<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential for Use of the
Commission Only [as
[as permitted by Rule 14a-6(e)(2)]
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INSCI CORP
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] 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:
Common Stock
----------------------------------------------------------------------------
(2) Aggregate member of securities to which transaction applies:
N/A
----------------------------------------------------------------------------
(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:
N/A
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
----------------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Rule
Act 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 of Schedule and the date of its filing.
(1) Amount previously paid:
$125
(2) Form, Schedule or Registration Statement No.:
N/A
(3) Filing Party:
N/A
(4) Date Filed:
N/A
<PAGE>
- --------------------------------------------------------------------------------
INSCI Corp
- --------------------------------------------------------------------------------
TWO WESTBOROUGH BUSINESS PARK
WESTBOROUGH, MASSACHUSETTS 01581
(508) 870-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 7, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of INSCI Corp
(the "Company") will be held at the Company's headquarters at Two Westborough
Business Park, Westborough, MA 01581, on Tuesday, October 7, 1997 at 11:00 AM
(the "Meeting"), for the following purposes:
(1) To elect six (6) Directors to serve for the ensuing year or until
their successors are elected and have been qualified.
(2) To ratify the appointment of Pannel Kerr Forster PC as the
independent public accountants for the Company's fiscal year ended
March 31, 1997.
(3) Such other business as may be properly brought before the meeting
or any adjournment thereof.
Only those shareholders who were shareholders of record at the close of
business on August 8, 1997 will be entitled to notice of, and to vote at the
Meeting or any adjournment thereof. If a shareholder does not return a signed
proxy card or does not attend the Annual Meeting and vote in person, the shares
will not be voted. Shareholders are urged to mark the boxes on the proxy card to
indicate how their shares are to be voted. If a shareholder returns a signed
proxy card but does not mark the boxes, the shares represented by the proxy card
will be voted as recommended by the Board of Directors. The Company's Board of
Directors solicits proxies so each shareholder has the opportunity to vote on
the proposals to be considered at the Annual Meeting.
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE WHICH HAS BEEN PROVIDED.
IN THE EVENT YOU ARE ABLE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND
VOTE YOUR SHARES IN PERSON.
August 12, 1997 By Order of the Board of Directors
Westborough, MA
/s/ DR. E. TED PRINCE
----------------------------------------
Dr. E. Ted Prince
Chairman and Chief Executive Officer
<PAGE>
- --------------------------------------------------------------------------------
INSCI CORP
- --------------------------------------------------------------------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
OCTOBER 7, 1997
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of INSCI
Corp ("INSCI" or the "Company") for use at the Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held at the Company's headquarters at
Two Westborough Business Park, Westborough, MA 01581, on Tuesday, October 7,
1997 at 11:00 AM , and any adjournment or adjournments thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. All
stockholders are encouraged to attend the Annual Meeting. Your proxy is
requested, however, whether or not you attend in order to assure maximum
participation and to expedite the proceedings.
At the Annual Meeting, stockholders will be requested to act upon the
matters set forth in this Proxy Statement. If you are not present at the
meeting, your shares can be voted only when represented by proxy. The shares
represented by your proxy will be voted in accordance with your instructions if
the proxy is properly signed and returned to the Company before the Annual
Meeting. You may revoke your proxy at any time prior to its being voted at the
Annual Meeting by delivering a new duly executed proxy with a later date or by
delivering written notice of revocation to the Secretary of the Company prior to
the day of the Annual Meeting, or by appearing and voting in person at the
Annual Meeting. It is anticipated that this proxy statement and accompanying
proxy will first be mailed to the Company's stockholders on or about August 22,
1997. The Company's 1997 Annual Report to its stockholders on Form 10-KSB, filed
electronically (EDGAR System) with the Securities and Exchange Commission on
June 27, 1997, is also enclosed and should be read in conjunction with the
matters set forth herein. The expenses incidental to the preparation and mailing
of this proxy material are being paid by the Company. No solicitation is planned
beyond the mailing of this proxy material to stockholders.
Abstentions and broker non-votes will be counted toward determining
whether a quorum is present.
The Principal executive offices of the Company are located at Two
Westborough Business Park, Westborough, MA 01581. The telephone number is (508)
870-4000.
OUTSTANDING SHARES AND VOTING RIGHTS
The only security entitled to vote at the Annual Meeting is the
Company's Common Stock. The Board of Directors, pursuant to the Bylaws of the
Company has fixed August 8, 1997 at the close of business, as the record date of
the determination of Stockholders entitled to notice of and to vote at the
Annual Meeting or any adjournment or adjournments thereof. At August 8, 1997,
there were 4,436,107 shares of Common Stock outstanding and entitled to be voted
at the Annual Meeting. Each share of Common Stock is entitled to one vote at the
Annual Meeting. A majority of the shares of Common Stock outstanding and
entitled to vote which are represented at the Annual Meeting, in person or by
proxy, will constitute a quorum. As per the Bylaws of the Company, provided a
quorum (majority) of issued and outstanding shares entitled to vote are present
in person or by proxy, a majority vote in favor of a proposal is required for
approval of an agenda item.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Company proposes that the Company's
current directors standing for re-election be elected as directors and serve
until the next Annual Meeting of the Stockholders and continuing until their
successors are elected and qualified. Unless authority is withheld on the proxy
it is the intention of the proxy holder to vote for the directors standing for
election named below.
Certain information concerning the directors and executive officers of
the Company is set forth in the following table and in the paragraphs following.
Information regarding each such director's and executive officer's ownership of
voting securities of the Company appears as "Securities Ownership of Certain
Beneficial Owners and Management" below.
<TABLE>
<CAPTION>
NAME CURRENT POSITION WITH COMPANY DIRECTOR SINCE
- ----- ----------------------------- --------------
<S> <C> <C>
Dr. E. Ted Prince Chief Executive Officer, President, Director 1995
Leonard Gartner Director 1995
Francis X. Murphy Director 1995
Richard T. Gerstner Director 1996
Andre Daniel-Dreyfus1 Director 1997
Mitchell Klein1 Director 1997
Robert Oxenberg2 Director 1994
1 Messrs. Dreyfus and Klein were appointed as directors of the Company in June 1997.
2 Indicates resignation and/or decision not to stand for re-election to the board.
</TABLE>
DR. E. TED PRINCE, age 50, was appointed President and Chief Executive
Officer of the Company in June 1995. He was elected Chairman of the Board of
Directors in August of 1995 and appointed and served as Chief Financial and
Accounting Officer on an interim basis in May 1996 through July, 1996. Dr.
Prince has been President of several software companies and is also President of
Perth Ventures, Inc., a New York City based investment banking firm specializing
in the emerging technology sector. Dr. Prince is an author and publisher of an
industry newsletter, The Technology Fundamentalist. Dr. Prince also serves as a
Director for several software companies and has a degree in Political Science
from The University of New South Wales (Australia) and a Master and Ph.D. degree
from Monash University in Australia.
LEONARD GARTNER, age 55, has been the principal of Gartner and Company,
an accounting firm, for the past five years. His firm specializes in structuring
debt and equity instruments, advising clients on the financial and tax aspects
of acquisitions, stock option plans and stock issuance matters. Mr. Gartner also
serves as a member of the Company's Audit and Compensation Committees. Mr.
Gartner was elected as a Director of INSCI in September 1995.
FRANCIS X. MURPHY, age 49, was elected a Director of the Company in
September 1995. He is the founder of Emerging Technology Ventures, Inc. and has
served as President and Chief Executive Officer from its inception in September
1994. From February 1994 through September 1994 Mr. Murphy was the President and
Chief Operating Officer of Cryo-Cell International, Inc., a Research and
Development stage medical products public company. From 1991 through 1994, he
served as President and Chief Operating Officer of Creative Socio-Medics Corp.,
a wholly owned subsidiary of Advanced Computer Techniques, a provider of
technology to the health care industry. Mr. Murphy also serves as a member of
the Company's Audit and Compensation Committees. He holds both a Bachelors of
Arts and Masters of Business Administration in Corporate Finance from Adelphi
University.
RICHARD GERSTNER, age 57, was appointed a Director of the Company in
March of 1996. In addition to serving as a Director of INSCI Corp, Mr. Gerstner
serves as a Director for the Lyme Disease Foundation. Mr. Gerstner is currently
the President and CEO of Clausner Wireless Corp. Prior to joining Clausner
Wireless Corp. he served as President and Chief Executive Officer of Telular
Corporation, a manufacturer of fixed wireless telecommunications equipment. Mr.
Gerstner is a graduate of Villanova University with a Bachelors of Science
Degree in Chemical Engineering and holds a Masters of Science in Industrial
Engineering from Stanford University.
ANDRE DANIEL-DREYFUS, age 57, was appointed a Director of the Company
in June, 1997. From 1989 to the present, Mr. Dreyfus has been Senior Vice
President, Corporate Finance, at Fechtor Detwiler & Co. Inc. an investment
banking firm. From 1979 to 1989 Mr. Dreyfus was Vice President at McTeague &
Company, a private investment banking firm. Mr. Dreyfus holds a Bachelors of
Arts and Master of Arts from Yale University.
MITCHELL KLEIN, age 47, was appointed a Director of the Company in
June, 1997. Mr. Klein is currently the President of Mitchell Capital, Inc., an
investment management company formed in June, 1994. Since March of 1994, he has
also been Managing Director of Brill Securities, Inc. members of the NYSE, SIPC.
Mr. Klein has over fifteen years of computer industry experience. He has served
in various senior management positions with Digital Equipment Corporation for
nine years, after having been President of his own software development and
consulting firm. Mr. Klein is a graduate of the State University of New York at
Albany and holds a Masters of Arts from the University of Michigan at Ann Arbor.
ROBERT H. OXENBERG, age 47, served as a Director of the Company from
April 1992 to November 1993. Mr. Oxenberg was reappointed to the Board to fill a
vacancy in September 1994. Mr. Oxenberg has chosen not to stand for re-election
to the board. Mr. Oxenberg has no disagreements with the Company in regards to
matters affecting the Company's operations, policies, practices or financial
statements.
CURRENT EXECUTIVE OFFICERS OF INSCI
In addition to Dr. Prince, the following INSCI employees are executive officers
of the Company.
JOHN L. GILLIS, age 44, is Executive Vice President-Field Operations
and Chief Operating Officer of the Company. Mr. Gillis served as President of
the Company from July 1994 through June 1995. He served as a director of the
Company from October 1993 through September 1996. From August 1992 through
November 1993, Mr. Gillis served as Senior Vice President. Mr. Gillis joined the
Company as Vice President Sales in November 1990.
KRISHAN CANEKERATNE, age 31, was elected Chief Technology Officer and
Senior Vice President of the Company in June 1995. He joined the Company in
December 1989 as Project Manager/Senior Programmer and was promoted to Director
of Software in September 1991, Vice President in November 1992 and Senior Vice
President in November 1993. Prior to joining the Company, Mr. Canekeratne worked
for the Independent Election Corporation of America.
ROGER C. KUHN, age 54, joined the Company and was appointed Vice
President Finance and Chief Financial Officer on July 29, 1996. From 1986
through 1994 Mr. Kuhn was Chief Financial Officer of Itran Corp./Acuity Imaging,
Inc. From 1994 to 1995 Mr. Kuhn was Chief Financial Officer of Momentum Software
Corp. Mr. Kuhn was also Vice President and Controller of Computervision
Corporation. Mr. Kuhn holds a Bachelors of Science in Accounting and Masters of
Business Administration in Finance from Fairleigh Dickinson University.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended March 31, 1997, there were twelve meetings
of the Board of Directors, of which all Directors attended more than 75% of the
meetings. In addition, the Compensation and Audit Committees each met four times
with full attendance by all members.
The Audit Committee was established by the Board of Directors in
September 1995 and consists of two non-employee directors: Mr. Gartner
(Chairman), Mr. Murphy and one outside financial consultant, Mr. B. Nicholas
Harvey. Mr. Harvey is the Chief Financial Officer of Transcend Therapeutics, a
Bio-Tech firm in Cambridge, Massachusetts. The primary purpose of the Audit
Committee is to provide independent and objective oversight of the Company's
accounting function and internal controls and to ensure the objectivity of the
Company's financial statements. The Committee also reviews and advises the Board
of Directors with respect to the Company's insurance coverage and tax policies.
The Committee is responsible for engaging the Company's independent accountants
and reviews with them (1) the scope and timing of their audit services and any
other services they may be asked to perform, (2) their report on the Company's
financial statements following the completion of the audit, and (3) the
Company's policies and procedures with respect to internal accounting and
financial controls. This Committee meets separately with representatives of the
Company's independent accountants and with representatives of senior management.
The Audit Committee had four meetings in fiscal year 1997.
THE COMPENSATION COMMITTEE
The Compensation Committee was established by the Board of Directors in
September 1995 and consists of three non-employee directors: Messrs. Murphy
(Chairman), Oxenberg and Gartner. The Committee advises the Board of Directors
with respect to the Compensation of the Company's employee directors and
executive officers and with respect to employee benefit plans. The Committee
also is responsible for administering the Company's equity incentive plans and
executive bonus program. The Compensation Committee held four meetings in fiscal
year 1997.
The Company's executive compensation program links management pay with
the Company's annual and long-term performance. The program is intended to
attract and retain highly-qualified senior managers by providing compensation
opportunities that are consistent with the Company's performance. The program
provides for base salaries that reflect factors such as level of responsibility,
individual contribution, internal fairness and external competitiveness; annual
cash bonus awards that are payable for the achievement of financial and
operational objectives; and long-term incentive opportunities in the form of
stock options that strengthen the mutuality of interest between employees and
the Company's stockholders. Among the Compensation Committee's objectives is
establishing executive compensation levels comparable to that of companies of
similar size and business activity. To that end, the Company will participate in
and review the results of various industry surveys. In addition, the Committee
may, from time to time, utilize the services of independent consultants to
assess external marketplace pay practices. The Committee's purpose is to pay
competitive compensation based on a total assessment of salary, cash bonuses and
stock options. The Committee therefore uses its discretion and business judgment
in setting executive compensation levels. The Committee believes that the
resulting total cash compensation paid to the Company's executive officers is
within the median range of the selected groups of comparative companies
reflected in the data represented by the aforementioned industry surveys.
The Committee also made decisions regarding the payment of cash bonuses
to the Company's other executive officers. The purpose of the bonus plan is to
reward executive officers based on the overall achievement of corporate goals.
Individual bonus awards are based on a written evaluation of the degree of
achievement of certain annual performance objectives. The Committee considers,
without any specific assignment of weight thereto, factors such as the Company's
overall financial performance, the individual's level of compensation relative
to the external marketplace, individual performance versus objectives and
overall value to the Company.
Additionally, the Committee makes recommendations to the Board
regarding the award of stock options to certain key employees. The purpose of
this program is to provide long-term incentives to key employees to increase
shareholder value and to align management's economic interests with those of
shareholders. Such stock options have been directly awarded, or awarded under
the 1992 Stock Options Plan and, under the 1997 Equity Incentive Plan. These
options may be awarded in lieu of or in addition to the cash bonus, and
generally incorporate vesting requirements to encourage key employees to
continue in the employ of the Company and to encourage management's long-term
perspective. The Committee considers the amounts and terms of prior grants in
deciding whether to award options for the last completed fiscal year. With
respect to the Company's stock option plans, the Committee has retained the
services of a compensation consulting firm specializing in employee incentive
programs to determine the most effective use of certain types of long term
incentives such as stock options, restricted stock, stock appreciation rights
and other forms of deferred compensation.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the compensation for each of the last
three (3) fiscal years earned by the Chief Executive Officer and each of the
most highly compensated executive officers whose individual remuneration
exceeded $100,000 for the fiscal year ended March 31, 1997 (the "Named
Executives"). The Company's compensation policies are discussed in "The
Compensation Committee" Report as discussed within this document.
<PAGE>
SUMMARY ANNUAL COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------
LONG TERM
COMPENSATION
PRINCIPAL OTHER OPTIONS
NAME POSITION YEAR SALARY BONUS COMPENSATION GRANTED **
- ----- -------- ---- ------ ----- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
DR. E. TED PRINCE President and 1997 $200,000 - $31,596 (1) 75,000
Chief Executive 1996 157,692 $100,000 72,983 (1) 1,200,000
Officer 1995 - - -
JOHN L. GILLIS Executive Vice 1997 165,000 110,330 90,707 (2)
President 1996 150,447 55,000 54,539 (2) 350,000
Chief Operating 1995 149,154 30,000 157,659 (2)
Officer
KRISHAN CANEKERATNE Senior Vice 1997 123,884 83,690 6,000 (3)
President 1996 118,461 52,454 5,538 (3) 350,000
Development 1995 107,384 60,000 46,280 (3)
GEORGE TRIGILIO, JR. Executive Vice 1997 98,846 - 7,715 (4)
President 1996 - - - 300,000
Imaging Division 1995 - - -
ROGER KUHN Executive Vice 1997 82,212 36,250 3,923 (5) 100,000
President 1996 - - -
Chief Financial 1995 - - -
Officer
*DAVID GRACE Acting Chief 1997 (6) - (6)
Executive 1996 - - - 10,000
Officer 1995 17,000 - -
*JOHN STEINKRAUSS Chief Financial 1997 21,578 - 808 (7)
Officer
Vice President 1996 123,536 11,000 18,615 (7) 125,000
Finance
& Administration 1995 88,845 - 20,961 (7)
*GERARD DORSEY Chief 1997 (8) - (8)
Executive 1996 - - -
Officer 1995 144,000 - -
</TABLE>
* Indicates resignation
** The Company does not have a restricted stock award program
(1) In fiscal year 1997, Dr. Prince was paid a $6,000 living allowance, $8,247
for an automobile lease, $2,204 for garage rental and $15,145 for apartment
rental. Other compensation in 1996 represents $25,000 paid directly as a
signing bonus and $25,000 paid indirectly as a consulting fee through Perth
Ventures. The remaining $22,983 is comprised of $4,269 living allowance,
$6,098 payment for an automobile lease, $1,560 for garage rental, $10,686
for apartment rental and $370 for an automobile allowance.
(2) In fiscal year 1997, Mr. Gillis received an automobile allowance of $6,741
and $83,966 stemming from the surrender of 19,134 stock options as payment
against a $150,000 loan made to Mr. Gillis in April 1994. Other
compensation for 1996 of $54,539 includes, $21,003 which represents 1995
calendar year imputed interest relative to the loan and $27,810 from the
surrender of 9,924 stock options to pay down the loan. The remaining $5,726
was an automobile allowance. In 1995, Mr. Gillis was paid an automobile
allowance of $5,140 and housing allowance of $900 and the Company included
$150,000 which represented the loan made to Mr. Gillis in April 1994.
Please refer to the Company's 1996 Annual Report 10-K for additional
information relative to Mr. Gillis' loan under Related Party Transactions
on page F-13.
(3) In fiscal years 1997 and 1996, Mr. Canekeratne was paid an automobile
allowance in the amount of $6,000 and $5,538 respectively. The amounts for
1995 represent a automobile allowance of $3,000, housing allowance of
$13,280 and a relocation allowance of $30,000.
(4) Other compensation for fiscal year 1997 of $7,715 includes commission paid
to Mr. Trigilio of $2,377 and an automobile allowance of $5,338.
(5) In fiscal year 1997, Mr. Kuhn received an automobile allowance of $3,923.
(6) Mr. Grace is a past Director and was Chief Executive Officer for an interim
period. Mr. Grace was not paid a salary.
(7) In fiscal year 1997, Mr. Steinkrauss was paid an automobile allowance of
$808. Amounts for 1996 represent $5,538 for an automobile allowance and
$13,077 in relocation costs. For 1995, Mr. Steinkrauss received an
automobile allowance of $4,038 and a relocation allowance of $16,923.
(8) All compensation to Mr. Dorsey was paid by Information Management
Technology Corporation (IMTECH), the Company's former majority stockholder.
Mr. Dorsey resigned as an officer and director of the Company and IMTECH in
September 1994.
APPOINTMENT OF OFFICERS AND DIRECTORS
On June 4, 1997, the Board of Directors of the Company appointed Andre
Daniel-Dreyfus and Mitchell Klein as members of the Board of Directors of the
Company. Messrs. Daniel-Dreyfus and Klein are serving as independent members of
the Board of Directors and have been nominated to stand for election to the
Board of Directors.
OPTION GRANTS DURING FISCAL YEAR 1997
The following table provides information concerning options granted to
officers and directors during the Fiscal Year ended March 31, 1997 and reflects
the potential value of such options assuming 5% and 10% annual stock
appreciation.
OPTION GRANTS DURING FISCAL 1997
<TABLE>
<CAPTION>
PERCENT OF
TOTAL SHARES POTENTIAL REALIZABLE VALUE AT
UNDERLYING ASSUMED ANNUAL RATES
OPTIONS GRANTED OF STOCK PRICE APPRECIATION
TO EMPLOYEES IN EXERCISE EXPIRATION FOR OPTION TERM
NAME NUMBER FISCAL YEAR PRICE DATE 5% 10%
- ---- ------ --------------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
E. Ted Prince 75,000 20% $3.75 May 7, 07 $177,000 $448,000
Roger Kuhn 100,000 26% $6.18 July 29, 06 $388,000 $985,000
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the exercise of
options during the last fiscal year and unexercised options held as of the end
of the fiscal year with respect to each of the Named Directors and Executives:
Aggregate Option Exercises In Last Fiscal Year
And Fiscal Year End Option Values
<TABLE>
<CAPTION>
Shares Number of Shares Value of Unexercised
Acquired Value Underlying Options In-the-Money Options
On Exercise Realized At March 31, 1997 At March 31, 1997 (2)
-------------- -------- ------------------ ------------------------------
(#) ($) (1)
--- --------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
E. Ted Prince - - 751,391 448,609 1,673,255 1,049,745
Richard Gerstner - - 33,333 466,667 - -
Francis Murphy - - 116,132 383,868 201,161 170,668
John Gillis - - 120,942 200,000 283,004 468,000
Krishan Canekeratne - - 150,000 200,000 351,000 468,000
Roger Kuhn - - - 100,000 - -
George Trigilio, Jr. - - 95,000 - - -
Robert Oxenberg - - 80,000 75,000 156,566 194,584
Leonard Gartner - - 73,333 66,667 85,333 170,668
John Steinkrauss - - - - - -
David Grace - - - - - -
Olin Broadway 5,000 16,550 - 5,000 - 12,800
(1) Calculated by multiplying the number of shares underlying options by the
difference between the closing price of the Common Stock as reported by
NASDAQ on the date of exercise and the exercise price of the options.
(2) Calculated by multiplying the number of shares underlying options by the
difference between the closing price of the Common Stock as reported by
NASDAQ on March 31, 1997 and the exercise price of the options.
</TABLE>
REMUNERATION ON NON-MANAGEMENT DIRECTORS
Each member of the Board of Directors who is not an officer or employee
of the Company is entitled to participate in the Directors Option Plan described
below, and to receive reimbursement for travel and other expenses directly
related to his activities as a director. The Company does not pay inside or
outside Directors on a per meeting basis for attendance at Board of Director
meetings or related Committee meetings. However, each outside Director may be
compensated pursuant to a written agreement with the Company to provide specific
types of professional services such as financial, accounting or tax advice
covering compensation plans, acquisitions and debt/equity placements.
With respect the Audit Committee, the Company has retained a financial
consultant, Mr. B. Nicholas Harvey to be a member of the Committee on a retainer
basis at $1,500 per quarter. He is the only non-Director member on any of the
Company's Committees.
COMPENSATION PLANS:
EMPLOYMENT AGREEMENTS
Effective June 15, 1995, the Company entered into an employment
agreement for a period of three years with Dr. E. Ted Prince (Dr. Prince) the
Company's Chairman of the Board of Directors and President. Dr. Prince's
employment agreement, as amended, provides for a base salary of $200,000 per
annum to be paid through the term of the agreement, annual incentive bonuses
based upon achievement of defined profitability criteria, 250,000 vested stock
options to purchase 250,000 shares of common stock at an exercise price of $2.00
per share, and 950,000 vested stock options to purchase 950,000 shares of common
stock at an exercise price of $1.66 per share. With respect to the latter
options, if the employment of Dr. Prince is terminated for any reason during the
thirty-six month period of the employment agreement, then he must return to the
Company a pro-rata portion of the 950,000 options. The portion to be returned
would be determined based upon the number of months remaining in the agreement
after his termination date as a percent of the original term of thirty-six
months. In the event of a change of control of the Company through merger or
acquisition, the provisions with respect to the return of the stock options
would be waived. Dr. Prince achieved a $100,000 management incentive bonus
during fiscal year 1996 and stock option grant of 75,000 shares at an exercise
price of $3.75 relating to fiscal 1997 performance.
Mr. George Trigilio, Jr. became employed by the Company at the end of
fiscal year 1996 as a result of the acquisition of the Courtland Group, Inc. Mr.
Trigilio has a two year employment agreement with the Company providing an
annual salary of $100,000 as well as incentive bonuses conditioned upon his
performance.
The Company has employment agreements with its other executive officers
which also includes annual incentive bonuses attainment of defined profitability
criteria and other performance related objectives. If an executive officer's
employment is terminated for any reason other than voluntary resignation or for
cause (as defined in the agreements) then a severance benefit will be paid. The
severance benefit varies from officer to officer, but is not greater in any
instance than twelve months salary and benefits. Exclusive of Dr. Prince,
certain key members of management have been granted stock options as part of
their compensation package. Mr. John L. Gillis and Mr. Krishan Canekeratne have
321,000 and 350,000 options, respectively.
Mr. Roger C. Kuhn the Company's Chief Financial Officer and Vice
President has an employment agreement at a base salary of $125,000 and a base
annual incentive of $25,000 based on performance objectives. In addition, Mr.
Kuhn was granted 100,000 stock options upon entering into the agreement.
In December of 1996 the Board of Directors amended the employment
agreements of Messrs. Canekeratne, Gillis and Kuhn to provide for a one-year
severance or payment of the balance of compensation under their Employment
Agreements and vesting of all stock options, whichever is less, in the event of
a change of control of the Company, and/or a termination of their employment
without cause.
DIRECTORS AND OTHER STOCK OPTIONS
The Directors Option Plan (the "Directors Plan") was adopted by the
Board of Directors in 1992 to make service on the Board more attractive to
present and prospective directors. The Plan was amended in September 1995 to
increase the number of shares authorized to 1,000,000. On July 29, 1996 the
Directors Plan was amended so that each new director receive 100,000 stock
options upon being appointed to the Board of Directors. In addition, the current
change of control provision was modified to reflect immediate vesting.
The Directors Plan is administered by a committee made up of at least
two members of the Board of Directors. The exercise price per share of any
option granted under the Directors Plan shall not be less than the fair market
value of such shares on the date of grant. Eligible directors include all
members of the Board of Directors who are not also employees of the Company or
any parent or subsidiary of the Company. Options expire five years from the date
of grant, subject to earlier termination in accordance with the terms of the
Directors Plan. All rights to exercise options terminate 90 days following the
date the optionee ceases to serve as a director of the Company with certain
exceptions. At March 31, 1997 there were 45,000 Directors options outstanding
and 955,000 options available for future grant.
During fiscal 1996, the Company, with shareholder approval, granted
aggregate stock options of 3,000,000 shares to new and continuing Directors and
officers of the Company. The stock options are for a term up to five years and
have vesting schedules based on different criteria including time qualifications
and performance standards. The shares underlying the stock options are
restricted and are unregistered. The Company has included the underlying shares
in its preliminary Form S-1 Registration Statement that has been filed with the
Securities and Exchange Commission and is in the process of being amended.
THE 1997 EQUITY INCENTIVE PLAN
The 1997 Equity Incentive Plan is the successor plan to the Company's
1992 Stock Option Plan (the Plan) which was terminated by shareholder
ratification at the Company's annual meting in September 1996. Under the 1992
Plan, 4,000,000 shares of common stock $.01 par value were authorized and
reserved for issuance in the form of incentive stock option and non-qualified
stock options. Of these, 609,565 stock options had been granted as of March 31,
1997. These stock options are currently outstanding to employees of the Company
and other key persons and, as such, will remain in effect according to their
terms and conditions (including vesting requirements) as provided for in the
1992 Plan and individual stock option agreements. The remaining 3,390,435
authorized and reserved shares of common stock are no longer subject to issuance
under the 1992 Plan.
The Company, with shareholder approval, has reserved 3,000,000 shares
for future use under the new 1997 Equity Incentive Plan (the 1997 Plan). These
new shares, in effect, replace the shares remaining and not granted under the
terminated 1992 Plan. As of March 31, 1997, there were 220,800 options granted
under the 1997 Plan. The 1997 Plan is administered by the Compensation Committee
of the Board of Directors (the Committee) consisting of two or more non-employee
directors of the Company who are not eligible to receive grants or awards under
the 1997 Plan. The plan provides for the granting of equity incentive awards to
employees in the form of incentive stock options, non-qualified stock options,
stock appreciation rights, stock appreciation awards, restricted stock awards,
deferred stock awards, and other performance-related or non-restricted stock
awards. The new plan permits the Company to provide its employees with incentive
compensation opportunities which are highly motivational and which afford the
most favorable tax and accounting treatments to the Company. The Committee
believes that the flexibility of the incentive award vehicles provided for by
the 1997 Plan will enhance the effectiveness and cost efficiency of the
Company's management incentive program in the best interest of shareholders.
The Committee, subject to the provisions of the 1997 Plan will designate
participants, determine the terms and provisions of each award, interpret the
provisions of the plan and supervise the administration of the plan. The
Committee may, in its sole discretion, delegate certain administrative
responsibilities related to the 1997 Plan to Company employees or outside
consultants, as appropriate. The exercise price of any stock option granted
under the 1997 Plan shall not be less than the fair market value of the common
stock of the Company on the date of grant. The Committee shall determine any
service requirements and/or performance requirements pertaining to any stock
awards under the 1997 Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1995, Mr. Robert Oxenberg, a director of the Company, was
granted 25,000 options at $1.13 per share. In September, 1995 Mr. Oxenberg was
also granted a ten-year option to acquire 10,000 shares of Common Stock at an
exercise price of $1.66 per share. During fiscal 1996 the Company paid $35,000
to Mr. Oxenberg as remuneration for his efforts on behalf of the Company to
secure additional financing. In September 1995, the Company signed an agreement
with Mr. Oxenberg to assist INSCI to approach potential investment sources. Mr.
Oxenberg was paid a retainer of 10,000 stock options at $7.00 per share.
Additionally, success fees are paid to Mr. Oxenberg when INSCI enters into a
binding arrangement with investors. Success fees are 3.5% of funds raised and
25,000 shares of stock for each $1 million raised.
In April 1994, the Company loaned John L. Gillis, presently the
Company's Executive Vice President and Chief Operating Officer, and his wife,
the amount of $150,000 to purchase a residence in Westborough, Massachusetts.
The loan carries interest at the prime rate. In May 1996, the Company and Mr.
Gillis reached an agreement on a schedule of payments which anticipates repaying
the loan principal and interest in full during the course of the next two fiscal
years. The loan is collateralized by a pledge of Mr. Gillis' Imtech Class A
Common Stock, and certain INSCI stock options and 500 INSCI Units. This
collateral has a present market value materially less than the outstanding
balance of the loan. During fiscal 1996 the Company established an allowance for
loan loss as the underlying collateral had minimal value. During fiscal 1997,
Mr. Gillis paid down the loan in the amount of $55,860 through a combination of
cash payments and surrender of stock options. Interest paid by Mr. Gillis was
$9,522 during fiscal 1997 and $24,284 during fiscal 1996. The outstanding loan
balance as of March 31, 1997 is $87,759, and is offset by an allowance for loan
losses by the same amount.
In June 1995, the Company commenced an interim office sharing
arrangement on a month-to-month basis with Perth Ventures at a monthly charge of
$2,000 per month. Dr. Prince, who is President, Chief Executive Officer and
Chairman of the Board of Directors of the Company, is 100% owner in and is
President of Perth Ventures. In June 1995, the Company engaged Dr. Prince as a
consultant prior to Dr. Prince's employment by the Company. A total of $11,538
was paid to Dr. Prince for consulting services rendered to the Company prior to
his employment. In conjunction with Dr. Prince's employment the Company paid an
additional $25,000 to Dr. Prince and $25,000 to Perth Ventures for consulting
fees during fiscal 1996. Dr. Prince is also an investor in one $25,000 unit of
the Company's 10% convertible preferred stock.
The Company engaged Emerging Technology Ventures, Inc. ("ETVI") to
manage its acquisition and strategic alliance activities. Mr. Francis X. Murphy
("Mr. Murphy"), who is President of ETVI, became a director of the Company in
September 1995. ETVI is paid a monthly retainer of $6,000. ETVI was granted an
incentive stock option to acquire 400,000 shares of the Company's common stock
at an exercise price of $2.31 per share until October, 1997 and includes an
updated exercise price of $5.09 per share under specific circumstances. These
options are only exercisable to the extent that transactions which are
contemplated in the amended agreement are completed in accordance with the terms
of the agreement. For completed transactions ETVI will receive a commission,
which is offset against cumulative retainer fees paid and a portion of the stock
options granted will vest immediately. As a result of the Company acquiring
certain assets from the Courtland Group, Inc. in March, 1996 ETVI received a fee
of $33,750 which was offset against the retainer and 43,537 options vested from
the 400,000 options described above. In connection with the acquisition of the
Image Express software from Customs Solution, Inc. during fiscal 1996, ETVI had
an additional 25,000 options vested. The aggregate options vested were valued at
$138,000 and have been recorded as part of the acquisition cost. As a result of
the Company acquiring certain assets from Action Computer Supplies Holdings PLC,
ETVI received a success fee in fiscal 1997 of $25,000 which was offset against
the retainer and had an additional 14,262 options vested at $5.09 per share.
In June 1995, the Company engaged Gartner and Associates as financial
consultants to advise the Company. Mr. Leonard Gartner ("Mr. Gartner"),
principal of Gartner and Associates, became a director of the Company in
September 1995. Gartner and Associates was paid a monthly retainer of $4,500
plus expenses during fiscal year 1996. Pursuant to an April 1996 amendment to
the agreement, Gartner and Associates has been paid a monthly retainer of $6,000
plus expenses during fiscal year 1997, and also received a grant of 40,000
incentive stock options at an exercise price of $4.06 per share. All the 40,000
options vested during fiscal year 1997. During fiscal 1997 Gartner and
Associates was paid, in addition to the $6,000 monthly retainer fee,
approximately $61,000 in fees related to the additional assignments regarding
the preparation of the Company's Form S-1 filed with the Securities and Exchange
Commission and for services performed in connection with acquisition activities
of the Company.
In September 1995, Mr. Gartner and Mr. Murphy purchased 100,000 shares
and 10,000 shares, respectively, of the Company's common stock from Imtech.
In September 1995, the Company entered into an agreement with Technology
Providers Ltd. ("TPL") of Sri Lanka under which TPL will provide computer
programming services for certain software products under development and for
selected customer application projects. During fiscal 1997, additional
agreements to provide computer programming services were entered into with TPL.
Payments to TPL totaled $647,000 in fiscal 1996 and $652,000 in fiscal 1997. TPL
is owned by family members of Mr. Krishan A. Canekeratne who is the Company's
Senior Vice President of Development. Mr. Canekeratne has no direct ownership
interest in TPL. In the opinion of management, the fees paid under this
agreement are at fair market value rates. The Company has issued approximately
$944,000 in purchase orders for services to be performed by TPL in fiscal 1998.
In September 1995, the Company granted to its present and former
directors the following stock options at an exercise price of $1.44 per share:
two year options to purchase 10,000 shares each were granted to Messrs. Grace
and Broadway, former directors of the Company, and options vesting over three
years to purchase 100,000 shares each to Messrs. Gartner, Murphy and Oxenberg,
the non-officer directors elected to the Board of Directors at the Annual
Shareholders Meeting in September. In March 1996, the Company granted an
incentive stock option vesting over three years to purchase 100,000 shares at an
exercise price of $4.38 per share to Mr. Richard Gerstner, who joined the Board
of Directors. In June 1996, the Company granted Mr. Gerstner 400,000 stock
options at $6.25 per share. Options under this grant vest when earned based upon
signing new customers to reseller agreements and ensuring the annual
continuation of such agreements. No options under this grant are currently
vested.
All of the grants of stock and options awarded by the Company were
previously ratified by stockholders at the Company's annual meeting of
stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company to the best of its knowledge has not received a copy of any
Form 5 with respect to the fiscal year ended March 31, 1997 or any
representations from any officer, director or 10% shareholder of the Company,
other than Dr. Prince, Messrs. Gartner, Murphy, Gillis, Canekeratne, Kuhn,
Oxenberg and Gerstner. Accordingly any other person who, at any time during the
fiscal year, was a director, officer or beneficial owner of more than ten
percent of the Company's Common Stock may have been required to file, on a
timely basis, reports required by Section 16(a) during the most recent fiscal
year or prior years.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, to the best knowledge of the Company, as
of March 31, 1997, certain information with respect to (1) beneficial owners of
more than five percent (5%) of the outstanding Common Stock of the Company, (2)
beneficial ownership of shares of the Company's Class Stock by each director and
named executive; and (3) beneficial ownership of shares of Common Stock of the
Company by all directors and officers as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES OF OPTIONS/ TOTAL % OF COMMON
COMMON OTHER BENEFICIAL STOCK
STOCK OWNERSHIP OUTSTANDING
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Information Management Technologies Corp. 599,667 - 599,667 14%
130 Cedar Street-4th Floor
New York, NY 10006
CEDE, Depository Trust Co. 1,037,808 - 1,037,808 25%
PO Box 20
New York, NY 10274
Dr. E. Ted Prince, CEO 5,789 751,391 757,180 15%
2 Westborough Business Park
Westborough, MA 01581
Francis X. Murphy, Director 10,000 116,132 126,132 3%
342 Madison Avenue
New York, NY 10173
John L. Gillis, COO - 120,942 120,942 3%
2 Westborough Business Park
Westborough, MA 01581
Roger Kuhn, CFO - - - -
2 Westborough Business Park
Westborough, MA 01581
Krishan Canekeratne, Senior Vice President 700 150,000 150,700 3%
2 Westborough Business Park
Westborough, MA 01581
George Trigilio, Jr., Executive Vice President - 95,000 95,000 2%
5300 Dorsey Hill, Suite 150
Elicott City, MD 21042
Robert H. Oxenberg, Director 7,047 80,000 87,047 2%
PO Box 12381
Aspen, CO 81612
Leonard Gartner, Director 100,000 133,333 233,333 5%
140 East 56th Street
New York, NY 10022
Richard Gerstner, Director - 33,333 33,333 1%
106 Saddle Hill Road
Stamford, CT 06903
All Directors and Executive Officers as a Group 123,536 1,480,131 1,603,667 28%
(1) Unless otherwise noted, all shares are beneficially owned and the sole voting and investment power is held by the
persons/entities indicated.
(2) Based upon the aggregate of all shares of Common Stock issued and outstanding as of March 31, 1997 in addition to shares
issuable upon exercise of options or warrants currently exercisable or becoming exercisable within 60 days followings the date
of this report and which are held by the individuals named on the table.
</TABLE>
THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE SIX (6) NOMINATED DIRECTORS
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors have selected Pannel Kerr Forster PC as the
Company's independent auditors for the fiscal year ended March 31,1997.
Representatives of Pannel Kerr Forster PC are expected to be present at the
Annual Meeting.
The affirmative vote of a majority of the outstanding voting shares of
the Company's Common Stock is required for the ratification of this selection.
THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
DEADLINE FOR SUBMITTING STOCKHOLDER PROPOSALS
Rules of the Securities and Exchange Commission require that any
proposal by a stockholder must be received by the Company for consideration at
the 1998 Annual Meeting of Stockholders no later than March 1, 1998 if any such
proposal is to be eligible for inclusion in the Company's Proxy materials for
its 1998 Annual Meeting. Under such rules the Company is not required to include
stockholder proposals in its proxy materials unless certain other conditions
specified in such rules are met.
OTHER MATTERS
Management of the Company is not aware of any other matters to be
presented for action at the Annual Meeting other than those mentioned in the
Notice of Annual Meeting of Stockholders and referred to in this proxy.
VOTING PROCEDURE
Under Delaware law, each holder of record is entitled to vote the
number of shares owned by the shareholder for any agenda item. There are no
cumulative voting rights for the shareholders of the Company.
The Company is not aware of any other agenda item to be added to the
agenda as it has not been informed by any stockholder of any request to do so.
There are no matters on the agenda which involve rights of appraisal of
a stockholder. The Company incorporates by reference all items and matters
contained in its Form 10-KSB for the Fiscal Year ended March 31, 1997 as filed
with the Securities and Exchange Commission in addition to Form 10-QSB and Form
8-K Reports as filed with the Commission.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DR. E. TED PRINCE
--------------------------------------
Dr. E. Ted Prince
Chairman and Chief Executive Officer
August 12, 1997
Westborough, MA
<PAGE>
- -------------
P R O X Y INSCI Corp
- ------------- TWO WESTBOROUGH BUSINESS PARK
WESTBOROUGH, MA 01581
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dr. E. Ted Prince, Leonard Gartner,
Francis X. Murphy, Richard T. Gerstner, Andre Daniel-Dreyfus and Mitchell Klein
as proxies each with the power to appoint his or her substitute and hereby
authorizes them to represent and to vote as designated below all shares of
Common Stock of INSCI Corp held on record by the undersigned on August 8, 1997
at the Annual Meeting of Stockholders to be held on October 7, 1997 at 11:00
a.m. at the executive offices of the Company located at Two Westborough Business
Park, Westborough, MA 01581 or any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] For all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(Except as marked to the for all nominees listed
contrary below) below
Dr. E. Ted Prince, Leonard Gartner, Francis X. Murphy, Richard T. Gerstner,
Andre Daniel-Dreyfus and Mitchell Klein
(Instruction: To withhold authority to vote for any individual nominee's
name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PANNEL KERR FORSTER PC. as the
independent public accountants of the Corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion the proxies are authorized to vote upon such other
further business as may properly come before the meeting. This proxy when
properly executed will be voted in the manner directed herein by the undersigned
stockholder. If no direction is provided, this proxy will be voted FOR Proposals
1 and 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: ________________________, 1997
______________________________________
Signature
______________________________________
Signature if held jointly
Please mark, sign, date and return
the proxy card promptly using the
enclosed envelope.
