SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Effective Management Systems, Inc.
(Name of Registrant as Specified in its Charter)
--------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[EMS Logo]
EFFECTIVE MANAGEMENT SYSTEMS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 30, 1998
To the Shareholders of
Effective Management Systems, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
Effective Management Systems, Inc. will be held on April 30, 1998, at 4:00
P.M., Central Time, at the Milwaukee Athletic Club, 758 North Broadway,
Milwaukee, Wisconsin 53202, for the following purposes:
1. To elect two (2) directors to hold office until the annual
meeting of shareholders in 2001 and until their successors are duly
elected and qualified.
2. To consider and act upon a proposal to approve and adopt
the Effective Management Systems, Inc. 1998 Employee Stock Purchase
Plan.
3. To consider and act upon a proposal to approve the
Effective Management Systems, Inc. 1993 Stock Option Plan, as
amended.
4. To consider and act upon such other business as may
properly come before the meeting or any adjournment or postponement
thereof.
The close of business on March 16, 1998 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to
vote at, the meeting and any adjournment or postponement thereof.
A proxy for the meeting and a proxy statement are enclosed herewith.
By Order of the Board of Directors
EFFECTIVE MANAGEMENT SYSTEMS, INC.
Thomas M. Dykstra
Secretary
Milwaukee, Wisconsin
April 6, 1998
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY
BE. TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY
AS YOUR NAME APPEARS THEREON AND RETURN IMMEDIATELY.
<PAGE>
EFFECTIVE MANAGEMENT SYSTEMS, INC.
12000 West Park Place
Milwaukee, Wisconsin 53224
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 30, 1998
This proxy statement is being furnished to shareholders by the Board
of Directors (the "Board") of Effective Management Systems, Inc. (the
"Company") beginning on or about April 6, 1998 in connection with a
solicitation of proxies by the Board for use at the annual meeting of
shareholders to be held on Thursday, April 30, 1998, at 4:00 P.M., Central
Time, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee,
Wisconsin 53202, and all adjournments or postponements thereof (the
"Annual Meeting"), for the purposes set forth in the attached Notice of
Annual Meeting of Shareholders.
Execution of a proxy given in response to this solicitation will not
affect a shareholder's right to attend the Annual Meeting and to vote in
person. Presence at the Annual Meeting of a shareholder who has signed a
proxy does not in itself revoke a proxy. Any shareholder giving a proxy
may revoke it at any time before it is exercised by giving notice thereof
to the Company in writing or in open meeting.
A proxy, in the enclosed form, which is properly executed, duly
returned to the Company and not revoked will be voted in accordance with
the instructions contained therein. The shares represented by executed
but unmarked proxies will be voted FOR the individuals nominated for
election as directors referred to herein, FOR approval of the Effective
Management Systems, Inc. 1998 Employee Stock Purchase Plan (the "1998
Stock Purchase Plan"), FOR the Effective Management Systems, Inc. 1993
Stock Option Plan, as amended (the "1993 Plan"), and on such other
business or matters which may properly come before the Annual Meeting in
accordance with the best judgment of the persons named as proxies in the
enclosed form of proxy. Other than the election of directors and the
proposals to approve the 1998 Stock Purchase Plan and the 1993 Plan, the
Board has no knowledge of any matters to be presented for action by the
shareholders at the Annual Meeting.
Only holders of record of the Company's common stock, $.01 par value
per share (the "Common Stock"), at the close of business on March 16, 1998
are entitled to vote at the Annual Meeting. On that date, the Company had
outstanding and entitled to vote 4,079,455 shares of Common Stock, each of
which is entitled to one vote per share.
ELECTION OF DIRECTORS
The Company's By-laws provide that the directors shall be divided
into three classes, with staggered terms of three years each. At the
Annual Meeting, the shareholders will elect two directors to hold office
until the annual meeting of shareholders in 2001 and until their
successors are duly elected and qualified. Unless shareholders otherwise
specify, the shares represented by the proxies received will be voted in
favor of the election as directors of the individuals named as the Board's
nominees herein. The Board has no reason to believe that the listed
nominees will be unable or unwilling to serve as directors if elected.
However, in the event that any one of the nominees should be unable to
serve or for good cause will not serve, the shares represented by proxies
received will be voted for another nominee selected by the Board.
Directors of the Company are elected by a plurality of the votes cast
(assuming a quorum is present). An abstention from voting will be
tabulated as a vote withheld on the election and will be included in
computing the number of shares present for purposes of determining the
presence of a quorum, but will not be considered in determining whether
the director nominees have received a plurality of the votes cast at the
Annual Meeting. A broker or nominee holding shares registered in its
name, or the name of its nominee, which are beneficially owned by another
person and for which it has not received instructions as to voting from
the beneficial owner, has the discretion to vote the beneficial owner's
shares with respect to the election of directors.
The following sets forth certain information, as of March 1, 1998,
about the Board's nominees for election at the Annual Meeting and each
director of the Company whose term will continue after the Annual Meeting.
Nominees for Election at the Annual Meeting
Terms expiring at the 2001 Annual Meeting
Helmut M. Adam, 47, has served as President of Olympus Flag &
Banner, Inc., a manufacturer of banners, flags and display products, since
1992. Prior thereto, Mr. Adam was President of Ransomes Inc., a
manufacturer of commercial grass mowing equipment. Mr. Adam is a
Certified Public Accountant.
Director since: 1987
Michael D. Dunham, 52, a co-founder of the Company, has served
as President and Chief Executive Officer of the Company since its
inception in 1978. Mr. Dunham has over 20 years of experience in
management, sales, consulting, software design and development in the
manufacturing and distribution software industry. Mr. Dunham has a B.S.
degree in electrical engineering from the University of Denver and a
Masters of Management Science degree from the Stevens Institute of
Technology. Mr. Dunham is a Fellow of the American Production and
Inventory Control Society.
Director since: 1978
THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS
AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE NOMINEES. SHARES OF COMMON
STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" THE
BOARD'S NOMINEES.
Directors Continuing in Office
Terms expiring at the 1999 Annual Meeting
Scott J. Mermel, 50, has served as Vice President, Marketing of
Metrix, Inc., a developer and marketer of customer service and product
support software, since April 1997. From 1980 to April 1997, Mr. Mermel
was a floor trading member of the Chicago Mercantile Exchange. Prior to
that, he held several managerial positions with Xerox Computer Services, a
developer and marketer of software systems for manufacturing companies.
Director since: 1987
Robert E. Weisenberg, 48, is a private investor. From December 1989
to December 1997, Mr. Weisenberg was Vice President - Operations and
General Manager of the Company. Mr. Weisenberg also served as Assistant
Secretary of the Company from December 1993 until December 1997. Mr.
Weisenberg has a B.A. degree from Stanford University and is a Certified
Public Accountant.
Director since: 1993
Term expiring at the 2000 Annual Meeting
Thomas M. Dykstra, 56, a co-founder of the Company, has served as a
Vice President and as Secretary and Treasurer of the Company since its
incorporation in 1978. During his tenure with the Company, Mr. Dykstra
has managed several different functions including product development,
marketing, affiliate sales, finance, and administration and support. Mr.
Dykstra has a degree in mathematics from Hope College and an M.B.A. degree
from the University of Chicago. Mr. Dykstra is a Fellow of the American
Production and Inventory Control Society.
Director since: 1978
BOARD OF DIRECTORS
General
The Board has standing Audit and Compensation Committees. The Audit
Committee is responsible for recommending to the Board the appointment of
independent auditors, approving the scope of the annual audit activities
of the auditors, approving the audit fee payable to the auditors and
reviewing audit results. Messrs. Adam, Dunham and Mermel are members of
the Audit Committee. The Audit Committee held two meetings in fiscal
1997.
The Compensation Committee (a) reviews and recommends to the Board
the compensation structure for the Company's directors, officers and other
managerial personnel, including salary rates, participation in any
incentive bonus plans, fringe benefits, non-cash perquisites and other
forms of compensation, and (b) administers the Company's 1993 Plan and the
1994 Employee Stock Purchase Plan. If approved by shareholders at the
Annual Meeting, the Compensation Committee will also administer the 1998
Stock Purchase Plan. Messrs. Adam and Mermel are members of the
Compensation Committee. The Compensation Committee held six meetings in
fiscal 1997.
The Board has no standing nominating committee. The Board selects
the director nominees to stand for election at the Company's annual
meetings of shareholders and to fill vacancies occurring on the Board.
The Board will consider nominees recommended by shareholders, but has no
established procedures which shareholders must follow to make a
recommendation. The Company's By-laws also provide for shareholder
nominations of candidates for election as directors. These provisions
require such nominations to be made pursuant to timely notice (as
specified in the By-laws) in writing to the Secretary of the Company. The
shareholder's notice of nomination must contain information relating to
the nominee which is required to be disclosed by the Company's By-laws and
the Securities Exchange Act of 1934.
The Board held seven meetings in fiscal 1997. Each director attended
(a) all of the meetings of the Board and (b) all of the meetings held by
all committees of the Board on which such director served during the year.
Director Compensation
Directors who are officers or employees of the Company receive no
compensation as such for service as members of either the Board or
committees thereof. In fiscal 1997, the non-employee directors received a
cash retainer fee of $3,500. In addition, non-employee directors of the
Company are entitled to receive grants of options to purchase Common Stock
under the 1993 Plan. Under the 1993 Plan, each person who is first
elected as a non-employee director automatically receives on the date of
his or her election an option to purchase 2,030 shares of Common Stock.
On the day following the annual meeting of shareholders in each year, each
non-employee director is also entitled to receive an option to purchase
1,500 shares of Common Stock for serving on the Board and an option to
purchase 1,000 shares of Common Stock for each Board committee on which
the director serves. Options granted to non-employee directors have a per
share exercise price of 100% of the fair market value of a share of Common
Stock on the date of grant. Non-employee director options under the 1993
Plan vest as to 10% of the shares subject thereto on the first anniversary
of the grant date, an additional 20% on the second anniversary of the
grant date, an additional 30% on the third anniversary of the grant date,
and the final 40% on the fourth anniversary of the grant date, except that
if the non-employee director ceases to be a director by reason of death,
disability or retirement during such period, or in the event of a change
in control of the Company, the option will become immediately exercisable
in full. Options granted to non-employee directors will terminate on the
earlier of (a) ten years after the date of grant, (b) six months after the
non-employee director ceases to be a director of the Company by reason of
death, or (c) three months after the non-employee director ceases to be a
director of the Company for any reason other than death. Under the terms
of the 1993 Plan, Messrs. Adam and Mermel each received in fiscal 1997 an
option to purchase 3,500 shares of Common Stock at a per share exercise
price of $5.50. No options were exercised by the non-employee directors
during fiscal 1997.
EXECUTIVE OFFICERS
The following table sets forth information, as of March 1, 1998,
about the other executive officers of the Company who are not directors.
Such officers serve at the pleasure of the Board.
Jeffrey J. Fossum, 44, has served as Chief Financial Officer of the
Company since 1987 and as Assistant Treasurer since December 1993. From
1983 to 1987, Mr. Fossum was the Controller of Berg Company, a
manufacturer of restaurant equipment. Mr. Fossum received his B.A. degree
from the University of Wisconsin-Eau Claire. Mr. Fossum is a Certified
Public Accountant.
Wayne T. Wedell, 39, joined the Company in 1981 and has held
positions of Account Manager, Senior Account Manager, Group Manager as
well as Professional Services Manager, and was promoted to Vice President-
Services in 1992. Mr. Wedell holds a B.A. degree in business
administration from the University of Wisconsin-Milwaukee.
PRINCIPAL SHAREHOLDERS
Management
The following table sets forth information, as of March 1, 1998,
regarding beneficial ownership of Common Stock by each director and
nominee, each employee of the Company (including executive officers) who
owns beneficially more than 5% of the Common Stock, each of the persons
named in the Summary Compensation Table set forth below, and all of the
directors and executive officers as a group. Except as otherwise noted,
each of the persons listed has sole voting and investment power over the
shares beneficially owned.
Amount and Nature of Percent
Name of Beneficial Owner(1) Beneficial Ownership(2) of Class
Michael D. Dunham . . . . . 637,300 15.6%
Thomas M. Dykstra . . . . . 630,000(3) 15.4%
Robert E. Weisenberg(4) . . 283,200 6.9%
Donald W. Vahlsing(5) . . . 250,900 6.2%
Richard W. Grelck (5) . . . 215,276 5.3%
Thomas G. Allen(6) . . . . 66,080 1.6%
Helmut M. Adam . . . . . . 23,385 *
Scott J. Mermel . . . . . . 23,385 *
All directors and executive
officers as a group
(7 persons) . . . . . 1,641,933(7) 39.2%
__________
* Less than one percent (1%).
(1) The address of each person who holds in excess of 5% of the
Common Stock identified in this table is 12000 West Park
Place, Milwaukee, Wisconsin 53224.
(2) Includes the following shares subject to stock options which
were exercisable as of or within 60 days of March 1, 1998:
Mr. Grelck, 189,176 shares; Mr. Allen, 47,780 shares; Mr. Adam,
21,385 shares; Mr. Mermel, 21,385 shares; and all directors
and executive officers as a group, 113,520 shares.
(3) Consists of (a) 210,000 shares held by the Dykstra Family
Limited Partnership for which Mr. Dykstra acts as managing
general partner and (b) 420,000 shares held by a family trust
for which Mr. Dykstra serves as trustee.
(4) Mr. Weisenberg resigned as Vice President - Operations and
General Manager and Assistant Secretary of the Company on
December 31, 1997.
(5) Mr. Vahlsing and Mr. Grelck are employees of the Company.
(6) Mr. Allen resigned as Vice President - Sales and Marketing of
the Company on December 31, 1997.
(7) Assumes the exercise of all options held by the group which
were exercisable as of or within 60 days of March 1, 1998.
The number of shares reflected as beneficially owned by all
directors and executive officers does not include the shares
owned by Mr. Vahlsing, Mr. Grelck and Mr. Allen.
Other Beneficial Owner
The following table sets forth information, as of December 31, 1997,
regarding beneficial ownership by the only other person known to the
Company to own beneficially more than 5% of the outstanding Common Stock
as of such date. The beneficial ownership set forth below has been
reported on a filing made by such beneficial owner on Schedule 13G with
the Securities and Exchange Commission.
Amount and Nature
Name and Address of Beneficial Ownership
of Beneficial Owner Voting Power Investment Power Percent
Sole Shared Sole Shared Aggregate of Class
Heartland Advisors,
Inc.(1) 707,800 0 780,800 0 780,800 19.1%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
(1) The filing made by Heartland Advisors, Inc. indicates that
the Common Stock as to which it is deemed to be beneficial
owner is held in various investment advisory accounts.
EXECUTIVE COMPENSATION
Summary Compensation Information
The following table sets forth certain information concerning
compensation paid for the last three fiscal years to the Company's Chief
Executive Officer and each of the Company's other executive officers who
earned cash compensation in excess of $100,000 for the fiscal year ended
November 30, 1997. The persons named in the table are sometimes referred
to herein as the "named executive officers."
Summary Compensation Table
Long Term
Compensation
Awards
Securities
Name and Principal Annual Compensation(1) Underlying Stock
Position Year Salary($) Bonus($) Options(#)
Michael D. Dunham . . . 1997 $185,586 $ --- ---
President and 1996 175,148 --- ---
Chief Executive 1995 141,956 --- ---
Officer
Thomas M. Dykstra . . . 1997 $176,308 --- ---
Vice President, 1996 164,739 --- ---
Secretary and 1995 131,981 --- ---
Treasurer
Robert E. Weisenberg(2) 1997 $125,187 --- ---
1996 123,089 13,000(3) ---
1995 115,887 15,000 ---
Thomas G. Allen(4) . . 1997 $135,000 26,755 ---
1996 130,008 37,642 30,000
1995 125,040 20,000 38,780
__________
(1) Certain personal benefits provided by the Company and its
subsidiaries to the named executive officers are not included in
the table. Such benefits consisted of Company-provided automobiles
and reimbursement of certain medical expenses. The aggregate
amount of such benefits for each named executive officer in each
year reflected in the table did not exceed 10% of the sum of such
officer's salary and bonus in each respective year.
(2) Mr. Weisenberg resigned as Vice President - Operations and General
Manager and Assistant Secretary of the Company on December 31,
1997.
(3) This bonus was earned for the fiscal year ended November 30, 1996,
but was not awarded and paid until after the Company's 1997 annual
meeting of shareholders.
(4) Mr. Allen resigned as Vice President - Sales and Marketing of the
Company on December 31, 1997.
Stock Options
The Company has in effect the 1993 Plan pursuant to which options to
purchase Common Stock may be granted to employees (including executive
officers) of the Company and its subsidiaries. No options were granted to
the named executive officers during fiscal 1997.
The following table sets forth information regarding the exercise of
stock options by Mr. Allen during the 1997 fiscal year and the fiscal
year-end value of unexercised options held by Mr. Allen. Mr. Allen was the
only named executive officer who held options to acquire Common Stock
during fiscal 1997.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<CAPTION>
Number of Securities
Shares Value Underlying Unexercised Value of Unexercised
Acquired on Realized Options at Fiscal In-the-Money Options
Name Exercise (#) ($)(1) Year-End (#) at Fiscal Year-End ($)(1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Allen 39,500 $149,705 26,268 42,512 0 0
(1) The dollar values are calculated by determining the difference between the fair market value of the
underlying Common Stock and the exercise price of the options at exercise or fiscal year-end, as the
case may be.
</TABLE>
Compensation Committee Report
The Compensation Committee of the Board is responsible for all
aspects of the Company's compensation package offered to its executive
officers, including the named executive officers. The Compensation
Committee determines the compensation package (including the grant of
stock options pursuant to the 1993 Plan) to be paid to each executive
officer.
Executive Compensation Policies. The Company's executive
compensation program is intended to establish a relationship between
compensation and the Company's business strategies as well as the
Company's goal of maintaining and improving profitability and maximizing
long-term shareholder value. The focus of compensation decisions is on
the achievement of long-term performance objectives as opposed to the
attainment of short-term, narrowly defined goals. The focus on long-term
performance objectives is intended to avoid unwarranted adjustments in
executive compensation based solely on short-term swings (either up or
down) in the Company's markets.
In recommending and establishing levels of executive compensation, it
is the policy of the Compensation Committee to (a) offer competitive
compensation packages in order to attract and retain key executive
officers crucial to the Company's long-term success; (b) provide, on a
limited basis, performance-based compensation opportunities (including
equity-based awards) which allow executive officers to earn rewards for
long-term strategic management and the enhancement of shareholder value;
(c) establish a relationship between executive compensation and the
Company's annual and long-term strategic goals; and (d) provide
compensation programs which recognize and reward individual initiative and
achievement.
Executive Compensation Package. As reflected under the section
entitled "Executive Compensation," the Company's executive compensation
package consists primarily of salary and, to a limited extent, bonus
awards and stock option grants, as well as benefits under the employee
benefits plans offered by the Company.
In setting and adjusting executive salaries, including the salaries
of the Chief Executive Officer and the other named executive officers, the
Compensation Committee has historically compared the base salaries paid or
proposed to be paid by the Company with the ranges of salaries paid by
corporations of similar size relative to the Company and operating in
comparable industries (the "Comparison Group"). It is the judgment of the
Compensation Committee that a review of the compensation practices of
companies within the Comparison Group is appropriate in establishing
competitive salary ranges for the Company's executive officers. The
relative financial performance of companies within the Comparison Group
was considered by the Compensation Committee in setting base salaries for
the Company's executive officers for the fiscal year ended November 30,
1997.
Based on the criteria enumerated above, the Compensation Committee
awarded a base salary increase of 6.0% to the Company's Chief Executive
Officer and base salary increases to the other named executive officers
ranging from 1.7% to 7.0% for the fiscal year ended November 30, 1997. No
options were awarded to the named executive officers during fiscal 1997.
In addition, the Compensation Committee awarded Mr. Allen a $26,755 bonus
based on the operating income of the business unit under his supervision.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
limits deductibility for federal income tax purposes of compensation in
excess of $1 million paid to the Chief Executive Officer and certain
executive officers unless certain requirements are met. The Compensation
Committee does not believe that in the foreseeable future the annual
compensation of any executive officer will be subject to the limit.
Effective Management Systems, Inc. Compensation Committee
Helmut M. Adam
Scott J. Mermel
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Adam and Mermel. Mr.
Mermel is an executive officer of Metrix, Inc. Mr. Dunham serves as a
director of Metrix, Inc.
PERFORMANCE INFORMATION
The following graph compares on a cumulative basis changes since
February 25, 1994 (the date on which the Common Stock was first publicly
traded) in (a) the total shareholder return on the Common Stock, (b) the
total return of companies in the Nasdaq Stock Market Index ("Nasdaq
U.S."), and (c) the total shareholder return of companies in the Nasdaq
Computer and Data Processing Stock Market Index ("Nasdaq CDPSM")
consisting of a peer group of publicly-traded software companies. The
total return information presented in the graph assumes the reinvestment
of dividends. The graph assumes $100 was invested on February 25, 1994 in
Common Stock, the Nasdaq U.S. and the Nasdaq CDPSM.
[Performance Graph]
2/25/94 11/30/94 11/30/95 11/30/96 11/30/97
Effective Management $100 $ 80.00 $ 59.00 $ 77.00 $ 54.00
Systems, Inc.
Nasdaq U.S. $100 $113.00 $136.00 $168.00 $208.00
Nasdaq CDPSM $100 $ 95.00 $176.00 $217.00 $281.00
RELATED PARTY TRANSACTIONS
Michael D. Dunham, the Company's President, Thomas M. Dykstra, the
Company's Vice President, Secretary and Treasurer, Robert E. Weisenberg,
the former Vice President-Operations and General Manager and Assistant
Secretary of the Company, and Donald W. Vahlsing, an employee of the
Company, own all of the outstanding common stock of EMS Solutions, Inc.
("EMS Solutions"). EMS Solutions employs 18 people, including a full-time
Vice President and General Manager. Although Messrs. Dunham and Dykstra
are shareholders and directors and Messrs. Weisenberg and Vahlsing are
shareholders of EMS Solutions, they are not involved in the daily
management of its operations.
EMS Solutions develops and sells computer software and related
hardware to the food vending and food distribution industry. In the past,
the Company provided office space, accounting and administrative services,
computer processing time, and other miscellaneous services to EMS
Solutions. Fees received for these services amounted to approximately
$122,000 for the fiscal year ended November 30, 1997. Management believes
that the fees charged for these services were comparable to the fees that
would have been charged by unaffiliated third parties. The Company also
sold computer hardware to EMS Solutions. Sales of such hardware to EMS
Solutions by the Company totalled approximately $331,000 for the fiscal
year ended November 30, 1997. At November 30, 1997, EMS Solutions had
debt outstanding to the Company of approximately $404,000. Such debt
represented trade payables for services and equipment provided by the
Company to EMS Solutions. Interest was paid by EMS Solutions with respect
to these trade payables at a rate equal to the Company's cost of funds
under its revolving line of credit. The rate of interest charged (which
was recalculated monthly) on the trade payables of EMS Solutions was 9.5%
at November 30, 1997. On July 1, 1997, EMS Solutions moved to new
facilities and no longer utilizes office space or other material services
of the Company. In addition, EMS Solutions no longer purchases computer
hardware from the Company.
APPROVAL OF THE 1993 PLAN, AS AMENDED
General
The Board has unanimously adopted two amendments to the 1993 Plan
contingent upon shareholder approval of the 1993 Plan, as so amended, at
the Annual Meeting. The first amendment increases the aggregate number of
shares authorized for issuance under the 1993 Plan from 550,025 to 750,025
(subject to adjustment in order to prevent dilution in certain cases
described below). As of the date of this Proxy Statement, only 83,988
shares of Common Stock remain available for the granting of new options
under the 1993 Plan. The Board approved this amendment to allow for
additional options to be awarded under the 1993 Plan. The second
amendment to the 1993 Plan increases the number of shares of Common Stock
with respect to which any individual employee may be granted options
thereunder. Prior to being amended, the 1993 Plan provided that no
employee was permitted to be granted options that could result in the
employee receiving more than 150,000 shares of Common Stock under the 1993
Plan (subject to adjustment in order to prevent dilution in certain cases
as described below). As amended, the 1993 Plan provides that no employee
may be granted options that could result in the employee receiving more
than 200,000 shares (subject to adjustment in order to prevent dilution in
certain cases described below) of Common Stock under the 1993 Plan. The
increase in the individual limit is being proposed to reflect the increase
in the authorized shares issuable under the 1993 Plan, as amended.
The 1993 Plan was initially adopted by the Board on December 17, 1993
and approved and ratified by shareholders on January 14, 1994. Earlier
amendments to the 1993 Plan were adopted by the Board on February 14, 1995
and February 2, 1996 and approved and ratified by shareholders on April
20, 1995 and April 30, 1996. The currently proposed amendments to the
1993 Plan were approved by the Board on March 3, 1998.
The text of the 1993 Plan, as amended, is set forth in Appendix A to
this Proxy Statement. A description of the 1993 Plan is set forth below
and is qualified in its entirety by reference to the complete text of the
1993 Plan.
Purpose of the 1993 Plan
The 1993 Plan permits the grant of options to purchase shares of
Common Stock to employees (including officers) of the Company and its
subsidiaries as well as to non-employee directors of the Company. The
purpose of the 1993 Plan is to promote the best interests of the Company
and its shareholders by providing employees of the Company and its
subsidiaries and members of the Board who are not employees of the Company
or its subsidiaries with an opportunity to acquire a proprietary interest
in the Company. It is intended that the 1993 Plan will promote continuity
of management and increased incentive and personal interest in the welfare
of the Company by employees of the Company and its subsidiaries. In
addition, by encouraging stock ownership by non-employee directors, the
Company seeks both to attract and retain on its Board persons of
exceptional competence and to provide a further incentive to serve as a
director of the Company.
Administration
The 1993 Plan is administered by the Compensation Committee of the
Board. The Compensation Committee has full authority and discretion,
subject to the express provisions of the 1993 Plan, to determine with
respect to employees, among other things, (a) the employees to whom, and
the price at which, options will be granted, (b) the option period (which
may not exceed ten years), (c) the number of shares subject to each
option, and (d) the other terms and conditions of any option granted under
the 1993 Plan. Grants of options to non-employee directors are automatic
and nondiscretionary.
Eligibility
Options may be granted under the 1993 Plan to employees of the
Company or its subsidiaries (including officers and employee-directors of
the Company or its subsidiaries). In addition, under the 1993 Plan, each
non-employee director is entitled to receive options in the manner
described under the caption "Board of Directors-Director Compensation."
Approximately 340 persons are currently eligible to receive option
grants under the 1993 Plan.
Awards Under the 1993 Plan; Available Shares
The 1993 Plan permits the grant to employees of either "incentive
stock options," which qualify for special income tax treatment under the
Internal Revenue Code, or "nonstatutory stock options," which do not so
qualify. The aggregate value (determined as of the date the option is
granted) of Common Stock with respect to which any incentive stock options
granted under the 1993 Plan or any other plan of the Company are
exercisable for the first time by an employee during any calendar year may
not exceed $100,000. In addition, no incentive stock options may be
granted to employees under the 1993 Plan after December 17, 2003. Non-
employee directors will be eligible to receive nonstatutory stock options
only.
Prior to being amended, the maximum number of shares of Common
Stock for which options were permitted to be granted under the 1993 Plan
was 550,025, subject to adjustment in order to prevent dilution in certain
cases as described below. Under the 1993 Plan, as amended, a total of
750,025 will be available to be issued pursuant to the exercise of
options, subject to adjustment in order to prevent dilution in certain
cases as described below. In the event that all or any portion of an
option granted under the 1993 Plan expires unexercised, is cancelled or
terminates, the shares then subject to such option will again be available
for the granting of additional options under the 1993 Plan. Prior to
being amended, the 1993 Plan provided that no employee participant was
permitted to be granted options that could result in such participant
receiving more than 150,000 shares of Common Stock under the 1993 Plan,
which number of shares was subject to adjustment to prevent dilution in
certain cases as described below. As amended, the 1993 Plan provides that
no employee participant may be granted options that could result in such
employee receiving more than 200,000 shares of Common Stock under the 1993
Plan, subject to adjustment to prevent dilution in certain cases described
below.
Terms of Options
Grants to Employees
The option price per share of any option granted to an employee is to
be determined by the Compensation Committee, but may not be less than 100%
of the fair market value of a share of Common Stock on the date the option
is granted; provided, however, that no incentive stock option may be
granted to any employee who, at the time such incentive stock option is
granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or its subsidiaries unless
the option exercise price of such incentive stock option is at least 110%
of the fair market value of a share of Common Stock on the date of grant.
Unless otherwise determined by the Compensation Committee to the extent
permitted by the 1993 Plan, the fair market value of a share of Common
Stock on the date of grant will be equal to the last sale price of the
Common Stock on The Nasdaq Stock Market on the trading date preceding the
date on which the option is granted. The last sale price of the Common
Stock on The Nasdaq Stock Market on March 20, 1998 was $3.13 per share.
Options granted to employees may be exercised in whole or in part at
any time after the date of grant, except as limited by, among other
provisions, any vesting period set forth in the applicable option
agreement; provided, however, that any option granted to an employee who
is subject to the provisions of Section 16(b) of the Securities Exchange
Act of 1934 on the date of the grant may not become exercisable (except as
otherwise provided in the option agreement) until at least six months
after the date of grant. An option granted under the 1993 Plan to an
employee generally may be exercised only while the recipient is an
employee of the Company or a subsidiary thereof and only if the employee
has been continuously so employed since the date the option was granted.
In no case may any option be exercised more than ten years after the date
of grant. An incentive stock option granted to an employee who, at the
time the incentive stock option is granted, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or its subsidiaries may not be exercisable after the expiration of
five years from the date of grant.
Grants to Non-Employee Directors
Non-employee directors of the Company are entitled to receive
automatic grants of options under the 1993 Plan. For a description of
these grants, see "Board of Directors-Director Compensation." The
Compensation Committee has no discretion to alter the provisions governing
options granted to the non-employee directors.
Payment of Exercise Price; Nonassignability
The purchase price for shares of Common Stock acquired upon exercise
of options under the 1993 Plan must be paid (a) in cash or its equivalent
and/or (b) by tendering, in full or partial payment, previously acquired
shares of Common Stock (valued at their fair market value, as determined
in accordance with the 1993 Plan) or (c) by any combination of the means
of payment set forth in clauses (a) or (b); provided, however, that, with
respect to employees, any payment involving the tender of previously
acquired Common Stock is permitted only with the consent of the
Compensation Committee. The 1993 Plan does not permit the practice known
as "pyramiding" whereby shares acquired upon exercise of an option are
simultaneously surrendered in exchange for all or part of the remaining
shares subject to the option. No shares of Common Stock will be issued
under the 1993 Plan until full payment therefor has been made.
Options granted under the 1993 Plan are not transferable or
assignable otherwise than by will or by the laws of descent and
distribution and may be exercised during the life of the participant only
by the participant or his or her guardian or legal representative.
Capital Adjustments
In the event of a capital adjustment resulting from a stock dividend
(other than a stock dividend in lieu of an ordinary cash dividend), stock
split, reorganization, spin-off, split-up or distribution of assets to
shareholders, recapitalization, merger, consolidation, combination or
exchange of shares or the like, the number of shares of Common Stock
subject to the 1993 Plan, the limit imposed on the number of options that
may be granted to any one participant, the number of options subject to
grant to non-employee directors, and the number of shares under option in
outstanding option agreements will be adjusted in a manner consistent with
such capital adjustment; provided, however, that no such capital
adjustment will require the Company to sell any fractional shares and the
adjustment will be limited accordingly. The option price of any shares
subject to an outstanding option agreement will be adjusted so that there
will be no change in the aggregate exercise price payable upon exercise of
any such option. The determination of the Compensation Committee as to
any capital adjustment is final.
Amendment and Termination
The Board may at any time and from time to time amend, suspend or
terminate the 1993 Plan; provided, however, that the provisions relating
to non-employee directors may not be amended more than once every six
months other than to comply with certain Federal laws; and provided
further that shareholder approval of any amendment must also be obtained
if: (a) then required by Rule 16b-3 under the Securities Exchange Act of
1934, the Internal Revenue Code or the quotation requirements of The
Nasdaq Stock Market (or any principal securities exchange on which the
Common Stock is then traded); (b) such amendment materially modifies the
eligibility requirements for participation in the 1993 Plan; (c) such
amendment increases the total number of shares of Common Stock which may
be acquired under the 1993 Plan (except as permitted by the anti-dilution
provisions thereof); or (d) such amendment reduces the minimum option
exercise price per share at which options may be granted. No amendment,
suspension or termination of the 1993 Plan may, without the participant's
consent, alter or impair any of the rights or obligations under any option
previously granted to such participant.
Withholding
Under the 1993 Plan, the Company may deduct and withhold from any
cash otherwise payable to a participant (whether payable as salary, bonus
or other compensation) such amount as may be required to satisfy the
Company's obligation to withhold Federal, state or local taxes. In the
event such amount withheld is insufficient for such purpose, the Company
may require the participant to pay to the Company an amount necessary to
satisfy the obligation to withhold any such taxes. The Compensation
Committee has discretionary authority to permit a participant who is an
employee to satisfy the Company's withholding tax requirements by electing
to have the Company withhold shares of Common Stock otherwise issuable to
such participant or by delivering to the Company shares of Common Stock
having a fair market value on the date income is recognized pursuant to
the exercise of an option equal to the amount to be withheld.
Certain Federal Income Tax Consequences
The grant of a stock option under the 1993 Plan will create no income
tax consequences to the participant or the Company. A participant who is
granted a nonstatutory stock option will generally recognize ordinary
income at the time of exercise in an amount equal to the excess of the
fair market value of the Common Stock at such time over the exercise
price. The Company will be entitled to a deduction in the same amount and
at the same time as ordinary income is recognized by the participant. A
subsequent disposition of the Common Stock will give rise to a capital
gain or loss to the extent the amount realized from the sale differs from
the tax basis, i.e., the fair market value of the Common stock on the date
of exercise. The capital gain or loss will be either short-term, mid-term
or long-term capital gain or loss depending upon the holding period of the
Common Stock.
In general, if an employee participant holds the shares of Common
Stock acquired pursuant to the exercise of an incentive stock option for
at least two years from the date of grant and one year from the date of
exercise, the employee participant will recognize no income or gain as a
result of exercise (except that the alternative minimum tax may apply).
Any gain or loss by the employee participant on the disposition of the
Common Stock will be treated as either a mid-term or long-term capital
gain or loss. No deduction will be allowed to the Company. If these
holding period requirements are not satisfied, the employee participant
will recognize ordinary income at the time of the disposition equal to the
lesser of (a) the gain realized on the disposition, and (b) the difference
between the exercise price and the fair market value of the shares of
Common Stock on the date of exercise. The Company will be entitled to a
deduction in the same amount and at the same time as ordinary income is
recognized by the employee participant. Any additional gain realized by
the employee participant over the fair market value at the time of
exercise will be treated as a capital gain. This capital gain will be
either short-term, mid-term or long-term capital gain depending upon the
holding period of the Common Stock.
Awards Under the 1993 Plan
The following table sets forth information with respect to awards
that were granted under the 1993 Plan during fiscal 1997 and, through the
date of this Proxy Statement, during fiscal 1998 to the various
individuals and groups identified below. All of such awards consisted of
nonstatutory stock options which vest and become exercisable over a four-
year period (10% after the first year, an additional 20% after the second
year, an additional 30% after the third year, and the final 40% after the
end of the fourth year). The options have per share exercise prices
ranging from $5.50 to $6.75.
New Plan Benefits
Number of Shares
Name and Position Subject to Options
All executive officers as a group (5 persons) . . 4,500
All non-employee directors as a group
(2 persons) . . . . . . . . . . . . . . . . . . . 7,000
All employees (other than executive officers) as
a group (334 persons) . . . . . . . . . . . . . . 98,313
Except for stock options automatically granted to the non-employee
directors, the Company cannot currently determine the options that may be
granted to eligible participants under the 1993 Plan in the future. Such
determinations will be made from time to time by the Compensation
Committee.
Vote Required to Approve the 1993 Plan, as Amended
Assuming that a quorum is present, the affirmative vote of the
holders of a majority of the shares of Common Stock represented and voted
at the Annual Meeting with respect to the 1993 Plan, as amended, is
required to approve such Plan. Any shares not voted at the Annual Meeting
with respect to the 1993 Plan as so amended (whether as a result of broker
non-votes or otherwise, except abstentions) will have no impact on the
vote. Shares of Common Stock as to which holders abstain from voting will
be treated as votes against the 1993 Plan, as amended. In the event that
the 1993 Plan, as amended, is not approved by shareholders at the Annual
Meeting, the 1993 Plan (except for the amendments currently proposed) will
remain in full force and effect.
THE BOARD RECOMMENDS A VOTE "FOR" THE 1993 PLAN, AS AMENDED. SHARES
OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED
PROXIES WILL BE VOTED "FOR" THE 1993 PLAN, AS AMENDED.
1998 STOCK PURCHASE PLAN
General
On March 3, 1998, the Board unanimously approved the adoption of the
1998 Stock Purchase Plan, subject to shareholder approval at the Annual
Meeting. The 1998 Stock Purchase Plan, which is the successor to the
Company's 1994 Employee Stock Purchase Plan, is intended to provide
employees (including executive officers) of the Company with the
opportunity to purchase Common Stock. Following the termination of the
offering period ended June 30, 1998, no additional shares will be issuable
under the 1994 Employee Stock Purchase Plan.
The purpose of the 1998 Stock Purchase Plan is to allow eligible
employees of the Company and its subsidiaries to purchase shares of Common
Stock and thereby share in the ownership of the Company. It is intended
that the 1998 Stock Purchase Plan will qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code.
The text of the 1998 Stock Purchase Plan is set forth in Appendix B
to this Proxy Statement. A description of the 1998 Stock Purchase Plan is
set forth below and is qualified in its entirety by reference to the
complete text of the 1998 Stock Purchase Plan.
Administration
If approved by shareholders at the Annual Meeting, the 1998 Stock
Purchase Plan will be administered by the Compensation Committee of the
Board. The Compensation Committee will have full authority and
discretion, subject to the express provisions of the 1998 Stock Purchase
Plan, to (a) establish such terms and conditions for the grant of purchase
rights as the Committee may deem necessary or advisable, (b) adopt such
rules or regulations which may become necessary or advisable for the
operation of the 1998 Stock Purchase Plan and (c) make such
determinations, and take such other actions, as are expressly authorized
or contemplated in the 1998 Stock Purchase Plan or as may be required for
the proper administration of the 1998 Stock Purchase Plan.
To assist in the administration of the 1998 Stock Purchase Plan, the
Compensation Committee intends to appoint Thomas M. Dykstra as the 1998
Stock Purchase Plan Administrator. The 1998 Stock Purchase Plan
Administrator will assist the Compensation Committee in corresponding with
employees, with record keeping and in performing other administrative
functions in connection with the 1998 Stock Purchase Plan.
Eligibility
Any employee who has completed one year of continuous employment at
the beginning of an offering period is eligible to participate in the 1998
Stock Purchase Plan. The 1998 Stock Purchase Plan provides that no
employee may be granted options to purchase shares of Common Stock under
the 1998 Stock Purchase Plan that could result in such employee (a)
owning, and/or holding options to purchase, 5% or more of the total
combined voting power or value of all classes of stock of the Company, or
any subsidiary, or (b) having rights to purchase stock under all employee
stock purchase plans of the Company that accrue at a rate which exceeds
$25,000 in fair market value of the Common Stock for each calendar year in
which such purchase rights are outstanding. Approximately 340 persons are
currently eligible to participate in the 1998 Stock Purchase Plan.
Shares Subject to the 1998 Stock Purchase Plan
The maximum number of shares of Common Stock which may be issued
under the 1998 Stock Purchase Plan is 100,000, subject to adjustment in
order to prevent dilution in certain cases as described below. Under the
1998 Stock Purchase Plan, the Company offers eligible employees the
opportunity to purchase shares of Common Stock in up to eight successive
offerings, each with a duration of six months. The first offering will
commence on July 1, 1998 and end on December 31, 1998. Under the 1998
Stock Purchase Plan, the Company may not issue more than 12,500 shares of
Common Stock in any single offering, plus the aggregate number of unissued
shares from all prior offerings, whether or not previously offered to any
employee. The Compensation Committee may elect to divide a semi-annual
offering into two three-month offerings, in which case only 6,250 shares
may be offered per three-month offering. If the total number of shares of
Common Stock for which options are exercisable at the end of any offering
period exceeds the maximum number of shares issuable in such offering, the
Company will allocate the shares available for purchase by participants on
a pro rata basis as uniformly as practicable.
Payroll Deductions; Withdrawal from the 1998 Stock Purchase Plan
Under the 1998 Stock Purchase Plan, employees are eligible, through a
system of regular payroll deductions, to apply up to 5% of their
compensation to the purchase of Common Stock at a price equal to the
lesser of 85% of the fair market value of the stock at the beginning of
the six-month offering period or 85% of the fair market value of the stock
at the end of the six-month offering period. The last sale price of the
Common Stock on The Nasdaq Stock Market on March 20, 1998 was $3.13 per
share. The amount withheld from an employee's compensation during an
offering period for the purchase of Common Stock will be held until the
end of the period, at which time it will be applied automatically to the
purchase of shares. Each employee will be entitled to withdraw the entire
accumulated balance in the payroll deduction account at any time before
the end of the offering period, but the employee may not participate in
the 1998 Stock Purchase Plan during the balance of that offering period.
Such withdrawal does not affect the ability of the employee to participate
in any subsequent offering under the 1998 Stock Purchase Plan. The
accumulated balance of an employee's account will also be automatically
returned to the employee in the event of a termination of employment for
any reason other than the death of the employee. Upon the death of an
employee who has elected to participate in the 1998 Stock Purchase Plan,
the designated beneficiary will be permitted to elect, within a limited
period of time, whether to purchase shares of Common Stock with the
employee's account balance or to withdraw such balance. No interest is
paid by the Company at any time on the accumulated balance in the account
regardless of the ultimate disposition of the funds in the account.
Nontransferability of Options
Subject to the terms of the 1998 Stock Purchase Plan, an employee's
right to exercise options under the Plan (a) may not be transferred,
pledged, assigned or otherwise alienated or hypothecated by the employee,
except by will or the laws of descent and distribution, and (b) may be
exercised only by the employee.
Capital Adjustments
To prevent the dilution or enlargement of purchase rights, in the
event of a stock dividend, stock split, reorganization, recapitalization,
merger, consolidation, or other change in shares of Common Stock, the
Compensation Committee may adjust, among other things, the number of
shares of Common Stock subject to the 1998 Stock Purchase Plan and the
number of shares and the purchase price under each outstanding option as
the Committee deems appropriate; provided, however, that no such capital
adjustment will require the Company to sell any fractional shares and the
adjustment will be limited accordingly.
Amendment and Termination
The Board may at any time amend or terminate the 1998 Stock Purchase
Plan; provided, however, that shareholder approval of any amendment must
also be obtained if: (a) then required by the Internal Revenue Code, or
the quotation requirements of The Nasdaq Stock Market (or any principal
securities exchange on which the Common Stock is then traded); (b) such
amendment modifies the eligibility requirement for participation in the
1998 Stock Purchase Plan; (c) such amendment increases the total number of
shares of Common Stock which may be acquired under the 1998 Stock Purchase
Plan (except as permitted by the anti-dilution provisions thereof); (d)
such amendment changes the class of corporation whose employees will be
granted purchase rights under the 1998 Stock Purchase Plan; or (e) such
amendment materially increases the benefits to employees under the 1998
Stock Purchase Plan. No amendment or termination of the 1998 Stock
Purchase Plan may, without the participating employee's consent, alter or
impair any of the rights or obligations under any option previously
granted to such participating employee.
Withholding
Under the 1998 Stock Purchase Plan, the Company may deduct and
withhold from any cash otherwise payable to a participating employee
(whether payable as salary, bonus or other compensation) such amount as
may be required to satisfy the Company's obligations to withhold Federal,
state or local taxes. The Company may withhold the issuance of
certificates for shares of Common Stock covering shares to be issued
pursuant to the 1998 Stock Purchase Plan until the employee has made
arrangements to satisfy the Company's obligation to withhold Federal,
state or local taxes.
Certain Federal Income Tax Consequences
Participating employees will not recognize taxable income on the
grant or exercise of the options issued pursuant to the 1998 Stock
Purchase Plan. Shares received upon exercise of an option will have an
initial tax basis equal to the option exercise price. Although
participating employees will not recognize any taxable income when they
purchase shares, they will recognize ordinary income and/or gain or loss
when the shares acquired under the 1998 Stock Purchase Plan are sold,
exchanged or otherwise disposed of.
Provided that the participating employee has held the shares for at
least two years from the date the option was granted and one year after
the option is exercised, the lesser of (a) the fair market value of the
shares disposed of (at the time of such disposition), including shares
sold, exchanged, gifted, transferred at death, etc., over the amount paid
for such shares or (b) the fair market value of the shares at the time of
grant over the option price, will be included in the participant's taxable
income as additional ordinary compensation income on the date of
disposition or death. The basis of the shares will generally be increased
by the amount of compensation income recognized. The Company will not be
entitled to a deduction in this case. In addition, on such a sale (or
other taxable exchange or transfer) the amount of gain or loss recognized
by a participant will be the difference between the amount which the
participant received for his or her shares and the tax basis (as adjusted)
thereof. Such gain or loss will generally be a mid-term or long-term
capital gain or loss.
If the participating employee disposes of his or her shares without
holding such shares for the two and one-year periods set forth above, then
the participant will recognize additional ordinary compensation income in
an amount equal to the difference between the fair market value of such
shares on exercise and their initial tax basis. The basis of the shares
will generally be increased by the amount of compensation income
recognized. The Company will be entitled to a deduction in the same
amount and at the same time as ordinary income is recognized by the
employee participant. The amount of gain or loss on such sale (or other
taxable exchange or transfer) will be the difference between the amount
which the participant received for his or her shares and the tax basis (as
adjusted) thereof. Such gain or loss will generally be a capital gain or
loss, long-term, mid-term or short-term, depending upon the participant's
holding period.
Offerings
As of the date of this Proxy Statement, no offerings under the 1998
Stock Purchase Plan have been made and no shares of Common Stock have been
sold under such Plan.
Vote Required to Approve Stock Purchase Plan
Assuming that a quorum is present, the affirmative vote of the
holders of a majority of the shares of Common Stock represented and voted
at the Annual Meeting with respect to the 1998 Stock Purchase Plan is
required to approve such Plan. Any shares not voted at the Annual Meeting
with respect to the 1998 Stock Purchase Plan (whether as a result of
broker non-votes or otherwise, except abstentions) will have no impact on
the vote. Shares of Common Stock as to which holders abstain from voting
will be treated as votes against the 1998 Stock Purchase Plan.
THE BOARD RECOMMENDS A VOTE "FOR" THE 1998 PLAN. SHARES OF COMMON
STOCK REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES
WILL BE VOTED "FOR" THE 1998 PLAN.
MISCELLANEOUS
Independent Auditors
Ernst & Young LLP acted as the independent auditors for the Company
in the fiscal year ended November 30, 1997 and it is anticipated that such
firm will be similarly appointed to act for the fiscal year ending
November 30, 1998. Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting and will have the opportunity to make a
statement if they so desire. Such representatives are also expected to be
available to respond to appropriate questions.
Shareholder Proposals
Proposals which shareholders of the Company intend to present at and
have included in the Company's proxy statement for the 1999 annual meeting
must be received by the Company by the close of business on December 7,
1998. In addition, a shareholder who otherwise intends to present
business at the 1999 annual meeting must comply with the requirements set
forth in the Company's By-laws. Among other things, to bring business
before an annual meeting, a shareholder must give written notice thereof
to the Secretary of the Company in advance of the meeting in compliance
with the terms and within the time periods specified in the By-laws.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and more than 10% beneficial
owners to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. The regulations of the Securities and
Exchange Commission require such persons to furnish the Company with
copies of all Section 16(a) forms they file. In August 1997, Mr. Dykstra
inadvertently failed to report the sale of stock by a trust for which he
serves as trustee and of which he and his spouse are beneficiaries, and in
January and March of 1997, Mr. Wedell inadvertently failed to report the
receipt of stock options from the Company. Both Messrs. Dykstra and
Wedell have subsequently reported such transactions on the appropriate
forms. The Company believes that all other officers, directors and more
than 10% beneficial owners have timely complied with the Section 16(a)
filing requirements.
Solicitation Expenses
The cost of soliciting proxies will be borne by the Company. In
addition to soliciting proxies by mail, proxies may be solicited
personally and by telephone by certain officers and regular employees of
the Company. The Company will reimburse brokers and other nominees for
their expenses in communicating with the persons for whom they hold Common
Stock.
The Company will provide without charge a copy of its Annual Report
on Form 10-K (including financial statements, but not including exhibits
thereto), as filed with the Securities and Exchange Commission, to each
person who is a record or beneficial holder of Common Stock as of the
record date for the Annual Meeting. A written request for a Form 10-K
should be addressed to Thomas M. Dykstra, Secretary, Effective Management
Systems, Inc., 12000 West Park Place, Milwaukee, Wisconsin 53224.
By Order of the Board of Directors
EFFECTIVE MANAGEMENT SYSTEMS, INC.
Thomas M. Dykstra
Secretary
April 6, 1998
<PAGE>
APPENDIX A
EFFECTIVE MANAGEMENT SYSTEMS, INC.
1993 STOCK OPTION PLAN
AS AMENDED
1. Purpose. The purpose of the Effective Management Systems, Inc.
1993 Stock Option Plan (the "Plan") is to promote the best interests of
Effective Management Systems, Inc. (the "Company") and its shareholders by
providing employees of the Company and its subsidiaries and members of the
Company's Board of Directors who are not employees of the Company or its
subsidiaries with an opportunity to acquire a proprietary interest in the
Company. It is intended that the Plan will promote continuity of
management and increased incentive and personal interest in the welfare of
the Company by employees of the Company and its subsidiaries. In
addition, by encouraging stock ownership by non-employee directors, the
Company seeks both to attract and retain on its Board of Directors (the
"Board") persons of exceptional competence and to provide a further
incentive to serve as a director of the Company.
It is intended that certain of the options issued pursuant to the
Plan will constitute incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, and successor provisions thereto (the "Code"), and the remainder
of the options issued under the Plan will constitute nonstatutory stock
options.
2. Administration. The Plan shall be administered by a committee
designated by the Board (the "Committee"). The Committee shall consist of
not less than two members of the Board who are "non-employee directors" as
defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by at least a
majority of its members. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully as
effective as if it had been made by a unanimous vote at a meeting duly
called and held.
In accordance with the provisions of the Plan, the Committee shall:
select the employees to whom options are granted; determine the number of
shares to be covered by each option, the time at which the option is to be
granted, the type of option, the option period, the option exercise price
and the manner and time in which options become exercisable; and establish
such other provisions of the option agreements as the Committee may deem
necessary or desirable. Grants of options to non-employee directors, all
of which options shall be nonstatutory stock options, shall be automatic
and the amount and the terms of such awards shall be determined in
accordance with Section 5 hereof.
The Committee may adopt such rules and regulations for carrying out
the Plan as it may deem proper and in the best interests of the Company.
The interpretation of any provision of the Plan by the Committee and any
determination made by the Committee on the matters referred to in this
Section 2 shall be final.
3. Shares Subject to the Plan. The shares to be subject to options
under the Plan shall be shares of the Company's Common Stock ("Stock").
The total number of shares of Stock which may be purchased pursuant to
options granted under the Plan shall not exceed an aggregate of 750,025
shares, subject to adjustment as provided in Section 8 hereof. Shares of
Stock delivered upon exercise of an option under the Plan may consist, in
whole or in part, of authorized but unissued shares or of treasury shares.
In the event that an option granted under the Plan expires, is cancelled
or terminates unexercised as to any shares of Stock covered thereby, such
shares shall thereafter be available for the granting of additional
options under the Plan.
4. Grants to Employees.
(a) Eligibility. Any employee ("Employee") of the Company or
its present and future subsidiaries, as defined in Section 424(f) of the
Code ("Subsidiaries"), including any such Employee who is also an officer
or director of the Company, whose judgment, initiative and efforts
contribute to the successful performance of the Company shall be eligible
to receive options under the Plan. Notwithstanding any provision to the
contrary herein, no Employee shall be granted options that could result in
such Employee receiving more than 200,000 shares of Stock under the Plan
(such number of Shares shall be subject to adjustment as provided in
Section 8 hereof).
(b) Option Price. The option exercise price per share of Stock
shall be fixed by the Committee, but shall not be less than 100% of the
fair market value of a share of Stock on the date the option is granted;
provided, however, that no Incentive Stock Option shall be granted to any
Employee who, at the time such Incentive Stock Option is granted, owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its parent corporation or
Subsidiaries unless the option exercise price of such Incentive Stock
Option is at least 110% of the fair market value of a share of Stock on
the date of grant. Unless otherwise determined by the Committee, the
"fair market value" of a share of Stock on the date of grant shall be the
last sale price for shares of Stock in the NASDAQ National Market System
on the trading date next preceding the date on which the option is
granted, as reported in The Wall Street Journal (Midwest Edition);
provided, however, that if the principal market for the Stock is then a
national securities exchange, the "fair market value" shall be the closing
price for shares of Stock on the principal securities exchange on which
the Stock is traded on the trading date next preceding the date of grant,
or, in either case above, if no trading occurred on the trading date next
preceding the date of grant, then the option price per share shall be
determined with reference to the next preceding date on which the Stock is
traded.
(c) Grant of Options. Subject to the terms and conditions of
the Plan, the Committee may, from time to time, grant to Employees options
to purchase such number of shares of Stock and on such terms and
conditions as the Committee may determine; provided, however, that any
option granted to an Employee who is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended, on the date
of the grant shall not become exercisable (except as otherwise
specifically set forth in the option agreement) until at least six months
elapse from the date of grant. More than one option may be granted to the
same Employee. The date on which an option is granted shall be the date
the Committee approves the granting of the option or if the Committee so
specifies, such later date as the Committee may determine. Options
granted to Employees may be either Incentive Stock Options or nonstatutory
stock options as determined by the Committee. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision thereto,
and any regulations promulgated thereunder.
(d) Option Period. The Committee shall determine the
expiration date of each option, but such expiration date shall be not
later than ten years after the date such option is granted; provided,
however, that no Incentive Stock Option shall be granted to any Employee
who, at the time such Incentive Stock Option is granted, owns stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of its parent corporation or Subsidiaries
unless such Incentive Stock Option by its terms is not exercisable after
the expiration of five years from the date of grant.
(e) Maximum Per Participant. The aggregate fair market value
(determined as of the date the option is granted) of the Stock with
respect to which any Incentive Stock Options are exercisable for the first
time by an Employee during any calendar year under the Plan or any other
plan of the Company or any parent corporation or Subsidiary shall not
exceed $100,000.
(f) Exercise of Options. An option may be exercised, subject
to its terms and conditions and the terms and conditions of the Plan, in
full at any time or in part from time to time by delivery to the Assistant
Secretary of the Company at the Company's principal office in Milwaukee,
Wisconsin, of a written notice of exercise specifying the number of shares
with respect to which the option is being exercised. Any notice of
exercise shall be accompanied by full payment of the option price of the
shares being purchased (i) in cash or its equivalent; (ii) with the
consent of the Committee (as set forth in the option agreement or
otherwise), by tendering previously acquired shares of Stock (valued at
their fair market value as of the date of exercise, as determined by the
Committee consistent with the method of valuation set forth in
Section 4(b) above); or (iii) with the consent of the Committee (as set
forth in the option agreement or otherwise), by any combination of the
means of payment set forth in subparagraphs (i) and (ii). For purposes of
this Section 4, the term "previously acquired shares of Stock" shall only
include Stock owned by the Employee prior to the exercise of the option
for which payment is being made and shall not include shares of Stock
which are being acquired pursuant to the exercise of said option. No
shares shall be issued until full payment therefor has been made.
5. Grants to Non-Employee Directors.
(a) Eligibility. Each member of the Board who is not an
employee of the Company or any of its Subsidiaries or any parent
corporation of the Company (a "Non-Employee Director") shall be eligible
to be granted nonstatutory stock options under the Plan. A Non-Employee
Director may hold more than one option, but only on the terms and subject
to any restrictions set forth in this Section 5.
(b) Option Price. The option exercise price per share of Stock
shall be equal to 100% of the fair market value of a share of Stock on the
date the option is granted. For purposes of this Section 5, the "fair
market value" of a share of Stock shall be determined in the manner set
forth in Section 4(b) hereof; provided, however, that, to the extent
applicable, the fair market value of a share of Stock shall be determined
with reference to the reported market price of the Stock determined in the
manner provided in Section 4(b).
(c) Grant of Options. Any person who is first elected as a
Non-Employee Director after the date of approval of the Plan by the Board
shall automatically on the date of such election be granted an option to
purchase 2,030 shares of Stock (which number of shares shall be subject to
adjustment in the manner as provided in Section 8). Thereafter, in
consideration for serving on the Board, each Non-Employee Director (if he
or she continues to serve in such capacity) shall automatically be granted
an option on the day following the annual meeting of shareholders in each
year commencing with the 1995 annual meeting and continuing for so long as
the Plan remains in effect and a sufficient number of shares are available
thereunder for the granting of such option. Such option shall entitle the
Non-Employee Director to purchase 1,500 shares of Stock (which number of
shares shall be subject to adjustment in the manner as provided in Section
8). In addition, in consideration for serving on committees of the Board,
each Non-Employee Director (if he or she continues to serve in such
capacity) shall automatically be granted an additional option on the day
following the annual meeting of shareholders in each year commencing with
the 1995 annual meeting and continuing for so long as the Plan remains in
effect and a sufficient number of shares are available thereunder for the
granting of such option. Such option shall entitle the Non-Employee
Director to purchase a number of shares of Stock equal to the product of
(i) 1,000 shares of Stock (which number of shares shall be subject to
adjustment in the manner as provided in Section 8) multiplied by (ii) the
number of committees of the Board on which the Non-Employee Director is
then serving.
(d) Exercisability and Termination of Options. Options granted
to Non-Employee Directors shall vest and become exercisable, but only
during the time that the Non-Employee Director serves in such capacity, as
to 10% of the shares of Stock subject thereto after one year has elapsed
from the date of grant, as to an additional 20% after the second year has
elapsed from the date of grant, as to an additional 30% after the third
year has elapsed from the date of grant, and as to the final 40% after the
fourth calendar year has elapsed from the date of grant; provided,
however, that if a Non-Employee Director ceases to be a director of the
Company by reason of death, disability or retirement within four years
after the date of grant or in the event of a Change in Control (as defined
in Section 5(f) below), the option shall become immediately exercisable in
full. Options granted to Non-Employee Directors shall terminate on the
earlier of:
(i) ten years after the date of grant;
(ii) six months after the Non-Employee Director ceases
to be a director of the Company by reason of death; or
(iii) three months after the Non-Employee Director
ceases to be a director of the Company for any reason other than
death.
(e) Exercise of Options. An option may be exercised, subject
to its terms and conditions and the terms and conditions of the Plan, in
full at any time or in part from time to time by delivery to the Assistant
Secretary of the Company at the Company's principal office in Milwaukee,
Wisconsin, of a written notice of exercise specifying the number of shares
with respect to which the option is being exercised. Any notice of
exercise shall be accompanied by full payment of the option price of the
shares being purchased (i) in cash or its equivalent; (ii) by tendering
previously acquired shares of Stock (valued at their fair market value as
of the date of exercise as determined in the manner set forth in
Section 4(b) above; provided, however, that, to the extent applicable, the
fair market value of a share of Stock shall be determined with reference
to the reported market price of the Stock determined in the manner
provided in Section 4(b)); or (iii) by any combination of the means of
payment set forth in subparagraphs (i) and (ii). For purposes of
subparagraphs (ii) and (iii) above, the term "previously acquired shares
of Stock" shall only include Stock owned by the Non-Employee Director
prior to the exercise of the option for which payment is being made and
shall not include shares of Stock which are being acquired pursuant to the
exercise of said option. No shares shall be issued until full payment
therefor has been made.
(f) Change in Control. A "Change in Control" shall be deemed
to have occurred if the events set forth in any one of the following
paragraphs shall have occurred:
(i) any "Person" (as such term is defined in section
3(a)(9) of the Securities Exchange Act of 1934, as amended, as
modified and used in sections 13(d) and 14(d) thereof), other
than (A) the Company or any Subsidiaries, (B) a trustee or other
fiduciary holding securities under any employee benefit plan of
the Company or any Subsidiaries, (C) an underwriter temporarily
holding securities pursuant to an offering of such securities or
(D) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportion
as their ownership of Stock in the Company ("Excluded Persons"),
is or becomes the "Beneficial Owner" (as defined in rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly
or indirectly, of securities of the Company representing 25% or
more of either the then outstanding shares of Stock or the
combined voting power of the Company's then outstanding voting
securities; or
(ii) the shareholders of the Company approve a merger
or consolidation of the Company with any other corporation or
approve the issuance of voting securities of the Company in
connection with a merger or consolidation of the Company (or any
direct or indirect Subsidiary) pursuant to applicable stock
exchange requirements, other than (i) a merger or consolidation
that would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity
or any parent thereof) at least 50% of the combined voting power
of the voting securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person (other than an Excluded Person)
is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 25% or more of either the
then outstanding shares of Stock or the combined voting power of
the Company's then outstanding voting securities; or
(iii) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or
a series of related transactions within any period of 24
consecutive months), other than a sale or disposition by the
Company of all or substantially all of the Company's assets to
an entity at least 75% of the combined voting power of the
voting securities of which are owned by Persons in substantially
the same proportion as their ownership of the Company
immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be deemed to
have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of
the Stock immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an
entity that owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
6. Nontransferability of Options. No option shall be transferable
by an optionee other than by will or the laws of descent and distribution.
Options under the Plan may be exercised during the life of the optionee
only by the optionee or his guardian or legal representative.
7. Powers of the Company Not Affected. The existence of the Plan
or any options granted under the Plan shall not affect in any way the
right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issuance of bonds, debentures, or
preferred or prior preference stock ahead of or affecting the Stock or the
rights thereof, or any dissolution or liquidation of the Company, or any
sale or transfer of all or any part of the Company's assets or business or
any other corporate act or proceeding, whether of a similar character or
otherwise.
8. Capital Adjustments Affecting Stock. In the event of a capital
adjustment resulting from a stock dividend (other than a stock dividend in
lieu of an ordinary cash dividend), stock split, reorganization, spin-off,
split up or distribution of assets to shareholders, recapitalization,
merger, consolidation, combination or exchange of shares or the like
following Board approval of the Plan, the number of shares of Stock
subject to the Plan, the number of shares referenced in the limitation in
Section 4(a) hereof, the number of shares subject to options to be granted
to Non-Employee Directors pursuant to Section 5(c) hereof, and the number
of shares under option in outstanding option agreements shall be adjusted
in a manner consistent with such capital adjustment; provided, however,
that no such adjustment shall require the Company to sell any fractional
shares and the adjustment shall be limited accordingly. The price of any
shares under option shall be adjusted so that there will be no change in
the aggregate purchase price payable upon exercise of any such option.
The determination of the Committee as to any adjustment shall be final.
9. Corporate Mergers and Other Consolidations. The Committee may
also grant options having terms and provisions which vary from those
specified in the Plan provided that any options granted pursuant to this
Section 9 are granted in substitution for, or in connection with the
assumption of, existing options granted by another corporation and assumed
or otherwise agreed to be provided for by the Company pursuant to or by
reason of a transaction involving a corporate merger, consolidation,
acquisition or other combination or reorganization to which the Company is
a party.
10. Option Agreements. All options granted under the Plan shall be
evidenced by written agreements (which need not be identical) in such form
as the Committee shall determine. Each option agreement shall specify
whether the option granted thereunder is intended to constitute an
Incentive Stock Option or a nonstatutory stock option.
11. Rights as a Shareholder; Rights as an Employee or a Director.
An optionee shall have no rights as a shareholder with respect to shares
covered by an option until the date of issuance of stock certificates to
him or her and only after such shares are fully paid. Neither the Plan
nor any option granted hereunder shall confer upon any optionee the right
to continue as an employee or as a director of the Company.
12. Transfer Restrictions. Shares of Stock purchased under the Plan
and held by any person who is an officer or director of the Company, or
who directly or indirectly controls the Company, may not be sold or
otherwise disposed of except pursuant to an effective registration
statement under the Securities Act of 1933, as amended, or except in a
transaction which, in the opinion of counsel for the Company, is exempt
from registration under said Act. The Committee may waive the foregoing
restrictions in whole or in part in any particular case or cases or may
terminate such restrictions whenever the Committee determines that such
restrictions afford no substantial benefit to the Company.
13. Amendment of Plan. The Board shall have the right to amend the
Plan at any time and for any reason; provided, however, that the
provisions of Section 5 of the Plan shall not be amended more than once
every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder; and provided further that shareholder approval of
any amendment to the Plan shall also be obtained: (a) if otherwise
required by (i) the rules and/or regulations promulgated under Section 16
of the Securities Exchange Act of 1934, as amended (in order for the Plan
to remain qualified under Rule 16b-3 or any successor provision under such
Act), (ii) the Code, or any rules promulgated thereunder (in order to
allow for Incentive Stock Options to be granted under the Plan) or (iii)
the quotation or listing requirements of NASDAQ or any principal
securities exchange or market on which the Stock is then traded (in order
to maintain the Stock's quotation or listing thereon); (b) if such
amendment materially modifies the eligibility requirements as provided in
Sections 4(a) and 5(a) hereof; (c) if such amendment increases the total
number of shares of Stock, except as provided in Section 8 hereof, which
may be purchased pursuant to the exercise of options granted under the
Plan; or (d) if such amendment reduces the minimum option price per share
at which options may be granted as provided in Sections 4(b) and 5(b)
hereof. Any amendment of the Plan shall not, without the consent of the
optionee, alter or impair any of the rights or obligations under any
option previously granted to the optionee.
14. Termination of Plan. The Board shall have the right to suspend
or terminate the Plan at any time; provided, however, that no Incentive
Stock Options may be granted after the tenth anniversary of the effective
date of the Plan. Termination of the Plan shall not affect the rights of
optionees under options previously granted to them, and all unexpired
options shall continue in force and operation after termination of the
Plan except as they may lapse or be terminated by their own terms and
conditions.
15. Effective Date. The Plan shall become effective on the date of
adoption by the Board, subject to approval and ratification by the
shareholders of the Company within twelve months of the date of adoption
by the Board. All options granted prior to shareholder approval and
ratification of the Plan shall be subject to such approval and
ratification and shall not be exercisable until after such approval and
ratification.
16. Tax Withholding. The Company may deduct and withhold from any
cash otherwise payable to the optionee (whether payable as salary, bonus
or other compensation) such amount as may be required for the purpose of
satisfying the Company's obligation to withhold Federal, state or local
taxes. Further, in the event the amount so withheld is insufficient for
such purpose, the Company may require that the optionee pay to the Company
upon its demand or otherwise make arrangements satisfactory to the Company
for payment of such amount as may be requested by the Company in order to
satisfy its obligation to withhold any such taxes.
With the consent of the Committee, an Employee may be permitted to
satisfy the Company's withholding tax requirements by electing to have the
Company withhold shares of Stock otherwise issuable to the Employee or to
deliver to the Company shares of Stock having a fair market value on the
date income is recognized pursuant to the exercise of an option equal to
the amount required to be withheld. The election shall be made in writing
and shall be made according to such rules and in such form as the
Committee may determine.
<PAGE>
APPENDIX B
EFFECTIVE MANAGEMENT SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I--PURPOSE
The Effective Management Systems, Inc. 1998 Employee Stock
Purchase Plan (the "Plan") has been established by Effective Management
Systems, Inc., a Wisconsin corporation (the "Company"), to allow employees
of the Company and its subsidiaries to purchase shares of Common Stock of
the Company ("Common Stock") and thereby share in the ownership of the
Company. The Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the applicable
requirements of the Code and the regulations thereunder.
ARTICLE II--DEFINITIONS
2.01. Committee.
"Committee" shall mean the committee of directors described in
Section 10.01.
2.02. Compensation.
"Compensation" shall mean the Employee's wages, salaries, and
other amounts received for personal services actually rendered in the
course of employment by the Company, including, but not limited to,
bonuses, commissions, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums and tips.
2.03. Employee.
"Employee" means any person who is customarily employed on a
full-time or part-time basis by the Company, who is regularly scheduled to
work more than 20 hours per week and whose customary employment is for at
least five months in any calendar year.
2.04. Plan Administrator.
"Plan Administrator" shall mean the individual appointed by the
Committee pursuant to Section 10.04.
2.05. Subsidiary Corporation.
"Subsidiary Corporation" shall mean any present or future
corporation which (a) would be a "subsidiary corporation" of the Company
as that term is defined in Section 424(f) of the Code and (b) is
designated as a participant in the Plan by the Committee.
ARTICLE III--ELIGIBILITY AND PARTICIPATION
3.01. Initial Eligibility.
Any employee who shall have completed one (1) year of continuous
employment and shall be employed by the Company or a Subsidiary
Corporation on the date his participation in the Plan is to become
effective shall be eligible to participate in offerings under the Plan
that commence on or after such period has concluded.
3.02. Leave of Absence.
For purposes of participation in the Plan, a person on leave of
absence shall be deemed to be an Employee for the first 90 days of such
leave of absence and such employee's employment shall be deemed to have
terminated at the close of business on the 90th day of such leave of
absence unless such employee shall have returned to regular full-time or
part-time employment (as the case may be) prior to the close of business
on such 90th day. Termination by the Company or a Subsidiary Corporation,
as the case may be, of any employee's leave of absence, other than
termination of such leave of absence on return to full-time or part-time
employment, shall terminate an employee's employment for all purposes of
the Plan and shall terminate such employee's participation in the Plan and
right to exercise any option.
3.03. Restrictions on Participation.
Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option to participate in the Plan:
(a) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5% or
more of the total combined voting power or value of all classes of stock
of the Company or any Subsidiary Corporation (for purposes of this
paragraph, the rules of Sections 423(b)(3) and 424(d) of the Code shall
apply in determining stock ownership of any Employee); or
(b) which permits his rights to purchase stock under all
employee stock purchase plans of the Company to accrue at a rate which
exceeds $25,000 in fair market value of the Common Stock (determined at
the time such option is granted) for each calendar year in which such
purchase rights are outstanding.
ARTICLE IV--OFFERINGS
4.01. Semi-Annual Offerings.
The Plan will be implemented by eight semi-annual offerings of
Common Stock (the "Offerings") beginning on the first day of July in each
of the years 1998, 1999, 2000 and 2001 and on the first day of January in
each of the years 1999, 2000, 2001 and 2002, each Offering terminating on
December 31 of the same year in the case of a July 1 Offering and on June
30 of the same year in the case of a January 1 Offering. The maximum
number of shares issued in each of the respective Offerings shall be
12,500 shares of Common Stock plus unissued shares from the prior
Offerings, whether offered or not.
As used in the Plan, "Offering Commencement Date" means the
January 1 or July 1, as the case may be, on which the particular Offering
begins, "Offering Termination Date" means the June 30 or December 31, as
the case may be, on which the particular Offering terminates and "Offering
Period" shall be the period that begins on the Offering Commencement Date
and ends on the Offering Termination Date of the same Offering.
4.02. Discretionary Three-Month Offerings.
Each semi-annual Offering may, in the discretion of the
Committee exercised prior to the commencement thereof, be divided into two
three-month Offerings. The maximum number of shares issued in each of the
respective three-month Offerings shall be 6,250 shares plus unissued
shares from the prior Offerings, whether offered or not. If the Committee
authorizes the division of the six-month Offerings into three-month
Offerings, the defined terms set forth in Section 4.01 and the number of
option shares calculated pursuant to Section 6.01 shall be appropriately
modified.
ARTICLE V--PAYROLL DEDUCTIONS
5.01. Amount of Deduction.
At the time an Employee files his authorization for payroll
deduction, he shall elect to have deductions made from his Compensation on
each payroll date during the time he is an Employee participating in an
Offering at the rate of any whole percent selected by the Employee that is
less than or equal to 5% of his Compensation payable during the Offering
Period.
5.02. Employee's Account.
All payroll deductions made for an Employee shall be credited to
his account under the Plan. An Employee may not make any separate cash
payment into such account except when on leave of absence and then only as
provided in Section 5.04.
5.03. Changes in Payroll Deductions.
An Employee may discontinue his participation in the Plan as
provided in Article VIII, but no other change can be made during an
Offering, including any change in the amount of his payroll deductions for
that Offering.
5.04. Leave of Absence.
If an Employee is granted a leave of absence from employment by
the Company, such Employee shall have the right to elect either to (a)
withdraw the balance in his account pursuant to Section 7.02, (b)
discontinue contributions to the Plan but remain a participant in the
Plan, or (c) remain a participant in the Plan during such leave of
absence, authorizing deductions to be made from payments by the Company to
the Employee during such leave of absence and undertaking to make cash
payments to the Plan at the end of each payroll period to the extent that
amounts payable by the Company to such Employee are insufficient to meet
such Employee's authorized Plan deductions.
5.05. Interest on Account.
No interest shall be paid by the Company on any funds held by
the Company in any account established pursuant to Section 5.02, whether
such funds are used to purchase Common Stock pursuant to Section 7.01 or
are subsequently withdrawn pursuant to Section 7.02.
ARTICLE VI--GRANTING OF OPTION
6.01. Number of Option Shares.
On each Offering Commencement Date, a participating Employee
shall be deemed to have been granted an option to purchase a maximum
number of shares of Common Stock equal to (a) that percentage of the
Employee's Compensation which he has elected to have withheld, multiplied
by (b) the Employee's Compensation during the last thirteen complete
biweekly payroll periods ending immediately prior to the Offering
Commencement Date, divided by (c) 85% of the fair market value of the
Common Stock on the applicable Offering Commencement Date. The fair
market value of the Common Stock shall be determined as provided in
paragraph (a) of Section 6.02.
6.02. Option Price.
The option price of Common Stock purchased with payroll
deductions made during an Offering Period shall be the lesser of:
(a) 85% of the closing price of the Common Stock on the
Offering Commencement Date or the nearest prior business day on which
trading occurred on the NASDAQ National Market System; or
(b) 85% of the closing price of the Common Stock on the
Offering Termination Date or the nearest prior business day on which
trading occurred on the NASDAQ National Market System.
If the Common Stock is not admitted to trading on any of the aforesaid
dates for which closing prices of the Common Stock are to be determined,
then reference shall be made to the fair market value of the stock on that
date, as determined on such basis as shall be established or specified for
the purpose by the Committee. Notwithstanding the foregoing, the option
price per share of Common Stock shall in no event be less than the par
value of such share.
ARTICLE VII--EXERCISE OF OPTIONS
7.01. Automatic Exercise.
Unless an Employee gives written notice to the Company as
provided in Section 7.02, the Employee's option to purchase Common Stock
with payroll deductions made during any Offering Period will be deemed to
have been exercised automatically on the Offering Termination Date
applicable to such Offering, for the purchase of the number of full shares
of Common Stock which the accumulated payroll deductions in his account at
that time will purchase at the applicable option price (but not in excess
of the number of shares for which options have been granted to the
Employee pursuant to Section 6.01 and subject to a pro rata reduction
pursuant to Section 9.01), and any excess in his account will be returned
to the Employee. Notwithstanding the foregoing, no Employee shall be
entitled to exercise his option to purchase Common Stock for fewer than
the Applicable Minimum Number, as defined in Section 7.04, of shares of
Common Stock
7.02. Withdrawal of Account.
At any time prior to the Offering Termination Date applicable to
any Offering, an Employee may, by written notice to the Company, elect to
withdraw all of the accumulated payroll deductions in his account at such
time.
7.03. Fractional Shares.
Fractional shares of Common Stock will not be issued under the
Plan. Any accumulated payroll deductions that would have been used to
purchase fractional shares will be returned to any Employee promptly
following the termination of the Offering, without interest.
7.04. Applicable Minimum Number.
The "Applicable Minimum Number" of shares of Common Stock that
may be purchased during an Offering Period shall be such number of shares
as the Committee, in its discretion, may determine for the purpose of
minimizing the cost and expense to the Company of issuing stock
certificates and maintaining shareholder account records. Notwithstanding
the foregoing, in no event shall the Applicable Minimum Number with
respect to an Employee be greater than the number of shares of Common
Stock that the Employee is offered in a single Offering pursuant to
Section 6.01.
7.05. Stock Certificates.
Certificates covering the shares of Common Stock purchased under
the Plan shall be issued as soon as reasonably practicable after the
exercise of the option to purchase. Shares of Common Stock to be
delivered to an Employee under the Plan will be registered in the name of
the Employee, subject to the provisions of Section 11.02. The Company
will pay all stamp taxes and the like, and all fees, in connection with
such issue.
ARTICLE VIII--WITHDRAWAL FROM PARTICIPATION
8.01. In General.
Pursuant to Section 7.02, an Employee may withdraw payroll
deductions credited to his account under the Plan at any time before the
Offering Termination Date by giving written notice to the Company. All of
the Employee's payroll deductions credited to his account shall be paid to
him promptly after receipt of the Employee's notice of withdrawal, and no
further payroll deductions will be made from the Employee's Compensation
during such Offering. The Company may, at its option, treat any attempt
to borrow by an Employee on the security of his accumulated payroll
deductions as an election under Section 7.02 to withdraw such deductions.
8.02. Effect on Subsequent Participation.
An Employee's withdrawal from any Offering will not have any
effect upon his eligibility to participate in any subsequent Offering or
in any similar plan that may hereafter be adopted by the Company.
8.03. Termination of Employment.
Upon termination of an Employee's employment for any reason,
including retirement (but excluding death while in the employ of the
Company or continuation of a leave of absence for a period exceeding 90
days), the payroll deductions credited to the Employee's account will be
returned to him, or, in the case of his death subsequent to the
termination of his employment, to the person or persons entitled thereto
under Section 11.02.
8.04. Termination of Employment Due to Death.
Upon termination of an Employee's employment because of his
death, his beneficiary shall have the right to elect, by written notice
given to the Company prior to the earlier of the Offering Termination Date
or the 60th day after the date of death of the Employee, either:
(a) to withdraw all of the payroll deductions credited to the
Employee's account under the Plan, or
(b) to exercise the Employee's option for the purchase of
Common Stock on the Offering Termination Date next following the date of
the Employee's death for the purchase of the number of full shares of
Common Stock that the accumulated payroll deductions in the Employee's
account will purchase at the applicable option price, and any excess in
such account will be returned to the beneficiary, without interest.
In the event that no such written notice of election shall be duly
received by the Company, the beneficiary shall automatically be deemed to
have elected, pursuant to paragraph (b), to exercise the Employee's
option.
8.05. Leave of Absence.
An Employee on leave of absence shall, subject to the election
made by the Employee pursuant to Section 5.04, continue to be a
participant in the Plan so long as such Employee is on continuous leave of
absence. An individual who has been on leave of absence for more than 90
days and who therefore is not an Employee for the purpose of the Plan
shall not be entitled to participate in any Offering commencing after the
90th day of such leave of absence. Notwithstanding any other provision of
the Plan, unless a participant on leave of absence returns to regular
full-time or part-time employment with the Company at the termination of
such leave of absence, the participant's participation in the Plan shall
terminate on the termination of the leave of absence.
ARTICLE IX--STOCK
9.01. Maximum Number of Shares.
The maximum number of shares which shall be issued under the
Plan, subject to adjustment upon changes in capitalization of the Company
as provided in Section 11.04, shall be 12,500 shares in each semi-annual
Offering (6,250 shares in each three-month Offering) plus, with respect to
each Offering, all unissued shares from prior Offerings, whether offered
or not, not to exceed 100,000 shares for all Offerings. If the total
number of shares of Common Stock for which options are exercised on any
Offering Termination Date in accordance with Article VI exceeds the
maximum number of shares issuable in such Offering, the Company shall make
a pro rata allocation of the shares available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as
it shall determine to be equitable, and the balance of payroll deductions
credited to the account of each Employee shall be returned to him as
promptly as possible.
9.02. Employee's Interest in Stock.
The Employee will have no interest in Common Stock covered by
his option until such option has been exercised.
9.03. Restrictions on Exercise.
Purchase rights granted under the Plan shall not become
exercisable until such time as the shares of Common Stock, which may be
issued pursuant to the Plan (a) have been registered under the Securities
Act of 1933, as amended (the "Act"), and any applicable state and foreign
securities laws; or (b) in the opinion of the Company's counsel, may be
issued pursuant to an exemption from registration under the Act and in
compliance with any applicable state and foreign securities laws.
ARTICLE X--ADMINISTRATION
10.01. Membership of Committee.
The Plan shall be administered by the Compensation Committee of
the Board of Directors of the Company (the "Committee") consisting of not
less than two (2) directors appointed for such purpose who are "non-
employee directors" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended.
10.02. Conduct of Committee.
A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by at least a
majority of its members. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully as
effective as it if had been made by a unanimous vote at a meeting duly
called and held.
10.03. Authority of Committee.
In accordance with the provisions of the Plan, the Committee
shall establish such terms and conditions for the grant of purchase rights
as the Committee may deem necessary or advisable, adopt such rules or
regulations which may become necessary or advisable for the operation of
the Plan, and make such determinations, and take such other actions, as
are expressly authorized or contemplated in the Plan or as may be required
for the proper administration of the Plan in accordance with its terms.
The interpretation of any provision of the Plan by the Committee and any
determination on the matters referred to in this Article X shall be final.
10.04. Plan Administrator.
The Committee, in its discretion, may appoint an individual (the
"Plan Administrator") to assist the Committee in corresponding with
Employees, with record keeping and in performing other administrative
functions in connection with the Plan; provided, however, that the Plan
Administrator shall exercise no discretion with respect to the
interpretation of the Plan or the grant of options to purchase shares of
Common Stock pursuant to the Plan.
ARTICLE XI--MISCELLANEOUS
11.01. Tax Withholding.
The Company may withhold the issuance of certificates for shares
of Common Stock to an Employee pursuant to Section 7.05 until such time as
the Employee has made arrangements satisfactory to the Company to permit
the Company to comply with any applicable requirement for withholding of
federal, state or local income or FICA taxes or any other amounts required
by law to be withheld. In the absence of such arrangements, the Company
may deduct and withhold from any cash otherwise payable to the Employee
(whether payable as salary, bonus or other compensation) for the purpose
of satisfying such requirements.
11.02. Designation of Beneficiary.
An Employee may file a written designation of a beneficiary who
is to receive any Common Stock that may be issued on the exercise of
purchase rights hereunder after the death of the Employee or cash in the
Employee's account. Such designation of beneficiary may be changed by the
Employee at any time by written notice to the Plan Administrator. Upon
the death of an Employee and upon receipt by the Company of proof of
identity and existence at the Employee's death of a beneficiary validly
designated by him under the Plan, the Company shall deliver such Common
Stock and/or cash to such beneficiary. In the event of the death of an
Employee and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Employee's death, the Company shall
deliver such Common Stock and/or cash to the executor or administrator of
the estate of the Employee, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such Common Stock and/or cash to the spouse or to
any one or more dependents of the Employee as the Company may designate.
No beneficiary shall, by virtue of the provisions of this Section 11.02,
acquire any interest at any time in the Common Stock issued to the
Employee prior to the death of the Employee, and no beneficiary shall,
prior to the death of the Employee by whom he has been designated, acquire
any interest in the Common Stock (if any) to be issued to the Employee
and/or cash in the account under the Plan after the death of the Employee.
11.03. Transferability.
Subject to the provisions of Section 11.02, an Employee's right
to exercise an option under the Plan (a) shall not be transferable by such
Employee, (b) may be exercised only by the Employee, and (c) may not be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, except by will or the laws of descent and distribution.
11.04. Adjustments Upon Changes in Capitalization.
In order to prevent dilution or enlargement of purchase rights,
in the event of reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation or other change in
shares of Common Stock after the Board of Directors has adopted the Plan,
the Committee shall make appropriate changes in the number of shares of
Common Stock which may be purchased pursuant to the Plan, and the number
of shares of Common Stock covered by, and the purchase price under, each
outstanding option, and such other changes in the Plan and outstanding
options as the Committee may deem appropriate under the circumstances. No
rights to purchase a fractional share of Common Stock shall result from
any such change, and any fractional share resulting from such change shall
be rounded to the nearest whole number.
11.05. Amendment and Termination.
The Board of Directors may amend or terminate the Plan at any
time, provided, however, that the Board of Directors may not, without the
approval of the shareholders of the Company, amend the Plan (a) if
shareholder approval is required by (i) the Code, or any rules promulgated
thereunder; or (ii) the quotation or listing requirements of NASDAQ or any
principal securities exchange on which the Common Stock is then traded (in
order to maintain the Common Stock's quotation or listing thereon); or (b)
if such amendment would (i) increase the maximum number of shares of
Common Stock which may be purchased pursuant to the Plan (except as
provided in Section 11.04); (ii) modify the requirements as to eligibility
for participation in the Plan; (iii) change the class of corporations
whose employees will be granted purchase rights under the Plan; or (iv)
materially increase the benefits to Employees under the Plan. Any
amendment of the Plan shall not, without the consent of the Employee,
alter or impair any of the rights or obligations under any option
previously granted to the Employee.
11.06. Other Restrictions on Transfer.
The Committee may impose such non-discriminatory restrictions on
the transfer of any shares of Common Stock acquired pursuant to the
exercise of a purchase right under the Plan as it may deem advisable,
including, without limitation, restrictions under applicable federal
securities law, under the requirements of any stock exchange upon which
such shares of Common Stock are then listed, if any, and under any state
and foreign securities laws applicable to such shares.
11.07. No Employment Rights.
The Plan does not, directly or indirectly, create any right for
the benefit of any Employee or class of Employees to purchase any shares
under the Plan, or create in any Employee or class of Employees any right
with respect to continuation of employment by the Company, and it shall
not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an Employee's employment at any time.
11.08. Effect of Plan.
The provisions of the Plan shall, in accordance with its terms,
be binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrators or trustees thereof,
heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such Employee.
11.09. Applicable Law.
The plan shall, to the extent not inconsistent with applicable
federal law, be construed under the laws of the State of Wisconsin.
11.10. Effective Date.
The Plan shall become effective as of the date of its adoption
by the Board of Directors of the Company, subject to approval of the Plan
by the shareholders within twelve months of such effective date. Purchase
rights may be granted prior to such approval; provided, however, that such
purchase rights shall be subject to such approval and shall not be
exercised until after such approval.
<PAGE>
Effective Management Systems, Inc.
12000 West Park Place
Milwaukee, Wisconsin 53224
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Michael D. Dunham and Thomas M. Dykstra
and each of them, as Proxies with power of substitution (to act jointly or
if only one acts then by that one) and hereby authorizes them to represent
and to vote as designated on the reverse all of the shares of Common Stock
of Effective Management Systems, Inc. held of record by the undersigned on
March 16, 1998, at the annual meeting of shareholders to be held on
April 30, 1998, or at any adjournment or postponement thereof.
(Continued on reverse side)
[SEE REVERSE ]
[ SIDE ]
<PAGE>
[ X ] Please Mark your
[___] vote as in
this example.
The Board of Directors recommends a vote FOR the following proposals:
WITHHOLD Term expiring For Against Abstain
AUTHORITY at the 2001 2. Approval [ ] [ ] [ ]
FOR the to vote for Annual Meeting: of the Effective
nominees the nominees Management Systems,
listed at listed at Inc. 1993 Stock
right right Option Plan, as amended.
For Against Abstain
1. ELECTION OF [ ] [ ] Nominees: 3. Approval [ ] [ ] [ ]
DIRECTOR Helmut M. Adam of the Effective
Michael D. Dunham Management Systems,
Inc. 1998
Employee Stock
Purchase Plan.
INSTRUCTIONS; To withhold authority 4. IN THEIR DISCRETION, THE
to vote for any individual nominee, PROXIES ARE AUTHORIZED TO
write that nominee's name in the VOTE UPON SUCH OTHER
space provided below: BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
_____________________________
This proxy when properly executed will
be voted in the manner directed herein
by the undersigned shareholder. If no
direction is made, this proxy will be
voted "FOR" the election of the Board's
nominees and "FOR" items 2 and 3.
PLEASE SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
SIGNATURE __________ DATE ____, 1998 SIGNATURE ___________ DATE ____, 1998
IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. 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 the President or other authorized
officer. If a partnership, please sign in partnership name by
authorized person.
