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 9, 2001
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 9, 2001 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 II directors to serve for a term expiring on the
date on which the Annual Meeting of Stockholders is held in the year 2004.
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, 2001.
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 26, 2000
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 9, 2001
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 on February 9, 2001 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 9, 2001
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 26, 2000
are entitled to notice of and to vote at the Annual Meeting. As of December 26,
2000, 13,582,537 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. (CIC), Attention: 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.
<PAGE>
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 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.
2
<PAGE>
Deadlines for Submission of Stockholder Proposals for 2002 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 2002 Annual Stockholder Meeting must submit such proposal to the
Company by September 14, 2001 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 2002
Annual Stockholder Meeting must submit such a proposal to the Company prior to
September 14, 2001.
3
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
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 II directors are
to be elected at the Annual Meeting for a three-year term ending at the Annual
Meeting in 2004 or when their successors are elected.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the two (2) Class II 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 Class II nominees 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, 2000 are set forth below:
<TABLE>
<CAPTION>
Director Term
Name of Director Age Position(s) With the Company Since Expires
-------------------------------------- ------- --------------------------------------------- ---------- ---------
<S> <C> <C> <C> <C>
Nominees for Class II Director:
Richard Black(1).................... 67 Director 1999 2001
Wen-Huang (Simon) Chang............. 47 Director 1994 2001
Directors Whose Terms Continue:
Gilbert Hu(2)....................... 44 President, Chief Executive Officer, Director 1994 2002
Thomas Shao, Ph.D.(1)............... 66 Director 1996 2003
Masaharu Shinya(2).................. 57 Director 1999 2002
Kenneth Tai(1) and (2).............. 50 Director 1998 2003
</TABLE>
------------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
4
<PAGE>
Nominees for Class II Director
Richard Black has served as a director of the Company since August 1999.
Since December 1987, he has served as a director of Oak Technology, Inc.
("Oak"), 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 advisor
and investment banking company Gabelli Funds, Inc. Mr. Black sat on the board of
directors of Gabelli Asset Management, Inc. from March 1999 to May 2000. 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 the Company 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.
Directors Whose Terms Continue
Gilbert Hu founded the Company and has served as our President and Chief
Executive Officer and a director since May 1994. Before founding the Company,
Mr. Hu was a founder, President and Chief Executive Officer of Centrum
Communications, Inc. from May 1991 to December 1993, 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.
Thomas Shao, Ph.D. has served as a director of AltiGen since April 1996.
Since October 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 June 1986 to October 1995 he served as Senior Vice President of
DynaTech Development Corporation, a management consulting and investment firm.
In addition to AltiGen, Dr. Shao has been a member of the board of directors of
AboveNet Communications Inc., a colocation company, since April 1994. 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.
Masaharu Shinya has served as a director of the Company 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 Bachelor degree in
Economics from Waseda University in Japan.
5
<PAGE>
Kenneth Tai has served as a director of the Company 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. Since August 1999, Mr. Tai has has served as a
member of the board of directors of Sage, Inc. Since October 1999 Mr. Tai has
served as a member of the board of directors of Solopoint, Inc. 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.
Board Meetings and Committees
The Board of Directors of the Company held a total of four meetings during
the fiscal year ended September 30, 2000. The committees of the Board of
Directors include an Audit Committee and a Compensation Committee.
The Audit Committee of the Board of Directors was appointed on June 2,
1999, and originally consisted of Messrs. Black, Chang and Shao. On April 24,
2000, Mr. Chang resigned from the committee and was replaced by Mr. Tai. The
Audit Committee held four 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 its meetings in conjunction with the regular meetings of the
Board of Directors. The Compensation Committee reviews and makes recommendations
to the Board of Directors regarding the compensation of officers and other
managerial employees. The Compensation Committee also reviews and approves
option grants.
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 receive $1,000 cash compensation for attending each Board
meeting, and 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
6
<PAGE>
of common stock at $11.69 per share under the 1999 Stock Option Plan. In
February 2000, all directors were granted options to purchase 10,000 shares of
common stock at $12.6875 per share under the 1999 Stock Option Plan.
7
<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, 2001 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.
8
<PAGE>
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, 2000 exceeded $100,000. These individuals are referred to as the
"Named Executive Officers" here and elsewhere in this proxy statement.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
----------------------------- ----------------------
Securities
Name and Principal Salary Bonus Underlying
Position Fiscal Year ($) ($) Options(#)
------------------------------------------- ----------- ----------- ----------- ----------------------
<S> <C> <C> <C> <C>
Gilbert Hu................................ 2000 $132,000 $110,298 100,000
President and Chief Executive Officer 1999 129,000 58,110 --
1998 120,000 30,218 299,463
Philip McDermott (1)...................... 2000 173,980 -- 60,000
Chief Financial Officer 1999 47,727 -- 71,871
Simon Chouldjian.......................... 2000 122,250 -- 60,000
Vice President of Manufacturing 1999 113,001 -- 5,989
1998 110,004 -- 47,914
Tricia Chu (2)............................ 2000 115,000 25,020 60,000
Vice President of Finance and Admin 1999 55,433 8,928 41,925
Michele Shannon (3)....................... 2000 131,250 90,280 60,000
Vice President of Sales 1999 120,000 54,920 11,979
1998 120,000 35,737 1,431
Tsyr-Yi (Shirley) Sun..................... 2000 116,666 -- 60,000
Vice President of Research & 1999 77,494 -- 29,946
Development 1998 40,832 -- 44,321
Joseph Chiu (4)........................... 2000 136,670 -- 60,000
Vice President of Platform Engineering 1999 97,497 -- 23,957
1998 88,800 -- 11,978
</TABLE>
(1) Mr. McDermott's employment with the Company began in June 1999.
(2) Ms. Chu's employment with the Company began in March 1999.
(3) Ms. Shannon resigned from the Company in November 2000.
(4) Mr. Chiu resigned from the Company in October 2000.
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 2000. The figures
representing percentages of total options granted to employees in the fiscal
year 2000 are based on an aggregate of 2,053,743 options granted by us during
the
9
<PAGE>
fiscal year ended September 30, 2000 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:
o 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
o 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.
<TABLE>
<CAPTION>
Option Grants During Fiscal Year Ended September 30, 2000
-----------------------------------------------------------------------------------------------------------------------
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 2000 ($/share) Date (1) 5% 10%
--------------------------- ---------- --------- --------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gilbert Hu................ 60,000 2.9% $11.375 11/01/09 $429,220.58 $1,087,729.23
10,000 0.5% 12.688 02/03/10 79,794.15 202,214.04
30,000 1.5% 8.000 04/17/10 150,934.71 382,498.19
Philip McDermott.......... 40,000 1.9% 11.375 11/01/09 286,147.06 725,152.82
20,000 1.0% 8.000 04/17/10 100,623.14 254,998.79
Simon Chouldjian.......... 40,000 1.9% 11.375 11/01/09 286,147.06 725,152.82
20,000 1.0% 8.000 04/17/10 100,623.14 254,998.79
Tricia Chu................ 40,000 1.9% 11.375 11/01/09 286,147.06 725,152.82
20,000 1.0% 8.000 04/17/10 100,623.14 254,998.79
Michele Shannon........... 40,000 1.9% 11.375 11/01/09 286,147.06 725,152.82
20,000 1.0% 8.000 04/17/10 100,623.14 254,998.79
Tsyr-Yi (Shirley) Sun..... 40,000 1.9% 11.375 11/01/09 286,147.06 725,152.82
20,000 1.0% 8.000 04/17/10 100,623.14 254,998.79
Joseph Chiu............... 40,000 1.9% 11.375 11/01/09 286,147.06 725,152.82
20,000 1.0% 8.000 04/17/10 100,623.14 254,998.79
</TABLE>
--------------------------
(1) The options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated.
10
<PAGE>
Aggregate Option Exercises in Last Fiscal Year
The following table summarizes the value of options held at September 30,
2000 by our Named Executive Officers. The value of unexercised in-the-money
options at September 30, 2000 figures in the right-hand columns are based on the
difference between the fair market value of $4.188 per share at fiscal year-end
and the per-share exercise price, multiplied by the number of shares issued upon
exercise of the option.
Aggregated Option Exercises in Fiscal Year Ended September 30, 2000
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised In-
Shares Underlying Unexercised the-Money Options
Acquired Options at at September 30,
on Value September 30, 2000 (#) 2000 ($)
Exercise Realized ------------------------- -------------------------------
Name (#) ($) Vested Unvested Vested Unvested (1)
------------------------------ ------------ ---------- ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gilbert Hu................... -- -- 618,872 100,000 $2,481,436.18 --
Philip McDermott............. -- -- 22,460 109,411 --(1) --
Simon Chouldjian............. -- -- 41,176 72,727 153,743.55 --
Tricia Chu................... -- -- 15,722 86,202 13,893.76 --
Michele Shannon.............. 10,219 $88,942.12 12,159 67,874 30,112.48 --
Tsyr-Yi (Shirley) Sun........ -- -- 38,755 95,510 98,951.21 --
Joseph Chiu.................. -- -- 48,163 77,717 160,687.73 --
</TABLE>
(1) The aggregate exercise price for these unexercised options was less than
the fair market value of the underlying securities on September 30, 2000.
11
<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 held its meetings in conjunction with the regular meetings of the
Board of Directors.
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 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 provide 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.
Compensation of Chief Executive Officer
Base Salary: As a result of AltiGen's performance in 1999 and his
individual performance, Mr. Hu's annual salary increased to $132,000 for 2000.
Annual Incentive (Bonus): Annual incentive compensation for Mr. Hu is
based upon relative attainment of the annual performance goals for the Company
and on Mr. Hu's individual objectives as
12
<PAGE>
determined by the Committee. Based on these criteria, Mr. Hu was awarded a bonus
of $110,298, representing 87% of his guideline incentive for performance in
2000.
Long-Term Incentive Awards: In 2000, Mr. Hu received three grants for a
total of 100,000 stock options which become fully exercisable four years from
the date of grant and will expire ten years after the date of grant. In
determining the amounts granted, the Committee considered, without specific
weighting, the performance of the Company and relative total shareholder return,
the value of such awards granted to other chief executive officers in the Nasdaq
Telecommunications Index and industry in general, and the number of stock
options and common stock units granted in prior years.
Tax Deductability of Executive Compensation
The Committee has considered the impact of Internal Revenue Code Section
162(m). Section 162(m) does not allow any publicly held corporation to deduct
individual compensation exceeding $1 million in a taxable year for certain
employees of the Company (the "Covered Employees"). There is an exception from
this rule under Section 162(m)(4)(C) for certain performance-based compensation.
The Committee believes that the total compensation paid by the Company to the
Covered Employees will not affect the tax deductions available to the Company
with respect to the compensation of any of its executive officers.
The Compensation Committee
Gilbert Hu
Masaharu 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.
13
<PAGE>
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended September 30,
2000. The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the 1934
Securities Exchange Act, as amended, except to the extent that the Company
specifically incorporates by reference in such filing.
Appointed on June 2, 1999, 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. A copy of the
Charter for the Audit Committee is attached hereto as Appendix A. The Audit
Committee held four meetings during the last fiscal year.
Audited Financial Statements
The Audit Committee has reviewed the audited financial statements prepared
for the fiscal year ending September 30, 2000. The Audit Committee has discussed
the audited financial statements with various members of management of the
Company.
In addition, the Audit Committee has discussed the audited financials with
Arthur Andersen LLP, the Company's independent auditors for the last fiscal year
("Arthur Andersen"), including such items as Statement on Auditing Standards No.
61 requires. The Audit Committee has also received from Arthur Andersen a letter
and other written disclosures necessary under Independence Standards Board
Standard No. 1, and has had discussions with Arthur Andersen, regarding the
independence of the Company's independent accountants.
After review of all discussions and all written correspondence described
above, as well as such other matters deemed relevant and appropriate by the
Audit Committee, the Audit Committee recommended to the Board of Directors that
the audited financial statements for the last fiscal year be included in our
Annual Report on Form 10-K.
The Audit Committee
Richard Black
Thomas Shao
Kenneth Tai
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return data
for the Company's stock for the period beginning October 4, 1999 (the date on
which the Company's stock was first publicly traded on The Nasdaq National
Market) and ending on September 30, 2000 to the cumulative return over such
period of (i) The Nasdaq National Market Composite Index and (ii) the Nasdaq
Telecommunications Index. The graph assumes that $100 was invested on October 4,
1999 in the common stock of the Company and in each of the comparative indices,
and it assumes reinvestment of any dividends. The graph further assumes that
such amount was initially invested in the common stock of the Company at a per
share price of $10, the price to which such stock was first offered to the
public by the Company on the date of its initial public offering. The stock
price performance on the following graph is not necessarily indicative of future
stock price performance.
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------------------------
10/99 12/99 3/00 6/00 9/00
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
AltiGen Communications, Inc 100.00 103.13 110.30 57.58 40.61
Nasdaq Stock Market 100.00 145.63 112.41 97.54 90.36
Nasdaq Telecommunications Index 100.00 159.95 108.53 85.76 71.91
</TABLE>
[LINE GRAPH OF COMPARATIVE RETURNS OMITTED]
15
<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 26, 2000. The table shows
ownership by:
o each person or entity known to us to own beneficially more than five
percent (5%) of the shares of our outstanding stock;
o each of our directors;
o each of our named executive officers;
o each nominee for director, if such person is not currently a
director or executive officer; and
o all of our directors, executive officers, and director nominees as a
group.
The percentage ownership figures are based on 13,582,537 shares of common
stock outstanding as of December 26, 2000.
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)............................................................. 1,453,459 10.7%
Kenneth Tai(3)................................................................ 907,256 6.7
Wen-Huang (Simon) Chang(4)(14)................................................ 646,777 4.8
Thomas Shao(5)................................................................ 227,595 1.7
Tricia Chu(6)................................................................. 196,130 1.4
Masaharu Shinya(7)............................................................ 127,030 *
Joseph Chiu(8)................................................................ 67,577 *
Michele Shannon(9)............................................................ 81,759 *
Simon Chouldjian(10).......................................................... 65,024 *
Tsyr-Yi (Shirley) Sun(11)..................................................... 63,993 *
Philip McDermott(12).......................................................... 45,740 *
Richard Black(13)............................................................. 6,995 *
All directors and executive officers as a group (12 persons).................. 3,889,335 28.6%
</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, 2000 are deemed to be outstanding and to be beneficially
owned by the person holding such options for the purpose of computing the
16
<PAGE>
percentage ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
(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
638,872 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
6,867 shares.
(4) Includes 149,732 shares registered in the name of Mr. Chang's wife,
Hsiang- Li Chang Hu, and 143,742 shares registered in the name of his
daughter Ya-Ting Chang. Also includes vested, but unexercised, options
held by Mr. Chang to purchase 6,867 shares.
(5) Includes 179,678 shares registered in the name of Techgains Corporation,
of which Dr. Shao is managing director, and 17,967 shares registered in
the name of TSS Enterprises. Also includes 23,083 vested, but unexercised,
shares held by TSS Enterprises. Dr. 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
Dr. Shao to purchase 6,867 shares.
(6) Includes 29,446 shares registered in the name of her son Nicholas Shih,
and 29,446 shares registered in the name of her daughter Diana Shih. Also
includes vested, but unexercised, options held by Ms. Chu to purchase
33,421 shares.
(7) Includes vested, but unexercised, options held by Mr. Shinya to purchase
5,245 shares.
(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 48,412 shares. Mr. Chiu left the Company after the close of
fiscal year 2000.
(9) Includes vested, but unexercised, options held by Ms. Shannon to purchase
14,897 shares. Ms. Shannon left the Company after the close of fiscal year
2000.
(10) Includes vested, but unexercised, options held by Mr. Chouldjian to
purchase 65,024 shares.
(11) Includes vested, but unexercised, options held by Ms. Sun to purchase
60,197 shares.
(12) Includes vested, but unexercised, options held by Mr. McDermott to
purchase 43,279 shares.
(13) Includes vested, but unexercised, options held by Mr. Black to purchase
4,995 shares.
(14) Mr. Hu and Mr. Chang are brothers-in-law.
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 $
817,278.46. The contract provides that in the event Ms. Chu is terminated
without cause all of her options will immediately vest and become exercisable.
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 $
1,527,421.99. 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.
Loan to Gilbert Hu
In August 2000, the Company loaned Gilbert Hu, our current President,
Chief Executive Officer and a director, $1,000,000 in exchange for a secured
promissory note with a one year term, bearing interest at 6.88%. The note is
secured by a real estate deed of trust. As of December 31, 2000, Mr. Hu has made
all scheduled interest payments, and there is outstanding principal in the
amount of $1,000,000.
18
<PAGE>
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 ten percent (10%) 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, 2000, all
officers, directors and greater than ten percent beneficial owners complied with
all Section 16(a) filing requirements, except that Tricia Chu reported the sale
of a total of 1,000 shares of the Company's Common Stock, 500 of which were sold
by each of Ms. Chu's son and daughter on June 6, 2000, on a Form 4 on September
11, 2000, instead of on the required reporting date of July 11, 2000.
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 9, 2001
19
<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 26, 2000 at the
Annual Meeting of Shareholders to be held on February 9, 2001 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
----------- -----------
|X| Please mark
votes as in
this example.
1. Election of Directors.
Nominees: (01) Richard Black and (02) Wen-Huang (Simon) Chang
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
|_| |_| |_|
<PAGE>
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:____________________
<PAGE>
APPENDIX A
AMENDED AND RESTATED CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
ALTIGEN COMMUNICATIONS, INC.
PURPOSE:
The purpose of the Audit Committee of the Board of Directors of AltiGen
Communications, Inc. (the "Company") shall be:
o to provide oversight and monitoring of Company management and the
independent auditors and their activities with respect to the
Company's financial reporting process;
o to provide the Company's Board of Directors with the results of its
monitoring and recommendations derived therefrom;
o to nominate to the Board of Directors independent auditors to audit
the Company's financial statements and oversee the activities and
independence of the auditors; and
o to provide to the Board of Directors such additional information and
materials as it may deem necessary to make the Board of Directors
aware of significant financial matters that require the attention of
the Board of Directors.
The Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
may from time to time prescribe.
MEMBERSHIP:
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board of Directors and will consist of at least three members
of the Board of Directors. On or before June 14, 2001, the members will meet the
following criteria:
1. Each member will be an independent director, in accordance with the
Nasdaq National Market Audit Committee requirements;
2. Each member will be able to read and understand fundamental
financial statements, in accordance with the Nasdaq National Market
Audit Committee requirements; and
3. At least one member will have past employment experience in finance
or accounting, requisite professional certification in accounting,
or other comparable experience or background, including a current or
past position as a chief executive or financial officer or other
senior officer with financial oversight responsibilities.
<PAGE>
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include:
o Providing oversight and monitoring of Company management and the
independent auditors and their activities with respect to the
Company's financial reporting process;
o Recommending the selection and, where appropriate, replacement of
the independent auditors to the Board of Directors;
o Reviewing fee arrangements with the independent auditors;
o Reviewing the independent auditors' proposed audit scope, approach
and independence;
o Reviewing the performance of the independent auditors, who shall be
accountable to the Board of Directors and the Audit Committee;
o Requesting from the independent auditors of a formal written
statement delineating all relationships between the auditor and the
Company, consistent with Independent Standards Board Standard No. 1,
and engaging in a dialogue with the auditors with respect to any
disclosed relationships or services that may impact the objectivity
and independence of the auditors;
o Directing the Company's independent auditors to review before filing
with the SEC the Company's interim financial statements included in
Quarterly Reports on Form 10-Q, using professional standards and
procedures for conducting such reviews;
o Discussing with the Company's independent auditors the matters
required to be discussed by Statement on Accounting Standard No. 61,
as it may be modified or supplemented;
o Reviewing with management, before release, the audited financial
statements and Management's Discussion and Analysis in the Company's
Annual Report on Form 10-K;
o Providing a report in the Company's proxy statement in accordance
with the requirements of Item 306 of Regulation S-K and Item 7(e)
(3) of Schedule 14A;
o Reviewing the Audit Committee's own structure, processes and
membership requirements; and o Performing such other duties as may
be requested by the Board of Directors.
MEETINGS:
The Audit Committee will meet at least quarterly. The Audit Committee may
establish its own schedule, which it will provide to the Board of Directors in
advance.
The Audit Committee will meet separately with the independent auditors as
well as members of the Company's management as it deems appropriate in order to
review the financial controls of the Company.
<PAGE>
MINUTES:
The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board of
Directors.
REPORTS:
Apart from the report prepared pursuant to Item 306 of Regulation S-K and
Item 7(e) (3) of Schedule 14A, the Audit Committee will summarize its
examinations and recommendations to the Board from time to time as may be
appropriate, consistent with the Committee's charter.
