<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
T-NETIX, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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:
-----------------------------------------------------------------------
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
-----------------------------------------------------------------------
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE
FILING FEE IS CALCULATED AND STATE HOW IT WAS DETERMINED):
-----------------------------------------------------------------------
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
-----------------------------------------------------------------------
(5) TOTAL FEE PAID:
-----------------------------------------------------------------------
[ ] 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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
T-NETIX, INC.
67 INVERNESS WAY EAST
ENGLEWOOD, COLORADO 80112
(303) 790-8023
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2000
To the Stockholders of T-NETIX, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of T-NETIX,
Inc., a Colorado corporation (the "Company"), will be held on Thursday, May 11,
2000, at 10:00 a.m. at the Company's headquarters at 67 Inverness Drive East,
Suite 100, Englewood, Colorado, for the following purposes:
1. To elect four directors of the Company to hold office until the
2003 Annual Meeting of Stockholders or until their respective successors
are duly elected and qualified;
2. To ratify the selection of KPMG LLP, independent auditors, as
auditors of the Company for the year ending December 31, 2000; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The names of the nominees for directors are set forth in the accompanying
Proxy Statement.
The Board of Directors has fixed the close of business on March 21, 2000,
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting or any adjournments thereof.
A copy of the Company's 1999 Annual Report to Stockholders, which includes
the Company's consolidated financial statements, was mailed with this Notice on
or about April 11, 2000, to all stockholders of record on the record date. The
Company's Annual Report on Form 10-K to the Securities and Exchange Commission
may be obtained without charge upon written request directed to the Secretary of
the Company at the address above. The officers and directors of the Company
cordially invite you to attend the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, you should
complete, date and sign the enclosed proxy card and mail it promptly in the
enclosed postage prepaid envelope. The proxy card must be signed and returned in
order to be counted.
By Order of the Board of Directors,
/s/ JOHN GIANNAULA
John Giannaula
Corporate Secretary
Englewood, Colorado
April 7, 2000
<PAGE> 3
T-NETIX, INC.
67 INVERNESS WAY EAST
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 2000
INTRODUCTION
This Proxy Statement is furnished to the stockholders of T-NETIX, Inc., a
Colorado corporation (the "Company"), in connection with the solicitation of
proxies to be used in voting at the Annual Meeting of Stockholders to be held on
Thursday, May 11, 2000. The enclosed proxy is solicited by the Board of
Directors of the Company. The proxy materials were mailed on or about April 11,
2000, to the stockholders of record at the close of business on March 21, 2000
(the "Record Date").
The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others who forward solicitation
material to beneficial owners of the Company's common stock (the "Common
Stock"). The Company has arranged for Corporate Stock Transfer, Inc. to serve as
its agent to coordinate and oversee the return of proxy cards.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on the
Record Date will be entitled to vote at the Annual Meeting. On the Record Date,
there were 12,543,719 shares of Common Stock outstanding and entitled to vote.
Each share of Common Stock is entitled to one vote on all matters on which
stockholders may vote. There is no cumulative voting in the election of
directors.
The inspectors of election appointed for the meeting will tabulate votes
cast by proxy or in person at the Annual Meeting. Attendance in person or by
proxy of holders of a majority of the outstanding Common Stock is required for a
quorum at the Annual Meeting. The inspectors of election will treat abstentions
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but as unvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is exercised. It may be revoked by (1) filing a
written notice of revocation with the Secretary of the Company at the Company's
principal executive offices, 67 Inverness Drive East, Suite 100, Englewood,
Colorado 80112, (2) duly executing and delivering a proxy bearing a later date,
or (3) attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not, by itself, revoke a proxy.
SUMMARY OF PROPOSALS
Stockholders will be asked to vote upon the following proposals at the
Annual Meeting:
1. Election of the following four persons to the Board of Directors:
Martin T. Hart, W.P. Buckthal, John H. Burbank, III, and B. Holt Thrasher.
2. Ratification of the selection of KPMG LLP as independent auditors
for the Company for 2000.
The proxies will be voted, unless authority to do so is withheld, to elect
the four nominees recommended by the Board, and to ratify the selection of KPMG
LLP as the Company's auditors for 2000.
1
<PAGE> 4
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The names, ages (as of December 31, 1999), positions with the Company and
the business experience over the past five years of each of the directors and
executive officers is set forth below. Each director has served continuously
with the Company since the date indicated below.
<TABLE>
<CAPTION>
TERM TO
NAME AGE POSITION(S) SINCE EXPIRE
- ---- --- ----------- ----- -------
<S> <C> <C> <C> <C>
Daniel M. Carney................... 68 Chairman and Director 1991 2002
Robert A. Geist.................... 59 Director(2) 1994 2002
James L. Mann...................... 65 Director(2) 1995 2002
Martin T. Hart..................... 63 Director(1) 1997 2000
John H. Burbank, III............... 36 Director(1) 1999 2000
Daniel J. Taylor................... 56 Director(1) 1999 2001
W.P. Buckthal...................... 72 Director(2) 1999 2000
B. Holt Thrasher................... 39 Director 1999 2000
Alvyn A. Schopp.................... 41 Chief Executive Officer and 1993 2001
Director
Richard E. Cree.................... 50 Chief Operating Officer and 1999 2001
Director(3)
Thomas E. Larkin................... 42 President(4) 2000 N/A
John Giannaula..................... 38 Vice President Finance and 1994 N/A
Secretary
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee
(3) Mr. Cree stepped down as the Company's Chief Operating Officer in March 2000
but remained with the Company in a non-executive officer position.
(4) Mr. Larkin was appointed President in March 2000.
Mr. Carney has served as a director of the Company since 1991 and as
Chairman since 1998. Since 1997, Mr. Carney has been a private investor. He
co-founded Pizza Hut, Inc. in 1958 and served as Chairman of the Board until
1975 and as a director through 1977 when Pizza Hut was acquired by PepsiCo, Inc.
Mr. Geist has served as a director of the Company since August 1994. Since
1979, he has been Chairman of the Board and Chief Executive Officer of Rage
Administrative & Marketing Services, Inc., a management company for Pizza Hut
franchises. Since 1991, he has been a director of Beauty Warehouse, Inc. (a
franchisor of beauty salons and professional beauty products).
Mr. Mann became a director of the Company in September 1995. Since 1986,
Mr. Mann has been the Chairman and Chief Executive Officer of SunGard Data
Systems, Inc., a provider of proprietary application software systems and
processing services for investment support activities and a provider of computer
disaster recovery services. From 1983 to 1986 he was SunGard's President and
Chief Operating Officer. From 1981 to 1983 he was President of Bradford National
Corporation, a computer services and software concern.
Mr. Hart has served as a director of the Company since 1997. Mr. Hart is a
Denver-based businessman and investor. Mr. Hart serves as a director of P.J.
America, a food service company, Pacific National Financial Group, a bank
holding company, MassMutual Corporate Investors, an investment company,
MassMutual Participation Investors, and investment company, Optical Securities
Corporation, a manufacturer of security systems, Ardent Software, Inc., a data
management company, and Schuler Homes, Inc., a real estate development company.
Mr. Burbank has served as a director of the Company since February 1999.
Since 1999, Mr. Burbank has been the Director of Research at St. Claire Capital,
a hedge fund. From 1996 to 1999, Mr. Burbank was the Director of Research at
ValueVest Management Co., a global value hedge fund. From 1993 to 1994 Mr.
Burbank was a joint venture partner in Odwalla, Inc., a fresh juice company. Mr.
Burbank holds an MBA from Stanford Graduate School of Business and a B. A. from
Duke University.
2
<PAGE> 5
Mr. Taylor has served as a director of the Company since February 1999.
Since 1996 Mr. Taylor has been a private investor. From 1993 to 1996, Mr. Taylor
was Chairman of the Board of Advantage Companies, Inc., a holding company with
subsidiaries that operated rental-purchase stores. From 1977 to 1992, Mr. Taylor
was Chairman of the Board of various Pizza Hut franchise companies, in addition,
Mr. Taylor served as the Senior Vice President of Finance for Pizza Hut, Inc.
Mr. Buckthal has served as a director of the Company since June 1999. Mr.
Buckthal has been an independent geologist and oil and gas producer in Amarillo,
Texas for the past 35 years. Prior to that, he was a geologist for Hamilton
Brothers for three years and for Texaco for ten years. He is a member of the
American Association of Petroleum Geologists and has been active in that
organization's Division of Professional Affairs, including serving as national
board secretary. He has also served on the Alumni Advisory Counsel of the School
of Geology and Geophysics at the University of Oklahoma. After serving two years
in the Navy during World War II, Mr. Buckthal attended the University of
Oklahoma and received a BS degree in geology.
Mr. Thasher has served as a director of the Company since June 1999. Mr.
Thrasher is a managing director of Broadview International, LLC, an investment
banking firm. Mr. Thrasher oversees the Communications Software and
Telecommunications Services practice of Broadview. Before joining Broadview, Mr.
Thrasher was a consultant with Omnipoint, a PCS service provider and developer
of wireless communications equipment. Earlier, he was a vice president at Smith
Barney and prior to that an associate at Brown Brothers Harriman, both
investment banking firms. Mr. Thrasher serves as a director of SignalSoft
Corporation, a wireless location service provider and the Kairos Foundation, a
non-profit organization. Mr. Thrasher holds a MBA degree from the International
Institute of Management Development in Lausanne, Switzerland and a B.A. degree
from Colby College.
Mr. Schopp has served as Chief Executive Officer since 1998 and as a
director in the Company since 1993. From 1993 to 1998 he served as the Company's
Chief Financial Officer and Treasurer. In 1997, he was named President of the
Corrections Division and in 1994 was named Executive Vice President. Prior to
joining the Company, he spent 13 years as an accountant with KPMG LLP.
Mr. Cree served as Chief Operating Officer of the Company from June 1999
through March 2000, and has been a director of the Company since June 1999. From
1989 to 1999, Mr. Cree was the Chief Executive Officer and President of Gateway
Technologies, Inc. From 1982 to 1988, Mr. Cree was Executive Vice President of
American Republic Bancshares, a bank holding company based in New Mexico. From
1971 to 1982, Mr. Cree served as President and Chief Executive Officer of
C-Five, a telecommunications company specializing in the manufacture and
development of peripheral telecommunications equipment.
Mr. Larkin has served as the President of the Company since March 2000.
From 1999 to 2000 he served as Executive Vice President of Sales. From June 1997
to 1999 Mr. Larkin was the Vice President Government and Carrier Relations with
Rostelsat Jupiter Investments, an international trade broker. From January 1997
to June 1997 Mr. Larkin was Regional Sales Manager for Palmer Wireless, a
wireless communications services company. From 1992 to 1997 Mr. Larkin was the
Director of Business Development and Government Sales for Ramoil Management
Company, an international trade broker. From 1991 to 1992 Mr. Larkin was
Director of National Accounts for Nextel Communications, a wireless
communications services company. From 1983 to 1991 Mr. Larkin served in varying
positions including General Manager for McCaw Cellular Communications, a
wireless communications services company.
Mr. Giannaula has served as Vice President Finance of the Company since
June 1994 and as secretary since July 1994. Prior to joining the Company, he
spent 10 years as an accountant with KPMG LLP. He is a Certified Public
Accountant in the State of Colorado.
3
<PAGE> 6
BOARD AND COMMITTEE MEETINGS
During 1999, the Board met on 4 occasions (3 regular meetings and 1 special
meeting). All other actions taken by the Board during 1999, were accomplished by
means of unanimous written consent. During 1999 all directors attended at least
75% of the meetings of the Board and of the committees of the Board on which
they were members, except for Mr. Mann who attended 50% of the Meetings. The
Board has an Audit Committee and a Compensation Committee.
The Audit Committee reviews the results and scope of the annual audit and
other accounting related services. The Audit Committee, which is currently
comprised of Mr. Hart (Chairman), Mr. Taylor and Mr. Burbank, met one time
during 1999.
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation for officers and employees of the Company.
See "Report by Compensation Committee on Executive Compensation." The committee
is currently comprised of Mr. Mann (Chairman), Mr. Buckthal, and Mr. Geist. The
Compensation Committee met one time during 1999.
DIRECTOR COMPENSATION
Each non-employee director of the Company receives:
- $1,000 for each regular meeting of the Board attended;
- stock options for 20,000 shares of Common Stock upon initial selection to
the Board pursuant to the Company's Non-Qualified Stock Option Plan (the
"NQSO Plan").
Directors who are also employees of the Company do not receive compensation
for their service on the Board. The Company also provides directors' and
officers' liability insurance and indemnity agreements for its directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The three members of the Compensation Committee, Messrs. Mann, Buckthal and
Geist, have no interlocking relationships as defined by rules and regulations of
the Securities and Exchange Commission. The Compensation Committee determined
the compensation for the Company's chief executive officer for 1999 and granted
stock options in 1999 under the Company's stock option plans. See "Stock Option
Plans."
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 21, 2000, there were 12,727,334 shares of Common Stock
outstanding held of record by 145 stockholders. The following table sets forth
as of March 21, 2000, the number and percentage of outstanding shares of Common
Stock beneficially owned by (a) each person known by the Company to beneficially
own more than 5% of the outstanding Common Stock, (b) each current director of
the Company, (c) each executive officer named in the Executive Compensation
table on page 6, and (d) all directors and executive officers of the Company as
a group. Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days of March 21, 2000 are deemed outstanding for
computing the percentage ownership of the person holding the options.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF OUTSTANDING
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------- ----------------------- ----------------------
<S> <C> <C>
Daniel M. Carney...................................... 1,925,140(1) 15.1%
Tallgrass Executive Park
Building 1900
8100 East 22nd Street North
Wichita, KS 67226
W.P. Buckthal......................................... 600,000 4.7%
Richard E. Cree....................................... 483,991(2) 3.8%
Robert A. Geist....................................... 310,000(3) 2.4%
Alvyn A. Schopp....................................... 281,859(4) 2.2%
Daniel J. Taylor...................................... 85,000(5) *
Martin T. Hart........................................ 55,000(6) *
James L. Mann......................................... 21,900(7) *
John H. Bubank, III................................... 9,450(8) *
B. Holt Thrasher...................................... 4,200 *
John Giannaula........................................ 63,050(9) *
All executive officers and directors of the Company as
a group (11 persons)................................ 3,839,590(10) 28.9%
</TABLE>
- ---------------
* Less than 1.0%.
(1) Includes (i) 115,000 shares owned by Communications Vending Corporation of
Arizona, of which Mr. Carney has a 30% beneficial interest; and (ii) 20,000
shares issuable pursuant to options exercisable within 60 days of March 21,
2000.
(2) Includes (i) 32,430 shares owned by family trusts for which Mr. Cree is
Trustee; and (ii) 176,046 shares issuable pursuant to options exercisable
within 60 days of March 21, 2000.
(3) Includes 20,000 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
(4) Includes 239,000 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
(5) Includes 5,000 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
(6) Includes 10,000 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
(7) Includes 20,000 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
(8) Includes 5,000 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
(9) Includes 62,500 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
(10) Includes 557,546 shares issuable pursuant to options exercisable within 60
days of March 21, 2000.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth information concerning all compensation
received for services rendered for the fiscal years ended December 31, 1999,
1998 and 1997 for the Company's Chief Executive Officer, and by executive
officers who were serving as executive officers at the end of 1999 and other
highly compensated non-executive officers, each of whose total annual salary and
bonus exceeded $100,000. No restricted stock awards, long-term incentive plan
payouts or stock appreciation rights ("SARS") were granted to Messrs. Schopp,
Cree, Giannaula, Comstock, and Merrick in such years.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
SECURITIES
ANNUAL COMPENSATION UNDERLYING
FISCAL ------------------- STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS
- --------------------------- ------ ------ -------- ------------
<S> <C> <C> <C> <C>
Alvyn A. Schopp..................................... 1999 $180,000 $ -- --
Chief Executive Officer(3) 1998 167,000 17,000 100,000
1997 159,000 15,000 --
Richard E. Cree..................................... 1999 $187,000 $ -- 20,000
Chief Operating Officer(3)(4) 1998 175,000 -- 38,119
1997 110,000 -- --
John Giannaula...................................... 1999 $103,000 $ -- --
Vice President Finance(3) 1998 98,000 10,000 --
1997 95,000 5,000 --
Robert Comstock..................................... 1999 $121,000 $ -- 40,300
Vice President Engineering 1998 -- -- --
1997 -- -- --
Aaron A. Merrick.................................... 1999 $103,000 $ -- --
Vice President Information Services 1998 98,000 7,500 --
1997 92,000 5,000 --
</TABLE>
- ---------------
(1) With respect to each of the individuals named in the Summary Compensation
Table, the aggregate of amount of perquisites and other personal benefits
received did not exceed the lessor of either $50,000 or 10% of the total
annual salary and bonus reported for each individual.
(2) Bonuses, if applicable, were paid pursuant to Management Incentive Programs
described below under "Management Incentive Programs".
(3) Executive officers as of December 31, 1999.
(4) Mr. Cree stepped down as the Chief Operating Officer in March 2000, but
remained with the Company in a non-executive officer position.
6
<PAGE> 9
STOCK OPTION PLANS
The Company's 1993 Incentive Stock Option Plan, adopted by the Company on
May 1, 1993 and the Company's 1991 Incentive Stock Option Plan, adopted by the
Company on January 10, 1991, (together, the "ISO Plans") provide that options
for Common Stock may be granted to such key employees, including officers and
directors who are also employees, of the Company or its subsidiaries whom the
Board of Directors deems to be important to the future of the Company or its
subsidiaries. The NQSO Plan adopted by the Company on January 10, 1991, provides
that options for Common Stock may be granted to eligible employees, officers and
directors of the Company or its subsidiaries. The period for which an option is
granted under all three plans may not exceed ten years from the date of the
grant. In general, an optionee may not exercise any part of an option granted
under the two incentive plans unless the optionee has been in the continuous
employment of the Company or a subsidiary at all times from the date of the
grant until the date three months prior to the date of exercise. The Board of
Directors determines the option price per share at the time and option is
granted and the option price cannot be less than 100 percent of the fair market
value of the Common Stock on the date of grant. Currently, there are 3,850,000
shares authorized for grant pursuant to the three plans. Of this amount, as of
March 21, 2000, options for 1,890,296 shares of Common Stock are outstanding.
On July 24, 1997, the Board amended the Plans to provide that the
Compensation Committee may amend certain outstanding options with an exercise
price in excess of the current market price in order to modify the exercise
price to the current market price or greater. On August 11, 1997, the
Compensation Committee re-priced the exercise price to $7.25 per share for
certain outstanding options under the Plans having and exercise price equal to
or greater than $7.50 prior to such re-pricing. This re-pricing affected 725,000
options under the ISO Plans and 48,000 under the NQSO Plan.
The Board may amend these plans at any time but may not, without
shareholder approval, adopt any amendment that would (i) materially increase the
benefits accruing to the participants, (ii) materially modify the eligibility
requirements, or (iii) increase the maximum number of shares which may be issued
under each plan.
The following table sets forth information concerning stock options granted
to each of the named executive officers and the potential realizable value for
the stock options based on future appreciation assumptions.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
PERCENT OF OF STOCK PRICE APPRECIATION
NUMBER OF TOTAL OPTIONS FOR OPTION TERM(1)
SECURITIES UNDERLYING GRANTED TO EXERCISE OR POTENTIAL REALIZABLE VALUE
OPTIONS GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
- ---- --------------------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alvyn A. Schopp...... -- --% $ -- -- $ -- $ --
Richard E. Cree...... 20,000 8.9% 5.75 6/14/09 72,323 183,280
John Giannaula....... -- --% -- -- -- --
Robert Comstock...... 40,300 18.0% 4.96 2/1/09 161,156 375,015
Aaron Merrick........ -- --% -- -- -- --
</TABLE>
- ---------------
(1) Amounts reported in these columns show hypothetical gains that may be
realized upon exercise of the options assuming that market price of Common
Stock appreciates at the specified annual rates of appreciation, compounded
annually over the terms of the options. These numbers are calculated based
upon rules promulgated by the SEC. Actual gains, if any, depend on the
future performance of Common Stock and overall market conditions.
7
<PAGE> 10
The following table sets forth information about the number and value of
stock options held at December 31, 1999 by each named executive officer.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED ON VALUE YEAR END (#) YEAR END ($)(1)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alvyn A. Schopp............... -- -- 239,000 83,000 $ 54,500 $ --
Richard E. Cree............... -- -- 176,046 20,000 480,606 --
John Giannaula................ -- -- 62,500 2,500 -- --
Robert Comstock............... -- -- -- 40,300 -- --
Aaron Merrick................. -- -- 42,500 2,500 -- --
</TABLE>
- ---------------
(1) Represents the difference between option exercise price and the closing
sales price per share of the Common Stock as quoted on Nasdaq on December
31, 1999 ($4.34 per share).
(2) Amount reflects the August 11, 1997 re-pricing of certain stock options. See
"Stock Option Plans".
MANAGEMENT INCENTIVE PROGRAMS
In 1998, the Board of Directors adopted the 1999 Management Incentive
Program (covering fiscal 1999) by readopting the basic terms as the prior year
Management Incentive Program with new performance targets.
In 1997, the Board adopted the 1998 Management Incentive Program (covering
fiscal 1998) which provided that certain employees of the Company will be
rewarded for achieving specific individual and Company objectives. The 1998
Management Incentive Program rewarded individuals for Company performance
targets based on revenue and earnings before interest and taxes (subject to
adjustment for extraordinary events).
In 1996, the Board adopted the 1997 Management Incentive Program (covering
fiscal year 1997) which provided that certain employees of the Company would be
rewarded for achieving specific individual and Company objectives. The 1997
Management Incentive Program was designed to reward individuals for Company
performance targets based on total revenue, new revenue, and earnings before
interest and taxes.
EMPLOYMENT AGREEMENTS
In connection with the merger with Gateway, the Company entered into an
employment agreement with Mr. Cree. The term of the agreement is three years,
and it provides for a base annual salary of $190,000. In addition, over a
two-year period Mr. Cree will receive options to purchase a total of 60,000
shares of Common Stock, and will receive vacation time and other benefits
commensurate with this position. Mr. Cree will not receive compensation for his
participation on the Board of Directors of any of the Company's subsidiaries.
Under the employment agreement, the Company may terminate Mr. Cree's employment
at any time, with or without "cause" (as defined in the employment agreement.)
If, during the term of the employment agreement, Mr. Cree is terminated without
cause, or is terminated because of a change of control of the Company, he will
receive certain benefits. As part of the employment agreement, Mr. Cree has
agreed not to disclose confidential information about the Company to any third
party, and not to compete against the Company, in each case for the duration of
his employment with the Company plus three years.
8
<PAGE> 11
Effective March 3, 2000, the Company entered into an employment agreement
with Mr. Larkin. The term of the agreement is two years, and it provides for a
base annual salary of $180,000, plus an annual bonus of 30% or more of Mr.
Larkin's annual salary based upon achieving performance objectives established
by the Board or a committee of the Board. In addition, on April 4, 2000, Mr.
Larkin received options to purchase a total of 185,000 shares of Common Stock,
one-quarter of which vest on each of the first four anniversaries of April 4,
2000. He will also receive vacation time and other benefits commensurate with
this position. Under the employment agreement, the Company may terminate Mr.
Larkin's employment at any time, with or without "cause" (as defined in the
employment agreement). If, during the term of the employment agreement, Mr.
Larkin is terminated without cause, or is terminated because of a change of
control of the Company, he will receive certain benefits. As part of the
employment agreement, Mr. Larkin has agreed not to disclose confidential
information about the Company to any third party, and not to compete against the
Company, in each case for the duration of his employment with the Company plus
two years.
REPORT BY THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee recognizes that the success of the Company,
including its ability to expand its service offerings and its markets and to
maintain existing contracts and customer relationships, is dependent on the
performance of its employees. As a result, the Compensation Committee has
adopted the following executive compensation policies:
- The Company's executive compensation policies should balance the
long-term and short-term goals of the Company. They should encourage
growth and yet reward current profitability.
- Base salaries should be at or close to market but salaries should be
enhanced by bonus plans and stock option incentives to meet or exceed
Company goals, should reward both group and individual performances, and
should be flexible in their design and application.
- Stock options should be awarded to reward performance and to align
executives' interests with those of shareholders.
The Compensation Committee believes its executive compensation program
effectively serves the interests of shareholders by allowing the Company to
attract and retain talented executive personnel who have incentives to perform
at the highest levels. Due to the level of compensation received by the
executive officers of the Company, the Committee has not yet deemed it necessary
to adopt a policy regarding the one million dollar limit on deductibility of
certain executive compensation under Section 162(m) of the Internal Revenue
Code.
CEO Compensation. Mr. Alvyn A. Schopp has served as the Company's Chief
Executive Officer since December 1998. From 1993 to 1998 he served as the
Company's Chief Financial Officer and Treasurer. In 1997, he was named President
of the Corrections Division and in 1994 was named Executive Vice President. In
fiscal 1999, Mr. Schopp received a base salary of $180,000 in recognition of his
duties. For fiscal 2000, Mr. Schopp's base salary is unchanged. The Compensation
Committee will continue to review all aspects of Mr. Schopp's compensation
annually to establish goals for the ensuing fiscal year against which his
performance and adjustments to compensation will be evaluated. For fiscal 2000,
Mr. Schopp has again been given the opportunity to receive a bonus based upon
performance targets.
In summary, the Committee believes that its policy of linking executive
compensation to Company performance was met. The Committee believes that the
Company's compensation levels adequately reflect its philosophy. In addition,
the Committee believes that the Company's executive compensation programs and
policies are supportive of its overall objective to enhance stockholder value
through the profitable management of its operations.
James L. Mann (Chairman)
W. P. Buckthal
Robert A. Geist
9
<PAGE> 12
STOCK PRICE PERFORMANCE GRAPH
The following graph presents the cumulative total yearly stockholder return
for the Common Stock since November 8, 1994, the date of the Company's initial
public offering, compared with the Nasdaq Market Index and the Nasdaq
Telecommunications Stock Index. The graph assumes that $100 was invested on
November 8, 1994, and that all dividends were reinvested.
STOCK PRICE PERFORMANCE
COMPARISON OF CUMULATIVE TOTAL RETURN
T-NETIX, INC., NASDAQ MARKET INDEX AND
NASDAQ TELECOMMUNICATIONS STOCK INDEX
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON DECEMBER 31, 1994)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
11/8/94 7/31/95 7/31/96 7/31/97 7/31/98 12/31/98 12/31/99
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T-NETIX, Inc. $100.00 $131.58 $ 92.11 $ 84.21 $ 84.21 $ 52.63 $ 45.73
NASDAQ Telecomm. Index $100.00 $115.90 $115.29 $153.82 $254.80 $301.37 $533.25
NASDAQ Composite (US) $100.00 $131.34 $143.11 $211.18 $248.60 $294.96 $545.85
</TABLE>
(1) Effective December 31, 1998, the Company changed its fiscal year to December
31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Any transactions between the Company and its officers, directors, employees
and affiliates that are outside the scope of the Company's employment
relationship with such persons will be subject to approval of a majority of the
disinterested members of the Board of Directors based upon a determination that
the terms are at least as favorable to the Company as those that could be
obtained from unrelated parties.
10
<PAGE> 13
COMPLIANCE WITH SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of the Common Stock. Based
solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to the
Company with respect to the year ended December 31, 1999, to the best of the
Company's knowledge the Company's directors, officers and holders of more than
10% of its Common Stock complied with all Section 16(a) filing requirements.
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, four directors will be elected, each to hold office
until the Company's 2003 Annual Meeting of Stockholders or until his respective
successor has been elected and qualified. All of the nominees are currently
directors of the Company. The Board has no reason to anticipate that any nominee
will decline or be unable to serve as a director. In the event any nominee does
decline or is unable to serve, proxies may be voted for the election of a
substitute nominee or the Board may reduce the number of directors to be
elected.
The shares of Common Stock represented by the enclosed proxy will be voted
for the election to the Board of the four nominees named below, unless a vote is
withheld from one or more individual nominees. If any nominee becomes
unavailable for any reason, or if a vacancy should occur before election, shares
represented by the enclosed proxy may be voted for such other person as may be
determined by the holders of such proxy. The simple majority vote of shares
voting is required for election of directors.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF MARTIN T. HART, W.
P. BUCKTHAL, JOHN H. BURBANK III, AND B. HOLT THRASHER.
PROPOSAL 2 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
KPMG LLP has served as the Company's auditors for the year ended December
31, 1999. Management recommends that KPMG LLP be ratified as the principal
accounting firm to be utilized by the Company throughout the year ending
December 31, 2000.
The Company anticipates that representatives of KPMG LLP will attend the
Annual Meeting for the purpose of responding to appropriate questions. At the
Annual Meeting, the representatives of KPMG LLP will be afforded an opportunity
to make a statement if they so desire.
Ratification of the selection of KPMG LLP as the Company's independent
auditors requires the affirmative vote of a majority of the outstanding shares
of Common Stock present, in person or by proxy, and entitled to vote at the
Annual Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE SELECTION OF
KPMG LLP AS THE COMPANY'S AUDITORS FOR 2000.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received by the Company at
its principal executive offices not later than December 11, 2000, in order to be
included in the proxy statement and form of proxy relating to the annual
meeting.
11
<PAGE> 14
OTHER ITEMS
The Board does not intend to present further items of business to the
meeting and knows of no such items that will or may be presented by others.
However, if any other matter properly comes before the meeting, the persons
named in the enclosed proxy form will vote thereon in such manner as they may in
their discretion determine.
By Order of the Board of Directors,
/s/ JOHN GIANNAULA
John Giannaula
Corporate Secretary
Englewood, Colorado
April 11, 2000
12
<PAGE> 15
REVOCABLE PROXY T-NETIX, INC. REVOCABLE PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, MAY 11, 2000
The undersigned holder of common stock of T-NETIX, Inc., a Colorado
corporation (the "Company"), acknowledges receipt of a copy of the Notice of
Annual Meeting of Stockholders dated April 7, 2000, and, revoking any proxy
heretofore given, hereby appoints Alvyn A. Schopp and Daniel M. Carney, and each
of them, with full power to each of substitution as attorneys and proxies to
appear and vote all shares of common stock of the Company registered in the
name(s) of the undersigned and held by the undersigned of record as of March 21,
2000, at the Annual Meeting of Stockholders of the Company to be held at 67
Inverness Drive East, Suite 100, Englewood, Colorado, on May 11, 2000, at 10:00
a.m., and at any postponements and adjournments thereof, upon the following
items as set forth in the Notice of Annual Meeting and to vote according to
their discretion on all other matters which may be properly presented for action
at the meeting. All properly executed proxies will be voted as indicated.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING
ITEMS:
1. To elect as directors the nominees listed below.
<TABLE>
<S> <C>
[ ] FOR ALL nominees listed below [ ] WITHHELD AUTHORITY to vote for
(except as marked to the contrary) all nominees listed below.
</TABLE>
Instruction: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
Martin T. Hart, W. P. Buckthal, John H. Burbank, III, B. Holt Thrasher
(2) To ratify the selection of KPMG LLP, independent auditors, as auditors of
the Company for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side.)
(3) In their discretion, the proxy holders are authorized to vote upon such
other business as may properly come before the meeting or matters incidental
to the conduct of the meeting.
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1 and 2. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED.
IF NO DIRECTION IS MADE IT WILL BE VOTED "FOR" PROPOSALS 1 and 2.
WITNESS my hand this day of
, 2000.
------------------------------
------------------------------
Signature of Shareholder(s)
(Please sign exactly as name
appears hereon. When signing
as attorney, executor,
administrator, trustee or
guardian, give full title as
such. If a corporation, please
affix corporate seal. If a
partnership, please sign in
partnership name by authorized
persons. If joint tenants,
each joint tenant should
sign.)
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY BY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
I/WE DO
- ------ DO NOT
- ------ EXPECT TO ATTEND THIS MEETING.
