SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EIS International, Inc.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
EIS INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON April 28, 1998
- --------------------------------------------------------------------------------
April 7, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of EIS
International, Inc. (the "Company") will be held at the offices of the Company,
555 Herndon Parkway, Herndon, Virginia 20170, on Tuesday, April 28, 1998 at
10:00 a.m., local time, for the purposes set forth below.
1. To elect one Class III Director to serve for a three-year term expiring in
2001 or at such time as his successor has been duly elected and qualified.
2. To approve the Company's 1998 Stock Incentive Plan.
3. To approve amendments to the Company's 1993 Stock Option Plan for
Non-Employee Directors (i) increasing by 50,000 the number of shares of the
Company's Common Stock issuable under such Plan, and (ii) providing for
discretionary grants of stock options under such Plan.
4. To ratify the appointment of KPMG Peat Marwick LLP as the independent
accountants of the Company for the year ending December 31, 1998.
5. To consider and act upon such other matters as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed March 6, 1998 as the record date for the
determination of stockholders entitled to vote at the Annual Meeting. Only
stockholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT
YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY, WHICH, BY ITS TERMS, PERMITS YOU TO
REVOKE IT AT ANY TIME BEFORE THE ANNUAL MEETING. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
Kent M. Klineman
Secretary
<PAGE>
EIS INTERNATIONAL, INC.
55 Herndon Parkway
Herndon, VA 20170
------------------------------
PROXY STATEMENT
dated April 7, 1998
------------------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
to be held on April 28, 1998
------------------------------
This Proxy Statement is being furnished to the stockholders of EIS
International, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Company's Board of Directors (the "Board")
for use at the Annual Meeting of Stockholders of the Company to be held on April
28, 1998 and at any adjournments thereof (the "Annual Meeting"). This Proxy
Statement and the accompanying form of proxy will be mailed to stockholders on
or about April 7, 1998.
Only holders of record of Common Stock, $.01 par value, of the Company
("Common Stock") at the close of business on March 6, 1998 will be entitled to
notice of and to vote at the Annual Meeting. As of the close of business on
March 6, 1998, the Company had outstanding 11,555,171 shares of Common Stock.
The presence, in person or by proxy, of the holders of a majority of the
outstanding Common Stock entitled to vote at the Annual Meeting will constitute
a quorum. Each share of Common Stock outstanding is entitled to one vote on each
matter that may be brought before the meeting. Abstentions and broker non-votes
with respect to any proposal are counted only for purposes of determining
whether a quorum is present for the purpose of voting on that proposal and will
not be voted for or against that proposal. The affirmative vote of the holders
of a plurality of the votes cast by the stockholders entitled to vote at the
Annual Meeting is required for the election of directors. The affirmative vote
of the holders of a majority of the shares of Common Stock present or
represented and voting on the matter is required for the approval of the 1998
Stock Incentive Plan, the approval of the amendment to the 1993 Stock Option
Plan for Non-Employee Directors and the ratification of independent accountants.
Solicitation of proxies is being made by the Company through the mail.
In addition, certain officers, directors and employees of the Company may,
without additional compensation, solicit the return of proxies personally or by
telephone or telegraph. The total expense of preparing, assembling and mailing
the proxy materials will be borne by the Company. Such expense may also include
reimbursement for out-of-pocket disbursements incurred by brokerage houses and
other custodians, nominees or other fiduciaries for forwarding such documents to
stockholders.
All proxies delivered pursuant to this solicitation are revocable by
the person executing the proxy by giving written notice to the Secretary of the
Company at any time before the voting thereof or by his voting the shares
subject to the proxy by written ballot. Proxies given in the form enclosed,
unless previously revoked, will be voted at the Annual Meeting in accordance
with the instructions contained therein and, if no choice is specified, will be
voted in accordance with the specifications made thereon.
The Annual Report of the Company for the year ended December 31, 1997
accompanies this Proxy Statement but is not part of the proxy soliciting
materials.
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board currently consists of five directors, divided into two
classes of two directors each and one class of one director. The term of the
current Class III Director will expire at the Annual Meeting. The terms of the
current Class I and Class II Directors will expire in 1999 and 2000,
respectively, at such times as their respective successors are duly elected and
qualified (subject to their earlier resignation or removal). Directors of each
Class are elected for a full term of three years (or any lesser period
representing the balance of the previous term of such Class) and until their
respective successors are duly elected and qualified or until their earlier
resignation or removal.
At the Annual Meeting, the holders of record of Common Stock are to
elect one Class III Director to serve until the annual meeting of the Company's
stockholders to be held in 2001 and until such director's successor is duly
elected and qualified or until his earlier resignation or removal. The election
of directors requires the affirmative vote of the holders of a plurality of the
Common Stock present and voting at the Annual Meeting. It is intended that
proxies in the accompanying form that do not withhold the authority to vote for
the nominee will be voted for the election as director of such nominee. The
nominee is currently a director of the Company.
The nominee has indicated his willingness to serve if elected; however,
if the nominee should become unable or unwilling for any reason before the
Annual Meeting to serve as a director, the proxies will be voted for a
substitute person to be selected by the current Board. The Board has no reason
to expect that the nominee will not be a candidate at the Annual Meeting and
therefore does not at this time have in mind any substitute for the nominee.
There are no family relationships between any of the directors and
executive officers of the Company.
Nominee for Election as a Director
The following table sets forth certain information with respect to each
nominee. Information set forth below concerning age, occupation(s) and other
directorships has been furnished to the Company by the individuals named.
Information with respect to the number of shares of Common Stock beneficially
owned by each director, directly or indirectly, as of January 31, 1998, appears
below under the heading "Security Ownership of Certain Beneficial Holders and
Management."
Class III Director (term expires at the Annual Meeting):
Name Age Principal Occupation(s)
---- --- -----------------------
Robert J. Cresci 54 Chairman of the Board of Directors of the
Company; Managing Director of Pecks
Management Partners Ltd. ("Pecks") (1)
2
<PAGE>
Robert J. Cresci has been a director of the Company since March 1991
and has served as Chairman of the Board of Directors of the Company since
February 1997. He has been a Managing Director of Pecks, an investment
management firm, since September 1990 and serves as a director of the Company.
Mr. Cresci currently serves on the boards of Bridgeport Machines, Inc.,
Serv-Tech, Inc., Vestro Natural Foods, Inc., Olympic Financial Ltd., Hitox,
Inc., Sepracor Inc., Garnet Resources Corporation, HarCor Energy, Inc., Meris
Laboratories, Inc., Natures Elements, Inc. and GeoWaste, Inc., all publicly held
corporations, as well as several private companies.
Current Directors
The following table sets forth certain information about those
directors whose terms of office will continue after the Annual Meeting.
Information set forth below concerning age, occupation(s) and other
directorships has been furnished to the Company by the individuals named.
Class I Directors (term expires at the 1999 Annual Meeting):
Name Age Principal Occupation(s)
---- --- -----------------------
Robert M. Jesurum 57 Founder of the Company and Private
Consultant (2)
Charles W. McCall 54 President and Chief Executive Officer of
HBO & Company (2)
Robert M. Jesurum founded the Company in January 1980 and has served as
a director since its inception. He also served as the Company's Chairman of the
Board (from inception to February 1993) and as the Company's Executive Vice
President and Chief Technical Officer (from inception until October 1991). Mr.
Jesurum retired as an employee of the Company in October 1991 and is currently
pursuing noncompetitive independent business research and product development as
a sole proprietor.
Charles W. McCall has been a director of the Company since April 1993.
He has been President, Chief Executive Officer and a director of HBO & Company,
a company in the business of providing software to the medical field, since
January 1991. From April 1985 to January 1991, Mr. McCall served as President
and Chief Executive Officer of CompuServe Inc., a computer communications and
information services company based in Columbus, Ohio. Mr. McCall is currently a
director of SYMIX, Inc., a publicly held corporation.
Class II Directors (term expires at the 2000 Annual Meeting):
Name Age Principal Occupation(s)
---- --- -----------------------
Kent M. Klineman 65 Secretary of the Company; Attorney and
Private Investor (1)(2)
James E. McGowan 54 President and Chief Executive Officer
of the Company
- --------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
3
<PAGE>
Kent M. Klineman has been Secretary of the Company and a director since
June 1988. He also served as Treasurer of the Company from June 1988 until
December 1989. He is an attorney and private investor and serves as a director
of a number of closely held companies. He is a director of Concord Camera Corp.,
a publicly held corporation.
James E. McGowan has been President and Chief Executive Officer and a
director of the Company since February 1997. He was also President and Chief
Operating Officer of EIS Systems, an operating division of the Company, from
April 1996 until February 1997. From September 1993 to January 1996 he was
President and Chief Executive Officer of Deluxe Data, a provider of electronic
funds transfer processing and software for financial institutions and automated
teller machine networks. From January 1993 to September 1993 he ran McGowan
Associates, a consulting company which he founded. From January 1990 to December
1992 he served as President and Chief Executive Officer at Xerox Imaging
Systems.
Meetings of the Board and Committees of the Board
During 1997, the Board held nine meetings and took one action by
unanimous written consent. No director attended fewer than 75% of all such
meetings of the Board (which occurred during his tenure as a director). The
Board has an Audit Committee and a Compensation Committee. During 1997, the
Audit Committee held five meetings and the Compensation Committee held four
meetings. No member of the Audit Committee or the Compensation Committee
attended fewer than 75% of all of the meetings of such Committee (which occurred
during his tenure as a member of such Committee).
The current members of the Audit Committee are Messrs. Cresci and
Klineman. The functions performed by the Audit Committee are to make
recommendations to the Board as to the independent accountants to be appointed
by it; review with the independent accountants the scope of their examination;
receive their reports and meet with their representatives for the purpose of
reviewing and considering questions relating to their examination and reports;
and review, either directly or through such accountants, the Company's internal
accounting and auditing procedures.
The current members of the Compensation Committee are Messrs. Jesurum,
Klineman and McCall. The functions performed by the Compensation Committee are
to recommend and review salary changes, administer the Company's stock option
plans and review other proposed benefits or incentive arrangements.
Compensation of Directors
Each director of the Company who is not an employee of the Company is
paid an annual fee of $10,000 plus $1,000 for each meeting of the Board attended
and $500 for each meeting of the Audit Committee and Compensation Committee
attended. In addition, the Company's 1993 Stock Option Plan for Non-Employee
Directors provides for grants to non-employee directors pursuant to a specified
formula. Pursuant to this Plan, Messrs. Cresci, Jesurum, McCall and Klineman
were each granted an option to purchase 1,000 shares of Common Stock in February
1997 at an exercise price of $5.9375 per share. In addition, in April 1997 and
subject to the approval of the Amendments described in Proposal 3, Mr. Cresci
was granted an option under this Plan to purchase 33,750 shares of Common Stock,
and Messrs. Jesurum, McCall and Klineman were each granted an option to purchase
20,000 shares of Common Stock, in each case at an exercise price of $5.00 per
share. If the Amendments to the 1993 Stock Option Plan for Non-Employee
Directors are not approved (see Proposal 3, below), these option grants will be
deemed to have been made under the Company's Amended and Restated Stock Option
Plan.
4
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation of the Company's executive officers (the "Named
Executive Officers") for each of the last three fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ----------
Securities
Other Underlying
Annual Options
Compen- (number of All Other
Name and Principal Position Year Salary Bonus(1) sation shares) Compensation(3)
- --------------------------- ---- ------ -------- ------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James E. McGowan 1997 $268,447 $125,000 (2) 150,000 $ 62,103
President and Chief Executive 1996 178,042 -- (2) -- 17,612
Officer(4)
Frederick C. Foley 1997 152,832 52,000 (2) 60,000 26,425
Senior Vice President, Finance, 1996 139,182 -- (2) 5,000 2,163
Chief Financial Officer and 1995 125,000 42,500 (2) -- 120
Treasurer
Joseph E. Smith 1997 129,079 34,000 (2) 75,000 63,334
Senior Vice President,
Worldwide Sales and
Marketing(5)
Joseph J. Porfeli,
Former Chairman of the Board, 1997 35,202 -- (2) -- 169,167
President and Chief 1996 285,192 -- (2) -- 1,875
Executive Officer(6) 1995 248,899 $135,000 (2) -- 2,170
</TABLE>
(1) Except as otherwise noted below, all amounts set forth in this column
constitute performance bonuses.
(2) As to each individual named, the aggregate amounts of personal benefits not
included in the Summary Compensation Table do not exceed the lesser of
either $50,000 or 10% of the total annual salary and bonus reported for the
named executive officer.
(3) Represents premiums paid by the Company with respect to group term life
insurance for the benefit of the named executive officer, except for (i)
with respect to Mr. McGowan, $33,090 for relocation expenses and $28,555 of
loan forgiveness during 1997, (ii) with respect to Mr. Foley, $3,500 for
relocation expenses, a $20,925 relocation bonus and $2,000 in matching
401(k) contributions during 1997, (iii) with respect to Mr. Smith, $38,191
for relocation expenses and a one-time $25,000 signing bonus paid upon
joining the Company and (iv) with respect to Mr. Porfeli, $169,167 in
severance pay during 1997.
(4) Mr. McGowan joined the Company as President and Chief Operating Officer of
EIS Systems in April 1996. Accordingly, no information is provided for
1995. Mr. McGowan became President and Chief Executive Officer of the
Company in February 1997 upon the resignation of Mr. Porfeli.
(5) Mr. Smith joined the Company in 1997. Accordingly, no information is
provided for 1995 or 1996.
(6) Mr. Porfeli resigned from his employment with the Company in February 1997.
5
<PAGE>
1997 Option Information
Option Grants in 1997
The following table summarizes certain information regarding options
granted to Named Executive Officers during 1997.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants Terms (1)
--------------------------------------- ---------------------------
Percent of
Total
Shares Options
Subject to Granted to Exercise
Options Employees Price Per Expiration
Name Granted in FY Share Date 5% 10%
- -------- ---------- ---------- ---------- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
James E. McGowan (2) 70,000 7.27% $5.625 2/28/07 $247,627 $627,536
80,000 8.30% 5.00 4/29/07 251,558 637,497
Frederick C. Foley (2) 20,000 2.08% 5.00 4/29/07 62,890 159,360
40,000 4.15% 5.00 4/29/07 125,789 318,767
Joseph E. Smith 75,000 7.78% 7.8125 6/16/07 368,493 933,833
Joseph J. Porfeli -- -- -- -- -- --
</TABLE>
- -----------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised.
(2) Certain options granted to each of these individuals were cancelled in
exchange for new options with a lower exercise price which are reflected on
this table, as follows: (i) options to purchase 41,556 and 38,444 shares of
Common stock at an exercise price of $9.625 per share granted to Mr.
McGowan were cancelled in exchange for options to purchase 41,556 and
38,444 shares of Common Stock at an exercise price of $5.00 per share and
(ii) options to purchase 2,500, 2,676, 14,824, 8,918, 6,082, 3,750 and
1,250 shares of Common Stock at exercise prices of $8.625, $12.375,
$12.375, $12.8125, $12.8125, $16.375 and 16.275, respectively, granted to
Mr. Foley were cancelled for options to purchase the same number of shares
of Common stock at an exercise price of $5.00 per share.
6
<PAGE>
Option Exercises in 1997
The following table sets forth the number of options exercised in 1997
and the dollar value realized thereon by the Named Executive Officers, along
with the number and dollar value of any options remaining unexercised on
December 31, 1997.
<TABLE>
<CAPTION>
Aggregated Option Exercises in
1997 and 1997 Year-Ended Option Values
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at 1997 Year-
Options at 1997 Year-End(1) End(1)
----------------------------- -----------------------------------
Shares
Acquired
on Value
Name Exercise Realized(2) Exercisable Unexercisable Exercisable(3) Unexercisable(3)
---- -------- ----------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James E. McGowan -- -- -- 150,000 -- $54,800
Frederick C. Foley -- -- -- 60,000 -- 39,420
Joseph E. Smith -- -- -- 75,000 -- --
Joseph J. Porfeli 330,000 $1,427,572 -- -- -- --
</TABLE>
(1) On December 31, 1997, the average of the closing bid and asked prices per
share of Common Stock as reported by the Nasdaq National Market was $5.50.
(2) Represents the difference between market value on the date of exercise and
the option exercise price.
(3) Represents the difference between the market value of the Common Stock
underlying the option and the exercise price of such option upon exercise
or year-end, as the case may be.
Repricing of Options
The following table sets forth certain information concerning the
repricing of stock options held by the Named Executive Officers of the Company
during 1997, as well as information concerning the repricing of stock options
held by executive officers of the Company during the past ten years.
7
<PAGE>
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining at
Options Time of at Time of Date of
Repriced or Repricing or Repricing or New Exercise Repricing or
Amended Amendment Amendment Price Amendment
Name Date (#) ($) ($) ($) (in months)
---- ---- ----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
James E. McGowan 12/04/96(1) 41,556 $9.625 $16.3125 $9.6250 112
President and Chief 12/04/96(1) 38,444 $9.625 $16.3125 $9.6250 112
Executive Officer 4/29/97 41,556 $5.00 $9.625 $5.00 115
4/29/97 38,444 $5.00 $9.625 $5.00 115
Edward J. Sarkisian 9/02/92 15,000 $5.0625 $6.6667 $5.0625 99
Vice President,
Customer Support
Frederick C. Foley 9/02/92 18,750 $5.0625 $6.6667 $5.0625 109
Senior Vice 4/29/97 2,500 $5.00 $8.625 $5.00 72
President, Finance 4/29/97 2,676 $5.00 $12.375 $5.00 80
and Chief Financial 4/29/97 14,824 $5.00 $12.375 $5.00 80
Officer 4/29/97 8,918 $5.00 $12.8125 $5.00 92
4/29/97 6,082 $5.00 $12.8125 $5.00 92
4/29/97 3,750 $5.00 $16.375 $5.00 106
4/29/97 1,250 $5.00 $16.375 $5.00 106
Herbert F. Balzuweit 12/04/96 40,000 $9.625 $14.9375 $9.6250 110
Former Group Chief
Financial Officer
and Executive Vice
President
E. Kevin Dahill 9/02/92 15,000 $5.0625 $6.6667 $5.0625 109
Former Executive
Vice President,
Operations, Chief
Financial Officer
and Treasurer
Jacob W. Jorgensen,
Former Senior Vice
President,
Engineering and 9/02/92 22,500 $5.0625 $6.6667 $5.0625 95
Chief Technical 9/02/92 22,500 $5.0625 $6.6667 $5.0625 103
Officer 9/02/92 30,000 $5.0625 $6.6667 $5.0625 109
</TABLE>
- ---------------
(1) Mr. McGowan was President and Chief Operating Officer of EIS Systems, an
operating division of the Company, at the time these options were repriced.
8
<PAGE>
Compensation Committee Report on Option Repricing
Effective April 29, 1997, the Compensation Committee approved the
repricing of certain outstanding stock options, including options held by
certain of the Named Executive Officers (see "Repricing of Options"). Because of
a decline in the market price of the Company's Common Stock, many outstanding
options were exercisable at prices that exceeded the market price of the Common
Stock, thereby substantially impairing the effectiveness of such options as
performance incentives. The Compensation Committee believed that the decline in
the market price of the Company's Common Stock was largely attributable to
issues unrelated to the performance of the Company's core business. In view of
this price decline, and consistent with the Company's philosophy of utilizing
equity incentives to motivate and retain management and employees, the
Compensation Committee felt that it was important to restore the performance
incentives intended to be provided by options through the repricing of options
with exercise prices in excess of the market price at the time of repricing.
Other than the change in the exercise price for the shares to $5.00, the fair
market value of a share of the Company's Common Stock on the effective date of
the repricing, and the resetting of vesting to begin on the date of repricing
with respect to all repriced options, the terms of such repriced options are the
same as the options they replaced. A total of 35 option holders, holding options
to purchase an aggregate of 472,413 shares of the Company's Common Stock with
exercise prices ranging from $8.625 to $17.125 per share, were granted new
options on the terms described above.
The foregoing report on option repricing has been approved by Messrs.
Jesurum, Klineman and McCall, the members of the Compensation Committee.
Compensation Committee Report on Executive Compensation
General. The Compensation Committee is responsible for developing the
Company's executive compensation policies and determining the compensation paid
to the Company's Chief Executive Officer and its other executive officers. To
that end, the Compensation Committee has sought to (i) provide sufficient
compensation to attract, motivate and retain the best available executive
officers, (ii) provide additional incentives to them to exert their maximum
efforts toward the Company's success, and (iii) align the executive officers'
interests with the Company's success by making a portion of their pay dependent
upon the Company's performance. The Compensation Committee has used its
discretion to set executive compensation at levels warranted, in its judgment,
by external, internal or individual circumstances.
Executive officer compensation consists of base salary, annual cash
incentive compensation, long-term incentive compensation in the form of stock
options, and various benefits, including medical and tax-deferred savings plans
generally available to the Company's employees.
Base Salary. In determining base salary levels for the Company's
executive officers, the Compensation Committee takes into account the
compensation of companies in the telecommunications and electronics industries
and other comparable companies, individual responsibilities, experience and
performance and specific issues particular to the Company.
Annual Bonus. To provide the Company's executive officers and other key
employees with direct financial incentives to achieve the Company's annual
goals, the Company currently maintains an incentive arrangement for payment of
bonuses, subject to the Company's achievement of certain projected operating
results (e.g., in the case of 1997, achievement of a predetermined level of
pretax profits), to selected executive officers and key employees. Target bonus
levels are set at a level competitive with companies in the telecommunications
and electronics industries as well as a broader
9
<PAGE>
group of companies of comparable size and complexity. The Company paid
performance-related bonuses of $125,000 to McGowan, $52,000 to Mr. Foley and
$34,000 to Mr. Smith relating to fiscal 1997.
Stock Option and Stock Purchase Plans. To provide additional incentives
to its executive officers and employees to exert their maximum efforts toward
the Company's success, and to provide them with an opportunity to acquire a
proprietary interest in the Company through ownership of Common Stock, the
Company maintains a stock option plan and a stock purchase plan. During 1997,
options to purchase an aggregate of 285,000 shares of Common Stock were granted
under the Company's Amended and Restated Stock Option Plan to executive officers
of the Company (after giving effect to the cancellation and repricing of certain
options as described under the caption "Repricing of Options").
Other Benefits. The Company provides all employees, including executive
officers, with group medical, dental, disability and life insurance on a
non-discriminatory basis. The Company maintains a savings and investment plan
intended to qualify under Section 401(a) of the Internal Revenue Code of 1986
(the "Code") and to permit employee salary reductions for tax-deferred savings
purposes pursuant to Section 401(k) of the Code. Contributions to this plan by
the Company are discretionary, and contributions of approximately $250,000 were
made on behalf of all employees in 1997, including $2,000 on behalf of Named
Executive Officers. The Company also maintains a pretax premium plan, intended
to qualify under Section 125 of the Code and to permit salary reductions for
pretax payment of employee health plan contributions.
Compensation of Chief Executive Officer. Mr. Porfeli received total
salary and bonus amounting to $35,202 in 1997. In February 1997, Mr. McGowan was
appointed as President and Chief Executive Officer upon Mr. Porfeli's
resignation, at an annual salary of $250,000 and was awarded an option to
purchase 70,000 shares of the Company's Common Stock at an exercise price of
$5.625 per share. Mr. McGowan was paid total salary of $268,447 and received a
bonus of $125,000 for 1997.
The foregoing report on executive compensation has been approved by
Messrs. Jesurum, Klineman and McCall, the members of the Compensation Committee.
Employment, Termination and Change-in-Control Arrangements
The Company is party to an employment arrangement with James McGowan,
its President and Chief Executive Officer and a director of the Company.
Pursuant to this arrangement, the Company will pay Mr. McGowan an annual salary
of $300,000 in 1998, with a possible bonus equal to 50% of his annual salary,
assuming the achievement of certain performance targets. In addition, this
arrangement provides that Mr. McGowan will be paid monthly severance at a rate
commensurate with his annual salary and will continue to receive health care and
insurance benefits for a period of one year following the termination of his
employment without cause, or until such time as he obtains full-time employment,
whichever occurs first. Furthermore, pursuant to this arrangement, the Company
extended to Mr. McGowan a $100,000 loan, bearing interest at a rate of 6% per
annum and maturing on February 6, 2000. One twelfth of the original principal
amount of this loan, and all accumulated interest thereon, will be forgiven at
the end of each three-month period commencing on May 7, 1997 and ending on
February 7, 2000, unless Mr. McGowan voluntarily terminates his employment with
the Company, at which point any such forgiveness will cease and he will be
required to pay the remaining principal balance of the loan and remaining
accrued interest thereon at maturity. Mr. McGowan was also granted an option to
purchase 70,000 shares of the Company's Common Stock at an exercise price of
$5.625 per share.
In February 1997, Joseph J. Porfeli resigned as the President, Chief
Executive Officer and Chairman of the Board of Directors of the Company. In
connection with his resignation, the Company
10
<PAGE>
agreed to make a one-time payment to him of approximately $169,167. This payment
was offset against approximately $133,603 in principal and interest owed by Mr.
Porfeli on a loan made by the Company to him (see "Certain Transactions"), and
$27,565 owed to the Company for product purchases by Ameri Care, a company
controlled by Mr. Porfeli. The Company also agreed to extend the termination
date of Mr. Porfeli's outstanding stock options, which would otherwise have
terminated within 90 days of his resignation, to August 6, 1997.
Compensation Committee Interlocks and Insider Participation
Mr. Klineman, a director of the Company and a member of its
Compensation Committee, performs legal and consulting services for the Company
and is paid a retainer of $5,000 per month in consideration of these services,
plus an additional amount for extraordinary services rendered, an aggregate of
$80,000 in respect of services rendered during 1997. The Company believes that
this represents the fair market value of such services and that such services
are provided on terms at least as favorable to the Company as those that could
be obtained from an unaffiliated third party.
Performance of the Common Stock
The following indexed graph indicates the Company's total return to its
stockholders since December 31, 1992 as compared to total return for the Nasdaq
Stock Market (US Companies) Index and the Nasdaq Computer & Data Processing
Services Industry Group Index, assuming an investment of $100 on December 31,
1992. Total stockholder return for the Company as well as for such indices is
determined by adding (a) the cumulative amount of dividends for such period
(assuming dividend reinvestment), and (b) the difference between the share price
at the beginning and at the end of such period, the sum of which is then divided
by the share price at the beginning of such period.
[IPERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
EIS International, Inc. $100 $145.21 $167.12 $175.34 $94.52 $60.27
Nasdaq Stock Market (U.S. Companies) Index $100 $114.79 $112.21 $158.56 $195.17 $239.50
Nasdaq Computer and Data Processing Services
Group Index $100 $105.84 $128.50 $196.02 $241.65 $296.86
</TABLE>
- -------------
(1) Total return calculations for the Nasdaq Stock Market (US Companies) and
Nasdaq Computer and Data Processing Services Group Index were prepared for
Nasdaq by the Center for Research in Securities Prices at the University of
Chicago.
11
<PAGE>
CERTAIN TRANSACTIONS
On February 29, 1996, the Company closed its acquisition of Surefind
Information, Inc. ("Surefind"). Joseph J. Porfeli, the Chairman of the Board of
Directors, Chief Executive Officer and President of the Company was also Chief
Executive Officer of Surefind. Mr. Porfeli owned approximately 18% of the
capital stock of Surefind on a fully diluted basis, for which he paid aggregate
consideration of $690,550. As a result of the acquisition, Mr. Porfeli acquired
94,556 shares of the Company's Common Stock with a value of approximately
$1,702,000 (based upon the value of the Company's Common Stock as set forth in
the Agreement and Plan of Merger between the Company and Surefind). In addition,
in March 1996, the Company made a loan to Mr. Porfeli in the amount of $123,433,
bearing interest at a rate of 9% per annum, in order to help Mr. Porfeli pay
certain taxes incurred by him as a stockholder of Surefind in connection with
the Company's acquisition of Surefind. This loan was repaid in full during 1997.
In February 1997, the Company made a loan to Mr. McGowan in the amount
of $100,000 bearing interest at a rate of 6% per annum and quarterly amounts are
forgiven and included as compensation to Mr. McGowan over the three year term of
the loan. If Mr. McGowan leaves the employ of the Company prior to the end of
the three year term, the balance due at such time must be repaid in full. As of
December 31, 1997, there was $75,584 outstanding under this loan.
In July 1997, the Company made an interest-free loan to Mr. Smith in
the amount of $78,000 as an advance to help defray expenses relating to his
relocation upon joining the Company. This loan was repaid in full in two
installments during the first quarter of 1998.
For additional information regarding transactions between the Company
and its officers or directors, see "Employment, Termination and
Change-in-Control Arrangements" and "Compensation Committee Interlocks and
Insider Participation."
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of January 31, 1998 (except as otherwise noted)
by (i) each person known by the Company to own beneficially more than 5% of the
outstanding Common Stock, (ii) each of the Company's directors, (iii) each of
the Company's executive officers named in the Summary Compensation Table, and
(iv) all of the Company's executive officers and directors as a group.
Name Number(1) Percent
---- --------- -------
Five Percent Stockholders
- -------------------------
Dimensional Fund Advisors Inc.(2) 733,100 6.3%
1299 Ocean Avenue
Santa Monica, CA 90401
Peter Wright(3) 664,500 5.8%
c/o PAW Capital Corp.
10 Glenville Street
Greenwich, CT 06831
Robert M. Jesurum(4) 640,398 5.5%
1 Harborview Drive
Rye, NH 03801
Other Directors
- ---------------
Kent M. Klineman(5) 402,511 3.5%
Charles W. McCall(6) 55,250 *
Robert J. Cresci(7) 11,000 *
James E. McGowan(8) 17,500 *
Other Executive Officers
- ------------------------
Joseph E. Smith, III -- *
Frederick C. Foley 5,210 *
Joseph J. Porfeli(9) 106,025 *
All current executive officers and directors
as a group (7 persons)(10) 1,131,869 9.8%
- ----------------
* Less than 1%
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, if any, the persons named in the table
have sole voting and investment power
13
<PAGE>
with respect to all shares of the Common Stock. In addition, the numbers in
this column do not include options which are not exercisable within 60 days
of January 31, 1998.
(2) Based solely upon a Schedule 13G filed with the Securities and Exchange
Commission on February 10, 1998.
(3) Based solely upon a Schedule 13D filed with the Securities Exchange
Commission on January 16, 1998.
(4) Includes (i) 143,092 shares held by Mr. Jesurum's wife, as to which Mr.
Jesurum disclaims beneficial ownership, (ii) 40,000 shares owned by the
Jesurum 1994 Family Limited Partnership, (iii) 100,000 shares owned by the
Jesurum Charitable Trust and (iv) 1,000 shares issuable upon the exercise
of stock options which are currently exercisable or which are exercisable
within 60 days of January 31, 1998. Mr. Jesurum disclaims beneficial
ownership of all the aforesaid shares held by other members of his family.
(5) Includes (i) 300,000 shares held by Mr. Klineman's wife, as to which Mr.
Klineman disclaims beneficial ownership, and (ii) 1,000 shares issuable
upon exercise of stock options exercisable within 60 days of January 31,
1998.
(6) Includes 19,000 shares issuable upon exercise of stock options which are
currently exercisable or which are exercisable within 60 days of January
31, 1998.
(7) Includes 1,000 shares issuable upon exercise of stock options exercisable
within 60 days of January 31, 1998.
(8) Consists solely of shares issuable upon exercise of stock options which are
currently exercisable or which are exercisable within 60 days of January
31, 1998.
(9) Includes 2,430 shares of common stock issuable upon exercise of a currently
exercisable warrant. Mr. Porfeli resigned from his employment with the
Company in February 1997.
(10) Includes 38,500 shares (including those referred to in the applicable notes
above) issuable upon exercise of stock options held by executive officers
and directors which are currently exercisable or which are exercisable
within 60 days of January 31, 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and regulations of the Securities and Exchange Commission
("SEC") thereunder require the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of initial ownership and changes in ownership
with the SEC and the National Association of Securities Dealers, Inc. Such
officers, directors and ten-percent stockholders are also required by SEC rules
to furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons that no other reports were
required for such persons, the Company believes that, during or with respect to
the period from January 1, 1997 to December 31, 1997, all of its executive
officers, directors and ten-percent stockholders complied with their Section
16(a) filing obligations.
14
<PAGE>
PROPOSAL 2 - APPROVAL OF 1998 STOCK INCENTIVE PLAN
On March 20, 1998, the Board of Directors of the Company adopted,
subject to stockholder approval, the 1998 Stock Incentive Plan (the "1998
Plan"). Up to 500,000 shares of Common Stock (subject to adjustment in the event
of stock splits and other similar events) may be issued pursuant to options or
restricted stock awards granted under the 1998 Plan.
The 1998 Plan is intended to supplement the Company's Amended and
Restated Stock Option Plan, which expires in 2002 and under which only 148,035
shares remained available for new option grants as of December 31, 1997.
The Board of Directors believes that the future success of the Company
depends, in large part, upon the ability of the Company to maintain a
competitive position in attracting, retaining and motivating key personnel.
Accordingly, the Board of Directors believes adoption of the 1998 Plan is in the
best interests of the Company and its stockholders and recommends a vote FOR
this proposal.
Summary of the 1998 Plan
The following is a brief summary of the 1998 Plan.
Description of Awards
The 1998 Plan provides for the grant of incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonstatutory stock options, restricted stock awards and
other stock-based awards, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights (collectively "Awards").
Incentive Stock Options and Nonstatutory Stock Options. Optionees
receive the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the Common Stock on the date of grant. Under present law, however,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Code may not be granted at an exercise
price less than the fair market value of the Common Stock on the date of grant
(or less than 110% of the fair market value in the case of incentive stock
options granted to optionees holding more than 10% of the voting power of the
Company). Options may not be granted for a term in excess of ten years. The 1998
Plan permits the Board to determine the manner of payment of the exercise price
of options, including through payment by cash, check or in connection with a
"cashless exercise" through a broker, by surrender to the Company of shares of
Common Stock, by delivery to the Company of a promissory note, or by any other
lawful means.
Restricted Stock Awards. Restricted Stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
Other Stock-Based Awards. Under the 1998 Plan, the Board has the right
to grant other Awards based upon the Common Stock having such terms and
conditions as the Board may determine, including the grant of shares based upon
certain conditions, the grant of securities convertible into Common Stock and
the grant of stock appreciation rights.
15
<PAGE>
Eligibility to Receive Awards
Officers, employees, directors, consultants and advisors of the Company
and its subsidiaries are eligible to be granted Awards under the 1998 Plan.
Under present law, however, incentive stock options may only be granted to
employees. The maximum number of shares with respect to which an Award may be
granted to any participant under the 1998 Plan may not exceed 100,000 shares per
calendar year.
As of December 31, 1997, approximately 400 persons were eligible to
receive Awards under the 1998 Plan, including the Company's three executive
officers and four non-employee directors. The granting of Awards under the 1998
Plan is discretionary, and the Company cannot now determine the number or type
of Awards to be granted in the future to any particular person or group.
On January 30, 1998, the last reported sale price of the Company Common
Stock on the Nasdaq National Market was $6.75.
Administration
The 1998 Plan is administered by the Board of Directors. The Board has
the authority to adopt, amend and repeal the administrative rules, guidelines
and practices relating to the 1998 Plan and to interpret the provisions of the
1998 Plan. Pursuant to the terms of the 1998 Plan, the Board of Directors may
delegate authority under the 1998 Plan to one or more committees of the Board.
The Board has authorized the Compensation Committee to administer certain
aspects of the 1998 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 1998 Plan, the
Board of Directors, the Compensation Committee, or any other committee or
executive officer to whom the Board delegates authority, as the case may be,
selects the recipients of Awards and determines (i) the number of shares of
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of options,
and (iv) the number of shares of Common Stock subject to any restricted stock or
other stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
The Board of Directors is required to make appropriate adjustments in
connection with the 1998 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event or earlier Acceleration Time (each, as
defined in the 1998 Plan), each outstanding Option or other stock-based Award
shall become immediately exercisable (or vested) in full. Upon the occurrence of
an Acquisition Event, the Board of Directors shall provide for outstanding
Options or other stock-based Awards to be assumed or substituted for by the
acquiring or succeeding corporation. If the acquiring or succeeding corporation
does not agree to assume or substitute for such Options or other stock-based
Awards, the Board of Directors shall accelerate the Awards to make them fully
exercisable prior to consummation of the Acquisition Event or to provide for a
cash out of the value of any outstanding options. If any Award expires or is
terminated, surrendered, canceled or forfeited, the unused shares of Common
Stock covered by such Award will again be available for grant under the 1998
Plan.
Amendment or Termination
No Award may be made under the 1998 Plan after March 20, 2008, but
Awards previously granted may extend beyond that date. The Board of Directors
may at any time amend, suspend or terminate the 1998 Plan, except that no Award
designated as subject to Section 162(m) of the Code by the Board of Directors
after the date of such amendment shall become exercisable, realizable or vested
(to the extent such amendment was required to grant such Award) unless and until
such amendment shall have been approved by the Company's stockholders.
16
<PAGE>
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1998 Plan and with respect to the sale of Common Stock acquired under the 1998
Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the
grant or exercise of an incentive stock option. Instead, a participant will
recognize taxable income with respect to an incentive stock option only upon the
sale of Common Stock acquired through the exercise of the option ("ISO Stock").
The exercise of an incentive stock option, however, may subject the participant
to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price
prior to having owned it for at least two years from the Grant Date and one year
from the Exercise Date (a "Disqualifying Disposition"), then all or a portion of
the gain recognized by the participant will be ordinary compensation income and
the remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then
the participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonstatutory Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis
equal to the exercise price plus any income recognized upon the exercise of the
option. Upon selling NSO Stock, a participant generally will recognize capital
gain or loss in an amount equal to the excess of the sale price of the NSO Stock
over the participant's tax basis in the NSO Stock. This capital gain or loss
will be a long-term gain or loss if the participant has held the NSO Stock for
more than one year prior to the date of the sale.
17
<PAGE>
Restricted Stock Awards
A participant will not recognize taxable income upon the grant of a
restricted stock Award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary income, for the year in which the Award is
granted, in an amount equal to the difference between the fair market value of
the Common Stock at the time the Award is granted and the purchase price paid
for the Common Stock. If a Section 83(b) Election is not made, the participant
will recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The participant will have a basis in
the Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a
restricted stock Award, the participant will recognize a capital gain or loss
equal to the difference between the sale price of the Common Stock and the
participant's basis in the Common Stock. The gain or loss will be a long-term
gain or loss if the shares are held for more than one year. For this purpose,
the holding period shall begin just after the date on which the forfeiture
provisions or restrictions lapse if a Section 83(b) Election is not made, or
just after the Award is granted if a Section 83(b) Election is made.
Other Stock-Based Awards
The tax consequences associated with any other stock-based Award
granted under the 1998 Plan will vary depending on the specific terms of such
Award. Among the relevant factors are whether or not the Award has a readily
ascertainable fair market value, whether or not the Award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the Award and the participant's holding
period and tax basis for the Award or underlying Common Stock.
Maximum Income Tax Rates on Capital Gain and Ordinary Income
Long-term capital gain will be taxable at a maximum rate of 20% if
attributable to Common Stock held for more than eighteen months and at a maximum
rate of 28% if attributable to Common Stock held for more than one year but not
more than eighteen months. Short-term capital gain and ordinary income will be
taxable at a maximum rate of 39.6%. Phaseouts of personal exemptions and
reductions of allowable itemized deductions at higher levels of income may
result in slightly higher marginal tax rates. Ordinary compensation income will
also be subject to a medicare tax and, under certain circumstances, a social
security tax.
Tax Consequences to the Company
The grant of an Award under the 1998 Plan will have no tax consequences
to the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 1998 Plan will have
any tax consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1998 Plan, including in connection
with a restricted stock Award or as a result of the exercise of a nonstatutory
stock option or a Disqualifying Disposition. Any such deduction will be subject
to the limitations of Section 162(m) of the Code. The Company will have a
withholding obligation with respect to any ordinary compensation income
recognized by participants under the 1998 Plan who are employees or otherwise
subject to withholding in connection with a restricted stock Award or the
exercise of a nonstatutory stock option.
18
<PAGE>
Vote Required
The approval of the 1998 Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock present and voting at the
Annual Meeting.
The Board recommends a vote FOR this proposal and it is intended that
shares represented by the enclosed form of proxy will be voted in favor of this
proposal unless otherwise specified in such proxy.
PROPOSAL 3 -- APPROVAL OF AN AMENDMENT TO
THE COMPANY'S 1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
On March 20, 1998, subject to stockholder approval, the Board of
Directors of the Company adopted amendments (the "Amendments") to the Company's
1993 Stock Option Plan for Non-Employee Directors (the "Director Plan") (i) to
increase the number of shares of Common Stock issuable under the Director Plan
from 260,000 shares to 310,000 shares and (ii) to amend the Director Plan to
provide for discretionary grants of stock options. The reason for the Amendments
is to have additional shares available for future grants under the Director Plan
(under which there are currently no shares available) and to allow the Board of
Directors or any committee to which it has delegated its authority the
flexibility to grant stock options to those directors who will contribute to the
future success of the Company.
Terms of the Director Plan
The Director Plan provides for grants of nonstatutory stock options to
purchase shares of Common Stock to non-employee directors of the Company. As of
January 31, 1998, the total number of such persons eligible to receive options
under the Director Plan was four. If the Amendments are adopted, the grant of
options under the Director Plan will be discretionary; therefore, the Company
cannot now determine the number of options to be granted in the future to any
particular person. In the event of a merger, consolidation, reorganization or
sale of all or substantially all of the assets of the Company, the holders of
options are treated as if all shares subject to such stock options had been
issued and outstanding prior to such event. The total number of shares of Common
Stock issuable pursuant to options granted under the Director Plan (subject to
adjustment in the event of stock splits and other similar events) is 260,000.
This number would increase to 310,000 upon adoption of the Company's
stockholders of the Amendment. As of January 31, 1998, 42,500 shares had been
issued, 217,500 shares were subject to outstanding options at exercise prices
per share ranging from $5.00 to $12.375 (expiring on dates ranging from December
2003 to April 2007), and no shares were available for future issuance. As of
January 30, 1998, the last reported sale price of the Company Common Stock on
the Nasdaq National Market was $6.75.
The Director Plan is administered by the Compensation Committee of the
Board, whose determinations under the Director Plan are conclusive. The
Compensation Committee has the authority, subject to the terms of the Director
Plan, to interpret the Director Plan; prescribe, amend and rescind rules and
regulations relating to the Director Plan; and make all other determinations and
take all other actions necessary or advisable for the administration of the
Director Plan.
The Director Plan currently provides for the grant to each non-employee
director of the Company of options to acquire up to an aggregate of 30,000
shares of Common Stock, as follows: (i) an option to acquire 26,000 shares of
Common Stock will be granted to each non-employee director on the date on which
such person becomes a member of the Board, and (ii) an option to acquire 1,000
shares of Common Stock will be granted to each non-employee director on the
February 23 next
19
<PAGE>
following the date on which such person becomes a member of the Board, and on
each succeeding anniversary of such February 23 (provided such person remains a
non-employee director on such succeeding anniversary date) through the third
such anniversary date. Each option referred to in clause (i) above will become
exercisable, on a cumulative basis, as to one-quarter of the shares covered by
such option on each February 23 following such date of grant through the fourth
such February 23, except that if a non-employee director fails to attend at
least 75% of the Board meetings in any succeeding calendar year, such person
will automatically forfeit that portion of such option as would otherwise have
become exercisable on the next following February 23 (and that portion of his
option shall cease to be of any further force or effect). Each option referred
to in clause (ii) above is or will be immediately exercisable upon grant. Each
option referred to in this paragraph was or is to be granted at the fair market
value of the Common Stock on the applicable date of grant. If the Amendments are
approved by the stockholders of the Company, the Compensation Committee will
have the authority to determine the number of shares of Common Stock covered by
options, as well as the dates upon which such options shall be granted and
become exercisable.
The exercise price of each option may be paid, as determined by the
Board, in cash or shares of Common Stock having a fair market value equal to the
exercise price. If the total number of shares of Common Stock subject to options
to be granted on a particular date under the Director Plan exceeds the number of
remaining shares available, a pro rata reduction will be made in the number of
shares subject to each such option granted on such date.
Each option will terminate on the tenth anniversary of the date of
grant. Shares obtained upon exercise of an option may not be sold until six
months after the date the option was granted. If an optionee ceases to be a
member of the Board, any options granted to such optionee to the extent not
theretofore exercised will expire three months thereafter (or, if such optionee
ceased to be a member of the Board by reason of his death, six months
thereafter) or, if earlier, on the tenth anniversary of the date of grant;
provided, however, that if the optionee was removed or terminated as a member of
the Board for fraud, dishonesty or intentional misrepresentation in connection
with the optionee's duties as a member of the Board or embezzlement,
misappropriation or conversion of assets or opportunities of the Company or any
of its subsidiaries, any unexercised options held by such optionee will expire
forthwith. No option will be transferable by the optionee other than by will or
the laws of descent and distribution, and each option will be exercisable during
the lifetime of the optionee only by such optionee.
The Board may at any time terminate the Director Plan or from time to
time make such modifications or amendments of the Director Plan as it may deem
advisable; provided, however, that the Board may not, without approval by the
affirmative vote of the holders of a majority of the outstanding shares of the
capital stock of the Company entitled to vote thereon, (i) increase the maximum
number of shares as to which options may be granted under the Director Plan or
(ii) change the class of persons eligible to receive options under the Director
Plan; and provided, further, that the Director Plan may not be amended more than
once every six months other than to comport with certain changes in the law. The
Director Plan (but not options granted thereunder) will terminate on February
23, 2003, unless sooner terminated by the Board. No termination, modification or
amendment of the Director Plan may, without the consent of any person then
holding an option, adversely affect the rights of such person under such option.
For a discussion of the federal income tax consequences of the Director
Plan, please see "Federal Income Tax Consequences -- Nonstatutory Stock Options"
under Proposal 2, above.
20
<PAGE>
Vote Required
The approval of the Amendments requires the affirmative vote of the
holders of a majority of the shares of Common Stock present and voting at the
Annual Meeting.
The Board recommends a vote FOR this proposal and it is intended that
shares represented by the enclosed form of proxy will be voted in favor of this
proposal unless otherwise specified in such proxy.
PROPOSAL 4 -- RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has appointed KPMG Peat Marwick LLP, certified public
accountants ("KPMG"), to serve as the Company's independent accountants for the
year ending December 31, 1998, subject to the ratification by the Company's
stockholders. If the Company's stockholders vote against ratification of the
Board's appointment of independent accountants, the Board will determine what
action is then appropriate. KPMG served as the Company's independent accountants
for the year ended December 31, 1997.
The Company expects a representative of KPMG to be present at the
Annual Meeting, at which time such representative will have the opportunity to
make a statement, if he so desires, and will be available to respond to
appropriate questions.
Vote Required
The ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for 1998 requires the affirmative vote of the
holders of a majority of the shares of Common Stock present and voting at the
Annual Meeting.
The Board recommends a vote FOR this proposal and it is intended that
shares represented by the enclosed form of proxy will be voted in favor of this
proposal unless otherwise specified in such proxy.
STOCKHOLDER PROPOSALS
Stockholders who wish to submit proposals for inclusion in the Proxy
Statement for the Company's Annual Meeting to be held in 1999 must submit the
same to the Company at the Company's principal executive office, 555 Herndon
Parkway, Herndon, Virginia 20170, directed to the attention of the Secretary, on
or before December 9, 1998.
GENERAL
The Company does not know of any other matters that may come before the
Annual Meeting. However, if any other business comes before the Annual Meeting
(including any adjournment thereof), proxies will be voted in accordance with
the discretion of the persons named therein.
21
<PAGE>
All Stockholders are urged to complete, date and sign the accompanying
form of proxy and return it in the enclosed envelope which requires no postage
if mailed in the United States.
By Order of the Board of Directors,
Kent M. Klineman
Secretary
Dated: April 7, 1998
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 INCLUDING FINANCIAL STATEMENTS
AND SCHEDULES THERETO (EXCEPT EXHIBITS) TO EACH OF THE COMPANY'S STOCKHOLDERS
UPON RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED TO THE COMPANY'S OFFICES,
ATTENTION: INVESTOR RELATIONS. REQUESTS FROM BENEFICIAL STOCKHOLDERS MUST SET
FORTH A REPRESENTATION AS TO SUCH OWNERSHIP ON MARCH 6, 1998.
22
<PAGE>
Appendix 1
----------
EIS INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS -- April 28, 1998
The undersigned, having received notice of the meeting and management's
Proxy Statement therefor, and revoking all prior proxies, hereby appoint(s)
James E. McGowan, Frederick C. Foley and Kent M. Klineman, and each of them
(with full power of substitution), as proxies of the undersigned to attend the
Annual Meeting of Stockholders of EIS International, Inc. (the "Company") to be
held on Tuesday, April 28, 1998 and any adjourned sessions thereof, and there to
vote and act upon the following matters in respect of all shares of Common Stock
of the Company which the undersigned would be entitled to vote or act upon, with
all powers the undersigned would possess if personally present.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company in
a fiduciary, custodial or joint capacity or capacities, this proxy is signed by
the undersigned in every such capacity as well as individually.
In their discretion, the named Proxies are authorized to vote upon such
other matters as may properly come before the meeting, or any adjournment
thereof.
1. To elect the following individuals as a Class I Director:
Robert J. Cresci FOR [ ] WITHHOLD AUTHORITY [ ]
2. To approve the 1998 Stock Incentive Plan of the Company, as described in the
accompanying Proxy Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve the amendments to the Company's 1993 Stock Option Plan for
Non-Employee Directors, as described in the accompanying Proxy Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To ratify the appointment of KPMG Peat Marwick LLP as the independent
accountants of the Company for the year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The shares represented by this proxy will be voted as directed by the
undersigned. If no direction is given with respect to any election to office or
any proposal specified above, this proxy will be voted for such election to
office or proposal.
<PAGE>
This proxy is solicited on behalf of the Board of Directors of the Company.
------------------------------------
------------------------------------
Signature(s)
Dated:
------------------------------
Please sign name(s) exactly as appearing hereon. When signing as attorney,
executor, administrator or other fiduciary, please give your full title as such.
Joint owners should each sign personally. If a corporation, sign in full
corporate name, by authorized officer. If a partnership, please sign in
partnership name, by authorized person.
<PAGE>
APPENDIX 2
----------
EIS INTERNATIONAL, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 1998 Stock Incentive Plan (the "Plan") of EIS
International, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of EIS International, Inc. as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder (the "Code").
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other
stock-based awards (each, an "Award") under the Plan. Any person who has been
granted an Award under the Plan shall be deemed a "Participant".
3. Administration, Delegation
(a) Administration by Board of Directors. The Plan will be administered
by the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
<PAGE>
(b) Appointment of Committees. To the extent permitted by applicable
law, and except as otherwise provided in the next sentence, the Board may
delegate any or all of its powers under the Plan to one or more committees or
subcommittees of the Board (a "Committee"). For so long as the common stock,
$.01 par value per share, of the Company (the "Common Stock") is registered
under the Securities Exchange Act of 1934 (the "Exchange Act"), if the Board
elects to appoint and delegate its powers hereunder to such a Committee, such
Committee shall be composed of not less than two members, each member of which
shall be an "outside director" within the meaning of Section 162(m) of the Code
and a "non-employee director" as defined in Rule 16b-3 promulgated under the
Exchange Act." All references in the Plan to the "Board" shall mean the Board or
a Committee of the Board or the executive officer referred to in Section 3(b) to
the extent that the Board's powers or authority under the Plan have been
delegated to such Committee or executive officer.
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 4(c), Awards
may be made under the Plan for up to 500,000 shares of Common Stock. If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Award shall
again be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options (as hereinafter defined), to any limitation
required under the Code. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 4(c),
the maximum number of shares with respect to which an Award may be granted to
any Participant under the Plan shall be 100,000 per calendar year. The
per-participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
(c) Adjustment to Common Stock. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to each outstanding Restricted Stock Award, and (iv) the terms
of each other outstanding stock-based Award shall
-2-
<PAGE>
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 4(c)
applies and Section 8(e)(1) also applies to any event, Section 8(e)(1) shall be
applicable to such event, and this Section 4(c) shall not be applicable.
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option@ as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement, provided that no option shall be granted for a term
in excess of 10 years.
(e) Exercise of Option. Options may be exercised only by delivery to
the Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of
an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise provide in an Option
Agreement, (i) by delivery of an irrevocable and unconditional undertaking by a
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<PAGE>
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price, or delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price,
(ii) by delivery of shares of Common Stock owned by the Participant valued at
the fair market value of such shares of Common Stock on the date of grant as
determined in good faith by the Board (the "Fair Market Value"), which Common
Stock was owned by the Participant at least six months prior to such delivery,
or (iii) by payment of such other lawful consideration as the Board may
determine;
(3) to the extent permitted by the Board and explicitly provided in
an Option Agreement (i) by delivery of a promissory note of the Participant to
the Company on terms determined by the Board together with an amount in cash at
least equal to the aggregate par value per share of the shares being purchased;
or
(4) any combination of the above permitted forms of payment.
6. Restricted Stock
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award"). Any
such Award shall require the recipient to pay cash for such shares in an amount
at least equal to the aggregate par value per share of such shares.
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
-4-
<PAGE>
7. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Common Stock and the grant of stock appreciation
rights.
8. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
(b) Documentation. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each
type of Award may be made alone or in addition or in relation to any other type
of Award. The terms of each type of Award need not be identical, and the Board
need not treat Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Acquisition Events
(1) Consequences of Acquisition Events. Each Option or other Award
shall include a provision to the extent that such Option or Award shall become
immediately exercisable (or vested) in full upon an Acquisition Event or
earlier Acceleration Time (as both terms are defined below). Upon the occurrence
of an Acquisition Event, or the execution by the Company of any agreement with
respect to an Acquisition Event, the Board shall provide that outstanding
Options shall be assumed, or equivalent Options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), provided that any
such Options substituted for Incentive Stock Options shall satisfy, in the
determination of the Board, the requirements of Section 424(a) of the Code.
Notwithstanding the foregoing, if the acquiring or succeeding corporation does
not agree to assume, or substitute for, such Options, then the Board shall (i)
upon written
-5-
<PAGE>
notice to the Participants, provide that all then unexercised Options will
become exercisable in full as of a specified time (the "Acceleration Time")
prior to the Acquisition Event and will terminate immediately prior to the
consummation of such Acquisition Event, except to the extent exercised by the
Participants between the Acceleration Time and the consummation of such
Acquisition Event; (ii) in the event of an Acquisition Event under the terms of
which holders of Common Stock will receive upon consummation thereof a cash
payment for each share of Common Stock surrendered pursuant to such Acquisition
Event (the "Acquisition Price"), provide that all outstanding Options shall
terminate upon consummation of such Acquisition Event and each Participant shall
receive, in exchange therefor, a cash payment equal to the amount (if any) by
which (A) the Acquisition Price multiplied by the number of shares of Common
Stock subject to such outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such Options; (iv) provide that all
Restricted Stock Awards then outstanding shall become free of all restrictions
prior to the consummation of the Acquisition Event; and (v) provide that any
other stock-based Awards outstanding (A) shall become exercisable, realizable or
vested in full, or shall be free of all conditions or restrictions, as
applicable to each such Award, prior to the consummation of the Acquisition
Event, or (B), if applicable, shall be assumed, or equivalent Awards shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof).
An "Acquisition Event" shall mean: (a) any merger or consolidation
which results in the voting securities of the Company outstanding immediately
prior thereto representing immediately thereafter (either by remaining
outstanding or by being converted into voting securities of the surviving or
acquiring entity) less than 50% of the combined voting power of the voting
securities of the Company or such
-6-
<PAGE>
surviving or acquiring entity outstanding immediately after such merger or
consolidation; (b) any sale of all or substantially all of the assets of the
Company; (c) the complete liquidation of the Company; or (d) the acquisition of
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities (other than through a merger or
consolidation or an acquisition of securities directly from the Company) by any
"person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act
other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company.
(2) Assumption of Options Upon Certain Events. The Board may grant
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(f) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(h) Conditions on Delivery of Stock. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws
-7-
<PAGE>
and any applicable stock exchange or stock market rules and regulations, and
(iii) the Participant has executed and delivered to the Company such
representations or agreements as the Company may consider appropriate to satisfy
the requirements of any applicable laws, rules or regulations.
(i) Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of all restrictions or that any other stock-based
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
9. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant designated as subject to Section 162(m) by the Board shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders. No Awards shall be
granted under the Plan after the completion of ten years from the earlier of (i)
the date on which the Plan was adopted by the Board or (ii) the date the Plan
was approved by the Company's stockholders, but Awards previously granted may
extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to Section 162(m) by the Board after the date
of such amendment shall become exercisable, realizable or vested, as applicable
to such Award (to the extent that such amendment to the Plan was required to
grant such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders.
-8-
<PAGE>
(e) Stockholder Approval. For purposes of this Plan, stockholder
approval shall mean approval by a vote of the stockholders in accordance with
the requirements of Section 162(m) of the Code.
(f) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Approved by the Board of Directors on
March 20, 1998
[Approved by the Stockholders on
April 28, 1998]
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<PAGE>
APPENDIX 3
----------
EIS INTERNATIONAL, INC.
1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purposes.
This 1993 Stock Option Plan for Non-Employee Directors (the
"Plan") is intended to attract and retain the services of experienced and
knowledgeable non-employee directors of EIS International, Inc. (the "Company")
and to increase their proprietary interests in the Company's long term success.
The above aims will be effectuated through the granting of certain stock
options. Under the Plan, options will be granted which are not intended to
qualify as Incentive Stock Options under Section 422 of the Internal Revenue
Code of 1986 (the "Code").
2. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors
of the Company (the "Board of Directors"), as the Board of Directors may be
composed from time to time, except as provided in subparagraph (b) of this
Paragraph 2. The determinations of the Board of Directors under the Plan,
including without limitation their determinations as to matters referred to in
this Paragraph 2, shall be conclusive. Any determination by a majority of the
members of the Board of Directors at any meeting, or by written consent in lieu
of a meeting, shall be deemed to have been made by the whole Board of Directors.
Within the limits of the express provisions of the Plan, the Board of Directors
shall have the authority, in its discretion, to take the following actions under
the Plan:
(i) to interpret the Plan,
(ii) to prescribe, amend and rescind rules and regulations
relating to the Plan, and
(iii) to make all other determinations and take all other
actions necessary or advisable for the administration of
the Plan.
(b) Notwithstanding anything to the contrary contained herein,
the Board of Directors may at any time, or from time to time, appoint a
committee (the "Committee") of at least two members of the Board of Directors,
and delegate to the Committee the authority of the Board of Directors to
administer the Plan. Upon such appointment and delegation, the Committee shall
be substituted for, and have all the powers, privileges and duties of, the Board
of Directors in the administration of the Plan, except that the power to appoint
members of the Committee and to terminate, modify or amend the Plan shall be
retained by the Board of Directors. The Board of Directors may from time to time
appoint members of the Committee in substitution
<PAGE>
for or in addition to members previously appointed, may fill vacancies in the
Committee and may discharge the Committee. A majority of the Committee shall
constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members. Any determination reduced to writing and signed by a
majority of the members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held.
3. Shares Subject to the Plan.
There shall be a total of 260,0001 shares of the Company's
Common Stock, par value $.01 ("Common Shares"), which shall be available for
options granted under the Plan ("Options"), subject to adjustment as provided in
Paragraph 7. The Company shall at all times while the Plan is in force reserve
for authorized and unissued Common Shares or reacquired Common Shares or any
combination thereof. The unexercised portion of any expired, terminated or
canceled Option shall again be available for the grant of Options under the
Plan.
4. Eligibility.
(a) Each member of the Board of Directors who is not an
employee of the Company or any of its subsidiaries (a "Non-Employee Director")
on the date on which any Option is granted to such member pursuant to this
Paragraph 4(a) shall be granted Options (which shall not comply with the
requirements of Section 422 of the Code) in accordance with the following
formula: (i) an Option to acquire 26,000 Common Shares shall be granted on the
Grant Date (defined below) at the Exercise Price (defined below) and such Option
shall become exercisable as to 6,500 such Common Shares on the February 23 next
following such Grant Date and as to an additional 6,500 such Common Shares on
each February 23 thereafter through the fourth such February 23 and (ii) an
Option to acquire 1,000 Common Shares shall be granted, on the February 23 next
following the Grant Date and on each anniversary of such February 23 through the
fourth such February 23 next following the Grant Date, at the Exercise Price,
and such Options shall be exercisable immediately upon grant. Notwithstanding
the foregoing, commencing with the 1994 calendar year, if a Non-Employee
Director fails to attend at least 75% of the Board of Directors meetings in any
calendar year while he is a director, such person shall automatically forfeit
his right to exercise that portion of the Option provided for in clause (i)
above that would have otherwise become exercisable on the next following
February 23 and such portion of his Option shall cease to be of any force or
effect. For purposes of this Paragraph 4(a), "Grant Date" means (x) December 21,
1993 with respect to each Non-
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(1) If the Amendments are adopted, this number will increase to 310,000.
2
<PAGE>
Employee Director serving in such capacity on such date and (y) the date of his
election to the Board of Directors after December 21, 1993 with respect to each
Non-Employee Director who was not serving in such capacity on December 21, 1993;
and "Exercise Price" means (x) the Fair Market Value of the Common Shares on the
respective Grant Dates with respect to each Option granted pursuant to clause
(i) above and (y) the Fair Market Value of the Common Shares on each date of
grant with respect to Options granted pursuant to clause (ii) above. Each
individual for whom an Option is granted hereunder is referred to herein as an
"Optionee."2
(b) If on any date when Options are to be granted pursuant to
subparagraph (a) of this Paragraph 4 the total number of Common Shares as to
which Options are to be granted exceeds the number of Common Shares remaining
available under the Plan, there shall be a pro rata reduction in the number of
Common Shares as to which each Option is granted on such day.
(c) Nothing contained in the Plan shall be construed to limit
the right of the Company to grant options otherwise than under the Plan for
proper corporate purposes.
5. Terms of Options.
The terms of each Option granted under the Plan shall be
determined by the Board of Directors consistent with the provisions of the Plan,
including the following:
(a) "Fair Market Value" shall mean the mean of the highest and
lowest trading prices or the high bid and low asked prices of the Common Shares
as officially reported on the relevant date (or if there were no sales on such
date, on the next preceding date on which such prices were recorded) by the
principal national securities exchange on which the Common Shares are listed or
admitted to trading, or, if the Common Shares are not listed or admitted to
trading on any such national securities exchange, the mean of the highest and
lowest trading prices or the high bid and low asked prices of the Common Shares
as furnished by the National Association of Securities Dealers through NASDAQ or
a similar organization if NASDAQ is no longer reporting such information, or, if
the Common Shares are not quoted on NASDAQ, as determined in good faith by
resolution of the Board of Directors (whose determination shall be conclusive),
based on the best information available to it.
(b) Each Option shall be vested and exercisable in whole or in
part at any time and from time to time, subject to stockholder approval of the
Plan.
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(2) If the Amendments are adopted, Section 4(a) will read in its entirety
as follows: "Notwithstanding anything in the Plan to the contrary, the
Board of Directors may grant options under the Plan to eligible
directors at such times, in such amounts and on such vesting terms as
it deems appropriate."
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(c) Common Shares obtained upon exercise of an Option may not
be sold until six months after the date the Option was granted.
(d) Each Option shall be exercisable for ten years after the
granting thereof. Each Option shall be subject to earlier termination as
expressly provided in Paragraph 6 hereof.
(e) Options shall be exercised by the delivery to the Company
at its principal office, or at such other address as may be established by the
Board of Directors, of written notice of the number of Common Shares with
respect to which the Option is being exercised, accompanied by payment in full
of the purchase price of such Common Shares. Payment for such Common Shares may
be made (i) in cash, (ii) by certified check or bank cashier's check payable to
the order of the Company in the amount of such purchase price, (iii) by delivery
of capital stock of the Company having a fair market value (determined on the
date of exercise in accordance with the provisions of subparagraph (a) of this
Paragraph 5) equal to said purchase price, or (iv) by any combination of the
methods of payment described in (i) through (iii) above.
(f) An Optionee shall not have any of the rights of a
shareholder with respect to Common Shares subject to an Option until such shares
are issued upon the exercise of such Option as provided herein.
(g) An Option shall not be transferable, except by will or the
laws of descent and distribution. An Option may be exercised during the lifetime
of the Optionee only by the Optionee. No Option granted under the Plan shall be
subject to execution, attachment or other process.
6. Death or Termination of Director Status.
(a) If an Optionee ceases to be a member of the Board of
Directors for any reason other than the death of the Optionee, all unexercised
Options held by the Optionee shall expire three months after the Optionee ceases
to be a member of the Board of Directors, subject to the provisions of
subparagraph (c) of this Paragraph 6; provided, however, that if the Optionee is
removed, withdraws or otherwise ceases to be a member of the Board of Directors
due to the Optionee's fraud, dishonesty or intentional misrepresentation in
connection with the duties of the Optionee as a member of the Board of Directors
or the Optionee's embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any of its subsidiaries, all unexercised Options
held by such Optionee shall expire forthwith.
(b) If an Optionee dies while a member of the Board of
Directors, any unexercised Options held by such Optionee at the date of the
Optionee's death may be exercised at any time within six months thereafter,
subject to the provisions
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of subparagraph (c) of this Paragraph 6.
(c) An Option shall expire on the tenth anniversary of the
date it was granted and may not be exercised after such anniversary.
7. Adjustment upon Changes in Capitalization.
(a) In the event that the outstanding Common Shares are
hereafter changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination or exchange of
shares and the like, or dividends payable in Common Shares, an appropriate
adjustment shall be made by the Board of Directors in the aggregate number of
shares available under the Plan and in the number of shares and price per share
subject to outstanding Options as shall be necessary to maintain the
proportionate interests of each Optionee and preserving without exceeding the
value of such Options. If the Company shall be reorganized, consolidated, or
merged with another corporation, or if all or substantially all of the assets of
the Company shall be sold or exchanged, an Optionee shall be entitled to receive
upon the exercise of an Option the same number and kind of shares of stock or
the same amount of property, cash or securities as the Optionee would have been
entitled to receive upon the occurrence of any such corporate event if the
Optionee had been, immediately prior to such event, the holder of the number of
shares as to which the Option is exercised.
(b) Any adjustment under this Paragraph 7 in the number of
Common Shares subject to Options shall apply only to the unexercised portion of
any Option outstanding as of the time of the event triggering such adjustment.
Any fraction of a share resulting from any such adjustment, shall be
disregarded.
8. Further Conditions of Exercise.
(a) Unless prior to the exercise of an Option the Common
Shares issuable upon such exercise are the subject of a registration statement
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), and there is then in effect a
prospectus filed as part of such registration statement meeting the requirements
of Section 10(a)(3) of the Securities Act, the notice of exercise with respect
to such Option shall be accompanied by a representation or agreement of the
Optionee to the Company to the effect that such shares are not being acquired
for distribution, or such other documentation as may be required by the Company,
unless, in the opinion of counsel to the Company, such representation, agreement
or documentation is not necessary to comply with the Securities Act.
(b) Anything in the Plan to the contrary notwithstanding, the
Company shall not be obligated to issue or sell any Common Shares until they
have
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been listed on each securities exchange on which the Common Shares may then be
listed and until and unless, in the opinion of counsel to the Company, the
Company may issue such shares pursuant to a qualification or an effective
registration statement, or an exemption from registration, under such state and
federal laws, rules or regulations as such counsel may deem applicable. The
Company shall use reasonable efforts to effect such listing, qualification and
registration, as the case may be.
9. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the
Plan) shall terminate ten years from the earlier of the date of its adoption by
the Board of Directors or the date on which the Plan is approved by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon. No Option shall be
granted after termination of the Plan.
(b) The Board of Directors may at any time terminate the Plan
or from time to time make such modifications or amendments of the Plan as it may
deem advisable; provided, however, that the Board of Directors shall not without
approval by the affirmative vote of the holders of a majority of the outstanding
shares of the capital stock of the Company entitled to vote thereon, (i)
increase (except as provided in Paragraph 7 hereof) the maximum number of Common
Shares as to which Options may be granted under the Plan or (ii) change the
class of persons eligible to receive Options under the Plan; and provided,
further, that the Plan may not be amended more than once every six months other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
(c) No termination, modification or amendment of the Plan may
adversely affect the rights conferred by any Option without the consent of the
Optionee.
10. Effectiveness of the Plan.
The Plan shall become effective upon adoption by the Board of
Directors, subject to approval of the Plan by the affirmative vote of the
holders of a majority of the outstanding shares of the capital stock of the
Company entitled to vote thereon within one year following adoption of the Plan
by the Board of Directors. All Options granted prior to such approval by the
stockholders shall be subject to such approval and shall not be exercisable
prior thereto. In the event such approval is not obtained within such one-year
period, the Plan and all Options granted thereunder shall be null and void.
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11. No Rights of Directors.
Nothing contained in the Plan or in any stock option agreement
executed pursuant to the Plan shall be deemed to confer upon any individual to
whom an Option is or may be granted any right to remain a member of the Board of
Directors or to be nominated for election as a member of the Board of Directors.
