<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
DELPHI INFORMATION SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / $125 per Exchange Act Rules 0-ll(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22A of Schedule 14A
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
DELPHI INFORMATION SYSTEMS, INC.
3501 ALGONQUIN ROAD, SUITE 500
ROLLING MEADOWS, ILLINOIS 60008
August 12, 1998
Dear Stockholder:
The Annual Meeting of Stockholders of Delphi Information Systems, Inc. (the
"Company") will be held at 11:00 a.m. local time on Thursday, September 10,
1998, at the Company's principal executive office, which is located at 3501
Algonquin Road, Suite 500 in Rolling Meadows, Illinois.
The notice of meeting, proxy statement and proxy card are included with this
letter. The business of the meeting is described in the attached notice of the
meeting.
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 meeting, you
may, of course, withdraw your proxy should you wish to vote in person.
Sincerely,
[SIGNATURE]
Reid E. Simpson
Senior Vice President--Finance and
Administration, Chief Financial
Officer and Secretary
<PAGE>
DELPHI INFORMATION SYSTEMS, INC.
3501 ALGONQUIN ROAD, SUITE 500
ROLLING MEADOWS, ILLINOIS 60008
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
------------------------
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, Suite 500, in
Rolling Meadows, Illinois, at 11:00 a.m. local time, on Thursday, September 10,
1998, for the following purposes:
(1) To elect four directors of the Company, each to serve until the 1999 annual
meeting of stockholders and until their respective successors are elected
and qualified.
(2) To approve the Company's 1998 Non-Employee Director Stock Option Plan.
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournment(s) thereof.
The close of business on August 7, 1998 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, par value $.10 per
share, and the Company's Series D Preferred Stock, par value $.10 per share, 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,
Suite 500, in Rolling Meadows, Illinois, during the ten-day period preceding the
meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. 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,
[SIGNATURE]
Reid E. Simpson
SENIOR VICE PRESIDENT--FINANCE AND
ADMINISTRATION, CHIEF FINANCIAL OFFICER
AND SECRETARY
Dated: August 12, 1998
<PAGE>
DELPHI INFORMATION SYSTEMS, INC.
3501 ALGONQUIN ROAD, SUITE 500
ROLLING MEADOWS, ILLINOIS 60008
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
------------------------
PROXY STATEMENT
------------------------
This proxy statement and the enclosed proxy card are being mailed on or
about August 12, 1998, with the solicitation of proxies by the Board of
Directors (the "Board of Directors") of Delphi Information Systems, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on September
10, 1998, and any adjournment(s) thereof (the "Annual Meeting").
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 Annual 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
Annual 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 Annual Meeting in accordance with the directions specified
therein. If no directions are specified, proxies will be voted in favor of each
of the proposals set forth herein and otherwise at the discretion of the proxy
holders on all other matters that may properly come before the Annual Meeting.
The holders of a majority of the issued and outstanding Common Stock, par
value $.10 per share (the "Common Stock") of the Company, and the holders of a
majority of the issued and outstanding Series D Preferred Stock, par value $.10
per share (the "Series D Preferred Stock") of the Company, together as a class,
present in person or represented by proxy, shall constitute a quorum for the
transaction of business at the Annual Meeting. If a quorum is not present or
represented by proxy at the Annual Meeting, the stockholders entitled to vote at
the meeting, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented by proxy. If the
adjournment is for more than thirty days, or, if after the adjournment a new
record date is set, a notice of adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At such adjourned meeting
at which a quorum shall be present or represented by proxy, any business may be
transacted which might have been transacted at the original meeting.
Abstentions, withheld votes and broker non-votes will be treated as present and
entitled to vote for purposes of determining a quorum. A broker non-vote occurs
when a nominee holding shares for a beneficial owner does not vote on a proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner. Stockholders of record at the
close of business on Friday, August 7, 1998 (the "Record Date") are entitled to
notice of and to vote at the Annual Meeting or any adjournments thereof. All
historical share information set forth herein, except as otherwise indicated,
reflects the Company's one-for-five reverse stock split effective May 8, 1998.
1
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on the Record Date, there were 7,395,449 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 45.2 votes (representing a total of 9,998 votes for the
Series D Preferred Stock), on all matters of business to come before the Annual
Meeting. There is no right to cumulative voting as to any matter. Directors are
elected by the affirmative vote of the holders of a plurality of the shares of
Common Stock and Series D Preferred Stock, voting together as a class; the
nominees who receive the most votes will be elected. Abstentions, withheld
votes, and broker non-votes will not be taken into account and will have no
effect in determining the outcome of the election. The adoption of the 1998
Non-employee Director Stock Option Plan and any other matter that would be
properly presented for action at the Annual Meeting would generally require, the
affirmative vote of the holders of a majority of the Common Stock and Series D
Preferred Stock present and entitled to vote at the meeting, voting together as
a class. Abstentions will be treated as a vote against the adoption of the 1998
Non-employee Director Stock Option Plan and all other proposals presented to
stockholders. Broker non-votes will not be considered entitled to vote as to
that matter at the meeting and, accordingly, will have no effect on the adoption
of the 1998 Non-employee Stock Option Plan or any other proposal presented to
stockholders. Votes cast at the Annual Meeting will be counted by the person
appointed by the Company to act as inspector of election for the Annual Meeting.
Proxies received on behalf of the Board of Directors for which no direction is
given will be voted for the election of directors as set forth in Item 1 and in
favor of adoption of the 1998 Non-employee Director Stock Option Plan in Item 2.
The Company has been advised by Coral Partners II ("Coral"), of which Directors
of the Company Messrs. Almog and Baumel are affiliates, that Coral intends to
vote for the election of the directors and the adoption of the 1998 Non-employee
Director Stock Option Plan as set forth in Items 1 and 2, respectively.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of July 15, 1998, the ownership of Common
Stock and Series D Preferred Stock by each director of the Company, by each
current executive officer of the Company, 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.
<TABLE>
<CAPTION>
COMMON STOCK SERIES D PREFERRED
------------------------- ----------------------------
PERCENT PERCENT
OF OF
NAME AND POSITION OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS(3) OWNERSHIP(2) CLASS
- --------------------------------------------------------------- ------------ ----------- ----------------- ---------
<S> <C> <C> <C> <C>
Bay Area Micro-Cap Fund, L.P. (4).............................. 703,150 9.2% -- --
Covington Associates (5)....................................... -- -- 221 100.0%
Coral Partners II, a limited partnership (6)................... 1,282,623 16.9 -- --
Okabena Partnership K, a general partnership (7)............... 476,900 6.2 -- --
Yuval Almog ...................................................
Director and Chairman of the Board (8) 1,318,623 17.3 -- --
William Baumel ................................................
Director (9) 1,293,523 17.0 -- --
Larry Gerdes ..................................................
Director (10) 46,744 * -- --
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK SERIES D PREFERRED
------------------------- ----------------------------
PERCENT PERCENT
OF OF
NAME AND POSITION OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS(3) OWNERSHIP(2) CLASS
- --------------------------------------------------------------- ------------ ----------- ----------------- ---------
<S> <C> <C> <C> <C>
W. Max Seybold ................................................
Director and President and
Chief Executive Officer (11) 18,500 * -- --
Reid Simpson ..................................................
Senior Vice President, Finance
and Administration; Chief
Financial Officer (12) 16,700 * -- --
Robin Raina ...................................................
Senior Vice President (13) 5,000 * -- --
All directors and executive officers as a group (6 persons).... 1,416,467 18.5 -- --
</TABLE>
- ------------------------
(1) 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.
(2) Each holder has sole voting and investment power with respect to the shares
listed unless otherwise indicated.
(3) Percentages less than one percent are indicated by an asterisk.
(4) Includes 283,000 shares of Common Stock which may be acquired upon exercise
of warrants and 25,300 shares of Common Stock held by Gregory F. Wilbur and
Carolyn G. Wilbur as joint tenants with right of survivorship. The address
of Bay Area Micro-Cap Fund, L.P. is 1151 Bay Laurel Drive, Menlo Park,
California 94025.
(5) The address of Covington Associates is 60 State Street, Boston,
Massachusetts 02109.
(6) Includes 200,000 shares of Common Stock which may be acquired upon exercise
of warrants. The address of Coral Partners II is 60 South Sixth Street,
Suite 3510, Minneapolis, Minnesota 55402.
(7) Includes 200,000 shares of Common Stock which may be acquired upon exercise
of warrants. The address of Okabena Partnership K is 5140 Norwest Center,
Minneapolis, Minnesota 55402-4133.
(8) Of the 1,318,623 shares of Common Stock, 1,282,623 shares of Common Stock
are held by Coral Partners II, 10,000 shares are held by Coral Group, Inc.
Retirement Plan for the benefit of Yuval Almog, 10,000 shares of Common
Stock are held by Mr. Almog, 10,000 shares of Common Stock may be acquired
by Mr. Almog upon exercise of warrants and 6,000 shares of Common Stock are
held by Mr. Almog and his wife who have shared voting and investment power.
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.
(9) Of the 1,293,523 shares of Common Stock, 1,282,623 shares of Common Stock
are held by Coral Partners II, 1,400 shares are held by Coral Group, Inc.
Retirement Plan for the benefit of William Baumel, 4,000 shares of Common
Stock are held by Mr. Baumel, and 5,500 shares of Common Stock, of which
4,000 shares of Common Stock may be acquired upon exercise of warrants and
1,500 shares of Common Stock are held by Mr. Baumel and his wife who have
shared voting and investment power. Mr. Baumel is a Venture Partner of
Coral Partners II. Mr. Baumel disclaims beneficial ownership of the shares
held by Coral Partners II. The address of Mr. Baumel is 60 South Sixth
Street, Suite 3510, Minneapolis, Minnesota 55402.
3
<PAGE>
(10) Includes 14,000 shares of Common Stock which may be acquired upon exercise
of warrants. The address of Mr. Gerdes is 3353 Peachtree Road, N.E., Suite
1030, Atlanta, Georgia 30326.
(11) Includes 15,000 shares of Common Stock subject to stock options which may
be exercised.
(12) Includes 15,000 shares of Common Stock subject to stock options which may
be exercised and 1,700 shares of Common Stock held by The Reid E. Simpson
Revocable Trust as to which Mr. Simpson, as trustee, has sole voting and
investment power.
(13) Represents shares of Common Stock subject to stock options which may be
exercised.
ITEM 1--ELECTION OF DIRECTORS
Four incumbent members of the Board of Directors are proposed to be elected
at the Annual 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 Annual 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 Annual Meeting by a plurality of
the votes cast at the Annual Meeting by the holders of Common Stock and Series D
Preferred Stock represented in person or by proxy.
Set forth below is information as to each nominee for director, including
age, as of July 15, 1998, 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.
YUVAL ALMOG, 48, 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 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.
WILLIAM R. BAUMEL, 30, was appointed a director of the Company in July 1996.
Mr. Baumel is a partner 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.
LARRY G. GERDES, 49, was elected a director of the Company in 1985. Since
1991, Mr. Gerdes has been Chief Executive Officer of Transcend Services, Inc., a
provider of outsourced services to hospitals in the health management area. Mr.
Gerdes is also a director of Transcend Services, Inc. Prior to Transcend, Mr.
Gerdes spent over 14 years in various executive capacities at HBO & Company, a
health services corporation, including serving as Chief Financial Officer of HBO
& Company and as Chief Executive Officer of Medical Systems Support, Inc., a
wholly owned subsidiary of HBO & Company. Since 1983 Mr. Gerdes has been a
general partner of Sand Hill Financial Company, a venture capital partnership.
Additionally, since 1991 Mr. Gerdes has been a general partner in Gerdes Huff
Investments, a private investment partnership.
W. MAX SEYBOLD, 37, was appointed to the Board of Directors in March 1998.
Mr. Seybold joined the Company in January, 1998 as Senior Vice President of
Professional Services and was named President and Chief Executive Officer in
February 1998. Prior to joining the Company, Mr. Seybold held the position of
President and Chief Executive Officer for Mindware/BPR, Inc., an international
solutions consulting firm from October 1995 to January 1998. From January 1995
to October 1995, Mr. Seybold was employed with
4
<PAGE>
SI Consulting Group AG as its general manager. Prior to working for SI
Consulting Group AG, Mr. Seybold founded software/professional services firms
based in Switzerland and Germany for more than two years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR LISTED ABOVE.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has a standing Audit Committee that consists
exclusively of non-employee 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. Baumel (Chairman) and Mr. Gerdes. The
Audit Committee met three times during fiscal 1998.
The Board of Directors has a standing Compensation Committee that consists
exclusively of non-employee 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 met four times during fiscal
1998.
The Board of Directors does not have a nominating committee or a committee
performing similar functions.
The Board of Directors held nine meetings during fiscal 1998. No director
attended fewer than 75 percent of the meetings of the Board of Directors and its
committees on which he served.
Non-employee directors do not receive an annual retainer or any other fees
for their service as directors. If the stockholders of the Company approve the
1998 Director Stock Option Plan (as described below) Messrs. Almog, Baumel and
Gerdes will each be granted options to purchase up to 22,800 shares of Common
Stock of the Company on the terms and conditions set forth below. The 1998
Director Stock Option Plan would provide that (i) upon election or appointment
of a person who is not an employee of the Company or any of its subsidiaries as
a director, such person shall receive an option to purchase 12,000 shares of
Common Stock at an exercise price per share of 100% of the fair market value of
a share of Common Stock on the date of a grant and (ii) each non-employee
director shall immediately following each annual meeting of the stockholders of
the Company, commencing with the 1998 annual meeting, automatically be granted
an option to acquire 3,600 shares of Common Stock of the Company at an exercise
price per share of 100% of the fair market value of a share of Common Stock on
the date of the grant. Pursuant to the Company's 1996 Stock Incentive Plan,
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.
ITEM 2--ADOPTION OF THE NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company formerly maintained (i) a Nonqualified Stock Option Plan for
Directors (the "Former Director Plan") pursuant to which each non-employee
director was granted a non-statutory stock option to purchase 3,000 shares of
the Company's Common Stock on the date such individual first became a director
and an additional option to purchase 1,000 shares of Common Stock each year
thereafter so long as such individual continued to serve as a non-employee
director and (ii) the 1983 Stock Incentive Plan (the "1983 Plan"). Messrs. Almog
and Gerdes had received grants to acquire an aggregate of 8,000 and 6,000 shares
of Common Stock respectively pursuant to the Former Director Plan and the 1983
Plan (the "Pre-Existing Option Grants"). Mr. Baumel had not received any grants
to acquire shares of Common Stock under the Former Director Plan or the 1983
Plan.
5
<PAGE>
In 1996, the Board of Directors adopted, subject to stockholder approval,
the 1996 Stock Incentive Plan (the "1996 Plan"). Pursuant to the 1996 Plan,
directors, officers and other key employees and consultants to the Company and
its subsidiaries are eligible to receive grants from time to time of Option
Rights, Restricted Shares, Deferred Shares, Performance Shares and Performance
Units (all as such terms are defined in the 1996 Plan). At the time that the
Board of Directors approved the 1996 Plan, the Board of Directors also approved
a compensation plan for the directors of the Board (the "1996 Director Option
Plan"), under which each non-employee director received (i) a grant of a
non-statutory option to purchase 12,000 shares of Common Stock upon joining the
Board of Directors (subject to three year vesting); (ii) if he was a
non-employee director on the adoption date of the plan, a one-time grant of a
non-statutory stock option to acquire 12,000 shares of Common Stock of the
Company with an exercise price equal to the fair market value on the date of the
grant in cancellation of his Pre-Existing Option Grants; and (iii) an automatic
grant of a non-statutory stock option to acquire 3,600 shares of Common Stock of
the Company upon being reelected to the Board, with an exercise price equal to
the fair market value on the date of the grant and vesting over the following
year on a quarterly basis. Messrs. Almog and Gerdes had agreed to surrender the
Pre-Existing Option Grants if the 1996 Plan was approved by the stockholders.
The Company's proxy statement for the 1996 annual meeting of stockholders
(the "1996 Proxy") included a description of the 1996 Plan and recommended
approval of the 1996 Plan to the stockholders. Specifically, the 1996 Proxy
noted that the Board of Directors had adopted the 1996 Plan "to replace both the
Director's Plan and the 1983 Stock Incentive Plan" and specified that
"[d]irectors, officers (including officers who are also directors) and other key
employees of and consultants to the Company and its subsidiaries may be selected
by the Board of Directors to receive benefits under the 1996 Plan." The 1996
Proxy further noted that at July 31, 1996 "there were three nonemployee
directors (not including Donald L. Lucas who [was] not standing for reelection
as a director), three officers (including officers who are also directors),
approximately 50 key employees, and no consultants eligible to participate in
the 1996 Plan." The 1996 Proxy also noted, in the section describing director
compensation, that "the Directors' Plan will be replaced by the 1996 Plan,
pursuant to which nonemployee directors will be eligible to receive
discretionary grants from time to time of options to purchase shares of Common
Stock and other stock-based incentive-compensation awards . . ." The 1996 Proxy
further noted that the nominees for director who hold options granted under the
Directors' Plan had agreed to surrender those options if the 1996 Plan is
approved by the stockholders. The 1996 Proxy did not describe the 1996 Director
Option Plan. The 1996 Plan was approved at the 1996 annual stockholders meeting
and became effective. Messrs. Almog, Baumel and Gerdes filed reports on Form 4
reflecting grants pursuant to the 1996 Director Option Plan.
Shortly after the Company's 1996 annual stockholders meeting, the Board of
Directors met and (i) elected Joseph J. Oddo as a non-employee director of the
Company, (ii) approved entry into a letter agreement with Mr. Oddo, (iii)
granted to Mr. Oddo 12,000 restricted shares of Common Stock, vesting at a rate
of 1,000 at the end of each month during each month he is paid for consulting
services and (iv) granted Mr. Oddo options to purchase 60,000 shares of Common
Stock vesting as set forth in the letter agreement and to be exercisable for 5
years following vesting. According to the Company's proxy statement for the 1997
annual meeting of stockholders (the "1997 Proxy"), Mr. Oddo advised the Company
on a full time basis and of the options granted to him, 24,000 were to vest on
the completion of "short-term objectives" and 36,000 were to vest on the
completion of "long-term objectives."
In the 1997 Proxy Statement, the table of Security Ownership of Management
and Certain Beneficial Owners reflected grants intended to be made pursuant to
the 1996 Directors Option Plan. Under the heading of Compensation of Directors,
the 1997 Proxy stated that: "Nonemployee directors participate in the Company's
Nonqualified Stock Option Plan for Directors . . ., pursuant to which a
nonqualified option to purchase [3],000 shares of Common Stock is granted to
each director on the date he first becomes a non-employee director and an
additional option to purchase [1],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 . . .,
non-employee directors are eligible to receive
6
<PAGE>
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".
The Company and its directors desire to give effect to the basic terms of
the originally contemplated 1996 Director Option Plan. In view of the absence of
a description of the 1996 Director Option Plan in the 1996 Proxy or the 1997
Proxy, the Company and the Board of Directors have determined that is in the
best interests of the Company and its stockholders to prepare a written plan to
give effect to the basic terms of the 1996 Director Option Plan and to seek
stockholder approval of such a plan at the Annual Meeting. Accordingly, the
Board of Directors has adopted, subject to stockholder approval, the Delphi
Information Systems, Inc. Non-Employee Director Stock Option Plan (the "1998
Director Option Plan"). The 1998 Director Option Plan is summarized below. In
order to give effect to the originally contemplated 1996 Director Option Plan,
the Board has granted pursuant to the 1998 Director Option Plan and subject to
stockholder approval, options to Messrs. Almog, Baumel and Gerdes, to acquire
the same number of shares of Common Stock at the same price as would have been
the case had the 1998 Director Option Plan been in effect immediately following
the 1996 annual meeting of stockholders, effective on the condition that each
such person waive any claim of any rights to any grants of options under the
1996 Plan. Each of Messrs. Almog, Baumel and Gerdes have agreed to waive any
claim or any rights to any grants of options under the 1996 Plan, subject to
approval by the stockholders of the 1998 Director Option Plan.
The summary of the 1998 Director Option Plan that appears below is qualified
in its entirety by reference to the full text of the Plan, the text of which is
included in this proxy statement as EXHIBIT A.
ELIGIBILITY. Only directors of the Company who are not employees of the
Company or any of its subsidiaries ("Eligible Directors") are eligible to
participate in the 1998 Director Option Plan.
NUMBER OF SHARES ISSUABLE. The 1998 Director Option Plan provides for the
issuance of up to 300,000 shares of Common Stock, subject to anti-dilution
adjustments.
OPTION GRANTS. The 1998 Director Option Plan provides for the following:
(i) upon the election or appointment of an Eligible Director to serve on the
Board of Directors, such person shall receive an option to purchase 12,000
shares of Common Stock at an exercise price per share of 100% of the fair market
value of a share of Common Stock on the date of the grant ("New Director
Grants") and (ii) each Eligible Director, immediately following each annual
meeting of stockholders of the Company commencing with the 1998 annual meeting,
shall automatically be granted an option to purchase 3,600 shares of Common
Stock at an exercise price per share of 100% of the fair market value of a share
of Common Stock on the date of the grant ("Annual Grants"). In addition to the
New Director Grants and Annual Grants, the 1998 Director Option Plan provides
that (a) each Eligible Director who was an Eligible Director on September 4,
1996 shall receive an option to purchase 15,600 shares of Common Stock at an
exercise price of $5.00 per share (the "1996 Replacement Option") and (b) each
Eligible Director who was an Eligible Director on September 4, 1997 shall
receive an option to purchase 3,600 shares of Common Stock at an exercise price
of $5.94 per share (the "1997 Replacement Option"); provided that such Eligible
Director with respect to either the 1996 Replacement Option or the 1997
Replacement Option waives any claim or rights to any grants of options under the
1996 Plan.
EXERCISABILITY. The 1996 Replacement Option will vest and be exercisable in
two installments of (i) 11,600 shares on the date the option is granted and (ii)
4,000 shares on the earlier of (a) September 3, 1999 or (b) the date of the 1999
annual meeting of stockholders. The 1997 Replacement Option will vest and be
fully exercisable on the date the option is granted. New Director Grants will
vest and become exercisable in an annual installment of 4,000 shares, commencing
on the day prior to the first anniversary of the date the option is granted, and
thereafter, in eight quarterly installments of 1,000 shares commencing with the
last day of the calendar quarter ending on or after the first anniversary of the
date the option is granted. Annual Grants will vest and become exercisable in
four quarterly installments of 900 shares,
7
<PAGE>
commencing with the last day of the calendar quarter ending on or after the date
on which the option is granted. In all cases, no option will become exercisable
until after the 1998 Director Stock Option Plan is approved by the stockholders
of the Company entitled to vote thereon. If such approval is not obtained on or
before September 10, 1999, all outstanding options will expire and no additional
options will be granted. The option exercise price is payable, at the director's
option, in cash, shares of Common Stock of the Company acquired on the open
market or held by the grantee for more than six months, valued at their fair
market value as of the date of exercise, or a cashless exercise through a
broker-dealer approved by prior arrangement with the Company for this purpose,
to the extent such cashless exercise is permitted under Regulation T.
EXERCISE AFTER TERMINATION OF DIRECTORSHIP. All options which have not been
fully exercised on the date such director ceases to be a director for any reason
shall terminate, provided that any option which is vested may be exercised until
the earlier of (i) one year after the date such person ceased to be a director,
or (ii) the expiration of the term of such option.
TAX CONSEQUENCES. Under present law, the following are the federal income
tax consequences generally arising with respect to awards granted under the 1998
Director Option Plan. The grant of an option will create no tax consequences for
the grantee or the Company. Upon exercising an option, the grantee must
recognize ordinary income equal to the difference between (i) the exercise price
of the option, and (ii) and the fair market value of the Common Stock on the
date of exercise; the Company will be entitled to a deduction for the same
amount.
OTHER. Options granted under the 1998 Director Option Plan will have a
maximum term of ten years. The 1998 Director Option Plan will terminate on
September 10, 2008.
The following table sets forth the options to acquire of shares of Common
Stock that will be received by the following non-employee directors if the 1998
Director Stock Option Plan is approved by the Company's stockholders:
1998 DIRECTOR STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME UNDERLYING OPTIONS GRANTED EXERCISE PRICE EXPIRATION DATE
- ----------------------------------------------------------------- -------------------------- -------------- ---------------
<S> <C> <C> <C>
Yuval Almog...................................................... 15,600 $5.00 09/03/06
3,600 $5.94 09/03/07
3,600 (1) 09/09/08
William R. Baumel................................................ 15,600 $5.00 09/03/06
3,600 $5.94 09/03/07
3,600 (1) 09/09/08
Larry G. Gerdes.................................................. 15,600 $5.00 09/03/06
3,600 $5.94 09/03/07
3,600 (1) 09/09/08
</TABLE>
- ------------------------
(1) The exercise price is 100% of the Fair Market Value (as such term is defined
in the 1998 Director Stock Option Plan) on the date the 1998 Director Stock
Option Plan is approved by the Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE COMPANY'S
1998 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.
8
<PAGE>
EXECUTIVE COMPENSATION
Set forth in the table below is information regarding the annual and
long-term compensation for the fiscal years ended March 31, 1996, 1997 and 1998,
for the acting and former Chief Executive Officers, and two current and one
former most highly compensated executive officers of the Company (collectively,
the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
---------------------------------------------------- SECURITIES
FISCAL SALARY BONUS OTHER ANNUAL UNDERLYING OPTIONS ALL OTHER
NAME AND CURRENT POSITION YEAR ($) ($) COMPENSATION(A) (# OF SHARES) COMPENSATION(B)
- --------------------------- ----------- --------- --------- ----------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
W. Max Seybold (1)......... 1998 29,423 23,538 91,000 180,000 --
President and Chief 1997 -- -- -- -- --
Executive Officer 1996 -- -- -- -- --
Reid E. Simpson (2)........ 1998 43,269 -- -- 90,000 --
Senior Vice President-- 1997 -- -- -- -- --
Finance & Administration 1996 -- -- -- -- --
and Chief Financial
Officer
Robin Raina (3)............ 1998 66,692 20,000 -- 90,000 --
Senior Vice President 1997 -- -- -- -- --
1996 -- -- -- -- --
John Trustman (4).......... 1998 122,500 60,577 -- 180,000 111,057
Former President and 1997 -- -- -- -- --
Chief Executive Officer 1996 -- -- -- -- --
James Harsch (5)........... 1998 121,577 30,450 -- -- 24,168
Former Vice President-- 1997 100,385 -- 43,963 60,000 --
Administration and 1996 -- -- -- -- --
Chief Financial Officer
</TABLE>
- ------------------------
(A) Represents reimbursement for relocation expenses and consulting fees.
(B) Represents amounts paid in connection with the termination of such executive
officer's employment with the Company.
(1) Mr. Seybold joined the Company effective January 9, 1998.
(2) Mr. Simpson joined the Company effective December 8, 1997.
(3) Mr. Raina joined the Company effective November 1, 1997.
(4) Mr. Trustman was employed by the Company from May 28, 1997 to February 5,
1998. While no definitive employment agreement was entered into, upon
execution of such an agreement, the Company contemplated granting Mr.
Trustman options to purchase 180,000 shares of Common Stock,
9
<PAGE>
subject to certain terms and conditions. Pursuant to the terms and
conditions of the Company's 1996 Stock Incentive Plan, participants have 90
days from the termination of employment to exercise vested stock options.
Mr. Trustman left the Company effective February 5, 1998 and did not
exercise any options within 90 days.
(5) Mr. Harsch was employed by the Company from July 15, 1996 to December 31,
1997.
OPTION GRANTS IN LAST FISCAL YEAR
Set forth in the table below is information regarding individual grants of
stock options to purchase shares of Common Stock made during the fiscal year
ended March 31, 1998 to each of the Named Officers. All stock options were
granted under the Company's 1996 Stock Incentive Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
-------------------------------------------------------------- RATES OF STOCK
% OF TOTAL APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE OPTION TERM
UNDERLYING OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------------------------- -------------------- --------------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
W. Max Seybold................................. 60,000(1) 4.07 01/09/08(A) 153,293 388,475
120,000(2) 3.28 03/23/08(B) 247,533 627,297
------- ------- ---------
180,000 23% 400,826 1,015,771
--
------- ------- ---------
Reid E. Simpson................................ 60,000(3) 5.00 12/08/07(A) 188,668 478,123
30,000(2) 3.28 03/23/08(C) 61,883 156,824
------- ------- ---------
90,000 11% 250,552 634,970
--
------- ------- ---------
Robin Raina.................................... 20,000(4) 5.15 11/01/07(A) 64,776 164,155
70,000(2) 3.28 03/23/08(D) 144,394 365,923
------- ------- ---------
90,000 11% 209,170 530,079
--
-------
John Trustman.................................. 180,000(5) 23% 5.47 11/28/07 -- --
--
------- ------- ---------
</TABLE>
- ------------------------
(A) Options vest in installments of 25% six months after the date of the grant
and 6.25% quarterly thereafter, subject to continued employment through such
date.
(B) Of the 120,000 shares, options to acquire 60,000 shares vest one year after
the date of the grant and 6.25% quarterly thereafter, subject to continued
employment, and options to acquire 60,000 shares vest pursuant to
performance criteria established by the Compensation Committee of the Board
of Directors.
(C) Options vest pursuant to performance criteria established by the
Compensation Committee of the Board of Directors.
(D) Of the 70,000 shares, options to acquire 40,000 shares vest in installments
of 25% one year after the date of the grant and 6.25% quarterly thereafter,
subject to continued employment, and options to acquire 30,000 shares vest
pursuant to performance criteria established by the Compensation Committee
of the Board of Directors.
(1) Granted on January 9, 1998
(2) Granted on March 23, 1998
(3) Granted on December 8, 1997
(4) Granted on November 1, 1997
10
<PAGE>
(5) While no definitive employment agreement was entered into upon execution of
such an agreement, the Company contemplated granting Mr. Trustman options to
purchase 180,000 shares of Common Stock subject to certain terms and
conditions. Effective February 5, 1998, Mr. Trustman left the Company.
Pursuant to the terms and conditions of the Company's 1996 Stock Incentive
Plan, participants have 90 days from the termination of employment to
exercise vested stock options. Mr. Trustman left the Company effective
February 5, 1998 and did not exercise any options within 90 days.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END VALUES
Set forth in the table below is information regarding the exercise of stock
options to acquire shares of Common Stock during the fiscal year ended March 31,
1998 by each of the Named Officers and the fiscal year-end value as of March 31,
1998 of unexercised stock options of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END AT FY-END ($)(A)
SHARES ACQUIRED VALUE REALIZED -------------------------- ------------------------------
NAME ON EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ------------------- --------------------- ----------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Max Seybold........ -- -- -- 180,000 -- 75,120
Reid E. Simpson....... -- -- -- 90,000 -- 18,780
Robin Raina........... -- -- -- 90,000 -- 43,820
John Trustman......... -- -- 37,500 142,500 -- --
James Harsh........... -- -- -- -- -- --
</TABLE>
- ------------------------
(A) Based on the closing price of the Company's Common Stock as reported on
Nasdaq on March 31, 1998 of $3.91.
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 executive officer of the other company
serves on the Board of Directors.
COMPENSATION COMMITTEE OF REPORT ON COMPENSATION OF 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 basis
upon which compensation is determined by the Committee with respect to the
executive officers of the Company, including the Named Officers.
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.
11
<PAGE>
- 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.
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 profitability, revenue growth,
management development and other specific performance criteria. The Company did
not award bonuses to any Named Officers for the fiscal year ended March 31,
1997. The Company awarded bonuses to Messrs. Seybold, Raina, Trustman and Harsch
for the fiscal year ended March 31, 1998.
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.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Trustman served as Chief
Executive Officer of the Company from May 1997 to February 1998. Mr. Trustman's
compensation was based solely on the product of negotiations between Mr.
Trustman and the Board of Directors. Mr. Seybold was recently named Chief
Executive Officer in February 1998. His compensation is solely the product of
the negotiation between Mr. Seybold and the Board of Directors. The factors that
are expected to predominate in the evaluation of the Chief Executive Officer
over time are performance in relation to (i) strengthening the Company's
management team, (ii) upgrading the Company's products and broadening its
product lines, and (iii) achievement of consistent profitability and growth.
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
12
<PAGE>
corporations with which the Company competes. The foregoing report has been
approved by all members of the Committee.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the corporation's Chief Executive Officer or four other most-highly
compensated executive officers named in the proxy statement. The Company will
continue to analyze its executive compensation practices and plans on an ongoing
basis with respect to Section 162(m) of the Internal Revenue Code. Where it
deems advisable, the Company will take appropriate action to maintain the tax
deductibility of its executive compensation.
Respectfully submitted,
Yuval Almog
Larry G. Gerdes
13
<PAGE>
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 stockholder 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, 1993, and the reinvestment of dividends (rounded
to the nearest dollar).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG DELPHI INFORMATION SYSTEMS, INC., THE NASDAQ STOCK MARKET
(U.S.) INDEX AND THE NASDAQ COMPUTER DATA PROCESSING INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DELPHI INFORMATION SYSTEMS,
INC. NASDAQ STOCK MARKET (U.S.) NASDAQ COMPUTER DATA PROCESSING
<S> <C> <C> <C>
3/93 100 100 100
3/94 55 108 102
3/95 16 120 138
3/96 15 163 195
3/97 14 181 214
3/98 10 275 375
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (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, the Company believes that during the period from April
1, 1997, through March 31, 1998,
14
<PAGE>
the following person failed to file on a timely basis, as disclosed in the above
Forms, reports required by Section 16(a) of the Exchange Act:
Robin Raina was appointed Senior Vice President effective February 1998. Mr.
Raina reported his appointment and certain grants of options under the 1996
Delphi Information Systems, Inc. Stock Incentive Plan made throughout the fiscal
year by filing a Form 5 on a timely basis.
COST OF SOLICITATION
The cost of soliciting proxies, which also includes the preparation,
printing, and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily through the mail, but certain
employees of the Company, who will receive no compensation for their services
other than their regular remuneration, may also solicit proxies by telephone,
telegram, telex, telecopy, or personal interview. The Company will request
brokers and nominees to obtain voting instructions of beneficial owners of stock
registered in the names of such brokers and nominees and other "street names"
and will reimburse them for any expenses incurred in connection therewith. The
Company's transfer agent, ChaseMellon Shareholders Services, L.L.C., will assist
the Company in the solicitation of proxies from brokers and nominees for a fee
of approximately $4,000. The Company will also reimburse the transfer agent for
its reasonable out-of-pocket expenses incurred in connection with providing
solicitation services.
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 Annual
Meeting. If any other business should come before the Annual Meeting, the
proxies will be voted in the discretion of the proxyholders.
1998 ANNUAL REPORT
The Company's Annual Report on Form 10-K, as amended, for the fiscal year
ended March 31, 1998, 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, 1998, will be present at the Annual
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
Company intends to change its fiscal year end to December 31. The Audit
Committee has selected Arthur Andersen LLP as its independent public accountants
for the fiscal year ending December 31, 1998.
15
<PAGE>
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, 1999, to be included in the Company's
proxy statement and form of proxy relating to that meeting. Proxies solicited
with respect to the Company's 1999 annual meeting of stockholders may confer
discretionary authority to vote on various matters, including any matter with
respect to which the Company has not received notice of such proposal by July
28, 1999. These dates may change in the event that the Company significantly
changes the date of its annual stockholders meeting in connection with the
anticipated change in its fiscal year.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE
THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
[SIGNATURE]
Reid E. Simpson
Senior Vice President--Finance and
Administration, Chief Financial
Officer and Secretary
August 12, 1998
16
<PAGE>
EXHIBIT A
DELPHI INFORMATION SYSTEMS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of the Delphi Information Systems, Inc. Non-Employee Directors
Stock Option Plan (as set forth herein and as amended from time to time, the
"Plan") is to encourage qualified persons to become and remain directors of
Delphi Information Systems, Inc., a Delaware corporation (the "Company"), and to
provide directors of the Company with a direct stake in its success.
ARTICLE II
DEFINITIONS
2.1 "ARTICLE" means an Article of this Plan.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "COMMON STOCK" means the common stock, par value $.10 per share, of
the Company.
2.4 "DIRECTOR" means a member of the Board.
2.5 "EFFECTIVE DATE" means September 10, 1998.
2.6 "ELIGIBLE DIRECTOR" means a Director who is not an employee of the
Company or any of its Subsidiaries as of the date of any grant of an Option to
him.
2.7 "FAIR MARKET VALUE" of a security means, as of any applicable date,
(i) if the security is listed for trading on a national securities exchange or
the Nasdaq National Market, the closing price, regular way, of the security as
reported on the consolidated transaction reporting system applicable to such
security, or if no such reported sale of the security shall have occurred on
such date, on the next preceding date on which there was such a reported sale,
or (ii) if the security is not listed for trading on a national securities
exchange or the Nasdaq National Market, but is listed on the Nasdaq SmallCap
Market, the average of the closing bid and asked prices, regular way, on the
Nasdaq SmallCap Market or, if no such prices shall have been so reported for
such date, on the latest preceding date for which such prices were so reported.
2.8 "GRANTEE" means the Director to whom an Option has been granted.
2.9 "MATURE SHARES" means shares of Common Stock that were acquired on the
open market or that have been held for more than six months.
2.10 "OPTION" means a right to purchase Common Stock granted under this
Plan.
2.11 "TERM" shall have the meaning provided in Article 5.2.
ARTICLE III
ADMINISTRATION
The Plan is intended not to require discretionary action by any
administrative body with regard to any transaction under the Plan. Subject to
the provisions of the Plan, the Board shall have the power to construe and
interpret the Plan, to determine all questions arising thereunder, and to adopt
and amend rules for the administration of the Plan; PROVIDED, HOWEVER, that no
such interpretation or rule shall change the number of Options that may be
granted under the Plan or the terms upon which, or the times at which,
17
<PAGE>
or the periods within which, such Options may be exercised. Any decision of the
Board in the administration of the Plan shall be final.
ARTICLE IV
AMOUNT OF COMMON STOCK
The aggregate number of shares of Common Stock that may be delivered upon
exercise of Options shall not exceed 300,000, subject to adjustment pursuant to
Article VII. Such shares of Common Stock may be either authorized but unissued
shares or previously-issued shares reacquired by the Company. If any Options
terminate or expire without being exercised in whole or in part, new Options may
be granted covering the shares not purchased under such terminated or expired
Options.
ARTICLE V
GRANT OF OPTIONS
5.1 GRANTS OF OPTIONS.
(a) EFFECTIVE DATE GRANTS.
(i) Subject to the condition set forth in Section 5.1(a)(ii) below and
Section 8.1, the following grants of Options are made as of the Effective
Date:
(A) "A" GRANTS. For each person who is an Eligible Director on the
Effective Date of the Plan who was an Eligible Director on September 4,
1996, an Option to purchase 15,600 shares of Common Stock at an exercise
price of $5.00 per share. Notwithstanding the provisions of Section 5.2
or any other provisions hereof, the Term of the Option granted under this
Section 5.1(a)(i)(A) shall expire on September 3, 2006.
(B) "B" GRANTS. For each person who is an Eligible Director on the
Effective Date of the Plan who was an Eligible Director on September 4,
1997, an Option to purchase 3,600 shares of Common Stock at an exercise
price of $5.94 per share. Notwithstanding the provisions of Section 5.2
or any other provision hereof, the Term of the Option granted under this
Section 5.1(a)(i)(B) shall expire on September 3, 2007.
(ii) The Effective Date Grants of Options described in Section 5.1(a)
shall be effective only on the condition that the Grantee waives any claim
or any rights to any grants of options under the Delphi Information Systems,
Inc. 1996 Stock Incentive Plan.
(b) NEW DIRECTOR OPTIONS GRANTS. Subject to Section 8.1, a person who
becomes an Eligible Director on or after the Effective Date shall automatically
be granted an Option for 12,000 shares of Common Stock upon becoming an Eligible
Director.
(c) SUBSEQUENT ANNUAL GRANTS OF OPTIONS. Subject to Section 8.1,
immediately following each annual meeting of the stockholders of the Company,
commencing with the 1998 annual meeting, which occurs on the Effective Date,
each person who is an Eligible Director at the conclusion of such meeting shall
automatically be granted an Option for 3,600 shares of Common Stock.
5.2 TERM OF OPTIONS. Except as otherwise provided in Section 5.1, each
Option shall have a term ("Term") of 10 years beginning on the date of grant,
unless earlier terminated as provided herein.
5.3 EXERCISE PRICE. Except as otherwise provided in Section 5.1, the
exercise price per share for each Option shall be 100% of the Fair Market Value
of a share of Common Stock on the date of grant, subject to adjustment pursuant
to Article VII.
5.4 OPTION AGREEMENTS. Each Option shall be evidenced by an agreement in
such form as the Board shall prescribe from time to time and shall be consistent
with the Plan.
18
<PAGE>
ARTICLE VI
EXERCISE OF OPTIONS
6.1 VESTING.
(a) EFFECTIVE DATE GRANTS.
(i) Subject to Section 8.1, each outstanding Option granted under
Section 5.1(a)(i)(A) shall be cumulatively exercisable in accordance with
the following table:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OPTION EXERCISABLE
- ------------------------ -------------------------------------------------------------------
<S> <C>
11,600 shares On the date on which the Option is granted.
4,000 shares Earlier of (i) September 3, 1999, or (ii) the date
of the 1999 annual meeting of stockholders of the Company.
</TABLE>
Notwithstanding the above table, no portion of any Option shall become
exercisable after a Grantee ceases to be a Director for any reason.
(ii) Subject to Section 8.1, each outstanding Option granted under
Section 5.1(a)(i)(B) shall be fully exercisable on the date the Option is
granted.
(b) NEW DIRECTOR GRANTS. Subject to Section 8.1, each outstanding Option
granted under Section 5.1(b) shall become cumulatively exercisable in accordance
with the following table:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OPTION EXERCISABLE
- ------------------------ -------------------------------------------------------------------
<S> <C>
4,000 shares On the day prior to the first anniversary of the date
on which the Option is granted.
1,000 shares On the last day of each of eight calendar quarters commencing on
the last day of the calendar quarter ending on or after the first
anniversary of the date the Option is granted.
</TABLE>
Notwithstanding the above table, no portion of any Option shall become
exercisable after a Grantee ceases to be a Director for any reason.
(c) SUBSEQUENT ANNUAL GRANTS OF OPTIONS. Subject to Section 8.1, each
outstanding Option granted under Section 5.1(c) shall become cumulatively
exercisable in accordance with the following table:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OPTION EXERCISABLE
- ------------------------ -------------------------------------------------------------------
<S> <C>
900 shares On the last day of the calendar quarter ending on
or after the date on which the Option is granted.
900 shares On the last day of the second calendar quarter ending on
or after the date on which the Option is granted.
900 shares On the last day of the third quarter ending on
or after the date on which the Option is granted.
900 shares On the last day of the fourth quarter ending on
or after the date on which the Option is granted.
</TABLE>
Notwithstanding the above table, no portion of any Option shall become
exercisable after a Grantee ceases to be a Director for any reason.
19
<PAGE>
6.2 EXERCISE. An Option shall be exercised by delivery during the Term to
the Company of (i) written notice of the exercise specifying the number of
shares to be purchased and (ii) full payment in cash for the shares of Common
Stock being acquired thereunder, which payment, at the election of the Grantee
(or after the Grantee's death, his representative) may be made (a) in cash or
its equivalent, (b) to the extent it would not violate any financial or other
covenant of the Company, by delivery to the Company of Mature Shares valued at
their Fair Market Value on the date of exercise, (c) by means of a cashless
exercise through a broker approved by prior arrangement with the Company for
this purpose, to the extent such cashless exercise is permitted under Regulation
T, or (d) by any combination of the foregoing.
6.3 EXERCISE AFTER TERMINATION OF DIRECTORSHIP. If a Grantee shall cease
to be a Director for any reason while holding an unexpired Option that has not
been fully exercised, such Option shall thereupon terminate; PROVIDED that the
Grantee, or in the case of his death or adjudication of incompetency, his
executor, administrator, distributees, guardian or legal representative, as the
case may be, may exercise the Option (to the extent that it was exercisable
pursuant to Section 6.1 on the date the person ceased to be a Director) at any
time until the earlier to occur of (i) one year after the date such person
ceased to be a Director, or (ii) the expiration of the Term of such Option.
ARTICLE VII
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
7.1 ADJUSTMENTS. If the outstanding Common Stock is changed by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, reverse stock split, stock dividend, rights offering, combination,
spinoff, exchange of shares, or the like, an appropriate adjustment shall be
made by the Board to (i) the aggregate number of shares then-remaining available
under the Plan, (ii) the number of shares of Common Stock in respect of which
Options are subsequently to be granted, and (iii) to the extent that any such
adjustments are necessary to preserve the economic value of unexercised Options,
the number or type of shares of capital stock subject to, and the exercise price
of, outstanding Options.
7.2 NO FRACTIONAL SHARES. If a fraction of a share would otherwise result
from any adjustment pursuant to Section 7.1, the adjusted share amount shall be
rounded to the nearest whole number.
ARTICLE VIII
MISCELLANEOUS
8.1 STOCKHOLDER APPROVAL. No Option shall become exercisable until after
the Plan has been approved by the holders of a majority of the shares of Common
Stock present and entitled to vote thereon at a meeting of the stockholders of
the Company. If such approval is not obtained on or before the first anniversary
of the Effective Date, all outstanding Options shall expire and no additional
Options shall be granted.
8.2 OPTIONS NON-TRANSFERABLE. An Option shall not be transferable by its
Grantee except by will or the laws of descent and distribution and shall be
exercisable during the Grantee's lifetime only by the Grantee or his or her
guardian or legal representative; PROVIDED, HOWEVER, that a Grantee may in a
manner and to the extent permitted by the Board (a) designate in writing a
beneficiary to exercise an Option after his or her death and (b) transfer an
Option to a revocable, inter vivos trust as to which the Grantee is the settlor
and trustee and of which the sole beneficiaries are the Grantee's spouse, the
Grantee's parents or his spouse's parents, or lineal descendants of the Grantee
(or trusts for their exclusive benefit); PROVIDED, HOWEVER, that a transfer of
an Option shall be effective only if the Company shall have received an opinion
of its counsel to the effect that the restrictions of this Section 8.2 are not
required to allow such an Option to be exempt from potential liability under
Section 16(b) of the Securities Exchange Act of 1934 pursuant to SEC Rule 16b-3
thereunder.
20
<PAGE>
8.3 EXPENSES. The expenses of the Plan shall be borne by the Company. Any
taxes imposed on a Grantee upon exercise of an Option shall be paid by such
Grantee.
8.4 NO RIGHT TO RE-ELECTION. Neither the Plan nor any action taken
hereunder shall be construed as giving any Director any right to be retained or
re-elected as a Director.
8.5 SECURITIES REGISTRATION. The Company shall not be obligated to deliver
any shares of Common Stock hereunder until such shares have been listed on each
securities exchange, stock market or national market system on which the Common
Stock may then be listed, or until there has been compliance with all applicable
state or federal securities laws; PROVIDED, HOWEVER, that the Company shall use
all reasonable efforts to cause any such listing and compliance.
8.6 TAXES. The Company shall not be required to issue shares of Common
Stock upon the exercise of an Option unless the Grantee shall remit to the
Company, in such manner as the Company may permit, an amount sufficient to
satisfy any liability of the Company to withhold federal, state, local or
foreign income or other taxes relating to such exercise.
8.7 RIGHTS AS STOCKHOLDER. A Grantee shall not by reason of any Option
have any right as a stockholder of the Company with respect to the shares of
Common Stock which may be deliverable upon exercise of such Option until such
shares have been delivered to him.
8.8 SEVERABILITY. If all or any part of the Plan is declared by any court
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not declared to
be unlawful or invalid. Any Article or part of an Article so declared to be
unlawful or invalid shall, if possible, be construed in a manner which gives
effect to the terms of such Article or part of an Article to the fullest extent
possible while remaining lawful and valid.
8.9 APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Illinois.
ARTICLE IX
AMENDMENT
The Plan may be amended from time to time by the Board as it shall deem
advisable, including amendments necessary to qualify for any exemption or to
comply with applicable law or regulations; PROVIDED, HOWEVER, that no amendment
to the Plan may be made without the approval of the stockholders of the Company
which changes (i) the criteria for Eligible Directors or (ii) the vesting
conditions, term of exercisability, grant timing, grant amount or exercise price
of Options. No amendment of the Plan shall adversely affect the rights of any
Grantee under an Option without the consent of such Grantee.
ARTICLE X
TERMINATION
The Plan shall terminate on the 10th anniversary of the Effective Date of
the Plan, unless sooner terminated by the Board. Any termination of the Plan
shall not affect any Option then outstanding.
21
<PAGE>
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
DELPHI INFORMATION SYSTEMS, INC.
3501 ALGONQUIN ROAD, SUITE 500
ROLLING MEADOWS, ILLINOIS 60008
The undersigned hereby appoints John Trustman and James A. Harsch, and
each of them, as proxies, with power of substitution and revocation, acting
by a majority of those present and voting (or if only one is present and
voting, then that one) to vote the stock of Delphi Information Systems, Inc.
(the "Company") that the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on September 3, 1997, and at any
adjournment or postponement thereof, with all powers that the undersigned
would possess if present, with respect to the following:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE>
Please mark your votes as indicated in this example /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS.
1. Election of Directors
Election of Yuval Almog, William R. Baumel, Larry G. Gerdes and John
Trustman as directors until the next annual meeting of stockholders and
until their successors are elected and qualified.
<TABLE>
<CAPTION>
WITHHOLD
AUTHORITY
FOR TO VOTE FOR ALL WITHHOLD AUTHORITY TO
NOMINEES NOMINEES VOTE FOR THE FOLLOWING NOMINEE(S):
------------------------------------
<S> <C> <C>
/ / / / / / ------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED, IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR EACH NOMINEE FOR
DIRECTOR.
PLEASE SIGN EXACTLY AS NAMES APPEAR ON THIS PROXY. JOINT OWNERS SHOULD
EACH SIGN. TRUSTEES, EXECUTORS, ETC. SHOULD INDICATE THE CAPACITY IN WHICH
THEY ARE SIGNING.
-----------------------------------------------------------, 1998
DATED
-----------------------------------------------------------------
SIGNED
</TABLE>
