SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
ALTRIS SOFTWARE, INC.
- ----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ----------------------------------------------------------------------------
(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)(1)
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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/ / Fee paid previously with preliminary materials.
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/ / 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.
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ALTRIS SOFTWARE, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 6, 2001
------------------------
The Annual Meeting of Shareholders of Altris Software, Inc., a California
corporation (the "Company"), will be held at the Company's headquarters at 9339
Carroll Park Drive, San Diego, California, at 9:00 a.m. on Tuesday, March 6,
2001 for the following purposes:
1. To elect five directors to hold office until the next Annual Meeting and
until their successors have been elected and qualified.
2. To amend the Company's Amended and Restated 1996 Stock Incentive Plan to
approve an increase in the number of shares of common stock reserved for
issuance under the plan from 1,425,000 to 2,425,000 shares.
3. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on February 4, 2001
as the record date for the determination of shareholders entitled to receive
notice of, and to vote at, the Annual Meeting and any adjournments or
postponements thereof, and only holders of record of the Company's common stock
at the close of business on that date will be entitled to receive notice of, and
to vote at, the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THIS WILL
ENSURE THAT YOUR SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A
QUORUM WILL BE PRESENT. YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING, AND YOU
MAY VOTE IN PERSON EVEN THOUGH YOU HAVE RETURNED YOUR PROXY.
By Order of the Board of Directors,
/s/ JOHN W. LOW
John W. Low
Secretary
February 9, 2001
ALTRIS SOFTWARE, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 6, 2001
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Altris Software, Inc. (the "Company") for
use at the Annual Meeting of Shareholders to be held at the Company's
headquarters at 9339 Carroll Park Drive, San Diego, California, on Tuesday,
March 6, 2001 at 9:00 a.m., or at any adjournments or postponements thereof, for
the purposes set forth herein and in the foregoing Notice. This Proxy Statement
and the accompanying proxy will be first sent to shareholders on or about
February 9, 2001.
PROXY INFORMATION
Shares represented by properly executed proxies, if received in time and not
revoked or suspended, will be voted in accordance with the instructions
indicated thereon or, if no instructions are given for any or all of the
proposals, will be voted in favor of the election of all persons named in, or
otherwise nominated as set forth in, this Proxy Statement to serve as directors,
and in favor of the proposal to amend the Company's Amended and Restated 1996
Stock Incentive Plan in order to increase the number of shares of the Company's
common stock, no par value (the "Common Stock"), reserved for issuance
thereunder from 1,425,000 to 2,425,000 shares. A shareholder giving a proxy has
the power to revoke it at any time before it is exercised by attending and
voting at the Annual Meeting or by filing with the Secretary of the Company
either a written notice of revocation or a duly executed proxy bearing a later
date.
RECORD DATE AND VOTING
Each shareholder of record of the Common Stock at the close of business on
February 4, 2001 is entitled to vote on all matters submitted to a vote of the
shareholders at the Annual Meeting. At the close of business on January 25,
2001, there were 30,838,590 shares of common stock outstanding held of record by
approximately 1,140 shareholders.
Directors will be elected by a plurality of the votes of the shares of
common stock represented and voting on the election of directors. Therefore, the
nominees receiving the greatest number of votes will be elected. The affirmative
vote of a majority of shares of common stock represented and voting on the
proposal to amend the Amended and Restated 1996 Stock Incentive Plan to increase
the number of shares of common stock reserved for issuance under the plan from
1,425,000 to 2,425,000 shall be the act of the shareholders.
In general, abstentions will have no effect on the outcome of the voting
with respect to any matter.
As to certain matters other than the election of directors, New York Stock
Exchange and American Stock Exchange rules generally require when shares are
registered in street or nominee name that their member brokers receive specific
instructions from the beneficial owners in order to vote on such a proposal. If
a member broker indicates on the proxy that such broker does not have
1
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.
Holders of common stock have one vote for each share on all matters
submitted to the shareholders at the Annual Meeting, except that shareholders
may cumulate votes for any one or more directors in the election of directors if
any shareholder gives notice to the Secretary of such shareholder's intention to
cumulate votes prior to the voting. Under cumulative voting, each shareholder
may give any one candidate whose name was placed in nomination prior to the
commencement of voting a number of votes equal to the number of directors to be
elected, multiplied by the number of votes to which the shareholder's shares are
normally entitled, or distribute such number of votes on the same principle
among as many candidates as the shareholder sees fit. The proxy holders will
have authority, in their discretion, to vote cumulatively for less than all of
the nominees.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to shares of the Common Stock
owned as of December 31, 2000 by (i) each director, (ii) each Named Executive
Officer (as defined on page 7), (iii) all directors and executive officers as a
group and (iv) each person who, to the extent known to the Company, beneficially
owned more than 5% of the outstanding shares of common stock. Unless otherwise
indicated in the footnotes following the table, the persons as to whom the
information is given have sole voting and investment power over the shares shown
as beneficially owned, subject to community property laws where applicable.
NUMBER OF PERCENT OF
NAME SHARES (1) CLASS (1)
- ---- ------------ ----------
Roger H. Erickson........................................... 161,750 *
Pierre de Wet............................................... 44,850 *
John W. Low................................................. 131,750 *
Mark C. Schneider........................................... 30,950 *
W. Alan Turner.............................................. 79,500 *
D. Ross Hamilton............................................ 205,250 *
Larry D. Unruh.............................................. 23,047 *
Hilton Isaacman (2)......................................... 19,092,381(3) 61.3%
Johann Leitner (2).......................................... 19,092,381(3) 61.3%
Spescom Limited............................................. 19,092,381(3) 61.3%
All Current Directors and Executive Officers as a Group (9
persons) (2).............................................. 19,769,478 63.5%
- ------------------------
* Less than one percent.
(1) Amounts and percentages include shares of common stock that may be acquired
within 60 days of December 31, 2000 through the exercise of stock options as
follows: 98,750 shares for Mr. Erickson, 43,250 shares for Mr. De Wet,
78,250 shares for Mr. Low, 27,750 shares for Mr. Schneider, 42,750 shares
for Mr. Turner, 18,750 shares for Mr. Hamilton, 18,750 shares for
Mr. Unruh, and 328,250 shares for all directors and executive officers as a
group.
(2) As affiliates of Spescom, Messrs. Isaacman and Leitner could be deemed to be
beneficial owners of the shares of common stock owned by Spescom Limited.
However, Messrs. Isaacman and Leitner disclaim beneficial ownership of all
such shares.
(3) Amount includes 300,000 shares of common stock issuable upon exercise of a
warrant having an exercise price of $1.90 per share.
2
CHANGE IN CONTROL
In accordance with the Stock Purchase Agreement (the "Agreement"), dated as
of January 14, 2000, between the Company and Spescom Limited ("Spescom"), and
approved at the April 14, 2000 Special Meeting of Shareholders, Spescom acquired
the ability to exercise control over all matters requiring approval by the
Company's shareholders. The Company issued an aggregate of 14,813,810 shares of
its common stock to Spescom for the following consideration:
- for 5,285,714 shares, Spescom paid the Company $3,700,000, or $0.70 per
share;
- the Company issued 9,528,096 shares in exchange for delivery to the
Company of
(1) 11.5% Subordinated Debenture in the principal amount of $3,000,000
issued by the Company on June 27, 1997 (the "Debenture") and (2) 3,000
shares of Series E Convertible Preferred Stock of the Company, stated value
$1,000 per share (the "Preferred Stock"). With the issuance of the 9,528,096
shares of common stock in this exchange, the Debenture and the Preferred
Stock were canceled and no longer constitute obligations of the Company; and
- the Company paid Spescom $200,000 in cash for the transfer to the Company
of Spescom's
EMS 2000 technology (as described in Exhibit A to the Agreement annexed to
the Company's Proxy Statement dated March 14, 2000 in connection with the
April 14, 2000 Special Meeting of Shareholders).
As a result of the transactions contemplated by the Agreement, Spescom now
owns approximately 61% of the outstanding common stock of the Company.
ITEM 1
ELECTION OF DIRECTORS
Five directors, including two nominees of Spescom, are to be elected at the
Annual Meeting to hold office until the next Annual Meeting and until their
successors are elected and qualified. In the election of directors, the proxy
holders intend to vote for the election of the nominees named below. Should any
nominee decline or become unavailable to serve as a director or should any
vacancy occur before the election, the proxies will be voted, in the absence of
instructions to the contrary, for the election of the remaining nominees named
in this Proxy Statement.
In accordance with the Agreement, the Company has covenanted to include two
nominees of Spescom in management's slate of nominees to be elected to the Board
of Directors and to recommend to the shareholders the election of such nominees
for as long as Spescom or any affiliate of Spescom holds at least thirty-three
percent (33%) of the Company's common stock.
The following table sets forth certain information concerning each person
nominated for election as a director:
NAME AGE POSITION
- ---- -------- --------
Roger H. Erickson......................... 44 Chairman and Chief Executive Officer,
Director
D. Ross Hamilton.......................... 62 Director
Hilton Isaacman........................... 47 Director
Johann Leitner............................ 47 Director
Larry D. Unruh............................ 49 Director
3
MR. ERICKSON has been a Director of the Company from 1990 to 1995 and from
1998 to the present. In May 2000, Mr. Erickson was appointed Chairman of the
Board of Directors. Mr. Erickson was appointed the Company's Chief Executive
Officer in April 1998, a position which he previously held from October 1991 to
August 1993. Mr. Erickson has served the Company in various other capacities,
including as (i) Vice President, Strategic Partners, from July 1997 to
April 1998, (ii) Vice President, Operations, from June 1996 to Ju ly 1997,
(iii) Vice President, Worldwide Channel Sales, from April 1995 to
February 1996, (iv) Vice President, Alliances and General Manager, PDM Business
Unit, from February 1996 to June 1996, (v) Executive Vice President, Marketing
and Sales, from September 1993 to March 1995 and (vi) Vice President,
Engineering, from June 1990 to October 1991. From 1984 until March 1990,
Mr. Erickson served the Company in several positions including Senior Systems
Engineer and Director of Technical Projects. Mr. Erickson earned a M.S. degree
in Computer Science from the University of California, Santa Barbara in 1982 and
a B.A. degree in Mathematics from Westmont College in 1978.
MR. HAMILTON has been a Director of the Company since June 1994. He served
as Chairman of the Board of the Company from January 1997 through June 1997.
Since 1983 Mr. Hamilton has served as President of Hamilton Research, Inc., an
investment banking firm. Mr. Hamilton currently serves as a director of Luther
Medical Products, Inc., a medical device manufacturer. Mr. Hamilton received a
B.S. degree in Economics from Auburn University in 1961.
MR. ISAACMAN, a nominee of Spescom, has been a Director of the Company since
April 2000. Mr. Isaacman is currently the Director of Corporate Finance of
Spescom. Mr. Isaacman previously served as Spescom's Financial Director from
1990 to 1998. Mr. Isaacman began his career with Spescom in 1988 as Financial
Manager and has been a member of Spescom's Board of Directors since 1990.
Mr. Isaacman received a certificate in accounting, tax and auditing from the
University of Capetown in 1982.
DR. LEITNER, a nominee of Spescom, has been a Director of the Company since
April 2000. Dr. Leitner has held the position of Director of Strategic Business
Development at Spescom since 1998. Dr. Leitner joined Spescom in 1981 and has
served in various technical and operating capacities within Spescom, including
Group Marketing Director from 1995 to 1997. Since 1987, Dr. Leitner has also
served on the Board of Directors of Spescom. Dr. Leitner earned a BSc in
Engineering in 1975 and a PhD in Electronic Signal Processing in 1979 from the
University of Capetown.
MR. UNRUH has served as a Director of the Company since May 1988. He is a
partner of Hein & Associates LLP, certified public accountants, and has been its
Managing Tax Partner since 1982. Mr. Unruh currently serves as a director of
Basin Exploration, Inc., an oil exploration and development company and also
serves as a director of LK Business Services, Inc., a specialty automobile
lubricant manufacturer. Mr. Unruh received a B.S. degree in Accounting from the
University of Denver in 1973.
All directors are elected annually and serve until the next annual meeting
of shareholders and until their successors have been elected and qualified.
4
MANAGEMENT
EXECUTIVE OFFICERS
The following table and discussion set forth certain information with regard
to the Company's current executive officers.
NAME AGE POSITION
- ------------------------------------------ -------- ------------------------------------------
Roger H. Erickson......................... 44 Chief Executive Officer
Pierre de Wet............................. 37 Vice President, Operations
John W. Low............................... 44 Chief Financial Officer and Secretary
Mark C. Schneider......................... 41 Vice President, Engineering
W. Alan Turner............................ 49 Vice President, Marketing
Biographical information for MR. ERICKSON is set forth above under Election
of Directors.
MR. DE WET was appointed Vice President of Operations in September 1999.
Previously, Mr. DeWet served as Director of Operations from April 1998 to
September 1999 and Director of Projects from May 1997 to April 1998. Prior to
joining the Company, Mr. DeWet was a Technical Marketing Manager at Paradigm
System Technology from June 1995 to April 1997 where he was responsible for
establishing relationships with technical partners in Europe and North America.
From April 1991 to June 1995, Mr. DeWet was with PQ Africa, a division of
Comparex Holdings. Mr. DeWet earned a B.S. from the University of Pretoria in
1989.
MR. LOW has served as Chief Financial Officer and Secretary since
June 1990. Previously, Mr. Low had served as Corporate Controller since joining
the Company in August 1987. From 1980 until joining the Company, Mr. Low was
with Price Waterhouse LLP, most recently as a Manager working with middle-market
and growing companies. Mr. Low, a certified public accountant, earned a B.A.
degree in Economics from the University of California, Los Angeles in 1978.
MR. SCHNEIDER was appointed Vice President of Engineering in January 2000.
He has held many positions since joining the Company in 1985 as an Electronic
Design Engineer. From June 1999 to January 2000, Mr. Schneider served as acting
Vice President of Engineering until his formal appointment. Previously,
Mr. Schneider was Senior Software Engineer from 1998 to 1999 and Project Lead
from 1996 to 1997. Prior to 1996, Mr. Schneider served as a Manager of
Workstation Products and Software Engineer. Before joining the Company,
Mr. Schneider was an Electronic Design Engineer with Teledyne Electronics.
Mr. Schneider earned a B.S. degree in Electrical Engineering from California
State University, Northridge in 1981.
MR. TURNER was appointed Vice President of Marketing in March of 1998. Since
joining the Company, Mr. Turner served as Vice President of Channel Sales from
1997 to 1998 and as Business Development Director from 1993 to 1997. Previously,
Mr. Turner was in the offshore oil industry, heading teams of engineers in
product design, analysis and testing. Mr. Turner received a BSc degree in
Mechanical Engineering from Heriot-Watt University, Edinburgh, Scotland in 1974,
and received a postgraduate degree in Engineering Design from Loughborough
University, England in 1977.
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth certain information concerning the annual and
long-term compensation for services rendered in all capacities to the Company
for the nine-month period ended September 30, 2000 and the years ended
December 31, 1999, 1998 and 1997 of (i) the Company's Chief Executive Officer
and (ii) the four other most highly compensated executive officers having
5
compensation of $100,000 or more during 1999 (collectively, the "NAMED EXECUTIVE
OFFICERS"). The Company recently changed its fiscal year-end from December 31 to
September 30.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------ LONG-TERM
OTHER COMPENSATION
ANNUAL AWARDS--
COMPENSATION STOCK OPTIONS
NAME AND POSITION YEAR(1) SALARY($)(1)) BONUS($) ($)(2) (# SHARES)(1)
- ----------------- -------- ------------- -------- ------------ -------------
Roger H. Erickson.................... 2000 $162,569 -- -- 40,000
Chief Executive Officer 1999 196,999(3) $50,000 -- 55,000
1998 164,635 -- $131,215(4) 65,000
1997 174,708 9,000 -- --
Pierre de Wet........................ 2000 $ 99,230 -- -- --
Vice President-- 1999 112,692 $ 3,500 -- 52,000
Operations 1998 106,450 -- -- 23,000
1997 54,596 -- -- --
John W. Low.......................... 2000 $132,037 -- $ 13,461(5) 15,000
Chief Financial Officer 1999 147,000(3) $ 7,000 -- 47,000
and Secretary 1998 147,000 -- $100,245(6) 28,000
1997 142,535 -- -- 25,000
Mark C. Schneider.................... 2000 $ 90,966 -- -- --
Vice President-- 1999 101,847 -- -- 46,500
Engineering (7) 1998 93,981 -- -- --
1997 82,580 -- -- 2,000
W. Alan Turner....................... 2000 $105,150 -- -- --
Vice President-- 1999 112,465 $ 3,500 -- 54,500
Marketing 1998 104,759 -- -- 20,000
1997 109,992 30,000 -- --
- ------------------------
(1) The Company recently changed its fiscal year-end from December 31 to
September 30. Information presented for 2000 is presented for the nine-month
period from January 1, 2000 through September 30, 2000, and information for
prior years is presented for the fiscal year of January 1 through
December 31 of each such year.
(2) Excludes compensation in the form of other personal benefits, which, other
than as set forth in the table above, did not exceed the lesser of $50,000
or 10% of the total annual salary and bonus reported for each year.
(3) The 1999 salary for Mr. Erickson and Mr. Low includes $27,692 and $8,654,
respectively, of which they voluntarily deferred payment until 2000 to
assist the Company in managing its cash flow.
(4) This comprises (i) $105,843 relating to forgiveness of a promissory note
that had been made by Mr. Erickson in favor of the Company in connection
with his exercise of stock options that were due to expire and (ii) $25,372
in commissions paid in 1998 relating to Mr. Erickson's position as Vice
President, Strategic Partners in 1997.
(5) Payment for accrued vacation.
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(6) This comprises (i) $70,562 relating to forgiveness of a promissory note that
had been made by Mr. Low in favor of the Company in connection with his
exercise of stock options that were due to expire and (ii) a $29,683 payment
for accrued vacation.
(7) Mr. Schneider was appointed an executive officer of the Company in
January 2000. From June 1999 until his appointment, Mr. Schneider served as
acting Vice President of Engineering.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information concerning grants of options issued by the
Company to the Named Executive Officers during the nine-month period ended
September 30, 2000 and the year ended December 31, 1999:
POTENTIAL REALIZABLE
VALUE AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE FOR OPTION TERM (3)
OPTIONS FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) PERIOD(2) ($/SHARE) DATE 5% ($) 10% ($)
- ---- ------------- ------------ --------- ---------- --------- ---------
Roger H. Erickson.............. 40,000(4) 21% $1.03 5/22/10 $25,936 $65,726
35,000(5) 5% $0.56 11/15/09 $12,370 $31,349
20,000(7) 3% $0.75 5/10/09 $ 9,433 $23,906
Pierre de Wet.................. 32,000(5) 5% $0.56 11/15/09 $11,310 $28,662
20,000(6) 3% $0.50 8/5/09 $ 6,289 $15,937
John W. Low.................... 15,000(4) 8% $1.06 5/15/10 $10,028 $25,412
27,000(5) 4% $0.56 11/15/09 $ 9,543 $24,183
20,000(6) 3% $0.50 8/5/09 $ 6,289 $15,937
Mark Schneider................. 35,500(5) 5% $0.56 11/15/09 $12,547 $31,797
5,000(6) 1% $0.50 8/5/09 $ 1,572 $ 3,984
6,000(8) 1% $0.35 1/20/09 $ 1,321 $ 3,347
W. Alan Turner................. 34,500(5) 5% $0.56 11/15/09 $12,194 $30,901
20,000(6) 3% $0.50 8/8/09 $ 6,289 $15,937
- ------------------------
(1) All options were granted with an exercise price equal to the closing sale
price of the Common Stock as reported on the OTC Bulletin Board on the date
of grant.
(2) Information presented for 2000 is presented for the nine-month period from
January 1, 2000 through September 30, 2000, and information for 1999 is
presented for the fiscal year of January 1 through December 31 of 1999. The
percentage indicated represents the percentage of total options granted
during the applicable period.
(3) The 5% and 10% assumed rates of appreciation are specified under the rules
of the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of its Common Stock. The actual
value, if any, which a Named Executive Officer may realize upon the exercise
of stock options will be based upon the difference between the market price
of the Common Stock on the date of exercise and the exercise price.
(4) Options were granted in May 2000. The options vest 25% 90 days from the date
of grant and in additional annual installments of 25% commencing on the
first anniversary of the date of grant.
7
(5) Options were granted in November 1999. The options vest 25% 90 days from the
date of grant and in additional annual installments of 25% commencing on the
first anniversary of the date of grant.
(6) Options were granted in August 1999. The options vest 25% 90 days from the
date of grant and in additional annual installments of 25% commencing on the
first anniversary of the date of grant.
(7) Options were granted in May 1999. The options vest 25% 90 days from the date
of grant and in additional annual installments of 25% commencing on the
first anniversary of the date of grant.
(8) Options were granted in January 1999. The options vest 25% 90 days from the
date of grant and in additional annual installments of 25% commencing on the
first anniversary of the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth for the Named Executive Officers information
with respect to option exercises during the nine-month period ended
September 30, 2000 and the year ended December 31, 1999 and unexercised options
and option values at September 30, 2000, in each case with respect to options to
purchase shares of the Company's Common Stock:
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED HELD AS OF SEPTEMBER 30, 2000 AT SEPTEMBER 30, 2000(1)
ON VALUE ------------------------------ ----------------------------
NAME EXERCISE REALIZED EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- ----------------------------- -------- -------- ------------- -------------- ----------- --------------
Roger H. Erickson............ -- -- 90,000 70,000 $81,491 $40,724
Pierre de Wet................ -- -- 35,250 39,750 $32,410 $33,981
John W. Low.................. -- -- 71,500 43,500 $42,408 $30,223
Mark Schneider............... -- -- 17,375 32,625 $13,603 $27,284
W. Alan Turner............... -- -- 34,125 40,875 $31,231 $34,943
- ------------------------
(1) Based on the closing sale price of the Common Stock on the OTC Bulletin
Board on September 29, 2000 ($1.375 per share).
BOARD COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors has an Audit Committee, which makes recommendations
regarding the selection of independent public accountants and reviews with them
the scope and results of the audit engagement. The Board of Directors has
adopted a written Audit Committee charter at the meeting of the Board of
Directors on May 12, 2000, which is annexed hereto as Appendix A. Through
April 2000, the Audit Committee was comprised of Messrs. McGovern, Unruh and
Atkinson. In May 2000, Messrs. Isaacman and Hamilton replaced Messrs. McGovern
and Atkinson who resigned in connection with the consummation of Spescom
Limited's investment in the Company in April 2000. The Audit Committee held two
meetings during 1999 and two meetings during the period from January 1, 2000
through September 30, 2000.
The Board of Directors also has a Compensation Committee, which reviews
compensation of officers. Through April 2000, the Compensation Committee was
comprised of Messrs. McGovern, Hamilton and Unruh. In May 2000,
Messrs. Isaacman and Leitner replaced Messrs. McGovern and Unruh on the
Compensation Committee. The Compensation Committee held one meeting during 1999
and one meeting during the period from January 1, 2000 through September 30,
2000.
In addition, the Board of Directors has a Stock Option Committee, which
generally administers the Company's Amended and Restated 1996 Stock Incentive
Plan and the 1987 Stock Option Plan. Through April 2000, the Stock Option
Committee was comprised of Messrs. McGovern, Unruh and Hamilton. The Stock
Option Committee held one meeting during the year ended December 31, 1999 and
three meetings during the period from January 1, 2000 through September 30,
2000.
8
The Board of Directors does not have a standing Nominating Committee or any
other committee which performs a similar function.
The Board of Directors held ten meetings during 1999 and four meetings
during the period from January 1, 2000 through September 30, 2000. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board held during the period for which he was a director and (ii) the total
number of meetings held by all committees of the Board on which he served during
the period he served.
AUDIT FEES
For the nine-month period ended September 30, 2000 and the year ended
December 31, 1999, Grant Thornton LLP, the Company's independent public
accountants, billed the Company an aggregate of $104,900 and $153,625
respectively for professional services rendered for the audit of the Company's
financial statements for such period and the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q during such period.
ALL OTHER FEES
For the nine-month period ended September 30, 2000 and the year ended
December 31, 1999, Grant Thornton LLP billed the Company an aggregate of $20,905
and $57,275 respectively for all other services not described above under the
captions "Audit Fees" during such periods.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of our
audited financial statements to generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed with
management and the independent auditors the audited financial statements. The
Audit Committee has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). Also, the Audit Committee received from the independent
auditors the written disclosures required by Independence Standards Board No. 1
(Independence Discussions with Audit Committees) and discussed with them their
independence from the Company and its management. Additionally, the Audit
Committee did consider the independent auditors' provision of non-audit related
tax work and found it not to be incompatible with the independent accountants
independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board approved, that
the audited financial statements and related schedules for the nine-month period
ended September 30, 2000 and the fiscal year ended December 31, 1999 be included
in the Company's Transition Report on Form 10-K for the nine-month period ended
September 30, 2000, for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee
Larry D. Unruh--Chair
D. Ross Hamilton
Hilton Isaacman
In accordance with the rules of the Securities and Exchange Commission (the
"SEC"), the foregoing information, which is required by paragraphs (a) and
(b) of Regulation S-B Item 306, shall
9
not be deemed to be "soliciting material" or to be "filed" with the Commission
or subject to the Commission's Regulation 14A, other than as provided in that
Item, or to the liabilities of Section 18 of the Securities Exchange Act of
1934, except to the extent that the Company specifically requests that the
information be treated as soliciting material or specifically incorporates it by
reference into a document filed under the Securities Act of 1933, or the
Securities Exchange Act of 1934.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than 10% of the
Company's common stock to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the SEC. Executive officers, directors and 10%
shareholders are required by the SEC to furnish the Company with copies of all
Forms 3, 4 and 5 that they file.
Based solely on the Company's review of the copies of such forms it has
received and representations from certain reporting persons that they were not
required to file a Form 5 for specified fiscal years, the Company believes that
all of its executive officers, directors and greater than 10% shareholders have
complied with all of the filing requirements applicable to them with respect to
transactions during the fiscal year ended December 31, 1999, except that Forms 3
were not timely filed for Mr. Turner and Mr. de Wet, though they were
subsequently filed, and Forms 5 were not timely filed for any of the Company's
executive officers, directors and greater than 10% shareholders with respect to
transactions during the period from January 1, 2000 through September 30, 2000.
COMPENSATION OF DIRECTORS
In an effort to assist the Company, the Directors have foregone any cash
compensation for serving on the Board until the Company returns to
profitability. Each Director is reimbursed for all reasonable expenses incurred
in connection with attendance at meetings.
Mr. Unruh, a Director, provided consulting services to the Company during
fiscal year 1999 for which he received $5,244.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Through April 2000, the Compensation Committee of the Board of Directors was
comprised of Messrs. McGovern, Hamilton and Atkinson. In May 2000,
Messrs. Isaacman and Leitner replaced Messrs. McGovern and Atkinson on this
committee. None of the committee members is or was an employee or officer of the
Company in 2000. No executive officer of the Company has served as a member of
the Board of Directors or Compensation Committee of any company in which
Messrs. McGovern, Hamilton, Atkinson, Isaacman, or Leitner is an executive
officer.
10
ITEM 2
APPROVAL OF INCREASE IN NUMBER OF SHARES OF COMMON STOCK
RESERVED UNDER THE COMPANY'S AMENDED AND RESTATED
1996 STOCK INCENTIVE PLAN
Effective April 1, 1996, the Board of Directors adopted, and the
shareholders subsequently approved, the Company's 1996 Stock Incentive Plan, as
amended and restated (the "1996 Plan"). There are presently 1,425,000 shares of
the Company's Common Stock authorized for issuance under the 1996 Plan. At
December 31, 2000, 160,350 shares of common stock had been issued pursuant to
the exercise of options previously granted under the 1996 Plan and options were
outstanding to purchase 1,192,900 shares of common stock.
In August 2000, the Board approved an amendment to the 1996 Plan, subject to
shareholder approval, to increase the number of shares authorized for issuance
under the 1996 Plan from an aggregate of 1,425,000 shares to an aggregate of
2,425,000 shares. The Board adopted this amendment to ensure that the Company
can continue to grant stock options to employees, directors and consultants at
levels determined appropriate by the Board and the Compensation Committee. The
ability to offer options in order to attract and retain talented employees is
particularly important to the Company's competitive position in its industry.
The essential features of the 1996 Plan are outlined below. You may obtain a
copy of the Plan by writing to the Company in accordance with the instructions
set forth on page 16 below under "Annual Report and Incentive Plan".
GENERAL
The purpose of the 1996 Plan is to enable the Company and its subsidiaries
to attract, retain and motivate its employees, directors and consultants by
providing for or increasing the proprietary interests of such persons in the
Company. Every director, employee and consultant of the Company and its
subsidiaries is eligible to be considered for the grant of awards under the 1996
Plan. As of January 8, 2001, the Company and its subsidiaries had a total of 74
employees.
The 1996 Plan is administered by the Stock Option Committee, each member of
which must be a "non-employee director" as defined in Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act"). The members of
the Stock Option Committee will not be eligible for the grant of awards under
the 1996 Plan. The Stock Option Committee has full and final authority to select
the individuals to receive awards and to grant such awards and has a wide degree
of flexibility in determining the terms and conditions of awards. Subject to
limitations imposed by law, the Board of Directors of the Company may amend or
terminate the Plan at any time and in any manner. However, no such amendment or
termination may deprive the recipient of an award previously granted under the
Plan of any rights thereunder without his or her consent.
Awards under the 1996 Plan are not restricted to any specified form or
structure and may include, without limitation, sales or bonuses of stock,
restricted stock, stock options, reload stock options, stock purchase warrants,
other rights to acquire stock, securities convertible into or redeemable for
stock, stock appreciation rights, phantom stock, dividend equivalents,
performance units or performance shares. An award to an employee may consist of
one such security or benefit or two or more of them in tandem or in the
alternative. The 1996 Plan does not specify a minimum exercise price or other
consideration that a recipient of an award must pay to obtain the benefit of an
award, and therefore the maximum compensation payable to employees pursuant to
the 1996 Plan, during the term of the 1996 Plan and awards granted thereunder,
is equal to the number of shares of common stock with respect to which awards
may be issued thereunder, multiplied by the value of such shares on the date
11
such compensation is measured. An award granted under the 1996 Plan to an
employee will generally include a provision conditioning or accelerating the
receipt of benefits upon the occurrence of specified events, such as a change of
control of the Company or a dissolution, liquidation, sale of substantially all
of the property and assets of the Company or other significant corporate
transaction.
Currently, the maximum number of shares of common stock that may be issued
pursuant to awards granted under the 1996 Plan is 1,425,000. The 1996 Plan
generally provides that no single employee may be granted options or other
awards with respect to more than 1,425,000 shares of common stock in any one
calendar year. The 1996 Plan also contains customary anti-dilution provisions;
provided, however, that no adjustment will be made pursuant to such provisions
to the extent such adjustment would cause incentive stock options (as discussed
below under "Certain Income Tax Consequences") issued or issuable under the 1996
Plan to be treated as other than incentive stock options, or to the extent that
the Stock Option Committee determines that such adjustment would result in the
disallowance of a federal income tax deduction for compensation attributable to
such awards by causing such compensation to be treated as other than
"performance-based compensation" within the meaning of the 1996 Plan.
Awards may not be granted under the 1996 Plan on or after the tenth
anniversary of the adoption of the 1996 Plan. Although any award that was duly
granted prior to such date may thereafter be exercised or settled in accordance
with its terms, no shares of common stock may be issued pursuant to any award on
or after the twentieth anniversary of the adoption of the Plan.
SECTION 16(B) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(b) of the Exchange Act, directors, executive officers
and 10% shareholders of the Company are generally liable to the Company for
repayment of any profits realized from any non-exempt purchase and sale of
common stock occurring within a six-month period. Rule 16b-3 promulgated under
the Exchange Act provides an exemption from Section 16(b) liability for certain
transactions by an officer or director pursuant to an employee benefit plan that
complies with such Rule. The 1996 Plan is designed to comply with Rule 16b-3.
CERTAIN INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax treatment
that generally applies to awards made under the 1996 Plan, based on federal
income tax laws in effect on the date hereof. The exact federal income tax
treatment of awards will depend on the specific nature of any such award.
Pursuant to the 1996 Plan, participants that are employees may be granted
options that are intended to qualify as incentive stock options ("ISOs") under
Section 422 of the Internal Revenue Code of 1986 (the "Code"). Generally, the
optionee is not taxed, and the Company is not entitled to a deduction, on the
grant or exercise of an ISO. However, if the optionee sells the shares acquired
upon the exercise of an ISO ("ISO Shares") at any time within (i) one year after
the transfer of ISO Shares to the optionee pursuant to the exercise of the ISO
or (ii) two years from the date of grant of the ISO, then the optionee will
recognize ordinary income in an amount equal to the excess, if any, of the
lesser of the sale price or the fair market value of the ISO Shares on the date
of exercise, over the exercise price of the ISO. The Company will generally be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee. If the optionee sells the ISO Shares at any time after the optionee
has held the ISO Shares for at least (i) one year after the date of transfer of
the ISO Shares to the optionee pursuant to the exercise of the ISO and (ii) two
years from the date of grant of the ISO, then the optionee will recognize
capital gain or loss equal to the difference between the sales price and the
exercise price of such ISO, and the Company will not be entitled to any
deduction.
The amount by which the fair market value of the ISO Shares received upon
exercise of an ISO exceeds the exercise price will be included as a positive
adjustment in the calculation of an optionee's
12
"alternative minimum taxable income" ("AMTI") in the year of exercise. The
"alternative minimum tax" imposed on individual taxpayers is generally equal to
the amount by which 28% (26% of AMTI below certain amounts) of the individual's
AMTI (reduced by certain exemption amounts) exceeds his or her regular income
tax liability for the year.
The grant of an option or other similar right to acquire stock that does not
qualify for treatment as an ISO (a "non-qualified stock option") is generally
not a taxable event for the optionee. Upon exercise of the option, the optionee
will generally recognize ordinary income in an amount equal to the excess of the
fair market value of the stock acquired upon exercise (determined as of the date
of exercise) over the exercise price of such option, and the Company will be
entitled to a deduction equal to such amount. Nonemployees may only be awarded
non-qualified stock options.
If an optionee is a director, officer or shareholder subject to Section 16
of the Exchange Act (an "Insider") and exercises an option within six months of
the date of grant, the timing of the recognition of any ordinary income should
be deferred until the earlier of the following two dates (the "16(b) Date"):
(i) six months after the date of grant or (ii) a disposition of the shares of
common stock, unless the Insider makes an election under Section 83(b) of the
Code (an "83(b) Election") within 30 days after exercise to recognize ordinary
income based on the value of the Common stock on the date of exercise. In
addition, special rules apply to an Insider who exercises an option having an
exercise price greater than the fair market value of the underlying shares on
the date of exercise.
Awards under the 1996 Plan may also include stock sales, stock bonuses or
other grants of stock that include provisions for the delayed vesting of the
recipient's rights to the stock. Unless the recipient makes an 83(b) Election as
discussed above within 30 days after the receipt of the restricted shares, the
recipient generally will not be taxed on the receipt of restricted shares until
the restrictions on such shares expire or are removed. When the restrictions
expire or are removed, the recipient will recognize ordinary income (and the
Company will be entitled to a deduction) in an amount equal to the excess of the
fair market value of the shares at that time over the purchase price. However,
if the recipient makes an 83(b) Election within 30 days of the receipt of
restricted shares, he or she will recognize ordinary income (and the Company
will be entitled to a deduction) equal to the excess of the fair market value of
the shares on the date of receipt (determined without regard to vesting
restrictions) over the purchase price. In the case of an Insider (as defined
above), the timing of income recognition (including the date used to compute the
fair market value of shares) with respect to restricted shares may be deferred
until the 16(b) Date, as described above, unless the Insider makes a valid 83(b)
Election.
Awards may be granted under the 1996 Plan, which do not fall clearly into
the categories described above. The federal income tax treatment of these awards
will depend upon the specific terms of such awards. Generally, the Company will
be required to make arrangements for withholding applicable taxes with respect
to any ordinary income recognized by a recipient in connection with awards made
under the 1996 Plan.
Special rules will apply in cases where a recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations under the 1996 Plan by delivering previously owned shares of common
stock or by reducing the amount of shares otherwise issuable pursuant to the
award. The surrender or withholding of such shares will in certain circumstances
result in the recognition of income with respect to such shares or a carryover
basis in the shares acquired.
The terms of the agreements pursuant to which specific awards are made under
the 1996 Plan may provide for accelerated vesting or payment of an award in
connection with a change in ownership or control of the Company. In that event
and depending upon the individual circumstances of the recipient, certain
amounts with respect to such awards may constitute "excess parachute payments"
under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be
13
subject to a 20% excise tax on any "excess parachute payments" and the Company
will be denied any deduction with respect to such payment.
In certain circumstances, the Company may be denied a deduction for
compensation (including compensation attributable to the ordinary income
recognized with respect to awards made under the 1996 Plan) to certain officers
of the Company to the extent that the compensation exceeds $1,000,000 (per
person) annually.
CONCLUSION
The Board of Directors has directed that the proposed amendment to the 1996
Plan be submitted for shareholder approval. The affirmative vote of a majority
of the shares of common stock represented at the Annual Meeting will be required
for approval. In the absence of approval, the amendment to the 1996 Plan will be
without effect, and the maximum number of shares of common stock issuable under
the 1996 Plan will remain 1,425,000.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE 1996 PLAN.
When a proxy in the form of the proxy enclosed with this Proxy Statement is
returned properly executed, unless marked to the contrary, such proxy will be
voted in favor of adoption of the amendment to the 1996 Plan.
INDEPENDENT ACCOUNTANTS
Grant Thornton LLP has audited the Company's financial statements and
related schedules for the nine-month period ended September 30, 2000 and the
fiscal year ended December 31, 1999. Representatives of Grant Thornton LLP are
not expected to be present at the annual meeting of shareholders. The selection
of independent accountants to audit the Company's 2001 financial statements will
be made in the second half of 2001 after an evaluation of the audit fee
proposal.
ANNUAL REPORT AND INCENTIVE PLAN
The Company's Transition Report on Form 10-K including financial statements
and related schedules for the nine-month period ended September 30, 2000 and the
fiscal year ended December 31, 1999 filed with the SEC is being mailed to all
shareholders. Any shareholder who has not received a copy may obtain one by
writing to the Company at 9339 Carroll Park Drive, San Diego, California 92121,
Attention: Shareholder Relations. In addition, any shareholder may obtain a copy
of the 1996 Plan by writing to the Company at the foregoing address.
SHAREHOLDER PROPOSALS
A proposal of a shareholder intended to be presented at the 2002 Annual
Meeting of Shareholders and to be included in the Proxy Statement for that
meeting must be submitted to the Company at its principal executive offices,
9339 Carroll Park Drive, San Diego, California 92121, and received by the
Company a reasonable time before it begins to print and mail its proxy materials
for the 2002 Annual Meeting. The Company intends to specify the date by which
such proposals must be received in one of its Quarterly Reports on Form 10-Q to
be filed in 2001. A shareholder proposal submitted outside the processes of
Rule 14a-8 under the Exchange Act will be considered untimely if not submitted a
reasonable time before the printing and the mailing of the proxy materials for
the 2002 Annual Meeting.
14
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. However, if any other matters are properly presented for action, the
persons named in the accompanying proxy intend to vote on such matters in their
discretion.
SOLICITATION OF PROXIES
The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, telephone or telegram and personally by
directors, officers and other employees of the Company, but such persons will
not receive compensation for such services over and above their regular
salaries. The Company will reimburse brokers, banks, custodians, nominees and
fiduciaries holding stock in their names or in the names of their nominees for
their reasonable charges and expenses in forwarding proxy material to the
beneficial owners of such stock.
15
APPENDIX A
AUDIT COMMITTEE CHARTER
MAY 2000
PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Corporation to
any governmental body or the public; the Corporation's systems of internal
controls regarding finance, accounting, and compliance that management and the
Board have established; and the Corporation's auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee should encourage continuous improvement of, and should foster
adherence to, the Corporation's policies, procedures and practices at all
levels. The Audit Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
- Review and appraise the audit efforts of the Corporation's independent
accountants, and monitor their independence.
- Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board of Directors.
- Monitor the Corporation's compliance with legal and regulatory
requirements.
MEMBERSHIP
The Audit Committee will be composed of not less than three members of the
Board. They will be selected by the Board, taking into account prior experience
in matters to be considered by the Committee, probable availability at times
required for consideration of such matters, and their individual independence
and objectivity.
The Committee's membership will meet the requirements of the audit committee
policy of the National Association of Securities Dealers ("NASD"). Accordingly,
all of the members will be directors independent of management and free from
relationships that, in the opinion of the Board of Directors, would interfere
with the exercise of independent judgment as a committee member.
No officers or employees of the Corporation or any of its subsidiaries may
serve on the Committee, provided that a former officer of the Corporation may
serve on the Committee (even though the former officer may be receiving pension
or deferred compensation payments from the Corporation) if, in the opinion of
the Board of Directors, the former officer will exercise independent judgment
and will significantly assist the Committee to function. However, a majority of
the Committee will be directors who were not formerly officers of the
Corporation or any of its subsidiaries.
When considering relationships that might affect independence, including
possible affiliate status, the Board of Directors will give appropriate
consideration, in addition to its audit committee policy, to guidelines issued
by the NASD which are provided to assist boards of directors in observing the
spirit of the NASD policy.
A-1
MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. At least two members of the Committee must be present for
a quorum. As part of its job to foster open communication, the Committee should
meet at least annually with management and the independent accountants in
separate executive sessions to discuss any matters that the Committee or each of
these groups believe should be discuss privately. In addition, the Committee or
at least its Chair should meet with the independent accountants and management
quarterly to review the Corporation's financials.
The Committee shall have the authority to retain special legal, accounting
or other consultants to advise it. The Committee may request any officer or
employee of the Corporation or the Corporation's outside counsel or independent
auditors to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
ACTIONS OF THE COMMITTEE
The Committee's activities will include the following actions:
A. Oversight of the financial statements and relations with the independent
auditors. The committee shall:
1. Instruct the independent auditors that the Board of Directors is the
client in its capacity as the shareholders' representative.
2. Expect the independent auditors to meet with the Board of Directors at
least annually so the Board has a basis on which to recommend the
independent auditors' appointment to the shareholders or to ratify the
Committee's selection of the independent auditors.
3. Expect financial management and the independent auditors to analyze
significant financial report issues and practices on a timely basis.
4. Expect financial management and the independent auditors to discuss with
the Committee:
a. Qualitative judgments about whether current or proposed accounting
principles and disclosures are appropriate, not just acceptable.
b. Aggressiveness or conservatism of accounting principles and financial
estimates.
c. Adequacy of internal controls that could significantly affect the
Corporation's financial statements.
5. Expect the independent auditors to provide the Committee with:
a. Independent judgments about the appropriateness of the Corporation's
current or proposed accounting principles and whether current or
proposed financial disclosures are clear.
b. Views on whether the accounting principles chosen by management are
conservative, moderate, or aggressive as they relate to income,
asset, and liability recognition, and whether these accounting
principles are commonly used.
c. Reasons why accounting principles and disclosure practices used for
new transactions or events are appropriate.
d. Reasons for accepting or questioning significant estimates made by
management.
e. Views on how selected accounting principles and disclosures practices
affect shareholder and public attitudes about the Corporation.
f. Periodic reports regarding the auditor's independence consistent with
Independent Standards Board Standard 1.
A-2
B. Actions to be taken by the Committee on the Board's behalf that require
Board notification but not Board approval shall include the following:
1. Review and approval of the scope of the Corporation's audit and that of
its subsidiaries as recommended by the independent auditors and the
president.
2. Review and approval of the scope of the Corporation's annual profit and
pension trust audits.
3. Answer questions raised by shareholders during an annual shareholders'
meeting on matters relating to the Committee's activities.
4. Ask the president to have staff study a particular area of interest or
concern to the Committee.
5. Review the terms of the engagement of the independent auditors,
including the scope of their audit, proposed fees, and personnel
qualifications.
C. Matters requiring the Committee's review and study before making a
recommendation for the Board of Director's action include the following:
1. Appointment of the independent auditors and evaluation of their
performance.
2. Implementation of major accounting policy changes.
3. SEC registration statements to be signed by the Board of Directors.
4. The auditors' reports and financial statements prior to publication in
the annual report, including whether it recommends to the Board that the
most recent year's audited financial statements be included in the
Corporation's Form 10-K filed with the Securities and Exchange Commission
("SEC").
5. The adequacy of this Charter and the need to amend it.
6. Action required to oversee or assure the independence of the auditors,
including review of information submitted no less often than annually by
the auditors pertaining to their independence and discussion of such
information with the auditors.
7. Preparation of the report of the Committee required by the rules of the
SEC to be included in the Corporation's annual proxy statement.
D. Matters requiring the Committee's review and study before providing summary
information to the Board of Directors:
1. Accounting policy changes proposed or adopted by organizations such as
the Financial Accounting Standards Board, the SEC, and the American
Institute of Certified Public Accountants, or by comparable bodies
outside the U.S.
2. The independent auditors' assessment of the strengths and weaknesses of
the Corporation's financial staff, systems, controls, and other factors
that might be relevant to the integrity of the financial statements.
3. Quarterly financial statements review with management and independent
auditors before earnings release or publication.
4. Administration of the Corporation's "conflict of interest" policy and
corporate compliance policies.
5. The performance of management and operating personnel under the
Corporation's code of ethics.
6. Gaps and exposures in insurance programs and other major financial risk
exposures.
A-3
7. Reports about the Corporation or its subsidiaries submitted by agencies
of governments in countries in which the Corporation or its subsidiaries
operate.
8. Periodic SEC filings and the adequacy of programs and procedures to
assure compliance with SEC regulations and regulations of the NASD.
9. Review with the Corporation's general counsel legal matters, including
litigation, that may have a material impact on the financial statements,
the Corporation's compliance policies and any material reports or
inquiries received from regulators or governmental agencies.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor or
to assure compliance with laws and regulations.
A-4
ALTRIS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
SOFTWARE, DIRECTORS OF ALTRIS SOFTWARE, INC.
INC. The undersigned hereby appoints Roger H. Erickson and
PROXY John W. Low, and each of them, as Proxies, each with the
9339 CARROLL PARK DRIVE, SAN DIEGO, CA 92121 power to appoint his or her substitute, and hereby
- --------------------------------------------- authorizes each of them to represent and vote, as
designated below, all the shares of common stock of
Altris Software, Inc., a California corporation (the
"Company"), held of record by the undersigned on
February 4, 2001, at the Annual Meeting of Shareholders
to be held on March 6, 2001 or any postponements or
adjournments thereof.
1. Election of FOR all nominees listed below WITHHOLD AUTHORITY
Directors:
(EXCEPT AS MARKED TO THE CONTRARY to vote for all nominees listed
BELOW). / / below. / /
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
ROGER H. ERICKSON, JOHANN LEITNER, D. ROSS HAMILTON, LARRY D. UNRUH, HILTON
ISAACMAN
2. To amend the Company's Amended and Restated 1996 Stock Incentive Plan to
increase the number of shares of common stock reserved for issuance under
the plan from 1,425,000 to 2,425,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such business
as may properly come before such meeting and any and all postponements or
adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
[Reverse Side of Proxy]
This proxy when properly executed will be voted in accordance with the
instructions indicated; however, if no instructions are given, the proxies
will vote the shares for each of the nominees for director, for amendment
of the Amended and Restated 1996 Stock Incentive Plan and in their
discretion on the matters described in Item 3.
Do you plan to attend the meeting? / / YES / / NO
Please sign exactly as your name appears on the stock certificate(s). When
shares are held by joint tenants, both should sign.
-------------------------------------- When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as such.
If a corporation, please sign in
full corporate name by the president
or other authorized officer. If a
partnership or limited liability
company, please sign in the
partnership's or limited liability
company's name by an authorized
person.
DATED ---------------- , 2001 ------------------------------------------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY ------------------------------------------------------------
CARD PROMPTLY USING THE ENCLOSED ENVELOPE Signature if held jointly