UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,D.C.DC 20549Schedule 14A
(RULE 14A-101)INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant
|X|xFiled by a
Partyparty other than the Registrant|_|¨Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For:
x Preliminary Proxy Statement |
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
¨ Definitive Proxy Statement |
¨ Definitive Additional Materials |
¨ Soliciting Material Pursuant to § 240.14a-12 |
MIDWEST ENERGY EMISSIONS CORP. |
(Exact name of registrant as specified in its charter) |
Commission Only (As Permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-12
DIGICORP
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
file number 000-33067
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_|
x | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
¨ | Fee paid previously with preliminary materials: |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. |
(1) | Amount Previously Paid: |
Not Applicable
(2) | Form, Schedule or Registration Statement No.: |
Not Applicable
(3) | Filing Party: |
Not Applicable
(4) | Date Filed: |
Not Applicable
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed(17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 0-11 (set forth13e-4(c) under the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
DIGICORP
4143 Glencoe Avenue
Marina Del Rey, CA 90292
(17 CFR 240.13e-4(c))
MIDWEST ENERGY EMISSIONS CORP
500 W. Wilson Bridge Rd, Suite 140
Worthington, Ohio 43085
____________
NOTICE OF SPECIALANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON *, 2006
To our Shareholders:
NOVEMBER 18, 2014
____________
TO THE SHAREHOLDERS:
You are cordially invited to attend a Specialhereby notified that the Annual Meeting (the "Special
Meeting") of Shareholders of Digicorp, whichMidwest Energy Emissions Corp, a Delaware corporation (the “Company”), will be held at 1800 Century Park
East, Suite 200, Los Angeles, CA 90067,the Energy & Environmental Research Center, 15 N. 23rd St., Grand Forks, North Dakota 58202, on *, 2006,Tuesday, November 18, 2014, at 1010:00 a.m. (local time), to
consider and act uponCentral Time, for the following matters, each of which is described more
fully in the accompanying Proxy Statement:
1. Proposal No. 1: To authorize and approve a change of the Company's
domicile from Utah to Delaware effected by the merger of the
Company, a Utah corporation, with and into, Digicorp, Inc., a newly
formed wholly owned subsidiary of the Company that was incorporated
under the Delaware General Corporation Law (the "DGCL") for the
purpose of effecting the change of domicile.
2. Proposal No. 2: To authorize and approve the Company's Stock Option
and Restricted Stock Plan.
The foregoing matters are more fully described in the Proxy Statement
accompanying this Notice.
The Board of Directors has fixed *, 2006 (the "Record Date") as the record
date for the Special Meeting. purposes:
1. | Election of five directors, each for a term of one year. | |
2. | Ratification of the appointment of Schneider Downs & Co., Inc. | |
3. | Proposal to approve the Amendment to Certificate of Incorporation to increase our authorized shares of Common Stock by 50,000,000. | |
4. | Proposal to approve the 2014 Equity Incentive Plan, as amended. | |
5. | An advisory vote on a resolution to approve executive compensation. | |
6. | An advisory vote on the frequency of holding an advisory vote to approve executive compensation. | |
7. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
Only shareholders of record at the close of business on the Record DateOctober 17, 2014 will be entitled to notice of and to vote at the Special Meeting and atmeeting or any adjournmentsadjournment thereof. Each shareholder of record as
of the Record Date will be entitled to one vote for each share of Common Stock
held on the Record Date.
You may vote your shares by marking, signing and dating the enclosed proxy
card as promptly as possible and returning it in the enclosed postage-paid
envelope.
You may also vote in person at the Special Meeting, even if you use the
option set forth above.
By order of the Board of Directors:
/s/ Jay Rifkin
-------------------------------------
Jay Rifkin
Chairman and Chief Executive Officer
DIGICORP
4143 Glencoe Avenue
Marina Del Rey, CA 90292
BY ORDER OF THE BOARD OF DIRECTORS, | |||
RICHARD H. GROSS | |||
October 27, 2014 | Secretary |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY STATEMENTMATERIALS FOR A SPECIALTHE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON *, 2006
Digicorp (referredNOVEMBER 18, 2014:
This proxy statement and the Company’s 2013 annual report to herein as the "Company," "we," "us," and "our") is a
Utah corporation with its principal executive offices locatedshareholders are also available at 4143 Glencoe
Avenue, Marina Del Rey, California 90292. The Company's telephone number is
(310) 728-1450. http://www.midwestemissions.com/meeting-access/
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED TO VOTE BY TELEPHONE OR THE INTERNET OR TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE TO ENSURE THAT THEIR SHARES ARE REPRESENTED AT THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
MIDWEST ENERGY EMISSIONS CORP
500 W. Wilson Bridge Rd, Suite 140
Worthington, Ohio 43085
____________________
PROXY STATEMENT
____________________
This Proxy Statementproxy statement is furnished in connection with the solicitation of proxies by and on behalf of the Board of Directors of the CompanyMidwest Energy Emissions Corp., a Delaware corporation (the “Company”), for use at a
Specialthe Annual Meeting of Shareholders of the Company (the "Special Meeting"“Annual Meeting”) to be held at 1800
Century Park East, Suite 200, Los Angeles, CA 90067,the Energy & Environmental Research Center, 15 N. 23rd St., Grand Forks, North Dakota 58202, on *, 2006,Tuesday, November 18, 2014, at 1010:00 a.m.
(local time), Central Time, and at any and all adjournments thereof, for the purposes set
forth in the accompanying Notice of Special Meeting of Shareholders.
Accompanying this Proxy Statement is a proxy card, which you may use to indicate
your vote as to the proposals described in this Proxy Statement. adjournment thereof.
This Proxy
Statement and the accompanying proxy card will be mailed on or about *, 2006 to
all shareholders entitled to vote at the Special Meeting.
QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND VOTING
Why am I receiving these materials?
You have been sent this Proxy Statement and the enclosed proxy card
because the Company is soliciting your proxy to vote at the Special Meeting on
the proposals described herein (the "Proposals"). You are invited to attend the
Special Meeting to vote in person on the Proposals. However, you do not need to
attend the Special Meeting to vote your shares. Instead, you may vote your
shares on the enclosed proxy card, as further described herein. The Notice of
Special Meeting of Shareholders, this proxy statement and the accompanying notice and form of proxy cards are first being mailed to shareholders on or about *, 2006.
Who can voteOctober 27, 2014. A copy of the Company’s Annual Report to Shareholders, including financial statements, for the fiscal year December 31, 2013 (the “2013 fiscal year”) is enclosed with this proxy statement.
The presence of any shareholder at the Special Meeting?
Only shareholdersAnnual Meeting will not operate to revoke his proxy. Any proxy may be revoked, at any time before it is exercised, in open meeting, or by giving notice to the Company in writing, or by filing a duly executed proxy bearing a later date.
The holders of shares of a majority of the shares of common stock outstanding on the record date, present in person or by proxy, shall constitute a quorum for the transaction of business to be considered at the Annual Meeting. Broker non-votes and abstaining votes will be counted as “present” for purposes of determining whether a quorum has been achieved at the meeting, but will not be counted in favor of or against any director nominee. The voting standards for each of the other known matters to be considered at the meeting are set forth within the proposals.
If the enclosed proxy is executed and returned to the Company, the persons named therein will vote the shares represented by it at the Annual Meeting. The proxy permits specification of a vote for the election of directors, or the withholding of authority to vote in the election of directors, or the withholding of authority to vote for one or more specified nominees and a vote for, against or abstain on the other proposals described in this proxy statement. Where a choice is specified in the proxy, the shares of common stock represented thereby will be voted in accordance with such specification. If no specification is made, such shares will be voted to elect as directors the nominees set forth herein under “Election of Directors” and FOR the other proposals (for one year on the say-on-pay frequency proposal) included in this proxy.
The close of business on *, 2006 (the
"Record Date") will beOctober 17, 2014, has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the SpecialAnnual Meeting. As of October 17, 2014, the Record
Date, there were *Company’s outstanding voting securities consisted of 40,228,123 shares of Common Stock outstanding andcommon stock, with par value of $0.001, each of which is entitled to vote.
What am I voting on?
There are twoone vote on all matters scheduled for a voteto be presented to the shareholders at the Special Meeting:
o Proposal No.Annual Meeting.
VOTING PROCEDURES
If you are a record holder:
· | You may vote by mail: complete and sign your proxy card and mail it in the enclosed, prepaid and addressed envelope | |
· | You may vote by telephone: call toll-free 1-800-690-6903 on a touch tone phone and follow the instructions provide by the recorded message. You will need your proxy card available if you vote by telephone. | |
· | You may vote by Internet: access www.proxyvote.com and follow the steps outlined on the secure website. | |
· | You may vote in person at the meeting, however, you are encouraged to vote by mail, telephone or Internet even if you plan to attend the meeting. |
If you are a “street name” holder:
· | You must vote your shares of common stock through the procedures established by your bank, broker, or other holder of record. Your bank, broker, or other holder of record has enclosed or otherwise provided a voting instruction card for you to use in directing the bank, broker, or other holder of record how to vote your common shares. | |
· | You may vote at the meeting, however, to do so you will first need to ask your bank, broker or other holder of record to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting and hand it in with a signed ballot that you can request at the meeting. You will not be able to vote your shares of common stock at the meeting without a legal proxy and signed ballot. |
ANNUAL REPORT; INTERNET AVAILABILITY
A copy of our Annual Report to Shareholders for the year ended December 31, 2013, is enclosed with this Proxy Statement. Additional, this proxy Statement and our Annual Report to Shareholders for the year ended December 31, 2013 are available at http://www.midwestemissions.com/meeting-access/.
PROPOSAL 1: The authorization and approval of a changeELECTION OF DIRECTORS
At the Annual Meeting, shares represented by proxies will be voted, unless otherwise specified in such proxies, for the election of the Company's domicile from Utahfive nominees to Delaware effectedthe Board of Directors named in this proxy statement and the enclosed proxy. These nominees were selected by the mergerBoard of Directors and will, if elected, serve as directors of the Company until the next Annual Meeting of the shareholders and until their successors are elected and qualified or until their earlier removal or resignation. All of the nominees are currently members of the Board of Directors and all nominees have consented to be nominated and to serve if elected. If, for any reason, any one or more nominees becomes unavailable for election, it is expected that proxies will be voted for the election of such substitute nominees as may be designated by the Board of Directors. The director nominees who receive the greatest number of affirmative votes will be elected.
Nominees to serve for the One-Year Term expiring in 2015:
Name |
| Age |
| Principal Occupation for the Past Five Years |
| Director of the Company Since |
|
|
|
|
|
|
|
Johnny F. Norris, Jr. |
| 65 |
| Chief Executive Officer (2011 to 2013); President and Chief Executive Officer, Fuel Tech, Inc. (air pollution control company) (2006 to 2010) |
| 2011 |
Richard A. MacPherson |
| 59 |
| Director of Business Development, (2011 to present) Chief Executive Officer, MES, Inc. (current subsidiary and operating company of the Company) (2008 to 2011) |
| 2011 |
Jay Rifkin |
| 59 |
| President, Mojo Music, Inc. (1995 to present); Chief Executive Officer (2005 to 2011); |
| 2006 |
R. Alan Kelley |
| 62 |
| President and Chief Executive Officer (June 2013 to present); President and Chief Operating Officer (November 2011 to June 2013); President and Chief Executive Officer, Grand Bahama Power Company (2009 to 2011) |
| 2013 |
Christopher Greenberg |
| 48 |
| Chief Executive Officer, Global Safety Network (employment screening and safety compliance services) (2003 to present); Owner, Express Employment Professionals (staffing agency that provides full time and temporary job placement, human resources services and consulting) (1997 to present) |
| 2013 |
The Board of Directors recommends that the shareholders vote FOR the nominees.
In addition to the professional and occupational experience described above for each nominee, the Board has concluded that the skills, qualifications, experiences and attributes described below make the nominees persons who should serve as directors:
Johnny F. Norris, Jr. – Mr. Norris has decades of demonstrated experience at the senior executive level. He has an industry-proven ability in successfully building new services companies. Mr. Norris has many years of significant public company experience, and has been instrumental in managing over a Utah corporation,dozen successful mergers and acquisitions in his career. His experience includes both COO and CEO positions at mid-size companies, as well as senior executive positions in major corporations with direct operational responsibility of tens of billions of dollars in assets, billions of dollars in annual revenues, and into, Digicorp,over 8,000 employees.
Richard A. MacPherson – Mr. MacPherson has worked with industry leading scientists and engineers to bring Midwest’s technology from the R&D phase, through multiple product development stages, to the final commercialization phase, acting as the lead on all required initiatives and activities.
Jay Rifkin - Mr. Rifkin is a successful media executive who founded Mojo Music, Inc., a newly formed wholly owned subsidiarymusic publishing company, in 1995 and has been President since it was founded. Mr. Rifkin has served as Producer and Executive Producer on various motion pictures and is also a music producer, engineer and songwriter. From 1988 to 2004, Mr. Rifkin, through Mojo Music, Inc., served as a Managing Member of Media Ventures, LLC, an entertainment cooperative founded by Mr. Rifkin and composer Hans Zimmer. 1995, Mr. Rifkin founded Mojo Records, LLC, which in 1996 became a joint venture with Universal Records, and was subsequently sold to Zomba/BMG Records in 2001.
R. Alan Kelley – Mr. Kelley has many years of extensive public company experience as well as demonstrated success in multiple “turnarounds” of underperforming businesses. In addition, Mr. Kelley has international experience in developing and implementing return-on-investment regulatory structures. Mr. Kelley was Chairman of the Association of Edison Illuminating Companies Generation Committee, whose members represent over half of the generating facilities nationally and Chairman of the Mid-America Interconnected Network Regional Reliability Council. He is a former member of the Board of Directors of the North American Electric Reliability Council.
Christopher Greenberg – Mr. Greenberg is a dedicated and technically-skilled business professional with a versatile skill set developed through experience as an entrepreneur, business developer and community leader. Currently Mr. Greenberg is the CEO of Global Safety Network and Owner of Express Employment Professionals (Grand Forks, Fargo, Minot, North Dakota, Aberdeen and Watertown, South Dakota and Tampa, Florida). A highly-experienced Operations Executive who has demonstrated the ability to lead diverse teams of professionals to new levels of success in a variety of highly-competitive industries, cutting-edge markets, and fast-paced environments. Mr. Greenberg has strong technical and business qualifications with an impressive track record of more than 19 years of hands-on experience in strategic planning, business unit development, project and product management, and proprietary software development. He also has the proven ability to successfully analyze an organization’s critical business requirements, identify deficiencies and potential opportunities, and develop innovative and cost-effective solutions for enhancing competitiveness, increasing revenues, and improving customer service offerings.
Board Leadership
The Board does not have a formal policy regarding the separation of the roles of CEO and Chairman of the Board as the Board believes it is in the best interest of the Company and our shareholders to make that was
incorporated underdetermination based on the DGCL for the purpose of effecting the change
of domicile;position and o Proposal No. 2: The authorization and approvaldirection of the Company'sCompany and the membership of the Board. At this time, the Board has determined that separating the role of Chairman from the role of CEO is in the best interest of the Company and our shareholders. This structure permits our President and CEO to devote more time to focus on the strategic direction and management of our day-to-day operations. Currently the Board has one independent director, Mr. Greenberg.
Board’s Role in Risk Oversight
It is management’s responsibility to manage risk and bring to the Board of Directors’ attention the most material risks to the Company. The Board of Directors has oversight responsibility of the processes established to report and monitor systems for material risks applicable to the Company. The full Board regularly reviews enterprise-wide risk management, which includes treasury risks, financial and accounting risks, legal and compliance risks and other risk management functions. The full Board considers risks related to the attraction and retention of talent and related to the design of compensation programs tailored to the specific needs of the Company. The full Board considers strategic risks and opportunities and receives reports from management on risk.
Board of Directors Structure
The Board of Directors has determined that Christopher Greenberg is an “independent director” as defined by the listing standards of The Nasdaq Stock OptionMarket.
The full Board of Directors acts as an Audit Committee and Restricted Stocka Compensation Committee. In addition, the Company’s Board of Directors does not have a nominating committee. The Board of Directors as a whole functions as the Nominating Committee due to the relatively small size of the Board and the smaller market capitalization of the Company. Therefore, the Board does not have any committee charters.
The full Board of Directors acts as the Audit Committee and approves the Company’s retention of independent auditors and pre-approves any audit or non-audit services performed by them. It reviews with such accountants the arrangements for, and the scope of, the audit to be conducted by them. It also reviews with the independent accountants and with management the results of audits and various other financial and accounting matters affecting the Company.
The Board of Directors acts as the Compensation Committee and administers the Company’s compensation, benefits and the Company’s 2014 Equity Incentive Plan. Our policies and overall compensation practices for all employees do not create risks that are reasonably likely to have a material adverse effect on the Company. In addition, incentive compensation (in the past generally in the form of stock options) is not designed to create, and does not create, risks that are reasonably likely to have a material adverse effect on the Company. Recommendations regarding compensation of officers (other than the CEO) are made to the full Board by our CEO. The Board of Directors can exercise its discretion in modifying any amount presented by our CEO. During fiscal 2013, the Board of Directors did not retain the services of a compensation consultant.
The Board of Directors met 14 times during the 2013. Each director currently serving on the Board attended 75% or more of these Proposals,the meetings held during such year by the Board. The Company encourages the attendance of all directors at the annual shareholders meetings.
Nominations for Director are made by the Board of Directors as a whole. The Board determines the desired skills and characteristics for directors as well as the recommendationcomposition of the Board of Directors as a whole. This assessment considers the directors’ qualifications and independence, as well as diversity, age, skill and experience in the context of the needs of the Board of Directors. At a minimum, directors should share the values of the Company and should possess the following characteristics: high personal and professional integrity; the ability to exercise sound business judgment; an inquiring mind; and the time available to devote to Board of Directors’ activities and the willingness to do so. The Board does not have a formal policy specifically focusing on the consideration of diversity; however, diversity is one of the many factors that the Board considers when identifying candidates. In addition to the foregoing considerations, generally with respect to eachnominees recommended by shareholders, the Board will evaluate such recommended nominees considering the additional information regarding them provided to the Board. When seeking candidates for the Board of theseDirectors, the Board may solicit suggestions from incumbent directors, management and third-party search firms. Ultimately, the Board will recommend prospective nominees who the Board believes will be effective, in conjunction with the other members of the Board of Directors, in collectively serving the long-term interests of the Company’s shareholders. The Board will review any candidate recommended by shareholders of the Company in light of its criteria for selection of new directors. See “2015 Stockholder Proposals or Nominations.”
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF SCHNEIDER DOWNS & CO, INC.
The full Board of Directors act as the Audit Committee. The Board currently anticipates appointing Schneider Downs & Co, Inc. as our independent registered public accounting firm for the fiscal year ending December 31, 2014. For fiscal year 2013, Schneider Downs was engaged by us to audit our annual financial statements. Representatives of Schneider Downs are describedexpected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
The Board seeks an indication from shareholders of their approval or disapproval of the anticipated appointment of Schneider Downs as the Company’s independent registered public accounting firm for the 2014 fiscal year. The submission of this matter for approval by shareholders is not legally required, however, the Board believes that the submission is an opportunity for the shareholders to provide feedback to the Board on an important issue of corporate governance. If the shareholders do not approve the appointment of Schneider Downs, the appointment of the Company’s independent registered public accounting firm will be re-evaluated by the Board but will not require the Board to appoint a different accounting firm. If the shareholders approve the appointment of Schneider Downs, the Board in greater detail elsewhere in
this Proxy Statement.
How do I vote?
Your vote is important. Please mark, sign and dateits discretion may select a different independent registered public accounting firm at any time during the enclosed proxy card
as promptly as possible and returnyear if it determines that such a change would be in the enclosed postage-paid envelope to
ensure that your shares are represented at the Special Meeting. A pre-addressed,
postage-paid envelope is provided for this purpose.
For eachbest interest of the mattersCompany and its shareholders. Approval of the proposal to ratify the selection of Schneider Downs as our independent registered public accounting firm requires the affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to be voted on you may vote "FOR" or "AGAINST" or
"ABSTAIN" from voting.
1
How many votes do I have?
On each matter to be voted uponthe proposal at the Special Meeting, you have one vote
for each share of Common Stock you own as of the Record Date. No preemptive,
subscription, or conversion rights pertain to the Common Stock and no redemption
or sinking fund provisions exist for the benefit thereof.
What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any voting
selections, all of your shares will be voted "FOR" each of the Proposals
described in this Proxy Statement.
Who is paying for this proxy solicitation?
The Company will pay for the entire cost of soliciting proxies for the
SpecialAnnual Meeting. The original solicitation of proxies by mail may be
supplemented by solicitation in person, by mail, by telephone, by facsimile, or
by telegram, by the Company's regularly employed officers and employees. The
Company's officers and employees will not receive any additional compensation
for soliciting proxies.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card it means that your shares are
registered in more than one name or are registered in different accounts. Please
complete, sign, date and return each proxy card to ensure that all of your
shares are voted at the Special Meeting.
Can I change my vote after submitting my proxy card?
You can change your vote by revoking your proxy at any time before the
final vote at the Special Meeting. You may revoke your proxy in any one of three
ways:
o You may submit another properly completed proxy card at a later
date;
o You may send a written notice that you are revoking your proxy to
the Company's Corporate Secretary at 4143 Glencoe Avenue, Marina Del
Rey, California 90292; or
o You may attend the Special Meeting and vote in person in accordance
with the procedures specified above. However, simply attending the
Special Meeting will not, by itself, revoke your proxy.
Following the final vote at the Special Meeting, you may not revoke your
proxy or otherwise change your vote.
How are votes counted?
Votes will be counted by the inspector of election appointed for the
Special Meeting.
How many votes are needed to approve each proposal?
o Proposal No. 1: Proposal No. 1 (The authorization and approval of a
change of the Company's domicile from Utah to Delaware effected by
the merger of the Company, a Utah corporation, with and into,
Digicorp, Inc., a newly formed wholly owned subsidiary of the
Company that was incorporated under the DGCL for the purpose of
effecting the change of domicile) will be approved if a majority of
the outstanding shares of Common Stock of the Company are voted
"FOR" the proposal. Abstentions will have the same effect as votes "AGAINST"against the proposal. Broker non-votes will not be considered shares of common stock present and entitled to vote on the proposal and will not have a positive or negative effect on the outcome of this proposal, however, there should be no broker non-votes on this proposal because brokers have the discretion to vote uninstructed common shares on this proposal.
The Board of Directors recommends that the shareholders vote FOR Proposal No. 1.
o Proposal No. 2: Proposal No. 2 (the authorization and2.
PROPOSAL 3: AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE OUR AUTHORIZED SHARES OF COMMON STOCK
Background
On October 9, 2014, our Board of Directors unanimously approved, subject to shareholder approval, an amendment to our Certificate of Incorporation (“Amendment”). The Board of Directors recommends that the shareholders approve the Amendment to increase from 102,000,000 to 152,000,000 the number of the Company's Stock OptionCompany’s authorized shares. The Company currently has authorized 100,000,000 shares of common stock and Restricted Stock Plan)2,000,000 shares of preferred stock, 40,228,123 shares of common stock issued and outstanding and 55,323,441 shares of common stock are reserved for issuance upon conversion of notes or exercise of warrants and options as of October 17, 2014. No preferred stock is issued or outstanding as of October 17, 2014. The Board believes that the increase of 50,000,000 in the number of shares of common stock authorized would provide the Company greater flexibility with respect to the Company’s capital structure for such purposes as issuing stock options, additional equity financing, and stock-based acquisitions. The Board of Directors also directed that the Amendment be submitted for approval by the Company’s shareholders as required by Delaware law. A copy of the proposed amendment is included in this proxy statement as Appendix A.
The Board of Directors recommends that the shareholders approve the Amendment.
Summary
The terms of the additional shares of common stock will be approvedidentical to those of the currently outstanding shares of common stock. However, because holders of common stock have no preemptive rights to purchase or subscribe for any unissued stock of the Company, any future issuance of additional shares of common stock will reduce the current shareholders’ percentage ownership interest in the total outstanding shares of common stock. This amendment and the creation of additional shares of authorized common stock will not alter the current number of issued shares. The relative rights and limitations of the shares of common stock will remain unchanged under this amendment.
As of October 17, 2014, a total of 40,228,123 shares of the Company’s currently authorized 100,000,000 shares of common stock are issued and outstanding and 55,323,441 are reserved for issuance upon conversion of notes or exercise of warrants, options and other contractual obligations. The increase in the number of authorized shares of common stock would enable the Company to issue shares from time to time as may be required for proper business purposes, such as issuing stock options, raising additional capital for ongoing operations, business and asset acquisitions, stock splits and dividends, present and future employee benefit programs and other proper corporate purposes.
As of October 17, 2014, in addition to the 40,228,123 shares of common stock outstanding, there are 55,323,441 shares of common stock reserved for issuance upon conversion of notes or exercise of warrants, options and other contractual obligations, and an additional 4,448,436 shares of common stock unreserved and available for issuance. If the amendment to the Certificate of Incorporation is adopted, approximately 54,448,436 shares of common stock would be authorized, unissued and unreserved. The proposed increase in the authorized number of shares of common stock could have a number of effects on the Company’s shareholders depending upon the exact nature and circumstances of any future issuances of authorized but unissued shares. The Securities and Exchange Commission requires the Company to discuss how the increase in shares could be used to make it more difficult to effect a change in control of the Company. The increase could have an anti-takeover effect, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover of the Company more difficult. For example, additional shares could be issued by the Company so as to dilute the stock ownership or voting rights of persons seeking to obtain control of the Company, even if the persons seeking to obtain control of the Company offer an above-market premium that is favored by a majority of the total votes properly castindependent shareholders. Similarly, the issuance of additional shares to certain persons allied with the Company’s management could have the effect of making it more difficult to remove the Company’s current management by diluting the stock ownership or voting rights of persons seeking to cause such removal. The Company does not have any other provisions in personits Certificate of Incorporation, Bylaws, employment agreements, or by proxy atany other documents that have material anti-takeover consequences. Additionally, the Special Meeting by the holdersCompany has no plans or proposals to adopt other provisions, or enter into other arrangements, that may have material anti-takeover consequences. The Board of Common Stock are
voted "FOR" the proposal. Abstentions will have no effect on the
resultDirectors is not aware of any attempt, or contemplated attempt, to acquire control of the vote.
2
TheCompany, and this proposal is not being presented with the intent that it be utilized as a type of anti-takeover device. While the Company has no present plans for the issuance of additional shares of common stock, it desires to have such shares available for future issuances as the business need may arise.
Vote Required for Approval
Approval of this amendment to the Certificate of Incorporation requires approval of each Proposal described in this proxy statement is
independent from the approval of each of the other Proposals described in this
Proxy Statement.
What is the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. For
purposes of Proposal Nos. 1 and 2 a quorum will be present if at leastby a majority of the outstanding shares of Commoncommon stock. As a result, any shares not voted (whether by abstention or otherwise) will have the same effect as a vote against the proposal. Brokers will have discretionary authority to vote on this proposal, so broker non-votes will not apply to this proposal.
PROPOSAL 4: APPROVAL OF THE 2014 EQUITY INCENTIVE PLAN, AS AMENDED
Background
The 2014 Equity Incentive Plan, as amended (the “EIP”), was first approved by the Board of Directors on January 10, 2014. The number of shares of the Company’s common stock that may be issued under the EIP was originally 2,500,000 shares, subject to the adjustment for stock dividends, stock splits, recapitalizations and similar corporate events. On October 9, 2014 the Board of Directors approved an amendment to the EIP to increase by 5,000,000 the number of authorized shares of common stock that may be issued under the EIP to 7,500,000. EIP provides that it shall become effective following its adoption by the Board (which occurred on January 10, 2014 and October 9, 2014), subject to its approval by the Company’s shareholders within 12 months after such adoption by the Board of Directors to the extent then required under Section 422 or 424 of the Code or any other applicable law, or deemed necessary or advisable by the Board. This description of the EIP is subject to and qualified by a copy of the EIP (prior to the amendment to increase the shares available to 7,500,000), which is available at www.sec.gov as an exhibit to the Company’s Form 8-K filed with the SEC on January 16, 2014. This filing is also available through the Company’s website www.midwestemissions.com(see “Investors”, “SEC Filings”).
The Board of Directors recommends that the Company’s shareholders approve the EIP.
Summary
· | The purpose of the EIP is to promote the Company’s long-term growth and profitability by enabling the Company to attract, retain and reward key employees and officers and to strengthen the common interests of such employees and the Company’s shareholders by offering key employees and officers equity or equity-based incentives. In addition, the purpose of the EIP is to provide officers, other employees and directors of, and consultants to, the Company and its subsidiaries an incentive (a) to enter into and remain in the service of the Company or its subsidiaries, (b) to enhance the long-term performance of the Company and its subsidiaries, and (c) to acquire a proprietary interest in the success of the Company and its subsidiaries. | |
· | Eligible participants under the EIP include officers, employees of, or consultants to, the Company or any of its subsidiaries, or any person to whom an offer of employment is extended, or any person who is a non-employee director of the Company. | |
· | The EIP will be administered by a committee of the Board comprised of no fewer than two members of the Board. In the absence of a Committee, the Board will administer the EIP. Currently, the EIP is administered by the full Board. | |
· | The Committee (Board) determines who shall receive awards, the type and amount of awards, the consideration, if any, to be paid for awards, the timing of awards and the terms and conditions of awards. | |
· | The types of awards which the Committee (Board) will be able to grant under the EIP include stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares or performance units and stock awards. | |
· | The Committee may grant stock options that (i) qualify as incentive stock options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) subject to prior shareholder approval of the EIP, (ii) do not qualify as ISOs, or (iii) both. To qualify as an ISO, an option must meet certain requirements set forth in the Code. | |
· | Stock options and all other equity-based awards will be evidenced by a separate award agreement in the form approved by the Committee (Board). | |
· | Stock options will be exercisable and restricted stock grants will vest at such time or times as the Committee (Board) determines at the time of grant. In general, restricted stock is non-transferable prior to vesting. | |
· | The exercise price of a stock option granted under the EIP may not be less than 100% of the fair market value of the Company’s common stock on the date the stock option is granted, except that with respect to an incentive stock option granted to a 10% stockholder, the exercise price may not be less than 110% of the fair market value of the Company’s common stock on the date of grant. | |
· | The term of each stock option will be fixed by the Committee (Board) and may not exceed ten years from the date the stock option is granted. | |
· | The Committee (Board) may determine and provide in the applicable award agreement that vesting or other terms of an award may be accelerated in the event of change of control (as defined in the EIP) of the Company. |
· | Non-employee directors will be entitled to receive all types of awards under the EIP, and each non-employee director will be automatically granted a non-qualified stock option to purchase 25,000 shares of common stock on May 1 of each year, if as of such date, such non-employee director will have served on the Board for at least three months, which option shall become exercisable one year from the date of grant and which option shall expire five years from the date of grant. | |
· | In the event of any merger, reorganization, consolidation, recapitalization, share dividend, share split, combination of shares or other change in the Company’s corporate structure affecting the shares, an adjustment or substitution may be made as approved by the Committee (Board). | |
· | The EIP will not be qualified under Section 401(a) of the Code and will not be subject to the provisions of the Employee Retirement Income Security Act of 1974. | |
· | The Board may at any time and from time to time and in any respect, amend the EIP and any award granted under the EIP. The Board may seek the approval of any amendment by the Company’s shareholders to the extent it deems necessary or advisable in its discretion for purposes of compliance with Section 162(m) or Section 422 of the Code, the listing requirements of the applicable exchange or securities market or for any other purpose. |
Federal Tax Consequences
The following summary of the federal income tax consequences applicable to options awarded under the EIP is only a general summary of the applicable provisions of the Code and regulations promulgated thereunder as in effect on the date of this proxy statement. The actual federal, state, local and foreign tax consequences to the participant may vary depending upon his or her particular circumstances.
Incentive Stock are represented by
shareholders presentOptions
Issuance of an ISO does not cause recognition of taxable income to the participant and does not provide a deduction to the Company at the Special Meetingtime it is granted or by proxy. Asexercised. However, the excess of the Record Date,
there were *fair market value of the shares acquired upon exercise of an ISO over the exercise price is an item of adjustment in computing the alternative minimum taxable income of the participant. If the participant holds the shares received as a result of an exercise of an ISO for at least two years from the date of the grant of the ISO and one year from the date of exercise, then any gain realized on disposition of the shares (generally the amount received in excess of the exercise price) is treated as a long-term capital gain.
If shares acquired on exercise of an ISO are disposed of before expiration of the holding periods described above (i.e., a “Disqualifying Disposition”), the participant will include in income, as compensation for the year of the Disqualifying Disposition, an amount equal to the excess, if any, of the fair market value of the shares on the date of exercise of the ISO over the exercise price (or, if less, the excess of the amount realized upon disposition over the exercise price). The gain or loss on the sale of shares acquired under an ISO will be either a long-term or a short-term capital gain and will depend on whether the participant has held the shares for more than one year. If a participant includes amounts in income upon a Disqualifying Disposition, the Company will be entitled to a deduction, in the year of such a disposition, for the amount includible in the participant’s income as compensation.
The participant’s basis in shares acquired upon exercise of an ISO is equal to the exercise price paid, plus any amount the participant includes in income as a result of a Disqualifying Disposition.
If an ISO is exercised by tendering previously owned shares of Commoncommon stock, the following generally will apply: a number of new shares equal to the number of previously owned shares of common stock tendered will be considered to have been received in a tax-free exchange; the participant’s basis and holding period (except for the Disqualifying Disposition period) for such number of new shares of common stock will be equal to the basis and holding period of the previously owned common shares exchanged. To the extent that the number of shares of common stock received exceeds the number of shares of common stock surrendered, no taxable income will be realized by the participant at that time; such excess shares of common stock will be considered ISO stock with a zero basis; and the holding period of the participant in such shares of common stock will begin on the date such shares of common stock are transferred to the participant. If the shares of common stock surrendered were acquired as the result of the exercise of an ISO and the surrender takes place within two years from the date the ISO relating to the surrendered shares of common stock was granted, or within one year from the date of such exercise, the surrender will result in a Disqualifying Disposition and the participant will realize ordinary income at that time in the amount of the excess, if any, of the fair market value at the time of exercise of the shares of common stock surrendered over the basis of such shares of common stock. If any of the shares of common stock received are disposed of in a Disqualifying Disposition, the participant will be treated as first disposing of the shares of common stock with a zero basis.
Non-qualified Stock outstandingOptions
The grant of a non-qualified stock option generally results in no recognition of taxable income to the participant or allowance of a deduction to the Company at the time it is granted. A participant exercising such an option will, at that time, recognize taxable income from compensation equal to the excess of the then market value of the shares over the aggregate exercise price. Subject to the applicable provisions of the Code, the Company will be allowed a deduction for federal income tax purposes in the year of exercise in an amount equal to the taxable income recognized by the participant.
The participant’s basis in shares acquired upon exercise of a non-qualified option is equal to the sum of the exercise price plus the amount includible in his or her income upon exercise. Any gain or loss upon subsequent disposition of the shares of common stock will be a long-term or short-term gain or loss, depending upon the holding period of the shares of common stock.
If a non-qualified option is exercised by tendering previously owned shares of common stock, the following generally will apply: a number of new shares of common stock equal to the number of previously owned shares tendered will be considered to have been received in a tax-free exchange; and the participant’s basis and holding period for such number of new shares of common stock will be equal to the basis and holding period of the previously owned shares of common stock exchanged. The participant will have compensation income equal to the fair market value on the date of exercise of the number of new shares of common stock received in excess of such number of exchanged shares of common stock; the participant’s basis in such excess shares of common stock will be equal to the amount of such compensation income; and the holding period in such shares of common stock will begin on the date of exercise.
Restricted Shares
A participant will not recognize any taxable income upon the grant of restricted stock unless the participant makes a voluntary election to recognize income at grant under Section 83(b) of the Code. Upon the expiration of a restriction period for restricted stock, whether such period lapses due to the satisfaction of certain pre-established performance criteria or due solely to the lapse of time, the participant will recognize compensation income and the Company will be entitled to vote.
Your shares will be counted towardsa deduction equal to the quorum only if you submit a valid
proxy card or if youvalue of the restricted stock that the participant receives.
Vote Required for Approval
The affirmative vote at the Special Meeting. Abstentions will be counted
towards the quorum requirement. If there is no quorum,of a majority of the votes presentcast in person or by proxy by shareholders represented and entitled to vote at the SpecialAnnual Meeting may adjourn or postpone the Special Meeting to
another date upon which a quorum may be obtained.
Any adjournment may be made with respect to one or more proposals for the
Company, but not necessarily for all proposals of the Company. In the event that
a quorumShareholders is present at the Special Meeting but sufficient votes to approve any
proposal are not received, the person named as proxy may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies or
to obtain the vote required for approval of onethe EIP. Broker non-votes will not be treated as votes cast and will not have a positive or more proposals.
How can I find outnegative effect on the resultsoutcome of the proposal. Abstentions will be treated as votes cast and, consequently, will have the same effect as votes against the proposal.
PROPOSAL 5: SAY-ON-PAY
Pursuant to the requirements of the Dodd-Frank Act the Company provides its shareholders with the opportunity to cast an advisory non-binding vote to approve the compensation of its Named Executive Officers as disclosed pursuant to the SEC’s compensation disclosure rules (a “say-on-pay proposal”). The Company believes that it is appropriate to seek the views of shareholders on the design and effectiveness of the Company’s executive compensation program.
The Company’s goal for its executive compensation program is to attract, motivate, and retain a talented, entrepreneurial and creative team of executives who will provide leadership for the Company’s success in competitive markets. The Company seeks to accomplish this goal in a way that rewards performance and is aligned with its shareholders’ long-term interests.
The Board recommends that shareholders vote for the following resolution:
“RESOLVED that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K compensation tables and narrative discussion, is hereby APPROVED.” |
Because the vote is advisory, it will not be binding upon the Board. The Board values the opinions of our shareholders and will take into account the outcome of the vote when considering future executive compensation arrangements.
The affirmative vote of a majority of the shares of common stock present or represented by proxy and voting at the Special Meeting?
Preliminaryannual meeting will constitute approval of this non-binding resolution. Abstentions will have the same effect as votes against the proposal. Broker non-votes will not be considered shares of common stock present and entitled to vote on this proposal and will not have a positive or negative effect on the outcome of the proposal.
The Board of Directors recommends that the shareholders vote FOR Proposal 5.
PROPOSAL 6: SAY ON PAY FREQUENCY
Rules mandated by the Dodd-Frank Act also require the Company to seek a non-binding advisory shareholder vote every six years regarding the frequency (annually, every other year, or every three years) at which the Company will ask its shareholders to provide the advisory vote on executive compensation.
After careful consideration, the Board recommends that future advisory votes on executive compensation occur every year because the Board believes it is important to hear from its shareholders frequently regarding its compensation practices and philosophy.
As an advisory vote this proposal is non-binding. The Board values the opinions of our shareholders and understands that executive compensation is an important matter, and they will consider the outcome of the vote when making future decisions on the frequency of the Company’s executive compensation advisory votes.
Shareholders may cast their votes in favor of one year, two years or three years or abstain from voting resultson the proposal. The choice selected by the greatest number of votes will be announced atdeemed the Special Meeting. Final
voting resultsshareholders’ choice on the frequency of the Company’s executive compensation advisory vote. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
The Board of Directors recommends that the shareholders vote of ONE YEAR on Proposal 6.
AUDIT COMMITTEE REPORT
The full Board of Directors act as the Audit Committee. In this report references to the Committee shall be reporteddeemed references to the full Board of Directors. Only one director, Mr. Greenberg, is independent under the Sarbanes-Oxley Act. The Committee’s responsibilities include oversight of the Company’s independent auditors as well as oversight of management’s conduct in the Company's QuarterlyCompany’s financial reporting process. The Committee also approves the Company’s retention of independent auditors and pre-approves any audit or non-audit services performed by them. Management is responsible for the Company’s internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing a report thereon. For fiscal 2013, the Committee has met and discussed with management and the independent auditors the fair and complete presentation of the Company’s financial statements. The Committee has also discussed and reviewed with the independent auditors all communications required by GAAP, including those described in Auditing Standards No. 16, “Communication with Audit Committees”, as adopted by the PCAOB. The Committee has discussed significant accounting policies applied in the financial statements, as well as alternative treatments. Management has represented that the consolidated financial statements have been prepared in accordance with GAAP. The Company’s independent auditors also provided to the Committee the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communication with the Committee concerning independence. The Committee discussed with the independent auditors their firm’s independence.
Based on the Committee’s discussion with Management and the independent auditors and the report of the independent auditors to the Committee, the Board of Directors included the audited consolidated financial statements in the Company’s Annual Report on Form 10-QSB10-K for the fiscal quarter ending *, 2006.
REASONS FOR THE SPECIAL MEETING
year ended December 31, 2013 for filing with the Securities and Exchange Commission.
The Special Meeting is being held in orderBoard of Directors
Johnny F. Norris, Jr
Richard A. MacPherson
Jay Rifkin
R. Alan Kelley
Christopher Greenberg
INDEPENDENT AUDITOR FEES
The aggregate audit fees billed to vote on two important
proposals. Each proposal that will be presented at the Special Meeting is
described in greater detail below.
PROPOSAL NO. 1
CHANGE IN THE COMPANY'S STATE OF INCORPORATION
FROM UTAH TO DELAWARE
("CHANGE OF DOMICILE")
Principal ReasonsCompany by the Company’s independent auditors, Schneider Downs & Co., Inc., were $62,000 for the Changeyear ended December 31, 2013 and $60,000 for the year ended December 31, 2012. Fees billed for professional services rendered in connection with the preparation of Domicile
our tax returns and other tax compliance services were $11,400 and $10,275 for the years ended December 31, 2013 and December 31, 2012, respectively. There were no audit-related or other fees paid to our independent auditors for the years ended December 31, 2013 and December 31, 2012.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company'sfollowing table sets forth certain information regarding the beneficial ownership of our common shares as of September 1, 2014, by: (a) our directors and nominees for election as directors; (b) each other person who is known by us to own beneficially more than 5% of our outstanding common shares; (c) the executive officers named in the Summary Compensation Table; and (d) all of our executive officers and directors as a group. The percentages in the table are calculated on the basis of the amount of outstanding securities plus securities deemed outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act (e.g., exercisable options).
Name of | Number of Shares | Percent of Class | ||||||
|
|
|
| |||||
Richard A. MacPherson (1) | 16,426,506 | 38.3 | % | |||||
Christopher Greenberg (2) | 3,338,500 | 7.8 | % | |||||
Jay Rifkin (3) | 2,204,183 | 5.1 | % | |||||
R. Alan Kelley (4) | 525,000 | 1.2 | % | |||||
Johnny F. Norris, Jr (5) | 225,000 | * | ||||||
Marcus A. Sylvester (6) | 275,000 | * | ||||||
Richard H Gross (7) | 125,000 | * | ||||||
All Executive Officers and Directors as a Group | 23,119,189 | 53.9 | % |
___________________
* | Less than one percent of the outstanding shares of common stock of the Company. | |
(1) | Includes: (a) 16,426,506 shares, which as of September 1, 2014, were owned by 3253517 Nova Scotia Limited of which Mr. MacPherson is the sole managing member; and (b) 506,920 shares owned by Mr. MacPherson personally. Mr. MacPherson’s address is 34 Cedarbank Terrace, Halifax Nova Scotia B3P 2T4, Canada. | |
(2) | Includes: (a) 2,004,500 shares of common stock directly owned by Arthur Greenberg, Jr. individually, (b) 5,000 shares of common stock directly owned by Greenberg Family Consolidated Limited Partnership, of which Arthur Greenberg, Jr., L.L.P. serves as the general partner. Arthur Greenberg, Jr. is a general partner and the managing partner of Arthur Greenberg, Jr., L.L.P., (c) 1,005,000 shares of common stock and 320,000 options directly owned by Christopher Greenberg individually, and (d) 4,000 shares of common stock directly owned by Arctic Blast of Fargo, Inc., of which Christopher Greenberg and his wife are the sole shareholders. As stated in Mr. Arthur Greenberg and Mr. Christopher Greenberg’s joint Schedule 13G, amendment No. 1., for purposes of Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended, Arthur Greenberg, Jr. and Christopher Greenberg have shared beneficial ownership as a group of the 3,024,000 shares owned by them as set forth above. Mr. Greenberg’s address is 3590 S. 42nd St., Grand Forks, ND 58201. | |
(3) | Includes: (a) 361,585 shares owned by Mojo Music Inc. and 998,128 shares owned by Rebel Holdings, LLC; Mr. Rifkin is the sole managing member of both companies; and (b) 339,130 shares and 357,274 options owned directly by Mr. Rifkin and 148,066 shares owned by The Jay Rifkin 2006 Irrevocable Trust. Mr. Rifkin’s address is 12237 Sunset Parkway, Los Angeles, CA 90064. | |
(4) | Represents 525,000 shares of common stock that Mr. Kelley has the right to acquire upon the exercise of a stock option. | |
(5) | Represents 225,000 shares of common stock that Mr. Norris has the right to acquire upon the exercise of a stock option. | |
(6) | Represents 275,000 shares of common stock that Mr. Sylvester has the right to acquire upon the exercise of a stock option. | |
(7) | Represents 125,000 shares of common stock that Mr. Gross has the right to acquire upon the exercise of a stock option. | |
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for each of the Company’s last two fiscal years the compensation for the Company’s Principal Executive Officer and each of the Company’s other two most highly compensated officers:
Name, Position | Year | Salary ($) | Stock Options | All Other | Total ($) | |||||||||||||||
Johnny F. Norris, Jr., Chairman (1) | 2013 | $ | 170,000 | 9,448 | 4,801 | $ | 184,249 | |||||||||||||
2012 | $ | 180,000 | - | 10,743 | $ | 190,743 | ||||||||||||||
R. Alan Kelley, CEO & President (2) | 2013 | $ | 280,000 | 9,448 | 9,401 | $ | 298,849 | |||||||||||||
2012 | $ | 240,000 | - | 12,695 | $ | 252,695 | ||||||||||||||
Richard H. Gross, Vice President & CFO (3) | 2013 | $ | 150,000 | 9,448 | 5,044 | $ | 164,492 | |||||||||||||
2012 | $ | 122,000 | - | 5,411 | $ | 127,411 | ||||||||||||||
Marcus A. Sylvester, Vice President (4) | 2013 | $ | 150,000 | 9,448 | 6,012 | $ | 165,460 | |||||||||||||
2012 | $ | 150,000 | - | 7,512 | $ | 157,512 |
(1.) | Mr. Norris was appointed Chief Executive Officer in June 2011 and Chairman of the Board in October 2011. In June 2103, he retired from the position of Chief Executive Officer and was an Executive Advisor until April 2014, when he retired from that position. The Company and Johnny F. Norris, Jr have entered into an employment agreement. Pursuant to his employment agreement Mr. Norris agreed to be employed by the Company as Chief Executive Officer and Chairman for a period of three years, which term may be renewed subject to the approval by the Board. After his retirement, described above, Mr. Norris agreed that he shall serve an employee as an Executive Adviser. During the period of employment, Mr. Norris shall receive an annual base salary equal to $180,000, until his retirement when the annual base salary was adjusted to $120,000. As of December 31, 2013, $130,000 of salary remained unpaid. Under his employment agreement, Mr. Norris shall also be entitled to participate in all corporate 401(k) programs and health benefit plans instituted by the Company and yearly structured bonuses, if any, to be reviewed and approved by the Board. Mr. Norris shall also be entitled to participate in any stock option and incentive plans adopted by the Company. Pursuant to the December 12, 2013 amendment to his employment agreement, because Mr. Norris remained an employee on January 1, 2014, he was issued a 1,500,000 stock unit award on January 1, 2014, which award replaced stock grants in the same denominations that were to be made on January 1, 2014 to Mr. Norris prior to the December 12, 2013 amendment. The stock units will vest and become non-forfeitable upon the earlier of a change in control of the Company or when the Company has a minimum of $3.5 million in working capital and its cash position equals or exceeds $2.5 million after deducting the amount sufficient to cover all federal, state and local taxes required by law to be withheld with respect to the stock units vesting under the aforesaid awards. Such award will be for forfeited if the conditions have not been met by January 1, 2017. After the stock units become vested and non-forfeitable, the Company shall distribute to Mr. Norris the number of shares of common stock equal to the number of stock units that so vested and became non-forfeitable, provided, however, that the Company shall withhold shares of common stock from the stock units in an amount sufficient to cover the withholding tax obligation. In addition, pursuant to the amendment on December 12, 2013, Mr. Norris was issued a five year, fully vested stock option to purchase 25,000 shares of common stock on December 12, 2013 with an exercise price equal to the fair market value of the Company’s common stock on that date ($0.50/share). | |
(2.) | Mr. Kelley was appointed Chief Operating Officer and President in November 2011 and became Chief Executive Officer and a Director in June 2013. The Company and R. Alan Kelley have entered into an employment agreement. Pursuant to his employment agreement Mr. Kelley agreed to be employed by the Company as president and Chief Operating Officer for a period of three years, which term may be renewed subject to the approval by the Board. The agreement was amended to add the duties of Chief Executive Officer as described above. Mr. Kelley shall receive an annual base salary equal to $280,000. As of December 31, 2013, $140,000 of salary remained unpaid. Under his employment agreement, Mr. Kelley shall also be entitled to participate in all corporate 401(k) programs and health benefit plans instituted by the Company and yearly structured bonuses, if any, to be reviewed and approved by the Board. Mr. Kelley shall also be entitled to participate in any stock option and incentive plans adopted by the Company. Pursuant to the December 12, 2013 amendment to his employment agreement, because Mr. Kelley remained an employee on January 1, 2014, he was issued a 650,000 stock unit award on January 1, 2014, which award replaced stock grants of 500,000 shares that were to be made on January 1, 2014 to Mr. Kelley prior to the December 12, 2013 amendment. The stock units will vest and become non-forfeitable upon the earlier of a change in control of the Company or when the Company has a minimum of $3.5 million in working capital and its cash position equals or exceeds $2.5 million after deducting the amount sufficient to cover all federal, state and local taxes required by law to be withheld with respect to the stock units vesting under the aforesaid awards. Such award will be for forfeited if the conditions have not been met by January 1, 2017. After the stock units become vested and non-forfeitable, the Company shall distribute to Mr. Kelley the number of shares of common stock equal to the number of stock units that so vested and became non-forfeitable, provided, however, that the Company shall withhold shares of common stock from the stock units in an amount sufficient to cover the withholding tax obligation. In addition, pursuant to the December 12, 2013 amendment, Mr. Kelley was issued a five year, fully vested stock option to purchase 25,000 shares of common stock on December 12, 2013 with an exercise price equal to the fair market value of the Company’s common stock on that date ($0.50/share). |
(3.) | Mr. Gross was appointed Chief Financial Officer and Vice President in October 2011. The Company and Richard H. Gross have entered into an employment agreement. Pursuant to his employment agreement Mr. Gross agreed to be employed by the Company as Chief Financial Officer for a period of three years, which term may be renewed subject to the approval by the Board. Mr. Gross shall receive an annual base salary equal to $150,000. As of December 31, 2013, $37,500 remained unpaid. Under his employment agreement, Mr. Gross shall also be entitled to participate in all corporate 401(k) programs and health benefit plans instituted by the Company and yearly structured bonuses, if any, to be reviewed and approved by the Board. Mr. Gross shall also be entitled to participate in any stock option and incentive plans adopted by the Company. Pursuant to the December 12, 2013 amendment to his employment agreement, because Mr. Gross remained an employee on January 1, 2014 he was issued a 100,000 stock unit award on January 1, 2014, which award replaced stock grants of 50,000 shares that were to be made on January 1, 2014 to Mr. Gross prior to the December 12, 2013 amendment. The stock units will vest and become non-forfeitable upon the earlier of a change in control of the Company or when the Company has a minimum of $3.5 million in working capital and its cash position equals or exceeds $2.5 million after deducting the amount sufficient to cover all federal, state and local taxes required by law to be withheld with respect to the stock units vesting under the aforesaid award. Such award will be for forfeited if the conditions have not been met by January 1, 2017. After the stock units become vested and non-forfeitable, the Company shall distribute to the Mr. Gross the number of shares of common stock equal to the number of stock units that so vested and became non-forfeitable, provided, however, that the Company shall withhold shares of common stock from the stock units in an amount sufficient to cover the withholding tax obligation. In addition, pursuant to the December 12, 2013 amendment, Mr. Gross was issued a five year, fully vested stock option to purchase 25,000 shares of common stock on December 12, 2013 with an exercise price equal to the fair market value of the Company’s common stock on that date ($0.50/share). | |
(4.) | Mr. Sylvester was appointed Vice President of Sales in August 2011. The Company and Marcus A. Sylvester have entered into an employment agreement. Pursuant to his employment agreement Mr. Sylvester agreed to be employed by the Company as Vice President of Sales for a period of three years, which term may be renewed subject to the approval by the Board. Mr. Sylvester shall receive an annual base salary equal to $150,000, sales commissions of up to 5% and for transactions completed and closed directly in relation to his efforts, and a management fee of 1% on certain ongoing sales. The base salary will be reduced if certain commissions and management fees are earned. As of December 31, 2013, $37,500 of salary remained unpaid. Under his employment agreement, Mr. Sylvester shall also be entitled to participate in all corporate 401(k) programs and health benefit plans instituted by the Company and yearly structured bonuses, if any, to be reviewed and approved by the Board. Mr. Sylvester shall also be entitled to participate in any stock option and incentive plans adopted by the Company. Pursuant to the December 12, 2013 amendment to his employment agreement, because Mr. Sylvester remained an employee on January 1, 2014 he was issued a 250,000 stock unit award on January 1, 2014, which award replaced stock grants in in the same denominations that were to be made on January 1, 2014 to Mr. Sylvester prior to the December 12, 2013 amendment. The stock units will vest and become non-forfeitable upon the earlier of a change in control of the Company or when the Company has a minimum of $3.5 million in working capital and its cash position equals or exceeds $2.5 million after deducting the amount sufficient to cover all federal, state and local taxes required by law to be withheld with respect to the stock units vesting under the aforesaid award. Such award will be for forfeited if the conditions have not been met by January 1, 2017. After the stock units become vested and non-forfeitable, the Company shall distribute to the Mr. Sylvester the number of shares of common stock equal to the number of stock units that so vested and became non-forfeitable, provided, however, that the Company shall withhold shares of common stock from the stock units in an amount sufficient to cover the withholding tax obligation. In addition, pursuant to the December 12, 2013 amendment, Mr. Sylvester was issued a five year, fully vested stock option to purchase 25,000 shares of common stock on December 12, 2013 with an exercise price equal to the fair market value of the Company’s common stock on that date ($0.50/share). |
(5) | Represents the dollar amount recognized for consolidated financial statement reporting purposes of shares to be issued to the executive officers computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. There can be no assurance the amounts determined in accordance with FASB ASC Topic 718 will ever be realized. The following table provides information concerning the Stock options issued to the executive officers: |
Name | Stock Options (#) | FASB ASC Topic 718 Value | ||||||
Johnny F Norris, Jr. | 25,000 | $ | 9,448 | |||||
R. Alan Kelley | 25,000 | $ | 9,448 | |||||
Richard H. Gross | 25,000 | $ | 9,448 | |||||
Marcus A. Sylvester | 25,000 | $ | 9,448 |
(6) | The amounts shown for 2013 in the “All Other Compensation” column are comprised of the following: |
Name | Year | 401k Match | Group Term Life Insurance | Total Other Compensation | ||||||||||||
Johnny F. Norris, Jr. | 2013 | $ | 1,600 | $ | 3,201.00 | $ | 4,801 | |||||||||
2012 | $ | 7,200 | $ | 3,543.00 | $ | 10,743 | ||||||||||
R. Alan Kelley | 2013 | $ | 5,600 | $ | 3,810.00 | $ | 9,410 | |||||||||
2012 | $ | 9,600 | $ | 3,095.00 | $ | 12,695 | ||||||||||
Richard H. Gross | 2013 | $ | 4,500 | $ | 544.00 | $ | 5,044 | |||||||||
2012 | $ | 4,880 | $ | 531.00 | $ | 5,411 | ||||||||||
Marcus A. Sylvester | 2013 | $ | 4,500 | $ | 1,512.00 | $ | 6,012 | |||||||||
2012 | $ | 6,000 | $ | 1,512.00 | $ | 7,512 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table sets forth certain information about the number of unexercised nonqualified stock options and unearned stock awards held as of December 31, 2013 by each director and executive named in the Summary Compensation Table. There were no stock options exercised during fiscal 2013.
Unexercised Options and Stock Grants
Name | Stock Options Exercisable | Exercise Price | Expiration Date | ||||||
John Norris | 25,000 | $ | 0.50 | December 12, 2018 | |||||
Alan Kelley | 25,000 | $ | 0.50 | December 12, 2018 | |||||
Rich Gross | 25,000 | $ | 0.50 | December 12, 2018 | |||||
Marc Sylvester | 25,000 | $ | 0.50 | December 12, 2018 |
Retirement and Savings Plan - 401(k)
Since November 1, 2011, the Company has maintained a Retirement and Savings Plan under IRS Code Section 401(k) (“the 401(k) Plan”). The 401(k) Plan allows eligible employees to defer a portion of their compensation before federal income tax to a qualified trust. All employees who are at least 21 years of age are eligible to participate in the 401(k) Plan. The participants may choose from nineteen investment options for the investment of their deferred compensation. In addition, the Company matches 100% of each participant’s salary deferral, for the first 4% of their salary, with a cash contribution. For the year ended December 31, 2013, the Company contributed $16,200 to the 401(k) Plan.
Director Compensation
Directors who are also employees of the Company do not receive additional compensation as directors. On January 10, 2012, the Company agreed to a consulting agreement with Eastern Emissions Consultants Incorporated (“EECI”), a firm that Richard A. MacPherson is the controlling principal and President. The contracts calls for monthly payments of $15,000 to EECI, was effective as of November 1, 2011 and has a term of three years. The Company paid EECI, $180,000 for consulting services in 2012 and $30,000 for consulting services in 2013. $150,000 was unpaid as of December 31, 2013. No other compensation was paid to Directors in the year ended December 31, 2013.
2015 STOCKHOLDER PROPOSALS OR NOMINATIONS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, some stockholder proposals may be eligible for inclusion in the Company’s 2015 proxy statement. Any stockholder proposal under Rule 14a-8 must be submitted, along with proof of ownership of the Company’s stock in accordance with Rule 14a-8(b)(2), to the Company’s principal executive offices in care of the Company’s Secretary by letter to 500 W. Wilson Bridge Rd., Suite 140, Columbus, Ohio, 43085. Failure to deliver a proposal in accordance with this procedure may result in the proposal not being deemed timely received. The Company must receive all submissions no later than the close of business (5:00 p.m. Eastern Time) on June 19, 2015. The Company encourages any stockholder interested in submitting a proposal to contact the Company’s Secretary in advance of this deadline to discuss the proposal, and stockholders may find it helpful to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a stockholder proposal does not guarantee that we will include it in the Company’s proxy statement. The Board of Directors believes thatreviews all stockholder proposals and will take appropriate action on such proposals. If the change2015 annual meeting is held more than 30 days from the anniversary of domicile will
givethe 2014 Annual Meeting, the Company will make appropriate disclosure in a greater measureForm 10-Q setting forth the revised deadline for stockholder proposals pursuant to Rule 14a-8.
In addition, under the Company’s Bylaws, any stockholder who intends to nominate a candidate for election to the Board or to propose any business at the Company’s 2015 annual meeting, other than precatory (non-binding) proposals presented under Rule 14a-8, must give notice to the Company’s Secretary between June 19, 2015 and the close of flexibilitybusiness on September 12, 2015. The notice must include information specified in the Company’s Bylaws, including information concerning the nominee or proposal, as the case may be, and simplicity in corporate
governanceinformation about the stockholder’s ownership of and agreements related to the Company’s stock. If the 2015 annual meeting is held more than is available under Utah law and will increase30 days from the marketabilityanniversary of the Company's securities.2014 Annual Meeting, the stockholder must submit notice of any such nomination and of any such proposal that is not made pursuant to Rule 14a-8 by the later of the 60th day before the 2015 annual meeting or the 10th day following the day on which the date of such meeting is first publicly announced. The StateCompany will not entertain any proposals or nominations at the annual meeting that do not meet the requirements set forth in the Company’s Bylaws. Also, if the stockholder does not also comply with the requirements of Delaware is recognized for adopting comprehensive modern and
flexible corporate laws whichRule 14a-4(c)(2) under the Securities Exchange Act of 1934, as amended, the Company’s proxies may exercise discretionary voting authority under proxies that Company’s Board of Directors solicits to vote in accordance with their best judgment on any such stockholder proposal or nomination. The Bylaws are periodically revised to respondavailable on the SEC’s website attached as an exhibit to the changing legalCompany’s Form 8-K filed with the SEC on October 16, 2014. To make a submission or to request a copy of the Company’s Bylaws, stockholders should contact the Company’s Secretary at the address listed above. Again, the Company encourages stockholders to seek advice from knowledgeable counsel before submitting a proposal or a nomination.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and business needsexecutive officers, and owners of corporations. For this reason, many major
corporations have initially incorporatedmore than ten percent of the Company’s Common Shares (“10% stockholders”), to file with the Securities and Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in Delaware or have changed their
corporate domiciles to Delaware in a manner similar to that proposed byownership of Common Shares of the Company. Consequently,Executive officers, directors and 10% stockholders are required by SEC regulations to furnish the Delaware judiciary has become particularly familiarCompany with corporate law matterscopies of all forms they file pursuant to Section 16(a).
To the Company’s knowledge, based on review of the copies of such reports furnished to the Company, and a substantial body of court decisions has
developed construing the DGCL. The DGCL, accordingly, has been, and is likely to
continue to be, interpreted in many significant judicial decisions, a fact which
may provide greater clarity and predictability with respect to the Company's
corporate legal affairs. For these reasons,officers and directors, representations that no other reports were required, during the Company's Board of Directors
believes that the Company's businessyear ended December 31, 2013, all Section 16(a) filing requirements applicable to its executive officers, directors and affairs can be conducted to better
advantage if the Company is able to operate under Delaware law. See "Certain
Significant Differences between the Corporation Laws of Delaware and Utah,"
below.
3
Principal Features10% stockholders were complied with.
EXPENSES OF SOLICITATION
The cost of the Changesolicitation of Domicile
The change of domicileproxies will be effectedborne by the mergerCompany. In addition to the use of the mail, proxies may be solicited by regular employees of the Company, either personally or by telephone. The Company does not expect to pay any compensation for the solicitation of proxies, but it may reimburse brokers and other persons holding shares in their names or in the names of nominees for their expenses in sending proxy materials to beneficial owners and obtaining proxies from such owners.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Shareholders may communicate with Board members by addressing a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned
subsidiaryletter to the Secretary of the Company that was incorporated on *, 2006 under the DGCL for
the purpose of effecting the change of domicile. The change of domicile will
become effective upon the filing of the requisite merger documents in Delaware
and Utah, which filings will occur promptly after the Special Meeting. Following
the merger, Digicorp, Inc. will be the surviving corporation.
On the effective date of the change of domicile, (i) each issued and
outstanding share of Common Stock of the Company will be converted into one
share of common stock of Digicorp, Inc.at 500 W. Wilson Bridge Rd., $.001 par value ("New Common Stock"),
and (ii) each outstanding share of common stock of Digicorp, Inc. held by the
Company will be retired and canceled and will resume the status of authorized
and unissued Common Stock.
On the effective date of the change of domicile, the Company will be
governed by the Delaware Certificate of Incorporation of Digicorp, Inc. (the
"Delaware Certificate"), the Delaware Bylaws of Digicorp, Inc. (the "Delaware
Bylaws") and the DGCL, which include a number of provisions that are not part of
the Company's present Articles of Incorporation, the Company's present Bylaws or
the Utah Revised Business Corporation Act. Accordingly, as described below, a
number of significant changes in shareholders' rights will be effected in
connection with the change of domicile, some of which may be viewed as limiting
the rights of shareholders. In particular, the Delaware Certificate includes a
provision authorized by the DGCL that would limit the liability of directors to
the Company and its shareholders for breach of fiduciary duties. The Delaware
Certificate will provide directors and officers with modern limited liability
and indemnification rights authorized by the DGCL. Suite 140, Columbus, Ohio 43085.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action at the Annual Meeting other than that shown in this document. Should any other matters be properly presented for action at the Annual Meeting, the enclosed proxy confers upon the proxy holders named therein the authority to vote on such matters in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS, | |||
RICHARD H. GROSS | |||
Worthington, Ohio | Secretary | ||
October 27, 2014 |
Appendix A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MIDWEST ENERGY EMISSIONS CORP.
We, the undersigned, President and Secretary, respectively, of Midwest Energy Emissions Corp., a corporation organized and existing under and by virtue of the Company believes that these provisions will enhance its ability to attract and
retain qualified directors and encourage them to continue to make
entrepreneurial decisions on behalfGeneral Corporation Law of the Company. Accordingly, implementationState of these provisions has been included as partDelaware
DO HEREBY CERTIFY:
FIRST: The Corporation is currently authorized to issue two classes of the changestock. The total number of domicile. The
Company believes that the changeshares of domicile will contribute to the long-term
quality and stability of the Company's governance. The Company's Board of
Directors has concluded that the benefit to shareholders of improved corporate
governance from the change of domicile outweighs any possible adverse effects on
shareholders of reducing the exposure of directors to liability and broadening
director indemnification rights.
Upon consummation of the change of domicile, the daily business operations
of the Company will continue as they are presently conducted at the Company's
principal executive office located at 4143 Glencoe Avenue, Marina Del Rey,
California 90292. After the change of domicile, the authorized capital stock of each class which the Company will consist of 60,000,000 shares of common stock, $.001Corporation is authorized to issue and the par value perof each share and 1,000,000 shares of preferredeach class of stock $.001 par value per share
(the "Preferred Stock"). The Preferred Stock will be issuable in series by
actionare as follows:
Class | Par Value | Authorized Shares | ||||||
Common | $ | 0.001 | 100,000,000 | |||||
Preferred | $ | 0.001 | 2,000,000 | |||||
Total | 102,000,000 |
SECOND: That at a meeting of the Company's Board of Directors. The Board of Directors will be
authorized, without further action by the shareholders, to fix the designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of the unissued Preferred Stock
including shares of Preferred Stock having preferences and other terms that
might discourage takeover attempts by third parties.
After the change of domicile, the Board of Directors will continue to
consist of those persons presently serving on the Board of Directors of the
Company. The individuals who will serve as executive officersMidwest Energy Emissions Corp. held on October 9, 2014, resolutions were duly adopted setting forth a proposed amendment of the Company
after the changeCertificate of domicile are those who currently serve as executive officersIncorporation of said Corporation, declaring said amendment to be advisable and calling a meeting of the Company.
Exchangestockholders of Share Certificates
As soonsaid Corporation for consideration thereof. The resolution setting forth the proposed amendment is as practicable upon or afterfollows:
RESOLVED, that the changeCertificate of domicile,Incorporation of this Corporation be amended by changing the Company's
shareholdersArticle thereof numbered “Fourth” so that, as amended, said Article shall be and read as follows:
FOURTH: The Corporation is authorized to issue two classes of record immediately prior to the changestock. One class of domicile willstock shall be sent
detailed instructions concerning the procedures to be followed for submission of
certificates representing Common Stock, to the Company's transfer agent, together
with a form of transmittal letter to be sent to the transfer agent at the time
such certificates are submitted.
After the change of domicile, the transfer agent will deliver to any
holder who has previously submitted a duly completed and executed transmittal
letter and a certificate representing the Common Stock, a new certificate issued
by the Company representing an equal number of shares of Common Stock into which
such shares of the Common Stock were converted.
4
After the change of domicile but before a certificate representing Common
Stock is surrendered, certificates representing New Common Stock will represent
the number of shares of Common Stock as a Delaware corporation into which such
Common Stock was converted pursuant to the terms of the change of domicile.
Failure by a shareholder to return appropriate transmittal letters or to
surrender certificates representing Common Stock will not affect such person's
rights as a shareholder, as such shareholder's certificates representing Common
Stock following the change of domicile will represent the number of shares of
New Common Stock as a Delaware corporation into which such Common Stock was
converted pursuant to the terms of the change of domicile, and will present no
material consequences to the Company.
Capitalization
The authorized capital of the Company on the Record Date, consisted of
50,000,000 shares of Common Stock, $.001 par value $0.001 per share,share. The second class of which
37,100,820 shares of Commonstock shall be Preferred Stock, were outstanding. The authorized capital of
Digicorp, Inc., which will be the authorized capital of the Company after the
change of domicile, consists of 60,000,000 shares of New Common Stock and
1,000,000 shares of Preferred Stock. As part of the change of domicile, the
authorized Common Stock of the Company will be increased from 50,000,000 shares
to 60,000,000 shares. The Company does not have any plans to issue additional
authorized New Common Stock or Preferred Stock. After the change of domicile the
Company will have outstanding approximately 37,100,820 shares of New Common
Stock and no shares of Preferred Stock. The change of domicile will not affect
total shareholder equity or the total outstanding capitalization of the Company.par value $0.001 per share. The Preferred Stock, that will be authorized upon effectiveness of the
change of domicile is commonly referred to as "blank check" preferred stock
("Blank Check Preferred") because the Blank Check Preferred wouldor any series thereof, shall have such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be expressed in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors from time to time. As such, the Blank Check
Preferred would be available for issuance without further action by the
Company's shareholders, except asand may be required by applicable lawmade dependent upon facts ascertainable outside such resolution or pursuant
to the requirements of the exchange or quotation system upon which the Company's
securities are then trading or quoted.
The Board of Directors believes that the creation of Blank Check Preferred
is advisable and in the best interests of the Company and its shareholders for
several reasons. The authorization of the Blank Check Preferred would permit the
Board of Directors to issue such stock without shareholder approval and,
thereby, provide the Company with maximum flexibility in structuring
acquisitions, joint ventures, strategic alliances, capital-raising transactions
and for other corporate purposes. The Blank Check Preferred would enable the
Company to respond promptly to and take advantage of market conditions and other
favorable opportunities without incurring the delay and expense associated with
calling a special shareholders' meeting to approve a contemplated stock
issuance.
The authorization of the Blank Check Preferred would also afford the
Company greater flexibility in responding to unsolicited acquisition proposals
and hostile takeover bids. The issuance of Blank Check Preferred could have the
effect of making it more difficult or time consuming for a third party to
acquire a majority of the Company's outstanding voting stock or otherwise effect
a change of control. Shares of Blank Check Preferred may also be sold to third
parties that indicate that they would support the Board in opposing a hostile
takeover bid. The availability of Blank Check Preferred could have the effect of
delaying a change of control and of increasing the consideration ultimately paid
to the Company and its shareholders. Authorization of the Blank Check Preferred
is not intended to be an anti-takeover measure, and the Board of Directors is
not aware of any present third party plans to gain control of the Company.
The actual effect of the issuance of any shares of Blank Check Preferred
upon the rights of holders of New Common Stock cannot be stated until the Board
determines the specific rights of the holders of such Blank Check Preferred.
However, the effects might include, among other things, restricting dividends on
the New Common Stock, diluting the voting power of the New Common Stock,
reducing the market price of the New Common Stock, or impairing the liquidation
rights of the New Common Stock, without further action by the shareholders.
Holders of the Company's New Common Stock will not have preemptive rights with
respect to the Blank Check Preferred.
5
Although the Company may consider issuing Blank Check Preferred in the
future for purposes of raising additional capital or in connection with
acquisition transactions, the Company currently has no agreements or commitments
with respect to the issuance of the Blank Check Preferred.
Significant Differences Between the Corporation Laws of Utah and Delaware
The Company is incorporated under the laws of the State of Utah and
Digicorp, Inc. is incorporated under the laws of the State of Delaware. Upon the
change of domicile, the shareholders of the Company, whose rights currently are
governed by Utah law and the Company's Articles of Incorporation and Bylaws,
which were created pursuant to Utah law, will become shareholders of a Delaware
company, Digicorp, Inc., and their rights as shareholders will then be governed
by Delaware law and the Delaware Certificate and the Delaware Bylaws which were
created under Delaware law.
Although the corporate statutes of Utah and Delaware are similar, certain
differences exist. The most significant differences, in the judgment of the
Company's management, are summarized below. This summary is not intended to be
complete, and shareholders should refer to the DGCL and the Utah Revised
Business Corporation Act ("Utah law") to understand how these laws apply to the
Company and Digicorp, Inc.
Quorum. Section 725(1) of the Utah law states that, unless the
corporation's articles of incorporation provide otherwise, a majority of the
votes entitled to be cast on a matter constitutes a quorum for action on that
matter. Section 216 of the DGCL contains a similar provision, but goes on to
state that "in no event shall a quorum consist of less than one-third of the
shares entitled to vote at the meeting." Neither the Delaware Certificate nor
the Delaware Bylaws will contain any contrary provision. Therefore, management
does not believe that the change of domicile will create any material change in
the shareholders' meeting quorum requirements of the Company.
Action of Shareholders Without a Meeting. Both Section 704 of the Utah law
and Section 228 of the DGCL permit any action that may be taken at an annual or
special meeting of the shareholders to be taken without a meeting and without
notice if one or more written consents, setting forth the action so taken, are
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shareholders attend and vote. However, Section 1704(4) of
the Utah law prohibits a Utah corporation in existence before July 1, 1992 from
taking any action by the written consent of fewer than all of the shareholders
entitled to vote with respect to the subject matter of the action unless a
resolution providing otherwise is approved either by a written consent signed by
all of the shareholders entitled to vote with respect to such matter or at a
duly convened meeting of shareholders by a majority of the outstanding shares of
common stock of the corporation entitled to vote. Because the Company was
incorporated under the Utah law on July 19, 1983, and because the Company's
shareholders have not approved a resolution providing otherwise, the Company, as
a Utah corporation, presently may not take any action by the written consent of
fewer than all of its shareholders entitled to vote. Both statutes further
require that the corporation give notice of shareholder approval of any matter
without a meeting, unless the written consents of all shareholders have been
obtained. The Utah law requires that such notice be given to non-consenting
shareholders at least ten days before the consummation of the matter authorized
by consent, while the DGCL requires "prompt" notice of any such action. In any
event, applicable federal securities laws in the United States require reporting
companies with a class of securities registered pursuant to Section 12 Exchange
Act to provide notice to shareholders of actions taken by written consent at
least 20 days prior to the effective date of the corporate action. Accordingly,
so long as the Company's common stock remains registered under Section 12 of the
Exchange Act, this difference between the Utah law and the DGCL will not affect
the rights of shareholders. However, Section 704(5) of the Utah law provides
that directors may never be elected by written consent of shareholders unless
the written consents of all shares entitled to vote on the election are
obtained. The DGCL contains no comparable provision. Once the change of domicile
has been completed, this difference may make it easier for the Company to take
action by unanimous written consent of its shareholders and will make it easier
for Company's shareholders to remove and elect directors by written consent.
Authorized Number of Directors. Section 803(1) of the Utah Law provides
that, once shares in a Utah corporation have been issued, the corporation must
have at least three directors. Section 141(b) of the DGCL requires a Delaware
corporation to have a minimum of one director. Therefore, following the change
of domicile, it would be possible for the powersresolutions of the Board of Directors, to be
concentratedprovided that the matter in which such facts shall operate upon such designations, preferences, rights and qualifications; limitations or restrictions of such class or series of stock is clearly and expressly set forth in the handsresolution or resolutions providing for the issuance of fewer directors than is permittedsuch stock by Utah law.
6
Removalthe Board of Directors. Under Section 808 of the Utah law, the shareholders
of a Utah corporation may remove one or more directors with or without cause,
unless the articles of incorporation provide that directors may be removed only
for cause. If cumulative voting (the right of a shareholder to multiply the
number of voting shares he, she or it owns times the number of directors to be
elected, with the ability to vote the product thereof for one or more
candidates) is in effect, a director may not be removed if the
The total number of shares sufficientof stock of each class which the Corporation shall have authority to elect him or her is voted against removal. Under the Utah law, a
director may be removed by the shareholders only at a meeting called for that
purpose,issue and the noticepar value of the meeting must state that the purpose, or oneeach share of the purposeseach class of the meeting, is the removalstock are as follows:
Class | Par Value | Authorized Shares | |||||
Common | $ | 0.001 | 150,000,000 | ||||
Preferred | $ | 0.001 | 2,000,000 | ||||
Total | 152,000,000 |
THIRD: That thereafter, pursuant to resolution of the director. Section 141(k) of
the DGCL provides similar removal provisions, but does not limit removal by
shareholders to meetings called for that purpose. The effect of this difference
in law would be to grant the Company's shareholders greater flexibility in
removing directors.
Special Meetings of Shareholders. Section 702(1) of the Utah law and
Section 211(d) of the DGCL permit a corporation'sits Board of Directors, and such
person or persons as are authorized by the bylaws to call a special meeting of the shareholders. In addition, the DGCL permits a Delaware corporation to
authorize such persons to call a special meetingstockholders of said Corporation was duly called and held upon notice in its certificate of
incorporation. Unlike the DGCL, the Utah law also permits the holders of 10% or
moreaccordance with Section 222 of the shares entitled to vote on a matter to submit a written demand for a
special meeting to the corporate secretary. Following the change of domicile,
10% or greater shareholders of the Company will not have the legal right to
demand a special meeting.
Indemnification of Directors. The Utah law and the DGCL contain similar
provisions for the indemnification of directors in certain circumstances. Both
statutes require a corporation to indemnify a director who was successful, on
the merits or otherwise, in the defense of any proceeding or any claim, issue or
matter, to which he or she was a party because of his or her status as a
director of the corporation, against reasonable expenses incurred in connection
with the proceeding or claim with respect to which he or she was successful.
However, the Utah law authorizes the limitation of such mandatory
indemnification in a corporation's articles of incorporation; the DGCL contains
no such limitation. The effect of this difference following the change of
domicile would be to prevent the Company from limiting mandatory indemnification
of its directors in such circumstances.
Inspection of Shareholder List for Meeting. After fixing a record date for
a shareholders' meeting, Section 720 of the UtahGeneral Corporation Law requires a Utah corporation
to prepare a list of the names of all its shareholders entitled to be given
notice of the meeting and to make the shareholder list available for inspection
by any shareholder for a period beginning on the earlier of ten days before the
meeting for which the list was prepared or two business days after notice of the
meeting is given, and continuing through the meeting and any adjournments
thereof. Under Section 720(4) of the Utah law, if the corporation refuses to
allow a shareholder to inspect the shareholder list before or at the meeting,
the shareholder may apply to the district court of the county where the
corporation's principal office or, if none, its registered office, is located,
and the district court may summarily order inspection or copying of the list at
the corporation's expense and may postpone the meeting until the inspection or
copying is complete. Section 219(a) of the DGCL likewise requires a Delaware
corporation to make its shareholder list available for inspection by
shareholders prior to any meeting of shareholders, but this is required only for
ten days prior to the meeting and at the meeting. Under Section 219(b) of the
DGCL, the willful neglect or refusal of the directors to produce such list at a
meeting for the election of directors will result in their ineligibility for
election to any office at such meeting. This is the only remedy provided by the
DGCL for failure to provide the shareholder list as required. Because management
fully intends to comply with right of shareholders to inspect lists of
shareholders entitled to be given notice of meetings, the Company's management
does not believe that the foregoing statutory differences will have any
significant effect on the rights of the Company's shareholders.
Appraisal Rights. Section 262 of the DGCL provides appraisal rights to
shareholders that are substantially similar to the Utah law in connection with
mergers or consolidations. However, the statutes differ in that the DGCL permits
a shareholder who has received notice of appraisal rights from the corporation,
and who has submitted a written demand for appraisal, to file a petition with
the Court of Chancery of the State of Delaware to demand a determination of the
fair value of such shareholder's shares. Such petition must be filed within 120
days after the effective date of a merger or consolidation. Section 262(b) of
the DGCL provides that shareholders do not have appraisal rights for certain
mergers with or into single direct or indirect wholly owned subsidiaries, which
includes the proposed change of domicile of the Company. The Utah law also sets
forth procedures for a Utah corporation to give shareholders notice of their
appraisal rights, and for such shareholders to exercise such rights. However,
the Utah law authorizes only the corporation to commence judicial appraisal
proceedings with all shareholders who have properly dissented and whose demand
remain unresolved to be named as parties to such proceedings.
7
Dividends. Section 640 of the Utah law authorizes the Board of Directors
of a Utah corporation to make distributions to its shareholders subject to the
articles of incorporation. However, no such distribution may be made if, after
giving it effect, the corporation would not be able to pay its debts as they
become due in the usual course of business, or the corporation's total assets
would be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed, if the
corporation were dissolved at the time of the distribution, to satisfy the
preferential rights of preferred shareholders. Section 170 of the DGCL similarly
permits a Delaware corporation to pay dividends upon its capital stock subject
to the certificate of incorporation, but only (a) out of its surplus, or, (b) if
no surplus exists, out of its net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year, and then only if the
corporation has capital equal to or in excess of the aggregate amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of the corporation's assets. The DGCL also
protects a corporation's Board of Directors from personal liability for good
faith reliance on the records of the corporation and the representations and
opinions of its officers and employees and others with respect to the
determination of the amount of surplus or other funds from which dividends may
be paid. The Utah law does not contain similar protection for the Board of
Directors.
Anti-Takeover Provisions. Section 61-6-1 et seq. of the Utah Code
Annotated (the "Utah Control Shares Acquisitions Act" or "UCSAA") provides that
"control shares" of an "issuing public corporation" acquired in a "control share
acquisition" shall have the same rights as they had before such acquisition only
to the extent granted by resolution of the shareholders of the corporation. The
UCSAA defines "control shares" as shares that, when combined with all other
voting shares held by the shareholder, would entitle the holder to vote in the
election of directors within any of the following ranges of voting power: (a)
1/5 or more but less than 1/3 of all voting power; (b) 1/3 or more but less than
a majority of all voting power; or (c) a majority or more of all voting power.
An "issuing public corporation" is defined as a Utah corporation with (a) 100 or
more shareholders; (b) its principal place of business, its principal office, or
substantial assets within the state; and (c) (i) more than 10% of its
shareholders resident in Utah; (ii) more than 10% of its shares owned by Utah
residents; or (iii) 10,000 shareholders resident in the state. A Utah
corporation's articles of incorporation or bylaws may provide that the UCSAA
does not apply to control share acquisitions of the corporation, as long as any
such provision is adopted before the control share acquisition in question.
Section 203 of the DGCL prohibits a Delaware corporation that is (a)
listed on a national securities exchange; (b) authorized for quotation on the
NASDAQ Stock Market; or (c) held of record by more than 2,000 shareholders from
engaging in any "business combination" with any "interested stockholder" for a
period of three years from the date that such person became an interested
stockholder. A Delaware corporation subject to Section 203 may engage in a
"business combination" with an "interested stockholder" under certain
circumstances including circumstances in which, prior to the person becoming an
interested stockholder, the corporation's Board of Directors approves the
"business combination" with the interested stockholder or the transaction in
which the person becomes an interested shareholder. A "business combination" is
defined as, among other things, a merger or consolidation of the corporation or
any subsidiary with the interested stockholder or with any other corporation if
such transaction is caused by the interested stockholder and as a result of such
merger or consolidation Section 203 is not applicable to the surviving
corporation. An "interested stockholder" is defined as any person that (a) owns
15% or more of the corporation's voting stock; or (b) is an affiliate or
associate of the corporation and was the owner of 15% or more of the
corporation's voting stock at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether such person is
an interested stockholder. As under the UCSAA, a corporation may opt out of
Section 203. However, under Section 203(b)(3) of the DGCL, if the corporation's
certificate of incorporation or bylaws are amended to opt out by shareholder
vote, such amendment will not be effective until 12 months after its adoption
and will not apply to any business corporation between the corporation and any
person who became an interested shareholder on or prior to such adoption.
These foregoing differences are not the only differences between the Utah
law and the DGCL. However, management believes that they are the most likely to
have a material effect on the relative rights of the Company's shareholders as a
result of the change of domicile.
8
Officers And Directors
Upon the effective date of change of domicile, the present officers and
directors will continue to be the officers and directors of the Company.
Federal Tax Consequences
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Common Stock who receive New Common Stock as
a result of the proposed change of domicile. No state, local, or foreign tax
consequences are addressed herein.
This discussion does not address the state, local, federal or foreign
income tax consequences of the change of domicile that may be relevant to
particular shareholders, such as dealers in securities, or Company shareholders
who exercise dissenters' rights. In view of the varying nature of such tax
considerations, each shareholder is urged to consult his or her own tax adviser
as to the specific tax consequences of the proposed change of domicile,
including the applicability of federal, state, local, or foreign tax laws.
Subject to the limitations, qualifications and exceptions described herein, and
assuming the change of domicile qualifies as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
the following federal income tax consequences generally should result:
o No gain or loss should be recognized by the shareholders of the
Company upon conversion of their Common Stock into New Common Stock
pursuant to the change of domicile;
o The aggregate tax basis of the New Common Stock received by each
shareholder of the Company in the change of domicile should be equal
to the aggregate tax basis of Common Stock converted in exchange
therefor;
o The holding period of New Common Stock received by each shareholder
of the Company in the change of domicile should include the period
during which the shareholder held his or her Common Stock converted
therefor, provided such Common Stock is held by the shareholder as a
capital asset on the effective date of the change of domicile; and
o The Company should not recognize gain or loss for federal income tax
purposes as a result of the change of domicile.
The Company has not requested a ruling from the Internal Revenue Service
or an opinion of counsel with respect to the federal income tax consequences of
the change of domicile under the Code. The Company believes the change of
domicile will constitute a tax-free reorganization under Section 368(a) of the
Code, inasmuch as Section 368(a)(1)(F) of the Code defines a reorganization as a
mere change in identity, form, or place of organization of one corporation
however effected.
Vote Required; Board Recommendation
Proposal No. 1 (The authorization and approval of a change of the
Company's domicile from Utah to Delaware effected by the merger of the Company,
a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned
subsidiary of the Company that was incorporated under the DGCL for the purpose
of effecting the change of domicile) will be approved if a majority of the
outstanding shares of Common Stock of the Company are voted "FOR" the proposal.
Abstentions will have the same effect as votes "AGAINST" Proposal No. 1. The
Board unanimously recommends that you vote all of your shares "FOR" the approval
of the Plan as described in this Proposal No. 1.
9
PROPOSAL NO. 2
AUTHORIZATION AND APPROVAL OF
THE COMPANY'S STOCK OPTION AND RESTRICTED STOCK PLAN
Background
Effective July 20, 2005, the Board of Directors approved the Company's
Stock Option and Restricted Stock Plan (the "Plan"), which provides for the
issuance of a maximum of up to 15,000,000 restricted shares of common stock,
options to purchase shares of Common Stock (including non-qualified stock
options and also incentive stock options ("ISOs")) upon shareholder approval of
this Proposal No. 2) and warrants to purchase shares of Common Stock to
employees, directors and consultants. As of May 23, 2006 the Company has issued
16,071 restricted shares of Common Stock, options to purchase 8,662,500 shares
of Common Stock and warrants to purchase 50,000 shares of Common Stock pursuant
to the Plan.
The Company is requesting stockholder approval of the Plan, which is
included as Appendix A to this proxy statement. The purpose of the Plan is to
advance the interests of the Company by providing to key employees of the
Company and its subsidiaries who have substantial responsibility for the
direction and management of the Company, as well as certain directors and
consultants of the Company, additional incentives, to the extent permitted by
law, to exert their best efforts on behalf of the Company, to increase their
proprietary interest in the success of the Company, to reward outstanding
performance and to provide a means to attract and retain persons of outstanding
ability to the service of the Company. It is recognized that the Company cannot
attract or retain these individuals without this compensation. Upon approval of
Proposal No. 2 at the Special Meeting, options granted under the Plan may
qualify as ISOs, as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
Except for restricted stock and options which have already been granted
under the Plan as described above, and except for the equity compensation of
Board members described below, the Company has not yet determined the amount of
any options grants, warrant grants or restricted stock awards to be offered to
any officers, employees, directors or consultants under the Plan. The Company
has adopted the following policy for equity compensation paid to directors. Each
director receives $1,000 for each meeting of the Board of Directors that each
such director attends (either in person or by teleconference). Such $1,000 may
be paid at the Company's option either in cash or in shares of restricted Common
Stock of the Company valued at the closing price of the Common Stock on the date
of the meeting or, if such meeting date is a day that the principal trading
market of the Common Stock is not open for business, then valued at the closing
price of the Common Stock on the most recent date after the meeting date on
which the principal trading market is open for business.
A committee of the Board of Directors (the "Committee") comprised of at
least two non-employee directors determines the amount and features of the stock
options, warrants or restricted stock to be awarded to participants in the Plan.
The Committee evaluates a number of criteria, including the service of each such
participant to the Company, the present and potential contributions of such
participant to the success of the Company, and such other factors as the
Committee deems relevant in connection with accomplishing the purposes of the
Plan, including the recipient's current stock holdings, position with the
Company, and other factors. The Committee does not apply a formula assigning
specific weights to any of these factors when making its determination. The
Committee awards stock options, warrants and restricted stock on a subjective
basis and such awards depend in each case on the performance of the officer,
employee or consultant under consideration, and in the case of new hires, their
potential performance.
Description of the Plan
The following is a brief description of the material features of the Plan.
Such description is qualified in its entirety by reference to the full text of
the Plan, which is attached to this proxy statement as Appendix A.
Purpose. The purpose of the Plan is to advance the interests of the
Company by providing key employees of the Company who have substantial
responsibility for the direction and management of the Company, as well as
certain directors, employees and consultants with additional incentives to exert
their best efforts to increase their proprietary interest in the success of the
Company, to reward outstanding performance, and to attract and retain persons of
outstanding ability.
10
Authorization. The Plan provides for the issuance of a maximum of
15,000,000 shares of Common Stock, which may be issued as restricted shares of
Common Stock, options to purchase shares of Common Stock (including
non-qualified stock options and also ISOs upon shareholder approval of this
Proposal No. 2) and warrants to purchase shares of Common Stock.
Administration. The Plan is administered by a Committee of the Board of
Directors comprised of at least two members of the Board, each of whom must (a)
be a non-employee director, as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (b) be an
"outside director" as the term is defined under Section 162(m) of the Code.
The Committee interprets the Plan and, to the extent and in the manner
contemplated in the Plan, exercises the discretion reserved to it in the Plan.
The decision of the Committee on any interpretation of the Plan or
administration thereof is final and binding with respect to the Company, any
participant or any person claiming to have rights as, or on behalf of, any
participant.
Participants. The Committee determines and designates those officers,
employees, directors and consultants of the Company who are eligible to
participate in the Plan. The Committee also determines the number of options,
warrants and shares of restricted stock to be awarded to each participant. In
making these determinations, the Committee takes into account the potential
contributions of the participant to the success of the Company, and such other
factors as the Committee deems relevant to accomplish the purposes of the Plan.
Award Agreements. All options, warrants and restricted stock granted under
the Plan are evidenced by an agreement. Agreements evidencing awards made to
different participants or at different times need not contain similar
provisions. Options that are intended to be ISOs will be designated as such; any
option not so designated will be treated as a non-qualified stock option.
Terms of options and warrants. Stock options and warrants are granted
under the Plan at a price not less than the prevailing market value at the time
of grant and will have realizable value only if the Company's stock price
increases. The Committee determines the amount and features of the stock options
and warrants, if any, to be awarded to participants. The Committee evaluates a
number of criteria, including the present and potential contributions of such
participant to the success of the Company, and such other factors as the
Committee deems relevant in connection with accomplishing the purposes of the
Plan, including the participant's current stock holdings, position with the
Company and other factors. The Committee does not apply a formula assigning
specific weights to any of these factors when making its determination. The
Committee awards stock options and warrants on a subjective basis and such
awards depend in each case on the performance of the participant under
consideration. Options granted under the Plan may be ISOs or non-qualified stock
options.
Exercise of options and warrants. Options and warrants are exercisable at
a price equal to the fair market value of the shares at the time the option or
warrant is granted, provided, however, that the exercise price of any option
that is intended to be treated as an ISO and that is granted to a holder of 10%
or more of the Company's shares may not be less than 110% of such current fair
market value. The day on which the Company approves the grant of an option or
warrant or the date specified in the Plan will be considered the date on which
the option or warrant is granted. For purposes of the Plan, the fair market
value of the shares as of any date is the average of the high and low trading
prices of the shares on that date. Options may contain such other terms and
conditions as the Committee deems advisable, including, but not limited to,
being exercisable only in installments. Options and warrants granted to
different participants or at different times need not contain similar
provisions. Each option and warrant states the period or periods of time within
which the option or warrant may be exercised by the participant, which may not
exceed ten years from the date the option or warrant is granted and, in the case
of an option that is intended to be an ISO and that is granted to a holder of
10% or more of the Company's shares, not more than five years. Unless
specifically provided otherwise in an agreement evidencing the award of options,
any option awarded to a participant becomes exercisable over four years, with
25% of the option becoming exercisable on each of the first four anniversaries
of the date of the award.
11
Awards of Restricted Stock. Each award of restricted stock contains a
vesting schedule, which sets forth the times at which meeting the participant will
acquire a nonforfeitable right to the shares awarded to him or her. In general,
it is intended that awards of restricted stock will vest ratably over the four
years following the date of the award, but an individual award agreement may
provide otherwise. Shares that are not vested upon a participant's termination
of employment with, or cessation of providing services to, the Company will be
forfeited.
Effect of change in shares subject to the Plan. If there is a change in
the outstanding shares through the declaration of stock dividends, stock splits,
or combinations or exchanges of shares, or otherwise, thenecessary number of shares available for options, warrants and awards of restricted stock and the shares
subject to an option or warrant and the option and warrant prices will be
appropriately adjustedas required by the Committee.
Amendment and termination. The Board of Directors may amend or alter,
suspend or discontinue the Plan at any time. While the Board may seek
shareholder approval of an action modifying a provisionstatute were voted in favor of the Plan when deemed
advisable, the Board may make certain modifications without shareholder approval
(except with respect to the number of shares authorized for issuance under the
Plan). The Plan will terminate ten years from the date of its adoption by the
Board.
Resale of shares acquired pursuant to awards. Participants purchasing
shares pursuant to options, warrants and/or vesting in awards of restricted
stock may resell the shares through brokers or dealers at prevailing market
prices, to the extent a market exists for the Company's Common Stock. Any sales
by participants who may be deemed affiliates of the Company must be made
pursuant to registration under the Securities Act or pursuant to an exemption
therefrom.
Any resale of shares acquired pursuant to awards under the Plan that are
made pursuant to registration under the Securities Act or an exemption therefrom
may be made at the Company's expense.
Federal tax consequences of the Plan. The following is a summary of
certain federal income tax consequences of transactions under the Plan based on
current federal income tax laws. This summary is not intended to be exhaustive
and does not describe state, local, or other tax consequences.
Non-qualified stock options and warrants. The grant of a non-qualified
stock option or a warrant under the Plan will not result in the recognition of
taxable income to the participant or in a deduction to the Company. In general,
upon exercise, a participant will recognize ordinary income in an amount equal
to the excess of the fair market value of the shares of common stock purchased
over the exercise price. The Company is required to withhold tax on the amount
of income so recognized, and is entitled to a tax deduction equal to the amount
of such income. Gain or loss upon a subsequent sale of any shares of common
stock received upon the exercise of a non-qualified stock option or a warrant is
taxed as capital gain or loss (long-term or short-term, depending upon the
holding period of the stock sold) to the participant.
Incentive stock options. Generally, neither the grant nor the exercise of
an incentive stock option will result in the recognition of taxable income by
the participant. Rather, when the participant disposes of stock acquired upon
exercise of an ISO, the participant will recognize income in the amount of the
excess of the amount realized upon disposition (if any) over the exercise price.
This special tax treatment is available only if the participant does not dispose
of the stock acquired upon the exercise of the ISO before the later of the first
anniversary of the date of exercise or the second anniversary of the date of the
grant of the option. A disposition before that time is referred to as a
"disqualifying disposition." If a participant effects a disqualifying
disposition, he or she will generally have income taxable at ordinary rates
equal to the excess of the fair market value of the stock on the date of
exercise over the exercise price and income taxable at capital gains rates on
any amount realized on disposition in excess of the fair market value of the
stock on the date of exercise. The Company is generally not entitled to any
deduction in connection with the issuance or exercise of an ISO. If, however, a
participant effects a disqualifying disposition, the Company will be entitled to
a deduction in an amount equal to the amount of income recognized by the
participant that is taxable at ordinary income rates.
Restricted Stock. The grant of an award of restricted stock will not
result in the recognition of taxable income or in a deduction for the Company.
Instead, when a participant becomes vested in shares of restricted stock, the
participant generally will recognize income taxable at ordinary income rates in
an amount equal to the fair market value of the stock on the date of vesting,
and the Company will be entitled to a corresponding deduction. A participant
may, however, make an election to include in income at the time of grant the
fair market value of the restricted stock by making an election under section
83(b) of the Code within 30 days of the award of restricted stock. The Company
will be entitled to a corresponding deduction. If the participant subsequently
forfeits shares of restricted stock, he or she may not be entitled to claim a
deduction or a loss.
12
Transferability of Options, Warrants and Restricted Stock. Options,
warrants and restricted stock is not transferable other than to the spouse or
lineal descendants (includingamendment.
FOURTH: That said amendment was duly adopted children) of the participant, any trust
for the benefit of the participant or the benefit of the spouse or lineal
descendants (including adopted children) of the participant, or the guardian or
conservator of the participant.
Termination of Options, Warrants and Restricted Stock Awards. All rights
to exercise options and warrants terminate 60 days after any optionee or warrant
holder ceases to be a director of the Company or a key employee or consultant of
the Company and/or any of its subsidiaries, and no options or warrants will vest
after an optionee's or warrant holder's termination date. Notwithstanding the
foregoing, however, if an optionee's or warrant holder's service as a director
of the Company or key employee or consultant terminates as a result of the
optionee's or warrant holder's death or his total and permanent disability, the
optionee, warrant holder or the executors or administrators or legatees or
distributees of the estate, as the case may be and to the extent they are
permitted transferees, shall have the right, from time to time within one year
after the optionee's or warrant holder's total and permanent disability or death
and prior to the expiration of the term of the option or warrant, to exercise
any portion of the option or warrant not previously exercised, in whole or in
part, as provided in the respective agreement evidencing the award of the
options or warrants. A participant's rights to shares awarded as restricted
stock shall, under all circumstances, be set forth in the agreement evidencing
the award of restricted stock.
Vote Required; Board Recommendation
Proposal No. 2 (the authorization and approval of the Company's Stock
Option and Restricted Stock Plan) will be approved if a majority of the total
votes properly cast in person or by proxy at the Special Meeting by the holders
of Common Stock are voted "FOR" the proposal. Abstentions will have no effect on
the result of the vote. The Board unanimously recommends that you vote all of
your shares "FOR" the approval of the Plan as described in this Proposal No. 2.
ADDITIONAL INFORMATION
Executive Compensation
The following table sets forth information concerning the total
compensation that we have paid or that has accrued on behalf of our chief
executive officer and other executive officers with annual compensation
exceeding $100,000 during the years ended December 31, 2005, 2004 and 2003 (the
"named executive officers").
SUMMARY COMPENSATION TABLE
IN WITNESS WHEREOF, the Corporation Act provide a righthas caused this Certificate of a shareholder to dissent and obtain
appraisal of or payment for such shareholder's shares of common stock.
Other Matters
The Board of Directors does not know of any other matters that may
properly be brought, and which are likelyAmendment to be brought, before the Special
Meeting. However, should other matters be properly brought before the Special
Meeting, the persons named on the enclosed proxy or their substitutes will vote
in accordance with their best judgment on such matters.
Shareholder Proposals and Discretionary Proxy Voting Authority
The Boardduly executed this _____ day of Directors has not yet determined the date on which the next
annual meeting of shareholders will be held. Any proposal by a shareholder
intended to be presented at the Company's next annual meeting of shareholders
must be received at our offices a reasonable amount of time prior to the date on
which the information or proxy statement for that meeting is mailed to
shareholders in order to be included in the information or proxy statement
relating to that meeting.
Rule 14a-4(c) promulgated under the Exchange Act, as amended, governs the
Company's use of its discretionary proxy voting authority with respect to a
shareholder proposal that the shareholder has not sought to include in the
Company's proxy statement. The rule provides that if a proponent of a proposal
fails to notify the Company of the proposal at least 45 days before the date of
mailing of the prior year's proxy statement, then the management proxies will be
allowed to use their discretionary voting authority when the proposal is raised
at the meeting, without any discussion of the matter required in the proxy
statement. If during the prior year the Company did not hold an annual meeting,
or if the date of the meeting has changed more than 30 days from the prior year,
then notice by a proponent of a proposal must not have been received a
reasonable time before the Company mails its proxy materials for the current
year.
Forward-Looking Statements and Information
This Proxy Statement includes forward-looking statements. You can identify
our forward-looking statements by the words "expects," "projects," "believes,"
"anticipates," "intends," "plans," "predicts," "estimates" and similar
expressions.
The forward-looking statements are based on management's current
expectations, estimates and projections about us. The Company cautions you that
these statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that the Company cannot predict. In addition, the
Company has based many of these forward-looking statements on assumptions about
future events that may prove to be inaccurate. Accordingly, the Company's actual
outcomes and results may differ materially from what is expressed or forecast in
the forward-looking statements.
17
You should rely only on the information provided in this Proxy Statement.
The Company has not authorized any person to provide information other than that
provided herein. You should not assume that the information in this Proxy
Statement is accurate as of any date other than the date on the front of the
document.
Where You Can Find More Information About the Company
The Company files annual, quarterly and current reports, proxy statements
and other information with the SEC. You can read and copy any materials the
Company files with the SEC at the SEC's Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. You can obtain information about the operation of
the SEC's Public Reference Room by calling the SEC at (202) 551-8090. The SEC
also maintains an Internet website that contains information the Company files
electronically with the SEC, which you can access over the Internet at
http://www.sec.gov. Copies of these materials may also be obtained by mail from
the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C.
20549 at prescribed rates.
18
Appendix A
DIGICORP
STOCK OPTION AND RESTRICTED STOCK PLAN
1. PURPOSE OF THE PLAN
The purpose of this Stock Option and Restricted Stock Plan (this "Plan")
is to advance the interests of Digicorp (the "Company") and its subsidiaries by
providing to key employees of the Company and its subsidiaries who have
substantial responsibility for the direction and management of the Company, as
well as certain directors and consultants of the Company, additional incentives,
to the extent permitted by law, to exert their best efforts on behalf of the
Company, to increase their proprietary interest in the success of the Company,
to reward outstanding performance and to provide a means to attract and retain
persons of outstanding ability to the service of the Company. It is recognized
that the Company cannot attract or retain these individuals without this
compensation. Options granted under this Plan may qualify as incentive stock
options ("ISOs"), as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
2. ADMINISTRATION
This Plan shall be administered by a committee (the "Committee") comprised
of at least two (2) members of the Company's Board of Directors ("Board") who
each shall (a) be a "non-employee director," as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, unless
administration of the Plan by "non-employee directors" is not then required for
transactions under the Plan to be exempt from the requirements of Rule 16b, and
(b) be an "outside director" as defined under Section 162(m) of the Code, unless
the action taken pursuant to the Plan is not required to be taken by "outside
directors" to qualify for tax deductibility under Section 162(m) of the Code.
The Committee shall interpret this Plan and, to the extent and in the manner
contemplated herein, shall exercise the discretion reserved to it hereunder. The
Committee may prescribe, amend and rescind rules and regulations relating to
this Plan and to make all other determinations necessary for its administration.
The decision of the Committee on any interpretation of this Plan or
administration hereof, if in compliance with the provisions of the Act and
regulations promulgated thereunder, shall be final and binding with respect to
the Company, any optionee, warrant holder or any person claiming to have rights
as, or on behalf of, any optionee or warrant holder.
3. SHARES SUBJECT TO THE PLAN
The shares subject to option, warrant grant and the other provisions of
this Plan shall be shares of the Company's common stock, par value $0.001 per
share ("shares"). Subject to the provisions hereof concerning adjustment, the
total number of shares that may be purchased upon the exercise or surrender of
stock options granted under this Plan shall not exceed the greater of thirty
percent (30%) of the total number of shares authorized and outstanding as of the
most recent quarterly period ended or 15,000,000 REDUCED BY the number of shares
with respect to which restricted stock is awarded. The total number of shares
that may be awarded as restricted shares under this Plan shall not exceed twenty
percent (20%) of the total number of shares subject to the Plan. Any shares that
are authorized for issuance pursuant to the exercise of options may be issued
upon the exercise of ISOs. In the event any option or warrant shall cease to be
exercisable in whole or in part for any reason, the shares which were covered by
such option or warrant, but as to which the option or warrant had not been
exercised, shall again be available under this Plan. Similarly, any shares that
were granted pursuant to an award of restricted stock under this Plan but that
are forfeited pursuant to the terms of the Plan or an award agreement shall
again be available under this Plan. In addition, shares not delivered to
participants in connection with the stock-for-stock exercise of an option or
warrant shall again be available under this Plan. Shares may be made available
from authorized, un-issued or reacquired stock or partly from each.
19
4. PARTICIPANTS
(A) Key Employees, Directors and Consultants. The Committee shall
determine and designate from time to time those key employees, directors and
consultants of the Company and its subsidiaries who shall be eligible to
participate in this Plan. The Committee shall also determine the number of
shares to be offered from time to time to each participant, either pursuant to
an option, pursuant to a warrant or pursuant to an award of restricted stock, or
either. In making these determinations, the Committee shall take into account
the past service of each such key employee, director or consultant to the
Company and its subsidiaries, the present and potential contributions of such
key employee, director or consultant to the success of the Company and its
subsidiaries and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of this Plan. The agreement
documenting the award of any option, warrant or restricted stock granted
pursuant to this Plan shall contain such terms and conditions as the Committee
shall deem advisable, including but not limited to being vested or exercisable,
as the case may be, only in such installments as the Committee may determine.
(B) Award Agreements. All options, warrants and restricted stock granted
under the Plan will be evidenced by an agreement. Agreements evidencing awards
made to different participants or at different times need not contain similar
provisions. Options that are intended to be ISOs will be designated as such; any
option not so designated will be treated as a nonqualified stock option.
5. OPTION/WARRANT PRICE
Each agreement representing an award of options or warrants shall state
the price at which the subject option or warrant may be exercised, which shall
not be less than the current fair market value of the shares at the date of
issuance of an option or warrant; provided, however, that the exercise price of
any option that is intended to be an ISO and that is granted to a holder of 10%
or more of the Company's shares shall not be less than 110% of such current fair
market value. For purposes of this Plan, the fair market value of any Share as
of any date shall be the average of the high and low trading prices of the
shares on that date.
6. OPTION/WARRANT PERIOD
Each agreement representing an award of options or warrants shall state
the period or periods of time at and within which the subject option or warrant
may be exercised, in whole or in part, by the optionee or warrant holder, which
shall be such period or periods as may be determined by the Committee; provided,
however, that the option or warrant period shall not exceed ten years from the
date of issuance of the option or warrant and, in the case of an option that is
intended to be an ISO and that is granted to a holder of 10% or more of the
Company's shares, shall not exceed five years. Unless specifically provided
otherwise in an agreement evidencing the award of options, any option awarded to
a participant shall become exercisable over four years, with 25% of the option
becoming exercisable on each of the first four anniversaries of the date of the
award.
7. PAYMENT FOR SHARES
Full payment for shares purchased pursuant to an option or warrant shall
be made at the time of exercising the option or warrant in whole or in part.
Payment of the purchase price shall be made in cash (including check, bank draft
or money order), unless the Company provides to any or all participants the
ability to effect a stock-for-stock exercise of his or her options or warrants.
8. RESTRICTED STOCK
Each agreement representing an award of restricted stock shall state the
number of shares subject to the award and the terms and conditions pursuant to
which the recipient of the award shall acquire a nonforfeitable right to the
shares awarded as restricted stock. Unless specifically provided otherwise in an
agreement evidencing the award of restricted stock, a participant shall acquire
a nonforfeitable right to the shares subject to the award over four years, with
25% of the restricted stock becoming vested on each of the first four
anniversaries of the date of the award, and shares that are not vested upon a
participant's termination of employment with, or cessation of providing services
to, the Company shall be forfeited.
20
9. TRANSFERABILITY OF OPTIONS, WARRANTS AND RESTRICTED STOCK
Options, warrants and restricted stock shall not be transferable other
than to the spouse or lineal descendants (including adopted children) of the
participant, any trust for the benefit of the participant or the benefit of the
spouse or lineal descendants (including adopted children) of the participant, or
the guardian or conservator of the participant ("Permitted Transferees").
10. TERMINATION OF OPTIONS, WARRANTS AND RESTRICTED STOCK AWARDS
All rights to exercise options and warrants shall terminate sixty days
after any optionee or warrant holder ceases to be a director of the Company or a
key employee or consultant of the Company and any of its subsidiaries, and no
options or warrants will vest after an optionee's or warrant holder's
termination date. Notwithstanding the foregoing, however, if an optionee's or
warrant holder's service as a director of the Company or key employee or
consultant terminates as a result of the optionee's or warrant holder's death or
his total and permanent disability, the optionee or warrant holder or the
executors or administrators or legatees or distributees of the estate, as the
case may be and to the extent they are Permitted Transferees, shall have the
right, from time to time within one year after the optionee's or warrant
holder's total and permanent disability or death and prior to the expiration of
the term of the option or warrant, to exercise any portion of the option or
warrant not previously exercised, in whole or in part, as provided in the
respective agreement evidencing the award of the options or warrants. A
participant's rights to shares awarded as restricted stock shall, under all
circumstances, be set forth in the agreement evidencing the award of restricted
stock.
11. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
Subject to any required action by the shareholders of the Company and the
provisions of applicable corporate law, the number of shares represented by the
unexercised portion of an option or warrant, the number of shares that has been
authorized or reserved for issuance hereunder, and the number of Shares covered
by any applicable vesting schedule hereunder, as well as the exercise price for
a share represented by the unexercised portion of an option or warrant, shall be
proportionately adjusted for (a) a division, combination or reclassification of
any of the shares of common stock of the Company or (b) a dividend payable in
shares of common stock of the Company.
12. GENERAL RESTRICTION
Each award shall be subject to the requirement that, if at any time the
Board shall determine, at its discretion, that the listing, registration or
qualification of the shares subject to such option or warrant upon any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such award or the issue or
purchase of the shares thereunder, such option or warrant may not be exercised
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company. Subject to the limitations of paragraph 6, no option
or warrant shall expire during any period when exercise of such option or
warrant has been prohibited by the Board, but shall be extended for such further
period so as to afford the optionee or warrant holder a reasonable opportunity
to exercise his option or warrant.
13. MISCELLANEOUS PROVISIONS
(A) No optionee or warrant holder shall have rights as a shareholder with
respect to shares covered by his option or warrant until the date of exercise of
his option or warrant.
(B) The granting of any award under the Plan shall not impose upon the
Company any obligation to appoint or to continue to appoint as a director, key
employee or consultant any participant, and the right of the Company and its
subsidiaries to terminate the employment of any key employee or other employee
or consultant, or service of any director, shall not be diminished or affected
by reason of the fact that an award has been made under the Plan to such
participant.
21
(C) Awards under the Plan shall be evidenced by award agreements in such
form and subject to the terms and conditions of this Plan as the Committee shall
approve from time to time, consistent with the provisions of this Plan. Such
award agreements may contain such other provisions, as the Committee in its
discretion may deem advisable. In the case of any discrepancy between the terms
of the Plan and the terms of any award agreement, the Plan provisions shall
control.
(D) The aggregate fair market value (determined as of the date of issuance
of an option) of the Shares with respect to which an option, or portion thereof,
intended to be an ISO is exercisable for the first time by any optionee during
any calendar year (under all incentive stock option plans of the Company and
subsidiary corporations) shall not exceed $100,000.
(E) All awards under this Plan shall be made within ten years from the
earlier of the date of adoption of this Plan (or any amendment thereto requiring
shareholder approval pursuant to the Code) or the date this Plan (or any
amendment thereto requiring shareholder approval pursuant to the Code) is
approved by the shareholders of the Company.
(F) A leave of absence granted to an employee does not constitute an
interruption in continuous employment for purposes of this Plan as long as the
leave of absence does not extend beyond one year.
(G) Any notices given in writing shall be deemed given if delivered in
person or by certified mail; if given to the Company addressed to Corporate
Secretary, Digicorp, 100 Wilshire Boulevard, Suite 1750, Santa Monica,
California 90401; and, if to an optionee or warrant holder, in care of the
optionee or warrant holder at his or her last known address.
(H) This Plan and all actions taken by those acting under this Plan shall
be governed by the substantive laws of Delaware without regard to any rules
regarding conflict-of-law or choice-of-law.
(I) All costs and expenses incurred in the operation and administration of
this Plan shall be borne by the Company.
14. AMENDMENT AND TERMINATION
The Board may modify, revise or terminate this Plan at any time and from
time to time, subject to such supermajority voting requirements as may be
contained in the Company's certificate of incorporation or by-laws. While the
Board may seek shareholder approval of an action modifying a provision of the
Plan where it is determined that such shareholder approval is advisable under
the provisions of applicable law, the Board of Directors shall be permitted to
make any modification or revision to any provision of this Plan without
shareholder approval. This Plan shall terminate when all Shares reserved for
issuance hereunder have been issued upon the exercise of options or warrants and
all restricted stock awards have fully vested, or by action of the Board of
Directors pursuant to this paragraph, whichever shall first occur.
15. EFFECTIVE DATE OF THE PLAN
The Plan shall become effective upon the adoption by the Board.
22
DIGICORP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
*, 2006
The undersigned hereby appoints Jay Rifkin and William B. Horne, or either
of them, as attorneys and proxies to vote all the shares of common stock, par
value $.001 per share, of Digicorp, a Utah corporation (the "Company"), which
are outstanding in the name of the undersigned and which the undersigned would
be entitled to vote as of *, 2006, at the Company's Special Meeting of
Shareholders, to be held at 1800 Century Park East, Suite 200, Los Angeles, CA
90067, on *, 2006, at 10 a.m. (local time), and at any or all adjournments or
postponements thereof; and the undersigned hereby instructs and authorizes said
attorneys to vote as indicated below.
The shares represented hereby will be voted in accordance with the
instructions contained below. If no instructions are given the shares will be
voted "FOR" Proposal Nos. 1 and 2 below, each of said items being more fully
described in the notice of meeting and accompanying Proxy Statement, receipt of
which is hereby acknowledged. In the event of any proposed adjournment of the
Special Meeting to permit further solicitation of proxies with respect to any
proposal listed below, shares will be voted "FOR" adjournment.
PLEASE INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOX BELOW, AS SHOWN,
USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED
HEREIN.
_____________, 2014.
By: R. Alan Kelley | By: Richard H. Gross | ||
Its: President | Its: Secretary |