<PAGE> 1
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
CONTINENTAL INFORMATION SYSTEMS CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ X / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
CONTINENTAL INFORMATION
SYSTEMS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 23, 1996
The Annual Meeting of Stockholders of Continental Information Systems
Corporation (the "Company") will be held at ONCENTER, 800 South State Street,
Syracuse, New York, on Wednesday, October 23, 1996 at 11:00 a.m., local time,
to consider and act upon the following matters:
1. To elect five (5) Directors to serve for the next
year.
2. To consider and act upon a proposal to amend the
Company's Restated Certificate of Incorporation to
increase the number of authorized common shares, $.01
par value per share, from ten million (10,000,000) to
twenty million (20,000,000).
3. To ratify the appointment by the Board of Directors
of Price Waterhouse LLP as the Company's independent
auditors for the 1996-1997 fiscal year.
4. To transact such other business as may properly come
before the meeting or any adjournments thereof.
Stockholders of record at the close of business on September 23, 1996
will be entitled to vote at the meeting or any adjournments thereof. A list of
the stockholders entitled to vote at the meeting will be open to the
examination of any stockholder of the Company, for any purpose germane to the
meeting, during ordinary business hours at the offices of the Company for the
ten-day period prior to the meeting.
By Order of the Board of Directors,
FRANK J. CORCORAN, Secretary
Syracuse, New York
SEPTEMBER 27, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED,
SELF-ADDRESSED ENVELOPE TO THAT YOUR SHARES ARE REPRESENTED. NO POSTAGE IS
NEEDED IF THE PROXY IS MAILED WITHIN THE UNITED STATES.
<PAGE> 3
CONTINENTAL INFORMATION SYSTEMS CORPORATION
ONE NORTHERN CONCOURSE
P. O. BOX 4785
SYRACUSE, NEW YORK 13221-4785
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 23, 1996
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Continental Information Systems
Corporation (the "Company") for use at the Annual Meeting of Stockholders to be
held on October 23, 1996 and at all adjournments of that meeting (the
"Meeting"). All proxies will be voted in accordance with the instructions
contained in them. If no choice is specified, the proxies will be voted in
favor of the matters set forth in the accompanying Notice of Meeting. Any
proxy may be revoked by a stockholder at any time before its exercise by
delivery of written revocation to the Secretary of the Company.
On September 23, 1996, the record date for the determination of
stockholders entitled to vote at the Meeting, there were outstanding and
entitled to vote an aggregate of 6,999,040 shares of common stock, $.01 par
value per share ("Common Stock"), of the Company. Each share is entitled to
one vote.
The Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1996 is being mailed to stockholders with the mailing of this Notice and
Proxy Statement beginning on or about [SEPTEMBER 27, 1996].
VOTES REQUIRED
Pursuant to the Joint Plan of Reorganization dated October 4, 1994,
filed with the United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court"), as modified and confirmed by the Bankruptcy
Court on November 29, 1994 (the "Plan"), the Company was authorized to issue
7,000,000 shares of Common Stock. The Plan and the Restated Certificate of
Incorporation of the Company provide that until 6,300,000 of the shares of
Common Stock have been distributed to creditors and prior equity holders
pursuant to the Plan, any matter requiring the approval of stockholders shall
require the approval of a vote of at least two-thirds (2/3) of the then-issued
and outstanding shares of Common Stock. At the record date, 952,503 shares are
held by James P. Hassett as Trustee for the Liquidating Estate (the "Trustee")
for distribution to creditors and prior equity holders under the Plan, which
means 6,300,000 shares have not yet been distributed. Until the Trustee has
distributed all of the shares of Common Stock under the Plan, the Trustee
possesses the authority to vote such shares of Common Stock until they are
distributed. If any director does not receive an approval vote of at least
two-thirds (2/3) of the then-issued and outstanding shares of Common Stock,
such director will continue to serve until a successor is duly elected and
qualified, or until the earlier death, resignation or removal of such director.
Shares of Common Stock represented in person or by proxy at the Meeting
(including shares that abstain or do not vote with respect to one or more of
the matters presented at the Meeting) will be tabulated by the inspectors of
election appointed for the Meeting whose tabulation will determine whether or
not a quorum is present. Abstentions will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum with respect to any matter, but will not be counted as votes in favor of
such matter. Accordingly, an abstention from voting on a matter by a
stockholder present in person or represented by proxy at the Meeting will have
the same legal effect at a vote
<PAGE> 4
"against" the matter. If a broker holding stock in "street name"
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a matter, those shares will not be considered as
present and entitled to vote with respect to that matter. Accordingly, a
"broker non-vote" on a matter will have no effect on the voting on such matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 23, 1996 (except as
otherwise footnoted below), certain information regarding the ownership of
Common Stock of (i) each person known by the Company to be the beneficial owner
of more than five percent of the outstanding Common Stock; (ii) each of the
directors, nominees for director and named executive officers of the Company;
and (iii) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Number of
Name and Address of Beneficial Owner (1) Shares Owned Percent Owned
---------------------------------------- ------------ -------------
<S> <C> <C>
Oscar Gruss & Son Incorporated, et al. (Group) 1,122,368(2) 16.04%
74 Broad Street
New York, NY 10004
Heine Securities Corporation and 419,828(3) 6.00%
Michael F. Price (Group)
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Gabriel Capital, L.P., Ariel Fund Limited, 472,602(4) 6.75%
Ariel Management Corp. and J. Ezra Merkin (Group)
450 Park Avenue
New York, New York 10022
Executive Officers and Directors
James P. Hassett, Trustee 952,503(5) 13.61%
One Northern Concourse
P. O. Box 4785
Syracuse, New York 13221-4785
Dr. Leon H. Bloom 179,562(7) 2.56%
Michael L. Rosen 29,947(6)(2) *
Thomas J. Prinzing 58,387(8) *
Paul M. Solomon 16,000(9) *
James J. Mosher 4,175(10) *
</TABLE>
- 2 -
<PAGE> 5
<TABLE>
<CAPTION>
Number of
Name and Address of Beneficial Owner (1) Shares Owned Percent Owned
---------------------------------------- ------------ -------------
<S> <C> <C>
Frank J. Corcoran 16,866(11) *
All directors and executive officers as a group 1,257,440(12) 17.79%
(9 persons)
</TABLE>
----------------------------------------------
* Percentage is less than 1% of the total number of outstanding shares of
the Company.
(1) Except as otherwise indicated, each party has sole voting and
investment power of the shares beneficially owned.
(2) In a Schedule 13D filed with the Commission on April 28, 1995, as
amended on July 24, 1995, December 20, 1995, February 9, 1996, and
September 10, 1996, Oscar Gruss & Son Incorporated (356,805 shares),
together with nine other persons, reported beneficial ownership of a
total of 1,122,368 shares as a group as follows: Emanuel Gruss
(302,976 shares); Riane Gruss (100,000 shares); Harvey Gelfenbein
(15,458 shares); Hermann Merkin (163,065 shares); Michael Rosen
(26,947 shares); Daniel Goldberg (10,000 shares); Julius S. Anreder
(10,000 shares); and Emanuel Gruss and Harvey Gelfenbein as trustees
for the benefit of Oren Arthur Gruss Hirsch (34,872 shares), Jonathan
Oscar Gruss Hirsch (31,154 shares), Ripton Philip Gruss Rosen (31,154
shares), Morgan Alfred Gruss Rosen (27,437 shares) and Leni Gruss
Hirsch (12,500 shares). Each reporting person has the sole power to
vote and dispose of the shares such person beneficially owns.
(3) As reported to the Company in a Schedule 13G filed with the Commission
by Heine Securities Corporation ("HSC") and Michael F. Price,
President of HSC, on February 1, 1996. Both HSC and Mr. Price
disclaim beneficial ownership of such shares.
(4) As reported to the Company in a Schedule 13D filed with the Commission
on November 9, 1995: Gabriel Capital, L.P. ("Gabriel") beneficially
owns 179,117 shares and Ariel Fund Limited ("Ariel Fund") beneficially
owns 264,185 shares. Ariel Management Corp., as Investment Advisor to
Ariel Fund, has the voting and dispositive power of the shares held by
Ariel Fund. In addition, Ariel has the sole voting and dispositive
power with respect to 29,300 shares owned by a private discretionary
investment account, so it may be deemed to be the beneficial owner of
293,485 shares. As general partner of Gabriel, J. Ezra Merkin has the
voting and dispositive power of the shares held by Gabriel. In
addition, as the sole shareholder and president of Ariel, Mr. Merkin
may be deemed to be the beneficial owner of the shares held by the
Ariel Fund and Ariel (472,602 shares).
(5) Represents shares of Common Stock issued to the Trustee for
distribution to holders of allowed claims under the Plan of
Reorganization. Under the Plan of Reorganization and the Restated
Certificate of Incorporation of the Company, the Trustee holds all
undistributed shares of Common Stock for the benefit of holders of
allowed claims and equity interests and has authority under any
applicable law to vote these shares for the benefit of such holders
until such time as the shares have been distributed under the Plan
of Reorganization. Mr. Hassett disclaims beneficial ownership of
these shares.
- 3 -
<PAGE> 6
(6) The shares held by Mr. Rosen are also included in the aggregate number
of shares disclosed in Note 2. Includes 3,000 shares of Common Stock
issuable upon exercise of stock options that are exercisable within 60
days.
(7) Dr. Bloom has sole voting and dispositive power with respect to these
shares, which are held by certain family trusts, IRA accounts,
corporations and partnerships controlled by Dr. Bloom and in the name
of each of his three children, who have granted him a power of
attorney with respect to this investment. Includes the following
shares of Common Stock issuable upon exercise of stock options that
are currently exercisable (3,000 shares) and that are exercisable
within 60 days (3,000 shares).
(8) Includes 54 shares held by Mr. Prinzing's daughter, of which he
disclaims beneficial ownership, and includes (i) 33,333 shares of
Common Stock issuable upon exercise of stock options that are
currently exercisable and (ii) 15,000 shares of Common Stock granted
under the Company's 1995 Stock Compensation Plan in July 1996, but not
yet issued. Does not include 66,667 shares of Common Stock that are
not exercisable within 60 days pursuant to stock options.
(9) Includes shares of Common Stock issuable upon exercise of stock
options that are currently exercisable (3,000 shares) and that are
exercisable within 60 days (3,000 shares).
(10) Includes 3,333 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable. Does not include 6,667 shares
of Common Stock that are not exercisable within 60 days pursuant to
stock options.
(11) Includes 16,666 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable. Does not include 33,334 shares
of Common Stock that are not exercisable within 60 days pursuant to
stock options.
(12) Includes 68,332 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable and 15,000 shares of Common
Stock granted, but not yet issued. Does not include 106,668 shares of
Common Stock that are not exercisable within 60 days pursuant to stock
options.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES FOR TERMS EXPIRING IN 1997
It is proposed to elect five (5) directors of the Company to serve until
the annual meeting of stockholders to be held in 1997 and until their
successors are elected and qualified. Each nominee is currently a director of
the Company. At the Meeting, the persons named in the enclosed proxy will vote
to elect the directors listed below, unless the proxy is marked otherwise.
Each of the nominees has indicated his willingness to serve, if elected;
however, if any nominee should be unable to serve, the proxies may be voted for
a substitute nominee designated by the Board of Directors. Arthur R. Brehm,
currently a director of the Company, is not standing for re-election at the
Meeting.
- 4 -
<PAGE> 7
<TABLE>
<CAPTION>
Director Principal Occupation and Business
Nominee Age Since Experience During the Past Five Years
------- --- ----- -------------------------------------
<S> <C> <C> <C>
Dr. Leon H. Bloom 72 1994 Since 1980, Dr. Bloom has been President and Chairman of
the Board of L.H.B. Financial Management Co. in Encino, CA,
involved with financial management and estate planning. He
has also been, at various times, Treasurer of Database
Connections, Inc., founder, President and Chairman of the
Board of the California Medical Investment & Management
Association, a Los Angeles County Commissioner, and a
residential/commercial real estate developer, syndicator
and property manager.
James P. Hassett 64 1995 Since 1989, Mr. Hassett has served as the court appointed
Trustee for the Company before it emerged from bankruptcy
and is now the Trustee for the Liquidating Estate and a
director. Since May 1996, Mr. Hassett has also been a
consultant to the Bankruptcy Court, the Debtor and
Creditors Committee of Nelco, Ltd. Mr. Hassett also served
as the court appointed adviser to the Creditors' Committee
for ICS Cybernetics, Inc., and subsequently as Person-in-
Control from 1988 through 1995. From April through
November 1992, he also served as a director and interim
President and Chief Executive Officer of Intellicall, Inc.
Thomas J. Prinzing 50 1995 President and Chief Executive Officer since December 14,
1995, and acting Chief Executive Officer from July 6, 1995
until December. Mr. Prinzing has served as President of
CIS Air Corporation, a wholly-owned subsidiary of CIS
Corporation, since 1991. Mr. Prinzing is also the
President of CIS Aircraft Partners, Inc., a wholly-owned
subsidiary of CIS Corporation, which serves as a general
partner of two publicly traded limited partnerships. From
1989 to 1991 he was Senior Vice President of the Company.
From 1984 to 1991 he was Senior Vice President and Chief
Financial Officer of the Company.
Michael L. Rosen 40 1995 Since 1988, Mr. Rosen has been affiliated with Oscar Gruss
& Son Incorporated, a registered broker-dealer and in 1996
became Chief Executive Officer of this firm. In addition
to his work with Oscar Gruss & Son, Mr. Rosen operates a
variety of real estate development projects and multi-
family rental properties through Park Square Associates,
Inc., of which he is the President and a major stockholder.
</TABLE>
- 5 -
<PAGE> 8
<TABLE>
<CAPTION>
Director Principal Occupation and Business
Nominee Age Since Experience During the Past Five Years
------- --- ----- -------------------------------------
<S> <C> <C> <C>
Paul M. Solomon 53 1994 Since 1993, Mr. Solomon has been a principal of Exponential
Business Development Company, Syracuse, N.Y. From 1991 to
1993 he was Senior Vice President of GATX Logistics. From
1989 to 1991, he was Executive Vice President of Itel
Distribution Services, Inc.
</TABLE>
BOARD AND COMMITTEE MEETINGS
During the last fiscal year, the Board of Directors held a total of six
meetings. All directors attended at least 75% of their scheduled Board
meetings and meetings held by Committees of which they were members.
The Audit Committee consists of Messrs. Solomon, Chairman, Bloom and Rosen.
It oversees actions taken by the Company's independent auditors, recommends the
engagement of auditors and reviews the Company's internal audits. During the
last fiscal year, the Audit Committee held one meeting. The Audit Committee
also acts by unanimous written consent.
The Compensation Committee consists of Dr. Bloom, Chairman, and Messrs.
Rosen and Solomon. It makes recommendations to the Board of Directors with
respect to the compensation of executives of the Company and administers the
Company's incentive plans and employee benefit plans. During the last fiscal
year, the Compensation Committee held five meetings. The Compensation
Committee also acts by unanimous written consent.
While the Company does not have a standing Nominating Committee, the Board
established a Nominating Committee on July 11, 1996 to make recommendations to
the Board of Directors in connection with the Meeting with respect to (i) the
appropriate number of members of the Board, and (ii) nominees for election to
the Board. It consists of Messrs. Hassett, Rosen and Solomon. The Nominating
Committee may act by unanimous written consent.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINATED
DIRECTORS.
PROPOSAL 2 - INCREASE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
The Board of Directors has declared it advisable to amend the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock from ten million (10,000,000) to twenty
million (20,000,000) shares. If approved, the amendment will be effected by
the prompt filing in New York of a certificate of amendment to the Restated
Certificate of Incorporation.
As of May 31, 1996, the Company had a total of 10,000,000 shares of Common
Stock authorized of which 6,999,040 shares were issued and outstanding with 960
additional shares being held by the Company as treasury stock. The remaining
3,000,000 shares constitute those shares that are authorized
- 6 -
<PAGE> 9
but unissued. Of these unissued shares, 1,500,000 shares have been reserved
for the Company's "1995 Stock Compensation Plan." The Company's Board of
Directors considers the proposed increase of authorized shares of Common Stock
desirable (i) to permit the Company flexibility in using its Common Stock in
any potential future acquisitions of property or securities of other companies,
(ii) to permit possible future dividends in shares of the Company's Common
Stock, and (iii) for other corporate purposes, including adoption of new
employee benefit plans or amendment of existing ones. The Company currently
has no plans to issue any additional shares (other than pursuant to the
Company's 1995 Stock Compensation Plan).
The authorized and unissued shares of the Company's Common Stock will be
available for issuance by the Company in the discretion of the Board without
further stockholder action and without first offering such shares to the
stockholders. The Financial Statements in the 1996 Annual Report to
Stockholders is incorporated herein by reference.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE INCREASE IN THE NUMBER OF
SHARES OF COMMON STOCK.
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors is seeking ratification of its appointment of Price
Waterhouse LLP as its independent auditors for the 1996-1997 fiscal year, as
recommended by the Audit Committee. If a majority of stockholders voting at
the Meeting should not approve the selection of Price Waterhouse LLP, the
selection of independent auditors may be reconsidered by the Board of
Directors.
Price Waterhouse LLP is currently the Company's independent auditors. A
representative of Price Waterhouse LLP is expected to attend the Meeting and be
available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE LLP.
EXECUTIVE COMPENSATION AND OTHER MATTERS
COMPENSATION OF DIRECTORS
Each outside director of the Company is paid an annual fee of $12,500, plus
$2,500 for services as chairman of each committee of the Board of which that
person is chairman. Each outside director also receives attendance fees of
$1,500 for each meeting of the Board and $1,000 for each meeting of any
committee (other than telephonic meetings) that he attends, plus travel and
other expenses. Each outside director also receives automatic grants of
nonqualified stock options to purchase 3,000 shares of common stock of the
Company on the date of each Annual Meeting. The exercise price per share is
generally the fair market value of the common stock on the date as of which the
director is appointed, elected, or re-elected to the Board. Options granted as
of each annual meeting or between annual meetings become fully exercisable on
the day before the next occurring annual meeting and can be exercised until the
earlier of five years after the date granted or one year after the director
ceases for any reason to be a member of the Board. Although Mr. Hassett is
eligible to receive formula options as a non-employee director, he has informed
the Company that he will decline to accept any options so long as the
Liquidating Estate holds in excess of five percent of the outstanding shares of
common stock. At May 31,
- 7 -
<PAGE> 10
1996, 24,000 nonqualified stock options had been granted with 15,000 of such
options currently exercisable.
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS. The following persons were executive officers of the
Company as of May 31, 1996 and currently hold the positions indicated:
<TABLE>
<CAPTION>
Name Age Position and Information
---- --- ------------------------
<S> <C> <C>
Thomas J. Prinzing 50 President and Chief Executive Officer since December 14, 1995.
Prior to that, Mr. Prinzing was acting Chief Executive Officer
since July 6, 1995. Mr. Prinzing has served as President of CIS
Air since 1991. From 1989 to 1991 he was Senior Vice President
of the Company. From 1984 to 1991 he was Senior Vice President
and Chief Financial Officer of the Company.
Frank J. Corcoran 46 Senior Vice President, Chief Financial Officer, Treasurer and
Secretary. Mr. Corcoran joined the Company in November 1994.
From 1992 until joining the Company, he had been Vice President
and General Manager of Unisys Finance Corporation, an equipment
leasing and financing company. From 1991 to 1992 he was Chief
Financial officer of Unisys Finance Corporation.
Arthur R. Brehm 57 Mr. Brehm is a Vice President of the Company. Prior to July
1996, he was the President of Aviron Computer Technologies,
Inc., a wholly-owned subsidiary of CIS Corporation, in Mine
Hill, NJ. From 1985 until 1993, he was Vice President-Large
Systems at CIS Corporation.
James J. Mosher 59 Vice President and Controller. Mr. Mosher has served as
Controller of the Company since 1980.
</TABLE>
- 8 -
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------
Other Annual All other
Name and Principal Position Year Salary (1) Bonus Compensation (2) Compensation (3)
--------------------------- ---- ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Thomas J. Prinzing 1996 $217,500 None $241,281 (4) $1,500
President and Chief Executive 1995 $150,000 None $288,898 (4) $1,082
Officer 1994 $150,000 None $ 21,178 (4) $ 657
Richard B. Lasken 1996 $ 22,212 (5) None $204,794 (6) None
Former President and 1995 $156,923 None $120,911 (7) None
Chief Executive Officer 1994 - - - -
Frank J. Corcoran 1996 $150,000 None $145,406 (8) $ 755
Senior Vice President, Chief 1995 $ 79,615 $12,000 $ 12,923 (8) -
Financial Officer, Treasurer 1994 - - - -
and Secretary
Arthur R. Brehm 1996 $150,000 None None $ 730
Vice President 1995 $150,000 $25,000 $19,516 (9) $1,103
1994 $150,000 $35,000 None $1,838
Daniel L. Wieneke 1996 $ 56,250 None $45,000 (10) $ 621
Former Senior Vice President, 1995 $150,000 None None $1,492
General Counsel and Secretary 1994 $150,000 None None $1,497
James J. Mosher 1996 $ 95,000 None None $ 947
Vice President 1995 $ 95,000 None None $ 945
1994 $ 95,000 None None $ 948
</TABLE>
(1) Includes amounts earned but deferred at the election of the executive,
such as salary deferrals under the Company's 401(k) Plan established
under Section 401(k) of the Code.
(2) The Company has awarded no Restricted Stock Awards, Stock Appreciation
Rights, or Stock Options to executive officers during the last three
fiscal years.
(3) These amounts represent the Company's payment of matching and
discretionary contributions to the Company's 401(k) Retirement Plan.
(4) This amount consists of commissions received as President of CIS Air.
(5) Mr. Lasken became Chief Executive Officer of the Company in September
1994. His annual salary was $225,000. Mr. Lasken resigned on July 6,
1995.
- 9 -
<PAGE> 12
(6) Includes $200,000 severance payment received pursuant to separation
agreement, together with health and other insurance benefits (see
"Employment Agreements" below).
(7) This amount includes: $50,000 for a relocation fee and $70,911 for
travel, temporary living, and moving expenses.
(8) This amount consists of payments for temporary living expenses.
(9) Amount reimbursed for taxes pursuant to Company's relocation policy.
(10) Mr. Wieneke resigned effective October 10, 1995; this amount consists
of severance payments.
EMPLOYMENT AGREEMENTS
Richard P. Lasken, the former President and Chief Executive Officer of the
Company, resigned from his employment on July 6, 1995 and entered into a
separation agreement and release with the Company on the same date. The
agreement provides for Mr. Lasken to be paid severance pay of $150,000 and
$50,000 in lieu of participation in a bonus program, all as provided for in his
employment agreement with the Trustee. The Company also agreed to continue Mr.
Lasken's health and other insurance benefits for twelve months, or until he
commences other full time employment, whichever occurs first.
On December 6, 1995, Mr. Prinzing entered into a letter agreement with the
Company concerning salary, incentive compensation and severance benefits while
serving as acting president and chief executive officer ("Acting CEO"). The
agreement provided that effective July 6, 1995, Mr. Prinzing would receive a
base salary of $225,000 per year for so long as he served as Acting CEO. Mr.
Prinzing was also entitled to receive certain commissions ("Incentive Plan")
for so long as he continued to exercise the duties and responsibilities of
President of CIS Air. In addition, the Company agreed to provide Mr. Prinzing
certain severance benefits in the event his employment was terminated by the
Company for reasons other than cause, or, at his option, upon certain changes
in his salary, responsibilities, incentive compensation or benefits following
the appointment of a new CEO.
Mr. Prinzing was appointed President and Chief Executive Officer of the
Company on December 14, 1996. The Company has agreed in principle to pay
severance compensation to Mr. Prinzing if his employment is terminated by the
Company for reasons other than cause, or, at his option, upon certain changes
in his salary, responsibilities or incentive compensation (a "Severance
Event"). If a Severance Event occurs, Prinzing shall receive the following:
(i) a severance payment of equal to 18 months base salary, payable, at
Prinzing's option in a lump sum or in 18 equal monthly installments; and (ii)
certain continued benefits (life insurance, medical, health and accident, and
disability arrangements) ("Continued Benefits") for up to 18 months.
In addition, the Company intends to enter into severance compensation
agreements with other executive officers, containing terms comparable to those
in Mr. Prinzing's severance agreement, except for the number of months for
which base salary and benefits would be paid, as follows:
- 10 -
<PAGE> 13
<TABLE>
<CAPTION>
Executive Officer Months of Benefits
----------------- ------------------
<S> <C>
Frank J. Corcoran 6 months
James J. Mosher 6 months
</TABLE>
The revised severance agreements will supersede and replace certain "change
in control" agreements with Messrs. Prinzing, Corcoran and Mosher entered into
on January 4, 1995. These agreements provided benefits upon termination of
employment following a "change of control" as defined in the agreements, for
cause or, at the option of the employee, upon reduction of duties, titles,
compensation or perquisites of such employee without his consent. The Company
is also a party to a comparable agreement with Arthur Brehm. Pursuant to the
agreement, the Company expects to terminate the agreement with Mr. Brehm
effective January 4, 1997.
EMPLOYEE BENEFITS PROGRAMS
The Company has a 401(k) plan that matches employee pretax contributions on
a semi-monthly basis at the rate of 50% of the first 2% of eligible
compensation. In addition, the Company may make an annual discretionary
contribution, based on participants' eligible compensation, once a year, for
all employees with at least one year of service and who are on the payroll as
of December 31 of a given year. The vesting schedule for employer
contributions is as follows: 10% after one (1) year; 20% after two (2) years;
30% after three (3) years; 40% after four (4) years; and 100% after five (5)
years. Employees may elect to defer up to 15% of their compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee consists of Dr. Bloom, Chairman, and Messrs.
Rosen and Solomon. None of the members are officers or employees of the
Company. There is no insider participation in compensation committee
decisions.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
consists entirely of non-employee directors. The Committee has the authority
to review and make recommendations to the Board concerning compensation paid or
awarded to the Company's executive officers and to make grants of stock or
stock options pursuant to the Company's 1995 Stock Compensation Plan (the "1995
Plan").
Upon the resignation of the Company's former Chief Executive Officer in
July 1995, Thomas J. Prinzing was appointed Acting Chief Executive Officer. In
order to induce Mr. Prinzing to take on the responsibilities of this position
in addition to those he then held as President of CIS Air, the Committee
recommended to the Board that Mr. Prinzing's base salary be increased to
$225,000, the same as that paid the former CEO, so long as Mr. Prinzing served
as Acting CEO. It also approved Mr. Prinzing's continuing to receive
commissions based on a percentage of the pre-tax earnings of CIS' Air Group,
so long as he continued to exercise the duties and responsibilities of
President of CIS Air. In addition, the Company agreed to provide Mr. Prinzing
certain severance benefits in the event his employment was terminated by the
Company for reasons other than cause, or, at his option, upon certain changes
in his salary, responsibilities, incentive compensation or benefits following
the appointment of a new CEO.
Following an executive search process, the Board appointed Mr. Prinzing to
the position of President and Chief Executive Officer of the Company on
December 14, 1995. The Committee maintained Mr. Prinzing's base salary at
$225,000, but determined his incentive compensation should be tied to the
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<PAGE> 14
performance of the Company as a whole and not just the Air Group. Accordingly,
Mr. Prinzing's compensation for the year ended May 31, 1996 included Air Group
commissions only for two quarters ended November 30, 1995. Following the end
of the fiscal year, the Compensation Committee considered whether any
additional bonus should be paid to Mr. Prinzing based on its subjective
assessment of management's performance with respect to improving quarterly
profitability, the LaserAccess acquisition, Aviron, and other objectives. Based
on its assessment and the total amount of cash compensation Mr. Prinzing
received in salary and commissions, the Committee awarded Mr. Prinzing a bonus
consisting of 15,000 shares of Common Stock plus cash in an amount sufficient
to pay taxes on the income resulting from this award. The Committee did not
grant any other bonuses for fiscal 1996.
The Committee during the fiscal year also considered the desirability of
tying a portion of management's compensation to improvements in the Company's
stock value. In September 1995, the shareholders approved the 1995 Plan.
Following the end of the fiscal year, pursuant to the 1995 Plan, the Committee
awarded options to purchase 100,000 shares of Common Stock to Mr. Prinzing and
options to purchase 210,000 shares to nine other officers. The Committee
determined the recipients of the options and the number of shares to be awarded
to officers other than the CEO based on the recommendations of the CEO.
One-third of the options are exercisable immediately, one-third on May 31, 1997
and one-third on May 31, 1998. The options will be exercisable for three years
from the date they become exercisable. The Committee decided it was
appropriate to make a portion of the options immediately exercisable in light
of the passage of time between the approval of the 1995 Plan and the
Committee's action in awarding the options.
The Committee has reviewed the application of the Internal Revenue Code's
$1 million annual limit on deductible compensation for certain executives. The
Committee does not anticipate that any deductions will be lost as a result of
this limitation in the foreseeable future.
Compensation Committee
Dr. Leon H. Bloom, Chairman
Michael L. Rosen
Paul M. Solomon
PERFORMANCE GRAPH
The following line graph compares the percentage change in the total
cumulative stockholder return on the Company's Common Stock since March 29,
1995 with the cumulative total return on the GNOSTIC Market Index and the
capital stocks of a peer group (the "Peer Group") of the following companies:
AT&T Capital Corporation, Capital Associates, Inc., Comdisco, Inc., LDI
Corporation, Leasing Solutions, Inc., and PLM International, Inc. Although the
Company's Common Stock did not begin trading on GNOSTIC until May 16, 1995, the
Company is required by the Securities and Exchange Commission to include
trading information from The Pink Sheets(R) and the OTC Bulletin Board since
January 9, 1995, the day the Company's registration statement on Form 10 became
effective. The first point on the graph is the initial trading price on March
29, 1995, the date of the first reported trade, as obtained from The Pink
Sheets(R). The closing prices for March and April 1995 were obtained from the
National Quotation Bureau, Inc. THE COMPANY BELIEVES THAT THE PROPORTIONATE
INCREASES IN STOCK PRICE REFLECTED IN THE GRAPH SHOULD NOT BE REGARDED AS A
MEANINGFUL MEASURE OF THE COMPANY'S
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<PAGE> 15
BUSINESS PERFORMANCE OR THE PERFORMANCE OF THE COMPANY'S STOCK, BECAUSE, AMONG
OTHER REASONS, THE TRADING MARKET IN THE COMMON STOCK WAS NOT FULLY DEVELOPED
DURING MOST OF THIS PERIOD.
[THE GRAPH OMITTED CONTAINS THE FOLLOWING INFORMATION:]
<TABLE>
<CAPTION>
3-29-95 5-31-95 8-31-95 11-30-95 2-29-96 5-31-96
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
The Company 100 189.14 142.86 121.71 125.14 107.43
NASDAQ Market Index 100 104.10 118.98 119.65 124.19 139.31
Peer Group 100 101.91 118.79 141.69 140.92 155.75
</TABLE>
Notes: 1. Assumes $100 invested on March 29, 1995.
2. The lines represent monthly index levels derived from
compounded daily returns that include all dividends.
3. The indices are reweighted daily, using the market
capitalization on the previous trading day.
THE FOREGOING GRAPH SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE
INTO ANY FILING OF THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a party to certain agreements with James P. Hassett, as
Trustee. These agreements were all entered into prior to Mr. Hassett's
appointment to the Board of Directors.
MANAGEMENT SERVICES AGREEMENT. On the Effective Date, the Trustee, on
behalf of the Liquidating Estate, entered into an agreement (the "Management
and Services Agreement") with the Company, pursuant to which the Company,
directly and through its affiliates, provides certain administrative services
to the Liquidating Estate. Under the Management and Services Agreement the
Company provides: (i) billing and collection (through a "lockbox" arrangement)
of accounts receivable to the extent requested by the Trustee; (ii) to the
extent requested by the Trustee, record keeping and accounting services for the
Liquidating Estate and cooperates with the accounting firm of Price Waterhouse
LLP in its preparation of tax returns for the Liquidating Estate; (iii)
assistance to the Trustee in the analysis, negotiation, and resolution of
unresolved claims, and (iv) an office for the Trustee and secretarial services
to assist the Trustee in the discharge of the Trustee's duties.
As compensation for the Company's performance under the Management and
Services Agreement, the Liquidating Estate pays to the Company a fee, comprised
of: (i) the allocable share of the Company's direct costs for employees'
salaries, employees' fringe benefits, office space and other direct charges
required for its performance under the Management and Services Agreement; plus
(ii) 10% of the foregoing aggregate payments; plus (iii) reasonable
out-of-pocket disbursements of the Company incurred directly in the performance
of its duties under the Management Services Agreement. The Company provides
the foregoing services under the Trustee's supervision, direction and guidance.
The amount received by the Company for the period from June 1, 1995 through May
31, 1996 was $537,150.
The Trustee in his sole discretion has the authority at any time, with or
without cause, to terminate the Management and Services Agreement as to future
services by the Company and/or to enter into other agreements with other
entities that may perform the same or similar functions for the Liquidating
Estate. In the event of a termination by the Trustee, the Company will be
entitled only to payments accrued up to the date of termination. Absent such
termination of the Management and Services Agreement, the Company will be bound
by the Management and Services Agreement until the entry of the final decree
closing the Chapter 11 cases in which the Company was involved.
SENIOR SECURED NOTE. One element of the Plan of Reorganization involves
the capitalization of the Company with cash and other tangible assets with a
net fair market value (in the Trustee's estimate) of $30 million. Initially,
it was contemplated that the Company would be capitalized with exactly $30
million of cash and assets. However, this required that the Company's
portfolio of equipment and leases be divided, with a significant portion of
such equipment and leases constituting the "Retained Assets," and the remainder
constituting the "Liquidating Assets." The Trustee determined that it would be
administratively inefficient and costly to divide the portfolio in this manner,
and that it would be more efficient and cost effective to leave the portfolio
intact. In order to ensure that leaving the portfolio intact did not result in
the Company having more than $30 million in cash and assets, the Company
executed a senior secured promissory note (the "Senior Secured Note") payable
to the Trustee, as trustee of the Liquidating Estate, in the principal amount
of $6.023 million, all as provided for in the Plan. The Senior Secured Note
was paid in full in March 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers, directors, and ten percent beneficial
owners of Common Stock are required to file reports of ownership and change of
ownership with the Securities and Exchange
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<PAGE> 17
Commission under the Exchange Act. Mr. Rosen filed a Form 3 (Initial Statement
of Beneficial Ownership of Securities) late when he became a director of the
Company in September 1995. Dr. Bloom filed a Form 4 (Statement of Changes in
Beneficial Ownership) late to report the receipt of 21,256 shares distributed
by the Liquidating Estate in January 1996, as his brokerage account did not
inform him of the receipt of the distribution. Mr. Hassett, as Trustee of the
Liquidating Estate, filed Form 4s late to reflect distributions made by the
Liquidating Estate in April, July, August and October 1995, and in January
1996. Mr. Hassett disclaims beneficial ownership of any of the shares held by
the Liquidating Estate. Theodore T. Lithgow, Jr., a former director, did not
file a Form 5 (Annual Statement of Changes in Beneficial Ownership) to report
the grant of options to purchase 3,000 shares that he received effective
September 27, 1995 while a director of the Company.
OTHER MATTERS
The Board of Directors knows of no other business that may come before the
Meeting. If any other business is properly presented at the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the securities laws that might incorporate future
filings, the report of the Compensation Committee and the performance graph
included in this Proxy Statement shall not be incorporated by reference into
any such filing.
THE COMPANY IS PROVIDING A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MAY 31, 1996, INCLUDING FINANCIAL STATEMENTS AND
SCHEDULES, TO EACH OF THE COMPANY'S STOCKHOLDERS OF RECORD ON SEPTEMBER 23,
1996, AND TO EACH BENEFICIAL OWNER OF STOCK ON THAT DATE. IN THE EVENT THAT
EXHIBITS TO SUCH FORM 10-K ARE REQUESTED BY ANY HOLDERS UPON RECEIPT OF A
WRITTEN REQUEST MAILED TO THE COMPANY'S OFFICES, ONE NORTHERN CONCOURSE, P.O.
BOX 4785, SYRACUSE, NEW YORK 13221-4785, ATTENTION FRANK J. CORCORAN, A FEE
WILL BE CHARGED FOR REPRODUCTION OF SUCH EXHIBITS. REQUESTS FROM BENEFICIAL
OWNERS OF COMMON STOCK MUST SET FORTH A GOOD FAITH REPRESENTATION AS TO SUCH
OWNERSHIP.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, the Company's directors, officers, and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians, and
fiduciaries will be requested to forward proxy soliciting material to the
beneficial owners of Common Stock held in their names, and the Company will
reimburse them for their out-of-pocket expenses incurred in connection with the
distribution of proxy materials.
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<PAGE> 18
PROPOSALS FOR THE 1997 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Syracuse, New York not later than May 30, 1997 for inclusion in the proxy
statement for that meeting.
By Order of the Board of Directors,
Frank J. Corcoran, Secretary
SEPTEMBER 27, 1996
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN, AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE MEETING, YOU
MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
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<PAGE> 19
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CONTINENTAL INFORMATION SYSTEMS CORPORATION
The undersigned hereby appoints Thomas J. Prinzing and Frank J. Corcoran as
attorneys and proxies, each with power to act without the other and with power
of substitution, and hereby authorizes them to represent and vote, as
designated on the other side, all the shares of common stock of Continental
Information Systems Corporation standing in the name of the undersigned with
all powers which the undersigned would possess if present at the Annual Meeting
of Stockholders of the Company to be held October 23, 1996 and at any and all
continuations and adjournments thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- - --------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS NOMINEES: Dr. Leon H. Bloom, James P. Hassett, Thomas J. Prinzing, Michael L. Rosen,
and Paul M. Solomon
<S> <C> <C>
FOR all nominees WITHHOLD (INSTRUCTION: To withhold authority to vote for any individual nominee, write each
listed to the right AUTHORITY such nominee's name in the space below).
(except as marked to vote for all
to the contrary) nominees listed -------------------------------------------------------------------------------
to the right
/ / / /
</TABLE>
<TABLE>
<S> <C>
2. To increase the number of authorized 3. Ratification of Price Waterhouse 4. In their discretion, the Proxies
common shares, $.01 par value per share, as the independent auditors of are authorized to vote upon such
from ten million (10,000,000) to twenty the corporation. other business as may properly
million (20,000,000) come before the meeting.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
Please sign exactly as name appears hereon. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please give
full corporate name and have a duly authorized officer sign,
stating title. If a partnership, please sign in partnership
name by authorized person.
Dated: , 1996
------------------------------------------
---------------------------------------------------
(Signature)
---------------------------------------------------
(Signature if held jointly)
</TABLE>
PLEASE VOTE, SIGN, DATE, AND PROMPTLY RETURN THE
PROXY CARD USING THE ENCLOSED ENVELOPE.
