SCHEDULE 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
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| Filed by a Party other than the Registrant | | o | | |
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| | | Check the appropriate box: | | | | |
| o | | Preliminary Proxy Statement | | o | | Confidential, for Use of the |
| þ | | Definitive Proxy Statement | | | | Commission Only (as Permitted |
| o | | Definitive Additional Materials | | | | by Rule 14a-6(e)(2)) |
| o | | Soliciting Material pursuant to | | | | |
| | | Rule 14a-11(c) or Rule 14a-12 | | | | |
USA Synthetic Fuel Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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| 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. |
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USA SYNTHETIC FUEL CORPORATION
312 Walnut Street, Suite 1600
Cincinnati, OH 45202
November 14, 2012
Dear Stockholder:
We are pleased to invite you to the 2012 Annual Meeting of Stockholders of USA Synthetic Fuel Corporation (the “Company”), which will be held Wednesday, November 28, 2012 at 11:00 a.m. (EST) at the Company’s offices, Suite 1025, 1717 Pennsylvania Ave. N.W. Washington, D.C. 20006.
At the annual meeting, you will be asked to: (i) elect members of our board of directors to serve a one-year term each and (ii) ratify the appointment by our board of Directors of an independent registered public accounting firm as our auditor for fiscal year 2012.
The enclosed notice and proxy statement contain complete information about the matters to be considered at the Annual Meeting. We are also enclosing our Annual Report, which was filed with the Securities and Exchange Commission on Form 10-K on April 20, 2012. Copies of these reports are available for review at www.usasfc.com or may be mailed to you free of charge by requesting a copy by telephone at 513-762-7870 or mailing a request to the USA Synthetic Fuel Corporation’s Investor Relations department located at USA Synthetic Fuel Corporation, 312 Walnut Street, Suite 1600, Cincinnati, OH 45202.
We hope you will be able to attend the meeting in person. Whether or not you expect to attend, we urge you to complete, date, sign and return the proxy card in the enclosed envelope so that your shares will be represented and voted at the meeting.
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| | Sincerely, | |
| | /s/ Dr. Steven C. Vick | |
| | Dr. Steven C. Vick | |
| | President and Chief Executive Officer | |
USA SYNTHETIC FUEL CORPORATION
312 Walnut Street, Suite 1600
Cincinnati, OH 45202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, NOVEMBER 28, 2012
11:00 a.m. EST
To Our Stockholders:
The Annual Meeting of Stockholders of USA Synthetic Fuel Corporation (the “Company”), will be held at 11:00 a.m. (EST) on November 28, 2012, at the Company’s offices, Suite 1025, 1717 Pennsylvania Ave. N.W. Washington, D.C. 20006, for the following purposes:
| | 1. | | To elect three members of our Board of Directors to serve a one-year term each; |
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| | 2. | | To ratify the appointment by our Board of Directors of an independent registered public accounting firm as our auditor for fiscal year 2012; and |
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| | 3. | | To transact other business as may properly come before the meeting. |
WHO MAY VOTE:
Stockholders of record of our common stock as of the close of business on November 1, 2012 are entitled to vote at the Annual Meeting or any adjournment or postponement thereof. A list of stockholders will be available at the Annual Meeting and during the 10 days prior to the annual meeting at our principal executive offices located at 312 Walnut Street, Suite 1600, Cincinnati, OH 45202.
All stockholders are cordially invited to attend the Annual Meeting. Whether you plan to attend the Annual Meeting or not, we urge you to vote and submit your proxy by mail to ensure the presence of a quorum. You may change or revoke your proxy at any time before it is voted at the meeting.
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| | By order of the Board of Directors, | |
| | /s/ Lynne R. Graves | |
| | Lynne R. Graves | |
| | Corporate Secretary | |
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WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY CARD.
TABLE OF CONTENTS
| PROXY STATEMENT | 1 |
| RECORD DATE; QUORUM | 2 |
| VOTING PROCEDURES | 2 |
| SOLICITATION AND REVOCATION | 2 |
| PROPOSAL NO. 1 | 4 |
| PROPOSAL NO. 2 | 9 |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 11 |
| EXECUTIVE COMPENSATION AND OTHER MATTERS | 12 |
| DIRECTOR COMPENSATION | 13 |
| SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 13 |
| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 13 |
| CODE OF CONDUCT AND ETHICS | 14 |
| REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS | 14 |
| STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR | 15 |
| OTHER MATTERS | 15 |
USA SYNTHETIC FUEL CORPORATION
312 Walnut Street, Suite 1600, Cincinnati, OH 45202 (513)762-7870
PROXY STATEMENT
FOR THE 2012 ANNUAL MEETING OF STOCKHOLDERS
This proxy statement, along with the accompanying notice of the 2012 Annual Meeting of stockholders (the “Annual Meeting”), contains information about the Annual Meeting of USA Synthetic Fuel Corporation, including any adjournments or postponements of the Annual Meeting. We are holding the Annual Meeting at 11:00 a.m. (EST) on Wednesday, November 28, 2012 at the Company’s offices, Suite 1025, 1717 Pennsylvania Ave. N.W. Washington, D.C. 20006. In this proxy statement, we refer to USA Synthetic Fuel Corporation as “we,” “our,” “us” or the “Company.”
This proxy statement relates to the solicitation of proxies by our board of directors for use at the Annual Meeting.
On or about November 14, 2012, we began sending this proxy statement, the attached Notice of Annual Meeting of Stockholders and the enclosed proxy card to all stockholders entitled to vote at the Annual Meeting. Although not part of the proxy statement, we are also sending along with this proxy statement our 2011 Annual Report, which includes our financial statements for the fiscal year ended December 31, 2011.
Important Notice Regarding the Availability of Proxy Materials for Our
Annual Meeting to Be Held on Wednesday, November 28, 2012
This Proxy Statement, our 2011 Annual Report to Stockholders, and our interim financial statements as of September 30, 2012 on Form 10-Q are available on the website of the Securities and Exchange Commission at www.sec.gov as well as on our website at http://www.usasfc.com. You may also obtain a printed copy of our Annual Report on Form 10-K, including our financial statements, free of charge, from us by sending a written request to: 312 Walnut Street, Suite 1600, Cincinnati, OH 45202, Attention: Lynne R. Graves. Exhibits will be provided upon written request and payment of an appropriate processing fee.
RECORD DATE; QUORUM
Only holders of record of our common stock and holders of the 4% subordinated secured convertible note due August 31, 2017at the close of business on November 1, 2012 are entitled to vote at the Annual Meeting (the “Record Date”). As of the Record Date, approximately 80,682,390 shares of common stock were issued and outstanding and 10,312,500 shares were reserved for the convertible noteholders, each of which entitles its holder to cast one vote on each matter to be presented at the Annual Meeting. A quorum is present at the Annual Meeting if a majority of shares of common stock issued and outstanding and entitled to vote on the record date are represented in person or by proxy. If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is obtained.
VOTING PROCEDURES
The shares represented by the proxies received, properly dated and executed and not revoked will be voted at the Annual Meeting in accordance with the instructions of the stockholders.
If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. If your shares are not registered in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and bring it to the Annual Meeting in order to vote.
The vote of the holders of a plurality of the shares of common stock voting on the matter is required for the election of directors (Proposal 1). The affirmative vote of the holders of a majority of the shares of common stock voting on the matter is required for the ratification of the selection by the Audit Committee of an independent registered public accounting firm as our auditor our auditor for the fiscal year ending December 31, 2012 (Proposal 2).
Abstentions and broker “non-votes” will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum. An abstention is the voluntary act of not voting by a stockholder who is present at a meeting and entitled to vote. A broker “non-vote” occurs when a broker nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary power for that particular item and has not received instructions from the beneficial owner.
Proposal 1: A plurality of the votes duly cast is required for the election of directors. This means that the nominees receiving the highest number of affirmative votes will be elected to fill the director positions available. Accordingly, votes withheld will have no effect in determining which director receives the highest number of votes. Additionally, the election of directors is not a matter on which a broker or other nominee is allowed to vote.
Proposal 2: The vote of holders of a majority of voting power held by the stockholders present in person or represented by proxy is required for the ratification of the selection by the Board of Directors of an independent registered public accounting firm as our auditor for the fiscal year ending December 31, 2012. A properly executed proxy marked “ABSTAIN” will not be voted, although it will be counted as present and entitled to vote for purposes of the Proposal. Accordingly, an abstention will have the effect of a vote against the Proposal. Additionally, the ratification of the appointment of an independent registered public accounting firm as auditor for 2012 is a matter on which a broker or other nominee is allowed to vote. Broker non-votes will have no effect on the results of Proposal 2.
Properly executed proxies that do not contain voting instructions will be voted (1) FOR each of the nominees named below for election as director, (2) FOR ratification of the recommendation of our board of Directors of an independent registered public accounting firm for the fiscal year ending December 31, 2012, and (3) at the discretion of the proxy holders with respect to other matters that may come before the Annual Meeting.
SOLICITATION AND REVOCATION
After you have submitted a proxy, you may change your vote at any time before the proxy is exercised by submitting a notice of revocation or a proxy bearing a later date. You may change your vote by submitting a proxy card prior to the date of the Annual Meeting. In each event, the later submitted vote will be recorded and the earlier vote revoked. You may also revoke a proxy by voting in person at the Annual Meeting. Your attendance at the Annual Meeting will not by itself constitute revocation of a proxy.
We will bear the cost of the solicitation of proxies from our stockholders, including the cost of preparing, assembling and mailing the proxy solicitation materials. In addition to solicitation by mail, our directors, officers and employees may solicit proxies from stockholders by telephone or other electronic means or in person, but no such person will be specifically compensated for such services. We will cause brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of stock held of record by such persons. We will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in doing so. We have engaged American Stock Transfer and Trust Company to aid in the distribution of the proxy materials and will reimburse the related reasonable out-of-pocket expenses.
PROPOSAL 1 - ELECTION OF DIRECTORS
A board of three directors, constituting the entire Board of Directors, will be elected at the Annual Meeting by the stockholders of the Company to hold office until their successors have been elected and qualify. It is intended that, unless authorization to do so is withheld, the proxies will be voted “FOR” the election of the director nominees named below. Each nominee has consented to be named in this Proxy Statement and to serve as a director if elected. However, if any nominee becomes unable to stand for election as a director at the Meeting, an event not now anticipated by the Board, the Proxy will be voted for a substitute designated by the Board.
The nominees are listed below with brief statements of their principal occupation and other information:
| Name of Nominee | | Age | | Director Since | | Principal Occupation |
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| Harry H. Graves | | 56 | | December 2009 | | Chairman of the Board and Chief Financial Officer |
| Dr. Steven C. Vick | | 61 | | July 2010 | | Director, President and Chief Executive Officer |
| Ernest Jacquet | | 65 | | February 2012 | | Director and Director of Finance |
Biographies
Harry H. Graves— Chairman of the Board and Chief Financial Officer. Mr. Graves is our Chief Financial Officer, a position he has held since July 2010. He was appointed to our Board of Directors in December 2009, where he continues to serve as Chairman. Mr. Graves is President and Chief Executive Officer of Global Energy, Inc. and has served in that capacity since the company’s founding in 1988. He has also served as a director of Global Energy since 1988. Mr. Graves has served on the Steering Committee of the Coalition for the Green Bank, Washington, D.C. Mr. Graves was also the longest standing founding director of the Washington, D.C.-based Gasification Technologies Council, an organization formed to promote a better understanding of the potential role of gasification in the energy industry. Mr. Graves brings to the Company a wealth of knowledge in the gasification business, developed over twenty years with Global Energy, Inc. Prior to 1988, Mr. Graves worked for Procter & Gamble Company in positions of increasing responsibility in the Boston, New York, Philadelphia and Minneapolis markets from 1978 to 1988, including Central Field Manager and Special Markets Manager at Procter & Gamble Company’s world headquarters in Cincinnati, Ohio. Mr. Graves earned a B.A. in economics from Trinity College in Hartford, Connecticut.
Dr. Steven C. Vick—Director, President and Chief Executive Officer. Dr. Vick was appointed to our Board of Directors in July, 2010. Dr. Vick also began serving as President and Chief Executive Officer for the Company in July 2010. Dr. Vick is committed to the mission of the Company, and his background in technology development as well as gasification facility operations positions him well to help steer the direction of this development stage company. In addition, he is Chief Technology Officer for Global Energy, Inc., a position he has held since March 2006, and has served as the President of Carbon Management Technologies LLC since February 2008. Dr. Vick has served in various capacities with Global Energy and its affiliated companies since August 1995, including General Manager at the Wabash River Gasification Facility, now known as SG Solutions LLC, from September 2003 to February 2006 when it was under Global Energy’s management, and Senior Vice President of Global Environmental, Ltd. from 1995 to 2003. Before joining Global Energy, Dr. Vick served as the President of Trans-End Technology, a PCB disposal company, from June 1994 until April 1995. From 1977 until June 1994, Dr. Vick worked for Union Carbide Corporation’s chemical and polymers companies and UNISON Transformer Services, Inc., a Union Carbide Corporation subsidiary, in various positions of increasing responsibility, including Director of Research and Technology. Dr. Vick earned a PhD in inorganic chemistry from Massachusetts Institute of Technology.
Ernest K. Jacquet—Director, and Director of Finance. Mr. Jacquet joined the Board of Directors in February 2012 and became our Director of Finance in September 2012. Since 2007 Mr Jacquet has been a Managing Partner at Mentor Partners and Chairman of Passport Brands, Inc. and Executive Producer of AMERICA STAND UNITED: In Support of our Troops. Previously, he was Managing Partner of Parthenon Capital, a $1.7B private equity firm. Prior to co-founding Parthenon Capital in 1998, Mr. Jacquet was a General Partner at Summit Partners, a $6 billion venture capital firm where he started their Buyouts Group. In the 1980’s, he was a Principal at Bain Capital and was a member of the International M&A Group at Morgan Stanley & Co, New York. Mr. Jacquet spent eight years in the United Kingdom, where he became one of the youngest Directors of Trafalgar House Investments PLC developing Oil and Gas offshore. Prior to the North Sea, he served four years as a U.S. Navy Diving Officer in the Far East.Mr. Jacquet currently serves as Chairman of the Board of Directors of Passport Brands (“PBIX”), the North American licensee of Marithe +Francois Girbaud. Mr. Jacquet has served on numerous other boards including Chairman of Interline Brands Inc. (“IBI”), Acurex (Chairman), Astech (Chairman), Academic Management Services (Chairman) and Chase Federal Bank. Mr. Jacquet is a licensed Professional Engineer and patent holder. He earned his MSE and BSE with Honors from the University of Michigan and his MBA from Stanford Business School.
Board Composition
Our Board of Directors currently consists of three directors (Mr. Jacquet, Mr. Graves, and Dr. Vick), with Mr. Graves serving as the chairman of the board. The Board of Directors has approved an increase in board size to seven directors, which we expect to achieve over the next twelve months. We are not presently required to have independent directors. If we become a listed issuer whose securities are listed on a national securities exchange or on an automated inter-dealer quotation system of a national securities association, which has independent director requirements, we intend to comply with all applicable requirements relating to director independence.
Board Meetings
In 2011, there were a total of seven board meetings. No director attended less than 75% of the meetings. We currently do not have a policy with regard to director attendance at annual meetings of stockholders, but plan to develop such a policy within the next twelve months. There were no committee-only meetings, as committee business was discussed in the at-large board meetings.
Board Committees
Our Board of Directors has approved the creation of an audit committee, a compensation committee, and a nominating and governance committee, which at this time are each composed of the entire Board of Directors. Each of these committees has a charter approved and adopted by our Board of Directors and the committee. The committee charters are posted on our website at www.usasfc.com. While our Board of Directors currently consists of three directors, it has determined that, upon its expansion to seven directors, all of the individuals who will serve on these committees will be independent to the extent required by, or as defined under, the rules approved by the Securities and Exchange Commission (“SEC”) and the appropriate national exchange and, in the case of the audit committee, the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Until such time as our Board of Directors is expanded to seven directors, all three current directors are members of each board committee.
Audit Committee
The Board of Directors has an audit committee, consisting of Messrs. Graves, Jacquet, and Vick. Upon the expansion of our board, we expect that one of the independent directors will serve as chair of the audit committee and that at least one will qualify as an “audit committee financial expert” within the meaning of the regulations of the SEC and NASDAQ Global Market rules. The primary responsibilities of our audit committee include:
| · | Appointing, approving the compensation of, and assessing the qualifications and independence of our independent registered public accounting firm, which currently is KWCO, PC. |
| · | Overseeing the work of our independent registered public accounting firm, including the receipt and assessment of reports from that firm. |
| · | Reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures. |
| · | Preparing the audit committee report required by SEC rules to be included in our annual proxy statements. |
| · | Monitoring our internal control over financial reporting and our disclosure controls and procedures. |
| · | Reviewing our risk management status. |
| · | Establishing policies regarding hiring employees from our independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns. |
| · | Meeting independently with our independent registered public accounting firm and management. |
| · | Monitoring compliance by our senior financial officers with our code of conduct and ethics. |
All audit and non-audit services to be provided by our independent registered public accounting firm must be approved in advance by the audit committee.
Compensation Committee
The Board of Directors has a compensation committee, consisting of Messrs. Graves, Jacquet and Vick. Mr. Graves serves as the chair of the compensation committee. Upon expansion of the Board of Directors, none of the persons who will be members of our compensation committee will have ever been employed by us. The primary responsibilities of the compensation committee include:
| · | Annually reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer. |
| · | Determining the compensation of our chief executive officer. |
| · | Reviewing and approving, or making recommendations to our Board of Directors with respect to, the compensation of our other executive officers. |
| · | Overseeing an evaluation of our executive officers. |
| · | Overseeing and administering our cash and equity incentive plans, if any. |
Policies and Procedures
During 2012 the Company began to establish formal compensation objectives, policies and procedures with respect to our principal executive officer and our principal financial officer in conjunction with our financing with Third Eye Capital Corporation. While we entered into employment agreements with two individuals in September 2012 as more fully disclosed in the Executive Compensation section, we expect to continue formalizing our policies and procedures as they relate to all of our management within the next twelve months.
Decisions regarding the compensation to be paid to our named executive officers will be made by our compensation committee and in accordance with its written charter, as outlined above. We expect that the compensation committee will use information readily available within our industry to benchmark and update the compensation packages for our named executive officers that will be allow us to continually attract and retain the best executive, professional and technical expertise for our industry, without hiring compensation consultants. Upon the expansion of our board of directors which is anticipated within the next twelve months, we will not expect our executive officers to have a role in recommending the amount of, or form of, executive compensation, except to the extent it will enable us to retain our named executive officers.
Nominating and Governance Committee
The Board of Directors has a nominating and governance committee, consisting of Messrs. Graves, Jacquet and Vick. The primary responsibilities of the nominating and governance committee include:
| · | Identifying individuals qualified to become members of our Board of Directors. |
| · | Recommending to our Board of Directors the persons to be nominated for election as directors and to each of our board’s committees. |
| · | Reviewing and making recommendations to our Board of Directors with respect to management succession planning. |
| · | Developing, updating and recommending to our Board of Directors corporate governance principles and policies. |
| · | Overseeing the evaluation of our Board of Directors. |
| · | Reviewing and making recommendations to our Board of Directors with respect to director compensation. |
Consideration of Director Candidates Recommended by Stockholders
At this time, the nominating committee does not have a formal policy for the consideration of director candidates submitted by the Company’s stockholders. The Board of Directors believes this is appropriate due to the size of the board, which consists of three (3) individuals currently: two of whom (Mr. Graves and Dr. Vick) we believe have significant history and experience in the business area of the Company. In addition, the concentration and distribution of common shares, and hence voting rights, at this time also supports this belief. The board, however, does have an unofficial policy that it will consider director candidates submitted by Company stockholders. Any such nomination, together with a statement of the nominee's qualifications and consent to be considered as a nominee and to serve if elected, should be mailed to the Secretary of the Company no later than December 31, 2012, in order to be included in the proxy statement in connection with next year's Annual Meeting of Stockholders. While our Board of Directors currently consists of three directors, it has determined that, upon its expansion to seven directors, it expects to adopt a formal policy for identifying, evaluating and considering director candidates, including nominees submitted by Company stockholders. At this time, we do not anticipate there will be any differences in the manner in which the nominating committee evaluates nominees for directors based on whether the nominee is recommended by a stockholder, by the Board of Directors, or by other means. Upon its expansion, the Board of Directors expects to adopt a set of specific minimum qualifications that the board of directors and the nominating committee believes must be met by any nominee for a position on the board of directors along with any specific qualities or skills the nominating committee believes are necessary for one or more of the Company’s directors to possess. We expect, at a minimum, these qualifications should include the following characteristics:
| | · | The highest personal and professional ethics, integrity and values; |
| | · | Broad-based skills and experience at an executive, policy-making level in business, academia, government or technology areas relevant to the Company’s activities; |
| | · | A willingness to devote sufficient time to become knowledgeable about the Company’s business and to carry out his or her duties and responsibilities effectively; and |
| | · | A commitment to serve on the Board for two years or more at the time of his or her initial election. |
Other factors we believe should be included in the selection process as it is developed may include, but are not limited to, the following:
| | · | Experience in the technology areas relevant to the Company’s activities; |
| | · | Experience as a director or executive officer of a public company; |
| | · | Experience as an independent public accountant; |
| | · | Significant academic experience in a field of importance to the Company; |
| | · | Recent experience in an operating role at a large company; and |
| | · | Other relevant information. |
The Board of Directors currently does not have a policy in place which considers diversity in identifying nominees for director. As the Board of Directors recognizes that diversity within corporations is important, we also plan on implementing a diversity policy concurrent with our board expansion to seven members.
Contacting the Board of Directors
Any stockholder who desires to contact our Board of Directors, committees of the Board of Directors or individual directors may do so by writing to: USA Synthetic Fuel Corporation, 312 Walnut Street, Suite 1600, Cincinnati, OH 45202, Attention: Lynne R. Graves, Secretary. Mrs. Graves will direct such communication to the appropriate persons.
Board Leadership Structure and Role in Risk Oversight
The Company has put in place a leadership structure that is based on split responsibilities for the roles of Chairman of the Board and Principal Executive Officer. Mr. Graves leads the Company’s Board of Directors as Chairman and Dr. Vick leads the Company as President and Chief Executive Officer. This structure is designed to work well with independent directors that will comprise the balance of the board. The Company is pursuing a high growth business plan with the commercial deployment of ultra clean btu converters across the United States. Accordingly, the Company plans to add more independent directors as business activity ramps up.
The Board of Directors unanimously recommends that stockholders vote “FOR” the election as directors of the nominees listed above.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
The Board of Directors, by its audit committee, will present its choice of independent registered public accounting firm to audit the consolidated financial statements of our Company and its subsidiaries for fiscal year 2012 at the annual meeting and is asking the stockholders for ratification of the audit committee’s appointment for auditor. Stockholder ratification is not required by our Company’s bylaws or under any other applicable legal requirement. If the stockholders do not ratify the board of directors’ appointment, the audit committee will reconsider the appointment. A representative of the accounting firm does not expect to be present at the Annual Meeting.
We expect that the independent registered public accounting firm would audit our consolidated financial statements for fiscal year 2012, review the related interim quarters, and perform audit-related services and consultation in connection with various accounting and financial reporting matters. The appointed firm may also perform certain non-audit services for our Company. The audit committee has determined that the provision of the services to be provided by the firm as set forth herein are compatible with maintaining their independence and the prohibitions on performing non-audit services set forth in the Sarbanes-Oxley Act and relevant Securities and Exchange Commission rules.
Audit Fees
KWCO, our current principal accountant, billed us approximately $80,000 for professional services for the audit of our annual consolidated financial statements for the 2011 fiscal year and the reviews of the consolidated financial statements included in our quarterly reports on Form 10-Q for the 2011 fiscal year and approximately $54,000 for the 2010 fiscal year.
Audit-Related Fees
KWCO billed us approximately $8,000 for audit services related to the preparation of SEC filings in 2010, including the Form 10.
Tax Fees
In connection with tax services, KWCO did not perform professional services related specifically to tax compliance for the 2010 or 2011 fiscal year.
All Other Fees
KWCO did not bill us in the 2011 or 2010 fiscal years for any services or products other than Audit and Audit-related fees, as listed above.
Audit Committee Pre-Approved Policy
In accordance with audit committee policy and the requirements of law, all services provided by KWCO were pre-approved by the audit committee and all services to be provided by our auditor going forward will be pre-approved. Pre-approval includes audit services, audit-related services, tax services and other services. To avoid certain potential conflicts of interest, the law prohibits a publicly traded company from obtaining certain non-audit services from its auditing firm. We obtain these services from other service providers as needed.
Required Vote and Board Recommendation
While approval of the Independent Registered Public Accounting Firm proposal is not required, the board seeks the affirmative vote of a majority of the shares of common stock present at the Annual Meeting in person or by proxy and entitled to vote.
The Board of Directors unanimously recommends that stockholders vote “FOR” the ratification of the selection of the Board of Directors’ choice of independent registered public accounting firm for the year ending December 31, 2012.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of common stock as of November 1, 2012 by each of the following:
| | • | each person (or group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) known by us to own beneficially more than 5% of the common stock; |
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| | • | the executive officers named in the Summary Compensation Table in this proxy statement; |
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| | • | each of our directors and director nominees; and |
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| | • | all of our directors and executive officers as a group. |
The amounts and percentages are based on 80,682,390 shares of common stock issued as of November 1, 2012, except as noted for convertible noteholders and warrantholders. As used in this table, “beneficial ownership” means the sole or shared power to vote or direct the voting or to dispose or direct the disposition of any security. A person is considered the beneficial owner of securities that can be acquired within 60 days of such date through the exercise of any option, warrant or right. Shares of common stock subject to options, warrants or rights which are currently exercisable or exercisable within such 60 days are considered outstanding for computing the ownership percentage of the person holding such options, warrants or rights, but are not considered outstanding for computing the ownership percentage of any other person.
Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of our common stock, except to the extent authority is shared by spouses under community property laws. Except as otherwise indicated in the table below, addresses of named beneficial owners are in care of the Company, 312 Walnut Street, Suite 1600, Cincinnati, Ohio 45202.
| Name of Beneficial Owner | Amount of Beneficial Ownership | Percentage |
| | | | | |
| 5% Stockholders: | | | | |
Fifth Third Bank Agent for T.H. Graves, P.F. Graves, J.H. Graves U/A Trust 3 dated December 1, 2005 (1) | 9,000,000 | | 11.15% | |
| Strative Capital Ltd. (2) | 10,312,500 | | 11.33% | |
| Strative Capital Ltd. (3) | 10,312,500 | | 11.33% | |
| Lynne R. Graves (4) | 32,355,430 | | 40.10% | |
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| Executive Officers and Directors: | | | | |
| Harry H. Graves (5) | 32,355,430 | | 40.10% | |
| Steven C. Vick | 480,000 | | * | |
| Ernest K. Jacquet | 200,000 | | * | |
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| All executive officers and directors as a group: | | | | |
| (3 persons) | 33,035,430 | | 40.95% | |
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| Total Shares Outstanding: | 80,682,390 | | 100.00% | |
| (1) | Fifth Third Bank, 38 Fountain Square Plaza, Floor 17, Cincinnati, OH 45202. |
| (2) | 100 King Street, Suite 5700, Toronto, ON M5X 1C7 Canada. 4% subordinated secured convertible note due August 31, 2017 convertible into 10,312,500 shares of common stock contains right to vote shares. Ownership percentage is based on total of 90,994,890 shares. |
| (3) | 100 King Street, Suite 5700, Toronto, ON M5X 1C7 Canada. Warrants for 10,312,500 shares of common stock are exercisable at any time through September 24, 2022. Voting power is contingent on exercise of warrants. Ownership percentage is based on total of 90,994,890 shares. |
| (4) | Includes 28,235,860 shares beneficially owned by Mrs. Graves’ spouse. |
| (5) | Includes 4,119,570 shares beneficially owned by Mr. Graves’ spouse. |
EXECUTIVE COMPENSATION AND OTHER MATTERS
Summary Compensation Table
The table set forth below summarizes for our named executive officers the compensation paid, accrued or granted, during or with respect to the fiscal years ended December 31, 2011 and 2010.
| Name and Principal Position | Year | Salary | | Total |
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| Steven C. Vick | 2011 | $277,000 | | $277,000 |
President and Chief Executive Officer | 2010 | $115,415 | (1) | $115,415 |
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| Harry H. Graves | 2011 | $200,000 | (2) | |
| Chief Financial Officer | 2010 | $83,335 | (2) | $83,335 |
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| (1) Dr. Vick agreed to accrue his salary in 2010 and 2011 to assist the Company. |
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| (2) Mr. Graves agreed to accrue his salary to assist the Company. On December 21, 2011, Mr. Graves agreed to convert his total accrued salary through 12/31/11 to equity. |
Discussion of Summary Compensation
Employment Agreements
On September 24, 2012, we entered into formal employment agreements with Dr. Steven C. Vick, our chief executive officer, and Mr. Harry H. Graves, our executive chairman and chief financial officer.
Dr. Vick. The employment agreement with Dr. Vick provides that Dr. Vick is an at-will employee and may be terminated for any reason at any time. Under the agreement, we agreed to pay Dr. Vick an annual base salary of $277,000, with the possibility of a bonus based on board-determined performance-based criteria. We do not anticipate paying a bonus in the immediate future. In the event that Dr. Vick’s employment agreement is terminated by us without “Cause”, as that term is defined in his employment agreement, we will be obligated to pay him his then-current rate of base salary for a period of 1 year following termination. In the event that Dr. Vick’s employment agreement is terminated by him in a manner that satisfies the definition of a “Separation from Service for Good Reason”, as that term is defined in the employment agreement, we will be obligated to pay him his then current rate of base salary for a period of 1 year following termination.
Mr. Graves. The employment agreement with Mr. Graves provides for a ten- year initial term with one-year automatically renewable extensions thereafter until terminated. Under the agreement, we agreed to pay Mr. Graves an annual base salary of $240,000, with the possibility of a bonus based on board-determined performance-based criteria. We do not anticipate paying a bonus in the immediate future. In the event that Mr. Graves’ employment agreement is terminated by us without “Cause”, as that term is defined in his employment agreement, we will be obligated to pay Mr. Graves an amount equal to the sum of his then-current rate of base salary that would have been payable had he remained employed by us during the remainder of the term of his employment agreement in effect immediately prior to the date of termination, payable in accordance with our normal payroll procedures. In the event that Mr. Graves’ employment agreement is terminated by him in a manner that satisfies the definition of a “Separation from Service for Good Reason”, as that term is defined in the employment agreement, we will be obligated to pay Mr. Graves an amount equal to the sum of his then-current rate of base salary that would have been payable had he remained employed by us during the remainder of the term of his employment agreement in effect immediately prior to the date of termination, payable in accordance with our normal payroll procedures.
Outstanding Equity Awards at Fiscal Year-End
None.
Director Compensation
There are no standard compensation arrangements for our board members. In 2011, no compensation or stock awards were awarded to or earned by any of our directors. In 2010, the Board of Directors considered a board compensation policy such that each non-employee member of our board of directors would be entitled to an annual fee of $35,000, which the director may elect to receive in cash or in shares of our common stock. The Board of Directors has not approved the policy, but plans to reconsider it in the future.
We expect that in the future, our nominating and governance committee will determine the compensation and benefits for our Board of Directors in consideration for their services on the board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires executive officers and directors and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than 10% stockholders are required by regulations of the SEC to furnish us with copies of all Section 16(a) reports they file.
Mr. Graves filed a Form 5 on February 14, 2012 due to a change in ownership. Mr. Jacquet has not filed a Section 16(a) report, and Dr. Vick had no changes in 2011.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a description of transactions, since January 1, 2011, in which the Company was or is to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at year end for the last two completed fiscal years, and to which any related person had or will have a direct or indirect material interest:
On September 30, 2011, the Company issued 1,004,356 shares of common stock to GEI to clear the Lima energy senior secured note balance and accrued interest of $7,030,489.
On December 21, 2011, GEI agreed to accept 45,912 shares of the Company’s common stock in payment of amounts advanced to the Company since inception.
On December 21, 2011, the Company’s Chairman and Chief Financial Officer agreed to accept 40,477 shares of common stock for his accrued salary through December 31, 2011.
On September 24, 2012, the Company issued 2,500,000 shares of common stock to GEI for $25,000,000, which represents half of the purchase price of the Indiana BOE Energy Asset.
On September 24, 2012, GEI purchased 1,100,000 shares of common stock of the Company for $11,000,000.
Policies and Procedures with Respect to Related Party Transactions
As of the date hereof, our Board of Directors has not adopted formal written policies or procedures regarding the review, approval or ratification of related party transactions. The Company intends to adopt such policies and procedures in the next twelve months. Such policies will include, among other things, descriptions of the types of transactions covered, the standards to be applied in reviewing such transactions, the process for review of such transactions, and the individuals on the Board of Directors or otherwise who are responsible for implementing the policies and procedures. Our audit committee, which will be comprised entirely of independent directors, will be responsible for such matters on an ongoing basis, consistent with its written charter. Notice of the Company’s adoption of these policies and procedures will be given to all appropriate Company personnel.
CODE OF CONDUCT AND ETHICS
We have adopted a code of conduct and ethics that applies to all of our employees, including our chief executive officer and chief financial and accounting officers. The text of the code of conduct and ethics is posted on our website at www.usasfc.com and will be made available to stockholders without charge, upon request, in writing to the Corporate Secretary at 312 Walnut Street, Suite 1600, Cincinnati, OH 45202. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting of such amendments or waivers is then permitted by the rules of the national securities exchange which the Company trades.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
This Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Exchange Act of 1934, as amended (together, the “Acts”), except to the extent that we specifically incorporate this information by reference, and shall not be deemed filed under the Acts.
The Company’s Audit Committee hereby reports as follows:
1. The Company’s management has the primary responsibility for the financial statements and the reporting process, including establishing and monitoring the system of internal accounting controls. The Audit Committee, in their oversight role, has reviewed and discussed the audited financial statements with the Company’s management team.
2. Members of the Audit Committee have discussed with the Company’s internal auditors and its independent registered public accounting firm, KWCO, the overall scope of, and plans for, the Company’s audits. The Audit Committee has held discussions with the internal auditors and independent registered public accounting firm to discuss the Company’s financial reporting process and internal accounting controls in addition to other matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380) as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T, as may be modified or supplemented.
3. The Audit Committee has received the written disclosures and the letter from KWCO required by applicable requirements of the Public Company Accounting Oversight Board regarding KWCO’s communications with the Audit Committee concerning independence, and has discussed with KWCO their independence.
4. The Audit Committee has an established charter outlining the practices it follows. The charter is available on the Company’s website at: http://www.usasfc.com/usasfc_dev/wp-content/uploads/2011/05/USASF-Audit-Committee-Charter1.pdf
5. The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee of all fees paid to, and all services performed by, the Company’s independent registered public accounting firm. At the beginning of each year, the Audit Committee approves the proposed services, including the nature, type and scope of service contemplated and the related fees, to be rendered by the firm during the year. In addition, Audit Committee pre-approval is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees approved by the Audit Committee. For each category of proposed service, KWCO, the independent accounting firm, is required to confirm that the provision of such services does not impair their independence. Pursuant to the Sarbanes-Oxley Act of 2002, the fees and services provided as noted elsewhere in this proxy were authorized and approved by the Audit Committee in compliance with the pre-approval policies and procedures described herein.
6. Based on the review and discussions referred to in paragraphs (1) through (5) above, the Audit Committee recommended to the Board of Directors and the Board of Directors has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, for filing with the Securities and Exchange Commission.
| | For the Audit Committee: Harry H. Graves (Chair) Steven C. Vick Ernest K. Jacquet |
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR
Any stockholder who intends to present a proposal (other than for director nominations) at the 2013 Annual Meeting of Stockholders, currently expected to occur in November 2013, must deliver the proposal to the Corporate Secretary, USA Synthetic Fuel Corporation, 312 Walnut Street, Suite 1600, Cincinnati, OH 45202, no later than July 14, 2013 if such proposal is to be considered for inclusion in our proxy materials for that meeting.
OTHER MATTERS
The board of directors knows of no other business to be presented for action at the Annual Meeting. If any matters do come before the meeting on which action can properly be taken, the persons named in the enclosed proxy will have the discretion to vote such matters in accordance with their judgment.
ANNUAL MEETING OF STOCKHOLDERS OF
USA SYNTHETIC FUEL CORPORATION
November 28, 2012
MAIL — Sign, date and mail your proxy card in the envelope provided as soon as possible.
IN PERSON — You may vote your shares in person by attending the Annual Meeting.
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Please sign, date and mail your proxy card in the envelope provided as soon as possible. |
o Please detach along perforated line and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSAL 2 PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |
| | | | | | | | | FOR | | AGAINST | | ABSTAIN | | |
| 1. | To elect the following nominees to our board of directors to each serve a one-year term: | | | 2. | Ratify the appointment of the independent registered public accounting firm for fiscal year 2012 as recommended by the Board of Directors | | o | | o | | o | | |
| | | | | NOMINEES: | | | | | | | | | | | | | | | | |
o o o | FOR ALL NOMINEES WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) | | o o o | Harry H. Graves Ernest K. Jacquet Dr. Steven C. Vick | | | | | | | | | | | | | | | | | |
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| INSTRUCTION: | To withhold authority to vote for any individual nominee(s), mark “ FOR ALL EXCEPT ” and fill in the circle next to each nominee you wish to withhold, as shown here:ooo | | | | MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING | | | | o | | | | | | | | | | | |
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | | o | | | | | | | | | | | | | | | | | | | |
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| Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | |
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| Note: | | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
USA SYNTHETIC FUEL CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 28, 2012
The undersigned stockholder of USA SYNTHETIC FUEL CORPORATION, a Delaware corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated November 14, 2012, and hereby appoints Lynne R. Graves as proxy, with full power of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2012 Annual Meeting of Stockholders of USA SYNTHETIC FUEL CORPORATION to be held on November 28, 2012 at the Company’s offices, Suite 1025, 1717 Pennsylvania Avenue, N. W. Washington, D.C. 20006, and at any adjournment or postponement thereof, and to vote all shares of common stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth below.
This Proxy, when executed, will be voted in the manner directed herein. If you do not specify below how you want your shares to be voted, this Proxy will be voted FOR the election of Directors and FOR Proposal 2. In their discretion the proxies are authorized to vote upon such other matters as may properly come before the meeting or any adjournments of the meeting.
(Continued and to be signed on the reverse side)
