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SECURITIES AND EXCHANGE COMMISSION
Exchange Act of 1934 (Amendment No. 1)
Filed by a Party other than the Registranto
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
þ | No fee required. | |
o | 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: | ||
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: | ||
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(3) | Filing Party: | ||
(4) | Date Filed: | ||
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5990 Greenwood Plaza Blvd., Suite 390
Greenwood Village, Colorado 80111
April 29, 2008
Sincerely | ||||
/s/ Chris Sapyta | ||||
President, Chief Executive Officer, and Director | ||||
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1. | Election of two directors, each to serve a three year term (Proposal A); | ||
2. | Approval of the potential issuance of shares of common stock by the company in excess of the 20% limitation imposed by the American Stock Exchange upon the conversion of debt outstanding or to pay installments of principal and interest becoming due on the company’s secured convertible debentures or convertible operating loan notes and of the issuance of shares of common stock upon the exercise of certain warrants held by the holders of the secured convertible debentures and convertible operating loan notes. (Proposal B). | ||
3. | To approve an amendment to our 2006 Equity Incentive Plan to increase the total number of shares with respect to which options may be granted under the plan from 1,400,000 to 1,900,000 (Proposal C); and | ||
4. | The transaction of such other business as may properly come before the meeting or any adjournments or postponements of the meeting. |
/s/ Chris Sapyta | ||||
President, Chief Executive Officer, and Director | ||||
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5990 Greenwood Plaza Blvd., Suite 390
Greenwood Village, Colorado 80111
Proposal A: | Election of two directors: Doug Kelsall and Jack Burkholder. | |
Proposal B: | Approval of the potential issuance of shares of common stock by the company in excess of the 20% limitation imposed by the American Stock Exchange upon the conversion of debt outstanding or to pay installments of principal and interest becoming due on the company’s secured convertible debentures or convertible operating loan notes and of the issuance of shares of common stock upon the exercise of certain warrants held by the holders of the secured convertible debentures and convertible operating loan notes. (Proposal B). | |
Proposal C: | To approve an amendment to our 2006 Equity Incentive Plan to increase the total number of shares with respect to which options may be granted under the plan from 1,400,000 to 1,900,000. |
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• | sending a written notice of revocation to our corporate secretary at our principal offices, 5990 Greenwood Plaza Blvd., Suite 390 Greenwood Village, Colorado 80111, or | ||
• | by attending the annual meeting and voting in person. |
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• | each person (or group of affiliated persons) known to us to beneficially own more than 5% of the outstanding shares of our voting stock; | ||
• | each of our directors and executive officers; | ||
• | all of our executive officers and directors as a group. |
Voting | Total | |||||||||||||||||||
Common | Footnote | Percentage | Percentage | Percentage | ||||||||||||||||
Name of Shareholder | Stock | Number | of Class | Owned | of Equity | |||||||||||||||
Chris Sapyta | 784,054 | (1 | )(10) | 6.2 | % | 6.2 | % | 6.2 | % | |||||||||||
Edward Johnson | 574,638 | (2 | )(10) | 4.6 | % | 4.6 | % | 4.6 | % | |||||||||||
Kent J. Lund | 101,025 | (3 | )(10) | * | * | * | ||||||||||||||
John Jenkins | 136,602 | (4 | )(10) | 1.1 | % | 1.1 | % | 1.1 | % | |||||||||||
Doug Kelsall | 200,602 | (5 | )(10) | 1.6 | % | 1.6 | % | 1.6 | % | |||||||||||
Jack Burkholder | 52,640 | (6 | )(10) | * | * | * | ||||||||||||||
Lee Schlessman | 4,435,919 | (7 | ) | 28.0 | % | 28.0 | % | 28.0 | % | |||||||||||
Thomas P. Grainger | 2,545,310 | (8 | ) | 17.5 | % | 17.5 | % | 17.5 | % | |||||||||||
Pete Bloomquist | 163,590 | (9 | )(10) | 1.3 | % | 1.3 | % | 1.3 | % | |||||||||||
All officers and directors as a group (6 persons) | 8,994,380 | 61.6 | % | 61.6 | % | 61.6 | % | |||||||||||||
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* | Less than one percent (1%) | |
(1) | Includes an option to purchase 128,000 shares issuable to Mr. Sapyta under the terms of his employment agreement, with exercise prices from $6.00 to $7.00, and includes 13,500 options exercisable at $4.73 granted December 29, 2006, vested as to 25% on date of grant and, with respect to as to the remaining 75% of the shares covered by the options, in equal quarterly increments over the next following 12 calendar quarters after the date grant as of the end of each quarter; and includes 18,000 options exercisable at $0.68 granted January 15, 2008 which also vest in equal quarterly increments over the next following 12 calendar quarters as of the end of each quarter commencing March 31, 2008. | |
(2) | Includes an option to purchase 100,000 shares issuable to Mr. Johnson under the terms of his employment agreement, with exercise prices ranging from $6.00 to $7.00, and includes warrants to purchase 11,170 shares at an exercise price of $5.00; warrants to purchase 25,000 shares at an exercise price of $0.95; warrants to purchase 25,000 shares at an exercise price of $1.10; warrants to purchase 12,500 shares at an exercise price of $1.00; and includes 13,500 options exercisable at $4.73 granted December 29, 2006, vested as to 25% on date of grant and, with respect to the remaining 75% of the shares covered by the options, in equal quarterly increments over the next following 12 calendar quarters after the date of grant; and includes 15,000 options exercisable at $0.68 granted January 15, 2008, which also vest in equal quarterly increments over the next following 12 calendar quarters as of the end of each quarter commencing March 31, 2008. | |
(3) | Includes a warrant to purchase 2,000 shares exercisable at $5.00 per share, 3,000 warrants exercisable at $7.50 per share; 10,000 warrants exercisable at $0.95 per share; 10,000 warrants exercisable at $1.10 per share and 5,000 warrants exercisable at $1.00 per share. | |
(4) | Includes a warrant to purchase 3,000 shares exercisable at $5.00 per share and 1,000 warrants exercisable at $7.50 per share, 25,000 warrants exercisable at $0.95 per share; 25,000 warrants exercisable at $1.10 per share; and 12,500 warrants exercisable at $1.00 per share. | |
(5) | Includes a warrant to purchase 5,000 shares exercisable at $5.00 per share and 5,000 warrants exercisable at $7.50 per share; 25,000 warrants exercisable at $0.95 per share; 25,000 warrants exercisable at $1.10 per share; and 12,500 warrants exercisable at $1.00 per share. | |
(6) | Includes a warrant to purchase 2,000 shares exercisable at $5.00 per share and 3,000 warrants exercisable at $7.50 per share. |
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(7) | Includes warrants to purchase 27,967 shares exercisable at $0.625 per share; warrants to purchase 116,762 shares exercisable at $2.50; warrants to purchase 34,714 shares exercisable at $5.00 per share, warrants to purchase 61,802 shares at an exercise price of $7.50 per share; warrants to purchase 171,000 shares exercisable at $1.50 per share; warrants to purchase 79,167 shares exercisable at $1.00 per share; warrants to purchase 25,000 shares at $0.95 per share; warrants to purchase 25,000 shares at $1.10 per share, a convertible note that converts into shares at $3.00 (or up to 316,667 shares), a convertible note that converts into shares at $2.00 per share (up to 200,000 shares) a convertible note that converts into shares at $1.00 (up to 171,000 shares); a convertible note that converts into shares at $0.75 per share (up to 133,333 shares); also includes 690,618 shares, warrants to purchase 68,182 shares at an exercise price of $.625 per share; warrants to purchase 70,200 shares at an exercise price of $2.50 per share; warrants to purchase 33,334 shares at an exercise price of $5.00 per share, warrants to purchase 266,000 shares at an exercise price of $7.00 per share; warrants to purchase 43,180 shares at an exercise price of $7.50 per share; warrants to purchase 105,300 shares at an exercise price of $1.50 per share; warrants to purchase 50,000 shares at an exercise price of $1.00 per share; warrants to purchase 100,116 shares at an exercise price of $3.375 per share; and 195,000 shares to be issued upon the conversion of debt at a conversion price of $3.00 per share and 886,667 shares from conversion of convertible notes that convert at $3.75 per share; 50,000 shares from convertible notes that convert at $2.00 per share; 105,300 shares from convertible notes that convert at $1.00 per share; 100,000 shares from convertible notes that convert at $0.75 per share, which include notes, debentures and warrants owned by Mr. Schlessman or family members, trusts or entities that Mr. Schlessman controls by power of attorney or ownership of the entity. The address for Lee Schlessman, the listed beneficial owner who has the dispositive and voting power for the shares and who is not a director or executive officer of the company, but who is deemed a related person based on share ownership is 1301 Pennsylvania Street, Suite 800, Denver, CO 80203-8015. | |
(8) | The number of shares beneficially owned by Thomas P. Grainger is based solely on information in a Schedule 13G/A filed with the SEC on February 19, 2008, reporting sole voting power over 2,545,310 shares of common stock including 411,422 common shares; 675,000 shares issuable upon conversion by Thomas P. Grainger of a 7% Unsecured Convertible Note due September 2, 2010 having a conversion price of $0.80 per share; 266,666 shares issuable upon conversion by Thomas P. Grainger of a 12% Unsecured Convertible Note due January 22, 2009 having a conversion price of $0.75 per share; shares issuable upon exercise by Thomas P. Grainger of two warrants exercisable until December 5, 2011, consisting of: one warrant to purchase 322,222 shares at a $7.50 exercise price, one warrant to purchase 100,000 shares at a $1.50 exercise price, one warrant to purchase 100,000 shares at a $1.25 exercise price, one warrant to purchase 100,000 shares at a $1.00 exercise price; and shares issuable upon exercise by Thomas P. Grainger of warrants exercisable until January 22, 2013, each to purchase 285,000 shares with exercise prices of $1.00 and $1.25, respectively. The number of shares beneficially owned as reflected in the table does not include additional shares of our common stock acquirable by Thomas P. Grainger pursuant to certain convertible notes and warrants issued in April 2008 as discussed under the heading Certain Relationships and Related Person Transactions in this Proxy Statement. The address for Thomas P. Grainger, the listed beneficial owner who has the dispositive and voting power for the shares and who is not a director or executive officer of the company, but who is deemed a related person based on share ownership, is Post Office Box 7, Saratoga, WY 82331; Highway 130, 4 Miles South of Saratoga. |
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(9) | Includes warrants to purchase 59,776 shares exercisable at $0.625 per share; warrants to purchase 2,000 shares exercisable at $1.20 per share; warrants to purchase 10,020 shares exercisable at $5.00 per share; warrants to purchase 18,234 shares exercisable at $2.50 per share; warrants to purchase 3,616 shares exercisable at $3.75 per share; 45,000 options exercisable at $4.73 per share; and 13,500 options exercisable at $0.68 per share. | |
(10) | The address for the listed beneficial owners who are directors or executive officers, is c/o Smart Move, Inc., 5990 Greenwood Plaza Blvd, Suite 390, Greenwood Village, CO |
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Our Board of Directors has six members divided into three classes with two directors in each class. At each annual meeting, the elected successors to the directors in the class whose term expires at that annual meeting are to be elected for a three year term. The current term of office of our Class I directors will end at the annual meeting of stockholders held in 2010. The current term of office of our Class II directors will end at this year’s annual meeting of stockholders, and the term of office of our Class III directors will end at the annual meeting of stockholders held in 2009. Each director elected will continue in office until a successor has been elected and qualified.
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Class I directors whose terms | ||||||||||
expire at the 2010 annual | Director | |||||||||
meeting | Principal Occupation | Age | Since | |||||||
John Jenkins | John Jenkinshas served as one of our directors since February 2006. Mr. Jenkins was Chairman and Chief Executive Officer of SAN Holdings, a provider of data storage and management solutions to industry and government, from 2001 to March 2007. From January 1995 through June 2000, he served as Chief Executive Officer, President and a director of TAVA Technologies, Inc., where he led the build-out of a national systems integration business. From 1990 until he joined TAVA in 1995, he served as president of Morgan Technical Ceramics, Inc., a wholly-owned subsidiary of Morgan Crucible plc, a diversified industrial products company based in England and publicly-traded on the London Stock Exchange. Mr. Jenkins holds a B.S.M.E. (Bachelor of Science in Mechanical Engineering) from the University of Washington (1973) and a J.D. from the University of Denver Law School (1977). | 58 | 2006 | |||||||
Kent Lund | Kent Lundhas served on our Board of Directors since February 2006. Mr. Lund currently serves as Executive Vice President and Chief Compliance Officer of George K. Baum & Company, an investment banking firm. From 2005 to 2007, he served as an independent business, legal and securities compliance consultant. From 2002 to 2005, Mr. Lund served as a Board member and/or Corporate Secretary of four affiliated financial services companies (Kirkpatrick, Pettis, Smith, Polian Inc., a NASD member securities broker dealer, two registered investment advisers and a state chartered trust company). From 2002 to 2005, he served as Executive Vice President and General Counsel of Kirkpatrick, Pettis, Smith, Polian Inc. From 1998 to 2001, he served as Senior Vice President and General Counsel of Fiserv Correspondent Services, Inc., a NYSE member securities broker dealer. From 1985 to 1998, he was an attorney with Amoco Corporation, a major multinational oil, natural gas and petrochemical company. From 1982 to 1985, Mr. Lund was an associate attorney with the Denver, Colorado law firm of Sherman & Howard. From 1980 to 1982, Mr. Lund was a staff law clerk for two United States Court of Appeals Judges. Mr. Lund earned a B.A. degree, magna cum laude, from Midland Lutheran College (1977), a J.D. degree, with honors, from Drake University Law School (1980) and a M.B.A. degree from the University of Colorado (2005). | 52 | 2006 |
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Class II directors whose terms | ||||||||||
expire at the 2008 annual | ||||||||||
meeting and who are nominees | ||||||||||
for terms expiring at the 2011 | ||||||||||
annual meeting of stockholders | ||||||||||
Doug Kelsall | Doug Kelsallhas served as our director since February 2006. Mr. Kelsall has served as President and Chief Financial Officer of Education Sales Management, a company focused on enrollment services for the education market, since November 2007. Previously, Mr. Kelsall served as President and Chief Operating Officer of eCollege.com, an online technology and services company providing support to distance learning and other educational programs since 2003. From 1999 to 2003, Mr. Kelsall served as Executive Vice President and CFO of eCollege.com. From 1997 to 1999, he was Chief Financial Officer of TAVA Technologies, Inc. and from 1995 to 1997, he was Chief Financial Officer of Evolving Systems, Inc., a telecommunications software company. Mr. Kelsall holds a B.A. degree from the University of Colorado (1976) and an M.B.A. degree from the University of Denver (1978). Mr. Kelsall serves on the Board of Trustees of Westwood Colleges, the Board of Directors of TopSchool, Inc., the Advisory Boards of the Universities of Colorado at Denver Business School, and the Executive Strategic Council of the IMS Learning Consortium. | 53 | 2006 | |||||||
Jack Burkholder | Jack Burkholderhas served as our director since February 2006. Mr. Burkholder is the principal of several companies engaged in real estate and hotel and resort development. Since 1997, he has served as Managing Director of Golf Lodging, LLC, a hotel and resort development firm; since 2005 as Manager of SeNa Properties, LLC, a luxury, single-family home developer; and from 2003 to 2008 as Manager of BBLM, LLC, a hospitality and real estate consulting and development company. He has been a member of the Financial Audit Committee of the Board of Education, Cherry Creek School District, Denver, Colorado, since 2003. Since 1984 to present, Mr. Burkholder has provided corporate finance and real estate advisory services to corporations, financial institutions, insurance companies, and high net worth investors through his consulting firm, Burkholder & Associates. From 1972 to 1978, he was vice president of Investment Banking at the Schroder Group in New York City. He received a B.A. degree from Cornell University (1968) and an M.B.A. degree from Fordham University (1972). | 63 | 2006 |
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Class III directors whose terms | ||||||||||||
expire at the 2009 annual | ||||||||||||
meeting | ||||||||||||
Chris Sapyta | Chris Sapytahas served as our Chief Executive Officer and as a director since our inception. Mr. Sapyta founded Smart Move in August 2004 and served as its Managing Member. In 1996, he founded MicroStar Keg Management L.L.C., a keg asset management and logistics company that with its overseas affiliates had over 5 million keg assets under its management. From 1996 to 2004, he served as President of MicroStar. From 2001 to 2004, Mr. Sapyta served as Senior Vice President of New Markets at TrenStar, Inc., MicroStar’s parent entity. Mr. Sapyta received his B.A. degree in accounting from St. Mary’s University (1982). | 46 | 2004 | |||||||||
L. Edward Johnson | L. Edward Johnson served as a manager of Smart Move, since August 2004 and has served as our Senior Vice President of Corporate Finance and as our director since November 2005. Mr. Johnson has been providing financial guidance and tax planning for various private companies since 1977. From 1989 to 2000, Mr. Johnson served as Tax Manager with Leede Company, a private company located in Denver, Colorado, as its Vice President of Finance and Tax Manager. The Leede Company is engaged primarily in oil and gas, real estate and franchise operations. From 1974 until 1989 and again from 2000 to 2005, he maintained his own accounting and finance practice for select private companies and high net worth individuals. As part of this practice, he provided accounting and financial consulting services to both MicroStar Keg Management, L.L.C. and Smart Move. Mr. Johnson received his B.B.A. degree from Texas Tech University (1974). | 54 | 2004 |
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Fees earned or | Stock awards | Total | ||||||||||
Name | paid in cash ($) | ($)* | ($) | |||||||||
Kent Lund | $ | 15,000 | $ | 10,000 | $ | 25,000 | ||||||
John Jenkins | $ | 20,000 | $ | 10,000 | $ | 30,000 | ||||||
Doug Kelsall | $ | 20,000 | $ | 10,000 | $ | 30,000 | ||||||
Jack Burkholder | $ | 20,000 | $ | 10,000 | $ | 30,000 |
* | The annual grant of restricted shares to each of our non-employee directors for fiscal 2007 consisted of 2,169 shares of our common stock, based on the stipulated total grant value of $10,000 and a fair market value per share determined based on the $4.61 per share average closing price of a share of our common stock on the American Stock Exchange on trading days during the period between and including December 20, 2006 and December 29, 2006 (the only time period in December, 2006 during which the company’s common stock traded as a separate security). |
Fees earned or | Stock awards | Total | ||||||||||
Name | paid in cash ($) | ($)* | ($) | |||||||||
Kent Lund | $ | 29,500 | $ | 15,000 | $ | 44,500 | ||||||
John Jenkins | $ | 29,500 | $ | 15,000 | $ | 44,500 | ||||||
Doug Kelsall | $ | 36,000 | $ | 15,000 | $ | 51,000 | ||||||
Jack Burkholder | $ | 29,500 | $ | 15,000 | $ | 44,500 |
* | The annual grant of restricted shares to each of our non-employee directors for fiscal 2008 consisted of 22,471 shares of our common stock, based on the stipulated total grant value of $15,000 and a fair market value per share determined based on the $0.667 per share average closing price of a share of our common stock on the American Stock Exchange during the month of December 2007. |
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Kent Lund
Jack Burkholder
Fees for Services | 2007 | 2006(1) | ||||||
Audit Fees* | $ | 302,798 | $ | 275,911 | ||||
Audit-Related Fees Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total Fees | $ | 302,798 | $ | 275,911 |
(1) | Our proxy statement for the 2007 annual meeting of stockholders disclosed total audit fees of $300,607 for the year ended December 31, 2006. The actual audit fees billed with respect to the year ended December 31, 2006 were $275,911, and the disclosure of 2006 audit fees has been adjusted in the table above to reflect actual fees. |
* | Includes fees and expenses related to the fiscal year audit and interim reviews, notwithstanding when the fees and expenses were billed or when the services were rendered. Audit fees also include fees and expenses related to SEC filings, comfort letters, consents and comment letters. |
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APPROVAL OF THE POTENTIAL ISSUANCE OF SHARES OF COMMON STOCK BY THE COMPANY IN EXCESS OF THE 20% LIMITATION IMPOSED BY THE AMERICAN STOCK EXCHANGE UPON THE CONVERSION OF DEBT OUTSTANDING OR TO PAY INSTALLMENTS OF PRINCIPAL AND INTEREST BECOMING DUE ON THE COMPANY’S SECURED CONVERTIBLE DEBENTURES OR CONVERTIBLE OPERATING LOAN NOTES AND OF THE ISSUANCE OF SHARES OF COMMON STOCK UPON THE EXERCISE OF CERTAIN WARRANTS HELD BY THE HOLDERS OF THE SECURED CONVERTIBLE DEBENTURES AND CONVERTIBLE OPERATING LOAN NOTES. (PROPOSAL B).
As of April 25, 2008, there were 12,399,623 shares of our common stock outstanding. Our certificate of incorporation, as amended, authorizes the issuance of 100,000,000 shares of common stock, $.0001 par value, which we believe is a sufficient number of currently authorized shares.
The Listing Standards of the American Stock Exchange, however, require shareholder approval for any sale, issuance, or potential issuance of stock at a price that is below the greater of the book or market value, where the amount of stock being issued equals or exceeds 20% of the outstanding common stock. The company has taken care to insure that any convertible securities sold in previous private placement transactions reported in our previous periodic reports and our current reports filed on Form 8-K were issued at a conversion price or exercise price not less than the greater of book or market value on the date of issuance.
Although the company has not issued any securities that have a “floating” conversion or exercise price linked to the market price of our common stock, the terms of the Secured Convertible Debentures we issued in January 2008, in the aggregate amount of $3,655,000 permit the company to issue shares of our common stock to pay principal and interest due on the debentures. The number of shares we may issue for the purpose of repaying the principal obligation owing under the Secured Convertible Debentures is determined based upon the lower of the Fixed Conversion Price ($0.75 per share) or 80% of the Fair Market Value of the common stock on the date of payment (the average of the daily closing prices for a share of the company’s stock on the American Stock Exchange over the five consecutive trading days before the date the payment is due). If the stock price of a share of the company’s common stock remains lower than the Fixed Conversion Price of $0.75, the number of shares required to be issued to satisfy principal and interest payment obligations could be proportionately greater than the 4,873,333 shares into which the Secured Convertible Debentures are convertible at the holders’ option. Certain convertible notes we have issued to Thomas P. Grainger, which are described under the heading “Certain Relationships and Related Person Transactions” on page 36, and which we collectively refer to as “convertible operating loan notes” have previously been amended in connection with subsequent financings to reduce the originally specified conversion price or include provisions for limited adjustment of the stated conversion price as described on page 36.
Section 713 of the AMEX Company Guide requires shareholder approval for the sale, issuance, or potential issuance of common stock (or securities convertible into, or exercisable for, common stock) representing 20% or more of an issuer’s common stock or voting power outstanding before such issuance at a price below the greater of the common stock’s book or market value. The company is soliciting shareholder approval of the issuance of shares of common stock upon the conversion of debt to equity, or in lieu of cash payments of principal and interest on the Secured Convertible Debentures or our convertible operating loan notes, or upon the exercise of any warrants attached to the Secured Convertible Debentures or our convertible operating loan notes, to the extent any or all of such issuances require shareholder approval under the rules of the American Stock Exchange because they exceed or may exceed 20% of the outstanding common stock of the company.
Why we need shareholder approval.
If the company obtains shareholder approval as requested, the company itself may issue shares in excess of the 20% limitation imposed by the American Stock Exchange for the purpose of making payments of principal and/or interest becoming due under the Secured Convertible Debentures or our convertible operating loan notes by issuing however many shares of common stock may be required or permitted to be issued under the existing terms of these debentures and notes. The company may also issue an appropriate number of shares in excess of the 20% limitation imposed by the American Stock Exchange upon any exercise of conversion rights by a holder of Secured Convertible Debentures or our convertible operating loan notes, or upon any automatic conversion provided for under the terms of the Secured Convertible Debentures or our convertible operating loan notes. If the company does not obtain shareholder approval, the company may not be able to issue a sufficient number of the shares to satisfy its payment obligations to the holders, because it is clear that the shares required would exceed 20% of the outstanding common stock. If the company is unable to issue shares of common stock to pay the principal and interest owing to the holders of the Secured Convertible Debentures or our convertible operating loan notes, it is unlikely that the company will be able to make all required payments of principal and interest to the holders in cash. The company does not currently have sufficient cash to redeem all of these debts as they become due. Without the ability to pay the Secured Convertible Debentures or our convertible operating loan notes with cash or to issue sufficient shares to the holders where permitted or required, we may become in default on these obligations and may no longer be able to maintain operations.
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Terms of our Operating Loan Notes and of our January 2008 Secured Convertible Debentures and Related Warrants
The terms of our convertible operating loan notes and related warrants issued to Thomas P. Grainger, which may involve issuances of shares of our common stock in excess of the 20% limitation imposed by the American Stock Exchange, are summarized under the heading “Certain Relationships and Related Person Transactions” on page 36. The terms of the Secured Convertible Debentures, which may involve issuances of shares of our common stock in excess of the 20% limitation imposed by the American Stock Exchange, are summarized below. Copies of the complete agreements applicable to the Secured Convertible Debentures are attached as exhibits to our Current Report on Form 8-K filed with the SEC on January 18, 2008.
January 2008 Secured Convertible Debentures
Issue Date:January 15, 2008
Aggregate principal amount outstanding:$3,655,000 (issued at an original issue discount of 15%)
Interest Rate:11% per annum from the date of issuance
Use of proceeds:Repayment of the company’s previous loan with Silicon Valley Bank in the approximate amount of $345.000 and for general working capital purposes.
Final Maturity:The Secured Convertible Debentures mature 24 months after the date of Issuance.
Payments of principal and interest:Subject to certain rights of the holders to defer receipt of principal payments. the Secured Convertible Debentures are payable as to principal in monthly installments corresponding to 5.66% of outstanding principal commencing in August 2008 and in monthly installments of interest commencing in February 2008. The Company may, in is discretion, either pay principal and interest becoming due in cash at 115% of the amount due, or pay the amount of principal and interest due by issuing shares of common stock that have been registered for resale by the holders or which are eligible to be sold by them under Rule 144 promulgated under the Exchange Act. If a payment in shares is made for the purpose of paying the principal amount due on the Secured Convertible Debentures, the number of shares that will be required to satisfy the amount due is based on 80% of the average daily closing price for a share of our common stock during the five (5) consecutive trading days preceding the principal and interest payment date. In the case of an interest payment obligation discharged by issuance of shares the number of shares required to satisfy the payment obligation is based on 85% of the closing bid price of our common stock for the average of the lowest five (52 trading days during the previous twenty (202 days immediately preceding the payment date.
Conversion of debt to equity:The holders of the debentures may convert unpaid principal on the debentures into common shares at a fixed conversion price of $0.75 per share (which may be reduced to a lower conversion price if the Company issues shares or convertible notes at a lower sale price than $.075 per share to parties other than the holders or strategic operating partners of the company at a lower price). Based on the fixed conversion price of $0.75 per share, and an aggregate Debenture face value of $3,655,000, the Debenture is convertible into 4,873,333 shares of common stock. These potential conversions at the election of the holders may not be applicable if the company itself has converted outstanding debt to equity by exercising its right to pay the principal of the debt by issuing shares of common stock for that purpose or if an automatic conversion has occurred as described in the following paragraph.
Automatic Conversion:The Company may require holders to convert the remaining principal amount outstanding on their debentures in the event the market price of the shares of our common stock for at least the immediately preceding ten consecutive trading days is at least 175% of the Conversion Price. All of the debt converts to shares if the average trading volume during the applicable ten day period is at least 100,000 shares per day, 50% of the shares convert if volume is at least 75,000 shares per day, and a 25% conversion results if the average volume during such ten (10) day period is at least 50.000 shares per day.
Security:The holders of the Secured Convertible Debentures have a first lien securing their convertible debt covering assets of the company consisting 35 flatbed trailers, 65 forklifts, certain GPS units in use or held for use, accounts receivable, office furniture and software, and equity ownership of any subsidiaries.
Certain conditions and limitations:The investors contractually agreed to a cap on their actual share ownership percentage acquired so as not to exceed 4.99%. The investors also committed not to engage in any short sale or hedging transactions, including for a full year after they acquire any registered shares as a result of an effective resale registration statement:
Warrants:The investors received five year common stock purchase warrants at an exercise price of $1.00 per share which may be exercised to acquire 2,436,666 shares of common stock.
The Board of Directors unanimously recommends a vote FOR approval of the potential issuance of shares of common stock by the company in excess of the 20% limitation imposed by the American Stock Exchange upon the conversion of debt outstanding or to pay installments of principal and interest becoming due on the company’s Secured Convertible Debentures or convertible operating loan notes and of the issuance of shares of common stock upon the exercise of certain warrants held by the holders of the secured convertible debentures and convertible operating loan notes.
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Kent Lund
Doug Kelsall
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• | Attracting, motivating, and retaining highly capable and knowledgeable executives who are vital to our short- and long-term success, profitability, and growth; | ||
• | Aligning the interests of our executives and shareholders by rewarding executives for the achievement of strategic, financial performance and other goals that we believe will enhance shareholder value; | ||
• | Differentiating executive rewards based on actual individual performance. |
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Salary Compensation | Nonqualified | |||||||||||||||||||||||||||||||||||
Non-Equity | Deferred | All Other | ||||||||||||||||||||||||||||||||||
Name and | Stock | Options | Incentive Plan | Compensation | Compensation | |||||||||||||||||||||||||||||||
Principal | Fiscal | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||||
Position | Year | ($) | ($) | ($) | ($)(1) | ($) | ($) | ($)(2) | ($) | |||||||||||||||||||||||||||
Chris Sapyta, | 2007 | $ | 196,000 | (4) | — | — | $ | — | — | — | — | $ | 196,000 | |||||||||||||||||||||||
Chief Executive Officer | 2006 | $ | 188,000 | 75,000 | (3) | 1,400,000 | $ | 26,900 | — | — | — | $ | 1,689,000 | |||||||||||||||||||||||
Edward Johnson, | 2007 | $ | 182,400 | (4) | — | — | $ | — | — | — | — | $ | 182,400 | |||||||||||||||||||||||
Chief Financial Officer | 2006 | $ | 175,000 | 50,000 | (3) | 1,000,000 | $ | 26,900 | — | — | — | $ | 1,251,900 | |||||||||||||||||||||||
Pete Bloomquist, | 2007 | $ | 137,500 | — | — | $ | — | — | — | — | $ | 137,500 | ||||||||||||||||||||||||
Senior Vice President | 2006 | $ | 41,666 | — | — | $ | 87,750 | — | — | — | $ | 129,416 | ||||||||||||||||||||||||
and Treasurer |
(1) | Reflects the dollar amount expensed by the company during applicable fiscal year for financial statement reporting purposes pursuant to FAS 123R. FAS 123R requires the company to determine the overall value of the options as of the date of grant based upon the Black-Scholes method of valuation, and to then expense that value over the service period over which the options become exercisable (vest). As a general rule, for time-in-service-based options, the company will immediately expense any option or portion thereof which is vested upon grant, while expensing the balance on a pro rata basis over the remaining vesting term of the option. For a description of FAS 123R and the assumptions used in determining the value of the options under the Black-Scholes model of valuation, see the notes to the consolidated financial statements included with the company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. | |
(2) | Includes all other compensation not reported in the preceding columns, including (i) perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is less than $10,000; (ii) any “gross-ups” or other amounts reimbursed during the fiscal year for the payment of taxes; (iii) discounts from market price with respect to securities purchased from the company except to the extent available generally to all security holders or to all salaried employees; (iv) any amounts paid or accrued in connection with any termination (including without limitation through retirement, resignation, severance or constructive termination, including change of responsibilities) or change in control; (v) contributions to vested and unvested defined contribution plans; (vi) any insurance premiums paid by, or on behalf of, the company relating to life insurance for the benefit of the named executive officer; and (vii) any dividends or other earnings paid on stock or option awards that are not factored into the grant date fair value required to be reported in a preceding column. |
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(3) | Bonuses for 2006 were paid pursuant to the employment agreements. No bonuses were paid for 2007. Although we do not have a separate non-equity incentive plan for executives at present, any bonuses under employment contracts for 2008 will be based on the performance criteria established by the Compensation Committee which stipulate certain hurdles of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and number of moves. | |
(4) | The Compensation Committee recommended to the Board of Directors that, with effect from February 15, 2007, the salaries of Chris Sapyta, CEO, and Edward Johnson be increased to $196,000 in the case of Mr. Sapyta and $182,400 in the case of Mr. Johnson and these recommendations were adopted on April 26, 2007, subject to annual review commencing in 2008. |
Option Awards | ||||||||||||||||||||
Number of | Number of | |||||||||||||||||||
Securities | Securities | |||||||||||||||||||
Underlying | Underlying | |||||||||||||||||||
Unexercised | Unexercised | |||||||||||||||||||
Options (#) | Options (#) | Option Exercise Price | Value realized | |||||||||||||||||
Name | Exercisable | Unexercisable | ($) | Option Expiration Date | on exercise (4) | |||||||||||||||
Chris Sapyta | 128,000 | (1) | $6,00 and $7.00 | (1) | November 15, 2016(1) | $ | — | |||||||||||||
6,750 | 6,750 | (2) | $4.73 | December 29, 2016(2) | $ | — | ||||||||||||||
Edward Johnson | 100,000 | (1) | $6,00 and $7.00 | (1) | November 15, 2016(1) | $ | — | |||||||||||||
6,750 | 6,750 | (2) | $4.73 | December 29, 2016(2) | $ | — | ||||||||||||||
Pete Bloomquist | 22,500 | 22,500 | (3) | $4.73 | December 29, 2016(2) | $ | — |
(1) | Options granted pursuant to November 15, 2006 amendments to employment contracts, covering 128,000 shares issuable to Mr. Sapyta and 100,000 shares issuable to Mr. Johnson have exercise prices from $6.00 to $7.00. They vest ratably in equal increments on September 30, 2008 and 2009, subject to their continued employment on those dates, provided Smart Move achieves targeted moves of 12,000 and 15,000 moves as of the annual period ending on each date. |
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(2) | Options to purchase 13,500 shares of common stock at an exercise price of $4.73 per share were granted on December 29, 2006. These options were vested and exercisable as to 25% of the covered shares on the grant date and vest ratably over the next 12 quarters. | |
(3) | Options to purchase 45,000 shares of common stock at an exercise price of $4.73 per share were granted on December 29, 2006. These options were vested and exercisable as to 25% of the covered shares on the grant date and vest ratably over the next 12 quarters. | |
(4) | The realizable value upon exercise will be the difference between (a) the market price at the time of exercise and (b) the exercise price applicable to the option grant. |
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Before Change in | After Change in | |||||||||||||
Control | Control | |||||||||||||
Termination | Termination | |||||||||||||
w/o Cause or for | w/o Cause or | Voluntary | ||||||||||||
Name | Benefit | Good Reason | for Good Reason | Termination | ||||||||||
Chris Sapyta | Salary | — | $ | 188,000 | None | |||||||||
Options(1) | — | $ | — | (2) | None | |||||||||
Insurance and other benefits | — | $ | 36,000 | None | ||||||||||
Edward Johnson | Salary | — | $ | 175,000 | None | |||||||||
Options(1) | — | $ | — | (2) | None | |||||||||
Insurance and other benefits | — | $ | 36,000 | None |
(1) | Options granted pursuant to November 15, 2006 amendments to employment contracts, covering 192,000 shares issuable to Mr. Sapyta and 150,000 shares issuable to Mr. Johnson which have exercise prices from $5.00 to $7.00. If the CEO or CFO is terminated without cause, all unvested options become vested upon termination. | |
(2) | The value of the termination benefit would be based upon the difference between the closing price of our common stock on the last day of the relevant fiscal year and the applicable exercise price. |
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/s/ Chris Sapyta | ||||
President, Chief Executive Officer, and Director | ||||
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2006 EQUITY INCENTIVE PLAN
Adopted by the Board of Directors and Approved by the Shareholders on February 9, 2006
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o | Mark this box with an X if you have made changes to your name or address details above. |
A. | Election of Directors |
Proposal A | For | Withhold | ||||
01 — Doug Kelsall | o | o | ||||
For | Withhold | |||||
02 — Jack Burkholder | o | o |
B. | Issues |
Proposal B | ||||||
APPROVAL OF THE POTENTIAL ISSUANCE OF SHARES OF COMMON STOCK BY THE COMPANY IN EXCESS OF THE 20% LIMITATION IMPOSED BY THE AMERICAN STOCK EXCHANGE UPON THE CONVERSION OF DEBT OUTSTANDING OR TO PAY INSTALLMENTS OF PRINCIPAL AND INTEREST BECOMING DUE ON THE COMPANY’S SECURED CONVERTIBLE DEBENTURES OR CONVERTIBLE OPERATING LOAN NOTES AND OF THE ISSUANCE OF SHARES OF COMMON STOCK UPON THE EXERCISE OF CERTAIN WARRANTS HELD BY THE HOLDERS OF THE SECURED CONVERTIBLE DEBENTURES AND CONVERTIBLE OPERATING LOAN NOTES. (PROPOSAL B) | For o | Against o | Abstain o |
Proposal C | ||||||
TO APPROVE AN AMENDMENT TO OUR 2006 EQUITY INCENTIVE PLAN TO INCREASE THE TOTAL NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED UNDER THE PLAN FROM 1,400,000 TO 1,900,000 | For o | Against o | Abstain o |
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
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GREENWOOD VILLAGE, CO 80111
ANNUAL MEETING PROXY CARD
C. | Authorized Signatures — Sign Here — This section must be completed for your instructions to be executed. |
Signature 1 — Please keep signature within the box | Signature 2 — Please keep signature within the box | Date (mm/dd/yyyy) | ||