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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant / /
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 Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
JAVELIN SYSTEMS, INC.
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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JAVELIN SYSTEMS, INC.
17891 CARTWRIGHT ROAD
IRVINE, CALIFORNIA 92614
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 1999
------------------------
TO THE STOCKHOLDERS OF JAVELIN SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of JAVELIN
SYSTEMS, INC., a Delaware corporation (the "Company"), will be held on
Wednesday, December 22, 1999 at 1:00 p.m. local time at 17891 Cartwright Road,
Irvine, California 92614 for the following purposes:
1. To elect two (2) directors to serve until the 2002 Annual Meeting of
Stockholders and until such directors' successors are elected;
2. To approve an amendment of the Company's Restated Certificate of
Incorporation to change the Company's name to "Aspeon, Inc."
3. To approve the Company's 1997 Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 1,000,000 shares.
4. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending June 30, 2000; and
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on November 1, 1999,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
[LOGO]
Horace Hertz
SECRETARY
Irvine, California
November 12, 1999
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
JAVELIN SYSTEMS, INC.
17891 CARTWRIGHT ROAD
IRVINE, CALIFORNIA 92614
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 1999
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The Proxy Statement and the enclosed proxy card are furnished in connection
with the solicitation of proxies by the Board of Directors (the "Board") of
JAVELIN SYSTEMS, INC., a Delaware corporation (the "Company"), for use in voting
at the Annual Meeting of Stockholders to be held on December 22, 1999, at
1:00 p.m. local time, or at any adjournment or postponement thereof (the "Annual
Meeting"), for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at 17891 Cartwright Road,
Irvine, California, 92614. The Company intends to mail this Proxy Statement and
accompanying proxy card on or about November 12, 1999 to all stockholders
entitled to vote at the Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
The Board has fixed November 1, 1999 as the record date (the "Record Date")
for the determination of stockholders entitled to vote at the Annual Meeting.
Only holders of record of Common Stock at the close of business on November 1,
1999 will be entitled to notice of and to vote at the Annual Meeting. The only
outstanding class of capital stock of the Company is its Common Stock, $.01 par
value per share. At the close of business on the Record Date the Company had
outstanding and entitled to vote 8,974,074 shares of Common Stock. The presence
in person or by proxy of the holders of record of 8,974,074 of the issued and
outstanding Common Stock of the Company entitled to vote is required to
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be considered represented at the Annual
Meeting for the purposes of determining a quorum.
Each holder of Common Stock on the Record Date will be entitled to one vote
for each share held on all matters to be voted upon.
All proxies will be voted in accordance with the instructions contained in
the proxy. If no choice is made on your signed proxy card that is returned to
the Company, the shares represented by your executed proxy will be voted FOR
(i) Proposal 1 to elect management's nominees for director to the class which
term expires as of the Annual Meeting, (ii) Proposal 2 to approve an amendment
to the Company's Certificate of Incorporation to change the Company's name to
Aspeon, Inc., and (iii) Proposal 3 to approve the Company's 1997 Equity
Incentive Plan, as amended to increase the aggregate number of shares of Common
Stock for issuance under such plan by 1,000,000 shares, and (iv) Proposal 4 to
ratify the selection of PricewaterhouseCoopers LLP as the Company's independent
auditors for the fiscal year ending June 30, 2000. If the instructions on your
proxy card specifies "ABSTAIN" with respect to a particular proposal, the shares
represented by your proxy will be counted as an abstention for such proposal.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same
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effect as negative votes. Broker non-votes are counted towards a quorum, but are
not counted for any purpose in determining whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 17891
Cartwright Road, Irvine, California 92614, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
In order to be included in the Company's proxy statement and proxy card
relating to the 2000 Annual Meeting of Stockholders, proposals of stockholders
that are intended to be presented at the Company's 2000 Annual Meeting of
Stockholders must comply with the applicable Securities and Exchange Commission
rules and regulations. Such proposals of stockholders must also be sent to the
Secretary of the Company at the address set forth on page 1 of this Proxy
Statement and be received by the Company not later than July 17, 2000.
Unless a stockholder who wishes to bring a matter that will not be included
in the proxy statement before the stockholders at the Company's 2000 Annual
Meeting notifies the Company of such matter prior to September 28, 2000,
management will have discretionary authority to vote all shares for which it has
proxies in opposition to such matter.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and By-laws provide that
the Board shall be divided into three classes, with each class having a
three-year term. Vacancies on the Board may be filled only by persons elected by
a majority of the remaining directors. A director elected by the Board to fill a
vacancy (including a vacancy created by an increase in the number of directors
to serve on the Board) shall serve for the remainder of the full term of the
class of directors in which the vacancy occurred and until such director's
successor is elected and qualified.
The Board of Directors is presently composed of four members. Two vacancies
currently exist on the Board. There are two directors in the class whose term of
office expires in 1999. The nominees for election to this class, Richard P.
Stack and Robert Nichols are currently directors of the Company. Mr. Stack was
previously elected by the stockholders. Mr. Nichols was appointed to the Board
by a majority of the remaining directors to fill a vacancy on the Board. If
elected at the Annual Meeting, each of Mr. Stack and
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Mr. Nichols will serve until the 2002 Annual Meeting of Stockholders and until
his successor is elected and has qualified, or until his earlier death,
resignation or removal.
The two candidates receiving the highest number of affirmative votes cast at
the meeting will be elected directors of the Company. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of Mr. Stack and Mr. Nichols. In the event that Mr. Stack or
Mr. Nichols should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted (unless the proxy card is marked to the
contrary) for the election of such substitute nominee, if any, as management may
propose. Mr. Stack and Mr. Nichols have agreed to serve if elected, and
management has no reason to believe that Mr. Stack or Mr. Nichols will be unable
to serve. It is believed that all officers and directors of the Company will
vote their respective shares in favor of Mr. Stack and Mr. Nichols.
Set forth below is biographical information for Mr. Stack, Mr. Nichols and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
RICHARD P. STACK, age 34, has been President, Chief Executive Officer and a
director of the Company since the Company's inception in September 1995. Prior
to that time, from 1991 through September 1995, Mr. Stack was Managing Director
of Hi-Technology Supply, a manufacturer and distributor of personal computers
and components located in South Africa, which he founded and grew to
approximately $6 million in annual sales and 15 employees prior to its sale to a
South Africa-based personal computer and component manufacturing company. From
1988 through 1991, Mr. Stack was employed by Pan-American Airlines in technical
management positions. Mr. Stack holds a B.A. degree from the University of
California at Berkeley.
ROBERT NICHOLS, age 46, has been Vice President, Sales and Marketing, and a
director of the Company since April 1998, and has been President of CCI
Group, Inc. since its inception in 1992. Prior to that time, from 1991 to 1992,
Mr. Nichols served as Director of Sales and Marketing for DP-Tek, Inc., an
electronic components manufacturer and systems integrator. From 1985 through
1991, Mr. Nichols served in various sales and marketing positions, most recently
as Sales Manager, Quick Service Restaurants, for Unisys Corporation, a
publicly-traded computer and information systems provider. Mr. Nichols holds an
Associates Degree from the State University of New York and B.S. and M.B.A.
degrees from the University of Missouri.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE IN FAVOR OF THE NAMED NOMINEES.
DIRECTOR CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
There are currently two vacancies in the class of directors to be elected at
the 2000 Annual Meeting of Stockholders. The Board intends to identify and elect
at least one qualified person to fill such vacancies prior to the 2000 Annual
Meeting.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
JAY L. KEAR, age 62, was elected as a director of the Company in
August 1996. Since 1988, Mr. Kear has represented Stack Enterprises in working
with and investing in high technology companies. From 1988 through 1993,
Mr. Kear also engaged in similar work for the Noorda Family Trust. Prior to
1988, Mr. Kear held various sales, marketing, engineering, and general
management positions with private and public companies in the high technology
sector. Mr. Kear received a B.S. degree from the University of Southern
California.
ANDREW F. PUZDER, age 49, was elected as a director of the Company in
November 1996. Mr. Puzder is currently Executive Vice President of Irvine-based
Fidelity National Financial, Inc., Executive Vice
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President and General Counsel of CKE Restaurants, Inc., Chief Executive Officer
and a director of Santa Barbara Restaurants Group, and a director of Checkers
Drive-In Restaurants, Inc. He is also a partner on leave at the law firm of
Stradling, Yocca, Carlson & Rauth. Mr. Puzder received his J. D. from the
Washington University School of Law.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended June 30, 1999 the Board held four meetings. The
Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the auditor's comments as to controls, adequacy of staff
and management performance and procedures in connection with audit and financial
controls. The Audit Committee is composed of two non-employee directors:
Messrs. Kear and Puzder. The Audit Committee met one time immediately following
the 1999 fiscal year end to discuss the annual audit with the Company's
independent auditors.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plan and otherwise determines compensation levels and
performs such other functions regarding compensation as the Board may delegate.
The Compensation Committee is composed of two non-employee directors and one
employee director: Messrs. Kear, Puzder and Stack, respectively. Steve Goodman
was a member of the Compensation Committee until his resignation from the Board
of Directors in September 1999. The Compensation Committee acted by written
consent five times during the 1999 fiscal year.
The Board did not have a standing Nominating Committee during fiscal year
1999.
During the fiscal year ended June 30, 1999, each Board member, except
Mr. Nichols attended 75% or more of the aggregate of the meetings of the Board,
and of the committees on which he served, held during the period for which he
was a director or committee member, respectively.
PROPOSAL 2
APPROVAL OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
TO CHANGE NAME TO "ASPEON, INC."
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Amended and Restated Certificate of Incorporation
(the "Amendment") to change the Company's corporate name from Javelin
Systems, Inc. to "Aspeon, Inc." The proposed form of Amendment is attached
hereto as APPENDIX A. Please review carefully APPENDIX A in conjunction with
this proxy statement.
The Company and the Board of Directors have determined that it is in the
best interest of the Company to change its name to be consistent with the
Company's long term goals. In September 1999, the Company launched Aspeon
Solutions, a division responsible for marketing end-to-end solutions to the
foodservice industry. The Company believes that the change of its corporate name
to Aspeon, Inc. symbolizes its focus to provide end-to-end solutions in the
future.
Stockholders are requested in this Proposal 2 to approve the Amendment. The
affirmative vote of the holders of a majority of the outstanding shares will be
required to approve the Amendment. As a result, abstentions and broker non-votes
will have the same effect as negative votes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE 1997 EQUITY INCENTIVE PLAN
In September 1997, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1997 Equity Incentive Plan (the "1997
Plan"). Under the 1997 Plan, 300,000 shares of the Company's Common Stock were
reserved for issuance pursuant to the exercise of stock awards granted to
employees, directors and consultants. In 1998, the Board and the holders of a
majority of the Common Stock of the Company approved an amendment to the 1997
Plan to increase the number of shares authorized for issuance under the 1997
Plan to an aggregate of 1,100,000 shares.
In October 1999, the Board approved an amendment to the 1997 Plan, subject
to stockholder approval, to increase the number of shares authorized for
issuance under the 1997 Plan to 2,100,000 shares. The Board adopted this
amendment to ensure that the Company can continue to grant stock options to
employees at levels determined appropriate by the Board and the Compensation
Committee.
Stockholders are requested in this Proposal 3 to approve the 1997 Plan, as
amended. The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the amendment to the 1997 Plan, as amended. Abstentions will
be counted toward the tabulation of votes as negative votes. Broker non-votes
will not be counted for any purpose in determining whether this matter has been
approved.
The essential features of the 1997 Plan, as amended are outlined below:
GENERAL
The 1997 Plan provides for the grant of both incentive and nonstatutory
stock options as well as stock appreciation rights. Incentive stock options
granted under the 1997 Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Nonstatutory stock options granted under the 1997 Plan are
intended not to qualify as incentive stock options under the Code. See "Federal
Income Tax Information" for a discussion of the tax treatment of incentive and
nonstatutory stock options.
PURPOSE
The 1997 Plan was adopted to provide a means by which directors, selected
officers and employees of and consultants to the Company and its affiliates
could be given an opportunity to purchase stock in the Company, to assist in
retaining the services of directors and employees holding key positions, to
secure and retain the services of persons capable of filling such positions and
to provide incentives for such persons to exert maximum efforts for the success
of the Company. All of the Company's approximately 350 employees and consultants
are eligible to participate in the 1997 Plan.
ADMINISTRATION
The 1997 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1997 Plan and, subject to the
provisions of the 1997 Plan, to determine the persons to whom and the dates on
which options will be granted, the number of shares to be subject to each
option, the time or times during the term of each option within which all or a
portion of such option may be exercised, the exercise price, the type of
consideration and other terms of the option. The Board of Directors is
authorized to delegate administration of the 1997 Plan to a committee composed
of not fewer than 2 members of the Board, who may also be "outside directors"
within the meaning of Section 162(m) of the Code. The Board has delegated
administration of the 1997 Plan to the Compensation Committee of the Board. As
used herein with respect to the 1997 Plan, the "Board" refers to the
Compensation Committee as well as to the Board of Directors itself.
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ELIGIBILITY
Incentive stock options may be granted under the 1997 Plan only to employees
(including officers) of the Company and its affiliates. Stock awards other than
incentive stock options and stock appreciation rights appurtenant thereto may be
granted only to employees, directors or consultants.
No incentive stock option may be granted under the 1997 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed 5 years from the date of grant. For incentive
stock option grants, the aggregate fair market value, determined at the time of
grant, of the shares of Common Stock with respect to which such options are
exercisable for the first time by an optionee during any calendar year (under
all such plans of the Company and its affiliates) may not exceed $100,000.
STOCK SUBJECT TO THE 1997 PLAN
If options granted under the 1997 Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such options again
becomes available for issuance under the 1997 Plan. If proposal 3 is approved,
stock options granted under the 1997 Plan may not exceed in the aggregate
2,100,000 shares of the Company's Common Stock. If proposal 3 is not approved,
stock options granted under the 1997 Plan may not exceed in the aggregate
1,100,000 shares of the Company's Common Stock. As of the date of this Proxy
Statement, the Company has granted 1,095,250 options under the 1997 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1997 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options
under the 1997 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory options under the 1997 Plan may not be less
than 85% of the fair market value of the Common Stock subject to the option on
the date of the option grant. Deductions for compensation attributable to the
exercise of such options with exercise prices below market value could be
limited by Section 162(m). See "Federal Income Tax Information." At
September 15, 1999, the closing price of the Company's Common Stock as reported
on the Nasdaq National Market System was $11.3125 per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options.
The exercise price of options granted under the 1997 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement or (iii) in any other form of
legal consideration acceptable to the Board.
OPTION EXERCISE. Options granted under the 1997 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered by
options under the 1997 Plan will typically vest over a 4 to 5 year period with
25% to 20% vesting one year from the date of grant and 25% to 20% of the
remaining shares vesting yearly thereafter. Shares covered by options granted in
the future under the 1997 Plan may be subject to different vesting terms. To the
extent provided by the terms of an option, an optionee may satisfy any federal,
state or local tax withholding obligation relating to the exercise
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of such option by a cash payment upon exercise, by authorizing the Company to
withhold a portion of the stock otherwise issuable to the optionee, by
delivering already-owned stock of the Company or by a combination of these
means.
TERM. The maximum term of options under the 1997 Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is 5 years. Options
under the 1997 Plan generally terminate 3 months after termination of the
optionee's employment or relationship as a consultant or director of the Company
or any affiliate of the Company, unless (a) such termination is due to such
person's permanent and total disability (as defined in the Code), in which case
the option may, but need not, provide that it may be exercised at any time
within one year of such termination; (b) the optionee dies while employed by or
serving as a consultant or director of the Company or any affiliate of the
Company, or within 30 days after termination of such relationship, in which case
the option may, but need not, provide that it may be exercised (to the extent
the option was exercisable at the time of the optionee's death) within
18 months of the optionee's death by the person or persons to whom the rights to
such option pass by will or by the laws of descent and distribution; or (c) the
option by its terms specifically provides otherwise. Individual options by their
terms may provide for exercise within a longer period of time following
termination of employment or the consulting relationship. The option term may
also be extended in the event that exercise of the option within these periods
is prohibited for specified reasons.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1997 Plan or subject to
any option granted under the 1997 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1997 Plan and options
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such plan, the maximum number of shares
which may be granted to an employee during a calendar year, and the class,
number of shares and price per share of stock subject to such outstanding
options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1997 Plan provides that, in the event of a dissolution or liquidation of
the Company, specified type of merger or other corporate reorganization, to the
extent permitted by law, any surviving corporation will be required to either
assume options outstanding under the 1997 Plan or substitute similar options for
those outstanding under such plan. In the event that any surviving corporation
declines to assume options outstanding under the 1997 Plan, or to substitute
similar options, then such options will be terminated if not exercised prior to
such event.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1997 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1997 Plan will terminate in September 2007.
The Board may also amend the 1997 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within 12 months before or after its adoption by the Board if the
amendment would: (a) modify the requirements as to eligibility for participation
(to the extent such modification requires stockholder approval in order for the
Plan to satisfy Section 422 of the Code, if applicable, or Rule 16b-3
("Rule 16b-3") of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")); (b) increase the number of shares reserved for issuance upon exercise of
options; or (c) change any other provision of the 1997 Plan in any other way if
such modification requires stockholder approval in order to comply with
Rule 16b-3 or satisfy the requirements of Section 422 of the Code. The Board may
submit any other amendment to the 1997 Plan for stockholder approval, including,
but not limited to, amendments intended to satisfy the requirements of
Section 162(m)
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of the Code regarding the exclusion of performance-based compensation from the
limitation on the deductibility of compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1997 Plan, an incentive stock option may not be transferred by the
optionee otherwise than by will or by the laws of descent and distribution and
during the lifetime of the optionee, may be exercised only by the optionee. A
nonstatutory stock option may be transferred by the optionee to the spouse,
children, lineal ancestors and lineal descendants of the optionee or to an
organization to which tax deductible contributions may be made.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1997 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date on which the option is granted and
more than one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on the
length of time such stock was held. Long-term capital gains currently are
subject to lower tax rates than ordinary income. Slightly different rules may
apply to optionees who acquire stock subject to certain repurchase options or
who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
1997 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be
long-term or short-term depending on the length of time such stock was held.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
8
<PAGE>
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. Code Section 162(m) denies a
deduction to any publicly held corporation for compensation paid to covered
employees in a taxable year to the extent that compensation exceeds $1,000,000
for a covered employee. It is possible that compensation attributable to stock
options, when combined with all other types of compensation received by a
covered employee from the Company, may cause this limitation to be exceeded in
any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by the stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending June 30, 2000 and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting,
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection, the
Audit Committee and the Board will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Audit Committee and the Board in
their discretion may direct the appointment of different independent auditors at
any time during the year if they determine that such a change would be in the
best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent auditors. The Board unanimously approved the selection of
PricewaterhouseCoopers LLP and believes that all officers and directors will
vote their respective shares in favor of this Proposal 4.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 15, 1999, by
(i) each person who is known by the Company to own beneficially more than 5% of
the Company's outstanding Common Stock, (ii) each Named Executive Officer,
(iii) each of the Company's directors, and (iv) all current directors and
executive officers as a group. Except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) NUMBER PERCENT
- ------------------------------------------ --------- --------
<S> <C> <C>
Richard P. Stack(3)....................................... 706,791 7.9%
Robert D. Nichols(4)...................................... 403,783 4.5
C. Norman Campbell(5)..................................... 281,884 3.2
Jay L Kear(6)............................................. 41,000 *
Andrew F. Puzder(7)....................................... 25,000 *
Horace M. Hertz(8)........................................ 49,833 *
All Executive Officers and Directors as a group
(6 persons)(9).......................................... 1,305,941 16.6%
</TABLE>
- ------------------------
* Less than one percent
(1) All persons listed above have an address c/o the Company's principal
executive offices at 17891 Cartwright Road, Irvine, CA 92614.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and generally includes voting
or investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 8,894,803 shares of Common
Stock outstanding as of September 15, 1999.
(3) Includes 9,700 shares owned by Mr. Stack's children and 62,000 shares owned
by Mr. Stack's mother. Also includes 31,250 shares subject to options
exercisable within 60 days of September 15, 1999.
(4) Includes 12,600 shares owned by Mr. Nichols' children. Also includes 19,750
shares subject to options exercisable within 60 days of September 15, 1999.
(5) Includes 26,250 shares subject to options exercisable within 60 days of
September 15, 1999.
(6) Includes 5,000 shares held by the Jay Louis Kear family Trust of which
Mr. Kear is the trustee and 12,000 shares owned by an individual retirement
account of which Mr. Kear is the trustee. Also includes 24,000 shares
subject to options exercisable within 60 days of September 15, 1999.
(7) Includes 24,000 shares subject to options exercisable with 60 days of
September 15, 1999.
(8) Includes 1,500 shares held by GAK Limited, a partnership of which Mr. Hertz
is a general partner. Also includes 48,333 shares subject to options
exercisable with 60 days of September 15, 1999.
(9) Includes 173,583 shares subject to options exercisable within 60 days of
September 15, 1999.
10
<PAGE>
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(a)
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with 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 a 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 June 30, 1999, all officers,
directors and greater than ten percent beneficial owners complied with all
Section 16(a) filing requirements applicable to them; except that one report,
covering one transaction, was filed late by each of Messrs. Stack, Hertz,
Nichols and Campbell, respectively.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ----------------------------------
<S> <C> <C>
Richard P. Stack (1)(3)........... 34 President, Chief Executive Officer
and Director
Robert D. Nichols (2)(3).......... 46 Vice President, Sales and
Marketing, President, CCI
Group, Inc. and Director
C. Norman Campbell................ 45 Vice President, Engineering
Horace M. Hertz................... 50 Chief Financial Officer and
Secretary
Andrew F. Puzder(1)(2)(3)......... 45 Director
Jay L. Kear(1)(2)(3).............. 62 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) The biographies of the directors of the Company are set forth under Proposal
1, Election of Directors.
C. NORMAN CAMPBELL, age 45, has been Vice President, Engineering, of the
Company since its inception in September 1995. Mr. Campbell also served as
director of the Company from its inception through May 1998. Prior to that time,
from 1991 through September 1995, Mr. Campbell served in various engineering
management positions, including Director of Research and Development, Singapore,
for Advanced Logic Research, a publicly-traded high-end file server
manufacturing company. From 1984 to 1991, Mr. Campbell also acted as consultant
to the computer industry with such companies as Intel, ITT, Orange Micro Inc.
and IBC (UK).
HORACE M. HERTZ, age 50, has been Chief Financial Officer of the Company
since November 1997. Prior to that time, from 1996 to 1997, Mr. Hertz acted as
financial consultant for various companies. From October 1995 to December 1995,
Mr. Hertz was the Chief Financial Officer of Access Healthnet, Inc., an entity
that declared bankruptcy in December 1995. From 1991 to 1995, Mr. Hertz was a
partner of Corbin & Wertz, a CPA firm specializing in publicly-held companies.
From 1974 to 1991, Mr. Hertz was a partner of Deloitte & Touche LLP. Mr. Hertz
holds a masters degree in mathematics from the University of California at
Irvine.
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The members of the Board do not receive any cash compensation for their
service as a director, but are eligible for reimbursement of their expenses
incurred in connection with attendance at Board meetings in accordance with
Company policy.
Further, each non-employee director of the Company is to be granted options
to purchase 30,000 shares of the Company's Common Stock pursuant to the terms of
the Company's stock option plan then in effect for services rendered as a
director of the Company. During the last fiscal year, the Company did not grant
options to its non-employee directors. As of September 15, 1999 no non-employee
director had exercised any options.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal year ended June 30, 1999,
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and the three other most highly compensated executive officers who
earned more than $100,000 in the fiscal year ended June 30, 1999 (collectively,
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
SALARY BONUS SECURITIES
NAME AND PRINCIPAL POSITION YEAR ($) ($) UNDERLYING OPTIONS
- --------------------------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C>
Richard P. Stack............................... 1999 $187,887 -- 75,000
President, Chief Executive Officer 1998 $105,508 -- 50,000
and Director 1997 $ 87,958 -- --
Robert D. Nichols.............................. 1999 $ 37,500 $152,909 75,000
Vice President, Sales and Marketing, 1998 $ 73,250 $ 87,500 5,000
President, CCI Group, Inc. and Director
Horace M. Hertz................................ 1999 $143,333 $ 20,000 110,000
Chief Financial Officer 1998 $ 65,215 -- 55,000
C. Norman Campbell............................. 1999 $149,995 -- 75,000
Vice President, Engineering 1998 $107,593 -- 30,000
1997 $ 90,415 -- --
</TABLE>
STOCK OPTION GRANTS AND EXERCISES
In August 1996, the Company adopted, and the stockholders subsequently
approved, the Company's 1996 Stock Incentive Award Plan (the "1996 Plan"). Under
the 1996 Plan, 300,000 shares of the Company's Common Stock are reserved for
issuance pursuant to the exercise of stock awards granted to employees,
directors and consultants. As of September 15, 1999 options to purchase a total
of 185,700 shares were outstanding under the 1996 Plan and no shares remained
available for grant thereunder. The 1996 Plan will terminate in August 2006,
unless sooner terminated by the Company's Board of Directors.
The 1996 Plan provides for the grant of both incentive and nonstatutory
stock options, restricted stock, stock appreciation rights, dividend
equivalents, stock payments and/or performance awards (collectively "Incentive
Awards"). Incentive stock options granted under the 1996 Plan are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as
12
<PAGE>
amended (the "Code"). Nonstatutory stock options granted under the 1996 Plan are
intended not to qualify as incentive stock options under the Code.
No incentive stock option may be granted under the 1996 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock option grants, the aggregate fair market value, determined at
the time of grant, of the shares of Common Stock with respect to which such
options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Company and its affiliates) may not exceed
$100,000.
The Company did not grant any options to its executive officers under the
1996 Plan during the fiscal year ended June 30, 1999.
As of September 15, 1999 options to purchase a total of 1,019,400 shares
were outstanding under the 1997 Plan and options to purchase 63,750 shares
remained available for grant thereunder. The 1997 Plan will terminate in
September 2007, unless sooner terminated by the Company's Board of Directors.
The Company granted options for an aggregate of 345,000 shares to its
executive officers under the 1997 Plan during the fiscal year ended June 30,
1999.
In April 1999, the Board of Directors adopted the Company's 1999 Non-Officer
Stock Option Plan (the "1999 Plan"). The adoption of the 1999 Plan did not
require stockholder approval. Under the 1999 Plan, 1,000,000 shares of the
Company's Common Stock are reserved for issuance pursuant to the exercise of
stock options granted to employees and consultants. Under the 1999 Plan, stock
options may not be granted to the Company's officers or members of the Board. As
of September 15, 1999 options to purchase a total of 602,250 shares were
outstanding under the 1999 Plan and 397,750 shares remained available for grant
thereunder. The 1999 Plan will terminate in April 2009, unless sooner terminated
by the Company's Board of Directors.
The 1999 Plan provides for the grant of nonstatutory stock options.
Nonstatutory stock options granted under the 1996 Plan are intended not to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The exercise price of
stock options granted under the 1999 Plan must be equal to 100% of the fair
market value of the Company's Common Stock on the date of grant.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 1999 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE OR MARKET PRICE
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE ON DATE OF EXPIRATION
NAME GRANTED(1) FISCAL YEAR(2) ($/SH) GRANT DATE
- ---- ------------------ -------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Richard Stack................... 75,000 8.3% $ 8.75 $ 8.75 11/10/08
Robert D. Nichols............... 75,000 8.3% $ 8.75 $ 8.75 11/10/08
Horace M. Hertz................. 75,000 8.3% $ 8.75 $ 8.75 11/10/08
45,000 5.0% $10.875 $10.875 7/10/08
C. Norman Campbell.............. 75,000 8.3% $ 8.75 $ 8.75 11/10/08
</TABLE>
- ------------------------
(1) The options referenced above become exercisable over a 4-year period with
25% vesting one year from the date of grant and 25% of the remaining shares
vesting yearly thereafter.
(2) Based on options to purchase 903,750 shares granted to employees in the
fiscal year ended June 30, 1999, including the Named Executive Officers.
AGGREGATED FISCAL YEAR-END OPTION VALUES
There were no option exercises by the Named Executive Officers during the
fiscal year ended June 30, 1999. The following table sets forth information with
respect to the number and value of securities underlying unexercised options
held by the Named Executive Officers as of June 30, 1999:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(1) AT FISCAL YEAR-END(2)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard P. Stack............................... 10,000 115,000 $36,250 $407,500
Robert D. Nichols.............................. 1,000 79,000 $ 3,563 $276,750
Horace M. Hertz................................ 18,333 156,667 $66,457 $457,243
C. Norman Campbell............................. 7,500 97,500 $27,188 $344,063
</TABLE>
- ------------------------
(1) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of the
Company's Common Stock.
(2) Based on the fair market value of the Common Stock as of June 30, 1999.
Amounts reflected are based on the fair market value minus the exercise
price and do not indicate that the optionee sold such stock.
EMPLOYMENT AGREEMENTS
The Company and Richard P. Stack entered into an Employment Agreement dated
August 19, 1996 (the "Stack Employment Agreement"). The Stack Employment
Agreement expired on August 19, 1999 and was not renewed. The Stack Employment
Agreement provided for payment to Mr. Stack of an annual salary of $95,000 from
January 1, 1997 through December 31, 1997 and $105,000 from and after
January 1, 1998. As of April 1, 1998, Mr. Stack's annual salary was increased to
$150,000. During the 1999 fiscal year
14
<PAGE>
Mr. Stack's salary was increased to $200,000. In addition to his salary,
Mr. Stack was reimbursed for all reasonable and necessary travel and other
business expenses incurred in connection with the performance of his duties. The
Company was also obligated to pay the premium for a life insurance policy
insuring Mr. Stack's life providing for death benefits of up to $750,000 to the
named beneficiary of the policy. During the term of the Stack Employment
Agreement, if Mr. Stack's employment with the Company was terminated for cause
(as defined in the Stack Employment Agreement), Mr. Stack would have been
entitled to receive his base salary through the date of termination. During the
term of the Stack Employment Agreement, if Mr. Stack's employment with the
Company was terminated without cause, he would have been entitled to receive
payment of his base salary for the greater of (i) the remaining term of the
Stack Employment Agreement, or (ii) one (1) year from the date of termination.
The Company and C. Norman Campbell entered into an Employment Agreement
dated August 19, 1996 (the "Campbell Employment Agreement"). The Campbell
Employment Agreement expired on August 19, 1999 and was not renewed. The
Campbell Employment Agreement provided for payment to Mr. Campbell of an annual
salary of $95,000 from January 1, 1997 through December 31, 1997 and $105,000
from and after January 1, 1998. As of April 1, 1998, Mr. Campbell's annual
salary was increased to $130,000. During the 1999 fiscal year, Mr. Campbell's
salary was increased to $150,000. In addition to his salary, Mr. Campbell was
reimbursed for all reasonable and necessary travel and other business expenses
incurred in connection with the performance of his duties. The Company was also
obligated to pay the premium for a life insurance policy insuring
Mr. Campbell's life providing for death benefits of up to $750,000 to the named
beneficiary of the policy. During the term of the Campbell Employment Agreement,
if Mr. Campbell's employment with the Company was terminated for cause (as
defined in the Campbell Employment Agreement), Mr. Campbell would have been
entitled to receive his base salary through the date of termination. During the
term of the Campbell Employment Agreement, if Mr. Campbell's employment with the
Company was terminated without cause, he would have been entitled to receive
payment of his base salary for the greater of (i) the remaining term of the
Campbell Employment Agreement, or (ii) one year from the date of termination.
CCI Group, Inc., a wholly-owned subsidiary of the Company ("CCI"), and
Robert Nichols entered into an Employment Agreement dated January 1, 1998 (the
"Nichols Employment Agreement"). The Nichols Employment Agreement expires on
December 31, 2002 and provides for payment to Mr. Nichols of an annual base
salary of $100,000. Mr. Nichols is also entitled to a quarterly bonus of $6,250
and a year-end bonus of approximately $31,750, subject to adjustment based on
CCI's profitability for the applicable fiscal year. In addition to his base
salary and bonuses, Mr. Nichols is also reimbursed for all reasonable and
necessary travel and other business expenses incurred in connection with the
performance of his duties. If Mr. Nichols' employment with CCI is terminated for
cause (as defined in the Nichols Employment Agreement) or in the event of a
voluntary termination of employment by Mr. Nichols following a change in control
(as defined in the Nichols Employment Agreement), Mr. Nichols will be entitled
to his base salary through the date of termination. If Mr. Nichols is terminated
without cause (as defined in the Nichols Employment Agreement), then
Mr. Nichols will be entitled to a lump sum equal to Mr. Nichol's annual base
salary.
CERTAIN TRANSACTIONS
On September 25, 1999, the Company loaned $80,000 to Andrew Puzder, a
director of the Company, at an interest rate of 6% per year for personal
reasons. Mr. Puzder's options to purchase 30,000 shares of the Company's Common
Stock serve as collateral for such loan.
On December 22, 1997, the Company issued 557,500 shares of the Company's
Common Stock to Robert Nichols, Executive Vice President, Sales and Marketing,
and a Director of the Company, for his entire interest in CCI in connection with
the purchase by the Company of all the outstanding capital stock of CCI. In
connection with the acquisition of CCI, the Company also assumed a note payable
to Mr. Nichols with a balance of approximately $185,000 (the "Nichols Note"). In
February 1998, the
15
<PAGE>
Company repaid to Mr. Nichols the principal amount and all accrued interest
outstanding under the Nichols Note.
The Company has entered into employment agreements with Richard P. Stack and
C. Norman Campbell which expired in August 1999. In addition, CCI entered into
an employment agreement with Robert Nichols. See "Management-Employment
Agreements."
OTHER MATTERS
The Board knows of no other matters that will be presented for consideration
at the Annual Meeting. If any other matters are properly brought before the
meeting, it is the intention of the persons named in the accompanying proxy and
to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
[LOGO]
Horace Hertz
SECRETARY
November 12, 1999
THE COMPANY WILL FURNISH TO RECORD AND BENEFICIAL HOLDERS OF ITS COMMON
STOCK UPON REQUEST, FREE OF CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 1999 BY CALLING OR WRITING TO THE
COMPANY AT: CORPORATE SECRETARY, JAVELIN SYSTEMS, INC., 17891 CARTWRIGHT ROAD,
IRVINE, CALIFORNIA 92614 (TELEPHONE NUMBER (949) 440-8000).
16
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF JAVELIN SYSTEM, INC.
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
JAVELIN SYSTEMS, INC.
JAVELIN SYSTEMS, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby certify that:
1. The name of the Corporation is Javelin Systems, Inc. The Corporation was
originally incorporated under the name Sunwood Research, Inc. The
Certificate of Incorporation for Sunwood Research, Inc. was filed with the
Secretary of State of the State of Delaware (the "Secretary of State") on
September 19, 1995.
2. Pursuant to an Action by Unanimous Written Consent in lieu of a meeting of
the Board of Directors of the Corporation, the Corporation adopted
resolutions setting forth a proposed Amendment to Amended and Restated
Certificate of Incorporation of the Corporation, declaring said Amendment to
Amended and Restated Certificate of Incorporation to be advisable and
authorizing the officers of the Corporation to present the proposed
Amendment to Amended and Restated Certificate of Incorporation to the
stockholders of the Corporation for their consideration.
3. Thereafter, the proposed Amendment to Amended and Restated Certificate of
Incorporation of the Corporation was approved by the holders of a majority
of the outstanding shares of stock of the Corporation entitled to vote
thereon at a duly convened annual meeting of stockholders called in
accordance with Section 222 of the DGCL.
4. Pursuant to Sections 242 of the DGCL, this Amendment to Amended and Restated
Certificate of Incorporation amends the provisions of the Amended and
Restated Certificate of Incorporation of this Corporation filed with the
Secretary of State on January 12, 1999.
5. This Amended and Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 of the DGCL.
6. Article FIRST of the Certificate of Incorporation of the Corporation is
hereby amended to read in its entirety as follows:
"FIRST. The name of the Corporation is Aspeon, Inc."
IN WITNESS WHEREOF, Javelin Systems, Inc. has caused this Certificate of
Amendment to be signed by its President and attested to by its Secretary this
day of December, 1999.
JAVELIN SYSTEMS, INC.
By:
--------------------------------------
Richard Stack,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
ATTEST:
By:
------------------------------------------
Horace Hertz,
SECRETARY
<PAGE>
PROXY JAVELIN SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 1999
The undersigned hereby appoints Richard P. Stack and Horace M. Hertz, and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Javelin Systems, Inc. which
the undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Javelin Systems, Inc. to be held at the offices of the Company, 17891 Cartwright
Road, Irvine, California 92614 at 1:00 p.m. local time, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect two (2) directors to serve until the 2002 Annual Meeting of
Stockholders and until their successors are elected.
/ / FOR the nominees listed below. / / WITHHOLD AUTHORITY to vote for the
nominee or the Nominees indicated
below:
NOMINEES: Richard P. Stack and Robert Nichols
- ----------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 2: To approve an amendment to the Company's amended and restated
certificate of incorporation to change the Company's name to
"Aspeon, Inc."
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 3.
PROPOSAL 3: To approve the Company's 1997 Equity Incentive Plan, as amended to
increase the number of shares authorized under the 1997 Plan from
1,100,000 to 2,100,000.
/ / FOR / / AGAINST / / ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 4.
PROPOSAL 4: To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Company for its fiscal year ending June 30, 2000.
/ / FOR / / AGAINST / / ABSTAIN
DATED
-----------------------------------,
1999
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SIGNATURE(S)
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS HEREON. IF THE STOCK IS
REGISTERED IN THE NAMES OF TWO OR
MORE PERSONS, EACH SHOULD SIGN.
EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND
ATTORNEYS-IN-FACT SHOULD ADD THEIR
TITLES. IF SIGNER IS A CORPORATION,
PLEASE GIVE FULL CORPORATE NAME AND
HAVE A DULY AUTHORIZED OFFICER
SIGN, STATING TITLE. IF SIGNER IS A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
