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. )
Filed by 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 Rule 14a-12
Astea International Inc.
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(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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Astea International Inc.
240 Gibraltar Road
Horsham, Pennsylvania 19044
--------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 21, 2003
To the Stockholders of Astea International Inc.:
The Annual Meeting of Stockholders of Astea International Inc., a
Delaware corporation (the "Company"), will be held on Thursday, August 21,
2003 at 10:00 a.m., local time, at the Company's headquarters at 240
Gibraltar Road, Horsham, Pennsylvania 19044, for the following purposes:
1. To elect four (4) Directors to serve until the next Annual
Meeting of Stockholders.
2. To approve a proposal to authorize the Board of Directors to
amend the Company's Certificate of Incorporation to effect a
reverse stock split of the Company's outstanding Common Stock
based upon a 1:5 reverse stock split ratio. At any time in the
twelve (12) months following the Meeting, the Board of Directors,
in its discretion, and assuming stockholder approval has been
received, will implement the reverse stock split if it deems it
to be in the best interests of the Company and its stockholders.
If the 1:5 reverse stock split is implemented, every five shares
of our Common Stock outstanding will be converted into one share
of Common Stock.
3. To ratify the selection of BDO Seidman LLP as independent
auditors for the fiscal year ending December 31, 2003.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof. Only stockholders of record
at the close of business on June 30, 2003, the record date fixed
by the Board of Directors, are entitled to notice of and to vote
at the meeting.
All stockholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, you are urged to
complete, sign, date and return the enclosed proxy card as promptly as possible
in the postage-prepaid envelope enclosed for that purpose. Any stockholder
attending the meeting may vote in person even if such stockholder has returned a
proxy.
By Order of the Board of Directors
/s/ Zack B. Bergreen
--------------------------------
Zack B. Bergreen
President and Chief Executive Officer
Horsham, Pennsylvania
July 15, 2003
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
CARD IS MAILED IN THE UNITED STATES.
Astea International Inc.
240 Gibraltar Road
Horsham, Pennsylvania 19044
--------------------------------------
PROXY STATEMENT
July 15, 2003
Proxies in the form enclosed with this proxy statement, which were
first mailed to stockholders on or about July 15, 2003, are being solicited by
the Board of Directors of Astea International Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on
Thursday, August 21, 2003, at 10:00 a.m. local time, at the Company's
headquarters at 240 Gibraltar Road, Horsham, Pennsylvania 19044, or at any
adjournments thereof (the "Annual Meeting").
Only stockholders of record at the close of business on June 30, 2003
(the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof. As of that date, 14,606,530 shares of
common stock, $.01 par value per share (the "Common Stock"), of the Company were
issued and outstanding. The holders of Common Stock are entitled to one vote per
share on any proposal presented at the Annual Meeting. Stockholders may vote in
person or by proxy. If the form of Proxy which accompanies this Proxy Statement
is executed and returned, it will be voted in accordance with the instructions
marked thereon. Execution of a proxy will not in any way affect a stockholder's
right to attend the Annual Meeting and vote in person. Any stockholder giving a
proxy has the right to revoke it at any time before it is exercised, by (1)
filing with the Secretary of the Company, before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (2) duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of the Company before the taking of the vote at
the Annual Meeting or (3) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
a revocation of a proxy).
Our Bylaws provide that at any meeting of stockholders, the holders of
a majority of the issued and outstanding shares of Common Stock present in
person or by proxy constitute a quorum for the transaction of business. The
election of directors will be decided by a plurality of the votes of the shares
cast, in person or by proxy, at the Annual Meeting. Accordingly, abstentions and
broker non-votes will not affect the outcome of the election of directors. A
broker non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power for that proposal and has not received voting
instructions from the beneficial owner. The approval and ratification of the
appointment of BDO Seidman LLP as independent auditors requires the affirmative
vote of a majority of the shares present in person or by proxy and entitled to
vote. An abstention with respect to any such proposal will have the same effect
as a vote against such proposal. With respect to broker non-votes, the shares
will not be considered present at the meeting for the proposal as to which
authority was withheld. Consequently, broker non-votes will have the effect of
reducing the number of affirmative votes required to approve these proposals,
because they reduce the number of shares present at the meeting from which a
majority is calculated. The approval of the amendment to our Certificate of
Incorporation to effect a reverse stock split requires the affirmative vote of a
majority of the issued and outstanding shares of Common Stock as of June 30,
2003, the record date for the determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting. Accordingly, abstentions and broker
non-votes will have the same effect as a vote against such proposal.
The persons named as proxies and attorneys-in-fact are officers of the
Company. All properly executed proxies returned in time to be counted at the
Annual Meeting will be voted. In addition to the election of Directors, the
stockholders will consider and vote upon a proposal to authorize the Board of
Directors to amend the Certificate of Incorporation to effect a reverse stock
split, and a proposal to ratify the selection of auditors, as further described
in this proxy statement. Where a choice has been specified on the proxy with
respect to the foregoing matters, the shares represented by the proxy will be
voted in accordance with the specifications, and will be voted FOR the proposals
if no specification is indicated.
At the Meeting, you will be asked to approve an amendment to the
Company's Certificate of Incorporation to effect a reverse stock split of the
Company's outstanding common stock, par value $0.01 per share ("Common Stock")
at a ratio of 1:5 (the "Reverse Stock Split"). If the proposal is approved by
the Company's stockholders, the Board of Directors will have the authority, in
its discretion, to implement the Reverse Stock Split at any time in the twelve
(12) months following the Meeting if it deems it to be in the best interests of
the Company and its stockholders.
As described herein, the Chairman and Chief Executive Officer of the
Company, Zack B. Bergreen, controls, in the aggregate, the vote of 6,892,000
shares of the Company's Common Stock, and has expressed his intention to vote in
favor of the proposal. These shares represent 46.9% of the total issued and
outstanding Common Stock. Because the proposal is considered to be adopted by
the stockholders of the Company if a majority of the Company's issued and
outstanding shares vote in favor of the proposal, the approval and adoption of
the proposal is likely if Mr. Bergreen votes his shares consistent with his
expressed intent.
Expenses incurred in the solicitation of proxies will be borne by the
Company. Solicitations will be made by mail, and officers and other employees of
the Company may also solicit proxies by telephone, telecopy or personal
interview.
The Board of Directors of the Company knows of no other matters to be
presented at the Annual Meeting other than as set forth in this proxy statement.
If any other matter should be presented at the Annual Meeting (or any
adjournments thereof) upon which a vote properly may be taken, shares
represented by all proxies received by the Board of Directors will be voted with
respect thereto in accordance with the judgment of the persons named as proxies
and attorneys-in-fact in the proxies, to the extent permitted by applicable law.
An Annual Report to Stockholders, also referred to as Form 10-K,
containing financial statements for the fiscal year ended December 31, 2002, is
being mailed together with this proxy statement to all stockholders entitled to
vote.
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
In accordance with the Company's By-Laws, the Company's Board of
Directors is currently fixed at four (4) members. Zack B. Bergreen, Adrian
Peters, Eric Siegel and Isidore Sobkowski are the current Directors. Messrs.
Peters, Siegel and Sobkowski are independent Directors. The terms of the current
Directors will expire at the Annual Meeting. All Directors will hold office
until their successors have been duly elected and qualified or until their
earlier resignation or removal.
The Board of Directors has nominated and recommended Zack B. Bergreen,
Adrian Peters, Eric Siegel and Isidore Sobkowski to be elected to hold office
until the 2004 Annual Meeting of stockholders. The Board of Directors knows of
no reason why the director nominees should be unable or unwilling to serve, but
if any director nominee should for any reason be unable or unwilling to serve,
the proxies will be voted for the election of such other person for the office
of Director as the Board of Directors may recommend in the place of such
director nominee. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the director nominees named below.
THE BOARD RECOMMENDS A VOTE "FOR" THE DIRECTOR NOMINEES LISTED BELOW.
The following table sets forth the nominees to be elected at the Annual
Meeting and the year each such nominee was first elected a Director; the
positions currently held by the nominee with the Company, if applicable; and the
year the nominee's term will expire:
Nominee's Name and Year Nominee Position(s) with Year Current Term
First Became a Director The Company Will Expire
----------------------- ----------- -----------
Zack B. Bergreen (1979) Chairman of the Board, President and 2003
Chief Executive Officer
Adrian Peters (2000) Director 2003
Eric Siegel (2002) Director 2003
Isidore Sobkowski (2000) Director 2003
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the current Directors and director
nominees to be elected at the Annual Meeting and the executive officers of the
Company, their ages, and the positions currently held by each such person with
the Company.
Name Age Position
--------------- --- -------------------------------------------------
Zack B. Bergreen 58 Chairman of the Board, President, and Chief Executive Officer
Adrian Peters (1) 54 Director
Eric Siegel (1) 46 Director
Isidore Sobkowski (1) 47 Director
Fredric Etskovitz 48 Chief Financial Officer and Treasurer
John Tobin 37 Vice President, General Counsel, and Secretary
John Reed 46 Vice President of Sales, North America
Ashim Bose 41 Vice President of Customer Services
- -----------------
(1) Member of Audit Committee.
Zack B. Bergreen, 58, founded the Company in November 1979. From
November 1979 to January 1998, he served as President, Treasurer and Director of
the Company. In April 1995, he was elected Chief Executive Officer and Chairman
of the Board of Directors. From January 1998 through August 1999 Mr. Bergreen
served as Chairman of the Board and Chief Executive Officer. Mr. Bergreen has
served as Chairman of the Board since August 1999, when Bruce R. Rusch was
elected President and Chief Executive Officer. Following the resignation of Mr.
Rusch on May 30, 2000, Mr. Bergreen resumed the positions of President and Chief
Executive Officer. Mr. Bergreen holds Bachelor of Science and Master of Science
degrees in Electrical Engineering from the University of Maryland.
Adrian A. Peters, 54, joined the Company's Board of Directors in June
2000 and is a member of the Audit Committee. He is the President and founder of
Tellstone (previously Boston Partners), a firm that specializes as strategic
advisors to high-tech firms, starting in 1995. From 1986 through 1995, he held
positions as President and CEO of various companies, within Siemens AG, a large
maker of telecommunications and industrial and other equipment. Prior to that,
he held senior positions at Federale, an investment firm, Andersen Consulting
and IBM. Mr. Peters studied science and engineering at the University of
Stellenbosch in South Africa as well as management at Harvard Business School.
Isidore Sobkowski, 47, joined the Company's Board of Directors in June
2000 and is a member of the Audit Committee. He is the founder and currently
serves as the President of Self Service Techologies, LLC, a company specializing
in software development. Immediately prior to that, he founded PrimeCloud, Inc.,
a software firm specializing in e-commerce personalization. From 1994 through
1998, he served as the President and Chief Executive Officer at Professional
Help Desk, an information technology services company, and upon its acquisition
by Computer Associates, served from 1998 through 2000 as a Division Vice
President at Computer Associates. Mr. Sobkowski received a Bachelor of Science
degree in Computer Science from City College of New York in 1978 and a Master of
Science in Computer Science from City College of New York in 1982.
Eric Siegel, 46, is the newest member of the Astea Board of Directors,
and is a member of the Audit Committee. In 1983, he founded Siegel Management
Company, a strategy consulting and investment banking advisory firm with a
diverse client base, principally middle market firms. His expertise and
experience had been utilized by growth companies, public market and acquisition
candidates, industry consolidators and turnarounds. He also serves on the Board
of NCO Group (NASDAQ: NCOG), a provider of outsourced accounts receivable
management and collection services, and PSCInfoGroup, an information management
company. An established author, he has been a lecturer in management at the
Wharton School for over twenty years. Mr. Siegel is a magna cum laude graduate
of the University of Pennsylvania and received an MBA from the Wharton School
with honors.
Rick Etskovitz, 48, joined the Company in June 2000 when he was elected
Chief Financial Officer and Treasurer. He is a certified public accountant and
has been a shareholder of a local accounting firm, Schectman, Marks, Devor &
Etskovitz since 1995. From 1986 through 1993, he worked with the Company as the
engagement partner with its independent accounting firm. Mr. Etskovitz received
his Bachelor of Science degree from the Pennsylvania State University in 1976
and his Masters of Business Administration Degree from the Wharton Graduate
School at the University of Pennsylvania in 1980.
John Tobin, 37, joined the Company in June 2000 and serves as Vice
President, General Counsel, and Secretary. Mr. Tobin is responsible for handling
the legal affairs of the Company, along with various corporate development and
business development initiatives. Prior to joining Astea, John worked at the
Philadelphia law firms Pepper Hamilton and Wolf Block, specializing in corporate
transactions and intellectual property. Prior to returning to the Philadelphia
area in 1998, he worked as a corporate and entertainment lawyer in Los Angeles,
specializing in motion picture, television and music transactions and licensing,
most recently with PolyGram Filmed Entertainment. Mr. Tobin holds a B.S. in
Economics from the Wharton School of the University of Pennsylvania in 1987, and
received his law degree from the University of Pennsylvania in 1992.
John Reed, 46, joined Astea as Vice President of North American Sales
in July 2002. John brings to Astea over twenty years of experience in technology
sales and sales management, ranging from Supply Chain solutions and intelligent
software application development, to computer-based control systems. Prior to
joining Astea, John held senior management positions at i2 Technologies, an
enterprise software company, where he focused on the Telecommunications and
Discrete Manufacturing industries, from 2000 to 2001 and Gensym Corporation, a
provider of software for operational processes, where he was vice president of
sales for their communications business unit, from 1992 to 2000. He began his
career in sales with American Cyanamid and AccuRay Corporation (now part of
ABB). John holds a Bachelor of Science in Chemistry from Penn State University
and a Masters in Business Administration from Temple University.
Ashim Bose, 41, joined Astea as Vice President of Customer Services in
February 2003. Mr. Bose is responsible for all customer service and support
operations in Astea. In this capacity he manages the delivery of support,
customization, and professional services to the North American client base.
Ashim comes to Astea from i2 Technologies where he was a Practice Director,
Consulting Services, from 1998 to 2002. Earlier, he was in technical management
roles at GTE (now Verizon) and Space Telescope Science Institute, a NASA
affiliate. He started his career at Marktech Systems, a boutique consulting firm
in the Healthcare sector. He holds a Ph.D. in Computer Science from the Univ. of
Minnesota and a M.S. in Mechanical Engineering from the Univ. of Houston.
Executive officers of the Company are elected by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive officers
or Directors of the Company.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The business and affairs of the Company are managed under the direction
of its Board of Directors. The Board of Directors met four (4) times in person
or by telephone during the fiscal year ended December 31, 2002. During their
respective terms of service in fiscal 2002, each of the Directors attended at
least 75% of the meetings of the Board of Directors and of all committees on
which he served. The Board of Directors established an Audit Committee in May
1995. The Audit Committee of the Board of Directors, of which Messrs. Peters,
Siegel and Sobkowski are currently members, reviews with the Company's
independent auditors the scope and timing of their audit services and any other
services they are asked to perform, the auditor's report on the Company's
financial statements following completion of their audit and the Company's
policies and procedures with respect to internal accounting and financial
controls. In addition, the Audit Committee makes recommendations to the Board of
Directors for the appointment of independent auditors for the ensuing year. The
Audit Committee met four times during the fiscal year ended December 31, 2002.
The Board of Directors currently performs the functions of a compensation
committee and has no nominating committee.
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of June 30, 2003
regarding the beneficial ownership of shares of Common Stock by each Director,
by each Named Executive Officer, by all Directors and executive officers as a
group, and by each person known to the Company to be the beneficial owner of 5%
or more of the outstanding shares of Common Stock.
Amount of
Name and Address Of Beneficial Owner Ownership(1) Percent of Class(2)
------------------------------------ ------------ -------------------
Zack B. Bergreen(3) 6,892,000 46.9%
c/o Astea International
240 Gibraltar Road
Horsham, Pennsylvania 19044
Adrian Peters (4) 42,500 *
Isidore Sobkowski (4) 42,500 *
Eric Siegel 0 *
Rick Etskovitz (5) 58,750 *
John Tobin (6) 50,000 *
John Reed (7) 52,500 *
All current directors, nominees and executive officers 7,138,250 47.8%
as a group (7 persons)(1)-(7)
* Less than 1% of the outstanding shares of Common Stock.
(1) Except as noted in the footnotes to this table, each person or entity named
in the table has sole voting and investment power with respect to all
shares of Common Stock owned, based upon information provided to the
Company by Directors, officers and principal stockholders. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "Commission") and includes voting and investment
power with respect to shares of Common Stock subject to options currently
exercisable or exercisable within 60 days after the Record Date ("currently
exercisable stock options").
(2) Applicable percentage of ownership as of the Record Date is based upon
14,606,530 shares of Common Stock outstanding as of that date. Currently,
exercisable stock options are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
(3) Includes 782,834 shares of Common Stock held by trusts of which Mr.
Bergreen and his wife are the only trustees, 272,342 shares held by trusts
with independent trustees, and 279,019 shares of Common Stock held by a
family limited partnership of which Mr. Bergreen is the sole general
partner. Also included are 100,000 options, all of which are currently
exercisable.
(4) Board Of Directors. Represents options to purchase 42,500 shares, all of
which are currently exercisable.
(5) Represents 15,000 shares of common stock and options to purchase 43,750
shares, 37,500 of which are currently exercisable, and 6,250 of which shall
become exercisable within the next 60 days.
(6) Represents options to purchase 50,000 shares, all of which are currently
exercisable.
(7) Represents options to purchase 52,500 shares which shall become exercisable
in the next 60 days.
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
Executive Compensation Summary
The following table sets forth information concerning the compensation
for services in all capacities to the Company for the fiscal years ended
December 31, 2002, 2001, and 2000, of the following persons: (i) each person who
served as Chief Executive Officer during the year ended December 31, 2002, and
(ii) four other most highly compensated executive officers of the Company in
office at December 31, 2002 who earned more than $100,000 in salary and bonus in
fiscal 2002 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------ ------------
Securities
Underlying
Options All Other
Name and Principal Position Year Salary($) Bonus ($) (# of shares) Compensation ($)
--------------------------- ----- --------- ---------- ------------- ----------------
Zack B. Bergreen 2002 $ 130,000 -- -- $ 69,600(2)
Chairman of the Board and 2001 130,000 -- 400,000(1) 69,600(2)
Chief Executive Officer 2000 233,971 -- -- 242,897(3)
Rick Etskovitz 2002 $ 127,050 -- 50,000(4) --
Chief Financial Officer 2001 119,160 -- 25,000(4) --
2000 55,538 -- 25,000(4) --
John Tobin (5) 2002 $ 151,033 -- 50,000(4) --
Vice President and General Counsel 2001 126,895 -- 25,000(4) --
2000 42,957 -- 25,000(4) --
John Reed (6) 2002 $ 65,538 $ 42,847 210,000(4) --
Vice President, North American Sales
Lynn Ledwith (7) 2002 $ 87,667 $ 16,125 100,000(4) --
Vice President, Marketing
(1) Represents options to purchase shares of Common Stock, which were awarded
in lieu of a decrease taken in salary.
(2) Includes premiums for term, split-dollar life insurance paid by the Company
on behalf of the Named Executive Officer.
(3) Includes premiums for term, split-dollar life insurance paid by the Company
on behalf of the Named Executive Officer, payout for consulting services
performed January 2000 through May 2000, and vacation payout.
(4) Represents options to purchase shares of Common Stock.
(5) Compensation paid to Coleman Legal, a third party legal services provider.
(6) John Reed joined Astea in July 2002.
(7) Lynn Ledwith joined Astea in April 2002 and terminated employment in
February 2003.
Option Grants in Last Fiscal Year
The following table sets forth each grant of stock options made during
the year ended December 31, 2002 to each of the Named Executive Officers:
Individual Grants
-----------------------------------
Percent of Potential Realizable Value at
Total Assumed
Number of Options Annual Rates of Stock Price
Securities Granted to Appreciation for Option
Underlying Employees Exercise Terms(2)
Options In Fiscal Price Expiration ------------
Name Granted (#) Year ($/Share)(1) Date 5%($) 10%($)
---- ----------- ------ ------------ ---- ----- ------
Rick Etskovitz 50,000(3) 7% $0.89 05/10/2012 $72,486 $115,422
John Tobin 50,000(3) 7% $0.89 05/10/2012 $72,486 $115,422
John Reed 210,000(3) 31% $0.66 08/13/2012 $225,765 $359,493
Lynn Ledwith 100,000(4) 15% $0.89 05/10/2012 $144,972 $230,843
(1) The exercise price per share of each option was fixed by the Board of
Directors based on the closing price on Nasdaq on the date of grant.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the market value of the Company's Common Stock on the date of option
grant over the term of the options. These numbers are calculated based on
rules promulgated by the Commission and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the timing of
such exercise and the future performance of the Company's Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by the
individual.
(3) Options to purchase shares will vest in equal installments on each of the
first four anniversaries of the grant date.
(4) Upon termination of her employment in February 2003, 100,000 options,
representing the unvested portion of this grant, were cancelled.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth, for each of the Named Executive
Officers, information with respect to the exercise of stock options during the
year ended December 31, 2002 and the year-end value of unexercised options:
Numbers of Underlying Value of Unexercised
Shares Unexercised In-the-Money Options
Acquired on Value Options at Year End at Year End
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
<c> <c>
Zack B. Bergreen -- -- 100,000/400,000 --
Rick Etskovitz -- -- 18,750/81,250 --
John Tobin -- -- 31,250/68,750 --
John Reed -- -- --/210,000 --
Lynn Ledwith -- -- --/100,000 --
Employment Agreements and Severance Arrangements with Executive Officers
The Company has not entered into employment agreements with any of its
current Executive Officers.
Board Interlocks and Insider Participation
No executive officer of the Company served as a member of the Board of
Directors, compensation committee, or other committee performing equivalent
functions, of another entity, one of whose executive officers served as a
Director of the Company. Other than Mr. Bergreen, no person who served as a
member of the Board was, during the fiscal year ended December 31, 2002,
simultaneously an officer, employee or consultant of the Company or any of its
subsidiaries. Mr. Bergreen did not participate in any Company determination of
his own personal compensation matters.
Compensation of Directors
Directors who are not employees of the Company receive a fee of $1,000
for attendance at each regular and special meeting of the Board of Directors,
and are also reimbursed for their reasonable out-of-pocket expenses incurred in
attending meetings. Non-Employee Directors may elect to receive, in lieu of the
foregoing cash compensation, unrestricted shares of Common Stock of the Company.
Shares of Common Stock in lieu of cash compensation are acquired at the fair
market value of the Common Stock on the last day of the calendar quarter during
which the cash compensation was earned and foregone. Non-employee Directors are
also eligible to receive annual stock option grants under the Company's 1995
Non-Employee Director Stock Option Plan. Directors who are employees are not
compensated for their service on the Board of Directors or any committee
thereof.
Board Report on Executive Compensation
This report is submitted by the Board of Directors of the Company (the
"Board") because the Company did not have a Compensation Committee in 2002. The
Board is responsible for developing the compensation programs that relate to the
Company's executive officers, senior management and other key employees and for
establishing the specific short- and long-term compensation elements thereunder.
The Board also oversees the general compensation structure for all of the
Company's employees. In addition, the Board currently administers the Company's
1991 Amended Non-Qualified Stock Option Plan, 1994 Amended Stock Option Plan,
1995 Amended Non-Employee Director Stock Option Plan, 1995 Employee Stock
Purchase Plan, 1997 Stock Option Plan, 1998 Stock Option Plan and 2001 Stock
Option Plan.
The principal objective of the Company's executive compensation program
is to enhance the Company's short-term and long-term financial results for the
benefit of the Company's stockholders. To achieve this objective, the Company's
executive compensation program is designed to provide levels of compensation
that assist the Company in attracting, motivating and retaining qualified
executive officers and aligning their financial interests with those of the
Company's stockholders by providing a competitive compensation package based on
corporate and individual performance. In addition, the Company performs periodic
reviews of its executive compensation program to confirm the competitiveness of
its overall executive compensation package as compared with companies which
compete with the Company for prospective employees possessing skills necessary
for developing, manufacturing and marketing successful high technology products
and associated services.
Compensation under the Company's executive compensation program
consists of three principal elements: (i) cash compensation in the form of base
salary, (ii) annual incentive compensation in the form of cash bonuses, and
(iii) long-term incentive awards in the form of stock option grants. In
addition, the compensation program is comprised of various benefits, including
medical and insurance plans, the Company's 1995 Employee Stock Purchase Plan,
and a 401(k) profit sharing plan with matching Company contributions, which are
available to all employees of the Company.
Base Salary. Compensation levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally set within the
range of salaries that the Board believes are paid to executive officers with
comparable qualifications, experience and responsibilities at similar companies.
In setting compensation levels, the Board seeks to align total executive
compensation levels with corporate performance. Accordingly, base salary levels
are set at what the Board believes are at the low-end of base salaries paid to
executive officers with comparable qualifications, experience and
responsibilities at similar companies, while endeavoring to provide relatively
higher incentive award opportunities. In addition, the Board generally takes
into account such factors as (i) the Company's past financial performance and
future expectations, (ii) business unit performance and future expectations,
(iii) individual performance and experience and (iv) past salary levels. The
Board does not assign relative weights or rankings to these factors, but instead
makes an informed, but ultimately subjective, determination based upon the
consideration of all of these factors as well as the progress made with respect
to the Company's long-term goals and strategies. Generally, salary decisions for
the Company's executive officers other than the Chief Executive Officer are made
by the Board near the beginning of each calendar year based on recommendations
of the Chief Executive Officer.
Fiscal 2002 base salaries were determined after considering the base
salary level of the executive officers in prior years, and taking into account
for each executive officer the amount of base salary as a component of total
compensation. Base salary, while reviewed annually, is only adjusted as deemed
necessary by the Board in determining total compensation to each executive
officer. A significant factor in setting base salary levels for each of the
Company's executive officers, other than the Chief Executive Officer, were
evaluations and recommendations made by the Chief Executive Officer. The Board
of Directors believes that fiscal 2002 base salary levels for each of the Named
Executive Officers named in the Summary Compensation Table were slightly below
the median salary levels for comparable positions at comparable companies.
Incentive Compensation. Each executive officer is eligible to receive a
cash bonus at the end of the fiscal year based upon the Company's performance,
at the sole discretion of the Board. Additional bonuses may be awarded during
the fiscal year to reward an executive officer for superior individual or
business-unit performance. In 2002, because the Company was not profitable, no
cash bonuses were awarded based on Company performance, however, certain Named
Executive Officers received bonuses for individual or business-unit performance.
Mr. Reed received $42,847 in connection with bonuses payable pursuant to his
sales incentive plan. Ms. Ledwith received $16,125 in bonuses pursuant to her
marketing incentive plan.
Stock Options. Stock options are the principal vehicle used by the
Company for the payment of long-term compensation, to provide a stock-based
incentive to improve the Company's financial performance, and to assist in the
recruitment, motivation and retention of key professional and managerial
personnel. Long-term incentive compensation in the form of stock options enables
officers to share in the appreciation of the value of the Company's Common
Stock. The Board of Directors believes that such long-term stock option
participation more closely aligns the interests of the executive officers with
those of the stockholders by encouraging executive officers to enhance the value
of the Company. In addition, the Board of Directors believes that equity
ownership by executive officers helps to balance the short-term focus of annual
incentive compensation with a longer-term view.
The Company's stock option plans have been administered by the Board
since January 1997. The Board periodically grants new options to provide
continuing incentives for future performance. When establishing stock option
grant levels, the Board considers existing levels of stock ownership, previous
grants of stock options, vesting schedules of outstanding options and the
current price of the Company's Common Stock. For additional information
regarding the grant of options, see the table under the heading "Option Grants
in Last Fiscal Year."
Other Benefits. The Company also has various broad-based employee
benefit plans. Executive officers participate in these plans on the same terms
as eligible, non-executive employees, subject to any legal limits on the amounts
that may be contributed or paid to executive officers under these plans. The
Company offers an employee stock purchase plan, under which employees may
purchase Common Stock at a legally permitted discount, and a 401(k) profit
sharing plan, which permits employees to invest in a variety of funds on a
pre-tax basis and includes partial matching Company contributions. The Company
also maintains insurance and other benefit plans for its employees.
Compensation of Chief Executive Officer. In 2002, Mr. Bergreen received
a base salary of $130,000 per year. Beginning in 2001, the Board reduced Mr.
Bergreen's base salary by $100,000 per year to the current level in favor of
increasing the stock option based element of his compensation package. The Board
did this in the interest of aligning Mr. Bergreen's compensation with the
overall performance of the Company. In the event that the Company improves its
financial performance, the base salary may increase, and bonuses may potentially
be awarded. The Board deemed Mr. Bergreen's compensation appropriate based on an
assessment of salaries believed by the Board to be paid to chief executive
officers at comparable companies, and an assessment of Mr. Bergreen's
qualifications, performance and expected contributions to the Company's future
growth.
Tax Deductibility of Executive Compensation. Section 162(m) of the Code
limits the tax deduction to $1 million for compensation paid to any of the
executive officers, unless certain requirements are met. The Board has
considered these requirements and the related regulations. It is the present
intention of the Board that, so long as it is consistent with its overall
compensation objectives, substantially all executive compensation shall be
deductible for federal income tax purposes.
Respectfully submitted by the following Members of the Board of
Directors.
Zack B. Bergreen
Adrian Peters
Eric Siegel
Isidore Sobkowski
REPORT OF THE AUDIT COMMITTEE
Securities and Exchange Commission rules now require the Company to
include in its proxy statement a report from the Audit Committee of the Board.
The following report concerns the committee's activities regarding oversight of
the Company's financial reporting and auditing process.
The Audit Committee is comprised solely of independent directors, as
defined in the Marketplace Rules of The Nasdaq Stock Market, and it operates
under a written charter adopted by the Board of Directors, a copy of which was
attached to the 2001 proxy statement. The composition of the Audit Committee,
the attributes of its members and the responsibilities of the committee, as
reflected in its charter, are intended to be in accordance with applicable
requirements for corporate audit committees. The committee reviews and assesses
the adequacy of its charter on an annual basis.
As described more fully in its charter, the purpose of the Audit
Committee is to assist the Board of Directors in its general oversight of the
Company's financial reporting, internal controls and audit functions. Management
is responsible for the preparation, presentation and integrity of the Company's
financial statements, accounting and financial reporting principles, internal
controls and procedures designed to ensure compliance with accounting standards,
applicable laws and regulations. The Company's independent auditing firm,
previously Arthur Andersen LLP, and since June 11, 2001, BDO Seidman LLP, is
responsible for performing an independent audit of the consolidated financial
statements in accordance with generally accepted auditing standards.
The Audit Committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or to certify the
activities of management and the independent auditor, nor can the committee
certify that the independent auditor is "independent" under applicable rules.
The committee serves a board-level oversight role, in which it provides advice,
counsel and direction to management and the auditors on the basis of the
information it receives, discussions with management and the auditors and the
experience of the Committee's members in business, financial and accounting
matters.
Among other matters, the Audit Committee monitors the activities and
performance of the Company's internal and external auditors, including the audit
scope, external audit fees, auditor independence matters and the extent to which
the independent auditor may be retained to perform non-audit services. The Audit
Committee and the Board have ultimate authority and responsibility to select,
evaluate and, when appropriate, replace the Company's independent auditor. The
Audit Committee also reviews the results of the internal and external audit work
with regard to the adequacy and appropriateness of the Company's financial,
accounting and internal controls. Management and independent auditor
presentations to and discussions with the Audit Committee also cover various
topics and events that may have significant financial impact or are the subject
of discussions between management and the independent auditor.
For Fiscal 2002, the Audit Committee has reviewed and discussed the
consolidated financial statements with management and the independent auditor,
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 discussed with the independent
auditor the matters required to be discussed by Statement on Auditing Standards
No. 61, as amended, "Communication with Audit Committees." The Company's
independent auditor also provided the 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 auditor that firm's independence.
Following the Committee's discussions with management and the
independent auditor, 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 year ended December 31, 2002.
Audit Fees:
Audit fees billed to the Company by BDO Seidman LLP during the
Company's 2002 fiscal year for audit of the Company's annual financial
statements and review of those financial statements included in the Company's
quarterly reports on Form 10-Q totaled $82,500.
Financial Information Systems Design and Implementation Fees:
The Company did not engage BDO Seidman LLP to provide advice to the
Company regarding financial information systems design and implementation during
the fiscal year ended December 31, 2002.
All Other Fees:
Fees billed to the Company by BDO Seidman LLP during the Company's 2002
fiscal year for all other non-audit services rendered to the Company, including
tax related services, totaled $64,713. Of this amount, $30,500 was for tax
matters, while the remainder included charges for resolving a state sales tax
issue, for issuance of an opinion on the Company's S-3 registration statement,
and for an audit of the Company's 401(k) Plan.
The Audit Committee has considered the non-audit services rendered to
the Company by BDO Seidman LLP and believes the rendering of those services is
not incompatible with BDO Seidman LLP maintaining its independence. All
non-audit services for 2003 shall be explicitly approved in advance by the Audit
Committee.
Audit Committee:
Adrian Peters
Eric Siegel
Isidore Sobkowski
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative
total stockholder return on the Company's Common Stock during the period from
December 31, 1997 through December 31, 2002, with the cumulative total return on
(i) an SIC Index that includes all organizations in the Company's Standard
Industrial Classification (SIC) Code 7372-Prepackaged Software and (ii) the
Nasdaq Market Index. The comparison assumes that $100 was invested on December
31, 1997 in the Company's Common Stock at the initial public offering price and
in each of the foregoing indices, and assumes reinvestment of dividends, if any.
COMPARE 5-YEAR CUMULATIVE
TOTAL RETURN AMONG ASTEA INTERNATIONAL INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
ASTEA INTERNATIONAL INC. 100.00 88.52 281.96 72.31 60.33 51.24
SIC CODE INDEX 100.00 168.03 314.12 171.65 151.57 103.86
NASDAQ MARKET INDEX 100.00 141.04 248.76 156.35 124.64 86.94
ASSUMES $100 INVESTED ON DEC. 31, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2002
Related Party Transactions
In each of 2002, 2001 and 2000, the Company paid premiums on behalf of
Zack B. Bergreen (the Chairman and Chief Executive Officer) and his wife of
$69,600 under split dollar life insurance policies. As of January 1, 2003, the
Company has ceased to make these premium payments.
In November 2001, the Company entered into a five year development and
license agreement with a third party called Self Service Technologies, which is
wholly owned by Isidore Sobkowski, a Director of the Company. The agreement
requires the third party to design, develop and deliver a product to be re-sold
by the Company in exchange for a royalty payable per license agreement to Self
Service Technologies. In accordance with the agreement, the Company paid royalty
fees totaling $37,500 and $7,500 in 2002 and 2001, respectively.
PROPOSAL 2
REVERSE STOCK SPLIT PROPOSAL
The Board of Directors of the Company has unanimously approved the
presentation to stockholders of a proposal to authorize the Board of Directors,
at any time in the twelve (12) months following the Meeting, to amend the
Company's Certificate of Incorporation (the "Certificate of Incorporation") to
effect the Reverse Stock Split of the Company's outstanding Common Stock on the
terms described herein. The Board of Directors has declared such amendment to
the Certificate of Incorporation to be advisable and has recommended that the
amendment be presented to the stockholders of the Company for approval. If the
proposal is approved by the Company's stockholders, the Board of Directors, in
its discretion, will implement the Reverse Stock Split if it deems it to be in
the best interests of the Company and its stockholders.
Except for adjustments that may result from the treatment of fractional
shares as described below, each stockholder will hold the same percentage of
Common Stock outstanding immediately following the Reverse Stock Split as such
stockholder held immediately prior to the Reverse Stock Split. If approved by
the stockholders of the Company as provided herein, the Reverse Stock Split will
be effected by an amendment to the Certificate of Incorporation in substantially
the form attached to this Proxy Statement as Appendix A (the "Reverse Stock
Split Amendment") and will become effective upon the filing of the Reverse Stock
Split Amendment with the Secretary of State of Delaware or at such later date as
may be set forth therein (the "Effective Date").
The following discussion is qualified in its entirety by the full text
of the Reverse Stock Split Amendment, which is incorporated by reference herein.
On the Effective Date, the Reverse Stock Split will result in the
automatic conversion of five shares of issued and outstanding Common Stock into
one share of Common Stock. Fractional shares of Common Stock will not be issued
as a result of the Reverse Stock Split, but instead, the Company will pay each
holder of a fractional share an amount in cash equal to the value of such
fractional interest on the Effective Date, as calculated based upon the average
closing market price for the five business day period preceding the Effective
Date.
Even if the Reverse Stock Split proposal is approved by the
stockholders, the Reverse Stock Split will be effected only upon a determination
by the Board of Directors that the Reverse Stock Split continues to be in the
best interests of the Company and its stockholders at that time. Notwithstanding
approval of the Reverse Stock Split proposal by the stockholders of the Company,
the Board of Directors may, in its sole discretion, determine not to effect the
Reverse Stock Split or to delay such action based on the then-current trading
price of the Common Stock or certain other factors, such as extension of the
grace period for Nasdaq SmallCap minimum bid price compliance, as further
described herein.
Dissenting stockholders have no appraisal rights under Delaware law,
the Company's Certificate of Incorporation or the Company's By-laws in
connection with the approval of the Reverse Stock Split Amendment and the
consummation of the Reverse Stock Split.
The Chairman and Chief Executive Officer of the Company, Zack B.
Bergreen, controls, in the aggregate, the vote of 6,892,000 shares of the
Company's Common Stock, and has expressed his intention to vote in favor of the
proposal. These shares represent 46.9% of the total issued and outstanding
Common Stock. Because the proposal is considered to be adopted by the
stockholders of the Company if a majority of the Company's issued and
outstanding shares vote in favor of the proposal, the approval and adoption of
the proposal is likely if Mr. Bergreen votes his shares consistent with his
expressed intent.
BACKGROUND OF THE REVERSE STOCK SPLIT
We have been a public company since July 1995, and our common stock was
initially listed on the Nasdaq National Market. On July 26, 2002, we transferred
the listing of our common stock from the Nasdaq National Market to the Nasdaq
SmallCap Market. In order to satisfy Nasdaq's minimum listing maintenance
requirements for the Nasdaq SmallCap Market, we must satisfy various financial
tests, including maintaining a minimum closing bid price of at least $1.00. On
July 9, 2003, the last reported sale price of the Common Stock on The Nasdaq
SmallCap Market was $0.62 per share. Transferring to the Nasdaq SmallCap Market
has enabled us to take advantage of the extended grace period provided by the
Nasdaq SmallCap Market to meet the minimum $1.00 per share closing bid price
requirement for continued listing. As a result of this transfer, the closing bid
price of our common stock must be above $1.00 for a minimum of 10 consecutive
trading days by July 21, 2003 in order to avoid initiation of procedures to
delist our common stock from the Nasdaq SmallCap Market. In the event delisting
procedures are initiated, we would appeal any attempt to delist to the Nasdaq
Qualifications Listing Board, and present the reverse split option as one method
of regaining compliance and good standing. The Company is in compliance with the
other listing maintenance requirements of the Nasdaq SmallCap Market, which are
as follows:
(1) either (a) net tangible assets of $2,000,000, (b) net income in
two of the last three years of $500,000, or (c) a market
capitalization of $35,000,000;
(2) a public float of 500,000 shares;
(3) a market value of public float of $1,000,000;
(4) a minimum bid price of $1 per share;
(5) two market makers;
(6) 300 round lot shareholders; and
(7) compliance with Nasdaq corporate governance rules.
Given the recent last reported sale price, the Company expects that the
minimum bid price of the Common Stock after a Reverse Stock Split would be more
than the $1.00 amount required for continued listing on The Nasdaq SmallCap
Market.
Failure to achieve this minimum price listing requirement would result
in the removal of the listing of our common stock from the Nasdaq SmallCap
Market. If our common stock is delisted from the Nasdaq SmallCap Market, it
would be listed on the OTC Bulletin Board, which we believe is viewed by most
investors as a less desirable and less liquid marketplace. Thus, delisting from
the Nasdaq SmallCap Market could make trading our common stock more difficult
for investors, potentially leading to further declines in share prices.
Nasdaq has proposed allowing all SmallCap companies that are out of bid
price compliance but meet certain other core initial listing requirements to be
granted additional 180 day grace periods to regain compliance, up to a maximum
of 540 days, or until expiration of the proposed pilot program on December 31,
2004, whichever is earlier. The Company presently meets the other required core
listing requirement for this proposal of $5,000,000 in shareholder's equity. We
have already received certain extensions of the grace period, so if the proposal
is approved by the SEC, we would be eligible for a maximum of one additional 90
day period and one additional 180 day period, commencing upon the expiration of
our current grace period on July 21, 2003. For more information, please refer to
the Nasdaq filing with the SEC, SR-NASD-2003-44, dated March 18, 2003. This
proposal is subject to approval by the SEC. As of the filing date of this proxy
statement, the SEC has not yet taken any action on the proposal, and there is no
assurance the SEC will take any action prior to the expiration of our grace
period. Should the SEC approve the Nasdaq proposal prior to expiration of our
grace period, it is unlikely the Company would decide to proceed with the
reverse split, at least in the short term.
In order to proportionally raise the per share price of our common
stock by reducing the number of shares of our common stock outstanding, the
Board of Directors believes that it is in the best interests of our stockholders
for the Board of Directors to obtain stockholder authority to implement a
reverse stock split. In addition, the Board of Directors believes that the share
price of our Common Stock is a factor in whether common stock meets investing
guidelines for certain institutional investors and investment funds. Finally,
the Board of Directors believes that our stockholders will benefit from
relatively lower trading costs for a higher priced stock. The Company believes
that the combination of lower transaction costs and increased interest from
institutional investors and investment funds may ultimately improve the trading
liquidity of our Common Stock. The Board of Directors is not seeking authority
to implement a reverse stock split in anticipation of any future transaction or
series of transactions, including any "going private" transaction.
If the stockholders approve this proposal, the reverse stock split will
be effected, if at all, only upon a determination by the Board of Directors that
the reverse stock split is in the best interests of the Company and its
stockholders at that time. The Board of Directors will set the timing for such a
split at any time during the twelve (12) months following the Annual Meeting. No
further action on the part of stockholders will be required to either implement
or abandon the reverse stock split. If the Board of Directors does not implement
the reverse stock split prior to August 21, 2004, the authority granted in this
proposal to implement the reverse stock split on these terms will terminate. The
Board of Directors reserves its right to abandon the reverse stock split if it
determines, in its sole discretion, that this proposal is no longer in the best
interests of the Company and our stockholders.
The Board of Directors believes that, if necessary to remain eligible
for listing on the Nasdaq SmallCap Market, the Reverse Stock Split is the best
course of action for the Company in order to maintain the $1.00 minimum bid
price required for continued listing on the Nasdaq Small Cap Market. However, if
the Company fails to satisfy the requirements for the Nasdaq SmallCap Market,
trading in shares of Common Stock would likely be conducted only in the
over-the-counter market, such as the OTC Bulletin Board, or possibly on regional
exchanges.
REASONS FOR THE REVERSE STOCK SPLIT PROPOSAL
The primary purpose of the Reverse Stock Split is to cause an increase
in the trading price per share of the Common Stock. The Company believes that a
higher trading price will aid the Company in remaining eligible for listing on
The Nasdaq SmallCap Market.
The Company believes that maintaining the listing of its Common Stock
on The Nasdaq SmallCap Market is in the best interests of the Company and its
stockholders. Inclusion in The Nasdaq SmallCap Market increases liquidity and
may potentially minimize the spread between the "bid" and "asked" prices quoted
by market makers. Further, a Nasdaq SmallCap Market listing may enhance the
Company's access to capital and increase the Company's financial flexibility.
The Company believes that prospective investors will view an investment in the
Company more favorably if its shares are listed on The Nasdaq SmallCap Market.
The Company also believes that a Nasdaq SmallCap Market listing is viewed
favorably by prospective and current customers, partners and employees.
The Company also believes that the current trading price per share of
the Common Stock has reduced the effective marketability of the Company's shares
of Common Stock because of the reluctance of many leading brokerage firms to
recommend low-priced stock to their clients. Certain investors view low-priced
stock as speculative and unattractive. In addition, a variety of brokerage firm
policies and practices tend to discourage individual brokers within those firms
from encouraging trading in low-priced stock. Such policies and practices arise
in part in connection with the payment of brokers commissions and to
time-consuming procedures that make the handling of low-priced stocks
unattractive to brokers from an economic standpoint.
There is no assurance that the Company will be able to maintain the
minimum bid price required for continued listing on The Nasdaq SmallCap Market
without implementing the Reverse Stock Split. Therefore, if the stockholders of
the Company do not approve the Reverse Stock Split, the Company may be delisted
from the Nasdaq SmallCap Market. In addition, because brokerage commissions on
low-priced stock generally represent a higher percentage of the stock price than
commissions on higher-priced stock, the current share price of the Common Stock
can result in individual stockholders paying transaction costs (commissions,
markups or markdowns) that represent a higher percentage of their total share
value than would be the case if the share price were substantially higher. This
factor also may limit the willingness of institutions to purchase the Common
Stock at its current low share price.
In addition, if the Common Stock is not listed on The Nasdaq SmallCap
Market and the trading price of the Common Stock were to remain below $1.00 per
share, trading in the Common Stock would also be subject to the requirements of
certain rules promulgated under the Exchange Act which require additional
disclosures by broker-dealers in connection with any trades involving a stock
defined as a "penny stock" (generally, a non-Nasdaq equity security that has a
market price of less than $5.00 per share, subject to certain exceptions). In
such event, the additional burdens imposed upon broker-dealers to effect
transactions in the Common Stock could further limit the market liquidity of the
Common Stock and the ability of investors to trade the Common Stock.
If the Common Stock is delisted from the Nasdaq SmallCap Market, sales
of the Common Stock would likely be conducted only in the over-the-counter
market or potentially on regional exchanges. This may have a negative impact on
the liquidity and price of the Common Stock and investors may find it more
difficult to purchase or dispose of, or to obtain accurate quotations as to the
market value of, the Common Stock.
For all the above reasons, the Company believes that the Reverse Stock
Split is in the best interests of the Company and its stockholders. There can be
no assurance, however, that the Reverse Stock Split will have the desired
consequences. Specifically, there can be no assurance that, after the Reverse
Stock Split, the market price of the Common Stock will not decrease to its
pre-split levels or that the market capitalization of the Common Stock after the
proposed Reverse Stock Split will be equal to the market capitalization before
the proposed Reverse Stock Split. Consequently, even if we implement the Reverse
Stock Split, there is no guarantee that the price of the Common Stock will
remain above the minimum bid price, or that the Company will continue to satisfy
the market value of public float level required for continued listing on Nasdaq.
EFFECT OF APPROVAL OF THE REVERSE STOCK SPLIT PROPOSAL
Approval by the stockholders of the proposal will authorize the Board
to effect a reverse stock split at any time in the twelve (12) months following
the Meeting. The actual timing of such filing will be determined by the Board of
Directors based upon its evaluation as to when and if such action is most
advantageous to the Company and its stockholders. Further, notwithstanding
approval of the Reverse Stock Split proposal by the stockholders of the Company,
the Board of Directors may elect not to file the Reverse Stock Split Amendment
at all.
After the Effective Date, if implemented, of the Reverse Stock Split,
each stockholder would own a reduced number of shares of Common Stock but would
hold the same percentage of the outstanding shares (subject to adjustments for
fractional shares resulting from the Reverse Stock Split) as such stockholder
held prior to the Effective Date. The number of shares of Common Stock that may
be purchased upon the exercise of outstanding options, warrants, and other
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock, and the per share exercise or conversion prices thereof, would be
adjusted in proportion to the Reverse Stock Split exchange ratio in accordance
with their terms as of the Effective Date. The Company does not believe that the
immediate impact of the Reverse Stock Split would be to reduce the number of
beneficial or record stockholders, except to the extent that a stockholder
currently holds less than five shares, in which case such stockholder would
receive only cash and would no longer hold any shares. The Company currently
has 88 stockholders of record and approximately 1,400 beneficial owners. If
the Company were to implement the Reverse Stock Split, the Company would have
one fewer stockholder of record, for a total of 87.
The Reverse Stock Split might also result in some stockholders owning
"odd lots" of less than 100 shares of Common Stock. Brokerage commissions and
other costs of transactions in odd lots may be higher, particularly on a
per-share basis, than the cost of transactions in even multiples of 100 shares.
Following a Reverse Stock Split, the number of shares of Common Stock
outstanding would be reduced in proportion to the reverse split exchange ratio.
The Reverse Stock Split would not affect the Company's total stockholders'
equity. All share and per share financial statement information would be
retroactively adjusted following the Effective Date to reflect the Reverse Stock
Split for all periods presented in future filings.
Based on the 14,606,530 shares of Common Stock outstanding as of June
30, 2003, the approximate number of shares of Common Stock that would be
outstanding as a result of the Reverse Stock Split, based on the 1:5 exchange
ratio, is 2,921,306.
There are currently 25,000,000 shares of Common Stock authorized under
the Certificate of Incorporation. The Reverse Stock Split Amendment will not
reduce the number of authorized shares of Common Stock. Therefore, the number of
authorized but unissued shares of Common Stock will increase significantly as a
result of the Reverse Stock Split, from 10,393,470 to approximately 22,078,694.
The issuance in the future of such additional authorized but unissued shares may
have the effect of diluting the earnings per share and book value per share, as
well as the stock ownership and voting rights, of the currently outstanding
shares of Common Stock.
The following table illustrates the effect of the Reverse Stock Split
on the Common Stock of the Company:
Prior to Reverse Stock Split After Reverse Stock Split
Total Authorized................... 25,000,000 25,000,000
Authorized and Unreserved....... 7,172,470 24,355,800
Authorized and Reserved......... 3,221,000 644,200
--------- -------
Total Authorized But Unissued 10,393,470 10,393,470 22,078,694 22,078,694
Issued and Outstanding............ 14,606,530 2,921,306
The Board of Directors considered reducing the number of shares of
authorized Common Stock in connection with the Reverse Stock Split. However,
under the Company's Certificate of Incorporation, the approval of 75% of the
outstanding shares of the Company's stock entitled to vote is required to reduce
or eliminate the number of authorized shares of Common Stock. Since the
stockholder who has expressed an intention to vote in favor of the Reverse Stock
Split controls the vote of only 46.9% of the total issued and outstanding Common
Stock, the approval of the Reverse Stock Split would not be assured if it
included a provision to reduce the number of shares of authorized Common Stock.
Also, the Board of Directors determined that the availability of additional
authorized shares may be beneficial to the Company in the future because it will
allow the Board of Directors to issue shares for corporate purposes, if
appropriate opportunities should arise, without further action by stockholders
or the time delay involved in obtaining stockholder approval (except to the
extent that approval is otherwise required by applicable law). The Company has
no current written or other plans, proposals or arrangements to issue additional
shares to acquire any business or engage in any investment opportunity.
The purpose of the Reverse Stock Split is to bring the Company into
compliance with the minimum bid price per share required for continued listing
of the Common Stock on the Nasdaq SmallCap Market. However, the Reverse Stock
Split may also be construed as having an anti-takeover effect. The Board of
Directors could in the future cause the Company to issue the increased available
number of authorized but unissued shares of Common Stock to purchasers who might
oppose a given transaction favorable to the interests of the majority of the
stockholders who are not members of the Board of Directors, such as a tender
offer at an above market premium. Similarly, the Board of Directors could issue
such shares to purchasers so as to hinder or discourage a merger, tender offer,
proxy contest, assumption of control of a large block of the Company's Common
Stock or the removal of incumbent management. The proposal for the Reverse Stock
Split is not designed to address, nor is the Company aware of any specific
effort to accomplish, any of the purposes stated above. The Reverse Stock Split
is also not part of a plan by management or the Board of Directors to propose a
series of anti-takeover amendments to its Certificate of Incorporation or
By-laws in future proxy solicitations.
The Company's Certificate of Incorporation does not grant the Common
Stock cumulative voting rights. However, the Company's Certificate of
Incorporation and By-laws do contain the following provisions which could have
an anti-takeover effect:
o the Board of Directors may issue up to 5,000,000 authorized
and unissued shares of preferred stock, and may designate
their voting and other rights, without further stockholder
approval;
o while the Board of Directors may adopt, amend or repeal
provisions of the By-Laws by a simple majority, approval by
80% of the outstanding shares entitled to vote is required
for similar actions by the stockholders;
o stockholder action by written consent is prohibited;
o special stockholder meetings may be called only by the
President, Chairman of the Board of Directors or a majority
of the Board of Directors;
o approval by 75% of the outstanding shares entitled to vote
is required to remove a director without cause; and
o advance notice procedures limiting the ability of
stockholders to nominate directors for election or propose
business to be considered at a meeting of stockholders.
The Reverse Stock Split, if effected, would affect all stockholders
equally and would not affect any stockholder's proportionate equity interest in
the Company (except with respect to adjustments for fractional shares). None of
the rights currently accruing to holders of the Common Stock or options to
purchase Common Stock would be affected by a Reverse Stock Split. Following a
Reverse Stock Split, each share of the Common Stock resulting from the Reverse
Stock Split would entitle the holder thereof to one vote per share and will
otherwise be identical to the outstanding Common Stock immediately prior to the
Effective Date.
EXCHANGE OF STOCK CERTIFICATES; NO FRACTIONAL SHARES
The conversion of the shares of Common Stock pursuant to the Reverse
Stock Split would occur automatically on the Effective Date without any action
on the part of stockholders of the Company and without regard to the date on
which certificates evidencing shares of Common Stock prior to the Reverse Stock
Split are physically surrendered for new certificates. As of the Effective Date,
five shares of Common Stock would be converted and reclassified into one share
of post-split Common Stock.
For example, if the 1:5 Reverse Stock Split is implemented by the Board
of Directors, a holder of 500 shares immediately prior to the Effective Date
would hold 100 shares after the Effective Date. Fractional shares of Common
Stock would not be issued as a result of the Reverse Stock Split, but instead,
the Company would pay each holder of a fractional share an amount in cash equal
to the value of such fractional interest on the Effective Date, such value to be
calculated based upon the average closing market price for the five trading days
immediately previous to the Effective Date.
As soon as practicable after the Effective Date, transmittal forms will
be mailed to each holder of record of shares of Common Stock, to be used in
forwarding such holder's stock certificates for surrender and exchange for
certificates evidencing the number of shares of Common Stock such stockholder is
entitled to receive as a consequence of the Reverse Stock Split. The transmittal
forms will be accompanied by instructions specifying other details of the
exchange. Upon receipt of such transmittal form, each stockholder should
surrender the certificates evidencing shares of Common Stock prior to the
Reverse Stock Split in accordance with the applicable instructions. Each holder
who surrenders certificates will receive new certificates evidencing the whole
number of shares of Common Stock that such stockholder will hold as a result of
the Reverse Stock Split. Stockholders will not be required to pay any transfer
fee or other fee in connection with the exchange of certificates. Persons who
hold their shares in brokerage accounts or "street name" would not be required
to take any further actions to effect the exchange of their shares.
The Company estimates that its aggregate expenses relating to the
Reverse Stock Split will be approximately $20,000.
STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL THEY
RECEIVE A TRANSMITTAL FORM FROM THE COMPANY.
As of the Effective Date, each certificate representing shares of
Common Stock outstanding prior to the Effective Date will be deemed canceled
and, for all corporate purposes, will be deemed only to evidence the right to
receive a new stock certificate representing the number of shares of Common
Stock into which the shares of Common Stock evidenced by such certificate have
been converted as a result of the Reverse Stock Split.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material federal income tax
consequences of the Reverse Stock Split is based upon the Internal Revenue Code
of 1986, as amended, Treasury regulations thereunder, judicial decisions and
current administrative rulings and practices, all as in effect on the date
hereof and all of which could be repealed, overruled or modified at any time,
possibly with retroactive effect. No ruling from the Internal Revenue Service
(the "IRS") with respect to the matters discussed herein has been requested and
there is no assurance that the IRS would agree with the conclusions set forth in
this discussion.
This discussion may not address certain federal income tax consequences
that may be relevant to particular stockholders in light of their personal
circumstances or to certain types of stockholders (such as dealers in
securities, insurance companies, foreign individuals and entities, financial
institutions and tax-exempt entities) that may be subject to special treatment
under the federal income tax laws. This discussion also does not address any tax
consequences under state, local or foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT.
Except as discussed below, no gain or loss should be recognized by a
stockholder who receives only Common Stock in connection with the transactions
contemplated by the Reverse Stock Split. The aggregate tax basis of the shares
of Common Stock held by a stockholder following the Reverse Stock Split will
equal the stockholder's aggregate basis in the Common Stock held immediately
prior to the Reverse Stock Split and generally will be allocated among the
shares of Common Stock held following the Reverse Stock Split on a pro-rata
basis. Stockholders who have used the specific identification method to identify
their basis in shares of Common Stock combined in the Reverse Stock Split should
consult their own tax advisors to determine their basis in the shares of Common
Stock received in exchange therefore in the Reverse Stock Split. Shares of
Common Stock received should have the same holding period as the Common Stock
surrendered. The receipt of a cash payment in lieu of a fractional interest will
result in recognition of gain or loss for federal income tax purposes and the
aggregate tax basis of the shares of Common Stock held following the Reverse
Stock Split must take into account the gain recognition.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" THE REVERSE STOCK SPLIT
ASSUMING THE PROPOSAL IS APPROVED BY THE STOCKHOLDERS, THE COMPANY'S BOARD OF
DIRECTORS INTENDS TO IMPLEMENT THE PROPOSAL IF, IN ITS DISCRETION, IT DETERMINES
IT TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS.
NOTWITHSTANDING STOCKHOLDER APPROVAL OF THE REVERSE STOCK SPLIT, THE BOARD OF
DIRECTORS MAY, IN ITS DISCRETION, ABANDON IT ALTOGETHER IF IT DEEMS IT IN THE
BEST INTERESTS OF THE COMPANY.
PROPOSAL 3
RATIFICATION AND SELECTION OF AUDITORS
The Board of Directors has selected the firm of BDO Seidman LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending December 31, 2003. Arthur Andersen LLP had served as the Company's
accountants from March 1995 until June 11, 2001. It is expected that a member of
BDO Seidman LLP will be present at the Annual Meeting with the opportunity to
make a statement if so desired and will be available to respond to appropriate
questions.
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
1. On June 11, 2001, the Company engaged the accounting firm of BDO Seidman,
LLP as independent public accountants for the Registrant for the fiscal
year ending December 31, 2001. Arthur Andersen LLP ("AA") was dismissed on
June 11, 2001 as the Registrant's auditor, however they continued, for a
limited time thereafter, to work on certain tax matters which have since
been resolved. The change was recommended by management and approved by the
Company's Audit Committee and its Board of Directors.
2. In connection with its audits for the two most recent fiscal years prior to
and through June 11, 2001 there were no disagreements with AA on any matter
of accounting principle or practice, financial statement disclosure,
auditing scope or procedure, whereby such disagreements, if not resolved to
the satisfaction of AA, would have caused them to make reference thereto in
their report on the financial statements for such years, nor were there any
reportable events.
3. The reports of AA on the financial statements of the Company for the two
years prior to its dismissal contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope
or accounting principle.
4. The Company did not consult with BDO Seidman, LLP during the last two
fiscal years or subsequent interim periods (prior to AA's dismissal) on
either (i) the application of accounting principles to a specified
transaction (either completed or proposed) or the type of audit opinion BDO
Seidman, LLP might issue on the Company's financial statements or (ii) any
matter that was either the subject of a disagreement (as described in
Paragraph 304(a)(1)(iv) of Regulation S-K) or a reportable event (as
described in Paragraph 304(a)(1)(v) of Regulation S-K).
5. The Company requested that AA furnish a letter addressed to the Commission
stating whether or not AA agrees with the above statements. A copy of such
letter to the Commission, dated June 18, 2001, was filed as an Exhibit to
the Form 8-K/A filed June 21, 2001.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THIS
SELECTION.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors,
executive officers and holders of more than 10% of the Company's Common Stock
(collectively, "Reporting Persons") to file with the Commission initial reports
of ownership and reports of changes in ownership of Common Stock of the Company.
Such persons are required by regulations of the Commission to furnish the
Company with copies of all such filings. Based on its review of the copies of
such filings received by it with respect to the fiscal year ended December 31,
2002 and written representations from certain Reporting Persons, the Company
believes that all Reporting Persons complied with all Section 16(a) filing
requirements in the fiscal year ended December 31, 2002.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement
to be furnished to all stockholders entitled to vote at the next annual meeting
of stockholders of the Company must be received by the Company's Secretary not
later than March 24, 2004. Any such proposal must comply with the rules and
regulations of the Commission. In order to curtail controversy as to the date on
which a proposal was received by the Company, it is suggested that proponents
submit their proposals by Certified Mail, Return Receipt requested to Astea
International Inc., 240 Gibraltar Road, Horsham, Pennsylvania 19044, Attention:
Secretary. In addition, the execution of a proxy solicited by the Company in
connection with the 2004 Annual Meeting of Stockholders shall confer on the
designated proxyholder discretionary voting authority to vote on any shareholder
proposal which is not included in the Company's proxy materials for such meeting
and for which the Company has not received notice before June 7, 2004.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company.
Proxies may be solicited by mail, personal interview, telephone or telegraph
and, in addition, directors, officers and regular employees of the Company may
solicit proxies by such methods without additional renumuration. The Company may
request banks, brokers and other custodians, nominees and fiduciaries to solicit
their customers who have stock of the Company registered in the names of a
nominee and, if so, will reimburse such banks, brokers and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket costs.
THE COMPANY WILL PROVIDE TO EACH PERSON SOLICITED, WITHOUT CHARGE
EXCEPT FOR EXHIBITS, UPON REQUEST IN WRITING, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2002. REQUESTS SHOULD BE DIRECTED TO CHIEF FINANCIAL OFFICER, ASTEA
INTERNATIONAL, 240 GIBRALTAR ROAD, HORSHAM, PENNSYLVANIA 19044
By Order of the Board of Directors
/s/ Zack B. Bergreen
---------------------------------
Zack B. Bergreen
President and Chief Executive Officer
Horsham, Pennsylvania
July 15, 2003
APPENDIX A
----------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ASTEA INTERNATIONAL INC.
Astea International Inc. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware ("DGCL"), does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions declaring advisable the amendment of the Certificate of
Incorporation of the Corporation to effect a combination of the outstanding
Common Stock of the Corporation. The resolutions setting forth the proposed
amendment are as follows:
RESOLVED, that without any other action on the part of the Corporation
or any other person, on the effective date (the "Effective Date") of
the Certificate of Amendment to the Corporation's Certificate of
Incorporation setting forth these resolutions and filed with the
Secretary of State of the State of Delaware, every five (5) shares of
Common Stock then outstanding shall be automatically converted into one
(1) share of Common Stock; and
RESOLVED FURTHER, that no fractional shares of Common Stock shall be
issued upon the conversion of shares pursuant to the preceding
resolution. Fractional shares shall entitle the holders thereof to
receive an amount in cash equal to the value of such fractional
interest as calculated based on the average closing market price of the
shares of Common Stock of the Corporation for the five trading days
immediately preceding the Effective Date; and
RESOLVED FURTHER, that following the Effective Date, (i) new stock
certificates (the "New Certificates") representing shares of Common
Stock shall be issued by the Corporation in exchange for the surrender
of stock certificates (the "Old Certificates") representing outstanding
shares of Common Stock immediately prior to the Effective Date, and
(ii) the Old Certificates shall be deemed canceled, shall not be
recognized as evidencing outstanding Common Stock, and shall represent
only the right of the holders thereof to receive New Certificates.
SECOND: That pursuant to resolution of its board of directors, an
annual meeting of the stockholders of the Corporation was duly called and held,
upon notice in accordance with the provisions of Section 222 of the DGCL, at
which meeting the necessary number of shares as required by the DGCL were voted
in favor of the amendment.
THIRD: That the foregoing amendment was duly adopted in accordance with
the provisions of Section 242 of the DGCL.
FOURTH: That this Certificate of Amendment to the Corporation's
Certificate of Incorporation shall become effective at the close of business on
XXXX XX, 2003.
IN WITNESS WHEREOF, Astea International Inc. has caused this
certificate to be signed by Zack B. Bergreen, its Chief Executive Officer, and
John Tobin, its Secretary, this day of ______, 2003.
--------------------------
Zack B. Bergreen
Chairman and Chief Executive Officer
--------------------------
John Tobin
Secretary
ASTEA INTERNATIONAL INC.
Proxy for Annual Meeting of Stockholders
August 21, 2003
Solicited by the Board of Directors
The undersigned stockholder of Astea International Inc., a Delaware
corporation (the "Corporation"), hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and accompanying Proxy Statement each dated July
15, 2003 and hereby appoints Zack B. Bergreen and Fredric Etskovitz as proxies
and attorneys-in-fact, with full power of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of the Corporation to be held at the offices of the Company at 240
Gibraltar Road, Horsham, Pennsylvania 19044, on August 21, 2003 at 10:00 a.m.
local time, and at any adjournment or adjournments thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on all matters set forth in the Notice of Annual
Meeting of Stockholders and accompanying Proxy Statement, and in their
discretion upon any other business that may properly come before the meeting or
any adjournment or adjournments thereof:
1. To elect four (4) Directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified.
o FOR all nominees listed below o WITHHOLD
(except as indicated below)
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below.
Nominees: Zack B. Bergreen, Adrian A. Peters, Eric Siegel and
Isidore Sobkowski
2. To approve the reverse stock split proposal. The Board of Directors will be
authorized, at their discretion, to amend the Company's Certificate of
Incorporation to effect a reverse stock split of the Company's outstanding
Common Stock, whereby every five shares of Common Stock outstanding will be
converted into one share of Common Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
3. To ratify the selection of the firm of BDO Seidman, LLP as independent
auditors for the fiscal year ending December 31, 2003.
|_| FOR |_| AGAINST |_| ABSTAIN
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR APPROVAL OF THE REVERSE SPLIT
PROPOSAL, AND FOR RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN LLP AS
INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS MAY VOTE IN PERSON
EVEN THOUGH THEY HAVE PREVIOUSLY MAILED THIS PROXY.
Dated: _________________________________, 2003
----------------------------------------------
(Signature)
----------------------------------------------
(Signature)
(This Proxy should be marked, dated
and signed by the stockholder(s) exactly as
his or her name appears on his or her stock
certificate or records of the Company, and
returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should
so indicate. If shares are held by joint
tenants or as community property, both should
sign.)