SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SS 240.14a-11(c) or SS 240.14a-12
SYS
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(Name of Registrant as Specified In Its Charter
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(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)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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<PAGE>
SYS
9620 Chesapeake Drive
San Diego, California 92123
(858) 715-5500
NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 17, 2001
To the Holders of Common Stock of SYS:
The 2000 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 17, 2001, at 1:00 p.m., local time, to consider
the following business:
1. To elect a Board of five Directors to serve for the ensuing year and
until their respective successors are elected; and
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 2001.
3. To amend the Articles of Incorporation to increase the number of
common shares authorized for issuance from 12.0 million to
48.0 million shares.
4. To amend the SYS 1997 Incentive Stock Option and Restricted Stock
Plan (the "Plan") to increase the amount of common shares subject to
the Plan for employees from 750,000 to a total of 1,750,000.
The Board of Directors has fixed November 17, 2000 as the record date for
the determination of shareholders entitled to notice of and to vote at the
2000 Annual Meeting of Shareholders and at any adjournment thereof.
All Shareholders are cordially invited to attend the 2000 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/ Michael W. Fink
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San Diego, California Michael W. Fink
November 27, 2000 Secretary
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<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 2000 Annual Meeting of
Shareholders to be held at the corporate office, 9620 Chesapeake Drive,
Suite 201, San Diego, California 92123 on Wednesday, January 17, 2001, at
1:00 p.m., local time. The approximate mailing date of this proxy statement
and the accompanying proxy and annual report is December 8, 2000.
When the enclosed proxy is properly executed and returned, the shares it
represents will be voted at the 2000 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 17, 2000 will be entitled to
vote at the 2000 Annual Meeting of Shareholders. On that date, there were
3,162,732 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
(five (5) 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.
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<PAGE>
ELECTION OF DIRECTORS
At the 2000 Annual Meeting of Shareholders, five 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 five
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
five nominees for directors.
<TABLE>
The table immediately below contains pertinent information concerning the
nominees and is followed by a brief biography of each nominee:
<CAPTION>
Date Elected Other
Name Age Principal Occupation Director Directorships
----------------- --- --------------------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Zoltan A. Harasty 70 Consultant Jan. 19, 2000 None
Kameron W. Maxwell 64 Consultant Sep. 21, 1999 None
W. Gerald Newmin 63 Chairman, Chief Executive Oct. 19, 1993 Exten Industries, Inc.,
Officer and Chief Financial Corporate Directors Forum
Officer of the Company
Charles E. Vandeveer 59 Executive Vice President Mar. 21, 1997 Naval Construction Battalion
of the Company Center Credit Union
Charles H. Werner 73 Consultant Mar. 6, 1989 None
</TABLE>
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<PAGE>
Mr. Zoltan A. "Walt" Harasty is a graduate of the Stanford Law School,
was legal counsel to the Company at the time of its formation and initial
public offering and was elected to the Board of Directors on January 19, 2000
to serve the term of Lawrence L. Kavanau, who resigned his seat on
January 19, 2000. Mr. Harasty had previously served as a director of the
Company from April 14, 1994 to March 21, 1997. Mr. Harasty is a Corporate
Counsel with in-depth experience of over 40 years in securities transactions,
SEC filings, stock exchange listings, corporate financing and in almost every
area of security law. His experience was gained both as a Corporate General
Counsel and as a partner in Tremaine and Shenk and Managing Partner of
McDonald, Halsted & Laybourne. He was General Counsel and Vice President,
Expansion for Carrows Restaurants and also acted as Special Counsel to Collins
Foods International (Sizzler Restaurants and the then largest franchisee of
KFC). He was General Counsel of Malibu Grand Prix Corporation with 42
subsidiaries operating nationwide amusement centers featuring miniature racing
cars, video games and miniature golf. Prior to the time of his retirement in
1998, Mr. Harasty was a principal in Boardroom Counselors, a management
consulting firm specializing in small business capital formation. With his
knowledge of NASD, SEC, security dealers, financing, public offerings, private
placements, bank financing and real estate matters. Mr. Harasty brings
significant legal and business expertise to the Company's Board of Directors
and helps in its growth.
Kameron W. Maxwell, Ph.D. was elected to the Board of Directors as of
September 21, 1999. Dr. Maxwell is currently a consultant to various
biotechnology and contract research companies. He held various positions at
the Veterans Administration Hospital in Salt Lake City, both in the clinical
laboratory and research departments as well as having a teaching appointment in
the Microbiology department at the University of Utah College of Medicine.
After leaving Salt Lake City he took a position with Baxter Travenol's Hyland
Division in Costa Mesa, California. While at Hyland, he held a number of
positions in the Research and Development department with the most recent being
that of Director. In this position he supervised a large group of scientists
and coordinated research both within the company and with outside academic
collaborators. Dr. Maxwell left Baxter and held the position of Director of
Research and Development at Newport Pharmaceuticals. In this capacity he was
responsible for the research, development and registration of a new chemical
entity. Dr. Maxwell was president and co-founder of Americal Pharmaceuticals
Inc., a company that manufactured, imported and distributed sterile liquid
pharmaceutical products. These products were predominately used in the
treatment of cancer (generic oncology products) and ophthalmic conditions.
Following the Americal position, Dr. Maxwell held various positions at
Genta Inc. The most recent being that of Sr. Vice President of Pharmaceuticals
Operations. Dr. Maxwell has had extensive experience in the regulatory affairs
arena and is RAC certified. He has established numerous working relationships
with universities and contract service organizations, and has researched,
developed and marketed numerous products ranging from diagnostics through
prescription pharmaceuticals. He is a member of The American Academy of
Dermatology, The Regulatory Affairs Professional Society, the American Society
for Microbiology, the Drug Information Association, the American Association of
Pharmaceutical Scientists, the Controlled Release Society and other scientific
and professional organizations. Dr. Maxwell brings to the Company his
knowledge and experience in start up financing, research and development,
strategic planning and management, operations, product and process quality and
securing product regulatory approvals. Dr. Maxwell's education consists of a
Ph.D., Immunology, Minor, Histology, University of Utah; an M.S., Microbiology,
Minor, Parasitology, University of Utah and a B.S., Bacteriology, University of
Utah.
Mr. W. Gerald Newmin was elected to the Board of Directors as of
October 19, 1993. On October 21, 1998, Mr. Newmin was elected as interim
Chairman of the Board and Chief Executive Officer of the Company. On
January 20, 1999, Mr. Newmin was elected Chief Executive Officer and Chief
Financial Officer of the Company. On January 19, 2000, Mr. Newmin was elected
Chairman of the Board, Chief Executive Officer and Chief Financial Officer of
the Company. Mr. Newmin served as Corporate Secretary from December 10, 1993
to January 20, 1999. Mr. Newmin also serves as Chairman and Chief Executive
Officer of Exten Industries, Inc., a publicly held bio-medical company and on
the Board of two non-profit organizations, the Corporate Directors Forum and
the Corporate Governance Institute. 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 and participated in
numerous acquisitions. 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, Whittaker's Marine
Group consisting of Bertram Yacht, Columbia Yacht and Trojan Yacht
Corporations. 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. On August 26, 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, which was discontinued on
October 21, 1998. 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.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND THAT SHAREHOLDERS VOTE FOR
ALL FIVE (5) NOMINEES NAMED ABOVE.
There is no family relationship between any of the directors and executive
officers of the Company.
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<PAGE>
AFFILIATE TRANSACTIONS AND RELATIONSHIPS
During the year ended June 30, 2000, the Board of Directors granted stock
purchase options to four outside directors exercisable at $0.625 per share.
One new director, Mr. Kameron Maxwell, also received a stock option for 25,000
shares at $1.00 per share with vesting over five years. Some of these purchase
options contain certain buyback provisions which become effective in the event
of termination of directorship. See the table under Remuneration for complete
details of outstanding stock option to directors.
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. There are outstanding stock options for
69,800 common shares for the period of September 1, 1997 to August 31, 1998.
Under the same policy, for the period from September 1, 1998 through
August 31, 1999, stock options for 40,645 common shares at $0.68 per share are
owed to outside directors. Under the same policy, for the period from
September 1, 1999 through June 30, 2000, stock options for 25,387 common shares
at $0.625 per share are owed to outside directors.
Effective September 21, 1999, the Board of Directors elected
Mr. Kameron W. Maxwell to fill the Board of Directors vacancy created by
Mr. Robert D. Mowry's resignation. Also effective September 21, 1999, the
Company entered into a Consulting Agreement and Amendment to Prior
Understanding (the "Agreement") with Mowry.
Effective September 24, 1999, the Board of Directors agreed to replace the
Big Canyon Investments, Inc. (BCI)/UniPrise debt with a Secured Negotiable
Promissory Note (the "Note") for $179,000 from Mowry and BCI. The Note was
secured by certain third party receivables, Mowry's personal guarantee and
common stock of the Company held or controlled by Mowry. The Note accrued
interest at 10% per annum and principal and interest were due on
December 31, 1999. As of January 1, 2000, the Note was in default and the
Company foreclosed on February 23, 2000 on the 124,000 shares of Company common
stock held as collateral. Pursuant to the Agreement, Mowry has an option to
purchase 124,000 shares of common stock for one dollar per share through
June 30, 2001.
Effective January 1, 2000, the Company entered into a new Secured
Negotiable Promissory Note (the "New Note") with Mowry and BCI for $55,000.
The New Note is for the remaining balance of the Note ($179,000 - $124,000 =
$55,000). The New Note is secured by certain third party receivables and
Mowry's personal guarantee. The New Note accrues interest at 10% per annum and
principal and interest was due on June 30, 2000. The Company and Mowry have
extended the New Note through June 30, 2001. Mowry is no longer an affiliate
of the Company.
The Company added an employee stock ownership plan to its existing 401(k)
plan, thus creating the SYS 401(k) Employee Stock Ownership Plan and Trust
Agreement (the "Plan"). Effective January 1, 2000, instead of the matching
cash contribution the Company had been giving to the employees through the
401(k), the Company will now contribute Company stock to the employees through
the Plan.
At the Annual Board of Directors Meeting on January 19, 2000, which was
held subsequent to the Annual Shareholders Meeting, Mr. Lawrence L. Kavanau
resigned his seat on the Board of Directors effective at the conclusion of the
meeting. The Board of Directors elected Mr. Zoltan A. Harasty to fill the
Board of Directors vacancy created by Mr. Kavanau's resignation.
On February 4, 2000, the Company signed a Joint Venture Agreement with
LaRRK Digital, Inc. (LaRRK). LaRRK assists its customers to identify, develop,
internally deploy and/or sell their intellectual property through the creation
of knowledge management strategies and sales programs. LaRRK uses software and
internet technologies to accomplish these goals. The Company agreed to loan
LaRRK $60,000. The Company has certain rights, which includes trading the
LaRRK note receivable for a one third interest in LaRRK. The Company and LaRRK
have entered into discussions on a more definitive agreement.
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<PAGE>
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 2000, its executive officers and directors
complied with Section 16(a) requirements.
Pursuant to the reporting requirements of Item 404(c) of Regulation S-K,
no 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 2001 fiscal year (commencing
July 1, 2000) and nominates that firm for selection at the 2000 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 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 12.0 million
to 48.0 million Shares.
If the Company's shareholders approve the proposed Amendment, the
Company's Board of Directors will be authorized to issue up to 36.0 million
additional Shares of the Company's Common Stock in excess of the 12.0 million
currently authorized without 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 thereby be
less able to influence the course of the Company's affaires 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.
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 issue 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.
The additional Common Stock to be authorized if this proposal is adopted
would have rights identical to the currently outstanding Common Stock of the
Company.
The Board desires to have additional authorized shares for future business
and financial purposes. The Board believes that the proposed increase in the
number of authorized shares of Common Stock will facilitate the Company's
growth strategy. The additional shares may be issued, without further
stockholder approval, for various purposes, including (without limitation)
raising capital, acquiring other product or business lines through mergers or
acquisitions of other products or businesses, providing equity incentives to
employees, as well as stock dividends to existing stockholders.
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<PAGE>
The increase in the authorized number of shares of Common Stock, and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in the control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by the California Corporations Code) be issued in one or more
transactions which would make a change in control of the Company more
difficult, and therefore less likely.
Any such issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of outstanding shares of Common
Stock or the stock ownership or voting rights of a person seeking to obtain
control of the Company.
The Company is and will continue to seek appropriate merger and
acquisition candidates. The increase in the authorized number of shares of the
Company's Common Stock may result in the Company issuing these shares in one or
more such transactions.
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 employees from 750,000 to a total of
1,750,000. 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 750,000 common shares for employees of the Company and 450,000 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 356,000 shares authorized but
as yet unissued to employees; 111,486 shares issued and outstanding to
directors, and 173,345 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 Directors 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.
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<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 eight scheduled meetings during the fiscal
year ended June 30, 2000: July 21, 1999, August 26, 1999, September 16, 1999,
October 20, 1999, December 16, 1999, January 19, 2000, March 1, 2000 and
May 10, 2000. A quorum was reached at each of these meetings.
The SYS Audit Committee has adopted a Charter. This Charter is attached
as Attachment A.
REMUNERATION
The following is a table showing the remuneration paid by the Company
during its fiscal year ended June 30, 2000 for services in all capacities to
the Chief Executive Office and 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:
===============================================================================
<PAGE>
<TABLE>
Cash and Cash-Equivalent
Forms of Remunerations
------------------------
<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. Kavanau (1) Chairman $ 54,740 $ 3,500 None
W. Gerald Newmin (2) Chairman, CEO, CFO $ 60,008 None None
Charles E. Vandeveer Executive Vice President $ 95,871 $ 6,000 None
--------- --------- ----
All Executive
Officers (4) as a Group $ 292,747 $ 12,500 None
========= ========= ====
<FN>
(1) Lawrence L. Kavanau was the Company's Chairman from July 1, 1999 through
January 19, 2000.
(2) W. Gerald Newmin assumed the duties of Chairman on January 19, 2000 in
addition to the CEO and CFO duties.
</TABLE>
During Fiscal Year 2000, each Director of the Company (excluding full time
executive officers) received a stock option for 12,000 shares of Company common
stock (see below for stock option prices) plus approved expenses per month.
During the last year, the Board of Directors of the Company held eight Board of
Director meetings. 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.
<TABLE>
The following is a list of common stock options given to directors and
officers as of June 30, 2000:
<CAPTION>
Option Expiration
Name and Title Grant Date # of shares Price Date
-------------------------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Mowry - Former Director 05/21/97 12,513 $0.47 03/21/04
Anderson - Former Director 11/19/97 12,000 $0.75 11/19/03
Carroll - Former Director 11/19/97 12,000 $0.75 11/19/03
Mowry - Former Director 11/19/97 12,000 $0.75 11/19/03
Newmin - Director 11/19/97 12,000 $0.75 11/19/03
Werner - Director 11/19/97 12,000 $0.75 11/19/03
Wood - Former Director 11/19/97 9,800 $0.75 11/19/03
Anderson - Former Director 09/01/98 5,000 $0.68 09/01/04
Carroll - Former Director 09/01/98 5,000 $0.68 09/01/04
Mowry - Former Director 09/01/98 12,000 $0.68 09/01/04
Newmin - Director 09/01/98 1,645 $0.68 09/01/04
Werner - Director 09/01/98 12,000 $0.68 09/01/04
Wood - Former Director 09/01/98 5,000 $0.68 09/01/04
Harasty - Director 09/01/99 5,387 $0.625 09/01/05
Maxwell - Director 09/01/99 9,300 $0.625 09/01/05
Mowry - Former Director 09/01/99 700 $0.625 09/01/05
Werner - Director 09/01/99 10,000 $0.625 09/01/05
Maxwell -Director 09/21/99 25,000 $1.00 09/21/06
Vandeveer -Director 06/03/98 60,000 $0.71 06/03/03
Fink - Officer 06/03/98 50,000 $0.71 06/03/03
</TABLE>
===============================================================================
<PAGE>
<TABLE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following information is furnished as of June 30, 2000 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:
<CAPTION>
Amount & Nature Percent
Name & Address of of Beneficial of
Title Of Class Beneficial Owner Office, If Any Ownership (1) Class (2)
-------------- --------------------------- ------------------------ ------------------- ---------
<S> <C> <C> <C> <C>
Common Stock Charles H. Werner Director 731,566 (3) 22.9%
Without Par P.O. Box 1966
Value Rancho Santa Fe, CA 92067
Lawrence L. Kavanau None 298,189 (Direct) 14.6%
3320-140 Caminito East Bluff 162,333 (As Trustee
La Jolla, CA 92037 or Executor,
With Voting Rights)
W. Gerald Newmin Chairman, 285,324 (4) 9.0%
48 Admiralty Cross Chief Executive Officer,
Coronado, CA 92118 Chief Financial Officer
Charles E. Vandeveer Director, 179,616 (5) 5.6%
8203 Tiara Drive Executive Vice President
Ventura, CA 93004
Michael W. Fink Vice President, 96,980 (6) 3.0%
3410 Bangor Place Finance and
San Diego, CA 92106 Administration, Secretary
Kameron W. Maxwell Director 34,000 (7) 1.1%
P.O. Box 3736
Rancho Santa Fe, CA 92067
Zoltan A. Harasty Director 32,294 (8) 1.0%
918 Hornbeck Place
Solvang, CA 93463
------------------- ---------
All Directors and 1,359,780 (9) 40.5%
Officers as a Group (10) =================== =========
<FN>
(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.
(2) A total of 3,162,732 shares of Common Stock of the Company has been
considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) for purposes
of Item 11 of this Form 10-KSB. For each Beneficial Owner above, any
options exercisable within 60 days have been included in the denominator.
(3) The following stock options of Mr. Werner are included in the stock total:
(1) granted 11/19/97, 12,000 shares, option price of $0.75 per share;
(2) granted 9/1/98, 12,000 shares, option price of $0.68 per share and
(3) granted 9/1/99, 10,000 shares, option price of $0.625 per share.
Mr. Werner has a total of 34,000 shares that may be purchased through
stock options. The total shown here includes these stock options.
(4) The following stock options of Mr. Newmin are included in the stock total:
(1) granted 11/19/97, 12,000 shares, option price of $0.75 per share and
(2) granted 9/1/98, 1,645 shares, option price of $0.68 per share.
Mr. Newmin has a total of 13,645 shares that may be purchased through
stock options. The total shown here includes these stock options.
(5) The following stock option of Mr. Vandeveer is included in the stock
total: (1) granted 6/3/98, 60,000 shares, option price of $0.71 per share.
The total shown here includes these stock options.
(6) The following stock option of Mr. Fink is included in the stock total:
(1) granted 6/3/98, 50,000 shares, option price of $0.71 per share.
The total shown here includes these stock options.
(7) The following stock options of Mr. Maxwell are included in the stock
total: (1) granted 9/1/99, 9,300 shares, option price of $0.625 per share
and (2) granted 9/21/99, 25,000 shares, option price of $1.00 per share.
Mr. Maxwell has a total of 34,300 shares that may be purchased through
stock options. The total shown here includes these stock options.
(8) The following stock option of Mr. Harasty is included in the stock total:
(1) granted 9/1/99, 5,387 shares, option price of $0.625 per share.
The total shown here includes these stock options.
(9) Current officers and directors hold a total of 197,332 stock options.
The total shown here includes these stock options.
(10) No director or officer of the Company is the beneficial owner of any
shares of the Company's Preferred Stock, $0.50 par value, or Series B 9%
Cumulative Convertible Callable Non-Voting Preference Stock, $1.00 par
value.
</TABLE>
===============================================================================
<PAGE>
EXECUTIVE OFFICERS
<TABLE>
The following table sets forth pertinent information concerning the
persons who are the current executive officers (who are not directors) of the
Company:
<CAPTION>
Name Age Capacity
---------------- --- -----------------------------------------------------
<S> <C> <C>
Michael W. Fink 43 Vice President, Finance and Administration, Secretary
</TABLE>
Michael W. Fink is Vice President, Finance and Administration at the
Corporate offices and was elected Corporate Secretary on January 20, 1999.
Mr. Fink joined the Company in July of 1995. He is responsible for the
financial and administrative functions of the Company, including finance,
accounting, SEC reporting, banking, human resources, contracts and other
management areas. He held various executive positions at San Diego Aircraft
Engineering, Inc. (SANDAIRE) before being hired by the Company. SANDAIRE is an
engineering firm specializing in the aerospace and defense industries. Some
of SANDAIRE's major customers have included the U.S. Navy, NASA, Lockheed,
McDonnell Douglas, Tracor Aviation, Teledyne Ryan Aeronautical and
Westinghouse. 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 2001 must be received at the Company's
office at 9620 Chesapeake Drive, Suite 201, San Diego, California 92123,
no later than July 1, 2001 in order to be included in the Company's proxy
statement and proxy relating to that meeting.
ANNUAL REPORT
THE COMPANY'S 2000 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/ Michael W. Fink
-------------------
San Diego, California Michael W. Fink
November 27, 2000 Secretary
===============================================================================
<PAGE>
Attachment A
SYS
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the board of directors to be known as the audit
committee. The audit committee shall be composed of directors who are
independent of the management of the corporation and are free of any
relationship that, in the opinion of the board of directors, would interfere
with their exercise of independent judgment as a committee member.
STATEMENT OF POLICY
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders,
and investment community relating to corporate accounting, reporting practices
of the corporation, and the quality and integrity of the financial reports of
the corporation. In so doing, it is the responsibility of the audit committee
to maintain free and open means of communication between the directors, the
independent auditors, and the financial management of the corporation.
RESPONSIBILITIES
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with
all requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
* Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries.
* Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
* Review, with the independent auditors and company financial and accounting
personnel, the adequacy and effectiveness of the accounting and financial
controls of the corporation, and elicit any recommendations for the
improvement of such internal control procedures or particular areas where
new or more detailed controls or procedures are desirable. Particular
emphasis should be given to the adequacy of such Internal controls to
expose any payments, transactions, or procedures that might be deemed
Illegal or otherwise improper. Further, the committee periodically should
review company policy statements to determine their adherence to the code
of conduct.
* Review the proposed audit plans and the coordination of such plans for the
coming year with the independent auditors.
* Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the shareholders.
Any changes in accounting principles should be reviewed.
* Provide sufficient opportunity for the independent auditors to meet with
the members of the audit committee without members of management present.
Among the items to be discussed in these meetings are the independent
auditors' evaluations of the corporation's financial, accounting, and
auditing personnel, and the cooperation that the independent auditors
received during the course of the audit.
* Review accounting and financial human resources and succession planning
within the company.
* Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the board of
directors.
* Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
===============================================================================
<PAGE>
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JANUARY 17, 2001
The undersigned hereby appoints Kameron W. Maxwell and
Charles E. Vandeveer, 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 2000 ANNUAL MEETING OF SHAREHOLDERS OF SYS
TO BE HELD AT 1:00 P.M. ON WEDNESDAY, JANUARY 17, 2001 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 17, 2000, 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 for all nominees listed below.
the contrary below).
Nominees: Zoltan A. Harasty Charles E. Vandeveer
Kameron W. Maxwell Charles H. Werner
W. Gerald Newmin
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 2001 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. To amend the Articles of Incorporation to increase the number of
common shares authorized for issuance from 12.0 million to
48.0 million shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 4. To amend the SYS 1997 Incentive Stock Option and Restricted Stock
Plan (the "Plan") to increase the amount of common shares subject to
the Plan for employees from 750.000 to a total of 1,750,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(NOTE: Please see reverse of this 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 ___________________________,_______.
(month and day) (year)
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
===========================================
