RECONDITIONED SYSTEMS, INC.
444 West Fairmont
Tempe, Arizona 85282
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 27, 2001
To the Stockholders of Reconditioned Systems, Inc.:
The 2001 Annual Meeting of the Stockholders of Reconditioned Systems,
Inc., an Arizona corporation (the "Company"), will be
held at Reconditioned Systems, Inc., 444 West Fairmont, Tempe, Arizona
85282, on Friday, July 27, 2001 at 8:00 a.m., Mountain
Standard Time, for the following purposes:
1. To elect three directors to the Board of Directors;
2. To consider and act upon a proposal to ratify the appointment of
Moffitt & Company, PC as the Company's independent public
accountants for the fiscal year ending March 31, 2002; and
3. To transact such other business as may properly come before the
meeting.
Only Stockholders of record at the close of business on June 8, 2001
are entitled to notice of and to vote at the Annual Meeting. Holders of Common
Stock as of such date are entitled to vote on all of the above proposals. Shares
can be voted at the meeting only if the holder is present or represented by
proxy. A list of Stockholders entitled to vote at the Annual Meeting will be
open for inspection at the Annual Meeting and will be open for inspection at the
offices of Reconditioned Systems, Inc., 444 West Fairmont, Tempe, Arizona 85282,
during ordinary business hours for ten days prior to the meeting.
It is important that your shares be represented at this
meeting. To assure your representation at the meeting, please complete, date,
sign and promptly mail the enclosed proxy card in the accompanying envelope,
which requires no postage if mailed in the United States.
By Order of the Board of Directors,
/s/ Dirk D. Anderson
Tempe, Arizona Dirk D. Anderson, Secretary
July 10, 2001
PROXY STATEMENT
OF
RECONDITIONED SYSTEMS, INC.
444 West Fairmont
Tempe, Arizona 85282
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GENERAL INFORMATION
-------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Reconditioned Systems, Inc., an Arizona
corporation (the "Company"), of proxies for use at the 2001 Annual Meeting of
Stockholders to be held on July 27, 2001, at 8:00 a.m., Mountain Standard
Time. The Annual Meeting will be held at Reconditioned Systems, Inc.,
444 West Fairmont, Tempe, Arizona 85282.
This Proxy Statement and the accompanying form of proxy are being first
mailed to Stockholders on or about July 10, 2001. The Stockholder giving the
proxy may revoke it at any time before it is exercised at the meeting by: (i)
delivering to the Secretary of the Company a written instrument of revocation
bearing a date later than the date of the proxy; (ii) duly executing and
delivering to the Secretary a subsequent proxy relating to the same shares; or
(iii) attending the meeting and voting in person (attendance at the meeting will
not in and of itself constitute revocation of a proxy). Any proxy which is not
revoked will be voted in accordance with the recommendations of the Board of
Directors as to such items. The proxy card gives authority to the proxies to
vote shares in their discretion on any other matter properly presented at the
Annual Meeting.
Proxies will be solicited from the Company's Stockholders by mail. The
Company will pay all expenses in connection with the solicitation, including
postage, printing and handling, and the expenses incurred by brokers,
custodians, nominees and fiduciaries in forwarding proxy material to beneficial
owners. It is possible that directors, officers and regular employees of the
Company may make further solicitation personally or by telephone, telegraph or
mail. Directors, officers and regular employees of the Company will receive no
additional compensation for any such further solicitation.
Only holders (the "Stockholders") of the Company's Common Stock, no par
value (the "Common Stock") at the close of business on June 8, 2001 (the "Record
Date"), are entitled to notice of, and to vote at, the Annual Meeting. On the
Record Date, there were 1,170,750 shares of Common Stock outstanding. Each share
of Common Stock is entitled to one vote on each matter to be considered at the
Annual Meeting. A majority of the outstanding shares of Common Stock present in
person or represented by proxy at the Annual Meeting, will constitute a quorum
for the transaction of business at the Annual Meeting.
The affirmative vote of holders of a plurality of the outstanding
shares of Common Stock of the Company entitled to vote and present in person or
by proxy at the Annual Meeting is required for approval of the election of
directors pursuant to Proposal One. The affirmative vote of holders of a
majority of the outstanding shares of Common Stock of the Company entitled to
vote and present in person or by proxy at the Annual Meeting is required for
approval of Proposal Two. Votes that are withheld will have the effect of a
negative vote. Abstentions may be specified on all proposals except Proposal One
relating to the election of directors. Abstentions will have the effect of a
negative vote on a proposal. Broker non-votes are not counted for purposes of
determining whether a quorum is present or whether a proposal has been approved.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee. Stockholders voting on the election of directors may
cumulate their votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
Stockholder's shares are entitled, or may distribute their votes on the same
principle among as many candidates as being solicited. In order to cumulate
votes, at least one Stockholder must announce, prior to the casting of votes for
the election of directors, that he or she intends to cumulate votes. Proxies
will be tabulated by the Company with the assistance of the Company's transfer
agent. The Company will, in advance of the Annual Meeting, appoint one or more
Inspectors of Election to count all votes and ballots at the Annual Meeting and
make a written report thereof.
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table sets forth certain information, as of June 8, 2001,
with respect to the number of shares of the Company's Common Stock beneficially
owned by individual directors, by individual executive officers, by all
directors and executive officers of the Company as a group and by persons known
by the Company to own more than 5% of the Company's Common Stock.
Amount
And Nature Percent
Name and Address of of Beneficial of
Beneficial Owner Owner Total **
--------------- ------ ---------
Scott W. Ryan 339,829* 24.63%
111 Presidential Blvd
Suite 246
Bala Cynwyd, PA 19004
Granite Capital 331,117 24.00%
25th Floor
New York, NY 10022
Dirk Anderson 155,250* 11.25%
444 West Fairmont
Tempe, Arizona 85282
Frank Hart 68,950 5.00%
1085 Riverside Trace N.W.
Atlanta, GA 30328
All directors and officers as 564,029** 40.88%
a group (four persons)
--------------------
* Includes options to purchase 104,500 shares that are presently exercisable.
**Includes options to purchase 209,000 shares that are presently exercisable.
PROPOSAL ONE
------------
ELECTION OF DIRECTORS
---------------------
Nominees
- --------
The Board of Directors currently consists of three members holding
seats to serve as members until the next Annual Meeting of Stockholders or until
their respective successors are duly elected and qualified, unless they earlier
resign or are removed from office. The Company's Articles of Incorporation
presently provide for a Board of Directors of not less than three (3) nor more
than nine (9) in number, with the exact number to be fixed as provided by the
Company's Bylaws. The term of office of all current directors will expire at the
2001 Annual Meeting of Stockholders.
On May 12, 2001, the Company's Board of Directors nominated Messrs.
Scott W. Ryan, Dirk D. Anderson, and Frank Hart for election to the Board of
Directors. Messrs. Scott W. Ryan, Dirk D. Anderson and Frank Hart are currently
serving as directors. None of the nominees has a family relation to any of the
other nominees. A brief description of the business experience of each nominee
is set forth below in the table under the heading "Directors and Executive
Officers." Unless otherwise instructed, the persons named in the accompanying
proxy will vote FOR the election of such nominees. All of the nominees have
consented to being named herein and have indicated their intention to serve if
elected. If for any reason any nominee should become unable to serve as a
director, the accompanying proxy may be voted for the election of a substitute
nominee designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
-------------------------------------------------------------------
OF THE NOMINEES.
----------------
Directors and Executive Officers
- --------------------------------
The following table sets forth certain information with respect to the directors
and executive officers of the Company as of July 10, 2001.
Name Age Position, Tenure and Experience
- ---- --- -------------------------------
Scott W. Ryan 55 Mr. Ryan has been a Director since December 1995
and served as the Company's President and Chief
Executive Officer from November 1999 to August
2000. Mr. Ryan is also the Chief Operating
Officer of S.W. Ryan & Company, Inc. which is
a securities brokerage and asset management
firm located in Bala Cynwyd, Pennsylvania that
he founded in 1988. Previously, Mr.Ryan was
with other securities brokerage firms
including Merrill Lynch and Goldman,
Sachs & Co. Mr. Ryan was also a Board Member and
Vice Chairman of NASD District #9.
Dirk D. Anderson 37 Mr. Anderson has been a Director since December
1995 and the Company's President and Chief
Executive Officer since August 2000 He served as
the Company's Chief Operating Officer from
November 1999 to August 2000 and as the Chief
Financial Officer from August 1995 through
October 1999 and prior to that was employed as
the Company's Controller for approximately two
years. Previously, he served as Audit Manager at
Semple & Cooper, LLP, where his career spanned
seven years.
Frank Hart 54 Mr. Hart has been a Director since August 2000
and has been President of Profit Concepts, Ltd.
since 1978. Profit Concepts, Ltd. has been the
Manager of a private investment fund, High
Capital Funding, LLC and its predecessor, since
1983. Prior to 1983, Profit Concepts was in the
business of rendering management and financial
consulting services.
Board Meetings and Committees of the Board of Directors
- -------------------------------------------------------
During the fiscal year ended March 31, 2001, the Board of Directors met
seven times. The Board of Directors has established an Audit Committee and a
Compensation Committee. The Board does not have a Nominating Committee, and the
entire Board is responsible for recommending nominees to serve on the Board.
During the fiscal year ended March 31, 2001, the Board of Directors
appointed Scott W. Ryan and Frank Hart to the Audit Committee and adopted an
Audit Committee Charter. A copy of the Audit Committee Charter is attached as
Appendix A. The functions of the Audit Committee are to: receive reports with
respect to loss contingencies, which may be legally required to be publicly
disclosed through financial statement notation; annually review and examine
those matters that relate to the financial audit of the Company; recommend to
the Company's Board of Directors the selection, retention and termination of the
Company's independent accountants; review the professional services, proposed
fees and independence of such accountants; review and examine those matters that
relate to the interim financial statements of the Company; and provide for the
periodic review and examination of management performance in selected aspects of
corporate responsibility. The Audit Committee met once during the fiscal year
ended March 31, 2001.
During the fiscal year ended March 31, 2001, the Board of Directors
appointed Scott W. Ryan and Frank Hart to the Compensation Committee. The
functions of the Compensation Committee are to review annually the performance
of the Chief Executive Officer and President and of the other principal officers
whose compensation is subject to the Committee's review and report thereon to
the Company's Board of Directors. In addition, the Compensation Committee
reviews the compensation of outside directors for their services on the Board of
Directors and reports thereon to the Board of Directors. The Compensation
Committee met once during the fiscal year ended March 31, 2001.
During the fiscal year ended March 31, 2001, each incumbent director
attended 75% or more of the aggregate of (i) the total number of meetings of the
Board of Directors and (ii) the total number of meetings held by all committees
on which such director served.
Compensation of Directors
- -------------------------
The Company provides for quarterly compensation to its non-employee
directors of $1,250. In addition, the Company reimburses them for reasonable
expenses incurred in attending meetings.
Executive Compensation
- ----------------------
The following table sets forth the compensation paid or accrued to the
current Chief Executive Officer (Named Executive Officer) of the Company.
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------
Long-Term
Compensation
Awards
Annual Compensation
- ------------------------------------------------------------------------------------------------------
Securities
Name and Principal Underlying All Other
Position Year Ended Salary ($) Bonus ($) Options (#) Compensation
- ----------------------- -------------- ------------ ------------ -------------- ------------
Scott W. Ryan March 31, 2001 $ 0 $ 0 2,500 $5,000*
Chairman & Former March 31, 2000 $ 0 $ 0 2,000 $5,000*
CEO March 31, 1999 $ 0 $ 0 0 $5,000*
Dirk D. Anderson March 31, 2001 $ 100,000 $ 60,795 2,500 $ 0
CEO March 31, 2000 $ 100,000 $ 32,856 2,000 $ 0
March 31, 1999 $ 75,000 $ 58,036 0 $ 0
<FN>
* Represents standard non-employee director's fee.
</FN>
Option Grants
- -------------
The following table sets forth the options and SARs Granted to the
current and former Chief Executive Officers (Named Executive Officer) of the
Company during the last fiscal year.
Option/SAR Grants in Last Fiscal Year
- --------------------------------------------------------------------------------
Individual Grants
- --------------------------------------------------------------------------------
% of Total
Number of Options/SARs
Securities Granted to Exercise
Underlying Employees or
Options/SARs in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date
- ------------------- ---------------- ----------------- ------------- -----------
Scott Ryan 2,500 16.54% $3.00 4/1/2011
Dirk Anderson 2,500 16.54% $3.00 4/1/2011
Aggregated Option Exercises and Fiscal Year-End Option Values
- -------------------------------------------------------------
The following table sets forth information with respect to the number
of unexercised options held by the Named Executive Officers on March 31, 2001.
No options were exercised by the Named Executive Officers during the fiscal year
ended March 31, 2001.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
------------------------------------------------------------------------
- ------------------------------------- ----------------------------------- -----------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised Options at FY-End (#) In-the Money
Options at FY-End ($)
- ------------------------------------- ----------------------------------- -----------------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------- ------------------------------- -----------------------------------
Scott W. Ryan 104,500/0 $200,740/$0
Dirk D. Anderson 104,500/0 $200,740/$0
Employment Agreements and Termination of Employment Arrangements
- ----------------------------------------------------------------
On August 10, 1996, the Company entered into an employment agreement
with Dirk Anderson pursuant to which he serves as the Company's Chief Executive
Officer. The agreement is automatically extended for successive one year periods
unless either the Board of Directors or Mr. Anderson gives written notice to the
other at least ninety days prior to the end of the initial or any renewal term
of its or his intention not to renew. The agreement automatically renewed on
August 10, 2000, and since no written notice was given by the Company ninety
days prior to August 10, 2001, the agreement will again be automatically
extended. Under the agreement, Mr. Anderson receives a base annual salary of
$75,000. Increases to Mr. Anderson's base salary and bonuses are at the
discretion of the Company's Board of Directors. Mr. Anderson is entitled to
participate in all retirement and employee benefit plans that the Company may
adopt for the benefit of its senior executives. On March 24, 1999, the Board of
Directors and Mr. Anderson agreed to change the base annual salary of Mr.
Anderson to $100,000, effective April 1, 1999. The agreement also entitles Mr.
Anderson to receive the options described above under the heading "Aggregated
Option Exercises and Fiscal Year-End Option Values."
Under the agreement, if Mr. Anderson's employment is terminated by
reason of death, Disability or Retirement, upon expiration of the term of the
agreement, by the Company for Cause or by Mr. Anderson without Good Reason (in
each case as such terms are defined in the agreement), the Company shall: (i)
pay Mr. Anderson any base salary which has accrued but has not been paid as of
the termination date (the "Accrued Base Salary"); (ii) reimburse Mr. Anderson
for expenses incurred by him prior to termination which are subject to
reimbursement pursuant to applicable Company policies (the "Accrued Reimbursable
Expenses"); (iii) provide to Mr. Anderson any accrued and vested benefits
required to be provided by the terms of any Company-sponsored benefit plans (the
"Accrued Benefits"); (iv) pay Mr. Anderson any discretionary bonus with respect
to a prior fiscal year which has accrued and been earned but has not been paid
(the "Accrued Bonus"); (v) permit Mr. Anderson to exercise all vested,
unexercised stock options outstanding at the termination date; and (vi) to the
extent permitted by the terms of the policies then in effect, give Mr. Anderson
a right of first refusal to cause the transfer of the ownership of all key-man
life insurance policies maintained by the Company on Mr. Anderson to Mr.
Anderson at his expense (the "Right of First Refusal"). If Mr. Anderson's
employment is terminated by the Company without Cause or by Mr. Anderson for
Good Reason, the Company shall: (i) pay Mr. Anderson the Accrued Base Salary;
(ii) pay Mr. Anderson the Accrued Reimbursable Expenses; (iii) pay Mr. Anderson
the Accrued Benefits; (iv) pay Mr. Anderson the Accrued Bonus; (v) pay Mr.
Anderson the base salary, as and when it would have been paid had the
termination not occurred, for a period of six months following the termination
date; (vi) maintain in effect, until the first to occur of (a) his attainment of
comparable benefits upon alternative employment or (b) six months following the
termination date, the employee benefits in which he was entitled to participate
immediately prior to such termination; (vii) permit Mr. Anderson to exercise all
vested, unexercised stock options in accordance with the terms of the plans and
agreements pursuant to which they were issued; and (viii) give Mr. Anderson the
Right of First Refusal.
On August 19, 1996 the Company amended the employment agreement to
include compensation pursuant to a change in control. Under the amendment, if
Mr. Anderson's employment is terminated by the Company subsequent to a Change of
Control by the Company either by the new controlling party or by the executive
for Good Reason, Mr. Anderson will receive a two-year consulting agreement at
$100,000 per year in addition to the severance pay detailed above.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") initial report of ownership and
reports of changes in ownership of the Company's equity securities. Based solely
upon the copies of such reports furnished to the Company and certain written
representations, the Company believes that all Section 16(a) filing requirement
applicable to the Company's officers, directors and greater than 10%
stockholders were timely satisfied during the fiscal year ended March 31, 2001.
PROPOSAL TWO
------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------------------------------
The Company's Board of Directors has selected, and is submitting to the
Stockholders for ratification, the appointment of Moffitt & Company, PC to serve
as independent public accountants to audit the financial statements of the
Company for the fiscal year ending March 31, 2002 and to perform other
accounting services as may be requested by the Company. Moffitt & Company, PC
has acted as independent public accountants for the Company since its
appointment effective June 22, 2001.
The Company does not expect that representatives of Moffitt & Company,
PC will be present at the 2001 Annual Meeting. If present, however, they will
have the opportunity to make a statement and will be available to respond to
appropriate questions.
Although it is not required to do so, the Board of Directors has
submitted the selection of Moffitt & Company, PC to the Stockholders for
ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL TWO.
------------------------------------------------------------
Changes in and Disagreements With Accountants on Accounting and Financial
- -------------------------------------------------------------------------
Disclosure
- ----------
On June 8, 2001, the Company's former principal independent accountant,
Semple & Cooper, LLP resigned. Semple & Cooper's reports on the Company's
financial statements for the years ended March 31, 1999 and 2000 did not contain
an adverse opinion or disclaimer of opinion, and were not modified as to
uncertainty, audit scope, or accounting principles. There were no disagreements
with Semple & Cooper on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. On June 29th,
2001, Semple & Cooper notified the Company they were withdrawing their opinions
for the audits for the fiscal years ended March 31, 1999 and 2000. (See the
Company's reports filed on Form 8-K dated June 15, 2001 and June 29, 2001.) On
June 22, 2001, the Registrant appointed Moffitt & Company, P.C. as its new
principal independent accountant to audit the Company's financial statements for
the year ended March 31, 2001. The Company has authorized Semple & Cooper to
respond fully to the inquiries, if any, of the new accountant.
Fees to Independent Public Accountants
- --------------------------------------
Audit Fees
- ----------
The aggregate amount of fees billed or expected to be billed to the
Company by Moffitt & Company, PC for professional services rendered in
connection with the audit of the Company's annual financial statements for the
fiscal year ended March 31, 2001 is currently expected to approximate $17,000.
The aggregate amount of fees billed or expected to be billed to the Company by
Semple & Cooper, LLP, the Company's former principle accountant, for the review
of the Company's interim financial statements including the Company's quarterly
reports on Form 10-QSB for the fiscal year ended March 31, 2001, is currently
expected to approximate $4,500.
Financial Information System Design and Implementation Fees
- -----------------------------------------------------------
There were no professional services rendered to the Company by Moffitt
& Company, PC or Semple & Cooper, LLP for the design and implementation of
financial information systems for the fiscal year ended March 31, 2001.
All Other Fees
- --------------
The aggregate amount of fees billed to the Company by Semple & Cooper,
LLP for all other non-audit services rendered to the Company for the fiscal year
ended March 31, 2001 was approximately $1,700.
Audit Committee Report
- ----------------------
Management is responsible for the Company's internal controls,
financial reporting process and compliance with laws and regulations and ethical
business standards. The independent auditor is responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and issuing a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes on behalf of the Board of Directors.
In this context, the Audit Committee has reviewed and discussed the
audited financial statements with management and the independent auditors. The
Audit Committee has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committee). In addition, the Audit Committee has received from the
independent auditors the written disclosures required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and
discussed with them their independence from the Company and its management.
Moreover, the Audit Committee has considered whether the independent auditor's
provision of information technology services and other non-audit services to the
Company is compatible with maintaining the auditor's independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 2001, for filing with the Securities and Exchange
Commission. By recommending to the Board of Directors that the audited financial
statements be so included, the Audit Committee is not opining on the accuracy,
completeness or presentation of the information contained in the audited
financial statements.
Submitted by the Audit Committee of the Board of Directors
Scott W. Ryan, Chairman
Frank E. Hart
OTHER MATTERS
-------------
The Company's Board of Directors is not aware of any other business to
be considered or acted upon at the Annual Meeting of the Stockholders other than
those described above. If other business requiring a vote of the Stockholders is
properly presented at the meeting, proxies will be voted in accordance with the
judgement on such matters of the person or persons acting as proxies. If any
matter not appropriate for action at the Annual Meeting is presented, the holder
of the proxies will vote against consideration thereof or action thereon.
STOCKHOLDER PROPOSALS
---------------------
The Company welcomes comments or suggestions from its Stockholders. If
a Stockholder desires to have a proposal formally considered at the 2002 Annual
Meeting of Stockholders, and evaluated by the Board for possible inclusion in
the Proxy Statement for that meeting, the proposal (which must comply with the
requirements of Rule 14a-8 promulgated under the Exchange Act) must be received
in writing by the Secretary of the Company at the address set forth on the first
page hereof on or before March 16, 2002. If a Stockholder desires to have a
proposal formally considered at such meeting, but outside the process of Rule
14a-8, the proposal must be received in writing by the Secretary of the Company
at the address set forth on the first page hereof on or before May 25, 2002.
ANNUAL REPORT
-------------
The Company' Annual Report to Stockholders and the Annual Report on
Form 10-KSB, with audited financial statements, accompanies this Proxy Statement
and was mailed this date to all Stockholders of record as of the Record Date.
The Company will furnish to any Stockholder submitting a request a copy of any
exhibit to the Annual Report on Form 10-KSB. The fee for furnishing a copy of
any exhibit will be 25 cents per page plus $3.00 for postage and handling.
Please direct any and all such requests to Investor Relations, 444 West
Fairmont, Tempe, Arizona 85282.