SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
Alternate Marketing Networks, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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by registration statement number, or the Form or Schedule and the
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(4) Date Filed:
ALTERNATE MARKETING NETWORKS, INC.
13155 Noel Road, 10th Floor
Dallas, TX 75240
(972) 720-3500
April 8, 2003
Dear Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 11:00 a.m., on Thursday, May 8, 2003, at 13155 Noel
Road, 10th Floor, Dallas, Texas 75240.
This year you are presented with proposals to elect one (1) Class I
director and increase the number of authorized shares reserved for the 1995
Long-Term Incentive and Stock Option Plan. Following the formal business of
the meeting, I will report on the affairs of the Company and respond to
questions of general interest to stockholders.
We look forward to greeting personally those of you who are able to be
present at the meeting. However, whether or not you plan to attend, it is
important that your shares be represented, regardless of the number of shares
which you hold. Accordingly, you are requested to sign and date the enclosed
proxy and mail it in the envelope provided at your earliest convenience.
Very truly yours,
/s/ Adil Khan
Adil Khan
Chief Executive Officer
ALTERNATE MARKETING NETWORKS, INC.
13155 Noel Road, 10th Floor
Dallas, TX 75240
(972) 720-3500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2003
Dear Stockholder:
You are cordially invited to attend our 2003 Annual Meeting of
Stockholders, which will be held at 11:00 a.m. Central Time on Thursday, May
8, 2003 at 13155 Noel Road, 10th Floor, Dallas, Texas 75240.
We are holding the annual meeting for the following purposes:
1. To elect one (1) Class I director to serve for a three-year term
expiring at the 2006 annual meeting of stockholders, upon election and
qualification of the Class I director=s successor.
2. To act upon a proposal to increase the number of shares authorized
for issuance under the 1995 Long-Term Incentive and Stock Option Plan from
1,500,000 shares to 3,000,000 shares.
3. To transact other business that may properly come before the
annual meeting or any adjournment or postponement of the meeting.
These items are fully described in the proxy statement, which is part of
this notice. We have not received notice of other matters that may be properly
presented at the annual meeting.
Only stockholders of record at the close of business on March 24, 2003
will be entitled to notice of and to vote at the annual meeting and at any
adjournment or postponement of the meeting. For 10 days prior to the annual
meeting, a list of stockholders entitled to vote at the meeting will be
available for inspection at the Company's offices at 13155 Noel Road, 10th
Floor, Dallas, TX 75240. If you would like to view the stockholder list,
please call ALTM Investor Relations at (972) 720-3500 to schedule an
appointment.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to be present personally at the annual meeting,
please complete, date, sign and return the accompanying Proxy as promptly as
possible to ensure your representation at the meeting. A self-addressed
return envelope is enclosed for that purpose. Even if you have given your
proxy, you may still vote in person if you attend the meeting. Please note,
however, that if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the meeting, you must first obtain from the
record holder a proxy issued in your name. We sincerely hope that all
stockholders who can attend the annual meeting will do so.
By Order of the Board
/s/ Sandra J. Smith
April 8, 2003 Sandra J. Smith, Secretary
TABLE OF CONTENTS
RECORD DATE AND VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROPOSAL 1 - ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . 3
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . 4
The Board, Board Committees, and Meetings. . . . . . . . . . . . . . . . . 6
Security Ownership of Certain Beneficial Owners and Management . . . . . . 8
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Certain Relationships and Related Transactions . . . . . . . . . . . . . . 10
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . . . . 13
Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PROPOSAL 2 - INCREASE IN NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER
THE 1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN. . . . . . . . . . . . 17
The 1995 Long-Term Incentive and Stock Option Plan . . . . . . . . . . . . 17
Proposed Increase in Number of Authorized Shares . . . . . . . . . . . . . 17
New Plan Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . 20
AUDIT COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . 21
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PROPOSALS FOR FISCAL 2003 ANNUAL MEETING . . . . . . . . . . . . . . . . . 24
WHERE YOU CAN FIND MORE INFORMATION. . . . . . . . . . . . . . . . . . . . 25
ALTERNATE MARKETING NETWORKS, INC.
13155 Noel Road, 10th Floor
Dallas, Texas 75240
(972) 720-3500
PROXY STATEMENT
This proxy statement and the attached form of proxy are first provided to
stockholders on or about April 8, 2003 by the board of directors of Alternate
Marketing Networks, Inc. in connection with the solicitation by the Company by
use of the mails only of proxies for use at the annual meeting of stockholders
to be held on Thursday, May 8, 2003 at 11:00 a.m. Central Time at 13155 Noel
Road, 10th Floor, Dallas, Texas 75240, and at any postponement or adjournment
of the meeting, for the purposes and in connection with the matters to be
acted upon set forth in the preceding ANotice of Annual Meeting of
Stockholders.@ We are not currently aware of any other matters which will
come before the meeting. The cost of solicitation has been or will be borne
directly by the Company.
A copy of the annual report on Form 10-KSB of the Company for the fiscal
year ended December 31, 2002 is enclosed for your information. It is not a
part of the proxy solicitation material. The report describes the financial
condition of the Company as of December 31, 2002.
We have asked brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to the beneficial owners of our
common stock and we will reimburse them for their expenses in so doing. To
ensure adequate representation of shares at the meeting, our officers, agents
and employees may communicate with stockholders, banks, brokerage houses and
others by telephone, facsimile, or in person to request that proxies be
furnished.
Voting Securities
9,895,878 shares of common stock are outstanding and entitled to be voted
at the annual meeting. Each holder of outstanding shares of common stock is
entitled to one vote per share held as of the record date. The record date,
with respect to this solicitation, is March 24, 2003. No persons solicited
have any cumulative voting rights.
Voting Procedures and Vote Required
The presence at the annual meeting in person or by proxy of the holders
of a majority of the outstanding shares of our common stock entitled to vote
constitutes a quorum for the transaction of business. All matters listed in
the Notice of Annual Meeting of Stockholders (except election of directors,
which is by plurality vote) require the affirmative vote of a majority of the
shares present at the annual meeting either in person or by proxy, and
entitled to vote on that matter.
How to Vote
By signing and returning the enclosed proxy card, you will be giving your
proxy to the Board and authorizing the Board to vote your shares.
How Your Proxy Will Be Voted
Unless revoked, all properly executed proxies will be voted as specified.
Proxies that are signed but that lack any specification will be voted FOR
each nominee and FOR each other proposal described in this proxy statement.
If any other matters properly come before the annual meeting, or if any of the
persons named to serve as directors should decline or be unable to serve, the
persons named in the proxy will vote in accordance with their discretion.
Revocability of Proxy
You have the power to revoke your proxy at any time before convening of
the annual meeting. Revocations of proxy will be honored if received by us,
at the Company, addressed to the attention of Adil Khan, Chief Executive
Officer, on or before April 30, 2003. In addition, on the day of the meeting,
prior to the convening thereof, revocations may be delivered to the tellers
who will be seated at the door of the meeting room.
No Dissenters= Right of Appraisal
The stockholders of the Company are not entitled to any rights of
appraisal or similar rights of dissenters with respect to any matter to be
acted upon or contemplated by this proxy statement.
Abstentions
If you abstain from voting as to any matter, your shares shall be deemed
present at the meeting for purposes of determining a quorum and for purposes
of calculating the vote with respect to such matter, but shall not be deemed
to have been voted in favor of such matter. Abstentions, therefore, as to any
proposal will have the same effect as votes against such proposal.
Broker Non-Votes
If a broker turns in a Anon-vote@ proxy, indicating a lack of voting
instruction by the beneficial holder of the shares and a lack of discretionary
authority on the part of the broker to vote on a particular matter, then the
shares covered by such non-vote proxy will be considered present at the
meeting for purposes of determining a quorum but will not be considered to be
represented at the meeting for purposes of calculating the vote required for
approval of such matter.
RECOMMENDATIONS OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR ELECTION OF EACH NOMINEE FOR DIRECTOR
NAMED IN THIS PROXY STATEMENT AND FOR THE INCREASE IN THE AUTHORIZED SHARES
UNDER THE 1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN (THE ASTOCK OPTION
PLAN@).
PROPOSAL 1: ELECTION OF DIRECTORS
The certificate of incorporation and bylaws of the Company provide for a
classified board of directors with three (3) classes of directors. The
current members of the Board and their classes are as follows:
Name Class Term Expires In
J. Robert Routt I 2003
Thomas Hiatt II 2004
R. Phillip Baker II 2004
Adil Khan III 2005
Phillip Miller III 2005
Three current members of the Board, including the only nominee for the
upcoming election of directors, are independent directors, as defined in the
applicable rules for companies traded on The NASDAQ Stock Market, Inc. and the
other two members of the Board are members of the Company's senior management.
Each director serves for a three-year term.
Only Class I directors will be standing for re-election at the annual
meeting. Our current Class I director is also our nominee for the upcoming
election of directors. The Board has nominated the person listed below to
serve as a director for the term beginning at the annual meeting of
stockholders on May 8, 2003. Unless proxy cards are otherwise marked, the
persons named as proxies will vote all proxies received FOR the election of
the nominee named in this section.
If the director nominee is unable or unwilling to serve as a nominee at
the time of the annual meeting, the persons named as proxies may vote either
for a substitute nominee designated by the present Board to fill the vacancy.
The Board has no reason to believe that the following nominee will be
unwilling or unable to serve if elected as a director. This person has been
nominated to serve until the annual meeting of stockholders in 2006 or until
their successor, if any, is elected or appointed. This section contains the
name and biographical information of the nominee.
Recommendation of the Board
The Board recommends a vote "FOR" the election of the following nominee.
J. Robert Routt
Mr. Routt has been a director of the Company since December 2002. Mr.
Routt retired in May 2002 from E.W. Scripps Company where he served as vice
president and controller. E.W. Scripps is a New York Stock Exchange-traded
media company with revenues in excess of $1 billion. Mr. Routt was an auditor
with Deloitte & Touche from 1976 through 1980, when he joined E.W. Scripps.
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of the Company are:
Name/Position(s) and Office(s) with the Company Age Present Year
Term First
Expires Elected
Director
Phillip D. Miller 51 2005 1988
President and Chairman of the Board
Adil Khan 37 2005 2002
Director and Chief Executive Officer
Thomas Hiatt 55 2004 1998
Director
R. Phillip Baker 55 2004 2002
Director
J. Robert Routt 49 2003 2002
Director
Sandra J. Smith 44 N/A N/A
Secretary, Treasurer, and Chief Financial
Officer
Frank O=Connell 60 N/A N/A
Vice President-Sales/USSPI Division
David Bender 50 N/A N/A
Chief Operating Officer
William Warren 44 N/A N/A
Vice President-Business
Development/Hencie Division
The following biographical information is furnished with respect to each
of the current directors and executive officers other than Mr. Routt, the
current nominee, whose biographical information is included above.
Phillip D. Miller. Mr. Miller is the founder of the Company and has
served as its Chief Executive Officer (CEO) and as a member of the Board since
inception in 1988. He became the Company=s President in August 2002, when the
Company acquired Hencie and he was replaced as the Company=s CEO. Mr. Miller
has 25 years experience as an entrepreneur, primarily in the private delivery
industry, where he is recognized as a leader and spokesperson. In the course
of his career, Mr. Miller has founded and either merged or sold five
companies, including Promotional Media Management, American Field Marketing,
and Discovery BIDCO (a financial institution in the State of Michigan). Mr.
Miller holds an associate degree in business from Grand Rapids Junior College.
Thomas Hiatt. Mr. Hiatt has been a director of the Company since January
12, 1998. Mr. Hiatt is a general partner of Middlewest Management Co., LP,
which serves as the general partner of Middlewest Ventures II, LP, a venture
capital fund. He is also a managing director of MWV Capital Partners, a
private equity fund. Mr. Hiatt currently serves as a director of several
companies, including PackageNet, Inc., PowerWay, Inc. and Stratis Corporation.
Adil Khan. Mr. Khan has been the Chief Executive Officer of the Company
and a director since August 2002, when the Company acquired Hencie. Mr. Khan,
founder of Hencie, graduated from Virginia Tech University in 1986 with a
degree in Computer Engineering. His professional experience includes many
different areas in the software services industry, including designing
software and technical infrastructure, marketing software services, building
strategic alliances, and managing day-to-day operations. He also attended an
Executive MBA program at the University of Texas at Dallas and completed his
education in marketing and management. Mr. Khan started his career as a
software engineer in 1986 designing mission-critical software systems based on
UNIX and Oracle databases. In 1989, he co-founded Champ Computer Systems to
create and market vertical software for the healthcare and retail industries,
including the popular product, Register-Mate, to retail stores. In 1994, Champ
Computer Systems was sold to Polyphase Corporation. In 1995, Mr. Khan entered
the enterprise software market and provided senior consulting services at MCI
Systemhouse (now EDS) and Oracle Corporation.
R. Phillip Baker. Mr. Baker has been a director of the Company since
August 2002. Mr. Baker is a certified public accountant. He graduated form
the University of Texas at Austin in 1969, with a major in accounting. He
practiced public accounting for 22 years while building the largest local
public accounting firm during that period in the Dallas/Ft, Worth, Texas area.
From 1971 to the time he sold his interest in the firm, Mr. Baker
concentrated his practice in the rent-to-own industry as it was being formed
and expanded. In addition, he advised and assisted clients in business sales
and acquisitions and significant financings. In 1991, he sold his practice
and joined Chickasaw Holding Company, a telecommunications company in
Oklahoma, as Executive Vice President, becoming Chief Executive Officer in
1996. Since retiring in the spring of 2000, he has been assisting a private
group of which he is a principal in the acquisition of a chain of consumer
small loan stores.
Sandra J. Smith. Ms. Smith has been the Chief Financial Officer of the
Company since July 1995. From 1989 until appointment as Chief Financial
Officer, Ms. Smith served as the Controller of the Company. From 1987 to
1989, Ms. Smith was Controller of United Delivery Systems, a private delivery
firm, which was founded and operated by Phillip D. Miller prior to the
formation of the Company in 1989. Ms. Smith has been a licensed certified
public accountant since 1983. Ms. Smith holds a bachelor of business
administration degree from Grand Valley State University.
Frank O=Connell. Mr. O=Connell has been Vice President and Sales Manager
- USSPI Division of the Company since March 1996. From 1994 until appointment
as Vice President, Mr. O=Connell served as Vice President of Sales for the
USSPI Division of National Home Delivery, Inc. From 1979 through 1994, Mr.
O=Connell served in various sales positions for U.S. Suburban Press, Inc.
Prior to 1979, Mr. O=Connell held sales positions at various companies
including Media Networks, Inc., Redbook and Cosmopolitan Magazine. Mr.
O=Connell holds a bachelor=s degree from Southern Illinois University.
David Bender. Mr. Bender was promoted to Chief Operating Officer of
Hencie in 2001. Previously, he directed Hencie=s delivery organization,
managing client relationships and upselling. Mr. Bender has more than 26
years of experience in information technology, with more than 23 years of
management experience. During a 19-year tenure at Kerr-McGee, Mr. Bender
served as Assistant Controller-Systems and Director of System Development
managing a team of over 100 IT professionals and Manager of the Exploration
and Production Information Technology Division, responsible for worldwide oil
& gas IT. He managed and delivered multiple enterprise resource planning
(ERP) and energy projects budgeted at more than $25 million that included more
than 120 project participants. Mr. Bender joined Hencie in May 2000. Mr.
Bender has a Bachelor of Science in Mathematics from Davidson College and a
Master of Business Administration, Accounting degree from University of
Houston.
William Warren. Mr. Warren has 20 years of experience in the consulting
and information technology industries, including over 17 years in sales, sales
management, business development, and client relationship management roles.
Mr. Warren began his career at IBM where he held positions in sales and
marketing in the National Accounts Division with responsibility for accounts
in the oil and gas industry. Most recently, Mr. Warren served as Regional
Director, Business Development for the Southwestern Region of Cambridge
Technology Partners, a major consulting and systems implementation firm. He
was responsible for managing the sales, field marketing and client management
functions for this $40M region. Mr. Warren has direct experience in a variety
of practice areas including ERP, client relationship management (CRM), e-
business and web development, custom application development, strategy
services, and business process re-engineering. Mr. Warren holds a Master of
Business Administration degree in Marketing from the University of North Texas
with emphasis in strategic market planning. Mr. Warren joined Hencie in April
2001 as Vice President - Business Development.
THE BOARD, BOARD COMMITTEES, AND MEETINGS
Corporate governance is typically defined as the system that allocates
duties and authority among a company's stockholders, board of directors, and
management. The stockholders elect the board and vote on extraordinary
matters, the board is the company's governing body, responsible for hiring,
overseeing and evaluating management, particularly the Chief Executive Officer
(CEO), and management runs the company's day-to-day operations. Our Board
currently consists of five directors as described in "Proposal 1: Election of
Directors." The current Board members include three independent directors and
two members of the Company's senior management. The primary responsibilities
of the Board are oversight, counseling and direction to the Company's
management in the long-term interests of the Company and its stockholders.
The Board's detailed responsibilities include (i) selecting, regularly
evaluating the performance of, and approving the compensation of the Chief
Executive Officer and other senior executives, (ii) reviewing and, where
appropriate, approving the Company's major financial objectives, strategic and
operating plans and actions, (iii) overseeing the conduct of the Company's
business to evaluate whether the business is being properly managed, and
(iv) overseeing the processes for maintaining the Company's integrity with
regard to its financial statements and other public disclosures and compliance
with law and ethics. The Board has delegated to the Chief Executive Officer,
working with the Company's other executive officers, the authority and
responsibility for managing the Company's business in a manner consistent with
the Company's standards and practices, and in accordance with any specific
plans, instructions or directions of the Board. The Chief Executive Officer
and management are responsible for seeking the advice and, in appropriate
situations, the approval of the Board with respect to extraordinary actions to
be undertaken by the Company.
The Board and its committees meet throughout the year on a set schedule,
and also hold special meetings and act by written consent from time to time as
appropriate. The Board has delegated various responsibilities and authority
to different Board committees as described in this section of the proxy
statement. Board members have access to all Company employees outside of
Board meetings.
The Board currently has, and appoints the members of, standing Audit and
Compensation Committees. The members of the committees are identified below.
The Audit Committee is comprised of Messrs. Baker, Hiatt, and Routt. Mr.
Baker is the Chair of the Audit Committee. The Audit Committee assists the
Board in its general oversight of the Company's financial reporting, internal
controls and audit functions, and is directly responsible for the appointment,
compensation and oversight of the work of the Company's independent auditors.
During 2002, the Audit Committee held four meetings. The responsibilities
and activities of the Audit Committee are described in greater detail in
"Audit Committee Report."
The Compensation Committee is comprised of Messrs. Baker, Hiatt, and
Routt. Mr. Hiatt is the Chair of the Compensation Committee. The
Compensation Committee reviews and approves salaries and other matters
relating to executive compensation, and administers the Company's stock option
plans, including reviewing and granting stock options to officers and other
employees. The Compensation Committee also reviews and approves various other
Company compensation policies and matters. The Compensation Committee held
one meeting during 2002 and also regularly acts by written consent.
The Board held nine meetings during 2002. All directors are expected to
attend each meeting of the Board and the committees on which he serves. In
2002, no director attended less than 75% of all the meetings of the Board and
the committees on which he served.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 24, 2003, as to
the name, address, and shares of each class of equity securities of the
Company or any of its parents or subsidiaries other than directors' qualifying
shares, beneficially owned (as determined in accordance with Rule 13d-3 under
the Exchange Act) by all directors, nominees, and Anamed executive officers@
(as defined in Item 402(a)(2) of Regulation S-B) of the Company, directors and
executive officers of the Company as a group, and any person who is known to
us to be the beneficial owner of more than five percent (5%) of any class of
the Company=s voting securities.
Title Name and Address Amount and Nature of Percent of
of Class (1) of Beneficial Owner (2) Beneficial Ownership (3) Class (4)
Individual Directors,
Nominees, and Named
Executive Officers:
Adil Khan
Director and Chief Executive Officer 1,000,000 (5) 10.1
Phillip D. Miller
Director, President, and Chairman
of the Board 886,553 (6) 9.9
Thomas Hiatt
Director 381,008 (7) 4.3
J. Robert Routt
Director 252,710 2.8
Sandra J. Smith
Secretary, Treasurer, and Chief
Financial Officer 80,550 (8) *
David Bender
Chief Operating Officer 68,199 (9) *
Frank O=Connell
Vice President-Sales/USSPI Division 27,000 (10) *
R. Phillip Baker
Director 6,000 *
William Warren
Vice President-Business
Development/Hencie Division -0- (11) 0.0
Directors and Executive Officers as a
Group:
9 persons 2,702,020 27.0
Other 5% Beneficial Owners:
Drawbridge Investment Partners LLC
c/o Fortress Investment Group
1251 Avenue of the Americas, Suite 1600
New York, NY 10020 2,474,039 25.0
Stan Henry
2137 Deer Park Avenue
Deer Park, NY 11729-1321 888,953 (12) 10.0
Tribune Company
435 N. Michigan Avenue
Chicago, Illinois 60611 843,758 (13) 9.5
The Krieger Group
P.O. Box 7787
Princeton, New Jersey 08543 675,992 (14) 7.6
__________
(1) Unless otherwise indicated, the title of each class of securities
included in this table is common stock, par value $0.01 per share.
(2) Unless otherwise indicated, the address for each beneficial owner
included in this table is c/o Alternate Marketing Networks, Inc., 13155
Noel Road, 10th Floor, Dallas, Texas 75240.
(3) Unless otherwise indicated, each beneficial owner included in this table
has sole voting and investment power with respect to the securities
beneficially owned, subject to applicable community property laws,
unless otherwise indicated.
(4) The beneficial ownership percentages in this table have been calculated
on the basis of the amount of outstanding securities, excluding
securities held by or for the account of the Company or its
subsidiaries, plus securities deemed outstanding pursuant to Rule 13d-
3(d)(1) under the Exchange Act.
(5) Does not include 4,428 shares of the 17,300,904 diluted outstanding
shares of common stock, par value $0.01 per share, of Hencie, Inc., a
Delaware corporation and a majority owned subsidiary of the Company,
which Mr. Khan has the right to acquire within 60 days of March 24, 2003
pursuant to options granted by Hencie to Mr. Khan under the Hencie 2000
Stock Option Plan.
(6) Includes 25,000 shares which Mr. Miller has the right to acquire within
60 days of March 24, 2003 pursuant to options granted by the Company to
Mr. Miller under the Stock Option Plan and 232,975 shares which The
Krieger Group has the right to acquire within 60 days of March 24, 2003
pursuant to an option granted by Mr. Miller to The Krieger Group. See
also Note 13 below.
(7) Includes 363,508 shares held of record by Middlewest Ventures II, LP, of
which Mr. Hiatt is a general partner, and 17,500 shares which Middlewest
has the right to acquire within 60 days of March 24, 2003 pursuant to an
option granted by the Company to Middlewest under the Outside Directors
and Advisors Stock Option Plan (the ADirector=s Plan@).
(8) Includes 30,000 shares which Ms. Smith has the right to acquire within
60 days of March 24, 2003 pursuant to options granted by the Company to
Ms. Smith under the Stock Option Plan.
(9) Does not include 3,998 shares of the 17,296,476 outstanding shares of
common stock, par value $0.01 per share, of Hencie, Inc., a Delaware
corporation and a majority owned subsidiary of the Company, owned and
held of record by Mr. Bender.
(10) Includes 30,000 shares which Mr. O=Connell has the right to acquire
within 60 days of March 24, 2003 pursuant to options granted by the
Company to Mr. O=Connell under the Stock Option Plan.
(11) Does not include 180,000 shares of the 17,296,476 outstanding shares of
common stock, par value $0.01 per share, of Hencie, Inc., a Delaware
corporation and a majority owned subsidiary of the Company, owned and
held of record by Mr. Warren.
(12) Includes 388,516 shares held for the benefit of family members, 5,000
shares which Mr. Henry has the right to acquire within 60 days of March
24, 2003 pursuant to options granted by the Company to Mr. Henry under
the Director=s Plan, and 232,975 shares which The Krieger Group has the
right to acquire within 60 days of March 24, 2003 pursuant to an option
granted by Mr. Henry to The Krieger Group. See also Note 13 below.
(13) Does not include shares held of record by Messrs. McKeon and Sito, who
are affiliates of Tribune and former directors of the Company.
(14) Includes 5,500 shares, which may be purchased by Dale B. Krieger, a
former director of the Company, upon exercise of an option granted under
the Directors Plan and 19,250 shares, which may be purchased upon
exercise of an option granted under the Stock Option Plan. Shares held
of record as follows: (i) shares described in Note (4) above, held of
record by Dale B. Krieger, a former director of the Company, (ii)
496,057 shares held of record by The Krieger Family Limited Partnership,
which includes 396,057 shares which may be acquired upon exercise of
options from Phillip D. Miller and Stan Henry; (iii) 69,891 shares held
of record by Richard A. Ruderman, which may be acquired upon exercise of
options from Phillip D. Miller and Stan Henry; (iv) 20,294 shares held
of record by Paula Ruderman; (v) 32,000 shares held of record by The
Dale and Veronica Krieger Foundation, and (vi) 33,000 shares held in
accounts managed by KR Financial Investment Advisory Clients, an
investment advisor.
* Less than 1.0%.
Change in Control
To the knowledge of the Company, no change in control of the Company has
occurred since January 1, 2002.
Legal Proceedings
On October 30, 2002, Hencie.com, Inc., a Delaware corporation, and Paul
A. Tanner initiated a legal proceeding in the County Court of Dallas County,
Texas against Hencie Consulting, a wholly-owned subsidiary of Hencie, certain
current and former employees of Hencie Consulting, including Adil Khan, and
certain other parties, including Hencie International. Hencie.com and Mr.
Tanner are seeking approximately $2.0 million, exemplary damages, interest,
and legal fees in connection with claims regarding an alleged equity
investment in Hencie Consulting prior to the acquisition of Hencie by the
Company. On February 18, 2003, the Company executed a Mutual Release
Agreement with Adil Khan, the company=s CEO, which provides for Adil Khan to
contribute up to 200,000 shares of common stock to the Company if the Company
requests the shares so transferred to be used for any settlement of this
litigation. The Company intends to vigorously defend against and contest the
claims and pursue any potential counterclaims that may be available to Hencie
Consulting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective as of January 1, 2003, K2 VC LTD., a Texas limited partnership
and an affiliate of Adil Khan, the Chief Executive Officer of the Company,
contributed 1,474,039 shares, par value $0.01 per share, of common stock of
the Company to the Company pursuant to that certain Contribution Agreement,
effective as of January 1, 2003, by and between the Company and K2 VC. Mr.
Khan may be deemed to be an indirect beneficial owner of such shares and
exercises indirect voting power over such shares as the Co-Managing Member of
K2 VC Management, LLC, a Texas limited liability company and the sole general
partner of K2 VC.
On February 18, 2003, the Company granted to Mr. Khan a non-qualified
stock option to purchase up to 1,700,000 shares of common stock at an exercise
price of $0.50 per share with vesting of 25% per year over the next four years
pursuant to and in accordance with that certain Non-Qualified Stock Option
Agreement, dated February 18, 2003, by and between the Company and Mr. Khan.
On February 18, 2003, the Company also released K2 VC and Mr. Khan from
indemnification obligations owed by Mr. Khan to the Company, in exchange for
the option to use 200,000 shares of common stock owned by K2 VC to settle
certain pending claims against the Company pursuant to and in accordance with
that certain Mutual Release Agreement, dated February 18, 2003, by and among
the Company, K2 VC, and Mr. Khan.
On February 18, 2003, the Company entered into that certain Release
Agreement, dated February 18, 2003, by and among the Company, Hencie, Hencie
Consulting, K2 VC, Mr. Khan, Drawbridge Investment Partners, LLC , who was the
largest creditor of Hencie and Hencie Consulting, and certain directors and
stockholders of the Company, to eliminate approximately $1,000,000 in debt of
the Company in exchange for $120,000, 2,474,309 shares of common stock, and
registration rights for the registration of the 2,474,309 shares of common
stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, officers and
beneficial owners of more than 10% of our common stock to report beneficial
ownership and changes in beneficial ownership with the Commission. Based
solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to
the Company, we believe that all these persons filed the reports required by
Section 16(a) of the Exchange Act with the Commission on a timely basis during
fiscal year 2002.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the
compensation paid by the Company for services rendered during the fiscal years
ended December 31, 2000, 2001 and 2002 to the Company=s chief executive
officer and each of the other four persons serving as executive officers on
December 31, 2002 (collectively, the Anamed executive officers@).
SUMMARY COMPENSATION TABLE
Annual Compensation
Other
Annual
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($)
Adil Khan
Chief Executive Officer 2002(1) 76,750 -0- 3,806(2)
2001 N/A N/A N/A
2000 N/A N/A N/A
Phillip D. Miller
President 2002 212,562 -0- 14,642(3)
2001 212,562 -0- 13,183(4)
2000 212,562 -0- 13,107(5)
Sandra J. Smith
Chief Financial Officer 2002 110,000 -0- 24,250(6)
2001 110,000 3,000 1,100(7)
2000 109,615 2,500 1,121(8)
Frank O=Connell
Vice President-Sales/USSPI Div. 2002 57,000 5,000 195,038(9)
2001 57,000 3,500 172,841(10)
2000 57,000 5,000 144,576(11)
David Bender
Chief Operating Officer/
Hencie Division 2002(1)72,667 600 -0-
2001 N/A N/A N/A
2000 N/A N/A N/A
William Warren
Vice President-Business Dev./
Hencie Division 2002(1)71,042 646 -0-
2001 N/A N/A N/A
2000 N/A N/A N/A
_______________
(1) Employed by the Company from August 1, 2002 through December 31, 2002.
(2) Includes $3,806 auto allowance.
(3) Includes $7,200 auto allowance, $5,192 in Company-paid insurance
premiums, and $2,250 in Company contributions to Mr. Miller=s 401(k)
plan.
(4) Includes $7,200 auto allowance, $3,748 in Company-paid insurance
premiums, and $2,235 in Company contributions to Mr. Miller=s 401(k)
plan.
(5) Includes $7,200 auto allowance, $3,673 in Company-paid insurance
premiums, and $2,234 in Company contributions to Mr. Miller=s 401(k)
plan.
(6) Includes $23,150 stock based compensation and $1,100 in Company
contributions to Ms. Smith=s 401(k) plan.
(7) Includes $1,100 in Company contributions to Ms. Smith=s 401(k) plan.
(8) Includes $1,121 in Company contributions to Ms. Smith=s 401(k) plan.
(9) Includes $192,493 in sales commissions and $2,545 in Company
contributions to Mr. O=Connell=s 401(k) plan.
(10) Includes $170,516 in sales commissions and $2,325 in Company
contributions to Mr. O=Connell=s 401(k) plan.
(11) Includes $142,531 in sales commissions and $2,045 in Company
contributions to Mr. O=Connell=s 401(k) plan.
OPTION GRANTS IN LAST FISCAL YEAR
We did not grant any stock options or stock appreciation rights to any
named executive officers during fiscal year 2002.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the fiscal year-end
value of the unexercised options of each named executive officer for fiscal
year 2002. No named executive officers exercised any stock options or stock
appreciation rights during fiscal year 2002.
Number of Securities
Underlying Unexercised
Options at Fiscal Year-End
(#)
Value of Unexercised
In-the-Money Options at
Fiscal Year-End ($)
Name
Exercisable
Unexercisable
Exercisable
Unexercisable
Adil Khan
-0-
-0-
N/A
N/A
Phillip D.
Miller
25,000
-0-
N/A
N/A
Sandra J.
Smith
-0-
-0-
N/A
N/A
Frank
O=Connell
27,000
-0-
N/A
N/A
David Bender
-0-
-0-
N/A
N/A
William
Warren
-0-
-0-
N/A
N/A
COMPENSATION OF DIRECTORS
It is the general policy of the Board that compensation for independent
directors should be a mix of cash and equity-based compensation. Employee
directors are not paid for Board service in addition to their regular employee
compensation. Independent directors may not receive consulting, advisory or
other compensatory fees from the Company in addition to their Board
compensation.
In 2002, each independent director was paid for out-of-pocket expenses
for each regular Board meeting.
Although the Company has historically granted stock options to
independent directors, the Company did not grant any stock options to any
independent directors in 2002.
In February 2003, the Compensation Committee and the Board reviewed and
revised the Board's cash compensation. Starting with 2003, independent
directors are now paid a retainer of $10,000 per year, with a possible
additional $1,500 per day for committee projects.
The Compensation Committee and the Board also decided to review its use
of annual stock option grants to directors, which are typically granted in
connection with the election of directors. The Compensation Committee and
management are engaged in a strategic review of executive compensation,
including the use of stock options and the possible use of other equity-
related incentives such as "restricted stock" grants. The use of stock
options and other equity-related incentives for the Board will similarly be
reviewed, with the expectation that changes in Board compensation practices
with regard to equity-related incentives will be considered, if appropriate,
to keep them aligned with future changes in executive compensation practices.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company entered into an employment agreement with Adil Khan effective
August 1, 2002, to serve as Vice Chairman of the board of directors and Chief
Executive Officer of the Company at a base salary of $177,000 for the first
year, $193,000 for the second year and $206,600 for the third year. Mr.
Khan=s salary is subject to annual review by the Compensation Committee. The
term of the Agreement is for a period of three (3) years. In accordance with
the terms of the Agreement, Mr. Khan is also entitled to an annual bonus
payment in the discretion of the Compensation Committee. The Agreement also
provides for disability and life insurance and standard employee benefits
consistent with established benefit plans of the Company (including retirement
plans, life insurance plans, medical plans and dental plans). In addition to
the standard benefits provided by the Company, the Company has agreed to
provide Adil Khan with a term life insurance policy in the face amount of
$2,000,000 ($1,000,000 for the benefit of the Company and $1,000,000 for the
benefit of Mr. Khan=s designated beneficiaries). The Agreement is terminable
by the Company in the event Mr. Khan becomes disabled or for Acause@,
including (i) commission of an act of material fraud, misappropriation, or
dishonesty or other material willful act of similar magnitude against the best
interests of the Company, (ii) intentional material falsification of a written
document delivered to the Company, or on behalf of the Company, (iii) habitual
insobriety, (iv) addiction to non-prescription drugs, or (v) continued gross
malfeasance in connection with Mr. Khan=s duties for 30 days after written
notice describing such gross malfeasance. In addition, Mr. Khan may terminate
the Agreement within 12 months of a change of control (including any merger,
consolidation, sale of substantially all of the assets of the Company,
dissolution or liquidation of the Company, and similar events). If Mr. Khan
is terminated on account of a breach by the Company, Mr. Khan is entitled to a
severance payment equal to two times the amount of Mr. Khan=s annual base
salary as of the date of termination plus the annual average bonus paid to Mr.
Khan in the most recent two years (or such shorter period as such bonus shall
have actually been paid).
The Company entered into a second addendum to the employment agreement of
Phillip D. Miller to serve as Chairman of the Board of the board of directors
of the Company and as President of Alternate Postal Direct, Inc. and National
Home Delivery, Inc., wholly-owned subsidiaries of the Company (the ASubsidiary
Companies@). Mr. Miller=s base salary is $195,000 per year, with annual
increases equal to the then existing salary multiplied by the average increase
in the cost of living index published by the United States Department of Labor
for the 12 month period preceding such date. Mr. Miller is also entitled to
bonuses up to 30% of his base salary based on attainment of performance
criteria specified by the Compensation Committee of the Company. Mr. Miller
will serve as President of the Subsidiary Companies (which term will
automatically renew for successive one year periods until the Company gives
Mr. Miller 6 months written notice of non-renewal prior to the end of any
applicable term) through December 31, 2002, as Chairman of the board of
directors of the Company through June 30, 2003, and will serve on the board of
directors of the Company through June 30, 2005. The agreement is terminable
without an expressed reason by either Mr. Miller or the Company by giving
three months prior written notice. In addition, the Company may terminate the
agreement effective immediately for Acause@, including neglect of duty,
malfeasance or continued failure to perform specified duties within 30 days
after having received a written warning. If the agreement is terminated by
the Company without an expressed reason, the Company is required to pay Mr.
Miller, as severance, within 60 days of the effective termination date, an
amount equal to 12 month=s base salary at the salary rate then in effect, plus
accrued bonuses, if any. In the event of termination of the agreement by Mr.
Miller, the Company is required to pay salary accrued through the date of
termination, excluding any accrued bonuses. The agreement further provides
that Mr. Miller shall not, directly or indirectly, for a period of two years
after termination (or one year if terminated by the Company without cause),
engage in any similar business, solicit customers of the Company, or solicit
employees of the Company in competition with the Company in the United States.
The agreement also provides for disability and life insurance at the
Company=s expense. The Company also agrees to pay for the cost of dependent
coverage included in the Company=s group health insurance plan.
The Company entered into a first addendum to the employment agreement of
Sandra J. Smith to serve as the Controller of the Company, the Chief Financial
Officer of each of the Company=s subsidiaries, and as Vice President-
Operations of Alternate Postal Direct, Inc. Ms. Smith=s agreement provides
for a term expiring in December 2003 at a base salary of $110,000 per year,
with an annual increase equal to the then-existing salary multiplied by the
average monthly increase in the cost of living index published by the United
States Department of Labor for the 12-month period preceding each anniversary
date. The agreement is terminable without an expressed reason by the Company
provided that it pay salary and benefits for the unexpired portion of the
term. In addition, the Company may terminate the agreement effective
immediately for Acause@. The agreement further provides that Ms. Smith shall
not, directly or indirectly, for a period of one year after termination,
directly or indirectly, engage or be employed by, any business or entity that
is in competition with the Company, without the prior written consent of the
Company=s CEO.
Mr. Bender is employed pursuant to an employment agreement dated May 8,
2000 that provides for a base salary and employee benefits. Mr. Warren is
employed pursuant to an employment agreement dated November 15, 2001 that
provides for a base salary, employee benefits, and up to six month's salary
upon a change in control. Stock options to purchase shares of common stock of
Hencie were granted to each of these named executive officers in 2002 and
2001.
The Company does not have an employment agreement with Mr. O=Connell.
401(k) Profit Sharing Plan
On September 1, 1996, the Company established a qualified 401(k)
retirement plan covering all employees who have met certain requirements as to
age and date of service. The plan allows employees to make contributions by
salary reductions. Company contributions are discretionary and are determined
annually by the Board. Company contributions for the year ended December 31,
2002 were $9,329.
1995 Long-Term Incentive and Stock Option Plan
See APROPOSAL 2 B INCREASE IN NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER THE 1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN@ for information
regarding the Stock Option Plan.
PROPOSAL 2: INCREASE IN NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE
1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN
COMPENSATION PLANS
Plans Subject to Security Holder Action
The 1995 Long-Term Incentive and Stock Option Plan
Effective July 21, 1995, the Company, by resolution of its Board and
stockholders, adopted the Stock Option Plan, which currently provides for the
issuance of up to 1,500,000 shares of the Company's common stock. No
preferred stock or other securities are authorized for issuance under the
Stock Option Plan. The Stock Option Plan will terminate on July 20, 2005,
unless sooner terminated by action of the Board.
All full or part-time employees (including officers and directors) of the
Company (and any subsidiaries, including Alternate Postal Direct, Inc.,
National Home Delivery, Inc. and others, if the Company acquires or forms any
additional subsidiaries) and non-employee directors, consultants and
independent contractors providing services to the Company (or any
subsidiaries) are eligible to receive options and awards under the Stock
Option Plan. The Stock Option Plan is not subject to the Employee Retirement
Income Security Act of 1974.
The Stock Option Plan permits the granting of awards to employees and
non-employee officers, directors and agents of the Company in the form of
stock appreciation rights, restricted stock awards and stock options. Stock
options granted under the Stock Option Plan may be Aincentive stock options,@
meeting the requirements of Section 422 of the Internal Revenue Code (the
ACode@), or nonqualified options, which do not meet the requirements of
Section 422. The Stock Option Plan is currently administered by the
Compensation Committee. The Stock Option Plan gives broad powers to the
Compensation Committee to administer and interpret the Stock Option Plan,
including the authority to select the individuals to be granted options and
rights, and to prescribe the particular form and conditions of each option or
right granted. Incentive stock options, in order to receive favored tax
treatment under the Code, must be exercisable for not more than 10 years and
at not less than the fair market value of the Common Stock as of the date of
the grant (not more than 5 years and not less than 110 % of fair market value
if the optionee is a 10% or greater stockholder) and may be granted only to
employees. As of March 5, 2003, 533,854 options have been granted and 122,600
are outstanding.
Proposed Increase in Number of Authorized Shares
As of December 31, 2002, 1,500,000 shares reserved under the Stock Option
Plan were subject to 122,600 outstanding options and 7,500 options granted
under the Stock Option Plan have been exercised. In general, options become
exercisable in equal installments over several years commencing with the first
anniversary of grant.
The Board anticipates that it will continue to grant options to employees
as part of its incentive program. In addition, the Board anticipates that,
employees of Hencie may become eligible to participate in the Stock Option
Plan and may choose to exercise their options by rendering their Hencie stock.
On March 6, 2003, the Board increased the number of shares reserved and
authorized for issuance under the Stock Option Plan from 1,500,000 to
3,000,000, subject to stockholder approval. In order to have sufficient
shares available, the Board recommends approval of the increase.
The following table sets forth the benefits or amounts of the newly
authorized shares that will be received by or allocated to each of the
following under the Stock Option Plan, to the extent such benefits or amounts
are determinable:
NEW PLAN BENEFITS
1995 Long-Term Incentive Stock Option Plan
Name and Position Number of Units
Chief Executive Officer 330,000
Executive Group 330,000
Non-Executive Director Group 75,000
Non-Executive Officer None
Employee Group
Tax Rules
The following is a brief summary of the federal income tax rules
currently applicable to stock options that may be granted under the Stock
Option Plan.
The grant of a NQSO will have no immediate tax consequences to the
grantee or to the Company. Upon the exercise of a NQSO, the grantee will
recognize ordinary income (and the Company will generally be entitled to a
compensation deduction) in an amount equal to the excess of the fair market
value of the shares of common stock on the date of the exercise of the option
over the option exercise price. The grantee=s tax basis in the shares will be
the exercise price plus the amount of ordinary income recognized by the
grantee, and the grantee=s holding period will commence on the date the shares
are transferred.
Upon a subsequent sale of shares of common stock acquired pursuant to the
exercise of a NQSO, any difference between the grantee=s tax basis in the
shares and the amount realized on the sale is treated as long-term or short-
term capital gain or loss, depending on the holding period of the shares.
The grant of an ISO will have no immediate tax consequences to the
grantee or to the Company. The exercise of an ISO by the payment of cash to
the Company will generally have no immediate tax consequences to the grantee
(except to the extent it is an adjustment in computing alternative minimum
taxable income) or to the Company. If a grantee holds the shares acquired
pursuant to the exercise of an ISO for the required holding period, the
grantee generally will realize long-term capital gain or long-term capital
loss upon a subsequent sale of the shares in the amount of the difference
between the amount realized upon the sale and the purchase price of the shares
(i.e., the exercise price). In such case, no compensation deduction will be
allowable to the Company in connection with the grant or exercise of the ISO
or the sale of shares of common stock acquired pursuant to such exercise.
If, however, a grantee disposes of the shares prior to the expiration of
the required holding period (a Adisqualifying disposition@), the grantee will
recognize ordinary income (and the Company will generally be entitled to a
compensation deduction equal to the excess of the fair market value of the
shares of common stock on the date of exercise (or the proceeds of the
disposition, if less) over the exercise price.
Certain limitations apply to the Company=s deduction of compensation
payable to the person serving as its chief executive officer or to any of its
four other most highly compensated executives in office as of the end of the
year in which such compensation would otherwise be deductible. In general,
the Company may not deduct compensation, other than Aperformance-based@
compensation, payable to such an executive in excess of $1 million for any
year. Income resulting from the exercise of a stock option may be included in
calculation of total income for purposes of determining whether the $1 million
limit has been exceeded.
Market Value and Resale of Option Shares
Market value and tradability of the shares issuable under the Stock
Option Plan may be a consideration for some stockholders in evaluating
Proposal 2.
As of March 5, 2003, 9,895,878 shares of the Company=s Common Stock were
issued and outstanding. On March 5, 2003, the closing bid and ask prices for
the Company=s Common Stock on the Over the Counter Bulletin Board (OTCBB) were
$0.31 and $0.45 per share, respectively.
The shares authorized for issuance under the Incentive Plan (including
the shares which are subject to approval by the stockholders at the Annual
Meeting) are registered under the Securities Act of 1933 and, upon issuance,
are freely tradable.
Information Regarding Plans and Other Arrangements Not Subject to Security
Holder Action
The following table sets forth information regarding the securities
previously authorized for issuance under the Stock Option Plan (including all
outstanding options, warrants, and rights previously granted pursuant to the
Stock Option Plan and any securities remaining available for future issuance
under the Stock Option Plan).
EQUITY COMPENSATION PLAN INFORMATION
Plan Category
Number of
securities
to be issued
upon
exercise of
outstanding
options,
warrants and
rights
Weighted-
average
exercise
price of
outstanding
options,
warrants
and rights
Number of
securities
remaining
available for
future issuance
Equity compensation
plans approved by
security holders
1,540,000
$0.76
-0-
Equity compensation
plans not approved
by security holders
N/A
N/A
N/A
Total
1,540,000
$0.76
-0-
AUDIT COMMITTEE REPORT
The ultimate responsibility for good corporate governance rests with the
Board, whose primary roles are oversight, counseling and direction to the
Company's management in the best long-term interests of the Company and its
stockholders. The Board's Audit Committee has been established for the
purpose of overseeing the accounting and financial reporting processes of the
Company and audits of the Company's annual financial statements.
Our Audit Committee is made up solely of independent directors and it
operates under a written charter adopted by the Board. The composition of the
Audit Committee, the attributes of its members and its responsibilities, as
reflected in its charter, are intended to be in accordance with applicable
requirements for corporate audit committees. The Audit Committee reviews and
assesses the adequacy of its charter on an annual basis. The charter is
presently under review, and it is expected that the Board, with the
recommendation of the Audit Committee, will amend the charter later this year
to reflect the relevant provisions of the Sarbanes-Oxley Act and related
NASDAQ rules applicable to the Company if any. A copy of the Audit
Committee's charter was most recently published in the Company's proxy
statement for its 2002 annual meeting of stockholders.
As described more fully in its charter, the purpose of the Audit
Committee is to assist the Board in its general oversight of the Company's
financial reporting, internal controls and audit functions. Management is
responsible for the preparation, presentation and integrity of the Company's
financial statements, accounting and financial reporting principles, internal
controls, and procedures designed to ensure compliance with accounting
standards, applicable laws and regulations. The Company=s internal auditors
and accounting personnel are responsible for objectively reviewing and
evaluating the adequacy, effectiveness and quality of the Company's system of
internal controls relating to the reliability and integrity of its financial
information. The Company=s independent auditors are responsible for
performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards. The Audit Committee
has ultimate authority and responsibility to select, compensate, evaluate and,
when appropriate, replace the Company's independent auditors.
The Audit Committee members are not professional accountants or auditors,
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditors, nor can the Audit Committee
certify that the independent auditors are "independent" under applicable
rules. The Audit Committee serves a board-level oversight role, in which it
provides advice, counsel and direction to management and the auditors on the
basis of the information it receives, discussions with management and the
auditors, and the experience of the Audit Committee's members in business,
financial and accounting matters. The Audit Committee has the authority to
engage its own outside advisers, including experts in particular areas of
accounting, as it determines appropriate, apart from counsel or advisers hired
by management.
The Audit Committee has an annual agenda that includes reviewing the
Company's financial statements, internal controls and audit matters. The
Audit Committee meets regularly with the Company=s independent auditors and
management to review the Company's interim financial results before the
publication of the Company's quarterly earnings press releases. Management's
and the Company=s independent auditor=s presentations to and discussions with
the Audit Committee cover various topics and events that may have significant
financial impact and/or are the subject of discussions between management and
the independent auditors. In addition, the Audit Committee generally oversees
the Company's internal compliance programs. The Audit Committee is
responsible for establishing procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, including the confidential, anonymous
submission by Company employees, received through established procedures, of
concerns regarding questionable accounting or auditing matters.
Among other matters, the Audit Committee monitors the activities and
performance of the Company=s internal and external auditors, including the
audit scope, external audit fees, auditor independence matters and the extent
to which the independent auditors may be retained to perform non-audit
services. The Company's independent auditors provide the Audit Committee with
the written disclosures required by Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees," and the Audit
Committee discusses with the independent auditors and management that firm's
independence.
In accordance with existing Audit Committee policy, all services to be
provided by the Company=s independent auditors are subject to pre-approval by
the Committee. This includes audit services, audit-related services, tax
services, and other services. In some cases, pre-approval is provided by the
full Committee for up to a year, and relates to a particular category or group
of services and is subject to a specific budget. In other cases, the Chairman
of the Audit Committee has the delegated authority from the Committee to pre-
approve additional services, and such pre-approvals are then communicated to
the full Audit Committee.
The Audit Committee has reviewed and discussed the consolidated financial
statements for fiscal year 2002 with management and the independent auditors;
management represented to the Audit Committee that the Company's consolidated
financial statements were prepared in accordance with generally accepted
accounting principles; and the independent auditors represented that their
presentations included the matters required to be discussed with the
independent auditors by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees." This review included a discussion with
management of the quality, and not merely the acceptability, of the Company's
accounting principles, the reasonableness of significant estimates and
judgments, and the clarity of disclosure in the Company's financial
statements. In reliance on these views and discussions, and the report of the
independent auditors, the Audit Committee has recommended to the Board, and
the Board has approved, the inclusion of the audited financial statements in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
2002 for filing with the Commission.
Audit Committee:
R. Phillip Baker, Chairman
Thomas Hiatt
J. Robert Routt
INDEPENDENT AUDITORS
Selection of Independent Auditor for 2003
Deloitte & Touche LLP was selected in August 2002 by the Board to serve
as the Company's independent auditors for the fiscal year ended December 31,
2002. Deloitte & Touche is engaged as our independent auditor by the Audit
Committee, who can dismiss the firm in its sole discretion without payment of
any penalty fee.
In the past, we have requested that our stockholders vote to ratify the
appointment of our independent auditor for the year. This vote is only
advisory, because the Board (and now the Audit Committee) has the sole
authority to hire and dismiss the independent auditors. We have not included
an auditor ratification proposal this year because the Board did not consider
a ratification proposal to be meaningful this year.
The services and fees relating to Deloitte & Touche are primarily for
audit, audit-related, and tax services, as described below. In part due to
the new requirements and other current and future regulations, the Company
expects that its audit and audit-related expenses will increase for 2003 over
the 2002 amounts described below. The Company's overall costs, including
related internal costs, would likely be greater in the event that a firm other
than Deloitte & Touche is chosen as our independent auditors for 2003. Extra
time and expense would be involved to familiarize new auditors with the
Company's operations, procedures, systems and the industry environment. The
knowledge, expertise and efficiencies developed over time by Deloitte & Touche
with regard to the Company would not likely be duplicated by a new firm for a
number of years. Similar commitments of time and expense would be involved in
any related changes in the providers of non-audit services as described above.
The Audit Committee considered these and other matters in its selection
process.
The Audit Committee pre-approves and reviews audit and non-audit services
performed by Deloitte & Touche as well as the fees charged by Deloitte &
Touche for such services. In its pre-approval and review of non-audit service
fees, the Audit Committee considers, among other things, the possible effect
of the performance of such services on the auditors' independence.
The Company expects that a representative of Deloitte & Touche will
attend the annual meeting, and the representative will have an opportunity to
make a statement if he or she so desires. The representative will also be
available to respond to appropriate questions from stockholders.
Audit Fees
The Company was billed the following fees by Deloitte & Touche for the
audit for fiscal year 2002. No other fees were paid to Deloitte & Touche in
2002.
Audit Fees ($158,000). This category includes the audit of the Company's
annual financial statements, review of financial statements included in the
Company's Form 10-QSB Quarterly Reports and services that are normally
provided by the independent auditors in connection with statutory and
regulatory filings or engagements for those fiscal years. This category also
includes advice on audit and accounting matters that arose during, or as
a result of, the audit or the review of interim financial statements.
Audit-Related Fees, Tax Fees, and All Other Fees ($0). No fees were
billed by Deloitte & Touche during 2002 for these types of services.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Our directors and executive officers may benefit from the Stock Option
Plan, if amended to increase the number of shares authorized for issuance
under the Stock Option Plan, as certain directors and executive officers may
be eligible to participate in the Stock Option Plan and may receive benefits
and awards under the 1995 Plan. The Board, in approving the amendment to
increase the number of share authorized for issuance under the Stock Option
Plan may have different and/or conflicting interests than or with the
stockholders of the Company. In addition, the Board, management of the
Company, and the stockholders affiliated with the Company may have different
and/or conflicting interests than or with stockholders of the Company that are
not affiliated with the Company in any capacity other than their capacity as a
stockholder of the Company.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING OF STOCKHOLDERS
The deadline for submitting stockholder proposals for inclusion in the
company=s proxy statement and form of proxy for the company=s 2004 annual
meeting of stockholders is December 10, 2003. Stockholder proposals must be
received at the Company's principal executive offices at 13155 Noel Road, 10th
Floor, Dallas, Texas 75240 no later than December 10, 2003 in order to be
included in the Company=s proxy statement and form of proxy for the Company=s
2004 annual meeting of stockholders. Notice of a stockholder proposal
submitted outside the processes of Rule 14a-8 under the Exchange Act will be
considered untimely after February 8, 2004; provided, however, that in the
event that the date of the annual meeting is more than thirty (30) days
earlier or more than sixty (60) days later than such anniversary date, notice
by the stockholder to be timely must be so delivered or received not earlier
than the one hundred twentieth (120th) day prior to such annual meeting and
not later than the close of business on the later of the ninetieth (90th) day
prior to such annual meeting or the tenth (l0th) day following the day on
which public announcement (as defined below) of the date of such meeting is
first made.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
Only one copy of this proxy statement is being delivered to multiple
stockholders sharing an address unless the Company has received contrary
instructions from one or more of the stockholders sharing an address. Upon
the written or oral request of a stockholder at a shared address to which a
single copy of the proxy statement was delivered, the Company shall promptly
deliver a separate copy of this proxy statement to the stockholder.
Stockholders may notify the Company that the stockholder wishes to receive a
separate copy of this proxy statement by writing to Alternate Marketing
Networks, Inc., Attention: Investor Relations, 13155 Noel Road, 10th Floor,
Dallas, TX 75240 or by calling the Department of Investor Relations of the
Company at (972) 720-3500. In addition, if any stockholder wishes to receive
a separate copy of this proxy statement in the future, such stockholder may
notify the Company either by writing to the foregoing address or calling the
foregoing telephone number. Stockholders sharing an address may request
delivery of a single copy of the annual reports or proxy statements of the
Company if they are receiving multiple copies of the annual reports or
information or proxy statements of the Company by writing to the foregoing
address or calling the foregoing telephone number.
WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the Exchange Act and is required to file
reports, proxy statements, and other information with the Commission regarding
the business, financial condition, and other matters of the Company pursuant
to and in accordance with the Exchange Act. You may read and copy the
reports, proxy statements, and other information filed by the Company at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330
for additional information about the public reference facilities. The
reports, proxy statements, and other information filed with the Commission are
also available to the public over the Internet at http://www.sec.gov, the
Internet website of the Commission. The Internet website of the Company is
http://www.altmarknet.com. All inquiries regarding the Company should be
addressed to the principal executive offices of the Company at Alternate
Marketing Networks, Inc., 13155 Noel Road, 10th Floor, Dallas, TX 75240.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" the information
and documents filed by us with the Commission, which means that we can
disclose important information to you by referring you to those documents.
The information incorporated by reference is considered to be a part of this
proxy statement, and information that is filed later by us with the Commission
will automatically update and supersede this information. The Company
incorporates by reference the documents listed below:
The Annual Report on Form 10-KSB of the Company for the fiscal year ended
December 31, 2002 filed by the Company with the Securities and Exchange
Commission on March 31, 2003.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Alternate Marketing Networks, Inc.,
Attention: Investor Relations, 13155 Noel Road, 10th Floor, Dallas, TX 75240
or (972) 720-3500. Any statement contained in a document that is incorporated
by reference shall be modified or superseded for all purposes to the extent
that a statement contained in this proxy statement (or in any other document
that is subsequently filed with the Commission and incorporated by reference)
modifies or is contrary to such previous statement. Any statement so modified
or superseded shall not be deemed a part of this proxy statement except as so
modified or superseded.
By Order of the Board of Directors,
Dated: April 8, 2003 /s/ Sandra J. Smith
Sandra J. Smith, Secretary
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF ALTERNATE MARKETING NETWORKS, INC. FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 8, 2003
The undersigned stockholder of Alternate Marketing Networks, Inc., a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement, each dated April 8, 2003,
hereby appoints Phillip D. Miller proxy and attorney-in-fact, with full power
of substitution, on behalf and in the name of the undersigned, to represent
the undersigned at the Annual Meeting of Stockholders of Alternate Marketing
Networks, Inc. to be held on Thursday, May 8, 2003 at 11:00 a.m. at 13155 Noel
Road, 10th Floor, Dallas, Texas 75240, and at any adjournment or postponement
thereof, and to vote all shares of common stock which the undersigned would be
entitled to vote if personally present, on the matters set forth below:
1. Election of Class I Director duly nominated:
[ ] FOR nominee listed below (except as indicated)
[ ] WITHHELD authority to vote nominee listed below
J. Robert Routt
2. Increase in the number of shares authorized for issuance under the
1995 Long-Term Incentive and Stock Option Plan from 1,500,000 to
3,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The authority to vote, in his discretion, on all other business that
may properly come before the meeting.
[ ] GRANTED [ ] WITHHELD
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR EACH NOMINEE, (2) FOR PROPOSAL 2;
AND (3) IN THE DISCRETION OF THE PROXY HOLDER ON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN exactly as name appears below. When shares are held by joint
tenants, both should sign. If signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Dated:___________________, 2003 __________________________________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
I WILL_____ WILL NOT_____ BE ATTENDING THE ANNUAL MEETING.
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