SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use Of The Commission Only (as permitted by
Rule 14a-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
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CONCERO INC.
(Name of Registrant as Specified In Its Charter)
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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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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Rule 0-11 (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.
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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[Logo]
6300 Bridgepoint Parkway, Building 1, Suite 500
Austin, Texas 78730
April 19, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 annual meeting of stockholders of
Concero Inc., which will be held at our facilities, 6300 Bridgepoint Parkway,
Building 3, Second Floor, Suite 100, Austin, Texas on Tuesday, May 21, 2002 at
9:00 a.m. (Central Time).
Details of the business to be conducted at the annual meeting are given in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
After careful consideration, our Board of Directors has unanimously approved
the proposals set forth in the Proxy Statement and recommends that you vote in
favor of such proposals including each of the directors nominated for election
to the Concero Inc. Board of Directors.
You may vote your shares by signing, dating, and returning the enclosed proxy
promptly in the accompanying reply envelope. Representation of your shares at
the meeting is very important. Accordingly, whether or not you plan to attend
the meeting, we urge you to submit your proxy promptly. If you are able to
attend the annual meeting and wish to change your proxy vote, you may do so
simply by voting in person at the annual meeting.
We look forward to seeing you at the annual meeting.
Sincerely,
/s/ Timothy D. Webb
Timothy D. Webb
President and Chief Executive Officer
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YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and return it
in the enclosed envelope. No postage need be affixed if mailed in the United
States.
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CONCERO INC.
6300 Bridgepoint Parkway, Building 1, Suite 500
Austin, Texas 78730
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 2002
TO THE STOCKHOLDERS OF CONCERO INC.:
Notice is hereby given that the 2002 Annual Meeting of Stockholders of Concero
Inc. will be held at our facilities, 6300 Bridgepoint Parkway, Building 3,
Second Floor, Suite 100, Austin, Texas on Tuesday, May 21, 2002 at 9:00 a.m.
(Central Time) for the following purposes:
1. To elect six directors to serve until the Annual Stockholders' Meeting
in 2003, or in each case until their respective successors have been
elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending December 31, 2002; and
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 29, 2002 are
entitled to notice of, and to vote at, the Annual Meeting. Our stock transfer
books will remain open between the record date and the date of the Annual
Meeting. A list of stockholders entitled to vote at the Annual Meeting will be
available for inspection at our executive offices.
Whether or not you plan to attend the meeting in person, please sign, date and
return the enclosed proxy card in the reply envelope provided. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
of your shares are voted. You may revoke your proxy at any time. If you attend
the meeting and vote by ballot, your proxy will be revoked automatically and
only your vote at the meeting will be counted. The prompt return of your proxy
card will assist us in preparing for the meeting.
By Order of the Board of Directors,
/s/ Keith D. Thatcher
KEITH D. THATCHER
Secretary
Austin, Texas
April 19, 2002
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ACCOMPANYING PROXY STATEMENT CAREFULLY, AND VOTE YOUR SHARES BY
COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE AND RETURNING IT IN THE ENCLOSED ENVELOPE.
CONCERO INC.
6300 Bridgepoint Parkway, Building 1, Suite 500
Austin, Texas 78730
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FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 2002
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General
The enclosed proxy is solicited on behalf of the Board of Directors of Concero
Inc., a Delaware corporation, for use at the Annual Meeting of Stockholders to
be held on May 21, 2002. The Annual Meeting will be held at 9:00 a.m. Central
Time at our facilities, 6300 Bridgepoint Parkway, Building 3, Second Floor,
Suite 100, Austin, Texas. The proxy solicitation materials were mailed on or
about April 19, 2002, to all stockholders entitled to vote at our Annual
Meeting.
Voting
The specific proposals to be considered and acted upon at our Annual Meeting are
summarized in the accompanying notice and are described in more detail in this
proxy statement. On March 29, 2002, the record date for determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting, we had
outstanding 10,225,090 shares of our common stock. Each stockholder is entitled
to one vote for each share of common stock held by such stockholder on March 29,
2002. Stockholders may not cumulate votes in the election of directors.
All votes will be tabulated by the inspector of election appointed for the
meeting who will separately tabulate affirmative and negative votes, abstentions
and broker non-votes. Abstentions and broker non-votes are counted as present
for purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions will be counted towards the tabulations of
votes cast on proposals presented to the stockholders and will have the same
effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved.
Proxies
If the enclosed form of proxy is properly signed and returned, the share
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If you sign and return your proxy without
specifying how the shares represented thereby are to be voted, the proxy will be
voted FOR the election of the directors proposed by our board unless the
authority to vote for the election of such directors is withheld and, if no
contrary instructions are given, the proxy will be voted FOR the approval of
Proposal 2 described in the accompanying notice and this proxy statement. You
may revoke or change your proxy at any time before the Annual Meeting by filing
with our Corporate Secretary at our executive offices at 6300 Bridgepoint
Parkway, Building 1, Suite 500, Austin, Texas, a notice of revocation or another
signed proxy with a later date. You may also revoke your proxy by attending the
Annual Meeting and voting in person.
Solicitation
We will bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this proxy statement, the proxy and any
additional solicitation material furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in the names that are beneficially owned by others so
that they may forward this solicitation material to such beneficial owners. In
addition, we may reimburse such persons for their costs in forwarding the
solicitation material to such beneficial owners. The original solicitation of
proxies by mail may be supplemented by a solicitation by telephone, telegram or
other means by our directors, officers or employees. No additional compensation
will be paid to these individuals for any such services. We do not presently
intend to solicit proxies other than by mail.
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Deadline for Receipt of Stockholder Proposals
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, stockholder
proposals to be presented at our 2003 Annual Meeting of Stockholders and in our
proxy statement and form of proxy relating to that meeting, must be received by
us at our principal executive offices in Austin, Texas, addressed to our
Corporate Secretary, not later than December 20, 2002, the date which is 120
days prior to April 19, 2003. With respect to any stockholder proposal not
submitted pursuant to Rule 14a-8 and unless we receive notice in the manner
specified in the previous sentence, persons acting as proxies shall have
discretionary authority to vote against any proposal presented at our 2003
Annual Meeting of Stockholders. These proposals must comply with applicable
Delaware law, the rules and regulations promulgated by the Securities and
Exchange Commission and the procedures set forth in our bylaws.
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PROPOSAL 1
ELECTION OF DIRECTORS
General
At this Annual Meeting, we will be electing six directors to hold office until
their term expires at the 2003 Annual Meeting or until their successors are duly
elected and qualified. Our board currently consists of seven directors. Thomas
Herring, one of our current directors, has informed the board that he will,
regretfully, be unable to stand for re-election. We have begun a search for a
qualified candidate to serve as our seventh director. Each of the nominees
listed below is a current director.
The nominees for election have agreed to serve if elected, and management has no
reason to believe that the nominees will be unavailable to serve. In the event a
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who may be designated by our
present board of directors to fill the vacancy. Unless otherwise instructed, the
proxy holders will vote the proxies received by them FOR the nominees named
below.
Nominees for Director
Name Age Current Position
---- --- ----------------
Timothy D. Webb ................ 41 President, Chief Executive Officer and Director
Wade E. Saadi .................. 52 Chairman of the Board
Edward C. Ateyeh, Jr. .......... 49 Director
W. Frank King, PhD ............. 62 Director
Kevin B. Kurtzman .............. 54 Director
Michael J. Maples .............. 59 Director
Mr. Webb has served as President, Chief Executive Officer and a director of
Concero since September 1, 1998. Prior to joining Concero, Mr. Webb was Vice
President, Enterprise Solutions for Syntel, Inc., a technology services company.
From June 1995 through February 1998, Mr. Webb was employed by Oracle
Corporation, a global software company, last serving as a Regional Vice
President for Oracle's Consulting Service Division. From 1983 through May 1995,
Mr. Webb was employed by Accenture, a consulting firm, rising to the level of
Associate Partner before leaving to join Oracle. Mr. Webb holds a bachelor's
degree in Systems Management Engineering from Princeton University.
Mr. Saadi has served on our board of directors since October 1, 1996. He is the
founder of Pencom Systems Incorporated, a privately held New York corporation
and has served as its President and Chief Executive Officer since its inception
in 1973. In 1996, Mr. Saadi won the Technology Entrepreneur of the Year Award(R)
in New York City. Mr. Saadi is a governor of the Board of the Collectors
Club and a regional vice president of the United States Philatelic Classics
Society. Mr. Saadi attended the Polytechnic Institute of Brooklyn where he
majored in chemical engineering.
Mr. Ateyeh has served on our board of directors since October 1, 1996. He is
presently an Executive Vice President of Pencom Systems Incorporated, where he
has been employed since 1977. Mr. Ateyeh served as President of Pencom's
software division, the predecessor to Concero, from 1989 to 1992. In 1994, Mr.
Ateyeh founded Collective Technologies, Pencom's system management consulting
division where he currently serves as President and Chief Executive Officer. Mr.
Ateyeh is a board member of the Economic Development Council of the Greater
Austin Chamber of Commerce, a member of the Austin Community College Software
Industry Advisory Council, as well as the Austin Software Council's
President/CEO Peer Group. Mr. Ateyeh earned a Bachelor of Science degree from
the University of Notre Dame.
Dr. King has served on our board of directors since October 1, 1996. From 1992
to September 1, 1998, Dr. King served as our President and Chief Executive
Officer. From 1988 to 1992, Dr. King was Senior Vice President of the Software
Business group of Lotus, a software publishing company. Prior to joining Lotus,
Dr. King was with IBM, a technology company, for 19 years, where his last
position was Vice President of Development for the
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Personal Computing Division. Dr. King serves on the boards of directors of
several companies, including Natural Microsystems, Inc., Eon Communications,
Inc. and Perficient Inc. Dr. King earned a doctorate in electrical engineering
from Princeton University, a master's degree in electrical engineering from
Stanford University, and a bachelor's degree in electrical engineering from the
University of Florida.
Mr. Kurtzman has served on our board of directors since December 1996. He is
presently the Chief Financial Officer of Pencom, a position he has held since
July 1997. Prior to that, Mr. Kurtzman had been with Margolin, Winer & Evens
LLP, a certified public accounting firm, since 1972 and was a Partner and a
member of its executive committee and an Audit and Business Advisory Partner.
Mr. Kurtzman is a former officer and director of CPA Associates International.
Mr. Kurtzman received a bachelor's degree in accounting from Queens College of
the City University of New York.
Mr. Maples has served on our board of directors since December 1996. Mr. Maples
held several positions with Microsoft, a technology company, from April 1988
through July 1995, where his last position was Executive Vice President of
Worldwide Products. Prior thereto, Mr. Maples held various positions with IBM
over the course of 23 years, the last of which was Director of Software
Strategy. Mr. Maples serves on the boards of directors of Lexmark International
Inc., Mission Critical Software and J.D. Edward and Company. Mr. Maples holds a
master's degree from Oklahoma City University and a bachelor's degree in
electrical engineering from the University of Oklahoma.
Board Meetings and Committees
In 2001, our board of directors met 13 times and acted a number of times by
written consent. Each of the incumbent directors attended at least 75% of the
aggregate of (i) the total meetings of the board and (ii) the total number of
meetings held by all committees of the board on which they served.
Compensation Committee
The members of the compensation committee are Messrs. Saadi, Ateyeh and Dr.
King. The compensation committee of the board of directors provides
recommendations for the salaries and incentive compensation of our officers,
employees and consultants. The compensation committee also administers various
incentive compensation, stock and benefit plans. The compensation committee had
no meetings in 2001 but acted a number of times by written consent.
Audit Committee
The audit committee currently consists of three non-employee directors, Messrs.
Herring, Kurtzman and Maples. Mr. Herring has informed the board of directors
that he will not stand for re-election and, consequently, will step down from
the audit committee upon the election of directors at the Annual Meeting. Dr.
King has agreed to serve as a member of the audit committee upon Mr. Herring's
departure. The audit committee reviews, acts on and reports to the board of
directors with respect to various auditing and accounting matters, including the
selection of our independent accountants, the scope of the annual audits, fees
paid to the independent accountants, the performance of our independent
accountants and our accounting practices, and engages in such other functions
outlined in its written charter approved by our board of directors. During 2001,
the audit committee held four meetings.
The board has determined that Messrs. Herring, Maples and Dr. King are
independent as that term is defined in Rule 4200 of the listing standards of the
National Association of Securities Dealers (the NASD). The board has been unable
to affirmatively determine that Mr. Kurtzman is independent as that term is
defined in Rule 4200. Mr. Kurtzman is currently the Chief Financial Officer of
Pencom Systems Incorporated, a privately held corporation. Prior to October
1996, we conducted our business and operations as the software division of
Pencom. In October 1996, Pencom distributed all of the capital stock of Concero
to Pencom's stockholders at that time. As a result of this transaction, the
three largest stockholders of Pencom, Edward C. Ateyeh, Jr., Wade E. Saadi and
Edgar G. Saadi, received shares of our common stock and, as of March 29, 2002,
collectively owned approximately 49% of the outstanding shares of our common
stock. In addition, Messrs. Ateyeh and Wade Saadi serve as directors. Due to the
significant stock ownership of Messrs. Ateyeh, Saadi and Saadi in both Pencom
and Concero and the service
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of Messrs. Ateyeh and Wade Saadi as directors of Concero, the NASD may find that
Pencom and Concero are under the common control of Messrs. Ateyeh, Saadi and
Saadi and, as a result, may deem that Pencom and Concero are affiliates. If such
determination were made, Mr. Kurtzman's position as Chief Financial Officer of
Pencom would preclude him from being considered independent under the NASD
rules.
Although Mr. Kurtzman may not qualify as independent under the NASD listing
standards, the board has determined that the best interests of Concero and its
stockholders require Mr. Kurtzman's membership on the audit committee. Mr.
Kurtzman has significant experience with financial statements and financial
reporting matters. In addition to his experience as the Chief Financial Officer
of Pencom from July 1997 to the present, Mr. Kurtzman was a partner with
Margolin, Winer & Evans LLP, a certified public accounting firm, which he joined
in 1972 as well as a member of its Executive Committee. Mr. Kurtzman is also a
former officer and director of CPA Associates International. Mr. Kurtzman has an
in-depth knowledge of our financial reporting matters due to his involvement
with our audit committee since October 1996. Consequently, the board has
determined that Mr. Kurtzman shall serve on the audit committee pursuant to the
exception provided in Rule 4350(d)(2)(B) of the NASD listing standards.
We do not have a standing nominating committee or any other committee performing
similar functions. Such matters are considered at meetings of the full board of
directors.
Director Compensation and Indemnification Agreements
We pay each of our non-employee directors $3,750 per calendar quarter, which may
be in the form of cash or, at the discretion of each eligible director, may be
applied to the acquisition of an option to purchase common stock pursuant to the
Director Fee Option Grant Program in effect under our 1996 Stock Option/Stock
Issuance Plan (the "1996 Plan"). Under the Automatic Option Grant Program of the
option plan, eligible non-employee board members receive a series of option
grants over their period of board service. Each non-employee board member will,
at the time of his or her initial election or appointment to the board, receive
an option to purchase 20,000 shares of common stock, provided such individual
has not previously been in our employ. On the date of the first annual
stockholders meeting following the fourth anniversary of the date on which a
non-employee board member joined our board and following each four-year period
of board service thereafter, he or she will receive an option to purchase 20,000
shares of common stock, provided he or she will continue to serve as a
non-employee board member. In addition, on the date of each annual stockholders
meeting, each individual who is to continue to serve as a non-employee board
member will automatically be granted an option to purchase 4,000 shares of
common stock, provided he or she has served as a non-employee board member for
at least six months. Each automatic grant will have an exercise price per share
equal to the fair market value per share of common stock on the grant date and
will have a maximum term of 10 years, subject to earlier termination following
the optionee's cessation of board service. Each automatic option will be
immediately exercisable for all of the option shares; however, any unvested
shares purchased under such option will be subject to our repurchase, at the
exercise price paid per share, should the optionee cease board service prior to
vesting in those shares. The shares subject to each initial 20,000-share
automatic option grant and each subsequent 20,000-share automatic grant will
vest in a series of four successive equal annual installments upon the
optionee's completion of each year of board service over the four-year period
measured from the grant date. The shares subject to each annual 4,000-share
automatic grant will vest upon the optionee's completion of one-year of board
service measured from the grant date. However, the shares subject to each
outstanding automatic option grant will immediately vest in full upon certain
changes in control or ownership of Concero or upon the optionee's death or
disability while a board member. Following the optionee's cessation of board
service for any reason, each option will remain exercisable for a 12-month
period and may be exercised during that time for any or all shares in which the
optionee is vested at the time of such cessation of board service.
On May 23, 2001, Messrs. Saadi, Ateyeh, Herring, Kurtzman, Maples and Dr. King
each received an option to purchase 20,000 shares of our common stock and an
option to purchase 4,000 shares. All options had an exercise price of $1.46, the
fair market value per share of our common stock on such date. Following this
Annual Meeting, each of Messrs. Saadi, Ateyeh, Kurtzman, Maples and Dr. King
will receive an option to purchase 4,000 shares of our common stock at an
exercise price equal to the fair market value per share (closing selling price)
of our common stock on the date of the Annual Meeting.
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Our certificate of incorporation limits the liability of our directors to us and
our stockholders for breaches of the directors' fiduciary duties to the fullest
extent permitted by Delaware law. In addition, our certificate of incorporation
and bylaws provide for mandatory indemnification of directors and officers to
the fullest extent permitted by Delaware law. We also maintain directors' and
officers' liability insurance and enter into indemnification agreements with all
of our directors and executive officers.
Recommendation of the Board of Directors: The board of directors unanimously
recommends that the stockholders vote FOR the election of all of the nominees
listed above.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
Our board of directors appointed the firm of Ernst & Young LLP, as independent
auditors for the year ended December 31, 2001 and has appointed Ernst & Young
LLP to serve in the same capacity for the year ended December 31, 2002. The
board is asking the stockholders to ratify this appointment. The affirmative
vote of a majority of the outstanding shares represented and entitled to vote at
the Annual Meeting is required to ratify the selection of Ernst & Young LLP.
In the event that the stockholders fail to ratify the appointment, the board of
directors will reconsider its selection. Even if the selection is ratified, the
board of directors, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the board of
directors believes that such change would be in Concero's and the stockholders'
best interests.
Fees billed to Company by Ernst & Young LLP during the year ended December 31,
2001
Audit Fees: During the year ended December 31, 2001, Ernst & Young LLP billed us
$73,000 for the audit of our annual financial statements and for review of the
financial statements included in our quarterly reports on Form 10-Q and other
SEC filings.
Financial Information Systems Design and Implementation Fees: We did not engage
Ernst & Young LLP to provide us with advice regarding financial information
systems design and implementation during the year ended December 31, 2001.
All Other Fees: During the year ended December 31, 2001, Ernst & Young billed us
$58,975 for other non-audit, primarily tax related, services rendered to us.
The audit committee, as stated in its audit committee report included elsewhere
in this proxy statement, has considered whether the provision of the services
described in the preceding paragraphs is compatible with maintaining the
independence of Ernst & Young LLP.
A representative of Ernst & Young will be present at the Annual Meeting, will
have the opportunity to make a statement if he or she desires to do so, and will
be available to respond to appropriate questions.
Recommendation of the Board of Directors: The board of directors unanimously
recommends that the stockholders vote FOR the ratification and approval of the
selection of Ernst & Young LLP as our independent auditors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 29, 2002 by:
o each person who is known by us to be a beneficial owner of five percent
(5%) or more of our common stock;
o each current director, each of whom is a nominee for election as a
director, with the exception of Thomas A. Herring;
o each executive officer named in the summary compensation table of the
Executive Compensation and Other Information section of this proxy
statement; and
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o all current directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power with
respect to the securities. Except as indicated in the notes following the table,
and subject to applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. The number of shares of common stock
used to calculate the percentage ownership of each listed person includes shares
of common stock underlying options or warrants held by such persons that are
exercisable within sixty (60) days of March 29, 2002. The percentage of
beneficial ownership is based on 10,225,090 shares of common stock outstanding
as of March 29, 2002.
Our common stock is the only class of voting securities outstanding. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws, where applicable.
Percentage
Shares of Shares
Beneficially Beneficially
Beneficial Owner Owned Owned
---------------- ------------ ------------
Wade E. Saadi ............................................................ 1,689,393 16.52%
Edward C. Ateyeh, Jr. .................................................... 1,689,392 16.52%
Edgar G. Saadi ........................................................... 1,630,093 15.94%
Timothy D. Webb .......................................................... 623,178 6.09%
W. Frank King, Ph. D. .................................................... 605,046 5.92%
Dimensional Fund Advisors, Inc. .......................................... 512,600 5.01%
John M. Velasquez ........................................................ 182,898 1.79%
Michael J. Maples ........................................................ 102,109 *
Kevin B. Kurtzman ........................................................ 80,841 *
Keith D. Thatcher ........................................................ 78,517 *
Thomas A. Herring ........................................................ 76,252 *
Wayne E. Mock ............................................................ 30,895 *
Cathy S. Hetzel .......................................................... 3,125 *
All current directors and executive officers as a group (11 persons) ..... 5,161,646 50.48%
------------
* Less than one percent of the outstanding common stock.
Unless otherwise indicated, the address for all officers and directors is c/o
Concero Inc., 6300 Bridgepoint Parkway, Building 1, Suite 500, Austin, Texas
78730.
Wade E. Saadi. These shares include exercisable warrants to purchase 14,705
shares of common stock and exercisable options to purchase 59,303 shares of
common stock, of which 15,000 shares are unvested. Mr. Saadi's address is c/o
Pencom Systems Incorporated, 40 Fulton Street, New York, New York 10038.
Edward C. Ateyeh, Jr. These shares include exercisable warrants to purchase
14,704 shares of common stock and exercisable options to purchase 59,303 shares
of common stock, of which 15,000 shares are unvested. Mr. Ateyeh's address is
c/o Pencom Systems Incorporated, 40 Fulton Street, New York, New York 10038.
Edgar G. Saadi. These shares include exercisable warrants to purchase 14,708
shares of common stock. Mr. Saadi's address is c/o Pencom Systems Incorporated,
40 Fulton Street, New York, New York 10038.
Timothy D. Webb. These shares include exercisable options to purchase 539,178
shares of common stock, of which 200,000 shares are unvested.
W. Frank King, Ph.D. These shares include exercisable options to purchase
112,000 shares of common stock, of which 15,000 shares are unvested.
John M. Velasquez. These shares include exercisable options to purchase 133,428
shares of common stock.
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Michael J. Maples. These shares include exercisable options to purchase 60,099
shares of common stock, of which 15,000 shares are unvested.
Kevin B. Kurtzman. These shares include exercisable options to purchase 80,841
shares of common stock, of which 15,000 shares are unvested.
Keith D. Thatcher. These shares include exercisable options to purchase 70,047
shares of common stock.
Thomas A. Herring. These shares include exercisable options to purchase 76,252
shares of common stock, of which 15,000 shares are unvested.
Wayne E. Mock. These shares include exercisable options to purchase 28,452
shares of common stock.
Cathy S. Hetzel. These shares include exercisable options to purchase 3,125
shares of common stock.
MANAGEMENT
Executive Officers
Set forth below is certain information concerning our executive officers as of
March 29, 2002:
Name Age Position Held
---- --- -------------
Timothy D. Webb ............ 41 President and Chief Executive Officer
Keith D. Thatcher .......... 43 Chief Financial Officer, Treasurer, Secretary and
Senior Vice President
John M. Velasquez .......... 38 Senior Vice President
Cathy S. Hetzel ............ 50 Senior Vice President
Wayne E. Mock .............. 36 Vice President and Chief Technology Officer
Biographical information concerning Mr. Webb is set forth under PROPOSAL
1--Election of Directors.
Mr. Thatcher was promoted to Senior Vice President of Finance in February 2000.
Mr. Thatcher continues to serve as our Chief Financial Officer and Treasurer,
positions he has held since May 1998 and October 1996, respectively. Mr.
Thatcher assumed responsibilities for the Secretary position on May 23, 2001.
From October 1994 to June 1996, Mr. Thatcher was Chief Financial Officer,
Secretary and Treasurer of Tanisys Technology, Inc., a technology start-up
company. Prior to that, Mr. Thatcher served as Vice President and Treasurer for
Kinetic Concepts, Inc., a medical services and products company, from 1987 to
1994. From 1985 to 1987, Mr. Thatcher was employed by Peat Marwick Main & Co. as
an audit manager. Mr. Thatcher earned a bachelor's degree in accountancy from
Northern Arizona University.
Mr. Velasquez was named Senior Vice President in February 2000, having
previously served as our Vice President of Enterprise Solutions since January
1999. Prior to joining us, Mr. Velasquez served as Vice President, Data
Warehousing for Syntel, Inc., a technology services company, from April 1998
until January 1999. From 1994 to 1998, Mr. Velasquez was President of a
consulting firm specializing in systems design and management and prior to that
was employed by Accenture. Mr. Velasquez holds a bachelor's degree in industrial
engineering from Stanford University.
Ms. Hetzel was named Senior Vice President in January 2001 after serving as our
Vice President, e-TV and Broadband since February 2000. Prior to joining us, Ms.
Hetzel served as Senior Vice President, Residential Business of Digital Cable
Radio Associates, a digital music service distributed by satellite and cable
companies, in 1998 and 1999. Ms. Hetzel had previously served as Senior Vice
President, Affiliate Sales & Marketing and Sales and Affiliate Relations for
Digital Cable Radio Associates between 1994 and 1998. Ms. Hetzel attended San
Diego State University.
Mr. Mock was promoted to Vice President and Chief Technology Officer in January
2001 after providing professional software engineering services to us since
December 1991. Mr. Mock has led large development teams in the creation of
applications and sub-systems for interactive television applications that
provide services such as interactive program guides, enhanced television, and
television commerce on digital set-top boxes. He has
8
experience with a number of interactive television technologies, including
ATVEF, Liberate, MicrosoftTV, Motorola, Scientific Atlanta, Harmonic/DiviCom,
Zenith and Pace. Mr. Mock holds a bachelor's degree in computer science from the
University of Texas.
EXECUTIVE COMPENSATION
Summary Compensation Information
The following table provides certain summary information concerning the
compensation earned by our Chief Executive Officer and each of the other four
most highly compensated executive officers whose salary and bonus for 2001 was
in excess of $100,000, for services rendered in all capacities to Concero for
the years ended December 31, 1999, 2000 and 2001. The listed individuals shall
be referred to as the Named Executive Officers.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
--------------------- ------------
Salary Number of All Other
Name and Principal Position Year (1) Bonus Stock Options Compensation (2)
--------------------------- ---- --- ----- ------------- ----------------
Timothy D. Webb ............. 2001 $325,186 -- 128,355 $2,500
President and Chief 2000 $342,528 -- 100,000 $2,500
Executive Officer 1999 $329,344 -- -- $1,612
John M. Velasquez ........... 2001 $222,000 -- 89,355 $2,500
Senior Vice President 2000 $237,500 -- 25,000 $2,500
1999 $210,938 $102,140(3) 150,000 $ 746
Keith D. Thatcher ........... 2001 $161,875 -- 59,115 $2,500
Chief Financial Officer 2000 $170,833 -- 25,000 $2,500
1999 $145,833 $ 50,000 11,139 $1,458
Cathy S. Hetzel ............. 2001 $190,917 -- 116,936 $2,500
Senior Vice President 2000 $154,978 $ 44,117(4) 62,500 $2,500
1999 -- -- -- --
Wayne E. Mock ............... 2001 $157,250 $ 51,000 38,710 $2,500
Chief Technology Officer 2000 $130,000 -- 22,000 $2,500
1999 $110,000 $ 29,558 10,000 $2,500
(1) All Named Executive Officers agreed to participate in a ten percent (10%)
pay reduction effective April 1, 2001 to March 31, 2002, as part of our cost
reduction measures. Additionally, the salary figures shown include salary
deferral contributions to our 401(k) Plan.
(2) The indicated amount for each Named Executive Officer is comprised of the
contributions we made on behalf of such individual to our 401(k) Plan.
(3) Includes a sign-on bonus of $30,000.
(4) Includes a relocation benefit of $4,117.
9
Stock Option and Stock Appreciation Rights
The following table sets forth certain information regarding option grants made
pursuant to our 1996 Plan during 2001 to each of the Named Executive Officers.
No stock appreciation rights were granted to the Named Executive Officers during
2001.
Option Grants in 2001
Individual Grants
----------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percentage Annual Rates of Stock
Securities of Options Price Appreciation for
Underlying Granted to Exercise Option Term (5)
Options Employees Price Per Expiration ------------------------
Name Granted in 2001(3) Share (4) Date 5% 10%
---- ------- ---------- --------- ---- -- ---
Timothy D. Webb ........... 28,355(1) 1.69 $1.01 4/23/11 18,011 45,642
Timothy D. Webb ........... 100,000(1) 5.95 0.47 7/31/11 29,558 74,906
------- ---- ------ ------
128,355 7.64 47,569 120,548
John M. Velasquez ......... 20,000(1) 1.19 2.25 2/01/11 28,300 71,718
John M. Velasquez ......... 19,355(1) 1.15 1.01 4/23/11 12,294 31,155
John M. Velasquez ......... 50,000(1) 2.97 0.60 8/15/11 18,867 47,812
------- ---- ------ -------
89,355 5.31 59,461 150,686
Keith D. Thatcher ......... 20,000(1) 1.19 2.25 2/01/11 28,300 71,718
Keith D. Thatcher ......... 14,115(1) 0.84 1.01 4/23/11 8,966 22,721
Keith D. Thatcher ......... 25,000(1) 1.49 0.60 8/15/11 9,433 23,906
------- ---- ------ -------
59,115 3.52 46,699 118,345
Cathy S. Hetzel ........... 66,936(1) 3.98 0.62 9/07/11 26,099 66,141
Cathy S. Hetzel ........... 50,000(2) 2.97 0.62 9/07/11 19,496 49,406
------- ---- ------ -------
116,936 6.95 45,595 115,547
Wayne E. Mock ............. 13,710(1) 0.82 1.01 4/23/11 8,708 22,069
Wayne E. Mock ............. 25,000(1) 1.49 0.60 8/15/11 9,433 23,906
------- ---- ------ -------
38,710 2.31 18,142 45,975
(1) The option will become exercisable in four successive equal annual
installments upon the optionee's completion of each year of service measured
from the grant date. The option will become exercisable on an accelerated
basis upon a liquidation or dissolution of Concero or a merger or
consolidation in which there is a change in ownership of securities
possessing more than 50% of the total combined voting power of our
outstanding securities, unless the option is assumed by the surviving
entity, and will become fully exercisable following such events upon
termination of employment under certain circumstances. In addition, the
compensation committee of the board of directors may accelerate the vesting
of the option in the event (i) there is a change in the composition of the
board of directors over a period of two years or less such that those
individuals serving as directors at the beginning of the period cease to
represent a majority of the board or (ii) change of ownership of securities
possessing more than 50% of the total combined voting power of our
outstanding securities pursuant to a hostile tender offer.
(2) This option was granted pursuant to the option exchange program. This option
has a vesting schedule pursuant to which 25% will vest and become
exercisable in a series of three annual installments upon the optionee's
completion of each year of service over the three-year period measured from
the grant date of the tendered option. The remaining 25% will vest and
become exercisable upon the optionee's completion of the six months of
service following that three-year period. In addition, the option will
become exercisable on an accelerated
10
basis upon a liquidation or dissolution of Concero or a merger or
consolidation in which there is a change in ownership of securities
possessing more than 50% of the total combined voting power of Concero's
outstanding securities, unless the option is assumed by the surviving
entity, and will become exercisable following such events upon termination
of employment under certain circumstances. In addition, the compensation
committee may accelerate the vesting of the option in the event (i) there is
a change in the composition of the board of directors over a period of two
years or less such that those individuals serving as directors at the
beginning of the period cease to represent a majority of the board or (ii)
change of ownership of securities possessing more than 50% of the total
combined voting power of Concero's outstanding securities to a hostile
tender offer.
(3) Based on options to purchase an aggregate of 1,681,656 shares
of common stock that were granted to employees in 2001, including options
granted to the Named Executive Officers.
(4) The exercise price may be paid in cash or in shares of common stock valued
at fair market value on the exercise date. Alternately, the option may be
exercised through a cashless exercise procedure pursuant to which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to us, out of the sales proceeds, an amount
equal to the exercise price plus all applicable withholding taxes. The
compensation committee may also assist an optionee in the exercise of an
option by authorizing a loan from us in a principal amount not to exceed the
aggregate exercise price plus any tax liability incurred in connection with
the exercise.
(5) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the 10-year option term. The assumed 5% and
10% rates of stock appreciation are mandated by rules of the Securities and
Exchange Commission and do not represent our estimate of the future market
price of our common stock. These amounts were calculated based on the fair
market value on the date of grant and do not take into account any other
appreciation, or decline in the price of the common stock from the date of
grant to the current date.
None of the Named Executive Officers exercised options in 2001. The following
table sets forth for each of the Named Executive Officers certain information
concerning the value of unexercised options at the end of 2001. No Named
Executive Officer held any stock appreciation rights at the end of 2001.
Fiscal 2001 Option Values
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options at
Options at December 31, 2001 December 31, 2001 (1)
----------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Timothy D. Webb ........... 325,000 403,355 -- --
John M. Velasquez ......... 118,750 145,605 -- --
Keith D. Thatcher ......... 55,204 99,435 -- --
Cathy S. Hetzel ........... 3,125 126,311 -- --
Wayne E. Mock ............. 20,347 66,210 -- --
(1) Value is determined by subtracting the aggregate exercise price from the
market value of our common stock at December 31, 2001 ($0.38 per share based
upon the closing price of our common stock on the Nasdaq National Market on
such date) and multiplying by the number of shares underlying the options.
Employment Contracts and Change of Control Arrangements
We have entered into an employment agreement with Timothy D. Webb dated August
28, 1998. Pursuant to the agreement, we agreed to pay Mr. Webb an annual base
salary of $325,000 with an annual increase of four percent. In addition, we
issued to Mr. Webb options to purchase an aggregate of 500,000 shares of common
stock at $3.50 per share. The options vest over six (6) years with 100,000
vesting upon Mr. Webb's completion of six months of employment, an additional
100,000 vesting upon the completion of two years of employment, an additional
100,000 vesting upon the completion of three years of employment, an additional
25,000 vesting upon the completion of four years of employment, an additional
75,000 vesting upon the completion of five years of employment, and the final
100,000 vesting upon the completion of six years of service. The options were to
be incentive stock options to the maximum extent permitted by law. Accordingly,
options to purchase 199,997 shares were classified as incentive stock options.
On July 31, 2001, the agreement was modified and we agreed to grant
11
Mr. Webb an option to purchase an additional 100,000 shares of common stock at
$0.47 per share, which was the fair market value of the common stock on such
date, plus the payment of a cash bonus for $50,000 on March 31, 2002. We may
terminate the employment relationship in our sole discretion without cause,
effective immediately, upon payment of three months salary and health and
welfare benefits, and the immediate vesting of the next scheduled vesting of the
unvested options issued in connection with the agreement or immediately for
cause upon written notice. The agreement terminates August 28, 2004.
We have entered into an employment agreement with John M. Velasquez dated
January 25, 1999. Pursuant to the agreement, we agreed to pay Mr. Velasquez an
annual base salary of $225,000, a transition bonus of $30,000 and a guaranteed
bonus of $72,140 for the calendar year 1999. In addition, we agreed to grant
Mr. Velasquez an option to purchase 150,000 shares of common stock. The option
was granted on January 25, 1999 and has an exercise price of $3.06 per share,
which was the fair market value on the date of grant. The option vests in a
series of four equal annual installments, with the first installment having
vested July 25, 1999 and the successive three installments vesting annually on
that date thereafter. Pursuant to the terms of the agreement, either party may
terminate the employment relationship without cause. We may terminate the
employment relationship in our sole discretion without cause, effective
immediately, upon payment of three months salary and the immediate vesting of
one-third of any unvested options issued in connection with the agreement or
immediately for cause upon written notice.
We have also entered into employment agreements with each of Messrs. Thatcher,
Mock and Ms. Hetzel dated, June 13, 1996, December 13, 1991 and February 15,
2000, respectively. In connection with Ms. Hetzel's employment agreement we
agreed to pay a guaranteed bonus of $40,000 for the calendar year 2000 and
grant stock options to purchase 50,000 shares of common stock at $36.00 per
share, which was the fair market value of the common stock on such date. Either
party may terminate the employment relationship without cause upon two weeks'
prior written notice to the other party. We may terminate the employment
relationship in our sole discretion without cause, effective immediately, upon
payment of two weeks' salary to the employee or immediately for cause upon
written notice.
The agreements provide for customary fringe benefits and contain provisions
which, among others, prohibit the employee from disclosing or otherwise using
certain confidential information, assign inventions or ideas conceived by the
employee during his employment to us, prohibit solicitation by the employee of
our clients and other employees and prohibit the employee from accepting any
opportunity (whether by contract or full-time employment) with our clients.
Salaries paid pursuant to these agreements are reviewed and adjusted annually by
the compensation committee. Accordingly, the annual base salaries authorized for
Messrs. Thatcher, Mock and Ms. Hetzel are currently $175,000, $170,000 and
$210,000, respectively.
We have entered into written agreements with our officers whereby in the event
of the officer's involuntary termination within 18 months following an
acquisition of Concero or change in control of Concero either through a change
of control of our Board of Directors or a tender offer made directly to our
shareholders, any unvested options assumed or replaced in connection with the
acquisition or otherwise outstanding will automatically accelerate so that the
option shall become immediately exercisable.
The compensation committee, as plan administrator of the 1996 Plan, has the
authority to provide for the accelerated vesting of outstanding options held by
the Chief Executive Officer and any other executive officer or the shares of
common stock subject to direct issuances held by such individual, in connection
with certain changes in control of Concero or the subsequent termination of the
officer's employment following the change in control event.
Key-Person Life Insurance
We do not maintain key-person life insurance policies on the lives of any of our
executive officers.
2001 Option Exchange Program
In February 2001, the compensation committee authorized the implementation of
an option exchange program that would give certain employees, including
non-director executives, the opportunity to exchange their outstanding options
to purchase shares of our common stock for new stock options to be granted to
them at a later date. The compensation
12
committee implemented the program because competition for key employees in our
industry is intense, and the use of significant stock options for retention and
motivation of such personnel is pervasive in our industry. The compensation
committee believes that stock options are a critical component of the
compensation package we offer to our employees in order to promote long-term
retention, motivate high levels of performance and reward their contributions to
our success.
By implementing an option exchange program in which the outstanding options
under our 1996 Plan and 2000 Non-Officer Stock Option/Stock Issuance Plan (the
"2000 Plan") could be exchanged for new options that will be granted at a later
date with an exercise price equal to the fair market value of our common stock
on that grant date, the compensation committee intended to provide our employees
with the opportunity to acquire new options that over time may have a greater
potential to increase in value, and thereby create better incentives for our
employees to remain with us and contribute to the attainment of our business and
financial objectives and the creation of value for all of our stockholders.
As a result of the option exchange program authorized by the compensation
committee, certain employees on February 1, 2001, including non-director
executive officers, were given the opportunity to exchange their outstanding
stock options under our 1996 Plan and 2000 Plan, if those options had exercise
prices of $2.25 per share or more, for new replacement options to be granted
under our 1996 Plan and 2000 Plan on the second day following the six month
anniversary of the date the tendered options were cancelled. Options for
approximately 1,986,355 shares of common stock were eligible for participation
in the option exchange program. Of this total, options for 666,024 shares were
held by our non-director executive officers.
At the conclusion of the option exchange program, we granted replacement options
to purchase 173,525 shares of common stock in exchange for those cancelled
options, which represented 8.74% of the total number of shares covered by the
options subject to the option exchange program. No replacement options were
granted to any employee whose options were cancelled pursuant to the option
exchange program, if that individual ceased to be in our employ through the
grant date of the replacement option.
Each replacement option covers the same number of shares subject to the
cancelled option to which it relates. Each replacement option has a vesting
schedule pursuant to which 25% will vest and become exercisable in a series of
three annual installments upon the optionee's completion of each year of service
over the three-year period measured from the grant date of the tendered option.
The remaining 25% will vest and become exercisable upon the optionee's
completion of the next six months of service following that three-year period.
The exercise price of each replacement option is equal to the closing price per
share of our common stock on the grant date, as that price is reported on the
Nasdaq National Market. Each replacement option is a non-statutory option with a
maximum term of ten years from the grant date, subject to earlier termination
upon the optionee's cessation of employment with us.
The table below provides certain information regarding any re-pricing, or
cancellation/re-grant programs for options effected since we became a public
company. Except for the February 2001 option exchange program and a re-pricing
completed in September 1998, we have not implemented any other option re-pricing
or option cancellation/re-grant programs since becoming a public company.
13
10-YEAR OPTION RE-PRICINGS
Number of Length of
Securities Market Price Exercise Exercise Original Option
Underlying of Stock at Price at Price of Term Remaining
Options/SARs Time of Time of Re-priced or at Date of
Name and Date of Re-pricing/ Re-priced/ Re-pricing/ Re-pricing/ Replacement Re-pricing/
Principal Position Cancellation Cancelled Cancellation Cancellation Option Cancellation
------------------ ------------ --------- ------------ ------------ ------ ------------
Francisco X. Burgos February 15, 2001 35,000 $2.2500 $ 2.2500 (2) 10 years
Senior Vice President February 15, 2001 40,000 $2.2500 $ 36.0000 (2) 9.08 years
Robert Carter September 29, 1998 8,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Vice President September 29, 1998 3,077 $1.9375 $ 3.9000 $1.9375 7.83 years
William C. Cason September 29, 1998 25,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Senior Vice President September 29, 1998 30,000 $1.9375 $11.6250 $1.9375 8.67 years
Kenneth Drake September 29, 1998 2,500 $1.9375 $ 6.0625 $1.9375 9.67 years
Vice President September 29, 1998 15,000 $1.9375 $ 6.1250 $1.9375 9.67 years
Cathy S. Hetzel March 7, 2001 50,000 $2.1900 $36.0000 $0.6200(1) 9 years
Senior Vice President
Michael V. Jaggers September 29, 1998 2,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Vice President September 29, 1998 2,462 $1.9375 $ 7.9600 $1.9375 8.25 years
September 29, 1998 3,692 $1.9375 $ 9.0000 $1.9375 8.46 years
September 29, 1998 15,400 $1.9375 $ 6.1250 $1.9375 9.67 years
James T. Kelsey September 29, 1998 122,212 $1.9375 $ 6.1250 $1.9375 9.67 years
Senior Vice President
Julie M. Kirk September 29, 1998 4,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Vice President September 29, 1998 16,600 $1.9375 $ 6.1250 $1.9375 9.67 years
Wayne E. Mock September 29, 1998 2,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Chief Technology Officer September 29, 1998 3,000 $1.9375 $ 6.1250 $1.9375 9.67 years
Nancy A. Richardson September 29, 1998 15,200 $1.9375 $ 6.1250 $1.9375 9.67 years
Senior Vice President September 29, 1998 4,800 $1.9375 $ 9.0000 $1.9375 8.75 years
Charles R. Schneider September 29, 1998 1,500 $1.9375 $ 9.0000 $1.9375 9.67 years
Vice President September 29, 1998 11,500 $1.9375 $ 6.1250 $1.9375 8.75 years
April 23, 2001 5,000 $1.0100 $16.6250 $0.3700(1) 9.08 years
April 23, 2001 20,000 $1.0100 $ 9.6250 $0.3700(1)
Keith D. Thatcher September 29, 1998 4,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Chief Financial Officer September 29, 1998 8,000 $1.9375 $ 3.9000 $1.9375 7.83 years
September 29, 1998 40,000 $1.9375 $ 6.1250 $1.9375 9.67 years
Dennis Thompson September 29, 1998 20,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Vice President
Brent Terry September 29, 1998 4,000 $1.9375 $ 9.0000 $1.9375 8.75 years
Vice President September 29, 1998 17,700 $1.9375 $ 6.1250 $1.9375 9.67 years
(1) The replacement option was granted six months and two days from the date the
original option was cancelled. The exercise price of each replacement option
is equal to the closing price per share of our common stock on the grant
date, as that price is reported on the Nasdaq National Market.
(2) Options were canceled on February 15, 2001. However, his employment
terminated prior to his re-grant date.
14
Of the executives listed in the above table only Cathy S. Hetzel, Wayne E. Mock
and Keith D. Thatcher are still employed by the Company. Other than options held
by these three employees, the options listed in the above table are no longer
outstanding.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors consists of three
non-employee directors: Messrs. Saadi, Ateyeh and Dr. King. None of these
individuals was an officer or employee of Concero at any time during the 2001
fiscal year or at any other time except for Dr. King. During 2001, no current
executive officer of Concero served as a member of the board of directors or
compensation committee of any other entity that has or has had one or more
executive officers serving as a member of our board of directors or
compensation committee.
Report on Executive Compensation
It is the duty of the compensation committee to review and provide
recommendations for the salaries and incentive compensation, including
long-term incentives like stock option grants, of our executives, including the
President and Chief Executive Officer, employees and consultants. The board
then approves the compensation committee recommendations.
The compensation committee believes that the compensation programs for our
executive officers should reflect our performance and the value created for our
stockholders. In addition, the compensation programs should support our
short-term and long-term strategic goals and values and should reward individual
contribution to our success. The market for system integration and software
development services is very competitive, and our success depends upon its
ability to attract and retain qualified executives through the competitive
compensation packages we offer to such individuals.
General Compensation Policy. The compensation committee's policy is to provide
our executive officers with compensation opportunities which are based upon
their personal performance, our financial performance and their contribution to
that performance and which are competitive enough to attract and retain highly
skilled individuals. Each executive officer's compensation package is comprised
of three elements: (1) base salary that is competitive with the market and
reflects individual performance, (2) annual variable performance awards payable
in cash or stock options and tied to our achievement of annual financial
performance goals and (3) long-term stock based incentive awards designed to
strengthen the mutuality of interests between the executive officers and our
stockholders. As an officer's level of responsibility increases, a greater
proportion of his or her total compensation will be dependent upon our financial
performance and stock price appreciation rather than base salary.
Base Salary. The base salary for each executive officer reflects the salary
levels for comparable positions in similar companies, such as systems
integrators and software companies, as well as the individual's personal
performance and internal alignment considerations. The relative weight given to
each factor varies with each individual in the sole discretion of the
compensation committee. Each executive officer's base salary is subject to
minimums set forth in their respective employment agreements and is adjusted
each year on the basis of (1) the compensation committee's evaluation of the
officer's personal performance for the year and (2) the competitive marketplace
for persons in comparable positions. Our performance and profitability may also
be a factor in determining the base salaries of executive officers.
Annual Incentives. We generally maintain a cash incentive to reward executive
officers and employees for attaining defined performance targets. For most
executive officers and employees, bonuses are based primarily on company-wide
performance targets. Upon achievement of a performance target, an employee is
entitled to a cash payment.
In setting performance targets for 2001, we considered our historical
performance and underlying business model, and external as well as internal
expectations related to 2001 revenue and operating profits. The financial
factors were derived directly from our operating plan for 2001.
Long Term Incentives. Generally, the compensation committee reviews stock option
grants for our executive officers annually. Each grant is designed to maintain a
significant unvested position to provide incentives to create
15
stockholder value and allows the officer to acquire shares of our common stock
at a fixed price per share (the fair value on the grant date) over a specified
period of time (up to ten years). Certain option grants are immediately
exercisable, but option shares that are purchased subject to vesting
restrictions are re-purchasable by us at the exercise price, if the officer's
employment is terminated prior to the vesting date.
The size of the option grant to each executive officer, including the Chief
Executive Officer, is set by the compensation committee at a level that is
intended to create a meaningful opportunity for stock ownership based upon the
individual's current position with us, the individual's personal performance in
recent periods and his or her potential for future responsibility and promotion
over the option term. The relevant weight given to each of these factors varies
from individual to individual. The compensation committee has established
certain guidelines with respect to the option grants made to the executive
officers, but has the flexibility to make adjustments to those guidelines at its
discretion.
CEO Compensation. The total compensation payable to Mr. Webb, our President and
Chief Executive Officer, for 2001 and continuing until August 27, 2004, is
governed by the terms of his employment agreement dated August 28, 1998. The
agreement currently provides for an annual base salary of $365,580. Mr. Webb
agreed to participate in a ten percent (10%) pay reduction effective April 1,
2001 to March 31, 2002, as part of our cost reduction measures. On July 31,
2001, the agreement was modified and we agreed to grant Mr. Webb an option to
purchase an additional 100,000 shares of common stock at $0.47 per share, which
was the fair market value of the common stock on such date, plus the payment of
a cash bonus for $50,000 on March 31, 2002.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code provides that a publicly traded corporation cannot deduct
compensation paid to certain of its executives, to the extent that the
executive's compensation exceeds $1 million per year. The compensation paid to
our executives who were subject to Section 162(m) in 2001 did not exceed the $1
million limitation. The income that our executives recognize because of the
operation of our 1996 Plan is taken into account for purposes of the Section
162(m) limitation, unless their stock option grants qualify as
"performance-based compensation." The grants of stock options that were made in
2001 will not qualify as performance-based compensation. Although the
compensation committee intends on structuring compensation packages so that any
compensation in excess of the $1 million limitation will qualify as
performance-based compensation, it retains the flexibility to design
compensation arrangements that do not so qualify.
It is the opinion of the compensation committee and the board that the executive
compensation policies and plans provide the necessary total remuneration program
to properly align our performance and the interests of our stockholders through
the use of competitive and equitable executive compensation in a balanced and
reasonable manner, for both the short and long term.
Submitted by the Board of Directors
Wade E. Saadi
Edward C. Ateyeh, Jr.
Thomas A. Herring
W. Frank King, Ph.D.
Kevin B. Kurtzman
Michael J. Maples
Timothy D. Webb
Audit Committee Report
The following is the report of the audit committee with respect to our audited
financial statements for the year ended December 31, 2001, included in our
Annual Report on Form 10-K for that year. The audit committee has reviewed and
discussed these audited financial statements with management of Concero. The
audit committee has discussed with Concero's independent auditors, Ernst & Young
LLP, the matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standards, AU Section 380) as amended, which includes, among other
16
items, matters related to the conduct of the audit of the financial statements.
The audit committee has received the written disclosures and the letter from
Ernst & Young LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) as amended, and has discussed
with Ernst & Young LLP the independence of Ernst & Young LLP from Concero. The
audit committee has also considered whether the provision of services by Ernst &
Young LLP to Concero as described under the caption Proposal to Ratify
Independent Accountants is compatible with maintaining the independence of Ernst
& Young LLP.
Based on the review and discussions referred to above in this report, the audit
committee recommended to the board of directors that the audited financial
statements be included in Concero's Annual Report on Form 10-K for the year
ended December 31, 2001 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee of the
Board of Directors
Thomas A. Herring
Kevin B. Kurtzman
Michael J. Maples
17
Stock Performance Graph
The graph below depicts our stock price as an index assuming $100 invested on
June 5, 1997 (the date of our initial public offering), along with the composite
prices of companies listed in the S & P Software & Services Companies Index and
Nasdaq Stock Market (U.S. Companies) Index. The Standard & Poor's Computers
Index and the Nasdaq Stock Market have provided this information to us. The
comparisons in the graph are required by regulations of the Securities Exchange
Commission and are not intended to forecast or to be indicative of the possible
future performance of our common stock.
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN*
AMONG CONCERO INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P COMPUTERS (SOFTWARE & SERVICES) INDEX
[THE FOLLOWING INFORMATION WAS REPRESENTED AS A LINE CHART IN THE PRINTED
MATERIAL]
CONCERO INC. ........................... 100 116.11 33.33 221.53 33.33 4.22
NASDAQ STOCK MARKET (U.S.) ............. 100 112.82 159.10 295.66 177.89 141.08
S & P COMPUTERS (SOFTWARE & SERVICES) .. 100 104.21 188.82 349.19 164.99 166.05
o $100 invested on 6/5/97 in stock or on 5/31/97 in index-including
reinvestment of dividends. Fiscal year ending December 31.
Research Data Group, Inc. Total Return--Data Summary
CERO Cumulative Total Return
---------------------------------------- --------------------------------------------------------------
6/5/97 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
------ -------- -------- -------- -------- --------
CONCERO INC. ........................... 100 116.11 33.33 221.53 33.33 4.22
NASDAQ STOCK MARKET (U.S.) ............. 100 112.82 159.10 295.66 177.89 141.08
S & P COMPUTERS (SOFTWARE & SERVICES) .. 100 104.21 188.82 349.19 164.99 166.05
18
CERTAIN TRANSACTIONS WITH MANAGEMENT
Registration Rights Agreement
We have entered into an agreement with each of our existing stockholders and
warrant holders pursuant to which such stockholders and warrant holders were
granted certain registration rights.
Loan Arrangement
We lent approximately $62,000 to John Velasquez, one of our executive officers,
pursuant to a promissory note dated January 1, 2002. The note bears interest at
a rate of 6.75% per annum. Principal and interest is payable in twenty-three
(23) semi-monthly payments of $671.75 with a final balloon payment of $50,000
due and payable on December 31, 2002.
ITEMS NOT INCORPORATED BY REFERENCE
Notwithstanding anything to the contrary set forth in any of our previous or
future filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate this proxy statement
or future filings made by us under those statutes, the preceding Report on
Executive Compensation, Audit Committee Report and the Stock Performance Graph
are not deemed filed with the Securities and Exchange Commission and shall not
be incorporated by reference into any of those prior filings or into any future
filings made by us under those acts.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership and changes in ownership of our common
stock and securities with the Securities and Exchange Commission and the Nasdaq
Stock Market. Officers, directors and greater than 10% beneficial owners are
required by Securities and Exchange Commission regulations to furnish us with
copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to us or
written representations from certain reporting persons that no Forms 5 were
required, we believe that, during 2001, our executive officers, directors, and
greater than 10% beneficial owners complied with all applicable Section 16(a)
reporting requirements.
ANNUAL REPORT ON FORM 10-K
We filed an Annual Report on Form 10-K with the Securities and Exchange
Commission on March 29, 2002. A copy of our Annual Report for 2001 has been
mailed concurrently with this proxy statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. The Annual Report is not
incorporated into this proxy statement and is not considered proxy solicitation
material. Stockholders may obtain a copy of this report, without charge, by
writing to the attention of Chief Financial Officer, at our executive offices
located at 6300 Bridgepoint Parkway, Building 1, Suite 500, Austin, Texas 78730.
OTHER MATTERS
The board of directors is not aware of any matter to be presented for action at
the Annual Meeting other than the matters set forth in this proxy statement.
Should any other matter requiring a vote of the stockholders arise, the persons
named as proxies on the enclosed proxy card will vote the shares represented
thereby in accordance with their best judgment in the interest of Concero.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed proxy card.
By Order of the Board of Directors,
/s/ Keith D. Thatcher
KEITH D. THATCHER
Secretary
19
April 19, 2002
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CONCERO INC.
The undersigned hereby appoints Timothy D. Webb and Wade E. Saadi as proxies,
and each of them, with full power of substitution, and hereby authorizes them to
represent the undersigned and to vote all of the shares of Common Stock of
Concero Inc. (the Company) held of record by the undersigned on March 29, 2002
at the Annual Meeting of Stockholders of the Company to be held on Tuesday, May
21, 2002, and any adjournment(s) thereof as follows and in accordance with their
judgment upon any other matter properly presented:
(Continued, and to be marked, dated and signed, on the other side)
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This proxy when properly executed will be voted as directed by the undersigned
stockholder. If directions are not indicated, the proxy will be voted to elect
the nominees described in item 1 and for item 2.
Please mark
your vote as [X]
indicated in
this example
The Board of Directors recommends a vote FOR Items 1 and 2.
FOR WITHHELD
FOR ALL
1. Election of Six Directors [ ] [ ]
Nominees
Dr. W. Frank King, Wade E. Saadi, Edward C.
Ateyeh, Jr., Kevin B. Kurtzman, Michael J.
Maples and Timothy D. Webb
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
---------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2-- RATIFY THE APPOINTMENT OF [ ] [ ] [ ]
ERNST & YOUNG AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR
2002.
Signature
------------------------------------------
Signature Date
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NOTE: Please sign as name appears hereon. If shares are held jointly, all
holders must sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
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