Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rules 14a-11(c) or 14a-12
ALYN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, $.001 par value, of
ALYN CORPORATION
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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 filling by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
NA
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
NA
- --------------------------------------------------------------------------------
3) Filing Party:
NA
- --------------------------------------------------------------------------------
4) Date Filed:
NA
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
ALYN CORPORATION
16761 HALE AVENUE
IRVINE, CALIFORNIA 92606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1998
TO OUR STOCKHOLDERS:
Please take notice that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Alyn Corporation, a Delaware corporation (the "Company"),
will be held at 10:00 a.m., local time, on Wednesday, June 3, 1998, at the
Doubletree Hotel, 3050 Bristol Street, Costa Mesa, California 92626, for the
following purposes:
1. To elect six directors to hold office until the 1999 Annual Meeting of
Stockholders;
2. To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for its fiscal year ending December 31,
1998; and
3. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Stockholders of record at the close of business on the record date, April
24, 1998, are entitled to notice of, and to vote at, the Annual Meeting and any
postponement or adjournment thereof.
By Order of the Board of Directors
/S/ WALTER R. MENETREY
----------------------
April 30, 1998 Walter R. Menetrey
Secretary
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED FORM OF PROXY IN THE ENVELOPE PROVIDED WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED
STATES. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND
VOTE THEIR SHARES IN PERSON.
- --------------------------------------------------------------------------------
<PAGE>
ALYN CORPORATION
16761 HALE AVENUE
IRVINE, CALIFORNIA 92606
PROXY STATEMENT
FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
JUNE 3, 1998
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Alyn Corporation, a Delaware corporation
("Alyn" or the "Company"), for use at the 1998 Annual Meeting of Stockholders
scheduled to be held on Wednesday, June 3, 1998, at 10:00 a.m., local time, or
any postponement or adjournment thereof (the "Annual Meeting"). The Annual
Meeting will be held at the Doubletree Hotel, 3050 Bristol Street, Costa Mesa,
California 92626. A form of proxy for use at the Annual Meeting and a return
envelope for the proxy are also enclosed.
Purpose of the Annual Meeting. It is proposed that at the Annual Meeting:
(i) six members of the Board of Directors be elected for terms expiring at the
1999 Annual Meeting of Stockholders; and (ii) the appointment by the Board of
Directors of the independent accountants of the Company for fiscal year 1998 be
ratified.
The Company is not aware at this time of any other business to be acted
upon at the Annual Meeting. However, if any other business properly comes before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of proxy to vote on those matters in accordance with their best judgment.
Solicitation and Voting of Proxies; Revocation. Shares cannot be voted at
the Annual Meeting unless the owner thereof is present in person or by proxy.
The Board of Directors urges stockholders to complete, date, sign and return
their proxies promptly whether or not they plan to attend the Annual Meeting.
All duly executed and unrevoked proxies in the accompanying form that are
received in time for the Annual Meeting will be voted at the Annual Meeting in
accordance with the instructions indicated thereon. In the absence of such
instructions, duly executed proxies will be voted "FOR" the election of the
director nominees listed below and "FOR" the approval of the other proposals set
forth in the Notice of Annual Meeting of Stockholders of the Company.
The submission of a signed proxy will not affect a stockholder's right to
attend, or to vote in person at, the Annual Meeting. A stockholder who executes
a proxy may revoke it at any time before it is voted by filing a revocation with
the Secretary of the Company, executing a proxy bearing a later date or by
attending the Annual Meeting and voting in person. In accordance with applicable
rules, boxes and a designated blank space are provided on the form of proxy for
stockholders to mark if they wish either to withhold authority to vote for the
nominees for director or abstain on the other matters presented for a vote of
stockholders.
The solicitation will be by mail, and may also be made personally or by
telephone by directors, officers and employees of the Company, for which they
will receive no compensation other than their regular compensation as directors,
officers or employees, if any. All the expenses of the solicitation will be
borne by the Company. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy materials to
beneficial owners of the Company's voting securities, and the Company will
reimburse such brokerage houses and others for their reasonable expenses in so
doing. This Proxy Statement and the enclosed proxy card are being mailed to
stockholders beginning approximately May 4, 1998.
Record Date; Voting Rights. Stockholders of record at the close of business
on April 24, 1998 (the "Record Date"), will be entitled to notice of, and to
vote at, the Annual Meeting. At the close of business on the Record Date, there
were issued and outstanding 10,750,000 shares of Alyn common stock, $0.001 par
value per share (the "Common Stock"). Holders of Common Stock are entitled to
one vote for each share of Common Stock registered in their name. The presence
at the Annual Meeting, in person or by proxy, of stockholders holding a majority
of the shares of Common Stock outstanding on the Record Date will constitute a
quorum to transact business at the Annual Meeting. Matters to be voted upon at
the Annual Meeting require the affirmative vote of a majority in voting power of
the shares of Common Stock that are present in person or by proxy voting as a
single class.
In accordance with applicable Securities and Exchange Commission ("SEC")
rules, designated blank spaces are provided on the form of proxy for
stockholders to mark if they wish either to abstain on one or more of the
proposals or to withhold authority to vote for any nominee for director. Under
the rules of the principal stock exchanges, when brokers have not received
instructions from their customers, brokers holding shares in street name have
the authority to vote the shares on some matters, but not others. Such missing
votes are called "broker non-votes." Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum. Since
the Company's Certificate of Incorporation requires the affirmative vote of a
majority of shares present, in person or by proxy, an abstention on the
Company's proposal to ratify the selection of its auditors will have the
practical effect of a negative vote since it represents one less vote for
approval. With regard to the election of directors, votes that are withheld will
be excluded entirely from the vote and will have no effect. Under applicable
Delaware law, broker non-votes will not be counted for purposes of determining
total votes cast and thus will have no effect on the outcome of the election of
the Board of Directors or the Company's other proposals.
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
Information concerning the nominees for election to the Company's Board of
Directors is set forth below. Each nominee for election to the Board of
Directors named below has consented to being named as a nominee and has agreed
to serve if elected. If elected, each director would serve for a one-year term,
expiring at the 1999 Annual Meeting of Stockholders. The persons identified as
proxies on the enclosed form of proxy intend to vote each properly executed
proxy "FOR" the election of the listed nominees for the ensuing terms or until
their successors are elected and qualified, unless indicated otherwise in a
properly executed form of proxy. If any of the named nominees is not available
for election at the time of the Annual Meeting, discretionary authority will be
exercised to vote for a substitute or substitutes unless the Board of Directors
chooses to reduce the number of directors. Management is not aware of any
circumstances that would render any nominee for director named below
unavailable.
Messrs. Price, Carden, Menetrey, Edelson, Markbreiter and Toledano are
currently serving on the Company's Board of Directors. Mr. Toledano has been
Chairman of the Board of the Company since January 1997. Mr. Price was appointed
as a Director on April 14, 1998.
The following information with respect to each nominee has been furnished
to the Company by such nominee. The ages of the nominees are as of April 30,
1998.
Steven S. Price, 42, has been President and Chief Executive Officer since
April 20, 1998, and a Director since April 14, 1998. Mr. Price is Chairman of
the Company's Executive Committee and a member of the Compensation Committee.
From 1995 to April 1998, he was President of AlliedSignal Automotive
Aftermarket, a division of AlliedSignal, Inc., which supplies automotive parts
and products to retail, wholesale and installer sales channels. From 1993 to
1995, he was General Manager of the Residential Division of NIBCO Incorporated,
a privately held manufacturer of plumbing fittings and valves. From 1989 to
1993, he was Vice President, Marketing for Black and Decker Corporation's
subsidiary Kwikset Corporation and from 1987 to 1989, he was a Director, Sales
and Marketing for Black and Decker's Power Tool Group. From 1977 to 1987, he was
with The Procter and Gamble Company in various brand management and marketing
positions. Mr. Price has a Bachelor of Arts degree in Economics from Brown
University.
Robin A. Carden, 40, is the founder of the Company and has been a Director
since the Company's formation in 1990. Mr. Carden is a member of the Company's
Executive Committee. From the Company's formation until April 1998, he was
President and Chief Executive Officer. Prior to 1990, Mr. Carden was employed by
Ceradyne Inc., a company engaged in the development and production of advanced
ceramics products, as Senior Sales Engineer, and was engaged in developing
civilian applications for advanced ceramics products originally developed for
military use. Mr. Carden graduated from Long Beach State University with a
Bachelor of Science degree. A number of United States patents have been issued
to Mr. Carden.
Walter R. Menetrey, 64, has been the Executive Vice President, Chief
Operating Officer and a Director of the Company since May 1996. From August 1992
to April 1996, he worked as an independent management consultant to numerous
companies engaged in, among other things, the security and software industries.
Prior to July 1992, Mr. Menetrey was Chief Executive Officer of Meret, Inc., a
company engaged in the manufacture and sale of fiber optics communication
equipment. Mr. Menetrey received a Bachelor of Science degree in Physics and a
Master of Science degree in Electrical Engineering from the California Institute
of Technology.
Harry Edelson, 61, has been a Director of the Company since May 1996. Mr.
Edelson is Chairman of the Company's Audit Committee. Since 1984, Mr. Edelson
has been the Managing Partner of Edelson Technology Partners, a series of four
venture capital funds with ten large corporations as the limited partners. The
focus of the funds is to provide the corporate partners with access to high
technology products and services. One of the funds, Edelson Technology Partners
III, is a principal stockholder of the Company. Edelson Technology Partners,
through its related funds, has invested in approximately 80 companies involved
in a wide range of technologies, including telecommunications, computers,
semiconductors, specialty chemicals, environmental and publishing. Prior to
founding Edelson Technology Partners, Mr. Edelson was a transmission engineer at
AT&T, a senior computer engineer for UNISYS and a technology analyst for three
leading investment banking firms, Merrill Lynch, Drexel Burnham Lambert and
First Boston. Mr. Edelson has a Bachelor of Science degree in Physics from
Brooklyn College and a Masters of Business Administration from New York
University.
Michael Markbreiter, 36, has been a Director of the Company since May 1996.
Mr. Markbreiter is a member of the Company's Executive, Audit and Compensation
Committees. Since August 1995, Mr. Markbreiter has been a portfolio manager for
private equity investments for Kingdon Capital Management Corp., a manager of
investment funds. In April 1994, he co-founded Ram Investment Corp., a venture
capital company. From March 1993 to January 1994, he served as a portfolio
manager for Kingdon Capital Management Corp. Prior to February 1993, he worked
as an analyst at Alliance Capital Management Corp. Since December 1997, Mr.
Markbreiter has been a Director of Global Pharmaceutical Corporation, a publicly
traded generic pharmaceutical manufacturing company. Mr. Markbreiter graduated
from Cambridge University with a degree in Engineering.
Udi Toledano, 47, has been a Director of the Company since May 1996 and
Chairman of the Board since January 1997. Mr. Toledano is Chairman of the
Company's Compensation Committee, and a member of the Company's Executive and
Audit Committees. Mr. Toledano has been the President of Andromeda Enterprises,
Inc., a private investment company, since December 1993. Prior to that he was
the President of CR Capital Inc., a private investment company, for more than
five years. Since May 1996, Mr. Toledano has been a Director of HumaScan Inc., a
publicly traded medical device company, and since April 1995, he has been a
Director of Global Pharmaceutical Corporation, a publicly traded generic
pharmaceutical manufacturing company. Since July 1994, Mr. Toledano has been a
Director of Universal Stainless & Alloy Products, Inc., a publicly traded
specialty steel producing company. Mr. Toledano has a Bachelor of Science degree
in Physics and a Masters of Business Administration from the Hebrew University
of Jerusalem.
Unless individual stockholders indicate otherwise, each returned proxy
will be voted "FOR" the election to the Board of Directors
of each of the six nominees named above.
Board of Directors Committees and Meetings
During 1997, the Board of Directors held five meetings. All members of the
Board of Directors attended all meetings. The Board of Directors has three
standing committees: the Executive Committee; the Audit Committee; and the
Compensation Committee.
The Executive Committee has all the powers of the Company's full Board of
Directors, except that it is not authorized to amend the Company's Certificate
of Incorporation, declare any dividends or issue shares of capital stock of the
Company. The Executive Committee consists of Messrs. Price (Chairman), Carden,
Markbreiter and Toledano. The Executive Committee held three meetings in 1997.
Following the Annual Meeting, if all nominees for director are elected, the
Executive Committee is expected to consist of Messrs. Price, Carden, Markbreiter
and Toledano.
The Audit Committee was established in June 1996. The functions of the
Audit Committee are to recommend annually to the Board of Directors the
appointment of the independent public accountants of the Company, review the
scope of the annual audit and other services the independent auditors are asked
to perform, review the report on the Company's financial statements following
the audit, review the accounting and financial policies of the Company and
review management's procedures and policies with respect to the Company's
internal controls. The Audit Committee consists of Messrs. Edelson (Chairman),
Markbreiter and Toledano. The Audit Committee held one meeting in 1997.
Following the Annual Meeting, if all nominees for director are elected, the
Audit Committee is expected to consist of Messrs. Edelson, Markbreiter and
Toledano.
The Compensation Committee held two meetings in 1997. Its functions are
discussed in the Report on Executive Compensation which starts on page 13. The
Compensation Committee consists of Messrs. Toledano (Chairman), Price and
Markbreiter. Following the Annual Meeting, if all nominees for director are
elected, the Compensation Committee is expected to consist of Messrs. Toledano,
Price and Markbreiter.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Toledano, Price and
Markbreiter. Mr. Price is President and Chief Executive Officer of the Company.
Mr. Toledano is Chairman of the Board of the Company.
Director Compensation
Members of the Board of Directors of the Company presently receive no
annual remuneration for acting in that capacity. The Company compensates its
non-employee directors at the rate of $500 (plus reasonable expenses) for each
attended meeting of the Board of Directors. Certain members of the Board of
Directors of the Company are also eligible for the grant of options under the
1996 Stock Incentive Plan that provides for each non-employee Director
(currently, Messrs. Edelson, Markbreiter and Toledano) to receive an initial
grant of options to purchase 15,000 shares of Common Stock and an annual grant
of options to purchase 10,000 shares of Common Stock.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998, and has
directed that the appointment of the independent accountants be submitted for
ratification by the stockholders at the Annual Meeting. Price Waterhouse LLP has
audited the Company's financial statements since 1996.
Stockholder ratification of the appointment of Price Waterhouse LLP as the
Company's independent accountants is not required by the Company's By-laws or
otherwise. However, the Board of Directors is submitting the appointment of
Price Waterhouse LLP to the stockholders for ratification as a matter of what it
considers to be good corporate practice. If the stockholders fail to ratify the
appointment, the Board of Directors will reconsider whether or not to retain
that firm. Even if the appointment is ratified, the Board of Directors in its
discretion may direct the appointment of a different independent accounting firm
at any time during the year if the Board of Directors determines that such a
change would be in the best interests of the Company and its stockholders.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting, and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions from
stockholders.
The Board of Directors Recommends a Vote "FOR" Ratification of the
Appointment of Price Waterhouse LLP as the
Independent Accountants for the Current Fiscal Year.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned, as of April 4, 1998, by (i) each stockholder known to the
Company to be a beneficial owner of more than 5% of the Common Stock, (ii) each
director and nominee for director and (iii) the directors and officers of the
Company as a group. Unless otherwise noted, all shares are owned directly with
sole voting and dispositive powers.
Beneficial Ownership
--------------------
Name(1) No. of Shares % of Total
- ------- ------------- ----------
Robin A. Carden 3,044,500 27.84%
Kingdon Capital Management Corp.(2) 2,488,000 22.76%
Udi Toledano(3) 577,667 5.28%
Herbert V. Turk(4) 560,000 5.12%
Harry Edelson(5) 541,667 4.95%
Walter R. Menetrey(6) 242,650 2.22%
Steven S. Price(7) 80,000 *
Richard Little(8) 20,000 *
Michael Markbreiter(9) 21,667 *
All executive officers and directors
of the Company as a 3,940,150 36.04%
group (seven persons)(10)
- ----------
*Less than 1%.
(1) The address for each of the persons in the table below is c/o Alyn
Corporation, 16761 Hale Avenue, Irvine, California 92606.
(2) Includes shares of Common Stock held by M. Kingdon Offshore NV, Kingdon
Associates, L.P. and Kingdon Partners, L.P. Does not include the shares of
Common Stock underlying immediately exercisable options that appear in the
table above opposite the name of Michael Markbreiter, a Director of the
Company and an employee of Kingdon Capital Management Corp. Mr. Mark
Kingdon is the sole shareholder, director and executive officer of Kingdon
Capital Management Corp.
(3) Includes options immediately exercisable for 21,667 shares of Common Stock.
Also includes 276,000 shares of Common Stock held by Mr. Toledano's wife
and 80,000 shares of Common Stock held by a certain trust for the benefit
of their minor children. Also includes an aggregate of 48,000 shares of
Common Stock owned by certain other members of Mr. Toledano's family, with
respect to which Mr. Toledano disclaims beneficial ownership.
(4) Includes 344,000 shares of Common Stock held by Mr. Turk jointly with his
wife. Also includes 216,000 shares of Common Stock held by Mr. Turk's two
adult daughters, with respect to which Mr. Turk disclaims beneficial
ownership.
(5) Includes options immediately exercisable for 21,667 shares of Common Stock
held by Mr. Edelson. Also includes 520,000 shares of Common Stock held by
Edelson Technology Partners III, with respect to which Mr. Edelson
disclaims beneficial ownership.
(6) Includes options immediately exercisable for 16,650 shares of Common Stock.
(7) Includes options immediately exercisable for 80,000 shares of Common Stock.
(8) Includes options immediately exercisable for 20,000 shares of Common Stock.
(9) Represents options immediately exercisable for 21,667 shares of Common
Stock. Does not include 420,800 shares of Common Stock held by Kingdon
Partners, L.P. 420,800 shares of Common Stock held by Kingdon Associates,
L.P., and 1,246,400 shares of Common Stock M. Kingdon Offshore NV, with
respect to which Mr. Markbreiter disclaims beneficial ownership.
(10) Includes options immediately exercisable for 161,650 shares of Common
Stock. Does not include (i) 520,000 shares of Common Stock held by Edelson
Technology Partners III, with respect to which Mr. Edelson, a Director,
disclaims beneficial ownership, (ii) shares of Common Stock held by Kingdon
Partners, L.P., Kingdon Associates, L.P. and M. Kingdon Offshore NV, with
respect to which Mr. Markbreiter, a Director, disclaims beneficial
ownership and (iii) 48,000 shares of Common Stock owned by certain members
of Mr. Toledano's family, with respect to which Mr. Toledano, a Director,
disclaims beneficial ownership.
<PAGE>
EXECUTIVE OFFICERS
See "Proposal 1 - Election of Directors" above for information pertaining
to Messrs. Price and Menetrey, the Company's executive officers holding the
offices of President and Chief Executive Officer and Executive Vice President
and Chief Operating Officer, respectively. In addition to the foregoing
executive officers, Mr. Richard L. Little serves as the Company's Vice
President, Finance and Administration and Chief Financial Officer.
Richard L. Little, 53, has been the Vice President, Finance and
Administration and Chief Financial Officer of the Company since May 1997. Mr.
Little was Executive Vice President of d'Essence Designer Fragrances, a marketer
of fine perfumes and related products from 1995 to 1997 and President of
d'essence International from 1996 to 1997. From 1994 to 1995, he was Chief
Operating Officer and Chief Financial Officer of Graphix Zone, a publicly traded
producer of CD-ROMS. In 1989, Mr. Little co-founded Bainbridge International
Holdings, a merchant bank specializing in acquiring middle market companies.
From 1986 to 1989, Mr. Little was Chief Financial Officer, Vice President
Finance, Treasurer and Secretary of Teradata Corporation, a publicly traded
manufacturer and marketer of supercomputers for managing very large data bases.
Prior to joining Teradata, Mr. Little was Chief Financial Officer of Quotron
Systems, a publicly traded provider of on-line financial information services.
Mr. Little has a Bachelor of Science degree in Engineering and a Masters of
Business Administration in Finance from the University of California, Los
Angeles. He is also a CPA.
Executive officers of the Company serve at the discretion of the Board.
There are no family relationships between or among any of the Company's
directors or executive officers.
Employment Agreements with Key Employees
In April 1998, the Company entered into a two-year employment agreement
with Steven S. Price, the Company's President and Chief Executive Officer.
Subject to the termination provisions provided therein, the term of Mr. Price's
employment agreement shall automatically be renewed for a one-year term after
the expiration of the initial two-year term. The employment agreement provides
that Mr. Price's annual base salary shall be $200,000 during the initial year
and not less than $200,000, as determined by the Compensation Committee, during
the second year of the initial two-year term. In addition to his base salary
during the initial two-year term, Mr. Price is entitled to an annual bonus of up
to one hundred percent (100%) of his base salary, subject to a $100,000 minimum
guarantee. He will also receive a Company paid personal term life insurance
policy in an amount of not less than $1 million, reimbursement of certain
relocation costs and a customary benefits package. The employment agreement
provides that Mr. Price shall be granted options to purchase 400,000 shares of
the Company's common stock, to be vested in the following amounts and at the
times indicated: (I) 80,000 shares on the date of execution of his employment
agreement; (ii) 80,000 shares on the last day of the first year of employment;
and (iii) 40,000 shares upon completion of each succeeding six month period of
employment for a period of three years. Under the termination provisions of Mr.
Price's employment agreement, if he is not terminated for cause, he may not be
terminated during the first year of his employment. If terminated during the
second year of his employment other than for cause, he would be entitled to a
twelve (12) month continuation of salary and benefits, plus the minimum
guaranteed bonus. If terminated in the third year and thereafter other than for
cause, he would be entitled to a six (6) month continuation of salary and
benefits. The employment agreement prohibits Mr. Price from (i) competing with
the Company for a period of two years following termination of employment with
the Company and (ii) disclosing confidential information or trade secrets in any
unauthorized manner.
In May 1996, the Company entered into a three-year employment agreement
with Robin A. Carden, then the Company's President and Chief Executive Officer.
On April 20, 1998, Mr. Carden was replaced by Mr. Price as President and Chief
Executive Officer. Subject to the provisions for termination provided in his May
1996 agreement, the term of Mr. Carden's employment agreement shall
automatically be renewed for a one-year term after the expiration of the initial
three-year term, and for successive one-year terms thereafter for a maximum of
10 years. The employment agreement provides that Mr. Carden's annual base salary
shall be determined by the Board of Directors, but in no event shall such annual
salary be less than $150,000, which amount shall be increased annually in an
amount equal to at least the annual Consumer Price Index. In addition to his
base salary, Mr. Carden is entitled to bonus consideration and a customary
benefits package. The employment agreement prohibits Mr. Carden from (i)
competing with the Company for a period of two years following termination of
employment with the Company and (ii) disclosing confidential information or
trade secrets in any unauthorized manner.
In May 1996, Walter R. Menetrey entered into a two-year employment
agreement with the Company for the position of Chief Operating Officer. Subject
to the termination provisions provided therein, Mr. Menetrey's employment
agreement shall automatically be renewed for a one-year term after the
expiration of the initial two-year term, and for successive one-year terms
thereafter. Mr. Menetrey's agreement has been renewed for its first one-year
extension. His employment agreement provides for an annual base salary to be
determined by the Compensation Committee of the Board of Directors, but in no
event shall such annual salary be less than $100,000. In addition to an annual
base salary, Mr. Menetrey's employment agreement provides for bonus
consideration and a customary benefits package. In the event that the Company
terminates the employment agreement without cause, Mr. Menetrey would be
entitled to receive his base salary and benefits until the earlier of (i) the
expiration of the then current term of the employment agreement without any
further extensions or (ii) the date which is six months after the termination
date. The employment agreement prohibits Mr. Menetrey from (i) competing with
the Company for a period of two years following termination of employment with
the Company and (ii) disclosing confidential information or trade secrets in any
unauthorized manner.
In May 1997, Richard L. Little entered into a one-year employment agreement
with the Company for the position of Vice President, Finance and Administration
and Chief Financial Officer. Subject to the termination provisions provided
therein, Mr. Little's employment agreement shall automatically be renewed for a
one-year term after the expiration of the initial term, and for successive
one-year terms thereafter. Mr. Little's agreement has been renewed for its first
one-year extension. His employment agreement provides for an annual base salary
to be determined by the Compensation Committee of the Board of Directors, but in
no event shall such annual salary be less than $135,000. In addition to an
annual base salary, Mr. Little's employment agreement provides for a minimum
annual bonus of $20,000 and a customary benefits package. In the event that the
Company terminates the employment agreement without cause, Mr. Little would be
entitled to receive his base salary and benefits until the earlier of (i) the
expiration of the then current term of the respective employment agreement
without any further extensions or (ii) the date which is two months after the
termination date. The employment agreement prohibits Mr. Little from (i)
competing with the Company for a period of two years following termination of
employment with the Company and (ii) disclosing confidential information or
trade secrets in any unauthorized manner.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information for the years indicated
concerning the compensation awarded to, earned by or paid to the Chief Executive
Officer of the Company and the two most highly paid executive officers, other
than the Chief Executive Officer (collectively, the "Named Executive Officers")
for services rendered in all capacities to the Company during such period.
Salary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Number of
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options Compensation(1)
------------------ ---- ------ ----- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robin A. Carden 1997 $156,667 -- -- -- $ 6,900
President and 1996 100,000 $28,500 -- -- 310,895
Chief Executive 1995 29,975 -- -- -- --
Officer
Walter R. Menetrey 1997 $117,708 -- -- -- --
Executive Vice 1996 5,000 $27,500 -- $50,000 --
President and 1995 -- -- -- --- --
Chief Operating
Officer
Richard L. Little 1997 $84,375 $20,000 -- 60,000 $1,500
Vice President, 1996 -- -- -- -- --
Finance and 1995 -- -- -- -- --
Administration
and Chief
Financial Officer
</TABLE>
- ----------
(1) For 1997, represents car allowances for Mr. Carden of $6,900 and Mr. Little
of $1,500. For 1996, represents Mr. Carden's $4,800 car allowance, $283,100
in deferred compensation and $22,995 interest on his loan to the Company.
Stock Option Grants and Exercise
The following table sets forth information regarding stock options granted
to each Named Executive Officer during fiscal year 1997 pursuant to the
Company's 1996 Stock Option Plan.
<TABLE>
<CAPTION>
% of Total Exercise or Grant Date
Options Awards Granted Base Present
Granted(1) to Employees in Price(3) Expiration Value(4)
Name (#) Fiscal Year(2) ($/Sh) Date ($/Sh)
---- --- -------------- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Robin A. Carden -- -- -- -- --
Walter R. Menetrey -- -- -- -- --
Richard L. Little 60,000 26.1% 8.38 04/28/07 $5.44
</TABLE>
- -------------
(1) Options are granted at fair market value at date of grant and are
exercisable in a series of three (3) equal and successive annual
installments over the optionee's period of service with the Company,
measured from the grant date, with the first installment exercisable one
year from the grant date. Each option must be exercised within 10 years of
the grant date, subject to earlier termination in the event of the
optionee's termination of employment with the Company. An incentive stock
option granted to a person owning more than 10% of the total combined
voting power of all classes of stock of the Company or of any parent or
subsidiary of the Company (a "Ten Percent Stockholder") must be exercised
within five years of the grant date. For incentive stock options granted
to a Ten Percent Stockholder, the exercise price shall not be less than
110% of the Fair Value per share of Common Stock.
(2) A total of 260,500 options were granted for the fiscal year ended December
31, 1997. At December 31, 1997 524,500 shares were outstanding. Of these
138,894 options were exercisable. At December 31, 1997 there were 475,500
shares of common stock reserved under the plan for future stock option
grants. In October 1996, the Company granted options for the purchase of
383,000 shares of common stock at the initial public offering price, all
of which were outstanding at December 31, 1996. Of the options outstanding
at December 31, 1996, 25,000 options with an exercise price of $13.50 were
exercisable.
(3) The exercise price for each option granted under the 1996 Stock Option
Plan shall not be less than 100% of the fair market value (the "Fair
Value") per share of Common Stock on the date such option is granted,
which with respect to the options granted to Mr. Little was equal to $8.38
per share. The exercise price may be paid in cash (by check), by
transferring shares of Common Stock owned by the option holder and having
a Fair Value on the date of surrender equal to the aggregate exercise
price of the option or, solely with respect to options other than those
granted to non-employee Directors, by cash payments in installments or
pursuant to a full recourse promissory note, in either case, upon the
terms and conditions as the Compensation Committee shall determine. Upon
the exercise of any option, the Company is required to comply with all
applicable withholding tax requirements.
(4) Represents grant date valuation computed under the Black-Scholes option
pricing model adapted for use in valuing stock options. The actual value,
if any, that may be realized will depend on the excess of the stock price
over the exercise price on the date the option is exercised, so there can
be no assurance that the value realized will be at or near the value
estimated by the Black-Scholes model. Grant date values were determined
based in part on the following assumptions for 1997: risk-free rate of
return of 6.28%, no dividend yield, expected life of 5 years, and
historical volatility of 56.92%.
Option Exercises and Holdings as of December 31, 1997
No stock options were exercised in fiscal year 1997 by any of the Named
Executive Officers. The following table sets forth, as of December 31, 1997, the
number of unexercised options held by each Named Executive Officer and the value
thereof based on the closing price of the Common Stock of $10.50 on December 31,
1997.
Aggregated Option/Warrant Exercises in Last Fiscal Year
and Fiscal Year-End Option/Warrant Values
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-the-Money
Options/Warrants at FY-End (#) Options/Warrants at FY-End ($)(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------
<S> <C> <C>
Robin A. Carden 0/0 0/0
Walter R. Menetrey 16,650/50,000 0/0
Richard L. Little 0/60,000 0/127,200
</TABLE>
- ----------
(1) Represents (i) the number of shares of Common Stock underlying options
(including options the exercise price of which was more than the market
value of the underlying securities) multiplied by (ii) the closing price at
December 31, 1997 of $10.50 minus the exercise price.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Andromeda Enterprises, Inc.
Andromeda Enterprises, Inc., a Delaware corporation ("Andromeda"), received
$60,000 from the Company in 1997 for sales, marketing and consulting services
performed by Andromeda on behalf of the Company. Mr. Udi Toledano, a Director,
principal stockholder and Chairman of the Board of the Company, is the President
of Andromeda and, together with his wife, beneficially owns all of its
outstanding capital stock.
REPORT ON EXECUTIVE COMPENSATION (1)
Introduction
Three of Alyn's directors, Messrs. Toledano (Chairman), Price and
Markbreiter, constitute the Compensation Committee, which, among other things,
is responsible for (1) reviewing and approving salaries, benefits and bonuses
for all executive officers of the Company; (2) reviewing and approving stock
option grants to employees of the Company; and (3) reviewing and recommending to
the Board of Directors matters relating to employee compensation and employee
benefit plans. The Board of Directors did not modify or reject any action or
recommendation of the Compensation Committee regarding compensation for the 1997
fiscal year.
This report sets out the Company's executive compensation philosophy and
objectives, describes the components of its executive compensation program and
describes the bases on which 1997 executive compensation determinations were
made with respect to the executive officers of the Company, including those
named in the Summary Compensation Table preceding this report.
Executive Compensation Philosophy and Objectives
In establishing and evaluating the effectiveness of compensation programs
for executive officers, as well as other employees of the Company, the
Compensation Committee is guided by three basic principles:
- The Company must offer competitive salaries to be able to attract and
retain highly-qualified and experienced executives and other
management personnel;
- Executive cash compensation in excess of base salaries should be tied
to Company and individual performance; and
- The financial interests of the Company's executives should be aligned
with the financial interests of the stockholders, primarily through
stock option grants and incentive compensation.
Compensation Program Components
Consistent with the Company's executive compensation objectives,
compensation for its senior executives consists of three elements: an annual
base salary, annual incentive compensation and long-term incentive compensation.
Annual Base Salary. The Compensation Committee annually reviews each
executive's base salary. Salary levels are generally targeted at and correspond
to the median of the range of compensation paid by similarly situated companies.
Actual salaries are based on individual performance contributions within a
competitive salary range for each position that is established through job
evaluation and market comparisons. Base pay levels for the executive officers
are competitive within a range that the Compensation Committee considers to be
reasonable and necessary to attract and retain qualified executives. Increases
in base salary are primarily the result of individual performance, which
includes meeting specific goals established by the Compensation Committee. The
criteria used in evaluating individual performance varies depending on the
executive's function, but generally include leadership inside and outside the
Company; advancing the Company's interests with customers, vendors and in other
business relationships; product quality and development; and advancement in
skills and responsibility.
- --------
1. Pursuant to Item 402(a)(9) of Regulation S-K promulgated by the SEC,
neither the "Report on Executive Compensation" nor the material under the
caption "Performance Measurement Comparison" shall be deemed to be filed
with the SEC for purposes of the Securities Exchange Act of 1934, as
amended, nor shall such report or such material be deemed to be
incorporated by reference in any past or future filing by the Company under
the Exchange Act or the Securities Act of 1933, as amended.
<PAGE>
Annual Incentive Compensation. The Compensation Committee annually
considers the performance of the Company and of each executive in determining
the amount of cash compensation to be paid in excess of base salaries. The
Compensation Committee also considers Management recommendations regarding bonus
compensation for all other employees, which are also based upon Company and
individual performance.
Long-Term Incentive Compensation. The 1996 Stock Incentive Plan authorizes
the Compensation Committee to make grants and awards of stock options to the
Company's employees. The stock options are granted with an exercise price equal
to the market price of the Company's Common Stock on the date of grant, have a
duration of ten years, and vest over three or four years. This approach is
designed to motivate management to increase stockholder value over the long-term
since, the full benefit of the compensation package cannot be realized unless
stock price appreciation occurs over a number of years. In determining the
number of options awarded, the Compensation Committee considers competitive
practices, the duties and scope of responsibilities of each officer's position
and the amount and terms of options already held by management.
Chief Executive Officer's Compensation. Mr. Carden's base salary was raised
from $150,000 to $160,000 effective May 1, 1997. Due to his significant
participation in the ownership of the Company, Mr. Carden did not receive a
grant of stock options in 1997. Mr. Price, who was appointed Chief Executive
Officer on April 20, 1998, has a base annual salary of $200,000, a guaranteed
minimum bonus compensation of $100,000 per year and in April 1998 received
options to purchase 80,000 shares of the Company's Common Stock.
Summary
The Compensation Committee believes that the compensation program for the
executives of the Company is comparable with the compensation programs provided
by comparable companies and serves the best interests of the stockholders of the
Company. The Compensation Committee also believes that annual performance pay is
appropriately linked to individual performance, annual financial performance of
the Company and stockholder value.
The Compensation Committee
Udi Toledano (Chairman)
Steven Price
Michael Markbreiter
<PAGE>
Performance Measurement Comparison
The following graph provides a comparison of the cumulative total
shareholder return for the period from October 22, 1996 (the date on which the
Common Stock was issued in the Company's initial public offering at $13.50 per
share) through December 31, 1997 (assuming reinvestment of any dividends) among
the Company, the NASDAQ Stock Market - U.S. Index and the Russell 2000 Index.
COMPARISON OF 12 MONTH CUMULATIVE TOTAL RETURN
AMONG ALYN CORPORATION, THE NASDAQ STOCK MARKET-U.S. INDEX
AND THE RUSSELL 2000 INDEX FOR PERIOD ENDING DECEMBER 31, 1997*
[GRAHPIC OMITTED]
* Assumes that the value of the investment in Alyn Corporation Common Stock and
each index was $100 on December 31, 1996 and that all dividends were reinvested.
The foregoing graph is based upon the following data:
Cumulative Total Return
<TABLE>
<CAPTION>
12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
ALYN CORPORATION 100 86 110 124 97
NASDAQ STOCK MARKET - U.S. INDEX 100 100 108 125 124
RUSSELL 2000 INDEX 100 94 109 125 121
</TABLE>
<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders is being provided to
each stockholder of the Company with this Proxy Statement. Additional copies may
be obtained without charge by writing to Alyn Corporation, 16761 Hale Avenue,
Irvine, California 92606, Attention: Secretary.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires certain
officers of the Company and its directors, and persons who own beneficially more
than ten percent of any registered class of the Company's equity securities, to
file reports of ownership and changes in ownership of Common Stock of the
Company with the SEC, the Nasdaq National Market and the Company. Based solely
on a review of the reports and representations provided to the Company by the
above-referenced persons, the Company believes that during 1997, all filing
requirements applicable to its reporting officers, directors and greater than
ten percent beneficial owners were properly and timely satisfied, except that
Richard Little, the Company's Chief Financial Officer, did not timely file his
Initial Statement of Beneficial Ownership on Form 3, which report has been
subsequently filed. In making these statements, the Company has relied on
representations of its directors, officers and greater than ten percent
beneficial owners, and copies of reports they have filed with the SEC.
STOCKHOLDER PROPOSALS
The eligibility of stockholders to submit proposals, the proper subjects of
stockholder proposals and the form of stockholder proposals are regulated by
Rule 14a-8 under Section 14 of the Securities Exchange Act of 1934, as amended.
In accordance with regulations issued by the SEC, stockholder proposals intended
for presentation at the 1999 Annual Meeting of stockholders must be received by
the Company at its principal executive office, 16761 Hale Avenue, Irvine, CA
92606, no later than February 3, 1999, if such proposals are to be considered
for inclusion in the Company's proxy statement for the 1999 Annual Meeting of
stockholders. Each proposal submitted should include the full and correct name
and address of the stockholder(s) making the proposal, the number of shares
beneficially owned and their date of acquisition. If beneficial ownership is
claimed, proof thereof should also be submitted with the proposal. The
stockholder or his or her representative must appear in person at the annual
meeting and must present the proposal, unless he or she can show good reason for
not doing so.
By Order of the Board of Directors
/S/ WALTER R. MENETREY
----------------------
Walter R. Menetrey
Secretary
