SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement.
[X ] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (check the appropriate box):
[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
9 Fee paid previously with preliminary materials.
9 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
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NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Thursday, May 29, 2003
Notice is hereby given that the Annual Meeting of Shareholders of
Integrated Business Systems and Services, Inc., a South Carolina corporation,
will be held at the Company's headquarters, 1601 Shop Road, Suite E, Columbia,
South Carolina on Thursday, May 29, 2003 at 10:00 a.m. local time for the
following purposes:
(1) Election of directors;
(2) Ratification of the appointment of Scott McElveen, LLP as the Company's
independent auditors for the fiscal year ending December 31, 2003; and
(3) Transaction of such other business as may properly come before the Annual
Meeting or any adjournment of the Annual Meeting.
These items of business and the means by which you are entitled to vote at
the Annual Meeting are more fully described in the proxy statement that
accompanies this Notice.
Only shareholders whose names appeared of record on the stock records of
the Company on April 11, 2003 will be entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement of the Annual Meeting.
You are cordially invited and urged to attend the Annual Meeting in person,
but if you are unable to do so, please date, sign and promptly return to the
Company's stock transfer agent the enclosed proxy card in the enclosed,
self-addressed, postage-paid envelope. If you attend the Annual Meeting and
desire to revoke your proxy and vote in person, you may do so. In any event, a
proxy may be revoked at any time before it is exercised.
By Order of the Board of Directors,
/s/ George E. Mendenhall, Ph.D.
----------------------------------------------
George E. Mendenhall, Ph.D.
Chief Executive Officer and Chairman of the Board
Columbia, South Carolina
April 30, 2003
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INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
Suite E, 1601 Shop Road
Columbia, South Carolina 29201
PROXY STATEMENT
FOR THE 2003 ANNUAL MEETING OF SHAREHOLDERS
QUESTIONS AND ANSWERS
ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
1. Why am I receiving these materials?
The Board of Directors of Integrated Business Systems and Services, Inc.
(or the "Company") is providing you with these proxy materials in connection
with its solicitation of proxies to be used in voting at the 2003 Annual Meeting
of Shareholders of the Company. The Annual Meeting will be held at the Company's
headquarters at 1601 Shop Road, Suite E, Columbia, South Carolina, on Thursday,
May 29, 2003, at 10:00 a.m. As a shareholder, you are requested to vote on the
proposals described in this proxy statement and in the accompanying proxy card.
These proxy materials are first being mailed on or about April 30, 2003 to our
shareholders of record.
2. What is a proxy statement?
It is a document that the regulations of the United States Securities and
Exchange Commission require us to give you when we ask you to sign a proxy card
designating proxies to vote on your behalf.
3. What is a proxy or a proxy card?
A proxy is your legal designation of another person to vote the shares of
our common stock that you own. That other person is called a proxy. If you
designate someone as your proxy in a written document, that document also is
called a proxy or a proxy card. As is our usual practice, two of our employees
have been designated as proxies for the 2003 Annual Meeting. By completing and
returning the proxy card, you are authorizing these two individuals to vote your
shares at the Annual Meeting as you have instructed them on the proxy card. In
this way, you can vote your shares whether or not you attend the Annual Meeting.
4. Who can vote at the Annual Meeting?
Our Board of Directors has established April 11, 2003 as the record date
for determining the shareholders entitled to vote at the Annual Meeting. You can
vote at the meeting, either in person or by proxy, only if you were a
shareholder of record of our common stock at the close of business on the record
date. A list of shareholders eligible to vote will be available at our
headquarters at 1601, Shop Road, Suite E, Columbia, SC 29201 beginning on May
19, 2003. Shareholders may examine this list during normal business hours for
any purpose relating to the Annual Meeting.
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5. What am I being asked to vote on?
As described in the Notice of Annual Meeting accompanying this proxy
statement, we are asking you to vote on:
(a) the election of three directors, and
(b) the ratification of Scott McElveen, LLP as our independent
auditors for the fiscal year ending December 31, 2003.
6. Can other matters be voted upon at the Annual Meeting?
The Board of Directors does not presently intend to bring up for a
shareholder vote at the Annual Meeting any business other than the specific
proposals referred to above. So far as is known to the Board of Directors, no
other matters are to be brought before the Annual Meeting. If any other business
properly comes before the Annual Meeting, it is intended that proxies, in the
form accompanying this proxy statement, will be voted on such matters in
accordance with the judgment of the persons voting such proxies.
7. How do I vote?
If you were a shareholder of record on the record date, you can vote either
(a) by filling out the enclosed proxy card, dating and signing it,
and mailing it in the enclosed envelope or delivering it in
person to the Company at or prior to the meeting, or
(b) by voting in person by written ballot distributed at the meeting.
If you are a shareholder who held your shares in street name on the record
date, the broker, bank , trustee or other nominee holding your shares will send
you separate instructions describing the procedures and providing the
documentation for your use in voting your shares. Each share of our common stock
is entitled to one vote on each matter to be voted upon at the Annual Meeting.
8. What is the difference between a "shareholder of record" and a shareholder
who holds stock in "street name"?
(a) Shareholder of Record. You are a shareholder of record only if the
actual stock certificates representing your shares of our common stock are
registered directly in your name with our stock transfer agent. If so, these
proxy materials are being sent directly to you by the Company, and you have the
right to vote in person at the meeting or to grant your proxy directly to the
Company by using the proxy card enclosed with these materials.
(b) Street Name Holder. If the certificates representing your shares are
registered and held in the name of a broker, bank, trustee or other nominee,
then you are considered to be the "beneficial owner" of those shares, and they
are referred to as being held in "street name." If you hold your shares in
street name, these proxy materials are being forwarded to you by your broker or
other nominee who is the shareholder of record of those shares. Your broker or
nominee is required to provide you with a voting instruction card for you to use
instead of the proxy card that is being sent to our shareholders of record. As
the beneficial owner, you have the right to direct your broker on how to vote,
and you are also invited to attend the Annual Meeting. However, if you are not
the shareholder of record, you may not vote your shares in person at the meeting
unless you follow the procedure described in response to Question 10 below.
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9. If I hold all or part of my shares in street name, can I vote those shares
by delivering to the Company the voting instruction card received by me
from my broker or other nominee?
No. As noted above, only shareholders of record can vote at the Annual
Meeting. Voting cards or other documents sent to you by your broker or other
nominee cannot be accepted by the Company to record your vote.
10. If my shares are held in street name, is there any way I can still vote
those shares in person at the Annual Meeting?
Yes. If your shares are held in street name, but you desire to vote those
shares in person at the meeting instead of having them voted by your broker or
other nominee, then you will need to ask your broker or other nominee for a
legal proxy entitling you to vote your shares directly at the meeting. You must
bring that legal proxy with you to the meeting in order to have your vote
counted. Please note that if your shares are held in street name and you request
a legal proxy, any voting card previously completed by you with respect to your
shares will be revoked, and your vote will not be counted unless you appear at
the meeting and vote in person.
11. What is required for me to attend the meeting in person?
All shareholders will need to present proper photo identification to the
registration desk outside of the meeting room in order to be admitted to the
Annual Meeting. If you are a shareholder of record, presentation of this
identification is all that is required. If your shares are held in street name,
however, you will also need to present either one of the following:
(a) the legal proxy received from your broker or other nominee as
described in the preceding paragraph, or
(b) if you have not received the legal proxy, your most recent
brokerage statement. We can use that statement to verify your
ownership of our common stock and admit you to the meeting.
However, you will not be able to vote your shares at the meeting
without the legal proxy described in the preceding paragraph.
12. If I vote by proxy, can I change my vote later?
Yes. If you are a shareholder of record, you can revoke your proxy and
change your vote prior to the completion of voting at the meeting by any one of
the following methods:
(a) delivering to the Secretary of the Company a later-dated written
notice revoking your proxy,
(b) delivering to the Secretary of the Company a later-dated proxy,
or
(c) voting in person at the meeting.
Please note that your attendance at the Annual Meeting will not, by itself,
revoke a duly executed proxy. If your shares are held in street name, you may
change your vote only by submitting new voting instructions to your broker or
other nominee.
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13. Can my shares be voted if I don't return my proxy card and don't attend the
annual meeting?
If you are the shareholder of record of any shares and you do not vote
those shares by proxy or in person, those shares will not be voted. If any of
your shares are held in street name, your broker or other nominee can vote your
shares on any of the matters scheduled to come before the meeting. If your
broker or other nominee does not have discretion to vote your shares held in
street name on a particular proposal, and you do not give your nominee
instructions on how to vote your shares, your shares will not be voted on that
proposal. This is called a "broker non-vote." Broker non-votes will have no
effect on the vote on any matter scheduled to be voted upon at the Annual
Meeting.
14. What are my voting choices when voting for director nominees? What vote is
needed to elect directors?
In the vote on the election of the three director nominees, you may:
(a) vote in favor of all nominees,
(b) vote to withhold votes as to all nominees, or
(c) vote to withhold votes as to specific nominees.
Directors will be elected by a plurality vote. This means that the director
nominees receiving the greatest number of votes cast (although not necessarily a
majority of the votes cast) in the election of directors are elected to the
Board of Directors. Accordingly, directions to withhold authority, abstentions,
and broker non-votes will have no effect on the outcome of the vote. The
Articles of Incorporation of the Company do not allow for cumulative voting in
the election of directors.
15. What are my voting choices when voting on the ratification of the
appointment of Scott McElveen, LLP as independent auditors? What vote is
needed to ratify their appointment?
In the vote on the ratification of the appointment of Scott McElveen, LLP
as independent auditors, you may:
(a) vote in favor of the ratification,
(b) vote against the ratification, or
(c) abstain from voting on the ratification.
The proposal to ratify the appointment of Scott McElveen, LLP as
independent auditors will require approval by a majority of the votes cast by
the holders of the shares of common stock voting in person or by proxy at the
meeting. Accordingly, abstentions and broker non-votes will have the same effect
as a vote "against" this proposal.
The Board recommends a vote "FOR" this proposal.
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16. What if I don't vote for some matters listed on my proxy card?
You should specify your choice for each matter on the enclosed proxy card.
If you do not mark your voting instructions on the proxy card, then for any
proposal left unmarked on your duly signed proxy card, your shares will be voted
FOR the election of all director nominees and FOR the proposal to ratify the
appointment of Scott McElveen, LLP, as applicable.
17. Is my vote confidential? Who counts the votes?
We will continue our long-standing practice of holding the votes of all
shareholders in confidence from directors, officers and employees except: (a) as
necessary to meet applicable legal requirements and to assert or defend claims
for or against the Company, (b) in case of a contested proxy solicitation, (c)
if a shareholder makes a written comment on the proxy card or otherwise
communicates that shareholder's vote to management, or (d) as we have for many
years, to allow our General Counsel (who will act as the inspector of the
election) to certify the results of the vote.
18. What does it mean if I receive more than one set of proxy materials?
It means that your shares are registered differently or are in more than
one account. Please provide voting instructions for all proxy cards and voting
instruction cards that you receive.
19. How many shares must be present to hold the Annual Meeting?
On the record date, there were 22,286,258 issued and outstanding shares of
our common stock. There are no other outstanding shares of capital stock of the
Company eligible to be voted at the Annual Meeting.
The outstanding shares on the record date were held by approximately 74
shareholders of record. From this group of shareholders, there must be present
at the meeting, either in person or represented by proxy, holders of at least a
majority of these outstanding shares in order to hold and conduct business at
the Annual Meeting. This is called a quorum. For the purposes of determining a
quorum, we will count all shares represented at the meeting, including any
shares as to which there are directions from their respective owner(s) to
withhold authority to vote for directors or to abstain from voting on any
matter, as well as any shares as to which there are broker non-votes.
If a quorum is not present or represented at the Annual Meeting, the
shareholders entitled to vote, present in person or represented by proxy, have
the power to adjourn the meeting from time to time, without notice to you, other
than an announcement at the meeting, until a quorum is present or represented.
Directors, officers and regular employees of the Company may solicit proxies for
the reconvened meeting in person or by mail, telephone or telegraph. At any such
reconvened meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
scheduled. Your proxy will still be good and may be voted at the postponed or
adjourned meeting. You will still be able to change or revoke your proxy until
it is voted.
20. Who is bearing the cost for soliciting votes for the Annual Meeting?
The Company is paying for the distribution and solicitation of the proxies.
As part of this process we reimburse brokers, banks, trustees, nominees,
fiduciaries and other custodians for reasonable fees and expenses in forwarding
proxy materials to our shareholders. Our employees may also solicit proxies
through mail, telephone, the Internet or other means, but they do not receive
additional compensation for providing these services.
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Proposal One
ELECTION OF DIRECTORS
The Board of Directors is currently comprised of seven director seats that
are divided into three classes serving staggered terms, generally three years in
duration. The division into three classes is made so that, as nearly as
possible, the terms of only one-third of the members of the Board of Directors
will expire at each annual meeting of shareholders. Five individuals currently
serve as members of the Board of Directors, and there are two vacancies. Two
directors serve in the class of three directors with a term expiring at the
forthcoming Annual Meeting. Two directors serve in the class of two directors
with a term expiring at the first annual meeting of shareholders following the
forthcoming Annual Meeting. One director serves in the class of two directors
with a term expiring at the second annual meeting of shareholders following the
forthcoming Annual Meeting.
Immediately following last year's annual meeting held on June 13, 2002, the
Board of Directors consisted of three directors, with four vacancies. During the
fourth quarter of 2002, the Board of Directors appointed Ms. Dollie A. Cole and
Mr. Richard D. Pulford as directors to fill two of these four vacancies. Mr.
Pulford was appointed to fill one of the vacancies in the class of three
directors with a term expiring at the forthcoming Annual Meeting. Ms. Cole was
appointed to fill the vacancy in the class of two directors with a term expiring
at the first annual meeting of shareholders following the forthcoming Annual
Meeting.
Mr. Stuart E. Massey and Mr. Richard D. Pulford are the two directors whose
existing terms will expire at the Annual Meeting. The Board of Directors has
nominated each of them for election to the class of directors with a term
expiring at the third annual meeting of shareholders following the forthcoming
Annual Meeting. As noted above, Ms. Cole was appointed by the Board of Directors
in 2002 to serve for a term that extends beyond the date of the forthcoming
Annual Meeting. Because of this, South Carolina corporate law requires that her
service as a director for the period extending beyond the Annual Meeting must be
approved by the shareholders at the forthcoming Annual Meeting. Consequently,
shareholders will be asked to vote for the election of a total of three
directors at the Annual Meeting. For additional information on these three
individuals, please see the information set forth elsewhere in this proxy
statement under the heading "Management - Directors and Executive Officers."
No individuals who are not also currently serving as directors have been
nominated for election as directors at the Annual Meeting. As a result, two
vacancies will continue to exist on the Board of Directors following the Annual
Meeting. Pursuant to the Company's bylaws and applicable South Carolina
corporate law, the five directors who will serve following the Annual Meeting
will have the authority prior to the next annual shareholder's meeting to elect
individuals to fill one or both of these two vacancies. Management is currently
in the process of identifying suitable candidates for election to fill such
vacancies.
The persons named in the accompanying proxy have been designated by the
Board of Directors to vote for the election of the three director nominees
identified above. Unless authority is specifically withheld in a proxy properly
delivered at the Annual Meeting, these designees have indicated that they intend
to vote FOR the election of the three director nominees. You may vote for any
and all nominees, or you may withhold your vote from any or all nominees. In
each case, you may cast your vote by signing and returning the accompanying
proxy card. Where you have appropriately specified how the proxy is to be voted,
it will be voted in accordance with your specifications. Although not
contemplated, in the event that prior to the Annual Meeting any of the three
director nominees becomes unable to serve, the persons named on the enclosed
proxy card will have the authority to vote for the election of other persons in
accordance with their best judgment.
The persons named in the enclosed proxy card will vote the proxy as
specified by you. If no specification is made, the proxy will be voted "FOR" the
election of the nominees listed above.
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Proposal Two
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Scott McElveen, LLP, as
independent auditors to make an examination of the accounts of the Company for
the fiscal year ending December 31, 2003, subject to shareholder ratification.
If the shareholders do not ratify this appointment, other certified public
accountants will be considered by the Board of Directors.
The Board of Directors recommends a vote "for" this proposal. The persons
named in the form of proxy will vote the proxy as specified. If no specification
is made, the proxy will be voted "FOR" the ratification of the Company's
independent auditors.
A representative of Scott McElveen, LLP is expected to be in attendance at
the Annual Meeting and will have the opportunity to make a statement and be
available to respond to appropriate questions.
PROPOSALS FOR THE 2004 ANNUAL MEETING
If you would like to have a proposal considered for inclusion in the proxy
statement for our 2004 annual meeting, we must receive your written proposal at
the address on the cover of this proxy statement, attention Corporate Secretary,
no later than December 31, 2003. A proposal is your recommendation or
requirement that the Company and/or its Board of Directors take action, which
you intend to present at the annual meeting. If you submit any proposal, you
must comply with the proxy rules under the Securities Exchange Act of 1934, as
amended, including Rule 14a-8 of Regulation 14A of that act. Included in the
proxy rules is the requirement that for at least one year prior to submitting
your proposal you have continuously held shares of our common stock with a
market value of at least $2,000, or have held at least one percent of the total
number of our outstanding shares of common stock entitled to be voted on your
proposal at the annual meeting. You must also continue to hold those shares
through the date of the annual meeting.
If you do not comply with the requirements described in the preceding
paragraph, you will not be entitled to have your proposal considered by the
Company for inclusion in the proxy statement for our 2004 annual meeting. In
that event, if you still wish to submit a proposal for consideration at the
annual meeting, recognizing that it will not be included in the proxy statement
for such meeting, we must receive your proposal in accordance with the
requirements set forth in our Bylaws relating to shareholder proposals.
Our Bylaws require timely advance written notice of any proposals to be
presented at an annual meeting of our shareholders. For your notice to be
considered timely, it must be given to and received by the Secretary of the
Company, either by personal delivery or by United States mail, postage prepaid,
return receipt requested, at our principal offices at the address on the cover
of this proxy statement at least ninety days in advance of the annual meeting.
Your notice must set forth as to each matter you propose to bring before the
annual meeting each of the following: (a) a description of the business that you
desire to be brought before the annual meeting, including the specific
proposal(s) you desire to be presented, and the reasons for conducting such
business at the annual meeting; (b) your name and your record address as it
appears on the stock records maintained by our stock transfer agent; (c) the
class and number of shares of our common stock that you own of record as of the
record date for the annual meeting, if such date has been made publicly
available, or as of a date within ten days of the effective date of your notice
if the record date has not been made publicly available, (d) the class and
number of shares of our common stock that you hold beneficially, but not of
record, as of the record date for the annual meeting, if such date has been made
publicly available, or as of a date within ten days of the effective date of
your notice if the record date has not been made publicly available, and (e) any
interest you have in the business described in your notice as set forth above in
item (a) of this paragraph.
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Shareholders desiring to make proposals to be presented at the annual
meeting are directed to these requirements as more specifically set forth in our
Bylaws, a copy of which is available upon request to our Corporate Secretary at
the address listed on the cover of this proxy statement. The chairman of the
annual meeting may exclude from consideration at the annual meeting any matters
that are not properly presented in accordance with these Bylaw requirements.
MANAGEMENT
Directors and Executive Officers
Set forth below is the age and certain biographical information with
respect to each of the Company's directors and executive officers.
Director Nominees
Stuart E. Massey, 43, has served as Executive Vice President of the Company
since September 2001 and as a director of the Company since April of 1991. In
April of 2002, Mr. Massey's title was modified to Executive Vice President and
Chief Technology Officer. Prior to that time, he had served as Vice President of
Engineering. Mr. Massey also serves as Secretary of the Company. His
responsibilities include the day-to-day management and coordination of large
projects, including the continuing maintenance of the Synapse software
configuration tool. Before joining the Company, among other things, Mr. Massey
managed the implementation of an inter-bank financial transaction switch for
automated teller machine and point-of-sale systems and assisted in the design of
financial transaction processing software products for Applied Communications,
Inc. Mr. Massey's experience in the industrial automation industry includes the
design of a variety of computer control systems, such as airport lighting,
industrial machine tool control, inventory control and shop floor control
systems. Mr. Massey received a Bachelor of Science degree in Electrical and
Computer Engineering from the University of South Carolina in 1986.
Richard D. Pulford, 57, has served as a director of the Company since
October 3, 2002. He has served as President of Corporate Strategies, Inc.,
("CSI"), since he founded CSI in 1981. CSI provides investment banking services
in the Great Lakes region of the United States. Until 1987, the primary focus of
CSI was in brokering the purchase and sale of automotive production suppliers,
including transaction negotiations and financing. Since that time, CSI's
concentration has been primarily in the technology arena. Under Mr. Pulford's
direction, CSI has been a contributor in equity capital fund-raising endeavors
for technology start-up companies. Mr. Pulford also operates in a sales
consultant capacity in the automotive industry for a variety of technology
companies, and has provided such services in the past for the Company. Prior to
forming CSI, Mr. Pulford owned and operated a consulting practice specializing
in financing acquisition transactions for operating companies. Mr. Pulford also
held positions in the marketing field after receiving his Masters of Business
Administration in Finance.
Dollie A. Cole, 73, has served as a director of the Company since December
5, 2002. She has been involved for many years in the leadership of several
business, charitable and civic organizations. Dr. Cole is Chairman of the Dollie
Cole Corporation, a venture capital and industrial consulting firm. She serves
on the Board of Directors of HPSC, Inc. (AMEX:HDR), a leading national provider
of capital to healthcare professionals, and serves as a consultant to the Solar
and Electric 500 Company. In addition to these business activities, Dr. Cole
also serves as Vice Chairman of the Smithsonian Institution's National Air and
Space Museum, Chairman of the National Corvette Museum, Vice President of the
Pegasus School for Abused Boys, and serves or has served on the boards of the
100 Club of Central Texas, Project HOPE - the World Health Organization, the
National Captioning Institute for the Hearing Impaired, the President's Circle
of the National Academy of Science, the President's Club of the University of
Michigan, Michigan State Chancellor's Club - Oakland University, and the Myer
Prentess Cancer Foundation.
Continuing Director Whose Term Expires at the Annual Meeting Following the 2003
Annual Meeting
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George E. Mendenhall, Ph.D., 65, has served as Chairman of the Board and
Chief Executive Officer of the Company since September 2001. Prior to that time,
he had served since January 1998 as Vice President of Application Development of
the Company and since May 1995 as Executive Vice President of the Company. He
initially became an employee of the Company in February 1994, serving as the
Director of Industrial Consulting. He has served as a director of the Company
since May 1995. Dr. Mendenhall's responsibilities include the general and active
management of the business of the Company and seeing that all orders and
resolutions of the Board of Directors are carried into effect. Dr. Mendenhall
has conducted academic research and taught economics and other courses at
Indiana University and Indiana Institute of Technology. In addition, he has
published articles concerning research and evaluation techniques, and has been
quoted in such periodicals as Computer World and Industry Week. Before joining
the Company, Dr. Mendenhall provided consulting services and computer systems to
various large manufacturing companies on an independent basis and, from 1990
through February 1994, provided consulting services to the Company. From 1984
until 1989, Dr. Mendenhall was the President of Synergistic Business
Infrastructures Corporation ("SBI"). SBI was a computer systems integrator based
in Fort Wayne, Indiana that specialized, among other things, in the
conceptualization, design and implementation of manufacturing shop floor
systems, data collection systems and material tracking systems. Dr. Mendenhall
received a Bachelor of Science degree in Economics from Manchester College in
1960 and a Master in Economics degree and a Ph.D. in economics from Indiana
University in 1968 and 1978, respectively.
Continuing Director Whose Term Expires at the Second Annual Meeting Following
the 2003 Annual Meeting
Carl Joseph Berger, Jr., 67, has served as a director of the Company since
June 1998. He retired in 1997 from Springs Industries, Inc., a New York Stock
Exchange-listed manufacturer and marketer of home furnishings and specialty
fabrics ("Springs"), after serving for eight years as Corporate Director for
Electronic Data Interchange. During his thirty years with Springs, Mr. Berger
served the company in various positions, including Director of Distribution.
Prior to his service with Springs, he worked in various positions with Milliken
and Company and M. Lowenstein Corporation, both of which are major textile
manufacturers and marketers. He has served on numerous boards and committees,
including the District Three School Board in Rock Hill, South Carolina, where he
also served for ten years as Treasurer. Mr. Berger received his Master's in
Business Administration from Winthrop University and a Bachelor's degree from
the University of Georgia.
Other Executive Officers
William S. McMaster, 45, has served as the Company's Chief Financial
Officer since August 2000 and as the Company's General Counsel since May 2000.
His responsibilities include overseeing the Company's financial reporting,
internal controls, investor relations, treasury and legal compliance functions.
Additionally, he coordinates all capital raising activities as well as any
mergers, acquisitions, strategic alliances or similar transactions. Prior to
joining the Company, he was a partner in the law firm of Nexsen Pruet Jacobs &
Pollard, LLC in Columbia, South Carolina where he was the team leader of the
firm's publicly traded clients practice group. He continues to hold an Of
Counsel position with Nexsen Pruet. Mr. McMaster has over seventeen years of
experience in representing both privately held and publicly traded companies in
the areas of corporate finance, securities regulation, mergers and acquisitions,
and employee benefits. He is past Chairman of the South Carolina Bar Section on
Corporations, Banking and Securities. Before joining Nexsen Pruet in 1989, Mr.
McMaster practiced securities law with Vinson & Elkins, LLP in Houston, Texas.
Prior to receiving his law degree with honors from the University of Virginia in
1985, he worked for two years with PricewaterhouseCoopers in Washington, D.C. He
is a 1980 summa cum laude, Phi Beta Kappa graduate of Duke University with a
Bachelor of Arts degree in accounting and business administration. He became a
Certified Public Accountant in 1982 and was admitted to the Texas State Bar in
1985 and the South Carolina Bar in 1989.
Donald R. Futch, 52, has served as Vice President of Business Development
of the Company since April 13, 1999. Prior to that date, he served as Vice
President of Operations since joining the Company in January 1998. Mr. Futch is
responsible for marketing, sales and establishing strategic relationships with
business partners and distribution channels. From October 1994 until he joined
the Company, Mr. Futch served as Chief Information Officer for Telequest
Corporation, an electronic payments processing company. Mr. Futch was awarded a
patent for the creation of a telecommunications-based home banking system in
August 1997. From May 1992 until joining Telequest Corporation in October 1994,
Mr. Futch served as Vice President of Association Membership Services, Inc.
(d/b/a Electronic Merchant Services), where he served primarily as an electronic
payments system integrator to the hotel industry. From January 1983 through
April 1992, he was a Technical Consultant for AT&T. Mr. Futch received his
Masters in Business Administration degree with an emphasis in marketing research
from the University of South Carolina in 1974.
9
Board Meetings and Committees
During 2002, the Board of Directors of the Company met as a Board or acted
pursuant to unanimous written consent a total of seven times. No director
attended fewer than 75 percent of the total of such Board meetings and the
meetings of the committees upon which the director served.
Pursuant to the Bylaws of the Company, the Board of Directors has
established the following two standing committees of the Board: the Audit and
Risk Management Committee and the Compensation and Human Resources Committee.
The Board of Directors has not established a separate committee to perform
the functions traditionally associated with a nominating committee. Such
functions are currently performed by the Board of Directors acting as a whole.
The Board of Directors will consider nominees recommended by the shareholders
for election as directors at any annual meeting of the Company, provided the
nomination is made in writing and properly identifies the shareholder making the
nomination as a shareholder of record entitled to vote at such meeting; includes
the consent of the nominees to serve, if elected, and the representation of the
nominating shareholder to appear in person or by proxy to nominate the
identified nominees; provides pertinent information concerning the nominee's
background, experience and any arrangement or understanding between the
nominating shareholder and the nominee pursuant to which the nomination is made;
and is delivered to the Secretary of the Company no later than ninety days prior
to the annual meeting, unless the Company notifies the shareholders otherwise.
During 2002, the Audit and Risk Management Committee was composed of
Messrs. Berger and Roger A. Kazanowski until Mr. Kazanowski's voluntary
resignation from the Board of Directors in May of 2002. Mr. Pulford and Ms. Cole
were appointed to the Audit and Risk Management Committee following their
respective appointments to the Board of Directors in the fourth quarter of 2002.
Each of Mr. Berger and Ms. Cole have been determined to be independent as
defined in Rule 4200(a)(15) of the NASD's listing standards. Under the guidance
of a written charter adopted by the Board of Directors, the Audit and Risk
Management Committee is responsible for recommending to the Board of Directors
the retention of independent auditors, reviewing the scope of the annual audit
undertaken by the Company's independent auditors and the progress and results of
their work, and reviewing the financial statements of the Company and its
internal accounting and auditing procedures. This committee met a total of three
times during 2002.
During 2002, the Compensation and Human Resources Committee was composed of
Messrs. Berger, and Roger A. Kazanowski until Mr. Kazanowski's voluntary
resignation from the Board of Directors in May of 2002. Mr. Pulford and Ms. Cole
were appointed to the Compensation and Human Resources Committee following their
respective appointments to the Board of Directors in the fourth quarter of 2002.
The functions of the Compensation and Human Resources Committee include
reviewing and approving executive compensation policies and practices, reviewing
salaries and bonuses for certain officers of the Company, administrating the
Company's stock option and incentive plans, making recommendations to the Board
with respect to the participation in such plans by directors, officers and
employees of, and consultants to the Company, and the extent of that
participation, and considering such other matters as may from time to time be
referred to the Compensation and Human Resources Committee by the Board of
Directors. No directors of the Company who are also executive officers of the
Company participate in the deliberations by such committee concerning the
compensation of such executive officers. This committee met a total of seven
times in combination with the Board of Directors meetings during 2002.
10
MANAGEMENT COMPENSATION
Executive Compensation
The following table sets forth a summary of the cash compensation paid
during each of the three most recently completed fiscal years to the Company's
President and Chief Executive Officer and to each of the Company's other
executive officers during 2002 (collectively, the "Named Executive Officers").
Long Term
-------------------
Compensation
Awards
Fiscal Common Stock
Name and Principal Position Year Salary (1) Bonus Underlying
--------------------------- ---- ----------- ----- Options (2)
George E. Mendenhall 2002 $ 97,956 -0- 96,894
Chief Executive Officer and 2001 132,611 -0- 10,000
Chairman of the Board 2000 126,083 $ 21,750 35,000
Stuart E. Massey 2002 $ 97,956 -0- 96.894
Executive Vice President and 2001 132,611 -0- 10,000
Chief Technology Officer 2000 126,083 $ 21,750 42,000
William S. McMaster 2002 $ 115,026 -0- 381,107
Chief Financial Officer and 2001 208,333 -0- 10,000
General Counsel 2000 93,750 -0- 100,000
Donald R. Futch 2002 $ 83,778 -0- 92,825
Vice President 2001 115,556 -0- 10,000
Business Development 2000 118,750 $ 19,500 40,500
(1) Effective September 1, 2001, each of the named executive officers in the
table above voluntarily elected to defer a portion of the cash compensation
otherwise payable to him in order to assist the Company in meeting its cash
flow demands. For the year ended December 31, 2002, the Company accrued
deferred cash compensation payable to Dr. Mendenhall and Messrs. Massey,
McMaster and Futch in the amounts of $50,667, $50,667, $125,000 and
$43,333, respectively. For the year ended December 31, 2001, the Company
accrued deferred cash compensation payable to Dr. Mendenhall and Messrs.
Massey, McMaster and Futch in the amounts of $16,889, $16,889, $41,667 and
$14,445, respectively.
(2) Amount represents shares of common stock underlying options granted during
the indicated fiscal year.
Director Compensation
The directors of the Company who are executive officers of the Company are
not separately compensated for serving as directors of the Company. All
directors of the Company are reimbursed by the Company for all out-of-pocket
expenses reasonably incurred by them in the discharge of their duties as
directors, including out-of-pocket expenses incurred in attending meetings of
the Board of Directors and its committees. Non-employee directors receive
discretionary annual grants of stock options.
During the fiscal year ended December 31, 2002, Mr. Berger was granted
stock options for the purchase of 39,000 shares of the Company's common stock,
and Ms. Cole was granted stock options for the purchase of 50,000 shares of the
Company's common stock. Directors are granted additional options for service as
chair and co-chair of the committees on which they serve. The exercise prices of
options granted to directors are equal to the closing sales price of the common
stock on the date of the respective option grant. The term of each option is ten
years, with 50% of the option vesting on the date six months from the effective
date of the grant and the remainder vesting on the one-year anniversary of the
effective date of the grant.
11
Option Grants
The following table sets forth certain information with respect to options
to purchase common stock that were granted during the fiscal year ended December
31, 2002 to each of the Named Executive Officers.
Options Grants in Last Fiscal Year
Individual Grants
Percent of
Number of Total Options
Securities Granted to Market Price
Underlying Employees Exercise on date Expiration
Options Granted in Fiscal Year Price of Grant Date
--------------- -------------- -------- ------------- -----------
Name
Stuart E. Massey 35,000 1.89% $0.97 $0.97 3/8/2007
13,722 0.74% $0.90 $0.90 3/15/2012
33,778 1.83% $0.33 $0.33 9/24/2012
14,394 0.78% $0.01 $0.33 9/24/2012
---------------------------------------------------------------------------------------------------------
George E. Mendenhall 35,000 1.89% $0.97 $0.97 3/8/2007
13,722 0.74% $0.90 $0.90 3/15/2012
33,778 1.83% $0.33 $0.33 9/24/2012
14,394 0.78% $0.01 $0.33 9/24/2012
---------------------------------------------------------------------------------------------------------
Donald R. Futch 35,000 1.89% $0.97 $0.97 3/8/2007
11,736 0.63% $0.90 $0.90 3/15/2012
33,778 1.83% $0.33 $0.33 9/24/2012
12,311 0.67% $0.01 $0.33 9/24/2012
---------------------------------------------------------------------------------------------------------
William S. McMaster 200,000 10.82% $0.97 $0.97 3/8/2007
33,854 1.83% $0.90 $0.90 3/15/2012
83,333 4.51% $0.33 $0.33 9/24/2012
63,920 3.46% $0.01 $0.17 12/31/2012
It is important to note that stock options have value to their recipients,
including the listed executive officers, only if the stock price advances beyond
the grant date price shown in the table during the effective option period.
Awards in the preceding table were made pursuant to the Company's 2001 Stock
Incentive Plan or the 2002 Stock Option Plan. Under the 2001 Stock Incentive
Plan, the exercise price per share must be not less than the fair market value
of a share of the common stock on the date the stock option is granted. The
grants provide that the options may not be exercised during the first six months
after the date of grant.
12
Option Exercises and Fiscal Year-End Option Values
The following table sets forth certain information with respect to
unexercised options held by the Named Executive Officers at December 31, 2002.
None of the Named Executive Officers exercised any options during 2002.
Aggregated Option Exercises and December 31, 2002 Option Values
----------------------------------------------------------------
Number of Securities Underlying Value of Unexcercised
Unexercised Options at 12/31/02 In-the-Money Options at 12/31/02
------------------------------------------------ --------------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
George E. Mendenhall 0 0 126,222 65,672 $0 $2,303
Stuart E. Massey 0 0 133,222 65,672 $0 $2,303
William S. McMaster 0 0 243,854 246,623 $0 $10,126
Donald R. Futch 0 0 128,736 58,700 $0 $1,975
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2002, certain
information relating to our equity compensation plans (including individual
compensation arrangements) under which our common stock is authorized for
issuance.
Number of shares of
our common stock
remaining available
for future issuance
Number of shares of under equity
our common stock to Weighted-average compensation plans
be issued upon exercise exercise price of (excluding shares of
of outstanding options, outstanding options, our common stock
Plan Category(1) warrants, and rights warrants, and rights reflected in column (a))
---------------- ----------------------- --------------------- ------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders 790,732 $6.00 781,990
Equity compensation plans
not approved by security holders 408,723 $3.91 491,277
Total 890,734 $5.29 1,273,267
In March of 2002, the Board of Directors found it necessary to achieve
additional cash flow relief through reductions in staff and reductions of 12% in
the cash compensation being paid to the Company's middle management. In August
of 2002, the Board of Directors again found it necessary for cash flow purposes
to further reduce staffing and to reduce all employees cash compensation by 10%.
The Company adopted the 2002 Stock Option Plan effective August 1, 2002 as a
vehicle to address the hardship that resulted from the pay cut. Under this plan,
Employees were granted stock options at $0.01 price per share for an amount of
shares deemed by the Compensation and Human Resources Committee of Board of
Directors as appropriate to return to the employee an amount of value
approximating the amount of their respective pay cuts. The total number of
shares initially authorized for issuance under this plan at December 31, 2002
was 800,000. As of that date, options to purchase 308,723 shares of our common
stock had been granted. The plan was included as an exhibit to our Quarterly
Report on Form 10-KSB for the nine months ended September 30, 2002.
13
From time to time, the Company has granted warrants for the purchase of
common stock outside of our formal equity compensation plans in order to
compensate certain employees, consultants and other providers of services to the
Company.
Employment Contracts
General.
Each of the Named Executive Officers has entered into an employment
contract with the Company. Under each of these contracts, each of the executive
officers may receive a bonus at the discretion of the Company's Board of
Directors. In addition to the foregoing, the Company has also agreed to provide
each executive officer with life insurance, medical insurance, vacation leave,
sick leave and other benefits, such as stock options, as may be approved by the
Board of Directors. Each executive officer is also eligible to participate in
the Company's employee benefit plans, which currently consist of a group medical
benefits plan and a 401(k) retirement plan. The Company does not contribute any
amounts to the 401(k) plan.
Each of the Company's employment contracts contains a non-competition
clause restricting the employee's ability to compete with the business of the
Company during the term of the contract and for a period of one to two years
thereafter in those states where the Company had clients when the employment
contract was terminated. Each contract also contains a provision limiting the
disclosure of confidential or trade secret information of the Company.
Additional details of each officer's respective employment contract are
summarized below.
Voluntary Compensation Deferral.
As a means of assisting the Company in addressing its critical cash flow
demands during the second half of 2001, each of the Named Executive Officers
voluntarily entered into a compensation deferral agreement under which he
elected as of September 1, 2001 to defer the cash compensation that otherwise
would have been paid to him for the period from September 1, 2001 to March 1,
2002, with the ability of the Company to elect to extend the deferral period
until August 31, 2002 if the Company's cash flow needs warranted such an
extension. The Company elected to extend each of these contracts to its full
term. Upon the expiration of these contracts at the end of August of 2002, each
of these officers agreed that the Company's continued need for additional cash
flow relief warranted that each of them voluntarily elect to continue the
deferral of the amounts that had accrued to him under his deferral agreement
during 2001 and 2002.
In order to continue to provide additional cash flow relief to the Company,
each of the Named Executive Officers also entered into a new agreement to defer
the cash compensation that otherwise would be paid to him for the period from
September 1, 2002 to February 28, 2003, with the ability to extend the deferral
period until May 31, 2003 if the Company's cash flow needs warranted such an
extension. The Company has elected to extend each of these contracts to its full
term. The deferred obligation of the Company under these agreements currently
bears simple interest at the annual rate of five percent, provided, however,
that to the extent principal on the notes of Messrs. Mendenhall and Massey that
is payable to the Company remains outstanding, that same amount of the deferred
compensation obligation of the Company to these two officers will bear interest
at the same rate as the interest rate payable under the notes. A description of
these notes payable to the Company from Messrs. Mendenhall and Massey is set
forth in this proxy statement under the caption "Certain Relationships and
Related Transactions."
14
Included in the deferral agreements of each officer is the grant of an
option to purchase one share of the Company's common stock for each two dollars
of cash compensation deferred. The exercise piece of each option is equal to the
trading price of the common stock on the date of grant of the option. The term
of each option is ten years, and each option vests six months following its date
of grant. Options granted to the Named Executive Officers during 2002 pursuant
to these deferred compensation agreements are disclosed in the table set forth
in this proxy statement under the caption "Management Compensation - Option
Grants."
Officer Employment Contracts.
Messrs. Mendenhall and Massey have each been a party to employment
contracts with the Company since January 1, 1997. Each of these contracts has
been amended from time to time. Under the terms of these employment contracts as
currently in effect, Messrs. Mendenhall and Massey agree to act as the Company's
Chief Executive Officer and Chairman of the Board and as Executive Vice
President, respectively, in exchange for annual cash compensation of $142,000.
Each of these contracts renews automatically for successive one-year terms
unless the Company or the executive officer provides written notice of
termination at least 90 days before the end of the then-current term. If the
contract is terminated by the Company without cause, the Company will be
required to pay the executive officer an amount equal to the greater of the
total salary and benefits that otherwise would have been payable to him during
the unexpired term of the employment contract, or an amount equal to two times
his annual salary and benefits.
Mr. McMaster has been a party to an employment contract with the Company
since May 30, 2000. Under the terms of his employment contract as currently in
effect, Mr. McMaster agrees to act as the Company's Chief Financial Officer and
General Counsel in exchange for annual cash compensation of $205,000. The
initial term of the contract is for the three-year period ending on May 30,
2003. The contract renews automatically for successive one-year terms unless no
later than 180 days prior to the expiration of the then-current term, either
party to the contract notifies the other of the notifying party's intent not to
renew the contract. By operation of this provision, the existing term of Mr.
McMaster's contract will expire on May 30, 2004. If the contract is terminated
by the Company without cause or is terminated for any reason following a change
in control of the Company, the Company will be required to pay for Mr.
McMaster's then-existing medical benefits for up to one year, and pay a lump sum
amount equal to the compensation that otherwise would have been payable during
the unexpired term of the employment contract, plus eighteen months of his
then-existing monthly base salary.
Mr. Futch has been a party to an employment contract with the Company since
January 1, 1998, which has been amended from time to time. Under the terms of
his employment contract as currently in effect, Mr. Futch agrees to act as the
Company's Vice President of Business Development in exchange for annual cash
compensation of $100,000.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of common stock as of April 11, 2003.
Information is presented for (i) shareholders known to us as owning more than
five percent of the outstanding common stock, (ii) each director and executive
officer of the Company, individually, and (iii) all directors and executive
officers of the Company, as a group. The percentages are calculated based on the
shares of common stock outstanding on April 11, 2003.
15
Number of Shares Percentage
Name of Beneficial Owner Beneficially Owned (1) Ownership
------------------------ ---------------------- ---------
Carl Joseph Berger, Jr. (2) 248,730 1.1%
Dollie A. Cole (3) 262,500 1.2%
Donald R. Futch (4) 301,013 1.3%
Roger A. Kazanowski (5) 2,166,845 9.6%
Stuart E. Massey (6) 1,381,982 6.2%
William S. McMaster (7) 429,387 1.9%
George E. Mendenhall (8) 1,430,882 6.4%
Richard D. Pulford (9) 50,000 *
All executive officers and directors as a group (7 persons) 4,104,494 17.4%
* Amount represents less than 1.0 percent
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange. Shares of common stock subject to options or
warrants currently exercisable or exercisable within 60 days are deemed to
be outstanding for computing the percentage beneficially owned by such
holder but are not deemed outstanding for purposes of computing the
percentage beneficially owned by any other person. As of April 11, 2003,
22,286,058 shares of common stock of the Company were issued and
outstanding.
(2) Includes 4,780 shares held by a family member of Mr. Berger and 140,200
shares issuable under options.
(3) Includes 50,000 shares issuable under options.
(4) Includes 1,000 shares held by a family member and 207,436 shares issuable
under options.
(5) Includes 181,560 shares issuable upon exercise of commons stock warrant
agreements and upon exercise of common stock purchase options. The address
of Mr. Kazanowski is 5811 Turnberry, Commerce, Michigan, 48382.
(6) Includes 988 shares issuable upon exercise of common stock warrant
agreement and 199,882 shares issuable under options. The address of Mr.
Massey is 1601 Shop Road Ste. E, Columbia, SC 29201.
(7) Includes 2,200 shares held by a family member of Mr. McMaster and 427,187
shares issuable under options.
(8) Includes 988 shares issuable upon exercise of common stock warrant
agreement and 191,894 shares issuable under options. The address if Dr.
Mendenhall is 1601 Shop Road Ste E, Columbia, SC 29201.
(9) Includes 25,000 shares issuable under options.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than 10% shareholders are
required by Securities and Exchange Commission rules to furnish the Company with
copies of all forms they file. Based solely on its review of the copies of such
forms received by the Company and written representations from certain reporting
persons, the Company believes that, during fiscal 2002, all Section 16(a) filing
requirements applicable to its executive officers, directors and 10%
shareholders were satisfied.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2002, there were no transactions or arrangements between
the Company and any of its officers, directors or significant shareholders which
individually or in the aggregate equaled or exceeded $60,000 in value, or were
otherwise disclosable pursuant to Regulation S-B promulgated by the Securities
and Exchange Commission, except for the following:
Dr. Mendenhall was indebted to the Company pursuant to two promissory notes
dated April 29, 1999 in the principal amount of $33,910, and dated December 22,
1999 in the principal amount of $30,114. Both notes were for three-year terms
and were delivered to the Company by Dr. Mendenhall in payment of the purchase
price for common stock upon the exercise by him of stock options on the
respective dates of the notes. The notes carry an annual interest rate of prime
on the unpaid principal balance and are collateralized by the shares of common
stock purchased upon the delivery of the notes. All unpaid interest and
principal is due at maturity. Although both of these notes matured in 2002, Dr.
Mendenhall did not possess the financial means to repay the amounts owed.
Consequently, the notes now constitute demand notes. The greatest amount owed to
the Company under these notes, including interest, during fiscal year 2002 was
$78,512 which equaled the amount owed at December 31, 2002. In addition to the
obligations under these two notes, Dr. Mendenhall was indebted to the Company in
the amount of $17,400 as of January 1, 2002 in connection with certain
non-interest bearing cash advances that were made to him during 2000. The amount
outstanding at December 31, 2002 pursuant to these advances was $15,000.
Mr. Massey was indebted to the Company pursuant to two promissory notes
dated April 29, 1999 in the principal amount of $33,910, and dated December 29,
1999 in the principal amount of $30,683. Both notes were for three-year terms
and were delivered to the Company by Mr. Massey in payment of the purchase price
for common stock upon the exercise by him of stock options on the respective
dates of the notes. The notes carry an annual interest rate of prime on the
unpaid principal balance and are collateralized by the shares of common stock
purchased upon the delivery of the notes. All unpaid interest and principal is
due at maturity. Although both of these notes matured in 2002, Mr. Massey did
not possess the financial means to repay the amounts owed. Consequently, the
notes now constitute demand notes. The greatest amount owed to the Company under
these notes, including interest, during fiscal year 2002 was $79,107 which
equaled the amount owed at December 31, 2002. In addition to the obligations
under these two notes, Mr. Massey was indebted to the Company in the amount of
$2,600 as of January 1, 2002 in connection with certain non-interest bearing
cash advances that were made to him during 2000. The amount outstanding at
December 31, 2002 pursuant to these advances was $200.
During 2001, Mr. Pulford was a party to a consulting agreement with the
Company pursuant to which he advised and assisted the Company in its business
development efforts and was compensated on the basis of a fixed monthly retainer
fee. Mr. Pulford's engagement as a consultant to the Company expired prior to
his appointment to the Board of Directors in October of 2002. The amount paid to
Mr. Pulford as a consultant to the Company during 2001 was $100,000.
AUDIT COMMITTEE REPORT
As discussed above under "Management - Board Meetings and Committees," one
of the primary functions of the Audit Committee is reviewing the scope of the
annual audit undertaken by the Company's independent auditors and the progress
and results of their work, and reviewing the financial statements of the Company
and its internal accounting and auditing procedures. The Audit Committee
reviewed and discussed the audited financial statements for the year ended
December 31, 2002 with management and the independent auditors, Scott McElveen,
LLP. Management represented to the Audit Committee that the Company's financial
statements were prepared in accordance with generally accepted accounting
principles, and the Audit Committee reviewed and discussed the financial
statements with management and the independent accountants. The discussions with
Scott McElveen, LLP also included the matters required by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
17
Scott McElveen, LLP provided to the Audit Committee the written disclosures
and the letter regarding its independence as required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees). This
information was discussed with Scott McElveen, LLP.
Based on the discussions with management and Scott McElveen, LLP, the Audit
Committee's review of the representations of management and the report of Scott
McElveen, LLP, the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in the Company's Annual Report on
Form 10-KSB that was filed with the Securities and Exchange Commission for the
year ended December 31, 2002.
Submitted by the Audit Committee of the Company's Board of Directors.
Carl Joseph Berger, Jr.
Dollie A. Cole
Richard D. Pulford
SCOTT McELVEEN, LLP'S FEES
Audit Fees
During 2002, Scott McElveen, LLP billed the Company an aggregate of $69,869
for professional services rendered for the audit of our annual financial
statements for the year ended December 31, 2001. We estimate that the total fees
for services rendered by Scott McElveen, LLP for the audit of our financial
statements for the year ended December 31, 2002 will be approximately $60,000.
Financial Information Systems Design and Implementation Fees
During the year ended December 31, 2002, Scott McElveen, LLP did not
provide the Company with any services related to financial information systems
design or implementation.
All Other Fees
During the year ended December 31, 2002, in addition to the billed audit
fees described above, Scott McElveen, LLP billed the Company an aggregate of
$26,090 for the following professional services provided during 2002: tax return
preparation, assistance with preparation of the Annual Report on Form 10-KSB and
reviews of the financial statements included in our periodic reports on Form
10-QSB. The Audit Committee has considered whether the provision of these
services is compatible with maintaining the independence of Scott McElveen, LLP.
18
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2002, which is required to be, and has been, filed with the
Securities and Exchange Commission, is being delivered to shareholders
concurrently with the delivery of this proxy statement. Shareholders to whom
this proxy statement is mailed who desire an additional copy of the Form 10-KSB
may obtain one, without charge, by making written request to Ms. Sharon R.
Gambrell, Integrated Business Systems and Services, Inc., Suite E, 1601 Shop
Road, Columbia, South Carolina 29201 (803)736-5595 extension 100.
By Order of the Board of Directors,
/s/ George E. Mendenhall
-------------------------------------------------
George E. Mendenhall, Ph.D.
Chief Executive Officer and Chairman of the Board
Columbia, South Carolina
April 30, 2003
19
PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MAY 29, 2003 AT THE COMPANY'S HEADQUARTERS, 1601 SHOP
ROAD, SUITE E, COLUMBIA, SOUTH CAROLINA AT 10:00 A.M. LOCAL TIME.
The undersigned hereby appoints Donald R. Futch and Sharon R. Gambrell, or any
of them acting in the absence of the other, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the shares of the
common stock of Integrated Business Systems and Services, Inc., a South Carolina
corporation, held or owned by the undersigned or standing in the name of the
undersigned at the 2003 Annual Meeting of Shareholders of the Company and any
adjournment thereof, and the undersigned hereby instructs said attorneys to vote
as follows:
1. Election of Directors:
For All Except:
For Withhold
Nominees:
Dollie A. Cole --- ---
Stuart E. Massey --- ---
Richard D. Pulford --- ---
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
all Except" and write that nominee's name in the space provided below.
For Against Abstain
2. Ratifications of appointment of Scott --- --- ---
McElveen, LLP, as independent public
accountants for the Company for the fiscal
year ending December 31, 2003.
3. In their discretion, upon any other business which may properly come before
the meeting or any adjournment thereof.
Please be sure to sign and date this Proxy in the spaces provided below.
------------------------------------------------------------------------
Shareholder sign above Co-holder (if any) sign above
----------------------
Date
THIS PROXY WILL BE VOTED AS INSTRUCTED. IN THE ABSENCE OF SUCH INSTRUCTIONS,
THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED ABOVE, AND THE
PROXIES HEREIN NAMED WILL VOTE ON OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF IN ACCORDANCE WITH THEIR JUDGMENT.
To be represented at the Meeting, this Proxy must be received at the office
of "PACIFIC CORPORATE TRUST COMPANY" by mail or fax no later than forty -
eight (48) hours (excluding Saturdays, Sundays and holidays) prior to the
time of the Meeting, or adjournment thereof.
The mailing address of Pacific Corporate Trust Company is 10th Floor, 625
Howe Street, Vancouver, British Columbia, V6C 3B8 and its FAX number is (604)
689-8144.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY