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
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, For Use
of Commission Only (as
permitted by
/ X / Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ALTRIS SOFTWARE, INC.
- -------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- -------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee:
/ X / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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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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ALTRIS SOFTWARE, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 28, 1999
The Annual Meeting of Shareholders of Altris Software, Inc., a California
corporation (the "Company"), will be held at the Company's headquarters at 9339
Carroll Park Drive, San Diego, California, at 9:00 a.m. on Thursday, October 28,
1999 for the following purposes:
1. To elect five directors to hold office until the next succeeding
Annual Meeting and until their successors have been elected and
qualified.
2. To vote upon a proposal to amend the Company's Articles of
Incorporation to increase the number of authorized shares of Common
Stock from 20,000,000 to 30,000,000.
3. To amend the Company's Amended and Restated 1996 Stock Incentive Plan
to vote upon a proposal to increase the number of shares of Common
Stock reserved for issuance under the plan from 925,000 to 1,425,000.
4. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on September 22,
1999 as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, the Annual Meeting and any adjournments or
postponements thereof, and only holders of record of the Company's Common Stock
at the close of business on that date will be entitled to receive notice of, and
to vote at, the Annual Meeting.
WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THIS WILL
ENSURE THAT YOUR SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A
QUORUM WILL BE PRESENT. YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING, AND YOU
MAY VOTE IN PERSON EVEN THOUGH YOU HAVE RETURNED YOUR PROXY.
By Order of the Board of Directors,
John W. Low
Secretary
September 28, 1999
ALTRIS SOFTWARE, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
_________________________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 28, 1999
_________________________________
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Altris Software, Inc. (the "Company")
for use at the Annual Meeting of Shareholders to be held at the Company's
headquarters at 9339 Carroll Park Drive, San Diego, California, on Thursday,
October 28, 1999 at 9:00 a.m., or at any adjournments or postponements
thereof, for the purposes set forth herein and in the foregoing Notice. This
Proxy Statement and the accompanying proxy were first sent to shareholders on
or about September 28, 1999.
PROXY INFORMATION
Shares represented by properly executed proxies, if received in time and
not revoked or suspended, will be voted in accordance with the instructions
indicated thereon or, if no instructions are given for any or all of the
proposals, will be voted as recommended by the Board of Directors.
A shareholder giving a proxy has the power to revoke it at any time
before it is exercised by attending and voting at the Annual Meeting or by
filing with the Secretary of the Company either a written notice of
revocation or a duly executed proxy bearing a later date.
RECORD DATE AND VOTING
Each shareholder of record of the Common Stock at the close of business
on September 22, 1999 is entitled to vote on all matters submitted to a vote
of the shareholders at the Annual Meeting. At the close of business on
September 22, 1999, there were 11,620,663 shares of Common Stock outstanding
and held of record by approximately 300 shareholders. The presence, in person
or by proxy, of the holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting is necessary to constitute a
quorum.
Directors will be elected by a plurality of the votes of the shares of
Common Stock represented and voting on the election of directors (I.E., the
nominees receiving the greatest number of votes will be elected). The
affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting will be required for approval of the
proposal to increase the number of authorized shares of Common Stock from
20,000,000 to 30,000,000. In all other matters, the affirmative vote of a
1
majority of the shares of Common Stock represented and voting on a particular
matter shall be the act of the shareholders.
In general, abstentions will have no effect on the outcome of the voting
with respect to any matter. However, abstentions will have an effect on the
proposal to increase the number of authorized shares of Common Stock, as the
affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting is required for approval.
As to certain matters other than the election of directors, New York
Stock Exchange and American Stock Exchange rules generally require when
shares are registered in street or nominee name that their member brokers
receive specific instructions from the beneficial owners in order to vote on
such a proposal. If a member broker indicates on the proxy that such broker
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
Holders of Common Stock have one vote for each share on all matters
submitted to the shareholders at the Annual Meeting, except that shareholders
may cumulate votes in the election of directors if any shareholder gives
notice to the Secretary prior to the voting of his or her intention to
cumulate votes. Under cumulative voting, each shareholder may give any one
candidate whose name was placed in nomination prior to the commencement of
voting a number of votes equal to the number of directors to be elected,
multiplied by the number of votes to which the shareholder's shares are
normally entitled, or distribute such number of votes on the same principle
among as many candidates as the shareholder sees fit. The proxy holders will
have authority, in their discretion, to vote cumulatively for less than all
of the nominees.
2
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to shares of the Common Stock
beneficially owned as of September 1, 1999 by (i) each director, (ii) each Named
Executive Officer (as defined on page 6), (iii) all directors and executive
officers as a group and (iv) each person who, to the extent known to the
Company, beneficially owns more than 5% of the outstanding shares of Common
Stock. Unless otherwise indicated in the footnotes following the table, the
persons as to whom the information is given have sole voting and investment
power over the shares shown as beneficially owned, subject to community property
laws where applicable.
NUMBER OF PERCENT OF
NAME SHARES (1) CLASS (1)
- ---- -------------- -----------
Roger H. Erickson............................ 123,500 1.1%
John W. Low.................................. 99,750 *
D. Ross Hamilton............................. 186,500 1.6%
Michael J. McGovern.......................... 353,251 3.0%
Larry D. Unruh............................... 11,797 *
Martin P. Atkinson........................... 7,500 *
Finova Mezzanine Capital Corporation......... 2,101,381(2) 15.3%
Spescom Ltd.................................. 2,000,000 17.2%
All directors and executive officers
as a group (8 persons).................... 835,173 7.1%
- -----------
*Less than one percent.
(1) Amounts and percentages include shares of Common Stock that may be acquired
within 60 days of September 1, 1999 through the exercise of stock options
as follows:
- 62,500 shares for Mr. Erickson,
- 52,750 shares for Mr. Low,
- 15,000 shares for Mr. Hamilton,
- 7,500 shares for Mr. McGovern,
- 7,500 shares for Mr. Unruh,
- 7,500 shares for Mr. Atkinson and
- 174,675 shares for all directors and executive officers as a group.
(2) Amount consists of (i) 1,801,381 shares of Common Stock issuable upon
conversion of Series E Convertible Preferred Stock having a conversion
price of $1.90 per share and (ii) 300,000 shares of Common Stock issuable
upon exercise of a warrant having an exercise price of $1.90 per share.
3
ITEM 1
ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting to hold office
until the next Annual Meeting and until their successors are elected and
qualified. In the election of directors, the proxy holders intend to vote for
the election of the nominees named below. Should any nominee decline or
become unavailable to serve as a director or should any vacancy occur before
the election (which events are not anticipated), the proxies will be voted,
in the absence of instructions to the contrary, for the election of the
remaining nominees named in this Proxy Statement.
The following table sets forth certain information concerning each
person nominated for election as a director:
Name Age Position
- ----- ----- ---------
Roger H. Erickson....................... 43 Chief Executive
Officer, Director
D. Ross Hamilton........................ 61 Director
Michael J. McGovern..................... 69 Director
Larry D. Unruh.......................... 48 Director
Martin P. Atkinson...................... 53 Director
Mr. Erickson was appointed the Company's Chief Executive Officer in
April 1998, a position which he previously held from October 1991 to August
1993. In addition, Mr. Erickson was appointed as a Director of the Company
in 1998, a position which he previously held from July 1990 to June 1995.
Mr. Erickson has served the Company in various other capacities, including as
(i) Vice President, Strategic Partners, from July 1997 to April 1998, (ii)
Vice President, Operations, from June 1996 to July 1997, (iii) Vice
President, Worldwide Channel Sales, from April 1995 to February 1996, (iv)
Vice President, Alliances and General Manager, PDM Business Unit, from
February 1996 to June 1996, (v) Executive Vice President, Marketing and
Sales, from September 1993 to March 1995 and (vi) Vice President,
Engineering, from June 1990 to October 1991. From 1984 until March 1990, Mr.
Erickson served the Company in several positions including Senior Systems
Engineer and Director of Technical Projects. Mr. Erickson earned a M.S.
degree in Computer Science from the University of California, Santa Barbara
in 1982 and a B.A. degree in Mathematics from Westmont College in 1978.
Mr. Hamilton has been a Director of the Company since June 1994. He
served as Chairman of the Board of the Company from January 1997 through June
1997. Since 1983 Mr. Hamilton has served as President of Hamilton Research,
Inc., an investment banking firm. Mr. Hamilton received a B.S. degree in
Economics from Auburn University in 1961.
Mr. McGovern has served as a Director of the Company since he founded
the Company in February 1981, and served as the Company's Chairman and Chief
Executive Officer from its inception until December 1987. Mr. McGovern was a
founder of Autologic, Inc. in 1968, where he was Vice President of
Engineering in charge of developing computer driven photo typesetters for the
newspaper and publishing industries. Mr. McGovern also serves as a director
of Qtel, Inc. (since March 1997) and as a director of Alpha Data Tech. (since
April 1997). He received a B.S.E.E. degree from City University of New York
in 1952 and an M.S.E.E. degree from Arizona State University in 1959.
4
Mr. Unruh has served as a Director of the Company since May 1988. He is
a partner of Hein & Associates LLP, certified public accountants, and has
been its Managing Tax Partner since 1982. Mr. Unruh currently serves as a
director of Basin Exploration, Inc., an oil exploration and development
company. Mr. Unruh received a B.S.B.A. degree in Accounting from the
University of Denver in 1973.
Mr. Atkinson has served as a Director of the Company since 1997. Mr.
Atkinson presently runs a consulting firm based in Kent, England that advises
middle-market companies on banking and corporate finance matters. Prior to
establishing his consulting firm, Mr. Atkinson was employed by Lloyds Bank
for 28 years until his retirement from there (at the senior executive level)
in December 1996. While at Lloyds, Mr. Atkinson was the Head of Risk Control
of Lloyds Merchant Bank Limited, a Director of Lloyds' Capital Markets Group,
where he was responsible for arranging several multi-million pound syndicated
loans, and from 1992 to 1996, he was responsible for Lloyds' middle-market
activities in certain counties in England. Mr. Atkinson is an Associate of
the Institute of Bankers, England. He received a law degree from Nottingham
University in England in 1968.
All directors are elected annually and serve until the next annual
meeting of shareholders and until their successors have been elected and
qualified.
5
MANAGEMENT
EXECUTIVE OFFICERS
The following table and discussion set forth certain information with
regard to the Company's current executive officers.
Name Age Position
- ------------------------------------ ----------- --------------------------------------------------
Roger H. Erickson................... 43 Chief Executive Officer
Pierre De Wet....................... 35 Vice President, Operations
John W. Low......................... 42 Chief Financial Officer and Secretary
Alan Turner......................... 48 Vice President, Marketing
The biography for Mr. Erickson is set forth on page 4 above.
Mr. DeWet was appointed Vice President of Operations in September 1999.
Previously, Mr. DeWet served as Director of Operations from April 1998 to
September 1999 and Director of Projects from May 1997 to April 1998. Prior
to joining Altris, Mr. DeWet was a Technical Marketing Manager at Paradigm
System Technology from June 1995 to April 1997 where he was responsible for
establishing relationships with technical partners in Europe and North
America. From April 1991 to June 1995, Mr. DeWet was with PQ Africa, a
division of Comparex Holdings. Mr. DeWet earned his B.S. from the University
of Pretoria in 1989.
Mr. Low has served as Chief Financial Officer and Secretary since June
1990. Previously, Mr. Low had served as Corporate Controller since joining
the Company in August 1987. From 1980 until joining the Company, Mr. Low was
with Price Waterhouse LLP, most recently as a Manager working with
middle-market and growing companies. Mr. Low, who is a certified public
accountant, earned a B.A. degree in Economics from the University of
California, Los Angeles in 1978.
Mr. Turner was appointed Vice President of Marketing in March of 1998.
Since joining the Company, Mr. Turner served as Vice President of Channel
Sales from 1997 to 1998 and as Business Development Director from 1993 to
1997. Previously, Mr. Turner was in the offshore oil industry, heading teams
of engineers in product design, analysis and testing. Mr. Turner received a
BSc degree in Mechanical Engineering from Heriot-Watt University, Edinburgh,
Scotland in 1974, and received a postgraduate degree in Engineering Design
from Loughborough University, England in 1977.
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for services rendered in all capacities to the
Company for the three years ended December 31, 1998 of (i) the Company's
Chief Executive Officers during 1998 and (ii) the four other most highly
compensated executive officers having compensation of $100,000 or more during
1998 (collectively, the "Named Executive Officers").
6
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------------------
LONG-TERM
OTHER COMPENSATION
ANNUAL AWARDS--
COMPENSATION STOCK OPTIONS
NAME AND POSITION YEAR SALARY($) BONUS($) ($)(1) (# SHARES)
- ----------------------------------- ---- --------- -------- ------------- --------------
Roger H. Erickson 1998 $164,635 - $131,215(3) 65,000
Chief Executive Officer(2) 1997 174,708 $9,000 - -
1996 185,427 - - 25,000
Jay V. Tanna 1998 $ 57,885 - $104,393(5) -
Former President and Chief 1997 215,000 - - 75,000(6)
Executive Officer(4) 1996 205,865 - - 112,500(6)
John W. Low 1998 $147,000 - $100,245(7) 28,000
Chief Financial Officer 1997 149,639 - - -
and Secretary 1996 142,535 - - 25,000
Steven D. Clark 1998 $125,200 - $14,067(9) 38,000
Former Vice President 1997 168,462 $25,000 - 40,000
Sales(8) 1996 136,355 - 66,719(9) -
David Chu 1998 $130,000 $10,000 - 48,000
Former Vice President 1997 96,346 - - 20,000
Engineering(10) 1996 - - - -
Jay Patel 1998 $108,829 $13,594 - 30,000
Former Managing Director, 1997 99,359 - - 15,000
U.K. Operations(11) 1996 86,317 - - 2,500
- ------------
(1) Excludes compensation in the form of other personal benefits, which, other
than as set forth in the table above, did not exceed the lesser of $50,000
or 10% of the total annual salary and bonus reported for each year.
(2) Mr. Erickson became President and Chief Executive Officer of the Company
in April 1998.
(3) This comprises (i) $105,843 relating to forgiveness of a promissory note
that had been made by Mr. Erickson in favor of the Company in connection
with his exercise of stock options that were due to expire and (ii) $25,372
in commissions paid in 1998 relating to Mr. Erickson's position as Vice
President, Strategic Partners in 1997. See Certain Transactions on page
16.
(4) Mr. Tanna became President and Chief Executive Officer of the Company in
April 1996 and resigned from that position effective April 1, 1998.
(5) This comprises (i) $82,686 paid to Mr. Tanna under a Separation Agreement
and (ii) a $21,707 payment for accrued vacation. See Certain Transactions
on page 16.
(6) The options for 75,000 shares granted in 1997 were subsequently returned to
the Company and canceled under the terms of the Separation Agreement. The
options for 112,500 shares granted in 1996 expired in May 1998.
(7) This comprises (i) $70,562 relating to forgiveness of a promissory note
that had been made by Mr. Low in favor of the Company in connection with
his exercise of stock options that were due to expire and (ii) a $29,683
payment for accrued vacation. See Certain Transactions on page 16.
(8) Mr. Clark resigned from the Company in August 1999. The bonus paid in 1997
related to services provided in 1996 as Director of U.S. Sales.
(9) These payments were for sales commissions.
(10) Mr. Chu resigned from the Company in June 1999.
(11) Mr. Patel's employment with the Company was terminated in January 1999.
7
OPTION GRANTS IN 1998
Shown below is information concerning grants of options issued by the
Company to the Named Executive Officers during 1998:
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- ------------- ------------ --------- ---------- -----------------------------
Roger H. Erickson.... 15,000(3) 2% $0.63 6/30/08 $5,896 $14,941
50,000(4) 8% $0.25 9/14/08 $7,861 $19,922
John W. Low.......... 8,000(3) 1% $0.63 6/30/08 $3,144 $ 7,969
20,000(4) 3% $0.25 9/14/08 $3,144 $ 7,969
Steven D. Clark...... 8,000(3) 1% $0.63 6/30/08 $3,144 $ 7,969
30,000(4) 5% $0.25 9/14/08 $4,716 $11,953
David Chu............ 8,000(3) 1% $0.63 6/30/08 $3,144 $ 7,969
40,000(4) 6% $0.25 9/14/08 $6,289 $15,937
Jay Patel............ 8,000(5) 1% $0.63 6/30/08 $3,144 $ 7,969
15,000(5) 2% $0.25 9/14/08 $2,358 $ 5,977
________________
(1) All options were granted with an exercise price equal to the closing sale
price of the Common Stock as reported on the OTC Bulletin Board on the date
of grant.
(2) Options were granted in June 1998. The options vest 25% 90 days from
the date of grant and in additional annual installments of 25%
commencing on the first anniversary of the date of grant.
(3) Options were granted in September 1998. The options vest in quarterly
installments of 25% commencing three months after the date of grant.
(4) Options were granted in June and September 1998. The options originally
vested 25% 90 days from the date of grant and in additional annual
installments of 25% commencing on the first anniversary of the date of
grant. In January 1999, in connection with Mr. Patel's severance
arrangement, the Board of Directors approved accelerating these options
to be fully vested on March 15, 1999.
(5) The 5% and 10% assumed rates of appreciation are specified under the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future price of its Common
Stock. The actual value, if any, which a Named Executive Officer may
realize upon the exercise of stock options will be based upon the
difference between the market price of the Common Stock on the date of
exercise and the exercise price.
8
AGGREGATED OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES
The following table sets forth for the Named Executive Officers
information with respect to unexercised options and year-end option values,
in each case with respect to options to purchase shares of the Company's
Common Stock. The Named Executive Officers did not exercise any options in
1998.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
HELD AS OF DECEMBER 31, 1998 AT DECEMBER 31, 1998(1)
------------------------------- -------------------------------
NAME EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- --------------------------------- ----------- -------------- ----------- --------------
Roger H. Erickson................ 16,250 48,750 $1,250 $3,750
John W. Low...................... 35,750 27,250 $ 500 $1,500
Steven D. Clark.................. 24,500 28,500 $ 750 $2,250
David Chu........................ 12,000 36,000 $1,000 $3,000
Jay Patel........................ 15,125 25,375 $ 375 $1,125
__________
(1) Based on the closing sale price of the Common Stock on the OTC
Bulletin Board on December 31, 1998 ($0.35 per share).
BOARD COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors has an Audit Committee which makes
recommendations regarding the selection of independent public accountants and
reviews with them the scope and results of the audit engagement. The Audit
Committee, which is comprised of Messrs. McGovern, Unruh and Atkinson, held
four meetings during 1998.
The Board of Directors also has a Compensation Committee which reviews
compensation of officers. The Compensation Committee, which is comprised of
Messrs. McGovern, Hamilton and Atkinson, held one meeting in 1998.
In addition, the Board of Directors has a Stock Option Committee which
generally administers the Company's Amended and Restated 1996 Stock Incentive
Plan and 1987 Stock Option Plan. The Stock Option Committee, which is
comprised of Messrs. McGovern, Unruh and Hamilton, held four meetings in
1998.
The Board of Directors does not have a standing Nominating Committee or
any other committee which performs a similar function.
In 1998, the Board of Directors held 14 meetings. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board held during the period for which he was a director and (ii) the
total number of meetings held by all committees of the Board on which he
served during the period he served.
9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than 10% of the Company's common stock to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission (the "SEC"). Executive officers, directors and 10%
shareholders are required by the SEC to furnish the Company with copies of
all Forms 3, 4 and 5 that they file.
Based solely on the Company's review of the copies of such forms it has
received and representations from certain reporting persons that they were
not required to file a Form 5 for specified fiscal years, the Company
believes that all of its executive officers, directors and greater than 10%
shareholders have complied with all of the filing requirements applicable to
them with respect to transactions during 1998.
COMPENSATION OF DIRECTORS
Each director, other than directors who are also employees of the
Company or are precluded from accepting a fee by their employers, receives a
$5,000 annual fee plus a $1,000 meeting fee for four paid meetings a year. In
addition, each director is reimbursed for all reasonable expenses incurred in
connection with attendance at such meetings. As a result of the Company's
current cash constraints, the directors have agreed to the deferral of all
annual and meeting fees until the Company's financial position improves.
Directors who are employees of the Company are not compensated for serving as
directors.
In 1998, Mr. Unruh performed services for the Company in connection with
the Company's audit restatement and management changes that resulted in
compensation to Mr. Unruh of $13,713 plus out-of-pocket expenses. Mr.
Atkinson also performed services relating to certain management changes that
resulted in compensation to Mr. Atkinson of $4,600 plus out-of-pocket
expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1998, the Compensation Committee of the Board of Directors was
comprised of four members, Messrs. McGovern, Hamilton and Unruh and Michael
Comegna (who resigned as a Director in April 1998), none of whom is or was an
employee or officer of the Company in 1998. No executive officer of the
Company has served as a member of the Board of Directors or Compensation
Committee of any company in which Messrs. McGovern, Hamilton, Unruh or
Comegna is an executive officer.
10
ITEM 2
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED
SHARES OF COMMON STOCK
The Board of Directors has adopted a resolution amending Article III of the
Company's Articles of Incorporation to increase the authorized shares of Common
Stock from 20,000,000 shares to 30,000,000 shares, thereby increasing the total
number of authorized shares of capital stock from 21,000,000 to 31,000,000 (the
"Charter Amendment"). To effect the Charter Amendment, Article III of the
Articles of Incorporation would be amended and restated to read as follows:
"This corporation is authorized to issue two classes of shares of
stock, designated, respectively as Common Stock and Preferred Stock.
The total number of shares of all classes of stock that this
Corporation is authorized to issue is Thirty One Million (31,000,000),
consisting of Thirty Million (30,000,000) shares of Common Stock and
One Million (1,000,000) shares of Preferred Stock."
At the close of business on September 22, 1999, there were:
- 11,620,663 shares of Common Stock issued and outstanding,
- 1,017,000 shares of Common Stock issuable upon the exercise of
outstanding stock options,
- 1,801,381 shares of Common Stock issuable upon the conversion of up to
3,000 shares of Series E Convertible Preferred Stock,
- 360,000 shares of Common Stock issuable upon exercise of outstanding
warrants and
- up to 700,000 shares of Common Stock issuable upon the exercise of
warrants which the Company may be required to grant under certain
preferred stock and debt purchase agreements during the period
June 27, 2000 through June 27, 2002.
In addition, the Company anticipates that it may issue up to 2,304,271
shares of Common Stock in connection with settling class action litigation
arising out of the Company's restatement of its financial statements for 1996
and the nine months ended September 30, 1997.
The increase in the authorized number of shares is proposed in order to
allow the Company to grant additional stock options or other stock-based
compensation to its employees and consultants and, where advantageous to the
Company, to issue shares of its capital stock in order to raise additional
capital, in connection with future acquisitions or other business combinations
or for other purposes.
The Company believes that the number of shares of Common Stock that would
be available for issuance following adoption of the Charter Amendment would be
sufficient for any purposes foreseeable by the Company. Except as set forth in
the bullet points above and in connection with settling the class action
litigation, the Company does not have plans, commitments or understandings to
issue any of the additional shares of Common Stock that would be authorized if
the Charter Amendment is approved. Other than increasing the number of
authorized shares of the Company's Common Stock, the proposal to
11
increase the authorized shares of Common Stock will not affect the rights,
preferences, or privileges of the Company's shareholders.
The Board of Directors has directed that the Charter Amendment be submitted
for shareholder approval. The affirmative vote of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting will be required
for approval of the Charter Amendment. In the absence of approval, the
authorized number of shares of Common Stock will remain 20,000,000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR APPROVAL OF THE CHARTER AMENDMENT TO INCREASE THE AUTHORIZED SHARES OF
COMMON STOCK.
When a proxy in the form of the proxy enclosed with this Proxy Statement is
returned properly executed, unless marked to the contrary, such proxy will be
voted in favor of the increase in authorized shares of Common Stock contemplated
by the Charter Amendment.
ITEM 3
APPROVAL OF INCREASE IN NUMBER OF SHARES OF COMMON STOCK RESERVED UNDER THE
COMPANY'S AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN
Effective April 1, 1996, the Board of Directors adopted, and the
shareholders subsequently approved, the Company's Amended and Restated 1996
Stock Incentive Plan (the "Plan"). There are presently 925,000 shares of the
Company's Common Stock authorized for issuance under the Plan. At September
22, 1999, 7,250 shares of Common Stock had been issued pursuant to the
exercise of options previously granted under the Plan and options were
outstanding to purchase 845,250 shares of Common Stock.
In August 1999, the Board approved an amendment to the Plan, subject to
shareholder approval, to increase the number of shares authorized for issuance
under the Plan from 925,000 shares to 1,425,000 shares. The Board adopted this
amendment to ensure that the Company can continue to grant stock options to
employees, directors and consultants at levels determined appropriate by the
Board and the Compensation Committee. The ability to offer options in order to
attract and retain talented employees is particularly important to the Company's
competitive position in its industry.
The essential features of the Plan are outlined below. You may obtain a
copy of the Plan by writing to the Company in accordance with the instructions
set forth on page 16 below under "Annual Report and Incentive Plan".
GENERAL
The purpose of the Plan is to enable the Company and its subsidiaries to
attract, retain and motivate its employees, directors and consultants by
providing for or increasing the proprietary interests of such persons in the
Company. Every director, employee and consultant of the Company and its
subsidiaries is eligible to be considered for the grant of awards under the
Plan. As of August 31, 1999, the Company and its subsidiaries had a total of 54
employees.
The Plan is administered by the Stock Option Committee, each member of
which must be a "non-employee director" as defined in Rule 16b-3 promulgated
under the Exchange Act. The Stock Option Committee has full and final
authority to select the individuals to receive awards and to grant such
awards and has a wide degree of flexibility in determining the terms and
12
conditions of awards. Subject to limitations imposed by law, the Board of
Directors of the Company may amend or terminate the Plan at any time and in
any manner. However, no such amendment or termination may deprive the
recipient of an award previously granted under the Plan of any rights
thereunder without his or her consent.
Awards under the Plan are not restricted to any specified form or
structure and may include, without limitation, sales or bonuses of stock,
restricted stock, stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares. An award to an
employee may consist of one such security or benefit or two or more of them
in tandem or in the alternative. The Plan does not specify a minimum
exercise price or other consideration that a recipient of an award must pay
to obtain the benefit of an award, and therefore the maximum compensation
payable to employees pursuant to the Plan, during the term of the Plan and
awards granted thereunder, is equal to the number of shares of Common Stock
with respect to which awards may be issued thereunder, multiplied by the
value of such shares on the date such compensation is measured. An award
granted under the Plan to an employee will generally include a provision
conditioning or accelerating the receipt of benefits upon the occurrence of
specified events, such as a change of control of the Company or a
dissolution, liquidation, sale of substantially all of the property and
assets of the Company or other significant corporate transaction.
The maximum number of shares of Common Stock that may be issued pursuant
to awards granted under the Plan is 925,000. In August 1998, the Company's
shareholders approved an increase in the maximum number of shares of Common
Stock that may be issued pursuant to awards granted under the Plan from
625,000 to 925,000. The Plan generally provides that no single employee may
be granted options or other awards with respect to more than 925,000 shares
of Common Stock in any one calendar year. The Plan also contains customary
anti-dilution provisions; provided, however, that no adjustment will be made
pursuant to such provisions to the extent such adjustment would cause
incentive stock options (as discussed below under "Certain Income Tax
Consequences") issued or issuable under the Plan to be treated as other than
incentive stock options, or to the extent that the Stock Option Committee
determines that such adjustment would result in the disallowance of a federal
income tax deduction for compensation attributable to such awards by causing
such compensation to be treated as other than "performance-based
compensation" within the meaning of the Plan.
Awards may not be granted under the Plan on or after the tenth anniversary
of the adoption of the Plan. Although any award that was duly granted prior to
such date may thereafter be exercised or settled in accordance with its terms,
no shares of Common Stock may be issued pursuant to any award on or after the
twentieth anniversary of the adoption of the Plan.
SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(b) of the Exchange Act, directors, executive
officers and 10% shareholders of the Company are generally liable to the
Company for repayment of any profits realized from any non-exempt purchase
and sale of Common Stock occurring within a six-month period. Rule 16b-3
promulgated under the Exchange Act provides an exemption from Section 16(b)
liability for certain transactions by an officer or director pursuant to an
employee benefit plan that complies with such Rule. The Plan is designed to
comply with Rule 16b-3.
13
CERTAIN INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax treatment
that will generally apply to awards made under the Plan, based on federal income
tax laws in effect on the date hereof. The exact federal income tax treatment
of awards will depend on the specific nature of any such award.
Pursuant to the Plan, participants that are employees may be granted
options that are intended to qualify as incentive stock options ("ISOs") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Generally, the optionee is not taxed, and the Company is not entitled to a
deduction, on the grant or exercise of an ISO. However, if the optionee sells
the shares acquired upon the exercise of an ISO ("ISO Shares") at any time
within (i) one year after the transfer of ISO Shares to the optionee pursuant to
the exercise of the ISO or (ii) two years from the date of grant of the ISO,
then the optionee will recognize ordinary income in an amount equal to the
excess, if any, of the lesser of the sale price or the fair market value of the
ISO Shares on the date of exercise, over the exercise price of the ISO. The
Company will generally be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee. If the optionee sells the ISO
Shares at any time after the optionee has held the ISO Shares for at least (i)
one year after the date of transfer of the ISO Shares to the optionee pursuant
to the exercise of the ISO and (ii) two years from the date of grant of the ISO,
then the optionee will recognize capital gain or loss equal to the difference
between the sales price and the exercise price of such ISO, and the Company will
not be entitled to any deduction.
The amount by which the fair market value of the ISO Shares received
upon exercise of an ISO exceeds the exercise price will be included as a
positive adjustment in the calculation of an optionee's "alternative minimum
taxable income" ("AMTI") in the year of exercise. The "alternative minimum
tax" imposed on individual taxpayers is generally equal to the amount by
which 28% (26% of AMTI below certain amounts) of the individual's AMTI
(reduced by certain exemption amounts) exceeds his or her regular income tax
liability for the year.
The grant of an option or other similar right to acquire stock that does
not qualify for treatment as an ISO (a "non-qualified stock option") is
generally not a taxable event for the optionee. Upon exercise of the option,
the optionee will generally recognize ordinary income in an amount equal to
the excess of the fair market value of the stock acquired upon exercise
(determined as of the date of exercise) over the exercise price of such
option, and the Company will be entitled to a deduction equal to such amount.
Nonemployees may only be awarded non-qualified stock options.
Awards under the Plan may also include stock sales, stock bonuses or
other grants of stock that include provisions for the delayed vesting of the
recipient's rights to the stock. Unless the recipient makes an election under
Section 83(b) of the Code (an "83(b) Election") within 30 days after the
receipt of the restricted shares, the recipient generally will not be taxed
on the receipt of restricted shares until the restrictions on such shares
expire or are removed. When the restrictions expire or are removed, the
recipient will recognize ordinary income (and the Company will be entitled to
a deduction) in an amount equal to the excess of the fair market value of the
shares at that time over the purchase price. However, if the recipient makes
an 83(b) Election within 30 days of the receipt of restricted shares, he or
she will recognize ordinary income (and the Company will be entitled to a
deduction) equal to the excess of the fair market value of the shares on the
date of receipt (determined without regard to vesting restrictions) over the
purchase price.
Awards may be granted under the Plan which do not fall clearly into
the categories described above. The federal income tax treatment of these awards
will depend upon the specific terms of such
14
awards. Generally, the Company will be required to make arrangements for
withholding applicable taxes with respect to any ordinary income recognized
by a recipient in connection with awards made under the Plan.
Special rules will apply in cases where a recipient of an award pays
the exercise or purchase price of the award or applicable withholding tax
obligations under the Plan by delivering previously owned shares of Common Stock
or by reducing the amount of shares otherwise issuable pursuant to the award.
The surrender or withholding of such shares will in certain circumstances result
in the recognition of income with respect to such shares or a carryover basis in
the shares acquired.
The terms of the agreements pursuant to which specific awards are
made under the Plan may provide for accelerated vesting or payment of an
award in connection with a change in ownership or control of the Company. In
that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such award may constitute "excess parachute
payments" under the "golden parachute" provisions of the Code. Pursuant to
these provisions, a recipient will be subject to a 20% excise tax on any
"excess parachute payments" and the Company will be denied any deduction with
respect to such payment.
In certain circumstances, the Company may be denied a deduction for
compensation (including compensation attributable to the ordinary income
recognized with respect to awards made under the Plan) to certain officers of
the Company to the extent that the compensation exceeds $1,000,000 (per
person) annually.
CONCLUSION
The Board of Directors has directed that the proposed amendment to the Plan
be submitted for shareholder approval. The affirmative vote of a majority of
the shares of Common Stock represented at the Annual Meeting will be required
for approval. In the absence of approval, the amendment to the Plan will be
without effect, and the maximum number of shares of Common Stock issuable under
the Plan will remain 925,000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR APPROVAL OF THE AMENDMENT TO THE PLAN.
When a proxy in the form of the proxy enclosed with this Proxy Statement is
returned properly executed, unless marked to the contrary, such proxy will be
voted in favor of adoption of the amendment to the Plan.
15
CERTAIN TRANSACTIONS
In April 1998, the Company and Jay V. Tanna entered into a Separation
Agreement whereby Mr. Tanna resigned his positions as Chairman of the Board,
President and Chief Executive Officer of the Company. Under the Separation
Agreement, Mr. Tanna was to act as an on-call consultant for any matters the
Company may have referred to him for his input and participation. His annual
compensation for such services was $215,000 plus medical, dental and car
allowance benefits. The Separation Agreement terminated on March 31, 1999. As
part of a U.S. District Court approved settlement of certain shareholder class
action litigation, Mr. Tanna has agreed to forego any claim for unpaid
compensation of $131,000 under the Separation Agreement and to surrender to the
Company 35,000 shares of the Company's common stock held in his name. In
addition, Mr. Tanna and the Company have executed a Settlement Agreement and
Mutual Release resolving all claims and disputes with one another, with the
exception of certain existing indemnification obligations under the Company's
bylaws, California law and an indemnity agreement between the Company and Mr.
Tanna related to his services as a director and officer of the Company.
In October 1996, the Company loaned (i) Roger H. Erickson, then Vice
President, Operations, $92,812 and (ii) John W. Low, Chief Financial Officer and
Secretary, $61,875. Each loan was at a simple interest rate of 9.25% with a
maturity date of March 31, 1997. The loans were made to Messrs. Erickson and
Low in connection with their exercise of stock options that were due to expire.
On May 15, 1998, the Company agreed, as additional compensation to Messrs.
Erickson and Low, to forgive these promissory notes. The outstanding principal
and interest payable by Messrs. Erickson and Low under such notes was $105,843
and $70,562, respectively, as of May 15, 1998.
INDEPENDENT ACCOUNTANTS
Grant Thornton LLP has audited the Company's 1998 financial statements. The
selection of independent accountants to audit the Company's 1999 financial
statements will be made in the second half of 1999 after an evaluation of the
audit fee proposal.
ANNUAL REPORT AND INCENTIVE PLAN
The Company's Annual Report on Form 10-K, including financial statements
and related schedules for the year ended December 31, 1998 as filed with the
Securities and Exchange Commission, is being mailed to all shareholders. Any
shareholder entitled to vote at the meeting who has not received a copy may
obtain one by writing to the Company at 9339 Carroll Park Drive, San Diego,
California 92121, Attention: Shareholder Relations. In addition, any such
shareholder may obtain a copy of the Plan by writing to the Company at the
foregoing address.
SHAREHOLDER PROPOSALS
A proposal of a shareholder intended to be presented at the 2000 Annual
Meeting of Shareholders and to be included in the Proxy Statement for that
meeting must be submitted to the Company at its principal offices, 9339 Carroll
Park Drive, San Diego, California 92121, and received by the Company a
reasonable time before it begins to print and mail its proxy materials for the
2000 Annual Meeting. The Company intends to specify the date by which such
proposals must be received in one of its Quarterly Reports on Form 10-Q to be
filed in 2000.
16
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. However, if any other matters are properly presented for action, the
persons named in the accompanying proxy intend to vote on such matters in their
discretion.
SOLICITATION OF PROXIES
The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, telephone or telegram and personally by
directors, officers and other employees of the Company, but such persons will
not receive compensation for such services over and above their regular
salaries. The Company will reimburse brokers, banks, custodians, nominees and
fiduciaries holding stock in their names or in the names of their nominees for
their reasonable charges and expenses in forwarding proxy material to the
beneficial owners of such stock.
17
_______________________________________________________________________________
PROXY
ALTRIS SOFTWARE, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ALTRIS SOFTWARE, INC.
The undersigned hereby appoints Roger H. Erickson and John W. Low, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote as designated below, all
the shares of Common Stock of Altris Software, Inc., a California corporation
(the "Company"), held of record by the undersigned on September 22, 1999, at
the Annual Meeting of Shareholders to be held on October 28, 1999 and any
postponements or adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
(Reverse Side of Proxy)
_______________________________________________________________________________
- FOLD AND DETACH HERE -
_______________________________________________________________________________
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS INDICATED; HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXIES
WILL VOTE THE SHARES FOR EACH OF THE NOMINEES FOR DIRECTOR, FOR AMENDMENT OF
THE ARTICLES OF INCORPORATION, FOR AMENDMENT OF THE AMENDED AND RESTATED 1996
STOCK INCENTIVE PLAN AND IN THEIR DISCRETION ON THE MATTERS DESCRIBED IN ITEM 4.
Please mark
your votes as / X /
indicated in
this example
FOR all nominees listed below WITHHOLD AUTHORITY to vote for
(except as marked to the contrary below). all nominees listed below.
1. Election of Directors: / / / /
INSTRUCTION:
To withhold authority to vote for any individual nominee, strike a line through
the nominee's name in the list below.
ROGER H. ERICKSON LARRY D. UNRUH
D. ROSS HAMILTON MARTIN P. ATKINSON
MICHAEL J. McGOVERN
2. To amend the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock from 20,000,000 to 30,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. To amend the Company's Amended and Restated 1996 Stock Incentive Plan to
increase the number of shares of Common Stock reserved for issuance under the
plan from 925,000 to 1,425,000.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before such meeting and any and all
postponements or adjournments thereof.
YES NO
Do you plan to attend the meeting? / / / /
Please sign exactly as your name appears on the stock certificate(s). When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such. If a corporation, please sign in full corporate name by the president
or other authorized officer. If a partnership or limited liability company,
please sign in the partnership's or limited liability company's name by an
authorized person.
DATED:__________________, 1999
______________________________
Signature
______________________________
Signature if held jointly
Please mark, sign, date and return the Proxy Card promptly using the
enclosed envelope.
_______________________________________________________________________________
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