SYSCOMM INTERNATIONAL CORPORATION
(a Delaware corporation)
NOTICE OF 2000 ANNUAL
MEETING OF STOCKHOLDERS TO BE
HELD AT 10:00 A.M. ON JANUARY 27, 2000
To the Stockholders of SYSCOMM INTERNATIONAL CORPORATION:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of SYSCOMM INTERNATIONAL CORPORATION (the "Company") will be held on
January 27, 2000, 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 two (2) Class I directors;
2. to amend the Company's 1998 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance
thereunder from 500,000 to 1,000,000;
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, 2000; 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 17, 1999, 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 20, 1999 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
/s/ Thomas F. Belleau, Secretary
Shirley, New York
December 27, 1999
<PAGE>
SYSCOMM INTERNATIONAL CORPORATION
20 Precision Drive
Shirley, New York 11967
------------------------------
PROXY STATEMENT
------------------------------
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10:00 A.M. ON JANUARY 27, 2000
The enclosed Proxy Statement is solicited by the Board of Directors of
SYSCOMM INTERNATIONAL CORPORATION (the "Company") in connection with the 2000
Annual Meeting of Stockholders (the "Meeting") to be held on January 27, 2000,
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 17, 1999, 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 4,720,894 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 amendment of the Company's 1998 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder from
500,000 to 1,000,000;
(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, 2000; 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 1999 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 27,
1999.
<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 III and three (3) members in Class II. 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, 2002 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.
Two (2) directors are to be elected as Class I directors by a plurality of
the votes cast at the Meeting, each to hold office until the 2003 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 the
Class I directors.
Each of the nominees for election as a Class I 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 John H. Spielberger and Lowell Shulman as Class I directors.
Information Regarding Directors
The following table sets forth certain information with respect to (i) the
nominees for election as Class I directors, including the year in which such
nominees' terms would expire, if elected, and (ii) each of the Class II and
Class III directors whose terms will continue after the Meeting:
<TABLE>
<CAPTION>
YEAR TERM EXPIRES,
IF ELECTED, AND
NAME AGE POSITION CLASS
---- --- -------- -----
<S> <C> <C>
John H. Spielberger*........... 57 Chairman of the Board of Directors, President 2003 Class I
and Chief Executive Officer of SysComm
Lowell Shulman*................ 36 Vice President, General Manager - Consulting and 2003 Class I
Director of SysComm
Thomas F. Belleau.............. 56 Vice President, Director of SysComm, Chief 2002 Class II
Financial Officer and Secretary of SysComm
John C. Spielberger............ 30 Director of SysComm 2002 Class II
Cornelia Eldridge.............. 58 Director of SysComm 2001 Class III
Lee Adams...................... 67 Director of SysComm 2001 Class III
Lawrence S. Brochin 50 Director of SysComm 2002 Class II
- ------------------------
<FN>
* Nominee for Class I Director
</FN>
</TABLE>
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.
Lowell A. Shulman joined InfoTech in June 1999 and has been a member of
SysComm's Board of Directors since November 1999. Mr. Shulman is currently
General Manager of InfoTech's Consulting Group. From August 1985 through June
1996, Mr. Shulman held various positions at IBM involving software development,
technical sales, and consulting services. From July 1996 through May 1999, Mr.
Shulman was employed by The Kernel Group, Inc. as manager of its New York
office. Mr. Shulman graduated from the University of Pennsylvania in May 1985
with a B.S.E. in Computer Science.
Thomas F. Belleau joined SysComm in October 1999 and was elected by the
Board of Directors in November 1999 as a Director of the Company. From 1995 to
prior to joining SysComm, Mr. Belleau was managing director of T. F. Belleau and
Company, a consulting firm in finance and administration to small businesses.
Mr. Belleau graduated from the University of Notre Dame in 1965 with a B.A. in
Economics, and from the Stern School of Business of New York University in 1973
with an MBA in Corporate Finance. He is also a CPA.
John C. Spielberger has been a Director of the Company since May 1994. 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 has been a Director of the Company since January 1999
and 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 mergers 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 at the discretion of the Board.
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 Cornelia Eldridge, Lawrence S.
Brochin and Lee Adams. The Audit Committee held one (1) meeting during the
fiscal year ended September 30, 1999. 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 Lee Adams, Cornelia Eldridge
and Lawrence S. Brochin. The Compensation Committee held one (1) meeting during
the fiscal year ended September 30, 1999. 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 eight (8) occasions and acted one (1) time by
unanimous written consent during the fiscal year ended September 30, 1999.
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.
Directors' 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 10,000 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.
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, 1999 to the
Company's Chief Executive Officer and the three most highly paid Executive
Officers whose total cash compensation for such periods exceeded $100,000 (the
"Named Executives"):
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation
-------------------
<TABLE>
<CAPTION>
Name and Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
- ------------------ ------- ------------ ---------- -----------------
<S> <C> <C> <C> <C>
John H. Spielberger, Chairman of 1999 $126,000 $ 42,219 $ 26,427(1)
the Board of Directors, President 1998 $157,333 $ 15,204 $ 71,819(2)
and Chief Executive Officer of 1997 $140,000 $ 133,142 $ 27,623(3)
SysComm
Dennis R. Wilson, Vice President, 1999 $117,500 $ 15,000 -
Chief Financial Officer, Secretary 1998 $137,667 $ - $189,280(5)
and Director of SysComm (4) 1997 $120,000 $ 15,000 $ -
Thomas J. Baehr, Vice President and 1999 $ 90,728 $ 42,219 $ 1,722(7)
Director of SysComm, President and 1998 $160,000 $ 15,204 $182,000(5)
Chief Operating Officer of InfoTech 1997 $150,000 $160,332 $ -
(6)
Norman M. Gaffney, Director of 1999 $136,813 - -
SysComm, Vice President, Regional 1998 $140,000 $112,225 $182,000(5)
Manager New York Group (8) 1997 $125,000 $169,852 $ -
- -------------------------------
<FN>
(1) Consists of expenses for a Company car ($719) and life insurance
premiums ($25,708).
(2) 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.
(3) Consists of expenses for a Company car ($719); life insurance premiums
($25,854); and administration fees on pension plan ($1,050).
(4) Effective September 24, 1999, Mr. Wilson resigned his position as an
officer and director of the Company and its subsidiary.
(5) Represents the difference between the market value and exercise price
of non-qualified stock options on the date of exercise.
(6) Effective May 28, 1999, Mr. Baehr resigned his position as an officer
and director of the Company and its subsidiary.
(7) Consists of expenses for a Company car ($1,218) and life insurance
premiums ($504).
(8) Effective May 25, 1999, Mr. Gaffney resigned his position as an
officer and director of the Company.
</FN>
</TABLE>
Stock Options
There were no stock options granted to the Named Executives during the
Company's fiscal year ended September 30, 1999.
Aggregated Option Exercises in Last Fiscal Year and Year-End Values
The following table sets forth information concerning the exercise of stock
options by the Named Executives during the Company's fiscal year ended September
30, 1999, the number of options owned by the Named Executives and the value of
any in-the-money unexercised stock options as of September 30, 1999.
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
---------------------------------
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options at
at Fiscal Year End (#) Fiscal Year End ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name (on Exercise (#)) $ Unexercisable Unexercisable (1)
---- ---------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John H. Spielberger 3,000 0 1500/1500 -0-/-0-
Dennis R. Wilson (2) 0 0 0 -0-/-0-
Thomas J. Baehr (3) 0 0 0 -0-/-0-
Norman M. Gaffney (4) 0 0 0 -0-/-0-
John C. Spielberger 2,000 0 1000/1000 -0-/-0-
- -------------------
<FN>
(1) Represents the closing price of the Company's Common Stock listed on
the NASDAQ National Market on September 30, 1999 ($1.31) minus the
respective exercise prices.
(2) Effective September 24, 1999, Mr. Wilson resigned his position as an
officer and director of the Company and its subsidiary.
(3) Effective May 28, 1999, Mr. Baehr resigned his position as an officer
and director of the Company and its subsidiary.
(4) Effective May 25, 1999, Mr. Gaffney resigned his position as an
officer and director of the Company.
</FN>
</TABLE>
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
was granted 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 granted constitute incentive stock options ("ISO") and which
Options 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 were
granted to any employee and which were exercisable for the first time by such
employee during any calendar year (under all stock option plans of the Company
and any related corporation) could 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, 1999, 36,000 options had been granted and remain
outstanding 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 options to purchase 18,000 shares of Common
Stock 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, 1999,
267,000 options were granted under the 1998 Plan. Under their terms, all such
options were immediately exercisable. The 1998 Plan currently 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.
1999 Employee Stock Purchase Plan
Summary of the Plan
On January 28, 1999, the stockholders approved the Company's 1999 Employee
Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan has 200,000 shares
of Common Stock reserved for issuance upon purchase by the Company's employees.
The Purchase Plan provides eligible employees of the Company and its designated
subsidiaries with an opportunity to acquire an interest in the future of the
Company.
The purpose of the Purchase Plan is to provide employees of the Company and
its designated subsidiaries with an opportunity to purchase Common Stock through
accumulated payroll deductions, and give them a greater personal interest in the
success of the Company. The Purchase Plan is administered by the Board of
Directors of the Company, which, within the limitations set forth in the
Purchase Plan, determines the persons who may purchase shares of Common Stock,
the number of shares to be sold, the time, manner and form of payment, and
whether restrictions are to be imposed on the shares subject to purchase. The
Purchase Plan provides eligible employees an opportunity to purchase shares of
Common Stock through payroll deductions during two offering periods: October 1
through March 31 and April 1 through September 30. At the time a participant
files his subscription agreement, he shall elect to have payroll deductions made
on each pay day during the offering period in an amount not exceeding ten (10%)
percent of the compensation he receives each pay day during the offering period.
All payroll deductions made for participants in the Purchase Plan are credited
to the employee's account under the Purchase Plan and are withheld in whole
percentages only. A participant may discontinue his participation in the
Purchase Plan under certain circumstances, or may increase or decrease the rate
of his payroll deductions during the offering period. The purchase price per
share is an amount equal to eighty-five (85%) percent of the fair market value
of a share of Common Stock on the first or last day of the offering period,
whichever is lower. The aggregate number of shares purchased by an employee may
not exceed 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 the offering period. The Purchase Plan expires
by its terms on December 17, 2008.
<PAGE>
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, 1999, 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.
(STOCK PERFORMANCE GRAPH INSERTED HERE)
<PAGE>
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) plan became eligible to participate. 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,
1999, 1998 and 1997, the Company recorded 401(k) costs totaling $21,411,
$19,945, and $42,986, respectively. During the fiscal year ended September 30,
1999, the Company recorded 401(k) contributions in the amount of $550 in each of
the accounts of John H. Spielberger, Thomas J. Baehr, Dennis R. Wilson and
Norman M. Gaffney.
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 a two (2) year employment agreement between himself and
the Company, which agreement became effective June 17, 1997 and expired by its
terms on September 30, 1999. No new employment agreements have been entered into
between the Company and any executive officer. During the Company's fiscal years
ended September 30, 1998 and 1999, 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 three (3) independent outside directors of 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.
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, 1999, the actual bonus
payment paid to any of the Named Executives was derived from specific measures
of Company and individual performance. The actual annual bonus awards paid to
Named Executives were based on the terms established in their employment
agreements.
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, was compensated under a previously disclosed employment agreement
between himself and the Company, which agreement expired by its terms at the
close of fiscal 1999. This contract established the minimum levels of
compensation which were to be paid to Mr. Spielberger by the Company.
Effective September 1, 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 was 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, 1999, 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 bonus
payment of $42,219 for the fiscal year ended September 30, 1999.
COMPENSATION COMMITTEE:
Lee Adams
Cornelia Eldridge
Lawrence S. Brochin
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> <C> <C>
John H. Spielberger (1) (3)........ 2,528,500 53.5%
John C. Spielberger (1) (4)....... 15,618 *
Cornelia Eldridge (5).............. 22,500 *
Lee Adams (6)...................... 88,600 1.9%
Lawrence S. Brochin (7)............ 15,000 *
Lowell A. Schulman (8)............. 0 *
Thomas F. Belleau (9).............. 0 *
All Officers and Directors as a group 2,670,218 55.6%
(seven persons) (10)............
- ----------
<FN>
* less than one (1%) percent
(1) The addresses of John H. Spielberger and John C. Spielberger 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 1,500 shares of
Common Stock at an exercise price of $6.11875 per share, exercisable
as of July 22, 1999. Does not include options to purchase 1,500 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 1,000 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 1,000
shares of Common Stock at an exercise price of $5.5625 per share.
(5) The address of Cornelia Eldridge is 4514 Elkhorn Road, P.O. Box 6243,
Sun Valley, Idaho 83354. Includes options to purchase, (i) 2,500
shares of Common Stock at an exercise price of $5.5625, exercisable as
of July 22, 1999, (ii) 5,000 shares of Common Stock at an exercise
price of $1.875 per share, exercisable as of September 1, 1998, and
(iii) 10,000 shares of Common Stock at an exercise price of $.969,
exercisable as of November 18, 1999. Does not include options to
purchase 2,500 shares of Common Stock at an exercise price of $5.5625
per share.
(6) The address of Lee Adams is P.O. Box 2404, Lake Arrowhead, California
92352. Includes options to purchase (i) 2,500 shares of Common Stock
at an exercise price of $5.5625, exercisable as of July 22, 1999, (ii)
options to purchase 35,000 shares of Common Stock at an exercise price
of $1.875 per share, exercisable as of September 1, 1998, and (iii)
10,000 shares of Common Stock at an exercise price of $.969,
exercisable as of November 18, 1999. Does not include options to
purchase 2,500 shares of Common Stock at an exercise price of $5.5625
per share.
(7) The address of Lawrence S. Brochin is 445 Northern Boulevard, Great
Neck, New York 11021. Includes options to purchase 5,000 shares at an
exercise price of $2.6875, exercisable as of January 28, 1999, and
options to purchase 10,000 shares at an exercise price of $.969,
exercisable as of November 18, 1999.
(8) The address of Lowell A. Schulman is c/o SysComm International
Corporation, 20 Precision Drive, Shirley, New York 11967. Excludes
options to purchase 60,000 shares at an exercise price of $1.5625 per
share.
(9) The address of Thomas F. Belleau is c/o SysComm International
Corporation, 20 Precision Drive, Shirley, New York 11967. Excludes
options to purchase 20,000 shares at an exercise price of $.969 per
share.
(10) Percentages may not add up exactly due to rounding.
</FN>
</TABLE>
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, 1999, the Company believes that all reports required to be filed
by such persons with respect to the Company's fiscal year ended September 30,
1999 were filed.
2. AMENDMENT OF 1998 STOCK OPTION PLAN
At the meeting, the Company's stockholders will be asked to approve an
amendment to the 1998 Stock Option Plan (the "1998 Plan") to increase the number
of shares of Common Stock for issuance thereunder from 500,000 to 1,000,000. The
1998 Plan was adopted by the Board of Directors of the Company in November 1998
and approved by the stockholders in February of 1999.
As of September 30, 1999, options have been granted under the 1998 Plan to
purchase 267,000 shares, with 55,000 of those shares exercisable as of such
date.
The Board believes that in order to enable the Company to continue to
attract and retain personnel of the highest caliber, provide incentives for
certain directors, officers and employees of the Company and certain other
persons instrumental to the success of the Company and to continue to promote
the well-being of the Company, it is in the best interest of the Company and its
stockholders to provide to such persons, through the granting of stock options,
the opportunity to participate in the value and/or appreciation in value of the
Company's Common Stock. The Board has found that the grant of options has proven
to be a valuable tool in attracting and retaining key employees. The Board
believes that the 1998 Plan (i) will provide the Company with significant means
to attract and retain talented personnel; (ii) will result in saving cash, which
otherwise would be required to maintain current key employees and adequately
attract and reward key personnel; and (iii) consequently will prove beneficial
to the Company's ability to be competitive.
If the above-described amendment to the 1998 Plan is approved by the
stockholders, additional options may be granted under the 1998 Plan, the timing,
amounts and specific terms of which cannot be determined at this time.
The following summary of the 1998 Plan does not purport to be complete, and
is subject to and qualified in its entirety by reference to the full text of the
1998 Plan, as proposed to be amended, set forth as Exhibit "A" to this Proxy
Statement.
Summary of the Plan
The 1998 Plan, as amended, would have 1,000,000 shares of Common Stock
reserved for issuance upon the exercise of options designated as either (i)
incentive stock options ("ISOs") under the Code 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. In
certain circumstances, the exercise of stock options may have an adverse effect
on the market price of the Common Stock.
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, 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 are 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, 2010; however, options granted under the 1998 Plan
will expire not more than ten 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.
Certain Federal Income Tax Consequences of the Plan
The following is a brief summary of the Federal income tax aspects of stock
options to be granted under the Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe state or local tax consequences.
Incentive Stock Options. A participant will recognize no taxable income
upon the grant or exercise of an ISO. Upon a disposition of the shares after the
later of two (2) years from the date of grant and one (1) year after the
transfer of the shares to the participant (i) the participant will recognize the
difference, if any, between the amount realized and the exercise price as
long-term capital gain or long-term capital loss (as the case may be) if the
shares are capital assets; and (ii) the Company will not qualify for any
deduction in connection with the grant or exercise of the options. The excess,
if any, of the fair market value of the shares on the date of exercise of an ISO
over the exercise price will be treated as an item of adjustment for a
participant's taxable year in which the exercise occurs and may result in an
alternative minimum tax liability for the participant. In the case of the
disposition of shares in the same taxable year as the exercise, where the amount
realized on the disposition is less than the fair market value of the shares on
the date of exercise, there will be no adjustment since the amount treated as an
item of adjustment, for alternative minimum tax purposes, is limited to the
excess of the amount realized on such disposition over the exercise price which
is the same amount included in the regular taxable income.
If Common Stock acquired upon the exercise of an ISO is disposed of prior
to the expiration of the holding periods described above, (i) the participant
will recognize ordinary compensation income in the taxable year of disposition
on an amount equal to the excess , if any, of the lesser of the fair market
value of the shares on the date of exercise or the amount realized on the
disposition of shares, over the exercise price paid for such shares; and (ii)
the Company will qualify for a deduction equal to any such amount recognized,
subject to the limitation that the compensation be reasonable. The participant
will recognize the excess, if any, of the amount realized over the fair market
value of the shares on the date of exercise, if the shares are capital assets,
as short-term or long-term capital gain, depending on the length of time that
the participant held the shares, and the Company will not qualify for a
deduction with respect to such excess.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock option.
See "Non-Qualified Stock Options".
Non-Qualified Stock Option. Except as noted below, with respect to
non-qualified stock options (i) upon grant of the option, the participant will
recognize non income; (ii) upon exercise of the option (if the shares of Common
Stock are not subject to a substantial risk of forfeiture), the participant will
recognize ordinary compensation income in an amount equal to the excess, if any,
of the fair market value of the shares on the date of exercise over the exercise
price, and the Company will qualify for a deduction in the same amount, subject
to the requirement that the compensation be reasonable; (iii) the Company will
be required to comply with applicable Federal income tax withholding
requirements with respect to the amount of ordinary compensation income
recognized by the participant; and (iv) on a sale of the shares, the participant
will recognize gain or loss equal to the difference, if any, between the amount
realized and the sum of the exercise price and the ordinary compensation income
recognized. Such gain or loss will be treated as capital gain or loss if the
shares are capital assets and as short-term or long-term capital gain or loss,
depending upon the length of time that the participant held the shares.
Recommendation and Vote Required
The vote of the holders of a majority of the shares of the Company's Common
Stock present in person or represented by proxy at the Meeting is required to
adopt the foregoing proposal to amend the 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 six (6) 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, 2000. 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, 2000.
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.
<PAGE>
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 22, 2000. 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
/s/ Thomas F. Belleau, 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, 1999. Such request should be addressed to Stockholder Relations, SysComm
International Corporation, 20 Precision Drive, Shirley, New York 11967.
Dated: December 27, 1999
EXHIBIT A
SYSCOMM INTERNATIONAL CORPORATION
1998 STOCK OPTION PLAN
AS AMENDED
1. Plan; Purpose; General. The purpose of this Stock Option Plan (the
"Plan") is to advance the interests of SysComm International Corporation and any
present and future subsidiaries (as defined below) of SysComm International
Corporation (hereinafter inclusively referred to as the "Company") by enhancing
the ability of the Company to attract and retain selected employees,
consultants, advisors and directors (collectively the "Participants") by
creating for such Participants incentives and rewards for their contributions to
the success of the Company, and by encouraging such Participants to become
owners of shares of the Company's Common Stock, $.01 par value per share, as the
title or par value may be amended (the "Shares").
Options granted pursuant to the Plan may be incentive stock options
("Incentive Options") as defined in the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified options, or both. The proceeds received
from the sale of Shares pursuant to the Plan shall be used for general corporate
purposes.
2. Effective Date of Plan. The Plan will become effective upon approval by
the Board of Directors (the "Board"), and shall be subject to the approval by
the shareholders of the Company as provided under the Securities Act of 1933, as
amended (the "Act").
3. Administration of the Plan. The Plan will be administered by the Board
of the Company. The Board will have authority, not inconsistent with the express
provisions of the Plan, to take all action necessary or appropriate thereunder,
to interpret its provisions, and to decide all questions and resolve all
disputes which may arise in connection therewith. Such determinations of the
Board shall be conclusive and shall bind all parties.
The Board may, in its discretion, delegate its powers with respect to the
Plan to an employee benefit plan committee or any other committee (the
"Committee"), in which event all references to the Board hereunder, including
without limitation the references in Section 9, shall be deemed to refer to the
Committee. The Committee shall consist of not fewer than two (2) members
provided, however, that if the Company is subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), each of
the members of the Committee must be a "non-employee director" as that term is
defined in Rule 16b-3 adopted pursuant to the Exchange Act. A majority of the
members of the Committee shall constitute a quorum, and all determinations of
the Committee shall be made by the majority of its members present at a meeting.
Any determination of the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by all of the Committee members.
Subject to the foregoing, from time to time the Board may increase the size of
the Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution thereof, or fill
vacancies however caused.
The Board and the Committee, if any, shall have the authority, consistent
with the terms of the Plan, to determine eligibility, the number of Options
granted and the exercise price of Options.
4. Eligibility. The Participants in the Plan shall be all employees,
consultants, advisors and directors of the Company whether or not they are also
officers of the Company provided, however, that Incentive Options shall only be
granted to employees of the Company.
5. Grant of Options.
(a) The Board shall grant Options to Participants that it, in its sole
discretion, selects. Options shall be granted in accordance with the terms and
conditions set forth in Section 6 hereof and on such other terms and conditions
as the Board shall determine. Such terms and conditions may include a
requirement that a Participant sell to the Company any Shares acquired upon
exercise of Options upon the Participant's termination of employment upon such
terms and conditions as the Board may determine. Incentive Options shall be
granted on terms that comply with the Code and Regulations thereunder.
(b) No Options shall be granted after February 28, 2010 but Options
previously granted may extend beyond that date.
6. Terms and Conditions of Options
(a) Exercise Price. The purchase price per share for Shares issuable upon
exercise of Options shall be a minimum of 100% of fair market value on the date
of grant as determined by the Board. For this purpose, "fair market value" will
be determined as set forth in Section 8 hereof. Notwithstanding the foregoing,
if any person to whom an Option is to be granted owns in excess of ten (10%)
percent of the outstanding capital stock of the Company (a "Principal
Shareholder"), then no Option may be granted to such person for less than 110%
of the fair market value on the date of grant as determined by the Board.
(b) Period of Options. The expiration of each Option shall be fixed by the
Board, in its discretion, at the time such Option is granted. No Option shall be
exercisable after the expiration of ten (10) years from the date of its grant,
or after the expiration of five (5) years from the date of its grant in the case
of an Incentive Option granted to a Principal Shareholder who was such on the
date of grant, and each Option shall be subject to earlier termination as
expressly provided in Section 6 hereof or as determined by the Board, in its
discretion, on the date such Option is granted.
(c) Payment for Delivery of Shares. Shares which are subject to Options
shall be issued only upon receipt by the Company of full payment of the purchase
price for the Shares as to which the Option is exercised. Payment for Shares may
be made (as determined by the Board at the time the Option is granted) (i) in
cash, (ii) by certified or bank check payable to the order of the Company in the
amount of the purchase price, (iii) by delivery of Shares owned by the
Participant having a fair market value equal to the purchase price, or (iv) by
any combination of the methods of payment described in (i) through (iii) above,
as determined by the Board at the time the Option is granted.
The Company shall not be obligated to deliver any Shares unless and until,
in the opinion of the Company's counsel, all applicable federal and state laws
and regulations have been complied with and until all other legal matters in
connection with the issuance and delivery of Shares have been approved by the
Company's counsel. Without limiting the generality of the foregoing, the Company
may require from the person exercising an Option such investment representation
or such agreement, if any, as counsel for the Company may consider necessary in
order to comply with the Act and applicable state securities laws. (d) Rights as
Shareholder. A Participant or a transferee of an Option shall have no rights as
a Shareholder with respect to any Shares covered by the Option until the date of
the issuance of a stock certificate to him for such Shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 7 hereof.
(e) Vesting. The Board may impose such vesting restrictions as it sees fit
at the time of grant.
(f) Non-Transferability of Options. Options may not be sold, assigned or
otherwise transferred or disposed of in any manner whatsoever except as provided
in Section 6(h) hereof.
(g) Termination of Relationship. Except as otherwise provided in an Option
or other agreement between the Company and a Participant, upon the termination
of a Participant's status as an employee, consultant, advisor or director, for
any reason other than as set forth in subsections (ii) and (iii) below, at a
time when the Shares are then Publicly Traded (as defined below), then the
following provisions shall apply:
(i) Such Participant may exercise Options to the extent exercisable on the
date of termination within three (3) months (or such shorter time as may be
specified in the grant), after the date of such termination. To the extent that
the Participant was not entitled to exercise the Option at the date of such
termination, or does not exercise such Option within the time specified herein,
such Option shall terminate.
(ii) Notwithstanding the provisions of subsection (i) above, in the event
of termination of a Participant's status as an employee as a result of
"permanent disability" (as such term is defined in any contract of employment
between the Company and the Participant or, if not defined, then such term shall
mean the inability to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of twelve (12) months), the Participant may exercise the
Option, but only to the extent such Option was exercisable on the date the
Participant ceased working as the result of the permanent disability. Such
exercise must occur within eighteen (18) months (or such shorter time as is
specified in the grant) from the date on which the Participant ceased working as
a result of the permanent disability. To the extent that the Participant was not
entitled to exercise such Option on the date the Participant ceased working, or
does not exercise such Option within the time specified herein, such Option
shall terminate.
(iii) Notwithstanding the provisions of subsection (i) above, in the event
of the death of a Participant, the Option may be exercised, at any time within
six (6) months following the date of death (or such shorter time as may be
specified in the grant), by the Participant's estate or by a person who acquired
the right to exercise the Option by will or the applicable laws of descent or
dissolution, but only to the extent such Option was exercisable on the date of
the Participant's death. To the extent that the Participant was not entitled to
exercise such Option on the date of death, or the Option is not exercised within
the time specified herein, such Option shall terminate.
<PAGE>
(iv) Notwithstanding subsections (i), (ii), and (iii) above, the Board
shall have the authority to extend the expiration date of any outstanding Option
in circumstances in which it deems such action to be appropriate (provided that
no such extension shall extend the term of an Option beyond the date on which
the Option would have expired if no termination of the Participant's
relationship's with the Company had occurred).
(h) Financial Assistance. The Company is vested with authority under this
Plan to assist any employee to whom an Option is granted hereunder (including,
to the extent permitted by law, any director or officer of the Company who is
also an employee of the Company) in the payment of the purchase price payable on
exercise of that Option, by lending the amount of such purchase price to such
employee on such terms and at such rates of interest and upon such security (or
unsecured) as shall have been authorized by or under authority of the Board.
(i) Withholding Taxes. To the extent required by applicable federal, state,
local or foreign law, a Participant shall make arrangements satisfactory to the
Company for the satisfaction of any withholding tax obligations that arise by
reason of an Option exercise or any sale of Shares. The Company shall not be
required to issue Shares until such obligations are satisfied. The Board may
permit these obligations to be satisfied by having the Company withhold a
portion of the Shares that otherwise would be issued to the Participant upon
exercise of the Option, or to the extent permitted, by tendering Shares
previously acquired.
7. Shares Subject to Plan.
(a) Number of Shares and Stock to be Delivered. Shares delivered pursuant
to this Plan shall in the discretion of the Board be authorized but unissued
Shares or previously issued Shares acquired by the Company. The unexercised
portion of any expired, terminated or cancelled Option shall again be available
for the grant of Options under the Plan. Subject to adjustment as described
below, the aggregate number of Shares which may be delivered under this Plan
shall not exceed 1,000,000 Shares.
(b) Changes in Stock. In the event of a stock dividend, stock split or
combination of Shares, recapitalization, merger in which the Company is the
surviving Company or other change in the Company's capital stock, the number and
kind of Shares of stock or securities of the Company to be subject to the Plan
and to Options then outstanding or to be granted thereunder, the maximum number
of Shares or securities which may be delivered under the Plan, the Option price
and other relevant provisions shall be appropriately adjusted by the Board,
whose determination shall be binding on all persons. In the event of a
consolidation or merger in which the Company is not the surviving Company or
which results in the acquisition of substantially all the Company's outstanding
stock by a single person or entity, or in the event of the sale or transfer of
substantially all the Company's assets, all outstanding Options, whether or not
then exercisable, shall immediately become exercisable. The Board shall notify
the Participants that the Option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will terminate
upon the expiration of such period.
The Board may also adjust the number of Shares subject to outstanding
Options, the exercise price of outstanding Options and the terms of outstanding
Options to take into consideration material changes in accounting practices or
principles, consolidations or mergers (except those described in the immediately
preceding paragraph), acquisitions or dispositions of stock or property or any
other event if it is determined by the Board that such adjustment is appropriate
to avoid distortion in the operation of the Plan.
8. Certain Definitions.
Certain terms used in the Plan have been defined above. In addition, as
used in the Plan, the following terms shall have the following meanings:
(a) A "subsidiary" is any company (i) in which the Company owns, directly
or indirectly, stock possessing fifty (50%) percent or more of the total
combined voting power of all classes of stock or (ii) over which the Company has
effective operating control.
(b) The "fair market value" of the Shares shall mean the closing price of
the Shares as of the day in question (or, if such day is not a trading day in
the principal securities market or markets for such Shares, on the nearest
preceding trading day), as reported with respect to the market (or the composite
of markets, if more than one) in which Shares are then traded, or, if no such
closing prices are reported, on the basis of the mean between the high bid and
low asked prices that day on the principal market or quotation system on which
Shares are then quoted, or, if not so quoted, as furnished by a professional
securities dealer making a market in such Shares selected by the Board.
9. Indemnification of Board. In addition to and without affecting such
other rights of indemnification as they may have as members of the Board or
otherwise, each member of the Board shall be indemnified by the Company to the
extent legally possible against reasonable expenses, including attorney's fees,
actually and reasonably incurred in connection with any appeal therein, to which
he may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any Option granted thereunder, and against all
judgments, fines and amounts paid by him in settlement thereof; provided that
such payment of amounts so indemnified is first approved by a majority of the
members of the Board who are not parties to such action, suit or proceedings, or
by independent legal counsel selected by the Company, in either case on the
basis of a determination that such member acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company; and except that no indemnification shall be made in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Board member is liable for a breach of the duty of loyalty, bad faith or
intentional misconduct in his duties; and provided further, that the Board
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend same.
10. Amendments. The Board may at any time discontinue granting Options
under the Plan. The Board may at any time or times amend the Plan or amend any
outstanding Option or Options for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the extent explicitly
required or permitted hereinabove) no such amendment will, without the approval
of the shareholders of the Company, (a) increase the maximum number of Shares
available under the Plan, (b) reduce the Option price of outstanding Options or
reduce the price at which Options may be granted, (c) extend the time within
which Options may be granted, (d) amend the provisions of this Section 10 of the
Plan, (e) extend the period of an outstanding Option beyond ten (10) years from
the date of grant (five (5) years for Incentive Options granted to Principal
Shareholders), (f) adversely affect the rights of any Participant (without his
consent) under any Options theretofore granted or (g) be effective if
shareholder approval is required by applicable statute, rule or regulation.
<PAGE>
11. Miscellaneous Provisions.
(a) Rule 16b-3. With respect to Participants subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Plan administrators fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Board.
(b) Underscored References. The underscored references contained in the
Plan and in any Option agreement are included only for convenience, and they
shall not be construed as a part of the Plan or Option agreement or in any
respect affecting or modifying its provisions.
(c) Number and Gender. The masculine, feminine and neuter, wherever used in
the Plan or in any Option agreement, shall refer to either the masculine,
feminine or neuter and, unless the context otherwise requires, the singular
shall include the plural and the plural the singular.
(d) Governing Law. The place of administration of the Plan and each Option
agreement shall be in the State of New York. The corporate law of the Company's
state of incorporation shall govern issues related to the validity and issuance
of Shares. Otherwise, this Plan and each Agreement shall be construed and
administered in accordance with the laws of the State of New York, without
giving effect to principles relating to conflict of laws.
(e) No Employment Contract. Neither the adoption of the Plan nor any
benefit granted hereunder shall confer upon any employee any right to continued
employment nor shall the Plan or any benefit interfere in any way with the right
of the Company to terminate the employment of any of its employees at any time.
