SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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.
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
[_] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
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(Name of Registrant as Specified In Its Charter)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Thursday, June 13, 2002
Notice is hereby given that the Annual Meeting of Shareholders of
Integrated Business Systems and Services, Inc., a South Carolina corporation,
will be held at the Company's headquarters, 115 Atrium Way, Suite 228, Columbia,
South Carolina on Thursday, June 13, 2002 at 10:00 a.m. for the following
purposes:
(1) Election of Directors;
(2) Approval of an amendment to the Company's 2001 Stock Incentive Plan;
(3) Ratification of the appointment of Scott McElveen, LLP as the
Company's independent auditors for the fiscal year ending December 31,
2002; and
(4) Transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this Notice.
Only shareholders whose names appeared of record on the books of the
Company on April 29, 2002 will be entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement thereof.
You are cordially invited and urged to attend the Annual Meeting in person,
but if you are unable to do so, please date, sign and promptly return to the
Company's stock transfer agent the enclosed proxy card in the enclosed,
self-addressed, postage-paid envelope. If you attend the Annual Meeting and
desire to revoke your proxy and vote in person, you may do so. In any event, a
proxy may be revoked at any time before it is exercised.
By Order of the Board of Directors,
George E. Mendenhall, Ph.D.
Chief Executive Officer and Chairman of the Board
Columbia, South Carolina
April 30, 2002
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
Suite 228, 115 Atrium Way
Columbia, South Carolina 29223
PROXY STATEMENT
Date, Time and Place of Annual Meeting
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Integrated Business Systems and Services,
Inc. (the "Company") to be used in voting at the Annual Meeting of Shareholders
of the Company to be held for the purposes described in this proxy statement.
The Annual Meeting will be held at the Company's headquarters at 115 Atrium Way,
Suite 228, Columbia, South Carolina, on Thursday, June 13, 2002, at 10:00 a.m.
This proxy statement and the accompanying form of proxy are being mailed to
shareholders commencing on or about May 10, 2002.
Proposals to be Voted Upon
At the Annual Meeting, shareholders will be asked to vote upon the
following proposals:
1. To elect one member to the Board of Directors;
2. To approve an amendment to the Company's 2001 Stock Incentive Plan;
3. To ratify the appointment of Scott McElveen, LLP, as the Company's
independent auditors for the fiscal year ending December 31, 2002; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments of the Annual Meeting.
Record Date
Only holders of record of our common stock at the close of business on
April 29, 2002 (the "Record Date") are entitled to notice of, and will be
entitled to vote at, the Annual Meeting.
Shares Outstanding and Entitled to Vote
The common stock of the Company is entitled to one vote per share on each
matter that is presented for shareholder approval at the Annual Meeting. As of
the close of business on the Record Date, there were 17,829,811 issued and
outstanding shares of the common stock held by approximately 67 shareholders of
record. All of those shares are eligible to be voted on each matter currently
scheduled to come before the Annual Meeting, and there are no other outstanding
shares of capital stock of the Company eligible to be voted at the Annual
Meeting. Cumulative voting for the election of directors is not available under
the Company's Articles of Incorporation. Consequently, each share of common
stock is entitled to one vote on each matter to be voted upon at the Annual
Meeting.
Voting and Revocation of Proxies
Shareholders are requested to complete, date and sign the accompanying form
of proxy and promptly return it in the accompanying envelope or otherwise mail
it to the Company. All proxies that are properly executed and returned, and that
are not revoked, will be voted at the Annual Meeting in accordance with the
instructions indicated on the proxies. If no instructions are indicated on a
proxy, that proxy will be voted FOR each of the proposals described in this
proxy statement, including election of the director nominee set forth in this
proxy statement.
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The Board of Directors does not presently intend to bring any business
before the Annual Meeting other than the specific Company proposals referred to
in this proxy statement and specified in the accompanying Notice of the Annual
Meeting. So far as is known to the Board of Directors, no other matters are to
be brought before the Annual Meeting. If any other business properly comes
before the Annual Meeting, it is intended that proxies, in the form accompanying
this proxy statement, will be voted on such matters in accordance with the
judgment of the persons voting such proxies.
Any shareholder who has signed the form of proxy that accompanies this
proxy statement may revoke it at any time before it is voted at the Annual
Meeting by (i) delivering to the Secretary of the Company a written notice,
bearing a date later than the date of execution of the form of proxy, stating
that such proxy is revoked, (ii) signing and so delivering a form of proxy
relating to the same shares and bearing a later date prior to the vote at the
Annual Meeting, or (iii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not, by itself, revoke a duly
executed proxy). Whether or not you plan to attend the Annual Meeting, you are
urged to sign and return the form of proxy that accompanies this proxy
statement.
Quorum
The presence in person or by proxy of the holders of a majority of the
outstanding shares of common stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting or at any adjournment of
the Annual Meeting. Directions to withhold authority to vote for directors,
abstentions, and broker non-votes will be considered shares present in person or
by proxy and entitled to vote, and therefore, will be counted for purposes of
determining whether there is a quorum at the Annual Meeting. (A broker non-vote
occurs when a broker or other nominee holding shares for a beneficial owner
votes on one proposal, but does not vote on another proposal because the broker
or nominee does not have the discretionary voting power and has not received
voting instructions from the beneficial owner.)
If a quorum is not present or represented at the Annual Meeting, the
shareholders entitled to vote, present in person or represented by proxy, have
the power to adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present or represented.
Directors, officers and regular employees of the Company may solicit proxies for
the reconvened meeting in person or by mail, telephone or telegraph. At any such
reconvened meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
scheduled.
Vote Required
Election of Directors
Under the Company's bylaws, directors are elected by plurality vote. This
means that the director nominees receiving the greatest number of votes cast
(although not necessarily a majority of the votes cast) in the election of
directors at the meeting are elected to the Board of Directors. Accordingly,
directions to withhold authority, abstentions, and broker non-votes will have no
effect on the outcome of the vote. The Articles of Incorporation of the Company
do not allow for cumulative voting in the election of directors.
Approval of an Amendment to the Company's 2001 Stock Incentive Plan and
Ratification of Auditor's Proposal
Approval by the affirmative vote of the holders of a majority of the shares
of common stock present in person or represented by proxy at the Annual Meeting
and entitled to vote is required to approve each of the Amendment to the
Company's 2001 Stock Incentive Plan proposal, and the ratification of auditors
proposal. Accordingly, abstentions will have the same effect as a vote against
such proposals. Broker non-votes will be considered shares present but not
entitled to vote and, therefore, will have no effect on the outcome of the vote.
Approval of the Amendment to the Company's 2001 Stock Incentive Plan proposal is
required pursuant
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to the Internal Revenue Code.
Solicitation of Proxies and Expenses
The Company will bear the cost of preparing, assembling and mailing this
proxy statement and the accompanying form of proxy to shareholders. In addition
to solicitation by mail, the directors, officers and employees of the Company
may solicit proxies from shareholders by telephone, telegram, letter, facsimile
or in person. No compensation will be paid for such solicitations. The Company
intends to request brokers, banking institutions, custodians, nominees,
fiduciaries and other record holders to forward copies of this proxy statement
and the accompanying materials to persons for whom they hold shares of common
stock and to request authority for the exercise of proxies. In such cases, the
Company, upon the request of the record holders, will reimburse such holders for
their reasonable forwarding expenses.
Description of Proposals
PROPOSAL ONE
ELECTION OF DIRECTORS
One director is to be elected at the Annual Meeting. The Company's
Articles of Incorporation provide for a classified Board of Directors so that,
as nearly as possible, one-third of the members of the Board of Directors are
elected at each annual meeting to serve until the third annual shareholder's
meeting after their election. The Board of Directors is currently comprised of
seven director seats that are divided into three classes with staggered terms.
At the date of the Annual Meeting, the Board of Directors will consist of three
directors, with four vacancies. One director currently serves in the class of
two directors with a term expiring at the Annual Meeting. A vacancy was created
in this class upon the voluntary withdrawal from board membership by Mr. Harry
P. Langley in October 2001. This vacancy has not yet been filled by the Board of
Directors. One director currently serves in the class of three directors with a
term expiring at the annual meeting in 2003. Three vacancies were created in
this class upon the voluntary withdrawals from board membership by
Mr. Roger A. Kazanowski in May 2002, Mr. R. Michael Campbell in January 2002 and
Russell King in September 2001. The vacancy created by Mr. King's withdrawal was
filled by the Board's concurrent appointment of Mr. Roger A. Kazanowski as a
director. The two vacancies in this class have not yet been filled by the Board
of Directors. One director currently serves in the class of two directors with
a term expiring at the Annual Meeting in 2004. A vacancy was created in this
class at the 2001 annual meeting of shareholders at which the Board nominated
only one person for election to this class. The Board has not yet filled this
vacancy.
The current term of one member of the Board of Directors, Carl Joseph
Berger, Jr. will expire at the Annual Meeting. The Board of Directors has
nominated Mr. Berger for election as a director at the Annual Meeting for a term
expiring at the third annual meeting of shareholders after the date of his
election. For additional information on Mr. Berger, please see the information
set forth elsewhere in this proxy statement under the heading
"Management - Directors and Executive Officers."
Because the Board of Directors is currently composed of seven director
seats, with four vacancies, the nomination of only one person for election to
the class of two director seats with a term expiring at the Annual Meeting will
continue the vacancy in that class of directors. The Board of Directors has
indicated that it does not expect to have that vacancy or either of the
other three existing vacancies filled at the Annual Meeting. Consequently,
immediately following the Annual Meeting, the Board of Directors will continue
to consist of three members. Pursuant to the Company's bylaws and applicable
South Carolina corporate law, the three directors who will serve following the
Annual Meeting will have the authority prior to the next annual shareholder's
meeting to elect individuals to fill one or more of the four vacancies that will
exist on the Board of Directors. Management is currently in the process of
identifying suitable candidates for election to fill such vacancies.
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The persons named in the accompanying proxy have been designated by the
Board of Directors, and unless authority is specifically withheld, they intend
to vote for the election of the nominee listed above. A shareholder
executing the accompanying proxy may vote for the nominee or may withhold such
vote from the nominee. In each case where the shareholder has appropriately
specified how the proxy is to be voted, it will be voted in accordance with such
shareholder's specifications. Although it is not contemplated that the nominee
will become unable to serve prior to the Annual Meeting, the persons
named on the enclosed proxy will have the authority to vote for the election of
another person in accordance with their best judgment.
The persons named in the form of proxy will vote the proxy as specified. If
no specification is made, the proxy will be voted "for" the election of the
nominee listed above.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE COMPANY'S 2001 STOCK INCENTIVE PLAN
General
On April 12, 2002, the Board of Directors approved an amendment (the
"Amendment") to the Integrated Business Systems and Services, Inc. 2001 Stock
Incentive Plan (the "Stock Plan"), subject to the approval of the Amendment by
the shareholders at the Annual Meeting. The Amendment increases the number of
shares of common stock that may be issued under the Stock Plan from 600,000
shares to 1,200,000 shares. The increase in such number of issuable shares is
expected to be sufficient for the remainder of the term of the Stock Plan,
thereby removing the need for any future shareholder approval of the number of
shares issuable under the Stock Plan.
The Board of Directors approved the Amendment to be effective April 12,
2002. The approval of the Amendment requires the affirmative vote of the holders
of a majority of the shares of common stock present or represented by properly
executed and delivered proxies at the Annual Meeting. Abstentions and shares
held in street name voted as to any matter at the Annual Meeting will be
included in determining the number of votes present or represented at the Annual
Meeting. If the Amendment is not approved by the shareholders, the Stock Plan
will remain in effect without the Amendment. The following discussion of the
Stock Plan, as amended by the proposed Amendment, is qualified in its entirety
by reference to the Stock Plan. The Company will provide promptly, upon request
and without charge, a copy of the full text of the Stock Plan, as amended, to
each shareholder to whom a copy of this proxy statement is delivered. Requests
should be directed to: Ms. Sharon R. Gambrell, Executive Assistant, Integrated
Business Systems and Services, Inc., 115 Atrium Way, Suite 228, Columbia, South
Carolina 29223, telephone: (803) 736-5595.
Purpose
The Stock Plan was initially approved by the shareholders of the Company to
be effective as of February 23, 2001. The Stock Plan is intended to provide the
Company with maximum flexibility to meet the evolving needs of the Company in
providing stock-based incentives and rewards to officers, directors and
employees of the Company, and to consultants and advisors to the Company who
are and have been in a position to contribute materially to improving the
Company's profits. The enhanced employment incentives available through the
Stock Plan are expected to promote the interests of the Company and its
shareholders by strengthening the Company's ability to attract and retain key
officers and employees. Through the operation of the Stock Plan, such present
and future officers and employees may be encouraged to acquire, or to increase
their acquisition of, common stock, thus maintaining their personal and
proprietary interests in the Company's continued success and progress.
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Administration
The Board of Directors has the ultimate authority to oversee and carry out
the provisions of the Stock Plan. The Board of Directors has designated the
Board's existing Compensation and Human Resources Committee (the "Committee") to
assume such duties and any other duties as are contemplated for any committee so
designated by the Board of Directors under the terms of the Stock Plan.
Consequently, until otherwise directed by the Board of Directors, the Committee
will be responsible to the Board for the operation of the Stock Plan and will
make recommendations to the Board with respect to participation in the Stock
Plan by officers, directors and employees of, and consultants and advisors to,
the Company, and with respect to the extent of that participation. During 2001
the Committee was composed of Mr. Carl Joseph Berger, Jr., and Mr. Roger A.
Kazanowski. The interpretation and construction by the Committee of any
provisions of the Stock Plan or of any award granted under the Stock Plan are
final. All awards made under the Stock Plan are evidenced by written agreements
between the Company and the participant.
Operation
The Stock Plan provides for the grant of incentive stock options ("ISOs"),
nonqualified stock options ("NSOs"), stock appreciation rights ("SARs") and
restricted stock awards ("Restricted Stock"). The Stock Plan is effective for a
term of ten years after the date of its adoption by the Board of Directors
(February 23, 2001). As amended by the proposed Amendment, a maximum of
1,200,000 shares of the Company's common stock may be issued pursuant to awards
granted under the Stock Plan, and the Board of Directors has reserved 1,200,000
shares for this purpose. The number of shares reserved for issuance under the
Stock Plan will be adjusted in the event of an adjustment in the capital stock
structure of the Company affecting the common stock (in connection with a
merger, consolidation, recapitalization, reclassification, combination, stock
dividend, stock split, spin-off, spin-out, or other distribution of assets
materially affecting the price of the common stock, or any assumption or
conversion to the Stock Plan of an acquired company's outstanding option
grants), and the Committee is authorized to adjust the terms of awards under the
Stock Plan in the event of a change in the capital stock in order to prevent
dilution or enlargement of awards under the Stock Plan. If the proposed
Amendment is approved by the shareholders at the Annual Meeting, the Company
intends to file with the Securities and Exchange Commission a registration
statement on Form S-8 with respect to the Stock Plan in order to register under
the Securities Act of 1933 the shares of common stock reserved under the Plan.
All obligations of the Company under the Stock Plan and under any award
granted under the Stock Plan will be binding upon any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase of all or substantially all of the business or assets of the Company,
or a merger, consolidation or otherwise. Unless otherwise specifically
prohibited by the terms of any award or under any applicable laws, rules or
regulations, upon the occurrence of a change in control of the Company, each
then outstanding option and SAR that is not otherwise exercisable will become
immediately and fully exercisable, and any restrictions imposed on Restricted
Stock will lapse. Under the Stock Plan, events constituting a change in control
include the acquisition by any third party or group of 25 percent or more of the
outstanding common stock; the change over a two-year period of the makeup of a
majority of the members of the Board; a tender offer to acquire control of the
outstanding common stock; shareholder approval of the liquidation of the
Company; the sale of substantially all of the assets of the Company; or the
merger, consolidation or reorganization of the Company where the voting
securities of the Company prior to such event do not continue to constitute at
least 75 percent of the voting securities of the surviving entity.
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Eligibility
Each officer, director and employee of the Company or any of its
subsidiaries is eligible to participate in the Stock Plan. Awards under the
Stock Plan may also be granted from time to time to persons serving as
consultants or advisors to the Company or any of its subsidiaries. Awards that
are granted at the same or at different times under the Stock Plan are not
required to contain similar provisions. The Committee selects the individuals
for participation in the Stock Plan. Members of the Committee are not restricted
under the terms of the Stock Plan from participating in the Stock Plan while
serving as members of the Committee. On the date of this proxy statement, four
directors (including one non-employee director), approximately 40 employees
and three consultants and advisors were eligible to participate in the Stock
Plan.
No awards may be granted under the Stock Plan after February 23, 2011. The
Board may terminate the Stock Plan sooner without further action by the
shareholders. The Board also may amend the Stock Plan without shareholder
approval, except that no amendment that increases the number of shares of common
stock that may be issued under the Stock Plan or changes the class of
individuals who may be selected to participate in the Stock Plan will become
effective until such amendment is approved by the shareholders.
Stock Options
The Stock Plan permits the granting of non-transferable ISOs that qualify
as incentive stock options under Section 422A(b) of the Internal Revenue Code
and non-transferable NSOs that do not so qualify. The option exercise price of
each option will be determined by the Committee in its sole discretion, but may
not be less than the fair market value of the common stock on the date the
option is granted in the case of ISOs and may not be less than 50 percent of
such fair market value in the case of NSOs. On April 26, 2002, the reported last
sale price of the common stock on the Over-the-Counter Bulletin Board was $0.80
per share.
The term of each option is fixed by the Committee, but may not exceed ten
years from the date of grant. The Committee determines at what time or times
each option may be exercised. Options may be made exercisable in installments,
and the exercisability of options may be accelerated by the Committee. The
exercise price of options granted under the Stock Plan may be paid by cash or
check, by a note payable to the Company secured by the shares acquired upon
exercise, by "cashless exercise" whereby the number of shares actually issued
upon exercise is reduced by a formula set forth in the Stock Plan, by delivery
of shares of common stock or by any combination of these forms of payment.
Except as otherwise provided below, upon termination of a participant's
employment, an option terminates upon the earliest to occur of the full exercise
of the option, the expiration of the option by its terms, and the date three
months following the date of employment termination. Should termination of
employment (a) result from the death or permanent and total disability of a
participant, such three-month termination period extends to one year, or (b) be
for cause, the option terminates on the date of employment termination. The
employment of a consultant or advisor is deemed terminated upon the Company's
notice to the participant that the Company will no longer transact business with
the consultant or advisor.
To qualify as an ISO, an option may only be granted to an employee of the
Company. Consequently, non-employee directors and consultants and advisors to
the Company are not eligible to be granted ISOs. In addition, to qualify as an
ISO, the option must meet additional federal tax requirements, including limits
on the value of shares subject to ISOs first exercisable during any calendar
year by any participants, and a shorter exercise period and higher minimum
exercise price in the case of certain large shareholders. To the extent these
special requirements are changed or eliminated, the Stock Plan will be amended
accordingly.
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Stock Appreciation Rights
The Committee may also grant non-transferrable rights, alone or in
conjunction with options, entitling the holder, upon exercise, to receive an
amount in any combination of cash or shares of common stock (in the sole
discretion of the Committee) equal to the increase since the date of grant in
the fair market value of the shares covered by such SAR over the SAR price for
such shares. The SAR price is established at the date of grant of the SAR and is
determined by the Committee in its sole discretion, except that the SAR price
may not be less than the fair market value of the common stock on the date the
SAR is granted in the case of an SAR issued in tandem with an ISO, and may not
be less than 50 percent of such fair market value in the case of all other SARs.
The restrictions applicable to the exercise of SARs under the Stock Plan in the
context of termination of employment with the Company are the same as those
restrictions applicable to the exercise of stock options under the Stock Plan as
discussed above.
Restricted Stock Awards
The Committee may also award shares of common stock subject to such
conditions and restrictions, if any, as the Committee may determine. The
purchase price, if any, of such shares of "Restricted Stock" is determined by
the Committee. Recipients of Restricted Stock may be required to enter into a
Restricted Stock award agreement with the Company in such form as the Committee
may determine, setting forth the restrictions to which the shares are subject
and the date or dates on which the restrictions will lapse. The Committee may at
any time waive such restrictions or accelerate such dates. Shares of Restricted
Stock are generally non-transferable. If a participant who holds shares of
Restricted Stock terminates employment for any reason (including death) prior to
the lapse or waiver of any restrictions, then the shares are forfeited to the
Company for no payment. Prior to the lapse of any restrictions on shares of
Restricted Stock, the participant has all rights of a shareholder with respect
to the shares, including voting and dividend rights, subject only to the
conditions and restrictions generally applicable to the Restricted Stock or
specifically set forth in any Restricted Stock award agreement.
Current Awards
Set forth below are the number of options that have been granted through
the date of this proxy statement under the Stock Plan to the indicated
individuals and groups.
Number of Shares
Underlying
Name and Position Options Granted
Harry P. Langley
Former President and Chief Executive Officer ......... 10,000
George E. Mendenhall
Chief Executive Officer and Chairman of the Board .... 58,722
Stuart E. Massey
Executive Vice President and Chief Technology Officer. 58,722
All current executive officers, as a group
(including the persons named above) .................. 241,847
All current directors and director nominees
who are not executive officers, as a group ........... 57,000
All employees, including all current officers
who are not executive officers, as a group ........... 90,000
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Federal Income Tax Consequences
The following discussion is intended only as a brief summary of the federal
income tax rules currently in effect that are generally relevant to stock
incentive awards. The laws governing the tax aspects of awards are highly
technical and such laws are subject to change.
Incentive Stock Options: For regular income tax purposes, no taxable income
is realized by the optionee upon the grant or exercise of an ISO. The optionee
must be an employee of the Company both at the time of grant of the ISO and at
the time of its exercise. As long as no disposition of shares issued upon
exercise of the ISO is made by the optionee within two years from the date of
grant or within one year after the transfer of such shares to the optionee, then
(a) upon sale of such shares, any amount realized in excess of the option price
will be taxed to the optionee as a long-term capital gain, and any loss
sustained will be a long-term capital loss, and (b) no deductions will be
allowed to the Company for federal income tax purposes. However, the exercise of
an ISO will give rise to an item of tax preference that may result in
alternative minimum tax liability for the optionee.
If shares acquired upon the exercise of an ISO are disposed of prior to the
expiration of the holding periods described above (generally referred to as a
"disqualifying disposition"), (a) the optionee will realize ordinary income in
the year of disposition in an amount equal to the excess (if any) of the fair
market value of the shares at exercise (or, if less, the amount realized on a
sale of such shares) over the applicable exercise price, and (b) the Company
will be entitled to deduct such amount. Any further gain realized will be taxed
as short-term or long-term capital gain and will not result in any deduction by
the Company. Special rules apply when all or a portion of the exercise price of
the ISO is paid by tendering shares of common stock, and special rules may also
apply where the optionee is subject to Section 16(b) of the Securities Exchange
Act of 1934. A disqualifying disposition will eliminate the item of tax
preference associated with the exercise of the ISO if it occurs in the same
taxable year as the exercise of the ISO.
Nonqualified Stock Options: No income is realized by the optionee at the
time an NSO is granted. Generally, (a) at exercise, ordinary income is realized
by the optionee in an amount equal to the difference between the option price
and the fair market value of the shares on the date of exercise, and the Company
receives a tax deduction for the same amount, and (b) at disposition,
appreciation or depreciation after the date of the exercise is treated as either
short-term or long-term capital gain or loss, depending on how long the shares
have been held. Special rules could apply in some situations if the optionee is
subject to Section 16(b) of the Securities Exchange Act of 1934.
Stock Appreciation Rights: No income is realized by a participant in
connection with the grant of an SAR. When the SAR is exercised, or when a
participant receives payment in cancellation of an SAR, the participant
generally is required to include as taxable ordinary income in the year of such
exercise or payment an amount equal to the amount of cash received and the fair
market value of any stock received. The Company will generally be entitled at
the same time to a deduction for federal income tax purposes equal to the amount
includable as ordinary income by such participant.
Restricted Stock Awards: The recipient of Restricted Stock generally
realizes ordinary income equal to the fair market value of the stock at the time
the stock is no longer subject to forfeiture, minus any amount paid for such
stock. The Company receives a corresponding deduction. However, unless
prohibited by any award agreement, a recipient may elect under Section 83(b) of
the Internal Revenue Code to realize ordinary income on the date of issuance
equal to the fair market value of the shares of Restricted Stock at that time
(measured as if the shares were unrestricted and could be sold immediately),
minus any amount paid for such stock. If the shares are forfeited, the recipient
is not entitled to any deduction, refund or loss for tax purposes with respect
to the forfeited shares. After the forfeiture period has expired, the holding
period to determine
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whether the recipient, upon sale of the shares, has long-term or short-term
capital gain or loss begins when the restriction period expires (or upon earlier
issuance of the shares, if the recipient has elected immediate recognition of
income under Section 83(b) of the Internal Revenue Code). If Restricted Stock is
received in connection with another award under the Stock Plan, the income and
the deduction, if any, associated with such award may be deferred in accordance
with the rules described above for Restricted Stock.
The foregoing discussion is provided for the information of shareholders
and is not a complete description of the federal tax consequences in respect of
transactions under the Stock Plan, nor does it describe state or local tax
consequences.
The Board of Directors recommends a vote "for" approval of the Amendment to
the Company's 2001 Stock Incentive Plan. The persons named in the accompanying
form of proxy will vote the proxy as specified. If no specification is made, the
proxy will be voted "for" the approval of the Amendment.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Scott McElveen, LLP, as
independent auditors to make an examination of the accounts of the Company for
the fiscal year ending December 31, 2002, subject to shareholder ratification.
If the shareholders do not ratify this appointment, other certified public
accountants will be considered by the Board of Directors.
The Board of Directors recommends a vote "for" this proposal. The persons
named in the form of proxy will vote the proxy as specified. If no specification
is made, the proxy will be voted "for" the ratification of the Company's
independent auditors.
A representative of Scott McElveen, LLP is expected to be in attendance at
the Annual Meeting and will have the opportunity to make a statement and be
available to respond to appropriate questions.
OTHER BUSINESS
The Board of Directors of the Company knows of no other matter to come
before the Annual Meeting. However, if any matter requiring a vote of the
shareholders should arise, it is the intention of the persons named in the
enclosed proxy to vote such proxy in accordance with their best judgment.
PROPOSALS FOR 2003 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2003 Annual Meeting
of Shareholders must be received by the Company by January 1, 2003 for possible
inclusion in the proxy material relating to such meeting.
MANAGEMENT
Directors and Executive Officers
Set forth below is the age and certain biographical information with
respect to each of the Company's directors and executive officers.
9
Director Nominee for the Term Expiring in 2005:
Carl Joseph Berger, Jr., 66, retired in 1997 from Springs Industries, Inc.,
a New York Stock Exchange-listed manufacturer and marketer of home furnishings
and specialty fabrics ("Springs"), after serving for eight years as Corporate
Director for Electronic Data Interchange. During his thirty years with Springs,
Mr. Berger served the company in various positions, including Director of
Distribution. Prior to his service with Springs, he worked in various positions
with Milliken and Company and M. Lowenstein Corporation, both of which are major
textile manufacturers and marketers. Mr. Berger received a master's degree in
Business Administration from Winthrop University and a Bachelor's degree from
the University of Georgia. He has served on numerous boards and committees,
including the District Three School Board in Rock Hill, South Carolina, where he
also served for ten years as Treasurer. Mr. Berger has been a director of the
Company since June 1998.
Director Whose Term Expires in 2004:
George E. Mendenhall, Ph.D., 64, has served as Chairman of the Board and
Chief Executive Officer since September 2001. Prior to that time, he had served
as Vice President of Application Development since January 1998 and as Executive
Vice President since May 1995. He initially became an employee of the Company in
February 1994, serving as the Director of Industrial Consulting. He has served
as a director of the Company since May 1995. Dr. Mendenhall's responsibilities
include the general and active management of the business of the Company and
seeing that all orders and resolutions of the Board of Directors are carried
into effect. He also oversees the day-to-day management of the Synapse system
business unit. Dr. Mendenhall received a Bachelor of Science degree in
Economics from Manchester College in 1960 and a masters degree and a Ph.D. in
Economics from Indiana University in 1968 and 1978, respectively. Dr. Mendenhall
has conducted academic research and taught economics and other courses at
Indiana University and Indiana Institute of Technology. In addition, he has
published articles concerning research and evaluation techniques, and has been
quoted in such periodicals as Computer World and Industry Week. Before joining
the Company, Dr. Mendenhall provided consulting services and computer systems to
various large manufacturing companies on an independent basis and, from 1990
through February 1994, provided consulting services to the Company. From 1984
until 1989, Dr. Mendenhall was the President of Synergistic Business
Infrastructures Corporation ("SBI"), SBI was a computer systems integrator based
in Fort Wayne, Indiana that specialized, among other things, in the
conceptualization, design and implementation of manufacturing shop floor
systems, data collection systems and material tracking systems.
Director Whose Term Expires in 2003:
Stuart E. Massey, 42, has served as Executive Vice President of the Company
since September 2001 and as a director of the Company since April of 1991. In
April of 2002, Mr. Massey's title was modified to Executive Vice President and
Chief Technology Officer. Prior to that time, he had served as Vice President of
Engineering.
10
Mr. Massey also serves as the Company's Secretary. His responsibilities include
the day-to-day management and coordination of large projects, including the
continuing maintenance of the Synapse software configuration tool. Mr. Massey
received a Bachelor of Science degree in Electrical and Computer Engineering
from the University of South Carolina in 1986. Before joining the Company, Mr.
Massey managed the implementation of an inter-bank financial transaction switch
for automated teller machine and point-of-sale systems and assisted in the
design of financial transaction processing software products for Applied
Communications, Inc., among other things. Mr. Massey's experience in the
industrial automation industry includes the design of a variety of computer
control systems, such as airport lighting, industrial machine tool control,
inventory control and shop floor control systems.
Other Executive Officers
William S. McMaster, 44, has served as the Company's Chief Financial
Officer since August 2000 and as the Company's General Counsel since May 2000.
His responsibilities include overseeing the Company's financial reporting,
internal controls, investor relations, treasury and legal compliance functions.
Additionally, he coordinates all capital raising activities as well as any
mergers, acquisitions or similar transactions. Prior to joining the Company, he
was a partner in the law firm of Nexsen Pruet Jacobs & Pollard, LLP in Columbia,
South Carolina where he was the team leader of the securities practice group for
the firm's publicly traded clients. He continues to hold an Of Counsel position
with Nexsen Pruet. Mr. McMaster has over seventeen years of experience in
representing publicly traded companies in the areas of corporate finance,
securities regulation, mergers and acquisitions, and employee benefits. Before
joining Nexsen Pruet in 1989, Mr. McMaster practiced securities law at the law
firm of Vinson & Elkins, LLP in Houston, Texas. Prior to receiving his law
degree from the University of Virginia in 1985, he worked for two years with
PricewaterhouseCoopers in Washington, D.C. He graduated summa cum laude from
Duke University in 1980 with a degree in accounting and business administration.
He became a Certified Public Accountant in 1982 and was admitted to the Texas
State Bar in 1985 and the South Carolina Bar in 1989. He is past Chairman of the
South Carolina Bar Section on Corporations, Banking and Securities.
Donald R. Futch, 51, has served as Vice President of Business Development
since April 13, 1999. Prior to that date, he served as Vice President of
Operations since joining the Company in January 1998. Mr. Futch is responsible
for marketing, sales and establishing strategic relationships with business
partners and distribution channels. Mr. Futch received a masters degree in
business administration with an emphasis in marketing research from the
University of South Carolina in 1974. From October 1994 until he joined the
Company, Mr. Futch served as Chief Information Officer for Telequest
Corporation. Mr. Futch was awarded a patent for the creation of a
telecommunications-based home banking system in August 1997. From May 1992 until
joining Telequest Corporation in October 1994, Mr. Futch served as Vice
President of Association Membership Services, Inc. (d/b/a Electronic Merchant
Services), where he served primarily as an electronic payments system integrator
to the hotel industry. From January 1983 through April 1992, Mr. Futch was a
Technical Consultant for AT&T.
James V. Hopkins, 50, has served as Vice President of Operations since
April 13, 1999. Prior to his promotion to Vice President, he served as
senior-account-manager since joining the Company in October 1995. Mr. Hopkins is
responsible for customer related projects, including project management, account
management, programming, quality assurance, training and documentation. From
1993 until he joined the Company, Mr. Hopkins served as Vice President of
Association Membership Services, Inc. (d/b/a Electronic Merchant Services).
Prior to Mr. Hopkins' employment with Electronic Merchant Services, he served
from 1983 to 1993 as Director of Operations for the Division of Computing and
Information Technology, a large-scale service bureau at Clemson University.
11
Board Meetings and Committees
During 2001, the Board of Directors of the Company met as a Board or acted
pursuant to unanimous written consent a total of six times. No director attended
fewer than 75 percent of the total of such Board meetings and the meetings of
the committees upon which the director served.
Pursuant to the bylaws of the Company, the Board of Directors has
established an Audit and Risk Management Committee, and a Compensation and Human
Resources Committee. The Board of Directors has not established a separate
committee to perform the functions traditionally associated with a nominating
committee. Such functions are currently performed by the Board of Directors
acting as a whole. The Board of Directors will consider nominees recommended by
the shareholders for election as directors at any annual meeting of the Company,
provided the nomination is made in writing, properly identifies the shareholder
making the nomination as a shareholder of record entitled to vote at such
meeting, includes the consent of the nominee to serve, if elected, the
representation of the nominating shareholder to appear in person or by proxy to
nominate the identified nominee, provides pertinent information concerning the
nominee's background, experience and any arrangement or understanding between
the nominating shareholder and the nominee pursuant to which the nomination is
made, and is delivered to the Secretary of the Company no later than ninety days
prior to the annual meeting, unless the Company notifies the shareholders
otherwise.
During 2001, the Audit and Risk Management Committee was composed
of Messrs. Berger, Kazanowski and King. The functions of the Audit and Risk
Management Committee include recommending to the Board of Directors the
retention of independent auditors, reviewing the scope of the annual audit
undertaken by the Company's independent auditors and the progress and results
of their work, and reviewing the financial statements of the Company and its
internal accounting and auditing procedures. This committee met a total of four
times during 2001.
During 2001, the Compensation and Human Resources Committee was composed of
Messrs. Berger, Kazanowski and King. The functions of the Compensation and Human
Resources Committee include reviewing and approving executive compensation
policies and practices, reviewing salaries and bonuses for certain officers of
the Company, administrating the Company's stock option and incentive plans,
making recommendations to the Board with respect to the participation in such
plans by directors, officers and employees of, and consultants to the Company
and the extent of that participation, and considering such other matters as may
from time to time be referred to the Compensation and Human Resources Committee
by the Board of Directors. No directors of the Company who are also executive
officers of the Company participate in the deliberations by such committee
concerning the compensation of such executive officers. This committee met a
total of four times during 2001.
MANAGEMENT COMPENSATION
Executive Compensation
The following table sets forth a summary of the compensation earned during
each of the three most recently completed fiscal years by the Company's
President and Chief Executive Officer, and the Company's four other most highly
compensated executive officers (collectively, the "Named Executive Officers").
12
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
------------------------------ ------------------
Common Stock
Fiscal Underlying
Name and Principal Position Year Salary(1) Bonus Options(2)
- --------------------------- ------- -------- ------- ------------------
George E. Mendenhall, Ph.D. 2001 132,611 - 0 - 10,000
Chief Executive Officer and Chairman 2000 126,083 21,750 35,000
of the Board of Directors 1999 70,000 - 0 - 50,000
Stuart E. Massey 2001 132,611 - 0 - 10,000
Executive Vice President and 2000 126,083 21,750 42,000
Chief Technology Officer 1999 70,000 - 0 - 50,000
Harry P. Langley(3) 2001 $135,111 - 0 - 100,000
Former Chairman of the Board, 2000 127,833 $42,800 47,000
President and Chief Executive Officer 1999 70,000 - 0 - 50,000
William S. McMaster 2001 208,333 - 0 - 10,000
Chief Financial Officer and 2000 93,750 - 0 - 100,000
General Counsel
Donald R. Futch 2001 115,556 - 0 - 10,000
Vice President of Business Development 2000 118,750 19,500 40,500
1999 75,000 - 0 - 50,000
(1) Effective September 1, 2001, each of the Named Executive Officers in the
table above voluntarily elected to defer a portion of the cash compensation
paid to them. As of December 31, 2001, Dr. Mendenhall and Messrs. Langley,
Massey, McMaster and Futch had deferred cash compensation payable to them
in the amounts of $16,889, $16,889, $16,889, $41,667 and $14,445,
respectively. See "Employment Contracts."
(2) Amount represents shares of common stock underlying options granted during
the indicated fiscal year.
(3) Effective October 15, 2001, Mr. Langley withdrew as an officer of the
Company. Of the salary amount reflected in the table, $16,888 represents
payments to Mr. Langley as part of his severance arrangement with the
Company. All of the options reflected for 2001 for Mr. Langley were granted
as part of his severance arrangement with the Company.
Director Compensation
The directors of the Company who are executive officers of the Company are
not separately compensated for serving as directors of the Company. All
directors of the Company are reimbursed by the Company for all out-of-pocket
expenses reasonably incurred by them in the discharge of their duties as
directors, including out-of-pocket expenses incurred in attending meetings of
the Board of Directors and its committees. Non-employee directors receive
discretionary annual grants of stock options. During the fiscal year ended
December 31, 2001, Mr. Berger received stock options for the purchase of 18,000
shares of the Company's common stock. Directors are granted additional options
for service as chair and co-chair of the committees on which they serve. The
exercise prices are equal to the closing sales price of the common stock on the
date of option grant. The option term is ten years with 50% vesting on the date
six months from the effective date of the grant and 50% on the one year
anniversary of the effective date of the grant.
13
Option Grants
The following table sets forth certain information with respect to options
to purchase common stock that were granted during the fiscal year ended December
31, 2001 to each of the Named Executive Officers.
OPTION GRANTS IN 2001
Individual Grants
Percent of Total
Number of Options Granted to
Securities Employees Exercise
Underlying Options In 2001 Price Expiration
Name Granted Classification Per Share Date
------------------------------------- ------------------- ------------------ --------- ----------
George E. Mendenhall, Ph.D. 10,000 5.75% 3.41 11/11/11
Stuart E. Massey 10,000 5.75% 3.41 11/11/11
Harry P. Langley 100,000 57.50% $ 1.80 10/15/06
William S. McMaster 10,000 5.75% 3.41 11/11/11
Donald R. Futch 10,000 5.75% 3.41 11/11/11
It is important to note that stock options have value to their recipients,
including the listed executive officers, only if the stock price advances beyond
the grant date price shown in the table during the effective option period. All
awards in the preceding table, except for the awards to Mr. Langley, were made
pursuant to the Company's 2001 Stock Incentive Plan. Under this plan, the
exercise price per share must be not less than the fair market value of a share
of the common stock on the date the stock option is granted. The grants provide
that the options may not be exercised during the first six months after the date
of grant.
Option Exercises and Fiscal Year-End Option Values
The following table sets forth certain information with respect to
unexercised options held by the Named Executive Officers at December 31, 2001.
None of the Named Executive Officers exercised any options or warrants during
2001.
- ------------------------------------------------------------------------------------------
December 31, 2001 Option Values
- ------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
- ------------------------------------------------------------------------------------------
In-the-Money-Options
Unexercised Options at 12/31/01 at 12/31/01
------------------------------- -----------
- ------------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
- ------------------------------------------------------------------------------------------
Harry P. Langley -0- 100,000 -0- -0-
- ------------------------------------------------------------------------------------------
Stuart E. Massey 97,000 5,000 $6,893 -0-
- ------------------------------------------------------------------------------------------
George E. Mendenhall 90,000 5,000 -0- -0-
- ------------------------------------------------------------------------------------------
William S. McMaster 80,000 5,000 -0- -0-
- ------------------------------------------------------------------------------------------
Donald R. Futch 129,500 5,000 81,436 -0-
- ------------------------------------------------------------------------------------------
Employment Contracts
Each of the Named Executive Officers has entered into an employment
contract with the Company which renews automatically for successive one-year
terms unless the Company or the executive officer provides written notice of
termination at least 90 days before the end of the current term. The material
features of those employment contracts are summarized below. In addition, each
of the Named Executive Officers voluntarily elected as of September 1, 2001 to
defer the cash compensation paid to them for the period from September 1, 2001
to June 1, 2002, with the ability to extend the deferral period until September
2002. The deferred obligation of the Company bears simple interest at the annual
rate of ten percent. In addition, each officer receives an option to purchase
one share of common stock for each two dollars of cash compensation deferred.
The exercise price of each option is equal to the trading price of the common
stock on the date of grant of the option.
Messrs. Mendenhall and Massey have each been a party to employment
contracts with the Company since January 1, 1997. Each of these contracts has
been amended from time to time. Under the terms of these employment contracts as
currently in effect, Messrs. Mendenhall and Massey agree to act as the Company's
Chief Executive Officer and Chairman of the Board and as Executive Vice
President, respectively, in exchange for annual compensation of $152,000 and
$145,000, respectively. If the contract is terminated by the Company without
cause, the Company will be required to pay the affected executive officer an
amount equal to the greater of the total salary and benefits due to the
executive officer for the remainder of the term of the employment contract or
two year's total salary and benefits.
Mr. Futch has been a party to an employment contract with the Company since
January 1, 1998, which has been amended from time to time. Under the terms of
his employment contract as currently in effect, Mr. Futch agrees to act as the
Company's Vice President of Business Development in exchange for annual
compensation of $130,000.
Mr. Hopkins has been a party to an employment contract with the Company
since October 1995, which has since been amended under the terms of his
employment contract as currently in effect, Mr. Hopkins agrees to act as the
Company's Vice President of Operations in exchange for annual compensation of
$126,000.
Mr. McMaster has been a party to an employment contract with the Company
since May 30, 2000. Under the terms of his employment contract, Mr. McMaster
agrees to act as the Company's Chief Financial Officer and General Counsel in
exchange for annual compensation of $250,000.
Each of the executive officers may receive a bonus at the discretion of the
Company's Board of Directors. In addition to the foregoing, the Company has also
agreed to provide each executive officer with life insurance, medical insurance,
vacation leave, sick leave and other benefits, such as stock options, as may be
approved by the Board of Directors. Each executive officer is also eligible to
participate in the Company's employee benefit plans, including any established
retirement, profit sharing or deferred compensation plan.
Each of the Company's employment contracts contains a non-competition
clause restricting the employee's ability to compete with the business of the
Company during the term of the contract and for a period of one to two years
thereafter in those states where the Company had clients when the employment
contract was terminated. Each contract also contains a provision limiting the
disclosure of confidential or trade secret information of the Company.
Effective October 15, 2001, Harry P. Langley, the Company's former Chief
Executive Officer and President, voluntarily resigned from his Officer and Board
of Director positions with the Company to pursue other interests. Under his
severance agreement with the Company, Mr. Langley is entitled to salary and
medical benefits continuation through October 15, 2003, and the extension of the
expiration date on stock options he held for the purchase of 100,000 shares of
Common Stock. The Company's obligation to Mr. Langley is reduced dollar-for-
dollar by the amounts owed to the Company by Mr. Langley. See "Certain
Relationships Related Transactions."
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of common stock as of March 31, 2002.
Information is presented for (i) shareholders owning more than five percent of
the outstanding common stock, (ii) each director, director nominee and executive
officer of the Company, individually, and (iii) all directors and executive
officers of the Company, as a group. The percentages are calculated based on the
shares of common stock outstanding on March 31, 2002.
- --------------------------------------------------------------------------------
Number of Percentage
Name of Beneficial Owner Shares Ownership
- ------------------------ Beneficially ---------
------------
Owned (1)
---------
- --------------------------------------------------------------------------------
Carl Joseph Berger, Jr. (2) 117,530 *
- --------------------------------------------------------------------------------
Donald R. Futch (3) 213,077 1.18%
- --------------------------------------------------------------------------------
Harry P. Langley (4) (8) 1,309,879 7.30%
- --------------------------------------------------------------------------------
Stuart E. Massey (5) (8) 1,390,088 7.76%
- --------------------------------------------------------------------------------
William S. McMaster (6) 112,200 *
- --------------------------------------------------------------------------------
George E. Mendenhall (7) (8) 1,353,988 7.55%
- --------------------------------------------------------------------------------
All executive officers and directors as a group
(6 persons) 4,496,762 24.25%
- -------------------------------------------------------------------------------
* Amount represents less than 1.0 percent
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission. Shares of common stock subject to
options or warrants currently exercisable or exercisable within 60 days are
deemed to be outstanding for computing the percentage beneficially owned by
such holder but are not deemed outstanding for purposes of computing the
percentage beneficially owned by any other person.
(2) Includes 4,780 shares held by a family member of Mr. Berger and 101,200
shares issuable under options.
(3) Includes 1,000 shares held by a family member and 199,500 shares issuable
under options.
(4) Includes 1,000 shares held by a family member and 109,879 shares issuable
under options.
(5) Includes 97,988 shares issuable under options.
(6) Includes 2,200 shares held by a family member of Mr. McMaster and 110,000
shares issuable under options.
(7) Includes 95,988 shares issuable under options.
(8) The address of Messrs. Langley, Massey, and Mendenhall is Suite 228, 115
Atrium Way, Columbia, South Carolina 29223. The address of Mr. Langley is
39 Shore line Dr. Columbia SC 29229.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than 10% shareholders are
required by Securities and Exchange Commission rules to furnish the Company with
copies of all forms they file. Based solely on its review of the copies of such
forms received by the Company and written representations from certain reporting
persons, the Company believes that, during fiscal 2001, all Section 16(a) filing
requirements applicable to its executive officers, directors and 10%
stockholders were satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2001, there were no transactions or arrangements between
the Company and any of its officers, directors or significant shareholders,
which individually or in the aggregate, equaled or exceeded $60,000 in value, or
were otherwise disclosable pursuant to Regulation S-B promulgated by the SEC,
except for the following:
Dr. Mendenhall was indebted to the Company pursuant to two promissory notes
dated April 29, 1999 in the principal amount of $33,910, and dated December 22,
1999 in the principal amount of $30,114. Both notes were delivered to the
Company by Dr. Mendenhall in payment of the purchase price for common stock upon
the exercise by him of stock options on the respective dates of the notes. The
notes carry an annual interest rate of prime on the unpaid principal balance and
are collateralized by the shares of common stock purchased upon the delivery of
the notes. All unpaid interest and principal is due at maturity. The greatest
amount owed to the Company under these notes, including interest, during fiscal
year 2001 was $75,549 which equaled the amount owed at December 31, 2001. In
addition, Dr. Mendenhall was indebted to the Company in the amount of $19,800 as
of January 1, 2001 in connection with certain non- interest bearing cash
advances that were made to him during 2000. The amount outstanding at December
31, 2001 pursuant to these advances was $17,400.
Mr. Massey was indebted to the Company pursuant to two promissory notes
dated April 29, 1999 in the principal amount of $33,910, and dated December 29,
1999 in the principal amount of $30,683. Both notes were delivered to the
Company by Mr. Massey in payment of the purchase price for common stock upon the
exercise by him of stock options on the respective dates of the notes. The notes
carry an annual interest rate of prime on the unpaid principal balance and are
collateralized by the shares of common stock purchased upon the delivery of the
notes. All unpaid interest and principal is due at maturity. The greatest amount
owed to the Company under these notes, including interest, during fiscal year
2001 was $76,119 which equaled the amount owed at December 31, 2001. In
addition, Mr. Massey was indebted to the Company in the amount of $5,000 as of
January 1, 2001 in connection with certain non-interest bearing cash advances
that were made to him during 2000. The amount outstanding at December 31, 2001
pursuant to these advances was $2,600.
Mr. Langley was indebted to the Company pursuant to two promissory notes
dated April 29, 1999 in the principal amount of $33,910, and dated December 29,
1999 in the principal amount of $30,683. Both notes have a three year term, were
delivered to the Company by Mr. Langley in payment of the purchase price for
common stock upon the exercise by him of stock options on the respective dates
of the notes. The notes carry an annual interest rate of prime on the unpaid
principal balance and are collateralized by the shares of common stock purchased
upon the delivery of the notes. All unpaid interest and principal is due at
maturity. The greatest amount owed to the Company under these notes, including
interest, during fiscal year 2001 was $69,083 which equaled the amount owed at
December 31, 2001. In addition, Mr. Langley was indebted to the Company in the
amount of $47,650 as of January 1, 2001 in connection with certain non-interest
bearing cash advances that were made to him during 2000. The amount outstanding
at December 31, 2001 pursuant to these advances was $45,250.
AUDIT COMMITTEE REPORT
The Audit Committee reviewed and discussed the audited financial statements
for the year ended December 31, 2001 with management and the independent
auditors, Scott McElveen, LLP. Management represented to the Audit Committee
that the Company's financial statements were prepared in accordance with
generally accepted accounting principles, and the Audit Committee reviewed and
discussed the financial statements with management and the independent
accountants. The discussions with Scott McElveen, LLP also included the matters
required by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
Scott McElveen, LLP provided to the Audit Committee the written disclosures
and the letter regarding its independence as required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees). This
information was discussed with Scott McElveen, LLP.
Based on the discussions with management and Scott McElveen, LLP, the Audit
Committee's review of the representations of management and the report of Scott
McElveen, LLP, the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in our Annual Report on Form 10-KSB
that was filed with the Securities and Exchange Commission for the year ended
December 31, 2001.
Submitted by the Audit Committee of the Company's Board of Directors.
Carl Joseph Berger, Jr.
Roger A. Kazanowski
SCOTT McELVEEN, LLP'S FEES
Audit Fees
During 2001, Scott McElveen, LLP billed the Company an aggregate of $32,200
for professional services rendered for the audit of our annual financial
statements for the year ended December 31, 2000. We estimate that the total fees
for such services rendered by Scott McElveen, LLP for the audit of our financial
statements for the year ended December 31, 2001 will be approximately $ 71,000.
Financial Information Systems Design and Implementation Fees
During the year ended December 31, 2001, Scott McElveen, LLP did not
provide the Company with any services related to financial information systems
design or implementation.
All Other Fees
During the year ended December 31, 2001, in addition to the billed audit
fees described above, Scott McElveen, LLP billed the Company an aggregate of
$56,155 for the following professional services provided during 2001: tax return
preparation, assistance with preparation of the Annual Report on Form 10-KSB and
reviews of the financial statements included in our periodic Forms 10-QSB.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2001, which is required to be, and has been, filed with the
Securities and Exchange Commission, is being delivered to shareholders
concurrently with the delivery of this proxy statement. Shareholders to whom
this proxy statement is mailed who desire an additional copy of the Form 10-KSB
may obtain one without charge, by making written request to Ms. Sharon R.
Gambrell, Integrated Business Systems and Services, Inc., Suite 228, 115 Atrium
Way, Columbia, South Carolina 29223 (803)736-5595 ext. 125.
By Order of the Board of Directors,
/s/ George E. Mendenhall
George E. Mendenhall, Ph.D.
Chief Executive Officer and Chairman of the Board
Columbia, South Carolina
April 30, 2002
Exhibit
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
2001 STOCK INCENTIVE PLAN
1. PURPOSES
1.1. The purposes of the Integrated Business Systems and Services, Inc.
2001 Stock Incentive Plan are to (i) provide an incentive and reward to
directors and employees of the Company, and consultants and advisors to the
Company, who are and have been in a position to contribute materially to
improving the Company's profits, (ii) aid in the growth of the Company, and
(iii) encourage ownership of Shares by directors and employees.
2. DEFINITIONS
2.1. For purposes of this Plan the following terms shall have the
definition which are attributed to them below, unless another definition is
clearly indicated by a particular usage and context.
(a) "Agreement" means the written document issued by the Committee
---------
to a Participant whereby an Award is made to that Participant.
(b) "Award" means the issuance pursuant to this Plan of an Option,
-----
an SAR or Restricted Stock.
(c) "Awarded Shares" means Shares subject to outstanding Awards.
--------------
(d) "Board" means the Company's Board of Directors.
-----
(e) "Cause" means theft or destruction of property of the Company,
-----
a Parent or Subsidiary, disregard of Company rules or
policies, or conduct evidencing willful or wanton disregard of
the interest of the Company. Such determination shall be made
by the Committee based on information presented by the Company
and the Participant and shall be final and binding on all
parties to the Agreement.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
(g) "Committee" means the Stock Incentive Plan Committee(s)
---------
appointed by the Board pursuant to Section 3.1.
(h) "Company" means Integrated Business Systems and Services,
-------
Inc., a corporation incorporated under the laws of the state
of South Carolina, and any successor thereto.
(i) "Consultant" means any person or entity that provides services
----------
to the Company as a consultant or advisor.
(j) "Director" means any individual appointed or elected to the
--------
Board.
(k) "Effective Date of Grant" means the effective date on which
-----------------------
the Committee makes an Award.
(l) "Employee" means any individual who performs services as a
--------
common law employee for the Company, a Parent or Subsidiary,
and is included on the regular payroll of the Company, a
Parent or Subsidiary.
(m) "Fair Market Value" means the value established by the
-----------------
Committee based upon such factors as the Committee in its sole
discretion shall decide, including, but not limited to, a
valuation prepared by an independent third party appraiser
selected or approved by the Committee. If at any time the
Shares are traded on an established trading system, it means
the last sale price reported on any stock exchange or over-the
counter trading system on which Shares are trading on a
specified date or, if not so trading, the average of the
closing bid and asked prices for a Share on a specified date.
If no sale has been made on the specified date, then prices on
the last preceding day on which any such sale shall have been
made shall be used in determining fair market value under
either method prescribed in the previous sentence.
(n) "Incentive Stock Option" means any option granted under this
----------------------
Plan which meets the requirements of Code (s) 422A and any
regulations or rulings promulgated thereunder and is
designated by the Committee as an Incentive Stock Option.
(o) "Nonqualified Stock Option" means any Option granted under
-------------------------
this Plan which is not an Incentive Stock Option.
(p) "Option" means the right to purchase from the Company a stated
------
number of Shares at a specified price.
(q) "Option Price" means the purchase price per Share subject to
------------
an Option and shall be fixed by the Committee.
(r) "Parent" means any corporation (other than the Company) in an
------
unbroken chain of corporations ending with the Company if, at
the time of the granting of the Award, each of the
corporations (other than the Company) owns stock possessing
50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain within
the meaning of Code (s) 425(e) and any regulations or rulings
promulgated thereunder.
(s) "Participant" means a Director, an Employee or a Consultant
-----------
who has received an Award under this Plan.
(t) "Permanent and Total Disability" shall have the same meaning
------------------------------
as given to that term by Code (s) 22(e)(3) and any regulations
or rulings promulgated thereunder.
(u) "Plan" means this Integrated Business Systems and Services,
----
Inc. 2001 Stock Incentive Plan, as evidenced herein and as
amended from time to time.
2
(v) "Restricted Stock" means Shares issued to the Participant
----------------
pursuant to Section which are subject to the restrictions of
this Plan and the Agreement.
(w) "Restriction Period" means a period commencing on the
------------------
Effective Date of Grant and ending on such date or upon the
achievement of such performance or other criteria as the
Committee shall determine. The Restriction Period may, in the
sole discretion of the Committee, be structured to provide for
a release of restrictions in installments.
(x) "SAR" means stock appreciation rights issued to a Participant
---
pursuant to Section .
(y) "SAR Price" means the base value established by the Committee
---------
for an SAR on the Effective Date of Grant used in determining
the amount of benefit, if any, paid to a Participant.
(z) "Share" means one share of the common stock of the Company.
-----
(aa) "Subsidiary" means any corporation in an unbroken chain of
----------
corporations beginning with the Company if, at the time of the
granting of the Award, each of the corporations (other than
the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain, within the meaning of Code ss. 425(f) and any
regulations or rulings promulgated thereunder.
(bb) "1933 Act" means the Securities Act of 1933, as amended.
--------
(cc) "1934 Act" means the Securities Exchange Act of 1934, as
--------
amended.
3. ADMINISTRATION
3.1. This Plan shall be administered by a Committee, or by more than one
Committee if desired and deemed necessary by the Board in order to provide
separate Committee authority for the granting of Awards to separate categories
of eligible Participants. Any such Committee shall consist of not less than two
members. The members of the Committee shall be appointed by the Board. The Board
may from time to time remove members from or add members to the Committee.
Vacancies on the Committee, howsoever caused, shall be filled by the Board.
3.2. The action of a majority of the Committee at which a quorum is
present, or an action approved in writing by a majority of the Committee, shall
be the valid action of the Committee.
3.3. The Committee shall from time to time at its discretion designate
the Directors, Employees and Consultants who shall be Participants, determine
all the terms and conditions as set forth in Section 6.1 or otherwise, including
the type of Award to be made to each, the exercise period, expiration date and
other applicable time periods for each Award, the number of Shares subject to
each Award, with respect to each Option whether it is an Incentive Stock
3
Option or Nonqualified Stock Option and, if applicable, the Option Price or SAR
Price and the general terms of the Award.
3.4. The interpretation and construction by the Committee of any
provisions of this Plan or of any Option granted under it and all actions of the
Committee shall be final and binding on all parties hereto. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to this Plan or any Award granted under it.
4. ELIGIBILITY
4.1. Each Participant shall be a Director, an Employee or a Consultant
of the Company, a Parent or a Subsidiary as selected by the Committee in its
sole discretion from time to time.
4.2. A Participant may hold more than one Award, but only on the terms
and subject to the restrictions set forth in this Plan.
5. SHARES SUBJECT TO AWARD
5.1. The securities subject to the Awards shall be 1,100,000 Shares.
Such number shall be adjusted as appropriate in order to give effect to changes
made in the number of outstanding Shares as a result of a merger, consolidation,
recapitalization, reclassification, combination, stock dividend, stock split, or
other relevant change.
5.2. In the event that any outstanding Award under this Plan expires
or is terminated for any reason, the Awarded Shares subject to that Award may
again be the subject of an Award under this Plan.
6. TERMS AND CONDITIONS
6.1. Awards granted pursuant to this Plan shall be authorized by the
Committee under terms and conditions approved by the Committee and shall be
evidenced by Agreements in such form as the Committee shall from time to time
approve, which Agreements shall contain or shall be subject to the following
terms and conditions, whether or not such terms and conditions are specifically
included therein:
(a) Number of Shares. Each Award shall state the number of Shares to
----------------
which it pertains.
(b) Date. Each Award shall state the Effective Date of Grant.
----
(c) Price. With respect to each Award or portion thereof, which
-----
requires payment of an Option Price, it shall state the Option
Price. With respect to an SAR, it shall state the SAR Price.
(d) Method and Time of Payment. With respect to an Award, or portion
--------------------------
thereof, which requires payment of an Option Price, the Option
Price shall be payable on the exercise of the Award and may be
paid in or by any one of the following
4
means, or any combination thereof, to the extent not otherwise
designated by the Committee in the Agreement:
(1) Cash;
(2) Check (which clears in due course) payable to Integrated
Business Systems and Services, Inc.;
(3) Shares tendered to the Company, duly endorsed for transfer
and owned by Participant to be credited against the Option
Price at the Fair Market Value of such tendered Shares on
the date of exercise; provided however, that no fractional
shares may be so transferred, and the Company shall not be
obligated to make any cash payments in consideration of any
amount by which the aggregate Fair Market Value of the
Shares so transferred exceeds the aggregate Option Price;
and
(4) A note payable executed and delivered by Participant to the
Company upon terms acceptable to the Company in an amount
equal to the aggregate Option Price or relevant portion
thereof, such note payable to be fully secured by the pledge
to the Company of any Shares whose Option Price is covered
by such note and the certificates representing such Shares
shall be held in the custody of the Company until such note
is paid in full. The Option shall be deemed exercised and
the Shares purchased thereby shall be deemed issued as of
the date such payment (in one or more of the alternative
forms permitted herein) is received in full by the Company.
(e) Conversion of Option. Unless the Committee elects otherwise in
--------------------
the Agreement representing any Award, in lieu of the payment of
all or any or any portion of the Option Price in accordance with
the preceding subparagraph (d), a Participant may convert all or
a portion of an Option by the surrender of the Agreement and
delivery of a Notice of Conversion in the form attached to the
Agreement, duly executed, at the principal executive offices of
the Company, into Shares as provided in this subparagraph (e).
Upon exercise of this conversion right, the Participant shall be
entitled to receive that number of Shares equal to the quotient
obtained by dividing [(A-B)(X)] by (A), where:
A = the current Fair Market Value of one Share on the date of
conversion.
B = the Option Price for one Share under the Agreement.
X = the number of Shares with respect to which the Option is
being converted.
If the above calculation results in a negative number, then no
Shares shall be issued or be issuable upon conversion of the
Option. By way of illustration, if the Option Price is $10.00 per
Share, the current Fair Market Value is $20.00 per Share, and the
Option is being converted with respect to 100,000 Shares, then
50,000 Shares would be issued on conversion [($20.00 -$10.00) x
100,000
5
divided by $20.00 = 50,000] and the number of Shares issuable
upon exercise of the Option would be reduced by 100,000.
(f) Transfer of Option or Stock. No Award, Option, SAR, or Restricted
---------------------------
Stock (prior to the expiration of the Restriction Period) shall
be transferable by the Participant, except by will or the laws of
descent and distribution upon the Participant's death and subject
to any other limitations of this Plan. In addition to any other
restriction hereunder or otherwise provided in the Agreement with
the Participant, no Shares acquired pursuant to an Award of any
type may be sold, transferred or otherwise disposed of prior to
the end of the six (6) month period which begins on the Effective
Date of Grant of such Award.
(g) Recapitalization. The Committee shall make appropriate
----------------
adjustments in the number of Awarded Shares or in the Option
Price or SAR Price in order to give effect to changes made in the
number of outstanding Shares as a result of a merger,
consolidation, recapitalization, reclassification, combination,
stock dividend, stock split, or other relevant change.
(h) Investment Purpose.
------------------
(1) The Company shall not be obligated to sell or issue any
Shares pursuant to any Award unless such Shares are at that time
effectively registered or exempt from registration under the 1933
Act. The determination of whether a Share is exempt from
registration shall be made by the Company's legal counsel and its
determination shall be conclusive and binding on all parties to
the Agreement.
(2) Notwithstanding anything in this Plan to the contrary, each
Award under this Plan shall be granted on the condition that the
purchases of Shares thereunder shall be for investment purposes
and not with a view for resale or distribution except that in the
event the Shares subject to such Award are registered under the
1933 Act, or in the event of a resale of such Shares without such
registration that would otherwise be permissible, such condition
shall be inoperative if in the opinion of counsel for the Company
such condition is not required under the 1933 Act or any other
applicable law, regulation, or rule of any governmental agency.
(i) Other Provisions. Awards authorized under this Plan may contain
----------------
any other provisions or restrictions as the Committee in its sole
and absolute discretion shall deem advisable including, but not
limited to:
(1) Offering Options in tandem with or reduced by other Options,
SARs or other employee benefits and reducing one Award by the
exercise of another Option, SAR or benefit; or
(2) Providing for the issuance to the Participant upon exercise
of an Option and payment of the exercise price thereof with
previously owned Shares, of an additional Award for the number of
shares so delivered, having such other terms and conditions not
inconsistent with this Plan as the Committee shall determine.
6
(j) Duration of Award. Each Award shall be for a term of up to ten (10)
-----------------
years from the Effective Date of Grant as determined in the sole
discretion of the Committee.
6.2. The Company may place such legends on stock certificates
representing the Shares as the Company, in its sole discretion, deems necessary
or appropriate to reflect restrictions under this Plan, the Agreement, the Code,
the securities laws or otherwise.
6.3. Notwithstanding any provision herein to the contrary, employment
shall be at the pleasure of the Board, of its designees, of the Company, a
Parent or Subsidiary, as the case may be, at such compensation as the
appropriate board or designee shall determine. Nothing contained in this Plan or
in any Award granted pursuant to it shall confer upon any Participant any right
to continue in the employ of the Company, Parent or Subsidiary, as the case may
be, or to interfere in any way with the right of the Company, Parent or
Subsidiary to terminate employment at any time. So long as the Participant shall
continue to be a Director, an Employee or a Consultant, the Award shall not be
affected by any change of the Participant's duties or position except to the
extent the Agreement with the Participant provides otherwise.
6.4. Any person entitled to exercise an Option or an SAR may do so in
whole or in part by delivering to the Company at its principal office, attention
Corporate Secretary, a written notice of exercise. The written notice shall
specify the number of Shares for which an Option or SAR is being exercised.
(a) With respect to an Option, the notice shall be accompanied by full
payment of the Option Price for the Shares being purchased.
(b) During the Participant's lifetime, an Option or SAR may be exercised
only by the Participant, or on the Participant's behalf by the
Participant's legal guardian.
7. INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS
7.1. The Committee in its sole discretion may designate whether an Award
to an Employee is to be considered an Incentive Stock Option or a Nonqualified
Stock Option. An Award to a non-Employee Director or Consultant may be only a
---------------------------------------------------------------
Nonqualified Stock Option. The Committee may grant both an Incentive Stock
- -------------------------
Option and a Nonqualified Stock Option to the same Employee. However, where both
an Incentive Stock Option and a Nonqualified Stock Option are awarded at one
time, such Awards shall be deemed to have been awarded in separate grants, shall
be clearly identified, and in no event will the exercise of one such Award
affect the right to exercise the other such Award except to the extent the
Agreement with the Participant provides otherwise.
7.2. Any Award to an Employee designated by the Committee as an Incentive
Stock Option will be subject to the general provisions applicable to all Awards
granted under this Plan. In addition, the aggregate Fair Market Value of Shares
(determined at the Effective Date of Grant) with respect to which Incentive
Stock Options granted under all Incentive Stock Option Plans of the Company, a
Parent or Subsidiary, are exercisable by the Employee for the first time during
any calendar year shall not exceed $100,000.
7
7.3. The Option Price shall be established by the Committee in its sole
discretion. With respect to an Incentive Stock Option, the Option Price shall
not be less than 100% of the Fair Market Value of a Share on the Effective Date
of Grant. With respect to a Nonqualified Stock Option, the Option Price shall
not be less than 50% of the Fair Market Value of a Share on the Effective Date
of Grant.
7.4. Any Award to an Employee will be considered to be a Nonqualified
Stock Option to the extent that any or all of the grant is in conflict with
Section or with any requirement for Incentive Stock Options pursuant to Code (S)
422A and the regulations issued thereunder.
7.5. An Option may be terminated as follows:
(a) During the period of continuous employment with the Company, Parent or
Subsidiary, an Option will be terminated only if it has been fully
exercised or it has expired by its terms.
(b) Upon termination of employment, the Option will terminate upon the
earliest of (i) the full exercise of the Option (ii) the expiration of
the Option by its terms, and (iii) not more than three (3) months
following the date of employment termination; provided, however,
should termination of employment (A) result from the death or
Permanent and Total Disability of the Participant, such period shall
be one (1) year or (B) be for Cause, the Option will terminate on the
date of employment termination. For purposes of this Plan, a leave of
absence approved by the Company shall not be deemed to be termination
of employment except with respect to an Incentive Stock Option as
required to comply with Code (S) 422A and the regulations issued
thereunder.
(c) Subject to the terms of the Agreement with the Participant, if a
Participant shall die or becomes subject to a Permanent and Total
Disability prior to the termination of employment with the Company,
Parent or Subsidiary and prior to the termination of an Option, such
Option may be exercised to the extent that the Participant shall have
been entitled to exercise it at the time of death or disability, as
the case may be, by the Participant, the estate of the Participant or
the person or persons to whom the Option may have been transferred by
will or by the laws of descent and distribution.
7.6. Except as otherwise expressly provided in the Agreement with the
Participant, in no event will the continuation of the term of an Option beyond
the date of termination of employment allow the Participant, or the
beneficiaries or heirs of the Participant, to accrue additional rights under
this Plan, or to purchase more Shares through the exercise of an Option than
could have been purchased on the day that employment was terminated.
7.7. A Participant shall have no rights as a stockholder with respect to
any Shares subject to an Option until the date of the issuance of a stock
certificate to such Participant for such Shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 6.1(g).
8
7.8. The continuous employment of a Consultant will be deemed terminated
for purposes of this Plan upon receipt of written notice from the Company to the
effect that the Company will no longer transact business with the Consultant.
8. STOCK APPRECIATION RIGHTS
8.1. The Committee, in its sole discretion, may grant to a Participant an
SAR.
8.2. The SAR Price shall be established by the Committee in its sole
discretion. The SAR Price shall not be less than 100% of Fair Market Value of a
Share on the Effective Date of Grant for a SAR issued in tandem with an
Incentive Stock Option and for other SARs, shall not be less than 50% of Fair
Market Value of a Share on the Effective Date of Grant.
8.3. Upon exercise of an SAR, the Participant shall be entitled, subject
to the terms and conditions of this Plan and the Agreement, to receive the
excess for each Share being exercised under the SAR (a) the Fair Market Value of
a Share on the date of exercise over (b) the SAR Price for such Share.
8.4. At the sole discretion of the Committee, the payment of such excess
shall be made in (a) cash, (b) Shares, or (c) a combination of cash and Shares.
Shares used for this payment shall be valued at their Fair Market Value on the
date of exercise of the applicable SAR.
8.5. An Award of an SAR shall be considered an Award for purposes of the
number of Shares subject to an Award pursuant to Section , unless the Agreement
making the Award of the SAR provides that the exercise of an SAR results in the
termination of an unexercised Option for the same number of Shares.
8.6. An SAR may be terminated as follows:
(a) During the period of continuous employment with the Company, Parent or
Subsidiary, an SAR will be terminated only if it has been fully
exercised or it has expired by its terms.
(b) Upon termination of employment, the SAR will terminate upon the
earliest of (1) the full exercise of the SAR, (2) the expiration of
the SAR by its terms, and (3) not more than three months following the
date of employment termination; provided, however, should termination
of employment (A) result from the death or Permanent and Total
Disability of the Participant, such three month period shall be one
year, or (B) be for Cause, the SAR will terminate on the date of
employment termination. For purposes of this Plan, a leave of absence
approved by the Company shall not be deemed to be termination of
employment unless otherwise provided in the Agreement or by the
Company on the date of the leave of absence.
(c) Subject to the terms of the Agreement with the Participant if a
Participant shall die or becomes subject to a Permanent and Total
Disability prior to the termination of employment with the Company,
Parent or Subsidiary and prior to the termination of an SAR, such SAR
may be exercised to the extent that the Participant shall have been
entitled to exercise it at the time of death or disability, as the
case may be, by
9
the Participant, the estate of the Participant or the person or
persons to whom the SAR may have been transferred by will or by
the laws of descent and distribution.
(d) Except as otherwise expressly provided in the Agreement with the
Participant, in no event will the continuation of the term of an
SAR beyond the date of termination of employment allow the
Employee, or his beneficiaries or heirs, to accrue additional
rights under this Plan, have additional SARs available for
exercise or to receive a higher benefit than the benefit payable
as if the SAR was exercised on the date of employment termination.
8.7. If an SAR which was considered an Award for purposes of Section is
terminated or unexercised for any reason, the number of Shares of such SAR that
were unexercised shall be again available for Award under this Plan.
8.8. The Participant shall have no rights as a stockholder with respect
to an SAR. In addition, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or rights except as provided in Section 6.1(g).
9. RESTRICTED STOCK
9.1. The Committee may award to a Participant Restricted Stock under
such terms or conditions as the Committee, in its sole discretion, shall
determine and as otherwise provided herein.
9.2. Restricted Stock shall be Shares which are subject to Restriction
Period.
9.3. Should the Participant terminate employment for any reason, all
Restricted Stock which is still subject to the Restriction Period shall be
forfeited and returned to the Company for no payment.
9.4. Upon such forfeiture, shares representing such forfeited restricted
Stock shall obtain become available for Award under the Plan.
9.5. The Committee may require under such terms and conditions as it
deems appropriate or desirable that the certificates for Restricted Stock
awarded under this Plan may be held by the Company or its designee until the
Restriction Period expires. In addition, the Committee may place upon such
certificate such legend as the Committee deems necessary or appropriate and may
require as a condition of any receipt of Restricted Stock that the Participant
shall deliver a stock power endorsed in blank relating to the Restricted Stock.
10. AMENDMENT OR DISCONTINUANCE OF PLAN
10.1. The Board may at any time amend, suspend, or discontinue this Plan;
provided, however, that without further approval of the shareholders of the
Company no amendments by the Board shall:
(a) Change the class of Employees eligible to participate; or
10
(b) Except as provided in Section 5, increase the number of Shares
which may be subject to Options granted under this Plan.
10.2. No amendment to this Plan shall alter or impair any Award granted
under this Plan without the consent of the holder of such Award.
11. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees, actually incurred in connection with the defense of any pending,
threatened or possible action, suit or proceeding, or in connection with any
pending, threatened or possible appeal therein, to which they or any of them may
be a party by reason of any actual or alleged action taken or failure to act
under or in connection with this Plan or any option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Committee member
is liable for gross negligence or willful misconduct in the performance of his
duties: provided that within sixty days after institution of any such action,
suit or proceeding a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
12. NO OBLIGATION TO EXERCISE OPTION OR SAR
The granting of an Option or SAR shall impose no obligation upon the
Participant to exercise such Option.
13. EFFECTIVE DATE; DURATION OF PLAN
13.1. This Plan shall become effective as of February 23, 2001.
13.2. No Award may be made after the tenth anniversary of the effective
date of this Plan.
14. EFFECT OF PLAN
The making of an Award under this Plan shall not give the Participant any
right to similar grants in future years or any right to be retained in the
employ of the Company, the Parent or a Subsidiary, but a Participant shall
remain subject to discharge to the same extent as if this Plan were not in
effect.
15. CHANGE IN CONTROL
15.1. Treatment of Outstanding Awards. Upon the occurrence of a Change
-------------------------------
In Control, as defined below, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governmental agencies or
national securities exchanges, or by the express provisions of any Agreement,
(a) each Option and each SAR then outstanding hereunder that is
11
not otherwise exercisable shall become immediately and fully exercisable, and
shall remain exercisable throughout their entire term, notwithstanding any
provision in the Agreement relating to such Option or SAR for the exercise of
such Option or SAR in installments or otherwise pursuant to a vesting schedule,
and (b) any Restriction Period and restrictions imposed on Restricted Stock
shall lapse.
15.2. Change in Control Defined. For purposes of this Section, a Change
-------------------------
In Control shall mean that any of the following events shall have occurred:
(a) A person, partnership, joint venture, corporation or other entity,
or two or more of any of the foregoing acting as a group (or a
"person" within the meaning of Section 13(d)(3) of the 1934 Act),
other than the Company, a majority-owned subsidiary of the
Company, an employee benefit plan (or related trust) of the
Company or such subsidiary, become(s) after the effective date of
this Plan the "beneficial owner" (as defined in Rule 13(d)(3)
under the 1934 Act) of 25% or more of the then outstanding voting
stock of the Company;
(b) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Company's Board of
Directors (together with any new director whose election by the
Company's Board of Directors or whose nomination for election by
the Company's shareholders, was approved by the vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office;
(c) The Board determines that a tender offer for the Company's
outstanding Shares indicates a serious intention by the offeror to
acquire control of the Company; or
(d) The Shareholders of the Company approve (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all of the Company's assets;
or (iii) a merger, consolidation, or reorganization of the Company
with or involving any other corporation, other than a merger,
consolidation, or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least seventy-five percent (75%) of the combined voting power of
the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation or
reorganization.
15.3. Termination, Amendment and Modifications of Change in Control
-------------------------------------------------------------
Provisions. Notwithstanding any other provision of this Plan or any Agreement,
- ----------
the provisions of this Section may not be terminated, amended or modified on or
after the effective date of a Change in Control to affect adversely the
operation of any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards.
12
16. SUCCESSORS; CONSOLIDATION, MERGER AND OTHER EVENTS
16.1. All obligations of the Company under this Plan or any Agreement
with respect to any Award granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct
or indirect purchase of all or substantially all of the business and/or assets
of the Company, or a merger, consolidation or otherwise. Specifically, in case
of any capital reorganization of the Company, or of any reclassification of any
Shares (other than a change as a result of subdivision or combination), or in
case of the consolidation of the Company with or the merger of the Company with
any other corporation (other than a consolidation or merger in which (a) the
Company is the continuing corporation and (b) the holders of the Shares
immediately prior to such merger or consolidation continue as holders of Shares
after such merger or consolidation) or of the sale of the properties and assets
of the Company as, or substantially as, an entirety to any other corporation,
each Option and each SAR then outstanding shall after such reorganization,
reclassification, consolidation, merger or sale be exercisable, upon the terms
and conditions specified herein and in the Agreement relating to such Option or
SAR, for or with respect to the number of Shares or other securities or property
to which a holder of the number of Shares relating to such Option or SAR (at the
time of such reorganization, reclassification, consolidation, merger or sale)
upon exercise of such Option or SAR would have been entitled in connection with
such reorganization, reclassification, consolidation, merger or sale; and in any
such case, if necessary, the provisions set forth in this Section with respect
to the rights and interests thereafter of the holder of the Option or SAR shall
be appropriately adjusted so as to be applicable, as nearly as may reasonably
be, to any shares of stock or other securities or property thereafter
deliverable on the exercise of the Option or SAR.
13
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
This Agreement, dated as of _________________, implements the grant of an
incentive stock option pursuant to action of the committee ("Committee")
appointed by the Board of Directors ("Board") of Integrated Business Systems and
Services, Inc. ("Company") to ("Optionee") subject to the terms and conditions
of the Integrated Business Systems and Services, Inc. 2001 Stock Incentive Plan
("Plan") and the terms and conditions set forth below. Terms defined in the Plan
shall have the same meaning herein as in the Plan.
The Committee desires to afford the Optionee the opportunity to acquire
Shares of the Company's common stock so the Optionee has a proprietary interest
in the Company, and the Optionee desires the opportunity to acquire Shares.
Accordingly, the Company and the Optionee agree as follows:
1. Grant of Option and Purchase Price. The Company, pursuant to action of
----------------------------------
the Committee, grants to the Optionee an Option to purchase _________________
Shares at a price of $ ____________per share ("Option Price"), which has been
determined to be not less than the Fair Market Value of a Share on the date of
grant of this option.
2. Expiration of the Option. This Option shall expire ("Expiration Date")
------------------------
on the earlier of (i)_________________ (_________) years from the date hereof;
(ii) three months after the Optionee ceases to be an Employee of the Company, a
Parent or a Subsidiary (twelve months if termination of employment is due to the
Optionee's death or the Optionee having incurred a Permanent and Total
Disability or the date of termination of employment, if termination of
employment is due to Cause); (iii) the date this Option is fully exercised; or
(iv) the date mutually agreed to by the Committee and the Optionee.
3. Exercise of Option
------------------
3.1. Subject to any other conditions herein, this Option shall vest
on the _________ anniversary date of this Agreement. The Optionee's vested
percentage of the total grant hereunder shall be fixed as of the date the
Optionee is no longer an Employee of the Company, a Subsidiary or a Parent and
shall not increase during the additional period, if any, during which this
Option may be exercised under Section hereof. Vested portions of this Option may
be exercised at any time, in whole or in part, before the Expiration Date.
3.2. This Option may be exercised by mailing or delivering to
Integrated Business Systems and Services, Inc., Attention: Corporate Secretary,
115 Atrium Way, Suite 228, Columbia, South Carolina 29223, (i) a written signed
notice of such exercise which specifies the Effective Grant Date of this Option,
and the number of Shares being purchased, and (ii) payment for such Shares in
accordance with Section 6.1 of the Plan. The Option shall be deemed exercised
and the Shares purchased thereby shall be deemed issued as of the date such
payment is received by the Company.
4. Non-transferability of Option. This Option shall not be transferable
-----------------------------
by the Optionee other than by will or the laws of descent and distribution and
shall be exercisable during the Optionee's lifetime only by the Optionee.
14
5. Adjustment in Shares Subject to the Option. The Committee will make
------------------------------------------
appropriate adjustments in the number of Shares subject to this Option or the
Option Price in order to give effect to changes made in the number of
outstanding Shares as a result of a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split, or other relevant
change.
6. Rights as Shareholder or Employee.
---------------------------------
6.1. This Option shall not entitle the Optionee to any rights as a
shareholder of the Company with respect to any Shares subject to this Option
until it has been exercised and any such Shares issued.
6.2. This Option does not confer upon the Optionee any right with respect
to continuation of employment by the Company or a Subsidiary, nor does it in any
way interfere with or affect Optionee's right, the Company's right or a
Subsidiary's right to terminate such employment at any time.
7. Withholding. The Committee will make whatever arrangements the Company
-----------
deems necessary or appropriate to comply with all applicable tax withholding
requirements. The Committee and the Company shall have no obligation to deliver
a certificate evidencing the Shares purchased upon exercise of the Option unless
and until tax withholding arrangements satisfactory to the Company are made. The
Optionee's failure to comply with the required withholding arrangements shall
result in a forfeiture of any benefits hereunder.
8. Entire Agreement. This Agreement, together with the provisions of the
----------------
Plan which are incorporated herein by reference, constitutes the entire
Agreement between the Optionee and the Company with respect to the Option
granted hereunder.
9. Applicable Law. The Plan and this Agreement shall be governed by the laws
--------------
of the State of South Carolina.
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
By:
Optionee (Signature)
__________________________________
Optinee (Please print full name)
15
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
This Agreement, dated as of ________________, implements the grant of a
nonqualified stock option pursuant to action of the committee ("Committee")
appointed by the Board of Directors ("Board") of Integrated Business Systems and
Services, Inc. ("Company") to ("Optionee") subject to the terms and conditions
of the Integrated Business Systems and Services, Inc. 2001 Stock Incentive Plan
("Plan") and the terms and conditions set forth below. Terms defined in the Plan
shall have the same meaning herein as in the Plan.
The Committee desires to afford the Optionee the opportunity to acquire
Shares of the Company's common stock so the Optionee has a proprietary interest
in the Company, and the Optionee desires the opportunity to acquire Shares.
Accordingly, the Company and the Optionee agree as follows:
1. Grant of Option and Purchase Price. The Company, pursuant to action of
----------------------------------
the Committee, grants to the Optionee an Option to purchase _________________
Shares at a price of $_________________ per share ("Option Price"), which has
been determined to be not less than the Fair Market Value of a Share on the date
of grant of this option.
2. Expiration of the Option. This Option shall expire ("Expiration Date")
------------------------
on the earlier of (i) ___________________(_________) years from the date hereof;
(ii) three months after the Optionee ceases to be a Director, an Employee or a
Consultant of the Company, a Parent or a Subsidiary (twelve months if
termination of employment is due to the Optionee's death or the Optionee having
incurred a Permanent and Total Disability or the date of termination of
employment, if termination of employment is due to Cause); (iii) the date this
Option is fully exercised; or (iv) the date mutually agreed to by the Committee
and the Optionee.
3. Exercise of Option
------------------
3.1. Subject to any other conditions herein, this Option shall vest on
the _________ anniversary date of this Agreement. The Optionee's vested
percentage of the total grant hereunder shall be fixed as of the date the
Optionee is no longer a Director, an Employee or a Consultant of the Company, a
Subsidiary or a Parent and shall not increase during the additional period, if
any, during which this Option may be exercised under Section hereof. Vested
portions of this Option may be exercised at any time, in whole or in part,
before the Expiration Date.
3.2. This Option may be exercised by mailing or delivering to Integrated
Business Systems and Services, Inc., Attention: Corporate Secretary, 115 Atrium
Way, Suite 228, Columbia, South Carolina 29223, (i) a written signed notice of
such exercise which specifies the Grant Effective Date of this Option, and the
number of Shares being purchased, and (ii) payment for such Shares by check
(which clears in due course) payable to Integrated Business Systems and
Services, Inc. and/or by surrender of Shares previously owned by the Optionee
valued at the Fair Market Value thereof on the date received by the Company. The
Option shall be deemed exercised and the Shares purchased thereby shall be
deemed issued as of the date such payment is received by the Company.
16
4. Non-transferability of Option. This Option shall not be transferable
-----------------------------
by the Optionee other than by will or the laws of descent and distribution and
shall b exercisable during the Optionee's lifetime only by the Optionee.
5. Adjustment in Shares Subject to the Option. The Committee will make
------------------------------------------
appropriate adjustments in the number of Shares subject to this Option or the
Option Price in order to give effect to changes made in the number of
outstanding Shares as a result of a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split, or other relevant
change.
6. Rights as Shareholder or Employee.
---------------------------------
6.1. This Option shall not entitle the Optionee to any rights as a
shareholder of the Company with respect to any Shares subject to this Option
until it has been exercised and any such Shares issued.
6.2. This Option does not confer upon the Optionee any right with respect
to continuation of employment by the Company or a Subsidiary, nor does it in any
way interfere with or affect Optionee's right, the Company's right or a
Subsidiary's right to terminate such employment at any time.
7. Withholding. The Committee will make whatever arrangements the Company
-----------
deems necessary or appropriate to comply with all applicable tax withholding
requirements. The Committee and the Company shall have no obligation to deliver
a certificate evidencing the Shares purchased upon exercise of the Option unless
and until tax withholding arrangements satisfactory to the Company are made. The
Optionee's failure to comply with the required tax withholding arrangements
shall result in a forfeiture of any benefits hereunder.
8. Entire Agreement. This Agreement, together with the provisions of the
----------------
Plan which are incorporated herein by reference, constitutes the entire
Agreement between the Optionee and the Company with respect to the Option
granted hereunder.
9. Applicable Law. The Plan and this Agreement shall be governed by the
--------------
laws of the State of South Carolina.
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
By:_______
Its:______
Optionee (Signature)
Optionee (Please print name)
17
PLEASE MARK VOTES
: AS IN THIS EXAMPLE
REVOCABLE PROXY
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, JUNE 6, 2002 AT THE COMPANY'S HEADQUARTERS, 115 ATRIUM
WAY, SUITE 228, COLUMBIA, SOUTH CAROLINA AT 10:00 A.M. LOCAL TIME.
The undersigned hereby appoints Donald R. Futch and Sharon R. Gambrell, or any
of them acting in the absence of the other, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the shares of the
common stock of Integrated Business Systems and Services, Inc., a South Carolina
corporation, held or owned by the undersigned or standing in the name of the
undersigned at the 2002 Annual Meeting of Shareholders of the Company and any
adjournment thereof, and the undersigned hereby instructs said attorneys to vote
as follows:
1. Election of Directors:
For All Except: []
For Withhold
Three-year term:
Carl Joseph Berger, Jr. [] []
One-year term:
Roger A. Kazanowski [] []
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.
For Against Abstain
2. Approval of Amendment to [] [] []
2001 Stock Incentive Plan
3. Ratifications of appointment of Scott [] [] []
McElveen, LLP, as independent public
Accountants for the Company for the fiscal
Year ending December 31, 2002.
4. In their discretion, upon any other business which may properly come before
the meeting or any adjournment thereof.
Please be sure to sign and date this Proxy in the spaces provided below.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shareholder sign above Co-holder (if any) sign above
- ----------------------------------------
- ----------------------------------------
Date
THIS PROXY WILL BE VOTED AS INSTRUCTED. IN THE ABSENCE OF SUCH INSTRUCTIONS,
THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED ABOVE, AND THE
PROXIES HEREIN NAMED WILL VOTE ON OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF IN ACCORDANCE WITH THEIR JUDGMENT.
To be represented at the Meeting, this Proxy must be received at the office of
"PACIFIC CORPORATE TRUST COMPANY" by mail or fax no later than forty - eight
(48) hours (excluding Saturdays, Sundays and holidays) prior to the time of the
Meeting, or adjournment thereof.
The mailing address of Pacific Corporate Trust Company is 10th Floor, 625 Howe
Street, Vancouver, British Columbia, V6C 3B8 and its FAX number is (604)
689-8144.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY