CIMETRIX INCORPORATED
6979 South High Tech Drive
Salt Lake City, Utah 84047-3757
April 30, 2002
Dear Shareholder:
On behalf of the Board of Directors and management, we cordially invite you
to attend the Annual Meeting of shareholders for Cimetrix Incorporated, which
will be held on Saturday, June 1, 2002, at 9:00 a.m. at the Company's
headquarters, located at 6979 South High Tech Drive, Salt Lake City, Utah.
At the meeting, your Board is asking you to elect four directors, to amend
the Company's 1998 Stock Option Plan to authorize an additional 1,000,000 shares
of common stock to be made available for issuance under the plan, to ratify the
appointment of Tanner + Co. as the Company's independent accountants, and to
transact such other business as may properly come before the meeting or any
adjournment thereof. These proposals are fully set forth in the accompanying
proxy statement, which you are urged to read thoroughly. We will also report on
the progress of the Company.
It is important that your shares are represented and voted at the meeting
whether or not you plan to attend. Accordingly, you are requested to sign, date
and mail the enclosed proxy in the envelope provided at your earliest
convenience.
Very truly yours,
By: /s/ Robert H. Reback
---------------------
Robert H. Reback
President and Chief Executive Officer
CIMETRIX INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2002
------------------------------
To our Shareholders:
The Annual Meeting of the Shareholders of Cimetrix Incorporated, a Nevada
corporation (the "Company"), will be held on June 1, 2002, commencing at 9:00
a.m., in the Company's headquarters located at 6979 South High Tech Dr., Salt
Lake City, Utah, to consider and vote on the following matters described in this
notice and the accompanying Proxy Statement:
1. To elect four directors to the Company's Board of Directors to serve for
one-year terms.
2. To amend the Company's 1998 Stock Option Plan to authorize an additional
1,000,000 shares of common stock to be made available for issuance under the
plan.
3. To ratify the appointment of Tanner + Co. as the Company's independent public
accountants.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on April 15, 2002 as
the record date for determination of share owners entitled to vote at the Annual
Meeting or any adjournments thereof, and only record holders of Common Stock at
the close of business on that day will be entitled to vote. At the record date,
24,025,968 shares of Common Stock were issued and outstanding.
TO ASSURE REPRESENTATION AT THE ANNUAL MEETING, SHARE OWNERS ARE URGED TO
SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHARE OWNER ATTENDING
THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE PREVIOUSLY RETURNED A
PROXY. A PROXY MAY BE REVOKED BY WRITTEN REVOCATION FILED WITH THE SECRETARY OF
THE COMPANY AT ANY TIME PRIOR TO THE ANNUAL MEETING.
By Order of the Board of Directors,
By: /s/ Riley G. Astill
--------------------
Riley G. Astill
Vice President of Finance and Secretary
April 30, 2002
Salt Lake City, Utah
CIMETRIX INCORPORATED
6979 South High Tech Drive
Salt Lake City, Utah 84047-3757
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is being sent on or about April 30, 2002 in connection
with the solicitation of proxies by the Board of Directors of Cimetrix
Incorporated, a Nevada corporation (the "Company" or "Cimetrix"). The proxies
are for use at the 2002 Annual Meeting of the Share Owners of the Company, which
will be held on June 1, 2002, commencing at 9:00 a.m., at the Company's
headquarters, 6979 South High Tech Drive, Salt Lake City, Utah, and at any
meetings held upon adjournment thereof (the "Annual Meeting"). The record date
for the Annual Meeting is the close of business on April 15, 2002 (the "Record
Date"). Only holders of record of the Company's Common Stock on the Record Date
are entitled to notice of the Annual Meeting and to vote at the Annual Meeting.
A proxy card is enclosed. Whether or not you plan to attend the Annual
Meeting in person, please sign, date and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided, to ensure that
your shares will be voted at the Annual Meeting. Any share owner who returns a
proxy has the power to revoke it at any time prior to its effective use by
filing with the Secretary of the Company an instrument revoking it or a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Unless contrary instructions are given, any such proxy, if not
revoked, will be voted at the Annual Meeting for the four nominees for election
as directors, to amend the Company's 1998 Stock Option Plan to authorize an
additional 1,000,000 shares of common stock to be made available for issuance
under the plan , and to ratify the appointment of Tanner + Co. as the Company's
independent public accountants, as set forth in this Proxy Statement.
At the Record Date, April 15, 2002, there were 24,025,968 shares of the
Company's Common Stock issued and outstanding. No other voting securities of the
Company were outstanding at the Record Date. The presence, either in person or
by proxy, of persons entitled to vote a majority of the Company's outstanding
Common Stock is necessary to constitute a quorum for the transaction of business
at the Annual Meeting. Abstentions and broker non-votes are counted for purposes
of determining a quorum, but are not considered as having voted for purposes of
determining the outcome of a vote.
Holders of the Common Stock have one vote for each share on any matter that
may be presented for consideration and action by the share owners at the Annual
Meeting. In order for action to be taken on any matter, votes received in favor
must exceed votes against, except the election of directors. Directors may be
elected by a plurality vote. The four nominees for director receiving the
highest number of votes at the Annual Meeting will be elected. Unless instructed
otherwise, the shares represented by proxies to management will be voted for the
named nominees, to amend the Company's 1998 Stock Option Plan to authorize an
additional 1,000,000 shares of common stock to be made available for issuance
under the plan, and to ratify the appointment of Tanner + Co. as the Company's
independent public accountants.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company may
request banks and brokers to solicit their customers who beneficially own Common
Stock listed of record in names of nominees, and will reimburse such banks and
brokers for their reasonable out-of-pocket expenses for such solicitations. The
solicitation of proxies by mail may be supplemented by telephone, telegram and
personal solicitation by officers, directors and regular employees of the
Company, but no additional compensation will be paid to such individuals.
-1-
ELECTION OF DIRECTORS
Proposal 1
Nominees
The Board of Directors has determined that the four directors named below
will be nominated for election as directors at the Annual Meeting. Each nominee
has consented to being named in the Proxy Statement as a nominee for election as
director and has agreed to serve as director if elected.
The Board of Directors has advised the Company that it intends at the
Annual Meeting to direct the voting of shares covered by the proxies for the
election of the nominees named below, unless contrary instructions are given in
the Proxy form. If any one or more of such nominees should for any reason become
unavailable for election, the Board of Directors may vote for the election of
such substitute nominees as the Board of Directors may propose. The accompanying
form of proxy contains a discretionary grant of authority with respect to this
matter. Each Director presently serves for a term of one year or until their
successor is elected.
The nominees for election as directors at the Annual Meeting are set forth
below.
Director or Position with
Name Age Officer since the Company
- ---- --- ------------- -----------
Randall A. Mackey, Esq. 56 January 1998 Chairman of the Board
Lowell K. Anderson, D.M.D. 59 January 1998 Director
Richard Gommermann 45 April 2001 Director
Joe K. Johnson 44 April 2001 Director
Biographical Information
There is no family relationship among the current directors and executive
officers. The following sets forth brief biographical information for each
director of Cimetrix.
Randall A. Mackey has served as a director of the Company since January
1998 and as Chairman of the Board since June 2001. Mr. Mackey has been President
of the Salt Lake City law firm of Mackey, Price & Williams since 1992, and a
shareholder and director of the firm and its predecessor firms since 1989. From
1979 to 1989, he practiced law with the Salt Lake City law firm of Fabian &
Clendenin, where he was a shareholder and director of the firm from 1982 to
1989. From 1977 to 1979, Mr. Mackey was associated with the Washington, D.C. law
firm of Hogan & Hartson. Mr. Mackey received a B.S. degree in Economics from the
University of Utah in 1968, an M.B.A. degree from Harvard University in 1970, a
J.D. degree from Columbia University in 1975 and a B.C.L. degree from Oxford
University in 1977. He has served as a director since January 2000 and from
November 1995 to September 1998 of Paradigm Medical Industries, Inc., which
develops, manufactures and sells ophthalmic surgical systems. Mr. Mackey has
also served as Chairman of the Board since July 2000 and as a trustee since 1993
of Salt Lake Community College.
Lowell K. Anderson, D.M.D. has served as a director of the Company since
January 1998. Dr. Anderson has practiced oral and maxillofacial surgery from
1975 to the present. From 1973 to 1975, he served as a Major in the United
States Air Force. From 1970 to 1973, Dr. Anderson did his residency at the Mayo
Clinic and Mayo Graduate School of Medicine. He graduated from the University of
Louisville Dental School with honors in 1966. Dr. Anderson is currently a member
of the Brigham Young University Alumni Board. Dr. Anderson also served as
president of the Western Society of Oral and Maxillofacial Surgeons,
representing over 600 surgeons.
-2-
Richard Gommermann has served as a director of the Company since April
2001. Since 2000, Mr. Gommermann has been President and Chief Executive Officer
of RNG Capital, Inc., a finance and consulting firm in the telecommunications
industry and internet market. From 1999 to 2000, he was President, Chief
Operating Officer and co-founder of GiantRewards, Inc., an e-promotions and
offline marketing and technology company. Prior to co- founding GiantRewards,
Inc., he spent 16 years at U.S. West in various marketing, finance, legal, and
sales positions. In his last position at U.S. West, he managed a $140 million
distribution channel. Mr. Gommermann received B.A., M.A. and M.B.A. degrees from
Creighton University. He also spent 18 months in graduate studies at Gutenberg
University in Mainz, Germany.
Joe K. Johnson has served as a director of the Company since April 2001.
Since 1998, Mr. Johnson has been the manager of Aspen Capital Resources, LLC, an
investment company that provides bridge financing to public companies. Aspen
Capital Resources, LLC has financed 12 companies since 1998, and is currently a
major shareholder in several firms. From 1983 to 1998, Mr. Johnson was President
of Aspen Finance, a Salt Lake City insurance agency. Mr. Johnson attended the
University of Utah, majoring in Finance. He left the University of Utah in 1983
to pursue a career in the insurance industry. Mr. Johnson served as a director
of Covol Technologies, Inc. from 1998 to 1999 and has served as a director of
First Scientific, Inc. since April 2001.
Board Meetings and Committees
The Company's Board of Directors met sixteen times during 2001. Each of the
Company's directors attended at least 75% of the meetings of the Board of
Directors. All directors of the Company hold office until the next annual
meeting of share owners and until their successors have been elected and
qualified.
The Company has Audit and Compensation Committees with its Board of
Directors, all of which are independent outside directors, serving in its
entirety as these committees.
Report of the Audit Committee
The Company has an Audit Committee consisting of the four non-management
directors, Lowell K. Anderson, Richard Gommerman, Joe K. Johnson and Randall A.
Mackey. Each member of the audit committee is considered independent and
qualified in accordance with applicable independent director and audit committee
listing standards. The Company's Board of Directors has adopted a written
charter for the Audit Committee and included such charter as an appendix to this
proxy statement.
During the year 2001, the Audit Committee met two times. The Audit
Committee has met with management and discussed the Company's internal controls,
the quality of the Company's financial reporting, the results of internal and
external audit examinations, and the audited financial statements. In addition,
the Audit Committee has met with the Company's independent auditors, Tanner +
Co., and discussed all matters required to be discussed by the auditors with the
Audit Committee under Statement on Auditing Standards No. 61 (communication with
audit committees). The Audit Committee received and discussed with the auditors
their annual written report on their independence from the Company and its
management, which is made under Independence Standards Board Standard No. 1
(independence discussions with audit committees), and considered with the
auditors whether the provision of financial information systems design and
implementation and other non-audit services provided by them to the Company
during 2001 was compatible with the auditors' independence.
In performing these functions, the Audit Committee acts only in an
oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Company's management, which is responsible for the
integrity of the Company's internal controls and its financial statements and
reports, and the Company's independent auditors, who are responsible for
performing an independent audit of the Company's financial statements in
accordance with generally accepted auditing standards and for issuing a report
on these financial statements.
-3-
Pursuant to the reviews and discussions described above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, for filing with the Securities and Exchange
Commission.
Executive Officers
The following table sets forth certain biographical information with
respect to the executive officers of the Company:
Name Age Title
---- --- -----
Robert H. Reback 42 President and Chief Executive Officer
David P. Faulkner 46 Executive Vice President and Managing
Director of Machine Control Products
Steven D. Hausle 51 President Semiconductor Division
Michael D. Feaster 31 Vice President of Software Development
Steven K. Sorensen 43 Vice President and Chief Technical Officer
Riley G. Astill 41 Vice President of Finance, Chief Financial
Officer, Treasurer and Secretary
Each officer serves at the discretion of the Board of Directors. There are
no family relationships between any of the officers and/or between any of the
officers and directors.
Robert H. Reback has served as President and Chief Executive Officer of the
Company since June 2001. He joined the Company as Vice President of Sales in
January 1996, was appointed as Executive Vice President of Sales in January
1997, to the Office of the President in January 2001, and as President and Chief
Executive Officer in June 2001. From 1994 to 1995, Mr. Reback was the District
Manager of Fanuc Robotics' West Coast business unit. From 1985 to 1993, he was
Director of Sales and Account Executives for Thesis, Inc., a privately-owned
supplier of factory automation software. Prior to that, Mr. Reback was a senior
automation engineer at Texas Instruments. Mr. Reback has a B.S. degree in
Mechanical Engineering and a M.S. degree in Industrial Engineering from Purdue
University.
David P. Faulkner has served as Executive Vice President and Managing
Director of Machine Control Products since June 2001. He joined the Company as
Executive Vice President of Operations in August 1996, was appointed Executive
Vice President of Marketing in January 1997, and Managing Director of Machine
Control Products in June 2001. From 1986 to 1996, Mr. Faulkner was employed as
manager of PLC Marketing, manager of Automotive Operations and district sales
manager for GE Fanuc Automation, a global supplier of factory automation
computer equipment specializing in programmable logic controllers, factory
software and computer numerical controls. Mr. Faulkner has a B.S. degree in
Electrical Engineering and an M.B.A. degree from Rensselaer Polytechnic
Institute.
Steven D. Hausle has served as President and General Manager of the
Semiconductor Division of the Company since March 2001. From May 2000 to March
2001, he was Vice President and General Manager of the Company's Semiconductor
Division. From 1999 to 2000, Mr. Hausle was Executive Vice President for GW
Associates, Inc., a privately owned software developer. From 1988 to 1999, he
was President of Bridgetek, Inc., a sales and marketing firm that brought
leading edge technology start-up firms to market. From 1986 to 1988, Mr. Hausle
was Vice President Sales and Marketing for Flexible Manufacturing Systems, an
early adopter of Automated Material handling and CIM software. From 1983 to
1986, he was a member of the management team that started Prometrix Inc., which
is now part of KLA- Tencor. Mr. Hausle holds a B.S. degree from Santa Clara
University.
-4-
On March 18, 2002, Mr. Hausle was suspended, pending investigation by the
Company into alleged violations of Company policy and Company proprietary
interests. On April 12, 2002, Mr. Hausle, Daniel J. Garnett M.D., Stephanie A.
Garnett, Axcient Corporation, and Ronald Tripiano, as plaintiffs, filed suit
against the Company, Robert H. Reback and Randall A. Mackey, as defendants, in
United States District Court, Northern District of California, San Jose
Division, Case Number C02-01769. The complaint alleges breach of oral and
written contract, fraud, negligent misrepresentation, breach of privacy, unfair
competition, wrongful termination, negligence and shareholder derivative claims
for breach of fiduciary duties, constructive fraud, negligence, and seeks
injunctive and declaratory relief. The plaintiffs are demanding $16,000,000 and
a jury trial. The Company believes the complaint is without merit and intends to
vigorously defend the action.
Michael D. Feaster, has served as Vice President of Software Development of
the Company since December 1998. From April 1998 to December 1998, he was
Director of Customer Services of the Company. From 1994 to 1998, Mr. Feaster was
Vice President of Software Development at Century Software, Inc. During that
time, Century Software, Inc. was a global supplier of PC to UNIX connectivity
software, specializing in internet access of Windows to legacy mission critical
applications. From 1988 to 1994, he served as a software engineer contractor and
subcontractor for such companies as Fidelity Investments, IAT, Inc., NASA, and
Mexico's Border Inspection Division. Mr. Feaster attended Southwest Missouri
University from 1987 to 1990.
Dr. Steven K. Sorensen, has served as Vice President and Chief Technical
Officer of the Company since November 2001. Prior to that he served as Vice
President and Chief Engineer from May 1990 to November 2001. Prior to joining
the Company, Dr. Sorensen was an Associate Professor of Engineering at Brigham
Young University, Provo, Utah, where he received his Ph.D. degree in Mechanical
Engineering. Dr. Sorensen has been working to develop the Company's technology
for the past thirteen years and is one of the principal architects of many of
the Company's most important products.
Riley G. Astill, has served as Vice President of Finance, Treasurer, Chief
Financial Officer and Secretary. He had originally joined the Company as
Controller in July 1994. He remained Controller until October 1996, when he left
the Company prior to its moving its accounting department to Tampa, Florida. Mr.
Astill rejoined the Company as Vice President of Finance, Treasurer, Chief
Financial Officer and Secretary in December 1997. Mr. Astill was Controller of
ArtBeats, Inc., a privately held Salt Lake City publisher from 1991 to 1994, and
was responsible for all financial controls and reporting. From 1990 to 1991, he
was a senior accountant for Oryx Energy Company, located in Dallas, Texas
working in their state tax compliance department. From 1988 to 1990 he was an
accountant at Ernst & Young in Dallas, Texas, performing tax compliance and
audit services. He has a B.S. degree in Accounting from the University of Utah
and a M.S. degree in Accounting from Utah State University, located in Logan,
Utah.
-5-
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Director Compensation
Directors of the Company receive no cash compensation, but are reimbursed
for expenses. Each director has been granted stock options to purchase shares of
common stock at an exercise price per share in excess of the market price at the
time of grant. Options vest immediately and become exercisable at a pro rata
amount each month, such that 100% of the options become exercisable within one
year after the date of grant. The following table summarizes the options held by
each of the Company's directors.
Exercise Exercise Exercise
Name Price $1.00 (1) Price $2.50 (2) Price $3.50 (3)
- ---- -------------- -------------- ---------------
Lowell K. Anderson 50,000 56,000 24,000
Joe K. Johnson 50,000 0 0
Richard Gommermann 50,000 0 0
Randall A. Mackey 50,000 56,000 24,000
- ---------------------------
(1) All options exercisable at $1.00 per share were granted in July 2001.
(2) Messrs. Anderson and Mackey were each granted options to purchase 8,000,
24,000 and 24,000 shares of the Company's common stock, in January 1998, June
1998 and June 1999, respectively.
(3) All options exercisable at $3.50 per share were granted in June 2000.
1998 Director Stock Option Plan
On January 23, 1998, the Company adopted the 1998 Directors Stock Option Plan
(the "Director Plan"). The Director Plan provides for the grant by the Company
of options to purchase up to an aggregate of 400,000 shares of common stock for
issuance thereunder. The Director Plan provides that each member of the
Company's Board of Directors who is not an employee of the Company automatically
is eligible to receive options to purchase the Company's common stock under the
Director Plan.
Effective as of January 23, 1998, and on each anniversary date thereafter during
the term of the Director Plan, each outside director is to automatically receive
options to purchase 24,000 shares of common stock. In addition, each new outside
director who shall first join the Board after the effective date is to be
granted options to purchase 24,000 shares upon the date which such person first
becomes an outside director and an annual grant of options to purchase 24,000
shares on each anniversary date thereafter during the term of the Director Plan.
On July 10, 2001, the Directors Plan was amended to increase the number of
options granted to each outside Director, when such director first becomes an
outside director and on each anniversary date thereafter, to options to purchase
50,000 shares of common stock. The options granted to outside directors shall
vest in their entirety on the first anniversary date of the grant and are
exercisable while the outside director remains a director of the Company and for
a period of five years thereafter. The primary purpose of the Director Plan is
to enhance the Company's ability to attract and retain well-qualified persons
for service as directors and to provide incentives to such directors to continue
their association with the Company.
In the event of a merger of the Company with or into another company, or a
consolidation, acquisition of stock or assets or other change in control
transaction involving the Company, such options become exercisable in full,
unless such options are assumed by the successor corporation. In the event the
transaction is not approved by a majority of the "continuing directors" (as
defined in the Director Plan), such options become fully vested and exercisable
in full immediately prior to the consummation of such transaction, whether or
not assumed by the successor corporation.
-6-
Executive Officer Compensation
The following table discloses compensation, for the three fiscal years ended
December 31, 2001, 2000 and 1999, paid by the Company to the named executive
officers whose annual compensation equals or exceeds $100,000 (collectively the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-----------------------------------------
Awards Payout
Annual Compensation ------------------------- ------
------------------------------------- Restricted Securities Long-term
Stock Underlying Incentive All Other
Name and Principal Position Year Salary($) Bonus($) Other Awards ($) Options Payout ($) Compensation
- --------------------------- ---- --------- -------- ----- ---------- ---------- ---------- ------------
Robert H. Reback, President 2001 145,000 0 0 0 650,000 0 9,175 (1)
and Chief Executive Office 2000 133,713 20,000 (7) 0 0 100,000 0 7,670 (1)
1999(8) 120,000 0 0 0 0 0 7,236 (1)
Paul A. Bilzerian, former 2001 7,558 0 0 0 0 0 89 (2)
President and Chief 2000 137,079 0 0 0 0 0 1,069 (2)
Executive Officer 1999 120,000 0 0 0 0 0 1,069 (2)
David P. Faulkner, Executive 2001 145,000 0 0 0 500,000 0 8,925 (3)
Vice President and Director 2000 120,000 15,000 (7) 0 0 100,000 0 7,670 (3)
Machine Control Sales 1999 120,000 0 0 0 100,000 0 6,336 (3)
Steven D. Hausle, President 2001 220,000 0 0 0 0 0 5,632 (4)
Semiconductor Division 2000 128,333 0 0 0 200,000 0 3,269 (4)
1999(9) n/a
Michael D. Feaster, Vice 2001 123,500 0 0 0 300,000 0 5,537 (5)
President of Software Dev 2000 114,328 10,000 (7) 0 0 100,000 0 5,208 (5)
1999 100,000 0 0 0 65,000 0 4,953 (5)
Steven K. Sorensen, Vice 2001 97,500 0 0 0 300,000 0 2,859 (6)
President and Chief 2000 97,369 5,000 (7) 0 0 0 0 2,436 (6)
Technical Officer 1999 82,082 0 0 0 100,000 0 2,389 (6)
- -------------------
(1) Includes matching contributions of $2,400, $2,400 and $2,200 to the
Company's 401k plan for years 2001, 2000 and 1999, respectively. Includes
$1,175, $1,070, and $836, for term life insurance premiums in 2001, 2000
and 1999, respectively. Also includes $5,600, $4,200 and $4,200 for an
automobile allowance in 2001, 2000 and 1999, respectively.
(2) Includes $89, $1,069, and $1,069, for term life insurance premiums in 2001,
2000 and 1999, respectively.
(3) Includes matching contributions of $2,150, $2,400, and $2,000 to the
Company's 401k plan for 2001, 2000 and 1999, respectively. Includes $1,175,
$1,070, and $836 for term life insurance premiums in 2001, 2000 and 1999,
respectively. Also includes $5,600, $4,200 and $4,200 for an automobile
allowance in 2001, 2000 and 1999, respectively.
(4) Includes matching contributions of $4,228 and $2,567 to the Company's 401k
plan for 2001 and 2000, respectively. Includes $1,404 and $702 for term
life insurance premiums in 2001 and 2000, respectively.
(5) Includes matching contributions of $260 to the Company's 401k plan for year
2001. Also includes $1,077, $1,008, and $753 for term life insurance
premiums in 2001, 2000 and 1999, respectively. Also includes $4,200, for an
automobile allowance in 2001, 2000 and 1999.
(6) Includes matching contributions of $1,947, $1,700 and $1,631to the
Company's 401k plan for 2001, 2000 and 1999, respectively. Includes $912,
$805 and $758 for term life insurance premiums in 2001, 2000 and 1999,
respectively.
(7) Bonus amounts listed on the table are shown in the year they were earned.
Actual payments were made in the subsequent fiscal period.
(8) Was Executive Vice-President of Sales in the years indicated.
(9) Did not hold position in the periods indicated.
-7-
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant of
stock options to the person named in the Summary Compensation Table during the
fiscal year ended December 31, 2001.
Individual Grants
----------------------------------------------------------- Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for
Options Employees in Price Per Expiration Option Term ($) (1)
Name Granted (#) Fiscal Year Share ($) Date 5% 10%
- ---- ----------- ----------- -------------------------- -------- --------
Robert H. Reback 650,000 30 1.00 11/29/06 0 0
David P. Faulkner 500,000 23 1.00 11/29/06 0 0
Steven D. Hausle 0 n/a n/a n/a n/a n/a
Michael D. Feaster 300,000 14 1.00 11/29/06 0 0
Steven K. Sorensen 300,000 15 1.00 11/29/06 0 0
- ------------
(1) Potential realizable value is based on the assumption that the common stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the 5 year option term,
using the market price on the date of the grant, which was $.40, as the
beginning value. The real value of the options depends on the actual
appreciation of the value of the Company's common stock. These numbers do
not reflect the Company's estimates of future stock price growth and no
assurance exists that the price of the Company's common stock will
appreciate at the rates assumed in the table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End (#) Fiscal Year-End ($)(1)
Acquired on Value ------------------------------ ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ----------- ------------- ----------- -------------
Robert H. Reback 0 0 391,666 558,334 0 0
David P. Faulkner 0 0 316,667 483,333 0 0
Steven D. Hausle 0 0 50,000 150,000 0 0
Michael D. Feaster 0 0 183,750 316,250 0 0
Steven K. Sorensen 0 0 175,000 225,000 0 0
_______________
(1) The product of, the closing market value of the Company's common stock at
December 31, 2001, of $.32, minus the respective exercise prices of $1.00,
$2.50, $3.00, or $3.50, and the number of options in each category.
1998 Incentive Stock Option Plan
The Company adopted a 1998 Stock Option Plan (the "Plan") for officers and
employees of the Company on May 16, 1998. The Plan authorized the granting of
stock options ("Plan Options") to purchase an aggregate of not more than
2,000,000 shares of the Company's Common Stock. On June 2, 2001, the Company's
shareholders approved an amendment to the Plan to increase the number of shares
of Common Stock reserved for issuance thereunder from 2,000,000 shares to
3,000,000 shares.
-8-
The Plan is administered by the Compensation Committee. In general, the
Compensation Committee will select the person to whom options will be granted
and will determine, subject to the terms of the Plan, the number, exercise, and
other provisions of such options. Options granted under the Plan will become
exercisable at such times as may be determined by the Compensation Committee.
Plan Options are incentive stock options ("ISOs"), as such term is defined in
the Internal Revenue Code. ISOs may only be granted to persons who are employees
of the Company. ISOs may be granted to any employee of the Company, as the
Compensation Committee believes has contributed, or will contribute, to the
success of the Company. The Compensation Committee shall determine the exercise
price of options granted under the Plan, provided that, such price may not be
less than 100% (110% in the case of ISOs granted to holders of 10% of voting
power of the Company's stock) of the fair market value (as defined in the Plan)
of the Common Stock on the date of grant. The aggregate fair market value
(determined at the time of option grant) of stock with respect to which ISOs
become exercisable for the first time in any year cannot exceed $100,000.
The term of each Option shall not be more than 10 years (five years in the
case of ISOs granted to holders of 10% of the voting power of the Company's
stock) from the date of grant. The Board of Directors has a right to amend,
suspend or terminate the Plan at any time; provided, however, that unless
ratified by the Company's shareholders, no amendment or change in the Plan will
be effective which would increase the total number of shares which may be issued
under the Plan, materially increase the benefits accruing to persons granted
under the Plan or materially modify the requirements as to eligibility and
participation in the Plan. No amendment, supervision or termination of the Plan
shall, without the consent of an employee to whom an option shall heretofore
have been granted, affect the rights of such employee under such option.
Employment Agreements
The Company has entered into an employment agreement, effective November
30, 2001, with Robert H. Reback. The agreement provides that Mr. Reback be
employed as President and Chief Executive Officer of the Company for a term
ending December 31, 2003. In the agreement, Mr. Reback is to receive an annual
salary of $150,000, which is subject to increases as the Board of Directors
determines. In addition, Mr. Reback is eligible to receive a cash bonus at the
end of each fiscal year, upon the satisfaction of the performance objectives
that shall be determined by the Board of Directors on an annual basis.
The employment agreement also provides for the grant of stock options under
the 1998 Incentive Stock Option Plan to purchase 650,000 shares of the Company's
common stock, at an exercise price of $1.00 per share. The options are
exercisable over a five year period from the date of grant and vest in equal
amounts on December 31, 2001, 2002 and 2003. In addition, the employment
agreement provides that Mr. Reback cannot compete with the Company during the
term of the agreement and for a period of two years thereafter.
The agreement further provides for severance pay equal to Mr. Reback's
annual salary in effect, but not more than the salary left to be paid during the
remainder of the agreement, if Mr. Reback is terminated without cause by the
Company or resigns for "good reason" (as such terms are defined in the
agreement) and, in such events, all of Mr. Reback's options under the Company's
stock option plan become fully exercisable for their remaining term. If a change
in control of the Company occurs, Mr. Reback is entitled to accelerated vesting
of his options.
The Company has entered into employment agreements, effective November 30,
2001, with each of David P. Faulkner, Michael D. Feaster, Dr. Steven K. Sorensen
and Riley G. Astill. The respective agreements provide that Mr. Faulkner be
employed as Executive Vice President and Managing Director of Machine Control
Products, that Mr. Feaster be employed as Vice President of Software
Development, that Dr. Sorensen be employed as Vice President and Chief Technical
Officer, and that Mr. Astill be employed as Vice President of Finance and Chief
Financial Officer. The term of each agreement ends on December 31, 2003. Under
the respective agreements, Mr. Faulkner's annual salary is $150,000, Mr.
Feaster's annual salary is $125,000, Dr. Sorensen's annual salary is $100,000
and Mr. Astill's annual salary is $80,000 or, in each case, such higher salary
as the Board of Directors determines. Each agreement provides that the executive
officer is eligible to receive a cash bonus at the end of each fiscal year, upon
the satisfaction of performance objectives as shall be determined by the
President and Chief Executive Officer of the Company on an annual basis.
The respective employment agreements provide for the granting of stock
options under the 1998 Incentive Stock Option Plan to purchase shares of the
Company's common stock, at an exercise price of $1.00 per share. The options are
exercisable over a five-year period from the date of grant and vest in equal
amounts on December 31, 2001, 2002 and 2003. Under the respective agreements,
Mr. Faulkner is granted options to purchase 500,000 shares of common stock, Mr.
Feaster is granted options to purchase 200,000 shares of common stock, Dr.
Sorensen is granted options to purchase 300,000 shares of common stock and Mr.
Astill is granted options to purchase 150,000 shares of common stock. Each
agreement also provides that the executive officer cannot compete with the
Company during the term of the agreement and for a period of two years
thereafter.
-9-
<page>
Each agreement further provides for severance pay in an amount equal to six
months of the annual salary then payable to the executive officer, but not more
than the salary left to be paid for the remainder of the agreement, if the
executive is terminated without cause by the Company or resigns for "good
reason" (as such terms are defined in the agreements) and, in such events, all
of the options under the option plan become fully exercisable for their
remaining term. If a change of control of the Company occurs, each executive
officer is entitled to accelerated vesting of his options.
The Company entered into a letter agreement, effective May 15, 2000, with
Steven D. Hausle, providing for the employment of Mr. Hausle for a period of two
years ending May 15, 2002, with an annual salary of not less than $220,000. The
agreement further provides for the grant of stock options under the 1998
Incentive Stock Option Plan to purchase 200,000 shares of the Company's common
stock, at an exercise price of $5.00 per share. The options are exercisable over
a five-year period from the date of grant and vest 25% per year on the
anniversary of the grant date.
REPORT ON EXECUTIVE OFFICER COMPENSATION
The Board of Directors reviewed and approved the compensation and fringe
benefits for the Company's officers, consisting of six persons. The Board
evaluates the performance of all officers, and administers the Company's
compensation program for its officers.
Compensation Philosophy
The Company's compensation philosophy for officers conforms to its
compensation philosophy for all employees generally. The Company's compensation
is designed to:
- - Provide compensation comparable to that offered by companies with similar
business, allowing the Company to successfully attract and retain the
employees necessary to its long-term success.
- - Provide compensation that rewards individual achievement and differentiates
among employees based upon individual performance.
- - Provide incentive compensation that varies according to both the Company's
success in achieving its performance goals and the employee's contribution
to that success; and
- - Provide an appropriate linkage between employee compensation and the
creation of share owner value through awards that are tied to the Company's
financial performance and by facilitating employee stock ownership.
In furtherance of these goals, the Company's officers' compensation
comprises salary, annual cash bonuses, long-term incentive compensation in the
form of stock options and various fringe benefits, including medical benefits
and a 401(k) savings plan.
Salaries
The Compensation Committee reviewed the salaries of all the officers of the
Company for fiscal year 2001. Salary decisions concerning the officers were
based upon a variety of considerations in conformance with the compensation
philosophy stated above. First, salaries were competitively set relative to both
other companies in the software industry and other comparable companies. Second,
the Board of Directors considered each officer's level of responsibility and
individual performance, including an assessment of the person's overall value to
the Company. Third, internal equity among employees was factored into the
decision. Finally, the Board of Directors considered the Company's financial
performance and its ability to absorb any increases in salaries.
Bonuses
Each officer is eligible to receive an annual cash bonus that is generally
paid pursuant to an incentive compensation formula established at the beginning
of a year in connection with the preparation of the Company's operating budget
for the year. In formulating decisions with respect to cash bonus awards, the
Board of Directors evaluates each officer's role and responsibility in the
Company and other factors that the Board deems relevant to motivate each officer
to achieve strategic performance goals.
-10-
Stock Options
The Company has a stock option plan (the 1998 Incentive Stock Option Plan)
that is designed to align the interests of the share holders and the Company's
officers in the enhancement of share owner value. Stock options are granted
under the plan by an administrative committee comprising disinterested members
of the Board of Directors. Stock options are granted at an exercise price not
lower than the fair market value of the Company's common stock on the date of
grant. In formulating its recommendations to the administrative committee for
the stock option plan, the Board of Directors evaluates the Company's overall
financial performance for the year, the desirability of long-term service from
an officer and the number of stock options held by other officers in the Company
who have the same, more or less responsibility. To encourage long-term
performance, the stock options granted in fiscal year 2001 vest ratably over a
four-year period and expire five years after the date of grant.
Chief Executive Officer Compensation
Since June 2001, Robert H. Reback was the President and Chief Executive
Officer of the Company. The total compensation for Mr. Reback for fiscal year
2001 is disclosed in the "Summary Compensation Table" above, and primarily
consisted of salary and stock options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April l, 1999, the Company entered into an agreement with Bicoastal
Holding Company providing for the continued services of Paul A. Bilzerian, then
President and Chief Executive Officer of the Company. The agreement required the
Company to pay Bicoastal Holding Company for Mr. Bilzerian's services at a rate
of $10,000 per month through December 31, 2000, and a $1,500 monthly living
allowance. On September 15, 2000, Mr. Bilzerian resigned as a director of the
Company, and the Company hired Bilzerian directly as its President, buying out
the remainder of the contract with Bicoastal Holding Company for $35,750. On
January 30, 2001, Mr. Bilzerian resigned as President of the Company.
In February 2000, the Company contracted to purchase an automobile for Paul
A. Bilzerian, then President and Chief Executive Officer of the Company, and his
family. The purchase agreement required the Company to make monthly payments of
$588 over a period of 60 months, beginning on February 1, 2001. Terri L.
Steffen, wife of Mr. Bilzerian, agreed to make all payments under the purchase
agreement. In July 2001, the Company obtained the automobile from Ms. Steffen
and sold it at a loss of $10,980. Ms. Steffen has made all required payments
under the purchase agreement prior to the date of the sale. However, the $10,980
loss that the Company incurred on the sale of the automobile has not been
repaid.
In May 2000, the Company purchased a residential property, which it
immediately resold to Michael D. Feaster, the Company's Vice President of
Software Development. The Company received in return a promissory note, with a
principal of $417,557, bearing interest at 10%, secured by the property.
Interest payments were to be made twice each month, with the principal due on
May 31, 2002. On April 3, 2001, Mr. Feaster paid $379,200, leaving a balance due
on the note in the amount of $38,357. On April 27, 2001, Mr. Feaster paid the
remaining balance on the note.
On January 18, 2001, the Company loaned Paul A. Bilzerian, then President
and Chief Executive Officer, a total of $22,000 to pay for legal expenses. Mr.
Bilzerian signed a promissory note with the Company, which requires the payment
of the outstanding principal balance of the note plus accrued interest at the
rate of 10% annually upon demand. Lowell K. Anderson, a director of the Company,
signed an unconditional guarantee that guarantees payment of the note, and a
stock pledge agreement, in which Mr. Anderson pledged 10,000 shares of the
Company's common stock to secure the loan.
Randall A. Mackey, Chairman of the Board of the Company, is President and a
shareholder of the law firm of Mackey Price & Williams, which has rendered legal
services to the Company. Legal fees and expenses paid to Mackey Price & Williams
for fiscal years ending December 31, 2000 and 2001 totaled $27,964, and
$135,825, respectively.
-11-
On March 18, 2002, Steven D. Hausle, President of the Company's
semiconductor division, was suspended pending investigation by the Company into
alleged violations of Company policy and Company proprietary interests. On April
12, 2002, Mr. Hausle, Daniel J. Garnett M.D., Stephanie A. Garnett, Axcient
Corporation, and Ronald Tripiano, as plaintiffs, filed suit against the Company,
Robert H. Reback and Randall A. Mackey, as defendants, in United States District
Court, Northern District of California, San Jose Division, Case Number
C02-01769. The complaint alleges breach of oral and written contract, fraud,
negligent misrepresentation, breach of privacy, unfair competition, wrongful
termination, negligence and shareholder derivative claims for breach of
fiduciary duties, constructive fraud, negligence, and seeks injunctive and
declaratory relief. The plaintiffs are demanding $16,000,000 and a jury trial.
The Company believes the complaint is without merit and intends to vigorously
defend the action.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and greater than 10% shareholders to file reports
of ownership and periodic changes in ownership of the Company's common stock
with the Securities and Exchange Commission. Such persons are also required to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of stock reports received by it
with respect to fiscal 2001, or written representations from certain reporting
persons, the Company believes that all filing requests applicable to its
directors, officers and greater than 10% beneficial owners were compiled with,
except that (i) Dr. Lowell K. Anderson, Richard Gommermann, Joe K. Johnson and
Randall A. Mackey, directors of the Company, through an oversight, each filed a
late Form 5 reporting the receipt of stock options; and (ii) Robert H. Reback,
David P. Faulkner, Dr. Steven K. Sorensen, Michael D. Feaster and Riley G.
Astill, officers of the Company, through an oversight, each filed a late Form 5
reporting the receipt of stock options.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Company's common stock (inclusive of options or warrants), as
of April 15, 2001, for (i) each executive officer of the Company; (ii) each
director of the Company; and (iii) each beneficial owner of more than 5% of the
Company's common stock; and (iv) all executive officers and directors as a
group:
Percent of
Name and Address(1) Number of Shares Ownership (13)
- ------------------------------------ ---------------- --------------
Securities and Exchange Commission v. 6,207,649 25.8%
Paul A. Bilzerian et al., Civil Action
89-1854 (SSH) Receivership Estate
1994 Bilzerian Irrevocable Trust (2) 1,648,500 6.9%
Joe K. Johnson (3) 1,516,361 6.3%
Dr. Lowell K. Anderson (4) 285,450 1.2%
Richard Gommermann (5) 260,350 1.1%
Randall A. Mackey (6) 130,000 *
Robert H. Reback (7) 537,666 2.2%
Steven K. Sorensen (8) 442,390 1.8%
Michael D. Feaster (9) 233,750 1.0%
David P. Faulkner (10) 396,667 1.6%
Steven D. Hausle (11) 50,000 *
Riley G. Astill (12) 137,500 1.0%
Executive officers and directors
as a group (10 persons) 3,990,134 15.4%
- ----------------------------
* Less than 1%.
-12-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT(continued)
(1) The address for the Receivership Estate is Piper Murbury Rudnick & Wolfe
LLP, 1200 Nineteenth Street, N.W., Washington, D.C. 20036-2412. The address
for the 1994 Bilzerian Irrevocable Trust is Park Tower, Suite 2630, 400
North Tampa Street, Tampa, Florida 33602. The address for Mr. Johnson is
8989 South Schofield Circle, Sandy, Utah 84093. The address for Dr.
Anderson is 2848 North Foothill Drive, Provo, Utah 84604. The address for
Mr. Mackey is 1474 Harvard Avenue, Salt Lake City, Utah 84105. The address
for Mr. Gommermann is 515 Ash Street, Denver, Colorado 80220. The addresses
for Messrs. Reback, Sorensen, Feaster, Faulkner, Hausle and Astill are c/o
Cimetrix Incorporated, 6979 South High Tech Drive, Salt Lake City, Utah
84047-3757.
(2) Under the terms of the Final Judgment by Consent Against Terri L. Steffen,
Overseas Holding Limited Partnership, Overseas Holding Co., Bicoastal
Holding Co., The Paul A. Bilzerian and Terri L. Steffen 1994 Irrevocable
Trust, Loving Spirit Foundation and Puma Foundation, Civil Action No.
89-1854 (RCL), dated January 16, 2002, Judge Royce C. Lamberth of the
United States District Court for the District of Columbia ordered that such
shares be subject to an irrevocable proxy in favor of the court appointed
receiver who is Deborah R. Meshulan of the Washington, D.C. law firm of
Piper Marbury Rudnick & Wolfe LLP until such shares are disposed of in an
arms-length transaction. The legal name of the 1994 trust is "The Paul A.
Bilzerian and Terri L. Steffen 1994 Irrevocable Trust for the benefit of
Adam J. Bilzerian and Dan B. Bilzerian".
(3) Includes 50,000 shares of common stock which Mr. Johnson has the right to
acquire within 60 days upon the exercise of stock options.
(4) Includes 130,000 shares of common stock which Dr. Anderson has the right to
acquire within 60 days upon the exercise of stock options.
(5) Includes 12,500 shares of common stock which Mr. Gommermann has the right
to acquire within 60 days upon the exercise of warrants. Also includes
50,000 shares of common stock which Mr. Gommermann has the right to acquire
within 60 days upon the exercise of stock options.
(6) Includes 130,000 shares of common stock which Mr. Mackey has the right to
acquire within 60 days upon the exercise of stock options.
(7) Includes 466,666 shares of common stock which Mr. Reback has the right to
acquire within 60 days upon the exercise of stock options.
(8) Includes 200,000 shares of common stock which Mr. Sorensen has the right to
acquire within 60 days upon the exercise of stock options.
(9) Includes 233,750 shares of common stock which Mr. Feaster has the right to
acquire within 60 days upon the exercise of stock options.
(10) Includes 391,667 shares of common stock which Mr. Faulkner has the right to
acquire within 60 days upon the exercise of stock options. Also includes
5,000 shares of common stock which Mr. Faulkner has the right to acquire
within 60 days upon the exercise of warrants.
(11) Includes 50,000 shares of common stock which Mr. Hausle has the right to
acquire within 60 days upon the exercise of stock options.
(12) Includes 137,500 shares of common stock which Mr. Astill has the right to
acquire within 60 days upon the exercise of stock options.
(13) All applicable percentage ownership is based on 24,025,968 shares of common
stock outstanding as of the Record Date, together with applicable options
and warrants for the share owners. Shares of common stock subject to
options currently exercisable or exercisable within 60 days after the
Record Date, are deemed outstanding for computing the percentage ownership
of the person holding the options, but are not deemed outstanding for
computing the percentage of any other person.
-13-
APPROVAL OF AMENDMENT TO THE 1998 STOCK OPTION PLAN
Proposal 2
The Board of Directors adopted on July 10, 2001, subject to the approval by
the shareholders, an amendment (the "2001 amendment") to the Company's 1998
Stock Option Plan. The 2001 Amendment increases from 3,000,000 to 4,000,000 the
number of shares of the Company's common stock available for issuance under the
1998 Stock Option Plan. This plan is explained earlier under the heading "1998
Incentive Stock Option Plan".
The Company has in the past used, and intends in the future to use, stock
options as incentive devices to motivate and compensate its salaried officers
and other key employees, and believes that equity incentives represented by
stock options enhances the Company's ability in attracting and retaining the
best possible persons for positions of significant responsibility by providing
its officers and other key employees with additional incentives to contribute to
the Company's long-term success.
Management further believes the availability of such equity incentives has
served, and will continue to serve, an important part of the Company's
compensation package. As of April 30, 2002, options to purchase an aggregate of
27,500 shares of common stock have been exercised under the 1998 stock option
plan; as of such date, options to purchase 3,619,500 shares of common stock were
outstanding under the 1998 Stock Option plan. Accordingly, no options are
available for future grants and some existing option grants will be rescinded if
additional shares are not approved for issuance.
The Board of Directors recommends that the shareholders vote "for" approval
of the 2001 Amendment.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Proposal 3
The Audit Committee has recommended and the Board of Directors has
appointed Tanner + Co., to serve as the Company's auditors for the fiscal year
ended December 31, 2002. Tanner + Co. has audited the Company's financial
statements since fiscal 1997. Representatives from the firm are expected to be
present at the Annual Meeting of Shareholders, where they will have an
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
The Board of Directors recommends that the shareholders vote "for"
ratification of the appointment of Tanner + Co. as the Company's independent
public accountants for fiscal 2002.
AUDIT FEES, FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
AND ALL OTHER FEES
Fees for the year 2001 annual audit and related quarterly reviews were
$35,825, financial information systems design and implementation fees were
$7,918 for the purchase and installation of new accounting software, and all
other fees were $8,992. Other fees consisted of preparation of corporate and
state tax returns, assistance in filing of reports on the EDGAR system of the
Securities and Exchange Commission, accounting consultations, and assistance
with other filings made with the Securities and Exchange Commission.
-14-
PERFORMANCE GRAPH
The following graph shows a comparison of the five year cumulative total
return for the Company's Common Stock, the Nasdaq Stock Market (U.S.) Index, and
the Nasdaq Computer and Data Processing Stocks Index, assuming an investment of
$100 on December 31, 1996. The cumulative return of the Company was computed by
dividing the difference between the price of the Company's Common Stock at the
end and the beginning of the measurement period (December 31, 1996 to December
31, 2001) by the price of the Company's Common Stock at the beginning of the
measurement period.
[GRAPHIC OMITTED]
-15-
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 (including audited financial statements) accompanies this
proxy statement. An additional copy will be furnished without charge to
beneficial stockholders or stockholders of record upon request to Riley G.
Astill, Vice President of Finance, Cimetrix Incorporated, 6979 South High Tech
Drive, Salt Lake City, Utah 84047-3757.
SHAREHOLDERS PROPOSALS
Shareholders who wish to include proposals for action at the Company's 2003
Annual Meeting of Shareholders in next year's proxy statement must, in addition
to other applicable requirements, cause their proposals to be received in
writing by the Company at its address set forth on the first page of this Proxy
Statement no later than January 1, 2003. Such proposals should be addressed to
the Company's Secretary and may be included in next year's proxy statement if
they comply with certain rules and regulations promulgated by the Securities and
Exchange Commission.
OTHER MATTERS
Management knows of no matters other than those listed in the attached
Notice of the Annual Meeting, which are likely to be brought before the Annual
Meeting. However, if any other matters should properly come before the Annual
Meeting or any adjournment thereof, the persons named in the enclosed proxy will
vote all proxies given to them in accordance with their best judgment of such
matters.
By Order of the Board of Directors,
/s/ Riley G. Astill
-----------------------------
Riley G. Astill
Vice President of Finance, Treasurer,
Chief Financial Officer and Secretary
Salt Lake City, Utah
April 30, 2002
-16-
APPENDIX A
CHARTER
OF THE
AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
CIMETRIX INCORPORATED
Adopted April 15, 2002
I. Purpose
The purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Cimetrix Incorporated (the "Company") is to assist
the Board in fulfilling its statutory and fiduciary oversight responsibilities
relating to the Company's financial accounting, reporting and controls. The
Committee's principal functions are to:
(a) Monitor the periodic reviews of the adequacy of the accounting and
financial reporting processes and systems of internal control that are
conducted by the Company's independent auditors, and the Company's
financial and senior management.
(b) Review and evaluate the independence and performance of the Company's
independent auditors.
(c) Facilitate communication among the Company's independent auditors, the
Company's financial and senior management, and the Board.
(d) Exercise an active oversight role with respect to the internal audit
function.
The Committee will fulfill these functions primarily by carrying out the
activities enumerated in Part IV of this charter. In furtherance of these
functions, the Committee shall have unrestricted access to Company personnel and
documents, and shall have authority to direct and supervise an investigation
into any matters within the scope of its duties, including the power to retain
outside counsel in connection with any such investigation.
While the Audit Committee has the responsibilities and powers set forth in
this charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the Company's independent auditors. Nor is it
the duty of the Committee to conduct investigations, to resolve disagreements,
if any, between management and its independent auditors or to assure compliance
with laws and regulations and the Company's policies and procedures.
II. Membership
All members of the Committee will be appointed by, and shall serve at the
discretion of, the Board. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the Committee
membership.
-1-
As of April 15, 2002, the Committee shall consist of three or more members
of the Board, with the exact number being determined by the Board. Each member
of the Committee shall have the ability to read and understand fundamental
financial statements (or become able to do so within a reasonable time after
joining the Committee) and at least one member shall have prior experience in
accounting, financial management or financial oversight, as required by the
Rules.
III. Meetings
Meetings of the Committee shall be held from time to time as determined by
the Board. The Committee should periodically meet with the independent auditors
out of the presence of management about internal controls, the fullness and
accuracy of the Company's financial statements and any other matters that the
Committee or these groups believe should be discussed privately with the
Committee. The Committee members, or the Chair of the Committee on behalf of all
of the Committee members, should communicate with management and the independent
auditors on a quarterly basis in connection with their review of the Company's
financial statements.
IV. Responsibilities and Duties - Independent Auditors
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities. These processes are set forth as
a guide with the understanding that the Committee may supplement them as
appropriate and may establish policies and procedures from time to time that it
deems necessary or advisable in fulfilling its responsibilities.
1. Review the Company's quarterly and annual financial statements, including
any report or opinion by the independent auditors, prior to distribution to
the public or filing with the Securities and Exchange Commission.
2. In connection with the Committee's review of the annual financial
statement:
(a) Discuss with the independent auditors and management the financial
statements and the results of the independent auditors' audit of the
financial statements.
(b) Discuss any items required to be communicated by the independent
auditors in accordance with SAS 61, as amended. These discussions
should include the independent auditors' judgments about the quality
and appropriateness of the Company's account principles, the
reasonableness of significant judgments, the clarity of the
disclosures in the Company's financial statements and any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
3. In connection with the Committee's review of the quarterly financial
statements:
(a) Discuss with the independent auditors and management the results of
the independent auditors' SAS 71 review of the quarterly financial
statements.
(b) Discuss significant issues, events and transactions and any
significant changes regarding accounting principles, practices,
judgments or estimates with management and the independent auditors,
including any significant disagreements among management and the
independent auditors.
4. Discuss any comments or recommendations of the independent auditors
outlined in their annual management letter. Approve a schedule for
implementing any recommended changes and monitor compliance with the
schedule.
-2-
5. Discuss with the independent auditors and management the periodic reviews
of the adequacy of the Company's accounting and financial reporting
processes and systems of internal control, including the adequacy of the
systems of reporting to the audit committee by each group.
6. Periodically consult with the independent auditors out of the presence of
management about internal controls, the fullness and accuracy of the
Company's financial statements and any other matters that the Company or
these groups believe should be discussed privately with the Committee.
7. Review the independence and performance of the independent auditors.
Recommend to the Board of Directors the appointment or discharge of the
independent auditors.
8. Communicate with the Company's independent auditors about the Company's
expectations regarding its relationship with the auditors, including the
following: (i) the independent auditors' ultimate accountability to the
Board and the Committee, as representatives of the Company's shareholders;
and (ii) the ultimate authority and responsibility of the Board and the
Committee to select, evaluate and, where appropriate, replace the
independent auditors.
9. Review and approve processes and procedures to ensure the continuing
independence of the Company's independent auditors. These processes shall
include obtaining and reviewing, on an annual basis, a letter from the
independent auditors describing all relationships between the independent
auditors and the Company required to be disclosed by Independence Standards
Board Standard No. 1, reviewing the nature and scope of such relationships
and discontinuing any relationships that the Committee believes could
compromise the independence of the auditors.
10. Review the independent auditor's audit plan.
11. Approve the fees and other significant compensation to be paid to the
independent auditors.
V. Responsibilities and Duties - Internal Audit
1. The audit committee meets with internal auditing to review the audit plan
and help ensure the effectiveness of overall controls.
2. The audit committee receives briefing on internal audit activities,
including significant conditions and weaknesses.
3. As part of its active oversight role of the internal auditing function, the
audit committee should also review and approve the internal audit charter
and concur in the appointment or removal of the director of internal
auditing.
4. Periodically consult with the Controller out of the presence of management
about internal controls.
VI. Other Matters
1. Periodically review the status of any legal matters that could have a
significant impact on the Company's financial statements.
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2. Annually prepare a report to the Company's stockholders for inclusion in
the Company's annual proxy statement as required by the rules and
regulations of the Securities and Exchange Commission, as they may be
amended from time to time.
3. Maintain minutes of meetings and periodically report to the Board of
Directors on significant matters related to the Committee's
responsibilities.
4. Review and reassess the adequacy of the Committee's charter at least
annually, Submit the charter to the Company's Board of Directors for review
and include a copy of the charter as an appendix to the Company's proxy
statement as required by the rules and regulations of the Securities and
Exchange Commission, as they may be amended from time to time (currently,
once every three years).
5. Perform any other activities by applicable law, rules or regulations,
including the rules of the Securities and Exchange Commission and any stock
exchange or market on which the Company's Common Stock is listed, and
perform other activities that are consistent with this charter, the
Company's Bylaws and governing laws, as the Committee or the Board deems
necessary or appropriate.
VII. Minutes
The Committee will maintain written minutes of its meetings, which will be
filed within the Company's minute books along with the minutes of the meetings
of the Board. The Committee also will issue reports as required to comply with
the SEC proxy rules and other applicable laws and regulations.
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