SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
CIMETRIX INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:______________________________________________________
2) Form, Schedule or Registration Statement No.:________________________________
3) Filing Party:________________________________________________________________
4) Date Filed:__________________________________________________________________
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CIMETRIX, INCORPORATED
6979 South High Tech Drive
Salt Lake City, Utah 84047-3757
April 14, 2004
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, May 22, 2004, 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 (i) elect four directors, one
for a three-year term, two for a two-year term and one for a one-year term; (ii)
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 thereunder; (iii)
approve a reverse stock split of the Company's common stock in the range of
1-for-3 to 1-for-7, to be made at the sole discretion of the Board of Directors
at any time during the period from May 22, 2004 to May 22, 2005; (iv) approve an
amendment to the Articles of Incorporation to reduce the number of authorized
shares of common stock from 100,000,000 shares to an amount within the range of
15,000,000 shares to 30,000,000 shares, to be made at the sole discretion of the
Board of Directors at any time during the period from May 22, 2004 to May 22,
2005; (v) ratify the appointment of Tanner + Co. as the Company's independent
accountants, and (vi) 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
<page>
CIMETRIX, INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2004
------------------------------
To our Shareholders:
The Annual Meeting of the Shareholders of Cimetrix Incorporated, a Nevada
corporation (the "Company"), will be held on Saturday, May 22, 2004, commencing
at 9:00 a.m., in the Company's headquarters located at 6979 South High Tech
Drive, 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, one for a
three-year term, two for a two-year term and one for a one-year term.
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 approve a reverse stock split of the Company's common stock in the
range of 1-for-3 to 1-for-7, to be made at the sole discretion of the
Board of Directors at any time during the period from May 22, 2004 to
May 22, 2005.
4. To approve an amendment to the Articles of Incorporation to reduce the
number of authorized shares of common stock from 100,000,000 shares to
an amount within the range of 15,000,000 shares to 30,000,000 shares,
to be made at the sole discretion of the Board of Directors at any
time during the period from May 22, 2004 to May 22, 2005.
5. To ratify the appointment of Tanner + Co. as the Company's independent
public accountants.
6. 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 March 26, 2004 as
the record date for determination of shareholders 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,
27,627,246 shares of common stock were outstanding.
TO ASSURE REPRESENTATION AT THE ANNUAL MEETING, SHAREHOLDERS ARE URGED TO
SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER 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/ Brian L. Phillips
---------------------
April 14, 2004 Brian L. Phillips
Salt Lake City, Utah Secretary and Treasurer
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 14, 2004 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 2004 Annual Meeting of the Shareholders of the Company, which
will be held on Saturday, May 22, 2004, commencing at 9:00 a.m., at the
Company's headquarters, 6979 South High Tech Drive, Salt Lake City, Utah, and at
any adjournment thereof (the "Annual Meeting"). The record date for the Annual
Meeting is the close of business on March 26, 2004 (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. The Company
is making this proxy solicitation.
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 shareholder 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.
At the Record Date, there were 27,627,246 shares of the Company's common
stock outstanding, all of which are entitled to be voted at the meeting. 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.
There is no cumulative voting.
Holders of the common stock have one vote for each share on any matter that
may be presented for consideration and action by the shareholders 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.
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, one for a
three-year term, two for a two-year term and one for a one-year term. 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.
Under the Company's Articles of Incorporation and By-laws, the directors
are divided into three classes.The term of office of only one class of directors
expires in each year and their successors are elected for terms of three years
and until their successors are elected and qualified. There is no cumulative
voting for election of directors.
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 may vote for the election of such substitute
nominees as the board 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 his successor is elected.
The nominees for election as directors at the Annual Meeting are set
forth below.
Expiration
Expiration of Term
Director of Current For Which Position with
Name Age Since Term Nominated the Company
- -------------------- --- -------- ----------- ---------- --------------------
Robert H. Reback 44 2002 2004 2006 President, Chief
Executive Officer
and Director
C. Alan Weber 52 2003 2004 2007 Director
Scott C. Chandler 42 2003 2004 2006 Director
Michael B. Thompson 51 N/A N/A 2005 Nominee for Director
Biographical Information
There is no family relationship among the current directors and executive
officers. There is no arrangement or understanding between any director and any
other person pursuant to which the director was or is to be selected as a
director or nominee. The following sets forth brief biographical information for
each director and nominee.
Robert H. Reback, President, Chief Executive Officer and Director, joined
Cimetrix as Vice President of Sales in January 1996, was promoted to Executive
Vice President of Sales in January, 1997 and was promoted to President on June
25, 2001. Mr. Reback was appointed a director in July 2002. Prior to joining
Cimetrix, Mr. Reback was the District Manager of Fanuc Robotics' West Coast
business unit from 1994 to 1995. From 1985 to 1993, he was Director of
Sales/Account Executives for Thesis, Inc., a privately-owned supplier of factory
automation software and was previously a Senior Automation Engineer for Texas
Instruments. Mr. Reback has a B.S. degree in Mechanical Engineering and a M.S.
degree in Industrial Engineering from Purdue University.
-2-
<page>
C. Alan Weber has served as a director of the Company since May 2003. Mr.
Weber is the President of Alan Weber and Associates, Inc., a consulting company
specializing in semiconductor Advanced Process Control, eDiagnostics, and other
related manufacturing systems technologies. Before founding his own company he
was the Vice President/General Manager of the KLA-Tencor Control Solutions
Division, which was acquired from ObjectSpace, Inc. in March 2000. While at
ObjectSpace, Mr. Weber was responsible for all aspects of the company's
semiconductor manufacturing system business. Before joining ObjectSpace in early
1997, Mr. Weber spent eight years at SEMATECH and was responsible for advanced
manufacturing systems and related standards R&D. Prior to this Mr. Weber spent
16 years at Texas Instruments, managing a variety of technology programs in the
semiconductor CAD and industrial automation/control businesses. Mr. Weber has
B.A. and M.E.E. degrees in Electrical Engineering from Rice University.
Scott C. Chandler has served as a director of the Company since May 2003.
Since 2002 Mr. Chandler has been Managing Partner for Franklin Court Partners,
LLC, a consulting firm designed to help companies develop business plans, raise
initial funding, secure additional rounds of financing and assist in operational
and financial restructuring. From 1998 to 2001, Mr. Chandler was Chief Financial
Officer (1998-2000) and Senior Vice President for Global Business Development
(2000-2001) for RHYTHMS NetConnections, a leading provider of broadband services
utilizing digital subscriber line (DSL) technology. At RHYTHMS, Mr. Chandler was
responsible for raising over $2 Billion for the company and in 2001 led the
financial restructuring of RHYTHMS which resulted in the sale of its assets to
Worldcom. From 1996 to 1998 Mr. Chandler served as President and Chief Executive
Officer of C-COR.net, a pioneer in the cable television industry. Under Mr.
Chandler's leadership, C-COR.net's revenues increased to over $150 million, and
was named by Fortune magazine as one of the 100 fastest-growing public
companies. Mr. Chandler earned an M.B.A. from the Wharton School of Business at
the University of Pennsylvania, and a B.A from Whitworth College. Mr. Chandler
currently serves as a member of the Board of Directors for several privately
held companies.
Michael B. Thompson was nominated on March 29, 2004 by the Board of
Directors to be included in this year's proxy statement as a director nominee.
Since June 2003, Mr. Thompson has been the President, Chief Executive Officer
and a director of Setpoint Companies, an industry leader in lean automation that
fully designs, assembles, tests and delivers automated assembly and test
equipment. From 1986 to 2003, Mr. Thompson was the Vice President of the
Planning and Logistics Solutions group of Brooks-PRI software division.
Brooks-PRI PLS' primary market focus is to provide simulation, scheduling and
material handling automation and software controls to the semiconductor and
related high technology industries. He was the President of AutoSimulations,
Inc., which was acquired by Brooks in January of 2000. Mr. Thompson has been
involved with automation, modeling and scheduling manufacturing systems for over
25 years. He holds B.S. and M.S. degrees from the Department of Engineering
Sciences and Technology at Brigham Young University. Mr. Thompson has been a
pioneer in the field of industrial scheduling and the application of simulation
technology to industrial problems. He has authored over 50 papers and articles
that have been published in technical magazines and professional journals.
APPROVAL OF AMENDMENT TO THE 1998 STOCK OPTION PLAN
Proposal 2
The Board of Directors adopted on February 26, 2004, subject to the
approval by the shareholders, an amendment (the "2004 amendment") to the
Company's 1998 Stock Option Plan. The 2004 Amendment increases from 4,000,000 to
5,000,000 the number of shares of the Company's common stock available for
issuance under the 1998 Stock Option Plan. This plan is explained below 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.
-3-
<page>
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 14, 2004, a total of 27,500 options have been
exercised under the plan; as of such date, options to purchase 3,965,000 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.
If Proposal 3 is approved by the shareholders, and if the Board of
Directors exercises its discretion under Proposal 3 to effect a reverse stock
split, that reverse stock split will automatically reduce the number of shares
of Company common stock available for issuance under the 1998 Incentive Stock
Option Plan, consistent with the reverse split exchange ratio. Thus, for
example, if 5,000,000 shares are available for issuance under the 1998 Stock
Option Plan, as proposed in this Proposal 2, before the reverse stock split, the
reverse split would have the following effect on the number of shares available:
- If a 1-for-3 reverse split, the number of option shares available would
equal 1,666,667
- If a 1-for-7 reverse split, the number of option shares available would
equal 714, 286
Approval of Proposal 2 requires the affirmative vote of a majority of the
shares present in person or by proxy at the Annual Meeting of Shareholders.
The Board of Directors recommends that the shareholders vote "for" approval
of the 2004 Amendment.
PROPOSED REVERSE STOCK SPLIT
Proposal 3
The proposal would give the Board of Directors sole discretion to decide
whether to effectuate a reverse stock split of the Company's common stock in the
range of 1-for-3 to 1-for-7 at any time during the next twelve months, from May
22, 2004 to May 22, 2005. Thus, the Board would have discretion to decide
whether to effect a reverse stock split at all, when to effect a reverse split
within the timeframe stated above, and the exchange ratio for the reverse split
within the range stated above. The Board would also have discretion to select a
record date and a date for the reverse exchange to take effect.
A reverse stock split is an accounting adjustment that involves the
altering of the number of shares outstanding. It is the opposite of a stock
split and would result in a decrease in the number of outstanding shares of
common stock. Generally, a reverse split is intended to result in a
proportionate increase in the price of the stock on the date the reverse stock
split becomes effective. Following the implementation of a reverse split, a
company's share price will typically trade based on perception of the company's
prospects, market conditions, and the multitude of factors that affect stock
prices. There can be, of course, no assurance or guarantee that the share price
of the Company would increase in proportion to the reverse split ratio or that
any particular share price would be sustained.
It is important to note that a reverse stock split, by itself, does not
change the value of shares held. The Company's reverse split would be designed
to reduce the number of shares outstanding to better align share count with the
size of the Company and proportionately increase the market price of Company
shares to put it in a trading range more popular with a broader set of
institutional investors. The immediate effect of a reverse stock split on the
Company's share price should be to increase our share price and, at the same
time, reduce each shareholder's number of shares, thereby leaving each
shareholder with the same total value he or she had before the reverse split.
-4-
<page>
The determination by the Board of Directors whether or not to implement the
reverse split, if approved by the shareholders, will be based upon a number of
factors, including but not limited to market conditions, existing and expected
trading prices for the Company's common stock, and the likely effect of business
developments on the market price for the Company's common stock.
The Board and management recognize that the fundamental drivers of
shareholder value over time will be the financial performance of the Company.
While reducing share count can help to highlight positive performance by
resulting in greater earnings per share, it is not intended as a substitute for
good performance and execution by the Company in the marketplace.
The Company believes that the combination of increased investor visibility,
the reduced number of shares better aligned to the size of the Company, and
potentially lower transaction costs to investors will ultimately make Cimetrix
stock a more attractive stock for investors to consider owning.
In addition, management is hopeful that a reverse stock split would
position the Company for a possible Nasdaq listing in the next several years if
the Company achieves improved financial performance. The initial listing
requirements for the Nasdaq SmallCap Market requires a minimum bid price of
$4.00 per share and a bid price of $1.00 per share for continued listing.
Further, the reverse stock split would allow the Company to report future
earnings per share numbers that would hopefully be more attractive to
shareholders and investors.
A 1-for-3 reverse stock split would decrease the number of outstanding
shares of the Company's common stock from 27,627,246 shares to 9,209,082 shares.
A 1-for-7 reverse stock split would decrease the number of outstanding shares of
the Company's common stock from 27,627,246 shares to 3,946,750 shares.
NO FRACTIONAL SHARES WILL BE ISSUED to any shareholder as a result of the
exchange of his or her shares pursuant to the reverse stock split, AND NO CASH
WILL BE PAID BY THE COMPANY FOR FRACTIONAL SHARES.
If the exchange results in any fraction at all for a given shareholder, his
or her shares will be rounded up by one. Thus, for example, the reverse stock
split would have the following effect on a shareholder owning 100,000 shares of
common stock:
- If a 1-for-3 reverse split, the number of shares would equal 33,334, with
the .3 share being rounded up.
- If a 1-for-7 reverse split, the number of shares would equal 14,286, with
the .7 share being rounded up.
A reverse stock split would affect all holders of Cimetrix common stock,
whether they hold common stock directly or through a stock broker. It would also
affect all holders of stock options and warrants. If this Proposal 3 is
approved, all of the outstanding option and warrant shares covered by stock
option plans and warrants would be adjusted proportionate to the reverse split
ratio. At the same time, the exercise price for options and warrants would be
adjusted, so that the total exercise price for a given option or warrant remains
the same.
Approval of Proposal 3 requires the affirmative vote of a majority of the
shares present in person or by proxy at the Annual Meeting of Shareholders.
The Board of Directors recommends a vote "for" the reverse stock split of
the Company's common stock in the range of 1-for-3 to 1-for-7, to be made at the
sole discretion of the Board of Directors at any time during the twelve month
period from May 22, 2004 to May 22, 2005.
-5-
<page>
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION
Proposal 4
The proposal would give the Board of Directors sole discretion to amend the
Articles of Incorporation to reduce the number of authorized shares of the
Company's common stock from 100,000,000 shares to a number of shares within the
range of 15,000,000 shares to 30,000,000 shares, at any time during the period
from May 22, 2004 to May 22, 2005, depending on whether the Board of Directors
completes the proposed reverse stock split.
Management is proposing this reduction in the number of authorized shares
on account of the proposed reverse stock split of the Company's common stock
under Proposal 3. Thus, if Proposal 3 is not approved by the shareholders, or if
Proposal 3 is approved but the Board of Directors decides ultimately not to
effectuate a reverse stock split, then the Board will not effect a reduction in
the number of authorized shares.
Approval of Proposal 4 requires the affirmative vote of a majority of the
shares present in person or by proxy at the Annual Meeting of Shareholders.
The Board of Directors recommends a vote "for" the proposal to amend the
Articles of Incorporation, to be made at the sole discretion of the Board of
Directors, to reduce the authorized shares of common stock from 100,000,000
shares to a number of shares within the range of 15,000,000 shares to 30,000,000
shares depending on whether the proposed reverse stock split is approved by the
shareholders and the actual ratio that the Board of Directors determines to be
used for purposes of such reverse stock split.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Proposal 5
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, 2004. Tanner + Co. has audited the Company's financial
statements since fiscal year ended December 31,1997. 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.
Approval of Proposal 5 requires the affirmative vote of a majority of the
shares present in person or by proxy at the Annual Meeting of Shareholders.
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 year 2004.
AUDIT AND OTHER FEES
Audit Fees
Tanner + Co. billed the Company approximately $49,000 for professional
services related to the review of the Company's financial statements on Form
10-Q filed in 2003, and for the audit of the Company's annual financial
statements on Form 10-K for the fiscal year ended December 31, 2003.
Audit-Related Fees
None
-6-
<page>
Tax Fees
Tanner + Co. billed the Company approximately $6,000 for services related
to the preparation and filing of the Company's Federal and State Income Tax
returns for the fiscal year ended December 31, 2002. Tanner + Co. billed the
Company approximately $6,500 for services related to the preparation and filing
of the Company's Federal and State Income Tax returns for the fiscal year ended
December 31, 2003.
All Other Fees
Tanner + Co. billed the Company approximately $3,000 for the purchase of
accounting software support and other accounting assistance for the fiscal year
ended December 31, 2002. Tanner + Co. billed the Company approximately $3,000
for other accounting assistance for the fiscal year ended December 31, 2003.
BOARD MEETINGS AND COMMITTEES
Board Meetings
The Company's Board of Directors met ten times during 2003. 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 shareholders and until their successors have been elected and
qualified.
Audit Committee
The Audit Committee consists of the two non-management directors, Scott C.
Chandler and C. Alan Weber. 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 determined that Scott C. Chandler, who
currently serves as a director of the Company as well as a member of the
Company's audit committee, is an independent audit committee financial expert.
The Company's Board of Directors has adopted a written charter for the
Audit Committee. The Audit Committee met two times in fiscal year 2003 and has
already met one time in fiscal 2004.
Audit Committee Report
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 2003 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 in the United States of
America, and for issuing a report on these financial statements.
-7-
<page>
Based upon 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, 2003, for filing with the Securities and Exchange Commission.
Respectfully submitted,
Scott C. Chandler
C. Alan Weber
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 44 President,Chief Executive Officer and Director
David P. Faulkner 48 Executive Vice President of Sales and Marketing
Michael D. Feaster 33 Vice President of Software Development
Steven K. Sorensen 45 Vice President and Chief Technical Officer
Each officer serves at the discretion of the Board of Directors. There is
no arrangement or understanding between any officer and any other person
pursuant to which the officer was or is to be selected as a officer or nominee.
There are no family relationships between any of the officers and/or between any
of the officers and directors.
David P. Faulkner was appointed as Executive Vice President of Sales and
Marketing in June 2002. 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.
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 sixteen years and is one of the principal architects of many of the
Company's most important products.
-8-
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
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 equal to or in excess of 110% 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 Exercise
Price Price Price Price
Name $0.35 (1) $1.00 (2) Price $2.50(3) Price $3.50 (4)
- ----- --------- --------- -------------- ---------------
Scott C. Chandler 50,000 0 0 0
Joe K. Johnson (5) 100,000 50,000 0 0
C. Alan Weber 50,000 0 0 0
Lowell K. Anderson (6) 50,000 50,000 48,000 24,000
Richard Gommermann (6) 50,000 50,000 0 0
Randall A. Mackey (6) 50,000 50,000 48,000 24,000
Michael B. Thompson (7) 0 0 0 0
___________________________
(1) Messrs. Johnson,Anderson,Gommermann and Mackey were granted 50,000 options
in October 2002 at an exercise price of $0.35 per share. All other options
exercisable at $0.35 per share were granted in August 2003
(2) All options exercisable at $1.00 per share were granted in July 2001.
(3) Messrs. Anderson and Mackey were each granted options to purchase 8,000,
24,000 and 24,000 shares of the Company's common stock at $2.50 per share,
in January 1998, June 1998 and June 1999, respectively. In January 2003,
8,000 of these options expired, none having been exercised.
(4) All options exercisable at $3.50 per share were granted in June 2000.
(5) Mr. Johnson has not been nominated for re-election to the Board of
Directors and his term as a Board member will expire when his successor is
elected at the annual meeting, on May 22, 2004.
(6) Messrs. Anderson, Gommermann and Mackey are no longer members of the Board
of Directors. Their terms as Board members expired on May 10, 2003.
(7) On March 29, 2004, Mr. Thompson was nominated to serve as a Director. His
name is being presented for election to the Board at the annual meeting on
May 22, 2004
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EXECUTIVE OFFICERS
Executive Officer Compensation
The following table discloses compensation, for the three fiscal years
ended December 31, 2003, 2002 and 2001, respectively, 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 2003 154,327 8,000 0 0 300,000 0 10,334 (1)
and Chief Executive Officer 2002 150,046 0 0 0 0 0 10,309 (1)
2001 145,000 0 0 0 650,000 0 9,175 (1)
David P. Faulkner, Executive 2003 150,000 5,074 0 0 250,000 0 10,054 (2)
Vice President of Sales and 2002 149,921 0 0 0 0 0 10,059 (2)
Marketing 2001 145,000 0 0 0 500,000 0 8,925 (2)
Michael D. Feaster, Vice 2003 133,333 5,074 0 0 250,000 0 6,012 (3)
President of Software 2002 123,509 0 0 0 0 0 6,934 (3)
Development 2001 123,500 0 0 0 300,000 0 5,537 (3)
Steven K. Sorensen, Vice 2003 100,000 0 0 0 150,000 0 2,801 (4)
President and Chief Technical 2002 99,750 0 0 0 0 0 2,948 (4)
Officer 2001 97,500 0 0 0 300,000 0 2,859 (4)
- ------------------------------------
(1) For the years 2003, 2002 and 2001, respectively, this amount includes
matching contributions of $2,720, $2,500 and $2,400 to the Company's 401k
plan , payments of $1,014, $1,209 and $1,175, for term life insurance
premiums and $6,600, $6,600 and $5,600 for an automobile allowance.
(2) For the years 2003, 2002 and 2001, respectively, this amount includes
matching contributions of $2,440, $2,250 and $2,150 to the Company's 401k
plan, payments of $1,014, $1,209 and $1,175 for term life insurance
premiums and $6,600, $6,600 and $5,600 for an automobile allowance.
(3) Includes matching contributions of $852, $1,634 and $260 to the Company's
401k plan for years 2003, 2002 and 2001, respectively. Also includes $960,
$1,100 and $1,077 for term life insurance premiums in 2003, 2002 and 2001,
respectively. Also includes $4,200 for an automobile allowance in 2003,
2002 and 2001.
(4) For the years 2003, 2002 and 2001, respectively, this amount includes
matching contributions of $2,000, $2,000 and $1,947 to the Company's 401k
plan, and payments of $801, $948 and $912 for term life insurance premiums.
-10-
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant of
stock options to the persons named in the Summary Compensation Table during the
fiscal year ended December 31, 2003.
Individual Grants
---------------------------------------------------
Potential Realizable Value
Number of at Assumed Annual Rate
Securities Percent of Total of Stock Price
Underlying Options Granted Exercise Appreciation for Option
Options to Employees in Price Per Expiration Term ($) (1)
Name Granted (#) Fiscal Year Share ($) Date 5% 10%
- ------------------ ----------- ---------------- --------- ---------- -- --
Robert H. Reback 300,000 25% $ 0.35 1/1/08 0 0
David P. Faulkner 250,000 21% $ 0.35 1/1/08 0 0
Michael D. Feaster 250,000 21% $ 0.35 1/1/08 0 0
Steven K. Sorensen 150,000 13% $ 0.35 1/1/08 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 $0.16, as the
beginning value. The real value of the options depends on the actual
appreciation of the value of the Company's common stock. These numbers do
not reflect the Company's estimates of future stock price growth and no
assurance exists that the price of the Company's common stock will
appreciate at the rates assumed in the table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End (#) Fiscal Year-End ($)(1)
Acquired on Value ------------------------------ ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ----------- ------------- ----------- -------------
Robert H. Reback 0 0 725,000 325,000 0 0
David P. Faulkner 0 0 575,000 275,000 0 0
Michael D. Feaster 0 0 375,000 275,000 0 0
Steven K. Sorensen 0 0 300,000 150,000 0 0
- -------------------
(1) Closing market value per share of the Company's common stock at December
31, 2003, of $0.26, minus the respective exercise prices of $0.35, $1.00,
$2.50,or $3.00.
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. On June 1, 2002, the Company's shareholders approved an
amendment to the Plan to increase the number of shares of Common Stock reserved
for issuance thereunder from 3,000,000 shares to 4,000,000 shares.
-11-
<page>
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.
As of April 14, 2004, the Company had 21 employees and or officers that are
eligible to receive option grants under the plan. The Compensation Committee has
not determined which employees or officers would receive future ISOs if Proposal
2 is approved by the Company's shareholders.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The table titled "Long-Term Incentive Plans - Awards in Last Fiscal Year"
has been omitted because there were no long-term incentive plan awards during
the year ended December 31, 2003, to either the Company's Executive Officers or
Directors.
EMPLOYMENT AGREEMENTS
President and Chief Executive Officer
The Company has 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
its discretion. 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, which was in excess of
110% of fair market value at date of grant. 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.
-12-
<page>
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.
Effective January 1, 2004, the Company entered into an extension of the
employment agreement with Mr. Reback. The amended agreement provides that Mr.
Reback be employed by the Company through December 31, 2005. The amended
agreement also provides that Mr. Reback's salary be modified to an annual salary
of $175,000 effective January 1, 2004. All other provisions of the original
agreement remain in full force and effect through December 31, 2005.
Other Executive Officers
The Company also has employment agreements, effective November 30, 2001,
with each of David P. Faulkner, Michael D. Feaster, and Dr. Steven K. Sorensen.
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, and that Dr.
Sorensen be employed as Vice President and Chief Technical 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,
and Dr. Sorensen's annual salary is $100,000 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 was granted options to purchase 500,000 shares of common stock, Mr.
Feaster was granted options to purchase 200,000 shares of common stock, and Dr.
Sorensen was granted options to purchase 300,000 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.
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.
Effective September 1, 2003, the Company entered into an extension of the
employment agreement with Mr. Feaster. The amended agreement provides that Mr.
Feaster be employed by the Company through December 31, 2005. The amended
agreement also provides that Mr. Feaster's salary be modified to an annual
salary of $150,000 effective September 1, 2003. All other provisions of the
original agreement remain in full force and effect through December 31, 2005
Effective January 1, 2004, the Company entered into an extension of the
employment agreement with Mr. Faulkner. The amended agreement provides that Mr.
Faulkner be employed by the Company through December 31, 2005. All other
provisions of the original agreement remain in full force and effect through
December 31, 2005.
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<page>
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors, including Scott C. Chandler and C. Alan Weber, each
of whom is an outside director, reviewed and approved the compensation and
fringe benefits for the Company's officers. The board evaluates the performance
of all officers and administers the Company's compensation program for its
officers. Although the board votes on and approves compensation for the Chief
Executive Officer, Mr. Reback abstains from participating in the vote. There are
no relationships that are considered interlocks.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
Decisions regarding executive compensation are made by the Company's
Compensation Committee. The compensation committee consists of the two
non-management directors, Scott C. Chandler and C. Alan Weber, and one
management director, Joe K. Johnson.
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 shareholder 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,
401(k) savings plan, and a car allowance.
Annual Compensation
Base Salary
The Compensation Committee reviewed the salaries of all the officers of the
Company for fiscal year 2003. Salary decisions concerning the officers were
based upon a variety of considerations consistent 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 Compensation Committee 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 Compensation Committee considered the Company's financial
performance and its ability to absorb any increases in salaries.
Annual Incentive 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
Compensation Committee evaluates each officer's role and responsibility in the
Company and other factors that the committee deems relevant to motivate each
officer to achieve strategic performance goals.
-14-
<page>
Long-Term Compensation
Stock Options
The Company has a stock option plan (the 1998 Incentive Stock Option Plan)
that is designed to align the interests of the shareholders and the Company's
officers in the enhancement of shareholder value. Stock options are granted
under the plan by the Board of Directors, including at least a majority vote by
the disinterested members of the board who are currently C. Alan Weber and Scott
C. Chandler. 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 making
decisions regarding 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 under the plan
generally vest ratably over a four-year period and expire five years after the
date of grant.
Compensation of Chief Executive Officer
Since June 2001, Robert H. Reback has been the President and Chief
Executive Officer of the Company. Compensation for Mr. Reback for fiscal year
2003 was based upon the compensation philosophy stated above. During fiscal year
2003, Mr. Reback received a base annual salary amount of $150,000. This base
salary amount was unchanged from fiscal year 2001. Subsequent to year-end, on
January 1, 2004, Mr. Reback's base annual salary was increased to $175,000. Mr.
Reback is also eligible to receive an annual cash bonus based upon the
compensation philosophy regarding bonuses stated above. Mr. Reback received a
bonus of $8,000 in fiscal year 2003.
Mr. Reback is eligible to participate in the Company's long-term incentive
programs. During fiscal year 2003, Mr. Reback was granted options to purchase
300,000 shares of common stock. Subsequent to year-end, on February 26, 2004,
Mr. Reback was granted options to purchase 150,000 shares of common stock. In
fiscal year 2001, Mr. Reback received options to purchase 650,000 shares of the
Company's common stock. The total compensation for Mr. Reback for fiscal years
2003, 2002 and 2001 is disclosed in the "Summary Compensation Table" above, and
primarily consisted of salary and stock options.
Respectfully submitted,
C. Alan Weber
Joe K. Johnson
Scott C. Chandler
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 2002 the Company issued 600 warrants to Joe K. Johnson, a
member of the Company's Board of Directors. Each warrant entitles Mr. Johnson to
purchase 500 shares of the Company's common stock at $0.35 per share, for a
total of 300,000 shares. These warrants were authorized to be issued to any
holders of the Company's 1997 Senior Notes, that had either converted their
Senior Notes into the Company's common stock or would agreed to convert their
Senior Notes into common stock at a price greater than $0.75 per share. Mr.
Johnson exchanged $600,000 of 1997 Senior Notes for 400,000 shares of the
Company's common stock in June 1998.
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 balance of $417,557, bearing interest at 10% per annum, 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.
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<page>
Randall A. Mackey, who served as Chairman of the Board of the Company until
May 2003, is President and a shareholder of the law firm of Mackey Price &
Thompson, which has rendered legal services to the Company. Legal fees and
expenses paid to Mackey Price & Thompson for fiscal years ending December 31,
2003, 2002 and 2001 totaled $67,025, $117,068 and $135,825, respectively.
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. These reports are made on Forms
3,4, and 5. 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 Forms 3, 4, and 5 received with
respect to fiscal year 2003, 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 complied with.
-16-
<page>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to beneficial
ownership of the Company's common stock (inclusive of options and warrants), as
of March 31, 2004, for each beneficial owner of more than 5% of the Company's
common stock that is known to the Company:
Number of Share Percent of
Name and Address of Common Stock Ownership
- --------------------------------------------------------------------------------
Securities and Exchange Commission v.
Paul A. Bilzerian, et al.,Civil Action 89-1854
(SSH) Receivership Estate (1) (2) 3,647,513 13.2%
1994 Bilzerian Irrevocable Trust (1) (2) 1,648,500 6.0%
Joe K. Johnson, Director (3) (4) (5) 1,681,201 5.9%
Investment Partnership-Tsunami Network
Partners Corporation (6) 1,474,911 5.3%
- --------------------------------------------------------------------------------
(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.
(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. Also includes shares delivered to the receiver by
Mr. Ernest B. Haire, III, pursuant to the same civil action. 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) The address for Mr. Johnson is c/o Cimetrix Incorporated, 6979 South High
Tech Drive, Salt Lake City, Utah 84047-3757.
(4) Includes 137,500 shares of common stock which Mr. Johnson has the right to
acquire within 60 days upon the exercise of stock options. Includes 300,000
shares which Mr. Johnson has the right to acquire within 60 days upon the
exercise of warrants. Includes 1,222,333 shares held in Mr. Johnson's
wife's name (Mrs. Melina Johnson). Although Mr. Johnson owns these shares
indirectly, he is still reported as the beneficial owner of these shares.
(5) Shares of common stock subject to options currently exercisable or
exercisable within 60 days after the Record Date are deemed outstanding for
purposes of computing Mr. Johnson's percentage ownership.
(6) The address for Investment Partnership-Tsunami Network Partners Corporation
is c/o Tsunami Network Partners Corporation 3-6-1-Shin-Yokohama,Kouhoku-Ku,
Yokohama-City, Kanagawa Japan 222-0033
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Company's common stock (inclusive of options and warrants), as
of March 31, 2004, for each executive officer of the Company and all executive
officers and directors as a group:
Number of
Shares of Percent of
Name, Title, and Address(1) Common Stock Ownership (10)
- ------------------------------------------------ ------------ -------------
Joe K. Johnson, Director (2) 1,681,201 5.9%
Robert H. Reback, President, CEO and Director (3) 973,500 3.5%
C. Alan Weber, Director (4) 37,500 *
Scott C. Chandler Director (5) 37,500 *
Michael B. Thompson, Director (9) 0 *
Steven K. Sorensen, VP and Chief Engineer (6) 579,890 2.1%
Michael D. Feaster, VP of Software Dev. (7) 462,500 1.7%
David P. Faulkner, Exec. VP of Sales & Mktg. (8) 685,000 2.5%
Executive officers and directors
as a group (8 persons) 4,457,091 16.1%
- --------------------------------------------------------------------------------
* Less than 1%.
(1) The addresses for Messrs. Johnson, Reback, Weber, Chandler, Sorensen,
Feaster, and Faulkner, are c/o Cimetrix Incorporated, 6979 South High Tech
Drive, Salt Lake City, Utah 84047-3757.
(2) Includes 137,500 shares of common stock which Mr. Johnson has the right to
acquire within 60 days upon the exercise of stock options. Includes 300,000
shares which Mr. Johnson has the right to acquire within 60 days upon the
exercise of warrants. Includes 1,222,333 shares held in Mr. Johnson's
wife's name (Mrs. Melina Johnson). Although Mr. Johnson owns these shares
indirectly, he is still reported as the beneficial owner
(3) Includes 825,000 shares of common stock which Mr. Reback has the right to
acquire within 60 days upon the exercise of stock options. Also includes
37,500 shares which Mr. Reback has the right to acquire within 60 days upon
the exercise of warrants.
(4) Includes 37,500 shares of common stock which Mr. Weber has the right to
acquire within 60 days upon the exercise of stock option.
(5) Includes 37,500 shares of common stock which Mr. Chandler has the right to
acquire within 60 days upon the exercise of stock option.
(6) Includes 337,500 shares of common stock which Mr. Sorensen has the right to
acquire within 60 days upon the exercise of stock options.
(7) Includes 462,500 shares of common stock which Mr. Feaster has the right to
acquire within 60 days upon the exercise of stock options.
(8) Includes 662,500 shares of common stock which Mr. Faulkner has the right to
acquire within 60 days upon the exercise of stock options. Also includes
22,500 shares of common stock which Mr. Faulkner has the right to acquire
within 60 days upon the exercise of warrants.
(9) Mr. Thompson has been nominated to serve as a Director only. His term will
begin May 22, 2004 if elected by a majority of votes at the Shareholders
meeting on that date.
(10) All applicable percentage ownership is based on 27,652,246 shares of common
stock issued 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.
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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, 1998. 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, 1998 to December
31, 2003) by the price of the Company's Common Stock at the beginning of the
measurement period.
[GRAPHIC OMITTED]
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ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2003 (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 Joe K.
Johnson, Interim Chief Financial Officer, 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 2005
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, 2005. 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,
By: /S/ Brian L. Phillips
---------------------
Brian L. Phillips
Secretary and Treasurer
Salt Lake City, Utah
April 14, 2004
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