SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14 a-11(c) or 240.14a-12
SYSCOMM INTERNATIONAL CORPORATION
(Name of Registrant as Specified In Its Charter)
Dennis Wilson, Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check Appropriate Box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
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:
4) Proposed maximum aggregate value of transaction:
[ ] 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:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
SYSCOMM INTERNATIONAL CORPORATION
(a Delaware corporation)
NOTICE OF 1999 ANNUAL
MEETING OF STOCKHOLDERS TO BE
HELD AT 10:00 A.M. ON JANUARY 28, 1999
To the Stockholders of SYSCOMM INTERNATIONAL CORPORATION:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Meeting") of SYSCOMM INTERNATIONAL CORPORATION (the "Company") will be held on
January 28, 1999, at 10:00 A.M. at the offices of the Company, 20 Precision
Drive, Shirley, New York 11967 for the following purposes:
1. to elect three (3) Class II directors;
2. to adopt the Company's 1999 Employee Stock Purchase Plan;
3. to ratify the appointment of Albrecht, Viggiano, Zureck &
Company, P.C. as the Company's independent auditors for
the fiscal year ending September 30, 1999; and
4. to transact such other business as may properly come
before the Meeting and any adjournment or postponement
thereof.
The Board of Directors has fixed December 18, 1998, at the close of
business, as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting, and only holders of record of shares of
the Company's Common Stock at the close of business on that day will be entitled
to vote. The stock transfer books of the Company will not be closed.
A complete list of stockholders entitled to vote at the Meeting shall be
available at the offices of the Company during ordinary business hours from
December 21, 1998 until the Meeting for examination by any stockholder for any
purpose germane to the Meeting. This list will also be available at the Meeting.
All stockholders are cordially invited to attend the Meeting in person.
However, whether or not you expect to be present at the Meeting, you are urged
to mark, sign, date and return the enclosed Proxy, which is solicited by the
Board of Directors, as promptly as possible in the postage-prepaid envelope
provided to ensure your representation and the presence of a quorum at the
Meeting. The shares represented by the Proxy will be voted according to your
specified response. The Proxy is revocable and will not affect your right to
vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Dennis Wilson, Secretary
Shirley, New York
December 28, 1998
<PAGE>
SYSCOMM INTERNATIONAL CORPORATION
20 Precision Drive
Shirley, New York 11967
------------------------------
PROXY STATEMENT
------------------------------
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10:00 A.M. ON JANUARY 28, 1999
The enclosed Proxy Statement is solicited by the Board of Directors of
SYSCOMM INTERNATIONAL CORPORATION (the "Company") in connection with the 1999
Annual Meeting of Stockholders (the "Meeting") to be held on January 28, 1999,
at 10:00 a.m. at the offices of the Company, 20 Precision Drive, Shirley, New
York 11967 and at any adjournment thereof. The Board of Directors has set
December 18, 1998, at the close of business, as the record date ("Record Date")
for the determination of stockholders entitled to notice of and to vote at the
Meeting. As of the record date, the Company had 4,757,705 shares of Common Stock
outstanding. A stockholder executing and returning a proxy has the power to
revoke it at any time before it is exercised by filing a later proxy with, or
other communication to, the Secretary of the Company or by attending the Meeting
and voting in person.
The proxy will be voted in accordance with your directions as to:
(1) the election of the persons listed herein as directors of the
Company;
(2) the adoption of the Company's 1999 Employee Stock Purchase
Plan;
(3) the ratification of the appointment of Albrecht, Viggiano,
Zureck & Company, P.C. as the Company's independent auditors
for the fiscal year ending September 30, 1999; and
(4) the transaction of such other business as may properly come
before the Meeting and any adjournment or postponement
thereof.
In the absence of direction, the proxy will be voted in favor of these
proposals.
The entire cost of soliciting proxies will be borne by the Company. The
cost of solicitation, which represents an amount believed to be normally
expended for a solicitation relating to an uncontested election of directors,
will include the cost of supplying necessary additional copies of the
solicitation materials and the Company's 1998 Annual Report to Stockholders (the
"Annual Report") to beneficial owners of shares held of record by brokers,
dealers, banks, trustees, and their nominees, including the reasonable expenses
of such recordholders for completing the mailing of such materials and Annual
Report to such beneficial owners.
In voting at the Meeting, each stockholder of record on the Record Date
will be entitled to one vote on all matters to come before the Meeting. Holders
of a majority of the outstanding shares of Common Stock must be represented in
person or by proxy in order to achieve a quorum to vote on all matters. The
Proxy Statement, the attached Notice of Meeting, the enclosed form of Proxy and
the Annual Report are being mailed to stockholders on or about December 28,
1998.
<PAGE>
1. ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation provides
that the Board of Directors shall be divided into three (3) classes, with each
class consisting, as nearly as may be possible, of one-third of the total number
of directors constituting the entire Board. The Company's Board of Directors
presently consists of seven (7) members with two (2) members in each of Class I
and Class II and three (3) members in Class III. Each Class is elected for a
term of three years. The term of office of the current Class I, II and III
directors is scheduled to expire at the 2000, 1999 and 2001 annual meeting of
stockholders, respectively. At each annual meeting, directors are elected to
succeed those in the class whose term expires at that annual meeting, such newly
elected directors to hold office until the third succeeding annual meeting and
the election and qualification of their respective successors.
Three (3) directors are to be elected as Class II directors by a plurality
of the votes cast at the Meeting, each to hold office until the 2002 annual
meeting of stockholders and until their respective successors are elected and
qualified. Unless otherwise directed, the persons named in the accompanying
Proxy have advised management that it is their intention to vote for the
election of Class II directors.
Each of the nominees for election as a Class II director has advised the
Company of his willingness to serve as a director and management believes that
each nominee will be able to serve. If any nominee becomes unavailable, proxies
may be voted for the election of such person or persons who may be designated by
the Board of Directors. The Board of Directors recommends voting FOR the
election of Norman M. Gaffney, John C. Spielberger and Lawrence S. Brochin as
Class II directors.
Information Regarding Directors
The following table sets forth certain information with respect to (i) the
nominees for election as Class II directors, including the year in which such
nominees terms would expire, if elected, and (ii) each of the Class I and Class
III directors whose terms will continue after the Meeting:
<TABLE>
<CAPTION>
YEAR TERM EXPIRES,
IF ELECTED, AND
CLASS
NAME AGE POSITION
<S> <C> <C> <C>
John H. Spielberger............ 56 Chairman of the Board of Directors, President 2000 Class I
and Chief Executive Officer of SysComm
Thomas J. Baehr................ 42 Vice President, Director of SysComm, President 2000 Class I
and Chief Operating Officer of InfoTech
Dennis R. Wilson............... 49 Vice President, Director of SysComm, Chief 2001 Class III
Financial Officer and Secretary of SysComm
Norman M. Gaffney*............. 50 Director of SysComm, Vice President and Regional 2002 Class II
Manager, New York Group
John C. Spielberger*........... 29 Director of SysComm 2002 Class II
Cornelia Eldridge.............. 57 Director of SysComm 2001 Class III
Lee Adams...................... 66 Director of SysComm 2001 Class III
Lawrence S. Brochin* 49 Director of SysComm 2002 Class II
</TABLE>
- ------------------------
* Nominee for Class II Director
John H. Spielberger is the Chairman of the Board of Directors, President
and Chief Executive Officer of SysComm, which he founded in 1986. He is also
currently the Chairman of the Board and Chief Executive Officer of InfoTech,
which he founded in 1980. From 1968 through 1976, Mr. Spielberger worked for IBM
as a sales representative. From 1976 through 1980, Mr. Spielberger was employed
as Vice President of The Harvey Group Inc., a company listed on the American
Stock Exchange, where he was responsible for all management information systems
and communications. In 1980, Mr. Spielberger founded John Spielberger &
Associates, Inc., a designer, programmer and installer of computer systems,
which later became known as InfoTech. Mr. Spielberger is a trustee of Dowling
College. Mr. Spielberger graduated from Long Island University, C.W. Post
Campus, New York in May 1966 with a B.A. in Biology.
Thomas J. Baehr joined InfoTech in January 1994 and has been a member of
SysComm's Board of Directors since August 1995. Mr. Baehr became InfoTech's
President in January 1996 and is currently its Chief Operating Officer. From
June 1978 through October 1979, Mr. Baehr worked as a sales representative at
the Burroughs Corporation. From October 1979 through November 1986, Mr. Baehr
was employed at Honeywell Information Systems, where he was responsible for the
sale of mainframe and minicomputers to the General Electric Company. From
November 1986 through July 1992, Mr. Baehr was employed by Prime Computer Inc.
in various positions including sales manager for the New York metropolitan area
and regional manager for the northeastern United States. From July 1992 through
January 1994, Mr. Baehr was employed by Basic Computer Corporation in White
Plains, New York. Mr. Baehr graduated Fairfield University, Connecticut in May
of 1978 with a B.S. in Marketing.
Dennis R. Wilson has been a director of the Company since 1986 and became
Vice President and Chief Financial Officer of SysComm and InfoTech in March
1995. From 1972 through March 1992, Mr. Wilson was employed by The Harvey Group
Inc. During his career at The Harvey Group, Mr. Wilson held the following
positions: Member of the Board of Directors, Executive Vice President and Chief
Financial Officer, Corporate Secretary and Director of Internal Audit. From 1992
through February 1995, Mr. Wilson was employed at The Boerner Company, a
successor to The Harvey Group, as Chief Financial Officer. He received a B.S. in
Accounting from St. John's University in June 1970 and received his M.B.A. from
St. John's in January 1976. He is also a member of the Institute of Management
Accountants and the Association of MBA Executives.
Norman M. Gaffney has been a Director on the Board of SysComm since
September 1996. He is currently Vice President-Regional Manager of InfoTech's
New York Group. Mr. Gaffney joined InfoTech in November 1994 and has previously
served as Executive Vice President of Sales and Marketing. Prior to joining
SysComm, Mr. Gaffney was employed by IBM in various positions including
Consulting Marketing Representative and Senior Accounts Manager for 22 years.
Mr. Gaffney graduated from the University of Miami receiving a B.S. in
Marketing.
John C. Spielberger is a Director of the Board of SysComm. In 1991, he
received a B.S. in Marketing from the Wallace School of Management, Boston
College. From February 1992 through October 1992, Mr. Spielberger was employed
as a marketing support representative for Lexmark International. Mr. Spielberger
joined InfoTech in October 1992 and is a sales specialist for the RS/6000. Mr.
Spielberger is the son of John H. Spielberger, the Chairman of the Board,
President and Chief Executive Officer of SysComm.
Cornelia Eldridge has been a Director of the Company since July 1997. Since
1981, Ms. Eldridge has been President of Eldridge Associates, Inc., a management
consulting firm. Eldridge Associates provides strategic planning and
organizational consulting services to senior executive management including
Chief Executive Officers. Ms. Eldridge has a B.A. from Ohio Wesleyan University
and an M.B.A. from the University of Massachusetts. She serves on the Board of
Directors of DE Frey, Inc., a privately-held financial services firm. Ms.
Eldridge also currently provides consulting services to Commonwealth Associates.
Lee Adams has been a Director of the Company since July 1997. From 1989
through March 1997, when that company was sold, Mr. Adams was the Chairman and
Chief Executive Officer of Target Solutions, Incorporated, a privately-held
vertical remarketer of IBM's AS/400 line of products. From 1963 to 1989, Mr.
Adams held various executive sales and marketing positions at IBM. Mr. Adams
received a B.B.A. from Kalamazoo College in June 1963.
Lawrence S. Brochin is currently an attorney in private practice,
specializing in corporate and commercial law. From April 1987 through December
1993, Mr. Brochin was a partner in the law firm of Blodnick Abramowitz &
Blodnick located in Roslyn Heights, New York, where he concentrated in merger
and acquisitions, SEC reporting and general corporate counseling. From May 1980
to February 1986, Mr. Brochin was Corporate Counsel and Assistant Secretary for
Vecco Instruments, Inc., a multinational electronics company located in
Melville, New York. From September 1973 to May 1980, he was employed as
associate attorney with Rosenman & Colin in New York City. Mr. Brochin received
a B.A. in Political Science from the State University of New York at Stony Brook
in 1970 and a J.D. from the New York University School of Law in 1973. Mr.
Brochin is admitted to practice law in New York and Florida.
The Company's officers are elected annually by the Board of Directors and
serve until their successors are duly elected and qualified.
The Company's By-Laws provide that the Company shall indemnify each
director and such of the Company's officers, employees and agents as the Board
of Directors shall determine from time to time to the fullest extent provided by
the laws of the State of Delaware.
The Company carries insurance providing indemnification, under certain
circumstances, to all of its directors and officers for claims against them by
reason of, among other things, any act or failure to act in their capacities as
directors or officers. To date, no sums have been paid to any past or present
director or officer of the Company under this or any prior indemnification
insurance policy.
Meetings and Committees of the Board of Directors
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board of Directors does not have a nominating committee or a committee
performing the functions of a nominating committee.
The members of the Audit Committee are John C. Spielberger, Cornelia
Eldridge and Lee Adams. The Audit Committee held one (1) meeting during the
fiscal year ended September 30, 1998. The function of the Audit Committee is to
recommend annually to the Board of Directors the appointment of the independent
public accountants of the Company, discuss and review the scope and the fees of
the prospective annual audit and review the results thereof with the independent
public accountants, review and approve non-audit services of the independent
public accountants, review compliance with existing major accounting and
financial policies of the Company, review the adequacy of the financial
organization of the Company and review management's procedures and policies
relative to the adequacy of the Company's internal accounting controls.
The members of the Compensation Committee are Thomas Baehr, Cornelia
Eldridge and Lee Adams. The Compensation Committee held one (1) meeting during
fiscal year ended September 30, 1998. The function of the Compensation Committee
is to make recommendations to the Board of Directors concerning salaries and
incentive compensation for the Company's executives and employees.
The Board of Directors met on five (5) occasions and acted two (2) times by
unanimous written consent during the fiscal year ended September 30, 1998.
Family Relationships
John H. Spielberger, the Chairman of the Board of Directors, President and
Chief Executive Officer of the Company is the father of John C. Spielberger, a
Director of the Company.
Director's Compensation
Directors who are employees of the Company receive no compensation, as
such, for service as members of the Board. Directors who are not employees of
the Company receive options to purchase 5,000 shares of Common Stock for each
year served on the Board and reimbursement of expenses incurred in connection
with attendance of Board and Committee Meetings. The Company's officers are
elected annually by the Board of Directors and serve at the discretion of the
Board.
<PAGE>
Executive Compensation
The following table sets forth the compensation paid or accrued by the
Company during each of the three fiscal years ended September 30, 1998 to the
Company's Chief Executive Officer and the three most highly paid Company's
Executive Officers whose total cash compensation for such periods exceeded
$100,000 (the "Named Executives"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
- ------------------ ------- ------------ ---------- -----------------
<S> <C> <C> <C> <C>
John H. Spielberger, Chairman of 1998 $157,333 $ 15,204 $ 71,819(1)
the Board of Directors, President 1997 $140,000 $ 133,142 $ 27,623(2)
and Chief Executive Officer of 1996 $100,000 $ 90,000 $ 29,411(3)
SysComm
Dennis R. Wilson, Vice President, 1998 $137,667 $ - $189,280(4)
Chief Financial Officer, Secretary 1997 $120,000 $ 15,000 $ -
and Director of SysComm 1996 $100,000 $ 35,000 $ -
Thomas J. Baehr, Vice President and 1998 $160,000 $15,204 $182,000(4)
Director of SysComm, President and 1997 $150,000 $160,332 $ -
Chief Operating Officer of InfoTech 1996 $134,579 $157,000 $ -
Norman M. Gaffney, Director of 1998 $140,000 $112,225 $182,000(4)
SysComm, Vice President, Regional 1997 $125,000 $169,852 $ -
Manager New York Group 1996 $304,613 $ - $ -
- -------------------------------
</TABLE>
(1) Consists of expenses for a Company car ($719); life insurance premiums
($28,300); administration fees on pension plan ($1,050); and ($41,750)
represents the difference between the market value and the exercise price of
non-qualified stock options on the date of exercise.
(2) Consists of expenses for a Company car ($719); life insurance premiums
($25,854); and administration fees on pension plan ($1,050).
(3) Consists of expenses for a Company car ($4,464), life insurance
premiums ($23,897) and administration fees on pension plan ($1,050).
(4) Represents the difference between the market value and exercise price
of non-qualified stock options on the date of exercise.
Stock Options
There were no stock options granted to the Named Executives during the
Company's fiscal year ended September 30, 1998.
Aggregated Option Exercises in Last Fiscal Year and Year-End Values
The following table sets forth information concerning the exercise of stock
options by the Named Executives during the Company's fiscal year ended September
30, 1998, the number of options owned by the Named Executives and the value of
any in-the-money unexercised stock options as of September 30, 1998.
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options at
at Fiscal Year End (#) Fiscal Year End ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) $ Unexercisable Unexercisable (1)
---- --------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John H. Spielberger 40,000 41,750 750/2250 -0-/-0-
Dennis R. Wilson 104,000 189,280 750/2250 -0-/-0-
Thomas J. Baehr 100,000 182,000 750/2250 -0-/-0-
Norman M. Gaffney 100,000 182,000 750/2250 -0-/-0-
John C. Spielberger 4,000 7,280 500/1500 -0-/-0-
</TABLE>
- -------------------
(1) Represents the closing price of the Company's Common Stock listed on
the NASDAQ National Market on September 30, 1998 ($1.4375) minus the respective
exercise prices.
Stock Option Plans
1988 Stock Option Plan.
On July 29, 1988, the stockholders approved a stock option plan (the "1988
Plan"). In connection with the 1988 Plan, 1,000,000 shares of Common Stock are
reserved for issuance pursuant to options that were granted under the plan
through May 5, 1998, the 1988 Plan's expiration date.
The purpose of the 1988 Plan is to encourage stock ownership by employees
of the Company, its divisions and subsidiary corporations and to give them a
greater personal interest in the success of the Company. The 1988 Plan is
administered by the Compensation Committee. The Compensation Committee consists
of at least three members of the Board of Directors. The Compensation Committee
shall have the authority in its discretion, subject to and not inconsistent with
the express provisions of the 1988 Plan, to administer the 1988 Plan and to
exercise all the powers and authorities either specifically granted to it under
the 1988 Plan or necessary or advisable in the administration of the 1988 Plan,
including, without limitation, the authority to grant Options; to determine
which Options shall constitute incentive stock options ("ISO") and which Options
shall constitute Non-Qualified Stock Options; to determine which Options (if
any) shall be accompanied by rights or limited rights; to determine the purchase
price of the shares of Common Stock covered by each Option (the "Option Price");
to determine the persons to who, and the time or times at which, Options shall
be granted; to determine the number of shares to be covered by each Option; to
interpret the 1988 Plan; to prescribe, amend and rescind rules and regulations
relating to the 1988 Plan; and to make all other determinations deemed necessary
or advisable for the administration of the 1988 Plan. The Compensation Committee
may delegate to one or more of its members or to one or more agents such
administrative duties as it may deem advisable, and the Compensation Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the
Compensation Committee or such person may have under the 1988 Plan.
Options granted under the 1988 Plan could not be granted at a price less
than the fair market value of the Common Stock on the date of grant (or 110% of
fair market value in the case of persons holding 10% or more of the voting stock
of the Company). The aggregate fair market value of shares for which ISOs
granted to any employee are exercisable for the first time by such employee
during any calendar year (under all stock option plans of the Company and any
related corporation) may not exceed $100,000. Options granted under the 1988
Stock Option Plan will expire not more than ten (10) years from the date of
grant (five (5) years in the case of ISOs granted to persons holding 10% or more
of the voting stock of the Company). Options granted under the 1988 Stock Option
Plan are not transferable during an optionee's lifetime but are transferable at
death by will or by the laws of descent and distribution.
As of September 30, 1998, 57,000 options had been granted at exercise
prices ranging from $5.5625 to $6.11875 per share. To date, none of those
options has been exercised. The options vest over a three (3) or four (4) year
period, depending on the particular grant, following the date of the grant.
Currently, only 14,250 shares are exercisable.
1998 Stock Option Plan
On February 24, 1998, the stockholders approved a stock option plan (the
"1998 Plan") as a successor to the expiring 1988 Plan. As of September 30, 1998,
40,000 options were granted under the 1998 Plan. Under their terms, all such
options were immediately exercisable. The 1998 Plan has 500,000 shares of Common
Stock reserved for issuance upon the exercise of options designated as either
(i) ISOs or (ii) non-qualified stock options. ISOs may be granted under the 1998
Plan to employees and officers of the Company. Non-qualified options may be
granted to consultants, directors (whether or not they are employees), employees
or officers of the Company.
The purpose of the 1998 Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and certain other persons
instrumental to the success of the Company and give them a greater personal
interest in the success of the Company. The 1998 Plan is administered by the
Compensation Committee. The Committee, within the limitations of the 1998 Plan,
determines the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISOs,
the duration and rate of exercise of each option, the option purchase price per
share and the manner of exercise, the time, manner and form of payment upon
exercise of an option, and whether restrictions such as repurchase rights in the
Company are to be imposed on the shares subject to options. Options granted
under the 1998 Plan may not be granted at a price less than the fair market
value of the Common Stock on the date of the grant (or 110% of fair market value
in the case of persons holding 10% or more of the voting stock of the Company).
The aggregate fair market value of shares for which ISOs granted to any person
and exercisable for the first time by such person during any calendar year
(under all stock option plans of the Company and any related corporation) may
not exceed $100,000. The 1998 Plan will terminate in February, 2008; however,
options granted under the 1998 Plan will expire not more than ten (10) years
from the date of grant. Options granted under the 1998 Plan are not transferable
during an optionee's lifetime but are transferable at death by will or by the
laws of descent and distribution.
Stock Performance Graph
The following graph compares the percentage change in the cumulative total
stockholder return for the period beginning on June 17, 1997 and ending on
September 30, 1998, based upon the market price of the Company's Common Stock,
the NASDAQ Stock Market Index for U.S. companies and a group consisting of the
Company's peer corporations on a line-of-business basis. The corporations making
up the peer group are AlphaNet Solutions, Inc., En Pointe Technologies, Inc.,
Manchester Equipment Co., Inc., Micros to Mainframes, Inc. and Pomeroy Computer
Resources, Inc. The graph assumes (i) the reinvestment of dividends, if any, and
(ii) the investment of $100 on June 17, 1997 (the date the Company's Common
Stock commenced trading) in the Company's Common Stock, the NASDAQ Stock Market
Index and the Peer Group Index.
Employment Agreements
The Company has entered into employment agreements with its executive
officers that expire on September 30, 1999, unless sooner terminated for death,
physical or mental incapacity or cause (which is defined as the uncured refusal
to perform, or habitual neglect of, the performance of the executive officer's
duties, willful misconduct, dishonesty or breach of trust which causes the
Company to suffer any loss, fine, civil penalty, judgment, claim, damage or
expense, a material breach of the employment agreement, or a felony conviction),
or terminated by either party with thirty (30) days' written notice, and are
automatically renewed for consecutive terms, unless cancelled at least thirty
(30) days prior to expiration of the existing term. Each Employment Agreement
provides that all of such executive's business time be devoted to the Company.
In addition, each of the Employment Agreements also contains: (i)
non-competition provisions that preclude each employee from competing with the
Company for a period of up to two years from the date of the termination of his
employment of the Company, (ii) non-disclosure and confidentiality provisions
providing that all confidential information developed or made known during the
term of employment shall be exclusive property of the Company, and (iii)
non-interference provisions whereby, for a period of two years after his
termination of employment with the Company, the executive shall not interfere
with the Company's relationship with its customers or employees.
The employment agreements also include compensation plans for fiscal year
1998 as follows: John H. Spielberger will receive $160,000 plus a bonus based on
a percentage of pre-tax earnings of the Company based on sales volume; Thomas J.
Baehr will receive $160,000 plus a bonus of a percentage of pre-tax earnings of
InfoTech based on sales volume; Dennis R. Wilson will receive $140,000 plus a
discretionary bonus determined by the Compensation Committee; and Norman M.
Gaffney will receive $140,000 plus a bonus of 1% of the gross profit dollars of
InfoTech and 1% of the pre-tax earnings of InfoTech. Notwithstanding the
foregoing, each of the above-named executive officers received twenty (20%)
percent reductions in their base compensation during the fiscal year ended
September 30, 1998.
These employment agreements contain annual performance incentive plans
which will be reviewed during the fiscal year and new incentive plans will be
implemented by the Company's Compensation Committee for fiscal year 1999, and
thereafter as applicable.
401(k) Plan
On January 1, 1994, the Company adopted a 401(k) savings plan for the
benefit of all eligible employees. All employees as of the effective date of the
401(k) became eligible. An employee who became employed after January 1, 1994
would become a participant after the completion of six (6) months of service and
attainment of twenty (20) years of age. Under the 401(k) plan, participants may
elect to contribute from their compensation any amount up to the maximum
deferral allowed by the Internal Revenue Code. Company contributions are
discretionary and the Company may make optional contributions for any plan year
at its discretion. During the fiscal years ended September 30, 1998, 1997 and
1996, the Company recorded 401(k) costs totaling $19,945, $42,986 and $31,738
respectively. During the fiscal year ended September 30, 1998, the Company
recorded 401(k) contributions in the amounts of $2,375, $2,265 and $2,375 for
the accounts of Thomas J. Baehr, Dennis R. Wilson and Norman M. Gaffney,
respectively.
<PAGE>
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Prior to the Company's initial public offering in June 1997, the Company
did not have a Compensation Committee of its Board of Directors. In June 1997,
the Company formed a Compensation Committee. Prior to the formation of the
Compensation Committee, decisions regarding compensation were made by John H.
Spielberger, the Company's Chairman, President and Chief Executive Officer,
including entering into two (2) year employment agreements between themselves
and the Company, which agreements became effective June 17, 1997 and terminate
September 30, 1999. During the Company's fiscal year ended September 30, 1998,
the Compensation Committee made all decisions concerning compensation of
executive officers.
Board Compensation Committee Report
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two (2) independent outside directors of the Company and one (1)
inside director or the Company.
The Committee focuses on compensating Company executives on a competitive
basis with other comparably sized and managed companies, in a manner consistent
and supportive of overall Company objectives, and through a compensation plan
which balances the long-term and short-term strategic initiatives of the
Company. The Committee intends that the Company's executive compensation program
will:
(1) reward executives for strategic management and enhancement
of stockholder value;
(2) reflect each executive's success at resolving key operational
issues;
(3) facilitate both the short-term and long-term planning
process; and
(4) attract and retain key executives believed to be critical to the
long-term success of the Company.
The Company's compensation program for executive officers generally
consists of a fixed base salary, performance-related annual bonus awards and
long-term incentive compensation in the form of stock options. In addition,
Company executives are able to participate in various benefit plans generally
available to other full-time employees of the Company.
In reviewing the Company and executives' performance over the past fiscal
year, the Committee took into consideration, among other things, the following
performance factors in making its compensation recommendations: revenues, net
income and cash flow.
Base Salary
Base salary for the Company's executives is intended to provide competitive
remuneration for services provided to the Company over a one (1) year period.
Base salaries are set at levels designed to attract and retain the most
appropriately qualified individuals for each of the key management level
positions within the Company. Minimum base salary levels for the Named
Executives are determined according to employment agreements which are in effect
through September 30, 1999. Notwithstanding the foregoing, each of the Named
Executives received a twenty (20%) percent reduction in their base salary.
Short-Term Incentives
Short-term incentives are paid primarily to recognize specific operating
performance achieved within the last fiscal year. Since such incentive payments
are related to a specific year's performance, the Committee understands and
accepts that such payments may vary considerably from one year to the next. The
Company's bonus program ties executive compensation directly back to the annual
performance of both the individual executive and the Company overall. Through
this program, in the fiscal year ended September 30, 1998, each of the Named
Executives' actual bonus payment was derived from specific measures of Company
and individual performance. The actual annual bonus awards payable to the Named
Executives are based on the terms established in their employment agreements
which are in effect through September 30, 1999.
Long-Term Incentives
In light of the Company's performance during the past fiscal year, the
Company declined to award the Named Executives any stock option grants, deciding
that such grants would be contrary to the Company's commitment to enhance
stockholder value.
Chief Executive Officer
Through September 30, 1999, Mr. John H. Spielberger, Chief Executive
Officer, will be compensated under a previously disclosed employment agreement
between himself and the Company. This contract establishes the minimum levels of
compensation which are to be paid to Mr. Spielberger by the Company.
During the fiscal year ended September 30, 1998, Mr. Spielberger reduced
his base salary by twenty (20%) percent from the prior year's level. In addition
to his base salary, Mr. Spielberger is eligible to participate in the short-term
and long-term incentive programs outlined above for the other Named Executives.
During the fiscal year ended September 30, 1998, the amount of Mr. Spielberger's
short-term incentive bonus was calculated based on the terms established in the
employment agreement. Based on this formula, Mr. Spielberger received a $15,204
bonus payment for the fiscal year ended September 30, 1998.
COMPENSATION COMMITTEE:
Thomas J. Baehr
Cornelia Eldridge
Lee Adams
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of shares of the
Common Stock as of the date hereof, by (i) each person who owns beneficially
more than 5% of the outstanding shares of Common Stock; (ii) each executive
officer and director of the Company; and (iii) all officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (2) of Class
<S> <C> <C>
John H. Spielberger (1) (3)........ 2,527,750 53.13%
Dennis R. Wilson (1) (5)........... 59,767 1.27%
Thomas J. Baehr (1) (6)............ 58,267 1.23%
Norman M. Gaffney (1) (6).......... 38,686 .81%
John C. Spielberger (1) (4)....... 9,500 .20%
Cornelia Eldridge (1) (7).......... 6,250 .13%
Lee Adams (8)...................... 72,350 1.52%
All Officers and Directors as a group
(seven persons) (9)............. 2,772,570 58.28%
</TABLE>
<PAGE>
_______________
(1) The addresses of John H. Spielberger, Dennis R. Wilson, Thomas J.
Baehr, John C. Spielberger, and Norman M. Gaffney are c/o SysComm International
Corporation, 20 Precision Drive, Shirley, New York 11967.
(2) Beneficial ownership is determined in accordance with the Rule 13d-3 of
the Securities Exchange Act of 1934 and generally includes voting and investment
power with respect to securities, subject to community property laws, where
applicable. A person is deemed to be the beneficial owner of securities that can
be acquired by such person within 60 days from the date of this Proxy Statement
upon exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held by
such person (but not those held by any other person) and that are exercisable
within 60 days from the date of this Proxy Statement have been exercised. Unless
otherwise noted, the Company believes that all persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
beneficially owned by them.
(3) Includes 600,000 shares owned by Bearpen Limited Partnership, a
partnership of which John H. Spielberger and his wife, Catherine, are the
general partners. Excludes 50,000 shares owned by Mr. Spielberger's wife,
Catherine, of which John H. Spielberger disclaims beneficial ownership. Includes
options to purchase 750 shares of Common Stock at an exercise price of $6.11875
per share, exercisable as of July 22, 1998. Does not include options to purchase
2,250 shares of Common Stock at an exercise price of $6.11875 per share.
(4) Excludes 20,000 shares owned by Teresa Murphy, John C. Spielberger's
wife. Includes options to purchase 500 shares of Common Stock at an exercise
price of $5.5625 per share, exercisable as of July 22, 1998. Does not include
options not currently exercisable to purchase 1,500 shares of Common Stock at an
exercise price of $5.5625.
(5) Includes options to purchase 750 shares of Common Stock at an exercise
price of $5.5625 per share, exercisable as of July 22, 1998. Does not include
options not currently exercisable to purchase 2,250 shares of Common Stock at an
exercise price of $5.5625 per share.
(6) Includes options to purchase 750 shares of Common Stock at an exercise
price of $5.5625 per share, exercisable as of July 22, 1998. Does not include
options not currently exercisable to purchase 2,250 shares of Common Stock at an
exercise price of $5.5625 per share.
(7) The address of Cornelia Eldridge is 4514 Elkhorn Road, P.O. Box 6243,
Sun Valley, Idaho 83354. Includes options to purchase 1,250 shares of Common
Stock at an exercise price of $5.5625 and 5,000 shares of Common Stock at an
exercise price of $1.875 per share, exercisable as of July 22, 1998. Does not
include options to purchase 3,750 shares of Common Stock at an exercise price of
$5.5625 per share.
(8) The address of Lee Adams is P.O. Box 2404, Lake Arrowhead, California
92352. Includes options to purchase 1,250 shares of Common Stock at an exercise
price of $5.5625 and options to purchase 3,750 shares of Common Stock at an
exercise price of $1.875 per share, exercisable as of July 22, 1998. Does not
include options to purchase 3,750 shares of Common Stock at an exercise price of
$5.5625 per share.
(9) Percentages may not add up exactly due to rounding.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and to furnish
the Company with copies of these reports. Based solely on the Company's review
of the copies of such forms received by it during its fiscal year ended
September 30, 1998, the Company believes that all reports required to be filed
by such persons with respect to the Company's fiscal year ended September 30,
1998 were filed, except that a report of changes in ownership for Lee Adams was
filed late.
2. ADOPTION OF THE SYSCOMM INTERNATIONAL
1999 EMPLOYEE STOCK PURCHASE PLAN
Employee Stock Purchase Plan. On December 17, 1998, the Board of Directors
adopted, subject to stockholder approval the SysComm International Corporation
1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"). A summary of the
material features of the 1999 Purchase Plan follows. This summary is qualified
in its entirety by reference to the full text of the 1999 Purchase Plan, which
is set forth in Exhibit A hereto and incorporated by reference herein.
The 1999 Purchase Plan provides eligible employees of the Company and its
designated subsidiaries with an opportunity to acquire shares of the Company's
Common Stock and thereby acquire an interest in the future of the Company. If
the 1999 Purchase Plan is approved by the stockholders, the Company will reserve
up to 200,000 shares of its Common Stock for sale under the 1999 Purchase Plan.
Employees eligible to participate in the 1999 Purchase Plan include each
employee of the Company and each designated subsidiary whose customary
employment with the Company is at least twenty (20) hours per week and more than
five (5) months in any calendar year and who has been an employee for at least
three (3) consecutive months on a given enrollment date, except that employees
who own stock possessing five (5%) percent or more of the total combined voting
power or value of all classes of the Company's or any designated subsidiary's
capital stock are not eligible to participate in the 1999 Purchase Plan.
Eligible employees acquire Common Stock under the 1999 Purchase Plan by
exercising options to acquire Common Stock upon the completion of six-month
periods referred to as "Offering Periods". Offering Periods commence on each
April 1 and October 1; subject to stockholder approval of the 1999 Purchase
Plan, the initial Offering Period will commence April 1, 1999 and expire on
September 30, 1999. Prior to the commencement of any Offering Period, an
eligible employee authorizes the Company to withhold a portion of such
employee's compensation (not less than one (1%) percent nor more than ten (10%)
percent of compensation). However, in no event is an employee permitted to
purchase during each Offering Period more than a number of shares determined by
dividing Twelve Thousand Five Hundred ($12,500) Dollars by the fair market value
of a share of the Company's Common Stock on the first day of each Offering
Period. No interest will be paid on amounts withheld pursuant to the 1999
Purchase Plan from a participating employee's compensation. On the last day of
the Offering Period ("Exercise Date"), the entire account balance of a
participating employee is applied to purchase the maximum number of shares of
the Company's Common Stock. The shares are purchased at a price equal to
eighty-five (85%) percent of the lesser of (a) the fair market value of the
stock on the date of purchase (the last business day of the Offering Period) or
(b) the fair market value in the first day of the Offering Period.
At any time prior to the expiration of any Offering Period, an employee may
cancel his or her option to purchase the Company's Common Stock on the last day
of such Offering Period and, upon such cancellation, such employee's account
balance shall be returned to him or her without interest. An employee may also
increase or decrease the rate of his or her withholding at any time during an
Offering Period. Rights to purchase stock under the 1999 Purchase Plan are
exercisable during the employee's lifetime only by such employee and may not be
sold, pledged, assigned or otherwise transferred. A participating employee may
elect to have any accumulated payroll deductions at the time of his or her death
applied to the purchase of the Company's Common Stock pursuant to the 1999
Purchase Plan for the benefit of his or her named beneficiaries.
In the event of any change in the outstanding stock of the Company due to a
stock dividend, split-up, recapitalization, merger, consolidation,
reorganization or other capital change, the aggregate number of shares available
under the 1999 Purchase Plan, the number of shares under options granted but not
exercised and the option price will be appropriately adjusted. The Company has
the right to amend the 1999 Purchase Plan at any time, but cannot make an
amendment (other than as stated above) relating to the aggregate number of
shares available under the Plan or the employees eligible to participate under
the 1999 Purchase Plan without the approval of the stockholders. The 1999
Purchase Plan will terminate automatically on December 17, 2008, except that the
Company may suspend or terminate the 1999 Purchase Plan at any prior time, but
such termination will not affect the rights of employees holding options at the
time of termination.
Administration. The Board of Directors, or a committee thereof, will
administer the 1999 Purchase Plan, determine all questions arising thereunder
and adopt, administer and interpret such rules and regulations relating to the
Plan as it deems necessary or advisable.
Certain Federal Income Tax Consequences. In general, for United States
federal income tax purposes, a participating employee will not recognize taxable
income by reason of such participation during the Offering Period.
An employee who purchases shares under the 1999 Purchase Plan and disposes
of such shares within two (2) years after the first day of the applicable
Offering Period will recognize ordinary income on the difference between the
price paid per share and the fair market value on the last day of that Offering
Period. The Company will generally be entitled to a deduction in the amount of
this income, subject to a possible limitation in the case of certain of the
Company's officers. In addition to ordinary income, and employee who sells
shares within this two-year period will recognize a capital gain or loss on the
difference between the amount realized on the sale and the employee's basis in
the shares (i.e., the price paid by the employees under the 1999 Purchase Plan
plus ordinary income recognized by reason of the sale).
If an employee disposes of shares purchased under the 1999 Purchase Plan
more than two (2) years after the first day of the applicable Offering Period or
dies at any time while holding the shares, ordinary income will be recognized
equal to the lesser of (a) the excess of the fair market value of the shares at
the time of disposition or death over the price paid under the 1999 Purchase
Plan, or (b) fifteen (15%) percent of the fair market value of the shares on the
first day of the applicable Offering Period. The Company would not be entitled
to a deduction for this amount. In addition to ordinary income, a capital gain
will be recognized on the excess, if any, of the amount realized on a sale over
the employee's basis in the shares (i.e., the price paid by the employee under
the 1999 Purchase Plan plus any ordinary income recognized by reason of the
sale). Any loss will be treated as a capital loss.
The foregoing is intended as a summary of certain federal income tax
consequences associated with the 1999 Purchase Plan and it is recommended that
employees eligible to participate in the 1999 Purchase Plan consult their own
tax advisors for counseling. The tax treatment under foreign, state, local or
other law is not covered in this summary.
Stockholder Approval. The affirmative vote of the holders of a majority of
the shares of Common Stock present, in person or represented by proxy, and
entitled to vote at the Annual Meeting is required to approve the 1999 Purchase
Plan. The Board of Directors believes the 1999 Purchase Plan is in the best
interests of the Company and its stockholders and is important in order to help
assure the ability of the Company to continue to recruit and retain highly
qualified employees. The Board of Directors recommends voting for the approval
of the Company's 1999 Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ADOPTION OF PROPOSAL 2.
3. SELECTION OF AUDITORS
The firm of Albrecht, Viggiano, Zureck & Company, P.C. has audited the
financial statements of the Company for the past five (5) years and the Board of
Directors has, subject to ratification by stockholders, appointed that firm to
act as its independent public accountants for the Company's fiscal year ending
September 30, 1999. Accordingly, management will present to the Meeting a
resolution proposing the ratification of the appointment of Albrecht, Viggiano,
Zureck & Company, P.C. as the Company's independent public accountants for the
fiscal year ending September 30, 1999.
A representative of Albrecht, Viggiano, Zureck & Company, P.C. is expected
to be present at the Meeting and will be given the opportunity to make a
statement and to respond to appropriate questions addressed by stockholders.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ADOPTION OF PROPOSAL 3.
4. OTHER BUSINESS
The Board of Directors has no knowledge of any other business which may
come before the Meeting and does not intend to present any other business.
However, if any other business shall properly come before the Meeting or any
adjournment thereof, the persons named as proxies will have discretionary
authority to vote the shares of Common Stock represented by the accompanying
proxy in accordance with their best judgment.
Stockholder's Proposals
Any stockholder of the Company who wishes to present a proposal to be
considered at the next annual meeting of stockholders of the Company and who
wishes to have such proposal presented in the Company's proxy statement for such
Meeting must deliver such proposal in writing to the Company at 20 Precision
Drive, Shirley, New York 11967, on or before August 23, 1999. In order to
curtail controversy as to the date on which the proposal was received by the
Company, it is suggested that proponents submit their proposals by certified
mail, return receipt requested.
By Order of the Board of Directors
Dennis Wilson, Secretary
The Company will furnish without charge to each person whose proxy is being
solicited by this proxy statement, on the written request of such person, a copy
of the Company's Annual Report on Form 10-K, for its fiscal year ended September
30, 1998. Such request should be addressed to Stockholder Relations, SysComm
International Corporation, 20 Precision Drive, Shirley, New York 11967.
Dated: December 28, 1998
<PAGE>
EXHIBIT A
SYSCOMM INTERNATIONAL CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of SysComm International Corporation:
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.
(d) "Company" shall mean SysComm International Corporation and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings and
sales commissions, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the Company
for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as continuing
intact while the individuals is on sick leave or other leave of absence approved
by the Company. Where the period of leave exceeds 90 days and the individual's
right to reemployment is not guaranteed either by statute or by contract, the
employment relationship will be deemed to have terminated on the 91st day of
such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "Exercise Date" shall mean the last day of each Offering Period.
(j) "Fair Market Value" shall mean, as of any date, (i) the closing price
of the Company's Common Stock appearing on a national securities exchange if the
Company's Common Stock is listed on such an exchange, or if not listed, the
closing bid price appearing on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"); or (ii) if the Shares are not listed on
NASDAQ, then the closing bid price for the Company's Common Stock as listed in
the National Quotation Bureau's pink sheets; or (iii) if there are no listed bid
prices published in the pink sheets, then the market value shall be based upon
the closing bid price as determined following a polling of all dealers making a
market in the Company's Common Stock.
(k) "Offering Period" shall mean a period of approximately six (6) months,
commencing on the first Trading Day on or after April 1 and terminating on the
last Trading Day in the period ending the following September 30, or commencing
on the first Trading Day on or after October 1 and terminating on the last
Trading Day in the period ending the following March 31, during which an option
granted pursuant to the Plan may be exercised. The duration of Offering Periods
may be changed pursuant to Section 4 of this Plan. The initial Offering Period
shall be determined by the Board of Directors.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower.
(n) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock exchanges and
the National Association of Securities Dealers Automated Quotation (NASDAQ)
System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall have been employed
by the Company for at least three (3) consecutive months on a given Enrollment
Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) to the extent, immediately after
the grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase such stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Subsidiary, or (ii) to the
extent his or her rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries were to accrue at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair
market value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on the first Trading Day on or
after April 1 and October 1 each year, or on such other date as the Board shall
determine, and continuing thereafter until terminated in accordance with Section
19 hereof. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without stockholder approval if approval of such change is announced
at least fifteen (15) days prior to the scheduled beginning of the first
Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions substantially in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and will be withheld in whole percentages only. A
participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll
deductions may be decreased to 0% at such time during any Offering Period which
is scheduled to end during the current calendar year (the "Current Offering
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Offering Period which ended during
that calendar year plus all payroll deductions accumulated with respect to the
Current Offering Period equal Twenty Five Thousand ($25,000) Dollars. Payroll
deductions shall recommence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the appropriate federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to the sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than a
number of Shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof, and
shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon the exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company
substantially in the form of Exhibit B to the Plan. All of the participant's
payroll deductions credited to his or her account will be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offering Period. If a participant withdraws from an Offering Period, payroll
deductions will not resume at the beginning of a succeeding Offering Period
unless the participant delivers to the Company a new subscription agreement.
(b) Upon the termination of a participant's status as an Employee (as
defined in Section 2(g) hereof), for any reason, he or she will be deemed to
have elected to withdraw from the Plan and the payroll deductions credited to
such participant's account during the Offering Period but not yet used to
exercise the option will be returned to such participant or, in the case of his
or her death, to the person or persons entitled thereto under Section 14 hereof,
and such participant's option will be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(c) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which shall
be made available under the Plan shall be 200,000 shares, subject to adjustment
upon changes in capitalization of the Company as provided in Section 18 hereof.
If on a given Exercise Date the number of shares with respect to which options
are to be exercised exceeds the number of shares then available under the Plan,
the Company shall make pro-rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant will have no interest or voting right in shares covered
by his/her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection
(a) of this Section 13, in the event that Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to an Exercise Date on
which the option is exercised but prior to delivery to such participant of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to exercise of the option.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice to the Company. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in it discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of any option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
Stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration". Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date") or to cancel each outstanding right to
purchase and refund all sums collected from participants during the Offering
Period then in progress. If the Board shortens the Offering Period then in
progress in lieu of assumption or substitution in the event of a merger or sale
of assets, the Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for his/her
option has been changed to the New Exercise Date and that his/her option will be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding Common Stock, and in
the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during any
Offering Period, establish the exchange ratio applicable to amounts withheld in
a currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to any option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon its adoption by the
Board of Directors, provided that within twelve (12) months thereafter it shall
be approved by the stockholders of the Company. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 19 hereof.
<PAGE>
Exhibit A
SYSCOMM INTERNATIONAL CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ________
_____ Change in Payroll Deduction Rate
_____ Change in Beneficiary(ies)
1. ___________________________________ hereby elects to participate in the
SysComm International Corporation 1999 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ___% of my Compensation on each payday (not to exceed 10%) during the
Offering Period in accordance with the Employee Stock Purchase Plan. (Please
note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.
4. I have received a copy of the complete "Employee Stock Purchase Plan." I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to the terms of the Plan. I understand that the grant of the
option by the Company under this Subscription Agreement is subject to obtaining
stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse Only):
________________________________
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares), I will be treated for federal
income tax purposes as having received ordinary income at the time of such
disposition in an amount equal to the excess of the fair market value of the
shares at the time such shares were purchased by me over the price which I paid
for the shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of shares and I will make adequate provision
for Federal, state or other tax withholding obligations, if any, which arise
upon the disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year holding period, I understand that I will be
treated for federal income tax purposes as having received income only at the
time of such disposition, and that such income will be taxed as ordinary income
only to the extent of an amount equal to the lesser of (1) the excess of the
fair market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market value
of the shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
NAME: (Please print)__________________________________________________________
(First) (Middle) (Last)
_______________________ _____________________________________________
Relationship
_____________________________________________
(Address)
EMPLOYEE NAME: (Please print)________________________________________________
(First) (Middle) (Last)
Employee's Social
Security Number: _______________________
Employee's Address: _______________________
_______________________
_______________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:______________________ __________________________________
Signature of Employee
_________________________________
Spouse's Signature
(If beneficiary other than spouse)
<PAGE>
Exhibit B
SYSCOMM INTERNATIONAL CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the SysComm
International Corporation 1999 Employee Stock Purchase Plan which began on
____________ 19__ (the "Enrollment Date") hereby notifies the Company that he or
she hereby withdraws from the Offering Period. He or she hereby directs the
Company to pay to the undersigned as promptly as practicable all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her option for such Offering
period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
_____________________________________
_____________________________________
_____________________________________
Signature:
_____________________________________
Date:________________________________
