<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 permitted by Rule 14a-6(e)(2)]
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240, 14a-11c or Section 240, 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):
[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:
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
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid: N/A
[ ] 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:
N/A
(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 SEPTEMBER 10, 1998
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 September 10, 1998, at 11:00 AM (the
"Meeting"), for the following purposes:
(1) To elect seven (7) Directors to serve for the ensuing year or
until their successors are elected and have been qualified.
(2) To ratify the appointment of Pannell Kerr Forster PC as the
independent public accountants for the Company's fiscal year
ended March 31, 1998.
(3) To ratify and approve the Board of Directors' resolution to
extend the expiration term of the non-qualified stock options
granted to three former members of the Board of Directors and to
current members of the Board and Executive Officers of the
Company from 90 days following termination of service or
departure from the Board or as Executive Officers to 24 months
from termination or departure.
(4) Such other business as may be properly brought before the meeting
or any adjournments thereof.
Only those shareholders who were shareholders of record at the close
of business on July 28, 1998 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 7, 1998 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 SEPTEMBER 10, 1998
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 September 10, 1998, 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 10,
1998. The Company's 1998 Annual Report to its stockholders on Form 10-KSB, filed
electronically (EDGAR System) with the Securities and Exchange Commission on
June 29, 1998, 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 July 28, 1998 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 July 28, 1998, there were
7,104,610 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 and the director nominee 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.
NAME CURRENT POSITION WITH COMPANY DIRECTOR SINCE
- ---- -------------------------------- --------------
DIRECTORS STANDING FOR ELECTION
Dr. E. Ted Prince Chief Executive Officer, Director 1995
Francis X. Murphy Director 1995
Andre Daniel-Dreyfus Director 1997
Thomas Farkas(1) Director 1998
Robert F. Little(1) Director 1998
Darryl R. Dobin(1) President, Director Nominee
John A. Lopiano Director Nominee
(1)Messrs. Farkas and Little were appointed as directors of the Company
in June 1998. Mr. Dobin was appointed as President in July, 1998.
Directors Standing for Election
Dr. E. Ted Prince, age 51, 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 and consulting companies. Dr. Prince
currently serves and has served 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.
Francis X. Murphy, age 50, 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.
Andre Daniel-Dreyfus, age 58, 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.
Thomas Farkas, age 77, was appointed as a Director of the Company in June,
1998. For the past five years, Mr. Farkas has been president of Dynamic
Controls, a company engaged in the avionics business. Mr. Farkas has many years
of experience in developing and growing a business involved in military
technology and controls systems. Mr. Farkas is a major shareholder in the
Company.
Robert F. Little, age 81, was appointed as a Director of the Company in
June, 1998. For the last five years, Mr. Little has been a private investor and
is a shareholder in the Company. He is a retired attorney who specialized in
civil litigation. Mr. Little has also been involved in real estate development
and construction for his own account. He has an AB degree from Princeton and an
LLB degree from Columbia Law School.
Darryl R. Dobin, age 52, joined the Company as President in July, 1998.
From April 1996 to July 1998, Mr. Dobin was the President of NEPS, Inc. a
wholly-owned subsidiary of the Moore Corp. From 1992 to 1996, Mr. Dobin had been
at Xerox Corp as Manager of the Marketing Partnership Group. Prior to Xerox, Mr.
Dobin spent twenty two years at IBM and held numerous technical, sales and
marketing positions. From 1988 to 1992, Mr. Dobin managed IBM's channel strategy
for the US Marketing organization. He holds a BS degree in Administration and
Management Science from Carnegie Mellon University.
John A. Lopiano, age 59, is currently a Senior Vice President at Xerox
Corp and President of the Production Systems Group. The Production Systems Group
has total revenue of approximately $5 billion and consists of Printing Systems
for centralized computer environments and Document Productions Systems for
publishing and low volume commercial printing. Mr. Lopiano has been with Xerox
for 8 years. Prior to joining Xerox, he worked at IBM Corporation for 25 years,
where his experience included 12 years in the field, 5 years in manufacturing
industry marketing, 5 years in product development, and 3 years in the document
image market development area. Mr. Lopiano graduated from the United States
Military Academy and later earned an MBA degree from New York University.
Directors Not Standing for Re-election
Leonard Gartner, age 56, Mr. Gartner served as a Director of the Company
from September 1995 to June 1998. Mr. Gartner has chosen not to stand for
re-election to the board. Mr. Gartner resigned from the Board as a result of a
disagreement with the Company's renewal and extension of the employment
agreement of E. Ted Prince, the Company's Chief Executive Officer.
Richard Gerstner, age 58, served as a Director of the Company from March
1996 to June 1998. Mr. Gerstner has chosen not to stand for re-election to the
board. Mr. Gerstner resigned from the Board as a result of a disagreement with
the Company's renewal and extension of the employment agreement of E. Ted
Prince, the Company's Chief Executive Officer.
Mitchell Klein, age 48, served as a Director of the Company from June 1997
to June 1998. Mr. Klein has chosen not to stand for re-election to the board.
Mr. Klein resigned from the Board as a result of a disagreement with the
Company's renewal and extension of the employment agreement of E. Ted Prince,
the Company's Chief Executive Officer.
Current Executive Officers of INSCI
In addition to Dr. Prince, the following INSCI employees are executive officers
of the Company.
John L. Gillis, age 45, is Executive Vice President of the INSCI and has
held senior management positions with the Company since joining as Vice
President Sales in November, 1990. Mr. Gillis has over nineteen years experience
in the information processing industry, serving from 1985 to 1990 as Manager of
National Accounts for Data General Corporation. Mr. Gillis began his career with
IBM in 1973 and was involved in sales and sales management at Exxon, CPT, EXCEL
and Data General.
Krishan Canekeratne, age 32, 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. Mr. Canekeratne is no
longer an officer and serves as a consultant to the Company.
Roger C. Kuhn, age 55, 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, 1998, there were eight 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 at least two non-employee directors. 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 1998.
The Compensation Committee
The Compensation Committee was established by the Board of Directors in
September 1995 and consists of at least two non-employee independent directors.
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 1998.
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, 1998 (the "Named Executives"). The
Company's compensation policies are discussed in "The Compensation Committee"
section contained herein.
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>
Dr. E. Ted Prince President and 1998 $200,000 - $32,147 (1) -
Chief Executive 1997 $200,000 - $31,596 (1) 75,000
Officer 1996 157,692 $100,000 72,983(1) 1,200,000
John L. Gillis Executive Vice 1998 175,000 85,025 9,000 (2)
President 1997 165,000 110,330 90,707 (2)
1996 150,447 55,000 54,539 (2) 350,000
* Krishan Canekeratne Senior Vice President 1998 144,000 93,891 6,000 (3) -
Development 1997 123,884 83,690 6,000 (3) -
1996 118,461 52,454 5,538 (3) 350,000
Roger Kuhn Vice President Finance 1998 135,000 11,666 6,000 (4) -
and 1997 82,212 36,250 3,923 (4) 100,000
Chief Financial Officer 1996 - - - -
*David Grace Acting Chief 1998 (5) - (5) -
Executive 1997 - - - -
Officer 1996 - - - 10,000
*John Steinkrauss Chief Financial Officer 1998 - - - -
Vice President Finance 1997 21,578 - 808 (6) -
& Administration 1996 123,536 11,000 18,615 (6) 125,000
</TABLE>
* Indicates resignation
** The Company does not have a restricted stock award program
(1)In fiscal year 1998, Dr. Prince was paid a $6,000 living allowance, $10,359
for an automobile lease, $2,315 for garage rental and $13,473 for apartment
rental. 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 Inc. a company wholly owned by Dr. Prince. 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 1998, Mr. Gillis received an automobile allowance of $9,000.
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. Additional information relative to Mr. Gillis' loan is discussed
herein under "Certain Relationships and Related Transactions".
(3)In fiscal years 1998 and 1997, Mr. Canekeratne was paid an automobile
allowance in the amount of $6,000. Other compensation for 1996 represents an
automobile allowance of $5,538.
(4)In fiscal year 1998 and 1997, Mr. Kuhn received an automobile allowance of
$6,000 and $3,923 respectively.
(5)Mr. Grace is a past Director and was Chief Executive Officer for an interim
period. Mr. Grace was not paid a salary.
(6)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.
Appointment of Officers and Directors
On June 18, 1998, the Board of Directors of the Company appointed Thomas
Farkas and Robert F. Little as members of the Board of Directors of the Company.
On July 27, 1998, the Board of Directors appointed Darryl R. Dobin as President
of the Company. Messrs. Farkas and Little and are serving as independent members
of the Board of Directors and have been nominated to stand for election to the
Board of Directors. Mr. Dobin joined the Company in July, 1998 as its President.
Option Grants during Fiscal Year 1998
The following table provides information concerning options granted to
officers and directors during the Fiscal Year ended March 31, 1998 and reflects
the potential value of such options assuming 5% and 10% annual stock
appreciation.
<TABLE>
<CAPTION>
Option Grants During Fiscal 1998
Percent of Potential Realizable Value at
Total Shares Assumed Annual Rates
Underlying of Stock Price Appreciation
Options for Option Term
Granted to Exercise Expiration
Name Number Employees in Price Date
Fiscal Year -------- ---------- 5% 10%
----------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Andre Daniel-Dreyfus 20,000 1.4% $2.25 October 7, 02 $12,400 $ 27,400
Andre Daniel-Dreyfus 100,000 7.2% $2.25 June 3, 02 $62,200 $137,400
Leonard Gartner 20,000 1.4% $2.25 October 7, 02 $12,400 $ 27,400
Richard Gerstner 20,000 1.4% $2.25 October 7, 02 $12,400 $ 27,400
Richard Gerstner 100,000 7.2% $2.25 July 30, 02 $62,400 $137,400
Mitchell Klein 20,000 1.4% $2.25 October 7, 02 $12,400 $ 27,400
Mitchell Klein 100,000 7.2% $2.25 June 4, 02 $62,400 $137,400
Francis Murphy 20,000 1.4% $2.25 October 7, 02 $12,400 $ 27,400
Roger Kuhn 25,000 1.8% $2.25 May 10, 07 $35,500 $ 89,750
Roger Kuhn 75,000 5.4% $2.25 April 11, 07 $106,200 $269,000
</TABLE>
Option Exercises and Holdings
The following table sets forth information concerning the exercise of
options during the last fiscal year and unexercised options held as of the end
of the fiscal year with respect to each of the Named Directors and Executives:
Aggregate Option Exercises In Last Fiscal Year
And Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Shares Underlying Options In-the-Money Options
Acquired Value At March 31, 1998 At March 31, 1998 (2)
On Exercise Realized
(#) ($) (1)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
E. Ted Prince - - 883,333 391,667 - -
Richard Gerstner - - 66,666 153,334 - -
Francis Murphy - - 199,466 320,534 - -
John Gillis - - 206,669 91,667 - -
Krishan Canekeratne - - 258,333 91,667 - -
Roger Kuhn - - 25,000 75,000 - -
Robert Oxenberg 25,000 $28,250 76,667 - - -
Leonard Gartner - - 106,667 53,333 - -
Mitchell Klein - - - 120,000 - -
Andre Daniel-Dreyfus - - - 120,000 - -
</TABLE>
(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, 1998 and the exercise price of the options.
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.
The following table summarizes the cash compensation paid to non-management
directors for the last completed fiscal year. Information related to option
grants for these directors is provided under the heading "Options Grants during
Fiscal Year 1998" contained herein.
Cash Compensation
-----------------------------------
Annual Consulting/
Retainer Meeting Other
Name Fees Fees Fees
- ----------------- -------- ---- -----------
Francis X. Murphy $72,000 -- $26,000
Leonard Gartner $72,000 -- $22,000
Richard Gerstner -- -- $11,500
Mitchell Klein -- -- $22,000
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, President and Chief Executive Officer. 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. As of June
18, 1998 the Company's Board of Directors resolved to extend Dr. Prince's
employment contract, with terms to be finalized during July, 1998.
The Company has employment agreements with its other executive officers,
which also includes annual incentive bonus 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 six 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
298,336 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 $135,000 and a base annual
incentive of $36,000 based on performance objectives. In addition, Mr. Kuhn was
granted 100,000 stock options upon entering into his agreement.
Additionally, the Company is currently finalizing the employment agreement
with Mr. Darryl R. Dobin to serve as President of the Company.
Directors and Other Stock Options
The Board of Directors adopted the Directors Option Plan (the Directors
Plan") in 1992 to make service on the Board more attractive to present and
prospective directors. The Directors 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, 1998 there were 205,000 Directors options outstanding and 795,000
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 Company has included the underlying shares in its
Form S-1 Registration Statement that has been declared effective by the
Securities and Exchange Commission on October 6, 1997.
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,
354,800 stock options had been granted as of March 31, 1998. 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 3,645,200 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, 1998, there were 1,055,583 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 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. During fiscal
1996 the Company established an allowance for loan loss as the underlying
collateral had minimal value. However, Mr. Gillis has been repaying this loan
through a surrender of a combination of stock options, salary and bonuses.
During fiscal 1998 and 1997, the loan was reduced by $16,119 and $55,860
respectively. Interest on the loan was $7,434 and $9,522 during fiscal 1998 and
1997 respectively. The outstanding loan balance as of March 31, 1998 is $71,640
and is offset by an allowance for loan losses of 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. E. Ted 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 May, 1997 the Company increased its payment to Perth Ventures
for this office to $3,300 per month based upon dedicated utilization of the
space for Company business. The Company terminated its use of this office and
reimbursement to Perth Ventures in March, 1998, upon expiration of Perth's lease
for this space. 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. In addition, during
fiscal 1998, ETVI was paid an additional $26,000 in connection with consulting
services performed for the Company on behalf of the Company's Executive
Committee. In October, 1995, 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. These options are only exercisable to the extent that
transactions 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 concurrent with the date of the completed transaction. The arrangement with
ETVI also provides that a portion of the stock options granted will vest upon
arranging strategic sales alliances for the Company and that ETVI will receive
2% of the revenues generated from these alliances. During fiscal 1998, ETVI had
50,000 options vest as the result of strategic alliances established. The fair
value of the 50,000 options vested were estimated to be approximately $20,000.
Amounts earned related to the 2% of revenues from strategic alliances in fiscal
1998 were $2,967. As the result of the Company acquiring certain assets and
business in fiscal 1997, ETVI received a success fee of $25,000 which was offset
against the retainer and had an additional 14,262 options vested. At March 31,
1998, the remaining unvested options were 267,201. Subsequent to March 31, 1998
as the result of establishing additional strategic alliances, 75,000 options
were vested.
The company engaged Gartner and Associates as financial consultants to
advise the Company. Mr. Leonard Gartner ("Mr. Gartner"), principal of Gartner
and Associates, is a former director of the Company. Gartner and Associates was
paid a monthly retainer of $6,000 plus expenses. In addition, during fiscal 1998
and 1997, Gartner and Associates was paid approximately $22,000 and $61,000
respectively in fees related to additional assignments for the preparation of
the Company's annual report and Form S-1 Registration Statement.
The Company has 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. Payments to TPL totaled $1,078,000 in fiscal 1998, 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 $487,000 in purchase orders for services to
be performed by TPL in fiscal 1999.
During fiscal 1998, Richard Gerstner ("Mr. Gerstner") a former director of
the Company was granted stock options to acquire 100,000 shares of the Company's
common stock at an exercise price equal to the current market price as of the
date granted. Subsequently, these options were re-priced to an exercise price of
$2.25 per share with the provision that these options can only be exercised in
the event that the Company's ten day trading price exceeds $3.38 per share.
These options are only exercisable based upon the completion of a distributor
agreement. None of these options have vested as of March 31, 1998. In addition,
Mr. Gerstner was paid fees in the amount of $11,500 for consulting work
performed for the Company during fiscal 1998.
In June, 1997, Andre Daniel-Dreyfus and Mitchell Klein joined the
Company's Board of Directors and each was granted 100,000 stock options vesting
over three years at $3.38 per share and $3.25 per share, respectively, the fair
market value at time of grant. In November, 1997 the options for these directors
were re-priced to $2.25 per share, the fair market value in November, 1997, with
the provision that these options can only be exercised in the event that the
Company's ten day trading price exceeds $3.38 per share.
In October, 1997, the Company's outside directors, Messrs.
Daniel-Dreyfus, Gartner, Gerstner, Klein and Murphy were each granted 20,000
stock options vesting over three years at $2.25 per share, the fair market value
at the time of grant, for their activities as members of the Company's
executive, compensation and audit committees. In addition, during fiscal 1997,
Mr. Gartner received a grant of 40,000 options at $4.06 per share in connection
with his assistance in the audit and compensation committees.
During fiscal 1998, Mitchell Capital, Inc., whose principal shareholder is
Mitchell Klein, a former director of the Company, was paid consulting fees in
the amount of $22,000 for work performed for the Company.
During fiscal 1998 and 1997, Terry Prince, the wife of the Company's Chief
Executive Officer, E. Ted Prince, was paid $5,200 and $7,460 respectively, for
services performed on behalf of the Company.
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, 1998 or any
representations from any officer, director or 10% shareholder of the Company,
other than Dr. Prince, Messrs. Gartner, Murphy, Dreyfus, Gillis, Canekeratne,
Kuhn 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, 1998, 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 Common 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>
Shares of Total % of Common
Common Options/ Beneficial Stock
Name of Beneficial Owner Stock Other Ownership Outstanding
- -------------------------------------------------- ----------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Information Management Technologies Corp. 486,032 - 486,032 9%
130 Cedar Street-4th Floor
New York, NY 10006
CEDE, Depository Trust Co. 2,205,087 - 2,205,087 42%
PO Box 20
New York, NY 10274
Thomas P. Farkas 375,653 1,321,309 1,696,962 26%
c/o Dynamic Controls
8 Nutmeg Road South
South Windsor, CT 06074
Dr. E. Ted Prince, CEO 18,180 893,667 911,847 15%
2 Westborough Business Park
Westborough, MA 01581
John L. Gillis, COO - 206,669 206,669 4%
2 Westborough Business Park
Westborough, MA 01581
Roger Kuhn, CFO - 25,000 25,000 -
2 Westborough Business Park
Westborough, MA 01581
Krishan Canekeratne, Senior Vice President 700 258,333 259,033 5%
2 Westborough Business Park
Westborough, MA 01581
Leonard Gartner, Director 100,000 106,667 206,667 4%
140 East 56th Street
New York, NY 10022
Francis X. Murphy, Director - 199,466 199,466 4%
2 Westborough Business Park
Westborough, MA 01581
Mitchell Klein, Director - - - -
33 Scott Avenue
Nashua, NH 03062
Andre Daniel-Dreyfus, Director 1,000 - - -
c/ Fechtor, Detwiler & Co., Inc.
225 Franklin Street
Boston, MA 02110
Richard Gerstner, Director - 66,666 66,666 1%
106 Saddle Hill Road
Stamford, CT 06903
All Directors and Executive Officers as a Group 119,880 1,756,468 1,876,348 27%
(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, 1998 in
addition to shares issuable upon exercise of options or warrants currently exercisable or becoming
exercisable within 60 days following the date of this report and which are held by the individuals
named on the table.
</TABLE>
PROPOSAL 1: THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF THE SEVEN (7) NOMINATED DIRECTORS
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors have selected Pannell Kerr Forster PC as the
Company's independent auditors for the fiscal year ended March 31,1998.
Representatives of Pannell 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
PROPOSAL 3: RATIFICATION OF THE BOARD OF DIRECTORS' RESOLUTION TO EXTEND THE
EXPIRATION TERM OF THE NON-QUALIFIED STOCK OPTIONS GRANTED TO THREE FORMER
MEMBERS OF THE BOARD OF DIRECTORS AND TO CURRENT MEMBERS Of THE BOARD AND
EXECUTIVE OFFICERS OF THE COMPANY FROM 90 DAYS FOLLOWING TERMINATION OF SERVICE
OR RESIGNATION FROM THE BOARD TO 24 MONTHS FROM TERMINATION OR
RESIGNATION
With respect to the third item on the Agenda, the Board of Directors of
the Company resolved to grant an extension of the exercise period from 90 days
to 24 months for all issued and outstanding vested stock options awarded to
three (3) former directors of the Company as well as to current directors and
executive officers. The agreement entered into by and between the Company and
each former director is subject to shareholder approval and ratification. The
specific agreements are as follows:
Richard Gerstner, a former Director, was granted immediate vesting of
20,000 stock options awarded to him as a non-employee Director for services
performed as a member of Company's Executive and Compensation Committees, at an
exercise price of $2.25 per share, for a period of 24 months or until June 18,
2000. Additionally, the agreement provides full vesting in 100,000 stock options
for service as a Member of the Board of Directors of the Company, exercisable at
$2.25 per share.
The exercise of the aggregate 120,000 stock options are further proposed
to be unrestricted as to market price and terms during the proposed extension of
the 24 month exercise period. The agreement further provides that the Company
will maintain a current effective Registration Statement for the underlying
shares with respect to the options on a cost-free basis. Additionally, the
agreement contains a provision wherein, in the event that Shareholders do not
ratify, adopt and confirm the Board's resolution concerning the 24 month
extension of the stock option from the current 90 days, then, and in that event,
the Company has agreed to pay to Mr. Gerstner the sum of $25,000 per annum for
an aggregate of $75,000 for three (3) years of service as compensation for
services rendered on behalf of the Company in serving as a Member of the Board
of Directors and as a Member of the Executive and Compensation Committees of the
Board.
Leonard Gartner a former Director and financial consultant to the Company,
was granted vesting of 20,000 stock options awarded to him as a non-employee
Director for services performed as a member of Company's Audit Committee, at an
exercise price of $2.25 per share, commencing June 17, 1998, the date of his
resignation as a Member of the Board of the Company. Mr. Gartner was further
awarded and is fully vested in 100,000 stock options for services as a Member of
the Board of Directors of the Company. Both the 20,000 options and 100,000
options are exercisable at $2.25 and $1.44 per share, respectively.
Additionally, Mr. Gartner is vested in an additional 40,000 options exercisable
at $4.06 per share.
The exercise of the aggregate 160,000 stock options are further proposed
to be unrestricted as to market price and terms during the proposed extension of
the 24 month exercise period. The Agreement further provides that the Company
will maintain a current effective Registration Statement for the underlying
shares with respect to the options on a cost-free basis. Additionally, the
Agreement contains a provision wherein, in the event that Shareholders do not
ratify, adopt and confirm the Board's resolution concerning the extension of the
stock options from the current 90 days , then, and in that event, the Company
has agreed to pay to Mr. Gartner the sum of $25,000 per annum for an aggregate
of $75,000 for his three (3) years of service as compensation for services
rendered on behalf of the Company in serving as a Member of the Board of
Directors and as a Member of the Audit Committee of the Board.
Mitchell Klein, a former Director and consultant to the Company, was
granted immediate vesting of 20,000 stock options awarded to him as a
non-employee Director for services performed as a member of Company's Executive
and Compensation Committees, at an exercise price of $2.25 per share.
Additionally, Mr. Klein was further awarded and is fully vested in 66,667 stock
options awarded to him for services as a Member of the Board of Directors of the
Company. The options are exercisable at $2.25 per share. Mr. Klein has served on
the Board for more than one (1) year and all of his Committee and two thirds of
his Director options were agreed to be accelerated to the end of the full
vesting period so that Mr. Klein would be vested in the aggregate of 86,667
options.
The exercise of all the aggregate of 86,667 stock options are further
proposed to be unrestricted as to market price and terms during the proposed
extension of the 24 month exercise period. The Agreement further provides that
the Company will maintain a current effective Registration Statement for the
underlying shares with respect to the options on a cost-free basis.
Additionally, the Agreement contains a further provision wherein, in the
event that Shareholders do not ratify, adopt and confirm the Board's resolution
concerning the extension of the stock option from the current 90-days, then, and
in that event, the Company has agreed to pay to Mr. Klein the sum of $25,000 per
annum for an aggregate of $37,500 for one and one-half years of service as
compensation for services rendered on behalf of the Company in serving as a
Member of the Board of Directors and as a Member of the Executive and
Compensation Committees of the Board.
Messrs. Gerstner, Gartner and Klein resigned from the Board as a result of
a disagreement with the Company's renewal and extension of the employment
agreement of E. Ted Prince, the Company's Chief Executive Officer.
The Board has also resolved to extend the expiration period of vested
stock options granted to all Directors and Executive Officers for a period of 24
months following their departure and/or resignation from the Company from the 90
days that is currently in effect. The 24 month extension of all vested options
granted to a Director or an Executive Officer is further subject to the
individual Director and/or Executive Officer not being discharged as a Director
or Executive Officer for cause. The stock option program for Directors was
previously ratified by Stockholders of the Company and are subject to all
accounting and tax regulations, as made and provided by the applicable Internal
Revenue Service regulations, and both Generally Accepted Accounting Principles
and Securities and Exchange Commission ("SEC")-SX accounting regulations, with
respect to the award and grant of stock options to Directors and Executive
Officers of the Company. The policy of the Company and its Board is only to
grant and award stock options at the fair market value as of the date of the
grant, and to provide for vesting of those options on the basis of one-third or
33-1/3% annually for each Director of the Company. The extension of the
expiration period from 90 days to 24 months was resolved by the Board in order
to provide for additional non-cash incentive compensation to Directors and
Executive Officers for their service and continued service to the Company in
lieu of Director's fees to be paid to Directors by the Company, or additional
compensation to be paid to Executive Officers of the Company.
THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION
OF DIRECTORS OPTION PLAN
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 1999
Annual Meeting of Stockholders no later than March 1, 1999 if any such proposal
is to be eligible for inclusion in the Company's Proxy materials for its 1999
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.
COMMON STOCK PERFORMANCE
As part of the executive compensation information presented in the Proxy
Statement, the Securities and Exchange Commission requires a five year
comparison of stock performance of the Company with the stock performance of
appropriate smaller companies. The Company has selected the NASDAQ Composite
Index (US) for the published industry index for stock performance comparison.
The chart reflects the NASDAQ index for a five year period. INSCI's initial
public offering was in April, 1994 and consisted of a unit of common stock and
warrant (INSCI Units). In December, 1995, the Company's securities were listed
separately, that is, INSCI Common Stock, and INSCI warrant.
Percent increase (decrease) Mar 94 Mar 95 Mar 96 Mar 97 Mar 98
from March, 1994:
INSCI Units -- -67% -- -- --
INSCI Common Stock -- -- -7% 2% -75%
INSCI Warrants -- -- 42% -17% --
Nasdaq Composite Index -- 11% 51% 68% 155%
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, 1998 as filed
with the Securities and Exchange Commission in addition to Form 10-QSB and Form
8-K Reports as filed with the Commission.
Dated August 7, 1998 BY ORDER OF THE BOARD OF DIRECTORS
Westborough, MA
/s/ DR. E. TED PRINCE
----------------------------------------
Dr. E. Ted Prince
Chairman and Chief Executive Officer
<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, Francis X. Murphy,
Andre Daniel-Dreyfus, Thomas Farkas and Robert F. Little 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 July 28, 1998 at the Annual Meeting of
Stockholders to be held on September 10, 1998 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 contrary below for all nominees listed below
Dr. E. Ted Prince, Francis X. Murphy, Andre Daniel-Dreyfus, Thomas Farkas,
Robert F. Little, Darryl R. Dobin and John A. Lopiano
(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
[ ] [ ] [ ]
3. PROPOSAL TO RATIFY AND APPROVE THE BOARD OF DIRECTORS' RESOLUTION TO EXTEND
THE EXPIRATION TERM OF THE NON-QUALIFIED STOCK OPTIONS granted to three former
members of the Board of Directors and to current members of the Board and
Executive Officers of the Company from 90 days following termination of service
or departure from the Board or as Executive Officers to 24 months from
termination or departure.
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:________________________, 1998
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
Please mark, sign, date and return
the proxy card promptly using the
enclosed envelope.
