<PAGE>
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
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SYS
- --------------------------------------------------------------------------------
(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:
Common Shares
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
3,138,786
------------------------------------------------------------------------
(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 fee 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>
SYS
6363 Greenwich Drive, Suite 200
San Diego, California 92122
(619) 587-0484
NOTICE OF THE 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 8, 1998
To the Holders of Common Stock of SYS:
The 1997 Annual Meeting of Shareholders of SYS (the "Company") will be held
at the La Jolla Marriott, located at 4240 La Jolla Village Drive, La Jolla,
California 92037, on Thursday, January 8, 1998, at 1:00 p.m., local time, to
consider the following business:
1. To elect a Board of nine Directors to serve for the ensuing year
and until their respective successors are elected;
2. To approve the appointment of J.H. Cohn LLP, public accountants,
as independent public auditors to examine the accounts of the
Company for the Fiscal Year 1998;
3. To amend the SYS 1997 Incentive Stock Option and Restricted Stock
Plan;
4. To amend the Article Fifth of the Articles of Incorporation to
increase the number of authorized Common Shares from 6.0 million
to 12.0 million Common Shares.
The Board of Directors has fixed October 10, 1997 as the record date for
the determination of shareholders entitled to notice of and to vote at the 1997
Annual Meeting of Shareholders and at any adjournment thereof.
All Shareholders are cordially invited to attend the 1997 Annual Meeting of
Shareholders in person. Whether or not you plan to attend, please date, sign,
and promptly return the enclosed Proxy in the enclosed self-addressed envelope
in order that your shares are represented at this meeting and to ensure a
quorum. If you are able to attend in person, we will cancel the Proxy at your
request.
By Order of the Board of Directors
/s/ W. GERALD NEWMIN
San Diego, California W. Gerald Newmin
November 14, 1997 Secretary
<PAGE>
SYS
PROXY STATEMENT
GENERAL INFORMATION
THE ACCOMPANYING PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF
DIRECTORS OF SYS (the "Company") to be used at the 1997 Annual Meeting of
Shareholders to be held at the La Jolla Marriott located at 4240 La Jolla
Village Drive, La Jolla, California 92037 on Thursday, January 8, 1998,
at 1:00 p.m., local time. The approximate mailing date of this proxy
statement and the accompanying proxy and annual report is December 3,
1997.
When the enclosed proxy is properly executed and returned, the
shares it represents will be voted at the 1997 Annual Meeting of
Shareholders in accordance with any directions noted thereon. If no
direction is indicated, the shares it represents will be voted in favor
of the proposals set forth in the notice attached hereto. Any
shareholder signing and delivering a proxy may revoke it at any time
before it is voted by filing with the Secretary of the Company an
instrument revoking it, or a duly executed proxy bearing a later date.
Any shareholder attending the meeting in person may withdraw his proxy
and vote his shares.
The cost of the solicitation of proxies will be borne by the
Company. Solicitations will be made only by mail provided, however,
that, if necessary, officers and regular employees of the Company may
make solicitations of proxies personally or by telephone or telegram, but
such persons will not be specially compensated for such services. The
Company may also reimburse brokers, banks, custodians, nominees and
fiduciaries holding stock in their names or in the names of their
nominees for their reasonable charges and expenses in forwarding proxies
and proxy material to the beneficial owners of such stock.
VOTING RIGHTS
The only voting securities of the Company consists of Common Stock.
Holders of record of Common Stock on October 10, 1997 will be entitled to
vote at the 1997 Annual Meeting of Shareholders. On that date, there
were 3,138,786 shares of Common Stock outstanding. Each share is
entitled to one vote on all matters to come before the meeting, except
that cumulative voting may be used in the election of directors. Under
California law, each shareholder may cumulate his votes for candidates
placed in nomination prior to the voting for directors. Under cumulative
voting, each shareholder may vote for a single candidate, or distribute
votes among the candidates as such shareholder chooses, a number of votes
equal to the number of candidates (nine (9) at this meeting) multiplied
by the number of shares held by such shareholder. Cumulative voting will
apply only to those candidates whose names have been placed in nomination
prior to voting. No shareholder shall be entitled to cumulate votes
unless the shareholder has given notice at the meeting, prior to the
voting, of the shareholder's intention to cumulate the shareholder's
votes. If any one shareholder gives such notice, all shareholders must
cumulate their votes for candidates in nomination, except to the extent
that a shareholder withholds votes from the nominees. The proxy holders
named in the accompanying form of proxy, in their sole discretion, will
vote such proxy for, and, if necessary, exercise cumulative voting rights
with complete discretion in voting the shareholder's shares. Directors
shall be elected by a plurality of the votes cast.
ELECTION OF DIRECTORS
On October 28, 1997, by written consent, a majority of the holders
of SYS stock then outstanding resolved to increase the maximum number of
directors authorized to serve on the Board of Directors from eight (8) to
nine (9) directors. An Amendment to the Articles of Incorporation was
filed with the Secretary of State of California on November 7, 1997.
At the 1997 Annual Meeting of Shareholders, nine directors are to be
elected. Each director will serve until the next Annual Meeting and
until his successor has been elected and qualified. All of the nominees
described in this Proxy Statement, except Mr. Richard W. Wood, are
currently serving as members of the Board of Directors. The Company
knows of no reason why the nominees would not be available for election
and would not be able to serve.
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In the absence of instructions to the contrary, the shares
represented by the proxies delivered to the Board of Directors will be
voted for the nine nominees for election as Directors of the Company. If
any such nominee should decline or become unable to serve as a director
for any reason, votes will be cast instead for a substitute nominee, if
any, designated by the Board of Directors or, if none is so designated,
will be cast according to the judgment in such matters of the person or
persons voting the Proxy.
Proxies solicited by the Board of Directors cannot be voted for more
than nine nominees for directors.
The table immediately below contains pertinent information
concerning the nominees and is followed by a brief biography of each
nominee:
<TABLE>
<CAPTION>
DATE ELECTED OTHER
NAME AGE PRINCIPAL OCCUPATION DIRECTOR DIRECTORSHIPS
- ---- --- -------------------- -------- -------------
<S> <C> <C> <C> <C>
Paul I. Anderson 61 President & CEO Oct. 4, 1996 Strategic Catalysts, Inc.
(2) (3) of Strategic Catalysts, Inc.
Robert E. Carroll 75 Executive Consultant Oct. 19, 1993 Sedona Cultural Park, Inc.;
(1) (4) Chairman or ENTRE ENTRE International, Inc.
International, Inc.
Lawrence L. Kavanau 71 Chief Financial Officer of the Sept. 7, 1966 None
(1) (3) Company
L. Randolph Knapp 60 Chairman of UniPrise Systems, Aug. 20, 1997 Storage Concepts
Inc.; Knapp Consulting
Group
Robert D. Mowry 41 Chairman and CEO of the Mar. 21, 1997 Big Canyon Investments, Inc.,
Company, CEO of North American Timeshare,
UniPrise Systems, Inc., President Inc., Photonics Laboratories,
of North American Timeshare, Inc Inc .
dba United Computer Systems, Inc.,
President of American Technology
Investment, Inc.
W. Gerald Newmin 60 Chairman and CEO of Exten Oct. 19, 1993 Exten Industries, Inc., Occu-
(1) (2) (3) Industries, Inc Med, Inc., Greene International,
Inc., Caldwell Industries, Inc.,
Int'l Forum of Corporate Directors
Charles E. Vandeveer 55 Vice-President of Operations Mar. 21, 1997 Naval Construction Battalion
of the Company Center Credit Union
Charles H. Werner 70 Consultant Mar. 6, 1989 None
(2) (4)
Richard W. Wood 44 Vice-President, American Oct. 15, 19971 None
Technology Investments, Inc.
</TABLE>
(1) Member of Nomination and Compensation Committee
(2) Member of Audit and Finance Committee
(3) Member of Planning and Acquisition Committee
(4) Member of Contracts and Legal Committee
(1) On October 15, 1997 the Board of Directors elected Richard Wood
to fill the vacancy for the ninth director, subject to the amendment of the
Articles of Incorporations by the Shareholders.
2
<PAGE>
Mr. Paul I. Anderson was elected to the Board of Directors on October 4,
1996, and served as Acting Chairman of the Company from March 21, 1997 to
July 31, 1997. Mr. Anderson is President and CEO of Strategic Catalysts,
Inc., an international strategic consulting organization. In 1983 and 1984,
Mr. Anderson was Division Vice President of RCA Video Disc Operations. From
1979 to 1983 he was Senior Vice President and General Manager of Rayovac
Corporation, a manufacturer of primary power sources and lighting devices.
In this capacity, Mr. Anderson was responsible for the restructuring of North
American Operations which included product development, eight manufacturing
facilities, ten distribution centers, and a direct sales force. From 1956 to
1979 he was with the 3M Company in various management capacities including
engineering, marketing, business development, and general management. These
responsibilities included four years as General Manager, 3M Europe, where he
was responsible for the manufacture and sales of 3M's optical and magnetic
systems and media throughout Western Europe, Eastern Europe, and the Middle
East. Mr. Anderson's educational background includes an engineering degree
from Oregon State University and graduate business studies at Boston
University.
Mr. Robert E. Carroll is a Consultant on Corporate and Program
Management, Professional Seminar Leader on Government Contracting, Chairman
of ENTRE International, Inc., which provides international market and
financial expansion services to small and medium-sized companies in
high-growth markets, and is a member of the Board of Sedona Cultural Park.
He was President, Chief Executive Officer, Chief Financial Officer and a
Director of the Company from March 1984 to March 1989. Prior to joining the
Company, he served as President of the Systems Management and Engineering
Corporation (SMEC), a Burroughs company. In 1978, he formed that
organization as the Energy and Environment Division of the System Development
Corporation (SDC). From 1962 to 1978, he had been Vice President and
President of other SDC operations. Mr. Carroll has over 40 years of
industrial and government management experience, including a number of
successive Vice President assignments at North American Rockwell, Space
Division; and procurement, pricing and other management executive positions
with Sperry Utah Company (Sperry-Rand) and the Hughes Aircraft Company.
Prior to that, he served as the Civilian Executive Officer and Principal
Contracting Officer of the Pittsburgh Ordnance District of the United States
Army. He received his Bachelors degree from Duquesne University and his
Doctor of Jurisprudence degree from the University of Pittsburgh and was a
practicing attorney in the Commonwealth of Pennsylvania.
Dr. Lawrence L. Kavanau is the Founder and served as President of the
Company from the Company's formation in 1966 until June 1975. He has been
a Director of the Company continuously since 1966. He was elected Chairman
of the Board, Chief Executive Officer and Chief Financial Officer by the
Board of Directors on November 19, 1993 and remained Chairman until March
21, 1997, and CEO until July 31, 1997. From June 1975 to November 1993, he
was a business and management consultant and Principal Associate of Kavanau
& Associates. He served as Corporate Secretary for the Company from June
25, 1992 to November 19, 1993. From January 1989 to December 1992, he was
President of Golf Lake Development, Inc. He was Chairman and Chief
Executive Officer of Team Austin, Inc., a computer software and contract
programming company located in San Diego, until December 1988. From
February 1978 to February 1980, Dr. Kavanau also was Executive Vice
President and Chief Financial Officer of Spatial, Inc., a manufacturer of
pre-amplifiers. From August 1978 to January 1985, Dr. Kavanau was
President of SKC Research, Inc., a company engaged in contracted research.
Dr. Kavanau was a member of the Board of Directors of SKC Research, Inc.
from August 1978 to February 1986. He was a member of the group which, in
1956, formed Aeronutronics Division of Ford Motor Company. He subsequently
served in the Department of Defense responsible for DOD's interests in
space research and development activities and was the Department's
principal liaison with NASA. Prior to his founding of the Company, he was
Executive Vice President - Technical of the North American Aviation (now
Rockwell International) Space and Information Systems Division, and
Assistant to the President, North American Aviation.
Mr. L. Randolph Knapp was elected to the Board of Directors on August
20, 1997. He is Chairman of UniPrise Systems, Inc., a developer of software
for commercial computer systems, and a principal of Knapp Consulting Group,
which provides strategic and business planning to a large variety of
companies (including UniPrise Systems, Inc.). Mr. Knapp serves as an
advisory board member of the board of directors of the National Bank of
Southern California, and as a Commissioner to the California Commission for
the Teaching Profession. From 1989 to 1993, Mr. Knapp was Chief Operating
Officer and Director of RDI Computer Corp., a company which he founded and
which was a developer of SUN portable workstations. Mr Knapp was co-founder
and senior partner of Stein Knapp Associates, a management consulting
company, and senior partner of CAI, a business development corporation
located in Mexico City. He was CFO and a member of the Board of Directors of
Wilson Laboratories, founder and CEO of Wespercorp, past Chairman of the
Board of Quality Education Project, a non-profit corporation, past Chairman
of the American Electronics Association-Orange County (California) chapter,
and past member of the Board of PCC, a computer retailer. Mr. Knapp
graduated from the Business School
3
<PAGE>
of College of San Mateo in 1970.
Mr. Robert D. Mowry was elected to the Board of Directors on March 21,
1997, and became the Company's Chairman of the Board and Acting Chief
Executive Officer effective August 1, 1997. Mr. Mowry is also Chief
Executive Officer of UniPrise Systems, Inc., which is engaged in the
development and marketing of proprietary software products. Mr. Mowry is
the founder of Big Canyon Investments, Inc., which was formed for investment
and management of investments and which was sold to UniPrise Systems, Inc. in
December, 1996. He is also President of North American Timeshare, Inc., dba
United Computer Systems, a computer hardware and software company. In 1983,
Mr. Mowry was founder and President of Personal Computer Centre, which was a
retail outlet for Compaq, IBM and Apple Computers. He sold his interest in
this company in 1985. Prior to this, in 1974, Mr. Mowry founded California
Minicomputer Systems, Inc. (CMS), which installed on-line distributed
computer systems to large corporations. In 1982, he sold CMS to a computer
electronics manufacturer and remained President of CMS until 1984, overseeing
operations of the subsidiary company including new business activities with
the Federal Aviation Administration.
Mr. W. Gerald Newmin is the principal of Newmin Associates specializing
in mergers and acquisitions and the operational management of turnaround
companies. Mr. Newmin is currently Chairman and Chief Executive Officer of
Exten Industries, Inc., a publicly held bio-medical company and serves on the
Board of Directors of Occu-Med, Inc., a managed health care company, Greene
International West, Inc., and Caldwell Industries, Inc., both industrial
manufacturing companies. Mr. Newmin is also currently Chairman of
International Forum of Corporate Directors, a non-profit organization. He
was President of HealthAmerica Corp. which grew to over $500 million annually
and the company was the first in its industry to be listed on the New York
Stock Exchange. Mr. Newmin was President of the International Silver
Company, a diversified multi-national manufacturing company which he
restructured. He was Vice President and Regional Director for American
Medicorp, Inc. In this capacity Mr. Newmin was responsible for the
management of 23 acute care hospitals located throughout the Western United
States. Mr. Newmin was instrumental in Whittaker Corporation's entry into
both the United States and International health care markets. At Whittaker,
Mr. Newmin has held various other senior executive positions, including those
of Chief Executive Officer of Whittaker's Production Steel Company, Whittaker
Textiles Corporation, Trojan Yacht Corporation and Anson Automotive
Corporation. Mr. Newmin holds a Bachelors degree in Accounting from Michigan
State University.
Mr. Charles E. Vandeveer is Vice President, Director of Operations of
the Company's contractual endeavors with the United States Navy. Mr.
Vandeveer has held various management, supervisory, administrative and
project positions since he joined the Company is 1987. He is a retired
Commander, United States Navy, Supply Corps. Mr. Vandeveer served as a
Director of Naval Supply Centers and Supply Annexes, managing material
operations and ship repairable programs. He was also a Ship
Superintendent/Type Desk Officer, responsible for coordinating Naval Shipyard
repairs and overhauls. Mr. Vandeveer has brought his valuable Navy
experience to the Company and has put it to work expanding the Company's
presence in the Oxnard area. He has organized and directed large scale
management studies and supervised subcontractors with various firms. Mr.
Vandeveer received his Bachelors degree in Agricultural Industries from
Southern Illinois University in 1963, and has held a Designated Financial
Planner Certification from UCLA since 1989.
Mr. Charles H. Werner has been an independent consultant since August
1995 when he resigned his position with the Company as President -
Administration, which position he held since November 1993. From August
1992 to November 1993 he was President and Chief Operating Officer. From
January 1992 to August 1992 Mr. Werner was President, and from March 1989
to January 1991 he served as the Company's President, Chief Executive
Officer and Chief Financial Officer. Prior to joining the Company, he
served as Executive Vice President of Arrowsmith Industries, Inc., a wholly
owned subsidiary of KDT Industries, Inc., of Austin, Texas. In 1986 and
1987, Mr. Werner served as a consultant to the Strategic Defense Initiative
Organization in Washington, D.C. Previously, he had been a management
consultant; Vice President of Marketing and Advanced Programs for Convair,
San Diego, California; Executive Vice President, Defense Systems, Emerson
Electric Company; and Vice President and Chief Operating Officer of SSP
Industries, Inc., Burbank, California. He received his engineering degrees
from Washington University in St. Louis, Missouri and Ohio State University
in Columbus, Ohio.
Mr. Richard W. Wood is Vice-President of American Technology
Investments, Inc., a company involved in the management and development of
investment strategies and opportunities. From 1994 to 1997, Mr. Wood was
Chief Operating Officer and Executive Vice-President of Concepts 4, Inc.,
responsible for instituting financial and accounting systems, restructuring
management, planning and forecasting procedures, and management of
strategic investments in market
4
<PAGE>
instruments and real estate. From 1989 to 1994 he was President of Spencer
Mortgage Corporation, a company involved in real estate equity
participations, commercial and residential lending, joint venture consulting,
and residential loan underwriting. Mr. Wood was President of First Kansas
City Group's investment banking activities, and Vice-President of Corporate
Finance and First Vice-President of Institutional Bond Sales for Stern
Brothers & Company Investment Bankers. Mr. Wood received his B.S. degree in
Public Administration/Business in 1975 from University of Missouri.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND THAT SHAREHOLDERS VOTE
FOR ALL NINE (9) NOMINEES NAMED ABOVE.
There is no family relationship between any of the directors and executive
officers of the Company.
AFFILIATE TRANSACTIONS AND RELATIONSHIPS
Robert D. Mowry's (Mowry) relationship, as an individual and/or
companies in which he was or is an officer, began with the Company in 1989,
when SYS purchased United Computer Systems, Inc. (UCSI) from Mowry.
Subsequently, SYS financed certain computer programming and support
services for North American Timeshare, Inc., which was owned by Mowry.
About September 1994, Mowry paid off outstanding obligations to SYS
amounting to about $98,000.
In January 1995, the SEI asset loan which SYS had with its Bank and
the proceeds from the SEI accounts receivable and claims were assumed,
without recourse to the Company, by KRW Contracts & Financial Management,
Inc. (KRW), an unrelated third party. SYS introduced Mowry to its Bank
and, in April 1995, Big Canyon Investments, Inc. (BCI), a company owned by
Mowry, consummated the purchase of the KRW loan from the Bank. SYS had
previously contracted with the Bank to collect proceeds from these assets
for the Bank on a cost reimbursable basis.
In August 1995, Mowry (BCI) took over the direct financing and
management of the collection work utilizing two SYS employees under a cost
reimbursable basis. In September 1995, Mr. Werner, the former
President-Administration and Director of SYS, went to work as a consultant
for Mowry and BCI. At the present time BCI owes approximately $80,000 to SYS
for unpaid collection expenses.
In October 1995, Mowry advanced funds to finance certain SYS trial
expenses in return for possible future proceeds. These expenses by Mowry
were guaranteed by SYS to the extent that SYS would in the future receive
funds from SEI assets being collected by BCI. In August 1996, Mowry
purchased KRW which had previously assumed the bank loan from SYS and to whom
the SEI related assets and proceeds were pledged.
Mr. L. Randolph Knapp is Chairman of UniPrise Systems, Inc., a company
in which Mr. Mowry is Chief Executive Officer. Mr. Richard W. Wood is
Vice-President of American Technology Investment, Inc., a company in which
Mr. Mowry is President.
During the year ended June 30, 1997 the Board of Directors granted
stock purchase options to three key employees and three outside directors
totaling 180,000 common shares, exercisable at $.05 per share. These
purchase options contain certain buy-back provisions which become effective
in the event of termination of employment or directorship. All of these
purchase options have been exercised as follows:
(i) On October 11, 1996 Michael W. Fink exercised his option to
purchase 30,000 common shares; on October 12, 1996 Charles E.
Vandeveer exercised his option to purchase 50,000 common shares and
Larry W. Moe exercised his option to purchase 25,000 common shares.
(ii) On May 8, 1997, outside directors W. Gerald Newmin, Zoltan A.
Harasty (now a former outside director) and Robert E. Carroll each
exercised their options to purchase 25,000 common shares each.
On March 11, 1997 the Company authorized the conversion of Series B 9%
Cumulative Convertible Callable Non-Voting Preference Stock to common
stock, at the rate of two common shares for each preference share
converted, including the following individuals: Lawrence L. Kavanau
converted 4,243 preference shares for 8,486 common shares; Charles E.
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<PAGE>
Vandeveer converted 9,758 preference shares for 19,516 common shares; Larry
W. Moe converted 8,566 preference shares for 17,132 common shares; and
Michael W. Fink converted 2,697 preference shares for 5,394 common shares.
On April 15, 1997, Mr. Robert E. Carroll agreed to sell Mr. Robert D.
Mowry 186,922 shares of Common stock from the Carroll Living Trust and
10,000 shares owned directly by Mr. Carroll. Mr. Carroll gave options to
Mr. Mowry to purchase an additional 123,078 shares over a three year
period. As part of the option agreement, Mr. Mowry was given irrevocable
voting rights for the shares on which he has options.
During the year ended June 30, 1997 the Board of Directors authorized
non-qualified stock purchase options of 25,000 common shares each to
outside directors Paul I. Anderson, Charles H. Werner and Robert D. Mowry,
which may be exercised at $.31, $.09 and $.47 per share, respectively.
Exercise of the Mowry and Werner options is subject to the approval of the
Shareholders to increase the number of shares allocated under the 1997 SYS
Incentive Stock Option and Restricted Stock Plan for non-employee directors
and consultants by 250,000 shares. The remaining 25,000 shares currently
issuable were allocated, subsequent to fiscal year end, to Mr. Anderson
under a Non-Qualified Stock Option Agreement dated July 31, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Pursuant to
Section 16(a) of the Securities Exchange Act of 1934 and the rules issued
thereunder, the Company's executive officers and directors are required to
file with the SEC reports of ownership and changes in ownership of the Common
Stock. Based solely on its review of the copies of such reports furnished to
the Company, or written representations that no reports were required, the
Company believes that, during Fiscal year 1997, its executive officers and
directors complied with Section 16(a) requirements with the following
exceptions: Robert E. Carroll was delinquent in filing three Form 4s
disclosing three transactions; Charles E. Vandeveer was delinquent in filing
two Form 4s disclosing three transactions; Charles H. Werner was delinquent
in filing Form 5. Robert D. Mowry failed to file Form 5.
Pursuant to the reporting requirements of Item 404(c) of Regulation
S-K, as of June 30, 1997 Mr. Mowry (BCI/UniPrise) is indebted to the
Company in the amount of approximately $80,000, and no other officer or
director of the Company is indebted to the Company.
The term of office for a director runs until the next annual meeting
of shareholders and until a successor has been elected and qualified. The
term of office for each executive officer runs until removal by the Board
of Directors or election and qualification of his successors.
SELECTION OF INDEPENDENT AUDITORS
Management recommends appointment of J.H. Cohn LLP as the Company's
independent auditors for the Company's 1998 fiscal year (commencing July 1,
1997) and nominates that firm for selection at the 1997 Annual Meeting of
Shareholders. A representatives of J.H. Cohn LLP is expected to be
present at the meeting, with the opportunity to make a statement if they
desire to do so, and to respond to appropriate questions.
AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES
Management recommends approval of an Amendment to the Article Fifth of
the Articles of Incorporation (the "Amendment") to increase the number of
Common Shares (no par value) authorized for issuance by the Company from
6.0 million to 12.0 million Shares.
If the Company's shareholders approve the proposed Amendment, the
Company's Board of Directors will be authorized to issue up to 6.0 million
additional Shares of the Company's Common Stock in excess of the 6.0
million currently authorized without the prior approval of the Company's
shareholders, except as such approval is required pursuant to the
regulations and requirements of governing entities.
Since the Company's Articles of Incorporation do not grant existing
shareholders any pre-emptive rights to purchase any additional Shares that
the Company may issue, the issuance of any additional Shares will result in
existing shareholders experiencing a reduction in their percentage
ownership interest in the Company and, as a result, existing shareholders
will
6
<PAGE>
thereby be less able to influence the course of the Company's affairs
in connection with matters presented at any regular or special meetings of
the Company's shareholders, in connection with the election of Directors,
and otherwise.
Finally, in the event that the Amendment is approved and the Company's
Board of Directors utilizes the authority granted by the Amendment to issue
additional Shares of the Company's Common Stock, there can be no assurance
that any additional Share issuances can be completed at a price per Share
that is equal to or exceeds the current book value per Share of the
Company's Common Stock. In the event that the Company's Board of Directors
issues additional Shares of the Common Stock at a price that is less than
the current book value of the Company's Common Stock, the book value of the
Shares of the Company's Common Stock currently outstanding will decrease.
A decline in the book value of the Company's Common Stock may adversely
impact the market value of the Company's Common Stock with the result that
current stockholders may experience a significant and sustained decline in
the market price of the Common Stock they acquired prior to the issuance of
any said additional Shares.
AMENDMENT TO SYS 1997 INCENTIVE STOCK OPTION AND RESTRICTED STOCK PLAN
Management recommends approval of an amendment to the SYS 1997
Incentive Stock Option and Restricted Stock Plan ("Plan") to increase the
amount of common shares subject to the Plan for non-employee directors and
consultants from 100,000 to a total of 350,000. Benefits and amounts are
not currently determinable. The essential features of the Plan are as
follows:
STATUS OF SHARES: The maximum number of shares which may be issued pursuant
to the grant of incentive stock options and/or stock purchase rights is
300,000 common shares for employees of the Company and 100,000 for
non-employee directors and consultants. These shares may be authorized, but
unissued, or reacquired Common Stock. Under the Plan there are currently no
shares issued and outstanding to employees, 75,000 shares issued and
outstanding to directors, and 25,000 authorized but as yet unissued to a
director. Exercise of an option in any manner shall result in a decrease in
the number of shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of shares as to which
the option is exercised.
ELIGIBILITY; ADMINISTRATION: Under the Plan, incentive stock options
intended to qualify within the meaning of Section 422 of the Internal
Revenue Code of 1986 may be granted only to employees; nonstatutory stock
options and stock purchase rights may be granted to employees or
consultants, and only nonstatutory stock options may be granted to
directors. The Plan is administered by the Board of Directors which
determines the terms of stock purchase rights and options granted,
including exercise price, the number of shares subject to each option and
the options' exercisability; decisions of the Administrator are final and
binding. Incentive Stock Options may be granted only to Employees;
Nonstatutory Stock Options and Stock Purchase Rights may be granted to
Employees and Consultants
EXERCISE PRICE; MARKET VALUE: The exercise price of incentive stock options
and nonstatutory stock options must be at least equal to the fair market
value on the date of grant.
EXERCISABILITY: Any option granted under the Plan shall be exercisable at
such times and under such conditions as shall be determined by the
Administrator. Options may not be transferred other than by the laws of
descent or distribution, and each option may be exercised, during the
lifetime of the optionee, only by the optionee. The Administrator may offer
to buy out for a payment in cash or shares, an option previously granted,
based on terms and conditions established by the Administrator and
communicated at the time such offer is made.
STOCK PURCHASE RIGHTS: Stock purchase rights may be granted alone or in
conjunction with other awards under the Plan or outside of the Plan.
Offers must be made by the Administrator to the offeree in writing,
containing all terms, conditions and restrictions of the offer, and shall
allow not more than 30 days from the date of such offer for the offeree to
accept or reject the offer. Stock Purchase Right agreements shall grant
the Company a repurchase option, with the repurchase price equal to the
original price paid by the purchaser.
AMENDMENT AND TERMINATION OF THE PLAN. The Administrator may at any time
amend, alter, suspend or discontinue the Plan, but not without optionee or
stock purchase rightholder consent. Any such amendment or termination of
the Plan shall not effect options or stock purchase rights already granted,
unless mutually agreed in writing by the optionee and the Company.
7
<PAGE>
TAX INFORMATION REGARDING STOCK OPTIONS. An optionee who is granted an
incentive stock option will not recognize taxable income either at the time
the option is granted or at the time it is exercised, although exercise of
the option may subject the optionee to the alternative minimum tax. The
Company will not be allowed a deduction for federal income tax purposes as
a result of the exercise of an incentive stock option regardless of the
applicability of the alternative minimum tax. Upon the sale or exchange of
the shares at least two years after grant of the option and one year after
exercise of the option, any gain will be treated as long-term capital gain.
If these holding periods are not satisfied at the time of sale, the
optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of (i) the fair market value of the stock at
the date of the option exercise or (ii) the sale price of the stock, and
the Company will be entitled to a deduction in the same amount. (Different
rules may apply upon a premature disposition by an optionee who is an
officer, director or 10% shareholder of the Company.) Any additional gain
or loss recognized on such a premature disposition of the shares will be
characterized as capital gain or loss. If the Company grants an incentive
stock option and as a result of the grant the optionee has the right in any
calendar year to exercise for the first time one or more incentive stock
options for shares having an aggregate fair market value (under the Plan of
the Company and determined for each share as of the date the option to
purchase the share was granted) in excess of $100,000, then the excess
shares must be treated as non-statutory options.
An optionee who is granted a non-statutory stock option will also not
recognize any taxable income upon the grant of the option. However, upon
exercise of a non-statutory stock option, the optionee will recognize
ordinary income for tax purposes measured by the excess of the then fair
market value of the shares over the exercise price. Any taxable income
recognized by an optionee who is an employee of the Company will be subject
to tax withholding by the Company. Upon resale of the shares by the
optionee, any difference between the sales price and the fair market value
at the time of exercise, to the extent not recognized as ordinary income as
described above, will be treated as capital gain or loss. The Company will
be allowed a deduction for federal income tax purposes equal to the amount
of ordinary income recognized by the optionee.
GENERAL
The Board of Directors held fourteen scheduled meetings during the
fiscal year ended June 30, 1997: July 17, 1996, August 20, 1996,
September 18, 1996, September 26, 1996 (telephonic), October 7, 1996
(telephonic), October 16, 1996, November 21, 1996, December 5, 1996
(telephonic), December 10, 1996, January 15, 1997, February 19, 1997, March
21, 1997, April 15, 1997, May 21, 1997, and June 18, 1997. A quorum was
reached at each of these meetings.
REMUNERATION
The following is a table showing the remuneration paid by the Company
during its fiscal year ended June 30, 1997 for services in all capacities
to each officer, the sum of whose cash-equivalent forms of remuneration
during such year exceeded $100,000, and the remuneration paid during each
year to all officers as a group:
CASH AND CASH-EQUIVALENT
FORMS OF REMUNERATIONS
<TABLE>
<CAPTION>
AGGREGATE OF
NAME OF INDIVIDUAL OR SALARIES, FEES, SECURITIES OF PROPERTY CONTINGENT
NUMBER OF PERSONS IN CAPACITIES IN COMMISSIONS INSURANCE BENEFITS OR FORMS OF
GROUP WHICH SERVED & BONUSES REIMBURSEMENT REMUNERATION
- --------------------- ------------- --------------- ---------------------- ------------
<S> <C> <C> <C> <C>
Lawrence L. Chief Executive $90,000.00 $6,000.00 --
Kavanau 1
All Executive $232,092.00 $20,500.00 --
Officers (4)
as a Group
</TABLE>
1 Lawrence L. Kavanau was the Company's Chief Executive Officer
for Fiscal Year 1997; Robert D. Mowry assumed this position effective
August 1, 1997.
8
<PAGE>
During Fiscal Year 1997, each Director of the Company (excluding full
time executive officers) received a fee in the amount of $500.00 plus
approved expenses per month. During the last year, the Board of Directors
of the Company has been meeting on an average of once per month. Directors
serve as chairmen or members of standing committees of the Board of
Directors and may meet in these capacities at times other than those
designated for meetings of the Board.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following information is furnished as of June 30, 1997 for each
director, all directors and officers as a group, and each stockholder who
is known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock:
<TABLE>
<CAPTION>
AMOUNT & NATURE
TITLE OF NAME & ADDRESS OF OF BENEFICIAL PERCENT OF
CLASS BENEFICIAL OWNER OFFICE, IF ANY OWNERSHIP 1 CLASS 2
-------- ----------------- -------------- --------------- ---------
<S> <C> <C> <C> <C>
Common Stock Robert D. Mowry Chairman, 658,504 (Direct) 31.2%
Without Par 19 Cherry Hills Lane CEO 320,000 (Indirectly, with
Value Newport Beach, CA 92660 Voting Rights, through
American Technology
Investments, Inc.) 3,4
Lawrence L. Kavanau CFO, 333,189 (Direct) 15.8%
3320-140 Caminito East Bluff Director 162,333 (As Trustee or
La Jolla, CA 92037 Executor, With Voting Rights)
W. Gerald Newmin Director, 271,679 8.7%
3223-18 Caminito East Bluff Secretary
La Jolla, CA 92037
Charles H. Werner Director 229,789 7.3%
P.O. Box 1966
Rancho Santa Fe, CA 92067
Charles E. Vandeveer Director, 119,616 3.8%
8203 Tiara Drive Vice President-
Ventura, CA 93004 Operations
Robert E. Carroll Director 60,500 (as Trustee, 1.9%
110 Painted Cliffs Dr. With Voting Rights) 4
Sedona, AZ 86336
Michael W. Fink Vice President, 35,494 1.1%
1150 Akron Street Administration
San Diego, CA 92106
Paul I. Anderson Director 0 0.0%
6418 Cayenne Lane
La Costa, CA 92009
All Directors and 2,191,104 69.9%
Officers as a Group 5
</TABLE>
1 To the best knowledge of the Company, each of the beneficial
owners listed herein has direct ownership of and sole voting power and
sole investment power with respect to the shares of the Company's
Common Stock, except as set forth herein.
9
<PAGE>
2 As of June 30, 1997, a total of 3,133,418 shares of Common Stock
of the Company were considered to be outstanding pursuant to SEC Rule
13d-3(d)(1) for purposes of this Proxy Statement.
3 American Technology Investments, Inc. (ATI) , is an entity
solely controlled by Mr. Mowry, and of which Mr. Mowry is the sole
shareholder.
4 Robert E. Carroll granted to ATI, an option to purchase a total
of 123,078 common shares over a three year period; at this time Mr. Carroll
retains beneficial ownership to these shares, but has assigned all voting
rights to ATI.
5 No officer or director is the holder of any shares of Preferred
Stock or Series B Preference Stock.
EXECUTIVE OFFICERS
The following table sets forth pertinent information concerning the
persons who are the current executive officers (who are not Directors) of
the Company.
NAME AGE CAPACITY
- ---- --- --------
Michael W. Fink 40 Vice President - Administration
Mr. Michael W. Fink is Vice President - Administration. Mr. Fink
joined the Company in July of 1995. He is responsible for the
administrative functions of the Company, including finance, accounting,
human resources, contracts and other management areas. He was President of
SANDAIRE before being hired by the Company. SANDAIRE is an engineering
firm specializing in the aerospace industry. Mr. Fink received a Bachelor
of Science degree in Business Administration (Accounting) from San Diego
State University (SDSU). He has also attended Graduate School at SDSU
where he studied mechanical engineering.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to present at the next Annual
Shareholders Meeting for Fiscal Year 1998 must be received at the Company's
office at 6363 Greenwich Drive, Suite 200, San Diego, California 92122, no
later than July 1, 1998 in order to be included in the Company's proxy
statement and proxy relating to that meeting.
ANNUAL REPORT
THE COMPANY'S 1997 ANNUAL REPORT FOR SHAREHOLDERS IS BEING MAILED
HEREWITH. Upon written request to Shareholder Relations Department at
6363 Greenwich Drive, Suite 200, San Diego, CA 92122, and at no charge, a
copy of the Company's annual report on Form 10-KSB, including the financial
statements and the financial statement schedules, will be forwarded.
OTHER BUSINESS
Management does not know of any other business to be presented at the
meeting and does not intend to bring any other matters before the meeting.
However, if any other matters properly come before the meeting, or any
adjournments thereof, it is intended that the persons named in the
accompanying proxy will vote therein according to their best judgement in
the interest of the Company.
By Order of the Board of Directors
/s/ W. GERALD NEWMIN
------------------
San Diego, California W. Gerald Newmin
November 14, 1997 Secretary
10
<PAGE>
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JANUARY 8, 1998
The undersigned hereby appoints L. Randolph Knapp and W. Gerald
Newmin, or either of them, proxies of the undersigned, to vote and
represent all shares of the Common Stock, without Par Value, registered in
the name of the undersigned, at the 1997 ANNUAL MEETING OF SHAREHOLDERS OF
SYS TO BE HELD AT 1:00 P.M. ON THURSDAY, JANUARY 8, 1998 AT THE LA JOLLA
MARRIOTT, LOCATED AT 4240 LA JOLLA VILLAGE DRIVE, LA JOLLA, CALIFORNIA
92037.
THE SHARES REPRESENTED BY THIS PROXY CAN BE VOTED AS MARKED BY THE
SYS COMMON SHAREHOLDER OF RECORD ON OCTOBER 10, 1997, WHOSE PRINTED NAME
AND SIGNATURE IS PLACED ON THE OPPOSITE SIDE. PLEASE MARK THE APPROPRIATE
BOX.
Item 1. Election of Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below). for all nominees listed below.
Nominees: Paul I. Anderson W. Gerald Newmin
Robert E. Carroll Charles E. Vandeveer
Lawrence L. Kavanau Charles H. Werner
L. Randolph Knapp Richard W. Wood
Robert D. Mowry
To withhold authority for any individual nominee, write the nominee's
name in the space provided:____________________________________________________
Item 2. Proposal to approve the appointment of J.H. Cohn LLP as the independent
certified public accountants for the Corporation for its 1998 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Proposal to amend the Articles of Incorporation to increase the number
of Common Shares authorized by the Company from 6.0 million to 12.0 million
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(NOTE: PROPOSALS CONTINUE ON THE REVERSE OF THIS PAGE)
11
<PAGE>
Item 4. Proposal to amend the SYS 1997 Incentive Stock Option and Restricted
Stock Plan to increase the number of Common Shares subject to the Plan for
issuance to non-employee directors from 100,000 to 350,000 Common Shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 5. Other Matters: In their discretion, on any other business which may
properly come before the meeting.
IF CUMULATIVE VOTING FOR DIRECTORS IS REQUESTED, THE PROXY HOLDER WILL HAVE
COMPLETE DISCRETION IN VOTING YOUR SHARES. IF NO INDICATION IS MADE
ABOVE ON HOW YOU DESIRE YOUR SHARES TO BE VOTED, THE PROXY HOLDER WILL HAVE
COMPLETE DISCRETION IN VOTING YOUR SHARES.
IN WITNESS WHEREOF, the undersigned has signed this proxy on ___________, 1997.
(month and day)
The undersigned [ ] PLANS [ ] DOES NOT PLAN to attend the meeting.
Shareholders who are present at the meeting may withdraw their proxy by
contacting the Secretary in order to vote in person if they so desire.
__________________________________ __________________________________
(Print Name) (Signature)
__________________________________ __________________________________
(Print Name) (Signature)
NOTE: PLEASE DATE THE PROXY AND SIGN YOUR NAME AS IT APPEARS ON THE LABEL.
If shares are registered in the name of two or more persons, each should
sign. Executors, administrators, trustees, guardians, attorneys, and
corporation officers should show their full titles.
PLEASE DATE, SIGN AND RETURN PROXY PROMPTLY
12
