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Securities Exchange Act of 1934
Check the appropriate box:
|_| Preliminary Information Statement
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Only (as permitted by Rule 14c-5(d)(2))
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AutoInfo, Inc.
(Name of Registrant as Specified in Its Charter)
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AUTOINFO, INC.
6401 Congress Avenue
Suite 230
Boca Raton, Florida 33487
(Principal Executive Offices)
INFORMATION STATEMENT
----------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
THIS INFORMATION STATEMENT IS BEING PROVIDED TO
STOCKHOLDERS TO INFORM THEM OF STOCKHOLDER
ACTION TAKEN BY WRITTEN CONSENT OF A MAJORITY
OF AUTOINFO, INC. STOCKHOLDERS.
Pursuant to the requirements of Section 14(c) of the Securities Exchange
Act of 1934 and Section 228(d) of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law"), this Information Statement is being
furnished to the stockholders of record as of June 30, 2003 (the "Record Date")
of AutoInfo, Inc., a Delaware corporation ("AutoInfo"), in connection with the
following actions which have been approved by written consent of the holders of
a majority of the outstanding voting securities of AutoInfo:
(1) an amendment to Article FOURTH of AutoInfo's Certificate of
Incorporation increasing AutoInfo's total authorized capital stock from
100,000,000 shares to 110,000,000 shares, of which 100,000,000 shares shall be
common stock, with a par value of $0.001 per share (the "Common Stock") and
10,000,000 shares shall be preferred stock, with a par value of $0.001 per share
(the "Preferred Stock"). The Preferred Stock may be issued from time to time in
one or more series with such designations, preferences and relative
participating, optional or other special rights and qualifications, limitations
or restrictions thereof, as shall be stated in the resolutions adopted by the
Board of Directors providing for the issuance of such Preferred Stock or series
thereof (the "Amendment"). The Amendment will be filed with the Secretary of
State of the State of Delaware on or after the twentieth day after this
Information Statement is first sent to the stockholders of AutoInfo.
(2) the election of four directors to hold office until their successors
are elected and qualified;
(3) the approval of the AutoInfo 2003 Stock Option Plan; and
(4) the ratification of Dworken, Hillman, LaMorte & Sterczala, P.C. as
independent auditors for AutoInfo for fiscal 2003.
OUTSTANDING SECURITIES AND VOTING RIGHTS
As of the Record Date, there were issued and outstanding 27,347,923 shares
of Common Stock. The Majority Stockholders (as identified below) held 15,600,000
shares of Common
1
Stock, or approximately 57% of AutoInfo's issued and outstanding Common Stock as
of the Record Date.
Each holder of Common Stock would normally be entitled to one vote in
person or by proxy for each share of Common Stock in his or her name on the
books of AutoInfo, as of the Record Date, on any matter submitted to a vote of
stockholders. However, under Section 228(a) of the Delaware Corporation Law, any
action which may be taken at a stockholders' meeting may be taken by written
consent of the requisite number of stockholders required to take such action.
The proposed actions require the affirmative vote or written consent of a
majority of AutoInfo's outstanding Common Stock. On June 23, 2003, the Majority
of Stockholders consented to these actions by written consent.
Delaware law does not afford to the stockholders the right to dissent from
the corporate action described in this Information Statement or to receive an
agreed or judicially appraised value for their shares.
The Majority Stockholders and the number of shares voted by them is as
follows:
Number of Percentage of
Stockholder Shares Voted Outstanding
- ----------- ------------ -----------
Harry Wachtel 7,220,000 26.4%
Thomas C. Robertson 60,000 *
Peter C. Einselen 230,000 0.8%
Mark Weiss 1,000,000 3.7%
William I. Wunderlich 820,000 3.0%
James T. Martin/Lizstan Ltd. 6,270,000 22.9%
---------- ----
TOTAL 15,600,000 57.0%
========== ====
- ----------
* less than one percent.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table, together with the accompanying footnotes, sets forth
information, as of May 31, 2003, regarding stock ownership of all persons known
by us to own beneficially 5% or more of our outstanding common stock, all
directors, and all directors and executive officers as a group.
2
Name of Shares of Common Stock Percentage
Beneficial Owner (1) Beneficially Owned Of Ownership
-------------------- ------------------ ------------
(i) Directors and Executive Officers
Harry Wachtel 9,770,000(2) 34.7%
Thomas C. Robertson 227,500(3) *
Peter C. Einselen 1,245,500(4) 4.4%
Mark Weiss 1,000,000(7) 3.7%
William I. Wunderlich 1,765,000(5)(8) 6.2%
All executive officers and directors as
a group (5 persons) 12,258,000(9) 40.5%
(ii) 5% Stockholders
James T. Martin 6,622,000(6) 23.9%
- ----------
* Less than 1%
(1) Unless otherwise indicated below, each director, executive officer and
each 5% stockholder has sole voting and investment power with respect to
all shares beneficially owned. The address for Mr. Wachtel and Mr.
Wunderlich is c/o AutoInfo, Inc., 6401 Congress Avenue, Suite 230, Boca
Raton, FL 33487. The address for Dr. Martin is c/o Bermuda Trust Company,
Compass Point Road, 9 Bermudian Road, Hamilton HM11, Bermuda.
(2) Includes 800,000 shares issuable upon the conversion of a convertible
subordinated debenture; and 1,750,000 shares with respect to which Mr.
Wachtel has been granted voting rights pursuant to voting proxy
agreements.
(3) Includes 67,500 shares issuable upon the exercise of stock options and
100,000 shares issuable upon the conversion of a convertible subordinated
debenture.
(4) Includes 67,500 shares issuable upon the exercise of stock options and
948,000 shares issuable upon the conversion of a convertible subordinated
debenture.
(5) Includes 845,000 shares issuable upon the exercise of stock options and
100,000 shares issuable upon conversion of a convertible subordinated
debenture.
(6) Includes 352,000 shares issuable upon the conversion of a convertible
subordinated debenture.
(7) Includes 1,000,000 with respect to which Mr. Weiss has granted voting
rights to Mr. Wachtel pursuant to a voting proxy agreement. Mr. Weiss
retains full control over the disposition of these shares.
(8) Includes 750,000 with respect to which Mr. Wunderlich has granted voting
rights to Mr. Wachtel pursuant to a voting proxy agreement. Mr. Wunderlich
retains full control over the disposition of these shares.
(9) Assumes that all currently exercisable options or warrants owned by
members of this group have been exercised and all convertible subordinated
debentures owned by this group have been converted.
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than ten percent of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (SEC). Officers, directors and
greater than ten-percent stockholders are required by SEC regulation to furnish
us with copies of all Section 16(a) forms they file. Based solely on review of
the copies of such forms furnished to us, or written representations that no
Forms 5 were required, we believe that all Section 16(a) filing requirements
applicable to our officers and directors were complied with.
AMENDMENT TO CERTIFICATE OF INCORPORATION
AUTHORIZING A NEW CLASS OF PREFERRED STOCK
On June 13, 2003 the Board of Directors adopted, subject to stockholder
approval, an amendment to AutoInfo's Certificate of Incorporation increasing the
authorized capitalization by 10,000,000 shares of Preferred Stock, par value
$.001 per share, issuable in series, each series possessing such rights,
preferences and privileges as are determined by the Board of Directors upon the
designation of that series. If the outstanding shares of any series are given
voting rights,
3
they will vote together with the Common Stock as one class and such voting
rights will not be superior to the voting rights of the Common Stock.
Nonconvertible shares of any series will not be granted more than one vote per
share and each share of a convertible series will not be granted the right to
more than one vote for each share of Common Stock into which it is convertible.
Stockholder authorization of this class of Preferred Stock would leave within
the discretion of the Board the determination of matters such as dividend rights
or interest rates, conversion privileges, redemption prices, liquidation
preferences and other rights and enable the Board to fix these rights without
additional stockholder approval. Depending on the determination of the specific
voting rights of any series of Preferred Stock, even within the limitations set
forth above or the determination of other rights and privileges of the series,
the rights of the Common Stock could be adversely affected. Authorization for
preferred stock of the type now being sought by AutoInfo, sometimes referred to
as "Variable Preferred Stock" or "Blank Check Preferred Stock" is possessed by
many corporations and would provide AutoInfo with a flexible financial
instrument which could be used by it in merger or acquisition transactions, in
satisfaction of existing indebtedness, in payment of trade creditors or in
future financing transactions. Accordingly, the Board believes, that having
authorized "Blank Check" Preferred Stock will provide AutoInfo with increased
flexibility in structuring and a greater possibility of effecting one or more of
the foregoing transactions. However, at the present time there are no agreements
or any specific plans with respect to the use of this Preferred Stock.
The issuance of Preferred Stock could, under certain circumstances, have
an anti-takeover effect (for example, by diluting the stock ownership of a
person seeking to effect a change in the composition of the Board of Directors
or contemplating a tender offer or other transaction directed to the combination
of AutoInfo with another company), the current proposal to amend the Certificate
of Incorporation is not in response to any effort to accumulate the Company's
stock or to obtain control of AutoInfo by means of a merger, tender offer,
solicitation in opposition to management or otherwise. As of the date of this
Information Statement, management is not aware of any actions taken by any
person or group to obtain control of AutoInfo. In addition, the proposal is not
part of any plan by management to recommend a series of similar amendments to
the Board of Directors and the stockholders.
APPROVAL OF THE AUTOINFO 2003 STOCK OPTION PLAN
On June 13, 2003 the Board of Directors adopted, subject to stockholder
approval, the AutoInfo 2003 Stock Option Plan (the "2003 Plan"), which provides,
among other matters, for the grant to AutoInfo's employees, directors,
consultants and agents of incentive and/or non-qualified stock options to
purchase up to 3,000,000 shares of Common Stock.
The purpose of the 2003 Plan is to provide incentives to employees,
directors and consultants whose performance will contribute to our long-term
success and growth, to strengthen our ability to attract and retain employees,
directors and consultants of high competence, to increase the identity of
interests of such people with those of our stockholders and to help build
loyalty to AutoInfo through recognition and the opportunity for stock ownership.
A committee of the Board will administer the 2003 Plan.
The following description of the 2003 Plan is a summary and is qualified
in its entirety by reference to the 2003 Plan, a copy of which is annexed hereto
as Appendix A.
4
Eligibility
Under the 2003 Plan, incentive stock options may be granted only to
employees and non-qualified stock options may be granted to employees, directors
and consultants. To date, no options have been granted under the 2003 Plan.
Terms of Options
The 2003 Plan permits the granting of both incentive stock options and
non-qualified stock options. Generally, the option price of both incentive stock
options and non-qualified stock options must be at least equal to 100% of the
fair market value of the shares on the date of grant. The maximum term of each
option is ten years. For any participant who owns shares possessing more than
10% of the voting rights of AutoInfo's outstanding shares of Common Stock, the
exercise price of any incentive stock option must be at least equal to 110% of
the fair market value of the shares subject to such option on the date of grant
and the term of the option may not be longer than five years. Options become
exercisable at such time or times as the Board committee may determine at the
time it grants options.
Federal Income Tax Consequences
Non-qualified Stock Options. The grant of non-qualified stock options will
have no immediate tax consequences to AutoInfo or the grantee. The exercise of a
non-qualified stock option will require an employee to include in his gross
income the amount by which the fair market value of the acquired shares on the
exercise date (or the date on which any substantial risk of forfeiture lapses)
exceeds the option price. Upon a subsequent sale or taxable exchange of the
shares acquired upon exercise of a non-qualified stock option, an employee will
recognize long or short-term capital gain or loss equal to the difference
between the amount realized on the sale and the tax basis of such shares.
We will be entitled (provided applicable withholding requirements are met)
to a deduction for Federal income tax purposes at the same time and in the same
amount as the employee is in receipt of income in connection with the exercise
of a non-qualified stock option.
Incentive Stock Options. The grant of an incentive stock option will have
no immediate tax consequences to AutoInfo or the employee. If the employee
exercises an incentive stock option and does not dispose of the acquired shares
within two years after the grant of the incentive stock option nor within one
year after the date of the transfer of such shares to him (a "disqualifying
disposition"), he will realize no compensation income and any gain or loss that
he realizes on a subsequent disposition of such shares will be treated as a
long-term capital gain or loss. For purposes of calculating the employee's
alternative minimum taxable income, however, the option will be taxed as if it
were a non-qualified stock option.
The following table sets forth, as of December 31, 2002, information
concerning our 2000 stock option plans, as well as information relating to other
equity compensation plans that we have adopted.
5
Equity Compensation Plan Table (1)
---------------------------------------------------------------------
Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding for future issuance
outstanding options, options, warrants under equity
warrants and rights and rights compensation plans
------------------- ---------- ------------------
Equity Compensation Plans Approved By
Security Holders 2,583,196 $0.11 726,804
Equity Compensation Plans Not Requiring
Approval By Security Holders (1) -- -- --
--------- ----- -------
Total................................ 2,583,196 $0.11 726,804
========= ===== =======
- ----------
(1) The Company does not have any equity compensation plans which have not
been approved by security holders.
ELECTION OF DIRECTORS
Four directors were elected by the Majority Stockholders, each for a term
of one year and until the election and qualification of a successor. Each
director was an incumbent director.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of our
directors, executive officers and key employees:
Name Age Position
- -------------------- ----- -----------------------------------------------
Peter C. Einselen 63 Director
Thomas C. Robertson 57 Director
Harry Wachtel 45 President, chief executive officer and director
Mark Weiss 43 National account executive and director
William Wunderlich 55 Chief financial officer
PETER C. EINSELEN has been a director since January 1999. Mr. Einselen has
served as senior vice president of Andersen & Strudwick, a brokerage firm, since
1990. From 1983 to 1990, Mr. Einselen was employed by Scott and Stringfellow,
Incorporated, a brokerage firm.
THOMAS C. ROBERTSON has been a director since January 1999. From 1988
through December 31, 2002, Mr. Robertson was president, chief financial officer
and a director of Andersen & Strudwick, a brokerage firm. Currently, Mr.
Robertson is senior vice-president and a director of Andersen & Strudwick. Mr.
Robertson has been president of Gardner & Robertson, a money management firm,
since 1997.
HARRY WACHTEL joined us in conjunction with the acquisition of Sunteck and
has been a director, and our president and chief executive officer since
December 7, 2000. Since 1997, he has been president of Sunteck. From 1992 to
1997, he served as vice president of sales
6
and marketing for Pioneer Services, Inc., a third party, non-asset based
transportation logistics provider. From 1990 to 1991 he served as president of
Guaranteed Federal Financial, a mortgage origination company.
MARK WEISS joined us in conjunction with the acquisition of Sunteck and
has been a director since December 7, 2000. Since 1997, he has been employed by
Sunteck as a national account executive. From 1994 to 1997 he served as a
national account executive for Pioneer Services, Inc., a third party, non-asset
based transportation logistics provider. From 1982 to 1994 he was president of
The Picture Place Ltd. Inc., a retailer and wholesaler of photographic, video
and art equipment and supplies. Mr. Weiss is the brother-in-law of Mr.
Wunderlich, our executive vice president and chief financial officer of the
Company.
WILLIAM WUNDERLICH joined us in October 1992 as our vice president -
finance, became chief financial officer in January 1993, president in January
1999 and, in conjunction with the acquisition of Sunteck, became executive vice
president in December 2000. From 1990 to 1992, he served as vice president of
Goldstein Affiliates, Inc., a public adjusting company. From 1981 to 1990, he
served as executive vice president, chief financial officer and a director of
Novo Corporation, a manufacturer of consumer products. Mr. Wunderlich is a
Certified Public Accountant with a B.A. degree in Accounting and Economics from
the City University of New York at Queens College. Mr. Wunderlich is the
brother-in-law of Mr. Weiss, one of our directors.
Board of Directors Meetings and Committees
During the year ended December 31, 2002, the Board of Directors held four
meetings, the Audit Committee held one meeting and the Compensation Committee
held one meetings. Each director attended all of Board of Directors meetings and
committee meetings on which such director served.
The Board of Directors maintains an Audit Committee and Compensation
Committee, each of which is currently comprised of Messrs. Einselen and
Robertson. Each committee member is a non-employee director of the Company who
meets the applicable independence requirements.
Audit Committee
The Audit Committee approves the selection of the Company's independent
auditors and meets and interacts with the independent auditors to discuss
questions in regard to the Company's financial reporting. In addition, the Audit
Committee reviews the scope and results of the audit with the independent
auditors, reviews with management and the independent auditors the Company's
quarterly and annual operating results, considers the adequacy of the Company's
internal accounting controls and procedures and considers the effects of such
procedures on the auditors' independence.
The Audit Committee currently consists of two directors, both of whom meet
the applicable independence requirements. No member of the Audit Committee is an
officer of the Company or employed or affiliated with Dworken, Hillman, LaMorte
& Sterczala, P.C., nor has any member of the Audit Committee been an officer of
the Company within the past three years. No member of the Audit Committee has
any relationship with the Company that, in the opinion
7
of the Board of Directors, would interfere with his independence from management
and the Company. Each member of the Audit Committee is, in the judgment of the
Board of Directors, financially literate, and at least one member of the Audit
Committee has accounting or related financial management experience. Mr.
Robertson has been designated as the Audit Committee's financial expert.
Compensation Committee
The Compensation Committee is responsible for reviewing and approving
executive compensation programs and has the responsibility for periodically
evaluating and modifying the various compensation plans covering executives. In
addition, the Compensation Committee evaluates the performance of the Company's
executive employees and determines the salaries and other compensation payable
to such persons, consistent with the Company's business and stockholder
objectives. This committee is responsible for leading the annual review of the
Company's chief executive officer's performance.
Option grants during the year ended December 31, 2002
Our compensation committee did not grant any options to the named
executives during the year ended December 31, 2002. During 2001, non-employee
directors were granted options to purchase a total of 30,000 shares of our
common stock at $0.05 per share, the fair market value on the date of grant.
These shares vest ratably over a three-year period.
Option exercises and year-end option values. The following table provides
information with respect to options exercised by the Named Executive Officers
during 2002 and the number and value of unexercised options held by the Named
Executive Officers as of December 31, 2002.
Aggregated Option Exercise in Last Fiscal Year and Year-End Option Values
Number of Shares Underlying Value of Unexercised In-the-
Unexercised Options at Fiscal Money Options At Fiscal
Year-End Year-End (2)
----------------------------- ----------------------------
Shares Acquired
Name on Exercise (#) Value Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------------ ----------- ------------- ----------- -------------
Harry Wachtel -- -- -- -- -- --
Mark Weiss -- -- -- -- -- --
William Wunderlich 50,000 $3,500 845,000 0 $42,250 $0
- ----------
(1) For the purposes of this calculation, value is based upon the difference
between the exercise price of the options and the stock price at date of
exercise.
(2) For the purposes of this calculation, value is based upon the difference
between the exercise price of the exercisable and unexercisable options
and the stock price at December 31, 2002 of $0.15 per share.
Director Compensation
We do not pay any directors' fees. Directors are reimbursed for the costs
relating to attending board and committee meetings. In March 2003, each
non-employee Director was granted options to purchase a total of 52,500 shares
of our common stock at $.11 per share, the fair market value on the date of
grant.
8
EXECUTIVE COMPENSATION
Summary compensation. The following table sets forth certain information
concerning compensation paid for services in all capacities awarded to, earned
by or paid to our chief executive officer and the other most highly compensated
executive officers during 2002, 2001 and 2000 whose aggregate compensation
exceeded $100,000.
All other
Name and principal position Salary Bonus compensation (1)
- --------------------------- ------ ----- ----------------
Harry Wachtel
President and chief executive officer
2002 ....................................... $175,000 $13,035 --
2001 ....................................... $ 75,000(2) -- --
2000 ....................................... $231,325 -- --
William Wunderlich
Executive vice president and chief financial
officer (3)
2002 ....................................... $ 75,000 $28,035 --
2001 ....................................... $ 75,000 -- --
2000 ....................................... $144,960 -- $4,575
Mark Weiss
National account executive
2002 ....................................... $127,836 -- --
2001 ....................................... $131,663 -- --
2000 ....................................... $137,771 -- --
- ----------
(1) Represents amount contributed to the Company's 401(k) deferred
compensation plan.
(2) For the year ended December 31, 2001, Mr. Wachtel waived $100,000 of his
minimum salary.
(3) From January 1, 2000 to November 2001, Mr. Wunderlich was our president.
Employment Agreements
In December 2000, we entered into employment agreements with Messrs.
Wachtel and Wunderlich providing for their employment, as our chief executive
officer and chief financial officer, respectively, for terms expiring on
December 31,2003 subject to automatic one-year renewals unless either party
gives written notice ninety days prior to the end of the then current term of
the agreement. The agreements provide for annual base salaries of $175,000 and
$75,000, respectively, and for participation in all executive benefit plans. As
of April 1, 2003, Mr. Wunderlich's base salaries were increased to $100,000. Mr.
Wachtel's agreement, as amended, provides that he will be entitled to a bonus
equal to 10% of our consolidated pre-tax profit from $100,000 to $1,250,000. Mr.
Wunderlich's agreement provides that he will be entitled to a bonus equal to 10%
of our consolidated pre-tax profit from $100,000 to $1,250,000. Further, the Mr.
Wachtel's agreement provides, among other things, that, if employment is
terminated without cause (as defined) or if he terminates his employment for
good reason (as defined) or within six months after a change of control (as
defined), we will pay him an amount equal to his respective current base salary
plus the average incentive compensation due to him during the remaining term of
the agreement.
9
Certain Relationships and Related Transactions
In August 2001, we entered into a $500,000 line of credit agreement with
James T. Martin, a significant stockholder, secured by our accounts receivable,
which expires in August 2003. Interest on the outstanding borrowings is 17% per
annum, payable quarterly in arrears. As of December 31, 2002, outstanding
borrowings under this line of credit totaled $500,000 and interest of $85,000
and $32,000 was charged to operations in 2002 and 2001, respectively. This line
of credit was terminated in May 2003.
During the year ended December 31, 2001, Harry Wachtel, our president,
waived $100,000 of compensation due pursuant to his employment agreement dated
December 6, 2000.
In December 2001, we lent $100,000 to the father-in-law of Harry Wachtel,
our president. This loan bears interest at 4% per annum and is due in December
2003.
In December 2000, the Company obtained financing totaling $575,000 from
certain related parties in the form of ten year 12% subordinated convertible
debentures. The debentures are convertible into common stock at the option of
the debenture holder at a conversion price of $0.25 per share and are
redeemable, at the option of the holder, on or after December 31, 2003. Interest
of $69,000 was charged to operations in each of 2002 and 2001.
CONFIRMATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Majority Stockholders confirmed the Board's appointment of Dworken,
Hillman, LaMorte & Sterczala, P.C. as the Company's independent accountants for
the fiscal year ending December 31, 2003.
Dworken, Hillman, LaMorte & Sterczala, P.C. has served as the Company's
independent accountants since 1999. During the two most recent fiscal years and
the subsequent interim period preceding the engagement of Dworken, Hillman,
LaMorte & Sterczala, P.C., neither the Company, nor anyone on its behalf, has
consulted with Dworken, Hillman, LaMorte & Sterczala, P.C. regarding: (i) the
application of accounting principles to a specific completed or proposed
transaction, or the type of audit opinion that might be rendered on the
Company's financial statements, which consultation resulted in the providing of
a written report or oral advice concerning the same to the Company that Dworken,
Hillman, LaMorte & Sterczala, P.C. concluded was an important factor considered
by the Company in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was either the subject of a
disagreement (as defined in Rule 304(a)(1)(iv) of Regulation S-B promulgated
under the Securities Act of 1933, as amended) or a reportable event (as defined
in Rule 304(a)(1)(v) of Regulation S-B).
Audit Fees
The aggregate fees billed for the professional services rendered by
Dworken, Hillman, LaMorte & Sterczala, P.C. for the audit of the Company's
annual financial statements for fiscal year 2002 and the reviews of the
Company's financial statements included in the Company's Forms 10-QSB for fiscal
year 2002 totaled $43,000.
10
Financial Information Systems Design and Implementation Fees
No professional services were rendered by Dworken, Hillman, LaMorte &
Sterczala, P.C. in connection with information systems, design and
implementation during fiscal year 2002.
All Other Fees
No non-audit services were rendered by Dworken, Hillman, LaMorte &
Sterczala, P.C. during fiscal 2002.
Work Performed by Principal Accountant's Full Time Permanent Employees
Dworken, Hillman, LaMorte & Sterczala, P.C. utilized its full time,
permanent employees and partners of in performing the Company's audits for
fiscal year 2002.
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board of Directors in
overseeing the Company's financial reporting process. The Board of Directors, in
its business judgment, has determined that all members of the Audit Committee
are "independent", as required by applicable law. In addition, the Board of
Directors has determined that Thomas C. Robertson is both independent and an
audit committee financial expert, as defined by Securities and Exchange
Commission rules. The Audit Committee's responsibilities are described in its
Charter, adopted by the Board of Directors on March 20, 2003, a copy of which is
attached hereto as Appendix B.
In the performance of its oversight function, the Audit Committee has
considered and discussed the audited financial statements with management and
the independent auditors. The Audit Committee has also discussed with the
independent auditors the matters required to be discussed by the Statement on
Auditing Standards No. 61, Communication with Audit Committees, as currently in
effect. Finally, the Audit Committee has received the written disclosures and
the letter from the independent auditors required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees, as
currently in effect, has considered whether the provision of non-audit services
by the independent auditors to the Company is compatible with maintaining the
auditors' independence and has discussed with the auditors the auditors'
independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting, and are not employed by the Company for
accounting, financial management or internal control purposes. Management of the
Company is responsible for the preparation of the Company's financial
statements. The independent auditors are responsible for auditing the Company's
financial statements and expressing an opinion as to their conformity with
generally accepted accounting principles. Members of the Audit Committee rely
without independent verification on the information provided to them and on the
representations made by management and the independent auditors.
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Audit
Committee referred to above and in the Charter, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 2002
as filed with the Securities and Exchange Commission.
11
Submitted by the Audit Committee
Peter C. Einselen
Thomas C. Robertson
OTHER BUSINESS
No further business will be transacted by the written consent to corporate
action in lieu of meeting of stockholders to which this Information Statement
pertains.
By Order of the Board of Directors
Harry W. Wachtel
President
Chairman of the Board and
Chief Executive Officer
Dated: Boca Raton, Florida
June 30, 2003
12
APPENDIX A
AutoInfo, Inc.
2003 STOCK OPTION PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the AutoInfo, Inc. 2003 Stock Option Plan (the
"Plan") is to align the interests of officers, other key employees, consultants,
agents and nonemployee directors of AutoInfo, Inc. (the "Company") and its
affiliates with those of the stockholders of the Company, to afford an incentive
to such officers, employees, consultants and directors to continue as such, to
increase their efforts on behalf of the Company and to promote the success of
the Company's business. To further such purposes, the Committee may grant
options to purchase shares of the Company's common stock. The provisions of the
Plan are intended to satisfy the requirements of Section 16(b) of the Securities
Exchange Act of 1934 and of Section 162(m) of the Internal Revenue Code of 1986,
as amended, and shall be interpreted in a manner consistent with the
requirements thereof, as now or hereafter construed, interpreted and applied by
regulations, rulings and cases.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated below:
(a) "Agreement" shall mean a written agreement entered into between
the Company and an Optionee in connection with an award under the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause," when used in connection with the termination of an
Optionee's employment by the Company or the cessation of an Optionee's service
as a consultant or a member of the Board, shall mean (i) the conviction of the
Optionee for the commission of a felony, or (ii) the willful and continued
failure by the Optionee substantially to perform his duties and obligations to
the Company or a Subsidiary (other than any such failure resulting from his
incapacity due to physical or mental illness), or (iii) the willful engaging by
the Optionee in misconduct that is demonstrably injurious to the Company or a
Subsidiary. For purposes of this Section 2(c), no act, or failure to act, on an
Optionee's part shall be considered "willful" unless done, or omitted to be
done, by the Optionee in bad faith and without reasonable belief that his action
or omission was in the best interest of the Company. The Committee shall
determine whether a termination of employment is for Cause for purposes of the
Plan.
(d) "Change in Control" shall mean the occurrence of the event set
forth in any of the following paragraphs:
(i) any Person (as defined below) is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its subsidiaries)
representing 50% or more of the combined voting power of the Company's
then outstanding securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or
recommended; or
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(iii) there is consummated a merger or consolidation of the
Company or a direct or indirect subsidiary thereof with any other
corporation, other than (A) a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior to
such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company, at least 50% of the combined voting power of the
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its subsidiaries)
representing 50% or more of the combined voting power of the Company's
then outstanding securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the Company's
assets to an entity, at least 50% of the combined voting power of the
voting securities of which are owned by Persons in substantially the same
proportions as their ownership of the Company immediately prior to such
sale.
For purposes of this Section 2(d), "Person" shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the Company
or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean a committee established by the Board to
administer the Plan.
(g) "Common Stock" shall mean shares of common stock, no par value,
of the Company.
(h) "Company" shall mean AutoInfo, Inc., a corporation organized
under the laws of the State of Utah, or any successor corporation.
(i) "Disability" shall mean an Optionee's inability to perform his
duties with the Company or on the Board by reason of any medically determinable
physical or mental impairment, as determined by a physician selected by the
Optionee and acceptable to the Company.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(k) "Fair Market Value" per share as of a particular date shall mean
(i) if the shares of Common Stock are then listed on a national securities
exchange, the closing sales price per share of Common Stock on the national
securities exchange on which the Common Stock is principally traded for the last
preceding date on which there was a sale of such Common Stock on such exchange,
or (ii) if the shares of Common Stock are then traded in an over-the-counter
market, the closing bid price for the shares of Common Stock in such
over-the-counter market for the last preceding date on which there was a sale of
such Common Stock in such market, or (iii) if the shares of Common Stock are not
then listed on a national securities exchange or traded in an over-the-counter
market, such value as the Committee, in its sole discretion, shall determine.
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(l) "Incentive Stock Option" shall mean any option intended to be
and designated as an incentive stock option within the meaning of Section 422 of
the Code.
(m) "Nonemployee Director" shall mean a member of the Board who is
not an employee of the Company.
(n) "Nonqualified Option" shall mean an Option that is not an
Incentive Stock Option.
(o) "Option" shall mean the right, granted hereunder, to purchase
shares of Common Stock. Options granted by the Committee pursuant to the Plan
may constitute either Incentive Stock Options or Nonqualified Stock Options.
(p) "Optionee" shall mean a person who receives a grant of an
Option.
(q) "Option Price" shall mean the exercise price of the shares of
Common Stock covered by an Option.
(r) "Parent" shall mean any company (other than the Company) in an
unbroken chain of companies ending with the Company if, at the time of granting
an Option, each of the companies other than the Company owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other companies in such chain.
(s) "Plan" shall mean this AutoInfo, Inc. 2003 Stock Option Plan.
(t) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in
effect, promulgated by the Securities and Exchange Commission under Section 16
of the Exchange Act, including any successor to such Rule.
(u) "Subsidiary" shall mean any company (other than the Company) in
an unbroken chain of companies beginning with the Company if, at the time of
granting an Option, each of the companies other than the last company in the
unbroken chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other companies in
such chain.
(v) "Ten Percent Stockholder" shall mean an Optionee who, at the
time an Incentive Stock Option is granted, owns (or is deemed to own pursuant to
the attribution rules of Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Parent or Subsidiary.
3. Administration.
The Plan, except as may otherwise be determined by the Board, shall
be administered by the Committee, the members of which shall be "nonemployee
directors" under Rule 16b-3 and "outside directors" under Section 162(m) of the
Code.
The Committee shall have the authority in its discretion, subject to
and not inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically granted
to it under the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to grant Options; to
determine which Options shall constitute Incentive Stock Options and which
Options shall constitute Nonqualified Stock Options; to determine the purchase
price of the shares of Common Stock covered by each Option; to determine the
persons to whom, and the time or times at which awards shall be granted; to
determine the number of shares to be covered by each award; to interpret the
Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the Agreements (which need not be
identical) and to cancel or suspend awards, as necessary; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
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The Committee may not delegate its authority to grant Options. The
Committee may employ one or more persons to render advice with respect to any
responsibility the Committee may have under the Plan. The Board shall have sole
authority, unless expressly delegated to the Committee, to grant Options to
Nonemployee Directors. All decisions, determination and interpretations of the
Committee shall be final and binding on all Optionees of any awards under this
Plan.
The Board shall have the authority to fill all vacancies, however
caused, in the Committee. The Board may from time to time appoint additional
members to the Committee, and may at any time remove one or more Committee
members. One member of the Committee shall be selected by the Board as chairman.
The Committee shall hold its meetings at such times and places as it shall deem
advisable. All determinations of the Committee shall be made by a majority of
its members either present in person or participating by conference telephone at
a meeting or by written consent. The Committee may appoint a secretary and make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any award
granted hereunder.
4. Eligibility.
Awards may be granted to officers and other key employees of and
consultants to the Company, and its Subsidiaries, including officers and
directors who are employees, and to Nonemployee Directors. In determining the
persons to whom awards shall be granted and the number of shares to be covered
by each award, the Committee shall take into account the duties of the
respective persons, their present and potential contributions to the success of
the Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan.
5. Stock.
The maximum number of shares of Common Stock reserved for the grant
of awards under the Plan shall be 3,000,000 , subject to adjustment as provided
in Section 9 hereof. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company.
If any outstanding award under the Plan should for any reason
expire, be canceled or be forfeited without having been exercised in full, the
shares of Common Stock allocable to the unexercised, canceled or terminated
portion of such award shall (unless the Plan shall have been terminated) become
available for subsequent grants of awards under the Plan.
6. Terms and Conditions of Options.
Each Option granted pursuant to the Plan shall be evidenced by an
Agreement, in such form and containing such terms and conditions as the
Committee shall from time to time approve, which Agreement shall comply with and
be subject to the following terms and conditions, unless otherwise specifically
provided in such Option Agreement:
(a) Number of Shares. Each Option Agreement shall state the number
of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically state
that the Option constitutes an Incentive Stock Option or a Nonqualified Stock
Option.
(c) Option Price. Each Option Agreement shall state the Option
Price, which shall not be less than one hundred percent (100%) of the Fair
Market Value of the shares of Common Stock covered by the Option on the date of
grant. The Option Price shall be subject to adjustment as provided in Section 9
hereof. The date as of which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted,
unless such resolution specifies a different date.
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(d) Medium and Time of Payment. The Option Price shall be paid in
full, at the time of exercise, in cash.
(e) Exercise Schedule and Period of Options. Each Option Agreement
shall provide the exercise schedule for the Option as determined by the
Committee; provided, however, that, the Committee shall have the authority to
accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be ten (10) years from the date of the grant of the Option
unless otherwise determined by the Committee; provided, however, that, in the
case of an Incentive Stock Option, such exercise period shall not exceed ten
(10) years from the date of grant of such Option. The exercise period shall be
subject to earlier termination as provided in Sections 6(f) and 6(g) hereof. An
Option may be exercised, as to any or all full shares of Common Stock as to
which the Option has become exercisable, by written notice delivered in person
or by mail to the Secretary of the Company, specifying the number of shares of
Common Stock with respect to which the Option is being exercised.
(f) Termination. Except as provided in this Section 6(f) and in
Section 6(g) hereof, an Option may not be exercised unless (i) with respect to
an Optionee who is an employee of the Company, the Optionee is then in the
employ of the Company or a Subsidiary (or a company or a Parent or Subsidiary
company of such company issuing or assuming the Option in a transaction to which
Section 424(a) of the Code applies), and unless the Optionee has remained
continuously so employed since the date of grant of the Option and (ii) with
respect to an Optionee who is a Nonemployee Director, the Optionee is then
serving as a member of the Board or as a member of a board of directors of a
company or a Parent or Subsidiary company of such company issuing or assuming
the Option. In the event that the employment of an Optionee shall terminate or
the service of an Optionee as a member of the Board shall cease (other than by
reason of death, Disability, or Cause), all Options of such Optionee that are
exercisable at the time of such termination may, unless earlier terminated in
accordance with their terms, be exercised within ninety (90) days after the date
of such termination or service (or such different period as the Committee shall
prescribe).
(g) Death or Disability of Optionee. If an Optionee shall die while
employed by the Company or a Subsidiary or serving as a member of the Board, or
within ninety (90) days after the date of termination of such Optionee's
employment or cessation of such Optionee's service (or within such different
period as the Committee may have provided pursuant to Section 6(f) hereof), or
if the Optionee's employment shall terminate or service shall cease by reason of
Disability, all Options theretofore granted to such Optionee (to the extent
otherwise exercisable) may, unless earlier terminated in accordance with their
terms, be exercised by the Optionee or by his beneficiary, at any time within
one year after the death or Disability of the Optionee (or such different period
as the Committee shall prescribe). In the event that an Option granted hereunder
shall be exercised by the legal representatives of a deceased or former
Optionee, written notice of such exercise shall be accompanied by a certified
copy of letters testamentary or equivalent proof of the right of such legal
representative to exercise such Option. Unless otherwise determined by the
Committee, Options not otherwise exercisable on the date of termination of
employment shall be forfeited as of such date.
(h) Other Provisions. The Option Agreements evidencing awards under
the Plan shall contain such other terms and conditions not inconsistent with the
Plan as the Committee may determine, including penalties for the commission of
competitive acts.
7. Nonqualified Stock Options.
Options granted pursuant to this Section 7 are intended to
constitute Nonqualified Stock Options and shall be subject only to the general
terms and conditions specified in Section 6 hereof.
8. Incentive Stock Options.
Options granted pursuant to this Section 8 are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions
A-5
specified in Section 6 hereof. An Incentive Stock Option may not be granted to a
Nonemployee Director or a consultant to the Company.
(a) Value of Shares. The aggregate Fair Market Value (determined as
of the date the Incentive Stock Option is granted) of the shares of Common Stock
with respect to which Incentive Stock Options granted under this Plan and all
other option plans of any subsidiary become exercisable for the first time by
each Optionee during any calendar year shall not exceed $100,000.
(b) Ten Percent Stockholder. In the case of an Incentive Stock
Option granted to a Ten Percent Stockholder, (i) the Option Price shall not be
less than one hundred ten percent (110%) of the Fair Market Value of the shares
of Common Stock on the date of grant of such Incentive Stock Option, and (ii)
the exercise period shall not exceed five (5) years from the date of grant of
such Incentive Stock Option.
9. Effect of Certain Changes.
(a) In the event of any extraordinary dividend, stock dividend,
recapitalization, merger, consolidation, stock split, warrant or rights
issuance, or combination or exchange of such shares, or other similar
transactions, each of the number of shares of Common Stock available for awards,
the number of such shares covered by outstanding awards, and the price per share
of Options, as appropriate, shall be equitably adjusted by the Committee to
reflect such event and preserve the value of such awards.
(b) Upon the occurrence of a Change in Control, each Option granted
under the Plan and then outstanding but not yet exercisable shall thereupon
become fully exercisable.
10. Surrender and Exchange of Awards.
The Committee may permit the voluntary surrender of all or a portion
of any Option granted under the Plan or any option granted under any other plan,
program or arrangement of the Company or any Subsidiary ("Surrendered Option"),
to be conditioned upon the granting to the Optionee of a new Option for the same
number of shares of Common Stock as the Surrendered Option, or may require such
voluntary surrender as a condition precedent to a grant of a new Option to such
Optionee. Subject to the provisions of the Plan, such new Option may be an
Incentive Stock Option or a Nonqualified Stock Option, and shall be exercisable
at the price, during such period and on such other terms and conditions as are
specified by the Committee at the time the new Option is granted.
11. Period During Which Awards May Be Granted.
Awards may be granted pursuant to the Plan from time to time within
a period of ten (10) years from the date the Plan is adopted by the Board, or
the date the Plan is approved by the stockholders of the Company, whichever is
earlier, unless the Board shall terminate the Plan at an earlier date.
12. Nontransferability of Awards.
Except as otherwise determined by the Committee, awards granted
under the Plan shall not be transferable otherwise than by will or by the laws
of descent and distribution, and awards may be exercised or otherwise realized,
during the lifetime of the Optionee, only by the Optionee or by his guardian or
legal representative.
13. Approval of Stockholders.
The Plan shall take effect upon its adoption by the Board and shall
terminate on the tenth anniversary of such date, but the Plan shall be subject
to the approval of Company's stockholders, which approval must occur within
twelve months of the date the Plan is adopted by the Board.
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14. Agreement by Optionee Regarding Withholding Taxes.
If the Committee shall so require, as a condition of exercise of a
Nonqualified Stock Option (a "Tax Event"), each Optionee who is not a
Nonemployee Director shall agree that no later than the date of the Tax Event,
such Optionee will pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the Tax Event. Alternatively, the Committee
may provide that such an Optionee may elect, to the extent permitted or required
by law, to have the Company deduct federal, state and local taxes of any kind
required by law to be withheld upon the Tax Event from any payment of any kind
due the Optionee. The withholding obligation may be satisfied by the withholding
or delivery of Common Stock. Any decision made by the Committee under this
Section 15 shall be made in its sole discretion.
15. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that, unless otherwise determined
by the Board, an amendment that requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any
other law, regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. Except as provided in
Section 9(a) hereof, no suspension, termination, modification or amendment of
the Plan may adversely affect any award previously granted, unless the written
consent of the Optionee is obtained.
16. Rights as a Stockholder.
An Optionee or a transferee of an award shall have no rights as a
stockholder with respect to any shares covered by the award until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 9(a) hereof.
17. No Rights to Employment or Service as a Director or Consultant.
Nothing in the Plan or in any award granted or Agreement entered
into pursuant hereto shall confer upon any Optionee the right to continue in the
employ of the Company or any Subsidiary or as a member of the Board or a
consultant to the Company or any Subsidiary or to be entitled to any
remuneration or benefits not set forth in the Plan or such Agreement or to
interfere with or limit in any way the right of the Company or any such
Subsidiary to terminate such Optionee's employment or service. Awards granted
under the Plan shall not be affected by any change in duties or position of an
employee Optionee as long as such Optionee continues to be employed by the
Company or any Subsidiary.
18. Beneficiary.
An Optionee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Optionee, the executor or administrator of the Optionee's estate
shall be deemed to be the Optionee's beneficiary.
19. Governing Law.
The Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Delaware.
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APPENDIX B
CHARTER
OF THE
AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS OF AUTOINFO, INC.
- --------------------------------------------------------------------------------
I. PURPOSE OF THE COMMITTEE
The Committee's purpose is to provide assistance to the Board in
fulfilling its legal and fiduciary obligations with respect to matters involving
the accounting, auditing, financial reporting, internal control and legal
compliance functions of AutoInfo, Inc. and its subsidiaries (the "Corporation"),
including, without limitation, (a) assisting the Board's oversight of (i) the
integrity of the Corporation's financial statements, (ii) the Corporation's
compliance with legal and regulatory requirements, (iii) the Corporation's
independent auditors' qualifications and independence, and (iv) the performance
of the Corporation's independent auditors and the Corporation's internal audit
function, and (b) preparing the report required to be prepared by the Committee
pursuant to the rules of the Securities and Exchange Commission (the "SEC") for
inclusion in the Corporation's annual proxy statement.
II. COMPOSITION OF THE COMMITTEE
The Committee shall be comprised of three or more directors as determined
from time to time by resolution of the Board. Each member of the Committee shall
be qualified to serve on the Committee pursuant to the requirements of the
Nasdaq Stock Market ("Nasdaq") and the Sarbanes-Oxley Act of 2002 (the "Act")
and the rules and regulations promulgated by the SEC pursuant to the Act.
Director's fees (including any additional amounts paid to chairs of committees
and to members of committees of the Board) are the only compensation a member of
the Committee may receive from the Corporation; provided, however, that a member
of the Committee may also receive pension or other forms of deferred
compensation from the Corporation for prior service so long as such compensation
is not contingent in any way on continued service.
No director may serve as a member of the Committee if such director serves
on the audit committee of more than two other public companies, unless the Board
determines that such simultaneous service would not impair the ability of such
director to effectively serve on the Committee. Any such determination must be
disclosed in the Corporation's annual proxy statement.
The chairperson of the Committee shall be designated by the Board,
provided that if the Board does not so designate a chairperson, the members of
the Committee, by a majority vote, may designate a chairperson. Each member of
the Committee must be "able to read and understand fundamental financial
statements, including a company's balance sheet, income statement and cash flow
statement," as such qualification is interpreted by the Board in its business
judgment, or must become able to do so within a reasonable period of time after
his or her appointment to the Committee. In addition, at least one member of the
Committee must 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," as the Board interprets such qualification in its business
judgment. Further, either (i) at least one member of the Committee must be an
"audit committee financial expert," as such term is defined in the rules and
regulations promulgated by the SEC pursuant to the Act, or (ii) if no member of
the Committee is a "financial expert," the Committee shall so inform the
Corporation.
Any vacancy on the Committee shall be filled by majority vote of the Board
at the next meeting of the Board following the occurrence of the vacancy. No
member of the Committee shall be removed except by majority vote of the
directors that are independent pursuant to the rules and regulations of Nasdaq
and the SEC.
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III. MEETINGS OF THE COMMITTEE
The Committee shall meet once every fiscal quarter or more frequently as
it shall determine is necessary to carry out its duties and responsibilities.
The Committee, in its discretion, may ask members of management or others to
attend its meetings (or portions thereof) and to provide pertinent information
as necessary. The Committee should meet separately on a periodic basis with (i)
management, (ii) the Corporation's internal auditing department or other person
responsible for the internal audit function and (iii) the Corporation's
independent auditors, in each case to discuss any matters that the Committee or
any of the above persons or firms believe should be discussed privately.
A majority of the members of the Committee present in person or by means
of a conference telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other shall constitute a
quorum.
The Committee may form subcommittees for any purpose that the Committee
deems appropriate and may delegate to such subcommittees such power and
authority as the Committee deems appropriate; provided, however, that no
subcommittee shall consist of fewer than two members; and provided further that
the Committee shall not delegate to a subcommittee any power or authority
required by any law, regulation or listing standard to be exercised by the
Committee as a whole.
The Committee shall maintain minutes of its meetings and records relating
to those meetings and provide copies of such minutes to the Board.
IV. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
In carrying out its duties and responsibilities, the Committee's policies
and procedures should remain flexible, so that it may be in a position to best
react or respond to changing circumstances or conditions. The following are
within the authority of the Committee:
Selection and Evaluation of Auditors
1. In its sole discretion (subject, if applicable, to stockholder
ratification), retain, determine funding for and oversee the firm of
independent auditors to audit the books and accounts of the Corporation
and its subsidiaries for each fiscal year;
2. Review and, in its sole discretion, approve in advance the Corporation's
independent auditors' annual engagement letter, including the proposed
fees contained therein, as well as all audit and, as provided in the Act,
all permitted non-audit engagements and relationships between the
Corporation and such auditors (which approval should be made after
receiving input from the Corporation's management). Approval of audit and
permitted non-audit services may also be made by one or more members of
the Committee as shall be designated by the Committee and the person
granting such approval shall report such approval to the Committee at the
next scheduled meeting;
3. Review the performance of the Corporation's independent auditors,
including the lead partner of the independent auditors, and, in its sole
discretion (subject, if applicable, to stockholder ratification), make
decisions regarding the replacement or termination of the independent
auditors when circumstances warrant;
4. Obtain at least annually from the Corporation's independent auditors and
review a report describing:
(a) the independent auditors' internal quality-control procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the independent auditors,
or by any inquiry or investigation by any governmental or
professional authority, within the preceding five years, respecting
one or more independent audits carried out by the independent
auditors, and any steps taken to deal with any such issues; and
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(c) all relationships between the independent auditors and the
Corporation (including a description of each category of services
provided by the independent auditors to the Corporation and a list
of the fees billed for each such category);
The Committee should present its conclusions with respect to the above
matters, as well as its review of the lead partner of the independent auditors,
and its views on whether there should be a regular rotation of the independent
auditors, to the Board.
5. Oversee the independence of the Corporation's independent auditors by,
among other things:
(a) actively engaging in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may impact
the objectivity and independence of the independent auditors, and
taking appropriate action to satisfy itself of the auditors'
independence;
(b) ensuring that the lead audit partner and reviewing audit partner
responsible for the audit of the Corporation's financial statements
have not performed audit services for the Corporation for more than
the previous five consecutive fiscal years of the Corporation;
(c) ensuring that the chief executive officer, controller, chief
financial officer, chief accounting officer or other person serving
in an equivalent position of the Corporation, was not, within one
year prior to the initiation of the audit, an employee of the
independent auditor who participated in any capacity in the
Corporation's audit; and
(d) considering whether there should be a regular rotation of the
Corporation's independent auditors;
6. Instruct the Corporation's independent auditors that they are ultimately
accountable to the Committee and that the Committee is responsible for the
selection (subject, if applicable, to stockholder ratification),
evaluation and termination of the Corporation's independent auditors;
7. Inform the Corporation's independent auditors that, to the extent the
Corporation's independent auditors do not already provide such
information, the Committee expects the independent auditors'
communications to the Committee to include the items required under the
rules promulgated under the Act;
Oversight of Annual Audit and Quarterly Reviews
8. Review and accept, if appropriate, the annual audit plan of the
Corporation's independent auditors, including the scope of audit
activities and all critical accounting policies and practices to be used,
and monitor such plan's progress and results during the year;
9. Review the results of the year-end audit of the Corporation, including any
comments or recommendations of the Corporation's independent auditors;
10. Review with management and the Corporation's independent auditors, the
following:
(a) the Corporation's annual audited financial statements and quarterly
financial statements, including the Corporation's disclosures under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and any major issues related thereto;
(b) critical accounting policies and such other accounting policies of
the Corporation as are deemed appropriate for review by the
Committee prior to any interim or year-end filings with the SEC or
other regulatory body, including any financial reporting issues
which could have a material impact on the Corporation's financial
statements;
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(c) major issues regarding accounting principles and financial
statements presentations, including (A) any significant changes in
the Corporation's selection or application of accounting principles
and (B) any analyses prepared by management and/or the independent
auditors setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial
statements, including analyses of the ramifications and effects of
alternative generally accepted accounting principles methods on the
Corporation's financial statements;
(d) all alternative treatments of financial information that have been
discussed by the independent auditors and management, ramifications
of the use of such alternative disclosures and treatments, and the
treatment preferred by the auditors;
(e) all other material written communications between the independent
auditors and management, such as any management letter or schedule
of unadjusted differences; and
(f) the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial statements of the
Corporation;
11. Review with the chief executive officer and chief financial officer and
independent auditors, periodically, the following:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Corporation's ability to
record, process, summarize, and report financial data, including any
material weaknesses in internal controls identified by the
Corporation's independent auditors;
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Corporation's
internal controls; and
(c) any significant changes in internal controls or in other factors
that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
12. Attempt to resolve all disagreements between the Corporation's independent
auditors and management regarding financial reporting;
13. Review on a regular basis with the Corporation's independent auditors any
problems or difficulties encountered by the independent auditors in the
course of any audit work, including management's response with respect
thereto, any restrictions on the scope of the independent auditor's
activities or on access to requested information, and any significant
disagreements with management. In connection therewith, the Committee
should review with the independent auditors the following:
(a) any accounting adjustments that were noted or proposed by the
independent auditors but were rejected by management (as immaterial
or otherwise);
(b) any communications between the audit team and the independent
auditor's national office respecting auditing or accounting issues
presented by the engagement; and
(c) any "management" or "internal control" letter issued, or proposed to
be issued, by the independent auditors to the Corporation;
14. Confirm that the Corporation's interim financial statements included in
Quarterly Reports on Form 10-QSB have been reviewed by the Corporation's
independent auditors;
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Oversight of Financial Reporting Process and Internal Controls
15. Review:
(a) the adequacy and effectiveness of the Corporation's accounting and
internal control policies and procedures on a regular basis,
including the responsibilities, budget and staffing of the
Corporation's internal audit function, through inquiry and
discussions with the Corporation's independent auditors and
management of the Corporation; and
(b) the yearly report prepared by management, and attested to by the
Corporation's independent auditors, assessing the effectiveness of
the Corporation's internal control structure and procedures for
financial reporting and stating management's responsibility to
establish and maintain such structure and procedures, prior to its
inclusion in the Corporation's annual report;
16. Review with management the Corporation's administrative, operational and
accounting internal controls, including any special audit steps adopted in
light of the discovery of material control deficiencies, and evaluate
whether the Corporation is operating in accordance with its prescribed
policies, procedures and codes of conduct;
17. Receive periodic reports from the Corporation's independent auditors and
management of the Corporation to assess the impact on the Corporation of
significant accounting or financial reporting developments that may have a
bearing on the Corporation;
18. Establish and maintain free and open means of communication between and
among the Board, the Committee, the Corporation's independent auditors,
the Corporation's internal auditing department and management, including
providing such parties with appropriate opportunities to meet separately
and privately with the Committee on a periodic basis;
19. Review the Corporation's earnings press releases (especially the use of
"pro forma" or "adjusted" information not prepared in compliance with
generally accepted accounting principles), as well as financial
information and earnings guidance provided by the Corporation to analysts
and rating agencies (which review may be done generally (i.e., discussion
of the types of information to be disclosed and type of presentations to
be made), and the Committee need not discuss in advance each earnings
release or each instance in which the Corporation may provide earnings
guidance);
20. Establish clear hiring policies by the Corporation for employees or former
employees of the Corporation's independent auditors;
21. Discuss guidelines and policies governing the process by which senior
management of the Corporation and the relevant departments of the
Corporation assess and manage the Corporation's exposure to risk, as well
as the Corporation's major financial risk exposures and the steps
management has taken to monitor and control such exposures;
Other Matters
22. Meet at least annually with the general counsel, and outside counsel when
appropriate, to review legal and regulatory matters, including any matters
that may have a material impact on the financial statements of the
Corporation;
23. Review and approve or disapprove all proposed related party transactions
(including all transactions required to be disclosed by Item 404 of
Regulation S-B of the SEC);
24. Issue the report pursuant to Item 306 of Regulation S-B of the SEC that is
required to be included in the Corporation's annual proxy statement
addressing the Committee's review of the Corporation's financial
statements, certain communications with management and with the
independent auditors, the Committee's
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recommendation as to whether the financial statements should be included
in the Corporation's annual report on Form 10-KSB;
25. Review the certifications and reports required by Sections 302, 404 and
906 of the Act, and the rules, if any, promulgated thereunder;
26. Review the Corporation's policies relating to the avoidance of conflicts
of interest and review past or proposed transactions between the
Corporation and members of management as well as policies and procedures
with respect to officers' expense accounts and perquisites, including the
use of corporate assets. The Committee shall consider the results of any
review of these policies and procedures by the Corporation's independent
auditors;
27. Review the Corporation's program to monitor compliance with the
Corporation's Code of Conduct, and meet periodically with the
Corporation's Compliance Officer to discuss compliance with the Code of
Conduct;
28. Obtain from the Corporation's independent auditors any information
pursuant to Section 10A of the Securities Exchange Act of 1934;
29. Maintain procedures, as set forth in Exhibit I hereto, for the receipt,
retention and treatment of complaints received by the Corporation
regarding financial statement disclosures, accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission
by employees of the Corporation of concerns regarding financial statement
disclosures, accounting, internal accounting controls or auditing matters;
30. Cause to be made an investigation into any appropriate matter brought to
its attention within the scopes of its duties;
31. Secure independent expert advice to the extent the Committee determines it
to be appropriate, including retaining and determining funding for, with
or without Board approval, independent counsel, accountants, consultants
or others, to assist the Committee in fulfilling its duties and
responsibilities, the cost of such independent expert advisors to be borne
by the Corporation;
32. Report regularly to the Board on its activities, as appropriate. In
connection therewith, the Committee should review with the Board any
issues that arise with respect to the quality or integrity of the
Corporation's financial statements, the Corporation's compliance with
legal or regulatory requirements, the performance and independence of the
Corporation's independent auditors, or the performance of the internal
audit function;
33. Prepare and review with the Board an annual performance evaluation of the
Committee, which evaluation must compare the performance of the Committee
with the requirements of this charter, and set forth the goals and
objectives of the Committee for the upcoming year. The evaluation should
include a review and assessment of the adequacy of the Committee's
charter. The performance evaluation by the Committee shall be conducted in
such manner as the Committee deems appropriate. The report to the Board
may take the form of an oral report by the chairperson of the Committee or
any other member of the Committee designated by the Committee to make this
report; and
34. Perform such additional activities, and consider such other matters,
within the scope of its responsibilities, as the Committee or the Board
deems necessary or appropriate.
With respect to the duties and responsibilities listed above, the Committee
should:
1. Report regularly to the Board on its activities, as
appropriate;
2. Exercise reasonable diligence in gathering and considering all
material information;
3. Understand and weigh alternative courses of conduct that may
be available;
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4. Focus on weighing the benefit versus harm to the Corporation
and its stockholders when considering alternative
recommendations or courses of action;
5. If the Committee deems it appropriate, secure independent
expert advice and understand the expert's findings and the
basis for such findings, including retaining independent
counsel, accountants or others to assist the Committee in
fulfilling its duties and responsibilities; and
6. Provide management, the Corporation's independent auditors and
internal auditors with appropriate opportunities to meet
privately with the Committee.
* * *
While the Committee has the duties and responsibilities set forth in this
charter, the Committee is not responsible for planning or conducting the audit
or for determining whether the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Committee are not full-time employees of the Corporation, it is
not the duty or responsibility of the Committee or its members to conduct "field
work" or other types of auditing or accounting review or procedures or to set
auditor independence standards, and each member of the Committee shall be
entitled to rely on (i) the integrity of those persons and organizations within
and outside the Corporation form which it receives information, (ii) the
accuracy of the financial and other information provided to the Committee absent
actual knowledge to the contrary (which shall be promptly reported to the Board)
and (iii) statements made by management or third parties as to any information
technology, internal audit and other non-audit services provided by the auditors
to the Corporation.
**********
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Exhibit I
Procedures for the Anonymous Submission of Complaints or Concerns
Regarding Financial Statement Disclosures, Accounting,
Internal Accounting Controls or Auditing Matters
The following is the procedure for the confidential, anonymous submission by
employees of AutoInfo, Inc. [and its subsidiaries] (the "Corporation") of
concerns regarding questionable accounting, internal control, auditing or
related matters ("Concerns"):
1. The Corporation shall forward to the Audit Committee of the Board of
Directors (the "Audit Committee") any complaints that it has received
regarding financial statement disclosures, accounting, internal accounting
controls or auditing matters.
2. Any employee of the Corporation may submit, on a confidential, anonymous
basis if the employee so desires, any Concerns by setting forth such
Concerns in writing and forwarding them in a sealed envelope to the Chair
of the Audit Committee, in care of the Corporation's Corporate Secretary
(the "Secretary"), such envelope to be labeled with a legend such as:
"Anonymous Submission of Complaint or Concern." If an employee would like
to discuss any matter with the Audit Committee, the employee should
indicate this in the submission and include a telephone number at which he
or she might be contacted if the Audit Committee deems it appropriate. Any
such envelopes received by the Secretary shall be forwarded promptly to
the Chair of the Audit Committee.
3. The Secretary shall prepare an executive summary of the contents of each
submission with respect to Concerns that do not specifically allege
participation in wrongdoing by the Corporation's Chief Executive Officer
(the "CEO") and send it to the CEO. The CEO shall promptly investigate the
subject of each such executive summary and report his findings in writing
to the Chairman of the Audit Committee with recommendations, if any. The
Secretary shall send a copy of each submission with respect to Concerns
that specifically allege participation in wrongdoing by the CEO both to
the Chairman of the Audit Committee and to the CEO.
4. At each of its meetings, including any special meeting called by the Chair
of the Audit Committee following the receipt of any information pursuant
to this Annex, the Audit Committee shall review and consider any such
complaints or concerns that it has received and take any action that it
deems appropriate in order to respond thereto.
5. The Audit Committee shall retain any such complaints or concerns for a
period of no less than 7 years.
6. This Annex A shall appear on the Corporation's website as part of this
Charter.
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