SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
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
Commission only (as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Socrates Technologies Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(1) Title of each class 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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[_] 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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Notes:
<PAGE>
Socrates Technologies Corporation
8500 Leesburg Pike, Suite 406
Vienna, Virginia 22182
(703) 356-5353 Fax (703) 356-5354
January 31, 2000
Dear Shareholder:
The management of Socrates Technologies Corporation (Company), a Delaware
corporation, is pleased to invite you to attend the 1999 Annual Meeting of
Shareholders (Annual Meeting). The Annual Meeting will be held on Friday, April
21, 2000, at 11:00 a.m., local time, at the Sheraton Premiere Hotel, 8661
Leesburg Pike, First Floor, Vienna, Virginia 22182. Directions to the site of
the Annual Meeting are included with this Notice of Meeting
At the Annual Meeting we will elect six directors, ratify the appointment
of our auditors, review our performance during fiscal 1999 and answer your
questions.
We have simplified this year's Proxy Statement to make it easier to
understand. The Securities and Exchange Commission is encouraging companies to
write documents for investors in plain English.
The vote of every shareholder is important. Please vote your proxy by
telephone or complete and mail your proxy card. Your cooperation will be greatly
appreciated.
The Company's annual meeting of stockholders is typically held in April
or May of each year. The Annual Meeting was delayed due to several changes in
the senior management and board of directors of the Company during 1999 and the
resulting need to recruit a new board and management team for the Company. The
Company will hold the 2000 Annual meeting of stockholders in November or
December 2000. The Company's Board has amended the By-Laws to require the
Company to hold the annual meeting of stockholders before May 31st of each year
after year 2000.
On behalf of the Company's Board of Directors and management, we look
forward to greeting you and our other esteemed shareholders who are able to
attend.
Sincerely,
/s/ Andreas A. Keller
- ---------------------------------
Chairman of the Board
Socrates Technologies Corporation
<PAGE>
Socrates Technologies Corporation
Notice of the 1999 Annual Meeting of Shareholders
The 1999 Annual Meeting of Shareholders of Socrates Technologies
Corporation will be held on Friday, April 21, 2000, at 11:00 a.m., local time,
at the Sheraton Hotel, 8661 Leesburg Pike, First Floor, Vienna, Virginia 22182,
for the following purposes:
1. To elect six directors to serve until their successors are elected and
assume their offices; and
2. To ratify the selection of Grant Thornton, LLP as independent auditors for
the Company for fiscal year 1999; and
3. To transact such other business as may properly come before the meeting.
Shareholders owning shares of Common Stock at the close of business on
February 22, 2000 are entitled to attend and vote at the Annual Meeting. A
complete list of these shareholders will be available from Paul W. Richter,
Secretary, at the Company's principal executive offices at 8500 Leesburg Pike,
Suite 406, Vienna, Virginia 22182 for at least ten days prior to the meeting.
By Order of the Board of Directors,
/s/ Andreas A. Keller
- ----------------------------------------
Andreas A. Keller, Chairman of the Board
<PAGE>
SHAREHOLDERS OWNING COMPANY SHARES OF RECORD
AT THE CLOSE OF BUSINESS ON FEBRUARY 22, 2000
ARE ENTITLED TO ATTEND AND VOTE AT THE MEETING
The Company's Board of Directors is soliciting proxies for the Annual
Meeting. This Proxy Statement contains important information for you to consider
when deciding how to vote on the matters brought before the meeting. Please read
it carefully.
The Board set February 22, 2000 as the record date for the meeting.
Shareholders who owned shares of the Common Stock of record at the close of
business on that date are entitled to vote at and attend the meeting, with each
share entitled to one vote. There were ____________ shares of the Company's
Common Stock outstanding on the record date. On the record date, the closing bid
price of the Company's Common Stock on the Nasdaq National Stock Market was
$______ per share.
This Proxy Statement is being mailed on or about March 17, 2000 to
shareholders entitled to vote at the meeting.
In this Proxy Statement:
"Board" means the Board of Directors of Socrates Technologies Corporation,
a public Delaware holding company with its Common Stock listed on The Nasdaq
Stock Market National Market System under the symbol "SOCT".
"We" and "Company" mean Socrates Technologies Corporation. Unless stated
otherwise or the context indicates otherwise, "We" and the "Company" shall
include in its meaning the subsidiaries of the Company.
"Expert" means Expert, Inc., a subsidiary of the Company.
"JMR" means JMR Distributors, Inc., a subsidiary of the Company.
"MVS" means MVS Modular Vision Systems, Inc., a subsidiary of the Company.
"Networkland" means Networkland Inc., a subsidiary of the Company.
"Socrates" means Socrates Technologies, Inc., a subsidiary of the Company.
"SSC" means Socrates Solutions Corporation, a subsidiary of the Company.
"Technet" means Technet Computer Services, Inc., a subsidiary of the
Company.
. Holding shares in "street name" means your shares of Common Stock are held
in an account at a brokerage firm and the stock certificates and record
ownership are not in your name.
. "SEC" or the "Commission" means the Securities and Exchange Commission.
. "Beneficial ownership" of Common Stock is defined under various SEC rules
in different ways for different purposes, but generally means that, although you
(or the person or entity in question) don't hold the shares in your name, you do
have investment or voting control (and/or an economic or "pecuniary" interest)
in the shares through an agreement, relationship or the like.
"Fair market value" when referring to a stock option means the exercise
price for the shares of Common Stock underlying the stock options is the closing
bid price of the Common Stock on the date that the stock option is granted.
"Common Stock" means the Common Stock, $0.01 par value, of the Company.
<PAGE>
QUESTIONS AND ANSWERS
Q: When and where is the shareholder meeting?
A: The Company's Annual Meeting of Shareholders is being held on
Friday, April 21, 2000, at 11:00 a.m. at the Sheraton Premiere
Hotel, Lobby Level, 8661 Leesburg Pike, Vienna, Virginia 22182.
Q: Do I need a ticket to attend the shareholder meeting?
A: Yes, you will need a ticket to attend.
* Please complete the enclosed Ticket Request form, and
. Acquire a legal proxy from your broker if you own your shares in street
name
. Mail the form and a copy of the legal proxy to: Paul W. Richter-Annual
Meeting, P.O. Box 2493, Merrifield, Virginia 22116. Please allow enough time for
us to mail the ticket back to you.
Q: Why am I receiving this Proxy Statement and proxy card?
A: You are receiving a Proxy Statement and proxy card from us because you owned
shares of Common Stock on the record date. This Proxy Statement describes issues
on which we would like you, as a shareholder, to vote. It also gives you
information on these issues so that you can make an informed decision.
When you sign the proxy card, you appoint Paul W. Richter and Stephen Fogarty
as your representatives at the meeting. Mr. Richter and Mr. Fogarty will vote
your shares, as you have instructed them on the proxy card, at the Annual
Meeting. This way, your shares will be voted whether or not you attend the
Annual Meeting. Even if you plan to attend the meeting, it is a good idea to
complete, sign and return your proxy card or vote by telephone in advance of the
Annual Meeting just in case your plans change. You can always vote in person at
the meeting, even if you have already sent in your proxy card or voted by
telephone.
If an issue comes up for a vote at the Annual Meeting that is not on the
proxy card, Messrs. Richter and Fogarty will vote your shares, under your proxy,
in accordance with their best judgment.
Q: What am I voting on?
A: You are being asked to vote on:
* the election of six nominees to serve on our Board of Directors; and
* ratification of the appointment of our independent auditors for fiscal year
1999.
Q: How do I vote?
A: There are three ways you may vote. (Please see detailed instructions on your
proxy card.)
. Mail in your completed, signed and dated proxy card.
If you return a signed card but do not provide voting instructions, your
shares will be voted: FOR the six named nominees and FOR ratification of the
auditors.
OR
. Place your vote by telephone.
Please follow the instructions that came with your Proxy Statement. If you
vote by telephone, you do not need to mail in your proxy card.
OR
. Vote in person by attending our Annual Meeting.
We will pass out written ballots to anyone who wants to vote at the
meeting. If you hold your shares in street name, you must request a legal proxy
from your stockbroker in order to vote at the meeting.
Q: What does it mean if I receive more than one proxy card?
A: It means that you have multiple accounts at the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all your
shares are voted.
Q: What if I change my mind after I return my proxy card?
A: You may revoke your proxy (that is, cancel it) and change your vote at any
time prior to the voting at the Annual Meeting by written notice to Paul W.
Richter-Annual Meeting, P.O. Box 2493, Merrifield, Virginia 22116.
You may also do this by:
. Signing another proxy card with a later date,
. Voting in person at the Annual Meeting, or
. Voting via the telephone on a date after the date on your proxy card (your
latest proxy is counted.
Q: Will my shares be voted if I do not sign and return my proxy
card?
A: If your shares are held in street name, your brokerage firm may either vote
your shares on "routine matters" (such as election of directors) or leave your
shares un-voted. Your brokerage firm may not vote on "non-routine matters" such
as a proposal submitted by a shareholder.
We encourage you to provide instructions to your brokerage firm by completing
the proxy that they send to you. This ensures your shares will be voted at the
Annual Meeting.
Q: How are abstentions counted?
A: Abstentions are counted for the purposes of determining both (1) the presence
or absence of a quorum and (2) the total number of votes cast with respect to a
proposal. Abstentions thus have the same effect as a vote "Against."
Q: What is a "broker non-vote?"
A: Under the rules that govern brokers who have record ownership of shares that
are held in "street name" for their clients, who are the beneficial owners of
the shares, brokers have the discretion to vote such shares on routine matters,
but not on non-routine matters. Thus, if the proposals to be acted upon at the
Annual Meeting include both routine and non-routine matters, the broker may turn
in a proxy card for uninstructed shares that votes "FOR" the election of
directors and ratification of accountants.
Q: How are broker non-votes counted?
A: Broker non-votes will be counted for the purpose of determining the presence
or absence of a quorum, but will not be counted for determining the number of
votes cast. A broker non-vote will not affect the outcome on any proposal in the
Proxy Statement.
Q: What is a "quorum"?
A: A "quorum" is the number of shares that must be present, in person or by
proxy, in order for business to be transacted at the meeting. The required
quorum for the Annual Meeting is a majority of the shares outstanding on the
record date. There must be a quorum for the Annual Meeting to be held. All
completed and signed proxy cards, telephone votes, whether representing a vote
for, against, withheld, abstained or a broker non-vote, will be counted toward
the quorum.
Q: How many shares can vote at the meeting?
A: As of the record date, _____ shares of Common Stock were outstanding. Each
outstanding share of Common Stock entitles the holder to one vote on all matters
covered in this proxy statement. Therefore, there are a maximum of ___ votes
that may be cast at the meeting.
Q: What is the required vote for a proposal to pass?
A: For the proposals in this Proxy Statement, the required vote
is the affirmative (i.e. "FOR") vote of a majority of the votes
cast. The votes cast on a particular proposal includes votes FOR,
AGAINST, WITHHELD, and ABSTAINED, but does not include broker
non-votes.
Q: Who is soliciting my vote?
A: This proxy solicitation is being made and paid for by Socrates Technologies
Corporation. Besides this solicitation by mail, proxies may be solicited by our
directors, officers and other employees by telephone, telegraph, telefax or
telex, in person or otherwise. Such person will not receive any additional
compensation for assisting in the solicitation. We will also request brokerage
firms, nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners. We will reimburse such persons and the Company's transfer
agent for their reasonable out-of-pocket expenses in forwarding such material.
We may also retain the services of proxy solicitation, information agent and/or
mailing service to perform the broker nominee search and to distribute proxy
materials to banks, brokers, nominees and intermediaries. Such a service would
also solicit voted proxies from shareholders for the meeting. We anticipate that
the fee for such an agent's services would range from $3,500 to $10,000, plus
expenses and depending on the level of services.
Q: Where are the Company's principal executive offices located?
A: The corporate headquarters is located at 8500 Leesburg Pike, Suite 406,
Vienna, Virginia 22182. The Company's Board of Directors approved a resolution
on January 31, 2000, to change the site of the Company's principal executive
offices from 8133 Leesburg Pike, Suite 760, Vienna, Virginia 22182 to larger
quarters at 8500 Leesburg Pike, Suite 406, Vienna, Virginia 22182. The offices
at 8500 Leesburg Pike, Suite 406, Vienna, Virginia 22182, were formerly used as
a sales office by the Company's Socrates Technologies, Inc. subsidiary. The
Board believes that the Vienna, Virginia location is more centrally located to
the Company's operating subsidiaries and is more centrally located to the main
business offices of the Company's most important customers and strategic
partners.
<PAGE>
SHARE OWNERSHIP BY
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
This table shows how much Common Stock is beneficially owned by owners of more
than 5% of the outstanding shares, directors and certain executive officers, as
of January 28, 2000. On January 28, 2000, there were * shares of Common Stock
outstanding.
AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED (1)(11)
Directors, Named Officers Shares Beneficially Owned
and 5%+ Shareholders (1) Number Percent
- ---------------------------------------------------------
Farshad Sajedi (2) 2,000,000 9.87%
Edward Ratkovich (3) 1,865,800 9.3%
Edward Paul Roberts (4) 532,358 *
Timothy Keenan (5) 72,000 *
Paul W. Richter (6) 100,000 *
Richard Prins (7) 15,000 *
Stephen Fogarty (8) -0- *
Andreas A. Keller (9) -0- *
Mariellen Lowry (10) -0- *
All current directors
and executive officers
as a group (7 persons)
- --------
* less than one percent
(1) Includes shares for which the named person:
. has sole voting and investment power, or
. has shared voting and investment power with his or her spouse, unless
otherwise indicated in the footnotes.
Excludes shares that:
. may be acquired through stock option exercises, unless the shares may be
acquired within 60 days of April 21, 2000, or
. are restricted stock holdings
Unless indicated otherwise and to the Company's knowledge, each person
listed above in the table has sole voting power and investment power with
respect to the shares. The address for each person listed in the table is c/o
Socrates Technologies Corporation, 8500 Leesburg Pike, Suite 406, Vienna,
Virginia 22182.
(2) Director, Chief Executive Officer and President of Networkland Inc., a
subsidiary of the Company. Appointed as a director on September 1, 1999. All of
the shares were acquired when the Company acquired Networkland Inc. in a
stock-for-stock acquisition on August 17, 1999.
(3) Former Director. Resigned, effective November 15, 1999. Owns shares with his
spouse as tenants in the entirety.
(4) Former Director. Resigned, effective November 15, 1999.
(5) Consists of 72,000 shares unedrlying a stock option that is exercisable
within 60 days of April 21, 2000.
(6) Consists of 100,000 shares underkying stock options that are exercisable
within 60 days of April 21, 2000.
(7) Appointed as a Director on September 22, 1999. Shares purchased in open
market transactions during 1999.
(8) Chief Financial Officer and Vice President.
(9) Appointed as a Director on September 22, 1999. Appointed as Chairman of the
Board on November 15, 1999.
(10) Appointed as a Director, effective January 1, 2000.
(11) The table does not include the following stock ownership by former officers
and directors: (a) Abbas Fathi has the right to purchase 230,000 shares of
Common Stock under a stock option; (b) James Miller, the former Acting Chairman
of the Board, beneficially owns 15,000 shares of Common Stock; and (c) Clive
Whittenbury, a former director, beneficially owns 100,000 shares of Common
Stock.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
A Board of six directors is to be elected at the Annual Meeting.
Directors elected at the Annual Meeting will hold office until the next Annual
Meeting of shareholders, which the Company intends to hold in November or
December 2000, and until their successors are elected and qualified, except in
the event of their earlier death, resignation or removal. All of the nominees
have indicated that they are able and willing to serve if elected. If any
nominee should become unavailable prior to the election, the Board of Directors
may recommend another person and Mr. Richter and Mr. Fogarty, as your
representatives, will vote for such person.
The Company is presenting a slate of six nominees for the elction to
the Board at the Annual Meeting. Five of the nominees currently serve as
directors. Mr. Timothy Keenan is a first time nominee for election to the Board.
Seventh Board Nominee.
At a January 28, 2000 Special Meeting of the Board, the Board passed a
resolution approving the current slate of nominees as well as directing the
Chairman of the Board, Mr. Keller, to search for, evaluate and present a list of
qualified noinees to the Board for consideration as an outside or independent,
seventh director of the Board. If the Board locates a suitable candidate for the
seventh board seat, which seat is reserved for an outside or independent
director, before March 15, 2000, then the Company intends to revise this proxy
statement and to seek shareholder approval for seven nominees to the Board at
the Annual Meeting. If the Board does not find a seventh nominee in time to
revise and distribute this proxy statement for the Annual Meeting, then the
Board will consider appointing the seventh nominee to the Board after April 21,
2000, or, alternatively, not appointing the seventh nominee to the Board but
rather nominating the seventh nominee to stand for election at the 2000 Annual
Meeting of Stockholders in November or December 2000.
Changes in the Board during 1999.
On December 22, 1998, Edward Ratkovich took a sabbatical from his
duties as Chairman of the Board and Mr. James H. Miller was elected by the Board
on that same date to serve as Acting Chairman of the Board until a permanent
Chairman was appointed by the Board. Upon Mr. Miller's resignation on September
3, 1999, Paul W. Richter was elected as Acting Chairman of the Board of
Directors. With Mr. Ratkovich's resignation as a Director and Chairman of the
Board, effective November 15, 1999, and with Mr. Richter's resignation as Acting
Chairman of the Board, effective November 15, 1999, the Board appointed Andreas
A. Keller as Chairman of the Board on the same date.
On December 22, 1998, the Company's Board of Directors appointed James
H. Miller and Jean H. Sisco to join the Company's Board of Directors as outside
directors. At the request of Paul Richter and George Cowan, the Board agreed on
December 22, 1998 to create a Special Committee to review the management and
financial controls, systems and practices of the Company and its corporate
governance practices and policies for the period from January 1, 1997 to the
present. Ms. Sisco, Mr. Miller and Mr. Richter were appointed by the Company's
Board of Directors at the December 22, 1998 Board meeting as members of the
Special Committee and received the Board's mandate to conduct the aforementioned
review for the stated period. The Washington, D.C. law firm of Arnold & Porter
was retained to act as outside legal counsel to the Special Committee. The
Special Committee concluded its review in August 1999 and reported its findings
and recommendations to the Board on September 1, 1999. After reporting its
findings and making its recommendations, the Special Committee was abolished by
the Board at the September 1, 1999 Board meeting. The Company has implemented or
is implementing all of the recommendations of the Special Committee concerning
management, financial and corporate governance practices, systems and controls.
<PAGE>
Biographies of the Board of Directors
Andreas A. Keller, Age 55
Director since 1999
Positions with Company
o Appointed a Director on September 22, 1999. Appointed Chairman of
the Board on November 15, 1999. Appointed as Chairman of the
Executive Committee of the Board on January 4, 2000.
Other Experience:
o Andreas A. Keller started his twenty-five year banking career in
his native country of Switzerland with Union Bank of Switzerland
and soon joined Citibank N.A. where he spent twenty three years
accumulating a broad-based international experience in commercial
banking, investment banking and private banking. He worked eight
years in New York, six years in Europe, and six years in Asia
before settling down in Washington, D.C. in 1990.
o His assignments with Citibank included positions of steadily
increasing responsibility from managing global account
relationships, to country management in the Middle East, to
Corporate Bank Head of Citibank India, Nepal, and Bangladesh.
From 1984 to 1989 he served as a Director on the Board of
Citicorp Overseas Software Ltd. in Bombay, India, and in 1988,
Mr. Keller was asked to head up Citibank's Private Bank in
Germany with the mandate to bring about a turnaround. Mr. Keller
carried Citibank's professional designation of Senior Credit
Officer.
o In 1992, Mr. Keller applied his business experience to building
his own company in the residential security industry growing it
to become the 8th largest regional security company in the
greater Washington metropolitan area which he sold in 1997. He
served as consultant to the Dallas based Financial Security
Services, Inc., and to Washington Technology Group in
Springfield, Virginia. In 1999 Mr. Keller became President of the
newly formed web based Accounts Receivable Management
Corporation, armcor.com, which provides working capital
management services for federal government contractors.
Education:
o Master of Science in Business Policy, Columbia University, New
York, New York.
o B.A., Jesuit College, Feldkirch, Austria.
Richard K. Prins, Age 42
Director since 1999
Positions with Company
o Appointed as a Director for first time on September 22, 1999.
Chairman of the Compensation Committee of the Board and Member of
the Executive Committee of the Board since January 4, 2000.
Other Experience
o Senior Vice President and Director of Mergers and Acquisitions,
Ferris Baker & Watts, Incorporated, an investment banking and
brokerage firm based in the greater Washington, D.C.-Baltimore
region.
o Managing Director, Crestar Securities Corp.'s Investment Banking
Division, Richmond, Virginia, 1988-1996.
Education
o M.B.A., Oral Roberts University, Tulsa, Oklahoma.
o B.A. Colgate University, Hamilton, New York.
o
Mariellen Lowry, Age 41
Director since 2000
Positions with Company
o Appointed as a Director for the first time on January 4, 2000.
Chairman of the Audit Committee of the Board and a Member of the
Compensation Committee of the Board since January 4, 2000.
Other Experience:
o Director of Business Development, Emerald Solutions, Vienna,
Virginia (1999-date). Responsible for creating a healthcare
technology vertical market for Emerald, a national technology
services and systems development firm;
o Vice President, Phoenix Health Systems (1997-1999), Gaithersburg,
Maryland. Responsible for obtaining consulting engagements with
healthcare organizations to provide technology and management
services. Responsible for $7 million increase in revenues in one
year.
o President, Healthcare Business Development Corporation
(1992-1997). Founder and chief executive of a healthcare
consulting firm, which firm organized physician networks in the
greater Washington, D.C.-Baltimore region, assisted health care
providers in management, medical billing, insurance verification
and development of ambulatory infusion centers.
o President, American Home Therapies, Upper Marlboro, Maryland.
Founder and manager of home infusion company. Sold company in
1992.
Education:
o B.A., Scranton University, Scranton, Pennsylvania.
Farshad Sajedi, Age 37
Director since 1999
Positions with Company:
o First appointed as a Director on September 1, 1999. He is also
the Chief Executive Officer, President and a director of
Networkland Inc., a subsidiary of the Company since August 17,
1999.
Other Experience:
o Mr. Sajedi was the founder and principal executive officer of
Networkland Inc. since its founding in 1987.
Education:
o BS in Electrical Engineering from a local community college.
Timothy Keenan, Age 34
First Time Nominee to the Board
Positions with Company:
o President of Company since September 1999.
o Non-voting management member of Executive Committee since January
4, 2000.
Other Experience:
o Director, Associated Venture Management Corp., New York City
(1995-1999). Evaluated and raised money for mergers and
acquisitions. Raised capital in private and public securities
offerings for companies in AVMC's portfolio companies.
Participated in strategic business and financing planning. Served
as an officer or director of three privately held porfolio
companies.
o Vice President, CS First Boston, New York City (1993-1995).
Responsible for valuation and financial investments in merchant
banking and distressed asset portfolios.
o Associate, Cornerstone Partners, LLC, New York City (1991-1993).
Responsible for oversight of 35 private equity partnership
investments and evaluation and management of protfolio of in-kind
security distributions.
o Senior Auditor, Price Waterhouse, LLP, New York City (1988-1991).
Supervising auditor for several corporate clients.
Education:
o B.S. in Accounting and Finance, University of Albany, Albany, New
York. Graduate Cum Laude.
o Certificated Public Accountant, New York, 1990.
o Series 7, 63 Licenses as registered investment advisor.
Paul W. Richter, Age 44
Director since 1998
Positions with Company:
o From September 3, 1999 until November 15, 1999, Acting Chairman
of the Board of the Company. As of September 9, 1999, Mr. Richter
is also the Company's General Counsel, Director of Human
Resources, Vice President of Corporate Development (Mergers &
Acquisitions) and Secretary. Mr. Richter is also the General
Counsel and Secretary of all of the Company's current operating
subsidiaries.
o First appointed to the Board on February 7, 1998
Other Experience:
o Practiced corporate and securities law in greater Washington,
D.C.-Baltimore region from 1990 until December 1996, primarily
served as outside legal counsel to small high technology
companies.
o Founder and Executive Manager of two start-up legal research
companies, one sold to West Publishing Company and the other sold
to Clark Boardman Co. (December 1988 to January 1990)
o Executive Operations Officer with Simon & Company, a subsidiary
of Gulf + Western Industries, Inc. (August 1984 to August 1988
o General Manager, WSB, Inc., a subsidiary of CCH, Inc.
(1982-1984).
Education:
o L.LM., Securities Regulation, Georgetown University Law Center,
Washington, D.C. (1987)
o J.D., George Mason University Law School, Arlington, Virginia
(1985)
o B.A., Knox College, Galesburg, Illinois (1977). Graduate Cum
Laude.
<PAGE>
Meetings and Committees of the Board of Directors
The Board of Directors held 16 meetings during the last fiscal year
ended December 31, 1999. During the last fiscal year, all directors attended at
least 75 percent of the board meetings held during their respective terms of
service as directors. Due to the several changes in the membership of the Board
during fiscal year 1999, Paul Richter, Edward Ratkovich and Paul Roberts were
the only members of the Board who attended at least 75 percent of all of the
board meetings held in fiscal year 1999.
Name of Number of Functions of Committee
Current Committee/
Members Meetings in
Fiscal 1999
- --------------------------------------------------------------------------------
1) Audit (1) 5 Recommends selection of
independent auditors to the
Mariellen Lowry Board; reviews internal
financial controls; confers
with independent and confers
with Company accounting
personnel on auditor's work
and audits. Reviews progress
of Company in implementing and
maintaining financial controls
and systems.
2) Compensation (2) 7
Reviews performance of
executives; determines total
Mariellen Lowry compensation package for
Richard K. Prins executives and others,
administers stock plans and
determines grants of stock
options to executives,
employees and others.
3) Executive Committee (3) 0 Liaison between the Board and
management; acts on behalf of
Andreas A. Keller Board on certain business,
Richard Prins management and financial
Farshad Sajedi financial matters; reports to
Paul Richter Board on business, management
and financial affairs of the
Company. Reviews performance
of and assists management in
performance of duties.
4) Conflicts Committee 0 Reviews transactions and
Agreements between the Company
Mariellen Lowry and its subsidiaries and their
respective officers,
directors, employees,
shareholders and agents for
possible conflicts of interest
or self-dealing.
- -------------
(1) James Miller and Jean Head Sisco were members of the Audit Committee from
December 22, 1998 until their resignations on September 3, 1999 and August 20,
1999, respectively. Ms. Sisco served as Chairman of the Audit Committee for that
period. Mr. Edward Paul Roberts was a member of the Audit Committee from
February 7, 1998 until his resignation on November 15, 1999. Ms. Lowry was
appointed to the Audit Committee on January 4, 2000.
(2) Mr. James Miller and Ms. Jean Head Sisco were Compensation Committee members
from December 22, 1998 until their resignations on September 3, 1999 and August
20, 1999, respectively. Mr. Edward Paul Roberts was a Compensation Committee
member from December 22, 1998 until his resignation on November 15, 1999.
Richard Prins was appointed to the Compensation Committee on September 22, 1999.
Mr. Mariellen Lowry was appointed to the Compensation Committee on January 4,
2000.
(3) Board abolished the Executive Committee on December 22, 1998 because of
decision of the Board to meet monthly throughout 1999. The Executive Committee
was re-established by the Board and Andreas A. Keller, Farshad Sajedi, Richard
Prins and Paul Richter were appointed as members of that Committee on January 4,
2000. Non-voting management members of the Executive Committee are Timothy
Keenan, Stephen Fogarty.
(4) The Conflicts Committee was formed on January 4, 2000. The Conflicts
Committee was formed at the recommendation of the Special Review Committee. Ms.
Lowry was appointed as a member of the Conflicts Committee on January 28, 2000.
The Company does not have a nominating committee to locate and
recommend potential board members to the Board. This function is fulfilled by
the full Board. Any suggestion for a nominee should be submitted to the
Secretary of the Company at the Company's principal executive offices. Such
potential nominees will be reviewed by the full Board in accordance with its
established procedures.
The full Special Committee met six times during fiscal year 1999.
Vote Required and Board Recommendation
The six nominees for director receiving the highest number of
affirmative votes shall be elected as directors. Votes withheld from any
director are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but have no other legal effect under
Delaware law. Shareholders do not have the right to cumulate their votes in the
election of directors.
The Board of Directors recommends that shareholders vote FOR the slate
of six nominees set forth above.
Compensation of Directors
Outside, independent directors receive a quarterly fee of $3,000 for
being a director. If the outside, independent director also serves as a
committee member of a board committee, then she or he receives a committee
meeting fee of $750 per meeting attended. Outside directors also receive an
annual grant of a non-qualified stock option to purchase 25,000 shares of Common
Stock at a purchase price equal to the fair market value of the Common Stock on
the date of the grant. Employee directors do not typically receive compensation
above and beyond their compensation as officers for serving as directors.
1999 Non-Employee Director Stock Option Plan
In order to provide an incentive for qualified outside, independent
directors to serve as directors of the Company and to continue to serve in their
capacity as directors of the Company, the Board approved and adopted a 1999
Non-Employee Director Stock Option Plan in December 1999. Under this plan, each
outside, independent director receives an annual grant of a non-qualified stock
option to purchase 25,000 shares of Common Stock at fair market value. As of
January 31, 2000, a non-qualified stock option to purchase 25,000 shares of
Common Stock at fair market value and with a two-year vesting period have been
issued to Richard Prins, Andreas Keller and Mariellen Lowry. None of the options
issued have vested or been exercised in fiscal year 1999.
<PAGE>
PROPOSAL TWO
RATIFICATION OF THE SELECTION OF GRANT HORNTON, LLP
AS INDEPENDENT AUDITORS
The Audit Committee, composed entirely of non-employee directors,
recommended to the Board of Directors that Grant Thornton, LLP be appointed as
independent auditors. As our independent auditors, Grant Thornton, LLP would
audit our consolidated financial statements for fiscal year 1999 and perform
audit-related services and consultation in connection with that audit.
The Board approved the selection of Grant Thornton, LLP as independent
auditors for fiscal 1999 and is asking the shareholders for ratification of
their selection. The affirmative vote of a majority of the Votes Cast is
required for ratification. If the shareholders do not approve the selection of
Grant Thornton, LLP, the Audit Committee and the Board will reconsider the
appointment.
Grant Thornton, LLP, or its predecessors have audited the consolidated
financial statements of the Company since 1995.
The Company has been advised by Grant Thornton, LLP that it will have a
representative present at the Annual Meeting who will be available to respond to
appropriate questions. The representative will also have the opportunity to make
a statement if he or she desires to do so.
The Board of Directors recommends a vote FOR the ratification of the
selection of Grant Thornton, LLP as independent auditors. The Board believes
that this proposal is in the best interests of the Company and its shareholders.
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below shows, for the last three fiscal years, compensation
paid to the Company's Chief Executive Officer and the four most highly
compensated executive officers serving at fiscal year end. The table also lists
one former executive officer who would have been included had he still been an
executive officer of the Company at fiscal 1999 year end. We refer to all of
these officers and a former officer as the "Named Officers."
Name and Principal(6)(7) Fiscal Year Annual Compensation Securities
Position Salary Bonus underlying
Stock Options
(# of Shares)
Edward Ratkovich (1) 1998 $102,000 -0- -0-
Chairman 1997 $102,000 -0- 300,000
1996 $195,000 -0- -0-
Abbas Fathi (2) 1998 $150,000 -0- 100,000
CEO, President 1997 $150,000 $75,000 100,000
1996 $150,000 -0- -0-
Gana Govind (3) 1998 $180,000 -0- -0-
CEO and President 1997 $180,000 -0- -0-
Technet Computer 1996 n/a n/a n/a
Services, Inc.
Cabot Caskie (4) 1999 $140,000 -0- 50,000
Chief Financial 1998 n/a -0- n/a
Officer 1997 n/a -0- n/a
George Cowan (5) 1999 $120,000 -0- 50,000
Executive Vice 1998 $120,000 -0- -0-
President 1997 n/a n/a
- -------------------------
(1) Compensation and bonus deferred at the election of Mr. Ratkovich. Pursuant
to an August 1999 letter agreement with the Company, Mr. Ratkovich cancelled his
deferred compensation and bonus in return for Company's agreement to reach
agreement on a settlement of Mr. Ratkovich's two loans to the Company. Mr.
Ratkovich resigned as Chairman of the Board and a director on November 15, 1999.
(2) Abbas Fathi resigned as an officer and director of the Company and SOcrates
on June 30, 1999.
(3) Gana Govind resigned as an officer and director of Technet on October 1,
1999. As of 10/1/99, Mr. Govind has served as a management and technical
consultant to Technet.
(4) Cabot Caskie resigned as an officer of the Company on November 15, 1999.
(5) George Cowan resigned as an officer and director of the Company on June 30,
1999.
(6) No Named Officer received perquisites in an amount greater than the lesser
of (i) $50,000 or (ii) 10 percent of such Named Officer's total salary plus
bonus.
(7) Farshad Sajedi was employed as Chief Executive Officer and President of
Networkland on August 17, 1999 for a term of three years. His annual base salary
is $180,000 plus he receives an annual performance bonus of 12% of Networkland's
pre-tax earnings. Under the terms of employment, Mr. Sajedi also receives a
stock option grant to purchase 100,000 shares of Common Stock upon signing the
employment agreement and an second option to purchase 100,000 in fiscal year
1999.
Stock Options Grants in Fiscal Year 1998
This table shows stock option grants during the fiscal 1999 to the
Named Officers. No stock appreciation rights have been granted by the Company to
the Named Officers.
OPTION TABLE
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Potential
Year Value at
Number of % of Total Assumed
Securities Options Annual Rates
Underlying Grnated to Exercise Price Apprecia-
Stock Employees in Price Expiration tion for Option
Name Options in Last Fiscal ($/Sh) Date Term
- ------------------------------------------------------------------------------------
5% 10%
-------------------
($) ($)
<S> <C> <C> <C> <C> <C>
Abbas
Fathi 500,000 $1.38 10/31/09 433,937 1,099,082
50,000 $2.94 4/14/07
50,000 $4.13 7/31/07
Farshad
Sajedi 100,000 $0.50 10/06/09 31,445 79,687
100,000 $0.50 10/06/09 31,445 79,687
Tim
Keenan 100,000 $0.53 11/7/09 33,331 84,468
72,000 $1.25 01/01/00 56,601 143,437
Cabot
Caskie 50,000 $0.53 11/7/09 33,331 84,468
Paul
Richter 50,000 $0.53 11/07/09 16,166 42,234
</TABLE>
(1) Potential realizable value assumes the stock price will appreciate
at the annual rates shown. These rates are compounded annually from the date of
grant until the end of the 10-year term of the option. The potential realizable
value is: the potential stock price at the end of the term based on the 5
percent and 10 percent assumed rates
. less the exercise price
. times the number of shares subject to the option
These numbers are calculated based on the requirements of the
Securities and Exchange Commission and do not reflect the Company's estimate of
future stock price growth.
(2) The Company option plans are administered by the Compensation Committee of
the Board of Directors. The Compensation Committee determines the eligibility of
officers, directors, employees and consultants, the number of shares to be
subject to the options granted and the terms of such grants. All options shown
in the table have exercise prices equal to the fair market value on date of
grant, vest over two years and have a term of ten years. In the event of a
change in control, except as otherwise determined by the Board prior to the
occurrence of such change in control, all options shall be fully exercisable and
vested and shall be terminated in exchange for a net cash payment. In the event
of a merger of the Company or the sale of substantially all of the assets of the
Company that does not constitute a change in control, unvested options shall be
assumed by the acquiring company. The Board of Directors can accelerate unvested
options if the acquiring company does not assume the options. The plans provide
for various methods of exercise. The Company currently allows for cash,
cashier's check or cashless exercise.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
This table shows information regarding stock option exercises during fiscal 1999
and the number and value of options held at 1999 fiscal year end by the Named
Officers.
(1) Value of unexercised in-the-money options is:
. the fair market value of the Company's Common Stock at fiscal 1999 year end
. less the option exercise price per share of in-the-money options
. times the number of shares subject to the options.
(2) Value realized upon exercise is:
. the fair market value of the Company's Common Stock on the date of exercise
. less the option exercise price per share
. times the number of shares exercised.
(3) Former Executive Officer.
1998 Non-Qualified Stock Option Plan
The Board approved and adopted the 1998 Non-Qualified Stock Option Plan
on November 10, 1998, in order to provide employees and agents of the Company
with grants of non-qualified stock options to purchase shares of Common Stock at
fair market value and with a two-year vesting schedule. No options issued under
this plan were exercised in fiscal year 1999. Officers and directors of the
Company are not eligible to participate in this plan.
Employment Contract, Termination of Employment and Change-in-Control
Arrangements.
The Company does not have a Chief Executive Officer or Chief Operating
Officer. The senior management of the Company is Andreas A. Keller, Chairman;
Timothy Keenan, President; Steve Forgarty, Chief Financial Officer and Vice
President; and Paul Richter, General Counsel, Vice President, Secretary, and
Director of Human Resources. Farshad Sajedi is the Chief Executive Officer and
President of Networkland. Badri Devanthan is the President of Technet. The
senior management of SSC is: Mr. Keller, Chairman; Mr. Keenan, President; Mr.
Fogarty, Chief Financial Officer and Vice President; and Mr. Richter, General
Counsel, Secretary and Vice President. Mr. Richter is the senior executive
officer of Expert, JMR and MVS, all dormant operations scheduled for liquidation
in the year 2000.
The Company has an agreement in principal to engage Mr. Timothy Keenan
as President of the Company and SSC in year 2000. Under the proposed terms of
the employment, the annual base salary for Mr. Keenan would be $180,000. The
employment agreement provides for an annual performance bonus at the Board's
sole discretion. If granted by the Board, the performance bonus would be for a
minimum of $50,000 and a maximum of $180,000. Mr. Keenan and the Company are
still negotiating the terms of incentive compensation for the proposed
employment of Mr. Keenan as President of the Company and SSC.
Under his prior consulting agreement, dated September 15, 1999, which
agreement will be superseded by the proposed employment agreement, Mr. Keenan
received in January 2000 a non-statutory stock option to purchase 100,000 and
72,000 shares of the Company's Common Stock at fair market value and received an
annual base compensation of $150,000.
If the Company terminates other than for cause or if a constructive
termination should occur, he shall be entitled to receive as severance an amount
equal to three (3) months of his annual base salary.
On January 28, 2000, the Company entered into an agreement with Andreas
Keller whereby Mr. Keller would receive an annual base salary of $100,1.00, pro
rated for hours actually worked, for services rendered as Chairman of the Board
of the Company, SSC, and Technet, and as Chairman of the Executive Committee of
the Board. The term of the agreement is from January 1, 2000 until Mr. Keller's
successor is appointed and assumes office. The Company considers appointment of
a Chairman of the Board at each annual meeting of the Board. Mr. Keller is
entitled under the agreement to receive a grant of a non-statutory option to
purchase 100,000 shares of the Company's Common Stock at an exercise price of 71
cents per share. Prior to becoming Chairman, Mr. Keller received a non-statutory
option to purchase 25,000 shares of the Company's Common Stock at $0.53 per
share. All of the options granted to Mr. Keller have a two year vesting
schedule.
On August 17, 1999, Networkland entered into an employment agreement
with Farshad Sajedi whereby Mr. Sajedi agreed to remain as Chief Executive
Officer, President and a director of Networkland. Under the employment
agreement, which has an initial term of 3 years and is renewable for one year
period extensions with the consent of Mr. Sajedi and Networkland. Under the
employment agreement, Mr. Sajedi receives an annual base salary of $180,000, an
annual increase in his annual base salary of at least 8% of the increase in the
cost of living index published by the U.S. Department of Commerce for the
preceding year and is entitled to receive a quarterly performance bonus of 12%
of pre-tax earnings of Networkland. The employment agreement also provides for
the lease of a company car for Mr. Sajedi and the annual issuance, if he is
still employed by Networkland, of a qualified stock option to purchase 100,000
shares of Common Stock at fair market value. The employment agreement was a
condition to the acquisition of Networkland by the Company.
On November 15, 1999, the Company entered into a letter employment
agreement whereby Stephen Fogarty agreed to serve as Chief Financial Officer and
Vice President of the Company. Mr. Fogarty's annual base salary under the letter
employment agreement was initially $120,000, which salary was raised to $132,000
on January 1, 2000. Under the letter employment agreement, as amended, Mr.
Fogarty received a qualified stock option to purchase 50,000 shares at an
exercise price of 71 cents per share and another qualified stock option to
purchase 100,000 shares at an exercise price of 71 cents per share. The options
granted to Mr. Fogarty have a two year vesting schedule. The term of the letter
employment agreement is one year. If Mr. Fogarty's employment is terminated
without cause by the Company, then he would be entitled to receive severance
payment equal to nine month's of his then-current base annual salary.
Paul Richter has an employment agreement with the Company whereby he
agreed to serve as General Counsel, Secretary, Vice President of Corporate
Development and Director of Human Resources of the Company; as General Counsel
and Secretary of Technet; as General Counsel, Secretary and Vice President of
Networkland; as President and Liquidating Trustee of Expert and JMR; as General
Counsel, Vice President and Secretary of SSC; and as General Counsel of MVS. Mr.
Richter is also a director of the Company, Technet, Networkland, Expert, JMR and
SSC. Mr. Richter's base salary was $120,000 during fiscal year 1999. Effective
January 1, 2000, his annual base salary was raised to $140,000. The term of Mr.
Richter's employment agreement extends to January 1, 2003. Under the employment
agreement, Mr. Richter is entitled to receive an annual stock option grant,
subject to the approval of the Compensation Committee of the Board, of a
qualified stock option to purchase 25,000 shares of Company Stock at fair market
value at the time of grant. All options granted to Mr. Richter have a two year
vesting schedule. If Mr. Richter's employment is terminated without cause, he
would be entitled to receive his annual base salary for the remainder of the
term of his employment agreement.
The Company entered into a consulting agreement on January 1, 2000 with
Steve Kaston to provide investor relations, public relations and related
services for year 2000 and to do so as an independent contractor. Mr. Kaston
receives an annual fee of $144,000 per year for services rendered under the
consulting agreement. Mr. Kaston is eligible to receive an annual performance
bonus of $30,000, which is granted in the sole discretion of the Board. Under
the consulting agreement, Mr. Kaston is entitled to receive a non-statutory
stock option grant in year 2000 to purchase 100,000 shares of Common Stock at
fair market value on December 23, 1999 and, if the Company elects to pay Mr.
Kaston the aforementioned cash bonus of $30,000, then he will also be granted at
the same time a second non-statutory option to purchase 50,000 shares of Common
Stock at fair market value. The options vest in two years. Mr. Kaston received
an option to purchase 115,000 shares of Common Stock at a purchase price of
$1.25 per share, which option has vested.
Mr. George Cowan resigned as Executive President and a Director of the
Company on June 30, 1999. Under a settlement agreement and mutual release, Mr.
Cowan's base salary and health insurance benefits were paid by the Company until
October 31, 1999.
Mr. Abbas Fathi resigned as Chief Executive Officer and President of
the Company and as a Director of the Company on May 20, 1999. Under a
settlement agreement and mutual release, the Company will pay Mr. Fathi's annual
base salary and health insurance until October 31, 2000; Mr. Fathi also agreed
to cancel his qualified stock option for all but 100,000 shares in return for a
non-qualified stock option to purchase 500,000 shares of Common Stock under a
two year vesting, which vesting dates are October 31, 1999 and October 31, 2000.
The non-qualified stock option has a ten year term. The exercise price is $1.38
per share.
Gana Govind, Chief Executive Officer, President and a director of
Technet, resigned from those positions on October 1, 1999. Under a consulting
agreement entered into by the Company and Mr. Govind in November 1999, Mr.
Govind acts as a management consultant and technical manager for Technet with
his compensation based on his former officer annual base salary of $180,000. Mr.
Badri Devanthan was appointed President of Technet on January 1, 2000.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Membership of the Committee
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is composed of
No member of the Compensation Committee has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity. From time to time, certain officers of the Company and outside
consultants attend meetings of the Compensation Committee. Mr. Richter worked
closely with the Compensation Committee as Director of Human Resources on a
number of compensation issues. Mr. Richter handles non-benefit personnel issues.
Mr. Steve Fogarty handles benefits administration for the Company. No officer of
the Company is present during discussions or deliberations regarding his or her
own compensation.
Responsibilities of the Committee
Acting on behalf of the Board of Directors, the Compensation
Committee's responsibilities, include the following:
. Reviewing the performance of the senior executive officers.
. Determining total compensation package for the senior executive officers of
the Company.
. Reviewing the general Company compensation philosophy for all employees,
including the senior executive officers.
. Approving discretionary bonuses and actual bonus payments for the senior
executive officers.
. Administering the Company's employee stock option and stock purchase plans
(the "Stock Plans"), including determining eligibility, the number and type of
options to be granted and the terms of such grants.
* Resolving any disputes or complaints about compensation from
employees and agents of the Company and its subsidiaries.
Executive Officer Compensation
The Company's executive compensation is based on a cash annual base
salary and incentive compensation based on cash performance bonuses and stock
options or employee stock purchases under the Stock Plans. The intent of the
compensation arrangements for the executives is designed to support the
achievement of Company performance objectives, to ensure that executive
officers' interests are aligned with the success of the Company and to provide
compensation opportunities that will attract, retain and motivate superior
executive personnel. Consistent with these objectives, the Committee believes
that the compensation of executive officers should be a combination of cash and
stock options in order to provide an incentive to remain with the Company and to
increase the performance of the Company.
The Company's compensation program for executive officers is structured
to be competitive within the high technology industry. The Company and the
Director of Human Resources have reviewed compensation arrangements of a group
of comparable companies selected on the basis of similarity in revenue level,
industry segment and competitive employment market to the Company. Most of the
companies included in this group for the 1999 executive compensation analysis
are also included in the Nasdaq Computer and Data Processing Services index used
to compare the Company's stock price performance on the Performance Graph set
forth below.
The Company's executive level positions are matched to comparable
positions in the group of companies surveyed for compensation arrangements and
competitive levels are determined for base salary and target bonus and
stock-based incentives. Factors considered in determining actual incentive bonus
for each executive officer include Company, team and individual performance, and
the scope of each executive officer's responsibilities. The relative weight
given to such factors varies between executive officers, based upon their
respective responsibilities and capacity to affect Company performance.
Grants under the Company's Stock Plans are designed to further
strengthen the linkage between executive compensation and shareholder return, to
provide additional incentives to executive officers tied to growth of stock
price over time and encourage continued employment with the Company. Stock
option grants are based upon industry survey data and individual executive
performance. Stock options generally become exercisable over a two-year period
and are usually granted at a price that is equal to the fair market value of the
Company's stock on the date of grant.
1999 Executive Officer Compensation
During fiscal year 1999, the Committee adjusted Abbas Fathi's (the
"CEO") annual base salary from $150,000 to $180,000. The bonus for the CEO was a
discretionary annual performance bonus which was only awarded by the Board in
its sole discretion. The amount of any such bonus would also be determined by
the Board. This compensation arrangement conforms to compensation arrangements
for prior Company CEO's. Mr. Fathi was also eligible for a performance bonus in
fiscal year 1999 if Socrates achieved profitability in fiscal year 1999. Since
Socrates did not achieve profitability in fiscal year 1999, no bonus was paid to
the CEO from Socrates in fiscal year 1999.
Mr. Fathi resigned as an officer and director of the Company and
Socrates on May 20, 1999. The Company has not appointed a new CEO as of the date
of this Proxy Statement. The senior executive management and duties of chief
executive officer of the Company has been handled by Andreas Keller, Chairman,
and Timothy Keenan, President.
Mr. Keenan was retained under a September 1999 consulting agreement to
fulfill certain services customarily performed by the chief executive officer or
president of the Company, especially those services concerning promotion of the
Company to the investment community and the development and implementation of
strategic business plans for the Company and its subsidiaries. His annual rate
of compensation was $150,000 under the consulting agreement. Mr. Keenan also
received a non-statutory stock option grant to purchase 100,000 shares of Common
Stock at $0.53 per share and a non-qualified Stock Option to purchase 72,000
shares of Common Stock at $1.25 per share. The latter option has fully vested
and the first option has a two year resting.
Mr. Keenan's current proposed employment agreement is described above.
During fiscal 1999, the Compensation Committee reviewed industry survey
data and current executive responsibilities. The Compensation Committee felt
that executive salaries in general needed to receive merit increases to reflect
the current competitive market, their individual performance as well as their
multiple capacities. Stock options were also reviewed based on survey data.
1999 CEO Compensation
The committee also reviewed Abbas Fathi's compensation and terms of
employment contract which stated that his base salary is subject to a normal
review for potential cost of living or performance adjustments. After reviewing
both the market data and the terms of previous CEO's employment contract, the
Committee agreed to an increase in Mr. Fathi's base pay from $150,000 to
$180,000. The Company has not appointed a new CEO since Mr. Fathi's resignation.
The executive management of the Company and the duties of the CEO have been
handled by one or more executives of the Company since May 20, 1999.
Qualifying Compensation
The Committee has considered the potential impact of Section 162(m) of
the Internal Revenue Code ("Section 162(m)") adopted under the Federal Revenue
Reconciliation Act of 1993. Section 162(m) disallows a tax deduction for any
publicly-held corporation for certain executive officers' compensation exceeding
$1 million per person in any taxable year unless it is "performance based"
within the meaning of Section 162(m). The cash compensation plus stock vesting
of each of the Company's executive officers was below the $1 million threshold
and options granted under the Company's option plans were designed to meet the
requirement of being performance-based under the provisions of Section 162(m).
Therefore, Section 162(m) did not reduce the tax deduction available to the
Company for fiscal 1997 or prior years. The Company's policy is, to the extent
reasonable, to qualify its executive officers' compensation for deductibility
under the applicable tax laws.
Respectfully submitted,
/s/ Richard Prins
- -------------------------------------------------------
Richard Prins, Chairman, Member since November 15, 1999
Mariellen Lowry, Member since January 4, 2000
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of the Company's
Common Stock with the performance of Russell 2000 Index (the "Index") and an
industry index over the periods starting from, respectively, December 31, 1996
through December 31, 1998. The graph assumes that $100 was invested on,
respectively, December 31, 1996 in the Company's Common Stock, the Index and the
industry index, and that all dividends were reinvested.
The Company's industry index is The Nasdaq Computer & Data Processing
Services Index, which is composed of all Nasdaq companies with a SIC Code of
#3827. A list of the companies included in this index will be furnished by the
Company to any shareholder upon written request of the Corporate Secretary.
Measurement
Period
(Fiscal Year Nasdaq Stock- U.S. Russell
Covered) Market Company 2000 Index
- --------------------------------------------------------------------------------
08/15/95 (1) $100 - -
09/30/95 $214 $100 $100
09/30/96 $279 $186 $191
09/30/97 $211 $256 $254
09/30/98 $ 50
12/31/98 $ 96
12/31/99 $ 63
- -------
(1) First trading day of the Common Stock.
<PAGE>
CERTAIN TRANSACTIONS
The Company's Common Stock, $0.01 par value per share, (Stock) is
listed on The Nasdaq Stock Market National Market System (NMS). The Nasdaq Stock
Market requires companies with capital stock listed on the NMS to maintain at
least $4 million in net tangible assets. The Registrant's net tangible assets
fell below $4 million in the third and fourth fiscal quarters of fiscal year
1999. The Registrant has sought to remedy this deficiency by converting insider
loans to the Registrant to shares of Stock and by a December 1999 private
placement of a minimum of 333,334 restricted shares of Stock to a maximum of
1,666,667 restricted shares of Stock to ten or fewer Accredited Investors (as
defined in Rule 501(a) of Regulation D, promulgated under the Securities Act of
1933,as amended, ("Act")) under Section 4(2) and Section 4(6) of the Act and at
a purchase price of $1.50 per share. As a result of the private placement,
produced approximately $800,000 in aggregate offering proceeds to the Registrant
as of January 15, 2000, the closing date of the private placement, and the
conversion of the loans, the Company believes that its net tangible assets
exceeded $4.3 million as of January 7, 2000.
The Company entered into an agreement with Edward Ratkovich, the former
Chairman of the Board, Chief Executive Officer and President of the Registrant,
to convert his two loans to the Company to "restricted" (as defined in Rule 144
as promulgated under the Act) shares of the Company's Common Stock, $0.01 par
value, (the "Shares") at a conversion rate of Ninety Six (96) cents per Share,
which rate resulted in the issuance of 1,291,666 restricted Shares to Mr.
Ratkovich. The Registrant and Mr. Ratkovich entered into a mutual release in
connection with the loan conversion. The two loans by Mr. Ratkovich totaled
$1,240,000 in unpaid principal and accrued interest thereon as of December 15,
1999. The conversion rate was based on the average closing bid price of the
Shares for the thirty (30) consecutive trading days immediately preceding
December 15, 1999. The agreement with Mr. Ratkovich was consummated on December
31, 1999 and was approved by the disinterested directors of the Registrant's
Board of Directors.
The agreement with Mr. Ratkovich contains a mutual release between the
Company and Mr. Ratkovich. Under the release, each party agreed to not pursue
any claim that the party may have or had against the other party on and prior to
December 15, 1999.
Mr. Ratkovich resigned as Chief Executive Officer of the Registrant on
October 4, 1998 and resigned as Chairman and a director on November 15, 1999.
The Company entered into an agreement with Edward Paul Roberts, a
former director of the Company, to convert his $300,000 loan, which has accrued
interest of $7,875.00 as of December 31, 1999, to the Company for 232,358
"restricted" (as defined in Rule 144 under the Act) Shares. Mr. Roberts loaned
the Company $300,000 in August 1999 to provide working capital for the Company.
The conversion rate of the loan was $1.32 per Share. The conversion rate was
calculated on the basis of the thirty (30) consecutive trading days immediately
preceding December 31, 1999. The agreement was consummated and effective as of
December 31, 1999.
Mr. Roberts resigned as a director of the Registrant on November 15,
1999.
The Company has agreed to use its good faith efforts register Mr.
Roberts' 232,358 Shares and Mr. Ratkovich's 1,291,666 Shares under the Act with
the first non-Form S-8 registration statement filed in 2000. The Registrant has
also agreed to use its best efforts to register the Shares issued under the
private placement within 120 days after the closing of the private placement,
which occurred on January 15, 2000.
In December 1999, Mr. Edward Paul Roberts also agreed to issue 300,000
of his unrestricted shares of Common Stock to Pinnacle Systems and Development
Co. (PSDC) as a retainer for PSDC to provide financial and investment banking
advisory services to the Company and to assist the Company as a placement agent
in raising working capital through private placements of Common Stock to
accredited investors (as defined in Rule 501(a) of Regulation D, promulgated
under the Securities Act of 1933, as amended). The Company entered into an
agreement to issue 300,000 registered, unrestricted shares to Mr. Roberts in
year 2000 to replace the 300,000 shares of Common Stock issued by Mr. Roberts to
PSDC on behalf of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Except as noted below, the Company believes that all Forms 3, 4 and 5
required to be filed by its directors, officers and greater than 10%
shareholders were filed on time during fiscal year 1999.
<PAGE>
DEADLINE FOR FUTURE
PROPOSALS OF SHAREHOLDERS
Proposals that shareholders desire to have included in the Company's proxy
materials for the 2000 Annual Meeting must be received by the Secretary of the
Company at its principal office (8500 Leesburg Pike, Suite 406, Vienna, Virginia
22182, Attention Corporate Secretary) no later than September 4, 2000 in order
to be considered for possible inclusion in such proxy materials.
ADDITIONAL INFORMATION
Annual Report
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1999, including the consolidated financial statements and related
notes thereto, together with the report of the independent auditors and other
information with respect to the Company, accompanies this Proxy Statement.
Annual Meeting Summary
The Company will provide a summary of the activities at the Annual
Meeting to Shareholders, including the final vote on all proposals. The summary
will be available on the Company website at approximately one week after the
meeting. Shareholders may also obtain a copy by calling (703) 288-6500.
OTHER MATTERS
The Company is not aware of any other business to be presented at the
Annual Meeting. If matters other than those described herein should properly
arise at the meeting, the proxies will vote on such matters in accordance with
their best judgment.
<PAGE>
[MAP TO LOCATION OF SHAREHOLDERS' ANNUAL MEETING APPEARS HERE
ALONG WITH WRITTEN DIRECTIONS]
[GRAPHIC OMITTED]
<PAGE>
Front of card
Socrates Technologies Corporation
8500 Leesburg Pike, Suite 406
Vienna, Virginia 22182
This Proxy is Solicited on Behalf of the Board of Directors. The
undersigned hereby constitutes and appoints Paul W. Richter and Stephen Fogarty,
and each of them, his true and lawful agents and proxies with full power of
substitution in each, to represent the undersigned at the Annual Meeting of
Shareholders of Socrates Technologies Corporation to be held at the Sheraton
Premiere Hotel, Lobby Level, 8661 Leesburg Pike, Vienna, Virginia 22182, on
Friday, April 21, 2000, at 11:00 a.m., local time, and at any adjournments
thereof, and to vote all shares of Common Stock that the undersigned would be
entitled to vote if then and there personally present on the matters set forth
on the reverse site.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, FOR RATIFICATION OF
INDEPENDENT AUDITORS, AGAINST THE SHAREHOLDER PROPOSAL AND AS THE PROXY HOLDER
MAY DETERMINE IN HIS DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY BROUGHT
BEFORE THE MEETING.
PLEASE VOTE BY TELEPHONE OR THE INTEREST OR MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE
(Continued on reverse side)
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. Call (703) 288-6522 and follow the oral instructions,
or
2. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.
It is not necessary to mail your proxy card, if you vote by telephone.
PLEASE VOTE
Back of card
The Board of Directors recommends a vote FOR items 1 and 2.
1. Election of Directors--Nominees
Andreas A. Keller
Richard K. Prins
Mariellen Lowry
Timothy Keenan
Farshad Sajedi
Paul W. Richter
Check One:
(a) VOTE FOR ALL [__]
(b) WITHHOLD FOR THE FOLLOWING DIRECTORS [___]: Print name
of directors for whom you are withholding your vote:
-------------------------------------------------------------
(c) WITHHOLD FOR ALL [__]
1. RATIFICATION of Grant Thornton, LLP as independent auditors.
Check One:
Vote For [___] Vote Against [___] Abstain [___]
IN THEIR DISCRETION, the proxy holders are authorized to vote upon such
other business as may properly come before the Annual Meeting or any
adjournments thereof.
Dated:__________________, 2000
[_] I plan to attend Annual Meeting (Return Ticket Request Form to the Company
at: Paul Richter - 1999 Annual Meeting, P.O. Box 2493, Merrifield, Virginia
22116).
Name of Shareholder(s): ________________________________________________________
Signature of Shareholder(s):____________________________________________________
Signature of Shareholder(s):____________________________________________________
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both 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 other authorized officer. If a
partnership please sign in partnership name by authorized person.
Your telephone authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card
VOTE BY PHONE: Call (703) 288-6528 between 9:00 a.m. and 5:00 p.m., local
Washington, D.C. time, You will be asked to enter the 9-digit Control Number
located in the lower right of this form
TICKET REQUEST FORM
If you plan on personally attending the Annual Shareholders Annual Meeting on
April 22, 2000, at 11:00 a.m., local Washington, D.C. time, you will need a
ticket. Please provide the Company with the following information.
1. Please print all information
NAME: _______________________________________________________________________
STREET: __________________________________________ APT ________________________
CITY: ________________________________ STATE __________ ZIP __________________
SOCIAL SECURITY NUMBER__________________________________________________________
TELEPHONE NUMBER _______________________________________________________________
2. If you hold your stock in street name (in a broker account) please obtain a
legal proxy from the broker and provide a copy attached to this form.
3. Mail this form and the copy of the legal proxy (if required) to:
Paul Richter - 1999 Annual Meeting
P.O. Box 2493
Merrifield, Virginia 22116
(703) 288-6500
You may also fax the information to (703) 288-6530
If you plan on attending, please act quickly as space is limited and we will
return the ticket to you by first class mail.
PLEASE VOTE
VIA BY TELEPHONE OR
MAIL YOUR COMPLETED SIGN PROXY CARD
SEE YOUR PROXY CARD FOR INSTRUCTIONS
