SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Sectioin 240.14a-12
Equitex, Inc.
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(Name of Registrant as Specified in its Charter)
John W. Kellogg, Esq.
Friedlob Sanderson Paulson & Tourtillott, LLC
1400 Glenarm Place
Denver, Colorado 80111
(303) 571-1400
(303) 595-3970
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(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
pursuat to Exchange Act Rule 0-11:____________________________
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(5) Total Fee Paid:_______________________________________________
[ ] Fee previously paid with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by regitration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:__________________________________
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(4) Date Filed:______________________________________________
EQUITEX, INC.
7315 EAST PEAKVIEW AVENUE
ENGLEWOOD, COLORADO 80111
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Notice of Annual Meeting of Stockholders
To Be Held on December 27, 2000
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November 30, 2000
To the Stockholders of Equitex, Inc.
An Annual Meeting of Stockholders of Equitex, Inc., a Delaware corporation
(the "Company"), will be held at the offices of Friedlob Sanderson Paulson &
Tourtillott, LLC located at 1400 Glenarm Place, Third Floor, Denver, Colorado,
on December 27, 2000 at 9:00 a.m. Mountain Standard Time, to consider and take
action on the following matters:
1. The election of three directors to serve until the next annual meeting
of stockholders and until their successors have been elected and
qualified.
2. A proposal to ratify the appointment of Gelfond Hochstadt Pangburn,
P.C. as the independent auditor of the Company for the year ended
December 31, 2000.
3. Such other business as may properly come before the meeting, or any
adjournment or adjournments thereof.
Stockholders holding shares of Common Stock of record at the closing of
business on November 17, 2000, will be entitled to receive notice of and vote at
the meeting.
Stockholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in the Proxy
Statement.
By Order of the Board of Directors:
Thomas B. Olson
Secretary
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR
SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY
DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
Your vote is important
EQUITEX, INC.
7315 EAST PEAKVIEW AVENUE
ENGLEWOOD, COLORADO 80111
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Proxy Statement
Annual Meeting of Stockholders
December 27, 2000
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To our Stockholders:
This Proxy Statement (the "Proxy Statement") is furnished to stockholders
of Equitex, Inc., a Delaware corporation (the "Company") in connection with the
solicitation of proxies by and on behalf of the Company's Board of Directors
(the "Board") for use at the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held on December 27, 2000 at the offices of Friedlob Sanderson
Paulson & Tourtillott, LLC located at 1400 Glenarm Place, Third Floor, Denver,
Colorado, at the time and for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders. This Proxy Statement, the accompanying proxy
card and the Notice of Annual Meeting (collectively, the "Proxy Materials") will
be first sent to stockholders on or about November 30, 2000.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, NW, Washington, DC
20549 or at the Regional Offices of the Commission which are located as follows:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained from the Commission at
prescribed rates. Written requests for such material should be addressed to the
Public Reference Section, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549. The Commission maintains a Web site that contains
reports, proxy statements and other information filed electronically by the
Company with the Commission which can be accessed over the Internet at
http://www.sec.gov.
GENERAL INFORMATION
As of the close of business on November 17, 2000, the record date for
entitlement to notice of an vote at the Annual Meeting, the Company had
outstanding 7,106,943 shares of common stock, $.02 par value per share (the
"Common Stock"). The presence, in person or by proxy, of holders of one-third of
the shares of Common Stock entitled to vote at the Meeting constitutes a quorum
for the transaction of business at the Meeting.
Each share of Common Stock outstanding on the record date is entitled to
one vote on each matter presented at the Meeting.
Abstentions will be treated as shares present or represented and entitled
to vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the stockholders. As to any shares a broker indicates on its proxy that it does
not have the authority to vote on any particular matter because it has not
received direction from the beneficial owner thereof, said shares will not be
counted as voting on a particular matter.
1
A stockholder who gives a proxy may revoke it at any time before it is
voted by giving notice of the revocation thereof to the Secretary of the
Company, by filing another proxy with the Secretary or by attending the Meeting
and voting in person. All properly executed and unrevoked proxies delivered
pursuant to this solicitation, if received in time, will be voted in accordance
with the instructions of the beneficial owners contained thereon.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply Proxy Materials to the beneficial
owners of the Company's Common Stock for whom they hold shares and will
reimburse them for their reasonable expenses in so doing.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Set forth below is certain information as of October 30, 2000, with respect
to ownership of the Company's Common Stock held of record or beneficially by (i)
the Company's executive officers, (ii) each director of the Company, (iii) each
person who owns beneficially more than five percent of the Company's outstanding
Common; and (iv) all directors and executive officers as a group:
PERCENTAGE
NUMBER OF OWNED OF
NAME AND ADDRESS COMMON COMMON
OF BENEFICIAL OWNER STOCK OWNED (1) STOCK
- ------------------- --------------- ----------
Henry Fong 1,620,044 (2)(3) 20.1%
7315 East Peakview Avenue
Englewood, Colorado 80111
Russell L. Casement 486,900 (4) 6.5%
1355 S. Colorado Blvd., Suite 320
Denver, Colorado 80222
Aaron A. Grunfeld 412,200 (5) 5.5%
10390 Santa Monica Blvd., Fourth Floor
Los Angeles, California 90025
All officers and directors
as a group (four persons) 2,615,444 (6) 29.5%
- ----------------------
(1) The beneficial owners exercise sole voting and investment power.
(2) Includes 945,700 shares underlying options granted under the Company's
1999 Stock Option Plan.
(3) Includes 459,554 shares owned by a corporation in which Mr. Fong is an
officer and director.
(4) Includes 36,400 shares underlying options granted under the Company's
1993 Stock Option Plan for Non- Employee Directors and 329,500 shares
underlying options granted under the Company's 1999 Stock Option Plan.
(5) Includes 50,000 shares underlying options granted under the Company's
1993 Stock Option Plan for Non- Employee Directors and 329,500 shares
underlying options granted under the Company's 1999 Stock Option Plan.
(6) Includes 86,400 shares underlying options granted under the Company's
1993 Stock Option Plan for Non- Employee Directors and 1,671,000 shares
underlying options granted under the Company's 1999 Stock Option Plan.
The issuance of 7,140,000 shares of the Company's common stock in the
acquisitions of Nova Financial Systems, Inc. and Key Financial Systems, Inc., as
described in the Company's preliminary proxy statement for a
2
special meeting of the stockholders under proposal one, may, at a subsequent
date, result in a change in control of the Company.
PROPOSAL 1
ELECTION OF DIRECTORS
The following three persons are to be elected as directors of the Company
for a term of one year and until the election and qualification of their
successors: Henry Fong, Russell L. Casement and Aaron A Grunfeld. These three
directors will constitute the entire Board of Directors. The persons named in
the proxy intend to vote for Messrs. Fong, Casement and Grunfeld who have been
recommended for election by the Board of Directors of the Company unless a
stockholder withholds authority to vote for any or all of the nominees. If any
nominee is unable to serve or, for good cause, will not serve, the persons named
in the proxy reserve the right to substitute another person of their choice as
nominee in his place. Each of the nominees has agreed to serve, if elected.
VOTE REQUIRED
A majority of the votes cast at the meeting by stockholder entitled to vote
thereon will be required for election to the Board of Directors.
INFORMATION ABOUT DIRECTORS AND OFFICERS
HENRY FONG, Age 64
Mr. Fong has been the President, Treasurer and a director of the Company
since its inception. From 1987 to June 1997, Mr. Fong was chairman of the board
and chief executive officer of RDM Sports Group, Inc. (f/k/a Roadmaster
Industries, Inc.) a publicly held investee of the Company and was its president
and treasurer from 1987 to 1996. Subsequent to Mr. Fong's departure from RDM, it
filed Chapter 11 bankruptcy petitions for RDM and all of its subsidiaries with
the U.S. Bankruptcy Court for the Northern District of Georgia on August 29,
1997. From July 1996 to October 1997, Mr. Fong was a director of IntraNet
Solutions, Inc., a publicly-held investee company which provides
internet/intranet solutions to Fortune 1000 companies and was the chairman of
the board and treasurer of its predecessor company, MacGregor Sports and
Fitness, Inc. from February 1991 until the two companies merged in July 1996.
From January 1993 to January 20, 1999, Mr. Fong was chairman of the board and
Chief Executive Officer of California Pro Sports, Inc., a publicly traded
manufacturer and distributor of in-line skates, hockey equipment and related
accessories. From 1959 to 1982 Mr. Fong served in various accounting, finance
and budgeting positions with the Department of the Air Force. During the period
from 1972 to 1981 he was assigned to senior supervisory positions at the
Department of the Air Force headquarters in the Pentagon. In 1978, he was
selected to participate in the Federal Executive Development Program and in
1981, he was appointed to the Senior Executive Service. In 1970 and 1971, he
attended the Woodrow Wilson School, Princeton University and was a Princeton
Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious Civilian
Service Award in 1982. Mr. Fong has passed the uniform certified public
accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as
Silver Award winners in FINANCIAL WORLD magazine's corporate American "Dream
Team."
THOMAS B. OLSON, Age 34
Mr. Olson has been Secretary of the Company since January 1988. From
February 1990 to February 2000, Mr. Olson was a director, and from May 1994 to
February 2000 secretary, of Immune Response, Inc. a publicly held investee of
the Company which was recently merged with an unaffiliated third party company.
Mr. Olson has attended Arizona State University and the University of Colorado
at Denver.
3
AARON A. GRUNFELD, Age 53
Mr. Grunfeld has been a director of the Company since November 1991. Mr.
Grunfeld has been engaged in the practice of law for the past 28 years and has
been of counsel to the firm of Resch Polster Alpert & Berger, LLP, Los Angeles,
California since November 1995. From April 1990 to November 1995, Mr. Grunfeld
was a member of the firm of Spensley Horn Jubas & Lubitz, Los Angeles,
California. Mr. Grunfeld received an A.B. in Political Science from UCLA in 1968
and a J.D. from Columbia University in 1971. He is a member of the California
Bar Association.
RUSSELL L. CASEMENT, Age 56
Dr. Casement has been a director of the Company since February 1989. Since
1969, Dr. Casement has been the president of his own private dental practice,
Russell Casement, D.D.S., P.C., in Denver, Colorado. Dr. Casement earned a
Doctor of Dental Science degree from Northwestern University in 1967. Dr.
Casement is a member of the American Dental Association, the Colorado Dental
Association and the Metro Denver Dental Association.
MEETINGS OF THE BOARD OF DIRECTORS
During the last full fiscal year, the Company held six meetings of the
Board of Directors and took action through unanimous consent on seven separate
occasions.
AUDIT AND NOMINATING COMMITTEES
The Company has appointed an Audit Committee currently consisting of Dr.
Casement as chairman and Mr. Grunfeld. All members of the Audit Committee are
independent, as that term is defined in Rule 4200(a)(14) of the National
Association of Securities Dealers' listing standards. The Company does not have
a nominating committee of the Board of Directors, or any other committees
performing similar functions.
The Audit Committee has a written charter, which is attached as Exhibit A
to this proxy statement. The Audit Committee reviews and approves the scope of
the annual audit undertaken by the Company's independent public accountants and
meets with them as necessary to review the progress and results of their work as
well as any recommendations they may make. The Audit Committee also reviews the
fees of the independent public accountants and recommends to the Board of
Directors the appointment of independent public accountants. In connection with
the internal accounting controls of the Company, the Audit Committee reviews
internal control and reporting systems in conjunction with management and the
accountants.
During the year ended December 31, 1999, the Audit Committee formally met
once.
REPORT OF AUDIT COMMITTEE
The Audit Committee has discussed with the independent auditors the matters
required to be discussed by SAS 61, as may be modified or supplemented. The
Audit Committee has received the written disclosures and the letter from the
independent accountants required by the Independence Standards Board Standard
No. 1, as may be modified or supplemented, and has discussed with the
independent accountant the independent accountant's independence. Because the
Audit Committee was formed in June 2000, the Audit Committee has reviewed and
discussed the financial information for the quarters ending June 30, 2000 and
September 30, 2000 with management of the Company. In accordance with its
charter, the Audit Committee will review and discuss the audited financial
statements for the year ended December 31, 2000 with management of the Company.
If appropriate, the Audit Committee will recommend to the Board of Directors
that the audited financial statements be included in the Company's annual report
on Form 10-K for the year ended December 31, 2000.
4
Russell L. Casement
Aaron A. Grunfeld
COMPENSATION COMMITTEE
The Company has appointed a Compensation Committee currently consisting of
Mr. Grunfeld as chairman and Dr. Casement.
The Compensation Committee reviews the Company's compensation arrangements
as necessary and makes recommendations to the Board of Directors.
During the year ended December 31, 1999, the Compensation Committee took
action through unanimous written consent on one occasion.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In January, 1998, the Compensation Committee of the Company's board of
directors retained an independent consultant to review the President's
compensation. The compensation committee directed the consultant to review both
the President's salary and bonus structure. The independent consultant analyzed
the compensation structure of the Company and compared it to the compensation
structures of companies similar to the Company. The consultant recommended no
change in the President's salary. The consultant did recommend a change in the
bonus component of the President's compensation from one based solely on the
assets of the Company, to one based primarily on increases in the market value
of the Company's common stock. The Compensation Committee agreed and directed
the consultant to provide a recommendation, based on their research, for a bonus
plan tied to the Company's market performance.
As a result of that further review, the consultant recommended an annual
bonus plan equaling 1% of the Company's total assets combined with 5% of the
increase in the market value of the Company's common stock not held by the
Company's President. The bonus is calculated and paid quarterly from January 1
to December 31 of any fiscal year based on a formula provided by the consultant.
The Compensation Committee feels this compensation arrangement, tied primarily
to the market performance of the Company's common stock while including
incentives for increases in assets, is the most equitable method for
compensating the Company's President. This provides a quantitative measure on
which to reward the President's performance, by directly emphasizing market
performance, which correlates directly with the expectations and goals of the
Company and its stockholders.
During 1999, the Compensation Committee reviewed the compensation structure
and determined no changes should be made. Although this plan was instituted
during the period in which the Company was operating as an investment company,
the Compensation Committee feels it is no less valid under the operating company
structure. In reviewing any issues related to that change, the Committee
determined the 1% bonus based on total assets would be paid based upon the
Company's assets prior to consolidation with any subsidiary. No further
refinements were warranted.
Aaron A. Grunfeld
Russell L. Casement
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Henry Fong, the President of the Company and the only officer of the
Company whose total compensation exceeded $100,000 for the fiscal year ended
December 31, 1999, received an annual salary of $183,013. In January, 1998, the
Compensation Committee of the Company's board of directors retained an
independent consultant to review the President's compensation. As a result of
that review, a new compensation arrangement was
5
instituted based on recommendations made by the independent consultant. In
addition to Mr. Fong's annual salary, beginning January 1, 1998, Mr. Fong is to
receive an annual bonus equaling 1% of the Company's total assets combined with
5% of the increase in the market value of the Company's common stock calculated
quarterly from January 1 to December 31 of any fiscal year. If there is a
negative computation in any given quarter, no bonus is paid and that negative
amount is carried forward to offset the subsequent quarter's bonus during the
fiscal year. Negative amounts will not be accumulated nor carried into
subsequent fiscal years. During the year ended December 31, 1999, this bonus
totaled $883,164. This new compensation arrangement replaces the previous bonus
of 3% of the Company's total assets at year-end, which totaled $151,153 for the
year ended December 31, 1997.
On April 1, 1992, the Company obtained a life insurance policy with
retirement benefits for Mr. Fong which pays his beneficiary $2,600,000 in the
event of Mr. Fong's death or provides for retirement benefits for Mr. Fong upon
his retirement at or after age 65 utilizing the cash value of the policy at that
time. This benefit is being provided to Mr. Fong in consideration of his 17
years of service to the Company and in anticipation of his serving the Company
until retirement. The Company has no other retirement or pension plan for Mr.
Fong. The annual premium on this policy is $105,414 per year for seven years
until March 30, 1999, and may be considered other future compensation to Mr.
Fong. For the year ended December 31, 1999, $105,414 was paid toward the policy
and an additional $59,586 was paid to Mr. Fong for deferred income taxes on the
policy. Concurrently, the Company obtained a Key-man Life Insurance policy which
pays the Company $3,000,000 in the event of Mr. Fong's death. The Company paid
$23,937 on this policy in 1999 which is not considered compensation to Mr. Fong.
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation paid to
the officers of the Company during the years ended December 31, 1999, 1998 and
1997:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
---------------------------- ------
Other All
Name & Annual Other
Principal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($) & SARs(#) ($)
- -------- ---- --- --- --- --------- ---
Henry Fong 1999 183,013 883,164 0 469,700 165,000(1)
President,
Treasurer
Principal
Executive
Officer and
Accounting
Officer
Henry Fong 1998 183,013 1,208,042 0 469,655 165,000(1)
Henry Fong 1997 183,013 151,153 0 0 165,000(1)
- ----------
(1) Includes payments and tax liability on the life insurance policy as
explained more fully in "Item 10 (a) General" above.
6
OPTION/SAR GRANTS IN FISCAL 1999
OPTION/SAR GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE
--------------------------------------------------------
Number of
Securities Percent of total
Underlying options/ SARs Exercise Grant
Options/ granted to of Base Date
SARs employees in Price Expiration Present
Name Granted (#) Fiscal Year ($/Sh) Date Value($)
- ---- ----------- ----------- ------ ---- --------
Henry Fong 469,700 47% $6.75 1/4/2004 3,170,475
AGGREGATED OPTION/SAR EXERCISES IN 1999 AND FY-END OPTION/SAR VALUES
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-End (#) at FY-End (#)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------ ------------ ------------- -------------
Henry Fong 602,200 12,093,316 469,700/0 $587,125/0
PERFORMANCE GRAPH
12/30/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Nasdaq US 100.00 141.33 173.89 231.07 300.25 542.43
Nasdaq Financial 100.00 145.68 187.03 286.11 277.73 274.63
Equitex 100.00 133.33 92.09 41.30 349.21 406.35
7
COMPENSATION OF DIRECTORS
Each independent member of the Company's Board of Directors, Messrs.
Russell L. Casement and Aaron A. Grunfeld, receive $10,000 per year payable
monthly and $500 for each Board of Director's meeting attended either in person
or by telephone. For the year ended December 31, 1999, Messrs. Casement and
Grunfeld each received a total of $13,000. Members of the Board of Directors
also receive reimbursement for expenses incurred in attending board meetings.
1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Company has adopted the 1993 Stock Option Plan for Non-Employee
Directors (the "Directors' Plan") reserving an aggregate of 250,000 shares of
Common Stock for issuance pursuant to the exercise of stock options (the
"Options") which may be granted to non-employee directors of the Company. On
July 5, 1995, an order was issued by the Securities and Exchange Commission
authorizing the Directors' Plan and the options granted thereunder. The
Directors' Plan is for a ten-year term commencing July 5, 1995 (the "Effective
Date"). Each non-employee director automatically, as of the Effective Date, was
granted an option to purchase 50,000 shares of common stock at $3.00 per share.
Thereafter, each director who first becomes a non-employee director shall
automatically, as of the date 90 days following the date such person becomes a
non-employee director, be granted an option to purchase 50,000 shares of common
stock. No additional options can be granted under the Directors' Plan except to
an individual who first becomes a non-employee director after the Effective
Date. No discretionary grants can be made under the Directors' Plan.
On June 2, 1998, the Company's board of directors authorized the granting
of 75,000 options to purchase common stock of the Company to each of the
Company's two independent directors at $3.19 per share for a period of five
years. The grant of these options was contingent upon the Company's successful
withdrawal as a business development company. After obtaining the necessary vote
of the stockholders to change the business of the Company, the Company on
January 4, 1999 withdrew its election to be treated as a business development
company as defined in the Investment Company Act of 1940.
1999 STOCK OPTION PLAN
On January 5, 1999, the Company's board of directors adopted a new stock
option plan, the 1999 Stock Option Plan. On January 5, 1999, the Company's two
independent directors each received options to purchase 158,700 shares of the
Company's common stock at an exercise price of $6.75 per share expiring on
January 5, 2004. These options were granted in lieu of the 75,000 options at
$3.19 per share, which were cancelled. In addition, each director received
86,800 options to purchase 86,800 shares of the Company's common stock at an
exercise price of $6.75 per share under the 1999 Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On April 1, 1992, the Company obtained a life insurance policy on the
Company's President, Henry Fong, which policy provides for a payment to Mr.
Fong's beneficiary of $2,600,000 in the event of his death or a retirement
benefit to Mr. Fong consisting of the cash value of the policy upon Mr. Fong's
retirement from the Company at or after age 65. The Company has no other
compensation plan or arrangement with respect to any executive officer which
plan or arrangement results or will result from the resignation, retirement or
any other termination of such individual's employment with the Company. The
Company has no plan or arrangement with respect to any such persons which will
result from a change in control of the Company or a change in the individual's
responsibilities following a change in control.
8
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16")
requires the Company's officers, directors and persons who own more than ten
percent of the Company's voting securities to file reports of their ownership
and changes in such ownership with the Securities and Exchange Commission (the
"Commission"). Commission regulations also require that such persons provide the
Company with copies of all Section 16 reports they file. Based solely upon its
review of such reports received by the Company, or written representations from
certain persons that they were not required to file any reports under Section
16, the Company believes that, during 1999, its officers and directors have
complied with all Section 16 filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company currently leases approximately 1,800 square feet of office
space in Greenwood Executive Park, 6400 South Quebec, Englewood, Colorado from a
partnership in which its President is the sole partner, on terms comparable to
the existing market for similar facilities.
During 1998, a company in which the Company's President is an officer and
director loaned the Company a total of $165,000 which is due on demand and bears
interest at 8% per annum. Of that amount, $22,672 was repaid during 1998 and the
balance of $142,328 was repaid in November 1999.
In addition, a related entity loaned the Company $100,000 in August 1997.
This loan carried an interest rate of 12% per annum, was due on demand and was
collateralized by 25,000 shares of the Company's investment in an investee
company's common stock. The Company paid $30,000 in principal due on this note
during 1998 and paid the balance of $70,000 in April 1999.
The Company has placed members of its Board and its officers on the boards
of directors of certain investee companies and other companies in which it has
obtained an equity interest or to which it has made loans or guarantees. In most
instances, the board representation was subsequent to these acquisitions, loans
or guarantees. The Company may be considered to be in control of certain of its
investee companies.
INDEBTEDNESS OF MANAGEMENT
During 1998, Aaron Grunfeld, a director of the Company, purchased 39,200
shares of common stock of the Company pursuant to a private placement at $1.16
per share. In payment of the shares, Mr. Grunfeld executed a note payable to the
Company in the amount of $45,472, which was due on December 15, 1998 and carried
interest at 8% per annum. The due date on this note was subsequently extended to
February 15, 1999. All principal and interest due was paid on this note prior to
the extended expiration date.
In August 1999, the Company loaned a director, Aaron Grunfeld, $180,000.
The note bears interest at 9.75% annually, is collateralized by 39,200 shares of
the Company's common stock, and was originally due on November 18, 1999. The
note has been extended to December 31, 2000. On January 10, 2000 Mr. Grunfeld
paid all accrued interest through December 31, 1999. On April 4, 2000, Mr.
Grunfeld paid $80,000 in principal and all accrued interest through March 31,
1999 leaving an unpaid principal balance of $100,000 as of that date.
9
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of Gelfond
Hochstadt Pangburn, P.C. as independent auditor of the Company for the year
ended December 31, 2000. A representative of Gelfond Hochstadt Pangburn is not
expected to be present at the meeting. There are no existing direct or indirect
understandings or agreements between the Company and Gelfond Hochstadt Pangburn
& Co. that place a limit on current or future years' audit fees.
The firm of Davis & Co., CPA's, P.C. provided services to the Company
during the year ended December 31, 1998 relating principally to the examination
of the financial statements and related reporting which included the annual
audit of the Company's financial statements.
On August 20, 1999, the Company dismissed Davis & Co., CPA's, P.C. as its
independent certified public accountant. There have been no adverse opinions,
disclaimers of opinion or qualifications or modifications as to uncertainty,
audit scope or accounting principles regarding the reports of Davis & Co.,
CPA's, P.C. on the Company's financial statements for each of the fiscal years
ended December 31, 1998 and 1997, or any subsequent interim period. The Audit
Committee of the Company's Board of Directors approved the change of accountants
and that action was ratified by the Board of Directors of the Company. There
were no disagreements with Davis & Co., CPA's, P.C. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures leading to their dismissal.
There were no reportable events, in each case, during either of the
Company's two most recent fiscal years or any subsequent interim period.
Simultaneously with the dismissal of its former accountants, the Company
approved and engaged Gelfond Hochstadt Pangburn, P.C. to act as its independent
certified public accountant as successor to Davis & Co., CPA's, P.C. During the
Company's two most recent fiscal years or subsequent interim periods the Company
has not consulted Gelfond Hochstadt Pangburn, P.C. regarding the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Company's financial
statements, or any matter that was the subject of a disagreement or a reportable
event.
VOTES REQUIRED
A majority of the votes cast at the meeting by stockholders entitled to
vote thereon will be required to ratify the appointment of the independent
auditors.
FINANCIAL INFORMATION
A copy of the 1999 Annual Report of the Company, including a copy of the
Company's Annual Report on Form 10-K for the year ended December 31, 1999, is
being sent to stockholders with this Proxy Statement.
OTHER MATTERS
Management of the Company knows of no other matter which may come before
the Annual Meeting. However, if any additional matters are properly presented at
the Annual Meeting, it is intended that the person named in the enclosed Proxy
Statement, or his substitute, will vote such Proxy in accordance with his
judgment on such matters.
10
STOCKHOLDER PROPOSALS
Any stockholder proposing to have any appropriate matter brought before the
2001 Annual Meeting of Stockholders, tentatively scheduled for July 27, 2001,
must submit such proposal in accordance with the proxy rules of the Securities
and Exchange Commission. Such proposals should be sent to Thomas B. Olson,
Secretary, Equitex, Inc., 7315 East Peakview Avenue, Englewood, Colorado 80111,
for receipt no later than March 31, 2001.
EQUITEX, INC.
By Order of the Board of Directors:
Thomas B. Olson
Secretary
Date: November 30, 2000
11
EXHIBIT A
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EQUITEX, INC.
AUDIT COMMITTEE CHARTER
MAY 2000
The audit committee is a committee of the board of directors of the Company. Its
primary function is to assist the board in fulfilling its oversight
responsibilities by reviewing the financial information which will be provided
to the Company's stockholders and others, the systems of internal controls which
management and the board of directors have established, and the audit process.
In meeting its responsibilities, the audit committee is expected to:
1. Provide an open avenue of communication between the Company's
management, the independent accountant, and the board of directors.
2. Review and update the Audit Committee Charter annually.
3. Recommend to the board of directors the independent accountant to be
nominated, approve the compensation of the independent accountant, and
review and approve the discharge of the independent accountant.
4. Confirm and assure the independence of the independent accountant,
including a review of management consulting services provided by the
independent accountant and related fees.
5. Inquire of management and the independent accountant about significant
risks or exposures and assess the steps management has taken to
minimize such risk to the Company.
6. Consider with management and the independent accountant the audit
scope and plan of the independent accountant.
7. Consider and review with the independent accountant and management:
a. The adequacy of the Company's internal controls including
computerized information system controls and security.
b. Any related significant findings and recommendations of the
independent accountant together with management's responses
thereto.
8. Review with management and the independent accountant at the
completion of the annual examination:
a. The Company's audited financial statements and related footnotes.
b. The independent accountant's audit of the financial statements
and their report thereon.
c. Any significant changes required in the independent accountant's
audit plan.
d. Any serious difficulties or disputes with management encountered
during the course of the audit, if any.
e. Other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted accounting
standards.
EXHIBIT A
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9. Consider and review with management:
a. Significant findings during the year and management's responses
thereto.
b. Any difficulties encountered in the course of the audits,
including any restrictions on the scope of the work or access to
required information.
c. Any changes required in the planned scope of the audit plan.
10. Review SEC filings and other public documents containing the Company's
financial statements and consider whether the information contained in
those documents is consistent with the information contained in the
financial statements.
11. Review with management and the independent accountant, if necessary,
all interim financial reports prior to filing with the SEC.
12. Review legal and regulatory matters that may have a material impact on
the financial statements, related company compliance policies and
programs, and any reports or correspondence received from regulators.
13. Meet with the independent accountant and management in separate
executive sessions to discuss any matters that the committee or these
groups believe should be discussed privately with the audit committee.
14. Report committee actions to the board of directors with such
recommendations as the committee may deem appropriate.
15. The audit committee shall have the power to conduct or authorize
investigations into any matters within the committee's scope of
responsibilities. The committee shall be empowered to retain
independent counsel, accountants, or others to assist it in the
conduct of any investigation.
16. The committee shall meet at least four times per year or more
frequently as circumstances require. The committee may ask members of
management or others to attend the meeting and provide pertinent
information as necessary.
17. The committee will perform such other functions as assigned by law,
the Company's bylaws or the board of directors.
The membership of the audit committee shall consist of at least two independent
members of the board of directors who shall serve at the pleasure of the board
of directors. Audit committee members and the committee chairman shall be
designated by the full board of directors.
The duties and responsibilities of a member of the audit committee are in
addition to those duties set out for a member of the board of directors.
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PROXY
- --------------------------------------------------------------------------------
EQUITEX, INC.
7315 East Peakview Avenue
Greenwood Executive Park, Building 8
Englewood, Colorado 80111
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 27, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stock-holder of Equitex, Inc. (the "Company") appoints Henry
Fong or Thomas B. Olson as attorneys and proxies to attend and vote all of the
shares of the Common Stock of the Company standing in the name of the
undersigned at the 2000 Annual Meeting of Stockholders on December 27, 2000, at
9:00 local time, and at any postponements or adjournments that may take place:
1. To elect the following three directors to serve until the next annual
meeting of stockholders and until their successors have been elected
and qualified: Henry Fong, Russell L. Casement and Aaron A. Grunfeld.
For all nominees: _____
Withhold authority to vote for all nominee(s): _____
Withhold authority to vote for the following nominee(s): _____
2. To consider and vote upon the ratification of the appointment of
Gelfond Hochstadt Pangburn, PC, as independent auditor of the Company
for 2000.
FOR ______ AGAINST ______ ABSTAIN ______
3. To transact such other business as may properly come before the
meeting.
THE SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AS SPECIFIED BY
YOU. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES
ON ANY OTHER BUSINESS.
Please mark, date and sign your name exactly as it appears on the label,
and return it in the enclosed envelope as promptly as possible. It is important
to return this Proxy properly signed to exercise your right to vote if you
choose not do not attend the meeting and vote in person. When signing as agent,
partner, attorney, administrator, guardian, trustee or in any other fiduciary or
official capacity, please indicate your title. If stock is held jointly, each
joint owner must sign.
Date:____________________ Signature(s):________________________
Address, if different from that on label: ________________________
Street Address
________________________
City, State and Zip Code
________________________
Number of shares
Please check if you intend to be present at the meeting: ______