SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CALTON, 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 Registrant)
Payment of Filing Fee (Check the appropriate box):
Check the appropriate box
|X| No fee required
|_| Fee computed on table below per Exchange Act
Rules 14(a)(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:
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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:
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4) Date Filed:
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CALTON, INC.
125 Half Mile Road
Red Bank, New Jersey 07701
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 19, 2001
-----------------------------------
TO THE SHAREHOLDERS OF CALTON, INC.
The Annual Meeting of the Shareholders of CALTON, INC. (the "Company")
will be held on Thursday, April 19, 2001 at the Hyatt Regency Orlando
International Airport Hotel, 9300 Airport Boulevard, Orlando, Florida at 11:00
a.m., local time, for the following purposes:
1. To elect three (3) directors.
2. To consider and vote upon a proposal to adopt the Company's
Employee Stock Purchase Plan.
3. To consider and vote upon a proposal to approve the grant of options
to purchase 62,250 shares of Common Stock to certain officers of the Company's
wholly owned subsidiary, eCalton.com, Inc.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Holders of Common Stock of record at the close of business on March 12,
2001 are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
MARY H. MAGEE
SECRETARY
Red Bank, New Jersey
March 19, 2001
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU ARE UNABLE TO
DO SO, PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY AND MAIL IT AT ONCE IN
THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
CALTON, INC.
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement is furnished to the holders of Calton, Inc. (the
"Company" or "Calton") Common Stock, $.05 par value ("Common Stock"), in
connection with the solicitation of proxies for use at the annual meeting of
shareholders to be held on April 19, 2001, and at any adjournment thereof (the
"meeting" or "annual meeting"), pursuant to the accompanying Notice of Annual
Meeting of Shareholders. Holders of Common Stock are referred to herein
collectively as the "shareholders." Forms of proxies for use at the meeting are
also enclosed. The Company anticipates mailing this Proxy Statement to its
shareholders on or about March 19, 2001. The executive offices of the Company
are located at 2013 Indian River Boulevard, Vero Beach, Florida 32960.
Shareholders may revoke the authority granted by their execution of
proxies at any time before the effective exercise of proxies by filing written
notice of such revocation with the secretary of the meeting. Presence at the
meeting does not of itself revoke the proxy; however, a vote cast at the meeting
by written ballot will revoke the proxy. All shares represented by executed and
unrevoked proxies will be voted in accordance with the specifications therein.
Proxies submitted without specification will be voted FOR the election of the
nominees for director named herein, FOR the proposal to adopt the Employee Stock
Purchase Plan and FOR the proposal to approve the grant of options to certain
officers of the Company's wholly owned subsidiary, eCalton.com, Inc. Management
is not aware at the date hereof of any matters to be presented at the meeting
other than the election of the directors and the proposals described above. If
any other matter is properly presented, the persons named in the proxy will vote
thereon according to their best judgment.
Proxies for use at the meeting are being solicited by the Board of
Directors of the Company. The cost of preparing, assembling and mailing the
proxy material is to be borne by the Company. It is not anticipated that any
compensation will be paid for soliciting proxies, and the Company does not
intend to employ specially engaged personnel of the Company or other paid
solicitors in the solicitation of proxies. It is contemplated that proxies will
be solicited principally through the mail, but directors, officers and employees
of the Company may, without additional compensation, solicit proxies personally
or by telephone, facsimile transmission or letter.
VOTING SECURITIES
The voting securities entitled to vote at the meeting consist of shares
of Common Stock, with each share entitling its owner to one vote on an equal
basis. On March 12, 2001, the number of outstanding shares of Common Stock was
4,149,356. Only shareholders of record on
the books of the Company at the close of business on March 12, 2001 will be
entitled to vote at the meeting. The holders of a majority of the outstanding
shares of Common Stock, present in person or by proxy, will constitute a quorum
at the meeting. The affirmative vote of a plurality of the shares of Common
Stock present in person or represented by proxy and entitled to vote, is
required for the election of directors. The proxy card provides space for a
shareholder to withhold votes for any nominee for the Board of Directors. Each
of the proposal to adopt the Employee Stock Purchase Plan and the proposal to
approve the grant of options to certain officers of eCalton.com, Inc. must be
approved by a majority of the votes cast at the meeting on such proposal.
All votes will be tabulated by the inspector of election appointed at
the meeting who will separately tabulate affirmative votes, negative votes,
authority withheld for any nominee for director, abstentions and broker
non-votes. Authority withheld will be counted toward the tabulation of the votes
cast on the election of directors and will have the same effect as a negative
vote. Under New Jersey law, any proxy submitted and containing an abstention or
broker non-vote will not be counted as a vote cast on any matter to which it
relates and, accordingly, will have no effect on the outcome of the vote.
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present at the annual meeting.
Except as otherwise indicated, share information contained in this
Proxy Statement has been adjusted to reflect a one-for-five reverse stock split
effected May 31, 2000.
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to each person
who, as of March 12, 2001, is known by the Company to be the beneficial owner
(as defined in Rule 13d-3 ("Rule 13d-3") of the Securities Exchange Act of 1934)
of more than five percent (5%) of the Company's Common Stock. Except as set
forth in the footnotes to the table, the shareholders have sole voting and
investment power over such shares:
AMOUNT AND PERCENT
NATURE OF OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------ -------------------- -----
Anthony J. Caldarone .................... 1,395,750(1) 32.9%
Joyce P. Caldarone ...................... 1,395,750(2) 32.9%
- ----------
(1) Includes an aggregate of 456,240 shares held by Joyce P. Caldarone, Mr.
Caldarone's wife, as to which shares he disclaims any beneficial
interest, and 88,000 shares subject to stock options within are
exercisable within 60 days of March 12, 2001 ("Currently Exercisable
Stock Options").
(2) Includes an aggregate of 939,510 shares beneficially owned by Anthony
J. Caldarone, Mrs. Caldarone's husband, as to which shares she
disclaims any beneficial interest.
2
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 12, 2001, with
respect to the beneficial ownership (as defined in Rule 13d-3) of the Company's
Common Stock by each director and nominee for director, each of the Named
Officers (as defined in the section captioned "Executive Compensation") who is
currently an officer of the Company and by all directors and executive officers
as a group. Except as set forth in the footnotes to the table, the shareholders
have sole voting and investment power over such shares.
AMOUNT AND PERCENT
NATURE OF OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------ -------------------- -----
Anthony J. Caldarone ............................ 1,395,750 32.9%
J. Ernest Brophy ................................ 16,011 (3)
Mark N. Fessel .................................. 17,307 (3)
Frank Cavell Smith, Jr .......................... 10,000 (3)
Kenneth D. Hill ................................. 58,580 (3)
Robert E. Naughton .............................. 4,000 (3)
Gerald W. Stanley ............................... 2,829 (3)
All Directors and Executive Officers as
a Group (11 persons)(1)(2)(4)(5) and (6) ..... 1,554,600 35.9%
- ----------
(1) Includes an aggregate of 456,240 shares held by Joyce P. Caldarone, Mr.
Caldarone's wife, as to which shares he disclaims any beneficial
interest, and 88,000 shares subject to Currently Exercisable Stock
Options.
(2) Includes 10,000 shares subject to Currently Exercisable Stock Options.
(3) Shares beneficially owned do not exceed 1% of the Company's outstanding
Common Stock.
(4) Includes 8,000 shares held by Mr. Hill's spouse, as to which shares he
disclaims any beneficial interest, and 42,000 shares subject to
Currently Exercisable Stock Options.
(5) Includes 4,000 shares subject to Currently Exercisable Stock Options.
(6) Includes 17,668 shares subject to Currently Exercisable Stock Options.
ELECTION OF DIRECTORS
The Company's by-laws provide that the Board of Directors shall consist
of not fewer than three nor more than fifteen members. The Board of Directors is
divided into four classes, with each class to hold office for a term of four
years and the term of office of one class to expire each year. The Board of
Directors has fixed the number of directors at seven, three of whom are to be
elected at the 2001 Annual Meeting, two whose terms expire at the annual meeting
in 2002, one whose term expires at the annual meeting in 2003, and one whose
term expires at the annual meeting in 2004.
Gerald W. Stanley, Anthony J. Caldarone and Robert E. Naughton are the
incumbent directors whose terms expire at the 2001 annual meeting. Mr. Stanley
has been nominated to stand for election at the meeting to hold office until the
2003 annual meeting. Mr. Caldarone and
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Mr. Naughton have been nominated to stand for reelection at the meeting to hold
office until the 2005 annual meeting. It is the intention of the persons named
in the accompanying proxy to vote, unless otherwise instructed, in favor of each
of the nominees identified above. If any nominee should be unable to serve, the
proxies will be voted for the election of a substitute nominee, if any,
designated by the Board of Directors. The Company is not aware of any reason why
any nominee, if elected, would be unable to serve as a director.
Set forth below is certain biographical information with respect to the
nominees for election to the Board and the directors whose terms of office will
continue after the 1999 annual meeting.
NOMINEE FOR ELECTION FOR A TWO-YEAR TERM EXPIRING AT THE 2003 ANNUAL MEETING
GERALD W. STANLEY. Gerald W. Stanley, age 60, was appointed to the
Company's Board of Directors in July 2000. Mr. Stanley currently serves as an
independent consultant. From January 1996 to October 1999, he served as
President and Chief Executive Officer of Real 3D, Inc., a computer graphics
technology firm. From 1986 through December, 1995 he served as a consultant to
venture capital firms, numerous Fortune 500 and start-up companies, with a focus
on advanced computing, communications technologies and international market
development. From 1982 to 1985 he served as Vice President and General Manager
of the Manufacturing Systems Division of Martin Marietta Data Systems. He was a
founder of Apollo Computer, Inc. and served as Vice President of Marketing,
Sales and Customer Service of that company from 1980 to 1982.
NOMINEES FOR ELECTION FOR A FOUR-YEAR TERM EXPIRING AT THE 2005 ANNUAL MEETING.
ANTHONY J. CALDARONE. Mr. Caldarone, age 63, was reappointed as
Chairman, President, Chief Executive Officer and a Director of Calton in
November 1995, having previously served in such capacities from the inception of
the Company in 1981 through May 1993. From June 1993 through October 1995, Mr.
Caldarone served as a Director of the Company.
ROBERT E. NAUGHTON. Mr. Naughton, age 63, has served as a Director of
Calton since April 1999. He has served as Executive Vice President of the
Company's wholly-owned subsidiary, eCalton.com, Inc. since December 2000. He
served as a consultant to eCalton.com from July 2000 through November 2000. From
1990 until July 2000, he served as President and CEO of SIG, Inc., an
information technology consulting firm specializing in network design and
management, technology transition, business profit improvement, project
management, e business and staff augmentation. Prior to 1990, Mr. Naughton held
management positions with AGS Information Services, Compuware and SPR
Corporation. He has 24 years of experience in the information technology
industry, including sales, marketing, recruiting and P&L management.
DIRECTOR CONTINUING IN OFFICE UNTIL 2003 ANNUAL MEETING.
MARK N. FESSEL. Mr. Fessel, age 43, has served as a Director of Calton
since May 1993. Since 1985, Mr. Fessel has owned and operated a real estate
company and has acted as principal in numerous commercial and residential real
estate developments throughout the northeast. In
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1984, Mr. Fessel served as the Vice President of Acquisitions of the Meredith
Organization, a nationally recognized real estate developer.
DIRECTORS CONTINUING IN OFFICE UNTIL 2002 ANNUAL MEETING.
KENNETH D. HILL. Mr. Hill, age 59, has served as a Director of Calton
since April 1999. He is currently Chief Executive Officer of the Company's
wholly owned subsidiary, eCalton.com, Inc. Since 1975, he has founded and
managed computer related companies, including NASTEC Corporation, a developer of
computer-aided software engineering development tools, from 1982 until its
acquisition in 1987, and Multiple Technologies Corporation, a consulting and
application development company, from 1975 to 1982. From January 1994 through
February 1996, he was employed as a consultant by KDH Enterprises, Inc. From
March 1997 through April 1998, Mr. Hill served as President and Chief Executive
Officer of DataTell Solutions, Inc., a regional systems integration company that
filed for federal bankruptcy protection in May 1998. He served as President and
Chief Executive Officer of National AmeriServe, Inc., an internet business
solutions provider, from May 1998 through October 1998, when it merged with iAW,
Inc., the predecessor of eCalton.com, Inc.
J. ERNEST BROPHY. Mr. Brophy, age 75, a self-employed attorney and
Certified Public Accountant specializing in tax consultation to clients engaged
in the construction business, was reappointed as a Director of Calton in
November 1995, having served in such capacity from March 1983 through November
1985 and from April 1986 until through May 1993. From 1992 through March 1996,
Mr. Brophy served as Chief Financial Officer and a director of Hurdy-Gurdy
International, Inc., a company that marketed sorbet products.
DIRECTOR CONTINUING IN OFFICE UNTIL 2004 ANNUAL MEETING
FRANK CAVELL SMITH, JR. Mr. Smith, age 54, has served as a Director of
Calton since May 1993. Since 1990, Mr. Smith has been associated with the MEG
Companies as a Senior Consultant responsible for corporate real estate
consulting activities. From 1977 to 1990, Mr. Smith served as a Real Estate
Consultant and Real Estate Development Manager for The Spaulding Co., Inc. Mr.
Smith also is an adjunct faculty member at Boston University and a member of the
Board of Trustees of Shelter, Inc.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the fiscal year ended November 30, 2000, the Board of Directors
held seven (7) meetings and acted by unanimous written consent on five (5)
occasions. During fiscal 2000, each member of the Company's current Board of
Directors attended at least 75% of the meetings of the Board of Directors and
all of the meetings of the committees on which he served. See the section
captioned "Directors' Compensation" for a discussion of fees paid by the Company
to its directors for their services.
During fiscal 2000, the Board of Directors had two standing committees:
the Audit Committee and the Compensation Committee.
The Audit Committee currently consists of Mr. Brophy, Mr. Smith and Mr.
Stanley. The functions performed by the Audit Committee are, among other things,
to recommend to the
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Board of Directors the auditors to be engaged as the Company's independent
public accountants, to review the proposed plan and scope for the annual audit
and the results of such audit when completed, to review the services rendered by
the auditors and the fees charged for such services, to determine the effect, if
any, on the independent public accountants' independence of the performance of
any non-audit services and to review the plan, scope and results of the
Company's internal audit operations. During fiscal 2000, the Audit Committee
held four (4) meetings. See "Report of Audit Committee."
Messrs. Fessel and Mr. Naughton currently serve as members of the
Compensation Committee. From April 2000 through November 2000, Mr. Naughton
served in place of Mr. Smith on the Compensation Committee. When Mr. Naughton
became an employee of eCalton.com, Inc. in December 2000, Mr. Smith replaced Mr.
Naughton as a member of the Compensation Committee. The Compensation Committee
reviews and approves compensation for executive employees of the Company on a
periodic basis, subject to approval of the Board, and administers the Company's
Incentive Compensation Plan, the 1996 Equity Incentive Plan (the "1996 Option
Plan"), the Amended and Restated 1993 Non-Qualified Stock Option Plan (the "1993
Option Plan") and the 2000 Equity Incentive Plan (the "2000 Option Plan" and
collectively with the 1993 Option Plan and the 1996 Option Plan, the "Option
Plans"). The Compensation Committee will also administer the Employee Stock
Purchase Plan if the proposal to adopt the plan is approved at the meeting.
During fiscal 2000, the Compensation Committee held one (1) meeting and acted by
unanimous written consent on three (3) occasions.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company and its
subsidiaries for the fiscal years ended November 30, 2000, 1999 and 1998 of the
Chief Executive Officer of the Company in fiscal 2000 and the other executive
officers of the Company who earned salary and bonuses in fiscal 2000 in excess
of $100,000 (collectively, the "Named Officers"):
LONG TERM
ANNUAL COMPENSATION AWARDS COMPENSATION
-------------------------- --------------------
AWARDS
------ ALL OTHER
NAME AND SECURITIES COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) UNDERLYING OPTIONS ($)(2)
- ----------------------------- ------ ------------ -------------- ------------------ ------------
Anthony J. Caldarone 2000 $ 275,000 $ --- 100,000(3) $ 10,093
Chairman, Chief 1999 275,000 --- 200,000 15,672
Executive Officer 1998 275,000 350,000 600,000 17,855
& President
Kenneth D. Hill 2000 120,000 --- --- ---
Chief Executive Officer of 1999 45,000 --- 120,000 ---
eCalton.com, Inc. (4) 1998 --- --- --- ---
David J. Coppola 2000 70,260 --- 8,000(5) 109,043 (6)
Former Vice President 1999 85,000 25,000 40,000 688
& Treasurer (7) 1998 --- --- --- ---
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- ---------------
(1) Represents amounts accrued in fiscal 2000, 1999 and 1998 and paid in
the subsequent fiscal year to the Named Officers pursuant to the
Company's Incentive Compensation Plan (the "Incentive Plan"). The
Incentive Plan provides for an incentive compensation pool equal to ten
percent (10%) of the Company's annual pre-tax income, subject to
certain adjustments to pre-tax income that may be made by the
Compensation Committee to remove the effect of events or transactions
not in the ordinary course of the Company's operations. No awards were
made under the Incentive Plan for fiscal 2000. Officers and key
operations and senior corporate management employees (the "Eligible
Employees") of the Company and its subsidiaries are eligible for
participation in the Incentive Plan. In addition, a portion of the
incentive compensation pool established under the Incentive Plan may be
used for bonuses to full time employees who do not otherwise have an
opportunity to obtain a specified level of commissions or bonuses. The
Eligible Employees are determined each fiscal year by the Compensation
Committee based on the recommendations of the President and Chief
Executive Officer of the Company. An Eligible Employee may not receive
a distribution from the incentive compensation pool for any fiscal year
that exceeds the lesser of twenty percent (20%) of the available
incentive compensation pool or one hundred percent (100%) of the
Eligible Employee's base salary for such fiscal year, unless otherwise
provided in the Eligible Employee's employment agreement with the
Company. The Compensation Committee ultimately determines the
percentage, if any, of the incentive compensation pool for a fiscal
year to be awarded to an Eligible Employee.
(2) Includes cost of premiums paid by the Company under a program which
provides officers of the Company with additional life insurance
(supplementing the coverage available under the Company's group life
insurance plan) as follows: Mr. Caldarone - $10,093 and Mr. Coppola -
$759.
(3) Represents shares underlying options granted in January 2001 for
services rendered in fiscal 2000.
(4) Mr. Hill was not an executive officer of the Company in fiscal 1998.
(5) Represents shares subject to options repriced in July 2000.
(6) Represents accrued vacation and severance pay to Mr. Coppola in
connection with the termination of his employment in September 2000.
(7) Mr. Coppola was not an executive officer of the Company in fiscal 1998.
DIRECTORS' COMPENSATION
Members of the Board of Directors who are not full time employees of
Calton were each entitled in fiscal 2000 to annual compensation of $20,000 for
service as a director. Calton paid or accrued a total of $95,900 in director
fees to members of the Board of Directors during fiscal year 2000 ($14,650 of
which was paid in the form of Common Stock pursuant to elections permitted under
the 1996 Option Plan). In addition, Mr. Naughton was paid an aggregate of
$32,484 in consulting fees in fiscal 2000 in connection with the Company's
development of an information technology consulting business in Houston, Texas.
Directors are reimbursed for travel expenses incurred in connection with
attendance at Board and committee meetings. Directors who are not full time
employees are paid a participation fee of $1,000 for each committee meeting
attended. In addition, each non-employee director is awarded options to purchase
2,000 shares of the Company's Common Stock each time such director is elected or
re-elected to the Board of Directors and each time that an annual meeting of
shareholders is held
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during the term of such director. In order to receive the
award, an incumbent non-employee director must have attended 75% of all Board
meetings and 75% of all meetings of Board committees of which the director is a
member during the prior 12 months. Options to purchase an aggregate of 8,000
shares of Common Stock at an exercise price of $8.75 per share (the fair market
value of the Common Stock on the date of grant) were granted to non-employee
directors pursuant to this arrangement in fiscal 2000.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
Effective November 21, 1995, the Company entered into an Employment
Agreement (the "Employment Agreement") with Anthony J. Caldarone, Chairman,
President and Chief Executive Officer of the Company. The term of the Employment
Agreement will end on November 30, 2001. Pursuant to the Employment Agreement,
Mr. Caldarone will receive a minimum annual salary of $250,000 ("Base
Compensation") which may be increased by the Board or a committee thereof. In
January 1998, the Compensation Committee fixed Mr. Caldarone's annual salary at
$275,000. Mr. Caldarone is entitled to participate in any bonus compensation or
benefit plan or arrangement provided by the Company to its employees or senior
level executives, including the Company's Incentive Plan. Under the Employment
Agreement, Mr. Caldarone may be awarded up to thirty percent (30%) of the
Incentive Plan's designated incentive compensation for any fiscal year and,
subject to such limitation, is entitled to not less than one-half of the average
percentage that all awards to other Eligible Participants are of the respective
Eligible Participants' base salary for the relevant fiscal year. Mr. Caldarone
is entitled to be reimbursed by the Company for certain automobile expenses and
was granted options to purchase 100,000 shares of Common Stock under the 1996
Option Plan pursuant to the Employment Agreement.
If the Employment Agreement is terminated by reason of Mr. Caldarone's
death, the Company is obliged to reimburse Mr. Caldarone's designated
beneficiaries the cost of COBRA benefits, other than long-term disability
coverage, for a period of 18 months following the date of death. If the
Employment Agreement is terminated by reason of Mr. Caldarone's disability, Mr.
Caldarone will be entitled to receive a lump sum cash payment equal to one
year's Base Compensation (the "Severance Compensation") from the Company as well
as the cost of COBRA benefits, other than long-term disability, for him and his
family for a period of 18 months following the date of termination, and continue
to participate in any group life insurance or supplemental life insurance
program of the Company then in effect for a period of 18 months following the
date of termination (collectively, the "Severance Benefits"). The Company may
terminate the Employment Agreement for just cause in the event Mr. Caldarone is
convicted of a felony in connection with his duties as an officer of the
Company, if the commission of such felony resulted in a personal financial
benefit to Mr. Caldarone. Upon termination for just cause by the Company, Mr.
Caldarone is not entitled to receive any Severance Compensation or Severance
Benefits. If the Company terminates the Employment Agreement without just cause,
Mr. Caldarone is entitled to the Severance Compensation and Severance Benefits.
If the Company terminates the Employment Agreement by issuing a notice of
non-extension, Mr. Caldarone is entitled to receive a lump sum cash payment
equal to one year's Base Compensation as well as the Severance Benefits. Mr.
Caldarone may terminate the Employment Agreement for just cause and receive
Severance Compensation and Severance Benefits, if (i) the Board fails to
re-elect him as each of Chairman, President and Chief Executive Officer of the
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Company, (ii) the Board significantly reduces the nature and scope of his
authorities, powers, duties and functions, (iii) the Company breaches any
material covenant of the Employment Agreement or (iv) the Company consents to
Mr. Caldarone's retirement. If Mr. Caldarone terminates the Employment Agreement
without just cause or by issuing a notice of non-extension, he is not entitled
to the Severance Compensation or Severance Benefits. After the date of
termination of Mr. Caldarone's employment for any of the reasons specified
herein and in the Employment Agreement, Mr. Caldarone will not receive any
further salary payments under the Employment Agreement.
For the term of the Employment Agreement and for a period of twelve
(12) months following termination of Mr. Caldarone's employment, other than for
just cause by the Company or without just cause by Mr. Caldarone, Mr. Caldarone
is restricted from competing with the Company in the homebuilding business in
certain regions if the Company is actively engaged in the homebuilding business.
OPTION GRANTS
Shown below is further information with respect to grants of stock
options in fiscal 2000 to the Named Officers by the Company which are reflected
in the Summary Compensation Table set forth under the caption "Executive
Compensation."
INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- -------------- ------------ ----------- ---------- --------- -----------
Anthony J. Caldarone........ 100,000 (2) 27.1% $4.26 1/25/06 117,704 260,073
Kenneth D. Hill............. --- --- --- --- --- ---
David J. Coppola............ 8,000 (4) 2.1 4.50 1/27/05 21,244 53,129
- ---------------
(1) Represents shares of Common Stock underlying options granted in January
2001 for services rendered in fiscal 2000.
(2) These options are exercisable cumulatively in four equal annual
installments commencing on the first anniversary of the date of grant.
(3) Represents shares of Common Stock underlying options which were
repriced in July 2000. These options are exercisable in five equal
annual installments commencing on January 27, 2001.
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OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to options exercised by the
Named Officers during fiscal 2000 and the value of unexercised options to
purchase the Company's Common Stock held by the Named Officers at November 30,
2000.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT FY-END (#) OPTIONS AT FY-END ($)(1)
-------------------------- ------------------------
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Anthony J. Caldarone.... --- $--- 140,000 120,000 $165,000 (2)
Kenneth D. Hill......... --- --- 80,000 40,000 (2) (2)
David J. Coppola........ 4,000 53,252 16,000 --- 5,495 ---
- ---------------
(1) Represents market value of shares covered by in-the-money options on
November 30, 2000. The closing price of the Common Stock on such date
was $3.375. Options are in-the-money if the market value of shares
covered thereby is greater than the option exercise price.
(2) Exercise price of options exceeded closing price of Common Stock on
November 30, 2000.
REPORT ON OPTION REPRICING
In July 2000, the Compensation Committee examined the market price of
the Company's Common Stock over a period of time and determined that the
exercise price of certain stock options issued under the Company's Option Plans
were consistently higher than the average market price of the Company's Common
Stock over the period of time studied. The Compensation Committee concluded that
such stock options were not providing the desired incentive to certain employees
of the Company whom the Compensation Committee believed were making and were
expected to continue to make substantial contributions to the successful growth
of the Company's business. In order to make the incentive feature of certain
options more meaningful to the employees whom the Company believes are important
to the future growth and success of the Company, the Compensation Committee,
which administers the Option Plans, approved an adjustment in the exercise price
of certain options to $4.50. The last reported sales price of the Company's
Common Stock on the American Stock Exchange on July 19, 2000, the date of the
adjustment, was $4.00. The repriced options retained their original vesting
status and expiration dates. The Compensation Committee believes that the
repricing of such options has had the desired effect and will, once again,
provide employees of the Company with an attractive opportunity for increased
equity ownership and a meaningful incentive to remain in the employ of the
Company for the long term. Certain of the Named Officers of the Company were
among those employees who had stock options repriced.
10
COMPENSATION COMMITTEE
Mark N. Fessel
Frank C. Smith
Robert E. Naughton (former Compensation Committee member)
Shown below is information with respect to all repricings of options
held by any executive officer of the Company during the ten fiscal years ended
November 30, 2000.
Ten-Year Option Repricings
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining at
Options Time of at Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing
NAME DATE AMENDED ($) Amendment ($) Amendment ($) PRICE AMENDMENT
---- ---- ----------- ------------ ------------- -------- -----------
Kelly S. McMakin Senior
Vice President &
Treasurer ........... 7/19/00 10,000 $4.00 $12.65 $4.50 9 yr 5 mo.
Christopher J. Burk Vice
President............ 7/19/00 20,000 $4.00 $12.65 $4.50 9 yr 5 mo.
Maria F. Caldarone Vice
President............ 7/19/00 10,000 $4.00 $12.65 $4.50 9 yr 5 mo.
Laura Camisa
Vice President....... 7/19/00 4,000 $4.00 $12.65 $4.50 9 yr 5 mo.
David J. Coppola Former
Vice President and
Treasurer............ 7/19/00 8,000 $4.00 $12.65 $4.50 9 yr 5 mo.
Bradley A. Little 1/28/97 5,000 (1) $2.05 $2.65 $2.05 9 yr 3 mo.
Senior Vice 1/28/97 12,000 (1) 2.05 2.50 2.05 8 yr
President-Finance 1/28/97 20,000 (1) 2.05 2.50 2.05 8 yr 6 mo.
and 4/18/95 12,000 (1) 2.50 3.60 2.50 9 yr 9 mo.
Treasurer............ 4/18/95 20,000 (1) 2.50 9.70 2.50 8 yr 3 mo
Robert A. Fourniadis 1/28/97 2,000 (1) $2.05 $2.65 $2.05 9 yr 3 mo.
Senior Vice 1/28/97 12,000 (1) 2.05 2.50 2.05 8 yr
President-Legal 1/28/97 20,000 (1) 2.05 2.50 2.05 8 yr 6 mo.
and 4/18/95 12,000 (1) 2.50 3.60 2.50 9 yr 9 mo.
Secretary............ 4/18/95 20,000 (1) 2.50 9.70 2.50 8 yr 3 mo
Douglas T. Noakes Former
Chief Executive Officer
and President........ 5/28/93 112,913 (2) $8.75 (3) $50.00 (3) $7.65 12 yr 1 mo.
11
(1) Reflects a 1 for 5 reverse stock split effected on May 31, 2000. These
options are no longer outstanding. Information with respect to these
options is provided pursuant to Securities and Exchange Commission
regulations.
(2) After giving effect to a 1 for 20 reverse stock split effected on May
28, 1993 and a 1 for 5 reverse stock split effected on May 31, 2000.
(3) Represents the arithmetic average of the highest and lowest sale prices
of the Company's Common Stock (as adjusted for the reverse stock splits
described above) on the American Stock Exchange for June 2, 1993, the
date the Common Stock issued in connection with the Company's 1993 Plan
of Reorganization began trading on the American Stock Exchange. These
options are no longer outstanding. Information with respect to these
options is provided pursuant to Securities and Exchange Commission
regulations.
CORPORATE PERFORMANCE
Set forth below is a performance graph which compares the percentage
change in the cumulative total shareholder return on the Common Stock of the
Company for the period from December 1, 1995 to November 30, 2000, with the
cumulative total return over the same period on the American Stock Exchange
Market Value Index, the JP Morgan H&Q Internet 100 Index and a former peer group
index1 over the same period (assuming the investment of $100 in the Company's
Common Stock, the American Stock Exchange Market Value Index, the JP Morgan H&Q
Internet Index and the former peer group index on December 1, 1995 and that all
dividends were reinvested).
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
--------------------------------------------------
11/95 11/96 11/97 11/98 11/99 11/00
----- ----- ----- ----- ----- -----
CALTON, INC 100.00 71.43 100.00 242.86 385.83 30.86
AMEX MARKET VALUE 100.00 105.05 124.50 131.18 165.91 171.79
JP MORGAN H & Q INTERNET 100 100.00 84.14 99.36 206.35 620.93 363.26
FORMER PEER GROUP 100.00 111.77 122.44 56.67 84.25 92.30
1 Due to the change in the Company's business which occurred as a result
of the sale of the Company's homebuilding operations in December 1998 and its
strategic plan to acquire or combine with one or more operating businesses, the
Company did not believe it could reasonably identify a peer group of companies
engaged in a similar line of business as of November 30, 1999. The companies in
the former peer group, which was comprised of companies having similar market
capitalizations as of November 30, 1999, are: Collins Industries, Inc., Delphos
12
Citizens Bancorp, Eufaula Banccorp Inc., Marine Petroleum Trust, MFRI Inc.,
Mobile America Corp FL, Nanophase Technologies C, Neorx Corp., Oryx Technology
Corp., Penn Octane Corp., Urologix Inc., Valley Forge Scientific and Xicor Inc.
Due to the increase in the Company's business activities in fiscal 2000 and its
adoption of a strategic plan to acquire controlling interests in information
technology companies, the Company has replaced the former peer group comparison
with a comparison to the JP Morgan HQ Internet 100 Index.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee" or the "Committee") has furnished the following report on executive
compensation.
The Compensation Committee is currently comprised of independent,
non-employee directors. It is charged with the responsibility of reviewing and
approving the compensation of the Company's officers and administration of the
Company's Incentive Plan, the Option Plans and severance policy for the
Company's senior executives.
The Committee has determined that the Company's policies for
compensation, including base compensation, incentive compensation and benefits,
should be guided by the marketplace. In recent years, the Committee has
determined that the blend of base salary and incentive compensation offered to
the Company's executive officers should emphasize performance based incentive
compensation over base salary compensation. To accomplish the Committee's
compensation objectives for the Company and to attract, motivate and retain key
executives for the management and long term success of the Company, the Company
has developed compensation programs which provide executive officers a base
salary and the opportunity to earn additional compensation based on the profits
and overall success of the Company. Compensation programs include salary and
incentive plans.
The Company's executive compensation programs have three principal
components: base salary, incentive compensation awards and stock option grants.
Factors considered when determining the base salary for an officer of the
Company include the position of the officer, the amount of responsibility
associated with such position, past performance of such responsibilities,
dedication to the pursuit of achieving individual and Company goals and the
overall results of the Company. The Committee believes that the base salaries of
the Company's executive officers are generally below or similar to the amounts
paid to comparable officers at other companies of the same or similar size and
in the businesses currently and previously conducted by the Company, and,
therefore, incentive compensation in the form of awards under the Incentive Plan
and stock option grants are key components of the total compensation paid or
awarded to officers of the Company. The type and amount of incentive
compensation is a function of the performance of both Company and individual
participants in the particular plan. For example, the Company's Incentive Plan
is a cash based plan directly linked to the Company's financial performance
while the Option Plans provide a method whereby the officers can share in the
long-term growth and success of the Company. The Committee believes these
components collectively provide an appropriate relationship between an
executive's compensation and the Company's financial performance.
The Compensation Committee reviews the performance of the Chief
Executive Officer and other officers of the Company annually. The Compensation
Committee makes recommendations to the Board with respect to salaries and
determines awards to be made under
13
the Incentive Plan. The Compensation Committee also determines recipients of,
and the number of shares to be covered by, options granted under the Option
Plans to all employees, including officers. Incentive compensation and stock
option grants for executive officers are determined by evaluating the
performance of the individuals reviewed, their contributions to the performance
of the Company, their responsibilities, experience and potential, their period
of service at current salary and compensation practices for comparable positions
at other companies. Financial results, nonfinancial measures and the Chief
Executive Officer's evaluation of other executive officers are considered.
In November 1995, the Board of Directors appointed Anthony J. Caldarone
as Chairman, President and Chief Executive Officer of the Company. Mr. Caldarone
had previously served in such capacity from the inception of the Company in 1981
through May 1993. In connection with the appointment of Mr. Caldarone as
Chairman, President and Chief Executive Officer, the Board approved an
employment agreement between the Company and Mr. Caldarone which provides for a
minimum base salary of $250,000 per year. In approving the employment agreement
and the compensation payable thereunder, the Board considered the compensation
paid to chief executive officers of similarly situated companies, as well as Mr.
Caldarone's qualifications and prior experience in serving in such capacity. See
"Employment Agreement with Chief Executive Officer" for a more detailed
description of the terms of the employment agreement between the Company and Mr.
Caldarone. In January 2001, the Committee reviewed Mr. Caldarone's compensation,
considering the fact that Mr. Caldarone had received only one increase in salary
(which increased his annual base salary to $275,000) since his return to the
Company in 1995. Based upon this information, and the Committee's desire to
provide a further incentive to Mr. Caldarone to further develop and execute the
Company's strategic plan to enhance shareholder value, the Committee granted Mr.
Caldarone options to purchase 100,000 shares of Common Stock at an exercise
price of $4.26 per share (110% of the fair market value on the date of the
grant).
In 1993, the Internal Revenue Code of 1986, as amended (the "Code"),
was amended to add Section 162(m). Section 162(m) places a limit of $1,000,000
on the amount of compensation that may be deducted by the Company in any year
with respect to certain of the Company's highest paid executives. Certain
performance based compensation that has been approved by shareholders is not
subject to the deduction limit. The Company believes that compensation paid to
its officers under all of its compensation plans, except the Incentive Plan,
options to acquire 163,000 shares of Common Stock under the 1993 Option Plan and
options to acquire 280,000 shares of Common Stock granted pursuant to certain
employment agreements entered into in connection with the Company's acquisition
of iAW, Inc, will qualify as performance based compensation, and will therefore
be exempt from the $1,000,000 deduction limit. See "Certain Relationships and
Related Party Transactions."
COMPENSATION COMMITTEE:
Mark N. Fessel
Frank Cavell Smith, Jr.
Robert E. Naughton (former Compensation Committee member)
14
REPORT OF THE AUDIT COMMITTEE
The Audit Committee operates under a written charter adopted by the
Board of Directors which is annexed to this Proxy Statement as Exhibit A. J.
Ernest Brophy, Frank C. Smith, Jr. and Gerald W. Stanley are the members of the
Audit Committee. The Audit Committee oversees the Company's 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 systems of internal controls. In fulfilling its oversight responsibilities,
the Audit Committee reviewed the audited financial statements in the Company's
Annual Report with management..
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, the matters
required to be discussed by Statement on Accounting Standard No. 61
(Communications with Audit Committees). In addition, the Audit Committee has
discussed with the independent auditors the auditors' independence from
management and the Company, including the matters in the written disclosures
required by the Independence Standards Board.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
November 30, 2000 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
J. Ernest Brophy
Frank C. Smith, Jr.
Gerald W. Stanley
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its executive officers, directors and
greater than ten percent shareholders complied with all filing requirements
applicable to them with respect to events or transactions during fiscal 2000,
except that the Form 4 required to be filed by Robert E. Naughton to report a
sale of Common Stock by his wife in March 2000 and a Form 4 required to be filed
to report a purchase of Common Stock by him in May 2000 were filed late. In
addition, the Form 3 required to be filed by Maria F. Caldarone, Vice President
of the Company, in February 2000 was filed in March 2000.
15
PROPOSAL TO ADOPT THE CALTON, INC. EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
There will be presented at the meeting a proposal to approve and adopt
the Calton, Inc. Employee Stock Purchase Plan (the "Stock Purchase Plan"). The
Board of Directors of the Company approved and adopted the Stock Purchase Plan,
subject to shareholder approval, at a meeting of the Board of Directors in
October 2000. The Board of Directors believes that the Stock Purchase Plan would
advance the best interests of the Company and its shareholders since the Board
of Directors believes the adoption of the Stock Purchase Plan will improve
employee morale and increase employee interest and involvement in the growth and
development of the Company's business by allowing employees to use salary
deductions to invest in the Company's Common Stock pursuant to a plan which is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Code. The Stock Purchase Plan is neither a pension,
profit-sharing, nor stock bonus plan designed to qualify under Section 401(a) of
the Code nor an employee benefit plan subject to any of the provisions of the
Employee Retirement Income Security Act of 1974.
SUMMARY OF PROVISIONS OF STOCK PURCHASE PLAN
The Stock Purchase Plan, if approved by the Company's shareholders,
would be administered by the Compensation Committee which will have the
authority to interpret the provisions of the Stock Purchase Plan and to
prescribe, amend and rescind rules and regulations relating to the Stock
Purchase Plan. If approved by the Company's shareholders, the Stock Purchase
Plan will provide for the issuance of up to an aggregate of 175,000 shares of
common stock to participating employees. The Stock Purchase Plan provides that
the number of shares authorized for issuance under the Stock Purchase Plan will
automatically increase annually by 2% of the outstanding number of shares of
Common Stock, up to a maximum of an additional 75,000 shares of Common Stock per
year.
The Stock Purchase Plan will be administered by the Compensation
Committee. All employees who have completed three months of employment and whose
customary employment is more than 20 hours per week and for more than five
months in any calendar year are eligible to participate in the Stock Purchase
Plan. The right to purchase Common Stock under the Stock Purchase Plan will be
made available through a series of offerings. The Committee will specify the
term of each offering period and any interim payment periods within the offering
period. On the first day of an offering period, the Company will grant to each
eligible employee who has elected in writing to participate in the Stock
Purchase Plan an option to purchase shares of common stock. The employee will be
required to authorize an amount, between 1% and 15% of the employee's
compensation, to be deducted from the employee's pay during the offering period.
On the last day of each payment period, the employee will be deemed to have
exercised the option, at the option exercise price, to the extent of accumulated
payroll deductions. Under the terms of the Stock Purchase Plan, the option
exercise price is an amount equal to 85% of the fair market value of one share
of common stock on either the first or last day of the payment period, whichever
is lower. No employee may be granted an option that would permit the employee's
rights to purchase common stock to accrue in excess of $25,000 in any calendar
year. Options granted under the Stock Purchase Plan terminate upon an employee's
voluntary withdrawal from
16
the plan at any time or upon termination of employment. No options have been
granted to date under the Stock Purchase Plan.
At the end of each offering period, the Company will deposit the number
of shares of Common Stock which each participant has purchased into an account
established in the participant's name with the Company's transfer agent or at a
stock brokerage or other financial services firm designated by the Company.
Subject to the terms of the Stock Purchase Plan, a participant may sell or
otherwise dispose of shares in his/her account at any time.
FEDERAL INCOME TAX CONSEQUENCES
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code. Generally, neither
the grant nor the exercise of an option under the Stock Purchase Plan will have
immediate tax consequences to the employee participants or the Company;
provided, that like incentive stock options, the employee participant does not
dispose of the shares of Common Stock acquired within two years of the date of
grant of the option or one year after the transfer of such shares of Common
Stock to the employee participant, and at all times during the period beginning
with the date of grant of the option and ending on the day three months before
the exercise of an option, the participant was an employee of the Company or a
subsidiary of the Company. The amounts deducted from an employee participant's
compensation for the purchase of shares of Common Stock under the Stock Purchase
Plan will not be excludable from such employee's taxable compensation income and
will generally be deductible by the Company as compensation expense.
A portion of the gain, if any, recognized by an employee participant
upon the disposition of shares of Common Stock acquired under the Stock Purchase
Plan will be treated as compensation income to an employee participant, taxable
at ordinary federal income tax rates. If such disposition of shares of Common
Stock occurs more than two years after the date the option to purchase shares
was granted and more than one year after the date of transfer of such shares to
the employee participant, or in the event of the death of an employee
participant, at any time while owning shares of Common Stock acquired pursuant
to the Stock Purchase Plan, the amount of compensation income will be limited to
the lesser of (i) the excess of the fair market value of the shares of Common
Stock at the time of such disposition over the amount paid for such shares or
(ii) the excess of the fair market value of the shares of Common Stock at the
time the option was granted over the amount paid for such shares. Income tax
withholding would be required. The Company would not be entitled to a business
deduction for the amount of compensation income recognized by the employee
participant. The amount of such ordinary compensation income would be added to
the employee participant's basis of the shares of Common Stock disposed of and
any additional gain recognized by the holder of shares upon such disposition
will be taxed as a long-term capital gain.
If shares of Common Stock acquired pursuant to the Stock Purchase Plan
are disposed of within two years of the date of grant of the option or one year
of the date of transfer of the shares of Common Stock to the employee
participant, then a "disqualifying disposition" within the meaning of Section
421(b) of the Code will have occurred, and the employee participant must
recognize ordinary compensation income for the year in which the disqualifying
disposition occurred equal to the excess of the fair market value of such shares
of Common Stock on the
17
date the option was exercised over the purchase price paid for such shares of
Common Stock. Income tax withholding would be required. The Company may claim a
business deduction for compensation expense equal to the amount of ordinary
compensation income recognized by the employee participant making the
disqualifying disposition. The amount of ordinary compensation income recognized
by the employee participant will be added to the employee's basis in the shares
of Common Stock disposed, and any remaining gain or loss recognized by such
employee for such disposition will be short-term or long-term capital gain or
loss, depending on the employee's holding period for the shares of Common Stock.
Gain or loss related to the disqualifying disposition of any shares of Common
Stock held for more than one year will be long-term capital gain or loss.
The Board of Directors believes that the $1 million deduction limit
imposed by Section 162(m) of the Code with respect to compensation paid by the
Company to certain officers should not apply in connection with any disposition
by an employee participant of shares of Common Stock acquired pursuant to the
Stock Purchase Plan and held for the requisite holding periods since the Company
is not entitled to a business deduction for the amount of ordinary compensation
income recognized by the employee participant. The Board of Directors believes
that the $1 million deduction limit imposed by Section 162(m) would apply with
respect to the Company's deduction in connection with a disqualifying
disposition by certain officers of the Company since the compensation income to
be recognized results from the purchase of shares of Common Stock at a discount
from fair market value. However, the Board of Directors believes that the
potential impact of Section 162(m) with respect to the Stock Purchase Plan is
limited, particularly since Mr. Caldarone owns more than 5% of the shares of the
Company's outstanding Common Stock and is not eligible to participate in the
Stock Purchase Plan.
OTHER INFORMATION
Employee participants in the Stock Purchase Plan will have all of the
rights and privileges of a shareholder of the Company with respect to shares of
Common Stock purchased under the Stock Purchase Plan, including, without
limitation, the right to vote the shares with respect to any matter requiring
shareholder approval and the right to receive dividends. Any option granted
under the Stock Purchase Plan is not transferable other than by will or the laws
of descent and distribution. In the event of a stock split, share combination or
recapitalization, the number of shares reserved under the Stock Purchase Plan,
and the number of shares of Common Stock acquired pursuant to the Stock Purchase
Plan, shall be appropriately adjusted. When an employee ceases to be eligible to
participate in the Stock Purchase Plan, the amount of an employee participant's
payroll deductions not yet invested shall be refunded to the participant or the
participant's estate. The Stock Purchase Plan shall terminate on November 30,
2010, unless terminated at an earlier date by the Board of Directors, all shares
of Common Stock reserved for issuance are issued, or at any other time at the
discretion of the Board of Directors. The Board of Directors may amend the Stock
Purchase Plan in any respect, subject to shareholder approval if required.
NEW PLAN BENEFITS
At this time, no options have been granted under the Stock Purchase
Plan to any employee of the Company or its subsidiaries, and it is not possible
to determine how many
18
eligible employees will participate in the Stock Purchase Plan. However, if the
Stock Purchase Plan had been in effect during the Company's entire 2000 fiscal
year and each of the employees of the Company who would have been eligible to
participate in the Stock Purchase Plan during fiscal 2000 had designated the
maximum allowable amount of the their salary earned during fiscal 2000 to
purchase shares of the Company's Common Stock pursuant to the terms of the Stock
Purchase Plan, then the Named Officers, the current executive officers and the
other employees of the Company would have acquired the number of shares of the
Company's Common Stock set forth in the following table.
ESTIMATED NEW PLAN BENEFITS
UNDER THE EMPLOYEE STOCK PURCHASE PLAN
MAXIMUM EMPLOYEE NUMBER OF SHARES OF
NAME AND POSITION CONTRIBUTION ($)(1) COMMON STOCK (#)(2)
- ----------------- ------------------- -------------------
Anthony J. Caldarone................................. $ --- ---
President & Chief Executive Officer (3)
David J. Coppola..................................... 10,539 3,673
Former Vice President and Secretary
Current Executive Officer Group...................... 48,782 16,979
Non-Executive Officer Director Group (4)............. --- ---
Non-Executive Officer Employee Group................. 259,240 90,233
- ---------------
(1) Maximum employee contribution is based on the deduction of 15% of 2000
compensation and investment of such amount in the Stock Purchase Plan.
(2) Estimated number of shares of Common Stock which would have been
acquired pursuant to the Stock Purchase Plan is based on the investment
during 2000 of employee contributions on November 30, 2000 at the fair
market value of the Common Stock on such date.
(3) Mr. Caldarone owns more than 5% of the outstanding shares of the
Company's Common Stock and is not eligible to participate in the Stock
Purchase Plan.
(4) Only employees of the Company are eligible to participate in the Stock
Purchase Plan.
VOTE REQUIRED
Approval and adoption by the Company's shareholders of the Stock
Purchase Plan requires the affirmative vote of a majority of the votes cast at
the meeting by the holders of shares of Common Stock present in person or
represented by proxy. Any proxy containing an abstention and any share of Common
Stock present at the meeting that has abstained from voting
19
on the proposal to approve the adopt the Stock Purchase Plan will be counted as
a negative vote. Broker non-votes will not be counted as a vote cast on this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE STOCK PURCHASE PLAN.
PROPOSAL TO APPROVE GRANT OF STOCK OPTIONS TO OFFICERS OF ECALTON.COM, INC.
BACKGROUND
In July 1999, the Company, through its wholly owned subsidiary,
eCalton.com, Inc. ("eCalton"), acquired substantially all of the assets of iAW,
Inc., an Internet business solutions provider. In connection with the
acquisition, eCalton entered into employment agreements with three of the
principals of iAW, Inc. (the "eCalton Officers"), including Kenneth D. Hill, who
then served and who continues to serve as a director of the Company, and his son
Robert Hill. The employment agreements provided for the grant of options (the
"Options") to acquire 120,000 shares of Common Stock to each of the eCalton
officers, subject to the condition that if the rules of the American Stock
Exchange required shareholder approval of the grant of any portion of the
Options, then the grant of the portion of the Options requiring shareholder
approval would be subject to shareholder approval. The employment agreements
require the Company to seek such approval, if required. The Options become
exercisable in three equal annual installments. The first installment became
exercisable on July 19, 2000. The exercise price of the Options is $8.15 per
share. On March 12, 2001, the closing price of the Common Stock as reported by
the American Stock Exchange was $3.62 per share.
Section 712 of the American Stock Exchange Rules provides, in part, as
follows:
Approval of shareholders is required (pursuant to a proxy
solicitation conforming to SEC proxy rules) as a prerequisite to
approval of applications to list additional shares to be issued as sole
or partial consideration for an acquisition of the stock or assets of
another company in the following circumstances:
(a) if any individual director, officer or substantial
shareholder of the listed company has a 5% or greater interest (or such
persons collectively have a 10% or greater interest), directly or
indirectly, in the company or assets to be acquired or in the
consideration to be paid in the transaction and the present or
potential issuance of common stock, or securities convertible into
common stock, could result in an increase in outstanding common shares
of 5% or more;
In May 2000, the American Stock Exchange, in response to an inquiry by
the Company, advised the Company that due to Mr. Hill's ownership interest in
iAW, Inc., it would require shareholder approval of grant of Options for the
number of shares which exceeded five percent (5%) of the shares of Common Stock
outstanding at the time of the iAW acquisition transaction. At the time of the
iAW acquisition, there were 2,845,000 shares of Common Stock outstanding. As a
result, Options with respect to 142,250 shares required shareholder approval.
The employment of one of the eCalton officers terminated in September 2000. This
termination resulted in the forfeiture of Options to acquire 80,000 shares of
Common Stock. As a result, the
20
Company, as required by the Employment Agreements, is seeking shareholder
approval of the grant of Options to acquire 62,250 shares of Common Stock.
CONSEQUENCES IF SHAREHOLDER APPROVAL NOT OBTAINED
The Employment Agreements provide that if shareholder approval of the
grant of the Options is not obtained, the Company and the eCalton Officers will
negotiate in good faith to develop an equitable substitute for the Options
forfeited by reason of the failure to obtain shareholder approval. The Company
and the eCalton Officers have not discussed what any such substitute would be;
however, substitute compensation could be in the form of cash or options granted
under the Option Plans or a combination of cash and options.
VOTE REQUIRED
Approval of the proposal to approve the grant of Options to acquire
62,250 shares of Common Stock to the eCalton Officers requires the affirmative
vote of a majority of the votes cast at the annual meeting by the holders of
Common Stock present in person or represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL
TO APPROVE THE GRANT OF THE OPTIONS TO THE ECALTON OFFICERS.
ANNUAL REPORT
The annual report to shareholders for the fiscal year ended November
30, 2000 accompanies this Proxy Statement. PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") has audited the financial statements of the Company
for the three fiscal years ended November 30, 2000, which financial statements
are contained in the annual report to shareholders. Such annual report,
including the audited financial statements contained therein, is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
soliciting material.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Selection of the independent public accountants for the Company is made
by the Board of Directors. On November 20, 2000, the Company's Board of
Directors approved the engagement of PricewaterhouseCoopers to serve as the
Company's independent public accountants for fiscal 2000. PricewaterhouseCoopers
has served as the Company's auditors since 1988. The Board of Directors has not
yet met to select the Company's independent public accountants for the current
fiscal year.
As previously stated under the caption "Election of Directors," the
Company's Board of Directors has an Audit Committee consisting of outside
directors, and the present members of the committee are Mr. Brophy, Mr. Smith
and Mr. Stanley.
21
During fiscal 2000, PricewaterhouseCoopers provided various audit and
non-audit services to the Company as follows:
(a) AUDIT FEES: Aggregate fees billed for professional services
rendered for the audit of the Company's fiscal year 2000
annual financial statements and review of financial statements
in the Company's Form 10-Q Reports: $124,524
(b) FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
$0
(c) ALL OTHER FEES: Tax Return Review and Consulting Services: $121,863
The Audit Committee of the Board has considered whether provision of
the services described in sections (b) and (c) above is compatible with
maintaining the independent accountant's independence and has determined that
such services have not adversely affected PricewaterhouseCooper's independence.
A representative of PricewaterhouseCoopers will be present at the
meeting and will have an opportunity to make a statement if the representative
desires to do so. Said representative will also be available to respond to
appropriate questions from shareholders of the Company.
SHAREHOLDER PROPOSALS
Shareholder proposals for presentation at the Company's next annual
meeting must be received by the Company at its principal executive offices for
inclusion in its proxy statement and form of proxy relating to that meeting no
later than November 19, 2001. The Company's by-laws contain certain procedures
which must be followed in connection with shareholder proposals.
THE MANAGEMENT OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
THE NOMINEES TO THE BOARD OF DIRECTORS.
THE COMPANY SUBMITS TO THE SECURITIES AND EXCHANGE COMMISSION AN ANNUAL
REPORT ON FORM 10-K. COPIES OF THE REPORT WILL BE FURNISHED WITHOUT CHARGE UPON
WRITTEN REQUEST RECEIVED FROM ANY HOLDER OF RECORD OR BENEFICIAL OWNER OF SHARES
OF COMMON STOCK OF THE COMPANY. REQUESTS SHOULD BE DIRECTED TO SHAREHOLDER
RELATIONS, CALTON, INC., 125 HALF MILE ROAD, SUITE 206, RED BANK, NEW JERSEY
07701.
22
ALL SHAREHOLDERS ARE URGED TO MARK, SIGN, DATE AND SEND IN THEIR
PROXIES IN THE ENCLOSED ENVELOPE WITHOUT DELAY TO FIRST CITY TRANSFER COMPANY,
P.O. BOX 170, ISELIN, NEW JERSEY 08830. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
MARY H. MAGEE
SECRETARY
March 19, 2001
23
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EXHIBIT A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
CALTON, INC.
CHARTER
I. PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") of Calton, Inc. (the "Corporation"),
in fulfilling its responsibility to oversee the business and affairs of the
Corporation. The Audit Committee's primary duties and responsibilities are to:
1) serve as an independent and objective party to monitor the financial
reporting process and internal control system; 2) review and appraise the audit
efforts of the Corporation's independent accountants and internal accounting
personnel; 3) provide an open forum for communication among the independent
accountants, financial and senior management, and the Board of Directors. The
Audit Committee will fulfill these responsibilities primarily by carrying out
the activities enumerated in Section IV of this Charter. Consistent with these
functions, the Audit Committee shall encourage continuous improvement of and
adherence to the Corporation's policies, procedures and practices.
II. COMPOSITION
The Audit Committee shall be initially comprised of two (2) independent
directors, as determined by the Board. Following the annual meeting of the
shareholders of the Corporation to be held in April 2001 or, in any event, no
later than June 14, 2001, the Audit Committee shall be comprised of three (3)
independent directors, as determined by the Board.
An independent director is a person other than (a) an officer or
employee of the Corporation or any of its subsidiaries; or (b) any other person
having a relationship which, in the opinion of the Board would interfere with
the exercise of independent judgment in carrying on the responsibilities of a
director of the Corporation. The following persons shall not be considered
independent: (i) a director who is employed by the Corporation or any of its
subsidiaries or affiliates for the current year or any of the past three years;
(ii) a director who accepts any compensation from the Corporation or any of its
subsidiaries or affiliates in excess of $60,000 during the previous fiscal year,
other than compensation for Board service, benefits under a tax-qualified
retirement plan, or non-discretionary compensation; (iii) a director who is a
member of the immediate family of an individual who is, or has been in any of
the past three years, employed by the Corporation or any of its subsidiaries or
affiliates as an executive officer. Immediate family includes a person's spouse,
parents, children, siblings, mother-in-law, father-in-law, brother-in-law,
sister-in-law, son-in-law, daughter-in-law, and anyone who resides in such
person's home; (iv) a director who is a partner in, or a controlling shareholder
or an executive officer of, any for-profit business organization to which the
Corporation or any of its subsidiaries or affiliates made, or from which the
Corporation or any of its subsidiaries or affiliates received, payments (other
than those arising solely from investments in the securities of the Corporation
or any of its subsidiaries or affiliates) that exceed 5% of the Corporation's or
business organization's consolidated gross revenues for that year, or $200,000,
whichever is
A-1
more, in any of the past three years.; (v) a director who is employed as an
executive of another entity where any of the Corporation's executives serve on
that entity's compensation committee.
All members of the Committee shall have a working familiarity with
basic finance and accounting practices, and at least one (1) member of the
Committee shall have accounting or related financial management expertise.
Committee members may enhance their familiarity with finance and accounting by
participating in educational programs. This experience can consist of past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
The members of the Committee shall be elected by the Board at the
annual organizational meeting of the Board and shall serve until their
successors shall be duly elected and qualified. Unless a Chair is elected by the
full Board, the members of the Committee may designate a Chair by majority vote
of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least annually with management and
the independent accountants in separate sessions to discuss any matters that the
Committee or each of these groups believe should be discussed. In addition, the
Committee should meet with the independent accountants at least once a year to
review the Corporation's financial statements. The Committee should meet with
senior management and the independent accountant at least quarterly to review
the Corporation's financial statements and the 10-Q. These meetings may be
telephonic.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter at least annually and as conditions
warrant.
2. Review the regular internal reports to senior management prepared by
Corporate's internal accounting personnel and management's response.
3. Review with financial management and the independent accountants the
10-Q prior to its filing or prior to the release of earnings and
discuss those matters required to be discussed by "Statement of
Auditing Standards No 61". The Chair of the Committee may represent the
entire Committee for purposes of this review.
4. Review with financial management and the independent accountants the
10-K prior to its filing or prior to the release of earnings and annual
report to shareholders prior to its filing and discuss those matters
required to be discussed by "Statement of Auditing Standards No 61".
A-2
INDEPENDENT ACCOUNTANTS
5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
The full Board shall approve the fees and other compensation paid to
the independent accountants. On an annual basis, the Committee should
review and discuss with the accountants all significant relationships
the accountants have with the Corporation to determine the accountants'
independence and obtain a formal written statement delineating all
relationships between the accountants and the Corporation.
6. Periodically consult with the independent accountants about internal
controls and the completeness and accuracy of the organization's
financial statements.
7. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
FINANCIAL REPORTING PROCESS
8. In consultation with the independent accountants and internal auditor,
review the integrity of the organization's financial reporting
processes, both internal and external.
9. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles and
underlying estimates as applied in its financial reporting.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management or the internal
accounting personnel.
PROCESS IMPROVEMENT
11. Establish regular and separate systems of reporting to the Audit
Committee by management, the independent accountants and the internal
accounting department regarding any significant judgments made in
management's preparation of the financial statements.
12. Following completion of the annual audit, review separately with
management, the independent accountants, and the internal accounting
personnel, any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access
to required information.
13. Review with the independent accountants, internal accounting personnel
and management, the extent to which changes or improvements in
financial or accounting practices, as approved by the Audit Committee,
have been implemented.
A-3
14. Review any significant disagreement among management and the
independent accountants or internal accounting personnel in connection
with the preparation of the financial statements.
ETHICAL AND LEGAL COMPLIANCE
15. Establish, review and update periodically a Code of Ethics and
determine that there is an established system to enforce this code.
16. Review the system established by management to enforce the Code of
Ethics. Review management's monitoring of the Corporation's compliance
with the Code of Ethics.
17. Review management's system established to ensure that management has
the proper review system in place to ensure that the Corporation's
financial statements and reports disseminated to governmental
organizations and the public satisfy legal requirements.
18. Review activities, qualifications, and organizational structure of the
internal accounting department.
19. Review with the Corporation's counsel any legal matter that could have
a significant impact on the organization's financial statements.
20. Review with the Corporation's counsel legal compliance matters.
21. Perform any other activities consistent with this Charter, the
Corporation's By-laws, rules of the American Stock Exchange ("AMEX")
and governing law, as the Committee or the Board deems necessary or
appropriate.
June 2000
A-4
Please mark
your votes as
indicated in
this example
1. ELECTION OF DIRECTORS: GERALD W. STANLEY, ANTHONY J. CALDARONE AND
ROBERT E. NAUGHTON
FOR / / WITHHOLD / /
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEES:
- ----------------------------------------------------------------
2. APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
FOR / / AGAINST / / ABSTAIN / /
3. APPROVAL OF GRANT OF OPTIONS TO OFFICERS OF eCALTON.COM, INC.
FOR / / AGAINST / / ABSTAIN / /
(Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s) on
this card. When signing as attorney, trustee, executor, administrator, guardian
or corporate officer, please give your FULL title.)
Dated:
--------------------------------------
- --------------------------------------------
Signature
- --------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
CALTON, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 19, 2001
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CALTON, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Anthony J. Caldarone and Kelly S. McMakin and each of them, the
true and lawful attorneys, agents and proxies of the undersigned, with full
power of substitution, to vote with respect to all the shares of Common Stock of
CALTON, INC., standing in the name of the undersigned at the close of business
on March 12, 2001, at the annual meeting of shareholders to be held at the Hyatt
Regency Orlando International Airport Hotel, Orlando Florida on April 19, 2001
and at any and all adjournments thereof, with all powers that the undersigned
would possess if personally present and especially (but without limiting the
general authorization and power hereby given) to vote as indicated on the
reverse side hereof. Said proxies are authorized to vote in their discretion
upon any other matters which may come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED, AND IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED, WILL BE VOTED
FOR THE ELECTION OF GERALD W. STANLEY, ANTHONY J. CALDARONE AND ROBERT E.
NAUGHTON AS DIRECTORS, FOR THE PROPOSAL TO ADOPT THE EMPLOYEE STOCK PURCHASE
PLAN AND FOR THE PROPOSAL TO APPROVE THE GRANT OF OPTIONS TO OFFICERS OF
ECALTON.COM, INC.
FOLD AND DETACH HERE