SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
(Amendment No. )
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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-11(c) or Rule 14a-12
Dauphin Technology, Inc.
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(Name of Registrant As Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement. If other than the Registrant)
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DAUPHIN TECHNOLOGY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 25, 2002
To The Shareholders of
Dauphin Technology, Inc.:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Dauphin Technology, Inc. (the "Company"), which will be held at the
Cotillion Banquet Hall, 360 Creekside (Routes 14 and 53) in Palatine, Illinois
on Tuesday, June 25, 2002, at 2:00 p.m., Central Standard Time, to consider and
act upon the following matters:
1. The election of four Directors.
2. Ratification of the appointment of Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending December 31, 2002.
3. Such other business as may come before the Meeting or any adjournments
thereof.
Only Shareholders of record at the close of business as of April 29, 2002,
are entitled to notice of and to vote at the Annual Meeting and any adjournment
of the Meeting. The Annual Report of the Company for the fiscal year ended
December 31, 2001 is being mailed to all Shareholders of record and accompanies
this Notice and related Proxy Statement.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE MEETING IN PERSON,
BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING,
YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
of Dauphin Technology, Inc.
/s/ Luke Lukens
Luke Lukens
Assistant Secretary
Dated: April 29, 2002
DAUPHIN TECHNOLOGY, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 25, 2002
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of DAUPHIN TECHNOLOGY, INC., an Illinois
corporation (the "Company"), to be voted at the Annual Meeting of Shareholders
to be held June 25, 2002, as stated in the foregoing notice. Solicitations will
be made by mail and all expenses incurred in connection with the solicitations
will be borne by the Company.
Each outstanding share of common stock of the Company is entitled to one
vote on each matter submitted to a vote at the Meeting, without cumulative
voting. Votes may be cast by mail by signing and returning the enclosed Proxy
or by voting in person at the Meeting. If you intend to vote in person at the
Meeting and your shares are held in the name of your broker or other nominee,
you will need to bring a Proxy from your broker or nominee authorizing you to
vote your shares. The Board of Directors has fixed April 29, 2002, as the
record date for the determination of Shareholders entitled to notice of, and to
vote at, the Annual Meeting, or any adjournment or adjournments thereof.
If the enclosed Proxy is properly executed and returned to American Stock
Transfer & Trust Company, 59 Maiden Lane, Plaza Level, New York, N.Y. 10038,
all shares represented thereby will be voted for the Proposals described in
this Proxy Statement. Anyone giving a Proxy may revoke it at any time before it
is exercised. A Proxy may be revoked by signing and returning another Proxy at
a later date, providing written notice of revocation to the Company's Secretary
or attending the Meeting and voting in person.
The Company had 65,050,646 shares of $0.001 par value common stock
outstanding on April 22, 2002. A quorum, which is a majority of the outstanding
shares entitled to vote as of the record date, must be present to hold the
Meeting and to conduct business. Shares are counted as present at the Meeting
if you appear in person or if you vote your shares by mailing a properly
executed Proxy. If shares are held in the name of a broker and you do not
return a Proxy, your broker may leave your shares un-voted or may vote your
non-voted shares on routine matters such as those contained in Proposals 1 and
2. To the extent your broker votes your shares on Proposals 1 and 2, your
shares will be counted as present for purposes of determining a quorum. If your
vote is withheld for any Proposal, it will be counted for purposes of
determining a quorum, but not for voting on the Proposal.
It is anticipated that the mailing to Shareholders of this Proxy Statement
and the enclosed Proxy will commence on or about May 6, 2002. The Annual Report
of the Company for the fiscal year ended December 31, 2001, is being mailed to
all Shareholders of record and accompanies this Proxy Statement.
Matters to be Considered at the Meeting
The Company's Shareholders are being asked to consider and act upon the
following Proposals:
1. The election of four Directors.
2. The ratification of the appointment of Grant Thornton LLP as the
Company's independent auditors for the fiscal year ending December 31, 2002.
3. Such other business as may come before the Meeting or any adjournments
thereof.
1
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, four Directors will be elected for a term of one year, or
until their successors have been elected and qualified. The nominees are Andrew
J. Kandalepas; Gary E. Soiney; Mary Ellen Conti, M.D. and Dr. Daniel D. Kiddy.
Messers. Kandalepas and Soiney and Dr. Conti are currently a member of the
Board of Directors. Mr. Jeffrey L. Goldberg has indicated his intention to
retire from the Board at the end of his term and accordingly will not stand for
re-election.
The shares represented by each Proxy given pursuant to this solicitation
will be voted in the manner authorized by the laws of the state of Illinois for
the nominees listed below, unless such authorization is withheld in the Proxy.
Each share is entitled to one vote on each matter addressed at the Meeting,
including the election of Directors. Shares do not provide cumulative voting on
any matter. In the absence of contrary direction, the Proxies will cast votes
in such manner as to elect all or as many nominees as possible. If any nominee
becomes unavailable for any reason presently unknown, the Proxies will be voted
for substitute nominees. Information with respect to each nominee is set forth
below.
Name of Nominee Age Principal Position with the Company
--------------- --- --------------------------------------
Andrew J. Kandalepas......... 50 Chairman of the Board; Chief Executive
Officer; President
Gary E. Soiney............... 61 Director
Mary Ellen Conti, M.D........ 57 Director
Dr. Daniel D. Kiddy.......... 38 Director
Mr. Kandalepas joined the Company as Chairman of the Board in February 1995.
He was named CEO and President in November 1995. In addition, Mr. Kandalepas is
the founder and President of CADserv Corporation, a Schaumburg, Illinois
electronics design services firm ("CADserv"). Mr. Kandalepas graduated from
DeVry Institute in 1974 with a Bachelor's Degree in Electronics Engineering
Technology. He then served as a product engineer at GTE for two years. Mr.
Kandalepas left GTE to serve ten years as a supervisor of PCB design for
Motorola prior to founding CADserv.
Mr. Soiney has served as a Director since November 1995. He is also a member
of the Audit Committee. He graduated from the University of Wisconsin in
Milwaukee as a marketing major with a degree in Business Administration. He is
currently a 75% owner in Pension Design & Services, Inc., a Wisconsin
corporation that performs administrative services for qualified pension plans
primarily in the Midwest, a position he has held for the past five years.
Dr. Conti was appointed to the Board of Directors and to the Audit Committee
in September, 2000. Dr. Conti is a Radiation Oncologist and owns and operates
four Radiation Therapy Clinics in the St. Louis, Missouri area. She has
practiced in the medical field since 1974 and has been a member of the Planning
and Budget Committee of Memorial Hospital in Belleville, Illinois. Dr. Conti
currently serves as a member of the Board of Directors of Creighton University,
FirstStar Bank Health Care Board, Association of Freestanding Radiation
Oncology Centers and the Accreditation Association for Ambulatory Health Care.
Dr. Kiddy is a surgeon specializing in podiatric medicine with a private
practice in O'Fallon, Missouri. He began private practice in 1992 after
completing surgical residencies at Yale, St. Raphael Hospital in New Haven,
Connecticut and at Delaware Valley Medical Center. He is currently on the
executive medical committee for Unity Health Care and operates private business
providing healthcare to patients in over 150 nursing homes throughout the state
of Missouri.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
NOMINEES LISTED ABOVE.
2
Compensation of Directors
No Directors have received Directors' fees for any Director's or Committee
Meeting attended. Directors are entitled to reimbursement of reasonable
expenses incurred in attending Meetings of the Board of Directors and any
Committee of the Board of Directors.
Meetings and Committees of the Board of Directors
The Board of Directors held ten Meetings during the fiscal year ended
December 31, 2001, each of which were attended by all of the Directors then in
office.
The Board of Directors has an Audit Committee, which consisted of the
following independent Directors: Jeffrey L. Goldberg, Gary E. Soiney and Mary
Ellen Conti, M.D. The Audit Committee meets with the Company's independent
public accountants, reviews the scope and results of their audit, reviews
management response to advisory comments and inquiries into various matters
such as adequacy of internal controls and security, application of new
regulatory policies and accounting rules and other issues that may from time to
time be of concern to the Committee or its members. The Audit Committee met
four times for the fiscal year 2001. The Audit Committee's Report is set forth
later in this Proxy Statement.
The Board of Directors does not have a Compensation Committee. The full
Board is responsible for reviewing and approving compensation paid to Executive
Officers of the Company, including salaries and bonuses. The full Board also
administers the Company's employee benefits plans, including the Company's
401(k) Plan. The Board's Report on Executive Compensation is set forth later in
this Proxy Statement.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Grant Thornton LLP to audit the
financial statements of the Company for the fiscal year ending December 31,
2002. Grant Thornton LLP has audited the Company's financial statements since
the fiscal year ending December 31, 1999. A representative of Grant Thornton
LLP is expected to be present at the Meeting, will have the opportunity to make
a statement and is expected to be available to respond to appropriate questions.
Ratification of the appointment of the Company's independent auditors
requires the affirmative vote of a majority of the shares present and eligible
to vote at the Meeting. In the event that appointment of Grant Thornton LLP is
not ratified, the appointment of independent auditors will be reconsidered by
the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
3
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth as of April 22, 2002, the number and
percentage of outstanding shares of the Company's common stock beneficially
owned by (i) each Executive Officer and Director, (ii) all Executive Officers
and Directors as a group, (iii) all persons known by the Company to own
beneficially more than 5% of the Company's common stock. Beneficial ownership
has been determined in accordance with Rule 13d-3 under the Exchange Act. Under
this rule, certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power to
dispose of the shares). In addition, shares are deemed to be beneficially owned
by a person if the person has the right to acquire the shares (for example,
upon exercise of an option or warrant) within 60 days of the date as of which
the information is provided; in computing the percentage ownership of any
person, the amount of shares is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of these
acquisition rights. As a result, the percentage of outstanding shares of any
person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date.
Amount and Nature Percent of
of Beneficial Shares of
Name Title Ownership Common Stock
- ---- ----- ----------------- ------------
Andrew J. Kandalepas**..... Chairman, Chief Executive
Officer & President 4,526,337(1) 7.0%
Harry L. Lukens, Jr........ Chief Financial Officer,
Asst. Secretary 480,000(2) *
Jeffrey L. Goldberg........ Secretary, Director 80,000(3) *
Christopher L. Geier....... Executive Vice-President 1,000,000(4) 1.5%
Gary E. Soiney**........... Director 80,000(5) *
Mary Ellen Conti, M.D.**... Director 164,500(6) *
--------- ---
(Executive Officers and Directors as a group (6 persons) 6,330,837(7) 9.7%
========= ===
- --------
*Less than 1%
**Nominee for election to the Board
(1) Includes options to purchase 1,150,000 shares under options immediately
exercisable.
(2) Includes options to purchase 480,000 shares under options immediately
exercisable.
(3) Includes options to purchase 80,000 shares under options immediately
exercisable.
(4) Includes options to purchase 1,000,000 shares under options immediately
exercisable.
(5) Includes options to purchase 80,000 shares under options immediately
exercisable.
(6) Includes options to purchase 40,000 shares under options immediately
exercisable.
(7) Includes options to purchase 2,840,000 shares under options immediately
exercisable.
4
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth in the format required by applicable
regulations of the Securities and Exchange Commission the compensation for
Executive Officers of the Company who served in such capacities as of December
31, 2001.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation (1)
------------------- --------------------
Awards Payouts
---------- ---------
Long-Term
Securities Incentive
Fiscal Year Underlying Plan All Other
Ended Options Payouts Compensation
Name and Title Dec. 31 Salary Bonus (#) ($) (2)
- -------------- ----------- -------- ------- ---------- --------- ------------
Andrew J. Kandalepas......... 2001 $195,000 $ -0- -0- $-0- $5,000
Chairman, CEO and President 2000 195,000 50,000 -0- -0- 5,000
1999 84,000 -0- -0- -0- 5,000
Christopher L. Geier (3)..... 2001 $185,000 -0- -0- -0- -0-
Executive Vice-President 2000 185,000 -0- -0- -0- -0-
1999 65,585 -0- -0- -0- -0-
Harry L. Lukens, Jr. (4)..... 2001 $175,000 -0- -0- -0- -0-
Chief Financial Officer, 2000 106,000 -0- -0- -0- -0-
Assistant Secretary
- --------
(1) The Company presently has no long-term compensation arrangements and had no
such plans during fiscal years 1999 through 2001.
(2) The amounts disclosed in this column consist of Company discretionary
contributions to the Company's 401(k) Plan and insurance premiums paid by
the Company. The Company made no discretionary contributions to the 410(k)
Plan in fiscal years 1999 through 2001.
(3) Mr. Geier commenced employment in March 1999 and therefore, the
compensation shown for him for 1999 is for the period from March 1999
through December 1999.
(4) Mr. Lukens commenced employment in May 2000 and therefore, the compensation
shown for him for 2000 is for the period from May 2000 through December
2000.
401(k) PLAN
Effective January 1, 1996, the Company adopted the Dauphin Technology, Inc.
401(k) Plan ("Plan"), covering substantially all employees. The Plan is
administered by the Board of Directors of the Company and the trustees are
Andrew J. Kandalepas, Christopher L. Geier and Harry L. Lukens, Jr. The Plan is
a defined contribution plan that permits participants to contribute up to 15%
of pretax annual compensation, as defined in the Plan, in addition to
discretionary contributions that may be made by the Company, at the discretion
of the Company's Board of Directors. Plan participants are provided forty-six
optional forms of direct investment under the Plan. The Company made no
discretionary contributions to the Plan for fiscal years 1999 through 2001.
5
STOCK OPTION GRANTS
The following table sets forth certain information regarding options to
acquire shares of common stock granted during the fiscal year ended December
31, 2001 to the named Executive Officers.
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Number of Price Appreciation
Shares % of Total for Option Term
Underlying Options Granted Exercise Expiration ------------------
Name Options During Fiscal Year Price Date 5% 10%
- ---- ---------- ------------------ -------- ---------- ------- -------
Harry L. Lukens, Jr. 50,000 3.34% $3.59 03/01/04 $28,300 $59,400
Mary Ellen Conti.... 20,000 1.33% 1.31 04/25/04 4,200 8,700
All options granted during the last fiscal year have an exercise price equal
to 100% of the fair market value of the Company's stock on the grant date. All
options are immediately exercisable. According to Securities and Exchange
Commission rules, the potential realizable value information columns set forth
gains that may exist for the respective options, assuming that the market price
for the Company's shares appreciates from the date of grant over a period equal
to the term of the option at the annual rates of 5% and 10%, respectively. If
the Company's shares do not increase in price above the exercise price, no
value will be realizable from these options.
AGGREGATED 2001 OPTION EXERCISES/
YEAR-END 2001 OPTION VALUES TABLE
Shares Underlying `Value of Unexercised
Unexercised Options Held at In-the-Money Options Held
Option Exercises in 2001 (1) Dec. 31, 2001 at Dec. 31, 2001 (2)
---------------------------- --------------------------- -------------------------
Shares
Underlying Value
Name Options Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ---------- -------- ----------- ------------- ----------- -------------
Andrew J. Kandalepas -- -- 1,150,000 -- $473,280 $--
Harry L. Lukens, Jr. -- -- 480,000 -- 74,700 --
Jeffrey L. Goldberg. -- -- 80,000 -- 12,964 --
Christopher L. Geier -- -- 1,000,000 -- 439,400 --
Gary E. Soiney...... -- -- 80,000 -- 12,964 --
Mary Ellen Conti.... -- -- 40,000 -- 5,976 --
- --------
(1) No options were exercised in 2001 by any Executive Officer or Director of
the Company.
(2) Represents the closing price for Dauphin common stock on December 31, 2001
of $1.08 less the exercise price for all outstanding exercisable and
unexercisable options for which the exercise price is less than the closing
price.
6
COMPARATIVE PERFORMANCE GRAPH
The following graph shows a comparison of the five-year cumulative total
shareholder returns for the Company's common stock with the Russell 2000 Index
and a peer group of companies engaged in the hand-held computer and set-top box
industries comprised of: Symbol Technologies, Inc., Eagle Broadband, Inc.,
TVIA, Inc. and Urbana.ca Inc.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG DAUPHIN TECHNOLOGY, INC.,
RUSSELL 2000 INDEX AND PEER GROUP INDEX
[CHART]
ASSUMES $100 INVESTED ON JAN. 1, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2001
FISCAL YEAR
COMPANY 1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- ------- -------
Dauphin Technology, Inc. $100.00 $113.33 $ 62.90 $ 28.32 $133.26 $115.14
Peer Group.............. 100.00 128.11 325.71 486.07 412.93 272.22
Russell 2000 Index...... 100.00 122.34 118.91 142.21 136.07 137.46
The comparison of total return on investment is based on changes in year-end
price plus reinvestment of all dividends for each period and assumes that $100
was invested on December 31, 1996, in Company common stock, and in common stock
of the companies which comprise the Russell 2000 Index and the selected peer
group companies.
7
BOARD OF DIRECTORS REPORT
ON EXECUTIVE COMPENSATION
Compensation Philosophy and Objectives
The Board of Directors is responsible for reviewing and approving the
compensation paid to the Executive Officers of the Company, including salaries
and bonuses. It is the philosophy of the Company to ensure that executive
compensation be linked directly to continuous improvements in corporate
performance and increases in shareholder value. The Board believes that
corporate performance includes, in addition to stock market and financial
performance, such factors as the quality of the Company's products and the
timeliness of its services, monitoring and improving the Company's
environmental performance and maintaining equitable opportunities for the
Company's employees.
The following objectives have been adopted by the Board as guidelines for
compensation decisions:
. provide a competitive total compensation program that enables the
Company to attract and retain key executives.
. provide variable compensation opportunities that are directly linked
with the performance of the Company and align executive remuneration
with the interests of the Shareholders.
. integrate all pay programs with the Company's annual and long-term
business strategies and objectives and focus executive behavior on the
fulfillment of those objectives.
The Board does not use a quantitative method or use mathematical formulas
exclusively in setting any element of compensation. The Board uses discretion,
guided in large part by the concept of pay for performance, and considers all
elements of an executive's compensation package when setting each portion of
compensation. Further, the focus on pay for performance may cause individual
compensation amounts to change significantly from year to year.
The key elements of the Company's executive compensation program presently
consists of salary, non-qualified stock options and the use of a 401(k) Plan,
in lieu of a defined benefit pension plan, which ties the retirement income of
the Executive Officers closely to the long-term performance of the Company. The
Board's philosophy on each of these key elements, including the basis for the
compensation awarded to the CEO, is discussed below.
Salaries
Salaries for Executive Officers are determined by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the comparative marketplace for executive talent, including a
comparison to base salaries for comparable positions at comparable companies.
The Board receives the recommendations of the CEO for the compensation to be
paid to Executive Officers (other than himself) and after due deliberations
determines the compensation of such Executive Officers and the CEO. Each year
recommendations for future salary levels for Executive Officers (other than
himself) are prepared by the CEO and are reviewed with, modified where
appropriate, and approved by the Board.
Compensation of the Chief Executive Officer
The Board of Directors reviews the total annual compensation of Mr.
Kandalepas and takes into account his role and responsibilities as President
and Chief Executive Officer of the Company, taking into consideration those
factors described in the preceding paragraph. During fiscal year 2001, no
adjustments were made to Mr. Kandalepas' annual salary.
8
Bonuses
No Executive Officer received a bonus during the fiscal year 2001 due to the
difficult business and financial circumstances facing the Company. Mr.
Kandalepas received a bonus in 2000 in the amount of $50,000 for his
extraordinary efforts is assisting the Company through its successful private
placement, completing the common stock purchase agreement and equity line
financing with Techrich International Limited and the successful negotiations
and completion of the set-top box contract with Estel S.A. No Executive Officer
received a bonus in 1999.
Deductibility of Certain Executive Compensation
Section 162(m) added to the federal Internal Revenue Code by the Omnibus
Budget Reconciliation Act of 1993 (the "Act"), denies publicly held
corporations a deduction for compensation in excess of $1 million per year paid
or accrued with respect to certain executives in taxable years beginning on or
after January 1, 1994, except to the extent that such compensation qualifies
for an exemption from that limitation. Exempt compensation includes only the
following: (a) performance-based compensation (provided that certain outside
directors, shareholder approval, and certification requirements are met); (b)
commissions; (c) payments from certain tax-qualified retirement plans; (d)
health and other fringe benefits that are reasonably believed to be excludable
from gross income; and (e) compensation payable under a binding written
contract in effect February 17, 1993.
The new deduction limitation has no effect on the Company's ability to
deduct payments made (or deemed made for tax purposes) in fiscal years 1999,
2000 and 2001 to the named Executive Officers listed in the Summary
Compensation Table. The new limitation, however, could affect the ability of
the Company to deduct compensation paid to such officers in subsequent years.
The Company intends to take appropriate action to comply with the Act so that
deductions will be available to it for all compensation paid to its Executive
Officers.
Board Interlocks and Insider Participation
In respect of deliberations concerning Executive Officers' compensation, all
members of the Board of Directors participated in its deliberations, except
that no Executive Officer participated in votes concerning his own compensation
or related deliberations.
There are no interlocking relationships, as defined in the regulations of
the Securities and Exchange Commission, involving members of the Board of
Directors and its determination of compensation payable to any Executive
Officer.
AUDIT COMMITTEE REPORT
The members of the Audit Committee are independent as that term is defined
in Rule 4200(a)(15) of the National Association of Securities Dealers listing
standards. On September 22, 2000, the Audit Committee adopted a written Audit
Committee Charter, a copy of which is provided herewith as Exhibit A to this
Proxy Statement. The Audit Committee has reviewed and discussed the audited
financial statements for the fiscal year ended December 31, 2001 with the
management of the Company. Additionally, the Audit Committee has discussed with
the independent auditors the matters required by Statement of Auditing
Standards No. 61. The Audit Committee has received the written disclosures and
the letter from the independent auditors required by the Independence Standards
Board Standard No. 1 and has discussed with the independent auditor the
independent auditor's independence. Based on the discussions and reviews noted
above, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year 2001.
AUDIT COMMITTEE:
Jeffrey L. Goldberg, Chairman
Gary E. Soiney
Mary Ellen Conti, M.D.
9
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, Executive Officers, and any persons holding more than 10% of the
Company's common stock to file with the Securities and Exchange Commission
initial reports and reports of changes in ownership of common stock and other
equity securities of the Company. Such Directors, Executive Officers and 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they file. SEC regulations require the Company to
identify in this Proxy Statement anyone who failed to file or filed a required
report late during the most recent fiscal year. Based on the review of forms
that the Company received, or written representations from reporting persons
stating that they were not required to file these forms, we believe that,
during the fiscal year, all Section 16(a) reports were satisfied on a timely
basis except only for the failure to timely file the Annual Report on Form 5 by
each of the Directors, except for Mr. Kandalepas.
Fees Paid to Independent Auditors
Audit Fees. The aggregate fees billed by Grant Thornton LLP, for
professional services rendered for the audit of the Company's annual financial
statements for the year ended December 31, 2001, and for the reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for that fiscal year were $49,000.
All Other Fees. The aggregate fees billed by Grant Thornton for services
rendered to the Company, other than the services described above, for the year
ended December 31, 2001, were $41,000. The components are: services related to
the filing of registration statements on Form S-1 and S-3 during the year
($27,000) and review of income tax returns and miscellaneous tax consulting
($14,000).
Shareholder Proposals
Shareholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules and the
Company's Bylaws. If you would like us to consider including a proposal in our
Proxy Statement next year, you must deliver said proposal to our offices on or
before January 31, 2003.
As of the date of this Proxy Statement, the Board of Directors is not aware
of any business which will be presented for consideration at the Meeting other
than the matters set forth in this Proxy Statement. However, if other matters
not now known properly come before the Meeting it is intended that the persons
named as Proxies, or their substitutes, will vote the stock in accordance with
their best judgment on such matters.
By Order of the Board of Directors,
/s/ Andrew J. Kandalepas
Andrew J. Kandalepas,
Chief Executive Officer and
President
Palatine, Illinois
April 29, 2002
10
EXHIBIT A
Dauphin Technology, Inc.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS CHARTER
I. PURPOSE
The primary purpose of the Audit Committee is to assist the Board of
Directors of Dauphin Technology, Inc. in fulfilling its oversight
responsibilities by reviewing the financial reports and other financial
information provided by the Corporation to any governmental body or the public;
the Corporation's system of internal controls regarding finance, accounting,
legal compliance and ethics that management and the Board have established; and
the Corporation's auditing, accounting and financial reporting process
generally. Consistent with this function, the Audit Committee should encourage
continuous improvement of, and should foster adherence to, the corporation's
policies, procedures and practices at all levels. The Audit Committee's primary
duties and responsibilities are to:
. Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
. Review and appraise the audit efforts of the Corporation's independent
accountants.
. Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices, and at least one member of the committee
shall have accounting or related financial management expertise. Committee
members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by outside consultants.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board of Directors or until their successors
shall be duly elected and qualified. Unless a Chair is elected by the full
Board of Directors, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of the groups believe should be discussed privately. In
addition, the Committee or at least its Chair should meet with the independent
accountants and management quarterly to review the Corporation's financial
statements consistent with IV.3 below.
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IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee shall:
Documents/Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the organization's annual financial statements and any reports
or other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review rendered by
the independent accountants.
3. Review with financial management and the independent accountants the
10-Q quarterly reports prior to its filing or prior to the release of
earnings. The Chair of the Committee may represent the entire Committee for
purposes of this review.
Independent Accountants
4. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the fees
and other compensation to be paid to the independent accountants. On an
annual basis, the Committee should review and discuss with the accountants
all significant relationships the accountants have with the Corporation to
determine the accountants; independence.
5. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant.
6. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and accuracy
of the organization's financial statements.
Financial Reporting Process
7. In consultation with the independent accountants, review the integrity
of the organization's financial reporting process, both internal and
external.
8. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in its
financial reporting.
9. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as suggested
by the independent accounts or management.
Process Improvement
10. Establish regular and separate systems of reporting to the Audit
Committee by each of management and the independent accountants regarding
any significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such judgment.
11. Following completion of the annual audit, review separately with each
of management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on
the scope of work or access to required information.
12. Review any significant disagreements among management and the
independent accountants in connection with the preparation of the financial
statements.
13. Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as
approved by the Audit Committee, have been implemented.
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Ethical and Legal Compliance
14. Establish, review and update periodically a Code of Ethical Conduct
and ensure that management has established a system to enforce this Code.
15. Review management's monitoring of the Corporation's compliance with
the organization's Ethical Code, and ensure that management has the proper
review system in place to ensure that the Corporation's financial
statements, reports and other financials information disseminated to
governmental organizations, and the public satisfy legal requirements.
16. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
17. Review, with the organization's counsel, any legal matter that could
have a significant impact on the organization's financial statements.
18. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board of
Directors deems necessary or appropriate.
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DAUPHIN TECHNOLOGY, INC.
The undersigned hereby appoints Andrew J. Kandalepas and Harry L. Lukens, Jr.,
and either of them, each with the power of substitution, as proxies for the
undersigned, to vote all the shares of common stock of DAUPHIN TECHNOLOGY, INC.
which the undersigned is entitled to vote, with all powers which the undersigned
would possess if personally present, at the Annual Meeting of Shareholders to be
held at The Cotillion, 360 Creekside Drive, Palatine, Illinois 60074 on
Tuesday, June 25, 2002, at 2:00 p.m., Central Daylight Time, and at any
adjournment thereof, upon all matters that may be submitted to a vote of
Shareholders, including the matters described in the Proxy Statement of the
Company dated April 29, 2002, pursuant to the directions indicated on the
reverse.
(Continued and to be signed on reverse side.)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
DAUPHIN TECHNOLOGY, INC.
June 25, 2002
. Please Detach and Mail in the Envelope Provided .
A [X] Please mark your
votes as in this
example.
1. ELECTION OF DIRECTORS:
WITHHOLD Nominees: Andrew J. Kandalepas
FOR AUTHORITY Gary E. Soiney
all nominees to vote for all Mary Ellen Conti, M.D.
listed at right nominees listed at right Dr. Daniel D. Kiddy
[_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee, cross out
that nominee's name. If no directions are given, the proxies will vote FOR all
of the nominees listed in proposal 1.
2. RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2002.
FOR AGAINST ABSTAIN
[_] [_] [_]
In their discretion upon all other matters as may properly come before the
Meeting and any adjournment thereof.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such shares.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DAUPHIN
TECHNOLOGY, INC. AND, EXCEPT AS SPECIFIED TO THE CONTRARY, WILL BE VOTED FOR
PROPOSALS 1 AND 2.
Please sign, date and return promptly in the enclosed envelope. No postage need
be affixed if mailed in the United States.
SIGNATURE(S) OF SHAREHOLDER(S) _______________ _______________ DATED: _____ 2002
Note: (Please sign exactly as name(s) appears on this Proxy, including where
proper, official position or representative capacity.)