<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 (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 sec. 240.14a-11(c) or sec. 240.14a-12
INTERSYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
CLARE J. ATTURA
- --------------------------------------------------------------------------------
(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)(l) 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:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
INTERSYSTEMS, INC.
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 3, 1997
----------------------
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
InterSystems, Inc. (the "Company") to be held on Wednesday, September 3, 1997,
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 consider and vote upon a proposal to adopt the Company's 1997 Stock
Option Plan and to reserve 500,000 shares of common stock for issuance
thereunder;
3. 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 July 11, 1997 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
July 15, 1997
2
<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 September 3, 1997 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 July 11,
1997 as the record date for the meeting. On that date, the Company had
outstanding 6,386,623 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 July 15, 1997.
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 1997 Annual Meeting of Stockholders. The nominees named
by the Board of Directors are Mr. Daniel T. Murphy and Mr. William Lurie.
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.
3
<PAGE> 4
The nominees and directors are presented below by class.
<TABLE>
<CAPTION>
DIRECTOR TERM AS
OF THE DIRECTOR
NAME AGE COMPANY SINCE EXPIRES IN
- ---- --- ------------- ----------
<S> <C> <C> <C>
Nominees for Director
Daniel T. Murphy 55 1986 1997
William Lurie 66 1995 1997
Other Directors
Herbert M. Pearlman 64 1984 1998
Fred S. Zeidman 50 1993 1998
John E. Stieglitz 63 1991 1998
David S. Lawi 62 1984 1999
Walter M. Craig, Jr. 43 1993 1999
</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 22% 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").
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.
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.
4
<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 of the Foundation 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 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.
5
<PAGE> 6
COMMITTEES AND ATTENDANCE
During 1996, the Company's Board of Directors held one meeting, 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 1996. The Audit Committee
and the Compensation Committee presently is comprised of Messrs. Stieglitz and
Lurie. The Audit Committee and the Compensation Committee did not meet
separately from the full Board of Directors during 1996. The Acquisition
Committee presently is comprised of Mr. Lurie. Mr. Lurie held several meetings
during 1996 in connection with the possible acquisition of Interpak Terminals,
Inc. from Helm Resources, Inc. which did not take place.
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. All 1996 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.
[The rest of this page intentionally left blank.]
6
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of June 1, 1997 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.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Name Ownership (1)(2) Class (2)
- ---- ---------------- ---------
<S> <C> <C>
Beneficial Holders
Helm Resources, Inc. ............. 1,397,733(3) 22.0%
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 .................. 675,000(5) 9.9%
8790 Wallisville Road
Houston, Texas 77029
Herbert M. Pearlman .............. 623,214(6) 9.1%
537 Steamboat Road
Greenwich, CT 06830
David S. Lawi .................... 447,467(7) 6.6%
537 Steamboat Road
Greenwich, CT 06830
Walter M. Craig, Jr .............. 20,345(8) *
Daniel T. Murphy ................. 19,062(9) *
John E. Stieglitz ................ 27,347(10) *
William Lurie .................... 20,000(11) *
All executive officers
and directors
as a group (7 persons) ........... 1,832,435(11) 23.8%
</TABLE>
- ----------------------
* Less than 1%
(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.
7
<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),
Common Stock Purchase Warrants expiring June 30, 2000 at $1.50 per
share (the "Warrants") (15,000) and Common Stock Purchase Warrants
expiring October 29, 2001 at $1.375 per share (the "1996 Warrants")
(30,000).
(6) Includes shares issuable upon exercise of stock options (31,250),
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") (66,667), 1996 Warrants
(60,000), conversion of Series A 10% Convertible Subordinated
Debentures due June 30, 2001 at $1.32 per share (the "Series A 10%
Debentures") (151,515), 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 (15,625),
Dividend Warrants (73,875), Employment Warrants (33,333), 1996 Warrants
(60,000), Series A 10% Debentures (151,515) 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 (3,125) and
Dividend Warrants (3,750).
(9) Includes shares issuable upon exercise of stock options (3,906) 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 stock
options (10,000) and conversion of 8% Debentures (1,923).
(11) Includes 20,000 shares issuable upon exercise of stock options.
(12) Includes shares issuable upon exercise of stock options (483,906),
Dividend Warrants (157,176), Warrants (65,000) and Employment Warrants
(100,000), 1996 Warrants (150,000) and conversion of Series A 10%
Debentures (303,030), 10% Debentures (5,464) and 8% Debentures (40,454).
8
<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 10,000 shares of common stock was filed one day 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 1996. With the exception of Mr. Pearlman, no executive
officers of the Company earned over $100,000 for the fiscal year ended December
31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Annual Compensation
Principal -------------------------- Other Annual
Position Year Salary Compensation(1)
- -------- ---- ------ ---------------
<S> <C> <C> <C>
Fred S. Zeidman, 1996 $ 50,000 --
President and 1995 50,000 --
CEO 1994 50,000 --
Herbert Pearlman, 1996 100,000 $ 57,300
Chairman 1995 100,000 19,344
1994 100,000 --
</TABLE>
(1) Includes life insurance premiums and auto allowance.
[The rest of this page intentionally left blank.]
9
<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.
<TABLE>
<CAPTION>
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
- ---- -------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Fred S.
Zeidman -- -- 400,000/ -- -- / --
Herbert M.
Pearlman -- -- 31,250/ -- -- / --
</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 1996, 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 1996, 1995 and 1994, respectively. He also received a $10,000
bonus from Interpak in 1996, 1995 and 1994.
10
<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.
In October 1996, the Company granted to Mr. Zeidman 30,000 common stock
purchase warrants with an exercise price of $1.375 and an expiration date of
October 29, 2001 as compensation for his services in placing Units in the
private placement which was completed in early 1996.
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 October 1996, the Company granted to Mr. Pearlman 60,000 common stock
purchase warrants with an exercise price of $1.375 and an expiration date of
October 29, 2001 as compensation for his services in placing Units in the
private placement which was completed in early 1996.
11
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During 1996, management of Helm provided various administrative,
managerial, financial, legal and accounting services to the Company for which
the Company is charged direct costs and expenses. Certain indirect
administrative and managerial costs are allocated to the Company based upon
certain formulas which management deems to be reasonable. The Company paid Helm
$51,000 during the year ended December 31, 1996 for such services. At December
31, 1996, the Company had net advances due from Helm of $244,000. The net
advances are for general corporate matters, less unpaid allocated expenses
totaling $32,000.
Interpak Holdings, Inc. ("Interpak"), a subsidiary of Helm, provides
management services to Chemtrusion. The allocated expenses for such management
services, based upon certain formulas which management deems reasonable,
amounted to $36,000 in 1996. In addition, during 1996 Interpak paid certain
operating expenses of the Company and had a balance due from Interpak at
December 31, 1996 of $25,000.
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 bore
interest at 15% per annum plus a 10% enhancement fee thereafter payable in
common stock of the Company at the rate of 2,000 common stock purchase warrants
for each month that the loan is outstanding. The loan matured on December 31,
1995 and was paid in full in March 1996, and 35,000 common stock purchase
warrants with an exercise price of $3.50 per share and an expiration date of
December 31, 1999 were issued in connection with the enhancement fee. 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 was 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 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. On
October 31, 1996, an involuntary petition under Chapter 7 of the federal
bankruptcy laws was filed against TMG. The filing was later converted to a
voluntary petition and the operating agreement between TMG and TSI terminated.
TSI has guaranteed the amounts owing by TMG to PFS. At December 31, 1996,
$70,000 was outstanding under the TMG line of credit and $49,000 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 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.
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.
12
<PAGE> 13
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"). The March 1996 Earnout Payment, which is the last
such 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 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.
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 1996 sales were approximately
$13,000, which remained unpaid at December 31, 1996, as compared to $7,000 in
1995.
13
<PAGE> 14
ADOPTION OF THE COMPANY'S 1997 STOCK OPTION PLAN
On June 6, 1997, the Board of Directors unanimously adopted the 1997 Stock
Option Plan (the "Plan"), subject to approval of the Company's stockholders, a
copy of which is attached as Exhibit A to this Proxy Statement. The Plan will
not become effective unless it is approved by the holders of a majority of the
shares of common stock present and voted in person or represented by proxy at
the Meeting.
The Board of Directors recommends the reservation of 500,000 shares of
common stock of the Company as the maximum number of shares which may be
optioned and sold under the Plan.
The purpose of the Plan, which terminates in the year 2007, is to promote
the interests of the Company and its stockholders by enabling the Company and
its subsidiaries to attract, retain, motivate and reward the best available
employees, directors and consultants of the Company to exert their utmost
efforts to improve and promote the success of the business of the Company by
providing them the opportunity to acquire common stock through the exercise of
stock options.
The Plan authorizes the granting of options to acquire an aggregate of
500,000 shares of common stock to eligible individuals. Both non-qualified
options ("Non-Qualified Options") and options intended to qualify as incentive
stock options ("Incentive Options") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") may be granted under the Plan
(collectively, Non-Qualified and Incentive Options are referred to as
"Options").
ADMINISTRATION
The Plan is administered by the Compensation and Stock Option Committee of
the Board of Directors (the "Committee"). Each member of the Committee must be
a "non-employee director" as defined in, and if required under, Rule 16b-3 of
the Securities Exchange Act of 1934, as amended (the "Act"). Subject to the
provisions of the Plan, the Committee has the authority to determine the
individuals to whom Options are to be granted, the time or times Options are to
be granted, the number of shares to be covered by each Option and the terms and
provisions of each Option, including the vesting and exercise period thereof.
ELIGIBILITY
Officers, directors and regular, full-time employees of the Company or a
subsidiary thereof are eligible to receive Options under the Plan.
The number of shares of common stock which may be subject to Options
granted under the Plan is 500,000. Shares subject to options which are no
longer exercisable shall thereafter become available for issuance under the
Plan pursuant to the grant of new Options.
14
<PAGE> 15
EXERCISE PRICE OF OPTIONS
Options must have an exercise price equal to the fair market value of
the Common Stock on the date of grant. However, at no time may the exercise
price of an Incentive Option granted to an individual (a "Principal
Stockholder") owning more than 10% of the total combined voting power of all
classes of stock of the Company, or any of its subsidiaries or of a parent, be
less than 110% of the fair market value of the shares of common stock on the
date of grant. Options may be granted for terms not exceeding ten years from
the date of grant, except for Incentive Options which are granted to Principal
Stockholders which may be granted for terms not exceeding five years from the
date of grant. Under the terms of the Plan, the aggregate fair market value of
the stock with respect to which Incentive Options are exercisable for the first
time by such individual during any calendar year shall not exceed $100,000.
"Fair market value" is determined by the Committee based upon the
closing bid price of the common stock on the date of grant. On July 8, 1997,
the closing bid price was $1 7/8. Any monies received by the Company from the
exercise of Options will be used for general corporate purposes.
TERMS
All Options available to be granted under the Plan must be granted by
the tenth anniversary of the date the Plan was adopted by the Board of
Directors. The Committee will determine the actual term of the Options but no
Option will be exercisable more than ten years from the date of grant. No
Incentive Options granted to a Principal Stockholder may be exercised more than
five years from the date of grant.
Incentive Options granted to employees under the Plan may be exercised
only by the employee during his employment with the Company or for a period of
thirty (30) days (or such other period of time not exceeding three months as
determined by the Committee) after voluntary or involuntary termination, or for
a period of three months (or such other period of time not exceeding one year
as determined by the Committee) if the employee ceased employment because of
permanent and total disability within the meaning of Section 422(e)(3) of the
Code. Such Incentive Options may, however, be exercised by the employee's
estate, or by any person who acquired the right to exercise such options by
bequest or inheritance from the employee for a period of twelve months from the
date of the employee's death, disability or termination. If such options shall
by their terms sooner expire, such options shall not be extended as a result of
the employee's death, disability or termination. Options granted under the Plan
need not be exercised in the order in which they are granted.
Non-Qualified Options granted under the Plan must be exercised within
ten years from the date of grant or as otherwise specified in an option granted
by the Committee. At the discretion of the Committee, Non-qualified options may
be transferred by the optionee to his/her immediate family, trusts for the
benefit of the immediate
15
<PAGE> 16
family or partnerships or limited liability companies in which only immediate
family members are partners or members, provided any such transfer is made
without consideration and no subsequent transfers are permitted except by
operation of law.
With the exception of the consideration received by the Company upon
the exercise of the options granted under the Plan, no consideration is
received by the Company for the granting of any Options.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE INCENTIVE OPTIONS.
An optionee to whom an Incentive Option is granted under the Plan will
not realize any compensation income, and the Company will not recognize any
compensation deduction, at the time an Incentive Option is granted or
exercised. In the year of exercise, however, the amount by which the fair
market value of the common stock exceeds the option price will constitute a tax
preference item under the alternative minimum tax. If the employee incurs
minimum tax in the year of exercise, however, he should qualify for the credit
for prior year minimum tax liability in the first future year he has regular
tax liability.
In order to obtain incentive stock option treatment for Federal income
tax purposes upon the subsequent sale (or other disposition) by the optionee of
the shares of common stock received upon the exercise of the Option, the sale
(or other disposition) must not occur within two years form the date the Option
was granted nor within one year after the issuance of such shares upon exercise
of the Option (the "ISO holding period requirement"). If the ISO holding period
requirements are satisfied, on the subsequent sale (or other disposition) by
the optionee of the shares of Common Stock received upon exercise of an option,
the optionee generally will recognize income from the sale of a capital asset
equal to the difference, if any, between the proceeds realized from the sale
(or other disposition) and the amount paid as the exercise price of the option.
Alternatively, if the ISO holding period requirements are not satisfied, on the
subsequent sale (or other disposition) by the optionee of the shares of common
stock received upon exercise of the option, the optionee generally will
recognize income taxable as compensation (and the Company will recognize a
compensation deduction) in an amount equal to the lesser of (a) the difference,
if any, between the fair market value of the shares on the date of exercise and
the amount paid as the exercise price of the option or (b) the difference, if
any, between the proceeds realized from the sale or other disposition and the
amount paid as the exercise price of the option. Any additional gain realized
on such sale or disposition (in addition to the compensation income referred to
above) would give rise to income from the sale of a capital asset and be taxed
accordingly.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO NON-QUALIFIED OPTIONS.
The Non-Qualified Options which may be granted under the Plan are not
intended to qualify as incentive stock options within the meaning of Section
422 of the Code. An optionee to whom a Non-Qualified
16
<PAGE> 17
Option is granted under the Plan will generally not realize any compensation
income, and the Company will not recognize any compensation deduction, at the
time the Non-Qualified Option is granted. In the year of exercise, however, the
optionee will generally realize income taxable as compensation (and the Company
will realize a compensation deduction) in an amount equal to the difference, if
any, between the fair market value of the common stock on the date of exercise
and the amount paid as the exercise price of the option.
The tax basis of the shares of common stock received by an optionee
upon exercise will be equal to the amount paid as the exercise price plus the
amount, if any, includable in his gross income as compensation income. The
holding period of the shares will commence on the date of exercise.
If the optionee subsequently sells (or otherwise disposes of the
shares of common stock received upon the exercise of the option, the gain which
is the difference between the sale price and the basis will be taxed as
long-term or short-term capital gain, depending on the holding period of the
stock.
AMENDMENTS AND DISCONTINUANCE OF THE PLAN
The Plan can be amended, suspended or terminated at any time by action
of the Board of Directors except that no amendment to the Plan can be made
without prior stockholder approval where such amendment would (i) materially
increase the total number of shares of Common Stock which may be purchased
under the Plan, or (ii) be required to a approved by a majority of the
stockholders in compliance with Rule 16b-3 of the Act, or Section 422 of the
Code.
OPTION GRANTS TO DIRECTORS, OFFICERS AND EMPLOYEES
As of the date of this Proxy Statement, no options have been granted
under the Plan, and future grants under the Plan are not readily determinable
at this time. Under the Company's 1986 Stock Option Plan, there are outstanding
a total of 54,431 options at prices ranging from $4.00 to $8.20 per share, most
of which expire in October 1997. In addition, in June 1993, the Board of
Directors of the Company awarded to Mr. Fred Zeidman, President, in connection
with his employment by the Company, stock options to purchase 200,000 shares of
common stock at $2.00 per share and stock options to purchase 200,000 shares of
common stock at $3.00 per share. These options are fully vested and expire in
June 1998. Stockholders ratified the grant to Mr. Zeidman at the Company's 1993
Annual Meeting.
VOTE REQUIRED
The approval of the Plan requires the affirmative vote of the holders
of a majority of the shares of common stock present in person or represented by
proxy and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS ADOPTION, APPROVAL AND RATIFICATION OF
THE 1997 STOCK OPTION PLAN AT THE MEETING.
17
<PAGE> 18
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. With respect to the proposal to adopt the Plan,
abstentions may be specified and will be counted as present for purposes of the
item on which the abstention is noted. Accordingly, since the adoption of the
Plan requires the approval of a majority of the outstanding voting shares,
present in person or represented by proxy at the Meeting and entitled to vote,
abstentions will have the effect of a negative vote. 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.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected BDO Seidman, LLP as independent
auditors for the Company for the year ended December 31, 1997. 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 May 6, 1998.
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
July 15, 1997
18
<PAGE> 19
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 September 3, 1997 and at any adjournment
thereof on the items of business set forth below and on such other business as
may properly come before the meeting.
ELECTION of each of Daniel T. Muprhy and William Lurie as director his
successor shall be duly elected.
FOR [ ] WITHHOLD AUTHORITY [ ]
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), PRINT NAME(S) BELOW
-------------------------------------------------------
ADOPTION of the Company's 1997 Stock Option Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
19
<PAGE> 20
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: , 1997 (L.S.)
---------- ------------------------
Signature of Stockholder
(L.S.)
------------------------
Signature of Stockholder
(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).
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
A 1997 Stock Option Plan
</TABLE>
<PAGE> 1
EXHIBIT A
INTERSYSTEMS, INC.
1997 STOCK OPTION PLAN
1. PURPOSES. The purposes of this 1997 Stock Option Plan (the "Plan") are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Directors and Employees
of the Company or its subsidiaries (as defined in Section 2 below) to whom
options may be granted under this Plan, and to promote the success of the
Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended
("ISO's"), or "Non-ISO's," at the discretion of the Board and as reflected in
the terms of the written option agreement.
The Plan is not intended as an agreement or promise of employment.
Neither the Plan, nor any Option granted pursuant to the Plan, shall confer on
any person any right to continue in the employ of the Company. The right of
the Company to terminate an Employee is not limited by the Plan, nor by any
Option granted pursuant to the Plan, unless such right is specifically
described by the terms of any such Option.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed,
or the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Committee appointed under Section
4(a) hereof, or, in the absence of such appointment, the Board of Directors of
the Company.
(d) "Common Stock" shall mean the Common Stock of the Company par
value $.01 per share.
(e) "Company" shall mean InterSystems, Inc., a Delaware
corporation.
(f) "Continuous Service or Continuous Status as an Employee" shall
mean the absence of any interruption or termination of service as an Employee
or Director. Continuous Status as an Employee or Director shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board.
<PAGE> 2
(g) "Director" shall mean any person serving on the Board of
Directors.
(h) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(j) "Fair Market Value" shall mean the closing bid price of the
Company's Common Stock as reported on the American Stock Exchange (or if the
Common Stock is not traded on the American Stock Exchange, on the Exchange
Quotation System or Electronic Bulletin Board which reports or quotes the
closing prices for a share of the Company's Common Stock) for any date (or, if
no shares of Common Stock are traded on such date, for the immediately
preceding date on which shares of Common Stock were traded) as reported in the
Wall Street Journal (or if the Wall Street Journal no longer reports such
price, any newspaper, trade journal or quotation service selected by the
Committee); or, if no such price quotation is available, the price which the
Committee acting in good faith determines through any reasonable valuation
method that a share of Common Stock might change hands between a willing buyer
and a willing seller, neither being under any compulsion to buy or to sell and
both having reasonable knowledge of the relevant facts.
(k) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(l) "Non-ISO" shall mean an Option granted under the Plan to
purchase stock which is not intended by the Committee to satisfy the
requirements of Section 422 of the Code.
(m) "Option" shall mean a stock option granted pursuant to the
Plan.
(n) "Option Price" shall mean the price per Option Share at which
an Option may be exercised.
(o) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(p) "Optionee" shall mean an Employee or Director who receives an
Option.
(q) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" shall mean this InterSystems, Inc. 1997 Stock Option
Plan, as amended from time to time.
(s) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Exchange Act.
2
<PAGE> 3
(t) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(u) "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
(v) "Ten Percent Shareholder" shall mean a person who owns (after
taking into account the attribution rules of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or a Subsidiary.
3. STOCK AUTHORIZED.
Subject to the provisions of Section 11 of the Plan, the maximum
aggregate number of shares which may be Optioned and sold under the Plan shall
not exceed five hundred thousand (500,000) shares of authorized, but unissued,
or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for further grant under the Plan.
4. ADMINISTRATION.
(a) Procedure. The Plan shall be administered by the Board of
Directors or by a Committee of not fewer than two members of the Board of
Directors (the "Committee") to be designated by the Board of Directors of the
Company. No member of the Committee shall be eligible at any time during his
or her tenure to receive Options under the Plan. In addition, no member of the
Committee shall have received any Options under the Plan during the one (1)
year period prior to his or her tenure on the Committee. A majority vote of
the members of the Committee shall be required for all of its actions. The
provisions of the immediately preceding two sentences shall not be applicable
to the extent Rule 16b-3 is amended such that similar requirements are no
longer applicable for the exemption offered thereunder.
A majority of the entire Committee shall constitute a quorum, and the
action of the majority of the Committee members present at any meeting at which
a quorum is present shall be the action of the Committee. All decisions,
determinations, and interpretations of the Committee shall be final and
conclusive on all persons affected thereby and shall, as to Incentive Stock
Options, be consistent with Section 422 of the Code. The Committee shall have
all of the powers and duties set forth herein, as well as such additional
powers and duties as the Board of Directors may delegate to it; provided,
however, that the Board of Directors expressly retains the right in its sole
discretion (i) to elect and to replace the members of the Committee, and (ii)
to terminate or amend this Plan in any manner consistent with applicable law.
The Board of Directors may from time to time elect members of the Committee in
substitution for and in addition to members previously elected, may fill
vacancies in the Committee, however caused, and may discharge the Committee.
Duly authorized actions of the Committee shall constitute actions of the Board
of Directors for the purpose
3
<PAGE> 4
of this Plan and the administration thereof. Notwithstanding anything to the
contrary contained herein unless the last sentence of the first paragraph of
Section 4(a) is applicable, no member of the Committee shall serve as such
under this Plan unless such person is a "disinterested person" within the
meaning of Rule 16b-3(c)(2)(i) of the Exchange Act.
(b) Powers of the Committee. Subject to the provisions of the
Plan, the Committee shall have the authority, in its discretion: (i) to grant
Incentive Stock Options, in accordance with Section 422 of the Code, or to
grant "Non-ISO's;" (ii) to determine the Fair Market Value of the Common
Stock; (iii) to determine the exercise price per share of Options to be granted
which exercise price shall be determined in accordance with Section 8(a) of the
Plan; (iv) to determine the Employees and Directors to whom, and the time or
times at which, Options shall be granted and the number of Shares to be
represented by each Option; (v) to interpret the Plan; (vi) to prescribe, amend
and rescind rules and regulations relating to the Plan; (vii) to determine the
terms and provisions of each Option granted (which need not be identical) and,
with the consent of the holder thereof, modify or amend each Option; (viii) to
accelerate or defer (with the consent of the Optionee) the exercise date of any
Option; (ix) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Board; and (x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Effect of the Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all Optionees and any other holders of any Options granted under the Plan.
5. ELIGIBILITY. Options may be granted only to consultants, advisors,
Employees and to Directors who are not serving on the Committee, except to the
extent provided in the last sentence of the first paragraph of Section 4(a).
Any Employee or Director, consultant or advisor who has been granted an Option
may, if he is otherwise eligible, be granted an additional Option or Options.
Each grant of an Option shall be evidenced by an Option Agreement, and
each Option Agreement shall (1) specify whether the Option is an Incentive
Stock Option or a Non-ISO and (2) incorporate such other terms and conditions
as the Committee acting in its absolute discretion deems consistent with the
terms of this Plan, including, without limitation, a restriction on the number
of shares of stock subject to the Option which first become exercisable during
any calendar year.
To the extent that the aggregate Fair Market Value of the stock of the
Company subject to Incentive Stock Options granted any Optionee which first
become exercisable in any calendar year exceeds $100,000, such Options shall be
treated as Non-ISO's. This $100,000 limitation shall be administered in
accordance with the rules under Section 422(d) of the Code.
6. EFFECTIVE DATE AND TERM OF PLAN. The effective date of this Plan
("Effective Date") shall be the date it is adopted by the Board, provided the
stockholders of the Company (acting at a duly called meeting of such
stockholders) approve this Plan within twelve (12) months after such Effective
Date. The effectiveness of Options granted under this Plan prior to the date
such shareholder approval is obtained shall be contingent on such shareholder
approval.
4
<PAGE> 5
Subject to the provisions of Section 13 hereof, no Option shall be
granted under this Plan on or after the earlier of
(a) the tenth anniversary of the Effective Date of this Plan in
which event the Plan otherwise thereafter shall continue in effect until all
outstanding Options shall have been surrendered or exercised in full or no
longer are exercisable, or
(b) the date on which all of the Common Stock reserved for
issuance under Section 3 of this Plan has (as a result of the exercise or
expiration of Options granted under this Plan) has been issued or no longer is
available for use under this Plan, in which event the Plan also shall terminate
on such date.
7. TERM OF OPTION. An Option shall expire on the date specified in such
Option, which date shall not be later than the tenth anniversary of the date on
which the Option was granted, except that if any Employee or Director, at any
time an Incentive Stock Option is granted to him, owns stock representing more
than ten percent of the total combined voting power of all classes of Common
Stock (or, under Section 424(d) of the Code is deemed to own stock representing
more than ten percent of the total combined voting power of all such classes of
Common Stock, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal
descendant of such Employee or Director, or by or for any corporation,
partnership, state or trust of which such Employee or Director is a
shareholder, partner or beneficiary), the Incentive Stock Option granted him
shall not be exercisable after the expiration of five years from the date of
grant or such earlier expiration as provided in the particular Option
agreement.
8. EXERCISE PRICE AND CONSIDERATION.
(a) The Option Price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Committee,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, immediately
before the grant of such Incentive Stock Option, owns stock (considering
attribution under Section 424(d) of the Code) representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the Option Price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to an Employee, the per share
exercise price shall be no less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.
(ii) In the case of an Option granted on or after
the effective date of registration of any class of equity security of the
Company pursuant to Section 12 of the Exchange Act and prior to six months
after the termination of such registration, the per Share exercise price
5
<PAGE> 6
shall be no less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board and may consist entirely of cash, check, promissory note, other
Shares of Common Stock having a fair market value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said option
shall be exercised, by conversion of Shares (in the manner provided in the
succeeding sentence), or any combination of such methods of payment, or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under Delaware Law. If the optionee desires to pay for the
Optioned Shares, in whole or in part, by conversion of Shares, Optionee shall
be entitled to receive that number of Shares equal to the quotient obtained by
dividing [(A-B)(x)] by (A) where:
(A) = the Fair Market Value of one Share of Common Stock on
the date of conversion.
(B) = the Option Price for one Share of Common Stock
subject to an Option.
(X) = the Number of Shares of Common Stock issuable upon
exercise of the Option if exercised for cash;
provided, that if the above calculation results in a negative number, then no
Shares shall be issued or issuable upon conversion of the Option. Any payment
made in Shares of the Company's Common Stock shall be treated as equal to the
Fair Market Value of such Common Stock on the date the properly endorsed
certificate for such Common Stock is delivered to the Committee (or its
delegate).
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Committee, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance, which in no event will be delayed more than thirty (30)
days from the date of the exercise of the Option (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), of the stock certificate evidencing such Shares, no
right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock,
6
<PAGE> 7
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Service as an Employee or Director. If the
Continuous Service of any Employee or Director terminates, he may, but only
within thirty (30) days (or such other period of time not exceeding three (3)
months as is determined by the Committee) after the date he ceases to be an
Employee or Director of the Company, exercise his Option to the extent that he
was entitled to exercise it as of the date of such termination. To the extent
that he was not entitled to exercise the Option at the date of such
termination, or if he does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event an Optionee who is at the time of his becoming
disabled an Employee or Director is unable to continue his Continued Service
with the Company as a result of his total and permanent disability (as defined
in Section 105(d)(4) of the Code, as amended), he may, but only within three
(3) months (or such other period of time not exceeding twelve (12) months as is
determined by the Committee) from the date of disability, exercise his Option
to the extent he was entitled to exercise it at the date of such disability and
to the extent such Option has not already expired by its terms. To the extent
that he was not entitled to exercise the Option at the date of disability, or
if he does not exercise such Option (which he was entitled to exercise) within
the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Optionee who is at the time of his
death an Employee or Director of the Company and who shall have been in
Continuous Status as an Employee or Director since the date of grant of the
Option, the Option may be exercised, at any time within twelve (12) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only
to the extent of the right to exercise that would have accrued had the Optionee
continued living one (1) month after the date of death; or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Committee) after the
termination of Continuous Status as an Employee or Director, the Option may be
exercised, at any time within three (3) months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination and not yet expired.
7
<PAGE> 8
10. TRANSFERABILITY OF OPTIONS.
(a) Incentive Stock Options. The Incentive Stock Options may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
(b) Non-qualified Stock Options. The Committee may, in its
discretion, authorize all or a portion of the options to be granted to the
Optionee to be on terms which permit transfer by such Optionee to (i) the
spouse, children or grandchildren or parents of the Optionee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership or limited liability company in which
such Immediate Family Members are the only partners or members, provided that
(x) there is no consideration paid for any such transfer and (y) subsequent
transfers shall be prohibited except in accordance with the laws of descent and
distribution, or by will. Following transfer, any such options shall continue
to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that for purposes of Sections 4, 5, 8 and 9
hereof, the term "Optionee" shall be deemed to refer to the transferee. The
events of termination of employment of Section 9 hereof shall continue to be
applied with respect to the original Optionee, following which the options
shall be exercisable by the transferee only to the extent, and for the periods
specified at Section 9 hereof.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend with
respect to the Common Stock or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, or in the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may,
in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board and give each Optionee
the right to exercise his Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
8
<PAGE> 9
12. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN. (a) The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall require
approval of the holders of a majority of the outstanding shares of the Company
entitled to vote:
(i) any material increase in the number of Shares subject to the
Plan, other than in connection with an adjustment under Section 11 of the Plan;
or
(ii) if shareholder approval of such amendment is required for
continued compliance with Rule 16b-3 or Section 422 of the Code.
(b) Shareholder Approval. Any amendment requiring shareholder
approval under Section 13(a) of the Plan shall be solicited as described in
Section 19 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
14. RIGHTS AS A STOCKHOLDER. The holder of an option shall have no rights as
a stockholder with respect to any shares covered by the option (including,
without limitation, any rights to receive dividends or non-cash distributions
with respect to such shares) until the date of issue of a stock certificate to
him or her for such shares. No adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.
15. CANCELLATION AND NEW GRANT OF OPTIONS, ETC. The Board of Directors shall
have the authority to effect, at any time and from time to time, with the
consent of the affected Optionees, (i) the cancellation of any or all
outstanding options under the Plan and the grant in substitution therefor of
new options under the Plan covering the same or different numbers of shares and
having an option exercise price per share which may be lower or higher than the
exercise price per share of the cancelled options or (ii) the amendment of the
terms of any and all outstanding options under the Plan to provide an option
exercise price per share which is higher or lower than the then-current
exercise price per share of such outstanding options.
16. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without
9
<PAGE> 10
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
18. OPTION AGREEMENT. Options shall be evidenced by written Option agreements
in such form as the Committee shall approve. The stock option agreement
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable. Any such stock option agreement shall contain
such limitations and restrictions upon the exercise of the Option as shall be
necessary in order that such option will be an Incentive Stock Option as
defined in Section 422 of the Code.
19. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve months before or
after the date the Plan is adopted. If such shareholder approval is obtained
at a duly held stockholders' meeting, it may be obtained by the affirmative
vote of the holders of a majority of the outstanding shares of the Company
present or represented and entitled to vote thereon. The approval of such
stockholders of the Company shall be (1) solicited substantially in accordance
with Section 14(a) of the Exchange Act and the rules and regulations
promulgated thereunder, or (2) solicited after the Company has furnished in
writing to the holders entitled to vote substantially the same information
concerning the Plan as that which would be required by the rules and
regulations in effect under Section 14(a) of the Exchange Act at the time such
information is furnished.
20. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any Option granted thereunder,
10
<PAGE> 11
and against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Board member is liable for negligence
or misconduct in the performance of his duties; provided that within 60 days
after institution of any such action, suit or proceeding a Board member shall
in writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
21. APPLICATION OF FUNDS. The proceeds received by the Company from the sale
of Common Stock pursuant to Options will be used for general corporate
purposes.
22. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall impose
no obligation upon the Optionee to exercise such Option.
23. OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect any
other stock option or incentive or other compensation plans in effect for the
Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
24. SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the singular
shall include the plural, and the masculine pronoun shall include the feminine
gender.
25. HEADINGS, ETC., NO PART OF PLAN. Headings of Articles and Sections hereof
are inserted for convenience and reference; they constitute no part of the
Plan.
26. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware, except to the extent preempted by
Federal law. The Plan is intended to comply with Rule 16b-3. Any provisions
inconsistent with Rule 16b-3 shall be inoperative and shall not affect the
validity of the Plan, unless the Board of Directors shall expressly resolve
that the Plan is no longer intended to comply with Rule 16b-3.
IN WITNESS WHEREOF, InterSystems, Inc. has caused its duly authorized
representative to execute this Plan this __ day of ____, 1997 to evidence its
adoption of the Plan.
INTERSYSTEMS, INC.
By:
--------------------------------
Name:
---------------------------
Title:
-------------------------
11
