<PAGE> 1
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 Section 240.14a-11(c) or
Section 240.14a-12
NORRIS COMMUNICATIONS, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14A-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / 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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<PAGE> 2
NORRIS COMMUNICATIONS, INC.
12725 STOWE DRIVE, POWAY, CALIFORNIA 92064
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 6, 1996
TO THE STOCKHOLDERS OF
NORRIS COMMUNICATIONS, INC.
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Norris Communications, Inc., a Delaware corporation (the
"Company"), will be held at California Center for the Arts located at 340 N.
Escondido Boulevard, Escondido, California 92025, on Friday, December 6, 1996,
beginning at 9:00 a.m. local time. The Annual Meeting will be held for the
following purpose:
1. To elect directors of the Company to serve as directors until the
annual meeting of stockholders to be held in 1997, until such directors'
successor has been duly elected and qualified or until such directors have
otherwise ceased to serve as directors.
2. To ratify the appointment of Ernst & Young as independent
accountants for the Company for the fiscal year ending March 31, 1997.
3. To transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
The Board of Directors has fixed November 1, 1996 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any postponements or adjournments thereof, and only
stockholders of record at the close of business on that date are entitled to
such notice and to vote at the Annual Meeting. A list of stockholders entitled
to vote at the Annual Meeting will be available at the offices of the Company
for ten (10) days prior to the Annual Meeting.
We hope that you will use this opportunity to take an active part in
the affairs of the Company by voting on the business to come before the Annual
Meeting either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE
REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A
STAMPED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES
MORE THAN ONE PROXY CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT
NAMES OR ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
By Order of the
Board of Directors
[SIG]
R. GORDON ROOT
President and Chief
Executive Officer
Poway, California
November 5, 1996
<PAGE> 3
NORRIS COMMUNICATIONS, INC.
12725 STOWE DRIVE
POWAY, CALIFORNIA 92064
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 6, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Norris Communications, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 9:00 a.m., local time, on December 6, 1996, and
any postponements or adjournments thereof for the purposes set forth in the
accompanying Notice of Annual Meeting. This Proxy Statement and the accompanying
form of proxy were first mailed to stockholders on or about November 5, 1996.
RECORD DATE AND VOTING
November 1, 1996 has been fixed as the record date (the "Record Date")
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting, and any postponements or adjournments thereof. As of November 5,
1996, there were 22,376,637 shares of the Company's common stock, $.001 par
value per share (the "Common Stock"), issued and outstanding. No shares of the
Company's preferred stock, $.001 par value per share, were outstanding as of
that date. A majority of the shares of Common Stock entitled to vote, present in
person or represented by proxy, will constitute a quorum at the meeting.
Each share of Common Stock issued and outstanding on the Record Date is
entitled to one vote on any matter presented for consideration and action by the
stockholders at the Annual Meeting. With respect to all matters other then the
election of directors, the affirmative vote of a majority of the shares of the
Company's Common Stock present in person or represented by proxy at the meeting
and entitled to vote on the subject matter will be the act of the stockholders.
Directors will be elected by a plurality of the votes of the shares of the
Company's Common Stock present in person or represented by proxy and entitled to
vote on the election of directors. Abstentions will be treated as the equivalent
of a negative vote for the purpose of determining whether a proposal has been
adopted and will have no effect for the purpose of determining whether a
director has been elected. Unless otherwise instructed, proxies solicited by the
Company will be voted "FOR" the nominees named herein for election as directors
and "FOR" the ratification of the selection of Ernst & Young to provide audit
services to the Company for the fiscal year ending March 31, 1997.
New York Stock Exchange Rules ("NYSE Rules") generally require that
when shares are registered in street or nominee name, its member brokers must
receive specific instructions from the beneficial owners in order to vote on
certain proposals. However, the NYSE Rules do not require specific instructions
in order for a broker to vote on the election of directors. If a member broker
indicates on the proxy that such broker does not have discretionary authority as
to certain shares to vote on any proposal that does require specific
instructions, those shares will not be considered as present and entitled to
vote with respect to that matter. Pursuant to Delaware law, a broker non-vote
will not be treated as present or voting in person or by proxy on the proposal.
A broker non-vote will have no effect for the purpose of determining whether a
director has been elected.
<PAGE> 4
A stockholder giving a proxy has the power to revoke it at any time
before it is exercised by giving written notice of revocation to the Secretary
of the Company, by executing a subsequent proxy, or by attending the Annual
Meeting and voting in person. Subject to any such revocation, all shares
represented by properly executed proxies will be voted in accordance with the
specifications on the enclosed proxy card.
ELECTION OF DIRECTORS
The Company's bylaws state that the Board of Directors shall consist of
not less than four nor more than seven members. The specific number of Board
members within this range is established by the Board of Directors and is
currently set at five. A Board of five directors will be elected at the Annual
Meeting. Unless otherwise instructed, proxy holders will vote the proxies
received by them for the Company's five nominees named below. In the event that
any nominee of the Company is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any nominee who shall
be designated by the present Board of Directors to fill the vacancy. In the
event that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner as will
assure the election of as many of the nominees listed below as possible, and, in
such event, the specific nominees to be voted for will be determined by the
proxy holders. It is not expected that any nominee will be unable or will
decline to serve as a director. The term of office of each person elected as a
director will continue until the next annual meeting of stockholders and such
time as his or her successor is fully elected and qualified or until his or her
earlier resignation, removal or death. The nominees have supplied the following
background information to the Company:
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Elwood G. Norris 57 Chairman of the Board and Chief Technology 1988
Officer of the Company since 1988
R. Gordon Root 45 President and Chief Executive Officer of 1995
the Company since 1995
Robert Putnam 38 Vice President and Secretary of the 1995
Company since 1988
James D. Miller 53 Vice President of Manufacturer's 1995
Services, Ltd. since 1996
Michael W. Joe 31 Managing Director of Klein Investment N/A
Group, L.P.
</TABLE>
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE ABOVE NOMINEES.
2
<PAGE> 5
MANAGEMENT
Set forth below is certain information with respect to each of the
nominees for the office of director, each director whose term of office will
continue after the Annual Meeting and each executive officer of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Elwood G. Norris(1) 57 Chairman of the Board and Chief Technology Officer
R. Gordon Root 45 President, Chief Executive Officer and Director
Robert Putnam(2) 38 Vice President, Secretary and Director
James D. Miller(1)(2) 53 Director
Peter W. Gorrie 54 Chief Operating Officer
Kathleen E. Terry 43 Chief Financial Officer
Michael W. Joe 31 Director (nominee)
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Elwood G. Norris - Mr. Norris has been Chairman of the Board of
Directors of the Company since 1988. From 1988 to October 1995, he was President
and Chief Executive Officer. In October 1995 he was appointed Chief Technology
Officer. Since 1980, Mr. Norris has also been a Director of American Technology
Corporation ("ATC") and served as its President and Chief Executive Officer
until February 1994. ATC is a publicly held consumer electronic products
company, from which the Company acquired JABRA Corporation ("JABRA"). Since
August 1989, he has served as director of Patriot Scientific Corporation
("Patriot") and served as Chairman and Chief Executive Officer until June 1994.
From June 1995 until June 1996 when he was reappointed Chairman, Mr. Norris
served as temporary President and Chief Executive Officer of Patriot, upon the
illness and subsequent death of its Chairman, President and Chief Executive
Officer. Patriot is a public company engaged in the development of
microprocessor technology, digital modem products and radar and antenna
engineering. He invented the patented EarPHONE technology owned by JABRA and is
the primary inventor of the Company's digital recording technology. Mr. Norris
devotes only part-time services to the Company, approximately twenty hours per
week.
R. Gordon Root - Mr. Root was appointed President, Chief Executive
Officer and a director of the Company in October 1995. From 1993 to October
1995, he was President and Chief Executive Officer of Maxoptix Corporation, a
subsidiary of Kubota, a Japanese conglomerate. From 1990 to 1993 he was founder
and Chief Executive Officer of Brookhaven Business Development, Inc., an interim
management company, where he was active in six turnaround companies and
consulted on corporate image and brand identity programs. He served as President
and Chief Operating Officer of Emerald Systems Corporation, a computer network
peripheral and software company from 1989 to 1990. Previous positions included
executive positions with Carlisle Corporation, Cipher Data Products, Inc. and
Polaroid. Mr. Root obtained his MBA in marketing from the University of Southern
California and his BA in business from American University in 1972.
Robert Putnam - Mr. Putnam was appointed Secretary of the Company in
March 1988, and Vice President in April 1993. He was appointed a director of the
Company in 1995. He has been a director of ATC since 1984 and also served as
Secretary/Treasurer until February 1994 when he was appointed President and
Chief Executive Officer of ATC. He has also served as Secretary/Treasurer and a
director of Patriot since 1989. Mr. Putnam obtained a B.A. degree in mass
communications/advertising from Brigham Young University in 1983. Mr. Putnam
devotes only part-time services to the Company, approximately ten hours per
week.
James D. Miller - Mr. Miller was appointed as a director in December
1995. Since March 1996, he has served as Vice President in charge of west coast
operations for Manufacturer's Services, Ltd. ("MSL"), an international contract
manufacturer. From March 1993 to March 1996, Mr. Miller served as Vice President
and General Manager of all West
3
<PAGE> 6
Coast operations of AVEX Electronics, Inc. From March 1992 to March 1993, Mr.
Miller held the position of Program Director at Solectron Corporation. Prior to
joining Selectron, Mr. Miller served as Vice President of operations for Emerald
Systems Corporation from June 1989 through March 1992.
Michael W. Joe - Michael W. Joe has been a Managing Director of Klein
Investment Group, L.P. (formerly Iacocca Capital Partners, L.P.) and a Vice
President of ICG, Inc., the General Partner of Klein Investment Group, L.P.
since 1994. Klein Investment Group, L.P. is an investment and merchant bank
originally formed by Lee Iacocca, retired Chairman of Chrysler Corporation, two
other partners and the Jefferies Group, Inc. Prior to joining Klein Investment
Group, L.P., Mr. Joe was a Manager of Strategic Planning for the Walt Disney
Company from 1991 to 1994, where he specialized in new business development and
acquisitions for the Company's filmed entertainment division, and from 1987 to
1989 was an investment banker with Salomon Brothers Inc. Mr. Joe holds a Master
of Business Administration from the Wharton School at the University of
Pennsylvania and a Bachelor of Commerce from Queen's University in Canada.
Peter W. Gorrie - Mr. Gorrie has been Chief Operating Officer of the
Company since February 1996 and also served as Chief Financial Officer until May
1996. From 1991 to 1995, Mr. Gorrie served as an independent turn-around
consultant for a number of companies, including Quotron Systems, Inc., Talaris
Systems, Inc. and Cipher Data Products. Previous positions included executive
positions with Sega Electronics, Inc. and Psychology Today. Mr. Gorrie obtained
his B.S. in accounting from San Diego State University.
Kathleen E. Terry - Ms. Terry joined the Company as Chief Financial
Officer in May 1996. From March 1995 to May 1996, she was Chief Financial
Officer at BioSafety Systems Inc. From April 1992 to March 1995, Ms. Terry held
the positions of Corporate Secretary and Chief Financial Officer at IRT
Corporation. Prior to joining IRT Corporation, Ms. Terry was a co-founder and
Vice President of Finance for Health Vu from May 1991 to March 1992. Previous
positions included executive finance positions with Emerald Systems Corporation,
Carlisle Corporation and M/A-COM Telecommunications. Ms. Terry obtained her B.S.
in accounting from San Diego State University, her public accounting experience
with KPMG-Peat Marwick, and is a certified public accountant.
For information concerning beneficial ownership of Common Stock by
directors and executive officers, see "Security Ownership of Certain Beneficial
Owners and Management" below. The Board of Directors met two times during fiscal
1996, which meetings each director then in office attended.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
Audit Committee - The Board has a standing Audit Committee that reviews
the audit and control functions of the Company, the Company's accounting
principles, policies and practices and financial reporting, the scope of the
audit conducted by the Company's auditors, the fees and all non-audit services
of the independent auditors and the independent auditors' opinion and letter of
comment to management and management's response thereto. The Audit Committee did
not meet in fiscal 1996. At the date of this Proxy Statement, the Audit
Committee was comprised of Messrs. Norris and Miller.
Compensation Committee - The Board has a Compensation Committee (the
"Compensation Committee") whose members at the date of this Proxy Statement were
Messrs. Putnam and Miller. The Compensation Committee is authorized to review
and recommend to the Board the salaries, bonuses and prerequisites of the
Company's executive officers. The Compensation Committee also reviews and
recommends to the Board any new compensation or retirement plans and administers
the Company's 1992 and 1994 Stock Option Plans. The Compensation Committee did
not meet in fiscal 1996.
4
<PAGE> 7
DIRECTOR COMPENSATION
Standard Compensation - The Company has no other arrangements to pay
any direct or indirect remuneration to any directors of the Company in their
capacity as directors other than in the form of reimbursement of expenses for
attending directors' or committee meetings.
Stock Options - Directors have received in the past and may receive in
the future stock options pursuant to the Company's stock option plans. No
options were issued to non-employee directors during the fiscal year ended March
31, 1996.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the years ended March 31, 1996, 1995
and 1994, the cash compensation of the Chief Executive Officer and the four
other most highly compensated executive officers of the Company who received
compensation in excess of $100,000 in that year (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term All Other
Compensation Compensation Compensation
------------ ------------ ------------
Options
Name and Fiscal (# of Shares)
Principal Position Year Salary Bonus -------------
------------------ ---- ------ -----
<S> <C> <C> <C> <C> <C>
R. Gordon Root, President & 1996 $ 85,615 $20,000(2) 150,000 -0-
Chief Executive Officer(1) 1995 $ -0- -0- -0- -0-
1994 $ -0- -0- -0- -0-
Elwood G. Norris, Chairman 1996 $163,500 -0- 400,000 -0-
and Chief Technology 1995 $120,384 -0- -0- -0-
Officer(3) 1994 $ 47,944 -0- 300,000(4) -0-
</TABLE>
(1) In October 1995, the Company entered into an employment agreement with
R. Gordon Root, the Company's President and Chief Executive Officer.
The employment agreement provides for, among other standard benefits,
quarterly bonus payments of cash and stock (comprising 40% of his base
salary) of $180,000. The employment agreement, which has no specific
term, further provides that Mr. Root shall continue to receive his base
salary for a period of six months in the event of termination for
reason other than cause and voluntary termination.
(2) Amount stated reflects fair market value of 13,333 common shares as of
the date of grant.
(3) In September 1995, the Company entered into an employment agreement
with Elwood G. Norris, the Company's former President and Chief
Executive Officer and current Chief Technology Officer. The employment
agreement provides for payment of a base salary of $115,000 per year
until October 31, 1997, when the base salary shall automatically
increase 10% per year. The employment agreement, which terminates on
September 30, 1999, further provides that Mr. Norris (or his estate)
shall continue to receive his base salary for a period of not longer
than twelve months in the event Mr. Norris is unable to fulfill his
duties due to mental or physical disabilities or death. Under terms of
the employment agreement, Mr. Norris also is entitled to participate in
the Company's bonus pool and health insurance plan.
(4) During the fiscal year ended March 31, 1994, options on a total of
193,500 common shares granted in 1993 were repriced and 107,500 new
options were granted to Mr. Norris.
5
<PAGE> 8
The following table sets forth information with respect to options to
purchase shares of the Company's Common Stock granted in the fiscal year ended
March 31, 1996 to the Chief Executive Officer and the Named Executive Officer.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------
% of Total
Options
Granted to Exercise
Options Employees Price (per Expiration
Name Granted(#) in Fiscal 1996 share) Date
- ---- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
R. Gordon Root 150,000 15.6% $1.50 10/09/99
Elwood G. Norris 400,000 41.5% $3.38 4/03/00
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
There were no options exercised by the Named Executive Officers during
the fiscal year ended March 31, 1996. The following table provides information
on unexercised options at March 31, 1996:
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options At In-the-Money Options At
March 31, 1996 March 31, 1996
-------------- --------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
R. Gordon Root 50,000 100,000 $-0- $-0-
Elwood G. Norris 700,000 -0- $-0- $-0-
</TABLE>
The Company has not awarded stock appreciation rights to any employee of
the Company and has no long-term incentive plans, as that term is defined in
Securities and Exchange Commission regulations. The Company has no defined
benefit or actuarial plans covering any person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following security ownership information is set forth, as of November
1, 1996, with respect to certain persons or groups known to the Company to be
beneficial owners of more than 5% of the Company's outstanding Common Stock and
with respect to each director of the Company, each of the executive officers
named in the Summary Compensation Table currently employed by the Company, and
all current directors, nominees and executive officers as a group (seven
persons). Other than as set forth below, the Company is not aware of any other
person who may be deemed to be a beneficial owner of more than 5% of the
Company's Common Stock.
6
<PAGE> 9
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner(1)(2) Beneficial Ownership(3) Percent of Class
- ------------------------------------------ ----------------------- ----------------
<S> <C> <C>
Elwood G. Norris 1,399,838 (3) 6.1%
R. Gordon Root 163,333 (4) *
Robert Putnam 199,658 (5) *
James D. Miller Nil *
Peter W. Gorrie 100,000 (6)
Kathleen E. Terry Nil *
Michael W. Joe (7) Nil *
BKP Partners, L.P. (8) 1,987,048 8.9%
All officers, directors and nominees
as a group (7 persons) 1,862,829 (9) 8.4%
</TABLE>
* Less than 1%
(1) The address of each beneficial owner other than BKP Partners, L.P.
is 12725 Stowe Drive, Poway, California 92064. The address of BKP
Partners, L.P. is One Sansome Street, Suite 3900, San Francisco,
California 94104.
(2) Unless otherwise noted, sole voting and dispositive power are
possessed with respect to all shares of Common Stock owned.
(3) Includes 225,000 shares owned by ATC as a result of Mr. Norris' 38%
beneficial ownership and presently exercisable options to purchase
700,000 shares.
(4) Includes presently exercisable options to purchase 150,000 shares.
(5) Includes presently exercisable options to purchase 169,658 shares.
(6) Consists entirely of presently exercisable options to purchase
shares.
(7) Excludes presently exercisable warrants to purchase 907,824 shares
owned by Klein Investment Group, L.P., of which Mr. Joe is a
managing director.
(8) Voting and dispositive powers with respect to these shares are held
by Robert K. Pryt, the managing general partner of BKP Partners,
L.P.
(9) Includes presently exercisable options to purchase 1,119,658 shares
and the 225,000 shares owned by ATC and attributable to Mr. Norris.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers and persons who own more
than 10% of the Common Stock (collectively "Insiders") to file initial reports
of ownership (Forms 3) and reports of changes in ownership of Common Stock
(Forms 4 and Forms 5) with the Securities and Exchange Commission as well as the
Company and the NASDAQ (Small Cap) Market.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations from each Insider
known to the Company that no other reports were required, during the fiscal year
ended December 31, 1995, all Section 16(a) filing requirements applicable to its
Insiders were complied with.
7
<PAGE> 10
CERTAIN TRANSACTIONS
Elwood Norris, Chairman and Chief Technology Officer of the Company, is
also a director of ATC. He is the beneficial owner of 3,281,475 shares of ATC
(representing approximately 38% of its issued and outstanding capital) and
Robert Putnam, the Vice President/Secretary and a director of the Company is
also a director, President and Chief Executive Officer of ATC. He is the
beneficial owner of 620,000 shares of ATC (representing approximately 8% of its
issued and outstanding shares).
During the fiscal year ended March 31, 1996, the Company sublet its former
operating facility comprising approximately 10,800 square feet at 12800
Brookprinter Place, Poway, California to ATC on a month to month basis. During
the fiscal year ended March 31, 1996, ATC paid the Company $60,000 in rent.
Commencing on April 1, 1996, the Company commenced providing approximately 2,407
square feet of space and certain support services to ATC at the rate of $3,095
per month. As of July 31, 1996, the Brookprinter property was leased to an
independent third party, and the existing lease was terminated. The Company
believes that the terms of these arrangements are no less favorable than could
be obtained from an independent and unaffiliated party.
The Company also performs certain contract manufacturing for ATC from time
to time on terms the Company believes are comparable to other contract
manufacturing customers. During the fiscal year ended March 31, 1996,
approximately $68,000 of services were provided by the Company to ATC.
In August 1996, the Company entered into a three year consulting agreement
to provide financial advisory services with Klein Investment Group, L.P. In
connection therewith, Klein Investment Group, L.P. is entitled to receive
$10,000 per month and warrants to purchase a minimum of 400,000 to a maximum of
800,000 shares of the common stock of the Company, depending upon the occurrence
of certain events including, without limitation, the trading of the common stock
of the Company at certain increased price levels. Michael Joe, a director
nominee, is a Managing Partner of Klein Investment Group, L.P.
Conflicts of Interest. Certain conflicts of interest now exist and will
continue to exist between the Company and its officers and directors due to the
fact that they have other employment or business interests to which they devote
some attention and they are expected to continue to do so. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interest between the Company and its management or
management-affiliated entities. There can be no assurance that members of
management will resolve all conflicts of interest in the Company's favor. The
officers and directors are accountable to the Company as fiduciaries, which
means that they are legally obligated to exercise good faith and integrity in
handling the Company's affairs. Failure by them to conduct the Company's
business in its best interests may result in liability to them.
It is conceivable that the respective areas of interest of the Company,
ATC, MSL and Patriot could overlap or conflict. MSL (of which Mr. Miller, a
director, is primarily active) is in the same business as the Company's
subsidiary, Primus Contract Manufacturing Services, Inc., which was organized in
July 1996 for the Company's contract manufacturing business. Mr. Miller's
loyalties and duties are primarily with AVEX Electronics, Inc. Mr. Norris and
Mr. Putnam, executive officers and directors of the Company are also active in
the business of ATC and Patriot. The Company believes that although each of the
three corporations are involved in the electronics industry, the respective
areas of focus, products and technology directions of the three companies are
sufficiently distinct such that no conflict in business lines or executive
loyalties will result. Because of this unlikelihood, no steps have been taken to
resolve conflicts, and any such conflicts, should they arise, will be addressed
at the appropriate time.
Officer and director Robert Putnam also acts as Treasurer and Secretary of
Patriot where he ultimately reports to the Board of Directors of which Mr.
Norris is Chairman. Mr. Putnam is also President, Chief Executive Officer and a
director of ATC, a company effectively controlled by Mr. Norris. The possibility
exists that these other relationships could affect Mr. Putnam's independence as
a director of the Company. The Company has not provided a method of resolving
this conflict and probably will not do so, partly due to inevitable extra
expenses and delay any measures would occasion and
8
<PAGE> 11
partly because Mr. Norris and Mr. Putnam do not represent a majority of the
Board of Directors of the Company and do not control the other directors. Mr.
Norris and Mr. Putnam are obligated to perform their duties in good faith and to
act in the best interest of the Company and its stockholders, and any failure on
their part to do so may constitute a breach of their fiduciary duties and expose
them to damages and other liability under applicable law. While the directors
and officers are excluded from liability for certain actions, there is no
assurance that Mr. Norris or Mr. Putnam would be excluded from liability or
indemnified if they breached their loyalty to the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
For the 1996 fiscal year, Ernst & Young provided audit services which
included examination of the Company's annual financial statements, timely review
of unaudited quarterly financial information and assistance and consultation in
connection with the Company's registration statements on Form S-3 filed with the
Commission. Audit services were provided with the approval of the Board of
Directors which, among other things, considered the independence of the public
accountants. Arrangements for non-audit services, if any, are made by management
with the knowledge of the Board of Directors. Upon the recommendations of the
Audit Committee, the Board has selected Ernst & Young to provide audit services
to the Company for the fiscal year ending March 31, 1997. The stockholders are
being requested to ratify such selection at the Annual Meeting.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR
1997 ANNUAL MEETING
Any proposal relating to a proper subject which an eligible stockholder may
intend to present for action at the Company's 1997 Annual Meeting of
Stockholders and which such stockholder may wish to have included in the proxy
material for such meeting in accordance with the provisions of Rule 14a-8
promulgated under the Exchange Act must be received as far in advance of the
meeting as possible in proper form by the Secretary of the Company at 12725
Stowe Drive, Poway, California 92064 and in any event not later than June 23,
1997. It is suggested that any such proposal be submitted by certified mail,
return receipt requested.
OTHER BUSINESS OF THE ANNUAL MEETING
Management is not aware of any matters to come before the Annual Meeting or
any postponement or adjournment thereof other than the election of directors and
the ratification of accountants. However, inasmuch as matters of which
Management is not now aware may come before the meeting or any postponement or
adjournment thereof, the proxies confer discretionary authority with respect to
acting thereon, and the persons named in such proxies intend to vote, act and
consent in accordance with their best judgment with respect thereto, provided
that, to the extent the Company becomes aware a reasonable time before the
Annual Meeting of any matter to come before such meeting, the Company will
provide an opportunity to vote by proxy directly on such matter. Upon receipt of
such proxies in time for voting, the shares represented thereby will be voted as
indicated thereon and as described in this Proxy Statement.
MISCELLANEOUS
The solicitation of proxies is made on behalf of the Company and all the
expenses of soliciting proxies from stockholders will be borne by the Company.
In addition to the solicitation of proxies by use of the mails, officers and
regular employees
9
<PAGE> 12
may communicate with stockholders personally or by mail, telephone, telegram, or
otherwise for the purpose of soliciting such proxies, but in such event no
additional compensation will be paid to any such persons for such solicitation.
The Company will reimburse banks, brokers and other nominees for their
reasonable out-of-pocket expenses in forwarding soliciting material to
beneficial owners of shares held of record by such persons.
By Order of the Board of Directors
[SIG]
R. Gordon Root
Poway, California President and Chief Executive Officer
November 5, 1996
10
<PAGE> 13
PROXY NORRIS COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 6, 1996
The undersigned stockholder of Norris Communications, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated November 5, 1996, and hereby
appoints R. Gordon Root and Peter W. Gorrie, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1996 Annual Meeting
of Stockholders of Norris Communications, Inc., to be held on December 6, 1996
at 9:00 a.m., local time, at California Center for the Arts located at 340 N.
Escondido Boulevard, Escondido, California 92025, and at any adjournment
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
below:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below (except as indicated)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the following list:
Elwood G. Norris, R. Gordon Root, Robert Putnam, James D. Miller and
Michael W. Joe.
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG, AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and, in their discretion, upon such other matter or matters that may properly
come before the meeting or any adjournment thereof.
(CONTINUED ON REVERSE SIDE)
<PAGE> 14
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION AND NO
ABSTENTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG, AS INDEPENDENT AUDITORS AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
Dated:____________, 1996
________________________
Signature
________________________
Signature
(This Proxy should be
marked, dated and signed
by the stockholder(s)
exactly as his or her
name appears hereon, and
returned promptly in the
enclosed envelope.
Persons signing in a
fiduciary capacity
should so indicate. If
shares are held by joint
tenants or as community
property, both should
sign).
