SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _)
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CIRCUIT RESEARCH LABS, INC.
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(Name of Registrant as Specified in Its Charter)
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CIRCUIT RESEARCH LABS, INC.
2522 West Geneva Drive
Tempe, Arizona 85282
(602) 438-0888
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 18, 2002
To the Holders of Common Stock of Circuit Research Labs, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Circuit Research Labs, Inc. (the "Company") will be held at 2522
West Geneva Drive, Tempe, Arizona 85282 on June 18, 2002, at 2:00 p.m., local
time. The meeting is being called by the Company's Board of Directors to:
1. Elect six members of the Board of Directors for one-year terms; and
2. Transact any other business that may properly come before the Annual
Meeting and any adjournments.
Only shareholders of record at the close of business on May 1, 2002 are
entitled to receive notice of and to vote at the Annual Meeting.
We have enclosed our 2001 annual report, including financial statements,
and the proxy statement with this notice of Annual Meeting.
To assure your representation at the Annual Meeting, please vote, sign,
date and return the enclosed proxy as soon as possible in the postage-prepaid
envelope enclosed for that purpose. Any shareholder attending the Annual
Meeting may vote in person even if he or she previously has returned a proxy.
Your proxy is being solicited by the Board of Directors of the Company.
Sincerely,
/s/ Gary D. Clarkson
Gary D. Clarkson, Secretary
Tempe, Arizona
May 10, 2002
CIRCUIT RESEARCH LABS, INC.
2522 West Geneva Drive
Tempe, Arizona 85282
ANNUAL MEETING OF SHAREHOLDERS
____________________
PROXY STATEMENT
____________________
The proxy materials are delivered in connection with the solicitation, by the
Board of Directors of Circuit Research Labs, Inc. (the "Company"), of proxies to
be voted at our 2002 annual meeting of shareholders (the "Annual Meeting") and
at any adjournment or postponement thereof. The Company will bear the cost of
soliciting proxies, including the charges and expenses of brokerage firms and
others for forwarding solicitation materials to shareholders. Information about
the Annual Meeting is as follows:
Annual Meeting: June 18, 2002 at 2:00 p.m., local time, at 2522 West Geneva
Drive, Tempe, Arizona 85282.
Record Date: Close of business on May 1, 2002. If you were a shareholder at
that time, you may vote at the Annual Meeting. Each share is entitled to one
vote. You may cumulate votes with respect to the election of directors. On the
record date, we had 3,706,880 shares of our common stock outstanding.
Agenda:
1. Elect six members of the Board of Directors for one-year terms; and
2. Transact any other business that properly may come before the Annual
Meeting and any adjournments.
Proxies: Unless you tell us on the proxy card to vote differently, we will vote
signed returned proxies "for" the director nominees named in this proxy
statement. The proxy holders will use their discretion on other matters. If a
nominee cannot or will not serve as a director, the proxy holders will vote for
a person whom they believe will carry on the present policies of the Board of
Directors.
Mailing Date: We anticipate mailing this proxy statement on or about May 10,
2002. In addition to the use of the mails, proxies may be solicited by personal
interview, telephone or telegram.
Revoking Your Proxy: You may revoke your proxy before it is voted at the Annual
Meeting by either: (i) attending the Annual Meeting and voting in person; (ii)
duly executing and delivering a proxy bearing a later date; or (iii) sending
written notice of revocation prior to the Annual Meeting to the Secretary of the
Company at 2522 West Geneva Drive, Tempe, Arizona 85282.
Please Vote - Your Vote Is Important
1
VOTING SECURITIES OUTSTANDING
Only holders of record of the Company's Common Stock at the close of
business on May 1, 2002, will be entitled to vote at the Annual Meeting. At
that date, there were 3,706,880 shares of Common Stock outstanding. Each share
of Common Stock is entitled to one vote on each matter to be considered at the
Annual Meeting. All matters submitted to you at the Annual Meeting other than
the election of directors will be decided by a majority of the votes cast on the
matter, provided a quorum exists. A quorum is present if at least a majority of
the outstanding shares of Common Stock on the record date are present in person
or by proxy.
Pursuant to the provisions of the Arizona Business Corporation Act and the
Company's Bylaws, in any election of directors, each shareholder is entitled to
cumulative voting at such election. Thus, each shareholder may cast as many
votes in the aggregate as that shareholder is entitled to vote, multiplied by
the number of directors to be elected. Shareholders may cast their votes for a
single candidate or may distribute their votes among two or more candidates. To
be elected, directors must receive a plurality of the shares present and voting
in person or by proxy, provided a quorum exists. A plurality means receiving
the largest number of "for" votes, regardless of whether that is a majority.
Those who fail to return a proxy or attend the Annual Meeting will not
count towards determining any required plurality, majority or quorum.
Shareholders and brokers returning proxies or attending the Annual Meeting who
abstain from voting on a proposition will count towards determining a plurality,
majority or quorum for that proposition. The enclosed proxies will be voted in
accordance with the instructions you place on the proxy card. Unless otherwise
stated, all shares represented by your returned, signed proxy will be voted as
noted on the first page of this proxy statement.
ELECTION OF DIRECTORS
Board Structure: The Company's Bylaws provide for a Board of Directors of not
less than two nor more than nine members, which number may be altered as
provided in the Bylaws. On January 23, 2002, the Company's Board of Directors
increased its size from five to six members. Each director serves a one-year
term. The Board of Directors may fill vacancies occurring during a term for the
remainder of the full term.
Board Nominees: The following persons have been nominated for re-election to
the Company's Board of Directors, each to serve a one-year term expiring at next
year's annual meeting:
Name Age Director Position
Since
- ---------------------------- --- -------- ----------------------------
Charles Jayson Brentlinger 47 1999 Chief Executive Officer,
President and Chairman
of the Board
Berthold F. Burkhardtsmaier 45 2002 Vice President of
European Operations and
Director
Gary D. Clarkson 49 1978 Secretary, Vice President,
General Manager and Director
Robert A. Orban 56 2000 Chief Engineer and Director
Carl E. Matthusen 58 1988 Director
Phillip T. Zeni, Sr. 60 2000 Director
2
Information Concerning Directors and Nominees:
Charles Jayson Brentlinger has served as our President, Chief Executive
Officer and a director since June 1999, and as our Chairman of the Board since
October 1999. He was formerly the President and owner of Rainbow Broadcasting
Inc. and Brentlinger Broadcasting, Inc. In May 2000, Mr. Brentlinger sold all of
his broadcast ownership interests to his family. Mr. Brentlinger has over 27
years of experience in the radio industry. He has worked as a broadcast
consultant for nearly every radio station in the Phoenix area. Mr. Brentlinger
formed his own broadcast engineering firm in 1986. Some of his many clients
have included Scripps Howard Broadcasting, Adams Radio Communications
Corporation, Adams Satellite/ABC, Transtar Radio Network, Pulitzer Broadcasting
Phoenix, Duchossois Communications Corporation, Sundance Communications
Corporation, Arizona Radio and Television Corporation, Cook Inlet Corporation,
First Media Corporation, Duffey II Corporation and TransCOM/Transcolumbia
Corporation. Mr. Brentlinger attended DeVry Institute of Technology and the
University of Arkansas at Little Rock. He is a member of the Society of
Broadcast Engineers and National Association of Broadcasters. He holds a FCC
General Radiotelephone license, valid for life.
Berthold F. Burkhardtsmaier has served as our Vice President of European
Operations and a director since January 2002. In 1992, he founded Dialog4
System Engineering GmbH in Ludwigsburg, Germany and served as its Managing
Director for 10 years. During this time, he introduced the "MusicTAXI" and
"Soundtainer" product lines, established a world-wide product distribution
network and received ISO-9001 certification in 1998. From 1989 to 1992, he was
employed by Shure Bros., Inc. to establish its European subsidiary in Heilbronn,
Germany and to serve as its Managing Director. From 1986 to 1989, he was
employed by Harman Deutschland in Germany as a product manager for the JBL and
Shure product lines and was responsible for establishing new market segments in
cinema, professional sound reinforcement and industrial sound. In 1986, Mr.
Burkhardtsmaier received a masters degree in electromechanical engineering from
the Technical University in Munich, Germany specializing in acoustics and
communication systems.
Gary D. Clarkson is one of our founders and has served as our Vice
President and General Manager since August 2000, our Secretary since October
1999 and as a director since our incorporation in 1978. He also served as our
Treasurer from August 2000 to June 2001. Following the death of our other
founder, Mr. Ronald R. Jones, Mr. Clarkson served as our Chief Executive
Officer, President and Chairman from January 1998 to June 1999. Mr. Clarkson
began his broadcasting career by serving in assistant and chief engineering
positions at several Phoenix area radio stations from 1971 until 1978. Since
our founding in 1974, Mr. Clarkson has devoted substantially all of his business
efforts to our business and served as our design engineer from 1974 to 1998.
Mr. Clarkson holds an associate degree in electronics engineering technology
from DeVry Institute of Technology, Phoenix, Arizona.
Robert A. Orban has served as a Vice President since June 2001 and director
since May 2000. In 1975, he co-founded Orban Associates, Inc. with his late
business partner, Mr. John Delantoni. Since that time, Mr. Orban has served as
Chief Engineer for Orban Associates (and its successor, Orban, Inc.) where he
has concentrated on the theoretical support for and subjective tuning of that
company's products. In 1975, he introduced Orban Associates' standard-setting
OPTIMOD line of audio processors, including the OPTIMOD-FM processors which are
among the most widely used FM processors in the world. Mr. Orban is the holder
of 25 patents, and he has been widely published in such publications as the
Journal of the Audio Engineering Society and the NAB Engineering Handbook. In
1993, Mr. Orban shared (with Dolby Labs) a Scientific and Technical Award from
the Academy of Motion Picture Arts and Sciences, and in 1995 he received the
Radio Engineering Achievement Award from the National Association of
Broadcasters. Mr. Orban received a B.S. in Electrical Engineering from
Princeton University in 1967 and an M.S. in Electrical Engineering from Stanford
University in 1968.
3
Carl E. Matthusen has served as a director since February 1988. Mr.
Matthusen began his career in the broadcast industry in 1963 serving in various
capacities at seven radio broadcast stations in Arizona, Wisconsin, Minnesota
and Virginia. Since 1978, he has been General Manager of KJZZ-FM, KBAQ-FM and
Sun Sounds Radio Reading Service operated by Rio Salado College in Mesa,
Arizona. Mr. Matthusen served on the board of directors of National Public
Radio from 1990 to 1996, and was chairman of the board from 1992 to 1996. Since
1999, Mr. Matthusen has served as a member of the board of the International
Association of Audio Information Services.
Phillip T. Zeni, Sr. has served as a director since May 2000. Mr. Zeni's
professional and business career spans more than three decades and includes
ownership and senior management positions in consulting, publishing and
broadcasting. Since 1993, he has served as President of Transcontinental
Publishing, Inc., a publishing house specializing in international and regional
trade publications for the construction industry. Mr. Zeni is also Executive
Vice President of Palmieri USA, an importer and distributor of construction
equipment, and the owner and Managing Director of PhysicianNet.com, a
six-year-old Web site that serves the medical community. Previously, Mr. Zeni
served as managing partner of a Dallas-based group of broadcasting stations and
as Director of Business Development for NBC Radio and Westinghouse-Group "W"
Broadcasting in Chicago. He has also served as a Vice President of Multimedia
Communications, and as general manager of two of that company's major
broadcasting properties in the South. Mr. Zeni has presented seminars for the
National Association of Broadcasters and the Radio Advertising Bureau. Mr. Zeni
holds a B.A. from the University of Illinois. He has served as an adjunct
professor at the University of Arkansas at Little Rock and at Millikin
University in Decatur, Illinois. Mr. Zeni has also guest lectured at the
University of Wisconsin, Michigan State University, the University of Illinois
and Arkansas State University. Mr. Zeni has been active in a wide range of
charitable, civic and social organizations throughout his career. His time in
public service included serving on the staff of Illinois Governor Richard
Ogilvie, followed by two White House assignments during the Ford and Carter
administrations. Currently, Mr. Zeni serves as President and on the board of
directors of the University Club of Phoenix.
The shares represented by the enclosed proxy will be voted for the election
as directors of the nominees named above, unless a vote is withheld from any or
all of the individual nominees. If any nominee becomes unavailable for any
reason or if a vacancy should occur before the election (which events are not
anticipated), the shares represented by the enclosed proxy may be voted for such
other persons as may be determined by the holders of such proxy. The six
nominees receiving the highest number of votes cast at the Annual Meeting will
be elected.
The Board recommends that you vote "FOR" the nominees.
Other Executive Officers
Robert W. McMartin, 40, has served as our Treasurer since January 2002, and
as our Vice President and Chief Financial Officer since June 2001. Prior to
joining us, Mr. McMartin served as the Chief Financial Officer of IMSure
Network, Inc., a technology company providing eCommerce Internet technology
products, from March to December 2000. From November 1999 to March 2000, Mr.
McMartin served as the Director of Finance of Fox Animation Studios, Inc. in
Phoenix, Arizona. Prior to that time, he was Corporate Controller of Trapeze
Software Group, Inc., a software solutions manufacturer and developer, from
April 1998 to November 1999. Mr. McMartin was employed as a staff accountant
for Cotton Parker Johnson, L.L.P. from June 1998 to October 1998, and held a
similar position with The O'Connor Group, P.C. from November 1997 to May 1998.
From 1992 to 1995, Mr. McMartin served as Senior Financial Analyst for Blackwell
Financial, Inc., a capital investment firm.
4
Mr. McMartin holds a B.S. in Finance from Westminster College and a Post
Baccalaureate Certificate in Accountancy from Arizona State University.
Greg J. Ogonowski, 46, has served as our Vice President of New Product
Development since October 2000. In 1975, Mr. Ogonowski founded Gregg
Laboratories, an audio processing equipment manufacturing company. From 1998 to
October 2000, Mr. Ogonowski served as Technical Director for KBIG/KLAC in Los
Angeles, California, where he designed and installed a computer network and
digital audio delivery system that resulted in KBIG/KLAC being one of the first
radio stations to directly stream audio to the Internet with internal encoders
and servers. Mr. Ogonowski has also been directly responsible for other
technical facilities at many major market radio stations, including stations in
Detroit, Dallas and Seattle. As technical director for KTNQ/KLVE, Heftel
Broadcasting, Los Angeles, from 1985 to 1991, Mr. Ogonowski relocated studio
facilities and constructed a new efficient alternative use AM transmission
facility. In 1984, Mr. Ogonowski founded Modulation Index, a broadcast
engineering consulting company. He has conducted studies on broadcast
modulation measurement instrumentation and FM modulators, including STLs and
exciters. As a result of these studies, Mr. Ogonowski has developed
modifications for popular monitors, STLs and exciters to improve their dynamic
transient accuracy and competitiveness. A technical paper was presented before
the National Association of Broadcasters regarding these findings.
William R. Devitt, 57, has served as our Vice President of Manufacturing
and Production since January 2001. Mr. Devitt began his career at Orban, Inc.
in 1991 when he became Technical Services Manager. In this capacity, Mr. Devitt
developed service and technical support operations, setup administration,
technical staff policies and procedures. In 1996, his responsibilities were
expanded to include product engineering for manufacturing of new and existing
products. In February 2000, Mr. Devitt became Director of Manufacturing. His
duties were expanded to include administration of all manufacturing operations,
design services, materials and production.
Board Meetings: In 2001, the Board held 7 meetings. Each director attended at
least 75% of the Board of Director meetings and all meetings of committees on
which he served, with the exception of Mr. Matthusen who attended approximately
43% of the board of Director meetings.
Board Committees
The Board of Directors has an audit committee and an executive committee.
Messrs. Brentlinger and Clarkson comprise the executive committee which is
empowered to act on behalf of the full Board of Directors when it is
inconvenient for the full Board to meet. The Executive Committee held three
meetings during 2001.
The Company does not maintain a standing compensation committee. Rather,
the entire Board performs the functions that would otherwise be performed by
such a committee. Messrs. Brentlinger, Clarkson and Orban refrain from voting
with respect to their respective salaries and other compensation.
The Board of Directors established a nominating committee comprised of
Messrs. Matthusen, Orban and Zeni on June 19, 2001. The nominating committee is
responsible for annually reviewing with the Board the appropriate skills and
characteristics required of Board members; recommending to the Board a corporate
philosophy and strategy governing director compensation and benefits; conducting
an assessment of the full Board's performance; monitoring the qualification of
directors for continued service on the Board; and recommending candidates for
membership to the Board. The Company will consider director nominees
recommended by shareholders, but does not solicit the names of potential
nominees from shareholders. Shareholders wishing to submit director nominee
recommendations to the
5
Company must follow the procedures set forth below under "Submission of
Shareholder Proposals." The Nominating Committee held no meetings during 2001.
The Audit Committee: The Company's audit committee is comprised of Messrs.
Matthusen and Zeni, both of whom are "independent" as that term is defined by
the listing standards of the National Association of Securities Dealers. The
audit committee oversees the Company's financial reporting process and meets
with management and the independent auditors to review the results and scope of
the audit and the services provided by the independent auditors. Management has
the primary responsibility for the financial statements and the reporting
process, including the system of internal controls. The audit committee met
three times during 2001. The audit committee is required by rules of the
Securities and Exchange Commission to publish a report to shareholders
concerning the committee's activities during the prior fiscal year. The audit
committee's report is reprinted below. The charter under which the audit
committee operates was adopted by the Board of Directors on May 23, 2000. The
audit committee's charter was set forth at Appendix A of the Company's proxy
statement for the 2001 annual meeting of shareholders.
Audit Committee Report
The Audit Committee (the "Committee") has met and held discussions with the
Company's management and independent auditors concerning the Company's financial
statements for the year ended December 31, 2001 and related matters. Management
represented to the Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee has reviewed and discussed the audited
consolidated financial statements with management and the independent auditors.
The Committee discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards ("SAS") No. 61, "Communication
with Audit Committees", and SAS No. 90, "Audit Committee Communications."
Our independent auditors also provided to the Committee the written
disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees", and the Committee discussed
with the independent auditors that firm's independence.
Based on the Committee's review of the audited consolidated financial
statements and the various discussions with management and the independent
auditors noted above, the Committee recommended that the Board of Directors
include the audited consolidated financial statements in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2001, for filing with the
Securities and Exchange Commission.
The Audit Committee:
Carl E. Matthusen (Chair)
Phillip T. Zeni, Sr.
Information Concerning Independent Auditors
The Board of Directors, upon the recommendation of its audit committee,
appointed Altschuler, Melvoin and Glasser LLP ("AM&G"), independent public
accountants, to audit the consolidated financial statements of the Company for
the fiscal year ended December 31, 2001.
Audit Fees: The aggregate fees billed for professional services rendered
for the audit of the Company's annual financial statements for the fiscal year
ended December 31, 2001, and for the reviews
6
of the financial statements included in the Company's quarterly reports on Form
10-QSB for that fiscal year, were $86,812. Of that amount, $71,612 was billed
by AM&G and $15,200 was billed by Deloitte & Touche LLP.
All Other Fees: The aggregate fees billed by AM&G and Deloitte & Touche LLP
for services rendered, other than the services described above under
"Audit Fees" for the fiscal year ended December 31, 2001, were $7,835 and
$15,061 respectively.
The audit committee of the Board of Directors has considered whether the
provision by Altschuler, Melvoin and Glasser LLP of the non-audit services
described above is compatible with maintaining the independence of AM&G.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
On June 19, 2001, our Board of Directors approved a recommendation from its
Audit Committee that the Company's independent public accounting firm, Deloitte
& Touche LLP, be dismissed and that the independent public accounting firm of
Altschuler, Melvoin and Glasser LLP be engaged, effective as of June 26, 2001,
to audit the Company's consolidated financial statements for the year ending
December 31, 2001.
The Audit Committee was formed in August 1985 and is responsible for
recommending selection of the Company's independent public accountants. The
Audit Committee solicited proposals to render accounting and tax services to the
Company from several independent public accounting firms.
During the two most recent fiscal years, there were no disagreements
between the Company and Deloitte & Touche on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Deloitte & Touche, would have
caused them to make reference thereto in connection with their reports.
The consolidated financial statements of Circuit Research Labs, Inc. and
Subsidiaries as of December 31, 2000 that were audited by Deloitte & Touche LLP
and whose report dated April 16, 2001, (May 17, 2001 as to note 4 and 10, and
October 1, 2001 as to note 11), which expressed an unqualified opinion on those
consolidated financial statements with an emphasis paragraph covering a
restatement and substantial doubt regarding the Company's ability to continue as
a going concern. No report of Deloitte & Touche LLP on the statements for
either the past two years contained an adverse or qualified opinion or
disclaimer of opinion, audit scope or accounting principles.
Selection of Independent Auditor for 2002
The independent public accounting firm utilized by the Company during the
latter half of fiscal 2001 was Altschuler, Melvoin and Glasser LLP ("AM&G").
AM&G has been retained as the principal accounting firm to be utilized by the
Company during the 2002 fiscal year. The Board of Directors anticipates that
representatives of AM&G will be present at the Annual Meeting, will have the
opportunity to make a statement if they desire, and will be available to respond
to appropriate questions.
7
Board Compensation
We pay our directors (other than directors who are also employees) for
their service. Each director receives $100 for each board meeting and committee
meeting attended, either in person or by telephone. During the year ended
December 31, 2001, outside directors were paid a total of $1,500 for attendance
at board meetings.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid or accrued to the Chief Executive Officer and each
of the three most highly compensated executive officers whose salary and bonus
exceeded $100,000 during 2001.
Summary Compensation Table
Annual Compensation
-------------------
Securities
Name and Principal Fiscal Underlying All Other
Position Year Salary Bonus Options (#)(1) Compensation
- --------------------------- ---- ----------- --------- -------------- ------------
Charles Jayson Brentlinger 2001 $169,739 - 1,365,005(2) -
Chairman, Chief Executive 2000 125,000 - - -
Officer, President 1999 49,846(3) $2,884(4) 1,000,000(5) -
Robert A. Orban 2001 $178,093 - - -
Vice President and 2000 93,910(6) - - -
Chief Engineer
Greg J. Ogonowski 2001 $149,627 - - -
Vice President of New 2000 17,308(7) - - -
Product Development
James Seemiller 2001 $114,746 - - $25,000(9)
Vice President of 2000 33,646(10) - - 8,000(9)
Sales, Marketing and
New Business Development (8)
- ---------------------------
(1) On July 7, 2000, the Board of Directors declared a one hundred percent
stock dividend effective as of August 15, 2000, payable to record holders
of our common stock as of July 31, 2000. The number of shares of our
common stock underlying options reflects this stock dividend.
(2) Represents options received by Mr. Brentlinger pursuant to the Stock
Purchase Agreement (see Footnote 5 below) and options received after giving
effect to the anti-dilution provisions of the Stock Purchase Agreement.
For a discussion of the anti-dilution provisions, see Certain Relationships
and Related Transactions - Transactions with Management.
(3) Represents Mr. Brentlinger's compensation from June 28, 1999 to December
31, 1999.
(4) Represents bonus for vacation and sick time not used during the calendar
year. Prior to October 8, 2001, it was our policy to pay any employee who
had not used all of his or her vacation time by the end of the calendar
year the unused portion in January of the following year. It was also our
policy to pay any employee who had used less than three days of sick time
by the end of the calendar year the unused portion in January of the
following year.
8
(5) On June 23, 1999, we entered into a Stock Purchase Agreement with Mr.
Brentlinger. Pursuant to the Stock Purchase Agreement, Mr. Brentlinger
received a five-year option to purchase 1,000,000 shares for $1.25 per
share. This option expires on September 30, 2004. No options have been
exercised under this grant.
(6) Represents Mr. Orban's compensation from May 31, 2000 to December 31, 2000.
(7) Represents Mr. Ogonowski's compensation from November 13, 2000 to December
31, 2000.
(8) Mr. Seemiller's employment with the Company terminated effective as of
January 31, 2002.
(9) Represents consulting fees paid to ATB Broadcasting Corporation, a labor
management consulting company of which Mr. Seemiller is the owner and
President. See "Employment Contracts" below for additional details with
respect to the Company's consulting agreement with ATB Broadcasting
Corporation.
(10) Represents Mr. Seemiller's compensation from September 1, 2000 to December
31, 2000.
Employment Contracts
We have an employment agreement with our President, Chief Executive Officer
and Chairman of the Board, Charles Jayson Brentlinger. This agreement commenced
on January 1, 2002, and continues through May 31, 2005 unless earlier terminated
by the Company for cause. The agreement will continue in effect after May 31,
2005 unless earlier terminated by either party. Pursuant to the agreement, Mr.
Brentlinger will serve on a full-time basis as our President and Chief Executive
Officer. The agreement provides that Mr. Brentlinger will receive an annual
base salary of not less than $175,000. The agreement includes provisions
relating to other customary employee benefits and the confidentiality of our
proprietary information.
We have an employment agreement with our Vice President and Chief Engineer,
Robert A. Orban. The agreement is dated as of May 31, 2000, and has a five-year
term, unless otherwise earlier terminated by either party. Pursuant to this
agreement, Mr. Orban is employed on a full-time basis as Chief Engineer of our
wholly owned subsidiary, CRL Systems, Inc. doing business as Orban. The
agreement provides that Mr. Orban will receive an annual base salary of
$178,560, subject to increase annually based upon changes in the consumer price
index. Mr. Orban may also receive an annual bonus based on the net sales of
Orban products. The agreement includes provisions relating to other customary
employee benefits, the confidentiality of our proprietary information and Mr.
Orban's assignment to Circuit Research Labs, Inc. of inventions conceived or
developed by Mr. Orban during the term of the agreement.
We have an employment agreement with Greg J. Ogonowski, our Vice President
of New Product Development. This agreement commenced on January 1, 2002 and
continues through May 31, 2005 unless earlier terminated by the Company for
cause. The agreement will continue in effect after May 31, 2005 unless earlier
terminated by either party. Pursuant to this agreement, Mr. Ogonowski will
serve on a full-time basis as our Vice President of New Product Development.
The agreement provides that Mr. Ogonowski will receive an annual base salary of
not less than $150,000. The agreement includes provisions relating to other
customary employee benefits and the confidentiality of our proprietary
information.
9
We had a one-year employment and consulting agreement with James
Seemiller and ATB Broadcasting Corporation, a labor management consulting
company of which Mr. Seemiller is the owner and President. The agreement, which
was dated as of March 9, 2001, was terminated effective as of January 31, 2002.
Pursuant to the agreement, Mr. Seemiller served as our Chief Financial Officer
and Vice President of Sales, Marketing and New Business Development at an annual
base salary of approximately $111,000. Additionally, the agreement provided for
the payment of annual consulting fees of approximately $24,000 to ATB
Broadcasting.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table presents information concerning the beneficial
ownership of shares of our common stock as of March 29, 2002, for each of our
directors and named executive officers, all directors and executive officers as
a group and each person known by us to be the beneficial owner of more than five
percent of our common stock.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power over
securities. Except in cases where community property laws apply or as indicated
in the footnotes to this table, we believe that each shareholder identified in
the table possesses sole voting and investment power over all shares of common
stock shown as beneficially owned by the shareholder. Shares of common stock
subject to options and warrants that are exercisable or exercisable within 60
days of March 29, 2002 are considered outstanding and beneficially owned by the
person holding the options or warrants for the purpose of computing the
percentage ownership of that person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
Number of
Shares Percent
Beneficially of
Name of Beneficial Owner Title of Class Owned(1) Class(2)
- --------------------------------- -------------- --------- ------
Directors and Executive Officers:
Charles Jayson Brentlinger(3)(4) Common Stock 3,435,323 67.7%
Berthold Burkhardtsmaier(5) Common Stock 1,250,000 33.7%
Gary D. Clarkson(6) Common Stock 50,338 1.3%
Robert A. Orban(6) Common Stock 66,600 1.8%
Carl E. Matthusen(6) Common Stock 50,000 1.3%
Phillip T. Zeni, Sr.(6) Common Stock 50,000 1.3%
William R. Devitt Common Stock 135 *
Robert McMartin Common Stock 677 *
Greg J. Ogonowski Common Stock 6,666 *
All directors and executive
officers as a group (9 persons) Common Stock 3,659,739 69.4%
5% Holders:
Glenn W. Serafin(7) Common Stock 207,858 5.61%
Dialog4 System Engineering GmbH(5) Common Stock 1,250,000 33.7%
Cornelia Burkhardtsmaier(5) Common Stock 1,250,000 33.7%
Friedrich Maier(5) Common Stock 1,250,000 33.7%
Harman Acquisition Corporation(8) Common Stock 1,279,775 25.6%
- ---------------------------------
Unless otherwise noted, the address of each person named in the table is 2522
West Geneva Drive, Tempe, Arizona 85282.
* Less than 1%.
(1) On July 7, 2000, our Board of Directors declared a one hundred percent
stock dividend effective as of August 15, 2000, payable to record holders
of our common stock as of July 31, 2000. The number of shares of our
common stock beneficially owned by each shareholder listed reflects this
stock dividend. The inclusion herein of any shares of common stock does
not constitute an
11
admission of beneficial ownership of such shares, but are included in
accordance with rules of the Securities and Exchange Commission.
(2) On the basis of 3,706,880 shares of common stock outstanding as of March
29, 2002.
(3) Includes 1,365,005 shares subject to exercisable options granted to Mr.
Brentlinger pursuant to the Stock Purchase Agreement that we entered into
with him on June 23, 1999. Under the Stock Purchase Agreement, we granted
Mr. Brentlinger a five-year option to purchase 1,000,000 shares of our
common stock at an exercise price of $1.25 per share. This option was
exercisable upon its grant, and expires on September 30, 2004. No options
have been exercised under this grant. Mr. Brentlinger has acquired an
additional 365,005 options pursuant to anti-dilution modifications made
to the Stock Purchase Agreement by the Board of Directors on May 15, 2001.
Such anti-dilution modifications are retroactive to June 23, 1999.
(4) Includes 1,250,000 shares subject to an irrevocable proxy granted to Mr.
Brentlinger pursuant to a Stock Purchase Agreement, dated as of November
16, 2001, among Mr. Brentlinger, Dialog4 System Engineering GmbH, Berthold
Burkhardtsmaier, Cornelia Burkhardtsmaier, and Friedrich Maier.
(5) Based on the information provided in the Schedule 13D filed jointly by
Dialog4 System Engineering GmbH ("Dialog4") and Berthold Burkhardtsmaier,
Cornelia Burkhardtsmaier, and Friedrich Maier (collectively, the
"Shareholders") with the Securities and Exchange Commission on March 15,
2002. The Shareholders are deemed to have indirect beneficial ownership
of the shares owned by Dialog4 based on their status as controlling
shareholders of Dialog4. The address of Dialog4 and the Shareholders is
Businesspark Monrepos 55, Ludwigsburg, Germany D-71634.
(6) Includes 50,000 shares subject to immediately exercisable options granted
to this person by the Board of Directors on January 23, 2002. The options
have an exercise price of $1.00 per share and expire on January 23, 2005.
No options have been exercised under this grant.
(7) The address of Mr. Serafin is Post Office Box 262888, Tampa, Florida 33685.
(8) Based on the information provided in the Schedule 13D filed jointly by
Harman Acquisition Corporation and Harman International Industries, Inc.
with the Securities and Exchange Commission on March 13, 2002. The address
of Harman Acquisition Corporation is 8500 Balboa Boulevard, Northridge,
California 91329. The address of Harman International Industries, Inc. is
1101 Pennsylvania Avenue, Washington, D.C. 20004. For more information
regarding Harman's beneficial ownership of shares of our common stock, see
Certain Relationships and Related Transactions -- Acquisition of
Orban, Inc.
12
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC") initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Such reports are filed on Form 3,
Form 4, and Form 5 under the Exchange Act. Directors, executive officers and
greater-than-10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 3, 4, or 5
were required for those persons, the Company believes that all directors,
executive officers, and greater-than-10% beneficial owners have complied with
all Section 16(a) filing requirements applicable to such persons or entities
during the 2001 fiscal year with the exception of the following:
(1) James J. Seemiller, the Company's former Vice President of Sales, Marketing
and New Business Development who was elected to that position on August 25,
2000, failed to file his Form 3 until October 11, 2001; Mr. Seemiller had no
transactions or holdings to report on such Form 3; (2) Carl E. Matthusen, who
was elected to the Company's board of directors on February 8, 1988, failed
to file his Form 3 until February 11, 2002; Mr. Matthusen had no transactions or
holdings to report on such Form 3; (3) Phillip T. Zeni, Sr., who was elected to
the Company's board of directors on May 23, 2000, failed to file his Form 3
until February 11, 2002; Mr. Zeni had no transactions or holdings to report on
such Form 3; (4) Robert A. Orban, who was elected to the Company's board of
directors on May 23, 2000 and who filed his initial Form 3 on April 10, 2001,
filed an amendment to his Form 3 on March 25, 2002 to report the acquisition of
warrants to purchase shares of the Company's common stock on May 23, 2000;
(5) Greg J. Ogonowski, who became the Company's Vice President of New Product
Development on November 13, 2000 and who filed his initial Form 3 on April 13,
2001, filed an amendment to his Form 3 on March 25, 2002 to report the
acquisition of warrants to purchase shares of the Company's common stock on
May 23, 2000; (6) Robert W. McMartin, who became the Company's Vice President
and Chief Financial Officer on June 19, 2001, failed to file his Form 3 until
October 15, 2001; Mr. McMartin had no transactions or holdings to report on such
Form 3; and (7) William R. Devitt, who became the Company's Vice President of
Manufacturing and Production on January 15, 2001, failed to file his Form 3
until November 5, 2001; Mr. Devitt had no transactions or holdings to report on
such Form 3.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management
On June 23, 1999, we entered into a Stock Purchase Agreement with Mr.
Brentlinger, our current President, Chief Executive Officer and Chairman of the
Board. On September 30, 1999, pursuant to the Stock Purchase Agreement, Mr.
Brentlinger purchased 375,000 authorized but previously unissued shares of our
common stock for $1.525 per share, or $571,875. (All amounts of shares and
purchase prices reported in this item have been adjusted to reflect the effects
of a one for one stock dividend paid by us on August 15, 2000 to record holders
of our common stock as of July 31, 2000.) Pursuant to the Stock Purchase
Agreement, Mr. Brentlinger also purchased all of the shares of common stock
owned by Mr. Clarkson, our current Secretary, consisting of 242,624 shares, also
for $1.525 per share. Mr. Brentlinger agreed to purchase an additional 342,500
shares of our authorized but previously unissued common stock on or before
September 30, 2000, for a purchase price of $1.25 per share. Following an
extension of the purchase deadline, Mr. Brentlinger fulfilled his obligation to
purchase these shares on
13
February 8, 2001. Pursuant to the Stock Purchase Agreement, Mr. Brentlinger
also received a five-year option to purchase an additional 1,000,000 shares for
$1.25 per share. This option expires on September 30, 2004. On May 15, 2001,
the Board of Directors retroactively amended the Stock Purchase Agreement to
include anti-dilution provisions with respect to this option. The anti-dilution
provisions are triggered in the event that the Company (1) declares or pays a
stock dividend, (2) subdivides its outstanding shares of common stock,
(3) combines its outstanding shares of common stock, (4) issues any shares of
its common stock in a reclassification or reorganization of the common stock, or
(5) issues authorized but previously unissued shares of its common stock as
payment for the stock or assets of another entity
Mr. Brentlinger loaned us $195,000 in a short-term non-interest bearing
advance during the second quarter of 2000, to assist us in the purchase of the
assets of Orban, Inc. On November 30, 2000, Mr. Brentlinger purchased 156,000
shares of our common stock for $1.25 per share in partial fulfillment of his
contractual obligation to purchase 342,500 shares of our common stock pursuant
to the Stock Purchase Agreement. Mr. Brentlinger paid for these 156,000 shares
by cancellation of the debt we owed to him for the $195,000 advance. On
February 8, 2001, Mr. Brentlinger purchased 26,500 shares of our common stock
for $1.25 per share thus fulfilling his contractual obligation to purchase
342,500 shares of our common stock pursuant to the Stock Purchase Agreement.
We had a one-year employment and consulting agreement with James Seemiller
and ATB Broadcasting Corporation, a labor management consulting company of which
Mr. Seemiller is the owner and President. The agreement, which was dated as of
March 9, 2001, was terminated effective as of January 31, 2002. Pursuant to the
agreement, Mr. Seemiller served as our Chief Financial Officer and Vice
President of Sales, Marketing and New Business Development at an annual base
salary of approximately $111,000. Additionally, the agreement provided for the
payment of annual consulting fees of approximately $24,000 to ATB Broadcasting.
Acquisition of Orban, Inc.
On May 31, 2000, we acquired the assets of Orban, Inc., a wholly owned
subsidiary of Harman International Industries, Inc., including the rights to the
name "Orban." Including the $500,000 previously paid to Harman as
non-refundable deposits in 1999, the total stated purchase price was $10.5
million, of which $2 million was paid in cash and the balance of which was paid
by means of a combination of short-term and long-term promissory notes that we
issued to the seller. In order to raise the $2 million cash necessary for the
purchase, we sold approximately $1,171,000 in common stock and warrants through
a private placement, and we mortgaged our Tempe, Arizona office building for
$335,000. We also received a $150,000 advance from our majority shareholder,
Mr. Brentlinger. We obtained the remainder of the purchase price from cash on
hand. The seller financing consisted of a $3.5 million short-term note and a
$5 million long-term note payable to Harman.
We received several extensions on the long-term and short-term notes.
First, in exchange for $150,000 cash and an increase in the interest rates to 12
percent per annum for both notes, Harman extended the maturity date of the
short-term note to November 30, 2000. The maturity date of the short-term note
was subsequently extended several times without fees or other significant
changes to the original terms of the note and is due April 30, 2002.
Additionally, the first principal payment on the long-term note of $250,000,
originally due March 31, 2001, was extended to September 30, 2001, with the
remaining quarterly principal payments deferred until April 30, 2002.
On October 1, 2001, we entered into an Amendment to Credit Agreement with
Harman under which both the long-term and the short-term notes were amended and
restated. Under the Amended
14
Credit Agreement, both promissory notes were converted to demand notes payable
on the demand of Harman or, if no demand is sooner made, on the dates and in the
amounts specified in the Amended Credit Agreement. Interest only payments
remain payable from time to time for both notes and are also due on demand.
Additionally, under the Amended Credit Agreement, the first principal payment on
the long-term note of $250,000, the due date of which had been extended to
September 30, 2001, was increased to $1,250,000 and is now due April 30, 2002,
unless Harman demands payment at an earlier date. Interest has been paid
according to the scheduled due dates.
In addition to the stated purchase price, we issued to Harman warrants to
purchase 1,000,000 shares of our common stock, exercisable for $2.25 per share.
The warrants have a three-year term and can be exercised either (i) by payment
in cash, (ii) by reducing the amount of the unpaid principal on the long-term or
short-term note, or (iii) by any combination of (i) and (ii). We obtained an
independent valuation of the warrants in November 2000 from Houlihan Valuation
Advisors which valued the warrants at $1,050,000 as of May 31, 2000. When
combined with the cash purchase price, this results in a total purchase price of
Orban's assets of $11,550,000. As part of the acquisition, we also purchased
the rights to the name "Orban" and our Orban division is currently operating
under that name. Pursuant to certain anti-dilution provisions contained in the
warrants issued to Harman, Harman would have the right to purchase additional
shares of our common stock in the event of stock splits, stock dividends,
combinations, reclassifications and certain issuances of our common stock
occurring subsequent to the date on which the Harman warrants were issued. In
addition to the shares of our common stock beneficially owned by Harman as
disclosed on its Schedule 13D filed March 13, 2002, we estimate that as of
March 29, 2002, Harman would have the right to acquire an additional 115,915
shares of our common stock based upon anti-dilution adjustments.
Other
We issued $205,000 in long-term debt to one of our shareholders, Mr. Glenn
Serafin, in consideration for his role in the acquisition of the net assets of
Orban. The promissory note that evidences our debt to Mr. Serafin bears
interest at 7.5 percent per annum, with principal and interest due monthly
beginning August 1, 2000 and continuing for four years. We also incurred fees
of $97,500 to Mr. Serafin for arranging the purchase financing of Orban, the
total of which was due on May 14, 2001, but has since been extended to
August 14, 2001. On August 11, 2001, the note was converted to equity at the
market price of $1.05 per share.
On January 18, 2002, we acquired the assets of Dialog4 System Engineering
GmbH, a worldwide leader in ISO/MPEG, audio, ISDN, satellite transmission,
networking and storage. As part of the acquisition, we entered into an
employment agreement with Berthold Burkhardtsmaier pursuant to which he will
serve on a full-time basis as Vice President of European Operations and as a
member of our Board of Directors. Subsequently, we amended the Asset Sale and
Purchase Agreement pursuant to which Mr. Burkhardtsmaier acts as both the
Managing Director of Dialog4 System Engineering GmbH and as Vice President of
European Operations for our Orban Europe division. The amended agreement
extended the payment terms for the cash portion of the purchase from 10 months
to 20 months thus reducing the monthly installments to $37,500 while adding
interest on the remaining unpaid principal at a rate of 10 percent per annum
with monthly principal and interest payments due on the 20th day of each month
commencing April 20, 2002.
15
OTHER MATTERS
The Annual Meeting is being held for the purposes set forth in the Notice
which accompanies this proxy statement. As of the date of this proxy statement,
the management of the Company has no knowledge of any business which will be
presented for consideration at the Annual Meeting other than as set forth in
the Notice. As to other business, if any, that may properly come before the
Annual Meeting, or any adjournments or postponements thereof, it is intended
that the proxies hereby solicited will be voted with respect to such business in
accordance with the judgment of the proxy holders.
SUBMISSION OF SHAREHOLDER PROPOSALS
From time to time, shareholders seek to nominate directors or to present
proposals for inclusion in the proxy statement and form of proxy, or otherwise
for consideration at the annual meeting. To be included in the proxy statement
or considered at an annual meeting, you must timely submit nominations of
directors or other proposals to the Company in addition to complying with
certain rules and regulations promulgated by the Securities and Exchange
Commission. We must receive proposals for our 2003 annual meeting of
shareholders no later than January 25, 2003, for possible inclusion in the proxy
statement relating to such meeting. Direct any proposals, as well as related
questions, to our Corporate Secretary at the address set forth on the first page
of this proxy statement.
Shareholders who intend to present a proposal at the 2003 annual meeting of
shareholders without inclusion of such proposal in the Company's proxy statement
are required to provide notice of such proposal to the Company no later than
April 10, 2003. If the date of our 2003 annual meeting of shareholders is more
than 30 calendar days before or after the date of our 2002 meeting, your notice
of a proposal will be timely if we receive it by the close of business on the
tenth day following the day we publicly announce the date of our 2003 meeting.
If we do not receive notice of your proposal within this time frame, our
management will use its discretionary authority to vote the shares it represents
as the Board of Directors may recommend.
ANNUAL REPORT
Our 2001 annual report to shareholders has been mailed to shareholders
concurrently with the mailing of this proxy statement, but is not incorporated
into this proxy statement and is not to be considered to be a part of our proxy
solicitation materials.
Upon request, we will provide, without charge to each shareholder of record
as of the record date specified on the first page of this proxy statement, a
copy of our Annual Report on Form 10-KSB for the year ended December 31, 2001 as
filed with the Securities and Exchange Commission. Any exhibits listed in the
Annual Report on Form 10-KSB also will be furnished upon request at the actual
expense we incur in furnishing such exhibit. Any such requests should be
directed to our Corporate Secretary at our executive offices set forth on the
first page of this proxy statement.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS
Pursuant to the rules of the Securities and Exchange Commission, we and
services that we employ to deliver communications to our shareholders are
permitted to deliver to two or more shareholders sharing the same address a
single copy of each of our annual report to shareholders and our proxy
statement. Upon written or oral request, we will deliver a separate copy of the
annual report to shareholders and/or proxy statement to any shareholder at a
shared address to which a single copy of each document was delivered and who
wishes to receive separate copies of such documents in the future.
16
Shareholders receiving multiple copies of such documents may likewise request
that we deliver single copies of such documents in the future. Shareholders may
notify us of their requests by calling (602) 438-0888 or by writing us at 2522
West Geneva Drive, Tempe, Arizona 85282, Attention: Mr. Gary D. Clarkson,
Secretary.
By Order of the Board of Directors,
/s/ Charles Jayson Brentlinger
------------------------------
Charles Jayson Brentlinger
Chairman of the Board
Tempe, Arizona
Dated: May 10, 2002
17
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[FRONT]
PROXY PROXY
CIRCUIT RESEARCH LABS, INC.
2522 W. GENEVA DRIVE TEMPE, ARIZONA 85282
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of CIRCUIT RESEARCH LABS, INC. (the "Company") hereby appoints each of Charles Jayson Brentlinger and
Gary D. Clarkson as proxy, with full power of substitution, and authorizes each of them to represent the undersigned at the Annual
Meeting of Shareholders of the Company, to be held June 18, 2002, and any adjournment thereof and authorizes them to vote at such
meeting, as designated on this form, all of the shares of common stock of the Company held of record by the undersigned on the
record date for such meeting.
1. Election of directors.
[ ] FOR ALL nominees listed below (except as marked to the contrary below) [ ] WITHHOLD AUTHORITY to vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
CHARLES JAYSON BRENTLINGER BERTHOLD F. BURKHARDTSMAIER
GARY D. CLARKSON CARL E. MATTHUSEN
ROBERT A. ORBAN PHILLIP T. ZENI, SR.
2. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE.
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[BACK]
Dated: __________________________ 2002
[LABEL IS PLACED HERE]
______________________________________________________________
Signature of Shareholder
______________________________________________________________
Signature if held jointly
When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership
name by an authorized person.