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 Sections 240.14a-11(c) or Sections
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):
[ 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:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
CONTINENTAL INFORMATION
SYSTEMS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held October 20, 1998
The Annual Meeting of Stockholders (the "Meeting") of Continental
Information Systems Corporation (the "Company") will be held at the New York
Marriott World Trade Center, 3 World Trade Center, New York, New York, on
Tuesday, October 20, 1998 at 9:00 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 ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent
auditors for the fiscal year ending May 31, 1999.
3. 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 11, 1998
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,
JAMES J. MOSHER, Secretary
New York, New York
September 25, 1998
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 SO THAT YOUR SHARES ARE REPRESENTED. NO POSTAGE IS NEEDED IF THE PROXY
IS MAILED WITHIN THE UNITED STATES.
<PAGE>
CONTINENTAL INFORMATION SYSTEMS CORPORATION
45 Broadway Atrium, Suite 1105
New York, New York 10006
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
to be held October 20, 1998
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 20, 1998 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 11, 1998, the record date for the determination of
stockholders entitled to vote at the Meeting, there were outstanding and
entitled to vote an aggregate of 6,939,060 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, 1998 is being mailed to stockholders with the mailing of this Notice and
Proxy Statement beginning on or about September 25, 1998.
Votes Required
Directors are elected (Proposal 1) by a plurality of the votes of
shares present (in person or by proxy) and entitled to vote. The affirmative
vote of a majority of shares present in person or by proxy at the Meeting and
entitled to vote is required to approve Proposal 2.
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 as
a vote "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.
-2-
<PAGE>
Executive Officers of the Company
The following persons are currently executive officers of the Company.
Name Age Position and Information
---- --- ------------------------
Michael L. Rosen 42 President and Chief Executive Officer
since July 18, 1997 and director since
1995. Mr. Rosen is also the controlling
stockholder and since June 1996, the
Chief Executive Officer of Oscar Gruss &
Son Incorporated, a member firm of the
New York Stock Exchange, Inc. Prior to
1996, Mr. Rosen operated a variety of
real estate development projects and
multi-family rental properties, in which
he still has interests.
Jonah M. Meer 43 Senior Vice President, Chief Operating
Officer and Chief Financial Officer
since June 30, 1997. Prior to joining
the Company, Mr. Meer served as Senior
Vice President of Oppenheimer & Co.,
Inc., a registered broker-dealer from
May 1996 until June 1997. From 1983
until April 1996, Mr. Meer served as a
Vice President and Treasurer of Oscar
Gruss & Son Incorporated, a registered
broker-dealer.
Thomas J. Prinzing 52 President of CIS Air since 1989. Mr.
Prinzing served as President, Chief
Executive Officer and a director of the
Company from September 1995 until July
1997. From 1984 to 1991 he was Senior
Vice President and Chief Financial
Officer of the Company.
James J. Mosher 61 Vice President, Secretary and
Controller. Mr. Mosher has served as
Controller of the Company since 1980,
Vice President since 1983, and Secretary
since April 1997.
Bruce W. Lewis, Jr. 40 Treasurer, and Director of Accounting.
Mr. Lewis has served in various tax,
accounting and audit management
positions with the Company since 1983.
He was appointed Director of Accounting
in 1995 and Treasurer in April 1997.
-3-
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of September 11, 1998, 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 Shares Owned (1) Percent Owned
- ------------------------------------- ---------------- -------------
<S> <C> <C>
Oscar Gruss & Son Incorporated, et al. (Group) 1,360,659 (2) 19.61%
74 Broad Street
New York, New York 10004
Gabriel Capital, L.P., Ariel Fund Limited, 705,853 (3) 10.17%
Ariel Management Corp. and J. Ezra Merkin (Group)
450 Park Avenue
New York, New York 10022
Franklin Mutual Advisers, Inc. 550,209 (4) 7.93%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
The Chase Manhattan Corporation and its wholly owned
subsidiaries 546,978 (5) 7.88%
270 Park Avenue
New York, New York 10017
Frederick John Jaindl 419,934 (6) 6.05%
Jaindl Farms
3150 Coffeetown Road
Orefield, Pennsylvania 18069
Directors and Executive Officers
Julius S. Anreder 504,633 (2)(7) 7.27%
Dr. Leon H. Bloom 211,224 (8) 3.04%
James P. Hassett 237,448 (9) 3.42%
George H. Heilborn 3,337 (10) *
Michael L. Rosen 681,281 (2)(11) 9.82%
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Number of
Name and Address of Beneficial Owner Shares Owned (1) Percent Owned
- ------------------------------------- ---------------- -------------
<S> <C> <C>
Paul M. Solomon 42,000 (12) *
Jonah M. Meer 54,000 (13) *
James J. Mosher 10,842 (14) *
Bruce W. Lewis, Jr. 10,006 (15) *
Thomas J. Prinzing 125,050 (16) 1.80%
All directors and executive officers as a group (10 persons) 1,388,525 (17) 20.01%
</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 an Amendment No. 6 to Schedule 13D filed with the Commission in March
1997, and as updated by certain of the reporting persons through the date
of this proxy statement, Oscar Gruss & Son Incorporated (491,296 shares),
together with thirteen other persons, reported beneficial ownership of a
total of 1,284,655 shares of Common Stock as a group as follows: Emanuel
Gruss (303,699 shares); Riane Gruss (100,000 shares); Hermann Merkin
(166,227 shares); Michael L. Rosen (32,644 shares); Daniel Goldberg
(10,000 shares); Julius S. Anreder (10,000 shares); Emanuel Gruss and
Brenda Hirsch as trustees for the benefit of Oren Arthur Gruss Hirsch
(36,351 shares), Jonathan Oscar Gruss Hirsch (32,264 shares) and Leni
Gruss Hirsch (12,500 shares); Emanuel Gruss and Leslie Gruss as trustees
for the benefit of Ripton Philip Gruss Rosen (41,881 shares) and Morgan
Alfred Gruss Rosen (37,793 shares); Leslie Gruss (5,000 shares); and
Michael Shaoul (5,000 shares). Mr. Rosen also beneficially owns 72,667
shares of Common Stock issuable upon exercise of stock options that are
currently exercisable but he is not deemed to beneficially own 33,333
shares of Common Stock that are not exercisable within 60 days pursuant
to stock options. Mr. Anreder also beneficially owns 3,337 shares of
Common Stock issuable upon exercise of stock options that are currently
exercisable (337 shares) and that are exercisable within 60 days (3,000
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 an Amendment No. 1 to Schedule 13D filed
with the Commission on November 1996, and as updated by the reporting
persons through the date of this proxy statement, Gabriel Capital, L.P.
("Gabriel") beneficially owns 285,165 shares and Ariel Fund Limited
("Ariel Fund") beneficially owns 420,688 shares. Ariel Management Corp.
("Ariel"), as Investment Advisor to Ariel Fund, has the voting and
dispositive power of the shares held by Ariel Fund. As the 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 (705,853 shares).
(4) As reported to the Company in a Schedule 13G filed with the Commission in
January 1998, these shares are beneficially owned by one or more open or
closed-end investment companies or other managed accounts which are
advised by direct and indirect investment advisory subsidiaries
-5-
<PAGE>
("Advisor Subsidiaries") of Franklin Resources, Inc. ("FRI"). Such
advisory contracts grant to such Advisor Subsidiaries, including Franklin
Mutual Advisers, Inc., all voting and investment power for the securities
owned by such advisory clients. Charles B. Johnson and Rupert H. Johnson,
Jr. (the "Principal Shareholders") each own in excess of 10% of the
outstanding common stock of FRI and are the principal shareholders of
FRI. FRI, the Principal Shareholders and each of the Advisor Subsidiaries
disclaim any economic interest in or beneficial ownership of any of these
shares.
(5) As reported to the Company in a Schedule 13G filed with the Commission in
February 1998.
(6) As reported to the Company in a Schedule 13D filed with the Commission in
August 1997.
(7) Includes 491,296 shares of Common Stock beneficially owned by Oscar Gruss
& Son Incorporated, as to which Mr. Anreder disclaims beneficial
ownership. Includes shares of Common Stock issuable upon exercise of
stock options that are currently exercisable (337 shares) and that are
exercisable within 60 days (3,000 shares).
(8) 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 shares of Common Stock issuable upon
exercise of stock options that are currently exercisable (9,000 shares)
and that are exercisable within 60 days (3,000 shares).
(9) Includes 84,448 shares of Common Stock issued to Mr. Hassett in his
capacity as Trustee of the Liquidating Estate 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. Includes shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days (3,000 shares).
(10) Includes shares of Common Stock issuable upon exercise of stock options
that are currently exercisable (337) and that are exercisable within 60
days (3,000 shares).
(11) The shares held by Mr. Rosen are also included in the aggregate number of
shares set forth in Note 2. Includes 5,000 shares of Common Stock owned
by Mr. Rosen's spouse and 79,674 shares held by his minor children, as to
which Mr. Rosen disclaims beneficial ownership. Includes 491,296 shares
of Common Stock beneficially owned by Oscar Gruss & Son Incorporated, as
to which Mr. Rosen disclaims beneficial ownership. Includes shares of
Common Stock issuable upon exercise of stock options that are currently
exercisable (72,667 shares). Does not include 33,333 shares of Common
Stock that are not exercisable within 60 days pursuant to stock options.
<PAGE>
(12) Includes shares of Common Stock issuable upon exercise of stock options
that are currently exercisable (9,000 shares) and that are exercisable
within 60 days (3,000 shares).
(13) Includes 50,000 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable. Does not include 25,000 shares of
Common Stock that are not exercisable within 60 days pursuant to stock
options.
-6-
<PAGE>
(14) Includes 10,000 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable.
(15) Includes 10,000 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable.
(16) Includes 100,000 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable.
(17) Includes 491,296 shares of Common Stock beneficially owned by Oscar Gruss
& Son Incorporated, as to which Messrs. Anreder and Rosen disclaim
beneficial ownership. Includes shares of Common Stock issuable upon the
exercise of stock options that are currently exercisable (261,341 shares)
and that are exercisable within 60 days (15,000 shares). Does not include
58,333 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 1999
It is proposed to elect five (5) directors of the Company to serve
until the annual meeting of stockholders to be held in 1999 and until their
successors are elected and qualified. All nominees are currently directors 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. Dr. Leon H. Bloom, currently a
director of the Company, is not standing for re-election at the Meeting and the
number of directors will be reduced to five (5) following the Meeting.
<TABLE>
<CAPTION>
Director
Nominee Age Since Principal Occupation and Business Experience
------- --- ----- --------------------------------------------
<S> <C> <C> <C>
Julius S. Anreder 64 1997 Mr. Anreder is an Executive Vice President of
Oscar Gruss & Son Incorporated, a member firm of
the New York Stock Exchange, Inc. He has been
affiliated with the firm since 1962. From 1994
through 1997, he was Chairman of the Board of New
Energy Corporation of Indiana and from 1980
through 1997 he was a Director of American
Financial Enterprises Inc.
James P. Hassett 66 1995 Mr. Hassett is a private consultant and investor.
From 1989 to 1994, Mr. Hassett served as the
court-appointed Trustee for the Company before it
emerged from bankruptcy, and since then he has
served as Trustee for the Liquidating Estate under
the Company's Plan of Reorganization. From May
through July 1996, Mr. Hassett served as 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.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Director
Nominee Age Since Principal Occupation and Business Experience
------- --- ----- --------------------------------------------
<S> <C> <C> <C>
George H. Heilborn 63 1997 Mr. Heilborn is President and Chief Executive
Officer of G.H. Heilborn and Co., Inc. of
Hackensack, N.J., which is involved in investment
banking and financial advisory services for the
leasing and high-technology industries. He has
been in his current business since 1992. From 1963
to 1992, Mr. Heilborn was founder, President and
Chief Executive Officer of Information Processing
Systems, Inc. of Hackensack, N.J., a company
specializing in the leasing of medium- and
large-scale computer systems to major
corporations.
Michael L. Rosen 42 1995 Mr. Rosen is President and Chief Executive Officer
of the Company. He was appointed to that position
in July 1997. He is also the controlling
stockholder and since June 1996, the Chief
Executive Officer of Oscar Gruss & Son
Incorporated, a member firm of the New York Stock
Exchange, Inc. Prior to 1996, Mr. Rosen operated a
variety of real estate development projects and
multi-family rental properties, in which he still
has interests.
Paul M. Solomon 54 1994 Mr. Solomon is a principal of Exponential Business
Development Company, Syracuse, N.Y. He has held
this position since 1993. 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. In fiscal 1998, the
Board had an Audit Committee.
The Audit Committee consisted of Messrs. Solomon, Chairman, Bloom and
Heilborn. 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 four meetings.
The Board of Directors recommends a vote FOR the election of the nominated
directors.
-8-
<PAGE>
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors is seeking ratification of its appointment of
PricewaterhouseCoopers LLP as its independent auditors for the fiscal year
ending May 31, 1999, as recommended by the Audit Committee. If a majority of
stockholders voting at the Meeting should not approve the selection of
PricewaterhouseCoopers LLP, the selection of independent auditors may be
reconsidered by the Board of Directors.
PricewaterhouseCoopers LLP is currently the Company's independent
auditors. Its predecessor firm, Price Waterhouse LLP has served as the Company's
auditors since fiscal 1992. A representative of PricewaterhouseCoopers 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 PricewaterhouseCoopers 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 $1,000 for each meeting of any
committee (other than telephonic meetings) that he attends, plus travel and
other expenses. Each outside director also receives automatic grants of
nonqualified stock options to purchase 3,000 shares of common stock of the
Company on the date of each annual meeting. The exercise price per share is
generally the fair market value of the common stock on the date as of which the
director is appointed, elected, or re-elected to the Board. Options granted as
of each annual meeting become fully exercisable on the day before the next
occurring annual meeting and can be exercised until the earlier of five years
after the date granted or one year after the director ceases for any reason to
be a member of the Board. At May 31, 1998, 33,674 nonqualified stock options had
been granted to outside directors, with 18,674 of such options currently
exercisable.
-9-
<PAGE>
Executive Compensation
<TABLE>
<CAPTION>
Summary Compensation Table
for Fiscal Years Ending May 31, 1996, 1997 and 1998
Long Term
Compensation
Annual Compensation Awards
------------------------------------ -----------
Other Annual Securities All Other
Salary Bonus Compensation Underlying Compensation
Name and Principal Position Year ($)(5) ($)(6) ($)(7) Options(#) ($)(8)
- --------------------------- ---- ------ ------ ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Rosen (1) 1998 55,377 -- 8,750 100,000 --
President and Chief 1997 -- -- 24,500 3,000 --
Executive Officer 1996 -- -- 19,333 3,000 --
and Member of the Board
Jonah M. Meer (2) 1998 183,333 -- -- 75,000 --
Senior Vice President
Chief Operating Officer and
Chief Financial Officer
Thomas J. Prinzing (3) 1998 225,000 -- -- -- 1,600
President of CIS Air Group, 1997 225,000 17,500 -- 100,000 3,938
Former President and 1996 217,500 54,300 241,281 -- 1,500
Chief Executive Officer
John R. Campbell (4) 1998 -- -- 95,130 -- --
Former Executive Vice 1997 171,875 -- -- 75,000 4,604
President 1996 -- -- -- -- --
James J. Mosher 1998 95,000 -- -- -- 994
Vice President, Secretary 1997 95,000 4,375 -- 10,000 2,850
and Controller 1996 95,000 -- -- -- 947
Bruce W. Lewis, Jr. 1998 77,333 -- -- -- 881
Treasurer, and Director of 1997 77,000 4,375 -- 10,000 2,310
Accounting 1996 74,917 -- -- -- 770
</TABLE>
(1) Mr. Rosen, a member of the Board of Directors since 1995, became
President and Chief Executive Officer on July 18, 1997.
(2) Mr. Meer became Senior Vice President, Chief Operating Officer
and Chief Financial Officer on June 30, 1997.
(3) Mr. Prinzing resigned as President and Chief Executive Officer of
the Company on July 18, 1997. He remains the President of CIS
Air.
<PAGE>
(4) Mr. Campbell became an Executive Vice President of the Company on
October 23, 1996 and resigned from the Company on July 17, 1997.
(5) 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.
(6) Includes the fair market value of 15,000 shares of Common Stock
granted to Mr. Prinzing as a bonus for fiscal 1996 performance
and a tax reimbursement allowance for such grant.
-10-
<PAGE>
(7) Consists of the following: (a) the amounts for Mr. Rosen include
Board of Directors fees for the fiscal years 1996, 1997 and a
portion of 1998 until Mr. Rosen became President and Chief
Executive Officer of the Company and an inside director on July
18, 1997, (b) the amounts shown for Mr. Prinzing include
commissions received as President of CIS Air during fiscal year
1996, and (c) the amount for Mr. Campbell includes severance
payments accrued in fiscal year 1998 and paid in fiscal year
1999.
(8) These amounts represent the Company's payment of matching and
discretionary contributions to the Company's 401(k) Retirement
Plan.
Option Grants of Common Stock to Executives in Last Fiscal Year
The following table provides information about grants of options
during the fiscal year ended May 31, 1998, to the executive officers named
in the Summary Compensation Table above, to purchase shares of Common
Stock.
<TABLE>
<CAPTION>
Stock Option Grants During Fiscal Year Ended
May 31, 1998
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise
Granted Employees Price(3) Expiration Grant Date
Name (#)(1) in 1998(2) ($/Share) Date (4) Value($)(5)
- ---- ------ ---------- --------- -------- -----------
<S> <C> <C> <C> <C> <C>
Michael L. Rosen 33,334 19.1 2.38 7/18/00 30,667
33,333 19.0 2.38 7/18/01 30,666
33,333 19.0 2.38 7/18/02 30,666
Jonah M. Meer 25,000 14.3 2.25 6/30/00 23,000
25,000 14.3 2.25 6/30/01 23,000
25,000 14.3 2.25 6/30/02 23,000
</TABLE>
(1) The numbers in this column represent options to purchase Common
Stock.
(2) Percentages are based on a total of 175,000 options granted to 2
employees during fiscal year 1998.
(3) The exercise price per share is 100% of the fair market value of
a share of Common Stock on the date of grant. The exercise price
may be paid in cash.
(4) 100,000 options were granted to Mr. Rosen on July 18, 1997 at the
exercise price of $2.38 per share. One-third of the options were
exercisable at the time of grant ("1997 Options"), one-third of
the options became exercisable on July 18, 1998 ("1998 Options")
and the remaining one-third of the options become exercisable on
July 18, 1999 ("1999 Options"). The 1997 Options expire on July
18, 2000, the 1998 Options expire on July 18, 2001 and the 1999
Options expire on July 18, 2002.
<PAGE>
75,000 options were granted to Mr. Meer on June 30, 1997 at the
exercise price of $2.25 per share. One-third of the options were
exercisable at the time of grant ("1997 Options"), one-third of
the options became exercisable on June 30, 1998 ("1998 Options")
and the remaining one-third of the options become exercisable on
June 30, 1999 ("1999 Options). The 1997 Options expire on June
30, 2000, the 1998 Options expire on June 30, 2001, and the 1999
Options expire on June 30, 2002.
-11-
<PAGE>
(5) The fair value of each stock option grant has been estimated on
the date of each grant using the Black-Scholes option pricing
model with the following weighted average assumptions: (i)
risk-free interest rate of 6.3%, (ii) expected life of 46 months,
(iii) expected volatility of 42%, and (iv) no expected dividend
yield.
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Option
Value
The following table provides information on option exercises during the
fiscal year ended May 31, 1998 by the named executive officers and the value of
each such executive officer's unexercised options to acquire Common Stock at May
31, 1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised,
Underlying Unexercised In-the-Money
Shares Options at Options Held at
Acquired Value Fiscal Year-End(#) Fiscal Year-End($)(1)
On Exercise Realized ----------------------------- ------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Rosen -- -- 39,334 66,666 -- --
Jonah M. Meer -- -- 25,000 50,000 -- --
Thomas J. Prinzing -- -- 100,000 -- 19,000 --
John R. Campbell 50,000 50,250 -- -- -- --
James J. Mosher -- -- 10,000 -- 1,900 --
Bruce W. Lewis, Jr. -- -- 10,000 -- 1,900 --
</TABLE>
(1) Based on the Nasdaq closing price of Common Stock on May 29, 1998
of $2.16.
Employment and Severance Agreements
Jonah M. Meer. On June 9, 1997, Mr. Meer entered into a letter
agreement with the Company concerning salary, benefits, stock options and
severance benefits while serving as chief financial officer and chief operating
officer. Effective June 30, 1997, the agreement provides for a two-year term and
a base salary of $200,000 per year. In addition, the Company agreed to pay
severance compensation to Mr. Meer if his employment was terminated by the
Company for reasons other than cause, or, at his option, upon certain changes in
his salary or responsibilities (a "Meer Severance Event"). If a Meer Severance
Event occurs, Mr. Meer is entitled to receive the following until the earlier of
three months from the date of the Meer Severance Event or the commencement of
full time employment by another employer: (i) a monthly severance payment equal
to one-twelfth of his base salary as in effect on the date of the Meer Severance
Event; and (ii) certain continued benefits (life insurance, medical, health and
accident, and disability arrangements) ("Continued Benefits") for up to three
months.
<PAGE>
Thomas J. Prinzing. On May 21, 1997, Mr. Prinzing entered into a letter
agreement with the Company concerning salary, incentive compensation and
severance benefits in connection with resuming his duties as President of the
CIS Air Group. Effective June 1, 1997, the agreement provides for a two-year
term and a base salary of $225,000 per year. Mr. Prinzing is also entitled to
receive additional compensation tied to 0.33 times the difference between the
Air Group net earnings and a minimum return on equity, minus his base salary
("Compensation Amount"). In addition, the Company agreed to pay
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<PAGE>
severance compensation to Mr. Prinzing if his employment was terminated by the
Company for reasons other than cause, or, at his option, upon certain changes in
his salary, responsibilities or incentive compensation (a "Prinzing Severance
Event"). If a Prinzing Severance Event occurs, Mr. Prinzing is entitled to
receive the following until the earlier of 18 months from the date of the
Prinzing Severance Event or the commencement of full time employment by another
employer: (i) a monthly severance payment equal to the greater of (A) $18,750,
and (B) one-eighteenth of the difference between (1) the Compensation Amount
calculated from the beginning of the fiscal year in which the Prinzing Severance
Event occurs through the end of the calendar month preceding the Prinzing
Severance Event, and (2) the total amount of compensation paid to Mr. Prinzing
by the Company from the beginning of the fiscal year in which the Prinzing
Severance Event occurs through the Prinzing Severance Event; and (ii) Continued
Benefits for up to 18 months. Mr. Prinzing is also entitled to the following
alternate severance benefits if the Company terminates his employment after
November 30, 1997 and prior to May 31, 1999, if the aggregate Air Group net
earnings for the three most-recently completed fiscal quarters does not, on an
annualized basis, yield a return on equity invested by the Company in the CIS
Air Group of at least fifteen percent (15%). Upon such a termination, Mr.
Prinzing is entitled to receive the following until the earlier of 6 months from
the date of the alternate severance event or the commencement of full time
employment by another employer: (i) a monthly severance payment equal to
$18,750; and (ii) Continued Benefits for up to 6 months.
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. In fiscal year 1998, the Company
made no discretionary contribution to the 401(k) plan.
Report on Executive Compensation
During the fiscal year ended May 31, 1998, decisions regarding
executive compensation were made by the Board of Directors, and in July 1997,
the Board of Directors formally disbanded the Compensation Committee (which had
consisted of Dr. Bloom and Messrs. Rosen and Solomon). All directors of the
Company, including those who are officers of the Company, participate in
decisions regarding executive compensation (except that officers do not
participate in decisions regarding their own compensation). None of the members
of the former Compensation Committee were officers or employees of the Company
during the time they served on the Compensation Committee.
The Board of Director's goals are to align compensation with the
Company's business objectives and performance and to enable the Company to
attract, retain and reward executive officers and other key employees who
contribute to the long-term success of the Company and to establish an
appropriate relationship between executive compensation and the creation of
long-term shareholder value.
<PAGE>
In July 1997, the Board appointed Michael L. Rosen, a member of the
Board of Directors since 1995, to the position of President and Chief Executive
Officer. Mr. Rosen does not have an employment agreement with the Company. Mr.
Rosen's salary was set at $65,000 and he was granted options to purchase 100,000
shares of common stock, the terms of which are described above. The Board
concluded, in light of Mr. Rosen's other business activities, that a relatively
small salary was appropriate. At the same
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<PAGE>
time, the Board awarded Mr. Rosen a substantial number of stock options so that
his compensation would be increased if the Company's stock price appreciated.
In addition, in June 1997, the Company engaged Jonah M. Meer as Senior
Vice President, Chief Operating Officer and Chief Financial officer pursuant to
an employment agreement, the terms of which are described above. The employment
agreement was approved by the Board of Directors, which concluded that the
terms, including the grants of stock options and severance arrangements, were
necessary to attract Mr. Meer to the Company.
Other than the decisions regarding senior executives described above,
the Board of Directors did not change executive compensation levels from those
in the previous fiscal year, nor did it award bonuses or stock options during
the fiscal year.
Julius S. Anreder
Dr. Leon H. Bloom
James P. Hassett
George H. Heilborn
Michael L. Rosen
Paul M. Solomon
Related Party Transactions
The Company currently leases certain equipment with a total equipment
cost of approximately $94,000 to Oscar Gruss & Son Incorporated ("Oscar Gruss").
Oscar Gruss beneficially owns more than 5% of the Company's equity securities,
and the Company's President and Chief Executive Officer Michael L. Rosen is
Chief Executive Officer and a director of Oscar Gruss. Another director of the
Company, Julius S. Anreder, is an Executive Vice President of Oscar Gruss. The
equipment is leased under two three-year leases, which commenced June 1, 1998
and August 1, 1998, respectively and involve monthly rental payments of
$1,386.71 and $1,718.56, respectively.
In addition, in October 1997, the Company engaged G. H. Heilborn & Co.,
Inc. on a non-exclusive basis to perform financial advisory and investment
banking services to the Company in connection with the acquisition of one or
more lease portfolios or businesses engaged in leasing. George H. Heilborn, a
director of the Company, is President of G. H. Heilborn & Co., Inc.
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 NASDAQ 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. Two of these companies,
AT&T Capital Corporation and LDI Corporation, are not included in the Peer Group
during the fiscal years ended May 31, 1997 and May 31, 1998, as they were
acquired by other companies during this period and information is no longer
available for them. Although the Company's Common Stock did not begin trading on
NASDAQ until May 16, 1995, the Company is required by the Securities and
Exchange Commission to include trading information from The Pink Sheets 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. The closing prices for March and April 1995
were obtained from the National Quotation Bureau, Inc.
-14-
<PAGE>
CONTINENTAL INFORMATION SYSTEMS CORPORATION
vs. NASDAQ MARKET INDEX vs. PEER GROUP
[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
<CAPTION>
8-30-96 11-29-96 2-28-97 5-30-97 8-29-97 11-28-97 2-27-98 5-29-98
------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Company 103.43 107.43 142.86 136.00 185.71 160.57 139.43 123.43
NASDAQ Market Index 128.11 144.72 146.25 156.72 177.59 179.74 199.38 198.65
Peer Group 151.86 189.21 178.95 207.36 229.25 249.04 346.93 311.31
</TABLE>
Notes: 1. Assumes $100 invested on March 29, 1995.
2. The indices are calculated on a monthly basis and assume
dividends reinvested.
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.
-15-
<PAGE>
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 Commission under the Exchange Act.
Mr. Rosen's Forms 4 (Statement of Changes in Beneficial Ownership) to reflect
the purchase in August 1997 of 5,000 shares, the receipt in August 1997 of 1,996
shares in connection with certain distributions made by the Liquidating Estate
and the receipt in September 1997 of 1,043 shares pursuant to a distribution
made by the Liquidating Estate were late filed. J. Ezra Merkin did not timely
file a Form 3 (Initial Statement of Beneficial Ownership of Securities) to
report beneficial ownership of shares disclosed in Amendment No. 1 to Schedule
13D filed with the Commission by Gabriel Capital L.P. and others in November
1996. Bruce Lewis did not timely file a Form 3 to report beneficial ownership of
shares owned following his appointment as Treasurer in 1997.
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.
THE COMPANY IS PROVIDING A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED MAY 31, 1998, INCLUDING FINANCIAL STATEMENTS AND
SCHEDULES, TO EACH OF THE COMPANY'S STOCKHOLDERS OF RECORD ON SEPTEMBER 11,
1998. HOLDERS MAY OBTAIN COPIES OF EXHIBITS TO SUCH FORM 10-K UPON WRITTEN
REQUEST MAILED TO THE COMPANY'S OFFICES, ONE NORTHERN CONCOURSE, P.O. BOX 4785,
SYRACUSE, NEW YORK 13221-4785, ATTENTION: ANN TWOMEY. A FEE WILL BE CHARGED FOR
THE 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.
-16-
<PAGE>
Proposals for the 1999 Annual Meeting
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
in New York, New York not later than June 5, 1999 for inclusion in the proxy
statement for that meeting.
By Order of the Board of Directors,
JAMES J. MOSHER, Secretary
September 25, 1998
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.
-17-
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CONTINENTAL INFORMATION SYSTEMS CORPORATION
The undersigned hereby appoints Michael L. Rosen and Jonah M. Meer 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 20, 1998 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 AND 2.
1. ELECTION OF DIRECTORS
NOMINEES: Julius S. Anreder, James P. Hassett, George H. Heilborn
Michael L. Rosen, and Paul M. Solomon
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
to the right
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
each such nominee's name in the space below).
2. Ratification of PricewaterhouseCoopers LLP as the independent auditors of
the Company.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
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:___________________________________, 1998
-----------------------------------------------
(Signature)
-----------------------------------------------
(Signature if held jointly)
PLEASE VOTE, SIGN, DATE, AND PROMPTLY RETURN THE PROXY CARD USING
THE ENCLOSED ENVELOPE.
