SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MARKLAND TECHNOLOGIES, INC.
---------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(6) Amount Previously Paid:
(7) Form, Schedule or Registration Statement No.:
(8) Filing Party:
(9) Date Filed:
MARKLAND TECHNOLOGIES, INC.
1413 CHESTNUT AVENUE
HILLSIDE, NJ 07207
NOVEMBER 6, 2001
Dear Markland Technologies, Inc. Shareholder,
I am pleased to invite you to attend the 2001 Annual Meeting of
Shareholders of Markland Technologies, Inc. The meeting will occur on November
29, 2001, at the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081,
Room __, at 9:00 a.m., Eastern Standard time. The phone number for the hotel is
(973) 376-9400.
This letter is accompanied by the formal notice of Markland
Technologies' annual meeting and the proxy statement. The proxy statement tells
you more about the agenda and procedures for the meeting. It also describes how
the board operates and gives information about our director candidates, our
proposed stock incentive plan and our new accountants. A form of proxy for
voting at the meeting, and our 2001 annual report to shareholders on Form
10-KSB, are included with the notice and proxy.
We look forward to greeting personally those of you who are able to be
present at the annual meeting and sharing with you more information about
Markland Technologies.
YOUR VOTE IS VERY IMPORTANT AND IT IS IMPORTANT THAT YOUR SHARES ARE
REPRESENTED, WHETHER OR NOT YOU ARE ABLE TO BE WITH US AT THE MEETING. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, EVEN IF YOU ANTICIPATE ATTENDING IN PERSON,
WE URGE YOU TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. IF YOU
ATTEND, YOU WILL, OF COURSE, BE ENTITLED TO REVOKE YOUR PROXY AND VOTE IN
PERSON.
Sincerely,
/s/ LAWRENCE SHATSOFF
Lawrence Shatsoff
President
MARKLAND TECHNOLOGIES, INC.
1413 CHESTNUT AVENUE
HILLSIDE, NJ 07205
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 6, 2001
To Our Shareholders,
The 2001 annual meeting of shareholders of Markland Technologies, Inc.
will be on November 29, 2001, at the Holiday Inn, 304 Route 22 West,
Springfield, New Jersey 07081, Room_____, at 9:00 a.m., Eastern Standard time,
for the purpose of considering and acting upon the following matters described
in more detail in the accompanying proxy statement:
o the election of two directors, each for a term of one year;
o the approval of the Markland Technologies, Inc. 2001 Stock
Incentive Plan;
o the ratification of the appointment of Feldman Sherb & Co., P.C.
as our independent accountants for our fiscal year ended June 30,
2001 and our fiscal year ending June 30, 2002;
o the approval of an amendment to our articles of incorporation, as
amended, to increase the number of shares of our common stock,
$0.0001 par value per share, authorized for issuance from
300,000,000 to 500,000,000; and
o such other business as may properly come before the annual
meeting, or any adjournments thereof.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE FIRST FOUR
MATTERS OUTLINED ABOVE. OUR BOARD OF DIRECTORS HAS GRANTED THE PROXY HOLDERS
DISCRETIONARY AUTHORITY TO VOTE UPON ANY OTHER MATTER THAT PROPERLY COMES BEFORE
THE ANNUAL MEETING.
Our board of directors has fixed October 15, 2001 as the "record date"
for determining shareholders entitled to notice of and to vote at the annual
meeting. Only shareholders of record as of the record date will be entitled to
notice of and to vote at the annual meeting or any adjournment of the annual
meeting.
All shareholders are cordially invited to attend the annual meeting in
person. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE Annual Meeting IN PERSON,
YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. Shareholders who attend
the annual meeting, and so request, may revoke their proxy and vote their shares
in person even if they have already returned a proxy card.
For entry to the annual meeting, each shareholder may be asked to
present valid picture identification, such as a driver's license or passport.
Shareholders holding stock in brokerage
accounts ("street name" holders) will need to bring a copy of a brokerage
statement reflecting stock ownership as of the record date. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
PLEASE NOTE - IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission has adopted a new rule that
allows us to send a single annual report to two or more of our shareholders
sharing the same address, subject to certain conditions. This new "householding"
rule will provide greater convenience for investors and cost savings for us by
reducing the number of duplicate documents that shareholders receive. The
commission is also proposing an amendment to the new rule to include deliveries
of proxy statements as well.
Unless we receive contrary instructions, if you have the same last name
as any other shareholder who shares the same address, your household will
receive only one copy of our next annual report. If the proposed amendment to
the rule is adopted, you will also receive only one copy of each future proxy
statement, although you will receive a separate proxy card for each shareholder
in the household.
If you wish to continue to receive separate annual reports and proxy
statements for each household account, you may notify us by telephone at (908)
810-5632 or in writing at Markland Technologies, Inc., 1413 Chestnut Avenues,
Hillside, NJ 07205. Your withdrawal from "householding" status will be effective
30 days after we receive your notification. If we do not receive instructions to
remove your account from this service, your account will continue to be
"householded" until you notify us otherwise.
If you have stock in multiple accounts, you may be receiving more than
one copy of our annual report and proxy statement. To reduce the number of
reports and statements that you receive in connection with the our annual
meeting and save us the cost of producing and mailing these extra materials, you
can mark the designated box on the appropriate proxy card(s). Please make sure,
however, that at least one account continues to receive these materials.
Eliminating these duplicate mailings will not affect your receipt of future
proxy cards for any account. If you choose this option and change your mind at a
later date, we may resume mailing these materials within 30 days after
notification by you in the manner provided above.
If you own our common stock beneficially through a nominee (such as a
bank or broker) and receive more than one of our annual reports and proxy
statements, please consider giving permission to your nominee to eliminate
duplicate mailings.
2
We encourage your participation in these programs. It not only allows
us to reduce costs, but is more environmentally friendly by reducing the
unnecessary use of materials.
Sincerely,
/s/ LAWRENCE SHATSOFF
Lawrence Shatsoff
President
3
MARKLAND TECHNOLOGIES, INC.
1413 CHESTNUT AVENUE
HILLSIDE, NJ 07205
2001 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 29, 2001
TABLE OF CONTENTS
<Table>
Date, Time and Place of our Annual Meeting.....................................................................1
ABOUT THE ANNUAL MEETING................................................................................................1
What is the purpose of the annual meeting?.....................................................................1
Who is entitled to notice of and to vote at the annual meeting?................................................1
What are the voting rights of the shareholders?................................................................2
How do I vote and who will vote my proxy?......................................................................2
May I revoke my proxy?.........................................................................................2
What does it mean if I receive more than one proxy card?.......................................................2
Can I vote by telephone or electronically via the internet?....................................................2
What constitutes a quorum?.....................................................................................2
What vote is required to approve each item?....................................................................3
How will votes be tabulated?...................................................................................3
What are our board of directors' recommendations?..............................................................4
Does Markland have any standing committees of its board of directors?..........................................4
Who is paying the cost for this proxy solicitation and how is the solicitation process
conducted?............................................................................................4
Do I have dissenter's rights?..................................................................................4
How do I make a shareholder proposal at the next annual meeting?...............................................4
How do I obtain more information about Markland Technologies, Inc.?............................................5
Has there been a change in control of Markland Technologies, Inc. since the beginning of our
last fiscal year?.....................................................................................5
STOCK OWNERSHIP.........................................................................................................6
How much common stock do our directors and executive officers own and who are the largest
owners of our common stock?...........................................................................6
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION.............................................................................7
</Table>
i
<Table>
How is the compensation determined for our executive officers?................................................7
What is the current summary compensation for our executive officers?...........................................8
What is our philosophy behind our granting of stock options to our executive officers?.........................8
How many stock options were granted to our executive officers in the last fiscal year?.........................9
Have we entered into any employment agreements with any of our executive officers named in the
summary compensation table?...........................................................................9
How are our directors compensated?.............................................................................9
How many times did our board of directors meet during this past fiscal year?...................................9
Who are the current members of our board of directors?.........................................................9
Are there any of our executive officers who are not members of our board of directors?.........................9
Have our directors, officers and 10% beneficial owners complied with the beneficial ownership
reporting requirements of Section 16(a)?.............................................................10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................................................10
PROPOSAL 1 ELECTION OF DIRECTORS.......................................................................................12
PROPOSAL 2 APPROVAL OF THE MARKLAND TECHNOLOGIES, INC. 2001 STOCK INCENTIVE PLAN.......................................13
What is the purpose of our 2001 Stock Incentive Plan?.........................................................13
When will the plan be effective and what will its duration be?................................................13
How will the plan be administered?............................................................................14
What types of awards are to be granted under the plan?........................................................15
What shares of ours are subject to the plan?..................................................................15
To whom can stock options be granted?.........................................................................16
What is the exercise price for each option granted?...........................................................16
When are the awards exercisable?..............................................................................16
Can the options granted under the plan be transferred?........................................................16
Can the plan be amended or terminated?........................................................................17
Can the terms of awards already granted be adjusted or changed?...............................................17
What are the federal income tax consequences of the issuance and exercise of awards granted
under the plan?......................................................................................17
How many options will allocated under the plan if the plan is approved?.......................................18
Can I review the Markland Technologies, Inc. 2001 Stock Incentive Plan?.......................................19
PROPOSAL 3 RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS..................................................19
Who are our newly appointed independent accountants?..........................................................19
</Table>
ii
<Table>
Who were our former independent accountants?..................................................................19
Were there other changes in our independent accountants during our past two fiscal years?.....................19
PROPOSAL 4 APPROVAL OF CHARTER AMENDMENT TO INCREASE OUR COMMON STOCK AUTHORIZED FOR ISSUANCE.........................20
Purpose and Effect of the Charter Amendment...................................................................20
Rights of Holders of Common Stock.............................................................................21
FINANCIAL STATEMENTS...................................................................................................21
OTHER BUSINESS.........................................................................................................22
</Table>
iii
MARKLAND TECHNOLOGIES, INC.
1413 CHESTNUT AVENUE
HILLSIDE, NJ 07205
PROXY STATEMENT
DATE, TIME AND PLACE OF OUR ANNUAL MEETING
This proxy statement contains information and is furnished in
connection with the solicitation by the board of directors of Markland
Technologies, Inc., a Florida corporation, of proxies for use at the 2001 annual
meeting of shareholders of Markland Technologies, Inc. to be held on November
29, 2001, at the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081,
Room ____, at 9:00 a.m., Eastern Standard time, and any adjournment of the
annual meeting. This proxy statement and accompanying proxy card are first being
mailed to shareholders on or about November 6, 2001.
ABOUT THE ANNUAL MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, the shareholders will act upon the matters
outlined in the Notice of 2001 Annual Meeting of Shareholders on the cover page
of this proxy statement, including:
o the election of two directors, each for a term of one year;
o the adoption of the Markland Technologies, Inc. 2001 Stock
Incentive Plan;
o the ratification of Feldman Sherb & Co., P.C. as our independent
accountants for our fiscal year ended June 30, 2001 and our
fiscal year ending June 30, 2002; and
o the approval of an amendment to our articles of incorporation,
as amended, to increase the number of shares of our common
stock, $0.0001 par value per share, authorized for issuance from
300,000,000 to 500,000,000.
In addition, our management will report on the current operations of
Markland Technologies, Inc. and respond to questions from shareholders.
WHO IS ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL MEETING?
Our board of directors has fixed the close of business on October 15,
2001 as the "record date" for the determination of shareholders who are entitled
to notice of the meeting and who are entitled to vote at the annual meeting. As
of the record date we had 299,909,713 outstanding shares of common stock and 504
shareholders of record. Only holders of our common stock as of the record date
will be entitled to notice of and to vote at the annual meeting.
WHAT ARE THE VOTING RIGHTS OF THE SHAREHOLDERS?
The holders of our common stock will vote on all matters to be acted
upon at the annual meeting; each holder of a full share of common stock will be
entitled to one vote per each full share held.
HOW DO I VOTE AND WHO WILL VOTE MY PROXY?
If you properly complete, sign and return the accompanying proxy card,
it will be voted as you direct. Lawrence Shatsoff, the person named as proxy on
the proxy card accompanying this proxy statement, will vote each properly
executed and returned proxy as indicated on the directions of the returned
proxy; if no direction is indicated, the proxy will be voted in accordance with
the recommendations of our board of directors contained in this proxy statement.
Mr. Shatsoff was selected by our board of directors to serve in this capacity.
Even if you plan to attend the annual meeting, your plans may change, so it is a
good idea to complete, sign and return your proxy card in advance of the annual
meeting. "Street name" shareholders who wish to vote at the meeting will need to
obtain a proxy form from the institution that holds their shares. If you attend
the annual meeting, you will, of course, be allowed to vote in person.
MAY I REVOKE MY PROXY?
Yes. Each shareholder giving a proxy has the power to revoke it at any
time before the shares it represents are voted. Revocation of a proxy is
effective upon receipt by our Secretary at or prior to the annual meeting of
either an instrument revoking the proxy or a duly executed proxy bearing a later
date. Additionally, a shareholder may change or revoke a previously executed
proxy by attending the annual meeting and requesting to vote in person. Please
note that attendance at the annual meeting will not by itself revoke a
previously granted proxy.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means that you have multiple accounts at the transfer agent and/or
with stockbrokers. Please sign and return all proxy cards to ensure that all of
your shares are voted.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY VIA THE INTERNET?
No. You may not vote by telephone or electronically through the
Internet. You may vote only by returning a properly executed proxy card or by
voting in person at the annual meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting of at least a majority of the outstanding
shares of the aggregate of our common stock, whether present in person or by
proxy, will constitute a quorum. A quorum must be present at the annual meeting
to permit the conduct of business.
2
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. If you do not
give your broker or nominee specific instructions, your shares may not be voted
on those matters and will not be counted in determining the number of shares
necessary for approval. Shares represented by such "broker non-votes" will be
counted to determine whether there is a quorum.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the annual meeting is required to elect directors. A properly executed
proxy marked "WITHHOLD AUTHORITY" with respect to the election of one or more
directors will not be voted with respect to the director or directors indicated,
although it will be counted for purposes of determining whether there is a
quorum. "Broker non-votes" are not included in the tabulation of the vote
concerning the election of our directors and, therefore, do not have the effect
of votes in opposition to that election. Cumulative voting in the election of
our directors is not provided for in our articles of incorporation, as is
required by Florida law for cumulative voting to be available. Proxies cannot be
voted for a greater number of persons than the number of nominees named in this
proxy statement.
OTHER MATTERS. The affirmative vote of the holders of a majority of the
shares present and entitled to vote, whether in person or by proxy, at the
annual meeting is required to approve the Markland Technologies, Inc. 2001 Stock
Incentive Plan; to ratify the appointment of Feldman Sherb & Co., P.C. as our
independent accountants for the fiscal year ended June 30, 2001 and the fiscal
year ending June 30, 2002; and to approve an amendment to our articles of
incorporation to increase the number shares of our common stock authorized for
issuance. A properly executed proxy marked "ABSTAIN" with respect to either such
matter will not be voted, although it will be counted to determine whether there
is a quorum. Accordingly, an abstention will have the effect of a negative vote.
"Broker non-votes" are not included in the tabulation of the vote concerning
these matters and, therefore, do not have the effect of votes in opposition to
such appointment and approval.
HOW WILL VOTES BE TABULATED?
The election inspector appointed for the annual meeting will tabulate
the votes cast in person or by proxy at the annual meeting and will determine
whether or not a quorum is present. The election inspector will treat
abstentions as shares that are present and entitled to vote to determine the
presence of a quorum but as unvoted to determine the approval of any matter
submitted to the shareholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter but will be counted for purposes of
determining the presence of a quorum.
3
WHAT ARE OUR BOARD OF DIRECTORS' RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the person named
above will vote in accordance with the recommendations of our board of
directors. Our board of directors recommendations are set forth together with
the description of each item in this proxy statement. In summary, our board of
directors recommends a vote:
o for the election of the two nominated directors, each for a term of one
year;
o for the approval of the Markland Technologies, Inc. 2001 Stock
Incentive Plan;
o for the ratification of Feldman Sherb & Co., P.C. as our independent
accountants for our fiscal year ended June 30, 2001 and ending June 30,
2002; and
o for the approval of an increase in the number of shares of our common
stock authorized for issuance from 300,000,000 to 500,000,000.
With respect to any other matter that properly comes before the annual
meeting, the proxy holders will vote in their own discretion.
DOES MARKLAND HAVE ANY STANDING COMMITTEES OF ITS BOARD OF DIRECTORS?
No. We have no audit, nominating or compensation committee. Our board
of directors nominates candidates to stand for election as directors and sets
the compensation for our executive officers. Currently our directors receive no
compensation.
WHO IS PAYING THE COST FOR THIS PROXY SOLICITATION AND HOW IS THE SOLICITATION
PROCESS CONDUCTED?
We will pay the expense of this proxy solicitation. We do not
anticipate that the costs and expenses incurred in connection with this proxy
solicitation will exceed those normally expended for a proxy solicitation
relating to the matters to be voted on in this annual meeting. We will, upon
request, reimburse brokers, banks and similar organizations for out-of-pocket
and reasonable clerical expenses incurred in forwarding proxy material to their
principals.
In addition to the solicitation of proxies by use of the mails,
solicitation also may be made by telephone, telegraph or personal interview by
our directors, officers and regular employees, none of whom will receive
additional compensation for any such solicitation.
DO I HAVE DISSENTER'S RIGHTS?
No. The taking of the actions proposed at the annual meeting will not
entitle any shareholder to dissent and demand a right of appraisal or payment
for its shares under the Florida General Corporation Act.
HOW DO I MAKE A SHAREHOLDER PROPOSAL AT THE NEXT ANNUAL MEETING?
Proposals of shareholders that are intended to be presented by those
shareholders at our 2002 annual meeting and are intended to be included in our
proxy materials relating to our 2002 annual meeting must be received by us at
least 120 calendar days prior to the one year anniversary of the
4
mailing date of this proxy statement. That date is May 3, 2002. The submitted
proposals must be in compliance with applicable laws and regulations and follow
the procedures prescribed in the Securities and Exchange Commission's Rule 14a-8
to be considered for possible inclusion in the proxy materials.
If a shareholder wishes to present a proposal at our 2002 annual
meeting and the proposal is not intended to be included in our proxy statement
relating to that meeting, the shareholder must provide us with advance notice of
the proposal. Any shareholder proposals submitted to us after July 20, 2002,
will be considered untimely and will be subject to discretionary voting
authority by the proxy holders.
We have not been notified by any shareholder of his or her intent to
present a shareholder proposal from the floor at this year's annual meeting. The
enclosed proxy card grants the proxy holder discretionary authority to vote on
any matter properly brought before the annual meeting.
HOW DO I OBTAIN MORE INFORMATION ABOUT MARKLAND TECHNOLOGIES, INC.?
We file annual, quarterly and special reports and other information
with the Securities and Exchange Commission. You may read and copy any of these
documents at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference room. You may also read and copy any of
these documents at either of the following Regional Offices of the Commission:
New York Regional Office, Seven World Trade Center, Suite 1300, New York, New
York 10048 and Chicago Regional Office, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may
be obtained by mail at prescribed rates from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
You may read and download the filings of Markland Technologies, Inc. over the
Internet at the Commission's web site at http://www.sec.gov. You may also
request copies of our filings by contacting our President at (908) 810-5632 or
c/o Markland Technologies, Inc., 1413 Chestnut Avenue, Hillside, New Jersey
07205. Our common stock is listed on the NASDAQ Over-the-Counter Bulletin Board
under the symbol "MKLD."
HAS THERE BEEN A CHANGE IN CONTROL OF MARKLAND TECHNOLOGIES, INC. SINCE THE
BEGINNING OF OUR LAST FISCAL YEAR?
Yes. On March 15, 2001, the board of directors of Quest Net Corp.
approved the acquisition of all of the outstanding capital stock of Vidikron of
America, Inc., a privately-held Delaware corporation. The acquisition was also
approved by both Vidikron's board of directors and by Markland LLC, Vidikron's
sole stockholder. The acquisition was effected pursuant to an Exchange Agreement
and Plan of Reorganization executed on March 16, 2001. Vidikron merged into
Quest Net, with Vidikron surviving as a wholly-owned Delaware subsidiary of
Quest Net. As a result of the transaction Markland LLC is now a holder of 85% of
our issued and outstanding common stock. Prior to the transaction, James LLC was
our largest single shareholder.
Quest Net acquired Vidikron in a stock-for-stock transaction in which
Quest Net issued to Vidikron's sole stockholder, Markland LLC, 10 shares of
Quest Net's Series B convertible preferred stock, which would result in Markland
LLC owning approximately 85% of Quest Net's outstanding common stock upon
conversion, on a fully-diluted basis. The consideration paid to Markland LLC was
based on the then-current fair market value of Quest Net's common stock. The
terms of the transaction were determined in arms'-length negotiations.
5
As part of the transaction, both the board of directors of Quest Net
and holders of a majority of Quest Net's outstanding common stock executed
written consents and voted to amend Quest Net's articles of incorporation to:
o increase the number of shares of Quest Net common stock authorized
for issuance, from 50 million to 300 million;
o change our name from "Quest Net Corp." to "Markland Technologies,
Inc."; and
o effect a reverse split of our common stock whereby we would
exchange one share of our common stock for each 40 or fewer shares
of our common stock then issued and outstanding.
Our name change, the increase in authorized common stock and the
reverse stock split became effective June 21, 2001. On May 24, 2001, we filed a
Schedule 14C information statement with the Securities and Exchange Commission
describing these events, and mailed it to our stockholders.
The share figures in this proxy statement have been adjusted to reflect
the 40-for-1 reverse stock split of our common stock.
STOCK OWNERSHIP
HOW MUCH COMMON STOCK DO OUR DIRECTORS AND EXECUTIVE OFFICERS OWN AND WHO ARE
THE LARGEST OWNERS OF OUR COMMON STOCK?
The following table sets forth information as of November 6, 2001
regarding our common stock that was beneficially owned by:
o each of our current directors;
o all of our current directors and executive officers as a group;
and
o each person or entity that beneficially owned, directly or
together with affiliates, more than 5% of our common stock. The 5%
threshold was based on information available to us and based upon
a review of statements filed with the Securities and Exchange
Commission pursuant to the Securities Act.
We believe each person or entity listed has sole voting and investment power
over the shares beneficially owned by them. Unless otherwise indicated, the
address of each person or entity listed below is c/o Markland Technologies,
Inc., 1413 Chestnut Avenue, Hillside, New Jersey 07205.
6
<Table>
<Caption>
NUMBER OF SHARES
OWNED PERCENT OF
NAME OF BENEFICIAL OWNER POSITIONS HELD BENEFICIALLY CLASS OWNERSHIP
------------------------ -------------- ---------------- ---------------
Markland LLC Shareholder 254,911,356 85.0%
c/o Harbour House
2d Floor, Waterfront Drive
P.O. Box 972, Road Town
Tortola, British Virgin Islands
James LLC Shareholder 44,420,250 14.8%
c/o Citco Trustees (Cayman) LTD.
Corporate Centre, West
Bay Road, PO Box 31106 SMB
Grand Cayman, Cayman Islands,
BWI.
Lawrence Shatsoff President/Director 0 0%
David E. Danovitch Secretary/Director 0 0%
All officers and directors 0 0%
as a group
</Table>
Except as indicated above, based on information provided by
such shareholders, the shareholders named in the table above have sole voting
power and investment power with respect to all shares of common stock shown
beneficially owned by each of them.
Percentage of ownership is based on 299,909,179 shares of
common stock beneficially owned or outstanding as of November 6, 2001, plus any
options of each person that are exercisable within 60 days. Shares of common
stock subject to stock options that are exercisable within 60 days of November
6, 2001 are deemed outstanding for computing the percentage of that person and
the group.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
HOW IS THE COMPENSATION DETERMINED FOR OUR EXECUTIVE OFFICERS?
Since we do not have a compensation committee, our board of directors
determines the compensation of our executive officers based on the following
philosophy and criteria. Our executive compensation and benefit programs are
designed to attract and retain the best people in the industry and to provide
incentives for those senior members of management who bear responsibility for
our goals and achievements. These programs are also intended to recognize
corporate, business unit, individual, and team performance through the use of
incentives, including equity-based incentives, that reward for the creation of
shareholder value and the achievement of key financial, strategic, individual,
and team objectives. The key components of our compensation and benefit programs
are a base salary, with opportunity for significant bonuses to reward
outstanding performance, and a stock incentive plan.
7
Our board of directors relates total compensation levels for our
executive officers to the total compensation paid to similarly situated
executives of companies with which we compete for customers and executive
talent. Their total compensation is targeted to approximate the median of these
companies. However, because of the performance-oriented nature of our incentive
programs, total compensation may exceed market norms when our targeted
performance goals are exceeded. Likewise, total compensation may lag the market
when our performance goals are not achieved.
WHAT IS THE CURRENT SUMMARY COMPENSATION FOR OUR EXECUTIVE OFFICERS?
The following table sets forth compensation information for services
rendered to us by our chief executive officer and our most highly compensated
executive officers during our last fiscal year. The following information
includes the dollar value of base salaries, draws, bonus awards, the number of
stock options granted and other compensation, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ---------------------------------------
NAME AND PRINCIPAL YEAR OTHER ANNUAL RESTRICTED SECURITIES / UNDERLYING
POSITION ENDED SALARY COMPENSATION (3) STOCK AWARDS OPTION / SARS
------------------ --------- -------- ---------------- ------------ -----------------------
Lawrence Shatsoff, 6/30/01 $120,000 N/A N/A
President
Charles Wainer, 6/30/01 $100,000 $1,411,000 25,000
former President
</Table>
We executed an employment agreement dated March 1, 2000 with Charles
Wainer but the agreement has been terminated coincident with his resignation
effective May 18, 2001. Mr. Wainer's options to purchase 25,000 shares of our
common stock expired automatically upon his resignation, and he has no other
options to purchase shares of our common stock.
Mr. Lawrence Shatsoff, who became our President in June 2001, has an
informal agreement with us whereby he will be paid $120,000 during the 2002
fiscal year.
WHAT IS OUR PHILOSOPHY BEHIND OUR GRANTING OF STOCK OPTIONS TO OUR EXECUTIVE
OFFICERS?
We believe that we will only retain executives of caliber and
experience if they are offered competitive compensation packages. Because we
cannot afford to pay high cash salaries, our grant of options is a critical
component of the overall compensation paid to our officers. We believe it is
uncompetitive and a disincentive to set the exercise price of options at
unreasonable premiums over the market price of the shares on the date of grant.
Similarly, we believe a decline in the price of the shares over a period when
both our business operations and prospects are improving, and our executives
have made significant contributions, that is not offset by a reduction in the
exercise price, is unfair to those executives. A decline in our share price
results in an effective increase in the premium of the exercise price over the
market price which penalizes the executives, and is potentially harmful to us if
the executive then takes the view that their overall compensation package is
uncompetitive. We will continue to review the exercise prices and vesting dates
of options granted to our employees and may
8
reprice and/or change vesting dates as we deem appropriate based on the
prevailing price of our shares and our business operations and prospects.
HOW MANY STOCK OPTIONS WERE GRANTED TO OUR EXECUTIVE OFFICERS IN THE LAST FISCAL
YEAR?
During our fiscal year ended June 30, 2001, we granted no stock options
to any person named in the summary compensation table, nor did any person hold
any unexercised options as of June 30, 2001.
HAVE WE ENTERED INTO ANY EMPLOYMENT AGREEMENTS WITH ANY OF OUR EXECUTIVE
OFFICERS NAMED IN THE SUMMARY COMPENSATION TABLE?
No. Although Mr. Shatsoff, our President, will be compensated $120,000
over this year for his services, such compensation is not pursuant to any formal
employment agreement with us. Mr. Shatsoff has not been awarded any common stock
in connection with his employment, nor has he been granted any options to
purchase our common stock.
HOW ARE OUR DIRECTORS COMPENSATED?
In the past, our directors have been reimbursed for expenses incurred
in connection with attending meetings of the board of directors and were paid a
fixed amount per meeting. Currently, however, we do compensate our directors,
and are unsure how our directors will be compensated in the future, if at all.
We reimburse our directors for expenses incurred in connection with attending
meetings of the board of directors.
HOW MANY TIMES DID OUR BOARD OF DIRECTORS MEET DURING THIS PAST FISCAL YEAR?
During the fiscal year ended June 30, 2001, there was one regularly
scheduled meeting of our board of directors. All of our directors attended that
meeting.
WHO ARE THE CURRENT MEMBERS OF OUR BOARD OF DIRECTORS?
As of November 6, 2001, there are two members on our three-member board
of directors and one vacant position that has yet to be filled. Both of our
current members have been nominated to stand for re-election. The two current
members are as follows:
<Table>
<Caption>
NAME AGE TERM POSITION
------------------ --- ---- ------------------
Lawrence Shatsoff 47 2001 President/Director
David E. Danovitch 39 2001 Secretary/Director
</Table>
ARE THERE ANY OF OUR EXECUTIVE OFFICERS WHO ARE NOT MEMBERS OF OUR BOARD OF
DIRECTORS?
No. Mr. Lawrence Shatsoff, our single executive officer, is also on our
board of directors.
9
HAVE OUR DIRECTORS, OFFICERS AND 10% BENEFICIAL OWNERS COMPLIED WITH THE
BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS OF SECTION 16(a)?
Section 16(a) of the Securities and Exchange Act requires our officers,
directors and persons beneficially owning more than 10% of a registered class of
our equity securities to file reports of beneficial ownership and changes in
beneficial ownership with the Securities and Exchange Commission. Our officers,
directors and greater than 10% beneficial owners are also required to furnish us
with copies of these reports.
Based upon our review of forms filed by directors, officers and certain
beneficial owners of our common stock pursuant to Section 16 of the Securities
Exchange Act of 1934, as amended, we have identified the following Form 3
filings that were filed late by the Section 16 reporting persons during the
fiscal year 2001: James LLC (1 late report); Markland LLC (1 late report);
Lawrence Shatsoff (1 late report); and David E. Danovitch (1 late report)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of certain relationships and related
transactions among us and our subsidiaries and our directors, executive officers
and greater than 5% shareholders during our past two fiscal years.
From time to time during the year ended June 30, 2000, Quest Net paid
certain expenses related to ventures Mr. Pereira is associated with, but that
have no relative business purpose to Quest Net. The amounts totaled $97,360 and
have been deducted from amounts accrued and payable to Mr. Camilo Pereira
pursuant to his employment agreement by decreasing the shares to be issued to
Mr. Pereira in connection with his employment agreement by 374 shares. In
November 1999, Quest Net instituted a policy that prohibits payment of any new
expenses unrelated to its business. In addition, the Policy provides that Quest
Net may not enter into any transaction or loan with a related party unless the
transaction or loan is on terms that are no less favorable to us than we could
obtain from unrelated third parties. A majority of the disinterested,
"independent" members of our board of directors must review and approve or
ratify any transaction involving related parties or conflicts of interest.
In February 2000, as part of the termination agreement with Ms. Rebecca
Del Medico, received $50,000 and the right to 1,250 shares of Quest Net common
stock, which Quest Net has accrued over the three months ended December 31,
1999.
In February 2000, Quest Net had also decided to cancel its purchase of
shares of Africa Internet Corp. Quest Net had paid $200,000 of the purchase
price. Pursuant to the cancellation agreement, Quest Net received back the
shares issued for the acquisition, paid a cancellation penalty of $100,000 and
the balance was to be paid back in one year with an interest-bearing note as a
guarantee for that amount. The note was subsequently transferred to Internet
Strategy Group Ltd. as payment for past due consulting fees.
On February 25, 2000, Quest Net entered into a Stock Purchase Agreement
dated March 1, 2000 to purchase CWTel, Inc. from Charles Wainer, an individual,
for the sum of $1,200,000. Of the purchase price $200,000 was paid at closing,
$700,000 was paid by the issuance of 7,750 shares of Quest Net's restricted
common stock and $300,000 was to be paid in three equal payments at 90 days, 180
days, and 270 days from closing. These payments were represented by promissory
note and
10
guaranteed by the issuance, at closing, of 30,000 shares of preferred stock,
with a face value of $10.00 per share.
In March 2000, Quest Net entered into a two-year Consulting Agreement
with Internet Strategy Group Ltd. for a consulting fee of $20,000 per month
during the first and $24,000 per month during the second year plus 1,500 shares
of Quest Net common stock annually, to be issued every quarter in advance. Mr.
Pereira is an employee of Internet Strategy Group Ltd. Internet Strategy Group
Ltd. was to perform consulting and advisory services on behalf of Quest on an
as-needed basis, not to exceed 60 hours per months. The agreement was terminated
in July 2000 due to our inability to pay the consulting fees. No shares were
issued pursuant to the agreement.
In October 2000, we executed a $3,500,000 convertible promissory note
in favor of James LLC. The promissory note matures December 31, 2001, and bears
interest at the rate of eight percent per annum.
In July 2001, James LLC elected to convert $2,500,000 of the principal
amount of the $3,500,000 promissory note, together with $125,000 accrued
interest, into shares of our common stock. Pursuant to James LLC's conversion
election, we issued 43,750,000 shares of our common stock.
On September 19, 2001, we assumed all of Vidikron's rights and
obligations under the Market LLC $3,500,000 revolving credit facility by
entering into an Amendment and Assignment and Assumption Agreement with Market
LLC. Under the terms of the assignment and assumption agreement, the revolving
credit line available to us was increased from $3,750,000 to $4,500,000.
Borrowings under the revolving credit line are secured by our accounts
receivables and those of Vidikron, as well as by a second lien security interest
in the outstanding capital stock of Vidikron.
Quest Net issued 10 shares of its Series B convertible preferred stock
to Markland, LLC in connection with the acquisition of Vidikron of America, Inc.
The preferred stock was convertible into approximately 85% of our outstanding
common stock, on a non-diluted basis upon the effectiveness of a reverse stock
split of our outstanding common stock. The reverse stock split was effective
June 21, 2001. The automatic conversion resulted in our issuance of an aggregate
of 254,911,356 shares of our common stock to Markland, LLC on that date.
From time to time Charles Wainer, our one-time president, has accrued
salary and loaned money to us. All accrued salary has been paid. However, as of
November 6, 2001, we owe Mr. Wainer approximately $170,832 for loans advanced to
us. The loans are not evidenced by any formal instruments.
11
PROPOSAL 1
ELECTION OF DIRECTORS
Our board of directors has three seats only two of which currently are
filled. We will elect two directors at our annual meeting rather than three. We
are currently searching for a third director who we expect to be a non-employee,
outside director. Both of our current directors have been nominated to stand for
re-election.
Our directors are elected at our annual meetings of shareholders, and
hold office until the next annual meeting and until their successors are duly
elected and qualified, or until their earlier resignation or removal. Vacancies
on our board of directors are filled by our board of directors. Our board of
directors unanimously proposes that the nominees described below be elected for
a new term as directors until our next annual meeting of shareholders and until
their successors are duly elected and qualified. The board of directors has
approved these nominees for submission to a vote by our shareholders at the
annual meeting.
If, for any reason, the nominees become unable or unwilling to serve at
the time of the meeting, the persons named in the enclosed proxy card will have
discretionary authority to vote for substitute nominees. We do not anticipate
that the nominees will be unavailable for election.
The following information sets forth biographical and background
information as to each nominee for election at the annual meeting, including his
age, present principal occupation, other business experience during the last
five years, directorships in other publicly held companies, period of service as
one of our directors and any legal proceedings during the past five years that
are material to that person's evaluation as a director or nominee for director.
DIRECTOR NOMINEES:
The director nominees, their ages, and their positions with us as of
November 6, 2001, are as follows:
<Table>
<Caption>
NAME AGE POSITION
---- --- --------
Lawrence Shatsoff 47 Director and President
David E. Danovitch 39 Director and Secretary
</Table>
LAWRENCE SHATSOFF
Mr. Lawrence Shatsoff, 47, is our President and a director. From June
2000 to June 2001, Mr. Shatsoff served in various executive capacities and as a
director of LecStar Corporation (formerly Corzon, Inc.), a telecommunications
company. From 1995 to 2000, Mr. Shatsoff was the vice president and chief
operations officer of DCI Telecommunications, Inc. Mr. Shatsoff graduated in
1975 from Rider College with a bachelor of science degree in Decision Sciences
and Computers.
12
DAVID E. DANOVITCH
Mr. David E. Danovitch, 39, is our Secretary and a director. Since
January 2000, he has been a senior partner of NewWest Associates, LLC, an
international consulting firm, and Del Rey Investments, LLC, a merchant banking
firm, both based in New York, New York. From January 2000 to present, Mr.
Danovitch was a managing director of Cambridge Partners, a merchant banking
firm. From 1995 to 1997, he was a founding principal of Snowden Capital, Inc., a
New York City-based investment banking firm. Mr. Danovitch is an attorney and
member of the District of Columbia, Massachusetts and New York bars. He holds an
bachelor of arts from Kenyon College, a juris doctor from Suffolk University Law
School and an L.L.M. in taxation from Boston University School of Law. Mr.
Danovitch also has been a director of Imaging Diagnostic Systems, a
publicly-held company, since November 2000.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF BOTH NOMINEES FOR DIRECTORS NAMED ABOVE, EACH FOR A TERM OF ONE YEAR, WHICH
IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY CARD.
PROPOSAL 2
APPROVAL OF THE MARKLAND TECHNOLOGIES, INC. 2001 STOCK INCENTIVE PLAN
Our board of directors has unanimously approved for submission to a
vote of our shareholders entitled to vote on such matter, a proposal to approve
the Markland Technologies, Inc. 2001 Stock Incentive Plan.
WHAT IS THE PURPOSE OF OUR 2001 STOCK INCENTIVE PLAN?
The purpose of our 2001 Stock Incentive Plan is to:
o attract and retain the services of people with training,
experience and ability;
o motivate these people by means of appropriate incentives, to
achieve long-range goals;
o provide long-term incentives and rewards to these people on a
basis competitive with industry practices by the grant of an
opportunity to participate in the ownership of Markland
Technologies, Inc.; and
o further identify the interests of these people with those of our
shareholders.
WHEN WILL THE PLAN BE EFFECTIVE AND WHAT WILL ITS DURATION BE?
The plan will become effective upon the filing of our proposed
amendment to our Articles of Incorporation with the Florida Secretary of State
whereby we will effect an increase in authorized stock (Proposal 4). However,
any awards granted under the plan prior to shareholder approval will be
contingent on approval of the plan by the shareholders at the annual meeting.
The plan will have a
13
duration of 10 years. Any award granted under the plan will remain in effect
only so long as the plan is in effect.
HOW WILL THE PLAN BE ADMINISTERED?
The plan will be managed and administered by a committee to be selected
by our board of directors. If for any reason the committee does not exist, or
for any other reason determined by our board of directors, our board of
directors is allowed to take any action under the plan that would otherwise be
the responsibility of the committee.
Subject to the express provisions of the plan, the committee will have,
in its sole discretion, the authority to determine all terms and conditions
relating to awards granted under the plan and to make all other determinations
necessary or advisable in the administration of the plan including:
o the selection of individuals to be granted awards;
o when such awards are to be granted;
o the number of shares to be subject to each award;
o the fair market value of the shares subject to the plan and the
exercise price;
o the terms and type of award to be granted;
o the terms, conditions and restrictions of any shares issued
pursuant to the exercise of an option or stock appreciation
right; and
o the ability to cancel or suspend awards.
Grants under the plan to eligible persons need not be identical in any
respect, even when made simultaneously. The committee may adopt, amend and
rescind rules and regulations relating to the administration of the plan. The
interpretation and construction by the committee of any terms or provisions of
the plan or any award issued thereunder, or of any rule or regulation
promulgated in connection with the plan is conclusive and binding on all
interested parties. The committee may also delegate to one or more of its
members any or all authority for the responsibilities and powers under the plan.
14
WHAT TYPES OF AWARDS ARE TO BE GRANTED UNDER THE PLAN?
The plan allows the granting of:
o stock options, both incentive and non-qualified stock options;
o stock appreciation rights;
o stock unit awards;
o restricted stock and restricted stock unit awards; and
o performance share awards.
The stock appreciation rights entitle the holder to receive payment in
cash or stock, as determined by the committee, having an aggregate value equal
to the product of the excess of the fair market value on the exercise date of
one share over the exercise price per share, multiplied by the number of shares
called for by the stock appreciation right or portion thereof that is exercised.
A stock unit award is the grant of the right to receive shares of stock
in the future.
Restricted stock and restricted stock unit awards are grants of stock
and rights to receive shares of stock in the future where such grants or rights
to delivery are subject to forfeiture or other restrictions based upon the
completion of a certain period of service by the holder of the award or other
objectives as determined by the committee.
A performance share award is the grant of a right to receive shares of
stock in the future which is contingent on the achievement of a certain
performance or other objective by the holder of the award.
WHAT SHARES OF OURS ARE SUBJECT TO THE PLAN?
The stock subject to the plan is a portion of our common stock
presently authorized but unissued. The number of shares available to be awarded
under the plan during any fiscal year will be equal to and subject to the
following:
o the maximum number of shares which may be issued pursuant to
awards granted under the plan is 12 million shares;
o the number of shares available for award under the plan during
any fiscal year will be equal to 15% of the maximum number of
shares of our common stock that are authorized under the plan,
reduced by the number of shares previously granted under the
plan and any shares currently subject to issuance under the
plan;
o the maximum number of shares which may be issued pursuant to
stock options that are intended to be "incentive stock options"
is 8 million shares;
15
o the maximum number of shares which may be issued pursuant to
stock options and stock appreciation rights to any one
individual during any fiscal year is 1,333,333 shares; and
o no more than 1,333,333 shares of stock may be subject to
issuance under the plan that are intended to be
"performance-based compensation" as that term is defined in the
Internal Revenue Code.
The aggregate number of shares on which options may be granted may be
adjusted due to changes in our capitalization or upon certain types of
transactions entered into by us. If any option granted under the plan expires or
terminates for any reason without having been exercised in full, the unpurchased
shares will be returned to the plan and become available for future grant. As of
October 15, 2001, the closing market value of our common stock, as quoted on the
NASDAQ Over-the Counter Bulletin Board, was $.047 per share.
TO WHOM CAN STOCK OPTIONS BE GRANTED?
The plan authorizes us to grant awards to our directors, employees,
consultants and any other person providing services to us one of our
subsidiaries. As of October 15, 2001, approximately [___] people would be
eligible for participation in the plan. The basis for eligibility, the extent of
eligibility and the number of options to be granted to any participant is
determined by the committee as set forth under the terms and conditions of the
plan.
WHAT IS THE EXERCISE PRICE FOR EACH OPTION GRANTED?
Options and stock appreciation rights granted under the plan are
exercisable at a price determined by the committee at the time of the grant, but
in no event will the exercise price for option or stock appreciation right be
lower than the fair market value for our common stock on the date of the grant.
Consideration for the option exercise price can include cash, shares of our
common stock and promissory notes. The committee may also permit the holder of
the option to authorize a third party to sell the shares issuable upon the
exercise of the option and submit a sufficient portion of the sale proceeds to
us to cover the exercise price.
WHEN ARE THE AWARDS EXERCISABLE?
Awards become exercisable at times and in installments as the committee
provides in the terms of each individual award agreement. Termination of
employment, disability or death of the award holder may affect the holder's
entitlement to exercise the award or possibly accelerate their option to
exercise the award. Upon some transactions entered into by us or changes in
control, all outstanding and unexercised awards may accelerate so that each
award would become fully vested.
CAN THE OPTIONS GRANTED UNDER THE PLAN BE TRANSFERRED?
Options granted under the plan and the rights and privileges conferred
by the plan are not subject to execution, attachment or similar process and may
not be assigned, alienated, pledged, sold or transferred in any manner other
than by will or by the laws of descent and distribution.
16
CAN THE PLAN BE AMENDED OR TERMINATED?
Yes. The committee may amend and rescind any rules and regulations
relating to the plan. Our board of directors may amend or terminate the plan at
any time, provided though that no amendment or termination may adversely affect
the rights of the person or beneficiary holding the award without the consent of
each of those persons or beneficiaries to whom any option has previously been
granted.
CAN THE TERMS OF AWARDS ALREADY GRANTED BE ADJUSTED OR CHANGED?
Yes. The aggregate number of shares on which awards may be granted
under the plan, the number of shares covered by each outstanding award and the
exercise price per share of each award will each be proportionately adjusted for
any increase or decrease in the number of issued shares of our common stock
resulting from any increase or decrease in the number of shares of our common
stock without the receipt of consideration by us. Our board of directors shall
also have the discretion, pursuant to a sale, merger, consolidation,
liquidation, change in control or other disposition that affects us, to declare
that all options and other awards will be exercisable in full.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF
AWARDS GRANTED UNDER THE PLAN?
STOCK OPTIONS
Options granted under the plan may be either incentive stock options,
as defined in the Internal Revenue Code, or non-qualified stock options.
If an option granted under the plan is an incentive stock option, the
holder of the option will generally recognize no income upon the grant of the
incentive stock option and incur no tax liability due to the exercise of the
option provided the option holder is an employee of ours or a subsidiary at all
times from the date of grant until three months prior to its exercise. However,
the amount by which the fair market value of the shares on the date of exercise
exceeds the exercise price will be includable for purposes of determining any
alternative minimum taxable income of an option holder. We will not be allowed a
deduction for federal income tax purposes as a result of the exercise of an
incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
grant of the option and one year after receipt of the shares by the holder of
the option, any gain will be treated as long-term capital gain. If these holding
periods are not satisfied, the holder of the option will recognize ordinary
income equal to the difference between the exercise price and the lower of the
fair market value of the stock at the date of the option exercise or the sale
price of the stock. We would then be entitled to a take a deduction at the same
time the holder of the option recognizes the ordinary income and in the same
amount as the ordinary income recognized. Any gain or loss recognized by the
holder of the option on such a premature disposition of the shares in excess of
the amount treated as ordinary income will generally be characterized as capital
gain or loss.
All other stock options that do not qualify as incentive stock options
are referred to as non-qualified stock options. A holder of this type of option
will generally not recognize any taxable income at the time he or she is granted
a this type of option. However upon its exercise the holder of the non-qualified
option will generally recognize ordinary income for tax purposes measured by the
excess of the then fair market value of the shares over the exercise price. The
income recognized by a holder of
17
this type of option who is also an employee of ours will be subject to tax
withholding by us. The tax basis of the shares in the hands of the option holder
will equal the exercise price paid for the shares plus the amount of ordinary
compensation income the option holder recognizes upon exercise of the option,
and the holding period for the shares for capital gains purposes will commence
on the day the option is exercised. An option holder who sells any of the shares
will recognize capital gain or loss measured by the difference between the tax
basis of the shares and the amount realized on the sale. We will be entitled to
a federal income tax deduction equal to the amount of ordinary compensation
income recognized by the option holder. The deduction will be allowed at the
same time the option holder recognizes the income.
OTHER AWARDS
The current federal income tax consequences of other awards authorized
under the plan are generally in accordance with the following:
o stock appreciation rights are generally subject to ordinary
income tax at the time of exercise;
o restricted stock and restricted stock unit awards subject to a
substantial risk of forfeiture generally results in income
recognition by the participant of the excess of the fair market
value of the shares covered by the award over the purchase price
paid only at the time the restrictions lapse, unless the
recipient elects to accelerate recognition as of the date of
grant; and
o stock unit awards and performance share awards are generally
subject to ordinary income tax at the time of payment.
In each of the foregoing cases, we will generally be entitled to a
corresponding federal income tax deduction at the same time the participant
recognizes ordinary income.
The compensation of persons who are named as our executives is subject
to the tax deduction limits of Section 162(m) of the Internal Revenue Code.
However, stock options and stock appreciation rights that qualify as
"performance-based compensation" are exempt from Section 162(m), thus allowing
us the full tax deduction otherwise permitted for such compensation. If approved
by you, the plan will enable the committee to grant stock options and stock
appreciation rights that may be exempt from the deduction limits of Section
162(m).
The preceding discussion is based on Federal tax laws and regulations
presently in effect. They are, of course, subject to change. The discussion does
not purport to be a complete description of the Federal income tax aspects of
the plan. A participant may also be subject to state, local and possibly foreign
taxes in connection with the grant of awards under the plan. We suggest that
participants consult with their individual tax advisors to determine the
applicability of the tax rules to the awards granted to them in their personal
circumstances.
HOW MANY OPTIONS WILL ALLOCATED UNDER THE PLAN IF THE PLAN IS APPROVED?
We cannot now determine the exact number of options to be granted in
the future to the following groups of people:
18
o those executive officers named within the summary compensation
table;
o all current executive officers as a group;
o all current directors who are not executive officers as a group;
o all other employees (including current officers who are not
executive officers) as a group; or
o all advisors and consultants as a group.
CAN I REVIEW THE MARKLAND TECHNOLOGIES, INC. 2001 STOCK INCENTIVE PLAN?
Yes. A copy of the proposed plan is included in this booklet as
Appendix A.
The affirmative vote of the holders of a majority of shares present and
entitled to vote, whether in person or by proxy, at the annual meeting is
required to approve the Markland Technologies, Inc. 2001 Stock Incentive Plan.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL
TO ADOPT THE MARKLAND TECHNOLOGIES, INC. 2001 STOCK INCENTIVE PLAN WHICH IS
DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED PROXY CARD.
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
WHO ARE OUR NEWLY APPOINTED INDEPENDENT ACCOUNTANTS?
Subject to shareholder ratification, our board of directors has
appointed and approved the selection of Feldman, Sherb & Co., P.C. as our
independent accountants for our fiscal year ended June 30, 2001 and our fiscal
year ending June 30, 2002. Representatives of Feldman Sherb are expected to be
present at the annual meeting and will be available to respond to questions.
WHO WERE OUR FORMER INDEPENDENT ACCOUNTANTS?
Cordovano & Harvey P.C. was our independent accounting firm for the
first four months of our 2001 fiscal year. Representatives of Cordovano & Harvey
are not expected to be present at the annual meeting and will not be available
to respond to questions. Our management will be available to answer appropriate
questions regarding our financial statements regarding our past fiscal year and
will contact Cordovano & Harvey P.C. if necessary.
WERE THERE OTHER CHANGES IN OUR INDEPENDENT ACCOUNTANTS DURING OUR PAST TWO
FISCAL YEARS?
In November 2000 we dismissed Cordovano & Harvey P.C., as our
independent certified public accountants. Our lack of working capital prevented
us from retaining Cordovano & Harvey to complete our June 2000 audit. Our new
majority stockholder at the time, James LLC, agreed to provide the auditing firm
of Feldman Sherb & Co., P.C. to complete the audit.
19
During our two most recent fiscal years and the interim period
preceding the date of termination, the reports of Cordovano & Harvey contained
no adverse opinion or disclaimer of opinion, nor were they modified as to
uncertainty, audit scope, or accounting principles.
The decision to dismiss Cordovano & Harvey and retain Feldman Sherb &
Co. was approved of by our board of directors at a November 2, 2000 meeting.
Additionally, during our two most recent fiscal years, and the interim
period preceding the date of termination, there were no disagreements with
Cordovano & Harvey on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which
disagreement(s), if not resolved to the satisfaction of Cordovano & Harvey,
would have caused it to refer to the subject matter of the disagreement(s) in
connection with its report.
The affirmative vote of the holders of a majority of shares present and
entitled to vote, whether in person or by proxy, at the annual meeting is
required to ratify the appointment of Feldman, Sherb & Co., P.C. as our
independent accountants for the fiscal year ended June 30, 2001 and the fiscal
year ending June 30, 2002.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL
TO APPOINT FELDMAN, SHERB & CO., P.C. AS OUR INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDED JUNE 30, 2001 AND THE FISCAL YEAR ENDING JUNE 30, 2002, WHICH
IS DESIGNATED AS PROPOSAL NO. 3 ON THE ENCLOSED PROXY CARD.
PROPOSAL 4
APPROVAL OF CHARTER AMENDMENT TO
INCREASE OUR COMMON STOCK AUTHORIZED FOR ISSUANCE
Under Florida law, we may issue shares of our capital stock only to the
extent such shares have been authorized under our articles of incorporation, as
amended. Our articles currently authorize the issuance of up to 300,000,000
shares of common stock, par value $0.0001 per share. As of the record date,
299,909,713 shares of common stock were issued and outstanding, leaving
virtually no shares of common stock unissued and unreserved. In order to ensure
sufficient shares of common stock will be available for future corporate uses,
our board of directors approved, subject to stockholder approval, an amendment
to our articles of incorporation to increase the number of shares of common
stock authorized for issuance from 300,000,000 to 500,000,000. This change would
be effected by amending Article V of our articles of incorporation. The proposed
amendment to our articles of incorporation is included in this booklet as
Appendix B. The proposed amendment would not otherwise change the provisions of
Article V.
PURPOSE AND EFFECT OF THE CHARTER AMENDMENT
The purpose of the proposed amendment to our articles of incorporation
is to authorize additional shares of common stock so that shares will be
available for future issuance in the event our board of directors determines
that it is necessary or advisable in the future to declare stock dividends or
effect stock splits, to raise additional capital through the sale of equity
securities, to acquire other companies or their assets, to establish strategic
relationships with corporate partners, to provide equity
20
incentives to employees and officers, or for other corporate purposes. The
availability of additional shares of common stock is particularly important in
the event that our board of directors needs to undertake any of the foregoing
actions on an expedited basis and thus to avoid the time and expense of seeking
shareholder approval in connection with the contemplated issuance of common
stock.
Our board of directors has no current intention of declaring a stock
dividend or of effecting a stock split. Additionally, our board of directors has
no present agreement, arrangement or commitment to issue any of the shares of
common stock for which approval is sought. However, the board of directors
believes that if an increase in the number of authorized shares of common stock
were to be postponed until a specific need arose, the delay and expense in
obtaining the approval of our shareholders at that time could impair
significantly our ability to meet financing requirements or other objectives.
RIGHTS OF HOLDERS OF COMMON STOCK
Holders of common stock are entitled to one vote per share on all
matters submitted to a vote of our stockholders and to receive ratably
dividends, if any, as may be declared from time to time by the board of
directors from funds legally available therefor, subject to the payment of any
outstanding preferential dividends declared with respect to any preferred stock
that from time to time may be outstanding. Upon our liquidation, dissolution or
winding up, holders of common stock are entitled to share ratably in any assets
available for distribution to stockholders after payment of all of our
obligations, subject to the rights to receive preferential distributions of the
holders of any preferred stock then outstanding.
The increase in authorized common stock will not have any immediate
effect on the rights of existing stockholders. However, our board of directors
will have the authority to issue authorized common stock without requiring
future shareholder approval of such issuances, except as may be required by
applicable law. To the extent that we issue additional authorized shares in the
future, they may decrease the existing stockholders' percentage equity ownership
and, depending on the price at which they are issue, could be dilutive to the
existing stockholders. The holders of common stock have no preemptive rights,
which means that current shareholders do not have a prior right to purchase any
new issue of common stock in order to maintain their proportionate ownership.
Our board of directors has no plans to grant preemptive rights with respect to
any of the newly-authorized shares.
On October ___, 2001, our board of directors voted to submit Proposal
Four to our shareholders in order to increase the authorized number of shares of
our common stock from 300,000,000 to 500,000,000.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL
TO AMEND OUR CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES, WHICH IS
DESIGNATED AS PROPOSAL NO. 4 ON THE ENCLOSED PROXY CARD.
FINANCIAL STATEMENTS
A copy of our transition report on Form 10-KSB filed with the
Securities and Exchange Commission on October 15, 2001, containing audited
financial statements for the fiscal year ended June 30, 2001, is enclosed
herewith.
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OTHER BUSINESS
Our board of directors is not aware of any matters to be presented at
the annual meeting other than those set forth in the notice and this proxy
statement. If any other matters do come before the meeting, it is intended that
the holders of the proxies will vote, with respect to such matters, at that time
and in their discretion. The approval of any other matters will require the
affirmative vote of the majority of the shareholders present and entitled to
vote, whether in person or by proxy, at the annual meeting where a quorum is
present, or such greater vote as may be required by our Articles of
Incorporation, our Bylaws or the Florida General Corporation Act.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. THIS PROXY STATEMENT IS DATED NOVEMBER 6, 2001. YOU SHOULD ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF THAT
DATE ONLY, UNLESS OTHERWISE STATED. OUR BUSINESS FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE. WE UNDERTAKE NO
OBLIGATION TO PUBLISH THE RESULTS OF ANY ADJUSTMENTS TO THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT THAT MAY OCCUR AFTER THE DATE OF THIS PROXY
STATEMENT OR TO REFLECT THE OCCURRENCE OF UNEXPECTED EVENTS OCCURRING AFTER THE
DATE OF THIS PROXY STATEMENT.
Whether you expect to be present in person at the annual meeting,
please MARK, SIGN, DATE and RETURN THE ENCLOSED PROXY CARD in the accompanying
envelope as promptly as possible. You may revoke your proxy, in the manner
specified within this proxy statement, at any time before the shares it
represents are voted.
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APPENDIX A
MARKLAND TECHNOLOGIES, INC.
2001 STOCK INCENTIVE PLAN
SECTION 1
GENERAL
1.1 Purpose. The Markland Technologies, Inc. 2001 Stock Incentive Plan
(the "Plan") has been established by Markland Technologies, Inc., a Florida
corporation (the "Company"), to (i) attract and retain persons eligible to
participate in the Plan; (ii) motivate Participants, by means of incentives, to
achieve long-range goals; (iii) provide incentive compensation opportunities
that are competitive with those of similar companies; and (iv) further identify
Participants' interests with those of the Company's other shareholders through
compensation that is based on the Company's common stock; and thereby promote
the long-term financial interest of the Company and the Subsidiaries, including
the growth in value of the Company's equity and enhancement of long-term
shareholder return.
1.2 Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Grantees (including transferees of Eligible Grantees to the extent the
transfer is permitted by the Plan and the applicable Award Agreement), those
persons who will be granted one or more Awards under the Plan, and thereby
become "Participants" in the Plan. In the discretion of the Committee, a
Participant may be granted any Award permitted under the provisions of the Plan,
and more than one Award may be granted to a Participant. Awards may be granted
as alternatives to or replacement of awards outstanding under the Plan, or any
other plan or arrangement of the Company or a Subsidiary (including a plan or
arrangement of a business or entity, all or a portion of which is acquired by
the Company or a Subsidiary).
1.3 Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 8 of the Plan).
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SECTION 2
OPTIONS AND SARS
2.1 Definitions.
(a) The grant of an "Option" entitles the Participant to purchase
shares of Stock at an Exercise Price established by the Committee. Options
granted under this Section 2 may be either Incentive Stock Options ("ISOs") or
Non-Qualified Options ("NQOs"), as determined in the discretion of the
Committee. An "ISO" is an Option that is intended to satisfy the requirements
applicable to an "incentive stock option" described in section 422(b) of the
Code. An "NQO" is an Option that is not intended to be an "incentive stock
option" as that term is described in section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the Participant
to receive, in cash or Stock (as determined in accordance with subsection 2.5),
value equal to (or otherwise based on) the excess of: (a) the Fair Market Value
of a specified number of shares of Stock at the time of exercise; over (b) an
Exercise Price established by the Committee.
2.2 Exercise Price. The Exercise Price of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted. The Exercise Price shall not be less than 100% of the Fair
Market Value of a share of Stock on the date of grant of the Award provided,
however, that if the Option or SAR is granted in connection with the recipient's
hiring, promotion or similar event, the option exercise price may not be less
than the market value of the Stock on the date on which the recipient is hired
or promoted (or similar event), if the grant of the Option or SAR occurs not
more than 90 days after the date of such hiring, promotion or other event.
2.3 Exercise. An Option and an SAR shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee; provided, however that if a Participant shall die while in the
employ of the Company or a Subsidiary and shall not have fully exercised an
Option or SAR, the Option or SAR may be exercised, subject to the condition that
no Option or SAR shall be exercisable after the expiration of ten years from the
date it is granted, to the extent that the Participant's right to exercise such
Option or SAR had accrued pursuant to this Section 2 of the Plan at the time of
his death and had not previously been exercised, at any time within one (1) year
after the Participant's death, by the executors or administrators of the
Participant or by any person or persons who shall have acquired the Option or
SAR directly from the Participant by bequest or inheritance.
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2.4 Payment of Option Exercise Price. The payment of the Exercise Price
of an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the
full Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the case of
an exercise arrangement approved by the Committee and described in paragraph
2.4(c), payment may be made as soon as practicable after the exercise).
(b) The Exercise Price shall be payable in cash or by tendering, by
either actual delivery of shares or by attestation, shares of Stock acceptable
to the Committee, and valued at Fair Market Value as of the day of exercise, or
in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by irrevocably authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting
from such exercise or by executing a promissory note in form satisfactory to the
Committee.
2.5 Settlement of Award. Stock delivered pursuant to the exercise of an
option or SAR shall be subject to such conditions, restrictions and
contingencies as the Committee may establish in the applicable Award Agreement.
Settlement of SARs may be made in shares of Stock (valued at their Fair Market
Value at the time of exercise), in cash, or in a combination thereof, as
determined in the discretion of the Committee. The Committee, in its discretion,
may impose such conditions, restrictions and contingencies with respect to
shares of Stock acquired pursuant to the exercise of an Option or an SAR as the
Committee determines to be desirable.
SECTION 3
OTHER STOCK AWARDS
3.1 Definitions.
(a) A "Stock Unit" Award is the grant of a right to receive shares
of Stock in the future.
(b) A "Performance Share" Award is a grant of a right to receive
shares of Stock or Stock Units which is contingent on the achievement of
performance or other objectives during a specified period.
(c) A "Restricted Stock" Award is a grant of shares of Stock, and a
"Restricted Stock Unit" Award is the grant of a right to receive shares of Stock
in the future, with such shares of Stock or right to future delivery of such
shares of Stock subject to a risk of forfeiture or other restrictions that will
lapse upon the achievement of one or more goals relating to completion of
service by the Participant, or achievement of performance or other objectives,
as determined by the Committee.
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3.2 Restrictions on Stock Awards. Each Stock Unit Award, Restricted
Stock Award, Restricted Stock Unit Award and Performance Share Award shall be
subject to the following:
(a) Any such Award shall be subject to such conditions,
restrictions and contingencies as the Committee shall determine.
(b) The Committee may designate whether any such Awards being
granted to any Participant are intended to be "performance-based compensation"
as that term is used in Section 162(m) of the Code. Any such Awards designated
as intended to be "performance-based compensation" shall be conditioned on the
achievement of one or more Performance Measures. The Performance Measures that
may be used by the Committee for such Awards shall be based on any one or more
of the following, as selected by the Committee: return on capital or increase in
pretax earnings of the Company and/or one or more divisions and/or subsidiaries,
return on stockholders' equity of the Company, increase in earnings per share of
the Company, sales of the Company and/or one or more divisions and/or
subsidiaries, pretax earnings of the Company and/or one or more divisions and/or
subsidiaries, net earnings of the Company and/or one or more divisions and/or
subsidiaries, control of operating and/or non-operating expenses of the Company
and/or one or more divisions and/or subsidiaries, margins of the Company and/or
one or more divisions and/or subsidiaries, market price of the Company's
securities and other objectively measurable factors directly tied to the
performance of the Company and/or one or more divisions and/or subsidiaries. For
Awards intended to be "performance-based compensation," the grant of the Awards
and the establishment of the Performance Measures shall be made during the
period required under Code Section 162(m).
SECTION 4
OPERATION AND ADMINISTRATION
4.1 Effective Date; Duration. Subject to the approval of the
shareholders of the Company, the Plan shall be effective as of the filing of the
Articles of Amendment to the Articles of Incorporation of the Company whereby
the Company is increasing the number of its common stock authorized for issuance
from 300 million to 500 million (the "Effective Date"); provided, however, that
to the extent that Awards are granted under the Plan prior to its approval by
shareholders, the Awards shall be contingent on approval of the Plan by the
shareholders of the Company at such annual meeting. The Plan shall have a
duration of ten years from the date the Plan is adopted, or, if earlier, the
date the Plan is approved by shareholders; provided that in the event of Plan
termination, the Plan shall remain in effect as long as any Awards under it are
outstanding; provided, further however, that, no Award may be granted under the
Plan on a date that is more than ten years from the date the Plan is adopted or,
if earlier, the date the Plan is approved by shareholders.
4.2 Awards Subject to Plan. Awards granted under the Plan shall be
subject to the following:
(a) Subject to the following provisions of this subsection 4.2, the
number of shares of Stock available for Awards under the Plan during any fiscal
year of the Company shall equal to (i) 15 percent of the maximum number of
shares of Stock that are authorized to be
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issued under the Plan; reduced by (ii) any shares of Stock granted pursuant to
Awards under the Plan, and any shares of Stock subject to any outstanding Award
under the Plan.
(b) To the extent any shares of Stock covered by an Award are not
delivered to a Participant or beneficiary because the Award is forfeited or
canceled, or the shares of Stock are not delivered because the Award is settled
in cash or used to satisfy the applicable tax withholding obligation, such
shares shall not be deemed to have been delivered for purposes of determining
the maximum number of shares of Stock available for delivery under the Plan.
(c) If the exercise price of any stock option granted under the
Plan or the Prior Plan is satisfied by tendering shares of Stock to the Company
(by either actual delivery or by attestation), only the number of shares of
Stock issued net of the shares of Stock tendered shall be deemed delivered for
purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.
(d) Subject to paragraph 4.2(e), the following additional maximums
are imposed under the Plan.
(i) The maximum number of shares of Stock that are
authorized to be issued under the Plan pursuant to Awards granted under the Plan
shall be TWELVE MILLION (12,000,000) shares.
(ii) The maximum number of shares of Stock that may be
issued by Options intended to be ISOs shall be 8 million shares.
(iii) The maximum number of shares that may be covered by
Awards granted to any one individual pursuant to Section 2 (relating to Options
and SARs) shall be 1,333,333 shares during any fiscal year.
(iv) No more than 1,333,333 shares of Stock may be subject
to Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and
Performance Share Awards that are intended to be "performance-based
compensation" (as that term is used for purposes of Code Section 162(m)) granted
to any one individual during any one fiscal-year period (regardless of when such
shares are deliverable).
(e) Subject to any required action by the stockholders, the number
of shares that may be granted pursuant to this Plan and the number of shares
covered by each outstanding Award and the price per share in each such Award,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of the Company resulting from a subdivision or consolidation of
shares or the payment of a stock dividend (but only on the shares) or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Company.
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(f) If the Company merges or consolidates with another corporation,
whether or not the Company is a surviving corporation, or if the Company is
liquidated or sells or otherwise disposes of substantially all of its assets
while unexercised Options or other Awards remain outstanding under this Plan,
(A) subject to the provisions of clause (C) below, after the effective date of
the merger, consolidation, liquidation, sale or other disposition, as the case
may be, each holder of an outstanding Option or other Award shall be entitled,
upon exercise of that Option or Award or in place of it, as the case may be, to
receive, in lieu of shares of Stock, the number and class or classes of shares
of Stock or other securities or property to which the holder would have been
entitled if, immediately prior to the merger, consolidation, liquidation, sale
or other disposition, the holder had been the holder of record of a number of
shares of Stock equal to the number of shares of Stock as to which that Option
may be exercised or are subject to the Award; (B) if Options or other Awards
have not already become exercisable under Section 5 hereof, the Board of
Directors may waive any limitations set forth in or imposed pursuant to this
Plan so that all Options or other Awards, from and after a date prior to the
effective date of that merger, consolidation, liquidation, sale or other
disposition, as the case may be, specified by the Board of Directors, shall be
exercisable in full; and (C) all outstanding Options or SARs may be cancelled by
the Board of Directors as of the effective date of any merger, consolidation,
liquidation, sale or other disposition provided that any optionee or SAR holder
shall have the right immediately prior to such event to exercise his or her
Option or SAR to the extent such optionee or holder is otherwise able to do so
in accordance with this Plan (including Section 5 hereof) or his individual
Option or SAR agreement.
(g) In the event of a change in the shares of the Company as
presently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the shares within the meaning of this Plan.
(h) To the extent that the foregoing adjustments relate to Stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive;
provided, that each Option which, upon grant of the Option, is specifically
designated as an ISO shall not be adjusted in a manner that causes the Option to
fail to continue to qualify as an ISO without the consent of the Option holder.
(i) Except as hereinbefore expressly provided in this Section 4, a
Participant shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, or consolidation or spin-off of
assets or stock of another corporation, and any issue by the Company of shares
of stock of any class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Stock subject to
an Award, unless the Committee shall otherwise determine.
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(j) The grant of any Award pursuant to this Plan shall not affect
in any way the right or power of the Company (A) to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, (B) to merge or consolidate, (C) to dissolve, liquidate or sell, or
transfer all or any part of its business or assets or (D) to issue any bonds,
debentures, preferred or other preference stock ahead of or affecting the Stock.
If any action described in the preceding sentence results in a fractional share
for any Participant under any Award hereunder, such fraction shall be completely
disregarded and the Participant shall only be entitled to the whole number of
shares resulting from such adjustment.
4.3 General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under the Plan or make
any other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the applicable
requirements of any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance may be
effected on a non-certificated basis, to the extent not prohibited by applicable
law or the applicable rules of any stock exchange.
4.4 Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan.
4.5 Use of Shares. Subject to the overall limitation on the number of
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Subsidiary, including the plans and arrangements of the Company or
a Subsidiary assumed in business combinations.
4.6 Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.
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4.7 Payments. Awards may be settled through cash payments, the delivery
of shares of Stock, the granting of replacement Awards, or combination thereof
as the Committee shall determine. Any Award settlement, including payment
deferrals, may be subject to such conditions, restrictions and contingencies as
the Committee shall determine. The Committee may permit or require the deferral
of any Award payment, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest, or
dividend equivalents, including converting such credits into deferred Stock
equivalents. Each Subsidiary shall be liable for payment of cash due under the
Plan with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Subsidiary by the Participant.
Any disputes relating to liability of a Subsidiary for cash payments shall be
resolved by the Committee.
4.8 Transferability. Except as otherwise provided by the Committee,
Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
4.9 Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.10 Agreement With Company. An Award under the Plan shall be subject
to such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
to any Participant shall be reflected in such form of written document as is
determined by the Committee. A copy of such document shall be provided to the
Participant, and the Committee may, but need not, require that the Participant
shall sign a copy of such document. Such document is referred to in the Plan as
an "Award Agreement" regardless of whether any Participant signature is
required.
4.11 Action by Company or Subsidiary. Any action required or permitted
to be taken by the Company or any Subsidiary shall be by resolution of its board
of directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of such company.
4.12 Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
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4.13 Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets, funds or
property of the Company or any Subsidiary whatsoever, including, without
limitation, any specific funds, assets, or other property which the Company or
any Subsidiary, in its sole discretion, may set aside in anticipation of a
liability under the Plan. A Participant shall have only a contractual right to
the Stock or amounts, if any, payable under the Plan, unsecured by any assets of
the Company or any Subsidiary, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company or any Subsidiary shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating employee the right to
be retained in the employ of the Company or any Subsidiary, nor any right or
claim to any benefit under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Except as otherwise provided in the Plan,
no Award under the Plan shall confer upon the holder thereof any rights as a
shareholder of the Company prior to the date on which the individual fulfills
all conditions for receipt of such rights.
4.14 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 5
CHANGE IN CONTROL
5.1 Subject to the provisions of paragraph 4.2(e) (relating to the
adjustment of shares), and except as otherwise provided in the Plan or the Award
Agreement reflecting the applicable Award, upon the occurrence of a Change in
Control:
(a) All outstanding Options (regardless of whether in tandem with
SARs) shall become fully exercisable.
(b) All outstanding SARs (regardless of whether in tandem with
Options) shall become fully exercisable.
(c) All Stock Units, Restricted Stock, Restricted Stock Units, and
Performance Shares shall become fully vested.
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SECTION 6
COMMITTEE
6.1 Administration. Subject to this Section 6.1, the authority to
control and manage the operation and administration of the Plan shall be vested
in a committee (the "Committee") in accordance with this Section 6. The
Committee shall be selected by the Board, and at all times that any securities
of the Company are registered under Section 12 of the Securities Exchange Act of
1934, as amended, shall consist solely of two or more members of the Board who
are nonemployee directors within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and are outside directors within the meaning
of Code Section 162(m). If the Committee does not exist, or for any other reason
determined by the Board, the Board may take any action under the Plan that would
otherwise be the responsibility of the Committee.
6.2 Powers of Committee. The Committee's administration of the Plan
shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have
the authority and discretion to select from among the Eligible Grantees those
persons who shall receive Awards, to determine the time or times of receipt, to
determine the types of Awards and the number of shares covered by the Awards, to
establish the terms, conditions, performance criteria, restrictions, and other
provisions of such Awards, and (subject to the restrictions imposed by Section
7) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of the material
purposes of the Awards in jurisdictions outside the United States, the Committee
will have the authority and discretion to modify those restrictions as the
Committee determines to be necessary or appropriate to conform to applicable
requirements or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any Award
Agreement made pursuant to the Plan, and to make all other determinations that
may be necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on all persons.
(e) In controlling and managing the operation and administration of
the Plan, the Committee shall take action in a manner that conforms to the
articles and by-laws of the Company, and applicable state corporate law.
6.3 Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
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6.4 Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment,
termination of employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.
SECTION 7
AMENDMENT AND TERMINATION
7.1 The Board may, at any time, amend or terminate the Plan, provided
that no amendment or termination may, in the absence of written consent to the
change by the affected Participant (or, if the Participant is not then living,
the affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided that adjustments pursuant to
paragraph 4.2(e) shall not be subject to the foregoing limitations of this
Section 7.
SECTION 8
DEFINED TERMS
8.1 In addition to the other definitions contained herein, the
following definitions shall apply:
(a) Award. The term "Award" shall mean any award or benefit granted
under the Plan, including, without limitation, the grant of Options, SARs, Stock
Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and
Performance Share Awards.
(b) Board. The term "Board" shall mean the Board of Directors of
the Company.
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(c) Change in Control. The term "Change in Control" means a change
in the beneficial ownership of the Company's voting stock or a change in the
composition of the Board which occurs as follows:
(i) Any "person," including a "syndication" or "group" as those
terms are used in Section 13(d)(3) of the Securities Exchange Act of 1934, is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 40% or more of the combined voting power of the Company's
then outstanding "Voting Securities," which is any security which ordinarily
possesses the power to vote in the election of the Board of Directors of a
corporation without the happening of any precondition or contingency;
(ii) the Company is merged or consolidated with another
corporation and immediately after giving effect to the merger or consolidation
either (i) less than 60% of the outstanding Voting Securities of the surviving
or resulting entity are then beneficially owned in the aggregate by (x) the
stockholders of the Company immediately prior to such merger or consolidation,
or (y) if a record date has been set to determine the stockholders of the
Company entitled to vote on such merger or consolidation, the stockholders of
the Company as of such record date, or (ii) the Board of Directors, or similar
governing body, of the surviving or resulting entity does not have as a majority
of its members the persons specified in clauses (iii)(A) and (B) below;
(iii) If at any time the following do not constitute a majority
of the Board of Directors of the Company (or any successor entity referred to in
clause (ii) above): Persons who, prior to their election as a director of the
Company (or successor entity if applicable) were nominated, recommended or
endorsed by a formal resolution of the Board of Directors of the Company;
(iv) If at any time during a calendar year a majority of the
directors of the Company are not persons who were directors at the beginning of
the calendar year; or
(v) the Company transfers substantially all of its assets to
another corporation which is a less than 80% owned subsidiary of the Company.
(d) Code. The term "Code" means the Internal Revenue Code of 1986,
as amended. A reference to any provision of the Code shall include reference to
any successor provision of the Code.
(e) Eligible Grantee. The term "Eligible Grantee" shall mean any
employee or director of the Company or a Subsidiary and any consultant or other
person providing services to the Company or Subsidiary. An Award may be granted
to an employee, in connection with hiring, retention or otherwise, prior to the
date the employee first performs services for the Company or the Subsidiaries,
provided that such Award shall not become vested prior to the date the employee
first performs such services.
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(f) Fair Market Value. For purposes of determining the "Fair Market
Value" of a share of Stock as of any date, the following rules shall apply:
(i) If the principal market for the Stock is a national
securities exchange or the Nasdaq stock market, then the "Fair Market Value" as
of that date shall be the mean between the lowest and highest reported sale
prices of the Stock on that date on the principal exchange or market on which
the Stock is then listed or admitted to trading;
(ii) If sale prices are not available or if the principal
market for the Stock is not a national securities exchange and the Stock is not
quoted on the Nasdaq stock market, the average between the highest bid and
lowest asked prices for the Stock on such day as reported on the Nasdaq OTC
Bulletin Board Service or by the National Quotation Bureau, Incorporated or a
comparable service; or
(iii) If the day is not a business day, and as a result,
paragraphs (i) and (ii) next above are inapplicable, the Fair Market Value of
the Stock shall be determined as of the next earlier business day. If paragraphs
(i) and (ii) next above are otherwise inapplicable, then the Fair Market Value
of the Stock shall be determined in good faith by the Committee.
(g) Subsidiaries. The term "Subsidiary" means any subsidiary of the
Company, and any business venture designated by the Committee in which the
Company has a significant interest, as determined in the discretion of the
Committee.
(h) Stock. The term "Stock" shall mean shares of common stock of
the Company.
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SECTION 9
SECURITIES REGULATION
9.1 Each grant agreement hereunder may provide that, upon the receipt
of Stock as a result of the surrender or exercise of an Option or Award, the
Participant shall, if so requested by the Company, hold such Stock for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each grant agreement may also
provide that, if so requested by the Company, the Participant shall make a
written representation to the Company that he or she will not sell or offer to
sell any of such Stock unless a registration statement shall be in effect with
respect to such Stock under the Securities Act of 1933, as amended ("1933 Act"),
and any applicable state securities law, or unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Stock transferred upon the exercise
or surrender of an Option or Award granted under this Plan may at the discretion
of the Company bear a legend to the effect that such Stock has not been
registered under the 1933 Act or any applicable state securities law and that
such Stock may not be sold or offered for sale in the absence of an effective
registration statement as to such Stock under the 1933 Act and any applicable
state securities law or an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required.
SECTION 10
GOVERNING LAW
10.1 This Plan shall be governed by, and construed in accordance with,
the laws of the State of Florida.
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APPENDIX B
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MARKLAND TECHNOLOGIES, INC.
The undersigned does hereby certify that, pursuant to the authority conferred
upon the Board of Directors of MARKLAND TECHNOLOGIES, INC. (the "Corporation"),
a corporation organized and existing under the Florida Business Corporation Act,
by Florida Statute 607.0821 and pursuant to a Board of Directors meeting held on
October ___, 2001, whereby all of the members of the Corporation's Board of
Directors voted to increase the number of shares of its common stock, par value
$0.0001 per share (the "Common Stock," or the "Shares"), authorized for
issuance, from 3,000,000 to 5,000,000, and there being no shareholder action
required, the Corporation's Articles of Incorporation are hereby further amended
as follows:
ARTICLE I
The name of the corporation is Markland Technologies, Inc.
ARTICLE II
The amendment alters or changes Article V of the original Articles of
Incorporation and the full text of such provision altered is as follows:
The corporation is authorized to issue 500,000,000 shares of
common stock, $0.0001 par value, and 5,000,000 shares of preferred
stock, par value $0.0001, the rights and preferences of which shall be
established by the corporation's Board of Directors.
ARTICLE II
These Articles of Amendment were adopted by the stockholders of the Corporation
on November ___ 2001.
ARTICLE VI
The number of shares outstanding was [ ], all of which were entitled to
vote on this amendment. The number of shares voted for the amendment was [ ];
and the number shares voted against the amendment was [ ].
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Dated this the ____ day of November, 2001.
MARKLAND TECHNOLOGIES, INC.
a Florida corporation
-------------------------------
Lawrence Shatsoff
President
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PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MARKLAND TECHNOLOGIES, INC.
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
MARKLAND TECHNOLOGIES, INC.
TO BE HELD THURSDAY, NOVEMBER 29, 2001
The undersigned shareholder(s) of Markland Technologies, Inc., a
Florida corporation, hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated November 6, 2001. The
undersigned hereby appoints Lawrence Shatsoff as proxy and attorney-in-fact, on
behalf of and in the name of the undersigned, to represent the undersigned at
the 2001 Annual Meeting of Shareholders of Markland Technologies, Inc. to be
held on Thursday, November 29, 2001, at 9:00 a.m., Springfield, New Jersey time,
at the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081, and at any
adjournment(s) of the annual meeting, and to vote all shares of common stock
that the undersigned would be entitled to vote as if they were personally
present, on the matters set forth on the reverse side.
SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[X] Please mark votes as in this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTORS LISTED
BELOW AND FOR PROPOSALS 2, 3, AND 4, AND AS THE PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT OF THE
MEETING.
1. The election of two directors, each for a term of one year.
NOMINEES: FOR WITHHOLD AUTHORITY
Lawrence Shatsoff [ ] [ ]
David E. Danovitch [ ] [ ]
[ ]
-----------------------------------------
FOR all nominees except those listed on the line immediately above.
<Table>
FOR AGAINST ABSTAIN
2. The approval of the Markland Technologies, Inc. [ ] [ ] [ ]
2001 Stock Incentive Plan.
3. The ratification of the appointment of Feldman Sherb & [ ] [ ] [ ]
Co., P.C. as our independent accountants for our fiscal
year ended June 30, 2001 and our fiscal year ending
June 30, 2002.
4. The approval of an amendment to our articles of [ ] [ ] [ ]
incorporation to increase the number of shares of our
common stock authorized for issuance, from 300,000,000
to 500,000,000.
</Table>
[ ] Please check this box if this proxy card represents a duplicate account.
Checking the box will discontinue Annual Report and Proxy Statement mailings to
this account. Proxy cards though will continue to be mailed to this account.
Please make sure that at least one account continues to receive these materials.
This Proxy should be marked, dated and signed by the shareholder(s)
exactly as his or her name appears on the proxy card, and returned promptly in
the enclosed envelope. Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or as community property, both
should sign.
Each shareholder giving a proxy has the power to revoke it at any time
before the shares it represents are voted. Revocation of a proxy is effective
upon receipt by our Secretary, at or prior to the annual meeting, of either (i)
an instrument revoking the proxy or (ii) a duly executed proxy bearing a later
date. Additionally, a shareholder may change or revoke a previously executed
proxy by attending the annual meeting and requesting to vote in person.
Attendance at the annual meeting will not by itself revoke a previously granted
proxy.
Shareholder Signature(s):
---------------------------
Date:
----------------------------