CONTINENTAL INFORMATION
SYSTEMS CORPORATION
September 12, 2003
Dear Shareholder:
You are invited to attend the 2003 Annual Meeting of Continental
Information Systems Corporation's (the "Company") shareholders on October 13,
2003, at 8:45 a.m. local time at Portofino Tower, 300 South Pointe Drive, Miami,
Florida 33139.
Enclosed with this letter is a Notice of the Annual Meeting, a Proxy
Statement, a Proxy Card, and a return envelope. Both the Notice of Annual
Meeting and the Proxy Statement provide details of the business that we will
conduct at the Annual Meeting and other information about the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE COMPANY'S NOMINEE FOR
ELECTION AS DIRECTOR IN PROPOSAL 1 AND A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF LAZAR LEVINE & FELIX LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
IN PROPOSAL 2.
Your vote is important to us. Whether or not you plan to attend the annual
meeting, please submit your proxy to ensure your representation. Most of our
shareholders may vote in any of the following ways: (1) on the Internet at
www.voteproxy.com by following the instructions listed on the Proxy Card, (2) by
telephone by calling the toll-free number shown on your Proxy Card and following
the instructions listed on the Proxy Card, or (3) by signing and dating the
enclosed Proxy Card and returning it in the enclosed envelope.
Your vote is important regardless of the number of shares you own. Your
shares will be voted at the Annual Meeting in accordance with your proxy
instructions. Of course, if you attend the Annual Meeting, you may vote in
person.
I look forward to seeing you at the Annual Meeting. If you plan to attend
the meeting, please mark the appropriate box on the enclosed Proxy Card.
Sincerely,
Guy Zahavi,
Chairman of the Board of Directors
CONTINENTAL INFORMATION
SYSTEMS CORPORATION
7 Mikve Israel, Box 36351
Tel Aviv 61362 Israel
============================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 13, 2003
============================================
We will hold the 2003 Annual Meeting of Shareholders of Continental
Information Systems Corporation (the "Company") at Portofino Tower, 300 South
Pointe Drive, Miami, Florida 33139 on October 13, 2003 at 8:45 a.m. local time.
At the Annual Meeting, we will ask you to consider the following proposals:
1. Elect one (1) director to the Board of Directors;
2. Ratify the appointment by the Board of Directors of Lazar Levine &
Felix LLP as the Company's independent accountants for the fiscal year
ending May 31, 2004; and,
3. Transact any other business that is properly presented at the Annual
Meeting.
Your Board of Directors believes that each proposal is in the best
interests of the Company and its shareholders.
You will be able to vote your shares at the Annual Meeting if you were a
shareholder of record at the close of business on August 29, 2003.
If any other matters properly come before the Annual Meeting, including,
among other things, a motion to adjourn or postpone the Annual Meeting to
another time or place for the purpose of soliciting additional proxies or
otherwise, the persons named in the accompanying Proxy Card will vote the shares
represented by all properly executed proxies on such matters using their best
judgment. As of the date of the Proxy Statement, the Company is not aware of any
other such business.
TO INSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE SUBMIT YOUR
PROXY AS SOON A POSSIBLE. YOU MAY VOTE IN ANY OF THE FOLLOWING WAYS: (1) ON THE
INTERNET AT WWW.VOTEPROXY.COM BY FOLLOWING THE INSTRUCTIONS LISTED ON THE
ACCOMPANYING VOTING INSTRUCTION FORM, (2) BY TELEPHONE BY CALLING THE TOLL-FREE
NUMBER SHOWN ON YOUR PROXY CARD AND FOLLOWING THE INSTRUCTIONS LISTED ON THE
ACCOMPANYING VOTING INSTRUCTION FORM, OR (3) BY SIGNING AND DATING THE ENCLOSED
PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE. YOU MAY ATTEND THE ANNUAL
MEETING AND VOTE IN PERSON EVEN IF YOU HAVE SUBMITTED YOUR PROXY. THE PROXY MAY
BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE
ATTACHED PROXY STATEMENT.
By order of the Board of Directors,
Guy Zahavi,
President and Chief Executive Officer
New York, New York
September 12, 2003
YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.
PLEASE SUBMIT YOUR PROXY AS SOON A POSSIBLE. YOU MAY VOTE IN ANY OF THE
FOLLOWING WAYS: (1) ON THE INTERNET AT WWW.VOTEPROXY.COM BY FOLLOWING THE
INSTRUCTIONS LISTED ON THE ACCOMPANYING VOTING INSTRUCTION FORM, (2) BY
TELEPHONE BY CALLING THE TOLL-FREE NUMBER SHOWN ON YOUR PROXY CARD AND
FOLLOWING THE INSTRUCTIONS LISTED ON THE ACCOMPANYING VOTING INSTRUCTION
FORM, OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT
IN THE ENCLOSED ENVELOPE.
IF YOU ATTEND THE MEETING, YOU WILL BE ABLE TO REVOKE
YOUR PROXY AND VOTE IN PERSON.
CONTINENTAL INFORMATION
SYSTEMS CORPORATION
===================
PROXY STATEMENT
===================
PROXY STATEMENT FOR ANNUAL MEETING
OCTOBER 13 , 2003
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented at the 2003 Annual Meeting of the
Shareholders (the "Annual Meeting") of Continental Information Systems
Corporation (the "Company"). The 2003 Annual Meeting will be held on October 13,
2003 at 8:45 a.m. local time, at Portofino Tower, 300 South Pointe Drive, Miami,
Florida 33139.
This Proxy Statement provides detailed information about the Annual
Meeting, the proposals on which you will be asked to vote at the Annual Meeting,
and other relevant information.
On September 12, 2003, we began mailing information to people who,
according to our records, owned shares of the Company's common stock at the
close of business on August 29, 2003.
INFORMATION ABOUT THE 2003 ANNUAL MEETING,
VOTING AND THIS PROXY STATEMENT
THE ANNUAL MEETING
The 2003 Annual Meeting will be held on October 13, 2003 at 8:45 a.m.
local time at Portofino Tower, 300 South Pointe Drive, Miami, Florida 33139.
THIS PROXY SOLICITATION
We are sending you this Proxy Statement because the Company's Board of
Directors is seeking a proxy to vote your shares at the Annual Meeting. This
Proxy Statement is intended to assist you in deciding how to vote your shares.
The Company is paying the cost of requesting these proxies. The Company's
directors, officers and employees may request proxies in person or by telephone,
mail, telecopy or letter. The Company will reimburse brokers and other nominees
their reasonable out-of-pocket expenses for forwarding proxy materials to
beneficial owners of stock.
VOTING YOUR SHARES
You have one vote for each share of the Company's common stock that you
owned of record at the close of business on August 29, 2003. The number of
shares you owned on that date is listed on the enclosed Proxy Card and is the
number of shares you may vote at the Annual Meeting.
You may submit a proxy with voting instructions by the Internet or the
telephone, or if those options are not available to you, by mailing the enclosed
Proxy Card. You may attend the Annual Meeting and vote in person even if you
have submitted your proxy.
Vote by the Internet. If you hold your shares through a broker, nominee,
fiduciary or other custodian, you may be able to vote your shares on the
Internet. A large number of banks and brokerage firms are participating in the
ADP Investor Communications Service online program. This program allows eligible
shareholders to vote on the Internet. If your bank or brokerage firm is
participating in ADP's online voting program, you will be provided with
instructions for voting on the Internet. If you vote on the Internet you do not
need to return your Proxy Card by mail. If your bank or brokerage firm does not
provide for voting on the Internet or telephone, please mark your Proxy Card,
date and sign it, and return it in the enclosed envelope.
Vote by Telephone. If you hold your shares through a broker, nominee,
fiduciary or other custodian, you may be able to vote your shares by telephone.
A large number of banks and brokerage firms are participating in the ADP
Investor Communications Service telephone program. This program allows eligible
shareholders to vote by telephone. If your bank or brokerage firm is
participating in ADP's telephone voting program, you will be provided with
instructions for voting by telephone. If you vote by telephone you do not need
to return your Proxy Card by mail. If your bank or brokerage firm does not
provide for voting by telephone or
1
the Internet, please mark your Proxy Card, date and sign it, and return it in
the enclosed envelope.
Vote by Mail. If you vote by mail, simply mark your Proxy Card, date and
sign it, and return it in the enclosed envelope. IF YOU DATE AND SIGN THE PROXY
CARD BUT DO NOT COMPLETE THE VOTING INSTRUCTIONS, THEN YOUR SHARES WILL BE VOTED
FOR THE COMPANY'S NOMINEE IN THE PROPOSAL FOR THE ELECTION OF DIRECTORS AND FOR
RATIFICATION OF THE APPOINTMENT OF LAZAR, LEVINE & FELIX LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE 2004 FISCAL YEAR.
REVOKING YOUR PROXY
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in any one of three ways:
(1) You may notify the Secretary of the Company in writing that
you wish to revoke your proxy;
(2) You may submit a proxy dated later than your original proxy;
or
(3) You may attend the Annual Meeting and submit a ballot.
However, merely attending the Annual Meeting will not by
itself revoke a proxy; you must obtain a ballot and vote your
shares to revoke the proxy.
VOTE REQUIRED FOR APPROVAL
PROPOSAL 1 - ELECTION OF ONE DIRECTOR
The nominee for director will be elected if he receives a plurality of the
votes cast at the Annual Meeting, in person or by proxy. If you do not vote for
the nominee, or you indicate "withhold authority to vote" for the nominee on
your Proxy Card, your vote will not count as a vote "for" or "against" the
nominee.
PROPOSAL 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The affirmative vote of the holders of a majority of the shares of issued
and outstanding Common Stock of the Company (the "Shares") present in person or
represented by proxy at the Annual Meeting is required to ratify the appointment
of the independent accountants. So, if you abstain from voting, it has the same
effect as if you voted against this proposal.
DISSENTERS' RIGHT OF APPRAISAL
Pursuant to the New York Business Corporations Law, the actions
contemplated to be taken at the Annual Meeting do not create appraisal or
dissenters' rights.
2
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than for the election of directors, neither Guy Zahavi, as the
current and nominated director or executive officer, nor any of his associates,
has any direct or indirect interest in any matter to be acted upon at the Annual
Meeting.
OTHER INFORMATION
If you hold your shares with a broker and you do not tell your broker how
to vote, your broker has the authority to vote on each of the proposals
scheduled to be presented at this year's Annual Meeting.
On the record date for the Annual Meeting, August 29, 2003, 3,946,212
shares were issued and outstanding. A "quorum" must be present at the Annual
Meeting in order to transact business. A quorum will be present if one-third of
the Shares are represented at the Annual Meeting, either in person or by proxy.
If a quorum is not present, a vote cannot occur. In deciding whether a quorum is
present, abstentions will be counted as Shares that are represented at the
Annual Meeting.
The Board of Directors knows of no other business that may be presented at
the Annual Meeting. If any other business is properly presented at the Annual
Meeting, the persons named on the enclosed Proxy Card will vote, or otherwise
act, in accordance with their judgment on such matters.
ADDITIONAL INFORMATION ABOUT THE COMPANY
The Company's Annual Report to Shareholders for the fiscal year ended May
31, 2003 ("fiscal year 2003"), including consolidated financial statements, is
being mailed to all shareholders entitled to vote at the Annual Meeting together
with this Proxy Statement. The Annual Report does not constitute a part of the
proxy solicitation material. The Annual Report provides and tells you how to get
additional information about the Company.
3
PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING
1. ELECTION OF DIRECTORS
The sole nominee for election to the Board of Directors is:
Guy Zahavi
The Director will be elected to serve for a one-year term, or thereafter
until his replacement is duly elected or appointed. The nominee is currently the
sole member of the Board of Directors and has consented to serve as a director
if re-elected. If the nominee cannot serve for any reason, the Board of
Directors may designate a substitute nominee. If a substitute is nominated, the
persons named on the enclosed Proxy Card will vote all valid proxies for the
election of the substitute nominee. Proxies at the Annual Meeting may not be
voted for more than one director. More information about the nominee is
available in the section of this Proxy Statement entitled "The Board of
Directors," which begins on page 8.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR.
2. RATIFICATION OF THE APPOINTMENT OF LAZAR, LEVINE & FELIX LLP ("LLF") AS
INDEPENDENT ACCOUNTANTS
The Board of Directors is seeking ratification of its appointment of LLF
as the Company's independent accountants for the fiscal year ending May 31,
2004, as recommended by the Board of Directors. If a majority of the
shareholders voting at the Annual Meeting and represented by proxy should not
approve the appointment of LLF, the selection of independent accountants may be
reconsidered by the Board of Directors.
LLF is currently the Company's independent accountants, having replaced
PricewaterhouseCoopers LLP ("PWC") as of March 1, 2002. A representative of LLF
is expected to be available to respond to appropriate questions from
shareholders.
On March 1, 2002, the Company dismissed PWC which had served as the
Company's independent accountants for the fiscal year ended May 31, 2001.
The reports of PWC on the Company's audited financial statements for the
two years ended May 31, 2001 and 2000 did not contain an adverse opinion or a
disclaimer of opinion nor were they modified as to uncertainty, audit scope or
accounting principle, except that the reports of PWC for each of the past two
fiscal years contained an explanatory paragraph expressing substantial doubt
relating to the Company's ability to continue as a "going concern."
The Company's Board of Directors approved the change in the Company's
accountants based upon the desire to reduce operating costs. The Company has no
audit or similar committee of the Board of Directors.
4
On March 1, 2002, the Company engaged LLF, whose business address is 350
Fifth Avenue, New York, New York 10118-0170, to act as the Company's independent
accountants for the fiscal year ending May 31, 2002.
The Company had not consulted with LLF prior to LLF's retention on any
matter regarding: (i) either the application of accounting principles or the
type of audit opinion that might be rendered on the Company's financial
statements or (ii) any other matter that was either the subject of any
disagreement between the Company and its former auditor or a reportable event
(as defined in Item 304(a)(1)(v) of Regulation S-K promulgated under the
Securities Act of 1933, as amended).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF LLF.
5
STOCK OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 29, 2003, certain information
regarding the ownership of Common Stock of (i) each person known by the Company
to be the beneficial owner of more than five percent of the outstanding Common
Stock; (ii) each of the directors, nominees for director and named executive
officers of the Company; and (iii) all executive officers and directors of the
Company as a group. A beneficial owner is a person who, directly or indirectly,
has or shares voting and/or investment power.
Name and Address Numbers of
of Beneficial Owner Shares Owned (1) Percent Owned (2)
------------------- ------------ -------------
Emanuel Gruss, 74 Broad Street, NY, NY 10004 493,373 (3) 12.50%
Jonah M. Meer, 50 Battery Place, #7F, NY, NY 10280 753,488 (4) 19.09%
Name and Address of Executive Number of
Officers and Directors Title Shares Owned Percent Owned
---------------------- ----- ------------ -------------
Jonah M. Meer, 50 Battery Place, #7F, NY, NY 10280 Fmr. CEO, 753,488 (4) 19.09%
Director
All Executive Officers
and Directors as a Group 753,488 19.09%
(1 person)
<FN>
(1) Except as otherwise indicated, each shareholder has sole voting and
investment power of the shares beneficially owned.
(2) Except as otherwise indicated, the percentages owned are calculated
on the basis of 3,946,212 shares of Common Stock plus the number of
shares of Common Stock which such person or group has the right to
acquire within 60 days after August 29, 2003 by the exercise of
stock options.
(3) In an Amendment No. 9 to Schedule 13D filed with the Securities
and Exchange Commission ("Commission") in October 1998, and as
updated by certain of the reporting persons through March 6, 2002,
Emanuel Gruss (363,699 shares), together with five other persons,
reported beneficial ownership of a total of 1,493,373 shares of
Common Stock as a group as follows: Emanuel Gruss (363,699 shares),
Emanuel Gruss and Brenda Hirsch as trustees for the benefit of
Oren Arthur Gruss Hirsch (1,000 shares), Jonathan Oscar Gruss
Hirsch (1,000 shares) and Leni Gruss Hirsch (1,000 shares);
Emanuel Gruss and Leslie Gruss as trustees for the benefit of
Ripton Philip Gruss Rosen (65,381 shares) and Morgan Alfred Gruss
Rosen (61,293 shares). Mr. Gruss' wife, Riane Gruss, is the
beneficial owner of 100,000 shares. He does not have or share
any power to vote or dispose of any of such shares and disclaims
any beneficial interest therein.
6
(4) In Schedule 13D filed with the Commission on August 22, 2002,
Jonah M. Meer reported beneficial ownership of 778,488 shares of
Common Stock, which includes 729,988 shares owned by him directly,
23,500 shares owned by him held in his IRA Rollover Account, and
25,000 shares issuable upon the exercise of options, which options
have since expired.
</FN>
7
THE BOARD OF DIRECTORS
DIRECTOR AGE DIRECTOR SINCE POSITION HELD
-------- --- -------------- -------------
Guy Zahavi 35 2003 Director, Chairman
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
Guy Zahavi 35, has served as the Chief Executive Officer of the Company
since August 15, 2003 and as Consultant to the Company since July 21, 2003.
Mr. Zahavi is a specialist in brokerage technology and business operations.
Mr. Zahavi holds a BA in Economics and Management from The Academic College
of Tel Aviv, of Tel Aviv University. Mr. Zahavi is in the Air Force Reserve
of Israel having attained the rank of Major in the Israeli Air Force.
BOARD OF DIRECTORS ORGANIZATION AND MEETINGS
During fiscal year 2003, the Board of Directors held a total of five (5)
meetings. All directors attended 100% of their Board of Directors meetings.
The Board of Directors does not have an Audit Committee as a result of the
fact that Company has no currently active operations. The Board of Directors
does not have a Nomination Committee or a Compensation Committee.
AUDIT FEES. The aggregate fees billed by LLF for professional services
rendered for the audit of the Company's annual financial statements and for the
reviews of the financial statements included in the Company's Forms 10-Q during
fiscal year 2003 were $34,225.
ALL OTHER FEES. The aggregate fees billed by LLF for professional services
rendered for audit-related and tax-related and other services during fiscal year
2003 were $0. The Board of Directors has considered whether, and has determined
that, the provision of professional services other than in connection with
auditing services is compatible with the auditors remaining independent.
COMPENSATION OF DIRECTORS
FEES AND EXPENSES. In fiscal year 2003, directors did not receive
compensation for their services.
OPTION GRANTS TO DIRECTORS. Each non-employee director receives automatic
grants of nonqualified stock options to purchase 3,000 shares of common stock of
the Company on the date of each Annual Meeting. The exercise price per share is
the fair market value of the common stock on the date as of which the director
is appointed, elected, or re-elected to the Board of Directors. Options granted
as of each Annual Meeting become fully exercisable on the day before the next
occurring Annual Meeting and can be exercised until the earlier of five years
after the date granted or one year after the director ceases for any reason to
be a member of the Board of Directors. During fiscal year 2003, no stock options
had been granted to outside directors. As of the date hereof, Mr. Zahavi is the
sole director with no options having yet been issued to him.
8
EXECUTIVE OFFICERS AND COMPENSATION
EXECUTIVE OFFICERS
Information regarding the sole remaining executive officer of the Company,
Mr. Guy Zahavi, is set forth on page 8.
POSITION AND INFORMATION REGARDING OTHER EXECUTIVE OFFICERS
Until his resignation on August 15, 2003 Jonah M. Meer served as the Chief
Executive Officer and Director of the Company from June 20, 2002, and from June
30, 1997 he served as Senior Vice President, Chief Financial Officer and Chief
Operating Officer of the Company.
SUMMARY COMPENSATION TABLE
We have set forth below, for the periods indicated, certain summary
information concerning the cash and non-cash compensation earned by or awarded
to (i) the Company's Chief Executive Officer, and if applicable (ii) each of the
two (2) most highly compensated persons who were serving as executive officers
at the end of fiscal year 2003.
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- -------------------
OTHER SECURITIES
NAME AND ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPAL FISCAL SALARY BONUS COMPENSA- STOCK OPTIONS PAYOUTS COMPENSA-
POSITION YEAR ($)(1) ($) TION($)(2) AWARDS(4) (#)(3) ($) TION($)
- --------- ------ ------ ----- ---------- ---------- ---------- ------- ---------
Jonah M.Meer 2003 200,000 -- 5,000 (4) -- -- -- --
Chief Executive, 2002 200,000 -- 4,800 (4) -- -- -- --
Chief Operating 2001 200,000 -- 4,800 (4) -- -- -- --
Officer and Chief
Financial Officer
<FN>
---------------------
(1) Salary includes base salary, amounts deferred under the
Company's 401(k) plan and payroll deductions for health
insurance under the Company's health insurance plan.
(2) For fiscal year 2003, there were no perquisites with an
aggregate value for any named individual in excess of the
lesser of $50,000 or 10% of the total of salary and bonuses.
(3) There are no restricted stock awards for long-term incentive
plan payouts.
(4) The value of the Company's matching contribution to the 401(k)
Plan.
</FN>
9
OPTION EXERCISES IN FISCAL YEAR 2003 AND THE VALUE OF OPTIONS AT MAY 31, 2003
Set forth below is information on option exercises during fiscal year 2003
by the named executive officers and the value of each of the named executive
officer's unexercised options to acquire the Company's common stock at May 31,
2003. No executive officer exercised stock options in fiscal year 2003 and no
stock options were granted to executive officers in fiscal year 2003.
On July 6, 1995, the Board of Directors adopted the Continental
Information Systems Corporation 1995 Stock Compensation Plan (the "1995 Plan").
The 1995 Plan was approved by shareholders at the Annual Meeting held September
27, 1995, in Syracuse, New York. The 1995 Plan provides for the issuance of
options covering up to 1,000,000 shares of Common Stock and stock grants of up
to 500,000 shares of Common Stock to non-employee directors of the Company and,
in the discretion of the Compensation Committee, employees of and independent
contractors and consultants to the Company. As of May 31, 2003, 0 options had
been granted and 0 options were exercisable.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
-----------------------------------------------------------------------
Number of Securities Value of Unexercised,
Shares Underlying Unexercised In-The-Money
Acquired Options at Options Held at
on Value May 31, 2003 May 31, 2003
Exercise Realized (#) ($)
------------------------- ------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------- -------- -------- ----------- ------------- ----------- -------------
Jonah M. Meer -- -- 0 (1) -- 0 0
<FN>
----------------
(1) On June 30, 2003, 25,000 of Mr. Meer's options expired.
</FN>
EMPLOYMENT ARRANGEMENTS
The Company entered into an employment agreement with Guy Zahavi in order
to obtain Mr. Zahavi's services in connection with the Company's continued wind
down of its operations. The agreement was effective August 15, 2003 and has a
one year term. Under the agreement, Mr. Zahavi will serve as Chief Executive
Officer and Chief Operating Officer and be compensated with a monthly salary of
$1,000 plus 25% of the net revenues received by the Company from any sale,
transfer, joint venture or other disposition of the Company's subsidiary T1Xpert
Corp., or its assets. If Mr. Zahavi's employment is terminated for "cause" as
defined in the agreement, or death or disability he will receive no further
payments after such relevant event.
10
SEPARATION AND CONSULTING AGREEMENT
The Company entered into a Separation and Consulting Agreement with Jonah
M. Meer in order to continue to retain Mr. Meer's services in winding down its
operations. This agreement replaced the June 20, 2002 agreement appointing Mr.
Meer Chief Executive Officer and Chief Operating Officer. The Separation and
Consulting Agreement became effective August 15, 2003, has a two year term, and
unless notice of non-renewal is given by either party at least 90 days prior to
the end of the term, it will continue for successive periods. Under the
agreement, Mr. Meer will serve as a Consultant to the Company at a monthly rate
of $15,000 and benefits and a discretionary quarterly bonus which shall be no
less than $5,000. If Mr. Meer's consulting is terminated for "cause" as defined
in the agreement, he will receive no further payments after termination. If his
consulting is terminated for disability (as defined in the agreement) or death,
he or his estate will receive 24 months of payments after termination. If Mr.
Meer terminates his consulting for "good reason" or his consulting is terminated
by reason of a change of control (each as defined in the agreement), the Company
will pay to him a sum equal to the greater of (a) two times his annual
consulting payment or (b) the aggregate balance of his annual consulting
payments that would have been made through the end of the-then current term of
the agreement. "Good reason" generally means a material breach of the agreement
by the Company; a diminution of the responsibilities or reporting hierarchy or
scope of authority of Mr. Meer; or if the Company attempts to terminate the
agreement for any reason other than for cause, non-renewal or death or
disability. If Mr. Meer's employment is terminated by the Company by reason of
non-renewal of the consulting term, he shall continue to receive his annual
consulting payments and incentive compensation accrued through the termination
date for a period of 12 months.
EMPLOYEE BENEFITS PROGRAMS
The Company has a 401(k) plan that matches employee pretax contributions
on a semi-monthly basis at the rate of 50% of the first 6% of eligible
compensation. In addition, the Company may make an annual discretionary
contribution, based on participants' eligible compensation, once a year, for all
employees with at least one year of service and who are on the payroll as of
December 31 of a given year. The Company made no discretionary contribution in
fiscal year 2002. The vesting schedule for employer contributions is as follows:
10% after one (1) year; 20% after two (2) years; 30% after three (3) years; 40%
after four (4) years; and 100% after five (5) years. Under the current tax code
for 2003, employees may elect to defer up to 15% of their compensation, up to
$11,000.
COMPENSATION COMMITTEE REPORT
During fiscal year 2003, decisions about executive compensation were made
by the Board of Directors. Since there is only a sole Board member, the Board of
Directors has not maintained a Compensation Committee and the Board member has
been involved in decisions regarding Compensation.
During fiscal 2003, in June 2002 the Company entered into an employment
agreement appointing Jonah M. Meer Chief Executive Officer. That contract
governed Mr. Meer's employment compensation. Under that contract Mr. Meer
received an annual salary of $200,000 and certain employee benefits.
11
OTHER INFORMATION
RELATED PARTY TRANSACTIONS
During fiscal year 2003, no fees were paid to any related or former
related parties other than the office rental fees of approximately $9,000 from
the period June 1, 2002 through August 31, 2002 paid to Oscar Gruss & Son
Incorporated, a former related party of the Company.
PERFORMANCE GRAPH
The following line graph compares the percentage change in the total
cumulative shareholder return on the Company's Common Stock since May 31, 1998
with the cumulative total return on the NASDAQ Market Index and the capital
stocks of a peer group (the "Peer Group") of the following companies: Leasing
Solutions, Inc. Previous Proxy Statements included five additional companies,
AT&T Capital Corporation, LDI Corporation, Capital Associates, Inc. PLM
International, Inc. and Comdisco, Inc. in the Peer Group. However, AT&T Capital
Corporation and LDI Corporation have not been included in the Peer Group for
this Proxy Statement because the necessary information is no longer available
for them, as they were acquired by other companies. Capital Associates, Inc.
stopped trading in September of 2000 and PLM International, Inc. stopped trading
in February of 2002. Comdisco, Inc. filed for bankruptcy on July 16, 2001 and a
successor company emerged on August 12, 2002. Thus these companies have been
removed from the Peer Group. The companies included in the Peer Group reflect
the line-of-business in which the Company was engaged during the periods covered
by the graph, rather than the line of business the Company intends to pursue in
the future (as disclosed in the Company's Annual Report).
[GRAPHIC LINE CHART OMITTED]
12
DATA POINTS USED IN PRINTED GRAPHIC
Cumulative Total Return
-----------------------------------------
5/98 5/99 5/00 5/01 5/02 5/03
------ ------ ------ ------ ------ ------
CONTINENTAL INFORMATION SYSTEMS CORP 100.00 57.97 57.97 51.43 9.28 6.49
NASDAQ STOCK MARKET (U.S.) 100.00 146.95 217.68 139.16 106.41 103.28
PEER GROUP 100.00 124.87 131.50 11.14 0.23 0.45
NOTES:
1. Based on $100 invested on 05/31/98 in stock or index - including
reinvestment of dividends.
2. The indexes are reweighted daily, using the market capitalization on
the previous day.
3. If the annual interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
4. The index level for all series was set to $100 on May 31, 1998.
5. The lines represent annual index levels derived from compounded daily
returns that include all dividends.
THE FOREGOING GRAPH SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE
INTO ANY FILING OF THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers, directors, and ten percent beneficial
owners of common stock are required to file reports of ownership and change of
ownership with the Securities and Exchange Commission under the Exchange Act. We
are not aware of any failure to timely file reports required by Section 16 of
the Exchange Act.
INCORPORATION OF CERTAIN MATERIALS BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the securities laws that might incorporate future
filings, the Report on Executive Compensation and the Performance Graph included
in this Proxy Statement shall not be incorporated by reference into any such
filing.
PROPOSALS FOR THE 2004 ANNUAL MEETING OF SHAREHOLDERS
If you want to include a proposal in the Proxy Statement for the Company's
2004 Annual Meeting, send the proposal to Continental Information Systems
Corporation, Attention: Guy Zahavi Chief Executive Officer. Proposals must be
received on or before May 28, 2004 to be included in next year's Proxy
Statement. Please note that proposals must comply with all of the requirements
of Rule 14a-8 under the Securities Exchange Act of 1934, as well as the
requirements of the Company's certificate of incorporation and bylaws.
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