<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 [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(3)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 13, 2000
------------------------
Norwalk, Connecticut
September 15, 2000
TO THE HOLDERS OF COMMON STOCK
OF ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.:
The Annual Meeting of the Stockholders of ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC., will be held at the offices of Zilkha & Company, 767 Fifth
Avenue-46th Floor, New York, New York on Friday, October 13, 2000 at 10:00 A.M.,
local time, for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect five directors of the Company for the ensuing year.
2. To consider and take action upon a proposal to approve and adopt an
amendment, heretofore approved by the Board of Directors, to the
Company's 1993 Employee Stock Option Plan in order to increase the
number of shares issuable pursuant to the exercise of options granted
under said plan from 3,500,000 to 4,500,000 shares of Common Stock of
the Company.
3. To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
The close of business on August 28, 2000 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Meeting.
By Order of the Board of Directors
NORTON GARFINKLE,
Chairman of the Board and Secretary
You are cordially invited to attend the meeting in person. If you do not
expect to be present, please mark, sign and date the enclosed form of Proxy and
mail it in the enclosed return envelope which requires no postage if mailed in
the United States, so that your vote can be recorded.
<PAGE> 3
PROXY STATEMENT
GENERAL
This Proxy Statement, which will be mailed commencing on or about September
15, 2000 to the persons entitled to receive the accompanying Notice of Annual
Meeting of Stockholders, is provided in connection with the solicitation of
proxies on behalf of the Board of Directors of Electronic Retailing Systems
International, Inc. for use at the Annual Meeting of Stockholders (the
"Meeting") to be held on October 13, 2000 and at any adjournment or adjournments
thereof, for the purposes set forth in such Notice. The Company's executive
office is located at 488 Main Avenue, Norwalk, Connecticut 06851.
VOTING
At the close of business on August 28, 2000, the record date stated in the
accompanying Notice, the Company had outstanding 21,290,054 shares of common
stock, $.01 par value (the "Common Stock"), each of which is entitled to one
vote with respect to each matter to be voted on at the Meeting. The Company has
no class or series of voting stock outstanding other than the Common Stock.
A majority of the issued and outstanding shares of Common Stock present in
person or by proxy will constitute a quorum for the transaction of business at
the Meeting. Directors are elected by a plurality vote. The proposed amendment
to the Company's employee stock option plan will not be made effective unless it
is approved and adopted by the holders of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Meeting.
Abstentions and broker non-votes (as hereinafter defined) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. For the purpose of determining the vote required for approval of
matters to be voted on at the Meeting, shares held by stockholders who abstain
from voting will be treated as being "present" and "entitled to vote" on the
matter and, thus, an abstention has the same legal effect as a vote against the
matters. However, in the case of a broker non-vote or where a stockholder
withholds authority from his proxy to vote the proxy as to a particular matter,
such shares will not be treated as "present" and "entitled to vote" on the
matter. Accordingly, in the election of directors, and in the determination of
whether to approve and adopt the amendment to the Company's employee stock
option plan, a broker non-vote or the withholding of a proxy's authority will
have no effect on the outcome of the vote on the matter. A "broker non-vote"
refers to shares represented at the Meeting in person or by proxy by a broker or
nominee where such broker or nominee (i) has not received voting instructions on
a particular matter from the beneficial owner or persons entitled to vote; and
(ii) the broker or nominee does not have the discretionary voting power on such
matter.
At August 28, 2000, Norton Garfinkle, Chairman of the Board of the Company,
together with two affiliated limited partnerships, and Bruce F. Failing, Jr.,
the Company's Vice Chairman of the Board and Chief Executive Officer, together
with a trust established for the benefit of his children, beneficially owned
approximately 52% of the outstanding Common Stock of the Company. Messrs.
Garfinkle and Failing have entered into an agreement relating to the voting and
disposition of such shares. Accordingly, Messrs. Garfinkle and Failing, acting
together, will be in a position to elect all of the Company's directors and to
take action requiring stockholder approval. See "I. Election of
Directors -- Information Concerning Certain Stockholders" below.
I. ELECTION OF DIRECTORS
Five directors will be elected at the Meeting, each to serve for one year
and until a successor shall have been chosen and qualified. It is the intention
of each of the persons named in the accompanying form of Proxy to vote the
shares represented thereby in favor of the five nominees listed in the following
table, unless otherwise instructed in such Proxy. Each such nominee is presently
serving as a director. The Board of Directors has no reason to believe that any
person named will be unable or will decline to serve. In case any of the
nominees is unable or declines to serve, such persons reserve the right to vote
the shares represented by
2
<PAGE> 4
such Proxy for another person duly nominated by the Board of Directors in such
nominee's stead, or, if no other person is so nominated, to vote such shares
only for the remaining nominees. Certain information concerning the nominees for
election as directors is set forth below. Such information was furnished by them
to the Company.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OWNED BENEFICIALLY
NAME OF NOMINEE AND CERTAIN AS OF PERCENT
BIOGRAPHICAL INFORMATION AUGUST 1, 2000(1) OF CLASS
--------------------------- ------------------ --------
<S> <C> <C>
DAVID DIAMOND, age 41; Executive Vice President of Marketing
and New Applications, Catalina Marketing Corp., since
1997; consultant to suppliers of products and services to
the supermarket industry from prior to 1995 until 1997;
Director of the Company since 1996........................ 34,125(2) (3)
BRUCE F. FAILING, JR., age 51; founder of the Company in
1990, and its Vice Chairman of the Board and Chief
Executive Officer; President of the Company through 1997;
Director of the Company since 1990........................ 3,145,637(4)(5) 14.8%
NORTON GARFINKLE, age 69; founder of the Company in 1990,
and its Chairman of the Board; Chairman of Cambridge
Management Corporation (manufacturer and marketer of DAP
series of massively parallel processing computers) since
prior to 1995, and Chairman of its affiliates (engaged in
the research and development of new technologies),
including Oxford Management Corporation, during such
period; Director: eSynch Corporation; Director of the
Company since 1990(6)..................................... 7,890,758(4)(7) 37.1
MICHAEL B. PERSKY, age 36; President and Chief Operating
Officer of the Company since 1998; Vice President,
Marketing, of the Company from 1997 to 1998; Vice
President, Marketing, Executone, Inc. (manufacturer of
telephone systems) from 1996 until 1997; Marketing
Director, Europe, Middle East and Africa, Octel
Communications (a voice mail supplier) from prior to 1995
until 1996; Director of the Company since 2000............ 153,000(8) (3)
DONALD E. ZILKHA, age 49; President, Zilkha & Company
(private investment advisor) since prior to 1995; Director
of the Company since 1993................................. 132,472(9) (3)
</TABLE>
---------------
(1) Such persons have sole voting and investment power with respect to all
outstanding shares of Common Stock shown as being beneficially owned by
them, subject to the information contained in the footnotes to this table.
(2) Includes (i) 1,000 shares beneficially owned jointly by Mr. Diamond and his
wife, and (ii) 33,125 shares issuable upon exercise of stock options granted
by the Company exercisable within 60 days of August 1, 2000.
(3) Less than 1%.
(4) Such stockholders are party to a stockholders agreement among Norton
Garfinkle, Bruce F. Failing, Jr., certain family trusts and partnerships,
and Elizabeth Z. Failing, as described under "Information Concerning Certain
Stockholders" below.
(5) Includes 1,318,489 shares beneficially owned by a trust established for the
benefit of Mr. Failing's children, 168,318 shares beneficially owned by
Elizabeth Z. Failing, Mr. Failing's sister, and 20,000 shares beneficially
owned jointly by Mr. Failing and his wife, Leigh Q. Failing.
(6) In December 1995, pursuant to an agreement with New York State authorities,
Mr. Garfinkle admitted to a misdemeanor relating to his 1989 New York State
return and paid all taxes required by the agreement.
3
<PAGE> 5
(7) Includes 600,000 shares held by Garfinkle Limited Partnership I and
6,489,970.5 shares held by Garfinkle Limited Partnership II, both Delaware
limited partnerships with respect to each of which G.F. Management Corp.
(all of the shares of which are held by Norton Garfinkle) acts as sole
general partner.
(8) Includes 150,000 shares issuable upon exercise of stock options granted by
the Company exercisable within 60 days of August 1, 2000.
(9) Includes 35,000 shares issuable upon exercise of stock options granted by
the Company exercisable within 60 days of August 1, 2000.
No family relationship exists between any of the directors or executive
officers of the Company.
BOARD MEETINGS AND COMMITTEES
During the year ended December 31, 1999, the Board of Directors of the
Company met five times and took action by unanimous written consent on fourteen
occasions. Each current director of the Company, other than David Diamond,
attended at least 75% of the meetings of the Board of Directors and meetings of
any committees of the Board on which such person served which were held during
the time that person served.
The members of the Audit Committee of the Board of Directors of the Company
are Norton Garfinkle and Donald E. Zilkha and, during the year ended December
31, 1999, included Sheldon Weinig (from May 1999 and until January 2000) and
Paul A. Biddelman (until May 1999). The Audit Committee is responsible for
overseeing that management fulfills its responsibilities in connection with the
preparation of the consolidated financial statements of the Company and its
subsidiaries. The Committee's functions include making recommendations to the
Board regarding the engaging and discharging of the Company's independent
accountants, reviewing with the independent accountants the plan and the results
of the auditing engagement, approving the professional services provided by the
independent accountants, reviewing the independence of the independent
accountants, and reviewing the adequacy of the Company's system of internal
accounting controls. The Audit Committee met once during the year ended December
31, 1999.
The members of the Compensation Committee of the Board of Directors are
Norton Garfinkle and Donald E. Zilkha and, during the year ended December 31,
1999, included Sheldon Weinig (from June 1999) and Paul A. Biddelman (until June
1999). The functions of the Compensation Committee include making
recommendations to the Board of Directors of the Company regarding the salaries,
bonuses, fringe benefits or compensation of any kind for the officers of the
Company. During the year ended December 31, 1999, the Compensation Committee did
not meet.
The Company has not appointed a nominating committee of the Board of
Directors.
DIRECTOR COMPENSATION
The Company maintains the Electronic Retailing Systems International, Inc.
1993 Director Stock Option Plan (the "Director Option Plan") previously adopted
by the Board of Directors, and approved by the stockholders, of its predecessor
corporation. Under the Director Option Plan, pursuant to amendments approved by
the stockholders of the Company in January 1997 and June 1998, options to
purchase up to 750,000 shares of the Company's Common Stock may be granted to
directors of the Company. The Company has the ability to grant options under the
Director Option Plan to executive officers who are directors, which are intended
to be "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), provided that the option
exercise price is equal to the fair market value of the Common Stock on the date
of grant. Other options granted under the Director Option Plan will be
nonqualified options.
The Director Option Plan is administered by the Board of Directors of the
Company, which determines the persons who are to receive options and the number
of shares subject to each option. David Diamond and Donald Zilkha, hold options
granted under the Director Option Plan: (i) in June 1996 covering, respectively,
12,500 shares and 20,000 shares of Common Stock, exercisable at a price per
share equal to $1.875, the closing price per share of Common Stock on the Nasdaq
Stock Market on the date of grant; (ii) in June 1998 covering, respectively,
17,500 shares and 10,000 shares of Common Stock, exercisable at a price per
share
4
<PAGE> 6
equal to $4.00, the closing price per share of Common Stock on the Nasdaq Stock
Market on the date of grant; and (iii) in June 2000 covering, in each case,
30,000 shares of Common Stock, exercisable at a price per share, equal to $0.88,
the average of the closing high bid and closing low asked prices of the Common
Stock in the over-the-counter market on the date of grant. All such options
expire five years from the date of grant and are exercisable on the date of
grant with respect to one-quarter of the shares covered thereby, with an
additional one-quarter of such shares becoming exercisable annually thereafter.
Paul Biddelman, who served as a director until June 1999, held options
granted under the Director Option Plan: (i) in June 1996, covering 20,000 shares
of Common Stock exercisable at a price per share equal to $1.875; and (ii) in
June 1998, covering 10,000 shares of Common Stock exercisable at a price per
share equal to $4.00. Sheldon Weinig, who served as a director until January
2000, held options granted under the Director Option Plan in September 1998,
covering 10,000 shares of Common Stock, exercisable at a price per share equal
to $2.75. Such prices represented the closing price per share of Common Stock on
the Nasdaq Stock Market on the date of grant. Such options were exercisable on
the date of grant with respect to one-quarter of the shares covered thereby and
with an additional one-quarter of such shares becoming exercisable annually
thereafter, and expired without exercise upon the conclusion of such directors'
respective tenure on the Board of Directors.
Bruce F. Failing, Jr., the Company's chief executive officer, and Michael
B. Persky, the Company's chief operating officer, are parties to executive
compensation arrangements with the Company as described below under "Executive
Compensation" and "Certain Agreements with Executive Officers."
During the year ended December 31, 1999, the Company paid to Oxford
Management Corporation ("Oxford") the amount of $22,500 for services rendered by
Norton Garfinkle and $1,409 in reimbursement of other expenses, and incurred an
additional $90,000 for such services and $1,053 in reimbursement of other
expenses, which was invoiced in 2000. The Company's continuing arrangements with
Oxford, which are terminable at any time by the Company or Oxford, provide for
payments in the amount per month of $7,500 for services rendered by Mr.
Garfinkle.
The Company has not adopted any director fee arrangement, but reimburses
all of its directors for their out-of-pocket expenses incurred in the
performance of their duties as directors of the Company.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth information
concerning the annual compensation for each of the Company's last three
completed fiscal years of: (i) the Company's chief
5
<PAGE> 7
executive officer and (ii) each of the other four most highly-compensated
executive officers whose salary and bonus exceeded $100,000 during the most
recent fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION OTHER SECURITIES
-------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(2) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Bruce F. Failing, Jr..... 1999 150,000 -- -- -- --
Chief Executive Officer 1998 155,769 -- -- -- --
1997 206,731 -- -- -- --
Michael B. Persky........ 1999 234,519 -- -- -- 500(5)
President(1) 1998 214,385 -- -- 450,000(3) 500
1997 24,615 -- -- 60,000 --
Morty Bachar............. 1999 169,038 20,000 -- 175,000 500(5)
Vice President, 1998 -- -- -- -- --
Engineering(4) 1997 -- -- -- -- --
Norman Tsang............. 1999 164,769 40,000 40,000(7) 205,000 500(5)
Vice President, 1998 -- -- -- -- 500
Marketing(6) 1997 -- -- -- -- --
Paul Lavoie.............. 1999 160,000 20,000 -- 125,000 500(5)
Vice President, Sales(8) 1998 67,692 -- -- 50,000 --
1997 -- -- -- -- --
</TABLE>
---------------
(1) Mr. Persky became an executive officer upon joining the Company in December
1997.
(2) Excludes perquisites and other personal benefits unless the aggregate amount
of such compensation exceeds the lesser of either $50,000 or 10% of the
total of annual salary and bonus reported for the named executives.
(3) Options with respect to 60,000 shares replaced options previously granted
and surrendered contemporaneously with such replacement.
(4) Mr. Bachar became an executive officer in January 1999 after joining the
Company in 1998 and ceased to be an executive officer in January 2000.
(5) Represents 401(k) contributions by the Company under its defined
contribution plan.
(6) Mr. Tsang became an executive officer upon joining the Company in January
1999.
(7) Represents $40,000 paid to Mr. Tsang for relocation expenses.
(8) Mr. Lavoie became an executive officer upon joining the Company in 1998.
6
<PAGE> 8
Option Grant Table. The following table sets forth certain information
regarding options granted by the Company during the year ended December 31,
1999, to the individuals named in the above compensation table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL MARKET STOCK PRICE
SECURITIES OPTIONS PRICE PER APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE SHARE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE ON DATE OF EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) GRANT($) DATE 5%($) 10%($)
---- -------------- ------------ -------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce F. Failing,
Jr................. -- -- -- -- -- -- --
Michael B. Persky.... -- -- -- -- -- -- --
Morty Bachar......... 100,000 7.2 2.09 2.09 01/15/09 131,439 333,092
50,000 3.6 1.35 1.35 06/04/09 42,450 107,578
25,000 1.8 0.97 0.97 12/31/09 15,251 38,648
Norman Tsang......... 130,000(3) 9.4 2.25 2.25 01/15/09 183,952 466,170
50,000 3.6 1.35 1.35 06/04/09 42,450 107,578
25,000 1.8 0.97 0.97 12/31/09 15,251 38,648
Paul Lavoie.......... 100,000 7.2 1.35 1.35 06/04/09 84,901 215,155
25,000 1.8 0.97 0.97 12/31/09 15,251 38,648
</TABLE>
---------------
(1) Except as otherwise indicated, all such options become exercisable with
respect to one-quarter of the shares covered thereby on the first
anniversary of the date of grant, and with an additional one-quarter thereof
subject to exercise on each subsequent anniversary thereafter.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on arbitrarily assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the respective options are granted to
their expiration date.
(3) Of such options, options covering 30,000 shares become exercisable with
respect to all such shares on the first anniversary of the date of grant.
Aggregate Option Exercises and Year-End Option Table. The following table
sets forth certain information regarding exercises of stock options, and stock
options held as of December 31, 1999 by the individuals named in the above
compensation table.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#) AT YEAR-END(1)
ACQUIRED ON VALUE ----------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce F. Failing, Jr........ -- -- -- -- -- --
Michael B. Persky........... -- -- 100,000 350,000 -- --
Morty Bachar................ -- -- 7,500 197,500 -- --
Norman Tsang................ -- -- -- 205,000 -- --
Paul Lavoie................. -- -- 12,500 162,500 -- --
</TABLE>
---------------
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date or at year-end, as the case may be, less the
respective exercise prices.
7
<PAGE> 9
1993 EMPLOYEE STOCK OPTION PLAN
The Company maintains the Electronic Retailing Systems International, Inc.
1993 Employee Stock Option Plan (the "Employee Option Plan") previously adopted
by the Board of Directors, and approved by the stockholders, of its predecessor
corporation. For a description of the Employee Option Plan, see "II. Amendment
to the 1993 Employee Option Plan" below.
CERTAIN AGREEMENTS WITH EXECUTIVE OFFICERS
As described below under "Certain Information Concerning Directors,
Officers and Stockholders," during the current year the Company purchased an
interest in NewCheck Corporation ("NewCheck") and extended a management
agreement to NewCheck under which the Company will manage NewCheck's operations.
In connection with performance of these arrangements, the Company has allocated
to Bruce F. Failing, Jr., the Company's Vice Chairman and Chief Executive
Officer, a portion of the ten-year warrants, exercisable at a price per share of
$.001 with respect to the common stock, $.0001 par value (the "NewCheck Common
Stock"), of NewCheck, and related registration rights, extended by NewCheck to
the Company at closing, such portion covering 260,000 shares of the 1,110,000
shares of NewCheck Common Stock subject to the warrants extended to the Company.
Mr. Failing will be obligated to re-assign these warrants to the Company in the
event he is no longer employed by the Company, subject to specified exceptions,
which include Mr. Failing's right to exercise these warrants for up to two years
after any termination of employment without "cause" (as defined in such
arrangements).
The Company has also allocated to Michael B. Persky, its President and
Chief Operating Officer, to Norman Tsang, its Vice President, Marketing, to
Jerry McAuliffe, its Vice President, Chief Financial Officer, and to Paul
Lavoie, its Vice President, Sales, portions of certain additional ten-year
warrants, and related registration rights, extended by NewCheck to the Company
at closing and exercisable at a price per share of $.001 with respect to
NewCheck Common Stock in the event the equity value of NewCheck exceeds
specified levels during the three years after closing. Of its maximum
entitlement of up to 15% of NewCheck's equity, on a fully-diluted basis, the
Company has allocated to Mr. Persky 2% thereof, to Mr. Tsang 1% thereof, to Mr.
McAuliffe 0.7% thereof and to Mr. Lavoie 0.3% thereof. Such officers will be
obligated to re-assign these warrants to the Company under the same arrangements
that apply to Mr. Failing.
The Company has entered into severance agreements with Messrs. Persky,
Tsang, McAuliffe and Lavoie, and with Frank Romano, its Vice President,
Engineering, which provide that, if the employment of such officer is terminated
without "cause" or such officer resigns with "good reason" (as defined in the
agreements), the Company will continue payments of base salary and coverage
under the Company's welfare plans (or equivalent coverage) for a specified
period, calculated as six months in the case of Mr. Persky and three months in
the case of the other such officers. Such arrangements also provide that option
grants by the Company to such officers become immediately exercisable if
employment is terminated in specified circumstances during the twelve-month
period following a "change-of-control" of the Company (as defined therein), and
that options granted by the Company to such officers remain outstanding for a
period of two years following termination of employment in specified
circumstances, and impose on such officers confidentiality restrictions and, for
one year after departure from the Company, non-competition and non-solicitation
covenants. All such officers have entered into severance arrangements extended
by NewCheck on substantially similar terms in their respective capacities as
officers of NewCheck.
Messrs. Failing, Persky, Tsang, McAuliffe and Lavoie also hold options
granted by NewCheck under the NewCheck Corporation 1995 Stock Option Plan
covering, respectively, 260,000 shares, 207,000 shares, 52,000 shares, 31,000
shares and 21,000 shares of NewCheck Common Stock, exercisable at a price per
share of $.75. In the case of Mr. Failing, one-half of such options are
exercisable at grant and the remainder on the first anniversary of grant and, in
the case of the other officers, one-quarter of such options are exercisable on
the first anniversary of grant with an additional one-sixteenth thereof
exercisable each three-month period thereafter.
8
<PAGE> 10
PERFORMANCE GRAPH
The following performance graph compares the total stockholder return on
the Company's Common Stock to the S&P 500 Index and to the NASDAQ Computer &
Data Processing Index for the past five years. The graph assumes that $100 was
invested in the Common Stock and each such Index on December 31, 1994 and that
all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURNS
[CHART]
<TABLE>
<CAPTION>
ELECTRONIC RETAILING NASDAQ COMPUTER &
SYSTEMS INTERNATIONAL, INC. S&P 500 INDEX DATA PROCESSING INDEX
--------------------------- ------------- ---------------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 45.46 137.58 152.28
1996 75.00 169.17 187.94
1997 79.55 225.60 230.89
1998 51.13 290.08 412.21
1999 17.62 351.12 871.24
</TABLE>
Notwithstanding anything set forth in any of the Company's previous filings
under the Securities Act of 1933 or the Securities Exchange Act of 1934 which
might incorporate future filings, including this Proxy Statement, in whole or in
part, the preceding performance graph and the report that follows shall not be
deemed incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors makes recommendations
to the Board of Directors regarding the compensation arrangements for executive
officers of the Company. The Compensation Committee's objectives in formulating
the Company's executive compensation program are: (i) to offer levels of
compensation which are competitive with those offered by other companies in
similar businesses; (ii) to compensate executives based on each executive's
level of responsibility and contribution to the Company's business goals; (iii)
to link compensation with the Company's financial performance; and (iv) to align
the interests of the Company's executives with the interests of the Company's
stockholders.
In the case of executive officers other than the Company's chief executive
officer, who is a founder and principal stockholder of the Company, the
Compensation Committee acts upon information provided to it by the Company's
chief executive officer or chief operating officer in response to the
requirements of the Company's operations. During the fiscal year ended December
31, 1999, a principal objective of the Company remained the construction of
arrangements that would be effective in attracting and retaining executive
management so as to build an organization sufficient to support a larger
customer base and anticipated sales growth. During the current year, the Company
has furthermore endeavored to incentivize its executive
9
<PAGE> 11
management in order to permit the Company to perform more effectively under the
arrangements pursuant to which the Company manages the operations of NewCheck
Corporation.
The compensation program for the Company's executives has, through the year
ended December 31, 1999, consisted primarily of base salary and stock options,
and in appropriate circumstances has extended also to cash bonuses. The
Company's chief executive officer has not been awarded any bonus amounts since
the inception of the Company, and has not participated in the Company's stock
option program.
(i) Base Salary. The Compensation Committee determines executive base
salaries by level of responsibility, individual performance and Company
performance, as well as by the need to provide a competitive package that allows
the Company to retain key executives. After reviewing individual and Company
performance and available information on salaries at other companies of similar
size, the chief executive officer and chief operating officer make
recommendations to the Compensation Committee concerning the base salaries of
executive officers junior to them, respectively. The Compensation Committee
reviews and, with any changes it deems appropriate, approves these
recommendations for submission to the Board of Directors of the Company. Base
salary of the Company's chief executive officer during 1999 was $150,000 per
annum.
(ii) Cash Bonuses. During the year ended December 31, 1999, the Company
paid bonuses to Norman Tsang, the Company's Vice President, Marketing, in the
amount of $40,000, to Paul Lavoie, its Vice President, Sales, in the amount of
$20,000, and to Morty Bachar, who ceased to be an executive during the year, in
the amount of $20,000. The Company may in the future award bonuses to key
management personnel based on the achievement of corporate goals recommended by
senior executive management and approved by the Board of Directors of the
Company, individual objectives established for executive management by the
Compensation Committee in discussions with the employee, and an evaluation of
executive management by the Compensation Committee.
(iii) Stock Options. The primary purpose of the Company's stock option
program is to align the interests of the Company's executive officers more
closely with the interests of the Company's stockholders by offering the
executives an opportunity to benefit from increases in the market price of the
Common Stock. The Company's stock option program provides long-term incentives
that have enabled the Company to attract and retain key employees by encouraging
their ownership of Common Stock. The Compensation Committee believes that its
stock option program provides opportunities to executives that are consistent
with the returns that are generated on behalf of the Company's stockholders.
The Company's Employee Option Plan is administered by the Board of
Directors, which, in the case of executive officers, typically acts upon
recommendations of the Compensation Committee. During the year ended December
31, 1999, option grants were made to all officers named in the Summary
Compensation Table under "Executive Compensation" above (other than Bruce F.
Failing, Jr. and Michael Persky, the Company's chief executive officer and chief
operating officer, respectively) covering, in the aggregate, 505,000 shares of
Common Stock, representing options with respect to 36.5% of the Common Stock
covered by options granted that year. Each of the Company's executive officers
during 1999 (other than Mr. Failing) held options granted under the Employee
Option Plan. In selecting individuals for options under the plan and determining
the terms thereof, the Company takes into consideration present and potential
contributions to the success of the Company.
During 1999, the Company's policy was, generally, to award options either
in connection with new hires or upon promotion of an employee to a position of
enhanced responsibility. Options covering any aggregate of 1,289,000 shares of
Common Stock have been granted to executive officers of the Company as a group
during the current year (which, to the extent covering 539,000 shares, remain
subject to stockholder approval of the expansion of the Employee Option Plan,
described under "II. Amendments to the 1993 Employee Stock Option Plan" below).
During the current year, the Company entered into severance agreements with
Messrs. Persky, Tsang and Lavoie, and with Jerry McAuliffe, its Vice President,
Chief Financial Officer, and Frank Romano, its Vice President, Engineering,
under which the Company committed that option grants by the Company became
10
<PAGE> 12
immediately exercisable if the employment of such officer is terminated in
specified circumstances during the twelve-month period following a
"change-of-control" (as defined therein), and that options granted by the
Company remain outstanding for a period of two years following termination or
employment in specified circumstances. See "Certain Agreements with Executive
Officers" above.
During the current year, and following the Company's purchase of an
interest in NewCheck and the extension of a management agreement to NewCheck
under which the Company will manage NewCheck's operations, the Company's
executive management has also received, and will continue to receive
compensation arrangements extended by NewCheck, as described above under
"Certain Agreements with Executive Officers."
------------------------
Section 162(m) ("Section 162") of the Code generally limits federal income
tax deductions paid after 1993 to the chief executive officer and to the four
other most highly compensated officers of the Company to a total of $1 million
per year, but contains an exception for performance based compensation that
satisfies certain conditions. The Company has not adopted an absolute policy
regarding Section 162. In making compensation decisions, the Company will
consider the net cost of compensation to it and whether it is practicable and
consistent with other compensation objectives to qualify the Company's incentive
compensation under the applicable exemption of Section 162. The Company
anticipates that deductibility of compensation payments will be one among a
number of factors used in ascertaining appropriate levels or modes of
compensation, and that the Company will make its compensation decision based
upon an overall determination of what it believes to be in the best interests of
its stockholders.
Compensation Committee
Norton Garfinkle
Donald E. Zilkha
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1999, the members of the Company's
Compensation Committee were Norton Garfinkle, Donald E. Zilkha and until June
1999, Paul A. Biddelman, and, subsequent to June 1999, Sheldon Weinig.
During the year ended December 31, 1999, Oxford Management Corporation, a
company controlled by Mr. Garfinkle, was reimbursed an aggregate amount of
$22,500 for services rendered by Mr. Garfinkle and $1,409 in reimbursement of
other expenses, and incurred an additional $90,000 for services and $1,053 in
reimbursement of other expenses, which was invoiced in 2000. The Company's
continuing arrangements with Oxford, which are terminable at any time by the
Company or Oxford, provide for payments in the amount per month of $7,500 for
services rendered by Mr. Garfinkle.
Holders of shares of Common Stock obtained upon conversion of the Company's
previously outstanding Series A Cumulative Convertible Preferred Stock, $1.00
par value (the "Series A Preferred Stock"), remain entitled to certain demand
and incidental registration rights which, in the case of such demand rights,
obligate the Company to register such shares, on two occasions, provided that
the holders of at least 500,000 shares notify the Company that they intend to
offer for sale in the aggregate at least 100,000 shares of Common Stock. Such
holders include Garfinkle Limited Partnership II (an affiliate of Mr.
Garfinkle), an affiliate of Hanseatic Corporation (in which Mr. Biddelman is an
officer), and Mr. Zilkha.
Under agreements entered into by the Company in 1993 with the limited
partners of a partnership affiliated with the Company's predecessor corporation
(including Mr. Zilkha and Hanseatic Corporation's predecessor-in-interest), such
partners hold certain demand and incidental registration rights and co-sale
rights. In addition, the former stockholders of the Company's predecessor
corporation, including Mr. Garfinkle and Bruce F. Failing, Jr., Vice Chairman of
the Board and Chief Executive Officer and a director of the Company, and their
respective affiliates and related family trusts, became entitled to certain
demand and incidental registration rights with respect to shares of Common Stock
held by them upon the Company's
11
<PAGE> 13
acquisition of its predecessor corporation, which, in the case of such demand
registration rights, operate pursuant to the standards applicable to the shares
obtained upon conversion of Series A Preferred Stock. Certain stockholders of
the Company, including Mr. Failing and Messrs. Garfinkle and Zilkha, and their
respective affiliates, became entitled to certain incidental registration rights
with respect to shares of Common Stock purchased by them in a 1996 private
placement by the Company.
INFORMATION CONCERNING CERTAIN STOCKHOLDERS
The stockholders (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) who, to the knowledge of the
Board of Directors of the Company, owned beneficially more than 5% of any class
of the outstanding voting securities of the Company as of August 1, 2000 and all
directors and executive officers as a group, and their respective stockholdings
as of such date (according to information furnished by them to the Company), are
set forth in the following table:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
---------------- --------------------- --------
<S> <C> <C>
Norton Garfinkle............................................ 7,890,758(3) 37.1%
133 East 62nd Street
New York, NY 10021(2)
Bruce F. Failing, Jr........................................ 3,145,637(4) 14.8
83 Pecksland Road
Greenwich, CT 06831(2)
Fidelity International Limited.............................. 2,086,000(5) 9.8
Pembroke Hall
42 Crow Lane
Hamilton, Bermuda
Directors and executive officers as a group (ten persons)... 11,518,742(6) 54.1
</TABLE>
---------------
(1) Except as otherwise indicated, as of August 1, 2000 all of such shares are
owned with sole voting and investment power.
(2) Such stockholders are party to a stockholders agreement among Norton
Garfinkle, Bruce F. Failing, Jr., certain family trusts and partnerships,
and Elizabeth Z. Failing, as described below.
(3) Includes 600,000 shares held by Garfinkle Limited Partnership I and
6,489,970.5 shares held by Garfinkle Limited Partnership II, both Delaware
limited partnerships and with respect to each of which G.F. Management Corp.
(all of the shares of which are held by Norton Garfinkle) acts as sole
general partner.
(4) Includes 1,318,489 shares beneficially owned by a trust established for the
benefit of Mr. Failing's children, 168,318 shares beneficially owned by
Elizabeth Z. Failing, Mr. Failing's sister, and 20,000 shares beneficially
owned jointly by Mr. Failing and his wife Leigh Q. Failing.
(5) In a Statement on Schedule 13G filed with the Securities and Exchange
Commission by Fidelity International Limited ("FIL"), FIL has reported that
it beneficially owns such shares as investment adviser or the parent of the
investment adviser to a number of non-U.S. investment companies or
investment trusts.
(6) Includes 380,875 shares issuable upon exercise of stock options granted by
the Company exercisable within 60 days of August 1, 2000.
As of August 1, 2000, no executive officer of the Company named in the
Summary Compensation Table under "Executive Compensation" above (according to
information furnished by them to the Company)
12
<PAGE> 14
owned beneficially any shares of Common Stock, except for Bruce F. Failing, Jr.,
a nominee for election as director at the Meeting, and except as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
---------------- --------------------- --------
<S> <C> <C>
Michael B. Persky........................................... 153,000(2) (3)
Norman Tsang................................................ 67,500(4) (3)
Paul Lavoie................................................. 50,000(4) (3)
</TABLE>
---------------
(1) Except as otherwise indicated, as of August 1, 2000 all of such shares are
owned with sole voting and investment power.
(2) Includes 150,000 shares issuable upon exercise of stock options granted by
the Company exercisable within 60 days of August 1, 2000.
(3) Less than one percent.
(4) Represents shares issuable upon exercise of stock options granted by the
Company exercisable within 60 days of August 1, 2000.
Messrs. Garfinkle and Failing, together with certain family trusts and
partnerships, and Mr. Failing's sister (each, together with his related parties,
a "Stockholder Group"), are parties to an agreement dated March 1993, as amended
(the "Restated Stockholder Agreement"), under which: (i) both Stockholder Groups
have agreed that, through the year 2003, they will use their best efforts to
provide that the Board of Directors of the Company will consist of not more than
seven directors, six of whom (or such lesser number equivalent to the then
current number of directors) will be designated by Mr. Garfinkle and Mr. Failing
in proportion to the respective beneficial holdings of shares of Common Stock of
the Garfinkle Stockholder Group and the Failing Stockholder Group, (ii) except
for sales effected pursuant to Rule 144 and transfers to affiliates, family
members or related trusts, no such Stockholder Group may transfer any shares of
Common Stock to any third party without first offering such shares to the other
Stockholder Group at the same price as offered by such third party, (iii)
through the year 2003, in the event a Stockholder Group proposes to transfer
shares of Common Stock to a third party in a transaction pursuant to which
control of the Company would change, the other Stockholder Group will have the
right, on the same terms, to participate in such transaction, and (iv) through
the year 2003, Mr. Garfinkle has the option to acquire at fair market value all
shares held by the Failing Stockholder Group upon the death or incapacity of Mr.
Failing, which option may be assigned to the Company, subject to the Company's
acceptance of such option. Such arrangements terminate in the event either
Stockholder Group owns less than ten percent of the outstanding Common Stock, or
if Messrs. Garfinkle and Failing are unable to elect at least a majority of the
Board of Directors of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of copies of reports received by it pursuant to
Section 16(a) of the Securities Exchange Act of 1934, and the written
representations of its directors and officers, and holders of more than ten
percent of any registered class of the Company's equity securities, the Company
believes that, during 1999 all filing requirements applicable to its directors,
officers and ten percent holders under said section were satisfied.
OTHER INFORMATION CONCERNING DIRECTORS, OFFICERS AND STOCKHOLDERS
At August 1, 2000, Norton Garfinkle, Chairman of the Board and a director
of the Company, together with two affiliated limited partnerships, beneficially
owned approximately 37.1% of the outstanding Common Stock of the Company, and
Bruce F. Failing, Jr., Vice Chairman of the Board and Chief Executive Officer
and a director of the Company, together with a trust established for the benefit
of his children, beneficially owned approximately 14.8% of the outstanding
Common Stock of the Company. See "Compensation Committee Interlocks and Insider
Participation" above for information concerning certain demand and incidental
registration rights relating to the Company's Common Stock held by Messrs.
Garfinkle and Failing,
13
<PAGE> 15
and Donald E. Zilkha, a director of the Company, and Paul A. Biddelman (who
served as a director until June 1999), or their affiliates, and certain
reimbursements by the Company to a company controlled by Mr. Garfinkle.
During the year ended December 31, 1999, as a result of the advances by the
Connecticut Development Authority (the "CDA") under the Company's convertible
note (the "CDA Note"), and the exercisability of the Company's warrant (the "CDA
Warrant") held by the CDA, the CDA was the beneficial owner of in excess of 5%
of the outstanding Common Stock. Upon maturity in August 1999, the Company was
indebted under the CDA Note in the aggregate principal amount of $5,000,000.
Until repayment upon maturity, such amounts accrued interest, payable monthly,
at a rate of 7.4% per annum (of which $227,000 was paid during the year ended
December 31, 1999) and were secured by the assets of the Company. Such amounts
were convertible into shares of Common Stock, at an adjusted conversion price
calculated at $3.00 plus the average market price of the Common Stock during the
twelve months prior to conversion. The CDA Warrant was exercisable through
August 1999 with respect to 699,724 shares of Common Stock, at an adjusted price
calculated at $2.58 plus the average market price of the Common Stock during the
twelve months prior to exercise, and expired without exercise.
In February 2000, in exchange for payments aggregating $6.5 million, the
Company acquired 262,802 shares of the newly-created Series C Convertible
Preferred Stock, $.0001 par value (the "Senior Preferred Stock"), of NewCheck,
together with NewCheck's 8% Convertible Promissory Note (the "Convertible Note")
in the aggregate principal amount of approximately $4.6 million, convertible
into an additional 613,205 shares of Senior Preferred Stock. The shares of
Senior Preferred Stock acquired by the Company at closing represented
approximately 19% of NewCheck's outstanding voting securities. Mr. Failing is a
director and, since closing has been an executive officer, of NewCheck, and his
spouse, individually and as trustee, holds approximately 8% of the voting
securities of NewCheck outstanding at closing, consisting of shares of Senior
Preferred Stock acquired at closing and prior issued shares of NewCheck's Series
B Preferred Stock, $.0001 par value (the "Junior Preferred Stock").
NewCheck's Senior Preferred Stock: (i) is entitled, pursuant to its terms,
to receive preferential dividends, payable in additional shares at the rate of
8% per annum on the liquidation preference per share; (ii) is redeemable, at a
price equal to the greater of the original issue price or fair market value,
upon specified dates; (iii) is convertible into shares of NewCheck Common Stock,
at the election of the holder, and is automatically converted in specified
circumstances; (iv) in the event of specified events will, prior to other series
of preferred stock, receive an amount equal to its liquidation preference
(calculated initially as capital invested), and then participate on an "as
converted" basis with the NewCheck Common Stock, and other participating series,
in remaining amounts available for distribution; and (v) carries a number of
votes equal to the number of shares of NewCheck Common Stock issuable upon
conversion, and votes together with the NewCheck Common Stock and other voting
securities of NewCheck.
The Convertible Note accrues interest, payable at maturity, at the per
annum rate of 8%, matures on the fifth anniversary of issue, is repayable
(together with interest) in shares of Senior Preferred Stock at the election of
NewCheck, and is convertible after two years (and earlier in specified
circumstances) into shares of Senior Preferred Stock. As a condition to closing,
the Junior Preferred Stock was amended so as to allow the senior preferences of
the Senior Preferred Stock, reduce the liquidation preference of the Junior
Preferred Stock, provide holders the right to participate in the proceeds of
specified events, and eliminate certain covenants and other arrangements
accruing to the benefit solely of the Junior Preferred Stock.
The Company and NewCheck have also entered into a management agreement
under which, for an initial term of five years, the Company will manage
NewCheck's operations, in exchange for continuing reimbursements to the Company
of the costs of performance and issuance to the Company at closing of ten-year
warrants, exercisable after the first year to acquire shares of NewCheck Common
Stock equal to approximately 16% of NewCheck's voting securities outstanding at
closing (giving effect to such warrants and to the conversion of the Convertible
Note, but not to other outstanding rights to acquire NewCheck's voting
securities). The Company received additional ten-year warrants that vest with
respect to specified percentages of the outstanding NewCheck Common Stock in the
event the equity value of NewCheck exceeds specified
14
<PAGE> 16
levels during the three years after closing. NewCheck's arrangements with the
Company and the other subscribers at closing extend, among other matters, to
demand and incidental registration rights covering NewCheck's securities and
rights-of-first offer regarding new issues of securities by NewCheck.
The Company believes that the terms of the foregoing transactions between
the Company and its affiliates were no less favorable to the Company than it
could have obtained from unaffiliated third parties. As a matter of policy, all
future transactions between the Company and its affiliates will be on terms no
less favorable to the Company than those available with unaffiliated third
parties.
II. AMENDMENT TO THE 1993 EMPLOYEE STOCK OPTION PLAN
At the Meeting, the Company will propose an amendment of the Employee
Option Plan in order to increase the number of shares of Common Stock issuable
pursuant to the exercise of options granted under such plan from 3,500,000 to
4,500,000.
The Company maintains the Employee Option Plan previously adopted by the
Board of Directors, and approved by the stockholders, of its predecessor
corporation. Under the Employee Option Plan, pursuant to amendments approved by
the stockholders of the Company in June 1994, December 1996 and June 1998,
options to purchase up to 3,500,000 shares of the Company's Common Stock may be
granted to key employees of the Company and its subsidiaries, including
executive officers who are not directors. In June 2000, the Board of Directors,
subject to stockholder approval and adoption, approved a further increase in the
number of authorized shares of the Company's Common Stock available for issuance
under the Employee Option Plan to 4,500,000 shares.
SUMMARY OF EMPLOYEE OPTION PLAN
Under the Employee Option Plan, options to purchase shares of Common Stock
may be granted to key employees, including executive officers, of the Company or
any subsidiary thereof, and to consultants and other individuals providing
services to the Company, through March 31, 2003. Options may not be granted
under the Employee Option Plan to any member of the Board of Directors of the
Company (whether or not a key employee or consultant of the Company or any
subsidiary).
The Employee Option Plan is administered by the Board of Directors of the
Company. The Board of Directors determines the persons who are to receive
options under the Employee Option Plan, the number of shares subject to each
option and whether such options will be incentive stock options or non-qualified
stock options. In selecting individuals for options and determining the terms
thereof, the Board of Directors of the Company may take into consideration any
factors it deems relevant, including present and potential contributions to the
success of the Company. Options granted under the Employee Option Plan must be
exercised within a period fixed by the Board of Directors of the Company, which
may not exceed ten years from the date of the grant of the option or, in the
case of incentive stock options granted to any holder on the date of grant of
more than ten percent of the total combined voting power of all classes of stock
of the Company, five years from the date of grant of the option. Options may be
made exercisable in whole or in installments, as determined by the Board of
Directors of the Company.
Options under the Employee Option Plan may not be transferred other than by
will or by the laws of descent and distribution, and during the lifetime of an
optionee may be exercised only by the optionee. The exercise price of an option
under the Employee Option Plan may not be less than the par value per share of
the Common Stock, provided that no incentive stock options may be granted at an
option price which is less than the market value per share of the Common Stock
on the date of grant. In the case of incentive stock options granted to any
holder on the date of grant of more than ten percent of the total combined
voting power of all classes of stock of the Company, the exercise price may not
be less than 110% of the fair market value of the Common Stock on the date of
grant. Unless designated as "incentive stock options" intended to qualify under
Section 422 of the Code, options which are granted under the Employee Option
Plan are intended to be "non-qualified stock options." The exercise price may be
paid in cash, shares of Common Stock owned by the optionee, or a combination of
both.
15
<PAGE> 17
The Employee Option Plan provides that, in the event of changes in the
corporate structure of the Company or certain events affecting the Common Stock,
the Board of Directors of the Company may, in its discretion, make adjustments
with respect to the number and kind of shares which may be issued under the
Employee Option Plan or which are covered by outstanding options, in the
exercise price per share, or both. The Employee Option Plan further provides
that, in connection with any merger or consolidation in which the Company is not
the surviving corporation or any sale or transfer by the Company of all or
substantially all of its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then outstanding voting securities of the Company, all outstanding
options under the Employee Option Plan will, at the election of the Board of
Directors, become exercisable in full on and after (i) 15 days prior to the
effective date of such merger, consolidation, sale, transfer or acquisition or
(ii) the date of commencement of such tender offer or exchange offer, as the
case may be.
The Board of Directors may terminate the Employee Option Plan at any time.
No termination or amendment of the Employee Option Plan may, without the consent
of the optionee, adversely affect the rights of such optionee under any option
held by such optionee.
TAX STATUS OF EMPLOYEE STOCK OPTIONS
For federal income tax purposes, an optionee under the Employee Option Plan
will not recognize any income upon the grant of a non-qualified or incentive
stock option. Upon the exercise of a non-qualified stock option granted under
the Employee Option Plan, the optionee will recognize ordinary income in an
amount equal to the excess, if any, of the fair market value of the option stock
at the time of exercise over the exercise price of the option. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer or 10% stockholder of the
Company, the date of taxation may be deferred unless the optionee files an
election under Section 83(b) of the Code. Subject to the limitations of Section
162(m) of the Code, the Company will be entitled to a tax deduction in the same
amount and at the same time as the optionee realizes such income. Upon the sale
of shares purchased upon such exercise, the optionee will realize capital gain
or loss measured by the difference between the amount realized on the sale and
the fair market value of the option stock at the time of exercise of the option.
Such capital gain or loss may be short-term or long-term, depending upon the
length of time such shares were held by the optionee.
In contrast, an optionee will not be taxed upon exercise of an incentive
stock option granted under the Employee Option Plan, and the Company will not be
entitled to a deduction from income in respect thereof. If the optionee retains
the shares transferred to him upon exercise of an incentive stock option granted
under the Employee Option Plan for more than one year after the date of issuance
of the stock and two years after the date of grant of the option, any gain or
loss realized on a subsequent sale of the shares by the optionee will be treated
as long-term capital gain or loss. If, on the other hand, the optionee sells the
shares within one year after the date of transfer or two years after the date of
grant of the option, the optionee will realize ordinary income, and the Company
will be entitled to a deduction from income, to the extent of the excess of the
value of the shares on the date of exercise or the amount realized on the sale
(whichever is less) over the exercise price. Any excess of the sale price over
the value of the shares on the date of exercise will be treated as capital gain.
The spread between the fair market value of the shares on the date of exercise
and the exercise price constitutes a tax preference item for purposes of the
alternative minimum tax which, under certain circumstances, could cause tax
liability as a result of the exercise.
The foregoing statements are based upon current federal income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, change.
NEW PLAN BENEFITS
The grant of options pursuant to the additional authorization proposed
under the Employee Option Plan to eligible employees and consultants, including
the individuals named in the Summary Compensation Table under "I. Election of
Directors -- Executive Compensation", is currently subject to the discretion of
the Board of Directors of the Company. As of the date of this Proxy Statement,
there has been no action taken by
16
<PAGE> 18
the Board of Directors of the Company with respect to awards under the
additional authorization proposed under the Employee Option Plan, except for the
grant, subject to stockholder approval and adoption of the amendment to such
plan to be proposed at the Meeting, of options covering 539,000 shares of Common
Stock.
The following table sets forth certain information regarding options
granted by the Company under the Employee Option Plan, subject to stockholder
approval and adoption of the amendment to such plan to be proposed at the
Meeting to: (i) the individuals named in the Summary Compensation Table, and
(ii) the other groups specified below:
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
EMPLOYEE OPTION PLAN
----------------------
NUMBER OF
SECURITIES
DOLLAR UNDERLYING
VALUE(1) OPTIONS(#)
-------- ----------
<S> <C> <C>
Bruce F. Failing, Jr........................................ -- --
Chief Executive Officer(2)
Michael B. Persky........................................... -- --
President(2)
Morty Bachar................................................ -- --
Vice President, Engineering(3)
Frank Romano................................................ $.82 344,000
Vice President, Engineering
Paul Lavoie................................................. $.82 75,000
Vice President, Sales
Jerry McAuliffe............................................. $.82 75,000
Vice President, Chief Financial Officer
Norman Tsang................................................ $.82 45,000
Vice President, Marketing
Executive Group............................................. $.82 539,000
Non-Executive Director Group................................ -- --
Non-Executive Officer Employees Group....................... -- --
Additional Nominees for Election as Director:
Norton Garfinkle.......................................... -- --
David Diamond............................................. -- --
Donald Zilkha............................................. -- --
Associates of Directors, Executive Officers or Nominees..... -- --
</TABLE>
---------------
(1) Represents exercise price per share of Common Stock subject to option, in
each case equal to the fair market value thereof at the date of grant. At
August 28, 2000, the fair market value per share, as defined in the Employee
Option Plan, of the Common Stock was $0.89.
(2) Such officer is also a nominee for election as director.
(3) Mr. Bachar ceased to be an executive officer of the Company in January 2000.
AMENDMENT OF THE EMPLOYEE OPTION PLAN
As of August 1, 2000, an aggregate of 3,363,636 shares of Common Stock
remained subject to options granted and outstanding under the Employee Option
Plan (539,000 shares of which were subject to options granted subject to
stockholder approval and adoption of the amendment to the Employee Option Plan
described herein). As of such date, 526,771 shares of Common Stock had been
issued under the Employee Option Plan from its inception. On August 1, 2000, the
Company had approximately 65 full-time employees.
17
<PAGE> 19
There will be presented to the stockholders at the Meeting, a proposal to
amend the Employee Option Plan to increase from 3,500,000 to 4,500,000 the
number of shares of Common Stock available for options under the Employee Option
Plan as set forth below.
Section 3 of the Employee Option Plan would be amended so that the first
sentence thereof would provide as follows:
There shall be available for options under the Plan a total of 4,500,000
shares of Common Stock, subject to any adjustments which may be made
pursuant to Section 5(f) hereof.
The amendment to the Employee Option Plan will not be made effective unless
it is approved and adopted by the holders of a majority of the shares of the
Company's Common Stock present in person or represented by proxy and entitled to
vote at the Meeting. The Board of Directors regards the number of shares
remaining available under the Employee Option Plan for new options as
insufficient for the future requirements of the Company. The Board of Directors
believes that the benefits of stockholder approval and adoption of the amendment
to the Employee Option Plan are desirable for the Company and will assist in
effectuating the objectives of the Employee Option Plan. Accordingly, the Board
urges stockholders to vote FOR approval and adoption of the amendment to the
Employee Option Plan.
III. RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, as the auditors of the Company for the year ending December 31,
2000. Such firm has examined the consolidated financial statements of the
Company for the year ended December 31, 1999. The Board of Directors considers
PricewaterhouseCoopers LLP to be eminently qualified.
One or more representatives of PricewaterhouseCoopers LLP will attend the
Meeting, will have an opportunity to make a statement and will respond to
appropriate questions from stockholders.
IV. OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
which may be brought before the Meeting. However, if any such other matters are
properly presented for action, it is the intention of the persons named in the
accompanying form of proxy to vote the shares represented thereby in accordance
with their judgment on such matters.
V. MISCELLANEOUS
If the accompanying form of proxy is executed and returned, the shares
represented thereby will be voted in accordance with the terms of the proxy,
unless the proxy is revoked. If no directions are indicated in such proxy, the
shares represented thereby will be voted FOR approval and adoption of the
amendment to the Employee Option Plan and, in the election of the directors, in
favor of the nominees proposed by the Board of Directors. Any proxy may be
revoked at any time before it is exercised by giving written notice to the
Secretary of the Company prior to the actual vote at the Meeting. The casting of
a later dated ballot or proxy at the Meeting by a stockholder who may
theretofore have given a proxy will have the effect of revoking the initial
proxy.
All costs relating to the solicitation of proxies will be borne by the
Company. Proxies may be solicited by officers, directors and regular employees
of the Company and its subsidiaries personally, by mail or by telephone or
telegraph, and the Company may pay brokers and other persons holding shares of
stock in their names or those of their nominees for the reasonable expenses in
sending soliciting material to their principals.
It is important that proxies be returned promptly. Stockholders who do not
expect to attend the Meeting in person are urged to mark, sign and date the
accompanying form of proxy and mail it in the enclosed return envelope, which
requires no postage if mailed in the United States, so that their votes can be
recorded.
18
<PAGE> 20
Additional copies of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 (the "Annual Report"), as filed with the
Securities and Exchange Commission, are available without charge upon request.
Requests should be directed to the Company, at its executive offices at 488 Main
Avenue, Norwalk, Connecticut 06851, Attention: Secretary. The Annual Report is
not to be deemed part of this Proxy Statement.
STOCKHOLDER PROPOSALS
In the event that a stockholder fails to notify the Company by August 1,
2001 of an intent to be present at the Company's 2001 annual meeting of
stockholders in order to present a proposal for a vote, the Company will have
the right to exercise its discretionary authority to vote against the proposal,
if presented, without including any information about the proposal in its proxy
materials. The foregoing requirements are separate from and in addition to the
requirements of the Securities and Exchange Commission that a stockholder must
meet to have a proposal included in the Company's Proxy Statement. Stockholder
proposals intended to be presented at the 2001 annual meeting of stockholders of
the Company must be received by the Company by June 17, 2001 in order to be
considered for inclusion in the Company's Proxy Statement relating to such
meeting.
NORTON GARFINKLE,
Chairman of the Board and Secretary
Norwalk, Connecticut
September 15, 2000
19
<PAGE> 21
Appendix 1
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
1993 EMPLOYEE STOCK OPTION PLAN
1. Purposes of Plan. The purposes of this Plan, which shall be known as the
Electronic Retailing Systems International, Inc. 1993 Employee Stock Option
Plan, and is hereinafter referred to as the "Plan", are (i) to provide
incentives for key employees of Electronic Retailing Systems International, Inc.
(the "Company") and any parent and subsidiary corporations (within the
respective meanings of Sections 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended [the "Code"], and referred to herein as "Parent" and
"Subsidiary", respectively), and to consultants and other individuals providing
services to such companies, by encouraging their ownership of the common stock,
$.01 par value (the "Common Stock"), of the Company, and (ii) to aid the Company
in retaining such key employees and other persons, upon whose efforts the
Company's success and future growth depends, and attracting other such employees
and other persons.
2. Administration. The Plan shall be administered by the Board of Directors
of the Company or, as determined by the Board of Directors in its sole
discretion, by a committee from time to time appointed by the Board of Directors
and consisting of not less than two of its members (the Board of Directors, or
such committee, for purposes of this Plan hereinafter referred to as the
"Committee"), as hereinafter provided. Subject to the terms of the Plan, the
Committee shall have plenary authority to determine the key employees,
consultants and other individuals to whom options are to be granted under the
Plan, the number of shares to be subject to each such option, the terms and
conditions upon which the options are granted and are exercisable and whether
such options will be incentive stock options or non-qualified stock options. For
purposes of administration, the Committee, subject to the terms of the Plan,
shall have plenary authority to establish such rules and regulations, make such
determinations and interpretations and take such other administrative actions as
it deems necessary or advisable. All determinations and interpretations made by
the Committee shall be final, conclusive and binding on all persons, including
Optionees (as hereinafter defined) and their legal representatives and
beneficiaries.
The Board of Directors shall designate one of the members of the Committee
as its Chairman. The Committee shall hold its meetings at such times and at such
places as it may determine. A majority of its members shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members.
Any decision or determination reduced to writing and signed by all members shall
be as effective as if it had been made by a majority vote at a meeting duly
called and held. The Committee may appoint a secretary (who need not be a member
of the Committee). No member of the Committee shall be liable for any act or
omission with respect to his service on the Committee if he acts in good faith
and in a manner he reasonably
<PAGE> 22
believes to be in or not opposed to the best interests of the Company. Service
on the Committee shall constitute service as a director of the Company for all
purposes.
3. Stock Available for Options. There shall be available for options under
the Plan a total of 4,500,000 shares of Common Stock, subject to any adjustments
which may be made pursuant to Section 5(f) hereof. Shares of Common Stock used
for purposes of the Plan may be either authorized and unissued shares, or
previously issued shares held in the treasury of the Company, or both. Shares of
Common Stock covered by options which have terminated or expired prior to
exercise shall be available for further options hereunder.
4. Eligibility. Options under the Plan may be granted to key employees of
the Company or any Parent or Subsidiary thereof, including officers of the
Company or any Parent or Subsidiary thereof, and to consultants and other
individuals providing services to the Company or any Parent or Subsidiary.
Options may not be granted under the Plan to any member of the Board of
Directors of the Company (whether or not a key employee of, or a consultant or
other individual providing services to, the Company or any Parent or
Subsidiary). Options may be granted to eligible individuals whether or not they
hold or have held options previously granted under the Plan or otherwise granted
or assumed by the Company. In selecting individuals for options, the Committee
may take into consideration any factors it may deem relevant, including its
estimate of the individual's present and potential contributions to the success
of the Company and/or any Parent or Subsidiary thereof. Service as a consultant
of or to the Company or any Parent or Subsidiary shall be considered employment
for purposes of the Plan (and the period of such service shall be considered the
period of employment for purposes of Section 5(d) of the Plan); provided,
however, that incentive stock options may be granted under the Plan only to an
individual who is an "employee" (as such term is used in Section 422 of the
Code) of the Company or any Subsidiary or Parent.
5. Terms and Conditions of Options. The Committee shall, in its discretion,
prescribe the terms and conditions of the options to be granted hereunder which
terms and conditions need not be the same in each case, subject to the
following:
(a) Option Price. The price at which each share of Common Stock covered by
an option granted under the Plan may be purchased shall be determined by the
Committee and shall not be less than the par value per share of Common Stock.
The date of the grant of an option shall be the date specified by the Committee
in its grant of the option.
(b) Option Period. The period for exercise of an option shall in no event
be more than ten years from the date of grant. Options may, in the discretion of
the Committee, become vested and be made exercisable in installments during the
option period. Any shares not purchased on any applicable installment date may
be purchased thereafter at any time before the expiration of the option period.
(c) Exercise of Options. In order to exercise an option, the holder thereof
(the "Optionee") shall deliver to the Company written notice specifying the
number of
2
<PAGE> 23
shares of Common Stock to be purchased, together with cash or a certified or
bank cashier's check payable to the order of the Company in the full amount of
the purchase price therefor; provided that, for the purpose of assisting an
Optionee to exercise an option, the Company may make loans to the Optionee or
guarantee loans made by third parties to the Optionee, on such terms and
conditions as the Board of Directors may authorize and approve; and provided
further that such purchase price may be paid in shares of Common Stock owned by
the Optionee having a market value on the date of exercise equal to the
aggregate purchase price, or in a combination of cash and Common Stock. For
purposes of the Plan, the market value per share of Common Stock shall be the
last sale price regular way on the date of reference, or, in case no sale takes
place on such day, the average of the closing bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last sale price of
the Common Stock as reported on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System on such date, or if the
Common Stock is not so reported, the average of the closing high bid and low
asked prices of the Common Stock in the over-the-counter market on such date, as
reported on the NASDAQ system, or if there are no such prices reported on the
NASDAQ system on such date, as furnished to the Committee by a New York Stock
Exchange member selected from time to time by the Committee for such purpose. If
there is no bid or asked price reported on any such date, the market value shall
be determined by the Committee in accordance with the regulations promulgated
under Section 2031 of the Code, or by any other appropriate method selected by
the Committee. An Optionee shall have none of the rights of a stockholder until
the shares of Common Stock are issued to him. An option may not be exercised for
less than ten shares of Common Stock, or the number of shares of Common Stock
remaining subject to such option, whichever is smaller.
(d) Effect of Termination of Employment. An option may not be exercised
after the Optionee has ceased to be in the employ of the Company or any Parent
or Subsidiary, except that:
(i) if, subsequent to any vesting date specified in the option, the
Optionee's employment is terminated by action of his employer for reasons other
than "cause" (as hereinafter defined), or by the Optionee (unless his employer
shall have grounds to terminate his employment for "cause"), the option may be
exercised by the Optionee within the period specified in the terms of the
option;
(ii) In the event of the death of the Optionee after termination of
employment covered by (i) above, the person or persons to whom his rights are
transferred by will or the laws of descent and distribution shall have a period
specified in the terms of the option to exercise such option;
(iii) in the event of the death of the Optionee while employed, the person
or persons to whom the Optionee's rights are transferred by will or the laws of
descent and distribution shall have a period specified in the terms of the
option to exercise such option.
3
<PAGE> 24
For purposes hereof "cause" means (i) an Optionee's conviction of a
felony involving moral turpitude with respect to the business of the Company or
any Parent or Subsidiary thereof, (ii) an Optionee's willful violation of
directions of the Board or the Chief Executive Officer of the Company or any
Parent or Subsidiary thereof, (iii) an Optionee's engaging in conduct which
constitutes willful neglect or willful misconduct in connection with the
performance of his duties or (iv) an Optionee's engaging in conduct which
violates the terms or conditions of his option grant. Nothing in the Plan or in
any option granted pursuant to the Plan (in the absence of an express provision
to the contrary) shall confer on any individual any right to continue in the
employ of the Company or any Parent or Subsidiary thereof or interfere in any
way with the right of the Company to terminate his employment at any time.
(e) Nontransferability of Options. During the lifetime of an Optionee,
options held by such Optionee shall be exercisable only by him. No option shall
be transferable other than by will or by the laws of descent and distribution.
(f) Adjustments for Change in Stock Subject to Plan and Other Events. In
the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of the Company, the Committee shall
make such adjustments, if any, as it deems appropriate in the number and kind of
shares subject to the Plan, in the number and kind of shares covered by
outstanding options, or in the option price per share.
(g) Acceleration of Exercisability of Options Upon Occurrence of Certain
Events. In connection with any merger or consolidation in which the Company is
not the surviving corporation or any sale or transfer by the Company of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then outstanding voting securities of the Company, all outstanding
options under the Plan shall, at the election of the Committee, become
exercisable in full, notwithstanding any other provision of the Plan or of any
outstanding options granted thereunder, on and after (i) the fifteenth day prior
to the effective date of such merger, consolidation, sale, transfer or
acquisition or (ii) the date of commencement of such tender offer or exchange
offer, as the case may be. The provisions of the foregoing sentence shall apply
to any outstanding options which are incentive stock options to the extent
permitted by Section 422(d) of the Code and such outstanding options in excess
thereof shall, immediately upon the occurrence of the event described in clause
(i) and (ii) of the foregoing sentence, be treated for all purposes of the plan
as nonstatutory stock options and shall be immediately exercisable as such as
provided in the foregoing sentence. Notwithstanding the foregoing, in no event
shall any option be exercisable after the date of termination of the exercise
period of such option specified in Sections 5(b), 5(d) and 6.
(h) Registration, Listing and Qualification Shares of Stock. Each option
shall be subject to the require-ment that if at any time the Board of Directors
shall determine that the registration, listing or qualification of the shares of
Common Stock covered thereby upon any securities exchange or under any federal
or state law, or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the
4
<PAGE> 25
granting of such option or the purchase of shares of Common Stock thereunder, no
such option may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. The Company may require
that any person exercising an option shall make such representations and
agreements and furnish such information as it deems appropriate to assure
compliance with the foregoing or any other applicable legal requirement.
(i) Other Terms and Conditions. The Committee may impose such other terms
and conditions, not in-consistent with the terms hereof, on the grant or
exercise of options, as it deems advisable.
6. Provisions Applicable to Incentive Stock Options. The Committee may, in
its discretion, grant "incentive stock options" (within the meaning of Section
422 of the Code) under the Plan to eligible employees, provided, however, that:
(a) no such incentive stock option shall be granted at an option price which is
less than the market value per share of Common Stock on the date of the grant;
(b) no such incentive stock option shall be issued to any one Optionee if the
aggregate fair market value, determined at the time of the grant of such
incentive stock options, of the shares with respect to which such incentive
stock options are exercisable for the first time by such Optionee during any
calendar year, together with all options under any other incentive stock option
plan of the Company exercisable during such year, exceeds $100,000; (c) no such
incentive stock option shall be granted to any Optionee who at the time such
option is granted owns more than 10 percent of the total combined voting stock
of the Company unless (i) the option price is not less than 110 percent of the
fair market value per share of stock on the date of the grant, and (ii) the
option is not exercisable after five years from the date such option is granted;
(d) Section 5(d) hereof shall not (except for the definition of "cause"
thereunder) apply to any incentive stock option during any period in which such
option, pursuant to its terms, is an incentive stock option; and (e) during any
period in which such option, pursuant to its terms, is an incentive stock
option, no such incentive stock option may be exercised after the Optionee has
ceased to be in the employ of the Company or any Parent or Subsidiary, except
(i) if the Optionee's employment is terminated by action of his employer for
reasons other than "cause", or by reason of disability or retirement under any
retirement plan maintained by the Company or any Parent or Subsidiary thereof,
the incentive stock option may be exercised by the Optionee within 30 days after
such termination, but only as to any shares exercisable on the date the
Optionee's employment so terminates, and (ii) in the event of the death of the
Optionee while employed, the person or persons to whom his rights are
transferred by will or the laws of descent and distribution shall have a period
of one year from the date of the Optionee's death to exercise any incentive
stock options which were exercisable by the Optionee at the time of his death.
7. Withholding Tax. Upon the exercise of an option granted pursuant to the
Plan, or the disposition by any person of shares of Common Stock acquired
pursuant to the exercise of an option granted pursuant to the Plan, the Company
shall have the right to require such person to pay the Company the amount of any
taxes which the Company may be required to withhold with respect to such shares.
5
<PAGE> 26
8. Amendment and Termination. Unless the Plan shall theretofore have been
terminated as hereinafter provided, the Plan shall terminate on, and no option
shall be granted thereunder after March 31, 2003; provided, however, that the
Board of Directors may at any time prior to that date terminate the Plan. The
Board of Directors may at any time amend the Plan; provided, however, that,
except as contemplated in Section 5(f) hereof, the Board of Directors shall not,
without approval by a majority of the votes cast by the stockholders of the
Company at a meeting of stock-holders at which a proposal to amend the Plan is
voted upon: (i) increase the maximum number of shares of Common Stock for which
options may be granted under the Plan, (ii) change the formula as to minimum
option prices, (iii) extend the period during which options may be granted or
exercised, or (iv) amend the requirements as to the class of persons eligible to
receive options. No termination or amendment of the Plan may, without the
consent of an Optionee, adversely affect the rights of such Optionee under any
option held by such Optionee.
9. Other Actions. Nothing contained in the Plan shall be construed to limit
the authority of the Company to exercise its corporate rights and powers,
including but not by way of limitation, the right of the Company to grant or
assume options for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or association.
6
<PAGE> 27
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby (1) acknowledges receipt of the notice of the Annual
Meeting of Stockholders of Electronic Retailing Systems International, Inc. (the
"Company") to be held at the offices of Zilkha & Company, 767 Fifth Avenue-46th
Floor, New York, New York on Friday, October 13, 2000 at 10:00 A.M., local
time, and the Proxy Statement in connection therewith and (2) appoints Norton
Garfinkle and Bruce F. Failing, Jr., and each of them, his proxies with full
power of substitution, for and in the name, place and stead of the undersigned,
to vote and act with respect to all of the shares of Common Stock of the
Company standing in the name of the undersigned or with respect to which the
undersigned is entitled to vote and act, at the meeting and at any adjournment
thereof, and the undersigned directs that this proxy be voted as specified on
the reverse side.
If more than one of the proxies named above shall be present in person or by
substitute at the meeting or any adjournment thereof, all of the proxies so
present and voting, either in person or by substitute, shall exercise all of the
proxies hereby given.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
the proxies so present and voting, their substitutes or any of them, may
lawfully do by virtue hereof.
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 28
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C>
FOR ALL NOMINEES WITHHOLD NOMINEES: David Diamond
LISTED AT RIGHT (EXCEPT AUTHORITY Bruce F. Failing, Jr.
AS MARKED TO THE TO VOTE FOR ALL NOMINEES Norton Garfinkle
CONTRARY BELOW) LISTED AT RIGHT Michael B. Persky
(A) ELECTION OF [ ] [ ] Donald Zilklha
Directors:
</TABLE>
<TABLE>
<S> <C>
(b) Proposal to approve and adopt an amendment to the FOR AGAINST ABSTAIN
Company's 1993 Employee Option Plan to increase [ ] [ ] [ ]
the number of shares of Common Stock issuable
pursuant to the exercise of options from 3,500,000
to 4,500,000.
(c) In the discretion of the proxies on any other
matter that may property come before the meeting
or any adjournment thereof.
</TABLE>
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO HEREIN.
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED.
INSTRUCTIONS: To withhold authority to vote for any individual nominee as a
Director, write that nominee's name in the space provided below;
--------------------------------------------------
<TABLE>
<S> <C> <C> <C>
SIGNATURE DATED SIGNATURE DATED
-------------------------- ------------------------- ----------------------- -----------
</TABLE>
NOTE: Please date this proxy and sign your name exactly as it appears herein.
Where this is more than one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or trustee, please add your title as
such. If executed by a corporation, the proxy should be signed by a duly
authorized officer.
