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 Pursuant to Section 240.14a-12
CALTON, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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/X/ No fee required.
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CALTON, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 10, 2006
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TO THE SHAREHOLDERS OF CALTON, INC.
The Annual Meeting of the Shareholders of CALTON, INC. (the "Company")
will be held on Wednesday, May 10, 2006 at the Homes by Calton Model Center,
Pointe West Community, 7614 South Village Square, Vero Beach, Florida at 10:00
a.m., local time, for the following purposes:
1. To elect two (2) directors.
2. To consider and vote upon a proposal to adopt the Company's 2006
Equity Incentive Plan.
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 27,
2006 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 30, 2006
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU ARE UNABLE TO DO
SO, PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY AND MAIL IT AT ONCE IN THE
ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
CALTON, INC.
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement is furnished to the holders of Calton, Inc. (the
"Company" or "Calton") Common Stock, $.05 par value ("Common Stock"), in
connection with the solicitation of proxies for use at the annual meeting of
shareholders to be held on May 10, 2006, 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 30, 2006. The executive offices of the Company
are located at 2050 40th Avenue, Suite One, Vero Beach, Florida 32960.
Shareholders may revoke the authority granted by their execution of
proxies at any time before the effective exercise of proxies by filing written
notice of such revocation with the secretary of the meeting. Presence at the
meeting does not of itself revoke the proxy; however, a vote cast at the meeting
by written ballot will revoke the proxy. All shares represented by executed and
unrevoked proxies will be voted in accordance with the specifications therein.
Proxies submitted without specification will be voted FOR the election of the
nominees for director named herein and FOR the proposal to adopt the 2006 Equity
Incentive Plan. Management is not aware at the date hereof of any matters to be
presented at the meeting other than the election of the directors and the
proposal to adopt the 2006 Equity Incentive Plan. 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 27, 2006, the number of outstanding shares of Common Stock was
9,515,346. Only shareholders of record on the books of the Company at the close
of business on March 27, 2006 will be entitled to vote at
the meeting. The holders of a majority of the outstanding shares of Common
Stock, present in person or by proxy, will constitute a quorum at the meeting.
The affirmative vote of a plurality of the shares of Common Stock present in
person or represented by proxy and entitled to vote, is required for the
election of directors. The proxy card provides space for a shareholder to
withhold votes for any nominee for the Board of Directors.
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 27, 2006, 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................................... 4,238,705 (1) 44.2%
Joyce P. Caldarone..................................... 4,238,705 (2) 44.2%
Maria F. Caldarone..................................... 1,098,093 (3) 11.4%
John G. Yates.......................................... 893,942 (4) 9.2%
Laura A. Camisa........................................ 566,196 (5) 5.9%
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(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 75,000 shares subject to stock options which are
exercisable within 60 days of March 27, 2006 ("Currently Exercisable
Stock Options").
(2) Includes an aggregate of 3,782,465 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 85,000 shares subject to Currently Exercisable
Stock Options.
(4) Includes an aggregate of 165,000 shares subject to Currently Exercisable
Stock Options.
(5) Includes an aggregate of 80,000 shares subject to Currently Exercisable
Stock Options.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 27, 2006, 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......................................... 4,238,705 (1) 44.2%
Kenneth D. Hill.............................................. 151,797 (2) 1.6%
John G. Yates................................................ 893,942 (3) 9.2%
Maria F. Caldarone........................................... 1,098,093 (4) 11.4%
Laura A. Camisa.............................................. 566,196 (5) 5.9%
J. Ernest Brophy............................................. 75,418 (6) (7)
Mark N. Fessel............................................... 158,691 (6) 1.7%
Frank Cavell Smith, Jr....................................... 123,102 (6) 1.3%
All Directors and Executive Officers as
a Group (8 persons)(1),(2),(3),(4),(5) and (6)............ 7,305,944 72.2%
- ---------------
(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 75,000 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 50,000 shares subject to Currently
Exercisable Stock Options.
(3) Includes 165,000 shares subject to Currently Exercisable Stock Options.
(4) Includes 85,000 shares subject to Currently Exercisable Stock Options.
(5) Includes 80,000 shares subject to Currently Exercisable Stock Options.
(6) Includes 50,000 shares subject to Currently Exercisable Stock Options.
(7) Shares beneficially owned do not exceed 1% of the Company's outstanding
Common Stock.
3
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 year. The Board of
Directors has fixed the number of directors at six, two of whom are to be
elected at the 2006 Annual Meeting, two whose terms expire at the annual meeting
in 2007, one whose term expires at the annual meeting in 2008, and one whose
term expires at the annual meeting in 2009.
NOMINATION PROCESS
The Board of Directors established a Nominating Committee in 2004. The
current members of the Nominating Committee are J. Ernest Brophy, Mark N.
Fessel, Kenneth D. Hill and Frank Cavell Smith, Jr., each of whom currently
meets the standards for independence as set forth in the rules of the American
Stock Exchange. The Nominating Committee's primary responsibilities and duties
are to:
o identify individuals qualified to become members of the Board;
o select, or recommend to the Board, director nominees to be
presented for shareholder approval at the annual meeting;
o select, or recommend to the Board, director nominees to fill
vacancies on the Board as necessary; and
o review periodically the structure, size, composition and
operation of the Board and each committee of the Board.
The members of the Nominating Committee 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 Nominating Committee considers 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 nominees named below are
sitting directors of the Company who are up for re-election at the annual
meeting, the independent directors also considered the directors' past
performance on the Board. The Board seeks to identify individuals who satisfy
these criteria from among persons known to them.
The Nominating Committee 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 Nominating Committee will
apply the same criteria described above to any candidate suggested by a
shareholder, as well as evaluate any additional
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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.
J. Ernest Brophy and Kenneth D. Hill are the incumbent directors whose
terms expire at the 2006 annual meeting. Each of Mr. Brophy and Mr. Hill has
been unanimously nominated by the Nominating Committee to stand for election at
the meeting to hold office until the 2010 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. Brophy and Mr. Hill. If any nominee
should be unable to serve, the proxies will be voted for the election of a
substitute nominee, if any, designated by the Board of Directors. The Company is
not aware of any reason why any nominee, if elected, would be unable to serve as
a director.
Set forth below is certain biographical information with respect to the
nominees for election to the Board and the directors whose terms of office will
continue after the 2006 annual meeting.
NOMINEES
NOMINEES FOR ELECTION FOR FOUR-YEAR TERMS EXPIRING AT THE 2010 ANNUAL MEETING.
KENNETH D. HILL. Mr. Hill, age 64, 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. He served as President and Chief Executive Officer
of National AmeriServe, Inc., an internet business solutions provider, from May
1998 through October 1998, when it merged with iAW, Inc., the predecessor of
eCalton.com, Inc.
J. ERNEST BROPHY. Mr. Brophy, age 81, a retired attorney and Certified
Public Accountant who specialized in tax consultation to clients engaged in the
construction business, was reappointed as a Director of Calton in November 1995,
having served in such capacity from March 1983 through November 1985 and from
April 1986 until through May 1993. From 1992 through March 1996, Mr. Brophy
served as Chief Financial Officer and a director of Hurdy-Gurdy International,
Inc., a company that marketed sorbet products.
DIRECTOR CONTINUING IN OFFICE UNTIL THE 2009 ANNUAL MEETING:
ANTHONY J. CALDARONE. Mr. Caldarone, age 68, has served as Chairman,
President and Chief Executive Officer of the Company since January 2005 and
served in the same capacity from the inception of the Company in 1981 through
June 1993 and from November 1995 through September 2002. From September 2002
until January 2005, he served as Chairman and Chief Executive Officer of the
Company. He served as a Director of the Company from June 1993 through October
1995.
5
DIRECTOR CONTINUING IN OFFICE UNTIL THE 2008 ANNUAL MEETING:
FRANK CAVELL SMITH, JR. Mr. Smith, age 61, 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 49, 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 63, was appointed a Director of the
Company in October 2002. From September 2002 through January 2005, he served as
President and Chief Operating Officer of the Company. He has also 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.
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, 2005, the Board of Directors
held four meetings and acted by unanimous written consent on one occasion.
During fiscal 2005, each member of the Company's current Board of Directors
attended 100% 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 2005, the Board of Directors had three standing
committees: the Audit Committee, the Compensation Committee and the Nominating
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 five meetings in fiscal 2005 and acted by
unanimous written consent on one occasion.
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") and the Employee Stock Purchase Plan.
The Compensation Committee will also administer the 2006 Equity Incentive Plan
if the proposal to adopt the plan is approved at the annual meeting. The
Compensation Committee met once in fiscal 2005 and acted by unanimous written
consent on one occasion.
The Nominating Committee, which was established by the Board in August
2004, currently consists of Mr. Brophy, Mr. Fessel, Mr. Hill and Mr. Smith. The
duties and functions performed by the Nominating Committee are described under
the caption "Nomination Process." The Nominating Committee Charter is posted on
the Company's website, www.caltoninc.com, under "Investor Relations." The
Nominating Committee met on one occasion in fiscal 2005.
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, 2005, 2004, and 2003, of
the Chief Executive Officer of the Company in fiscal 2005 and the other
executive officers of the Company who earned salary and bonuses in fiscal 2005
in excess of $100,000 (collectively, the "Named Officers"):
ANNUAL COMPENSATION AWARDS
------------------------------
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(2)
- ----------------------------- ---------- ------------- --------------- ----------------
Anthony J. Caldarone 2005 $ 100,000 $ --- $9,913
Chairman, President and 2004 100,000 --- 9,468
Chief Executive Officer 2003 100,000 --- 8,487
Maria F. Caldarone 2005 127,223 40,000 1,134
Executive Vice President 2004 125,460 21,000 664
2003 121,000 --- 623
Laura A. Camisa 2005 121,945 35,000 692
Senior Vice President, 2004 120,335 18,000 647
Chief Financial Officer 2003 116,000 --- 460
and Treasurer
- ---------------
(1) Represents amounts accrued in fiscal 2004 and fiscal 2005 and paid in
fiscal 2005 and fiscal 2006, respectively, to the Named Officers
pursuant to the Company's Incentive Compensation Plan (the "Incentive
Plan"). The Incentive Plan provides for an incentive compensation pool
equal to ten percent (10%) of the Company's annual pre-tax income,
subject to certain adjustments to pre-tax income that may
7
be made by the Compensation Committee to remove the effect of events or
transactions not in the ordinary course of the Company's operations. No
awards were made under the Incentive Plan for fiscal 2003. Officers and
key operations and senior corporate management employees (the "Eligible
Employees") of the Company and its subsidiaries are eligible for
participation in the Incentive Plan. In addition, a portion of the
incentive compensation pool established under the Incentive Plan may be
used for bonuses to full time employees who do not otherwise have an
opportunity to obtain a specified level of commissions or bonuses. The
Eligible Employees are determined each fiscal year by the Compensation
Committee based on the recommendations of the President and Chief
Executive Officer of the Company. The Compensation Committee ultimately
determines the percentage, if any, of the incentive compensation pool
for a fiscal year to be awarded to an Eligible Employee, subject to the
limits contained in the plan.
(2) Amounts reported include cost of premiums paid by the Company under a
program that provides officers of the Company with additional life
insurance (supplementing the coverage available under the Company's
group life insurance plan).
DIRECTORS' COMPENSATION
Members of the Board of Directors who are not full time employees of
Calton were each entitled in fiscal 2005 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 $50,000 in director fees to
members of the Board of Directors during fiscal year 2005.
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 50,000 shares of Common
Stock at an exercise price of $0.53 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 2005.
Directors are reimbursed for travel expenses incurred in connection with
attendance at Board and committee meetings.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
Effective January 1, 2006, the Company entered into an Employment
Agreement (the "Employment Agreement") with Anthony J. Caldarone, Chairman,
President and Chief Executive Officer of the Company. The Employment Agreement
provides for an annual base salary of $100,000 and entitles Mr. Caldarone to
participate in all benefit plans made available to the Company's senior
executives. The Employment Agreement, which replaced the employment agreement
between the Company and Mr. Caldarone that expired on December 31, 2005, is
terminable at will by either party. Mr. Caldarone will be prohibited from
engaging in the acquisition, development, construction and marketing of
residential real estate in the State of Florida for a twelve month period
following the termination of the Employment Agreement.
8
OPTION GRANTS
Shown below is further information with respect to grants of stock
options in fiscal 2005 to the Named Officers by the Company which are reflected
in the Summary Compensation Table set forth under the caption "Executive
Compensation."
Individual Grants
--------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Price Expiration ---------------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ----------- ---------------- ------------- ---------- ------------ ------------
Maria F. Caldarone........... 35,000 35% $0.43 1/27/15 $9,466 $23,990
Laura A. Camisa.............. 30,000 30% $0.43 1/27/15 $8,114 $20,563
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to options exercised by the
Named Officers during fiscal 2005 and the value of unexercised options to
purchase the Company's Common Stock held by the Named Officers at November 30,
2005.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT FY-END (#) OPTIONS AT FY-END ($)(1)
--------------------------- ----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Anthony J. Caldarone.... -- -- 75,000 -- -- --
Maria F. Caldarone...... -- -- 85,000 -- 8,800 --
Laura A. Camisa......... -- -- 80,000 -- 8,800 --
- ----------
(1) Represents market value of shares covered by in-the-money options on
November 30, 2005. The closing price of the Common Stock on such date
was $0.44. Options are in-the-money if market value of shares covered
thereby is greater than the option exercise price.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of November 30, 2005 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 758,200 $0.70 534,168 (2)
approved by security
holders (1)
- --------------------------- ---------------------------- ---------------------------- --------------------------------
Equity compensation plans
not approved by security
holders (3) 120,000 $8.15 -0-
- --------------------------- ---------------------------- ---------------------------- --------------------------------
TOTAL 878,200 $1.72 534,168
=========================== ============================ ============================ ================================
(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 53,075 shares available for issuance under the 1996 Plan,
199,832 shares available for issuance under the 2000 Plan and 281,261
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.
10
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
John G. Yates and Thomas C. Corley have served as unpaid officers of the
Company's wholly owned subsidiary, PrivilegeONE Networks, LLC ("PrivilegeONE")
since August 31, 2003 and September 30, 2003, respectively. From those same
dates until January 2005 and April 2004, respectively, Mr. Yates and Mr. Corley
also served as unpaid officers of the Company. 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.
The Company provides a uniform Employee Discount Plan which provides a
seven and one-half percent (7.5%) discount to employees who purchase a home from
the Company as their principal residence. During the fiscal year ended November
30, 2005, Maria Caldarone, Executive Vice President of the Company, purchased a
home under the Employee Discount Plan at a price of $602,912.
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 and regulations of the American Stock
Exchange. In addition, the Board has determined that J. Ernest Brophy is both
independent and qualifies as a financial expert, as defined by rules and
regulations of the American Stock Exchange. 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.
11
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. The Charter was updated in
January 2005 and the updated Charter was filed with the SEC on March 30, 2005 as
Appendix "A" to the Company's proxy statement delivered in connection with the
2005 annual meeting of shareholders.
REVIEW OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 2005
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended November 30, 2005 with the
Company's management. The 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, 2005 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, 2005 and November 30, 2004 by Aidman, Piser:
Year Ended November 30,
2005 2004
----------- -----------
Audit Fees $65,200 $66,750
Audit-Related Fees 695 970
Financial Information Systems --- ---
Design and Implementation Fees --- ---
Tax Fees --- ---
All Other Fees --- ---
12
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 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 2005.
PROPOSAL TO ADOPT THE CALTON, INC. 2006 EQUITY INCENTIVE PLAN
INTRODUCTION
The Board of Directors has approved and adopted, subject to approval and
ratification by the shareholders, the 2006 Equity Incentive Plan (the "2006
Equity Incentive Plan" or the "2006 Plan"). The Board of Directors believes that
the 2006 Equity Incentive Plan can be an effective means of attracting,
motivating and retaining key employees and directors. In addition, the Board
believes that the 2006 Equity Incentive Plan will provide a method whereby key
employees and directors can share in the long-term growth in the Company.
The aggregate number of shares reserved for issuance under the 2006
Equity Incentive Plan is 1,000,000 shares.
SUMMARY OF PROVISIONS OF THE 2006 EQUITY INCENTIVE PLAN
GENERAL
The 2006 Equity Incentive Plan will be administered by the Compensation
Committee which will be authorized to grant (i) "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended,
(ii) non-qualified stock options, (iii) stock appreciation rights ("SARs"), (iv)
restricted stock grants, (v) deferred stock awards and (vi) other
13
stock based awards to employees of the Company and its subsidiaries. The
Compensation Committee will determine (i) the recipients of awards under the
Plan ("Awards"), (ii) the times at which Awards will be made and (iii) the size
and type or types of Awards to be made to each recipient. The Compensation
Committee will set forth in each such Award the terms, conditions and
limitations applicable to the Award granted. The Compensation Committee will
have full and exclusive power to interpret the Plan, to adopt rules, regulations
and guidelines relating to the Plan, to grant waivers of Plan restrictions and
to make all of the determinations necessary for its administration.
The aggregate number of shares of Common Stock reserved for issuance
pursuant to Awards granted under the Plan is 1,000,000 shares. The maximum
number of shares of Common Stock which may be issued to the Chief Executive
Officer ("CEO") of the Company pursuant to all Awards granted to the CEO under
the Plan may not exceed thirty-five percent (35%) of the number of shares of the
Company's Common Stock reserved for issuance under the Plan. The maximum number
of shares of the Company's Common Stock awarded to any other participant under
the Plan may not exceed twenty percent (20%) of the number of shares of the
Company's Common Stock reserved for issuance under the Plan. The 2006 Equity
Incentive Plan will terminate on May 9, 2016 unless earlier terminated by the
Board of Directors.
Those eligible to receive Awards under the Plan (each, a "Participant"
and collectively, the "Participants") will be persons in the employ of the
Company or any of its subsidiaries designated by the Compensation Committee
("Employees") and other persons or entities who, in the opinion of the
Compensation Committee, are in a position to make a significant contribution to
the success of the Company or its subsidiaries, including, without limitation,
consultants and agents of and advisors to the Company or any subsidiary. A
"subsidiary" for purposes of the Plan will be a present or future corporation or
other entity of which the Company owns or controls, or will own or control, more
than 50% of the total combined voting power of all classes of stock or other
equity interests.
AWARDS UNDER THE EQUITY 2006 INCENTIVE PLAN
STOCK OPTIONS. The Compensation Committee may grant either incentive
stock options or non-qualified stock options under the 2006 Equity Incentive
Plan. Only employees of the Company may be granted incentive stock options. The
exercise price of each option shall be equal to the "fair market value" (as
defined below) of the Common Stock on the date the option is granted to the
Participant; provided, however, that (i) in the Compensation Committee's
discretion, the exercise price of a non-qualified option may be less than the
fair market value of the Common Stock on the date of grant; (ii) with respect to
a Participant who owns more than 10% of the total combined voting power of all
classes of stock of the Company, the exercise price of an incentive stock option
granted to such Participant shall not be less than 110% of the fair market value
of the Common Stock on the date such option is repriced unless otherwise
determined by the Compensation Committee. For purposes of the exercise price of
an option, "fair market value" shall mean the closing sales price of the Common
Stock as reported on the principal securities exchange on which the Common Stock
is listed, or if not so listed, the last sale price (or the average of the high
asked and low bid prices of the Common Stock if sale price information is not
reported) of the Common Stock as reported by the Nasdaq Stock Market, by the
NASD OTC Bullet Board or similar quotation service. The term of each option
granted to a
14
Participant pursuant to the Plan will be determined by the Compensation
Committee; provided, however, that in no case shall an option be exercisable
more than ten years (five years in the case of an incentive stock option granted
to a ten-percent stockholder) from the date of the grant.
STOCK APPRECIATION RIGHTS. An SAR is an Award entitling the recipient to
receive payment, in cash and/or shares of Common Stock, determined in whole or
in part by reference to appreciation in the value of a share of Common Stock. An
SAR entitles the recipient to receive in cash and/or shares of Common Stock,
with respect to each SAR exercised, the excess of the fair market value of a
share of Common Stock on the date of exercise over the fair market value of a
share of Common Stock on the date the SAR was granted.
The Compensation Committee may grant SARs either alone or in combination
with an underlying stock option. The term of an SAR and the time or times at
which an SAR shall be exercisable shall be set by the Compensation Committee;
provided, that an SAR granted in tandem with an option will be exercisable only
at such times and to the extent that the related option is exercisable. An SAR
granted in tandem with an incentive stock option may be exercised only when the
market price of the shares of Common Stock subject to the incentive stock option
exceeds the exercise price of the incentive stock option, and the SAR may be for
no more than 100% of the difference between the exercise price of the underlying
incentive stock option and the fair market value of the Common Stock subject to
the underlying incentive stock option at the time the SAR is exercised. At the
option of the Compensation Committee, upon exercise, an SAR may be settled in
cash, Common Stock or a combination of both.
RESTRICTED STOCK GRANTS. The Compensation Committee may grant shares of
Common Stock under a restricted stock grant which sets forth the applicable
restrictions, conditions and forfeiture provisions which shall be determined by
the Compensation Committee and which can include restrictions on transfer,
continuous service with the Company or any of its subsidiaries, achievement of
business objectives, and individual, subsidiary and Company performance. Shares
of Common Stock may be granted pursuant to a restricted stock grant for no
consideration or for any consideration as determined by the Compensation
Committee. Subject to such restrictions, conditions and forfeiture provisions as
may be established by the Compensation Committee, any Participant receiving an
Award of Restricted Stock will have all the rights of a shareholder of the
Company with respect to the shares of Restricted Stock, including the right to
vote the shares and the right to receive any dividends thereon.
DEFERRED STOCK AWARDS. The Compensation Committee may grant shares of
Common Stock under a deferred stock award, with the delivery of such shares of
Common Stock to take place at such time or times and on such conditions as the
Compensation Committee may specify. At the time any deferred stock award is
granted, the Committee may provide that the Participant will receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
FORMULA AWARDS. Each time an individual who is not an employee of the
Company or a subsidiary of the Company is elected or reelected as a director of
the Company, the director will receive non-qualified stock options to acquire
10,000 shares of the Company's Common Stock. Each such option (a "Formula
Option") shall (i) have a per share exercise price equal to the fair market
value of the Common Stock on the date of such grant, (ii) have a term of five
years and (iii) become exercisable on the first anniversary of the date of
grant. In order for a non-employee
15
director to receive a Formula Option, such director must have attended 75% of
all Board meetings and 75% of all meetings of the Board committee(s) of which
the director was a member held during the prior 12 months while such director
was a member of the Board and committee(s). No award of Formula Options will be
made to a director who is receiving a comparable award under another option
plan.
DIRECTORS' FEES. Each director who is entitled to receive annual Board
retainer fees, Board meeting fees or Board committee fees shall receive such
fees in the form of shares of Common Stock having an aggregate fair market value
on the last day of each fiscal quarter equal to the aggregate amount of Board
fees owed to such director for such quarter. No fees payable in the form of
Common Stock will be payable to a director who is receiving such fees under the
2000 Plan.
FEDERAL INCOME TAX CONSEQUENCES
STOCK OPTIONS. The grant of an incentive stock option or a non-qualified
stock option does not result in income for the grantee or in a deduction for the
Company.
The exercise of a non-qualified stock option results in ordinary income
for the grantee and a business deduction for the Company measured by the
difference between the option's exercise price and the fair market value of the
shares of Common Stock received at the time of exercise. If the Company is
required to withhold income taxes in connection with the exercise of a
non-qualified stock option, the Compensation Committee may, in its discretion,
permit such withholding obligation to be satisfied by the delivery of shares of
Common Stock held by the grantee or to be delivered to the grantee upon exercise
of the option.
The exercise of a qualified incentive stock option does not result in
income for the grantee or in a business deduction for the Company; provided,
that the employee does not dispose of the shares of Common Stock acquired upon
exercise within two years after the date of grant of the option and one year
after the transfer of the shares of Common Stock upon exercise, and provided
further that, the employee is employed by the Company or a subsidiary of the
Company from the date of grant until three months before the date of exercise.
If these requirements are met, the employee's basis in the shares of Common
Stock would be the exercise price. Any gain related to the subsequent
disposition of shares of Common Stock will be taxed to the employee as a
long-term capital gain and the Company will not be entitled to any deduction.
The excess of the fair market value of the Common Stock on the date of exercise
over the exercise price is an item of tax preference for the employee,
potentially subject to the alternative minimum tax.
If an employee should dispose of the shares of Common Stock acquired
pursuant to the exercise of an incentive stock option prior to the expiration of
either of the designated holding periods, the employee recognizes ordinary
income and the Company is entitled to a business deduction in an amount equal to
the lesser of the fair market value of the shares of Common Stock on the date of
exercise minus the option exercise price or the amount realized on disposition
of the shares of Common Stock minus the option exercise price. Any gain in
excess of the ordinary income recognized by the employee is taxable as long-term
or short-term capital gain, depending on the holding period. If an option,
intended to be an incentive stock option,
16
does not satisfy all of the requirements of an incentive stock option pursuant
to Section 422 of the Code when granted, the employee recognizes ordinary income
upon exercise of the option and the Company is entitled to a business deduction
in an amount equal to the fair market value of the shares of Common Stock on the
exercise date minus the option exercise price. Income tax withholding would be
required. In the event an option intended to be an incentive stock option does
not qualify as such when granted or when exercised, the Board of Directors
believes that any related deduction should not be subject to the annual $1
million per capita limitation on employee remuneration for the Named Officers of
the Company imposed by Section 162(m) of the Code. The Board of Directors
believes that the income recognized by an employee or other Participant upon the
exercise of an option granted under the 2006 Equity Incentive Plan should be
qualified performance-based compensation and, therefore, an exception to the
limitations imposed on the Company by Section 162(m) of the Code with respect to
the deductibility of a Named Officer's compensation during a particular calendar
year.
SARs. The grant of an SAR does not result in income for the grantee or
in a business deduction for the Company for federal income tax purposes. Upon
the exercise of an SAR, the grantee recognizes ordinary income and the Company
is entitled to a business deduction measured by the fair market value of the
shares of Common Stock, plus any cash received. Income tax withholding would be
required for employees of the Company and its subsidiaries. The Board of
Directors believes that any income related to the exercise of SARs should be
exempt from the $1 million limit of Section 162(m) of the Code pursuant to the
performance-based compensation exception.
RESTRICTED STOCK GRANTS AND DEFERRED STOCK AWARD. If the shares of
Common Stock issued pursuant to a restricted stock grant or deferred stock award
are subject to restrictions resulting in a "substantial risk of forfeiture"
pursuant to the meaning of such term under Section 83 of the Code, the
restricted stock grant or deferred stock award does not result in income for the
grantee or in a business deduction for the Company for federal income tax
purposes until the restrictions lapse, unless the recipient files a written
election with the Internal Revenue Service pursuant to Section 83(b) of the Code
to be taxed on the date of issuance on the difference between the then fair
market value of the shares awarded and the price the recipient paid for the
shares . If there are no such restrictions, conditions, limitations or
forfeiture provisions, the grantee recognizes ordinary income and the Company is
entitled to a business deduction upon receipt of the shares of Common Stock.
Dividends paid to the grantee while the stock remained subject to any
restrictions would be treated as compensation for federal income tax purposes.
If an election under Section 83(b) is not made, at the time the restrictions
lapse, the grantee receives ordinary income and the Company is entitled to a
business deduction, subject to the $1 million deduction limitation under Section
162(m), measured by the fair market value of the shares of Common Stock at the
time of lapse. Income tax withholding would be required for employees of the
Company and its subsidiaries.
OTHER STOCK BASED AWARDS. Any employee of the Company or any of its
subsidiaries who receives shares of Common Stock as bonus compensation or in
lieu of the employee's cash compensation shall recognize ordinary income, and
the Company shall be entitled to a business deduction, subject to the $1 million
deduction limitation under Section 162(m), measured by the fair market value of
the shares of Common Stock issued to the employee.
17
COMPLIANCE WITH SECTION 409A OF THE CODE
The American Jobs Creation Act of 2004, enacted on October 22, 2004,
revised the federal income tax law applicable to certain types of awards that
may be granted under the 2006 Equity Incentive Plan. To the extent applicable,
it is intended that the 2006 Equity Incentive Plan and any grants made under the
2006 Equity Incentive Plan comply with the provisions of Section 409A of the
Code. The 2006 Equity Incentive Plan and any grants made under the 2006 Equity
Incentive Plan will be administered in a manner consistent with this intent, and
any provision of the 2006 Equity Incentive Plan that would cause the 2006 Equity
Incentive Plan or any grant made under the 2006 Equity Incentive Plan to fail to
satisfy Section 409A shall have no force and effect until amended to comply with
Section 409A (which amendment may be retroactive to the extent permitted by
Section 409A and may be made by the Compensation Committee without the consent
of the Participants). Any reference to Section 409A will also include any
proposed, temporary or final regulations, or any other guidance, promulgated
with respect to such Section by the U.S. Department of the Treasury or the
Internal Revenue Service.
ADJUSTMENTS
The number or kind of shares covered by outstanding awards under the
2006 Equity Incentive Plan and, if applicable, the prices per share applicable
thereto, are subject to adjustment in the event of stock dividends, stock
splits, combinations of shares, recapitalizations, mergers, consolidations,
spin-offs, reorganizations, liquidations, issuances of rights or warrants, and
similar events. In the event of any such transaction or event, the Compensation
Committee, in its discretion, may provide in substitution for any or all
outstanding awards under the 2006 Equity Incentive Plan such alternative
consideration (including cash), if any, as it may determine to be equitable in
the circumstances and may require the surrender of all Awards so replaced. The
Compensation Committee may also make or provide for such adjustments in the
number of shares available under the 2006 Equity Incentive Plan and the other
limitations contained in the 2006 Equity Incentive Plan as the Committee may
determine appropriate to reflect any transaction or event described above.
In the event of a proposal, which is approved by the Company's Board of
Directors, of any merger or consolidation in which the Company is not the
surviving entity, any sale of substantially all of the Company's assets or any
other transaction or series of related transactions as a result of which any
shares of Common Stock would be converted into cash, securities or other
property of another corporation or entity (other than a merger or consolidation
in which the holders of Common Stock immediately prior to the merger or
consolidation continue to own at least 50% of the Common Stock after the merger
or consolidation, or if the Company is not the surviving corporation, at least
50% of the Common Stock, or other voting securities of the surviving corporation
or other business entity immediately after the merger or consolidation) or any
sale of substantially all of the Company's assets or any other transaction or
series of transactions as a result of which a single person or several persons,
acting in concert (other than Anthony J. Caldarone and members of the immediate
family of Anthony J. Caldarone) own a majority of the Company's outstanding
Common Stock, then all outstanding stock options and SARs shall become
exercisable immediately and all restricted stock grants and deferred stock
awards shall immediately become free of all restrictions and conditions, or the
Compensation
18
Committee may arrange to have the surviving entity grant replacement awards for
all outstanding awards.
OTHER INFORMATION
Upon termination of service prior to age 65 for any reason other than
death or disability, stock options and SARs which are exercisable as of the date
of such termination may be exercised within three months of the date of
termination, and any restricted stock grants and deferred stock awards which are
still subject to any restriction shall be forfeited to the Company. Upon death
or disability or voluntary or involuntary termination of service after age 65,
all stock options and SARs become immediately exercisable and may be exercised
for a period of six months (in the case of death or disability) or three months
(in the case of termination for reasons other than death or disability) after
the date of termination, and all restricted stock grants and deferred stock
awards shall become immediately free of all restrictions and conditions. The
Compensation Committee has the discretionary authority to alter or establish the
terms and conditions of an award, suspend or terminate the 2006 Equity Incentive
Plan, subject to shareholder approval if required by any applicable federal or
state security laws, tax laws or corporate statute.
NEW PLAN BENEFITS
At this time, no awards have been granted under the 2006 Equity
Incentive Plan, and it is not possible to state the terms or benefits of any
individual awards which may be issued under the 2006 Equity Incentive Plan, or
which would have been issued if the 2006 Equity Incentive Plan had been in
effect during fiscal 2005, or the name or positions of, or respective amounts of
the allotment to, any persons who may participate.
VOTE REQUIRED
Approval and adoption by the Company's shareholders of the 2006 Equity
Incentive Plan requires the affirmative vote of a majority of the votes cast at
the annual meeting by the holders of shares of Common Stock present in person or
represented by proxy.
The Board of Directors recommends a vote "FOR" the approval and adoption
of the 2006 Equity Incentive Plan.
ANNUAL REPORT
The annual report to shareholders for the fiscal year ended November 30,
2005 accompanies this Proxy Statement. Aidman, Piser has audited the financial
statements of the Company for the last five fiscal years ended November 30,
2005.
INDEPENDENT AUDITORS
The firm of Aidman, Piser, independent registered public accountants,
was retained as independent auditors to the Company for the year ended November
30, 2005 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.
19
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 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 2007 annual meeting of shareholders must submit such proposal
to the Company and such proposal must be received by November 30, 2006. A
shareholder wishing to submit a proposal should write to the Company's Corporate
Secretary and include a detailed description of such proposal.
The Nominating Committee 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 2007 annual meeting of shareholders must submit the required
information to the Company and such information must be received by the Company
by February 9, 2007. The Nominating Committee retains complete discretion for
making nominations for election as a member of the Board.
20
THE MANAGEMENT OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
THE NOMINEES TO THE BOARD OF DIRECTORS AND FOR THE PROPOSAL TO ADOPT THE
COMPANY'S 2006 EQUITY INCENTIVE PLAN.
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 30, 2006
21
CALTON, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 10, 2006 THIS
PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CALTON, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Anthony J. Caldarone and Laura A. Camisa and each of them,
the true and lawful attorneys, agents and proxies of the undersigned,
P with full power of substitution, to vote with respect to all the shares
of Common Stock of CALTON, INC., standing in the name of the undersigned
R at the close of business on March 27, 2006, at the annual meeting of
shareholders to be held at the Homes by Calton Model Center, Pointe West
O Community, 7614 South Village Square, Vero Beach, Florida on May 10,
2006 and at any and all adjournments thereof, with all powers that the
X undersigned would possess if personally present and especially (but
without limiting the general authorization and power hereby given) to
Y vote as indicated on the reverse side hereof. Said proxies are
authorized to vote in their discretion upon any other matters which may
come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED, AND IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED, WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES LISTED ON THE REVERSE SIDE OF
THIS CARD AND FOR THE PROPOSAL TO ADOPT THE 2006 EQUITY INCENTIVE PLAN.
COMMON STOCK
(This proxy is continued from reverse side)
Please mark your [X]
votes as in this example.
FOR all
nominees
(except as WITHHOLD
provided to AUTHORITY to
the contrary vote for
below all nominees FOR AGAINST ABSTAIN
1. Election of J. Ernest Brophy and [ ] [ ] 2. Approval of 2006 [ ] [ ] [ ]
Kenneth D. Hill as Directors Equity Incentive Plan
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE NOMINEE(S) NAME HERE:
- -----------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSING ENVELOPE.
Signature(s) of Shareholder(s) _____________________________________________________________________________________________________
(Joint owner, 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.)