CONTINENTAL INFORMATION
SYSTEMS CORPORATION
September 12, 2002
Dear Shareholder:
You are invited to attend the 2002 Annual Meeting of Continental
Information Systems Corporation's (the "Company") shareholders on October 14,
2002, at 8:45 a.m. local time at the offices of Thacher Proffitt & Wood, 25 De
Forest Avenue, Summit, New Jersey 07901.
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,
Jonah M. Meer,
Chairman of the Board of Directors
CONTINENTAL INFORMATION
SYSTEMS CORPORATION
74 BROAD STREET, 3RD FLOOR
NEW YORK, NY 10004
=================================================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 14, 2002
=================================================================
We will hold the 2002 Annual Meeting of Shareholders of Continental
Information Systems Corporation (the "Company") at the offices of Thacher
Proffitt & Wood, 25 De Forest Avenue, Summit, New Jersey 07901 on October 14,
2002 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 Levin &
Felix LLP as the Company's independent accountants for the fiscal year
ending May 31, 2003; 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 September 9, 2002.
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 AS 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,
Jonah M. Meer,
President and Chief Executive Officer
New York, New York
September 12, 2002
YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.
PLEASE SUBMIT YOUR PROXY AS SOON AS 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 14, 2002
This Proxy Statement provides information that you should read before
you vote on the proposals that will be presented at the 2002 Annual Meeting of
the Shareholders (the "Annual Meeting") of Continental Information Systems
Corporation (the "Company"). The 2002 Annual Meeting will be held on October 14,
2002 at 8:45 a.m. local time, at the offices of Thacher Proffitt & Wood, 25 De
Forest Avenue, Summit, New Jersey 07901.
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, 2002, 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 September 9, 2002.
INFORMATION ABOUT THE 2002 ANNUAL MEETING,
VOTING AND THIS PROXY STATEMENT
THE ANNUAL MEETING
The 2002 Annual Meeting will be held on October 14, 2002 at 8:45 a.m.
local time at the offices of Thacher Proffitt & Wood, 25 De Forest Avenue,
Summit, New Jersey 07901.
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 September 9, 2002. 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 2003 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 Jonah M. Meer, 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, September 9, 2002, 4,979,920
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, 2002 ("fiscal year 2002"), 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:
JONAH M. MEER
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, LEVIN & 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,
2003, 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 attend the Annual Meeting and 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
During the Company's two most recent fiscal years and through March 1,
2002, the Company has had no disagreements with PWC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to PWC's satisfaction, would have caused them
to make reference to the subject matter of the disagreement in connection with
its reports on the financial statements for such years.
During the Company's two most recent fiscal years and through March 1,
2002, the Company has had no reportable events (as defined in Item 304(a)(1)(v)
of Regulation S-K promulgated under the Securities Act of 1933, as amended).
The Company has requested that PWC furnish it with a letter addressed
to the Securities and Exchange Commission stating whether or not it agrees with
the statements made above. Attached as Exhibit 16.1 to the Company's Form 8-K
Dated March 1, 2002 is a copy of such letter from PWC.
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).
As of March 1, 2002, the Company engaged LLF as its independent
accountants.
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 September 9, 2002, 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 OF NUMBERS OF PERCENT OWNED (2)
BENEFICIAL OWNER SHARES OWNED (1) ----------------
---------------- ----------------
Emanuel Gruss 493,373 (3) 9.9%
NAME AND ADDRESS OF
EXECUTIVE OFFICERS NUMBER OF
AND DIRECTORS TITLE SHARES OWNED PERCENT OWNED
------------- ----- ------------ -------------
Jonah M. Meer President, CEO, Director 778,488 (4) 15.6%
James P. Hassett Fmr. Director 396,100 (5) 7.9%
Michael Bruck Fmr. Director 21,440 (6) *
George H. Heilborn Fmr. Director 12,337 (7) *
Mark W. Jaindl Fmr. Director 0 (8) *
Michael L. Rosen Fmr. Director 25,000 (9) *
Michael "Mickey" Fmr. Officer 7,200 (10) *
Rosen
Paul M. Solomon Fmr. Director 60,000 (11) 1.5%
All Executive
Officers and
Directors as a Group 1,300,565 (12) 25.6%
(8 persons)
* Percentage is less than 1% of the total number of outstanding shares
(4,979,920) of the Company.
(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 4,979,920 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 September 9, 2002 by the exercise of
stock options.
6
(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, Diane
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.
(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.
(5) Includes 12,000 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable. James P. Hassett resigned from
the Board of Directors on or about December 20, 2001.
(6) Includes 5,140 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable. Michael Bruck resigned from
the Board of Directors on December 28, 2001.
(7) Includes 12,337 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable. George H. Heilborn resigned
from the Board of Directors on December 19, 2001.
(8) Mark W. Jaindl resigned from the Board of Directors on December 19,
2001.
(9) Michael L. Rosen resigned from the Board of Directors on June 20,
2002. Includes 25,000 shares issuable upon exercise of stock options,
as noted in Amendment No. 11 to Schedule 13D filed with the Commission
on August 22, 2002.
(10) Michael "Mickey" Rosen resigned from his position as President of
T1Xpert Corp. on December 21, 2001.
(11) Includes 15,000 shares of Common Stock issuable upon exercise of stock
options that are currently exercisable. Paul M. Solomon resigned from
the Board of Directors on December 28, 2001.
(12) Includes 94,477 shares which may be acquired by named executive
officers and directors within 60 days of September 9, 2002.
7
THE BOARD OF DIRECTORS
DIRECTOR AGE DIRECTOR SINCE POSITION HELD
-------- --- -------------- -------------
Jonah M. Meer 47 2002 Director, Chairman
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
Jonah M. Meer, 47, has served as the Chief Executive Officer of the
Company since June 20, 2002 and as Senior Vice President, Chief Financial
Officer and Chief Operating Officer since June 30, 1997. He has also been the
Managing Member of jBroker, LLC since June 1999. Prior to joining the Company,
Mr. Meer served as Senior Vice President of Oppenheimer & Co., Inc., a
registered broker-dealer, from May 1996 until June 1997. From 1983 until April
1996, Mr. Meer served as a Vice President and Treasurer of Oscar Gruss & Son
Incorporated, a registered broker-dealer.
TRANSACTIONS
On December 26, 2001 the Company completed a repurchase of 100,800
shares of outstanding common stock from Mark W. Jaindl. On that same date, the
Company completed a repurchase of 592,534 shares of common stock from Frederick
J. Jaindl, the father of Mark W. Jaindl. The reacquired shares represented
approximately 12% of the issued and outstanding common stock of the Company. The
shares were purchased for a total of $475,000 or $.685 per share. In addition,
Mark and Frederick Jaindl retain a 10% passive carried interest in T1Xpert
subsidiary which may result in additional compensation to the Jaindls if the
Company makes cash distributions to shareholders in excess of $2,525,000. The
Jaindls have agreed not to purchase any more shares of the Company and the
Company and the Jaindls have executed mutual releases.
BOARD OF DIRECTORS ORGANIZATION AND MEETINGS
During fiscal year 2002, the Board of Directors held a total of five
(5) meetings. All directors attended at least 75% of their scheduled Board of
Directors meetings and meetings held by Committees of which they were members.
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 PWC 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 2002 were $87,579. The Company has paid a retainer to LLF in the
amount of $10,000 for audit and other fees. To date, LLF has not billed for the
Company any fees related to its reviews of the financial statements included in
the Company's Forms 10-Q during fiscal year 2002.
8
ALL OTHER FEES. The aggregate fees billed by PWC and LLF for
professional services rendered for tax-related and other services during fiscal
year 2002 were $19,063. 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 2002, directors did not receive
compensation for their services. Directors were reimbursed for travel and other
expenses.
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 2002, no stock options had been granted to outside directors. As of the
date hereof, Mr. Meer is the sole director and 25,000 options issued to him on
October 20, 1998 are exercisable; of the options granted to former directors
44,477 are currently exercisable.
9
EXECUTIVE OFFICERS AND COMPENSATION
EXECUTIVE OFFICERS
Information regarding the sole remaining executive officer of the
Company, Mr. Jonah M. Meer, is set forth on page 8.
POSITION AND INFORMATION REGARDING OTHER EXECUTIVE OFFICERS
Until his resignation on June 20, 2002, Michael L. Rosen had been
President and Chief Executive Officer since July 18, 1997 and a director since
1995. He also served as the Chief Executive Officer and a director of T1Xpert.
Mr. Rosen was also a principal shareholder and, since June 1996, the Chief
Executive Officer of Oscar Gruss & Son, Incorporated, a member firm of the New
York Stock Exchange, Inc. until his resignation from that firm on December 31,
2001. Prior to 1996, Mr. Rosen operated a variety of real estate development
projects and multi-family rental properties in which he has interests.
Until his resignation on December 21, 2001 Michael "Mickey" Rosen, 47,
had served as the President and a director of T1Xpert. He was a Managing Member
of Kesher, LLC from January 1996 to August 1999. From January 1995 to June 1996,
he was President of W&D Securities, a member firm of the New York Stock
Exchange, Inc. Michael "Mickey" Rosen is not related to Michael L. Rosen, the
former President and Chief Executive 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 (ii) each of the two (2) most
highly compensated persons who were serving as executive officers at the end of
fiscal year 2001.
10
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ---------------------------
SECURITIES PAYOUTS
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($)(1) BONUS ($) ($)(2) (4) (#) ($) ($)
------------------ ------ ------ --------- ------------- ------------ ------- ------- -------------
Michael L. Rosen(6) 2002 $136,033 -- $ 2,400 -- -- -- --
President, Chief 2001 65,000 -- 2,400 -- -- (3) -- --
Executive Officer 2000 65,000 -- 2,400 -- -- -- --
and Member of the
Board of Directors
Jonah M. Meer 2002 200,000 -- 4,800(5) -- -- -- --
Senior Vice 2001 200,000 -- 4,800(5) -- -- -- --
President, 2000 200,000 -- -- -- -- -- --
Chief Operating
Officer and Chief
Financial Officer
Michael "Mickey"(7) 2002 125,000 -- 1,675(5) -- -- -- --
Rosen, President of 2001 250,000 -- 5,625(5) -- -- (3) -- --
T1Xpert Corp. 2000 198,878
_____________________
(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 2002, 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) In May 2000, Messrs. Michael L. Rosen and Michael "Mickey" Rosen
were each granted 500,000 stock options in T1Xpert. The exercise
price for T1Xpert options issued to Messrs. Michael L. Rosen and
Michael "Mickey" Rosen is $.0675. Both employees have resigned
and their options have expired.
(4) There are no restricted stock awards for long-term incentive plan
payouts.
(5) The value of the Company's matching contribution to the 401(k)
Plan.
(6) Michael L. Rosen's employment with the Company terminated on June
20, 2002.
(7) Michael "Mickey" Rosen's employment with T1Xpert terminated on
December 21, 2001.
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OPTION EXERCISES IN FISCAL YEAR 2002 AND THE VALUE OF OPTIONS AT MAY 31, 2002
Set forth below is information on option exercises during fiscal year
2002 by the named executive officers and the value of each of the named
executive officer's unexercised options to acquire the Company's common stock at
May 31, 2002. No executive officer exercised stock options in fiscal year 2002
and no stock options were granted to executive officers in fiscal year 2002.
On July 6, 1995, the Board of Directors adopted the Continental
Information Systems Corporation 1995 Stock Compensation Plan (the "1995 Plan").
The 1995 Plan was approved by shareholders at the Annual Meeting held September
27, 1995, in Syracuse, New York. The 1995 Plan provides for the issuance of
options covering up to 1,000,000 shares of Common Stock and stock grants of up
to 500,000 shares of Common Stock to non-employee directors of the Company and,
in the discretion of the Compensation Committee, employees of and independent
contractors and consultants to the Company. As of May 31, 2002, 149,810 options
had been granted and 149,810 options were exercisable.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS HELD AT
ACQUIRED MAY 31, 2002 MAY 31, 2002
ON VALUE (#) ($)
EXERCISE REALIZED ------------------------------ -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
Michael L. Rosen -- -- 25,000 (1) -- $0 (1) $0
Jonah M. Meer -- -- 25,000 (3) -- 0 0
Michael "Mickey" -- -- -- (2) -- -- (2) --
Rosen
________________
(1) Michael L. Rosen's options in T1Xpert have expired. On July 18,
2002, 33,333 of Mr. Rosen's options expired.
(2) Michael "Mickey" Rosen's options in T1Xpert have expired.
(3) On June 30, 2002, 25,000 of Mr. Meer's options expired.
EMPLOYMENT ARRANGEMENTS
The Company entered into an employment agreement with Jonah M. Meer in
order to continue to retain Mr. Meer's services in winding down its operations.
The agreement was effective June 20, 2002, has a three year term, and unless
notice of non-renewal is
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given by either party at least 90 days prior to the end of the term, it will
continue for successive 12 month periods. Under the agreement, Mr. Meer will
serve as Chief Executive Officer and Chief Operating Officer at an annual salary
of $200,000 and employee benefits. If Mr. Meer's employment is terminated for
"cause" as defined in the agreement, he will receive no further payments after
termination. If his employment 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 employment for "good reason" or his
employment 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 salary or (b) the aggregate balance of his annual salary
payments that would have been made through the end of the-then current term of
the agreement. "Good reason" generally means a transfer of the Company's offices
to a location which would increase Mr. Meer's daily commute by more than 25
miles in each direction, without his consent; 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 a failure of the Company's shareholders to
re-elect him to the Board of Directors to successive terms during the term of
the agreement; 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
employment term, he shall continue to receive his annual salary and incentive
compensation accrued through the termination date for a period of 24 months from
the effective termination date.
SEPARATION AND CONSULTING AGREEMENT
The Company entered into a Separation and Consulting Agreement with
Michael L. Rosen, effective as of June 20, 2002, under which Mr. Rosen's
employment is terminated and which includes a consulting arrangement with the
Company through June 19, 2004. Under this agreement, and in consideration of Mr.
Rosen assisting the Company in the collection of outstanding loans and
maximizing recovery on all of the Company's assets, the Company agrees to pay
Mr. Rosen 6% of all payments received by the Company from the company's
collection of loans and other investments of the Company.
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 2002, employees may elect to defer up to 15% of their compensation, up to
$11,000.
COMPENSATION COMMITTEE REPORT
During fiscal year 2002, decisions about executive compensation were
made by the Board of Directors. All of the Company's directors, including those
who are also employees of
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the Company, participate in decisions regarding executive compensation. Since
December 2001 when five of six Board of Directors' members resigned leaving a
sole Board member, the Board of Directors has not maintained a Compensation
Committee and the remaining Board member has been involved in decisions
regarding his Compensation.
Since his appointment to the position of Chief Executive Officer in
1997 through the end of fiscal year 2001, Michael L. Rosen's salary had been set
at $65,000 because he had significant other business activities including his
duties at Oscar Gruss & Son, Incorporated. In fiscal year 2001, the Board of
Directors determined that, in light of Mr. Rosen's other business activities, it
was appropriate to continue his salary at that same level. During fiscal year
2001, Mr. Rosen made a full-time commitment to lead T1Xpert and substantially
reduced his other business activities. Consequently, during fiscal year 2001,
the Compensation Committee recommended that Mr. Rosen be paid a salary of
$200,000 from T1Xpert and acted to reduce Mr. Rosen's salary with the Company to
$50,000. These changes went into effect on June 1, 2001 and continued until
December 31, 2001 when T1Xpert suspended operations. At that time Mr. Rosen
agreed to be employed without compensation. On June 20, 2002, Mr. Rosen resigned
as an executive officer and director and entered into a consulting agreement.
The consulting agreement provides for Mr. Rosen to receive a percentage of
assets collected on behalf of the Company as well as a per diem rate for time
spent assisting the corporation. On June 20, 2002 with the resignation of Mr.
Rosen as a Director, Jonah M. Meer became sole Director and Chief Executive
Officer.
Mr. Meer entered into an employment agreement with the Corporation,
effective June 20, 2002, that provides for severance in the event of his
non-renewal of services.
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OTHER INFORMATION
RELATED PARTY TRANSACTIONS
During fiscal year 2002, no fees were paid to any related parties other
than the rental fees of approximately $9000 from the period March 1, 2002
through May 31, 2002 paid to Oscar Gruss & Son Incorporated.
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, 1996
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: Comdisco,
Inc. and Leasing Solutions, Inc. Previous Proxy Statements included four
additional companies, AT&T Capital Corporation, LDI Corporation, Capital
Associates, Inc. and PLM International, 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 during the fiscal
year ended May 31, 1997. Capital Associates, Inc. stopped trading in September
of 2000 and PLM International, Inc. stopped trading in February of 2002. Thus
both of 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 OMITTED]
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DATA POINTS USED IN PRINTED GRAPHIC
Cumulative Total Return
-----------------------------------------------------
5/97 5/98 5/99 5/00 5/01 5/02
CONTINENTAL INFORMATION SYSTEMS CORP 100.00 95.83 56.25 55.56 46.67 9.11
NASDAQ STOCK MARKET (U.S.) 100.00 126.81 179.03 245.44 152.33 117.10
PEER GROUP 100.00 151.11 188.69 198.71 16.83 0.34
NOTES:
1. Based on $100 invested on 05/31/97 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, 1997.
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 2003 ANNUAL MEETING OF SHAREHOLDERS
If you want to include a proposal in the Proxy Statement for the
Company's 2003 Annual Meeting, send the proposal to Continental Information
Systems Corporation, Attention: Jonah M. Meer, Chief Executive Officer.
Proposals must be received on or before May 28, 2003 to be included in next
year's Proxy Statement. Please note that proposals must comply with all of the
16
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.
17