<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
ELITE INFORMATION GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[COMPANY LOGO]
Elite Information Group, Inc.
5100 West Goldleaf Circle, Suite 100
Los Angeles, California 90056
(323) 642-5200
May 19, 2000
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Stockholders' Meeting on Thursday, June 22, 2000, at 2:00 p.m.,
Pacific Daylight Saving Time. The meeting will be held at the Marriott Marina
Beach, located at 4100 Admiralty Way in Marina del Rey, California.
The attached notice and proxy statement describe the business to be
conducted at the meeting, including the approval of the Company's 2000 Employee
Stock Purchase Plan, approval of an amendment to the Company's 1996 Stock Option
Plan and the election of two directors. The Board of Directors has nominated
Christopher K. Poole and Roger Noall for reelection to the Board.
The Board of Directors appreciates and encourages stockholder
participation. Whether or not you plan to attend the meeting, it is important
that your shares be represented. Please take a moment now to sign, date and
return your proxy in the envelope provided even if you plan to be present. We
hope you will be able to attend the meeting.
Sincerely,
[INSERT SIGNATURE]
Christopher K. Poole
Chairman and Chief Executive Officer
<PAGE> 3
ELITE INFORMATION GROUP, INC.
5100 West Goldleaf Circle, Suite 100
Los Angeles, California 90056
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TIME....................... 2:00 p.m., PDT, on Thursday, June 22, 2000
PLACE...................... Marriott Marina Beach
4100 Admiralty Way
Marina del Rey, California 90292
ITEMS OF BUSINESS.......... 1. To elect two directors.
2. To approve the Company's 2000 Employee Stock
Purchase Plan.
3. To approve an amendment to the Company's 1996
Stock Option Plan.
4. To ratify the appointment of
PricewaterhouseCoopers LLP as independent
accountants of the Company for the year ending
December 31, 2000.
RECORD DATE................ Holders of Common Stock of record at the close of
business on May 5, 2000 are entitled to vote at the
meeting. A list of stockholders entitled to vote at
the meeting may be examined at the executive
offices of the Company, 5100 West Goldleaf Circle,
Suite 100, Los Angeles, California 90056, during
the 10-day period preceding the meeting.
ANNUAL REPORT.............. The annual report of the Company for the year ended
December 31, 1999 accompanies this proxy statement.
IMPORTANT.................. In order to avoid additional soliciting expense to
the Company, please SIGN, DATE and MAIL your proxy
PROMPTLY in the return envelope provided, even if
you plan to attend the meeting. If you attend the
meeting and wish to vote your shares in person,
arrangements will be made for you to do so.
By order of the Board of Directors:
[INSERT SIGNATURE]
Steven O. Todd
Secretary
Los Angeles, California
May 19, 2000
<PAGE> 4
ELITE INFORMATION GROUP, INC.
5100 West Goldleaf Circle, Suite 100
Los Angeles, California 90056
PROXY STATEMENT
Annual Meeting of Stockholders
June 22, 2000
VOTING SECURITIES, PRINCIPAL HOLDERS AND PROXIES
The accompanying proxy is solicited by the Board of Directors of Elite
Information Group, Inc. (the "Company") in connection with the Annual Meeting of
Stockholders of the Company to be held at the Marriott Marina Beach, located at
4100 Admiralty Way, Marina del Rey, California at 2:00 p.m., Pacific Daylight
Saving Time, on Thursday, June 22, 2000. The accompanying form of proxy is for
use at the Annual Meeting if a stockholder does not attend the meeting in person
or wishes to vote shares by proxy even if the stockholder plans to attend the
meeting. All valid proxies received prior to the meeting will be voted. Unless
marked to the contrary, such proxies will be voted in favor of Proposals 1, 2, 3
and 4 listed in the accompanying proxy card and described below. If any other
business is brought before the meeting, the proxies will be voted in accordance
with the judgment of the persons voting the proxies.
A stockholder who has given a proxy may revoke it at any time prior to
such proxy being voted at the meeting by filing with the Secretary of the
Company an instrument revoking it or a duly executed proxy bearing a later date
or by attending the meeting and giving notice of such revocation. Attendance at
the meeting does not by itself constitute revocation of a proxy. This proxy
statement and the accompanying form of proxy are being mailed to the Company's
stockholders on or about May 19, 2000.
The only class of voting securities of the Company is its common stock,
$.01 par value per share (the "Common Stock"). Only stockholders of record as of
the close of business on May 5, 2000 will be entitled to notice of and to vote
at the Annual Meeting of Stockholders or any adjournment thereof. On May 5, 2000
there were outstanding 9,415,473 shares of Common Stock. Each share of Common
Stock is entitled to one vote.
A majority of the shares entitled to vote at the Annual Meeting,
represented in person or by proxy, will constitute a quorum. Abstentions and
shares held by brokers with respect to which voting authority is withheld by
beneficial owners ("broker non-votes") will be counted for the purpose of
determining the presence or absence of a quorum. Directors of the Company are
elected by a plurality vote, and votes may either be cast in favor of nominees
or withheld. Withheld votes will be excluded entirely from the vote and will
have no effect on the outcome of the election. Approval of the remaining
proposals requires the affirmative vote of the holders of a majority of the
shares present or represented by proxy and entitled to vote. On any such
proposal, an abstention will have the same effect as a negative vote but,
because shares held by brokers will not be considered entitled to vote on
matters as to which the brokers withhold authority, a broker non-vote will have
no effect on the vote.
The Company will bear the cost of preparing the proxy statement and of
soliciting proxies in the accompanying form. The Company expects to solicit
proxies primarily by mail and through the use of Georgeson & Company, Inc., a
professional proxy solicitation firm. Proxies may be solicited personally and by
telephone by directors, officers and employees of the Company without additional
compensation and by employees of the professional proxy solicitation firm. The
Company anticipates that fees and expenses to be paid to the professional proxy
solicitation firm will be approximately $7,000. Arrangements also may be made
with brokerage firms or other custodians, nominees and fiduciaries who hold the
voting securities of record for the forwarding of solicitation material to the
beneficial owners thereof. The Company will reimburse such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection therewith.
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The following table sets forth the names and addresses of, and the
number and percentage of shares beneficially owned by, the persons known to the
Company to beneficially own five percent or more of the Company's outstanding
Common Stock:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
------------------- -------------------- -----------
PAR Investment Partners, L.P. 1,220,300(2) 13.0%
One Financial Center
Suite 1600
Boston, Massachusetts 02111
Dimensional Fund Advisors Inc. 729,100(3) 7.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Tudor Investment Corporation, et al. 578,150(4) 6.1%
600 Steamboat Road
Greenwich, Connecticut 06830
- ----------------
(1) Based on the shares of Common Stock outstanding as of May 5, 2000.
(2) Based upon an amended Schedule 13D of PAR Capital Management, Inc.
("PAR Capital"), PAR Group, L.P. ("PAR Group") and PAR Investment
Partners, L.P. ("PIP"), dated on or about May 17, 2000. Arthur G. Epker
III, a director of the Company, is a Vice President of PAR Capital and
may be deemed to be a controlling stockholder of PAR Capital. PAR
Capital is a Delaware S Corporation and the sole general partner of PAR
Group. The principal business of PAR Capital is to act as the general
partner of PAR Group. PAR Group is a Delaware limited partnership and
the sole general partner of PIP. The principal business of PAR Group is
that of a private investment partnership engaging in the purchase and
sale of securities for its own account. PIP is a Delaware limited
partnership and its principal business is that of a private investment
partnership engaging in the purchase and sale of securities for its own
account. Mr. Epker disclaims beneficial ownership of such shares. In
addition, Mr. Epker's wife owns 10,000 shares of the Company's Common
Stock through an Individual Retirement Account. Mr. Epker also
disclaims beneficial ownership of such shares.
(3) Based upon a Schedule 13G or amendment thereto of Dimensional Fund
Advisors Inc. dated February 4, 2000 filed by Dimensional Fund Advisors
Inc. on behalf of certain clients for which it is the investment
manager.
(4) Based upon Amendment No. 2 to Schedule 13G of Tudor Investment
Corporation, Paul Tudor Jones II, Tudor BVI Futures, Ltd., Tudor
Proprietary Trading, L.L.C., The Altar Rock Fund L.P., The Raptor
Global Portfolio Ltd., The Raptor Global Fund L.P., The Raptor Global
Fund Ltd. and The Upper Mill Capital Appreciation Fund Ltd. dated
February 11, 2000. These parties report shared voting and dispositive
power over various numbers of shares up to 578,150. Tudor Investment
Corporation disclaims beneficial ownership of certain shares it may be
deemed to own by virtue of its position as general partner of, or
investment advisor to, certain entities listed above. Mr. Jones
disclaims beneficial ownership of certain shares he may be deemed to
beneficially own by virtue of his position as controlling shareholder
or equity holder of certain entities listed above.
2
<PAGE> 6
PROPOSAL 1
ELECTION OF TWO DIRECTORS
The Company's Bylaws provide that the number of directors constituting
the Company's Board of Directors shall be not less than three nor more than
twenty-one as may be fixed or changed by the Board of Directors or by the
stockholders from time to time. The Board of Directors has fixed the number of
directors constituting the Board at six. The Board of Directors is divided into
three classes, as nearly equal in number as possible, each of whose members
serve for a staggered three-year term. The term of Christopher K. Poole and
Roger Noall, the two directors designated Class I directors, will expire at the
current annual meeting of stockholders, and Messrs. Poole and Noall will stand
for reelection. The term of the two Class II directors will expire at the annual
meeting to be held in 2001 and the term of the two Class III directors will
expire at the annual meeting to be held in 2002.
NOMINEES
The Board of Directors has nominated Christopher K. Poole and Roger
Noall for election as directors. If elected, Messrs. Poole and Noall would serve
three-year terms as members of Class I. Directors will be elected by a plurality
of the votes cast. Although the Board of Directors does not expect that any of
the nominees named will be unavailable for election, in the event that any
nominee is unable to serve as a director, it is intended that the shares
represented by proxies will be voted for the election of such substitute as the
Board of Directors may nominate. If Messrs. Poole and Noall are elected, the
three classes would be as follows:
CLASS I CLASS II CLASS III
------- -------- ---------
Christopher K. Poole David A. Finley Alan Rich
Roger Noall William G. Seymour Arthur G. Epker III
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
NOMINEES. PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE
NOMINEES TO THE BOARD OF DIRECTORS.
DIRECTORS
Listed below are the names of the two nominees to serve as directors
and the other four directors who will be continuing in office following the
Annual Meeting, together with their ages, their principal occupations during the
past five years, any other directorships they hold with companies having
securities registered under the Securities Exchange Act of 1934 and the years
during which their current consecutive terms as directors of the Company first
commenced (including terms with the Company's predecessor).
3
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE AND CERTAIN OTHER DIRECTORSHIPS SINCE
------------ ------------------------------- --------
<S> <C> <C>
Arthur G. Epker III, Age 37 Vice President, PAR Capital Management, Inc. (1) 1999
David A. Finley, Age 67 President, Investment Management Partners II, Inc. (2) 1990
Director: Intelligroup, Inc. and Hungarian Telephone & Cable
Corp.
Roger Noall, Age 65 Executive, KeyCorp (Retired) (3) 1996
Director: Alleghany Corp. and The Victory Funds
Christopher K. Poole, Age 42 Chairman of the Board and Chief Executive Officer, Elite 1999
Information Group, Inc. (4)
Alan Rich, Age 45 Co-Founder and non-employee Chairman, Elite Information 1999
Systems, Inc. (5)
William G. Seymour, Age 58 President, PRIMax Properties, LLC (6) 1981
Director: First Trust Bank
</TABLE>
- --------------
(1) Mr. Epker has been a Vice President of PAR Capital, an investment
management firm, since July 1992.
(2) Mr. Finley served as Executive Vice President and Chief Financial
Officer of the Company from January 1996 to July 1997 and again served
as Executive Vice President on a temporary basis from mid-September
1997 to mid-November 1997. Prior to joining the Company, Mr. Finley
worked as a consultant and was a private investor and the President,
since 1992, of Investment Management Partners II, Inc., an investment
management firm. Since leaving the Company, Mr. Finley has resumed his
work as a consultant, private investor and President of Investment
Management Partners, Inc. From September 1986 until his retirement in
August 1989, Mr. Finley served as Treasurer of International Business
Machines Corporation.
(3) Mr. Noall has been an Executive of KeyCorp from January 1, 1997 until
his retirement in February 2000. Mr. Noall served as Senior Executive
Vice President and Chief Administrative Officer of KeyCorp from March
1, 1994 to December 31, 1996 and served in the additional positions of
General Counsel and Secretary of KeyCorp from September 1, 1995 to June
14, 1996. Prior to March 1, 1994, Mr. Noall served as Vice Chairman of
the Board and Chief Administrative Officer of Society Corporation
(banking). Mr. Noall joined KeyCorp on that date upon the merger of
Society Corporation and KeyCorp.
(4) Mr. Poole has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since May 1999. Since May 1995, Mr.
Poole has served as Chief Operating Officer of Elite Information
Systems, Inc., the wholly owned operating subsidiary of the Company
("EIS"), and since January 1998 as the President of EIS. From November
1989 to May 1995, Mr. Poole was the Director of Technology and
Executive Director of Latham & Watkins, a law firm based in Los
Angeles, California.
(5) Mr. Rich is the co-founder of EIS and served as President of EIS from
January 1982 until his retirement in December 1997. Since that time,
Mr. Rich has continued to provide services as consultant to EIS and as
a director and non-employee Chairman of EIS.
(6) Mr. Seymour has served as President of PRIMax Properties, LLC, a real
estate investment company, since his retirement from the Company in
January 1995. Mr. Seymour, a co-founder of the Company, has served as
Vice Chairman of the Board from June 1993 to May 1999 and from
September 1985 to November 1989 and as Secretary of the Company from
June 1993 to May 1996. Mr. Seymour also served as Senior Vice President
of the Company from November 1989 to June 1993.
4
<PAGE> 8
Upon adoption of the 1996 Stock Option Plan on June 25, 1996, each
director who was not also an officer or employee of the Company on that date
(i.e., Mr. Seymour) was granted options to purchase 5,000 shares of Common Stock
at the fair market value of the shares on that date. In addition, under the 1996
Stock Option Plan, any individual who is not an employee or officer of the
Company and who is first elected to the Board after June 25, 1996 (i.e., Messrs.
Epker, Noall, Rich) receives upon the date of such election an option to
purchase 5,000 shares of Common Stock at an exercise price per share equal to
the fair market value of a share of Common Stock on such date. The 1996 Stock
Option Plan further provides for awards of options to purchase 5,000 shares of
Common Stock on each January 5 after the adoption of the 1996 Stock Option Plan
if the average daily value of a share of Common Stock for the immediately
preceding month of December is ten percent greater than the average daily value
of a share for the month of December of the immediately prior year. In the event
that the total exercise price of such options for 5,000 shares exceeds $100,000,
the number of shares purchasable under such option are to be reduced so that the
total exercise price of the options granted equals $100,000, and in the event
that the number of shares authorized under the 1996 Stock Option Plan are not
sufficient to make an award to outside directors, options for the remaining
authorized shares shall be awarded pro rata to the outside directors then
entitled to receive such options. These option awards were granted for 1999
based on the increase in the average daily value of the Company's Common Stock
for December 1999 over December 1998. All such options awarded to non-employee
directors under the 1996 Stock Option Plan become exercisable over a period of
four years, with 20% of the total award being exercisable on the date of grant
and an additional 20% becoming exercisable on each of the next four
anniversaries.
There are no family relationships among the executive officers or
directors of the Company.
The Company pays its non-employee directors a fee of $2,500 for each
directors' meeting attended and pays an additional $500 fee to each member of
the Audit Committee and Compensation Committee for each committee meeting
attended. Additional committees are established from time to time, and in 1999
members of such committees were paid a total of $8,100 in fees. No fee is paid
for telephonic meetings. Directors are reimbursed for travel and lodging
expenses. The Board of Directors held 15 meetings during the year ended December
31, 1999 (9 of which were telephonic meetings) and took action on 2 occasions by
unanimous written consent. During 1999, no director attended less than 75% of
the total number of meetings of the Board of Directors during his term of
service or the total number of meetings of committees of the Board on which he
served, except for G. Lawrence McTavish, who attended 71.4% of such meetings and
Roger Noall, who attended 73.3% of such meetings. In addition to regular and
special meetings of the Board, the Board confers with management by conference
call from time to time.
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
the Company and administers the Company's 1996 Stock Option Plan and the 2000
Employee Stock Purchase Plan; and an Audit Committee, which reviews the results
and scope of the audit and other services provided by the Company's independent
accountants. Messrs. Noall and Epker currently serve on the Compensation
Committee. Messrs. Rich, Finley and Seymour currently serve on the Audit
Committee. During the year ended December 31, 1999, the Compensation Committee
met 5 times and the Audit Committee met 4 times. The Board of Directors
nominates candidates for election to the Board, but directors who are members of
management abstain from participation in the nominating process. The Company's
bylaws prescribe the procedure a stockholder must follow to make nominations for
director candidates, as described below under "Stockholders' Proposals."
5
<PAGE> 9
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of May 5, 2000 the beneficial
ownership of Common Stock by each director and executive officer named in the
Summary Compensation Table below, and by all directors and executive officers as
a group.
SHARES BENEFICIALLY OWNED (1)
---------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ------ -------
Arthur G. Epker III 1,233,300(2) 13.1%
David A. Finley 83,000 *
Roger Noall 25,000 *
Christopher K. Poole 125,168 1.3%
Alan Rich 3,000 *
William G. Seymour 440,622 4.7%
Barry D. Emerson 8,334 *
All directors and executive officers
as a group (7 in number) 1,918,424 19.9%
- ----------------
*Less than one percent.
(1) Included in the calculation of the number of shares of Common Stock
owned beneficially are the following shares subject to options
exercisable as of May 5, 2000 or within 60 days thereafter by the
directors and executive officers indicated and by all the directors and
executive officers as a group: Mr. Epker - 3,000 shares; Mr. Finley -
81,000 shares; Mr. Noall - 5,000 shares; Mr. Poole - 120,168; Mr. Rich
- 3,000 shares; Mr. Seymour - 6,000 shares; Mr. Emerson 8,334 shares;
and members of the group (including the foregoing) - 226,502 shares.
(2) Mr. Epker is a Vice President of PAR Capital Management, Inc. ("PAR
Capital") and may be deemed to be a controlling stockholder of PAR
Capital. Accordingly, Mr. Epker may be deemed to beneficially own
shares of Common Stock owned by Par Capital, PAR Group, L.P. ("PAR
Group") and PAR Investment Partners, L.P. ("PIP"). See footnote (2) to
the table under "Principal Stockholders." PAR Capital is a Delaware S
Corporation and the sole general partner of PAR Group. The principal
business of PAR Capital is to act as the general partner of PAR Group.
PAR Group is a Delaware limited partnership and the sole general
partner of PIP. The principal business of PAR Group is that of a
private investment partnership engaging in the purchase and sale of
securities for its own account. PIP is a Delaware limited partnership
and its principal business is that of a private investment partnership
engaging in the purchase and sale of securities for its own account.
Mr. Epker disclaims beneficial ownership of such shares. In addition,
Mr. Epker's wife owns 10,000 shares of the Company's Common Stocks
through an Individual Retirement Account. Mr. Epker also disclaims
beneficial ownership of such shares.
6
<PAGE> 10
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
As of the date of this Proxy Statement, Messrs. Poole and Emerson are
the only executive officers of the Company. The following table sets forth a
summary, for fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997, of the compensation of the Messrs. Poole and Emerson, and
former executive officers Alan C.
Stanford and Keith B. Hall, who ceased to be employed by the Company in May
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Alan C. Stanford 1999 125,675 0 0 821,410(1)
Former Chairman and Chief 1998 300,000 100,000(2) 0 2,639(3)
Executive Officer 1997 300,000 100,000(2) 0 4,750(3)
Keith B. Hall(4) 1999 93,750 0 0 552,048(5)
Former Vice President and Chief 1998 200,000 25,000 0 5,000(3)
Financial Officer 1997 100,000 25,000 20,000 147,022(6)
Christopher K. Poole 1999 300,000 100,000 150,000 5,000(3)
Chairman and 1998 270,000 50,000 0 5,000(3)
Chief Executive Offer 1997 240,000 77,500 0 4,750(3)
Barry D. Emerson(7) 1999 93,333 40,000 25,000 2,100(3)
Vice President, Chief Financial
Officer and Treasurer
</TABLE>
- ------------
(1) Represents matching contributions made by the Company under the
Company's 401(k) retirement plan ($1,795), payments by the Company for
unused vacation ($19,615) and a severance payment made upon termination
of employment ($800,000).
(2) A portion of Mr. Stanford's 1997 and 1998 bonus was in lieu of
reimbursement of certain travel expenses incurred by Mr. Stanford.
(3) Represents matching contributions made by the Company under the
Company's 401(k) retirement plan.
(4) Mr. Hall's employment with the Company commenced July 1, 1997.
(5) Represents matching contributions made by the Company under the
Company's 401(k) retirement plan ($3,875), payments by the Company for
unused vacation ($16,875), a severance payment made upon termination of
employment ($500,000) and post-employment consulting fees and expense
reimbursement ($31,298).
(6) Includes $80,000, adjusted for potential tax liability to $144,772,
paid to Mr. Hall for relocation expenses, and matching contributions
made by the Company under the Company's 401(k) retirement plan.
(7) Mr. Emerson's employment with the Company commenced in May 1999.
7
<PAGE> 11
The following table sets forth certain information concerning grants of
stock options during the year ended December 31, 1999 to the executive officers
named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS GRANTED PRICE APPRECIATION FOR
OPTIONS TO EXERCISE OR OPTION TERM
GRANTED EMPLOYEES BASE PRICE EXPIRATION ----------------------
NAME (#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- --------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alan C. Stanford -- -- -- --
Keith B. Hall -- -- -- --
Christopher K. Poole 50,000(1) 100% $ 2.34 1/19/09 $ 73,500 $186,500
100,000(2) 100% $ 5.50 5/26/09 $346,000 $877,000
Barry D. Emerson 25,000(2) 100% $ 5.50 5/26/09 $ 86,500 $219,250
</TABLE>
- ----------------
(1) These options were 100% vested as of January 19, 2000.
(2) These options are currently 100% unvested, and will vest over 3 years
in annual installments of 33.33% beginning on May 26, 2000.
8
<PAGE> 12
The following table sets forth certain information with regard to stock
options held at December 31, 1999 by each of the executive officers named in the
Summary Compensation Table. No options were exercised by any of the executive
officers named in the Summary Compensation Table in the year ended December 31,
1999.
FY-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF SECURITIES UNDERLYING
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------- ----------------------------
Alan C. Stanford 0/0(2) 0/0
Keith B. Hall 0/0 0/0
Christopher K. Poole 61,830/129,166 208,650/727,650
Barry D. Emerson 0/25,000 0/129,750
- ----------------
(1) The fair market value used for computations in this column was $10.69,
which was the closing market price of the Company's Common Stock on
December 31, 1999.
(2) On January 15, 1999, Mr. Stanford voluntarily forfeited all 400,000 of
his stock options.
EMPLOYMENT, SEVERANCE AND CONSULTING AGREEMENTS
Christopher K. Poole. On June 1, 1999, the Company entered into an
employment agreement with Christopher K. Poole with respect to his service as
the Chief Executive Officer of the Company. The employment agreement has an
initial term of one year and renews automatically for successive one-year terms.
The Company may terminate Mr. Poole's employment under the agreement at any
time. If the Company terminates Mr. Poole's employment other than for "cause"
(as defined in the agreement) or as the result of his permanent disability, the
Company is obligated to pay to him (following receipt of a general release from
Mr. Poole) a lump-sum amount equal to twice his then-current annual salary (less
applicable tax withholding). If such termination occurs as a result of a change
in control of the Company or within two years after a change in control, the
Company is also obligated to pay to Mr. Poole the larger of the proportionate
amount of any incentive bonus that would otherwise be payable to Mr. Poole for
the year in which his employment is terminated (based on the number of days
elapsed in the year) or the amount of his incentive bonus paid for the prior
year.
If the Company terminates Mr. Poole's employment as the result of his
permanent disability, the Company is obligated to pay to him (following receipt
of a general release from Mr. Poole) a lump-sum amount equal to his then-current
annual salary (less applicable tax withholding) plus the proportionate amount of
any incentive bonus that would otherwise be payable to Mr. Poole for the year in
which his employment is terminated (based on the number of days elapsed in the
year). In addition, the Company would be obligated to pay for continued health
insurance coverage for Mr. Poole and his dependents for 18 months following a
termination of his employment for disability.
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The agreement provides that if Mr. Poole resigns due to a failure of
the Company to comply with a material term of the agreement that is not cured
within 30 days after written notice of the failure is given to the Company, the
Company is obligated to pay to him (following receipt of a general release from
Mr. Poole) a lump-sum amount equal to twice his then-current annual salary (less
applicable tax withholding). In addition, if Mr. Poole resigns following a
change in control of the Company accompanied by a termination of his authority
equivalent to that of the senior executive of the Company, the Company is
obligated to pay to him (following receipt of a general release from Mr. Poole)
a lump-sum amount equal to twice his then-current annual salary (less applicable
tax withholding) plus the larger of the proportionate amount of any incentive
bonus that would otherwise be payable to him for the year in which his
employment is terminated (based on the number of days elapsed in the year) or
the amount of his incentive bonus paid for the prior year. Mr. Poole shall be
considered to be the senior executive of the Company if the Company is acquired
and becomes part of another entity if Mr. Poole remains the senior executive of
the division, subsidiary or entity carrying on the business conducted by the
Company prior to the acquisition. In addition, if Mr. Poole resigns for any
reason after the first anniversary of a change in control but before the second
anniversary of a change in control, the Company is obligated to pay to him
(following receipt of a general release from Mr. Poole) a lump-sum amount equal
to one and one-half times his then-current annual salary (less applicable tax
withholding).
The agreement provides that Mr. Poole's annual salary will be $300,000,
which may be increased with the approval of the Compensation Committee of the
Company's Board of Directors. In addition, Mr. Poole is to be eligible to
participate in incentive bonuses and other compensation plans approved by the
Board of Directors or the Compensation Committee. Mr. Poole is also eligible to
participate in other benefit plans made available to employees and to receive
perquisites as agreed upon from time to time. Mr. Poole is also entitled to four
weeks paid vacation. If he elects to purchase long-term care or personal
disability insurance coverage, the Company shall pay one half of the premiums,
up to $2,500 per year, and the Company will continue to pay such amount
following termination of Mr. Poole's employment due to permanent disability so
long as he continues COBRA insurance coverage.
The agreement contains a covenant restricting Mr. Poole from engaging
in certain activities in competition with the Company for a period of one year
following the termination of his employment for any reason. The covenant applies
to competitive activities in the United States, Canada and the United Kingdom.
In addition, Mr. Poole agreed not to disclose confidential and proprietary
information of the Company without the Company's consent and to return copies of
any such information in his possession upon the termination of his employment.
Barry D. Emerson. On May 10, 1999, the Company entered into a severance
agreement with Barry D. Emerson in connection with Mr. Emerson's employment as
the Company's Chief Financial Officer. Pursuant to the agreement, Mr. Emerson is
employed "at will" by the Company and may be terminated at any time for any
reason. If the Company terminates Mr. Emerson's employment other than for
"cause" (as defined in the agreement), the Company is obligated to pay to him
(following receipt of a general release from Mr. Emerson) a lump-sum amount
equal to his then-current annual salary (currently $140,000), (less applicable
tax withholding). In addition, the Company would be obligated to pay for
continued health insurance coverage for Mr. Emerson for 12 months following a
termination of his employment.
Alan C. Stanford. Mr. Stanford's employment as Chief Executive Officer
of the Company terminated in May 1999. Prior to that time, Mr. Stanford was
employed pursuant to an amended and restated employment agreement dated January
15, 1999. Under the terms of the employment agreement, upon Mr. Stanford's
resignation for "good reason" (as defined), which resignation occurred in
connection with the sale of the Company's CRM business in May 1999, Mr. Stanford
became entitled to a severance payment equal to two times his most recent annual
base salary and bonus. Pursuant to this provision, Mr. Stanford received a lump
sum severance payment of $800,000, plus reimbursement of $19,615 for unused
vacation time. The employment agreement requires Mr. Stanford to refrain from
certain activities in competition with the Company for a period of two years
following the termination of his employment.
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<PAGE> 14
Keith B. Hall. Mr. Hall's employment as Chief Financial Officer of the
Company was terminated in May 1999. Prior to that time, Mr. Hall was employed
pursuant to an employment agreement dated May 29, 1997, as supplemented by a
letter agreement dated February 18, 1999. Under the terms of the letter
agreement, upon the sale of the CRM business in May 1999, Mr. Hall exercised an
option to resign his employment in exchange for a severance payment equal to two
times his most recent annual base salary and bonus. Pursuant to this provision,
Mr. Hall received a lump sum severance payment of $500,000, plus reimbursement
of $16,875 for unused vacation time. Mr. Hall's employment agreement requires
him to refrain from certain activities in competition with the Company for a
period of two years following the termination of his employment. Following the
termination of his employment in May 1999, Mr. Hall performed certain consulting
services for the Company for which he was paid a total of $31,298 in fees and
expense reimbursement.
Alan Rich. Since his retirement as President of EIS on December 31,
1997, Mr. Rich has provided EIS with consulting services as an independent
contractor pursuant to a Retirement and Post-Employment Agreement dated May 20,
1997 between Mr. Rich and EIS. Pursuant to this agreement, Mr. Rich is obligated
to provide such consulting services as requested by EIS from time to time
through December 31, 2000, unless Mr. Rich terminates the agreement upon 30 days
written notice. EIS pays Mr. Rich an annual fee of $100,000 in consideration of
such services. In addition, the agreement contains covenants restricting Mr.
Rich from engaging in certain activities in competition with EIS from the date
of the agreement until December 31, 2000. In exchange for these covenants not to
compete, EIS is obligated to pay Mr. Rich a total of $300,000, payable in 6
equal installments bi-annually. Under the agreement, Mr. Rich also has agreed
not to disclose confidential and proprietary information of EIS. Pursuant to the
agreement, EIS paid Mr. Rich a total of $200,000 in 1999.
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<PAGE> 15
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return for five fiscal years through the end of the most recent fiscal year,
December 31, 1999, assuming the investment on December 31, 1994, of $100 in
Common Stock, along with the cumulative total returns of a broad-based equity
market index -- the Center for Research in Securities Prices (CRSP) Total Return
Index for the Nasdaq Stock Market (U.S. Companies) -- and of a published
industry peer index -- the CRSP Nasdaq Computer & Data Processing Services Index
- -- over the same period assuming the investment on December 31, 1994, of $100 in
securities that are the components of these indices.
[CHART]
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Nasdaq U.S. 100 141 174 213 300 542
Peer 100 152 188 231 412 871
Company 100 75 48 44 10 49
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executive officers generally
are made by the Compensation Committee of the Board. Set forth below is a report
of the Board's Compensation Committee addressing the Company's compensation
policies for 1999 for its executive officers.
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<PAGE> 16
OBJECTIVES AND POLICIES
Over the past year, the Committee's policy in compensating executive
officers has been to align the interests of the executives with the strategic
goals established by the Board of Directors and to ensure that compensation and
benefits are at levels that enable the Company to retain the executives it
needs. Consistent with these objectives, it has been the policy of the Committee
to make a portion of executive compensation dependent upon corporate
performance, including the success of the Company in meeting its financial
goals, with a portion being linked to overall corporate results.
The Committee also believes it is essential that the Committee retain
the flexibility to evaluate not only the performance of the individual executive
officer in furthering the Company's strategic goals and the Company's
performance as a whole, but also the overall performance of the individual
executive officer and all circumstances and challenges facing the Company and
the respective executive officer. Consequently, the Committee relies on
subjective evaluation rather than objective formulas in setting and adjusting
the base salary of the Chief Executive Officer and the other executive officers
and in awarding bonuses and other incentive compensation.
BASE SALARIES; OPTIONS; AND ANNUAL BONUSES
In determining 1999 bonuses, the Committee used its subjective
assessment of the overall contribution of the individual executive officer in
terms of the objective goals established by the Board for the performance of the
Company as a whole.
Mr. Poole is currently employed pursuant to an employment agreement
that established his minimum level of salary for 1999 at $300,000, subject to
increases upon approval by the Compensation Committee. Mr. Emerson is employed
"at will" by the Company, and his 1999 base salary of $140,000, as a new
employee, was established by the Compensation Committee based upon his past
experience and demonstrated qualifications. The Committee established a target
bonus of $100,000 for Mr. Poole for 1999, and Mr. Emerson's offer letter
provided that he was eligible to receive a target bonus of $40,000 for 1999.
Mr. Poole received a grant of 50,000 options in January 1999, while he
was President of Elite Information Systems, Inc., a subsidiary of the Company.
This grant was one of a number of grants awarded to the officers and key
employees of the Company during the Company's search for a buyer for its
Charlotte-based CRM business unit. One of the purposes of these grants was to
encourage key personnel to remain with the Company through the search period.
Mr. Poole received an additional grant of 100,000 options upon becoming Chairman
and Chief Executive Officer of the Company upon the sale of the CRM business
unit to SAIC in May 1999. The Company also awarded options to Mr. Emerson to
purchase 25,000 shares of Common Stock upon his employment as Chief Financial
Officer of the Company in May 1999. The Company typically grants options to new
officers and key employees of the Company.
In determining the bonus to be awarded to Mr. Poole for 1999, the
Committee compared the Company's actual 1999 performance to its 1999 financial
goals and assessed Mr. Poole's contribution to such performance. The Company met
or exceeded its 1999 goals for both revenues and earnings. Accordingly, after
considering these factors, the Committee awarded Mr. Poole the maximum target
bonus of $100,000. Based on similar criteria, and on Mr. Emerson's outstanding
efforts relating to, and culminating in, the Company's entry into a merger
agreement with Solution 6 Holdings Limited in December 1999, Mr. Emerson was
awarded the maximum target bonus of $40,000 for 1999.
TAX POLICY
Section 162(m) of the Internal Revenue Code limits deductions for
certain executive compensation in excess of $1 million. Certain types of
compensation, including compensation pursuant to stock option plans, are
deductible only if performance criteria are specified in detail and are
contingent on stockholder approval of the compensation arrangement. The
Committee also anticipates that certain
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<PAGE> 17
option awards may be made as incentive stock options for which the Company
generally would not be able to claim a deduction for compensation expense. In
addition, compensation expense arising under option awards made from January
1996 to February 1998 during the terms of service of William G. Seymour and
Robert J. Levenson on the Committee may not qualify for the exemption from
Section 162(m) due to Mr. Seymour's prior service as an officer of the Company
and the level of transactions between Mr. Levenson's employer, First Data Corp.,
and the Company. While the Committee will consider deductibility under Section
162(m) with respect to future compensation arrangements with executive officers,
deductibility will not be the sole factor used in ascertaining appropriate
levels or modes of compensation. Since corporate objectives may not always be
consistent with the requirements for full deductibility, it is conceivable that
the Company may authorize compensation arrangements under which payments may not
be deductible under Section 162(m). The Committee believes that due to the level
of current salary and maximum cash bonus compensation of its executive officers,
and anticipated levels of future stock option awards, the Company will be able
to claim full deductibility of amounts paid under existing executive
compensation arrangements to the extent otherwise permitted by law.
For the Compensation Committee:
Roger Noall
Arthur G. Epker III
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Executive officers, directors and greater than ten percent shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the year ended
December 31, 1999, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent beneficial owners
were complied with, except that one initial ownership report, and one report
with respect to one transaction, were filed late by Mr. Poole.
PROPOSAL 2
APPROVAL OF THE 2000 EMPLOYEE STOCK PURCHASE PLAN
On May 1, 2000, the Board of Directors of Company adopted the 2000
Employee Stock Purchase Plan (the "Stock Purchase Plan"), effective July 1,
2000, to replace the Company's 1995 Employee Stock Purchase Plan, which expired
on December 31, 1999. The Stock Purchase Plan is intended to encourage employee
participation in the ownership of the Company by offering eligible employees of
the Company and its designated subsidiaries an opportunity to purchase Common
Stock of the Company at a discount through payroll deductions. The Board of
Directors believes that employee participation and ownership is to the combined
benefit of the employee, the Company and its participating subsidiaries and the
Company's stockholders. Accordingly, the Board of Directors unanimously adopted,
and proposes that the stockholders approve, the Stock Purchase Plan. Stockholder
approval is required to qualify the Stock Purchase Plan for treatment as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
(the "Code"), and the Stock Purchase Plan will not be effective unless
stockholder approval is obtained.
The Stock Purchase Plan is set forth as Exhibit A attached hereto, and
the description of the Stock Purchase Plan contained herein is qualified in its
entirety by reference to such Exhibit A. Under
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<PAGE> 18
the Stock Purchase Plan, eligible employees of the Company and its designated
subsidiaries may participate by electing to have payroll deductions made in an
amount not less than 1% nor more than 10% of the employee's compensation,
provided that the Fair Market Value (defined generally as the closing price of
the Common Stock on the NASDAQ National Market System as of the last business
day for which prices are available prior to the beginning of each quarterly
"Option Period") purchased in any year may not exceed $25,000. All regular
employees of the Company and its designated subsidiaries whose most recent date
of hire is on or before the 15th day of the month preceding the beginning of an
Option Period, who are actively employed on the first day of an Option Period
and who are customarily scheduled to work at least 20 hours per week are
eligible to participate in the Stock Purchase Plan during such Option Period.
However, any beneficial owner of 5% or more of the Common Stock is not eligible
to participate.
Eligible employees may elect to participate by delivering a completed
request form to the Company's Human Resources Department prior to established
deadlines. At the end of each Option Period, each participant's payroll
deductions are applied to acquire Common Stock at a price equal to 85% of the
closing price of the Common Stock on the NASDAQ National Market System on either
the first day or the last day (or the nearest prior trading day) of the Option
Period, whichever is lower.
Options granted under the Stock Purchase Plan are not transferable or
assignable by any participant other than by will or the laws of descent and
distribution. Options are exercisable during a participant's lifetime only by
the participant. In the event of a participant's death, the participant's
account balance not yet applied to purchase Common Stock will, upon written
timely notice, be distributed to the participant's beneficiary or, in the
absence of such notice, be applied to the purchase of Common Stock for that
Option Period.
As soon as practical after the end of each Option Period, the
administrator of the Stock Purchase Plan will cause Common Stock certificates
representing the number of whole shares purchased for each participant to be
issued to a brokerage account established by the administrator in the name of
the beneficiary. None of the rights or privileges of a stockholder of the
Company will exist with respect to the Common Stock purchased under the Stock
Purchase Plan unless and until shares of Common Stock have been issued by the
Company and either the participant has become the beneficial owner of the Common
Stock on the records of the brokerage firm or the participant has become the
record owner of the Common Stock. The granting of an option with respect to the
sale and delivery of Common Stock under the Stock Purchase Plan is subject to
the Company's effecting any required listing, registration or qualification of
the shares subject to options on any applicable securities exchange or under
federal or state law, and the obtaining of any necessary governmental consents
or approvals.
Employees may voluntarily withdraw from participation in the Stock
Purchase Plan by electing, within specified advanced notice periods, to
completely discontinue payroll deductions and requesting a return of all payroll
deductions not yet applied to purchase Common Stock. An employee's participation
also will cease upon termination of employment for reasons other than
retirement, disability or death, or otherwise if an employee no longer qualifies
as an eligible employee. Upon any withdrawal from participation, all payroll
deductions not applied to purchase Common Stock will be returned to the employee
as soon practicable.
The number of shares of Common Stock reserved for purchase under the
Stock Purchase Plan is 1,000,000, subject to an adjustment as a result of a
change in the Company's capital structure. Such reserved shares may be made
available by the Company from either authorized and unissued shares or treasury
shares.
The Stock Purchase Plan is administered by a committee composed of
members of the Company's Board of Directors not eligible to participate in the
Stock Purchase Plan, which initially will be the Compensation Committee. The
Compensation Committee has the authority to make, adopt, construe and enforce
rules not inconsistent with the Stock Purchase Plan, to interpret the Stock
Purchase Plan, to prescribe the contents of all forms and documents required in
connection with the Stock Purchase Plan and to amend, modify or terminate the
Stock Purchase Plan. No amendment or
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<PAGE> 19
modification may, however, unless required by law, affect rights or obligations
previously granted. In addition, no amendment or modification to the Stock
Purchase Plan may be effected without stockholder approval (if such approval is
required by applicable law or exchange act rules), to materially (a) affect
participant eligibility requirements, (b) increase the number of shares of
Common Stock available under the Stock Purchase Plan or (c) increase the
benefits to participants.
FEDERAL INCOME TAX CONSIDERATIONS
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code, and it is intended
to comply with the provisions of Sections 421 and 424 of the Code as well.
Under the Code as currently in effect, there are no federal income tax
consequences in connection with the acquisition of Common Stock pursuant to the
Stock Purchase Plan until the year in which the participant sells or otherwise
disposes of the shares, or, if earlier, the year in which the participant dies.
If the shares are sold or otherwise disposed of prior to a participant's death,
then the income tax consequences will depend upon whether or not the shares are
sold within two years after the last business day (the "Date of Grant") of the
applicable quarterly Option Period in which such shares were purchased.
If the shares are sold or disposed of more than two years after the
applicable Date of Grant, then the participant will recognize ordinary income in
an amount equal to the lesser of (i) 15% of the fair market value of the shares
on the applicable Date of Grant or (ii) the amount by which the fair market
value of the shares at the time of such sale or disposition exceeds the amount
paid for the shares, and the Company will not be entitled to any income tax
deduction. If the shares are sold or otherwise disposed of within two years
after the applicable Date of Grant, a participant will generally recognize
ordinary income in the amount by which the fair market value of the shares on
the Date of Grant exceeds the amount paid for the shares, and the Company will
be entitled to a corresponding income tax deduction.
In the event of the death of a participant prior to a sale or other
disposition of the shares (whether or not within two years after the applicable
Date of Grant), a participant will be subject to ordinary income tax in an
amount equal to the lesser of (i) 15% of the fair market value of the shares on
the applicable Date of Grant, or (ii) the amount, if any, by which the fair
market value of the shares as of the date of death exceeds the amount actually
paid for the shares.
In any case, the participant may also have a capital gain or loss
(long-term or short-term depending upon the length of time the shares were held)
in an amount equal to the difference between the amount realized upon the sale
and the participant's adjusted tax basis in the shares (the amount paid for the
shares plus the amount of ordinary income which the participant must recognize
at the time of the sale or other disposition).
The affirmative vote of a majority of the outstanding shares of Common
Stock present in person or represented by Proxy at the Annual Meeting and
entitled to vote is required to approve the Stock Purchase Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE 2000 EMPLOYEE STOCK PURCHASE PLAN. PROXIES, UNLESS INDICATED TO
THE CONTRARY, WILL BE VOTED "FOR" APPROVAL OF THE 2000 EMPLOYEE STOCK PURCHASE
PLAN.
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PROPOSAL 3
AMENDMENT OF THE COMPANY'S 1996 STOCK OPTION PLAN
The Board of Directors has approved an amendment to the Company's 1996
Stock Option Plan (the "1996 Plan"), subject to stockholder approval, to
increase the number of shares reserved for issuance under the 1996 Plan by an
additional 1,000,000 shares and to make certain other technical changes. The
1996 Plan was adopted by the Board of Directors and became effective on June 25,
1996, subject to stockholder approval, and was approved by the stockholders on
September 16, 1996.
The 1996 Plan permits the grant of options to employees and officers of
the Company and its subsidiaries and formula grants of options to directors who
are not officers or employees of the Company or any of its subsidiaries
("Outside Directors"). As of May 16, 2000, approximately 700,000 of the
originally reserved shares were either issued or subject to options granted
under the 1996 Plan, leaving only approximately 175,000 shares available for
future grant under the 1996 Plan. The amendment will not be implemented unless
the stockholders approve it.
SUMMARY OF 1996 STOCK OPTION PLAN
The 1996 Plan is summarized below. However, this summary is qualified
in its entirety by reference to the text of the 1996 Plan as proposed to be
amended, a copy of which is attached hereto as Exhibit B.
General. The purpose of the 1996 Plan is to promote the growth and
profitability of the Company by increasing personal participation of officers,
employees and directors in the financial performance of the Company, by enabling
the Company to attract and retain officers, employees and directors of
outstanding competence and by providing such persons with an equity opportunity
in the Company.
The 1996 Plan currently provides that a total of 875,000 shares of
Common Stock are authorized for issuance under the 1996 Plan, of which 825,000
shares may be issued under options to employees and officers and 50,000 shares
may be issued under options granted to Outside Directors. Under the proposed
amendment, the total number of shares of Common Stock authorized for issuance
would be increased by 1,000,000 shares. Of the additional pool of 1,000,000
shares, 940,000 would be eligible for issuance under options to employees and
officers and 60,000 would be eligible for issuance under options granted to the
Outside Directors. The maximum number of shares under options that may be
granted to an employee or officer under the 1996 Plan during any fiscal year is
500,000 shares. The number of options that may be granted under the 1996 Plan,
and the number of shares subject thereto and exercise prices of outstanding
options, will be adjusted to reflect any change in the capitalization of the
Company.
Options that may be awarded to employees and officers ("Employee
Options") may be: (i) options that are intended to qualify as incentive stock
options ("ISOs") under Section 422 of the Internal Revenue Code (the "Code");
(ii) options that are not intended to qualify under Section 422 of the Code
("NSOs"); or (iii) both of the foregoing, if granted separately and not in
tandem. The 1996 Plan provides that in the case of ISOs, the aggregate fair
market value of the shares with respect to which ISOs are exercisable for the
first time by a participant under the 1996 Plan during any calendar year (under
all plans taken into account pursuant to Section 422(d) of the Code) shall not
exceed $100,000. NSOs may be granted to any 1996 Plan participant without regard
to the Section 422(d) limitations.
Administration. The 1996 Plan will be administered by the Compensation
Committee or any other committee (the "Committee") of the Board of Directors
that is composed solely of Board members who are both "non-employee directors"
as defined in Rule 16b-3 under the Securities Exchange Act of 1934 and "outside
directors" as defined in Section 162(m) of the Code. The Committee has complete
authority to: (i) interpret all terms and provisions of the 1996 Plan consistent
with law; (ii) select from the officers and employees of the Company and its
subsidiaries the persons to whom Employee Options shall be granted; (iii) within
the limits established in the 1996 Plan, determine the number of shares of
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<PAGE> 21
Common Stock to be subject to, the exercise price of, and the term of, each
Employee Option; (iv) prescribe the form of instruments evidencing options; (v)
determine the time or times at which Employee Options shall be granted; (vi)
make special grants of Employee Options to officers or employees when determined
to be appropriate; (vii) provide, if appropriate, for the exercisability of
Employee Options granted to officers or employees in installments or subject to
specified conditions; (viii) determine the method of exercise of Employee
Options; (ix) adopt, amend and rescind general and special rules and regulations
for the 1996 Plan's administration; and (x) make all other determinations
necessary or advisable for the administration of the 1996 Plan.
The Committee may designate selected Board or Committee members or
certain employees of the Company to assist the Committee in the administration
of the 1996 Plan and may grant authority to such persons to execute documents,
including options, on behalf of the Committee, subject to certain limitations.
The 1996 Plan provides that no member of the Board or Committee or employee of
the Company assisting the Board or Committee in connection with the 1996 Plan
shall be liable for any action taken or determination made in good faith.
Further, the 1996 Plan provides that such persons shall be indemnified by the
Company against all liability (including reasonable expenses and amounts paid as
settlement or in satisfaction of a judgment) that results from any action taken
or failure to act in connection with the 1996 Plan or any option. However, such
indemnification does not extend to matters involving gross negligence or
misconduct.
Eligibility and Criteria for Employee Grants. Employee Options under
the 1996 Plan may be granted to officers and employees of the Company and its
subsidiaries who are selected by the Committee. Members of the Company's Board
who are also officers or employees of the Company are also eligible to receive
Employee Options. The 1996 Plan formerly limited eligibility for Employee
Options to officers and "key" employees, but the Committee believes it is
appropriate to expand the definition of eligible participants to include all
employees of the Company and its subsidiaries. In making any determination as to
the officers and employees to whom Employee Options shall be granted under the
1996 Plan, the Committee must take into account the level and responsibility of
the person's position, the level of the person's performance, the person's level
of compensation, the assessed potential of the person and such additional
factors as the Committee deems relevant to the accomplishment of the purposes of
the 1996 Plan. All employees of the Company and its subsidiaries (approximately
250 persons as of the date of this Proxy Statement), are eligible for selection
to receive Employee Options under the 1996 Plan as amended.
Option Awards to Outside Directors. The 1996 Plan provides that Outside
Directors be granted, upon initially joining the Board, options to purchase
5,000 shares of Common Stock at the fair market value of the shares under the
1996 Plan on the date of issuance. Outside Directors who were serving on June
25, 1996, the date the 1996 Plan was originally adopted, also received this
one-time grant of options to purchase 5,000 shares of Common Stock. The 1996
Plan further provides for awards of options to purchase 5,000 shares of Common
Stock on each January 5 after the adoption of the 1996 Plan if the average daily
value of a share of Common Stock for the immediately preceding month of December
is ten percent greater than the average daily value of a share for the month of
December of the immediately prior year. To date, awards have been payable under
this formula once, as of January 5, 2000, based on the increase in the Company's
stock price in 1999 over 1998. In the event that the total exercise price of
such options for 5,000 shares exceeds $100,000, the number of shares purchasable
under such option are to be reduced so that the total exercise price of the
options granted equals $100,000, and in the event that the number of shares
authorized under the 1996 Plan are not sufficient to make an award to an Outside
Director on any date, options for the remaining authorized shares shall be
awarded pro rata to the Outside Directors then entitled to receive such options.
All of the foregoing options awarded or to be awarded to Outside Directors under
the 1996 Plan become exercisable over a period of four years, with 20% of the
amount awarded being exercisable on the date of grant and an additional 20%
becoming exercisable on each of the next four anniversaries.
Terms of Options. The 1996 Plan generally provides that Employee
Options are exercisable at such time and upon such conditions as may be
determined by the Committee at the time of grant, except that the term of such
Options may not exceed 10 years (or 5 years for ISOs awarded to certain 10%
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<PAGE> 22
stockholders) from the date of grant. Options granted to Outside Directors under
the 1996 Plan are exercisable in the 10-year period subsequent to the date of
grant. To the extent that any options are subject to vesting requirements, the
1996 Plan also provides that such vesting requirements shall be eliminated
immediately in the event of any change of control of the Company (as defined in
the 1996 Plan) so that all options will thereafter become immediately available
at their stated exercise prices.
Transferability of Options. In general, Options granted under the 1996
Plan may not be transferred except by will, by the laws of descent and
distribution, or pursuant to certain qualified domestic relations orders. In the
case of ISOs, such options may not be transferred other than by will or the laws
of descent and distribution and during the optionee's lifetime may be exercised
only by the optionee. In no event may an option be exercised after the
expiration of its fixed term.
Exercise Price of Options. The price per share at which Employee
Options may be exercised is determined by the Committee at the time of grant
taking into account, in each case, the market price of the Common Stock, the
level and responsibility of the person's position, the level of the person's
performance, the person's level of compensation, the assessed potential of the
person, and such additional factors as the Committee deems relevant to the
accomplishment of the purposes of the 1996 Plan. However, the exercise price per
share of Employee Options may not be less than 100% of the fair market value of
the Common Stock on the date of grant. In the case of ISOs, the price per share
shall not be less than 100% (or 110% for certain 10% stockholders) of the fair
market value of the Common Stock at the time such option is granted. The
exercise price of options granted to Outside Directors under the 1996 Plan is
fair market value on the date of grant. "Fair market value" is generally defined
as the average of the high and the low sales prices per share on the date the
Committee grants the option.
No Repricing of Options Permitted. The 1996 Plan provides that the
Committee may not lower the exercise price on any outstanding options or grant
options to any holder of outstanding options either conditioned upon or under
any arrangement contemplating the voluntary surrender by such holder of any
outstanding options granted under the 1996 Plan.
Method of Exercise of Options. To exercise an option granted under the
1996 Plan, the optionee must deliver written notice to the Company, tender
payment in full of the exercise price for the shares for which the option is
exercised and comply with such other reasonable requirements as the Committee
may establish. Payment may be made in cash, or, in the discretion of the
Committee, in shares of the Common Stock or a combination of cash and shares of
Common Stock, the total market value of which equals the total option price of
the shares with respect to which the option is being exercised. The Committee
may determine, in the exercise of its discretion, to (i) grant such optionee
permission to pay the exercise price in installments or (ii) grant such optionee
permission to pay the exercise price by delivering for cancellation Options
having an aggregate value (calculated by subtracting the exercise price per
share from the fair market value of a share of Common Stock) equal to the total
amount of the exercise price. An option may be exercised for any lesser number
of shares than the full amount for which it could be exercised.
Termination of Employment. In general, options terminate on the date
the optionee ceases to be an employee of the Company (or for options granted to
Outside Directors, on the date the optionee ceases to be a director). However,
if an optionee dies, becomes permanently or totally disabled while in the
employment of the Company, resigns or retires with the consent of the Company,
or employment is terminated by the Company without "cause" (as defined in the
1996 Plan), the 1996 Plan provides certain additional time for exercise of the
options. The Committee may establish the same or other restrictions with respect
to NSOs, and may grant NSOs without any such restrictions. In general, unvested
stock awards terminate upon the holder's ceasing to be an officer, employee or
director of the Company, as the case may be.
Amendment of Plan and Options. Except for certain amendments relating
to options to be awarded to the Outside Directors, in general, the Committee
may, at any time, suspend, amend or terminate the 1996 Plan. However, amendments
that would: (i) materially increase the benefits accruing to participants, (ii)
increase the number of securities issuable under the 1996 Plan, (iii) change the
class
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<PAGE> 23
or classes of individuals eligible to receive options or stock awards, or (iv)
otherwise materially modify the requirements for eligibility, may not be
effected without the approval of the stockholders. The Committee may also amend
the terms and conditions of any outstanding Employee Option. However, no action
may be taken that would alter or impair any rights or obligations under any
outstanding Employee Option without the consent of the holder thereof.
Effective Date; Duration. The 1996 Plan became effective on June 25,
1996, and unless previously terminated by the Board or Committee, the 1996 Plan
will terminate at the close of business on June 25, 2006.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Nonstatutory Options. No taxable income is recognized by an optionee
upon the grant of an NSO. The optionee generally will recognize ordinary income
in the year in which the option is exercised equal to the excess of the fair
market value of the purchased shares at the date of exercise over the exercise
price, and the optionee will be required to satisfy the tax withholding
requirements applicable to such income, which the optionee may satisfy, if
permitted by the Committee in its discretion, by having the Company withhold
shares from the shares otherwise due or by delivering a sufficient number of
previously owned shares of the Company's Common Stock to the Company. On
ultimate sale of the shares, the optionee will generally recognize as capital
gain or loss the difference between the fair market value on the date of
exercise and the ultimate sales price.
Incentive Stock Options. No taxable income is recognized by the
optionee at the time of the grant of an ISO and, except in determining
alternative minimum tax, no taxable income is recognized at the time the ISO is
exercised. The optionee will, however, recognize taxable income or loss in the
year in which the purchased shares are sold or otherwise made the subject of
disposition.
For federal tax purposes, dispositions of ISOs are divided into two
categories: qualifying and disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other taxable disposition of
such shares is made more than two years after the grant date of the option and
more than one year after the exercise date. If the optionee fails to satisfy
either of these two holding periods prior to the sale or other disposition of
the purchased shares, then a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee generally
will recognize long-term gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition over (ii) the option price paid for
the shares. If there is a disqualifying disposition of the shares, then the
excess of (i) the fair market value of the shares at the date of exercise (or,
if lower, the fair market value of the shares on the date of disposition) over
(ii) the option price paid therefor will be taxable as ordinary income. Any
additional gain recognized upon the disposition will be a capital gain, and such
gain will be long-term if the shares have been held for more than one year
following exercise of the option.
Alternative Minimum Tax. The difference between fair market value of
shares subject to an ISO on the date of exercise and the exercise price of such
shares is an adjustment to income for purposes of the alternative minimum tax
(the "AMT"). The AMT (imposed to the extent it exceeds the taxpayer's regular
tax) is 26% of an individual taxpayer's alternative minimum taxable income (28%
in the case of alternative minimum taxable income in excess of $175,000).
Alternative minimum taxable income is determined by adjusting regular taxable
income for certain items, increasing that income by certain tax preference items
(including the difference between the fair market value of the shares subject to
the ISO on the date of exercise and the exercise price) and reducing this amount
by the applicable exemption amount ($45,000 in case of a joint return, subject
to reduction under certain circumstances). If a disqualifying disposition of the
shares subject to an ISO occurs in the same calendar year as exercise of the
ISO, there is no AMT adjustment with respect to those shares. Also, upon a sale
of such shares that is a qualifying disposition, alternative minimum taxable
income is reduced in the year of sale by the excess of the fair market value of
the shares subject to the ISO at exercise over the amount paid for such shares.
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<PAGE> 24
Deduction to the Company. The Company will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by the optionee in
connection with the exercise of an NSO. The deduction generally will be allowed
for the taxable year of the Company in which occurs the last day of the calendar
year in which the optionee recognizes ordinary income in connection with such
exercise.
If the optionee makes a disqualifying disposition of the shares
purchased on exercise of an ISO, then the Company will be entitled to an income
tax deduction for the taxable year in which such disposition occurs, equal to
the amount which is taxable to the employee as ordinary income. In no other
instance will the Company be allowed a deduction with respect to the optionee's
disposition of the shares purchased upon exercise of an ISO.
The affirmative vote of a majority of the outstanding shares of Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote is required to approve the amendment to the 1996 Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT OF THE 1996 PLAN. PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE
VOTED "FOR" APPROVAL OF THE AMENDMENT OF THE 1996 PLAN.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, upon the recommendation of the
Audit Committee, has appointed the firm of PricewaterhouseCoopers LLP to serve
as independent accountants of the Company for the year ending December 31, 2000,
subject to ratification of this appointment by the stockholders of the Company.
PricewaterhouseCoopers LLP has served as the Company's (and its predecessor's)
independent accountants for nine years and is considered by management of the
Company to be well qualified.
One or more representatives of PricewaterhouseCoopers LLP will be
present at this year's Annual Meeting and will have an opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
Ratification of the appointment of the independent accountants requires
the affirmative vote of a majority of the shares of Common Stock of the Company
represented in person or by proxy at the Annual Meeting and entitled to vote. If
the stockholders should not ratify the appointment of PricewaterhouseCoopers
LLP, the Board of Directors will reconsider the appointment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS. PROXIES,
UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS.
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<PAGE> 25
STOCKHOLDERS' PROPOSALS
Stockholders' proposals intended for inclusion in the Company's proxy
statement and the form of the proxy for the Annual Meeting in 2001 should be
sent by certified mail, return receipt requested, and must be received by the
Company at its principal executive offices (Attention: General Counsel) by
January 19, 2001. Such proposals may be made only by persons who are
stockholders, beneficially or of record, on the date the proposal is submitted
and who continue in such capacity through the meeting date, of at least 1% or
$1,000 in market value of securities entitled to be voted at the meeting, and
have held such securities for at least one year. In addition, the Company's
Bylaws prescribe the procedure a stockholder must follow to make nominations for
director candidates or to propose any business to be considered at an annual
meeting. Stockholder nominations for director or other proposals will be
considered at an annual meeting if the stockholder delivers to the Secretary of
the Company at its principal executive offices, no less than 60 nor more than 90
days prior to the meeting (or in the event that public disclosure of the date of
the annual meeting is first made less than 70 days in advance of the meeting
date, no later than the close of business on the tenth day after public
disclosure of the date of the annual meeting is made), a written notice setting
forth the information specified in the Company's Bylaws. Any stockholder
desiring a copy of the Company's Bylaws will be furnished one without charge
upon written request to the Secretary of the Company at 5100 Goldleaf Circle,
Suite 100, Los Angeles, California 90056.
OTHER BUSINESS
The Board of Directors is aware of no other matter that will be
presented for action at the meeting. If any other matter requiring a vote of the
stockholders properly comes before the meeting, the persons authorized under
management proxies will vote and act according to their best judgment.
FORM 10-K
A copy of the Annual Report on Form 10-K for the year ended December
31, 1999, as filed with the Securities and Exchange Commission may be obtained
upon request and without charge by writing:
Elite Information Group, Inc.
5100 Goldleaf Circle
Suite 100
Los Angeles, California 90056
Attn: Investor Relations
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<PAGE> 26
EXHIBIT A
ELITE INFORMATION GROUP, INC. 2000
EMPLOYEE STOCK PURCHASE PLAN
(Effective July 1, 2000)
<PAGE> 27
TABLE OF CONTENTS
Page
----
ARTICLE I BACKGROUND.........................................................3
1.1 Establishment of the Plan...........................................3
1.2 Applicability of the Plan...........................................3
1.3 Purpose.............................................................3
ARTICLE II DEFINITIONS.......................................................3
2.1 Administrator.......................................................3
2.2 Beneficiary.........................................................3
2.3 Board...............................................................3
2.4 Code................................................................4
2.5 Committee...........................................................4
2.6 Common Stock........................................................4
2.7 Company.............................................................4
2.8 Compensation........................................................4
2.9 Date of Grant.......................................................4
2.10 Employee............................................................4
2.11 Employer............................................................4
2.12 Exercise Date.......................................................4
2.13 Fair Market Value...................................................4
2.14 Option..............................................................5
2.15 Option Period.......................................................5
2.16 Option Price........................................................5
2.17 Participant.........................................................5
2.18 Plan................................................................5
2.19 Request for Participation Form, or Request Form.....................5
2.20 Subsidiary..........................................................5
ARTICLE III ELIGIBILITY AND PARTICIPATION....................................5
3.1 Eligibility.........................................................5
3.2 Leave of Absence....................................................6
3.3 Participation.......................................................6
ARTICLE IV STOCK AVAILABLE...................................................6
4.1 In General..........................................................6
4.2 Adjustment In Event of Changes In Capitalization....................6
4.3 Shares Unavailable..................................................6
ARTICLE V OPTION PROVISIONS..................................................7
5.1 Option Price........................................................7
5.2 Calendar Year $25,000 Limit.........................................7
ARTICLE VI PURCHASING COMMON STOCK...........................................7
6.1 Deductions from Payroll, Bonuses, Commissions, etc..................7
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6.2 Deduction Changes and Discontinuance................................7
6.3 Leave of Absence; Transfer to Ineligible Status.....................7
6.4 Participant's Account...............................................8
6.5 Automatic Exercise..................................................8
6.6 Issuance of Stock Certificates and Shareholder Rights...............8
6.7 Listing, Registration, and Qualification of Shares..................8
ARTICLE VII WITHDRAWAL OF DEDUCTIONS; TERMINATION OF EMPLOYMENT..............9
7.1 Discontinuance of Deductions; Leave of Absence; Transfer to
Ineligible Status.................................................9
7.2 Termination of Employment for Reasons Other Than Retirement,
Disability, or Death..............................................9
7.3 Retirement or Disability............................................9
7.4 Death...............................................................9
ARTICLE VIII AMENDMENT AND TERMINATION......................................10
8.1 Amendment..........................................................10
8.2 Termination........................................................10
ARTICLE IX MISCELLANEOUS....................................................10
9.1 Shareholder Approval...............................................10
9.2 Employment Rights..................................................10
9.3 Tax Withholding....................................................10
9.4 Rights Not Transferable............................................11
9.5 Effect of Certain Transactions.....................................11
9.6 No Repurchase of Stock by Company..................................11
9.7 Governing Law......................................................11
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ELITE INFORMATION GROUP, INC. 2000
EMPLOYEE STOCK PURCHASE PLAN
(Effective July 1, 2000)
ARTICLE I BACKGROUND
1.1 Establishment of the Plan.
Elite Information Group, Inc. (the "Company") hereby establishes a
stock purchase plan, to be known as the "ELITE INFORMATION GROUP, INC. 2000
EMPLOYEE STOCK PURCHASE PLAN" (the "Plan"), effective for a five year period
commencing July 1, 2000, unless earlier terminated as provided in this document.
The Plan is intended to be an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended, and the
regulations and rulings thereunder.
1.2 Applicability of the Plan.
The provisions of this Plan are applicable only to certain individuals
who, on the first day of each Option Period (as defined hereafter), are
employees of the Company and its participating subsidiaries.
1.3 Purpose.
The purpose of the Plan is to enhance the proprietary interest among
the employees of the Company and its participating subsidiaries through
ownership of Common Stock of the Company.
ARTICLE II DEFINITIONS
Whenever capitalized in this document, the following terms shall have
the respective meanings set forth below.
2.1 Administrator.
Administrator shall mean the person (who may be an officer or employee
of the Company) selected by the Committee to operate the Plan, perform
day-to-day administration of the Plan, and maintain records of the Plan.
2.2 Beneficiary.
Beneficiary shall mean that person so designated by the Participant on
a Request Form delivered to the Company's Human Resources Department. In the
event that no validly designated Beneficiary is living at the time of a
Participant's death, the estate of the Participant shall be deemed the
Participant's Beneficiary.
2.3 Board.
Board shall mean the board of directors of the Company.
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2.4 Code.
Code shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated thereunder.
2.5 Committee.
Committee shall mean a committee which consists of members of the Board
and which has been designated by the Board to have the general responsibility
for the administration of the Plan. Members of the Committee shall be chosen
from among those Board members who are not eligible to participate in the Plan.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority in its sole and absolute discretion to interpret and construe
any and all provisions of the Plan, to adopt rules and regulations for
administering the Plan, and to make all other determinations necessary or
advisable for administering the Plan. The Committee's determinations on the
foregoing matters shall be conclusive.
2.6 Common Stock.
Common Stock shall mean Common Stock of the Company.
2.7 Company.
Company shall mean Elite Information Group, Inc.
2.8 Compensation.
Compensation shall mean, for any Participant for any payroll period,
the Participant's compensation which is subject to an election to defer under
the Elite Information Group, Inc. 401(k) Plan.
2.9 Date of Grant.
Date of Grant shall mean the first day of each Option Period.
2.10 Employee.
Employee shall mean an employee of an Employer.
2.11 Employer.
Employer shall mean the Company and any Subsidiary designated by the
Committee as an employer participating in the Plan.
2.12 Exercise Date.
Exercise Date shall mean the final day of each Option Period.
2.13 Fair Market Value.
Fair Market Value of a share of Common Stock for each Option Period
shall mean the closing price of the Company's Common Stock on the NASDAQ
National Market System as of the last business day for which prices are
available prior to the Date of Grant.
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2.14 Option.
Option shall mean a right to purchase Common Stock under the Plan.
2.15 Option Period.
Option Period shall mean the period extending from the first day
through the final day of each calendar quarter that the Plan is in effect. The
Plan may terminate during an Option Period as provided in section 8.2.
2.16 Option Price.
Option Price for each Option Period shall mean the purchase price of
Common Stock determined under section 5.1.
2.17 Participant.
Participant shall mean any eligible Employee who has elected to
participate in the Plan under section 3.3.
2.18 Plan.
Plan shall mean the Elite Information Group, Inc. 2000 Employee Stock
Purchase Plan, as amended and in effect from time to time.
2.19 Request for Participation Form, or Request Form.
Request for Participation Form, or Request Form, shall mean an
Employee's payroll deduction authorization form, containing such terms and
provisions as may be required by the Administrator for each Option Period.
2.20 Subsidiary.
Subsidiary shall mean any present or future corporation which is a
"subsidiary corporation" of the Company as defined in Code section 424.
Except when otherwise indicated by the context, the definition of any
term herein in the singular may also include the plural.
ARTICLE III ELIGIBILITY AND PARTICIPATION
3.1 Eligibility.
Each Employee whose most recent date of hire by an Employer is on or
before the 15th day of the month immediately prior to the Date of Grant of an
Option Period, who is actively employed by an Employer on the first day of the
Option Period, and who is a regular Employee customarily scheduled to work at
least 20 hours each week shall be eligible to participate in the Plan for such
Option Period.
Notwithstanding the foregoing, no Employee shall be eligible to
participate during any Option Period if, immediately after the Date of Grant for
such Option Period, such Employee would own stock, within the meaning of Section
423(b)(3) of the Code, possessing five percent or more of the total combined
voting power or value of all classes of stock of the Company. For purposes of
this section, the attribution rules of Code section 424(d) shall apply in
determining stock ownership of any Employee.
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3.2 Leave of Absence.
For purposes of section 3.1, an individual on a leave of absence from
an Employer shall be deemed to be an Employee for the first 90 days of such
leave. For the purpose of the Plan only, such individual's employment with the
Employer shall be deemed to have terminated at the close of business on the
ninetieth day of such leave, unless the individual shall have returned to
regular employment with an Employer prior to the close of business on such
ninetieth day. Termination of any individual's leave of absence by an Employer,
other than on account of a return to employment with an Employer, shall be
deemed to terminate an individual's employment with the Employer for all
purposes of the Plan.
3.3 Participation.
An employee eligible to participate in the Plan for an Option Period
may become a Participant in the Plan by completing and forwarding a Request Form
to the Human Resources Department of the Company by the date established by the
Committee. A new Request Form must be completed and forwarded to the Human
Resources Department for each Option Period that an eligible employee elects to
participate in the Plan. The Request Form shall authorize a regular payroll
deduction, as defined in section 6.1, from the Employee's Compensation during
the Option Period.
ARTICLE IV STOCK AVAILABLE
4.1 In General.
Subject to adjustment as provided in section 4.2, an aggregate of
1,000,000 shares of Common Stock shall be available for purchase pursuant to the
provisions of the Plan. The shares may be authorized and unissued shares or may
be shares issued and subsequently acquired by the Company. If an Option under
the Plan expires or terminates for any reason without having been exercised in
whole or in part, the shares subject to such Option that are not purchased shall
again be available for subsequent Option grants under the Plan.
4.2 Adjustment In Event of Changes In Capitalization.
The aggregate number of shares of Stock reserved for purchase under the
Plan, as provided in Section 4.1, and the calculation of the Option Price per
share for Options granted but not yet exercised, shall be appropriately adjusted
to reflect any increase or decrease in the number of issued shares of Common
Stock resulting from a stock dividend, stock split, or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution with respect to holders of the Company's Common Stock other than
normal cash dividends. Such adjustment in outstanding Options shall be made
without change in the total price applicable to the unexercised portion of such
Options, and with a corresponding adjustment in the Option Price per share.
4.3 Shares Unavailable.
If, on any Exercise Date, the aggregate funds available for the
purchase of Stock would purchase a number of shares in excess of the number of
shares then available for purchase under the Plan pursuant to Section 4.1, the
following events shall occur:
(a) The number of shares that would otherwise be purchased by each
Participant shall be proportionately reduced on the Exercise
Date in order to eliminate such excess;
(b) The Plan shall automatically terminate immediately after the
Exercise Date as of which the supply of available shares is
exhausted; and
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(c) Any cash balance remaining in each of the Participants'
accounts shall be refunded promptly, without interest.
ARTICLE V OPTION PROVISIONS
5.1 Option Price.
The Option Price of Common Stock purchased for a Participant on the
Exercise Date of an Option Period shall be set by the Committee at the lesser
of:
(a) 85 percent of the closing price of the Common Stock on the
NASDAQ National Market System on the Date of Grant of the
Option Period or on the nearest prior business day on which
trading occurred on the NASDAQ National Market System; or
(b) 85 percent of the closing price of the Common Stock on the
NASDAQ National Market System on the Exercise Date of the
Option Period or on the nearest prior business day on which
trading occurred on the NASDAQ National Market System.
5.2 Calendar Year $25,000 Limit.
Notwithstanding anything else contained herein, no Employee may be
granted an Option which permits such Employee, during any calendar year, to
purchase Common Stock under this Plan, and any other qualified employee stock
purchase plan (within the meaning of Code section 423) of the Company and its
Subsidiaries, having an aggregate Fair Market Value, determined at the time of
each Date of Grant during such calendar year, of more than $25,000.
ARTICLE VI PURCHASING COMMON STOCK
6.1 Deductions from Payroll, Bonuses, Commissions, etc.
For each Option Period, an Employee eligible to participate in the Plan
under section 3.1 may elect to participate by submitting a Request Form, in
accordance with rules adopted by the Committee, authorizing a payroll deduction
of any whole percentage from 1 percent to 10 percent of such Employee's
Compensation payable each pay period, and at any other time an element of
Compensation is payable; provided, however, that a Participant's payroll
deduction shall be at least ten dollars each month or five dollars each payroll
period.
6.2 Deduction Changes and Discontinuance.
A Participant may not increase or decrease his or her payroll deduction
under section 6.1 during any Option Period.
A Participant may completely discontinue his or her payroll deduction
at any time, by filing a new Request Form with the Company's Human Resources
Department. This discontinuance shall be effective on the first pay period
commencing at least 25 days after receipt of the Request Form by the Company's
Human Resources Department.
6.3 Leave of Absence; Transfer to Ineligible Status.
If a Participant either goes on a leave of absence, is transferred to
employment with a Subsidiary not participating in the Plan, or remains employed
with an Employer but is not customarily scheduled to work at least 20 hours each
week, such Participant shall no longer be eligible for payroll deductions under
the Plan. Such Participant shall have the right to elect
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(a) to withdraw the balance in his or her account under section
7.1; or
(b) to discontinue payroll deductions under the Plan but remain a
Participant in the Plan.
If the Participant returns from such leave of absence before being
deemed to have ceased employment with the Employer under section 3.2, or again
becomes a full-time Employee of an Employer customarily scheduled to work at
least 20 hours each week, his or her payroll deductions shall automatically
recommence at the percentage level in effect immediately before the leave of
absence or disqualifying change in employment status (as applicable).
6.4 Participant's Account.
The Administrator shall establish an account in the name of each
Participant. A Participant's payroll deductions, as described above, shall be
credited to the Participant's account, without interest, until withdrawn,
distributed, or used to purchase Common Stock as described below.
All payroll deductions received or held by the Company under the Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate these payroll deductions.
6.5 Automatic Exercise.
Unless a Participant's account is distributed in cash as hereinafter
provided, his or her Option shall be deemed to have been exercised automatically
on the Exercise Date of the Option Period for the purchase of the number of
whole shares of Common Stock which the accumulated payroll deductions in such
Participant's account at that time will purchase at the Option Price.
Fractional shares shall not be issued or purchased under the Plan. If a
Participant has elected to participate in the Plan for the following Option
Period, any accumulated payroll deductions that would have been used to purchase
a fractional share shall be applied to such Participant's account for the
following Option Period. Otherwise, any remaining funds will be returned to the
Participant (or Beneficiary, as appropriate) without interest.
Sixty days after the Exercise Date of each Option Period, each
Participant participating in the Plan for such Option Period (or Beneficiary, as
appropriate) shall receive a statement indicating the number of shares purchased
for such Participant for such Option Period.
6.6 Issuance of Stock Certificates and Shareholder Rights.
As soon as practicable after the Exercise Date of an Option Period, the
Administrator shall cause Common Stock certificates representing the number of
whole shares purchased for each Participant (or Beneficiary, as appropriate) to
be issued to an account established in the name of such Participant (or
Beneficiary, as appropriate) with a securities brokerage firm designated by the
Administrator. As soon as practicable thereafter, the Administrator shall
notify, or cause such securities brokerage firm to notify, each Participant of
the number of shares of Common Stock held in such account and of the appropriate
account information. None of the rights or privileges of a shareholder of the
Company shall exist with respect to Common Stock purchased under the Plan unless
and until the shares of Common Stock have been issued by the Company and either
the Participant has become the beneficial owner of the Common Stock on the
records of the securities brokerage firm or the Participant has become the
record owner of the Common Stock.
6.7 Listing, Registration, and Qualification of Shares.
The granting of Options for, and the sale and delivery of, Common Stock
under the Plan, shall be subject to the effecting by the Company of any listing,
registration, or qualification of the shares subject to
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that Option upon any securities exchange or under any federal or state law, or
the obtaining of the consent or approval of any governmental regulatory body
that the Committee deems necessary or desirable for the issue or purchase of the
shares covered.
ARTICLE VII WITHDRAWAL OF DEDUCTIONS;TERMINATION OF EMPLOYMENT
7.1 Discontinuance of Deductions; Leave of Absence; Transfer to Ineligible
Status.
In the event of a Participant's complete discontinuance of payroll
deductions under section 6.2 or a Participant's leave of absence or transfer to
an ineligible status under section 6.3, the balance in the Participant's account
shall be:
(a) returned to the Participant, in cash, without interest, as
soon as practicable, upon the Participant's written request
received by the Company's Human Resources Department no later
than the 15th day of the final calendar month of the current
Option Period; or
(b) held under the Plan and used to purchase Common Stock for the
Participant under the automatic exercise provisions of section
6.5.
7.2 Termination of Employment for Reasons Other Than Retirement,
Disability, or Death.
If a Participant terminates employment with the Company and the
Subsidiaries for reasons other than retirement (voluntary termination of
employment with the Company and the Subsidiaries on or after age 65), disability
as determined under the Company's long-term disability plan, or death, the
balance in the Participant's account shall be returned to the Participant in
cash, without interest, as soon as practicable.
7.3 Retirement or Disability.
In the event a Participant terminates employment with the Company and
the Subsidiaries by reason of retirement (as defined in section 7.2) or
disability as determined under the Company's long-term disability plan, the
balance in such Participant's account shall be:
(a) returned to the Participant, in cash, without interest, as
soon as practicable, upon written request by the Participant
received by the Company's Human Resources Department no later
than the 15th day of the final calendar month of the current
Option Period; or
(b) held under the Plan and used to purchase Common Stock for the
Participant under the automatic exercise provisions of section
6.5.
7.4 Death.
In the event a Participant dies, the balance in such Participant's
account shall be:
(a) distributed to the Participant's Beneficiary, in cash, without
interest, as soon as practicable, upon written request by the
Beneficiary received by the Company's Human Resources
Department no later than the 15th day of the final calendar
month of the current Option Period; or
(b) held under the Plan and used to purchase Common Stock for the
Beneficiary under the automatic exercise provisions of section
6.5.
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ARTICLE VIII AMENDMENT AND TERMINATION
8.1 Amendment.
The Committee shall have the right to amend or modify the Plan, in full
or in part, at any time and from time to time; provided, however, that no
amendment or modification shall:
(a) affect any right or obligation with respect to any grant
theretofore made, unless required by law, or
(b) unless previously approved by the stockholders of the Company,
where such approval is necessary to satisfy then applicable
requirements of federal securities laws, the Code, or rules of
any stock exchange on which the Company's Common Stock is
listed,
(i) in any manner materially affect the eligibility
requirements set forth in sections 3.1 and 3.2,
(ii) materially increase the number of shares of Common
Stock subject to any Options issued to Participants
(except as provided in section 4.2), or
(iii) materially increase the benefits to Participants
under the Plan.
8.2 Termination.
The Committee may terminate the Plan at any time in its sole and
absolute discretion. Upon termination of the Plan, the Administrator shall give
notice thereof to Participants and shall terminate all payroll deductions. Cash
balances in Participants' accounts shall be refunded promptly, without interest.
ARTICLE IX MISCELLANEOUS
9.1 Shareholder Approval.
The Plan shall be approved and ratified by the stockholders of the
Company, not later than 12 months after the Plan is approved by the Board of
Directors, pursuant to Treasury regulation section 1.423-2(c). If for any reason
such approval is not given by such date, the Plan shall be null and void, all
payroll deductions shall cease, and the balances in Participants' accounts shall
be promptly distributed to them; provided, however, that any Common Stock
certificates issued and delivered to Participants prior to such date shall
remain the property of the Participants.
9.2 Employment Rights.
Neither the establishment of the Plan, nor the grant of any Options
thereunder, nor the exercise thereof shall be deemed to give to any Employee the
right to be retained in the employ of the Company or any Subsidiary or to
interfere with the right of the Company or any Subsidiary to discharge any
Employee or otherwise modify the employment relationship at any time.
9.3 Tax Withholding.
The Administrator shall be entitled to require any Participant to
remit, through payroll withholding or otherwise, any tax that it determines it
is so obligated to collect with respect to the issuance of Options or Common
Stock hereunder, or the subsequent exercise of such Options or the sale or
disposition of such Common Stock, and the Administrator shall institute such
mechanisms as shall insure the collection of such taxes.
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9.4 Rights Not Transferable.
No Option granted under the Plan is assignable or transferable by any
Participant, other than by will or the laws of descent and distribution. Options
granted to a Participant are only exercisable, during such Participant's
lifetime, by that Participant. A Participant's unexercised Options, in the event
that a Participant dies, shall be treated pursuant to the provisions of Section
7.4.
9.5 Effect of Certain Transactions.
Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger or consolidation,
or if the Company shall be merged for the purpose of changing the jurisdiction
of its incorporation, any Options granted hereunder shall pertain to and apply
to the shares of stock of the Company or the survivor. However, in the event of
a dissolution or liquidation of the Company, or of a merger or consolidation in
which the Company is not the surviving or resulting corporation, the Plan and
any Offering hereunder shall terminate upon the effective date of such
dissolution, liquidation, merger or consolidation, and the balance then standing
to the credit of each Participant in his or her account shall be refunded
promptly, without interest.
9.6 No Repurchase of Stock by Company.
The Company is under no obligation to repurchase from any Participant
any shares of Common Stock acquired under the Plan.
9.7 Governing Law.
The Plan shall be governed by and construed in accordance with the laws
of the State of California except to the extent such laws are preempted by the
laws of the United States.
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EXHIBIT B
ELITE INFORMATION GROUP, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Elite Information Group, Inc. 1996 Stock Option Plan
(formerly known as the Broadway & Seymour, Inc. 1996 Stock Option Plan) (the
"Plan") is to promote the growth and profitability of Elite Information Group,
Inc. (the "Company") and its subsidiaries ("Subsidiaries") from time to time by
increasing the personal participation of officers, employees and directors in
the financial performance of the Company, by enabling the Company to attract and
retain officers, employees and directors of outstanding competence and by
providing such officers, employees and directors with an equity opportunity in
the Company. This purpose will be achieved through the grant of stock options
("Options") to purchase shares of common stock of the Company, no par value per
share (the "Common Stock") subject to such restrictions as the administrators of
the Plan may determine.
2. ADMINISTRATION
The Plan will be administered by the Company's Board of Directors (the
"Board"); provided, however, that if the Board includes members who are not
"non-employee directors" (as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, or any applicable successor rule or
regulation ("Rule 16b-3")) or "outside directors" (as defined in Section 162(m)
of the Internal Revenue Code of 1986, as amended, and the regulations thereunder
("Section 162(m)")), then all authority of the Board under the Plan shall be
exercised by a committee of the Board (the "Committee") composed solely of
members thereof who are both "non-employee directors" and "outside directors"
(as so defined).
The Board or Committee shall have complete authority to: (i) interpret
all terms and provisions of the Plan consistent with law; (ii) select from the
group of officers and employees eligible to participate in the Plan the officers
and employees to whom Options shall be granted; (iii) within the limits
established herein, determine the number of shares to be subject to, the
exercise price of, and the term of each Option, granted to each of such officers
and employees; (iv) prescribe the form of instrument(s) evidencing Options
granted under this Plan; (v) determine the time or times at which Options shall
be granted to officers or employees; (vi) make special grants of Options to
officers or employees when determined to be appropriate; (vii) provide, if
appropriate, for the exercisability of Options granted to officers or employees
in installments or subject to specified conditions; (viii) determine the method
of exercise of Options granted to officers or employees under the Plan; (ix)
adopt, amend and rescind general and special rules and regulations for the
Plan's administration; and (x) make all other determinations necessary or
advisable for the administration of this Plan.
Any action which the Board or Committee is authorized to take may be
taken without a meeting if all the members of the Board or Committee sign a
written document authorizing such action to be taken, unless different provision
is made by the By-Laws of the Company or by resolution of the Board or
Committee.
The Board or Committee may designate selected Board or Committee
members or certain employees of the Company to assist the Board or Committee in
the administration of the Plan and may grant authority to such persons to
execute documents, including Options, on behalf of the Board or Committee,
subject in each such case to the requirements of Rule 16b-3.
No member of the Board or Committee or employee of the Company
assisting the Board or Committee pursuant to the preceding paragraph shall be
liable for any action taken or determination made in good faith.
<PAGE> 39
3. STOCK SUBJECT TO PLAN
The stock to be offered under this Plan shall be authorized but
unissued shares of Common Stock, shares of Common Stock previously issued and
thereafter acquired by the Company, or any combination thereof. An aggregate of
1,875,000 shares of Common Stock are reserved for Option grants under this Plan,
of which an aggregate of 1,765,000 shares may be the subject of Options granted
under Section 4 hereof and an aggregate of 110,000 shares may be the subject of
Options granted under Section 5 hereof. Any or all of the Options granted under
Section 4 hereof may, at the Board's or Committee's discretion, be intended to
qualify as incentive stock options ("Incentive Stock Options") under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). The number of
shares reserved under this Plan may be adjusted to reflect any change in the
capitalization of the Company as contemplated by Section 10 hereof and occurring
after the adoption of this Plan. The Board or Committee will maintain records
showing the cumulative total of all shares subject to Options outstanding under
this Plan.
4. OPTIONS FOR OFFICERS AND EMPLOYEES
a. Eligibility and Factors to be Considered in Granting Options
Options under this Section 4 may be granted to officers and employees
of the Company or any of its Subsidiaries who are selected by the Board or
Committee. Members of the Company's Board of Directors who are also officers or
employees of the Company are eligible to receive Options under this Section 4.
In making any determination as to the officer(s) and employee(s) to whom Options
shall be granted under this Section 4 and as to the number of shares to be
subject thereto, the Board or Committee shall take into account, in each case,
the level and responsibility of the person's position, the level of the person's
performance, the person's level of compensation, the assessed potential of the
person and such additional factors as the Board or Committee shall deem relevant
to the accomplishment of the purposes of the Plan.
Options may be granted under this Section 4 only for a reason connected
with an officer's or employee's employment by the Company or any Subsidiary.
b. Allotment of Shares
The Board or Committee may, in its sole discretion and subject to the
provisions of this Plan, grant to participants eligible under this Section 4, on
or after the date hereof, Options to purchase shares of Common Stock. Options
granted under this Section 4 may, at the discretion of the Board or Committee,
be: (i) Options that are intended to qualify as Incentive Stock Options; or (ii)
Options that are not intended to be Incentive Stock Options or (iii) both of the
foregoing, if granted separately, and not in tandem. Each Option granted under
this Plan must be clearly identified as to its status as an Incentive Stock
Option or not.
Options granted under this Section 4 may be allotted to participants in
such amounts, subject to the limitations specified in this Plan, as the Board or
Committee, in its sole discretion, may from time to time determine, provided
that in any fiscal year no participant may be granted Options with respect to
more than 500,000 shares of Common Stock.
In the case of Options intended to be Incentive Stock Options, the
aggregate fair market value (determined at the time of such Incentive Stock
Options' respective grants) of the shares with respect to which Incentive Stock
Options are exercisable for the first time by a participant hereunder during any
calendar year (under all plans taken into account pursuant to Section 422(d) of
the Code) shall not exceed $100,000. Options under this Section 4 not intended
to qualify as Incentive Stock Options may be granted to any Plan participant
without regard to the Section 422(d) limitations.
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<PAGE> 40
c. Time of Granting Options
The date of grant of an Option under this Section 4 shall, for all
purposes, be the date on which the Board or Committee makes the determination of
granting such Option (each such date, a "Grant Date"). Notice of the
determination shall be given to each officer or employee to whom an Option is so
granted under this Section 4 within a reasonable time after the Grant Date for
such Option.
d. Exercise Price for Options
The price per share at which each Option granted under this Section 4
may be exercised shall be such price as shall be determined by the Board or
Committee at the time of grant based on such criteria as may be adopted by the
Board or Committee at the time of grant in good faith, taking into account, in
each case, the market price of the Common Stock, the level and responsibility of
the person's position, the level of the person's performance, the person's level
of compensation, the assessed potential of the person, and such additional
factors as the Board or Committee shall deem relevant to the accomplishment of
the purposes of the Plan; provided, however, that in no event shall the exercise
price per share of an Option be less than 100% of the fair market value of the
Company's shares of Common Stock on the Grant Date for such Option. In the case
of an Option intended to qualify as an Incentive Stock Option, the price per
share shall not be less than 100% (or 110% for owners of more than 10% of the
total combined voting power of all classes of stock of the Company or any
Subsidiary) of the fair market value of the Common Stock on the Grant Date for
such Option.
If the Company's shares of Common Stock are:
(1) actively traded on any national securities exchange or NASDAQ
system that reports their sales prices, fair market value shall be the average
of the high and low sales prices per share on any Grant Date;
(2) otherwise traded over the counter, fair market value shall be the
average of the final bid and asked prices for the shares of Common Stock as
reported for any Grant Date;
(3) not traded, the Board or Committee shall consider any factor or
factors that it believes affects fair market value, and shall determine fair
market value without regard to any restriction other than a restriction that by
its terms will never lapse.
e. Term of Options
The term of each Option granted under this Section 4 shall be
established by the Board or Committee, but shall not exceed 10 years (or 5 years
for owners of more than 10% of the total combined voting power of all classes of
stock of the Company or of a Subsidiary) from the Grant Date for such Option.
f. Repricing and Replacement of Options Prohibited
Notwithstanding any other provision of the Plan, the Board or Committee
may not lower the exercise price on any outstanding Options granted under this
Section 4 or grant Options to the holder of outstanding Options either
conditioned upon or under an arrangement contemplating the voluntary surrender
by such holder of any such outstanding Options granted under this Section 4.
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<PAGE> 41
5. OPTIONS FOR DIRECTORS WHO ARE NEITHER OFFICERS NOR EMPLOYEES
a. Initial Director Options
On June 25, 1996, each member of the Board of Directors who is not an
officer or employee of the Company or any Subsidiary (an "Eligible Director")
shall receive, as of such date, subject to subsequent approval of this Plan by
the Company's stockholders to the extent required by Section 162(m) and the
rules of the NASDAQ Stock Market, an option to purchase 5,000 shares of Common
Stock, and thereafter upon the initial election of a member of the Board of
Directors who is an Eligible Director such Eligible Director shall receive, on
the date of such election, subject to subsequent approval of this Plan by the
Company's stockholders to the extent required by Section 162(m) and the rules of
the NASDAQ Stock Market, an option to purchase 5,000 shares of Common Stock.
b. Annual Director Options
Subject to subsequent approval of this Plan by the Company's
stockholders to the extent required by Section 162(m) and the rules of the
NASDAQ Stock Market, on January 5 of each year following the adoption of this
Plan the Company shall grant to each Eligible Director an Option to purchase
5,000 shares of Common Stock (subject to reduction as described below) if the
average of the daily fair market value (as determined in accordance with Section
4(d)) of a share of Common Stock over the immediately preceding month of
December is ten percent (10%) greater than the average of the daily fair market
value (as determined in accordance with Section 4(d)) of a share of Common Stock
over the month of December of the next preceding year. Notwithstanding the
foregoing, if the product of the exercise price per share under such Option
multiplied by 5,000 exceeds $100,000, then such Option shall be granted to
purchase the number of shares of Common Stock equal to the quotient of $100,000
divided by the exercise price per share under such Option (rounded down to the
nearest whole share).
c. Exercise Price
Each Option granted pursuant to this Section 5 shall have an exercise
price per share equal to the fair market value (as defined in Section 4(d)) of a
share of Common Stock on the date of grant (the "Director Grant Date") or, if
such date is not a business day, then on the next preceding business day.
d. Exercisability and Term
Each Option granted pursuant to this Section 5 shall become exercisable
as set forth below:
Aggregate Percentage of
Shares under such Option
Date Exercisable on such Date
---- ------------------------
Director Grant Date 20%
First Anniversary of 40%
Director Grant Date
Second Anniversary of 60%
Director Grant Date
Third Anniversary of 80%
Director Grant Date
Fourth Anniversary of 100%
Director Grant Date
The term of each Option granted pursuant to this Section 5 shall be ten years
from the Director Grant Date for such Option.
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<PAGE> 42
e. Insufficient Shares
In the event that any award of options to Outside Directors as set
forth in this Section 5 would exceed the remaining number of shares of Common
Stock authorized for awards under this Section 5, then the amount of options to
be awarded at such time shall be reduced to an amount equal to the quotient of
the remaining shares authorized under this Section 5 divided by the number of
Outside Directors then entitled to receive such award.
f. Repricing and Replacement of Options Prohibited
Notwithstanding any other provision of the Plan, the Board or Committee
may not lower the exercise price on any outstanding Options granted under this
Section 5 or grant Options to the holder of outstanding Options either
conditioned upon or under an arrangement contemplating the voluntary surrender
by such holder of any such outstanding Options granted under this Section 5.
6. NON-TRANSFERABILITY
An Option granted to a participant under this Plan shall not be
transferable by him or her except: (i) by will; (ii) by the laws of descent and
distribution; or (iii) pursuant to a qualified domestic relations order as
defined by the Code or in Title I of the Employee Retirement Income Security
Act, or the rules thereunder. In the case of an Option intended to be an
Incentive Stock Option, such Option shall not be transferable by a participant
other than by will or the laws of descent and distribution and during the
optionee's lifetime shall be exercisable only by him or her.
7. EXERCISABILITY OF OPTIONS
Subject to the provisions of this Plan, Options granted under Section 4
hereof shall be exercisable at such time or times after the Grant Date for such
Options according to such schedule and upon such conditions as may be determined
by the Board or Committee at the time of grant, and an Option granted under
Section 5 hereof shall be exercisable in accordance with the provisions of
Section 5 hereof.
Any Option granted under Section 5 of this Plan and, unless otherwise
determined by the Board or the Committee at the time of grant or thereafter, any
Option granted under Section 4 of this Plan, shall terminate in full (whether or
not previously exercisable) prior to the expiration of its term on the date the
optionee ceases to be a director of the Company or an employee of the Company or
any Subsidiary of the Company, unless the optionee shall (a) die while a
director of the Company or an employee of the Company or such Subsidiary, in
which case the participant's legatee(s) under his or her last will or the
participant's personal representative or representatives may exercise all or
part of the previously unexercised portion of such Option at any time within one
year, but not beyond the expiration of its term, after the participant's death
to the extent the optionee could have exercised the Option immediately prior to
his or her death or in the amount purchasable under the Option immediately after
the death of the optionee, whichever is greater, (b) become permanently or
totally disabled within the meaning of section 22(e)(3) of the Code (or any
successor provision) while a director of the Company or an employee of the
Company or such Subsidiary, in which case the participant or his or her personal
representative may exercise the previously unexercised portion of such Option at
any time within one year, but not beyond the expiration of its term, after
termination of his or her employment or directorship to the extent the optionee
could have exercised the Option immediately prior to such termination, or (c)
resign or retire with the consent of the Company or have his or her employment
with the Company or any Subsidiary terminated by the Company or any Subsidiary
other than for cause (as defined below), in which case the participant may
exercise the previously unexercised portion of such Option at any time within
six months, but not beyond the expiration of its term, after the participant's
resignation, retirement or employment termination to the extent the optionee
could have exercised the Option immediately prior to such resignation,
retirement or employment termination.
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<PAGE> 43
For purposes of this Section 7, employment termination for "cause"
means termination of employment by reason of gross misconduct as determined by
the Board or Committee, which will include but not be limited to the following:
(i) the commission of dishonest acts involving the Company, (ii) disclosure of
confidential information of the Company, (iii) obvious intoxication (whether due
to alcohol, drugs or other substance abuse) on the job or possession of any
alcoholic substance or illegal drugs on the premises of the Company or any
Subsidiary, (iv) misuse of Company or Subsidiary assets (which shall include but
be limited to cash, equipment, and/or other assets), (v) repeated disregard for
the lawful policies of the Company as may be established from time to time and
communicated to the employee, or (vi) any misconduct specified in any employment
agreement to which the participant is a party that would justify the termination
of such participant's employment with the Company or any Subsidiary "for cause."
In no event may an Option be exercised after the expiration of its
fixed term.
8. METHOD OF EXERCISE
Each Option granted under the Plan shall be deemed exercised when the
holder (a) shall indicate the decision to do so in writing delivered to the
Company, (b) shall at the same time tender to the Company payment in full of the
exercise price for the shares for which the Option is exercised, which payment
may be made in cash or, if permitted by the Committee or the Board in its sole
discretion, in (i), shares of the Common Stock, the total market value of which
equals the total option price of the shares with respect to which the option is
being exercised, or (ii) any combination of cash and shares of the Common Stock,
the total market value of which equals the total option price of the shares with
respect to which the option is being exercised, and (c) shall comply with such
other reasonable requirements as the Board or Committee may establish; provided
that in order to enable an optionee (including but not limited to members of the
Board and officers) to exercise options granted under this Plan, the Board or
the Committee may determine, in the exercise of its sole discretion, to (i)
grant such optionee permission to pay the exercise price in installments or (ii)
grant such optionee permission to pay the exercise price by delivering for
cancellation Options having an aggregate value (calculated by subtracting the
exercise price per share from the fair market value of a share of Common Stock)
equal to the total amount of the exercise price. The exercise of any Option
granted under this Plan may be made subject to the condition that, if at any
time the Board or the Committee shall determine, in its sole discretion, that
the satisfaction of withholding tax or other withholding liabilities under any
state or federal law is necessary or desirable as a condition of, or in
connection with, such exercise or the delivery or purchase of shares pursuant
thereto, then in such event, the exercise of the Option shall not be effective
unless such withholding tax or other withholding liabilities shall have been
satisfied in a manner acceptable to the Company, which may, if permitted by the
Committee or the Board in its sole discretion, include the withholding by the
Company of shares of Common Stock to be issued upon exercise of an Option having
a fair market value equal to the required withholding amount. With respect to
the foregoing sentences, the value of the shares of Common Stock shall be the
fair market value determined in accordance with Section 4(d) of this Plan as of
the day of such payment or withholding.
No person, estate or other entity shall have any of the rights of a
shareholder with reference to shares subject to an Option until a certificate
for the shares has been delivered.
An Option granted under this Plan may be exercised for any lesser
number of shares than the full amount for which it could be exercised. Such a
partial exercise of an Option shall not affect the right to exercise the Option
from time to time in accordance with this Plan for the remaining shares subject
to the Option.
9. TERMINATION OF OPTIONS
An Option granted under this Plan shall be considered terminated in
whole or in part, to the extent that, in accordance with the provisions of this
Plan and such Option, it can no longer be exercised for any shares originally
subject to the Option. The shares subject to any terminated Option or portion
thereof shall no longer be charged against the applicable limitation or
limitations provided in Section 3 of this Plan and may again become shares
available for the purposes, and subject to the same applicable limitations, of
this Plan.
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<PAGE> 44
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding Common Stock of the
Company by reason of a stock dividend, stock split, stock consolidation,
recapitalization, reorganization, merger, split up or the like, the shares
available for purposes of this Plan, the shares to be covered by subsequent
grants under Section 5 hereof and the number and kind of shares under option in
outstanding option agreements pursuant to this Plan (and the option price under
such agreements) shall be appropriately adjusted so as to preserve, but not
increase, the benefits of this Plan to the Company and the benefits to the
holders of such Options; provided, however, that for any Incentive Stock
Options, in the case of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the excess of the
aggregate fair market value of the shares subject to any Options immediately
after such event over the aggregate option price of such shares is not more than
the excess of the aggregate fair market value of all shares subject to such
Options immediately before such event over the aggregate option price of such
shares.
Adjustments under this Section shall be made by the Board or Committee,
whose determination as to what adjustments shall be made and the extent thereof,
shall be final, binding and conclusive.
11. COMPLIANCE WITH SECURITIES LAWS AND OTHER REQUIREMENTS
No certificate(s) for shares shall be executed and delivered upon
exercise of an Option until the Company shall have taken such action, if any, as
is then required to comply with the provisions of the Securities Act of 1933, as
amended, the 1934 Act, any applicable state securities law(s) and the
requirements of any exchange or quotation system on which the Common Stock may,
at the time, be listed or quoted.
In the case of the exercise of an Option by a person or estate
acquiring the right to exercise the Option by bequest or inheritance, the Board
or Committee may require reasonable evidence as to the ownership of the Option
and may require such consents and releases of taxing authorities as it may deem
advisable.
12. NO RIGHT TO EMPLOYMENT
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, shall confer upon any
employee participant under the Plan any right to continue in the employ of the
Company, or upon any director participant under the Plan any right to continue
as a director of the Company, or shall in any way affect the right and power of
the Company to terminate the employment or position with the Company of any
participant under this Plan at any time with or without assigning a reason
therefor, to the same extent as the Company might have done if this Plan had not
been adopted.
13. AMENDMENT AND TERMINATION
Subject to Section 5 hereof, the Board or Committee may at any time
suspend, amend, or terminate this Plan. Except as provided in Sections 4(f) and
5(f) of this Plan, the Board or Committee may make such modifications of the
terms and conditions of a holder's Option as it shall deem advisable; provided,
however, that an Option granted under Section 5 of this Plan may not be modified
by the Board or Committee with respect to any term or condition thereof required
by Section 5 hereof. No Option may be granted during any suspension of the Plan
or after such termination. Notwithstanding the foregoing provisions of this
Section, no amendment, suspension or termination shall, without the consent of
the holder of an Option, alter or impair any rights or obligations under any
Option theretofore granted under the Plan.
In addition to Board or Committee approval of an amendment, if the
amendment would: (i) materially increase the benefits accruing to participants;
(ii) increase the number of securities issuable under this Plan (other than an
increase pursuant to Section 10 hereof); (iii) change the class or classes of
individuals eligible to receive Options; or (iv) otherwise materially modify the
requirements for eligibility,
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<PAGE> 45
then such amendment must be approved by the holders of a majority of the
Company's outstanding capital stock present or represented by proxy and entitled
to vote at a meeting duly held of the shareholders of the Company.
14. USE OF PROCEEDS
The proceeds received by the Company from the sale of shares pursuant
to the exercise of Options granted under the Plan shall be used for general
corporate purposes as determined by the Board.
15. INDEMNIFICATION OF BOARD OR COMMITTEE
In addition to such other rights of indemnification as they may have as
members of the Board, the members of the Board or Committee shall to the fullest
extent permitted by law be indemnified by the Company against the reasonable
expenses, including attorney's fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided the settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such Board
member or Committee member is liable for gross negligence or misconduct in the
performance of his duties; provided, however, that within 60 days after
institution of any such action, suit or proceeding the Board member or Committee
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
16. EFFECTIVE DATE OF THE PLAN
This Plan was adopted by the Board of the Company on June 25, 1996, and
shall be effective until June 25, 2006, subject to its approval by the
appropriate stockholder vote at a special meeting called for such purpose or at
the next ensuing annual meeting of stockholders of the Company.
17. DURATION OF THE PLAN
Unless previously terminated by the Board or Committee, this Plan shall
terminate at the close of business on June 25, 2006, and no Option shall be
granted under it thereafter, but such termination shall not affect any Option
previously granted under this Plan.
18. COMPLIANCE WITH RULE 16b-3
With respect to any Plan participant who is subject to Section 16 of
the 1934 Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the
extent that any provision of the Plan or action by the Board or Committee fails
to so comply, such provision or action shall be deemed null and void to the
extent permitted by law and deemed advisable by the Board or Committee.
19. CHANGE OF CONTROL
In the event of a change of control of the Company, all vesting
requirements in respect of Options granted under this Plan shall be terminated
and all outstanding Options shall become immediately exercisable at their stated
exercise prices. From and after the date of such change of control, all such
Options shall be deemed fully vested. For the purposes of this Section, a change
of control shall include the following:
a. A tender offer or exchange offer is made whereby the effect
of such offer is to take over and control the affairs of the Company
and such offer is consummated for the
B-8
<PAGE> 46
ownership of securities of the Company representing 25% or more of the
combined voting powers of the Company's then outstanding voting
securities.
b. The adoption by the Company's stockholders of a plan of
merger or consolidation providing for the merger or consolidation of
the Company with another corporation and, as a result of such merger or
consolidation, less than 75% of the outstanding voting securities of
the surviving or resulting corporation would then be owned in the
aggregate by the former stockholders of the Company, other than
affiliates within the meaning of the 1934 Act or any party to such
merger or consolidation.
c. The Company transfers substantially all of its assets to
another corporation or entity which is not a wholly owned subsidiary of
the Company.
d. Any "person" (as such term is used in Sections 3(a)(9) and
13(d)(3) of the 1934 Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding securities,
and the effect of such ownership is to take over and control the
affairs of the Company.
e. As the result of a tender offer, merger, consolidation,
sale of assets, or contested election, or any combination of such
transactions, the persons who were members of the Board of Directors of
the Company immediately before the transaction, cease to constitute at
least a majority thereof.
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<PAGE> 47
[COMPANY LOGO]
<PAGE> 48
ELITE INFORMATION GROUP, INC.
REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS
to be held on June 22, 2000
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Christopher K. Poole, Barry D. Emerson and
Steven O. Todd as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated on the
reverse side, all the shares of common stock of Elite Information Group, Inc.
(the "Company"), held at record by the undersigned on May 5, 2000 at the
annual meeting of stockholders to be held on June 22, 2000, or any adjournment
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS AND THIS
PROXY WILL BE VOTED FOR THE PROPOSALS AND FOR THE ELECTION OF THE DIRECTOR
NOMINEES NAMED HEREIN UNLESS THE STOCKHOLDER DIRECTS OTHERWISE, IN WHICH CASE
IT WILL BE VOTED AS DIRECTED.
The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement dated May 18, 2000, and revokes all proxies heretofore given by the
undersigned.
- -------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please sign exactly as name(s) appear(s) on the reverse. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
- -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
___________________________________ _______________________________________
___________________________________ _______________________________________
___________________________________ _______________________________________
<PAGE> 49
[X] PLEASE MARK YOUR VOTE
AS IN THIS EXAMPLE
- -------------------------------------------------------------------------------
ELITE INFORMATION GROUP, INC.
- -------------------------------------------------------------------------------
Mark box at right if an address change or comment has been noted on
the reverse side of this card. [ ]
CONTROL NUMBER:
RECORD DATE SHARES:
1. Election of two Directors. For All With- For All
Nominees hold Except
(01) Christopher K. Poole [ ] [ ] [ ]
(02) Roger Noall
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the name of the nominee.
Your shares will be voted for the remaining nominee.
For Against Abstain
2. Proposal to approve the Company's 2000 [ ] [ ] [ ]
Employee Stock Purchase Plan.
3. Proposal to approve an amendment to the [ ] [ ] [ ]
Company's 1996 Stock Option Plan.
4. Proposal to ratify the selection of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the
Company's independent accountants.
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
------------------------------
Please be sure to sign and date this Proxy. Date
- -------------------------------------------------------------------------------
- ----------Stockholder sign here--------------------Co-owner sign here----------
DETACH CARD DETACH CARD
