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, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 4, 1999
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 May 4, 1999, at 10:00 A.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 2002 and until their successors are duly
elected and qualified.
2. 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 19, 1999 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, 1999
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 May 4, 1999
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, 1999 in connection with a solicitation of proxies
by the Board for use at the annual meeting of shareholders to be held on
Tuesday, May 4, 1999, at 10:00 A.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 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, the Board has no knowledge of any matters to be presented for action
by the shareholders at the Annual Meeting.
Only (i) holders of record of the Company's common stock, $.01 par
value per share (the "Common Stock"), at the close of business on March 19, 1999
(the "Record Date") and (ii) holders of record of the Company's Series B 8%
Convertible Redeemable Preferred Stock (the "Preferred Stock") at the Record
Date, who will have the number of votes that they would have had assuming
conversion of the Preferred Stock into Common Stock at the Record Date, are
entitled to vote at the Annual Meeting. The holders of Common Stock and
Preferred Stock will vote as a group at the Annual Meeting. On the Record Date,
the Company had outstanding and entitled to vote 4,118,486 shares of Common
Stock. In addition, on such date, the holders of Preferred Stock were deemed to
hold 909,825 shares of Common Stock for purposes of voting at the Annual
Meeting. Each outstanding share of Common Stock and each share of Common Stock
that is deemed to be outstanding by reason of conversion of the Preferred Stock
is entitled to one vote per share.
<PAGE>
ELECTION OF DIRECTORS
The Company's Bylaws 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 2002 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, 1999,
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 2002 Annual Meeting
Scott J. Mermel, 51, is a private investor. From April 1997 to July
1998, Mr. Mermel served as Vice President, Marketing of Metrix, Inc., a
developer and marketer of customer service and product support software. 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. Mr. Mermel has a B.S. degree and an M.S. degree in
Industrial Management from MIT.
Director since: 1987
Robert E. Weisenberg, 49, is President of Northwoods Software
Development, Inc., a software development firm. 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
THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS
AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE
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NOMINEES. SHARES OF STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED "FOR" THE BOARD'S NOMINEES.
Directors Continuing in Office
Term expiring at the 2000 Annual Meeting
Thomas M. Dykstra, 57, 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
Elliot Wassarman, 59, is an independent consultant to the high
technology market. In 1998, Mr. Wassarman served as President, Chief Executive
Officer, and a Director of Mitek Systems, Inc., a developer of neural networked
intelligent-character-recognition and advanced forms processing software. From
1996 to 1997, he served as President, Chief Executive Officer and Director of
Electric Classifieds, Inc. (k/n/a InstantObjects, Inc.), an internet e-commerce
products and services startup. During 1996, Mr. Wassarman also served as
President, Chief Operating Officer, and a Director of Teralinx Communications
Corp. From 1990 to 1996, Mr. Wassarman served as President, Chief Executive
Officer, and a Director of Promis Systems Corp., a software company. Mr.
Wassarman has a B.A. degree from Suffolk University.
Director since: 1999
Terms expiring at the 2001 Annual Meeting
Helmut M. Adam, 48, 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. Mr. Adam has
both B.B.A. and M.B.A. degrees from the University of Wisconsin and an M.S.
degree in Accounting from the University of Wisconsin-Milwaukee.
Director since: 1987
Michael D. Dunham, 53, 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
3
<PAGE>
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 one meeting in fiscal 1998.
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 Stock Option Plan (the
"1993 Plan") and the 1998 Employee Stock Purchase Plan. Messrs. Adam and Mermel
are members of the Compensation Committee. The Compensation Committee held five
meetings in fiscal 1998.
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 Bylaws
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 Bylaws) 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
Bylaws and the Securities Exchange Act of 1934.
The Board held ten meetings in fiscal 1998. Other than Mr. Adam, who
missed one meeting of the Board, 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 1998, 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 the 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 the 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 the Common Stock for serving on
the Board and an option to purchase 1,000 shares of the 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 the 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
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<PAGE>
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 1998 an option to purchase 3,500 shares of,
and Mr. Weisenberg received an option to purchase 1,500 shares of, Common Stock
at a per share exercise price of $3-7/16. No options were exercised by the
non-employee directors during fiscal 1998.
Mr. Wassarman, when he was first elected as a non-employee director
effective February 1, 1999, received under the terms of the 1993 Plan an option
to purchase 2,030 shares of Common Stock at a per share exercise price of
$1-7/16. In addition, on February 1, 1999, (i) Mr. Wassarman was granted an
option to purchase 20,000 shares of Common Stock and (ii) Messrs. Adam, Mermel
and Weisenberg were each granted an option to purchase 10,000 shares of Common
Stock. All of these options were granted outside of the 1993 Plan and are
exercisable at a price of $1-7/16 and have a ten-year term. These options vest
and become exercisable (i) as to 30% of the shares of Common Stock subject
thereto immediately, (ii) as to an additional 30% of the shares of Common Stock
subject thereto after one year has elapsed from the date of grant and (iii) as
to the remaining 40% of the shares of Common Stock subject thereto after two
years has elapsed from the date of grant.
EXECUTIVE OFFICERS
The following table sets forth information, as of March 1, 1999, about
the other executive officers of the Company who are not directors. Such officers
serve at the pleasure of the Board.
Jeffrey J. Fossum, 45, 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.
Richard W. Grelck, 56, has served as Chief Operating Officer of the
Company since April 1998. From June 1997 to April 1998, Mr. Grelck served as
Vice President of Technology Development and from February 1995 to June 1997 he
served as Vice President of Manufacturing Technology. Also from February 1995 to
June 1997 he served as Vice President and General Manager of a wholly-owned
subsidiary of the Company that sells and services the Company's software
products in Illinois and Indiana. Prior to February 1995, such subsidiary was a
50% owned joint venture of the Company in which Mr. Grelck held the position of
Chief Executive Officer. Mr. Grelck has a B.S. degree in Electrical Engineering
from Northwestern University.
Wayne T. Wedell, 40, joined the Company in 1981 and has held positions
of Account Manager, Senior Account Manager, Group Manager as well as
Professional Services Manager, and
5
<PAGE>
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, 1999,
regarding beneficial ownership of the Common Stock by each director and nominee,
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. None of the persons listed below own any shares of
Preferred Stock.
Amount and Nature of Percent
Name of Beneficial Owner(1) Beneficial Ownership(2) of Class
------------------------ -------------------- --------
Helmut M. Adam................ 28,835 *
Michael D. Dunham............. 640,300 15.5%
Thomas M. Dykstra............. 575,000(3) 14.0%
Jeffrey J. Fossum............. 20,821 *
Richard W. Grelck............. 229,204 5.3%
Scott J. Mermel............... 28,835 *
Elliot Wassarman.............. 6,000 *
Wayne T. Wedell............... 29,110 *
Robert E. Weisenberg.......... 246,200 6.0%
All directors and executive
officers as a group
(9 persons)................. 1,804,305(4) 40.9%
- ----------
* 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 or warrants which
were exercisable as of or within 60 days of March 1, 1999: Mr. Adam,
26,835; Mr. Dunham, 3,000 shares; Mr. Grelck, 202,704 shares; Mr. Mermel,
26,835 shares; Mr. Wassarman, 6,000 shares; Mr. Weisenberg, 3,000 shares;
and all directors and executive officers as a group, 292,744 shares. Other
than Mr. Dunham who holds warrants, all of the foregoing shares relate to
outstanding options.
(3) Consists of (a) 165,000 shares held by the Dykstra Family Limited
Partnership for which Mr. Dykstra acts as managing general partner and (b)
410,000 shares held by a family trust for which Mr. Dykstra serves as
trustee.
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(4) Assumes the exercise of all options and warrants held by the group which
were exercisable as of or within 60 days of March 1, 1999.
Other Beneficial Owners
The following table sets forth information, as of December 31, 1998,
regarding beneficial ownership by the only other persons 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 filings made by
such beneficial owners on Schedule 13G with the Securities and Exchange
Commission.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Ownership Percent
of Beneficial Owners Voting Power Investment Power of Class
- -------------------- ------------ ---------------- --------
Sole Shared Sole Shared Aggregate
---- ------ ---- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Heartland Advisors, Inc.(1)
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 378,200 0 826,200 0 826,200 20.1%
Donald W. Vahlsing
12000 West Park Place
Milwaukee, Wisconsin 53224 229,900 0 229,900 0 229,900 5.6%
- ---------------
(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.
</TABLE>
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Information
The following table sets forth certain information concerning
compensation paid for the last three fiscal years to (i) the Company's Chief
Executive Officer and (ii) each of the Company's four most highly compensated
executive officers who earned cash compensation in excess of $100,000 for the
fiscal year ended November 30, 1998. The persons named in the table are
sometimes referred to herein as the "Named Executive Officers."
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Awards
Securities
Underlying
Stock All Other
Name and Principal Annual Compensation(1) Options (#) Compensation(2)
Position Year Salary ($) Bonus ($)
<S> <C> <C> <C> <C> <C>
Michael D. Dunham 1998 $185,819 $ --- --- $ ---
President and Chief Executive 1997 185,586 --- --- ---
Officer 1996 175,148 --- --- ---
Thomas M. Dykstra 1998 176,439 --- --- ---
Vice President, Secretary and 1997 176,308 --- --- ---
Treasurer 1996 164,739 --- --- ---
Richard W. Grelck 1998 171,087 --- 43,000 ---
Chief Operating Officer 1997 122,191 125,000 --- ---
1996 122,929 58,000 --- ---
Wayne T. Wedell 1998 107,550 27,225 5,000 3,273
Vice President Corporate 1997 71,520 35,500 4,500 ---
Services 1996 67,008 6,120 10,000 ---
Jeffrey J. Fossum 1998 104,544 5,000 --- 3,160
Chief Financial Officer and 1997 95,460 5,000 --- ---
Assistant Treasurer 1996 90,832 --- 10,000 ---
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- ----------
(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) Consists of matching contributions made by the Company under its 401(k) plan.
</TABLE>
Stock Options
The Company has in effect equity incentive plans pursuant to which
options to purchase Common Stock may be granted to employees (including
executive officers) of the Company and its subsidiaries. The following table
presents certain information as to grants of stock options made during fiscal
1998 to the Named Executive Officers. Messrs. Dunham, Dykstra and Fossum were
not granted options in the 1998 fiscal year.
<TABLE>
<CAPTION>
Option Grants in 1998 Fiscal Year
Potential
Realizable Value
at
Assumed Annual
Rates of Stock
Individual Grants Price
--------------------------------------------------------------------------------------------- Appreciation for
Option Term (2)
-------------------
Number of Percentage of
Securities Total Options At 5% At 10%
Underlying Granted to Exercise or Annual Annual
Options Employees in Base Price Expiration Growth Growth
Name Granted (1) Fiscal Year ($/share) Date Rate Rate
---- ----------- ------------- ---------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Richard W. Grelck........... 43,000 11% $1.4375 10/13/08 $38,872 $98,513
Wayne T. Wedell............. 5,000 1.3% $1.4375 10/13/08 $4,520 $11,455
- ------------
(1) The options reflected in the table (which are non-qualified options for
purposes of the Internal Revenue Code) were granted under the 1993 Plan
and vest and become exercisable (i) as to 30% of the shares of Common
Stock subject thereto immediately, (ii) as to an additional 30% of the
shares of Common Stock subject thereto after one year has elapsed from the
date of grant and (iii) as to the remaining 40% of the shares of Common
Stock subject thereto after two years has elapsed from the date of grant.
(2) This presentation is intended to disclose a potential value which would
accrue to the optionee if the option were exercised the day before it
would expire and if the per share value had appreciated at the compounded
annual rate indicated in each column. The assumed rates of appreciation of
5% and 10% are prescribed by the rules of the Securities and Exchange
Commission regarding disclosure of executive compensation. The assumed
annual rates of appreciation are not intended to forecast possible future
appreciation, if any, with respect to the price of the Common Stock.
</TABLE>
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<PAGE>
The following table sets forth information regarding the exercise of
stock options by the Named Executive Officers during the 1998 fiscal year and
the fiscal year-end value of unexercised options held by the Named Executive
Officers. Messrs. Dunham and Dykstra do not hold any stock options.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Shares Number of Securities
Acquired on Value Underlying Unexercised Value of Unexercised
Exercise Realized Options at Fiscal In-the-Money Options
Name (#) ($)(1) Year-End (#) at Fiscal Year-End ($)(1)
---- ----------- ------ ------------ -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Grelck --- --- 202,704 30,100 --- ---
Wayne T. Wedell 3,500 $312.50 12,105 10,650 --- ---
Jeffrey J. Fossum --- --- 12,265 4,000 --- ---
- ---------------
(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>
Employment Arrangements
Mr. Wedell has an Employment and Separation Agreement with the Company
that provides for his employment at the level of Vice President or higher
through December 31, 2006, subject to earlier termination by either party and
subject to future extension. Among other benefits, the agreement provides for an
initial annual base salary of $90,000, subject to upward adjustment, and annual
bonus opportunities. In addition, Mr. Wedell's agreement provides for a
termination payment of up to 75% of his highest annual base salary in the event
of his termination by the Company, termination following a change in control of
the Company or upon his resignation following a change in control and a
diminution in the level of his responsibilities with the Company. Mr. Wedell
would also be entitled to insurance benefits and use of a Company-supplied
automobile for up to twelve months following such termination.
The Company also has a Special Compensation and Separation Agreement
with Mr. Fossum. Pursuant to this agreement, Mr. Fossum, assuming he remains an
employee of the Company, is entitled to receive a $25,000 bonus in the event the
Company enters into a business combination prior to July 1, 1999. In addition,
if Mr. Fossum is terminated within twenty-four months of such event, he will be
entitled to receive his base salary and insurance benefits for up to twelve
months, certain tuition reimbursement, the acceleration of unvested options and
use for twelve months of a Company-supplied automobile. For purposes of his
agreement, Mr. Fossum will, in addition to an actual termination, be deemed to
be terminated if his compensation or responsibilities are reduced or if he is
asked to relocate outside of the Milwaukee, Wisconsin area.
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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, 1998.
Based on the criteria enumerated above, the Compensation Committee
awarded no base salary increase to the Company's Chief Executive Officer and
base salary increases to the other Named Executive Officers for the fiscal year
ended November 30, 1998. As noted above, Messrs. Grelck and Wedell were granted
options under the 1993 Plan during fiscal 1998. By tying a portion of an
executive officer's overall compensation to stock price through the grant of
options,
11
<PAGE>
the Compensation Committee seeks to enhance its objective of providing a further
incentive to maximize long-term shareholder value.
Under Section 162(m) of the Internal Revenue Code, the tax deduction by
corporate taxpayers, such as the Company, is limited with respect to the
compensation of certain executive officers unless such compensation is based
upon performance objectives meeting certain regulatory criteria or is otherwise
excluded from the limitation. The Compensation Committee currently intends to
qualify compensation paid to the Company's executive officers for deductibility
by the Company under Section 162(m) of the Internal Revenue Code.
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, on July 31, 1998, resigned as 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.
[Stock Performance Graph]
<TABLE>
<CAPTION>
2/25/94 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98
<S> <C> <C> <C> <C> <C> <C>
Effective Management
Systems, Inc. $100 $80 $59 $77 $54 $25
Nasdaq U.S. $100 $113 $136 $168 $208 $254
Nasdaq CDPSM $100 $ 95 $176 $217 $281 $410
</TABLE>
RELATED PARTY TRANSACTIONS
Michael D. Dunham, the Company's President, Thomas M. Dykstra, the
Company's Vice President, Secretary and Treasurer, Robert E. Weisenberg, a
director of the Company, and Donald W. Vahlsing, an employee of the Company
until his resignation on March 1, 1999, own all
12
<PAGE>
of the outstanding common stock of EMS Solutions, Inc. ("EMS Solutions"). EMS
Solutions develops and sells computer software and related hardware to the food
vending and food distribution industry. 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.
In September 1998, EMS Solutions paid in full debt outstanding to the
Company, having a balance at the time of approximately $312,000. Prior to the
repayment of such debt, EMS Solutions paid interest thereon at a rate equal to
the Company's cost of funds under its revolving line of credit. The Company
continues to provide administrative services to EMS Solutions. Fees received for
these services amounted to approximately $75,000 for the fiscal year ended
November 30, 1998. The Company believes that the fees charged for these services
are comparable to fees that would be charged to unaffiliated third parties.
MISCELLANEOUS
Independent Auditors
Ernst & Young LLP acted as the independent auditors for the Company in
the fiscal year ended November 30, 1998 and it is anticipated that such firm
will be similarly appointed to act for the fiscal year ending November 30, 1999.
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 2000 annual meeting
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 ("Rule 14a-8")
must be received at the principal office of the Company no later than December
8, 1999. In addition, a shareholder who otherwise intends to present business at
the 2000 annual meeting must comply with the requirements set forth in the
Company's Bylaws. Among other things, to bring business before an annual
meeting, a shareholder must give written notice thereof, complying with the
Bylaws, to the Secretary of the Company not less than 60 days prior to the last
Tuesday in the month of March. Accordingly, if the Company does not receive
notice of a shareholder proposal submitted otherwise than pursuant to Rule 14a-8
prior to January 28, 2000, then the notice will be considered untimely and the
Company will not be required to present such proposal at the 2000 Annual Meeting
of Shareholders. If the Board nonetheless chooses to present such proposal at
the 2000 Annual Meeting, then the persons named in proxies solicited by the
Board for the 2000 Annual Meeting may exercise discretionary voting power with
respect to such proposal.
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
13
<PAGE>
16(a) forms they file. As follows, there were several late filings on the part
of several officers and directors: (i) in February 1998, Mr. Dykstra
inadvertently failed to report the January 30, 1998 sale of stock by a trust
(for which he serves as trustee and of which he and his spouse are
beneficiaries) until March 5, 1998; (ii) in April 1998, Mr. Grelck was seven
days late in filing his Initial Statement of Beneficial Ownership; and (iii) in
January 1999, Messrs. Adam, Mermel, and Wassarman were five days late in filing
their Annual Statements of Changes in Beneficial Ownership. The Company believes
that, in all other respects, the 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 shares.
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 or Preferred 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, 1999
<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 side all of the shares of Common Stock
of Effective Management Systems, Inc. held or deemed to be held of record by the
undersigned on March 19, 1999, at the annual meeting of shareholders to be held
on May 4, 1999, or at any adjournment or postponement thereof.
(Continued on reverse side) SEE REVERSE SIDE
<PAGE>
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
EFFECTIVE MANAGEMENT SYSTEMS, INC.
May 4, 1999
Please Detach and Mail-In the Envelope Provided.
A [X] Please mark your
votes as in
this example.
The Board of Directors recommends a vote FOR the following proposal:
WITHHOLD
AUTHORITY Term expiring at the
FOR the to vote for 2002 Annual Meeting:
nominees the nominees Nominees:
listed at listed at Scott J. Mermel
right right Robert E. Weisenberg
1. ELECTION
OF [ ] [ ]
DIRECTORS
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name on the line below)
--------------------------------------------------
2. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
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.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
SIGNATURE_________________ DATE___________ 1999
SIGNATURE _________________________ DATE____________ 1999
IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give
full name 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.
