<PAGE>
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:
/ / 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 Section 240.14a-11(c) or Section
240.14a-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:
------------------------------------------------------------------------
(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>
SYS
9620 Chesapeake Drive
San Diego, California 92123
(619) 715-5500
NOTICE OF THE 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 20, 1999
To the Holders of Common Stock of SYS:
The 1998 Annual Meeting of Shareholders of SYS (the "Company") will be
held at the corporate office, 9620 Chesapeake Drive, suite 201, San Diego,
California 92123, on January 20, 1999, at 1:00 p.m., local time, to consider
the following business:
1. To elect a Board of eight 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 1999; and
3. To amend 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 350,000
to a total of 450,000 and for employees from 500,000 to a total
of 750,000.
The Board of Directors has fixed November 20, 1998 as the record date
for the determination of shareholders entitled to notice of and to vote at
the 1998 Annual Meeting of Shareholders and at any adjournment thereof.
All Shareholders are cordially invited to attend the 1998 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
December 7, 1998 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 1998 Annual Meeting of
Shareholders to be held at the corporate office, 9620 Chesapeake Drive, suite
201, San Diego, California 92123 on Wednesday, January 20, 1999, at 1:00
p.m., local time. The approximate mailing date of this proxy statement and
the accompanying proxy and annual report is December 11, 1998.
When the enclosed proxy is properly executed and returned, the shares it
represents will be voted at the 1998 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 November 20, 1998 will be entitled to
vote at the 1998 Annual Meeting of Shareholders. On that date, there were
3,173,518 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
(eight (8) 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
At the 1998 Annual Meeting of Shareholders, eight 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 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.
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
eight 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.
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Proxies solicited by the Board of Directors cannot be voted for more
than eight 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 63 President & CEO Oct. 4, 1996 Strategic Catalysts, Inc.
(3) (4) of Strategic Catalysts, Inc.
Robert E. Carroll 76 Executive Consultant Oct. 19, 1993 Sedona Cultural Park, Inc.;
(1) (2) Chairman or ENTRE ENTRE International, Inc.
International, Inc.
Lawrence L. Kavanau 72 Chief Financial Officer of the Sept. 7, 1966 None
(1) (3) (4) (5) Company
Robert D. Mowry 42 President of North American Mar. 21, 1997 Big Canyon Investments, Inc.;
(1) (3) (5) Timeshare, Inc., dba United North American Timeshare,
Computer Systems, Inc.; Inc.; Photonics Laboratories,
President of American Technology Inc.
Investment, Inc.
W. Gerald Newmin 61 Chairman and CEO of the Oct. 19, 1993 Exten Industries, Inc.,
(2) (3) (4) Company; Chairman and Int'l Forum of Corporate Directors
CEO of Exten Industries, Inc.
Charles E. Vandeveer 55 Executive Vice President Mar. 21, 1997 Naval Construction Battalion
(1) of the Company Center Credit Union
Charles H. Werner 71 Consultant Mar. 6, 1989 None
(3) (4) (5)
Richard W. Wood 44 Vice-President, American Oct. 15, 1997 None
(2) (5) Technology Investments, Inc.
</TABLE>
- -----------
(1) Member of Nominating and Compensation Committee
(2) Member of Audit Committee
(3) Member of Acquisition Committee
(4) Member of Finance Committee
(5) Member of Search Committee
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.
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Mr. Robert E. Carroll was elected to the Board of Directors as of
October 19, 1993. Mr. 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 the Founding Chairman and CEO of the Sedona
Cultural Park, Inc. 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. From August 26, 1998 to
October 21, 1998, the Company's Board of Directors established an Office of
the Chief Executive (OCE), Dr. Kavanau was one of the three Principal
Executives of this office. 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. Robert D. Mowry was elected to the Board of Directors on March 21,
1997. From August 26, 1998 to October 21, 1998, the Company's Board of
Directors established an Office of the Chief Executive (OCE), Mr. Mowry was
one of the three Principal Executives of this office. From August 1, 1997 to
August 26, 1998, Mr. Mowry was the Company's Acting Chief Executive Officer.
From August 1, 1997 to October 21, 1998, Mr. Mowry was the Company's Chairman
of the Board. Mr. Mowry was 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 was elected to the Board of Directors on October
19, 1993. On October 21, 1998 Mr. Newmin was elected interim Chairman and
Chief Executive Officer of the Company. Mr. Newmin is Chairman and Chief
Executive Officer of Exten Industries, Inc., a publicly held bio-medical
company. 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
3
<PAGE>
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 was elected to the Board of Directors on March
21, 1997. Mr. Vandeveer is the Company's Executive Vice President and
coordinates 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 was elected to the Board of Directors on March 6,
1989. From August 26, 1998 to October 21, 1998, the Company's Board of
Directors established an Office of the Chief Executive (OCE), Mr. Werner was
one of the three Principal Executives of this office. Mr. 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 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 EIGHT (8) NOMINEES NAMED ABOVE.
There is no family relationship between any of the directors and
executive officers of the Company.
4
<PAGE>
AFFILIATE TRANSACTIONS AND RELATIONSHIPS
At June 30, 1998, the Company's Chairman and Chief Executive Officer was
Mr. Robert D. Mowry. Mr. Mowry also had the following associations:
1. Chief Executive Officer of Big Canyon Investments, Inc. (BCI)
2. Owner of KRW Contracts and Financial Management, Inc. (KRW)
3. Former Chief Executive Officer of UniPrise Systems, Inc. (UniPrise)
The Company has pledged certain rights it holds in Systems Exploration, Inc.
(SEI) accounts receivable and claims to KRW for payment on a loan owned by
BCI. BCI is the first secured debtor of all SEI accounts receivable and
claims up to the value of the loan BCI purchased from First National Bank of
San Diego plus interest and collection costs. The Company has had an
agreement with BCI to support the collection efforts on a cost reimbursement
basis and two Company employees have been assisting BCI in the collection of
SEI receivables, claims and contract closeouts. UniPrise entered into an
agreement to acquire BCI on or about December 1996 and Mr. Mowry became the
Chief Executive Officer of UniPrise. About January of 1998, UniPrise ceased
paying the Company's collection costs. At the Board of Directors meeting
held on April 15, 1998, the Board formed a subcommittee that was tasked with
the development of a plan to insure repayment of the debt owed the Company by
UniPrise as soon as possible. As of October 31, 1998, UniPrise owed the
Company approximately $101,000. Mr. Charles H. Werner, a director of the
Company, has been a consultant to BCI and manages the collection process for
BCI.
In October 1995, Mr. Mowry advanced funds in the amount of $165,000 to
finance certain Company trial expenses in return for possible future
proceeds. These expenses by Mr. Mowry were guaranteed by the Company to the
extent that the Company would in the future receive a portion of the funds
from SEI assets being collected by BCI.
During the year ended June 30, 1998 the Board of Directors granted stock
purchase options to four key employees and seven outside directors
exercisable at various prices per share. Some of these purchase options
contain certain buy-back provisions which become effective in the event of
termination of employment or directorship.
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
could be exercised at $0.31, $0.09 and $0.47 per share, respectively.
Exercise of the Mowry and Werner options was 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 shareholders did approve an increase
at the 1997 annual meeting.
On September 3, 1997, a Director of New Business Development was hired
by the Company. As part of her compensation package, she was granted
qualified options on 50,000 shares of the Company's common stock. Subsequent
to June 30, 1998, she left the employment of SYS and all stock options were
terminated.
At the November 19, 1997 Board of Directors meeting, the board approved
stock options for all outside directors in lieu of cash compensation for
board meeting attendance. Effective September 1, 1997, outside directors
were to receive stock options for 12,000 shares of the Company's common stock
as annual compensation at $0.75 per share. As of June 30, 1998, there were
67,300 common shares owed to the following outside directors: Paul I.
Anderson, 10,000 shares; Robert E. Carroll, 10,000 shares; L. Randolph Knapp,
9,500 shares; Robert D. Mowry, 10,000 shares; W. Gerald Newmin, 10,000
shares; Charles H. Werner, 10,000 shares; Richard W. Wood, 7,800 shares.
Effective February 1, 1998, Mr. Larry Moe was granted stock options for
60,000 shares of the Company's common stock by the Board of Directors. The
option is exercisable at 20,000 shares annually at $0.87 per share.
On February 18, 1998, the Board of Directors authorized non-qualified
stock purchase options of 25,000 common shares each to outside directors L.
Randolph Knapp and Richard W. Wood, which may be exercised at $0.75 per share.
At the June 3, 1998 Board of Directors meeting, stock options totaling
300,000 common shares were approved for key employees at $0.71 per share.
The stock options vest annually on a 20%, 20%, 30%and 30% basis over four
years. Included
5
<PAGE>
in this award were two officers, Charles E. Vandeveer and Michael W. Fink,
who received stock options of 60,000 and 50,000 shares, respectively.
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 1998, its executive officers and
directors complied with Section 16(a) requirements.
Pursuant to the reporting requirements of Item 404(c) of Regulation
S-K, as of October 31, 1998 Mr. Mowry (BCI/UniPrise) is indebted to the
Company in the amount of approximately $101,000, 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 1999 fiscal year (commencing July 1,
1998) and nominates that firm for selection at the 1998 Annual Meeting of
Shareholders. A representative 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 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 350,000 to a total of 450,000 and for employees from 500,000 to a total
of 750,000. 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
500,000 common shares for employees of the Company and 350,000 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, and 360,000 shares authorized but
as yet unissued to employees; 100,000 shares issued and outstanding to
directors, and 181,300 shares authorized but as yet unissued to directors.
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 option's 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
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<PAGE>
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.
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 twelve scheduled meetings during the fiscal
year ended June 30, 1998: July 16, 1997, August 20, 1997, September 16,
1997, October 15, 1997, November 19, 1997, December 17, 1997, January 8,
1998, February 18, 1998, April 15, 1998, May 27, 1998, June 3, 1998 and June
17, 1998. 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, 1998 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:
7
<PAGE>
Cash and Cash-Equivalent
FORMS OF REMUNERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Securities of
Name of Property, Aggregate of
Individual or Salaries, Fees, Insurance Contingent
Number of Persons Capacities In Commissions, Benefits or Forms of
in Group Which Served & Bonuses Reimbursement Remuneration
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lawrence L. Chief Financial $90,348 $ 6,000 --
Kavanau (1) Officer
- ----------------------------------------------------------------------------------------
All Executive $234,920 $15,000 --
Officers (4) as
a Group
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Lawrence L. Kavanau was the Company's Chief Executive Officer through
July 31, 1997.
During the first two months of Fiscal Year 1998, 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 ten months of
fiscal year 1998, each Director of the Company (excluding full time executive
officers) received a stock option for 12,000 shares of Company common stock
at $0.75 per share annually 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.
The following is a list of common stock options given to directors and
officers as of June 30, 1998:
<TABLE>
<CAPTION>
Name and Title Grant Date # of shares Option Price Expiration Date
- -------------- ---------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
Anderson, Paul - Director 5/21/97 25,000 $0.31 7/31/04
Mowry, Robert - Chairman 5/21/97 25,000 $0.47 3/21/04
Werner, Charles - Director 5/21/97 25,000 $0.09 Exercised
Knapp, Randolph - Director 2/18/98 25,000 $0.75 9/16/04
Wood, Richard - Director 2/18/98 25,000 $0.75 11/7/04
Anderson, Paul - Director 11/19/97 10,000 $0.75 11/19/03
Carroll, Robert - Director 11/19/97 10,000 $0.75 11/19/03
Knapp, Randolph - Director 11/19/97 9,500 $0.75 11/19/03
Mowry, Robert - Chairman 11/19/97 10,000 $0.75 11/19/03
Newmin, Gerald - Director 11/19/97 10,000 $0.75 11/19/03
Werner, Charles - Director 11/19/97 10,000 $0.75 11/19/03
Wood, Richard - Director 11/19/97 7,800 $0.75 11/19/03
Vandeveer, Charles -Director 6/3/98 60,000 $0.71 6/3/03
Fink, Michael- Officer 6/3/98 50,000 $0.71 6/3/03
All other employees various 250,000 various various
Total options outstanding 552,300
</TABLE>
8
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following information is furnished as of June 30, 1998 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
Name & Address of of Beneficial Percent of
Title Of Class Beneficial Owner Office, If Any Ownership (1) Class (2)
- --------------- ----------------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Common Stock Charles H. Werner Director 785,796 25.0%
Without Par P.O. Box 1966
Value Rancho Santa Fe, CA 92067
Lawrence L. Kavanau CFO, 298,189 (Direct) 14.6%
3320-140 Caminito East Bluff Director 162,333 (As Trustee or
La Jolla, CA 92037 Executor, With
Voting Rights)
Robert D. Mowry Director 102,497 (Direct) 9.5%
19 Cherry Hills Lane 196,922 (Indirectly, with
Newport Beach, CA 92660 Voting Rights, through
American Technology
Investments, Inc.)(3), (4)
W. Gerald Newmin Chairman, 271,679 8.6%
48 Admiralty Cross CEO,
Coronado, CA 92118 Secretary
Robert E. Carroll Director 219,078(4) 7.0%
110 Painted Cliffs Dr.
Sedona, AZ 86336
Charles E. Vandeveer Director, 119,616 3.8%
8203 Tiara Drive Executive
Ventura, CA 93004 Vice President
Michael W. Fink Vice President, 35,494 1.1%
3410 Bangor Place Administration
San Diego, CA 92106
Paul I. Anderson Director 0 0.0%
6418 Cayenne Lane
La Costa, CA 92009
Richard W. Wood Director 0 0.0%
117 Via Lido Soud
Newport Beach, CA 92660
All Directors and 2,191,604 69.6%
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, 1998, a total of 3,148,518 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. ATI exercised their option
to purchase 41,026 shares from Mr. Carroll on November 18, 1998. Mr. Carroll
retains beneficial ownership of the remaining 82,052 shares.
(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:
<TABLE>
<CAPTION>
Name Age Capacity
- ---- --- --------
<S> <C> <C>
Michael W. Fink 41 Vice President - Administration
</TABLE>
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 1999 must be received at the Company's
office at 9620 Chesapeake Drive, Suite 201, San Diego, California 92123, no
later than July 1, 1999 in order to be included in the Company's proxy
statement and proxy relating to that meeting.
ANNUAL REPORT
THE COMPANY'S 1998 ANNUAL REPORT FOR SHAREHOLDERS IS BEING MAILED
HEREWITH. Upon written request to Shareholder Relations Department at 9620
Chesapeake Drive, Suite 201, San Diego, CA 92123, 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
December 8, 1998 Secretary
10
<PAGE>
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JANUARY 20, 1998
The undersigned hereby appoints Paul I. Anderson and Richard W.
Wood, 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 1998 ANNUAL MEETING OF SHAREHOLDERS OF SYS TO BE HELD
AT 1:00 P.M. ON WEDNESDAY, JANUARY 20, 1999 AT THE CORPORATE OFFICE, 9620
CHESAPEAKE DRIVE, SUITE 201, SAN DIEGO, CALIFORNIA 92123.
THE SHARES REPRESENTED BY THIS PROXY CAN BE VOTED AS MARKED BY THE
SYS COMMON SHAREHOLDER OF RECORD ON NOVEMBER 20, 1998, 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 for all nominees listed
contrary below). below.
Nominees: Paul I. Anderson W. Gerald Newmin
Robert E. Carroll Charles E. Vandeveer
Lawrence L. Kavanau Charles H. Werner
Robert D. Mowry Richard W. Wood
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 1999 fiscal
year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Proposal to amend 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 350,000 to a total of 450,000 and for employees
from 500,000 to a total of 750,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(NOTE: PROPOSALS CONTINUE ON THE REVERSE OF THIS PAGE)
------------------------------------------------------
<PAGE>
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 ____________, 1998
(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
-------------------------------------------
