independent accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1998. Coopers & Lybrand
L.L.P. has served the Company in such capacity since 1993. The Board of
Directors anticipates that representatives of Coopers & Lybrand L.L.P.
will be present at the Annual Meeting, will have the opportunity to make
a statement if they so desire, and will be available to respond to
appropriate questions.
In the event that ratification of the appointment of Coopers & Lybrand
L.L.P. as the Company's independent accountants is not obtained at the
Meeting, the Board will reconsider its appointment.
The Board of Directors recommends the shareholders vote "For" the
ratification of such appointment.
OTHER MATTERS
The Board of Directors knows of no other matters, other than those
described in this Proxy Statement, to be submitted to the Meeting. If any
other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.
SHAREHOLDER PROPOSALS
Shareholder proposals that are intended to be presented by
shareholders at the Annual Meeting of Shareholders of the Company for the
fiscal year ending December 31, 1998, pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to be
included in the proxy statement and form of proxy relating to such Meeting,
must be received by the Company no later than January 31, 1999. Any
shareholder proposals intended to be presented at the Company's 1999 Annual
Meeting, other than a shareholder proposal submitted pursuant to
Exchange Act Rule 14a-8, must be received in writing by the Secretary of
the Company at the principal executive office of the Company no later than
the close of business on March 1, 1999, nor prior to February 1, 1999,
together with all supporting documentation required by the Company's By-laws.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR FISCAL 1997
(INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO), WHICH WAS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1998, WILL BE PROVIDED
WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS MAILED UPON
THE WRITTEN REQUEST OF ANY SUCH PERSON TO JOHN M. DUCK, VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, APPLIED INTELLIGENCE GROUP, INC., 13800 BENSON
ROAD, EDMOND, OKLAHOMA 73013.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO
THE COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD TODAY.
By order of the Board of Directors:
Robert N. Baker
Secretary
Edmond, Oklahoma
April 27, 1998
<PAGE>
AIG LOGO
April 27, 1998
Dear Shareholder:
The officers and directors of Applied Intelligence
Group,
Inc. cordially invite you to attend the Annual
Meeting of Shareholders, Tuesday, June 9, 1998 at
10:00 a.m., at the Harvey Business Center, Room
104, on the campus of Oklahoma Christian University
of Science & Arts, 2501 East Memorial Road,
Oklahoma City, Oklahoma.
Please review the important information enclosed
with this Proxy. Your vote counts, and you are
strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to
indicate how your shares will be voted. Then sign
the card, detach it and
return your proxy in the enclosed postage paid
envelope.
Thank you in advance for your prompt
consideration of these matters.
Sincerely,
Robert L. Barcum
Chairman of the Board
and Chief Executive Officer
<PAGE>
APPLIED INTELLIGENCE GROUP, INC.
13800 BENSON ROAD
EDMOND, OKLAHOMA 73013
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD June 9, 1998
The undersigned shareholder hereby constitutes and appoints Robert N.
Baker and John M. Duck, and each or either of them, as proxies of the
undersigned (the "Proxies"), with full power to substitute, and authorizes
each of them to represent and to vote all shares of common stock, par value
$.001 per share, of Applied Intelligence Group, Inc. (the "Company") held
by the undersigned at the close of business on April 17, 1998, at the
1998 Annual Meeting of Shareholders (the "Meeting") of the Company to be
held at the Harvey Business Center, Room 104, on the campus of Oklahoma
Christian University of Science & Arts, 2501 East Memorial Road, Oklahoma
City, Oklahoma 73134 on Tuesday, June 9, 1998 at 10:00 a.m., and at any
adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE PROPOSALS IN PARAGRAPHS 1 and 2, AND IN THE
DISCRETION OF THE PROXIES, FOR ANY MATTER DESCRIBED IN PARAGRAPH 3. A
shareholder wishing to vote in accordance with the recommendation of the
Board of Directors of the Company need only sign and date this Proxy and
return it to the Company.
1. To elect Robert L. Barcum and Robert N. Baker as Class II
Directors to the Board of Directors to hold office until the
2001 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified.
Mr. Barcum
[_] FOR [_] AGAINST [_] ABSTAIN
Mr. Baker
[_] FOR [_] AGAINST [_] ABSTAIN
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent public accountants for the fiscal year
ending December 31, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon
any other matters that may be properly brought before the Meeting
and at any adjournments or postponements thereof.
[_] FOR [_] AGAINST [_] ABSTAIN
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
The undersigned hereby acknowledge(s) receipt of a copy of the Notice
of Annual Meeting of Shareholders and hereby revoke(s) any proxy or
proxies heretofore given. This Proxy may be revoked at any time before it
is exercised.
Please sign exactly as name appears hereon. Joint owners should each
sign. Executors, administrators, trustees, guardians or other
fiduciaries should give full title as such. If signing for a corporation,
please sign in full corporate name by a duly authorized officer. If
signing for a partnership, please sign in Partnership name by an authorized
person.
______________________________ ______________________________
Signature Signature
______________________________ ______________________________
Print Name Print Name
______________________________ ______________________________
Date Date
