<PAGE> 1
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>
Precision Systems, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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
[PRECISION SYSTEMS LOGO]
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Precision Systems, Inc. (the "Company") to be held at the Tampa Bay Conference
Center, 6152 126th Avenue, Largo, Florida 34643, on June 13, 1996, at 2 p.m.
Eastern Time.
Matters to be considered and acted upon at the Annual Meeting include: (i)
the election of directors; (ii) First Amendment to the Stock Option Plan for
Outside Directors; (iii) Second Amendment to the Stock Option Plan for Outside
Directors; (iv) Second Amendment to the Employee Stock Option and Restricted
Stock Plan and (v) such other matters as may properly come before the Annual
Meeting.
Information concerning the matters to be considered and voted upon at the
Annual Meeting is set forth in the enclosed Proxy Statement. We encourage you to
review this material carefully; then sign, date, and return the proxy card in
the enclosed self-addressed envelope.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE,
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD.
We appreciate your cooperation and hope to see you at the Annual Meeting.
Sincerely,
/s/ John R. Hindman
-------------------
JOHN R. HINDMAN
Secretary
<PAGE> 3
PRECISION SYSTEMS, INC.
11800 30TH COURT, NORTH
ST. PETERSBURG, FLORIDA 33716
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 1996
---------------------
To Stockholders of Precision Systems, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Precision
Systems, Inc. (the "Company") will be held at the Tampa Bay Conference Center,
6152 126th Avenue, Largo, Florida 34643, on June 13, 1996, at 2 p.m. Eastern
Time for the following purposes:
1. To elect five directors of the Company to hold office until the next
Annual Meeting of Stockholders or until their successors have been duly
elected.
2. To approve the First Amendment to the Stock Option Plan for Outside
Directors.
3. To approve the Second Amendment to the Stock Option Plan for Outside
Directors.
4. To amend Section 5(a) of the Employee Stock Option and Restricted Stock
Plan (the "Employee Plan") to increase the aggregate number of shares
that are available for issuance under the Employee Plan to 4,000,000
from 3,000,000 shares;
5. To act upon, as determined in the best judgment of the Secretary of the
Company, who will serve as the proxy agent, such other matters as may
properly come before the Annual Meeting.
The close of business on May 3, 1996, has been fixed as the record date for
the meeting. All stockholders of record at that date are entitled to vote at the
meeting. A list of stockholders of record as of the record date will be
available for examination by stockholders prior to the Annual Meeting at the
offices of the Company, 11800 30th Court, North, St. Petersburg, Florida 33716.
By the Order of the Board of Directors
/s/ John R. Hindman
-------------------
John R. Hindman
Secretary
St. Petersburg, Florida
May 10, 1996
ALL HOLDERS OF COMMON STOCK AND CLASS B COMMON STOCK ARE URGED TO FILL IN AND
SIGN THE ENCLOSED PROXY AND RETURN IT TO THE COMPANY WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. PLEASE SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. IF YOU SHOULD BE PRESENT AT THE MEETING AND
DESIRE TO VOTE IN PERSON OR FOR ANY REASON DESIRE TO REVOKE YOUR PROXY, YOU MAY
DO SO AT ANY TIME BEFORE IT IS VOTED.
PLEASE SIGN YOUR PROXY CARD AS YOUR NAME APPEARS ON THE PROXY CARD.
<PAGE> 4
PRECISION SYSTEMS, INC.
11800 30TH COURT, NORTH
ST. PETERSBURG, FLORIDA 33716
---------------------
PROXY STATEMENT
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 13, 1996
---------------------
SOLICITATION OF PROXY, REVOCABILITY, AND VOTING
GENERAL
This Proxy Statement is being furnished to holders of Common Stock and
Class B Common Stock and is solicited on behalf of the Board of Directors of
Precision Systems, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on June 13, 1996 and at any
adjournments or postponements thereof. Only stockholders of record on May 3,
1996, will be entitled to vote at that meeting. On March 31, 1996, the Company
had 11,505,549 shares of Common Stock and 2,415,945 shares of Class B Common
Stock issued and outstanding.
The Company's principal executive offices are located at 11800 30th Court
North, St. Petersburg, Florida 33716. The approximate date on which the Proxy
Statement, the Notice of Annual Meeting of Stockholders, and the accompanying
proxy are first being sent to stockholders is May 10, 1996.
Representatives from the Company's independent accountants, Deloitte &
Touche LLP, will be present at the meeting and will be available to respond to
appropriate questions and make statements as they may desire.
VOTING
All shares of Common Stock and Class B Common Stock that are represented at
the Annual Meeting by properly executed proxies received prior to or at the
Annual Meeting, and not revoked, will be voted at the Annual Meeting in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such proxies will be voted in favor of each of the proposals
listed on the Proxy. The Board does not know of any other matters that are to
come before the Annual Meeting. If any other matters are properly presented at
the Annual Meeting for consideration, the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
Each share of Common Stock entitles its holder to one vote, and each share
of Class B Common Stock entitles its holder to ten votes, voting together with
the Common Stock as one class, on the matters to be considered by stockholders
at the Annual Meeting. The presence at the Annual Meeting, either in person or
by proxy, of the holders of a majority of the outstanding voting shares on the
record date is necessary to constitute a quorum for the transaction of business.
The owners of Common Stock are entitled, however, to elect 25 percent of the
directors voting as a separate class, rounded up to the next whole director.
Accordingly, holders of Common Stock, voting as a separate class, shall elect
two directors. The holders of Common Stock and the holders of Class B Common
Stock shall together elect three directors, with the Class B stockholders
casting ten votes for each share of Class B Common Stock owned by such
stockholders. Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting. Each is tabulated
separately. Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders and have the same legal effect as a vote
against a particular proposal, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved. If sufficient
votes in favor of the proposals presented to the stockholders are not received
by the date of the Annual Meeting, the person(s) named as proxies may propose
one or more adjournments of the Annual Meeting to permit further
<PAGE> 5
solicitation of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares of Common Stock and Class B Common
Stock present in person or by proxy at the Annual Meeting. The person(s) named
as proxies will vote in favor of any such adjournment.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. It may be revoked by
filing with the Secretary of the Company an instrument of revocation or by the
presentation at the meeting of a duly executed proxy bearing a later date. It
also may be revoked by attendance at the meeting and election to vote in person.
SOLICITATION
Expenses incurred in connection with the solicitation of proxies will be
paid by the Company. Upon request, the Company will reimburse brokers, dealers,
and banks or their nominees, for reasonable expenses incurred in forwarding
copies of the proxy materials to the beneficial owners of shares which such
persons hold of record. Solicitation of proxies will be made principally by
mail. Proxies may also be solicited in person, or by telephone or otherwise, by
directors, officers and other employees of the Company. Such directors, officers
and other employees will not be additionally compensated; however, they may be
reimbursed for out-of-pocket expenses in connection with such solicitation.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
BOARD OF DIRECTORS
The Board of Directors of the Company held seven meetings during fiscal
1995. In addition, the Board of Directors acted by unanimous written consent on
four occasions. The Board of Directors has two committees -- the Audit Committee
and the Compensation and Benefits Committee.
During the fiscal year ended August 31, 1995, all directors attended at
least 75 percent of the meetings of the Board of Directors and all committees of
the Board of Directors of which they were members.
AUDIT COMMITTEE
The Audit Committee, which currently consists of Hector Alcalde (serving as
Chairman of the Committee), John D. Loewenberg, and Bert Kolde, is empowered to
recommend to the Board of Directors independent certified public accounting
firms for selection as auditors of the Company; make recommendations to the
Board on auditing matters; examine and make recommendations to the Board
concerning the scope of audits; review and approve the terms of transactions
between the Company and related party entities; and review such other matters as
may be properly delegated to it by the Board of Directors. During the fiscal
year ended August 31, 1995, the Audit Committee met one time.
COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits Committee, which currently consists of
Kwang-I Yu (serving as Chairman of the Committee), John D. Loewenberg, and
Richard T. Liebhaber, is empowered to make recommendations to the Board of
Directors with respect to executive salaries and bonuses and administers the
Company's Employee Stock Option and Restricted Stock Plan (the "Employee Plan").
During the fiscal year ended August 31, 1995, the Compensation and Benefits
Committee met five times.
COMPENSATION OF DIRECTORS
The Company pays an annual fee of $10,000 ($2,500 per quarter) to each
director not employed as an officer of the Company. It also pays each director
not employed as an officer of the Company $1,000 for each meeting of the Board
of Directors which he or she attends in person or $500 for each telephonic
conference,
2
<PAGE> 6
plus reimbursement for all reasonable expenses incurred by such director in
connection with his or her attendance at any meeting of the Board of Directors.
Furthermore, the Company pays each member of a committee of the Board of
Directors not employed by the Company as an officer $1,000 for each meeting of a
committee of the Board of Directors which he or she attends in person, or $500
for each telephonic conference, plus reimbursement for any expenses incurred in
connection with his or her attendance at any committee meeting. The outside
directors of the Company also participate in the Stock Option Plan for Outside
Directors (the "Plan") pursuant to which each outside director has been granted
an option to purchase 25,000 shares of Common Stock (see discussion to follow
regarding proposed First and Second Amendments to the Directors' Plan that are
to be voted upon by the Company's Shareholders). During fiscal 1995, Bert Kolde
was granted an option to purchase 25,000 shares at an exercise price of $4.625
per share, and Richard T. Liebhaber was granted an option to purchase 25,000
shares at an exercise price of $7.375 per share, in each case the fair market
values of the stock on the date of grant.
Under the Plan, options to purchase up to 500,000 shares of Common Stock
may be granted to directors who are not employees of the Company. The Plan
provides that each director who is not a full-time employee of the Company shall
automatically be granted an option to purchase 25,000 shares of Common Stock
either on the day the director is first elected to the Board; or for those
directors elected prior to July 31, 1992, on that date (see discussion to follow
regarding proposed First and Second Amendments to the Directors' Plan that are
to be voted upon by the Company's Shareholders). The exercise price for options
issued under the Plan is to be equal to the fair market value of Common Stock on
the date prior to the date of grant or, in the case of options granted as of
July 31, 1992, the average of the last sale prices for the ten trading days
immediately following July 31, 1992. The closing price for the Company's Common
Stock on July 31, 1992, was $2.50 per share.
Options granted under the Plan are subject to the terms of a stock option
agreement and vest and become exercisable equally over three years beginning on
the date of grant. All options expire five years from the date of grant. Options
granted under the Plan expire 30 days after the resignation of a director from
the Board of Directors. The number of shares issuable under the Plan and the
exercise price for options granted under the Plan are subject to adjustment as
the result of stock splits, stock dividends, recapitalizations or mergers or
other similar changes affecting the number of outstanding shares of Common
Stock. No options may be granted under the Plan after the tenth anniversary of
its adoption.
Under the terms of a stock purchase agreement dated April 5, 1995 between
the Company and Vulcan Ventures Incorporated ("Vulcan"), the Company agreed to
cause one person designated by Vulcan to be nominated for election to the Board
of Directors of the Company provided Vulcan owns at least 1,000,000 shares of
Common Stock. Mr. Kolde is Vulcan's nominee. In addition, in connection with the
Company's purchase of a controlling interest in Vicorp N.V., the Company agreed
to use its best efforts to nominate for election to the Board of Directors of
the Company one person designated by Primwest Holding N.V. ("Primwest"),
formerly the controlling shareholder of Alta Investissments S.A., which in turn
was the controlling shareholder of Vicorp N.V., for so long as Primwest is the
holder of record of at least ten percent of the outstanding Common Stock.
Primwest has not designated a nominee to stand for election at the annual
meeting. It is expected, however, that in the event Primwest designates a person
as its nominee prior to the next annual meeting of shareholders, the size of
Board of Directors would be expanded and such nominee selected to fill the
vacancy so created to serve, subject to the Bylaws, until the next annual
meeting of stockholders.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
RUSSELL I. PILLAR, 30, has been President and Chief Executive Officer of
the Company since December 20, 1993, and has been a member of the Company's
Board of Directors since August 1992. Mr. Pillar was a founding partner of
Critical Mass, an investment partnership which provides strategic planning and
related advisory services to emerging technology companies, and served in such
position with Critical Mass and its predecessor companies from 1991 through
1993. From 1989 through 1991 he served in a number of executive positions, most
recently as President, with Japanese Capital Affiliates, Inc., an international
merchant bank. In
3
<PAGE> 7
addition to his service as a Director of the Company, Mr. Pillar is a Director
of Silver King Communications, Inc. and Parcel, Inc. He also is a Director of
Suncoast Ronald McDonald House, Inc., and is a Director Emeritus of Eyecycle,
Inc., two non-profit organizations.
KWANG-I YU, PH.D., 46, joined the Company as a member of the Board of
Directors in June 1994. Dr. Yu, who received a Ph.D. in Computer Science from
the California Institute of Technology, is President of Paracel, Inc., a leader
in the development of on-line publishing and information service technologies.
Prior to founding Paracel, Dr. Yu was a TRW Fellow and headed TRW's high-speed
computing research and development effort.
HECTOR ALCALDE, 62, joined the Company as a member of the Board of
Directors in January 1994. In 1973, Mr. Alcalde founded the firm Alcalde & Fay,
a government and public affairs consulting firm in Washington, D.C., and serves
as its President and Chief Executive Officer. He has provided consulting
services to numerous national and international organizations and has served on
many public and corporate boards.
BERT KOLDE, 42, was appointed to the Company's Board of Directors in June
1995. Mr. Kolde has been a member of The Paul Allen Group since 1994. Prior to
joining The Paul Allen Group, Mr. Kolde was President of Asymetrix Corporation
from 1993 to 1994. From 1985 to 1993, Mr. Kolde was Executive Vice President at
Asymetrix. Mr. Kolde currently is Vice Chairman and Director of The Portland
Trail Blazers and is a Director of Asymetrix Corporation, The Oregon Arena
Corporation, and Metatools Inc.
RICHARD T. LIEBHABER, 61, was appointed to the Company's Board of Directors
in June 1995. From 1985 to 1995 Mr. Liebhaber was with MCI Telecommunications,
Inc., where he most recently served as its Chief Strategy and Technology Officer
and as a member of its Management Committee and its Board of Directors. He was
the founding Chairman of Prodigy, the on-line computer service, and served on
that board for more then ten years. Mr. Liebhaber also is a Director of Geotek
Communications; Alcatel Network Systems, U.S.; Objective Communications Company;
and Scholz Design, Inc.
EXECUTIVE OFFICERS
The following is a list of the current executive officers of the Company
who do not serve on the Board of Directors:
MICHAEL T. FELIX, 42, joined the Company in May 1992 and currently serves
as Senior Vice President responsible for strategic planning. From 1982 to 1992
he was with U.S. Sprint and its predecessor companies, U.S. Telecom and ISACOMM.
During his tenure there, he held various management positions in engineering,
marketing, and sales support. His last position at Sprint was Director of
Opportunity Management.
JOHN R. HINDMAN, 47, joined the Company in October 1993 and currently
serves as Senior Vice President responsible for operations. He also serves as
the Company's Treasurer and Chief Financial Officer. Prior to joining the
Company, Mr. Hindman spent six years with Kimmins Environmental Service Corp. of
Tampa, where he held the position of Chief Financial Officer.
ALAN R. DONAHUE, 43, joined the Company in November 1995 and currently
serves as Senior Vice President for sales. Prior to joining the Company, Mr.
Donahue spent one year with Oracle Corporation where he held the position U.S.
Wireless Alliance Manager. Prior to Oracle, Mr. Donahue was with Tandem Computer
Company for five years where he held the position of Wireless Solutions Group
Leader.
KENNETH M. CLINEBELL, 34, joined the Company in January 1994 and currently
serves as Vice President of Finance and Controller. Prior to joining the
Company, Mr. Clinebell spent five years at Kimmins Environmental Service Corp.
of Tampa, where he held the position of Controller. Prior to Kimmins, Mr.
Clinebell was with Laventhol & Horwath, CPAs for five years, where he held the
position of Manager in the firm's audit and accounting division.
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and accompanying footnotes set forth information
concerning ownership of the Company's Common Stock as of April 16, 1996. The
table also shows information concerning beneficial ownership by all directors
and nominees, by each of the current executive officers named in the Summary
Compensation Table (the "Summary Compensation Table") that follows, and by all
directors and executive officers as a group. The number of shares beneficially
owned by each director or executive officer is determined under rules of the
Securities and Exchange Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares to which the individual has the sole or
shared voting power or investment power and also any shares which the individual
has the right to acquire within sixty days of March 31, 1996, through the
exercise of any stock option or other right. Unless otherwise indicated, each
person has sole investment and voting power (or shares such powers with his or
her spouse) with respect to the shares set forth in the following table:
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF SHARES OF CLASS
--------------------------------------------------------------- ---------- --------
<S> <C> <C>
Alta Investissments SA......................................... 2,808,392 19.61
8 boulevard Emmanuel Servais
L-2535 Luxembourg
Vulcan Ventures Incorporated................................... 2,750,000 19.20
110-110th Avenue, N.E.
Suite 530
Bellevue, Washington 98004
Roy M. Speer(1)................................................ 119,601 0.08
P. O. Box F41414
Freeport, Bahamas
RMS Limited Partnership(2)..................................... 347,114 2.42
50 West Liberty Street
Suite 650
Reno, Nevada 89501
John D. Loewenberg............................................. 25,000 *
Russell I. Pillar(4)........................................... 448,561 3.13
Hector Alcalde(5).............................................. 27,300 *
Bert Kolde(6).................................................. 8,334 *
Richard T. Liebhaber(6)........................................ 8,434 *
Kwang-I Yu(5).................................................. 16,667 *
Michael T. Felix(7)............................................ 111,035 *
John R. Hindman(8)............................................. 104,367 *
All officers and directors as a group (eight persons).......... 749,698 5.23
</TABLE>
The following tables sets forth information relating to the beneficial
ownership of the Company's Class B Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER PERCENT
OF BENEFICIAL OWNER OF SHARES OF CLASS
------------------------------------------------------------------ --------- --------
<S> <C> <C>
RMS Limited Partnership(2)(3)..................................... 2,415,945 100.00
50 West Liberty Street
Suite 650
Reno, Nevada 89501
</TABLE>
5
<PAGE> 9
The following table sets forth information relating to the beneficial
ownership of the Company's Series A Preferred Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER PERCENT
OF BENEFICIAL OWNER OF SHARES OF CLASS
------------------------------------------------------------------ --------- --------
<S> <C> <C>
RMS Limited Partnership(3)........................................ 10,000 100.00
50 West Liberty Street
Suite 650
Reno, Nevada 89501
</TABLE>
- ---------------
* Represents less than 1 percent
(1) Does not include 409,265 shares of Common Stock held by Richard W. Baker, as
Trustee for the Roy M. Speer Foundation, for which Mr. Speer disclaims
beneficial ownership. Does not include shares of Common Stock, Class B
Common Stock, or Series A Preferred Stock held by RMS Limited Partnership
or shares of Common Stock into which the Class B Common Stock or Series A
Preferred Stock may be converted. Does not include shares of Common Stock
held by Richard W. Baker, as Trustee for certain irrevocable trusts
established for the benefit of certain members of Roy M. Speer's family.
Mr. Speer and RMS Limited Partnership disclaim beneficial ownership of such
shares.
(2) Does not include shares of Common Stock held by Richard W. Baker, as Trustee
for certain irrevocable trusts established for the benefit of certain
members of Roy M. Speer's family. Does not include shares of Common Stock
held directly by Roy M. Speer or the Roy M. Speer Foundation. RMS Limited
Partnership is a limited partnership organized under the laws of the State
of Nevada, the managing general partner of which is Crystal Diamond, Inc.
Roy M. Speer is the sole stockholder of Crystal Diamond, Inc., and the
non-managing general partner of RMS Limited Partnership. Richard W. Baker,
as Trustee under an InterVivos Trust agreement dated January 1, 1967, with
Roy M. Speer, is a limited partner of RMS Limited Partnership. All or any
portion of the outstanding shares of Class B Common Stock may be converted
at any time into an equal number of shares of Common Stock. Upon conversion
of the Class B Common Stock, RMS Limited Partnership would own, in total,
2,763,059 shares of Common Stock or approximately 16.5 percent of the
class. All or any portion of Series A Preferred Stock may be converted at
any time following December 31, 1994, into shares of Common Stock at a
conversion price of $4.76 per share. The shares of Series A Preferred Stock
may be converted into 1,218,487 shares of Common Stock or approximately 6.8
percent of the class. Assuming conversion of all the outstanding shares of
Class B Common Stock and Series A Preferred Stock, RMS Limited Partnership
would own 3,981,546 shares, representing approximately 22.17 percent of the
class. Mr. Speer and Crystal Diamond, Inc., share beneficial ownership of
the Common Stock, Class B Common Stock, and Series A Preferred Stock held
by RMS Limited Partnership.
(3) Does not include shares of Common Stock beneficially owned by Roy M. Speer,
Crystal Diamond, Inc., or RMS Limited Partnership.
(4) Does not include non-vested options to purchase 136,668 shares of Common
Stock granted pursuant to the Company's Employee Stock Option and
Restricted Stock Plan. Additionally, does not include 10,457 vested shares
of Restricted Stock of which 5,229 shares cannot be sold until October
1996, and 5,228 shares which cannot be sold until October 1997.
(5) Does not include non-vested options to purchase 8,333 shares of Common Stock
granted pursuant to the Company's Stock Option Plan for Outside Directors.
(6) Does not include non-vested options to purchase 16,666 shares of Common
Stock granted pursuant to the Company's Stock Option Plan for Outside
Directors.
(7) Does not include non-vested options to purchase 36,667 shares of Common
Stock granted pursuant to the Company's Employee Stock Option and
Restricted Stock Plan. Additionally, does not include 3,921 vested shares
of Restricted Stock of which 1,961 shares cannot be sold until October 1996
and 1,960 shares which cannot be sold until October 1997.
(8) Does not include non-vested options to purchase 29,334 shares of Common
Stock granted pursuant to the Company's Employee Stock Option and
Restricted Stock Plan. Additionally, does not include 3,921 vested shares
of Restricted Stock of which 1,961 shares cannot be sold until October 1996
and 1,960 shares which cannot be sold until October 1997.
6
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides information on the compensation received by
the Chief Executive Officer ("CEO") and the two other highly compensated
executive officers (the "Executive Officers") for the years ended August 31,
1995, 1994, and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
--------------------------------- COMPENSATION AWARDS
OTHER ---------------------
ANNUAL RESTRICTED ALL OTHER
NAME AND FISCAL COMPENSA- STOCK OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS ($) TION ($) AWARD($) SARS ($)
- -------------------------------------- ------ --------- --------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Russell I. Pillar -- President, Chief
Executive Officer................... 1995 166,846 -- -- -- 45,000 --
1994 127,616 30,000 7,296(2) -- 510,000 --
1993(1) -- -- -- -- -- --
Michael T. Felix -- Senior Vice
President........................... 1995 134,365 -- -- -- 25,740 --
1994 113,847 19,500 -- -- 75,000 --
1993 130,000 -- 6,063(2) -- -- --
John R. Hindman -- Senior Vice
President and Chief Financial
Officer............................. 1995 128,219 -- -- -- 25,740 --
1994(3) 88,588 19,500 -- -- 105,000 --
1993 -- -- -- -- -- --
</TABLE>
- ---------------
(1) Mr. Pillar's employment commenced in December 1993. As a result, no
information regarding compensation prior to such date is provided herein.
(2) Represents relocation expense reimbursement.
(3) Mr. Hindman's employment commenced in October 1993. As a result, no
information regarding compensation prior to such date is provided herein.
The following table summarizes stock options granted to the Executive
Officers in fiscal 1995. The amount shown as potentially realizable values of
these options are based on assumed annual rates of appreciation in the price of
the Company's Common Stock of 5 and 10 percent over the terms of the options and
are not intended to forecast future appreciation of the Company's stock price:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ----------------------
NAME AND PRINCIPAL POSITION GRANTED(1) FISCAL YEAR PRICE(2) DATE 5 PERCENT 10 PERCENT
- -------------------------------------------- ---------- -------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Russell I. Pillar --
President, Chief Executive Officer........ 45,000 8.26% $ 2.50 10/05/00 $45,799 $106,731
Michael T. Felix --
Senior Vice President..................... 25,740 4.72% $ 2.50 10/05/00 $25,444 $ 59,295
John R. Hindman --
Senior Vice President and Chief Financial
Officer................................... 25,740 4.72% $ 2.50 10/05/00 $25,444 $ 59,295
</TABLE>
- ---------------
(1) Under the terms of the Employee Stock Option and Restricted Stock Option
Plan, the Compensation and Benefits Committee retains discretion, subject
to plan limits, to modify the terms of outstanding options and to reprice
such options.
(2) Options were granted at an exercise price equal to the closing price of the
Common Stock on the date prior to the date of grant.
(3) Fair market value of stock on grant date compounded annually at the rates
shown in column heading, for option term, less total exercise price. These
rates of appreciation are mandated by the rules of the
7
<PAGE> 11
Securities and Exchange Commission, and do not represent an estimate or
projection of future prices for the Company's Common Stock.
The following table summarizes the net value realized on the exercise of
options in fiscal 1995, and the value of outstanding options as of August 31,
1995, for the named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- --------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
- ------------------------ ----------- ----------- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Russell I. Pillar....... -- -- 387,498 192,502 $1,990,178 $ 982,823
Michael T. Felix........ -- -- 101,204 49,536 $ 499,424 $ 258,693
John R. Hindman......... -- -- 55,536 75,204 $ 362,500 $ 224,361
</TABLE>
- ---------------
(1) Difference between the fair market value of the underlying Common Stock and
the exercise price, for in-the-money options, on August 31, 1995.
Compensation of the Chief Executive Officer ("CEO") was determined based on
negotiations by the CEO and the Compensation and Benefits Committee and ratified
by the Board of Directors. The Compensation and Benefits Committee considered
two independent studies, by William M. Mercer, Inc. and Pearl Meyer Associates,
among other factors, as a basis for determining the CEO's compensation package.
The CEO is also eligible for the payment of a discretionary annual bonus for
achieving revenue and other performance criteria. These criteria will be
determined and mutually agreed to by the CEO and the Compensation and Benefits
Committee of the Board of Directors. During the fourth quarter of fiscal 1995,
the CEO's annual base salary was modified such that the CEO's annual base salary
was increased to $200,000 (from $120,000 as voluntarily negotiated by the CEO
and the Compensation and Benefits Committee as a means of maximizing the
Company's short-term cash flow during fiscal 1994). During fiscal 1995, no bonus
was paid to or accrued for the benefit of the CEO.
COMPENSATION AND BENEFITS COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board of Directors (the
"Committee") is responsible for reviewing and approving the compensation
arrangements for each of the Company's executive officers and the individual
managers reporting directly to the CEO and for granting of options to purchase
shares of Common Stock under the Company's Employee Stock Option and Restricted
Stock Plan. The goal of the Committee is to maintain executive compensation
programs and policies which enable the Company to attract and retain the
services of highly-qualified executives. Awards of incentive compensation in the
form of discretionary cash bonuses and periodic grants of stock options and/or
restricted stock grants are designed to reward and incentivize individual
initiative and achievement.
SALARY
In 1992 the Company undertook to establish a salary program in connection
with William M. Mercer, Inc., a compensation consulting firm. They reviewed the
salary practices of various industry groups in the local Tampa/St. Petersburg
market, the southeastern region, and nationally. In addition, in July 1995, the
Committee updated such study with additional work by Pearl Meyer Associates,
which explored industry comparables in depth. Based on these studies, the
Company established a salary grade matrix which includes matrices for merit and
promotional increases which were set at the median compensation amounts
identified in the study. Salaries paid to executive officers are based upon the
Committee's subjective assessment of the nature of the position, individual and
corporate performance, individual experience and expertise, attainment of
specific performance-related targets, and Company tenure of the executive. All
salary recommendations of
8
<PAGE> 12
the individuals reporting directly to the CEO are presented by the CEO to the
Committee, which is responsible for approving or disapproving those
recommendations.
INCENTIVE BONUS
Near the beginning of each fiscal year, the Board asks the CEO to submit to
the Committee a strategic and tactical plan for the coming fiscal year.
Following each fiscal year, the CEO develops individual bonus recommendations
for executives based upon the CEO's evaluation of each executive's contribution
to the Company. No specific formula is used; however, the CEO and the Committee
review factors which may include achieving specific objectives developed by the
executive and the CEO relating to achievement of budgeted goals of revenue,
profitability, new product development, cost containment, new customer
development, and other similar factors. Such factors are linked to specific
performance related targets and given specific weight. During fiscal 1995, no
bonuses were paid to or accrued for the benefit of the CEO or other executives
of the Company.
STOCK OPTIONS AND RESTRICTED STOCK
The Committee is authorized to grant incentive and non-qualified stock
options, as well as restricted stock grants, to key employees of the Company,
including executives. Such grants are intended to provide additional long-term
incentive to key employees. No specific formula is used to determine grants made
to any particular person (including executives); however, grants are based
generally on factors such as the length of employment, promotion, contribution
toward Company performance, and expected contribution toward meeting long-term
strategic goals of the Company, together with a review of outstanding options or
restricted stock grants. The Company has adopted guidelines regarding
appropriate stock option grants for employees. Option grants typically vest over
a five-year period and expire at the end of ten years. During the year ended
August 31, 1995, 544,988 options to purchase the Company's Common Stock were
granted to the Company's key employees, including executives.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Compensation of the CEO was determined based on negotiations by the CEO and
the Compensation Committee and ratified by the Board of Directors. The Chairman
of the Board and the Compensation Committee considered the compensation studies
among other factors, as a basis for determining the CEO's compensation package.
The CEO is also eligible for the payment of a discretionary annual bonus for
achieving revenue and other performance criteria. These criteria will be
determined and mutually agreed to by the CEO and the Chairman of the Board and
will be ratified by the Committee. During the fourth quarter of fiscal 1995, the
CEO's annual base salary was modified such that the CEO's annual base salary was
increased to $200,000 (from $120,000 as voluntarily negotiated by the CEO and
the Committee as a means of maximizing the Company's short-term cash flow during
fiscal 1994). During fiscal 1995, no bonus was paid to or accrued for the
benefit of the CEO.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue code, enacted in 1993, generally
disallows tax deduction to public companies for compensation over $1 million
paid to the corporation's Chief Executive Officer and four other most highly
compensated Executive Officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. The
Committee intends to consider the provisions of Section 162(m) in connection
with the performance-based portion of the compensation of its executives (which
currently consists of stock option grants, restricted stock grants, and annual
bonuses described above); however, the Committee does not necessarily intend to
structure compensation to its executives to avoid disallowance of any tax
deductions in the future in light of the Company's current net
9
<PAGE> 13
operating losses and the necessity to meet all of the requirements imposed by
Section 162(m) and the proposed regulations thereunder for compensation fully to
be deductible for federal income tax purposes.
Members of the Compensation and Benefits
Committee
Kwang-I Yu, Chairman
John D. Loewenberg
Richard T. Liebhaber
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1995, the Company issued 7,596 shares of restricted stock to
Hector Alcalde, a director of the Company, in exchange for consulting services
rendered.
STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative stockholder return on
its Common Stock since its spin off from Home Shopping Network, Inc., on July
31, 1992, through August 31, 1995, with the return on the NASDAQ Market Index,
the S&P 500 Index, and the S&P High Technology Composite Index. To date, no
dividends have been paid with respect to the capital stock of the Company.
[GRAPH]
<TABLE>
<CAPTION>
7/31/92 8/31/92 8/31/93 8/31/94 8/31/95
<S> <C> <C> <C> <C> <C>
Precision Systems, Inc. 100.00 35.00 215.00 122.50 285.00
NASDAQ Market Index 100.00 95.28 152.06 156.72 208.81
S&P 500 Index 100.00 97.94 109.19 114.13 131.47
S&P High Technology Composite Index 100.00 94.08 112.69 139.07 203.16
</TABLE>
Assumes $100 invested at the close of trading on July 31, 1992.
The stock price performance information shall not be deemed incorporated by
reference by any general statement incorporating this proxy into any filing
under the Securities Act of 1933 or the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates this information by
reference and shall not otherwise be deemed filed under such acts.
10
<PAGE> 14
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
ELECTION OF DIRECTORS
(ITEM I)
The directors are elected annually by the stockholders of the Company to
hold office until the next Annual Meeting of Stockholders or until their
respective successors have been elected. It is intended that proxies granted by
stockholders in the form enclosed will be voted, unless otherwise directed, in
favor of electing the following persons as directors: Russell I. Pillar, Kwang-I
Yu, Hector Alcalde, Bert Kolde, and Richard T. Liebhaber. Messrs. Kolde and
Liebhaber have been designated by the Board of Directors as the nominees for the
positions on the Board of Directors to be elected by holders of Common Stock
voting as a separate class. Election of the remaining directors requires the
favorable vote by the holders of a majority of the outstanding shares of Common
Stock and Class B Common Stock, voting as a single class, present in person or
represented by proxy and entitled to vote thereon at the meeting. In the event
any nominee named herein for election as a director at the Annual Meeting is not
available or willing to serve when the election occurs, proxies in the
accompanying form may be voted for a substitute as well as for the other persons
named herein. All of the nominees, with the exception of Mr. Kolde and Mr.
Liebhaber, were elected by the shareholders at the Company's last Annual Meeting
to serve as directors of the Company until the Annual Meeting for fiscal year
1995 or until their successors were elected. Mr. Kolde was appointed a director
by the Board of Directors on April 27, 1995 and Mr. Liebhaber was appointed a
director by the Board of Directors on June 21, 1995.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE FIVE INDIVIDUALS NAMED ABOVE
APPROVAL OF THE FIRST AMENDMENT TO
THE STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
(ITEM II)
GENERAL
Since 1992, the Company has used stock options issued pursuant to the
Company's Stock Option Plan for Outside Directors (the "Plan") to attract and
retain non-employee directors by encouraging and enabling such directors to
acquire a financial interest in the Company. The Plan was adopted and approved
prior to its spin-off from Home Shopping Network, Inc. in July 1992.
In order to continue and to enhance the effectiveness of the Plan, on
January 31, 1996, the Board of Directors approved a proposal ("First Amendment
Proposal") to amend the Plan ("First Amendment"), subject to the approval of the
stockholders of the Company. A summary of the principal provisions of the Plan
and the proposed First Amendment follows and is qualified in its entirety by
reference to a copy of the Plan and the First Amendment attached to this Proxy
Statement as Exhibits 1 and 2, respectively.
SUMMARY OF PROPOSAL
Generally, under the Plan, each non-employee director is automatically
granted a Non-qualified Stock Option to purchase 25,000 shares of Common Stock
of the Company ("Option shares") on the day on which the director is first
elected to the Board of Directors. At that time, and on each of the first two
anniversaries of such date, approximately 33 1/3 percent of the Non-qualified
Stock Option vests and may be exercised. The exercise period is five years from
the date such Option shares become exercisable. The purchase price of the Option
shares is the fair market value of each share as of the date that the option is
granted.
In order to provide directors with option grants beyond the initial grant
described above, the First Amendment Proposal would amend the Plan to grant each
director a Non-qualified Stock Option (a "Tenure Option") to purchase an
additional 25,000 Option shares. The Tenure Option would be granted
automatically on January 31, 1996, the date that the First Amendment was
approved by the Board of Directors, with respect to each then director who had
served as a director for one full calendar year (each such director is referred
to
11
<PAGE> 15
as a "Current Director"). With respect to each then Director who has not served
as a director for one full calendar year as of January 31, 1996, and each
director subsequently elected to the Board of Directors, the Tenure Option would
be granted automatically on the date of such director's first anniversary of his
or her election as a director. On the recipient's date of grant and on each of
the first four anniversaries of such date, 20 percent of the Tenure Option would
vest in the recipient. The exercise period would be five years from the date
such Option shares become exercisable. The purchase price of the Option shares
would be the fair market value of each share as of the date that the Tenure
Option is granted to the recipient.
In addition, the First Amendment would extend the exercise period of
options granted under the Plan following the termination of a director's service
on the Board of Directors from thirty to ninety days. This change will bring the
Plan into conformity with the post-termination exercise period under the
Employee Plan.
If the First Amendment Proposal is approved, Tenure Options will be
automatically granted to all Directors as of January 31, 1996, the date of the
approval of the amendment by the Board of Directors. Accordingly, Tenure Options
will be granted to Messrs. Loewenberg, Yu and Alcalde with the exercise price of
$9.00, the closing price of the shares of Common Stock on the Nasdaq Stock
Market on January 31, 1996. Although Mr. Pillar participates in the Plan as a
result of his service on the Board prior to becoming an employee of the Company,
he will not be entitled to receive a Tenure Option because of his current status
as an employee of the Company. Mr. Loewenberg is not standing for election to
the Board of Directors of the Company at the Annual Meeting. If the First
Amendment Proposal is approved, Mr. Loewenberg will have ninety days to exercise
the vested portion of such options.
SUMMARY OF MATERIAL PLAN PROVISIONS NOT AFFECTED BY THE FIRST AMENDMENT PROPOSAL
The maximum number of shares that may be granted under the Plan is 500,000.
The exercise price of each option is equal to the fair market value of the
Common Stock of the Company on the date of grant of each such option. The option
price of, and the number of shares covered by, each option is subject to
adjustment in the event of a merger, consolidation, recapitalization,
reclassification, combination, stock dividends, stock split or other relevant
change in the Company's capital structure Upon a Change of Control (as defined
in the Plan), all options become immediately and fully exercisable. No option is
transferable by an optionee except, upon death, any unexercised portion of an
option then exercisable may be exercised within six months of the death by a
legal representation, heir or devisee. No option may be granted under the Plan
after the expiration of 10 years following its effective date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to awards under the Plan. This summary is not intended to be exhaustive and,
among other things, does not describe state, local, or foreign tax consequences.
Grant of a Non-qualified Stock
An optionee will not recognize any income tax, and the Company will not be
entitled to a deduction, upon the grant of an option.
Exercise of an Option
Except as noted below, upon the exercise of an option an optionee will
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares acquired over the exercise price. The Company will be
generally entitled to a deduction of a corresponding amount at that time;
provided, however that the Company's deduction upon exercise of an option by an
executive officer may be subject to the limitations of Section 162(m) of the
Internal Revenue Code ("Code") if the option was granted at an exercise price
less than fair market value on the date of the grant. If an optionee's sale of
shares acquired by the exercise of an option could subject the optionee to suit
("Section 16(b) liability") under Section 16(b) of the Securities Exchange Act
of 1934 ("Exchange Act"), then the recognition and determination of the
12
<PAGE> 16
amount of income by the employee, and the corresponding deduction by the
Company, will be postponed until the earlier of six months after the acquisition
of such shares or the first day on which the sale of such shares would not
subject the optionee to such suit. However, the optionee may elect under Section
83(b) of the Code, within thirty days after exercise, to be taxed as of the
exercise date in the manner described above. As recently amended, Section 16(b)
of the Exchange Act generally does not impose Section 16(b) liability upon a
sale of shares received upon exercise of an option if the option was granted
more than six months prior to such sale (provided that no other purchases have
been made six months before or after such sale).
An optionee's aggregate basis for shares acquired upon exercise of an
option will be equal to the fair market value of such shares on the date that
governs the determination of optionee's ordinary income. The holding period for
such shares will commence on such date and, accordingly, will not include the
period during which the option was held.
Sale of Option Shares
In the event of a sale of shares received upon exercise will generally be a
capital gain or loss, assuming the shares are held as capital assets. The
capital gain or loss will be a long-term capital gain or loss if the shares were
held for more than one year after the date on which taxable compensation was
realized by the optionee in respect of the option exercise.
NEW PLAN BENEFITS
Pursuant to the Plan, on January 31, 1996, Messrs. Loewenberg, Yu, and
Alcalde were each granted options to purchase 25,000 shares of Common Stock at
an exercise price of $9.00 per share. Such grants are subject to the approval of
the First Amendment Proposal by stockholders.
The following table sets forth the benefits allocated under the Plan to (i)
each of the Company's Named Executive Officers, (ii) all the Company's executive
officers as a group, (iii) all directors who are not executive officers as a
group and (iv) all other employees, including the Company's officers who are not
executive officers, as a group. All of the awards set forth in the following
table are subject to approval of the First Amendment Proposal by the Company's
stockholders.
NEW PLAN BENEFITS
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
<TABLE>
<CAPTION>
EXERCISE PRICE NUMBER OF
NAME AND POSITION(1) PER SHARE ($)(2) SHARES(3)
- -------------------------------------------------------------------- ---------------- ---------
<S> <C> <C>
Russell I. Pillar................................................... $ 0 0
President and Chief Executive Officer
Michael T. Felix.................................................... 0 0
Senior Vice President
John R. Hindman..................................................... 0 0
Senior Vice President, Chief Financial Officer, Treasurer and
Secretary
Alan R. Donahue..................................................... 0 0
Senior Vice President
Kenneth M. Clinebell................................................ 0 0
Vice President of Finance and Controller
Executive Group..................................................... 0 0
Non-Executive Director Group........................................ 9.00 75,000
Non-Executive Officer Employee Group................................ 0 0
</TABLE>
- ---------------
(1) Pursuant to the terms of the Stock Option Plan for Outside Directors, only
non-employee directors of the Company's Board will be eligible for grants
thereunder.
13
<PAGE> 17
(2) It is not possible to determine the value of these benefits because the
benefits will depend upon exercise decisions by participants and the fair
market value of the Company's Common Stock at various future dates
following the adoption of the First Amendment to the Stock Option Plan for
Outside Directors.
(3) On January 31, 1996, each of Messrs. Loewenberg, Yu, and Alcalde were
granted options to purchase 25,000 shares of the Company's Common Stock at
an exercise price of $9.00 per share pursuant to the Stock Option Plan for
Outside Directors. Such options are subject to the approval of the First
Amendment to the Stock Option Plan for Outside Directors by the Company's
stockholders. The options would be granted automatically on the date of
such director's first anniversary of his election as a director. On the
recipient's date of grant and on each of the first four anniversaries of
such date, 20 percent of the option would vest.
VOTE REQUIRED FOR ADOPTION
Approval of the First Amendment Proposal requires the affirmative vote of
shares of Common Stock and Class B Common Stock of the Company present in person
or by proxy at the 1996 Annual Meeting representing more than 50% of the votes
represented and voting at the meeting. Holders of Common Stock and Class B
Common Stock present in person or by proxy at the meeting will vote together as
one Class with respect to the First Amendment Proposal with the holder of the
Class B Common Stock casting ten votes for each share of Class B Common Stock
held by such holder. If the First Amendment Proposal should not be approved by
the stockholders, the Plan will be continued as in effect prior to the amendment
described herein.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE FIRST
AMENDMENT PROPOSAL TO AMEND THE STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
14
<PAGE> 18
APPROVAL OF THE SECOND AMENDMENT TO
THE STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
(ITEM III)
GENERAL
In order to furnish additional incentives for those persons responsible for
the successful management of the Company, on January 31, 1996, the Board of
Directors approved a proposal ("Second Amendment Proposal") to amend the Plan
("Second Amendment"), subject to the approval of the stockholders of the
Company. A summary of the principal provisions of the Plan is set forth above
under Item II. A summary of the principal provisions of the Second Amendment
Proposal follows. These summaries are qualified in their entirety by reference
to a copy of the Plan and the Second Amendment attached to this Proxy Statement
as Exhibits 1 and 3, respectively.
SUMMARY OF PROPOSAL
The Chairman of the Board of Directors participates, in his capacity as a
director, in the Plan provided the Chairman was not an employee of the Company
upon his election to the Board of Directors. The principal terms of the Plan are
described above under Item II.
In order to provide the Chairman of the Board with option grants beyond the
initial grant contained in the Plan, the Second Amendment Proposal would amend
the Plan to grant the Chairman of the Board a non-qualified stock option
("Incentive Option") to purchase an additional 50,000 Option shares. This grant
would occur automatically on January 31, 1996, the date that the Second
Amendment was approved by the Board of Directors with respect to the then
current Chairman, who has served as of that date as Chairman for more than one
full calendar year. With respect to subsequent Chairmen, the Incentive Option
would be granted automatically on the date of such director's first anniversary
of his or her election as Chairman of the Board, provided that the Chairman is
not also a full-time employee of the Company. On such date, and on each of the
first four anniversaries of such date, 20 percent of the Incentive Option would
vest. The exercise period would be five years from the date such Option shares
become exercisable. The purchase price of the Option shares would be the fair
market value of each share as of the date that the Incentive Option is granted
to the Chairman of the Board.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
See the discussion under Certain Federal Income Tax
Consequences-Non-qualified Stock options on pages 12 and 13 of this proxy
statement.
NEW PLAN BENEFITS
Pursuant to the Stock Option Plan for Outside Directors, on January 31,
1996, Mr. Loewenberg was granted options to purchase 50,000 shares of Common
Stock at an exercise price of $9.00 per share. Such grant is subject to the
approval of the Second Amendment to the Stock Option Plan for Outside Directors
by stockholders. Mr. Loewenberg is not standing for election to the Board of
Directors of the Company at the Annual Meeting. If the Second Amendment Proposal
and the First Amendment Proposal are approved, under the terms of the Plan, Mr.
Loewenberg will have ninety days to exercise the vested portion of such options.
If the First Amendment Proposal is not approved, Mr. Loewenberg will have thirty
days to exercise the vested portion of such options.
15
<PAGE> 19
The following table sets forth the benefits allocated under the Stock
Option Plan for Outside Directors to (i) each of the Company's Named Executive
Officers, (ii) all the Company's executive officers as a group, (iii) all
directors who are not executive officers as a group and (iv) all other
employees, including the Company's officers who are not executive officers, as a
group. All of the awards set forth in the following table are subject to
approval of the Second Amendment to the Stock Option Plan for Outside Directors
by the Company's stockholders.
NEW PLAN BENEFITS
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
<TABLE>
<CAPTION>
EXERCISE PRICE NUMBER OF
NAME AND POSITION(1) PER SHARE ($)(2) SHARES(3)
- -------------------------------------------------------------------- ---------------- ---------
<S> <C> <C>
Russell I. Pillar................................................... $ 0 0
President and Chief Executive Officer
Michael T. Felix.................................................... 0 0
Senior Vice President
John R. Hindman..................................................... 0 0
Senior Vice President, Chief Financial Officer, Treasurer and
Secretary
Alan R. Donahue..................................................... 0 0
Senior Vice President
Kenneth M. Clinebell................................................ 0 0
Vice President of Finance and Controller
Executive Group..................................................... 0 0
Non-Executive Director Group........................................ 9.00 50,000
Non-Executive Officer Employee Group................................ 0 0
</TABLE>
- ---------------
(1) Pursuant to the terms of the Stock Option Plan for Outside Directors, only
non-employee directors of the Company's Board will be eligible for grants
thereunder.
(2) It is not possible to determine the value of these benefits because the
benefits will depend upon exercise decisions by the participant and the
fair market value of the Company's Common Stock at various future dates
following the adoption of the Second Amendment to the Stock Option Plan for
Outside Directors.
(3) On January 31, 1996, Mr. Lowenberg was granted options to purchase 50,000
shares of the Company's Common Stock at an exercise price of $9.00 per
share pursuant to the Stock Option Plan for Outside Directors. Such options
are subject to the approval of the Second Amendment to the Stock Option
Plan for Outside Directors by the Company's stockholders.
VOTE REQUIRED FOR ADOPTION
Approval of the Second Amendment Proposal requires the affirmative vote of
a majority of the shares of Common Stock and Class B Common Stock of the Company
present in person or by proxy at the Annual Meeting. Holders of Common Stock and
Class B Common Stock present in person or by proxy at the meeting will vote
together as one class with respect to the Second Amendment Proposal with the
holder of the Class B Common Stock casting ten votes for each share of Class B
Common Stock held by such holder. If the Second Amendment Proposal should not be
approved by the stockholders, the Plan will be continued as in effect prior to
the Second Amendment.
If the First Amendment Proposal (discussed above under Item II) is approved
by the stockholders, the Chairman of the Board will automatically receive a
Tenure Option. If this Second Amendment Proposal is approved by the
stockholders, the Chairman of the Board will also automatically receive an
Incentive Option. If the Second Amendment Proposal is approved by stockholders
and the First Amendment Proposal is not, the Chairman of the Board will receive
an Incentive Option, but no directors will be granted a Tenure Option.
16
<PAGE> 20
The First Amendment Proposal and the Second Amendment Proposal are
independent proposals and the approval of one is not a condition to the
effectiveness of the other. Accordingly, if the First Amendment Proposal is not
approved by stockholders, the Second Amendment proposal will only be effective
if approved by the stockholders of the Company. In such event certain conforming
changes will be made to the Second Amendment to reflect the absence of
stockholder approval of the First Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
SECOND AMENDMENT PROPOSAL TO AMEND THE STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
17
<PAGE> 21
APPROVAL OF THE SECOND AMENDMENT TO EMPLOYEE STOCK OPTION
AND RESTRICTED STOCK PLAN
(ITEM IV)
GENERAL
The Board of Directors proposes that the stockholders ratify an amendment
(the "Employee Plan Amendment") to the Employee Plan increasing the number of
shares reserved for issuance pursuant to stock incentive awards ("Awards")
granted under the Employee Plan from 3,000,000 shares to 4,000,000 shares.
The Employee Plan, as originally adopted in 1992, is designed to help the
Company attract and retain qualified persons for positions of substantial
responsibility and to provide certain key employees and consultants with an
additional long-term incentive to contribute to the success of the Company. As
of the record date, options to purchase 1,618,388 shares of the Company's Common
Stock were outstanding under the Employee Plan, options to purchase 876,459
shares had been exercised and 929,103 shares remained available for issuance or
transfer pursuant to Awards granted under the Employee Plan. The Employee Plan
Amendment increases to 4,000,000 the number of shares of the Company's Common
Stock reserved for issuance or transfer pursuant to Awards granted or to be
granted under the Employee Plan. The following is a summary of the principal
provisions of the Employee Plan.
EMPLOYEE PLAN SUMMARY
The Employee Plan authorizes the granting of Awards to qualified officers,
employee directors, key employees and consultants to the Company. At March 1,
1996, approximately 150 employees of the Company, and no directors of the
Company who are not also employees, were eligible to receive Awards. The
Employee Plan is administered by the Compensation and Benefits Committee of the
Board of Directors (the "Committee"). The Committee determines the number of
shares to be covered by an Award, the term and exercise price, if any, of the
Award and other terms and provisions of Awards.
Awards can be Stock Options ("Options") or Restricted Stock Awards
("RSAs"). The number and kind of shares available under the Employee Plan are
subject to adjustment in certain events. Shares relating to Options which are
not exercised and shares relating to RSAs which do not vest will again be
available for issuance under the Employee Plan.
An Option may be an incentive stock option ("ISO") or a nonqualified
Option. The exercise price for Options is to be determined by the Committee, but
in the case of an ISO is not to be less than fair market value on the date the
Option is granted (110% of fair market value in the case of an ISO granted to
any person who owns more than 10% of the Common Stock). The purchase price is
payable in any combination of cash, shares of Common Stock already owned by the
participant or, if authorized by the Committee, as permitted by applicable law.
Subject to early termination or acceleration provisions, an Option is
exercisable, in whole or in part, from the date specified in the related award
agreement (which may be six months after the date of grant) until the expiration
date determined by the Committee. The aggregate fair market value (determined on
the date of grant) of the shares of Common Stock for which ISOs may be granted
to any participant under the Employee Plan and any other plan by the Company or
its affiliates which are exercisable for the first time by such participant
during any calendar year may not exceed $100,000.
The Options granted under the Employee Plan become exercisable on such
dates as the Committee determines in the terms of each individual Option.
Options become immediately exercisable in full in the event of a disposition of
all or substantially all of the assets or capital stock of the Company by means
of a change in control, dissolution, liquidation or otherwise. The Committee in
any event may, on such terms and conditions as it deems appropriate, accelerate
the exercisability of Options granted under the Employee Plan.
The Options granted under the Employee Plan are not transferable other than
by will or the laws of descent and distribution. Unexercised Options generally
lapse upon termination of employment other than by reason of retirement,
disability or death in which case it terminates one year thereafter.
18
<PAGE> 22
An RSA is an award of a fixed number of shares of Common Stock subject to
restrictions. The Committee specifies the prices, if any, the recipient must pay
for such shares. Shares included in an RSA may not be sold, assigned,
transferred, pledged or otherwise disposed of or encumbered until they have
vested. These restrictions may not terminate earlier than six months after the
award date. The recipient may be entitled to dividend equivalent rights
pertaining to such RSA shares even though they have not vested, so long as such
share have not been forfeited.
Upon the date a participant is no longer employed by the Company for any
reason, shares subject to the participant's RSAs which have not become vested by
that date shall be forfeited in accordance with the terms of the related Award
agreements. Options which have become exercisable by the date of termination of
employment or of service on the Committee must be exercised within certain
specified periods of time from the date of termination, the period of time to
depend on the reason for termination. Options which have not yet become
exercisable on the date the participant terminates employment or service for a
reason other than retirement, death or total disability shall terminate on that
date.
The Board of Directors may, at any time, terminate, amend, or suspend the
Employee Plan. In addition, the Committee may, with certain exceptions, amend
any provision of the Employee Plan.
The Employee Plan, without giving affect to the Employee Plan Amendment,
provides for the grant of Awards to purchase or transfer up to an aggregate of
3,000,000 shares of the Common Stock of the Company (subject to an antidilution
provision providing for adjustment in the event of certain changes in the
Company's capitalization as described more fully below), of which 929,103 shares
remained available as of May 3, 1996, for future grant. The Employee Plan
Amendment would increase the aggregate number of shares of Common Stock that may
be issued pursuant to Awards under the Employee Plan to an aggregate of
4,000,000 shares.
The Employee Plan provides for antidilution adjustments in the event of a
reclassification, stock dividend or stock split. Upon the dissolution or
liquidation of the Company, of upon a change-in-control, sales of assets, merger
or consolidation of the Company as a result of which the Company is not the
surviving entity, the Employee Plan shall terminate, and any outstanding awards
shall become exercisable for period of time set by Committee.
The Employee Plan currently provides that the Board of Directors may amend
the Employee Plan at any time; provided, however, that no amendment may operate
to increase the maximum number of aggregate shares issuable, materially increase
the benefits accruing to participants or change the classes of eligible persons
under the Employee Plan without the approval of the holders of a majority of the
shares of Common Stock and Class B Common Stock.
The affirmative vote of a majority of shares of Common Stock and Class B
Common Stock voting at the Annual Meeting if a quorum is present will be
necessary for the approval of the Employee Plan Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE EMPLOYEE PLAN AMENDMENT.
19
<PAGE> 23
OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
presented for action at the Annual Meeting. If any matters properly come before
the meeting, however, John R. Hindman, Secretary of the Company, and the proxy
agent named in the enclosed proxy, will vote on such matters in accordance with
his best judgment.
Any proposal which a stockholder intends to present at the Annual Meeting
of Stockholders for fiscal 1996 must be received by the Company by August 26,
1996, in order to be considered for inclusion in the proxy statement and form of
proxy relating to such meeting.
By Order of the Board of Directors
/s/ John R. Hindman
-------------------
John R. Hindman
Secretary
May 10, 1996
St. Petersburg, Florida
20
<PAGE> 24
EXHIBIT 1
PRECISION SYSTEMS, INC.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
I. PURPOSE
It is the belief of the management of Precision Systems, Inc. (the
"Corporation") that the Board of Directors of the Corporation will effect
decisions and render guidance to the Corporation which will materially enhance
the stability and economic growth of the Corporation. Accordingly, Directors not
also serving as employees of the Corporation should be afforded the opportunity
to acquire shares of authorized common stock. By providing this opportunity
through the adoption of a Stock Option Plan for Outside Directors (the "Plan"),
it is the intention of the Corporation to give appropriate recognition to a
group of individuals who will have continuing responsibility for the
Corporation's growth and profitability.
II. ELIGIBILITY
The only persons eligible to receive Options under the Plan shall include
each of the Corporation's existing and future Directors who are not also
employees of the Corporation.
III. SHARES SUBJECT TO THE PLAN
The shares which shall be issued and delivered upon exercise of Options
granted under the Plan shall be shares of the Corporation's Common Stock. The
maximum number of shares which may be issued upon exercise of Options granted
under the Plan shall not exceed 500,000 shares. If any Option expires or
terminates prior to being fully exercised, any shares allocable to the
unexercised portion of such Option shall thereafter be made subject to the terms
of the Plan.
Appropriate adjustments in the number of shares available under the Plan
and in the Option price per share shall give effect to adjustments made in the
number of shares of stock outstanding as a result of a merger, consolidation,
recapitalization, reclassification, combination, stock dividend, stock split or
other relevant change in the capital structure of the Corporation.
IV. TERMS AND CONDITIONS
(a) Grant of Options
Subject to the provisions of the Plan, Directors of the Corporation shall
be granted Non-qualified Stock Options for the purchase of shares of Common
Stock of the Corporation.
(b) Option Agreement
Each Option shall be evidenced by a written agreement between the
Corporation and the Director specifying the number of shares of common stock
that may be purchased by its exercise.
(c) Date of Grant
The date on which an option is granted shall be either: (1) the effective
date of the adoption of the Plan as set forth in Article V hereof (the
"Effective Date") for those individuals who are serving on the Board of
Directors as of such date and who are not employees of the Company; (2) the
first day on which a Director who is not also an employee is first elected to
the Board of Directors; or (3) the date on which an Option is issued in
substitution for an Option previously granted under the Plan or an Option
previously granted is subsequently amended.
I-1
<PAGE> 25
(d) Option Price
Each Option Agreement shall state the purchase price of each share of
Common Stock which may be acquired upon exercising the Option, which price shall
be the fair market value of each share as of the Date of Grant. Fair Market
Value shall be deemed to be the closing price of the Common -- Stock of the
Corporation on the applicable Date of Grant, as published by the national
securities exchange on which the shares are traded. If such price is not
published for the Date of Grant such value shall be deemed to be the closing
price on the trading date occurring the nearest to and before the valuation date
or if no trading in the Common Stock shall have developed prior to such date,
the trading date on which regular way trading develops next following the
valuation date. If the Common Stock of the Corporation is not traded on an
exchange, the Fair Market Value shall be the mean of the closing bid and asked
prices on the Date of Grant or, if available, the closing trade price on the
Date of Grant. Notwithstanding the foregoing, if the Date of Grant is the
Effective Date, the Fair Market Value shall be deemed to be the average for the
ten trading days immediately following the date on which trading in the
Corporation's Common Stock first develops of (i) the mean of the daily closing
bid and ask prices for the Common Stock or (ii) if available, the closing trade
prices on such days.
(e) Number of Shares Granted
Each Director shall receive a Non-qualified Stock Option to purchase 25,000
shares of Common Stock of the Corporation on the date of grant. This grant shall
occur automatically on either: (1) The Effective Date; or (2) The first day upon
which a Director who is not also an employee is first elected to the Board of
Directors.
(f) Option Period and Restrictions of Exercise
The 25,000 Option shares shall be exercisable in the following manner for
the periods specified:
8,334 Option shares shall first become exercisable on the date of
grant and must be fully exercised within five years from the date granted.
The failure to exercise the 8,334 Option shares during this five-year
period shall mean that such Options shall be forfeited.
8,333 Option shares shall become exercisable one year from the date
such Option shares were granted and must be exercised within five years
from the date such Option shares become first exercisable. The failure to
exercise the 8,333 Option shares during this five-year period shall mean
that such options shall be forfeited.
8,333 Option shares shall become exercisable two years from the date
such Option shares were granted and must be exercised within five years
from the date such Option shares become first exercisable. The failure to
exercise the 8,333 Option shares during this five-year period shall mean
that such Options shall be forfeited.
(g) Manner of Exercise
Subject to the conditions and restrictions contained in paragraph (h) this
Article IV, the Option shall be exercised by delivering written notice of
exercise to the Corporate Secretary of Precision Systems, Inc. Such notice shall
be irrevocable and must be accompanied by payment in cash and a signed Option
exercise form. If prior authorization has been obtained, payment for the shares
may be made by delivery of Common Stock of the Corporation.
(h) Transferability and Termination of Option
Each Option granted hereunder may be exercised only by the individual to
whom it is issued and only during the period in which he or she is serving as an
outside Director of the Corporation or within the thirty (30) day period
following his or her resignation or other termination of such service for any
reason other than death. If such holder dies before fully exercising any portion
of an option then exercisable, such Option may be exercised by such holder's
legal representative(s), heir(s) or devisee(s) at any time within the six (6)
month period following his or her death.
I-2
<PAGE> 26
In the event that an outside Director becomes a full-time employee of the
Corporation, the outside Director shall not have to forfeit the 25,000 Option
shares granted pursuant to this Plan. However, the outside Director shall have
to satisfy all other terms and provisions of this Plan with respect to the
Options granted hereunder.
(i) Modification or Substitution of Options
Subject to the terms and conditions and within the limitations of the Plan,
the members of the Board of Directors who are not eligible to participate in the
Plan may modify, extend or renew outstanding Options granted under the Plan and
accept the surrender and cancellation of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new options in substitution
therefore or options as amended.
(j) Amendment
No amendment to this Article IV of the Plan may be made more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
(k) Acceleration of Vesting
Upon the occurrence of a Change in Control (as hereinafter defined, each
Option granted hereunder shall immediately become exercisable with respect to
all Option Shares which had not been forfeited prior to such period and which
Option shares were otherwise not exercisable as of such date. Option shares
which have been accelerated pursuant to this provision shall be exercisable for
a period of five years following such Change in Control. A Change in Control
shall be deemed to have occurred at such time as either (i) the Corporation is
merged or consolidated with or into another entity (the "Merger Partner") and as
a result of such merger or consolidation less than 75% of the outstanding voting
securities of the surviving or resulting entity shall be owned in the aggregate
by the former shareholders of the Corporation, as the same may have existed
prior to such merger or consolidation, but excluding from such determination the
interests held by any affiliate (as such term is used in the Securities Exchange
Act of 1934 (the "Exchange Act")) of the Merger Partner prior to such merger or
consolidation, or (ii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act as in effect on the date hereof) other than the
Corporation, a wholly-owned subsidiary of the Corporation, an employee benefit
plan of the Corporation or one of its subsidiaries , an officer or director of
the Corporation or an affiliate of an officer or director or a person who is the
beneficial owner of more than thirty percent (30%) of either the Company's
Common Stock or Class B Common Stock at the date this Plan is adopted becomes
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of 30% or
more of the Common Stock or Class B Common Stock of the Company.
V. EFFECTIVE DATE AND TERM OF PLAN
The effective date of the Plan shall be the date on which Home Shopping
Network, Inc. ("HSN") effects the distribution of all of the outstanding capital
stock of the Corporation to the stockholders of HSN following ratification and
approval of the adoption of the Plan by HSN as the sole stockholder of PSi prior
to such distribution. The Plan shall remain in existence for a period of ten
years thereafter. No Option may be granted subsequent to the expiration date of
the Plan, but Options then outstanding shall be exercisable in accordance with
the terms hereof.
VI. AMENDMENT
The Board of Directors may at any time suspend or discontinue the Plan, but
no amendment shall be authorized without shareholder approval which (i)
materially increases the benefits accruing to participants under the Plan; (ii)
materially increases the number of securities which may be issued under the
Plan, except as otherwise provided in Article III; or (iii) materially modifies
the requirements as to eligibility for participation in the Plan.
I-3
<PAGE> 27
EXHIBIT 2
FIRST AMENDMENT TO THE PRECISION SYSTEMS, INC.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
This is the First Amendment (the "Amendment") to the Stock Option Plan for
Outside Directors (the "Plan") of Precision Systems, Inc., a Delaware
corporation (the "Corporation").
1. Paragraph (c) to Article IV, Terms and Conditions, of the Plan is hereby
amended to read as follows:
The date (the "Date of Grant") on which any option is granted pursuant
to this Plan (an "Option") shall be: (1) the effective date of the adoption
of the Plan (the "Effective Date") for those individuals who are serving on
the Board of Directors as of such date and who are not employees of the
Company; (2) the day on which a Director who is not also an employee is
first elected to the Board of Directors; (3) the date on which an Option is
issued in substitution for an Option previously granted under the Plan or
an Option previously granted is subsequently amended; or (4) the date on
which a Director is entitled to receive an Option under paragraph (e)(2) of
this Article IV.
2. Paragraph (e) to Article IV, Terms and Conditions, of the Plan is hereby
amended to read as follows:
(e) Number of Shares Granted
(1) Initial Option. Each Director shall automatically be granted an Option
to purchase 25,000 shares of Common Stock (the "Initial Option") as of the day
on which a Director who is not also an employee of the Corporation is first
elected to the Board of Directors.
(2) Tenure Option. Each Director, who is not also an employee, shall
automatically be granted, in addition to the Option granted pursuant to
paragraph (e)(1) of Article IV of the Plan, an Option to purchase an additional
25,000 shares of Common Stock of the Corporation (the "Tenure Option"),
exercisable in accordance with the provisions of paragraph (f)(2) of this
Article IV. The grant of a Tenure Option shall occur automatically on either:
(1) the date that this Amendment is approved by the Board of Directors
("Approval Date") with respect to each Director who has served as a director for
one full calendar year as of such date; or (2) the date of each Director's first
anniversary of his or her initial election to the Board of Directors, with
respect to each Director who has not served as a director for one full calendar
year as of the Approval Date. For purposes of paragraph (d) of this Article IV,
Option Price, the purchase price of each share of Common Stock which may be
acquired upon exercising the Tenure Option shall be the fair market value of
each share as of the Date of Grant for such Tenure Option. Fair Market Value
shall be deemed to be the closing price of the Common Stock of the Corporation
on the Date of Grant, as published by the national securities exchange on which
the shares are traded. If such price is not published for the Date of Grant such
value shall be deemed to be the closing price on the trading date occurring the
nearest to and before the valuation date.
3. Paragraph (f) of Article IV, Terms and Conditions, of the Plan is hereby
amended to read as follows:
(f) Option Period and Restrictions of Exercise
(1) The Initial Option. Each Initial Option granted pursuant to the Plan
shall be exercisable in the following manner of the periods specified:
8,334 Initial Option shares shall first become exercisable on the Date
of Grant of the Initial Option and must be fully exercised within five
years from the date such Initial Option shares become first exercisable.
The failure to exercise the Initial Option with respect to such shares
during this five-year period shall mean that the Initial Option shall be
forfeited with respect to such shares.
8,333 Initial Option shares shall become exercisable one year from the
date such Initial Option shares were granted and must be exercised within
five years from the date such Option shares become first exercisable. The
failure to exercise the Initial Option with respect to such shares during
this five-year period shall mean that the Initial Option shall be forfeited
with respect to such shares.
8,333 Initial Option shares shall become exercisable two years from
the date such Initial Option shares were granted and must be exercised
within five years from the date such Option shares become
II-1
<PAGE> 28
first exercisable. The failure to exercise the Initial Option with respect
to such shares during this five-year period shall mean that the Initial
Option shall be forfeited with respect to such shares.
(2) The Tenure Option. Each Tenure Option shall be exercisable in the
following manner for the periods specified:
5,000 Tenure Option shares shall first become exercisable on the Date
of Grant of such Tenure Option and must be exercised within five years from
the date such Tenure Option shares become first exercisable. The failure to
exercise the Tenure Option with respect to such shares during this
five-year period shall mean that the Tenure Option shall be forfeited with
respect to such shares.
5,000 Tenure Option shares shall become exercisable one year from the
Date of Grant of such Tenure Option and must be exercised within five years
from the date such Tenure Option shares become first exercisable. The
failure to exercise the Tenure Option with respect to such shares during
this five-year period shall mean that the Tenure Option shall be forfeited
with respect to such shares.
5,000 Tenure Option shares shall become exercisable two years from the
Date of Grant of such Tenure Option and must be exercised within five years
from the date such Tenure Option shares become first exercisable. The
failure to exercise the Tenure Option with respect to such shares during
this five-year period shall mean that the Tenure Option shall be forfeited
with respect to such shares.
5,000 Tenure Option shares shall become exercisable three years from
the Date of Grant of such Tenure Option and must be exercised within five
years from the date such Tenure Option shares become first exercisable. The
failure to exercise the Tenure Option with respect to such shares during
this five-year period shall mean that the Tenure Option shall be forfeited
with respect to such shares.
5,000 Tenure Option shares shall become exercisable four years from
the Date of Grant of such Tenure Option and must be exercised within five
years from the date such Tenure Option shares become first exercisable. The
failure to exercise the Tenure Option with respect to such shares during
this five-year period shall mean that the Tenure Option shall be forfeited
with respect to such shares.
4. Paragraph (h) of Article IV of the Plan is hereby amended to read as
follows:
(h) Transferability and Termination of Option
Each Option granted hereunder may be exercised only by the individual
to whom it is issued and only during the period in which he or she is
serving as an outside Director of the Corporation or within the ninety (90)
day period following his or her resignation or other termination of such
service for any reason other than death. If such holder dies before fully
exercising any portion of an option then exercisable, such Option may be
exercised by such holder's legal representative(s), heir(s) or devisee(s)
at any time within the six (6) month period following his or her death.
In the event that an outside Director becomes an employee of the
Corporation, the Director shall not be required to forfeit any Option
granted pursuant to this Plan; provided, however, such Director shall have
to satisfy all other terms and provisions of this Plan with respect to any
options granted hereunder.
5. The effective date of the Amendment to the Plan shall be the date on
which this Amendment is approved by the Board of Directors of the Corporation
subject only to the subsequent approval of this Amendment by the stockholders of
the Corporation pursuant to the By-laws. Options (and any Option shares issued
pursuant thereto) granted pursuant to this Amendment upon the adoption of the
Amendment by the Board of Directors shall be granted conditionally and subject
only to stockholder approval at the annual or special meeting of the
stockholders following adoption by the Board of Directors.
6. Except as amended, modified or supplemented by this Amendment, the
terms, conditions and provisions of the Plan shall remain in full force and
effect. This Amendment shall not be deemed to amend, modify, alter or otherwise
affect the terms and conditions of any option granted pursuant to the Plan prior
to the date on which this Amendment is adopted.
Authorized and approved by the Board of Directors of the Corporation this
31st day of January, 1996.
Ratified and approved by the stockholders of the Corporation this 13th day
of June, 1996.
II-2
<PAGE> 29
EXHIBIT 3
SECOND AMENDMENT TO THE PRECISION SYSTEMS, INC.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
This is the Second Amendment (the "Amendment") to the Stock Option Plan for
Outside Directors (the "Plan") of Precision Systems, Inc., a Delaware
corporation (the "Corporation").
1. Paragraph (c) to Article IV of the Plan is hereby amended to add "or
(e)(3)" immediately following the reference to paragraph (e)(2) therein and
prior to the word "of" in subclause (4) of such paragraph.
2. A new clause (3) is hereby added to paragraph (e) of Article IV of the
Plan as follows:
(3) Additional Grant of Shares to Chairman of the Board. The Chairman
of Board, provided that he or she is not also an employee, shall
automatically be granted, in addition to the Options granted pursuant to
paragraphs (e)(1) and (e)(2) of Article IV of the Plan, an Option to
purchase 50,000 shares of Common Stock of the Corporation (the "COB
Option"), exercisable in accordance with the provisions of paragraph (f)(3)
of this Article IV. The grant of the COB Option shall occur automatically
on either: (1) the date that this Amendment is approved by the Board of
Directors provided the Chairman of the Board that has served as Chairman of
the Board for one full calendar year; (2) the date of such Director's first
anniversary of his or her election as Chairman of the Board. For purposes
of paragraph (d) of this Article IV, Option Price, the purchase price of
each share of Common Stock which may be acquired upon exercising the COB
Option granted under this paragraph (e)(3) shall be the fair market value
of each share as of the Date of Grant of such Option. Fair Market Value
shall be deemed to be the closing price of the Common Stock of the
Corporation on the Date of Grant, as published by the national securities
exchange on which the shares are traded. If such price is not published for
the Date of Grant such value shall be deemed to be the closing price on the
trading date occurring the nearest to and before the valuation date.
3. A new clause (3) is hereby added to paragraph (e) of Article IV of the
Plan as follows:
(3) COB Option. The COB Option shall be exercisable in the following
manner for the periods specified:
10,000 COB Option shares shall first become exercisable on the Date
of Grant of the COB Option and must be exercised within five years from
the date such COB Option shares become first exercisable. The failure to
exercise the COB Option with respect to such shares during this
five-year period shall mean that the COB Option shall be forfeited with
respect to such shares.
10,000 COB Option shares shall become exercisable one year from the
Date of Grant of the COB Option and must be exercised within five years
from the date such COB Option shares become first exercisable. The
failure to exercise the COB Option with respect to such shares during
this five-year period shall mean that the COB Option shall be forfeited
with respect to such shares.
10,000 COB Option shares shall become exercisable two years form
the Date of Grant of the COB Option and must be exercised within five
years from the date such COB Option shares become first exercisable. The
failure to exercise the COB Option with respect to such shares during
this five-year period shall mean that the COB Option shall be forfeited
with respect to such shares.
10,000 COB Option shares shall become exercisable three years from
the Date of Grant of the COB Option and must be exercised within five
years from the date such COB Option shares become first exercisable. The
failure to exercise the COB Option with respect to such shares during
this five-year period shall mean that the COB Option shall be forfeited
with respect to such shares.
10,000 COB Option shares shall become exercisable four years from
the Date of Grant of the COB Option and must be exercised within five
years from the date such COB Option shares become first exercisable. The
failure to exercise the COB Option with respect to such shares during
this five-year period shall mean that the COB Option shall be forfeited
with respect to such shares.
III-1
<PAGE> 30
4. The effective date of the Amendment to the Plan shall be the date on
which this Amendment is approved by the Board of Directors of the Corporation
subject only to the subsequent approval of this Amendment by the stockholders of
the Corporation pursuant to the By-laws. Options (and any Option shares issued
pursuant thereto) granted pursuant to this Amendment upon the adoption of the
Amendment by the Board of Directors shall be granted conditionally and subject
only to stockholder approval at the annual or special meeting of the
stockholders following adoption by the Board of Directors.
5. Except as amended, modified or supplemented by this Amendment, the
terms, conditions and provisions of the Plan shall remain in full force and
effect. This Amendment shall not be deemed to amend, modify, alter or otherwise
affect the terms and conditions of any Option granted pursuant to the Plan prior
to the date on which this Amendment is adopted.
Authorized and approved by the Board of Directors of the Corporation this
31st day of January, 1996.
Ratified and approved by the stockholders of the Corporation this 13th day
of June, 1996.
III-2
<PAGE> 31
[RECYCLE LOGO]
Printed on recycled paper
<PAGE> 32
Appendix
PRECISION SYSTEMS, INC.
REVOCABLE PROXY FOR
JUNE 13, 1996 MEETING OF SHAREHOLDERS
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PRECISION
SYSTEMS, INC.
The undersigned hereby appoints John R. Hindman, Secretary of Precision
Systems, Inc. (the "Company"), proxy with full power of substitution, to vote
all shares of Common Stock the undersigned is entitled to vote at the Meeting of
Shareholders of the Company to be held at the Tampa Bay Conference Center, 6152
126th Avenue, Largo, Florida, at 2:00 p.m. Eastern Daylight Time on June 13,
1996, or at any adjournment thereof, as follows, hereby revoking any proxy
previously given.
1. Election of Directors
<TABLE>
<S> <C>
/ / FOR the nominees listed below (except as marked to the contrary below) / / WITHHOLD AUTHORITY
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee named in the list below.)
Richard T. Liebhaber Kwang-I Yu Russell I. Pillar
Hector Alcalde Bert Kolde
2. Approval of the First Amendment to the Stock Option Plan for Outside
Directors.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of the Second Amendment to the Stock Option Plan for Outside
Directors.
/ / FOR / / AGAINST / / ABSTAIN
4. To amend Section 5(a) of the Employee Stock Option and Restricted Stock Plan
(the "Employee Plan") to increase the aggregate number of shares that are
available for issuance under the Employee Plan to 4,000,000 from 3,000,000
shares.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3, 4 AND 5
(Continued on other side)
(Continued from other side)
5. To act upon, as determined in the best judgement of the Secretary of the
Company who will serve as proxy agent, such other matters as may properly
come before the annual meeting.
/ / FOR / / AGAINST / / ABSTAIN
Shares represented by this proxy will be voted as directed by the
shareholder. If no direction is supplied, the proxy will be voted "FOR"
proposals 1, 2, 3, 4 and 5.
ALL AS SET OUT IN THE NOTICE AND PROXY STATEMENT RELATING TO THE MEETING,
RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED.
Dated , 19
---------------- ---------
----------------------------------
Signature
----------------------------------
Signature
(Please sign exactly as name
appears at left. If stock is owned
by more than one person, all
owners should sign. Persons
signing as executors,
administrators, trustees or in
similar capacities should so
indicate.)
VOTES MUST BE INDICATED /X/ IN
BLACK OR BLUE INK.
