SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ____]
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Profile Technologies, Inc.
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(Name of Registrant as Specified in its Charter)
Not Applicable
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(Name of Person(s) Filing Proxy Statement if other than 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:
Not applicable
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2. Aggregate number of securities to which transaction applies:
Not applicable
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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):
Not applicable
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4. Proposed maximum aggregate value of transaction:
Not applicable
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5. Total fee paid:
Not applicable
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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: Not applicable
2. Form, Schedule or Registration Statement No.: Not applicable
3. Filing Party: Not applicable
4. Date Filed: Not applicable
Profile Technologies, Inc.
2 Park Avenue, Suite 201
Manhasset, New York 11030
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
The Annual Meeting of Shareholders of Profile Technologies, Inc. (the
"Company") will be held at 9:00 a.m, local time, on Monday, December 9, 2002, at
the corporate offices of Hitchiner Manufacturing Company, Inc., 117 Old Wilton
Road, Milford, New Hampshire 03055-3134, for the following purposes:
1. To elect a Board of Directors consisting of five persons to serve a
term of one year (until the next Annual Meeting of the Shareholders)
or until their respective successors are elected and have been
qualified;
2. To increase the Company's authorized common stock from 10,000,000
shares to 15,000,000 shares; and
3. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
The Board of Directors has fixed October 24, 2002 as the record date for
determining the shareholders of the Company entitled to notice of, and to vote
at, the Annual Meeting and any adjournment of the Annual Meeting. The transfer
books of the Company will not be closed, but only shareholders of the Company of
record on such date will be entitled to notice of, and to vote at, the Annual
Meeting or adjournment of the Annual Meeting.
Shareholders are cordially invited to attend the meeting in person. Whether
or not you plan to attend the meeting in person, please complete, sign and date
the accompanying proxy as promptly as possible in the enclosed envelope. No
additional postage is required if the envelope is mailed in the United States.
The giving of a proxy will not affect your right to vote in person if you attend
the meeting and will assure that your shares are voted if you are unable to
attend.
By Order of the Board of Directors
/s/ Henry E. Gemino
-------------------
Henry E. Gemino
Chief Executive Officer
October 28, 2002
PROFILE TECHNOLOGIES, INC.
2 Park Avenue, Suite 201
Manhasset, New York 11030
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
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INTRODUCTION
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of Profile Technologies, Inc., a Delaware corporation (the "Company"), to be
voted at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at
the corporate offices of Hitchiner Manufacturing Company, Inc., 117 Old Wilton
Road, Milford, New Hampshire 03055-3134 at 9:00 a.m. local time on Monday,
December 9, 2002, and at any and all adjournments of the Annual Meeting. The
enclosed materials will be mailed to Shareholders on or about October 29, 2002.
The Company anticipates that the Company's shareholders will consider and
vote upon the following matters at the Annual Meeting:
1. To elect a Board of Directors consisting of five persons to serve a
term of one year (until the next Annual Meeting of the Shareholders)
or until their respective successors are elected and have been
qualified;
2. To increase the Company's authorized common stock from 10,000,000
shares to 15,000,000 shares; and
3. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment of the Annual Meeting.
VOTING OF PROXIES
Shares represented by proxies properly signed and returned, unless
subsequently revoked, will be voted at the Annual Meeting in accordance with the
instructions marked on the proxy. If a proxy is signed and returned without
indicating any voting instructions, the shares represented by the proxy will be
voted FOR approval of the proposals stated in this proxy statement, and in the
discretion of the holders of the proxies on other matters that may properly come
before the Annual Meeting.
If you have executed and delivered a proxy, you may revoke such proxy at
any time before it is voted by attending the Annual Meeting and voting in
person, by giving written notice of revocation of the proxy, or by submitting a
signed proxy bearing a later date. In order for the notice of revocation or
later proxy to revoke the prior proxy, the Company's Transfer Agent must receive
such notice or later proxy before the vote of shareholders at the Annual
Meeting. Unless you vote at the meeting or take other action, your attendance at
the Annual Meeting will not revoke your proxy.
2
VOTING PROCEDURES
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of the common stock of the Company is necessary to
constitute a quorum at the meeting. Votes cast by proxy or in person at the
Annual Meeting will be counted by a person appointed by the Company to act as
the election inspector for the Annual Meeting. The election inspector will treat
shares of the Company's common stock represented by proxies that reflect
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Under Delaware law and the Company's
Bylaws, directors are elected by a plurality of the votes cast in the election
at a meeting at which quorum is present. Other matters are approved if
affirmative votes cast by the holders of the shares represented at the meeting
at which quorum is present exceed votes opposing the election, unless Delaware
law or the Company's Certificate of Incorporation or Bylaws require a greater
number of affirmative votes or voting by classes. Therefore, abstentions and
broker non-votes have no effect and will be disregarded.
All of the officers and directors and their affiliates (who own in the
aggregate approximately 1,016,934 of the issued and outstanding shares of the
Company's common stock) have informed the Company that they intend to vote in
favor of management's nominees for directors as set forth in this proxy
statement.
VOTING SECURITIES
The Board of Directors has fixed the close of business on October 24, 2002
as the record date (the "Record Date") for determining the holders of the
Company's common stock entitled to receive notice of, and to vote at, the Annual
Meeting. At the close of business on the Record Date, there were 5,457,661
issued and outstanding shares of the Company's common stock, $.001 par value,
entitled to vote at the Annual Meeting, held by approximately 1,100 registered
holders. As of the Record Date, the only outstanding voting securities of the
Company were shares of the Company's common stock. As a holder of the
outstanding shares of the Company's common stock as of the Record Date, you are
entitled to one vote for each share held on each matter properly submitted at
the Annual Meeting.
PROPOSAL 1
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ELECTION OF DIRECTORS
The current Board of Directors of the Company consists of Henry E. Gemino,
John Tsungfen Kuo, Murphy Evans, William A. Krivsky and Charles Christenson. All
of these persons have agreed to be renominated to stand for election as a
director at the Annual Meeting. If one or more of the nominees is unable to
serve, or for good cause will not serve at the time of the Annual Meeting, the
shares represented by the proxies solicited by the Board of Directors will be
voted for the other nominees and for any substitute nominee(s) designated by the
Board of Directors.
3
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
The directors nominated for election at the Annual Meeting are as follows:
DIRECTOR
NAME AND AGE AGE PRINCIPAL OCCUPATION SINCE
------------ --- -------------------- -----
Henry E. Gemino 51 Chief Executive Officer, Chief Financial Officer, 1988
Profile Technologies, Inc.
Murphy Evans 70 President, Profile Technologies, Inc. 1995
John Tsungfen Kuo 80 Professor Emeritus, Columbia University 1995
Charles Christenson 72 Professor Emeritus 1999
Harvard Graduate School of Business Administration
William A. Krivsky 75 Partner in Kellogg, Krivsky & Buttler 2000
Henry E. Gemino. Since 1988, Mr. Gemino has been co-founder and served as a
director and the Chief Financial Officer of the Company. From 1988 through
October 2000, he served as Executive Vice President and Chief Operating Officer
of the Company. Since October, 2000, he has served as Chief Executive Officer of
the Company.
Murphy Evans. Since 1995, Mr. Evans has served as President and a director
of the Company. Mr. Evans also serves as the President of L & S Holding Co., a
family-owned holding company that is engaged in several different businesses.
Mr. Evans received an AB degree in history from Princeton University in 1954 and
an MBA degree from the Harvard Graduate School of Business Administration in
1958.
John Tsungfen Kuo, Ph.D., Sc.D. Dr. Kuo has been a director of and
consultant to the Company since 1995. Dr. Kuo is currently the Ewing and Worzel
professor emeritus at Columbia University and is an expert in acoustic, elastic,
hydrodynamics, and electromagnetic wave propagation. Born in China, Dr. Kuo
immigrated to the United States in 1949 and became a naturalized United States
citizen in 1967. He received a BS degree in Geology, Physics and Mathematics
from the University of Redlands in 1952 and an honorary Sc.D from the University
of Redlands in 1978. He received an MS degree in Geophysics from the California
Institute of Technology in 1954 and a Ph.D. in Geophysics from Stanford
University in 1958. Among his teaching positions, he was professor from
1967-1983, Vinton professor from 1983-1985 and Ewing and Worzel professor from
1984-1992, all at Columbia University. He has been involved in numerous research
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projects involving various aspects of Geophysics for almost 40 years. He was the
recipient of the Alexander Vin Humboldt award for Distinguished U.S. senior
scientists from the Federal Republic of Germany in 1986. He was a distinguished
senior scholar at the University of Cambridge, England from 1970-1971; a
visiting professor at the University of Texas in Austin from 1978-1979; adjunct
professor at Cornell University in 1992; and a visiting professor at the
Technical University of Clausthal in the Federal Republic of Germany in
1986-1987. He was also director of the Lamont-Doherty Earth Observatory's
underground Geophysical observatory in Ogdensburg, New Jersey from 1967-1977. He
is also associate life editor of Geophysics Review (a publication of the
American Geophysics Union) and a member of numerous other professional and
scientific organizations.
Charles Christenson. Professor Christenson has been a director of the
Company since 1999. He is the Royal Little Professor of Business Administration,
Emeritus, at the Graduate School of Business Administration at Harvard
University and served as faculty chairman of both the MBA and the Doctoral
Programs. He received his B.Sc. degree in Industrial and Labor Relations from
Cornell University in 1952, his MBA degree with high distinction from Harvard
University in 1954 and his DBA degree in Managerial Economics from Harvard
University in 1961. While on leave of absence from the Harvard University
faculty, he also served as Deputy to the Assistant Secretary of the Air Force
(Financial Management) during the Kennedy Administration. He is a member of the
American Association for the Advancement of Science. Professor Christenson has
also authored or co-authored a number of books and articles on quantitative
methods, management control and philosophy of science.
William A. Krivsky. Mr. Krivsky holds a Doctorate of Science from MIT and
was previously President of Velcro Industries N.V., Executive Vice President of
Bird Corporation, President of Compo Industries and Group Vice President of
Certaineed Corporation (now part of Paris-based St. Gobain Industries). He
currently serves as President of Kellogg, Krivsky & Buttler Inc., a mergers and
acquisition consulting firm, as President of Keyson Enterprises Inc., and as
President of the Keyson Co. Inc. He is also director of Cognex Corporation and
Hitchiner Manufacturing Company, Inc.
PROPOSAL 2
----------
INCREASE AUTHORIZED COMMON STOCK
By resolutions adopted at a meeting of the Board of Directors held on
October 9, 2002, the Board of Directors has recommended to the shareholders that
the Company's Certificate of Incorporation (the "Certificate") be amended to
increase the number of the Company's authorized common shares from 10,000,000 to
15,000,000 shares. A copy of the amendment to the Certificate is attached to
this proxy statement as Exhibit A.
The Board of Directors believes that increasing the number of authorized
shares of the Company's common stock is essential to ensure that the Company
will continue to have an adequate number of shares of common stock available for
future issuance. As of October 24, 2002, 5,457,661 shares of the Company's
common stock were issued and outstanding. In addition, the Company has reserved
the following number of shares of the Company's common stock to be available for
future issuance:
5
(a) 2,197,000 shares of the Company's common stock underlying options
and warrants previously issued, but unexercised, under the Company's 1999
Stock Plan and certain compensatory and stock purchase warrants; and
(b) 235,000 shares reserved for future issuance under the Company's
1999 Stock Plan.
As a result, the Company would have only 2,110,339 shares of common stock
available for future use without increasing the number of authorized shares.
Although the Board of Directors currently has no plans and has not entered
into any arrangements to issue any additional shares of the Company's common
stock, the Board of Directors believes it is in the best interest of the Company
to provide the Company with the flexibility to issue additional shares of common
stock for proper corporate purposes. If the shareholders approve the increase in
the number of authorized shares of the Company's common stock, the Company would
be able to issue stock for any valid corporate purposes that the Board of
Directors from time to time deems necessary or advisable. The Board of Directors
would be authorized to issue the additional shares of the Company's common
stock, without further shareholder approval, for various purposes, including
without limitation, to raise capital, to provide equity incentives to employees,
directors or officers, to establish strategic relationships with other
companies, to expand the Company's business or to acquire other products or
services, and for any other purposes the Board of Directors determines to be in
the best interest of the Company. The availability of additional shares of the
Company's common stock for issuance will provide management with greater
flexibility in taking any of these actions without the expense and delay of
obtaining shareholder approval other than as required by law.
The additional shares of the Company's common stock to be authorized by the
adoption of the amendment to the Certificate would have rights identical to the
currently issued and outstanding shares of the Company's common stock. The
adoption of the proposed amendment, and the authorization and future issuance of
the Company's common stock, would not affect the rights of the holders of
currently issued and outstanding shares of the Company's common stock, except
for effects incidental to increasing the number of shares of the Company's
common stock issued and outstanding, such as dilution of the earnings per share
and voting rights of existing stockholders. If the amendment is adopted, it will
become effective upon the filing of the amendment to the Certificate with the
Secretary of State for the State of Delaware.
While the Board will authorize the issuance of additional shares of the
Company's common stock based on its judgment as to the Company's and the
shareholders' best interests, future issuances could have a dilutive effect on
existing shareholders. Holders of the Company's common stock are not now, and
will not be, entitled to preemptive rights to purchase shares of any authorized
capital stock if additional shares are issued later. The proposed amendment is
not intended to have an anti-takeover effect. However, authorized but unissued
shares could be used in defending the Company from unsolicited attempts to
acquire control of the Company through the placement of additional shares with
selected shareholders or adoption of a shareholder rights plan. The existence of
a significant number of authorized but unissued shares could discourage a
potential purchaser from making an unsolicited offer to purchase control of the
Company.
6
The Board of Directors believes it is in the Company's best interest for
the shareholders to adopt this amendment in order to provide the Company with as
much flexibility as possible to issue additional shares for proper corporate
purposes as outlined above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK FROM 10,000,000 TO
15,000,000.
DIRECTOR COMPENSATION
The Company pays to all non-employee directors a director's fee in the
amount of $1,000 per month. The Company pays to the Chairman of the Board
compensation in the amount of $2,000 per month. The Company does not pay
additional compensation to any executive officer or employee who also serve as a
director. The members of the Board of Directors are entitled to participate in,
and the Company has issued options to members of the Board of Directors under,
the Company's 1999 Stock Plan. The Company also reimburses directors for any
actual expenses incurred to attend meetings of the Board of Directors.
Due to the Company's critical need for cash, the Company has deferred all
payments owed to the directors for directors' fees. As of June 30, 2002, the
Company owed all of the directors $27,000 in deferred fees, and such amounts
will continue to be deferred until the Company has sufficient resources to pay
the amounts owed, or the directors elect to exchange such amounts as described
below. On March 18, 2002, the Board of Directors approved a right under which
any director could exchange each dollar of his deferred director's fee for an
option to purchase two shares of the Company's common stock, which options may
be exercised over a five-year term, at an exercise price of $1.00 per share. As
of October 18, 2002, no conversions have occurred.
BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended June 30, 2002, the Board of Directors held a
total of 7 meetings. During the fiscal year ended June 30, 2002, all members of
the Board of Directors attended at least 75% of all meetings of the Board of
Directors.
The Board of Directors maintains an Audit Committee and a Compensation
Committee, which are described below. The Board of Directors does not have a
Nominating Committee. The directors serving on each of the Audit Committee and
the Compensation Committee attended all meetings of each such committee.
The Audit Committee is composed of William Krivsky and Charles Christenson.
The principal functions of the Audit Committee are to monitor the Company's
financial reporting process and internal control system, to review and appraise
the audit efforts of the Company's independent accountants and the internal
audit function, to provide a means of communication among the independent
accountants, financial and senior management, the internal audit function, and
the Board of Directors, and to communicate with the Company's independent
7
accountants outside of the presence of management, when necessary. The Audit
Committee is also responsible for all matters set forth in its written charter,
a copy of which was attached to the Company's Proxy Statement for the 2001
Annual Meeting of the Shareholders. The Audit Committee held one meeting during
the fiscal year ended June 30, 2002. The Audit Committee also reviewed the
Company's quarterly financial reports before their publication but did not find
any issues in these quarterly financial reports that required formal meetings.
The Compensation Committee is composed of Murphy Evans and William Krivsky.
G. L. Scott, the former Chairman of the Board, served on the Compensation
Committee until his unexpectant and tragic death from a stroke on September 29,
2002. The principle functions of the Compensation Committee are to establish
overall compensation policies for the Company and to review the recommendations
submitted by the Company's management. The Compensation Committee held one
meeting during the year ended June 30, 2002.
There are no family relationships among the directors. There are no
arrangements or understandings between any director and any other person,
pursuant to which any director was elected.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of two directors
and operates under a written charter adopted by the Board of Directors, a copy
of which is attached to the Company's Proxy Statement for the 2001 Annual
Meeting of the Shareholders. The Board of Directors has evaluated the
independence of the two directors serving on the Audit Committee based on the
definition of an "independent director" as provided under the listing standards
of the National Association of Securities Dealers (the "NASD"). All members of
the Audit Committee are independent directors as defined by the listing
standards of the NASD.
The independent auditors are responsible for performing an independent
audit of the Company's financial statements in accordance with generally
accepted auditing standards and issuing a report thereon. One of the Audit
Committee's primary responsibilities is to monitor and oversee this process. The
Audit Committee also recommends to the Board of Directors the selection of the
Company's independent auditors.
In discharging its responsibility, the Audit Committee has reviewed and
discussed the Company's financial statements with management. The Audit
Committee has discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Company's independent auditors also provided to the Audit
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and the Audit Committee discussed with the
independent auditors their independence.
8
Based on the foregoing, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2002 for filing
with the Securities and Exchange Commission.
Audit Committee
William Krivsky
Charles Christenson
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 27, 2002
by (i) all persons who own of record, or are known to the Company to
beneficially own, more than 5% of the issued and outstanding shares of the
Company's common stock, and (ii) by each director, each director nominee, and
each of the executive officers named in the tables under "Executive
Compensation," and by all executive officers and directors as a group:
Amount and Nature of Percent of Class
Positions and Beneficial Common Stock Based on Beneficial
Name and Address Offices Held Ownership(1) Ownership((1))
---------------- ------------ ------------ --------------
Henry Gemino Chief Executive 878,766(2) 16.09%
5 Strickland Place Officer, Chief
Manhasset, L.I., NY 11030 Financial Officer,
Director
Murphy Evans President, 562,688(3) 10.3%
204 Railroad Street Director
P.O. Box 688
Laurinburg, NC 28532
John Tsungfen Kuo Director 360,000(4) 6.59%
11 Hoffman Lane
Blauvelt, NY 10913
Charles Christenson Director 80,666(5) 1.48%
1 Chauncy Lane
Cambridge, MA 02238
William A. Krivsky Director 15,000(6) *
117 Perimeter Road
Nashua, NH 06063
Gale D. Burnett Shareholder 691,000 12.65%
9191 Northwood Rd.
Lynden, WA 98264
Joseph Galbraith Vice President, Field 35,000(7) *
Operations
Phillip L. Jones Chief Operating 82,572(8) 1.51%
203 Beaver Road Officer
Sewickley, PA 15143
Frank Goodhart, Jr. Shareholder 550,000 10.07%
1069 Old Forge Crossing
Lancaster, PA 17601
Estate of G.L. Scott Shareholder 444,467(9) 8.14%
P.O. Box 986
Rogue River, OR 97537
All Directors and Officers as a 1,433,900(10) 26.25%
Group (7 persons)
* less than one percent
--------------------
9
(1) Calculated pursuant to rule 13d-3(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Unless otherwise stated below, each
such person has sole voting and investment power with respect to all such
shares. Under Rule 13d-3(d) of the Exchange Act, shares not outstanding
which are subject to options, warrants, rights or conversion privileges
exercisable within 60 days are deemed outstanding for the purpose of
calculating the number and percentage owned by such person, but are not
deemed outstanding for the purpose of calculating the percentage owned by
each other person listed.
(2) Includes warrants to purchase 403,333 shares of the Company's common stock.
(3) Includes 30,000 shares held by the wife of Mr. Evans. Also includes 45,000
shares held in the name of Falco Enterprises, Inc., a company controlled by
Mr. Evans. Also includes 15,500 held by L&S Holding Co., a company
controlled by Mr. Evans. Also includes 5,000 shares held in a trust to
which Mr. Evans is trustee with sole voting and investment power over the
shares. Also includes warrants to purchase 258,353 shares of the Company's
common stock.
(4) Includes warrants to purchase 330,000 shares of the Company's common stock.
(5) Includes options to purchase 35,000 shares of the Company's common stock
and warrants to purchase 20,833 shares of the Company's common stock.
(6) Consists entirely of options to purchase the Company's common stock.
(7) Includes options to purchase 15,000 shares of the Company's common stock
and warrants to purchase 20,000 shares of the Company's common stock.
(8) Consists of options to purchase 50,000, and warrants to purchase 14,286,
shares of the Company's common stock.
(9) Includes 19,800 shares issued in the name of Mr. Scott's wife. Also
includes warrants to purchase 145,000 shares of the Company's common stock
issued to Mr. Scott prior to his death.
(10) Assumes exercise of all warrants and options owned by all officers and
directors.
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EXECUTIVE OFFICERS OF THE COMPANY
Certain information regarding the executive officers of the Company
follows:
Name Age Position Held With Company
---- --- --------------------------
Henry Gemino 50 Chief Executive Officer,
Chief Financial Officer
Murphy Evans 70 President
Philip L. Jones 60 Executive Vice President and
Chief Operating Officer
Joseph Galbraith 53 Vice President, Field Operations
Philip L. Jones has been serving as Executive Vice President and Chief
Operating Officer since September, 2001. For one year previous to his employment
by the Company, he provided energy consulting services to certain utility
companies. Prior to that, Mr. Jones served in various capacities with
Consolidated Natural Gas Company, a large integrated energy company, for more
than 30 years, including six years as Vice President for Marketing with CNG's
exploration and production subsidiary, CNG Producing Company. He received his
law degree from West Virginia College of Law in 1967 and his B.A. from Princeton
University in 1964. Mr. Jones was a Captain in the U.S. Army, 142nd JAG
Detachment.
Since October, 1997, Mr. Galbraith has been serving as the Vice President,
Field Operations for the Company. Mr. Galbraith has a BS degree in Metallurgical
Engineering and a MS degree in Metallurgy from the New Mexico Institute of
Mining and Technology.
There are no family relationships among the executive officers. There are
no arrangements or understandings between any officers and any other person,
pursuant to which any officer was selected.
EXECUTIVE COMPENSATION
Employment Contracts.
---------------------
None of the executive officers of the Company are employed pursuant to
employment contracts. However, the Company has entered into confidentiality
agreements with each executive officer concerning the confidentiality of
valuable and proprietary information in connection with the Company's
technology.
Cash Compensation.
------------------
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and the highest paid executive officers of
the Company as of the end of the Company's last fiscal year whose salary and
bonus for such period in all capacities in which the executive officer served
exceeded $100,000.
11
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Bonus Annual Restricted Options/ All Other
Name and Principal ----- Compen- Stock SARs LTIP Compen-
position Year Salary($) ($) sation($) Award(s) $ (#) Payouts ($) sation($)
-------- ---- --------- --- --------- ---------- --- ----------- ---------
Henry E. Gemino, 2002 $120,000(2),(3) 0 0 0 0 0 0
Chief Executive Officer 2001 $120,000 0 0 0 0 0 0
and Chief Financial 2000 $120,000 0 0 0 0 0 0
Officer (1)
Joseph Galbraith, 2002 $123,200 0 0 0 15,000 0 0
Vice President, Field 2001 $117,600 0 0 0 0 0 0
Operations 2000 $112,000 0 0 0 0 0 0
John Tsungfen Kuo 2002 $85,000(2),(5) 0 0 0 20,000 0 0
Former Chief Technology 2001 $120,000 0 0 0 0 0 0
Officer(4) 2000 $120,000 0 0 0 0 0 0
(1) On October 9, 2000, Mr. Gemino became Chief Executive Officer. Prior to
that date, he served as Executive Vice President and Chief Operating
Officer. Throughout the most recent fiscal year, Mr. Gemino served as Chief
Financial Officer.
(2) Due to the Company's critical need for cash, the Company has deferred all
payments owed to certain officers of the Company. Such amounts will
continue to be deferred until the Company has sufficient resources to pay
the amounts owed, or if such officers elect to exchange such amounts as
described below. On March 18, 2002, the Board of Directors approved a right
under which any officer (or applicable employee or director) could exchange
each dollar of his or her deferred salary for an option to purchase two
shares of the Company's common stock, which options may be exercised over a
five-year term, at an exercise price of $1.00 per share. As of October 18,
2002, no conversions have occurred.
(3) As of June 30, 2002, the Company has deferred payment of $11,500 of the
$120,000 base salary owed to Henry E. Gemino.
(4) Dr. John Tsungfen Kuo resigned as the Chief Technology Officer of the
Company on December 31, 2002.
(5) As of June 30, 2002, the Company has deferred $25,000 of the $85,000 base
salary owed to Dr. Kuo.
12
Options Grants in the Last Fiscal Year
--------------------------------------
The following table sets forth information regarding stock options granted
during the fiscal year ended June 30, 2002 to each of the named executive
officers.
Number Of
Securities Percent Of Total
Underlying Options Options Granted Exercise Of Market Price
Granted To Employees In Base Price Base Expiration
Name (#) Fiscal Year ($/Sh) ($/Sh)(1) Date
(a) (b) (c) (d-1) (d-2) (e)
---------------------- ------------------ ---------------- ----------- ------------ ----------
Henry E. Gemino, Chief --- --- --- --- ---
Executive Officer and
Chief Financial Officer
Joseph Galbraith, Vice 15,000 21.4% $1.00 $1.01 11/12/06
President, Field Operations
John Tsungfen Kuo, Chief 20,000 28.6% $1.00 $1.01 11/12/06
Technology Officer
(1) The market price is based on the market value ($1.01) of the Company's
common stock as of the close of business on November 12, 2001, the most
recent day on which trades in the Company's common stock were reported on
the OTC Bulletin Board.
Options Exercises and Holdings
------------------------------
The following table sets forth information regarding stock options
exercised during the fiscal year ended June 30, 2002 by each of the named
executive officers and the value of the unexercised options held by these
individuals as of June 30, 2002, based on the per share market value ($0.65) of
the Company's common stock on June 28, 2002, the last day during the fiscal year
ended June 30, 2002 that trades in the Company's common stock were reported on
the OTC Bulletin Board.
Aggregated Options Exercises in Last Fiscal Year and FY-End Options/SAR
Values:
(a) (b) (c) (d) (e) (1)
Number of Securities Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired On Value at FY-End (#) at FY End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------ ------------------------- -------------------------
Henry Gemino --- --- 300,000/0(2) 0/0
Joseph Galbraith --- --- 35,000/0(3) 0/0
John Tsungfen Kuo --- --- 370,000/0(4) 0/0
13
(1) The value calculations are based on $0.65 per share, the fair market value
of the underlying shares of the Company's common stock at year end (June
28, 2002, the last day of the fiscal year on which the Company's stock was
traded) less the exercise price for the shares.
(2) Consists of warrants to purchase 190,000 shares and 60,000 shares of the
Company's common stock at exercise prices of $1.25 and $3.00 per share,
respectively, granted in March, 1996 and warrants to purchase 50,000 shares
of the Company's common stock at an exercise price of $3.00 per share
transferred by Gale D. Barnett in November, 1996.
(3) Consists of the following: (A) warrants to purchase 20,000 shares of the
Company's common stock at an exercise price of $13.50 per share granted on
February 26, 1998 and (B) options to purchase 15,000 shares of the
Company's common stock at an exercise price of $1.00 per share granted
November 13, 2001, pursuant to the Company's 1999 Stock Plan.
(4) Consists of the following: (A) warrants to purchase 50,000 and 15,000
shares of the Company's common stock at exercise prices of $3.00 and $7.20
per share, respectively, granted in March, 1996, (B) warrants to purchase
285,000 shares of the Company's common stock at an exercise price of $3.50
granted in November, 1996, and (C) options to purchase 20,000 shares of the
Company's common stock at an exercise price of $1.00 per share granted on
November 13, 2001, pursuant to the Company's 1999 Stock Plan.
REPORT OF BOARD OF DIRECTORS ON
REPRICING OF COMPENSATORY WARRANTS
----------------------------------
The Company granted to Murphy Evans, the President and a director of the
Company the following warrants: (i) warrant to purchase 25,000 and 15,000 shares
of the Company's common stock, at an exercise price of $3.00 and $7.20 per
share, respectively, in March, 1996, (ii) warrants to purchase 25,000 shares of
the Company's common stock at an exercise price of $7.20 per share, in November,
1996, and (iii) warrants to purchase 85,000 shares of the Company's common stock
at an exercise price of $7.50 per share during the fiscal year ended June 30,
1999 (collectively, the "Evans Warrants"). The Board of Directors approved the
issuance of the Evans Warrants as compensation for services provided by Mr.
Evans as the President of the Company.
On May 9, 2002, the Company entered into a $150,000 bridge loan agreement
with Murphy Evans (the "Evans Loan"). Mr. Evans has currently loaned the Company
$126,000, pursuant to the Evans Loan. Under the terms of the Evans Loan, once
Mr. Evans loaned the Company $125,000, the Company is obligated to cancel the
Evans Warrants, and issue to Mr. Evans 150,000 five-year warrants with an
exercise price of $1.05 (the "Repriced Evans Warrants"). Due to the Company's
immediate need for cash, the Board of Directors approved the terms of the Evans
Loan, including the repricing of the Evans Warrants. Since the Repriced Evans
Warrants were granted by the Company in consideration of the Evans Loan, the
Board of Directors no longer considers these Repriced Evans Warrants to be
compensatory.
Other than the repricing of the stock purchase warrants held by Murphy
Evans, there have been no awards of options, compensatory warrants or SARs, or
any adjustments or amendments to the exercise price of options, compensatory
warrants, or SARs previously awarded to any of the named executive officers,
whether through amendment, cancellation or replacement grants or any other means
during the fiscal year ended June 30, 2002.
14
Securities Authorized for Issuance Under Equity Compensation Plans.
-------------------------------------------------------------------
The following table sets forth information concerning equity compensation
plans, including individual compensation arrangements, under which the Company
is authorized to issue equity securities.
Number of
securities
remaining
available for
Number of future issuance
securities to be Weighted-average under equity
issued upon exercise price compensation
exercise of of outstanding plans (excluding
outstanding options, securities
options, warrants warrants and reflected in
and rights rights column (a))
(a) (b) (c)
---------------------------------------------------------------------------------------
Equity compensation plans 265,000 $3.52 235,000
approved by security holders
Equity compensation plans not 1,110,000(1),(2),3),(4) $3.71 N/A(3)
approved by security holders
Total 1,375,000 $3.67 235,000
(1) Consists of various grants of compensatory warrants, all of which were
issued prior to the adoption of the Company's 1999 Stock Plan, which was
recommended by the Board of Directors in October, 1998 and approved by the
shareholders on November 16, 1998, except for the warrants issued to R.F.
Lafferty & Co., Scott Meaker, and Dr. Charles Frost, as described in
Footnote 2 below, and none of whom are officers or directors of the
Company.
(2) Consists of the following individual grants of compensatory warrants: (A)
in March, 1996 and November, 1996, to Gale D. Burnett, compensatory
warrants to purchase 210,000 shares at exercise prices ranging from $1.25
to $3.00 per share (of which 50,000 warrants at an exercise price of $3.00
per share were transferred to Henry Gemino in November, 1996), (B) in
March, 1996, to Henry E. Gemino, compensatory warrants to purchase 250,000
shares at exercise prices ranging from $1.25 to $3.00 per share, (C) in
March, 1996 and November, 1996, to Allen Reeves, compensatory warrants to
purchase 130,000 shares at exercise prices ranging from $1.25 to $7.20 per
share, of which 15,000 shares have been exercised (at an exercise price of
$1.25 per share), (D) in March, 1996 and November, 1996, to G. L. Scott,
compensatory warrants to purchase 70,000 shares at exercise prices ranging
from $1.25 to $7.20 per share, (E) in March, 1996 and November, 1996, to
Dr. John T. Kuo, compensatory warrants to purchase 350,000 shares at
exercise prices ranging from $3.00 to $7.20 per share, (F) in February,
1998, to Joseph Galbraith, compensatory warrants to purchase 20,000 shares
at an exercise price of $13.50 per share, (G) in November, 2000, to R.H.
Lafferty & Co., compensatory warrants to purchase 100,000 shares at an
exercise price of $6.50 per share, (H) in January, 2002, to Scott Meaker,
compensatory warrants to purchase 50,000 shares at an exercise price of
$1.00 per share, and (I) in March, 2002 and May, 2002, to Dr. Charles
Frost, compensatory warrants to purchase 10,000 shares at an exercise price
of $1.00 per share.
15
(3) All of the compensatory warrants have fully vested, and none of the
warrants that were issued to officers and directors of the Company will
terminate if any such officer or director ceases to be employed by or to
serve as a director of the Company. All of the warrants issued prior to
February 12, 1997 are due to expire on October 31, 2004. The warrants
issued: (A) to Joseph Galbraith on February 26, 1998, are due to expire on
October 31, 2004, (B) to R.F. Lafferty & Co. on November 30, 2000, are due
to expire on October 31, 2003, (C) to Scott Meaker on January 28, 2002, are
due to expire on January 2, 2007, and (D) to Dr. Charles Frost, Marcy 6,
2002 and May 13, 2002, are due to expire on February 15, 2005.
(4) All of the compensatory warrants issued to the individuals as set forth in
Footnote 2 above were issued by the Company in exchange for services
provided by such individuals as executive officers and directors of the
Company, except as follows: (i) the warrants issued to Allen Reeves as
described in Footnote 2 above were issued in exchange for legal services
provided to the Company by Mr. Reeves; and (ii) the compensatory warrants
issued to R.F. Lafferty & Co., Scott Meaker and Dr. Frost, as described in
Footnote 2, were issued in exchange for consulting services provided to the
Company.
(3) All of the equity compensation plans aggregated as explained in Footnote 2
above represent individual compensation arrangements approved separately by
the Board of Directors and are not part of any written or formal plan under
which the Company will be obligated to issue equity compensation in the
future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September, 1988, at the time Gale D. Burnett, a beneficial shareholder
of more than 10% of the Company's common stock, first transferred certain
technology, know-how and patent rights to the Company, a royalty interest of 4%
of all pre-tax profits derived from the technology and know-how transferred was
granted to Northwood Enterprises, Inc., a family-owned company controlled by Mr.
Burnett. Northwoods Enterprises subsequently assigned such royalty interest back
to Mr. Burnett. On April 8, 1996, Mr. Burnett assigned 2% of this royalty
interest as follows: (1) to Henry Gemino, currently the Chief Executive Officer
and Chief Financial Officer, and a director of the Company, a 1 1/4% royalty
interest; (2) to Mr. G. L. Scott, the former Chairman of the Board of Directors,
a 1/2% royalty interest, which interest has passed to his estate; and (3) to the
Company's former legal counsel, Alan Reeves, a 1/4% royalty interest, which
interest has now passed to his heirs or beneficiaries. This royalty arrangement
also applies to all future patent rights and technology developed by Mr. Burnett
and assigned to the Company. To date, no royalty payments have been made or
earned under the above described arrangement.
In March 1996, the Company granted a net pre-tax royalty on profits equal
to 1% to Dr. John Kuo in return for his assignment of certain patent rights,
technological know-how and proprietary information and trade secrets. Under
these various royalty interests, a total of 5% of any net pre-tax earnings of
the Company derived from the use of the technology developed by Mr. Burnett or
Mr. Kuo is subject to distribution as above described. To date, no royalty
interest has been earned or distributed.
OTHER MATTERS TO BE VOTED UPON
As of the date of this proxy statement, the Board of Directors does not
know of or anticipate that any other matters will be brought before the
Company's shareholders at the Annual Meeting. If, however, any other matters not
mentioned in the proxy statement are properly brought before the Company's
shareholders at the Annual Meeting, the persons appointed as proxies will have
the discretion to vote or act in accordance with their best judgment.
16
COMPLIANCE WITH SECTION 16(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers, directors, and any person owning more
than 10% of a class of the Company's stock, are required to file reports of
ownership and changes in ownership of the Company's securities with the
Securities and Exchange Commission. Based solely on the information provided to
the Company by individual directors, executive officers and beneficial
shareholders of more than 10% of a class of the Company's stock, the Company
believes that during the last fiscal year all directors and executive officers
and beneficial shareholders of more than 10% of a class of the Company's stock
have complied with applicable filing requirements.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP as the independent certified
public accountants to audit the financial statements of the Company for its
fiscal year ended June 30, 2002. To the knowledge of management, neither such
firm nor any of its members has any direct or material indirect financial
interest in the Company nor any connection with the Company in any capacity
otherwise than as independent accountants.
A representative of KPMG LLP is expected to be present at the Annual
Meeting of Shareholders to answer proper questions and will be afforded an
opportunity to make a statement regarding the financial statements.
Audit Fees. The Company incurred aggregate fees of $53,815 payable to KPMG
LLP during the fiscal year ended June 30, 2002 for the annual audit and for
review of the Company's financial statements included in its Form 10-Qs for the
past fiscal year.
Financial Information Systems Design and Implementation Fees. The Company
did not incur any fees from KPMG LLP for information technology services during
the fiscal year ended June 30, 2002.
All Other Fees. The Company did not incur any other fees for any other
services provided by KPMG LLP other than the auditing fees described above
during the fiscal year ended June 30, 2002.
STOCKHOLDER PROPOSALS
Shareholders who wish to include a proposal in the Company's proxy
statement and form of proxy relating to the 2003 Annual Meeting of the
Shareholders should deliver a written copy of their proposal to the Company's
principal executive offices no later than June 17, 2003. Proposals must comply
with the SEC proxy rules relating to shareholder proposals in order to be
included in the Company's proxy materials. Except for shareholder proposals to
be included in the Company's proxy statement and form of proxy, the deadline for
nominations for director or other proposals made by a shareholder is five days
before the date of the 2003 Annual Meeting. Proposals should be directed to
Henry E. Gemino, Chief Executive Officer, Profile Technologies, Inc., 2 Park
Avenue, Suite 201, Manhasset, New York 11030.
17
ANNUAL REPORT ON FORM 10-K;
DELIVERY TO SHAREHOLDERS SHARING ADDRESS
The Company is providing a copy of its Annual Report to Shareholders on
Form 10-KSB for the fiscal year ended June 30, 2002 simultaneously with delivery
of this proxy statement. You may obtain additional copies of the Annual Report
by writing to Henry E. Gemino, Chief Executive Officer, Profile Technologies,
Inc., 2 Park Avenue, Suite 201, Manhasset, New York 11030.
The Company is delivering only one proxy statement and Annual Report to
multiple shareholders sharing an address unless the Company has received
contrary instructions from one or more of the shareholders. The Company will
promptly deliver upon written or oral request a separate copy of this proxy
statement or the Annual Report to a shareholder at a shared address to which a
single copy was sent. If you are a shareholder residing at a shared address and
would like to request an additional copy of the proxy statement or Annual Report
now or with respect to future mailings (or to request to receive only one copy
of the proxy statement or Annual Report if you are currently receiving multiple
copies), please send your request to Henry E. Gemino at the address noted above.
COST OF SOLICITATION
The Company will bear the cost of solicitation of proxies, including
expenses in connection with the preparation and mailing of this proxy statement.
The Company will solicit primarily through the mail, and the Company's officers,
directors, and employees may solicit by personal interview, telephone,
facsimile, or e-mail proxies. These people will not receive additional
compensation for such solicitations, but the Company may reimburse them for
their reasonable out-of-pocket expenses.
Holders of the Company's common stock are requested to complete, sign, and
date the accompanying proxy card and promptly return it to the Company's
Transfer Agent, in the enclosed addressed, postage paid envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Henry E. Gemino
-------------------
Henry E. Gemino
Chief Executive Officer
October 28, 2002
18
EXHIBIT A
---------
AMENDMENT TO CERTIFICATE OF INCORPORATION OF
PROFILE TECHNOLOGIES, INC. INCREASING NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
Paragraph 4 of the Company's Certificate of Incorporation shall be deleted
in its entirety and replaced with the following:
"The total number of shares of stock which the corporation
shall have the authority to issue is 15,000,000 shares of
common stock, $0.001 par value."
A-1
Profile Technologies, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
I, the undersigned shareholder of Profile Technologies, Inc. (the "Company"), do
hereby nominate, constitute and appoint Henry E. Gemino, my true and lawful
proxy and attorney with full power of substitution for me and in my name, place
and stead, to represent and vote all of the common stock, par value $0.001 per
share, of the Company, held in my name on its books as of October 24, 2002, at
the Annual Meeting of Shareholders to be held on Monday, December 9, 2002.
PROPOSAL 1. Election of the following Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD Authority to vote for
(except as marked to the all nominees listed below
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the name(s) of such nominee(s) below.)
Henry E. Gemino ___________________________
John Tsungfen Kuo ___________________________
Murphy Evans ___________________________
William A. Krivsky ___________________________
Charles Christenson ___________________________
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE
"FOR" THE ELECTION OF EACH OF THE NOMINEES.
--------------------------------------------------------------------------------
PROPOSAL 2. Adoption of the Amendment to the Company's Certificate of
Incorporation increasing the authorized shares of common stock from 10,000,000
to 15,000,000:
[ ] FOR adoption of the [ ] AGAINST Authority to vote [ ] ABSTAIN
Amendment for adoption of Amendment
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE
"FOR" ADOPTION OF THE AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION INCREASING THE AUTHORIZED
SHARES OF COMMON STOCK FROM 10,000,000 TO 15,000,000.
--------------------------------------------------------------------------------
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting of Shareholders.
IMPORTANT: PLEASE SIGN AND DATE ON REVERSE
A-2
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, the proxy will be voted
FOR Proposals 1 and 2. Should any other matter requiring a vote of the
shareholders arise, the proxy named above is authorized to vote in accordance
with his best judgment in the interest of the Company.
IMPORTANT: Please sign exactly as your 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 the full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ADDRESSED ENVELOPE OR OTHERWISE TO Continental Stock Transfer & Trust Company,
17 Battery Place, New York, New York 10004. IF YOU DO NOT SIGN AND RETURN A
PROXY OR ATTEND THE MEETING AND VOTE, YOUR SHARES CANNOT BE VOTED.
---------------------------
Date
---------------------------
Signature
---------------------------
Signature (if jointly held)
---------------------------
Print name(s) here
A-3