UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X| Filed by a Party other than the Registrant |_| Check
the appropriate box:
|_| 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 Under Rule l4a-l2
ACCESS INTEGRATED TECHNOLOGIES, INC.
(Name of Registrant As Specified In Its Charter)
N/A
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(Name of Person(s) Filing Consent solicitation statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules l4a-6(i)(4) and 0-11 (1)
Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth in the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[INSERT LOGO]
ACCESS INTEGRATED TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 14, 2004
Dear Fellow Stockholders:
We invite you to attend the 2004 Annual Meeting of
Stockholders of Access Integrated Technologies, Inc., a Delaware corporation
(the "Company"), which will be held on October 14, 2004, at 2:00 p.m., eastern
time, at the American Stock Exchange, 86 Trinity Place, New York, New York
10006. At the meeting, you will be asked to vote on the following proposals (as
more fully described in the Proxy Statement accompanying this Notice):
1. Proposal One - To elect eight (8) members of the Company's
Board of Directors to serve until the 2005 Annual Meeting of
Stockholders (or until successors are elected or directors
resign or are removed).
2. Proposal Two - To amend the Company's First Amended and
Restated 2000 Stock Option Plan to increase the total number
of shares of the Company's Class A Common Stock available from
the grant of options thereunder from 600,000 to 850,000
shares.
3. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Only stockholders of record at the close of business on
September 21, 2004 are entitled to notice of and to vote at the Annual Meeting
or any adjournment thereof.
YOUR VOTE IS VERY IMPORTANT. WE HOPE YOU WILL ATTEND THIS ANNUAL MEETING IN
PERSON, BUT IF YOU CANNOT, PLEASE SIGN AND DATE THE ENCLOSED PROXY. RETURN THE
PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON EVEN IF
YOU HAVE RETURNED A PROXY. IF YOU RECEIVED MORE THAN ONE PROXY CARD, IT IS AN
INDICATION THAT YOUR SHARES ARE REGISTERED IN MORE THAN ONE ACCOUNT. PLEASE
COMPLETE, DATE, SIGN AND RETURN EACH PROXY CARD YOU RECEIVE.
BY ORDER OF THE BOARD OF DIRECTORS
[INSERT SIGNATURE]
A. Dale Mayo
President, Chief Executive Officer and
Chairman of the Board of Directors
Morristown, New Jersey
Date: September 22, 2004
1
ACCESS INTEGRATED TECHNOLOGIES, INC.
55 MADISON AVENUE, SUITE 300
MORRISTOWN, NEW JERSEY 07960
---------------------------------
PROXY STATEMENT
---------------------------------
2004 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 14, 2004
INFORMATION CONCERNING VOTING AND PROXY SOLICITATION
GENERAL
This Proxy Statement is being furnished to the stockholders of ACCESS INTEGRATED
TECHNOLOGIES, INC. (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board"). The proxies are
for use at the Annual Meeting of Stockholders of the Company to be held on
Thursday, October 14, 2004, at 2:00 p.m. eastern time, or at any adjournment
thereof (the "Annual Meeting"). The Annual Meeting will be held at the American
Stock Exchange, 86 Trinity Place, New York, New York 10006. The Company's
telephone number is (973) 290-0080.
The shares represented by your proxy will be voted at the Annual Meeting as
therein specified (if the proxy is properly executed and returned, and not
revoked). You may revoke your proxy at any time before the proxy is exercised by
delivering to the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date. You may also revoke your proxy by attending
the Annual Meeting and voting in person.
The shares represented by your proxy will be voted as indicated on your properly
executed proxy. If no directions are given on the proxy, the shares represented
by your proxy will be voted:
o FOR the election of the director nominees named herein (Proposal
No. 1), unless you specifically withhold authority to vote for one
or more of the director nominees.
o FOR amending the Company's First Amended and Restated 2000 Stock
Option Plan to increase the number of shares of Class A Common
Stock available from the grant of options thereunder from 600,000
shares to 850,000 shares (Proposal No. 2), unless you designate
otherwise.
The Company knows of no other matters to be submitted to the Annual Meeting. If
any other matters properly come before the Annual Meeting, it is the intention
of the persons named in the accompanying form of proxy to vote the shares they
represent as the Board may recommend.
These proxy solicitation materials are first being mailed to the stockholders on
or about September 24, 2004.
2
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on September 21, 2004 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, (a) 8,574,947 shares of the Company's Class A Common Stock,
$.001 par value ("Class A Common Stock"), were issued and outstanding and (b)
1,005,811 shares of the Company's Class B Common Stock, $.001 par value ("Class
B Common Stock," and together with the Class A Common Stock, the "Common
Stock"), were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Attending the
Annual Meeting in and of itself will not constitute a revocation of a proxy.
VOTING AND SOLICITATION
Each holder of Class A Common Stock is entitled to one vote for each share of
Class A Common Stock held as of the Record Date. Each holder of Class B Common
Stock is entitled to ten votes for each share of Class B Common Stock held as of
the Record Date. Stockholders will not be entitled to cumulate their votes in
the election of directors.
This proxy solicitation is being made by the Board and the cost of soliciting
proxies will be borne by the Company. The Company expects to reimburse brokerage
firms, banks, custodians and other persons representing beneficial owners of
shares of Common Stock for their reasonable out-of-pocket expenses in forwarding
solicitation material to such beneficial owners. Proxies may be solicited by
certain of the Company's directors, officers and regular employees, without
additional compensation, in person or by telephone, e-mail or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
A majority of the aggregate combined voting power of the outstanding shares of
Class A Common Stock and Class B Common Stock as of the Record Date must be
present, in person or by proxy, at the Annual Meeting in order to have the
required quorum for the transaction of business. If the aggregate voting power
of the shares of Common Stock present, in person and by proxy, at the Annual
Meeting does not constitute the required quorum, the Annual Meeting may be
adjourned to a subsequent date for the purpose of obtaining a quorum.
Shares of Common Stock that are voted "FOR," "AGAINST" or "ABSTAIN" are treated
as being present at the Annual Meeting for purposes of establishing a quorum.
Shares that are voted "FOR," "AGAINST" or "ABSTAIN" with respect to a matter
will also be treated as shares entitled to vote at the Annual Meeting (the
"Votes Cast") with respect to such matter. Abstentions will be counted for
purposes of quorum and will have the same effect as a vote "AGAINST" a proposal.
Broker non-votes (i.e., votes from shares of Common Stock held of record by
brokers or other custodians as to which the beneficial owners have given no
voting instructions) will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted for
purposes of determining the number of Votes Cast with respect to a particular
proposal on which the broker has expressly not voted. Accordingly, broker
non-votes will not affect the outcome of the voting on a proposal.
3
APPRAISAL RIGHTS
Under Delaware General Corporation Law (the "DGCL") and the Company's
Certificate of Incorporation, stockholders are not entitled to any appraisal or
similar rights of dissenters with respect to any of the Proposals to be acted
upon at the Annual Meeting.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE 2005 ANNUAL
MEETING
The Company currently intends to hold its 2005 Annual Meeting of Stockholders on
or about August 20, 2005. In order for any stockholder proposal submitted
pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to be included in the Company's Proxy Statement to
be issued in connection with the 2005 Annual Meeting of Stockholders, such
proposal must be received by the Company no later than March 31, 2005. Any
notice of a proposal submitted outside the processes of Rule 14a-8 promulgated
under the Exchange Act, which a stockholder intends to bring forth at the
Company's 2005 Annual Meeting of Stockholders, will be untimely for purposes of
Rule 14a-4 of the Act and the By-laws of the Company if received by the Company
after June 14, 2005. All stockholder proposals must be made in writing addressed
to Secretary, Access Integrated Technologies, Inc., 55 Madison Avenue, Suite
300, Morristown, New Jersey 07960.
ELECTION OF DIRECTORS (PROPOSAL 1)
The Board currently consists of eight (8) directors. All eight of the current
members of the Board have been nominated for re-election. Each nominee has
consented to being named as a nominee for election as a director and has agreed
to serve if elected. Each nominee for election at the Annual Meeting shall, if
elected, serve on the Board until his successor is elected at the next annual
meeting of stockholders or until his earlier resignation or removal.
The directors shall be elected by a plurality of the outstanding votes cast at
the Annual Meeting. A "plurality" means that the individuals who receive the
largest number of votes cast are elected as directors up to the maximum number
of directors to be elected at the Annual Meeting. If any nominee is not
available for election at the time of the Annual Meeting (which is not
anticipated), the proxy holders named in the proxy, unless specifically
instructed otherwise in the proxy, will vote for the election of such other
person as the existing Board may recommend, unless the Board decides to reduce
the number of directors of the Company.
The following biographical information about the nominees to the Company's Board
is set forth as of September 1, 2004.
A. DALE MAYO (AGE 63): DIRECTOR SINCE MARCH 2000; CURRENTLY PRESIDENT, CHIEF
EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS
Mr. Mayo is a co-founder of the Company and has been Chairman, President and
Chief Executive Officer since the Company's inception in March 2000. Mr. Mayo is
a member of the Company's Compensation Committee and Nominating Committee. From
January to March 2000, Mr. Mayo explored various business opportunities,
including data center operations and digital cinemas. From December 1998 to
January 2000, he had been the President and Chief Executive Officer of
Cablevision Cinemas, LLC. In December 1994, Mr. Mayo co-founded Clearview Cinema
Group, Inc., which was sold to Cablevision Cinemas in 1998. Mr. Mayo was also
the founder, chairman and chief executive officer of Clearview Leasing
Corporation, a lessor of computer peripherals and telecommunications equipment
founded in 1976. Mr. Mayo began his career as a computer salesman with IBM in
1965.
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KEVIN J. FARRELL (AGE 42): DIRECTOR SINCE MARCH 2000; CURRENTLY SENIOR
VICE PRESIDENT - DATA CENTER OPERATIONS AND A DIRECTOR
Mr. Farrell is a co-founder of the Company and has been Senior Vice President --
Data Center Operations and a director since the Company's inception. From
December 1998 to March 2000, he had served as Director of Operations of Gateway
Colocation, LLC, of which he was also a co-founder, where he was responsible for
the completion of 80,000 square feet of carrier neutral colocation space and
supervised infrastructure build-out, tenant installations and daily operations.
Prior to joining Gateway, Mr. Farrell had served, from 1993 to 1998, as Building
Superintendent and Director of Facility Maintenance at the Newport Financial
Center in Jersey City, NJ. He is a former officer of the International Union of
Operating Engineers.
BRETT E. MARKS (AGE 42): DIRECTOR SINCE MARCH 2000; CURRENTLY SENIOR
VICE PRESIDENT - BUSINESS DEVELOPMENT AND A DIRECTOR
Mr. Marks is a co-founder of the Company and has been Senior Vice President --
Business Development and a director since the Company's inception. From December
1998 to March 2000, Mr. Marks had been Vice President of Real Estate and
Development of Cablevision Cinemas, LLC. From June 1998 until December 1998, he
was Vice President of First New York Realty Co., Inc. In December 1994, Mr.
Marks co-founded, with Mr. Mayo, Clearview Cinema Group, Inc. and was
instrumental in the site selection process that helped to increase its number of
theater locations.
ROBERT DAVIDOFF (AGE 77): DIRECTOR SINCE JULY 2000
Mr. Davidoff has been a director of the Company since July 2000 and has been the
Chairman of the Company's Compensation Committee since November 2000. Mr.
Davidoff currently serves on the Company's Audit Committee and Nominating
Committee. Since 1990, Mr. Davidoff has been a Managing Director of Carl Marks &
Co., Inc. and, since 1989, the General Partner of CMNY Capital II, L.P., a
venture capital affiliate of Carl Marks & Co. Since 1998, Mr. Davidoff has
served as a director of Sterling/Carl Marks Capital, Inc. He is also the
Chairman and Chief Investment Officer of CM Capital Corporation, the firm's
leveraged buyout affiliate. Mr. Davidoff is a director of Hubco Exploration,
Inc., Rex Stores Corporation and Marisa Christina, Inc. Mr. Davidoff serves on
the compensation committee of Hubco Exploration, Inc. and the audit and
compensation committees of each of Rex Stores Corporation and Marisa Christina,
Inc. Mr. Davidoff served as a director of Clearview Cinema Group, Inc. from
December 1994 to December 1998.
GARY S. LOFFREDO (AGE 39): DIRECTOR SINCE SEPTEMBER 2000; CURRENTLY SENIOR
VICE PRESIDENT - BUSINESS AFFAIRS, GENERAL COUNSEL, SECRETARY AND A DIRECTOR
Mr. Loffredo has been the Company's Senior Vice President -- Business Affairs,
General Counsel and Secretary, and a director since September 2000. From March
1999 to August 2000, he had been Vice President, General Counsel and Secretary
of Cablevision Cinemas, LLC. At Cablevision Cinemas, Mr. Loffredo was
responsible for all aspects of the legal function, including negotiating and
drafting commercial agreements, with emphases on real estate, construction and
lease contracts. He was also significantly involved in the business evaluation
of Cablevision Cinemas' transactional work, including site selection and
analysis, negotiation and new theater construction oversight. Mr. Loffredo was
an attorney at the law firm of Kelley Drye & Warren LLP from September 1992 to
February 1999.
5
WAYNE L. CLEVENGER (AGE 61): DIRECTOR SINCE OCTOBER 2001
Mr. Clevenger has been a director of the Company since October 2001. Mr.
Clevenger served on the Company's Compensation Committee from February 2002 to
April 2004 and has served on the Company's Audit Committee since April 2004. He
has more than 20 years of private equity investment experience. He has been a
Managing Director of MidMark Equity Partners II, L.P. ("MidMark") and its
predecessor company since 1989. Mr. Clevenger was President of Lexington
Investment Company from 1985 to 1989, and, previously, had been employed by DLJ
Capital Corporation (Donaldson, Lufkin & Jenrette) and INCO Securities
Corporation, the venture capital arm of INCO Limited. Mr. Clevenger served as a
director of Clearview Cinema Group, Inc. from May 1996 to December 1998.
MATTHEW W. FINLAY (AGE 37): DIRECTOR SINCE OCTOBER 2001
Mr. Finlay has been a director of the Company since October 2001 and has been
the Chairman of the Company's Audit Committee since February 2002. He is a
director of MidMark, which he joined in 1997. Previously, he had been a Vice
President with the New York merchant banking firm Juno Partners and its
investment banking affiliate, Mille Capital, from 1995 to 1997. Mr. Finlay began
his career in 1990 as an analyst with the investment banking firm Southport
Partners.
GERALD C. CROTTY (AGE 52): DIRECTOR SINCE AUGUST 2002
Mr. Crotty has been a director of the Company since August 2002, served on the
Company's Audit Committee from July 2003 to April 2004, and has served on the
Company's Compensation Committee since April 2004. Mr. Crotty co-founded and,
since June 2001, has directed, Weichert Enterprise LLC, a private and public
equity market investment firm. Weichert Enterprise oversees the holdings of
Excelsior Ventures Management, a private equity and venture capital firm that
Mr. Crotty co-founded in 1999. From 1991 to 1998, he held various executive
positions with ITT Corporation, including President and Chief Operating Officer
of ITT Consumer Financial Corp. and Chairman, President and Chief Executive
Officer of ITT Information Services, Inc. Mr. Crotty also serves as a director
of AXA Premier Funds Trust.
BOARD OF DIRECTORS
The Board intends to meet at least quarterly and the independent directors
serving on the Board intend to meet in executive session (i.e., without the
presence of any non-independent directors and management) at least once a year.
During the fiscal year ended March 31, 2004 (the "Last Fiscal Year"), the Board
held one meeting and the Board members acted 10 times by unanimous written
consent in lieu of holding a meeting. Other than Mr. Clevenger who did not
attend one meeting of the Company's audit committee, each current member of the
Board who was then serving attended at least seventy-five percent of the total
number of meetings of the Board and of the committees of the Board on which he
served in the Last Fiscal Year. Messrs. Davidoff, Crotty, Clevenger and Finlay
are considered "independent" under the rules of the AMEX.
6
Except for Messrs. Kevin A. Booth and Warren H. Colodner, since March 31, 2003,
no other director has resigned or declined to stand for reelection to the Board
for any reason. Messrs. Booth and Colodner resigned as directors in November
2003 and June 2003, respectively. Neither of such directors resigned because of
any disagreement with the Company on any matter relating to the Company's
operations, policies or practices. The Board currently does not provide a
process for securityholders to send communications to the Board. In the opinion
of the Board, it is appropriate for the Company not to have such a process in
place because the Board believes there is currently not a need for a formal
policy due to, among other things, the limited number of stockholders of the
Company. While the Board will review the need for a formal policy, at the
present time, stockholders who wish to contact the Board may do so by submitting
any communications to the Company's Secretary, at Secretary, Access Integrated
Technologies, Inc., 55 Madison Avenue, Suite 300, Morristown, New Jersey 07960,
with an instruction to forward the communication to a particular director or the
Board as a whole. The Company's Secretary will receive the correspondence and
forward it to any individual director or directors to whom the communication is
directed.
The Company does not currently have a policy in place regarding attendance by
Board members at the Company's annual meetings. However, each of the directors
currently intends to attend the Annual Meeting.
The Board has three standing committees, consisting of an audit committee, a
compensation committee and a nominating committee.
AUDIT COMMITTEE
The audit committee consists of Messrs. Davidoff, Clevenger and Finlay. Mr.
Finlay is the Chairman of the audit committee. The audit committee held two
meetings in the Last Fiscal Year. The audit committee has met with the Company's
management and its independent registered public accounting firm to review and
help ensure the adequacy of its internal controls and to review the results and
scope of the auditors' engagement and other financial reporting and control
matters. Both Messrs. Davidoff and Clevenger are financially literate, and Mr.
Davidoff is financially sophisticated, as those terms are defined under the
rules of the AMEX. Mr. Davidoff is also a financial expert, as such term is
defined under the Sarbanes-Oxley Act of 2002. Messrs. Davidoff, Clevenger and
Finlay are considered "independent" under the rules of the AMEX.
The audit committee has adopted a formal written charter which is attached
hereto as APPENDIX A. The audit committee is responsible for ensuring that the
Company has adequate internal controls and is required to meet with the
Company's auditors to review these internal controls and to discuss other
financial reporting matters. The audit committee is also responsible for the
appointment, compensation and oversight of the auditors. Additionally, the audit
committee is responsible for the review and oversight of all related party
transactions and other potential conflict of interest situations between the
Company and its officers, directors, employees and principal stockholders.
COMPENSATION COMMITTEE
The compensation committee consists of Messrs. Mayo, Davidoff and Crotty. Mr.
Davidoff is the Chairman of the compensation committee. The compensation
committee met one time during the Last Fiscal Year. The compensation committee
approves the compensation package of the Company's Chief Executive Officer and
reviews and recommends to the Board the levels of compensation and benefits
payable to the Company's other executive officers, reviews general policy
matters relating to employee compensation and benefits and recommends to the
entire Board, for its approval, stock option grants and discretionary bonuses to
its officers, employees, directors and consultants. Messrs. Davidoff and Crotty
are considered "independent" under the rules of the AMEX.
7
NOMINATING COMMITTEE
The nominating committee consists of Messrs. Mayo and Davidoff. Mr. Mayo is the
Chairman of the nominating committee. No meetings of the nominating committee
were held during the Last Fiscal Year. The nominating committee evaluates and
approves nominations for annual election to, and to fill any vacancies in, the
Board. Mr. Davidoff is considered "independent" under the rules of the AMEX.
The Nominating Committee has adopted a formal written charter which is attached
hereto as APPENDIX B. The charter sets forth the duties and responsibilities of
the Nominating Committee and the general skills and characteristics that the
Nominating Committee employs to determine the individuals to nominate for
election to the Board.
The nominating committee currently does not have a policy regarding the
consideration of director candidates recommended by stockholders. The Board
believes that it is appropriate for the Company to not have such a policy
because the committee has not previously received any director candidate
recommendations from a non-director stockholder. However, the nominating
committee will consider any such candidates recommended by stockholders.
Nevertheless, the Board may choose not to consider an unsolicited recommendation
if no vacancy exists on the Board and/or the Board does not perceive a need to
increase the size of the Board. Stockholders should submit any recommendations
of director candidates for the Company's 2005 Annual Meeting of stockholders to
Secretary, Access Integrated Technologies, Inc., 55 Madison Avenue, Suite 300,
Morristown, New Jersey 07960 by March 31, 2005.
There are no specific minimum qualifications that the nominating committee
believes must be met by a nominating committee-recommended director nominee.
However, the nominating committee believes that director candidates should,
among other things, possess high degrees of integrity and honesty; have literacy
in financial and business matters; have no material affiliations with direct
competitors, suppliers or vendors and preferably have experience in the
Company's business and other relevant business fields (e.g., finance,
accounting, law, banking).
Members of the nominating committee will meet prior to each of the Company's
annual meetings to identify and evaluate the skills and characteristics of each
director candidate for nomination for election as a director of the Company. The
nominating committee reviews the candidates in accordance with the skills and
qualifications set forth in the Company's Nominating Committee Charter and the
rules of the AMEX. There are no differences in the manner in which the
nominating committee evaluates director nominees based on whether or not the
nominee is recommended by a stockholder.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information concerning compensation
received by the Company's Chief Executive Officer at March 31, 2004, and its
four other most highly compensated executive officers at March 31, 2004, for
services rendered in all capacities during the Last Fiscal Year (the "Named
Executives").
8
Summary compensation table
Annual Compensation LONG-TERM COMPENSATION
----------------------------------------------------------- ----------------------
Securities
Restricted Underlying All Other
Name and Fiscal Other Annual Stock Options Compensation
Principal Position(s) Year Salary($) Bonus($) Compensation(1) Awards($)(2) (#)(3) ($)(4)
--------------------- ---- --------- -------- --------------- ------------ ---------- ------------
A. Dale Mayo 2004 $250,000 $252,035 $14,400 -- -- $27,428(5)
Chief Executive 2003 $250,000 $147,973 $14,400 -- -- $16,453(5)
Officer and President 2002 $200,000 $66,875 $14,400 -- -- $7,435(5)
Gary S. Loffredo 2004 $155,000 $35,000 $10,000 -- 50,000 $8,146
Senior Vice President - 2003 $150,000 $7,500 $10,000 -- 20,000 $22,065(6)
Business Affairs; General 2002 $150,000 $12,500 $10,000 -- 20,000 $6,646
Counsel; and Secretary
Jeff Butkovsky 2004 $130,000 $15,000 $7,200 -- 30,000 $3,744
Senior Vice President - 2003 $125,000 $10,000 $5,400 -- 20,000 $15,673(7)
Chief Technology Officer 2002 $125,000 $7,500 $ -- -- 10,000 $3,780
Brian Pflug 2004 $105,000 $35,000 $7,200 -- 50,000 $6,573
Senior Vice President - 2003 $100,000 $7,500 $ -- -- 10,000 $21,502(6)
Accounting and Finance 2002 $100,000 $2,500 $ -- -- 10,000 $5,089
Kevin J. Farrell 2004 $103,125 $15,000 $7,200 -- -- $5,696
Senior Vice President - 2003 $100,000 $10,000 $7,200 -- -- $5,502
Data Center Operations 2002 $100,000 $10,000 $7,200 -- -- $5,089
(1) Reflects car allowances paid by the Company.
(2) The Company has not made any restricted stock awards.
(3) Reflects stock options granted under the Company's First Amended and
Restated 2000 Stock Option Plan to Messrs. Loffredo, Butkovsky and
Pflug.
(4) Includes the Company's matching contributions under its 401(k) plan and
the premiums for group term life insurance paid by the Company. Under
its 401(k) plan, the Company automatically matches 50% of employee
contributions up to the lesser of 15% of the employee's pay (on a
per-payroll period basis) or the statutory annual limit set by the
Internal Revenue Service.
(5) Includes premiums for two ten-year term life insurance policies, each
in the benefit amounts of $5 million, under which the Company is the
beneficiary. Under one of the policies, the proceeds of the policy are
to be used to repurchase, after reimbursement of all premiums paid by
the Company, shares of the Company's capital stock held by Mr. Mayo's
estate.
(6) Includes $16,000 of shares of Class A Common Stock issued by the
Company to Messrs. Loffredo and Pflug in December 2002, which shares
were valued by an independent appraiser and are not subject to any
contractual restrictions.
(7) Includes $12,000 of shares of Class A Common Stock issued by the
Company to Mr. Butkovsky in December 2002, which shares were valued by
an independent appraiser and are not subject to any contractual
restrictions.
9
OPTIONS GRANTED DURING THE LAST FISCAL YEAR
The following table sets forth information concerning stock options granted to
the Named Executives during the Last Fiscal Year.
Individual Grants
-------------------------------------------------------------------------
Shares of Class A % of Total
Common Stock Options Granted
Underlying Options to Employees in Exercise Expiration
Name Granted(#) Fiscal Year Price($) Date
---- --------- ----------- -------- ----
A. Dale Mayo -- -- -- --
Gary S. Loffredo 50,000 26% $5.00 11/04/2013
Jeff Butkovsky 30,000 16% $5.00 11/04/2013
Brian Pflug 50,000 26% $5.00 11/04/2013
Kevin J. Farrell -- -- -- --
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding the number of stock options
exercised by the Named Executives during the Last Fiscal Year and, as of March
31, 2004, the number of securities underlying unexercised stock options and the
value of the in-the-money options held by the Named Executives. The Company has
not granted any stock appreciation rights.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
OPTIONS AT FY-END (#) AT FY-END ($)(1)
--------------------- ----------------
Shares of Class
A Common
Stock Acquired Value
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
A. Dale Mayo -- -- -- -- -- --
Gary S. Loffredo -- -- 90,000 70,000 $16,667 $33,333
Jeff Butkovsky -- -- 38,333 46,677 $8,333 $16,668
Brian Pflug -- -- 45,086 60,000 $8,333 $16,668
Kevin J. Farrell -- -- -- -- -- --
(1) Based on the trading price of shares of the Company's Class A Common Stock
on March 31, 2004.
EMPLOYEE BENEFIT PLANS
In July 2002, the Company terminated its then existing benefits plans, including
medical, dental and disability, and its 401(k) plan, and joined a Professional
Employer Organization ("PEO"). Through the PEO, the Company purchases all of its
benefits and payroll services, along with other PEO member companies. For tax
filing and for benefits purposes, the employees of the Company are considered to
be employees of the PEO. However, Hollywood Software, Inc. ("Hollywood SW"), one
of the Company's subsidiaries, is not a member of the PEO, and purchases its
benefits from other providers.
Through the PEO, the Company has a 401(k) plan that permits eligible employees
to contribute up to 15% of their compensation, not to exceed the statutory
limit. The Company automatically matches 50% of all of its employees'
contributions. Employee contributions, employer matching contributions and
related earnings vest immediately. Total expenses for the Company's prior 401(k)
plan and the PEO 401(k) plan were $37,000 and $39,000 for the fiscal years ended
March 31, 2003 and 2004, respectively.
10
Hollywood SW's employees are also covered by a profit sharing plan qualified
under section 401 of the Internal Revenue Code of 1986, as amended (the "IRC").
The plan provides for Hollywood SW to make discretionary profit contributions on
behalf of eligible employees. Hollywood SW made no contributions in 2003 or
2004.
The employees of Core Technology Services, Inc. ("Core") are also covered by a
401(k) plan that permits eligible employees to contribute up to 15% of their
compensation, not to exceed the statutory limit. Core matches 25% of the first
6% of compensation contributed by employees.
EMPLOYMENT AGREEMENTS BETWEEN THE COMPANY AND NAMED EXECUTIVES
A. DALE MAYO. In July 2000, the Company entered into an employment agreement
with A. Dale Mayo, which was amended on December 1, 2000. The amended employment
agreement provides for the Company's payment of an annual base salary of
$250,000 and annual bonuses equal to 3.5% of its annual gross revenues up to $10
million and 2% of any annual gross revenues in excess of $10 million. In
connection with the Company's November 2003 initial public offering (the "IPO"),
the Company and Mr. Mayo entered into a second amendment to the employment
agreement and agreed that his employment term will be extended through September
30, 2006; however, it will be automatically renewed for successive one-year
terms unless written notice is given by either the Company or Mr. Mayo at least
six months prior to the end of the term (as may be extended) that such party
desires to terminate the agreement. The Company and Mr. Mayo have further agreed
his combined annual salary and bonus will be limited to $1.2 million in any
fiscal year. Under his employment agreement, Mr. Mayo has agreed to not disclose
or use any confidential information of the Company and, for a period of one year
after the termination or expiration of his agreement, not to compete with the
Company, within certain geographical limitations. The Company may terminate Mr.
Mayo's employment if Mr. Mayo is convicted of theft or embezzlement, fraud,
unauthorized appropriation of any assets or property or any felony involving
dishonesty or moral turpitude. In the event of such termination, the Company
will pay only any earned but unpaid salary up to the date of termination. If the
Company terminates Mr. Mayo for any other reason, Mr. Mayo will be entitled to
receive his salary until the scheduled expiration of the agreement, during which
time Mr. Mayo will be obligated to seek other employment.
DIRECTORS' COMPENSATION
The Company's directors do not presently receive any cash compensation for
serving as directors or participating on any committee of the Board, but are
reimbursed for the out-of-pocket expenses that they incur in attending Board
meetings. Non-employee directors are eligible for grants under the Company's
First Amended and Restated 2000 Stock Option Plan and, to date, four present
directors and one former director have been granted options covering an
aggregate of 40,000 shares of Class A Common Stock for services provided by them
as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED ABOVE.
11
AMENDMENT TO FIRST AMENDED AND RESTATED 2000 STOCK OPTION PLAN (PROPOSAL TWO)
The Board adopted the Company's 2000 Stock Option Plan, on June 1, 2000 and, in
July 2000, the Company's stockholders approved this plan by written consent.
Under this plan, which was amended and restated in January 2003 pursuant to the
First Amended and Restated 2000 Stock Option Plan (as amended, the "Plan") and
further amended in September 2003, the Company may grant both incentive and
non-statutory stock options to the Company's employees, non-employee directors
and consultants. The primary purpose of the Plan is to enable the Company to
attract, retain and motivate its employees, non-employee directors and
consultants. The current Plan authorizes up to 600,000 shares of the Company's
Class A Common Stock for issuance upon the exercise of options granted under the
Plan. As of September 1, 2004, stock options covering 548,231 shares of the
Company's Class A Common Stock had been granted under the Plan. The total market
value of the Class A Common Stock underlying these options was $2,713,743 as of
September 1, 2004. However, stock options covering 498,231 shares of Class A
Common Stock are currently out-of-the-money.
Pursuant to Amendment No. 2 to the Plan in the form attached hereto as APPENDIX
C, the Board proposes to amend the Plan to increase the number of shares of
Class A Common Stock authorized for issuance upon the exercise of options from
600,000 to 850,000. This proposal requires approval by a majority of the
outstanding votes cast at the Annual Meeting.
The following table sets forth certain information, as of March 31, 2004,
regarding the shares of the Company's Class A Common Stock authorized for
issuance under the current Plan.
STATUS OF THE CURRENT PLAN (WITHOUT PROPOSED AMENDMENT)
Number of Shares of
Number of Shares of of Class A
Class A Common Weighted average Common Stock
Stock issuable upon of exercise price ($) remaining
exercise of outstanding of outstanding available forE
Plan Options (#) Options ($) future issuance(#)
---- ----------- ----------- -------------------
First Amended and Restated 2000
Stock Option Plan approved by
stockholders........................ 520,564 $6.12 79,436
Compensation plans not approved by
stockholders........................ N/A N/A N/A
Under the Plan, stock options covering no more than 100,000 shares of Class A
Common Stock may be granted to any participant in any single calendar year and
no participant may be granted incentive stock options with an aggregate fair
market value, as of the date on which such options were granted, of more than
$100,000 becoming exercisable for the first time in any given calendar year.
Options granted under the Plan expire 10 years following the date of grant (or
such shorter period of time as may be provided in a stock option agreement or
five years in the case of incentive stock options granted to stockholders who
own greater than 10% of the total combined voting power of the Company) and are
subject to restrictions on transfer. Options granted under the Plan vest
generally over three-year periods. The Plan is administered by the Board.
12
The Plan provides for the granting of incentive stock options with exercise
prices of not less than 100% of the fair market value of the Company's Common
Stock on the date of grant. Incentive stock options granted to holders of more
than 10% of the total combined voting power of the Company must have exercise
prices of not less than 110% of the fair market value of the Company's Common
Stock on the date of grant. Incentive and non-statutory stock options granted
under the Plan are subject to vesting provisions, and exercise is subject to the
continuous service of the optionee. The exercise prices and vesting periods (if
any) for non-statutory options are set in the discretion of the Board. Upon a
change of control of the Company, all options (incentive and non-statutory) that
have not previously vested will become immediately and fully exercisable. In
connection with the grants of options under the Plan, the Company and the
participants have executed stock option agreements setting forth the terms of
the grant.
The following is a brief summary of the principal anticipated federal income tax
consequences of grants under the Plan to recipients and the Company. This
summary is not intended to be exhaustive and does not describe all federal,
state or local tax laws.
OPTION GRANTS. Options granted under the Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the IRC or
non-statutory options which are not intended to meet such requirements. The
federal income tax treatments for the two types of options are as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the time
of the option grant, and no taxable income is generally recognized at the time
the option is exercised, provided that the optionee may incur alternative
minimum tax liability upon exercise. The optionee will, however, recognize
taxable income in the year in which the purchased shares of Class A Common Stock
are sold or otherwise made the subject of a taxable disposition.
For federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares of Class A
Common Stock for more than two (2) years after the option grant date and more
than one (1) year after the exercise date. If either of these two holding
periods is not satisfied, then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term capital
gain in an amount equal to the excess of (i) the amount realized upon the sale
or other disposition of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the shares of Class A
Common Stock, then the excess of (i) the fair market value of those shares on
the exercise date over (ii) the exercise price paid for the shares will be
taxable as ordinary income to the optionee. Any additional gain or loss
recognized upon the disposition will be recognized as a capital gain or loss by
the optionee.
If the optionee makes a disqualifying disposition of the purchased shares of
Class A Common Stock, then the Company will be entitled to an income tax
deduction, for the taxable year in which such disposition occurs, equal to the
excess of (i) the fair market value of such shares on the option exercise date
over (ii) the exercise price paid for the shares. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition of the
purchased shares of Class A Common Stock.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon the
grant of a non-statutory option. The optionee will in general recognize ordinary
income in the year in which the option is exercised, equal to the excess of the
fair market value of the purchased shares of Class A Common Stock on the
exercise date over the exercise price paid for the shares, and the optionee will
be required to satisfy the tax withholding requirements applicable to such
income.
13
The Company will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
AMENDMENT TO THE PLAN.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, executive
officers and persons who beneficially own more than 10% of its Common Stock to
file reports of ownership and changes in ownership with the Commission and to
furnish the Company with copies of all such reports they file. Based on the
Company's review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that except
as described in the next sentence, none of its directors, executive officers or
persons who beneficially own more than 10% of the Company's Common Stock failed
to comply with Section 16(a) reporting requirements in the Company's Last Fiscal
Year. Mr. Mayo failed to timely file a Form 4 regarding six custodial purchases
of the Company's Common Stock and Mr. Davidoff failed to timely file a Form 4
regarding his exchange of a previously issued note for a new note which is
convertible at any time into shares of the Company's Class A Common Stock.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In December 2002, A. Dale Mayo returned 30,000 shares of the Company's Class B
Common Stock and Brett E. Marks, Kevin A. Booth and Kevin J. Farrell returned
10,000, 10,000 and 10,000 shares, respectively, of Class A Common Stock and
received no consideration from the Company for such returned shares.
In connection with the execution of one of the Company's long-term real property
leases, A. Dale Mayo and Brett E. Marks posted a letter of credit in the
aggregate amount of $525,000 in June 2000. This letter of credit was reduced by
one-third in each of the three successive years and terminated in June 2003. The
Company reimbursed Messrs. Mayo and Marks for the issuance costs of
approximately $10,000 for the letter of credit.
Wayne Clevenger and Matthew Finlay, two of the Company's directors, are
directors of MidMark, which previously held all of the Company's outstanding
Series A and Series B preferred stock and related contingent warrants. In
connection with its purchase of shares of the Company's Series A and Series B
preferred stock, the Company paid MidMark a $75,000 investment banking fee. In
September 2003, the Company entered into an exchange agreement with MidMark,
under which the Company agreed to issue 2,207,976 additional shares of Class A
Common Stock to MidMark in exchange for all of the Company's outstanding shares
of Series A and Series B preferred stock, including accrued dividends thereon,
and through the exercise and exchange of certain warrants. Upon the IPO, MidMark
14
(i) converted all 8,202,929 shares of its Series A and Series B preferred stock
into 1,640,585 shares of Class A Common Stock; (ii) exchanged warrants that were
exercisable, subject to certain future conditions, for up to 951,041 shares of
Class A Common Stock, for 320,000 shares of Class A Common Stock; (iii)
exercised a warrant exercisable for up to 144,663 shares of Class A Common Stock
(143,216 shares on a cashless-exercise basis); and (iv) accepted 104,175 shares
of Class A Common Stock as payment of all accrued dividends on shares of Series
A and Series B preferred stock held by such stockholder. The number of shares of
Class A Common Stock issued as payment of accrued dividends was calculated at
the offering price of $5.00. Additionally, MidMark also purchased $333,000 of
one-year notes, which was repaid in April 2002, and was issued 6,902 of the
one-year notes warrants. Each of these directors have been granted options to
purchase 10,000 shares of the Company's Class A Common Stock. The Company paid
MidMark Investments, Inc., the operating company of MidMark, a management fee of
$50,000 per year until November 2003.
From March 2002 to August 2002, the Company borrowed from and issued five-year
promissory notes (each bearing interest at 8% per year) to, Mr. Mayo, Mr. Marks,
CMNY Capital II, L.P., John L. O'Hara, a member of the Company's board of
advisors, and several other investors in the aggregate principal amount of
$3.175 million. From June 2003 to July 2003, the Company borrowed from, and
issued five-year promissory notes (each bearing interest at 8% per year) to, Mr.
O'Hara and several other investors in the aggregate principal amount of $1.23
million. In connection with these five-year notes, the Company granted to these
investors ten-year warrants with an exercise price of $0.05 per share to
purchase up to an aggregate of 440,500 shares of Class A Common Stock, which
warrants were exercised before the completion of the IPO. Messrs. Mayo, Marks
and O'Hara and CMNY Capital II, L.P. have exercised all of the warrants attached
to the five-year notes held by them and purchased an aggregate of 142,500 shares
of Class A Common Stock. The net proceeds of the five-year note issuances were
used to repay the one-year notes and to fund the Company's working capital
requirements.
On March 24, 2004, pursuant to an exchange offer (the "Exchange Offer"), the
Company exchanged $2.5 million and $1.7 million aggregate principal amount of
five-year promissory notes for shares of Class A Common Stock and for longer
term 6% convertible notes, respectively. The Company issued 707,477 unregistered
shares of Class A Common Stock and $1.7 aggregate principal amount of
convertible notes convertible into a maximum of 308,225 shares of Class A Common
Stock (i) at any time up to the maturity date at each holder's option or (ii)
automatically on the date when the average closing price on the American Stock
Exchange of the Class A Common Stock for 30 consecutive trading days has been
equal to or greater than $12.00.
A. Dale Mayo and Brett E. Marks invested $250,000 and $125,000, respectively, in
the Company's offering of one-year 8% notes and received warrants to purchase
4,601 and 2,301 shares, respectively, of Class A Common Stock at $0.05 per
share. These notes were repaid prior to March 31, 2002. Messrs. Mayo and Marks
invested $250,000 and $125,000, respectively, in the Company's offering of
five-year 8% promissory notes and received warrants to purchase 25,000 and
12,500 shares, respectively, of Class A Common Stock at $0.05 per share. In
September 2003, all of the warrants that were attached to the Company's one-year
and five-year promissory notes held by Messrs. Mayo and Marks were exercised. In
March 2004, Messrs. Mayo and Marks participated in the Exchange Offer and
exchanged their 5-year notes and accrued interest totaling $382,000 for
convertible notes, convertible into 67,713 shares of Class A Common Stock. As of
March 31, 2003 and 2004, the principal due to these executive officers of
$375,000 and $382,000, respectively, is included in notes payable.
15
Warren H. Colodner, one of the Company's former directors, is a partner in the
law firm of Kirkpatrick & Lockhart LLP, which provided legal services to the
Company until November 2003, including handling legal matters related to the
IPO. For the fiscal years ended March 31, 2003 and 2004, the Company purchased
approximately $124,000 and $639,000, respectively, of legal services from this
firm. Mr. Colodner was granted options to purchase 4,000 shares of Class A
Common Stock.
Robert Davidoff, one of the Company's directors, is the general partner of CMNY
Capital II, L.P., which holds 157,927 shares of Class A Common Stock, and a
director of Sterling/Carl Marks Capital, Inc., which holds 51,025 shares of
Class A Common Stock. CMNY Capital II, L.P. also invested $1 million in the
Company's offering of one-year promissory notes, which was repaid in March 2002,
and invested $1 million in the Company's offering of five-year promissory notes.
The warrants attached to such one-year and five-year notes were exercised in
August 2003 and are included in the share numbers above. Mr. Davidoff has also
been granted options to purchase 9,000 shares of Class A Common Stock. In March
2004 CMNY Capital II, LP participated in the Exchange Offer and exchanged its
five-year promissory notes and accrued interest totaling $1 million for
convertible notes, convertible into 180,569 shares of Class A Common Stock. As
of March 31, 2003 and 2004, the principal due to CMNY Capital II, LP of $1
million in each of those years, is included in notes payable.
Harvey Marks, a member of the Company's board of advisors, is the father of
Brett E. Marks, one of the Company's founders and executive officers, and is a
partner in an entity that performs real estate services for the Company. The
Company incurred real estate commissions of $26,000 related to services provided
by this entity during the fiscal year ended March 31, 2002. Harvey Marks also
has been granted options to purchase 41,025 shares of Class A Common Stock at a
weighted average exercise price of $6.83 per share.
In the fiscal years ended March 31, 2003 and March 31, 2004, MidMark
Investments, Inc., the operating company of MidMark, received $50,000 per year
for management services rendered. Messrs. Clevenger and Finlay are the Managing
Director and Vice President, respectively, of MidMark Investment, Inc.
In January 2003, the Board approved the purchase of two separate ten-year, term
life insurance policies on the life of A. Dale Mayo. Each policy carries a death
benefit of $5 million, and the Company is the beneficiary of each policy. Under
one of the policies, however, the proceeds will be used to repurchase, after
reimbursement of all premiums paid by the Company, some or all of the shares of
the Company's capital stock held by Mr. Mayo's estate at the then-determined
fair market value.
In connection with the Hollywood SW acquisition, the Company purchased all of
the outstanding capital stock of Hollywood SW from its security holders, David
Gajda and Robert Jackovich, on November 3, 2003. Messrs. Gajda and Jackovich
have continued as executive officers of Hollywood SW under new employment
agreements and have received an aggregate of 400,000 unregistered shares of the
Company's Class A Common Stock, less 40,444 unregistered shares of Class A
Common Stock that were issued to certain optionees of Hollywood SW.
Hollywood SW and Hollywood Media Center, LLC, a limited liability company that
is 95% owned by David Gajda, one of the sellers of Hollywood SW, entered into a
Commercial Property Lease, dated January 1, 2000, for 2,115 square feet of
office space. The Company has assumed Hollywood SW's obligations under this
lease pursuant to the acquisition, including the monthly rental payments of
$2,335. The lease is currently a month-to-month tenancy with the same monthly
rent. Mr. Gajda is the President of Hollywood SW. On May 1, 2004 an additional
933 square feet were rented on a month-to-month basis for monthly additional
rental payments of $1,000.
16
In connection with Russell J. Wintner's employment arrangement with Access
Digital Media, Inc. ("AccessDM"), one of the Company's subsidiaries, the Company
paid Mr. Wintner a finder's fee of $25,000 during the fiscal year ended March
2004, in connection with his efforts related to the Hollywood SW acquisition.
The Company entered into a consulting agreement with Kevin A. Booth, one of the
Company's co-founders and directors, following the termination of his employment
with the Company as of July 5, 2003. Under the terms of the agreement, Mr. Booth
agreed to provide consulting services to the Company in connection with the IPO
and the Company's acquisition of Hollywood SW, for which he was paid $10,000 per
month (plus reasonable out-of-pocket expenses) for the period beginning on July
5, 2003 through September 30, 2003. The Company also paid Mr. Booth $20,000 in
November 2003 in connection with the completion of the IPO. After September 30,
2003, the Company may, in its sole discretion, retain Mr. Booth's services for
future projects on mutually agreed to terms. Mr. Booth has agreed that the term
of his confidentiality, non-solicitation and non-compete agreement, which he
entered into as of April 10, 2000, will remain in effect through July 4, 2004.
In connection with the acquisition of Core, the Company purchased all of the
outstanding capital stock of Core from its sole security holder, Erik Levitt, on
January 9, 2004. Mr. Levitt continued as an executive officer of Core under a
new employment agreement and as consideration for the sale of Core capital
stock, received $250,000 and 100,000 unregistered shares of Class A Common
Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of September 1, 2004, the Company's directors, executive officers and
principal stockholders beneficially own, directly or indirectly, in the
aggregate, approximately 49% of its outstanding Class A Common Stock and 100% of
its Class B Common Stock. Class B Common Stock entitles the holder to ten votes
per share of Class B Common Stock and Class A Common Stock entitles the holder
to one vote per share of Class A Common Stock. In particular, A. Dale Mayo, the
Company's President and Chief Executive Officer, beneficially holds 1,005,811
shares of Class B Common Stock and 9,601 shares of Class A Common Stock, which
represent approximately 54% of the total voting power of the Company's
outstanding Common Stock. These stockholders, and Mr. Mayo himself, will have
significant influence over the Company's business affairs, with the ability to
control matters requiring approval by the Company's stockholders, including the
two proposals set forth in this Proxy Statement as well as approvals of mergers
or other business combinations.
17
The following table sets forth as of September 1, 2004, certain information with
respect to the beneficial ownership of the Common Stock as to (i) each person
known by the Company to beneficially own more than five percent of the
outstanding shares of the Company's Common Stock, (ii) each of the Company's
directors, (iii) each of the Company's Named Executives and (iv) all of the
Company's directors and executive officers as a group.
CLASS A COMMON STOCK
--------------------
SHARES BENEFICIALLY OWNED(a)
----------------------------
NAME AND ADDRESS (b) NUMBER PERCENT OF CLASS
-------------------- ------ ----------------
A. Dale Mayo...................................... 1,015,412 (c) 10.6%
Brett E. Marks.................................... 533,563 (d) 6.2%
Kevin J. Farrell.................................. 305,000 3.6%
Gary S. Loffredo.................................. 110,000 (e) 1.3%
Jeff Butkovsky.................................... 56,667 (f) *
Brian Pflug....................................... 65,186 (g) *
Robert Davidoff, 40 Stoner Avenue
Great Neck, NY 11021............................. 2,667 (h) *
Gerald Crotty..................................... 667 (h) *
MidMark Equity Partners II, L.P.,
177 Madison Avenue, Morristown, NJ 07960........ 2,214,879 25.8%
MidMark Advisors II, LLC,
177 Madison Avenue, Morristown, NJ 07960........ - (i) -
Wayne L. Clevenger, c/o MidMark Equity Partners
II, L.P., 177 Madison Avenue, Morristown, NJ 07960 - (j) -
Matthew Finlay, c/o MidMark Equity Partners
II, L.P., 177 Madison Avenue, Morristown, NJ 07960 - (k) -
All directors and executive officers as a group.... 4,763,596 48.8%
--------------------
* Less than 1%
(a) Applicable percentage of ownership is based on 8,574,947 shares of Class A
Common Stock outstanding as of September 1, 2004 together with all
applicable options, warrants and other securities convertible into shares
of the Company's Class A Common Stock for such stockholder. Beneficial
ownership is determined in accordance with the rules of the SEC, and
includes voting and investment power with respect to shares. Shares of
Class A Common Stock subject to options, warrants or other convertible
securities exercisable within 60 days after September 1, 2004 are deemed
outstanding for computing the percentage ownership of the person holding
such options, warrants or other convertible securities, but are not deemed
outstanding for computing the percentage of any other person. Except as
otherwise noted, the named beneficial owner has the sole voting and
investment power with respect to the shares shown.
(b) Unless otherwise indicated, the business address of each person named in
the table is c/o Access Integrated Technologies, Inc., 55 Madison Avenue,
Suite 300, Morristown, New Jersey 07960.
(c) Includes 905,811 shares of Class B Common Stock held by Mr. Mayo and
100,000 shares of Class B Common Stock held by Mr. Mayo's spouse. Each
share of Class B Common Stock is convertible at any time at the holder's
option into one share of Class A Common Stock. Mr. Mayo disclaims
beneficial ownership of all 100,000 shares of Class B Common Stock held by
Mr. Mayo's spouse. The holder of each share of class B Common Stock is
entitled to ten votes per share of Class B Common Stock. Including the
voting rights of his shares of Class B Common Stock, Mr. Mayo may exercise
up to 54.0% of the total voting power of the Company's Common Stock.
18
(d) Includes 17,764 shares of Class A Common Stock held by Mr. Marks' spouse.
(e) Includes 90,000 shares of Class A Common Stock underlying options
exercisable within sixty days of September 1, 2004 that may be acquired
upon exercise of such options.
(f) Includes 41,667 shares of Class A Common Stock underlying options
exercisable within sixty days of September 1, 2004 that may be acquired
upon exercise of such options.
(g) Includes 45,186 shares of Class A Common Stock underlying options
exercisable within sixty days of September 1, 2004 that may be acquired
upon exercise of such options.
(h) Represents shares of Class A Common Stock underlying options exercisable
within sixty days of September 1, 2004 that may be acquired upon exercise
of such options.
(i) MidMark Advisors II, LLC is the general partner of MidMark Equity Partners
II, L.P.
(j) Mr. Clevenger is a managing director of MidMark Equity Partners II, L.P.
and a managing member of MidMark Advisors II, LLC.
(k) Mr. Finlay is a director of MidMark Equity Partners II, L.P.
CLASS B COMMON STOCK
--------------------
SHARES BENEFICIALLY OWNED(a)
----------------------------
NAME AND ADDRESS NUMBER PERCENT OF CLASS
---------------- ------ ----------------
A. Dale Mayo, c/o Access Integrated Technologies, Inc., 55
Madison Avenue, Suite 300, Morristown, New Jersey 07960...................... 1,005,811 (b) 100.0%
All directors and executive officers as a group.............................. 1,005,811 100.0%
--------------------
(a) Applicable percentage of ownership is based on 1,005,811 shares of Class B
Common Stock outstanding as of September 1, 2004 together with all
applicable options, warrants and other securities convertible into shares
of the Company's Class A Common Stock for such stockholder. Beneficial
ownership is determined in accordance with the rules of the SEC, and
includes voting and investment power with respect to shares. Shares of
Class B Common Stock subject to options, warrants or other convertible
securities exercisable within 60 days after September 1, 2004 are deemed
outstanding for computing the percentage ownership of the person holding
such options, warrants or other convertible securities, but are not deemed
outstanding for computing the percentage of any other person.
(b) Includes 100,000 shares of Class B Common Stock held by Mr. Mayo's spouse.
Mr. Mayo disclaims beneficial ownership of all 100,000 shares of Class B
Common Stock held by Mr. Mayo's spouse. Each share of Class B Common Stock
is convertible at any time at the holder's option into one share of Class A
Common Stock.
19
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Board's Audit Committee ("Audit Committee") oversees the Company's financial
reporting process on behalf of the Board. In fulfilling its oversight
responsibilities, the Audit Committee reviewed and discussed with management the
audited financial statements in the Company's Annual Report on Form 10-KSB,
including a discussion of the acceptability of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements.
The Audit Committee reviewed and discussed with the independent auditors, who
are responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, the matters
required to be discussed by SAS 61 and their judgments as to the acceptability
of the Company's accounting principles and such other matters as are required to
be discussed with the Audit Committee under generally accepted auditing
standards.
In addition, the Audit Committee has discussed with the independent auditors the
auditors' independence from management and the Company, including receiving the
written disclosures and letter from the independent auditors as required by the
Independence Standards Board Standard No. 1, and has considered the
compatibility of any non-audit services with the auditors' independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations and the overall quality of the Company's financial
reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board, and the Board approved, that the audited
financial statements be included in the Annual Report on Form 10-KSB for the
year ended March 31, 2004 for filing with the SEC.
Respectfully submitted,
The Audit Committee of the Board of Directors
Matthew W. Finlay, Chairman
Wayne L. Clevenger
Robert Davidoff
THE FOREGOING AUDIT COMMITTEE REPORT SHALL NOT BE "SOLICITING MATERIAL" OR BE
DEEMED "FILED" WITH THE SEC, NOR SHALL SUCH INFORMATION BE INCORPORATED BY
REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES
IT BY REFERENCE INTO SUCH FILING.
20
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP ("PwC") served as the Company's independent
registered public accounting firm to audit the financial statements of the
Company for the fiscal year ended March 31, 2004, and Eisner LLP ("Eisner") has
been appointed by the Board to serve as the independent registered public
accounting firm to audit the Company's financial statements for the fiscal year
ended March 31, 2005. No representative of either PwC or Eisner will be present
at the Annual Meeting.
On September 9, 2004, the Audit Committee of the Board dismissed PwC as the
Company's independent registered public accounting firm and engaged Eisner as
its new independent registered public accounting firm.
The audit reports of PwC on the Company's consolidated financial statements as
of and for the fiscal years ended March 31, 2003 and March 31, 2004 did not
contain any adverse opinion or disclaimer of opinion and were not modified as to
uncertainty, audit scope or accounting principle.
During the fiscal years ended March 31, 2003 and March 31, 2004 and through
September 9, 2004, there were no disagreements between the Company and PwC on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements if not resolved to PwC's
satisfaction would have caused PwC to make reference thereto in its reports on
the consolidated financial statements for such years.
No reportable events of the type described in Item 304(a)(1)(iv)(B) of
Regulation S-B occurred during the fiscal years ended March 31, 2003 and March
31, 2004 and through September 9, 2004.
During the two fiscal years ended March 31, 2003 and March 31, 2004 and through
September 9, 2004, the Company did not consult with Eisner on any matter that
(i) involved the application of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered on
the Company's financial statements, in each case where written or oral advice
was provided that was an important factor considered by the Company in reaching
a decision as to the accounting, auditing or financial reporting issue; or (ii)
was either the subject of a disagreement, as that term is described in Item
304(a)(1)(iv)(A) of Regulation S-B and the related instruction to Item 304 of
Regulation S-B, or reportable information, as that term is described in Item
304(a)(1)(iv)(B) of Regulation S-B.
PwC furnished the Company with a letter addressed to the SEC stating that it
agrees with the above statements. A copy of PwC's letter was filed as an exhibit
to the Current Report on Form 8-K filed by the Company with the SEC on September
14, 2004 to report this event.
The Company's audit committee has also adopted policies and procedures for
pre-approving all audit and non-audit work performed by PwC, the auditor of the
Company's annual consolidated financial statements for the fiscal years ended
March 31, 2003 and March 31, 2004 and to be performed by Eisner for the fiscal
year ended March 31, 2005. Specifically, the committee has pre-approved the use
of Eisner for performance of audit services and detailed, specific types of
services within the following categories of non-audit services: tax services and
review of the Company's financial statements in connection with its Form 10-QSB
for the fiscal quarter ended September 30, 2004. In each other case, the
committee requires management to obtain specific pre-approval from the committee
for any other work to be performed by Eisner.
21
The aggregate fees billed for professional services by PwC in the fiscal years
ended March 31, 2003 and 2004 for these various services were:
TYPE OF FEES 2003 2004
------------ ---- ----
(1) Audit Fees $339,626 $190,380
(2) Audit-Related Fees 60,685 26,308
(3) Tax Fees 72,084 15,875
(4) All Other Fees 1,400 1,400
------------------ ----- -----
Total $473,795 $233,963
======== ========
In the above table, in accordance with the Securities and Exchange Commission's
definitions and rules, "audit fees" are fees the Company paid PwC for
professional services for the audit of the Company's consolidated financial
statements included in Form SB-2 and Form 10-KSB and review of consolidated
financial statements included in Form SB-2 and Form 10-QSBs, and for services
that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements; "audit-related fees" are fees for assurance
and related services that are reasonably related to the performance of the audit
or review of the Company's consolidated financial statements; "tax fees" are
fees for tax compliance, tax advice and tax planning; and "all other fees" are
fees for any services not included in the first three categories. 100% of the
services set forth in sections (1) through (4) above were approved by the Audit
Committee in accordance with its charter.
OTHER MATTERS
The Board knows of no other business other than that set forth above to be
transacted at the Annual Meeting, but if other matters requiring a vote of the
stockholders arise, the persons designated as proxies will vote the shares of
Common Stock represented by the proxy cards in accordance with their judgment on
such matters.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ A. Dale Mayo
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS
September 22, 2004
22
ACCESS INTEGRATED TECHNOLOGIES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints A. Dale Mayo and Gary S. Loffredo, or either of
them, with full power of substitution, as proxies to vote at the Annual Meeting
of Stockholders of ACCESS INTEGRATED TECHNOLOGIES, INC. (the "Company") to be
held on October 14, 2004 at 2:00 p.m., eastern time, and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of Common Stock of the Company held or owned by the undersigned as
directed on the reverse side of this proxy card, and, in their discretion, upon
such other matters as may come before the meeting. IF NO DIRECTION IS MADE,
SHARES WILL BE VOTED FOR EACH OF THE PROPOSALS BELOW. In addition, the shares
will be voted as the Board of Directors of the Company may recommend with
respect to any other business as may properly come before the meeting or any
adjournment thereof.
1. Election of eight (8) directors (INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S
NAME IN THE LIST BELOW)
FOR all nominees listed to the [__] A. Dale Mayo
right (except as marked to the Kevin J. Farrell
contrary) Gary S. Loffredo
Brett E. Marks
Wayne L. Clevenger
Gerald C. Crotty
Robert Davidoff
Matthew W. Finlay
AGAINST, or ABSTAIN from, voting [__]
for all nominees listed to the right
2. Proposal to amend the Company's First Amended and Restated 2000 Stock
Option Plan to increase the number of shares of Class A Common Stock
available from the grant of options thereunder from 600,000 to 850,000.
FOR AGAINST ABSTAIN
[__] [__] [__]
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
Dated: _________________, 2004
Signature: _____________________
Name: __________________________
I will [_] will not [_] attend the Meeting.
NOTE:Please sign exactly as your name or names appear on
this Proxy. When shares are held jointly, each holder
should sign. When signing as an executor,
administrator, attorney, trustee or guardian, please
give full title as such. If the signer is a
corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If
signer is a partnership, please sign in partnership
name by authorized person. Please date, sign and mail
your Proxy Card in the envelope provided as soon as
possible.
APPENDIX A
ACCESS INTEGRATED TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
STATEMENT OF POLICY
The Audit Committee ("Audit Committee") of Access Integrated Technologies, Inc.
(the "Company") shall provide assistance to the Company's Board of Directors
(the "Board") in fulfilling its responsibility to the Company's stockholders,
potential stockholders and investment community relating to the integrity of
corporate accounting and reporting practices, the quality and integrity of
financial reports of the Company and the process for monitoring compliance with
laws and regulations and its code of ethics. In so doing, it is the
responsibility of the Audit Committee to maintain free and open communication
between the Board, the registered public accounting firm and the financial
management of the Company.
ORGANIZATION
1. The Audit Committee members shall be appointed by the Board.
2. The Audit Committee shall consist of at least two independent
directors. Independence shall be defined in accordance with the
Securities and Exchange Commission ("SEC") guidelines and the American
Stock Exchange ("AMEX") listing standards.
3. At least one member of the Audit Committee shall be a "financial
expert" as defined by the SEC and AMEX.
4. At least one member of the Audit Committee shall be "financially
sophisticated" as defined by AMEX.
5. Audit Committee members must be "financially literate" as defined by
AMEX.
6. The Board, in its discretion, shall make the determination of the
independence and qualifications to serve as a member of the Audit
Committee.
AUTHORITY
1. The Audit Committee has the sole authority for the appointment,
compensation and oversight of the work of any registered public
accounting firm employed by the Company (including resolution of
disagreements between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
related work, and each such registered public accounting firm shall
report directly to the Audit Committee.
A-1
2. The Audit Committee has the sole authority to investigate any matter
brought to its attention within the scope of its duties, with the
authority to engage and determine funding for independent counsel and
other advisers, as it determines necessary to carry out its duties.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its policies
and procedures should remain flexible in order to react best to changing
conditions and to ensure to the Board and the Company's stockholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are appropriate. It should be noted that fundamental
responsibility for construction and disclosure of the Company's financial
statements rests with management.
OVERSIGHT
1. Review and reassess the Audit Committee's responsibilities,
independence, functions and the Company's Audit Committee Charter (the
"Audit Committee Charter"); evaluate its performance and make
appropriate changes to keep pace with the Company and business
developments and to ensure compliance with SEC regulations and AMEX
listing standards.
2. Approve Audit Committee Reports and the Audit Committee Charter as
required by the SEC for inclusion in the proxy statement.
3. Review the qualifications of, and appoint, the registered public
accounting firm to be selected to audit the financial statements of
the Company. Pre-approve fees for annual audit and non-audit fees, as
applicable.
4. Review related party transactions and other potential conflict of
interest situations, as appropriate.
5. Establish, review and revise, as necessary, procedures for the
receipt, retention and treatment of complaints received by the issuer
regarding accounting, internal accounting controls, auditing or other
matters; and ensure the confidential, anonymous treatment of such
complaints. Engage independent counsel and other advisers, as
determined necessary to carry out the Audit Committee's duties.
6. Provide sufficient opportunity for the registered public accounting
firm to meet with the members of the Audit Committee without members
of management present.
7. Review and approve minutes of all Audit Committee meetings and submit
Audit Committee minutes to the Board.
AUDIT AND FINANCIAL REPORTING
1. Review and provide feedback on the registered public accounting firm's
plan and scope for the current year audit.
A-2
2. Review results of the annual audit with management and the registered
public accounting firm.
3. Review the financial statements and management's discussion and
analysis contained in the annual report to the Company's stockholders
with management and the registered public accounting firm. Report the
results of the annual audit to the Board and recommend whether or not
the audited financial statements should be included in the Company's
Annual Report on Form 10-KSB.
4. Review with financial management and the registered public accounting
firm the significant financial reporting issues and practices,
including changes in, or adoptions of, accounting principles and
disclosure practices and any off-balance sheet structures.
5. Review with financial management and the registered public accounting
firm all alternative treatments of financial information within United
States generally accepted accounting principles that have been
discussed with management officials of the Company, the ramifications
of using such alternative disclosures and treatments and the treatment
preferred by the registered public accounting firm. Determine whether
the registered public accounting firm is satisfied with the disclosure
and content of the financial statements to be presented to the
Company's stockholders.
6. Review other written communications provided by the registered public
accounting firm to management, including a schedule of unadjusted
audit differences.
7. As a whole, or through the Audit Committee chair, review with the
registered public accounting firm the Company's interim financial
results to be included in the Company's quarterly reports to be filed
with the SEC. This review will occur prior to the Company's filing for
the Form 10-QSB.
8. Obtain from the registered public accounting firm a statement of all
required communications under United States Generally Accepted
Auditing Standards, including matters required by SAS No. 61 and by
Independence Standards Board Standard No. 1, "Independence Discussions
with Audit Committees." Confirm the registered public accounting
firm's independence with respect to the Company by actively engaging
in dialogue with the auditor with respect to any disclosed
relationships or services that may have an impact on the objectivity
and independence of the registered public accounting firm.
COMPLIANCE AND INTERNAL CONTROL
1. Inquire of management and the registered public accounting firm about any
significant risks or exposures and assess the steps management has taken to
minimize such risks or exposures to the Company.
2. Discuss with management and the registered public accounting firm the
adequacy and effectiveness of the accounting and financial controls of the
Company. Obtain a copy of the registered public accounting firm's
management letter.
3. Review, approve and monitor the Company's code of ethics for its senior
officers, including disclosure to the Board of any exceptions to the code
of ethics.
A-3
4. Review adherence to the Company's code of conduct and policy statements to
determine compliance with the Foreign Corrupt Practices Act of 1977 and
other applicable laws and regulations.
5. Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related Company compliance policies.
6. Review the senior officers' quarterly attestation on financial full
disclosure, internal controls and fraud pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and discuss with management the basis for their
conclusions.
7. Review the registered public accounting firms' attestation on the
effectiveness of the internal control structure and procedures for
financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of
2002 and discuss with the registered public accounting firm the basis for
its conclusions.
A-4
AUDIT COMMITTEE MEETING AGENDA
The table below is intended to serve as a guideline to ensure that the Audit
Committee adequately fulfills all of its obligations. This document will serve
as a supplement to the Audit Committee Charter, organizing Audit Committee
activities by topic and meeting dates. The authority and responsibilities
enumerated here are consistent with those outlined in the Audit Committee
Charter.
Q1 Q2 Q3 Q4 10KSB
Aug Nov Feb June June
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
OVERSIGHT
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
1. Review and reassess the Audit Committee's X
responsibilities, independence, functions and Audit
Committee Charter; evaluate its performance and make
appropriate changes to keep pace with the Company and
business developments and to ensure compliance with
SEC regulations and AMEX listing standards.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
2. Approve Audit Committee Reports and the Audit X
Committee Charter as required by the SEC for inclusion
in the proxy statement.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
3. Review qualifications of and appoint the registered public X
accounting firm to be selected to audit the financial
statements of the Company. Pre-approve fees for annual
audit and non-audit fees as required.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
4. Review related party transactions and other potential X
conflict of interest situations, as appropriate.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
5. Establish, review and revise, as necessary, procedures for X
the receipt, retention and treatment of complaints received by
the issuer regarding accounting, internal accounting controls,
auditing or other matters; and ensure the confidential anonymous
treatment of such complaints. Engage independent counsel and
other advisers, as determined necessary to carry out the Audit
Committee's duties.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
6. Provide sufficient opportunity for the registered public X X X X
accounting firm to meet with the members of the Audit
Committee without members of management present.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
7. Review and approve minutes of all meetings and submit
minutes to the Board.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
A-5
Q1 Q2 Q3 Q4 10KSB
Aug Nov Feb June June
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
AUDIT AND FINANCIAL REPORTING
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
8. Review and provide feedback on the registered public X
accounting firms' plan and scope for the current year
audit.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
9. Review results of the annual audit with management X
and the registered public accounting firm.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
10. Review the financial statements and management's discussion X
and analysis contained in the annual report to the Company's
stockholders with management and the registered public
accounting firm. Report the results of the annual audit to the
Board and recommend whether or not the audited financial
statements should be included in the Company's Annual Report on
Form 10-KSB.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
11. Review with financial management and the registered X X X X
public accounting firm the significant financial reporting
issues and practices, including changes in, or adoptions of,
accounting principles and disclosure practices and any
off-balance sheet structures.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
12. Review with financial management and the registered public X X X X
accounting firm alternative treatments of financial
information within generally accepted accounting principles
that have been discussed with management officials of the
Company, ramifications of the use of such alternative
disclosures and treatments and the treatment preferred by the
registered public accounting firm. Determine whether the
registered public accounting firm is satisfied with the
disclosure and content of the financial statements to be
presented to the Company's stockholders.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
13. Review other written communications provided by the X X X X
registered public accounting firm to management, including
a schedule of unadjusted audit differences.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
14. As a whole, or through the Audit Committee chair, review X X X
with the registered public accounting firm the Company's interim
financial results to be included in the Company's quarterly
reports to be filed with the SEC. This review will occur prior
to the Company's filing of the Form 10-QSB.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
A-6
Q1 Q2 Q3 Q4 10KSB
Aug Nov Feb June June
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
15. Obtain from the registered public accounting firm a X
statement of all required communications under United States
Generally Accepted Auditing Standards, including matters
required by SAS No. 61 and by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit
Committees." Confirm the registered public accounting firm's
independence with respect to the Company by actively engaging in
dialogue with the auditor with respect to any disclosed
relationships or services that may have an impact on the
objectivity and independence of the registered public accounting
firm.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
COMPLIANCE AND INTERNAL CONTROL
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
16. Inquire of management and the registered public accounting X
firm about any significant risks or exposures and assess the
steps management has taken to minimize such risks or exposures
to the Company.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
17. Discuss with management and the registered public accounting X X X X
firm the adequacy and effectiveness of the accounting and
financial controls of the Company. Obtain a copy of the
registered public accounting firm's management letter.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
18. Review, approve and monitor the Company's code of ethics for X
its senior officers, including disclosure to the Board of any
exceptions to the code of ethics.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
19. Review adherence to the Company's code of conduct and policy X
statements to determine compliance with the Foreign Corrupt
Practices Act of 1977 and other applicable laws and regulations.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
20. Review reports received from regulators and other legal and X
regulatory matters that may have a material effect on the
financial statements or related Company compliance policies.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
21. Review the senior officers' quarterly attestation on X X X X
financial full disclosure, internal controls and fraud pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 and discuss
with management the basis for their conclusions.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
22. Review the registered public accounting firms' attestation X
on the effectiveness of the internal control structure
and procedures for financial reporting pursuant to Section 404
of the Sarbanes-Oxley Act of 2002 and discuss with the registered
public accounting firm the basis for its conclusions.
----------------------------------------------------------------------- ------- ------ ------ ------- ---------
A-7
APPENDIX B
ACCESS INTEGRATED TECHNOLOGIES, INC.
CHARTER OF THE NOMINATING COMMITTEE OF THE BOARD OF DIRECTORS
PURPOSE
Acting pursuant to Section 141(c)(2) of the Delaware General Corporation Law and
Section 2.7 of the By-laws of Access Integrated Technologies, Inc. (the
"Company"), the Board of Directors of the Company (the "Board") has established
a Nominating Committee (the "Committee") for the purpose of selecting,
evaluating and recommending to the Board qualified candidates for election or
appointment to the Board.
MEMBERSHIP
The Committee will consist of a minimum of two members of the Board of
Directors, all of whom shall be "independent directors" under the standards set
forth in the rules and regulations of the American Stock Exchange (or such other
securities exchange or market where the Company's securities are primarily
listed), as well as under any additional or supplemental independence standards
applicable to nominating committees established under any applicable law, rule
or regulation. The members of the Committee will be appointed by and serve at
the discretion of the Board. Unless a Chairman of the Committee is elected by
the Board, the members of the Committee may designate a Chairman.
RESPONSIBILITIES
The following shall be the principal recurring duties of the Committee in
carrying out its responsibilities. These duties are set forth as a guide with
the understanding that the Committee may supplement them as appropriate and may
establish policies and procedures from time to time that it deems necessary or
advisable in fulfilling its responsibilities under this Charter, the Company's
By-laws and governing law. The responsibilities of the Committee shall include
(1) annually presenting to the Board a list of individuals recommended for
nomination for election to the Board at the annual meeting of stockholders and
(2) assisting the Board in identifying, interviewing and recruiting candidates
for the Board.
The Committee may establish (i) a policy for the consideration of any director
candidates recommended by stockholders, including a statement that the Committee
will consider director nominations recommended by stockholders, (ii) procedures
to be followed by stockholders in submitting recommendations for director
nominees and (iii) a process for identifying and evaluating nominees.
In carrying out such responsibilities, the Committee shall have the power and
authority to retain such consultants, outside counsel and other advisors as the
Committee may deem appropriate and shall have the sole authority to approve the
fees and other terms of such engagements.
B-1
DIRECTOR QUALIFICATION GUIDELINES
The Committee believes that it is in the best interest of the Company and its
stockholders to identify and select highly-qualified candidates to serve as
directors. The Committee will seek candidates for election and appointment who
possess the skills and characteristics listed on ANNEX A hereto and who are
committed to staunchly representing the interests of the stockholders. The
Committee also believes that the Board should be comprised of a group of
individuals who have been associated with institutions noted for excellence and
who have broad experience and the ability to exercise sound business judgment.
MEETINGS AND REPORTS
The Committee will hold a regular meeting at least once each year generally in
conjunction with regularly scheduled meetings of the Board, and such special
meetings as the Chairman of the Committee or the Chairman of the Board may
direct. The Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board. The
Committee will make regular reports to the Board.
B-2
ANNEX A TO NOMINATING COMMITTEE CHARTER
SKILLS AND CHARACTERISTICS FOR DIRECTORS
BOARD COMPOSITION
The Board as a whole should possess the following core competencies:
1. Accounting, Finance and Disclosure: ability to protect and inform
stockholders and debtholders through liquidity and capital resource
management and internal financial and disclosure controls;
2. Business Judgment: ability to assess business risk and stockholder
valuation creation strategies;
3. Management: ability to apply general management best practices in a
complex, rapidly evolving business environment;
4. Crisis Response: ability and time to perform during periods of both
short-term and prolonged crisis;
5. Industry Knowledge: ability to assess opportunities and threats unique to
the Company's industry;
6. Leadership: ability to attract, motivate and energize a high-performance
leadership team; and
7. Strategy/Vision: ability to provide strategic insight and direction by
encouraging innovation, conceptualizing key trends, evaluating strategic
decisions and continuously challenging the Company to sharpen its vision.
SPECIFIC QUALIFICATIONS
Directors should have the following skills and characteristics:
1. Have high personal standards of:
a. Integrity;
b. Honesty; and
c. Desire to make full disclosure of all present and future
conflicts of interest.
2. Have the ability to make informed business judgments;
3. Have literacy in financial and business matters;
4. Have the ability to be an effective team member;
5. Have a commitment to active involvement and an ability to give priority to
the Company;
6. Have no material affiliations with direct competitors;
B-3
7. Have achieved high levels of accountability and success in his or her given
fields;
8. Have no geographic travel restrictions;
9. Have an ability and willingness to learn the Company's business;
10. Preferably have experience in the Company's business or in professional
fields (i.e. finance, accounting, law or banking) or in other industries or
as a manager of international businesses so as to have the ability to bring
new insight, experience or contacts and resources to the Company;
11. Preferably have no direct affiliations with major suppliers or vendors; and
12. Preferably have previous public company board experience together with good
references.
B-4
APPENDIX C
AMENDMENT NO. 2
TO
FIRST AMENDED AND RESTATED
ACCESS INTEGRATED TECHNOLOGIES, INC. 2000 STOCK OPTION PLAN
AMENDMENT NO. 2, dated as of October ___, 2004 (this "Amendment"), to the
First Amended and Restated 2000 Stock Option Plan (as amended, the "Plan") of
Access Integrated Technologies, Inc., a Delaware corporation (the
"Corporation").
WHEREAS, the Corporation maintains the Plan, effective as of June 1, 2000;
and
WHEREAS, in order to provide the Corporation with the flexibility to be
able to grant additional stock options to its employees, the Board of Directors
of the Corporation deems it to be in the best interest of the Corporation and
its stockholders to amend the Plan in order to increase the maximum number of
shares of the Corporation's Class A Common Stock, par value $.001 per share,
which may be issued and sold under the Plan from 600,000 shares to 850,000
shares.
NOW, THEREFORE, BE IT RESOLVED the Plan is hereby amended as follows:
1. The first and second sentences of Section 4.01 shall be revised and
amended to read as follows:
"The maximum number of shares authorized to be issued under the Plan and
available for issuance as Options shall be 850,000 shares of Common Stock. No
more than 100,000 shares shall be granted as an Option to any Participant in any
single calendar year."
2. This Amendment shall be effective as of the date first set forth above,
which is the date that this Amendment was approved by a majority of the
outstanding votes cast at the October 14, 2004 meeting of the holders of the
Corporation's Class A Common Stock and Class B Common Stock.
3. In all respects not amended, the Plan is hereby ratified and confirmed
and remains in full force and effect.
ACCESS INTEGRATED TECHNOLOGIES, INC.
By:
-----------------------------------------
A. Dale Mayo,
President, Chief Executive Officer and
Chairman of the Board of Directors
C-1