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 240.14a-11(c) or Rule 240.14a-12
SIMTROL, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[ ] Fee paid previously with preliminary materials:
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offsetting fee was paid previously. Identify the previous filing by
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filing.
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April 5, 2004
Dear Shareholders:
It is my pleasure to invite you to Simtrol's 2004 Annual Meeting of
Shareholders. We will hold the annual meeting on Thursday, April 22, 2004, at
4:00 p.m. at the company's headquarters at 2200 Norcross Parkway #255, Norcross,
GA 30071. In addition to formal items of business, we will review major
developments during 2003 and continuing into 2004, and answer any questions that
you may have.
We are sending you the official notice of the 2004 Annual Meeting, our
proxy statement and 2003 Annual Report, and a proxy card. Please carefully read
the entire proxy statement and accompanying Annual Report, and vote your shares
either on the enclosed proxy card or by telephone, as detailed in the
instructions on the card.
Very Truly Yours,
Larry M. Carr
Chairman of the Board
Simtrol, Inc.
SIMTROL, INC.
2200 NORCROSS PARKWAY #255
NORCROSS, GA 30071
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 2004
The Annual Meeting of Shareholders of Simtrol, Inc. (the "Company") will be
held on Thursday, April 22, 2004 at 4:00 p.m., at the Company's offices, 2200
Norcross Parkway #255, Norcross, Georgia, for the following purposes:
(1) to elect five directors to constitute the Board of Directors of
the Company;
(2) to approve a one-for-ten reverse stock split of the Company's
outstanding common stock;
(3) to approve an amendment to the Company's 2002 Stock Option Plan
to increase the number of shares of the Company's common stock
that may be issued under the Plan;
(4) to ratify the appointment of Marcum & Kliegman LLP as the
Company's independent auditors for the fiscal year ending
December 31, 2004; and
(5) to transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on March 12, 2004 will
be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
A proxy statement and a proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the proxy promptly. You may also
vote by telephone according to the directions on the proxy card. If you attend
the meeting, you may, if you wish, withdraw your proxy and vote in person.
By Order of the Board of Directors,
Larry M. Carr, Chairman of the Board
Norcross, Georgia
April 5, 2004
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE
MAY BE RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
1
SIMTROL, INC.
2200 NORCROSS PARKWAY #255
NORCROSS, GA 30071
ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 2004
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PROXY STATEMENT
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Simtrol, Inc. (the "Company") for use in
voting at the Annual Meeting of Shareholders to be held at 4:00 p.m. local time
on Thursday, April 22, 2004 at the Company's office at 2200 Norcross Parkway
#255, Norcross, Georgia and at any adjournments or postponements thereof (the
"Annual Meeting"), for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders. This Proxy Statement and the accompanying proxy
are first being mailed to shareholders on or about April 8, 2004. The address of
the principal executive offices of the Company is 2200 Norcross Parkway #255,
Norcross, Georgia 30071.
VOTING
VOTING AND REVOCABILITY OF PROXIES
When proxy cards are properly executed, dated and returned, the shares they
represent will be voted at the Annual Meeting in accordance with the
instructions of the shareholders. If no specific instructions are given the
shares will be voted FOR the election of the nominees for directors set forth
herein and FOR each of the other proposals described in this proxy statement. In
addition, if other matters come before the Annual Meeting, the persons named in
the proxy card will vote in accordance with their best judgment with respect to
such matters. Any proxy given pursuant to this solicitation may be revoked by
any shareholder who attends the meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition, any
proxy given pursuant to this solicitation may be revoked prior to the meeting by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed proxy for the same shares bearing a later date.
QUORUM; REQUIRED VOTE; ABSTENTIONS AND BROKER NON-VOTES
The presence at the Annual Meeting of the holders of one-third of the
outstanding shares of the Company's common stock as of the record date is
necessary to constitute a quorum. Shareholders will be counted as present at the
meeting if they are present in person at the Annual Meeting or if they have
properly submitted a proxy card or voted by telephone. The affirmative vote of a
plurality of all shares present and entitled to vote is required for the
election of directors. The affirmative vote of a majority of all shares
outstanding is required to authorize the one-for-ten reverse stock split of the
Company's outstanding common stock. The affirmative vote of a majority of all
shares present and entitled to vote is required to approve the amendment of the
Company's 2002 Stock Option Plan and to ratify the appointment of Marcum &
Kliegman LLP as the Company's independent auditors for the fiscal year ending
December 31, 2004. Abstentions and broker non-votes will not be counted as votes
either in favor of or against the matter with respect to which the abstention or
broker non-vote relates. As a result, abstentions and broker non-votes will have
no effect on the election of directors, but will have the same effect as a vote
against each of the other proposals.
1
RECORD DATE AND SHARE OWNERSHIP
The record of shareholders entitled to vote at the Annual Meeting was taken
on March 12, 2004. On that date, the Company had outstanding and entitled to
vote 23,367,226 shares of common stock, with each share entitled to one vote.
EXPENSES OF SOLICITATION
The expense of this solicitation, including the cost of preparing and
mailing this proxy statement, will be paid by the Company. In addition to
solicitations by mail, officers and regular employees of the Company, at no
additional compensation, may assist in soliciting proxies by telephone.
CORPORATE GOVERNANCE AND BOARD MATTERS
BOARD COMPOSITION
The Company's by-laws provide that the Board of Directors shall consist of
not less than three nor more than seven members, the precise number to be
determined from time to time by the Board of Directors. The Board of Directors
has set the number of directors at five, each serving a one-year term. The Board
presently consists of Larry M. Carr, Dallas S. Clement, Richard W. Egan, Julia
B. North and Edward S. Redstone. All members of the Board of Directors, with the
exception of Mr. Egan, are independent, as defined in Rule 4200(a)(15) of the
National Association of Securities Dealer's listing standards. Biographical
information regarding these directors is set forth below under the caption
"Proposal No. 1: Election of Directors."
MEETINGS OF THE BOARD OF DIRECTORS
During 2003, the Board of Directors met nine times. Each director attended
at least 75% or more of the aggregate number of meetings held by the Board of
Directors and any committees on which such director served. The Company's policy
is to have meetings of the Board of Directors on the same day as the Company's
annual meeting of shareholders, and it is the policy of the Board of Directors
that directors are expected to attend the annual meetings of shareholders. The
Company did not hold an annual meeting in 2003.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has several committees, including standing
Audit and Compensation Committees. The Board of Directors does not have a
standing nominating committee, such function being reserved to the full Board of
Directors.
Audit Committee. The Audit Committee is currently composed of Julia B.
North, Edward S. Redstone and Dallas S. Clement. The Audit Committee met once
during 2003. The Audit Committee's principal functions are to recommend to the
Company the appointment of independent auditors for the Company, review and
approve the annual report of the independent auditors, approve the annual
financial statements, and review and approve summary reports of the auditors'
findings and recommendations. The Audit Committee reviews and pre-approves all
audit and non-audit services performed by the Company's auditing accountants, or
other accounting firms, other than as may be allowed by applicable law. All
members of the Audit Committee are independent, as defined in Rule 4200(a)(15)
of the National Association of Securities Dealer's listing standards. The Board
of Directors has adopted a written Audit Committee Charter, a copy of which is
attached as "Appendix A" to this proxy statement. The Board of Directors has
determined that Dallas S. Clement is an "audit committee financial expert," as
defined in SEC rules.
2
Compensation Committee. The Compensation Committee is currently composed of
Larry M. Carr, Edward S. Redstone and Julia B. North. The Compensation Committee
did not meet during 2003. The Compensation Committee is responsible for
approving and monitoring the remuneration arrangements for senior management and
establishing the targets that determine awards payable under the Company's
incentive compensation plan.
The Company does not have a Nominating Committee. Director selection and
review are conducted by the entire Board of Directors. The Company believes that
this is adequate based on the size and make-up of the current Board of
Directors. The members of the Board of Directors have served as directors of the
Company for between three and ten years. The Company believes that this group of
longstanding directors is capable of evaluating the performance of the current
Board and the qualifications of proposed director nominees, and of determining
the need for additional directors. The Board of Directors does not have a
written charter or formal process governing the nominating process. The Board of
Directors will consider director nominees recommended by shareholders.
Generally, candidates should be highly qualified by business, professional or
comparable experience, affirmatively desirous of serving on the Board, and able
to represent the interests of all shareholders and not merely those of any
special interest group. Shareholders wishing to suggest candidate(s) for
consideration at the 2005 Annual Meeting should submit their proposals in
accordance with the timeframe and procedures set forth in the paragraph entitled
"Shareholder Proposals for 2005 Annual Meeting" below.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
The Board of Directors has implemented a process for shareholders to send
communications to the Board. Any shareholder desiring to communicate with the
Board, or with specific individual directors, may do so by writing to the
Company's Secretary at the address of the Company's principal executive offices,
who has been instructed by the Board to promptly forward all such communications
to the Board or such individual directors.
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
The deadline for submission of shareholder proposals for inclusion in the
Company's proxy statement for the 2005 annual meeting of shareholders is
December 9, 2004. Additionally, the Company must receive notice of any
shareholder proposal to be submitted at the 2005 annual meeting of shareholders
(but not required to be included in the Company's proxy statement) by February
22, 2005, or such proposal will be considered untimely and the persons named in
the proxies solicited by management may exercise discretionary voting authority
with respect to such proposal.
3
DIRECTOR COMPENSATION
The Company does not presently provide any cash compensation to directors
for their services as directors. Each of the Company's non-employee directors
receives an automatic grant of options to purchase 15,000 shares of the
Company's common stock each year under the terms of the Company's stock option
plans. On October 7, 2003 Messrs. Carr and Redstone were each granted options to
purchase an additional 35,000 shares of the Company's common stock in
consideration of their service on the Executive Committee of the Board of
Directors. Each director is reimbursed for travel and other expenses incurred in
connection with the performance of his or her duties.
Additionally, all new non-employee directors receive a one-time grant of an
option to purchase 5,000 shares of the Company's common stock at an exercise
price equal to the fair market value of the stock on the date of the grant. The
options expire, unless previously exercised or terminated, ten years from the
date of the grant.
NO FAMILY RELATIONSHIPS AMONG DIRECTORS AND OFFICERS
There are no family relationships between any director or executive officer
of the Company and any other director or executive officer of the Company.
EXECUTIVE OFFICERS
Executive officers are appointed by, and hold office at the pleasure of,
the Board of Directors. The executive officers of the Company are as follows:
NAME POSITION HELD
---- -------------
Richard W. Egan President and Chief Executive Officer
Stephen N. Samp Chief Financial Officer and Secretary
RICHARD W. EGAN, age 39, has served as a director and Chief Executive
Officer of the Company since May 2000. Mr. Egan joined the Company in June 1995
and served as National Account Manager until July 1996 when he became Regional
Sales Director. From February 1998 to June 1999, he served as Executive Vice
President of Sales. In June 1999, Mr. Egan was appointed President of the
Company.
STEPHEN N. SAMP, age 39, joined the Company in April 2002 as Chief
Financial Officer and Secretary. From February 2001 until March 2002 he served
as an independent financial consultant. From March 1998 to February 2001 he
served as Vice President, Chief Financial Officer and Secretary of eOn
Communications (NASDAQ:EONC), a provider of unified voice, e-mail, and Web-based
communications systems and software.
4
EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS
The following table provides certain summary information for 2003, 2002 and
2001 concerning compensation paid or accrued by the Company to or on behalf of
the Company's executive officers:
Long Term
Compensation
Annual Compensation Awards
Name and ------------------- -------
Principal Number of Shares
Position Year Salary Bonus Underlying Options
-------- ---- ------ ----- ------------------
Richard W. Egan 2003 $130,000(1) -- 75,000
President and CEO 2002 $130,000(1) -- 60,000
2001 $130,000 $1,250 --
Stephen N. Samp 2003 $115,000(2) -- 36,000
Chief Financial 2002 $ 86,923(2) -- 40,000
Officer
(1) Due to the business conditions of the Company, Mr. Egan deferred $35,500 of
his 2003 salary and $15,000 of his 2002 salary.
(2) Due to the business conditions of the Company, Mr. Samp deferred $23,861 of
his 2003 salary and $4,423 of his 2002 salary.
STOCK OPTION PLANS
1991 Stock Option Plan. In 1991, by action of the Company's Board of
Directors, the Company adopted the 1991 Stock Option Plan (the "1991 Plan") for
the Company's and its wholly-owned subsidiaries' officers, directors and
employees. The 1991 Plan was approved by the Company's shareholders on October
10, 1991. In July 1992, the 1991 Plan was amended to, among other things,
provide for the automatic grant of options to the Company's non-employee
directors, to increase the number of shares of common stock available for grant
thereunder and to expand the class of persons eligible to receive options under
the 1991 Plan to include employees of the Company's majority-owned subsidiaries.
In November 1993, the 1991 Plan was further amended to expand the class of
persons eligible to receive options under the 1991 Plan and to increase the
number of shares of common stock available for grant thereunder. The 1991 Plan,
as amended by the Company's shareholders on May 19, 1998, provides for the grant
of options to purchase up to an aggregate of 3,662,057 shares of the Company's
common stock. Under the terms of the 1991 Plan, the Stock Option Committee of
the Board of Directors may grant options to purchase shares of common stock to
the Company's officers, directors and employees, and to those of the Company's
subsidiaries. The right to grant additional options under this plan expired in
August 2001. Therefore, no additional grants of options will be made under this
plan. At December 31, 2003, options to purchase 640,250 shares of common stock
were outstanding under the 1991 Plan.
5
2002 Stock Option Plan. In June 2002 the Company's shareholders approved
the adoption of the 2002 Stock Option Plan (the "2002 Plan") for the Company's
and its wholly owned subsidiaries' officers, directors, employees, and
consultants. The 2002 Plan provides for the grant of options to purchase up to
an aggregate of 2,500,000 shares of the Company's common stock. Under the terms
of the 2002 Plan, the Stock Option Committee of the Board of Directors may grant
options to purchase shares of common stock to the Company's officers, directors
and employees, and to those of the Company's subsidiaries. At December 31, 2003,
options to purchase 735,000 shares of common stock were outstanding under the
2002 Plan.
The following table provides certain information concerning options granted
during 2003:
% OF TOTAL
OPTIONS
NUMBER OF SECURITIES GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED FISCAL YEAR BASE PRICE DATE
---- ------- ----------- ---------- ----
Richard W. Egan 75,000 27.3% $0.24 June 5, 2013
Stephen N. Samp 36,000 13.1% $0.24 June 5, 2013
The following table provides certain information concerning the value of
unexercised warrants and unexercised options held by the Company's executive
officers as of December 31, 2003. No options or warrants were exercised by
either of the executive officers during 2003:
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS OR WARRANTS IN-THE-MONEY OPTIONS AND
AT FISCAL YEAR END WARRANTS AT FISCAL YEAR END
--------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ----------- ------------- ----------- -------------
Richard W. Egan 221,250 120,000 -- --
Stephen N. Samp 11,000 65,000 -- --
The following table provides information as of December 31, 2003 regarding
the Company's compensation plans and arrangements:
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
Number of securities Weighted-average remaining available for
to be issued upon exercise price of future issuance under equity
exercise of outstanding compensation plans
outstanding options, options, warrants (excluding securities
warrants and rights and rights reflected in column (a))
Plan category (a) (b) (c)
----------------------------------------- ---------------------- ------------------- ------------------------------
Equity compensation plans approved
by security holders............... 1,375,250 $1.32 1,765,000
Equity compensation plans not
approved by security holders...... - -
Total................................. 1,375,250 $1.32 1,765,000
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RELATED PARTY TRANSACTIONS
During 2003, $30,000 of debt was issued to Messrs. Carr and Redstone at
prime rate plus 1% (then 5.25%), with a due date of December 31, 2003. All the
outstanding principal and accrued interest on the notes was converted to 128,421
shares of restricted common stock in July 2003 at a conversion price of $0.24
per share.
During 2002, the Company issued $272,500 each of Convertible Debt to
Messrs. Carr and Redstone. The debt accrues interest at prime rate plus 1% and
was originally due December 31, 2002. The proceeds of this debt were utilized
for working capital purposes. The debt is convertible into shares of common
stock of the Company at prices ranging from $0.22 to $0.79 per share. In
conjunction with the issuance of the convertible debt, the Company issued
272,500 common stock purchase warrants to the holders of the debt. The warrants,
which expire at various dates in 2007, are exercisable immediately and entitle
the holder to purchase one common share of the common stock of the Company at
prices ranging from $0.22 to $0.79 per share. The Company received an extension
to January 31, 2003 on the note effective December 31, 2002. At that time, the
conversion price of the note and the exercise prices of the warrants were
changed to $0.24 per share. Messrs. Carr and Redstone converted their notes and
all accrued interest into an aggregate of 2,371,757 shares of restricted common
stock on January 15, 2003.
On December 31, 2002, Messrs. Carr and Redstone agreed to extend the due
dates of their $200,000 convertible notes originated in 2001 to January 31, 2003
and then to December 31, 2003, from the original due dates of December 31, 2002.
The conversion price of the notes was adjusted from their original $0.49 per
share price to $0.24 per share. The notes had been previously extended from
their original due dates of February 7, 2002 in exchange for the issuance of
100,000 additional warrants each on that date. The exercise price of all
warrants issued in conjunction with these notes was adjusted to $0.24 per share
on December 31, 2002 in exchange for the extension of the due date. These notes
are collateralized by all of the assets of the Company.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company's 2003 audited
financial statements with management. The Audit Committee has discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The Audit
Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and has discussed with the
independent accountant the independent accountant's independence. Based on the
review and discussions referred to above, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-KSB for 2003 for filing with the SEC.
Respectfully submitted,
The Audit Committee
Mr. Edward S. Redstone
Ms. Julia B. North
Mr. Dallas S. Clement
7
PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Board of Directors of the Company, pursuant to the Company's by-laws,
has set the number of directors to serve for the next year at five, all five of
whom are to be elected at the Annual Meeting. The Company's Articles of
Incorporation provide that each director serves a one-year term. Each member of
the current Board of Directors is standing for re-election and, if elected, will
serve for a term of one year and until his or her successor is elected and
qualified.
In the event that any nominee withdraws or for any reason is not able to
serve as director, the proxy will be voted for such other person as may be
designated by the Board of Directors, but in no event will the proxy be voted
for more than five nominees. The Board of Directors recommends the election of
the five nominees listed below. Management of the Company has no reason to
believe that any nominee will not serve if elected.
The following persons have been nominated for re-election to the Board of
Directors:
LARRY M. CARR, age 60, has served as a director since June 1994 and as
Chairman of the Board since January 1998. Mr. Carr founded Nursefinders, Inc., a
temporary services company in the healthcare industry, in 1974. Although Adia
Services, Inc., acquired Mr. Carr's interest in this company, Mr. Carr still
owns and operates numerous Nursefinders franchises and assists in the
administration and management of several other franchises through an entity
known as Management Services, Inc. Mr. Carr is Chairman of the Board of
Northwest National Bank, located in Arlington, Texas, a director of Mobility
Electronics, Inc., of Scottsdale, Arizona, which designs, develops and markets
connectivity and remote peripheral interface technology and products and is a
director of several privately held companies, including OHA Financial, Inc.,
Trinity Airweights, LLC and Computerized Healthcare, Inc.
DALLAS S. CLEMENT, age 38, has served as a director since April 2001. Mr.
Clement has served as Senior Vice President, Strategy and Development for Cox
Communications, Inc. ("Cox") since August 2000. Prior to that, he served as Vice
President and Treasurer of Cox from January 1999 to July 2000. Mr. Clement
joined Cox in 1990 as a Policy Analyst and was promoted to Manager of Investment
Planning in January 1993, Director of Finance in 1994, and Treasurer in 1996.
From April 1995 to December of 1996, Mr. Clement served as Assistant Treasurer
for Cox Enterprises, Inc. and Cox.
RICHARD W. EGAN, age 39, has served as a director and Chief Executive
Officer of the Company since May 18, 2000. Mr. Egan joined the Company in June
1995 and served as National Account Manager until July 1996 when he took over
the position of Regional Sales Director. From February 1998 to June 1999, he
served as Executive Vice President of Sales. In June 1999, Mr. Egan was
appointed President of the Company.
JULIA B. NORTH, age 56, has served as a director since October 1997. Ms.
North served as President and Chief Executive Officer of the Company from
October 1997 until June 1999. Ms. North is a director of WinnDixie Stores, Inc.,
a food retailer, MAPICS, Inc., a global developer of extended enterprise
applications, and Acuity Brands, Inc., a maker of lighting equipment and
specialty products.
EDWARD S. REDSTONE, age 75, has served as a director since July 1996. Mr.
Redstone has been a private investor since 1994. From 1984 to 1994, he served as
Chairman of the Board of Martha's Vineyard National Bank. Mr. Redstone was a
co-founder of National Amusements, which, among other things, is the controlling
stockholder of Viacom. Mr. Redstone also founded First Bancorporation.
8
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2: APPROVAL OF A ONE-FOR-TEN REVERSE STOCK SPLIT
Background. The Company's Board of Directors has unanimously adopted a
resolution seeking shareholder approval to amend the Company's Certificate of
Incorporation to effect a one-for-ten reverse stock split of the Company's
common stock (the "Reverse Stock Split"). A copy of the proposed amendment is
attached to this proxy statement as Exhibit "B." The Board of Directors believes
that the Reverse Stock Split is in the Company's best interests in that it may
increase the trading price of the Company's common stock. An increase in the
price of the Company's common stock should, in turn, generate greater investor
interest in the Company's common stock, thereby enhancing the marketability of
the Company's common stock to the financial community. In addition, the
resulting reduction in the number of issued and outstanding shares of the
Company's common stock will provide the Company with additional authorized but
unissued shares, which the Company plans to utilize to raise equity financing to
continue the Company's operations.
Effect. The immediate effect of the Reverse Stock Split will be to reduce
the number of issued and outstanding shares of common stock from 23,367,226 to
approximately 2,336,723. Although the Reverse Stock Split may also increase the
market price of the common stock, the actual effect of the Reverse Stock Split
on the market price cannot be predicted. The market price of the common stock
may not rise in proportion to the reduction in the number of shares outstanding
as a result of the Reverse Stock Split. Further, there is no assurance that the
Reverse Stock Split will lead to a sustained increase in the market price of the
common stock. The Reverse Stock Split will affect all of the holders of the
Company's common stock uniformly and will not affect any shareholder's
percentage ownership interest in the Company or proportionate voting power,
except for insignificant changes that will result from the rounding of
fractional shares either up or down, as described below. Consummation of the
Reverse Stock Split will not have any federal income tax consequences to
shareholders.
Procedure for Effecting Reverse Split. The Reverse Stock Split is expected
to become effective on or about April 20, 2004, or as soon thereafter as
possible. Upon shareholder approval, the Company will file an amended
Certificate of Incorporation in accordance with Delaware law. The Reverse Stock
Split will take place without any action on the part of the holders of the
common stock and without regard to current certificates representing shares of
common stock being physically surrendered for certificates representing the
number of shares of common stock each shareholder is entitled to receive as a
result of the Reverse Stock Split. New stock certificates will not be issued.
Fractional Shares. No fractional shares will be issued in connection with
the Reverse Stock Split. Shareholders who would otherwise be entitled to receive
fractional shares because they hold a number of shares of common stock that is
not evenly divisible by 10 will have the number of new shares to which they are
entitled rounded to the nearest whole number of shares. The number of new shares
will be rounded up if the fractional share is equal to or greater than 0.5 and
rounded down if the fraction is less than 0.5. No shareholders will receive cash
in lieu of fractional shares.
9
No Dissenters' Rights. Pursuant to the Delaware Code, the holders of the
Company's common stock are not entitled to, and will not have, any dissenters'
rights in connection with the Reverse Stock Split.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE ONE-FOR-TEN REVERSE STOCK SPLIT.
PROPOSAL NO. 3: APPROVAL OF AMENDMENT OF THE 2002 STOCK OPTION PLAN
The Board of Directors has approved, and is recommending to the
shareholders for approval at the meeting, an amendment to increase the number of
shares that may be issued pursuant to the Company's 2002 Stock Option Plan. The
purpose of the 2002 Plan is to serve as an incentive and to encourage stock
ownership by the Company's directors, officers and employees. The Board of
Directors believes that the 2002 Plan promotes the Company's interests by
allowing such persons to share in the Company's success and encourages them to
remain in the Company's service. Under the 2002 Plan, the Company may grant
incentive stock options, as defined in Section 422 of the Code, or non-qualified
stock options.
The 2002 Plan currently provides that the number of shares of the Company's
common stock that may be issued pursuant to stock awards shall not exceed in the
aggregate 2,500,000 shares of common stock. As of March 25, 2004, 1,765,000
shares of the common stock remained available for grant under the 2002 Plan.
Pursuant to section 12(A) of the 2002 Plan, the Board recommends that the number
of shares that may be issued pursuant to stock awards be increased from
2,500,000 to 7,500,000. The proposed increase in the number of authorized shares
would ensure for uninterrupted continuation of the 2002 Plan. If "Proposal No.
2: Approval of the One-for-Ten Reverse Stock Split," above, is approved by
shareholders, the number of shares that may be issued pursuant to the 2002 Plan
would be adjusted to 250,000 to account for the 1:10 reverse stock split and the
number of shares that may be issued pursuant to the 2002 Plan would increase
from 250,000 to 750,000 if this proposal is approved.
As of March 25, 2004, the Company had granted options to purchase shares of
common stock pursuant to the 2002 Plan as follows: (i) each executive officer
(Richard W. Egan: 135,000 shares; Stephen N. Samp: 76,000 shares); (ii) all
current directors who are not executive officers, as a group: 190,000 shares;
and (iii) all employees, including all current officers who are not executive
officers, as a group: 334,000 shares.
Description of the 2002 Plan
Effective Date. The effective date of the 2002 Plan is April 23, 2002. The
2002 Plan shall remain in effect until all shares subject to or which may become
subject to the 2002 Plan shall have been purchased pursuant to options granted
under the 2002 Plan, provided that options under the 2002 Plan must be granted
within ten years from the effective date.
Shares Reserved for the 2002 Plan. The shares of the Company's common stock
to be sold to officers, directors, employees, and consultants under the 2002
Plan may, at the election of the Board of Directors, be either treasury shares
or shares originally issued for such purpose. The maximum number of shares that
shall be reserved and made available for sale under the 2002 Plan is currently
2,500,000. Any shares subject to an option that for any reason expires or is
terminated unexercised may again be subject to an option under the 2002 Plan.
10
In the event of a subdivision or combination of the Company's shares, the
maximum number of shares that may thereafter be issued and sold under the 2002
Plan and the number of shares under option shall be proportionately increased or
decreased, the terms relating to the price at which shares under option will be
sold will be appropriately adjusted, and such other action will be taken as in
the opinion of the Board of Directors is appropriate under the circumstances. In
the case of a reclassification or other change in the Company's shares, the
Board of Directors will also make appropriate adjustments.
Persons Eligible to Participate in the 2002 Plan. Under the 2002 Plan,
options may be granted only to those persons who are officers, directors,
employees, or consultants of the Company or of a subsidiary of the Company. In
determining the persons to whom options will be granted and the number of shares
to be covered by each option, the Stock Option Committee shall take into account
the duties of the respective officers, directors and employees, their present
and potential contributions to the Company's success or of a subsidiary of the
Company, the anticipated number of years of effective service remaining, and any
other factors as they shall deem relevant in connection with accomplishing the
purposes of the 2002 Plan.
Administration of the 2002 Plan. The 2002 Plan is administered by the
Stock Option Committee (the "Committee") appointed by the Company's Board of
Directors from among its members. Such Committee shall consist of not less than
two of the members of the Board of Directors who shall serve at the pleasure of
the Board.
Subject to the provisions of the 2002 Plan, the Committee has the
authority to administer the 2002 Plan, to select those persons to whom options
will be granted, to determine the terms and provisions of the respective stock
option agreements with optionee, including the number of shares to be optioned
to each such person, and to interpret, construe and implement the provisions of
the 2002 Plan.
Exercise Price, Terms of Exercise and Payment For Shares. All Options.
Each option granted under the 2002 Plan will be represented by an Option
Agreement which shall set forth the terms particular to that option, including
the number of shares covered by the option, the exercise price, the term of the
option period and any vesting requirements.
Stock purchased pursuant to an Option Agreement shall be paid for in
accordance with the terms and conditions set forth in the Option Agreement. The
terms and conditions of payment may vary with respect to each optionee. Upon
receipt of payment, the Company shall, without transfer or issue tax, deliver to
the optionee (or other person entitled to exercise the option) a certificate or
certificates for such shares.
It is intended that funds received by us from the exercise of options will
be added to the Company's general working capital and used for general corporate
purposes. Shares of the Company's common stock received in payment for the
exercise price of options may be, at the discretion of the Board of Directors,
either held as treasury shares or retired and returned to authorized but
unissued status.
Incentive Stock Options. The exercise price of incentive stock options
granted under the 2002 Plan will be determined by the Committee, but in no event
shall such price be less than 100% of the fair market value of the stock on the
date of the grant of the option. In no event may incentive stock options be
exercised later than ten years from the date of grant of the option.
Notwithstanding the foregoing, an optionee who owns, directly or
indirectly, more than ten percent of the total combined voting power of all
classes of stock of the Company ("10% Owner") may not be granted an incentive
stock option at less than 110% of the fair market value of the common stock on
the date the option is granted. Any incentive stock option granted to a 10%
Owner must by its terms be exercisable within five years from the date it is
granted.
11
The aggregate fair market value (determined at the time the option was
granted) of the shares with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all of the Company's incentive stock option plans) shall not exceed $100,000.
Automatic Grant of Options to Non-Employee Directors. The 2002 Plan grants
to the Company's non-employee directors, without necessity of action by the
Board of Directors or the Stock Option Committee, as the case may be, an option
to purchase 5,000 shares of common stock on the date such non-employee director
first becomes a member of the Board of Directors, at an exercise price equal to
the fair market value of such stock on the date of grant. In addition, the 2002
Plan grants to the Company's non-employee directors, without necessity of action
by the Board of Directors or the Stock Option Committee, as the case may be, an
option under the 2002 Plan to purchase 15,000 shares of common stock on each
July 5, at an exercise price equal to the fair market value of such stock on the
date of grant. Such options are exercisable from the date of grant and
thereafter until the date that is the tenth anniversary of the date of grant,
unless earlier terminated in accordance with the provisions of the 2002 Plan.
Options granted to non-employee directors under the 2002 Plan conform in all
respects to the terms of the 2002 Plan.
Termination of Employment, Assignment and Other Limitations. In the event
that an optionee during his or her lifetime ceases to be an officer, director or
employee of the Company or any subsidiary of the Company for any reason other
than death or total disability, any option or unexercised portion thereof which
is exercisable on the date the optionee ceases employment shall expire on the
date which is three (3) months following the date the optionee ceases to be an
officer, director or employee of the Company or of a subsidiary of the Company.
In the event of the death or total disability of an optionee while he is an
officer, director or employee of the Company or of a subsidiary of the Company,
the option may be exercised (to the extent the optionee would have been entitled
to do so) by a legatee or legatees of the optionee under his last will or by his
personal representative or representatives at any time within one year after
death or total disability.
No option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution. During the lifetime of the
optionee, the option shall be exercisable only by him or her.
An optionee shall have no rights as a shareholder with respect to any
shares covered by an option until the date of issuance of the stock certificate
to the optionee for such shares. Except as otherwise specifically provided in
the 2002 Plan, no adjustments shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is issued.
Adjustment of Shares. In the event that dividends are payable in the
Company's common stock or in the event there are splits, subdivisions or
combinations of shares of the Company's common stock (such as the proposed
Reverse Stock Split), the 2002 Plan provides that a proportionate adjustment
will be made in the number of shares available for option under the 2002 Plan,
and, as to options then outstanding, a proportionate adjustment to the number of
shares subject to the option and to the purchase price per share.
After any merger of one or more corporations into the Company, any merger
of the Company into another corporation, any consolidation of the Company and
one or more corporations, or any other corporate reorganization of any form
involving the Company as a party thereto involving any exchange, conversion,
adjustment or other modification of the outstanding shares, each optionee shall,
at no additional cost, be entitled, upon any exercise of his option, to receive
(subject to any required action by stockholders), in lieu of the number of
shares as to which the option shall then be so exercised, the number and class
of shares of stock or other securities or any other property to which the
optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or other reorganization if, at the time of the merger,
consolidation or other reorganization, the optionee had been a holder of record
of the number of shares equal to the number of shares as to which the option
shall then be so exercised.
12
In the event of a dissolution or liquidation of the Company, all
outstanding Stock Awards shall terminate immediately prior to such event. In the
event of (i) a sale, lease or other disposition of all or substantially all of
the assets of the Company, (ii) a merger or consolidation in which the Company
is not the surviving corporation or (iii) a reverse merger in which the Company
is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then any
surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 11(c)) for those outstanding under the
Plan. In the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full, and the Stock Awards shall terminate if
not exercised (if applicable) at or prior to such event. With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall terminate
if not exercised (if applicable) prior to such event.
Amendment and Termination of the 2002 Plan. The Board of Directors may at
any time and from time to time terminate, modify or amend the 2002 Plan in any
respect, except that without shareholder approval the Board of Directors may not
(1) increase the number of shares for which options may be granted under the
2002 Plan, (2) modify the requirements as to eligibility for participation, (3)
increase the benefits accruing to eligible officers, directors and employees,
(4) remove the administration of the 2002 Plan from the Committee, (5) reduce
the amount of any benefit or adversely change the terms and conditions thereof,
or (6) cause incentive stock options issued under the 2002 Plan to fail to meet
the requirements for incentive stock options under Section 422 of the Code or
any subsequent Code sections with respect to incentive stock options.
The termination or any modification or amendment of the 2002 Plan shall
not, without the consent of an optionee, affect his or her rights under an
option or right previously granted to him or her. With the consent of the
optionee affected, the Board of Directors may amend outstanding option
agreements in a manner not inconsistent with the 2002 Plan. Without employee
consent the Board of Directors may at any time and from time to time modify or
amend outstanding option agreements in such respects as it shall deem necessary
in order that options granted thereunder shall comply with the appropriate
provisions of the Code, and regulations thereunder which are in effect from time
to time respecting "Qualified Incentive Options."
Federal Income Tax Consequences of 2002 Plan
Incentive Stock Options. All incentive options granted or to be granted
under the 2002 Plan which are designated as incentive stock options are intended
to be incentive stock options as defined in Section 422 of the Code.
13
Under the provisions of Section 422 of the Code, neither the holder of an
incentive stock option nor we will recognize income, gain, deduction or loss
upon the grant or exercise of an incentive stock option. An optionee will be
taxed only when the stock acquired upon exercise of his incentive stock option
is sold or otherwise disposed of in a taxable transaction. If at the time of
such sale or disposition the optionee has held the shares for the required
holding period (two years from the date the option was granted and one year from
the date of the transfer of the shares to the optionee), the optionee will
recognize long-term capital gain or loss, as the case may be, based upon the
difference between his exercise price and the net proceeds of the sale. However,
if the optionee disposes of the shares before the end of such holding period,
the optionee will recognize ordinary income on such disposition in an amount
generally equal to the lesser of:
(a) gain on the sale or other disposition; or
(b) the amount by which the fair market value of the shares on the date
of exercise exceeded the option exercise price,
with any excess gain being capital gain, long-term or short-term, depending on
whether or not the shares had previously been held for more than one year on the
date of sale or other taxable disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition that results in the recognition of
ordinary income to the optionee will also result in a corresponding income tax
deduction for us.
The 2002 Plan permits an optionee to pay all or part of the purchase price
for shares acquired pursuant to exercise of an incentive stock option by
transferring to us other shares of the Company's common stock owned by the
optionee. Section 422 of the Code provides that an option will continue to be
treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to certain
"statutory option stock," an optionee who exercises an incentive stock option in
whole or in part by transferring to us shares of the Company's common stock will
recognize no gain or loss upon such exercise. The optionee's basis in the shares
so acquired that is equal to the number of shares surrendered will be equal to
the optionee's cost basis in the shares surrendered. The optionee's basis in the
additional number of new shares received will be zero (plus, in the case of
payment of the purchase price in a combination of cash and surrendered shares,
the amount of any cash paid).
Section 424(c)(3) of the Code provides that if "statutory option stock" is
transferred in connection with the exercise of an incentive stock option, and if
the holding period requirements under Section 422(a)(1) of the Code are not met
with respect to such statutory option stock before such transfer, then ordinary
income will be recognized as a result of the transfer of statutory option stock.
However, the incentive stock option stock acquired through the exchange of
statutory option stock will still qualify for favorable tax treatment under
Section 422 of the Code.
The excess of the fair market value of shares acquired through the
exercise of an incentive stock option over the exercise price is taken into
account in computing an individual taxpayer's alternative minimum taxable
income. Thus, the exercise of an incentive stock option could result in the
imposition of an alternative minimum tax liability.
14
In general, an option granted under the 2002 Plan that is designated as an
incentive stock option would be taxed as described above. However, in some
circumstances an option that is designated as an incentive stock option will be
treated as a non-qualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option that gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market value of the stock as of the date of the
grant), the option will be treated and taxed as a non-qualified stock option.
Non-Qualified Stock Options. All options granted or to be granted under
the 2002 Plan which do not qualify as incentive stock options are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
A participant in the 2002 Plan will recognize taxable income upon the
grant of a non-qualified stock option only if such option has a readily
ascertainable fair market value as of the date of the grant. However, under the
applicable Treasury Regulations, the non-qualified stock options issued under
the 2002 Plan will not have a readily ascertainable fair market value unless at
the time such options are granted similar options of the Company are actively
traded on an established market. We presently have no such actively traded
options.
Upon the exercise of a non-qualified stock option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. We are not entitled to
an income tax deduction with respect to the grant of a non-statutory stock
option or the sale of stock acquired pursuant thereto. We generally are
permitted a deduction equal to the amount of ordinary income the optionee is
required to recognize as a result of the exercise of a non-statutory stock
option.
The 2002 Plan permits the Committee to allow an optionee to pay all or
part of the purchase price for shares acquired pursuant to an exercise of a
non-statutory option by transferring to us other shares of the Company's common
stock owned by the optionee. If an optionee exchanges previously acquired common
stock pursuant to the exercise of a non-qualified stock option, the Internal
Revenue Service has ruled that the optionee will not be taxed on the unrealized
appreciation of the shares surrendered in the exchange. In other words, the
optionee is not taxed on the difference between his or her cost basis for the
old shares and their fair market value on the date of the exchange, even though
the previously acquired shares are valued at the current market price for
purposes of paying all or part of the option price. Thus, the optionee's basis
in the number of new shares so acquired that is equal to the number of shares
surrendered will be equal to the optionee's cost basis in the shares
surrendered. The optionee's basis in the additional number of new shares
received will be equal to the amount of ordinary compensation income recognized
as the result of the exercise of the option plus, in the case of payment of the
purchase price in a combination of cash and surrendered shares, the amount of
any cash paid.
Stock Bonus Award. Unless, at the time of grant, a stock bonus is subject
to a substantial risk of forfeiture and is not transferable free of such a risk
of forfeiture, the recipient of a stock bonus will recognize ordinary income
equal to (i) the excess of the fair market value of such stock bonus on the date
of grant over (ii) the price, if any, paid for such stock bonus. If, however, at
the time of grant, the stock bonus is subject to a substantial risk of
forfeiture and is not transferable free of such a risk of forfeiture, the tax
consequences of the receipt of the stock bonus will be as described below under
the heading "Restricted Stock."
15
Restricted Stock. Generally, and except as noted below, the grant of
restricted stock is not taxable at the time of the grant. Instead, at the time
restricted stock vests (i.e., it becomes free of a substantial risk of
forfeiture) or becomes transferable free of a substantial risk of forfeiture, a
participant will recognize ordinary income equal to (i) the excess of the fair
market value of such restricted stock on the date the shares vest or become
transferable over (ii) the price, if any, paid for such restricted stock. An
employee may, however, elect to recognize income as of the date of grant of the
restricted stock, in an amount equal to (i) the excess of the fair market value
of the restricted stock on the date of grant over (ii) the price, if any, paid
for the restricted stock. If such an election is made, no additional income will
be recognized at the time the stock vests or becomes transferable. In the event
of a subsequent forfeiture of the shares, an employee making such an election
may be able to recognize a capital loss with respect to the amount, if any, paid
for such restricted stock, but only to the extent such amount exceeds the amount
realized by such employee on such forfeiture. The employee will not be able to
recognize a loss for tax purposes with respect to the excess of fair market
value over the purchase price which was previously included in income. Dividends
paid on the shares of restricted stock before they vest will be taxed to the
participant either as additional compensation or, if the participant has made
the election described above, as dividend income.
In most cases, the basis in shares acquired upon exercise of a
non-qualified option or upon an award of a stock bonus or restricted stock will
be equal to the fair market value of the shares on the participant's income
recognition date, and the holding period for determining gains and losses on a
subsequent disposition of such shares will begin on such date.
As a general rule, we will be entitled to a deduction for federal income
tax purposes at the same time and in the same amount that an employee recognizes
ordinary income from awards granted under the 2002 Plan (including the
recognition of ordinary income as the result of a holder of stock obtained
through exercise of an incentive stock option disposing of such stock prior to
the expiration of the required holding period), to the extent such income is
considered reasonable compensation under the Code and generally provided that we
comply with the reporting requirements applicable to the ordinary income
recognized by the employee. We will not, however, be entitled to a deduction
with respect to payments to employees that are contingent upon a change of
control if such payments are deemed to constitute "excess parachute payments"
pursuant to Section 280G of the Code and do not qualify as reasonable
compensation pursuant to that Section. In addition, such payment will subject
the recipient to a 20% excise tax. We also may not be entitled to a deduction
with respect to payments to certain employees to the extent that the total
remuneration of such employee is found to be excessive under Section 162(m) of
the Code.
General. The 2002 Plan is not qualified under Section 401(a) of the Code
and is not subject to the provisions of the Employee Retirement Income Security
Act of 1974.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the statutory provisions of Section 422 of the Code,
its legislative history and related income tax regulations. Furthermore, the
foregoing is only a general discussion of the federal income tax consequences of
the 2002 Plan and does not purport to be a complete description of all federal
income tax aspects of the 2002 Plan. Option holders may also be subject to state
and local taxes in connection with the grant or exercise of options granted
under the 2002 Plan and the sale or other disposition of shares acquired upon
exercise of the options.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE AMENDMENT OF THE 2002 STOCK OPTION
PLAN.
16
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of the
Audit Committee, has appointed Marcum & Kliegman LLP to serve as independent
auditors of the Company for the year ending December 31, 2004, subject to
ratification of this appointment by the shareholders of the Company. Marcum &
Kliegman LLP is considered by management of the Company to be well qualified.
The Company has been advised by Marcum & Kliegman LLP that neither it nor any of
its members has any financial interest, direct or indirect, in either the
Company or any of the Company's subsidiaries in any capacity.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF MARCUM & KLIEGMAN LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 29, 2004
with respect to ownership of the outstanding common stock of the Company by (i)
each director and executive officer of the Company, (ii) all directors and
executive officers of the Company, as a group, and (iii) all persons known to
the Company to own beneficially more than 5% of the outstanding shares of the
Company's common stock:
Name of Shares Percent of
Beneficial Owner Beneficially Owned(1) Outstanding Shares
---------------- --------------------- ------------------
Larry M. Carr 5,475,757(2) 21.30%
Julia B. North 127,246(3) *
Edward S. Redstone 5,589,819(4) 21.90%
Richard W. Egan 292,746(5) 1.24%
Dallas S. Clement 474,045(6) 2.01%
A. John Knapp, Jr. 2,283,924(7) 9.52%
Stephen N. Samp 11,000(8) *
All directors and executive
officers as a group (6 persons) 11,970,613(9) 42.04%
* Less than 1% of outstanding shares.
(1) Except as otherwise indicated, each person named in this table
possesses sole voting and investment power with respect to the
shares beneficially owned by such person. "Beneficial ownership,"
determined in accordance with Rule 13d-3 of the Securities Exchange
Act of 1934, includes shares for which an individual, directly or
indirectly, has or shares voting or investment power and also
includes options which are exercisable within 60 days.
(2) Consists of 2,964,583 shares held directly, 183,750 shares of common
stock subject to stock options that are exercisable within 60 days
of February 29, 2004, 933,220 shares subject to conversion of
certain debt, and 727,537 shares of common stock subject to
presently exercisable common stock purchase warrants. Also includes
166,667 shares and 500,000 shares subject to warrants held in the
name of OHA Financial, of which Mr. Carr serves as Chairman of the
Board; Mr. Carr disclaims beneficial ownership of these shares. Mr.
Carr's business address is 2200 Norcross Parkway, #255, Norcross,
Georgia 30071.
(3) Consists of 7,245 shares held directly, 3,751 shares of common stock
issuable upon the exercise of warrants, and 116,250 options that are
exercisable within 60 days of February 29, 2004.
(4) Consists of 3,427,533 shares held directly, 81,250 shares of common
stock subject to stock options that are exercisable within 60 days
of February 29, 2004, 1,147,519 shares of common stock issuable upon
the exercise of warrants, 932,892 shares of stock subject to
conversion of certain debt, and 625 shares owned by Mr. Redstone's
spouse. Mr. Redstone's business address is 222 Merrimack Street,
Suite 210, Lowell, MA 01852.
(5) Consists of 57,745 shares held directly, 13,751 shares of common
stock issuable upon the exercise of warrants, and 221,250 options
that are exercisable within 60 days of February 29, 2004.
(6) Consists of 239,045 shares owned directly, 125,000 shares issuable
upon exercise of warrants, 35,000 shares of common stock subject to
stock options that are exercisable within 60 days of February 29,
2004, and 75,000 shares issuable upon conversion of certain debt.
(7) Consists of 1,469,134 shares owned directly and 62,505 shares
issuable upon exercise of warrants. Also includes 202,285 shares
owned by Andover Group, Inc., 250,000 shares of stock subject to
conversion of certain debt by Andover Group, Inc., and 300,000
shares of common stock issuable upon the exercise of warrants that
are exercisable within 60 days of February 29, 2004 by Andover
Group. Mr. Knapp is Chief Executive Officer and majority shareholder
of Andover Group, Inc. Mr. Knapp's business address is 910 Travis
Street, Suite 2205, Houston, TX 77002.
(8) Consists of 11,000 shares of common stock subject to stock options
that are exercisable within 60 days of February 29, 2004.
18
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of the
outstanding common stock of the Company to file with the Securities and Exchange
Commission reports of changes in ownership of the common stock of the Company
held by such persons. Officers, directors and greater than 10% shareholders are
also required to furnish the Company with copies of all forms they file under
this regulation. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and representations that no
other reports were required, during the year ended December 31, 2003, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% shareholders were complied with.
CHANGES IN CERTIFYING ACCOUNTANT
On January 16, 2004, the Company's independent auditors, Grant Thornton
LLP, resigned from its engagement from the Company. The Company subsequently
appointed Marcum & Kliegman LLP as its independent auditors for the fiscal year
ended December 31, 2003. Each of these actions was approved by the Board of
Directors and the Audit Committee of the Company.
Grant Thornton LLP audited the financial statements for the Company for
the fiscal year ended December 31, 2002. The audit report of Grant Thornton LLP
for the year ended December 31, 2002 did not contain any adverse opinion or a
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope, or accounting principles.
Except as described herein, in connection with the audit for the fiscal
year ended December 31, 2002 and for the period through January 16, 2004, there
were no disagreements with Grant Thornton LLP on any matter of accounting
principle or practice, financial statement disclosure, or audit procedure or
scope which disagreement, if not resolved to the satisfaction of Grant Thornton
LLP, would have caused it to make reference to the subject matter of the
disagreement in its report.
Further, prior to the engagement of Marcum & Kliegman LLP, neither the
Company nor any of its representatives sought the advice of Marcum & Kliegman
LLP regarding the application of accounting principles to a specific completed
or contemplated transaction or the type of audit opinion that might be rendered
on the Company's financial statements, which advice was an important factor
considered by the Company in reaching a decision as to the accounting, auditing
or financial reporting issue.
In connection with the audit of the fiscal year ended December 31, 2002
and for the period through January 16, 2004, Grant Thornton LLP did not advise
the Company that:
(i) internal controls necessary for the Company to develop reliable financial
statements did not exist;
(ii) information had come to its attention that led it unwilling to rely on
management's representations, or that made it unwilling to be associated
with the financial statements prepared by management;
(iii) there existed a need to expand significantly the scope of its audit, or
that information had come to its attention that if further investigated
may materially impact the fairness or reliability of either: a previously
issued audit report or the underlying financial statements, or the
financial statements issued or to be issued covering the fiscal period
subsequent to the date of the most recent financial statements covered by
an audit report (including information that may prevent it from rendering
an unqualified audit report on those financial statements).
19
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company has engaged Marcum & Kliegman LLP as the Company's independent
auditors to review and audit the Company's financial statements for the fiscal
year ending December 31, 2004.
A representative of Marcum & Kliegman LLP is expected to be either present
at the Annual Meeting or available by phone, will have an opportunity to make a
statement if he or she so desires to do so, and is expected to be available to
respond to appropriate questions which stockholders might have.
Audit Fees. The aggregate fees billed by Marcum & Kliegman LLP for
professional services rendered for the audit of the Company's annual financial
statements for the year ended December 31, 2003 and the review of the financial
statements included in the Company's Forms 10-QSB for 2003 was $55,000. The
aggregate fees billed by Grant Thornton LLP for professional services rendered
for the audit of the Company's annual financial statements for the year ended
December 31, 2002 and the review of the financial statements included in the
Company's Forms 10-Q for 2002 were $51,090.
Audit-Related Fees. There were no fees charged during 2003 and 2002 for
audit-related services.
Tax Fees. No tax compliance, tax advice, or tax planning services were
provided to the Company by either Marcum & Kliegman LLP or Grant Thornton LLP
during 2003. The aggregate fees for tax compliance, tax advice, and tax planning
provided in 2002 by Grant Thornton LLP were $15,000.
All Other Fees. During 2003 and 2002, neither Marcum & Kliegman LLP nor
Grant Thornton LLP provided any other products or services.
OTHER MATTERS
ANNUAL REPORT TO SHAREHOLDERS AND REPORT ON FORM 10-KSB
Additional information concerning the Company, including financial
statements of the Company, is provided in the Company's 2003 Annual Report to
Shareholders that accompanies this proxy statement. The Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2003, as filed with the
SEC, is available to shareholders upon written request to: Simtrol, Inc.,
Investor Relations Department, 2200 Norcross Parkway #255, Norcross, GA 30071.
Copies of exhibits filed with that report or referenced therein will be
furnished to shareholders of record upon request and payment of the Company's
expenses in furnishing such documents.
20
OTHER BUSINESS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if other matters should come before the Annual Meeting
it is the intention of the persons named in the enclosed form of proxy to vote
the proxy in accordance with their judgment of what is in the best interest of
the Company.
By Order of the Board of Directors,
Larry M. Carr, Chairman of the Board
Norcross, Georgia
April 5, 2004
21
APPENDIX A
SIMTROL, INC. AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements and (3) the
independence and performance of the Company's external auditors.
The members of the Audit Committee shall meet the independence and
experience requirements of the Securities and Exchange Commission and the stock
market on which its shares are traded. The members of the Audit Committee shall
be appointed by the Board.
The Audit Committee shall have the authority to retain special accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management, including
major issues regarding accounting and auditing principles and practices as
well as the adequacy of internal controls that could significantly affect
the Company's financial statements.
3. Review an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. Review with management and the independent auditor of the Company's
quarterly financial statements prior to the filing of its Form 10-QSB.
5. Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
6. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors
or management.
7. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the auditor.
22
10. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that the
Board replace the independent auditor.
11. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
12. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.
13. Obtain reports from management and the independent auditor that the
Company's subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements.
14. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit.
15. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
a. any difficulties encountered in the course of the audit work
including any restrictions on the scope of activities or access to
required information;
b. any changes required in the planned scope of the internal audit;
c. the internal audit department responsibilities, budget and staffing.
16. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
17. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations.
18. Review with the Company's outside counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
19. Meet at least annually with the chief financial officer and the
independent auditor in separate executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with applicable laws and regulations.
23
EXHIBIT B
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
SIMTROL, INC.
Pursuant to Sections 103 and 242 of the General Corporation Law of the
State of Delaware (the "General Corporation Law"), the undersigned, being the
duly elected President of Simtrol, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law (the "Company"), for purposes
of amending the Certificate of Incorporation of the Company, does hereby
execute, acknowledge and file the following:
I.
That, effective with the filing of this Certificate of Amendment, without
changing the authorized capital stock of the Company, each one share of the
Company's common stock, $.001 par value per share, issued and outstanding on the
effective date of this Amendment shall be automatically changed without further
action into one-tenth (1/10) of a fully paid and nonassessable share of the
Company's Common Stock, provided that no fractional shares shall be issued
pursuant to such change. Fractional share interests shall be adjusted either
upward or downward to the nearest whole share (with one-half shares rounded
upwards), but in no event shall any stockholder receive less than one whole
share. No cash shall be paid for fractional shares.
II.
That the foregoing amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law.
IN WITNESS WHEREOF, the undersigned, being the duly elected President of
the Corporation, has caused this Certificate of Amendment to be signed this
_______ day of April 2004.
SIMTROL, INC.
By:
---------------------------------
Richard W. Egan, President
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
SIMTROL, INC.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the 2004 Annual Meeting of Stockholders to be held on April 22, 2004
and the Proxy Statement for the 2004 Annual Meeting, and appoints Richard W.
Egan and Stephen N. Samp, and each of them, the proxy of the undersigned, with
full power of substitution, to vote all shares of common stock of Simtrol, Inc.
(the "Company"), which the undersigned is entitled to vote at the 2004 Annual
Meeting of Stockholders of the Company to be held at the Company's offices, 2200
Norcross Parkway, #255, Norcross, Georgia, on Monday, April 22, 2004 at 4:00
p.m. local time (the "Annual Meeting"), and at any adjournment or postponement
thereof, with the same force and effect as the undersigned might or could do if
personally present thereat. The shares represented by this proxy shall be voted
by the proxies in the manner set forth on the reverse side and with
discretionary authority with respect to any other business, not known or
determined at the time of the solicitation of this proxy, that properly comes
before the Annual Meeting or any postponement or adjournment thereof.
(1) To elect five directors to serve for terms of one year and until
their successors are elected and qualified:
|_| FOR all nominees listed below (except as indicated to the contrary
below)
|_| WITHHOLD authority to vote for all nominees
NOMINEES: Larry M. Carr, Julia B. North, Edward S. Redstone, Dallas S.
Clement and Richard W. Egan
INSTRUCTION: To withhold authority to vote for one or more individual
nominees, write the nominee's name in the following space:
______________________.
(2) To approve a one-for-ten reverse stock split of the Company's
outstanding common stock.
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To approve an amendment to the Company's 2002 stock option plan to
increase the number of shares of the Company's common stock that may
be issued under the plan.
FOR |_| AGAINST |_| ABSTAIN |_|
(4) To ratify the appointment of Marcum & Kliegman LLP as the Company's
independent auditors for the fiscal year ending December 31, 2004.
FOR |_| AGAINST |_| ABSTAIN |_|
(5) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Please date and sign this Proxy exactly as name(s) appears on the mailing label.
Unless instructions to the contrary are indicated in the space provided, this
Proxy will be voted "FOR" election of the nominees named herein and "FOR"
proposals (2), (3) and (4) described above.
NOTE: When signing as an attorney, trustee, executor, administrator or guardian,
please give your title as such. If a corporation or partnership, give full name
of authorized officer. In the case of joint tenants, each joint owner must sign.
x___________________________________
Dated: _____________________, 2004 x___________________________________
Print Name(s):______________________
____________________________________
|_| I plan to attend the Annual Meeting.
|_| I do not plan to attend the Annual Meeting.