SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
x Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for use of the Commission
X Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
Definitive Additional Materials
Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
TELESOFT CORP.
--------------
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
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:
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
TELESOFT CORP.
3443 NORTH CENTRAL AVENUE, SUITE 1800
PHOENIX, ARIZONA 85012
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 2001
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
Telesoft Corp., an Arizona corporation ("Company"), will be held at the
Company's executive offices at 3443 North Central Avenue, Suite 1800, Phoenix,
Arizona 85012, on Friday, May 18, 2001 at 9:00 a.m., Mountain Standard Time,
for the following purposes, all as more fully described in the attached proxy
statement:
1. To elect seven directors to hold office until the next annual meeting
of shareholders and until their respective successors have been duly elected
and qualified; and
2. To transact such other business as may properly come before the annual
meeting and any and all adjournments thereof.
The board of directors has fixed the close of business on April 24,
2001, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting or any adjournment thereof. The list
of shareholders entitled to vote at the annual meeting is available at the
Company's executive offices, 3443 North Central Avenue, Suite 1800, Phoenix,
Arizona 85012, for examination by any shareholder.
YOU ARE EARNESTLY REQUESTED TO DATE, SIGN AND RETURN THE
ACCOMPANYING FORM OF PROXY IN THE ENVELOPE ENCLOSED FOR THAT PURPOSE (TO WHICH
NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES) WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON. THE PROXY IS REVOCABLE BY YOU AT ANY
TIME PRIOR TO ITS EXERCISE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF
YOU ATTEND THE MEETING OR ANY ADJOURNMENT THEREOF. THE PROMPT RETURN OF THE
PROXY WILL BE OF ASSISTANCE IN PREPARING FOR THE MEETING AND YOUR COOPERATION
IN THIS RESPECT WILL BE APPRECIATED.
By Order of the Board of Directors
/s/ Thierry E. Zerbib
Thierry E. Zerbib, Secretary
Phoenix, Arizona
April 30, 2001
TELESOFT CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2001
This proxy statement and the accompanying form of proxy are furnished to
shareholders of Telesoft Corp., an Arizona corporation ("Company"), in
connection with the solicitation of proxies by the Company's board of
directors for use in voting at the annual meeting of shareholders to be held
at the Company's executive offices, 3443 North Central Avenue, Suite 1800,
Phoenix, Arizona 85012, on Friday, May 18, 2001, at 9:00 a.m., Mountain
Standard Time, and at any and all adjournments thereof. Any proxy given
pursuant to this solicitation may be revoked by the shareholder at any time
before it is exercised by written notification delivered to the secretary of
the Company, by voting in person at the annual meeting, or by delivering
another proxy bearing a later date. Attendance by a shareholder at the annual
meeting does not alone serve to revoke his or her proxy. Unless otherwise
specified in the form of proxy, shares represented by proxies will be voted
"FOR" the election of the nominees below under proposal I, and, in the
discretion of the proxies named on the proxy card with respect to any other
matters properly brought before the annual meeting and any adjournments
thereof. In such unanticipated event that any other matters are properly
presented at the annual meeting for action, the persons named in the proxy
will vote the proxies in accordance with their best judgment.
The Company's executive offices are located at 3443 North Central Avenue,
Suite 1800, Phoenix, Arizona 85012. On or about April 30, 2001, this proxy
statement and the accompanying form of proxy, together with a copy of the
annual report to shareholders for the fiscal year ended November 30, 2000, are
to be mailed to each shareholder of record at the close of business on April
24, 2001.
VOTING SECURITIES
The board of directors has fixed the close of business on April 24, 2001
("Record Date") as the record date for the determination of shareholders of
the Company who are entitled to receive notice of, and to vote at, the annual
meeting. Only shareholders of record at the close of business on that date
will be entitled to vote at the annual meeting or any and all adjournments
thereof. As of the Record Date, the Company had issued and outstanding
1,415,833 shares of common stock, the Company's only class of voting
securities outstanding. Each shareholder of the Company will be entitled to
one vote for each share of common stock registered in his or her name on the
record date, except for the election of directors, in which case cumulative
voting is permitted. The presence, in person or by proxy, of a majority of
the votes entitled to be cast will constitute a quorum at the annual meeting.
Proxies that are marked "abstain" and proxies relating to "street name" shares
that are returned to the Company but marked by brokers as "not voted" ("broker
non-votes") will be treated as shares present for purposes of determining the
presence of a quorum on all matters unless authority to vote is completely
withheld on the proxy. The election of directors requires a plurality of
votes cast at the annual meeting with respect to the election of directors.
"Plurality" means that the seven nominees who receive the highest number of
votes cast "FOR" will be elected as directors. Pursuant to the provisions of
Arizona General Corporation Law, at each election for directors, shareholders
are entitled to cumulate their votes by multiplying the number of votes they
are entitled to cast by the number of directors for whom they are entitled to
vote and casting the product for a single candidate or distributing the
product among two or more candidates. Accordingly, abstentions and broker
non-votes will not affect the outcome of the election of directors. All other
matters to be considered and acted upon by the shareholders at the annual
meeting must be approved by a majority of the shares represented at the annual
meeting and entitled to vote. On any such matter, abstentions will have the
same effect as a vote against the proposal. In contrast, broker non-votes
will not be counted in determining the number of votes required for a majority
and will therefore have no effect on the outcome.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date
with respect to (1) those persons or groups known to the Company to
beneficially own more than 5% of the Company's common stock, (2) each director
and nominee, (3) each executive officer whose compensation exceeded $100,000
in the fiscal year ended November 30, 2000 and (4) all directors and executive
officers as a group. The information is determined in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934 based upon
information furnished by the persons listed or contained in filings made by
them with the Securities and Exchange Commission. A person is deemed to be
the beneficial owner of voting securities that can be acquired by such person
within 60 days from the Record Date upon the exercise of options, warrants or
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible securities that
are held by such person (but not those held by any other person) and which are
exercisable within 60 days of the Record Date have been exercised. Except as
indicated below, the shareholders listed possess sole voting and investment
power with respect to their shares. Unless otherwise indicated, the address
of each of the persons listed is c/o Telesoft Corp., 3443 North Central
Avenue, Suite 1800, Phoenix, Arizona 85012.
Amount and Nature of Percent
Beneficial Ownership of Class
--------------------- ---------
Name and Address of Beneficial Owner
- -------------------------------------
Michael F. Zerbib 230,603 16.3%
Thierry E. Zerbib 232,617 16.4%
Brian H. Loeb 232,617 16.4%
Joseph W. Zerbib 0 *
Cecile Silverman 1,208(1) *
66 West State Avenue
Phoenix, Arizona 85021
Kalvan Swanky 1,208(1) *
8360 East Via de Ventura
Scottsdale, Arizona 85258
Todd P. Belfer 29,164(2) 2.1%
5450 East Arcadia Lane
Phoenix, Arizona 85018
Mark Gordon 111,293(3) 7.5%
Nicolas Zerbib 118,322 8.4%
20 Horseneck Lane
Greenwich, Connecticut 06830
All executive officers and directors
as a group (seven persons) 727,417(4) 51.3%
<FN>
______________________________
* Less than 1%.
(1) Represents shares of common stock issuable upon exercise of currently
exercisable options.
(2) Represents shares of common stock owned by T.P.B. Investment Limited
Partnership, an Arizona limited partnership of which Mr. Belfer is the general
partner.
(3) Includes 65,270 shares of common stock issuable upon exercise of
currently exercisable options. Excludes 5,000 shares of common stock issuable
upon exercise of options that become exercisable in October 2001.
(4) Includes those shares of common stock deemed to be included in the
respective beneficial ownership of Michael F. Zerbib, Thierry E. Zerbib, Brian
H. Loeb, Joseph W. Zerbib, Kalvan Swanky, Cecile Silverman and Todd P. Belfer.
PROPOSAL I: ELECTION OF DIRECTORS
The board of directors consists of the following seven members: Joseph W.
Zerbib, Thierry E. Zerbib, Brian H. Loeb, Michael F. Zerbib, Cecile Silverman,
Kalvan Swanky and Todd P. Belfer. The term of the directors will expire on
the date of this year's annual meeting. Each director serves from the date of
his or her election until the end of his or her term and until his or her
successor is elected and qualified.
Seven persons will be elected at the annual meeting to serve as directors
for a term of one year and until their successors have been duly elected and
qualified. The board of directors has nominated Joseph W. Zerbib, Thierry E.
Zerbib, Brian H. Loeb, Michael F. Zerbib, Cecile Silverman, Kalvan Swanky and
Todd P. Belfer as the candidates for election. Pursuant to the provisions of
Arizona General Corporation Law, at each election for directors, shareholders
are entitled to cumulate their votes by multiplying the number of votes they
are entitled to cast by the number of directors for whom they are entitled to
vote and casting the product for a single candidate or distributing the
product among two or more candidates. In case any of the nominees become
unavailable for election to the board of directors, an event which is not
anticipated, the persons named as proxies, or their substitutes, shall have
full discretion and authority to vote or refrain from voting for any other
candidate in accordance with their judgment.
INFORMATION ABOUT THE NOMINEES
The following table sets forth information with respect to the Company's
directors and executive officers:
NAME. . . . . . . . . . . . AGE POSITION
- --------------------------- --- ------------------------------------------------------------
Michael F. Zerbib(1) 34 President, Chief Executive Officer, Chief Financial Officer,
Treasurer and Director
Joseph W. Zerbib. . . . . . 65 Chairman of the Board of Directors
Thierry E. Zerbib 39 Vice President-Technologies, Secretary and Director
Brian H. Loeb 39 Vice President-Marketing, Sales and Operations and
Director
Cecile Silverman(1)(2) 76 Director
Kalvan Swanky (1)(2) 39 Director
Todd P. Belfer (2) 33 Director
______________________________________
(1) Member of compensation committee
(2) Member of audit committee
Michael F. Zerbib has been president and chief executive officer of the
Company since February 2000 and chief financial officer, treasurer and a
director of the Company since 1990. He holds a Bachelor of Science degree in
finance and a Master's degree in taxation and financial accounting from
Arizona State University.
Joseph W. Zerbib has been chairman of the board of directors since 1982.
From 1982 to February 2000, he served as president and chief executive officer
of the Company.
Thierry E. Zerbib has been vice president-technologies, secretary and a
director of the Company since 1982. He holds dual degrees in computer science
and math from Tel Aviv University, Israel.
Brian H. Loeb has been vice president-marketing, sales and operations
since 1982 and a director of the Company since 1992.
Cecile Silverman has been a director of the Company since June 1995. Ms.
Silverman is a certified public accountant and has been self-employed since
1989. From 1975 to 1989, she was a partner at the firm of Schwartz, Cohen &
Co. Ms. Silverman specializes in tax planning for corporations and
individuals, as well as representing clients before various governmental
agencies. She graduated from Syracuse University with a degree in
accounting.
Kalvan Swanky has been a director of the Company since June 1995. Since
1986, he has been employed by Storage Technology Corporation ("STC"), which
develops, manufactures and distributes computer memory devices. Mr. Swanky
has held a number of positions with STC, most recently as Direct Sales Manager
for Arizona and Nevada. He received a Bachelor of Science degree from the
University of Colorado.
Todd P. Belfer has been a director of the Company since April 2001. Mr.
Belfer has served as a director of Vitrix Inc. (OTCBB: VTTX) since April 1999,
as chairman of the board of directors of Vitrix Inc. since November 1999, and
as a director of its wholly-owned subsidiary since April 1996. Since February
1994, Mr. Belfer also has served as a director of M.D. Labs, Incorporated, a
private Arizona-based company. Mr. Belfer also co-founded Employee Solutions,
Inc. in May 1990, and served as its executive vice president and a director
from 1991 to 1996. Mr. Belfer received a Bachelor of Science degree in
Finance and Economics from the University of Arizona.
Joseph W. Zerbib is the father of Thierry E. Zerbib and Michael F. Zerbib
and the father-in-law of Brian H. Loeb. Accordingly, Thierry E. Zerbib and
Michael F. Zerbib are brothers and Brian H. Loeb is the brother-in-law of
Thierry E. Zerbib and Michael F. Zerbib.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended November 30, 2000, the board of directors
held five meetings. All directors attended these meetings.
COMPENSATION COMMITTEE
The board of directors maintains a compensation committee, which
currently is composed of Cecile Silverman, Kalvan Swanky and Michael Zerbib.
The responsibilities of the compensation committee include, in addition to
such other duties as the board of directors may specify, (1) reviewing and
recommending to the board of directors the salaries, compensation and benefits
of the Company's executive officers and key employees, (2) reviewing any
related party transactions on an ongoing basis for potential conflicts of
interest and (3) administering the Company's stock plans. The compensation
committee held two meetings during the fiscal year ended November 30, 2000.
AUDIT COMMITTEE REPORT
The board of directors maintains an audit committee, which currently is
composed of Cecile Silverman, Kalvan Swanky and Todd P. Belfer. Ms. Silverman
and Mr. Swanky have served as members of the audit committee since June 1995
and Mr. Belfer has served as a member of the audit committee since April 2001.
Each of these members is an "independent director" and is "financially
literate" as defined under the recently adopted Nasdaq listing standards. The
Nasdaq listing standards define an "independent director" generally as a
person, other than an officer of the company, who does not have a relationship
with the company that would interfere with the director's exercise of
independent judgment. Nasdaq's listing standards define "financially
literate" as being able to read and understand fundamental financial
statements (including a company's balance sheet, income statement and cash
flow statement).
The audit committee held three meetings during the fiscal year ended
November 30, 2000. The responsibilities of the audit committee include, in
addition to such other duties as the board of directors may specify, (1)
receiving reports with respect to loss contingencies, the public disclosure or
financial statement notation of which may be legally required, (2) annually
reviewing and examining those matters that relate to a financial and
performance audit of the Company's stock option plans, (3) recommending to the
board of directors the selection, retention and termination of the Company's
independent accountants, (4) reviewing the professional services, proposed
fees and independence of such accountants and (5) providing for the periodic
review and examination of management performance in selected aspects of
corporate responsibility. The audit committee has adopted a formal written
audit committee charter, a copy of which is attached to this proxy statement
as Appendix I.
The audit committee has met and held discussions with management and the
Company's independent auditors. Management represented to the committee that
the Company's consolidated financial statements were prepared in accordance
with generally accepted accounting principles, and the committee has reviewed
and discussed the consolidated financial statements with management and the
independent auditors. The committee discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Company's independent auditors
also provided the audit committee with the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the committee discussed with the independent auditors
the auditor's independence. Based upon the committee's discussion with
management and the independent auditors and the committee's review of the
representations of management and the report of the independent auditors to
the audit committee, the committee recommended that the board of directors
include the audited consolidated financial statements in the Company's annual
report on Form 10-K for the fiscal year ended November 30, 2000 filed with the
Commission.
Submitted by the Audit Committee:
Cecile Silverman
Kalvan Swanky
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company receive $500 for attendance
at each board meeting, plus reasonable out-of-pocket expenses incurred in
attending meetings. In April 1996, the Company granted to each of Ms.
Silverman and Mr. Swanky immediately exercisable options to purchase 1,000
shares of common stock at a price of $4.75 per share through August 2001. In
October 1996, the Company granted to each of Ms. Silverman and Mr. Swanky
immediately exercisable options to purchase 1,000 shares of common stock at a
price of $3.00 per share through October 2001. In October 1997, the Company
granted each of Ms. Silverman and Mr. Swanky immediately exercisable options
to purchase 1,000 shares of common stock at a price of $2.9375 per share
through October 2002. None of the options granted were pursuant to any stock
option plan. During the year ended November 30, 2000, both Ms. Silverman and
Mr. Swanky exercised 1,792 options, including 1,000 and 792 options with an
exercise price $2.9375 and $3.00, respectively, in connection with the
Company's self-tender offer. They each received $7,679 of net proceeds.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than ten percent of the
Company's common stock to file reports of ownership and changes in ownership
with the Commission. These reporting persons also are required to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on its review of the copies of such forms furnished to
it and representations that no other reports were required, the Company
believes that all Section 16(a) reporting requirements were complied with
during the fiscal year ended November 30, 2000.
- ------
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation received by the
chief executive officer and each additional executive officer whose
compensation exceeded $100,000 for services rendered in all capacities to the
Company and its subsidiaries for the fiscal years ended November 30, 2000,
1999, and 1998.
Long Term Compensation
Annual Compensation Awards Payouts
Other Securities All
Annual Restricted Underlying Other
Name and . . . . . . . . Compen- Stock Options/ LTIP Compen-
Principal Position . . . Year Salary Bonus sation Awards SARs Payouts sation
- ------------------------ ---------------------- ----------- ----------- ------ ------- ---- ------- ------
Michael F. Zerbib (1). . 2000 $ 123,000 -0- -0- -0- -0- -0- -0-
President, Chief
Executive Officer,
Chief Financial Officer
and Treasurer
1999 $ 144,000 -0- -0- -0- -0- -0- -0-
1998 $ 144,000 $ 150,000 -0- -0- -0- -0- -0-
---------------------- ----------- ----------- ------ ------- ---- ------- ------
Thierry E. Zerbib. . . . 2000 $ 182,000 -0- -0- -0- -0- -0- -0-
Vice President -
Technologies and
Secretary
1999 $ 154,000 -0- -0- -0- -0- -0- -0-
1998 $ 144,000 $ 150,000 -0- -0- -0- -0- -0-
---------------------- ----------- ----------- ------ ------- ---- ------- ------
Brian H. Loeb. . . . . . 2000 $ 129,000 -0- -0- -0- -0- -0- -0-
Vice President -
Marketing, Sales and
Operations
1999 $ 144,000 -0- -0- -0- -0- -0- -0-
1998 $ 144,000 $ 150,000 -0- -0- -0- -0- -0-
---------------------- ----------- ----------- ------ ------- ---- ------- ------
Joseph W. Zerbib (2) 2000 $ 129,000 -0- -0- -0- -0- -0- -0-
Chairman of the Board
1999 $ 144,000 -0- -0- -0- -0- -0- -0-
1998 $ 144,000 $ 150,000 -0- -0- -0- -0- -0-
---------------------- ----------- ----------- ------ ------- ---- ------- ------
<FN>
(1) Michael Zerbib acted as chief financial officer and treasurer until
February 1, 2000. Since February 1, 2000, he has served as president, chief
executive officer, chief financial officer and treasurer.
(2) Joseph Zerbib acted as president and chairman of the board until
February 1, 2000. Since February 1, 2000, he has served as chairman of
the board.
The executive officers of the Company named above routinely receive other
benefits from the Company, the amounts of which are customary in the industry.
The Company has concluded, after reasonable inquiry, that the aggregate
amounts of such benefits during the years ended November 30, 2000, 1999 and
1998 did not exceed the lesser of $50,000 or 10% of the compensation set forth
above as to any named individual.
OPTION GRANTS IN FISCAL 2000
No options were granted to the Company's executive officers during fiscal
2000.
OPTION FORFEITURES IN FISCAL 2000
During the year ended November 30, 2000, Michael Zerbib and Joseph Zerbib
forfeited 50,210 and 49,106 common stock options, respectively, and Thierry
Zerbib and Brian Loeb each forfeited 46,345 common stock options. These
forfeitures were completed in connection with the Company's self-tender offer
in March 2000.
OPTION EXERCISES IN FISCAL 2000
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End at FY-end(3)
Acquired on Value Exercisable / Exercisable /
Name Exercise (1) Realized (2) Unexercisable Unexercisable
- -------------------------------------
Michael F. Zerbib . . . . . . . . . . 44,790 $ 119,107 - -
President, Chief Executive Officer,
Chief Financial Officer and Treasurer
- -------------------------------------
Thierry E. Zerbib . . . . . . . . . . 41,655 $ 99,745 - -
Vice President -Technologies and
Secretary
- -------------------------------------
Brian H. Loeb . . . . . . . . . . . . 41,655 $ 99,745 - -
Vice President - Marketing, Sales
and Operations
- -------------------------------------
Joseph W. Zerbib. . . . . . . . . . . 43,894 $ 113,575 - -
Chairman of the Board
- -------------------------------------
(1) These common stock options were exercised in connection with the
self-tender offer in March 2000.
(2) Represents the difference between the purchase price ($7.25 per share)
and the exercise price of the options.
(3) Represents the difference between the aggregate market value at
November 30, 2000 of the common stock underlying the options (based on the
last sale price of $1.00 on that date) and the options' aggregate exercise
price.
STOCK OPTION PLANS
1995 AND 1996 INCENTIVE STOCK OPTION PLANS
The board of directors adopted the 1995 Incentive Stock Option Plan
("1995 ISO Plan") on February 1, 1995 and the 1996 Incentive Stock Option Plan
("1996 ISO Plan") on April 15, 1996. These plans subsequently were approved
by the shareholders. The terms and conditions of these plans are
substantively similar. Each of the plans authorizes the Company to grant to
key employees both nonqualified options and options intended to qualify as
incentive options under Section 422 of the Internal Revenue Code, as described
in the plans. The plans are administered by the compensation committee, which
has the authority to interpret their provisions, to establish and amend rules
for their administration, to determine the types and amounts of awards to be
made, subject to the plans' limitations, and to approve recommendations made
by management as to who should receive awards. There are 264,000 shares
authorized for grant under the 1995 ISO Plan. As of November 30, 2000, there
were no common stock options outstanding under the 1995 ISO Plan. There are
260,000 shares authorized for grant under the 1996 ISO Plan. As of November
30, 2000, options to purchase 31,457 shares of common stock were outstanding
under the 1996 ISO Plan. These options are held by certain employees of the
Company at exercise prices ranging from $3.00 to $4.75 per share.
1997 PERFORMANCE EQUITY PLAN
On October 2, 1997, the board of directors adopted the 1997 Performance Equity
Plan ("1997 Plan"). On May 15, 1998, the board of directors amended the 1997
Plan. The 1997 Plan was subsequently approved by the shareholders. The board
of directors has authorized 1,000,000 shares for grant under the 1997 Plan.
Awards consist of stock options (both nonqualified options and options
intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended), restricted stock awards, deferred
stock awards, stock appreciation rights and other stock-based awards, as
described in the 1997 Plan. The 1997 Plan is administered by the compensation
committee, which determines the persons to whom awards will be granted, the
number of awards to be granted and the specific terms of each grant, including
the vesting thereof, subject to the provisions of the 1997 Plan. As of
November 30, 2000, options to purchase 118,772 shares of common stock were
outstanding under the 1997 Plan. These options are held by certain employees
of the Company at exercise prices ranging from $2.9375 to $4.875 per share.
REPORT OF THE COMPENSATION COMMITTEE CONCERNING COMPENSATION OF EXECUTIVE
OFFICERS
The board of directors sets the base salary of the Company's executive
officers and approves individual bonuses, if any, for executive officers. The
compensation committee of the board administers the Company's 1995 ISO Plan,
1996 ISO Plan and the 1997 Plan. The Company may grant, either pursuant to
the plans or outside of the plans, various stock and stock-based awards,
including stock options. To date, the Company has not granted stock or
stock-based awards other than stock options to its executive officers. The
following is a summary of policies of the board and the compensation committee
that affect the compensation paid to executive officers, as reflected in the
tables and text set forth elsewhere in this proxy statement.
GENERAL COMPENSATION POLICY. The board's and the compensation
committee's policy is to offer competitive compensation opportunities for
executive officers based upon their personal performance, the financial
performance of the Company and their contribution to that performance. Each
executive officer's base salary reflects individual performance and is
established to be competitive with salary levels in the industry and for
companies of comparable size. The Company also has granted to its executive
officers stock-based awards in the form of stock options, designed to provide
a long-term incentive for the executive officers that is tied to improved
long-term performance of the Company and stockholder value. In addition, the
Company has in the past, and may in the future, award cash bonuses to some or
all of its executive officers, based upon their individual performance, the
performance of the Company and their contribution to the Company's
performance. The Company did not award or agree to award any cash bonuses to
executive officers during the past fiscal year.
FACTORS. Several factors considered in establishing the components of
each executive officer's compensation package for the 2000 fiscal year are
summarized below. Additional factors were taken into account to a lesser
degree. The board and compensation committee may in their discretion apply
entirely different factors, such as different measures of financial
performance, for future fiscal years. However, it is presently contemplated
that all compensation decisions will be designed to further the overall
compensation policy described above.
- - Base Salary. The base salary for each executive officer is set on the
basis of personal performance, the salary levels in effect for comparable
positions in similarly situated companies within the telecommunications
billing and software industry, and internal comparability considerations. No
specific weight is attached to these factors. Base salary also is linked in
part to the Company's financial performance. During fiscal 2000, three of the
Company's four executive officers received lower base salaries in order to
reduce the Company's expenses.
- - Stock-Based Incentive Compensation. The board and compensation
committee approve periodic grants of stock options to each of the Company's
executive officers and others, under the plans and, in the case of the board,
outside of the plans as well. These grants are designed to provide an
incentive for executive officers and other employees to work for the long-term
success of the Company and to increase the Company's ability to retain the
services of its executive officers and employees. During fiscal 2000, the
board and compensation committee determined that it would focus on providing
incentives other than stock-based compensation to its executive officers and
employees. In connection with the Company's self-tender officer in March
2000, the Company's executive officers forfeited options to purchase an
aggregate of 192,006 shares of common stock. As of the Record Date, none of
the Company's executive officers owned any options to purchase shares of
common stock.
- - Cash Bonuses. The Company did not pay a cash bonus to any executive
officer during the past fiscal year. The Company does not currently have a
formal cash bonus program for executive officers, but the board may consider
the desirability of granting cash bonuses to executive officers from time to
time. The board would consider the following factors: the officer's personal
performance, the Company's financial performance, the officer's contribution
to the Company's financial performance, and whether a bonus would be useful in
retaining the services of the officer in light of competing employment
opportunities for the officer.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Joseph Zerbib served as the
Company's chief executive officer from 1982 to February 2000 and Michael
Zerbib became the Company's chief executive officer in February 2000. In
setting the compensation payable during 2000 to the Company's chief executive
officer, the board used the same factors described above for the executive
officers. Mr. Zerbib received a lower salary in fiscal 2000 than he did in
fiscal 1999 in order to help reduce the Company's expenses, he did not receive
a cash bonus and he was not issued any stock-based incentive compensation. In
addition, Mr. Zerbib forfeited options to purchase 50,210 shares of common
stock in connection with the Company's self-tender offer in March 2000.
Submitted by the Compensation Committee:
Michael Zerbib
Cecile Silverman
Kalvan Swanky
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONCOMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is composed of Cecile Silverman, Kalvan Swanky
and Michael Zerbib. Michael Zerbib is the Company's president, chief
executive officer, chief financial officer and treasurer. No executive
officer of the Company sits on the compensation committee of another entity,
one of whose executive officers serves as a director of the Company or on the
Company's board, nor does any executive officer of the Company serve as a
director of another entity, one of whose executive officers serves on the
Company's board.
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return of the Company's
common stock from November 30, 1995 to November 30, 2000 with the cumulative
total return of the Russell 2000 Index and the Nasdaq Telecommunications
Index. The graph plots the growth in value of an initial $100 investment over
the indicated time periods, with dividends reinvested. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
[GRAPHIC OMITED]
[GRAPHIC OMITED]
COMPANY November November November November November November
NAME/INDEX 30, 1995 30, 1996 30, 1997 30, 1998 30, 1999 30, 2000
- ---------- -------- -------- -------- -------- -------- --------
Telesoft Corp. 100.00 37.50 46.43 70.54 61.61 14.29
Russell 2000 100.00 116.51 143.79 134.27 155.31 154.41
Nasdaq
Telecommunications 100.00 100.66 144.47 209.29 384.09 189.50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 24, 2000, the Company completed a "Dutch auction" self-tender
offer ("Tender Offer") representing an aggregate of 2.3 million shares of its
common stock. The Tender Offer price was $7.25 per share in cash. Three of
the Company's executive officers and directors, Thierry E. Zerbib, Brian H.
Loeb and Michael F. Zerbib, each respectively tendered 577,500, 577,500 and
572,500 shares of common stock, for an aggregate of 1,727,500 Telesoft shares,
at a price of $7.25 per share. They also tendered an additional 214,500
Telesoft shares (69,750, 69,750, 75,000, respectively) subject to vested
options at a price of $7.00 each. These shares represented approximately 50
percent of the total Telesoft shares outstanding prior to the Tender Offer,
and represented all Telesoft shares owned and subject to options and available
for tender by the affiliates of Telesoft. Pursuant to the rules of the Tender
Offer, 59.57% of these shares and options were purchased by the Company.
Concurrently with the Tender Offer in March 2000, Joseph Zerbib, the Company's
chairman of the board, sold all of his 293,750 shares of the Company's common
stock back to the Company at a price of $7.25 per share, for an aggregate of
$2,129,688 in connection with his retirement as the Company's president and
chief executive officer.
On April 3, 2000, each of Michael Zerbib, Thierry Zerbib and Brian Loeb
entered into an agreement with the Company, pursuant to which each of them
agreed to make available to the Company up to $1,000,000 on the Company's
request. On May 24, 2000, each of their agreements was amended to increase
the amount to $1,350,000. Draw downs are payable on May 31, 2001 and have an
annual interest rate of 10%. Each loan is secured by the Company's assets.
The interest rate on these loans is at least as favorable as the Company could
receive from third-party lenders. The Company has obtained several proposals
from third-party lenders bearing effective rates in excess of 12%. During the
year ended November 30, 2000, interest expense in connection with these notes
was $115,754. As of November 30, 2000, Michael Zerbib had loaned the Company
$675,000 and each of Thierry Zerbib and Brian Loeb had loaned the Company
$350,000, for a total of $1,375,000, and no interest was due on the notes. As
of the Record Date, the outstanding principal balance on each of the notes was
$200,000, for a total of $600,000. Pursuant to a second amendment to their
respective agreements in April 2001, each of these officers has agreed to
extend $350,000 of their respective loans until August 31, 2001.
The board of directors has adopted a policy that all future material
transactions and loans between the Company and its executive officers,
directors, employees and affiliates will be subject to the approval of the
majority of independent and disinterested directors and that such transactions
and loans, and any forgiveness of loans, will be on terms that are no less
favorable to the Company than those that are generally available from
unaffiliated third parties.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE ELECTION OF THE SEVEN DIRECTOR NOMINEES.
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the independent accounting firm of
Semple & Cooper, LLP as the auditors of the Company for the fiscal year ending
November 30, 2001. A representative of Semple & Cooper, LLP, the auditors of
the Company for the fiscal year ended November 30, 2000, is expected to be
present at the annual meeting. The representative will have the opportunity
to make a statement and will be available to respond to appropriate questions
from shareholders.
2002 SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 2002 annual meeting of
shareholders to be eligible for inclusion in the Company's proxy statement,
they must be received by the Company at its principal office in Phoenix,
Arizona not later than December 17, 2001. Pursuant to Rule 14a-4 promulgated
by the Commission, shareholders are advised that the Company's management
shall be permitted to exercise discretionary voting authority under proxies it
solicits and obtains for the Company's 2002 annual meeting of shareholders
with respect to any proposal presented by a shareholder at such meeting,
without any discussion of the proposal in the Company's proxy statement for
such meeting, unless the Company receives notice of such proposal at its
principal office in Phoenix, Arizona, not later than March 2, 2002.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of the
Company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telephone using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the
Company's stock.
OTHER MATTERS
The board of directors knows of no matter which will be presented for
consideration at the annual meeting other than the matters referred to in this
proxy statement. Should any other matter properly come before the annual
meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
Thierry E. Zerbib, Secretary
Phoenix, Arizona
April 30, 2001
TELESOFT CORP. - PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING TO BE HELD ON MAY 18, 2001
The undersigned shareholder(s) of TELESOFT CORP., an Arizona corporation
("Company"), hereby appoints Joseph W. Zerbib and Michael F. Zerbib, and each
of them, with full power of substitution and to act without the other, as the
agents, attorneys and proxies of the undersigned, to vote the shares standing
in the name of the undersigned at the annual meeting of shareholders of the
Company to be held on May 18, 2001 and at all adjournments thereof. This
proxy will be voted in accordance with the instructions given below. If no
instructions are given, this proxy will be voted FOR all of the following
proposals:
P
1. Election of the following directors:
R Joseph W. Zerbib Michael F. Zerbib
Thierry E. Zerbib Cecile Silverman
O Brian H. Loeb Kalvan Swanky
Todd P. Belfer
X
FOR all nominees listed above except as marked to the contrary below
Y
CUMULATIVE VOTES for one or more nominees as follows:
Joseph W. Zerbib _____ Michael F. Zerbib _____
Thierry E. Zerbib _____ Cecile Silverman _____
Brian H. Loeb _____ Kalvan Swanky _____
Todd P. Belfer _____
WITHHOLD AUTHORITY to vote for all nominees listed above
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.
_____________________________________________________
2. In their discretion, the proxies are authorized to vote upon such
other business as may come before the meeting or any adjournment thereof.
Dated ____________________________, 2001
______________________________________
Signature
______________________________________
Signature if held jointly
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
APPENDIX I
TELESOFT CORP.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board of Directors of Telesoft Corp.
("Company") to assist the Board in monitoring (1) the integrity of the
financial statements of the Company, (2) the compliance by the Company with
legal and regulatory requirements and (3) the independence and performance of
the Company's external auditors. The Audit Committee shall also review all
related party transactions on an ongoing basis for potential conflict of
interest situations.
The members of the Audit Committee shall meet the independence and experience
requirements of the Nasdaq Stock Market, Inc. The members of the Audit
Committee shall be appointed by the Board.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee
may request any officer or employee of the Company or the Company's outside
counsel or independent auditor to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management and the
independent auditors, including major issues regarding accounting and auditing
principles and practices as well as the adequacy of the Company's overall
accounting and financial internal controls that could significantly affect the
Company's financial statements.
3. Review an analysis prepared by management and the independent auditor
of significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. If requested by the Audit Committee, management or the independent
auditor, review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of the Company's Form 10-Q.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
6. Review with the independent auditor the Company's auditing and
accounting principles and practices. Review major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent auditor or management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence consistent with Independence Standards Board Standard
1, discuss such reports with the auditor, and if so determined by the Audit
Committee, take or recommend that the full Board take appropriate action to
oversee the independence of the auditor.
10. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
11. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
12. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.
13. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit.
14. Review with the independent auditor their financial report and any
problems or difficulties the auditor may have encountered and any management
letter provided by the auditor and the Company's response to that letter.
Such review should include:
(1) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to required
information.
(2) Any changes required in the planned scope of the internal audit.
(3) The internal audit department responsibilities, budget and staffing.
15. Recommend to the independent auditor to whom reports prepared by the
independent auditor should be submitted within the Company.
16. Be available to the independent auditors during the year for
consultation purposes.
17. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy statement.
18. Review with the Company's General Counsel legal matters that may have
a material impact on the financial statements and any material reports or
inquiries received from regulators or governmental agencies.
19. Meet at least annually with the chief financial officer and the
independent auditor in separate executive sessions.
20. Review all related party transactions on an ongoing basis for
potential conflict of interest situations.
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 Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the 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.