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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
R-TEC HOLDING, INC.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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R-TEC HOLDING, INC.
1471 E. Commercial Ave.
Meridian, Idaho 83642
(208)887-931
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TIME: 6:00 p.m. Mountain Standard Time on
Tuesday, November 19, 2002
PLACE: Nampa Civic Center
311 3rd Street South
Nampa, Idaho 83651
ITEMS OF
BUSINESS: (1) To elect four directors to the Board of
Directors to each serve a one year term.
(2) To ratify the selection of Balukoff,
Lindstrom & Co., P.A. as the Company's
independent auditors for the Company's
fiscal year ending December 31, 2002.
(3) To approve an amendment to the Articles
of Incorporation of the Company to
increase the authorized shares of voting
common stock from 30,000,000 to
60,000,000 shares.
(4) To transact other business as may
properly come before the meeting or any
adjournments or postponements thereof.
RECORD DATE: You are entitled to vote if you were a
stockholder at the close of business on
October 1, 2002. A list of shareholders
will be available for inspection for a
period of 10 days prior to the meeting
at the Company's principal office
identified above and will also be
available for inspection at the meeting.
VOTING BY PROXY: Please submit a proxy as soon as
possible so That your shares can be
voted at the meeting in accordance with
your instructions. For specific
instructions on voting, please refer to
the instructions on the proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
DOUGLAS G. HASTINGS
President and CEO
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (POSTAGE IS PREPAID IF MAILED
IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR
PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING AND REVOKE YOUR
PROXY. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER,
BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU WILL NOT BE
PERMITTED TO VOTE IN PERSON AT THE MEETING UNLESS YOU FIRST OBTAIN A PROXY
ISSUED IN YOUR NAME FROM THE RECORD HOLDER.
R-TEC HOLDING, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 2002
PROXY STATEMENT
-------------------
This Proxy Statement relates to the Annual Meeting of Stockholders of R-Tec
Holding, Inc., (the "Company"), an Idaho corporation, to be held on November 19,
2002, at 6:00 p.m., at the Nampa Civic Center, 311 3rd Street South, Nampa,
Idaho 83651 including any adjournments or postponements thereof (the "Meeting").
This Proxy Statement, the accompanying proxy card and the Company's Annual
Report are first being mailed to stockholders of the Company on or about October
20, 2002. THEY ARE FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE COMPANY
OF PROXIES FROM THE HOLDERS OF THE COMPANY'S COMMON STOCK, NONPAR VALUE ("COMMON
STOCK"), AND PREFERRED STOCK ("SERIES A CONVERTIBLE PREFERRED STOCK"), FOR USE
AT THE MEETING. Holders of preferred stock of the Company are also entitled to
vote as if they had converted their shares to common stock prior to the meeting
with respect to the matters to be considered at the meeting.
The principal solicitation of proxies is being made by mail; however, additional
solicitation may be made by telephone, facsimile or personal visits by
directors, officers and regular employees of the Company and its subsidiaries,
who will not receive additional compensation. The Company will reimburse
brokerage firms and others for their reasonable expenses in forwarding
soliciting material.
All shares represented by duly executed proxies in the accompanying form
received prior to the Meeting will be voted in the manner specified therein. Any
stockholder granting a proxy may revoke it at any time before it is voted by
filing with the Secretary of the Company either an instrument revoking the proxy
or a duly executed proxy bearing a later date. Any stockholder present at the
Meeting who expresses a desire to vote his/her shares in person may also revoke
his/her proxy. As to any matter for which no choice has been specified in a duly
executed proxy, the shares represented thereby will be voted FOR each proposal
listed herein and in the discretion of the persons named in the proxy in any
other business that may properly come before the Meeting.
STOCKHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING, TO
COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
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The Company's Annual Report to Stockholders for the fiscal year ended December
31, 2001, is being furnished with this Proxy Statement to stockholders of record
on October 1, 2002. The Annual Report to Stockholders does not constitute a part
of the proxy solicitation material except as otherwise provided by the rules of
the Securities and Exchange Commission, or as expressly provided for herein.
In this Proxy Statement:
- - "we", "Company" and "R-Tec Holding" mean R-Tec Holding, Inc., an Idaho
corporation with principal executive offices located at 1471 E. Commercial
Ave., Meridian, IDAHO 83642;
- - references to fiscal years are to our fiscal years ended December 31; and
- - holding shares in "street name" means your R-Tec Holding shares are held
in an account at a brokerage firm and the stock certificates and record
ownership are not in your name;
QUESTIONS AND ANSWERS
Q: WHY DID THE COMPANY SEND ME THIS PROXY STATEMENT AND PROXY CARD?
A: We sent you this Proxy Statement and proxy card because you owned shares
of R-Tec Holding common stock and/or shares of R-Tec Holding Series A
Preferred on the record date. This Proxy Statement describes issues on
which we would like you, as a stockholder, to vote. It also gives you
information on these issues so that you can make an informed decision. The
proxy card is used for voting.
Q. WHAT IS THE EFFECT OF SIGNING AND RETURNING THE PROXY CARD?
A. When you sign and return the proxy card, you appoint Douglas G. Hastings,
Gary A. Clayton and Rulon L. Tolman as your representatives at the
meeting. These individuals, as the proxy holders, will vote your shares,
as you have instructed them on the proxy card, at the meeting. In this
way, your shares will be voted whether or not you attend the meeting. Even
if you plan to attend the meeting, it is a good idea to complete, sign and
return your proxy card in advance of the meeting just in case your plans
change. You can always vote in person at the meeting, even if you have
already sent in your proxy card.
It is not expected that any matters other than those described in this
Proxy Statement will be brought before the meeting. However, if any other
matters properly come before the meeting, the individuals named as proxies
will be authorized by your proxy to vote on those matters in their
discretion.
Q: WHAT AM I VOTING ON?
A: You are being asked to vote on the following:
(1) To elect four directors to the Board of Directors to serve a
one year term.
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(2) To ratify the selection of Balukoff, Lindstrom & Co., P.A. as
the Company's independent auditors for the Company's fiscal
year ending December 31, 2001.
(3) To approve an amendment to the Articles of Incorporation of
the Company to increase the authorized shares of voting common
stock from 30,000,000 to 60,000,000 shares.
(4) To transact other business as may properly come before the
meeting or any adjournments or postponements thereof.
Stockholders will be entitled to one vote for each share of common stock
Or Series A Preferred stock held. Stockholders do not have the right to
cumulate their votes in the election of directors. In accordance with the
Idaho Business Corporation Act and our Articles of Incorporation and
Bylaws, if a quorum is present at the meeting:
(1) the four nominees for director who receive the highest number
of affirmative votes cast in the election of directors will be
elected;
(2) the proposal to ratify the appointment of independent public
accountants will be approved if such proposal receives the
affirmative vote of a majority of the votes cast;
(3) the proposal to approve an amendment to the Articles of
Incorporation of the Company to increase the authorized shares
of voting common stock from 30,000,000 to 60,000,000 shares
will be approved if such proposal receives the affirmative
vote of a majority of the votes cast;
Q: HOW DO I VOTE?
A: There are two ways in which you may vote (please see detailed instructions
on your proxy card). First, mail in your completed, signed and dated proxy
card. PLEASE NOTE, however, that if you return a signed card but do not
provide voting instructions, your shares will be voted in favor of the
four named nominees for director and in favor of each of the proposals
outlined above. Second, vote in person by attending the meeting. We will
pass out written ballots to stockholders who desire to vote in person at
the meeting. PLEASE NOTE, however, that if you hold your shares in street
name, you must request a legal proxy from your stockbroker in order to
vote at the meeting.
Q: WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY CARD?
A: You may revoke your proxy (that is, cancel it) and change your vote at any
time prior to the voting at the meeting by doing any one of the following:
- delivering written notice of revocation to the Corporate
Secretary;
- submitting a proxy card with a later date; or
- attending the meeting and voting in person.
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Q: WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
A: If your shares are held in street name, your brokerage firm may either
vote your shares on "routine" matters (such as election of directors) or
leave your shares unvoted. Your brokerage firm cannot vote on "non-routine
matters" such as a proposal submitted by a stockholder. Accordingly, we
encourage you to provide instructions to your brokerage firm by completing
the proxy that they send to you. This ensures that your shares will be
voted at the meeting.
Q: HOW ARE ABSTENTIONS COUNTED?
A: Stockholders may abstain from voting for the nominees for director and may
abstain from voting on the other proposals. While we are not aware of
there any definitive statutory or case law authority in the State of Idaho
as addressing the proper treatment of abstentions, we believe that
Abstentions should be counted for the purposes of determining both (1) the
presence or absence of a quorum for the transaction of business at the
meeting and (2) the total number of votes cast with respect to a proposal
(other than the election of directors). We will treat abstentions in this
manner. Accordingly, abstentions will have the same effect as voting
against a proposal (other than the election of directors), since approval
of these matters is based solely on the number of votes actually cast.
With respect to the election of directors, the nominees who receive the
most votes cast are elected as directors. Since abstentions do not
represent votes cast in favor of any nominee, abstentions have no effect
on the election of directors.
Q: WHAT IS A "BROKER NON-VOTE"?
A: As discussed briefly above, brokerage firms and other intermediaries
holding shares in street name for customers are generally required to vote
such shares in the manner directed by their customers. In the absence of
timely directions from their customers, brokers will generally have the
discretion to vote such shares on "routine" matters (E.G., election of
directors), but not on "non-routine" matters (E.G., stockholder
proposals). The absence of a vote with respect to any non-routine matter
under these circumstances is referred to as a "broker non-vote".
Q: HOW ARE BROKER NON-VOTES COUNTED?
A: Pursuant to applicable law, while broker non-votes should be counted for
purposes of determining the presence or absence of a quorum for the
transaction of business, broker non-votes should not be counted for
determining the number of votes cast with respect to the particular
proposal on which a broker has expressly not voted. We intend to treat
broker non-votes in this manner. Accordingly, a broker non-vote will not
affect the outcome on any proposal, since approval of these matters is
based solely on the number of votes actually cast.
Q: WHAT IS A "QUORUM?"
A: A "quorum" is the number of shares that must be present, in person or by
proxy, at the meeting for business to be transacted at the meeting. The
required quorum for the meeting is a majority of the shares outstanding as
of the record date. All completed and signed proxy cards, whether
representing a vote for, against, withheld, abstained or a broker
non-vote, will be counted toward the presence of a quorum at the meeting.
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Q: IS THERE A LIST OF STOCKHOLDERS AVAILABLE FOR MY REVIEW?
A: A complete list of stockholders will be available during normal business
hours for ten days prior to the meeting at our headquarters at 1471 E.
Commercial Ave., Meridian,Idaho 83642. A stockholder may examine the list
for any legally valid purpose related to the meeting. The list will also
be available during the Annual Meeting for inspection by any stockholder
present at the meeting.
Q: HOW MANY SHARES CAN VOTE AT THE MEETING?
A: As of the record date, 20,256,005 shares of our common stock and 2,778,090
shares of Series A Preferred Stock were outstanding. In accordance with
the Idaho Business Corporation Act, our Articles of Incorporation and
Bylaws, each outstanding share of common stock and each outstanding share
of Series A Preferred Stock, as of the record date of October 1, 2002,
entitles the holder to one vote on all matters. There are a maximum of
23,034,095 votes that may be cast at the meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
DIRECTORS.
At the Meeting, four directors are to be elected to hold office until the next
Annual Meeting of Stockholders or until the election and qualification of a
successor. It is the intention of the persons named in the proxy to vote the
proxies that are not marked to the contrary for the election as directors of the
persons named below as nominees. If any such nominee refuses or is unable to
serve as a director, the persons named as proxies may in their discretion vote
for any or all other persons who may be nominated. The four nominees receiving
the greatest number of votes cast will be elected directors, if each nominee
receives at least a majority of the votes cast.
Director nominees standing for election to serve until the 2003 Annual Meeting
are:
DIRECTOR
NAME AGE POSITION WITH COMPANY RESIDENCE SINCE
- ----- --- --------------------- --------- -------
Douglas G. Hastings 44 Director, President,CEO Meridian, ID 1999
Gary A. Clayton 44 Director, CTO, VP of Eng. Meridian, ID 1999
Rulon L. Tolman 52 Director, COO, VP of PR, Boise, ID 1999
and General Manager
David R. Stewart 48 Director Boise, ID 1999
Douglas G. Hastings, Meridian, Idaho, is currently serving as President and CEO
of the Company. He received a Micro M.B.A. in May of 1999, and received special
training in Robotics, Machine Vision and software controls. Prior to starting
R-Tec Corporation in 1995, Mr. Hastings was employed by Hewlett Packard from
1981 to 1995 specializing in electrical and mechanical tool design and controls.
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Gary A. Clayton, Meridian, Idaho, is currently serving as Vice President of
Engineering for the Company. He received a BS degree in Mechanical Engineering
from BYU in 1983. He received training in Robotics and Industrial Controls in
1987 (with honors), and a Masters Degree in Mechanical Engineering in 1993 from
the University of Utah. Prior to 1995 (when he helped start R-Tec Corporation),
Mr. Clayton was the Engineering Manager for Lynn Industries of Boise, Idaho for
a year, and prior thereto was Project Engineer at Thiokol Corporation in Brigham
City, Utah, for design, implementation and project management of HVAC system,
process equipment, CNC type machine tools, and plant automation.
Rulon L. Tolman, Boise, Idaho, is currently serving as Vice President of Public
Relations for the Company. Mr. Tolman was employed with Mutual of New York from
1978 through 2000 in various capacities including Account Executive, Field
Underwriter and Sales Manager. Previously Mr. Tolman was a Production Supervisor
with Boise Cascade Container Division managing up to 80 employees.
David R. Stewart, Boise, Idaho, is a Certified Public Accountant with more than
20 years experience. He has been President of the accounting firm for the past 6
years. He obtained his BS degree in Accounting in 1979 from the University of
Utah.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES.
During the year ended December 31, 2001, the Board of Directors held seven
meetings. All directors, with the exception of William E. Browand, who was not
appointed to the Board until July 17, 2001, attended 75% or more of the
aggregate of the meetings of the Board and Committees on which they served and
during the period for which he was a Board or Committee member, respectively.
*On or about April 12, 2002, Bill Browand resigned from the Board and his
position as Vice President of Sales, citing personal reasons.
The Committees of the Board of Directors during 2001 were the Audit and
Compensation Committees.
In 2001, the members of the Audit Committee were Rulon L. Tolman and David R.
Stewart, with Robert C. Montgomery as secretary. Mr. Tolman is chairman. The
Audit Committee reviews the proposed plan and scope of the Company's annual
audit as well as the result when it is completed. The Committee reviews the
services provided by the Company's independent auditors and their fees. The
Committee also meets with the Company's financial personnel to assure the
adequacy of the Company's accounting principles, financial controls and
policies. The Committee is also charged with reviewing transactions that may
present a conflict of interest on the part of management or directors.
The members of the Compensation Committee are Rulon L. Tolman and David R.
Stewart, with Robert C. Montgomery as secretary. Mr. Stewart is chairman. The
Compensation Committee makes recommendations concerning salaries and incentive
compensation, administers and approves stock options under the 2000 Stock Option
Plan, determines compensation levels and performs other functions regarding
compensation as the Board may delegate. The Compensation Committee met three
times in 2001.
DIRECTORS' COMPENSATION.
No cash compensation has been paid to any directors. Each of the initial
non-employee directors of the Company was granted a stock option to purchase
15,000 shares of the Company's common stock at $1.00 per share at the time of
his initial election or appointment to the Board. For the second year of service
on the Board, each non-employee director was granted a stock option to purchase
7,500 shares of the Company's common stock at $1.00 per share. The board decided
to increase the option for non-employee directors to 15,000 shares at $0.50 per
share for the year 2002. The grants are made in accordance with the terms of the
Company's 2000 Stock Option Plan.
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EMPLOYMENT AGREEMENT WITH EXECUTIVE OFFICERS
The Company entered into identical 5 year employment contracts with Douglas G.
Hastings and Gary A. Clayton. The contracts provide for the payment of a base
salary of $81,120 per year and a $25,000 signing bonus. On April 10, 2002,
following approval by the Board of Directors, the contracts were amended to
increase the respective base salaries to $85,280 per year. In addition, the
contracts provide for the payment of health care benefits for the employee, a
company car and maintenance expenses, the same employment benefits as provided
to other employees and periodic bonuses to be determined by the officers and
directors based upon the Company's profitability.
Bill Browand, former board member and Vice President of Sales, also entered into
an employment contract with the Company. However, Mr. Browand resigned his
position on the Board and terminated his employment with the Company, effective
April 12, 2002. Jeanette LaMeire, former Vice President of Marketing, also
entered into an employment contract with the Company. However, her employment
with the Company was terminated effective April 4, 2002.
PROPOSAL NO. 2
SELECTION OF AUDITORS
The Board of Directors has selected Balukoff, Lindstrom & Co., P.A. ("Balukoff,
Lindstrom"), as independent auditors for the Company's 2001 fiscal year.
Balukoff, Lindstrom has examined the financial statements of the Company for
each of its 1999-2001 fiscal years. Representatives of Balukoff, Lindstrom will
be present at the Annual Meeting, will have the opportunity to make a statement
if they so desire, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Balukoff, Lindstrom & Co., P.A. as
the Company's independent accountants is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Balukoff, Lindstrom
to the stockholders for ratification as a matter of good corporate practice, and
recommends that the stockholders vote for approval. If the stockholders fail to
ratify the selection, the Board and the Audit Committee may reconsider whether
or not to retain that firm. Even if the selection is ratified, the Board and the
Audit Committee in their discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine that
such a change would be in the best interests of the Company and its
stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the meeting is requested
to ratify the selection of Balukoff, Lindstrom & Co., P.A. Abstentions will be
counted toward the tabulation of votes cast on this Proposal No. 2 and will have
the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this matter
has been ratified.
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PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF VOTING COMMON STOCK
In August 2002, the Board of Directors approved and now recommends to the
shareholders an amendment to the Company's Articles of Incorporation to increase
the number of authorized shares of voting Common Stock from 30,000,000 to
60,000,000 shares.
The Company's current Articles of Incorporation provide that the Company is
authorized to issue two classes of stock consisting of 30,000,000 shares of non
par value voting Common Stock, and 5,000,000 shares of Preferred Stock. As of
the record date, 20,256,005 shares of voting Common Stock have been issued. In
addition, 2,778,090 shares of Series A Convertible Preferred shares have been
issued. These shares are convertible, at the option of the holder, into shares
of common voting stock, at any time on or after December 31, 2002. (Additional
conversion rights are contained in the Preferred Stock Amendment to the
Company's Articles of Incorporation) The Company has also set aside 2,000,000
shares of voting Common Stock pursuant to its Year 2000 Stock Option Plan for
option grants to key employees, officers, directors and consultants of the
Company.
The shareholders are being asked to approve at the Annual Meeting this
amendment. Under the proposed amendment, the first paragraph of Article Second
of the Articles of Incorporation would be amended to read as follows:
"Second: The aggregate number of shares that the Corporation shall have
authority to issue is 60,000,000 shares of voting Common Stock, all of
which shares shall be of non par value, and 5,000,000 shares of Preferred
Stock. The Preferred Stock shall be divided into series. The first series
consists of 2,778,090 shares with par value of $0.23437 per share, and
is designated `Series A Convertible Preferred'. The remaining one or more
series shall consist of such number of shares and shall be designated as
the Board of Directors shall determine into classes, series, and
preferences, limitations, restrictions and relative rights of each class
or series of Preferred Stock as authorized in ss.30-1-602 of the Idaho
Business Corporation Act."
(all other provisions of Article Second of the Articles of Incorporation shall
remain the same)
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of the proposed amendment to the Articles of Incorporation
is to authorize additional shares of voting Common Stock which will be available
in the event the Board of Directors determines that it is necessary or
appropriate to permit future stock dividends or stock splits, to raise
additional capital through the sale of securities, to acquire another company or
its business or assets, to establish a strategic relationship with a corporate
partner or similar business transactions. The Board of Directors has no present
plan, agreement, or arrangement to issue any of the shares for which approval is
sought. If the amendment is approved by the shareholders, the Board of Directors
does not intend to solicit further shareholder approval prior to the issuance of
any additional shares of voting Common Stock, except as may be required by
applicable law.
- 10 -
The increase in authorized shares of voting Common Stock will not have any
immediate effect on the rights of existing shareholders. To the extent that the
additional authorized shares are issued in the future, the existing
shareholders' percentage equity ownership will decrease and, depending on the
price at which shares are issued, could have the effect of diluting the earnings
per share and book value per share of outstanding shares of Common Stock. The
holders of voting Common Stock have no preemptive rights. The increase in the
authorized number of shares of voting Common Stock and the subsequent issuance
of such shares could have the effect of delaying or preventing a change in
control of the Company without further action by the shareholders by diluting
the stock ownership or voting rights of a person seeking to obtain control of
the Company.
REQUIRED VOTE
The approval of this amendment to the Articles of Incorporation requires the
affirmative vote of a majority of the outstanding shares of the Company's voting
Common Stock entitled to vote on this subject matter. Management recommends
voting "FOR" approval of the amendment.
EXECUTIVE OFFICERS
Name Age Position Date Appointed
---- --- -------- --------------
Douglas G. Hastings 43 President & CEO Nov.3, 1999
Gary A. Clayton 43 CTO, VP Engineering Nov.3, 1999
Rulon L. Tolman 51 COO, Nov.3, 1999
VP Public Relations,
and General Manager
Robert C. Montgomery 54 Corporate Secretary Nov.3, 1999
Michael T. Montgomery 44 CFO,VP Finance,Treas. Jan. 1, 2001
*William E. Browand 53 VP Sales Aug. 17, 2001
*Jeanette LaMeire 49 VP Marketing Aug. 17, 2001
* William E. Browand left his employment with the Company in the spring of
2002. The employment of Jeanette LaMeire was terminated in the spring of
2002.
The directors of the Company are elected to serve until the next annual
shareholder's meeting or until their respective successors are elected and
qualified. Officers hold office until removal by the Board of Directors.
Family Relationships: Douglas G. Hastings is married to Rena Clayton Hastings, a
sister of Gary A. Clayton. Robert C. Montgomery and Michael T. Montgomery are
brothers.
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Business Experience of Officers and Directors:
The business experience and training for each of the officers who are also
directors is set forth above under the section on directors.
Michael T. Montgomery, is presently CFO, Vice President of Finance and Treasurer
of the Company. He received a Bachelor of Arts Degree in Finance, with composite
minors in Accounting & Economics, from Brigham Young University in 1981. He
completed the MBA program at Boise State University in 1986. Prior to his
employment with the Company, he was involved in production management for 15
years, financial management 12 years and 1 year international business
management and government negotiations.
Robert C. Montgomery, is presently Secretary and General Counsel of the Company.
He received his Juris Doctors Degree from the University of Idaho in 1974 and is
admitted to practice law in the states of Idaho, Oregon and Washington. He has
served as legal counsel to both private and nonprofit corporations. He was a
former adjunct professor of Business Law and Ethics at Boise State University,
and has practiced law in Idaho since 1974.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires that
reports of beneficial ownership of common stock and preferred stock and changes
in such ownership be filed with the Securities and Exchange Commission by
Section 16 "reporting persons" including directors, certain officers, holders of
more than 10% of the outstanding common stock or preferred stock, and certain
trusts of which reporting persons are trustees. The Company is required to
disclose in this proxy statement each reporting person whom it knows has failed
to file any required reports under Section 16 on a timely basis. Based solely
upon a review of copies of Section 16 reports furnished to the Company for the
year ended December 31, 2001, to the Company's knowledge, the following Section
16 reporting requirements applicable to known reporting persons were made: No
reports were filed on Form 4 during the year. Form 5 was filed by various
individuals showing the following: Douglas G. Hastings acquired options for
50,000 shares at $1.00 per share pursuant to the Company's stock option plan for
management; Hastings also acquired 9,237 as a stock dividend from a spin-off
transaction and acquired 72,812 shares in a stock for stock exchange for R-Tec
Machine Tool, Inc.; Hastings also disposed of 238,188 shares in gift
transactions; Gary A. Clayton acquired options for 50,000 shares at $1.00 per
share pursuant to the Company's stock option plan for management; Clayton also
acquired 9,237 as a stock dividend from a spin-off transaction and acquired
72,812 shares in a stock for stock exchange for R-Tec Machine Tool, Inc.;
Clayton also disposed of 238,188 shares in gift transactions; Rulon L. Tolman
acquired options for 57,500 shares at $1.00 per share pursuant to the Company's
stock option plan for management; William E. Browand acquired an interest in
380,000 shares of common stock in a stock for stock exchange for assets of
Browand, LaMeire & Associates, Inc.,(Browand was a director and officer during
2001 but has since resigned and left his employment with the Company); Browland
also acquired options for 50,000 shares at $1.00 per share pursuant to the
Company's stock option plan for management; Jeanette LaMeire acquired an
interest in 380,000 shares of common stock in a stock for stock exchange for
assets of Browand, LaMeire & Associates, Inc.,(LaMeire was an officer during
2001, but her employment with the company has since been terminated); LaMeire
also acquired options for 50,000 shares at $1.00 per share pursuant to the
Company's stock option plan for management; Michael T. Montgomery acquired
options for 50,000 shares at $1.00 per share pursuant to the Company's stock
option plan for management; Montgomery also received 15,000 shares as a stock
bonus for the year. David R. Stewart acquired options for 7,500 shares at $1.00
per share pursuant to the Company's stock option plan for directors; Robert C.
Montgomery acquired options for 7,500 shares at $1.00 per share pursuant to the
Company's stock option plan as corporate secretary.
- 12 -
AUDITOR FEES
The aggregate fees billed by Balukoff, Lindstrom & Co., P.A., for professional
services rendered for the audit of the Company's annual financial statements and
the reviews of the financial statements included in the Company's quarterly
reports on Form 10-QSB, for the fiscal year ended December 31, 2001, were
$27,810.
EXECUTIVE COMPENSATION
The following table shows, for each of the three years ended December 31, 2001,
compensation awarded or paid to, or earned by the Company's Chief Executive
Officer and its other four most highly compensated executive officers at
December 31, 2001 and the prior two years in all capacities, unless such
compensation did not exceed $100,000.
- --------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-term Compensation
------------------------------------------------------------------------------------
Awards Payouts
----------------------------------------------------
Other Securities
Annual Restricted Underlying All
Compen- Stock Options/ LTIP Other
Name and Principal Year Salary Bonus Sation Award(s) SARs Payouts Compensation
Position ($) ($) ($) ($) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------------------------
Douglas G. Hastings 2001 $86,386 -0- 50,000
- --------------------------------------------------------------------------------------------------------------------------------
2000 $80,808 $25,000
- --------------------------------------------------------------------------------------------------------------------------------
1999 $82,032 -0-
- --------------------------------------------------------------------------------------------------------------------------------
Gary A. Clayton 2001 $86,386 -0- 50,000
- --------------------------------------------------------------------------------------------------------------------------------
2000 $80,808 $25,000
- --------------------------------------------------------------------------------------------------------------------------------
1999 $82,032 -0-
- --------------------------------------------------------------------------------------------------------------------------------
(1) Douglas G. Hastings, Gary A. Clayton and the Company's other executive
officers are each paid directly by the Company's subsidiary, R-Tec Corporation.
(2) The Company was not in existence in 1998. However, its wholly owned
subsidiary, R-Tec Corporation has been in business since 1995.
(3) No other executive officers of the Company, except for Hastings and Clayton,
received a salary and bonus which added together exceeded $100,000 for the years
1999, 2000 and 2001.
(4) As an additional benefit, Hastings and Clayton both receive the use of a
vehicle and gas card paid for by the Company.
The Company, on a discretionary basis, may grant options to its directors,
executive officers, consultants and key employees pursuant to the R-Tec Holding,
Inc., 2000 Stock Option Plan. As of December 31, 2001, options to purchase
429,600 shares were outstanding with 1,530,400 shares remaining available for
grant. Of the 429,600 shares subject to the option plan, 315,000 have been
granted to executive officers as indicated in the table below. 60,000 have been
granted to non-employee directors of the Company and 54,600 granted to
non-executive status employees. The following table provides information
concerning 2001 stock option grants to the Company's executive officers.
- 13 -
2001 OPTION GRANTS
- -------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Option/SARs Employees Exercise or
Granted In Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date
- -------------------------------------------------------------------------------------
Doglas G. Hastings 50,000 $1.00 2011
- -------------------------------------------------------------------------------------
Gary A. Clayton 50,000 $1.00 2011
- -------------------------------------------------------------------------------------
Rulon L. Tolman 65,000 $1.00 2011
- -------------------------------------------------------------------------------------
Michael T. Montgomery 50,000 $1.00 2011
- -------------------------------------------------------------------------------------
Jeanette LaMeire 50,000 $1.00 2011
- -------------------------------------------------------------------------------------
William E. Browand 50,000 $1.00 2011
- -------------------------------------------------------------------------------------
There were no executive officers' or directors' stock options exercised in 2000
or in 2001. Executive officers and /or director options remaining outstanding at
the end of 2001 were as follows: Douglas G. Hastings, 50,000 shares; Gary A.
Clayton, 50,000 shares; Rulon L. Tolman, 65,000 shares; Michael T. Montgomery,
50,000 shares; Jeanette LaMeire, 50,000 shares; William E. Browand, 50,000
shares; David R. Stewart, 22,500 shares and Robert C. Montgomery, 22,500 shares.
AUDIT COMMITTEE REPORT, CHARTER, INDEPENDENCE
The Audit Committee has reviewed and discussed the Company's audited financial
statements with management. The Audit Committee has discussed with Balukoff,
Lindstrom & Co., P.A., the Company's independent auditors, the matters required
to be discussed by Statement on Auditing Standards 61, which includes, among
other items, matters related to the conduct of the audit of the Company's
financial statements.
The Audit Committee has received written disclosure and the letter from the
auditors required by Independence Standards Board Standard No. 1, which relates
to the auditor's independence from the Company and its related entities, and has
discussed with the auditors the auditor's independence from the Company. The
Audit Committee has considered whether the provision of services by the
auditors, other than audit services and review of Forms 10-QSB is compatible
with maintaining the auditor's independence.
Based on the review and discussions of the Company's audited financial
statements with management and discussion with the independent auditors, the
Audit Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2001.
This report is respectfully submitted by the Audit Committee of the Company's
Board of Directors:
Rulon L. Tolman, Audit Committee Chairman
David R. Stewart, Audit Committee Member
- 14 -
AUDIT COMMITTEE CHARTER
The Board of Directors had adopted a written charter for the Audit Committee, a
copy of which is attached as Exhibit B.
AUDIT COMMITTEE INDEPENDENCE
Until more outside directors are added to the Company's Board of Directors, the
members of the Audit Committee do not meet all of the requirements for
independence as set forth in the Listing Standards of the National Association
of Securities Dealers.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth, as of October 1, 2002, the beneficial ownership
(as defined in the rules of the Securities and Exchange Commission) of the
Company's common stock and Series A Preferred Stock by (a) beneficial owners of
more than five percent; and (b) beneficial ownership of management. Unless
otherwise noted, each beneficial owner identified has sole voting and investment
power with respect to the shares indicated.
(a) BENEFICIAL OWNERS
The following table reflects the ownership by the persons indicated as of
September 1, 2002.
a: Beneficial Owners, known to the Company, owning more than 5% of voting
securities:
The following table sets forth information regarding the shares of Common Stock
and Preferred Stock of the Company that is convertible into common stock, which
is presently held beneficially by (i) each director and executive officer of the
Company, (ii) all officers and directors as a group, and (iii) each person known
by the Company to beneficially own 5% or more of the outstanding shares of the
Company's common and preferred stock. Share ownership and subscriptions are
reflected as of September 1, 2002.
Name and Address Amount & Nature
of Beneficial Owner of Beneficial Owner Percent of
Common - Preferred Common - Preferred
- ---------------------------------------------------------------------------------------
a. MORE THAN FIVE PERCENT SHAREHOLDERS
L. William Glazier(11) 250,000 568,974 1.23% 20.48%
121 Tyson Dr.
Cottage Grove, OR 97424
Ronald J. Tolman(11) 694,340 599,479 3.43% 21.58%
2326 Bruins Avenue
Boise, Idaho 83704
b. DIRECTORS AND EXECUTIVE OFFICERS
Gary A. Clayton(1)((2)(3) 4,337,847 -0- 21.42% -0-%
1471 E. Commercial Ave
Meridian, Idaho 83642
Douglas G. Hastings(1)(2)(4) 4,337,845 -0- 21.42% -0-%
1471 E. Commercial Ave
Meridian, Idaho 83642
Rulon L. Tolman(1)(2)(5) 1,099,250 531,638 4.3% 19.14%
7213 Potomac Drive
Boise, Idaho 83704
David R. Stewart(2)(6) 103,490 -0- 0.51% -0-%
9486 Fairview Ave
Boise, Idaho
Michael T. Montgomery(1)(7) 115,000 -0- 0.57% -0-%
3072 Maywood Ave
Boise, Idaho 83704
William E. Browand(1)(2)(8) 430,000* -0- 2.12% -0-%
C/O R-Tec Holding, Inc.
1471 E. Commercial Ave
Meridian, Idaho 83642
Jeanette LaMeire(1)(9) 430,000* -0- 2.12% -0-%
Robert C. Montgomery(1)(10) 271,300 149,337 1.34% 5.38%
2160 S. Twin Rapid Way
Boise, Idaho 83709
All Officers and Directors
as a Group (7 persons) 10,824,732* 2,778,090 53.44% 24.51%
- 15 -
* William E. Browand left his employment with the Company in the spring of
2002. Jeanette LaMeire's employment with the Company was terminated in the
spring of 2002. In addition, Mr. Browand resigned his position on the
Board of Directors, effective April 12, 2002, citing personal reasons.
380,000 of the total shares listed as beneficially owned by William E.
Browand and Jeanette LaMeire are the same shares and are not counted twice
for this calculation. Please refer to notes 8 & 9 for the explanation.
Total Shares Issued and Outstanding 20,256,005 2,778,090
(1) These individuals are current executive officers of the Company
except for William E. Browand and Jeanette LaMeire who left the
Company in the spring of 2002
(2) These individuals are current directors of the Company except for
William E. Browand who resigned as a director April 12, 2002.
(3) The beneficial ownership of Gary A. Clayton includes 100,000 options
By grant.
(4) The beneficial ownership of Douglas G. Hastings includes 100,000
options by grant.
- 16 -
(5) The beneficial ownership of Rulon L. Tolman includes 120,000 options
by grant.
(6) The beneficial ownership of David R. Stewart includes 37,500 options
by grant.
(7) The beneficial ownership of Michael T. Montgomery includes 65,000
options by grant.
(8) The beneficial ownership of William E. Browand includes 50,000
options by grant and 380,000 shares of the Company's common stock
issued to Browand, LaMeire & Associates, Inc., a corporation of
which Mr. Browand and Jeanette LaMeire are each 50% shareholders.
The shares were issued pursuant to the terms of an asset purchase
agreement between the Company and Browand, LaMeire and Associates.
(9) The beneficial ownership of Jeanette LaMeire includes 50,000 options
by grant and the same 380,000 shares of the Company's common stock
issued to Browand, LaMeire & Associates, Inc., a corporation of
which Ms. LaMeire is a 50% shareholder as indicated in No. 8 above.
The shares were issued pursuant to the terms of an asset purchase
agreement between the Company and Browand, LaMeire and Associates.
(10) The beneficial ownership of Robert C. Montgomery includes 37,500
options by grant.
(11) If converted to Common Stock at the present conversion ratio, the
Preferred Stock would represent approximately 12.1% of the after-
conversion issued and outstanding common stock.
(b) CHANGES IN CONTROL. When the Company was formed, shareholders Douglas G.
Hastings, Gary A. Clayton, Rulon L. Tolman, Ronald J. Tolman, L. William
Glazier, Robert C. Montgomery, George W. Wadsworth and Keith Cline, entered into
a voting agreement under which Hastings and Clayton have the right to nominate 3
of the 5 directors and the other named shareholders have the right to nominate 2
of the 5 directors. The combined ownership, which controls a voting percentage
of approximately 65%, would then be voted as a block for the nominated
directors. The voting agreement is effective for 5 years from August 11, 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
a. Commercial Building Ownership and leases:
R-Tec Corporation, the Company's subsidiary, currently leases the building it
presently occupies at 1471 E. Commercial Ave, Meridian, Idaho 83642 from H2C2 &
Associates, LLC, an Idaho limited liability company owned by Mr. and Mrs.
Hastings and Mr. and Mrs. Clayton under a five year lease ending November 30,
2004, with an option to extend the lease for an additional five years. The
rental rate is $5,165 per month subject to annual Cost of Living Index
increases.
b. Stock Transactions with Douglas G. Hastings and Gary A. Clayton.
On November 3, 1999, the Company issued 4,266,797 shares of Common Stock 50%
ownership) in a private placement transaction, to Gary A. Clayton and Douglas G.
Hastings the two shareholder-owners of R-Tec Corporation, an engineering company
located in Meridian, Idaho, in exchange for 80% of the outstanding stock of
R-Tec Corporation. In addition, the Company contributed its stock of IntorCorp,
Inc. to R-Tec Corporation. On November 4, 1999, R-Tec Corporation redeemed the
remaining 20% of R-Tec Corporation stock from the two shareholder-owners for the
price of $100,000 paid with an interest bearing promissory note payable from
available earnings commencing in January of 2001.
- 17 -
(c) Purchase of R-Tec Machine Tools by the Company
On July 3, 2001, the Company acquired R-Tec Machine Tool, Inc., an Idaho
corporation pursuant to a Share Exchange and Reorganization Agreement by and
between the Company and the four individual shareholders of R-Tec Machine Tool.
Under the terms of the Agreement, the parties agreed to be bound by and accept
the fair market value placed on R-Tec Machine Tool obtained from an independent
business appraisal. Consideration for the acquisition was 291,248 shares of the
common stock of the Registrant valued at $1.00 per share which the parties agree
and acknowledge was the fair market value of the Company's shares as of the date
of the Agreement. The Agreement provides for each of the four R-Tec Machine Tool
shareholders to receive equal shares of the Company's common stock in the
transaction. Two of R-Tec Machine Tool shareholders, Douglas G. Hastings and
Gary A. Clayton, are also officers, directors and major shareholders of the
Company. The other two shareholders of R-Tec Machine Tool are Walter T. Hinkle
and Joseph E. Hawkins. R-Tec Machine Tool is located in the same building used
by the Company as its primary business location.
(d) Purchase of Assets from Browand, LaMeire & Associates
On July 17, 2001, the Company acquired certain assets from Browand, LaMeire &
Associates, Inc., an Oregon corporation, pursuant to an Asset Purchase Agreement
(the "Agreement") by and between the Company and Browand, LaMeire & Associates
and its two shareholders, William E. Browand and Jeanette LaMeire. The Agreement
culminated a lengthy period of discussion and negotiation between the parties.
Under the terms of the Agreement, the Company acquired certain assets which
include the client list and industry contacts, certain items of office equipment
and inventory. Consideration for the acquisition was 380,000 shares of the
common stock of the Company valued at $1.00 per share which the parties agree
and acknowledge was the fair market value of the Company's shares as of the date
of the Agreement. The Agreement provides for the shares to be issued in the name
of Browand, LaMeire & Associates, Inc. Wlliam E. Browand was initially employed
as Vice President of Sales for the Company and Jeanette LaMeire was initially
employed as Vice President of Marketing. William E. Browand was also appointed
to the board of directors of the Company to fill the vacancy left by the
resignation of John R. Hansen, Jr. Browand left his employment with the Company
in the spring of 2002. LaMeire's employment with the Company was terminated in
the spring of 2002.
STOCKHOLDER PROPOSALS AT THE NEXT
ANNUAL MEETING OF STOCKHOLDERS
The Company must receive stockholder proposals submitted for inclusion in the
Company's 2002 proxy materials and consideration at the 2002 annual meeting of
stockholders no later than March 15, 2003. Stockholder proposals should be
submitted to the Secretary of R-Tec Holding, Inc., 1471 E. Commercial Ave.,
Meridian, Idaho 83642. Any such proposal should comply with the Securities and
Exchange Commission rules governing stockholder proposals submitted for
inclusion in proxy materials.
- 18 -
OTHER MATTERS
The management and Board of Directors of the Company know of no other matters
that may come before the Meeting. However, if any matters other than those
referred to above should properly come before the Meeting, it is the intention
of the persons named in the enclosed proxy to vote all proxies in accordance
with their best judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001, AS FILED WITH THE SEC, EXCLUDING EXHIBITS, MAY BE OBTAINED BY
STOCKHOLDERS WITHOUT CHARGE BY WRITTEN REQUEST ADDRESSED TO R-TEC HOLDING, INC.,
ATTN: RULON TOLMAN, 1471 E. COMMERCIAL AVE, MERIDIAN, IDAHO 83642. A COPY OF ANY
EXHIBITS TO FORM 10-KSB MAY ALSO BE OBTAINED BY CONTACTING THE COMPANY AS
INDICATED ABOVE AND PAYING FOR THE COMPANY'S COST FOR COPYING SUCH DOCUMENTS.
R-TEC HOLDING, INC.
DOUGLAS G. HASTINGS
President & CEO
EXHIBIT "A"
FORM OF PROXY
Please mark your votes with an [X] as indicated in this example
A VOTE IN FAVOR OF PROPOSALS 1, 2 and 3 IS RECOMMENDED BY THE BOARD OF
DIRECTORS.
1. ELECTION OF DIRECTORS (IF YOU DESIRE TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL MEMBER, STRIKE A LINE THROUGH THE MEMBER'S NAME IN THE LIST
BELOW)
[ ] WITHHOLD AUTHORITY [ ] VOTE FOR ALL NOMINEES BELOW
to vote for all nominees Douglas G. Hastings
Gary A. Clayton
Rulon L. Tolman
David R. Stewart
2. TO RATIFY THE SELECTION OF BALUKOFF, LINDSTROM & CO., P.A. AS THE
COMPANY'S INDEPENDENT AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. VOTE TO AMEND THE ARTICLES OF INCORPORATION OF THE COMPANY TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF VOTING COMMON STOCK FROM 30,000,000 TO
60,000,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
- 19 -
The undersigned acknowledge(s) receipt of the Notice of the Annual
Meeting, the Proxy Statement and Annual Report, each dated October ___,
2002.
Date_________________________________________, 2002
_____________________________________________ SIGNATURE OF STOCKHOLDER
_____________________________________________ SIGNATURE IF HELD JOINTLY
R-TEC HOLDING, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, hereby revoking all prior proxies, hereby appoints
Douglas G. Hastings, Gary A. Clayton and Rulon L. Tolman and each of them,
proxies with full and several power of substitution, to represent and to vote
all the shares of Common Stock of R-TEC HOLDING, INC., that the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of R-TEC HOLDING, INC., to be held on November 19, 2002, and at any
adjournment(s)thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC INDICATIONS ON
THE REVERSE SIDE. IN THE ABSENCE OF SUCH INDICATIONS, A SIGNED PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 & 3, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PROXY
WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BEFORE THE MEETING.
- 20 -
"Exhibit B"
R-Tec Holding, Inc.
AUDIT COMMITTEE CHARTER
Role
The Audit Committee of the Board of Directors of R-Tec Holding, Inc.
(hereinafter referred to as the "Company") shall be responsible to the Board of
Directors for oversight of the quality and integrity of the accounting,
auditing, and reporting practices of the Company and shall perform such other
duties as may be directed by the Board. The Committee shall maintain free and
open communication with the Company's outside auditors and management of the
Company and shall meet in executive session at least annually. In discharging
this oversight role, the Committee is empowered to investigate any matter
brought to its attention, with full power to retain outside counsel or other
experts for this purpose. The Board and the Audit Committee have the ultimate
authority and responsibility to select, oversee, evaluate, and, where
appropriate, to replace the outside auditor (or to nominate the outside auditor
to be proposed for shareholder approval in any proxy statement). The outside
auditor is ultimately accountable to the Board of Directors and the Audit
Committee as the representatives of the shareholders.
Membership and Independence
The Audit Committee shall include at least three members of the Board of
Directors, who are independent directors, each of whom is able to read and
understand fundamental financial statements, including the Company's balance
sheet, income statement, and cash flow statement or will become able to do so
within a reasonable period of time after his or her appointment to the Audit
Committee. At least one member of the Audit Committee shall have past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which results in
the individual's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities. Notwithstanding the above, one director
who is not independent as defined in Rule 4200 of the SEC, and is not a current
employee or an immediate family member of such employee, may be appointed to the
Audit Committee, if the Board, under the circumstances, determines that
membership on the committee by such individual is required by the best interests
of the corporation and its shareholders, and the Board discloses, in its next
annual proxy statement subsequent to such determination, the nature of the
relationship and the reasons for that determination.
Responsibilities
Internal Control
o Review the books and accounts of the Company and supervise the
financial controls of the Company; participate in the selection of
the Company's outside auditors; act upon recommendations of the
outside auditors; and take such further actions as the Committee
deems necessary to complete an audit of the books and accounts of
the Company.
o Perform additional functions and have such other powers as may be
necessary or convenient for the efficient discharge of the
foregoing.
o Review and reassess the adequacy of this charter on an annual basis.
Financial Reporting
o Keep informed of important new pronouncements from the accounting
profession and other regulatory bodies, as well as other significant
accounting and reporting issues, that may have an impact on the
Company's accounting policies and/or financial statements.
- 21 -
o Review the audited financial statements and management's discussion
and analysis of financial condition and results of operations
("MD&A") and discuss them with management and the outside auditors.
Such discussions shall include consideration of the quality of the
Company's accounting policies and principles as applied in its
financial reporting, including review of estimates, reserves and
accruals, review of judgment areas, review of audit adjustments,
whether or not recorded, and such other inquiries as may be
appropriate.
External Audit
o Review the performance of the outside auditors and recommend to the
Board the outside auditors to be engaged to audit the financial
statements of the Company and, if appropriate, the termination of
that relationship. In doing so, the Committee will request from the
auditors a written affirmation that the auditors are independent,
discuss with the auditors any relationships that may impact the
auditors' independence (including non-audit services) as
contemplated by Independence Standards Board Standard No. 1, and
recommend to the Board any actions necessary to oversee the
auditors' independence.
o Oversee the outside auditors' relationship by discussing with the
outside auditors the nature, scope and rigor of the audit process,
their ultimate accountability is to the Board of Directors and the
Audit Committee, as representatives of the shareholders. The Audit
Committee shall receive and review audit reports.
Reporting to Board of Directors
o Report to the Board of Directors from time to time, or whenever it
shall be called upon to do so.
Members of the Audit Committee as Selected by the Board of Directors for the
reporting period January 2000 thru December 2001 shall include the following:
Rulon L. Tolman
David R. Stewart
Robert C. Montgomery, Secretary
Board Approval:
By
---------------------------------- ----------------
Board Member, President & CEO Date