UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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PUBLICARD, INC.
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(Name of Registrant as Specified In Its Charter)
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October 22, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of
Shareholders of PubliCARD, Inc. (the "Company") to be held on Wednesday,
November 21, 2001 at 10:00 a.m. (New York City time) at the offices of Kaye
Scholer LLP, 425 Park Avenue, New York, New York.
The attached Notice of Annual Meeting and Proxy Statement fully
describe the business to be conducted at the Annual Meeting, including the
election of directors and the ratification of the appointment of the Company's
auditors.
Your Board of Directors recommends a vote "FOR" each of the listed
nominees for Director and "FOR" the ratification of the selection of Arthur
Andersen LLP as auditors for the fiscal year ending December 31, 2001.
Your vote is very important. We hope you will find it convenient to
attend the Annual Meeting in person. Whether or not you are personally able to
attend, it is important that your shares be represented at the meeting.
Accordingly, you are requested to sign, date and return the enclosed proxy
promptly. If you do attend the Annual Meeting, you may still revoke your proxy
and vote in person. Your cooperation is greatly appreciated.
Sincerely,
/s/ JAN-ERIK ROTTINGHUIS
President and Chief Executive Officer
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 21, 2001
To the Shareholders of PubliCARD, Inc.
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Shareholders
(the "Annual Meeting") of PubliCARD, Inc. (the "Company") will be held at the
offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York on Wednesday,
November 21, 2001 at 10:00 a.m. for the following purposes:
1. To elect seven directors to hold office until the annual meeting of
shareholders to be held in 2002 and until their respective successors
shall be duly elected and qualified;
2. To ratify the selection of Arthur Andersen LLP as auditors for the
fiscal year ending December 31, 2001; and
3. To transact such other business as may properly be brought before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 15,
2001, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof.
By Order of the Board of Directors,
/s/ ANTONIO L. DELISE
Vice President, Chief Financial Officer and Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS
OF THE NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE
ANNUAL MEETING. RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON
OR TO ATTEND THE ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU
CANNOT ATTEND. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE. PLEASE NOTE,
HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO ATTEND AND VOTE AT THE ANNUAL MEETING, YOU MUST OBTAIN
FROM SUCH BROKER, BANK OR OTHER NOMINEE A PROXY ISSUED IN YOUR NAME.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 21, 2001
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This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of PubliCARD, Inc., a Pennsylvania
corporation (the "Company" or "PubliCARD"), to be voted at the 2001 Annual
Meeting of Shareholders of the Company referred to in the foregoing Notice (the
"Annual Meeting").
RECORD DATE AND VOTING SECURITIES
Only holders of the Company's Common Stock, par value $0.10 per share
(the "Common Stock"), of record at the close of business on October 15, 2001
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
On that date, the Company had outstanding and entitled to vote 24,153,402 shares
of Common Stock. Each outstanding share of Common Stock entitles the record
holder to one vote on each matter.
VOTING PROCEDURES
In order for any business to be conducted at the Annual Meeting,
holders of more than 50% of the shares entitled to vote must be represented at
the Annual Meeting, either in person or by proxy. Abstentions and broker
non-votes are each included in the determination of the number of shares present
and voting. Each is tabulated separately. Abstentions are counted in tabulations
of the votes cast on proposals presented to shareholders, whereas broker
non-votes are not.
All proxies received pursuant to this solicitation will be voted, and,
where a choice is specified as to the proposals described in the foregoing
Notice, they will be voted in accordance with that specification. If no choice
is specified with respect to any proposal, the proxy will be voted in favor of
such proposal. Shareholders who execute proxies may revoke them at any time
before they are voted either by delivering to the Secretary of the Company
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. This proxy statement and
accompanying material are being mailed to the Company's shareholders on or about
October 22, 2001.
COST OF SOLICITING MANAGEMENT PROXIES
The entire cost of soliciting management proxies will be borne by the
Company. Proxies will be solicited by mail and may be solicited personally by
directors, officers or regular employees of the Company, who will not be
compensated for their services. In order to support the Board of Directors'
nominees and the other proposal herein and to help ensure the presence of a
quorum, the Company has retained the services of D.F. King & Co., Inc. as proxy
solicitor to assist in the solicitation of proxies for the Annual Meeting. The
fees payable to D.F. King & Co., Inc. in connection with this solicitation are
estimated to be $10,000. The Company will reimburse banks, brokerage firms and
other custodians, nominees and fiduciaries for reasonable expenses incurred in
sending proxy materials to their principals and obtaining their proxies.
Accompanying this proxy statement is a copy of the Company's 2000 Annual Report
and the Company's Quarterly Report for the fiscal quarter ended June 30, 2001.
SHAREHOLDER PROPOSALS
If a shareholder wishes to have a proposal considered for inclusion in
the Company's proxy materials for the 2002 Annual Meeting of Shareholders, the
proposal must be stated in writing and be received by the Company at its
principal executive office on or before June 6, 2002.
The deadline for delivering a notice of any other shareholder proposal
which does not seek to nominate a director(s) of the Company or is not to be
included in the proxy materials for the 2002 Annual Meeting of Shareholders will
be September 2, 2002. Any notice of a shareholder proposal received after
September 2, 2002 will be considered untimely. The persons named as proxies in
the proxy materials for the 2002 Annual Meeting of Shareholders may exercise
discretionary voting authority with respect to any matter that is not submitted
to the Company by such date. Additionally, even if proper notice is received on
or prior to September 2, 2002, the individuals named as proxies on the proxy
card for
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that meeting may nevertheless exercise their discretionary authority in voting
such proxies with respect to such proposal by advising the shareholders of the
proposal and how they intend to exercise their discretion to vote on such
proposal, unless the shareholder making the proposal solicits proxies with
respect to the proposal to the extent required by Rule 14a-4(c)(2) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, seven directors are to be elected to hold office
until the next annual meeting of shareholders and until their respective
successors have been elected and qualified. In order to be elected, each nominee
must receive a plurality of the votes cast at the Annual Meeting.
Unless otherwise directed, proxies given to the persons named in the
enclosed proxy pursuant to this solicitation will be voted for the election as
directors of Messrs. Freund, Goldsmith, Rottinghuis, Cohn, Schafran, Vogel and
DeLise. If any such nominee should become unavailable for any reason, which the
Board of Directors has no reason to anticipate, the proxy holders reserve the
right to substitute another person of their choice in his place.
The Company currently has seven directors, six of which were elected at
the Annual Meeting of Shareholders held on September 26, 2000. Antonio L. DeLise
was appointed as a director on July 9, 2001. On October 5, 2001, the Nominating
Committee of the Board of Directors nominated Emil Vogel to serve as a director
upon election at the Annual Meeting. Hatim A. Tyabji is not standing for
re-election as a member of the Board of Directors. All directors serve until the
next election of directors or until their successors have been elected and have
qualified. All of the persons named in the enclosed proxy are currently
directors of the Company, other than Emil Vogel. See "Executive Compensation --
Employment and Change in Control Agreements."
Set forth below as to each director nominated for election or
reelection as a director of the Company, as the case may be, is information
regarding age (as of October 1, 2001), position with the Company, principal
occupation, business experience, period of service as a director of the Company
and directorships currently held.
HARRY I. FREUND: Age 61; Director of PubliCARD since April 12, 1985,
Chairman of the Board of Directors since December 1985 and Chairman of PubliCARD
since October 1998. Since 1975, Mr. Freund has been Chairman of Balfour
Investors Inc., a merchant banking firm that had previously been engaged in a
general brokerage business ("Balfour").
JAY S. GOLDSMITH: Age 57; Director of PubliCARD since April 12, 1985,
Vice Chairman of the Board of Directors since December 1985 and Vice Chairman of
PubliCARD since October 1998. Since 1975, Mr. Goldsmith has been President of
Balfour.
JAN-ERIK ROTTINGHUIS: Age 53; Director of PubliCARD since December 13,
1999, President and Chief Executive Officer of PubliCARD effective in early
2000. Prior to joining PubliCARD, since 1993, Mr. Rottinghuis had been employed
by VeriFone, Inc., a subsidiary and part of the Internet Business Unit of
Hewlett Packard Company, most recently as Vice President, Worldwide Sales. Prior
to joining VeriFone, he was responsible for sales, marketing and business
development with Polaroid Europe, acting as General Manager of Polaroid France
and as Director of European Sales and Marketing. Prior to that, Mr. Rottinghuis
held various positions in international marketing and business development for
Wang Laboratories in Boston and France, and provided strategic management
consultancy to the diverse clientele of Bain & Company, also in Boston.
CLIFFORD B. COHN: Age 49; Director of PubliCARD since July 31, 1980,
and was Vice President of Government Affairs of PubliCARD from April 1, 1982 to
November 20, 1984. Mr. Cohn is the principal of Cohn and Associates, a law firm
in Philadelphia, Pennsylvania established in 1978.
L.G. SCHAFRAN: Age 63; Director of PubliCARD since December 3, 1986.
Mr. Schafran is the Managing General Partner of L.G. Schafran & Associates, a
investment and development firm established in 1984. He was Chairman of the
Executive Committee of Dart Group Corporation ("Dart") from 1994 to October 1997
and a director of Dart (and its publicly-traded subsidiaries) from 1993 to
October 1997. Mr. Schafran is a director of Tarragon Realty Advisors, Inc., and
Vertex Interactive, Inc., and is Chairman of the Board and Co-Chief Executive
Officer of Delta-Omega Technologies, Inc.
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and has been interim Chief Executive Officer and Chairman of the Board of Banyan
Strategic Realty Trust since October 2000.
Emil Vogel : Age 58; Emil Vogel is the Senior Partner and founder of
Tarnow Associates. Prior to Tarnow, Mr. Vogel spent nine years with an executive
search firm in the New York metro area conducting senior level search
assignments. Mr. Vogel is also a director of Q.E. P. Co., Inc.
Antonio L. DeLise : Age 40; Director of PubliCARD since July 9, 2001
and Vice President, Chief Financial Officer and Secretary since April 1995.
Prior to joining the Company, Mr. DeLise was employed as a senior manager with
the firm of Arthur Andersen LLP and had been with such firm from July 1983
through March 1995.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF MESSRS. FREUND,
GOLDSMITH, ROTTINGHUIS, COHN, SCHAFRAN, VOGEL AND DELISE FOR ELECTION AS
DIRECTORS OF THE COMPANY.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Through September 30, 2000, directors who were not officers of the
Company were paid $2,500 per month for services as directors and, in addition,
$750 per day for each meeting of the Board or of shareholders that they attended
without regard to the number of meetings attended each day. Effective October 1,
2000 the monthly retainer and per diem fees were suspended.
Messrs. Freund and Goldsmith are each party to an agreement with the
Company providing for payments to them under certain circumstances following a
change in control of the Company. See "Executive Compensation - Employment and
Change in Control Agreements."
The Company and Balfour are parties to a License Agreement, dated as of
October 26, 1994 (the "License Agreement"), with respect to a portion of the
office space leased by the Company in New York City. The Chairman and Vice
Chairman of the Company's Board of Directors are the only shareholders of
Balfour. The term of the License Agreement commenced on January 1, 1995 and will
expire on June 30, 2004, unless sooner terminated pursuant to law or the terms
of the License Agreement. The License Agreement provides for Balfour to pay to
the Company a portion of the rent paid by the Company under its lease, including
base rent, electricity, water, real estate tax escalations and operation and
maintenance escalations. As of October 1, 2001, Balfour's share of rent and
other costs was 31%. The current base rent payable by Balfour under the License
Agreement is $6,400 per month.
Directors of the Company are elected at each annual meeting of
shareholders to hold office until the next annual meeting of shareholders and
until their respective successors are duly elected and qualified. Executive
officers are elected to hold office until the first meeting of directors
following the next annual meeting of shareholders or until their successors are
sooner elected by the Board and qualified.
During 2000, there were 11 meetings of the Board of Directors of the
Company. The Board of Directors has various committees, including an Audit
Committee, a Compensation Committee, a Directors Compensation Committee and a
Nominating Committee. During 2000, each of the Directors attended at least 75%
of the total number of meetings held by the Board of Directors and the
committees of which he was a member.
The Audit Committee of the Board of Directors reviews with the
Company's independent public accountants the plan and scope of the audit for
each year, as well as the results of each audit when completed and the
accountants' fee for services performed. The Audit Committee also reviews with
management and with the independent accountants the Company's internal control
procedures. The Audit Committee is composed of members of the Board of Directors
who are not otherwise officers or employees of the Company. The present members
of the Audit Committee are L. G. Schafran (Chairman), Clifford B. Cohn and Hatim
Tyabji. The Audit Committee met four times during 2000.
The Compensation Committee of the Board of Directors, which consists
entirely of members of the Board of Directors who are not otherwise officers or
employees of the Company, reviews the compensation of key employees of the
Company. The present members of the Compensation Committee are Clifford B. Cohn
(Chairman) and L. G. Schafran. The Compensation Committee did not meet during
2000.
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The Directors Compensation Committee of the Board of Directors reviews
the compensation of directors of the Company. The present members of the
Directors Compensation Committee are L. G. Schafran (Chairman) and Clifford B.
Cohn. The Directors Compensation Committee did not meet during 2000.
The Nominating Committee of the Board of Directors advises and makes
recommendations to the Board of Directors on the selection of candidates as
nominees for election as directors. The members of the Nominating Committee are
Jay S. Goldsmith (Chairman), Harry I. Freund and Clifford B. Cohn. The
Nominating Committee did not meet during 2000. The Nominating Committee will
consider nominees recommended by shareholders pursuant to procedures described
in "Shareholder Nominations."
SHAREHOLDER NOMINATIONS
Nominations for election of directors may be made by any shareholder
entitled to vote for the election of directors, provided that written notice
(the "Notice") of such shareholder's intent to nominate a director at the
meeting is given by the shareholder and received by the Secretary of the Company
in the manner and within the time specified herein. The Notice shall be
delivered to the Secretary of the Company not less than 14 days nor more than 50
days prior to any meeting of the shareholders called for the election of
directors; provided, however, that if less than 21 days notice of the meeting is
given to shareholders, the Notice shall be delivered to the Secretary of the
Company not later than the earlier of the seventh day following the day on which
notice of the meeting was first mailed to shareholders or the fourth day prior
to the meeting. In lieu of delivery to the Secretary of the Company, the Notice
may be mailed to the Secretary of the Company by certified mail, return receipt
requested, but shall be deemed to have been given only upon actual receipt by
the Secretary of the Company.
The Notice shall be in writing and shall contain or be accompanied by:
(a) the name and residence of the shareholder submitting the
nomination;
(b) a representation that such shareholder is a holder of record of the
Company's voting stock and intends to appear in person or by proxy at the
meeting to nominate the persons specified in the Notice;
(c) such information regarding each nominee as would have been required
to be included in a proxy statement filed pursuant to Regulation 14A of the
rules and regulations established by the Securities and Exchange Commission
under the Exchange Act (or pursuant to any successor act or regulation) had
proxies been solicited with respect to such nominee by the management or Board
of Directors of the Company;
(d) a description of all arrangements or understandings among such
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which such nomination or nominations are to be made by
the shareholder; and
(e) the consent of each nominee to serve as director of the Company if
so elected.
Unless a judge or judges of election shall have been appointed pursuant
to the By-Laws, the Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that any nomination made at the meeting was not made
in accordance with the foregoing procedures and, in such event, the nomination
shall be disregarded. Any decision by the Chairman of the meeting shall be
conclusive and binding upon all shareholders of the Company for any purpose.
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PRINCIPAL SHAREHOLDERS
The following table sets forth as of October 1, 2001 the beneficial
ownership of the Company's Common Stock by each person who owns of record or is
known by the Company to own beneficially more than 5% of the Common Stock of the
Company, all directors, nominees and executive officers individually and all
directors, nominees and executive officers as a group. All information with
respect to beneficial ownership has been furnished to the Company by the
respective shareholders of the Company.
BENEFICIAL OWNERSHIP OF SHARES
OF COMMON STOCK AS OF PERCENT OF
NAME POSITION OCTOBER 1, 2001 (1) CLASS (1)
---- -------- ------------------- ---------
Taube Hodson Stonex N/A 2,995,000(2) 12.4%
Partners Limited
27 St. James Place
London SW1A INR
United Kingdom
Harry I. Freund Director, Chairman of the 1,696,372(3) 6.8%
c/o PubliCARD, Inc. Board and Chairman
620 Fifth Avenue
Rockefeller Center
New York, NY 10020
Jay S. Goldsmith Director, Vice Chairman of 1,740,062(4) 6.9%
c/o PubliCARD, Inc. the Board and Vice Chairman
620 Fifth Avenue
Rockefeller Center
New York, NY 10020
Jan-Erik Rottinghuis Director, President and 466,667(5) 1.9%
Chief Executive Officer
Clifford B. Cohn Director 239,373(6) 1.0%
L.G. Schafran Director 366,159(7) 1.5%
Hatim Tyabji Director 540,000(8) 2.2%
Emil Vogel Nominee for Director 62,400 Less than 1%
Antonio L. DeLise Director, Vice President, 198,666(9) Less than 1%
Chief Financial Officer and
Secretary
M. Richard Phillimore Former Executive Vice 260,000(10) 1.1%
President - Strategy
William Volmuth Former Vice President, 31,667(11) Less than 1%
Chief Technology Officer
All directors, nominees and 5,601,366(12) 20.2%
officers as a group (10 persons)
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----------------------
(1) Calculated in accordance with Rule 13d-3 adopted by the Securities and
Exchange Commission (the "SEC") under the Exchange Act.
(2) Based on statements on Schedule 13G filed with the SEC on October 11,
1999 and on Form 4 filed with the SEC on January 2, 2001. Taube Hodson
Stonex Partners Limited is a discretionary investment advisor to J.
Rothschild Assurance Life Fund, St. James Place International Unit
Trust, J. Rothschild Assurance Pension Fund, J. Rothschild
International Assurance Managed Fund, J. Rothschild International
Assurance US$ Managed Fund, TDG Funds Limited, GAM Worldwide Fund and
The Partners Fund. Taube Hodson Stonex Partners Limited has power to
vote and direct the vote and power to dispose and direct the
disposition of shares held by such funds.
(3) Includes shares of Common Stock which may be acquired by Mr. Freund
within 60 days as follows: 258,579 shares through the exercise of stock
options and 688,861 shares through the exercise of stock purchase
warrants. Also includes 5,454 shares of Common Stock held by Mr.
Freund's spouse over which Mr. Freund has shared voting and investment
power but as to which he disclaims any beneficial interest. Also
includes 13,000 shares that may be deemed to be owned beneficially by
Mr. Freund which are held by the Balfour Defined Benefit Pension Plan
(the "Plan"), for which Mr. Freund is a Trustee and Plan Administrator
and in which he participates. Mr. Freund disclaims ownership of 5,850
shares of such 13,000 shares.
(4) Includes shares of Common Stock which may be acquired by Mr. Goldsmith
within 60 days as follows: 258,579 shares through the exercise of stock
options and 744,930 shares through the exercise of stock purchase
warrants. Also includes 1,250 shares of Common Stock held by Mr.
Goldsmith's spouse over which Mr. Goldsmith has shared voting and
investment power but as to which he disclaims any beneficial interest.
Also includes 13,000 shares that may be deemed to be owned beneficially
by Mr. Goldsmith which are held by the Plan, of which Mr. Goldsmith is
a Trustee and Plan Administrator and in which he participates. Mr.
Goldsmith disclaims ownership of 7,280 shares of Common Stock held by
the Plan.
(5) Mr. Rottinghuis became the Company's President and Chief Executive
Officer in early 2000. Pursuant to the employment agreement between Mr.
Rottinghuis and the Company, the Company issued 200,000 shares of
Common Stock to Mr. Rottinghuis on November 2, 1999. Also includes
266,667 shares which may be acquired by Mr. Rottinghuis within 60 days
through the exercise of stock options. See "Employment and Change in
Control Agreements."
(6) Includes 172,059 shares which may be acquired by Mr. Cohn within 60
days through the exercise of stock options.
(7) Includes 212,059 shares which may be acquired by Mr. Schafran within 60
days through the exercise of stock options. Also includes 114,050
shares of Common Stock and 40,050 shares that may be acquired through
the exercise of stock purchase warrants held by Mr. Schafran's spouse
as to which Mr. Schafran disclaims any beneficial interest.
(8) Includes 540,000 shares which may be acquired by Mr. Tyabji within 60
days through the exercise of stock options.
(9) Includes 171,666 shares which may be acquired by Mr. DeLise within 60
days through the exercise of stock options.
(10) Includes 210,000 shares which may be acquired by Mr. Phillimore within
60 days through the exercise of stock options.
(11) Includes 31,667 shares which may be acquired by Mr. Volmuth within 60
days through the exercise of stock options.
(12) Includes shares of Common Stock which may be acquired by such persons
within 60 days as follows: 2,121,276 shares through the exercise of
stock options and 1,473,841 shares through the exercise of stock
purchase warrants.
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EXECUTIVE COMPENSATION
The following tables set forth information concerning the cash
compensation, stock options and retirement benefits provided to PubliCARD's
executive officers. The notes to these tables provide more specific information
concerning compensation. The Company's compensation policies are discussed in
the Compensation Committee Report on Executive Compensation.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION --------------------------
-------------------------------- RESTRICTED OPTIONS/SARs ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) STOCK (#) (2) COMPENSATION
---- ------ --------- ---------- ------------ ------------
Harry I. Freund (3).............. 2000 $312,500 $ - - 200,000 $15,000(6)
Chairman of the Board of 1999 325,000 - - - 15,000(6)
Directors and Chairman 1998 325,000 - - - 15,000(6)
Jay S. Goldsmith (3)............. 2000 312,500 - - 200,000 22,966(6)
Vice Chairman of the Board of 1999 325,000 - - - 22,966(6)
Directors and Vice Chairman 1998 325,000 - - - 22,966(6)
Jan-Erik Rottinghuis (4)......... 2000 343,750 100,000 - 230,000 5,604(6)
President, Chief Executive 1999 25,228 - - 800,000(7) 1,475,000(7)
Officer and Director
M. Richard Phillimore (5)........ 2000 325,000 66,875 - 22,500 5,100(8)
Former Executive Vice 1999 311,458 100,000 50,000(8) 200,000(8) 143,781(8)
President - Strategy
Antonio L. DeLise................ 2000 250,000 78,875 - 107,500 6,549(9)
Vice President, Chief Financial 1999 195,000 100,000 - - 5,713(9)
Officer and Secretary 1998 183,611 100,000 - 75,000 5,861(9)
--------------------------
(1) Reflects bonus earned during the fiscal year. In some instances, all or
a portion of the bonus was paid during the next fiscal year.
(2) Options to acquire shares of Common Stock.
(3) On November 1, 1998, Messrs. Freund and Goldsmith were appointed
executive officers of PubliCARD with the titles of Chairman and Vice
Chairman, respectively. Prior to such time, Messrs. Freund and
Goldsmith were directors of PubliCARD with the titles of Chairman of
the Board and Vice Chairman of the Board, respectively, titles and
positions which they still hold in addition to their positions as
executive officers of PubliCARD. For the period prior to November 1,
1998, Messrs. Freund and Goldsmith received compensation from PubliCARD
in their capacities as directors of PubliCARD and for serving as
Chairman of the Board and Vice Chairman of the Board, respectively, at
the rate of $325,000 per year. Commencing November 1, 1998, Messrs.
Freund and Goldsmith have received compensation from PubliCARD at the
same rate in their capacities as executive officers. Effective October
1, 2000, the annual salary of each of Messrs. Freund and Goldsmith was
reduced to $275,000.
(4) Mr. Rottinghuis was appointed President and Chief Executive Officer of
the Company by the Company's Board of Directors on November 5, 1999,
effective early in 2000.
(5) Mr. Phillimore served as Executive Vice President - Strategy through
February 2001.
(6) Represents life insurance premiums paid on behalf of Mr. Freund, Mr.
Goldsmith and Mr. Rottinghuis.
(7) Pursuant to an employment agreement dated November 2, 1999, Mr.
Rottinghuis was awarded 200,000 shares of Common Stock and options to
purchase a total of 800,000 shares of Common Stock. The dollar
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value as of the date the award of the 200,000 shares of Common Stock
has been included under the caption "All Other Compensation."
(8) Pursuant to an employment agreement, Mr. Phillimore was awarded 50,000
shares of restricted Common Stock, options to purchase 200,000 shares
of Common Stock and a $140,000 signing bonus. The restricted shares
vested on January 19, 2000. The caption "All Other Compensation"
includes the $140,000 signing bonus in 1999 and $3,781 and $5,100 in
contributions to PubliCARD's 401(k) plan in 1999 and 2000,
respectively.
(9) Consists of $4,800, $4,800 and $5,100 in contributions to PubliCARD's
401(k) plan for 1998, 1999 and 2000, respectively, and $1,061, $913 and
$1,449 for term life and disability insurance payments paid on behalf
of Mr. DeLise for 1998, 1999 and 2000, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants to
purchase shares of Common Stock to the following persons during the fiscal year
ended December 31, 2000:
PERCENT OF POTENTIAL REALIZABLE VALUE AT ASSUMED
TOTAL ANNUAL RATES OF STOCK PRICE
OPTIONS EXERCISE APPRECIATION FOR OPTION TERMS (1)
OPTIONS GRANTED TO PRICE PER EXPIRATION -------------------------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
---- ------- ---------- --------- ---------- ---------- -----------
Harry I. Freund.......... 200,000 8.0% $8.56 1/19/2005 $473,132 $1,045,498
Jay S. Goldsmith......... 200,000 8.0% 8.56 1/19/2005 473,132 1,045,498
Jan-Erik Rottinghuis..... 230,000 9.2% 3.28 6/7/2005 208,427 460,569
M. Richard Phillimore.... 12,500 .5% 3.28 6/7/2005 11,328 25,031
10,000 .4% 1.50 12/22/2010 9,433 23,906
Antonio L. DeLise........ 75,000 3.0% 9.50 1/24/2005 196,851 434,988
12,500 .5% 3.28 6/7/2005 11,328 25,031
10,000 .4% 2.69 9/14/2005 7,425 16,407
10,000 .4% 1.50 12/22/2010 9,433 23,906
----------------------------
(1) The potential gain is calculated from the closing price of Common Stock
on the date of grant to executive officers. These amounts represent
certain assumed rates of appreciation only. Actual gains, if any, on
stock option exercises and Common Stock holdings are dependent on the
future performance of the Common Stock and overall market conditions.
There can be no assurance that the amounts reflected in this table will
be achieved.
AGGREGATE STOCK OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information as of December 31,
2000 concerning exercisable and unexercisable stock options held by the
following persons:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END YEAR END (1)
NAME EXERCISE REALIZED EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
Harry I. Freund........... 325,000 $1,014,062 216,912(2) / 200,000 $28,723 / -
Jay S. Goldsmith.......... 325,000 1,014,062 216,912(2) / 200,000 28,723 / -
Jan-Erik Rottinghuis...... - - 333,332 / 696,668 - / -
M. Richard Phillimore..... - - 100,000 / 122,900 - / 1,250
Antonio L. DeLise......... 25,000 23,443 135,000 / 97,500 3,125 / 1,250
8
---------------------------
(1) These values are based on the December 31, 2000 closing price for
PubliCARD's Common Stock on the Nasdaq National Market of $1.625 per
share.
(2) Excludes shares of Common Stock which may be acquired by Messrs. Freund
and Goldsmith through the exercise of Common Stock purchase warrants in
the amounts of 688,861 and 744,930, respectively.
STOCK OPTION PLANS
Under the 1993 Long-Term Incentive Plan and the Non-employee Director
Stock Option Plan adopted by shareholders of the Company in 1994 and the 1999
Long-Term Incentive Plan and 1999 Stock Option Plan for Non-employee Directors
adopted by shareholders of the Company in 1999, the Company may grant stock
options, restricted stock options, stock appreciation rights, performance awards
and other stock-based awards equivalent to up to 7,300,000 shares of Common
Stock. As of December 31, 2000, a total of 1,639,750 shares of Common Stock in
the aggregate were available for grant under the stock option plans.
The plans are administered by the Board of Directors and/or the
Compensation Committee of the Board of Directors of the Company. Subject to the
express provisions of the plans, the Compensation Committee or the Board of
Directors, as applicable, has full and final authority to determine the terms of
all awards granted under the plans including (a) the purchase price of the
shares covered by each award, (b) whether any payment will be required upon
grant of the award, (c) the individuals to whom, and the time at which, awards
shall be granted, (d) the number of shares to be subject to each award, (e) when
an award can be exercised and whether in whole or in installments, (f) whether
the exercisability of the awards is subject to risk of forfeiture or other
condition and (g) whether the stock issued upon exercise of an award is subject
to repurchase by the Company, and the terms of such repurchase.
STOCK OPTION AGREEMENTS
In February 2001, the Company concluded a stock option re-pricing
program whereby a total of approximately 3.3 million stock options were
cancelled. Pursuant to the program, employees and directors voluntarily elected
to cancel stock options held with an exercise price that exceeded $4.81. In
return, the Company granted replacement stock options on August 20, 2001. The
replacement stock options generally contain the same terms and conditions of the
cancelled stock options and have an exercise price of $.39 per share, the
closing price of the Company's Common Stock on August 20, 2001.
In April 1985, the Company issued 1.6 million shares of Common Stock at
$2.50 per share in a private placement. Under the terms of the related
agreement, Balfour, the agent for the purchasers, received options to buy
400,000 shares of PubliCARD's Common Stock at an exercise price of $2.50 per
share for five years, which period was subsequently extended by ten years.
Balfour subsequently transferred the options to Messrs. Freund and Goldsmith. In
2000, these options were exercised.
In January 1996, PubliCARD issued options to Messrs. Cohn and Schafran
to buy a total of 200,000 shares of PubliCARD's Common Stock at an exercise
price of $2.50 per share for five years. In 2000, a total of 40,000 of such
options were exercised. The expiration date on the remaining options was
subsequently extended by five years to January 2006.
On January 18, 1999, the Company granted stock options to purchase an
aggregate of 200,000 shares of Common Stock to Mr. Phillimore. 100,000 of those
options are exercisable for five years beginning January 19, 2000 at an exercise
price of $5.50 per share. The remaining 100,000 of those options are exercisable
for five years beginning January 19, 2001 at an exercise price of $5.50 per
share.
On March 16, 1999, the Company granted stock options to purchase an
aggregate of 250,000 shares of Common Stock to Mr. Tyabji. 125,000 of those
options are exercisable for four years beginning March 16, 2000 at an exercise
price of $9.75 per share. The remaining 125,000 of those options are exercisable
for three years beginning March 16, 2001 at an exercise price of $9.75 per
share.
9
On November 2, 1999, the Company entered into an option agreement with
Mr. Rottinghuis in connection with his appointment as the Company's President
and Chief Executive Officer, effective in early 2000. Pursuant to the option
agreement, the Company granted options to purchase 400,000 shares of Common
Stock at an exercise price equal to $6.75 per share. 133,333 of these options
become exercisable on November 2, 2000. 133,333 of these options will become
exercisable on November 2, 2001 and 133,334 of these options will become
exercisable on November 2, 2002. If Mr. Rottinghuis' employment is terminated by
Mr. Rottinghuis for good reason or by the Company other than for cause (as each
such term is defined in Mr. Rottinghuis' employment agreement), these options
will become exercisable in full. See "Employment and Change in Control
Agreements." Unless sooner terminated, these options will expire on November 2,
2004.
On November 2, 1999, the Company entered into another option agreement
with Mr. Rottinghuis in connection with his appointment as the Company's
President and Chief Executive Officer. Pursuant to this option agreement, Mr.
Rottinghuis was granted an option to purchase from the Company up to 400,000
shares of Common Stock at an exercise price equal to $6.75 per share. This
option will become exercisable in accordance with, in such installments as may
be provided in and upon satisfaction of performance criteria that will be
established by mutual agreement of the Company and Mr. Rottinghuis. This option
will be exercisable for the periods specified in such performance criteria. If
Mr. Rottinghuis' employment agreement is terminated by the Company other than
for cause or by Mr. Rottinghuis for good reason, this option will be exercisable
for a number of shares of Common Stock equal to the sum of (i) the number of
shares for which it was exercisable immediately prior to such termination and
(ii) the number of shares for which it could become exercisable after such
termination if all performance criteria applicable to the period after
termination were met. Unless sooner terminated, this option will expire on
November 2, 2004.
In February 2001, the stock options held by Messrs. Rottinghuis, Tyabji
and Phillimore referenced in the previous paragraphs were cancelled pursuant to
the stock option re-pricing program. Replacement options have been issued to
each of them in respect of such cancelled options on August 20, 2001 as
described above.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
On November 2, 1999, the Company entered into an employment agreement
with Mr. Rottinghuis, pursuant to which he began to serve as President and Chief
Executive Officer of the Company, effective in early 2000, and pursuant to which
the Company agreed to nominate Mr. Rottinghuis to serve on the Company's board
of directors. The employment agreement provides that Mr. Rottinghuis'
compensation will consist of $350,000 per year plus an annual bonus in an amount
to be determined by the Company's board of directors, but not less than
$100,000. Effective October 1, 2000, Mr. Rottinghuis' annual salary was reduced
to $325,000.
Pursuant to the employment agreement, on November 2, 1999, the Company
issued to Mr. Rottinghuis (i) 200,000 shares of its Common Stock to compensate
him for economic losses he suffered as a result of terminating his prior
employment and (ii) options to acquire 400,000 shares of Common Stock. The
employment agreement also provides that Mr. Rottinghuis will be eligible to
receive an option to acquire 400,000 additional shares of Common Stock, which
will become exercisable upon the achievement of certain performance-based goals.
For the fiscal year ended December 31, 2000, 133,333 of these options vested.
The remaining options will vest upon achievement of certain performance-based
goals. See "Stock Option Agreements."
The term of Mr. Rottinghuis' employment with the Company is three
years, unless sooner terminated in accordance with the terms of the employment
agreement. The employment agreement may be terminated (a) upon the death of Mr.
Rottinghuis, (b) upon the disability of Mr. Rottinghuis, (c) for cause or (d)
for good reason (as each such term is defined in the employment agreement).
In August 1987, the Company entered into change of control agreements
with each of Messrs. Freund and Goldsmith, which provide for payments to them
under certain circumstances following a change of control of the Company. These
agreements were not adopted in response to any specific acquisition of shares of
PubliCARD or any other event threatening to bring about a change of control of
the Company. For purposes of the agreements, a change of control is defined as
any of the following: (a) the Company ceasing to be a publicly owned corporation
having at least 2,000 shareholders, (b) any person or group acquiring in excess
of 30% of the voting power of the Company's securities, (c) Messrs. Freund,
Goldsmith, Cohn and Schafran and any other director designated as a
10
"continuing director" prior to his election as a director by a majority of the
foregoing persons (the "Continuing Directors") ceasing for any reason to
constitute at least a majority of the board of directors, (d) the Company
merging or consolidating with any entity, unless approved by a majority of the
Continuing Directors or (e) the sale or transfer of a substantial portion of
PubliCARD's assets to another entity, unless approved by a majority of the
Continuing Directors.
In the event one of the above-named individuals (a) is terminated as an
employee of the Company for any reason other than conviction of a felony or any
act of fraud or embezzlement, (b) is disabled for six consecutive months or
dies, (c) is not elected and maintained in the office which he now occupies, (d)
is not included by the board of directors in the slate of directors recommended
to shareholders, (e) receives a reduction in his salary or fringe benefits, (f)
experiences a change in his place of employment or is required to travel
excessively or (g) experiences other substantial, material and adverse changes
in conditions under which the individual's services are to be rendered, within
three years following a change of control, the individual will be entitled to
receive in a lump sum within 10 days of the date of discontinuance, a payment
equal to 2.99 times the individual's average annual compensation for the shorter
of (a) the five years preceding the change of control, or (b) the period the
individual received compensation from PubliCARD for personal services. Assuming
a change of control of the Company and the discontinuance of an individual's
services were to occur at the present time, payments in the following amounts,
assuming there are no "excess parachute payments" as defined in the Internal
Revenue Code of 1986 (the "Code"), would be made pursuant to the change of
control agreements: Mr. Freund $964,000; and Mr. Goldsmith $964,000. In the
event any such payment, either alone or together with others made in connection
with the individual's discontinuance, is considered to be an excess parachute
payment, the individual is entitled to receive an additional payment in an
amount which, when added to the initial payment, results in a net benefit to the
individual, after giving effect to excise taxes imposed by Section 4999 of the
Code and income taxes on such additional payment, equal to the initial payment
before such additional payment. Since the change of control agreements would
require large cash payments to be made by any person or group effecting a change
of control of PubliCARD, absent the assent of a majority of the Continuing
Directors, these agreements may discourage hostile takeover attempts of
PubliCARD.
The change of control agreements would have expired on December 1, 2000
but have been and will continue to be automatically extended for a period of one
year on each December 1, unless terminated by either party prior to any December
1. In the event a change of control occurs while the change of control
agreements are in effect, the term of such agreements will automatically be
extended to three years from the date of the change of control and the foregoing
renewal option will become inapplicable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, consisting
entirely of outside directors, approves all of the policies under which
compensation is paid or awarded to the Company's executive officers. The present
members of the Compensation Committee are Clifford B. Cohn (Chairman) and L. G.
Schafran. The objectives of the Company's executive compensation program are to
attract and retain highly talented and productive executives and to align the
interests of the executive officers with the interests of the Company's
shareholders by basing a significant portion of their compensation upon the
Company's performance and achievement of strategic goals.
The Company's compensation program for executive officers currently
consists of base salary, annual bonus and long-term incentive compensation
consisting of periodic grants of qualified and nonqualified stock options. Each
element of this program serves a specific purpose in meeting the Company's
objectives.
Base salary. The Committee annually reviews the salaries of the
executive officers. In establishing the base salary, the Compensation Committee
considers level of responsibility, individual performance, Company performance,
competitive market conditions for executive compensation, prior experience and
contributions made to the Company's success. The Compensation Committee has not
found it practicable, nor has it attempted, to assign relative weights to the
specific factors used in determining base salary levels.
Quarterly bonus. The Company's cash bonus program represents an at-risk
component of pay designed to motivate executives to work effectively to achieve
the Company's performance objectives and to reward them when objectives are met.
In determining the quarterly bonus payments for 2000, the Compensation Committee
used both
11
quantitative measures of operating results and other quantitative and
non-quantitative measures including individual objectives designed to bring
about improvements in the operations of the Company's subsidiaries.
Long-term incentives. The Compensation Committee believes that option
grants (a) align executive interests with shareholder interests by creating a
direct link between compensation and shareholder return, (b) give executives a
significant long-term interest in the Company's success and (c) help retain key
executives in a competitive market for executive talent. Option grants are made
from time to time to executives whose contributions have or will have a
significant impact on the Company's long-term performance. The determination of
whether option grants are appropriate each year is based upon performance of
each individual. All options granted to executive officers in 2000 were granted
at the fair market value of the Common Stock on the date of grant, are
exercisable for five years and are generally forfeited should the executive
officer leave the Company before retirement, unless already exercised. All stock
option grants are made under the Company's stock option plans, which have been
approved by the Company's shareholders. Because the option grants have been made
at option prices equal to the fair market value on the dates of grant, the stock
options have value only if the stock price appreciates from the value on the
grant date. This design is intended to focus executives on the enhancement of
shareholder value over the long-term.
BASES FOR CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Rottinghuis became the Chief Executive Office of the Company
effective in March 2000. In order to induce Mr. Rottinghuis to join the Company,
in 1999, pursuant to his employment agreement with the Company, Mr. Rottinghuis
received 200,000 shares of Common Stock and options to acquire up to 800,000
shares of Common Stock, subject to certain conditions. See "Employment and
Change in Control Agreements" and "Stock Option Agreements." The Compensation
Committee considered the 2000 compensation commensurate with Mr. Rottinghuis'
expertise in the technology industry and the external pay practices offered with
his level of experience and expertise in the industry. Mr. Rottinghuis' bonus in
year 2000 was paid in accordance with the terms of his employment agreement with
PubliCARD, which Mr. Rottinghuis and the Company negotiated in an arms-length
transaction prior to his employment with the Company.
SECTION 162 (M)
Section 162(m) of the Code limits the tax deduction for compensation
paid to certain executives of public companies to $1.0 million. Having
considered the requirements of Section 162(m), the Compensation Committee
believes that grants made pursuant to the Company's stock option plans meet the
requirements that such grants be "performance based" and are, therefore, exempt
from the limitations on deductibility. Historically, the combined salary and
bonus of each executive officer has been below the $1.0 million limit. The
Compensation Committee's present intention is to comply with Section 162(m)
unless the Compensation Committee feels that required changes would not be in
the best interest of the Company or its stockholders.
This report is submitted by the members of the Compensation Committee
of the Board of Directors.
Compensation Committee
Clifford B. Cohn
L. G. Schafran
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors, which consists
entirely of outside directors, reviews the compensation of key employees of the
Company. The present members of the Compensation Committee are Clifford B. Cohn
(Chairman) and L.G. Schafran. See "Information Concerning the Board of
Directors," "Employment and Change of Control Agreements" and "Principal
Shareholders."
12
FIVE YEAR PERFORMANCE GRAPH: 1996-2000
The following performance graph compares the cumulative total return on
the Common Stock of PubliCARD for the five year period from December 31, 1995 to
December 31, 2000 to (i) the JP Morgan Hambrect & Quist Technology Index and
(ii) the Nasdaq Composite Stock Index.
The annual changes for the five year period from 1996 through 2000 are
based on the assumption that $100 had been invested in PubliCARD Common Stock
and each index on December 31, 1995 (as required by SEC rules), and that all
quarterly dividends were reinvested at the average of the closing stock prices
at the beginning and end of the quarters. The total cumulative dollar returns
shown in the graphs represent the value that such investments would have had on
December 31, 2000.
[LINE GRAPH GRAPHIC]
1995 1996 1997 1998 1999 2000
PubliCARD 100 61 58 589 276 68
JP Morgan H&Q Tech. Ind. 100 123 151 213 395 238
Nasdaq Comp. 100 124 146 227 506 327
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings, including this Proxy
Statement in whole or in part, the foregoing report and the Performance Graph
shall not be incorporated by reference into any such filing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers and persons who own more than 10 percent of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than 10% shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely upon the
Company's review of the copies of such forms received by it during the fiscal
year ended December 31, 2000 and representations that no other reports were
required, the Company believes that each person who, at any time during such
fiscal year was a director, officer or beneficial owner of more than 10% of the
Company's Common Stock complied with all Section 16(a) filing requirements
during such fiscal year, except, that L. G. Schafran and Clifford B. Cohn each
filed one late report covering a Form 4 transaction.
13
PROPOSAL 2 - RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP
as independent accountants to audit the books and accounts of the Company for
the year ending December 31, 2001. Representatives of Arthur Andersen LLP, the
Company's principal accountants for the most recently completed and the current
fiscal years, are expected to be present at the Annual Meeting, will have the
opportunity to make a statement, and will be available to respond to questions.
AUDIT FEES
The aggregate fees billed for professional services rendered by Arthur
Andersen LLP for the audit of the Company's financial statements for the fiscal
year ended December 31, 2000, and reviews of the financial statements included
in the Company's Forms 10-Q for such fiscal year were $120,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Arthur Andersen LLP did not provide the Company with any financial
information system design and implementation services such as defined in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X for the fiscal year ended
December 31, 2000.
ALL OTHER FEES
The aggregate fees billed for services rendered by Arthur Andersen LLP,
other than for audit services and financial information systems design and
implementation services, for the fiscal year ended December 31, 2000 were
$143,000.
GENERAL
The Audit Committee of the Company's Board of Directors has considered
whether the provision of services by Arthur Andersen LLP covered by "Financial
Information Systems Design and Implementation Fees" and "All Other Fees" above
is compatible with maintaining Arthur Andersen LLP's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS AUDITORS.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board consists of L. G. Schafran, Clifford
B. Cohn and Hatim Tyabji, each of whom has been determined to be independent as
defined by Rule 4200(a)(15) the National Association of Securities Dealers'
listing standards. The Audit Committee operates under a written charter adopted
by the Board, attached to this Proxy Statement as Appendix A.
In this context the Audit Committee met four (4) times during the
fiscal year 2000, and held discussions with management and the independent
accountants, Management represented to the Audit Committee that the Company's
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the Audit Committee has reviewed and
discussed the consolidated financial statements with management and the
independent accountants. The Audit Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61.
The Company's independent accountants also provided to the Audit
Committee the written disclosure and letter required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees." The
Audit Committee discussed with the independent accountants that firm's
independence and considered whether the non-audit services provided by the
independent accountants are compatible with maintaining its independence.
14
Based on the Audit Committee's discussion with management and the
independent accountants, and the Audit Committee's review of the representation
of management and the report of the independent accountants to the Audit
Committee, the Audit Committee recommended that the Board include the audited
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000, as amended, filed with the SEC.
Audit Committee
L. G. Schafran
Clifford B. Cohn
Hatim Tyabji
GENERAL
Management of the Company does not know of any matters other than the
foregoing that will be presented for consideration at the Annual Meeting.
However, if other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote thereon in
accordance with their judgment.
By Order of the Board of Directors
/s/ ANTONIO L. DELISE,
Vice President, Chief Financial Officer and Secretary
October 22, 2001
15
APPENDIX A
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF PUBLICARD, INC.
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Corporation to
the public; the Corporation's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established; and the Corporation's auditing, accounting and financial reporting
processes generally. Consistent with this function, the Audit Committee should
encourage continuous improvement of, and should foster adherence to, the
Corporation's policies, procedures and practices at all levels. The Audit
Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
- Review and appraise the audit efforts of the Corporation's
independent accountants and internal auditing department.
- Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department (if one exists or is established), and the Board of
Directors.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her judgment as a member of the Committee. All members of
the Committee shall have a working familiarity with basic finance and accounting
practices, and at least one member of the Committee shall have accounting or
related financial management expertise.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duty
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.
III. MEETINGS
The Committee shall meet at least two times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing department 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 its Chair should meet with the independent accountants and management
quarterly to review the Corporation's financial statements to be filed with the
Securities and Exchange Commission.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A-1
Documents/Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the organization's annual financial statements and any reports or
other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review rendered
by the independent accountants.
3. Review the regular internal reports to management prepared by the
internal auditing department and management's response.
4. Review with financial management and the independent accountants the Form
10-Q prior to its filing or prior to the release of earnings. The Chair of
the Committee may represent the entire Committee for purposes of this
review.
Independent Accountants
5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
6. On an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
7. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
8. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of
the organization's financial statements.
Financial Reporting Processes
9. In consultation with the independent accountants and the internal
auditors, review the integrity of the organization's financial reporting
processes, both internal and external.
10. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in
its financial reporting.
11. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the
independent accountants, management, or the internal auditing department.
Process Improvement
12. Following completion of the annual audit, review separately with each of
management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course of
the audit, including any restrictions on the scope of work or access to
required information.
13. Review any significant disagreement among management and the independent
accountants or the internal auditing department in connection with the
preparation of the financial statements.
14. Review with the independent accountants, the internal auditing department
and management the extent to which changes or improvements in financial
or accounting practices, as approved by the Audit Committee, have been
implemented.
A-2
Ethical and Legal Compliance
15. Review and make recommendations to the Board on concerning corporate
policy on codes of conduct, ethics and other broad social, political or
public issues.
16. Review and make recommendations to the Board on matters relating to
conflicts of interest policies and programs. Consult with directors and
officers of the Corporation concerning administration of those policies
and programs.
17. Review activities, organizational structure, and qualifications of the
internal audit department.
18. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
19. Review, with the organization's counsel, any legal matter that could have
a significant impact on the organization's financial statements.
20. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
It is acknowledged that all of the above listed tasks and focus areas may
not be relevant to all of the matters and tasks that the Committee may consider
and act upon from time to time, and the member of the Committee in their
judgment determine the relevance thereof and the attention such items will
receive in any particular context.
To the fullest extent permissible under applicable law, each member of the
Committee is entitled to rely in good faith upon the records of the Corporation
and upon such information, opinions, reports or statements presented to the
Committee by any of the Corporation's officers, employees or committees, or by
any other person as to matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
A-3
PUBLICARD, INC.
PROXY
SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Harry I. Freund and Jay S. Goldsmith, or
either of them, with full power of substitution, proxies to vote, unless such
authority is withheld, all shares registered in the name of the undersigned of
Common Stock of PubliCARD, Inc. (the "Company") that the undersigned would be
entitled to vote at the Annual Meeting of Shareholders of the Company to be held
at the offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York at 10:00
a.m. on November 21, 2001, and any adjournments thereof, with all powers the
undersigned would possess if personally present, for the election of directors
and on all other matters described in the Proxy Statement or which otherwise
come before the Annual Meeting in the discretion of the Board of Directors.
This Proxy, when properly executed, will be voted in the manner directed
herein. If no instruction to the contrary is indicated, this Proxy will be voted
FOR the election of the Directors named in proposal 1 and FOR proposal 2.
1. ELECTION OF DIRECTORS: Harry I. Freund, Jay S. Goldsmith, Clifford B.
Cohn, Jan-Erik Rottinghuis, L.G. Schafran, Emil Vogel and Antonio L.
DeLise
____ FOR all nominees listed above (except as marked to the contrary
hereon).
____ WITHHOLD AUTHORITY to vote for all nominees listed hereon.
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
--------------------------------------------------------------------------------
2. To ratify the selection of Arthur Andersen LLP as auditors for the fiscal
year ending December 31, 2001.
____ FOR ____ AGAINST ____ ABSTAIN
3. In their discretion, to act upon such other business as may properly be
brought before the Annual Meeting or any adjournment thereof.
(Continued and to be signed and dated on the reverse side.)
NOTE: YOUR SIGNATURE SHOULD CONFORM WITH YOUR NAME
AS IT APPEARS HEREON. IF SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE YOUR FULL TITLE AS SUCH. IF STOCK IS
OWNED BY A PARTNERSHIP OR CORPORATION, PLEASE
INDICATE YOUR CAPACITY IN SIGNING THE PROXY. IF
STOCK IS HELD IN JOINT OWNERSHIP, ALL CO-OWNERS
MUST SIGN.
--------------------------------------------------
Signature
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Signature if held jointly
Dated: , 2001
----------------------
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
P
R
O
X
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.