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. 1)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Soliciting Material Under Rule
|_| Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
GREENMAN TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
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___________________________________________________________________________
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:_______________________________________________
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GREENMAN TECHNOLOGIES, INC.
12498 Wyoming Avenue South
Savage, Minnesota 55378
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
To Be Held April 2, 2008
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders (the "Meeting") of GreenMan
Technologies, Inc., a Delaware corporation (together with its subsidiaries,
"we", "us" or "our"), will be held on Wednesday, April 2, 2008, at 10:00 A.M. in
the Youngstown Room at the Sleep Inn & Suites, 5850 Morning Star Court, Pleasant
Hill, Iowa 50327 for the following purposes:
1. To elect five members of our Board of Directors.
2. To approve an amendment to our Restated Certificate of Incorporation to
increase the number of authorized shares of our common stock from
40,000,000 to 60,000,000.
3. To approve an amendment to our 2005 Stock Option Plan to increase the
number of shares that may be issued under the plan from 2,000,000 to
3,500,000.
4. To consider and act upon a proposal to ratify the selection of the firm of
Schechter, Dokken, Kanter, Andrews & Selcer, Ltd. as our independent
auditors for the fiscal year ending September 30, 2008.
5. To transact such other business as may properly come before the Meeting
and any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on February 5, 2008
are entitled to notice of and to vote at the Meeting.
All stockholders are cordially invited to attend the Meeting in person.
However, to assure your representation at the Meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors
LYLE JENSEN
Chief Executive Officer
March __, 2008
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE.
GREENMAN TECHNOLOGIES, INC.
12498 Wyoming Avenue South
Savage, Minnesota 55378
PROXY STATEMENT
March __, 2008
Proxies in the form enclosed with this proxy statement are solicited by
our Board of Directors (the "Board of Directors") at our expense for use at the
Annual Meeting of Stockholders (the "Meeting") to be held at 10:00 AM on
Wednesday, April 2, 2008, at 10:00 A.M. in the Youngstown Room at the Sleep Inn
& Suites, 5850 Morning Star Court, Pleasant Hill, Iowa 50327.
Only stockholders of record as of February 5, 2008 will be entitled to
vote at the Meeting and any adjournments thereof. As of that date, 30,880,435
shares of our Common Stock, par value $.01 per share, were issued and
outstanding. The holders of our common stock are entitled to one vote per share
on any proposal presented at the Meeting. Stockholders may vote in person or by
proxy.
Execution of a proxy will not in any way affect a stockholder's right to
attend the Meeting and vote in person. Any stockholder giving a proxy has the
right to revoke it at any time before it is exercised by attending the Meeting
and voting in person or filing with our Secretary either a written instrument
revoking the proxy or another executed proxy bearing a later date.
All properly executed proxies returned in time to be counted at the
Meeting will be voted. With respect to the election of our Board of Directors,
shares represented by proxies will be voted as stated below under "Election of
Directors." Any stockholder submitting a proxy has the right to withhold
authority to vote for any individual nominee to the Board of Directors by
writing that nominee's name on the space provided on the proxy. In addition to
the election of Directors, the stockholders will consider and vote upon
proposals: (i) to approve an amendment to our Restated Certificate of
Incorporation to increase the number of authorized shares of our common stock
from 40,000,000 to 60,000,000, (ii) to approve an amendment to our 2005 Stock
Option Plan to increase the number of shares that may be issued under the plan
from 2,000,000 to 3,500,000, and (iv) to ratify the selection of Schechter,
Dokken, Kanter, Andrews & Selcer, Ltd. as our independent auditors, all as
further described in this proxy statement. Where a choice has been specified on
the proxy with respect to such matter, the shares represented by the proxy will
be voted in accordance with the specification and will be voted FOR if no
specification is made.
The representation in person or by proxy of a majority of the outstanding
shares of our common stock entitled to vote at the Meeting is necessary to
establish a quorum for the transaction of business. Votes withheld from any
nominee, abstentions and broker non-votes are counted as present or represented
for purposes of determining the presence or absence of a quorum. A "non-vote"
occurs when a broker holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the broker does not have
discretionary voting power and has not received instructions from the beneficial
owner. Directors are elected by a plurality of the votes cast by stockholders
entitled to vote at the Meeting. The affirmative vote of the holders of a
majority of the Common Stock issued and outstanding is required for approval of
the proposed amendment to our Restated Certificate of Incorporation and the
proposed amendment to the 2005 Stock Option Plan. The proposal to ratify the
selection of Schechter, Dokken, Kanter, Andrews & Selcer, Ltd. as our
independent auditors requires the affirmative vote of the majority of the shares
present in person or represented by proxy at the Meeting. An automated system
administered by our transfer agent tabulates the votes. 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.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote properly may be taken, shares represented by all proxies received by us
will be voted with respect thereto in accordance with the judgment of the
persons named as attorneys in the proxies.
Our Annual Report, containing financial statements for fiscal year ended
September 30, 2007 is being mailed contemporaneously with this proxy statement
to all stockholders entitled to vote. This proxy statement and the form of proxy
were first mailed to stockholders on or about March __, 2008.
2
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of February 5, 2008:
o by each of our directors and executive officers;
o by all of our directors and executive officers as a group; and
o by each person (including any "group" as used in Section 13(d) of the
Securities Exchange Act of 1934) who is known by us to own beneficially 5%
or more of the outstanding shares of common stock.
Unless otherwise indicated below, to the best of our knowledge, all
persons listed below have sole voting and investment power with respect to their
shares of common stock, except to the extent authority is shared by spouses
under applicable law. As of February 5, 2008, 30,880,435 shares of our common
stock were issued and outstanding.
Security Ownership of Management and Directors
Number of Shares Percentage
Name (1) Beneficially Owned (2) of Class (2)
-------- ---------------------- ------------
Dr. Allen Kahn (3)........................ 4,364,931 14.14%
Maurice E. Needham (4).................... 2,257,801 7.10%
Lyle Jensen (5)........................... 813,522 2.62%
Charles E. Coppa (6)...................... 781,828 2.50%
Nicholas DeBenedictis (7)................. 775,454 2.50%
Lew F. Boyd (8)........................... 401,072 1.30%
All officers and directors
as a group (6 persons).................. 9,935,108 28.89%
Security Ownership of Certain Beneficial Owners
Number of Shares Percentage
Name (1) Beneficially Owned (2) of Class (2)
-------- ---------------------- ------------
Laurus Master Fund, Ltd. (9).............. 1,540,934 4.99%
----------
(1) Except as noted, each person's address is care of GreenMan Technologies,
Inc., 12498 Wyoming Avenue South, Savage, Minnesota 55378.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
common stock that an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person shown in the
table.
(3) Includes 16,500 shares of common stock issuable pursuant to immediately
exercisable stock options.
(4) Includes 929,462 shares of common stock issuable pursuant to immediately
exercisable stock options. Also includes 59,556 shares of common stock
owned by Mr. Needham's wife.
(5) Includes 178,500 shares of common stock issuable pursuant to immediately
exercisable stock options.
(6) Includes 394,000 shares of common stock issuable pursuant to immediately
exercisable stock options.
(7) Includes 371,000 shares of common stock owned by Mr. DeBenedictis's wife
and 7,000 shares of common stock issuable pursuant to immediately
exercisable stock options.
(8) Includes 125,394 shares of common stock issuable pursuant to immediately
exercisable stock options.
(9) Laurus Master Fund, Ltd. holds warrants to purchase up to 6,000,000 shares
of common stock that are exercisable (subject to the following sentence)
at an exercise price of $.01 per share. The warrants are not exercisable,
however, to the extent that (a) the number of shares of our common stock
held by Laurus and (b) the number of shares of our common stock issuable
upon exercise of the warrant would result in beneficial ownership by
Laurus of more than 4.99% of our outstanding shares of common stock.
Laurus may waive these provisions, or increase or decrease that
percentage, with respect to the warrant on 61 days' prior notice to us, or
without notice if we are in default under our credit facility. Unless and
until Laurus waives these provisions, then Laurus beneficially owns
1,540,934 shares of our common stock issuable pursuant to underlying
warrant. Laurus's address is 335 Madison Avenue, New York, New York 10017.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to Proposal No. 1, the five nominees listed below will be
nominated to serve until the next Annual Meeting of Stockholders and until their
successors are elected. Officers are elected by and serve at the discretion of
the Board of Directors, subject to their employment contracts.
Shares represented by all proxies received by the Board of Directors and
not so marked to withhold authority to vote for any individual nominee will be
voted (unless one or more nominees are unable or unwilling to serve) FOR the
election of all nominees. The Board of Directors knows of no reason why any such
nominees should be unable or unwilling to serve, but if such should be the case,
proxies may be voted for the election of some other person or for fixing the
number of directors at a lesser number.
The following information is set forth with respect to each nominee for
election as a director.
Year Term
Nominee's Name Position(s) Held Will Expire
-------------- ---------------- -----------
Maurice E. Needham ........ Chairman of the Board of Directors 2009
Lyle Jensen ............... Chief Executive Officer, President
and Director 2009
Dr. Allen Kahn............. Director 2009
Lew F. Boyd................ Director 2009
Nicholas DeBenedictis...... Director 2009
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
Occupations of Directors and Executive Officers
The following table sets forth all of the candidates for election of
directors at the Meeting, and our executive officers, their ages, and the
positions held by each such person within our company.
Our directors, nominees and executive officers are as follows:
Name Age Position
---- --- --------
Maurice E. Needham ...... 67 Chairman of the Board of Directors
Lyle Jensen.............. 57 Chief Executive Officer; President;
Director
Charles E. Coppa ........ 44 Chief Financial Officer; Treasurer;
Secretary
Dr. Allen Kahn........... 86 Director
Lew F. Boyd ............. 62 Director
Nicholas DeBenedictis.... 48 Director
Each director is elected for a period of one year at the annual meeting of
stockholders and serves until his or her successor is duly elected by the
stockholders. The officers are appointed by and serve at the discretion of the
Board of Directors. During fiscal 2007, the Board agreed that each outside
director would receive $2,500 per quarter in recognition of the increased
frequency of telephonic Board meetings. Previously, outside directors received
$2,500 per meeting attended. In addition, during fiscal 2006, the Compensation
Committee agreed to discontinue future option grants made to outside directors
pursuant the Non-Employee Director Stock Option Plan.
We have established an Audit Committee consisting of Messrs. DeBenedictis
(Chair) and Boyd and Dr. Kahn, and a Compensation Committee consisting of
Messrs. Boyd (Chair) and DeBenedictis. Our Board of Directors has determined
that Mr. DeBenedictis is an "audit committee financial expert" within the
meaning given that term by Item 407(d)(5) of Regulation S-B. Our common stock is
traded on the OTC Bulletin Board under the symbol "GMTI" and we are not
currently subject to the listing requirements of any national securities
exchange. However, our Board of Directors has also determined that Mr.
DeBenedictis is "independent" within the meaning given to that term by Section
803 of the American Stock Exchange Company Guide. On April 12, 2006 Mr. Jensen
resigned as Chair of the Audit Committee and as a member of the Compensation
Committee and Mr. DeBenedictis became Chair of the Audit Committee and joined
the Compensation Committee.
4
MAURICE E. NEEDHAM has been Chairman since June 1993. From June 1993 to
July 21, 1997, Mr. Needham also served as Chief Executive Officer. He has also
served as a Director of Comtel Holdings, an electronics contract manufacturer
since April 1999. He previously served as Chairman of Dynaco Corporation, a
manufacturer of electronic components which he founded in 1987. Prior to 1987,
Mr. Needham spent 17 years at Hadco Corporation, a manufacturer of electronic
components, where he served as President, Chief Operating Officer and Director.
LYLE JENSEN has been a Director since May 2002. On April 12, 2006, Mr.
Jensen became our Chief Executive Officer. Mr. Jensen previously was Executive
Vice President/Chief Operations Officer of Auto Life Acquisition Corporation, an
automotive aftermarket leader of fluid maintenance equipment. Prior to that he
was a Business Development and Operations consultant after holding executive
roles as Chief Executive Officer and minority owner of Comtel and Corlund
Electronics, Inc. He served as President of Dynaco Corporation from 1988 to
1997; General Manager of Interconics from 1984 to 1988 and various financial and
general management roles within Rockwell International from 1973 to 1984.
CHARLES E. COPPA has served as Chief Financial Officer, Treasurer and
Secretary since March 1998. From October 1995 to March 1998, he served as
Corporate Controller. Mr. Coppa was Chief Financial Officer and Treasurer of
Food Integrated Technologies, a publicly-traded development stage company from
July 1994 to October 1995. Prior to joining Food Integrated Technologies, Inc.,
Mr. Coppa served as Corporate Controller for Boston Pacific Medical, Inc., a
manufacturer and distributor of disposable medical products, and Corporate
Controller for Avatar Technologies, Inc., a computer networking company.
ALLEN KAHN, M.D., has been a Director since March 2000. Dr. Kahn operated
a private medical practice in Chicago, Illinois, which he founded in 1953 until
his retirement in October 2002. Dr. Kahn has been actively involved as an
investor in "concept companies" since 1960. From 1965 through 1995 Dr. Kahn
served as a member of the Board of Directors of Nease Chemical Company
(currently German Chemical Company), Hollymatic Corporation and Pay Fone Systems
(currently Pay Chex, Inc.).
LEW F. BOYD has been a Director since August 1994. Mr. Boyd is the founder
and since 1985 has been the Chief Executive Officer of Coastal International,
Inc., an international business development and executive search firm,
specializing in the energy and environmental sectors. Previously, Mr. Boyd had
been Vice President/General Manager of the Renewable Energy Division of Butler
Manufacturing Corporation and had served in academic administration at Harvard
and Massachusetts Institute of Technology.
NICHOLAS DEBENEDICTIS has been a Director since September 2005. Mr.
DeBenedictis has been an independent investment advisor for the past nine years
and has over 16 years of experience in the financial markets and securities
business including positions with E.W. Smith Securities, Smith Barney, and
Janney Montgomery Scott.
Code of Ethics
On May 28, 2005, we adopted a code of ethics which applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. We have posted
our code of ethics on our corporate website, www.greenman.biz.
Board Meetings
Our Board of Directors met 16 times, in person or by telephone, during the
fiscal year ended September 30, 2007. None of the directors attended fewer than
75% of the meetings held during the period. There were no actions taken by
unanimous consent in lieu of a meeting during the fiscal year ended September
30, 2007.
Committees of the Board of Directors
Our Board of Directors has established an Audit Committee and a
Compensation Committee.
5
Audit Committee: The Audit Committee of the Board of Directors acts to:
(i) acquire a complete understanding of our audit functions; (ii) review with
management and our independent accountants our finances, financial condition and
interim financial statements; (iii) review with the independent accountants our
year-end financial statements; and (iv) review implementation with the
independent accountants and management any action recommended by our independent
accountants. The Audit Committee met five times during the fiscal year ended
September 30, 2007. None of the members of the Audit Committee attended fewer
than 75% of the meetings held during the period.
The Audit Committee adopted a written charter governing its actions on
June 1, 2000. The three members of the Audit Committee are "independent" within
the meaning given to that term by Section 803 of the American Stock Exchange
Company Guide.
Report of the Audit Committee
The Audit Committee has reviewed and discussed our audited
consolidated balance sheets and statements of operations, cash flows
and stockholders' deficit for the fiscal year ended September 30,
2007 and 2006 with management. The Audit Committee has discussed
with our independent auditors the matters required to be discussed
by Statement of Auditing Standards No. 61.
The Audit Committee has also received and reviewed written
disclosures and the letter from Schechter, Dokken, Kanter, Andrews &
Selcer, Ltd. as required by Independent Standards Board No. 1 and
has discussed with Schechter, Dokken, Kanter, Andrews & Selcer, Ltd.
their independence. Based on the foregoing review and discussions,
the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in our Annual Report on
Form 10-KSB for the fiscal year ended September 30, 2007 for filing
with the Securities and Exchange Commission.
AUDIT COMMITTEE
Nicholas DeBenedictis (Chairman) Lew Boyd Dr. Allen Kahn
Compensation Committee: The Compensation Committee of the Board of
Directors sets the compensation of the Chief Executive Officer and reviews and
approves the compensation arrangements for all other officers. The Compensation
Committee met eight times during the fiscal year ended September 30, 2007. None
of the members of the Compensation Committee attended fewer than 75% of the
meetings held during the period.
Our Board of Directors has not established a nominating committee. Our
Board believes that each of our current members should, and do, participate in
the consideration of director nominees. The policy of our Board is to consider
director candidates recommended by our stockholders. Stockholders wishing to
nominate director candidates must comply with certain procedures and notice
requirements set forth in our By-Laws. Nominations must be submitted in writing
to our principal executive office on a timely basis and must contain certain
information set forth in our By-Laws. See "Advance Notice Procedures" below. Our
Board has not established a formal charter regarding the nomination and
consideration of director candidates. We expect to establish a Nominating and
Governance Committee, and a charter governing its operations, in fiscal 2008.
When adopted, the charter will be posted on our corporate website.
Stockholders may communicate directly with members of our Board of
Directors by sending a letter or other written communication to The Chairman of
the Board (or, if applicable to an individual director by name), in care of the
Corporate Secretary, GreenMan Technologies, Inc., 12498 Wyoming Avenue South,
Savage, Minnesota 55378. Our current policy is to forward all communications to
the Chairman of the Board or the individually named director, if applicable, but
we reserve the right to modify that policy in the future.
6
Executive and Director Compensation
Summary Compensation Table
The following table summarizes the compensation paid or accrued for
services rendered during the fiscal years ended September 30, 2007 and 2006, to
our Chief Executive Officer and our Chief Financial Officer. We did not grant
any restricted stock awards or stock appreciation rights or make any long-term
plan payouts during the periods indicated.
Annual Compensation
------------------- Option All Other
Name and Principal Position Fiscal Year Salary Bonus Awards (1)(2) Compensation(3) Total
--------------------------- ----------- ------ ----- ------------- --------------- -----
Lyle Jensen ........... 2007 $195,000 $212,000 $ 32,466 $17,901 $457,367
Chief Executive Officer 2006 81,250 43,000 107,157 6,653 238,060
Charles E. Coppa ...... 2007 $150,000 $ 51,000 $ 10,533 $11,912 $223,445
Chief Financial Officer 2006 145,000 48,000 38,407 8,396 239,803
----------
(1) Amounts shown do not reflect compensation actually received by the named
executive officer. The amounts in the Option Awards column reflect the
dollar amount recognized as compensation cost for financial statement
reporting purposes for the fiscal years ended September 30, 2007 and
September 30, 2006, in accordance with SFAS 123(R) for all stock options
granted in such fiscal years. The calculation in the table above excludes
all assumptions with respect to forfeitures. There can be no assurance
that the amounts set forth in the Option Awards column will ever be
realized. A forfeiture rate was used in the expense calculation in the
financial statements.
(2) Options granted have a ten-year term and vest at an annual rate of 20%
over a five-year period from the date of grant with the exception of the
25,000 granted to Mr. Jensen which pursuant to the terms of his
employment, vest immediately on the date of grant and have a ten year
term.
(3) Represents payments made to or on behalf of Messrs. Jensen and Coppa for
health, life and disability insurance and auto allowances.
Employment Agreements
On April 12, 2006, we entered into a five-year employment agreement with
Mr. Jensen pursuant to which Mr. Jensen will receive a base salary of $195,000
per year. The agreement automatically renews for one additional year upon each
anniversary, unless notice of non-renewal is given by either party. We may
terminate the agreement without cause on 30 days' prior notice. The agreement
provides for payment of twelve months' salary and certain benefits as a
severance payment for termination without cause. Any increases in Mr. Jensen's
base salary will be made in the discretion of the Board of Directors upon the
recommendation of the Compensation Committee. Mr. Jensen also received a
relocation allowance of $23,603 and receives a car allowance of $600 per month.
Mr. Jensen has been granted a qualified option under our 2005 Stock Option Plan
to purchase 500,000 shares of our common stock with an exercise price of $.28
per share. The options vest at an annual rate of 20% over a five-year period
from date of grant and have a ten-year term.
The agreement also provides for Mr. Jensen to be eligible to receive
incentive compensation based on (i) non-financial criteria which may be
established by the Board of Directors and (ii) upon a calculation of our annual
audited earnings before interest, taxes, depreciation and amortization
("EBITDA") as a percentage of our revenue, as follows:
EBITDA as
% of Revenue Performance Incentive
------------ ---------------------
Base: 10.0 % or Less None
Level I: 10.1% - 12.0% 10% of EBITDA dollars above Base
Level II: 12.1% - 15.0% 12% of EBITDA dollars above Base
Level III: > 15.0% 15% of EBITDA dollars above Base
During fiscal 2007, Mr. Jensen earned an incentive bonus of $262,000 but
agreed to receive a reduced amount of $212,000. During fiscal 2007, Mr. Jensen
used approximately $52,000 (net of taxes) of his bonus to purchase 100,000
shares of unregistered common stock from the company. During fiscal 2006, Mr.
7
Jensen received an incentive bonus of $43,000 based on our performance from his
date of hire to the fiscal year-end. In addition, Mr. Jensen will be eligible to
be awarded qualified options to purchase up to 100,000 additional shares of
common stock annually, with the actual amounts contingent on achieving certain
levels of EBITDA performance. In December 2006, Mr. Jensen was granted
immediately exercisable options to purchase 25,000 shares of common stock at an
exercise price of $.36 per share based on fiscal 2006 EBITDA performance. The
right to exercise all options will accelerate in full immediately prior to any
transaction or series of sequenced events in which all or substantially all of
our assets or common stock are sold to or merged with a third party or third
parties. In addition, upon signing of his employment agreement, Mr. Jensen
purchased 500,000 unregistered shares of our common stock at $.28 which was the
closing bid price of our common stock on the date the agreement was executed.
Mr. Jensen's employment agreement was amended in January 2008 to increase
Mr. Jensen's base salary to $250,000 per year, with such increase retroactive to
October 1 2007. In addition, the amendment deleted the EBITDA-based incentive
compensation measures described above, and provides instead for incentive
compensation in respect of any fiscal year of up to the lesser of (x) 20% of our
audited annual profit after tax, as reported in the financial statements
included in our Annual Report on Form 10-KSB for such fiscal year and (y)
$150,000.
In April 1999, we entered into a three-year employment agreement with
Robert Davis, our former Chief Executive Officer pursuant to which he received a
salary of $230,000 per annum. The agreement automatically renewed for three
additional years upon each anniversary, unless notice of non-renewal is given by
either party, and provided for payment of twelve months salary as a severance
payment for termination without cause. The agreement also provided for incentive
compensation based on the following certain financial performance measures. No
bonus was payable for fiscal 2006 or 2005. On April 12, 2006, the Board of
Directors accepted Mr. Davis's resignation as President, Chief Executive Officer
and a member of the Board of Directors. Pursuant to the terms of his employment
agreement, Mr. Davis received severance of 12 months salary plus benefits
starting May 1, 2006 (valued at $260,000) plus all accrued and unpaid vacation
(valued at $40,000). All amounts due Mr. Davis have been paid as of September
30, 2007.
In June 1999, we entered into a two-year employment agreement with Mr.
Coppa pursuant to which Mr. Coppa received a salary of $130,000 per annum. In
July 2006, the Compensation Committee agreed to increase Mr. Coppa's base salary
to $150,000. The agreement automatically renews for two additional years upon
each anniversary, unless notice of non-renewal is given by either party. Any
increases or bonuses will be made at the discretion of our Board of Directors
upon the recommendation of the Compensation Committee. During fiscal 2007 and
2006, the Compensation Committee agreed to grant Mr. Coppa discretionary bonuses
of $51,000 and $48,000, respectively. During fiscal 2006, Mr. Coppa used $20,000
(net of taxes) of his bonus to purchase 50,000 shares of unregistered common
stock from the company. The agreement provides for payment of twelve months
salary as a severance payment for termination without cause.
Mr. Coppa's employment agreement was amended in January 2008 to increase
Mr. Coppa's base salary to $165,000 per year, effective January 1, 2008. In
addition, the amendment deleted the discretionary incentive compensation
measures described above, and provides instead for incentive compensation in
respect of any fiscal year to be based on mutually agreed performance measures
as determined our Compensation Committee, with maximum potential incentive
compensation in respect of any fiscal year equal to 25% of Mr. Coppa's base
salary for such fiscal year.
In June 2003, we entered into a three-year employment agreement with Mr.
Needham pursuant to which Mr. Needham receives a salary of $90,000 per annum. In
July 2006, Mr. Needham agreed to a 30% reduction in his base salary in
recognition of on going efforts to reduce corporate overhead. The agreement
automatically renews for three additional years upon each anniversary, unless
notice of non-renewal is given by either party. Any increases or bonuses will be
made at the discretion of our Board of Directors upon the recommendation of the
Compensation Committee. The agreement provides for payment of twelve months
salary as a severance payment for termination without cause.
8
Outstanding Equity Awards
The following table sets forth information concerning outstanding stock
options for each named executive officer as of September 30, 2007:
Number of Securities Underlying
Unexercised Options Exercise Option
------------------- Price Expiration
Name Date of Grant Exercisable Unexercisable Per Share Date
---- ------------- ----------- ------------- --------- ----
Lyle Jensen......... March 12, 2002 (1) 25,000 -- $1.51 March 12, 2012
August 23, 2002 (2) 2,500 -- $1.80 August 23, 2012
February 20, 2003 (3) 2,000 -- $1.95 February 20, 2013
April 24, 2004 (3) 2,000 -- $1.10 April 24, 2014
June 15, 2005 (3) 2,000 -- $0.51 June 15, 2015
April 12, 2006 (4) 500,000 400,000 $0.28 April 12, 2016
December 18, 2006 (4) 100,000 100,000 $0.35 December 18, 2016
December 29, 2006 (5) 25,000 -- $0.36 December 29, 2016
Charles E. Coppa ... March 23,1998 (2) 130,000 -- $1.09 March 23, 2008
July 22,1999 (2) 90,000 -- $0.53 July 22, 2009
February 18, 2000 (1) 100,000 -- $0.50 February 18, 2010
January 12, 2001 (2) 40,000 -- $0.40 January 12, 2011
August 23, 2002 (2) 7,500 -- $1.80 August 23, 2012
June 6, 2006 (4) 137,000 109,600 $0.36 June 6, 2016
September 28,2007 (4) 45,000 45,000 $0.35 September 28, 2017
----------
(1) These options are non-qualified, have a ten-year term and vest at an
annual rate of 20% over a five-year period from the date of grant
(2) These options were granted under the 1993 Stock Option Plan, have a
ten-year term and vest at an annual rate of 20% over a five-year period
from the date of grant
(3) These options were granted under the 1996 Non Employee Stock Option Plan,
have a ten-year term and vested immediately on the date of grant.
(4) These options were granted under the 2005 Stock Option Plan, have a
ten-year term and vest at an annual rate of 20% over a five-year period
from the date of grant.
(5) These options were granted under the 2005 Stock Option Plan, have a
ten-year term and vested immediately on the date of grant.
Director Compensation
The following table sets forth information concerning the compensation of
our Directors who are not named executive officers for the fiscal year ended
September 30, 2007:
Fees Earned or Paid in Option Award All Other
Name Cash or Common Stock (1) (2) Compensation Total
---- -------------------- ------- ------------ -----
Maury Needham............. $ -- $ 97,634 $ -- $ 97,634
Lew Boyd.................. $ 10,000 $ 8,050 $ -- $ 18,050
Dr. Allen Kahn............ $ 10,000 $ 8,050 $ -- $ 18,050
Nick DeBenedictis......... $ 10,000 $ 55,292 $ -- $ 65,292
----------
(1) Amounts shown do not reflect compensation actually received by the named
director. The amounts in the Option Awards column reflect the dollar
amount recognized as compensation cost for financial statement reporting
purposes for the fiscal year ended September 30, 2007, in accordance with
SFAS 123(R) for all stock options granted in such fiscal year. The
calculation in the table above excludes all assumptions with respect to
forfeitures. There can be no assurance that the amounts set forth in the
Option Awards column will ever be realized. A forfeiture rate was used in
the expense calculation in the financial statements.
(2) As of September 30, 2007, each non-employee director holds the following
aggregate number of shares under outstanding stock options:
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Number of Shares
Underlying
Name Outstanding Stock Options
---- -------------------------
Maury Needham........ 1,229,462
Lew Boyd............. 160,394
Dr. Allen Kahn....... 51,500
Nick DeBenedictis.... 235,000
During fiscal 2007, the Board agreed that each outside director would
receive $2,500 per quarter in recognition of the increased frequency of
telephonic Board meetings. Previously, outside directors received $2,500 per
meeting attended. In addition, during fiscal 2006, the Compensation Committee
agreed to discontinue future option grants made to outside directors pursuant
the Non-Employee Director Stock Option Plan.
Stock Option Plans
Our 1993 Stock Option Plan (the "1993 Plan") was established to provide
options to purchase shares of common stock to our employees, officers, directors
and consultants. In March 2001, our stockholders approved an increase to the
number of shares authorized under the 1993 Plan to 3,000,000 shares. The 1993
Plan expired on June 10, 2004.
As of September 30, 2007, there were 1,022,356 options granted and
outstanding under the 1993 Plan which are exercisable at prices ranging from
$0.38 to $1.80.
On March 18, 2005, our Board of Directors adopted the 2005 Stock Option
Plan (the "2005 Plan"), which was subsequently approved by our stockholders on
June 16, 2005. The 2005 Plan replaced the 1993 Plan. In April 2004, our Board
adopted a replacement stock option plan (the "2004 Plan") but did not submit it
for ratification by our stockholders. The 2004 Plan was terminated by our Board
on March 18, 2005, and all options granted under that plan have been terminated.
Options granted under the 2005 Plan may be either options intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended; or non-qualified stock options. For a detailed description of
the 2005 Plan, please see "Proposal No. 3 - Proposal to Increase the Number of
Shares Reserved Under the 2005 Plan," below.
During the year ended September 30, 2007, 800,000 options were granted
under the 2005 Plan at prices ranging from $.35 to $.55. As of September 30,
2007, there were 1,662,000 options granted and outstanding under the 2005 Plan
which are exercisable at prices ranging from $0.28 to $0.55.
Non-Employee Director Stock Option Plan
Our 1996 Non-Employee Director Stock Option Plan is intended to promote
our interests by providing an inducement to obtain and retain the services of
qualified persons who are not officers or employees to serve as members of our
Board of Directors. The Board of Directors has reserved 60,000 shares of common
stock for issuance under Non-Employee Director Stock Option Plan.
Each person who was a member of the Board of Directors on January 24,
1996, and who was not an officer or employee, was automatically granted an
option to purchase 2,000 shares of common stock. In addition, after an
individual's initial election to the Board of Directors, any director who is not
an officer or employee and who continues to serve as a director will
automatically be granted on the date of the Annual Meeting of Stockholders an
additional option to purchase 2,000 shares of common stock. The exercise price
per share of options granted under the Non-Employee Director Stock Option Plan
is 100% of the fair-market value of the common stock on the business day
immediately prior to the date of the grant and each option is immediately
exercisable for a period of ten years from the date of the grant. During fiscal
2006, the Compensation Committee agreed to discontinue future option grants made
under the Non-Employee Director Stock Option Plan.
As of September 30, 2007, options to purchase 38,000 shares of our common
stock have been granted under the 1996 Non-Employee Director Stock Option Plan,
of which 28,000 are outstanding and exercisable at prices ranging from $0.38 to
$1.95.
10
Employee Benefit Plan
In August 1999, we implemented a Section 401(k) plan for all eligible
employees. Employees are permitted to make elective deferrals of up to 15% of
employee compensation and employee contributions to the 401(k) plan are fully
vested at all times. We may make discretionary contributions to the 401(k) plan
which become vested over a period of five years. We did not make any
discretionary contributions to the 401(k) plan during the fiscal years ended
September 30, 2007 and 2006.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own more than 10% of our
common stock, to file with the Securities and Exchange Commission initial
reports of ownership of our common stock and other equity securities on Form 3
and reports of changes in such ownership on Form 4 and Form 5. Officers,
directors and 10% stockholders are required by the Securities and Exchange
Commission regulations to furnish us with copies of all Section 16(a) forms they
file.
To the best of management's knowledge, based solely on review of the
copies of such reports furnished to us during and with respect to, our most
recent fiscal year, and written representation that no other reports were
required, all Section 16(a) filing requirements applicable to our officers and
directors have been complied with.
PROPOSAL NO. 2
PROPOSAL TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has resolved to recommend to the stockholders that
our company amend its Restated Certificate of Incorporation to increase the
number of authorized shares of common stock from 40,000,000 to 60,000,000
shares. The text of the proposed amendment is set forth in Exhibit I to this
Proxy Statement.
As of February 5, 2008, 30,880,435 shares of our common stock were issued
and outstanding, and we had reserved approximately 10,545,758 additional shares
for future issuance. These reserved shares relate to the following: 3,382,356
shares for issuance upon exercise of awards granted under our 1993 Stock Option
Plan, 1996 Non-Employee Director Stock Option Plan, 2005 Stock Option Plan and
7,163,402 shares for issuance upon exercise of other stock options and stock
purchase warrants.
The number of shares reserved by our company for future issuance exceeds
the number of shares authorized for issuance. Although the Board believes that
it is likely that we will have a sufficient number of authorized but unissued
shares to satisfy all exercises of vested options and warrants granted to date,
the Board believes that we will be prohibited from making future grants under
the 2005 Stock Option Plan and that we will not have sufficient shares to issue
in conjunction with potential business development opportunities or capital
raising efforts.
If this proposal is approved, the Board of Directors will have the
authority to issue approximately 18,574,000 additional shares of common stock as
of February 5, 2008, and not including shares already reserved for issuance, as
described above, without further stockholder approval. The Board of Directors
believes that the increase in the number of authorized shares of common stock is
in the best interests of our company and our stockholders. The Board of
Directors believes that the authorized common stock should be increased to
provide sufficient shares for such corporate purposes as may be determined by
the Board of Directors. These purposes may include, among others, the issuance
of common stock to facilitate potential mergers or acquisitions, raising capital
or acquiring technology rights through the sale of stock, and/or attracting or
retaining valuable employees by the issuance of stock options. Except as
described above or elsewhere in this proxy statement, we have no plans,
understandings, commitments, agreements or undertakings concerning the issuance
of any such additional shares. The Board of Directors, however, considers the
authorization of additional shares of common stock advisable to ensure prompt
availability of shares for issuance should the occasion arise.
Under the Delaware General Corporation Law, the Board of Directors
generally may issue authorized but unissued shares of common stock without
further stockholder approval. The Board of Directors does not currently intend
to seek stockholder approval prior to any future issuance of additional shares
of common stock, unless stockholder action is required in a specific case by
applicable law, the rules of any exchange or market on which our securities may
then be listed or traded, or our Restated Certificate of Incorporation or
11
By-Laws then in effect. Frequently, opportunities arise that require prompt
action, and we believe that delay necessitated for stockholder approval of a
specific issuance could be detrimental to our company and our stockholders.
The additional shares of common stock authorized for issuance pursuant to
this proposal will have the rights and privileges which the presently
outstanding shares of common stock possess under our Restated Certificate of
Incorporation. Shares of our common stock, including the additional shares
proposed for authorization, do not have preemptive or similar rights. The
increase in authorized shares would not affect the terms or rights of holders of
existing shares of common stock. The voting, dividend and liquidation rights of
the holders of common stock, however, may be subordinate to the rights of the
holders of the any preferred stock which may be issued from time to time. All
outstanding shares of common stock would continue to have one vote per share on
all matters to be voted on by the stockholders, including the election of
directors.
The issuance of any additional shares of common stock by our company may,
depending on the circumstances under which those shares are issued, reduce
stockholders' equity per share and, unless additional shares are issued to all
stockholders on a pro rata basis, will reduce the percentage ownership of common
stock of existing stockholders. We expect, however, to receive consideration for
any additional shares of common stock issued, thereby reducing or eliminating
any adverse economic effect to each stockholder of such dilution.
The authorized but unissued shares of common stock could be used to make
more difficult a change in control of our company. For example, such shares
could be sold to purchasers who might side with the Board of Directors in
opposing a takeover bid that the Board determines not to be in the best
interests of our company and our stockholders. Such a sale could have the effect
of discouraging an attempt by another person or entity, through the acquisition
of a substantial number of shares of our common stock, to acquire control of our
company since the issuance of new shares could be used to dilute the stock
ownership of the acquirer. Our Restated Certificate of Incorporation and By-Laws
contain certain provisions, including the grant of authority to the Board of
Directors to issue up to 1,000,000 shares of preferred stock in one or more
series (with such rights and preferences as the Board may determined), without
the approval of stockholders, and certain provisions relating to the calling of
stockholder meetings and the conduct of such meetings, that may be considered to
have an anti-takeover effect. We are not aware of any pending or threatened
efforts to obtain control of our company, and the Board of Directors has no
current intention to use the additional shares of common stock to impede a
takeover attempt or to propose any additional anti-takeover measures in future
proxy solicitations.
Approval of the amendment to increase the number of authorized shares of
common stock will require the affirmative vote of the holders of a majority of
the common stock issued and outstanding as of the record date. Abstentions will
have the same effect as a vote against the proposal; broker non-votes will have
no outcome on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO OUR RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 40,000,000 TO 60,000,000 SHARES.
PROPOSAL NO. 3
PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED UNDER THE 2005 PLAN
The 2005 Plan was adopted by our Board of Directors on March 18, 2005 and
approved by our stockholders on June 16, 2005. A maximum of 2,000,000 shares of
common stock were originally reserved for issuance under the 2005 Plan upon the
exercise of options. On January 18, 2008, the Board of Directors approved an
increase to the number of shares authorized under the Plan to 3,500,000 shares,
subject to shareholder approval.
Management believes that providing key employees with long-term incentive
compensation with the opportunity to build an ownership interest in our company
through the granting of stock options. Our emphasis on long-term incentive
compensation through the granting of stock options is designed to align
individuals' interests with those of our shareholders, retain key employees
through the term of the awards, and motivate our employees to strive for
outstanding performance. Management relies on stock options as an essential part
of the compensation packages necessary for our company to attract and retain
experienced officers and employees.
12
The Board of Directors believes that the proposed increase in the number
of shares available under the 2005 Plan is essential to permit management to
continue to provide long-term, equity-based incentives to present and future
employees.
During the fiscal year ended September 30, 2007 we granted 800,000 options
under the 2005 Plan with fair market value exercise prices.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSAL
TO AMEND THE 2005 PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER THE PLAN FROM 2,000,000 TO 3,500,000.
Summary of the 2005 Plan
Administration. Our Board of Directors and/or the Compensation Committee
of the Board of Directors administers the 2005 Plan, which includes determining:
o the individuals to receive options;
o whether the options will be "incentive stock options" or
"non-qualified options," as further described below;
o the terms and conditions of each option, including the number of
shares and exercise price of the options;
o whether restrictions such as repurchase options are to be imposed on
shares subject to options, and the nature of such restrictions; and
o the time when the options become exercisable.
The Compensation Committee has full authority to interpret the terms of
the 2005 Plan and awards granted under the Plan, to adopt, amend and rescind
rules and guidelines for the administration of the Plan and for its own acts and
proceedings and to decide all questions and settle all controversies and
disputes which may arise in connection with the Plan. The Compensation Committee
or the Board may, in its discretion, determine to accelerate the vesting of any
option; provided, however, that neither the Compensation Committee nor the Board
may, without the consent of the option holder, accelerate the vesting of an any
incentive stock option if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Internal Revenue Code, as amended
(the "Code").
Authorized Shares. We currently have reserved 2,000,000 shares of our
common stock for issuance under the 2005 Plan. On January 18, 2008, the Board of
Directors approved an increase to the number of shares authorized under the Plan
to 3,500,000 shares, subject to shareholder approval. As described below, the
shares authorized under the Plan are subject to adjustment in the event of a
stock dividend, stock split or other change in corporate structure or
capitalization affecting our common stock. The number of shares delivered upon
exercise of an option will be determined net of any shares actually or
constructively transferred by the option holder to our company in payment of the
exercise price or tax withholding.
Eligibility. All directors, officers and employees of, or consultants to,
our company or any of its subsidiaries are eligible to participate in the 2005
Plan.
Types of Options. Options under the 2005 Plan may be in the form of
"incentive stock options" or "non-qualified options." Incentive stock options
are stock options that meet certain conditions imposed by Section 422A of the
Code. All other options are non-qualified options. The exercise price of an
incentive stock option may be not less than 100% (110% for an incentive stock
option granted to a 10% or more stockholder) of the fair market value of our
common stock on the date of grant. The aggregate fair market value, determined
on the date the option is granted, of the stock for which any person may be
granted incentive stock options which become exercisable for the first time by
such person in any calendar year cannot exceed the sum of $100,000 (determined
on the date such option is granted). No incentive stock option may be granted to
a person who is not an "employee" as defined in the applicable provisions of the
Code and regulations issued thereunder. An incentive stock option must expire in
ten years (five years in the case of an incentive stock option granted to a 10%
or more stockholder) after the date of grant. No incentive stock options can be
granted under the 2005 Plan after March 18, 2015, but options granted before
that date may be exercised thereafter.
13
Transferability. Options granted under the 2005 Plan are generally
non-transferable other than by will or by the laws of descent and distribution.
Non-qualified options may be transferred pursuant to qualified domestic
relations orders as defined in the Code or Title I of the Employee Retirement
Security Act of 1974. Options may be exercised by a person other than the person
to whom they were granted only in the circumstances outlined below.
Termination of Service. Under the 2005 Plan, all previously unexercised
incentive stock options terminate and are forfeited automatically upon the 90th
day after the termination of the option holder's service relationship with our
company and our subsidiaries, unless the Compensation Committee expressly
specifies otherwise. While not required to do so by the terms of the 2005 Plan,
the Board currently expects to impose similar conditions on non-qualified stock
options. In either case, however, if an option holder's service relationship is
terminated by reason of death or disability (as defined in the Plan), the
vesting of the options will cease upon the date of the termination of service
and the options may be exercised by the holder, the holder's executor or
administrator, or by the person to whom the option is transferred under the
applicable laws of descent or distribution, as the case may be, within 180 days
after the date of such termination of service. Notwithstanding the foregoing, in
no event may (i) any option be exercised beyond the date on which such option
would otherwise expire pursuant to its terms or (ii) any incentive stock option
be exercised after the expiration of ten years (five years in the case of an
incentive stock option granted to a 10% or more stockholder) from the date the
incentive stock option was granted. Shares of common stock which are not
delivered because of termination of awards may be reused for other awards.
Amendments. The Compensation Committee may at any time discontinue
granting awards under the 2005 Plan. The Board may terminate or amend the Plan
at any time, except that no amendment may adversely affect the rights of any
option holder without his or her consent and no amendment may, without the
approval of our stockholders obtained within 12 months after the Board adopts a
resolution authorizing such amendment: (i) materially increase the number of
shares of common stock available under the Plan (other than pursuant to a stock
dividend, stock split or other change in corporate structure or capitalization
affecting our common stock), (ii) change the group of persons eligible to
receive incentive stock options, (iii) change the exercise price at which shares
may be offered pursuant to incentive stock options (other than pursuant to a
stock dividend, stock split or other change in corporate structure or
capitalization affecting our common stock), or (iv) extend the expiration date
of the 2005 Plan.
Change in Corporate Structure or Capitalization; Change in Control. In the
event of a stock dividend, stock split or other change in corporate structure or
capitalization affecting our common stock, the number and kind of shares of
stock of our company then subject to the 2005 Plan and the options then
outstanding or to be granted thereunder, and the exercise price, if applicable,
will be appropriately adjusted. In the event our company is to be consolidated
with or acquired by another entity in a merger, sale of substantially all of our
assets or otherwise, then the Compensation Committee or the board of directors
of any entity assuming the obligations of our company under the 2005 Plan shall
either (i) make appropriate provision for the continuation of such options by
substituting on an equitable basis for the shares then subject to such options
the consideration payable with respect to the outstanding shares of our common
stock in connection with the acquisition; (ii) make appropriate provisions for
the continuation of such options by substituting on an equitable basis for the
shares then subject to such options any equity securities of the successor
corporation; (iii) upon written notice to the option holders, provide that all
options must be exercised, to the extent then exercisable, within a specified
number of days of the date of such notice, at the end of which period the
options shall terminate; (iv) terminate all options in exchange for a cash
payment equal to the excess of the fair market value of the shares subject to
such options (to the extent then exercisable) over the exercise price thereof;
(v) accelerate the date of exercise of such options or of any installment of
such options; or (vi) terminate all options in exchange for the right to
participate in any stock option or other employee benefit plan of any successor
corporation.
In the event of the proposed dissolution or liquidation of our company,
each option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Compensation Committee.
Term. The 2005 Plan, unless sooner terminated by the Board of Directors,
will remain in effect until March 18, 2015.
Federal Income Tax Consequences
The following is a summary of certain U.S. federal income tax aspects of
the 2005 Plan. This summary is not a complete description of such consequences.
Moreover, this summary relates only to federal income taxes; there may also be
federal estate and gift tax consequences associated with the 2005 Plan, as well
as foreign, state and local tax consequences. The 2005 Plan is not qualified
under Section 401(a) of the Code.
14
Incentive Stock Options. In general, neither the grant nor the exercise of
an incentive stock option granted under the 2005 Plan will result in taxable
income to the option holder or a deduction to our company. If the option holder
does not dispose of stock received upon exercise of an incentive stock option
within two years after the date the option is granted and within one year after
the date of exercise, any later sale of such stock will result in a capital gain
or loss.
If stock received upon the exercise of an incentive stock option is
disposed of before the holding period requirements described above have been
satisfied, the option holder will generally realize ordinary income at the time
of disposition. The amount of such ordinary income will generally be equal to
the difference between the fair market value of the common stock on the date of
exercise and the option price. In the case of a disqualifying disposition in
which a loss (if sustained) would be recognized, then the amount of ordinary
income will not exceed the excess of the amount realized on the sale over the
adjusted basis of the stock, that is, in general, the price paid for the stock.
We will generally be entitled to a deduction for federal income tax purposes
equal to the amount of ordinary income realized by the option holder, subject to
any necessary withholding and reporting requirements.
Certain option holders exercising incentive stock options may become
subject to the alternative minimum tax, under which the difference between (i)
the fair market value of stock purchased under incentive stock options,
determined on the date of exercise, and (ii) the exercise price, will be an item
of tax preference in the year of exercise for purposes of the alternative
minimum tax.
Non-Qualified Options. No income results upon the grant of a non-qualified
option with an exercise price that is not less than 100% of the fair market
value of our common stock on the date of grant. When an option holder exercises
a non-qualified option, he or she will realize ordinary income subject to
withholding. Generally, such income will be realized at the time of exercise and
in an amount equal to the excess, measured at the time of exercise, of the then
fair market value of our common stock over the option price. We will generally
be entitled to a deduction for federal income tax purposes equal to the amount
of ordinary income realized by the option holder, subject to certain withholding
and reporting requirements.
Under Section 409A of the Code, a recipient of a stock option granted with
an exercise price that is less than 100% of the fair market value of the
underlying common stock on the date of grant will realize ordinary income,
subject to withholding, in an amount equal to the excess of the fair market
value of the common stock on the date of grant over the option price. In
addition, the recipient will be subject to an additional excise tax equal to 20%
of such amount. Under such circumstances, we will generally be entitled to a
deduction for federal income tax purposes equal to the amount of ordinary income
(including the 20% excise tax) realized by the option holder.
New Incentive Plan Benefits
The future benefits or amounts that would be received under the 2005 Plan
by executive officers and other employees are discretionary and are therefore
not determinable at this time. In addition, the benefits or amounts which would
have been received by or allocated to such persons for the last completed fiscal
year if the 2005 Plan had been in effect cannot be determined.
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
reappointed Schechter, Dokken, Kanter, Andrews & Selcer, Ltd. ("SDKAS") to audit
our consolidated financial statements for the fiscal year ending September 30,
2008. SDKAS has served as our independent registered public accounting firm
since fiscal 2007.
Effective February 12, 2007, our Board of Directors dismissed Wolf and
Company, P.C. as our auditors and selected Schechter, Dokken, Kanter, Andrews &
Selcer, Ltd., certified public accountants based in Minneapolis, Minnesota, to
serve as auditors for the fiscal year ending September 30, 2007. SDKAS had
assisted our former auditor, Wolf & Company, P.C., in our annual audit during
the past eight years. Given the relocation of our corporate headquarters from
Massachusetts to Minnesota during fiscal 2006, our Board deemed it appropriate
to select a local firm to serve as our auditor commencing in fiscal 2007.
15
Wolf & Company, P.C.'s reports with respect to fiscal 2006 did not contain
any adverse opinion or a disclaimer of opinion and was not qualified or modified
as to uncertainty, audit scope or accounting principles. During fiscal 2006 and
the subsequent interim period we had no disagreements with Wolf & Company, P.C
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of Wolf & Company, P.C would have caused Wolf & Company , P.C to
make reference to the matter in its report.
Stockholder ratification of our independent auditors is not required under
Delaware law or under our Restated Certificate of Incorporation or By-Laws. A
representative of SDKAS is expected to be present at the Meeting, with the
opportunity to make a statement if the representative desires to do so, and is
expected to be available to respond to appropriate questions.
If the stockholders do not ratify the selection of Schechter, Dokken,
Kanter, Andrews & Selcer, Ltd. as our independent auditors for the fiscal year
ending September 30, 2008, our Board of Directors will evaluate what would be in
the best interests of our company and our stockholders and consider whether to
select new independent auditors for the current fiscal year or whether to wait
until the completion of the audit for the current fiscal year before changing
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ITS SELECTION
OF SCHECHTER, DOKKEN, KANTER, ANDREWS & SELCER, LTD. AS INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING SEPTEMBER 30, 2008.
INDEPENDENT PUBLIC ACCOUNTANTS
In February 2007 we selected the firm of Schechter, Dokken, Kanter,
Andrews & Selcer, Ltd. as our independent auditors for the fiscal year ending
September 30, 2007 and they commenced providing services in conjunction with the
quarter ended March 31, 2007. Our former auditors, Wolf and Company, P.C., only
provided services in conjunction with the quarter ended December 31, 2006.
In addition to audit services, SDKAS also provided certain non-audit
services to us during the fiscal year ended September 30, 2007. The Audit
Committee has considered whether the provision of these additional services is
compatible with maintaining the independence of SDKAS.
Audit Fees. The aggregate fees billed for professional services rendered
by SDKAS for (i) the audit of our financial statements as of and for the fiscal
year ended September 30, 2007 and (ii) the review of the financial statements
included our company's Form 10-QSB filings for fiscal 2007 were $120,712. The
aggregate fees billed for professional services rendered by Wolf & Company, P.C.
for the review of the financial statements included our company's Form 10-QSB
filings for fiscal 2007 were $25,050. The aggregate fees billed for professional
services rendered by Wolf & Company, P.C. for (i) the audit of our financial
statements as of and for the fiscal year ended September 30, 2006 and (ii) the
review of the financial statements included in our Form 10-QSB filings for
fiscal 2006 were $204,820.
Audit-Related Fees. The aggregate fees billed in fiscal 2007 for assurance
and related services rendered by SDKAS that are reasonably related to the
performance of the audit or review of our financial statements, was $10,828.
Services rendered in this category consisted of (i) financial accounting and
reporting consultations, (ii) participation in Board and Audit Committee
meetings and (iii) assurance services on specific transactions. The aggregate
fees billed in fiscal 2007 and 2006 for assurance and related services rendered
by Wolf & Company, P.C. that are reasonably related to the performance of the
audit or review of our financial statements were $0 and $4,300, respectively.
Services rendered in this category consisted of (i) financial accounting and
reporting consultations, (ii) participation in Board and Audit Committee
meetings and (iii) assurance services on specific transactions.
Tax Fees. The aggregate fees billed in fiscal 2007 and 2006 for
professional services rendered by Wolf & Company, P.C. for tax compliance, tax
advice and tax planning were $30,300 and $26,975, respectively.
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All Other Fees. The aggregate other fees billed during fiscal 2007 and
2006 by SDKAS for the audit of our company-sponsored benefit plan was $11,500
and $10,500, respectively. During fiscal 2007 and 2006, the aggregate fees
billed by Wolf & Company for products and services provided other than services
reported above were $5,750 and $0, respectively.
Pre-Approval Policies and Procedures. The Audit Committee has adopted
policies which provide that our independent auditors may only provide those
audit and non-audit services that have been pre-approved by the Audit Committee,
subject, with respect to non-audit services, to a de minimis exception
(discussed below) and to the following additional requirements: (i) such
services must not be prohibited under applicable federal securities rules and
regulations, and (ii) the Audit Committee must make a determination that such
services would be consistent with the principles that the independent auditor
should not audit its own work, function as part of management, act as an
advocate of our company, or be a promoter of our company's stock or other
financial interests. The chairman of the Audit Committee has the authority to
grant pre-approvals of permitted non-audit services between meetings, provided
that any such pre-approval must be presented to the full Audit Committee at its
next scheduled meeting.
During fiscal 2007, all of the non-audit services provided by SDKAS were
pre-approved by the Audit Committee. Accordingly, the Audit Committee did not
rely on the de minimis exception noted above. This exception waives the
pre-approval requirements for non-audit services if certain conditions are
satisfied, including, among others, that such services are promptly brought to
the attention of and approved by the Audit Committee prior to the completion of
the audit.
TRANSACTION OF OTHER BUSINESS
Our Board of Directors knows of no other matters which may be brought
before the Meeting. If any other matters properly come before the Meeting, or
any adjournment thereof, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy on such matters in accordance with
their best judgment.
ADVANCE NOTICE PROCEDURES
Under our By-laws, nominations for a director may be made only by the
Board of Directors, a committee appointed by the Board of Directors, or by a
stockholder of record entitled to vote on the election of directors, who is also
a stockholder at the record date of the meeting and also on the date of the
meeting at which directors are to be elected, who has delivered notice to our
principal executive offices (containing certain information specified in the
By-laws) (i) not fewer than 60 days nor more than 90 days prior to the
anniversary date of the preceding year's annual meeting, or (ii) if the meeting
is called for a date not within 30 days before or after such anniversary date,
not later than the close of business on the 10th day following the date notice
of such meeting is mailed or made public, whichever is earlier.
Our By-laws also provide that no business may be brought before an annual
meeting of stockholders except as specified in the notice of the meeting or as
otherwise brought before the meeting by or at the direction of the Board of
Directors, the presiding officer or by a stockholder who shall have been a
stockholder of record on the record date for such meeting and who shall continue
to be entitled to vote thereafter, who has delivered notice to our principal
executive offices (containing certain information specified in the By-laws) (i)
not fewer than 60 days nor more than 90 days prior to the anniversary date of
the preceding year's annual meeting, or (ii) for a special meeting or an annual
meeting called for a date not within 30 days before or after such anniversary
date, not later than the close of business on the 10th day following the date
notice of such meeting is mailed or made public, whichever is earlier.
These requirements are separate and apart from and in addition to the
requirements that a stockholder must meet in order to have a stockholder
proposal included in our Proxy Statement under Rule 14a-8 of the Securities
Exchange Act of 1934. A copy of the full text of the By-law provisions discussed
above may be obtained by writing to the Corporate Secretary, GreenMan
Technologies, Inc., 12489 Wyoming Avenue South, Savage, Minnesota 55378.
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STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to
be mailed to all stockholders entitled to vote at our next annual meeting of
stockholders must be received at our principal executive offices not later than
November __, 2008. In order to curtail controversy as to the date on which a
proposal was received by us, it is suggested that proponents submit their
proposals by Certified Mail Return Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation by proxies will be borne by us, in addition to
directly soliciting stockholders by mail, we may request banks and brokers to
solicit their customers who have our stock registered in the name of the nominee
and, if so, will reimburse such banks and brokers for their reasonable
out-of-pocket costs. Solicitation by our officers and employees may be made of
some stockholders in person or by mail or telephone.
INFORMATION INCORPORATED BY REFERENCE
Our Annual Report, containing financial statements and management's
discussion and analysis of our financial condition and results of operations for
the year ended September 30, 2007 is being mailed contemporaneously with this
proxy statement to all stockholders entitled to vote, and is incorporated herein
by this reference.
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EXHIBIT I
PROPOSED AMENDMENT TO
THE RESTATED CERTIFICATE OF INCORPORATION
OF
GREENMAN TECHNOLOGIES, INC.
RESOLVED: That Article FOURTH of the Restated Certificate of Incorporation of
GreenMan Technologies, Inc., as amended to date, be and hereby is
further amended by deleting the first paragraph thereof and
inserting in its place the following:
This corporation is authorized to issue two classes of stock, to be
designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares this corporation is authorized to issue is
Sixty-One Million (61,000,000) shares of capital stock. Of such
authorized shares, Sixty Million (60,000,000) shares shall be
designated "Common Stock" and have a par value of $0.01 per share.
One Million (1,000,000) shares shall be designated "Preferred Stock"
and have a par value of $1.00 per share.