<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INTERSYSTEMS, INC.
_______________________________________________________________________
(Name of Registrant as Specified in its Charter)
Clare J. Attura
_______________________________________________________________________
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act 0-11(c)(1)(ii), 14a-6(i)(1) or Rule 14a-
6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
_______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing fee for which the
offsetting fee was previously paid. Identify the previous filing by
registration statement number, or the form or schedule and the date of its
filing.
(1) Amount previously paid: _______________________
(2) Form, schedule or registration statement no.: _________________
(3) Filing party: __________________________________
(4) Date filed: ____________________________
<PAGE> 2
INTERSYSTEMS, INC.
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 29, 1996
----------------------
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
InterSystems, Inc. (the "Company") to be held on Tuesday, October 29, 1996, at
10:00 a.m., at the offices of the Company at 537 Steamboat Road, 4th Floor,
Greenwich, Connecticut 06830, for the following purposes:
1. to elect two directors;
2. to transact such other business as may properly come before
the meeting or any adjournment of the meeting.
Only stockholders of record at the close of business on September 18, 1996
will be entitled to notice of and to vote at the meeting.
Please sign, date and mail the enclosed proxy in the enclosed envelope,
which requires no postage if mailed in the United States, so that your shares
may be represented at the meeting.
By Order of the Board of Directors
David S. Lawi
Secretary
Houston, Texas
September 18, 1996
<PAGE> 3
INTERSYSTEMS, INC.
8790 WALLISVILLE ROAD
HOUSTON, TEXAS 77029
------------------
PROXY STATEMENT
------------------
The accompanying proxy is solicited on behalf of the Board of
Directors of the Company for use at the Annual Meeting of Stockholders to
be held on October 29, 1996 and at any adjournment of the meeting. The
proxy may be revoked at any time before it is exercised by notice, in
writing, to the secretary of the Company.
The Board of Directors has fixed the close of business on September 18,
1996 as the record date for the meeting. On that date, the Company had
outstanding 6,378,343 shares of common stock. Only stockholders of record
at the close of business on that date will be entitled to vote at the
meeting or at any adjournment of the meeting. Each such stockholder will
be entitled to one vote for each share held and may vote in person or by
proxy authorized in writing. Holders of the Company's common stock have no
cumulative voting rights in the election of directors.
The principal executive offices of the Company are located at 8790
Wallisville Road, Houston, Texas 77029. The proxy statement and form of
proxy are being sent to stockholders on or about September 18, 1996.
ELECTION OF DIRECTORS
---------------------
In 1988, the Company adopted a classified Board of Directors, which
divided the directors into three classes. At each annual meeting, the
successors to the class of directors whose term expires at that meeting are
elected to serve a three-year term and until their successors are elected
and qualified. Accordingly, the Directors whose terms expire in 1996 are
nominees for re-election at the 1996 Annual Meeting of Stockholders. The
nominees named by the Board of Directors are Mr. David S. Lawi and Mr.
Walter M. Craig, Jr.
The persons named in the enclosed form of proxy have advised that,
unless contrary instructions are received, they intend to vote for the
nominees named by the Board of Directors of the Company and listed below.
If, by reason of death or other unexpected occurrence, the nominee is not
available for election, the persons named in the form of proxy have advised
that they will vote for such substitute nominee as the Board of Directors
of the Company may propose.
4
<PAGE> 4
The nominees and directors are presented below by class.
Director Term as
of the Director
Name Age Company Since Expires in
- ---- --- ------------- ----------
<TABLE>
<S> <C> <C> <C>
Nominees for Director
David S. Lawi 61 1984 1996
Walter M. Craig, Jr. 42 1993 1996
Other Directors
Daniel T. Murphy 54 1986 1997
William Lurie 65 1995 1997
Herbert M. Pearlman 63 1984 1998
Fred S. Zeidman 49 1993 1998
John E. Stieglitz 62 1991 1998
</TABLE>
Principal Occupation Over the Past Five Years
- ---------------------------------------------
and Other Directorships of Nominee or Director
- ----------------------------------------------
Herbert M. Pearlman Mr. Pearlman has been Chairman of the Company's
Board of Directors since March l984. He has served as President, Chief
Executive Officer and a Director of Helm Resources, Inc., a diversified
public holding company and the holder of approximately 23% of the
Company's common stock ("Helm"), since 1980. Since June 1984 he has been
Chairman of the Board of Helm. Mr. Pearlman is Chairman of the Board of
Directors of Seitel, Inc. ("Seitel") and is currently Chairman of
Seitel's Executive Committee. Seitel is a New York Stock Exchange
company engaged in acquiring and marketing seismic information to the oil
and gas industry. In 1990, Mr. Pearlman became Chairman of the Board of
Unapix Entertainment, Inc. ("Unapix"), an American Stock Exchange company
which is engaged in marketing and distributing films and television
products. In 1994, Mr. Pearlman became Chairman of the Board of ABC
Dispensing Technologies, Inc. ("ABC"), a public company which is engaged
in the business of designing and manufacturing equipment which dispenses
liquids, solids, gases, pastes and gels.
Fred S. Zeidman Mr. Zeidman was appointed President, Chief Executive
Officer and a Director of the Company in July 1993. He also serves as
President of Interpak Terminals, Inc., a wholly-owned subsidiary of
Helm engaged in the packaging and distribution of thermoplastic resins.
Previously, Mr. Zeidman served as Chairman of Unibar Energy Services
Corporation, one of the largest independent drilling fluids company in the
United States, from 1985 to 1991, when it was acquired by Anchor Drilling
Fluids of Norway. From April 1992 until July 1993, Mr. Zeidman served as
President of Service Enterprises, Inc., which is primarily engaged in
plumbing, heating, air conditionaing and electrical installation and
repair. From 1983 to 1993, Mr. Zeidman served as President of Enterprise
Capital Corporation, a federally licensed small business investment
company specializing in venture capital financings.
5
<PAGE> 5
Walter M. Craig, Jr. Mr. Craig has been President of Professionals'
Financial Services, Inc., a Delaware corporation which is in the business
of financing receivables of healthcare and other enterprises, since 1993.
He has also served as President and a Director of PLB Management Corp.,
the general partner of The Mezzanine Financial Fund, L.P. (the "Fund"), a
Delaware limited partnership which makes collateralized loans to
companies, and as President of the Fund, since 1993. Mr. Craig has been
a Director of Seitel since 1987 and a director of Unapix since 1993. He
has also served as a Director, Executive Vice President and Chief
Operating Officer of Helm since 1993. Prior thereto, Mr. Craig served as
Vice President for business and legal affairs for Helm.
David S. Lawi Mr. Lawi has been Secretary of the Company since March
1984. He was elected Chairman of the Executive Committee in October
1986. He has been Secretary and a Director of Helm since 1980, and
served as Executive Vice President of Helm from 1980 until 1992. Since
l982 he has been a Director of Seitel and has been Chairman of Seitel's
Executive Committee since 1989. In 1993 he became Secretary and
Treasurer of Unapix, and a Director and Chairman of the Executive
Committee of Unapix.
William Lurie Mr. Lurie was first elected to the Board of Directors in
November 1995 and became Chairman of the Acquisition Committee. Mr.
Lurie is presently serving as Co-Chairman and a Director of Prevention & Early
Resolution of Conflicts. Prior thereto, he spent almost 20 years with General
Electric Company and ten years with International Paper Company
in legal and management positions, including General Counsel, and
thereafter served as President of The Business Roundtable for ten years.
He also serves as a Director of Mineral Technologies, Inc. and Seitel.
Daniel T. Murphy Mr. Murphy joined the Company in May 1984 as Vice
President-Finance and Operations and has been Executive Vice President
of Operations and Chief Financial Officer of the Company since July
1985. Mr. Murphy joined Helm in May 1984 as Vice President and Chief
Financial Officer. In January 1996, he was appointed Vice President and
Chief Financial Officer of Unapix.
John E. Stieglitz Mr. Stieglitz was appointed to the Board of Directors
of the Company in December 1991. Since l976, Mr. Stieglitz has been
President of Conspectus, Inc., a privately-held company engaged in
providing consulting services in the area of executive recruiting. Mr.
Stieglitz has been a director of Helm since 1986, a director of Seitel
since 1989 and a director of ABC since January 1995.
6
<PAGE> 6
Committees and Attendance
- -------------------------
During 1995, the Company's Board of Directors held two full meetings,
which were attended by all of the directors then in office.
The Board of Directors has an Executive Committee, an Audit Committee
and an Acquisition Committee. The Executive Committee is comprised of
Messrs. Pearlman, Lawi and Murphy. The function of the Executive
Committee is to act on an interim basis for the full Board. The
Executive Committee did not meet separately from the full Board of
Directors during 1995. The Audit Committee and the Compensation
Committee presently is comprised of Mr. Stieglitz. The Audit Committee
and the Compensation Committee did not meet separately from the full
Board of Directors during 1995. The Acquisition Committee presently is
comprised of Mr. Lurie. Mr. Lurie held several meetings during 1995 in
connection with the proposed acquisition of Interpak Terminals, Inc. from
Helm Resources, Inc.
Compensation of Directors
- -------------------------
Non-employee directors generally receive a fee of $6,000 in cash and
$6,000 of common stock for services they render to the Company, payable
on December 31 of each year. In exchange for his agreement to serve as
Chairman of the Acquisition Committee, the Company has agreed to pay Mr.
Lurie an additional $6,000 in cash and $6,000 in stock, and to issue to
him five year options to purchase 20,000 shares of common stock at $1
5/8. In addition, the Company has agreed to issue to Mr. Stieglitz five
year options to purchase 10,000 shares of common stock at $1 5/8. All
1995 compensation to Mr. Lurie was paid on a deferred basis. Expenses
reasonably incurred in the furtherance of the directors' duties are
reimbursed by the Company.
7
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Set forth below is certain information as of September 1, 1996
concerning the beneficial ownership of Common Stock (the Company's
only class of voting securities) held by each person who is the
beneficial owner of more than 5% of the Common Stock, and by each
director and by all executive officers and directors of the Company
as a group.
Amount and Nature
of Beneficial Percent of
Name Ownership (1)(2) Class (2)
- ---- ----------------- ----------
<TABLE>
<S> <C> <C>
Beneficial Holders
Helm Resources, Inc......... 1,462,083(3) 23.0%
537 Steamboat Road
Greenwich, CT 06830
John V. Winfield 576,000(4) 8.8%
2121 Avenue of the Stars
Los Angeles, CA 90067
Officers and Directors
Fred S. Zeidman ............ 645,000(5) 9.5%
8790 Wallisville Road
Houston, Texas 77029
Herbert M. Pearlman ........ 557,940(6) 8.4%
537 Steamboat Road
Greenwich, CT 06830
David S. Lawi .............. 391,101(7) 5.9%
537 Steamboat Road
Greenwich, CT 06830
Walter M. Craig, Jr......... 25,814(8) *
Daniel T. Murphy ........... 24,531(9) *
John E. Stieglitz........... 11,923(10) *
William Lurie............... -
All executive officers
and directors
as a group (7 persons) .... 1,656,309(11) 22.0%
- ----------------------
* Less than 1%
</TABLE>
(1) Except as otherwise indicated, each named holder has, to the best
of the Company's knowledge, sole voting and investment power with
respect to the shares indicated.
(2) Includes shares that may be acquired within 60 days by any of the
named persons upon exercise of any right.
8
<PAGE> 8
(3) Includes shares issuable upon exercise of Common Stock Purchase
Warrants expiring December 31, 1999 at $3.50 per share which were
issued as a dividend to the holders of common stock in October 1991
(the "Dividend Warrants") (6,035) and upon conversion of 10%
Convertible Subordinated Debentures due 2001 at $1.83 per share
(the "10% Debentures") (16,393).
(4) Includes 192,000 shares held by InterGroup Corporation, 2121 Avenue
of the Stars, Los Angeles, CA 90067, with respect to which Mr.
Winfield is Chairman of the Board. Also includes 192,000 shares
that are issuable upon exercise a like amount of Common Stock
Purchase Warrants expiring January 15, 2000 at $1.80 per share,
96,000 of which are held by Mr. Winfield directly and 96,000 of
which are held by InterGroup Corporation.
(5) Includes shares issuable upon exercise of stock options (400,000)
and Common Stock Purchase Warrants expiring June 30, 2000 at $1.50
per share (the "Warrants") (15,000). See "Employment Arrangements-
-Zeidman Agreement."
(6) Includes shares issuable upon exercise of stock options (62,500),
Dividend Warrants (77,551), Warrants (45,000), Common Stock
Purchase Warrants expiring July 11, 2000 at $1.125 per share issued
in lieu of compensation (the "Employment Warrants") (33,333),
conversion of Series A 10% Convertible Subordinated Debentures due
June 30, 2001 at $1.35 per share (the "Series A 10% Debentures")
(148,148), and conversion of 8% Convertible Debentures due January
31, 2004 at $1.43 per share (the "8% Debentures") (13,356). Does
not include shares held by Mr. Pearlman's wife and children as to
which he disclaims beneficial ownership.
(7) Includes shares issuable upon exercise of stock options (39,062),
Dividend Warrants (73,875), Employment Warrants (16,667), Series A
10% Debentures (148,148) and 8% Debentures (17,483). Does not
include shares held by Mr. Lawi's wife and children as to which he
disclaims beneficial ownership.
(8) Includes shares issuable upon exercise of stock options (8,594) and
Dividend Warrants (3,750).
(9) Includes shares issuable upon exercise of stock options (9,375) and
Dividend Warrants (2,000) and conversion of 10% Debentures (5,464)
and 8% Debentures (7,692).
(10) Includes shares issuable upon exercise of Warrants (5,000) and
conversion of 8% Debentures (1,923).
(11) Includes shares issuable upon exercise of stock options (519,531),
Dividend Warrants (157,176), Warrants (65,000) and Employment
Warrants (50,000), and conversion of Series A 10% Debentures
(296,296), 10% Debentures (5,464) and 8% Debentures (40,454).
9
<PAGE> 9
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC") and the American Stock
Exchange initial reports of ownership and reports of changes of
ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a)
reports they file. Based upon a review of reports and amendments thereto
furnished to the Company during, and with respect to, its most recent
fiscal year, and written representations furnished to the Company, it
appears that all such reports required to be filed were filed on a
timely basis, except that a report on Form 4 for Helm Resources, Inc.
reporting a private sale of 60,000 shares of common stock was filed
late.
EXECUTIVE COMPENSATION
----------------------
Set forth below is certain information with respect to cash and
noncash compensation awarded to, earned by or paid to the Company's
Chief Executive Officer during 1995. With the exception of Mr.
Pearlman, no executive officers of the Company earned over $100,000 for
the fiscal year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
--------------------------
Name and Annual Compensation
Principal -------------------
Position Year Salary
- --------- ---- ------
<TABLE>
<S> <C> <C>
Fred S. Zeidman, 1995 $ 50,000
President and 1994 50,000
CEO (1) 1993 18,138
Herbert Pearlman, 1995 100,000
Chairman 1994 100,000
1993 100,000
____________
</TABLE>
(1) Mr. Zeidman joined the Company in July 1993. See "Employment
Arrangements--Zeidman Agreement" below.
10
<PAGE> 10
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
--------------------------------------------------------------
YEAR-END OPTION/SAR VALUE TABLE
-------------------------------
The following table sets forth aggregated option exercises in the
last fiscal year, the number of unexercised options and fiscal year-end
values of in the money options for the Chief Executive Officer.
Value of
Number of Unexercised
Shares Unexercised In-the-money
Acquired Options at Options at
on Fiscal year-end fiscal year end
Exercise Value Exercisable/ Exercisable/
Name (#) Realized ($) Unexercisable Unexercisable
---- -------- ------------ -------------- --------------
<TABLE>
<S> <C> <C> <C> <C>
Fred S.
Zeidman - - 300,000/100,000 $18,750/$6,250
Herbert M.
Pearlman - - 62,500/ - - / -
</TABLE>
EMPLOYMENT ARRANGEMENTS
The specific material terms of the agreements for the current
executive officers of the Company are set forth below.
Zeidman Agreement
- -----------------
Mr. Zeidman and the Company have entered into a three-year employment
agreement pursuant to which Mr. Zeidman will serve as President and Chief
Executive Officer of the Company. Pursuant to the employment agreement,
Mr. Zeidman will receive a base salary of $150,000 per year and a bonus
beginning in 1994 of 2% of the first $1 million in net income of the
Company, 3% of the second $1 million of net income and 4% of all net income
in excess of $2 million, not to exceed 150% of salary. Mr. Zeidman has
also received options to purchase 200,000 shares of Common Stock at $2.00
per share and options to purchase 200,000 shares of Common Stock at $3.00
per share which were fully vested at June 30, 1996.
Mr. Zeidman also serves as President and Chief Executive Officer of
Interpak Terminals, Inc. ("Interpak"), a wholly-owned subsidiary of Helm
Resources, Inc. Mr. Zeidman allocates his time between the Company and
Interpak, and Interpak contributes a portion of the Company's contracted
salary directly to Mr. Zeidman in compensation of his services based upon
the relative amount of time spent at each company, thereby reducing the
amount of salary payable by the Company. During both 1995 and 1994, Mr.
Zeidman spent approximately 33% of his time on the business of the Company
and received approximately $100,000 in compensation from Interpak for his
services to that corporation in 1995 and 1994, and $66,700 in 1993,
respectively. He also received a $10,000 bonus from Interpak in 1995 and
1994.
11
<PAGE> 11
The Company's agreement with Mr. Zeidman also provides that the Board
of Directors will continue to cause Mr. Zeidman to be elected as a member
of the Board of Directors of the Company and a member of the Board of
Directors of Interpak Terminals, Inc., until the earlier of such time as
his ownership in the common stock of the Company is under 100,000 shares,
or his death or voluntary resignation. In addition, he has received from
Helm Resources, Inc. a five year option to purchase 16,667 shares of common
stock of Helm at $1.50 per share, which vests over a three year period, and
the right to receive from Interpak Terminals, Inc. an option to purchase
such number of shares of each class of capital stock of Interpak Terminals,
Inc. and any securities convertible or exchangeable into or carrying the
right to purchase such class of capital stock as will equal two percent of
such class on a fully diluted basis if a public offering of Interpak
Terminals securities is consummated before June 2003. The option price
would be equal to the public offering price, less applicable underwiting
discounts and commissions.
Pearlman Agreement
- ------------------
Mr. Pearlman is a party to an employment agreement which provides for
his employment as Chairman of the Company for a term ending December 31,
1997, and renewable thereafter at the Company's option on a year to year
basis. The agreement, as amended, provides for a base salary of
approximately $240,000, which has been voluntarily reduced to $100,000. In
addition, Mr. Pearlman is entitled to an annual bonus equal to 5% of the
Company's consolidated pre-tax profits, less the amount paid to Mr.
Pearlman by Helm for the Company's consolidated earnings for the year,
which are reflected in Helm's financial statements as a result of Helm's
ownership in the Company.
Upon a change in Helm's control of the Board, the agreement provides
that each officer may terminate his employment under the agreement upon 18
months notice and receive, upon conclusion of that period, after diligently
carrying out his duties, a lump sum severance payment equal to 18 months
salary. The agreement provides that upon the expiration of the term, if
the officer's employment is not continued, he will be entitled to a
severance payment of two years' salary continuation (unless employment is
secured elsewhere).
If employment continuation is offered but declined by the officer,
the officer must act as a consultant for two years at 50% of his latest
salary, during which time he may not provide services for any competitors.
In July 1995, the Company granted to Mr. Pearlman 100,000 common
stock purchase warrants, which have an exercise price of $1.125 per share,
vest 33% per year beginning with the year of grant and expire on July 11,
2000. The warrants were granted in lieu of cash compensation owing to Mr.
Pearlman under his employment agreements, which had been voluntarily waived
for several years prior to 1995.
12
<PAGE> 12
David S. Lawi
- -------------
Mr. Lawi's contract contains essentially the same provisions as Mr.
Pearlman's agreement, except that it provides for a current base salary of
$130,000, which has been voluntarily reduced to $50,000, and a bonus of
2.5% of the Company's consolidated pre-tax profits for each fiscal
year, less the amount paid to Mr. Lawi by Helm for the Company's
consolidated earnings for the year which are reflected in Helm's financial
statements as a result of Helm's ownership in the Company.
In July 1995, the Company granted to Mr. Lawi 50,000 common stock
purchase warrants, which have an exercise price of $1.125 per share, vest
33% per year beginning with the year of grant and expire on July 11, 2000.
The warrants were granted in lieu of cash compensation owing to Mr. Lawi
under his employment agreement, which had been voluntarily waived for
several years prior to 1995.
Daniel T. Murphy
- ----------------
Mr. Murphy's contract contains essentially the same provisions as Mr.
Pearlman's agreement, except that it provides for a current base salary of
$90,000, and a bonus at the discretion of the Board of Directors.
Effective November 1, 1995, Mr. Murphy agreed to accept $56,000 from the
Company, with the balance to be paid by affiliates of the Company for whom
he renders services.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
----------------------------------------------------
During 1995, management of Helm provided various administrative,
managerial, financial, legal and accounting services to the Company and the
Company paid Helm $5,153 during, and accrued an additional $47,767 at
December 31, 1995 for such services.
In the fall of 1994, the Company obtained a line of credit in the
maximum amount of $250,000 from the Mezzanine Financial Fund, L.P. (the
"Fund"), a Delaware limited partnership in which Helm holds a 9% limited
partnership interest, which line was increased to $450,000 during 1995.
The loan bears interest at 15% per annum plus a 10% enhancement fee
thereafter, which fee is payable in common stock of the Company, entitles
the Fund to receive 2,000 common stock purchase warrants for each month
that the loan is outstanding and is secured by a note receivable from the
sale of the Trading Business. The loan matured on December 31, 1995 and
was paid in full in March 1996 using proceeds from the December 1995
private placement. At December 31, 1995, $337,500 remained outstanding
under the line. Messrs. Pearlman, Lawi and Craig are limited partners of,
and Mr. Craig is President of, the Fund.
In January, 1995, Professionals' Financial Services, Inc. ("PFS"),
which is controlled by Messrs. Herbert Pearlman, David Lawi and Walter M.
Craig, Jr., made a $100,000 accounts receivable line of credit available to
The Tropical Manufacturing Group, Inc.("TMG"), which is a party to an
operating agreement and a letter of intent for the purchase of assets with
Tropical Systems, Inc. ("TSI"), a subsidiary of InterSystems Nebraska.
Effective upon the execution of the operating agreement in
13
<PAGE> 13
October 1995, no further accounts receivable of TMG were purchased under
the line of credit, and PFS entered into a substitute accounts receivable
line of credit in the amount of $250,000 with TSI. At December 31, 1995,
$203,804.39 was outstanding under the TMG line of credit and $193,610.21
was outstanding under the TSI line of credit.
In September 1995, the Fund loaned TMG $50,000 and in October 1995,
the Fund loaned TSI $50,000. These lines of credit mature on December
31, 1996 and bear interest at the rate of interest charged to the Company
in connection with the Fund's loan to the Company. Both lines are
guaranteed by the Company. These loans were repaid in full in February
1996 using proceeds from the private placement.
In December 1995, a corporation controlled by Mr. Fred Zeidman made a
$100,000 unsecured loan to the Company. The rate of interest on this loan
was 15%, payable monthly, and the loan was repaid in full in February 1996
using proceeds from the private placement.
Acquisition of InterSystems Nebraska
- ------------------------------------
In connection with the August 1993 purchase from Helm of all of
the outstanding capital stock of InterSystems Nebraska, additional
consideration is payable to Helm in the form of an earnout and a royalty.
Performance Earnout. Helm is entitled to receive a performance
earnout payable in the event that InterSystems Nebraska's average
earnings before federal income taxes, related party management fees and
non-recurring or extraordinary expense ("EBTME") in 1992 through 1995
inclusive, exceeds $550,000. If during this period, the average EBTME
of InterSystems Nebraska exceeds $550,000, the Company is required to
pay to Helm an amount equal to six (6) times such excess (the "Earnout
Payments"). Earnout Payments are required to be made commencing March
1994 (for any Earnout Payment payable under the formula for 1992 and
1993), and each successive year thereafter, as necessary, until March
1996. The March 1994 Earnout Payment covers average EBTME for 1992 and
1993. The March 1995 Earnout Payment covers average EBTME for 1992
through and including 1994. The March 1996 Earnout Payment covers
average EBTME for 1992 through and including 1995. In the event of a
reduction of average EBTME for any period from the average EBTME for
previous periods, no refund of Earnout Payments will be made. However,
the Payments due in March 1995 and 1996 will reflect a credit of the
payments previously made toward the total earnout payment owed.
Earnout Payments may be made, at the Company's option, by delivering
cash, shares of common stock (valued at the average closing sale price
on the American Stock Exchange for the 60 days preceding delivery), by
delivering to Helm shares of the Company's common stock having an
aggregate value of such Earnout Payment or other agreed upon
consideration or by the retirement of indebtedness of Helm to the
Company. InterSystems Nebraska's EBTME for the years 1995, 1994, 1993
and 1992 was $567,000, $507,000, $666,000 and $420,000, respectively.
No Earnout Payment was due for March 1994, March 1995 or March 1996.
14
<PAGE> 14
Royalty Arrangements. In addition to the base purchase price and the
earnout payments, Helm also is entitled to receive royalties on three
classes of InterSystems Nebraska products that were developed with the
assistance of Helm, and that have not yet had a material impact on
InterSystems Nebraska's sales to date. These three products are: a
sampler used to sample, among other things, wood chips and coal; a
higher capacity sampler used to sample, among other things, wood pulp,
cement and coal; and a radius bottom conveyor.
With respect to each of these three products, Helm will receive a
royalty of 5% of all net sales of such products exceeding certain
established thresholds (which thresholds approximated the highest
annual net sales for each of the products during the last three years),
payable on an annual basis for the 15-year period following the closing
(the "Royalties"). In no case can the annual Royalties paid to Helm in
any year with respect any of the products licensed exceed 10% of the
annual gross profit of such product, calculated in accordance with the
accounting procedures and practices currently employed by InterSystems
Nebraska. Royalties to Helm on account of 1995 sales were
approximately $7,000, which remained unpaid at December 31, 1995, as
compared to $5,000 in 1994.
VOTING ON THE PROPOSALS
-----------------------
With regard to the election of directors, votes may be cast in
favor or withheld; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on
all proposals (but not on the election of directors) and will be
counted as present for purposes of the item on which the abstention is
noted. Likewise, broker non-votes are counted for purposes of
determining the presence or absence of a quorum with respect to a given
proposal, but they are not counted for purposes of determining whether
the proposal has been approved. Accordingly, abstentions and broker
non-votes have the effect of a negative vote.
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------
The Board of Directors has selected BDO Seidman, LLP as independent
auditors for the Company for the year ended December 31, 1996. BDO
Seidman, LLP has served as independent auditors for the Company since
1985. The Company has been advised that representatives of BDO
Seidman, LLP will attend the Annual Meeting of Stockholders, will have
an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
PROPOSALS BY STOCKHOLDERS
-------------------------
Proposals that stockholders wish to include in the Company's proxy
statement and form of proxy for presentation at the next Annual Meeting
of Stockholders must be received by the Company at 8790 Wallisville
Road, Houston, Texas 77029, Attention David S. Lawi, prior to July 1,
1997.
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MISCELLANEOUS
-------------
The Board of Directors knows of no other matters that are to be
brought before the meeting. However, if any other matters do come
before the meeting, the persons named on the enclosed form of proxy or
their substitutes will vote in accordance with their judgment on those
matters.
The cost of solicitation of proxies, including expenses in
connection with preparing, assembling and mailing this proxy statement,
will be borne by the Company. The solicitation will be made by mail
and may also be made by officers or regular employees of the Company
personally or by telephone or telegram. The Company may reimburse
brokers, custodians and nominees for their expenses in sending proxies
and proxy material to beneficial owners.
Houston, Texas
September 18, 1996
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INTERSYSTEMS, INC.
FORM OF PROXY
The undersigned hereby appoints HERBERT M. PEARLMAN AND FRED ZEIDMAN,
and each of them with full power of substitution, proxies to vote all shares
of common stock of InterSystems, Inc. (the "Company") owned by the
undersigned at the Annual Meeting of Stockholders on October 29, 1996 and at
any adjournment thereof on the items of business set forth below and on such
other business as may properly come before the meeeting.
ELECTION of each of David S. Lawi and Walter M. Craig, Jr.
as director until his successor shall be duly elected.
FOR [___] WITHHOLD AUTHORITY [___]
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), PRINT NAME(S) BELOW
______________________________________________________________________
This proxy is solicited on behalf of the Board of Directors. If the
undersigned fails to specify how the proxy is to be voted, it will be voted
FOR the election of the nominees.
Date:____________, 1996 ________________________ (L.S.)
Signature of Stockholder
________________________ (L.S.)
(Please sign your name exactly as it
appears on the proxy. When signing as
attorney, agent, executor, administrator,
trustee, guardian or corporate officer,
please give your full title as such.
Each joint owner should sign the consent.)
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