3501 Algonquin Road
Rolling Meadows, Illinois 60008
August 5, 1997
Dear Stockholder:
Delphi's annual meeting of stockholders will be held at
10:00 a.m. local time on Wednesday, September 3, 1997, at Delphi's
principal executive office located at 3501 Algonquin Road in Rolling
Meadows, Illinois.
The notice of meeting, proxy statement and proxy card are
included with this letter. The formal business of the meeting is
described in the attached notice of meeting. After completion of that
business, there will be an update on developments in Delphi's products
and markets.
It is important that your shares are represented and voted
at the annual meeting, regardless of the size of your holdings.
Regardless of whether you plan to attend, please complete and return
the enclosed proxy to ensure that your shares will be represented at
the annual meeting. If you attend the annual meeting, you may, of
course, withdraw your proxy should you wish to vote in person.
Sincerely,
John Trustman
President and Chief Executive Officer<PAGE>
3501 Algonquin Road
Rolling Meadows, Illinois 60008
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 3, 1997
The annual meeting of stockholders of Delphi Information
Systems, Inc., a Delaware corporation (the "Company"), will be held at
the principal executive office of the Company, which is located at
3501 Algonquin Road in Rolling Meadows, Illinois, at 10:00 a.m. local
time, on Wednesday, September 3, 1997, for the following purposes:
(1) To elect four directors of the Company for the ensuing year.
(2) To transact such other business as may properly come before
the meeting or any adjournment thereof.
The close of business on August 5, 1997, has been fixed as
the record date for determination of those stockholders entitled to
vote at the meeting. Only holders of record of shares of the
Company's Common Stock and Series D Preferred Stock on that date will
be entitled to vote.
A list of the stockholders entitled to vote at the meeting
may be examined at the Company's principal executive office, located
at 3501 Algonquin Road in Rolling Meadows, Illinois, during the ten-
day period preceding the meeting.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING
IN PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY.
THE PROXY IS REVOCABLE AT ANY TIME. IF YOU ARE PRESENT AT THE ANNUAL
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON IF YOU SO
DESIRE.
By Order of the Board of Directors,
James A. Harsch
Secretary
August 5, 1997
<PAGE>
DELPHI INFORMATION SYSTEMS, INC.
3501 Algonquin Road
Rolling Meadows, Illinois 60008
______________________________
PROXY STATEMENT
______________________________
This proxy statement and the enclosed proxy card are being
mailed on or about August 11, 1997, to stockholders of Delphi
Information Systems, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the
"Board of Directors") for use at the annual meeting (the "Meeting")
of stockholders to be held on September 3, 1997, and any adjournments
thereof.
The total cost of this solicitation will be borne by the
Company. In addition to the mails, proxies may be solicited by
officers and other employees of the Company, without extra
remuneration, by personal interviews, telephone and telecopy. It is
anticipated that banks, brokerage houses and other custodians,
nominees and fiduciaries will forward soliciting material to
beneficial owners of shares entitled to vote at the Meeting, and such
parties will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection therewith.
If you execute and deliver a proxy pursuant to this proxy
statement, you may revoke it at any time before it is exercised at the
Meeting by filing with the Secretary of the Company an instrument
revoking it or by delivering a duly executed proxy bearing a later
date. In addition, if you are present at the Meeting, you may vote
your shares in person. Proxies in the form enclosed, if duly signed
and received in time for voting and not so revoked, will be voted at
the Meeting in accordance with the directions specified therein. If
no directions are specified, proxies will be voted in favor of each of
the proposals and for the nominees for election as directors set forth
herein and otherwise at the discretion of the proxyholders on all
other matters that may properly come before the Meeting and any
adjournment thereof.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on August 5, 1997, the record date
for the Meeting, there were ________ shares of Common Stock and 221
shares of Series D Preferred Stock outstanding. Each share of Common
Stock is entitled to one vote, and each share of Series D Preferred
Stock is entitled to 226.2 votes (representing a total of 49,990 votes
for the Series D Preferred Stock), on all matters of business to come
before the Meeting. There is no right to cumulative voting as to any
matter, including the election of directors. Under Delaware law,
abstentions are treated as present and entitled to vote and,
<PAGE>
therefore, have the effect of a vote against the matter. A broker
nonvote on a matter is considered not entitled to vote on that matter
and, therefore, is not counted in determining whether a matter
requiring approval of a majority of the shares present and entitled to
vote has been approved.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of July 15, 1997, the
ownership of Common Stock and Series D Preferred Stock by each
director of the Company, by each of the Named Officers (as defined
below under "EXECUTIVE COMPENSATION"), by all current executive
officers and directors of the Company as a group, and by all persons
known to the Company to be beneficial owners of more than five percent
of the Common Stock or the Series D Preferred Stock. The Common Stock
and the Series D Preferred Stock are the Company's only outstanding
classes of voting securities. The information set forth in the table
as to directors and officers is based upon information provided to the
Company by such persons in connection with the preparation of this
proxy statement. Except where otherwise indicated, the mailing
address of each of the stockholders named in the table is c/o Delphi
Information Systems, Inc., 3501 Algonquin Road, Suite 500, Rolling
Meadows, Illinois 60008.
<PAGE>
<TABLE>
<CAPTION>
Common Stock Series D Preferred
-------------------------------- -----------------------------
Name and Position of Percent of Percent of Percent of
Beneficial Owner Ownership<1> Class<2> Ownership<1> Class Total Vote<2>
<S> <C> <C> <C> <C> <C>
Bay Area Micro-Cap Fund, 2,348,751 6.2 -- -- 6.2
L.P.<3>
Covington Associates<4> -- -- 221 100 *
Coral Partners II, a limited 5,413,115 14.8 -- -- 14.8
partnership<5>
Okabena Partnership K, a 2,500,000 6.6 -- -- 6.6
general partnership<6>
Yuval Almog<7> 5,591,115 15.2 -- -- 15.2
Director and Chairman of the
Board
John Trustman -- -- -- -- --
President and Chief Executive
Officer
James Harsch<8> 75,000 * -- -- *
Vice President-
Administration; Chief
Financial Officer
Joseph Oddo<9> 38,000 * -- -- *
Director
William Baumel<10> 84,222 * -- -- *
Larry Gerdes<11> 246,719 * -- -- *
M. Denis Connaghan 20,000 * -- -- *
Director
All directors and executive 6,055,056 16.5 -- -- 16.5
officers as a group (7
persons)
=================================
<FN>
<1> Each holder has sole voting and investment power with respect to
the shares listed unless otherwise indicated.
<2> Percentages less than one percent are indicated by an asterisk.
<3> The address of Bay Area Micro-Cap Fund, L.P. is 1151 Bay Laurel
Drive, Menlo Park, California 94025.
<4> The address of Covington Associates is 60 State Street, Boston,
Massachusetts 02109.
<5> The address of Coral Partners II is 60 South Sixth Street, Suite
3510, Minneapolis, Minnesota 55402.
<6> The address of Okabena Partnership K is 5140 Norwest Center,
Minneapolis, Minnesota 55402-4133.
<7> Other than 78,000 shares subject to currently exercisable options
and 50,000 shares subject to warrants exercisable on July 15,
1997 and within 60 days thereafter held by Mr. Almog, all shares
of Common Stock are held by Coral Partners II. Mr. Almog is the
managing general partner of Coral Partners II. Mr. Almog
disclaims beneficial ownership of the shares held by Coral
Partners II. The address of Mr. Almog is 60 South Sixth Street,
Suite 3510, Minneapolis, Minnesota 55402.
<8> Includes 75,000 shares subject to options exercisable on July 15,
1997 and within 60 days thereafter.
<9> Total is options exercisable on July 15, 1997 and within 60 days
thereafter.
-2-
<PAGE>
<10> Includes 44,222 shares subject to options, and 20,000 shares
subject to warrants exercisable on July 15, 1997 and within 60
days thereafter.
<11> Includes 93,000 shares subject to options exercisable on July 15,
1997 and within 60 days thereafter. The address of Mr. Gerdes is
3353 Peachtree Road, N.E., Suite 1030, Atlanta, Georgia 30326.
</TABLE>
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Four members of the Board of Directors are proposed to be elected
at the Meeting to serve until the next annual meeting and until their
successors have been elected and qualified. Proxies received will be
voted for the election of the nominees named below as directors,
unless authority to do so is withheld. Each of the nominees is
currently a director of the Company and has served continuously as
such since the date indicated in his biography below. In the event
that any nominee is unable or declines to serve as a director at the
time of the Meeting (which is not anticipated), proxies will be voted
for the election of such person or persons as may be designated by the
present Board of Directors. Directors will be elected at the Meeting
by a plurality of the votes cast at the Meeting by the holders of
shares represented in person or by proxy.
Set forth below is information as to each nominee for director,
including age, as of July 15, 1997, principal occupation and
employment during the past five years, directorships with other
publicly-held companies, and period of service as a director of the
Company.
The Board of Directors recommends a vote FOR the election of each
of the following nominees for director.
Yuval Almog, 47, was elected a director of the Company in
September 1991 and was elected Chairman of the Board of Directors on
November 30, 1993. Mr. Almog is President of Coral Group, Inc. and
managing general partner of its venture capital partnerships. He
joined the Coral Group in 1986 and became its managing partner in
1991. Mr. Almog is Chairman of the Board of Directors of Tricord
Systems, Inc., Racotek, Inc. and Computer Aided Service, Inc. and is
also a director of Advanced Telecommunication Services, Systems &
Networks and Teltech Resource Network. Mr. Almog earned a bachelor of
arts degree in mathematics and bachelor of science degree in compute
sciences and economics from the University of Alabama and a master of
science degree in management from the Massachusetts Institute of
Technology.
-4-
<PAGE>
William R. Baumel, 29, was appointed a director of the Company on
July 15, 1996. Mr. Baumel is a venture capitalist with Coral Group,
where he specializes in information services and technology investing.
He joined Coral Group in 1996. From 1994 to 1996, Mr. Baumel held
various positions with the Private Markets Group of Brinson Partners,
Inc., an institutional money manager. His last position with Brinson
Partners' Private Market Group was as portfolio manager. Mr. Baumel
was in marketing with Proctor & Gamble, a consumer products company,
during 1993, and from 1990 to 1992, he was a certified public
accountant and consultant with Deloitte & Touche, an international
accounting and consulting firm. Mr. Baumel earned a bachelor of
science degree in accounting and economics from The Ohio State
University, SUMMA CUM LAUDE, and an MBA from The University of
Michigan, with HIGHEST DISTINCTION.
Larry G. Gerdes, 47, was elected a director of the Company in
1985. Mr. Gerdes has been Chief Executive Officer of Transcend
Services, Inc., which provides consulting and management services to
hospitals in the medical records area, since 1991. He is also a
director of Transcend Services, Inc.
John Trustman, 41, joined the Company in June 1997 as President
and Chief Executive Officer. From 1995 through 1996, Mr. Trustman was
Senior Vice President and Chief Information Officer of Aetna Health
Plans. From 1990 through 1995 he was with Fidelity Investments as
Senior Vice President. Prior to Fidelity he served as a manager and
consultant for Bain Consulting. Mr. Trustman has an MBA from Harvard
University and an AB degree from Yale University.
Board of Directors and Its Committees
The Board of Directors has a standing Audit Committee that
consists exclusively of nonemployee directors. The Audit Committee
meets with the Company's independent auditors, reviews audit
procedures, receives recommendations and reports from the auditors and
reviews internal controls. The Audit Committee currently consists of
Mr. Gerdes (Chairman) and Mr. Baumel. The Audit Committee met one
time during fiscal 1997.
The Board of Directors has a standing Compensation Committee that
consists exclusively of nonemployee directors. The Compensation
Committee is responsible for reviewing and recommending to the full
Board of Directors compensation of officers and directors and
administration of the Company's various employee benefit plans. The
Compensation Committee currently consists of Messrs. Almog (Chairman)
and Gerdes. The Compensation Committee did not meet during fiscal
1997.
The Board of Directors does not have a nominating committee or a
committee performing similar functions.
-5-
<PAGE>
The Board of Directors held 11 meetings during fiscal 1997. No
director attended fewer than 75 percent of the meetings of the Board
of Directors and its committees on which he served.
Compensation of Directors
Nonemployee directors participate in the Company's Nonqualified
Stock Option Plan for Directors (the "Directors' Plan"), pursuant to
which a nonqualified option to purchase 15,000 shares of Common Stock
is granted to each director on the date he first becomes a nonemployee
director and an additional option to purchase 5,000 shares is granted
to him on the first business day of each year thereafter for so long
as he continues to serve as a nonemployee director. Pursuant to the
Company's 1996 Stock Incentive Plan (the "1996 Plan"), nonemployee
directors are eligible to receive discretionary grants from time to
time of options to purchase shares of Common Stock and other stock-
based incentive-compensation awards. Nonemployee directors do not
receive an annual retainer or any other fees for their service as
directors.
EXECUTIVE COMPENSATION
Set forth in the table below is information regarding the annual
and long-term compensation for the fiscal years ended March 31, 1995,
1996 and 1997, for the acting and former Chief Executive Officers and
the four most highly compensated executive officers of the Company
(collectively, the "Named Officers").
-6-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE<*>
Annual Compensation Long-Term
Compensation
Stock
Options
Name and Fiscal Other Annual (# of All Other
Present Position Year Salary Bonus Compensation<A> Shares) Compensation
<S> <C> <C> <C> <C> <C> <C>
Joseph Oddo<1> 1997 $132,687 -- -- 438,000 --
Chairman of the Executive 1996 0 -- -- -- --
Committee 1995 0 -- -- -- --
James Harsch<2> 1997 $100,385 -- $43,963 300,000 --
Vice President- 1996 0 -- -- -- --
Administration; 1995 0 -- -- -- --
Chief Financial Officer
Greg Gamp 1997 $128,077 -- -- 220,000 --
Vice President-Strategy 1996 $118,592 $26,000 -- 40,000 --
1995 $109,874 -- -- 40,000 --
M. Denis Connaghan<3> 1997 $162,886 -- $25,136 -- --
Former President and 1996 $200,818 -- -- -- $88,375(A)
Chief Executive Officer 1995 $141,104 -- -- 300,000 --
Meigan Putnam4> 1997 $140,000 -- $61,850 200,000 --
Former Vice President- 1996 $139,818 -- -- 100,000 --
Operations 1995 $16,154 -- -- -- --
Rangaswarmy Srihari<5> 1997 $116,539 -- -- 220,000 --
Former Vice President- 1996 $120,456 $15,000 -- -- --
Product Development 1995 $45,306 -- -- 80,000 --
===============================
<FN>
<A> Represents reimbursement of relocation expenses.
<1> Mr. Oddo was chairman of the Executive Committee from August
1996.
<2> Mr. Harsch joined the Company effective July 15, 1996.
<3> Mr. Connaghan left the employment of the Company effective
December 31, 1996.
- ---------------
<*> The table does not include William Baumel who oversaw management
of the Company when the Company was searching for a new Chief Executive
Officer. Mr. Baumel was not paid for these services.
-7-
<PAGE>
<4> Ms. Putnam left the employment of the Company effective May 31,
1997.
<5> Mr. Srihari left the employment of the Company effective January
31, 1997.
</TABLE>
Option Grants in Last Fiscal Year
During the fiscal year ended March 31, 1997, 438,000 stock
options were granted to Mr. Oddo, 300,000 were granted to Mr. Harsch,
220,000 were granted to each of Mr. Gamp and Mr. Srihari and 200,000
were granted to Ms. Putnam.
Option Exercises and Fiscal Year-End Values
Set forth in the table below is information with respect to
(i) the exercise by the Named Officers of options to purchase Common
Stock during the fiscal year ended March 31, 1997, and (ii) the fiscal
year-end value of unexercised options to purchase Common Stock that
were held by the Named Officers at March 31, 1997.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Unexercised Value of Unexercised
Options at FY-End In-the-Money Options at FY-End
Shares Acquired Value
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
M. Denis Connaghan -- -- 150,000 150,000 -- --
Joseph Oddo -- -- 190,500 247,500 -- --
Meigan Putnam -- -- 50,000 250,000 10,950 10,950
James Harsch -- -- 62,500 237,500 (11,875) (106,875)
Greg Gamp -- -- 40,000 260,000 (11,400) (11,400)
Rangaswarmy Srihari -- -- 40,000 260,000 8,760 8,760
</TABLE>
<PAGE>
Employment Agreements with Named Officers
Mr. Connaghan was employed pursuant to a letter agreement dated
June 17, 1994, as amended by a letter agreement dated July 7, 1994,
under which he received an annual salary of not less than $200,000,
with an annual bonus target equal to 45 percent of annual base salary.
The bonus would be earned upon Mr. Connaghan's achievement of all
planned objectives agreed upon by him and the Board of Directors.
Pursuant to the letter agreement, Mr. Connaghan was granted an option
to purchase 300,000 shares of Common Stock at an exercise price of
$1.00 per share, which was the closing price of the Common Stock on
the Nasdaq National Market on the date of grant, October 6, 1994. The
option became exercisable to the extent of 25 percent of the shares
covered thereby after six months from the date of grant and to the
extent of an additional 25 percent thereof after 18 months from the
date of grant and will become exercisable to the extent of an
additional 25 percent of the shares covered thereby after 30 months
from the date of grant and 42 months from the date of grant. Pursuant
to the letter agreement, Mr. Connaghan would have received up to 12
months of salary continuance if his employment had been terminated by
the Company without cause prior to December 31, 1995. Mr. Connaghan
left the employment of the Company effective December 31, 1996.
Mr. Oddo was employed pursuant to a letter agreement dated August
26, 1996 under which he was paid a consulting fee of $25,000 per month
for the period in which he was advising the Company on a full-time
basis. Pursuant to the letter agreement, Mr. Oddo was granted 60,000
restricted shares of Common Stock which vested at the rate of 5,000
shares a month at the end of each month in which he was paid the
consulting fee. Mr. Oddo was also granted options to purchase 300,000
shares of Company Common Stock, 120,000 of which were to vest on the
completion of short-term objectives and 180,000 of which were to vest
on the completion of long-term objectives.
Mr. Trustman is employed pursuant to a letter agreement dated May
28, 1997 under which he receives a base salary of $175,000 per year
and a performance bonus of up to $87,500 per year based upon
performance objectives established by Mr. Trustman and the Board of
Directors. Pursuant to the letter agreement, Mr. Trustman is also
granted options to purchase 750,000 shares of Common Stock at an
exercise price of $1.094 per share which are to vest at 25% at then
end of each year. Mr. Trustman was also granted options to purchase
150,000 shares of Company Common Stock which are to vest on the
earlier of May 31, 2003 and the business day following the thirtieth
consecutive trading day on which the closing bid price for Company
Common Stock is $2.50 or more per share, provided that in both
instances, on the date of vesting Mr. Trustman continues to be the
President and Chief Executive Officer of the Company.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Messrs. Almog and
Gerdes. None of the executive officers of the Company serves on the
board of directors of another company in any instance where an
-9-
<PAGE>
executive officer of the other company serves on the Board of
Directors.
Compensation Committee Report on Compensation of Executive Officers
The Compensation Committee of the Board of Directors (the
"Committee") is pleased to present its report on executive
compensation. The Committee reviews and makes recommendations to the
Board of Directors regarding salaries, compensation and benefits of
officers and other key employees of the Company and grants options to
purchase Common Stock. This report documents the components of the
Company's executive officer compensation programs and describes the
bases upon which compensation is determined by the Committee with
respect to the executive officers of the Company, including the Named
Officers.
This report shall not be deemed filed, and shall not be deemed
incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing, under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), except to the extent that the Company
specifically incorporates this information by reference.
Compensation Philosophy. The compensation philosophy of the
Company is to endeavor to directly link executive compensation to
continuous improvements in corporate performance and increases in
stockholder value. The Committee has adopted the following objectives
as guidelines for compensation decisions.
* Display a willingness to pay levels of compensation that are
necessary to attract and retain highly qualified executives.
* Be willing to compensate executive officers in recognition
of superior individual performance, new responsibilities or
new positions within the Company.
* Take into account historical levels of executive
compensation and the overall competitiveness of the market
for high quality executive talent.
* Implement a balance between short and long-term compensation
to complement the Company's annual and long-term business
objectives and strategies and encourage executive
performance in furtherance of the fulfillment of those
objectives.
* Provide variable compensation opportunities based on the
performance of the Company, encourage stock ownership by
executives and align executive remuneration with the
interests of stockholders.
-10-
<PAGE>
Compensation Program Components. The Committee regularly reviews
the Company's compensation program to ensure that pay levels and
incentive opportunities are competitive with the market and reflect
the performance of the Company. The particular elements of the
compensation program for executive officers are further explained
below.
Base Salary. The Company's base pay levels are largely
determined by evaluating the responsibilities of the position
held and the experience of the individual and by comparing the
salary scale with companies of similar size and complexity.
Actual base salaries are kept within a competitive salary range
for each position that is established through job evaluation and
market comparisons and approved by the Committee as reasonable
and necessary.
Annual Incentives. The Company has historically awarded cash
bonuses to certain salaried employees (including the Named
Officers) of the Company. Bonuses are based on various factors,
including prior year profitability, management development and
the procurement and assimilation of acquisitions. The Company
awarded bonuses to Messrs. Gamp and Srihari for the fiscal year
ended March 31, 1996. The Company did not award bonuses to any
Named Officers for the fiscal year ended March 31, 1997.
Stock Option Program. The Committee strongly believes that by
providing those persons who have substantial responsibility over
the management and growth of the Company with an opportunity to
increase their ownership of the Company's stock, the interests of
stockholders and executives will be closely aligned. Therefore,
the Company's officers (including the Named Officers) and other
key employees are eligible to receive either incentive stock
options or nonqualified stock options as the Committee may
determine from time to time, giving them the right to purchase
shares of Common Stock at an exercise price equal to 100 percent
of the fair market value of the Common Stock at the date of
grant. The number of stock options granted to executive officers
is based on competitive practices.
President and Chief Executive Officer Compensation. The
compensation of the former President and Chief Executive Officer since
he joined the Company in July 1994 was chiefly determined under his
employment contract described above under "Employment Agreements with
Named Officers." Mr. Trustman only recently joined the Company. His
compensation is solely the product of the negotiation of his
employment agreement described above under Employment Agreements with
Named Officers. The factors that are expected to predominate in the
evaluation of the President and Chief Executive Officer over time are
his performance in relation to (i) strengthening the Company's
management team, (ii) upgrading the Company's products and broadening
its product lines, and (iii) installing the disciplines necessary to
achieve consistent profitability.
-11-
<PAGE>
Summary. After its review of all existing programs, the
Committee continues to believe that the total compensation program for
executives of the Company is focused on enhancing corporate
performance and increasing value for stockholders. The Committee
believes that the compensation of executive officers is properly tied
to stock appreciation through awards to be granted under the 1996 Plan
and that executive compensation levels at the Company are competitive
with the compensation programs provided by other corporations with
which the Company competes. The foregoing report has been approved by
all members of the Committee.
Respectfully submitted,
Yuval Almog
Larry G. Gerdes
Performance Graph
Rules promulgated by the Securities and Exchange Commission (the
"SEC") under the Exchange Act require that the Company include in this
proxy statement a line-graph presentation comparing cumulative
shareholder returns for the last five fiscal years with the Nasdaq
SmallCap Market stock index and either a nationally recognized
industry index or an index of peer group companies selected by the
Company. The Company chose the Nasdaq Computer & Data Processing
Index for purposes of this comparison. The following graph assumes
the investment of $100 on March 31, 1992, and the reinvestment of
dividends (rounded to the nearest dollar).
CERTAIN INTERESTS AND TRANSACTIONS
The Company issued convertible promissory notes in the aggregate
principal amount of $1,375,000 as of March 15, 1994, and issued an
additional $125,000 in the first quarter of fiscal 1995. These notes
were originally convertible at the option of the holder into shares of
Common Stock at a per share conversion price of $2.00, subject to
certain anti-dilution provisions. On April 19, 1996, these notes were
converted into shares of Common Stock and, as a result of the anti-
dilution provisions, redeemable warrants to purchase shares of Common
Stock at an exercise price of $1.50 per share at the rate of one share
of Common Stock and one warrant for each $1.00 of original principal
amount. $1,000,000 of the convertible promissory notes were held by
Coral Partners II, of which Mr. Almog is the managing general partner,
and $115,000 were held by foundations and trusts associated with, and
family members of, Donald L. Lucas, a former director of the Company.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's
officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to
file with the SEC reports of securities ownership on Form 3 and
changes in such ownership on Forms 4 and 5. Officers, directors and
more-than-ten-percent beneficial owners also are required by rules
promulgated by the SEC to furnish the Company with copies of all such
Section 16(a) reports that they file.
Based solely upon a review of the copies of Forms 3, 4, and 5
furnished to the Company or written representations that no Form 5
filings were required, the Company believes that during the period
from April 1, 1996, through March 31, 1997, its officers, directors
and more-than-ten-percent beneficial owners filed in a timely manner
all reports required to be filed pursuant to Section 16(a).
OTHER BUSINESS
At the date of this proxy statement, the Company has no knowledge
of any business other than that described above that will be presented
at the Meeting. If any other business should come before the Meeting,
the proxies will be voted in the discretion of the proxyholders.
1997 ANNUAL REPORT
The Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1997, as filed with the SEC, is enclosed with this
proxy statement.
INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of Arthur Andersen LLP, the
Company's independent public accountants who audited the financial
statements of the Company for the fiscal year ended March 31, 1997,
will be present at the Meeting, will have an opportunity to make a
statement if they so desire and will be available to answer
appropriate questions from stockholders. The company's independent
public accountants are selected annually by the Audit Committee of the
Board of Directors to audit the financial statements of the Company.
The Audit Committee has selected Arthur Andersen LLP as its
independent public accountants for the fiscal year ending March 31,
1998.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the
Company's next annual meeting of stockholders must be received by the
Company at its principal executive offices on or before April 15,
1998, to be included in the Company's proxy statement and form of
proxy relating to that meeting.
By Order of the Board of Directors,
James A. Harsch
Secretary
August 5, 1997
