1
EXHIBIT (c)(9)
---------------
Excerpts from the Proxy Statement, dated April 5, 1999
of EIS International, Inc. relating to its 1999 Annual
Meeting of Shareholders
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board currently consists of five directors, divided into two
classes of two directors each and one class of one director. If all of the
nominees for election as a director are elected at the Annual Meeting, the Board
will consist of seven directors, divided into two class of two directors each
and one class of three directors. The term of the current Class I Directors will
expire at the Annual Meeting. The terms of the current Class II and Class III
Directors will expire in 2000 and 2001, respectively, at such times as their
respective successors are duly elected and qualified. Directors of each class
are elected for a full term of three years (or any lesser period representing
the balance of the previous term of such class) and until their respective
successors are duly elected and qualified or until their earlier resignation or
removal.
At the Annual Meeting, the holders of record of Common Stock are to
elect (i) three Class I Directors to serve until the annual meeting of the
Company's stockholders to be held in 2002 and (ii) one Class III Director to
serve until the annual meeting of the Company's stockholders to be held in 2001
and, in each case, until such director's successor is duly elected and qualified
or until his earlier resignation or removal. The election of directors requires
the affirmative vote of the holders of a plurality of the Common Stock present
and voting at the Annual Meeting. It is intended that proxies in the
accompanying form that do not withhold the authority to vote for the nominee
will be voted for the election as director of such nominee. All of the nominees
except Messrs. Burton and Foreman are currently directors of the Company.
The nominees have indicated their willingness to serve if elected;
however, if any of the nominees should become unable or unwilling for any reason
before the Annual Meeting to serve as a director, the proxies will be voted for
a substitute person to be selected by the current Board. The Board has no reason
to expect that the nominees will not be candidates at the Annual Meeting and
therefore does not at this time have in mind any substitute for any of the
nominees.
There are no family relationships between any of the Company's
directors and executive officers.
Nominees for Election as a Director
The following table sets forth certain information with respect to each
nominee. Information set forth below concerning age, occupation(s) and other
directorships has been furnished to the Company by the individuals named.
Information with respect to the number of shares of Common Stock beneficially
owned by each director, directly or indirectly, as of January 31, 1999, appears
below under the heading "Security Ownership of Certain Beneficial Holders and
Management."
Class I Directors (terms expire at the Annual Meeting):
Name Age Principal Occupation(s)
---- --- -----------------------
Robert M. Jesurum 57 Founder of the Company and Private
Consultant (1)
Charles W. McCall 54 President and Chief Executive Officer of
McKesson HBOC, Inc. (1)
2
John F. Burton 47 Managing Director, Updata Capital, Inc.
- ---------------
(1) Member of the Compensation Committee
Robert M. Jesurum founded the Company in January 1980 and has served as
a director since its inception. He also served as the Company's Chairman of the
Board (from inception to February 1993) and as the Company's Executive Vice
President and Chief Technical Officer (from inception until October 1991). Mr.
Jesurum retired as an employee of the Company in October 1991 and is currently
pursuing noncompetitive independent business research and product development as
a sole proprietor.
Charles W. McCall has been a director of the Company since April 1993.
Mr. McCall has been Chairman of the Board of Directors and Chief Executive
Officer of McKesson HBOC, Inc. since January 1999. He had been President, Chief
Executive Officer and a director of HBO & Company, a company in the business of
providing software in the medical field from January 1991 to January 1999, at
which time HBO & Company merged with McKesson, Inc. to form McKesson HBOC, Inc.
From April 1985 to January 1991, Mr. McCall served as President and Chief
Executive Officer of CompuServe Inc., a computer communications and information
services company. Mr. McCall serves on the board of directors of WestPoint
Stevens, Inc., a publicly-held company.
John F. Burton has been a Managing Director of Updata Capital, Inc., an
investment banking firm, since 1997. From 1995 to March 1997, Mr. Burton was the
Managing Director of Burton Technology Partners, Ltd. From September 1995 to
September 1996, Mr. Burton was Chief Executive Officer of Nat Systems
International, Inc. From 1990 through January 1995, Mr. Burton served as
President, Chief Executive Officer, Chief Operating Officer and a director of
LEGENT Corporation. Mr. Burton serves as a director of Banyan Systems, Inc.,
Treev, Inc., and MapInfo Corporation, all publicly-held companies.
Class III Director (term expires at the 2001 Annual Meeting)
Peter B. Foreman 63 President, Sirius Corporation
Peter B. Foreman has been the President of Sirius Corporation, an
investment management firm which he founded since 1994. From 1976 to 1994, Mr.
Foreman was a founding partner of Harris Associates L.P., an investment advisory
firm. Mr. Foreman continues to manage Hesperus Partners, Ltd., a partnership
focusing on value-oriented investing. He is a member of the boards of directors
of Glacier Water Services, Inc. and Eagle Food Centers, Inc., both publicly-held
companies.
Current Directors
The following table sets forth certain information about those
directors whose terms of office will continue after the Annual Meeting.
Information set forth below concerning age, occupations and other directorships
has been furnished to the Company by the individuals named.
Class II Directors (terms expire at the 2000 Annual Meeting):
Name Age Principal Occupation(s)
---- --- -----------------------
Kent M. Klineman 66 Secretary of the Company; Attorney and Private
Investor (1)(2)
James E. McGowan 55 President and Chief Executive Officer of the Company
- - --------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
3
Kent M. Klineman has been a director since June 1988. He also served as
Treasurer of the Company from June 1988 until December 1989 and has served as
Secretary since June 1988. He is an attorney and private investor and serves as
a director of a number of closely held companies. He is also a director of
Concord Camera Corp., a publicly held corporation.
James E. McGowan has been EIS' Chief Executive Officer, President and a
director of the Company since February 1997. He was also President and Chief
Operating Officer of EIS Systems, an operating division of the Company, from
April 1996 until February 1997. From September 1993 to January 1996, he was
President and Chief Executive Officer of Deluxe Data, a provider of electronic
funds transfer processing and software for financial institutions and automated
teller machine networks. From January 1993 to September 1993, he ran McGowan
Associates, a consulting company which he founded. From January 1990 to December
1992, he served as President and Chief Executive Officer at Xerox Imaging
Systems.
Other Class III Director (term expires at the 2001 Annual Meeting):
Name Age Principal Occupation(s)
---- --- -----------------------
Robert J. Cresci 54 Chairman of the Board of Directors of the
Company; Managing Director of Pecks
Management Partners Ltd. ("Pecks") (1)
- ---------------
(1) Member of the Audit Committee
Robert J. Cresci has been a director of the Company since March 1991
and has served as Chairman of the Board of Directors of the Company since
February 1997. He has been a Managing Director of Pecks, an investment
management firm, since September 1990. Mr. Cresci currently serves on the boards
of directors of Bridgeport Machines, Inc., Serv-Tech, Inc., Vestro Natural
Foods, Inc., Olympic Financial Ltd., Hitox, Inc., Sepracor Inc., Garnet
Resources Corporation, HarCor Energy, Inc., Meris Laboratories, Inc., Natures
Elements, Inc. and GeoWaste, Inc., all publicly-held companies, as well as
several private companies.
. . .
Compensation of Directors
Each director of the Company who is not an employee of the Company is
paid an annual fee of $10,000, plus $1,000 for each meeting of the Board
attended (which was increased to $1,500 for meetings after January 1999) and
$500 for each meeting of the Audit Committee and Compensation Committee
attended. In addition, the Company's 1993 Stock Option Plan for Non-Employee
Directors provides for grants of stock options to non-employee directors at such
times, in such amounts and on such vesting terms as the Board may determine.
4
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation of the Company's Chief Executive Officer and the
four other executive officers whose total annual salary and bonus for 1998
exceeded $100,000 (collectively, the "Named Executive Officers") for each of the
last three fiscal years.
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Other Underlying
Annual Options
Compen- (number of All Other
Name and Principal Position Year Salary Bonus(1) sation shares) Compensation(3)
- ----------------------------- ---- -------- -------- ------ ----------- ---------------
James E. McGowan 1998 $300,000 $125,000 (2) 50,000 $ 49,663
President and Chief Executive 1997 268,447 125,000 (2) 150,000 62,103
Officer 1996 178,042 -- (2) -- 17,612
Frederick C. Foley 1998 $180,000 $ 63,000 (2) 25,000 $ 5,287
Senior Vice President, Finance, 1997 152,832 52,000 (2) 60,000 26,425
Chief Financial Officer and 1996 139,182 -- (2) 5,000 2,163
Treasurer
Edward J. Sarkisian(4) 1998 $164,600 $ 33,000 (2) -- $ 4,667
Senior Vice President,
Worlwide Sales, Marketing,
Customer Operations
Jonathan M. Wineberg(4) 1998 $165,400 $ 32,000 (2) 48,000 $ 94,379
Senior Vice President,
Engineering and Product
Development
Joseph E. Smith(5) 1998 $146,900 $ -- (2) 25,000 $147,028
Former Senior Vice President, 1997 129,079 34,000 (2) 75,000 63,334
Worldwide Sales and
Marketing
(1) Except as otherwise noted below, all amounts set forth in this column
constitute performance bonuses.
(2) As to each individual named, the aggregate amounts of personal benefits not
included in the Summary Compensation Table do not exceed the lesser of
either $50,000 or 10% of the total annual salary and bonus reported for the
named executive officer.
(3) For 1998, represents premiums paid by EIS with respect to group term life
insurance for the benefit of the Named Executive Officer, and (i) with
respect to Mr. McGowan, $37,428 of loan forgiveness, and a $2,000 401(k)
matching contribution; (ii) with respect to Mr. Foley, a $2,000 401(k)
matching contribution; (iii) with respect to Mr. Sarkisian, a $2,000 401(k)
matching contribution; (iv) with respect to Mr. Wineberg, $92,379 for
relocation expenses and a $2,000 401(k) matching contribution; and (v) with
respect to Mr. Smith, $55,874 for relocation expenses and $91,154 as
severance.
(4) Mr. Wineberg and Mr. Sarkisian became executive officers of EIS in 1998.
Accordingly, no information is provided for 1996 and 1997.
(5) Mr. Smith joined EIS in 1997. Accordingly, no information is provided
5
for 1996. Mr. Smith resigned from EIS in August 1998.
1998 Option Information
Option Grants in 1998
The following table summarizes certain information regarding options
granted to Named Executive Officers during 1998.
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants Terms (1)
--------------------------------------------------------- --------------------------
Percent of
Total
Shares Options
Subject to Granted to Exercise
Options Employees Price Per Expiration
Name Granted in FY Share Date 5% 10%
- ---- --------- ---------- --------- ----------- -------- --------
James E. McGowan 24,000 4.7% $7.00 1/28/08 $105,654 $267,749
26,000 5.1% 6.28125 4/28/08 102,706 260,278
Frederick C. Foley 12,500 2.5% $7.00 1/28/08 $55,028 $139,452
12,500 2.5% 6.28125 4/28/08 49,378 125,134
Edward J. Sarkisian -- -- -- -- -- --
Jonathan M. Wineberg 11,500 2.3% $7.00 1/28/08 $50,626 $128,296
11,500 2.3% 6.28125 4/28/08 45,428 115,123
25,000 4.9% 2.00 10/22/08 31,445 77,687
Joseph E. Smith 12,500 2.5% $7.00 1/28/08 (2) (2)
12,500 2.5% 6.28125 4/28/08
- -----------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised.
(2) Mr. Smith's options expired upon his resignation from EIS in 1998.
Accordingly, as of December 31, 1998, there was no potential realizable
value of these options.
Option Exercises in 1998
The following table sets forth the number of options exercised in 1998
and the dollar value realized thereon by the Named Executive Officers, along
with the number and dollar value of any options remaining unexercised on
December 31, 1998.
6
Aggregated Option Exercises in
1998 and 1998 Year-End Option Values
Number of Securities
Underlying Unexercised
Options at 1998 Year-End(1)(2)
-------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
James E. McGowan 37,500 162,500
Frederick C. Foley 15,000 70,000
Edward J. Sarkisian 54,750 56,250
Jonathan M. Wineberg 6,750 68,250
Joseph E. Smith -- --
(1) On December 31, 1998, the average of the closing bid and asked prices per
share of Common Stock as reported by the Nasdaq National Market was $1.688.
As of December 31, 1998, none of the Named Executive Officers held any
in-the-money options.
(2) None of the Named Executive Officers exercised options during 1998.
Compensation Committee Report on Executive Compensation
General. The Compensation Committee is responsible for developing the
Company's executive compensation policies and determining the compensation paid
to the Company's Chief Executive Officer and its other executive officers. To
that end, the Compensation Committee has sought to (i) provide sufficient
compensation to attract, motivate and retain the best available executive
officers, (ii) provide additional incentives to them to exert their maximum
efforts toward the Company's success, and (iii) align the executive officers'
interests with the Company's success by making a portion of their pay dependent
upon the Company's performance. The Compensation Committee has used its
discretion to set executive compensation at levels warranted, in its judgment,
by external, internal or individual circumstances.
Executive officer compensation consists of base salary, annual cash
incentive compensation, long-term incentive compensation in the form of stock
options, and various benefits, including medical and tax-deferred savings plans
generally available to the Company's employees.
Base Salary. In determining base salary levels for the Company's
executive officers, the Compensation Committee takes into account the
compensation of companies in the telecommunications and electronics industries
and other comparable companies, individual responsibilities, experience and
performance and specific issues particular to the Company.
Annual Bonus. To provide the Company's executive officers and other key
employees with direct financial incentives to achieve the Company's annual
goals, the Company currently maintains an incentive arrangement for payment of
bonuses, subject to the Company's achievement of certain financial and operating
results and the accomplishment of certain individual performance goals. Target
bonus levels are set at a level competitive with companies in the
telecommunications and electronics industries as well as a broader group of
companies of comparable size and complexity. The Company paid
performance-related bonuses of $125,000 to Mr. McGowan, $63,000 to Mr. Foley,
$33,000 to Mr. Sarkisian, $32,000 to Mr. Wineberg, and $0 to Mr. Smith relating
to fiscal 1998.
Stock Option and Stock Purchase Plans. To provide additional incentives
to its executive officers and employees to exert their maximum efforts toward
the Company's success, and to provide them with an opportunity to
7
acquire a proprietary interest in the Company through ownership of Common Stock,
the Company maintains a stock option plan and a stock purchase plan. During
1998, options to purchase an aggregate of 148,000 shares of Common Stock were
granted under the Company's 1998 Stock Incentive Plan to executive officers of
the Company.
Other Benefits. The Company provides all employees, including executive
officers, with group medical, dental, disability and life insurance on a
non-discriminatory basis. The Company maintains a savings and investment plan
intended to qualify under Section 401(a) of the Internal Revenue Code of 1986
(the "Code") and to permit employee salary reductions for tax-deferred savings
purposes pursuant to Section 401(k) of the Code. Contributions to this plan by
the Company are discretionary, and contributions of approximately $119,300 were
made on behalf of all employees in 1998, including $8,000 on behalf of Named
Executive Officers. The Company also maintains a pretax premium plan, intended
to qualify under Section 125 of the Code and to permit salary reductions for
pretax payment of employee health plan contributions.
Compensation of Chief Executive Officer. Mr. McGowan received total
salary and bonus amounting to $425,000 in 1998 and was awarded options to
purchase 24,000 and 26,000 shares of the Company's Common Stock at exercise
prices of $7.00 and $6.28125, respectively, per share.
The foregoing report on executive compensation has been approved by
Messrs. Jesurum, Klineman and McCall, the members of the Compensation Committee.
Employment, Termination and Change-in-Control Arrangements
The Company is party to an employment arrangement with James McGowan,
its President and Chief Executive Officer and a director of the Company.
Pursuant to this arrangement, the Company will pay Mr. McGowan an annual salary
of $300,000 in 1999, with a possible bonus equal to up to 50% of his annual
salary, assuming the achievement of certain performance targets, and additional
possible bonus amounts if such performance targets are exceeded. In addition,
this arrangement provides that Mr. McGowan will be paid monthly severance at a
rate commensurate with his annual salary and will continue to receive health
care and insurance benefits for a period of one year following the termination
of his employment without cause, or until such time as he obtains full- time
employment, whichever occurs first. Furthermore, pursuant to this arrangement,
the Company extended to Mr. McGowan a $100,000 loan, bearing interest at a rate
of 6% per annum and maturing on February 6, 2000. One twelfth of the original
principal amount of this loan, and all accumulated interest thereon, will be
forgiven at the end of each three-month period commencing on May 7, 1997 and
ending on February 7, 2000, unless Mr. McGowan voluntarily terminates his
employment with the Company, at which point any such forgiveness will cease and
he will be required to pay the remaining principal balance of the loan and
remaining accrued interest thereon at maturity. As of December 31, 1998, there
remained $41,875 outstanding under the loan.
Compensation Committee Interlocks and Insider Participation
Mr. Klineman, a director of the Company and a member of its
Compensation Committee, performs legal and consulting services for the Company
and was paid a retainer of $5,000 per month in consideration of these services,
plus an additional amount for extraordinary services rendered, an aggregate of
$83,000 in respect of services rendered during 1998. The Company believes that
this represented the fair market value of such services and that such services
are provided on terms at least as favorable to the Company as those that could
be obtained from an unaffiliated third party. The Company and Mr. Klineman
terminated this arrangement effective January 1, 1999.
. . .
CERTAIN TRANSACTIONS
In February 1997, the Company made a loan to Mr. McGowan in the amount
of $100,000 bearing interest at a rate of 6% per annum and quarterly amounts are
forgiven and included as compensation to Mr. McGowan over
8
the three year term of the loan. If Mr. McGowan leaves the employ of the Company
prior to the end of the three year term, the balance due at such time must be
repaid in full. As of December 31, 1998, there was $41,875 outstanding under
this loan.
. . .
THE COMPANY'S 1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
On January 28, 1999, subject to stockholder approval, the Board of
Directors of the Company adopted an amendment (the "Amendment") to the Company's
1993 Stock Option Plan for Non-Employee Directors (the "Director Plan") to
increase the number of shares of Common Stock issuable under the Director Plan
from 310,000 shares to 410,000 shares. The reason for the Amendments is to have
additional shares available for future grants under the Director Plan (under
which there are currently 30,000 shares available) to those directors who will
contribute to the future success of the Company.
Terms of the Director Plan
The Director Plan provides for grants of nonstatutory stock options to
purchase shares of Common Stock to non-employee directors of the Company. As of
January 31, 1999, the total number of such persons eligible to receive options
under the Director Plan was four. The grant of options under the Director Plan
is discretionary; therefore, the Company cannot now determine the number of
options to be granted in the future to any particular person. In the event of a
merger, consolidation, reorganization or sale of all or substantially all of the
assets of the Company, the holders of options are treated as if all shares
subject to such stock options had been issued and outstanding prior to such
event. The total number of shares of Common Stock issuable pursuant to options
granted under the Director Plan (subject to adjustment in the event of stock
splits and other similar events) is 310,000. This number would increase to
410,000 upon adoption of the Company's stockholders of the Amendment. As of
January 31, 1999, 42,500 shares had been issued upon exercise of outstanding
options, 217,500 shares were subject to outstanding options at exercise prices
per share ranging from $5.00 to $12.375 (expiring on dates ranging from December
2003 to April 2007). As of January 29,1999, the last reported sale price of the
Company Common Stock on the Nasdaq National Market was $2.188.
The Director Plan is administered by the Compensation Committee of the
Board, whose determinations under the Director Plan are conclusive. The
Compensation Committee has the authority, subject to the terms of the Director
Plan, to: interpret the Director Plan; prescribe, amend and rescind rules and
regulations relating to the Director Plan; and make all other determinations and
take all other actions necessary or advisable for the administration of the
Director Plan. The Compensation Committee also determines (i) the number of
shares of Common Stock covered by options and the dates upon which such options
become exercisable, (ii) the exercise price of options, and (iii) the duration
of options.
The exercise price of each option may be paid, as determined by the
Compensation Committee, in cash or shares of Common Stock having a fair market
value equal to the exercise price. If the total number of shares of Common Stock
subject to options to be granted on a particular date under the Director Plan
exceeds the number of remaining shares available, a pro rata reduction will be
made in the number of shares subject to each such option granted on such date.
Each option will terminate on the tenth anniversary of the date of
grant. Shares obtained upon exercise of an option may not be sold until six
months after the date the option was granted. If an optionee ceases to be a
member of the Board, any options granted to such optionee to the extent not
theretofore exercised will expire three months thereafter (or, if such optionee
ceased to be a member of the Board by reason of his death, six months
thereafter) or, if earlier, on the tenth anniversary of the date of grant;
provided, however, that if the optionee was removed or terminated as a member of
the Board for fraud, dishonesty or intentional misrepresentation in connection
with the optionee's duties as a member of the Board or embezzlement,
misappropriation or conversion of assets or opportunities of the Company or any
of its subsidiaries, any unexercised options held by such optionee will expire
9
forthwith. No option will be transferable by the optionee other than by will or
the laws of descent and distribution, and each option will be exercisable during
the lifetime of the optionee only by such optionee.
The Board may at any time terminate the Director Plan or from time to
time make such modifications or amendments of the Director Plan as it may deem
advisable; provided, however, that the Board may not, without approval by the
affirmative vote of the holders of a majority of the outstanding shares of the
capital stock of the Company entitled to vote thereon, (i) increase the maximum
number of shares as to which options may be granted under the Director Plan or
(ii) change the class of persons eligible to receive options under the Director
Plan; and provided, further, that the Director Plan may not be amended more than
once every six months other than to comport with certain changes in the law. The
Director Plan (but not options granted thereunder) will terminate on February
23, 2003, unless sooner terminated by the Board. No termination, modification or
amendment of the Director Plan may, without the consent of any person then
holding an option, adversely affect the rights of such person under such option.
. . .