SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PRODEO TECHNOLOGIES, 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRODEO TECHNOLOGIES, INC.
1817 West Fourth Street
Tempe, Arizona 85281
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 28, 2000
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Prodeo Technologies, Inc., a Delaware
corporation (the "Company"), will be held on Monday, August 28, 2000 at 9:00
a.m. local time, at the offices of the Company at 1817 West 4th Street, Tempe,
Arizona 85281, for the following purposes:
(1) To elect four directors to serve until the Annual Meeting of
Stockholders to be held in the year 2000 or until their respective successors
are elected;
(2) To consider and act upon a proposal to approve an amendment of the
Company's by-laws to create two classes of directors to serve on staggered
terms;
(3) To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche, L.L.P. as independent auditors of the Company for the fiscal
year ending March 31, 2001; and
(4) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on July 10, 2000 are
entitled to vote at the meeting and at any adjournment or postponement thereof.
Shares can be voted at the meeting only if the holder is present or represented
by proxy. A list of stockholders entitled to vote at the meeting will be open
for inspection at the Company's corporate headquarters for any purpose germane
to the meeting during ordinary business hours for ten days prior to the meeting.
A copy of the Company's 2000 Annual Report to Stockholders, which includes
certified financial statements, is enclosed. All stockholders are cordially
invited to attend the Annual Meeting in person.
By order of the Board of Directors,
Dr. Don M. Jackson, Jr.
Chief Executive Officer and President
Tempe, Arizona
July 31, 2000
IMPORTANT: IT IS IMPORTANT THAT YOUR STOCKHOLDINGS BE REPRESENTED AT THIS
MEETING. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
PRODEO TECHNOLOGIES, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 28, 2000
TABLE OF CONTENTS
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES..............................1
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF................................2
Security Ownership of Certain Beneficial Owners and Management...............2
PROPOSAL 1: ELECTION OF DIRECTORS..............................................3
Board Meetings and Committees................................................5
Compensation of Directors....................................................5
Certain Legal Proceedings....................................................6
EXECUTIVE COMPENSATION.........................................................6
Report of the Compensation Committee of the Board of Directors...............6
Compensation Committee Interlocks and Insider Participation..................8
Certain Transactions.........................................................8
Summary Compensation Table...................................................8
Option/SAR Grants in Last Fiscal Year........................................9
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values..........................................................9
Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements...............................................................9
PROPOSAL 2: APPROVAL OF AMENDMENT TO BY-LAWS CREATING TWO CLASSES
STAGGERED BOARD MEMBERSHIPS...................................................10
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT..................................10
PROPOSAL 3: APPOINTMENT OF INDEPENDENT AUDITORS...............................11
OTHER MATTERS.................................................................11
STOCKHOLDER PROPOSALS.........................................................11
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PRODEO TECHNOLOGIES, INC.
1817 West Fourth Street
Tempe, Arizona 85281
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 28, 2000
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of Prodeo Technologies, Inc. (the "Company"
or "Prodeo") for use at the Annual Meeting of Stockholders to be held on August
28, 2000 at 9:00 a.m. or any adjournment thereof (the "Annual Meeting") at the
offices of the Company at 1817 West Fourth Street, Tempe, Arizona 85281. All
shares represented by properly executed proxies, unless such proxies have
previously been revoked, will be voted in accordance with the direction on the
proxies. If no direction is indicated, the shares will be voted in favor of the
proposals to be acted upon at the Annual Meeting. The Board of Directors is not
aware of any other matter which may come before the meeting. If any other
matters are properly presented at the meeting for action, including a question
of adjourning the meeting from time to time, the persons named in the proxies
and acting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
When stock is in the name of more than one person, the proxy is valid if
signed by any of such persons unless the Company receives written notice to the
contrary. If the stockholder is a corporation, the proxy should be signed in the
name of such corporation by an executive or other authorized officer. If signed
as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment should be
furnished.
This Proxy Statement and the form of proxy which is enclosed are being
mailed to the Company's stockholders commencing on or about July 31, 2000.
A stockholder executing and returning a proxy has the power to revoke it at
any time before it is voted. A stockholder who wishes to revoke a proxy can do
so by executing a later-dated proxy relating to the same shares and delivering
it to the Secretary of the Company prior to the vote at the Annual Meeting, by
written notice of revocation received by the Secretary prior to the vote at the
Annual Meeting or by appearing in person at the Annual Meeting, filing a written
notice of revocation and voting in person the shares to which the proxy relates.
In addition to the use of the mails, proxies may be solicited by personal
conversations or by telephone, telex, facsimile or telegram by the directors,
officers and regular employees of the Company. Such persons will receive no
additional compensation for such services. Arrangements will also be made with
certain brokerage firms and certain other custodians, nominees and fiduciaries
for the forwarding of solicitation materials to the beneficial owners of Common
Stock held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection therewith. All expenses incurred in connection with this
solicitation will be borne by the Company.
The mailing address of the principal corporate office of the Company is
1817 West Fourth Street, Tempe, Arizona 85281. A COPY OF THE COMPANY'S FORM
10-K, EXCLUDING EXHIBITS, FOR THE FISCAL YEAR ENDING MARCH 31, 2000 IS BEING
FURNISHED WITH THIS PROXY STATEMENT. THE COMPANY WILL PROVIDED COPIES OF THE
EXHIBITS TO THE FORM 10-K AT A CHARGE OF $0.15 PER PAGE UPON WRITTEN REQUEST TO:
DAVID BAYS, CHIEF FINANCIAL OFFICER, PRODEO TECHNOLOGIES, INC., AT THE COMPANY'S
CORPORATE ADDRESS.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on July 10, 2000 (the
"Record Date") will be entitled to vote at the Annual Meeting. On the Record
Date, there were issued and outstanding 12,321,146 shares of Common Stock. Each
holder of Common Stock is entitled to one vote, exercisable in person or by
proxy, for each share of the Company's Common Stock held of record on the Record
Date. The presence of a majority of the shares of Common Stock entitled to vote,
in person or by proxy, is required to constitute a quorum for the conduct of
business at the Annual Meeting. Abstentions and broker non-votes are each
included in the determination of the number of shares present for quorum
purposes. The Inspector of Election appointed by the Chairman of the Board of
Directors shall determine the shares represented at the meeting and the validity
of proxies and ballots and shall count all proxies and ballots. The four
nominees for director receiving the highest number of affirmative votes (whether
or not a majority) cast by the shares represented at the Annual Meeting and
entitled to vote thereon, a quorum being present, shall be elected as directors.
The affirmative vote of a majority of the shares present in person or by proxy
and entitled to vote is required with respect to the approval of the other
proposals set forth herein.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto sets forth information regarding the
beneficial ownership of the Company's common stock at July 10, 2000 with respect
to (i) each person known to the Company to own beneficially more than five
percent of the outstanding shares of the Company's common stock, (ii) each
director of the Company and each director nominee, (iii) each of the named
executive officers and (iv) all directors and executive officers of the Company
as a group.
SHARES BENEFICIALLY
OWNED (1)(2)
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IDENTITY OF STOCKHOLDER OR GROUP NUMBER PERCENT
--------------------------------- ---------- ----------
Vince E. Birdwell (3) 1,030,640 8.09
Julian W. Gates 1,284,113 10.08
Dr. Don M. Jackson, Jr. 1,284,113 10.08
Kevin B. Jackson (4) 1,027,291 8.07
Paul D. Jackson (5) 1,284,113 10.08
Maurice L. McGill (6) 86,500 *
Parag S. Modi 1,284,113 10.08
Dr. Daniel L. Shunk (7) 86,500 *
Howard R. Neff (8) 15,000 0
All directors and executive 6,253,830 48.99
officers as a group (9)
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* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes voting or
investment power with respect to securities. In accordance with SEC rules,
shares which may be acquired upon exercise of stock options which are
currently exercisable or which become exercisable within 60 days of the
date of the table are deemed beneficially owned by the optionee. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons or entities named in the table above have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) Unless otherwise noted, the mailing address for each of the beneficial
owners listed below is c/o Prodeo Technologies, Inc., 1817 West Fourth
Street, Tempe, Arizona 85281. All information was obtained from the
Company's stock registry as of July 10, 2000.
(3) Mr. Birdwell is an employee of the Company and acts as Secretary of CMP
Solutions, Inc.
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(4) Mr. Kevin B. Jackson is the President of VSM Corporation. He is also the
son of Dr. Don M. Jackson, President, Chief Executive Officer and a
director of the Company.
(5) Mr. Paul D. Jackson is the Secretary of Prodeo and son of Dr. Don M.
Jackson, President, Chief Executive Officer and a director of the Company.
(6) Includes 62,500 shares Mr. McGill has a right to acquire upon exercise of
stock options.
(7) Includes 62,500 shares Dr. Shunk has a right to acquire upon exercise of
stock options.
(8) Includes 15,000 shares Mr. Neff has the right to acquire upon exercise of
stock options.
(9) Includes 140,000 shares directors have a right to acquire upon exercise of
stock options.
EXECUTIVE OFFICERS
PAUL JACKSON, 41
PAUL JACKSON, the son of the Company's Chief Executive Officer, Chairman of
the Board, and a director nominee Don Jackson, and the brother of Kevin Jackson,
became a Vice President of Prodeo in 1998. Paul Jackson was the Vice President
of Global Semiconductor Technologies, L.L.C. from 1996 through 1998. Prior to
his employment with Global Semiconductor Technologies, L.L.C., Paul Jackson was
the director of IPEC Advanced Technologies, a major CMP supplier. Paul Jackson
also has an extensive background in aerospace engineering.
KEVIN B. JACKSON, 39
KEVIN B. JACKSON, the son of the Company's Chief Executive Officer,
Chairman of the Board and a director nominee of Prodeo Don Jackson, and the
brother of Paul Jackson, became the President of VSM Corporation and Vice
President and Chief Legal Officer of Prodeo on June 7, 1999. Kevin Jackson was a
Senior Intellectual Property Attorney for Motorola, Inc. from 1993 to 1999,
following an assignment as Operations Manager for Motorola Semiconductor.
PROPOSAL 1: ELECTION OF DIRECTORS
All four directors are to be elected at the Annual Meeting to serve as
directors until the Annual Meeting of Stockholders to be held in the year 2000
and until their respective successors are elected. UNLESS OTHERWISE INSTRUCTED,
THE PROXY HOLDERS WILL VOTE THE PROXIES RECEIVED BY THEM FOR THE COMPANY'S
NOMINEES: DON M. JACKSON, JR., MAURICE L. MCGILL, DANIEL L. SHUNK AND HOWARD R.
NEFF. Messrs. Jackson, McGill, Shunk and Neff are currently directors of the
Company. The four nominees for director receiving the highest number of
affirmative votes (whether or not a majority) cast by the shares represented at
the Annual Meeting and entitled to vote thereon, a quorum being present, shall
be elected as directors. Only affirmative votes are relevant in the election of
directors.
Any stockholder entitled to vote for the election of directors at a meeting
may nominate persons for election as directors only if written notice of such
stockholder's intent to make such nomination is given, either by personal
delivery at 1817 West Fourth Street, Tempe, Arizona or by United States mail,
postage prepaid to Secretary, Prodeo Technologies, Inc., 1817 West Fourth
Street, Tempe, Arizona 85281, not later than: (i) with respect to the election
to be held at an annual meeting of stockholders, 20 days in advance of such
meeting; and (ii) with respect to any election to be held at a special meeting
of stockholders for the election of directors, the close of business on the
fifteenth (15th) day following the date on which notice of such meeting is first
given to stockholders. Each such notice must set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that such stockholder is a holder
of record of stock of the corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the SEC
if such nominee had been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a director of the
corporation if elected. The chairman of a stockholder meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
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Pursuant to the Company's Certificate of Incorporation, the Board of
Directors is comprised of four directors, each of whom serve one year terms. The
Board of Directors may increase the number of directors to a maximum of nine.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting. Stockholders do
not have the right to cumulate their votes in the election of directors. If any
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a director.
The names of the nominees for director and certain information about them,
are set forth below. The term of each director will expire at the Annual
Meeting.
NOMINEES FOR DIRECTORS WHOSE TERMS WILL EXPIRE AT THE ANNUAL MEETING
HELD IN THE YEAR 2000 UNLESS PROPOSAL 2 IS APPROVED:
DR. DON M JACKSON, JR. (1) (3), 66 years old Director since 1998
DR. DON M. JACKSON, JR., the father of Kevin Jackson, the Vice President
and Chief Legal Administrative Officer of Prodeo, and Paul Jackson, Vice
President of Prodeo, is one of the founders of CMP Solutions, Inc. and has
served as Chairman of the Board, President, and Chief Executive Officer since
the inception of Prodeo Technologies, Inc. operations on July 14, 1998. Don
Jackson joined the company after an extensive career in various executive
positions in technology companies such as ASM America, Inc., Superwave
Technology, Inc., Microelectronic Packaging, Inc., Integrated Process Equipment
Corporation, Westech Systems, Inc., Global Semiconductor Technologies, L.L.C.,
and Motorola. Don Jackson holds a Ph.D. from Arizona State University in
Electrical Engineering. Don Jackson presently also is a director and member of
the Audit Committees of Flexpoint Sensor Systems, Inc. in Midvale, Utah and M&I
Thunderbird Bank in Phoenix, Arizona.
MAURICE L. MCGILL (3), 63 years old Director since 1998
MAURICE L. MCGILL became a Director of Prodeo Technologies, Inc. on August
24, 1998. Mr. McGill is the Chairman of the Compensation Committee. He presently
serves as a Director of Bluebonnet Savings Bank and Premium Standard Farms, Inc.
Mr. McGill is the President of Wirmac Corp., a financial services provider
located in Garland, Texas. Mr. McGill held the positions of Executive V.P., CFO,
and Director of IBP, Inc. in Dakota City, Nebraska from which he retired in
1988. Mr. McGill previously served as a Partner and National Director of
Services for the meat industry for Touche Ross & Co. in Phoenix, Arizona. He
holds an MS in business administration from the University of Missouri.
DR. DANIEL L. SHUNK (1)(2), 52 years old Director since 1998
DR. DANIEL L. SHUNK became a Director of Prodeo Technologies, Inc. on
August 24, 1998. Dr. Shunk is an Associate Professor of Engineering at Arizona
State University and formerly functioned as its CIM Systems Research Center
Director. He previously has held various executive and management positions in
GCA Corporation, International Harvester, and Rockwell. Dr. Shunk has received
several engineering awards over the years. He received his Ph.D. in Industrial
Engineering from Purdue University.
HOWARD R. NEFF (2), 66 years old Director since 2000
HOWARD R. NEFF - has been Chief Executive Officer and Vice-Chairman of the
Board of Bluebonnet Savings Bank in Dallas, Texas since 1989. He recently
completed a six-year term as a board member of the Federal Home Loan Bank of
Dallas where he served as Vice-Chairman. He was previously president and chief
executive officer of Scottscom Bank in Scottsdale, Arizona. Mr. Neff was with
Touche Ross & Co. for twenty-seven years, where he was a partner and Director of
Audit Operations for its Phoenix, Arizona office. His audit experience included
partner responsibility for numerous clients in the electronics and high-tech
industries. Mr. Neff received a Bachelor of Science Degree in Business
Administration from the University of Missouri. He is a Certified Public
Accountant.
(1) Member of the Executive Committee with Dr. Jackson as chair.
(2) Member of the Audit Committee with Mr. Neff as chair.
(3) Member of the Compensation Committee with Mr. McGill as chair.
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<PAGE>
THE BOARD RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of 12 meetings during the fiscal year
ended March 31, 2000. No director attended fewer than 75 percent of the
aggregate of all meetings of the Board of Directors and any committee on which
such director served during the period of such service.
The Board presently has an Executive Committee, an Audit Committee and a
Compensation Committee. The Executive Committee, which acts on Board matters
that arise between meetings of the full Board of Directors, consists of Mr. Don
Jackson and Mr. Shunk and met one time during the fiscal year ending March 31,
2000.
The Audit Committee presently consists of Messrs. Shunk and Neff. The Audit
Committee met several times during the fiscal year ending March 31, 2000.
Prodeo's Board of Directors has adopted a written charter for the Audit
Committee. The Audit Committee Charter is attached as an exhibit to this proxy
statement. Pursuant to Rule 4200(a)(15) of the NASD's listing standards, the
members of the Audit Committee are independent. The Audit Committee meets
independently with representatives of the Company's independent auditors and
with representatives of senior management. The Committee reviews the general
scope of the Company's annual audit, the fee charged by the independent auditors
and other matters relating to internal control systems. In addition, the Audit
Committee is responsible for reviewing and monitoring the performance of
non-audit services by the Company's auditors. The Committee is also responsible
for recommending the engagement or discharge of the Company's independent
auditors.
The Compensation Committee, which consists of Messrs. McGill and Don
Jackson, met once during the fiscal year ending March 31, 2000. The Compensation
Committee reviews salaries and benefit programs designed for senior management,
officers and directors and administers certain stock option grants with a view
to ensure that the Company is attracting and retaining highly qualified managers
through competitive salary and benefit programs and encouraging extraordinary
effort through incentive rewards.
COMPENSATION OF DIRECTORS
In addition to the recent grant of stock options shown in the table in this
section, the Company pays non- employee directors an annual retainer of $36,000,
payable in cash or by the issuance of the Company's common stock at the fair
market price on the date of issuance.
Don Jackson does not receive any additional compensation for serving on the
Board of Directors.
5
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The following table summarizes options granted to non-employee directors during
the fiscal year ended March 31, 2000:
NUMBER OF OPTION
NAME DATE OF OPTION SHARES PRICE
---- -------------- ------ -----
Maurice L. McGill January 25, 2000 50,000 $14.437
Dr. Daniel L. Shunk January 25, 2000 50,000 $14.437
Howard R. Neff February 29, 2000 60,000 $ 8.187
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the audited financial
statements filed with this report with the Company's management. The Audit
Committee has met with Deloitte & Touche, L.L.P. and discussed the matters
required to be discussed by SAS 61. The independent accountants' independence
and the written disclosures is received as required by Independence Standards
Board Standard No. 1. Based on its review of and discussions regarding the
audited financial statements, the Audit Committee recommended to Prodeo's Board
of Directors that the audited financial statements be included in Prodeo's
Annual Report on Form 10-K for the fiscal year ending March 31, 2000 for filing
with the commission.
CERTAIN LEGAL PROCEEDINGS
On April 1, 1999, Sitek Incorporated was named as a defendant in a lawsuit
involving two separate claims by two plaintiffs; Edmond L. Lonergan and Robert
F. Russo, Jr. v. Sitek, Incorporated, et al., Superior Court for the State of
Arizona, County of Maricopa, Case No. CV 99-05785. The first plaintiff, Edmond
Lonergan, alleges that he was not paid for consulting services by Global
Semiconductor Technologies, Inc., a company controlled by certain shareholders
of Sitek Incorporated. Mr. Lonergan also claims that Global Semiconductor
Technologies, Inc. and/or the other defendants misappropriated trade secrets in
conducting the reverse merger of Dentmart into Sitek. The second plaintiff,
Robert Russo, Jr., was a former employee of Global Semiconductor Technologies,
Inc. Mr. Russo claims that he was wrongfully terminated. On January 10, 2000,
Mr. Russo filed a Stipulation for Dismissal with Prejudice dropping his claims
against Sitek et al. On April 26, 2000, Mr. Lonergan filed a motion to amend his
complaint alleging securities fraud involving the same set of facts set forth in
his original complaint. Sitek has prepared its response opposing the motion on
the basis that there are no grounds upon which a valid claim for securities
fraud could exist and denying the allegations of the claim. Sitek is continuing
to defend itself vigorously. Mr. Lonergan has demanded the value of 1,000,000
shares of Sitek's capital stock and other damages to be proven at trial in his
complaint.
On April 9, 2000, Sitek and Don Jackson, the Company's Chief Executive
Officer, were named as defendants in a lawsuit filed in the state of Colorado:
John Botdorf v. SITEK, Inc., et al., District Court, City and County of Denver,
State of Colorado, Case No. 00CV1951. Mr. Botdorf alleges that Sitek breached a
contract entered into with Mr. Botdorf in July of 1999 for consulting services
involving equity funding for Sitek. Additionally, Mr. Botdorf claims that Sitek
made false representations and fraudulent non-disclosure with respect to the
July 1999 agreement. Sitek currently is preparing its response and intends to
defend itself vigorously. Mr. Botdorf is seeking an option to purchase 600,000
shares of Sitek capital stock at $0.25 per share and other damages in an amount
to be proven at trial.
EXECUTIVE COMPENSATION
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD
OF DIRECTORS (THE "COMMITTE") SHALL NOT BE DEEMED SOLICITING MATERIAL OR
OTHERWISE DEEMED FILED AND SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE
BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO
ANY OTHER FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES THIS REPORT.
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Committee recommends the compensation of the Chief Executive Officer to
the Board and reviews and approves the design, administration and effectiveness
of compensation programs for other key executive officers, including salary,
cash bonus levels and other perquisites including option grants.
COMPENSATION PHILOSOPHY
The objectives of the Company's executive compensation policies are to
attract, retain and reward executive officers who contribute to the Company's
success, to align the financial interests of executive officers with the
performance of the Company, to strengthen the relationship between executive pay
and shareholder value, to motivate executive officers to achieve the Company's
business objectives and to reward individual performance. During the fiscal year
ending March 31, 2000, the Company used base salary and, to a lesser extent,
executive officer cash bonuses to achieve these objectives. In carrying out
these objectives, the Committee considers the following:
(1) THE LEVEL OF COMPENSATION PAID TO EXECUTIVE OFFICERS IN POSITIONS OF
COMPANIES SIMILARLY SITUATED IN SIZE AND PRODUCTS. To ensure that pay
is competitive, the Committee, from time to time, compares the
Company's executive compensation packages with those offered by other
companies in the same or similar industries or with other similar
attributes. The Company typically surveys publicly available
information regarding companies listed on the OTC Bulletin Board which
are comparable in size, products or industry with the Company.
(2) THE INDIVIDUAL PERFORMANCE OF EACH EXECUTIVE OFFICER. Individual
performance includes any specific accomplishments of such executive
officer, demonstration of job knowledge and skills and teamwork.
(3) CORPORATE PERFORMANCE. Corporate performance is evaluated both
subjectively and objectively. Subjectively, the Compensation Committee
discusses and makes its own determination of how the Company performed
relative to the opportunities and difficulties encountered during the
year and relative to the performance of competitors and business
conditions. Objectively, corporate performance is measured by
predetermined operating and financial goals.
(4) THE RESPONSIBILITY AND AUTHORITY OF EACH POSITION RELATIVE TO THE
OTHER POSITIONS WITHIN THE COMPANY.
The Committee does not quantitatively weigh these factors but considers all
factors as a whole, using its discretion, best judgment and the experiences of
its members, in establishing executive compensation. The application given each
of these factors in establishing the components of executive compensation are as
follows:
BASE SALARY. In establishing base salaries, the Committee tends to give
greater weight to factors 1, 2 and 4 above. The Company seeks to pay salaries to
executive officers that are commensurate with their qualifications, duties and
responsibilities and that are competitive in the market. In conducting annual
salary reviews, the Committee considers each individual executive officer's
achievements during the prior fiscal year in meeting the Company's financial and
business objectives, as well as the executive officer's performance of
individual responsibilities and the Company's financial position and overall
performance. The Committee considers the low, midpoint and upper ranges of base
salaries publicly disclosed by companies that Prodeo Technologies, Inc. believes
are comparable to it and generally targets base salary to the mid-point of the
ranges.
PERFORMANCE BONUSES. In establishing performance bonuses, the Committee
tends to give greater weight to factors 2, 3 and 4 above and further believes
that such performance bonuses are a key link between executive pay and
stockholder value. During the fiscal year ending March 31, 2000, the Company
established a bonus pool of $225,000, but has not yet awarded any bonuses to any
employees. The measures chosen by the Committee to evaluate the Company's
performance may vary from year to year depending on the particular facts and
circumstances at the time.
OPTION GRANTS. In establishing option grants or recommendations to the
entire Board, the Committee tends to give greater weight to factors 2 and 3
above. The Committee believes that equity ownership by executive officers
provides incentives to build stockholder value and aligns the interests of
officers with the stockholders. The Committee typically recommends or awards a
grant upon hiring executive officers, subject to a three-year vesting schedule.
Options are granted at the current fair market price for the Company's Common
Stock and, consequently, have value only if the price of the Common Stock
increases over the exercise price for the period during which the option is
exercisable. The size of the initial grant is usually determined with reference
to the seniority of the officer, the contribution the officer is expected to
7
<PAGE>
make to the Company and comparable equity compensation offered by others in the
industry. The Committee believes that such option grants provide incentives for
executive officers to remain with the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee reviews the performance of the Chief Executive Officer at
least annually. When the Committee entered into an employment agreement with Don
M. Jackson, Jr. on June 7, 1999, the Compensation Committee reviewed data from a
survey of salaries for companies comparable in size, products and industry and
considered the Company's earnings and financial position. Based on this
criteria, the Compensation Committee set Don Jackson's salary at $225,000, with
a $650 per month auto allowance (net of taxes) and an opportunity to participate
in future executive bonus plans. Prior to the June 7, 1999 employment agreement,
Don Jackson was employed on an at-will basis and earned $89,100 in salary for
the eight months he was acting as Chief Executive Officer of the Company during
the fiscal year ending March 31, 1999.
Compensation Committee Members during fiscal year ending March 31, 2000:
Maurice L. McGill Don M. Jackson, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Maurice McGill, who is on the Compensation Committee, is a non-employee
director of Prodeo. Don Jackson, who is also on the Compensation Committee, is
the Chief Executive Officer and director of Prodeo.
CERTAIN TRANSACTIONS
A shareholder of Prodeo and a related company advanced $388,000 to Prodeo
of which $76,698 was outstanding as of March 31, 2000. There is no interest
payable on this loan. The Company plans to pay this debt in August 2000.
SUMMARY COMPENSATION TABLE
The following table sets forth, with respect to the fiscal year ended March
31, 2000, compensation awarded to, earned by or paid to the Company's Chief
Executive Officer and the four other most highly compensated executive officers
who earned over $100,000 in total compensation who were serving as executive
officers at March 31, 2000. No compensation information exists for the fiscal
years ending March 31, 1998 as the Company began operations in July 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) (#) ($)
-------- ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Don M. Jackson, Jr. 2000 225,000 0 0 0 0
Director, President and 1999 89,100 (1) 0 0 0 0
Chief Executive Officer
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) (#) ($)
-------- ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Kevin B. Jackson, Vice 2000 110,484 0 0 0 0
President and Chief Legal
Administrative Officer
Paul Jackson, Vice 2000 132,716 0 0 0 0
President
</TABLE>
----------
(1) Salary listed reflects the partial year salary earned by Don Jackson since
August 1, 1998. Don Jackson's annual salary for the fiscal year ending
March 31, 2000 is $225,000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options were granted during the last fiscal year to the executive
officers named in the Summary Compensation Table. Consequently, no Option/SAR
Grant table is being provided.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Because none of the executive officers named in the Summary Compensation
Table had been granted any options, no options were exercised during the last
fiscal year and no Aggregate Option/SAR Exercises or FY-End Option/SAR Values
table is being provided.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT,
AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into employment agreements with each of Don Jackson
(for Chief Executive Officer, effective June 7, 1999), Kevin B. Jackson (for
Vice President and Chief Legal and Administrative Officer, June 14, 1999) and
Paul Jackson (for Vice President effective March 27, 2000). The Employment
Agreements provide that Don Jackson shall receive an annual salary of $225,000
and Kevin Jackson and Paul Jackson each shall receive an annual salary of
$135,000. Bonuses shall be determined annually by the Board of Directors. The
Company may terminate each employee's employment with cause, in which case the
Company shall be obligated to pay such employee's salary through the date of
termination. If the Company terminates Don Jackson's or Kevin B. Jackson's
employment without cause, Don Jackson and Kevin B. Jackson are entitled to their
salaries for the remaining term of their contract, an additional three years
salary and full vesting of all non-vested options (which shall have "piggyback"
registration rights for 10 years). If the Company terminates Paul Jackson's
employment without cause, Paul Jackson is entitled to his salary for the
remaining term of the contract, full vesting of all nonvested options and an
additional five years salary if there is less than one year remaining on the
current term of his employment agreement or an additional four years salary if
there is more than one year remaining on the current term of his employment
agreement. In addition, Don Jackson, Kevin Jackson and Paul Jackson will receive
medical insurance and other employee benefits for a period of three years. As of
July 30, 2000 the Company had not entered into any other employment contracts
with its executive officers.
Under the employment agreements for Don Jackson and Kevin B. Jackson, upon
the occurrence of a merger in which the Company is not the surviving entity, an
acquisition or take over by another entity, 100 percent of all unvested options
will vest and the employment contract will automatically renew for five years.
Under the employment agreement for Paul Jackson, upon the occurrence of a merger
in which the Company is not the surviving entity, an acquisition or take over by
another entity, 100 percent of all unvested options, will vest and the
employment contract will automatically renew for four years.
9
<PAGE>
PROPOSAL 2: APPROVAL OF AMENDMENT TO BY-LAWS CREATING TWO CLASSES OF
STAGGERED BOARD MEMBERSHIPS
The Board of Directors has proposed an amendment to Article 3.2(a) of the
Company's by-laws which would have the affect of electing directors on a
staggered basis. This would be accomplished by creating two classes of
directorships, with each class of directors serving for a term of two years. A
current Article 3.2(a) of the Company's by-laws allows the Board of Directors to
fix the number of members on the Board, ranging between one and nine members.
Each member of the Board currently serves a one year term and is up for election
before the shareholders at every annual shareholder meeting. In addition, the
shareholders may remove any member of the Board of Directors from his position
if the majority of the quorum of votes, present, in person or by proxy at a
properly called special shareholder meeting votes in favor of that director's
removal.
Under the proposed amendment to the Company's by-laws, the Company would
have two classes, I and II, of directors. Each class serving for a term of two
years and elected to the Board of Directors by the shareholders on a staggered
basis. The Board of Directors could determine the number to serve on the Board
between three and nine members. Currently, the Board of Directors is made up of
four members, two of which will be Class I Directors, and two of which will be
Class II Directors. The Board has proposed that Messrs. Shunk and McGill be
assigned the Class I Director positions, which term will end at the next Annual
Meeting of the Stockholders. Messrs. Jackson and Neff will fill the Class II
Directorships, which term will end at the Annual Meeting of the Stockholders
2002. Upon creation of this two class board the shareholders' ability to remove
a director from his position will be restricted as a shareholder will by statute
only be able to be removed for cause by a vote of the shareholders at a properly
held special shareholder meeting.
The text of the current Article 3.2(a) of the Company's by-laws is attached
as an exhibit to this proxy statement, along with a copy of the text of Article
3.2(a) as it is proposed to be revised. All other sections of the by-laws will
remain the same without changes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE BYLAWS CREATING TWO CLASSES OF STAGGERED BOARD MEMBERSHIPS.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
On May 2,2000, Prodeo dismissed its current accountants, McGladrey &
Pullen, LLP, and hired Deloitte & Touche, LLP.
The auditor's reports from McGladrey & Pullen, LLP for the Company's past
fiscal year did not contain an adverse opinion or a disclaimer of opinion, and
was not qualified or modified as to uncertainty, audit scope, or accounting
principles. McGladrey & Pullen became the Company's auditors for the fiscal year
ending March 31, 1999.
The decision to engage Deloitte & Touche, LLP was approved by the Audit
Committee and the Board of Directors.
During the Company's most recent fiscal year and the subsequent interim
period preceding the change, there has been one disagreement with McGladrey &
Pullen, LLP on a matter involving revenue recognition that was not resolved
before McGladrey and Pullen, LLP's dismissal. The matter has been transferred to
the Company's new accountants, Deloitte & Touche, LLP for their consideration. A
transaction valued at approximately $690,000 involving the exchange of inventory
owned by a third party for the Company's inventory was contemplated in the
quarter ended March 31, 2000. McGladrey & Pullen, LLP disagreed with the
Company's Chief Financial Officer desire to recognize the $690,000 as revenue.
The Company indicated to McGladrey & Pullen, LLP that it would send all required
documentation on this issue to its new accountants, Deloitte & Touche, LLP and
would follow whatever recommendation it received from Deloitte & Touche, LLP.
The Company had not received a recommendation on this matter at the time of
McGladrey & Pullen, LLP's dismissal. The outstanding issue regarding the revenue
recognition was not a factor in the dismissal of McGladrey & Pullen, LLP. The
Company has authorized McGladrey & Pullen, LLP to respond fully to inquiries
from Deloitte & Touche, LLP concerning this disagreement.
Since the dismissal of McGladrey & Pullen, LLP, the Company has consulted
with its new auditors about the revenue recognition matter and informed them
that the inventory exchange was restructured and would not be completed until
the following fiscal year. No revenues relating to the transaction have been
recorded as of March 31, 2000. Should the exchange occur in the future, the
Company has agreed to apply generally accepted accounting principles.
10
<PAGE>
Deloitte and Touche, LLP was given a copy of this disclosure prior to its
filing and given the opportunity to furnish the Securities and Exchange
Commission a letter containing any new information or clarification of this
disclosure which it has determined was unnecessary.
PROPOSAL 3: APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche, L.L.P. as
independent auditors to audit the financial statements of the Company for the
fiscal year ending March 31, 2001 and recommends that stockholders vote FOR
ratification of such appointment. In the event of a negative vote on such
ratification, the Board will reconsider its selection.
Deloitte & Touche, L.L.P. has audited the Company's financial statements
annually since May 2, 2000. Its representatives are expected to be present at
the Annual Meeting with the opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE APPOINTMENT OF DELOITTE & TOUCHE, L.L.P. AS INDEPENDENT AUDITORS
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matter properly comes before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's Annual Meeting for the fiscal year ending
March 31, 2001 must be received by the Company no later than April 4, 2001 in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting. Additionally, if a stockholder wishes to
present to the Company an item for consideration as an agenda item for a
meeting, he must timely give notice to the Secretary and give a brief
description of the business desired to be discussed. To be timely for the 2000
Annual Meeting, such notice must be delivered to or mailed to and received by
the Company no later than 5:00 p.m. local time on June 19, 2001.
July 31, 2000 THE BOARD OF DIRECTORS
11
<PAGE>
Exhibit A.
Original Bylaws
3. BOARD OF DIRECTORS
3.2. Election of Directors.
(a) Number, Qualification and Term of Office. The authorized
number of directors of the Corporation shall be fixed from time to time by the
Board of Directors, but will not be less than one nor more than nine. The exact
number of directors shall be determined from time to time by a resolution duly
adopted by a majority of the whole Board of Directors. Directors need not be
shareholders and may succeed themselves.
(b) Resignation. Any director may resign from the Board of
Directors at any time by giving written notice to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or if the time when such resignation shall become effective shall not
be so specified, then such resignation shall take effect immediately upon its
receipt by the Secretary; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
(c) Nomination of Directors. Candidates for director of the
Corporation shall be nominated only either by:
(i) the Board of Directors or a committee appointed by the
Board of Directors, or
(ii) nomination at any shareholders' meeting by or on behalf
of any shareholder entitled to vote at it; provided, that written notice of
such shareholder's intent to make such nomination or nominations must be
given, either by personal delivery or by United States certified mail,
postage prepaid, to the Secretary of the Corporation not later than (l)
with respect to an election to be held at an annual meeting of the
shareholders, 20 days in advance of such annual meeting, and (2) with
respect to an election to be held at a special meeting of the shareholders
for the election of directors, the close of business on the 15th day
following the date on which notice of such special meeting is first given
to the shareholders entitled to vote at it. Each such notice by a
shareholder must set forth: (l) the name and address of the (A) shareholder
who intends to make the nomination and (B) person or persons to be
nominated; (2) a representation that the shareholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (3) a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (4) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy or information statement filed with the
Securities and Exchange Commission pursuant to the proxy rules promulgated
under the Securities Exchange Act of 1934, as amended, or any successor
12
<PAGE>
statute thereto, had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and (5) the manually signed consent
of each nominee to serve as a director of the Corporation if so elected.
The presiding officer of the meeting of the shareholders may refuse to
acknowledge the nominee of any person not made in compliance with the
foregoing procedure.
(d) Vacancies. Vacancies and new directorships resulting from an
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by the sole
remaining director. Directors chosen as described in this Section 3.2(d) will
hold office until their successors are duly elected at the annual meeting and
qualified. If no directors are in office, an election may be held as provided by
statute.
13
<PAGE>
Exhibit B.
Proposed revision to Bylaws
3. BOARD OF DIRECTORS
3.2 Election of Directors.
(a) Classification and Terms of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors consisting of not less than two directors nor more than nine
directors, the exact number of directors to be determined from time to time
by resolution adopted by the Board of Directors. The directors need not be
shareholders and may succeed themselves. The directors shall be divided
into two classes, designated Class I and Class II. Each class shall
consist, as nearly as may be possible, of one-half of the total number of
directors constituting the entire Board of Directors. The terms of the
initial Class I directors shall terminate on the date of the first annual
meeting of stockholders held after the effective date of this Article 3.2.
At each annual meeting of stockholders beginning with the first annual
meeting held after the effective date of this Article 3.2, successors to
the class of directors whose term expires at that annual meeting shall be
elected for a two-year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible,
and any additional directors of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that
shall coincide with the remaining terms of that class, but in no case will
a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the
year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of
Directors, howsoever resulting (including without limitation newly created
directorships), may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
Any or all of the directors of the Corporation may be removed from office
at any time, but only for cause and only by the affirmative vote of the
holders of a majority of the outstanding shares of the Corporation then
entitled to vote generally in the election of directors.
14
<PAGE>
Exhibit C.
Audit Committee Charter.
PRODEO TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
The Board of Directors of Prodeo Technologies, Inc. (the "Corporation")
hereby constitutes and establishes an Audit Committee with authority,
responsibility, and specific duties as described below.
COMPOSITION
The Audit Committee shall be comprised of two or more directors, at least a
majority of which are independent directors. For this purpose, "independent
director" shall mean a person other than an officer or employee of the
Corporation or its subsidiaries or any other individual having a relationship
that, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. One of the members shall be appointed Committee Chairman by the Board
of Directors.
AUTHORITY
The Audit Committee is granted the authority to investigate any activity of
the Corporation, and all employees are directed to cooperate as required by
members of the Committee. The Committee is empowered to retain persons having
special competence, such as counsel, auditors or other advisors, as necessary to
assist the Committee in fulfilling its responsibility.
RESPONSIBILITY
The Audit Committee is intended to serve as focal point for communication
between non- Committee directors, the Corporation's independent accountants and
the Corporation's management as their duties relate to financial accounting,
reporting and controls. The Audit Committee is to assist the Board of Directors
in fulfilling its fiduciary responsibilities as to accounting policies and
reporting practices of the Corporation and all subsidiaries and the sufficiency
of auditing relative thereto. It is to be the Board's principal agent in
confirming and assuring the independence of the Corporation's independent
accountants, the integrity of management, and the adequacy of disclosures to
shareholders. However, the opportunity for the independent accountants to meet
with the entire Board of Directors as needed is not to be restricted.
MEETINGS
The Audit Committee is to meet at least two times per year, and as many
other times as that Committee deems necessary.
15
<PAGE>
ATTENDANCE
At least a majority of the members of the Audit Committee are to be present
at all meetings. As necessary or desirable, the Chairman may request that
members of management and representatives of the independent accountants be
present at meetings of the Committee.
MINUTES
Minutes of each meeting are to be prepared and sent to Committee members
and Corporation directors who are not members of the Committee. If the Secretary
of the Corporation has not taken the minutes, they should be sent to him or her
for permanent filing.
SPECIFIC DUTIES
The Audit Committee is to:
1. Inform the independent accountants and management that the independent
accountants and the Committee may communicate with each other at all
times; and the Committee Chairman may call a meeting whenever he deems
it necessary.
2. Review with the Corporation's management, independent accountants, the
Corporation's general policies and procedures to reasonably assure the
adequacy of internal accounting and financial reporting controls.
3. Have familiarity, through the individual efforts of its members, with
the accounting and reporting principles and practices applied by the
Corporation in preparing its financial statements. Further, the
Committee is to make, or cause to be made, all necessary inquiries of
management and the independent accountants concerning established
standards of corporate conduct and performance, and deviations
therefrom.
4. Review, prior to the annual audit, the scope and general extent of the
independent accountants' audit examination, including their engagement
letter. The auditor's fees are to be arranged with management, and
annually summarized for Committee review. The Committee's review
should entail an understanding from the independent accountants of the
factors considered in determining the audit scope, including:
- Industry and business risk characteristics of the Corporation
- External reporting requirements
- Materiality of the various segments and/or classes of services of
the Corporation's consolidated and non-consolidated activities
- Quality of internal accounting controls
- Extent of involvement of internal audit in the audit examination
- Other areas to be covered during the audit engagement
16
<PAGE>
5. Review the extent of nonaudit services provided by the independent
accountants in relation to the objectivity needed in the audit.
6. Review with management and the independent accountants, upon
completion of their audit, financial results for the year. This review
is to encompass:
- The Corporation's annual report to shareholders and Form 10-K,
including the financial statements, and financial statement
schedules and supplemental disclosures required by generally
accepted accounting principles and the Securities and Exchange
Commission's Regulation S-X
- Significant transactions not a normal part of the Corporation's
operations
- Changes, if any, during the year in the Corporation's accounting
principles or their application
- Significant adjustments proposed by the independent accountants
7. Evaluate the cooperation received by the independent accountants
during their audit examination, including their access to all
requested records, data and information. Inquire of the independent
accountants whether there have been any disagreements with management
which if not satisfactorily resolved would have caused them to issue a
nonstandard report on the Corporation's financial statements. Also,
elicit the comments of management regarding the responsiveness of the
independent accountants to the Corporation's needs.
8. Discuss with the independent accountants the quality of the
Corporation's financial and accounting personnel, and any relevant
recommendations which the independent accountants may have (including
those in their "letter of comments and recommendations"). Topics to be
considered during the discussion include improving internal financial
controls, the selection of accounting principles and management
reporting systems. Review written responses of management to "letter
of comments and recommendations" from the independent accountants.
9. Discuss with Corporation management the scope and quality of internal
accounting and financial reporting controls in effect.
10. Apprise the Board of Directors, through minutes and special
presentations as necessary, of significant developments in the course
of performing the above duties.
11. Review the Committee's charter annually and recommend to the Board of
Directors any appropriate extensions or changes in the duties of the
Committee.
12. Review and recommend to the Board of Directors the independent
accountants to be selected to audit the financial statements of the
Corporation and its divisions and subsidiaries, and provide a written
summary of the basis for any recommendations. Review and approve the
compensation of the independent accountants. Review and approve the
discharge of the independent accountants.
13. Conduct an appropriate review of all related party transactions with
the Corporation on an ongoing basis and review potential conflict of
interest situations where appropriate.
14. On an annual basis, review and discuss with the independent
accountants all significant relationships the accountants have with
the Corporation to determine the accountants' independence.
17
<PAGE>
PROXY PRODEO TECHNOLOGIES, INC.
1817 WEST FOURTH STREET
TEMPE, ARIZONA 85281
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dr. Don M. Jackson and Paul Jackson as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of Common Stock of Prodeo Technologies, Inc. held of record by the
undersigned on July 10, 2000, at the Annual Meeting of Stockholders to be held
on August 28, 2000 or any adjournment thereof.
Item 1. ELECTION OF DIRECTORS
Nominees: Dr. Don M. Jackson, Jr., Maurice L. McGill,
Dr. Daniel L. Shunk, and Howard R. Neff.
Dr. Don M. Jackson, Jr. [ ] FOR NOMINEE [ ] WITHHOLD VOTE FOR NOMINEE
Maurice L. McGill [ ] FOR NOMINEE [ ] WITHHOLD VOTE FOR NOMINEE
Dr. Daniel L. Shunk [ ] FOR NOMINEE [ ] WITHHOLD VOTE FOR NOMINEE
Howard R. Neff [ ] FOR NOMINEE [ ] WITHHOLD VOTE FOR NOMINEE
FOR AGAINST ABSTAIN
Item 2. APPROVAL OF AMENDMENT TO BY-LAWS [ ] [ ] [ ]
CREATING TWO CLASSES STAGGERED BOARD
MEMBERSHIPS
Item 3. APPOINTMENT OF INDEPENDENT AUDITORS [ ] [ ] [ ]
Item 4. In their discretion, the Proxies are [ ] [ ] [ ]
authorized to vote upon such other business
as may properly come before the meeting or
any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES.
Please sign exactly as name appears below. When shares are held by more
than one owner, all should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: ________________, 2000
------------------------------------
Signature
------------------------------------
Signature
NOTE: Please be sure to date this Proxy.
