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 (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ROBOCOM SYSTEMS INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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/X/ No fee required
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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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.
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(4) Date Filed:
ROBOCOM SYSTEMS INC.
511 Ocean Avenue
Massapequa, New York 11758
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 28, 1998
To the Shareholders of Robocom Systems Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of
Robocom Systems Inc., a New York corporation (the "Company"), will be held in
Executive Room 2 of the Huntington Hilton Hotel, 598 Broad Hollow Road,
Melville, New York 11747, on Wednesday, November 4, 1998 at 10:00 A.M., local
time, for the following purposes:
1. Election of five (5) directors to the Board of Directors to
hold office until the 1999 Annual Meeting of Shareholders or
until their successors shall have been duly elected and
qualified;
2. Approval and adoption of a proposal to amend the Company's
1997 Stock Option and Long-Term Incentive Compensation Plan to
increase the number of shares of Common Stock that may be
issued thereunder from 325,000 shares to 650,000 shares;
3. Approval and adoption of a proposal to amend the Company's
Restated Certificate of Incorporation to change the corporate
name of the Company from Robocom Systems Inc. to Robocom
Systems International Inc.; and
4. Such other business as may properly come before the Annual
Meeting.
Only shareholders of record at the close of business on Wednesday,
September 16, 1998 will be entitled to vote at the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, please mark,
sign and promptly return the enclosed proxy in the postpaid envelope provided.
If you receive more than one proxy because your shares are registered in
different names or addresses, each such proxy should be signed and returned so
that all your shares will be represented at the meeting.
Sincerely,
IRWIN BALABAN
Chairman of the Board, President
and Chief Executive Officer
ROBOCOM SYSTEMS INC.
511 Ocean Avenue
Massapequa, New York 11758
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished to shareholders of Robocom Systems
Inc., a New York corporation (the "Company"), in connection with the
solicitation, by order of the Board of Directors of the Company (the "Board"),
of proxies to be voted at the Annual Meeting of Shareholders, to be held on
Wednesday, November 4, 1998 at 10:00 A.M., local time, located in Executive Room
2 of the Huntington Hilton Hotel, 598 Broad Hollow Road, Melville, New York
11747 and at any adjournment or adjournments thereof (the "Annual Meeting"). The
accompanying proxy is being solicited on behalf of the Board. This Proxy
Statement and the enclosed proxy card were first mailed to shareholders of the
Company on or about September 28, 1998, accompanied by the Company's Annual
Report on Form 10-KSB, for the fiscal year ended May 31, 1998, and the Company
incorporates the contents of such report herein by reference thereto.
At the Annual Meeting, the following matters will be considered and
voted upon:
(1) Election of five (5) directors to the Board of Directors to hold
office until the 1999 Annual Meeting of Shareholders or until
their successors shall have been duly elected and qualified;
(2) Approval and adoption of a proposal to amend the Company's 1997
Stock Option and Long-Term Incentive Compensation Plan to increase
the number of shares of Common Stock that may be issued thereunder
from 325,000 shares to 650,000 shares;
(3) Approval and adoption of a proposal to amend the Company's
Restated Certificate of Incorporation (the "Restated Certificate
of Incorporation") to change the corporate name of the Company
from Robocom Systems Inc. to Robocom Systems International Inc.;
and
(4) Such other business as may properly come before the Annual
Meeting.
Voting and Revocation of Proxies; Adjournment
All of the voting securities of the Company represented by valid
proxies, unless the shareholder otherwise specifies therein or unless revoked,
will be voted FOR the election of the persons nominated as directors, FOR the
other proposals set forth herein and, at the discretion of the proxy holders, on
any other matters that may properly come before the Annual Meeting. The Board
does not know of any matters to be considered at the Annual Meeting other than
the election of directors and the other proposals set forth above.
If a shareholder has appropriately specified how a proxy is to be
voted, it will be voted accordingly. Any shareholder has the power to revoke
such shareholder's proxy at any time before it is voted. A proxy may be revoked
by delivery of a written statement to the Secretary of the Company stating that
the proxy is revoked, by a subsequent proxy executed by the person executing the
prior proxy and presented to the Annual Meeting, or by voting in person at the
Annual Meeting.
A plurality of the votes cast at the Annual Meeting by the shareholders
entitled to vote in the election is required to elect the director nominees, the
approval of the holders of a majority of all outstanding shares of Common Stock
entitled to vote at the Annual Meeting is required to approve the proposed
amendment to the Restated Certificate of Incorporation to change the name of the
Company and a majority of the votes cast by the shareholders entitled to vote at
the meeting is required to approve the proposed amendment to the Company's 1997
Stock Option and Long-Term Incentive Compensation Plan and to take any other
action. Although no formal agreement exists, the Company anticipates that the
1,699,000 shares (approximately 48.99% of the outstanding
shares) in the aggregate of the Common Stock, $.01 par value per share (the
"Common Stock"), of the Company beneficially owned by Mr. Irwin Balaban, the
Chairman of the Board, President and Chief Executive Officer of the Company, Mr.
Herbert Goldman, a Director of the Company, and Mr. Lawrence B. Klein, the
Executive Vice President - Marketing and Sales, Secretary and a Director of the
Company, will be voted as recommended for the director nominees and for the
other proposals set forth herein. Accordingly, the Board anticipates that its
nominees will be elected to serve as the Company's directors and that the other
proposals set forth herein will be approved and adopted. In the event that
sufficient votes in favor of any of the matters to come before the meeting are
not received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
by proxy at the Annual Meeting. The persons named as proxies will vote in favor
of any such proposed adjournment or adjournments.
Abstentions and broker non-votes are counted in determining the
existence of a quorum but are not counted as votes cast for the proposals as to
which the shareholder abstained or the broker withheld authority. Abstentions
and broker non-votes have the effect of reducing the number of affirmative votes
required to achieve a majority of the votes cast.
Solicitation
The solicitation of proxies pursuant to this Proxy Statement will be
primarily by mail. In addition, certain directors, officers or other employees
of the Company may solicit proxies by telephone, telegraph, mail or personal
interviews, and arrangements may be made with banks, brokerage firms and others
to forward solicitation material to the beneficial owners of shares held by them
of record. No additional compensation will be paid to directors, officers or
other employees of the Company for such services. The total cost of any such
solicitation will be borne by the Company and will include reimbursement of
brokerage firms and other nominees.
Quorum and Voting Rights
The Board has fixed Wednesday, September 16, 1998 as the record date
(the "Record Date") for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting. Holders of record of shares of Common Stock
at the close of business on the Record Date will be entitled to one vote for
each share held. The presence, in person or by proxy, of the holders of a
majority of the outstanding voting securities entitled to vote at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting.
Security Ownership of Certain Beneficial Owners and Management Ownership
The following table sets forth, as of September 1, 1998, the names,
addresses and number of shares of Common Stock beneficially owned by all persons
known to the management of the Company to be beneficial owners of more than 5%
of the outstanding shares of Common Stock, and the names and number of shares
beneficially owned by all directors of the Company and all executive officers
and directors of the Company as a group (except as indicated, each beneficial
owner listed exercises sole voting power and sole dispositive power over the
shares beneficially owned):
Name and Address of Number of Shares Percentage of Outstanding
Beneficial Owner(1) Beneficially Owned(2) Shares Beneficially Owned(2)
------------------- --------------------- ----------------------------
Irwin Balaban................................. 584,986(3) 16.80%
Herbert Goldman............................... 584,000(4) 16.74%
Mark Behrman.................................. -- (5) --
Barry J. Gordon............................... 5,000(6) *
Lawrence B. Klein............................. 577,986(7) 16.60%
All executive officers and directors
as a group (8 persons)....................... 1,969,972 55.48%
- ------------------
* Less than 1%.
2
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Robocom Systems Inc., 511 Ocean Avenue, Massapequa, New York 11758.
(2) Except as indicated in the footnotes to this table, the Company believes
that all persons named in the table have sole voting and investment power
with respect to all Common Stock shown as beneficially owned by them. In
accordance with the rules of the Securities and Exchange Commission (the
"Commission"), a person or entity is deemed to be the beneficial owner of
Common Stock that can be acquired by such person or entity within 60 days
upon the exercise of options or warrants or other rights to acquire Common
Stock. Each beneficial owner's percentage ownership is determined by
assuming that options and warrants that are held by such person (but not
those held by any other person) and which are exercisable within 60 days
have been exercised. The inclusion herein of such shares listed as
beneficially owned does not constitute an admission of beneficial
ownership.
(3) Includes 13,986 shares subject to options that are presently exercisable.
(4) Includes 564,000 shares held by the Herbert & Naomi J. Goldman Living
Trust, Herbert and Naomi J. Goldman, trustees and 15,000 shares subject to
options that are presently exercisable.
(5) Excludes shares owned by BlueStone Capital Partners, L.P., of which Mr.
Behrman is a Managing Director, as to which shares Mr. Behrman disclaims
beneficial ownership.
(6) Includes 5,000 shares subject to options that are presently exercisable.
(7) Includes 13,986 shares subject to options that are presently exercisable.
3
PROPOSAL 1 - ELECTION OF DIRECTORS
The Amended and Restated Bylaws of the Company provide that the number
of directors of the Company shall be at least three and not more than seven,
except that where all the shares are owned beneficially and of record by fewer
than three shareholders, the number of directors may be less than three, but not
less than the number of shareholders. Subject to the foregoing limitation, such
number may be fixed from time to time by action of the Board or of the
shareholders. The Board currently consists of five directors. The term of office
of the directors is one year, expiring on the date of the next annual meeting,
or when their respective successors shall have been elected and shall qualify,
or upon their prior death, resignation or removal.
Except where the authority to do so has been withheld, it is intended
that the persons named in the enclosed proxy will vote for the election of the
nominees to the Board listed below to serve until the date of the next annual
meeting of the shareholders of the Company and until their successors are duly
elected and qualified. Although the directors of the Company have no reason to
believe that the nominees will be unable or decline to serve, in the event that
such a contingency should arise, the accompanying proxy will be voted for a
substitute (or substitutes) designated by the Board.
The following table sets forth certain information regarding the
director nominees, all of whom currently serve as directors of the Company:
Principal Occupation for Past Five Years and
Name Age Current Public Directorships or Trusteeships
---- --- --------------------------------------------
Irwin Balaban 66 Co-founder of the Company, has been Chairman of the Board, President and Chief
Executive Officer of the Company since 1983; prior thereto he was the Manager
of Logistics for the Systems Management Division of Sperry Corporation.
Mark Behrman 36 Director of the Company since April 1998; since 1996, he has been a Managing
Director of BlueStone Capital Partners, L.P. ("BlueStone"); prior thereto, he
served as Managing Director and Head of Corporate Finance for Commonwealth
Associates; prior thereto, he was the Chief Financial Officer of Fundamental
Brokers, Inc., a government securities interdealer broker. He currently serves
on the Board of Directors of Roller Hockey International Inc., a total sports
entertainment company focusing on the growth in world-wide roller hockey.
Herbert Goldman 67 Co-founder of the Company, has been a director of the Company since 1983 and a
consultant to the Company since his retirement in July 1996; prior to his
retirement, he had been Executive Vice President - Operations of the Company
since October 1991. Prior to joining the Company in 1983 he was an Engineering
Section Manager of Computer System Design for Automated Warehousing at Sperry
Corporation.
Barry J. Gordon 53 Director of the Company since May 1997; since 1980, he has been President and a
director of American Fund Advisors, Inc., a money management firm, and has
served as Chairman of the Board of that company since 1987. In addition, he is
a director of Hain Pure Food Corp., a publicly traded specialty foods product
company, a director of Millennium Sports Management, Inc., a publicly traded
owner of a minor league baseball stadium, a director of Winfield Capital Corp.,
a publicly traded SBIC, and President of the John Hancock Global Technology
Fund, a mutual fund specializing in telecommunications and technology
securities. He is also the Chairman and
4
Principal Occupation for Past Five Years and
Name Age Current Public Directorships or Trusteeships
---- --- --------------------------------------------
Chief Executive Officer of the general partner of a limited partnership that
owns the New Jersey Cardinals, a Class "A" minor league affiliate of the
St. Louis Cardinals. He is also Chairman and Chief Executive Officer of the
general partner of the limited partnership that owns the Norwich Navigators,
a Class "AA" minor league affiliate of the New York Yankees.
Lawrence B. Klein 64 Co-founder of the Company, has been Executive Vice President -
Marketing and Sales and a director of the Company since 1991; prior thereto,
he served as Vice President - Automated Factory Systems and Sales of the
Company from July 1987 to October 1991. Prior to joining the Company in
1983 he was an Engineering Section Manager of Computer Applications
Equipment and Facilities at Sperry Corporation.
The term of office of the directors is one year, expiring on the date
of the next annual meeting and thereafter until their respective successors
shall have been elected and shall qualify.
Board Meetings and Committees
The Board of Directors met four times during the fiscal year ended May
31, 1998. Each director attended at least 75% of the Board and Committee
meetings of which he was a member during such time as he served as a director.
From time to time, the members of the Board act by unanimous written consent
pursuant to the Business Corporation Law of the State of New York, as amended.
The Board has an Audit Committee, which currently consists of Messrs.
Behrman and Gordon. The Audit Committee recommends engagement of the Company's
auditors for approval and is responsible for determining that management
fulfills its responsibilities in the preparation of financial statements and
financial control of operations. The Audit Committee was established in
September 1997 and held one meeting during the fiscal year ended May 31, 1998.
The Board has a Compensation Committee, which currently consists of
Messrs. Behrman and Gordon. The Compensation Committee reviews and makes
recommendations to the Company's Board of Directors relating to the Compensation
of executives and administers the Company's stock option and incentive plans.
The Compensation Committee was established in September 1997 and held one
meeting during the fiscal year ended May 31, 1998.
Board of Directors Compensation
Each non-employee director receives $500 for each Board meeting
attended and is reimbursed for all out-of-pocket expenses incurred in connection
with his attendance at meetings of the Board or any committee thereof. On June
26, 1997, the Board of Directors authorized the grant to each non-employee
director on such date of five-year options to purchase 5,000 shares of Common
Stock at the exercise price of $6.50 per share.
Vote Required
A plurality of the votes cast at the Annual Meeting by the shareholders
entitled to vote in the election is required to elect the director nominees.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE DIRECTOR
NOMINEES.
5
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth all compensation awarded to, earned by
or paid to the chief executive officer ("CEO") of the Company and all other
executive officers of the Company whose salary and bonus exceeds $100,000 in
compensation for the last three fiscal years (collectively, the "Named
Executives"):
SUMMARY COMPENSATION TABLE
Long-Term
Compensation Awards
Annual Compensation -------------------
------------------- Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary Compensation(1) Options/SARs Compensation(2)
------------------ ---- ------ --------------- ------------ ---------------
Irwin Balaban 1998 $240,366 $ 7,192 50,000 $ 4,837
Chairman of the Board, 1997 140,625(3) 13,188 0 2,925
President and Chief 1996 189,375 2,531 0 2,925
Executive Officer
Lawrence B. Klein 1998 203,817 7,172 45,000 4,106
Executive Vice President - 1997 122,363(4) 12,216 0 2,545
Marketing and Sales 1996 164,782 1,837 0 2,545
Robert O'Connor 1998 133,077 10,114 30,000 2,580
Vice President - 1997 100,833 5,748 0 1,892
Systems Development 1996 94,582 958 0 1,177
Elizabeth A. Burke(5) 1998 121,023 0 30,000 1,554
Vice President - Finance, 1997 18,333 0 0 0
Chief Financial Officer and
Treasurer
Martin Liebross 1998 100,000 8,766 5,000 2,147
Director - Network Systems 1997 100,000 4,800 0 2,000
Group 1996 100,000 800 0 2,000
- ---------------
(1) Represents amounts paid for automobile expenses and certain nonaccountable
expenses.
(2) Represents matching contributions made by the Company pursuant to the
Company's 401(k) Plan.
(3) Reflects a voluntary reduction in salary since fiscal 1996 of $48,750.
(4) Reflects a voluntary reduction in salary since fiscal 1996 of $42,419.
(5) Ms. Burke became an executive officer of the Company in April 1997.
6
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options and
stock appreciation rights ("SARs") made by the Company during fiscal 1998 to
each of the Named Executives:
Number of Percent of Total Exercise or
Securities Underlying Options/SARs Granted to Base Price Expiration
Name Options/SARs Granted(1) Employees in Fiscal Year(2) ($/Share) Date
---- ----------------------- --------------------------- --------- ----
Irwin Balaban 50,000 17.57% $7.15 06/26/03
Lawrence B. Klein 45,000 15.81% 7.15 06/26/03
Robert O'Connor 30,000 10.54% 6.50 06/26/03
Elizabeth A. Burke 30,000 10.54% 6.50 06/26/03
Martin Liebross 5,000 1.76% 6.50 06/26/03
- ------------------
(1) All options listed were granted effective on June 26, 1997. No SARs were
granted by the Company in fiscal 1998.
(2) In fiscal 1998, the Company granted options to purchase 284,575 shares of
Common Stock to an aggregate of 42 employees.
Stock Option Exercises
The following table contains information relating to the exercise of
the Company's stock options by the Named Executives in fiscal 1998, as well as
the number and value of their unexercised options as of May 31, 1998:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised
Shares Options at Value of Unexercised
Acquired Fiscal Year-End(#)(1) In-the-Money Options
on Value --------------------- at Fiscal Year End($)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
Irwin Balaban 0 0 0 50,000 0 0
Lawrence B. Klein 0 0 0 45,000 0 0
Robert O'Connor 0 0 0 30,000 0 0
Elizabeth A. Burke 0 0 0 30,000 0 0
Martin Liebross 0 0 0 5,000 0 0
- -----------------
(1) The sum of the numbers under the Exercisable and Unexercisable columns of
this heading represents each Named Executive's total outstanding options to
purchase shares of Common Stock.
7
Key Employees
In addition to the nominees for Directors listed above, set forth below
is a brief description of certain other key employees of the Company:
Elizabeth A. Burke has been Vice President - Finance, Chief Financial
Officer and Treasurer of the Company since April 1997. From July 1994 to January
1997, Ms. Burke was Vice President of Finance/Controller of Marvel Comics Group,
a division of Marvel Entertainment Group, Inc. ("Marvel"). From November 1991 to
July 1994, Ms. Burke was Corporate Controller of Marvel. From 1981 to November
1991, Ms. Burke was employed at Arthur Andersen LLP.
Judy Frenkel has been Manager of Systems Analysis of the Company since
September 1992. Prior thereto, Ms. Frenkel was a Senior Systems Analyst at the
Company from October 1988 to September 1992 and a Systems Analyst at the Company
from April 1986 to October 1988.
Steven Kuhl has been Vice President - Product Development of the
Company since October 1991. Prior thereto, Mr. Kuhl served as a Programming
Manager of the Company from 1983 to October 1991. Prior to joining the Company,
Mr. Klein was an Engineering Section Manager of Computer Applications Equipment
and Facilities at Sperry Corporation. Mr. Kuhl has been on long-term disability
leave since March 1, 1998.
Chung Hsin Lee has been the Manager of Software Development of the
Company since November 1994. Prior thereto, Mr. Lee served as the technical
leader in the development of radio frequency subsystems for the Company's
products from September 1985 to November 1994.
Martin Liebross has been Director of the Network Systems Group of the
Company since September 1993. From August 1989 to September 1993, Mr. Liebross
was President of Soma Lan Technologies, Inc., a computer network integrator.
Robert O'Connor has been Vice President - Systems Development of the
Company since October 1991. Prior thereto, Mr. O'Connor was employed as a
programming group leader by Sperry Corporation.
Richard L. Wilkins has been Director of Sales of the Company since
January 1994. From 1990 to January 1994, Mr. Wilkins was Director of New Product
Development and Marketing of Fairbanks Seales, Inc., a manufacturer of
commercial seals and weighing systems.
Employment and Consulting Agreements
The Company has entered into employment agreements with Messrs.
Balaban, Klein, Kuhl and O'Connor. Each employment agreement is effective as of
May 15, 1997, and has a three year term. Under each employment agreement, the
employee receives an annual base salary and is entitled to participate in all
benefit programs generally available to executive officers of the Company.
Pursuant to their respective employment agreements, Mr. Balaban serves
as President and Chief Executive Officer of the Company and receives an annual
base salary of $230,000; Mr. Klein serves as Vice President Marketing and Sales
of the Company and receives an annual base salary of $195,000; Mr. Kuhl serves
as Vice President - Product Development of the Company and receives an annual
base salary of $120,000; and Mr. O'Connor serves as Vice President - Systems
Development of the Company and receives an annual base salary of $120,000.
Pursuant to their respective employment agreements, on November 30 of each year,
commencing November 30, 1998, each employee's base salary will automatically
increase by 10%; however, Messrs. Balaban, Klein and O'Connor have waived the
10% increase that would have become effective on November 30, 1998. Mr. Kuhl has
been on long-term disability leave since March 1, 1998.
Under the employment agreements, each employee was granted incentive
stock options on June 26, 1997 under the Option Plan to purchase shares of
Common Stock. Messrs. Balaban and Klein received options to
8
purchase 50,000 and 45,000 shares, respectively, at $7.15 per share, and each of
Messrs. Kuhl and O'Connor received options to purchase 30,000 shares at $6.50
per share. The options granted to Messrs. Balaban and Klein fully vest over four
years and the options granted to Messrs. Kuhl and O'Connor vest equally over
three years. All options expire on the fifth anniversary of the date of grant.
In their employment agreements, each of Messrs. Balaban, Klein, Kuhl
and O'Connor has agreed that during the term of his employment agreement and for
a period of one year thereafter (in the event of termination of employment for
other than "cause" or "good reason") or two years thereafter (in the event of
termination of employment for "cause"), he will not, without the prior written
consent of the Company, compete with the Company by engaging in any capacity in
any business which is competitive with the business of the Company.
On May 15, 1997, Herbert Goldman, a director and principal shareholder
of the Company, entered into a three year consulting agreement with the Company
to provide consulting services with respect to new product development and
related technical matters. Pursuant to this agreement, Mr. Goldman is paid an
annual retainer of $12,000 plus a per diem of $1,000 for each day Mr. Goldman
performs consulting services at the Company's request. In addition, on June 26,
1997, Mr. Goldman was granted five year stock options to purchase up to 15,000
shares of Common Stock at a purchase price equal to $7.15 per share. For the
fiscal year ended May 31, 1998, Mr. Goldman received approximately $12,000 for
providing consulting services under his consulting agreement. During the period
from July 1, 1996 to May 15, 1997, Mr. Goldman received compensation aggregating
approximately $7,415 for providing consulting services under an informal
consulting arrangement with the Company.
9
PROPOSAL 2 - AMENDMENT TO THE 1997 STOCK OPTION
AND LONG-TERM INCENTIVE COMPENSATION PLAN
Proposed Amendment
On August 18, 1998, the Board adopted, subject to shareholder approval,
an amendment to the Company's 1997 Stock Option and Long-Term Incentive
Compensation Plan (the "Option Plan") to increase the number of shares of Common
Stock that may be issued thereunder from 325,000 shares to 650,000 shares. On
September 1, 1998, options with respect to an aggregate of 325,175 shares of
Common Stock were outstanding under the Option Plan (including options to
purchase 175 shares that are subject to the approval by the shareholders of this
proposed amendment to the Option Plan) and no shares of Common Stock were
available for additional grants.
The Option Plan
The purpose of the Option Plan, which was adopted in May 1997, is to
enable the Company to compete successfully in attracting, motivating and
retaining directors, officers, employees and consultants by making it possible
for them to own shares of Common Stock thereby giving them a direct and
continuing interest in the future success of the Company's business. The Option
Plan is intended to provide a method whereby directors, officers, employees and
consultants who are making or expected to make substantial contributions to the
successful growth and development of the Company may be offered additional
incentives thereby advancing the interests of the Company and its shareholders.
The Board believes that the Option Plan increases the Company's flexibility in
furthering such purposes.
Terms of the Option Plan
The Option Plan provides for the grant of incentive stock options
("ISO"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options, SARs, restricted stock and
stock bonuses.
The purchase price of shares of Common Stock covered by an ISO must be
at least 100% of the fair market value of such shares of Common Stock on the
date the option is granted. The purchase price for all options is payable in
cash or, subject to Committee approval, with shares of Common Stock previously
owned by Participant, by way of a broker assisted exercise procedure or by such
other method as the Committee may approve. No ISO will be granted to any
employee who, at the time of such grant, owns more than 10% of the total
combined voting power or value of all classes of capital stock of the Company,
or any subsidiary of the Company, unless the option price is at least 110% of
the fair market value of the shares of Common Stock subject to the option on the
date the option is granted and the option expires no later than five years from
the date the option is granted. In addition, the aggregate fair market value of
the shares of Common Stock, determined at the date of grant, with respect to
which ISOs are exercisable for the first time by a participant during any
calendar year, shall not exceed $100,000. No ISO may be granted under the Option
Plan to any individual who is not an employee of the Company. The purchase price
of shares of Common Stock covered by a non-qualified stock option may be equal
to or less than 100% of the fair market value of such shares of Common Stock on
the date the option is granted.
The Option Plan also provides for the grant of SARs, which entitle a
participant to receive a cash payment, equal to the difference between the fair
market value of a share of Common Stock on the exercise date and the exercise
price of the SAR. The terms and the exercise price of a SAR will be determined
by the Committee in its discretion at the time of the grant.
Awards of restricted stock ("Restricted Stock") which are grants of
shares of Common Stock that are subject to a restricted period during which such
shares may not be sold, assigned, transferred, made subject to gift or otherwise
encumbered and Stock Bonuses, which are bonuses in the form of Common Stock, may
also be made under the Option Plan.
10
Administration of the Option Plan
The Option Plan is administered by the Compensation Committee of the
Board (the "Compensation Committee"). The Compensation Committee will have full
authority, in its sole discretion, to interpret the Option Plan, to establish
from time to time regulations for the administration of the Option Plan and to
determine the directors, officers, employees and consultants to whom awards will
be granted and the terms of such awards. The Compensation Committee may not take
any action under the Option Plan unless it solely is at all times composed of
not less than three "Non-Employee Directors" within the meaning of Rule 16(b)(3)
("Rule 16(b)(3)") under the Exchange Act. In the event that the composition of
the Compensation Committee does not comply with Rule 16(b)(3), the Board shall
take any and all actions required or permitted to be taken by the Compensation
Committee under the Option Plan and shall serve as the Compensation Committee.
Exercise of Options and Rights
Under the Option Plan, options or SARs may be exercised and the
restrictions on Restricted Stock cease to apply, at such times and in such
installments as are specified in the terms of its grant, but with respect to
options and SARs not later than the expiration of ten years from the date of its
grant, (or five years in the case of an ISO granted to any employee who owns
more than 10% of the Company's voting stock) subject to earlier termination,
expiration or cancellation as provided in the grant or the Option Plan.
SARs may be granted in tandem with options and, to the extent that they
are so granted and such stock appreciation rights are exercised, the related
options shall be canceled. Similarly, if such options are exercised, the related
stock appreciation rights shall be canceled.
Options and SARs are not transferable by the participant otherwise than
by will or the laws of descent and distribution and are exercisable during the
participant's lifetime only by such participant. Restricted Stock is not
transferable until all of the restrictions with respect thereto cease to apply.
Unless otherwise provided in a grant, if participant's employment with
the Company shall terminate (as determined by the Compensation Committee in its
sole discretion) for any reason other than retirement, disability, death or for
cause, (a) to the extent exercisable at the time of such termination, options
shall remain exercisable until 90 days after the date of such termination and
stock appreciation rights shall be exercisable on and until the 30th day after
such termination on which date they shall expire, and (b) options and stock
appreciation rights granted to such participant to the extent that they are not
exercisable and all Restricted Stock, to the extent still restricted at the time
of such termination, shall expire at the close of business on the date of such
termination. In the event that the employment of such participant shall
terminate as a result of retirement, disability or death, (x) options and SARs
granted to such participant, to the extent that they were exercisable at the
time of such termination, shall remain exercisable until the expiration of their
term and (y) options and SARs granted to such participant to the extent that
they were not exercisable and all Restricted Stock to the extent still
restricted at the time of such termination shall expire at the close of business
on the date of such termination. In the event an participant's employment
terminates for cause, all options or stock appreciation rights granted to the
participant to the extent not exercised and all Restricted Stock to the extent
still restricted at the time of such termination shall expire on the close of
business on the date of such termination. The effect of exercising any ISO on a
day that is more than 90 days after the date of such termination (or, in the
case of a termination of employment on account of death or disability, on a day
that is more than one year after the date of such termination) will be to cause
such ISO to be treated as a non-qualified stock option pursuant to Section 422
of the Code.
Amendment of the Option Plan
The Board may at any time, or from time to time, suspend or terminate
the Option Plan in whole or in part, or amend it in such respects as the Board
may deem appropriate. No amendment, suspension or termination of the Option Plan
shall, without the participant's consent, alter or impair any of the rights or
obligations under any option plan theretofore granted to a participant under the
Option Plan.
11
Federal Income Tax Consequences
The following summary is intended only as a general guide as to the
federal income tax consequences under current law with respect to participation
in the Option Plan and does not attempt to describe all possible federal or
other tax consequences of such participation. Furthermore, the tax consequences
of awards made under the Option Plan are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable.
Incentive Stock Options. Options designated as incentive stock options
are intended to fall within the provisions of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). An optionee recognizes no taxable
income for regular income tax purposes as the result of the grant or exercise of
such an option. If an optionee does not dispose of his/her shares for two years
following the date the option was granted or within one year following the
transfer of the shares upon exercise of the option, the gain on the sale of the
shares (which is the difference between the sale price and the purchase price of
the shares) will be taxed as long-term capital gain. If an optionee satisfies
such holding periods, upon a sale of the shares, the Company will not be
entitled to any deduction for federal income tax purposes. If an optionee
disposes of the shares within two years after the date of grant or within one
year from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the date of exercise and the
option exercise price (not to exceed the gain realized on the sale if the
disposition is a transaction with respect to which a loss, if sustained, would
be recognized) will be taxed as ordinary income for the taxable year in which
the disqualifying disposition occurs. Any gain in excess of that amount will be
a capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period is more than one year. Any ordinary income
recognized by the optionee upon the disqualifying disposition of the shares
should be deductible as compensation paid by the Company for federal income tax
purposes, subject to the general "reasonableness" and other deductibility
requirements of Section 162 of the Code. The Company may be required to withhold
additional taxes from the wages of the employee with respect to the amount of
ordinary income taxable to the employee.
The excess of the fair market value of the Common Stock acquired by
exercise of an ISO (determined on the date of exercise) over the exercise price
constitutes an item of adjustment in determining "alternative minimum taxable
income" for purposes of computing "alternative minimum tax" ("AMT") under
Section 55 of the Code.
Nonstatutory Stock Options. Options that do not qualify as incentive
stock options are nonstatutory stock options and have no special tax status. An
optionee generally recognizes no taxable income upon the grant of such an
option.
Upon the exercise of a nonstatutory stock option, the optionee normally
recognizes ordinary income in the amount equal to the difference between the
option exercise price and the fair market value of the shares on the
determination date (which is generally the date of exercise). If the optionee is
an employee, such ordinary income generally is subject to withholding of income
and employment taxes. The "determination date" is, in general, the date on which
the option is exercised unless the shares received are not vested and/or the
sale of the shares at a profit would subject the optionee to liability under
Section 16(b) of the Securities Exchange Act of 1934 ("Section 16(b)"), in which
case the determination date is the later of (i) the date on which the shares
vest, or (ii) the date the sale of the shares at a profit would no longer
subject the optionee to liability under Section 16(b) (Section 16(b) generally
is applicable only to officers, directors and beneficial owners of more than 10%
of the Common Stock of the Company). Upon the sale of stock acquired by the
exercise of a nonstatutory stock option, any gain or loss, based on the
difference between the sale price and the fair market value on the date of
recognition of income, will be taxed as capital gain or loss. A capital gain or
loss will be long-term if the optionee's holding period is more than one year.
No tax deduction is available to the Company with respect to the grant of a
nonstatutory option or the sale of the stock acquired pursuant to such grant.
The Company should be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee as a result of the exercise of a nonstatutory
option, subject to the general "reasonableness" and other deductibility
requirements of Section 162 of the Code.
Stock Appreciation Rights. A participant will not be required to
recognize any income for federal income tax purposes upon the grant of a stock
appreciation right ("SAR"). However, upon the date of exercise of a SAR, the
participant will be required to recognize as ordinary income the amount of the
cash payment received (which is
12
equal to the excess of the fair market value of a share of Common Stock on the
exercise date over the exercise price of the SAR). The Company should be
entitled to a deduction equal to the amount of the ordinary income recognized
by the participant upon the settlement of the SAR, subject to the general
"reasonableness" and other deductibility requirements of Section 162 of the
Code.
Restricted Stock. In general, a participant will not be required to
recognize any income for federal income tax purposes upon the grant or issuance
of shares of Restricted Stock. Upon the vesting of such shares of Restricted
Stock, the participant will be required to recognize, as ordinary income, an
amount equal to the fair market value of such shares on the vesting date, except
that if the sale of such shares at a profit within six months after the issuance
of such shares could subject the participant to liability under Section 16(b),
the participant would not recognize income until the earlier of (i) the
expiration of such six-month period, or (ii) the first day on which the sale of
such shares at a profit would not subject the participant to liability under
Section 16(b). Alternatively, no later than thirty days after the date of
issuance of shares of Restricted Stock, the participant may also be able to
elect, under Section 83(b) of the Code (a "Section 83(b) Election"), to include
as ordinary income for the taxable year of such issuance, the fair market value
of such shares at the time of issuance (without regard to any Section 16(b) or
other "lapse" restriction). Any subsequent appreciation in shares of Restricted
Stock with respect to which a Section 83(b) Election is made will be taxed as
capital gain, and then only when such shares are sold or otherwise disposed of
in a taxable transaction. Such capital gain will be long-term capital gain if
the participant's holding period of such stock is more than one year. However,
if the shares with respect to which a Section 83(b) Election is made are
subsequently forfeited to the Company (e.g., upon termination of the
participant's employment with the Company prior to the vesting of such shares),
the participant will be unable to claim a deduction in respect of such
forfeiture for the amount previously included as ordinary income. The Company
should be entitled to a deduction equal to the amount of the ordinary income
recognized by the participant, subject to the general "reasonableness" and other
deductibility requirements of Section 162 of the Code.
Stock Bonuses. Unless shares of Common Stock granted to a participant
as part of a Stock Bonus are not vested or the participant could otherwise be
subject to liability under Section 16(b), the participant will be required to
recognize, as ordinary income, an amount equal to the fair market value of such
shares at the time of issuance. If such shares are not vested or the participant
could be subject to liability under Section 16(b) at the time of issuance, then,
unless a Section 83(b) Election is made, the participant will not be required to
recognize taxable income in respect of such shares until the later of the date
(i) on which such shares vest, or (ii) the sale of such shares at a profit would
no longer subject the participant to liability under Section 16(b). The Company
should be entitled to a deduction equal to the amount of the ordinary income
recognized by the participant, subject to the general "reasonableness" and other
deductibility requirements of Section 162 of the Code.
Vote Required
The proposed amendment to the Option Plan will become effective only
upon approval by the holders of a majority of the votes cast by the shareholders
entitled to vote.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO
THE OPTION PLAN.
13
PROPOSAL 3 - AMENDMENT THE CERTIFICATE OF
INCORPORATION TO CHANGE THE CORPORATE NAME
Proposed Amendment
On August 18, 1998, the Board adopted, subject to shareholder approval,
a resolution to amend Article First of the Restated Certificate of Incorporation
to change its corporate name from Robocom Systems Inc. to Robocom Systems
International Inc.
The Board believes that the proposal to amend the Restated Certificate
of Incorporation to change the Company's corporate name is in the best interest
of the Company. In the judgment of the Board, the change of the Company's
corporate name is desirable in view of the change in the character and strategic
focus of the business of the Company resulting from a greater involvement of the
Company in marketing its products in international markets. This international
involvement is part of a strategic corporate program to diversify the Company's
business operations and increase its potential for future growth.
If the proposed amendment is adopted, Article First of the Restated
Certificate of Incorporation will read as follows:
"FIRST: That the name of the corporation is Robocom
Systems International Inc. (the "Corporation")."
If the proposed amendment is adopted, shareholders will not be required
to exchange outstanding stock certificates for new stock certificates.
Vote Required
The proposed amendment to the Restated Certificate of Incorporation to
change the corporate name of the Company will become effective only upon
approval by the holders of a majority of the outstanding shares of Common Stock
and the filing of a Certificate of Amendment to the Restated Certificate of
Incorporation with the Secretary of the State of New York (the "Certificate of
Amendment"), which filing is expected to take place shortly after the Annual
Meeting. If this proposed amendment is not approved by the shareholders, then
the Certificate of Amendment will not be filed.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO
CHANGE THE CORPORATE NAME OF THE COMPANY.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases approximately 10,000 square feet of office space,
which functions as its corporate headquarters, in Massapequa, New York, pursuant
to a lease between the Company and Robocom Properties Inc. ("Robocom
Properties") that expires on December 31, 2010. The shareholders of Robocom
Properties are Messrs. Balaban, Goldman, Klein, Kuhl and O'Connor. The total
rental expense payable by the Company to Robocom Properties in each of the
fiscal years ended May 31, 1996 and 1997 was $168,000 and the total rental
expense paid by the Company to Robocom Properties in the fiscal year ended May
31, 1998 was $173,090, which amounts were payable in equal monthly installments
of approximately $14,000. Since June 1, 1996, the Company has continued to rent
in monthly installments of $14,000 to Robocom Properties. Since January 1, 1998,
the annual base rental of $168,000 payable under the lease has been adjusted and
thereafter will be adjusted each year by the ratio of the prime rate as
published in the Wall Street Journal on January 2 of such year to the prime rate
as published in the Wall Street Journal on January 2 of the previous year, which
for fiscal 1998 was the ratio of 8.5% to 8.25%. However, the parties have agreed
that rent will not be less than $14,000 per month. The Company believes that
these rental terms are at least as favorable to the Company as could be obtained
from an unaffiliated third party.
In connection with the purchase by Robocom Properties in 1989 of the
Company's corporate headquarters building, the Company guaranteed three mortgage
loans in an aggregate original principal amount of $1,053,000 that mature in
2010 and bear interest at rates ranging from 8.25% to 8.877% per annum. At May
31, 1998, the outstanding aggregate principal amount of the mortgage loans was
approximately $807,000.
Herbert Goldman, a director of the Company, has been acting as a
consultant to the Company since his retirement as Executive Vice President -
Operations of the Company effective July 1, 1996. On May 15, 1997, the Company
and Mr. Goldman entered into a three-year agreement pursuant to which Mr.
Goldman received $12,000 for providing consulting services and will continue to
provide consulting services to the Company on an as-needed basis.
The Company made distributions to its S Corporation shareholders of
$850,000 in fiscal 1993, did not make any such distributions in fiscal 1994,
1995 or 1996, made distributions to such shareholders aggregating $900,000 in
the fourth quarter of fiscal 1997. The Company paid the final S Corporation
distribution of $1,600,000 on July 1, 1997 using a portion of the net proceeds
received by the Company in its initial public offering (the "Offering"). In June
1997, prior to the consummation of the Offering, the Company entered into an
indemnity agreement with its then-existing shareholders, including Messrs.
Balaban, Klein, Goldman, Kuhl and O'Connor, pursuant to which the Company will
indemnify such shareholders against additional income taxes resulting from
adjustments made (as a result of a final determination made by a competent tax
authority) to the taxable income reported by the Company as an S Corporation for
periods prior to the Offering, but only to the extent those adjustments result
in a decrease in income taxes otherwise payable by the Company.
Between November 1993 and January 1997, Messrs. Balaban, Klein and
Goldman made demand loans to the Company from time to time in the aggregate
amounts of $265,000, $115,000 and $265,000, respectively. Interest rates on the
loans ranged from 6% per annum to 8% per annum. All of such loans were paid in
full in January 1997.
Each of Messrs. Balaban, Klein and Goldman has personally guaranteed
the Company's line of credit with the Bank of New York.
Mark Behrman, a director of the Company, is a Managing Director of
BlueStone, which was the managing underwriter for the Offering of its Common
Stock in June 1997. In connection with such transaction, BlueStone earned
underwriting discounts and commissions of approximately $424,000, was reimbursed
for expenses in the amount of $183,000 and received five-year warrants to
purchase up to 150,000 shares of Common Stock at an exercise price of $7.80 per
share. In addition, in connection with such transaction, the Company agreed to
indemnify the underwriters, including BlueStone, against certain civil
liabilities in connection with the Company's registration statement filed with
the Commission under the Securities Act of 1933, as amended.
15
INDEPENDENT AUDITORS
Ernst & Young LLP ("E&Y"), served as the Company's independent auditors
for the fiscal year ended May 31, 1998. A representative of E&Y is expected to
attend the Annual Meeting and such representative will have the opportunity to
make a statement if he so desires and will be available to respond to
appropriate questions from shareholders.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 furnished to the Company
pursuant to Rule 16a-3(e) and written statements from Directors and Executive
Officers that no report on Form 5 is due, no reporting person failed to file
reports required under Section 16(a) of the Securities and Exchange Act of 1934,
as amended (the "Exchange Act") with respect to the Company's securities.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for presentation at the 1999 Annual
Meeting of Shareholders and intended to be included in the Company's Proxy
Statement and form of proxy relating to that meeting in accordance with Rule
14a-8(e), promulgated under the Exchange Act, must be received at the address
appearing on the first page of this Proxy Statement by May 28, 1999. A recent
change in the proxy rules of the Securities and Exchange Commission limits the
circumstances under which the proxy card distributed by registered companies to
their shareholders may permit those companies to cast the votes represented by
the proxy voting cards in their sole discretion. As applied to the Company, the
most important limitation is that for proposals made by a shareholder at the
1999 annual meeting that are not properly submitted by the shareholder for
inclusion in the Company's own proxy materials, the Company may vote proxies in
its discretion with respect to those proposals only if it has not received
notice from the shareholder by August 14, 1999 at the latest that the
shareholder intends to make those proposals at the annual meeting.
OTHER BUSINESS
Other than as described above, the Board knows of no matters to be
presented at the Annual Meeting, but it is intended that the persons named in
the proxy will vote your shares according to their best judgment if any matters
not included in this Proxy Statement do properly come before the meeting or any
adjournment thereof.
EXPENSES
The expenses of printing and mailing proxy material, including expenses
involved in forwarding materials to beneficial owners of stock, will be borne by
the Company. No solicitation other than by mail is contemplated, except that
officers or employees of the Company may solicit the return of proxies from
certain stockholders by telephone, personal solicitation or facsimile.
16
ANNUAL REPORT
The Company's Annual Report on Form 10-KSB for the year ended May 31,
1998 including financial statements, is being mailed herewith. If, for any
reason you do not receive your copy of the Annual Report, please contact Robocom
Systems Inc., 511 Ocean Avenue, Massapequa, New York 11758, Attention:
Shareholder Relations, and another copy will be sent to you.
By Order of the Board of Directors,
IRWIN BALABAN,
Chairman of the Board, President
and Chief Executive Officer
Dated: September 28, 1998
Massapequa, New York
17
REVOCABLE PROXY
ROBOCOM SYSTEMS INC.
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Irwin Balaban, Elizabeth A. Burke and
Lawrence B. Klein or any of them, lawful attorneys and proxies of the
undersigned with full power of substitution, for and in the name, place and
stead of the undersigned to attend the Annual Meeting of Shareholders of Robocom
Systems Inc. to be held in Executive Room 2 of the Huntington Hilton Hotel, 598
Broad Hollow Road, Melville, New York 11747 on Wednesday, November 4, 1998 at
10:00 a.m., local time, and any adjournment(s) or postponement(s) thereof, with
all powers the undersigned would possess if personally present and to vote the
number of votes the undersigned would be entitled to vote if personally present.
The Board of Directors recommends a vote "FOR" the proposals set forth
below.
Please be sure to sign and date Date
this Proxy in the box below.
Shareholder sign above Co-holder (if any) sign above
With- For All
For hold Except
PROPOSAL 1: [ ] [ ] [ ]
The Election of Directors:
Irwin Balaban, Mark Behrman, Herbert Goldman, Barry J. Gordon and Lawrence B.
Klein.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
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For Against Abstain
PROPOSAL 2: Proposal to amend the [ ] [ ] [ ]
Company's 1997 Stock Option and
Long-Term Incentive Compensation Plan to
increase the number of shares of Common
Stock that may be issued thereunder from
325,000 to 525,000 shares.
For Against Abstain
PROPOSAL 3: Proposal to amend the [ ] [ ] [ ]
Company's Restated Certificate of
Incorporation to change its corporate
name from Robocom Systems Inc. to
Robocom Systems International Inc.
In accordance with their discretion, said Attorneys and Proxies are
authorized to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting.
This proxy when properly executed will be voted in the manner described
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for each of the Proposals set forth herein. Any prior proxy is hereby
revoked.
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ROBOCOM SYSTEMS INC.
Please sign exactly as your name appears on this proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD
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