SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, For Use of the
Commission Only (as Per-
mitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
CADAPULT GRAPHIC SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee Required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing:
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
110 Commerce Drive
Allendale, New Jersey 07401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on December 6, 2000
The Annual Meeting of Shareholders of Cadapult Graphic Systems, Inc.
("Cadapult") will be held on Wednesday, December 6, 2000 at 9:30 A.M., local
time, at Glenpoint Marriott, 100 Frank West Burr Blvd., Teaneck, New Jersey
07666, for the following purposes:
1. To elect seven members of the Board of Directors to serve until the next
Annual Meeting and until their successors have been duly elected and qualifed;
2. To ratify the selection of Wiss & Company, LLP as Cadapult's independent
certified public accountants for the fiscal year ending June 30, 2001; and
3. To act on such other business as may properly come before the Annual
Meeting or any adjournment thereof.
These matters are more fully described in the Information Statement
accompanying this Notice.
The record date for determining those shareholders who will be entitled to
vote at the Annual Meeting is October 31, 2000. The stock transfer books will
remain open between the record date and the date of the Annual Meeting. Shares
of common stock can be voted at the meeting only if the holder is present at the
meeting in person or by valid proxy. The Board of Directors is not soliciting
proxies in connection with the Annual Meeting, and you are requested not to send
proxies to us.
By order of the Board of Directors
/s/ Frances Blanco
Frances Blanco
Secretary
Allendale, New Jersey
October 31, 2000
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
1
<PAGE>
TABLE OF CONTENTS
Page
Voting Information 3
Proposal No. 1. Election of Directors 4
Nominees 4
Business Experience of Nominees 4
Board Committees and Meetings 6
Director Compensation 6
Proposal No. 2. Ratification of Selection of Independent Accountants 7
Ownership of Securities 8
Section 16(A) Beneficial Ownership Reporting Compliance 9
Executive Compensation 10
Certain Relationships and Related Transactions 14
Shareholder Proposals 17
Annual Report 17
Other Action at Meeting 17
Appendix A 18
2
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
INFORMATION STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
VOTING INFORMATION
Date, Time And Place Of Meeting
This Information Statement is provided to you by the Board of Directors of
Cadapult Graphic Systems, Inc. ("Cadapult") in connection with our Annual
Meeting. The Annual Meeting will be held at 9:30 A.M. on December 6, 2000, at
Glenpoint Marriott, 100 Frank West Burr Blvd., Teaneck, New Jersey 07666, or at
any adjournments or postponements of the Annual Meeting for the purposes set
forth in the accompanying Notice of Annual Meeting. We intend to mail this
Information Statement and the accompanying Notice of Annual Meeting on or about
November 1, 2000, to all shareholders entitled to vote at the Annual Meeting.
Purpose Of Meeting
The proposals that will be considered and acted on at the Annual
Meeting are summarized in the Notice of Annual Meeting. Each proposal is
described in more detail in this Information Statement.
Voting Rights And Outstanding Shares
Only holders of record of Cadapult's common stock at the close of business
on October 31, 2000 will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on October 31, 2000, Cadapult had outstanding
and entitled to vote 3,228,887 shares of common stock. Our common stock is the
only class of voting stock. Cadapult had outstanding 550,000 shares of preferred
stock on October 31, 2000. Each shareholder of record on October 31, 2000 is
entitled to one vote for each share held on all matters to be voted on at the
Annual Meeting, and there is no cumulative voting. A majority of the outstanding
shares of common stock must be present or represented at the Annual Meeting to
have a quorum. Proposals 1 and 2 each require the affirmative vote of a majority
of the outstanding voting shares of the quorum.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
The names of the nominees for directors and their positions and offices
with Cadapult are described in the table below. As of the date of this
Information Statement, the Board of Directors is not aware of any nominee
who is
unable or will decline to serve as a director. The seven nominees receiving the
highest number of affirmative votes of the shares entitled to vote at the Annual
Meeting will be elected directors of Cadapult to serve until the next Annual
Meeting and until their successors have been elected and qualified.
The persons listed in the table below are our present directors.
<TABLE>
---------------------------------------- ------------- -------------------------------------------------------------
Name Age Position
---------------------------------------- ------------- -------------------------------------------------------------
<S> <C> <C>
Michael W. Levin 35 Chief Executive Officer, President and Chairman of the Board
Frances Blanco 39 Vice President Marketing and Investor Relations, Treasurer,
Paul C. Baker 62 Director, Audit Committee Member
Edwin Ruzinsky 66 Director, Audit Committee Member
Donald Gunn 48 Director and Vice President of Media Sciences
Henry Royer 68 Director
Stanley Brooks 52 Director, Audit Committee Member
---------------------------------------- ------------- -------------------------------------------------------------
</TABLE>
Edwin Ruzinsky became a director on August 27, 1999. Donald Gunn and
Henry Royer became directors on December 23, 1999. Stanley Brooks became a
director on September 7, 2000.
Business Experience of Nominees
Michael W. Levin, Chief Executive Officer, President and Chairman of the
Board: Mr. Levin has served as our Chief Executive Officer, President and
Chairman of the Board since June 18, 1998. Before June 1998, he had served as
President, Treasurer, Secretary and Chairman of CGSI since 1987, when he founded
CGSI while attending Lehigh University. He is responsible for the senior
management team as well as merger and acquisition activity and corporate
finance. He earned a Bachelor of Science degree in Mechanical Engineering from
Lehigh University in 1987, graduating summa cum laude.
Frances Blanco, Vice President of Marketing and Investor Relations,
Treasurer, Secretary and Director: Ms. Blanco has served as our Vice President
of Marketing and Investor Relations, Treasurer, Secretary and a Director since
June 18, 1998. From 1993 to June 18, 1998, she served as Vice President of
Marketing and Investor Relations, Treasurer, Secretary and a director of CGSI.
Ms. Blanco manages all aspects of marketing, including brand identity, demand
creation and vendor relationships for us, as well as investor relations. From
1984 through 1989, Ms. Blanco was a Reseller Account Manager at Lotus, where she
designed and implemented marketing programs. From August 1989 through June 1993,
Ms. Blanco served as a Business Development Manager at Tektronix, Inc., where
she was responsible for the development of long term and strategic customers.
She earned a Bachelor of Science degree in Marketing from Bentley College in
1982, and a Masters of Business Administration degree from Boston College in
1985.
4
<PAGE>
Paul C. Baker, Director: Mr. Baker has served as a Director since June 18,
1998. From 1986 to the present, he has been President of Sherwood Partners,
Inc., a venture capital and management consulting company, which he founded,
that focuses on developing companies with high growth potential. Prior to
founding Sherwood Partners, Inc., Mr. Baker held numerous positions during his
twenty-five years of employment with American Cyanamid Co. At American Cyanamid,
Mr. Baker held several domestic and international management positions,
including President of Domestic Operations from April 1975 through October 1979,
President of Shulton Inc. from October 1977 through October 1979, and Group Vice
President of American Cyanamid from October 1979 through December 1984. Mr.
Baker graduated from Lehigh University in 1959 with a Bachelor of Arts degree in
Liberal Arts, earned a B.S.I.E. degree in Engineering from Lehigh University in
1960, and received a Masters in Business Administration from Fairleigh Dickinson
University in 1963.
Edwin Ruzinsky, Director: Mr. Ruzinsky has served as a Director since
August 27, 1999.He is a Certified Public Accountant and a Certified Management
Consultant. Prior to his retirement on June 1, 1996 as a Partner in Deloitte
Consulting LLC, a wholly-owned subsidiary of Deloitte & Touche LLP, he served
for many years as the firm's National Director-Media Industry Services. He
previously served at Times Mirror Company as Vice President of Finance &
Administration/Book Publishing Group, and at Parents' Magazine Enterprises, Inc.
as Chief Accounting Officer. Mr. Ruzinsky continues serving as a member of the
Pace University/Dyson School of Liberal Arts & Sciences/Master of Science in
Publishing Advisory Board. He is currently a member of the Board of Dowden
Publishing Company, Inc., a provider of specialized publications and customized
communication products for healthcare professionals and consumers. In addition,
for the past twenty-five years, he has been a consultant to The CPA Journal,
published by the New York State Society of Certified Public Accountants.
Donald Gunn, Director: Mr. Gunn has served as a Director since December 23,
1999. Since December 13, 1999, he has served as Vice President of Media
Sciences. He founded ultraHue, Inc., a manufacturer of ink and toner products
for computer printers in March 1996. He served as President and Chief Executive
Officer of ultraHue until we acquired ultraHue on December 13, 1999. From June
1997 to November 1998, he served as the Western Sales Manager for Invention
Machine Corporation, a Boston based provider of software designed to aid
engineers in the development of engineering solutions. From August 1995 to May
1997, he worked as Regional Manager for the Pacific Northwest for 3D Systems
Corp., located in Valencia, California, a company that produces stereo
lithography machines. From October 1987 to August 1995, he worked for the Color
Printer Division of Tektronix, Inc., located in Wilsonville, Oregon, in various
sales and marketing positions, including Major Account Manager and VAR Account
Manager for the Western United States. From July 1986 to October 1987, he worked
as a sales manager for Silma, Inc., located in Santa Clara, California, a
company that produced software for industrial equipment. From January 1985 to
June 1986, he was the Western Area Sales Manager for AAB Robotics Corp., located
in Fort Collins, Colorado, a company that produced equipment for the welding
industry. He received a Bachelors of Science degree in Electrical Engineering
from the University of Illinois in 1974.
Henry Royer, Director: Henry Royer has served as a Director since December
23, 1999. From 1965 to 1983, Mr. Royer held several positions at First National
Bank of Duluth in 1965, including Assistant Cashier, Assistant Vice President,
Assistant Manager of the Commercial Loan Department and Senior Vice President in
Charge of Loans, and served as Executive Vice President/Loans when he left First
National Bank. He then joined The Merchants National Bank of Cedar Rapids, now
named Firstar Bank Cedar Rapids, N.A., where he served as Chairman and President
until August 1994. From September 1994 through December 31, 1997, he served as
the President and Chief Executive Officer of River City Bank, Sacramento,
California. He served as an Independent Trustee of Berthel Growth & Income Trust
I from its date of inception in 1995 through February 5, 1999, when he resigned
to join Berthel Fisher & Company Planning Inc., and was elected President of
Berthel Trust in July 1999. He was elected President of Berthel SBIC, LLC in
August 1999. He graduated in 1953 from Colorado College with a B.A. in Money and
Banking.
5
<PAGE>
Stanley Brooks, Director: Stanley C. Brooks has served as a Director since
September 7, 2000. He is the Chairman and President of Brookstreet Securities
Corporation. He has served in this capacity for the past 10 years. Brookstreet
is a nationally recognized full service investment banking and corporate finance
firm, based in Irvine, California, with memberships in the NASD, BSE, NFA, RIBA,
and SIPC. Founded in 1990, Brookstreet has in excess of 110 branch offices
throughout the 50 states. Prior to his development of Brookstreet, Stanley
Brooks held both Executive and Senior Vice President Positions from 1976 to 1990
with three independent regional brokerage firms.
Board Committees And Meetings
During the fiscal year that ended on June 30, 2000, the Board of Directors
held four meetings. During this period, all of the directors serving on the
Board at the time attended or participated in more than 75% of the aggregate of
the total number of meetings of the Board of Directors.
Cadapult has an Audit Committee consisting of the following members of the
Board of Directors: Paul Baker, Edwin Ruzinsky and Stanley Brooks. The function
of the Audit Committee includes reviewing internal financial information,
monitoring cash flow, budget variances and credit arrangements, reviewing the
audit program of Cadapult, reviewing with Cadapult's independent accounts the
results of all audits upon their completion, annually selecting and recommending
independent accountants, overseeing the quarterly unaudited reporting process
and taking such other action as may be necessary to assure the adequacy and
integrity of all financial information distribution by Cadapult. The audit
committee consists of non-employee directors whom Cadapult has determined is
free of any relationship that could influence his judgement as a committee
member and is not associated with a major vendor to, or a customer of, Cadapult.
A copy of Cadapult's audit committee charter is provided as Appendix A to this
Information Statement.
Director Compensation
We have a compensation plan for our independent directors. Eligible outside
directors are paid $3,000 per year, payable quarterly, for attendance at regular
and special meetings and may be reimbursed for their reasonable out-of-pocket
expenses incurred in connection with their attendance at meetings of the Board
of Directors and for other expenses incurred in their capacity as directors of
Cadapult. Outside directors are also granted five year options to purchase
10,000 shares of common stock, exercisable at the fair market value on the date
of appointment to the Board, and will be granted, annually, additional options
to purchase 5,000 shares of common stock on each July 1 for each year of
continued service on the Board.
6
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
We are asking our shareholders to ratify the selection of Wiss & Company,
LLP as Cadapult's independent accountants for the fiscal year ending June 30,
2001.
Wiss & Company has audited Cadapult's financial statements for the fiscal
years ended April 30, 1998, June 30, 1999, and June 30, 2000. Wiss & Company has
advised us that Wiss & Company has no direct or indirect financial interest in
Cadapult or in any of its present or former subsidiaries, and that Wiss &
Company has had, during the last three years, no connection with Cadapult or any
of our present or former subsidiaries or affiliates other than as independent
auditors and related activities. A representative of Wiss & Company is expected
to be present at the Annual Meeting, will have the opportunity to make a
statement if the representative desires to speak, and will be available to
respond to appropriate questions of shareholders.
Wiss & Company has served as our only independent auditors since June 1999,
when we acquired Cadapult Graphic Systems Inc., a New Jersey corporation, for
whom Wiss & Company also served as independent auditors.
The affirmative vote of a majority of the votes of shareholders entitled to
vote at the Annual Meeting at which a quorum is present is required to ratify
the selection of Wiss & Company as our independent auditors. If the Cadapult
shareholders fail to ratify the appointment, the Board of Directors will
reconsider the selection. Even if the selection is ratified, the Board of
Directors, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year, if the Board of
Directors determines that such a change would be in the best interests of
Cadapult and Cadapult's shareholders.
7
<PAGE>
OWNERSHIP OF SECURITIES
Security Ownership of Certain Beneficial Owners
The table below sets forth, as of September 22, 2000, the shares of our
common stock beneficially owned by each person known to us to be the beneficial
owner of more than five percent of our outstanding shares of common stock,
except that the security ownership of management is provided in a separate
table. This information was determined in accordance with Rule 13(d)-3 under the
Securities Exchange Act of 1934, and is based upon the information provided by
the persons listed below. All persons named in the table have the sole voting
and dispositive power with respect to common stock beneficially owned.
You should consider the following factors when reviewing the table:
- For each person listed, shares of common stock that can be
acquired upon the conversion of preferred stock and the exercise
of stock options or warrants within 60 days are included in the
calculation of percent of class.
- Berthel SBIC's beneficial ownership includes shares of common
stock which may be acquired upon the exercise of warrants to
acquire 323,000 shares of common stock and upon the conversion of
100,000 series A preferred stock shares, at an assumed conversion
rate of one series A preferred stock share into 3.1 shares of
common stock, into 310,000 shares of common stock.
- Berthel SBIC's beneficial ownership also includes options to
acquire 15,000 shares of common stock granted to Berthel SBIC for
the services of Henry Royer, President of Berthel SBIC, on our
Board of Directors. The beneficial owners of Berthel SBIC are:
Thomas J. Berthel, Chief Executive Officer and Chairman; Ronald
O. Brendengen, Chief Financial Officer and Chief Operation
Officer; Henry Royer, President; Leslie D. Smith, Secretary; and
Julie K. Driscoll, Assistant Secretary.
- The beneficial owner of Brookstreet Securities Corporation is
Stanley Brooks.
<TABLE>
--------------------------------------------------- -------------------------- --------------------- -----------------
Name and Address Amount and Nature Acquirable Within Percent
of Beneficial Owner of Beneficial Owner 60 days of Class
--------------------------------------------------- -------------------------- --------------------- -----------------
<S> <C> <C> <C>
Berthel SBIC, LLC 0 648,000 16.7%
100 Second Street SE,
Cedar Rapids, Iowa 52407
Charles C. and Charles F. Bearoff 0 255,000 7.3%
P.O. Box 37
Bridgeport, PA 19405
Brookstreet Securities Corporation 0 255,900 7.3%
2361 Campus Drive #210
Irvine, CA 92612
General Conference Corp. of Seventh-Day Adventists 0 255,000 7.3%
12501 Old Columbia Pike
Silver Springs, MD 20904
--------------------------------------------------- -------------------------- --------------------- -----------------
</TABLE>
Security Ownership of Management
The table below sets forth, as of September 22, 2000, the shares of our
common stock beneficially owned by each of our officers and directors, and by
all of our officers and directors as a group. This information was determined in
accordance with Rule 13(d)-3 under the Securities Exchange Act of 1934, and is
based upon the information provided by the persons listed below. All persons
named in the table have the sole voting and dispositive power with respect to
common stock beneficially owned.
8
<PAGE>
You should consider the following factors when reviewing the table:
- For each person listed, shares of common stock that can be
acquired upon the exercise of stock options within 60 days are
included in the calculation of percent of class.
- Mr. Levin's reported shares of common stock exclude options,
subject to future vesting, to acquire 250,000 shares of common
stock.
- Ms. Blanco's reported shares of common stock exclude options,
subject to future vesting, to acquire 50,000 shares of common
stock.
- Mr. Huyler's reported shares of common stock exclude options,
subject to future vesting, to acquire 50,000 shares of common
stock.
- Mr. Yates' reported shares of common stock exclude options,
subject to future vesting, to acquire 106,000 shares of common
stock.
- Mr. Gunn's reported shares of common stock exclude options,
subject to future vesting, to acquire 50,001 shares of common
stock.
- Henry Royer's reported beneficial ownership includes 648,000
shares of common stock acquirable by Berthel SBIC. - Stanley
Brooks' reported beneficial ownership includes 255,900 shares of
common stock acquirable by Brookstreet Securities Corporation.
The address of each of the persons named in the table is Cadapult Graphic
Systems, Inc., 110 Commerce Drive, Allendale, New
Jersey 07401.
<TABLE>
-------------------------------------------------- ------------------------- --------------------- -----------------
Name and Address Amount and Nature Acquirable Within Percent
of Beneficial Owner of Beneficial Owner 60 days of Class
-------------------------------------------------- ------------------------- --------------------- -----------------
<S> <C> <C> <C>
Michael W. Levin 1,508,450 301,223 51.2%
Frances Blanco 40,775 57,741 3.0%
Duncan Huyler 40,775 59,265 3.0%
Duncan Yates 20,300 19,430 1.2%
Paul Baker 67,500 38,000 3.2%
Edwin Ruzinsky 0 10,000 0.3%
Donald Gunn 25,000 0 0.8%
Henry Royer 0 648,000 16.7%
Stanley Brooks 0 265,900 7.6%
-------------------------------------------------- ------------------------- --------------------- -----------------
All present officers and directors as a group 1,702,800 1,399,559 67.0%
(9 persons)
-------------------------------------------------- ------------------------- --------------------- -----------------
</TABLE>
Changes in Control
We do not have any arrangements that may result in a change in control.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Cadapult's
directors and executive officers, and persons who own more than ten percent of
Cadapult's common stock, to file with the SEC initial reports of beneficial
ownership and reports of changes in beneficial ownership of Cadapult's common
stock. Such persons are also required by SEC regulations to furnish Cadapult
with copies of all such Section 16(a) forms they file. Based solely on a review
of the copies of such reports furnished to Cadapult, Cadapult is not aware of
any delinquencies in the filing of such reports.
9
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below sets forth information concerning the annual and long-term
compensation during our last three fiscal years of our Chief Executive Officer
and other most highly compensated employees and all of our other officers and
directors. In reviewing the Summary Compensation Table below, consider that:
- On June 18, 1998, we acquired CGSI, a privately-held company. In
1998, Cadapult changed its fiscal year end from December 31 to
April 30, and CGSI changed its fiscal year end from April 30 to
June 30. The 1998 fiscal year compensations in the table below
include the operations of CGSI for the period May 1, 1997 through
April 30, 1998.
- Michael Levin became an officer and director on June 18, 1998. -
Frances Blanco became an officer and director on June 18, 1998. -
Duncan Huyler became an officer on June 18, 1999. - Paul Baker
became a director on June 18, 1998. - Edwin Ruzinsky became a
director on August 27, 1999.
- Donald Gunn became a director of Cadapult and an officer of Media
Sciences on December 23, 1999.
- Henry Royer became a director on December 23, 1999. For purposes
of the Executive Compensation section, we are reporting as
compensation to Mr. Royer certain options granted to Berthel
SBIC. Mr. Royer is President of Berthel SBIC and deemed a
beneficial owner of securities held by Berthel SBIC.
- Duncan Yates became an officer on July 15, 2000. His 1998
compensation covers a ten month period.
- Our matching contributions to employees' 401(k) plan are included
in the table as all other compensation.
<TABLE>
--------------------------------------- ------------------------------------- ------------------------ --------------
Long Term Compensation
------------------------
Annual Compensation Awards
------------------------------------- ------------------------
Securities Underlying All Other
Name and Principal Position Year Salary Bonus Options/SARS (#) Compensation
--------------------------------------- --------- -------------- ------------ ------------------------ --------------
<S> <C> <C> <C> <C> <C>
Michael W. Levin 2000 $131,717 $0 0 $2,503
Chief Executive Officer, President 1999 $130,000 $0 500,000 $2,379
and Chairman Of the Board 1998 $141,583 $0 51,223 $2,727
Frances Blanco 2000 $85,493 $9,920 0 $2,554
Vice President, Treasurer, Secretary 1999 $80,000 $10,000 100,000 $2,021
and Director 1998 $75,000 $25,000 7,741 $2,158
Duncan Huyler 2000 $96,725 $0 0 $1,765
Vice President 1999 $95,000 $0 100,000 $4,630
1998 $91,000 $25,000 9,265 $3,867
Duncan Yates 2000 $112,389 $0 3,000 $900
Vice President 1999 $93,467 $25,000 14,000 $900
1998 $59,761 $0 8,430 $602
Paul C. Baker 2000 $0 $0 0 $0
Director 1999 $0 $0 33,000 $0
1998 $0 $0 0 $0
Edwin Ruzinsky 2000 $0 $0 10,000 $0
Director
Donald Gunn 2000 $43,333 $0 50,001 $0
Director
Henry Royer 2000 $0 $0 10,000 $0
Director
--------------------------------------- --------- -------------- ------------ ------------------------ --------------
</TABLE>
10
<PAGE>
Option/SAR Grants in Last Fiscal Year - Individual Grants
The table below sets forth information concerning options granted during
the fiscal year ended June 30, 2000 to those persons named in the preceding
Summary Compensation Table. The percentage of total options is based on 155,304
options granted to officers, directors, and employees, including options during
the 2000 fiscal year. None of the options held by those individuals listed in
the Summary Compensation Table were exercised in fiscal year ended June 2000.
<TABLE>
---------------------------- ------------------------- -------------------------- ---------------- -----------------
Number of Securities Percent of Total
Underlying Options/SARs Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) Fiscal Year ($/Sh) Date
---------------------------- ------------------------- -------------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Michael W. Levin 0 - - -
Frances Blanco 0 - - -
Duncan Huyler 0 - - -
Duncan Yates 3,000 1.9% $2.00 10-01-10
Paul C. Baker 0 - - -
Edwin Ruzinsky 10,000 6.4% $2.06 08-27-04
Donald Gunn 50,001 32.2% $3.00 12-13-04
Henry Royer 10,000 6.4% $3.13 12-10-04
---------------------------- ------------------------- -------------------------- ---------------- -----------------
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table sets forth information concerning the value of
unexercised stock options at June 30, 2000 for those individuals named in the
Summary Compensation Table. We calculated the dollar values in the table by
multiplying the number of options by the difference between the fair market
value of a share of common stock underlying an option and the exercise price of
the option. The last sale price of a share of our common stock on June 30, 2000
was $2.187, as reported by the OTC Bulletin Board.
<TABLE>
------------------------- ----------------- ----------- ------------------------------ -------------------------------
Number of Number of Unexercised Value of Unexercised
Shares Acquired Value Securities Underlying In-the-Money Options/SARs
Name on Exercise Realized Options/SARs at FY-end at FY-end
------------------------------ -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------------------- ----------------- ----------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Levin - - 301,223 250,000 $658,775 $546,750
Frances Blanco - - 57,741 50,000 $126,280 $109,350
Duncan Huyler - - 59,265 50,000 $129,613 $109,350
Duncan Yates - - 19,430 6,000 $42,493 $13,122
Paul Baker - - 33,000 0 $72,171 $0
Edwin Ruzinsky - - 10,000 0 $21,870 $0
Donald Gunn - - 0 50,001 $0 $109,352
Henry Royer - - 10,000 0 $21,870 $0
------------------------- ----------------- ----------- -------------- --------------- --------------- ---------------
</TABLE>
11
<PAGE>
Employment Agreements with Named Executive Officers
Michael W. Levin
Michael W. Levin serves as our Chief Executive Officer and President
pursuant to a five year employment agreement that began on May 1, 1998, as
amended September 1, 1998. His current annual salary is $130,000. His salary
increases annually by the cost-of-living adjustments tied to the Consumer Price
Index. We may increase his salary at any time. Commencing in his third year of
employment and each year thereafter, his annual salary increases, each quarter,
by one percent of our earnings before interest, taxes, depreciation and
amortization in the prior fiscal year. We granted him 500,000 five-year options
to purchase 500,000 shares of common stock. These options vest only after we
achieve certain corporate levels of earnings. The exercise price for the options
is $1.375 per share. He may exercise 125,000 options following the first fiscal
year that our earnings before interest, taxes, depreciation and amortization
exceeds each of $500,000, $1,000,000, $1,500,000 and $2,000,000. Options to
purchase 250,000 shares vested due to the achievement of the first two vesting
criteria in the 2000 fiscal year. These options are cumulative and are subject
to anti-dilution rights.
He also receives:
- death benefits of $100,000,
- a fifteen year term life insurance policy for $1,000,000,
- a luxury automobile, and
- reimbursement for reasonable travel and other business related
expenses.
We may also award him financial or other bonuses as determined by the Board
of Directors.
If we undergo a "change of control", we must pay Mr. Levin an amount equal
to 290% of his salary and his incentive based options shall vest immediately. He
has the right to terminate his employment if we undergo a change in control. As
defined in his employment agreement, a change of control refers to
- a change in our ownership or management that must be reported in
under the Exchange Act of 1934;
- the acquisition, other than directly from Cadapult, of 25% or
more of our common stock or our voting securities by persons
other than Cadapult or Levin;
- a change in a majority of our Board of Directors of which our
Board does not approve or that results from a proxy contest);
- a reorganization, merger, consolidation or sale of substantially
all of our assets after which our shareholders do not own, in the
same proportion, more than 50% of the voting power, after which a
majority of the board of directors changes, and after which a new
shareholder beneficially owns 25% or more of the voting power; or
- shareholder approval of our liquidation or dissolution.
Frances Blanco
Frances Blanco serves as our Vice President of Marketing and Investor
Relations, Treasurer and Secretary pursuant to a three year employment agreement
that began on May 1, 1998 and was amended on March 5, 1999. She earns a current
annual salary of $90,000. We may grant her financial bonuses as we may
determine. We granted her 100,000 five-year options to purchase 100,000 shares
of our common stock. These options vest only after we achieve certain corporate
levels of earnings. The options have an exercise price of $2.00 per share. She
may exercise 25,000 options following the first fiscal year that our earnings
before interest, taxes, depreciation and amortization exceeds each of $500,000,
$1,000,000, $1,500,000 and $2,000,000. Options to purchase 50,000 shares vested
due to the achievement of the first two vesting criteria in the 2000 fiscal
year. These options are cumulative and are subject to anti-dilution rights. If
we undergo a "change of control", the incentive based options shall vest
immediately.
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Duncan Huyler
Duncan Huyler serves as our Vice President of Technical Services pursuant
to a three year employment agreement that began on May 1, 1998 and was amended
on March 5, 1999. He earns a current annual salary of $95,000. We may grant him
financial bonuses as we may determine. We granted him 100,000 five-year options
to purchase up to 100,000 shares of our common stock. These options vest only
after we achieve certain corporate levels of earnings. The options have an
exercise price of $2.00 per share. He may exercise 25,000 options following the
first fiscal year that our earnings before interest, taxes, depreciation and
amortization exceeds each of $500,000, $1,000,000, $1,500,000 and $2,000,000.
Options to purchase 50,000 shares vested due to the achievement of the first two
vesting criteria in the 2000 fiscal year. These options are cumulative and are
subject to anti-dilution rights. If we undergo a "change of control", the
incentive based options shall vest immediately.
Duncan Yates
Duncan Yates has served as our Vice President of Sales since July 15, 2000.
Pursuant to an oral agreement effective as of July 15, 2000 and as amended
September 7, 2000, Mr. Yates earns a base annual salary of $95,000 and is
entitled to commissions of 10% of gross profit on his sales. He is entitled to a
bonus of $10,000 each quarter for meeting certain criteria established by the
Board of Directors. We granted him 100,000 five-year options to purchase up to
100,000 shares of our common stock. These options vest only after we achieve
certain corporate levels of earnings. The options have an exercise price of
$2.00 per share. He may exercise 25,000 options following the first fiscal year
that our earnings before interest, taxes, depreciation and amortization exceed
each of $1,500,000 and $2,000,000. He may exercise up to 50,000 options
following the end of the 2001 fiscal year if certain sales targets established
by the Board of Directors are achieved. If we undergo a "change of control", the
incentive based options shall vest immediately.
Stock Option Plan
Under our incentive stock option plan for employees, which was adopted by
our Board of Directors and approved by our shareholders, we reserved 500,000
shares of our common stock . Our incentive stock option plan for employees is
administered by our Chairman of the Board. An incentive stock option entitles
the holder to purchase a share of our common stock at a purchase price equal to
the fair market value of the common stock on the day of grant. We filed a Form
S-8 to register the 500,000 shares underlying the stock options. As of September
7, 2000, we have outstanding incentive stock options to purchase about 324,347
shares of common stock, exercisable for five or ten years from the date of grant
at prices of $1.25 to $4.00, including options to purchase 151,659 shares of
common stock to our officers and directors, and employees have exercised options
to purchase 24,417 shares of common stock. If we undergo a "change of control",
the incentive based options shall vest immediately.
Employee Profit Sharing Plan
We have a tax-qualified employee paired profit sharing plan sponsored by
Kemper Financial Services, Inc. This 401(k) plan covers all of our employees
that have been employed for at least six months and meet other age and
eligibility requirements. Under the 401(k) plan, employees may choose to reduce
their current compensation by up to 15% each year and have that amount
contributed to the 401(k) plan. We make matching contributions equal to 25% of
the employee's contribution. In our discretion, we may contribute unmatched
contributions. The 401(k) plan qualifies under Section 401 of the Internal
Revenue Code, so that we can deduct contributions by employees or by us.
Employee contributions to the 401(k) plan are fully vested at all times, and our
contributions, if any, vest at the rate of 25% after two years and after two
years at the rate of 25% a year until fully vested.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We issued to Mr. Levin under an employment agreement stock options to
purchase up to 500,000 shares of common stock to vest upon us attaining certain
specified corporate milestones based upon corporate earnings, exercisable for
five years at $1.375. Options to purchase 250,000 shares vested due to the
achievement of the first two vesting criteria in the 2000 fiscal year.
We issued to each of Ms. Blanco and Mr. Huyler under employment agreements
stock options to purchase up to 100,000 shares of common stock each to vest upon
us attaining certain specified corporate milestones based upon corporate
earnings, exercisable for five years at $2.00. For each of Ms. Blanco and Mr.
Huyler, options to purchase 50,000 shares vested due to the achievement of the
first two vesting criteria in the 2000 fiscal year.
In August 1998, Paul and Brenda Levin, the parents of Michael W. Levin,
converted a $50,000 note payable by us to them for 40,000 shares of our common
stock at the rate of $1.25 per share. This transaction was part of a private
placement of common stock at $1.25 per share that we completed in August 1998.
In August 1998, we filed a registration statement on Form S-8 for our
incentive stock option plan for employees under which we may issue options that
may be exercised for up to 500,000 shares of common stock. As of September 22,
2000, executive officers and directors have been granted the following options
pursuant to the incentive stock option plan:
- Michael W. Levin, options to purchase 51,223 shares at $1.375
which expire on May 1, 2003;
- Frances Blanco, options to purchase 7,741 shares at $1.25 which
expire on June 18, 2008;
- Duncan Huyler, options to purchase 9,265 shares at $1.25 which
expire on June 18, 2008;
- Duncan Yates, options to purchase 8,430 shares at $1.25 which
expire on June 18, 2008, 9,000 shares at $2.00 which expire on
August 10, 2008, 5,000 shares at $2.00 which expire on August 13,
2008, and 3,000 shares at $2.00 which expire on September 30,
2009;
- Paul Baker, options to purchase 3,000 shares at $2.00 which
expire on August 11, 2008, 30,000 shares at $3.31 which expire on
April 6, 2009, and 5,000 shares at $2.19 which expire on July 3,
2010;
- Edwin Ruzinsky, options to purchase 10,000 shares at $2.06 which
expire on August 27, 2009 and 5,000 shares at $2.19 which expire
on July 3, 2010;
- Berthel SBIC, options to purchase 10,000 shares at $3.13 which
expire on December 8, 2004 and options to purchase 5,000 shares
at $2.19 which expire on July 3, 2010; and
- Stanley Brooks, options to purchase 10,000 shares at $2.94 which
expire on September 7, 2005.
On December 13, 1999, we completed, through our subsidiary Media Sciences,
the acquisition of certain assets and the assumption of certain liabilities of
ultraHue, Inc., a New Mexico corporation, pursuant to an asset purchase
agreement dated September 7, 1999. We acquired certain proprietary information
and intellectual property rights of ultraHue and other assets used in its
business operations, including:
- its trade secrets;
- its accounts receivable less allowances;
- its inventory;
- rights to the name ultraHue;
- its customer lists;
- its sales, service and vendor contracts; and
- its security deposits.
We assumed the following liabilities of ultraHue:
- its accounts payable as of the closing date;
- its customer deposits as of the closing date; and,
- its leases and contracts.
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The purchase price we paid at closing included:
- $2,340,000 at closing;
- a promissory note for $1,160,000, with 7% annual interest rate
payable in one year; and,
- a sum equal to ultraHue's cost for its inventory delivered to us
at the closing date.
The purchase price also included:
- the sum of accounts receivable as of the closing date that we
collected;
- for the first year from closing, 10% of the net profits that
Media Sciences derives from the first $1,500,000 dollars of Media
Sciences' gross profits;
- for the first year from closing, 30% of the net profits of Media
Sciences that are attributable to its gross profits in excess of
$1,500,000;
- for the second and third years from closing, 10% of the quarterly
net profits derived by Media Sciences from the first $1,000,000
of gross profits; and
- for the second and third years from closing, 30% of the net
profits of Media Sciences that are attributable to its gross
profits in excess of $1,000,000 dollars.
On December 13, 1999, Donald Gunn, an officer, director and controlling
shareholder of ultraHue, became Vice President of Media Sciences. Under a three
year employment agreement, we issued him options to purchase 50,001 shares of
our common stock. The exercise price of the options is $3.125 per share.
One-third of the options vest on each of the three anniversary dates of
employment. On December 23, 1999, Mr. Gunn was elected to serve on our Board of
Directors.
On December 13, 1999, Randy Hooker, an officer, director and controlling
shareholder of ultraHue, became an employee of Media Sciences. Under a three
year employment agreement, we issued him options to purchase 50,001 shares of
our common stock. The exercise price of the options is $3.125 per share.
One-third of the options vest on each of the three anniversary dates of
employment.
In December 1999, Berthel SBIC purchased 100,000 units of our securities in
a private placement at $10 per unit. Berthel SBIC beneficially owns 407,692
shares of common stock which may be acquired upon the conversion of 100,000
shares of series A preferred stock, at the current conversion rate of one
preferred stock share into 3.077 common stock shares, and the exercise of
five-year warrants to acquire 200,000 shares of common stock at $4.50 per share
which underlie the 100,000 units. Berthel SBIC also owns five year warrants to
acquire another 90,000 shares of common stock.
On January 14, 2000, Henry Royer purchased 10,000 shares of our common
stock in the public market at $3.25 per share.
On March 10, 2000, Henry Royer purchased 10,000 units of our securities in
our private placement conducted from December 1999 through March 10, 2000. Units
sold in the private placement were offered at $10.00 per unit and consisted of
one share of series A preferred stock and warrants to purchase two shares of
common stock. The warrants are exercisable for five years at $4.50. Henry Royer
sold all of his shares and units of our securities in May 2000 to attempt to
comply with the internal policies of Berthel SBIC of which he is President. He
sold his 10,000 shares of common stock in the public market at a loss, as
follows:
- 1,000 shares were sold at $3.00 on May 2, 2000;
- 1,000 shares were sold at $3.00 on May 4, 2000;
- 1,000 shares were sold at $2.50 on May 22, 2000;
- 1,000 shares were sold at $2.53 on May 22, 2000;
- 2,000 shares were sold at $2.1875 on May 23, 2000; and
- 4,000 shares were sold at $2.125 on May 23, 2000.
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Henry Royer also sold his 10,000 units of our securities at the same price of
$10.00 per unit he paid for the units in a private transaction to one individual
who represented that he was an accredited and sophisticated person with whom he
has had prior business relationships, and who accepted all of the same
conditions of purchase as had Mr. Royer when he purchased said securities.
We issued to Mr. Yates under an oral employment agreement, effective July
15, 2000, stock options to purchase up to 100,000 shares of common stock each to
vest upon us attaining certain specified corporate milestones, exercisable for
five years at $2.00.
In June 1998, Cadapult filed a registration statement on Form S-8 for
66,068 shares of common stock. We issued the shares to four individuals,
including its officers and directors, pursuant to written compensation
agreements as follows: Leonard W. Burningham, 63,068 shares; Kathleen L.
Morrison, 1,000 shares; Jason Osborn, 1,000 shares; and Terry Hardman, 1,000
shares. Kathleen L. Morrison, Jason Osborn, and Terry Hardman resigned as
directors and officers of Cadapult effective as of June 18, 1998.
On June 18, 1998, we completed the acquisition of Cadapult Graphic Systems
Inc., a privately-held New Jersey corporation formed on or about May 1, 1987
("CGSI"), in a transaction viewed as a reverse acquisition. Pursuant to an
Agreement and Plan of Reorganization dated June 5, 1998, between the Company,
CGSI, all of the shareholders of CGSI, Jenson Services, Inc., a Utah
corporation, Duane S. Jenson and Jeffrey D. Jenson, we issued 1,650,000 shares
of common stock to the shareholders of CGSI in exchange for all of the
outstanding common stock of CSGI. Pursuant to the reorganization, the
shareholders of CSGI became the controlling shareholders of Cadapult, the
officers and directors of Cadapult resigned and elected the CSGI nominees in
their places, and CSGI became a wholly-owned subsidiary of the Company. Michael
W. Levin acquired 300 shares, no par value, of CGSI on May 1, 1987 for $300.
Frances Blanco acquired 7.90 shares, no par value, of CSGI on June 3, 1997 for
$15,000. Duncan Huyler acquired 7.90 shares, no par value, of CSGI on June 3,
1997 for $15,000. Duncan Yates acquired 3.8748 shares, no par value, of CGSI on
April 20, 1998 for $15,000. In May 1998, Mr. Levin made a gift of 3.1 shares to
each of two of his minor children. Pursuant to the reorganization, Mr. Levin and
his children, Ms. Blanco, Mr. Huyler and Mr. Yates, representing all the issued
and outstanding shares of CGSI, exchanged their shares of CGSI proportionally
for 1,650,000 shares of Cadapult pursuant to Cadapult's acquisition of CGSI.
Michael W. Levin currently serves as our Chief Executive Officer, President and
Chairman of the Board. Frances Blanco currently serves as our Vice President,
Secretary, Treasurer and a Director. Duncan Huyler currently serves as our Vice
President and a Director.
Cadapult granted Mr. Levin five-year stock options to purchase up to
500,000 shares of common stock (no options are presently exercisable) to vest
upon Cadapult attaining certain specified corporate milestones based upon
corporate earnings, exercisable at $1.375. Cadapult granted to each of Ms.
Blanco and Mr. Huyler five-year stock options to purchase up to 100,000 shares
of common stock each (no options are presently exercisable) to vest upon
Cadapult attaining certain specified corporate milestones based upon corporate
earnings, exercisable at $2.00.
In August 1998, we filed a registration statement on Form S-8 for its 1998
Stock Option Plan. We granted certain employees, five-year and ten-year
incentive stock options to purchase 295,381 shares, of which 88,229 options are
presently exercisable, at prices of $1.25 to $4.00 per share. Executive officers
and directors have been granted the following options pursuant to the 1998 Stock
Option Plan: Michael W. Levin, five-year options to purchase 51,223 shares at
$1.375; Frances Blanco, ten-year options to purchase 7,741 shares at $1.25;
Duncan Huyler, ten-year options to purchase 9,265 shares at $1.25; and Paul
Baker, ten-year options to purchase 3,000 shares at $2.00 and 30,000 shares at
$3.31. Pursuant to the 1998 Stock Option Plan, we reserved 500,000 authorized
and unissued shares of common stock for issuance upon the exercise of the
incentive stock options.
Between August 17, 2000 and September 14, 2000, Cadapult borrowed an
aggregate of $325,000 from Michael Levin. Cadapult used the funds as bridge
financing for printers acquired for Cadapult's No-Cap Color printer program,
until larger quantities of printers are accumulated and financed through lease
or other debt financing. These loans are unsecured, payable on demand, and carry
a 10% interest rate. These short-term loans mature in May 2001. There can be no
representation or assurance that Mr. Levin will make any further loans to
Cadapult, on these or any other terms.
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SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in Cadapult's Year 2002 Information
Statement or Proxy Statement and related proxy materials must be received by
June 30, 2001. In addition, proposals of Cadapult's shareholders intended to be
presented at the 2002 Annual Meeting of Cadapult must be received by Cadapult
before August 30, 2001. Proposals for inclusion in Cadapult's Information
Statement or Proxy Statement or for presentation at the Annual Meeting must be
submitted to Cadapult in writing at c/o Cadapult Graphic Systems, Inc., 110
Commerce Drive, Allendale, New Jersey 07401, Attention: Secretary. There are
additional requirements regarding proposals of shareholders, and a shareholder
contemplating submission of a proposal is referred to Rule 14a-8 promulgated
under the Securities Exchange Act of 1934. We did not receive any shareholder
proposals in connection with this Information Statement and our Annual Meeting.
ANNUAL REPORT
Cadapult will mail without charge, upon written request, a copy of
Cadapult's annual report on Form 10-KSB, including the financial statements,
schedules, and list of exhibits. Requests should be sent to: Cadapult Graphic
Systems, Inc., 110 Commerce Drive, Allendale, New Jersey 07401, Attn.: Investor
Relations.
OTHER ACTION AT MEETING
The Board of Directors knows of no other matters, except the proposals
in this Information Statement, for shareholder action at the Annual Meeting.
However, if other matters do properly come before the Annual Meeting or any
adjournments or postponements, the Board intends that the shareholders at the
meeting will vote upon such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Frances Blanco
Frances Blanco
Secretary
Allendale, New Jersey
October 31, 2000
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Appendix A
Cadapult Graphic Systems, Inc.
Audit Committee Charter
One committee of the board of directors will be known as the audit committee.
The primary function of the audit committee is to assist the board in fulfilling
its oversight responsibilities by reviewing the financial information that will
be provided to the shareholders and others, the systems of internal controls
management and the board of directors have established and all audit processes.
|X| Composition
1. The audit committee shall consist of at least three
independent directors. An independent director is free of any
relationship that could influence his or her judgement as a
committee member. An independent director may not be
associated with a major vendor to, or a customer of, the
company. When there is some doubt about independence, as when
a member of the committee has a short-term consulting contract
with a major customer, the director should recuse himself for
any decisions that might be influenced by that relationship.
2. Each member of the audit committee is required to be
financially literate, as determined by the company's board of
directors in its business judgement, or must be financially
literate within a reasonable period of time after his
appointment to the audit committee.
3. At least one member of the audit committee must have
accounting or related financial management expertise, as
determined by the company's board of directors in its business
judgement.
|X| General responsibilities
1. The audit committee provides open avenues of communication among the
internal auditors, the independent accountant and the board of
directors.
2. The audit committee must report committee actions to the full board of
directors and may make appropriate recommendations.
3. The audit committee has the power to conduct or authorize
investigations into matters within the committee's scope of
responsibilities. The committee is authorized to retain
independent counsel, accountants or others it needs to assist
in an investigation.
4. The committee will meet at least two times each year, more
frequently if circumstances make that preferable. The audit
committee chairman has the power to call a committee meeting
whenever he or she thinks there is a need. An audit committee
member should not vote on any matter in which he or she is not
independent. The committee may ask members of management or
others to attend the meeting and is authorized to receive all
pertinent information from management.
5. The committee will do whatever else the laws, the company's
charter or bylaws or the board of directors require.
|X| Responsibilities for engaging independent accountants and appointing
the internal auditor
1. The audit committee will select the independent accountants
for company audits. The committee's selection is subject to
approval by the full board of directors. The audit committee
also will review and set any fees paid to the independent
accountants and review and approve dismissal of the
independent accountants.
2. The audit committee will review and have veto power over the
appointment, replacement, reassignment or dismissal of the
director of internal audit.
3. The audit committee will confirm and assure the independence
of the internal auditor and the independent accountant,
including a review of management consulting services provided
by the independent accountant and the fees paid for them.
4. The audit committee will consider, in consultation with the
independent accountant and the director of internal auditing,
the audit scope and procedural plans made by the internal
auditors and the independent accountant.
5. The audit committee will listen to management and the primary
independent auditor if either thinks there might be a need to
engage additional auditors. The audit committee will decide
whether to engage an additional firm and, if so, which one.
6. The audit committee will make sure that the director of
internal auditing and the independent accountant coordinate
the internal and external audits. The purpose of coordinating
these efforts is to assure completeness of coverage, reduce
redundancy and use audit resources effectively.
|X| Responsibilities for reviewing internal audits, the annual external
audit and the review of quarterly and annual financial statements
1. The audit committee will ascertain that the independent
accountant views the board of directors as its client, that it
will be available to the full board of directors at least
annually and that it will provide the committee with a timely
analysis of significant financial reporting issues.
2. The audit committee will ask management, the director of
internal auditing and the independent accountant about
significant risks and exposures and will assess management's
steps to minimize them.
3. The audit committee will review the following with the independent
accountant and the director of internal auditing:
a. The adequacy of the company's internal controls, including
computerized information system controls and security.
b. Any significant findings and recommendations made by the
independent accountant or internal auditing, together with
management's responses to them.
4. Shortly after the annual examination is completed, the audit committee
will review the following with management and the independent
accountant:
a. The company's annual financial statements and related footnotes.
b. The independent accountant audit of and report on the financial
statements.
c. The auditor's qualitative judgements about the appropriateness,
not just the acceptability, of accounting principles and
financial disclosures and how aggressive (or conservative) the
accounting principles and underlying estimates are.
d. Any serious difficulties or disputes with management encountered
during the course of the audit.
e. Anything else about the audit procedures or findings that
Generally Accepted Auditing Standards (GAAS) requires the
auditors to discuss with the committee.
5. The audit committee will consider and review with management and the
director of internal auditing:
a. Any significant findings during the year and management's
responses to them.
b. Any difficulties the internal auditor encountered while
conducting audits, including any restrictions on the scope of
their work or access to required information.
c. Any changes to the planned scope of management's internal audit
plan that the committee thinks advisable.
d. The internal auditing department's budget and staffing.
e. The internal auditing department's charter.
f. Whether the internal auditing department has complied with the
Internal Auditing's Standards for the Professional Practice of
Internal Auditing.
6. The audit committee will review the annual filings with the
SEC and other published documents containing the company's
financial statements and will consider whether the information
in the filings is consistent with the information in the
financial statements.
7. The audit committee will review the interim financial reports
with management, the independent accountant and the director
of internal auditing before those interim reports are released
to the public or filed with the SEC or other regulators.
8. The audit committee will prepare a letter for inclusion in the
annual report that describes the committee's composition and
responsibilities and how the responsibilities were fulfilled.
|X| Periodic responsibilities
1. Review and update the committee's charter annually.
2. Review policies and procedures covering officers' expense
accounts and perquisites, including their use of corporate
assets, and consider the results of any review of those areas
by the internal auditor or the independent accountant.
3. Review, with the director of internal auditing and the
independent accountant, the results of their examination of
compliance with the company's code of conduct.
4. Review legal and regulatory matters that may have a material
effect on the organization's financial statements, compliance
policies and programs and reports from regulators.
5. Meet with the director of internal auditing, the independent
accountant and management in separate executive sessions to
discuss any matters the committee or these groups believe
should be discussed privately with the audit committee.
