SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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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 Section 240.14a-11(c) or
Section 240.14a-12
Puradyn Filter Technologies Incorporated
----------------------------------------
(Name of Registrant as Specified In Its Charter)
not applicable
--------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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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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(4) Date Filed: November 8, 2004
Puradyn Filter Technologies Incorporated
2017 High Ridge Road, Boynton Beach, Florida 33426
Telephone 561 547 9499 Facsimile 561 547 4025
November 8, 2004
Dear Stockholder:
You are cordially invited to attend the 2004 Annual Meeting of
Stockholders of Puradyn Filter Technologies Incorporated, to be held on
Thursday, December 16, 2004 at 10:00 a.m. (local time) at the Holiday Inn
Catalina, 1601 North Congress Avenue, Boynton Beach, Florida 33426. The formal
Notice of the 2004 Annual Meeting of Stockholders and Proxy Statement are
attached.
The matters to be acted upon by our stockholders are set forth in the
Notice of 2004 Annual Meeting of Stockholders and include,
o the election of our Board of Directors;
o the ratification of the engagement of Ernst & Young LLP as our
Independent Registered Public Accounting Firm;
o the approval of such other matters as may properly come before
the meeting.
It is important that your shares be represented and voted at the
meeting. Accordingly, after reading the attached Proxy Statement, please sign,
date and return the enclosed proxy card. Your vote is important regardless of
the number of shares you own.
I hope that you will attend the meeting in person, at which time I will
review the business and operations of Puradyn Filter Technologies Incorporated.
Sincerely,
/s/ Richard C. Ford
-----------------------------------
Richard C. Ford
Chief Executive Officer
PURADYN FILTER TECHNOLOGIES INCORPORATED
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 16, 2004
The 2004 Annual Meeting of the Stockholders of Puradyn Filter
Technologies Incorporated will be held at 10:00 a.m. (local time), at the
Holiday Inn Catalina, 1601 North Congress Avenue, Boynton Beach, Florida 33426,
on Thursday, December 16, 2004. At the 2004 Annual Meeting, you will be asked to
vote on the following matters:
1. To elect a Board of Directors consisting of six (6) members;
2. To ratify the appointment of Ernst & Young LLP as our
Independent Registered Public Accounting Firm, to serve at the
pleasure of the Board of Directors;
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record, as shown on our transfer books at the
close of business on October 28, 2004, will be entitled to notice of and to vote
at the meeting. A list of stockholders entitled to vote at the 2004 Annual
Meeting will be available for examination by any stockholder, for proper
purposes, during normal business hours at our offices for a period of at least
10 days preceding the 2004 Annual Meeting.
The Board of Directors recommends that you vote FOR the Board's slate
of nominees to serve on the Board of Directors and FOR the ratification of the
appointment of Ernst & Young LLP.
By Order of the Board of Directors
/s/ Richard C. Ford
----------------------------------
Richard C. Ford
Chief Executive Officer
November 8, 2004
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE
PROVIDED AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO
IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
PURADYN FILTER TECHNOLOGIES INCORPORATED
PROXY STATEMENT
2004 ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 16, 2004
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of
Puradyn Filter Technologies Incorporated ("Puradyn", "we", "us", "our") to be
voted at the 2004 Annual Meeting of Stockholders to be held on December 16,
2004, and any adjournments thereof. When such proxy is properly executed and
returned, the shares it represents will be voted at the meeting as directed by
the stockholder's instructions. If no specification is indicated, the shares
will be voted in accordance with the recommendation of the Board with respect to
each matter submitted to our stockholders for approval. The quorum necessary to
conduct business at the Annual Meeting consists of a majority of the outstanding
Common Stock of the Company as of the record date. Abstentions and broker
non-votes are counted for purposes of determining a quorum, but will not be
counted as votes cast in connection with the election of directors or the
ratification of our Independent Registered Public Accounting Firm.
Any stockholder giving a proxy has the power to revoke it prior to its
exercise by notice of revocation in writing and delivered to the Company's
principal offices at 2017 High Ridge Road, Boynton Beach, Florida 33426, by
voting in person at the 2004 Annual Meeting, or by execution of a subsequent
proxy; provided, however, that such action must be taken in sufficient time to
permit the necessary examination and tabulation of the subsequent proxy or
revocation before the vote is taken.
At the close of business on October 28, 2004, the record date for
determining those stockholders entitled to notice of and to vote at the 2004
Annual Meeting, there were 17,452,164 shares of our Common Stock issued and
outstanding. The Company did not have any other class of equity securities
outstanding as of the record date. All shares of the Company's Common Stock
outstanding on the record date are entitled to vote at the Annual Meeting and
stockholders of record entitled to vote at the Annual Meeting will have one vote
for each share so held on the matters to be voted upon. This Proxy Statement and
the accompanying form of proxy are first being sent to stockholders on or about
November 8, 2004, and are accompanied by Puradyn's Annual Report on Form 10-KSB
for the year ended December 31, 2003.
In addition to the use of the mail, solicitations may be made by our
employees, by telephone, email, mailgram, facsimile, telegraph, cable and
personal interview. We will bear all expenses of soliciting proxies.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES AND DIRECTORS
Our Board of Directors currently consists of seven members. At the
meeting, six directors will be elected to serve until the next Annual Meeting of
Stockholders and until their successors are elected and qualified. Directors are
elected by a plurality of the votes cast, in person or represented by proxy, at
the 2004 Annual Meeting. Therefore, the six nominees receiving the greatest
number of votes cast will be elected directors of Puradyn (assuming a quorum is
present). We have no reason to believe that any nominee will be unable to serve
if elected. A vote FOR the nominees includes discretionary authority to vote for
a substitute nominee named by the Board, if any of the nominees become unable or
unwilling to serve.
The following persons have been nominated by the Board for election to
the Board of Directors:
NAME AGE POSITION
- ------------------ --- -----------------------------------------------
Joseph V. Vittoria 69 Chairman of the Board of Directors
Richard C. Ford 61 Chief Executive Officer and Director
Kevin G. Kroger 52 President, Chief Operating Officer and Director
Peter H. Stephaich 48 Director
Ottavio Serena 51 Director
Michael Castellano 63 Director
JOSEPH V. VITTORIA was appointed to the Board of Directors as Chairman on
February 8, 2000. Mr. Vittoria was Chairman and Chief Executive Officer of
Travel Services International, Inc. where he served from 1997 to 2000. From 1987
to 1997, Mr. Vittoria served as Chairman and Chief Executive Officer of Avis,
Inc., and was President and Chief Operating Officer of Avis, Inc. from 1982 to
1987. Mr. Vittoria also serves on the boards of several companies, including
Autoeurope. Inc.
RICHARD C. FORD has been a Director of Puradyn since its inception in 1988. He
also served as President of the Company from 1988 until April 1997, as Chief
Executive Officer and Treasurer until June 1997, and as Secretary of the Company
from 1988 until August 1997. He also served as Secretary of the Company from its
inception until August 1996. Mr. Ford resigned from the Company in 1997 but
returned in April 1998 as President and in January 1999, was elected Chairman of
the Board of Directors and appointed Chief Executive Officer. Mr. Ford was also
Director of TF Purifiner Ltd. through July 17, 1997 at which time he resigned.
He was re-appointed as a Director in 1999, currently serving as a Director on
the Board of Puradyn, Ltd.
KEVIN G. KROGER joined the Company July 3, 2000 as President and Chief Operating
Officer and was appointed to the Board of Directors in November 2000, and was
also appointed to the Board of Puradyn, Ltd. in December 2000. Mr. Kroger was
with Detroit Diesel Corporation from 1989 to the time he joined Puradyn, serving
in various executive positions prior to his appointment in 1998 to the position
of Vice President and General Manager of Series 30/40 Product. From 1987 to 1989
he was Vice President of R.E.S. Leasing and of VE Corporation. Prior to this,
from 1971 to 1987, Mr. Kroger held several management positions with Caterpillar
Corporation.
2
PETER H. STEPHAICH was appointed to the Board of Directors at its June 12, 2000
meeting and also serves a Chairman of our Compensation Committee. Mr. Stephaich
is currently Chairman, Chief Executive Officer and President of Blue Danube
Incorporated, a private holding Company engaged in the river transportation
industry on the Upper Ohio River. Mr. Stephaich has been on the Blue Danube
Board of Directors since 1982 and has held the titles of Chief Executive Officer
and President since 1995. Prior to 1995, Mr. Stephaich worked for various
financial institutions, including four years at Bankers Trust Company where he
provided international financial advisory services to the transportation and
aerospace industries.
OTTAVIO SERENA was appointed to the Board of Directors at its meeting on June
12, 2000. Mr. Serena is a principal of The Lynx Partners, a private equity
consulting firm. He is also President of The Explorer and Fiber Group and is
Managing Director of Lincolnshire Management, Inc., a publicly traded financial
Company. From 1993 to 1999, Mr. Serena was with Citicorp Venture Capital, a
leveraged buyout company. Mr. Serena co-founded and was managing director of The
Lynx Partners from 1987 to 1993.
MICHAEL CASTELLANO was appointed to the Board of Directors at our January 24,
2001 meeting and currently serves as Chairman of our Audit Committee. Mr.
Castellano retired in 1997 from Kobren Insight Group, a financial services
company, where he served as Chief Administrative Officer from 1995 to 1997, and
in 1994, he was Executive Vice President of Wall Street Access, a discount
brokerage firm. Prior to that, from 1988 to 1993, Mr. Castellano was Senior Vice
President and Corporate Controller for Fidelity Investments. Mr. Castellano also
serves on the Board of Kobren Insight Funds.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 2003, our Board of Directors met on 3 occasions and took action
by unanimous written consent on 19 occasions. Each Director attended each
meeting and concurred in each Board action by consent. We currently have an
Audit Committee and a Compensation Committee. The current Board of Directors is
comprised of three independent directors, Michael Castellano, Peter Stephaich
and Ottavio Serena; and four non-independent directors, Joseph V. Vittoria,
Richard C. Ford, Kevin G. Kroger and Alan J. Sandler. To maintain a balanced
Board with regard to independence as defined in Section 121B(2)(c), of the
American Stock Exchange listing standards, Alan J. Sandler will not seek
reelection to the Board at the 2004 Annual Meeting.
We do not have a nominating committee. The Board of Directors, sitting
as a Board, selects those individuals to stand for election as members of our
Board. Our Board members are selected on criteria based on a number of variables
including strong industry knowledge or a general business expertise and
background as a principal or executive, financial knowledge and experience, and
people who are known to us to be of high integrity, ethics and character.
The Board will consider candidates for Directors proposed by
stockholders, although no formal procedures for submitting candidates have been
adopted. Until otherwise determined, no less than 120 days prior to the Annual
Board of Directors' meeting at which the slate of Board nominees is adopted, the
Board accepts written submissions that include the name, address and telephone
number of the proposed nominee, along with a brief statement of the candidate's
qualifications to serve as a Director and a statement of why the stockholder
submitting the name of the proposed nominee believes that the nomination would
be in the best interests of stockholders. If the proposed nominee is not the
security holder submitting the name of the candidate, a letter from the
candidate agreeing to the submission of his or her name for consideration should
be provided at the time of submission. The letter should be accompanied by a
3
resume supporting the nominee's qualifications to serve on our Board of
Directors, as well as a list of references.
Stockholder Communications with our Board of Directors
We have established an informal process for security holders to send
communications to members of our Board of Directors. Stockholders who wish to
contact the Board of Directors or any of its members may do so by writing to
them, c/o Puradyn Filter Technologies, Inc., 2017 High Ridge Road, Boynton
Beach, Florida 33426. Correspondence directed to an individual Board member is
referred, unopened, to that Board member. Correspondence not directed to a
particular Board member is referred, unopened, to the Chairman of the Audit
Committee, for reviewing and forwarding to the appropriate person.
Audit Committee
During 2003, the Audit Committee of the Board of Directors was composed
of two independent directors (as independence is defined in Section 121(A) of
the American Stock Exchange listing standards), and operates under a written
charter adopted and reviewed annually by the Board of Directors. The Committee
members were Michael Castellano (Chairperson) and Peter H. Stephaich. During the
fiscal year ended December 31, 2003, the Audit Committee met on 4 occasions.
The Board has determined that Mr. Castellano satisfies the criteria as
an Audit Committee financial expert as established by the SEC under Item 401(e)
of Regulation S-B and the American Stock Exchange, and that both members of the
Committee are independent as that term is defined in applicable SEC Rules and
American Stock Exchange listing standards.
The Audit Committee reviews our financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the system of internal
controls.
In this context, the Chairperson has met and held discussions with
management and the Independent Registered Public Accounting Firm. Management
represented to the Committee that Puradyn's consolidated financial statements
were prepared in accordance with accounting principles generally accepted in the
United States, and the Committee has reviewed and discussed the consolidated
financial statements with management and the Independent Registered Public
Accounting Firm. The Committee discussed with the Independent Registered Public
Accounting Firm matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
In addition, the Committee has discussed with the Independent
Registered Public Accounting Firm the Firm's independence from Puradyn and its
management, including the matters in the written disclosures required by the
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees).
The Committee discussed with our Independent Registered Public
Accounting Firm the overall scope and plans for their respective audit. The
Committee meets with the Independent Registered Public Accounting Firm with and
without management present, to discuss the results of their examinations, the
evaluations of Puradyn's internal controls, and the overall quality of our
financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors, and the Board has approved,
that the audited consolidated financial statements be included in Puradyn's Form
10-KSB for the year ended December 31, 2003, for filing with the Securities and
Exchange Commission.
4
Submitted by the Audit Committee of the Board of Directors:
Michael Castellano Peter H. Stephaich
Compensation Committee
The Compensation Committee provides overall guidance for officer
compensation programs, including salaries and other forms of compensation
including all employee stock option grants and warrant grants to non-employees.
The Compensation Committee consists of three independent directors, Peter
Stephaich (Chairperson), Ottavio Serena and Michael Castellano.
Code of Ethics
We have adopted a Code of Ethics outlining business ethics and
conflicts of interest for all officers, directors and employees of the Company,
including procedures for prompt internal reporting of violations of the code to
the appropriate persons. The Code has been adopted to promote:
o honest and ethical conduct,
o full, fair, accurate, timely and understandable disclosure
in regulatory filings and public statements,
o compliance with applicable laws, rules and regulations,
o the prompt reporting of violation of the Code, and
o accountability for adherence to the Code of Ethics.
You will find a copy of our code of ethics posted on our website at
http://www.puradyn.com/ under Investor Relations, or you may write to us at
Puradyn Investor Relations, 2017 High Ridge Road, Boynton Beach, FL 33426. Our
Code of Ethics applies to all directors, officers and employees. We will provide
a copy to you upon request at no charge.
EXECUTIVE COMPENSATION
Cash Compensation
The following table shows, for the three year period ended December 31,
2003, the cash and other compensation paid by us to our Chief Executive Officer
and to each other executive officers who had annual compensation in excess of
$100,000.
- ------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
- ------------------------------------------------------------------------------------------------------------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (1) OPTIONS (#) ($) (3)
- ------------------------------------------------------------------------------------------------------------------
Richard C. Ford 2003 $ 208,000 $ -- $ 13,000 -- $ --
CEO and Director 2002 208,000 -- 12,000 -- --
2001 208,000 -- 11,000 -- --
Kevin G. Kroger 2003 166,000 -- 21,833 -- 2,372
President, COO and 2002 166,000 80,000(2) 18,482 100,000(2) 2,144
Director 2001 166,000 76,000 21,143 -- 1,964
Alan Sandler 2003 100,000 -- -- -- --
Vice President, 2002 100,000 -- -- -- --
Secretary and 2001 100,000 -- -- -- --
Director
- ------------------------------------------------------------------------------------------------------------------
5
- ----------------------
(1) This amount represents payments made by the Company for car allowances and,
in the case of Mr. Kroger, also for disability insurance premiums.
(2) In January 2003, in lieu of the contractual cash bonus amount of $80,000,
100,000 ISO stock options were granted to Mr. Kroger.
(3) Other compensation represents insurance premiums paid by the Company on
behalf of Mr. Kroger for term life insurance for the benefit of Mr.
Kroger's family. There are no dividends or cash surrender value payable on
this policy, which is renewable annually.
Incentive and Non-qualified Stock Option Plans
The Board of Directors adopted the 2000 Non-Employee Directors' Plan
(the "Directors' Plan") on November 8, 2000, under which options to purchase
400,000 shares have been authorized for issuance. The Directors' Plan provides a
means to attract and retain highly qualified persons to serve as non-employee
directors and advisory.
Each member of the Board of Directors was automatically granted 5,000
options at the date of commencement of the Directors' Plan and/or their initial
election as new members to the Board of Directors. Each Director receives an
additional 5,000 options at the close of each Annual Meeting of stockholders.
Additionally, each Director automatically receives 2,500 options for each
Committee of the Board on which the Director serves. Options are granted at a
price equal to the fair market value of the stock on the date of grant, are
exercisable commencing two years following grant, and will expire five years
from the date of grant. In the event a person ceases to serve on the Board of
Directors, the outstanding options expire one year from the date of cessation of
service. The Board of Directors administers the Directors' Plan.
The Company's 1999 Stock Option Plan (the "1999 Plan") and the 1996
Stock Option Plan (the "1996 Plan"), adopted on September 15, 1999 and amended
in June 2000 and July 31, 1996, respectively, will work to increase the
proprietary interest in Puradyn by our employees, Board of Advisors,
consultants, and non-employee Directors, and to align more closely their
interests with the interests of Puradyn's stockholders. The Plans will also
maintain our ability to attract and retain the services of experienced and
highly qualified employees and non-employee directors.
Under the 1999 Plan and 1996 Plan, we had reserved an aggregate of 3.0
million and 2.2 million shares, respectively, of common stock for issuance
pursuant to options granted under the Plans ("Plan Options"). The Board of
Directors or a Committee of the Board of Directors (the "Committee") administers
the Plans including, without limitation, the selection of the persons who will
be granted Plan Options under the Plans, the type of Plan Options to be granted,
the number of shares subject to each Plan Option and the Plan Option price.
Options granted under the 1996 and 1999 Plans may either be options
qualifying as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plans also allow for the inclusion
6
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plans must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
the Directors or the Committee, provided that no Plan Option may be exercisable
more than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of our common stock,
no more than five years after the date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee and cannot be less than the par value of
Puradyn's Common Stock.
The per share purchase price of shares subject to Plan Options granted
under the Plans may be adjusted in the event of certain changes in our
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Officers, directors, key employees and consultants of Puradyn and its
subsidiaries (if applicable in the future) are eligible to receive Non-Qualified
Options under the Plans. Only our officers and employees, and those of our
subsidiaries are eligible to receive Incentive Options.
All Plan Options are generally nonassignable and nontransferable,
except by will or by the laws of descent and distribution, and during the
lifetime of the optionee, may be exercised only by such optionee. If an
optionee's employment is terminated for any reason, other than his death or
disability or termination for cause, or if an optionee is not an employee but is
a member of Puradyn's Board of Directors and his service as a Director is
terminated for any reason, other than death or disability, the Plan Option
granted to him generally shall lapse to the extent unexercised on the earlier of
the expiration date or one year following the date of termination. If the
optionee dies during the term of his employment, the Plan Option granted to him
generally shall lapse to the extent unexercised on the earlier of the expiration
date of the Plan Option or the date one year following the date of the
optionee's death. If the optionee is permanently and totally disabled within the
meaning of Section 22 (c) (3) of the Internal Revenue Code of 1986, the Plan
Option granted to him generally lapses to the extent unexercised on the earlier
of the expiration date of the option or one year following the date of such
disability. Upon termination of service for any reason, employees of Puradyn
have 30 days from the date of termination to exercise stock options unless the
30-day exercise period is extended by Board approval.
The Board of Directors or the Committee may amend, suspend or terminate
the Plans at any time, except that no amendment shall be made which (i)
increases the total number of shares subject to the Plans or changes the minimum
purchase price therefore (except in either case in the event of adjustments due
to changes in the Company's capitalization), (ii) extends the term of any Plan
Option beyond ten years, or (iii) extends the termination date of the Plan.
Unless the Plans shall theretofore have been suspended or terminated by the
Board of Directors, the 1996 Plan shall terminate on July 31, 2006 and the 1999
Plan shall terminate on September 15, 2009. Any such termination of the Plans
shall not affect the validity of any Plan Options previously granted thereunder.
As of December 31, 2003, under the Directors' Plan, options to purchase
315,500 shares of common stock were outstanding. As of December 31, 2003, under
the 1996 Plan, incentive stock options to purchase 157,357 shares of common
stock were outstanding and non-qualified options to purchase 585,463 shares of
common stock were outstanding and, under the 1999 Plan, incentive stock options
to purchase 1,243,750 shares of common stock were outstanding and non-qualified
options to purchase 22,000 shares of common stock were outstanding.
7
On January 10, 2003, President/COO and Director Kevin Kroger was
awarded 100,000 incentive stock options in lieu of and in exchange for the
$80,000 year-end bonus, which was due and payable on December 31, 2002. These
options were granted under the 1999 Plan with 50,000 vesting immediately and
50,000 vesting one year from the date of grant.
- ---------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS/SARS EXERCISE OR
NAME UNDERLYING OPTIONS/SARS GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION DATE
GRANTED (#) FISCAL YEAR ($/SH)
- ---------------------------------------------------------------------------------------------------------------------------
Richard C. Ford -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Kevin G. Kroger 100,000 -- 1.70 1/10/13
- ---------------------------------------------------------------------------------------------------------------------------
Alan J. Sandler -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Option Exercises and Holdings
The following table sets forth information with respect to the exercise
of options to purchase shares of common stock during the fiscal year ended
December 31, 2003 to each person named in the Summary Compensation Table and the
unexercised options held as of the end of the 2003 fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN
SHARES UNDERLYING UNEXERCISED AT THE-MONEY OPTIONS/ SARS AT YEAR
ACQUIRED ON OPTIONS/ SARS YEAR END (#) END ($)
EXERCISE VALUE EXERCISABLE/ -------------------------------
REALIZED (#) EXERCISABLE/ ($) UNEXERCISABLE EXERCISABLE UNEXERCISABLE (1)
------------------------------------------------------------------------------------
Richard C. Ford
Chief Executive Officer and
Director -- 375,000 -- $ 538,500 --
Kevin G. Kroger
President, COO and Director -- 325,000 75,000 38,000 --
Alan J. Sandler
Vice President, Secretary
and Director -- -- -- -- --
- ----------------------
(1) In accordance with the Securities and Exchange Commission's rules, values
are calculated by subtracting the exercise price from the fair market value
of the underlying common stock. For purposes of this table, fair market
value is deemed to be $2.08, the closing price reported on December 31,
2003.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than ten percent (10%) of a registered class
of our equity securities, to file with the Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of Puradyn. Officers, directors and greater than ten percent (10%)
stockholders are required by Commission regulation to furnish us with copies of
all Section 16(a) forms they file.
8
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no other reports were
required, during the year ended December 31, 2003, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
(10%) beneficial owners were completed and filed on a timely basis, except for
those previously disclosed in the 10-KSB filing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows certain information regarding Puradyn's
common stock beneficially owned on the October 28, 2004 record date, by:
o each person who is known by us to own beneficially or exercise
voting or dispositive control over 5% or more of Puradyn's
common stock,
o each of Puradyn's directors,
o each officer named in the Summary Compensation Table, and
o all officers and directors as a group.
A person is considered a beneficial owner of any securities that the
person owns or has the right to acquire beneficial ownership of within 60 days.
At October 28, 2004, there were 17,452,164 shares of common stock outstanding.
Except as otherwise indicated, (a) we have been informed that the persons
identified in the table have sole voting and dispositive power with respect to
their shares, and (b) the address of each person is 2017 High Ridge Road,
Boynton Beach, Florida 33426.
- ---------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF COMMON
COMMON STOCK STOCK BENEFICIALLY
NAME AND ADDRESS OR IDENTITY OF GROUP BENEFICIAL OWNERSHIP OWNED
- ---------------------------------------------------------------------------------------------------
Quantum Industrial Partners LDC ("QIP") (1) 4,570,000 22.4%
- ---------------------------------------------------------------------------------------------------
Richard C. Ford (2) 1,933,985 9.5%
- ---------------------------------------------------------------------------------------------------
Joseph V. Vittoria (5) 1,791,870 8.8%
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Glenhill Capital Management, LP (8) 2,251,567 11.0%
- ---------------------------------------------------------------------------------------------------
Kevin G. Kroger (3) 432,000 2.1%
- ---------------------------------------------------------------------------------------------------
Alan J. Sandler (4) 315,992 1.6%
- ---------------------------------------------------------------------------------------------------
Peter Stephaich (6) 132,500 --*
- ---------------------------------------------------------------------------------------------------
Ottavio Serena (6) 130,000 --*
- ---------------------------------------------------------------------------------------------------
Michael Castellano (7) 39,000 --*
- ---------------------------------------------------------------------------------------------------
All Officers and Directors as a group (7 persons) 4,775,347 23.4%
- ---------------------------------------------------------------------------------------------------
- ----------------------
* Less than 1%.
(1) Address is c/o Curacao Corporation Company, N.V., Kaya Flamboyan,
Willenstad Curacao, Netherlands, Antilles.
(2) Mr. Ford serves as Chief Executive Officer and as a Director. Includes
options to purchase (i) 100,000 shares of common stock at $.56 per share
through April 14, 2009, options to purchase 100,000 shares of common stock
at $.21 per share through January 7, 2009, and options to purchase 175,000
shares of common stock at $.94 per share through April 1, 2009.
(3) Mr. Kroger is President, Chief Operating Officer, and a Director. Includes
options to purchase 300,000 shares of common stock at $9.25 through July 3,
2010, and options to purchase 100,000 shares of common stock at $1.70
through January 10, 2013.
9
(4) Mr. Sandler serves as Vice President, Secretary, and Director.
(5) Mr. Vittoria serves as Chairman of the Board of Directors. Includes options
to purchase 205,000 shares of common stock at $5.88 through October 23,
2005; and three warrants to purchase: 100,000 shares of common stock at
$4.05 through March 28, 2007; 125,000 shares of common stock at $2.25
through March 14, 2008, and 150,000 shares of common stock at $2.00 through
February 2, 2008, respectively.
(6) Mr. Stephaich and Mr. Serena serve as Directors. Includes options to
purchase 10,000 and 7,500 shares of common stock, respectively, at $5.88
through October 23, 2005, 10,000 and 7,500 shares of common stock,
respectively, at $2.60 through October 23, 2006 and 10,000 and 7,500 shares
of common stock, respectively, at $2.46 through October 9, 2007. For Mr.
Serena, also includes a warrant to purchase 100,000 shares of common stock
at $1.00 through December 20, 2004.
(7) Mr. Castellano serves as a Director. Includes options to purchase 7,500
shares of common stock at $6.50 through January 24, 2006; 2,500 shares of
common stock at $4.81 through May 16, 2006, 10,000 shares of common stock
at $2.60 through October 23, 2006, and 10,000 shares of common stock at
$2.46 through October 9, 2007.
(8) Address is 650 Madison Avenue, 26th Floor, New York, NY 10022.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 2001, we received promissory notes from two officers for the
exercise of their vested stock options in the amount of $853,750 and bearing
interest of 5.63%. The principal and accrued interest are due upon the earlier
of the expiration of the original option periods, which range from July 2008 to
December 2009, or upon the sale of the common stock acquired by the execution of
the options.
On April 1, 2002, we executed an agreement with a third party and a
related party who is affiliated with an executive officer, to receive web site
and advertising consulting services. The agreement was for a term of 15 weeks
and the two consultants received 20,000 stock options having a fair value of
approximately $61,000, as well as cash of approximately $30,000 for services
rendered. The fair value of the options was estimated at the date of grant using
a Black-Scholes option pricing model with the following assumptions: risk free
interest rates of 4.65%, volatility factors of the expected market price of our
common stock of 1.298; a dividend yield of zero, and a weighted expected life of
3 years.
On March 28, 2002, we executed a binding agreement with one of our
stockholders, who is also a Board Member, to fund up to $2.5 million through
March 31, 2003. Under the terms of the agreement, we could draw amounts as
needed in multiples of $500,000 to fund operations subject to Board of Director
approval. Amounts drawn bear interest at the prime rate per annum (4.75% at
September 30, 2004) payable monthly and were to become due and payable on
December 31, 2003, or upon a change in control of the Company or consummation of
any other financing over $3 million. In March 2003, the payback date was
extended to December 31, 2004. In consideration for the stockholder entering
into this agreement, we granted the stockholder 100,000 common stock purchase
warrants at an exercise price equal to the closing market price of our stock on
the date of grant. As of December 31, 2003, the Company had drawn the entire
$2.5 million of the available funds.
On March 14, 2003, we executed a second binding agreement with the same
stockholder to fund up to an additional $3.5 million through December 31, 2003.
Under the terms of the second agreement, we can draw amounts as needed in
multiples of $500,000 to fund operations subject to Board of Director approval.
Amounts drawn bear interest at the prime rate per annum (4.75% at September 30,
2004) payable monthly and become due and payable on December 31, 2004, or upon a
change in control of the Company or consummation of any other financing over $7
million. In consideration, we granted the stockholder 125,000 common stock
purchase warrants at an exercise price equal to the closing market price of our
10
stock on the date of grant. As of September 30, 2004, the Company had drawn $2.0
million of the available funds.
On February 2, 2004, we granted this same stockholder an additional
150,000 common stock purchase warrants at an exercise price equal to the closing
market price of our stock on the date of grant in consideration for extending
the expiration dates of the March 28, 2002 and March 14, 2003 agreements and
amendments thereto, from December 31, 2004 to December 31, 2005; for waiving the
funding requirement mandating payback terms until such time as we have raised an
additional $7.0 million over the amount raised during our recent 2004 private
placement offering, we are operating within sufficient cash flow parameters, as
defined, or until the Company is sold; and for his involvement in equity
financing in 2003 and 2004, to date.
We believe that the transactions referred to above were on terms no
less favorable to us than terms which could have been obtained from unrelated
third parties.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE BOARD'S
DIRECTOR NOMINEES.
PROPOSAL 2
PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP
AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR PURADYN FILTER
TECHNOLOGIES INCORPORATED
The appointment of Ernst & Young LLP as our Independent Registered
Public Accounting Firm for the fiscal year ending December 31, 2004, will be
submitted for ratification by our stockholders. Ratification of the appointment
of our Independent Registered Public Accounting Firm requires the affirmative
vote of a majority of the shares of Puradyn's common stock voting at the annual
meeting in person or by proxy.
Fees to Independent Registered Public Accounting Firm.
The following table sets forth the aggregate fees billed to the Company
for the years ended December 31, 2003 and December 31, 2002 by Ernst & Young
LLP, the Company's principal Independent Registered Public Accounting Firm:
2003 2002
------------ ------------
Audit Fees $ 150,605 $ 146,990
Audit-Related Fees -- --
Tax Fees -- --
All Other Fees -- --
Audit fees represent amounts billed for professional services rendered
for the audit of the Company's annual financial statements and the reviews of
the financials statements included in the Company's Forms 10-QSB for the fiscal
years ended December 31, 2003 and 2002. Before Ernst & Young LLP was engaged by
the Company to render audit or non-audit services, the engagement was approved
by the Company's Audit Committee.
11
Pre Approval Policies and Procedures
The Audit Committee has adopted a policy that requires advance approval
of all audit, audit-related, tax services, and other services performed by the
Independent Registered Public Accounting Firm. The policy provides for
pre-approval by the Audit Committee of specifically defined audit and non-audit
services. Unless the specific service has been previously pre-approved with
respect to that year, the Audit Committee must approve the permitted service
before the Independent Registered Public Accounting Firm is engaged to perform
it. The Audit Committee has delegated to the Chair of the Audit Committee
authority to approve permitted services provided that the Chair reports any
decisions to the Committee at its next scheduled meeting.
General
- -------
Representatives of Ernst & Young LLP are expected to be present at the
2004 Annual Meeting, and (a) will be provided with an opportunity to make a
statement if they desire to do so, and (b) are expected to be available to
respond to appropriate questions from stockholders.
Although the Board of Directors is submitting the appointment of Ernst
& Young LLP for stockholder approval, it reserves the right to change the
selection of Ernst & Young LLP as the Independent Registered Public Accounting
Firm, at any time during the fiscal year, if it deems such change to be in
Puradyn's best interest, even after stockholder approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF ERNST & YOUNG LLP AS PURADYN'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004.
FORMATION CONCERNING STOCKHOLDER PROPOSALS
The stockholder intending to present a proposal to be included in the
proxy statement for our 2004 Annual Meeting of Stockholders must deliver a
proposal in writing to our executive offices no later than December 1, 2004.
OTHER MATTERS
Management is not aware of any other matters to be presented for action
at the 2004 Annual Meeting. However, if any other matter is properly presented,
it is the intention of the persons named in the enclosed form of proxy to vote
in accordance with their best judgment on such matter.
ADDITIONAL INFORMATION
Our Annual Report on Form 10-KSB, which includes audited, consolidated
financial statements for the year ended December 31, 2003, is included in the
mailing with this proxy.
12
FOLD AND DETACH HERE
PURADYN FILTER TECHNOLOGIES INCORPORATED
2004 ANNUAL MEETING OF STOCKHOLDERS December 16, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PURADYN FILTER TECHNOLOGIES INCORPORATED
The undersigned hereby appoints Richard C. Ford proxy with power of substitution
and hereby authorizes him to represent and to vote, as designated below, all of
the shares of common stock of Puradyn Filter Technologies Incorporated held of
record by the undersigned on October 28, 2004, at the 2004 Annual Meeting of
Stockholders to be held at the Holiday Inn Catalina, 1601 North Congress Avenue,
Boynton Beach, Florida 33426, on Thursday, December 16, 2004, 10:00 a.m. local
time, and at all adjournments thereof, with all powers the undersigned would
possess if personally present. In his or her discretion, the Proxy is authorized
to vote upon such other business as may properly come before the meeting.
1. Election of Directors
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY [ ] FOR all nominees
except as noted below:
NOMINEES: Nominees: Joseph V. Vittoria, Richard C. Ford, Kevin G. Kroger,
Peter H. Stephaich, Ottavio Serena, and Michael Castellano.
__________________________________________________
Nominee exception(s)
2. Proposal to ratify the appointment of Ernst & Young LLP as Independent
Registered Public Accounting Firm for Puradyn Filter Technologies
Incorporated for the fiscal year ending December 31, 2004, to serve at the
pleasure of the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be dated and signed on reverse side)
FOLD AND DETACH HERE
(continued from reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
PROPOSALS 1 AND 2.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF 2004 ANNUAL MEETING
AND PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
DATED: _________________________________
________________________________________
(Signature)
________________________________________
(Signature if jointly held)
________________________________________
(Printed name(s))
Please sign exactly as name appears
herein. When shares are held by Joint
Tenants, both should sign. When signing
as attorney, as executor, as
administrator, trustee or guardian,
please give full title as such. If held
by a corporation, the president or
another authorized officer should sign
below the full name of the corporation.
If held by a partnership, an authorized
person should sign below the full name
of the partnership.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY IN THE ENCLOSED ENVELOPE. THANK
YOU.