===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
[_] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
CSP Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CSP Inc.
--------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
CSP INC.
(A Massachusetts Corporation)
---------------------
SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
---------------------
January 29, 2002
Notice is hereby given that a Special Meeting in lieu of the Annual Meeting
of Stockholders of CSP Inc. (the "Company") will be held at the executive
offices of the Company, 43 Manning Road, Billerica, Massachusetts 01821 on
Tuesday, January 29, 2002, beginning at 9:00 a.m. local time, for the following
purposes:
1. To elect two Class III Directors, for a three-year term.
2. To act upon a proposal to amend the Company's By-Laws relative to
changing the date of the annual Meeting of Stockholders from the second
Tuesday in January to the last Tuesday in January in each year.
3. To transact such further business as may properly come before the
Meeting, or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 7, 2001
as the record date for determining the stockholders of the Company entitled to
notice of, and to vote at, said Meeting and any adjournment thereof. Only
stockholders of record on such date are entitled to notice of, and to vote at,
said Meeting or any adjournment thereof.
By Order of the Board of Directors
Gary W. Levine
Clerk
November xx, 2001
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
CSP INC.
(A Massachusetts Corporation)
---------------------
PROXY STATEMENT
---------------------
Special Meeting in Lieu of
Annual Meeting of Stockholders
January 29, 2002
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of CSP Inc. ("CSPI" or the "Company") of proxies for use at
the Special Meeting in lieu of the Annual Meeting of Stockholders to be held on
January 29, 2002 (the "Meeting") and at any adjournment thereof. A form of
proxy is enclosed. Any stockholder executing such a proxy may revoke it at any
time insofar as it has not been exercised. All properly executed proxies that
are received by the Company before the Meeting and that are not revoked will be
voted at the Meeting in accordance with the stockholder's direction. The
principal executive offices of the Company are located at 43 Manning Road,
Billerica, Massachusetts 01821. The approximate date on which this Proxy
Statement and the form of proxy will be sent to stockholders is December 14,
2001.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report for the fiscal year ended August 31, 2001
accompanies this Proxy Statement, but is not incorporated herein and is not to
be deemed a part hereof.
Item 1. ELECTION OF DIRECTORS
The Company, as a Massachusetts corporation with a class of voting stock
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), has a Board of Directors divided into three classes, as nearly equal in
size as practicable, referred to as Class I, Class II and Class III. The
Directors in each class serve for a term of three years and until their
successors are duly elected and qualified. As the term of one class expires, a
successor class is elected at the annual meeting of stockholders for that year.
There are currently two Class III Directors, whose terms will expire at the
Special Meeting in lieu of the Annual Meeting to be held on January 29, 2002;
two Class I Directors, who were elected or appointed to serve until the annual
meeting to be held with respect to the end of the 2002 fiscal year; and one
Class II Director, who was elected to serve until the annual meeting to be held
with respect to the end of the 2003 fiscal year.
Pursuant to the by-laws of the Company, the Board of Directors has fixed the
number of Directors that will constitute the entire Board of Directors at five,
and has nominated two Class III Directors for election at the Special Meeting
in lieu of the Annual Meeting to be held January 29, 2002.
Unless authority is withheld, proxies in the accompanying form will be voted
in favor of electing C. Shelton James and Alexander R. Lupinetti as Class III
Directors, to hold office until the annual meeting to be held with respect to
the end of the 2004 fiscal year and until their respective successors are
elected and qualified. If the proxy is executed in such a manner as to withhold
authority to vote for the nominee for Directors, such instructions will be
followed by the persons named in the proxy.
Under the by-laws of the Company, a majority of the shares of the Company's
common stock, par value $.01 per share ("Common Stock"), issued and outstanding
and entitled to vote will constitute a quorum for the Meeting. If a quorum is
not present at the scheduled time for the Meeting, the persons named in the
proxy will vote to adjourn the Meeting until a later date when a quorum can be
obtained. Pursuant to the Company's by-laws, if it is necessary to adjourn the
Meeting for that purpose, no notice of the time and place of the adjourned
meeting is required to be given to stockholders.
If a quorum is present, the vote of the holders of a plurality of the shares
of Common Stock present or represented at the Meeting and entitled to vote is
required to elect Directors. In general, votes withheld from any nominee for
election as Director, abstentions, and broker "non-votes" are counted as
present or represented for purposes of determining the presence or absence of a
quorum for the meeting. A "non-vote" occurs when a broker or nominee holding
shares for a beneficial owner does not vote on a proposal because, in respect
of such proposal, the broker or nominee does not have discretionary voting
power and has not received instructions from the beneficial owner. The vote on
each matter submitted to stockholders is tabulated separately. Abstentions are
included in the number of shares present or represented and voting on each
matter. Broker "non-votes" are not so included.
Each of the nominees for Director, is currently members of the Board of
Directors. Although the Company expects each nominee to accept nomination and
to serve if elected, if one or both are unable to serve at the time of
election, then proxies will be voted for some other person or the Board of
Directors may fix the number of Directors at a lesser number.
2
Nominees
Listed below are the nominees showing age, the year they were first elected
as Director of the Company, and their business affiliations.
Name, Age and Class Business Affiliations
------------------- ---------------------
C. Shelton James (61)...................... Director of CSPI since 1994; from
Class III 1993 until his retirement in July
2000, President of Fundamental
Management Corporation; Director
of Cyberguard Corp. until March
2000; Chief Executive Officer and
Chairman of the Board of Elcotel
from May 1991 until February
2000; Director of DRS
Technologies, Concurrent Computer
Corporation, and Techsource Inc.;
Trustee of Clarkson University.
Alexander R. Lupinetti (56)................ Director of CSPI since 1996;
Class III Chairman of the Board of
Directors since January 1998;
Chief Executive Officer and
President of CSPI since October
1996; Director of VerticalBuyer,
Inc. from February 2000 until
March 2001; President and Chief
Executive Officer of each of TCAM
Systems Inc., Shared Systems
Corporation and SoftCom Systems
Inc. subsidiaries of Stratus
Computer Inc., from 1987 to1996.
Directors
Listed below are the continuing Directors of the Company, with information
showing the age of each, the year each was first elected a Director of the
Company, and the business affiliations of each. Messrs. Smith and Williams are
Class I Directors, whose terms expire in 2003. Mr. Lyons is a Class II Director
whose term expires in 2004.
Name, Age and Class Business Affiliations
------------------- ---------------------
Sandford D. Smith (54)..................... Director of CSPI since 1993;
Class I President of Therapeutics
International of Genzyme Corp., a
biopharmaceutical company, since
February 1997; President of
Specialty Therapeutics of Genzyme
Corp., from April 1996 to
February 1997; President and
Chief Executive Officer of
Repligen Corporation from 1987 to
1996; Director of Ariad
Pharmaceuticals, Inc. and Chemex
Pharmaceuticals, Inc.
Robert M. Williams (63).................... Director of CSPI since July 1998;
Class I from 1995 to his retirement in
March 1999 served as Vice
President for Asia, Africa and
the Near East of International
Executive Corps, a company that
directs technology and business
programs as a contractor for the
US Foreign Aid Program;
consultant to RM Williams
Associates Technology, from 1993
to 1995; Vice President of
Worldwide Development, Industrial
Sector Division for International
Business Machine Corp., and
served in various positions from
1963 to 1993.
3
Name, Age and Class Business Affiliations
------------------- ---------------------
J. David Lyons (63) ....................... Director of CSPI since March
Class II 1997; President of
Aubin International, Inc., an
executive search firm, from 1996
to present; Executive Vice
President at National Data Corp.
from 1993 to 1996; Executive
Vice President Sales and
Marketing, Syncordia from 1991 to
1993.
The Board of Directors recommends that you vote FOR the nominees as
Directors listed in this Proxy Statement.
Committees and Meetings of the Board of Directors
The Company's Board of Directors met four times during the fiscal year ended
August 31, 2001 ("fiscal 2001"). Mr. Smith has attended at least 50% and all
other members have attended at least 75% of all meetings of the Board and
committees which they are a member.
The Board of Directors has an Audit Committee and a Compensation Committee,
but does not have a nominating committee or other committee performing similar
functions. The Audit Committee consists of Messrs. James, Smith and Williams.
The Audit Committee met four times during fiscal 2001. The Compensation
Committee consists of Messrs. Lyons, James and Smith. The Compensation
Committee met twice during fiscal 2001.
Compensation of Directors
Each Director who is not an employee of the Company receives a quarterly fee
of $440 to serve as a Director, a quarterly fee of $138 for each committee of
the Board of which he is a member and a fee of $550, plus expenses, for each
meeting of the Board which he attends.
In addition, each non-employee Director receives 200 restricted shares of
CSP Inc. Common Stock annually as additional compensation. These shares cannot
be sold for one year from the date of issuance. Each non-employee Director also
receives an annual non-discretionary grant of a non-statutory option to
purchase 1,000 shares of Common Stock on the last business day of January in
each year. The aggregate number of shares that may be issued to all non-
employee Directors pursuant to this arrangement is 26,620. These
non-discretionary options have an exercise price per share equal to the fair
market value of the Common Stock on the date of grant, are not exercisable
until after six months following such date, have a term of three years and are
fully vested after six months.
4
Executive Compensation
Summary Compensation Table. The following Summary Compensation Table sets
forth certain information regarding compensation paid or accrued by the Company
with respect to the Company's Chief Executive Officer and the Company's most
highly compensated officers other than the Chief Executive Officer who served
as executive officers during fiscal 2001 and whose annual compensation exceeds
$100,000 for fiscal 2001:
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
-------------------- -------------------
Name and Principal Position Fiscal Option All Other
(at August 31, 2001) Year Salary Bonus Grants Compensation
--------------------------- ------ -------- -------- ------ ------------
Alexander R. Lupinetti......... 2001 $297,319 -- 25,000 $62,871(1)
Chairman, President and Chief 2000 $267,968 $102,695 75,000 $63,127(2)
Executive Officer 1999 $251,125 $ 63,393 60,500 $60,861(3)
Gary W. Levine................. 2001 $136,491 -- 4,000 $35,867(4)
Vice President of Finance 2000 $133,135 $ 30,520 10,000 $35,564(5)
And Chief Financial Officer 1999 $125,271 $ 18,253 6,050 $34,809(6)
Willam Bent.................... 2001 $129,231 -- 4,000 $ 4,851(7)
Vice President and General
Manager 2000 $114,782 $ 2,842 4,000 $ 4,329(7)
of CSP Multicomputer Division 1999 $106,392 $ 8,110 2,420 $ 4,286(7)
Fernando DeLaville............. 2001 $105,563 -- 1,000 $ 3,254(8)
President, Scanalytics 1999 $ 39,231(9) $ 947 2,000 --
--------
(1) This amount is comprised of a $7,406 contribution by the Company to Mr.
Lupinetti's 401(k) plan and $55,465 for a split dollar life insurance
policy for the benefit of Mr. Lupinetti.
(2) This amount is comprised of a $7,422 contribution by the Company to Mr.
Lupinetti's 401(k) plan and $55,705 for a split dollar life insurance
policy for the benefit of Mr. Lupinetti.
(3) This amount is comprised of a $5,000 contribution by the Company to Mr.
Lupinetti's 401(k) plan and $55,861 for a split dollar life insurance
policy for the benefit of Mr. Lupinetti.
(4) This amount is comprised of a $5,137 contribution by the Company to Mr.
Levine's 401(k) plan and $30,730 for a split dollar life insurance policy
for the benefit of Mr. Levine.
(5) This amount is comprised of a $4,744 contribution by the Company to Mr.
Levine's 401(k) Plan and $30,820 for a split dollar life insurance policy
for the benefit of Mr. Levine.
(6) This amount is comprised of a $3,763 contribution by the Company to Mr.
Levine's 401(k) plan and $31,046 for a split dollar life insurance policy
for the benefit of Mr. Levine.
(7) This amount represents contributions by the Company to Mr. Bent's 401(k)
plan.
(8) These amounts represent contributions by the Company to Mr. DeLaville's
401(k) plan.
(9) This amount represents pay from April 6, 2000, Mr. DeLaville's date of
hire.
5
Option Grants Table. The following table sets forth certain information
regarding stock options granted during the fiscal year ended August 31, 2001 by
the Company to the executive officers named in the Summary Compensation Table:
OPTIONS GRANTED IN LAST FISCAL YEAR
Potential
Realized Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Terms(2)
------------------------------ ----------------
% of total
options granted Exercise price
Option employees in Per share Expiration
Name Grants fiscal year ($/SH)(1) Date 5% 10%
---- ------ --------------- -------------- ---------- ------- --------
Alexander Lupinetti..... 25,000 59.1% $4.25 10/18/10 $66,820 $169,335
Gary W. Levine.......... 4,000 7.9% $4.25 10/18/10 $10,691 $ 27,094
William Bent............ 4,000 7.9% $4.25 10/18/10 $10,691 $ 27,094
Fernando DeLaville...... 1,000 2.0% $4.25 10/18/10 $ 2,673 $ 6,773
--------
(1) Stock options were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of the grant. The stock
options expire ten years from the date of grant.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation of the
Company's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimates of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and sale of the
shares and the future performance of the Company's Common Stock. There can
be no assurances that the rates of appreciation assumed in this table can
be achieved or that the amount shown will be received by the individual.
Fiscal Year-End Option Table. The following Fiscal Year-End Option Table
sets forth certain information regarding stock options held as of August 31,
2001 by the executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
Value of Unexercised
Number of Unexercised
Options at Fiscal In-the-Money Options at
Shares Year-End Fiscal Year-End(1)
Acquired Value ------------------------- -------------------------
Name on exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Alexander R. Lupinetti.. -- -- 208,866 84,734 -- --
Gary W. Levine.......... -- -- 21,453 14,535 -- --
William Bent............ -- -- 8,200 8,210 -- --
Fernando DeLaville...... -- -- 500 2,500 -- --
--------
(1) Value is based on the last sales price of Common Stock $3.75 on August 31,
2001, the last day prior to the end of fiscal 2001 for which a trade in the
Common Stock was reported by the NASDAQ National Market, less the
applicable option exercise price. These values have not been and may never
be realized. Actual gains, if any, will depend on the value of the Common
Stock on the date of the sale of the shares.
401(k) Plan
The Company has a defined contribution profit-sharing plan pursuant to
Section 401(k) of the Internal Revenue Code for the benefit of its employees,
including officers. The Board of Directors of the Company determines from year
to year whether and to what extent the Company will contribute to the 401(k)
plan by making matching contributions to the plan or by making profit-sharing
contributions to the plan, allocated in
6
proportion to each eligible employee's compensation, as a percentage of the
compensation of all eligible employees. During fiscal year 2001, the matching
contribution by the Company was set at 50% of contributions by eligible
employees up to a maximum of 6% of salary.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan under Section 423 of the
Internal Revenue Code pursuant to which participating employees may utilize
payroll deductions to purchase shares of the Company's Common Stock at a
discount from fair market value.
Report of the Compensation Committee
The Compensation Committee of the Board is composed of three Directors,
Messrs. Lyons, James and Smith. The Compensation Committee also administers the
Company's stock option plans. This Committee is charged with the responsibility
of reviewing and approving executive officers' compensation and approving all
discretionary grants of stock options under the Company's stock option plan.
The following describes the compensation programs in effect during fiscal 2001.
Compensation Policy
The Company's compensation policies are designed to pay executives an annual
salary that is industry competitive and an annual bonus that is based both on
the performance of the Company and on individual goals established for each of
the executives for the fiscal year. The Company also has longer term incentives
based on stock options. All three components of compensation are reviewed
annually by the committee to ensure salaries remain competitive, bonuses reward
performance and stock options provide continued incentives.
Salaries for executive officers are based on the duties and responsibilities
of the position held by the executive compared with executive officers of other
companies in the industry. Salaries are reviewed and established annually.
Various industry salary surveys are reviewed and provided to the Committee to
review in establishing the new compensation. Each executive has a performance
review prepared by the Chief Executive Officer. During this review the
officer's performance over the prior year is assessed and goals are established
for the next year.
This information is communicated to the Compensation Committee and, based on
this review and salary surveys, the annual salary for the executive is
established for next year.
Executive officers and key management employees participate in the bonus
plan. Payments under the plan are contingent on the Company meeting its sales
and net earnings objectives for the fiscal year. Based on the extent to which
the Company achieves those objectives, each participant other than the Chief
Executive Officer receives an executive bonus of up to 30%, and the Chief
Executive Officer receives up to 50%, of his regular annual salary if the
Company meets the revenue and profit goals and he has met his individual
objectives. If Company exceeds the sales and profit goals, the bonus percentage
increases. If, in addition, the officer or employee achieves his individual
goals established by the Company, the balance of the bonus will be paid. The
Committee reviews both the individual and Company goals annually. In fiscal
2001, no executive bonuses were earned.
The Company from time to time grants stock options to some or all of its
executives and key employees as a means of creating a long-term incentive and
benefit. Such stock options are generally granted at the fair market value of
shares of Common Stock on the date of grant. Thus, no benefit will accrue to
the executive or key employee from the stock option grant until the Common
Stock appreciates. This creates a long-term goal for appreciation of the Common
Stock which coincides with the interests of the stockholders.
7
Chief Executive Officer Compensation
The Company has an employment agreement with Mr. Lupinetti dated September
12, 1996 (the "Employment Agreement"), pursuant to which Mr. Lupinetti became
Director, Chief Executive Officer and President of the Company effective
October 1, 1996. Under the terms of Mr. Lupinetti's contract, if the Company is
acquired by a way of sale of substantially all of its assets or by merger, all
stock options will fully vest at the time of such acquisition. The Company also
has provided Mr. Lupinetti with an automobile. In the event Mr. Lupinetti's
employment is terminated by the Company other than for cause (as defined),
Mr. Lupinetti is entitled to 12 months of severance pay at his then effective
annual salary per month. Mr. Lupinetti participated in the Executive and Key
Management Bonus Plan. Payments under the plan are contingent on the Company
meeting its sales and net earnings objective for the year. Neither Mr.
Lupinetti nor any of the officers named in the compensation table received a
bonus in fiscal 2001, due to the fact that the Company did not reach the
financial objectives as set by the Board of Directors. Mr. Lupinetti's base
compensation was not increased for FY2002. His base salary is $284,000 and was
last increased in October, 2000. Mr. Lupinetti has 293,600 stock options as of
August 31, 2001, all granted at the fair market value of stock on the date of
the grant. Subsequently, he will again be eligible for the bonus plan which is
based on achieving revenue and earning objectives.
COMPENSATION COMMITTEE
J. David Lyons
C. Shelton James
Sandford D. Smith
Compensation Committee Interlocks and Insider Participation
J. David Lyons, C. Shelton James, and Sandford D. Smith served on the
Compensation Committee during fiscal 2001. Persons serving on the Compensation
Committee had no relationships with the Company other than their relationship
to the Company as Directors entitled to the receipt of standard compensation as
Directors and members of certain committees of the Board and their relationship
to the Company as stockholders. No person serving on the Compensation Committee
or on the Board of Directors is an executive officer of another entity for
which an executive officer of the Company serves on the board of directors or
on that entity's compensation committee.
Report of the Audit Committee of the Board of Directors
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act that
might incorporate this Proxy Statement or future filings with the SEC, in whole
or in part, the following report shall not be deemed to be incorporated by
reference into any such filing.
Membership and Role of the Audit Committee
The Audit Committee consists of the following members of the Company's Board
of Directors: C. Shelton James, Sandford Smith and Robert Williams. Each of the
members of the Audit Committee is independent as defined under the NASDAQ
listing standards. The Audit Committee operates under a written charter adopted
by the Board of Directors which is included in this proxy statement as Appendix
A.
The primary function of the Audit Committee is to provide advice with
respect to the Corporation's financial matters and to assist the Board of
Directors in fulfilling its oversight responsibilities regarding finance,
accounting, tax and legal compliance. The Audit Committee's primary duties and
responsibilities are to: (1) serve as an independent and objective party to
monitor the Corporation's financial reporting process and internal control
system; (2) review and appraise the audit efforts of the Corporation's
independent accountants; (3) evaluate the corporations quarterly financial
performance as well as its compliance with laws and
8
regulations; (4) oversee management's establishment and enforcement of
financial policies and business practices; and (5) provide an open avenue of
communication among the independent accountants, financial and senior
management, counsel and the Board of Directors.
Review of the Company's Audited Financial Statements for the Fiscal Year ended
August 31, 2001.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended August 31, 2001 with the
Company's management. The Audit Committee has discussed with KPMG LLP, the
Company's independent public accountants, the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
The Audit Committee has also received the written disclosures and the letter
from KPMG required by Independence Standards Board Standard No. 1 (Independence
Discussion with Audit Committees) and the Audit Committee has discussed the
independence of KPMG LLP with that firm.
Based on the Audit Committee's review and discussions noted above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 2001 for filing with the SEC.
AUDIT COMMITTEE
C. Shelton James
Sandford Smith
Robert Williams
9
INFORMATION CONCERNING AUDITORS
The Board of Directors selected the firm KPMG LLP to audit the Company's
financial statements for the past fiscal year. The Company's Board of Directors
has not yet selected the Company's independent public accountant for the
current fiscal year. A representative of KPMG LLP is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if such
representative desires to do so and will be available to respond to appropriate
questions.
For fiscal year ending August 31, 2001, fees for services provided by KPMG
LLP were as follows (in thousands):
Annual audit......................................................... $130.0
Tax returns.......................................................... 41.0
Financial information systems design and implementation.............. --
All other fees(1).................................................... 6.4
------
Total.............................................................. $177.4
======
--------
(1) Represents primarily accounting consultations.
The Audit Committee considered and determined that the provision of non-
audit services provided by KPMG is compatible with maintaining the firm's
independence.
10
Performance Graph
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index (the NASDAQ
Stock Market Index) and a published industry index (the NASDAQ Computer
Manufacturers' Index) for each of the most recent five fiscal years. The
cumulative stockholder return for shares of Common Stock and each of the
indices is calculated assuming that $100 was invested on August 31, 1996. The
Company paid no cash dividends during the periods shown. The performance of the
indices is shown on a total return (dividends reinvested) basis. The graph
lines merely connect year-end dates and do not reflect fluctuations between
those dates.
[GRAPH APPEARS HERE]
Cumulative Total Return
----------------------------------------
-----------------
8/30/96 8/29/97 8/28/98 8/29/99 8/30/00 8/31/01
CSP INC. 100.00 102.40 119.68 106.48 93.70 63.89
RUSSELL 2000 100.00 128.12 110.25 133.27 167.89 149.92
NASDAQ COMPUTER & DATA PROCESSING 100.00 180.18 180.18 316.82 444.53 176.32
11
Item 2. APPROVAL OF BY-LAW AMENDMENTS WITH RESPECT TO THE DATE AND TIME OF THE
ANNUAL MEETING OF STOCKHOLDERS
The by-laws of the Company currently require that the Annual Meeting of
stockholders of the Company (the "Annual Meeting") will be held at 10:00 a.m.
on the second Tuesday of January of each year. For the reasons set forth below,
the Board of Directors strongly supports and unanimously recommends an
amendment to the Company's by-laws that would provide that the Annual Meeting
be held at 9:00 a.m. local time, on the last Tuesday of January in each year.
Under Massachusetts law, the time of the Annual Meeting is established by the
by-laws, and under the Company's by-laws, only the stockholders are empowered
to change the date of the Annual Meeting.
Effective on October 1, 2001, the Company changed its Fiscal Year-end from
August 31 to September 30. The Board of Directors believes that this factor
makes it impracticable, if not impossible, for the Company to present financial
results for its first fiscal quarter (which concludes at the end of December)
in time for an Annual Meeting in early January. Because the Board considers it
very desirable that first quarter financial information be available by the
time of the Annual Meeting, the Board is recommending that the stockholders
change the date of the Annual Meeting as set forth in Article II of the by-laws
to the last Tuesday in January, essentially two weeks later than the current
date. The Board expects that this will ensure that the Company can present its
first quarter financial results to its stockholders at the time of the Annual
Meeting.
A copy of the by-law provisions as proposed to be amended is attached to
this Proxy Statement as Exhibit A.
If a quorum is present at the Meeting, the vote of a majority of the shares
present or represented at the Meeting and entitled to vote is necessary to
approve these changes to the bylaws of the Company. The first Annual Meeting
scheduled to be held under the amended by-laws would be scheduled to take place
on January 30, 2003.
The Board of Directors recommends that you vote FOR the proposal to amend
the By-Laws of the Company as described in this Proxy Statement.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has an employment agreement with Alexander Lupinetti dated
September 12, 1996 (the "Employment Agreement"), pursuant to which Mr.
Lupinetti became Director, Chief Executive Officer and President of the Company
effective October 1, 1996. Under the terms of the agreement Mr. Lupinetti's
initial base salary was $200,000 and has been increased to $284,000 and an
executive bonus based on the attainment of certain financial objectives. The
Company granted Mr. Lupinetti options to acquire up to 79,860 shares of Common
Stock under the Company's 1991 Incentive Stock Option Plan at an exercise price
of the fair market value of the Common Stock on the date of grant. Mr.
Lupinetti has received stock options annually since his initial employment. He
currently holds 293,600 stock options. Such options vest quarterly over a
period of four years from date of grant. However, if the Company is acquired by
a way of sale of substantially all of its assets or by merger, such options
will fully vest at the time of such acquisition. The Company also has provided
Mr. Lupinetti with an automobile. Finally, in the event Mr. Lupinetti's
employment is terminated by the Company other than for cause (as defined) Mr.
Lupinetti is entitled to 12 months of severance pay at his then effective per
month salary.
12
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The Company's only issued and outstanding class of voting securities is its
Common Stock. Holders of the Common Stock are entitled to one vote per share of
such stock held by them of record at the close of business on November 23, 2001
upon each matter which may come before the Meeting. At the close of business on
November 23, 2001, there were 3,511,392 shares of Common Stock issued and
outstanding.
Principal Stockholders
The following table sets forth certain information as of November xx, 2001
regarding each person known by the Company to own beneficially more than 5% of
the Company's Common Stock, each Director and nominee for Director of the
Company, each executive officer named in the Summary Compensation Table and all
Directors and executive officers of the Company as a group.
Shares
Beneficially Percent
Name Owned(1) of Class(2)
---- ------------ -----------
Royce Advisory Corp. .............................. 319,104(4) 9.1%
1414 Avenue of the Americas
New York, NY 10019
Dimensional Fund Advisors Inc. .................... 303,713(3) 8.6%
1299 Ocean Avenue
Santa Monica, CA 90401
Alexander R. Lupinetti(*).......................... 208,866(5) 5.9%
C. Shelton James(*)................................ 7,172(6) **
J. David Lyons..................................... 3,843(7) **
Sandford D. Smith(A)............................... 6,401(8) **
Robert M. Williams................................. 3,820(9) **
Gary W. Levine..................................... 24,547(10) **
William Bent....................................... 8,200(11) **
Fernando DeLaville................................. 500(12) **
All Directors and executive officers as a group (9
persons).......................................... 264,699(12) 7.5%
--------
** Owns less than one percent.
(1) Except as otherwise noted, all persons and entities have sole voting and
investment power Over their shares. All amounts shown in this column
include shares obtainable upon exercise of stock options exercisable
within 60 days of the date of this Proxy Statement
(2) Computed pursuant to Rule 13d-3 under the Exchange Act.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), DFA Investment Dimensions
Group Inc. (the "Fund") and The DFA Investment Trust Company (the "Trust")
have furnished the Company with a joint report on Schedule 13G dated
February 2, 2001, in which Dimensional has advised the Company that it is
a registered investment advisor and that Dimensional has sole dispositive
power with respect to 303,713 shares of the Company's Common Stock and
sole voting power with respect to 303,713 of those shares, and that
persons who are officers of Dimensional are also officers of the Fund and
the Trust (each an open-end investment company registered under The
Investment Company Act of 1940).
(4) Royce and Associates Inc. ("Royce") and Charles M. Royce have furnished
the Company with a joint report on Schedule 13G dated February 5, 2001, in
which it is stated that Royce is a registered investment advisor and that
Royce has sole voting and investment power with respect to 319,104 of
these shares. The report also states that Mr. Charles M. Royce may be
deemed to be a controlling person and
13
as such may be deemed to own beneficially all of the shares covered by the
report. Mr. Royce disclaims beneficial ownership of all such shares.
(5) Represents 208,866 shares obtainable upon exercise of stock options.
(6) Includes 3,972 shares owned by Mr. James and 3,200 shares obtained upon
exercise of stock options.
(7) Includes 643 shares owned by Mr. Lyons and 3,220 shares obtainable upon
exercise of stock options.
(8) Includes 3,201 shares owned by Mr. Smith and 3,220 shares obtainable upon
exercise of stock options.
(9) Includes 620 shares owned by Mr. Williams and 3,200 shares obtainable
upon exercise of stock options.
(10) Includes 18,953 shares obtainable upon exercise of stock options.
(11) These shares are obtainable upon exercise of stock options.
(12) Includes 250,669 shares obtainable upon exercise of stock options.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities Exchange Commission. Officers,
directors and greater-than-10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3, 4, 5 and amendments thereto
furnished to the Company during fiscal 2001, and written representations that
Form 5 was required and duly filed with the commission, the Company believes
that all Section 16(a) filing requirements applicable to its officers,
directors and greater-than-10% shareholders were fulfilled in a timely manner.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses
incurred in obtaining instructions from beneficial owners of the Common Stock.
In addition to the solicitation by mail, special solicitation of proxies may,
in certain circumstances, be made personally or by telephone by Directors,
officers and certain employees of the Company, or by American Stock Transfer &
Trust Company, the Company's transfer agent. It is expected that the expense
of such special solicitation will be nominal. All expenses incurred in
connection with this solicitation will be borne by the Company.
14
DATE WHEN STOCKHOLDER PROPOSALS ARE REQUIRED TO BE FURNISHED
TO THE COMPANY FOR THE NEXT ANNUAL MEETING
In order to be eligible for inclusion in the Company's proxy statement and
form of proxy for the annual meeting scheduled to be held in January 2003,
stockholder proposals must comply with SEC Rule 14a-8 and any other applicable
rules and must be delivered to the Company's principal executive offices at
least 120 days prior to the anniversary date of mailing of this Proxy
Statement. This Proxy Statement was sent on or about November 30, 2001, so the
date by which proposals were required to be received under Rule 14a-8 will be
August 1, 2002.
In addition, Section 5 of Article II of the Company's by-laws requires that
a stockholder who wishes to bring an item of business before the annual meeting
must provide notice of such item of business to the Company at its principal
executive offices not less than 90 days before the date for such meeting. For
next year's scheduled annual meeting, the deadline for submission of notice is
October 31, 2002. Section 4 of Article III of the by-laws imposes the same
deadline on the nomination by a stockholder of a candidate for election to the
Board of Directors. Any proposal or nomination submitted after October 31, 2002
will be untimely. The by-laws contain a number of other substantive and
procedural requirements which should be reviewed by any interested stockholder.
MISCELLANEOUS
The Board does not intend to present at the Meeting any business other than
the proposals listed herein, and the Board was not aware, a reasonable time
before mailing this Proxy Statement to stockholders, of any other business
which may be properly presented for action at the Meeting. No stockholder
proposals or stockholder nominees were submitted timely to the Company. If any
other business should come before the Meeting, the persons present will have
discretionary authority to vote the shares they own or represent by proxy in
accordance with their judgment
15
EXHIBIT A
CSP INC.
BY-LAW PROVISIONS WITH RESPECT TO THE PROPOSED CHANGE IN THE
ANNUAL MEETING DATE, AS PROPOSED TO BE AMENDED
Article II, Paragraph 1 in its entirety:
"The annual meeting of the stockholders shall be held at 9:00 a.m., local
time, on the last Tuesday in January in each year, if it be not a legal
holiday, and if it be a legal holiday, then at the same hour on the next
succeeding day not a legal holiday (the "Specified Annual Meeting Date").
Purposes for which an annual meeting is to be held, additional to those
prescribed by law, by the Articles of Organization and by these By-Laws, may be
specified by the President or the Directors. If such annual meeting is omitted
on the day herein provided therefor, a special meeting may be held in place
thereof, and any business transacted or elections held at such meeting shall
have the same effect as if transacted or held at the annual meeting. Such
special meeting shall be called in the same manner and as provided for special
stockholders' meetings."
A-1
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
CSP INC.
JANUARY 29, 2002
Please Detach and Mail in the Envelope Provided
-------------------------------------------------------------------------------
PLEASE MARK YOUR
A [X] VOTES AS IN THIS
EXAMPLE.
FOR WITHHOLD
the nominees, AUTHORITY
except as marked for the
to the contrary below nominees
Item 1.
Election of [_] [_] NOMINEES:
two Class III Alexander R. Lupinetti
Directors, for a three-year term: C. Shelton Jones
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
print the name(s) of such nominee(s) in the space provided below. To vote for or
to withhold authority for the nominee, see above.)
-----------------------------------
Item 2.
To amend the Company's By-Laws FOR AGAINST ABSTAIN
relative to changing the date of the [_] [_] [_]
Annual Meeting of Stockholders from
the second Tuesday in January to the last Tuesday in January in each year.
Check here if you plan to attend the Annual Meeting. [_]
SIGNATURE(S) DATE 2001
-------------------------------- -------------------
DATE 2001
-------------------------------- -------------------
IF HELD JOINTLY
NOTE: Please date, sign exactly as name appears hereon and return promptly. If
the shares are registered in the names of two or more persons, both should
sign. Executors, administrators, trustees, guardians, attorneys and
corporate officers should add their titles.
PROXY CSP INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CSP Inc. hereby appoints Alexander Lupinetti
and Gary Levine, and each or either of them, proxies (with power of substitution
to each and to each substitute appointed pursuant to such power) of the
undersigned to vote all shares of stock of the Corporation held by the
undersigned or which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of the Corporation to be held on Tuesday, January 29,
2002, and at any and all adjournments thereof, with all powers the undersigned
would possess if personally present, as indicated below and on the reverse side
hereon upon the matters set forth herein and more fully described in the Notice
and Proxy Statement for said Meeting and in their discretion upon all other
matters which may properly come before said Meeting. The undersigned hereby
revokes all proxies, if any, hitherto given by him to others for said Meeting.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED
HEREBY WILL BE VOTED. IF A CHOICE IS SPECIFIED ON THE REVERSE SIDE HEREOF BY THE
STOCKHOLDER WITH RESPECT TO A MATTER TO BE ACTED UPON, THE SHARES WILL BE
VOTED UPON SUCH MATTER IN ACCORDANCE WITH THE SPECIFICATION SO MADE. IN THE
ABSENCE OF ANY SPECIFICATION, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR ALL LISTED NOMINEES FOR DIRECTOR.
(Continued and to be signed on the other side)