<PAGE>
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(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
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
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INSCI Corp
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Two Westborough Business Park
Westborough, Massachusetts 01581
(508) 870-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 9, 1999
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 November 9, 1999, 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 approve an amendment to the Articles of Incorporation to change the
name of the Company to insci-statements.com,corp
(3) To ratify the appointment of Pannell Kerr Forster PC as the
independent public accountants for the Company's fiscal year ended
March 31, 1999.
(4) To ratify and approve the Board of Directors' resolution to increase
the authorized number of stock options under the Company's 1997 Equity
Incentive Plan from 3,000,000 shares to 4,000,000 shares
(5) 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 September 22, 1999 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.
September 22, 1999 BY ORDER OF THE BOARD OF DIRECTORS
Westborough, MA
/s/ DR. E. TED PRINCE
---------------------
Dr. E. Ted Prince
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
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INSCI Corp
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PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 9, 1999
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 November 9, 1999, 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 October 8,
1999. The Company's 1999 Annual Report to its stockholders on Form 10-KSB, filed
electronically (EDGAR System) with the Securities and Exchange Commission on
June 28, 1999, 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 September 22, 1999 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 September 20,
1999, there were 9,463,109 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. In accordance with 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.
CURRENT POSITION DIRECTOR
NAME WITH COMPANY SINCE
- ---- --------------------- -----
Dr. E. Ted Prince Chief Executive Officer,
Director 1995
Francis X. Murphy Director 1995
Robert Little Director 1998
Thomas Farkas Director 1998
Darryl R. Dobin President 1998
John A. Lopiano Director 1998
DIRECTORS STANDING FOR ELECTION
DR. E. TED PRINCE, age 52, 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 51, 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.
ROBERT F. LITTLE , age 82, 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.
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.
DARRYL R. DOBIN, age 53, joined the Company as President in July, 1998
and was elected as a Director in September, 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 60, was elected as a Director in September, 1998.
Mr. Lopiano is a private consultant and is retired from Xerox Corp where he
served as Senior Vice President and President of the Production Systems Group.
Mr. Lopiano had 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.
DIRECTOR NOT STANDING FOR RE-ELECTION
ANDRE DANIEL-DREYFUS, age 59, was appointed as a Director of the
Company in June, 1997. Mr. Dreyfus has chosen not to stand for re-election to
the Board. Mr. Dreyfus has no disagreements with the Company or its other
Directors.
CURRENT EXECUTIVE OFFICERS OF INSCI
In addition to Dr. Prince and Mr. Dobin, the following INSCI employees
are executive officers of the Company.
JOHN L. GILLIS, age 46, was Executive Vice President-Field Operations
for the Company until his resignation effective March 31, 1999. Mr. Gillis
served as President of the Company from July, 1994 through June, 1995. 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. He has
spent over twenty years in the information processing industry and is a
recognized expert in the design and implementation of integrated output
management systems for large enterprises. Mr. Gillis began his career at IBM in
1973 and was involved in sales and sales management at Exxon, CPT, EXCEL and
Data General.
ROGER C. KUHN, age 56, 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, 1999, there were fifteen
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 1999.
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 1999.
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, 1999 (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 Chief Executive 1999 $200,000 - $ 9,657 (1) 500,000
Officer 1998 $200,000 - $32,147 (1) -
1997 $200,000 - $31,596 (1) 75,000
DARRYL R. DOBIN President 1999 $114,423 65,000 250,000
*JOHN L. GILLIS Executive Vice 1999 195,980 115,416 56,834 (2) 41,000
President 1998 175,000 85,025 9,000 (2) -
1997 165,000 110,330 90,707 (2) -
ROGER KUHN Vice President Finance 1999 135,000 45,000 6,000 (3) 50,000
and 1998 135,000 11,666 6,000 (3) -
Chief Financial Officer 1997 82,212 36,250 3,923 (3) 100,000
* Indicates resignation
** The Company does not have a restricted stock award program
(1) In fiscal 1999, Dr. Prince was paid $9,657 for an automobile allowance. 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.
(2) In fiscal year 1999, Mr. Gillis received an automobile allowance of $9,000 and his loan balance in the amount of
$47,834 was canceled by the Company upon Mr. Gillis's resignation from the Company and in accordance with a
separation agreement between Mr. Gillis and the Company. 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.
Additional information relative to Mr. Gillis' loan is discussed herein under "Certain Relationships and Related
Transactions".
(3) In fiscal years 1999, 1998 and 1997, Mr. Kuhn received an automobile allowance of $6,000, $6,000 and $3,923
respectively.
</TABLE>
APPOINTMENT OF OFFICERS AND DIRECTORS
No new officers or directors have been appointed.
OPTION GRANTS DURING FISCAL YEAR 1999
The following table provides information concerning options granted to
officers and directors during the Fiscal Year ended March 31, 1999 and reflects
the potential value of such options assuming 5% and 10% annual stock
appreciation.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL SHARES POTENTIAL REALIZABLE VALUE AT
UNDERLYING ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE APPRECIATION
GRANTED TO FOR OPTION TERM
EMPLOYEES IN EXERCISE EXPIRATION ---------------------------
NAME NUMBER FISCAL YEAR PRICE DATE 5% 10%
- ---- ------ ----------- -------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Darryl R. Dobin 250,000 10.7% $0.92 Jul 27, 08 $44,600 $366,600
Thomas Farkas 100,000 4.3% $1.03 Jun 18, 03 $28,500 $ 62,900
Thomas Farkas 20,000 0.9% $0.93 Jul 16, 03 $ 5,100 $ 11,400
John Gillis 41,000 1.8% $0.93 Dec 31, 99 $ 0 $ 0
Roger C. Kuhn 100,000 4.3% $1.22 Aug 26, 08 $76,700 $194,400
Robert F. Little 20,000 0.9% $0.93 Jul 16, 03 $ 5,100 $ 11,400
Robert F. Little 100,000 4.3% $1.03 Jun 18, 03 $28,500 $ 62,900
Robert F. Little 20,000 0.9% $0.93 Jul 16, 03 $ 5,100 $ 11,400
John A. Lopiano 100,000 4.3% $1.09 Sep 10, 03 $30,100 $ 66,500
John A. Lopiano 20,000 0.9% $0.89 Oct 8, 03 $ 4,900 $ 10,900
Francis X. Murphy 100,000 4.3% $1.09 Sep 10, 03 $30,100 $ 66,500
Dr. E. Ted Prince 300,000 12.9% $1.75 Jan 15, 09 $30,200 $836,700
Dr. E. Ted Prince 200,000 8.6% $0.95 Jul 17, 08 $19,500 $302,800
</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, 1999 AT MARCH 31, 1999 (1)
ON EXERCISE REALIZED -------------------------------------------------------------
NAME # $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andre Daniel-Dreyfus - - 40,000 80,000 2,000 4,000
Darryl R. Dobin - - - 250,000 - 345,000
Thomas Farkas - - - 120,000 - 154,000
John Gillis - - 339,336 - 247,105 -
Roger C. Kuhn - - - 150,000 - 176,500
Robert F. Little - - - 120,000 - 154,400
John A. Lopiano - - - 120,000 - 149,200
Francis X. Murphy - - 339,466 280,534 155,583 123,339
Dr. E. Ted Prince - - 1,425,000 350,000 953,000 165,000
(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 March 31, 1999 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.
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 1999" contained herein.
CASH COMPENSATION
-----------------------------------
ANNUAL CONSULTING/
RETAINER MEETING OTHER
NAME FEES FEES FEES
- ----------------- -------- ---- -----------
Andre Daniel-Dreyfus -- -- --
Thomas Farkas -- -- --
Robert F. Little -- -- --
John A. Lopiano -- -- --
Francis X. Murphy $72,000 -- $39,000
<PAGE>
COMPENSATION PLANS:
EMPLOYMENT AGREEMENTS
During 1998 the Company's Compensation Committee recommended to the
Board of Directors that the employment agreement of Dr. E. Ted Prince ("Dr.
Prince") the Company's Chairman of the Board of Directors and Chief Executive
Officer should be amended to provide for an extension and increase in
compensation. The Board of Directors subsequently approved the proposed
amendment. Effective April 1, 1999, Dr. Prince's employment agreement provided
for an extension of the term of Dr. Prince's employment through September 30,
2001, and further provided for salary compensation at an annual rate of $250,000
per annum with an incentive bonus of up to 40% of base compensation based upon
performance targets established by the Board of Directors. Additionally, the
amendment provided for the immediate vesting of 200,000 stock options to
purchase 200,000 shares of Common Stock at $.95 per share. Further, an
additional 300,000 stock options were granted to Dr. Prince to purchase 300,000
shares at $1.75 per share vesting over a 2-year period. The stock options
granted to Dr. Prince are for a term of ten (10) years and expire April 1, 2009.
Additionally, the amendment also provided that the exercise period of stock
options previously granted to Dr. Prince of 950,000 options at $1.66 per share
and 250,000 options at $2.00 per share would be extended until June 16, 2005.
The Company has employment agreements with its other executive officers
which also include annual incentive bonuses based upon 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 month's salary and benefits. Exclusive of Dr.
Prince, key members of management have been granted stock options as part of
their compensation package.
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 receives 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 two years following the
date the optionee ceases to serve as a director of the Company with certain
exceptions. At March 31, 1999 there were 627,667 Directors options outstanding
and 373,333 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 meeting 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, 213,133 stock options had been granted and outstanding
as of March 31, 1999. 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 3,786,867 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 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, 1999, there were 2,415,164 options granted
under the 1997 Plan. The Company is seeking shareholder approval for an
additional 1,000,000 shares in the 1997 Equity Incentive Plan which would
increase stock options reserved under the Plan from 3,000,000 shares to
4,000,000 shares. 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 1997 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.
An S-8 Registration for 3,000,000 shares of underlying common stock
currently authorized under the Plan was filed with the Securities and Exchange
Commission on April 27, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April, 1994, the Company loaned John L. Gillis, the Company's former
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 had been repaying this loan
through a surrender of a combination of stock options, salary and bonuses.
During fiscal 1999 and 1998, the loan was repaid by $29,190 and $16,119
respectively. Interest on the loan was $5,384 and $7,434 during fiscal 1999 and
1998 respectively. The outstanding loan balance after fiscal 1999 payments was
$47,834, which was offset by an allowance for loan losses of the same amount.
The loan balance was cancelled by the Company on March 31, 1999, upon Mr.
Gillis's resignation from the Company and in accordance with a separation
agreement between Mr. Gillis and the Company.
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, is also a director of the Company.
ETVI is paid a monthly retainer of $6,000. In addition, during fiscal years 1999
and 1998, ETVI was paid an additional $39,000 and $26,000 respectively 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
1999, as the result of establishing strategic alliances, 125,000 options were
vested. The fair value of the 125,000 options vested were estimated to be
approximately $50,000. 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 during fiscal 1999 and 1998 were
$9,633 and $2,967, respectively. At March 31, 1999, remaining unvested options
outstanding totaled 167,201.
The Company had 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. During fiscal 1999, Gartner
and Associates was paid $18,000. During fiscal 1998, Gartner and Associates was
paid a monthly retainer of $6,000 per month and, in addition, approximately
$22,000 in fees related to additional assignments for the preparation of the
Company's annual report and Form S-1 Registration Statement.
The Company collectively has entered into an agreement with Technology
Providers (Ltd. of Sri Lanka and Incorporated of USA) ("TPL") under which TPL
will provide computer programming services for certain software products under
development and for selected customer application projects. Services rendered by
TPL totaled $1,369,000 in fiscal 1999 and $1,078,000 in fiscal 1998. TPL is
owned by family members of Mr. Krishan A. Canekeratne, a former Senior Vice
President of Development for the Company who resigned in fiscal 1999. Mr.
Canekeratne had no direct ownership interest in TPL during his employment with
the Company. In the opinion of management, the fees paid under this agreement
are at fair market value rates. The Company has issued approximately $1,114,000
in purchase orders for services to be performed by TPL in fiscal 2000. At March
31, 1999, amounts due to TPL approximated $460,000.
During fiscal 1998, Richard Gerstner ("Mr. Gerstner") a former director
of the Company was paid fees in the amount of $11,500 for consulting work
performed for the Company.
During fiscal 1999 and 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 $15,000 and $22,000, respectively, for
work performed for the Company.
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, 1999 or any
representations from any officer, director or 10% shareholder of the Company,
other than Dr. Prince, and Messrs. Dobin, Dreyfus, Farkas, Little, Lopiano,
Murphy and Kuhn. 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.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, to the best knowledge of the Company,
as of March 31, 1999, 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>
CEDE, Depository Trust Co. 4,188,054 -- 4,188,054 54%
PO Box 20
New York, NY 10274
Information Management Technologies Corp. 486,032 -- 486,032 6%
130 Cedar Street
New York, NY 10006
Andre Daniel-Dreyfus, Director 1,000 40,000 41,000 1%
c/o Fector, Detweiler & Co., Inc.
225 Franklin Street
Boston, MA 02110
Darryl R. Dobin, President 9,000 -- 9,000 0%
2 Westborough Business Park
Westborough, MA 01581
Thomas P. Farkas, Director 1,631,987 -- 1,631,987 17%
c/o Dynamic Controls
8 Nutmeg Road South
South Windsor, CT 06074
Roger Kuhn, CFO -- -- -- 0%
2 Westborough Business Park
Westborough, MA 01581
Robert L. Little, Director 137,315 -- 137,315 2%
c/o INSCI Corp
2 Westborough Business Park
Westborough, MA 01581
John A. Lopiano, Director 3,000 -- 3,000 0%
c/o INSCI Corp
2 Westborough Business Park
Westborough, MA 01581
Francis X. Murphy, Director -- 399,466 399,466 5%
c/o INSCI Corp
2 Westborough Business Park
Westborough, MA 01581
Dr. E. Ted Prince, CEO 37,787 1,400,000 1,437,787 16%
2 Westborough Business Park
Westborough, MA 01581
All Directors and Executive Officers as a Group 1,820,089 1,839,466 3,659,555 32%
(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, 1999 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>
PROPOSAL 1: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF THE SIX (6) NOMINATED DIRECTORS
PROPOSAL 2: AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE
THE CORPORATE NAME TO insci-statements.com, corp
On August 20, 1999, the Board of Directors approved the resolution to
change the name of INSCI Corp to insci-statements.com, corp, subject to approval
of the shareholders of the Company. The Board of Directors believe the name
change will more closely reflect the expanded focus of the Company and the
extension of the Company's business into the Electronic Commerce Market.
Specifically, the Company intends to setup a web portal to provide web-based
storage and management for commercial documents.
The Company based the proposed change of corporate name on potential
growth opportunities available to a web-based model of doing business. Many
supply chain systems are rapidly becoming web-based. In the transition,
companies are moving to digital documents and away from paper and microfiche
based storage. A key part of these digital documents are commercial transaction
documents chief amongst which are statements and invoices.
The Company believes that the name "insci-statements.com, corp" will
more accurately describe the diverse expertise, products and services that the
Company will offer.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE THE CORPORATE NAME
TO insci-statements.com, corp
PROPOSAL 3: 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 31,1999.
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 RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
PROPOSAL 4: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
AN INCREASE IN THE AUTHORIZED NUMBER OF OPTIONS UNDER THE COMPANY'S 1997 EQUITY
INCENTIVE PLAN FROM 3,000,000 TO 4,000,000 SHARES.
The Board of Directors has resolved to increase the authorized number
of stock options under the Company's 1997 Equity Incentive Plan from 3,000,000
to 4,000,000 option shares. The increase in the authorized shares available
under the 1997 Equity Incentive Plan is necessary for the continued granting of
equity incentive awards to employees in the form of incentive stock options,
non-qualified stock options, stock appreciation rights, stock appreciation
awards, restrictive stock awards, deferred stock awards, and other
performance-related or non-restricted stock awards. The Board of Directors
believe that the increase in authorized shares is necessary so that the Company
can continue 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 Board further believes that the
flexibility of the incentive awards provided for by the 1997 Equity Incentive
Plan will enhance the effectiveness and cost efficiency of the Company's
management incentive program and is in the best interest of shareholders.
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)
FROM MARCH 31, 1995: Mar 95 Dec 95 Mar 96 Mar 97 Mar 98 Mar 99
INSCI Units/Common 0% 50% 131% 100% -50% 28%
INSCI Warrants -- 0% 21% -17% -100% -100%
Nasdaq Composite Index 0% 14% 35% 49% 125% 201%
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, 1999 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 September 22, 1999 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,
Robert F. Little, Thomas Farkas, Darryl R. Dobin and John A. Lopiano 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 September 22, 1999 at the Annual
Meeting of Stockholders to be held on November 9, 1999 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, 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 AMEND THE ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE
COMPANY TO insci-statements.com, corp
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PANNELL KERR FORSTER PC as the
independent public accountants of the Corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" AN
INCREASE IN THE AUTHORIZED NUMBER OF OPTIONS UNDER THE COMPANY'S 1997 EQUITY
INCENTIVE PLAN FROM 3,000,000 TO 4,000,000 SHARES
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, 2, 3 and 4.
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:________________________, 1999
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
Please mark, sign, date and return
the proxy card promptly using the
enclosed envelope.
