SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended
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Check the appropriate box:
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CATALYST INTERNATIONAL, INC.
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Notes:
[CATALYST LOGO]
CATALYST INTERNATIONAL, INC.
8989 NORTH DEERWOOD DRIVE
MILWAUKEE, WISCONSIN 53223
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 1999
--------------------
To our Stockholders:
Catalyst International, Inc. will hold its Annual Meeting of Stockholders on
Monday, April 26, 1999 at 8:00 a.m. C.D.T. at its corporate headquarters
located at 8989 North Deerwood Drive, Milwaukee, Wisconsin 53223, for the
following purposes:
(1) To elect two Class I Directors to serve for three-year terms;
(2) To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for 1999; and
(3) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Stockholders of record at 5:00 p.m. C.D.T. on March 12, 1999 are entitled to
notice of and to vote at the Annual Meeting and at all adjournments thereof.
You are cordially invited to attend the Annual Meeting. Your vote is
important. Holders of a majority of the outstanding shares must be present in
person or by proxy in order for the Annual Meeting to be held.
WE URGE YOU TO DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY CARD IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON. IF YOU ATTEND THE ANNUAL MEETING AND WISH TO VOTE YOUR SHARES
PERSONALLY, YOU MAY DO SO BY REVOKING YOUR PROXY AT ANY TIME PRIOR TO THE
VOTING THEREOF.
By Order of the Board of Directors,
/s/ Mark T. Ehrmann
Mark T. Ehrmann, Secretary
March 24, 1999
PAGE 2
[CATALYST LOGO]
CATALYST INTERNATIONAL, INC.
8989 North Deerwood Drive
Milwaukee, Wisconsin 53223
---------------------
PROXY STATEMENT
---------------------
THIS ENCLOSED PROXY CARD IS SOLICITED BY THE BOARD OF DIRECTORS OF CATALYST
INTERNATIONAL, INC. (THE "COMPANY") FOR USE AT THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MONDAY, APRIL 26, 1999, AT 8:00 A.M. C.D.T., AT THE
COMPANY'S CORPORATE HEADQUARTERS LOCATED AT 8989 NORTH DEERWOOD DRIVE,
MILWAUKEE, WISCONSIN 53223 (THE "ANNUAL MEETING").
Only holders of record of the 6,970,769 shares of Common Stock outstanding at
the close of business on March 12, 1999 (the "Record Date") are entitled to
notice of and to vote at the Annual Meeting. The presence, in person or by
proxy, of a majority of the shares of the Common Stock outstanding on the
Record Date will constitute a quorum. Abstentions and broker non-votes (i.e.,
proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares as to a matter with respect to which brokers or nominees do not
have discretionary power to vote) will be treated as present for purposes of
determining the quorum. Neither abstentions nor broker non-votes will have an
impact on the election of Directors. With respect to Proposal Two,
abstentions and broker non-votes will have the same effect as a vote against
the proposal. Each share of Common Stock entitles its holder to cast one vote
on each matter to be voted upon at the Annual Meeting.
This Proxy Statement, Notice of Annual Meeting of Stockholders, and Proxy
Card, together with the Company's 1998 Annual Report to Stockholders,
including audited financial statements for the year ended December 31, 1998,
are being mailed to stockholders of the Company commencing on or about March
24, 1999.
The proxy holders, Sean P. McGowan and Mark T. Ehrmann, will vote all shares
of Common Stock represented by Proxy Cards that are properly signed and
returned by stockholders. If you properly sign and return your Proxy Card, but
do not specify your choices, your shares will be voted by the proxy holders as
recommended by the Board of Directors. The Proxy Card also authorizes the
proxy holders to vote the shares represented with respect to any matters not
known at the time this Proxy Statement was printed that may properly be
presented for consideration at the Annual Meeting. YOU MUST RETURN A SIGNED
PROXY CARD IF YOU WANT THE PROXY HOLDERS TO VOTE YOUR SHARES OF COMMON STOCK.
PAGE 3
IF THE ACCOMPANYING PROXY CARD IS PROPERLY SIGNED AND RETURNED TO THE COMPANY
AND NOT REVOKED, IT WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED THEREON. EACH STOCKHOLDER MAY REVOKE A PREVIOUSLY GRANTED PROXY AT
ANY TIME BEFORE IT IS EXERCISED BY WRITTEN NOTICE OF REVOCATION OR BY
SUBMITTING A DULY EXECUTED PROXY BEARING A LATER DATE TO THE SECRETARY OF THE
COMPANY OR BY ATTENDING THE ANNUAL MEETING AND REVOKING THE PROXY PRIOR TO
THE ANNUAL MEETING.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's directors are divided into three classes, designated as Class I,
Class II, and Class III, with staggered terms of three years each. The term
of office of the Directors in Class I expires at the 1999 Annual Meeting.
The Board of Directors proposes that the following nominees, who are currently
serving as Class I Directors, be elected as Class I Directors for a new term
of three years ending at the Company's 2002 Annual Meeting of Stockholders or
until their successors are duly elected and qualified.
Nominees receiving the largest number of affirmative votes cast will be
elected as Class I Directors up to the maximum number of Directors to be
chosen at the election.
NOMINEES FOR DIRECTOR
Class I Directors (term expiring in 2002)
Name Principal Occupation and Directorships
James F. Goughenour . . Mr. Goughenour has served as Director of the Company
Age 61 since January 1997. Since June 1997, Mr. Goughenour
has served as Vice President of Technology, Planning
and Operations Services at Sealy, Inc. Prior thereto,
Mr. Goughenour served successively as Vice President
of Information Technologies, Customer Service,
Distribution, Logistics, and Process Improvement &
Technology for HON Industries (a manufacturer of
office furniture and fireplaces).
Sean P. McGowan . . . . Mr. McGowan has served as President and Chief
Age 38 Executive Officer since August 1997. Mr. McGowan has
served as a Director of the Company since April 1997,
as a Director of the Company's wholly owned
subsidiary, Catalyst WMS International Limited since
August 1997, and as a Director of the Company's wholly
owned subsidiary , Kearney Systems, Inc. since August
1998. From January 1997 until August 1997, Mr.
McGowan served as President and Chief Operating
PAGE 4
Officer of the Company. From May 1996 until January
1997, Mr. McGowan served as Senior Vice President-
North American Operations of the Company. Prior to
joining the Company, Mr. McGowan served as General
Manager and as Sales Manager at Professional Control
Corporation from 1991 to 1996; as General Manager and
part-owner of All-Prox Distribution Services, Inc.,
from 1986 to 1991 and as a salesman for Sencon, an
Industrial Controls corporation, with territories
including the East Coast and Midwest from 1982 to
1985.
CONTINUING DIRECTORS
Class II Directors (term to expire in 2000)
Douglas B. Coder. . . . Mr. Coder has served as a Director of the Company
Age 63 since July 1992 and as Chairman of the Board since
January 1997. Mr. Coder has served as a principal of
the Coder Company (a real estate brokerage firm) and
DBC Realty (a real estate holding company) since 1969
and 1971, respectively.
Terrence L. Mealy . . . Mr. Mealy has served as a Director of the Company
Age 68 since July 1992. Mr. Mealy has been an attorney in
private practice since 1957 and is a member of the
State Bar of Iowa.
Class III Director (term to expire in 2001)
Roy J. Carver . . . . . Mr. Carver has served as a Director of the Company
Age 55 since April 1994. Since 1982, Mr. Carver has served
as Chairman of the Board of Carver Pump Company (a
manufacturer of pumps and related products). Since
1982, Mr. Carver has served as a Director of Bandag,
Inc. (a tire retreading company).
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ELECTION OF THE INDIVIDUALS
NOMINATED TO SERVE AS CLASS I DIRECTORS AND YOUR PROXY WILL BE SO VOTED UNLESS
YOU SPECIFY OTHERWISE.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Compensation, Long Range Planning,
and Nominating Committees. The Board of Directors does not have a Finance
Committee. The Board of Directors held five meetings in 1998. Each director
attended at least 75% of the full board meetings and meetings of committees on
which such Director served in 1998.
PAGE 5
The Audit Committee, consisting of Messrs. Carver, Goughenour, and Mealy,
nominates the Company's independent auditors for approval by the Board of
Directors and reviews the scope, results, and costs of the audit with the
Company's independent auditors. It also reviews the financial statements of
the Company and the audit function to assure full compliance with the
requirements of regulatory agencies and full disclosure of necessary
information to the stockholders of the Company. The Audit Committee was
established in November 1995 and held two meetings in 1998. It has
recommended the appointment of Ernst & Young LLP as the independent auditors
of the Company for the year ending December 31, 1999.
The Compensation Committee, consisting of Messrs. Carver, Coder, Goughenour,
and Mealy, establishes compensation levels for the executive officers of the
Company, including the annual bonus plan for senior management, and
administers the Company's 1993 Stock Option Plan, as amended, and 1997
Director Stock Option Plan. The Compensation Committee held six meetings in
1998.
The Long Range Planning Committee, consisting of Messrs. Carver, Coder,
Goughenour, and Mealy, determines the Company's future strategies. The Long
Range Planning Committee held three meetings in 1998.
The Nominating Committee, consisting of Messrs. Carver, Coder, and Mealy,
nominates persons for election as directors of the Company. Stockholders are
also entitled to nominate candidates for the Board of Directors, and the
Nominating Committee will consider nominees recommended by stockholders, in
accordance with the procedures set forth in the Company's By-Laws. The
Nominating Committee held two meetings in 1998.
DIRECTOR COMPENSATION
Directors of the Company who are not employees of the Company receive a fee
of $1,500 (or its equivalent in stock options) for each Board of Directors
meeting they attend and $500 (or its equivalent in stock options) for each
Committee meeting they attend and are reimbursed for their expenses incurred
in connection with their responsibilities as directors.
Mr. Coder receives compensation of $5,000 per month plus bonus (equal to
$60,000 for 1998) and full medical benefits in consideration for performing
his duties as Chairman of the Board.
The Director Stock Option Plan, approved at the 1997 Annual Meeting of
Stockholders, allows non-employee Directors to receive stock options in lieu
of cash compensation for attendance at Board of Directors and Committee
Meetings.
Page 6
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 furnished to the Company pursuant to
Section 16(a) of the Securities and Exchange Act of 1934, as amended, the
Company believes that all executive officers and directors are in compliance
with the filing requirements, with the following exceptions: David M. Kogut
failed to file a Form 4 on a timely basis reporting a stock purchase of 200
shares in November 1995 and Roy J. Carver, Douglas B. Coder, James F.
Goughenour, and Terrence L. Mealy each failed to file (i) a Form 4 on a timely
basis reporting a stock option grant of 135 shares in December 1998 and (ii) a
Form 5 reporting a stock option grant of 5,000 shares in April 1998. All such
filings have subsequently been made.
PAGE 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates, as of February 26, 1999 (unless otherwise
noted), beneficial ownership of Common Stock by (i) directors, (ii) those
executive officers named in the Summary Compensation Table appearing under
"Executive "Compensation," below, (iii) persons known by the Company to be
beneficial owners of more than 5% of its outstanding Common Stock, (iv) and
all directors and executive officers of the Company as a group. Unless
otherwise indicated, the person listed has sole voting and investment power.
Amount and
Nature of
Name and Address of Beneficial Percent of
Beneficial Owners Ownership Class
Roy J. Carver 252,956(1) 3.63%
2415 Park Avenue
Muscatine, IA 52761
Douglas B. Coder 801,218(2) 11.49%
8711 East Pinnacle Peak Road #127
Scottsdale, AZ 85255
James F. Goughenour 18,062(3) *
1228 Euclid Avenue
Cleveland, OH 44115
Sean P. McGowan 244,968(4) 3.51%
8989 North Deerwood Drive
Milwaukee, WI 53223
Terrence L. Mealy 921,252(5) 13.22%
301 East Second Street
Muscatine, IA 52761
David M. Kogut 64,282(6) *
8989 North Deerwood Drive
Milwaukee, WI 53223
Judith K. Fearn 42,282(7) *
8989 North Deerwood Drive
Milwaukee, WI 53223
John F. Kramer 42,986(8) *
8989 North Deerwood Drive
Milwaukee, WI 53223
PAGE 8
Michael D. Schulz 38,625(9) *
8989 North Deerwood Drive
Milwaukee, WI 53223
FMR Corp. 583,000(10) 8.59%
82 Devonshire Street
Boston, MA 02109
State of Wisconsin Investment Board 760,000(11) 10.82%
Post Office Box 7842
Madison, WI 53707
All directors and executive officers
as a group (18 persons) 2,895,020(12) 41.53%
- ------------
*Less than 1% of the outstanding Common Stock.
(1) Includes options to purchase 18,214 shares, all of which are
immediately exercisable.
(2) Includes 37,271 shares held by Mr. Coder's spouse, 286,240 shares held by
S&S Partnership and 104,498 shares held in trust for the benefit of Mr.
Coder's children. Mr. Coder disclaims beneficial ownership of all such
shares. Mr. Coder has sole voting and investment power with respect to
355,137 shares and shared voting and investment power with respect to
428,009 shares. Also includes options to purchase 18,072 shares, all of
which are immediately exercisable.
(3) Includes options to purchase 7,334 shares, all of which are
immediately exercisable.
(4) Includes options to purchase 229,968 shares which are exercisable within
60 days of February 26, 1999.
(5) Includes 6,000 shares held by Mr. Mealy's spouse. Mr. Mealy disclaims
beneficial ownership of all such shares. Mr. Mealy has sole voting and
investment power with respect to 897,089 shares and shared voting and
investment power with respect to 6,000 shares. Also includes options to
purchase 18,163 shares, all of which are immediately exercisable.
(6) Includes options to purchase 59,832 shares which are exercisable within
60 days of February 26, 1999.
(7) Includes options to purchase 42,082 shares which are exercisable within
60 days of February 26, 1999.
(8) Includes options to purchase 41,486 shares which are exercisable within
60 days of February 26, 1999.
(9) Represents options to purchase 38,625 shares which are exercisable within
60 days of February 26, 1999.
(10) This information is based on a Schedule 13G dated February 1, 1999.
(11) This information is based on a Schedule 13G dated January 16, 1999.
(12) Includes options to purchase 611,279 shares which are exercisable within
60 days of February 26, 1999.
PAGE 9
EXECUTIVE OFFICERS*
Name Age Position
- ---- --- --------
Sean P. McGowan 38 President and Chief Executive Officer
Michael D. Schulz 46 Executive Vice President-Operations and Chief
Operating Officer
Robert J. Kearney 45 Executive Vice President
James G. Stowers 55 Senior Vice President-International Sales
David M. Kogut 47 Senior Vice President-Complementary Services
Peter J. Briehl 41 Vice President-Development and Delivery
Lynne B. Briggs 38 Vice President-Software Engineering
Judith K. Fearn 37 Vice President-European Operations
David L. Harney 60 Vice President-Research and Development
Thomas G. Hickinbotham 54 Vice President-Finance & Administration and
Chief Financial Officer
Douglas J. Kennedy 35 Vice President-Professional Services
Organization
John F. Kramer 35 Vice President-Sales
Steven S. Rishel 33 Vice President-Marketing
Daniel A. Trew 47 Vice President-Product Strategy
* Information current as of March 3, 1999
SEAN P. MCGOWAN has served as President and Chief Executive Officer since
August 1997. Mr. McGowan has served as a Director of the Company since April
1997, as a Director of the Company's wholly owned subsidiary, Catalyst WMS
International Limited, since August 1997, and as a Director of the Company's
wholly owned subsidiary, Kearney Systems, Inc., since August 1998. From
January 1997 to August 1997, Mr. McGowan served as President and Chief
Operating Officer; and from May 1996 to January 1997 as Senior Vice President-
North American Operations. Prior to joining the Company, Mr. McGowan served
as General Manager and as Sales Manager at Professional Control Corporation
from 1991 to 1996; as General Manager and part-owner of All-Prox Distribution
Services, Inc., from 1986 to 1991 and as a salesman for Sencon, an Industrial
Controls corporation, with territories including the East Coast and Midwest
from 1982 to 1985.
MICHAEL D. SCHULZ has served as Executive Vice President-Operations and
Chief Operating Officer since January 1998. Prior to joining the Company, Mr.
Schulz was with Case Corporation and served as Director of Information Systems
from December 1996 to January 1998; as Director Information Services,
Worldwide Data Centers and Global Network Operations from August 1995 to
December 1996; and as Director of European Data Systems from June 1990 to
August 1995.
PAGE 10
ROBERT J. KEARNEY has served as Executive Vice President since August 1998.
Prior to joining the Company, Mr. Kearney served as chief executive officer,
president, and founder of Kearney Systems, Inc.
JAMES G. STOWERS is one of the cofounders of the Company and has served as
its Senior Vice President-International Sales since April 1994. Prior thereto,
Mr. Stowers served as a Vice President of the Company with various marketing,
sales, and management responsibilities. Mr. Stowers was a director of the
Company from August 1982 to November 1993.
DAVID M. KOGUT has served as Senior Vice President-Complementary Services
since July 1998. Prior thereto, Mr. Kogut served as Senior Vice President-
Customer Satisfaction from October 1997 to July 1998; as Senior Vice
President-Operations from January 1997 to October 1997; as Vice President-
Customer Service from October 1995 to January 1997; as Vice President-
Marketing from October 1993 to October 1995 and as Vice President-Systems
Integration since rejoining the Company in October 1991.
PETER J. BRIEHL has served as Vice President-Development and Delivery since
October 1997. Prior thereto, Mr. Briehl served as Director of Advanced
Technology from August 1996 to October 1997 and as Manager of Software
Distribution from February 1996 to August 1996. Prior to joining the Company,
Mr. Briehl was employed for over twenty years by the United States Marine
Corps and served as the Training and Operations Head at the Computer Science
School in Quantico, Virginia from July 1994 to February 1996.
LYNNE B. BRIGGS has served as Vice President-Software Engineering since
November 1998. Prior thereto, Ms. Briggs served as Director-Product
Development from September 1997 to November 1998; as Director-Application
Design from August 1996 to April 1997; and as a Project Manager from January
1996 to August 1996. Ms. Briggs left the Company briefly and served as
Director of Staff Planning at Carson Pirie Scott from April 1997 to September
1997. Prior to joining the Company in January 1996, Ms. Briggs served as
Chief Information Officer for Chestnut Health Systems from 1994 to 1995.
JUDITH K. FEARN has served as Vice President-European Operations since
December 1995. Prior thereto. Ms. Fearn served as the Company's Managing
Director-United Kingdom since May 1994. Ms. Fearn has been a director of the
Company's wholly owned subsidiary, Catalyst WMS International Limited, since
May 1995.
DOUGLAS J. KENNEDY has served as Vice President-Professional Services
Organization since August 1996. From December 1995 to August 1996, Mr.
Kennedy served as Director-Retail Operations of the Company and as a Project
Manager from November 1994 to November 1995. Prior to joining the Company,
Mr. Kennedy worked in various positions as Woolworth Corporation.
JOHN F. KRAMER has served as Vice President-Sales since November 1998. From
October 1996 to November 1998, Mr. Kramer served as Vice President-North
American Sales and from January 1996 to October 1996, as Regional Sales
PAGE 11
Manager for the Northeast United States. Prior to joining the Company, Mr.
Kramer was employed as a Regional Salesperson for Pansophic/Computer
Associates from December 1990 to January 1996.
DAVID L. HARNEY has served as Vice President-Research and Development since
December 1992 and served as Vice President-Software Development of the Company
from February 1991 to December 1992.
THOMAS G. HICKINBOTHAM has served as Vice President-Finance & Administration
and Chief Financial Officer since June 1997. Prior thereto, Mr. Hickinbotham
served as the Chief Financial Officer for Rent, Inc. and owned and operated
Essentials of International Business, Inc. from 1990 to June 1997.
STEVEN S. RISHEL has served as Vice President-Marketing since August 1996.
Prior to joining the Company, Mr. Rishel served as a Regional Manager at
Computer Technology Corporation from August 1993 to August 1996. Prior
thereto, Mr. Rishel served as a Regional Manager at Tayio America.
DANIEL A. TREW has served as Vice President-Product Strategy since November
1998. From August 1997 to November 1998, Mr. Trew served as a Product Manager
in the Marketing Group and from January 1994 to August 1997, as Director-
Logistics Technology. Prior thereto, Ms. Trew served as a consultant with IBM
Consulting Services.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by the Company to the Chief Executive Officer and each of the four most
highly compensated executive officers (collectively, the "Named Executive
Officers") of the Company for services rendered in all capacities to the
Company for the years ended December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
Long Term
Compensation Awards
Name and Annual Compensation Securities Underlying
Principal Position Year Salary($) Bonus($) Options (#)(1)(2)
- ------------------ ---- --------- -------- ---------------------
Sean P. McGowan 1998 200,000 52,500 50,000
President and Chief 1997 210,435 0 150,000
Executive Officer 1996 114,845 40,000 120,000
Michael D. Schulz(3) 1998 140,000 15,000 87,000
Executive Vice President-
Operations and Chief
Operating Officer
PAGE 12
David M. Kogut 1998 135,000 7,500 0
Sr. Vice President- 1997 131,632 0 65,000
Complementary Services 1996 90,203 0 5,000
Judith K. Fearn 1998 136,102 7,500 0
Vice President- 1997 137,083 0 10,000
European Operations 1996 118,400 0 10,000
John F. Kramer 1998 110,000 66,232(4) 15,000
Vice President-Sales 1997 129,750 87,112(4) 33,000
1996 92,160 10,620(4) 17,000
- ----------
(1) None of the named executive officers held restricted stock at the end of
1998.
(2) Option grants noted herein represent the option grants in the period in
which they were originally granted. Due to repricings effected by the
Company, some of the original option grants were repriced in subsequent
periods.
(3) Mr. Schulz was hired by the Company in January 1998.
(4) Represents sales commissions paid to Mr. Kramer.
Options. The Company granted options to the Named Executive Officers during
fiscal 1998 as set forth below.
OPTION GRANTS IN LAST FISCAL YEAR (1998)
Percentage
of Total Potential Realizable
Options Value At Assumed
Number of Granted to Annual Rates
Securities Employees of Stock Price
Underlying in Exercise Appreciation For
Options Fiscal Price Expiration Option Term
Name Granted 1998 ($/Share) Date 5%($) 10%($)
- ---- ------------ ------ --------- -------- ------- -------
Sean P. McGowan 50,000(1) 12.57% 7.00 04/09/08 220,113 557,810
Michael D. Schulz 42,000(2) 10.55% 4.25 01/29/08 112,258 284,483
45,000(3)(4) 11.31% 7.00 04/09/08 198,102 502,029
David M. Kogut 0
Judith K. Fearn 0
John F. Kramer 15,000(5)(6) 3.77% 7.00 04/09/08 66,034 167,343
Page 13
- ----------
(1) The options vest 100% on the two year anniversary of the date of grant
(April 9, 1998).
(2) The option vests 20% on the first anniversary of the date of grant
(January 19, 1998) and 1-2/3% each month thereafter provided Mr. Schulz
remains an employee of the Company.
(3) The option vests 100% on April 9, 2000 provided Mr. Schulz remains an
employee of the Company through such date.
(4) Pursuant to a letter agreement with the Company dated April 27, 1998,
these options shall vest upon the earlier of the date of a change in
control of the Company or December 31, 1999. In addition, one-half of
said options which were not vested on December 31, 1998 became vested on
such date.
(5) The option vests 20% on the first anniversary of the date of grant (April
9, 1998) and 1-2/3% each month thereafter provided Mr. Kramer remains an
employee of the Company.
(6) Pursuant to a letter agreement with the Company dated December 5, 1997,
these options shall vest upon the earlier of the date of a change in
control of the Company or December 31, 1999. In addition, one-half of
said options which were not vested on December 31, 1998 became vested on
such date.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information regarding the value of stock options
held at December 31, 1998 by the Chief Executive Officer and Named Executive
Officers. Neither the Chief Executive Officer nor any of the Named Executive
Officers exercised options in 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options
Options/SAR at Fiscal Year-End at Fiscal Year-End
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Sean P. McGowan 216,625 103,375 1,915,688 701,813
Michael D. Schulz 22,500 64,500 112,500 438,000
David M. Kogut 54,500 51,750 511,500 438,000
Judith K. Fearn 36,750 43,250 359,975 371,025
John F. Kramer 38,650 26,350 278,390 161,984
PAGE 14
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company and Mr. Stowers are parties to a letter agreement dated October
23, 1998 which sets forth the terms under which Mr. Stowers will continue to
serve as Senior Vice President-International Sales through May 31, 2000.
Under the employment agreement, Mr. Stowers receives a base salary as provided
in such agreement and is entitled to participate in the benefit plans
generally provided by the Company to its executive officers, including annual
bonus plans, vacation plans, and welfare plans. In addition, the Company
agrees to pay certain health benefits to Mr. Stowers and his immediate family
through a period which expires no later than December 31, 2018. The
employment agreement prohibits Mr. Stowers from competing with the Company
during his employment and for a period of four years thereafter.
The Company and Mr. Coder are parties to a letter agreement dated September
1997, as subsequently amended, under which the Company agreed to pay certain
health benefits to Mr. Coder and his immediate family through a period which
expires no later than December 31, 2011.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing compensation levels for the executive officers
of the Company, including the annual bonus plan for executive officers and
for administering the Company's 1993 Stock Option Plan, as amended, and 1997
Director Stock Option Plan. The Committee is comprised of four non-employee
directors: Mssrs. Carver, Coder, Goughenour, and Mealy. The Committee's
overall objective is to establish a compensation policy that will (i)
attract, retain, and reward executives who contribute to achieving the
Company's business objectives; (ii) motivate executives to obtain these
objectives; and (iii) align the interests of executives with those of the
Company's long-term investors.
The Company compensates executive officers with a combination of salary and
incentives designed to focus their efforts on maximizing both the near-term
and long-term financial performance of the Company. In addition, the
Company's compensation program rewards individual performance that furthers
Company goals. The executive compensation program includes the following:
(i) base salary; (ii) quarterly incentive bonuses; (iii) long-term equity
incentive awards in the form of stock option grants; and (iv) other benefits.
Each executive officer's compensation package is designed to provide an
appropriately weighted mix of these elements which cumulative provide a level
of compensation roughly equivalent to that paid by companies of similar size
and complexity.
BASE SALARY: Base Salary levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally set within a
range of base salaries that the Committee believes are paid to similar
PAGE 15
executive officers at companies deemed comparable based on the similarity in
revenue level, industry segment, and competitive employment market to the
Company. In addition, the Committee generally takes into account the
Company's past financial performance and future expectations, as well as the
performance of the executives and changes in the executives' responsibilities.
INCENTIVE BONUSES: The Committee recommends the payment of quarterly bonuses
to provide an incentive to these persons to be productive over the course of
each fiscal year. These bonuses are awarded only if the Company achieves or
exceeds certain corporate performance objectives. The amount of the incentive
bonus to each executive officer is based on the individual executive's
performance.
EQUITY INCENTIVES: Stock options are used by the Company for payment of
long-term compensation to provide a stock-based incentive to improve the
Company's financial performance and to assist in the recruitment, retention,
and motivation of professional, managerial, and other personnel. Generally,
stock options are granted to eligible employees from time to time based
primarily upon the individual's actual and/or potential contributions to the
Company and the Company's financial performance. Stock options are designed
to align the interests of the Company's executive officers with those of its
stockholders by encouraging executive officers to enhance the value of the
Company, the price of the common stock, and hence, the stockholder's return.
In addition, the vesting of stock options over a period of time is designed
to create an incentive for the individual to remain with the Company. The
Company grants new options to the executives, including the Chief Executive
Officer, on an ongoing basis to provide continuing incentives to the
executives to meet future performance goals and to remain with the Company.
During the fiscal year ended December 1998, options to purchase an aggregate
of 227,000 shares of common stock were granted to the Company's executive
officers.
OTHER BENEFITS: Benefits offered to the Company's executive officers are
served as a safety net of protection against the financial catastrophes that
can result from illness, disability, or death. Benefits offered to the
Company's executive officers are substantially the same as those offered to
all of the Company's regular employees.
In 1993, the Company established a tax-qualified deferred compensation 401(k)
Savings Plan (the "Plan") covering all of the Company's eligible full-time
employees. Under the Plan, participants may elect to contribute, through
salary reductions, up to 15% of their annual compensation subject to a
statutory maximum. In 1998, the Company provided additional matching
contributions in the amount of 25% under the Plan. The Plan is designed to
qualify under Section 401 of the Internal Revenue Code so that the
contributions by employees or by the Company to the Plan, and income earned
on plan contributions, are not taxable to employees until withdrawn from the
Plan, and so that contributions by the Company will be deductible by the
Company when made.
PAGE 16
CEO COMPENSATION: The Committee annually reviewed the performance and
compensation of the Chief Executive Officer based on the assessment of his
past performance and its expectation of his future contributions to the
Company's performance. Sean P. McGowan served as the Company's Chief
Executive Officer since August 1997. In 1998, Mr. McGowan's base salary was
set at $200,000, which the Committee believes to be a reasonable salary. In
addition, Mr. McGowan received incentive bonuses totaling $52,500 and was
granted 50,000 stock options.
COMPLIANCE WITH INTERNAL REVENUE CODE: Section 162(m) of the Internal
Revenue Code imposes a limit on tax deductions for annual compensation (other
than performance-based compensation) in excess of one million dollars paid by
a corporation to its Chief Executive Officer and the other four most highly
compensated executive officers of a corporation. The Company has not
established a policy with regard to Section 162(m) of the Code, since the
Company has not and does not currently anticipate paying cash compensation in
excess of one million dollars per annum to any employee. None of the
compensation paid by the Company in 1998 was subject to the limitations on
deductibility. The Board of Directors will continue to assess the impact of
Section 162(m) on its compensation practices and determine what further
action, if any, is appropriate.
Compensation Committee
Roy J. Carver
Douglas B. Coder
James F. Goughenour
Terrence L. Mealy
PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return of the Common
Stock with the cumulative total return of the Nasdaq Stock Market (R) Index
from the date of the Company's initial public offering (November 16, 1995) to
the fiscal year end (December 31, 1998). In addition, the graph also compares
the Company's performance to that of the Nasdaq Computer and Data Processing
Stock Index. The graph assumes that the value of the investment in the Common
Stocks and each index was $100 on November 16, 1995 and that all dividends
were reinvested. The Company has not paid any cash dividends on its Common
Stock and does not intend to do so in the foreseeable future. The performance
graph is not necessarily indicative of future performance.
[GRAPH]
PAGE 17
Nasdaq Stock Nasdaq Computer &
Measurement Catalyst Market (U.S. Data Processing
Period International, Inc.($) Companies)($) Stocks($)
- --------- --------------------------------- -------------------- -------------------------
11/16/95 100 100 100
12/31/95 88 101 100
12/31/96 36 124 123
12/31/97 31 152 151
12/31/98 92 214 271
FINANCIAL AND OTHER INFORMATION
With respect to the Company's (i) financial statements, (ii) management's
discussion and analysis of financial condition and results of operations, and
(iii) qualitative and quantitative disclosures about market risks, the
Company's 1999 Annual Report to Stockholders is incorporated herein by
reference.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee and subject to ratification by the
stockholders at the Annual Meeting, the Board of Directors has appointed Ernst
& Young LLP, an independent public accounting firm, to audit the financial
statements of the Company for the year ending December 31, 1999. Ernst &
Young LLP has audited the Company since 1993. Representatives of Ernst &
Young LLP will attend the Annual Meeting and have the opportunity to make a
statement if they so desire, and will also be available to answer questions.
THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF SHARES OF COMMON STOCK
PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE ANNUAL MEETING AND ENTITLED
TO VOTE THEREON IS REQUIRED TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1999. THE
BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY
OTHERWISE.
SUBMISSION OF STOCKHOLDER PROPOSALS
In accordance with the Company's By-Laws, nominations, other than by or at the
direction of the Board of Directors, of candidates for election as directors
PAGE 18
at the Company's 2000 Annual Meeting of Stockholders and other proposals to be
submitted for consideration at the Company's 2000 Annual Meeting of
Stockholders must be received by the Company no later than November 23, 1999
and must otherwise be in accordance with the requirements of the Company's By-
Laws. To be considered for inclusion in the proxy statement for the Company's
2000 Annual Meeting of Stockholders, stockholder proposals for consideration
at the Company's 2000 Annual Meeting of Stockholders must be received by the
Company at the Company's principal executive offices by November 23, 1999.
Such nominations or proposals must be submitted to Catalyst International,
Inc., 8989 North Deerwood Drive, Milwaukee, Wisconsin 53223, Attention:
Corporate Secretary. To avoid disputes as the date of receipt, it is
suggested that any stockholder proposal be submitted by certified mail, return
receipt requested.
OTHER MATTERS
Although management is not aware of any other matters that may come before the
Annual Meeting, if any such matters should be properly presented, the persons
named in the accompanying proxy intend to vote such proxy in accordance with
their best judgment.
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.
STOCKHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION AS FILED ON FORM 10-K AT NO COST BY WRITING
TO THE INVESTOR RELATIONS DEPARTMENT, CATALYST INTERNATIONAL, INC., 8989 NORTH
DEERWOOD DRIVE, MILWAUKEE, WISCONSIN 53223. EXHIBITS TO FORM 10-K WILL BE
FURNISHED UPON PAYMENT OF THE COMPANY'S REASONABLE EXPENSES IN FURNISHING THE
EXHIBITS.
By Order of the Board of Directors,
/s/ Mark T. Ehrmann
Mark T. Ehrmann, Secretary
CATALYST INTERNATIONAL, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CATALYST INTERNATIONAL, INC.
Annual Meeting of Stockholders - April 26, 1999
The undersigned hereby appoints Sean P. McGowan and Mark T. Ehrmann, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorized each of them to represent and to vote, as designated hereon,
all of the shares of common stock of Catalyst International, Inc. held of
record by the undersigned on March 12, 1999, at the 1999 Annual Meeting of
Stockholders of Catalyst International, Inc. to be held on April 26, 1999 or
at any adjournment or postponement thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be vote "FOR" (i) the election of the nominees as Class I Directors and
(ii) ratification of Ernst & Young LLP as the Company's independent auditors
for 1999, all as more fully described in the accompanying Proxy Statement.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
CATALYST INTERNATIONAL, INC. 1999 ANNUAL MEETING
1. ELECTION OF DIRECTORS: 1-JAMES F. GOUGHENOUR
2-SEAN P. MCGOWAN
[_] FOR the nominees [_] WITHHOLD AUTHORITY
listed to the left. to vote for the nominee
listed to the left.
2. To ratify the appointment of Ernst & Young LLP as the Company's
Independent auditors for 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
Check appropriate box
Indicate changes below:
Address Change? [_] Name Change? [_]
Date ____________________________ NO. OF SHARES _________________________
_______________________________________
SIGNATURE(S) IN BOX
Please sign exactly as your name appears
on this Proxy. When shares are held by
joint tenants, both should sign. When
signing as an attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
March 15, 1999 - Draft #1