SCHEDULE 14C - INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
EMERGENT GROUP INC.
(Name of Registrant As Specified In Charter
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) 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 of Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________________________
2) Form, Schedule or Registration Statement No.:___________________________
3) Filing Party:___________________________________________________________
4) Date Filed: ____________________________________________________________
EMERGENT GROUP INC.
932 Grand Central Avenue
Glendale, CA 91201
(818) 240-8250
INFORMATION STATEMENT
SHAREHOLDER MAJORITY ACTION IN LIEU OF AN ANNUAL MEETING
ON OR ABOUT AUGUST 4, 2003
NOTICE IS HEREBY GIVEN TO ALL SHAREHOLDERS THAT A MAJORITY ACTION OF
SHAREHOLDERS IN LIEU OF AN ANNUAL MEETING (THE "ACTION") OF EMERGENT GROUP INC.,
A NEVADA CORPORATION, (THE "COMPANY") WILL BE TAKEN ON OR ABOUT AUGUST 4, 2003
TO ADOPT THE FOLLOWING:
(1) To elect five Directors of the Company for the coming year;
(2) To ratify, adopt and approve the selection of Singer Lewak Greenbaum &
Goldstein LLP as the Company's independent auditors for the year ending December
31, 2003;
(3) To consider and vote upon an amendment to the Company's Articles of
Incorporation and the filing of said amendment with the Secretary of State of
the State of Nevada (a) changing the par value of the Company's Common Stock
from $.001 par value to $.04 par value; and (b) reducing the number of
outstanding shares of Common Stock through a one-for-40 reverse stock split,
effective on or about August 29, 2003, to be accomplished by all stockholders of
record being requested to exchange every 40 shares of Common Stock, $.001 par
value, for one share of Common Stock, $.04 par value;
(4) To ratify, adopt and approve the Company's 2002 Employee and Consulting
Compensation Plan covering 13,000,000 shares of Common Stock; and
(5) To ratify, adopt and approve the Company's 2001 Stock Option Plan
covering 585,000 shares of Common Stock.
Only shareholders of record at the close of business on June 23, 2003 are
entitled to receipt of this Information Statement.
By Order of the Board of Directors
Bruce J. Haber, Chairman and Chief Executive Officer
July 14, 2003
INFORMATION STATEMENT
The Board of Directors of Emergent Group Inc. ("Emergent" or "the Company")
is furnishing this Information Statement (which includes the Company's annual
report on Form 10-K for its fiscal year ended December 31, 2002, exclusive of
exhibits), to shareholders on or about July 14, 2003.
This Information Statement is being furnished to the stockholders of the
Company in connection with proposals (i) to elect five Directors of the Company
for the coming year, (ii) to ratify, adopt and approve the selection of Singer
Lewak Greenbaum & Goldstein LLP as the Company's independent auditors for the
upcoming fiscal year, (iii) to ratify, adopt and approve an amendment to the
Company's Articles of Incorporation and the filing of said amendment with the
Secretary of State of the State of Nevada (a) changing the par value of the
Company's Common Stock from $.001 par value to $.04 par value; and (b) reducing
the number of outstanding shares of Common Stock through a one-for-40 reverse
stock split, effective on or about August 29, 2003, to be accomplished by all
stockholders of record being requested to exchange every 40 shares of Common
Stock, $.001 par value, for one share of Common Stock, $.04 par value; (iv) to
ratify, adopt and approve the Company's 2002 Employee and Consulting
Compensation Plan covering 13,000,000 shares of Common Stock; and (v) to ratify,
adopt and approve the Company's 2001 Stock Option Plan covering 585,000 shares
of Common Stock.
The Company has authorized 100,000,000 shares of Common Stock, $.001 par
value. Of the 100,000,000 shares, there are currently 67,357,815 shares of
Common Stock currently outstanding. The Company has 10,000,000 shares of
authorized Preferred Stock, none of which is outstanding. The proposals
contained in the preceding paragraph are expected to be adopted by the written
consent of the holders of a majority in interest in the Company's outstanding
Common Stock and submitted to the Secretary of the Company on or about August 4,
2003 (the "Written Consent Effective Date"). If the proposals were not adopted
by written consent, it would have been required to be considered by the
Company's stockholders at an annual or special stockholders' meeting convened
for the specific purpose of approving the proposals.
The elimination of the need for an annual or special meeting of
stockholders to approve the proposals is made possible by Section 78.320 of the
Nevada Revised Corporation Law (the "Nevada Law") which provides that the
written consent of the holders of outstanding shares of common stock, having not
less than the minimum number of votes which would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted, may be substituted for such an annual or special meeting. In
order to eliminate the costs and management time involved in holding an annual
or special meeting and in order to effect the proposals as early as possible in
order to accomplish the purposes of the Company, as hereinafter described, the
Board of Directors of the Company voted to utilize the written consent of the
holders of a majority in interest of the Company's outstanding voting capital
stock
The date on which this Information Statement will first be sent to the
stockholders is on or about July 14, 2003. The record date established by the
Company for purposes of determining the number of outstanding shares of Common
Stock of the Company is June 23, 2003 (the "Record Date").
2
Inasmuch as the Company will have provided to its stockholders of record
this Information Statement, the Company will notify its stockholders in its next
Quarterly Report on Form 10-QSB and/or Form 8-K of the Written Consent Effective
Date of the five proposals. No additional action will be undertaken pursuant to
such written consents, and no dissenters' rights under the Nevada Law are
afforded to the Company's stockholders as a result of the adoption of the
proposals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of June 30, 2003, the Company had outstanding 67,357,815 shares of
Common Stock. The only persons of record who presently hold or are known to own
(or believed by the Company to own) beneficially more than 5% of the outstanding
shares of such class of stock is listed below. The following table also sets
forth certain information as to holdings of the Company's Common Stock of all
officers and directors individually, and all officers and directors as a group.
Table I does not reflect the changes in ownership interest that would result
from the reverse stock split and the automatic conversion of Notes held by
officers and directors of the Company.
- ------------------------------------------------------------- ------------------------------- ------------------------
Name and Address of Beneficial Owner (1) Number of Common Approximate
Shares Percentage
- ------------------------------------------------------------- ------------------------------- ------------------------
Daniel Yun
375 Park Avenue, Suite 3607
New York, NY 10152 11,472,036 (2) 17.0
- ------------------------------------------------------------- ------------------------------- ------------------------
Mark Waldron
932 Grand Central Avenue
Glendale, CA 91201 10,247,377 (3) 15.2
- ------------------------------------------------------------- ------------------------------- ------------------------
Howard Waltman
140 Deerfield
Tenafly, NJ 07670 3,453,255 (4) 4.9
- ------------------------------------------------------------- ------------------------------- ------------------------
Matthew Fong and Paula Fong
13191 Crossroads Parkway, Suite 285
Industry, CA 91746 1,000,000 (5) 1.5
- ------------------------------------------------------------- ------------------------------- ------------------------
William M. McKay
932 Grand Central Avenue
Glendale, CA 91201 480,000 (6) *
- ------------------------------------------------------------- ------------------------------- ------------------------
Bruce J. Haber
c/o BJH Management, LLC
145 Huguenot Street, Suite 405
New Rochelle, NY 10801 7,967,425 (7) 11.8
- ------------------------------------------------------------- ------------------------------- ------------------------
Louis Buther
205 Ridgefield Avenue
South Salem, NY 10590 5,975,569(7) 8.9
- ------------------------------------------------------------- ------------------------------- ------------------------
All current and proposed executive officers and directors
as a group (seven) persons 40,379,762 (8) 56.7
3
- ------------------------------------------------------------- ------------------------------- ------------------------
The Jessica L. Haber Trust, Michela I. Haber, Trustee
65 The Oaks
Roslyn Estates, NY 10576
7,967,425 (7) 11.8
- ------------------------------------------------------------- ------------------------------- ------------------------
Adventure Capital LLC
525 North Broadway, Suite 210
White Plains, NY 10603 5,737,247 8.5
- ------------------------------------------------------------- ------------------------------- ------------------------
Table II below shows the Common Stock ownership interest by officers and
directors of the Company after giving effect to the one-for-40 reverse stock
split and the issuance of post split shares resulting from the conversion of
promissory notes to Mr. Haber (500,000), Mr. Yun (500,000), Mr. Waldron
(150,000), Mr. Waltman (250,000), Mr. McKay (25,000) and Mr. Buther (150,000)
and the issuance of rights to purchase the Company's post-split shares of Common
Stock to Mr. Haber (303,031 shares) and Louis Buther (227,272 shares).
- ------------------------------------------------------------- ------------------------------- ------------------------
Name and Address of Beneficial Owner (1) Number of Common Approximate
Shares Percentage
- ------------------------------------------------------------- ------------------------------- ------------------------
Daniel Yun
375 Park Avenue, Suite 3607
New York, NY 10152 786,801 (2) 18.8
- ------------------------------------------------------------- ------------------------------- ------------------------
Mark Waldron
932 Grand Central Avenue
Glendale, CA 91201 406,185 (3) 9.7
- ------------------------------------------------------------- ------------------------------- ------------------------
Howard Waltman
140 Deerfield
Tenafly, NJ 07670 336,332 (4) 7.9
- ------------------------------------------------------------- ------------------------------- ------------------------
Matthew Fong and Paula Fong
13191 Crossroads Parkway, Suite 285
Industry, CA 91746 25,000 (5) *
- ------------------------------------------------------------- ------------------------------- ------------------------
William M. McKay
932 Grand Central Avenue
Glendale, CA 91201 37,000 (6) *
- ------------------------------------------------------------- ------------------------------- ------------------------
Bruce J. Haber
c/o BJH Management, LLC
145 Huguenot Street, Suite 405
New Rochelle, NY 10801 1,002,216 (7) 22.3
- ------------------------------------------------------------- ------------------------------- ------------------------
Louis Buther
205 Ridgefield Avenue
South Salem, NY 10590 526,662 (7) 11.9
- ------------------------------------------------------------- ------------------------------- ------------------------
All current and proposed executive officers and directors
as a group (seven) persons 3,120,198(8) 66.2
- ------------------------------------------------------------- ------------------------------- ------------------------
_______________
(*) Represents less than 1% of the outstanding shares of the Company's Common
Stock.
(1) All shares are directly owned, and the sole investment and voting power is
held, by the persons named unless otherwise noted.
4
(2) Includes 30,834 shares owned by Emergent Capital L.P., which Mr. Yun has
sole voting and disposition power, 17,500 shares gifted to 17 persons and
options to purchase 93 shares.
(3) Includes options to purchase 93 shares.
(4) Includes 11,332 shares owned by his family in the name of The THW Group
LLC, over which shares Mr. Waltman exercises voting and investment control
and options to purchase 75,000 shares.
(5) Includes options to purchase 25,000 shares.
(6) Includes options to purchase 12,000 shares of the Company's Common Stock
which are exercisable within 60 days of the anticipated mailing date of
this Proxy Statement.
(7) BJH Management LLC is a company owned by Mr. Bruce J. Haber. BJH acquired
348,575 shares of Common Stock of the Company pursuant to a services
agreement and Mr. Haber purchased $200,000 of Notes which will convert into
500,000 shares. Of the 348,575 shares, 199,186 shares were gifted by Mr.
Haber to an irrevocable trust for the benefit of his daughter, Jessica L.
Haber with his wife, Michela I. Haber, as Trustee. The remaining 149,389
shares were transferred to Louis Buther. BJH Management has certain
anti-dilution rights to maintain on behalf of itself, and at its option,
its transferees, a minimum combined 17.5% of the Company's outstanding
shares on a fully diluted basis. Pursuant to these rights as a result of
the Company's completion of its private placement offering and anticipated
stockholder approval of the Stockholder Matter, BJH will receive rights to
purchase 530,303 shares of Common Stock exercisable at $.20 per share. Of
these rights, the right to purchase 227,272 shares will be transferred to
Mr. Buther and the remaining rights to purchase 303.031 shares will be
transferred to Mr. Haber. The amount of stock shown in the table as owned
by Mr, Haber includes the shares held in his daughter's trust, although he
disclaims beneficial ownership of such shares.
(8) See footnotes (2) through (5) above.
Voting Agreement
During December 2002, the Company's former Chairman of the Board, Mr.
Daniel Yun and former Chief Executive Officer, Mr. Mark Waldron entered into a
Voting Agreement (the "Voting Agreement"), whereby they agreed to vote all of
their common stock in unison. However, to the extent that Messrs. Yun and
Waldron do not agree on any particular matter, then each of them shall vote
their shares of common stock in a manner consistent with the recommendation of
the majority of the Company's Board of Directors. The Voting Agreement
terminates on the earlier of five years from the effective date, or upon the
sale of such shares by Messrs. Yun or Waldron to a non-related or unaffiliated
party.
5
The Company does not know of any arrangement or pledge of its securities by
persons now considered in control of the Company that might result in a change
of control of the Company.
PROPOSAL TO RE-ELECT
DIRECTORS
It is anticipated that the written consents to be submitted to the
Secretary of the Company at the Written Consent Effective Date will include the
re-election of the Company's existing five directors for a period of one year
and until their successors are elected and shall qualify. The written consents
are intended to be a cost effective substitute to eliminate the need to hold a
2003 annual meeting of the Company's stockholders. The following five directors
of the Company are expected to be re-elected to continue to serve as directors
of the Company.
It is anticipated that the written consents to be submitted to the
Secretary of the Company at the Written Consent Effective Date will include the
re-election of the Company's existing five directors for a period of one year
and until their successors are elected and shall qualify. The written consents
are intended to be a cost effective substitute to eliminate the need to hold a
2003 annual meeting of the Company's stockholders. The following five directors
of the Company are expected to be re-elected to continue to serve as directors
of the Company.
Term First Principal
of Became Occupation
Name Age Office Director
Bruce J. Haber 51 (1) 2003 Chairman of the Board
and Chief Executive
Officer of the Company
Daniel Yun 36 (1) 2000 Private Investor
Mark Waldron 35 (1) 2000 Private Investor
Howard Waltman 70 (1) 2001 Private Investor
Matthew K. Fong 49 (1) 2001 President of Strategic
Advisory Group and
Senior Counsel with
Sheppard, Muller, Richter
& Hampton
________________
(1) Directors are elected at the annual meeting of stockholders and hold office
to the following annual meeting.
Identities of Executive Officers
Bruce J. Haber is Chairman of the Board and Chief Executive Officer, Louis
Buther is President of the Company and William M. McKay is Chief Financial
Officer, Secretary and Treasurer. The terms of all officers expire at the annual
meeting of directors following the annual stockholders meeting. Officers serve
at the pleasure of the Board and may be removed, either with or without cause,
by the Board of Directors, and a successor elected by a majority vote of the
Board of Directors, at any time.
Biographies of the Company's Nominees to the Board.
The biographies of the Company's five nominee's to serve as directors are
described in Item 10 of the Company's Form 10-K for its fiscal year ended
December 31, 2002, which are incorporated by reference. For a copy of the Form
10-K, see Appendix A to this Information Statement.
Board of Directors Meetings and Committees
The Company has five directors. Bruce J. Haber, its Chairman, joined the
Board of Directors effective January 31, 2002. During 2002, the Board of
Directors which consisted of four directors, namely Mark Waldron, Daniel Yun,
Howard Waltman and Matthew K. Fong, held two meetings, not including various
actions taken by unanimous written consent in lieu of a meeting. During the
period for which he was a director in 2002, each of the Company's four directors
attended at least 75% of all meetings of the Board held in 2002.
6
Committees
Prior to November 2001, the Company had no standing audit, nominating and
compensation committees of the Board of Directors or committees performing
similar functions.
On November 1, 2001, the Company's Board established a Compensation
Committee with Messrs. Waltman, Fong and Yun as its members. On November 1,
2001, the Company's Board also established an Audit Committee with Messrs.
Waltman and Fong and Dr. Bernard Rineberg, a former director, as its members. On
December 19, 2002, the Board approved each of the following: (i) a resolution
that upon the effective date of Mr. Bruce J. Haber becoming a director of the
Company (i.e. January 31, 2003), the members of the Compensation Committee shall
be changed to include Messrs. Haber, Waltman and Yun and (ii) a resolution
reducing the number of Audit Committee members to two with Messrs. Waltman and
Fong as its members.
Audit Fees
For the fiscal year ended December 31, 2002, the aggregate fees billed for
professional services rendered by Singer Lewak Greenbaum & Goldstein LLP
("independent auditors") for the audit of the Company's annual financial
statements and the reviews of its financial statements included in the Company's
quarterly reports totaled approximately $74,783.
Financial Information Systems Design and Implementation Fees
For the fiscal year ended December 31, 2002, there were $-0- in fees billed
for professional services by the Company's independent auditors rendered in
connection with, directly or indirectly, operating or supervising the operation
of its information system or managing its local area network.
All Other Fees
For the fiscal year ended December 31, 2002, there was $9,248 in fees
billed for preparation of corporate tax returns, tax research and other
professional services rendered by the Company's independent auditors. The
foregoing excludes expense reimbursement of $5,586.
Audit Committee Report
The members of the Company's audit committee consist of Howard Waltman and
Matthew Fong Sr., each of whom are deemed by Management to be independent
directors, but neither of whom would be deemed a "Financial Expert" within the
meaning of Sarbanes Oxley Act 0f 2002, as amended. The definition of
"independent director" is defined in Rule 4200(a)(14) of the NASD's Listing
Standards. The NASD's listing standards define an "independent director"
generally as a person, other than an officer of the Company, who does not have a
relationship with the company that would interfere with the director's exercise
of independent judgment. The term "Financial Expert" is defined as a person who
has the following attributes: an understanding of generally accepted accounting
principals and financial statements; has the ability to assess the general
application of such principals in connection with the accounting for estimates,
accruals and reserves; experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of complexity of
7
accounting issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the Company's financial
statements, or experience actively supervising one or more persons engaged in
such activities; an understanding of internal controls and procedures for
financial reporting; and an understanding of audit committee functions.
Effective May 20, 2003, the Board has adopted a written charter. A copy of the
audit committee charter is attached as Appendix B. The charter is expected to
include, among other things:
. annually reviewing and reassessing the adequacy of the committee's
formal charter;
. reviewing the annual audited financial statements with the Company's
management and its independent auditors and the adequacy of its
internal accounting controls;
. reviewing analyses prepared by the Company's management and
independent auditors concerning significant financial reporting issues
and judgments made in connection with the preparation of its financial
statements;
. being directly responsible for the appointment, compensation and
oversight of the independent auditor, which shall report directly to
the Audit Committee, including resolution of disagreements between
management and the auditors regarding financial reporting for the
purpose of preparing or issuing an audit report or related work;
. reviewing the independence of the independent auditors;
. reviewing the Company's auditing and accounting principles and
practices with the independent auditors and reviewing major changes to
its auditing and accounting principles and practices as suggested by
the independent auditor or its management;
. reviewing all related party transactions on an ongoing basis for
potential conflict of interest situations; and
. all responsibilities given to the Audit Committee by virtue of the
Sarbanes-Oxley Act of 2002, which was signed into law by President
George W. Bush on July 30, 2002.
The Company's Audit Committee met and held discussions with management and
its independent auditors. Management represented to the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Audit Committee has reviewed
and discussed the consolidated financial statements with management and the
independent auditors. The Audit Committee discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Company's independent auditors
also provided the Audit Committee with the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and the Audit Committee discussed with the independent auditors and
management the auditors' independence, including with regard to fees for
services rendered during the fiscal year and for all other professional services
rendered by the Company's independent auditors. Based upon the Audit Committee's
discussion with management and the independent auditors and the Audit
Committee's review of the representations of management and the report of the
independent auditors to the Audit Committee, the Audit Committee recommended the
inclusion of the audited consolidated financial statements in the Company's
annual report on Form 10-K for the fiscal year ended December 31, 2002.
Howard Waltman
Matthew K. Fong
8
Executive Compensation
Incorporated by reference is the contents of Item 11 of Emergent's Form
10-K for its fiscal year ended December 31, 2002, a copy of which is annexed to
this Information Statement as Appendix A.
Certain Transactions
Incorporated by reference is the contents of Item 11 of Emergent's Form
10-K for its fiscal year ended December 31, 2002, a copy of which is annexed to
this Information Statement as Appendix A.
Financial and Other Information
Accompanying this Information Statement as Appendix A is the Company's 2002
Annual Report on Form 10-K for its fiscal year ended December 31, 2002
(excluding exhibits). The Company incorporates by reference the information
contained in the Company's 2002 Annual Report.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Incorporated by reference is the contents of "Compliance with Section 16(a)
of the Securities Exchange Act of 1934" contained in Item 10 of Emergent's Form
10-K for its fiscal year ended December 31, 2002, a copy of which is annexed to
this Information Statement as Appendix A.
PROPOSAL TO RATIFY
THE BOARD'S SELECTION OF SINGER LEWAK GREENBAUM & GOLDSTEIN LLP,
AS INDEPENDENT AUDITORS FOR 2003
The Board of Directors has approved the selection of Singer Lewak Greenbaum
& Goldstein LLP, subject to the ratification of its shareholders, as the
Company's independent auditors for 2003. Singer Lewak Greenbaum & Goldstein LLP,
Certified Public Accountants, audited the Company's financial statements for its
last year ended December 31, 2002. Even if the selection is ratified, the Board
in its sole discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board believes that such a
change would be in the best interests of the Company and its stockholders.
For a discussion of the Audit Fees, Financial Information Systems Design
and Implementation Fees and other fees billed by the Company's independent
auditors for 2002, see the Proposal to re-elect directors.
It is expected that the written consents submitted to the Secretary of the
Company at the Written Consent Effective Date will include the ratification of
the Board's selection of Singer Lewak Greenbaum & Goldstein LLP, as independent
auditors.
Change in Accountants
Incorporated by reference is Item 9 of the Company's Form 10-K for its
fiscal year ended December 31, 2002, a copy of which is annexed to this
Information Statement as Appendix A.
9
PROPOSAL TO REDUCE THE NUMBER OF SHARES OF
OUTSTANDING COMMON STOCK, VIA A ONE-FOR- FORTY REVERSE
STOCK SPLIT AND PROPORTIONATELY INCREASE THE PAR VALUE OF THE COMPANY'S
COMMON STOCK, BY WAY OF AN AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION
The Company's Board of Directors has proposed to reduce the number of its
issued and outstanding shares of Common Stock via a one-for-forty reverse stock
split through issuing one share of Common Stock, $.04 par value, in exchange for
every forty shares of Common Stock, $.001 par value, as of the close of business
on or about August 29, 2003 (the "Effective Date"). In addition, the proposal is
to proportionately increase the par value of the Common Stock from $.001 par
value, to $.04 par value. A copy of the proposed amendment to the Articles of
Incorporation is annexed hereto as Appendix "C." The Company shall have the
right to make any additional changes to the form of amendment included in
Appendix C as required by the Nevada Secretary of State to complete such filing.
Purpose of Amendment
This proposal, which is in the nature of a reverse stock split will reduce
the number of shares of the Company's issued and outstanding Common Stock from
67,357,815 shares to approximately 4,183,946 shares (calculated as follows:
67,357,815 pre-split outstanding shares divided by 40 equals 1,683,946 shares
plus 2,500,000 shares of Common Stock that will be automatically issued upon the
conversion of certain notes described below). Prior to the reverse stock split,
the Company also has outstanding the following securities: options and warrants
to purchase up to 16,069,363 shares of Common Stock, and rights to purchase up
to 21,121,119 shares of Common Stock. The foregoing commitments to potentially
issue shares of Common Stock upon exercise of outstanding options and warrants
will become exercisable into 929,765 post split shares of Common Stock on the
Effective Date. With an authorized number of 100,000,000 shares of Common Stock
(and 10,000,000 preferred shares) remaining unchanged, the number of un-issued
shares of Common Stock that will be available for future issuance will increase
dramatically from 32,642,185 to 95,816,054. No fractional shares will be issued
and in lieu of fractional interests shareholders would otherwise be entitled to,
all amounts will be rounded up to the nearest whole share. Accordingly, no
common stockholder will receive less than one full common share.
In June 2003, the Company in a private placement sold its Subordinated
Promissory Notes (the "Notes") in the principal amount of $1,000,000. Of the
$1,000,000, $$700,000, was sold to executive officers and directors and counsel
of the Company and the balance of $300,000 to six other investors.
The following is a summary of the material terms of the private placement:
o 50 Units were offered by the Company on a "best efforts" basis at a
purchase price of $20,000 per Unit with each Unit consisting of a
Subordinated Promissory Note in the principal amount of $20,000;
o The Notes shall be subordinated to all bank, leasing and other types
of senior indebtedness, both current indebtedness and indebtedness
incurred in the future;
10
o Interest shall be at a rate of 6% per annum payable at the earlier of
maturity, conversion or redemption. Interest shall retroactively
increase to 12% per annum if this Proposal is not approved by
stockholders of the Company by August 7, 2003;
o A security interest in all the assets of the Company shall be granted
to all Note holders to the extent permitted by law and subject to the
priority liens of holders of senior indebtedness. A representative
shall be appointed after the offering by the Note holders to be
authorized on their behalf to perfect their security interest;
o The convertibility of the Notes is subject to stockholder approval of
this Proposal of a one-for-40 Reverse Stock Split and a proportionate
increase in the par value of the Company's Common Stock from $.001 per
share to a new par value of $.04 per share.
o In the event stockholders approve this Proposal, the Notes shall
automatically convert into Common Stock on the Effective Date of the
Reverse Stock Split (i.e. August 29, 2003) at the conversion rate of
$2.00 of principal into five post-split shares of Common Stock,
equivalent to 100 pre-split shares of Common Stock (the "Conversion
Rate")and the security interest in all assets of the Company granted
to noteholders shall be released; and
o Interest on the Notes will be payable in cash at the earlier of the
maturity date, conversion date or redemption date of the Notes unless
an affirmative election is made by the Note holders to receive Common
Stock in lieu thereof at a conversion price that will be no lower than
the Conversion Rate.
In the event this Proposal is approved by stockholders of the Company, the
number of outstanding shares of Common Stock will change dramatically as
discussed herein.
This amendment is intended to reduce the Company's outstanding Common Stock
to an amount which, in the Board of Director's opinion, is more appropriate for
smaller size companies. It is also intended to increase the market price per
share, if any, above its present level. A higher market price for the Company's
Common Stock, if any, is anticipated to result from this reduction since
potential earnings (or loss) per share will increase on a 40- to-1 basis and
there will be a decreased "float" of common stock. However, there can be no
assurances that the market price will increase in the same 40-to-1 proportion
nor, if increased, that such price will be maintained. Further, there can be no
assurances given that a higher market price will encourage more broker dealers
or investors to become involved in the Company's Common Stock, particularly
since the initial post-split market price of the Company's Common Stock on the
Effective Date is likely to still remain a "penny stock."
11
If this proposal is approved by the holders of Common Stock, the effective
result would be to automatically permit the conversion of the Notes on the
Effective Date of the reverse stock split and to increase the number of
un-issued and unreserved authorized shares of Common Stock that will be
available for issuance for such purposes and consideration as the Board may
approve without further stockholder approval, except such approval as may be
required by law or the regulations of any applicable Stock Exchange. Such
purposes may include additional public and private issuances of Common Stock or
other securities convertible into Common Stock in connection with financing
transactions, acquisitions or other corporate transactions, as well as stock
dividends, warrants, stock option plans and other stock-based incentive or
compensation programs. The availability of additional shares of Common Stock for
issuance, without delay and expense of obtaining stockholder approval, will
afford the Company greater flexibility in acting upon opportunities and
transactions which may arise in the future. The Company presently does not have
any specific plans to use any portion of its shares in connection with any
acquisitions, corporate transactions or business combinations.
The proposed increase in the authorized number of un-issued and unreserved
shares of Common Stock could have a number of effects on the Company's
stockholders depending on the exact nature and circumstances of any actual
issuances of authorized but un-issued and unreserved shares. The increase could
deter takeovers, in that additional shares could be issued (within the limits
imposed by applicable law) in one or more transactions that could make a change
in control or takeover of the Company more difficult. For example, additional
shares could be issued by the Company so as to dilute the stock ownership or
voting rights of persons seeking to obtain control of the Company. Similarly,
the issuance of additional shares to certain persons allied with the Company's
management could have the effect of making it more difficult to remove the
Company's current management by diluting the stock ownership or voting rights of
persons seeking to cause such removal. In addition, an issuance of additional
shares by the Company could have an effect on the potential realizable value of
a stockholder's investment. In the absence of a proportionate increase in the
Company's earnings and book value, a future increase in the aggregate number of
outstanding shares of the Company caused by the issuance of the additional
shares would dilute the earnings per share and book value per share of all
outstanding shares of the Company's Common Stock. If such factors were reflected
in the price per share of Common Stock, the potential realizable value of a
stockholder's investment could be adversely affected. The Common Stock has no
preemptive rights to purchase additional shares. The Board, within the
limitations and restrictions contained in the Articles of Incorporation and
without further action by the Company's holders of Common Stock, has the
authority to issue Common Stock from time to time.
Other than as described above, this proposal does not affect any rights,
privileges, powers or preferences of any of the Company's common stockholders,
except to the extent that shares will be rounded up to the nearest whole share
in lieu of fractional interests. Additionally, holders of Common Stock should
not be prejudiced with respect to sales, except for "odd lot" sales, (i.e. under
100 shares) since brokerage commissions on the sale of the lesser number of
shares of Common Stock giving effect to the reduction should be less. With
respect to "odd lots", which will be held by stockholders as a result of the
reduction in shares, higher per share brokerage commissions may be charged.
Additionally, "odd lot" sales may be more difficult since most purchasers
acquire stocks in round lots of 100.
This reduction in issued and outstanding shares of Common Stock and
proportionate increase change in par value will have no effect on the Company's
earnings, sales and stockholders' equity, stated capital and additional paid in
capital; the per share effect on earnings or losses, as the case may be, will be
due solely to the reduced number of shares issued and outstanding.
12
If this proposal is approved, it will not be absolutely necessary for
stockholders to exchange their existing stock certificates for new stock
certificates although it is highly recommended that they do. Stockholders will
have the right to make such an exchange should they so desire. Stock
certificates issued by the Company prior to the reverse stock split will,
subsequent to the reverse split, constitute "good delivery" of shares upon the
basis of only one share for every 40 pre-existing shares held. When presently
outstanding certificates are presented for transfer after the aforesaid
transaction, new certificates reflecting the reverse split and new cusip number
will be issued. New certificates will also be issued upon the request of any
shareholder, subject to normal requirements as to proper endorsement and payment
of applicable taxes, if any. If the proposal is approved, all shareholders will
be bound by its terms and no shareholder will be entitled to appraisal rights
or, cash payments for their shares. Common stockholders are not expected to
incur any substantial federal income tax by reason of the reverse stock split.
The number of shareholders of record of the Company's Common Stock is not
anticipated to materially change by virtue of said reverse stock split.
It is expected that the written consents submitted to the Secretary of the
Company and the Written Consent Effective Date will include the ratification of
the filing of an amendment to the Company's Articles of Incorporation and the
filing of said amendment with the Secretary of State of the State of Nevada (a)
changing the par value of the Company's Common Stock from $.001 par value to
$.04 par value; and (b) reducing the number of outstanding shares of Common
Stock through a one-for-40 reverse stock split, effective on or about August 29,
2003, to be accomplished by all stockholders of record being requested to
exchange every 40 shares of Common Stock, $.001 par value, for one share of
Common Stock, $.04 par value.
PROPOSAL TO RATIFY, ADOPT AND APPROVE THE COMPANY'S 2002 EMPLOYEE BENEFIT
AND CONSULTING COMPENSATION PLAN.
On April 1, 2002, the Company established an Employee Benefit and
Consulting Compensation Plan (the "2002 Plan") covering 13,000,000 shares. The
material features of the Plan are described below.
Administration
Our Board of Directors, Compensation Committee or both, in the sole
discretion of our Board, administers the 2002 Plan, which was approved by the
Company's Board of Directors on April 1, 2002. The Board, subject to the
provisions of the 2002 Plan, has the authority to determine and designate
officers, employees, directors and consultants to whom awards shall be made and
the terms, conditions and restrictions applicable to each award (including, but
not limited to, the option price, any restriction or limitation, any vesting
schedule or acceleration thereof, and any forfeiture restrictions). The Board
may, in its sole discretion, accelerate the vesting of awards. The Board of
Directors must approve all grants of Options and Stock Awards issued to our
officers or directors.
Types of Awards
The 2002 Plan is designed to enable us to offer certain officers,
employees, directors and consultants of us and our subsidiaries equity interests
in us and other incentive awards in order to attract, retain and reward such
13
individuals and to strengthen the mutuality of interests between such
individuals and our stockholders. In furtherance of this purpose, the 2002 Plan
contained provisions for granting incentive and non-statutory stock options and
Common Stock Awards. However, since stockholder approval of the 2002 Plan was
not obtained by April 1, 2003, all outstanding Incentive Stock Options granted
under the 2002 Plan automatically became Non-Statutory Stock Options and no
further Incentive Stock Options could be thereafter granted under the 2002 Plan.
Stock Options. A "stock option" is a contractual right to purchase a number
of shares of Common Stock at a price determined on the date the option is
granted. The option price per share of Common Stock purchasable upon exercise of
a stock option and the time or times at which such options shall be exercisable
shall be determined by the Board at the time of grant. Such option price shall
not be less than 100% of the fair market value of the Common Stock on the date
of grant. The option price must be paid in cash, money order, check or Common
Stock of the Company. The Options may also contain at the time of grant, at the
discretion of the Board, certain other cashless exercise provisions.
Options shall be exercisable at the times and subject to the conditions
determined by the Board at the date of grant, but no option may be exercisable
more than ten years after the date it is granted. If the Optionee ceases to be
an employee of our company for any reason other than death, any option
originally granted as an Incentive Stock Option exercisable on the date of the
termination of employment may be exercised for a period of thirty days or until
the expiration of the stated term of the option, whichever period is shorter. In
the event of the Optionee's death, any originally granted Incentive Stock Option
exercisable at the date of death may be exercised by the legal heirs of the
Optionee from the date of death until the expiration of the stated term of the
option or six months from the date of death, whichever event first occurs. In
the event of disability of the Optionee, any originally granted Incentive Stock
Options shall expire on the stated date that the Option would otherwise have
expired or 12 months from the date of disability, whichever event first occurs.
The termination and other provisions of a non-statutory stock option shall be
fixed by the Board of Directors at the date of grant of each respective option.
Common Stock Award. "Common Stock Award" are shares of Common Stock that
will be issued to a recipient at the end of a restriction period, if any,
specified by the Board if he or she continues to be an employee, director or
consultant of us. If the recipient remains an employee, director or consultant
at the end of the restriction period, the applicable restrictions will lapse and
we will issue a stock certificate representing such shares of Common Stock to
the participant. If the recipient ceases to be an employee, director or
consultant of us for any reason (including death, disability or retirement)
before the end of the restriction period unless otherwise determined by the
Board, the restricted stock award will be terminated.
Eligibility
The Company's officers, employees, directors and consultants of Emergent
Group and its subsidiaries are eligible to be granted stock options, and Common
Stock Awards. Eligibility shall be determined by the Board; however, all Options
and Stock Awards granted to officers and directors must be approved by the
Board.
Termination or Amendment of the 2002 Plan
The Board may at any time amend, discontinue, or terminate all or any part
of the 2002 Plan, provided, however, that unless otherwise required by law, the
rights of a participant may not be impaired without his or her consent, and
provided that we will seek the approval of our stockholders for any amendment if
such approval is necessary to comply with any applicable federal or state
securities laws or rules or regulations.
14
Awards
During 2002 and the first six months of 2003, we granted options to
purchase 10,736,106 pre-split (268,402 post-split) shares of our Common Stock
under the 2002 Plan, net of terminations. Substantially all options are
exercisable at $.01 per pre-split ($.40 per post-split) share. Unless sooner
terminated, the 2002 Plan will expire on March 31, 2012 and no awards may be
granted after that date.
It is not possible to predict the individuals who will receive future
awards under the 2002 Plan or the number of shares of Common Stock covered by
any future award because such awards are wholly within the discretion of the
Board. The table below contains information (on a pre-split basis) as of June
30, 2003 on the known benefits provided to certain persons and group of persons
under the 2002 Plan.
----------------------------------------------------- ---------------- ----------------- -----------------------
Number of Range of Value of unexercised
Shares subject exercise price options at June 30
to Options ($) per Share 2003(1)
Name and Position
----------------------------------------------------- ---------------- ----------------- -----------------------
Bruce J. Haber
Chief Executive Officer -0- -0- -0-
----------------------------------------------------- ---------------- ----------------- -----------------------
Louis Buther, President -0- -0- -0-
----------------------------------------------------- ---------------- ----------------- -----------------------
William M. McKay, Chief Financial Officer 1,200,000 .01 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
Three Executive Officers
As a group 1,200,000 .01 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
Three Non-Employee
Directors as a group 2,000,000 .01 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
Non-Executive Officer
Employees 6,960,036 .01 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
____________
(1) Value is normally calculated by multiplying (a) the difference between the
market value per share at June 30, 2003 and the option exercise price by
(b) the number of shares of Common Stock underlying the option. Due to the
limited and sporadic trading of the Company's Common Stock at year end, no
value is given to the options as of June 30, 2003.
Shares Subject to the Plan
The maximum number of shares of Common Stock that may be issued pursuant to
awards granted under the Plan is 13,000,000 pre-split (325,000 post-split). Such
shares may be either authorized and unissued shares or issued shares reacquired
by the Company and held in treasury. The Plan does not limit the number of
shares of Common Stock with respect to which options or Stock Awards may be
granted to any individual during any calendar year. The aggregate number of
shares issuable under the Plan and the number of shares subject to options and
awards to be granted under the Plan are subject to adjustment in the event of
certain mergers, reorganizations, consolidations, recapitalizations, dividends
(other than a regular cash dividend), stock split or other change in corporate
structure affecting the Common Stock. Shares subject to options that expire,
15
terminate or are canceled unexercised, shares of stock that have been forfeited
to the Company and shares that are not issued as a result of forfeiture or
termination of an award may be reissued under the Plan.
Federal Tax Consequences
The Federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed, and
may vary from locality to locality.
Non-Qualified Options. Under present Treasury regulations, an optionee who
is granted a non-qualified option will not realize taxable income at the time
the option is granted. In general, an optionee will be subject to tax for the
year of exercise on an amount of ordinary income equal to the excess of the fair
market value of the shares on the date of exercise over the option price, and
the Company will receive a corresponding deduction. Income tax withholding
requirements apply upon exercise. The optionee's basis in the shares so acquired
will be equal to the option price plus the amount of ordinary income upon which
he is taxed. Upon subsequent disposition of the shares, the optionee will
realize capital gain or loss, long-term or short-term, depending upon the length
of time the shares are held after the option is exercised.
Common Stock Awards. Recipients of shares of restricted Common Stock that
are not "transferable" and are subject to "substantial risk of forfeiture" at
the time of grant will not be subject to Federal income taxes until lapse or
release of the restrictions on the shares. The recipient's income and the
Company's deduction will be equal to the fair market value of the shares on the
date of lapse or release of such restrictions.
It is expected that the written consents submitted to the Secretary of the
Company at the Effective Date will include the ratification, adoption and the
approval of the 2002 Plan.
PROPOSAL TO RATIFY, ADOPT AND APPROVE THE COMPANY'S 2001 EMPLOYEE STOCK OPTION
PLAN.
On November 1, 2001, the Company adopted a 2001 Stock Option Plan, subject
to stockholder approval, similar to its 2002 Plan described above except that
the 2001 Plan does not provide for the direct issuance of stock and it has no
cashless exercise provisions. The Company granted options to purchase 970,000
pre-split shares under the 2001 Plan exercisable at $1.00 per share, 390,000 of
which have been terminated as a result of employees terminating their employment
with the Company. Since stockholder approval was not obtained on or before
November 1, 2002, all incentive stock options granted under the Plan have
automatically become non-statutory stock options and the Board is limited to
granting non-statutory stock options under the Plan. The Board of Directors has
no plans to issue any additional options under the 2001 Plan and on December 19,
2002, it approved a resolution reducing the number of authorized options under
the Plan from 8,000,000 shares to 585,000 pre-split shares (14,625 post-split
shares ) of Common Stock, representing the number of outstanding options under
the Plan as of that date. The exercisability of options outstanding under the
2001 Plan is subject to stockholder approval.
Awards
As of June 30, 2003, the Company has outstanding under the 2001 Plan,
options to purchase 580,000 pre-split shares (14,500 post-split shares) of our
Common Stock under the 2001 Plan. The options are exercisable at $1.00 per
pre-split share ($40.00 per post-split share).
16
While the Board of Directors has no plans to issue any additional options
under the 2001 Plan, it is not possible to predict the individuals who will
receive future awards under the 2001 Plan or the number of shares of Common
Stock covered by any future award because such awards are wholly within the
discretion of the Board. The table below contains information as of June 30,
2003 on the known benefits provided to certain persons and group of persons
under the 2001 Plan.
----------------------------------------------------- ---------------- ----------------- -----------------------
Number of Range of Value of unexercised
Shares subject exercise price options at June 30,
to Options ($) per Share 2003(1)
Name and Position
----------------------------------------------------- ---------------- ----------------- -----------------------
Bruce J. Haber
Chief Executive Officer -0- -0- -0-
----------------------------------------------------- ---------------- ----------------- -----------------------
Louis Buther, President -0- -0- -0-
----------------------------------------------------- ---------------- ----------------- -----------------------
William M. McKay, Chief Financial Officer -0- -0- -0-
----------------------------------------------------- ---------------- ----------------- -----------------------
Three Executive Officers
As a group -0- -0- -0-
----------------------------------------------------- ---------------- ----------------- -----------------------
Three Non-Employee -0- -0- -0-
Directors as a group
----------------------------------------------------- ---------------- ----------------- -----------------------
Non-Executive Officer
Employees 580,000 1.0 -0- (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
_________
(1) Value is normally calculated by multiplying (a) the difference between the
market value per share at June 30, 2003 and the option exercise price by
(b) the number of shares of Common Stock underlying the option. Due to the
limited and sporadic trading of the Company's Common Stock at year end, no
value is given to the options as of June 30, 2003.
Federal Tax Consequences
The Federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed, and
may vary from locality to locality.
Non-Qualified Options. Under present Treasury regulations, an optionee who
is granted a non-qualified option will not realize taxable income at the time
the option is granted. In general, an optionee will be subject to tax for the
year of exercise on an amount of ordinary income equal to the excess of the fair
market value of the shares on the date of exercise over the option price, and
the Company will receive a corresponding deduction. Income tax withholding
requirements apply upon exercise. The optionee's basis in the shares so acquired
will be equal to the option price plus the amount of ordinary income upon which
he is taxed. Upon subsequent disposition of the shares, the optionee will
realize capital gain or loss, long-term or short-term, depending upon the length
of time the shares are held after the option is exercised.
It is expected that the written consents submitted to the Secretary of the
Company at the Effective Date will include the ratification, adoption and the
approval of the 2001 Plan.
OTHER BUSINESS
As of the date of this Information Statement, the Board of Directors of the
Company knows of no other business which will be presented for consideration of
the stockholders of the Company.
17
AVAILABILITY OF SECURITIES AND EXCHANGE
COMMISSION'S FORM 10-K
THE COMPANY'S ANNUAL REPORT FOR ITS YEAR ENDED DECEMBER 31, 2002 ON FORM 10-K
INCLUDES THE FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS THERETO, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION; SUCH REPORT IS ATTACHED TO THIS
INFORMATION STATEMENT AS APPENDIX A (EXCLUSIVE OF EXHIBITS). ADDITIONAL COPIES
OF SUCH REPORT AND EXHIBITS ARE AVAILABLE WITHOUT CHARGE TO THE STOCKHOLDERS
UPON WRITTEN REQUEST. SUCH MATERIAL CAN BE OBTAINED BY WRITING TO EMERGENT GROUP
INC. , ATTENTION SHAREHOLDER RELATIONS AT 932 GRAND CENTRAL AVENUE GLENDALE,
CALIFORNIA, 91201.
Stockholders Proposals for the Next Annual Meeting
Proposals of security holders intended to be presented at the 2004 Annual
Meeting must be received by the Company for inclusion in the Company's Proxy
Statement and form of proxy relating to that meeting as soon as possible no
later than March 31, 2004.
EMERGENT GROUP INC.
By: /s/WILLIAM M. MCKAY, Secretary
18
APPENDIX A
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002
APPENDIX B
AUDIT CHARTER
Purpose
The primary function of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") of Emergent Group Inc. (the "Company") in
fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Company to any government body
or the public; the Company's system of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established; and the Company's auditing, accounting and financial reporting
processes. Consistent with this function, the Committee should encourage
continuous improvement of, and should foster adherence to, the Company's
policies, procedures and practices at all levels. The Committee's primary duties
and responsibilities are to:
o Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
o Review and appraise the audit efforts of the Company's independent
auditors.
o Provide an open avenue of communication among the independent
auditors, management, and the Board.
o Comply with the responsibilities of the Sarbanes-Oxley Act of 2002, as
amended
Composition
The Committee will be composed of not less than one member of the Board. They
will be selected by the Board, taking into account prior experience in matters
to be considered by the Committee, probable availability at times required for
consideration of such matters, and their individual independence and
objectivity. All members of the Committee shall have a working familiarity with
basic finance and accounting practices.
The Committee's membership will meet the requirements of the audit committee
policy of the National Association of Securities Dealers ("NASD") and those
contained in the Sarbanes-Oxley Act of 2002, as amended. Accordingly, all of the
members will be directors independent of management and free from relationships
that, in the opinion of the Board, would interfere with the exercise of
independent judgment as a committee member.
Meetings
The Committee shall meet at least once quarterly, or more frequently as
circumstances dictate. The Committee may meet with management and the
independent auditors in separate executive sessions to discuss any matters that
the Committee or either of these groups believes should be discussed privately.
In addition, the Committee or a designated member of the Committee shall meet
with the independent auditors quarterly to review the Company's quarterly
financial statements as described below.
Responsibilities
The Committee's responsibilities will include the following duties:
Oversight of the financial statements and relations with the independent
auditors:
o Instruct the independent auditors that the Board is the client in its
capacity as the shareholders' representative.
o Expect the independent auditors to meet with the Board at least
annually so the Board has a basis on which to recommend the
independent auditors' appointment to the shareholders or to ratify its
selection of the independent auditors.
o Expect management and the independent auditors to analyze significant
financial report issues and practices on a timely basis.
o Expect management and the independent auditors to discuss with the
Committee:
|_| Qualitative judgments about whether current or proposed
accounting principles and disclosures are appropriate, not just
acceptable.
|_| Aggressiveness or conservatism of accounting principles and
financial estimates.
o The Audit Committee in its capacity as a committee of the Board of
Directors, shall be directly responsible for the appointment,
compensation, and oversight of the work of any registered public
accounting firm employed by Emergent (including resolution of
disagreements between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
related work, and each such registered public accounting firm shall
report directly to the Audit Committee.
Expect the independent auditors to provide the Committee with:
o Independent judgments about the appropriateness of the Company's
current or proposed accounting principles and whether current or
proposed financial disclosures are clear.
o Views on whether the accounting principles chosen by management are
conservative, moderate, or aggressive as they relate to income, asset,
and liability recognition, and whether these accounting principles are
commonly used.
o Reasons why accounting principles and disclosure practices used for
new transactions or events are appropriate.
o Reasons for accepting or questioning significant estimates made by
management.
o Views on how selected accounting principles and disclosure practices
affect shareholder and public attitudes about the Company.
Actions taken on the Board's behalf that require Board notification but not
Board approval:
o Review and approve the scope of the Company's audit and that of its
subsidiaries as recommended by the independent auditors.
o Answer questions raised by shareholders during an annual shareholders'
meeting on matters relating to the Committee's activities if asked to
do so by the Board's chairperson.
o Ask the appropriate corporate officer to study a particular area of
interest or concern to the Committee.
Matters requiring the Committee's review and study before making a
recommendation for the Board's action:
o Ratification of the Committee's selection of the appointment of the
independent auditors.
o Implementation of major accounting policy changes.
o SEC registration statements to be signed by the Board.
o The auditors' reports and financial statements prior to publication in
the annual report.
Matters requiring the Committee's review and study before providing summary
information to the Board:
o Accounting policy changes proposed or adopted by organizations such as
the Financial Accounting Standards Board ("FASB"), the Securities and
Exchange Commission ("SEC"), and the American Institute of Certified
Public Accountants ("AICPA"), or by comparable bodies outside the U.S.
o The independent auditors' assessment of the strengths and weaknesses
of the Company's financial staff, systems, controls, and other factors
that might be relevant to the integrity of the financial statements.
o Quarterly financial statement review before publication.
o Administration of the Company's "conflict of interest" policy.
o The performance of management and operating personnel under the
Company's code of ethics.
o Gaps and exposures in insurance programs.
o Reports about the Company or its subsidiaries submitted by agencies of
governments in countries in which the Company or its subsidiaries
operate.
o Periodic SEC filings and the adequacy of programs and procedures to
assure compliance with SEC regulations and regulations of the NASD.
Complaints
The Audit Committee shall establish procedures for -
(A) the receipt, retention, and treatment of complaints received by
Emergent regarding accounting, internal accounting controls, or auditing
matters; and
(B) the confidential, anonymous submission by employees of Emergent of
concerns regarding questionable accounting or auditing matters.
Authority to Engage Advisers
The Audit Committee shall have the authority to engage independent counsel and
other advisers, as it determines necessary to carry out its duties.
Funding
Emergent shall provide for appropriate funding, as determined by the Audit
Committee, in its capacity as a committee of the board of Directors, for payment
of compensation to the registered public accounting firm employed by Emergent
for the purpose of rendering or issuing an audit report and to any advisers
employed by the audit committee.
APPENDIX C
FORM OF
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE EMERGENT GROUP INC.
DEAN HELLER
Secretary of State
101 North Carson Street, Suite 3
Carson City, Nevada 89701-4786
(775) 684-5708
Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 72.385 and 73.390 - After Issuance of Stock)
- Remit in Duplicate -
1. Name of Corporation: Emergent Group Inc.
2. The articles have been amended as follows:
RESOLVED, that the Board of Directors adopted the following resolutions and
declared it advisable and the stockholders by a majority consent in lieu of a
meeting approved the amendments to the Corporation's Articles of Incorporation
described below in the resolutions which were submitted to the Secretary of the
Corporation on August __, 2003:
RESOLVED, the Articles of Incorporation of Emergent Group Inc. are amended
by inserting a new Article 9 so that after Article 8, there appears the
following text:
"8. On the effective date of this amendment to the Articles of
Incorporation which shall be at 5:00 p.m. Daylight Savings Time on August
29, 2003 (the "Effective Date"), the Common Stock of the Corporation will
be reverse split on a one-for-forty basis so that each share of Common
Stock issued and outstanding immediately prior to the Effective Date shall
automatically be converted into and reconstituted as 1/40 (one-fortieth) of
a share of Common Stock (the "Reverse Split"). No fractional shares will be
issued by the Corporation as a result of a Reverse Split. Each fractional
share shall be rounded up to the nearest whole share. The par value per
share of the Corporation's Common Stock shall proportionately increase from
$.001 par value to $.04 par value as reflected in new Article 3." and it
was further
RESOLVED, that paragraph (a) of Article 3 of Emergent Group Inc.'s Articles
of Incorporation shall be amended to read as follows on the Effective Date:
"3. The aggregate number of shares that the Corporation shall be authorized
to issue shall be ONE HUNDRED TEN MILLION (110,000,000), consisting of ONE
HUNDRED MILLION (100,000,000) shares of Common Stock, par value $0.04, and
TEN MILLION (10,000,000) shares of Preferred Stock, par value $0.001."
3. That the number of shares of the Corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 67,357,815; that said change
and amendment has been consented to and authorized by the written consent of
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon in accordance with NRS 78.320.2.
4. Signatures:
By: ______________________ By: __________________________
Louis Buther, President William M. McKay, Secretary
STATE OF ___________ )
) ss.
COUNTY OF )
On_________, 2003, personally appeared before me, _________________, a
Notary Public, Louis Buther who acknowledged that he executed the above
instrument.
_________________________
Seal: __________________________
(Notary Public)
STATE OF CALIFORNIA )
) ss.
COUNTY OF )