SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
Calton, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
Check the appropriate box
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14(a)(6)(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total Fee Paid:
- --------------------------------------------------------------------------------
/ / 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:
----------------------------------------------------
2) Form, Schedule or Registration Statement No.
-------------------------------
3) Filing party:
--------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------
CALTON, INC.
----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2004
----------------------------------
TO THE SHAREHOLDERS OF CALTON, INC.
The Annual Meeting of the Shareholders of CALTON, INC. (the "Company")
will be held on Tuesday, April 27, 2004 at the corporate offices of Calton,
Inc., 2013 Indian River Boulevard, Vero Beach, Florida at 10:00 a.m., local
time, for the following purposes:
1. To elect one (1) director.
2. To consider and act upon a proposal of the Board of Directors to
amend the Company's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock from
10,740,000 to 25,000,000 shares.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Holders of Common Stock of record at the close of business on March 19,
2004 are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
MARY H. MAGEE
SECRETARY
Red Bank, New Jersey
March 26, 2004
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU ARE UNABLE TO DO
SO, PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY AND MAIL IT AT ONCE IN THE
ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
CALTON, INC.
--------------------
PROXY STATEMENT
--------------------
GENERAL INFORMATION
This Proxy Statement is furnished to the holders of Calton, Inc. (the
"Company" or "Calton") Common Stock, $.05 par value ("Common Stock"), in
connection with the solicitation of proxies for use at the annual meeting of
shareholders to be held on April 27, 2004, and at any adjournment thereof (the
"meeting" or "annual meeting"), pursuant to the accompanying Notice of Annual
Meeting of Shareholders. Holders of Common Stock are referred to herein
collectively as the "shareholders." Forms of proxies for use at the meeting are
also enclosed. The Company anticipates mailing this Proxy Statement to its
shareholders on or about March 26, 2004. The executive offices of the Company
are located at 2013 Indian River Boulevard, Vero Beach, Florida 32960.
Shareholders may revoke the authority granted by their execution of
proxies at any time before the effective exercise of proxies by filing written
notice of such revocation with the secretary of the meeting. Presence at the
meeting does not of itself revoke the proxy; however, a vote cast at the meeting
by written ballot will revoke the proxy. All shares represented by executed and
unrevoked proxies will be voted in accordance with the specifications therein.
Proxies submitted without specification will be voted FOR the election of the
nominee for director named herein and FOR the proposal to amend the Company's
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") to increase the number of authorized shares of the Company's
Common Stock from 10,740,000 to 25,000,000 shares. Management is not aware at
the date hereof of any matters to be presented at the meeting other than the
election of a director and the proposal to amend the Certificate of
Incorporation. If any other matter is properly presented, the persons named in
the proxy will vote thereon according to their best judgment.
Proxies for use at the meeting are being solicited by the Board of
Directors of the Company. The cost of preparing, assembling and mailing the
proxy material is to be borne by the Company. It is not anticipated that any
compensation will be paid for soliciting proxies, and the Company does not
intend to employ specially engaged personnel of the Company or other paid
solicitors in the solicitation of proxies. It is contemplated that proxies will
be solicited principally through the mail, but directors, officers and employees
of the Company may, without additional compensation, solicit proxies personally
or by telephone, facsimile transmission or letter.
VOTING SECURITIES
The voting securities entitled to vote at the meeting consist of shares
of Common Stock, with each share entitling its owner to one vote on an equal
basis. On March 19, 2004, the
number of outstanding shares of Common Stock was 9,263,474. Only shareholders of
record on the books of the Company at the close of business on March 19, 2004
will be entitled to vote at the meeting. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy, will
constitute a quorum at the meeting. The affirmative vote of a plurality of the
shares of Common Stock present in person or represented by proxy and entitled to
vote, is required for the election of directors. The affirmative vote of a
majority of the shares present in person or represented by proxy and entitled to
vote is required for the amendment of the Certificate of Incorporation. The
proxy card provides space for a shareholder to withhold votes for the nominee
for the Board of Directors.
All votes will be tabulated by the inspector of election appointed at the
meeting who will separately tabulate affirmative votes, negative votes,
authority withheld for any nominee for director, abstentions and broker
non-votes. Authority withheld will be counted toward the tabulation of the votes
cast on the election of directors and will have the same effect as a negative
vote. Under New Jersey law, any proxy submitted and containing an abstention or
broker non-vote will not be counted as a vote cast on any matter to which it
relates and, accordingly, will have no effect on the outcome of the vote.
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present at the annual meeting.
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to each person
who, as of March 19, 2004, is known by the Company to be the beneficial owner
(as defined in Rule 13d-3 ("Rule 13d-3") of the Securities Exchange Act of 1934)
of more than five percent (5%) of the Company's Common Stock. Except as set
forth in the footnotes to the table, the shareholders have sole voting and
investment power over such shares:
Amount and Percent
Nature of of
Name of Beneficial Owner Beneficial Ownership Class
- ------------------------ -------------------- -----
Anthony J. Caldarone.................................. 4,225,705 (1) 45.3%
Joyce P. Caldarone.................................... 4,225,705 (2) 45.3%
Maria F. Caldarone.................................... 1,031,760 (3) 11.1%
John G. Yates......................................... 731,744 (4) 7.9%
Laura A. Camisa....................................... 504,863 (3) 5.4%
- -------------------
(1) Includes an aggregate of 456,240 shares held by Joyce P. Caldarone, Mr.
Caldarone's wife, as to which shares he disclaims any beneficial
interest, and 62,000 shares subject to stock options which are
exercisable within 60 days of March 19, 2004 ("Currently Exercisable
Stock Options").
(2) Includes an aggregate of 3,769,465 shares beneficially owned by Anthony
J. Caldarone, Mrs. Caldarone's husband, as to which shares she disclaims
any beneficial interest.
(3) Includes an aggregate of 18,667 shares subject to Currently Exercisable
Options.
(4) Includes an aggregate of 52,000 shares subject to Currently Exercisable
Stock Options.
2
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 19, 2004, with
respect to the beneficial ownership (as defined in Rule 13d-3) of the Company's
Common Stock by each director and nominee for director, each of the Named
Officers (as defined in the section captioned "Executive Compensation") who is
currently an officer of the Company and by all directors and executive officers
as a group. Except as set forth in the footnotes to the table, the shareholders
have sole voting and investment power over such shares.
Amount and Percent
Nature of of
Name of Beneficial Owner Beneficial Ownership Class
- ------------------------ -------------------- -----
Anthony J. Caldarone......................................... 4,225,705 (1) 45.3%
Kenneth D. Hill.............................................. 192,599 (2) 2.0
John G. Yates................................................ 731,744 (3) 7.9
Maria F. Caldarone........................................... 1,031,760 (4) 11.1
Laura A. Camisa.............................................. 504,863 (4) 5.4
J. Ernest Brophy............................................. 79,338 (5) (7)
Mark N. Fessel............................................... 81,493 (5) (7)
Frank Cavell Smith, Jr....................................... 47,904 (6) (7)
Thomas C. Corley............................................. 31,577 (8) (7)
Robert E. Naughton........................................... 17,846 (9) (7)
All Directors and Executive Officers as
a Group (10 persons)(1),(2),(3),(4),(5),(6), (8) and (9).. 6,944,829 71.9
- ---------------
(1) Includes an aggregate of 456,240 shares held by Joyce P. Caldarone, Mr.
Caldarone's wife, as to which shares he disclaims any beneficial
interest, and 62,000 shares subject to Currently Exercisable Stock
Options.
(2) Includes 8,000 shares held by Mr. Hill's spouse, as to which shares he
disclaims any beneficial interest, and 140,000 shares subject to
Currently Exercisable Stock Options.
(3) Includes 52,000 shares subject to Currently Exercisable Stock Options.
(4) Includes 18,667 shares subject to Currently Exercisable Stock Options.
(5) Includes 22,000 shares subject to Currently Exercisable Stock Options.
(6) Includes 24,000 shares subject to currently exercisable options.
(7) Shares beneficially owned do not exceed 1% of the Company's outstanding
Common Stock.
(8) Includes 28,667 shares subject to Currently Exercisable Stock Options.
(9) Includes 14,000 shares subject to Currently Exercisable Stock Options.
ELECTION OF DIRECTORS
GENERAL
The Company's by-laws provide that the Board of Directors shall consist
of not fewer than three nor more than 15 members. The Board of Directors is
divided into four classes, with each class to hold office for a term of four
years and the term of office of one class to expire each
3
year. The Board of Directors has fixed the number of directors at seven, one of
whom is to be elected at the 2004 Annual Meeting, two whose terms expire at the
annual meeting in 2005, two whose terms expire at the annual meeting in 2006 and
two whose terms expire at the annual meeting in 2007.
NOMINATION PROCESS
The Company does not have a standing nominating committee or a nominating
committee charter. Currently, it chooses to rely on the expertise of its
independent directors, J. Ernest Brophy, Mark N. Fessel, and Frank Cavell Smith,
Jr., who consider the criteria set forth below, to propose nominees for director
and the judgment of the Board in determining the nominees for election. The
independent directors of the Board currently meet the standards for independence
as set forth in the rules of the American Stock Exchange ("AMEX"), the exchange
on which the Company's Common Stock is traded as of the date of this Proxy
Statement. The nominee named herein was unanimously proposed and recommended for
approval by the full Board by the following independent directors of the
Company, J. Ernest Brophy, Mark N. Fessel, and Frank Cavell Smith, Jr. The Board
expects to consider the appointment of a nominating committee of the Board of
Directors in fiscal 2004.
The members of the Board as a whole believe that, at a minimum, the Board
should be comprised of directors who have expertise that may be useful to the
Company as well as directors who have in the past exhibited the highest personal
and professional ethics. When considering nominees for director, the independent
directors consider several factors, including (i) relevant business experience;
(ii) independence from management; (iii) judgment, skill, integrity and
reputation; (iv) existing commitments and potential conflicts of interest; (v)
financial and accounting background; and (vi) the size and composition of the
existing Board. Because the nominee named below is a sitting director of the
Company who is up for re-election at the annual meeting, the independent
directors also considered the director's past performance on the Board. The
Board seeks to identify individuals who satisfy these criteria from among
persons known to them.
The independent directors of the Board will also consider nominees for
director suggested by shareholders of the Company. The process by which a
shareholder of the Company may suggest a nominee for director of the Company can
be found under "Shareholder Proposals and Nominees for Director." The
independent directors will apply the same criteria described above to any
candidate suggested by a shareholder as well as evaluate any additional
information required to be submitted therewith. The Company does not pay any
fees to third parties to identify, evaluate or assist in identifying or
evaluating potential nominees.
Frank Cavell Smith, Jr. is the incumbent director whose term expires at
the 2004 annual meeting. Mr. Smith has been nominated to stand for election at
the meeting to hold office until the 2008 annual meeting. It is the intention of
the persons named in the accompanying proxy to vote, unless otherwise
instructed, in favor of the election of Mr. Smith. If Mr. Smith should be unable
to serve, the proxies will be voted for the election of a substitute nominee, if
any, designated by the Board of Directors. The Company is not aware of any
reason why Mr. Smith, if elected, would be unable to serve as a director.
4
Set forth below is certain biographical information with respect to the
nominees for election to the Board and the directors whose terms of office will
continue after the 2004 annual meeting.
NOMINEE
NOMINEE FOR ELECTION FOR A FOUR YEAR TERM EXPIRING AT THE 2008 ANNUAL MEETING.
FRANK CAVELL SMITH, JR. Mr. Smith, age 59, has served as a Director of
Calton since May 1993. Since 1990, Mr. Smith has been associated with the MEG
Companies as a Senior Consultant responsible for corporate real estate
consulting activities. From 1977 to 1990, Mr. Smith served as a Real Estate
Consultant and Real Estate Development Manager for The Spaulding Co., Inc. Mr.
Smith also is an adjunct faculty member at Boston University and a member of the
Board of Trustees of Shelter, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2007 ANNUAL MEETING
MARK N. FESSEL. Mr. Fessel, age 47, has served as a Director of Calton
since May 1993. Since 1985, Mr. Fessel has owned and operated a real estate
company and has acted as principal in numerous commercial and residential real
estate developments throughout the northeast. Mr. Fessel is a 1981 graduate of
the New York University School of Law and the New York University Undergraduate
School of Business. Prior to forming his own real estate company in 1985, Mr.
Fessel was an associate at the New York based law firm of Weil, Gotshal &
Manges.
JOHN G. YATES. Mr. Yates, age 61, was appointed President and Chief
Operating Officer of the Company in September 2002 and a Director of the Company
in October 2002. He has served as President and Chief Executive Officer of the
Company's wholly owned subsidiary, PrivilegeONE Networks, LLC since May 2001.
For eight years prior to joining the Company, Mr. Yates served as Senior Vice
President and General Manager of American Express, and in that capacity
implemented and managed the American Express Corporate Purchasing Card division.
He was also employed for more than 24 years with General Electric in a variety
of senior management positions.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2006 ANNUAL MEETING
KENNETH D. HILL. Mr. Hill, age 62, has served as a Director of Calton
since April 1999. From July 1999 through June, 2001 he served as Chief Executive
Officer of the Company's wholly owned subsidiary, eCalton.com, Inc. Since 1975,
he has founded and managed computer related companies, including NASTEC
Corporation, a developer of computer-aided software engineering development
tools, from 1982 until its acquisition in 1987, and Multiple Technologies
Corporation, a consulting and application development company, from 1975 to
1982. From January 1994 through February 1996, he was employed as a consultant
by KDH Enterprises, Inc. From March 1997 through April 1998, Mr. Hill served as
President and Chief Executive Officer of DataTell Solutions, Inc., a regional
systems integration company that filed for federal bankruptcy protection in May
1998. He served as President and Chief Executive Officer of National AmeriServe,
Inc., an internet business solutions provider, from May 1998 through October
1998, when it merged with iAW, Inc., the predecessor of eCalton.com, Inc.
5
J. ERNEST BROPHY. Mr. Brophy, age 79, a self-employed attorney and
Certified Public Accountant specializing in tax consultation to clients engaged
in the construction business, was reappointed as a Director of Calton in
November 1995, having served in such capacity from March 1983 through November
1985 and from April 1986 until through May 1993. From 1992 through March 1996,
Mr. Brophy served as Chief Financial Officer and a director of Hurdy-Gurdy
International, Inc., a company that marketed sorbet products.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2005 ANNUAL MEETING
ANTHONY J. CALDARONE. Mr. Caldarone, age 66, has served as Chairman and
Chief Executive Officer of the Company since November 1995. From November 1995
through August 2002, Mr. Caldarone also served as President of the Company. He
served as director of the Company from June 1993 through October 1995 and as
Chairman, President and Chief Executive Officer from the inception of the
Company in 1981 through June 1993.
ROBERT E. NAUGHTON. Mr. Naughton, age 66, has served as a Director of
Calton since April 1999. He served as Executive Vice President of the Company's
wholly-owned subsidiary, eCalton.com, Inc., from December 2000 through November
2003. He served as a consultant to eCalton.com from July 2000 through November
2000. From 1990 until July 2000, he served as President and CEO of SIG, Inc., an
information technology consulting firm specializing in network design and
management, technology transition, business profit improvement, project
management, e-business and staff augmentation. Prior to 1990, Mr. Naughton held
management positions with AGS Information Services, Compuware and SPR
Corporation. He has 25 years of experience in the information technology
industry, including sales, marketing, recruiting and P&L management.
CODE OF CONDUCT
The Company has adopted a Code of Conduct that applies to all of its
directors, officers and employees, including its Chief Executive Officer, Chief
Financial Officer and other senior financial officers. The Company's Code of
Conduct is posted on its website, www.caltoninc.com, under Investor Relations.
The Company intends to disclose on its website any amendment to, or waiver of, a
provision of the Code of Conduct that applies to its Chief Executive Officer,
Chief Financial Officer or other senior financial officers.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the fiscal year ended November 30, 2003, the Board of Directors
held four meetings and acted by unanimous written consent on four occasions.
During fiscal 2003, each member of the Company's current Board of Directors
attended at least 75% of the meetings of the Board of Directors and all of the
meetings of the committees on which he served. See the section captioned
"Directors' Compensation" for a discussion of fees paid by the Company to its
directors for their services.
During fiscal 2003, the Board of Directors had two standing committees:
the Audit Committee and the Compensation Committee.
6
The Audit Committee currently consists of Mr. Brophy, Mr. Fessel and Mr.
Smith. The duties and functions performed by the Audit Committee are described
under the caption "Audit Committee Report" contained elsewhere in this Proxy
Statement. The Audit Committee held two meetings in fiscal 2003.
Mr. Fessel and Mr. Smith currently serve as members of the Compensation
Committee. The Compensation Committee reviews and approves compensation for
executive employees of the Company on a periodic basis, subject to approval of
the Board, and administers the Company's Incentive Compensation Plan, the 2000
Equity Incentive Plan (the "2000 Plan"), the 1996 Equity Incentive Plan (the
"1996 Plan"), the Amended and Restated 1993 Non-Qualified Stock Option Plan (the
"1993 Plan" and, collectively with the 2000 Plan and the 1996 Plan, the "Option
Plans") and the Employee Stock Purchase Plan. The Compensation Committee did not
meet in fiscal 2003.
7
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company and its
subsidiaries for the fiscal years ended November 30, 2003, 2002 and 2001 of the
Chief Executive Officer of the Company in fiscal 2003 and the other executive
officers of the Company who earned salary and bonuses in fiscal 2003 in excess
of $100,000 (collectively, the "Named Officers"):
LONG TERM
ANNUAL COMPENSATION AWARDS COMPENSATION
------------------------------- ----------------
AWARDS
----------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($) OPTIONS ($)(1)
- -------------------------------- --------- -------------- ---------------- ----------------- -----------------
Anthony J. Caldarone 2003 $ 100,000 $ --- --- $ 8,487
Chairman & Chief Executive 2002 117,433 --- (2) 7,594
Officer 2001 247,500 --- 175,000(3) 88,500
John G. Yates 2003 150,000 --- --- ---
President 2002 207,270 --- 90,000(2) ---
2001 134,000 $16,500(4) 55,000(5) ---
Thomas C. Corley 2003 116,667 --- --- ---
Senior Vice President, 2002 141,162 --- 20,000(2) ---
Treasurer and Chief 2001 --- --- --- ---
Financial Officer(6)
Maria F. Caldarone 2003 121,000 --- --- 623
Executive Vice President(7) 2002 120,000 --- 20,000(2) 589
2001 --- --- --- ---
Laura A. Camisa 2003 116,000 --- --- 460
Senior Vice President(7) 2002 115,000 --- 20,000(2) 580
2001 --- --- --- ---
- ---------------
(1) Amounts reported for fiscal 2003 report include cost of premiums paid by
the Company under a program which provides officers of the Company with
additional life insurance (supplementing the coverage available under the
Company's group life insurance plan).
(2) Does not include options granted in January 2002 for services rendered in
fiscal 2001 as follows: Mr. Caldarone - 75,000 shares; Mr. Yates - 25,000
shares; Mr. Corley - 20,000 shares; Ms. Caldarone - 30,000 shares; and
Ms. Camisa - 30,000 shares.
(3) Represents 75,000 shares underlying options granted in January 2002 for
services rendered in fiscal 2001 and 100,000 shares underlying options
which were repriced in fiscal 2001.
(4) Represents housing allowance.
(5) Represents 25,000 shares underlying options granted in January 2002 for
services rendered in fiscal 2001 and 30,000 shares underlying options
granted in July 2001.
(6) Mr. Corley was not an executive officer of the Company in fiscal 2001 and
thus compensation information for such years is not presented above.
(7) Compensation paid to this officer in fiscal year 2001 did not exceed
$100,000 and thus information with respect to such year is not presented
above.
8
DIRECTORS' COMPENSATION
Members of the Board of Directors who are not full time employees of
Calton were each entitled in fiscal 2003 to annual compensation of $10,000 for
service as a director. Effective February 26, 2003, all such compensation is
payable in the form of Common Stock having an equivalent market value at the
time of issuance. Calton paid or accrued a total of $42,000 in director fees to
members of the Board of Directors during fiscal year 2003 ($32,500 of which was
paid in the form of Common Stock).
Each non-employee director is awarded options to purchase 10,000 shares
of the Company's Common Stock each time such director is elected or re-elected
to the Board of Directors and each time that an annual meeting of shareholders
is held during the term of such director. In order to receive the award, an
incumbent non-employee director must have attended 75% of all Board meetings and
75% of all meetings of Board committees of which the director is a member during
the prior 12 months. Options to purchase an aggregate of 40,000 shares of Common
Stock at an exercise price of $.21 per share (the fair market value of the
Common Stock on the date of grant) were granted to non-employee directors
pursuant to this arrangement in fiscal 2003.
Directors are reimbursed for travel expenses incurred in connection with
attendance at Board and committee meetings.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
Effective November 21, 1995, the Company entered into an Employment
Agreement (the "Employment Agreement") with Anthony J. Caldarone, Chairman,
President and Chief Executive Officer of the Company. Pursuant to the Employment
Agreement, Mr. Caldarone is entitled to a minimum annual salary of $250,000
("Base Compensation") which may be increased by the Board or a committee
thereof. Mr. Caldarone agreed to a reduction in his annual base salary to
$165,000 in October 2001. In January 2002, Mr. Caldarone agreed to a further
reduction of his salary to $100,000 per year. In November 2003, the Board of
Directors extended the term of the Employment Agreement until December 31, 2005.
Mr. Caldarone is entitled to participate in any bonus compensation or benefit
plan or arrangement provided by the Company to its employees or senior level
executives, including the Company's Incentive Plan. Under the Employment
Agreement, Mr. Caldarone may be awarded up to thirty percent (30%) of the
Incentive Plan's designated incentive compensation for any fiscal year and,
subject to such limitation, is entitled to not less than one-half of the average
percentage that all awards to other Eligible Participants are of the respective
Eligible Participants' base salary for the relevant fiscal year. Mr. Caldarone
is entitled to be reimbursed by the Company for certain automobile expenses and
was granted options to purchase 100,000 shares of Common Stock under the 1996
Option Plan pursuant to the Employment Agreement.
If the Employment Agreement is terminated by reason of Mr. Caldarone's
death, the Company is obliged to reimburse Mr. Caldarone's designated
beneficiaries the cost of COBRA benefits, other than long-term disability
coverage, for a period of 18 months following the date of death. If the
Employment Agreement is terminated by reason of Mr. Caldarone's disability, Mr.
Caldarone will be entitled to receive a lump sum cash payment equal to $275,000
(the
9
"Severance Compensation") from the Company as well as the cost of COBRA
benefits, other than long-term disability, for him and his family for a period
of 18 months following the date of termination, and continue to participate in
any group life insurance or supplemental life insurance program of the Company
then in effect for a period of 18 months following the date of termination
(collectively, the "Severance Benefits"). The Company may terminate the
Employment Agreement for just cause in the event Mr. Caldarone is convicted of a
felony in connection with his duties as an officer of the Company, if the
commission of such felony resulted in a personal financial benefit to Mr.
Caldarone. Upon termination for just cause by the Company, Mr. Caldarone is not
entitled to receive any Severance Compensation or Severance Benefits. If the
Company terminates the Employment Agreement without just cause, Mr. Caldarone is
entitled to the Severance Compensation and Severance Benefits. If the Company
terminates the Employment Agreement by issuing a notice of non-extension, Mr.
Caldarone is entitled to receive Severance Compensation as well as the Severance
Benefits. Mr. Caldarone may terminate the Employment Agreement for just cause
and receive Severance Compensation and Severance Benefits, if (i) the Board
fails to re-elect him as each of Chairman, President and Chief Executive Officer
of the Company, (ii) the Board significantly reduces the nature and scope of his
authorities, powers, duties and functions, (iii) the Company breaches any
material covenant of the Employment Agreement or (iv) the Company consents to
Mr. Caldarone's retirement. If Mr. Caldarone terminates the Employment Agreement
without just cause or by issuing a notice of non-extension, he is not entitled
to the Severance Compensation or Severance Benefits. After the date of
termination of Mr. Caldarone's employment for any of the reasons specified
herein and in the Employment Agreement, Mr. Caldarone will not receive any
further salary payments under the Employment Agreement.
In February 2003, Mr. Caldarone and the Company agreed that effective
March 1, 2003, the amount of Severance Compensation payable to Mr. Caldarone
under his Employment Agreement would be reduced by the amount of salary
thereafter paid to Mr. Caldarone as Chairman and Chief Executive Officer of the
Company. As a result of this arrangement, as of March 1, 2004, the amount of
Severance Compensation potentially payable by the Company to Mr. Caldarone had
been reduced to $175,000.
ARRANGEMENT WITH CERTAIN OFFICERS
John G. Yates and Thomas C. Corley have served as unpaid officers of
Calton, Inc. and its wholly owned subsidiary, PrivilegeONE Networks, LLC
("PrivilegeONE") since August 31, 2003 and September 30, 2003, respectively. In
consideration of their agreement to continue to serve in such capacities and
pursue business opportunities on behalf of PrivilegeONE, the Company has agreed
that Mr. Yates and Mr. Corley will be entitled to 25% of the net profit
attributable to business arrangements with parties introduced by either of them
to PrivilegeONE. As a result of this arrangement, Mr. Yates and Mr. Corley are
not required to devote their full time and attention to the affairs of the
Company; however, the Company does not believe that the absence of a full time
commitment on the part of Mr. Yates and Mr. Corley has had, or will have, a
material adverse impact on the Company's ability to conduct its business.
10
OPTION GRANTS
No stock options were granted to any of the Named Officers in fiscal
2003.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to options exercised by the Named
Officers during fiscal 2003 and the value of unexercised options to purchase the
Company's Common Stock held by the Named Officers at November 30, 2003.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT FY-END (#) OPTIONS AT FY-END ($)(1)
-------------------------- ------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Anthony J. Caldarone.... -- -- 159,000 76,000 $2,100 $8,400
John G. Yates........... -- -- 47,000 98,000 18,550 38,500
Thomas C. Corley........ -- -- 24,667 35,333 4,527 10,173
Maria F. Caldarone...... -- -- 12,667 37,333 4,807 11,293
Laura A. Camisa......... -- -- 12,667 37,333 4,807 11,293
- -----------
(1) Represents market value of shares covered by in-the-money options on
November 28, 2003. The closing price of the Common Stock on such date was
$.075. Options are in-the-money if market value of shares covered thereby
is greater than the option exercise price.
11
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of November 30, 2003 with
respect to shares of Common Stock that may be issued under the Company's equity
compensation plans:
============================ =========================== =========================== ==============================
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE EXERCISE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING COMPENSATION PLANS (EXCLUDING
OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND SECURITIES REFLECTED IN
WARRANTS AND RIGHTS RIGHTS COLUMN (A))
PLAN CATEGORY (a) (b) (c)
- ---------------------------- --------------------------- --------------------------- ------------------------------
Equity compensation plans 735,400 $2.48 527,490 (2)
approved by security
holders(1)
- ---------------------------- --------------------------- --------------------------- ------------------------------
Equity compensation plans
not approved by security
holders(3) 120,000 $8.15 -0-
- ---------------------------- --------------------------- --------------------------- ------------------------------
Total 855,400 $3.27 527,490
============================ =========================== =========================== ==============================
(1) The Company's 1996 Plan and 2000 Plan provide for the issuance of
incentive awards to officers, directors, employees and consultants in the
form of stock options, stock appreciation rights, restricted stock and
deferred stock, and in lieu of cash compensation. The Company's Employee
Stock Purchase Plan permits the purchase of Common Stock by employees at
a discount to market value through periodic payroll deductions.
(2) Represents 521 shares available for issuance under the 1993 Plan, 1,075
shares available for issuance under the 1996 Plan, 394,632 shares
available for issuance under the 2000 Plan and 131,262 shares available
for issuance under the Employee Stock Purchase Plan. The number of shares
available for issuance under the Employee Stock Purchase Plan is
increased on January 1 of each year by an amount equal to the lesser of
two percent (2%) of the total number of shares of Common Stock then
outstanding or 75,000 shares.
(3) Represents shares subject to options granted to Kenneth D. Hill, a
Director of the Company pursuant to an employment agreement with the
Company which terminated in July 1999. The options granted to Mr. Hill
have an exercise price of $8.15 per share and expire in July 2009.
12
REPORT OF THE AUDIT COMMITTEE
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that might incorporate this Proxy Statement or
future filings with the SEC, in whole or in part, the following report shall not
be deemed to be incorporated by reference into any such filing.
MEMBERSHIP AND ROLE OF AUDIT COMMITTEE
The Audit Committee of the Board (the "Audit Committee") is comprised of
the following directors: J. Ernest Brophy, Mark N. Fessel and Frank Cavell
Smith, Jr. Each member of the Audit Committee qualifies as an independent
director in accordance with the rules of AMEX and the rules and regulations of
the SEC. In addition, the Board has determined that J. Ernest Brophy is both
independent and qualifies as a financial expert, as defined by SEC rules. The
Audit Committee operates under a written charter previously adopted by the Board
(see discussion below).
The primary function of the Audit Committee is to provide advice with
respect to the Company's financial matters and to assist the Board in fulfilling
its oversight responsibilities regarding finance, accounting, tax and legal
compliance. The Audit Committee's primary duties and responsibilities are to: 1)
serve as an independent and objective body to monitor the financial reporting
process and internal control systems of the Company; 2) oversee the quality and
integrity of the financial statements of the Company; 3) engage a firm of
independent auditors for the Company each year; 4) review and appraise the
qualifications, performance and independence of the Company's independent
auditors; 5) review and appraise the performance of the Company's internal audit
department; 6) provide an open forum for communication among the independent
auditors, senior financial officers, other members of management, the internal
audit department and the Board; and 7) assist in assuring the Company's
compliance with legal and regulatory requirements.
AUDIT COMMITTEE CHARTER
The Audit Committee developed an Audit Committee Charter (the "Charter")
in consultation with the Company's accounting department, the Company's
independent auditors and outside general counsel. The Board adopted the Charter
in fiscal 2001, and the Charter was filed with the SEC on March 16, 2001 as
Appendix "A" to the Company's proxy statement delivered in connection with the
2001 annual meeting of shareholders. The Audit Committee reviews the Charter on
an annual basis and updates the Charter as necessary. On January 28, 2004, the
Board adopted amendments to the Charter to comply with the recently amended
corporate governance rules of AMEX and the rules and regulations of the SEC. The
Charter, as amended, is attached hereto as "Appendix A."
REVIEW OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 2003
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended November 30, 2003 with the
Company's management. The
13
Audit Committee has discussed with Aidman, Piser & Company, P.A. ("Aidman,
Piser"), the Company's independent auditors, those matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
The Audit Committee has also received the written disclosures and the
letter from Aidman, Piser required by Independence Standards Board Standard No.
1 (Independence Discussion with Audit Committees), and the Audit Committee has
discussed the independence of Aidman, Piser with that firm. Aidman, Piser
confirmed, in its professional judgment, that it is not aware of any
relationship between Aidman, Piser and the Company that would reasonably bear on
its independence.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the Board that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended November 30, 2003 for filing with the SEC.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth the aggregate fees billed to the Company
for the years ended November 30, 2003 and November 30, 2002 by Aidman, Piser:
Year Ended November 30,
2003 2002
------------- ------------
Audit Fees $66,000 $58,384
Audit-Related Fees --- ---
Financial Information Systems --- ---
Design and Implementation Fees --- ---
Tax Fees --- ---
All Other Fees --- ---
Audit fees represent amounts billed for professional services rendered
for the audit of the Company's annual financial statements and the reviews of
its financial statements included in the Company's Forms 10-QSB for the fiscal
year. Before Aidman, Piser was engaged by the Company to render its audit
services, the engagement was approved by the Audit Committee of the Company's
Board of Directors.
Submitted by:
J. Ernest Brophy
Mark N. Fessel
Frank C. Smith, Jr.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with
14
the Securities and Exchange Commission (the "SEC"). Officers, directors and
greater than ten percent shareholders are required by SEC regulation to furnish
the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its executive officers, directors and
greater than ten percent shareholders complied with all filing requirements
applicable to them with respect to events or transactions during fiscal 2003,
except that Forms 4 required to be filed by Messrs. Brophy, Fessel and Hill in
January 2003 in connection with the acquisition of common stock under the 2000
Plan were filed late.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
GENERAL
The Board of Directors has determined that it would be in the best
interest of the Company to amend the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock from
10,740,000 to 25,000,000. The text of the proposed Certificate of Amendment is
attached hereto as Appendix B. As of March 19, 2004, there were 9,263,474 shares
of the Company's Common Stock outstanding, leaving 1,476,526 shares of Common
Stock authorized and available for issuance. As of March 19, 2004, there were
781,400 shares of Common Stock subject to outstanding options and an additional
676,490 shares of Common Stock reserved for issuance under the Company's Option
Plans and Employee Stock Purchase Plan.
In addition to satisfying the Company's current obligations as described
above, the Company may be required to raise additional capital to finance its
operations. Thus, one of the purposes of the proposed amendment includes
providing the Company with greater flexibility for entering into any financing
opportunity that might be presented to it. Currently, the Company is restricted
in its financing options due to the limited amount of authorized but unissued
shares of Common Stock provided for in its Certificate of Incorporation. The
Board believes that it is in the best interest of the Company to increase the
number of authorized shares of Common Stock to assure the availability of shares
for such purposes.
PURPOSES AND EFFECTS OF INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The proposed amendment of the Certificate of Incorporation would increase
the number of shares of Common Stock which the Company is authorized to issue
from 10,740,000 shares to 25,000,000 shares. If the Proposal to amend the
Certificate of Incorporation is approved by the shareholders of the Company, the
additional 14,260,000 shares of Common Stock authorized would be part of the
existing class of Common Stock and, if and when issued, would have the same
rights and privileges as the shares of Common Stock currently issued and
outstanding.
The Board believes that the proposed increase in the number of authorized
shares of Common Stock is advisable so that the Company will have sufficient
authorized capital to permit (i) future equity financings, (ii) potential
acquisitions of businesses for Common Stock, (iii) the grant of additional stock
options under its Option Plans, (iv) the issuance of additional shares of
15
Common Stock under its Employee Stock Purchase Plan, and (v) potential issuances
of shares of Common Stock upon exercise of outstanding warrants and options to
purchase Common Stock. There are no plans, arrangements or agreements currently
in place with respect to business acquisitions. Although the Company is
evaluating opportunities for equity financing, no arrangements or agreements for
equity financing are currently in place and no assurance can be given that the
Company will be successful in obtaining any additional equity financing.
Approval of the proposal by the shareholders of the Company will increase
the number of shares of Common Stock which the Company may issue without further
shareholder approval. The issuance of additional shares of Common Stock could
have the effect of delaying, deferring or preventing a change in control of the
Company and discouraging tender offers for the Company. In addition, the
issuance of additional shares of Common Stock will have a dilutive effect on the
current stockholders of the Company and could have an adverse impact on the
trading price of the Common Stock.
VOTE REQUIRED
Approval by the Company's shareholders of the proposal to amend the
Certificate of Incorporation requires the affirmative vote of a majority of the
votes cast at the annual meeting by the holders of Common Stock.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE PROPOSAL TO AMEND THE CERTIFICATE OF
INCORPORATION.
ANNUAL REPORT
The annual report to shareholders for the fiscal year ended November 30,
2003 accompanies this Proxy Statement. Aidman, Piser has audited the financial
statements of the Company for the three fiscal years ended November 30, 2003.
INDEPENDENT AUDITORSS
The firm of Aidman, Piser, independent certified public accountants, was
retained as independent auditors to the Company for the year ended November 30,
2003 by the Audit Committee of the Board of Directors. A representative of
Aidman, Piser will be present at the meeting and will have an opportunity to
make a statement if the representative desires to do so. Said representative
will also be available to respond to appropriate questions from shareholders of
the Company.
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
The Board has adopted a formal process to be followed for those
shareholders who wish to communicate directly with the Board or any individual
director of the Company. A shareholder can contact the Board, or any individual
director, by sending a written communication to: Board of Directors, Calton,
Inc., c/o Corporate Secretary, 43 W. Front Street, Suite 15, Red Bank, New
Jersey 07701. A shareholder's letter should also indicate that he or she
16
is a Calton, Inc. shareholder. The Secretary of the Company shall either (a)
distribute such communication to the Board, or a member or members thereof, as
appropriate depending upon the facts and circumstances described in the
communication received; or (b) determine that the communication should not be
forwarded to the Board because, in his or her judgment, (i) the communication is
primarily commercial in nature and relates to the Company's ordinary business or
relates to a topic that is improper or not relevant to the Board; or (ii) the
Company's management can adequately handle the shareholder inquiry or request,
in which case the inquiry or request will be forwarded to the appropriate
individual. If a shareholder communication is addressed to one or more members
of the Board, but not the entire Board, the Corporate Secretary shall notify any
member of the Board to whom such communication was not addressed that such
communication was received and shall provide a copy of such communication upon
request.
SHAREHOLDER PROPOSALS AND NOMINEES FOR DIRECTOR
A shareholder of the Company who wishes to present a proposal for action
at the Company's 2005 annual meeting of shareholders must submit such proposal
to the Company and such proposal must be received by November 28, 2004. A
shareholder wishing to submit a proposal should write to the Company's Corporate
Secretary and include a detailed description of such proposal.
The independent directors of the Board will also consider nominees for
director suggested by shareholders of the Company applying the same criteria for
nominees described under "Election of Directors--Nomination Process" and
considering the additional information required below. A shareholder who wishes
to suggest a nominee for director should write to the Company's Corporate
Secretary and include the following information: (1) the name and contact
information for the nominee; (2) a statement of the nominee's business
experience and educational background; (3) a detailed description describing any
relationship between the nominee and the proposing shareholder; (4) a statement
by the shareholder explaining why he or she believes that the nominee is
qualified to serve on the Board and how his or her service would benefit the
Company; and (5) a statement that the nominee is willing to be considered and
willing to serve as a director of the Company if nominated and elected. A
shareholder wishing to suggest a nominee for director for possible consideration
at the Company's 2005 annual meeting of shareholders must submit the required
information to the Company and such information must be received by the Company
by January 26, 2005. The Board retains complete discretion for making
nominations for election as a member of the Board.
17
THE MANAGEMENT OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
THE NOMINEE TO THE BOARD OF DIRECTORS AND FOR THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF THE COMPANY'S COMMON STOCK.
THE COMPANY SUBMITS TO THE SECURITIES AND EXCHANGE COMMISSION AN ANNUAL
REPORT ON FORM 10-KSB. COPIES OF THE REPORT WILL BE FURNISHED WITHOUT CHARGE
UPON WRITTEN REQUEST RECEIVED FROM ANY HOLDER OF RECORD OR BENEFICIAL OWNER OF
SHARES OF COMMON STOCK OF THE COMPANY. REQUESTS SHOULD BE DIRECTED TO
SHAREHOLDER RELATIONS, CALTON, INC., 43 WEST FRONT STREET, SUITE 15, RED BANK,
NEW JERSEY 07701.
ALL SHAREHOLDERS ARE URGED TO MARK, SIGN, DATE AND SEND IN THEIR PROXIES
IN THE ENCLOSED ENVELOPE WITHOUT DELAY TO STOCKTRANS, INC., 44 West Lancaster
Avenue, Ardmore, Pennsylvania 19003.
PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.
MARY H. MAGEE
SECRETARY
March 26, 2004
18
APPENDIX A
CALTON, INC.
AUDIT COMMITTEE CHARTER
(AMENDED ON JANUARY 28, 2004)
- --------------------------------------------------------------------------------
I. PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") of Calton, Inc. (the "Corporation"),
in fulfilling its responsibility to oversee the business and affairs of the
Corporation. The Committee's primary duties and responsibilities are to: 1)
serve as an independent and objective body to monitor the financial reporting
process and internal control system of the Corporation; 2) oversee the quality
and integrity of the financial statements of the Corporation; 3) review and
appraise the qualifications, performance and independence of the Corporation's
independent auditors; 4) review and appraise the performance of the
Corporation's internal accounting personnel; 5) provide an open forum for
communication among the independent auditors, senior financial officers, other
members of management, the Corporation's internal accounting personnel and the
Board; 6) prepare an annual Committee report to be included in the Corporation's
proxy statement as required by the regulations of the United States Securities
and Exchange Commission (the "SEC"); and 7) assist in assuring the Corporation's
compliance with legal and regulatory requirements. The Committee will fulfill
these responsibilities primarily by carrying out the activities enumerated in
Section IV of this Audit Committee Charter (this "Charter"). In addition, it
shall encourage continuous improvement of and adherence to the Corporation's
policies, procedures and practices, including, but not limited to, the
Corporation's Code of Conduct.
II. COMPOSITION
The Committee shall be comprised of a minimum of three (3) directors, as
determined by the Board, who qualify as "independent" directors in accordance
with the rules and regulations of the American Stock Exchange ("AMEX") and the
SEC, as such rules and regulations may be amended from time to time.
All Committee members shall be financially literate at the time of their
appointment or election, which includes having a working familiarity with basic
finance and accounting practices, and shall have sufficient financial expertise
and ability to enable them to discharge their responsibilities. At least one
member of the Committee shall qualify as a "financial expert." The term
"financial expert" shall have the meaning ascribed thereto in the rules and
regulations of the SEC, as such rules and regulations may be amended from time
to time. Committee members may enhance their familiarity with finance and
accounting by participating in educational programs.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve until their successors shall
be duly elected and qualified.
The Board may remove a member of the Committee in its discretion. Unless a Chair
is elected by the full Board, the members of the Committee may designate a Chair
by majority vote of the full Committee membership.
III. MEETINGS AND REPORTS
The Committee shall meet quarterly, or more frequently as circumstances
dictate. As part of its job to foster open communication and inquiry, the
Committee shall meet at least annually with management and the independent
auditors in separate sessions to discuss any matters that the Committee or each
of these groups believes should be discussed. In addition, the Committee shall
meet in a separate session with the independent auditors at least twice a year
to review the Corporation's financial statements. The Committee shall meet with
senior management and the independent auditors at least quarterly to review the
Corporation's financial statements and the quarterly report on Form 10-Q. Such
meetings may be via teleconferencing or other electronic means.
The Committee is authorized to retain persons having special competence,
legal counsel and other advisors as may be necessary or appropriate to assist
the Committee in fully complying with all duties and obligations set forth in
this Charter. The Committee shall make regular reports to the Board of its
activities, which shall include, where appropriate, recommendations for future
action by the Board. The Board shall ensure that the Committee is adequately
funded to (i) compensate any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Corporation; (ii) compensate any registered
public accounting firm engaged for the purpose of providing non-audit services;
and (iii) carry-out the activities and utilize the resources provided for
herein.
IV. RESPONSIBILITIES AND DUTIES
In order to fulfill its purpose, the Committee shall have the following
responsibilities and duties:
DOCUMENTS AND REPORTS
1. Review and assess the adequacy of this Charter annually and update this
Charter as conditions warrant.
2. Review the regular internal reports to management prepared by the
Corporation's internal accounting personnel and management's response to
such reports.
3. Review with senior financial officers and the independent auditors the
quarterly report on Form 10-Q, including significant changes in
accounting principles or their application, disclosure under
Management's Discussion and Analysis of Financial Condition and Results
of Operations, the discussion of the Corporation's critical accounting
policies and estimates, the certification of financial statements
included in the Form 10-Q and other financial information, prior to the
filing of the Form 10-Q with the SEC or prior to the release of earnings
to the public. The Chair of the Committee may represent the entire
Committee for purposes of this review.
2
4. Review with senior financial officers and the independent auditors the
annual report on Form 10-K, including significant changes in accounting
principles or their application, disclosure under Management's
Discussion and Analysis of Financial Condition and Results of
Operations, the discussion of the Corporation's critical accounting
policies and estimates, the certification of financial statements
included in the Form 10-K and other financial information, prior to the
filing of the Form 10-K with the SEC or prior to the release of earnings
to the public.
5. Recommend to the Board that the annual financial statements of the
Corporation be included in the Corporation's annual report on Form 10-K.
6. Review with senior financial officers and the independent auditors, as
appropriate, the annual report to shareholders prior to its distribution
to shareholders and prior to its filing with the SEC.
7. Prepare an annual Committee report to be included in the Corporation's
proxy statement as required by SEC regulations.
INDEPENDENT AUDITORS
8. Evaluate and select the independent auditors, considering independence
and effectiveness, and approve the terms of the engagement and the fees
and other compensation to be paid to the independent auditors. On an
annual basis, the Committee shall review and discuss with the auditors
all significant relationships the auditors have with the Corporation to
determine the independence of the auditors.
9. Pre-approve any permissible non-audit services to be provided to the
Corporation by the independent auditors and the fees associated with
such non-audit services.
10. Pre-approve any non-audit services to be provided to the Corporation by
outside consultants, other than the independent auditors, and the fees
associated with such non-audit services.
11. Periodically consult with the independent auditors about internal
controls and procedures and the completeness and accuracy of the
Corporation's financial statements and other financial information.
12. Review the performance of the independent auditors and approve any
proposed discharge of the independent auditors when circumstances
warrant. The Committee shall request, at least annually, a report from
the independent auditors detailing i) the auditors' internal quality
control procedures, ii) any problems or material issues raised by recent
internal quality control reviews, investigations or inquiries, or by any
inquiry or investigation by governmental or professional authorities,
and iii) the steps taken to rectify any factors that would call into
question the auditors' independence, including all relationships between
the Corporation and the auditors.
3
13. Ensure that the lead audit partner assigned by the Corporation's
independent auditors to the Corporation, as well as the audit partner
responsible for reviewing the Corporation's audit, shall be changed at
least every five (5) years.
14. Establish and enforce clear hiring policies with regard to employees and
former employees of the Corporation's independent auditors. The
Committee shall enforce a one-year cooling-off period before the lead
partner, the concurring partner or any other member of an audit
engagement team who provides more than ten hours of audit services
during an annual audit period may be employed by the Corporation in a
financial oversight role, including, without limitation, as a member of
the Board, chief executive officer, president, chief financial officer,
chief operating officer, chief accounting officer, controller, director
of internal audit or an equivalent position.
FINANCIAL REPORTING PROCESS
15. In consultation with the independent auditors and internal audit
department, review the integrity of the Corporation's financial
reporting processes, both internal and external, including the adequacy
of the Corporation's disclosure controls and procedures.
16. Discuss with the independent auditors any material correcting
adjustments that have been identified by the independent auditors and
made to conform with generally accepted accounting principles.
17. Consider the judgments of the independent auditors concerning the
quality and appropriateness of the Corporation's accounting principles
as applied in its financial reporting.
18. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the
independent auditors, management or the internal accounting personnel,
including alternatives to, and the rationale for, the decisions made.
19. Review and discuss with management, senior financial officers and the
independent auditors the Corporation's policies with respect to risk
assessment and risk management, including the Corporation's major
financial risk exposure and steps taken by management to monitor and
mitigate such exposure.
20. Discuss with the Corporation's principal executive and senior financial
officers and the Corporation's independent auditors all significant
deficiencies in the design or operation of internal controls and
procedures which could adversely affect the Corporation's ability to
record, process, summarize and report financial data and any material
weaknesses in internal controls, and, any fraud, whether or not
material, that involves management or other employees who have a
significant role in the Corporation's internal controls.
21. Discuss with the Disclosure Committee (the "Disclosure Committee") of
the Corporation (i) the information contained in the Corporation's
financial statements and reports to the SEC, (ii) the effectiveness of
the Corporation's disclosure controls and procedures, and (iii) any
change in the Corporation's internal controls over financial reporting
that has
4
materially affected or is reasonably likely to materially affect the
Corporation's internal controls over financial reporting. The Disclosure
Committee shall (i) ensure that the reports that the Corporation files
with the SEC pursuant to the Securities Exchange Act of 1934, as
amended, disclose all information required to be disclosed in such
reports, (ii) modify the Corporation's disclosure controls and
procedures, as necessary, and (iii) monitor the Corporation's internal
financial controls.
PROCESS IMPROVEMENT
22. Establish regular and separate systems of reporting to the Committee by
management and the independent auditors regarding any significant
judgments made by management or the independent auditors in its
preparation of the financial statements.
23. Establish regular and separate systems of reporting to the Committee by
the Corporation's internal accounting personnel. The Committee shall
review (i) the activities, duties and obligations of the Corporation's
internal accounting personnel, including, but not limited to, the
preparation of the annual internal audit plan and budget and those
duties and obligations prescribed in the Corporation's Code of Conduct,
and (ii) the results of any and all audit work performed by the internal
accounting personnel.
24. Following completion of the annual audit, review separately with each of
management, the independent auditors and the internal audit department
any significant difficulties encountered during the course of the audit,
including, but not limited to any restrictions on the scope of work or
access to required information.
25. Review with management, the independent auditors and the internal
accounting personnel the extent to which changes or improvements in
financial or accounting practices, as approved by the Committee, have
been implemented.
26. Review and resolve any significant disagreement among management and the
independent auditors or the internal accounting personnel in connection
with the preparation of the financial statements or other financial
information.
27. Oversee and evaluate all related party transactions proposed to be
entered into by the Corporation.
28. Assess annually the overall performance and effectiveness of the
Committee.
ETHICAL AND LEGAL COMPLIANCE
29. Review and update periodically the Corporation's Code of Conduct and
determine that there is an established system to enforce the Code of
Conduct.
30. Review the system established by management to enforce the Code of
Conduct. Review management's monitoring of the Corporation's compliance
with the Code of Conduct.
5
31. Review and investigate any matters pertaining to the integrity of
management, including conflicts of interest and adherence to standards
of business conduct as required in the Code of Conduct.
32. Review the system established by management to ensure that the
Corporation's financial statements and reports are accurately and timely
disseminated to governmental organizations and the public and satisfy
all legal requirements.
33. Review the organizational structure of the internal accounting personnel
and the qualifications of the internal accounting personnel.
34. Review with the Corporation's counsel any legal matter that could have a
significant impact on the organization's financial statements or other
financial information.
35. Review with the Corporation's counsel legal compliance and regulatory
matters.
36. Perform any other activities consistent with this Charter, the
Corporation's By-laws, rules of the AMEX and governing law, as the
Committee or the Board deems necessary or appropriate.
COMPLAINT PROCEDURES
37. Establish written procedures consistent with the Code of Conduct for
handling complaints regarding accounting, internal accounting controls
and auditing matters, including procedures for confidential, anonymous
submission of concerns by employees regarding accounting and auditing
matters.
38. Establish written procedures for the confidential receipt, retention and
consideration of any report by an attorney of evidence of (i) a material
violation of any applicable Federal or state securities law, (ii) a
material breach of fiduciary duty arising under Federal or state law, or
(iii) a similar material violation of any Federal or state law, by the
Corporation or any officer, director, employee or agent of the
Corporation.
39. Investigate any matter brought to the Committee's attention with full
access to all books, records, facilities and personnel of the
Corporation, and make recommendations to the Board as to any corrective
or remedial action unless such action shall be within the purview of the
authority of this Committee. The Committee is authorized to retain such
additional expert personnel as the Committee may deem necessary in
connection with any such investigation.
6
APPENDIX B
CERTIFICATE OF AMENDMENT
TO THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF CALTON, INC.
To: The Department of Treasury
State of New Jersey
Pursuant to the provisions of Sections 14A:7-15.1(3), 14A:9-2(2) and
14A:9-4(2) of the New Jersey Business Corporation Act, the undersigned
Corporation executes the following Certificate of Amendment to its Amended and
Restated Certificate of Incorporation:
1. The name of the Corporation is "Calton, Inc."
2. The following amendment to the Amended and Restated Certificate of
Incorporation (the "Amendment") was approved by the Board of Directors
and thereafter duly adopted by the shareholders of the Corporation on
April 27, 2004:
The first paragraph of Article IV of the Amended and Restated
Certificate of Incorporation of the Company is amended to read in its
entirety as follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 27,520,000, of which
25,000,000 shares shall be classified as "Common Stock," having a par
value of five cents ($.05) per share, 520,000 shares shall be of a class
designated "Preferred Stock," having a part value of ten cents ($.10)
per share, and 2,000,000 shares shall be of a class designated "Class A
Preferred Stock," having a par value of ten cents ($.10) per share."
3. The number of shares entitled to vote on the adoption of the Amendment
was _________ shares of Common Stock, par value five cents ($.05) per
share, entitling the holders thereof to one (1) vote per share. The
number of shares of Common Stock voted for the Amendment was __________
shares and the number of shares of Common Stock voting against the
Amendment was _________ shares. A total of __________ shares abstained
from voting on the Amendment.
IN WITNESS WHEREOF, Calton, Inc. has caused its duly authorized officer
to execute this Certificate of Amendment on this ____ day of April, 2004.
Calton, Inc.
By:
-------------------------------
Name:
Title:
CALTON, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 27, 2004
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CALTON, INC.
P KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Anthony J. Caldarone and Laura A. Camisa and each of them,
the true and lawful attorneys, agents and proxies of the undersigned, with
R full power of substitution, to vote with respect to all the shares of
Common Stock of CALTON, INC., standing in the name of the undersigned at
the close of business on March 19, 2004, at the annual meeting of
O shareholders to be held at 2013 Indian River Boulevard, Vero Beach,
Florida on April 27, 2004 and at any and all adjournments thereof, with
all powers that the undersigned would possess if personally present and
X especially (but without limiting the general authorization and power
hereby given) to vote as indicated on the reverse side hereof. Said
proxies are authorized to vote in their discretion upon any other matters
Y which may come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED,
AND IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED, WILL BE VOTED FOR
THE ELECTION OF FRANK CAVELL SMITH, JR. AS DIRECTOR AND FOR THE PROPOSAL
TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF CALTON, INC. COMMON STOCK.
COMMON STOCK
(This proxy is continued from reverse side)
Please mark your |X|
votes as in this example.
WITHHOLD
AUTHORITY to
vote for the
FOR the nominee nominee
FOR AGAINST ABSTAIN
1. Election of Frank C. |_| |_| 2. Approval of |_| |_| |_|
Smith, Jr. as Director. Amendment of
Certificate
of Incorporation
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSING ENVELOPE.
Signature(s) of
Shareholder(s)____________________________________________________________________________________
(Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s) on this card. When signing
as attorney, trustee, executor, administrator, guardian or corporate officer, please give your FULL title.)