As filed with the Securities and Exchange Commission on November 1, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
ROBOCOM SYSTEMS INTERNATIONAL INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value transaction:
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5. Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
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2. Form, Schedule or Registration Statement No.:
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<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 1, 2000
To the Shareholders of Robocom Systems International Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Robocom
Systems International Inc., a New York corporation (the "Company"), will be held
in the Executive Conference Room of Robocom Systems International Inc., 511
Ocean Ave., Massapequa, NY 11758, on Monday, December 4, 2000 at 9:00 A.M.,
local time, for the following purposes:
1. Election of six (6) directors to the Board of Directors to hold
office until the 2001 Annual Meeting of Shareholders or until their
successors shall have been duly elected and qualified;
2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from 10,000,000 shares to 30,000,000 shares;
3. Approval of a private placement offering of equity securities, or
securities convertible into equity securities, of the Company for
aggregate consideration in an amount not to exceed $10,000,000;
4. Approval and adoption of a proposal to amend the Company's 1997
Stock Option and Long-Term Incentive Compensation Plan, as amended,
to increase the number of shares of Common Stock that may be issued
thereunder from 650,000 shares to 1,150,000 shares;
5. Such other business as may properly come before the Annual Meeting.
Only shareholders of record at the close of business on Wednesday, October
25, 2000 will be entitled to vote at the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, please mark, sign
and promptly return the enclosed proxy in the postpaid envelope provided. If you
receive more than one proxy because your shares are registered in different
names or addresses, each such proxy should be signed and returned so that all
your shares will be represented at the meeting.
Sincerely,
C. Kenneth Morrelly
President and Chief Executive Officer
<PAGE>
ROBOCOM SYSTEMS INTERNATIONAL INC.
511 Ocean Avenue
Massapequa, New York 11758
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished to shareholders of Robocom Systems
International Inc., a New York corporation (the "Company"), in connection with
the solicitation, by order of the Board of Directors of the Company (the
"Board"), of proxies to be voted at the Annual Meeting of Shareholders, to be
held on Monday, December 4, 2000 at 9:00 A.M., local time, in the Executive
Conference Room of Robocom Systems International Inc., 511 Ocean Avenue,
Massapequa, NY 11758, and at any adjournment or adjournments thereof (the
"Annual Meeting"). The accompanying proxy is being solicited on behalf of the
Board. This Proxy Statement and the enclosed proxy card were first mailed to
shareholders of the Company on or about November 1, 2000, accompanied by the
Company's Annual Report on Form 10-KSB for the fiscal year ended May 31, 2000,
and the Company incorporates the contents of such report herein by reference
thereto.
At the Annual Meeting, the following matters will be considered and voted
upon:
(1) Election of six (6) directors to the Board of Directors to hold
office until the 2001 Annual Meeting of Shareholders or until their
successors shall have been duly elected and qualified;
(2) Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock, par value $ .01 per share (the "Common Stock"), of the
Company from 10,000,000 shares to 30,000,000 shares;
(3) Approval of a private placement offering of equity securities, or
securities convertible into equity securities, of the Company for
aggregate consideration in an amount not to exceed $10,000,000;
(4) Approval and adoption of a proposal to amend the Company's 1997
Stock Option and Long-Term Incentive Compensation Plan, as amended,
to increase the number of shares of Common Stock that may be issued
thereunder from 650,000 shares to 1,150,000 shares;
(5) Such other business as may properly come before the Annual Meeting.
Voting and Revocation of Proxies; Adjournment
All of the voting securities of the Company represented by valid proxies,
unless the shareholder otherwise specifies therein or unless revoked, will be
voted FOR the election of the persons nominated as directors and, at the
discretion of the proxy holders, on any other matters that may properly come
before the Annual Meeting. The Board does not know of any matters to be
considered at the Annual Meeting other than the election of directors, the
proposed amendment of the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock, the proposed offering
of equity securities, and the proposed amendment to the Company's 1997 Stock
Option and Long-Term Compensation Plan.
If a shareholder has appropriately specified how a proxy is to be voted,
it will be voted accordingly. Any shareholder has the power to revoke such
shareholder's proxy at any time before it is voted. A proxy may be revoked by
delivery of a written statement to the Secretary of the Company stating that the
proxy is revoked, by a subsequent proxy executed by the person executing the
prior proxy and presented to the Annual Meeting, or by voting in person at the
Annual Meeting.
<PAGE>
A plurality of the votes cast at the Annual Meeting by the shareholders
entitled to vote in the election is required to elect the director nominees, the
approval of the holders of a majority of all outstanding shares of Common Stock
entitled to vote is required to approve the proposed increase in the authorized
Common Stock of the Company and a majority of the votes cast at the Annual
Meeting by the shareholders entitled to vote is required to take any other
action. Although no formal agreement exists, the Company anticipates that the
2,501,000 shares (approximately 55.6% of the outstanding shares) in the
aggregate of the Common Stock beneficially owned by Mr. Irwin Balaban, the
Chairman of the Board, Mr. Herbert Goldman, a Director of the Company, and Mr.
Lawrence B. Klein, the Secretary and a Director of the Company, will be voted as
recommended for the director nominees set forth herein. Accordingly, the Board
anticipates its nominees will be elected to serve as the Company's directors and
the proposed amendment of the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock, the proposed offering
of equity securities and the proposed amendment to the Company's 1997 Stock
Option and Long-Term Compensation Plan will all be approved. In the event that
sufficient votes in favor of any of the matters to come before the meeting are
not received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
by proxy at the Annual Meeting. The persons named as proxies will vote in favor
of any such proposed adjournment or adjournments.
Abstentions and broker non-votes are counted in determining the existence
of a quorum but are not counted as votes cast for the proposals as to which the
shareholder abstained or the broker withheld authority. Abstentions and broker
non-votes have the effect of reducing the number of affirmative votes required
to achieve a majority of the votes cast.
Solicitation
The solicitation of proxies pursuant to this Proxy Statement will be
primarily by mail. In addition, certain directors, officers or other employees
of the Company may solicit proxies by telephone, telegraph, mail or personal
interviews, and arrangements may be made with banks, brokerage firms and others
to forward solicitation material to the beneficial owners of shares held by them
of record. No additional compensation will be paid to directors, officers or
other employees of the Company for such services. The total cost of any such
solicitation will be borne by the Company and will include reimbursement of
brokerage firms and other nominees.
Quorum and Voting Rights
The Board has fixed Wednesday, October 25, 2000 as the record date (the
"Record Date") for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Holders of record of shares of Common Stock at
the close of business on the Record Date will be entitled to one vote for each
share held. The presence, in person or by proxy, of the holders of a majority of
the outstanding voting securities entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting.
2
<PAGE>
Security Ownership of Certain Beneficial Owners and Management Ownership
The following table sets forth, as of October 5, 2000, the names,
addresses and number of shares of Common Stock beneficially owned by all persons
known to the management of the Company to be beneficial owners of more than 5%
of the outstanding shares of Common Stock, and the names and number of shares
beneficially owned by all directors and director nominees of the Company and all
executive officers and directors of the Company as a group (except as indicated,
each beneficial owner listed exercises sole voting power and sole dispositive
power over the shares beneficially owned):
Number of Percentage of
Shares Outstanding
Name and Address of Beneficially Shares Beneficially
Beneficial Owner (1) Owned(2) Owned(2)
-------------------- -------- --------
Irwin Balaban ............................... 1,014,958(3) 22.37%
Herbert Goldman ............................. 904,000(4) 20.02
William J. Hancock .......................... 5,000(5) *
Lawrence B. Klein ........................... 685,958(6) 15.12
C. Kenneth Morrelly ......................... 37,667(7) *
Yacov Shamash ............................... 5,000(5) *
All executive officers and directors as
a group (9 persons) ....................... 2,856,783(8) 60.76
----------
* Less than 1%.
(1) The address of each beneficial owner of more than 5% of the outstanding
shares of Common Stock is c/o Robocom Systems International Inc., 511
Ocean Avenue, Massapequa, New York 11758.
(2) Except as indicated in the footnotes to this table, the Company believes
that all persons named in the table have sole voting and investment power
with respect to all Common Stock shown as beneficially owned by them. In
accordance with the rules of the Securities and Exchange Commission (the
"Commission"), a person or entity is deemed to be the beneficial owner of
Common Stock that can be acquired by such person or entity within 60 days
upon the exercise of options or warrants or other rights to acquire Common
Stock. Each beneficial owner's percentage ownership is determined by
assuming that options and warrants that are held by such person (but not
those held by any other person) and which are exercisable within 60 days
have been exercised. The inclusion herein of such shares listed as
beneficially owned does not constitute an admission of beneficial
ownership.
(3) Includes 564,000 shares held by I&T Balaban L.P. and 41,958 shares subject
to options that are presently exercisable.
(4) Includes 564,000 shares held by H & N Goldman L.P., 160,000 shares held by
the Herbert Goldman Revocable Trust, 160,000 shares held by the Naomi J.
Goldman Revocable Trust and 20,000 shares subject to options that are
presently exercisable.
(5) Represents 5,000 shares subject to options that are presently exercisable.
(6) Includes 41,958 shares subject to options that are presently exercisable.
(7) Nominee for election to the Board of Directors; includes 21,667 shares
subject to options that are presently exercisable.
(8) Includes 205,583 shares subject to options that are presently exercisable.
3
<PAGE>
PROPOSAL 1 - Election of Directors
The Amended and Restated Bylaws of the Company provide that the number of
directors of the Company shall be at least three and not more than seven, except
that where all the shares are owned beneficially and of record by fewer than
three shareholders, the number of directors may be less than three, but not less
than the number of shareholders. Subject to the foregoing limitation, such
number may be fixed from time to time by action of the Board or of the
shareholders. The Board currently consists of five directors. The term of office
of the directors is one year, expiring on the date of the next annual meeting,
or when their respective successors shall have been elected and shall qualify,
or upon their prior death, resignation or removal.
Except where the authority to do so has been withheld, it is intended that
the persons named in the enclosed proxy will vote for the election of the
nominees to the Board listed below to serve until the date of the next annual
meeting of the shareholders of the Company and until their successors are duly
elected and qualified. Although the directors of the Company have no reason to
believe that the nominees will be unable or decline to serve, in the event that
such a contingency should arise, the accompanying proxy will be voted for a
substitute (or substitutes) designated by the Board.
The following table sets forth certain information regarding the director
nominees. All of the following individuals, with the exception of C. Kenneth
Morrelly, currently serve as directors of the Company:
Principal Occupation for Past Five Years and
Name Age Current Public Directorships or Trusteeships
---- --- --------------------------------------------
Irwin Balaban 68 Mr. Balaban is a co-founder of the Company and has been
Chairman of the Board since 1983. From 1983 until his
retirement in March 1999, he was President and Chief
Executive Officer of the Company and, since that time,
he has provided consulting services to the Company.
Herbert Goldman 69 Mr. Goldman is a co-founder of the Company and has been
a director of the Company since 1983. He has provided
consulting services to the Company from his retirement
in 1996 until May 2000. From 1991 until his retirement,
Mr. Goldman had been Executive Vice President -
Operations of the Company.
William J. Hancock 58 Mr. Hancock is has been a director of the Company since
1999. Since August 1998, he has been an independent
consultant specializing in defense logistics,
infrastructure outsourcing and privatization, and global
logistics process reengineering. He has provided
consulting services to the Company since November 1999.
From September 1996 to August 1998, in the rank of Vice
Admiral, Mr. Hancock served as the Deputy Chief of Naval
Operations for the Logistics Department of the Navy.
From June 1994 to September 1996, in the rank of Rear
Admiral, Mr. Hancock served as the Director, Office of
Budget, Department of the Navy.
Lawrence B. Klein 66 Mr. Klein is a co-founder of the Company and has been a
director of the Company since 1991. He was Executive
Vice President - Worldwide from May 1999 until his
retirement in May 2000, and since that time, has
provided consulting services to the Company. From 1991
to May 1999, Mr. Klein had been the Executive Vice
President, Marketing and Sales of the Company.
4
<PAGE>
C. Kenneth Morrelly 55 Mr. Morrelly has been President and Chief Executive
Officer of the Company since August 2000. From June 1999
to August 2000, he was Senior Vice President - Sales and
Marketing of the Company. For more than 15 years prior
thereto, Mr. Morrelly was a Senior Vice President of
Dayton T. Brown, Inc., a company that performs research,
development and testing for the Department of Defense.
Mr. Morrelly has over 30 years experience in information
technology and over ten years experience in advanced
supply chain management research and implementation.
Yacov Shamash 50 Mr. Shamash has been a director of the Company since
1999. Since 1992, he has been Dean of the College of
Engineering and Applied Sciences and the Harriman School
for Management and Policy at SUNY Stony Brook. Since
1989, Mr. Shamash has served as a director and chair of
the audit committee of Key Tronic Corporation, a
keyboard manufacturing company. Mr. Shamash also serves
as a director of Long Island High Technology Incubator
(LIHTI), the Long Island Forum for Technology (LIFT),
and the Long Island Software Technology Network
(LISTnet), which are not-for-profit organizations. He is
a Fellow of the Institute of Electronic and Electrical
Engineers (IEEE) and was a member of the Board of
Governors of the IEEE Aerospace and Electronics Systems
Society (AESS) from 1989 to 1995.
The term of office of the directors is one year, expiring on the date of
the next annual meeting and thereafter until their respective successors shall
have been elected and shall qualify.
Board Meetings and Committees
The Board of Directors met three times during the fiscal year ended May
31, 2000. Each director attended at least 75% of the Board and Committee
meetings of which he was a member during such time as he served as a director.
From time to time, the members of the Board act by unanimous written consent
pursuant to the Business Corporation Law of the State of New York, as amended.
The Board has an Audit Committee, which currently consists of Messrs.
Hancock and Shamash. The Audit Committee recommends engagement of the Company's
auditors for approval and is responsible for determining that management
fulfills its responsibilities in the preparation of financial statements and
financial control of operations. The Audit Committee was established in
September 1997 and held two meetings during the fiscal year ended May 31, 2000.
The Board has a Compensation Committee, which currently consists of
Messrs. Hancock and Shamash. The Compensation Committee reviews and makes
recommendations to the Company's Board of Directors relating to the compensation
of executives and administers the Company's stock option and incentive plans.
The Compensation Committee was established in September 1997 and held two
meetings during the fiscal year ended May 31, 2000.
5
<PAGE>
Board of Directors Compensation
Each non-employee director receives $500 for each Board meeting attended
and is reimbursed for all out-of-pocket expenses incurred in connection with his
attendance at meetings of the Board or any committee thereof. Upon the annual
election to the Board of Directors, each non-employee director is granted
five-year options to purchase 5,000 shares of Common Stock at an exercise price
equal to fair market value of the Common Stock at the date of grant. In
addition, directors serving on either the Audit Committee or the Compensation
Committee are granted additional five-year options to purchase 2,500 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock at the date of grant. These options vest immediately. Upon election to the
Board of Directors on October 29, 1999, Messrs. Hancock and Shamash received
five-year options to purchase 5,000 shares of Common Stock at the exercise price
of $1.4375 per share.
Vote Required
A plurality of the votes cast at the Annual Meeting by the shareholders
entitled to vote in the election is required to elect the director nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
DIRECTOR NOMINEES OF THE BOARD.
6
<PAGE>
PROPOSAL 2 - Approval of an amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 10,000,000 shares to 30,000,000 shares
The Company's Board of Directors has proposed an amendment to Section 4 of
the Company's Restated Certificate of Incorporation. This amendment would
increase the Company's authorized Common Stock from 10,000,000 shares to
30,000,000 shares. At October 5, 2000, 4,495,984 shares of the Company's Common
Stock were outstanding and an aggregate of 650,000 shares of Common Stock were
reserved for issuance under the Company's 1997 Stock Option Plan and Long-Term
Incentive Compensation Plan, as amended. Approval of the proposed increase would
give the Company approximately 25,504,000 shares of Common Stock for future
issuance.
The Company' also has 1,000,000 authorized shares of preferred stock, par
value $.01 per share (the "Preferred Stock"), of which there were no shares
outstanding at October 5, 2000. No increase in the authorized number of shares
of Preferred Stock is requested.
The Company's plans for the issuance of additional shares of Common Stock
are discussed in Proposal 3. The Board of Directors believes that the proposed
increase is desirable so that, as the need may arise, the Company will have more
financial flexibility and be able to issue additional shares of Common Stock
without the expense and delay associated with a special shareholders' meeting,
except where shareholder approval is required by applicable law or stock
exchange regulations. The additional shares of Common Stock might be used, for
example, in connection with an expansion of the Company's business through
investments or acquisitions, sold in a financing transaction or issued under an
employee stock option, savings or other benefit plan or in a stock split or
dividend to shareholders. The Board does not intend to issue any shares except
on terms that it considers to be in the best interests of the Company and its
shareholders.
The additional shares of Common Stock for which authorization is sought
would be a part of the existing class of Common Stock. If and when issued, these
shares would have the same rights and privileges as the shares of Common Stock
presently outstanding. No holder of Common Stock has any preemptive rights to
acquire additional shares of Common Stock.
The issuance of additional shares could reduce existing shareholders
percentage ownership and voting power in the Company and, depending on the
transaction in which they are issued, could affect the per share book value or
other per share financial measures.
Although the proposed amendment is not intended to be an anti-takeover
measure, shareholders should note that, under certain circumstances, the
additional shares of Common Stock could be used to make any attempt to gain
control to the Company or the Board of Directors more difficult or
time-consuming. Any of the additional shares of Common Stock could be privately
placed with purchasers who might side with the Board in opposing a hostile
takeover bid. It is possible that such shares could be sold with or without an
option, on the part of the Company, to repurchase such shares, or on the part of
the purchaser, to put such shares to the Company.
The amendment to increase the authorized Common Stock might be considered
to have the effect of discouraging an attempt by another person or entity,
through the acquisition of a substantial number of shares of the Company's
capital stock, to acquire control of the Company, since the issuance of the
additional shares of Common Stock would dilute the stock ownership of a person
or entity seeking to obtain control and to increase the cost to a person or
entity seeking to acquire a majority of the voting power of the Company. If so
used, the effect of the additional authorized shares of Common Stock might be
(i) to deprive shareholders of an opportunity to sell their stock at a
temporarily higher price as a result of a tender offer or the purchase of shares
by a person or entity seeking to obtain control of the Company or (ii) to assist
incumbent management in retaining its present position.
7
<PAGE>
Text of Proposed Amendment
Section 4 of the Company's Restated Certificate of Incorporation is
proposed to be amended to read as follows:
"The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 31,000,000, of which
30,000,000 shall be Common Stock, par value $.01 per share (the
"Common Stock"), and 1,000,000 shall be Preferred Stock, par value
$.01 per share (the "Preferred Stock"). The Preferred Stock may be
issued, from time to time, in one or more series with such
designations, preferences and relative participating optional or
other special rights and qualifications, limitations or restrictions
thereof, as shall be stated in the resolutions adopted by the Board
of Directors providing for the issuance of such Preferred Stock or
series thereof; and the Board of Directors is hereby expressly
vested with authority to fix such designations, preferences and
relative participating options or other special rights or
qualifications, limitations or restrictions for each series,
including, but not by way of limitation, the power to determine the
redemption and liquidation preferences, the rate of dividends
payable and the time for and the priority of payment thereof and to
determine whether such dividends shall be cumulative or not and to
provide for and determine the terms of conversion of such Preferred
Stock or any series thereof into Common Stock of the Corporation and
fix the voting power, if any, of Preferred Stock or any series
thereof."
Vote Required
The proposed amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
10,000,000 shares to 30,000,000 shares will become effective only upon approval
by the holders of a majority of all outstanding shares entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THIS PROPOSAL 2.
8
<PAGE>
PROPOSAL 3 - Approval of a private placement offering of equity securities, or
securities convertible into equity securities, of the Company for aggregate
consideration in an amount not to exceed $10,000,000.
The Company is contemplating a transaction or series of transactions
pursuant to which equity securities, or securities convertible into equity
securities, may be sold for aggregate consideration in an amount not to exceed
$10,000,000. These sales of securities may result in the issuance of a number of
shares of Common Stock that is more than 20% of the Company's outstanding Common
Stock, and such sales may or may not be below book or market value of the Common
Stock, depending on the market price of the Common Stock on the issuance date.
In no event, however, will the sales be at a discount of greater than 25% of the
market value of the Common Stock on the date of issuance. At the time of the
mailing of this Proxy Statement, the Company has not entered into any contracts
nor signed any engagement letters that would be binding to a contract to sell
securities as discussed herein. Therefore, since there have been no agreements
made and because there are no certain terms of any transaction other than as set
forth above, the Company is unable to provide any additional details of the
proposed transaction or series of transactions at this time. The Board of
Directors will determine the terms of the securities to be issued in its
discretion.
Reasons for the Sale of Securities
The purpose of the sale of securities is to enable the Company to obtain
funds to continue operations through the remainder of fiscal 2001 and fiscal
2002 and to finance additional growth through product development or through
acquisitions. The sale of securities should also enhance the Company's financial
structure and would give the Company additional flexibility to finance growth by
raising additional equity capital due to an improved capital structure.
The Company intends to use the proceeds of the sale of securities to fund
the continued development of RIMS, to expand its portfolio of products, to
increase its sales and marketing efforts, and to facilitate other general
corporate improvements.
Certain potential negative factors associated with the sale of securities
have also been considered. First, the sale price may be at a discount to the
market price of the Common Stock on either the date hereof or the closing date
of the private offering, or both. Second, the sale of securities in the private
offering will reduce the percentage of ownership of existing stockholders.
Third, the agreement by which the securities are purchased may contain certain
restrictive covenants, potentially limiting the ability to issue any additional
debt or equity securities without the consent of the purchasers in the private
offering.
The Common Stock is currently traded on the Nasdaq SmallCap Market. Rule
4310(c)(25)(H) governing the Nasdaq SmallCap Market requires shareholder
approval of any proposed transaction in which a number of shares of common stock
that is more than 20% of the outstanding shares of common stock may be issued
for less than the greater of book or market value of the common stock on the day
of issuance. Rule 4310(c)(25)(H) states that an issuer may not raise funds
through the sale of securities without shareholder approval unless (i) the
transaction results in an issuance or potential issuance of a number of shares
of common stock which is less than 20% of the total number of shares of the
issuer's common stock currently outstanding, (ii) the securities are sold at the
current market price, or (iii) the securities are sold in a public offering. The
sale of securities in a transaction contemplated by this Proposal 3 could raise
up to $10,000,000 in proceeds, compared to a maximum of approximately $1,293,000
(based on the closing price of the Common Stock on October 5, 2000) that could
be raised in a transaction without shareholder approval. Based on current market
conditions, management and the Board of Directors believe that a sale of
securities in the public markets at the current market price of the Common Stock
would involve substantial delay and significant expense and would probably be
unsuccessful given current conditions in the market for public offerings by
companies of similar size and financial position of, and in the same business
as, the Company. Therefore, the Board of Directors believe that the best option
is to complete a sale of securities on the terms outlined in this Proposal 3.
9
<PAGE>
Although the issuance of the securities in the proposed transaction(s)
will have a dilutive effect on the Company's current shareholders, the Board of
Directors believes that shareholder approval of Proposal 3 is in the Company's
best interest because the Company's ability to raise additional financing absent
shareholder approval is severely limited and could be very costly. Accordingly,
the Board of Directors recommends the approval of Proposal 3.
The Company is seeking shareholder approval at the annual meeting to avoid
delay and additional expense in obtaining shareholder approval at a later date,
in the event such shareholder approval is later required. In the event that
shareholder approval is not obtained, the Board of Directors may, in
consideration of its fiduciary duties, determine to proceed with a transaction
if the Board of Directors deems such action to be in the Company's best
interests.
Vote Required
The proposed approval of a private placement offering will become
effective only upon approval by the holders of a majority of the votes cast by
the shareholders entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THIS PROPOSAL 3.
10
<PAGE>
PROPOSAL 4 - Amendment to the 1997 Stock Option and Long-Term Incentive
Compensation Plan
Proposed Amendment
On October 10, 2000, the Board adopted, subject to shareholder approval,
an amendment to the Company's 1997 Stock Option and Long-Term Incentive
Compensation Plan, as amended (the "Option Plan"), to increase the number of
shares of Common Stock that may be issued thereunder from 650,000 shares to
1,150,000 shares. On October 5, 2000, options with respect to an aggregate of
589,450 shares of Common Stock were outstanding under the Option Plan.
The Option Plan
The purpose of the Option Plan, which was adopted in May 1997, is to
enable the Company to compete successfully in attracting, motivating and
retaining directors, officers, employees and consultants by making it possible
for them to own shares of Common Stock thereby giving them a direct and
continuing interest in the future success of the Company's business. The Option
Plan is intended to provide a method whereby directors, officers, employees and
consultants who are making or expected to make substantial contributions to the
successful growth and development of the Company may be offered additional
incentives thereby advancing the interests of the Company and its shareholders.
The Board believes that the Option Plan increases the Company's flexibility in
furthering such purposes.
Terms of the Option Plan
The Option Plan provides for the grant of incentive stock options ("ISO"),
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), non-qualified stock options, SARs, restricted stock and stock bonuses.
The purchase price of shares of Common Stock covered by an ISO must be at
least 100% of the fair market value of such shares of Common Stock on the date
the option is granted. The purchase price for all options is payable in cash or,
subject to Committee approval, with shares of Common Stock previously owned by
Participant, by way of a broker assisted exercise procedure or by such other
method as the Committee may approve. No ISO will be granted to any employee who,
at the time of such grant, owns more than 10% of the total combined voting power
or value of all classes of capital stock of the Company, or any subsidiary of
the Company, unless the option price is at least 110% of the fair market value
of the shares of Common Stock subject to the option on the date the option is
granted and the option expires no later than five years from the date the option
is granted. In addition, the aggregate fair market value of the shares of Common
Stock, determined at the date of grant, with respect to which ISOs are
exercisable for the first time by a participant during any calendar year, shall
not exceed $100,000. No ISO may be granted under the Option Plan to any
individual who is not an employee of the Company. The purchase price of shares
of Common Stock covered by a non-qualified stock option may be equal to or less
than 100% of the fair market value of such shares of Common Stock on the date
the option is granted.
The Option Plan also provides for the grant of SARs, which entitle a
participant to receive a cash payment, equal to the difference between the fair
market value of a share of Common Stock on the exercise date and the exercise
price of the SAR. The terms and the exercise price of a SAR will be determined
by the Committee in its discretion at the time of the grant.
Awards of restricted stock ("Restricted Stock") which are grants of shares
of Common Stock that are subject to a restricted period during which such shares
may not be sold, assigned, transferred, made subject to gift or otherwise
encumbered and Stock Bonuses, which are bonuses in the form of Common Stock, may
also be made under the Option Plan.
11
<PAGE>
Administration of the Option Plan
The Option Plan is administered by the Compensation Committee of the Board
(the "Compensation Committee"). The Compensation Committee will have full
authority, in its sole discretion, to interpret the Option Plan, to establish
from time to time regulations for the administration of the Option Plan and to
determine the directors, officers, employees and consultants to whom awards will
be granted and the terms of such awards. The Compensation Committee may not take
any action under the Option Plan unless it solely is at all times composed of
not less than three "Non-Employee Directors" within the meaning of Rule 16(b)(3)
("Rule 16(b)(3)") under the Exchange Act. In the event that the composition of
the Compensation Committee does not comply with Rule 16(b)(3), the Board shall
take any and all actions required or permitted to be taken by the Compensation
Committee under the Option Plan and shall serve as the Compensation Committee.
Exercise of Options and Rights
Under the Option Plan, options or SARs may be exercised and the
restrictions on Restricted Stock cease to apply, at such times and in such
installments as are specified in the terms of its grant, but with respect to
options and SARs not later than the expiration of ten years from the date of its
grant, (or five years in the case of an ISO granted to any employee who owns
more than 10% of the Company's voting stock) subject to earlier termination,
expiration or cancellation as provided in the grant or the Option Plan.
SARs may be granted in tandem with options and, to the extent that they
are so granted and such stock appreciation rights are exercised, the related
options shall be canceled. Similarly, if such options are exercised, the related
stock appreciation rights shall be canceled.
Options and SARs are not transferable by the participant otherwise than by
will or the laws of descent and distribution and are exercisable during the
participant's lifetime only by such participant. Restricted Stock is not
transferable until all of the restrictions with respect thereto cease to apply.
Unless otherwise provided in a grant, if participant's employment with the
Company shall terminate (as determined by the Compensation Committee in its sole
discretion) for any reason other than retirement, disability, death or for
cause, (a) to the extent exercisable at the time of such termination, options
shall remain exercisable until 90 days after the date of such termination and
stock appreciation rights shall be exercisable on and until the 30th day after
such termination on which date they shall expire, and (b) options and stock
appreciation rights granted to such participant to the extent that they are not
exercisable and all Restricted Stock, to the extent still restricted at the time
of such termination, shall expire at the close of business on the date of such
termination. In the event that the employment of such participant shall
terminate as a result of retirement, disability or death, (x) options and SARs
granted to such participant, to the extent that they were exercisable at the
time of such termination, shall remain exercisable until the expiration of their
term and (y) options and SARs granted to such participant to the extent that
they were not exercisable and all Restricted Stock to the extent still
restricted at the time of such termination shall expire at the close of business
on the date of such termination. In the event an participant's employment
terminates for cause, all options or stock appreciation rights granted to the
participant to the extent not exercised and all Restricted Stock to the extent
still restricted at the time of such termination shall expire on the close of
business on the date of such termination. The effect of exercising any ISO on a
day that is more than 90 days after the date of such termination (or, in the
case of a termination of employment on account of death or disability, on a day
that is more than one year after the date of such termination) will be to cause
such ISO to be treated as a non-qualified stock option pursuant to Section 422
of the Code.
Amendment of the Option Plan
The Board may at any time, or from time to time, suspend or terminate the
Option Plan in whole or in part, or amend it in such respects as the Board may
deem appropriate. No amendment, suspension or termination of the Option Plan
shall, without the participant's consent, alter or impair any of the rights or
obligations under any option plan theretofore granted to a participant under the
Option Plan.
12
<PAGE>
Federal Income Tax Consequences
The following summary is intended only as a general guide as to the
federal income tax consequences under current law with respect to participation
in the Option Plan and does not attempt to describe all possible federal or
other tax consequences of such participation. Furthermore, the tax consequences
of awards made under the Option Plan are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable.
Incentive Stock Options. Options designated as incentive stock options are
intended to fall within the provisions of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). An optionee recognizes no taxable income
for regular income tax purposes as the result of the grant or exercise of such
an option. If an optionee does not dispose of his/her shares for two years
following the date the option was granted or within one year following the
transfer of the shares upon exercise of the option, the gain on the sale of the
shares (which is the difference between the sale price and the purchase price of
the shares) will be taxed as long-term capital gain. If an optionee satisfies
such holding periods, upon a sale of the shares, the Company will not be
entitled to any deduction for federal income tax purposes. If an optionee
disposes of the shares within two years after the date of grant or within one
year from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the date of exercise and the
option exercise price (not to exceed the gain realized on the sale if the
disposition is a transaction with respect to which a loss, if sustained, would
be recognized) will be taxed as ordinary income for the taxable year in which
the disqualifying disposition occurs. Any gain in excess of that amount will be
a capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period is more than one year. Any ordinary income
recognized by the optionee upon the disqualifying disposition of the shares
should be deductible as compensation paid by the Company for federal income tax
purposes, subject to the general "reasonableness" and other deductibility
requirements of Section 162 of the Code. The Company may be required to withhold
additional taxes from the wages of the employee with respect to the amount of
ordinary income taxable to the employee.
The excess of the fair market value of the Common Stock acquired by
exercise of an ISO (determined on the date of exercise) over the exercise price
constitutes an item of adjustment in determining "alternative minimum taxable
income" for purposes of computing "alternative minimum tax" ("AMT") under
Section 55 of the Code.
Nonstatutory Stock Options. Options that do not qualify as incentive stock
options are nonstatutory stock options and have no special tax status. An
optionee generally recognizes no taxable income upon the grant of such an
option.
Upon the exercise of a nonstatutory stock option, the optionee normally
recognizes ordinary income in the amount equal to the difference between the
option exercise price and the fair market value of the shares on the
determination date (which is generally the date of exercise). If the optionee is
an employee, such ordinary income generally is subject to withholding of income
and employment taxes. The "determination date" is, in general, the date on which
the option is exercised unless the shares received are not vested and/or the
sale of the shares at a profit would subject the optionee to liability under
Section 16(b) of the Securities Exchange Act of 1934 ("Section 16(b)"), in which
case the determination date is the later of (i) the date on which the shares
vest, or (ii) the date the sale of the shares at a profit would no longer
subject the optionee to liability under Section 16(b) (Section 16(b) generally
is applicable only to officers, directors and beneficial owners of more than 10%
of the Common Stock of the Company). Upon the sale of stock acquired by the
exercise of a nonstatutory stock option, any gain or loss, based on the
difference between the sale price and the fair market value on the date of
recognition of income, will be taxed as capital gain or loss. A capital gain or
loss will be long-term if the optionee's holding period is more than one year.
No tax deduction is available to the Company with respect to the grant of a
nonstatutory option or the sale of the stock acquired pursuant to such grant.
The Company should be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee as a result of the exercise of a nonstatutory
option, subject to the general "reasonableness" and other deductibility
requirements of Section 162 of the Code.
13
<PAGE>
Stock Appreciation Rights. A participant will not be required to recognize
any income for federal income tax purposes upon the grant of a stock
appreciation right ("SAR"). However, upon the date of exercise of a SAR, the
participant will be required to recognize as ordinary income the amount of the
cash payment received (which is equal to the excess of the fair market value of
a share of Common Stock on the exercise date over the exercise price of the
SAR). The Company should be entitled to a deduction equal to the amount of the
ordinary income recognized by the participant upon the settlement of the SAR,
subject to the general "reasonableness" and other deductibility requirements of
Section 162 of the Code.
Restricted Stock. In general, a participant will not be required to
recognize any income for federal income tax purposes upon the grant or issuance
of shares of Restricted Stock. Upon the vesting of such shares of Restricted
Stock, the participant will be required to recognize, as ordinary income, an
amount equal to the fair market value of such shares on the vesting date, except
that if the sale of such shares at a profit within six months after the issuance
of such shares could subject the participant to liability under Section 16(b),
the participant would not recognize income until the earlier of (i) the
expiration of such six-month period, or (ii) the first day on which the sale of
such shares at a profit would not subject the participant to liability under
Section 16(b). Alternatively, no later than thirty days after the date of
issuance of shares of Restricted Stock, the participant may also be able to
elect, under Section 83(b) of the Code (a "Section 83(b) Election"), to include
as ordinary income for the taxable year of such issuance, the fair market value
of such shares at the time of issuance (without regard to any Section 16(b) or
other "lapse" restriction). Any subsequent appreciation in shares of Restricted
Stock with respect to which a Section 83(b) Election is made will be taxed as
capital gain, and then only when such shares are sold or otherwise disposed of
in a taxable transaction. Such capital gain will be long-term capital gain if
the participant's holding period of such stock is more than one year. However,
if the shares with respect to which a Section 83(b) Election is made are
subsequently forfeited to the Company (e.g., upon termination of the
participant's employment with the Company prior to the vesting of such shares),
the participant will be unable to claim a deduction in respect of such
forfeiture for the amount previously included as ordinary income. The Company
should be entitled to a deduction equal to the amount of the ordinary income
recognized by the participant, subject to the general "reasonableness" and other
deductibility requirements of Section 162 of the Code.
Stock Bonuses. Unless shares of Common Stock granted to a participant as
part of a Stock Bonus are not vested or the participant could otherwise be
subject to liability under Section 16(b), the participant will be required to
recognize, as ordinary income, an amount equal to the fair market value of such
shares at the time of issuance. If such shares are not vested or the participant
could be subject to liability under Section 16(b) at the time of issuance, then,
unless a Section 83(b) Election is made, the participant will not be required to
recognize taxable income in respect of such shares until the later of the date
(i) on which such shares vest, or (ii) the sale of such shares at a profit would
no longer subject the participant to liability under Section 16(b). The Company
should be entitled to a deduction equal to the amount of the ordinary income
recognized by the participant, subject to the general "reasonableness" and other
deductibility requirements of Section 162 of the Code.
Vote Required
The proposed amendment to the Option Plan will become effective only upon
approval by the holders of a majority of the votes cast by the shareholders
entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THIS PROPOSAL 4.
14
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth all compensation awarded to, earned by or
paid to the chief executive officer ("CEO") of the Company and the Company's
four most highly compensated executive officers, whose salary and bonus exceeded
$100,000 in compensation for the last three fiscal years (collectively, the
"Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------------- -------------------------------
Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary Compensation(1) Options/SARs Compensation(2)
------------------ ---- ------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
C. Kenneth Morrelly (3) 2000 $152,488 $11,700 70,000 $1,475
Sr. Vice President - Sales and
Marketing
David Dinin (4) 2000 261,779 16,107 25,000 3,414
President and Chief Executive 1999 38,462 2,568 140,000 0
Officer
Lawrence B. Klein (5) 2000 199,172 11,895 0 2,633
Director, Executive Vice 1999 187,500 10,508 0 3,900
President - Worldwide 1998 203,817 7,172 45,000 4,106
Robert O'Connor 2000 137,522 12,015 5,000 2,880
Vice President - 1999 125,786 11,570 0 2,776
Systems Development 1998 133,077 10,114 30,000 2,580
Elizabeth A. Burke 2000 141,154 0 50,000 1,781
Vice President - Finance, 1999 125,577 0 0 2,509
Chief Financial Officer and 1998 121,023 0 30,000 1,554
Treasurer
Martin Liebross 2000 127,309 11,934 0 2,682
Director - Network Systems 1999 100,000 31,404 0 2,251
Group 1998 100,000 8,766 5,000 2,147
</TABLE>
----------
(1) Represents amounts paid for automobile expenses, certain non-accountable
expenses and commissions.
(2) Represents matching contributions made by the Company pursuant to the
Company's 401(k) Plan.
(3) Mr. Morrelly became Sr. Vice President - Sales and Marketing in June 1999
and became President and Chief Executive Officer on August 25, 2000.
(4) Mr. Dinin became President and Chief Executive Officer in April 1999 and
resigned from employment with the Company in August 2000.
(5) Mr. Klein retired as an employee of the Company in May 2000.
15
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options and
stock appreciation rights ("SARs") made by the Company during fiscal 2000 to
each of the Named Executives:
<TABLE>
<CAPTION>
Number of
Securities Percent of Total Exercise or
Underlying Options/SARs Granted to Base Price Expiration
Name Options/SARs Granted(1) Employees in Fiscal Year(2) ($/Share) Date
---- ----------------------- --------------------------- --------- ----
<S> <C> <C> <C> <C>
C. Kenneth Morrelly 45,000(3) 20.9% $1.7500 06/01/04
25,000 11.6 2.6250 04/14/05
David Dinin 25,000 11.6 2.6250 04/14/05
Robert O'Connor 5,000 2.3 2.6250 04/14/05
Elizabeth A. Burke 40,000(4) 18.6 1.4375 10/29/04
10,000 4.7 2.6250 04/14/05
</TABLE>
----------
(1) The Company granted no SARs in fiscal 2000.
(2) In fiscal 2000, the Company granted options to purchase 215,000 shares of
Common Stock to an aggregate of 33 employees.
(3) Mr. Morrelly's stock options to purchase 30,000 shares of Common Stock
vest subject to the Company's net profit, as defined, for each of the next
two fiscal years.
(4) Ms. Burke's stock options to purchase 10,000 shares of Common Stock vest
subject to the Company's net profit, as defined, for each of the next two
fiscal years.
16
<PAGE>
Stock Option Exercises
The following table contains information relating to the exercise of the
Company's stock options by the Named Executives in fiscal 2000, as well as the
number and value of their unexercised options as of May 31, 2000:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Shares Options at Value of Unexercised
Acquired Fiscal Year-End(#)(1) In-the-Money Options
on Value -------------------------- at Fiscal Year End($)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Kenneth Morrelly 0 0 0 70,000 0 $ 78,750
David Dinin 0 0 16,667 148,333 $33,333 246,667
Lawrence B. Klein 0 0 41,958 3,042 0 0
Robert O'Connor 0 0 20,000 15,000 0 0
Elizabeth A. Burke 0 0 20,000 60,000 0 57,500
Martin Liebross 0 0 3,333 1,667 0 0
</TABLE>
----------
(1) The sum of the numbers under the Exercisable and Unexercisable columns of
this heading represents each Named Executive's total outstanding options
to purchase shares of Common Stock.
17
<PAGE>
Executive Officers
In addition to the nominees for Director listed above, set forth below is
a brief description of the remaining executive officers of the Company:
Elizabeth A. Burke, age 41, has been Vice President - Finance, Chief
Financial Officer and Treasurer of the Company since April 1997. From July 1994
to January 1997, Ms. Burke was Vice President of Finance/Controller of Marvel
Comics Group, a division of Marvel Entertainment Group, Inc. ("Marvel"). From
November 1991 to July 1994, Ms. Burke was Corporate Controller of Marvel. From
1981 to November 1991, Ms. Burke was employed at Arthur Andersen LLP.
Robert O'Connor, age 41, has been Senior Vice President - Technology since
September 2000. Prior thereto, Mr. O'Connor had been Vice President - Technology
from September 1999. From October 1991 to September 1999, he was the Vice
President - Systems Development of the Company. Prior thereto, Mr. O'Connor was
employed as a programming group leader by Sperry Corporation.
Judy Frenkel, age 48, has been Senior Vice-President - Systems Development
since September 2000. Prior thereto, Ms. Frenkel had been Vice President -
Systems Development from September 1999. From September 1992 to September 1999,
she was the Manager of Systems Analysis of the Company. From October 1988 to
September 1992, Ms. Frenkel was a Senior Systems Analyst at the Company and from
April 1986 to October 1988 was a Systems Analyst at the Company.
Employment and Consulting Agreements
The Company has entered into an employment agreement with C. Kenneth
Morrelly, the President and Chief Executive Officer of the Company. The Company
has also entered into consulting agreements with Irwin Balaban, Chairman of the
Board of the Company, William J. Hancock, a director of the Company, and
Lawrence Klein, the Secretary and a director of the Company.
Employment Agreement with Mr. Morrelly. On August 25, 2000, Mr. Morrelly
entered into a two-year employment agreement pursuant to which he serves as
President and Chief Executive Officer of the Company. Under his employment
agreement, Mr. Morrelly receives a base salary of $262,500, subject to a five
percent annual increase. In addition, Mr. Morrelly received options to purchase
140,000 shares at $1.56 per share, of which options to purchase 90,000 shares
fully vest subject to the Company's net profit, as defined, for each of the
twelve month periods ending August 2001 and August 2002. Of the remaining 50,000
options, options to purchase 16,667 shares vested on the date of grant and
options to purchase 16,666 shares vest on each of the next two anniversary dates
of the date of grant. All of Mr. Morrelly's options will also immediately vest
upon a change of control (as defined) of the Company. All options expire on the
fifth anniversary of the date of grant.
In his employment agreement, Mr. Morrelly agreed that during his
employment and for a period of one year thereafter he will not, without the
prior written consent of the Company, compete with the Company by engaging in
any capacity in any business that is competitive with the business of the
Company in any geographical area in which the Company then conducts business.
Consulting Agreement with Irwin Balaban. On April 1, 1999, Mr. Balaban
entered into a three-year consulting agreement with the Company to provide
consulting services with respect to new product development and related
technical matters. Pursuant to this agreement, Mr. Balaban is paid an annual
retainer of $12,000 plus a per diem of $1,000 for each day Mr. Balaban performs
consulting services at the Company's request. For the fiscal year ended May 31,
2000 and 1999, Mr. Balaban received approximately $22,000 and $3,000,
respectively, under this agreement. At May 31, 2000, $6,000 was accrued and
unpaid relating to such services.
18
<PAGE>
Consulting Agreement with Mr. Hancock. On November 23, 1999, Mr. Hancock
entered into a one-year consulting agreement with the Company to provide
consulting services with respect to new product development and related
technical matters. Pursuant to this agreement, Mr. Hancock is to receive an
annual retainer of $36,000. During fiscal 2000, consulting fees of approximately
$26,000 were paid under this agreement.
Consulting Agreement with Mr. Klein. On May 16, 2000, Mr. Klein entered
into a one-year consulting agreement with the Company to provide consulting
services with respect to new product development and related technical matters.
Pursuant to this agreement, Mr. Klein is to receive an annual retainer of
$18,000. No fees were accrued or paid under this agreement during fiscal 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases approximately 10,000 square feet of office space, which
functions as its corporate headquarters, in Massapequa, New York, pursuant to a
lease between the Company and Robocom Properties Inc. ("Robocom Properties")
that expires on December 31, 2010. The shareholders of Robocom Properties are
Messrs. Balaban, Goldman, Klein and O'Connor. The total rental expense payable
by the Company to Robocom Properties in each of the fiscal years ended May 31,
1998 and 1999 was $173,090 and 168,000, respectively. For the fiscal year ended
May 31, 2000, the Company paid $132,000 to Robocom Properties and, at May 31,
2000, $36,000 was included in accrued expenses. Since January 1, 1998, the
annual base rental of $168,000 payable under the lease has been adjusted and
thereafter will be adjusted each year by the ratio of the prime rate as
published in the Wall Street Journal on January 2 of such year to the prime rate
as published in the Wall Street Journal on January 2 of the previous year, which
for fiscal 1999 was the ratio of 7.75% to 8.50%. The prime rate on January 2,
2000 was 8.50%. However, the parties have agreed that rent will not be less than
$14,000 per month. The Company believes that these rental terms are at least as
favorable to the Company as could be obtained from an unaffiliated third party.
In connection with the purchase by Robocom Properties in 1989 of the
Company's corporate headquarters building, the Company guaranteed three mortgage
loans in an aggregate original principal amount of $1,053,000 that mature in
2010 and bear interest at rates ranging from 8.25% to 8.877% per annum. At May
31, 2000, the outstanding aggregate principal amount of the mortgage loans was
approximately $717,000.
Irwin Balaban, Chairman of the Board of the Company, has been acting as a
consultant to the Company since his retirement as President and Chief Executive
Officer of the Company effective April 1, 1999. On April 1, 1999, the Company
and Mr. Balaban entered into a three-year agreement pursuant to which Mr.
Balaban is to receive $12,000 per year for providing consulting services on an
as-needed basis. For the fiscal years ended May 31, 2000 and 1999, Mr. Balaban
received approximately $22,000 and $3,000, respectively, under this agreement.
William J. Hancock, a director of the Company, has been acting as a
consultant to the Company since November 23, 1999. On November 23, 1999, the
Company and Mr. Hancock entered into a one-year agreement pursuant to which Mr.
Hancock is to receive $36,000 per year for providing consulting services to the
Company on an as-needed basis. During fiscal 2000, consulting fees of
approximately $26,000 were paid under this agreement.
Lawrence Klein, a director of the Company, has been acting as a consultant
to the Company since his retirement as Vice President- Worldwide of the Company
effective May 15, 2000. On May 16, 2000, the Company and Mr. Klein entered into
a one-year agreement pursuant to which Mr. Klein is to receive $18,000 per year
for providing consulting services to the Company on an as-needed basis. No fees
were accrued or paid under this agreement during fiscal 2000.
19
<PAGE>
Herbert Goldman, a director of the Company, acted as consultant to the
Company commencing on his retirement as Executive Vice President - Operations of
the Company effective July 1996 through May 2000. On May 15, 1997, the Company
and Mr. Goldman entered into a three-year agreement pursuant to which Mr.
Goldman received $12,000 per year for providing consulting services on an
as-needed basis. For the fiscal years ended May 31, 2000, 1999 and 1998, Mr.
Goldman received approximately $17,000, $23,000 and $12,000, respectively, under
this agreement.
INDEPENDENT AUDITORS
Ernst & Young LLP ("E&Y"), served as the Company's independent auditors
for the fiscal year ended May 31, 2000. A representative of E&Y is expected to
attend the Annual Meeting and such representative will have the opportunity to
make a statement if he/she so desires and will be available to respond to
appropriate questions from shareholders.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities ("10% Stockholders"), to
file with the Securities and Exchange Commission (the "Commission") initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Officers, directors and 10% Stockholders
are required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on the Company's review of the copies of such reports
received by the Company, the Company believes that for the fiscal year 2000, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
Stockholders were complied with, except for the late filing of a Statement of
Changes in Beneficial Ownership of Securities on Form 4 by Irwin Balaban, the
Chairman of the Board of the Company.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for presentation at the 2001 Annual
Meeting of Shareholders and intended to be included in the Company's Proxy
Statement and form of proxy relating to that meeting in accordance with Rule
14a-8(e) promulgated under the Exchange Act, must be received at the address
appearing on the first page of this Proxy Statement by May 27, 2001. The proxy
rules of the Securities and Exchange Commission limit the circumstances under
which the proxy card distributed by registered companies to their shareholders
may permit those companies to cast the votes represented by the proxy voting
cards in their sole discretion. As applied to the Company, the most important
limitation is that for proposals made by a shareholder at the 2001 annual
meeting that are not properly submitted by the shareholder for inclusion in the
Company's own proxy materials, the Company may vote proxies in its discretion
with respect to those proposals only if it has not received notice from the
shareholder by May 27, 2001 at the latest that the shareholder intends to make
those proposals at the annual meeting.
OTHER BUSINESS
Other than as described above, the Board knows of no matters to be
presented at the Annual Meeting, but it is intended that the persons named in
the proxy will vote all proxies according to their best judgment if any matters
not included in this Proxy Statement do properly come before the meeting or any
adjournment thereof.
20
<PAGE>
EXPENSES
The expenses of printing and mailing proxy material, including expenses
involved in forwarding materials to beneficial owners of stock, will be borne by
the Company. No solicitation other than by mail is contemplated, except that
officers or employees of the Company may solicit the return of proxies from
certain stockholders by telephone, personal solicitation or facsimile.
ANNUAL REPORT
The Company's Annual Report on Form 10-KSB for the year ended May 31,
2000, including financial statements, is being mailed herewith. If, for any
reason, you do not receive your copy of the Annual Report, please contact
Robocom Systems International Inc., 511 Ocean Avenue, Massapequa, New York
11758, Attention: Shareholder Relations, and another copy will be sent to you.
By Order of the Board of Directors,
/s/ C. Kenneth Morrelly
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C. Kenneth Morrelly,
President and Chief Executive Officer
Dated: November 1, 2000
Massapequa, New York
21
<PAGE>
REVOCABLE PROXY
ROBOCOM SYSTEMS INTERNATIONAL INC.
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) C. Kenneth Morrelly, Elizabeth A. Burke
and Lawrence B. Klein, or any of them, lawful attorneys and proxies of the
undersigned with full power of substitution, for and in the name, place and
stead of the undersigned to attend the Annual Meeting of Shareholders of Robocom
Systems International Inc. to be held in the Executive Conference Room of
Robocom Systems International Inc., 511 Ocean Avenue, Massapequa, New York 11758
on Monday, December 4, 2000 at 9:00 a.m., local time, and any adjournment(s) or
postponement(s) thereof, with all powers the undersigned would possess if
personally present and to vote the number of votes the undersigned would be
entitled to vote if personally present.
The Board of Directors recommends a vote "FOR" the proposals set forth
below.
With- For All
For hold Except
PROPOSAL 1:
The Election of Directors: |_| |_| |_|
Irwin Balaban, Herbert Goldman, William J. Hancock, Lawrence B. Klein,
C. Kenneth Morrelly and Yacov Shamash.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
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For Against Abstain
PROPOSAL 2: Proposal to amend the Company's
Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock
from 10,000,000 shares to 30,000,000 shares. |_| |_| |_|
For Against Abstain
For Against Abstain
PROPOSAL 3: Proposal to approve a private
placement offering of equity securities, or
securities convertible into equity securities, of
the Company for aggregate consideration in an |_| |_| |_|
amount not to exceed $10,000,000.
For Against Abstain
For Against Abstain
PROPOSAL 4: Proposal to amend the Company's 1997
Stock Option and Long-Term Incentive Compensation
Plan to increase the number of shares of Common
Stock that may be issued thereunder from 650,000 |_| |_| |_|
shares to 1,150,000 shares.
Please be sure to sign and date this Proxy in the boxes below.
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Date
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Shareholder sign above Co-holder (if any) sign above
In accordance with their discretion, said Attorneys and Proxies are
authorized to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting.
This proxy when properly executed will be voted in the manner described
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for each director nominee of the Board of Directors and for each of the
Proposals set forth herein. Any prior proxy is hereby revoked.
<PAGE>
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ROBOCOM SYSTEMS INTERNATIONAL INC.
Please sign exactly as your name appears on this proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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