SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MICROS-TO-MAINFRAMES, INC.
(Name of Registrant as Specified In Its Quarter)
MICROS-TO-MAINFRAMES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated, and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
MICROS-TO-MAINFRAMES, INC.
614 Corporate Way
Valley Cottage, New York 10989
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of MICROS-TO-MAINFRAMES, INC.:
Notice is hereby given that the Fiscal 1998 Annual Meeting
of Shareholders (the "Annual Meeting") of Micros-to-Mainframes,
Inc. (the "Company"), a New York corporation, will be held on
October16, 1998, at 614 Corporate Way, Valley Cottage, New York
at the hour of 10:00 a.m., for the following purposes:
1. To elect five (5) Directors of the Company to serve
for the ensuing year and/or until their successors
are elected and qualify;
2. To ratify the adoption of the Company's 1998 Stock
Option Plan;
3. To ratify the appointment of Ernst & Young LLP as
independent auditors of the Company's financial
statements for the fiscal year ending March 31,
1999; and
4. To transact such other business as may properly come
before the Annual Meeting or any adjournment or
adjournments thereof.
The Board of Directors has fixed the close of business on
August 21, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Frank T. Wong, Secretary
Valley Cottage, New York
August 28, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD, AND
RETURN IT TO THE COMPANY. THE PROXY MAY BE REVOKED AT ANY TIME
BEFORE IT IS VOTED, AND SHAREHOLDERS EXECUTING PROXIES MAY
ATTEND THE MEETING AND VOTE THERE IN PERSON SHOULD THEY SO DESIRE.
<PAGE>
MICROS-TO-MAINFRAMES, INC.
614 Corporate Way
Valley Cottage, New York 10989
PROXY STATEMENT
This Proxy Statement is being furnished in connection with
the solicitation of proxies by Micros-To-Mainframes, Inc. (the
"Company") to be voted at the Fiscal 1998 Annual Meeting of the
Shareholders (the"Annual Meeting") to be held at 614 Corporate
Way, Valley Cottage, New York on October 16, 1998 at 10:00
a.m., and at any and all adjournments thereof. This Proxy
Statement and accompanying Notice of Meeting and form of proxy
are to be first mailed on or about August 28, 1998 to the
holders of record of the Company's common stock, $.001 par
value per share ("Common Stock) as of the close of business on
August 21, 1998. At the close of business on August 28, 1998,
there were issued and outstanding and entitled to vote
4,402,774 shares of Common Stock. Each share of Common Stock
is entitled to one vote on each matter which may properly come
before the Meeting. All expenses of this solicitation will be
paid for by the Company, which solicitation will be made by use
of the mails or by personal contacts by the officers of the
Company. The affirmative vote of the majority of the votes
cast by the holders of Common Stock present in person or by
proxy at the Annual Meeting and entitled to vote, voting
together as a single class, is required for the election of
Directors. The affirmative vote of the majority of the votes
cast by the holders of Common Stock present in person or by
proxy at the Annual Meeting and entitled to vote, voting
together as a single class, is required to adopt each other
proposal to be acted on at the Annual Meeting.
Common Stock represented by a valid unrevoked proxy will
be voted at the Annual Meeting and any adjournment thereof as
specified therein by the person giving the proxy. If no
specification is made, the Common Stock represented by such
proxy will be voted in favor of each Director for re-election,
"FOR" Proposals 2 and 3 and at the discretion of the proxy
agents upon any other matters which may properly become before
the Annual Meeting. Shares represented by proxies which are
marked "Abstain" for any matter, and proxies which are marked
to deny discretionary authority on all other matters will not
be included in the vote totals and therefore will have no
effect on the vote. In addition, where brokers are prohibited
from exercising discretionary authority for beneficial owners
who have not provided voting instructions (commonly referred to
as "broker non-votes"), those shares will not be included in
the vote totals. However, such shares will be counted for
purposes of determining whether a quorum is present. A proxy
may be revoked by the person executing the same at any time
before the authority thereby granted is exercised, upon written
notice of revocation received by the Company's Secretary, by
executing and delivering a later dated proxy or by attending
the Annual Meeting and voting in person.
A list of shareholders entitled to vote at the Annual
Meeting will be open to examination by any shareholders, for
any purpose germane to the Annual Meeting, at the offices of
the Company, 614 Corporate Way, Valley Cottage, New York 10989,
during ordinary business hours for ten (10) days prior to the
Annual Meeting. Such list shall also be available during the
Meeting.
<PAGE>
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
Proposal 1. Election of Five (5) Nominees As Directors
At the Annual Meeting, five (5) Directors are to be
elected for the ensuing year and until their successors are
duly elected and qualify. If, at the time of election, any of
the nominees should be unavailable for election, a circumstance
which is not expected by the Company, it is intended that the
proxies will be voted for such substitute nominee as may be
selected by the Company. The proxies cannot be voted for more
than five Directors at the Annual Meeting.
Proxies not marked to the contrary will be voted "For" the
election of the following five persons, all of whom, other than
Alan B. Nashman, is standing for re-election to the Board of
Directors:
Name Age Position(s) Year First Became a Director
---- --- ---------- ----------------------------
Howard Pavony 47 Chairman of the Board of 1986
Directors
Steven H. Rothman 49 Chief Executive Officer, 1986
President and a Director
William Lerner* 65 Director 1995
Arnold J. Wasserman* 60 Director 1998
Alvin E. Nashman 71 Director -
* Member of the Audit Committee and Compensation Committee.
Howard Pavony has served as Chairman of the Board of
Directors since September 1996 and, prior to that time, served
as the Company's Co-Chief Executive Officer, President and a
Director since the Company's inception in May 1986.
Steven H. Rothman has served as Chief Executive Officer,
President and Director since September 1996 and, prior to that
time, served as the Company's Co-Chief Executive Officer, Vice
President, and a Director since the Company's inception in May
1986. Mr. Rothman was the Company's Secretary from May 1986 to
September 1995.
William Lerner has served as a Director of the Company
since September 1995 and is the Chairman of the Compensation
Committee. Mr. Lerner has been engaged in the private practice
of corporate and securities law in New York and Pennsylvania
since 1991. His career includes service with the United States
Securities and Exchange Commission, the American Stock Exchange
and as counsel to a major investment banking/securities
brokerage firm. Mr. Lerner serves as a director of Helm
Resources, Inc., an American Stock Exchange listed company
engaged in providing financing and management services to
middle market public companies; Seitel, Inc., a New York Stock
Exchange listed company engaged in several facets of the oil
and gas business; and Rent-Way, Inc., a NASDAQ listed company
engaged in the rent-to-own business. Mr. Lerner also provides
corporate secretarial services to a number of other companies,
including Computer Research, Inc., an OTC-Bulletin Board listed
company engaged in providing computer accounting services to
the brokerage and banking industries.
Arnold J. Wasserman earned his electrical engineering
degree from New York University in 1962. He served as a
Director of the Company since March 1998 and is the Chairman of
the Audit Committee and a member of the Compensation Committee.
Mr. Wasserman has, for the past 30 years, been a principal of
P & A Associates, a leasing/consulting firm. Mr. Wasserman has
consulted with major corporations in the areas of marketing,
advertising and sales. For the past four years, he has served
as a director of Stratasys, Inc., a NASDAQ listed company
engaged in developing, manufacturing and marketing three
dimensional prototyping imaging equipment.
Alvin E. Nashman has been an independent consultant for
major corporations in the field of computer service for the
past six years. He is a director of several computer service
companies, including Haifax Corporation, an American Stock
Exchange listed company; and Andrulis Corporation, Spaceworks,
Teoco, Inc., Federal Sources, Inc., Trawick Associates and
Performance Engineering Corporation, all privately held
companies.
All directors hold office until the next annual meeting
of shareholders or until their successors are elected and
qualify. Officers are elected annually by, and serve at the
discretion of, the Board of Directors.
The Company has two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee
and the Compensation Committee are each composed of Messrs.
Lerner and Wasserman. The duties of the Audit Committee
include recommending the engagement of independent public
accountants, reviewing and considering actions of Management in
matters relating to audit functions, reviewing with independent
public accountants the scope and results of their audit
engagement, reviewing reports from various regulatory
authorities, reviewing the system of internal controls and
procedures of the Company and reviewing the effectiveness of
procedures intended to prevent violations of law and
regulations. Among the duties of the Compensation Committee
are to recommend to the Board of Directors remuneration for
officers of the Company, to determine the number and issuance
of options, to review any compensation and incentive program
for executive officers of the Company and to monitor the
performance of any pension or profit sharing programs of the
Company.
The Board of Directors held six meetings (including
unanimous written consents) during Fiscal 1998. The
Compensation Committee held two meetings, and the Audit
Committee held one meeting during Fiscal 1998. Each incumbent
Director attended at least 75% of the Board of Directors
meetings held by the Company during the time he served on the
Board of Directors and of the meetings of Committees on which
such Director served.
DIRECTOR FEES
The Company's independent directors receive an annual fee
of $9,000 payable quarterly in advance and, on April 1, 1998,
received ten-year options to purchase 5,000 shares of Common
Stock at an exercise price of $2.75 per share . In addition,
each independent director receives $1,500 for attendance in
person at each Board meeting and $250 for participating in each
telephonic board meeting held. Members of the Audit Committee
and Compensation Committee are appointed annually and serve at
the discretion of the Board of Directors. Each member of each
committee will receive $1,000 for each meeting attended in
excess of five committee meetings of such committee per year.
On April 1, 1998, Messrs. Lerner and Wasserman each received
ten-year options to purchase 10,000 shares of Common Stock at
an exercise price of $2.75 per share.
Management-Directors currently receive no cash
compensation for serving on the Board of Directors other than
reimbursement of reasonable expenses incurred in attending
meetings. Certain of the Company's directors have received
stock options from the Company. See "Stock Option Plans"
below.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 28, 1998,
certain information concerning the beneficial ownership (as
such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of Common Stock by (i) each person known
by the Company to be the owner of more than 5% of the
outstanding Common Stock, (ii) each Director, (iii) each
executive officer named in the Summary Compensation Table below
and (iv) all Directors and executive officers as a group:
Amount and Nature
of Beneficial Ownership Percent of Class (1)
----------------------- --------------------
Name and Address Common Common
of Beneficial Owner Shares Shares
- ------------------- ------- --------
Steven H. Rothman(2) 1,188,625 (3)(4) 25.8%
Howard Pavony(2) 1,187,500 (3)(5) 25.8%
Robert A. Fries
71 Peria Drive
Rocky Hill, CT 06061 87,000 2.0%
<PAGE>
Ramon Mota(2) 25,065 (3) *
William Lerner
423 East Beau Street
Washington, PA 15301 5,000 (3) *
Arnold Wasserman 0
All Directors and
executive officers
as a group (5 persons) 2,430,370 (3)(4)(5) 56.1%
- -----------------
* Represents less than 1%.
(1) Based on 4,402,774 shares of Common Stock issued and
outstanding as of the date of this Report.
(2) The address of this person is c/o the Company, 614
Corporate Way, Valley Cottage, New York 10989.
<PAGE>
(3) Includes options held by Steven Rothman and Howard Pavony
each to purchase 60,000 shares of Common Stock, options
to purchase 25,000 shares held by Ramon Mota and options
to purchase 5,000 shares held by Mr. Lerner which are
currently exercisable. Does not include options held by
each of Messrs. Pavony and Rothman to purchase 30,000
shares each, options held by Mr. Mota to purchase 5,000
shares and options held by Messrs. Lerner and Wasserman
to purchase 10,000 shares each which are not currently
exercisable.
(4) Includes 1,125 shares held by the wife of Mr. Rothman.
Also includes an aggregate of 169,139 shares of Common
Stock held in trust for Mr. Rothman's three children. Mr.
Rothman disclaims beneficial ownership of all of such
shares.
(5) Includes an aggregate of 164,044 shares held in trust for
Mr. Pavony's two children. Mr. Pavony disclaims
beneficial ownership of all of such shares.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded
to, earned by, or paid for all services rendered to the Company
during the three fiscal years ended March 31, 1998 by certain
executive officers of the Company. No other executive officers
received compensation in excess of $100,000 during such years.
Long-Term
Annual Compensation(1) Compensation
---------------------- -------------
Shares
Name and Principal Underlying
Position Year Salary($) Bonus($) Options(#)
- ------------------ ---- ---------- -------- -----------
Howard Pavony 1998 $213,334 $ -- --
Chairman of the Board 1997 $185,417 $20,000 50,000
of Directors 1996 $165,000 $20,000 10,000
Steven H. Rothman 1998 $213,334 $ -- -
President and CEO 1997 $185,417 $20,000 50,000
1996 $165,000 $20,000 10,000
Robert Fries 1998 $139,992 $ -- -
Vice President 1997 $103,326 -- 0
Ramon Mota 1998 $110,333 $ -- -
Vice-President 1997 $100,033 $ 9,000 5,000
Technology 1996 $ 95,000 $ 10,500 0
- --------------------
(1) The compensation figures shown do not include the cost to
the Company of benefits, including the use of automobiles
leased or car allowances paid by the Company, premiums for
life and health insurance and any other personal benefits
provided by the Company to such persons, which are, in the
aggregate, below reportable thresholds.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The table below includes the number of stock options
granted to the executive officers named in the Summary
Compensation Table during the year ended March 31, 1998,
exercise information and potential realizable value.
<TABLE>
<CAPTION>
Individual Grants
------------------ Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options Annual Rates of Stock
Underlying Granted to Price Appreciation
Options Employees in Exercise Expiration for Option Term
Granted(#) Fiscal Year Price($/sh) Date 5%($) 10%($)
----------- ------------- ------------ ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Steven H. Rothman 0 0.0% - - $ 0 $ 0
Howard Pavony 0 0.0% - - $ 0 $ 0
Robert Fries 0 0.0% - - $ 0 $ 0
Ramon Mota 5,000 12.5% $3.875 3/31/2002 $ 0 $1,671
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION VALUES
The table below includes information regarding the value
realized on option exercises and the market value of
unexercised options held by the executive officers named in the
Summary Compensation Table during Fiscal 1998.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-The-Money
Shares Options Options
Acquired at FY-End(#) at FY-End($)
on Exer- Value Exercisable/ Exercisable/
Name cise (#) Realized Unexercisable Unexercisable
- ----------------- --------- --------- ------------- --------------
<S> <C> <C> <C> <C>
Steven H. Rothman 0 0 60,000/30,000 $30,000/$0
Howard Pavony 0 0 60,000/30,000 $30,000/$0
Robert Fries 0 0 0/0 $0 / $0
Ramon Mota 0 0 25,000/5,000 $26,250/$2500
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS
On September 1, 1996, Steven H. Rothman and Howard Pavony,
respectively the Chief Executive Officer and Chairman of the
Board of Directors of the Company, each entered into a five
year employment agreement with the Company on the terms set
forth below. Each agreement renews annually after the term
unless either party elects to terminate. Salary for the fiscal
year ended March 31, 1998 was at the rate of $200,000. Under
each agreement, the executive receives annual increases in
salary equal to the greater of (i) the percentage increase in
the Consumer Price Index; and (ii) $10,000. Each executive is
entitled to participate in the Company's stock option plans and
any incentive bonus program established from time to time, as
determined by the Compensation Committee of the Board of
Directors and the Company is obligated to grant 50,000 options.
Further, the Company will maintain a $1,000,000 life insurance
policy on each executive's life, payable to the beneficiaries
named by him, and maintain disability insurance for the benefit
of each executive which will pay $150,000 per annum to him in
the event of his permanent disability. In the event that there
is a change in control of the Company, the executive will be
entitled, upon such change of control, to terminate his
employment and receive 2.9 times his annual salary as then in
effect.
On April 1, 1996, the Company and Mr. Mota entered into
a three-year employment agreement providing for a base salary
of $98,000 in the first year, $105,000 in the second year and
$115,000 in the third year; a bonus depending upon the earnings
generated by the Advanced Technology Group; grants of five-year
options to purchase up to 5,000 shares of Common Stock in each
of the first two years of the term; and a $300 to $400/month
car allowance.
Simultaneously with the acquisition of Data.Com, on May
6, 1996, the Company and Mr. Fries entered into a three-year
employment agreement providing for a base salary of $140,000;
a bonus of 6% of earnings of Data.Com, but in no event more
than $60,000 with respect to a fiscal year; grants of up to a
total of 20,000 incentive stock options over the three years,
subject to Data.Com's earning certain minimum amounts; and a
$400/month car allowance.
STOCK OPTION PLANS
The Company has established a 1993 Stock Option Plan (the
"1993 Plan") and a 1996 Stock Option Plan (the "1996 Plan")
and, subject to Shareholder approval at the Annual Meeting, a
1998 Stock Option Plan (the "1998 Plan").
Pursuant to the 1993 Plan, 250,000 shares have been
reserved, of which, as of the date hereof, the Company has
granted an aggregate of 247,500 stock options. Of the options
previously granted under the 1993 Plan, 202,500 are currently
exercisable, 27,500 have been exercised to date and 17,500
options have been canceled to date or lapsed and made available
for regrant under the 1993 Plan.
Pursuant to the 1996 Plan 350,000 shares have been
reserved, of which, as of the date hereof, the Company has
granted an aggregate of 205,000 options, including the grant of
20,000 to the current outside directors of the Company on April
1, 1998. Of the options previously granted under the 1996
Plan, 69,000 are exercisable and 126,700 are unexercisable.
9,300 options have been canceled to date and made available for
regrant under the 1996 Plan. No options have been exercised
under the 1996 Plan, to date. No options have been granted
under the 1998 Plan.
<PAGE>
As of the date hereof, the following persons each hold the
following stock options:
Person Number of Options Exercise Price Expiration Date
- -------------------------------------------------------------------------
Howard Pavony 10,000 $2.25 10/19/2005
50,000 $4.43 8/31/2001
50,000 $2.25 7/15/2000
Steven H. Rothman 10,000 $2.25 10/19/2005
50,000 $4.43 8/31/2001
50,000 $2.25 7/15/2000
Ramon Mota 5,000 $2.25 10/21/2008
15,000 $1.25 2/24/1999
5,000 $2.50 11/30/2001
5,000 $3.875 3/31/2002
William Lerner 2,500 $2.25 9/14/2000
2,500 $2.25 8/19/2001
10,000 $2.75 3/31/2008
Arnold J.Wasserman 10,000 $2.75 3/21/2008
- ------------------------------------------------------------------------
SUMMARY OF THE PLANS
The 1993 Plan, the 1996 Plan, and the 1998 Plan (each, a
"Plan"), provide for the grant of options to qualified
employees (including officers and directors) of the Company,
and its subsidiaries, independent contractors, consultants and
certain other individuals to purchase shares of Common Stock.
Each Plan must be administered by the Board of Directors or a
committee of at least two disinterested members (and no
interested members) of the Board of Directors (the
"Compensation Committee"). The Board of Directors or the
Compensation Committee has complete discretion to select the
optionee and to establish the terms and conditions of each
option, subject to the provisions of the respective Plan. The
exercise price of options may not be less than 100% (no such
limitation with respect to the 1998 Plan except as required by
state securities laws) of the fair market value of the Common
Stock as of the date of grant (110% of the fair market value if
the grant is an Incentive Option to an employee who owns more
than 10% of the outstanding Common Stock). Options may not be
exercised more than 10 years after the date of grant (5 years
after the date of the grant if the option is an ISO (as defined
below) to an employee who owns more than 10% of the outstanding
Common Stock). An option may be exercised by tendering payment
of the purchase price to the Company or, at the discretion of
the Board of Directors or Compensation Committee, by delivery
of shares of Common Stock having a fair market value equal to
the exercise price or through a cashless exercise involving the
cancellation of a portion of the shares underlying the options
("Option Shares") having a fair market value equal to the
exercise price of the Option Shares issued and with respect to
the 1998 Plan, by the cancellation of a number of options
having an "in-the-money" value equal to the average price of
the Options Shares issued. Options granted under the 1993 Plan
before April 1, 1998 and the 1996 Plan are not transferable and
may be exercised only by the respective grantees during their
lifetimes or by their heirs, executors or administrators in the
event of death. Under the 1993 Plan on or after April 1, 1998
and under the 1998 Plan, incentive stock options are treated as
described above, while non-qualified stock options may at the
option of the Board of Directors or Compensation Committee, be
transferable. Option Shares that are canceled or terminated
may later be re-granted. The number of options outstanding and
the exercise price thereof are subject to adjustment in the
case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends.
<PAGE>
The 1993 Plan provides for the grant of options to
purchase up to an aggregate of 250,000 Option Shares. Options
granted under the 1993 Plan may or may not be "incentive stock
options" as defined in Section 422 of the Code ("ISOs"), and
non-qualified stock options ("NQSOs") may be granted in tandem
with Stock Appreciation Rights ("SARs") or Stock Depreciation
Rights, depending upon the terms established by the Board of
Directors or the Compensation Committee at the time of grant.
The 1996 Plan provides for the grant of options to
purchase up to an aggregate of 350,000 Option Shares. Options
granted under the 1996 Plan may be ISOs or NQSOs and may be
granted in tandem with SARs, depending upon the terms
established by the Board of Directors or the Compensation
Committee at the time of grant.
The 1998 Plan provides for the grant of options to
purchase up to an aggregate of 250,000 Option Shares. Options
granted under the 1998 Plan may be ISOs or NQSOs and may be
granted in tandem with SARs, depending upon the terms
established by the Board of Directors or the Compensation
Committee at the time of grant.
COMPENSATION COMMITTEE REPORTS ON EXECUTIVE COMPENSATION
It is the responsibility of the Compensation Committee of
the Board of Directors to administer the Company's incentive
plans, to review the compensation levels and performance of
management and to recommend compensation changes to the Board
of Directors.
REPORT BY COMPENSATION COMMITTEE
Philosophy.
The Compensation Committee believes that maximizing
shareholder value is the most important measure of success, and
achieving this depends on the coordinated efforts of individual
employees working as a team toward defined common performance
goals. The objectives of the Company's compensation program
are to align executive compensation with shareholder value, to
reward individual and team effort and performance furthering
the Company's business goals and to attract, retain and reward
employees who will contribute to the long-term success of the
Company.
The total direct compensation package for the Company's
executives, including the Chairman of the Board of Directors
and the Chief Executive Officer and President, is made up of
three elements: (i) a competitive base salary; (d) attractive
short-term incentives to executives to earn additional bonus
income based on operating results; and (iii) the grant of stock
options, from time to time, to executives in an effort to
provide a closer identification of the executives' interests
with those of the Company and its shareholders by giving them
an opportunity to acquire a proprietary interest in the Company
by means of the purchase of Common Stock.
Salary
With respect to Steven H. Rothman, the Chief Executive
Officer, Howard Pavony, the Chairman of the Board of Directors,
Ramon Mota, Vice President - Technology and Robert Fries, Vice
President, salary is determined pursuant to the terms of their
respective employment contracts with the Company. The salaries
of the Company's other executive officers for Fiscal 1998 were
fixed by the Compensation Committee. The Compensation Committee
believes that the basic philosophy regarding salaries to be
followed is to consider increases based upon a favorable
evaluation of individual performance relative to individual
goals, the functioning of the executive's team within the
corporate structure, success in furthering the corporate
strategy and goals, and individual management skills,
responsibilities and anticipated workload. The Compensation
Committee also considers demonstrated loyalty and commitment to
the Company and the competitive salaries offered by similar
companies to attract executives. Merit increases for
executives are to be subject to the same budgetary guidelines
as apply to an other employees of the Company. In those cases
where an executive has entered into an employment agreement,
the base salary is determined pursuant to the terms of the
agreement, and renewals of contracts will be considered on the
basis of the performance of the individual, the performance of
the Company and the compensation philosophy of the Company.
<PAGE>
Bonuses
Bonus incentives are structured so that if the Company
achieves its target goals, the incentive bonuses for the
executives could be a significant percentage of base salary.
This policy is designed to further motivate individuals to
improve performance. Bonuses were awarded during Fiscal 1998
to the Chairman of and the Chief Executive Officer and
President in the amount of $20,000.
Stock Options
Executives are eligible for annual stock option grants
under the employee stock option plans applicable, from time to
time, to employees generally. The number of options granted to
any individual depends on individual performance, salary level
and competitive data, and the impact that such employee's
productivity may make to shareholder value over time. In
addition, in determining the number of stock options granted to
each executive, the Compensation Committee reviews the unvested
options of each executive to determine the future benefits
potentially available to the executive. The number of options
granted will depend in part on the total number of unvested
options deemed necessary to provide an incentive to that
individual to make a long term commitment to remain with the
Company. By giving to executives an equity interest in the
Company, the value of which depends upon stock performance, the
policy seeks to further align management and shareholder
interests.
On May 9, 1998, incentive stock options to purchase 50,000
shares of Common Stock at an exercise price of $3.375 per share
granted to Messrs. Pavony and Rothman pursuant to the 1993 Plan
lapsed. On July 15, 1998, the Company granted to each of
Messrs. Pavony and Rothman non-qualified stock options pursuant
to the 1993 Plan to purchase 50,000 shares of Common Stock at
an exercise price of $2.25 per share.
Respectfully Submitted,
The Compensation Committee:
William Lerner, Chairman
Arnold J. Wasserman
PERFORMANCE GRAPH
The graph below compares the cumulative shareholder return
of the Company with the cumulative return on the S&P 500 Stock
Index and a Peer Group Index and a Peer Group Index assuming a
$100 investment made on October 27, 1993, when public trading
of the Company's common stock commenced. Cumulative return
data presented assumes reinvestment of dividends. The stock
performance shown on the graph below is not necessarily
indicative of future price performance.
<PAGE>
<TABLE>
<CAPTION>
Comparison of Cumulative Total Return
Among Micros-To-Mainframes, Inc.,
the S&P SmallCap Index and the Peer Group Index
Indexed Returns
Company/Index At March 31:
--------------------------------------
Oct. 27, 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
MICROS-TO-MAINFRAMES, INC 100 88.89 117.17 153.54 101.00 88.91
STANDARD & POORS SMALLCAP 100 94.65 99.64 130.47 140.88 207.92
PEER GROUP 100 222.22 163.15 114.43 108.00 92.23
</TABLE>
The Company has constructed a Peer Group consisting of
other computer equipment resellers and packagers that also
provide consulting services to their clients, including
Alphanet Solutions, Inc., Applied Cellular Technology, Inc.,
Data Systems Network Corp., Elcom International Inc.,
Manchester Equipment Co., Inc.. and Transnet Corp. The Company
believes that these companies most closely resemble the
Company's business mix and that their performance is
representative of the industry.
The Board of Directors recommends that you vote "FOR" the
election of the Nominees named above (Proposal 1).
<PAGE>
Proposal 2. Ratification of 1998 Stock Option Plan
The Board of Directors of the Company, subject to the
approval of Shareholders at the Annual Meeting, has adopted a
1998 Stock Option Plan (the "Plan") covering an aggregate of
250,000 shares of Common Stock
The Board of Directors has deemed that it is in the best
interests of the Company to establish the Plan so as to provide
employees of the Company and its subsidiaries, as well as
Directors, independent contractors and consultants of the
Company and/or its subsidiaries an opportunity to acquire a
proprietary interest in the Company by means of grants of
options to purchase Common Stock in order to provide a closer
identification of their interests with those of the Company and
its shareholders. The Company currently employs 164 persons.
It is the opinion of the Board of Directors that by
providing the employees, Directors, independent contractors and
consultants of the Company and its subsidiaries the opportunity
to acquire an equity investment in the Company, the Plan will
maintain and strengthen their desire to remain with the
Company, stimulate their efforts on the Company's behalf, and
also attract other qualified personnel to become employed by or
otherwise become associated with the Company. The Plan was
adopted by the Company's Board of Directors on July 15, 1998.
As of August 28, 1998, no options have been granted pursuant
to the Plan. The closing market price of the Common Stock, as
reported by NASDAQ on August 25, 1998 was $2.313 per share.
SUMMARY OF THE 1998 PLAN
The following discussion summarizes certain provisions of
the Plan, which is qualified in its entirety by reference to
the text of the Plan, copies of which are available for
examination at the Securities and Exchange Commission and at
the principal office of the Company, 14 Corporate Way, Valley
Cottage, New York 10989.
The Plan allows the Company to grant incentive stock
options ("ISOs"), as defined in Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), Non-Qualified
Stock Options ("NQSOs") not intended to qualify under Section
422(b) of the Code, and ISOs or NQSOs in tandem with Stock
Appreciation Rights ("SARs"). ISOs, NQSOs and SARs are
referred to collectively herein as "Options."
Options granted under the Plan prior to the approval of
the Plan by the Company's shareholders are conditioned upon
approval of the Plan by such shareholders on or before July 15,
1999. If such approval is not obtained by such date, such
Options shall become null and void, and the Plan shall
terminate.
ELIGIBILITY FOR PARTICIPATION
The Plan provides that ISOs or ISOs in tandem with SARs
may be granted to employees of the Company and its
subsidiaries, including officers and Directors who are also
employees and that NQSOs or NQSOs in tandem with SARs may be
granted to employees of the Company and its subsidiaries,
Directors, independent contractors, consultants and other
individuals who are not employees of, but are involved in the
continuing development and success of, the Company and its
subsidiaries ("Participants").
<PAGE>
ADMINISTRATION
The Plan is administered by the Board of Directors and/or
the Compensation Committee. The Board of Directors and/or the
Compensation Committee will, among other things, select the
optionees, determine the number of shares to be subject to each
Option and determine the vesting period, option period and
option price. In making such determinations, there will be
taken into account the nature of the services rendered by
Participants, their present and potential contributions to the
success of the Company, and such other relevant factors as the
Board of Directors and/or the Compensation Committee in its
discretion shall deem relevant.
TERMS OF OPTIONS
The terms of Options granted under the Plan are to be
determined by the Board of Directors and/or the Compensation
Committee. Each Option is to be evidenced by a stock option
agreement between the Company and the participant to whom such
Option is granted and is subject to the following additional
terms and conditions:
(a) Exercise of the Option: The Board of Directors
and/or the Compensation Committee will determine the time
periods during which Options granted under the Plan may be
exercised. An Option must be granted within 10 years from the
date the Plan was adopted. The Plan is deemed adopted on July
15, 1998. Options may be exercisable in whole or in part at
any time during the period but may not have all expiration date
later than 10 years from the date of grant. ISOs or ISOs in
tandem with SARs granted to holders of more than 10% of the
Common Stock, however, may not have a term of more than 5
years. An Option is exercised by giving written notice of
exercise to the Company specifying the number of full shares of
Common Stock to be purchased and tendering payment of the
purchase price to the Company in cash or certified check, or if
permitted by the instrument of grant with respect to ISOs or
ISOs granted in tandem with SARs and at any time as permitted
by the Board of Directors or the Compensation Committee with
respect to other Options, by delivering a promissory note or
exchanging shares of Common Stock owned by the Participant, or
by a combination of cash, promissory notes and/or shares of
Common Stock, or, in the sole discretion of the Board or the
Compensation Committee, by another medium of payment,
including, but not limited to, "cashless exercises". The
ability to pay the option exercise price in shares of Common
Stock may enable a Participant to engage in a series of
successive stock-for-stock exercises of an Option and thereby
fully exercise an Option with little or no cash investment.
Officers and Directors who receive grants of SARs may exercise
them at any time after six months from the date of grant, but
generally may only exercise them within the period of 10
business days following publication of the Company's quarterly
financial information.
(b) Option Price: In no event may the option price of
the shares subject to an ISO or a SAR issued in tandem with an
ISO be less than the fair market value of the Common Stock an
the date of grant. The Board of Directors and/or the
Compensation Committee may set the price of an NQSO or an NQSO
granted in tandem with a SAR without any limitation other than
such price not being below the minimum exercise price allowed
by applicable state securities laws. Fair market value in the
case of ISOs shall be the closing price of the Common Stock
quoted on its principal market on the date of grant, if the
Common Stock is traded on a national securities exchange, or
the average of the closing bid and asked prices, if it is
traded over-the-counter. ISOs or ISOs in tandem with SARs
granted to holders of more than 10% of the Common Stock are
subject to the additional restriction that the option price
must be at least 110% of the fair market value of the Common
Stock on the date of grant.
(c) Vesting: The Board of Directors and/or the
Compensation Committee, will determine the time or times the
Options become exercisable. The Option Price of the shares of
Common Stock subject to an NQSO or an SAR in tandem with a NQSO
granted pursuant to the Plan shall be determined by the Board
of Directors or the Compensation Committee, in its sole
discretion, subject to any minimum vesting period established
from time to time under any state securities law or Federal
securities law with respect to grants in such state. Vesting
may be based upon, among other things, certain performance
standards established by the Board of Directors or the
Compensation Committee.
<PAGE>
(d) Termination of Employment; Disability; Death. If
the employment of a participant under the Plan is terminated
for any reason (other than because of death, disability,
voluntary termination or for cause), his ISOs and SARs issued
in tandem with ISOs shall expire and no longer be exercisable
three months after such termination, but in no event later than
the expiration date of the Options, and his other Options Shall
terminate as determined under the option agreement, but not
later than the expiration date. In the event a Participants
employment is terminated voluntarily or for cause, his Options
shall immediately expire.
In the event a Participant dies while in the employ of the
Company or its subsidiaries or within three months thereafter,
his Options may be exercised by a legatee or legatees of such
Options under such Participant's last will or by his personal
representatives or distributees within a period determined by
the Board of Directors or the Compensation Committee of at
least six months after his death, but in no event later than
the expiration date of the Options.
A Participant's employment with the Company or a
subsidiary Will not be considered to be terminated for purposes
of the Plan while the Participant is not active due to a
disability; provided, that an ISO may only be exercised within
six months after the Participant's employment would be
considered terminated because of such disability, under
applicable Sections of the Code, except as determined by the
Board of Directors or the Compensation Committee, but in no
event later than the expiration date of the Option.
Under the Plan, Participants on military or sick leave,
or on any other bona fide leave of absence, are to be
considered as remaining in the employ of the Company or its
subsidiaries for 90 days or such longer period as is guaranteed
either by contract or statute.
(e) Nontransferability of Options, No Liens: ISOs are
nontransferable and non-assignable by the Participant, other
than by will or the laws of descent and distribution and is
exercisable during the Participant's lifetime only by the
Participant. The Board of Directors or the Compensation
Committee have the option, in its sole discretion, to grant
NQSOs which are transferrable by the participant.
(f) Maximum Number of ISOs or SARs in Tandem with ISOs
which may Be Issued: No employee may receive a grant of ISOs or
SARs in tandem with ISOs if the aggregate fair market value of
all ISOs and SARs in tandem with ISOs granted to him under the
Plan and any other stock option plan of the Company exceeds
$100,000, as determined at the date of grant. Any options
granted in excess of the $100,000 limit are deemed to be NQSOs
under the Plan.
The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Plan as may
be determined by the Board of Directors and/or the Compensation
Committee.
TERMINATION, AMENDMENT OR DISCONTINUANCE
The Plan (but not Options previously granted under the
Plan) shall terminate 10 years from the date of its adoption by
the Board of Directors. No Option will be granted after
termination of the Plan.
The Board of Directors of the Company may terminate the
Plan at any time prior to its expiration date, or from time to
time make such modifications or amendments of the Plan as it
deems advisable. However, the Board of Directors may not,
without the approval of holders of a majority of the
outstanding shares of the Company, except under conditions
described under "Adjustments Upon Changes in Common Stock,"
increase the maximum number of shares as to which Options may
be granted under the Plan or materially change the standards of
eligibility under the Plan.
<PAGE>
No termination, modification or amendment of the Plan may
adversely affect the terms of any outstanding Options without
the consent of the holders of such Options.
ADJUSTMENTS UPON CHANGES IN COMMON STOCK
In the event that the number of outstanding shares of
Common Stock of the Company is changed by reason of
recapitalization, reclassification, stock split, stock
dividend, combination, exchange of shares or the like, or as a
result of a merger, consolidation or reorganization involving
the Company or its subsidiaries, the Board of Directors will
make an appropriate adjustment in the aggregate number of
shares of Common Stock available under the Plan, in the number
of shares of Common Stock issuable upon the exercise of then
outstanding Options and in the exercise prices of such Options.
Any adjustment in the number of shares will apply
proportionately only to the unexercised portion of Options.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is only a summary of the
principal Federal income tax consequences of the options and is
based on existing Federal law, which is subject to change, in
some cases retroactively. This decision is also qualified by
the particular circumstances of individual Participants, which
may substantially alter or modify the Federal income tax
consequences herein discussed.
Generally, under present law, when an Option qualifies as
an ISO under Section 422 of the Code, (i) an employee will not
realize taxable income either upon the grant or the exercise of
the Option, (ii) the amount by which the fair market value of
the shares acquired by the exercise of the Option at the time
of exercise exceeds the option price is included in alternative
minimum taxable income for purposes of determining the
employee's alternative minimum tax, (iii) any gain or loss (the
difference between the net proceeds received upon the
disposition of the shares and the option price paid therefor),
upon a qualifying disposition of the shares acquired by the
exercise of the Option will be treated as capital gain or loss
if the stock qualifies as a capital asset in the hands of the
employee, and (iv) no deduction will be allowed to the Company
for Federal income tax purposes in connection with the grant or
exercise of an ISO or a qualifying disposition of the shares.
A disposition by an employee of shares acquired upon exercise
of an ISO will constitute a qualifying disposition if it occurs
more than two years after the grant of the Option and one year
after the issuance of the shares to the employee. If such
shares are disposed of by the employee before the expiration of
those time limits, the transfer would be a "disqualifying
disposition" and the employee, in general, will recognize
ordinary income (and the Company will receive an equivalent
deduction) equal to the lesser of (i) the aggregate fair market
value of the shares as of the date of exercise less the option
price, or (ii) the amount realized on the disqualifying
disposition less the option price. Ordinary income from a
disqualifying disposition will constitute compensation for
which withholding may be required under Federal and state law.
The maximum rate of tax on ordinary income is greater than the
rate of tax on long-term capital gains.
In the case of an NQSO granted under the Plan, no income
generally is recognized by the Participant at the time of the
grant of the Option assuming such NQSO does not have a readily
ascertainable fair market value. The Participant generally
will recognize ordinary income when the NQSO is exercised equal
to the aggregate fair market value of the shares acquired less
the option price. Withholding may be required, and the Company
will receive an equivalent deduction, subject to excessive
employee renumeration provisions of Section 162(m) of the Code.
Section 162(m) disallows a deduction for employee renumeration
paid by a company in any taxable year generally to an executive
officer in excess of $1,000,000. For purposes of determining
<PAGE>
remuneration paid, the excess of the fair market value of the
Common Stock upon exercise of an NQSO over the exercise price
is considered remuneration paid in the year of exercise unless
the income is considered performance-based compensation. One
of the requirements to qualify as performance-based
compensation is that the Plan set forth the maximum number of
Options to which a Participant may be entitled. The Plan
contains such a provision. Furthermore, grants to executive
officers must be made by a compensation committee comprised
solely of two or more outside directors. Even though the
Company believes it currently meets such standards, no
assurance can be given that the company will meet such
standards in the future and that the NQSOs granted under the
Plan will not be considered performance-based compensation.
Shares acquired upon exercise of an NQSO will have a tax
basis equal to their fair market value on the exercise date or
other relevant date on which ordinary income is recognized and
the holding period for the shares generally will begin on the
date of the exercise or such other relevant date. Upon
subsequent disposition of the shares, the participant will
recognize capital gain or loss if the stock is a capital asset
in his hands. Provided the shares are held by the Participant
for more than one year prior to disposition, such gain or loss
will be long-term capital gain or loss. As set forth above,
the maximum rate of tax on ordinary income is currently greater
than the maximum rate of tax on long-term capital gains. To
the extent a Participant recognizes a capital loss, such loss
generally may offset capital gains and $3,000 of ordinary
income. Any excess capital loss is carried forward
indefinitely.
The grant of an SAR is generally not a taxable event for
the optionee. Upon the exercise of an SAR, the optionee will
recognize ordinary income in an amount equal to the amount of
cash and the fair market value of any Common Stock received
upon such exercise, and the Company will be entitled to a
deduction equal to the same amount.
Notwithstanding the above, if the sale of any shares
received upon the exercise of an NQSO or a SAR in tandem with
an NQSO would be subject to Section 16(b) of the Securities
Exchange Act of 1934, recognition of ordinary income
attributable to such shares received will be deferred until the
date such sale would not give rise to a Section 16(b) action.
However, such shares will be valued at the fair market value
at such later time, unless the optionee has made an election
under Section 83(b) of the Code within 30 days after the date
of exercise to recognize ordinary income as of the date of
exercise based on the fair market value at the date of
exercise.
The foregoing discussion is only a brief summary of the
applicable Federal income tax laws as in effect on this date
and should not be relied upon as being a complete statement.
The Federal tax laws are complex, and they are subject to
legislative changes and new or revised judicial or
administrative interpretations at any time. In addition to the
Federal income tax consequences described herein, a Participant
may also be subject to state and/or local income tax
consequences in the jurisdiction in which the grantee works
and/or resides.
The affirmative vote of the majority of the votes cast by
the holders of Common Stock present in person or by proxy and
entitled to vote at the Annual Meeting, voting together as a
single class, is required to ratify the adoption of the Plan.
The Board of Directors recommends that you vote "FOR" Proposal 2.
<PAGE>
Proposal 3. Ratification of Independent Public Accountants
Ernst & Young LLP have been the independent auditors of
the Company's accounts since 1988. They have no financial
interest, either direct or indirect, in the Company. Selection
of auditors is made by the entire Board of Directors, subject
to shareholder ratification. A representative of Ernst & Young
LLP is expected to attend the Annual Meeting and to have an
opportunity to make a statement or respond to appropriate
questions from shareholders.
The Board of Directors recommends that you vote "FOR" Proposal 3.
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any business to be
presented at the Annual Meeting except for the matters set
forth in the Notice and as described in this Proxy Statement.
Unless otherwise directed, all shares represented by Board of
Directors' proxies will be voted in favor of the proposals of
the Board of Directors described in this Proxy Statement. If
any other matters come before the Annual Meeting, the person(s)
named in the accompanying proxy will vote on those matters
according to their best judgment.
EXPENSES
The entire cost of preparing, assembling, printing and
mailing this Proxy Statement the enclosed proxy and other
materials, and the cost of soliciting proxies with respect to
the Annual Meeting will be borne by the Company. The Company
will request banks and brokers to solicit their customers who
beneficially own shares listed of record in mines of nominees
and will reimburse those banks and brokers for the reasonable
out-of-pocket expenses of such solicitations. The original
solicitation of proxies by mail may be supplemented by
telephone and telegram by Officers and other regular employees
of the Company, but no additional compensation will be paid to
such individuals.
COMPLIANCE WITH 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's Officers, Directors and persons who own
more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Officers, Directors and ten percent shareholders are required
by regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on the Company's copies of
such forms received or written representations from certain
reporting persons that no Form 5's were required for those
persons, the Company believes that, during Fiscal 1998, all
filing requirements applicable to its Officers, Directors and
greater than ten percent beneficial owners were complied with.
INCORPORATION BY REFERENCE
The financial information required to be included in this
Proxy Statement by Item 13 of Schedule 14A of the Proxy Rules
is hereby incorporated by this reference from the Company's
Annual Report to Shareholders mailed to shareholders with this
Proxy Statement.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of Shareholders of the Company that are intended
to be presented at the Company's next Annual Meeting must be
received by the Company no later than March 31, 1999 in order
for them to be included in the proxy Statement and form of
proxy related to that meeting.
By Order of the Board of Directors
Frank T. Wong, Secretary
Valley Cottage, New York
August 28, 1998
<PAGE>
Copies of the Company's Annual Report on Form 10-K for the
year ended March 31, 1998, as filed with the Securities and
Exchange Commission, including the financial statements, can be
obtained without charge by shareholders (including beneficial
owners of Common Stock) upon written request to Frank T. Wong,
the Company's Secretary, Micros-to-Mainframes, Inc.,
614 Corporate Way, Valley Cottage, New York, 10989. In addition,
the Company's EDGAR filings may be found on the Worldwide Web
at www.sec.gov.
