SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DTVN HOLDINGS, INC.
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DTVN HOLDINGS, INC.
635 West Campbell Road, Suite 130
Richardson, Texas 75080
July 3, 2001
Dear DTVN Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
DTVN Holdings, Inc. to be held at 10:00 a.m. local time, on July 25, 2001, at
Richardson Civic Center, 411 West Arapaho Road, Richardson, Texas 75083. I hope
that you will be able to participate in the meeting either in person or by
proxy.
Stockholders will be asked to elect directors, to consider and act upon a
proposal to amend the Company's 2000 Stock Option and Restricted Stock Plan, and
to ratify the appointment of KPMG LLP as the Company's independent accountants
for the fiscal year ending December 31, 2001.
The Board of Directors recommends that you vote "FOR" the election of each
nominee of the Board of Directors as directors of the Company, the approval of
the amendment of the Company's 2000 Stock Option and Restricted Stock Plan, and
the ratification of KPMG LLP as the Company's independent accountants for the
fiscal year ending December 31, 2001.
Whether or not you plan to attend the annual meeting, it is important that
your shares be represented and voted. Therefore, I urge you to sign and date
the enclosed proxy card and promptly return it in the enclosed envelope so that
your shares will be represented at the annual meeting. Please refer to the
enclosed proxy card for detailed instructions. If you so desire, you may
withdraw your proxy and vote in person at the annual meeting.
We look forward to seeing those of you who will be able to attend the
annual meeting on July 25, 2001. Thank you for your continued support.
Sincerely,
/s/ Hugh D. Simpson
---------------------------------
Hugh D. Simpson
President and Chief Executive Officer
DTVN HOLDINGS, INC.
635 West Campbell Road, Suite 130
Richardson, Texas 75080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of DTVN Holdings, Inc.:
The Annual Meeting of Stockholders of DTVN Holdings, Inc., a Delaware
corporation, will be held at Richardson Civic Center, 411 West Arapaho Road,
Richardson, Texas 75083, at 10:00 a.m. local time on July 25, 2001, for the
following purposes:
1. To elect directors.
2. To approve an amendment to the 2000 Stock Option and Restricted Stock
Plan to increase the number of shares authorized for issuance under
the plan.
3. To ratify the appointment of KPMG LLP as DTVN's independent
accountants for the fiscal year ending December 31, 2001.
4. To transact such other business as may properly come before the annual
meeting or any adjournments or postponements thereof.
Only holders of record of DTVN's common stock at the close of business on
June 29, 2001 are entitled to notice of and to vote at the annual meeting or any
adjournments or postponements thereof. All stockholders are cordially invited
to attend the annual meeting.
By Order of the Board of Directors
/s/ James D. Nickell
------------------------------------
James D. Nickell
Secretary
Richardson, Texas
July 3, 2001
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
SIGN, DATE AND COMPLETE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED
IN THE UNITED STATES. ANY STOCKHOLDER ATTENDING THE ANNUAL MEETING MAY VOTE IN
PERSON EVEN IF THAT STOCKHOLDER HAS RETURNED A PROXY.
DTVN HOLDINGS, INC.
635 WEST CAMPBELL ROAD, SUITE 130
RICHARDSON, TEXAS 75080
_________________
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 25, 2001
________________
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited on behalf of the Board of Directors of DTVN
Holdings, Inc., a Delaware corporation, with its principal executive offices at
635 West Campbell Road, Suite 130, Richardson, Texas 75080, for use at DTVN's
Annual Meeting of Stockholders to be held at 10:00 a.m. on July 25, 2001 at
Richardson Civic Center, 411 West Arapaho Road, Richardson, Texas 75083.
This proxy statement contains important information regarding DTVN's Annual
Meeting of Stockholders, the proposals on which you are being asked to vote,
information you may find useful in determining how to vote, and voting
procedures.
A number of abbreviations are used in this proxy statement. We refer to
DTVN Holdings, Inc. as "the Company" or "DTVN." The Company's Annual Meeting of
Stockholders is simply referred to as "the annual meeting." The Company's board
of directors is referred to as the "Board of Directors" or the "Board."
TABLE OF CONTENTS
Information Concerning Solicitation and Voting................................1
Table of Contents.............................................................2
Proposal 1 Election of Directors.............................................6
Executive Compensation.......................................................10
Security Ownership of Certain Beneficial Owners and Management...............14
Proposal 2 Approval of Amendment to 2000 Stock Option and
Restricted Stock Plan............................................16
Proposal 3 Ratification of Selection of KPMG LLP as the Company's
Independent Accountants..........................................21
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................21
Compliance with Section 16(a) of the Exchange Act............................22
Certain Relationships and Related Transactions...............................22
Annual Report on Form 10-KSB.................................................23
Other Matters................................................................23
Proposals of Stockholders for 2002 Annual Meeting............................24
Exhibit A Charter of the Audit Committee of the Board of Directors........A-1
Exhibit B Amendment to 2000 Stock Option and Restricted Stock Plan........B-1
2
RECORD DATE AND OUTSTANDING SHARES
The Board of Directors is sending this proxy statement on or about July 3,
2001 to all holders of record of the Company's common stock as of the record
date, June 29, 2001. Holders of the Company's common stock at the close of
business on June 29, 2001 are entitled to attend and vote at the annual meeting.
On the record date, there were 56,715,726 shares of the Company's
common stock issued and outstanding.
VOTING PROCEDURES
As a stockholder of the Company, you have a right to vote on certain
business matters affecting the Company. The proposals that will be presented at
the annual meeting and upon which you are being asked to vote are discussed
below. Each share of the Company's common stock you own entitles you to one
vote. You may vote by mail or in person at the annual meeting.
METHODS OF VOTING
Voting by Mail. By signing and returning the proxy card in the enclosed
prepaid and addressed envelope, you are enabling the individual named on the
proxy card (known as a "proxy") to vote your shares at the annual meeting in the
manner you indicate. We encourage you to sign and return the proxy card even if
you plan to attend the annual meeting. In this way, your shares will be voted
even if you are unable to attend the annual meeting.
Your shares will be voted in accordance with the instructions you indicate
on the proxy card. If you return the proxy card but do not indicate your voting
instructions, your shares will be voted as follows:
. FOR the election of the nominated slate of directors appearing on
page 6;
. FOR the approval of increasing the number of shares of common stock
authorized for issuance under the 2000 Stock Option and Restricted Stock Plan as
set forth on page 16; and
. FOR the ratification of the appointment of KPMG LLP as the Company's
independent accountants.
If you received more than one proxy card, it is an indication that your
shares are held in multiple accounts. Please sign and return all proxy cards to
ensure that all of your shares are voted.
Voting in Person at the Meeting. If you plan to attend the annual meeting
and vote in person, we will provide you with a ballot at the annual meeting. If
your shares are registered directly in your name, you are considered the
stockholder of record and you have the right to vote in person at the annual
meeting.
If your shares are held in the name of your broker or other nominee, you
are considered the beneficial owner of shares held in street name. If you wish
to vote at the annual meeting, you
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will need to bring with you to the annual meeting a legal proxy from your broker
or other nominee authorizing you to vote such shares.
REVOKING YOUR PROXY
You may revoke your proxy at any time before it is voted at the annual
meeting. In order to do this, you may either:
. sign and deliver to the Company another proxy dated a later date;
. provide written notice of the revocation to the Company's Secretary; or
. attend the annual meeting and vote in person.
QUORUM REQUIREMENT
A quorum, which is a majority of the voting power of the outstanding shares
entitled to vote as of the record date, June 29, 2001, must be present in order
to hold the annual meeting and to conduct business. Shares are counted as being
present at the annual meeting if you appear in person at the annual meeting or
if you vote your shares by submitting a properly executed proxy card.
VOTES REQUIRED FOR EACH PROPOSAL
The vote required and method of calculation for the proposals to be
considered at the annual meeting are as follows:
Proposal 1--Election of directors. Directors are elected by the
affirmative vote of a plurality of the votes represented by the shares of common
stock present at the annual meeting, in person or by proxy. This means that the
director candidates receiving the most votes will be elected to fill the seats
on the Board.
Proposal 2--Amendment to 2000 Stock Option and Restricted Stock Plan to
increase the number of authorized shares of the Company's common stock issuable
under the plan. Approval of this amendment requires the affirmative vote of a
majority of the voting power of the shares of common stock present at the annual
meeting, in person or by proxy.
Proposal 3--Ratification of the selection of KPMG LLP as the Company's
independent accountants. Approval of this proposal requires the affirmative
vote of a majority of the voting power of the shares of common stock present at
the annual meeting, in person or by proxy.
You may vote "for," "against," or "abstain" from the proposals to (a) elect
directors, (b) approve an amendment to the 2000 Stock Option and Restricted
Stock Plan, or (c) ratify selection of KPMG LLP as the Company's independent
accountants.
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ABSTENTIONS AND BROKER NON-VOTES
If you return a proxy card that indicates an abstention from voting in all
or some matters, the shares represented will be counted as present for the
purpose of determining a quorum. If you abstain from voting on the proposal to
elect directors, your abstention will not have any effect on the election of
directors. However, if you abstain from voting on the proposal to (a) approve
the amendment to the 2000 Stock Option and Restricted Stock Plan or (b) ratify
the selection of the Company's independent accountants, your abstention has the
same effect as a vote against the proposal.
Brokers may not have the discretionary authority to vote shares of the
Company's common stock held in "street name" if they have not received
instructions from the beneficial owners. Broker non-votes will not be counted
as votes cast or shares voting on Proposal 1 - election of directors - and will
have no effect on the outcome of Proposal 1. Broker non-votes will have the
same effect as votes cast against Proposals 2 and 3 - approving the amendment to
the 2000 Stock Option and Restricted Stock Plan and ratifying the selection of
the Company's independent accountants.
VOTING CONFIDENTIALITY
Proxies, ballots and voting tabulations are handled on a confidential basis
to protect your voting privacy. Information will not be disclosed except as
required by law.
VOTING RESULTS
Final voting results will be announced at the annual meeting and will be
published in the Company's Form 10-QSB for the quarter ended September 30, 2001.
We file this quarterly report with the Securities and Exchange Commission.
After the report is filed, you may obtain a copy by visiting the SEC's website
at www.sec.gov.
PROXY SOLICITATION COSTS
Solicitations of proxies may be made by personal interview, mail, telephone
or telegram by directors, officers and regular employees of the Company. The
Company may also request banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the Company's common stock held of record by such persons
and may reimburse such forwarding expenses. All costs of preparing, printing,
assembling and mailing the form of proxy and the material used in the
solicitation thereof and all clerical and other expenses of solicitation will be
borne by the Company.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Bylaws authorize the Board or the stockholders of the Company
to fix the number of directors from time to time. The number of directors of
the Board is currently set at eight, but concurrently with the election of
directors at the annual meeting, the Board is decreasing the number of directors
comprising the Board to six.
There are six nominees for the six available Board positions. Each
director elected will hold office until the next annual meeting of stockholders
and until his or her successor has been elected and qualified, or until such
director's earlier death, resignation or removal. Except for James S. Holden,
who is currently the Company's Chief Operating Officer, each nominee listed
below is currently a director of the Company. Two of the current directors,
Robert E. Conn and Robert A. Veschi, are not seeking re-election and will not
continue to serve on the Board after the election of the directors of the
Company at the annual meeting.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the seven nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as the Board may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
Set forth below are the names and certain information with respect to each
nominee for director and each current director of the Company.
NAME AGE POSITION SERVED AS
- ----------------- --- ------------------------------------- DIRECTOR SINCE
--------------
Hugh D. Simpson* 42 President, Chief Executive Officer, 2000
and Chairman of the Board
Philip N. O'Reilly* 46 Chief Financial Officer, Director 2001
James S. Holden* 47 Chief Operating Officer N/A
Amar Budarapu* 34 Director 2000
Robert E. Conn 74 Director 2000
David G. Olson* 48 Director 2000
G. Edward Powell* 64 Director 2000
Robert A. Veschi 39 Director 2000
______________
* Nominee for director
Mr. Simpson founded DataVoN Inc., a Texas corporation ("DataVon"), in 1997
and has served as its Chief Executive Officer, President and majority
shareholder since June 2000. On June 9, 2000, DataVon became a wholly-owned
subsidiary of the Company pursuant to the merger of DVN Acquisition Corporation,
a wholly-owned subsidiary of the Company, with and
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into DataVon, with DataVon continuing as the surviving corporation. Upon
consummation of the merger, Mr. Simpson assumed the role of Chief Executive
Officer, President, and a director of the Company. In 1991, Mr. Simpson founded
Travel Com 800 Inc., a communications company serving military personnel for
their calling card and wireless needs, where he worked until 1996 when
Mr. Simpson sold the communications segment to one equity partner, and the
wireless communications segment to another equity partner. Mr. Simpson's United
States Marine Corp Reserve Unit was activated for duty in Operation Desert
Shield and Storm in 1990, where he served until July 1991. Mr. Simpson was
promoted to the rank of Lieutenant Colonel before joining the inactive roles in
June 1999. From 1988 to 1990, Mr. Simpson was employed by International
Telecharge, Inc. as a National Product Manager.
Mr. O'Reilly has served as director of the Company since April 2001 and as
Chief Financial Officer of the Company since May 2001. Mr. O'Reilly is also
President of Video Intelligence, Inc., an operating subsidiary of the Company
since April 2001. Mr. O'Reilly is an attorney with practice experience in
antitrust, mergers & acquisitions and corporate matters and received his MBA
(magna cum laude) from Penn State University. After practicing for several
years with Duane, Morris & Heckscher in Philadelphia, Mr. O'Reilly became
General Counsel and Director of Acquisitions for The Midlantic Group, Inc. Over
a period of twelve years he directed the successful acquisition, turn-around and
sale of several multi-million dollars businesses. In 1990 he purchased Multi-
Flex Spring Company, where he served as Chief Executive Officer until its
acquisition by Chicago Spring Company in 1995. He then acquired Syncro Motion
Corporation, which was sold to ITW Corporation in 1998. Mr. O'Reilly then
accepted an appointment as a Professor at Penn State University, specializing in
entrepreneurship. He returned to the business world as Executive Vice President
of Logicstream, Inc., where his responsibilities included raising capital,
business development and strategic operations.
Mr. Holden has served as Chief Operating Officer of the Company since
September 2000. Prior to joining the Company, Mr. Holden was the Director of
Access Planning for CapRock Communications Corp., where he was responsible for
all domestic and international off-net facilities purchases, negotiating
interconnects and rates, forecasting overbuilds and monitoring entrance facility
usage. Mr. Holden was with CapRock Communications Corp. from October 1999 to
September 2000. From August 1979 to January 1999, Mr. Holden was with MCI
Telecommunications, serving in a broad range of management positions, concluding
his services as Senior Manager, Financial Operations, responsible for the day-
to-day business relationship between MCI WorldCom and GTE.
Mr. Budarapu has served as a director of the Company since October 2000.
Since August 2000, Mr. Budarapu has served as a Director, General Counsel and
Senior Vice President of CKX, Inc., a talent management company. From July 1993
to July 2000, Mr. Budarapu practiced law with Baker & McKenzie as a Partner and
member of the firm's Securities, Mergers and Acquisitions and Global Securities
Practice Groups. He also served as Managing Partner of the Houston office and
as the Chairman of the Securities Practice Group. The primary areas of
Mr. Budarapu's legal practice are securities and merger and acquisition law.
Mr. Conn has served as a director of the Company since October 2000.
Mr. Conn retired as Senior Counsel, specializing in telecommunications, mergers,
and acquisitions, from the
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Washington, D.C. law firm of Shaw Pittman. Prior to joining this law firm,
Mr. Conn served as Vice President, Regulatory Law, with MCI Communications from
1982 to 1984. From 1963 to 1982, Mr. Conn served as Chief Legal Officer of
Western Union International, Inc. ("WUI") and also as its Executive Vice
President in 1982, before its acquisition in 1982 by MCI Communications. At
varying periods between 1982 and 1988, Mr. Conn served on the Boards of
Directors of: WUI; WorldCom, Inc.; Houston International Teleport, Inc.;
Satellite Transmission & Reception Specialists, Inc.; and Pointe Communications
Corporation, formerly Charter Communications, Inc. and now Telescape
International, Inc.
Mr. Olson has served as a director of the Company since October 2000.
Mr. Olson retired from Charter Communications International, Inc. (predecessor
of Pointe Communications Corporation) in 1998, where he served as a director and
held the positions of Chairman, President, Chief Executive Officer and Chief
Operating Officer during various points in his tenure with the Company,
beginning in 1994. Charter Communications International, Inc., now Telescape
Communications, is a provider of local, long distance, Internet, and other
communications services primarily in the United States to Central and South
America. From 1991 to 1992, Mr. Olson served as Chief Executive Officer of
WorldCom, Inc., which was acquired by IDB Communications Group, Inc. in 1992.
Mr. Olson served as a consultant to IDB from 1993 to 1994. Mr. Olson was also
the founder, Chairman, Chief Executive Officer, and President of Satellite
Transmission and Reception Specialists, and the founder, Chairman, Chief
Executive Officer, and Chief Operating Officer of Houston International
Teleport, Inc., global providers of voice, video and data services.
Mr. Powell has served as a director of the Company since December 2000.
Mr. Powell is presently an investor, officer and/or director with several
emerging and middle market businesses, primarily in the technology sector.
Previously, Mr. Powell had a 35-year tenure with Price Waterhouse & Co., now
PricewaterhouseCoopers, LLP, where he served a wide variety of publicly and
privately owned business enterprises in a broad range of industries. In 1982,
Mr. Powell was appointed Managing Partner of the Houston office and retained
that position until his retirement in 1994.
Mr. Veschi has served as a director of the Company since October 2000.
Mr. Veschi is currently the President, Chief Executive Officer, and director of
zeroplus.com, Inc., a global provider of Internet telephony services, where he
has served in such capacity since February 2000. Mr. Veschi founded e-Net, Inc.
(the predecessor of zeroplus.com), a provider of telecommunications products and
patented voice over internet protocol solutions, in 1995. From 1990 to 1994,
Mr. Veschi was Group President of I-Net, Inc.'s Advanced Technology division,
where he was responsible for the design, construction, operation, and
maintenance of software and hardware management systems for their
telecommunications network.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" EACH OF
THE FOREGOING NOMINEES.
8
BOARD COMMITTEES
In January 2001, the Board of Directors designated two standing committees,
an audit committee and a compensation committee. The Company does not have a
nominating committee.
The audit committee of the Board of Directors, consisting of Messrs.
Powell, Olson, and Conn, reviews the Company's internal controls and recommends
to the Board of Directors the engagement of the Company's independent auditors,
reviewing with such accountants a plan for and the results of their examination
of the Company's financial statements and determining the independence of such
accountants. Concurrently with the election of directors at the annual meeting,
Mr. Budarapu will replace Mr. Conn as a member of the audit committee. The
Board of Directors has adopted a written charter for the audit committee setting
out the functions it is to perform. A copy of the written charter is attached
to this proxy statement as Exhibit A.
The compensation committee of the Board of Directors, consisting of Messrs.
Simpson, Powell, and Budarapu, makes decisions concerning the salaries and
incentive compensation for the employees and consultants of the Company.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended December 31, 2000, there were two meetings of
the Board of Directors. No incumbent director attended fewer than 75% of the
total number of meetings of the Board of Directors during the fiscal year ended
December 31, 2000 during the time which he or she was a director. In addition,
the Board of Directors acted at various times by unanimous written consent
pursuant to Delaware law.
The Company did not have standing audit, nominating or compensation
committees of its Board of Directors during the fiscal year ended December 31,
2000, and therefore, there were no committee meetings held during that time.
DIRECTOR COMPENSATION
Directors who are also employees of the Company receive no compensation for
serving on the Board of Directors. With respect to Directors who are not
employees of the Company, the Company reimburses such non-employee directors for
all travel and other expenses incurred in connection with attending Board of
Directors and committee meetings. Effective December 21, 2000, each non-
employee director of the Company shall receive on such date or on the date of
his or her appointment to the Board of Directors, whichever occurs later, a one-
time grant of stock options to purchase 100,000 shares of common stock under the
Company's 2000 Stock Option and Restricted Stock Plan. Unless otherwise
provided in the applicable stock option agreement, the options will become
exercisable as to one-twelfth of the shares of common stock subject to the
options at the end of each full calendar quarter following the grant of the
options, beginning with the end of the first calendar year following the date of
the grant of the options, and will have an exercise price per share equal to the
fair market value of the stock on the date of the grant.
9
EXECUTIVE OFFICERS
The names and ages of all executive officers of the Company as of June 12,
2001 and the principal occupation and business experience for at least the last
five years for each are set forth below, except as previously set forth above.
NAME AGE POSITION
- ---- --- --------
Hugh D. Simpson 42 President, Chief Executive Officer, Chairman of
the Board, and Director
Philip N. O'Reilly 46 Chief Financial Officer, Director
James S. Holden 47 Chief Operating Officer
Michael G. Donohoe 39 Senior Vice President, Corporate Development;
General Counsel; Assistant Secretary
Rodney Jones 48 Senior Vice President, Sales and Marketing
Michael G. Donohoe has served as General Counsel and Senior Vice President
of Corporate Development since February 2001. Mr. Donohoe most recently served
as Vice President/Legal for CapRock Communications Corp. While at CapRock
Communications Corp., Mr. Donohoe focused on various transactions,
telecommunications and regulatory matters, including a follow-on public offering
and the eventual sale of CapRock Communications Corp. to McLeodUSA in December
2000. In 1991, Mr. Donohoe and others founded a law firm that is now called
Donohoe, Jameson & Carroll, P.C., where his practice areas included workouts,
mergers and acquisitions, commercial finance, secured transactions and real
property. He began his career in the bankruptcy and reorganization department
at Strasburger & Price.
Rodney M. Jones has served as Senior Vice President, Sales & Marketing
since January 2001. Mr. Jones most recently served as the Director of Enhanced
Services for CapRock Communications Corp., where he was responsible for
developing marketing and sales plans and customer support services for targeted
carriers, independent telephone companies and wholesale customers utilizing a
variety of company products and services. Previously, Mr. Jones served as
National Sales Manager for Century Telecommunications, now CenturyTel, where he
was responsible for developing the pricing and marketing strategy for the
wholesale division. He began his career in 1987 at Star Tel of Abilene, Texas.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth summary information as
to compensation received by the Company's Chief Executive Officer for services
rendered to the Company and its subsidiaries for the years ended December 31,
2000, 1999, and 1998. None of the other persons who were serving as executive
officers of the Company as of December 31, 2000 received total annual
compensation in excess of $100,000.
10
Annual Compensation
-------------------
OTHER ANNUAL
NAME AND POSITION YEAR SALARY BONUS COMPENSATION
----------------- ---- -------- ------ ------------
Hugh D. Simpson/1/ 2000 $201,935 $3,000 --
Chief Executive Officer, 1999 $200,000 -- --
President and Chairman 1998 $167,000 -- --
of the Board
______________
/1/ Mr. Simpson was appointed as the Company's Chief Executive Officer,
President, Secretary, Chairman of the Board of Directors, and as a director,
effective as of June 9, 2000, the closing date of the merger of DVN Acquisition
Corporation and DataVon. Mr. Sam B. Myers, Jr. served in these capacities for
the Company prior to the merger, and resigned from these positions, effective as
of June 9, 2000. Mr. Myers earned $125,000, $150,588, and $150,000 in salary
from his positions with the Company for each of the fiscal years ended
December 31, 2000, 1999, and 1998, respectively.
The compensation figures provided above for Mr. Simpson reflect compensation
earned from his positions with DataVon for each of the fiscal years ended
December 31, 2000, 1999, and 1998.
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of the Board of Directors makes recommendations
to the Board of Directors regarding compensation of the Company's officers and
directors. All decisions of the compensation committee relating to compensation
of the Company's executive officers are reviewed and approved by the entire
Board of Directors.
Compensation Policy
The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long-term growth objectives and its ability to attract and
retain qualified executive officers. The compensation committee attempts to
achieve these goals by integrating on an individualized basis competitive annual
base salaries with stock options through the Company's stock option plans and
otherwise. The compensation committee believes that cash compensation in the
form of salary and bonus provides the Company's executives with short term
rewards for success in operations, and that long term compensation through the
award of stock options better coordinates the objectives of management with
those of the stockholders with respect to the long term performance and success
of the Company. The compensation committee generally takes into consideration a
variety of subjective and objective factors in determining the compensation
packages for executive officers, including how compensation compares to that
paid by competing companies and the responsibilities and performance by each
executive and the Company as a whole. In making its determinations, the
compensation committee attempts to address the unique challenges which are
present in the industry in which the Company competes against a number of public
and private companies with respect to attracting and retaining executives and
other key employees. The compensation committee has relied heavily on the
equity/option position of executives and key employees as an important mechanism
to retain and motivate executives and key employees while at the same time
aligning their interests with those of the stockholders
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generally. The compensation committee believes that option grants are
instrumental in motivating employees to meet the Company's future goals.
Base Salary
The base salary of the Company's executive officers is set at an amount
which the compensation committee believes is competitive with the salaries paid
to the executive officers of other companies of comparable size in similar
industries. In evaluating salaries, the compensation committee utilizes
publicly available information and surveys of the compensation practices of
information technology companies. Furthermore, the compensation committee
considers the executives' performance of their job responsibilities and the
overall financial performance of the Company.
Bonuses
The Company's annual bonuses to its executive officers are based upon the
Company's financial performance in the current year, the furthering of the
Company's strategic position in the marketplace and individual performance.
Stock Option Grants
The Company provides its executive officers with long-term incentives
through grants of stock options. A grant of options is made at the time an
executive is hired. The exercise price of all options granted is generally
equal to the closing market price of the Common Stock on the date of grant and
the options generally vest over three years. The amount and vesting of stock
options are not contingent on achievement of any specific performance targets.
All options granted will benefit the executive only to the extent that there is
appreciation in the market price of the Common Stock during the option period.
Grants of stock options have been made to certain employees upon joining
the Company and also to selected employees as performance related awards. The
amounts of such grants are determined based on the individual employee's
position with the Company and his or her potential ability to beneficially
impact the performance of the Company. The Company's goal is to provide
incentives to its employees to enhance the financial performance of the Company
by giving employees a stake in the financial performance of Company.
The Company's stock option plans currently qualify for exclusion under
Section 162(m) of the Internal Revenue Code.
Compensation of Chief Executive Officer
The Chief Executive Officer's base salary, annual incentive award and long-
term incentive compensation are determined by the compensation committee based
upon the same factors as those employed by the compensation committee for
executive officers generally. In the fiscal year ended December 31, 2000,
Hugh D. Simpson received $201,935 in salary and a
12
bonus of $3,000. No options to purchase stock were granted to Mr. Simpson in the
fiscal year ended December 31, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the compensation committee of the Board of Directors
are Messrs. Simpson, Powell, and Budarapu. With the exception of Mr. Simpson,
no member of the compensation committee of the Board of Directors is or has been
an officer or employee of the Company. No current executive officer of the
Company has served as a director or member of the compensation committee, or
other committee serving an equivalent function, of any other entity that has one
or more executive officers serving as a director of the Company or as a member
of its compensation committee.
REPORT OF THE AUDIT COMMITTEE
The audit committee of the Board of Directors is comprised of Messrs.
Powell, Olson, and Conn, each of whom is an "independent" director as defined
by the National Association of Securities Dealers, Inc.'s current listing
standards. Management is responsible for the Company's internal controls and
financial reporting process. The Company's independent accountants, KPMG LLP,
are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and to issue a report thereon. The audit committee's responsibility
is to monitor and oversee these processes.
In connection with these responsibilities, the audit committee met with
management and KPMG LLP to review and discuss the Company's December 31, 2000,
consolidated financial statements. The audit committee also discussed with KPMG
LLP the matters required by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. The audit committee also
received written disclosures from KPMG LLP required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees, as
amended, and the audit committee discussed with KPMG LLP that firm's
independence. The audit committee also has discussed with management and the
independent accountants such other matters and received such assurances from
them as the audit committee deemed appropriate.
Based on the audit committee's discussions with management and KPMG LLP and
the audit committee's review of the representations of management and KPMG LLP,
the audit committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2000, to be filed with the Securities and
Exchange Commission.
KPMG LLP Fees for Fiscal 2000
Audit Fees. Audit fees billed to the Company by KPMG LLP for the fiscal
year ended December 31, 2000, for review of the Company's annual financial
statement and those financial statements included in the Company's quarterly
reports on Form 10-QSB totaled $111,380.
13
Financial Information Systems Design and Implementation Fees. KPMG LLP did
not perform any financial information technology services for the Company during
the fiscal year ended December 31, 2000.
All Other Fees. The aggregate fees billed by KPMG LLP for all other
services rendered for the fiscal year ended December 31, 2000 totaled $101,810.
The audit committee has considered whether the non-audit services provided
by KPMG LLP are compatible with maintaining the accountants' independence.
Audit Committee: G. Edward Powell, David G. Olson and Robert E. Conn
G. Edward Powell, Chairman
David G. Olson
Robert E. Conn
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 12, 2001,
with respect to the beneficial ownership of common stock by: (i) each director
and nominee for election to the Board of Directors; (ii) each executive officer;
(iii) all of the directors and executive officers as a group; and (iv) to the
best of the Company's knowledge, each person who is a beneficial owner of more
than 5% of the outstanding shares of common stock. The information has been
determined in accordance with Rule 13d-3 promulgated under the Exchange Act
based upon information furnished by the persons listed or contained in filings
made by them with the SEC. Except as provided in the table below, the
stockholders listed in the table below have sole voting and investment power
with respect to their shares. Unless otherwise indicated, the business address
of each of the persons listed below is c/o DataVoN Inc., 635 West Campbell Road,
Suite 130, Richardson, Texas 75080.
14
Number of Shares of Percent
Name or Identity of Group Common Stock Beneficially Owned of Class(1)
- ------------------------- ------------------------------- -------------
Hugh D. Simpson 38,738,877 68.30%
Philip N. O'Reilly 5,267,201(2) 9.29%
James S. Holden -0-(3) --
Amar Budarapu 55,670(4) *
Robert E. Conn 25,000(5) *
David G. Olson 75,000(6) *
G. Edward Powell 16,667(7) *
Robert A. Veschi 25,000(8) *
Rodney Jones -0-(9) --
Michael G. Donohoe -0-(10) --
All Directors and Executive
Officers as a Group 44,203,415(11) 77.67%
- ---------------------
(1) Based on 56,715,726 shares of common stock issued and outstanding as of
June 12, 2001.
(2) Includes 5,256,137 shares of common stock and options to purchase 11,064
shares of common stock held by Mr. O'Reilly. The options to purchase 11,064
shares of common stock are exercisable within 60 days of June 12, 2001.
(3) Does not include options to purchase 900,000 shares of common stock held by
Mr. Holden, which are not exercisable within 60 days of June 12, 2001.
(4) Represents options to purchase 55,670 shares of common stock held by
Mr. Budarapu, which are exercisable within 60 days of June 12, 2001. Does not
include options to purchase 136,340 shares of common stock held by Mr. Budarapu,
which are not exercisable within 60 days of June 12, 2001.
(5) Represents options to purchase 25,000 shares of common stock held by
Mr. Conn, which are exercisable within 60 days of June 12, 2001. Does not
include options to purchase 75,000 shares of common stock held by Mr. Conn,
which are not exercisable within 60 days of June 12, 2001.
(6) Represents options to purchase 75,000 shares of common stock held by
Mr. Olson, which are exercisable within 60 days of June 12, 2001. Does not
include options to purchase 75,000 shares of common stock held by Mr. Olson,
which are not exercisable within 60 days of June 12, 2001.
(7) Represents options to purchase 16,667 shares of common stock held by
Mr. Powell, which are exercisable within 60 days of June 12, 2001. Does not
include options to purchase 83,333 shares of common stock held by Mr. Powell,
which are not exercisable within 60 days of June 12, 2001.
(8) Represents options to purchase 16,667 shares of common stock held by
Mr. Veschi, which are exercisable within 60 days of June 12, 2001. Does not
include options to purchase 75,000 shares of common stock held by Mr. Veschi,
which are not exercisable within 60 days of June 12, 2001.
(9) Does not include options to purchase 700,000 shares of common stock held
by Mr. Jones, which are not exercisable within 60 days of June 12, 2001.
(10) Does not include options to purchase 700,000 shares of common stock held
by Mr. Donohoe, which are not exercisable within 60 days of June 12, 2001.
(11) Includes options to purchase 200,068 shares of common stock, which are
exercisable within 60 days of June 12, 2001. Does not include options to
purchase 1,934,673 shares of common stock, which are not exercisable within 60
days of June 12, 2001.
15
PROPOSAL 2
APPROVAL OF AMENDMENT TO 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
PROPOSED AMENDMENT TO 2000 STOCK OPTION AND RESTRICTED STOCK PLAN
The Board of Directors has approved an amendment to the Company's 2000
Stock Option and Restricted Stock Plan (the "2000 Plan") that would increase the
number of shares of authorized for issuance under the 2000 Plan as is described
in more detail below under "-- Number of Shares" and attached to this Proxy
Statement as Exhibit B. The Board of Directors is recommending this amendment
to the stockholders for approval.
The 2000 Plan was originally adopted by the Company's stockholders on
December 21, 2000. Pursuant to the provisions of the 2000 Plan, the Board has
adopted amendments to the 2000 Plan to be effective as of the date of the Annual
Meeting which are not subject to stockholder approval. Initially, up to
7,000,000 shares of common stock were authorized for issuance under the 2000
Plan. At June 12, 2001, there were 2,330,838 shares of common stock available
for issuance under the 2000 Plan.
PURPOSE OF THE PROPOSED AMENDMENT
The Board believes that stock options and other stock-based awards play an
important role in the success of the Company if the Company is to continue to
attract and retain the best available directors, officers, employees, and
consultants necessary for the Company's future growth and success. The Board
believes that the amendment to the 2000 Plan is necessary to provide for an
adequate number of shares of common stock available for issuance under the 2000
Plan.
SUMMARY OF THE 2000 PLAN
The following description of certain terms of the 2000 Plan is intended to
be a summary only. This summary is qualified in its entirety by the full text
of the 2000 Plan.
NUMBER OF SHARES
Up to 7,000,000 shares of common stock may be issued under the 2000 Plan as
initially adopted. As set forth herein, the proposed amendment to the 2000 Plan
would amend the number of shares that may be issued under the 2000 Plan to the
number of shares equal to 15% of the shares of the Company's common stock issued
and outstanding (such determination as to the number of shares available for
grant to be made on July 1, 2001 and October 1, 2001 and, in each calendar year
thereafter, as of January 1, April 1, July 1 and October 1 of each such year for
which the 2000 Plan is in effect); provided, however, that subject to
adjustment, in no event may more than 750,000 shares be cumulatively available
under the 2000 Plan for the grant of incentive stock options; and provided,
further, that subject to adjustment, the aggregate number of shares available
for issuance under the 2000 Plan shall not be reduced to a number below the
number of shares subject to awards outstanding at the time of such
determination.
The number of shares of common stock authorized to be issued under the 2000
Plan will be adjusted for stock dividends, stock splits, or any other increase
or decrease in the number of
16
shares of the Company's common stock issued without receipt of consideration by
the Company. Shares to be issued under the 2000 Plan may be drawn from either
authorized but previously unissued shares of the Company's common stock or from
treasury shares.
ADMINISTRATION
The Board of Directors or a committee of the Board of Directors--as the
Board of Directors in its sole discretion shall determine--will administer the
2000 Plan. For purposes of the 2000 Plan and this section, the Board of
Directors acting in this capacity or the committee of the Board of Directors
will be referred to as the "Committee." The Company intends that any committee
established by the Board to administer the Plan will consist of at least two
persons, each of whom meet the definition of "non-employee director" under
Section 16 of the Exchange Act and the definition of "Outside Director" under
Section 162(m) of the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended (the "Code"). The members of the
Committee will be appointed by the Board of Directors. The Board may from time
to time remove members from, or add members to, the Committee.
ELIGIBILITY, OPTIONS AND RESTRICTED STOCK
The Committee has the authority under the 2000 Plan to grant stock options
or shares of restricted stock to directors, officers, employees or consultants
of the Company. As of June 12, 2001, the Company and its affiliates had 20
full-time employees. Options granted under the 2000 Plan may include incentive
stock options intended to qualify under Section 422 of the Code as well as non-
statutory options. Incentive stock options will only be granted to persons who
are employed by the Company at the time of the grant. Subject to the limits of
the 2000 Plan, the Committee may determine the number of shares to be issued
upon exercise, the exercise price, vesting period and other terms of the stock
options. However, incentive stock options will not be granted with an exercise
price below the fair market value of the common stock on the date of the grant
(or less than 110% of the fair market value in the case of an incentive stock
option granted to a 10% or greater stockholder of the Company) and in no event
can any incentive stock option be exercisable after the expiration of ten years
after the date of grant (or five years in the case of an incentive stock option
granted to a 10% or greater stockholder of the Company). The closing price of
the common stock as reported by the OTC bulletin board for June 12, 2001 was
$0.93. The Committee may also determine the number of shares, terms, conditions
and restrictions of the restricted stock. However, each grant of restricted
stock will require that the recipient remain an employee or otherwise provide
services to the Company for at least six months after the date of grant.
Subject to adjustment, the Committee will not grant stock options for shares of
common stock or make grants of restricted stock under the 2000 Plan to any
"covered employee" as defined in Section 162(m) during any calendar year period
in excess of 2,000,000.
IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Code limits the tax deductibility of compensation in
excess of $1 million paid to certain executive officers, unless the payments are
made under plans that satisfy the technical requirements of the Code and qualify
as performance-based pay. The Committee believes that performance-based pay
over $1 million is sometimes required to attract and retain executives in a
competitive marketplace. Stock options granted under the 2000 Plan are designed
so that the compensation paid will be tax deductible by the Company.
17
BACKGROUND-SECTION 162(m) EXEMPTION
Section 162(m) limits our ability to deduct compensation that we pay to
certain of our executive employees when determining our federal tax liability.
These limitations apply to compensation in excess of $1 million per year that we
pay to our chief executive officer and each of our four other highest paid
executive officers. Certain types of compensation are excluded from the
calculation of the $1 million limit in Section 162(m). These include
compensation under plans that are "performance based" and are approved by our
stockholders. "Performance based" compensation under Section 162(m) is
compensation based on the attainment of one or more objective performance goals,
the material terms of which are approved by stockholders.
DETERMINATION OF RESTRICTED STOCK AWARDS, PERFORMANCE OBJECTIVES
A covered award payable to a covered employee will be based on performance
objectives established by the Committee at the beginning of the year. The
Committee will establish performance objectives from one or more of the
following measures: specified increases in earnings per share; share price;
market share; total revenue; net profits; operating profit margins; and earnings
before interest expense and income, taxes on incomes, profits, or gains,
depreciation of balance sheet assets, or amortization of goodwill. Performance
objectives may be described in terms of company, subsidiary, major business
segment, division or departmental performance. Because covered awards under the
2000 Plan are subject to the discretion of the Committee and subject to the
attainment of the performance objectives, the benefits or amounts that will be
allocated to covered employees under the 2000 Plan are not determinable at this
time.
STOCK OPTION GRANTS, FAIR MARKET VALUE
Under Section 162(m) of the Code, if the exercise price of options granted
under a plan equals the fair market value of the stock as of the grant date and
the plan has been established in accordance with Section 162(m) of the Code,
then the option grant satisfies the exemption from compensation that is subject
to the $1 million deductibility limit for covered employees. All option grants
to any covered employee will be made at the fair market value of the Company's
common stock.
PAYMENT OF RESTRICTED STOCK
Covered awards of restricted stock will be paid to covered employees in
shares of stock as soon as practicable following the date the restrictions
terminate. Covered employees will be given the option to defer the receipt of
the shares to a future year. The amount of stock to be distributed will equal
the number of shares of the Company's common stock that would have been paid if
the award of restricted stock had been paid on the grant date, as adjusted for
dividends, stock splits and any other increase or decrease in the number of
issued shares effected without the receipt of consideration by the Company.
NON-EMPLOYEE DIRECTOR OPTIONS
Each non-employee director of the Company shall, subject to the terms of
the 2000 Plan, be granted (i) on his or her appointment to the Board of
Directors or on the approval of this 2000 Plan by the stockholders of the
Company, whichever occurs later, a grant of options to purchase
18
100,000 shares of the Company's common stock. Unless otherwise provided in the
applicable stock option agreement, each option shall become exercisable as to
one-third of the shares of the Company's common stock subject to options on the
first anniversary of the date of grant and as to the balance, yearly in equal
installments over the next two years following the first anniversary of the date
of grant, and would have an exercise price per share equal to the fair market
value of the Company's common stock on the date of grant.
CHANGE IN CONTROL
Upon a change in control, as defined in the 2000 Plan, all outstanding
options under the 2000 Plan will become immediately exercisable and all
restrictions on any shares of restricted stock granted under the 2000 Plan will
lapse and such stock will immediately vest in the holder notwithstanding that
such options were not fully exercisable or that such restricted stock had not
fully vested. In the event of a reorganization, lawful and fair provision shall
be made whereby the option holder shall thereafter have the right to purchase
and receive, in lieu of the shares of common stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented thereby, such shares of stock, securities, or assets as may be
issued or payable with respect to or in exchange for the number of outstanding
shares of such common stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by such options, had such reorganization not taken place.
AMENDMENT AND TERMINATION
The Board may amend or terminate the 2000 Plan at any time, but may not do
so without stockholder approval if the amendment changes the aggregate number of
shares that may be issued under the Plan, other than in connection with certain
adjustments or a reorganization of the Company as discussed above. The Board
may not, without the participant's consent, adversely affect the rights of a
participant under any option or restricted stock that has been granted. Unless
our Board later extends the 2000 Plan, it will automatically terminate ten years
following its effective date except as to awards outstanding at that date.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options
Some of the options granted under the 2000 Plan may be incentive stock
options as described in Section 422 of the Code ("ISOs"). An optionee does not
realize taxable income upon the grant or exercise of an ISO. Although the
optionee will not realize ordinary income at the time an ISO is exercised, the
excess of the fair market value of the shares acquired at the time of exercise
over the option price may constitute an item of adjustment used to compute
alternative minimum taxable income under Section 56 of the Code, and may,
therefore, result in the imposition of the alternative minimum tax under Section
55 of the Code on the optionee. If the optionee does not dispose of the shares
received upon exercise of an ISO within one year from the ISO's date of exercise
and within two years of the date that the ISO was granted, any gain or loss
realized from the subsequent sale or disposition of such shares will be treated
as long-term capital gain or loss to the optionee and no deduction will be
available to the Company. If the optionee disposes of the shares before the end
of the holding periods described above, the optionee has made a disqualifying
disposition and will recognize ordinary income equal to the
19
lesser of (i) the excess of the fair market value of the shares on the date of
exercise over the option price or (ii) the actual gain realized upon such
disposition. Any additional gain upon such disposition will be taxed as capital
gain. In the event of a disqualifying disposition, the Company receives a tax
deduction, subject to Section 162(m) of the Code, in an amount equal to the
ordinary income recognized by the optionee.
Non-Statutory Options
An optionee will not recognize any taxable income upon the grant of a non-
statutory stock option. However, on the date of exercise of a non-statutory
stock option, the optionee recognizes ordinary income in an amount equal to the
difference between the exercise price and the fair market value of the shares on
the date of exercise, and the Company receives a tax deduction for the same
amount, subject to Section 162(m) of the Code. The gain, if any, realized upon
a subsequent disposition of the shares will constitute short-term or long-term
capital gain, depending on the optionee's holding period.
Restricted Stock
A recipient of restricted stock will not recognize income upon the grant of
restricted stock. However, at the time the restrictions lapse, the recipient
recognizes ordinary income equal to the fair market value of the shares at the
time, and the Company receives a tax deduction for the same amount, subject to
the provisions of Section 162(m) of the Code. Upon disposition of the shares
acquired, an optionee will generally recognize the appreciation or depreciation
on the shares after the date the restrictions lapse as either short-term or
long-term capital gain or loss depending on the recipient's holding period.
Deduction Limits
A deduction otherwise available to the Company for any year with respect to
compensation payable to an executive officer may be denied under Section 162(m)
of the Code to the extent the amount exceeds $1,000,000. It is anticipated that
grants of options and restricted stock will qualify for an exemption to that
limitation for eligible performance-based compensation.
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE FOREGOING PROPOSAL
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND THEREFORE
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
20
PROPOSAL 3
RATIFICATION OF SELECTION OF KPMG LLP
AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation from the audit committee, has
selected KPMG LLP, independent certified public accountants, as the Company's
independent accountants for the fiscal year ended December 31, 2001 and requests
that the stockholders ratify the Board's selection. One or more representatives
of KPMG LLP are expected to be present at the annual meeting. They will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions that stockholders may have.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS
PROPOSAL.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
In December, 1999, the Company decided to replace Arthur Andersen LLP
("Andersen") as its independent accountants to audit its financial statements
for economic reasons. Andersen's reports on the Company's financial statements
for the two most recent fiscal years did not contain any adverse opinion or
disclaimer of opinion; however, the report included in the 1998 Form 10-K was
modified to disclose uncertainties regarding the Company's ability to continue
as a going concern. The decision to change accountants was approved by the
Board of Directors on December 31, 1999. During the Company's two most recent
fiscal years and any subsequent interim period preceding the change in
accountants, there were no disagreements with Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. The decision to change accountants was based on the
comparative cost of the audit services provided by Andersen and its replacement,
the firm of Hein + Associates LLP ("Hein"). The Company requested that Andersen
furnish it with a letter addressed to the U.S. Securities and Exchange
Commission stating whether it agrees with the above statements. A copy of that
letter was filed with the Commission.
The Company engaged Hein to serve as the Company's independent accountants
as of January 21, 2000. At the time of its engagement, Hein had not been
consulted during the two most recent fiscal years or any subsequent interim
period on any matters relating to accounting principles or a specific
transaction, either completed or proposed.
Effective August 4, 2000, the Company dismissed Hein as the Company's
independent accountant. None of the reports of Hein on the financial statements
during the past fiscal year contained an adverse opinion or disclaimer of
opinion, or was qualified or modified as to uncertainty, audit scope or
accounting principles. During the Company's engagement of Hein, there were no
disagreements with Hein on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Hein's satisfaction would have caused Hein to
make reference to the subject matter of the disagreement in connection with its
report. The Company requested that Hein furnish it with a letter addressed to
the U.S. Securities and Exchange Commission stating whether it agrees with the
above statements. A copy of that letter was filed with the Commission.
21
On August 4, 2000, the Company engaged KPMG LLP, to serve as the Company's
independent accountant and auditor for future periods. Prior to August 4, 2000,
KPMG LLP had served as the independent auditor for DataVon. Except for
consultation with matters relating to DataVon, during the Company's two most
recent fiscal years and the subsequent interim period preceding this engagement
of KPMG LLP, neither the Company nor anyone on its behalf has consulted with
KPMG LLP regarding the application of accounting principles to a specific or
contemplated transaction, or the type of audit opinion that might be rendered on
the Company's financial statements, and no written or oral advice was provided
to the Company that was a factor considered by the Company in reaching a
decision as to any accounting, auditing or financial reporting issue.
The Company's dismissal of Hein and engagement of KPMG LLP was approved and
ratified by the Board of Directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than 10% of the Company's common stock to file reports of their beneficial
ownership and changes in ownership--Forms 3, 4 and 5, and any amendment thereto-
- -with the Securities and Exchange Commission. Executive officers, directors,
and greater-than-ten percent holders are required to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of such forms furnished to the Company and any written representations
from the executive officers and directors, the Company believes that all Section
16(a) filing requirements applicable to its executive officers, directors and
greater-than-ten percent holders have been complied with, except for one Form 3
filed late by each: (i) James S. Holden, the Chief Operating Officer of the
Company, (ii) Marcia C. Kennedy, a former Chief Financial Officer and director
of the Company, (iii) Robert E. Conn, a director of the Company, (iv) David G.
Olson, a director of the Company, and (v) Robert A. Veschi, a director of the
Company. The delinquent Form 3's have all been filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1999, the Company entered into capital leases with EDVon, Inc.,
M.M. Simpson & Associates, P.C., and an agent of Fidelity National Title, all of
which are related parties, for computers, a vehicle and office equipment that
expire at various dates through 2003, except for the vehicle which was
terminated on May 1, 2000. At December 31, 2000, the gross amount of equipment
and related accumulated amortization recorded under capital leases was $16,451.
The lease terms for the equipment under capital leases are 36 months.
The Company paid M.M. Simpson & Associates, P.C. $126,221 and $7,589 in the
fiscal years ended December 31, 2000 and 1999, respectively, for legal services
provided to the Company.
The Company also paid M.M. Simpson & Associates, P.C. $25,955 and $29,683
in the fiscal years ended December 31, 2000 and 1999, respectively, for payroll
costs of shared employees.
22
On May 1, 2000, DataVon issued a note payable to Mr. Simpson in the amount
of $250,000, secured against accounts receivable of DataVon. The note bears
interest at 9% per annum, and is due on demand but no later than January 15,
2001. The note was issued to Mr. Simpson for moneys advanced by Mr. Simpson to
DataVon for operating capital. The money advanced by Mr. Simpson to DataVon
occurred subsequent to a cash distribution made to Mr. Simpson in the amount of
$400,000 to pay the estimated tax liability incurred by DataVon during its
Subchapter S status during taxable year 2000 and 1999.
Amar Budarapu, a director of the Company, was a partner in the law firm of
Baker & McKenzie until July 31, 2000. During the time Mr. Budarapu was
associated with Baker & McKenzie, he was compensated, in part, based on legal
fees paid by his clients. Through June 9, 2000, DataVon incurred and paid
Baker & McKenzie approximately $160,911 for legal services. From June 10, 2000
to July 31, 2000, the date that Mr. Budarapu ceased to be employed by
Baker & McKenzie, the Company incurred and paid Baker & McKenzie approximately
$39,566 for legal services.
The Company and DataVon believe that these arrangements were as fair to
them as any that could have been obtained from an unrelated party on an arms-
length basis.
ANNUAL REPORT ON FORM 10-KSB
Copies of the Company's Annual Report on Form 10-KSB are being sent to the
Company's stockholders concurrently with the mailing of this proxy statement.
Please note that the Company filed a Form 10-KSB/A-1 containing certain
information with respect to the Company's directors and executive officers.
Copies of the Form 10-KSB/A-1 are not being sent to the Company's stockholders
concurrently with the mailing of this proxy statement because all of the
information contained in the Form 10-KSB/A-1 has been updated and is included in
this proxy statement.
UPON WRITTEN REQUEST OF ANY BENEFICIAL STOCKHOLDER OR STOCKHOLDER OF
RECORD, ADDITIONAL COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2000 OR COPIES OF THE FORM 10-KSB/A-1 MAY BE
OBTAINED, WITHOUT CHARGE, BY CALLING (972) 783-0284 OR BY WRITING:
DATAVON INC.
635 WEST CAMPBELL ROAD, SUITE 130
RICHARDSON, TEXAS 75080
ATTN: INVESTOR RELATIONS
OTHER MATTERS
The Company's management is not aware of other matters which may come
before the annual meeting. The persons named in the accompanying form of proxy
will vote said proxy in accordance with their judgment if any other matter does
properly come before the annual meeting. A majority of those votes present at
the annual meeting cast in favor of any such matter will result in the passage
of such matter.
23
PROPOSALS OF STOCKHOLDERS FOR 2002 ANNUAL MEETING
Any proposal that a stockholder of the Company wishes to be considered at
the 2002 Annual Meeting of Stockholders must be submitted to the Secretary of
the Company at the Company's principal executive offices, 635 West Campbell
Road, Suite 130, Richardson, Texas 75080, no later than March 10, 2002 for
inclusion in the Company's proxy material for that meeting. In addition, such
proposals must comply with the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934, as amended.
By the Order of the Board of Directors,
/s/ James D. Nickell
---------------------------------------
James D. Nickell, Secretary
Richardson, Texas
July 3, 2001
24
EXHIBIT A
CHARTER
OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
A-1
DTVN Holdings, Inc.
CHARTER OF THE AUDIT COMMITTEE
PURPOSE
- --------
1. The Audit Committee is authorized by the Board of Directors of DTVN
Holdings, Inc. (referred to in this charter as "DTVN") to provide a direct
oversight of the independent public accounting firm and the financial management
of DTVN in order to assist the Directors in satisfying their fiduciary
obligations to DTVN's shareholders. Furthermore, the Audit Committee will assist
the Board of Directors in performing its oversight responsibilities related to
corporate accounting, financial reporting practices, the quality and integrity
of financial reports as well as compliance with policies and procedures, and
compliance of DTVN's financial statements and internal controls with Federal
securities regulatory requirements and business ethics, and to evaluate DTVN's
system of internal controls, the internal audit function, and other related
areas.
2. The Audit Committee's practices and procedures are intended to comply with
the recommendations of various authoritative bodies including the Securities and
Exchange Commission.
MEMBERSHIP
- ----------
1. The Audit Committee will be appointed annually by the Board of Directors or
until their successors shall be duly elected and qualified. Unless a Chair is
elected by the full Board the members of the Committee may designate a Chair by
majority vote of the full Committee membership and will be comprised of not less
than three qualified outside directors. An outside Director is an individual
who was neither an officer nor employee of DTVN or any affiliate.
2. No member of the Audit Committee shall be an active or retired employee of
DTVN. The Members shall be independent of the management of DTVN and DataVoN
Inc. as well as free from material relationships; personal, financial, or
otherwise that, in the opinion of the Board of Directors, would interfere with
their independent judgment as an Audit Committee Member.
3. Directors who owned or controlled, within the preceding year, assets
representing 10% or more of any outstanding class of voting securities of DTVN
shall be considered non-independent for purposes of Audit Committee membership.
4. Each Member of the Audit Committee will have a working knowledge of basic
finance and accounting practices and at least one member must have accounting or
related financial management expertise.
GENERAL RESPONSIBILITIES
- -------------------------
1. The Audit Committee will provide reasonable assurance to the Board of
Directors that the financial and regulatory affairs of DTVN are properly
conducted, supervised and reported.
A-2
2. The Audit Committee will maintain free and open communication with the Board
of Directors, independent auditors, legal counsel, financial management, and, as
necessary, other regulatory authorities.
3. Hold regular meetings of the Audit Committee at least twice annually, and
more frequently if determined necessary by the Chairman of the Audit Committee,
in order to review and discuss those specific matters regarding DTVN's financial
reporting, regulatory compliance, internal controls and other related practices,
procedures and policies with respect to which the Audit Committee has oversight
responsibility. At least annually the Committee should meet with management
internal audit and the independent accountants in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be
discussed privately. In addition, the Committee or at least the Chair should
meet with the independent accountants and management quarterly to review the
Company's financials prior to filing the 10-QSB or release of earnings.
4. Maintain minutes of all Audit Committee meetings regarding the results of
discussions concerning the topics set forth in the agenda and other business
items addressed. Report any matters that are deemed to warrant attention to the
Board of Directors.
5. Evaluate whether the Board of Directors has committed sufficient financial
resources to the Audit Committee to enable it to satisfy its responsibilities,
including the engagement of special counsel when necessary.
6. Review and update this charter periodically, at least annually, as
conditions dictate.
7. Review with the organizations legal counsel any matters that could have
significant impact on the Company's financial statements.
RESPONSIBILITIES AND AUTHORITY - INDEPENDENT ACCOUNTANT OVERSIGHT
- -----------------------------------------------------------------
1. Recommend to the Board of Directors the independent public accounting firm
to perform the annual audit of DTVN's financial statements.
2. The Audit Committee will review and assess any fees paid to the independent
public accountants as well as review and recommend to the Board of Directors for
approval the dismissal of the independent public accounting firm. The Audit
Committee will ascertain that the external auditor is aware that they are
ultimately accountable to the Board of Directors and the Audit Committee.
3. Obtain an appropriate written representation annually from the independent
public accounting firm assuring their independence associated with the financial
engagement as well as other management consulting services that may be provided
to DTVN. In the event that relationships may exist which might have an impact on
its independence and objectivity, the public accounting firm will disclose this
information to the Audit Committee such that the appropriate action is taken to
ensure their independence is maintained.
A-3
4. Meet with the independent public accounting firm and DTVN management prior
to commencement of the annual audit to review the audit scope, the procedural
plans to be used, the audit report anticipated to be issued, the audit timing,
and the proposed audit fee.
5. Obtain a letter from the independent public accounting firm concerning any
significant weaknesses or deficiencies with internal controls that are
discovered during the financial engagement.
6. Discuss with management and the independent public accounting firm the
substance of any significant issues raised by counsel concerning litigation,
contingencies or other claims, and how such matters affect the financial
statements.
7. Review, consider and monitor practices, procedures and policies related to
DTVN's financial and regulatory reporting responsibilities including, but not
limited to, the following:
A. Compliance with GAAP and SEC reporting requirements, including
representations and disclosures made in annual and quarterly reports, proxy
statements and all other required filings.
B. Review with management and the independent public accounting firm their
assessment of the adequacy of DTVN's internal control system, and the
resolution of identified material weaknesses and reportable conditions in
internal controls.
C. Evaluate of the performance of the independent public accounting firm and
its professional relationship with DTVN.
D. Review the audit opinion and audited financial statements with the
independent public accounting firm before the report is finalized; obtain the
independent public accountant's evaluation of the competence of financial and
accounting personnel; discuss and resolve disagreements between the
independent public accounting firm and DTVN management; and evaluate and
monitor recommendations for improvement of internal control deficiencies and
compliance weaknesses identified by the independent public accounting firm.
E. Review the independent accountant's qualitative judgments concerning the
propriety, not just the acceptability, of DTVN's accounting principles and
financial disclosures as well as how aggressive (or conservative) the approach
involving the accounting principles and underlying estimates.
F. Review with DTVN management and the independent public accounting firm
major accounting policies and reporting disclosures affecting annual and
quarterly financial statements.
G. Review with management and the independent public accounting firm the
basis for management's report on internal controls and compliance, and the
accountant's report on management's assessments and DTVN's consolidated
financial statements.
8. The Audit Committee will listen to management and the primary independent
auditor if either believes there might be a need to engage additional auditors.
The Audit Committee will decide whether to engage an additional firm and, if so,
which one.
A-4
EXHIBIT B
AMENDMENT TO 2000 STOCK OPTION
AND RESTRICTED STOCK PLAN
Subject to approval by the stockholders of the Corporation, Section 5(a) of
the 2000 Stock Option and Restricted Stock Plan is hereby amended and restated
in its entirety to read as follows:
"(a) BASIC LIMITATION. Shares offered under this Plan may be authorized
but unissued Shares or Shares that have been reacquired by the
Company. Subject to adjustment pursuant to Section 9 of this Plan,
the aggregate number of Shares that are available for issuance under
this Plan shall be that number of Shares equal to 15% of the Shares
issued and outstanding (such determination as to the number of Shares
available for grant to be made on July 1, 2001 and October 1, 2001
and, in each calendar year thereafter, as of January 1, April 1,
July 1, and October 1 of each such year for which the Plan is in
effect) (the "Plan Maximum"); provided, however, that subject to
adjustment pursuant to Section 9 of this Plan, in no event may more
than seven hundred fifty thousand (750,000) Shares be cumulatively
available for the grant of ISOs under the Plan; and provided,
further, that subject to adjustment pursuant to Section 9 of this
Plan, the aggregate number of Shares available for issuance under the
Plan shall not be reduced to a number below the number of Shares
subject to Plan Awards granted under the Plan at the time of such
determination. The Committee shall not issue more Shares than are
available for issuance under this Plan. The number of Shares that are
subject to unexercised Options at any time under this Plan shall not
exceed the number of Shares that remain available for issuance under
this Plan. The Company, during the term of this Plan, shall at all
times reserve and keep available sufficient Shares to satisfy the
requirements of this Plan."
B-1
DTVN HOLDINGS, INC.
635 West Campbell Road, Suite 130
Richardson, Texas 75080
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Hugh D. Simpson proxy with full power of
substitution and with all powers the undersigned would possess if personally
present, to represent and to vote at the 2001 Annual Meeting of Stockholders to
be held on July 25, 2001 and at any adjournment or postponement thereof, as
designated on the reverse side hereof and in his discretion with respect to any
matters incident to the conduct of the meeting and other matters as may
properly come before such meeting, all of the shares of common stock of DTVN
Holdings, Inc. held of record by the undersigned as of the close of business on
June 29, 2001. All proxies previously given with respect to the shares covered
hereby are hereby revoked.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE FOLLOWING PROPOSALS:
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder and at the discretion of the proxyholder
as to any other matters that may properly come before the meeting. If no
direction is made, this Proxy will be voted FOR the following proposals and at
the discretion of the proxyholder as to any other matters that may properly
come before the meeting.
1. PROPOSAL TO ELECT DIRECTORS.
FOR all nominees WITHHOLD AUTHORITY NOMINEES
listed at the For all nominees Hugh D. Simpson, Philip
right [_] listed at the N. O'Reilly, James S.
right [_] Holden, Amar Budarapu,
David G. Olson, G.
Edward Powell
Instruction: To withhold authority for any individual nominee(s), put an x in
the "For all nominees" box and strike a line through the name(s) of the
nominee(s) not voted for in the list at the right.
2. PROPOSAL TO APPROVE AND ADOPT THE AMENDMENT TO THE 2000 STOCK OPTION AND
RESTRICTED STOCK PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE.
FOR [_] AGAINST [_] ABSTAIN [_]
3. PROPOSAL TO RATIFY THE SELECTION OF KPMG LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS.
FOR [_] AGAINST [_] ABSTAIN [_]
Please sign and return promptly in the
enclosed envelope.
Signature(s)________________________________
Date________________________________________
NOTE: Please sign exactly as name appears.
When shares are held by joint tenants, both
should sign. When signing as attorney-in-
fact, executor, administrator, trustee or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by the president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.