SCHEDULE 14C
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES EXCAHNGE 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
ONLINE GAMING SYTEMS, LTD.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 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
O11(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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[ONLINE GAMING SYSTEMS LETTERHEAD]
ONLINE GAMING SYSTEMS, LTD.
3225 McLeod Drive, 1st Floor
Las Vegas, Nevada 89121
October 14, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Online Gaming Systems, Ltd. (the "Company" or "OGS")
which will be held on November 21, 2002 at 10:00 a.m., Pacific Standard Time, in
the offices of the Corporation.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals: (i) to elect four (4) directors of the Company; (ii) to
approve an amendment to the Company's Articles of Incorporation to increase the
amount of shares of common stock which the company is authorized to issue from
100,000,000 to 200,000,000; (iii) to approve amendments to the Company's 1999
Stock Option Plan; and (iv) to ratify the appointment of Moore Stephens, P.C.,
as independent accountants of the Company for the calendar year ending December
31, 2002.
The enclosed Information Statement more fully describes the details of
the business to be conducted at the Annual Meeting. Proxies are not being
solicited since a quorum exists for the meeting through Ahead Investment's 82
percent ownership of Online Gaming Systems, Ltd.
A copy of the Company's 2001 10KSB Annual Report will be made available
to all stockholders entitled to vote at the Annual Meeting, or will be mailed
upon request or is available at www.sec.gov.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
/s/ Lawrence P. Tombari
-------------------------------------
Lawrence P. Tombari
President and Chief Financial Officer
ONLINE GAMING SYSTEMS, LTD.
3225 McLeod Drive, 1st Floor
Las Vegas, Nevada 89121
October 14, 2002
NOTICE OF ANNUAL SHAREHOLDERS' MEETING
NOTICE IS HEREBY GIVEN THAT the annual meeting of shareholders of Online
Gaming Systems, Ltd. (the "Corporation"), shall be held on November 21, 2002, at
10:00 a.m., Pacific time, in the offices of the Corporation, in the City of Las
Vegas, Nevada.
The shareholders will deliberate and take action on the following matters:
1. TO ELECT DIRECTORS TO SERVE FOR THE ENSUING YEAR OR UNTIL THEIR
RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED. THE NOMINEES
ARE JOHN COPELYN, GAVIN CHAMBERLAIN, LAWRENCE P. TOMBARI, AND
MARCEL GOLDING.
2. TO APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK WHICH THE COMPANY
IS AUTHORIZED TO ISSUE FROM 100,000,000 TO 200,000,000.
3. TO APPROVE AMENDMENTS TO THE COMPANY'S 1999 STOCK OPTION PLAN
4. TO RATIFY THE APPOINTMENT OF MOORE STEPHENS, P.C., AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2002.
5. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
The foregoing items of business are more fully described in the Information
Statement that accompanies this Notice.
The board of directors has fixed the close of business on October 9, 2002
as the shareholder of record date. Only those shareholders, which were
shareholders of record at the close of business on October 9, 2002, will be
entitled to vote in person at the meeting or any adjournment thereof.
We look forward to seeing you at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
of Online Gaming Systems, Ltd.
/s/ Lawrence P. Tombari
-----------------------------------
Lawrence P. Tombari
President, Chief Financial Officer
INFORMATION STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
ONLINE GAMING SYSTEMS, LTD.
TO BE HELD NOVEMBER 21, 2002
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Q: Why did you not send me a proxy?
A: This is because a quorum already exits based on the 82% ownership of the
company's common stock by Ahead Investments, Ltd.
WE ARE NOT ASKING YOU FOR A PROXY AND YOUR ARE REQUESTED NOT TO SEND US A
PROXY.
Q: What does a quorum mean?
A: A quorum means a majority of the outstanding shares. The annual meeting
may only proceed if a quorum is present at the meeting. A majority of the
outstanding shares will be present at the meeting through Ahead
Investments, Ltd. At October 9, 2002, the record date there were
96,365,953 shares of Online Gaming Systems common stock outstanding. Ahead
Investments, Ltd. owns 78,698,120 shares of Online Gaming Systems, Ltd.
common stock or approximately 82 percent of the votes. A shareholder list
will be available at the meeting in our executive offices for your review.
Q: Who is entitled to vote?
A: Shareholders who owned Online Gaming Systems, Ltd. stock at the close of
business on October 9, 2002, the record date.
Q: What am I voting on?
A: At the Annual Meeting, you will be asked to consider and vote upon the
following proposals: (i) to elect four (4) directors of the Company; (ii)
to approve an amendment to the Company's Articles of Incorporation to
increase the amount of shares of common stock which the company is
authorized to issue from 100,000,000 to 200,000,000; (iii) to approve
amendments to the Company's 1999 Stock Option Plan; and (iv) to ratify the
appointment of Moore Stephens, P.C., as independent accountants of the
Company for the calendar year ending December 31, 2002.
Q: How do I vote?
A: By attending the annual meeting. At that time, you will be given a ballot
and you may vote your shares. If your shares of Online Gaming Systems,
Ltd. are held in the name of a broker, bank or other nominee, you must
bring an account statement or letter from the nominee showing you were the
beneficial owner of the shares on October 9, 2002.
1
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PROPOSAL NO. 1:
ELECTION OF DIRECTORS
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At the Annual Meeting, four directors (constituting the entire board)
are to be elected to serve until the next Annual Meeting of Stockholders and
until a successor for such director is elected and qualified, or until the
death, resignation, or removal of such director. There are four nominees, all of
whom are currently a director of the Company.
Each person nominated for election has agreed to serve if elected, and
the Board of Directors has no reason to believe that any nominee will be
unavailable or will decline to serve. Ahead Investments owns 78,698,120 shares
or about 82 percent of the company, and intends to vote all of its shares in
favor of the election of the four nominees as directors, thereby assuring their
election as directors.
NOMINEES
Set forth below is information regarding the nominees to the Board of Directors.
NAME/FIRST ELECTED POSITION AGE
------------------ -------- ---
J.A. Copelyn Chairman of the Board, Chief 53
July 1999 Executive Officer
Lawrence P. Tombari President, Chief Financial 44
December 2001 Officer, Director
Marcel Golding Director 46
August 1998
Gavin Cooper Chamberlain Director 40
December 2001
2
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION AS DIRECTORS
JOHN COPELYN is the Chief Executive Officer, and has been Chairman of the Board
of Directors of Online Gaming Systems, Ltd. since 1999. He is also the Chief
Executive Officer of the South African Clothing and Textile Workers Union
Investment Group and the Chief Executive Officer of Hosken Consolidated
Investments, Ltd., a company traded on the Johannesburg Stock Exchange. During
1992-1994, Mr. Copelyn was Chief Executive Officer of Zenzeleni Clothing. From
1994-1997, Mr. Copelyn served as an elected member of the democratically elected
South African parliament. In addition, he has held numerous positions with South
African trade unions including serving on the Central Committee of COSATU. Mr.
Copelyn is also a licensed attorney in South Africa. Mr. Copelyn also serves as
director for other gaming and non-gaming companies. He attended both the
University of Witwatersrand and University of South Africa.
LAWRENCE P. TOMBARI is President and Chief Financial Officer of the Company, and
was elected Director in 2001. Previously, he was Chief Financial Officer and
Senior Vice President of Lady Luck Gaming Corporation, from its inception in
1993 until the Company was acquired in 2000. Lady Luck generated revenue of more
than $200 million annually, and had more than 2,500 employees. Prior to Lady
Luck, Mr. Tombari spent eight years at Ernst & Young, in the Consulting
Division. He also worked for the previous two years at Arthur D. Little, Inc. as
a consultant. Mr. Tombari has a Bachelor of Science of Business Administration
from the University of Southern California, and an MBA from Arizona State
University.
MARCEL GOLDING was appointed a Director of the Company in August of 1998. Mr.
Golding is Chairman of Hosken Consolidated Investments (HCI) and Softline
Holdings, as well as being a Director of JCI and Global Capital, which are all
listed companies on the Johannesburg Stock Exchange. In addition, he was the
founding chairman of the Mineworkers Investment Company (linked to the National
Union of Mineworkers), one of the two pioneering trade union investment
companies in South Africa. He was elected the first Deputy General Secretary of
the union in 1987 at the age of 26, and was re-elected on three additional
occasions to this post of the Country's largest trade union. From 1994 to 1997
he served as a Member of Parliament, where he chaired the Minerals and Energy
Committee and the Audited Commission, the oversight committee of the office of
the Auditor-General. Mr. Golding holds a postgraduate degree from the University
of Cape Town.
GAVIN CHAMBERLAIN is Managing Director of Global Payment Technologies Holdings
(Pty) Ltd., the South African affiliate of Global Payment Technologies, Inc., a
leading manufacturer and innovator of currency acceptance systems used in the
worldwide gaming, beverage, and vending industries, and was elected Director in
2001. He is Managing Director of Vukani Gaming, which has a route business in
South Africa and Managing Director of International Payment Systems (Pty).
Recently, GPTHL agreed to merge its operations with Vukani Gaming Corporation, a
wholly owned subsidiary of Hosken Consolidated Investments Ltd., the Company's
majority stockholder. He is an South African citizen born in Johannesburg and
educated at the University of Witwatersrand.
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BOARD MEETINGS AND COMMITTEES
The Board held one meeting during the year ended December 31, 2001. In
addition, from time to time during such year, the members of the Board acted by
unanimous written consent. Each member of the Board of Directors, who served
during all of fiscal 2001, attended or participated in more than seventy-five
(75%) or more of the aggregate of (i) the total number of meetings of the Board
of Directors held during the fiscal year and (ii) the total number of meetings
held by all committees on which such director served during the past fiscal
year. There are no family relationships among executive officers or directors of
the Company. The Board of Directors has an Audit Committee and a Compensation
Committee. The entire Board of Directors performs the typical functions of such
committees. There is no nominating committee or any other board committees.
The Audit Committee of the Board of Directors held one (1) meeting
during fiscal 2001. The Audit Committee, which is comprised of Lawrence P.
Tombari, recommends engagement of the Company's independent accountants approves
services performed by such accountants and reviews and evaluates the Company's
accounting system and its system of internal controls.
The Compensation Committee of the Board of Directors held one (1)
meeting during fiscal 2001. The Compensation Committee, which is comprised of
John Copelyn and Lawrence P. Tombari has overall responsibility for the
Company's compensation policies and determines the compensation payable to the
Company's executive officers, including their participation in certain of the
Company's employee benefit and stock option plans.
DIRECTOR COMPENSATION
The Company does compensate directors and executive officers of the
Company for service on the Board of Directors. Directors and executive officers
receive $1,500 per meeting and are reimbursed for their expenses incurred in
attending meeting of the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF ALL OF THE ABOVE NOMINEES.
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PROPOSAL NO. 2:
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
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The Company is asking the stockholders to amend its Articles of
Incorporation, to increase the number of common shares the Company is authorized
to issue from 100,000,000 to 200,000,000.
The Company is authorized under its Articles of Incorporation to issue
110,000,000 shares of capital stock, 100,000,000 of which are designated
"Common Stock," $.001 par value, and 10,000,000 of which are designated
"Preferred Stock," $.001 par value. As of September 30, 2002 96,365,953 shares
4
of Common Stock were outstanding and 250,000 shares of Common Stock were
reserved under the Company's 1999 Stock Option Plan. There were no shares of
Preferred Stock outstanding.
During 2001, certain affiliates of the Company converted $3.6 million
of convertible debt into 60,000,000 shares of Common Stock, and the Company
believes that additional conversions of its convertible debt may occur in the
future. Additionally, the Company has utilized Common Stock in lieu of cash for
certain expenses.
The principal purposes of the amendment are to fulfill the Company's
obligations to keep sufficient shares reserved for conversion of convertible
debt, to facilitate the reserve of shares under the Company's amendments to its
1999 Stock Option Plan described in Proposal 3, and to provide the Company with
the flexibility to issue shares of Common Stock for other corporate purposes.
The Board has not authorized or taken any action with respect to the issuance
of, and has no present agreement or arrangement to issue any of the additional
shares that would be available if the amendment is approved by shareholders.
Adoption of the amendment would not affect the rights of existing
shareholders, except to the extent additional shares are actually issued, which
may have certain effects, including dilution of the earnings per share and
voting rights of current holders of common stock. If the amendment is adopted,
it will become effective upon the filing of Articles of Amendment of the
Company's Articles of Incorporation with the Secretary of State of the State of
Delaware. Ahead Investments owns 78,698,120 shares or about 82 percent of the
company, and intends to vote all of its shares in favor of this amendment,
thereby assuring its passage.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK WHICH THE COMPANY IS AUTHORIZED TO ISSUE FROM
100,000,000 TO 200,000,000.
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PROPOSAL NO. 3:
APPROVAL OF AMENDMENT TO THE COMPANY'S 1999 STOCK OPTION PLAN
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The Company is asking its shareholders to amend certain provisions of
its 1999 Stock Option and Incentive Plan that reflect changes in the competitive
environment and ownership structure of the Company.
In January 1997 the Company (then named Atlantic International
Entertainment, Ltd., or AIE) by and through its Board of Directors adopted an
Incentive Stock Option Plan that was known and became effective as the AIE 1999
Stock Option and Incentive Plan ("the Plan"). The purpose of the Plan is to
attract and retain the best available personnel as officers, directors and key
employees and to provide additional incentive to employees of the Company or
any present or future parent or subsidiary of the Company to promote the
success of the business. The Plan is intended to provide for the grant of
5
"Incentive Stock Options," within the meaning of Section 422 of the Internal
Revenue Code of 1954, as amended (the "Code") and Non-Incentive Stock Options.
A Committee, consisting of not less than three persons appointed by the
Board, administers the Plan. All persons designated as members of the Committee
shall be "disinterested persons" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, and shall be ineligible to receive Awards under
the Plan. The Plan allows for a maximum of 250,000 shares. The Plan has certain
features applicable to the grant of non-incentive stock options, as follows.
1. Individual Performance. Each participant that is an Employee may
be granted an Award in the event said employee's immediate
supervisor determines that said employee's annual performance is
either exceeds standard performance or is determined by be rated
"excellent" in accordance with the policies and procedures of the
Company. The number of Options to be granted shall be determined
by dividing (a) the amount of gross salary of each Participant
that is an Employee by (b) the percentage set forth on Exhibit
"A" (depending on the supervisors' evaluation).
2. Company Performance. Each Participant shall be granted Options in
the event the Company's net income before taxes, as defined by
generally accepted accounting principles (GAAP), exceeds
$1,000,000 in any fiscal year. However, in no event shall the
total number of Options granted hereunder exceed options on
60,000 Shares. The number of Options to be granted shall be
determined by multiplying (a) the amount of Company net income in
excess of $1,000,000 by (b) 5%.
The Board may alter, suspend or discontinue the Plan, except that no
action of the Board may increase the maximum number of shares permitted to be
optioned under the Plan unless such action of the Board shall be subject to
approval or ratification by the shareholders of the Company.
The Company currently has outstanding options (as of September 30,
2002) under the 1999 Plan covering 8,500 shares of Common Stock.
The Company believes that certain provisions of the 1999 Stock Option
Plan warrant amendment, and during a Board Meeting on August 13, 2002 approved
such amendments, subject to shareholder approval.
The Board of Directors has approved an amendment to increase the
maximum number of shares of Common Stock issuable upon exercise of options
granted under the 1999 Plan to 10,000,000. The Board believes that the increase
is important in continuing to incentive employees and others, and will not
substantially dilute the interests of existing shareholders. The Board believes
that the ratio of maximum shares under the Plan relative to total number of
shares outstanding is less than the average of many technology and software
companies.
The Board of Directors has approved an amendment to revise the
administration of the Plan from the Committee to the Board. The Board believes
this amendment is warranted to balance the composition of the Board and
6
compliance with Rule 16b-3 of the 1934 Act. The Board expects to grant options
periodically at scheduled Board meetings.
The Board also approved an amendment to eliminate provisions related to
the grant of non-incentive stock options, as outlined above. Accordingly, the
Board will have broader powers in which to grant non-incentive stock options in
the future.
Ahead Investments owns 78,698,120 shares or about 82 percent of the
company, and intends to vote all of its shares in favor of this amendment,
thereby assuring its passage.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE AMENDMENTS TO THE COMPANY'S 1999 STOCK OPTION PLAN.
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PROPOSAL NO. 4:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
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The Company is asking the stockholders to ratify the selection of Moore
Stephens, P.C. as the Company's independent public accountants for the calendar
year ending December 31, 2002. The affirmative vote of the holders of a majority
of the shares represented and voting at the Annual Meeting will be required to
ratify the selection of Moore Stephens, P.C.
In the event the stockholders fail to ratify the appointment, the Audit
Committee of the Board of Directors will consider it as a direction to select
other auditors for the subsequent year. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board of
Directors determines that such a change would be in the best interest of the
Company and its stockholders.
Moore Stephens, P.C. has audited the Company's financial statements
since the year ended December 31, 1998. Its representatives are not expected to
be present at the Annual Meeting but will be available to respond to appropriate
questions.
Fees Billed to Online Gaming Systems by Moore Stephens During Calendar Year 2001
Audit fees billed to Online Gaming Systems for the 2001 calendar year
were $28,000.
Online Gaming Systems did not engage Moore Stephens to provide advice
to the Company regarding financial information systems design and implementation
for the calendar year ended December 31, 2001.
Fees billed to Online Gaming Systems for all other non-audit services
rendered by Moore Stephens for the 2001 calendar year were $6,000.
Ahead Investments owns 78,698,120 shares or about 82 percent of the
company, and intends to vote all of its shares in favor of this proposal,
thereby assuring its passage.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO RATIFY THE SELECTION OF MOORE STEPHENS, P.C., TO SERVE AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE CALENDAR YEAR ENDING DECEMBER
31, 2002.
7
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 2002, information
regarding the beneficial ownership of our common stock by each person we know to
own five percent or more of the outstanding shares, by each of the directors and
officers, and by the directors and officers as a group. As of September 30,
2002, there were outstanding 96,365,953 shares of our common stock.
Beneficial ownership has been determined in accordance with Rule 13d-3
of the Securities Exchange Act of 1934. Generally, a person is deemed to be the
beneficial owner of a security if he has the right to acquire voting or
investment power within 60 days.
Amount of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
------------------------------------ -------------------- ----------------
Ahead Investments, Ltd. 78,698,120 81.7%
150 St. George's Street
Rhodes Blgd-5th Floor
Cape Town 8001 South Africa
Lawrence P. Tombari 550,000 .57%
C/o Online Gaming Systems, Ltd.
3225 McLeod, 1st Floor
Las Vegas, Nevada 89121
All Officers and Directors as a Group 79,248,120 82.24%
Ahead Investments is a wholly owned subsidiary of HCI. Both Mr. Copelyn and
Mr. Golding are substantial owners and officers of HCI.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten percent
8
(10%) stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based upon (i) the copies of Section 16(a) reports which the Company
received from such persons for their 1998 fiscal year transactions in the Common
Stock and their Common Stock holdings, and (ii) the written representations
received from one or more of such persons that no annual Form 5 reports were
required to be filed by them for the 2001 fiscal year, the Company believes that
all executive officers and Board members complied with all their reporting
requirements under Section 16(a) for such fiscal year, with the exception of
filings required for Ahead Investments, Ltd as the result of its conversion of
convertible debt into common stock of the Company.
FORM 10-KSB
THE COMPANY FILED AN ANNUAL REPORT ON FORM 10-KSB WITH THE SECURITIES
AND EXCHANGE COMMISSION ON OR ABOUT MAY 14, 2002. STOCKHOLDERS MAY OBTAIN A COPY
OF THIS REPORT, WITHOUT CHARGE, BY WRITING TO ONLINE GAMING SYSTEMS, LTD., ATTN:
CHIEF FINANCIAL OFFICER, AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT
3225 McLeod Drive, 1st Floor, Las Vegas, Nevada 89121.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION (1)
The following table provides certain summary information concerning the
compensation earned, by the Company's Chief Executive Officer and its Chairman
for services rendered in all capacities to the Company and its subsidiaries for
each of the last three calendar years. Such individuals will be hereafter
referred to as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
--------------------------- ---- ------ -----
Lawrence P. Tombari (2) 2002 $180,000 --
President and Chief Financial 2001 150,000 --
Officer
Gary Ramos (2) 2002 $ 88,967 --
Formerly President and Chief 2001 250,000 --
Executive Officer 2000 93,000 --
Peter Lawson 2001 $123,333 --
Formerly Chief Financial Officer 2000 150,000 (AUD) --
Steven Campbell 2002 $ 32,308 --
Formerly Secretary 2001 125,000 --
2000 112,000
9
(1) The columns for "Other Annual Compensation" and "Long-term
Compensation" have been omitted, as there is no compensation required
to be reported in such columns. The aggregate amount of perquisites and
other personal benefits did not exceed the lesser of $50,000 or 10% of
the total of salary and bonus.
(2) Mr. Tombari assumed the position of President in March of 2002. Mr.
Ramos resigned his position with the Company in March of 2002.
STOCK OPTIONS
On January 1, 1999, the Company adopted an Incentive Stock Option Plan
for Employees, Directors, Consultants, and Advisors (the "Plan"). The Plan will
expire December 31, 2006 unless further extended by appropriate action of the
Board of Directors. Employees, directors, consultants and advisors of the
Company, or any of its subsidiary corporations, are eligible for participation
in the Plan. The Plan provides for stock to issued pursuant to options granted
and shall be limited to 250,000 shares of Common Stock, $.001 par value. The
shares have been reserved for issuance in accordance with the terms of the Plan.
The exercise of these options may be for all or any portion of the option and
any portion not exercised will remain with the holder until the expiration of
the option period.
The following table contains information concerning the stock option
grants made to each of the named executive officers and employees for calendar
2001. There were no options granted during 2000.
INDIVIDUAL GRANTS
Name # Granted # Exercised In F/Y $/Sh Exp. Date
---- --------- ----------- ------ ---- ---------
Lawrence P. Tombari 133,333 0 2001 $.03 12/23/11
The Company applies Accounting Principles Board Option No. 25,
Accounting for Stock Issued to Employees, and related interpretations, for stock
options issued to employees in accounting for its stock option plans. The
exercise price of all options issued was the market price at the date of grant.
Accordingly, no compensation expense has been recognized for the Company's
stock-based compensation plans.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing the base salary and incentive cash bonus programs for the Company's
executive officers and other key employees and administering certain other
compensation programs for such individuals, subject in each instance to review
by the full Board. The Compensation Committee also has the exclusive
responsibility for the administration of the Company's 1999 Stock Option Plan
under which grants may be made to executive officers and other key employees.
10
The Compensation Committee is comprised of two members of the Board of
Directors.
GENERAL COMPENSATION POLICY
The overall policy of the Compensation Committee is to provide the
Company's executive officers and other key employees with competitive
compensation opportunities based upon their contribution to the financial
success of the Company and their personal performance. It is the Compensation
Committee's objective to have a substantial portion of each officer's
compensation contingent upon the Company's performance as well as upon the
officer's own level of performance. Accordingly, the compensation package for
each executive officer and key employee is comprised of three elements: (i) base
salary which reflects individual performance and is designed primarily to be
competitive with salary levels in effect at companies within and outside the
industry with which the Company competes for executive talent, (ii) annual
variable performance awards payable in cash and tied to the Company's
achievement of financial and individual performance targets, and (iii)
stock-based incentive awards which strengthen the mutuality of interests between
the executive officers and the Company's stockholders.
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or defined benefit
pension plans.
OTHER
No Director or Executive Officer is involved in any material legal
proceeding in which he is a party adverse to the Company or has a material
interest adverse to the Company.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL AGREEMENTS
The Company currently has an employment agreement with Mr.Tombari
pursuant to which he will serve as the Company's Chief Financial Officer for
three years, expiring on January 16, 2004. The first year base salary is
$150,000, increasing to $180,000 and $240,000 in the successive years, and Mr.
Tombari is granted rights to purchase company stock and receive options at a
price based on formula. The employment agreement contains arrangements for
severance compensation of up to 1.5 times the annual base salary plus benefits
upon termination without cause.
Other than the aforementioned agreement, the Company has not entered
into any other employment agreement with any of its officers, directors, or any
other person and no such agreements are anticipated in the immediate future.
11
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation paid to
certain executive officers, to the extent that compensation exceeds $1 million
per officer in any year. The compensation paid to the Company's executive
officers for the 2001 calendar year did not exceed the $1 million limit per
officer, and it is not expected the compensation to be paid to the Company's
executive officers for the 2002 calendar year will exceed that limit. Because it
is very unlikely that the cash compensation payable to any of the Company's
executive officers in the foreseeable future will approach the $1 million limit,
the Compensation Committee has decided at this time not to take any other action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. The Compensation Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
CERTAIN TRANSACTIONS
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent other required by the Delaware General
Corporation Law. The Company's Bylaws provide that the Company shall indemnify
its directors and officers to the fullest extent permitted by Delaware law,
including in circumstances in which indemnification is otherwise discretionary
under Delaware law.
All transactions between the Company and its officers, directors or any
affiliate of any such person have been on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented for consideration at the Annual Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's Annual Meeting of stockholders to be held in 2003 must be received by
on or before April 30, 2003 in order to be included in the proxy statement and
proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Lawrence P. Tombari
-------------------------------------
Lawrence P. Tombari
President and Chief Financial Officer
October 14, 2002