<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))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
insci-statements.com, corp.
(Formerly 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:
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(2) Aggregate number of securities to which transaction applies:
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(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-STATEMENTS.COM, CORP.
--------------------------------------------------------------------------------
TWO WESTBOROUGH BUSINESS PARK
WESTBOROUGH, MASSACHUSETTS 01581
(508) 870-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 26, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
insci-statements.com, corp. (the "Company") will be held at the Company's
headquarters at Two Westborough Business Park, Westborough, MA 01581, on
September 26, 2000, at 11:00 AM (the "Meeting"), for the following purposes:
(1) To elect six (6) Directors to serve for the ensuing year or until their
successors are elected and have been qualified.
(2) To ratify the appointment of Arthur Andersen LLP as the independent
public accountants for the Company's fiscal year ended March 31, 2000.
(3) 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 4,000,000 shares to 7,000,000 shares.
(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 August 11, 2000 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.
July 27, 2000 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-STATEMENTS.COM, CORP.
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PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 26, 2000
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of
insci-statements.com, 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 26, 2000, 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, whether or not you attend in order to assure maximum
participation and to expedite the proceedings.
At the Annual Meeting, stockholders will be requested to act upon the
matters set forth in this Proxy Statement. If you are not present at the
meeting, your shares can be voted only when represented by proxy. The shares
represented by your proxy will be voted in accordance with your instructions if
the proxy is properly signed and returned to the Company before the Annual
Meeting. You may revoke your proxy at any time prior to its being voted at the
Annual Meeting by delivering a new duly executed proxy with a later date or by
delivering written notice of revocation to the Secretary of the Company prior to
the day of the Annual Meeting, or by appearing and voting in person at the
Annual Meeting. It is anticipated that this Proxy Statement and accompanying
proxy will first be mailed to the Company's stockholders on or about August 22,
2000. The Company's 2000 Annual Report to its stockholders on Form 10-KSB, filed
electronically (EDGAR System) with the Securities and Exchange Commission on
June 29, 2000, is also enclosed and should be read in conjunction with the
matters set forth herein. The expenses incidental to the preparation and mailing
of this proxy material are being paid by the Company. No solicitation is planned
beyond the mailing of this proxy material to stockholders.
Abstentions and broker non-votes will be counted toward determining whether
a quorum is present.
The principal executive offices of the Company are located at Two
Westborough Business Park, Westborough, MA 01581. The telephone number is (508)
870-4000.
OUTSTANDING SHARES AND VOTING RIGHTS
The only security entitled to vote at the Annual Meeting is the Company's
Common Stock. The Board of Directors, pursuant to the Bylaws of the Company has
fixed August 11, 2000 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 25, 2000, there were
15,794,042 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.
<PAGE>
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.
NAME CURRENT POSITION WITH COMPANY DIRECTOR SINCE
---- ----------------------------- --------------
Dr. E. Ted Prince Chief Executive Officer, Director 1995
Francis X. Murphy Director 1995
Robert F. Little Director 1998
John A. Lopiano Director 1998
Leonard S. Simon Director 1999
Yaron I. Eitan Director 2000
DIRECTORS STANDING FOR ELECTION
DR. E. TED PRINCE, age 53, 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 Masters and Ph.D. degree from Monash University in Australia.
FRANCIS X. MURPHY, age 52, was elected a Director of the Company in
September 1995. He is the founder of Emerging Technology Ventures, Inc. and has
served as President from its inception in September 1994. Previously, Mr. Murphy
served in executive management positions with various information technology
firms. He holds both a Bachelors of Arts and Masters of Business Administration
in Corporate Finance from Adelphi University.
ROBERT F. LITTLE, age 83, was appointed as a Director of the Company in June
1998. Mr. Little, a substantial shareholder in the Company, has been a private
investor for the last fifteen years. 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.
JOHN A. LOPIANO, age 61, 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 9 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. Mr. Lopiano currently serves as a director
for Neomedia, Corp.
LEONARD S. SIMON, PH.D., age 63, was appointed as a Director of the Company
in December 1999. Dr. Simon has been Vice Chairman of Charter One Financial,
Inc. since 1997. From 1984 until 1997, Dr Simon served as Chairman, President
and Chief Executive Officer of Rochester Community Savings Bank and its holding
company. Previously, Dr. Simon was Assistant, Associate and Full Professor of
Business Administration at the William E. Simon Graduate School of Management at
the University of Rochester in New York. He holds a Bachelor of Science degree
from MIT and Masters and Ph.D. degrees from Columbia University.
YARON I. EITAN, age 44, was appointed as a Director of the Company in June
2000. Mr. Eitan was the chairman of Lognet 2000, Inc., prior to its acquisition
by the Company in May 2000. Mr. Eitan is the founder, President and CEO of
Selway Partners LLC, an operating holding company that invests and advises
technology companies. His activities at Selway include the founding of Test
University, Inc. where he serves as CEO and chairman. Between 1984 and 1998, Mr.
Eitan was the founder, Chairman and CEO of Geotek Communications, Inc., and
served as chairman of Bogen Communications, Inc. and National Bank Three of the
United Kingdom. Subsequent to Mr. Eitan's departure in 1998, Geotek
Communications, Inc. filed a Chapter 11 petition under the Bankruptcy Act. Mr.
Eitan holds a M.B.A. from the Wharton School of Business of the University of
Pennsylvania.
DIRECTOR NOT STANDING FOR RE-ELECTION
THOMAS FARKAS, age 78, was appointed as a Director of the Company in June
1998. Mr. Farkas has chosen not to stand for re-election to the Board. Mr.
Farkas has no disagreements with the Company or its other Directors.
CURRENT EXECUTIVE OFFICERS OF INSCI
In addition to Dr. Prince, the following INSCI employees are executive
officers of the Company.
JOHN C. PEMBLE, age 57, joined the Company as President and Chief Operating
Officer on January 15, 2000. Mr. Pemble was President of Savoy Automation from
1998 to 1999 and was with Fechtor, Detwiler & Co., Inc. from 1996 to 1998. He
served as Executive Vice President of Robotic Vision Systems, Inc. from 1994 to
1996. Previously, he was involved with several high technology companies as CEO.
Mr. Pemble has a Bachelor of Science degree in Electrical Engineering from
Michigan State University.
ROGER C. KUHN, age 57, joined the Company and was appointed Vice President
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, 2000, there were fifteen meetings of
the Board of Directors, of which all Directors attended more than 75% of the
meetings. The Audit Committee had four regularly scheduled quarterly meetings
and three additional meetings, in conjunction with the change in the Company's
auditors, with full attendance by all members. The Compensation Committee met
six times with full attendance by all members.
THE AUDIT COMMITTEE
The Audit Committee was established by the Board of Directors in September
1995 and consists of at least two non-employee directors. Members of the Audit
Committee are Robert F. Little and Leonard S. Simon, both 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 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.
Members of the Compensation Committee are John A. Lopiano and Francis X. Murphy,
both non-employee 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 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 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, 2000 (the "Named Executives"). The
Company's compensation policies are discussed in "The Compensation Committee"
section contained herein.
<TABLE>
<CAPTION>
SUMMARY ANNUAL COMPENSATION TABLE
Annual Compensation Long term
------------------------------------------- Compensation
Other Options
Name Principal Position Year Salary Bonus Compensation Granted **
---- ------------------ ---- ------ ----- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Dr. E. Ted Prince Chief Executive Officer 2000 250,000 -- 8,636 (1) --
1999 200,000 -- 9,657 (1) 500,000
1998 200,000 -- 32,147 (1) --
*Darryl R. Dobin President * 2000 181,644 -- 3,923 (2) --
Chief Operating Officer 1999 114,423 65,000 -- 250,000
John C. Pemble President 2000 37,019 (3) -- -- 500,000
Chief Operating Officer
Roger C. Kuhn Chief Financial Officer 2000 150,000 46,000 6,231 (4) 25,000
Vice President Finance 1999 135,000 45,000 6,000 (4) 50,000
1998 135,000 11,666 6,000 (4) --
* Indicates resignation
** The Company does not have a restricted stock award program
(1) In fiscal 2000 and 1999, Dr. Prince was paid $8,636 and $9,657, respectively, 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.
(2) In fiscal year 2000, Mr. Dobin received an automobile allowance of $3,923.
(3) Mr. Pemble joined the Company in the 4th quarter of fiscal year 2000. Had he been employed as of the
beginning of the fiscal year, his salary would have been $175,000.
(4) In fiscal years 2000, 1999, and 1998, Mr. Kuhn received an automobile allowance of $6,231, $6,000, and
$6,000 respectively.
</TABLE>
APPOINTMENT OF OFFICERS AND DIRECTORS
-------------------------------------
On December 22, 1999, Mr. Daryl R. Dobin resigned from his position as
President and as a member of the Board of Directors. Mr. Dobin did not have a
disagreement with the Company or its other Directors.
On December 22, 1999, Leonard S. Simon was appointed to the Board of
Directors.
On December 28, 1999, Mr. John C. Pemble was appointed President and Chief
Operating Officer of the company.
On June 1, 2000, Yaron I. Eitan was appointed to the Board of Directors.
OPTION GRANTS DURING FISCAL YEAR 2000
-------------------------------------
The following table provides information concerning options granted to
officers and directors during the Fiscal Year ended March 31, 2000 and reflects
the potential value of such options assuming 5% and 10% annual stock
appreciation.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of
Total Shares Stock Price
Number Underlying Appreciation for
of Shares Options Granted Option Term
Underlying to Employees in Exercise Expiration ----------------------------
Name Options Fiscal Year Price Date 5% 10%
------------------- ---------- ---------------- -------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger C. Kuhn 25,000 1.3% $2.58 April 1, 09 $ 40,600 $ 102,800
John C. Pemble 500,000 26.0% $4.11 December 16, 09 $ 1,292,400 $ 3,275,100
Leonard S. Simon 100,000 5.2% $3.78 December 22, 04 $ 104,400 $ 230,800
Leonard S. Simon 20,000 1.0% $3.78 December 22, 04 $ 20,900 $ 46,200
</TABLE>
OPTION EXERCISES AND HOLDINGS
-----------------------------
The following table sets forth information concerning the exercise of
options during the last fiscal year and unexercised options held as of the end
of the fiscal year with respect to each of the Named Directors and Executives:
Aggregate Option Exercises In Last Fiscal Year And Fiscal Year End Option Values
<TABLE>
<CAPTION>
Shares Number of Shares Value of Unexercised
Acquired Value Underlying Options In-the-money Options
on Exercise Realized at March 31, 2000 at March 31, 2000 (1)
Name # $ Exercisable Unexercisable Exercisable Unexercisable
------------------- ----------- ---------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Thomas Farkas - - 40,000 80,000 199,467 398,933
Roger C. Kuhn 46,600 227,562 20,067 108,333 95,940 493,498
Robert F. Little 40,000 199,467 - 80,000 - 398,933
John A. Lopiano - - 40,000 80,000 197,733 395,467
Francis X. Murphy 50,000 253,000 329,466 240,534 1,306,048 972,648
John C. Pemble - - - 500,000 - 945,000
Dr. E. Ted Prince 116,000 585,800 1,484,000 175,000 6,297,200 693,750
Leonard S. Simon - - - 120,000 - 266,400
(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, 2000 and the exercise price of
the options.
</TABLE>
REMUNERATION OF 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 2000" contained herein.
Cash Compensation
--------------------------------------------------------
Annual Meeting Consulting/
Name Retainer Fees Fees Other Fees
Thomas Farkas - - -
Robert F. Little - - -
John A. Lopiano - - -
Francis X. Murphy $72,000 - -
Leonard S. Simon - - -
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. 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. Also,
board members who participate on committees are entitled to receive 20,000
options.
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, 2000 there were 661,667 Directors options outstanding and 224,999
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,
48,800 stock options had been granted and remain outstanding as of March 31,
2000. 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 3,593,269
authorized and reserved shares of common stock are no longer subject to issuance
under the 1992 Plan.
The Company, with shareholder approval, has reserved 4,000,000 shares for
future use under the 1997 Equity Incentive Plan (the 1997 Plan). These shares,
in effect, replace the shares remaining and not granted under the terminated
1992 Plan. As of March 31, 2000, there were 3,268,568 options issued and
outstanding and 146,811 options available for future grant under the 1997 Plan.
The Company is seeking shareholder approval for an additional 3,000,000 shares
in the 1997 Equity Incentive Plan which would increase stock options reserved
under the Plan from 4,000,000 to 7,000,000 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, the loan was repaid by $29,190 and interest on the loan was
$5,384. 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 canceled 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. Subsequent to fiscal 2000, ETVI was paid
$168,750 as part of the Lognet acquisition, which occurred in May 2000. During
fiscal year 1999, ETVI was paid an additional $39,000 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. In July 1998 an amendment to the stock option agreement revised
the exercise price for future vesting options to be based upon fair market value
at the time a strategic alliance or acquisition is completed. 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 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 2000, no options were vested.
During fiscal 1999, as the result of establishing strategic alliances, 125,000
options were vested. The fair value of those options was estimated to be
approximately $50,000. The amount earned related to the 2% of revenues from
strategic alliances during fiscal 1999 was $9,633. At March 31, 2000, remaining
unvested options outstanding totaling 167,201 were valued at $876,000 using the
Black-Scholes option pricing model.
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 2000 and
1999, Gartner and Associates was paid $0 and $18,000, respectively.
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 $1,116,404 in fiscal 2000 and $1,369,000 in fiscal 1999. 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 $700,000 in
purchase orders for services to be performed by TPL in fiscal 2000. Amounts due
to TPL approximated $240,000 at March 31, 2000.
During fiscal 2000 and 1999, Mitchell Capital, Inc., whose principal
shareholder is Mitchell Klein, a former director of the Company, was paid
consulting fees in the amount of $0 and $15,000, respectively, for work
performed for the Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in their ownership to the
Securities and Exchange Commission ("SEC"). Specific due dates have been
established by the SEC, and the Company is required to disclose in this Proxy
Statement any failure to file by those dates. Based upon (i) the copies of
section 16(a) reports that the Company received from such persons for their 2000
fiscal year transactions and (ii) the written representations received from one
or more of such persons that no annual Form 5 reports were required to be filed
for them for the 2000 fiscal year, the Company believes that there has been
compliance with all Section 16(a) filing requirements applicable to such
officers, directors and ten-percent beneficial owners for such fiscal year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, to the best knowledge of the Company, as of
March 31, 2000, 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.
Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the persons/entities indicated.
Based upon the aggregate of all shares of Common Stock issued and
outstanding as of March 31, 2000 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>
<CAPTION>
% of
Shares of Total Common
Common Options/ Beneficial Stock
Name of Beneficial Owner Stock Other Ownership Outstanding
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
CEDE, Depository Trust Co. 9,293,068 - 9,293,068 72%
PO Box 20
New York, NY 10274
Tailwind Fund Ltd 820,936 280,936(1) 1,101,872 8%
Windermere House
303 East Bay Street
British Virgin Isles
John C. Pemble, President - - - 0%
c/o insci-statements.com, corp.
2 Westborough Business Park
Westborough, MA 01581
Yaron I. Eitan, Director - - - 0%
c/o insci-statements.com, corp.
2 Westborough Business Park
Westborough, MA 01581
Thomas Farkas, Director 1,861,628 80,000 1,941,628 15%
c/o Dynamic Controls
8 Nutmeg Road South
South Windsor, CT 06074
Roger Kuhn, CFO - 86,733 86,733 1%
2 Westborough Business Park
Westborough, MA 01581
Robert L. Little, Director 189,815 73,297 263,112 2%
c/o insci-statements.com, corp.
2 Westborough Business Park
Westborough, MA 01581
John A. Lopiano, Director 3,000 73,334 76,334 1%
c/o insci-statements.com, corp.
2 Westborough Business Park
Westborough, MA 01581
Francis X. Murphy, Director - 369,467 369,467 3%
c/o insci-statements.com, corp.
2 Westborough Business Park
Westborough, MA 01581
Dr. E. Ted Prince, CEO 22,787 1,509,000 1,531,787 11%
2 Westborough Business Park
Westborough, MA 01581
Leonard S. Simon, Director 162,470 - 162,470 1%
c/o insci-statements.com, corp.
2 Westborough Business Park
Westborough, MA 01581
All Current Directors and Executive Officers as a Group 2,239,700 2,191,831 4,431,531 29%
(1) Represents 280,686 warrants to purchase 280,686 shares of Common Stock at $4.30 per share until December 18, 2004.
</TABLE>
<PAGE>
PROPOSAL 1: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF THE SIX (6) NOMINATED DIRECTORS
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ended March 31, 2000. Representatives
of Arthur Andersen LLP 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.
Effective March 13, 2000, by a resolution of our Board of Directors, we
resolved to change auditing firms from Pannell Kerr Forster PC to Arthur
Andersen LLP. There were no disagreements with our former auditors in any matter
of accounting principles, practices, financial statement disclosures or auditing
scope or procedures in connection with audits by our former auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
PROPOSAL 3: 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 4,000,000 TO 7,000,000 SHARES.
The Board of Directors has resolved to increase the authorized number of
stock options under the Company's 1997 Equity Incentive Plan from 4,000,000 to
7,000,000 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 swards, deferred stock awards, and other
performance-related or non-restricted stock awards. The Board of Directors
believes 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 2001
Annual Meeting of Stockholders no later than March 27, 2001 if any such proposal
is to be eligible for inclusion in the Company's Proxy materials for its 2001
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.
<TABLE>
<S> <C> <C> <C> <C> <C>
PERCENT INCREASE (DECREASE) FROM MARCH 31, 1995 Mar 96 Mar 97 Mar 98 Mar 99 Mar-00
INSCI Common Shares 131% 100% -50% 28% 200%
Nasdaq Composite Index 35% 49% 125% 201% 460%
</TABLE>
The Stock Price Performance Graph above shall not be deemed incorporated by
reference by a general statement incorporating by reference the Proxy Statement
into any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that insci-statements.com specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
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 that 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, 2000 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 July 27, 2000 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-statements.com, corp
PROXY 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, John A. Lopiano, Leonard S. Simon, and Yaron I. Eitan 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-statements.com, corp held on record by the undersigned on
August 11, 2000 at the Annual Meeting of Stockholders to be held on September
26, 2000 at 11:00 a.m. at the executive offices of the Company located at Two
Westborough Business Park, Westborough, MA 01581, or any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY to vote
(Except as marked to the for all nominees
contrary below) listed below
Dr. E. Ted Prince, Francis X. Murphy, John A. Lopiano, Leonard S. Simon
and Yaron I Eitan.
(Instruction: To withhold authority to vote for any individual nominee's
name in the space provided below.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP as the independent
public accountants of the Corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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 4,000,000 TO 7,000,000 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 and 3.
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:_________________________, 2000
_____________________________________
Signature
_____________________________________
Signature if held jointly
Please mark, sign, date and return
the proxy card promptly using the
enclosed envelope.
