SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for use of
|X| Definitive Proxy Statement the Commission Only (as
|_| Definitive Additional Materials permitted by Rule
|_| Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
RESEARCH PARTNERS INTERNATIONAL, INC.
________________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________
(5) Total fee paid:
________________________________________________________________
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________
(3) Filing Party:
________________________________________________________________
(4) Date Filed:
________________________________________________________________
- - --------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC.
One State Street Plaza
New York, New York 10004
---------------------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
---------------------------
September 22, 1999
-------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Research Partners International, Inc. ("Company") will be held at our
principal office, located at One State Street Plaza, New York, New York 10004,
on September 22, 1999, at 10:00 a.m., for the following purposes, all as more
fully described in the attached Proxy Statement:
1. To elect three directors to serve for the ensuing three-year
period and until their successors are elected and qualified;
2. To elect one director to serve for the ensuing two-year
period and until her successor is elected and qualified;
3. To approve an amendment to the Company's 1991 Employee
Incentive Plan to permit non-employee directors of the
Company to participate in this plan and to modify provisions
regarding administration of this plan; and
4. To transact such other business as may properly come before
the meeting and any and all adjournments thereof.
Our Board of Directors has fixed the close of business on
August 16, 1999, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
Your vote is very important. You are earnestly requested to
date, sign and return the accompanying form of proxy in the envelope enclosed
for that purpose (to which no postage need be affixed if mailed in the United
States) whether or not you expect to attend the meeting in person.
By Order of the Board of Directors
Herbert Sontz, Secretary
New York, New York
August 19, 1999
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC.
---------------------------
PROXY STATEMENT
---------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 22, 1999
---------------------------
This Proxy Statement and the accompanying form of proxy is furnished to
you in connection with the solicitation of proxies, in the accompanying form, by
our Board of Directors for use in voting at the Annual Meeting of Stockholders
to be held at our principal place of business, located at One State Street
Plaza, New York, New York, 10004, on September 22, 1999, at 10:00 a.m., and at
any and all adjournments thereof.
On or about August 19, 1999, this Proxy Statement and the accompanying
form of proxy, together with a copy of our Annual Report for the fiscal year
ended January 31, 1999, are being mailed to each stockholder of record at the
close of business on August 16, 1999.
What am I voting on?
o The election of three directors to serve for a three-year term:
David M. Nussbaum, Roger N. Gladstone and Richard Y. Roberts.
o The election of one director for a two-year term: Roswitha
Mueller.
o A proposal to amend our 1991 Employee Incentive Plan that will
permit our non-employee directors to participate in this plan and
to modify provisions regarding the administration of this plan.
Who is entitled to vote? What is the total number of voting securities
outstanding?
Holders of our Common Stock as of the close of business on August 16,
1999, the record date, are entitled to vote at the meeting. Each stockholder is
entitled to one vote for each share of Common Stock held on the record date. As
of the record date, our Company had issued and outstanding 8,643,709 shares of
Common Stock.
Can I change my vote after I return my proxy card?
Yes. Any proxy given pursuant to this solicitation may be revoked by
the person giving it by giving notice to the Secretary of our Company, in
person, or by written notification actually received by the Secretary, at any
time prior to its being voted.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of a majority of
our outstanding Common Stock (or 4,321,855 shares) constitutes a quorum at the
meeting, permitting us to conduct our business. Proxies that are returned to us
but marked by brokers as "not voted" will be treated as shares present for
<PAGE>
purposes of determining the presence of a quorum on all matters but will not be
treated as shares entitled to vote on the matter as to which authority to vote
is withheld by the broker ("broker non-votes").
What is a "broker non-vote"?
A "broker non-vote" occurs if a broker submits a proxy that states that
the broker does not vote for one or more of the proposals. The broker does this
because it has not received instructions from the beneficial owner on how to
vote on such proposals and the broker does not have discretionary authority to
vote without these instructions.
How do I vote?
Sign and date the accompanying proxy card and return it to us in the
prepaid envelope and it will be voted as you direct. If you return your signed
proxy but do not indicate your voting preferences, we will vote on your behalf
FOR the election of the three directors, FOR the election of the one director
and FOR the proposal to amend our 1991 Employee Incentive Plan. If you attend
the meeting, you may deliver your completed proxy card in person or fill out and
return a ballot that will be supplied to you.
How many votes are needed for approval of each item?
o Election of Directors. The election of directors requires a
plurality vote of the Common Stock voted at the meeting with
respect to the election of directors. "Plurality" means that the
individuals who receive the largest number of votes cast "FOR"
are elected as directors. Consequently, any securities not voted
"FOR" a particular nominee will not be counted in such nominee's
favor.
o Amendment of our 1991 Employee Incentive Plan and Other Items.
The proposal to amend our 1991 Employee Incentive Plan and all
other proposals to be voted on will require the affirmative vote
of a majority of the Common Stock present or represented at the
meeting and entitled to vote on that item at the meeting. On any
such matter, abstentions will have the same effect as a negative
vote, but broker non-votes will have no effect on the vote.
What does our Company do?
We provide investment banking, research, securities brokerage and
trading services, with an emphasis on small and mid-capitalization companies,
through our principal operating subsidiaries. In the fiscal year ended January
31, 1999, our principal subsidiaries consisted of GKN Securities Corp.,
Southeast Research Partners, Inc., which we acquired in March 1997, Shochet
Securities, Inc., which we acquired in November 1995, and Research Partners
International AG, hereinafter referred to as RPII-AG, which we established in
February 1996. In June 1999, we sold certain of the assets of Southeast Research
Partners, Inc. and it was renamed EarlybirdCapital.com Inc. We also have
operations in the merchant banking business through our Dalewood Associates,
Inc. subsidiary, which we acquired in December 1996 and which is the general
partner of Dalewood Associates, L.P., a private investment fund.
2
<PAGE>
Beneficial Ownership of Voting Securities by 5% Stockholders, Directors and
Executive Officers
The table below sets forth stock ownership information as of August 16,
1999, with respect to (i) those persons or groups known to us to beneficially
own more than 5% of our outstanding voting securities, (ii) each of our
directors and director nominees, (iii) our Chief Executive Officer and four of
our other most highly compensated executive officers whose compensation was
$100,000 or greater during fiscal 1999, and (iv) all of our directors and
executive officers as a group.
The information is based upon information furnished by the persons
listed below or contained in filings made by them with the Securities and
Exchange Commission.
Number of Shares Percent Beneficially
Name of Beneficial Owner Beneficially Owned* Owned
- - ------------------------ ------------------- --------------------
David M. Nussbaum(1) 1,202,442(2) 13.9%
Roger N. Gladstone(1) 1,188,275(3) 13.7
Peter R. Kent 115,087(4) 1.3
Lester Rosenkrantz 41,430(5) **
Robert H. Gladstone(1) 498,275(6) 5.7
James I. Krantz 171,875(7) 2.0
John P. Margaritis 10,000(8) **
Roswitha S. Mueller -0- **
Arnold B. Pollard 10,000(8) **
Richard Y. Roberts 10,000(8) **
Dr. Ernst Muller-Mohl(9) 1,250,000 14.5
All Executive Officers
and Directors as a group
(11 persons) 3,247,384(10) 36.6%
- - ------------------------------
* For purposes of the information set forth above, all shares of our Common
Stock that an individual or group has a right to acquire within 60 days
pursuant to the exercise of warrants or options or other convertible
securities are deemed to be currently owned and outstanding for purposes of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table. Except as indicated in the
footnotes to the table, the security holders listed above possess sole
voting and investment power with respect to their securities, subject to
community property laws where applicable.
** Less than 1%.
(1) The business address of David M. Nussbaum and Robert H. Gladstone is One
State Street Plaza, New York, New York 10004. The business address of Roger
N. Gladstone is 433 Plaza Real, Boca Raton, Florida 33432.
(2) Includes 20,000 shares issuable upon exercise of options and 56,331
restricted shares issued to Mr. Nussbaum under the Company's 1996 Incentive
Compensation Plan ("IC Plan"). The holders of the restricted shares issued
under the IC Plan ("IC Shares") have the power to vote and the right to
receive dividends with respect to such shares but the IC Shares do not vest
3
<PAGE>
until March 2000 and may not be transferred prior to that date. Does not
include 35,000 shares held by The Nussbaum Family Foundation, Inc., one of
whose directors is the spouse of Mr. Nussbaum. Mr. Nussbaum disclaims
beneficial ownership of the shares held by such foundation.
(3) Includes 20,000 shares issuable upon exercise of options and 42,164 IC
Shares. Does not include 27,500 shares held by The Lisa and Roger Gladstone
Foundation, one of whose directors is the spouse of Roger Gladstone. Roger
Gladstone disclaims beneficial ownership of the shares held by such
foundation.
(4) Includes 70,000 shares issuable upon exercise of options and 45,087 IC
Shares.
(5) Includes 25,000 shares issuable upon exercise of options and 16,430 IC
Shares.
(6) Includes (i) 52,500 shares issuable upon exercise of options which are held
by Robert Gladstone's spouse, (ii) 56,331 IC Shares, and (iii) 6,666 shares
issuable upon exercise of options. Does not include 5,000 shares held by The
Robert Gladstone Family Foundation, one of whose directors is the spouse of
Robert Gladstone. Mr. Gladstone disclaims beneficial ownership of the shares
held by such foundation.
(7) Includes 3,125 shares held by Mr. Krantz's spouse and 10,000 shares issuable
upon exercise of options.
(8) Includes 10,000 shares issuable upon exercise of options.
(9) The business address of Dr. Ernst Muller Mohl is Ramistr. 18, Zurich 8001,
Switzerland.
(10)Includes the shares issuable upon exercise of options and included in the
table as described in the above footnotes.
Proposals 1 and 2: Election of Directors
Three Classes of Directors
Our Board of Directors is divided into three classes with approximately
one-third of our directors standing for election each year, generally for a
three-year term. You are requested to vote for three nominees for director whose
terms expire at this meeting and who will be elected for a new three-year term
and until their successors are elected and qualified: David M. Nussbaum, Roger
N. Gladstone and Richard Y. Roberts. You also are requested to vote for one
nominee for director whose term expires at this meeting and who will be elected
for a new two-year term and until her successor is elected and qualified:
Roswitha S. Mueller.
Unless authority is withheld, the proxies solicited by the Board of
Directors will be voted FOR the election of the nominees set forth below. If any
nominee becomes unavailable for election to the Board of Directors, the Board
may, by resolution, provide for a lesser number of directors or the persons
named as proxies, or their substitutes, shall have full discretion and authority
to vote or refrain from voting for any other candidate in accordance with their
judgment.
Biographical Information Regarding the Directors
Information regarding each director, including each director nominated
for re-election, is set forth on the following pages.
Nominees for director for three-year terms ending in 2002:
The Board recommends a vote FOR the nominees.
David M. Nussbaum, 45 years old, is our Chairman of the Board. He and
Peter R. Kent, our President, comprise the Office of the Chief Executive of our
Company and they share executive responsibilities as they determine. He served
as Chief Executive Officer from September 1990 until June 1999, served as our
Executive Vice President from January 1987 until September 1990 and has served
as one of our directors since January 1987. In June 1999 he became Chairman of
the Board and Chief Executive Officer of EarlybirdCapital.com (formerly
Southeast), and prior to that time served as an executive officer of this
subsidiary since it was acquired by us in March 1997. He is also Chairman of the
Board of GKN Securities and served as its Chief Executive Officer until June
1999. He has been an executive officer of Dalewood since our acquisition of
4
<PAGE>
Dalewood in December 1996. Mr. Nussbaum serves on the Board of Arbitrators of
the National Association of Securities Dealers, Inc. He is also a member of the
Young Presidents Organization and a member of the Board of Directors of the Sid
Jacobson Jewish Community Center in Roslyn, New York. From 1984 through 1986,
Mr. Nussbaum was engaged primarily in the acquisition, management, syndication
and operation of real estate projects. From 1980 through 1984, Mr. Nussbaum was
engaged in the private practice of law at the firm of Rosenman Colin Freund
Lewis & Cohen in New York. Mr. Nussbaum graduated from the University of
Michigan, magna cum laude. He received his law degree (cum laude; Order of the
Coif) from New York University School of Law. In August 1997, Mr. Nussbaum
concluded a settlement with NASD Regulation, Inc. ("NASDR") resolving an NASDR
investigation, discussed below.
Roger N. Gladstone, 45 years old, has been our Vice Chairman of the
Board since June 1999 and one of our directors since January 1987. He served as
our President from January 1987 until June 1999. In June 1999 he became Chairman
of the Board and Chief Executive Officer of Shochet, and prior to that time
served as an executive officer of this subsidiary. He also served as President
of GKN Securities until June 1999. He is also executive officer of Shochet and
Dalewood. Mr. Gladstone serves on the Board of Arbitrators of the National
Association of Securities Dealers, Inc. He is also a member of the Young
Presidents Organization and an honorary member of the board of directors of the
Sid Jacobson Jewish Community Center in Roslyn, New York. Mr. Gladstone is a
Director of No Small Affair South, a charitable foundation which provides
positive experiences for disadvantaged children. From 1984 through 1986, Mr.
Gladstone was engaged primarily in the acquisition, management, syndication and
operation of real estate projects. From 1980 through 1984, Mr. Gladstone was
engaged in the private practice of law in New York. Mr. Gladstone graduated from
Stanford University, received a Master of Business Administration from New York
University and received his law degree from the Benjamin N. Cardozo School of
Law, Yeshiva University. In August 1997, Mr. Gladstone concluded a settlement
with the NASDR resolving an NASDR investigation, discussed below.
Richard Y. Roberts, 48 years old, was elected a director of our Company
in December 1997. Mr. Roberts became affiliated with Thelen Reid & Priest LLP
(then known as Reid & Priest LLP) in January 1997, as counsel, where he
participates in their Business and Finance, Infrastructure and Government, and
Utility and Energy Practice Groups. From August 1995 to December 1996, Mr.
Roberts served as General Counsel to Princeton Venture Research, Inc., a venture
capital securities consulting firm. From October 1990 to July 1995, Mr. Roberts
served as a Commissioner of the United States Securities and Exchange
Commission. Prior to his term as Commissioner, Roberts served as the
administrative assistant and the legislative director for then Congressman and
later Senator Richard Shelby. Mr. Roberts is a member of the Legal Advisory
Board of the National Association of Securities Dealers, Inc., the Advisory
Board of Securities Regulation & Law Reports, the Editorial Board of the
Municipal Finance Journal, and the National Board of Policy Advisors of the
Institute of Law and Economic Policy. He is a graduate of Auburn University
where he earned a Bachelor of Science in Electrical Engineering. He received his
Juris Doctorate from the University of Alabama School of Law and his Master of
Laws from the George Washington University Law Center. Mr. Roberts is a member
of the Alabama Bar and the District of Columbia Bar.
Nominee for director for two-year term ending in 2001:
The Board recommends a vote FOR the nominee.
Roswitha S. Mueller, 41 years old, was elected a director of our
Company in June 1999. Ms. Mueller is a director of The Acacia Group, Inc., a
private money management firm. From 1992 until November 1998 she served in
various positions with Merrill Lynch & Co. and was Vice President Institutional
Sales in that Firm's New York office from March 1996 until November 1998. Prior
to that time, Ms. Mueller performed financial analysis and portfolio management
at BZ Bank Zurich Ltd. from 1986 until 1990. She received her Masters in
Business Administration in Finance from the Amos Tuck School of Business
Administration, Dartmouth College, and her Master of Arts from the University of
Basel. Ms. Mueller is the cousin of Dr. Ernst Muller-Mohl, who beneficially owns
more that 5% of our outstanding common stock.
5
<PAGE>
Other directors continuing in office until 2001:
Peter R. Kent, 46 years old, has served as our President since June
1999. He and David M. Nussbaum, our Chairman, comprise the Office of the Chief
Executive of our Company and they share executive responsibilities as they
determine. He has served as a director of our Company since May 1996. From
February 1996 until June 1999 he served as our Chief Operating Officer and from
July 1995 until October 1998 he served as our Chief Financial Officer. Since
June 1999 he has served as Vice Chairman of GKN Securities. From February 1996
until June 1999 he served as Chief Operating Officer of GKN Securities and from
July 1995 until October 1998 he served as its Chief Financial Officer. In June
1999 he became President and Chief Operating Officer of EarlybirdCapital.com,
and prior to that time served as an executive officer of this subsidiary since
our acquisition of it in March 1997. Until October 1998 he served as Chief
Financial Officer of Shochet, which position he held since we acquired it in
November 1995. He also has served as an executive officer of Dalewood since we
acquired it in December 1996. He also has served as director of RPII-AG since
January 1998. From September 1991 through February 1995, Mr. Kent served
initially as Chief Financial Officer, and subsequently as President, Chairman of
the Board, and Chief Executive Officer, of Consolidated Waste Services of
America, Inc., a solid waste management and recycling company. From 1988 until
1991, Mr. Kent was employed by the securities firm of Wessels, Arnold &
Henderson, where he served as a member of the Corporate Finance Department in
charge of its Environmental Services Group. From 1984 to 1988, Mr. Kent was
employed by Henry Ansbacher, Inc., a firm involved in the field of media mergers
and acquisitions, initially as Chief Financial Officer and subsequently as its
President and Chief Operating Officer. Previous to 1984, Mr. Kent had been
employed by Sutro & Co. Incorporated, Wells Fargo Bank, and Arthur Andersen &
Co. Mr. Kent is a Certified Public Accountant. Mr. Kent graduated from the
University of California at Berkeley, where he also received his Masters in
Business Administration.
John P. Margaritis, 50 years old, has served as a director of our
Company since August 1996. Since September 1998, Mr. Margaritis served as
President and Chief Executive Officer of The Hawthorn Group New York, an
international public relations firm. From June 1997 until September 1998, Mr.
Margaritis served as Chief Executive Officer of Margaritis & Associates, a
public relations consulting firm. Mr. Margaritis was the President and Chief
Executive Officer of Ogilvy Adams & Rinehart (currently known as Ogilvy Public
Relations Worldwide), a public relations firm from January 1994 through February
1997, and was the President and Chief Operating Officer from January 1992 to
January 1994. From July 1988 until January 1992, Mr. Margaritis was Chairman and
Chief Executive Officer of Ogilvy & Mathers, Public Relations. Mr. Margaritis is
a director of the Arthur Ashe Institution for Urban Health and Research America,
a non-profit organization to promote government's support of medical research.
Mr. Margaritis is a member of the President's Advisory Counsel for the Museum of
Television and Radio. Mr. Margaritis is also a trustee of Washington and
Jefferson College. Mr. Margaritis graduated from Washington and Jefferson
College and received his masters degree from the New School for Social Research.
Directors continuing in office until 2000:
James I. Krantz, 44 years old, has been one of our directors since
September 1990. Since 1977, Mr. Krantz has served as a Property, Casualty and
Life Insurance Broker and has been engaged in real estate management and
investment. Since September 1997 Mr. Krantz served as President and Chief
Executive Office of York International Agency, Inc., a full service insurance
agency and from 1993 to September 1997, Mr. Krantz served as Vice President of
York International Agency. Mr. Krantz graduated from Syracuse University. He
received his Chartered Property Casualty Underwriter (CPCU) designation in 1989.
Arnold B. Pollard, 56 years old, has been one of our directors since
August 1996. Since June 1993 he has been the President and Chief Executive
Officer of Chief Executive Group, which publishes "Chief Executive" magazine.
For over 20 years, he has been President of Decision Associates, a management
consulting firm specializing in organizational strategy and structure. Mr.
Pollard was a founding member of the Strategic Decision Analysis Group of SRI, a
company engaged in management consulting and contract research. Since October
1996, Mr. Pollard has served as a director and a member of the compensation
committee of Delta Financial Corp., a public company engaged in the business of
mortgage financing, of Sonic Foundry, a public company which develops audio
software, and International Management Education Foundation, a non-profit
educational organization. From 1989 to 1991 Mr. Pollard served as Chairman and
Chief Executive Officer of Biopool International, a biodiagnostic public company
focusing on blood related testing. From 1970 to 1973 Mr. Pollard served as
adjunct professor at the Columbia Graduate School of Business. Mr. Pollard
graduated from Cornell University (Tau Beta Pi) and holds a doctorate in
Management Science from Stanford University.
6
<PAGE>
Lester Rosenkrantz, 58 years old, has been a director and Executive
Vice President of our Company and GKN Securities since February 1994. Mr.
Rosenkrantz has been a director of Southeast since our acquisition of Southeast
in March 1997. Mr. Rosenkrantz was Vice Chairman and Director of Corporate
Finance of Reich & Co., Inc. (formerly Vantage Securities), a member of the New
York Stock Exchange ("NYSE"), from November 1990 until January 1994. He has also
served in various management positions at Rosenkrantz, Lyon and Ross,
Incorporated, a NYSE member firm from 1973 to 1990, serving as Vice Chairman at
the end of his tenure. Mr. Rosenkrantz was employed by Andresen & Company from
1963 to 1973, lastly as a General Partner and head of institutional and retail
sales. Mr. Rosenkrantz graduated from Pennsylvania State University.
Other key employees:
Robert H. Gladstone, 41 years old, served as our Executive Vice
President from November 1993 until June 1999 and was one of our directors from
January 1992 to May 1996. In June 1999 he became President and Chief Executive
Officer of GKN Securities, where he served as an executive officer of GKN
Securities since January 1990. In January 1997, Mr. Gladstone concluded a
settlement with the Securities and Exchange Commission ("SEC") resolving an SEC
investigation and in August 1997, he concluded a settlement with the NASDR
resolving an NASDR investigation, both of which are discussed below.
Richard M. Feldman, 38 years old, has served as our Senior Vice
President and Chief Financial Officer and Chief Financial Officer of GKN
Securities and Shochet since joining our Company in October 1998. In June 1999
he also was appointed Senior Vice President of GKN Securities and Executive Vice
President of Shochet. From August 1992 to October 1998, Mr. Feldman had served
in similar capacities at several broker dealers, including Waterhouse
Securities, Inc. and Muriel Siebert & Co., Inc., two national brokerage firms.
From 1982 through July 1992, Mr. Feldman was employed by Deloitte & Touche, LLP,
an international accounting firm. Mr. Feldman is a Certified Public Accountant,
and a member of the New York State Society of CPAs, the American Institute of
CPAs and the Security Industry Association. Mr. Feldman graduated from the
University of Massachusetts and received a Bachelor of Arts in Business
Administration.
Roger N. Gladstone is the brother of Robert H. Gladstone and the
brother-in-law of David M. Nussbaum. No other family relationships exist between
any of the executive officers or directors of the Company or its subsidiaries.
In January 1997, GKN Securities and Robert H. Gladstone concluded a
settlement with the SEC resolving a SEC investigation arising out of customer
complaints against certain brokers and alleged related supervisory failures
during 1991 and 1992. The settlement was entered in to without admitting or
denying the SEC's findings. Under the terms of the settlement, GKN Securities
paid a penalty of $100,000, engaged an independent consultant to review the
firm's supervisory and compliance policies and procedures and agreed to
implement the recommendations of the independent consultant. Robert H. Gladstone
agreed to pay a penalty of $50,000 and agreed to a suspension from all
association in any capacity with any broker, dealer, investment advisor,
investment company or municipal securities dealer for a period of thirty days,
and agreed not to be associated in a supervisory capacity for eleventh months
thereafter. In August 1997, GKN Securities and certain of its executive
officers, senior managers or former and present brokers (including David M.
Nussbaum, Roger N. Gladstone and Robert H. Gladstone) reached settlements with
the NASDR resolving an NASDR investigation concerning alleged excessive markups
on warrants of several companies GKN Securities underwrote and for which it made
a market during the period 1993 through 1996. The settlement was entered into
without admitting or denying the NASDR's allegations. Under the settlement, GKN
Securities consented to sanctions including censure, the payment of restitution,
interest and fines of $1,723,000 and engaged an independent consultant to review
GKN Securities' policies, practices and procedures relating to the fair pricing
and commissions charged to customers and to related supervisory and compliance
policies and structure and agreed to implement the recommendations of the
independent consultant. Each of David M. Nussbaum and Roger N. Gladstone
consented to censure, a fine of $50,000 and a suspension from association in any
capacity with any member of the NASD for thirty days. Robert H. Gladstone
consented to a censure, a fine of $100,000, a suspension from association in any
capacity with any member of the NASD for a period of thirty days and a
suspension from association, with any member in a principal or supervisory
capacity for a period of three months. In addition, he was required to requalify
by examination as a General Securities Principal if he subsequently became
associated as a principal or supervisor following the termination of his
suspension.
7
<PAGE>
Meetings of the Board of Directors:
During fiscal 1999, our Board of Directors held seven meetings and acted by
unanimous written consent on one occasion.
Committees of the Board of Directors:
Audit Committee
Current members: Roger Gladstone, J. Margaritis, A. Pollard and R. Roberts
Number of Meetings in fiscal 1999: Two
Functions:
o reviews the scope of accounting audits
o reviews with the independent auditors the corporate accounting
practices and policies and recommends to whom reports should
submitted
o reviews with the independent auditors their final report
o reviews with the internal and independent auditors overall
accounting and financial controls, and
o are available to the independent auditors during the year for
consultation purposes.
Compensation Committee
Current Members: D. Nussbaum, J. Margaritis and A. Pollard
Number of Meetings in Fiscal 1999: Three
Functions:
o reviews and makes recommendations to our Board of Directors
regarding salaries, compensation benefits (other than with
respect to the Company's 1991 Employee Incentive Plan ("1991
Plan") and IC Plan), and
o will review any related party transactions on an ongoing basis
for potential conflicts of interest.
Employee Incentive Committee
Current Members: J. Margaritis and A. Pollard
Number of Meetings in Fiscal 1999: One
Functions:
o decisions regarding grants of awards under the 1991 Plan and IC
Plan.
Executive Committee
Current Members: D. Nussbaum, R. Gladstone, P. Kent, J. Margaritis and
A. Pollard
Number of Acts by Written Consent in Fiscal 1999: Four
Functions:
o may address any and all matters handled by our Board of
Directors, except as otherwise provided by law.
8
<PAGE>
Director Compensation
Directors who are employed by us are not compensated for their services
as our directors nor for any committee participation. Directors who are not
employed by us are paid $2,500 per quarter. In June 1999, each of the five
non-employee directors were granted ten-year options to purchase 5,000 shares of
Common Stock at a purchase price of $3.6875, which options vest as to one-third
of the shares on each of the first three anniversaries of the grant date.
Executive Compensation
The following table shows the compensation paid by us and our
subsidiaries, as well as certain other compensation paid or accrued, during the
fiscal years ended January 31, 1999, 1998 and 1997, to our Chief Executive
Officer and to our other four most highly compensated executive officers whose
compensation was $100,000 or greater during fiscal 1999. The following
individuals are referred to as the "Named Officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Fiscal Annual Compensation Restricted Securities All
Year ------------------- Stock Underlying Other
Ended Salary Bonus Awards (1) Options/SARS Compensation(2)(3)
Name and Principal Position January 31, ($) ($) ($) (#) ($)
- - ---------------------------------------- ------------ ------------ ------------ -------------- -------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
David M. Nussbaum 1999 240,000 -0- -0- -0- 1,132,416(4)
Chairman of the Board and Chief 1998 240,000 -0- -0- -0- 453,987(5)
Executive Officer of the Company 1997 240,000 252,986 337,986 -0- 1,314,090
and GKN Securities
Roger N. Gladstone 1999 240,000 -0- -0- -0- 577,692(4)
President of the Company and GKN 1998 240,000 -0- -0- -0- 703,736(5)
Securities 1997 240,000 252,986 252,986 -0- 1,337,000
Peter R. Kent 1999 200,000 -0- -0- -0- 2,400
Chief Operating and Financial 1998 200,000 -0- -0- -0- -0-
Officer of the Company and GKN 1997 200,000 444,210 270,523 -0- -0-
Securities
Robert H. Gladstone 1999 240,000 -0- -0- -0- 868,023(4)
Executive Vice President of the 1998 240,000 -0- -0- -0- 415,008(5)
Company and GKN Securities 1997 240,000 252,986 337,986 6,666 1,301,359
Lester Rosenkrantz 1999 175,000 -0- -0- -0- 22,536
Executive Vice President of the 1998 175,000 -0- -0- -0- 23,323(5)
Company and GKN Securities 1997 157,500 140,746 98,582 -0- 86,164
</TABLE>
(1) Amounts shown in fiscal 1997 represent dollar values of restricted shares
issued pursuant to the IC Plan based on the closing price our common stock on
the date of grant. The IC Shares reported in the Summary Compensation Table
vest, in whole, on the third year anniversary from the date of grant. The
holders of the IC Shares have the right to vote such shares and to receive
dividends paid with respect to such shares. See "Compensation Arrangements -
1996 Incentive Compensation Plan."
(2) Amounts shown for fiscal 1998 and 1997 consist primarily of commissions paid
on the brokerage of securities. Amounts shown for fiscal 1999 also include, to a
lesser extent, contributions pursuant to our 401(k) plan consisting of (a) cash
in the amount of $1,200, $1,200, $1,200, $1,200 and $470, and (b) dollar values
of common stock in the amounts of $1,200, $1,200, $1,200, $1,200 and $470, all
on behalf of David M. Nussbaum, Roger N. Gladstone, Peter R. Kent, Robert H.
Gladstone and Lester Rosenkrantz, respectively, to match, based upon a formula
set forth in the 401(k) plan, fiscal 1999 pretax salary reduction deferral
contributions (included herein under the column Salary). Dollar values of our
9
<PAGE>
Common Stock contributed by us are based upon the closing price of our Common
Stock on the last trading day prior to our 1999 fiscal year end. The matching
contribution vests based upon years of service in accordance with a formula set
forth in our 401(K) plan, but the salary reduction deferral amount contributed
by the employee is 100% immediately vested upon deferral by such employee.
(3) Amounts shown in fiscal 1999 also represent dollar values of restricted
shares contributed by us and allocated to the account of three of the Named
Officers pursuant to the Deferred Compensation Plan of GKN Securities. Dollar
values of Common Stock in the amounts of $9,240, $8,947 and $8,962 were
contributed by us in April 1999 to the GKN Securities' Deferred Compensation
Plan on behalf of David M. Nussbaum, Roger N. Gladstone and Robert H. Gladstone,
respectively, to match the amount of fiscal 1999 pretax commission payout which
was deferred (included herein under the column All Other Compensation) by each
of such Named Officers, respectively, and contributed by them to their
respective accounts under the Deferred Compensation Plan. Both the Named
Officers' commission payout deferred amount and the related GKN Securities
matching contribution of our Common Stock have a three-year vesting period
beginning at the end of the applicable deferral year. Therefore, if a Named
Officer leaves the employ of GKN Securities prior to the end of the three-year
vesting period, such Named Officer loses both GKN's Securities' matching
contribution and the amount of the commission payout which was deferred by such
Named Officer pursuant to the Deferred Compensation Plan.
(4) Includes a payment in securities of various companies with a market value of
$876,250, $330,000 and $617,500 to David M. Nussbaum, Roger N. Gladstone and
Robert H. Gladstone, respectively. These securities were received upon the
exercise of Underwriter Warrants which were issued to the individuals during
prior fiscal years.
(5) Includes a payment in securities of various companies with a market value of
$147,911, $375,711, $92,703 and $7,811 to David M. Nussbaum, Roger N. Gladstone,
Robert H. Gladstone and Lester Rosenkrantz, respectively. These securities were
received upon exercise of Underwriter Warrants which were issued to the
individuals during prior fiscal years.
Management cannot determine, without unreasonable effort or expense,
the specific amount of certain personal benefits afforded to its employees, or
the extent to which benefits are personal rather than business. Management has
concluded that the aggregate amounts of such personal benefits which cannot be
specifically or precisely ascertained do not in any event exceed, as to each
individual named in the preceding table, the lesser of $50,000 or 10% of the
compensation reported in the preceding table for such individual, and that such
information set forth in the preceding table is not rendered materially
misleading by virtue of the omission of the value of such personal benefits.
Option Grants in Last Fiscal Year
No stock options were granted to the Named Officers during fiscal 1999.
10
<PAGE>
Option Exercises and Holdings
The following table sets forth information concerning the number and
value of unexercised options held by each of the Named Officers as of January
31, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money Options/SARs
Acquired Value Fiscal Year-End (#)(1) at Fiscal Year-End ($)(2)
on Exercise Realized -------------------------- --------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- - ------------------- ----------- -------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
David M. Nussbaum -0- -0- 20,000 -0- -0- -0-
Roger N. Gladstone -0- -0- 20,000 -0- -0- -0-
Peter R. Kent -0- -0- 70,000 -0- -0- -0-
Lester Rosenkrantz -0- -0- 25,000 -0- -0- -0-
Robert H. Gladstone -0- -0- 6,666 -0- -0- -0-
- - ------------------
</TABLE>
(1) Represents shares issuable upon exercise of options granted under the 1991
Plan.
(2) Based on the difference between the closing sale price of our common stock
on January 29, 1999 ($1 3/4) and the exercise price of the option
multiplied by the number of shares of common stock subject to the option.
11
<PAGE>
Stock Price Performance Graph
The Stock Price Performance Graph below compares cumulative total
stockholder return for us, the Nasdaq Stock Market (US) Index and a peer group
index selected by the Company* for the years since our initial public offering,
effective July 30, 1996 through this fiscal year end, January 31, 1999. The
graph plots the growth in value of an initial $100 investment in each of our
common stock, the Nasdaq Stock Market (US) Index and the peer group index
selected by the Company over the indicated time periods indicated in the graph,
with dividends reinvested. The stock price performance shown in the graph below
is not necessarily indicative of future price performance.
Cummulative Total Return
---------------------------------------
7/30/96 1/97 1/98 1/99
RESEARCH PARTNERS INTERNATIONAL, INC. 100 101 45 29
PEER GROUP 100 127 201 214
NASDAQ STOCK MARKET (U.S.) 100 129 152 238
* The peer group index is selected by the Company and is comprised of the
following companies engaged in the same business as the Company, each
with a market capitalization within $50,000,000 of the Company's market
capitalization: Advest Group, Inc., First Albany Companies Inc., Hoenig
Group Inc., Interstate/Johnson Lane, Inc., JWgenesis Financial Corp.,
Kinnard Investments, Inc., Scott & Stringfellow Financial, Inc., Stifel
Financial Corp. and Ziegler Companies, Inc.
12
<PAGE>
Compensation Arrangements
o Employment Agreements Regarding Named Officers
We have employment agreements with each of David M. Nussbaum, Roger N.
Gladstone and Robert H. Gladstone which expired on April 30, 1999 but were
extended on a month-to-month basis by an employment letter agreement between us
and each of such persons, dated as of April 28, 1999. Each agreement provides
for a salary at the minimum rate of $20,000 per month and the issuance of up to
15% of any underwriter warrants issuable to us in connection with our corporate
finance and investment banking activities. Messrs. Nussbaum, Gladstone and
Gladstone each receive payments of 20% of the gross brokerage commissions
generated under any of his or each other's customer accounts (an aggregate 60%
pay-out) and they are also entitled to bonuses under the IC Plan discussed
below. The agreements continue until either we or the employee gives the other
notice to terminate the employment agreement at the end of any month, at least
thirty days prior to the end of such month, unless terminated earlier under
conditions set forth in the agreement. Notwithstanding the foregoing, effective
February 1, 1999, each of Messrs. Nussbaum, Gladstone and Gladstone voluntarily
agreed to waive one-half of their base-salary until such time as we report two
consecutive profitable quarters. We also have an employment agreement with Peter
R. Kent which expired on April 30, 1999 but which was extended on a
month-to-month basis by an employment letter agreement between us and Mr. Kent,
dated as of April 28, 1999. The agreement provides for a salary at a minimum
rate of $16,666.67 per month. Mr. Kent is also entitled to bonuses under the IC
Plan. The agreement continues until either we or Mr. Kent gives the other notice
to terminate the employment agreement at the end of any month at least thirty
days prior to the end of such month, unless terminated earlier under conditions
set forth in the agreement. On June 29, 1999, Mr. Kent was granted options to
purchase 50,000 shares of common stock at a purchase price of $3.6875, which
options vest as to one-third of the shares on each of the first three
anniversaries of the grant date. The agreements with Messrs. Nussbaum,
Gladstone, Gladstone and Kent contain non-compete provisions, expiring one year
after termination of employment, which prohibit these persons from competing
with us without our prior written consent. Our Board approved the annual salary
of Lester Rosenkrantz as $175,000 for fiscal 1999 and fiscal 2000. Mr.
Rosenkrantz is also entitled to commissions on his brokerage business and
bonuses under the IC Plan.
The compensation and employment relationships we have with our Named
Executive Officers are currently being reviewed and we anticipate that certain
changes may occur as a result of this review in the near future.
o 1991 Employee Incentive Plan
In June 1991 we adopted and our stockholders approved the 1991 Employee
Incentive Plan which provides for the issuance of stock, stock options and other
stock purchase rights to officers and other key employees and consultants who
render significant services to us and our subsidiaries. The 1991 Plan was
adopted to provide our Board with sufficient flexibility regarding the forms of
incentive compensation which we will have at our disposal to reward these
persons. At the meeting, we are seeking stockholder approval of an amendment to
the 1991 Plan to permit our non-employee directors to participate in this Plan.
For more information, see the discussion under Proposal 3. Under the 1991 Plan,
both options intended to qualify as incentive stock options under Section 422 of
the Internal Revenue Code of 1986, as amended, and non-qualified options may be
granted. Our Board has designated the Employee Incentive Committee to administer
and determine the distribution and terms of awards granted under the 1991 Plan,
pursuant to guidelines set forth in the 1991 Plan. During fiscal 1999, options
to purchase a total of 332,000 shares of our common stock at exercise prices
ranging from $2.63 to $4.50 were granted under the 1991 Plan. As of July 31,
1999, a total of 4,093,144 shares of our common stock remain reserved for future
issuance pursuant to the 1991 Plan.
o 1996 Incentive Compensation Plan
In July 1996, we adopted and our stockholders approved the IC Plan
which, as amended, establishes an incentive compensation pool equal to 25% of
all pre-tax, pre-incentive compensation profits, once a 10% pre-tax,
pre-incentive return on beginning equity has been achieved. If our pre-tax,
pre-incentive compensation profits are sufficient to establish a bonus pool,
such bonus pool would then be distributed to management and business unit
managers, in majority part based upon a pre-fixed percentage determined in the
beginning of the fiscal year in question and to a lesser extent, based upon the
discretion of the Employee Incentive Committee after such fiscal year has ended.
In the discretion of the Employee Incentive Committee, up to 50% of the value of
13
<PAGE>
any award may be paid in restricted shares of our common stock, and up to 100%
may be paid in restricted shares with the consent of the recipient. The
"restricted" shares will not vest, except in limited circumstances, until three
years after the date of grant. During fiscal 1999, no grants were made pursuant
to the IC Plan. A total of 714,950 shares of our common stock is currently
reserved for issuance under the IC Plan.
o 1998 Deferred Compensation Plan
In March 1998, GKN Securities, adopted a deferred compensation plan
which was amended in March 1999, pursuant to which management level employees or
highly compensated employees of GKN Securities may defer a percentage of his or
her commission payout for a fiscal year. The maximum deferral percentage is
based upon the employee's prior year's annual production, calculated in
accordance with a formula set forth in the deferred compensation plan, and his
or her years with GKN Securities. Based upon the actual deferral percentage by
the employee, GKN Securities will match the dollar amount of such deferral with
a like amount of our Common Stock. Both the employee's deferred commission
payout amount and the related GKN Securities matching contribution of our common
stock have a three-year vesting period commencing at the end of the applicable
deferral year. Payment of the deferred account balance is made after the
completion of the three-year vesting period, or earlier upon death.
We have deposited our shares in the deferred account balance and have
made a book entry of the amount deferred by eligible employees. However, the
deferred account balances are considered to be unfunded until they are
distributed by or vested in an employee and until then, they are subject to
forfeiture upon the occurrence of events referenced in the deferred compensation
plan.
14
<PAGE>
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our Compensation Committee consists of three of our Board of Director
members, two of which are non-employee directors. The Compensation Committee is
charged with the responsibilities of establishing and administering the policies
and plans which govern compensation for executive officers, including the Named
Officers, reviewing and recommending to the Board of Directors the level of
compensation of our executive officers and key employees (other than with
respect to the 1991 Plan and the IC Plan) and reviewing related party
transactions on an ongoing basis for potential conflicts of interest. Our
Employee Incentive Committee is responsible for administering and making all
decisions with respect to the grant of bonus awards under the 1991 Plan and IC
Plan. For fiscal 1999, our Employee Incentive Committee consisted of John P.
Margaritis and Arnold B. Pollard, each a non-employee director.
Prior to the establishment of the Compensation Committee in August
1996, we entered into employment agreements, dated as of May 1, 1996, with each
of David M. Nussbaum, Roger N. Gladstone, Peter R. Kent and Robert H. Gladstone,
expiring in April 30, 1999, which were amended as of April 28, 1999 to extend
the term of such agreements on a month-to-month basis until terminated on thirty
days prior notice, unless earlier terminated in accordance with the agreement.
Those agreements fixed the salaries of such persons. Accordingly, the salaries
of such persons for fiscal 1999 were not reviewed by the Compensation Committee.
Management recommended an annual salary of $175,000 for Mr. Rosenkrantz for
fiscal 1999 and determined that he was entitled to commissions on his brokerage
business and eligible to receive bonuses under the IC Plan. Management
additionally recommended that Mr. Rosenkrantz's salary remain at $175,000 for
fiscal 2000. The Compensation Committee supported such recommendations based
upon the following factors: The Compensation Committee analyzed competitive
salaries of positions similar to Mr. Rosenkrantz's position; evaluated his level
of responsibility in the investment banking department and within our Company;
and reviewed our performance for fiscal 1999. The Compensation Committee
reaffirmed that Mr. Rosenkrantz is also entitled to commissions on his brokerage
business and bonuses under the IC Plan, if any, for fiscal 2000.
Bonuses for executive management, including the Named Officers (David
M. Nussbaum, Roger N. Gladstone, Peter R. Kent, Lester Rosenkrantz and Robert H.
Gladstone), are established in accordance with the terms of the IC Plan.
Pursuant to the IC Plan, a bonus pool is determined annually equal to 25% of all
of our pre-tax, pre-incentive compensation profits once a 10% pre-tax,
pre-incentive compensation return on beginning equity has been achieved.
Accordingly, unless we have a specified minimum of pre-tax, pre-incentive
compensation profits, no bonuses are awarded under the IC Plan. This reflects
our policy to have the bonuses of executive management, including the Named
Officers, directly related to our performance. We did not achieve a bonus pool
in fiscal 1999. Accordingly, we did not grant any bonuses to the Named Officers
for fiscal 1999.
The Compensation Committee discussed the relationship of the Company's
performance to the amount of David M. Nussbaum's compensation for fiscal 1999.
Insofar as Mr. Nussbaum's salary is fixed pursuant to an agreement dated prior
to the establishment of the Compensation Committee and he did not receive any
discretionary compensation for fiscal 1999, the Compensation Committee neither
recommended nor determined Mr. Nussbaum's compensation for fiscal 1999. Mr.
Nussbaum, however, together with Mr. Roger Gladstone and Mr. Robert Gladstone,
voluntarily agreed commencing February 1, 1999 to take only one-half of their
base salaries until such time as we report two profitable fiscal quarters.
COMPENSATION COMMITTEE
David M. Nussbaum
John P. Margaritis
Arnold B. Pollard
15
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers, directors and persons who beneficially own more than ten
percent of our common stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. These reporting persons
also are required to furnish us with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on its review of the copies of
such forms furnished to it and representations that no other reports were
required, all Section 16(a) reporting requirements were complied with during
fiscal 1999, except that an initial report which reported the grant of options
to Richard Feldman, our then recently appointed Chief Financial Officer, was
filed late.
Certain Transactions
In connection with its corporate finance and investment banking
activities, GKN Securities is often issued warrants to purchase securities of
the issuer for whom its services are rendered ("Underwriter Warrants"). Less
than half of the aggregate number of Underwriter Warrants issuable to GKN
Securities are issued to its executive officers and other personnel involved in
the transaction (collectively the "Individual Holders"). GKN Securities has, in
the past, and may, in the future, purchase Underwriter Warrants from the
Individual Holders at a price equal to the market price of the underlying
securities less the exercise price of the Underwriter Warrants. Additionally,
GKN Securities has, in the past, and may, in the future, lend to the Individual
Holders funds to pay the exercise price of the Underwriter Warrants, which loans
are repaid, without interest, within a period of no more than two weeks.
We have purchased and continue to purchase insurance using York
International Agency, Inc. ("York") and York Financial Concepts, Inc. ("York
Financial") as our agent. James I. Krantz, one of our directors, is President
and Chief Executive Officer, a director and a stockholder of York and a majority
shareholder of York Financial. In fiscal 1999, we paid to York and York
Financial, respectively, premiums of $156,510 and $50,760 for insurance policies
purchased through York and York Financial, respectively (a portion of which
amounts are paid by the insurer to York and York Financial).
In the fiscal year ended January 31, 1995, we loaned to Mr. Lester
Rosenkrantz, our Executive Vice President and director, an aggregate of $99,000.
An additional $25,000 loan was made in the fiscal year ended January 31, 1996.
Mr. Rosenkrantz repaid $10,000 in December 1995 and $20,000 in March 1996. In
February 1998, we loaned to Mr. Rosenkrantz an additional $50,000. As of January
31, 1999, the principal aggregate outstanding amount of the loans to Mr.
Rosenkrantz, amounted to $169,000. These loans were partially satisfied in July
1999 by Mr. Rosenkrantz surrendering his interest in certain Underwriter
Warrants.
Effective October 1, 1998, we sold to Dr. Ernst Muller-Mohl, a person
who beneficially owns more than 5% of our outstanding stock, all of the stock we
owned in GKN Asset Management AG, for Swiss francs 1 million (U.S. $728,000).
GKN Asset Management AG served as an investment advisor to Early Bird, an
investment company listed on the Swiss stock exchange. Also effective October 1,
1998, Dr. Ernst Muller-Mohl purchased 300,000 shares of our common stock for
$1,050,000. In connection with this purchase, Dr. Muller-Mohl agreed not to sell
any shares of our common stock owned by him until September 30, 1999 without our
consent and agreed not to purchase any additional shares of our common stock
until January 31, 2001 without our consent.
16
<PAGE>
PROPOSAL 3: Approval of an Amendment to the 1991 Employee Incentive
Plan to Permit Non-Employee Directors to Participate in This Plan and
to Modify Provisions Regarding the Administration of the Plan
At the meeting, our stockholders will be asked to approve an
amendment to the 1991 Employee Incentive Plan to permit our non-employee
directors to become eligible to receive stock options and other stock-based
awards under the 1991 Plan. We will also ask our stockholders to modify the
provisions of the 1991 Plan that do not permit directors who are eligible to
receive awards under the 1999 Plan (e.g., employees of the Company who are also
directors) to vote on issues regarding administration of the 1991 Plan and with
respect to particular awards to be made under the 1991 Plan. The amendment will
permit eligible directors to vote on these matters.
Reasons for the Amendment
In June 1991 we adopted and our stockholders approved the 1991 Employee
Incentive Plan which provides for the issuance of stock, stock options and other
stock purchase rights to officers and other key employees and consultants who
render significant services to us. The purpose of the 1991 Plan is to enable the
Company to offer these persons an opportunity to acquire a proprietary interest
in the Company. The 1991 Plans is intended to provide an additional incentive to
those persons whose past, present and future contributions are important to the
success of the Company, and to allow the Company to attract and retain qualified
persons for the successful conduct of its operations.
The 1991 Plan currently does not permit directors of the Company, who
are not employees or consultants to the Company, to receive awards under the
1991 Initial Plan. Accordingly, all grants of stock options that have been made
to our non-employee directors have been made outside of the 1991 Plan. In view
of the number of shares of Common Stock we have reserved for issuance under the
1991 Plan, we do not believe it is necessary for the grants of stock options or
other stock-based awards to our non-employee directors to be made outside of
this plan, and believe that it is better that the awards we issue to our
employees, consultants and directors be awarded under the Company's benefit
plans. Further, by permitting our directors to receive stock options and other
stock-based awards under the 1991 Plan, these awards would not require
stockholder approval in each specific instance. The requirements of the Nasdaq
National Market require that all awards to officers and directors of our
Company, other than awards issued under stockholder-approved plans, are limited
to the lesser of 1% of our outstanding Common Stock or 25,000 shares. We do not
believe that our Company should go to through the expense of seeking stockholder
approval for each particular award.
In addition, the 1991 Plan does not permit directors who are eligible
to receive awards under the 1991 Plan (e.g., employees of the Company who are
also directors) to vote on any matters relating to the administration of the
1991 Plan or with respect to any particular award granted under the 1991 Plan.
Although we believe it is good practice for directors who have a direct interest
with matters that are presented for consideration to the board of directors to
abstain from voting on such matters, it is not necessary in all instances that
directors who are employees who have received or are eligible to receive awards
under the 1991 Plan be prohibited from voting on matters in which they do not
have a direct interest.
Both of the foregoing restrictions were embodied in the 1991 Plan as
originally adopted in order to take advantage of provisions of Rule 16b-3
adopted by the SEC under authority granted to it under the Securities Exchange
Act of 1934. If a stock-based award is granted in accordance with the
requirements of Rule 16b-3, the grant of such award is not deemed to be a
purchase of Common Stock that will be matched against subsequent sales of Common
Stock within a six-month window that requires disgorgement of profits. After the
adoption of the 1991 Plan, the SEC significantly modified Rule 16b-3.
Accordingly, the present restrictions imposed by the 1991 Plan are no longer
necessary to comply with Rule in 16b-3 as currently in effect.
For these reasons, we believe the proposed amendment is appropriate.
Each of the non-employee directors of the Company were granted options to
purchase 5,000 shares of Common Stock on June 29, 1999 outside of the 1991 Plan
as indicated earlier in the Proxy Statement. At the present time we have no
intention to issue any options to our non-employee directors in the near future.
17
<PAGE>
The 1991 Plan is summarized on the following pages.
The Board of Directors Recommends Voting "FOR" PROPOSAL 3.
Summary of the 1991 Plan
General
Under the 1991 Plan, five types of compensation awards may be granted.
They are incentive stock rights, stock options (both options which are intended
to qualify as incentive stock options, under Section 422 of the Internal Revenue
Code of 1986, and options not qualified under the Internal Revenue Code) stock
appreciation rights, limited stock appreciation rights, and restricted stock
purchases (collectively these rights, options and shares are hereinafter
referred to as "Awards").
Eligibility
Awards may be made or granted to key employees and consultants who we
believe render significant services to us and who we believe will contribute to
our success. We refer to these persons as eligible participants. No incentive
stock options may be granted to someone who is not employed by us at the time of
grant. Nor may an incentive stock option be granted to an employee who owns more
than 10% of the combined voting power of all classes of our capital stock unless
the option price is at least 110% of the fair market value of the stock subject
to the incentive stock option and the option is exercisable for not more than
five years from the date granted.
Stock Subject to the 1991 Plan
A total of 5,000,000 shares of Common Stock was reserved for issuance
under the 1991 Plan. At July 31, 1999 there were outstanding options under the
1991 Plan to purchase an aggregate of 4,093,144 shares. Such shares may be
authorized and unissued shares, or shares purchased by the Company and reserved
for issuance under the 1991 Plan. If a stock option or incentive stock right for
any reason expires or is terminated without having been exercised in full, or if
shares issued pursuant to restricted stock purchase agreements are repurchased
by the Company in accordance with the terms thereof, those shares relating to an
unexercised stock option or incentive stock rights or shares which have been
repurchased will again become available for issuance under the 1991 Plan. In the
event that dividends are payable in Common Stock or in the event there are
splits, subdivisions or combinations of shares of Common Stock, the number of
shares available under the 1991 Plan will be increased or decreased
proportionately, as the case may be, and the number of shares delivered upon the
exercise thereafter of any stock option, stock appreciation right or limited
stock appreciation right, upon distribution pursuant to incentive stock rights
theretofore granted or upon sale pursuant to restricted stock purchase
agreements theretofore entered into, and the price per share with respect
thereto, will be increased or decreased proportionately, as the case may be,
without change in the aggregate purchase price (where applicable).
Administration
The 1991 Plan is administered by the Board of Directors of a designated
committee. Our Board has designated the Employee Incentive Committee to
administer the 1991 Plan. Reference to the Committee in this section
regarding the 1991 Plan, unless otherwise noted, means the Board or
Committee, whichever is then acting with respect to the 1991 Plan.
Subject to the provisions of the 1991 Plan, the Committee has the
authority in its discretion:
(1) to determine the fair market value of the Common Stock;
(2) to determine the exercise price per share of the stock options
to be granted;
18
<PAGE>
(3) to determine the eligible participants to whom, and time or
times at which, Awards shall be granted and the number of shares
to be issuable upon exercise of each stock option or right or
sold pursuant to stock purchase agreements;
(4) to construe and interpret the 1991 Plan;
(5) to adopt, amend and cancel rules and regulations relating to the
1991 Plan;
(6) to determine the terms and provisions of each Award (which need
not be identical); and
(7) to make all other determinations necessary or advisable for the
administration of the 1991 Plan.
Duration and Amendment of the 1991 Plan
The 1991 Plan will remain in effect until June 3, 2001, unless sooner
terminated. The board (but not the Employee Incentive Committee) has the
authority to amend the 1991 Plan. However, no amendment may be made that would
impair the rights of the recipient of any previously granted Awards, without his
or her consent, nor may the Board, without a requisite vote of our stockholders
approving such action, amend the 1991 Plan to:
(1) increase the total number of shares of stock reserved for the
purpose of the 1991 Plan; or
(2) extend the duration of the 1991 Plan; or
(3) materially increase the benefits accruing to participants under
the 1991 Plan; or
(4) change the category of persons who can be Eligible Participants
under the 1991 Plan.
Awards under the 1991 Plan
Incentive Stock Rights
Incentive stock rights give the holder the right to receive, without
payment, shares of Common Stock, subject to various terms, conditions and
restrictions. The Committee may grant to eligible participants incentive stock
rights pursuant to incentive stock right agreements in such form, and not
inconsistent with the 1991 Plan, as the Committee approves. An incentive stock
rights agreement specifies the number of shares of Common Stock which the holder
thereof is entitled to receive, without payment, in consideration for services
performed for the Company by the Eligible Participant. The holder of incentive
stock rights is entitled to receive shares of Common Stock only after the lapse
of certain time period as determined by the Committee at the time of the grant.
Options
An option is the right to purchase Common Stock. The 1991 Plan provides
for both incentive stock options and non-qualified options. All options are
evidenced by stock option agreements in such form, and not inconsistent with the
1991 Plan, as the Committee approves. These agreements generally contain the
following terms and conditions:
(1) The option price, which may not be less than 100% in the case of
incentive stock options, and 65% in the case of other options, of the
fair market value of the Common Stock at the time the option is granted.
(2) The total number of shares issuable upon exercise of the option and
whether the options are incentive stock options or non-qualified
options. Under the 1991 Plan, the aggregate fair market value of the
shares of Common Stock that are exercisable for the first time by the
holder under all incentive stock options held by this holder during any
calendar year may not exceed $100,000.
19
<PAGE>
(3) The terms and conditions to be satisfied before shares may be
purchased, including the dates on which shares subject to the option may
first be purchased. At the time an option is granted, the Committee will
fix the period during which it may be exercised which, unless the
Committee determines otherwise, shall not be less than one year nor more
than, with respect to an incentive stock option, ten years from the date
of grant, or with respect to a non-qualified option, no more than
thirteen years from the date of grant.
(4) Stock purchased pursuant to an option agreement generally may be
paid for in cash, in a combination of cash and a promissory note,
through the delivery of shares of Common Stock, or in a combination of
these methods.
(5) If an option holder ceases to be an employee or consultant of the
Company for any reason other than permanent disability or death, any
option, including any unexercised portion thereof, which was otherwise
exercisable on the date of termination, will expire unless exercised
within a period of three months from the date on which the option holder
ceased to be so employed, but in no event after the expiration of the
exercise period. However, if the Committee determines that an option
holder has been discharged for cause, options granted and not yet
exercised will terminate immediately. In the event of the permanent
disability of an option holder while an employee or consultant of the
Company, an option granted to such employee or consultant will be
exercisable for twelve months after the date of permanent disability,
but in no event after the expiration of the exercise period. In the
event of the death of an option holder while an employee or consultant
of the Company, or during the 12 month period after the date of
permanent disability of the option holder, that portion of the option
which had become exercisable on the date of death shall be exercisable
by his or her personal representatives, heirs or legatees at any time
prior to the expiration of one year from the date of the death of the
option holder, but in no event after the expiration of the exercise
period. Except as the Committee may provide otherwise, in the event an
option holder ceases to be an employee or consultant of the Company for
any reason, including death, prior to the option (or any portion)
becoming exercisable, the unexercisable portion of such option shall
terminate and be null and void.
Stock Appreciation Rights
A stock appreciation right is a right given to a holder of a stock
option to receive, upon surrender of all or a portion of his or her stock
option, without payment, a number of shares of Common Stock of the Company
and/or cash, determined pursuant to a formula. The Committee may grant stock
appreciation rights to eligible participants who are granted stock options under
the 1991 Plan pursuant to a stock appreciation rights agreement in such form,
and not inconsistent with the 1991 Plan, and as the Committee approves These
agreements generally contain the following terms and conditions:
(1) Each right will relate to a specific option granted under the 1991
Plan and will be granted to the option holder either concurrently with
the grant of such option, or at such later time as determined by the
Committee. The holder of the stock appreciation right is entitled to
receive the value of the appreciation of a specified number of shares of
Common Stock during a specified period of time as designated in the
stock appreciation right agreement. Upon exercise or maturity of a stock
appreciation right, the holder thereof will receive the full appreciated
value in any combination of cash, stock, or other consideration, as
specified in the stock appreciation right agreement without payment. No
stock appreciation right may be exercised within a period of six months
of the date of grant of such stock appreciation right and no stock
appreciation right granted with respect to an incentive stock option may
be exercised unless the fair market value of the Common Stock on the
date of exercise exceeds the exercise price of the incentive stock
option.
(2) Upon the exercise of a stock appreciations right, the related option
will be considered to have been exercised to the extent of the number of
shares of Common Stock with respect to which such stock appreciation
rights are exercised, and shall be considered to have been exercised to
that extent for purposes of determining the number of shares of Common
20
<PAGE>
Stock available for the grant of options under the 1991 Plan. Upon the
exercise or termination of the related option, the stock appreciation
rights with respect to such related option shall be considered to have
been exercised or terminated to the extent of the number of shares of
Common Stock with respect to which the related option was so exercised
or terminated.
(3) If the holder of a stock appreciation right ceases to be an employee
or consultant of the Company, his or her stock appreciation rights shall
be exercisable only to the extent and upon the conditions that its
related option is exercisable.
Limited Stock Appreciation Rights
A limited stock appreciation right is a stock appreciation right which
is exercisable only upon certain terms, conditions and restrictions. The
Committee may grant limited stock appreciation rights to the holder of any
option with respect to all or a portion of the shares subject to such option.
These limited rights will be granted pursuant to an agreement in such form, and
not inconsistent with the 1991 Plan, as the Committee approves. Unless otherwise
determined by the Committee, a limited right may be exercised only during the
period:
(1) beginning on the first day following any one of
(a) the date of approval by the stockholders of the Company of
an Approved Transaction (as defined in the 1991 Plan),
(b) the date of a Control Purchase (as defined in the 1991
Plan), or
(c) the date of a Board Change (as defined in the 1991 Plan);
and
(2) ending on the thirtieth day (or such other date specified in the
stock option agreement) following such date. Each limited right will be
exercisable during this limited period only to the extent the related
option is then exercisable, and in no event after the termination of the
related option.
Restricted Stock Purchases
A restricted stock purchase is the purchase of Common Stock that is
nontransferable and subject to substantial risk of forfeiture until specific
conditions based on continuing employment or achievement of pre-established
performance objectives are met. The Committee may authorize the issuance of
restricted shares of Common Stock to eligible participants pursuant to
restricted share agreements in such form, and not inconsistent with the 1991
Plan, as the Committee approves. The Committee determines the persons to whom
grants of restricted stock are made, the number of shares to be awarded, the
price (if any) to be paid for the restricted stock by the person receiving such
stock from the Company, the time or times within which awards of restricted
stock may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the restricted stock
awards.
Under a restricted stock grant, a recipient is granted shares of stock
that are subject to forfeiture unless certain conditions are met. The shares
become available to the recipient as the restrictions lapse, usually on the
completion of a period of employment or based on the performance of the Company,
as the Committee so determines.
Restricted shares will be represented by stock certificates registered
in the name of the holder to whom such restricted shares shall have been
awarded. During the restricted period, certificates representing the restricted
shares and any securities constituting retained distributions will bear a
restrictive legend to the effect that ownership of the restricted shares are
subject to the restrictions, terms and conditions provided in the 1991 Plan and
the applicable shares agreement. Such certificates are deposited by such holder
with the Company, together with stock powers or other instruments of assignment,
each endorsed in blank, which will permit transfer to the Company of all or any
portion of the restricted shares and any retained distributions that shall be
forfeited.
21
<PAGE>
Restricted shares constitute issued and outstanding shares of Common
Stock for all corporate purposes. The holder will have the right to vote such
restricted shares, to receive and retain all regular cash dividends, if any, and
such other distributions as the Committee may in its sole discretion designate,
pay, or distribute on such restricted shares and to exercise all other rights,
powers and privileges of a holder of Common Stock with respect to such
restricted shares, with the exception that
(1) the holder will not be entitled to delivery of the stock
certificate or certificates representing such restricted shares
until the restricted period shall have expired and unless all
other vesting requirements with respect thereto shall have been
fulfilled;
(2) the Company will retain custody of the stock certificate or
certificates representing the restricted shares during the
restricted period;
(3) other than regular cash dividends and such other
distributions as the Board may in its sole discretion designate,
the Company will retain custody of all distributions made or
declared with respect to the restricted shares, and such
retained distributions will be subject to the same restrictions,
terms and conditions as are applicable to the restricted shares,
until such time, if ever, as the restricted shares with respect
to which such retained distributions shall have been made, paid
or declared shall have become vested, and such retained
distributions shall not bear interest or be segregated in
separate accounts;
(4) the holder may not sell, assign, transfer, pledge, exchange,
encumber or dispose of the restricted shares or any retained
distributions during the restricted period; and
(5) a breach of the restrictions, terms or conditions provided
in the 1991 Plan or established by the Committee with respect to
any restricted shares or retained distributions will cause a
forfeiture of such restricted shares and any retained
distributions with respect thereto.
On the last day of the restricted period with respect to each award of
restricted shares, and the satisfaction of any other applicable restrictions,
terms and conditions all or part of such restricted shares become vested, and
any retained distributions with respect to such restricted shares shall become
vested. Unless the Committee determines otherwise, any such restricted shares
and retained distributions that shall not have become vested upon the
termination of employment of the holder shall be forfeited to the Company and
the holder shall not thereafter have any rights (including dividend and voting
rights) with respect to such restricted shares and retained distributions that
shall have been so forfeited, provided, however, that if the holder shall die,
become totally disabled or is terminated by the Company without cause during a
restricted period with respect to any restricted shares, then, unless the
restricted share agreement relating to such shares provided otherwise, the
restricted period applicable to each award of restricted shares to such holder
shall be deemed to have expired and all such restricted shares and retained
distributions shall become vested.
Acceleration
Notwithstanding any contrary waiting period in any stock option,
incentive stock or restricted stock purchase agreement, or in the 1991 Plan or
as determined by the Committee to provide otherwise at the time such Award is
granted or subsequent thereto, each outstanding option granted under the 1991
Plan shall become exercisable in full for the aggregate number of shares covered
thereby, and each share issuable upon lapse of an waiting period or issued
pursuant to a restricted stock purchase agreement shall vest unconditionally on
the first day following the occurrence of any of the following (as defined in
the 1991 Plan):
(1) the approval by the stockholders of the Company of an Approved
Transaction;
(2) a Control Purchase; or
(3) a Board Change.
22
<PAGE>
Nonassignability of Awards
No incentive stock right, stock option, stock appreciation right or
limited stock appreciation right issued pursuant to the 1991 Plan shall be
assignable or transferable by an eligible participant except by will or by the
laws of descent and distribution and during the lifetime of an eligible
participant may only be exercised by him or her.
Withholding Taxes
Whenever under the 1991 Plan shares are to be issued in satisfaction of
stock options, incentive stock rights, stock appreciation rights or limited
stock appreciation rights granted under the 1991 Plan, or pursuant to restricted
stock purchases, the Company has the right to require the eligible participant
to remit to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to the delivery of certificates for such
shares or at such later time as when the Company may determine that such taxes
are due. Whenever under the 1991 Plan payments are to be made in cash, such
payment shall be net of an amount sufficient to satisfy federal, state and local
withholding tax requirements.
Nonexclusivity of the 1991 Plan
Neither the adoption of the 1991 Plan by the Board of Directors nor any
provisions of the 1991 Plan shall be construed as creating any limitations on
the power of the Board (but not the Committee) to adopt such additional
compensation arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than pursuant to the 1991
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of
participation in the 1991 Plan is only a summary of the general rules applicable
to the awards and does not give specific details or cover, among other things,
state, local and foreign tax treatment of participation in the 1991 Plan. The
information contained in this section is based on present law and regulations,
which are subject to being changed prospectively or retroactively.
Incentive Stock Options
The eligible participant will recognize no taxable income upon the
grant or exercise of an incentive stock option. The Company will not qualify for
any deduction in connection with the grant or exercise of incentive stock
options. Upon a disposition of the shares after the later of two years from the
date of grant or one year after the transfer of the shares to the eligible
participant, the participant will recognize the difference, if any, between the
amount realized and the exercise price as long-term capital gain or long-term
capital loss (as the case may be) if the shares are capital assets. The excess,
if any, of the fair market value of the shares on the date of exercise of an
incentive stock option over the exercise price will be treated as an item of
adjustment for an eligible participant's taxable year in which the exercise
occurs and may result in an alternative minimum tax liability for the eligible
participant.
If Common Stock acquired upon the exercise of an incentive stock option
is disposed of prior to the expiration of the holding periods described above,
(i) the eligible participant will recognize ordinary compensation income in the
taxable year of disposition in an amount equal to the excess, if any, of the
lesser of the fair market value of the shares on the date of exercise or the
amount realized on the disposition of the shares, over the exercise price paid
for such shares and (ii) the Company will qualify for a deduction equal to any
such amount recognized, subject to the limitation that the compensation be
reasonable. In the case of a disposition of shares earlier than two years from
the date of the grant or in the same taxable year as the exercise, where the
amount realized on the disposition is less than the fair market value of the
shares on the date of exercise, there will be no adjustment since the amount
treated as an item of adjustment, for alternative minimum tax purposes, is
limited to the excess of the amount realized on such disposition over the
exercise price, which is the same amount included in regular taxable income.
23
<PAGE>
Non-qualified Options
With respect to non-qualified options (i) upon grant of the option, the
eligible participant will recognize no income, (ii) upon exercise of the option
(if the shares of Common Stock are not subject to a substantial risk of
forfeiture), the eligible participant will recognize ordinary compensation
income in an amount equal to the excess, if any, of the fair market value of the
shares on the date of exercise over the exercise price, and the Company will
qualify for a deduction in the same amount, subject to the requirement that the
compensation be reasonable and (iii) the Company will be required to comply with
applicable federal income tax withholding requirements with respect to the
amount of ordinary compensation income recognized by the eligible participant.
On a disposition of the shares, the eligible participant will recognize gain or
loss equal to the difference between the amount realized and the sum of the
exercise price and the ordinary compensation income recognized. Such gain or
loss will be treated as capital gain or loss if the shares are capital assets
and as short-term or long-term capital gain or loss, depending upon the length
of time that the Participant held the shares.
If the shares acquired upon exercise of a non-qualified option are
subject to a substantial risk of forfeiture, the eligible participant will
recognize ordinary income at the time when the substantial risk of forfeiture is
removed, unless such eligible participant timely files under Internal Revenue
Code Section 83(b) to elect to be taxed on the receipt of shares, and the
Company will qualify for a corresponding deduction at such time. The amount of
ordinary income will be equal to the excess of the fair market value of the
shares at the time the income is recognized over the amount (if any) paid for
the shares.
Stock Appreciation Rights
Upon the grant of a stock appreciation right, the eligible participant
recognizes no taxable income and the Company receives no deduction. The eligible
participant recognizes ordinary income and the Company receives a deduction at
the time of exercise equal to the cash and fair market value of Common Stock
payable upon such exercise.
Restricted Stock
An eligible participant who receives restricted stock, whether under
incentive stock rights or under a restricted stock purchase, will recognize no
income on the grant of the restricted stock and the Company will not qualify for
any deduction. At the time the restricted stock is no longer subject to a
substantial risk of forfeiture, an eligible participant will recognize ordinary
compensation income in an amount equal to the excess, if any, of the fair market
value of the restricted stock at the time the restriction lapses over the
consideration paid for the restricted stock. An eligible participant's shares
are treated as being subject to a substantial risk of forfeiture so long as his
or her sale of the shares at a profit could subject him or her to a suit under
Section 16(b) of the Exchange Act. The holding period to determine whether an
eligible participant has long-term or short-term capital gain or loss begins
when the restriction period expires, and the tax basis for the shares will
generally be the fair market value of the shares on such date.
An eligible participant may elect, under Section 83(b) of the Internal
Revenue Code, within 30 days of the transfer of the restricted stock, to
recognize ordinary compensation income on the date of transfer in an amount
equal to the excess, if any, of the fair market value on the date of such
transfer of the shares of restricted stock (determined without regard to the
restrictions) over the consideration paid for the restricted stock. If an
eligible participant makes such election and thereafter forfeits the shares, no
ordinary loss deduction will be allowed. Such forfeiture will be treated as a
sale or exchange upon which there is realized loss equal to the excess, if any,
of the consideration paid for the shares over the amount realized on such
forfeiture. Such loss will be a capital loss if the shares are capital assets.
If a Participant makes an election under Section 83(b), the holding period will
commence on the day after the date of transfer and the tax basis will equal the
fair market value of shares (determined without regard to the restrictions) on
the date of transfer.
On a disposition of the shares, an eligible participant will recognize
gain or loss equal to the difference between the amount realized and the tax
basis for the shares.
24
<PAGE>
Whether or not the eligible participant makes an election under Section
83(b), the Company generally will qualify for a deduction (subject to the
reasonableness of compensation limitation) equal to the amount that is taxable
as ordinary income to the eligible participant, in its taxable year in which
such income is included in the eligible participant's gross income. The income
recognized by the eligible participant will be subject to applicable withholding
tax requirements.
Dividends paid on restricted stock which is subject to a substantial
risk of forfeiture generally will be treated as compensation that is taxable as
ordinary compensation income to the eligible participant and will be deductible
by the Company subject to the reasonableness limitation. If, however, the
eligible participant makes a Section 83(b) election, the dividends will be
treated as dividends and taxable as ordinary income to the eligible participant,
but will not be deductible by the Company.
Other Stock-Based Awards
The federal income tax treatment of other stock-based awards will
depend on the nature of any such award and the restrictions applicable to such
award.
Independent Accountants
KPMG LLP has served as our independent accounting firm for fiscal 1999.
We anticipate selecting KPMG LLP as our independent accountants for the fiscal
2000 year, although no formal recommendation has been made to our Board of
Directors as of the date of this proxy statement. A representative of KPMG LLP
is expected to be present at the annual meeting. The representative will have
the opportunity to make a statement and will be available to respond to your
appropriate questions.
Fiscal 2000 Stockholder Proposals
In order for your proposals for our fiscal annual meeting of
Stockholders to be eligible for inclusion in our Proxy Statement, they must be
received by us at our principal office in New York, New York not later than
February 1, 2000. Pursuant to Rule 14a-4 promulgated by the Securities and
Exchange Commission, we advise you that our management shall be permitted to
exercise discretionary voting authority under proxies it solicits and obtains
for our fiscal 2000 annual meeting of stockholders with respect to any proposal
presented by a stockholder at such meeting, without any discussion of the
proposal in our proxy statement for such meeting, unless we received notice of
such proposal at our principal office in New York, New York, not later then
April 15, 2000.
Solicitation of Proxies
The solicitation of proxies in the enclosed form is made on our behalf
and the cost of this solicitation is being paid by us. In addition to the use of
the mails, proxies may be solicited personally or by telephone or telephone
using the services of our directors, officers and regular employees at nominal
cost. Banks, brokerage firms and other custodians, nominees and fiduciaries will
be reimbursed by us for expenses incurred in sending proxy material to
beneficial owners of our stock.
25
<PAGE>
Other Matters
Our Board of Directors does not know of any matter which will be
presented for consideration at the annual meeting other than the matters
referred to in this proxy statement. Should any other matter properly come
before the annual meeting, it is the intention of the persons named in the
accompanying proxy to vote such proxy in accordance with their best judgment.
Herbert Sontz, Secretary
New York, New York
August 19, 1999
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on September 22, 1999
The undersigned security holder(s) of RESEARCH PARTNERS INTERNATIONAL,
P INC., a Delaware corporation ("Company"), hereby appoints DAVID M.
NUSSBAUM, ROGER N. GLADSTONE and PETER R. KENT, or either of them,
with full power of substitution and to act without the other, as the
agents, attorneys and proxies of the undersigned, to vote the
securities standing in the name of the undersigned at the Annual
Meeting of Stockholders of the Company to be held on September 22,
R 1999 and at all adjournments thereof. This proxy will be voted in
accordance with the instructions given below. If no instructions are
given, this proxy will be voted FOR the following proposals:
O 1. ELECTION OF THE FOLLOWING THREE DIRECTORS FOR A THREE-YEAR TERM:
Y
FOR all nominees listed WITHHOLD AUTHORITY to vote
below, except as marked for the nominees listed
to the contrary below |_| below. |_|
DAVID M. NUSSBAUM, ROGER N. GLADSTONE
AND RICHARD Y. ROBERTS
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write that nominee's name in the space below.
-----------------------------------------------------------
2. ELECTION OF THE FOLLOWING DIRECTOR FOR A TWO-YEAR TERM:
FOR the nominee listed below |_| WITHHOLD AUTHORITY to vote
for the nominee listed below |_|
ROSWITHA MEULLER
3. APPROVAL OF AMENDMENT TO 1991 EMPLOYEE INCENTIVE PLAN
FOR |_| AGAINST |_| ABSTAIN |_|
4. In their discretion, the proxies are authorized to vote upon such
other business as may come before the meeting or any adjournment
thereof.
|_| I plan to attend the Annual Meeting.
Date ____________________, 1999
_________________________________
Signature
_________________________________
Signature if held jointly
Please sign exactly as name appears
above. When shares are held by
joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
