<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c)or Section 240.14a-12
ALTIGEN COMMUNICATIONS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-11.
[_] 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.
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
----------------
Notice of Annual Meeting of Stockholders
To Be Held February 11, 2000
To The Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AltiGen
Communications, Inc. (the "Company"), a Delaware corporation, will be held on
February 11, 2000 at 10:00 a.m., local time, at the Company's office located at
47427 Fremont Boulevard, Fremont, California 94538, for the following purposes:
1. To elect two Class I directors to serve for a term expiring on the date
on which the Annual Meeting of Stockholders is held in the year 2003.
2. To ratify and approve the appointment of Arthur Andersen LLP as the
independent public accountants of the Company for the fiscal year ending
September 30, 2000.
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on December 28, 1999
are entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to complete, sign and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person even if he or she
returned a proxy.
By Order of the Board of Directors
Philip M. McDermott
Chief Financial Officer and
Secretary
Fremont, California
January 13, 2000
YOUR VOTE IS IMPORTANT
To assure your representation at the Annual Meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and
return it in the enclosed envelope, which requires no postage if mailed in
the United States.
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
----------------
PROXY STATEMENT
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
AltiGen Communications, Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held February 11, 2000 at 10:00 a.m., local time, or at any
adjournment or postponement thereof, for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's office located at 47427 Fremont
Boulevard, Fremont California 94538. The Company's telephone number at that
location is (510) 252-9712.
These proxy solicitation materials were mailed on or about January 14, 2000
to all stockholders entitled to vote at the Annual Meeting.
Record Date and Voting Securities
Only stockholders of record at the close of business on December 28, 1999
are entitled to notice of and to vote at the Annual Meeting. As of December 28,
1999, 13,387,289 shares of the Company's Common Stock were issued and
outstanding. No shares of the Company's Preferred Stock were outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to Corporate Investor
Communications, Inc., attn: Charlotte Brown, 111 Commerce Road, Carlstadt, New
Jersey 07072, a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person. The mere
presence at the Annual Meeting of the stockholder who has appointed a proxy
will not revoke the prior appointment. If not revoked, the proxy will be voted
at the Annual Meeting in accordance with the instructions indicated on the
proxy card, or if no instructions are indicated, will be voted FOR the slate of
directors described herein, FOR Proposal Two, and as to any other matter that
may properly be brought before the Annual Meeting, in accordance with the
judgment of the proxy holders.
Voting and Solicitation
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the right
to cumulate their votes in the election of directors. Voting instructions are
included on the proxy or voting instruction card.
This solicitation of proxies is made by the Company, and all costs
associated with soliciting proxies will be borne by the Company. In addition,
the Company will reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, facsimile or telegram.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the record
date. All shares represented at the meeting, whether in person or by a general
or limited proxy, will be counted for the purpose of establishing a quorum.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions (including "Withheld"), the Company
believes that abstentions should be counted for purposes of
1
<PAGE>
determining both (i) the presence or absence of a quorum for the transaction of
business and (ii) the total number of shares present and entitled to vote
("Votes Cast") with respect to a proposal (other than the election of
directors). In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against the proposal.
Under current Delaware case law, while broker non-votes (i.e. the votes of
shares held of record by brokers as to which the underlying beneficial owners
have given no voting instructions) should be counted for purposes of
determining the presence or absence of a quorum for the transaction of
business, broker non-votes should not be counted for purposes of determining
the number of Votes Cast with respect to the particular proposal on which the
broker has expressly not voted. Accordingly, the Company intends to treat
broker non-votes in this manner. Thus, a broker non-vote will make a quorum
more readily obtainable, but the broker non-vote will not otherwise affect the
outcome of the voting on a proposal.
Stockholder Nominations and Proposals
The Company's Bylaws provide that nominations for the election of directors
and business proposed to be brought before any stockholder meeting may be made
by the board of directors or proxy committee appointed by the board of
directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
persons for election as directors at a meeting or propose business to be
brought before a meeting, or both, only if such stockholder has given timely
notice in proper written form of their intent to make such nomination or
nominations or to propose such business. To be timely, such stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation not less than one hundred twenty (120) calendar days
in advance of the date specified in the corporation's proxy statement released
to stockholders in connection with the previous year's annual meeting of
stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. In the notice,
the stockholder must provide (i) the name and address of the stockholder who
intends to make the nominations or propose the business and, as the case may
be, of the person or persons to be nominated or of the business to be proposed,
(ii) a representation that the stockholder is a holder of record of stock of
the Company entitled to vote at such meeting and, if applicable, intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (iii) if applicable, a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder, (iv) such other information
regarding each nominee or each matter of business to be proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, or the matter been
proposed, or intended to be proposed by the board of directors, and, (v) if
applicable, the consent of each nominee to serve as director of the corporation
if so elected.
Deadlines for Submission of Stockholder Proposals for 2001 Annual Meeting
Stockholders of the Company are entitled to present proposals for
consideration at forthcoming stockholder meetings provided that they comply
with the proxy rules promulgated by the Securities and Exchange Commission and
the Bylaws of the Company. Stockholders wishing to present a proposal at the
Company's 2001 Annual Stockholder Meeting must submit such proposal to the
Company by October 15, 2000 if they wish for it to be eligible for inclusion in
the proxy statement and form of proxy relating to that meeting. In addition,
under the Company's Bylaws, a stockholder wishing to make a proposal at the
2001 Annual Stockholder Meeting must submit such a proposal to the Company
prior to October 15, 2000.
2
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PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees Nominees
Pursuant to the Company's Bylaws the Board of Directors is divided into
three classes. The directors are elected to serve staggered three-year terms,
such that the term of one class of directors expires each year. The Company
currently has six directors divided among the three classes as follows: Class
I--Thomas Shao and Kenneth Tai; Class II--Richard Black and Wen-Huang (Simon)
Chang; and Class III--Masaharu Shinya and Gilbert Hu. Two Class I directors are
to be elected at the Annual Meeting for a three-year term ending at the Annual
Meeting in 2003 or when their successors are elected.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the two (2) Class I nominees named below. In the event
that any such nominee is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for a nominee who shall be
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner as will
assure the election of as many of the nominees listed below as possible, and,
in such event, the specific nominees to be voted for will be determined by the
proxy holders. The Company is not aware of any nominee who will be unable or
will decline to serve as a director. Each director elected at this Annual
Meeting will serve until the term of that director's class expires or until
such director's successor has been duly elected and qualified.
Vote Required
The two nominees in Class I receiving the highest number of affirmative
votes of the shares entitled to be voted shall be elected to the Board of
Directors. An abstention will have the same effect as a vote withheld for the
election of directors, and pursuant to Delaware law, a broker nonvote will not
be treated as voting in person or by proxy on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES
LISTED BELOW.
The names of the directors, certain information about them and their ages as
of September 30, 1999 are set forth below:
<TABLE>
<CAPTION>
Director Term
Name of Director Age Position(s) With the Company Since Expires
---------------- --- ---------------------------- -------- -------
Nominees for Class I
Director
<S> <C> <C> <C> <C>
Thomas Shao(1).......... 64 Director 1996 2000
Kenneth Tai(2).......... 49 Director 1998 2000
<CAPTION>
Directors Whose Terms
Continue
<S> <C> <C> <C> <C>
Gilbert Hu(2)........... 42 President, Chief Executive Officer, Director 1994 2002
Richard Black(1)........ 65 Director 1999 2001
Wen-Huang (Simon)
Chang(1)............... 47 Director 1994 2001
Masaharu Shinya(2)...... 55 Director 1999 2002
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
3
<PAGE>
Nominees for Class I Director
Thomas Shao has served as a Director of AltiGen since April 1996. Since
September 1997, Dr. Shao has served as Managing Director of Technology
Associates Management Co., Ltd., a venture fund manager consisting of five
employees. From September 1995 to September 1997, Dr. Shao was a senior
consultant for Technology Associates Corporation of Taiwan, a venture capital
firm. From September 1985 to September 1995 he served as Senior Vice President
of DynaTech Development Corporation, a management consulting and investment
firm. Prior to 1985, Mr. Shao held positions with AT&T/Bell Labs and IBM. In
addition to AltiGen, Dr. Shao is a member of the board of directors of AboveNet
Communications Inc., a colocation company. Dr. Shao received a Bachelor of
Science degree in Mechanical Engineering from the National Taiwan University in
Taiwan, a Masters of Science in Aeronautical Engineering from the University of
Illinois and a Ph.D. in Applied Mathematics and Computer Science from the
University of Illinois.
Kenneth Tai has served as a Director of AltiGen since April 1998. Since
March 1996, Mr. Tai has been the Chairman of InveStar Capital (Taiwan), Inc., a
venture capital firm. Since April 1998, Mr. Tai also has served as the chairman
of DigiTimes Publication, Inc., a daily electronic newspaper reporting on
technology issues in Taiwan. From March 1993 to December 1995, Mr. Tai served
as the Vice-Chairman of UMAX USA, which makes computer peripherals. Mr. Tai was
one of the co-founders of the Acer Group, and held various positions with the
Acer Group, including Vice President of Worldwide Sales and Marketing, and
President of the Acer Group USA from 1990 to March 1993. Mr. Tai received a
Bachelor of Science degree in Electrical Engineering from the National Chiao
Tung University in Taiwan and a Masters in Business Administration from Tamkang
University in Taiwan.
Directors Whose Terms Continue
Gilbert Hu founded AltiGen and has served as our President and Chief
Executive Officer and a Director since May 1994. Before founding AltiGen, Mr.
Hu was a founder, President and Chief Executive Officer of Centrum
Communications, Inc., a networking company acquired by 3Com Corporation in
early 1994. Mr. Hu has also served in technical and managerial roles at
Vitalink Communication Corporation, an internetworking equipment manufacturer.
He received a Bachelor of Science degree in Electrical Engineering from
National Chiao-Tung University in Taiwan and a Masters of Science degree in
Electrical Engineering from Arizona State University. Mr. Hu is a brother-in-
law of director Wen-Huang (Simon) Chang.
Richard Black has served as a Director of AltiGen since May 1999. Since
December 1987, he has served as a director of Oak Technology, Inc., a supplier
of semiconductor products to the personal computer and consumer electronics
markets. He also served as President of Oak from January 1998 to March 1999 and
has been Vice-Chairman of Oak since March 1999. Currently, Mr. Black also sits
on the boards of directors of investment advisors and investment banking
companies Gabelli Funds, Inc. and Gabelli Asset Management, Inc. Mr. Black also
sits on the boards of GSI Lumonics Inc., a manufacturer of laser scanning
systems and components, and Morgan Group, Inc., a public transportation
services company. From April 1987 until December 1998, he was a general partner
of KBA Partners, L.P., a venture capital firm. He has also served in managerial
positions with Vulcan Material Company, a producer of construction materials.
Mr. Black received a Bachelor of Science degree in Engineering from Texas A&M
University, a Masters in Business Administration from Harvard University and an
honorary Ph.D. from Beloit College.
Wen-Huang (Simon) Chang has served as a Director of AltiGen since June 1994.
From July 1991 to January 1995, he was Chairman of Centrum Technology
Corporation, a networking company. From August 1991 to early 1994, he served as
a director of Centrum Communications, Inc., a networking company acquired by
3Com Corporation in early 1994. Mr. Chang received a Bachelor of Science Degree
in Forest Industry from the National Taiwan University in Taiwan. Mr. Chang is
a brother-in-law of Gilbert Hu, the Company's President and Chief Executive
Officer and a Director.
4
<PAGE>
Masaharu Shinya has served as a Director of AltiGen since April 1999. From
July 1990 to March 1999, he served as President of Kanematsu Semiconductor
Corporation. Mr. Shinya continues to serve as an advisor to Kanematsu
Semiconductor Corporation. Mr. Shinya was on the board of directors for Quality
Semiconductor, Inc., a semiconductor manufacturer, until its acquisition by
Integrated Device Technology, Inc. Mr. Shinya received a Bachelors degree in
Economics from Waseda University in Japan.
Board Meetings and Committees
The Board of Directors of the Company held a total of 3 meetings during the
fiscal year ended September 30, 1999. The committees of the Board of Directors
include an Audit Committee and a Compensation Committee.
The Audit Committee of the Board of Directors, which was appointed on June
2, 1999, consists of Messrs. Black, Chang and Shao and held no meetings during
the last fiscal year. The Audit Committee makes recommendations to the Board of
Directors regarding the selection of independent auditors, reviews the results
and scope of audit and other services provided by the independent auditors and
reviews the accounting principles and auditing practices and procedures to be
used in the Company's financial statements.
The Compensation Committee of the Board of Directors, which was appointed on
June 2, 1999, consists of Messrs. Hu, Shinya and Tai. The Compensation
Committee held no meetings during the last fiscal year. The Compensation
Committee reviews and makes recommendations to the Board of Directors regarding
the compensation of officers and other managerial employees.
No director attended fewer than 75% of the sum of the total number of
meetings of the Board of Directors and committees thereof upon which that
director served, held subsequent to his or her becoming a director or his or
her appointment to such committee.
Compensation Committee Interlocks and Insider Participation
Mr. Hu, our President and Chief Executive Officer, also is a member of the
Compensation Committee of our Board of Directors. None of our executive
officers serves as a member of the Board of Directors or compensation committee
of another entity that has one or more executive officers serving on our Board
of Directors or compensation committee.
Director Compensation
The directors do not receive cash compensation for their services as
directors, but are reimbursed for their reasonable and necessary expenses
associated with attendance of meetings of the Board of Directors and its
committees. Additionally, in April 1998, the Company's non-employee directors
each received options to purchase 5,989 shares of common stock at $0.83 per
share under the 1994 Stock Option Plan. At that time, the Company's non-
employee directors were Messrs. Chang, Lin, Shao and Tai. In June 1999, the
Company's directors Messrs. Black and Shinya each were granted options to
purchase 5,989 shares of common stock at $11.69 per share under the 1999 Stock
Option Plan.
5
<PAGE>
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected Arthur Andersen
LLP, independent public accountants, to audit the financial statements of the
Company for the fiscal year ending September 30, 2000 and recommends that the
stockholders ratify this selection. Arthur Andersen LLP has audited the
Company's financial statements since the fiscal year ending September 30, 1996.
In the event of a negative vote on such ratification, the Board of Directors
will reconsider its selection. Representatives of Arthur Andersen LLP are
expected to be available at the Annual Meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth the compensation earned for services rendered
to AltiGen in all capacities for the three most recently completed fiscal years
by our Chief Executive Officer and our other most highly compensated executive
officers whose salary and bonus during fiscal year ended September 30, 1999
exceeded $100,000. These individuals are referred to as the "Named Executive
Officers" here and elsewhere in this proxy statement.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
---------------- ------------
Securities
Name and Principal Salary Bonus Underlying
Position Fiscal Year ($) ($) Options(#)
------------------ ----------- -------- ------- ------------
<S> <C> <C> <C> <C>
Gilbert Hu.............. 1999 $129,000 $58,110 --
President and Chief
Executive Officer 1998 120,000 30,218 299,463
1997 120,000 23,571 --
Simon Chouldjian........ 1999 113,001 -- 5,989
Vice President of
Manufacturing 1998 110,004 -- 47,914
1997 34,468 -- --
Michele Shannon......... 1999 120,000 54,920 11,979
Vice President of Sales 1998 120,000 35,737 1,431
1997 90,000 16,397 59,893
</TABLE>
6
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers in fiscal year 1999. The
figures representing percentages of total options granted to employees in the
fiscal year 1999 are based on an aggregate of 688,023 options granted by us
during the fiscal year ended September 30, 1999 to our employees and
consultants, including the Named Executive Officers.
Also shown below is the potential realizable value over the term of the
option. In accordance with the rules of the Securities and Exchange Commission,
we have based our calculation of the potential realizable value on the term of
the option at its time of grant, and we have assumed that:
. the value of our stock at the assumed initial public offering price
appreciates at the indicated annual rate compounded annually for the
entire term of the option; and
. the option is exercised and sold on the last day of its term for the
appreciated stock price.
These amounts are based on 5% and 10% assumed rates of appreciation and do
not represent our estimate of future stock prices. Actual gains, if any, on
stock option exercises will be dependent on the future performance of the
common stock. The gains shown are net of the option exercise price, but do not
include deductions for taxes and other expenses payable upon the exercise of
the option or for sale of underlying shares of common stock. Unless otherwise
indicated, the options in this table were granted under the 1994 Stock Option
Plan, have 10-year terms, and vest over a period of four years. Twenty-five
percent of the shares subject to each option will vest on the first anniversary
of the vesting start date, and 1/48th of the shares subject to each option will
vest each month thereafter. All of the options have exercise prices equal to
the fair market value of our common stock on the date of grant.
Option Grants During Fiscal Year Ended September 30, 1999
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Percent Assumed Annual
of Total Rates of Stock
Number of Options Price
Securities Granted Appreciation
Underlying to Exercise for Option
Options Employees Price Per Term($)
Granted In Fiscal Share Expiration ---------------
Name (#) Year 1999 ($/share) Date(1) 5% 10%
---- ---------- --------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Gilbert Hu........... -- -- -- -- -- --
Simon Chouldjian(2).. 5,989 0.9% 4.34 3/31/09 71,556 129,340
Michele Shannon...... 11,979 1.7 4.34 3/31/09 143,123 258,702
</TABLE>
- --------
(1) The options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated.
(2) The vesting start date for the options granted to Mr. Chouldjian is June 9,
1997
Aggregate Option Exercises in Last Fiscal Year
The following table summarizes the value of options held at September 30,
1999 by our Named Executive Officers. The value of unexercised in-the-money
options at September 30, 1999 figures in the right-hand columns are based on
the difference between the fair market value of $10.00 per share at fiscal
year-end and the per-share exercise price, multiplied by the number of shares
issued upon exercise of the option.
Aggregated Option Exercises in Fiscal Year Ended September 30, 1999
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised In-
Shares Underlying Unexercised the-Money Options
Acquired Options at at September 30,
on Value September 30, 1999(#) 1999($)
Exercise Realized ------------------------------------------
Name (#) ($) Vested Unvested Vested Unvested
---- -------- -------- ----------- --------------------- --------
<S> <C> <C> <C> <C> <C> <C>
Gilbert Hu........ -- -- 618,872 -- 6,078,310 --
Simon Chouldjian.. -- -- 26,952 26,951 263,219 152,513
Michele Shannon... 20,590 202,420 1,308 28,944 12,858 234,559
</TABLE>
7
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
Appointed on June 2, 1999, the Compensation Committee is charged with the
responsibility of reviewing all aspects of the Company's executive compensation
programs and administering the Company's stock option plans. The Compensation
Committee did not hold any meetings during the last fiscal year and plans to
hold its first meeting on January 17, 2000.
Compensation Philosophy
The Company's executive compensation policies are designed to attract and
retain qualified executives who will contribute to the Company's long-term
success, to reward executives for achieving the Company's financial goals, and
to link executive compensation and stockholder interests through equity-based
plans. The Committee believes that strong financial performance, on a sustained
basis, is the most certain avenue through which the Company can positively
affect long-term stockholder return. Furthermore, the Committee believes that,
in order to attract and retain the most qualified executives in the industry,
the Company's compensation policies must be competitive with other companies of
comparable size and in similar industries and must reinforce strategic
performance objectives through the use of incentive compensation programs. In
order to provide incentive to executive officers, a portion of their annual
compensation is paid as a bonus. The amount of the bonus for each person is
determined on the basis of several indicators of corporate performance as
outlined below.
Compensation Plans
The following are the key components of the Company's executive officer
compensation:
Base Compensation. The Committee will establish base salaries for executive
officers based on its review of base salaries of executive officers in
companies of comparable size and in similar industries.
Bonus. The Company's executive bonus plan provides for incentive
compensation to some but not all Company's executive officers and other key
employees and will be determined by principally on certain performance
measures. The performance measures include worldwide corporate performance and
individual performance. Worldwide performance is measured based on targets with
respect to the Company's revenue, days sales outstanding, return on products
and other factors. The Committee believes that these factors are indicative of
overall corporate performance and stockholder value. Individual performance is
measured based on goals related to each person's function within the
organization.
Long-Term Incentive Compensation. The Company's option plans provides for
long-term incentive compensation for employees of the Company, including
executive officers. These awards give employees an equity interest in the
Company, thereby aligning the interests of executive officers and stockholders
and providing incentive to maximize stockholder value.
The Compensation Committee
Gilbert Hu
Masayasu Shinya
Kenneth Tai
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended or the Securities
and Exchange Act of 1934, as amended (the "Exchange Act") that might
incorporate future filings, including this Proxy Statement, in whole or in
part, the preceding Compensation Committee Report on Executive Compensation
shall not be incorporated by reference into any such filings, nor shall such
Report be incorporated by reference into any future filings.
8
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT; PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of shares of our common stock as of December 31, 1999. The table
shows ownership by:
. each person or entity known to us to own beneficially more than 5% of the
shares of our outstanding stock;
.each of our directors;
.each of our named executive officers; and
. all of our directors and executive officers as a group.
The percentage ownership figures are based on 13,387,289 shares of common
stock outstanding as of December 31, 1999.
Unless otherwise indicated, the principal address of each of the
stockholders below is: c/o AltiGen Communications, Inc., 47427 Fremont
Boulevard, Fremont, California 94538. Except as otherwise indicated in the
footnotes to this table, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect
to all shares of AltiGen common stock as beneficially owned by them.
<TABLE>
<CAPTION>
Number of Percentage
Shares of Shares
Beneficially Beneficially
Name and Address of Beneficial Owner Owned(1) Owned
------------------------------------ ------------ ------------
<S> <C> <C>
Directors and Executive Officers
Gilbert Hu(2)(14).................................. 1,433,459 10.7%
Kenneth Tai(3)..................................... 902,635 6.7
Wen-Huang (Simon) Chang(4)(14)..................... 642,150 4.8
Thomas Shao(5)..................................... 214,993 1.6
Tricia Chu(6)...................................... 163,709 1.2
Masaharu Shinya.................................... 121,785 *
En-Kuang Lung(7)................................... 106,312 *
Joseph Chiu(8)..................................... 57,099 *
Michele Shannon(9)................................. 50,127 *
Simon Chouldjian(10)............................... 49,527 *
Tsyr-Yi (Shirley) Sun(11).......................... 25,281 *
Carl Marszewski(12)................................ 10,110 *
Philip McDermott................................... 2,000 *
Richard Black...................................... 2,000 *
Anthony Spielman................................... 500 *
All directors and executive officers as a group (15
persons).......................................... 3,781,687 28.2
5% Stockholders
Technology Associates Corporation(13).............. 942,815 7.0
11f 201, Chien Kuo South Road,
Section 2, Taipei, Taiwan R.O.C.
Shing-Kao (Jerry) Liao............................. 496,737 3.7
</TABLE>
- --------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, based on factors including voting and
investment power with respect to shares. Shares of common stock subject to
options that are currently exercisable or exercisable within 60 days of
December 31, 1999 are deemed to be outstanding and to be beneficially owned
by the person holding such options for the purpose of computing the
percentage ownership of such person, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person.
9
<PAGE>
(2) Includes 11,978 shares registered in the name of Mr. Hu's wife May Mei
Kuei-Rong Hu, 99,841 registered in the name of his daughter Michelle Hu,
and 99,841 shares registered in the name of his daughter Stephanie Hu. Also
includes vested, but unexercised, options held by Mr. Hu to purchase
618,872 shares.
(3) Includes shares held by the following affiliated entities: 598,927 shares
registered in the name of InveStar Burgeon Venture Capital, Inc.; 99,821
shares registered in the name of InveStar Dayspring Venture Group, Inc.;
99,821 shares registered in the name of InveStar Excelsus Venture Capital
(Int'l) Inc., LDC; and 99,820 shares registered in the name of Forefront
Venture Partners, L.P. Director Kenneth Tai is a general partner of all of
the above entities and disclaims beneficial ownership of the securities
held by the entities except for his proportional interest in the entities.
Also includes vested, but unexercised, options held by Mr. Tai to purchase
2,745 shares.
(4) Includes 149,730 shares registered in the name of Mr. Chang's wife, Hsiang-
Li Chang Hu, and 143,741 shares registered in the name of his daughter Ya-
Ting Chang. Also includes vested, but unexercised, options held by Mr.
Chang to purchase 2,745 shares.
(5) Includes 179,678 shares registered in the name of Techgains Corporation, of
which Mr. Shao is managing director, and 17,967 shares registered in the
name of TSS Enterprises. Also includes 15,597 vested, but unexercised,
shares held by TSS Enterprises. Mr. Shao disclaims beneficial ownership of
the securities held by these entities except for his proportional interest
in the entities. Also includes vested, but unexercised, options held by Mr.
Shao to purchase 2,745 shares.
(6) Includes 29,946 shares registered in the name of her son Nicholas Shih, and
29,946 shares registered in the name of her daughter Diana Shih.
(7) Includes 47,914 shares registered in the name of his mother-in-law Chin-Tzu
Lin Wu. Mr. Lung left the Company after the close of fiscal year 1999.
(8) Includes 11,978 shares registered in the name of his mother Chin-Chih Sung.
Also includes vested, but unexercised, options held by Mr. Chiu to purchase
36,434 shares.
(9) Includes vested, but unexercised, options held by Ms. Shannon to purchase
7,695 shares.
(10) Includes vested, but unexercised, options held by Mr. Chouldjian to
purchase 31,942 shares.
(11) Includes vested, but unexercised, options held by Ms. Sun to purchase
25,179 shares.
(12) Includes vested, but unexercised, options held by Mr. Marszewski to
purchase 8,110 shares. Mr. Marszewski left the Company after the close of
fiscal year 1999.
(13) Includes 140,309 shares registered in the name of affiliated entity Tech
Alliance Corporation.
(14) Mr. Hu and Mr. Chang are brothers-in-law.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Series C Preferred Stock. From June 1996 to December 1997, the Company sold
3,593,512 shares of series C preferred stock at a weighted average price of
$2.19 per share. The purchasers of series C preferred stock included, among
others:
<TABLE>
<CAPTION>
Shares of Series C
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Entities affiliated with Technology Associates
Corporation(1)......................................... 598,927
Entities affiliated with InveStar Capital, Inc.(2)...... 598,927
Entities affiliated with Techgains Corporation(3)....... 335,399
Shing-Kao (Jerry) Liao.................................. 158,715
Masaharu Shinya......................................... 119,785
Wen-Huang (Simon) Chang(4).............................. 64,363
Hsiang-Li Chang Hu(4)................................... 61,790
Ya-Ting Chang(4)........................................ 43,822
Chin-Tzu Lin Wu(5)...................................... 47,914
May Kuei-Rong Hu(6)..................................... 11,978
Simon Chouldjian........................................ 5,989
Michele Shannon......................................... 2,994
</TABLE>
10
<PAGE>
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(1) Technology Associates Corporation and Tech Alliance Corporation are
affiliated. Together, these entities are considered a greater than 5%
stockholder of AltiGen.
(2) InveStar Capital, Inc. includes affiliated entities InveStar Burgeon
Venture Capital, Inc., InveStar Dayspring Venture Capital Group, Inc.,
InveStar Excelsus Venture Capital (Int'l) Inc., LDC. and Forefront Venture
Partners L.P. Together, these entities are considered a greater than 5%
stockholder of AltiGen. Director Kenneth Tai is a general partner of all of
the above funds, and disclaims beneficial ownership of the securities held
by such entities, except for his proportional interest in the entities.
(3) Techgains Corporation is affiliated with Tekkang Management Consulting Inc.
and TSS Enterprises. Together, these entities are considered a greater than
5% stockholder of AltiGen. Director Thomas Shao is a Managing Director of
Techgains Corporation and a joint owner and principal of TSS Enterprises.
(4) Hsiang-Li Chang Hu is the spouse, and Ya-Ting Chang is the child, of
director Wen-Huang (Simon) Chang. Ms. Chang Hu is the sister of our
President and Chief Executive Officer Gilbert Hu.
(5) Chin-Tzu Lin Wu is the mother-in-law of our Vice President of Research and
Development En-Kuang Lung.
(6) May Kuei-Rong Hu is the spouse of our President and Chief Executive Officer
Gilbert Hu.
Series D Preferred Stock. In April, August and September 1998 and May 1999,
the Company sold a total of 1,423,194 shares of series D preferred stock at a
weighted average price of $9.57 share. The purchasers of Series D preferred
stock included, among others:
<TABLE>
<CAPTION>
Shares of Series D
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Entities affiliated with Technology Associates
Corporation(1)......................................... 343,888
Entities affiliated with InveStar Capital, Inc.(2)...... 299,463
Entities affiliated with Kanematsu Corporation(3)....... 128,303
Wen-Huang (Simon) Chang................................. 83,849
Tsyr-Yi (Shirley) Sun................................... 1,796
</TABLE>
- --------
(1) Technology Associates Corporation and Tech Alliance Corporation are
affiliated. Together, these entities are considered a greater than 5%
stockholder of AltiGen.
(2) InveStar Capital, Inc. includes affiliated entities InveStar Burgeon
Venture Capital, Inc., InveStar Dayspring Venture Capital Group, Inc.,
InveStar Excelsus Venture Capital (Int'l) Inc., LDC. and Forefront Venture
Partners L.P. Together, these entities are considered a greater than 5%
stockholder of AltiGen. Director Kenneth Tai is a general partner of all of
the above funds, and disclaims beneficial ownership of the securities held
by such entities, except for his proportional interest in the entities.
(3) Kanematsu Corporation, Kanematsu Semiconductor Corporation, and Kanematsu
USA, Inc. are affiliated entities. Director Masaharu Shinya formerly was
President of Kanematsu Semiconductor Corporation.
Distributor Agreement with Kanematsu Semiconductor Corporation
In a distributor agreement dated as of April 1997, the Company granted
Kanematsu Semiconductor Corporation a non-exclusive, non-transferable right to
market and distribute certain of our products to original equipment
manufacturers, system integrators and dealers in several East and South Asian
countries, including Japan, China, Korea, Taiwan, Singapore, the Philippines
and India. At the time the Company signed this agreement, Mr. Shinya, who is
currently a director, was the President of Kanematsu Semiconductor Corporation.
In fiscal year 1998, the agreement with Kanematsu Semiconductor generated
approximately $82,000 in revenue to the Company. Unless terminated by written
notice provided by either party, the distributor agreement automatically renews
on an annual basis.
Employment Contract with Tricia Chu
In March 1999, the Company entered into an employment contract with Tricia
Chu, the Vice President of Finance and Administration. Ms. Chu currently holds
options that, when fully vested, will have an aggregate exercise price of
$138,000. The contract provides that in the event Ms. Chu is terminated without
cause all of her options will immediately vest and become exercisable.
11
<PAGE>
Employment Contract with Philip McDermott
In June 1999, the Company entered into an employment contract with Philip
McDermott, the Chief Financial Officer. Mr. McDermott currently holds options
that, when fully vested, will have an aggregate exercise price of $840,000. The
contract provides that in the event of a change of control of AltiGen
immediately after which Mr. McDermott no longer holds the title and
responsibilities of Chief Financial Officer (or a position of similar title and
responsibilities), all of his options will immediately vest and become
exercisable.
Conversion of Promissory Notes by Simon Chouldjian
Between February and June 1997, the Company issued five promissory notes to
Simon Chouldjian, now the Vice President of Manufacturing, in return for
consulting services. In these notes, the Company agreed to sell Mr. Chouldjian
a total of 22,689 (pre-split) shares of preferred stock at the price of
preferred stock as of the date of each note. Between September 1995 and
December 1998, the Company also issued promissory notes to other persons for
consulting services. In June 1999, the Board authorized the conversion of these
notes; and the noteholders, including Mr. Chouldjian, agreed to accept one
share of common stock in lieu of each share of preferred stock. In the
aggregate, we received approximately $378,000 from the noteholders for
conversion of their notes. The original principal amount of Mr. Chouldjian's
notes totaled approximately $31,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1999, all
officers, directors and greater than ten percent beneficial owners complied
with all Section 16(a) filing requirements.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual Meeting.
If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed Proxy to vote the shares they
represent as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Philip M. McDermott
Chief Financial Officer and
Secretary
Dated: January 13, 2000
12
<PAGE>
PROXY
ALTIGEN COMMUNICATIONS, INC.
47427 FREMONT BLVD
FREMONT, CA 94538
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Gilbert Hu, with the power to appoint
his substitute, and hereby authorizes him to represent and to vote, as
designated on the reverse side, all shares of common stock of Altigen
Communications, Inc. (the "Company") held of record by the undersigned on
December 28, 1999 at the Annual Meeting of Shareholders to be held on February
11, 2000 and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- ---------------- -----------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ---------------- -----------------
<PAGE>
- ------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
1. Election of Directors.
Nominees: (01) Thomas Shao and (02) Kenneth Tai
FOR ALL NOMINEES [_] WITHHELD FROM ALL NOMINEES [_]
[_]_______________________________________
For all nominees except as noted above
2. Ratify the appointment of Arthur Andersen LLP as independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
MARK HERE [_]
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should give
full title as such. If signing for a corporation, please sign in full corporate
name by a duly authorized officer.
Signature:_____________________________________Date:____________________
Signature:_____________________________________Date:____________________
