<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ELECTRONIC CLEARING HOUSE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration 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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Notes:
<PAGE>
ELECTRONIC CLEARING HOUSE, INC.
--------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 4, 1999
--------------
To the Shareholders of Electronic Clearing House, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders (the "Meeting")
of Electronic Clearing House, Inc. (the "Company") will be held at the Radisson
Hotel, Agoura Hills, California on Thursday, February 4, 1999 at 10:30 a.m. for
the following purposes:
1. To elect one Director to serve for the respective term specified herein;
2. To consider and act upon a proposal to increase the authorized Common
Stock of the Company from 26,000,000 shares to 36,000,000 shares.
3. To amend the Incentive Stock Option Plan;
4. To ratify or reject the selection of PricewaterhouseCoopers LLP as
independent public accountants of the Company;
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on December 11, 1998, as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting or any adjournment thereof.
You are cordially invited to attend the Meeting. Shareholders who do not expect
to attend the Meeting in person are requested to complete, date and sign the
enclosed Proxy and return it promptly in the envelope provided for that purpose.
The enclosed Proxy is being solicited on behalf of the Board of Directors of the
Company.
By Order of the Board of Directors,
DONNA L. CAMRAS
Corporate Secretary
Agoura Hills, California
Dated: January 4, 1999
<PAGE>
PROXY STATEMENT
ELECTRONIC CLEARING HOUSE, INC.
P.O. BOX 3040
AGOURA HILLS, CA 91301
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 4, 1999
This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Electronic Clearing House, Inc., a Nevada
corporation (the "Company"), for use at the Annual Meeting of Shareholders (the
"Meeting") which will be held on February 4, 1999 at 10:30 a.m., Pacific
Standard Time, at the Radisson Hotel, Agoura Hills, California. The approximate
mailing date of this Proxy Statement is January 4, 1999.
PROXIES
The shares represented by proxy in the form solicited by the Board of Directors
of the Company will be voted at the Meeting if the proxy is returned to the
Company properly executed. Where a choice is specified with respect to the
matter being voted upon, the shares represented by the proxy will be voted in
accordance with such specification. The proxy may specify approval or
disapproval of all nominees for directors of the Company as a group, or may
withhold authority to vote for any one or more of the nominees for directors,
and for the approval of the other proposals described herein.
It is intended that shares represented by proxies in the accompanying form will
be voted for the election of the person listed below under "Election of
Directors". Although the Board of Directors does not know whether any
nominations will be made at the Meeting other than those set forth herein, if
any such nomination is made, or if votes are cast for any candidates other than
those nominated by the Board of Directors, the persons authorized to vote shares
represented by executed proxies in the enclosed form (if authority to vote for
the election of directors or for any particular nominee is not withheld) will
have full discretion and authority to vote for all of the nominees for the Board
of Directors, as provided in the Proxy. The Company is not aware of any matters
to be voted upon at the Meeting other than as stated herein and in the
accompanying Notice of Annual Meeting of Shareholders; if any other matters are
properly brought before the Meeting, the enclosed proxy gives authority to the
persons named in such proxy to vote the shares in their best judgment.
The cost of soliciting proxies will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other firms representing beneficial
owners of shares for their expenses in forwarding solicitation materials to the
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or telegram.
PLEASE MARK, SIGN and DATE the enclosed proxy card and RETURN it promptly in the
enclosed envelope provided for this purpose.
1.
<PAGE>
On December 11, 1998, the record date for determining shareholders entitled to
vote at the Annual Meeting, the Company had outstanding and entitled to vote at
the Meeting 16,621,541 shares of Common Stock, par value $.01 per share (the
"Common Stock"). Each share of Common Stock is entitled to one vote on any
matter brought before the Meeting, including election of the directors. The
Articles and By-Laws of the Company do not contain any provision for cumulative
voting.
The required quorum for the transaction of business at the Annual Meeting is a
majority of the shares of Common Stock outstanding on the record date. Shares
that are voted "for", "against", or "withheld" from a matter are treated as
being present at the meeting for purposes of establishing a quorum and are also
treated as votes eligible to be cast by the Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on the subject
matter with respect to such matter. While abstentions will be counted for
purposes of determining both the presence or absence of a quorum for the
transaction of business and the total number of votes cast with respect to a
particular matter, broker non-votes with respect to proposals set forth in this
Proxy Statement will not be considered votes cast and, accordingly, will not
affect the determination as to whether the requisite majority of votes cast has
been obtained with respect to a particular matter. A majority of votes cast is
required to pass a proposal.
PERFORMANCE GRAPH
The following graph shows a five-year comparison of the total cumulative returns
of investing $100 on September 30, 1993, in Electronic Clearing House, Inc.
Common Stock, the NASDAQ-Composite Index, and the NASDAQ-Finance Index. The
NASDAQ-Composite Index represents a broad market group in which the Company
participates. The NASDAQ-Finance Index was chosen as having a representative
peer group of companies for the 1998 Proxy Statement, and includes Electronic
Clearing House, Inc. All comparisons of stock price performance shown assumes
reinvestment of dividends.
[GRAPH SHOWN HERE]
<TABLE>
<CAPTION>
Measurement
Point
September 30, 1993 1994 1995 1996 1997 1998
- ------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ECHO $100 $ 57 $ 46 $ 89 $154 $121
NASDAQ-Composite $100 $101 $139 $165 $227 $232
NASDAQ-Finance $100 $105 $133 $165 $260 $240
</TABLE>
2.
<PAGE>
PRINCIPAL OWNERS OF COMMON STOCK
The following table sets forth the beneficial owners of more than 5% of the
Company's voting securities as of the record date, December 11, 1998.
<TABLE>
<CAPTION>
Amount of
Title Name and Address Beneficial Percent
of Class of Beneficial Owner Ownership of Class
- -------- --------------------- --------------- ---------
<S> <C> <C> <C>
Common Arthur Geiger 1,290,900 /[1]/ 7.77%
P.O. Box 309
Morristown, NJ 07963
Common Robert Feury 912,000 /[2]/ 5.49%
15 East Union Street
East Rutherford, NJ 07073
Common Herbert Smilowitz 1,165,000 /[1]/ 7.00%
15 East Union Street
East Rutherford, NJ 07073
</TABLE>
- --------------
/[1]/ Includes warrants issued in connection with various loans and underlying
common shares in connection with Series K Preferred Stock.
/[2]/ Includes underlying common shares in connection with Series K Preferred
Stock.
To the Company's knowledge, no other individual has beneficial ownership or
control over 5% or more of the Company's outstanding Common Stock.
The following table sets forth the number of shares of Common Stock owned
beneficially by the Company's officers and directors as of the record date,
December 11, 1998:
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name & Address Beneficially Owned Common Stock/[1]/
- -------------- ------------------ -----------------
<S> <C> <C>
Joel M. Barry 1,007,250 /[2]/ 5.73%
28001 Dorothy Drive
Agoura Hills, CA 91301
Donna Camras 60,000 /[2]/ 0.36%
28001 Dorothy Drive
Agoura Hills, CA 91301
Alice L. Cheung 170,000 /[2]/ 1.01%
28001 Dorothy Drive
Agoura Hills, CA 91301
Jesse Fong 155,110 /[2]/ 0.93%
28001 Dorothy Drive
Agoura Hills, CA 91301
R. Marshall Frost 20,000 /[2]/ 0.12%
28001 Dorothy Drive
Agoura Hills, CA 91301
</TABLE>
3.
<PAGE>
<TABLE>
<S> <C> <C>
David Griffin 182,637 /[2]/ 1.09%
28001 Dorothy Drive
Agoura Hills, CA 91301
Fariborz Hamzei 308,333 /[3]/ 1.82%
28001 Dorothy Drive
Agoura Hills, CA 91301
Herbert L. Lucas, Jr. 500,222 /[3,5]/ 2.95%
12011 San Vicente Blvd.
Los Angeles, CA 90049
Carl W. Schafer 408,333 /[3]/ 2.40%
66 Witherspoon St., #1100
Princeton, NJ 08542
Rick Slater 216,000 /[2]/ 1.28%
2630 Townsgate Road
Westlake Village, CA 91361
Larry Thomas 905,000 /[2,4]/ 5.24%
28001 Dorothy Drive
Agoura Hills, CA 91301
Patricia Atlas Williams 80,000 /[2]/ 0.48%
28001 Dorothy Drive
Agoura Hills, CA 91301
Jack Wilson 180,000 /[2]/ 1.07%
28001 Dorothy Drive
Agoura Hills, CA 91301
All officers and directors
as a group (13 persons) 4,192,885 /[1]/ 20.66%
</TABLE>
- --------------
/[1]/ Outstanding common shares with effect given to individual shareholder's
exercise of stock options described in footnotes 2 through 5.
/[2]/ Includes options according to the terms of the Incentive Stock Option
Plan.
/[3]/ Includes options granted to outside directors.
/[4]/ Includes common shares as payment for acquisition.
/[5]/ Includes 141,889 shares indirectly owned by Mr. Lucas through a trust for
his wife.
ELECTION OF DIRECTORS
One director is proposed to be elected at the Annual Meeting. The director will
be elected to hold office until the conclusion of his respective three-year term
and thereafter until the election and qualification of his successor.
Nominees
- --------
The nominee for election to the Board of Directors is Joel M. Barry. Mr.
Fariborz Hamzei, for personal reasons, decided not to stand for another term as
director. His directorship will terminate at the end of his current term in
February 1999.
4.
<PAGE>
Directors
- ---------
The current members of the Board of Directors are:
<TABLE>
<CAPTION>
Director Position with Term Ending
Name Age Since the Company February:
- ---- --- -------- ------------- ---------
<S> <C> <C> <C> <C>
Larry Thomas 52 1997 President, COO 2001
and Director
Joel M. Barry 48 1986 Chairman and CEO 1999
Fariborz Hamzei 40 1988 Director 1999
Herbert L. Lucas, Jr. 72 1991 Director 2000
Carl W. Schafer 62 1986 Director 2001
</TABLE>
LARRY THOMAS, age 52, joined the Company in November 1995, has served as Senior
Vice President since June 1996, and was appointed President and Chief Operating
Officer in October 1997. Prior to joining the Company, Mr. Thomas was a charter
member of the Cellular Digital Packet Data (CDPD) specification effort and
through the company he founded, XYNet Software Technologies, managed the
development and delivery to several carriers of CDPD accounting and provisioning
software. Mr. Thomas served Unisys/Burroughs Corporation for 20 years as a
system software/hardware developer, manager, and division general manager, with
his last position as Vice President of Unisys Network Management Systems. Mr.
Thomas has been a consultant, author, and speaker on Internet and OSI related
technologies, network management protocols, complex software systems and large-
network solutions for major system integration firms. Mr. Thomas holds an MSEE
and BSEE from Rice University in Houston, Texas, as well as a BA in Economics
from Rice.
JOEL M. BARRY, age 48, has been a Director of the Company since July 8, 1986,
Chairman of the Board since December 26, 1986, served as Chief Financial Officer
from May 1, 1987 to June 9, 1990, and Executive Vice President from October 12,
1987 to June 29, 1990, when he was designated Chief Executive Officer of the
Company. Mr. Barry is also a Director and Chief Executive Officer of the NCCR
and CBC subsidiaries. Since approximately August 1981, Mr. Barry has been a
lecturer and investment counselor regarding investment partnerships. Mr. Barry
was the founder and President of Basics Financial Planning & Investments, Inc.
("Basics"), a financial management firm, formed in August 1983 and dissolved in
June 1991. Basics is the successor to Dynamic Seminars, a firm founded by Mr.
Barry in August 1981.
FARIBORZ HAMZEI, age 40, has been a director since 1988. Mr. Hamzei is currently
an independent financial consultant and has been Vice President of Market
Analysts of Southern California since 1996. Mr. Hamzei was President of Caspian
Capital Corporation, Los Angeles, California, from July, 1990 to December, 1991,
and Executive Vice President of Caspian Capital Corporation from August, 1988 to
July, 1990. Previously, he was President and Chief Executive Officer of
International Message Switching Corporation, a publicly held company from August
1987 to October 1987. Mr. Hamzei has also held various positions in two high
tech start-up companies, and from 1978 through 1982 held various management
positions at Northrop's Aircraft Division. Mr. Hamzei holds a BS degree in
engineering from Princeton University.
5.
<PAGE>
HERBERT L. LUCAS, age 72, has been a director since 1991. Mr. Lucas received a
BA degree in History in 1950 from Princeton University and an MBA degree in 1952
from Harvard University Graduate School of Business Administration. He served
as President from 1972 to 1981 of Carnation International in Los Angeles and a
member of the Board of Directors of the Carnation Company. Since 1982, Mr.
Lucas has managed his family investment business. He has served on the Board of
Directors of various financial and business institutions including Wellington
Management Company, Arctic Alaska Fisheries, Inc., Nutraceutix, and Sunworld
International Airways, Inc. Mr. Lucas also serves as a Trustee of The J. Paul
Getty Trust, the Los Angeles County Museum of Art, and Winrock International
Institute for Agricultural Research and Development. He also was formerly a
member of the Board of Trustees of Princeton University.
CARL W. SCHAFER, age 62, has been a Director since July 1986. Mr. Schafer was
Financial Vice President and Treasurer (Chief Financial Officer) of Princeton
University from July 1976 to October 1987. From October 1987 to April 1990, Mr.
Schafer was a Principal of Rockefeller & Co., Inc. of New York, an investment
management firm. He is a Director of The Atlantic Foundation and Harbor Branch
Institution and became President of the Atlantic Foundation in April 1990. Mr.
Schafer also holds the following positions: Director/Trustee of the Paine Webber
and Guardian Families of Mutual Funds; Director of Roadway Express, Inc., a
trucking company; Director of Frontier Oil Corporation, an oil and gas refiner;
Director of Evans Systems, Inc., a petroleum product marketer, convenience
store, and diversified company; Director of Nutraceutix, Inc., a bio technology
company; Director of Base Ten Systems, Inc., a software company; and Chairman of
The Johnson Atelier and School Of Sculpture. He graduated from the University of
Rochester in 1958, and served with the U.S. Bureau of the Budget, successively,
as Budget Examiner, Legislative Analyst, Deputy Director and Director of Budget
Preparation. He resides in Princeton, New Jersey.
Board of Directors' Meetings
- ----------------------------
During fiscal year 1998, there were five regular meetings and one special
meeting of the Board of Directors. Mr. Hamzei attended five meetings and the
remaining directors attended all six meetings.
Officers
- --------
Officers of the Company are appointed by the Board of Directors and serve at the
discretion of the Board of Directors.
EXECUTIVE COMPENSATION
Cash Compensation of Officers
- -----------------------------
The following table sets forth the total compensation paid and stock options and
warrants offered by the Company to its Chief Executive Officer and to each of
its most highly compensated executive officers, other than the Chief Executive
Officer, whose compensation exceeded $100,000 during the fiscal years ended
September 30, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------ ------------
Securities
Capacities in ----------
Name Which Served Year Salary/[1]/ Underlying Options/[2]/
- ----- ------------- ---- ------ ------------------
<S> <C> <C> <C> <C>
Joel M. Barry Chairman/Chief 1998 $162,616/[3]/
Executive Officer 1997 160,282/[4]/ -
1996 120,000 650,000
</TABLE>
6.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Larry J. Thomas President/Chief 1998 $146,937/[5]/ 100,000
Operating Officer 1997 111,250/[6]/ -
1996 85,000 300,000
Jesse Fong Vice President 1998 $110,135/[7]/ -
1997 86,120/[8]/ 20,000
1996 80,000 -
</TABLE>
- --------------
/[1]/ The Company provides Messrs. Barry and Thomas with an automobile. Mr.
Barry, Mr. Thomas and Mr. Fong are participants of a Company sponsored
401(K) plan. There has been no compensation paid other than that
indicated in the above table.
/[2]/ None of these options have been exercised. See "Stock Option Plan".
/[3]/ Mr. Barry's salary includes a $14,000 bonus and a $1,117 vacation
paydown.
/[4]/ Mr. Barry's salary includes an $18,000 bonus and a $12,282 vacation
paydown.
/[5]/ Mr. Thomas's salary includes a bonus of $11,000.
/[6]/ Mr. Thomas's salary includes a bonus of $11,250.
/[7]/ Mr. Fong's salary includes a bonus of $27,433.
/[8]/ Mr. Fong's salary includes a $1,000 bonus and a $3,320 vacation paydown.
FISCAL 1998 OPTION GRANTS TABLE
-------------------------------
The following table sets forth the stock options granted to the Company's Chief
Executive Officer and each of its executive officers, other than the Chief
Executive Officer, whose compensation exceeded $100,000 during fiscal 1998.
Under applicable Securities and Exchange Commission regulations, companies are
required to project an estimate of appreciation of the underlying shares of
stock during the option term. The Company has chosen to project this estimate
using the potential realizable value at assumed annual rates of stock price
appreciation for the option term at assumed rates of appreciation of 5% and 10%.
However, the ultimate value will depend upon the market value of the Company's
stock at a future date, which may or may not correspond to the following
projections.
<TABLE>
<CAPTION>
Potential Realization
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Percent of Option Term
Total Granted Exercise ---------------------
Options to Employees in Price Expiration
Name Granted Fiscal Year ($/sh) Date 5% ($) $10% ($)
- ---- ------- --------------- --------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Joel M. Barry none n/a - - n/a n/a
Larry Thomas 100,000 37.7% $1.12 10/07 $53,000 $128,000
Jesse Fong none n/a - - n/a n/a
</TABLE>
7.
<PAGE>
The following table sets forth the number of unexercised options held by the
Company's Chief Executive Officer and each of its executive officers, other than
the Chief Executive Officer, whose compensation exceeded $100,000 during fiscal
1998.
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL-YEAR OPTION/SAR VALUE TABLE
----------------------------------
<TABLE>
<CAPTION>
Value of
Number of unexercised
Shares unexercised in-the-money
acquired on Value options/SARS Options/SARS
Name exercise # realized FY-end # at FY-end $/[1]/
- ---------------- ----------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
Joel M. Barry -0- -0- 650,000 $429,000
Larry Thomas -0- -0- 400,000 $100,000
Jesse Fong -0- -0- 70,000 $ 28,000
</TABLE>
- --------------
/[1]/ Based on the closing sales price of the Common Stock on September 30,
1998 of $1.06 per share, less the option exercise price.
Compensation of Directors
- -------------------------
Outside directors are entitled to receive $1,500 per quarter plus reasonable
expenses incurred in connection therewith. Directors are not compensated for
special meetings. Each one of the outside directors was awarded 33,333 shares of
stock options at market price during fiscal 1998.
Stock Option Plan
- -----------------
On May 13, 1992, the Company's Board of Directors authorized adoption of an
Incentive Stock Option Plan ("Plan"), ratified by the shareholders at the Annual
Meeting held July 10, 1992. The Plan provided for the issuance of up to 325,000
stock options, each to purchase one share of the Common Stock for $0.85 per
share, subject to adjustment in the event of stock splits, combinations of
shares, stock dividends or the like.
On May 1, 1995, Jesse Fong was granted 50,000 five-year options each to purchase
one share of Common Stock at $0.50 per share.
On September 30, 1995, Joel M. Barry was granted 650,000 five-year options each
to purchase one share of Common Stock at $0.40 per share.
On January 2, 1996, Larry Thomas was granted 100,000 five-year options each to
purchase one share of common stock at $0.50 per share.
On August 30, 1996, Larry Thomas was granted 200,000 five-year options each to
purchase one share of common stock at $0.84 per share.
On November 18, 1996, the Company's Board of Directors authorized an increase in
the Plan to 3,375,000 options and was ratified by the shareholders at the Annual
Meeting held in February 1997.
On February 6, 1997, Jesse Fong was granted 20,000 five-year options each to
purchase one share of Common Stock at $1.47 per share.
On October 29, 1997, Larry Thomas was granted 100,000 five-year options each to
purchase one share of common stock at $1.12 per share.
8.
<PAGE>
Employee Benefit Plans
- ----------------------
The Company does not presently have a formal stock option plan for employees.
Employment Agreements
- ---------------------
Mr. Thomas entered into a four-year employment contract, effective October 16,
1997, which provides for a salary of $137,500 with $5,000 salary increases
annually. At the time the employment contract was signed, Mr. Thomas owned
300,000 shares of the Company's stock options which became fully vested
immediately. Additionally, Mr. Thomas was awarded 100,000 shares of stock
options within one month after signing of the contract, and 100,000 shares of
stock options each year for three additional years within one month after the
anniversary of the contract, issued under the five-year vesting criteria and
having a strike price equal to the existing market bid price on the day of the
award.
Bonus, Profit Sharing and Other Remuneration Plans and Pension and Retirement
- -----------------------------------------------------------------------------
Plans
- -----
In addition to salary, the Committee, from time to time, grants options to
executive officers and key personnel. The Committee thus views options grants
as an important component of its long-term, performance-based compensation
philosophy. Since the value of an option bears a direct relationship to the
Company's stock price, the Committee believes that options motivate executive
officers and key personnel to manage the Company in a manner which will also
benefit shareholders. As such, options are granted at the current market price.
One of the principal factors considered in granting options to an executive
officer or key personnel is their ability to influence the Company's long-term
growth and profitability.
The Committee has also established a bonus program to reward extraordinary
performance that exceeds pre-set goals established for executive officers and
key personnel. The Company believes that such a bonus program provides the
incentive to exceed such goals, thereby building shareholder value.
Mr. Thomas is entitled to receive an annual bonus which ranges between 20% to
50% of his base salary compensation provided he meets the target performance as
agreed upon and set each fiscal year by the Company's Chief Executive Officer
and approved by the Board of Directors. Additionally, Mr. Thomas is entitled to
various performance-based stock options and cash bonuses upon meeting certain
predetermined levels of net income and earnings per share generated by the
Company during the term of the contract.
The Company has a contributory 401(K) Retirement Pension Plan which covers all
employees who are qualified under the plan provisions.
--------------------------------------------------------------------
DESCRIPTION OF PROPOSAL
PROPOSAL 1
PROPOSAL TO ELECT ONE DIRECTOR TO SERVE FOR THE RESPECTIVE TERM SPECIFIED
- -------------------------------------------------------------------------
On November 4, 1998, the members of the Nominating Committee passed a motion to
nominate Mr. Joel M. Barry for election to the Board of Directors for a three-
year term.
9.
<PAGE>
PROPOSAL 2
PROPOSAL TO AMEND ARTICLE FOURTH OF THE ARTICLES OF INCORPORATION
- -----------------------------------------------------------------
Article Fourth of the Articles of Incorporation provides that the Company
presently has an authorized capital consisting of 5,000,000 shares of Preferred
Stock, par value $.01 per share, and 26,000,000 shares of Common Stock par value
$.01 per share. If the proposed amendment is passed, the Company will have an
authorized capital consisting of 5,000,000 shares of Preferred Stock, par value
$.01 per share, and 36,000,000 shares of Common Stock, par value $.01 per share.
PRESENT:
"FOURTH: The amount of the total authorized capital stock of the corporation is
Three Hundred Ten Thousand Dollars ($310,000), which shall consist of twenty-six
million (26,000,000) shares of Common Stock at the par value of One Cent ($.01)
each and five million (5,000,000) shares of Preferred Stock having par value of
One Cent ($.01) each."
PROPOSED:
"FOURTH: The amount of the total authorized capital stock of the corporation is
Four Hundred Ten Thousand Dollars ($410,000), which shall consist of thirty-six
- -------------------------------------------- ----------
million (36,000,000) shares of Common Stock at the par value of One Cent ($.01)
- --------------------
each and five million (5,000,000) shares of Preferred Stock having par value of
One Cent ($.01) each."
The purpose of this proposed amendment is to enable the Company to have
sufficient shares, as required, to consider merchant portfolio acquisitions, to
consider related business acquisitions, to raise capital through a stock
offering, to provide underlying shares for options, and for other corporate
purposes.
PROPOSAL 3
PROPOSAL TO AMEND INCENTIVE STOCK OPTION PLAN
- ---------------------------------------------
On November 19, 1998, the Company's Board of Directors authorized the amending
of the Incentive Stock Option Plan ("Plan"), subject to ratification by the
shareholders at the Annual Meeting.
PRESENT:
3. Shares Subject to the Plan
--------------------------
Subject to adjustment as provided in Section 15 hereof, the aggregate
maximum number of Shares which are available for the grant of Options under this
Plan is Three Million Three Hundred Seventy-Five Thousand (3,375,000) Shares.
The Shares may be, in whole or in part as the Board of Directors shall from time
to time determine, issued Shares that shall have been reacquired by the Company
or authorized but unissued Shares, whether now or hereafter authorized. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unused Shares subject thereto shall again be
available for other Options to be granted under the Plan.
10.
<PAGE>
PROPOSED:
3. Shares Subject to the Plan
--------------------------
Subject to adjustment as provided in Section 15 hereof, the aggregate
maximum number of Shares which are available for the grant of Options under this
Plan is Five Million Three Hundred Seventy-Five Thousand (5,375,000) Shares.
------------------------------------------------------------
The Shares may be, in whole or in part as the Board of Directors shall from time
to time determine, issued Shares that shall have been reacquired by the Company
or authorized but unissued Shares, whether now or hereafter authorized. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unused Shares subject thereto shall again be
available for other Options to be granted under the Plan.
The purpose of this amendment is to dedicate adequate shares into the Incentive
Stock Option Plan in order to attract and maintain the highest quality officers
and key personnel for service with the Company. Assuming Proposal 2 is
approved, the shares available under the Incentive Stock Option Plan would
constitute 14.9% of total authorized shares.
PROPOSAL 4
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PROPOSAL TO RATIFY AND APPROVE THE SELECTION OF AUDITORS
- --------------------------------------------------------
The Board of Directors has appointed PricewaterhouseCoopers LLP, independent
certified public accountants, as auditors of the Company for the current fiscal
year. PricewaterhouseCoopers LLP has audited the financial statements of the
Company since 1984, and has no other relationship with or interest in the
Company.
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE ABOVE PROPOSALS.
UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED FOR RATIFICATION AND APPROVAL OF THE ABOVE PROPOSALS.
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SHAREHOLDER PROPOSALS AND OTHER MATTERS
- ---------------------------------------
Any shareholder desiring to have an appropriate proposal for action presented at
next year's Annual Meeting of Shareholders, now scheduled for February, 2000,
and who wishes to have it set forth in the Proxy Statement and form of Proxy for
the Meeting, must notify the Company and submit the proposal in writing for
receipt at the Company's executive offices as noted above not later than October
31, 1999.
11.
<PAGE>
If any other matters arise at the Meeting, it is intended that the shares
represented by Proxies in the accompanying form will be voted in accordance with
the judgment of the persons named in the Proxies.
A copy of the Company's Annual Report to the Securities and Exchange Commission
on Form 10-K may be obtained without charge by any beneficial owner of the
Company's Common Stock upon written request addressed to Donna Camras, Corporate
Secretary, 28001 Dorothy Drive, Agoura Hills, CA 91301 or Email: dcamras@echo-
inc.com.
By order of the Board of Directors,
DONNA L. CAMRAS
Corporate Secretary
Dated: January 4, 1999
12.
<PAGE>
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). If no choice is specified, this proxy will be
voted for proposals 1 through 5.
ELECTRONIC CLEARING HOUSE, INC.
P.O. Box 3040, 28001 Dorothy Drive, Agoura Hills, CA 91301
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder(s) hereby appoint(s) Larry Thomas and Carl W.
Schafer, and either of them, proxies with full power of substitution and hereby
authorize(s) them to represent and vote, as designated below, all the shares of
Common Stock held of record by the undersigned on December 11, 1998, at the
Annual Meeting of Shareholders of Electronic Clearing House, Inc. to be held on
February 4, 1999, or any adjournment thereof.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]
KEEP THIS PORTION FOR YOUR RECORDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(DETACH HERE AND RETURN THIS PORTION ONLY)
ELECTRONIC CLEARING HOUSE, INC. PROXY
The undersigned authorize(s) the proxies to vote on the matters set forth in the
Proxy Statement of the Company dated January 4, 1999, as follows:
1. ELECTION OF DIRECTORS
The Nominee is: JOEL M. BARRY
[_] For the Nominee Listed or, if needed nominee is unable to serve, for a
substitute nominee.
[_] Withhold Authority to Vote for Nominee Listed in the Proxy Statement.
For Against Abstain
[_] [_] [_] 2. PROPOSAL TO AMEND ARTICLE FOURTH OF THE ARTICLES OF
INCORPORATION.
[_] [_] [_] 3. PROPOSAL TO AMEND THE INCENTIVE STOCK OPTION PLAN.
[_] [_] [_] 4. PROPOSAL TO RATIFY THE SELECTION OF
PRICEWATERHOUSECOOPERS AS INDEPENDENT PUBLIC
ACCOUNTANTS.
[_] [_] [_] 5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF.
Please sign exactly as name appears on stock. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
- ------------------------------------- ------------------------------ -------
Name/Signature in which Stock is Held Name/Signature if Held Jointly Date
Please mark, sign, date and return this Proxy immediately. With your
cooperation, we can be ensured of a quorum.
PLEASE INDICATE ANY CHANGES IN ADDRESS ON REVERSE OF THIS PROXY FORM. THANK YOU.
