Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
EIS INTERNATIONAL, INC.
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
-------------------------------------------------------------------------
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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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 May 5, 1999
- -------------------------------------------------------------------------------
April 5, 1999
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 Wednesday, May 5, 1999 at 10:00
a.m., local time, for the purposes set forth below.
1. To elect (i) three Class I Directors to serve for a three-year term
expiring in 2002 or at such time as their respective successors have
been duly elected and qualified and (ii) one Class III Director to
serve for the remaining term of such class expiring in 2001 or at such
time as his successor is duly elected and qualified.
2. To approve an amendment to the Company's 1993 Stock Option Plan for
Non-Employee Directors increasing the number of shares of the Company's
Common Stock issuable under said plan by 100,000.
3. To ratify the appointment of KPMG LLP as the independent accountants of
the Company for the year ending December 31, 1999.
4. 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 12, 1999 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 5, 1999
FOR ANNUAL MEETING OF STOCKHOLDERS
to be held on May 5, 1999
------------------------------
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 May
5, 1999 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 5, 1999.
Only holders of record of Common Stock, $.01 par value, of the Company
("Common Stock") at the close of business on March 12, 1999 will be entitled to
notice of and to vote at the Annual Meeting. As of the close of business on
March 12, 1999, the Company had outstanding 10,914,360 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 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, 1998
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. If all of the
nominees for election as a dirctor are elected at the Annual Meeting, the Board
will consist of seven directors, divided into two class of two directors each
and one class of three directors. The term of the current Class I Directors will
expire at the Annual Meeting. The terms of the current Class II and Class III
Directors will expire in 2000 and 2001, respectively, at such times as their
respective successors are duly elected and qualified. 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 (i) three Class I Directors to serve until the annual meeting of the
Company's stockholders to be held in 2002 and (ii) one Class III Director to
serve until the annual meeting of the Company's stockholders to be held in 2001
and, in each case, 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. All of the nominees
except Messrs. Burton and Foreman are currently directors of the Company.
The nominees have indicated their willingness to serve if elected;
however, if any of the nominees 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 nominees will not be candidates at the Annual Meeting and
therefore does not at this time have in mind any substitute for any of the
nominees.
There are no family relationships between any of the Company's
directors and executive officers.
Nominees 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, 1999, appears
below under the heading "Security Ownership of Certain Beneficial Holders and
Management."
Class I Directors (terms expire at the Annual Meeting):
<TABLE>
<CAPTION>
Name Age Principal Occupation(s)
---- --- -----------------------
<S> <C> <C>
Robert M. Jesurum 57 Founder of the Company and Private
Consultant (1)
Charles W. McCall 54 President and Chief Executive Officer of
McKesson HBOC, Inc. (1)
John F. Burton 47 Managing Director, Updata Capital, Inc.
</TABLE>
- ---------------
(1) Member of the Compensation Committee
2
<PAGE>
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.
Mr. McCall has been Chairman of the Board of Directors and Chief Executive
Officer of McKesson HBOC, Inc. since January 1999. He had been President, Chief
Executive Officer and a director of HBO & Company, a company in the business of
providing software in the medical field from January 1991 to January 1999, at
which time HBO & Company merged with McKesson, Inc. to form McKesson HBOC, Inc.
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. Mr. McCall serves on the board of directors of WestPoint
Stevens, Inc., a publicly-held company.
John F. Burton has been a Managing Director of Updata Capital, Inc., an
investment banking firm, since 1997. From 1995 to March 1997, Mr. Burton was the
Managing Director of Burton Technology Partners, Ltd. From September 1995 to
September 1996, Mr. Burton was Chief Executive Officer of Nat Systems
International, Inc. From 1990 through January 1995, Mr. Burton served as
President, Chief Executive Officer, Chief Operating Officer and a director of
LEGENT Corporation. Mr. Burton serves as a director of Banyan Systems, Inc.,
Treev, Inc., and MapInfo Corporation, all publicly-held companies.
Class III Director (term expires at the 2001 Annual Meeting)
<TABLE>
<S> <C> <C>
Peter B. Foreman 63 President, Sirius Corporation
</TABLE>
Peter B. Foreman has been the President of Sirius Corporation, an
investment management firm which he founded since 1994. From 1976 to 1994, Mr.
Foreman was a founding partner of Harris Associates L.P., an investment advisory
firm. Mr. Foreman continues to manage Hesperus Partners, Ltd., a partnership
focusing on value-oriented investing. He is a member of the boards of directors
of Glacier Water Services, Inc. and Eagle Food Centers, Inc., both publicly-held
companies.
Vote Required
The election of each of the nominees for director requires the
affirmative vote of a plurality of the votes cast by holders of shares of Common
Stock present and voting at the Annual Meeting.
The Board recommends a vote FOR the election of each nominee and it is
intended that shares represented by the enclosed form of proxy will be voted in
favor of each nominee unless otherwise specified in such proxy.
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, occupations and other directorships
has been furnished to the Company by the individuals named.
3
<PAGE>
Class II Directors (terms expire at the 2000 Annual Meeting):
<TABLE>
<CAPTION>
Name Age Principal Occupation(s)
---- --- -----------------------
<S> <C> <C>
Kent M. Klineman 66 Secretary of the Company; Attorney and Private
Investor (1)(2)
James E. McGowan 55 President and Chief Executive Officer of the Company
</TABLE>
- --------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Kent M. Klineman has been a director since June 1988. He also served as
Treasurer of the Company from June 1988 until December 1989 and has served as
Secretary since June 1988. He is an attorney and private investor and serves as
a director of a number of closely held companies. He is also a director of
Concord Camera Corp., a publicly held corporation.
James E. McGowan has been EIS' Chief Executive Officer, President 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.
Other Class III Director (term expires at the 2001 Annual Meeting):
<TABLE>
<CAPTION>
Name Age Principal Occupation(s)
---- --- -----------------------
<S> <C> <C>
Robert J. Cresci 54 Chairman of the Board of Directors of the
Company; Managing Director of Pecks
Management Partners Ltd. ("Pecks") (1)
</TABLE>
- ---------------
(1) Member of the Audit Committee
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. Mr. Cresci currently serves on the boards
of directors 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 companies, as well as
several private companies.
4
<PAGE>
Meetings of the Board and Committees of the Board
During 1998, the Board held six meetings. The Board has an Audit
Committee and a Compensation Committee. During 1998, the Audit Committee held
four meetings and the Compensation Committee held five 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 (which was increased to $1,500 for meetings after January 1999) 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 of stock options to non-employee directors at such
times, in such amounts and on such vesting terms as the Board may determine.
5
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation of the Company's Chief Executive Officer and the
four other executive officers whose total annual salary and bonus for 1998
exceeded $100,000 (collectively, 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 1998 $300,000 $125,000 (2) 50,000 $ 49,663
President and Chief Executive 1997 268,447 125,000 (2) 150,000 62,103
Officer 1996 178,042 -- (2) -- 17,612
Frederick C. Foley 1998 $180,000 $ 63,000 (2) 25,000 $ 5,287
Senior Vice President, Finance, 1997 152,832 52,000 (2) 60,000 26,425
Chief Financial Officer and 1996 139,182 -- (2) 5,000 2,163
Treasurer
Edward J. Sarkisian(4) 1998 $164,600 $ 33,000 (2) -- $ 4,667
Senior Vice President,
Worlwide Sales, Marketing,
Customer Operations
Jonathan M. Wineberg(4) 1998 $165,400 $ 32,000 (2) 48,000 $ 94,379
Senior Vice President,
Engineering and Product
Development
Joseph E. Smith(5) 1998 $146,900 $ -- (2) 25,000 $147,028
Former Senior Vice President, 1997 129,079 34,000 (2) 75,000 63,334
Worldwide Sales and
Marketing
</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) For 1998, represents premiums paid by EIS with respect to group term
life insurance for the benefit of the Named Executive Officer, and (i)
with respect to Mr. McGowan, $37,428 of loan forgiveness, and a $2,000
401(k) matching contribution; (ii) with respect to Mr. Foley, a $2,000
401(k) matching contribution; (iii) with respect to Mr. Sarkisian, a
$2,000 401(k) matching contribution; (iv) with respect to Mr. Wineberg,
$92,379 for relocation expenses and a $2,000 401(k) matching
contribution; and (v) with respect to Mr. Smith, $55,874 for relocation
expenses and $91,154 as severance.
6
<PAGE>
(4) Mr. Wineberg and Mr. Sarkisian became executive officers of EIS in
1998. Accordingly, no information is provided for 1996 and 1997.
(5) Mr. Smith joined EIS in 1997. Accordingly, no information is provided
for 1996. Mr. Smith resigned from EIS in August 1998.
1998 Option Information
Option Grants in 1998
The following table summarizes certain information regarding options
granted to Named Executive Officers during 1998.
<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 24,000 4.7% $7.00 1/28/08 $105,654 $267,749
26,000 5.1% 6.28125 4/28/08 102,706 260,278
Frederick C. Foley 12,500 2.5% $7.00 1/28/08 $55,028 $139,452
12,500 2.5% 6.28125 4/28/08 49,378 125,134
Edward J. Sarkisian --- --- --- --- --- ---
Jonathan M. Wineberg 11,500 2.3% $7.00 1/28/08 $50,626 $128,296
11,500 2.3% 6.28125 4/28/08 45,428 115,123
25,000 4.9% 2.00 10/22/08 31,445 77,687
Joseph E. Smith 12,500 2.5% $7.00 1/28/08 (2) (2)
12,500 2.5% 6.28125 4/28/08
</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) Mr. Smith's options expired upon his resignation from EIS in 1998.
Accordingly, as of December 31, 1998, there was no potential realizable
value of these options.
7
<PAGE>
Option Exercises in 1998
The following table sets forth the number of options exercised in 1998
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, 1998.
Aggregated Option Exercises in
1998 and 1998 Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options at 1998 Year-End(1)(2)
-------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
<S> <C> <C>
James E. McGowan 37,500 162,500
Frederick C. Foley 15,000 70,000
Edward J. Sarkisian 54,750 56,250
Jonathan M. Wineberg 6,750 68,250
Joseph E. Smith --- ---
</TABLE>
(1) On December 31, 1998, the average of the closing bid and asked prices
per share of Common Stock as reported by the Nasdaq National Market was
$1.688. As of December 31, 1998, none of the Named Executive Officers
held any in-the-money options.
(2) None of the Named Executive Officers exercised options during 1998.
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 financial and operating
results and the accomplishment of certain individual performance goals. Target
bonus levels are set at a level
8
<PAGE>
competitive with companies in the telecommunications and electronics industries
as well as a broader group of companies of comparable size and complexity. The
Company paid performance-related bonuses of $125,000 to Mr. McGowan, $63,000 to
Mr. Foley, $33,000 to Mr. Sarkisian, $32,000 to Mr. Wineberg, and $0 to Mr.
Smith relating to fiscal 1998.
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 1998,
options to purchase an aggregate of 148,000 shares of Common Stock were granted
under the Company's 1998 Stock Incentive Plan to executive officers of the
Company.
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 $119,300 were
made on behalf of all employees in 1998, including $8,000 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. McGowan received total
salary and bonus amounting to $425,000 in 1998 and was awarded options to
purchase 24,000 and 26,000 shares of the Company's Common Stock at exercise
prices of $7.00 and $6.28125, respectively, per share.
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 1999, with a possible bonus equal to up to 50% of his annual
salary, assuming the achievement of certain performance targets, and additional
possible bonus amounts if such performance targets are exceeded. 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. As of December 31, 1998, there
remained $41,875 outstanding under the loan.
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 was paid a retainer of $5,000 per month in consideration of these services,
plus an additional amount for extraordinary services rendered, an aggregate of
$83,000 in respect of services rendered during 1998. The Company believes that
this represented 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. The Company and Mr. Klineman
terminated this arrangement effective January 1, 1999.
9
<PAGE>
Performance of the Common Stock
The following indexed graph indicates the Company's total return to its
stockholders since December 31, 1993 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 $100.00 on December 31,
1993. 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.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
EIS International, Inc. $100.00 $115.09 $120.75 $ 65.09 $ 41.51 $ 12.74
Nasdaq Stock Market (U.S. Companies) Index $100.00 $ 97.75 $138.13 $170.02 $208.64 $293.09
Nasdaq Computer and Data Processing Services $100.00 $121.41 $185.20 $228.31 $280.48 $502.97
Group Index
- -------------
</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.
10
<PAGE>
CERTAIN TRANSACTIONS
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, 1998, there was $41,875 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."
11
<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 28, 1999 (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.
<TABLE>
<CAPTION>
Name Number(1) Percent
---- --------- -------
<S> <C> <C>>
Five Percent Stockholders
- -------------------------
FMR Corp. (2) 1,173,500 10.8%
82 Devonshire Street
Boston, MA 02109
Peter Wright(3) 960,000 8.8%
c/o PAW Capital Corp.
10 Glenville Street
Greenwich, CT 06831
Dimensional Fund Advisors Inc.(4) 723,100 6.6%
1299 Ocean Avenue
Santa Monica, CA 90401
Robert M. Jesurum(5) 624,941 5.7%
1 Harborview Drive
Rye, NH 03801
Talon Asset Management, Inc. (6) 550,000 5.0%
One North Franklin Street, Suite 450
Chicago, IL 60606
Other Directors
- ---------------
Kent M. Klineman(7) 415,323 3.8%
Peter B. Foreman(8) 95,400 *
James E. McGowan(9) 67,500 *
Charles W. McCall(10) 50,500 *
Robert J. Cresci(11) 28,250 *
John F. Burton 0 *
Other Executive Officers
- ------------------------
Edward Sarkisian(12) 54,750 *
Frederick C. Foley(13) 24,724 *
Jonathan Wineberg(14) 10,679 *
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Name Number(1) Percent
---- --------- -------
<S> <C> <C>>
Joseph E. Smith, III 0 *
All current executive officers and directors 1,276,667 11.5%
as a group (8 persons)(15)
</TABLE>
- ----------------
* 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 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 28,
1999. The percentage holdings were calculated on the basis of
10,914,360 shares of Common Stock outstanding as of January 28, 1999.
(2) Based solely upon a Schedule 13G filed with the Securities and Exchange
Commission on December 10, 1999.
(3) Based solely upon a Schedule 13D filed with the Securities Exchange
Commission on February 8, 1999.
(4) Based solely upon a schedule 13G filed with the Securities and Exchange
Commission on February 11, 1998.
(5) Includes (i) 109,154 shares held by Mr. Jesurum's wife, as to which Mr.
Jesurum disclaims beneficial ownership, (ii) 245,000 shares owned by
the Jesurum 1994 Family Limited Partnership, as to which Mr. Jesurum
disclaims beneficial ownership, (iii) 4,600 shares owned by the Robert
Jerusum 1994 Long Term Trust, as to which Mr. Jesurum disclaims
beneficial ownership, and (iv) 14,812 shares issuable upon the exercise
of stock options which are exercisable within 60 days of January 26,
1999. Mr. Jesurum disclaims beneficial ownership of all the aforesaid
shares held by other members of his family.
(6) Talon Asset Management, Inc. is believed by the Company to be a holder
of 5% or more of the Company's Common Stock.
(7) Includes (i) 300,000 shares held by Mr. Klineman's wife, as to which
Mr. Klineman disclaims beneficial ownership, and (ii) 14,812 shares
issuable upon exercise of stock options exercisable within 60 days of
January 28, 1999.
(8) Comprised of (i) 15,000 shares held by the Peter B. Foreman Revocable
Trust, of which Mr. Foreman is the trustee, (ii) 30,000 shares held by
the Foreman Family Investment Company, of which Mr. Foreman is a
general partner, (iii) 40,400 shares held by the Peter and Virginia
Foreman Foundation, a private, non-profit foundation and (iv) 10,000
shares held in Mr. Foreman's IRA account.
(9) Consists solely of shares issuable upon exercise of stock options which
are currently exercisable or which are exercisable within 60 days of
January 28, 1999.
(10) Includes (i) 10,000 shares held by Mr. McCall's nephew, as to which Mr.
McCall disclaims beneficial ownership and (ii) 19,250 shares issuable
upon exercise of stock options which are exercisable within 60 days of
January 28, 1999.
(11) Includes 18,250 shares issuable upon exercise of stock options
exercisable within 60 days of January 28, 1999.
(12) Consists solely of shares issuable upon exercise of stock options which
are currently exercisable or which are exercisable within 60 days of
January 28, 1999.
13
<PAGE>
(13) Includes 18,125 shares issuable upon exercise of stock options which
are exercisable within 60 days of January 28, 1999.
(14) Includes 9,625 shares issuable upon exercise of stock options
exercisable within 60 days of January 28, 1999.
(15) Includes 217,124 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 28, 1999.
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, 1998 to December 31, 1998, all of its executive
officers, directors and ten-percent stockholders complied with their Section
16(a) filing obligations.
PROPOSAL 2 -- APPROVAL OF AN AMENDMENT TO
THE COMPANY'S 1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
On January 28, 1999, subject to stockholder approval, the Board of
Directors of the Company adopted an amendment (the "Amendment") to the Company's
1993 Stock Option Plan for Non-Employee Directors (the "Director Plan") to
increase the number of shares of Common Stock issuable under the Director Plan
from 310,000 shares to 410,000 shares. The reason for the Amendments is to have
additional shares available for future grants under the Director Plan (under
which there are currently 30,000 shares available) 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, 1999, the total number of such persons eligible to receive options
under the Director Plan was four. The grant of options under the Director Plan
is 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 310,000. This number would increase to
410,000 upon adoption of the Company's stockholders of the Amendment. As of
January 31, 1999, 42,500 shares had been issued upon exercise of outstanding
options, 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). As of January 29,
14
<PAGE>
1999, the last reported sale price of the Company Common Stock on the Nasdaq
National Market was $2.188.
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 Compensation Committee also 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, and (iii) the duration
of options.
The exercise price of each option may be paid, as determined by the
Compensation Committee, 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.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under the
Directors' Plan and with respect to the sale of Common Stock acquired under the
Directors' Plan.
15
<PAGE>
Nonstatutory Stock Options
A participant will not recognize taxable income upon the grant of a
nonstatutory 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.
Tax Consequences to the Company
The grant of an option under the Directors' Plan will have no 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 Directors' Plan, as a result of the
exercise of a nonstatutory stock option. Any such deduction will be subject to
the limitations of Section 162(m) of the Code.
Vote Required
The approval of the Amendment 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 -- RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has appointed KPMG LLP, certified public accountants
("KPMG"), to serve as the Company's independent accountants for the year ending
December 31, 1999, 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 LLP served as the Company's independent accountants for the
year ended December 31, 1998.
The Company expects a representative of KPMG LLP 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 LLP as the Company's
independent auditors for 1999 requires the affirmative vote of the holders of a
majority of the shares of Common Stock present and voting at the Annual Meeting.
16
<PAGE>
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.
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying proxy
to vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for their reasonable
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
Subject to the terms and conditions set forth herein, all Proxies
received by the Corporation will be effective, notwithstanding any transfer of
the shares to which such Proxies relate, unless at or prior to the Annual
Meeting the Corporation receives a written notice of revocation signed by the
person who, as of the record date, was the registered holder of such shares. The
Notice of Revocation must indicate the certificate number and number of the
shares to which such revocation relates and the aggregate number of shares
presented by such certificate(s).
Deadline for Submission of Stockholder Proposals for the 2000 Annual Meeting
In order to be included in the Proxy materials for the 2000 Annual
Meeting of Stockholders, Stockholders' proposed resolutions must be received by
the Company at its offices, 555 Herndon Parkway, Herndon, Virginia 20170 on or
before December 3, 1999. The Company suggests that proponents submit their
proposals by certified mail, return receipt requested, addressed to the
Secretary of the Company.
If a Stockholder of the Company wished to present a proposal before the
2000 Annual Meeting of Stockholders, but does not wish to have the proposal
considered for inclusion in the Company's proxy statement and proxy card, such
Stockholder must also give written notice to the Secretary of the Company at the
address noted above. The Secretary must receive such notice by February 10,
2000. If a Stockholder fails to provide timely notice of a proposal to be
presented at the 2000 Annual Meeting of Stockholders, the proxies designated by
the Board of Directors of the Company will have discretionary authority to vote
on any such proposal.
17
<PAGE>
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.
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 5, 1999
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 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 12, 1999.
18
<PAGE>
Appendix 1
EIS INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS -- May 5, 1999
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 Carl Mergele, 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
Wednesday, May 5, 1999 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 Class I Directors:
<TABLE>
<S> <C> <C>
Robert M. Jesurum FOR [ ] WITHHOLD AUTHORITY [ ]
Charles W. McCall FOR [ ] WITHHOLD AUTHORITY [ ]
John F. Burton FOR [ ] WITHHOLD AUTHORITY [ ]
To elect the following individual as a Class III Director:
Peter B. Foreman FOR [ ] WITHHOLD AUTHORITY [ ]
2. To approve the amendment to the Company's 1993 Stock Option Plan for
Non-Employee Directors, as described in the accompanying Proxy
Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To ratify the appointment of KPMG LLP as the independent accountants of
the Company for the year ending December 31, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
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.
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 310,000(1) 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) 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.
Each individual for whom an Option is granted hereunder is referred to herein as
an "Optionee."
(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:
- --------
(1)If the Amendment is adopted, this number will increase to 410,000.
2
<PAGE>
(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.
(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.
3
<PAGE>
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 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.
4
<PAGE>
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 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
5
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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.
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.
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