SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __________)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted
[X] Definitive proxy statement. by Rule 14a-6(e)(2)).
[ ] Definitive additional materials.
[ ] Soliciting material under Rule14a-12.
PERFECTDATA CORPORATION
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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.
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1 (set forth the
amount on which the filing fee is Calculated and state how it
was determined):
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[ ] Fee paid previously with preliminary materials.
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[ ] 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
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(4) Date Filed:
PERFECTDATA CORPORATION
110 West Easy Street
Simi Valley, CA 93065
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
PerfectData Corporation
The Annual Meeting of Shareholders (the "Annual Meeting") of PerfectData
Corporation (the "Company") will be held at Loews Santa Monica Beach Hotel,
located at 1700 Ocean Avenue, Santa Monica, California 90401, on Friday,
December 6, 2002, at 9:30 a.m., Pacific Daylight Time, for the following
purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualify.
2. To ratify the selection of KPMG LLP as independent accountants of the
Company for the fiscal year ending March 31, 2003.
3. To transact such other business as may come before the Annual Meeting
or any adjournment thereof.
Only shareholders of record at the close of business on Thursday, October 31,
2002, are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
By Order of the Board of Directors
Irene J. Marino
Secretary
November 8, 2002
Whether or not you expect to be present at the meeting, please date and sign the
enclosed proxy and return it in the enclosed envelope. The proxy may be revoked
in writing prior to the meeting or, if you attend the meeting, you may revoke
the proxy and vote your shares in person.
PERFECTDATA CORPORATION
110 West Easy Street
Simi Valley, CA 93065
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
December 6, 2002
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of PerfectData Corporation (the "Company") of proxies to
be voted at the Company's Annual Meeting of Shareholders (the "Meeting") to be
held on Friday, December 6, 2002, or at any adjournment thereof. The purposes
for which the Meeting is to be held are set forth in the preceding Notice of
Annual Meeting. This Proxy Statement and the enclosed form of proxy are first
being mailed on or about Friday, November 8, 2002, to holders of record of the
Company's Common Stock, no par value per share (the "Common Stock"), as of the
close of business on Thursday, October 31, 2002 (the "Record Date"), which has
been fixed as the record date for the determination of the shareholders entitled
to notice of, and to vote at, the Meeting.
As indicated in its proxy statement dated March 27, 2002, the Company had
originally intended to hold the Annual Meeting for its fiscal year ended March
31, 2002 ("fiscal 2002") in September 2002. However, because the Company was
engaged in merger negotiations until terminated by the other party on September
21, 2002 because of its acceptance of another offer by a large public company,
management had delayed the call of such Annual Meeting in order to add this
possible transaction to the agenda. Rather than further delaying the call of the
Annual Meeting for fiscal 2002 on the possibility that another acquisition
requiring shareholder approval may be ascertained in the next month or two, the
Board directed the Secretary of the Company to call this Meeting as described in
the preceding paragraph. The search for a suitable acquisition for the Company
is, of course, being actively pursued.
VOTING SECURITIES
On the Record Date, 6,159,530 shares of the Common Stock, which is the
only class entitled to vote at the Meeting, were issued, outstanding and
entitled to vote. Each shareholder of record is entitled to cast, in person or
by proxy, one vote for each share of the Common Stock held by such shareholder
as of the close of business on the Record Date. A plurality of the votes cast at
the Meeting shall be necessary to elect each of the five directors (i.e.,
Proposal One) unless a shareholder requests at the Meeting the right to vote
his, her or its votes on a cumulative basis as described in the second and third
succeeding paragraphs. In such event, the five candidates receiving the highest
number of votes will be elected directors. The affirmative vote of the holders
of a majority of the shares present in person or represented by proxy and
entitled to vote at the Meeting shall be necessary to approve the selection of
the independent auditors (i.e., Proposal Two).
A majority of the shares entitled to vote, present in person or
represented by proxy, constitutes a quorum at the Meeting. Abstensions and
broker non-votes are treated for the purpose of determining a quorum at the
Meeting and are not treated as a vote for or against a proposal.
Section 7(c) of the Company's Bylaws, consistent with Section 708 of the
California Corporations Code which governs the Company, permits a shareholder,
when voting for directors, to cumulate his, her or its votes. The shareholder
may give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which the shareholder's votes are
entitled, or may distribute the shareholder's votes on the same principle among
as many candidates as the shareholder thinks fit. No shareholder is entitled to
cumulate votes for any candidate or candidates pursuant to the preceding
sentence unless such candidate's name or candidates' names have been placed in
nomination prior to the voting and the shareholder gives notice at the Meeting
of his, her or its intention to cumulate the shareholders' vote prior to the
voting. Once any shareholder has given such notice, any other shareholder may
cumulate his, her or its votes for candidates in nomination. However, no other
shareholder is obligated to cumulate his, her or its votes. The five candidates
receiving the highest number of votes will be elected directors.
The following is an example of cumulative voting: If a shareholder owns
1,000 shares of the Common Stock on the Record Date, then such shareholder may,
because five directors are being elected, vote 5,000 shares in favor of one
nominated candidate or divide the 5,000 votes among two or more of the five
nominated candidates.
Proxies will be voted as indicated in this Proxy Statement and the
enclosed proxy. Shares presented by properly executed proxies, if received in
time, will be voted in accordance with any specifications made therein. A proxy
may be revoked by delivering a written notice of revocation to the Company
(Attention: Irene J. Marino, Secretary) at its principal executive office or in
person at the Meeting, or by a subsequently dated proxy, at any time prior to
the voting thereof. The principal executive office of the Company is located at
the address in the heading to this Proxy Statement.
Rules 451 and 452 of the New York Stock Exchange, Inc. (the "NYSE")
permit a member firm to vote for the directors and/or for the proposal to ratify
the selection of independent auditors if the member firm holds the shares of the
Common Stock for a beneficial owner and receives no instructions to the contrary
by the tenth day before the Meeting. Rules 576 and 577 of the American Stock
Exchange LLC (the "AMEX") are substantially similar to the foregoing NYSE Rules
except that the beneficial owner has to receive a copy of the proxy material at
least 15 days prior to the Meeting. Rule 2260(c)(2) of the National Association
of Securities Dealers, Inc. (the "NASD") permits a NASD member firm to deliver a
proxy, with respect to shares of the Common Stock held by the NASD member firm
for a beneficial owner, pursuant to the rules of any national securities
exchange (such as the NYSE and the AMEX) to which the NASD member firm is also
responsible provided that the records of the member firm clearly indicate which
procedure it is following.
The Company, nevertheless, urges each beneficial owner to instruct the
member firm which holds of record the shareholder's shares of the Common Stock
to vote in favor of the two proposals submitted to the shareholders for a vote
even though such instruction is not required. The Company also urges each
beneficial owner whose shares of the Common Stock are held of record on the
Record Date by an entity other than a member firm to urge such other entity to
vote the beneficial owner's shares in favor of both proposals.
A shareholder shall have no right to receive payment for his, her or its
shares as a result of shareholders' approval of any proposal in the Notice of
Annual Meeting.
Each of the persons who has served as a director or as an executive
officer of the Company since April 1, 2001 (i.e., the beginning of the last
fiscal year of the Company) and each of the persons nominated by the Board of
Directors of the Company for election as a director at the Meeting, all of which
nominees are currently serving as directors, has no substantial interest, direct
or indirect, by security holdings or otherwise, in either of the proposals
submitted to a vote at the Meeting (as described in the eighth preceding
paragraph), other than, if he or she is a nominee for election as a director,
that he or she has an interest in being elected as a director (i.e., Proposal
One).
PROPOSAL ONE: ELECTION OF DIRECTORS
Nominees for Election as Directors
Five directors will be elected at the Meeting, each to serve for a
one-year term until the next Annual Meeting of Shareholders and until his or her
successor is duly elected and qualifies.
Proxies received in response to this solicitation, unless specified
otherwise, will be voted, on a non-cumulative basis, in favor of the five
nominees named below, all of whom are currently serving as, and are currently
the sole, directors of the Company. If a nominee should not be available for
election as contemplated, the management proxy holders will vote for such lesser
number of directors as are available to serve or will vote for a substitute
designated by the current Board of Directors. In no event will proxies be voted
for more than five nominees.
The next following table sets forth certain information, as of the Record
Date, concerning the nominees for election as directors of the Company. The
information as to age has been furnished to the Company by the individual named.
For information as to the shares of the Common Stock beneficially owned by each
nominee, see the table under the caption "Security Ownership of Certain
Beneficial Holders and Management" elsewhere in this Proxy Statement.
Year First
Elected
Name of Nominee Age Director Position and Offices with the Company
--------------- --- -------- -------------------------------------
Harris A. Shapiro 67 2000 Director, Chairman of the Board and
Chief Executive Officer
Bryan Maizlish 41 2000 Director
Timothy D. Morgan 48 2000 Director
Tracie Savage 39 1995 Director
Corey P. Schlossmann 47 2000 Director
Family Relationships of Nominees and Executive Officers
There are no family relationships among the nominees for election as
directors and the executive officers of the Company.
Business History of Nominees
Harris A. Shapiro was elected as a director of the Company and its
Chairman of the Board on March 31, 2000. On September 7, 2000, he was designated
Chief Executive Officer of the Company. Mr. Shapiro has been the President of
Millennium Capital Corporation, a consulting firm specializing in mergers and
acquisitions, since 1994. He was Senior Vice President Corporate Finance of
Gilford Securities Incorporated, a registered broker-dealer, from January 1,
1999 to March 29, 2000. Prior to Gilford Securities, he was a Managing Director
of Whale Securities Co., L.P., a registered broker-dealer, from June 1993 until
December 1998.
Bryan Maizlish was elected as a director of the Company on March 31,
2000. He currently serves as the Chief Technology Disruptor and as the Chief
Technology Officer at Lockheed Martin Management and Data Systems Team NSGI and
has been employed at Lockheed Martin Corporation since August 2000. Prior
thereto, he served as the Executive Vice President, Chief Strategy Officer and
Chief Financial Officer of Magnet Interactive/Noor Group Ltd., a private company
furnishing comprehensive consulting, engineering and interactive services. Prior
thereto, he held various managerial positions for over a decade with companies
in the media communications industry, such as MCA, Inc., Gulf & Western
Corporation and Gene Roddenberry's Norway Corporation. Mr. Maizlish serves on
the Architecture Committee, Service Provider Group and Marketing Counsels at Sun
Microsystems for the SunTone Certification program.
Timothy D. Morgan was elected as a director of the Company on March 31,
2000. He has, since October 1997, been a consultant on matters of business
strategies, taxation, finance, and asset protection techniques, and providing
interim Chief Financial Officer and Controller services. None of the foregoing
services or any of those hereafter described were provided to the Company. From
1980 through October 1997, he was a principal of Abacus Tax and Financial
Services, a firm specializing in tax compliance and pension plan administration.
Prior to 1982, Mr. Morgan was manager of purchasing and accounting departments
for various companies, including Dennison Eastman Corporation, Syntel Cavitron,
Incorporated, and Contempo Casuals, Incorporated.
Tracie Savage was elected in July 1995 as a director of the Company. She
is currently a main news anchor for KFWB Radio in Los Angeles. She previously
worked for the Los Angeles television subsidiary of the National Broadcasting
Company, Inc. ("NBC"). From March 1994 to March 2001, Ms. Savage was the
co-anchor of NBC Channel 4's "Today in LA: Weekend". From 1991 to 1994, she was
a general assignment reporter for the independent Los Angeles station, KCAL. Ms.
Savage has been in broadcast journalism for more than 16 years and has been the
recipient of numerous awards and honors in her field.
Corey P. Schlossmann was elected as a director of the Company on March
31, 2000. Mr. Schlossmann has been Chief Executive Officer since October 1999,
and Chief Financial Officer since January 1999, of Nationwide Auction Systems.
Since January 1996, he has also served as a partner of Gordon, Fishburn &
Schlossmann, a management consulting and accounting firm. Mr. Schlossmann was a
partner of Hankin & Co., a consulting firm, from 1988 until 1995.
Directorships on Other Public Companies
Since October 1999, Corey P. Schlossmann has served as a director of
Entrade, Inc., a New York Stock Exchange holding company whose online
subsidiaries (including Nationwide Auction Systems of which he is an executive
officer as indicated in the preceding section "Business History" under this
caption "Proposal One: Election of Directors") provide auction and asset
disposition services to the utility and manufacturing industries, among others.
No other director of the Company currently serves on any board other than
the Company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to
the reporting requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940, as
amended.
Committees and Board Meetings
The Board has two standing committees: Audit and Compensation.
Since March 31, 2000, Timothy D. Morgan, Tracie Savage and Corey P.
Schlossmann have served as members of the Audit Committee, with Mr. Schlossmann
serving as the Chairman. All of such persons are "independent" in accordance
with Rider 4200(a)(15) of the NASD applicable to companies like the Company
whose Common Stock is traded on The Nasdaq Stock Market, Inc. For additional
information relating to the Audit Committee, see the succeeding section "Report
of Audit Committee" under this caption "Proposal One: Election of Directors."
The Board of Directors hereby certifies that, on October 15, 2002, the
directors adopted a charter for the Audit Committee, superceding the Charter
previously adopted on May 22, 2000. A copy of the amended Charter is attached to
this Proxy Statement as Appendix B, while a copy of the superceded Charter is
attached to this Proxy Statement as Appendix A.
Since March 31, 2000, Harris A. Shapiro and Corey P. Schlossmann have
served as members of the Compensation Committee, with Mr. Shapiro serving as the
Chairman. The Compensation Committee has the authority to approve the
remuneration of key officers of the Company and, if incorporated or acquired,
its subsidiaries, review and recommend to the Board of Directors changes in the
Company's stock benefit and executive, managerial or employee compensatory and
benefit plans or programs and administer stock option, restricted stock or
similar plans of the Company. However, to date the Board itself, rather than its
Compensation Committee, has been acting on the matters described in the
preceding sentence. The Board intends in the future to staff the Compensation
Committee with only independent directors.
Although the Company has no Nominating Committee, if a shareholder has a
recommendation as to a nominee for election as a director, such shareholder
should make his, her or its recommendation in writing addressed to Harris A.
Shapiro, as the Chairman of the Board of the Company, at the Company's address
shown in the heading to this Proxy Statement, giving the business history and
other relevant biographical information as to the proposed nominee and the
reasons for suggesting such person as a director of the Company. The Board will
then promptly review the recommendation and advise the shareholder of its
conclusion and, if a rejection, the reasons therefor. Although the nominees for
election as directors have in the past always been approved by a majority of the
"independent" directors, the Board intends to make this a formal requirement for
approval of nominees in the future.
During fiscal 2002, there were six meetings of the Board, one of which
was adjourned to a second day. Each director participated in all meetings of the
Board during such fiscal year. The Audit Committee held two meetings during
fiscal 2002 and, in addition, the Chairman of the Audit Committee reviewed with
management and the independent auditors the quarterly reports of the Company
before they were filed. On June 19, 2002, the Audit Committee met with the
independent auditors to review the Company's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 2002 before it was filed and, based on such
meeting, recommended that this Report be filed. The Compensation Committee held
no meetings during fiscal 2002.
REPORT OF THE AUDIT COMMITTEE
General
The Audit Committee of the Board of Directors of the Company is comprised
of three non-employee directors and operates under a written charter (the
"Charter") adopted by the Board of Directors on May 22, 2000. The Audit
Committee understands that a copy of the Charter will be attached to the
Company's proxy statement for its Annual Meeting of Shareholders as Appendix A.
The Audit Committee, at its meeting on October 15, 2002, reviewed the Charter
and recommended that certain changes be adopted, which proposed changes the
Board thereafter approved. The Audit Committee understands that a copy of the
amended Audit Committee Charter (the "Amended Charter") will be attached to that
proxy statement as Appendix B. While the members of the Audit Committee, as well
as the other directors, based on the advice of Wachtel & Masyr, LLP, counsel to
the Company, believe that the Amended Charter complies with the Sarbanes-Oxley
Act of 2002 (the "Act), the members of the Audit Committee and the other
directors understand that both the Securities and Exchange Commission (the
"Commission") and the National Association of Securities Dealers, Inc. (the
"NASD"), which adopts rules applicable to companies like the Company whose
Common Stock is traded on The Nasdaq Stock Market, Inc. ("Nasdaq"), may issue
regulations consistent with the Act which could require the Board to make
further changes to the Amended Charter.
The Board of Directors has determined that each Audit Committee member is
independent in accordance with Rule 4200(a)(15) of the NASD applicable to
companies like the Company whose Common Stock is traded on Nasdaq. The Board has
also determined that each member of the Audit Committee is "financially
literate" under the NASD definition and that at least one of the three members
has accounting or related financial management experience as required for Nasdaq
companies.
Since March 31, 2000, Timothy D. Morgan, Tracie Savage and Corey P.
Schlossmann have served as members of the Audit Committee, with Mr. Schlossmann
serving as the Chairman.
Functions Performed in Fiscal 2002
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors as the representative of the Company's
shareholders. Management is responsible for the Company's internal controls,
financial reporting process and compliance with laws and regulations and ethical
business standards. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes. In fulfillment of this responsibility, the Audit Committee has
reviewed and discussed the audited financial statements for the Company's fiscal
year ended March 31, 2002 ("fiscal 2002") with management and, as indicated in
the succeeding paragraph, with the independent auditors. The Audit Committee
also has the responsibility to report the results of its activities to the Board
of Directors and, where required or deemed appropriate, to the shareholders of
the Company. This report is an example of the latter.
In this context of monitoring and overseeing, the Committee has discussed
and reviewed with the independent auditors all matters required to be discussed
with them by the Statement on Auditing Standards No. 61 (Communications with
Audit Committees). The Audit Committee has met with the Company's independent
auditors, with and without management present, to discuss the overall scope of
their audit, the results of their examinations and their evaluations of the
Company's internal controls and the overall quality of the Company's financial
reporting. The Audit Committee has also reviewed resumes of the personnel of the
independent auditors who service the Company's account in order to evaluate
their experience and qualifications and a report by the independent auditors
describing the firm's internal control procedures and any material issues raised
by the firm's most recent internal quality control review by a peer firm,
including the firm's response to such review.
The Audit Committee has received from the independent auditors a formal
written statement describing all relationships between the independent auditors
and the Company which the independent auditors in their professional judgment
consider may be reasonably be thought to bear on the auditors' independence
consistent with Independence Standards Boards Standard No. 1 (Independence
Discussions with Audit Committees). The Audit Committee has discussed with the
auditors any relationships that may impact their objectivity and independence
and has satisfied itself as to the auditors' independence.
Audit Fees
KPMG LLP, the Company's independent auditors, billed $55,000 for
professional services rendered for its audit of the Company's annual financial
statements for fiscal 2002 and its reviews of the financial statements included
in the Company's Forms 10-QSB filed for fiscal 2002.
Financial Information Systems Design and Implementation Fees
During fiscal 2002, KPMG LLP did not, directly or indirectly, operate or
supervise the operation of the Company's information system or manage the
Company's local area network or design or implement for the Company a hardware
or software system that aggregates source data underlying the Company's
financial statements or generates information that is significant to the
Company's financial statements taken as a whole.
All Other Fees
KPMG LLP estimates that it will bill $8,000 to $9,000 for its services in
connection with the filing of annual tax returns for the Company for fiscal
2002. This was the only other service being performed by KPMG LLP for the
Company for fiscal 2002 other than those services described under the caption
"Audit Fees." The Audit Committee has reviewed these services and has concluded
that they are compatible with maintaining the independence of KPMG LLP and are
not prohibited services under the Act so as to cause KPMG LLP to lose its
independence. The Audit Committee also authorized the Company to pay the fee on
the basis of the estimated amount.
Actions Taken
Based on the review and discussions referred to 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-KSB
for the fiscal year ended March 31, 2002 for filing with the Commission. The
Audit Committee also has approved, subject to shareholder ratification, the
selection of KPMG LLP as the Company's independent auditors for the fiscal year
ending March 31, 2003 ("fiscal 2003"). The Audit Committee also has approved the
intended fee of KPMG LLP for such services. This fee will be $36,000 for the
audit and $15,000 for the three quarterly reviews, or an aggregate of $51,000.
The Audit Committee also has determined that the retention of KMPG LLP to make
quarterly reviews (of which one has already been made with the Audit Committee's
approval) and to prepare the Company's annual tax returns for fiscal 2003 would
not impact such firm's independence. Formal approval of such retention has been
deferred pending KPMG's advice as to its estimated fee for preparing such tax
returns. In addition, the Chairman, acting on behalf of the Audit Committee, met
with management and KPMG LLP and reviewed the financial statements to be
included in the Company's Quarterly Reports on Form 10-QSB for fiscal 2002 in
accordance with the Charter's requirement.
Submitted by the Audit Committee on October 15, 2002
Corey P. Schlossman, Chairman
Timothy D. Morgan
Tracie Savage
MANAGEMENT
Directors and Executive Officers
The following table contains certain information relating to the
directors and executive officers of the Company as of the Record Date:
Name Age Position
---- --- --------
Harris A. Shapiro 67 Chairman of the Board,
Chief Executive Officer and a Director
Bryan Maizlish 41 Director
Timothy D. Morgan 48 Director
Tracie Savage 39 Director
Corey P. Schlossmann 47 Director
Irene J. Marino 58 Vice President Finance, Chief Financial
Officer and Corporate Secretary
Each director is elected to serve until the next Annual Meeting of
Shareholders or until his or her successor is elected and shall have qualified.
All of the directors named in the foregoing table are the Board's nominees for
re-election as directors at the Meeting. See the section "Nominees for Election
as Directors" under the caption "Proposal One: Election of Directors." Each
officer of the Company is elected by the Board of Directors to serve at the
discretion of the Board.
Business History
For information as to the business histories of Ms. Savage and Messrs.
Shapiro, Maizlish, Morgan and Schlossmann, see the section "Business History of
Nominees" under the caption "Proposal One: Election of Directors."
Ms. Irene J. Marino originally joined the Company in March 1982 and
rejoined the Company in September 1987 after a leave of approximately four
months. Ms. Marino was promoted to Manager of Finance and Administration in
March 1983 and to Controller and Assistant Secretary in March 1986. Upon
rejoining the Company in September 1987, Ms. Marino assumed the positions of
Controller, Chief Financial Officer and Secretary of the Company. She was
appointed Vice President of Finance in August 1989, and has more than 35 years'
experience in finance, accounting and administration.
Compliance with Section 16(a) of the Exchange Act
Based solely on a review of Forms 3 and 4 furnished to the Company under
Rule 16a-3(e) promulgated under the Exchange Act, with respect to fiscal 2002,
the Company is not aware of any director or executive officer of the Company who
failed to file on a timely basis, as disclosed in such forms, reports required
by Section 16(a) of the Exchange Act during fiscal 2002.
As of March 31, 2002, i.e., the end of fiscal 2002, there were no
beneficial owners of 10% or more of the Common Stock known to the Company other
than Joseph Mazin, who was, until July 27, 2000, the President and Chief
Executive Officer of the Company and, until March 31, 2000, a director of the
Company, and his wife, Donna, a former employee of the Company. Mr. Mazin has
advised the Company that he and his wife timely filed all reports required by
Section 16(a) of the Exchange Act during fiscal 2002.
Certain Relationships and Related Transactions
On March 31, 2000, as a result of closing a private placement on behalf
of the Company for gross proceeds of $2,999,999.25, Millennium Capital
Corporation ("Millennium") and JDK & Associates Inc. ("JDK") became financial
advisors to the Company to seek acquisitions and financings on its behalf
pursuant to a Consulting Agreement dated as of January 20, 2000 (the "Consulting
Agreement") by and among Millennium, JDK and the Company. For their services,
Millennium and JDK are to receive a cash fee equal to five percent of the
Consideration (as defined in the Consulting Agreement) received or paid by the
Company with respect to the acquisition or the financing offering. Harris A.
Shapiro, the Chairman of the Board, Chief Executive Officer, and a director of
the Company, is the sole director, officer and shareholder of Millennium.
On September 7, 2000, the Board designated Mr. Shapiro as the Chief
Executive Officer of the Company and authorized that the Company enter into an
employment agreement with him providing for (1) a one-year term commencing
September 1, 2000 and (2) a base annual salary of $150,000, which was to be
deducted from any fees paid to Millennium pursuant to the Consulting Agreement.
The Board authorized, on October 31, 2001, an extension of the term of the
employment agreement until December 31, 2001; on February 18, 2002, an extension
until June 30, 2002 and, on June 15, 2002, an extension until December 31, 2002.
Also, on June 15, 2002, the Board authorized that Mr. Shapiro's salary would not
be deducted from any fees paid to Millennium pursuant to the Consulting
Agreement. In taking such action the Board recognized that his service as Chief
Executive Officer of the Company had lasted longer than originally anticipated
because it had been more difficult, as a result of market conditions, to attract
a candidate for acquisition; that he was devoting full time to the Company; and
that, in order to perform such duties, he had re-located to California at his
own expense.
On September 17, 2002, each director agreed to cancel the following
options granted under the Company's Stock Option Plan of 2000 (the "2000 Option
Plan") on either March 31, 2000 or September 7, 2000: (1) an option expiring
March 31, 2010 to purchase 25,000 shares of the Common Stock at $18.50 per share
and (2) an option expiring September 6, 2010 to purchase 25,000 shares of the
Common Stock at $4.625 per share. The directors agreed to such cancellations
because a proposed acquisition agreement pending at the time required such
cancellation and because both counsel to the Company and counsel to the proposed
acquisition candidate advised them that continuance thereof could cause material
adverse charges to the Company under California law.
As a result of such cancellations, each director is currently the holder
of the following options granted pursuant to the 2000 Option Plan:
Date of Grant Number of Shares Exercise Price Expiration Date
------------- ---------------- -------------- ---------------
6/19/02 10,000 $1.60 6/18/12
9/26/02 25,000 $1.00 9/25/12
Both options were granted at or above the closing sales price on the date of
grant.
EXECUTIVE COMPENSATION
For information as to the executive compensation paid by the Company in
fiscal 2002 and the two prior fiscal years, reference is made to Item 10 of the
Company's Annual Report on Form 10-KSB, a copy of which accompanies this Proxy
Statement and which information as to executive compensation is incorporated
herein by this reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain
information with respect to (1) any person known to the Company who beneficially
owned more than 5% of the Common Stock, (2) each director of the Company, each
of whom is a nominee for election at the Meeting, (3) the Chief Executive
Officer of the Company and (4) all directors and executive officers as a group.
Each beneficial owner who is a natural person has advised the Company that he or
she has sole voting and investment power as to the shares of the Common Stock,
except that, until an option or a warrant is exercised, there is no voting right
and except as noted in Note 2 to the table.
Name and Address Number of Shares Percentage of
of Beneficial Owner of Common Stock Common Stock
Beneficially Owned Beneficially Owned(1)
Joseph Mazin
c/o Flamemaster Corporation 794,997 (2) 12.9
11120 Sherman Way
Sun Valley, CA 91252
Flamemaster Corporation 537,997 8.7
11120 Sherman Way
Sun Valley, CA 91252
William B. Wachtel, 427,873 6.9
Trustee of Digital Trust (3)
c/o Wachtel & Masyr, LLP
110 East 59th Street
New York, NY 10022
Harris A. Shapiro (4) 294,500 (5) 4.8
c/o PerfectData Corporation
110 West Easy Street
Simi Valley, CA 93065
Bryan Maizlish (6) 4,256 (7) Nil
9705 Conestoga Way
Potomac, MD 20854
Timothy D. Morgan (6) 5,456 (7) Nil
11734 Gladstone Circle
Fountain Valley, CA 92708
Tracie Savage (6) 14,556 (8) Nil
6212 Banner Avenue
Los Angeles, CA 90038
Corey P. Schlossmann (6) 454,759 (7) 7.4
19654-A Roscoe Blvd.
Northridge, CA 91324
All directors and officers 778,968 (9) 12.6
as a group(6 in number)
-----------
(1) The percentages computed in the table are based upon 6,159,530 shares
of the Common Stock which were outstanding on the Record Date. Effect
is given, pursuant to Rule 13-d(1)(i) under the Exchange Act, to shares
issuable upon the exercise of options or warrants currently exercisable
or exercisable within 60 days of the Record Date.
(2) The shares of the Common Stock reported in the table include (a)
537,997 shares owned by Flamemaster Corporation ("Flamemaster") for
which Mr. Mazin has voting power as the President, Chairman and Chief
Executive Officer of Flamemaster; (b) 36,000 shares owned by the
Flamemaster Employees' Profit Sharing Plan for which Mr. Mazin is the
fiduciary; and (c) 23,000 shares owned by Altius Investment Corporation
("Altius") for which Mr. Mazin has shared voting power as Chairman of
the Board of Altius. The shares reported in the table also include (x)
5,000 shares issuable upon the exercise of an option expiring November
6, 2003 and (4) 1,000 shares issuable upon the exercise of an option
expiring January 27, 2003, both options being held by Donna Mazin, his
wife. Certain of the shares reported in the table are owned by Ms.
Mazin or as to which shares she shares dispositive and voting powers
with Mr. Mazin.
(3) William B. Wachtel as the Trustee of the Digital Trust has, under the
trust agreement, sole voting and investment power with respect to the
shares reported in the table. Harris A. Shapiro, currently the Chairman
of the Board, the Chief Executive Officer and a director of the
Company, was the settler of the Digital Trust and made an irrevocable
grant to it of the assets which the Digital Trust used to effect the
purchase of the shares. The beneficiaries of the Digital Trust are Mr.
Shapiro's children and grandchildren who survive him, although the
Trustee, in his absolute discretion, may pay or apply yearly income or
the principal of the Trust to any beneficiary. Because he made an
irrevocable grant and has no voting or investment power with respect to
the shares, Mr. Shapiro is not the beneficial owner of the shares
reported in the table as being owned of record by the Digital Trust and
beneficially by the Trustee.
(4) Mr. Shapiro is the Chairman of the Board, the Chief Executive Officer
and a director of the Company.
(5) The shares of the Common Stock reported in the table reflect (a)
284,500 shares owned by Millennium for which Mr. Shapiro has voting
power as its President and (b) 10,000 shares issuable upon the exercise
of a common stock purchase warrant expiring March 30, 2005 issued to
Millennium pursuant to the Consulting Agreement. The shares of the
Common Stock reported in the table do not include (x) 10,000 shares
issuable upon the exercise of an option expiring June 18, 2012 granted
to Mr. Shapiro under the 2000 Option Plan or (y) 25,000 shares issuable
upon the exercise of an option expiring September 25, 2012 granted to
Mr. Shapiro under the 2000 Option Plan, neither of which options was
exercisable as to such shares at the Record Date or within 60 days
thereafter.
(6) A director of the Company.
(7) The shares of the Common Stock reported in the table do not include (a)
10,000 shares issuable upon the exercise of an option expiring June 18,
2012 under the 2000 Option Plan or (b) 25,000 shares issuable upon the
exercise of an option expiring September 25, 2012 under the 2000 Option
Plan, neither of which options was exercisable as to such shares at the
Record Date or within 60 days thereafter.
(8) The shares of the Common Stock reported in the table include 10,000
shares issuable upon the exercise of an option expiring July 20, 2005.
The shares of the Common Stock reported in the table do not include (a)
10,000 shares issuable upon the exercise of an option expiring June 18,
2012 under the 2000 Option Plan or (b) 25,000 shares issuable upon the
exercise of an option expiring September 25, 2012 under the 2000 Option
Plan, neither of which options was exercisable as to such shares at the
Record Date or within 60 days thereafter.
(9) The shares of the Common Stock reported in the table include (a) those
shares indicated in the text to Notes 5, 7 and 8; (b) 1,500 shares
issuable to an executive officer upon her exercise of a stock option
expiring February 3, 2003; and (c) 625 shares issuable upon the
exercise of an option expiring October 30, 2011 granted to this
executive officer under the 2000 Option Plan. The shares of the Common
Stock reported in the table do not include 1,875 shares issuable upon
the exercise of the option described in (c), which option was not
exercisable at the Record Date or within 60 days thereafter.
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has re-appointed KPMG as the Company's independent
public accountants for fiscal year ending March 31, 2003 ("fiscal 2003"). KPMG
LLP became the independent auditors for the Company in connection with the audit
for fiscal year ended March 31, 2000.
The Board is seeking shareholders' approval of the Audit Committee's
selection of KPMG LLP. The California Corporations Code does not require the
approval of the selection of independent auditors by the Company's shareholders;
however, in view of the importance of the financial statements to shareholders,
the Board of Directors deems it desirable that the Company's shareholders pass
upon the selection of auditors. In the event that shareholders disapprove of the
selection, the Audit Committee will consider the selection of other auditors.
For information as to the services performed by KPMG LLP for fiscal 2002,
the fees for such services and the services authorized to be performed by KPMG
LLP for fiscal 2003, see "Report of the Audit Committee" elsewhere in this Proxy
Statement.
A representative of KPMG LLP will be present at the Meeting. The Company
has been informed that the representative does not intend to make any statement
to the shareholders at the Meeting, but will be available to respond to
appropriate questions from shareholders.
OTHER MATTERS COMING BEFORE THE MEETING
As of the date of this Proxy Statement, the Board of Directors does not
know of any matters to be presented to the Meeting other than the two proposals
set forth in the attached Notice of Annual Meeting. If any other matters
properly come before the Meeting, it is intended that the holders of the
management proxies will vote thereon in their discretion.
MISCELLANEOUS
The solicitation of proxies on the enclosed form of proxy is made by and
on behalf of the Board of Directors of the Company and the cost of this
solicitation is being paid by the Company. In addition to the use of the mails,
proxies may be solicited personally, or by telephone or telegraph, by the
officers or directors of the Company.
Shareholders' proposals for inclusion in the Company's proxy statement
for the Annual Meeting of Shareholders for fiscal 2003 must be received no later
than a reasonable time before the Company prints and mails its proxy material
for such Annual Meeting. If a shareholder intends to submit a proposal for
consideration at such Annual Meeting by means other than the inclusion of the
proposal in the Company's proxy statement for such Annual Meeting, the
shareholder must notify the Company of such intention no later than a reasonable
time before the Company prints and mails its proxy material for such Annual
Meeting, or risk management exercising discretionary voting authority with
respect to the management proxies to defeat such proposal when and if presented
at such Annual Meeting. The Company currently anticipates mailing the proxy
material for such Annual Meeting on or before Friday, August 22, 2003. The
Company shall advise its shareholders of any change in the contemplated mailing
date for its proxy material for the Annual Meeting of Shareholders for fiscal
2003 by notice in its earliest possible Quarterly Report on Form 10-QSB or by
other appropriate notice.
A copy of the Annual Report to Shareholders is being mailed to all
shareholders as of the Record Date with this Proxy Statement. The Annual Report
incorporates the Company's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 2002, including financial statements. A request for any exhibit
to the Form 10-KSB may be made by written or oral request to Irene J. Marino,
Vice President, Finance and Chief Financial Officer of the Company, at the
following address: 110 West Easy Street, Simi Valley, CA 93065, or telephone
number: (805) 581-4000, extension 215. A reasonable fee for duplicating and
mailing will be charged if a copy of any exhibit is requested. In addition, a
copy of the Company's Quarterly Report on Form 10-QSB for the quarter ended June
30, 2002 is being mailed to all stockholders as of the Record Date because of
the delay in holding this Meeting as described at the introduction of this Proxy
Statement.
By Order of the Board of Directors
/s/ Irene J. Marino
Irene J. Marino
Secretary
November 8, 2002
Appendix A
PERFECTDATA CORPORATION
AUDIT COMMITTEE CHARTER
(Adopted on May 22, 2000)
Organization
This Charter governs the operations of the Audit Committee (the "Committee") of
PerfectData Corporation (the "Company"). The Committee shall review and reassess
the Charter at least annually and obtain the approval of the Board of Directors
(the "Board"). The Committee shall be appointed by the Board and shall consist
of at least three directors appointed annually and serving at the pleasure of
the Board, each of whom is independent of management and the Company. For
meetings of the Committee two members (a majority if there are more than three
members of the Committee) of the Committee shall constitute a quorum. No action
may be taken except by the affirmative vote of at least two members (a majority
if there are more than three members of the Committee) of the Committee. In the
absence or disqualification of a member of the Committee, the member or members
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
to act at the meeting in place of any such absence of disqualified member,
provided that a majority of the persons acting at the meeting are independent of
management and the Company. Members of the Committee shall be considered
"independent" if they have no relationship that may interfere with the exercise
of their independence from management and the Company. So long as the Company's
Common Stock shall be traded on The Nasdaq Stock Market, Inc., or if in the
future the Common Stock be listed on the American Stock Exchange LLC, the Board
shall interpret "independence" as defined in the rules of the National
Association of Securities Dealers, Inc. (the "NASD"). If the Common Stock should
ever be listed on the New York Stock Exchange, Inc., the Board shall interpret
"independence" as defined by such Exchange or, if appropriate, continue to use
the definition in the NASD rules. All Committee members shall be financially
literate, or shall become financially literate within a reasonable period of
time after appointment to the Committee, and at least one member shall have
accounting or related financial management expertise.
Statement of Policy
The Committee shall provide assistance to the Board in fulfilling its oversight
responsibility to the shareholders, potential shareholders, the investment
community and others relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, the internal audit function (when established), the annual independent
audit of the Company's financial statements and the legal compliance and ethics
programs as established by management and the Board. In so doing, it is the
responsibility of the Committee to maintain free and open communication between
the Committee, the independent auditors, the internal auditors (when engaged)
and management of the Company. In discharging its oversight role, the Committee
is empowered to investigate any matter brought to its attention with full access
to all books, records, facilities and personnel of the Company and the power to
retain outside counsel, including outside counsel to the Company, or other
experts for this purpose.
Responsibilities and Processes
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of its
activities to the Board. Management is responsible for preparing the Company's
financial statements, and the independent auditors are responsible for auditing
those financial statements. The Committee, in carrying out its responsibilities,
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and circumstances. The Committee should take the
appropriate actions to set the overall corporate "tone" for quality financial
reporting, sound business risk practices and ethical behavior.
The following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable to
the Board and the Audit Committee as representatives of the Company's
shareholders. The Committee shall have the ultimate authority and responsibility
to evaluate and, where appropriate, to replace the independent auditors. The
Committee shall discuss with the auditors their independence from management and
the Company and the matters included in the written disclosures required by the
Independence Standards Board. Annually, the Committee shall review and recommend
to the Board the selection of the Company's independent auditors, subject to
shareholders' approval.
o The Committee shall approve the scope of the annual audit by the independent
auditors and authorize any supplementary reviews, investigations or audits as it
shall deem advisable. Also, the Committee shall discuss with management, the
internal auditors (when engaged) and the independent auditors the adequacy and
effectiveness of the accounting and financial controls, including the Company's
system to monitor and manage business risk, and legal and ethical compliance
programs. Further, the Committee shall meet separately with the internal
auditors (when engaged) and the independent auditors, with and without
management present, to discuss the results of their examinations.
o The Committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the Committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards. The Chairperson of the Committee may represent the entire Committee
for the purposes of this review.
o The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-K
(or the annual report to shareholders if distributed prior to the filing of Form
10-K), including its judgment about the quality, not just acceptability, of
accounting principles, the reasonableness of significant judgments and the
clarity of the disclosures in the financial statements. Also, the Committee
shall discuss the results of the annual audit and any other matters required to
be communicated to the Committee by the independent auditors under generally
accepted auditing standards.
o The Committee shall review the independent auditors' management letters with
the auditors and with the corporate staff and engage in the appropriate
follow-up of a recommendation in any such management letter.
o The Committee shall determine the appropriate actions that should be taken
regarding all irregularities uncovered.
o The Committee shall report to the Board on the activities and findings of the
Committee and, when appropriate, make recommendations to the Board based on
these findings.
Appendix B
PERFECTDATA CORPORATION
AUDIT COMMITTEE CHARTER
(As amended on October 15, 2002)
Organization
This Charter governs the operations of the Audit Committee (the "Committee") of
PerfectData Corporation (the "Company"). The Committee shall review and reassess
this Charter at least annually and obtain the approval of the Board of Directors
of the Company (the "Board") of its recommendations as to proposed changes or
additions to this Charter. The Committee shall be appointed by the Board and
shall consist of at least three directors appointed annually and serving at the
pleasure of the Board, each of whom is independent of management and the
Company.
A member of the Committee shall be considered "independent" if he or she has no
relationship that may interfere with the exercise of his or her judgment,
independent from management and the Company. So long as the Company's Common
Stock shall be traded on The Nasdaq Stock Market, Inc. ("Nasdaq"), or, if in the
future the Common Stock shall be listed on the American Stock Exchange LLC, the
Board shall interpret "independence" as defined in the rules of the National
Association of Securities Dealers, Inc. (the "NASD"). If the Common Stock should
ever be listed on the New York Stock Exchange, Inc., the Board shall interpret
"independence" as defined by such Exchange or, if appropriate, continue to use
the definition in the NASD rules. In addition, the Board shall interpret
"independence" pursuant to any rules adopted by the Securities and Exchange
Commission (the "Commission"). Subject to such regulations as the Commission may
hereafter adopt, for a member of the Committee to be independent, he or she
shall not, other than in his or her capacity as a member of the Committee, the
Board or any other Board committee, (a) accept any consulting, advisory or other
compensatory fee from the Company or (b) be an affiliated person of the Company
or any subsidiary thereof.
All Committee members shall, at the time of appointment, be able to read and
understand fundamental financial statements, including the Company's balance
sheet, income statement and cash flow statement. At least one member shall have
past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities. At least one member shall
qualify as a "financial expert" under the rules of the Commission.
For meetings of the Committee two members (a majority if there are more than
three members of the Committee) of the Committee shall constitute a quorum. No
action may be taken except by the affirmative vote of at least two members (a
majority if there are more than three members of the Committee) of the
Committee. In the absence or disqualification of a member of the Committee, the
member or members present at any meeting and not disqualified from voting,
whether or not he, she or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in place of any such absent or
disqualified member, provided that a majority of the persons acting at the
meeting is independent of management and the Company.
Statement of Policy
The Committee shall provide assistance to the Board in fulfilling its oversight
responsibility to the shareholders, potential shareholders, the investment
community and others relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, the internal audit function (when established), the annual independent
audit of the Company's financial statements and the legal compliance and ethics
programs as established by management and the Board. In so doing, it is the
responsibility of the Committee to maintain free and open communication between
the Committee, the independent auditors, the internal auditors (when engaged)
and management of the Company. In discharging its oversight role, the Committee
is empowered to investigate any matter brought to its attention with full access
to all books, records, facilities and personnel of the Company and the power to
retain outside counsel, including, but not limited to, outside counsel to the
Company, or other advisors for this purpose and to consult such other entities
having a relationship with the Company, including, without limitation, the
Company's investment bankers or financial analysts who follow the Company, as
the Committee deems appropriate. The Committee shall determine the compensation
for such counsel or other advisors and the Company shall make appropriate funds
available to the Committee for such purpose.
Responsibilities and Processes
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of its
activities to the Board and, where required or deemed appropriate, to the
shareholders of the Company. Not in limitation of the foregoing, the Committee
shall prepare annually the Audit Committee Report as required by Item 306 of the
Commission's Regulation S-K and Regulation S-B, whichever is applicable to the
Company, for inclusion in the Company's proxy statement for its Annual Meeting
of Shareholders. Management is responsible for preparing the Company's financial
statements, and the independent auditors are responsible for auditing those
financial statements. The Committee, in carrying out its responsibilities,
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and circumstances. The Committee should take the
appropriate actions to set the overall corporate "tone" for quality financial
reporting, sound business risk practices and ethical behavior.
The following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
o Annually, the Committee shall review and select the Company's independent
auditors, subject to shareholders' approval. The Committee shall have the sole
authority to determine the compensation to be paid to the independent auditors
for its services in preparing an audit report and in reviewing the financial
statements of the Company and the Company shall make appropriate funds available
for such purpose and for the services provided in the succeeding sentence. The
Audit Committee shall approve in advance the retention of the independent
auditors for any non-audit service and the fee for such service. The term
"non-audit service" shall mean any professional service provided to the Company
other than those provided in connection with an audit or a review of the
financial statements of the Company. The Committee's approval in advance may be
waived with respect to a non-audit service only if (a) the service was not
recognized by the Company at the time of the audit engagement to be a non-audit
service; (b) the aggregate amount paid for all non-audit services is not more
than five percent of the total amount of revenues paid by the Company to the
independent auditor during the fiscal year when the non-audit services were
performed; (c) the service is promptly brought to the attention of the
Committee; (d) the Committee approves the activity prior to the conclusion of
the audit; and (e) the Commission by regulation otherwise permits a waiver.
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are accountable to the Audit
Committee directly and the Board indirectly as the representatives of the
Company's shareholders. The Committee shall have the ultimate authority and
responsibility to evaluate, and the sole authority, where appropriate, to
replace, the independent auditors. The Committee shall discuss with the auditors
their independence from management and the Company and the matters included in
the written disclosures required by the Independence Standards Board. At least
annually the Committee shall (1) review resumes of key partners and managers of
the independent auditors in order to evaluate the experience and qualifications
of those who perform services for the Company and (2) review a report by the
independent auditors describing (a) the firm's internal quality control
procedures, (b) any material issues raised by the most recent internal quality
control review or peer review, or by any inquiry or investigation by
governmental or professional authorities within the preceding five years,
respecting one or more independent audits carried out by the firm, and any steps
taken to deal with any such issues, and (c) all relationships between the
independent auditors and the Company.
o The Committee shall approve the scope of the annual audit by the independent
auditors and authorize any supplementary reviews, investigations or audits as it
shall deem advisable. The independent auditors shall timely report to the
Committee all critical accounting policies and practices to be used and all
alternative treatments of financial information within generally accepted
accounting principles (GAAP) that have been discussed with management, the
ramifications of the use of such alternative disclosures and the treatment
preferred by the independent auditors. The independent auditors shall also
timely report to the Committee any accounting disagreements between the
independent auditors and management and any other material written
communications between the independent auditors and management. Also, the
Committee shall discuss with management, the internal auditors (when engaged)
and the independent auditors the adequacy and effectiveness of the accounting
and financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs. Further, the Committee
shall meet separately with the internal auditors (when engaged) and the
independent auditors, with and without management present, to discuss the
results of their examinations and any problems or difficulties encountered by
the independent auditors and management's response thereto. The Committee shall
also review in connection with its annual review of the audited financial
statements all non-audited services performed by the independent auditor to
confirm that each is permitted by law or regulation and was previously approved
by the Committee or such pre-approval was not required as provided above.
o The Committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q or Form 10-QSB. Also, the Committee shall discuss the
results of the quarterly review, including, without limitation, the Company's
disclosures in the Quarterly Report under "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and any other matters
required to be communicated to the Committee by the independent auditors under
generally accepted auditing standards. The Chairperson of the Committee (or, in
the event of his or her unavailability, a member) may represent the entire
Committee for the purposes of this review.
o The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-K
or Form 10-KSB (or the annual report to shareholders if distributed prior to the
filing of the Form 10-K or Form 10-KSB), including (a) the Company's disclosures
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and (b) their judgment about the quality, not just acceptability,
of accounting principles, the reasonableness of significant judgments,
particularly insofar as they related to critical accounting estimates, and the
clarity of the disclosures in the financial statements. Also, the Committee
shall discuss the results of the annual audit and any other matters required to
be communicated to the Committee by the independent auditors under generally
accepted auditing standards. Without limiting any of the foregoing, the
Committee shall (x) review with management and the independent auditors the
effect of regulatory and accounting initiatives on the Company's financial
statements, including, without limitiation, the initial adoption of material
accounting policies, and (y), where deemed necessary or appropriate, discuss
with the national office of the independent auditors issues on which it was
consulted by the audit team assigned to the Company and matters of audit quality
and consistency.
o The Committee shall review the independent auditors' management letters and
other material written communications between the independent auditors and the
Company with the independent auditors and with the corporate staff and engage in
the appropriate follow-up of a recommendation in any such management letter or
other communication. The Committee shall also review with management and the
independent auditors any correspondence with regulators or governmental
agencies, and any employee complaints or published reports, which raise material
issues regarding the Company's financial statements and/or accounting policies.
o The Committee shall determine the appropriate actions that should be taken
regarding all irregularities uncovered.
o The Committee shall establish procedures for (a) the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters and (b) the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.
o The Committee shall perform such other functions as may be required or deemed
appropriate by the Commission or by the national securities exchange or national
securities association on which the securities of the Company are publicly
traded (currently the NASD for Nasdaq) for an audit committee to perform.
o The Committee shall report to the Board on the activities and findings of the
Committee and, when appropriate, make recommendations to the Board based on
these findings.
===================================================================================================================
Table of Contents
Page
----
Notice of Annual Meeting of Shareholders ...........N/A
Proxy Statement:
Voting Securities....................................1
Proposal One: Election of Directors..................3 PERFECTDATA CORPORATION
Report of the Audit Committee........................6
Management...........................................9
Executive Compensation..............................11
Security Ownership of Certain Beneficial
Holders and Management...........................11
Proposal Two: Appointment of Independent
Auditors.........................................14
Other Matters Coming Before the Meeting.............15 Notice of Annual Meeting
Miscellaneous.......................................15 of Shareholders on
Appendix A - Audit Committee Charter December 6, 2002 and
(As originally adopted)......................A-1 Proxy Statement dated
Appendix B - Audit Committee Charter November 8, 2002
(as amended).................................B-1
===================================================================================================================
PERFECTDATA CORPORATION
110 West Easy Street
Simi Valley, CA 93605
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Harris A. Shapiro and Corey P.
Schlossmann as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all of the
shares of the Common Stock of PerfectData Corporation (the "Company") held of
record by the undersigned on October 31, 2002 at the Annual Meeting of
Shareholders to be held on December 6, 2002 or at any adjournment thereof.
1. Election of Harris A. Shapiro, Bryan Maizlish, Timothy D. Morgan, Tracie
Savage and Corey P. Schlossmann as Directors of the Company.
[ ] FOR all nominees listed above.
FOR all nominees listed above EXCEPT: ______________________________
(INSTRUCTION: To withhold authority to vote on any individual nominee(s), write
his/her name(s) in the space above.)
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed above.
2. Proposal to Ratify the Appointment of KPMG LLP as Independent Auditors of
the Company.
[ ]FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may come before the Annual Meeting or
any adjournment thereof.
This proxy, when executed, will be voted in the manner directed by the
undersigned shareholder(s). If no direction is made, this proxy will be voted
FOR Proposals 1 and 2
PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
I (we) shall attend the Annual Meeting in person [ ] Yes [ ] No
Please sign exactly as your
name appears to the left.
When shares are held by
joint tenants, please both
sign. When signing as
attorney, executor, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by the
President or other authorized
officer. If a partnership,
please sign in full
partnership name by a duly
authorized person.
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Signature
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Signature, if held jointly
Date: _________________________, 2002