SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [xx]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
R-TEC HOLDING, INC.
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(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):
[xx] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party: L. Gary Davis, CPA
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4) Date Filed:
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R-TEC HOLDING INC.
287 N. MAPLE GROVE ROAD
BOISE, IDAHO 83704
Dear Shareholder:
You are cordially invited to attend the 2004 Annual Meeting of Shareholders of
R-Tec Holding Inc. The annual meeting will be held on Monday, December 13,
2004, at the Hilton Garden Inn, 7699 W. Spectrum Street Boise, Idaho 83709, at
10:00 a.m. local time, for the following purposes, as more fully described in
the attached Proxy Statement.
Your vote is important and I urge you to vote your shares by proxy, whether or
not you plan to attend the meeting. After you read this proxy statement, please
indicate on the proxy card the manner in which you want to have your shares
voted. Then date, sign and mail the proxy card in the postage-paid envelope
that is provided. If you sign and return your proxy card without indicating
your choices, it will be understood that you wish to have your shares voted in
accordance with the recommendations of the Company's Board of Directors.
We hope to see you at the meeting.
Sincerely,
Faris McMullin
President, Chief Executive and Chairman
of the Board
November 15, 2004
2
R-TEC HOLDING INC.
287 N. MAPLE GROVE ROAD
BOISE, IDAHO 83704
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 13, 2004
NOTICE IS HEREBY GIVEN, that an Annual Meeting of Shareholders (the "Annual
------
Meeting") of R-Tec Holding Inc. (the "Company") will be held on Monday, December
- ------- -------
13, 2004, at the Hilton Garden Inn, 7699 W. Spectrum Street Boise, Idaho 83709,
at 10:00 a.m. local time, for the following purposes, as more fully described in
the attached Proxy Statement:
(1) To elect three members of the Board of Directors of the Company to
serve until the next annual meeting of stockholders or until their respective
successors are elected and qualified;
(2) To approve a proposal to amend the Articles of Incorporation to
increase the authorized common stock from 60,000,000 to 250,000,000 shares;
(3) To approve a 10:1 reverse stock split of the Company's voting common
stock
(4) To ratify the appointment of HJ & Associates LLC as the Company's
independent auditors for the fiscal year ending December 31, 2004; and
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 15,
2004, as the record date for determining the shareholders entitled to notice of
and to vote at the Annual Meeting or at any adjournment thereof. A complete
list of shareholders entitled to vote at the Annual Meeting will be open for
examination by any shareholder during ordinary business hours for a period of
ten days prior to the Annual Meeting at the Offices of the Company, 287 N. Maple
Grove Road, Boise, Idaho 83704.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSALS.
IMPORTANT
You are cordially invited to attend the Annual Meeting in person. In order
to ensure your representation at the meeting, however, please promptly complete,
date, sign and return the enclosed proxy in the accompanying envelope. If you
should decide to attend the Annual Meeting and vote your shares in person, you
may revoke your proxy at that time.
By Order of the Board of Directors,
Faris McMullin
President, Chief Executive and Chairman
of the Board
November 15, 2004
3
R-TEC HOLDING INC.
287 N. MAPLE GROVE ROAD
BOISE, IDAHO 83704
_________________________
PROXY STATEMENT
NOVEMBER 15, 2004
_________________________
This proxy statement contains information related to the annual meeting of
shareholders of R-Tec Holding Inc. The annual meeting will be held on Monday,
December 13, 2004, at the Hilton Garden Inn, 7699 W. Spectrum Street Boise,
Idaho 83709, at 10:00 a.m. local time, and at any postponements or adjournments
thereof. The Company is making this proxy solicitation.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, shareholders will act upon the matters
outlined in the notice of meeting on the cover page of this proxy statement,
which relates to the election of directors, the approval of an amendment to the
Company's Certificate of Incorporation to increase the authorized common stock
to 250,000,000 shares, to approve a reverse stock split of 10:1 of the common
stock, and to ratify the appointment of HJ & Associates L.L.C., as the Company's
independent auditors for the fiscal year ending December 31, 2004.
WHO IS ENTITLED TO VOTE?
Only shareholders of record on the close of business on the record date,
November 15, 2004, are entitled to receive notice of the annual meeting and to
vote the shares of common stock that they held on that date at the meeting, or
any postponements or adjournments of the meeting. Each outstanding share of
capital stock will be entitled to the number of votes set forth in the following
table on each matter to be voted upon at the meeting. The holders of common
stock vote together as a single class.
DESCRIPTION OF CAPITAL STOCK NUMBER OF VOTES TOTAL VOTES
- --------------------------------- ---------------------------- -----------
Common Stock One Vote Per Share 52,064,548
WHO CAN ATTEND THE ANNUAL MEETING?
All shareholders as of the record date, or their duly appointed proxies,
may attend the annual meeting. Seating, however, is limited. Admission to the
meeting will be on a first-come, first-serve basis. Registration will begin at
10:00 a.m., and seating will begin at 10:45 a.m., and the meeting will commence
at 11:00a.m. Each shareholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of
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the record date, the shareholders held a total of 52,064,548 votes. As such,
holders of at least 26,032,274 shares (i.e., a majority) must be present at the
---
meeting, in person or by proxy, to obtain a quorum. Proxies received but marked
as abstentions and broker non-votes will be included in the calculation of the
number of shares considered to be present at the meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Company, then it will be voted as you direct. If you are a registered
shareholder and attend the meeting, then you may deliver your completed proxy
card in person or vote by ballot at the 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.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
If you submit a proxy but do not indicate any voting instructions, then
your shares will be voted in accordance with the Board's recommendations.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary of
the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendation
of the Board of Directors. The Board's recommendation is set forth together
with the description of such item in this proxy statement. In summary, the
Board recommends a vote:
- FOR the election of the nominated slate of directors (see page 9);
- FOR the approval of an amendment to the Company's Articles of
Incorporation to increase the authorized shares of the Company's
common stock to 250,000,000 shares (see page 12);
- FOR the approval of a 10:1 reverse stock split on the common shares
(see page 15);
- FOR the approval to ratify the appointment of HJ & Associates L.L.C.,
as the Company's independent auditors for the fiscal year ending
December 31, 2004
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS AND SELECTION OF INDEPENDENT ACCOUNTANTS. The
affirmative vote of a plurality of the votes cast at the meeting (regardless of
the class or series of stock held) is required for the election of directors and
the selection of the independent accounts. This means that the five nominees
will be elected if they receive more affirmative votes than any other person. A
properly executed proxy marked "Withheld" with respect to the election of any
director will not be voted with respect to such director indicated, although it
will be counted for purposes of determining whether there is a quorum.
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INCREASE IN AUTHORIZED SHARES. For the approval of an amendment to the
Company's Articles of Incorporation to increase the authorized shares of the
Company's common stock to 250,000,000 shares and any other item that properly
comes before the meeting, the affirmative vote of the holders of a majority of
the shares present at the meeting at which a quorum exists will be required for
approval. A properly executed proxy marked "Abstain" with respect to such
matter will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative vote.
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. Thus, 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," however, will be
counted in determining whether there is a quorum.
6
STOCK OWNERSHIP
The following table shows how many shares of Common Stock were beneficially
owned as December 31, 2003, except for Faris McMullin who was updated through
November 12, 2004, by certain stockholders and each of our directors and
executive officers as a group.
BENEFICIAL OWNERS WHO OWN MORE THAN FIVE PERCENT (5%) %
OR MORE OF THE COMPANY'S COMMON STOCK COMMON COMMON
L. William Glazier
121 Tyson Dr. 250,000 1.09%
Cottage Grove, OR 97424
Ronald J. Tolman
2326 Bruins Avenue 694,340 3.03%
Boise, Idaho 83704
More than five percent
Shareholders as a group. 944,340 4.13%
(2 persons)
(b) DIRECTORS AND EXECUTIVE OFFICERS
Faris McMullin (1)(2)(10)
287 N. Maple Grove Road 21,946,080 42.0%
Boise, Idaho 83704
Gary A. Clayton (3)
1471 E. Commercial Ave 4,160,659 18.19%
Meridian, Idaho 83642
Douglas G. Hastings (2)(4)
1471 E. Commercial Ave 4,160,657 18.19%
Meridian, Idaho 83642
Rulon L. Tolman (5)
7213 Potomac Drive 1,009,250 4.41%
Boise, Idaho 83704
David R. Stewart (6)
9486 Fairview Ave 103,490 0.45%
Boise, Idaho
Michael T. Montgomery (1)(7)
3072 Maywood Ave. 115,000 0.50%
Boise, Idaho 83704
Robert C. Montgomery (8)(11)
2160 S. Twin Rapid Way 254,876 1.11%
Boise, Idaho 83709
All Officers and Directors
as a Group (6 persons) 31,750,012 42.85%
Total Shares Issued and Outstanding as of 11/12/04 include: 52,064,548
(1) These individuals are the executive officers of the Company.
(2) These individuals are the directors of the Company.
7
(3) The beneficial ownership of Gary A. Clayton includes 100,000 options
by grant.
(4) The beneficial ownership of Douglas G. Hastings includes 100,000
options by grant.
(5) The beneficial ownership of Rulon L. Tolman includes 115,000 options by
grant.
(6) The beneficial ownership of David R. Stewart includes 37,500 options
by grant.
(7) The beneficial ownership of Michael T. Montgomery includes 100,000
options by grant.
(8) The beneficial ownership of Robert C. Montgomery includes 37,500
options by grant.
(9) If converted to Common Stock at the present conversion ratio, the
Preferred Stock would represent approximately 13.93 % of the after-conversion
issued and outstanding common stock.
(10) Faris McMullin received the transfer of his shares on November 12,
2004 as a partial fulfillment of the share purchase agreement.
(11) Robert C. Montgomery is no longer an officer of the Company.
Note: All preferred stock was retired and converted to common stock in 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires
that reports of beneficial ownership of common stock and preferred stock and
changes in such ownership be filed with the Securities and Exchange Commission
by Section 16 "reporting persons" including directors, certain officers, holders
of more than 10% of the outstanding common stock or preferred stock, and certain
trusts of which reporting persons are trustees. The Company is required to
disclose each reporting person whom it knows has failed to file any required
reports under Section 16 on a timely basis. Based solely upon a review of copies
of Section 16 reports furnished to the Company for the year ended December 31,
2003, the Company finds the following information is appropriately disclosed:
None of the officers, directors and 10% shareholders filed Form 4 during the
year or Form 5 for calendar year 2003.
8
PROPOSAL 1 - ELECTION OF DIRECTORS
The following three persons have been nominated by the Board of Directors
for election at this annual meeting to hold office until the next annual meeting
and the election of their successors.
Director nominees standing for election to serve until the Annual Meeting
in 2005 are:
DIRECTOR
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NAME AGE POSITION WITH COMPANY RESIDENCE SINCE
- ----------------- --- --------------------------- --------- -----
Faris McMullin 58 Director, President and CEO Boise, ID 2004
Clyde B. Crandall 55 Director Boise, ID 2004
L. Gary Davis 51 Director Boise, ID 2004
FARIS MCMULLIN
- ---------------
Mr. McMullin was appointed as the Company's president, chief executive
officer, and chairman of the board in September 2004. He had been serving as a
consultant to the Company for several months prior to his executive office
appointment. Mr. McMullin is a Boise-based serial entrepreneur and inventor,
holding 32 patents, with several more in process. He also owns ConectL
Corporation, a maker of connectivity products, and has co-founded several other
companies.
CLYDE B. CRANDALL
- -------------------
On June 14, 2004, Clyde B. Crandall was nominated and elected to fill the
currently vacant seat on the Board of Directors of R-Tec Holding, Inc., and to
serve on the Board of Directors of the Company until the next regularly
scheduled annual meeting of the Shareholders of the Corporation. Mr. Crandall
was also nominated and elected to serve as the chair of the Company's Audit
Committee. Mr. Crandall has extensive experience in audit procedures, tax
planning, design and implementation of accounting and reporting systems for
proprietary as well as non-profit organizations. He is a graduate of Brigham
Young University, a Certified Public Accountant, and principal in the firm of
Crandall, Swenson & Gleason, Chtd., located in Boise, Idaho.
L. GARY DAVIS
- ---------------
Mr. Davis was recently engaged by the Company as a financial consultant and
has over 17 years experience as a Chief Financial Officer and Controller in
publicly traded and Fortune 500 companies. He is a graduate from Boise State
University and the State University of New York and is an active Certified
Public Accountant. His experience includes positive results in business
development, generating working capital, source financing, financial
forecasting, and proprietary budgeting. Gary is a results-oriented negotiator in
contract development and settlements, with extensive background in compliance
and regulations of the U.S. Securities and Exchange Commission.
OTHER CHANGES IN DIRECTORS AND OFFICERS
- --------------------------------------------
David R. Stewart resigned as a member of the Company's board of directors
effective September 30, 2003.
Gary A. Clayton resigned as a member of the Company's board of directors
and VP of Engineering effective January 19, 2004.
Marc C. Miller was appointed as a member of the Company's board of
directors effective February 2, 2004, and was rescinded by the board of
directors effective April 2, 2004.
Douglas G. Hastings resigned as the Company's President and Chief Executive
Officer effective December 3, 2003. Mr. Hastings continued as a director, but
will not stand for reelection for fiscal year 2004-2005.
9
Faris McMullin was appointed President, Chief Executive Officer and
Chairman of the Board on October 1, 2004.
Rulon L. Tolman was a director but will not stand for reelection in fiscal
year 2004-2005.
Michael T. Montgomery was the Interim President and Chief Executive Officer
from January 1, 2004 and continued to serve also as Treasurer, Chief Financial
Officer, and VP of Finance until October 1, 2004, when he was appointed as the
Chief Operating Officer.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES.
During the year ended December 31, 2003, the Board of Directors held four
meetings, and three were consent to meeting minutes, and several informal
telephone conference meetings. All of the directors attended at least 75% of
the meetings of the Board. The members of the Board of Directors serve as the
Executive Committee and Nominating Committee. The Compensation Committee
members are Messrs. Faris McMullin and Clyde B. Crandall.
The Nominating Committee met once during 2003, recommending the three directors
stand for election at the annual shareholders meeting in 2004.
The member of the Audit Committee is currently Mr. Clyde B. Crandall, who was
appointed as chairman of the Audit Committee in June 2004. The Audit Committee
reviews the proposed plan and scope of the Company's annual audit as well as the
results when it is completed. The Committee reviews the services provided by the
Company's independent auditors and their fees. The Committee meets with the
Company's financial officers to assure the adequacy of the Company's accounting
principles, financial controls and policies. The Committee is also charged with
reviewing transactions that may present a conflict of interest on the part of
management or directors. The Audit Committee meets at least quarterly to review
the financial results, discuss the financial statements and make recommendations
to the Board. Other items of discussion include the independent auditors'
recommendations for internal controls, adequacy of staff, and management's
performance concerning audit and financial controls. The Audit Committee met 4
times in 2003.
The Compensation Committee met once in 2003, for 2003, approval and issuance of
stock options to Company employees and Board members. This stock option
issuance is accounted for as fiscal year 2003, ending December 31, 2003.
DIRECTORS' COMPENSATION
- -----------------------
During fiscal year 2003, and 2004, the Board members served without direct
compensation.
MANAGEMENT REMUNERATIONS AND TRANSACTIONS
COMPENSATION OF EXECUTIVE OFFICERS
- -------------------------------------
The following are the executive officers (named executive officers) of the
Company:
NAME AGE POSITION WITH COMPANY, PRINCIPAL OCCUPATION
- --------------------- --- ---------------------------------------------
Faris McMullin 58 Director, Chairman, Chief Executive Officer and
President since October 2004
Michael T. Montgomery 48 Chief Operating Officer
10
CORPORATE GOVERNANCE RESPONSIBILITY
The Board of Directors is ultimately responsible for the Company's corporate
governance. Good corporate governance ensures that the Company complies with
federal securities laws and regulations, including those promulgated under the
Sarbanes-Oxley Act of 2002. The Board of Directors has adopted a Code of Ethics
for the Chief Executive Officer and Chief Operating Officer. The Code of
Ethics is attached as Exhibit A.
COMPENSATION COMMITTEE REPORT
The Compensation Committee members are Messrs. McMullin and Crandall. They
are responsible for developing and making decisions with respect to the
Company's executive compensation policies. For the upcoming fiscal year 2004,
the Committee also intends to review and approve the Company's compensation and
benefit plans and continue to administer the key employee and executive officer
Stock Option Plan.
The Company believes that executive compensation should reflect value created
for stockholders in furtherance of the Company's strategic goals. The following
objectives are among those utilized by the Compensation Committee:
1. Executive compensation should be meaningfully related to long-term and
short-term value created for stockholders.
2. Executive compensation programs should support the long-term and short-term
strategic goals and objectives of the Company.
3. Executive compensation programs should reflect and promote the Company's
overall value, business growth and reward individuals for outstanding
contributions to the Company.
4. Short and long term executive compensation are critical factors in
attracting and retaining well-qualified executives.
BASE SALARY -- The Compensation Committee, in determining the appropriate base
salaries of its executive officers, generally considers the level of executive
compensation in similar companies in the industry. The Compensation Committee
also considers (i) the performance of the Company and contributing roles of the
individual executive officers, (ii) the particular executive officer's specific
experience and responsibilities, and (iii) the performance of each executive
officer, and (iv) it should be noted as indicated in the Summary Compensation
Table above that the executive officers received a portion of their salary and
the balance was deferred. The base salaries for 2003, were established by the
Committee at levels believed to be at or somewhat below competitive amounts paid
to executives of companies in the manufacturing industry with comparable
qualifications, experience and responsibilities. During 2003, Douglas Hastings,
the Chief Executive Officer of the Company, received a base salary of $71,805,
and 500,000 stock options, which the Committee believes to be below average for
the base salary of chief executive officers with comparable qualifications,
experience and responsibilities of other companies in the manufacturing
industry. The base salary of Michael T. Montgomery was $64,800 and is also below
the industry average for his appointment as interim President, Chief Executive
Officer and then Chief Operating Officer. The executive officers, Douglas
Hastings prior Chief Executive Officer, and Michael Montgomery current Chief
Operating Officer, both have reduced salaries respectively for 2004, in an
effort to assist the Company meet its cash flow requirements and to help reduce
the Company's liabilities. Additionally in the same effort to assist in cash
flow Faris McMullin, current President and Chief Executive Officer takes no
direct compensation. No other executive compensation or forms of compensation,
short or long term apply and are required to be disclosed as required by Reg.
S-B 228.402 (Item 402).
The Company does not provide any retirement, pension, or 401(k) plan for
any employees, except for a Simple IRA.
ANNUAL INCENTIVES -- The bonus program provided for no bonuses in 2003. The
Compensation Committee has not yet approved a management bonus plan for 2004.
11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Douglas G. Hastings is married to Rena Clayton Hastings, a sister of Gary A.
Clayton. The Company does not have any transactions involving certain
relationships in excess of $60,000.
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR the adoption of the proposal
#1, electing the nominated slate of directors
PROPOSAL 2 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Company currently has 60,000,000 shares of authorized common stock, and
5,000,000 shares of authorized preferred stock. The Board of Directors has
approved an amendment to the Certificate which would allow the total number of
shares of all classes of stock to be 255,000,000 and divides that between
250,000,000 shares of common stock no par value and 5,000,000 of preferred stock
par value $.23437 per share. This amendment would increase the present number
of authorized common shares from 60,000,000 to 250,000,000.
The following is the text of the proposed amendment to Article VI (Sixth)
to the Company's Restated Articles of Incorporation as follows:
The total number of shares that the corporation is authorized to issue is
two hundred fifty-five million (255,000,000), of which two hundred fifty
million (250,000,000) shares of no par value each shall be designated
common stock and of which five million (5,000,000) shares at the par value
of $.23437 per share and is designated "Series "A" Convertible Preferred".
The remaining one or more series shall consist of such number of shares and
shall be designated as the Board of Directors shall determine into classes,
series, and preferences, limitations, restrictions and relative rights of
each class or series of Preferred Stock as authorized in Sec.30-1-602 of
the Idaho Business Corporation Act.
VOTE REQUIRED
The affirmative vote of the majority of the outstanding shares of common
stock is required to approve the amendment. If approved, no further stockholder
approval would be required to issue shares of either common stock or preferred
stock.
PURPOSES AND EFFECTS OF THE AMENDMENT
The Company is in the process of expanding its current operations. It has
begun to make investments in the current equipment and expand where needed, as
well as increasing the marketing plan to catalog and standardize parts to
quickly service the customer's needs.
Efforts have already begun to explore new product lines so that the Company
will become more horizontally integrated in the market for complete systems
testing. The future expansions will include products such as: sockets with
spring probes, handler change kits, and more robust products for production
testing and burn-in testing.
In order for the Company to be successful there will need to be a complete
restructuring and a change in posture to become a lower cost total solution
provider to the larger computer chip manufacturing companies. The socket
manufacturing industry is very saturated with small operations, and none have
been able to meet the demands of the larger chip producers. R-Tec has made
changes in management, and may have found investment capital through a group of
investors to expand on current and future resources to develop the underutilized
assets that the
12
Company already has available and become a larger more profitable company.
Management believes this will be a multiple step process, with each step taking
approximately one year, and each year will bring the Company more revenue and
continued growth. While the Company cannot provide any reasonable assurance it
will be successful in this plan, it has entered into a share purchase investment
agreement.
The terms of the share purchase agreement dated September 22, 2004,
provides for a change in ownership that effectively allows the Investor up to
49% ownership of the Company and that while the Company needs working capital,
and additional financing in order to continue the business the Investor will
provide such financing and capital, which the Investor has agreed to provide on
the terms and conditions contained in the agreement. On November 12, 2004,
21,946,080 common shares were transferred in partial satisfaction of the share
purchase agreement.
The Investor covenants and agrees, as of the Closing Date, to purchase from
the Company that number of shares and warrants in the capital stock of R-Tec
Holding, Inc., that will result in the Investor holding, in the aggregate, all
of the authorized and unissued common shares and a sufficient number of
preferred shares for Investor to have voting rights of not less than forty nine
percent (49%) of all shares able to vote on any matter coming before the
shareholders of the Company, with options to purchase shares three years and one
week from the Effective Date of the Agreement preferred shares equal to an
additional two percent (2%) of the total shares able to vote on any matter
coming before the shareholders of the Company (the "Share Acquisition") in
exchange for One Million (1,000,000) shares or ten percent (10%) of CONECTL
stock. Faris McMullin, Michael McMullin, and Clyde B. Crandall shall allocate
their respective ownership interests and their contributions of shares of
CONECTL stock in the manner selected by them, warranting that an aggregate
contribution of One Million (1,000,000) shares of CONECTL stock will be
transferred to R-TEC upon closing. Therefore, with the share purchase agreement
and intentions to grow the Company, the Board of Directors believes that it
needs additional shares authorized in order to carry the Company forward in a
positive business fashion and raise the capital required to expand operations.
Stockholders of the Company have no preemptive rights with respect to
additional shares being authorized.
Except as described above, the Company is not considering any financing
transactions, acquisitions or other corporate purposes to issue or to increase
shares of authorized common stock.
DESCRIPTION OF CAPITAL STOCK
The Company currently has registered capital stock with authority to issue:
sixty-five million (65,000,000), of which sixty million (60,000,000) shares are
no par value each are designated common stock and of which five million
(5,000,000) shares at the par value of $.23437 are designated preferred stock.
COMMON STOCK
The Company has registered common stock, as no par value per share, voting
rights of one vote per share, with no preemptive rights, non-cumulative, and no
redemption or liquidations. There are currently 60,000,000 shares authorized,
and 30,118,468 shares issued and outstanding.
PREFERRED
The Company currently has no issued or outstanding shares of Preferred
Stock.
WARRANTS
The Company has no issued or outstanding warrants.
DEBENTURES
None
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OPTIONS
Effective December 12, 2000, the Board of Directors of Company adopted a
stock option plan which allows for the grant of options for up to 2,000,000
shares of the Company's Common Stock to officers, directors or key employees of
the Company, consultants of the Company or employees of companies that do
business with the Company. The plan allows for granting incentive stock options
to employees and non-qualified stock options to all other parties. The plan
provides for the options to be granted on incentive stock options at a price
equal to the market price of the stock and at a price of not less than 85% of
the market price of the stock for non-qualified stock options. The plan further
allows for the option period to not exceed five years for the incentive stock
options and not to exceed ten years for the non-qualified stock options.
TRANSFER AGENT
The Transfer Agent is Computershare Trust Company, Inc., 350 Indiana St.,
Suite 800, Golden, CO 80401, Phone 303-262-0600
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION
AUTHORIZED AND UNISSUED STOCK. Authorized but unissued shares of common
stock would be available for future issuance without our shareholders' approval.
These additional shares may be utilized for a variety of corporate purposes
including but not limited to future public or direct offerings to raise
additional capital, corporate acquisitions and employee incentive plans. The
issuance of such shares may also be used to deter a potential takeover of the
Company that may otherwise be beneficial to shareholders by diluting the shares
held by a potential suitor or issuing shares to a shareholder that will vote in
accordance with the Company's Board of Directors' desires at that time. A
takeover may be beneficial to shareholders because, among other reasons, a
potential suitor may offer shareholders a premium for their shares of stock
compared to the then-existing market price.
The existence of authorized but unissued and unreserved shares of preferred
stock may enable the Board of Directors at that time to issue shares to persons
friendly to current management, which would render more difficult or discourage
an attempt to obtain control of the Company by means of a proxy contest, tender
offer, merger or otherwise, and thereby protect the continuity of the Company's
management.
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR the adoption of the proposal
#2, to amend the certificate to increase the authorized common stock.
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PROPOSAL 3 - TO APPROVE A 10:1 REVERSE STOCK SPLIT
The Company has registered common stock, as no par value per share, voting
rights of one vote per share, with no preemptive rights, non-cumulative, and no
redemption or liquidations. There are currently 60,000,000 shares authorized,
and 52,064,548 shares issued and outstanding. With the approval of Proposal #2
herein the total number of authorized shares will increase to two hundred fifty
million (250,000,000) shares of no par value each shall be designated common
stock. The directors are of the opinion that the reverse split of the stock is
a necessary prerequisite to a successful round of equity funding. The current
share price is exceedingly low, making a successful equity offering unlikely.
This proposal will allow for a 10:1 reverse stock split to be effected at
the direction of the Board of Directors.
BOARD RECOMMENDATION
The Board of Directors recommends that stockholders vote FOR the adoption
of the proposal #3, to have a 10:1 reverse stock split approved and put into
effect at the direction of the Board of Directors. Proposal #3 will be adopted
if a majority of the outstanding common stock represented at the Meeting is
voted in favor.
15
PROPOSAL 4 - RATIFICATION OF THE SELECTION OF AUDITORS
AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO AUDITOR
The Audit Committee of the Company is responsible for assisting the Board
in monitoring the integrity of the financial statements of the Company.
Management is responsible for the Company's internal controls and the financial
reporting process. The external auditors are responsible for performing an
independent audit of the Company's financial statements in accordance with
generally accepted auditing standards and to issue a report thereon. The
committee's responsibility is to monitor and oversee these processes. As part
of its activities, the committee:
1. reviewed and discussed with management the audited financial statements of
the Company;
2. discussed with the independent auditors the matters required to be
communicated under Statement and Auditing Standards No. 61 (Communications
with Audit Committees);
3. received the written disclosures and letter from the independent auditors
required by Independent Standards Board Standard No. 1 (Independent's
Discussion with Audit Committee); and
4. discussed with independent auditors their independence.
5. appointed new independent auditors, HJ & Associates, L.L.C., effective
October 25, 2004
Based on the review and discussions referred to above, the committee
recommended to the Board of Directors that the audited financial statements of
the Company for the year end of December 31, 2004, be included in the Company's
annual report on Form 10-KSB filed with the Securities and Exchange Commission.
The Audit Committee of the Company, which has not yet adopted a charter,
consists of the following members:
- Clyde B. Crandall, Chairman
AUDIT FEES
The aggregate fees billed to us by the predecessor auditor Balukoff
Lindstrom & Co. PA, for the audit of our financial statements and all amendments
for the fiscal years ended December 31,2003, and for reviews of financial
statements included in our quarterly reports on Form 10-QSB and amendments
thereto, for the fiscal years 2003, were $51,020. There were no other services
performed by Balukoff Lindstrom & Co. PA, for the Company, except for $625 of
fees other than audit.
The Audit Committee of the Board of Directors has appointed, HJ &
Associates, L.L.C. as independent auditors to audit the financial statements of
the Company for the year ended December 31, 2004. Representatives of HJ &
Associates, L.L.C., are expected to be present at the Annual Meeting and will be
available to answer questions and will have the opportunity to make a statement
if they desire to do so.
While not required to do so, the Board of Directors has submitted the
selection of HJ & Associates, L.L.C., to serve as our external auditors for the
fiscal year ending December 31, 2004, for ratification or to ascertain the views
of the stockholders on this appointment.
BOARD RECOMMENDATION
The Board of Directors recommends that you vote FOR the adoption of the
proposal #4, to ratify the selection of HJ & Associates, L.L.C., as the
independent auditors of the Company for the fiscal year ending December 31,
2004. Proxies will be voted FOR ratified this selection unless otherwise
specified.
16
OTHER MATTERS
As of the date of this proxy statement, our Company knows of no business
that will be presented for consideration at the meeting other than the items
referred to above. If any other matter is properly brought before the meeting
for action by shareholders, proxies in the enclosed form returned to our Company
will be voted in accordance with the recommendation of our Board of Directors
or, in the absence of such a recommendation, in accordance with the judgment of
the proxy holder.
ADDITIONAL INFORMATION
PROPOSALS OF SHAREHOLDERS FOR THE NEXT ANNUAL MEETING. Proposals of
shareholders intended for presentation at the 2005 annual meeting must be
received by R-Tec Holding, Inc. at our principal executive offices at 287 N.
Maple Grove Road, Boise, Idaho 83704, Attn: Corporate Secretary, on or before
December 15, 2004, in order to be included in the proxy statement and form of
proxy for that meeting. The proposal must comply with Securities and Exchange
Commission regulations regarding the inclusion of a shareholder proposal in
Company sponsored proxy materials.
PROXY SOLICITATION COSTS. Our Company is soliciting the enclosed proxies. The
cost of soliciting proxies in the enclosed form will be borne by our Company.
Officers and regular employees of our Company may, but without compensation
other than their regular compensation, solicit proxies by further mailing or
personal conversations, or by telephone, telex, facsimile or electronic means.
Our Company will, upon request, reimburse brokerage firms for their reasonable
expenses in forwarding solicitation materials to the beneficial owners of stock.
INCORPORATION BY REFERENCE. Certain financial and other information required
pursuant to Item 13 of the Proxy Rules is incorporated by reference to the
Company's Annual Report, which is on Form 10-KSB for the year ended December 31,
2003. A copy of the Annual Report may be obtained without charge by writing to
the Company at 287 N. Maple Grove Road, Boise, Idaho 83704, Attn: Corporate
Secretary, or by telephone request to (208) 887-0953
VOTING BY PROXIES. A properly executed proxy will be voted in accordance with
its terms. Unless you indicate otherwise, the Proxy Card will be voted FOR the
election of directors to serve as indicated, FOR the approval of the proposal to
amend the Articles of Incorporation to increase the authorized common stock, FOR
the approval of the Board of Directors to effect a 10:1 reverse common stock
split, FOR the ratification of HJ & Associates, L.L.C as the Company's
independent accountants, and in the discretion of the proxy for any other
proposal that may properly come before the meeting. A proxy may be revoked at
any time before it is voted.
BY ORDER OF THE BOARD OF DIRECTORS
Boise, Idaho Faris McMullin
November 15, 2004 President, Chief Executive Officer and
Chairman of the Board
17
EXHIBIT A
---------
R-TEC HOLDING, INC.
CODE OF ETHICS FOR PRESIDENT AND CHIEF EXECUTIVE OFFICER, CHIEF OPERATING
OFFICER AND SECRETARY
The Company's Board of Directors has adopted the following Code of Ethics for
its President and Chief Executive Officer, Chief Operating Officer and Secretary
("the Executives").
To the best of their knowledge and ability, the Executives shall:
1. Act with honesty and integrity, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;
2. Comply with applicable governmental laws, rules and regulations;
3. Promote the prompt internal reporting of violations of this Code of Ethics to
the Audit Committee or the Board of Directors;
4. Respect the confidentiality of information acquired in the course of
employment;
5. Proactively promote ethical and honest behavior within the Company and its
consolidated subsidiaries.
6. The Executives are responsible for full, fair, accurate, timely and
understandable financial disclosure in reports and documents filed by the
Company with the Securities and Exchange Commission and in other public
communications made by the Company. The Company's accounting records must be
maintained in accordance with all applicable laws and standards, must be proper,
supported and classified, and must not contain any false or misleading entries.
7. The Executives are responsible for the Company's system of internal financial
controls. The Executives shall promptly bring to the attention of the Audit
Committee of the Board of Directors any information the Executives may have
concerning (a) significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record, process,
summarize and report financial data, or (b) any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company's financial reporting, disclosures or internal controls.
8. The Executives may not compete with the Company. The Executives shall
promptly bring to the attention of the Board of Directors and the Audit
Committee any information the Executives may have concerning any actual or
apparent conflicts of interest between personal and professional relationships,
involving any management or other employees who have a significant role in the
Company's financial reporting, disclosures or internal controls.
9. The Company is committed to complying with both the letter and the spirit of
all applicable laws, rules and regulations. The Executives shall promptly bring
to the attention of the Board of Directors and the Audit Committee any
information the Executives may have concerning evidence of a material violation
of the securities or other laws, rules or regulations applicable to the Company
or its employees or agents.
10. The Executives shall promptly bring to the attention of the Board of
Directors and the Audit Committee any information the Executives may have
concerning any violation of this Code of Ethics. The Board of Directors may
determine, or designate appropriate persons to determine, appropriate additional
disciplinary or other actions to be taken in the event of violations of this
Code of Ethics by the Company's President and Chief Executive Officer, Chief
Operating Officer and Secretary.
18
AGREED AND ACKNOWLEDGED
______________________________________________ ________________
Faris McMullin, President and Date
Chief Executive Officer
______________________________________________ ________________
Michael T. Montgomery, Chief Operating Officer Date
______________________________________________ ________________
Ann Marie Baird, Secretary Date
19
Please mark
your votes as
indicated in
this example
[X]
1. Election of Directors (to withhold authority to vote for any individual
members, strike a line through the members name in the list below)
FOR all nominees listed to the right (except as marked to the contrary)
WITHHOLD AUTHORITY
to vote for all nominees Faris McMullin Clyde B. Crandall L. Gary Davis
listed to the right
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To approve a proposal to amend the Certificate of Incorporation to increase
the authorized Common Stock to 250,000,000 shares
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve a 10:1 reverse stock split at the direction of the Board of
Directors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To ratify the appointment of HJ & Associates, L.L.C., as the Company's
independent auditors for the fiscal year ending December 31, 2004
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
In their discretion, the proxies are authorized to vote upon such other matters
as come before the meeting.
Please sign below exactly as your name appears on this Proxy Card. If shares are
registered in more than one name, the signatures of all such persons are
required. A corporation should sign in its full corporate name by a duly
authorized officer, stating his/her title. Trustees, guardians, and
administrators should sign in their official capacity, giving their title as
such. Partnerships should sign in the partnership name by the authorized
person(s).
The undersigned acknowledge(s) receipt of the Notice of the aforesaid Annual
Meeting, the Proxy Statement and Annual Report accompany the same, each dated
December 6, 2004.
___________________________________ ______________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE IF HELD JOINTLY
Date_________________________, 2004
20
R-TEC HOLDING, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, hereby revoking all prior proxies, hereby appoints Faris
McMullin and Clyde B. Crandall and each of them, proxies with full and several
power of substitution, to represent and to vote all the shares of Common Stock
of R-TEC HOLDING, INC., that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of R-TEC HOLDING, INC.,
to be held on December 13, 2004, and at any adjournment(s) thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC INDICATIONS ON THE
REVERSE SIDE. IN THE ABSENCE OF SUCH INDICATIONS, A SIGNED PROXY WILL BE VOTED
FOR PROPOSALS 1-4, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PROXY WITH RESPECT
TO ANY OTHER BUSINESS PROPERLY BEFORE THE MEETING.
21