SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed
by the Registrant þ
Filed
by a Party other than the Registrant ¨
Check the
appropriate box:
¨
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Preliminary
Proxy Statement
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¨
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Confidential,
For Use of the Commission Only (As Permitted by Rule
14a-6(e)(2))
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þ
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material under §240.14a-12
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AFTERSOFT
GROUP, INC.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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Maple
Park, Maple Court
Barnsley,
UK S75 3DP
011
44 1244 311794
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Important
Notice Regarding the Availability of Proxy Materials
for
the Annual Meeting of Stockholders to Be Held on April 21,
2010
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The
Notice of Annual Meeting, Proxy Statement
and
Annual Report on Form 10-K are available at: http://aftersoft.investorroom.com
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NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON APRIL 21, 2010
To
the Stockholders of Aftersoft Group, Inc.:
NOTICE IS HEREBY GIVEN that an
Annual Meeting of Stockholders of Aftersoft Group, Inc., a Delaware corporation,
will be held on April 21, 2010 at 10:00 a.m. (Eastern Standard Time)
at the offices of O2Media, Inc., 2001 West Sample Road, Suite 101, Pompano
Beach, Florida 33064, for the following purposes:
1. To
elect six (6) members of the Company’s Board of Directors, each to serve until
the 2011 Annual Meeting of Stockholders and until their successors are elected
and qualified or until their earlier resignation or removal (Proposal No.
1);
2. To
consider and vote on a proposal to ratify the Board’s selection of KMJ Corbin
& Company LLP as the Company’s
independent auditors for the fiscal year ending June 30, 2010 (Proposal No.
2);
3. To
consider and vote on a proposal to amend the Company’s Certificate of
Incorporation to change the Company’s name to “MAM Software Group, Inc.”
(Proposal No. 3); and
4. To
consider and act upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The
foregoing items of business are more fully described in the Proxy Statement that
is attached and made a part of this Notice. Only stockholders of record of our
Common Stock, $0.0001 par value per share, at the close of business on March 1,
2010 will be entitled to notice of, and to vote at, the Annual Meeting of
Stockholders or any adjournment thereof.
A copy of
our Annual Report to Stockholders on Form 10-K for the year ended June 30, 2009,
which contains financial statements and other information of interest to
stockholders, accompanies this Notice and the enclosed Proxy
Statement.
All
stockholders are cordially invited to attend the Annual Meeting of Stockholders
in person. Your vote is important regardless of the number of shares you own.
Only record or beneficial owners of Aftersoft’s Common Stock as of the Record
Date may attend the Annual Meeting in person. When you arrive at the Annual
Meeting, you must present photo identification, such as a driver’s license.
Beneficial owners also must provide evidence of stock holdings as of the Record
Date, such as a recent brokerage account or bank statement.
Whether
or not you expect to attend the Annual Meeting of Stockholders, please complete,
sign, date, and return the enclosed proxy card in the enclosed postage-paid
envelope in order to ensure representation of your shares. It will help in our
preparations for the meeting if you would check the box on the form of proxy if
you plan on attending the Annual Meeting. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
Barnsley,
UK
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By
Order of the Board of Directors,
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March
11, 2010
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/s/
MICHAEL JAMIESON
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MICHAEL
JAMIESON
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Interim
Chief Executive Officer
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PROXY
STATEMENT FOR 2010 ANNUAL MEETING OF STOCKHOLDERS
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1
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Information
Concerning the Proxy Materials and the Annual Meeting
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1
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Voting
Procedures and Vote Required
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2
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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3
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Information
about the Change in Control of Aftersoft
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6
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ELECTION
OF DIRECTORS (Proposal No. 1)
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7
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CORPORATE
GOVERNANCE
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10
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Board
of Directors
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10
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Director
Independence
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10
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Board
Meetings and Attendance
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10
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Annual
Meeting Attendance
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10
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Stockholder
Communications with the Board
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10
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Board
Committees
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10
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Family
Relationships
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12
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Involvement
in Certain Legal Proceedings
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12
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DIRECTOR
COMPENSATION FOR FISCAL 2009
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12
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INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
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13
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EXECUTIVE
COMPENSATION
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14
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Compensation
Discussion and Analysis
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14
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Compensation
Committee Report
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20
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Summary
Compensation Table for Fiscal Years 2009, 2008 and 2007
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21
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Employment
Agreements with Executive Officers
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22
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Other
Compensation
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22
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Outstanding
Equity Awards at 2009 Fiscal Year End
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22
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
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24
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COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
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28
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RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS (Proposal No.
2)
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29
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APPROVAL
OF NAME CHANGE (Proposal No. 3)
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31
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AUDIT
COMMITTEE REPORT
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32
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STOCKHOLDER
PROPOSALS FOR 2011 ANNUAL MEETING
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33
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EXPENSES
AND SOLICITATION
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33
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OTHER
BUSINESS
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33
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ADDITIONAL
INFORMATION
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33
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PROXY
STATEMENT FOR 2010 ANNUAL MEETING OF STOCKHOLDERS
In this Proxy Statement, Aftersoft
Group, Inc., a Delaware corporation, is referred to as “Aftersoft,” the
“Company,” “we,” “us” and “our.”
Information
Concerning the Proxy Materials and the Annual Meeting
Proxies
in the form enclosed with this Proxy Statement are being solicited by our Board
of Directors for use at the 2010 Annual Meeting of our Stockholders to be held
at 10:00 a.m. (Eastern Standard Time) on April 21, 2010, at the offices of
O2Media, Inc., 2001 West Sample Road, Suite 101, Pompano Beach, Florida 33064,
and at any adjournment thereof. Your vote is very important. For this reason,
our Board of Directors is requesting that you permit your Common Stock, $0.0001
par value per share (“Common Stock”), to be represented at the Annual Meeting by
the proxies named on the enclosed proxy card. This Proxy Statement contains
important information for you to consider when deciding how to vote on the
matters brought before the meeting. Please read it carefully.
Voting
materials, which include this Proxy Statement, the enclosed proxy card, and the
enclosed Annual Report to Stockholders on Form 10-K for the fiscal year ended
June 30, 2009, which contains financial statements and other information of
interest to stockholders, will first be mailed to stockholders on or about March
17, 2010.
Only
stockholders of record as of the close of business on March 1, 2010 (the “Record
Date”) of our Common Stock will be entitled to notice of, and to vote at, the
Annual Meeting. As of the Record Date, 84,042,708 shares of Common Stock were
issued and outstanding. Holders of Common Stock are entitled to one vote per
share held by them. Stockholders may vote in person or by proxy, however,
granting a proxy does not in any way affect a stockholder’s right to attend the
Annual Meeting and vote in person. Any stockholder giving a proxy has the right
to revoke that proxy by (i) filing a later-dated proxy or a written notice of
revocation with us at our principal offices at any time before the original
proxy is exercised or (ii) attending the Annual Meeting and voting in
person.
Michael
Jamieson and Gerry Czarnecki are named as attorneys in the proxy. Mr. Jamieson
is our Interim Chief Executive Officer and is also a member of our Board of
Directors. Mr. Czarnecki is Chairman of our Board of Directors. Mr. Jamieson or
Mr. Czarnecki will vote all shares represented by properly executed proxies
returned in time to be counted at the Annual Meeting, as described below under
“Voting Procedures.” Any stockholder granting a proxy has the right to withhold
authority to vote for any or all of the nominees to the Board of Directors.
Where a vote has been specified in the proxy with respect to the matters
identified in the Notice of the Annual Meeting, including the election of
directors, the shares represented by the proxy will be voted in accordance with
those voting specifications. If no voting instructions are indicated, your
shares will be voted as recommended by our Board on all matters, and as the
proxy holders may determine in their discretion with respect to any other
matters properly presented for a vote before the Annual Meeting.
The
stockholders will consider and vote upon (i) a proposal to elect six (6) members
of our Board of Directors, each to serve until the 2011 Annual Meeting of
Stockholders and until their successors are elected and qualified or until their
earlier resignation or removal; (ii) a proposal to ratify the Board’s selection
of KMJ Corbin & Company LLP as our independent
auditors for the fiscal year ending June 30, 2010; and (iii) a proposal to amend
the Company’s Certificate of Incorporation to change the Company’s name to “MAM
Software Group, Inc.” (the “Name Change”). Stockholders also will consider and
act upon such other business as may properly come before the Annual
Meeting.
Voting
Procedures and Vote Required
Mr.
Jamieson or Mr. Czarnecki will vote all shares represented by properly executed
proxies returned in time to be counted at the Annual Meeting. The presence, in
person or by proxy, of at least a majority of the issued and outstanding shares
of Common Stock entitled to vote at the Annual Meeting is necessary to establish
a quorum for the transaction of business. Shares represented by proxies pursuant
to which votes have been withheld for any or all of the nominees for directors,
or which contain one or more abstentions, as well as “broker non-vote” shares
(described below) are counted as present for purposes of determining the
presence or absence of a quorum for the Annual Meeting.
All
properly executed proxies delivered pursuant to this solicitation and not
revoked will be voted at the Annual Meeting as specified in such proxies. As
noted above, proxies will be voted as recommended by our Board on all matters
and will be voted in the discretion of the proxy holder on any other matters
that properly come before the Annual Meeting, if no voting instructions are
indicated.
Vote Required for Election of
Directors (Proposal 1). Our Certificate of Incorporation, as
amended, does not authorize cumulative voting. Delaware law and our Bylaws
provide that directors are to be elected by a plurality of the votes of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. This means that the six (6)
candidates receiving the highest number of affirmative votes at the Annual
Meeting will be elected as directors. Only shares that are voted in favor of a
particular nominee will be counted toward that nominee’s achievement of a
plurality. Shares present at the Annual Meeting that are not voted for a
particular nominee or shares present by proxy where the stockholder properly
withheld authority to vote for such nominee will not be counted toward that
nominee’s achievement of a plurality.
Vote Required for Ratification of
Auditors (Proposal 2). Delaware law and our Bylaws provide
that, on all matters (other than the election of directors and except to the
extent otherwise required by our Certificate of Incorporation or applicable
Delaware law), the affirmative vote of a majority of the shares present, in
person or by proxy, and voting on the matter, will be required for approval.
Accordingly, the affirmative vote of a majority of the shares present at the
Annual Meeting, in person or by proxy, and voting on the matter, will be
required to ratify the Board’s selection of KMJ Corbin & Company LLP as our independent
auditors for the fiscal year ending June 30, 2010.
Vote Required for the Name Change
(Proposal 3). Delaware law and our Bylaws provide that, on all
matters (other than the election of directors and except to the extent otherwise
required by our Certificate of Incorporation or applicable Delaware law), the
affirmative vote of a majority of the shares present, in person or by proxy, and
voting on the matter, will be required for approval. Accordingly, the
affirmative vote of a majority of the shares present at the Annual Meeting, in
person or by proxy, and voting on the matter, will be required to amend the
Company’s Certificate of Incorporation to change the Company’s name to “MAM
Software Group, Inc.”
If you
hold shares beneficially in street name and do not provide your broker with
voting instructions, your shares may constitute “broker non-votes.” Generally,
broker non-votes occur on a matter when a broker is not permitted to vote on
that matter without instructions from the beneficial owner and instructions are
not given. Brokers that have not received voting instructions from their clients
cannot vote on their clients’ behalf on “non-routine” proposals. Broker
non-votes are not counted for the purposes of obtaining a quorum for the Annual
Meeting, and, in tabulating the voting result for any particular proposal,
shares that constitute broker non-votes are not considered entitled to vote. The
vote on Proposals 1 and 3 is considered “non-routine” and the vote on Proposal 2
is considered “routine.”
Abstentions
are counted as “shares present” at the Annual Meeting for purposes of
determining the presence of a quorum and with respect to any matters being voted
upon at the Annual Meeting. Abstentions will have no effect on the outcome of
the election of directors, but with respect to any other proposal an abstention
will operate to prevent the approval of such proposal to the same extent as a
vote against such proposal.
Votes at
the meeting will be tabulated by one or more inspectors of election appointed by
the Interim Chief Executive Officer.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of February 26, 2010 by (a) each stockholder
who is known to us to own beneficially 5% or more of our outstanding Common
Stock; (b) all directors; (c) our executive officers, and (d) all executive
officers and directors as a group. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to
their shares of Common Stock, except to the extent that authority is shared by
spouses under applicable law, and (ii) record and beneficial ownership with
respect to their shares of Common Stock. The percentage of beneficial ownership
is based upon 84,042,708 shares of Common Stock outstanding as of February 26,
2010. Unless otherwise identified, the address of our directors and officers is
c/o Aftersoft Group, Inc., Maple Park, Maple Court, Barnsley, UK S75
3DP.
Name and address of beneficial owner
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Amount and Nature of
Beneficial Ownership
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Percent of class of
Common Stock (1)
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Wynnefield
Persons (2)
c/o
Wynnefield Capital Inc.
450
Seventh Ave., Suite 509
New
York, NY 10123
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12,537,896 |
(3) |
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14.38
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% |
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Quillen
Persons (4)
145
East 57th Street, 10th Floor
New
York, NY 10022
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6,960,112 |
(5) |
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8.24
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% |
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ComVest
Capital LLC
105
S. Narcissus Ave.
West
Palm Beach, FL 33401
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10,169,949 |
(6) |
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10.79
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% |
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Directors
and Officers:
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Michael
Jamieson
Interim
Chief Executive Officer
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1,240,000 |
(7) |
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1.48
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% |
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Charles
F. Trapp
Chief
Financial Officer
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1,048,571 |
(8) |
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1.25
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% |
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Frederick
Wasserman,
Director
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169,305 |
(9) |
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0.20
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% |
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Dwight
B. Mamanteo,
Director
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568,419 |
(10) |
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0.68
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% |
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Marcus
Wohlrab,
Director
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122,396 |
(11) |
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0.15
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% |
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Gerald
M. Czarnecki,
Chairman
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968,044 |
(12) |
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1.15
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% |
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W.
Austin Lewis IV (13)
c/o
Lewis Asset Management Corp.
45
Rockefeller Plaza
New
York, NY 10111
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16,536,398 |
(14) |
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18.28
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% |
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Directors
and Officers as a group (7 persons)
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20,653,133 |
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22.80
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% |
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Former
Officers and Directors:
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Ian
Warwick
Chief
Executive Officer
and
Chairman
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4,561,452 |
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5.43
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% |
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Simon
Chadwick
Chief
Operating Officer
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1,961,084 |
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2.33
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% |
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(1)
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Based
on a total of 84,042,708 shares of Common Stock outstanding. In accordance
with Securities and Exchange Commission rules, each person’s percentage
interest is calculated by dividing the number of shares that person owns
by the sum of (a) the total number of shares outstanding as of February
26, 2010 plus (b) the number of shares such person has the right to
acquire within sixty (60) days of February 26,
2010.
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(2)
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Comprised
of Wynnefield Partners Small Cap Value, LP (“Wynnefield Partners”) and
Wynnefield Partners Small Cap Value LP I (“Wynnefield Partners I”), and
the general partner of each of these entities, Wynnefield Capital
Management, LLC (“Wynnefield LLC”); Wynnefield Small Cap Value Offshore
Fund Ltd. (“Wynnefield Offshore”) and its investment manager, Wynnefield
Capital, Inc. (“Wynnefield Capital”); Wynnefield Capital, Inc. Profit
Sharing & Money Purchase Plan (the “Plan”); Channel Partnership II, LP
(“Channel”); Nelson Obus, who serves as principal and co-managing member
of Wynnefield Capital Management, LLC, principal executive officer of
Wynnefield Capital, Inc. and general partner of Channel Partnership II,
LP; and Joshua H. Landes, who serves as principal and co-managing member
of Wynnefield Capital Management, LLC and executive officer of Wynnefield
Capital, Inc. (collectively, the “Wynnefield Persons”). Dwight Mamanteo,
one of the Company’s directors, is an investment analyst with Wynnefield
Capital. Mr. Mamanteo exercises neither voting nor dispositive control
over the shares beneficially owned by Wynnefield Capital. The Company has
been informed that Nelson Obus and Joshua H. Landes share voting and
investment control over the shares beneficially owned by Wynnefield
Partners, Wynnefield Partners I, Wynnefield Offshore, Wynnefield LLC,
Wynnefield Capital and the Plan, and that Nelson Obus exercises sole
voting and investment control over the shares beneficially owned by
Channel. Based upon information provided in a Schedule 13D/A
filed with the SEC on April 3, 2009 and a Form 4 filed on May 22,
2009.
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(3)
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Represents
an aggregate 9,412,894 shares of common stock and 3,125,002 shares
issuable upon exercise of warrants which are currently exercisable at
$1.00 per share and expire July 2, 2013, which are beneficially owned as
follows: (i) 2,451,015 shares of common stock and 833,334 shares issuable
upon exercise of warrants are beneficially owned by Wynnefield Partners;
(ii) 3,065,485 shares of common stock and 833,334 shares issuable upon
exercise of warrants are beneficially owned by Wynnefield Partners I;
(iii) 2,860,963 shares of common stock and 833,334 shares issuable upon
exercise of warrants are beneficially owned by Wynnefield Offshore; (iv)
410,431 shares of common stock beneficially owned by the Wynnefield
Capital, Inc. Profit Sharing & Money Purchase Plan; and (v) 625,000
shares of common stock and 625,000 shares issuable upon exercise of
warrants are beneficially owned by Channel. Based upon
information provided in a Form 4 filed with the SEC on May 22,
2009.
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(4)
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Comprised
of Little Wing, L.P. (“Little Wing”); Quilcap Corp., the general partner
of Little Wing (“Quilcap Corp.”); Tradewinds Fund, Ltd. (“Tradewinds”);
Quilcap Management, LLC, the investment manager of Little Wing and
Tradewinds (“Quilcap Management”); and Parker Quillen, the President of
Quilcap Corp. and the Sole Managing Member of Quilcap Management
(collectively, the “Quillen Persons”). Based upon information
provided in a Schedule 13G/A filed with the SEC on February 13,
2009.
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(5)
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Represents
(i) 5,976,508 shares of common stock and 357,292 shares of common stock
issuable upon exercise of warrants, which are currently exercisable at
$1.00 per share and expire July 2, 2013, owned by Little Wing, with
respect to which Little Wing has the power to vote and dispose, which
power may be exercised by Mr. Quillen, as President of Quilcap Corp and as
Sole Managing Member of Quilcap Management; and (ii) 540,879 shares of
common stock and 59,375 shares of common stock issuable upon exercise of
warrants, which are currently exercisable at $1.00 per share and expire
July 2, 2013, owned by Tradewinds, with respect to which Tradewinds has
the power to vote and dispose, which power may be exercised by Mr.
Quillen, as the Sole Managing Member of Quilcap Management; and (iii)
26,058 shares of common stock with respect to which Mr. Quillen has sole
voting and dispositive power. Based upon information provided
in a Schedule 13G/A filed with the SEC on February 13,
2009.
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(6)
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Includes
the following shares owned by ComVest Capital LLC: (i) 1,000,000 shares
issuable upon exercise of warrants to purchase shares of Common Stock,
which are currently exercisable at $0.1097 per share and expire December
31, 2013; (ii) 2,083,333 shares issuable upon exercise of warrants to
purchase shares of Common Stock, which are currently exercisable at
$0.3595 per share and expire December 31, 2013; (iii) 2,000,000 shares
issuable upon exercise of warrants to purchase shares of Common Stock,
which are currently exercisable at $0.1097 per share and expire December
31, 2013, and (iv) 3,386,616 shares of common stock issuable upon
conversion of the $5,000,000 principal amount of that certain Convertible
Term Note dated December 21, 2007 issued to Comvest Capital LLC, at a
current conversion rate of $1.4764 per share. The Company has been
informed that Comvest Capital Advisors, LLC is the managing entity of
ComVest Capital, LLC, and that Gary Jaggard, managing director of Comvest
Capital, LLC, exercises voting and investment control over the shares
beneficially owned by ComVest Capital, LLC. Also includes 1,700,000 shares
issuable upon exercise of warrants owned by Commonwealth Associates, LP,
an entity affiliated with Comvest Capital, LLC. See “Certain Relationships
and Related Transactions and Director Independence” for additional
detail.
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(7)
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Includes
560,000 vested shares of an award of an aggregate of 1,000,000 restricted
shares of Common Stock granted by the Company on May 13, 2008 for services
previously rendered.
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(8)
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Includes
420,000 vested shares of an award of an aggregate 750,000 restricted
shares of Common Stock granted by the Company on May 13, 2008 for services
previously rendered.
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(9)
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Includes
(i) 14,000 vested shares of restricted Common Stock of an award for an
aggregate 25,000 shares of restricted Common Stock granted on May 13, 2008
by the Company for services previously rendered; (ii) 55,002 vested shares
of restricted Common Stock out of an award of an aggregate of 110,000
shares of restricted Common Stock granted on October 6, 2008; (iii) 34,091
vested shares of restricted Common Stock out of an award of an aggregate
of 204,545 shares of restricted Common Stock granted on July 1, 2009; and
(iv) 26,212 shares which will vest within 60 days of February 26,
2010.
|
|
(10)
|
Includes
(i) 14,000 vested shares of restricted Common Stock of an award for an
aggregate 25,000 shares of restricted Common Stock granted on May 13, 2008
by the Company for services previously rendered; and (ii) 36,836 vested
shares of restricted Common Stock (net of taxes) out of an award of an
aggregate of 104,000 shares of restricted Common Stock granted on October
6, 2008; (iii) 25,606 vested shares of restricted Common Stock (net of
taxes) out of an award of an aggregate of 236,364 shares of restricted
Common Stock granted on July 1, 2009; and (iv) 28,364 shares which will
vest within 60 days of February
26, 2010.
|
|
(11)
|
Includes
(i) 14,000 vested shares of restricted Common Stock of an award for an
aggregate 25,000 shares of restricted Common Stock granted on May 13, 2008
by the Company for services previously rendered; (ii) 52,002 vested shares
of restricted Common Stock out of an award of an aggregate of 104,000
shares of restricted Common Stock granted on October 6, 2008; (iii) 31,818
vested shares of restricted Common Stock (net of taxes) out of an award of
an aggregate of 190,909 shares of restricted Common Stock granted on July
1, 2009; and (iv) 24,576 shares which will vest within 60 days of February
26, 2010.
|
|
(12)
|
Includes
(i) 12,430 vested shares of restricted Common Stock (net of taxes) out of
an award for an aggregate 25,000 shares of restricted Common Stock granted
by the Company for joining the Board of Directors on October 6, 2008; (ii)
63,822 vested shares of restricted Common Stock (net of taxes) out of an
award of an aggregate of 140,000 shares of restricted Common Stock granted
on October 6, 2008; (iii) 34,470 vested shares of restricted Common Stock
(net of taxes) out of an award of an aggregate of 318,182 shares of
restricted Common Stock granted on July 1, 2009; and (iv) 39,571 shares
which will vest within 60 days of February 26,
2009.
|
|
(13)
|
W.
Austin Lewis IV is the portfolio manager and general partner of Lewis
Asset Management Corp., the investment manager of Lewis Opportunity Fund,
LP and LAM Opportunity Fund, LTD. Accordingly, Mr. Lewis is deemed to
be the beneficial owner of the shares owned by Lewis Opportunity Fund, LP
and LAM Opportunity Fund, LTD. and beneficially owned by Lewis Asset
Management Corp.
|
|
(14)
|
Represents
(i) 3,440,215 shares owned directly by W. Austin Lewis IV, (ii) 5,322,646
shares of common stock and 5,112,328 shares issuable upon exercise of
warrants, which are currently exercisable at $1.00 per share and expire
April 24, 2014, owned by Lewis Opportunity Fund, LP; (iii) 1,348,719
shares of common stock and 1,290,671 shares of common stock issuable upon
exercise of warrants, which are currently exercisable at $1.00 per share
and expire April 24, 2014, owned by LAM Opportunity Fund, LTD. (iv) 8,500
vested shares of restricted Common Stock out of an award of an aggregate
of 25,000 shares of restricted Common Stock granted on February 20, 2009;
(v) 23,601 vested shares of restricted Common Stock out of an award of an
aggregate 80,000 shares of restricted Common Stock granted on February
20, 2009; (vi) 30,303 vested shares of restricted Common Stock out of
an award of an aggregate of 181,818 shares of restricted Common Stock
granted on July 1, 2009; and (vii) 21,819 shares which will vest within 60
days of February 26, 2010.
|
Information
about the Change in Control of Aftersoft
On
November 24, 2008 (the “Dividend Distribution Date”), Auto Data Network, Inc.
(“ADNW”), the former parent of Aftersoft, distributed a dividend of the
71,250,000 shares of Aftersoft Common Stock that ADNW owned at such time in
order to complete the previously announced spin-off of Aftersoft’s businesses.
The dividend shares were distributed in the form of a pro rata dividend to the
holders of record as of November 17, 2008 (the “Record Date”) of ADNW’s common
and convertible preferred stock. Each holder of record of shares of ADNW common
and preferred stock as of the close of business on the Record Date was entitled
to receive 0.6864782 shares of Aftersoft's common stock for each share of common
stock of ADNW held at such time, and/or for each share of ADNW common stock that
such holder would own, assuming the convertible preferred stock owned on the
Record Date was converted in full.
Due to
the nature of the dividend distribution, the ex-dividend date was set by NASDAQ
as Tuesday, November 25, 2008, one day following the Dividend Distribution Date.
No consideration was paid by any ADNW shareholder to receive the distribution of
the dividend shares. Only whole shares were delivered to ADNW shareholders, so
any resulting fractional shares in calculating the dividend were rounded up to
the nearest whole number, which rounding up resulted in the issuance of an
aggregate additional amount of approximately 8,247 shares.
As a
result of Aftersoft’s ownership of certain ADNW securities, Aftersoft received
approximately 13,965,295 shares of its own common stock in connection with the
dividend distribution.
Prior to
the spin-off, ADNW owned approximately 77% of Aftersoft’s issued and outstanding
common stock. Subsequent to and as a result of the spin-off, Aftersoft is no
longer a subsidiary of ADNW.
ELECTION
OF DIRECTORS
(Proposal
No. 1)
The
following individuals have been nominated as members of our Board of Directors,
each to serve until the 2011 Annual Meeting of Stockholders, until their
successors are elected and qualified or until their earlier resignation or
removal. Pursuant to Delaware law and our Bylaws, directors are to be elected by
a plurality of the votes of the shares present in person or represented by proxy
at the Annual Meeting and entitled to vote on the election of directors. This
means that the six (6) candidates receiving the highest number of affirmative
votes at the Annual Meeting will be elected as directors. Only shares that are
voted in favor of a particular nominee will be counted toward that nominee’s
achievement of a plurality. Proxies cannot be voted for a greater number of
persons than the number of nominees named or for persons other than the named
nominees.
Following
is information about each nominee, including biographical data for at least the
last five years. Should one or more of these nominees become unavailable to
accept nomination or election as a director, the individuals named as proxies on
the enclosed proxy card will vote the shares that they represent for the
election of such other persons as the Board may recommend, unless the Board
reduces the number of directors. We have no reason to believe that any nominee
will be unable or unwilling to serve if elected as a director.
Name of Director
|
|
Age
|
|
Director since:
|
Michael
Jamieson
|
|
42
|
|
February
2010
|
Dwight
B. Mamanteo
|
|
40
|
|
March
2007
|
Marcus
Wohlrab
|
|
47
|
|
March
2007
|
Frederick
Wasserman
|
|
55
|
|
July
2007
|
Gerald
M. Czarnecki
|
|
70
|
|
August
2008
|
W.
Austin Lewis IV
|
|
34
|
|
January
2009
|
Michael Jamieson was appointed
to the Board and to the position of interim Chief Executive Officer in February
2010. Mr. Jamieson previously served as Chief Operating Officer and a
director of the Company from December 2005 to March 2007. Mr.
Jamieson has served as Managing Director of Aftersoft's subsidiary, MAM Software
Ltd. (“MAM”), since 2004. Mr. Jamieson joined MAM in 1991 in its
installation and configuration department and has held a number of positions
within MAM's implementation and support departments until his appointment as
Department Manager for Workshop and Bodyshop Systems in 1995. Mr. Jamieson was
promoted to the position of Associate Director of Workshop and Bodyshop Systems
in 2002 before taking his current role as Managing Director of MAM in
2004.
Dwight B. Mamanteo became a
Director of the Company on March 1, 2007. Mr. Mamanteo serves as the Chairman of
the Company’s Compensation Committee and as a member of the Company’s Audit
Committee and a member of the Company’s Governance and Nomination Committee.
From November 2004 to the present, he has served as an investment analyst and
portfolio manager at Wynnefield Capital Inc., a private investment firm
headquartered in New York City. From September 1999 to June 2004, he served as
manager of Global Alliances Technical Services for BEA Systems in the US and
France. He has also provided technical consulting services to Delta
Technologies, VISA International, Liberty Mutual, Ameritec Communications and
Ericsson Communications. Mr. Mamanteo also serves on the Board of Directors of
PetWatch Animal Hospitals, Inc. and was appointed its Chairman of the Board in
February 2009, and since April 2009 has served on the Board of Directors, and a
member of the Compensation and Governance Committees of Easylink Services
International Corporation (NASDAQ: ESIC), a provider of e-commerce solutions
connecting businesses with their trading communities. He also served on the
Board of Directors of Sevis Sherpa Corporation, where he chaired the
Compensation Committee. Mr. Mamanteo received his MBA from the Columbia
University Graduate School of Business and his Bachelor of Electrical
Engineering from Concordia University (Montreal).
Marcus Wohlrab became a
Director of the Company on March 1, 2007. Mr. Wohlrab is the Chairman of the
Governance and Nomination Committee and is a member of the Compensation
Committee. In April 2001, Mr. Wohlrab founded Easting Capital Limited, a company
that serves as a placing agent for credit and interest rate securities as well
as negotiating public finance deals for large infrastructure projects as well as
private companies. Easting Capital has recently been re-launched beginning 2008
with new shareholders and is now known as Clearmond AG registered in
Switzerland. From October 2000 to April 2001, Mr. Wohlrab was Executive Vice
President Market Development for Easdaq, the pan-European Stock Market for
growth companies (later acquired by NASDAQ). From January 1998 to September
2000, he served as Director Europe and Middle East for NASDAQ International. He
also founded, built and helped finance WinWatch/WinVista, a software programming
entity focused on Internet and Windows security products. He was also Director
of Corporate Finance for Modatech Systems, Assistant Director for the Union Bank
of Switzerland, Vice President of Sales and Marketing for Paine Webber
International, and Vice President for Wood Gundy/CIBC/Oppenheimer. Mr. Wohlrab
received a Bachelor of Science degree in Mathematics and Geology from Devon
University and is fluent in Italian, French, German and English.
Frederick Wasserman became a
Director of the Company on July 17, 2007. Mr. Wasserman is the Chairman of the
Audit Committee and is a member of the Governance and Nomination Committee. Mr.
Wasserman is President of FGW Partners, LLC, a financial management consulting
firm he started, effective as of May 1, 2008. From August 2005 to December 2006,
he served as Chief Operating and Chief Financial Officer of Mitchell & Ness
Nostalgia Company, a manufacturer of licensed sportswear. From January 2001 to
February 2005, he served as President and Chief Financial Officer of Goebel of
North America, a subsidiary of the manufacturer of M.I. Hummel products, W.
Goebel Porzellanfabrik Company. From December 1995 to January 2001 he served as
Vice-President of Finance and Chief Financial Officer of Papel Giftware, serving
as the company’s interim president from May 2000 to January 2001. He also brings
13 years of public accounting experience, most notably work with each of Coopers
& Lybrand and Eisner & Company. He received a Bachelor of Science degree
in Economics from the University of Pennsylvania’s Wharton School, and has been
a Certified Public Accountant. Mr. Wasserman also serves as a Director for the
following companies: Acme Communications, Inc. (chairman- Nominating Committee,
member- Audit Committee), Breeze-Eastern Corporation (Chairman- Audit
Committee), Allied Defense Group (Member-Audit Committee, Ethics and Governance
Committee), TeamStaff, Inc.(Chairman- Audit Committee), Crown Crafts, Inc. and
Gilman + Ciocia, Inc. (Chairman- Compensation Committee, Member- Audit
Committee).
Gerald M. Czarnecki became a
lead Director of the Company on August 13, 2008 and Chairman of our Board of
Directors on September 23, 2009. Mr. Czarnecki is an ex officio member of each
of the Audit Committee, Compensation Committee and Governance and Nomination
Committee. Mr. Czarnecki has been the Chairman and CEO of The Deltennium Group,
Inc., a privately held consulting and direct investment firm, since its founding
in 1995. Since August 2007, Mr. Czarnecki has served as President and CEO of
02Media, Inc., a private organization providing direct response marketing
campaign management and infomercial production, educational and branded
entertainment TV programming and Internet marketing campaign management. From
April 1, 2007 to January 15, 2008, Mr. Czarnecki served as interim President and
CEO of Junior Achievement Worldwide, Inc., where he also serves on the board of
directors, and as member of the Executive Committee, and Chairman of its Human
Resources, Compensation and Pension Committees. Mr. Czarnecki is a member of the
Board of Directors of State Farm Insurance Company and is Chairman of the Audit
Committee; a member of the Board of Directors of Del Global Technology, Inc.
since June 2003, and Chairman of the Audit Committee; and a member of the Board
of Directors of State Farm Bank and State Farm Fire & Casualty. He is also a
member of the advisory board for Private Capital, Inc. and serves as Chairman of
the Board of Trustees of National University. In addition he is Chairman of the
Board of National Leadership Institute, a nonprofit organization dedication to
facilitating quality leadership and governance in nonprofit organizations;
Chairman of the National Association of Corporate Directors - Florida Chapter,
and faculty member; and member of the Board of Directors of Junior Achievement
of South Florida, Inc. Mr. Czarnecki holds a B.S. in Economics from Temple
University, and M.A. in Economics from Michigan State University, a Doctor of
Humane Letters from National University and is a Certified Public Accountant.
W. Austin Lewis IV was
appointed to the Board on January 27, 2009. Mr. Lewis serves as a member of the
Audit Committee and the Compensation Committee. He currently serves as the Chief
Executive Officer of Lewis Asset Management Corp., an investment management
company headquartered in New York City which he founded in 2004. From 2003 to
2004, Mr. Lewis was employed at Puglisi & Company, a New York based
broker-dealer registered with FINRA, where he served as a registered
representative and managed individual client accounts, conducted due diligence
for investment banking activities and managed his own personal account. In 2002,
Mr. Lewis co-founded Thompson Davis, & Company, Inc., a registered
broker-dealer headquartered in Richmond, Virginia. From 1998 to 2002, Mr. Lewis
was employed by Branch Cabell and Company, Inc. in Richmond, Virginia (“Branch
Cabell”) where he was a registered representative. Following the November 2000
acquisition of Branch Cabell by Tucker Anthony Incorporated (“Tucker Anthony”),
Mr. Lewis served as a Vice-President for Tucker Anthony and subsequently RBC
Dain Rauscher, Inc. which acquired Tucker Anthony in August of 2001. Mr. Lewis
received his Bachelor of Science degree in Finance and Financial Economics from
James Madison University in 1998.
At
the Annual Meeting a vote will be taken on a proposal to approve the election of
the six (6) director nominees.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF THE
SIX (6) DIRECTOR NOMINEES.
CORPORATE
GOVERNANCE
Board
of Directors
The Board
oversees our business affairs and monitors the performance of our management. In
accordance with our corporate governance principles, the Board does not involve
itself in day-to-day operations. The directors keep themselves informed through
discussions with the Chief Executive Officer, other key executives and by
reading the reports and other materials sent to them and by participating in
Board and committee meetings. Our directors hold office until the next annual
meeting of stockholders and until their successors are elected and qualified or
until their earlier resignation or removal, or for other reason is unable to
serve in the capacity of director.
Director
Independence
Our
determination of independence of directors is made using the definition of
“independent director” contained in Rule 5605(a)(2) of the rules of the NASDAQ
Stock Market (“NASDAQ”), even though such definitions do not currently apply to
us because we are not listed on NASDAQ. We have determined that Dwight B.
Mamanteo, Marcus Wohlrab, Frederick Wasserman, Gerald Czarnecki and Austin Lewis
are “independent” within the meaning of such rules. Michael Jamieson is not
“independent” under these rules, due to his position as our Interim Chief
Executive Officer.
Board
Meetings and Attendance
During
fiscal 2009, the Board held nine physical and telephonic meetings. No incumbent
director attended, either in person or via telephone, fewer than 75% of the
aggregate of all meetings of the Board and committees, if any, on which each
director served. The Board also approved certain actions by unanimous written
consent.
Annual
Meeting Attendance
Two of
the Company’s seven directors attended our 2009 Annual Meeting of Stockholders,
which was held in Chester, England.
Stockholder
Communications with the Board
We have
not implemented a formal policy or procedure by which our stockholders can
communicate directly with our Board of Directors. Nevertheless, every effort has
been made to ensure that the views of stockholders are heard by the Board of
Directors or individual directors, as applicable, and that appropriate responses
are provided to stockholders in a timely manner. We believe that we are
responsive to stockholder communications, and therefore have not considered it
necessary to adopt a formal process for stockholder communications with our
Board. During the upcoming year, our Board will continue to monitor whether it
would be appropriate to adopt such a process.
Board
Committees
Our Board
of Directors has three standing committees of the Board: a Compensation
Committee, an Audit Committee and Governance and Nomination Committee. As of
February 16, 2010, the members of these committees are:
Compensation Committee
|
|
Audit Committee
|
|
Governance and
Nomination Committee
|
Dwight
B. Mamanteo - Chair
|
|
Frederick
Wasserman** - Chair
|
|
Marcus
Wohlrab – Chair
|
Marcus
Wohlrab
|
|
Dwight
B. Mamanteo
|
|
Dwight
B. Mamanteo
|
W.
Austin Lewis IV
|
|
W.
Austin Lewis IV
|
|
Frederick
Wasserman
|
Gerald
M. Czarnecki -ex officio member
|
|
Gerald
M. Czarnecki -ex officio member
|
|
Gerald
M. Czarnecki -ex officio
member
|
**The
Board of Directors has determined that Frederick Wasserman is an “audit
committee financial expert” as defined in Regulation S-K.
Audit
Committee
The Audit
Committee of the Board of Directors assists the Board of Directors in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing, and reporting practices of the Company, and such other duties as
directed by the Board. The Committee’s purpose is to oversee the accounting and
financial reporting processes of the Company, the audits of the Company’s
financial statements, the qualifications of the public accounting firm engaged
as the Company's independent auditor to prepare or issue an audit report on the
financial statements of the Company, and the performance of the Company's
internal and independent auditors. The Committee’s role includes a particular
focus on the qualitative aspects of financial reporting to shareholders, the
Company’s processes to manage business and financial risk, and compliance with
significant applicable legal, ethical, and regulatory requirements. The
Committee is directly responsible for the appointment, compensation, retention
and oversight of the independent auditor.
During
fiscal 2009, the Audit Committee held four physical and telephonic
meetings.
The Audit
Committee’s charter was attached as Appendix A to the Company’s proxy statement
relating to the Company’s 2008 Annual Meeting of Stockholders, which was filed
with the SEC on May 15, 2008 and amended on May 19, 2008.
Compensation
Committee
The
Compensation Committee’s role is to discharge the Board’s responsibilities
relating to compensation of the Company’s executives, to produce an annual
report on executive compensation for inclusion in the Company’s proxy statement,
and to oversee and advise the Board on the adoption of policies that govern the
Company’s compensation programs, including stock and benefit plans.
During
fiscal 2009, the Compensation Committee held one physical meeting.
The
Compensation Committee’s charter was attached as Appendix B to the Company’s
proxy statement relating to the Company’s 2008 Annual Meeting of Stockholders,
which was filed with the SEC on May 15, 2008 and amended on May 19,
2008.
Governance and Nomination
Committee
The
Governance and Nomination Committee’s role is to appoint nominees for election
to the Company’s Board of Directors, to identify and recommend candidates to
fill vacancies occurring between annual shareholder meetings, to review,
evaluate and recommend changes to the Company’s corporate governance policies,
and to review the Company's policies and programs that relate to matters of
corporate responsibility, including public issues of significance to the Company
and its stakeholders.
During
fiscal 2009, the Governance and Nomination Committee held one physical
meeting.
The
Governance and Nomination Committee’s charter was attached as Appendix C to the
Company’s proxy statement relating to the Company’s 2008 Annual Meeting of
Stockholders, which was filed with the SEC on May 15, 2008 and amended on May
19, 2008.
Family
Relationships
There are
no familial relationships among any of our officers and directors.
Involvement
in Certain Legal Proceedings
No
director, person nominated to become a director, executive officer, promoter or
control person of our company has, during the last five years: (i) been
convicted in or is currently subject to a pending a criminal proceeding
(excluding traffic violations and other minor offenses); (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to any Federal or state securities or banking or commodities
laws including, without limitation, in any way limiting involvement in any
business activity, or finding any violation with respect to such law, nor (iii)
any bankruptcy petition been filed by or against the business of which such
person was an executive officer or a general partner, whether at the time of the
bankruptcy or for the two years prior thereto.
In
addition, the Company is not engaged in, nor is it aware of any pending or
threatened, litigation in which any of its directors, executive officers,
affiliates or owner of more than 5% of the Company’s Common Stock is a party
adverse to the Company or has a material interest adverse to the
Company.
DIRECTOR
COMPENSATION FOR FISCAL 2009
During
fiscal 2009, directors who were not officers of the Company received a $10,000
annual retainer, with the exception of the lead director, who received a $35,000
annual retainer. Directors who were not officers of the Company also
received $7,500 for serving as Audit Committee Chairman, $6,000 for serving as
Chairman of the Governance and Nomination or Compensation Committees, and $5,000
for serving as a Committee Member. Directors who are also executive officers of
the Company do not receive any additional compensation for their service on the
Board.
The
following table reflects all compensation awarded to, earned by or paid to the
Company’s directors for the fiscal year ended June 30, 2009.
|
|
Fees
Earned
or
Paid
in
Cash
($)
|
|
|
Stock Awards
($)(1)
|
|
|
Options Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compen-
sation
($)
|
|
|
Total
($)
|
|
Ian
Warwick
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Simon
Chadwick
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Dwight
B. Mamanteo
|
|
|
26,000 |
(2) |
|
|
4,247 |
(3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,247 |
|
Marcus
Wohlrab
|
|
|
23,500 |
|
|
|
4,247 |
(4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,747 |
|
Frederick
Wasserman
|
|
|
27,500 |
|
|
|
4,492 |
(5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31,992 |
|
Gerald
M. Czarnecki
|
|
|
35,000 |
(6) |
|
|
8,480 |
(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,380 |
|
W.
Austin Lewis IV
|
|
|
7,200 |
(8) |
|
|
877 |
(9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,077 |
|
|
(1)
|
The
amount shown in the table reflects the dollar amount recognized for fiscal
2009 financial statement reporting purposes of the outstanding stock
awards held by the directors in accordance with FAS 123R. Refer to the
Company’s Consolidated Financial Statements for the Fiscal Years Ended
June 30, 2009 and 2008, Note 1 “Stock Based Compensation” and Note 10
“Stockholders Equity” included in the Company’s Annual Report on Form 10-K
for the fiscal year ended June 30, 2009, with respect to valuation
assumptions for this stock grant. The directors held no other stock or
option awards at June 30, 2009.
|
|
(2)
|
Includes
185,714 shares of Common Stock valued at market price on the date of
issuance, and received in lieu of $6,500 of cash
compensation.
|
|
(3)
|
Includes
25,569 shares valued at market price on the date of issuance, net of
income taxes of $728.
|
|
(4)
|
Includes
34,668 shares valued at market price on the date of
issuance.
|
|
(5)
|
Includes
36,668 shares valued at market price on the date of
issuance.
|
|
(6)
|
Includes
197,512 shares of Common Stock valued at market price on the date of
issuance, net of income taxes of $3,062, and received in lieu of $17,500
of cash compensation.
|
|
(7)
|
Includes
46,850 shares valued at market price on the date of issuance, net of
income taxes of $1,097.
|
|
(8)
|
Includes
102,857 shares of Common Stock valued at market price on date of issuance,
and received in lieu of $3,600 of cash
compensation.
|
|
(9)
|
Includes
10,267 shares valued at market price on the date of
issuance.
|
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
Our
executive officers are:
Name
|
|
Age
|
|
Position
|
Michael
Jamieson
|
|
42
|
|
Interim
Chief Executive Officer and Director
|
Charles
F. Trapp
|
|
60
|
|
Chief
Financial
Officer
|
Biographical information about Michael
Jamieson appears on page 7 above.
Charles F. Trapp was appointed
Vice President of Finance and Chief Financial Officer on November 30,
2007. Prior to his employment with the Company, Mr. Trapp was the
co-founder and President of Somerset Kensington Capital Co., a Bridgewater, New
Jersey-based investment firm that provided capital and expertise to help public
companies restructure and reorganize from 1997 until November 2007. Earlier in
his career, he served as CFO and/or a board member for a number of public
companies, including AW Computer Systems, Vertex Electronics Corp., Worldwide
Computer Services and Keystone Cement Co. His responsibilities have included
accounting and financial controls, federal regulatory filings, investor
relations, mergers and acquisitions, loan and labor negotiations, and litigation
management. Mr. Trapp is a Certified Public Accountant and received his Bachelor
of Science degree in Accounting from St. Peter’s College in Jersey City, New
Jersey.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The
Compensation Committee (the “Compensation Committee” or the “Committee”) of the
Board administers our executive compensation program. Each member of the
Committee is a non-employee and an independent director. The Compensation
Committee is responsible for establishing salaries, administering our incentive
programs, and determining the total compensation for our Chief Executive Officer
and other executive officers. The Compensation Committees seeks to achieve the
following goals with our executive compensation programs: to attract, motivate,
and retain key executives and to reward executives for value creation. The
Compensation Committee seeks to foster a performance-oriented environment by
tying a significant portion of each executive’s cash and equity compensation to
the achievement of performance targets that are important to the Company and its
stockholders. Our executive compensation program has three principal elements:
base salary, cash bonuses, and equity incentives under a recently established
2007 Long-Term Stock Incentive Plan (the “LTIP”).
Unless
otherwise noted, this Compensation Discussion and Analysis speaks as of the end
of the fiscal year ended June 30, 2009.
Compensation
Principles
We
believe the top growing companies design their compensation program to attract,
motivate, and retain highly talented individuals to drive business success. We
further believe that the ideal programs tend to be principle-based rather than
rules-based with such best practices compensation programs providing for the
opportunity for executives and other key employees to achieve significant
compensation upon the realization of objectives that clearly benefit a company
and its shareholders. The Committee believes that best-practices plan will
reflect the following principles:
(1) Compensation
should be related to performance
A proper
compensation program should reinforce our Company’s business and financial
objectives. Employee compensation will vary based on Company versus individual
performance. When the Company performs well against the objectives that the
Compensation Committee and Board will set, employees will receive greater
incentive compensation. To the extent the business does not achieve or meet
these objectives, incentive awards will be reduced or eliminated. An employee’s
individual compensation will also vary based on his or her performance,
contribution, and overall value to the business. Employees with sustained high
performance should be rewarded more than those in similar positions with lesser
performance.
(2) Our
employees should think like stockholders
The
second critical principle of our compensation programs should be to foster an
environment where our employees should act in the interests of the Company’s
stockholders. We believe that the best way to encourage them to do that is
through an equity interest in their company. Equity interest in a company
can be achieved in several respects: the establishment of equity incentive plans
that provide for the granting of equity-based awards, such as stock options
and/or restricted stock or performance share units to employees. This requires
the establishment of an omnibus long-term stock-based incentive plan, which LTIP
was approved and adopted by our Board and shareholders. While this plan also
provides for traditional stock options, we believe that options should not
form the dominant focus of a proper incentive plan and that performance
share units or performance vesting restricted stock grants represent a preferred
form of equity incentive. The philosophy behind such a structure is that as
employees earn more stock (as opposed to options) they will think more like
stockholders. Put another way, when all employees become owners, they think and
behave like owners.
(3) Incentive
compensation should be a greater part of total compensation for more senior
positions
The
proportion of an individual’s total compensation that varies with individual and
Company performance objectives should increase as the individual’s business
responsibilities increase. Thus, cash bonuses and LTIP-based compensation should
form the overwhelmingly dominant portion of overall compensation for the
Company’s senior employees and the milestones for payouts on those plans for our
senior employees are based entirely on corporate results.
Compensation
Targets
Our
Compensation Committee with the input of the officers of the Company has
established competitive targets for our executive officers that we believe
reflect the challenges of our business and create an equity-focused culture
throughout the entire Company.
We
believe that in allocating compensation among these elements, the compensation
of a company’s senior-most levels of management - those persons having the
greatest ability to influence a company’s performance - should be predominantly
performance-based, while more junior employees should receive a greater portion
of their compensation based on their base salary.
These
targets are described below under “Employment Agreements.”
Base
Salary and Cash Incentive
We divide
total cash compensation into a base salary portion and a cash incentive bonus
portion. The Compensation Committee establishes the Chief Executive Officer’s
targeted cash compensation first and then sets the cash compensation for other
officers accordingly, based on the function served by that officer, that
officer’s experience, and expected individual performance. Generally, we believe
that the higher the level of responsibility of the executive within our Company,
the greater the portion of that executive’s target total cash compensation that
consists of the cash incentive component. The higher the executive’s level of
responsibility within the Company, the greater the percentage of the executive’s
compensation that should be tied to the Company’s performance.
Equity
Incentive
Long-term
performance is achieved through an ownership culture that encourages such
performance by our executive officers through the use of stock and stock-based
awards. The Committee believes that the use of stock and stock-based awards
offers the best approach to properly achieving our goals. We believe that
stock-based compensation provide the principal method for executive officers to
acquire equity or equity-linked interests in the Company. We have implemented
the LTIP which we will utilize for such a purpose, which has received
shareholder approval.
Rationale
for Paying each Element
Base
compensation and participation in benefit plans are established to provide
employees with appropriate industry competitive terms. Director retainers are
paid partially to compensate directors for their considerable time investment
and to assist directors in covering their indirect operating expenses as
independent contractors. Annual incentive cash bonuses are paid to reward
employees for performance and stockholder value enhancement in the current year,
based upon targets set by the Board for the CEO and his direct reports, with the
CEO establishing the individual targets for all other employees.
LTIP
awards are designed to reward the building of long-term stockholder value, while
providing modest, interim rewards in the pursuit of such longer-term
objectives.
Determination
of Amounts to Pay
Base
salaries, benefits and potential cash bonuses are established based upon current
market conditions. Where needed, outside consultants may be retained to assist
in this process. Benefit plan structures may be evaluated periodically to
determine market competitiveness with similar companies.
Stock-based
awards to be granted are evaluated based upon projected total compensation
levels for participants assuming certain objectives are achieved. Since the
majority of the total potential compensation is based upon performance, our
expectation is that the total projected compensation level be well above
average, because the “at risk” compensation levels generally exceed 2/3 of
anticipated compensation under the assumption that bonus targets are met. The
Committee, taking into consideration management’s recommendations and with
sign-off from all independent directors, will set each year’s goals and
milestones, their weightings, and the formulas for award calculation. For
accounting purposes, cash elements are expensed as earned. LTIP awards are
expensed as provided for under FAS 123R, and are further described in the
footnotes to the audited financial statements included in this Annual Report on
Form 10-K.
How
the Elements Interact
While
each element is set with certain needs in mind, the Committee also looks at the
total compensation package for each individual to determine that the total
payout is appropriate to the level of responsibility attributable to each
participant. The total compensation package will also include any bonus amounts
and awards to be based on performance targets, when such targets are ultimately
set by the Committee.
Chief
Executive Officer Compensation
The
Compensation Committee uses the same factors in determining the compensation of
our CEO as it does for other senior officers. Mr. Warwick’s annual
base salary for fiscal 2009 was $300,000, pursuant to the terms of his
employment agreement which was entered into effective as of December 1, 2008 and
is described further below under “Employment Agreements.” The terms
of the Mr. Warwick’s employment agreement, a United Kingdom resident, also
entitle Mr. Warwick to a make-whole payment that will restore him to the British
Pound Sterling equivalent that existed on the effective date of the agreement in
the event that the value of the U.S. Dollar relative to the British Pound
Sterling increases such that his base salary is reduced, as a result of such
currency translation, by 10% or more.
Historically,
Mr. Warwick’s salary was set pursuant to his employment agreement that was
entered into with our former parent, ADNW. Following our spinoff from
ADNW, we entered into the employment agreement described below, and used a peer
group for comparison purposes for evaluation of his salary. The peer group was
determined by our independent directors. Our independent directors surveyed
companies whose revenue base and organizational size were consistent with ours
as well as several companies within our industry, which we defined as business
and supply chain management software solutions. The peer group was thus created
from a group of companies that were both similar in size as well as companies
within our industry segment. Finally, we compared the peer group to compensation
for similar companies that were in the midst of a turnaround.
Mr.
Warwick resigned from the Company effective January 31,
2010. Pursuant to the terms of the Separation Agreement entered into
on January 20. 2010 with Mr. Warwick, the Company agreed to pay $300,000 in
termination payments, payable over six months, and additional payments of
$75,000 if certain events occur.
Employment
Agreements
Effective
as of December 1, 2008 (the “Effective Date”), upon the approval of our Board of
Directors, we entered into employment agreements with each of Ian Warwick, our
President and Chief Executive Officer, Charles F. Trapp, our Executive Vice
President and Chief Financial Officer, and Simon Chadwick, our Executive Vice
President and Chief Operating Officer.
Ian Warwick Employment
Agreement
The
Employment Agreement with Mr. Warwick (the “Warwick Agreement”) is for an
initial term of two and one-half years from the Effective Date, and is
automatically renewable for successive one-year periods unless terminated by Mr.
Warwick or us. Mr. Warwick will receive an annual base salary of $300,000,
payable in U.S. dollars. The annual salary is increased to $350,000 upon our
achievement of a market capitalization goal of $50 million for at least 25
consecutive trading days. The terms of the Warwick Agreement also entitles Mr.
Warwick, a United Kingdom resident, to a make-whole payment that will
restore him to the British Pound Sterling equivalent that existed on the
Effective Date in the event that the value of the U.S. Dollar relative to the
British Pound Sterling increases such that his base salary is reduced, as a
result of such currency translation, by 10% or more (the “Make-Whole
Payment”).
The
Warwick Agreement also provides for an appointment to our Board of Directors, on
which Mr. Warwick already serves.
Mr.
Warwick is eligible for a performance-based annual cash incentive bonus of up to
150% of his base salary in any fiscal year depending on the extent to which the
applicable performance goal(s) of the Company, which are to be established by
our Compensation Committee or pursuant to a formal bonus plan, are achieved,
subject to any operating covenants in place with respect to outstanding bank
debt. The Compensation Committee established an EBITDA-related target for the
fiscal year ended June 30, 2009, with respect to Mr. Warwick’s potential
incentive bonus for fiscal 2009.
In
addition, Mr. Warwick is entitled to participate in all of our benefit plans and
our equity-based compensation plans, which currently consists of our LTIP.
Pursuant to the Warwick Agreement, Mr. Warwick is to be awarded two grants of
3-year performance share unit awards under the LTIP, each for 500,000
performance share units as a base objective, with 30% of the award vesting in
the first year of the grant provided that the base target for that year is
met, 30% of the award vesting in the second year of the grant provided that
the base target for the second year is met, and 40% of the award vesting in the
third and final year of the grant provided that the base target for the third
year is met (“Performance Share Units”). The performance measures for these
awards, which have been set by the Compensation Committee, are based on
increases in our earnings per share (“EPS”) and return on invested capital
(“ROIC”). Further, with respect to both awards in each grant year, (i) if the
Company’s results amount to less than 80% of the established target(s), none of
the awards will vest; (ii) if the Company’s results are equal to 80% of the
established target(s), 50% of the award will vest; (iii) if the Company’s
results are equal to 100% of the established target(s), 100% of the award
will vest; and (iv) if the Company’s results are equal to or better than 120% of
the established target(s), 150% of the award will vest. Results between these
established parameters will be interpolated.
The
Warwick Agreement also entitles Mr. Warwick to be granted options to purchase
300,000 shares of our common stock under the LTIP. These options will vest as to
one-third of the award on each of the first three anniversaries of the grant
date, at a strike price of $0.75, $1.00 and $1.25, respectively. The options
expire ten years from the grant date.
The
Warwick Agreement provides that in the event Mr. Warwick’s employment is
terminated for Good Reason, for any reason other than for Cause, Death or
Disability or for Good Reason during the 30-day period immediately following the
first anniversary of the Effective Date (the “Window Period”), he is entitled
to, among other things, a severance payment equal to his 12 months base salary.
In addition, under such circumstances, all of Mr. Warwick’s stock options, stock
appreciation rights and restricted stock will immediately vest and be payable in
shares of our common stock and all of his performance share units that would
vest in the course of any fiscal year shall vest on a pro rata
basis.
Mr.
Warwick resigned from the Company effective January 31,
2010. Pursuant to the terms of the Separation Agreement entered into
on January 20. 2010 with Mr. Warwick, the Company agreed to pay $300,000 in
termination payments, payable over six months, and additional payments of
$75,000 if certain events occur.
Charles F. Trapp Employment
Agreement
The
Employment Agreement with Mr. Trapp (the “Trapp Agreement”) is for an initial
term of one year from the Effective Date, and is automatically renewable for
successive one-year periods unless terminated by Mr. Trapp or us. Mr. Trapp will
receive an annual base salary of $220,000, payable in U.S. dollars. Mr. Trapp is
eligible for a performance-based annual cash incentive bonus of up to 150%
of his base salary in any fiscal year depending on the extent to which the
applicable performance goal(s) of the Company, which are to be established by
the Compensation Committee or pursuant to a formal bonus plan, are achieved,
subject to any operating covenants in place with respect to outstanding bank
debt. The Compensation Committee established an EBITDA-related target for the
fiscal year ended June 30, 2009, with respect to Mr. Trapp’s potential incentive
bonus for fiscal 2009.
In
addition, Mr. Trapp is entitled to participate in all of our benefit plans and
equity-based compensation plans, which currently consists of the LTIP. Mr. Trapp
will be awarded two grants of 3-year Performance Share Unit awards under the
LTIP, each for 300,000 performance share units as a base objective, with the
same terms, performance targets and metrics as Mr. Warwick’s Performance Share
Unit awards described above. Mr. Trapp also will be granted options to
purchase 100,000 shares of our common stock under the LTIP. These options will
vest as to one-third of the award on each of the first three anniversaries of
the grant date, at a strike price of $0.75, $1.00 and $1.25, respectively. The
options expire ten years from the grant date.
The Trapp
Agreement provides that in the event Mr. Trapp’s employment is terminated for
Good Reason, for any reason other than for Cause, Death or Disability or for
Good Reason during the Window Period, Mr. Trapp is entitled to, among other
things, a severance payment equal to his 12 months base salary, all of Mr.
Trapp’s stock options, stock appreciation rights and restricted stock shall
immediately vest and be payable in shares of our common stock and all of his
performance share units that would vest in the course of any fiscal year shall
vest on a pro rata basis. The Employment Agreement with Mr. Trapp was
not renewed on November 30, 2009, but Mr. Trapp has continued as Chief Financial
Officer and Vice President, Finance for the Company.
Simon Chadwick
Employment
Agreement
The
Employment Agreement with Mr. Chadwick (the “Chadwick Agreement”) is for an
initial term of two years from the Effective Date, and is automatically
renewable for successive one-year periods unless terminated by Mr. Chadwick or
us. Mr. Chadwick will receive an annual base salary of $225,000, payable in U.S.
dollars. The terms of the Chadwick Agreement also entitles Mr. Chadwick, a
United Kingdom resident, to a Make-Whole Payment consistent with the one awarded
to Mr. Warwick.
The
Chadwick Agreement also provides for an appointment to our Board of Directors,
on which he already serves.
Mr.
Chadwick is eligible for a performance-based annual cash incentive bonus of up
to 150% of his base salary in any fiscal year depending on the extent to which
the applicable performance goal(s) of the Company, which are to be established
by the Compensation Committee or pursuant to a formal bonus plan, are achieved,
subject to any operating covenants in place with respect to outstanding bank
debt. The Compensation Committee established an EBITDA-related target for the
fiscal year ended June 30, 2009, with respect to Mr. Chadwick’s potential
incentive bonus for fiscal 2009.
In
addition, Mr. Chadwick is entitled to participate in all of our benefit plans
and our equity-based compensation plans, which currently consists of the LTIP.
Mr. Chadwick will be awarded two grants of 3-year Performance Share Unit awards
under the LTIP, each for 400,000 performance share units as a base objective,
with the same terms, performance targets and metrics as Mr. Warwick’s and
Mr. Trapp’s Performance Share Unit awards described above. The Chadwick
Agreement also grants Mr. Chadwick options to purchase 200,000 shares of our
common stock under the LTIP. These options will vest as to one-third of the
award on each of the first three anniversaries of the grant date, at a strike
price of $0.75, $1.00 and $1.25, respectively. The options expire ten years from
the grant date.
In the
event Mr. Chadwick’s employment is terminated for Good Reason, for any reason
other than for Cause, Death or Disability or for Good Reason during the Window
Period, Mr. Chadwick is entitled to, among other things, a severance payment
equal to his 12 months base salary, all of Mr. Chadwick’s stock
options, stock appreciation rights and restricted stock shall immediately
vest and be payable in shares of our common stock and all of his performance
share units that would vest in the course of any fiscal year shall vest on a pro
rata basis.
Mr.
Chadwick resigned from the Company effective January 31,
2010. Pursuant to the terms of the Separation Agreement entered into
on January 20. 2010 with Mr. Chadwick, the Company agreed to pay $225,000 in
termination payments, payable over six months, and additional payments of
$50,000 if certain events occur.
Severance
Benefits
As
described above, each of the employment agreements with our officers contains a
severance benefit for that officer if he or she is terminated other than for
cause or the officer leaves the Company after a change in control, provided they
leave for “good reason.” We provide this benefit because we want executives to
focus on the Company’s business and enhancing stockholder value without undue
concern about any possible loss of their job.
Retirement
Plans
We do not
offer retirement plans for our officers.
Change
in Control
Each
officer’s employment agreement contains standard provisions that protect that
officer in the event there is a change in control that has not been approved by
our Board of Directors. In addition, our LTIP provides for acceleration of
vesting in the event of a change in control.
The
precise terms and conditions of each employment agreement is described
above.
Perquisites
We offer
limited perquisites for our executives. We may offer life insurance policies for
our Named Executive Officers, but as of the date of this report, have yet to
establish those policies.
Board
Process
The
Compensation Committee of the Board of Directors approves all compensation and
awards to executive officers, which include the Chief Executive, the Chief
Financial Officer, and Chief Operating Officer, and any other Named Executive
Officers. Generally, on its own initiative the Compensation Committee reviews
the performance and compensation of the Chief Executive, Chief Financial
Officer, and Chief Operating Officer and, following discussions with those
individuals, establishes their compensation levels where it deems appropriate.
For the remaining officers, the Chief Executive Officer makes recommendations to
the Compensation Committee that generally, with such adjustments and
modifications that are deemed necessary or appropriate by the Committee, are
approved. With respect to equity-based compensation awarded to others, the
Compensation Committee grants restricted stock, generally based upon the
recommendation of the Chief Executive Officer.
The
Compensation Committee believes that objectives cannot be established in a
vacuum and thus invites management’s input into the establishment of milestones.
Although Committee meetings are held in executive session, without management’s
presence, the Committee (and from time to time individual members of the
Committee) routinely meets with senior officers of the Company to discuss
objectives, to explain the rationale for certain objectives or milestones, and
to assure that it has management’s input in assessing the consequences of
decisions made in Committee, for instance, the impact that its decisions may
have on our financial statements. The Committee’s interactions with management
seek to achieve a balance between receiving management’s buy-in for objectives
and assuring that management is not actually or effectively establishing the
terms and parameters for its own compensation.
Forward-Looking
Statements
Disclosures
in this Compensation Discussion & Analysis may contain certain
forward-looking. Statements that do not relate strictly to historical or current
facts are forward-looking and usually identified by the use of words such as
“anticipate,” “estimate,” “approximate,” “expect,” “intend,” “plan,” “believe”
and other words of similar meaning in connection with any discussion of future
operating or financial matters.
Without
limiting the generality of the foregoing, forward-looking statements contained
in this report include the matters discussed regarding the expectation of
compensation plans, strategies, objectives, and growth and anticipated financial
and operational performance of the Company and its subsidiaries. A variety of
factors could cause the Company’s actual results to differ materially from the
anticipated results or other expectations expressed in the Company’s
forward-looking statements. The risks and uncertainties that may affect the
operations, performance and results of the Company’s business and
forward-looking statements include, but are not limited to those set forth
herein.
Any
forward-looking statement speaks only as of the date on which such statement is
made and the Company does not intend to correct or update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Compensation
Committee Report
The
Report of the Compensation Committee (the “Compensation Report”) does not
constitute soliciting material and should not be deemed filed or incorporated by
reference into any other Company filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this Compensation Report by reference therein.
Recommendations of the Compensation
Committee. We have reviewed and discussed the Compensation Discussion
& Analysis (“CD&A”) with the Company’s management. Based on this review
and these discussions, we recommended to the Board of Directors that the
CD&A be included in the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2009.
This
Compensation Report has been furnished by the Compensation Committee of the
Board of Directors.
Dwight B.
Mamanteo, Chair
Marcus
Wohlrab
W. Austin
Lewis IV
Gerald M.
Czarnecki
Summary
Compensation Table for Fiscal Years 2009, 2008 and 2007
The
following table sets forth information for the fiscal years ended June 30, 2009,
2008 and 2007 concerning the compensation paid and awarded to all individuals
serving as (a) our Chief Executive Officer, Ian Warwick, (b) the two most highly
compensated Executive Officers (other than our Chief Executive Officer) of ours
and our subsidiaries at the end of our fiscal years ended June 30, 2009, 2008
and 2007 whose total compensation exceeded $100,000 for these periods, Simon
Chadwick and Charles F. Trapp, and (c) two additional individuals for whom
disclosure would have been provided pursuant to (b) except that they were not
serving as executive officers at the end of such fiscal years. These individuals
may be collectively referred to herein as our “Named Executive
Officers.”
Name and
Principal Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
|
|
Non-
qualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Ian
Warwick (1)
|
|
2009
|
|
|
292,828 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
292,828 |
|
Chief
Executive Officer,
|
|
2008
|
|
|
349,195 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
349,195 |
|
President
and Director
|
|
2007
|
|
|
350,682 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
350,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simon
Chadwick (2)
|
|
2009
|
|
|
218,780 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
218,780 |
|
Chief Operating Officer
|
|
2008
|
|
|
259,402 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
259,402 |
|
and
Director
|
|
2007
|
|
|
260,507 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
260,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
F. Trapp (3)
|
|
2009
|
|
|
224,166 |
|
|
|
|
|
|
|
5,775 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,941 |
|
Vice
President, Finance,
|
|
2008
|
|
|
214,583 |
|
|
|
— |
|
|
|
25,500 |
(4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
240,083 |
|
and
Chief Financial Officer
|
|
2007
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
(1)
|
Reflects
salary paid to Mr. Warwick for services rendered to us and our
subsidiaries during fiscal 2009, 2008 and 2007 as Aftersoft’s Chief
Executive Officer and President. Salary was paid in British pounds at an
annual salary of 175,000 GPB for each of the 2007 and 2008 fiscal years,
and for the period from July 1, 2008 to November 30, 2008 (or 72,916
GBP). Salary for the period from December 1, 2008 through June
30, 2009 was paid in US dollars at an annual base rate of $300,000 (or
$175,000 for the period), pursuant to the terms of Mr. Warwick’s
employment agreement. The amount shown for 2007 was translated
to US dollars based on a June 30, 2007 currency conversion rate of 1 GBP =
$2.0039. The amount shown for 2008 was translated to US dollars based on a
June 30, 2008 currency conversion rate of 1 GBP = $1.9954. The
portion of Mr. Warwick’s salary for fiscal 2009 which was paid in British
pounds (for the period from July 1, 2008 through November 30, 2008) was
translated to US dollars based on the June 30, 2009 currency conversion
rate of 1 GBP= $1.61593 (or $117,828). Mr. Warwick did not receive any
additional compensation for his services as a director on our Board of
Directors.
|
(2)
|
Reflects
salary paid to Mr. Chadwick for services rendered to us and our
subsidiaries during fiscal 2009, 2008 and 2007 as Aftersoft’s Chief
Operating Officer. Salary was paid in British pounds at an annual salary
of 130,000 GPB for each of the 2007 and 2008 fiscal years, and for the
period from July 1, 2008 to November 30, 2008 (or 54,167
GBP). Salary for the period from December 1, 2008 through June
30, 2009 was paid in US dollars at an annual base rate of $225,000 (or
$131,250 for the period), pursuant to the terms of Mr. Chadwick’s
employment agreement. The amount shown for 2007 was translated
to US dollars based on a June 30, 2007 currency conversion rate of 1 GBP =
$2.0039. The amount shown for 2008 was translated to US dollars based on a
June 30, 2008 currency conversion rate of 1 GBP = $1.9954. The
portion of Mr. Chadwick’s salary for fiscal 2009 which was paid in British
pounds (for the period from July 1, 2008 through November 30, 2008) was
translated to US dollars based on the June 30, 2009 currency conversion
rate of 1 GBP= $1.61593 (or $87,530). Mr. Chadwick did not receive any
additional compensation for his services as a director on our Board of
Directors.
|
(3)
|
Mr.
Trapp was appointed Vice President Finance and Chief Financial Officer
effective as of December 1, 2007.For the year ended June 30, 2009, the
amount shown in the table reflects salary in the amount of $95,833 earned
for services in these capacities between July 1, 2008 and November 30,
2008, as well as salary in the amount of $128,333 earned for services
between December 1, 2008 and June 30, 2009 pursuant to the terms of Mr.
Trapp’s employment agreement. The salary for fiscal 2009 also includes
$20,500 that was deferred and contributed by Mr. Trapp to the Company’s
plan established under section 401(k) of the Internal Revenue Code of
1986, as amended. For the year ended June 30, 2008, the amount
shown in the table reflects salary in the amount of $134,167 earned for
services between December 1, 2007 and June 30, 2008, as well as salary in
the amount of $80,416 earned for services as an accountant prior to his
appointment as an officer. The salary for fiscal 2008 also includes
$20,500 that was deferred and contributed by Mr. Trapp to the Company’s
plan established under section 401(k) of the Internal Revenue Code of
1986, as amended.
|
(4)
|
The
amount shown in the “Stock Awards” column reflects the dollar amount
recognized for fiscal 2009 and 2008 financial statement reporting purposes
of the outstanding stock awards held by Mr. Trapp in accordance with FAS
123R. Stock award represent an award on May 13, 2008 of 750,000 shares of
Common Stock with a grant date closing price of $0.10 per share, of which
34% or 255,000 shares vested immediately on the date of grant. The
remaining 66% of the shares or 495,000 shares will vest in three equal
installments of 165,000 shares on each of the first, second and third
anniversaries of the grant date. The shares were not issued pursuant to
any existing compensation plan. Refer to the Company’s Consolidated
Financial Statements for the Fiscal Years Ended June 30, 2008 and 2007,
Note 1 “Stock Based Compensation” and Note 10 “Stockholders Equity”
included in this Annual Report on Form 10-K, with respect to valuation
assumptions for this stock grant. Mr. Trapp held no other stock or option
awards at June 30, 2009 and 2008,
respectively.
|
Employment
Agreements with Executive Officers
Effective
as of December 1, 2008, upon the approval of our Board of Directors, We entered
into employment agreements with each of Ian Warwick, our President and Chief
Executive Officer, Charles F. Trapp, our Executive Vice President and Chief
Financial Officer, and Simon Chadwick, our Executive Vice President and Chief
Operating Officer. These employment agreements are described above
under “Compensation Discussion and Analysis - Employment
Agreements.”
Other
Compensation
Other
than as described above, there were no post-employment compensation, pension or
nonqualified deferred compensation benefits earned by the executive officers
during the year ended June 30, 2009. We do not have any retirement, pension, or
profit-sharing programs for the benefit of our directors, officers or other
employees. The Board of Directors may recommend adoption of one or more such
programs in the future.
Outstanding
Equity Awards at 2009 Fiscal Year End
The
following table provides information relating to the vested and unvested option
and stock awards held by the named executives as of June 30, 2009. Each award to
each named executive is shown separately, with a footnote describing the award’s
vesting schedule.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(# Exercisable)
|
|
|
Number of
Securities
Underlying
Unexercised
Option
(# Unexercisable)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other Rights
That Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
Or
Other
Rights
That
Have
Not
Vested
($)
|
|
Ian Warwick
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simon
Chadwick
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Charles
F. Trapp
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
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|
|
330,000 |
(1) |
|
$ |
33,000 |
(2) |
|
|
— |
|
|
|
— |
|
Michael O’Driscoll
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Stock
awards represent an award on May 13, 2008 to Mr. Trapp of 750,000 shares
of Common Stock with a grant date fair value of $0.10 per share, of which
34%, or 255,000 shares, vested immediately on the date of grant and
165,000 shares valued at $.035 per share vested on May 13, 2009. The
remaining 330,000 shares reflected in the table, will vest in two equal
installments of 165,000 shares, on each of the second and third
anniversaries of the grant date. The shares were not issued pursuant to
any existing compensation plan.
|
(2)
|
Based
on the closing price of $0.10 of the Company’s Common Stock on June 30,
2009.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Transactions
with Auto Data Network, Inc.
Prior to
the spin-off of Aftersoft from ADNW on November 24, 2008, Mr. Warwick served as
Chairman and CEO of both companies. Effective immediately following the spinoff,
Mr. Warwick resigned from all positions with ADNW. None of the Company’s other
officers and directors serve as officers or directors of ADNW.
On
November 24, 2008 (the “Dividend Distribution Date”), ADNW distributed a
dividend of the 71,250,000 shares of the Company’s common stock that ADNW owned
at such time in order to complete the previously announced spin-off of
Aftersoft’s businesses. The dividend shares were distributed in the form of a
pro rata dividend to the holders of record as of November 17, 2008 (the
“Record Date”) of ADNW’s common and convertible preferred stock. Each holder of
record of shares of ADNW common and preferred stock as of the close of business
on the Record Date was entitled to receive 0.6864782 shares of Aftersoft's
common stock for each share of common stock of ADNW held at such time, and/or
for each share of ADNW common stock that such holder would own, assuming the
convertible preferred stock owned on the Record Date was converted in
full.
Due to
the nature of the dividend distribution, the ex-dividend date was set by NASDAQ
as Tuesday, November 25, 2008, one day following the Dividend Distribution Date.
No consideration was paid by any ADNW shareholder to receive the distribution of
the dividend shares. Only whole shares were delivered to ADNW shareholders, so
any resulting fractional shares in calculating the dividend were rounded up to
the nearest whole number.
As a
result of Aftersoft’s ownership of certain ADNW securities, Aftersoft received
approximately 13,965,295 shares of its own common stock in connection with the
dividend distribution. On December 31, 2008, Aftersoft retired 13,722,112
of the shares. The remaining 243,183 shares were used by Aftersoft
for rounding of fractional shares issued in respect of the spin-off dividend, to
make adjustments for the benefit of the holders of ADNW’s Series B Convertible
Preferred Stock which received fewer shares in connection with the spin-off than
the number to which they were entitled as a result of a calculation error
relating to the Series B conversion rate, and for other minor
adjustments.
Prior to
the spin-off, ADNW owned approximately 77% of Aftersoft’s issued and outstanding
common stock. Subsequent to and as a result of the spin-off, Aftersoft is no
longer a subsidiary of ADNW.
Transactions
with ComVest Capital LLC and its affiliate, Commonwealth Associates
LP
ComVest
Capital LLC
ComVest
Capital LLC (“ComVest’) is the Company’s senior secured
lender. During fiscal 2008, ComVest extended to the Company a
$1,000,000 secured revolving credit facility and a $5,000,000 term loan pursuant
to the terms of a Revolving Credit and Term Loan Agreement (the “Loan
Agreement”), a Revolving Credit Note and a Convertible Term Note, each dated
December 21, 2007. The material terms of these loans are described
further below. In connection with this transaction, the Company issued to
ComVest warrants to purchase an aggregate of 5,083,333 shares of the Company’s
common stock. The material terms of these warrants are described further
below.
At the
time the loans were made, ComVest was not a party related to the Company. Each
of these loans were made in the ordinary course of business, were made on the
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with persons not related to the
lender and did not involve more than the normal risk of collectibility or
present other unfavorable features. As a result of the issuance of
the Convertible Term Note and the warrants, ComVest became a shareholder of the
Company, and currently may be deemed to have beneficial ownership of
approximately 10.79% of the Company’s common stock (including certain
warrants held by Commonwealth Associates LP, see below).
Credit Facility
and Revolving
Credit Note. Pursuant to the terms of the Loan Agreement, the Credit
Facility is available to the Company through November 30, 2009, unless the
maturity date is extended, or the Company prepays the Term Loan (described
below) in full, in each case in accordance with the terms of the Loan Agreement.
The Credit Facility provides for borrowing capacity of an amount up to (at any
time outstanding) the lesser of the Borrowing Base at the time of each advance
under the Credit Facility, or $1,000,000. The borrowing base at any time
will be an amount determined in accordance with a borrowing base report that the
Company is required to provide to the lender, based upon the Company’s Eligible
Accounts and Eligible Inventory, as such terms are defined in the Loan
Agreement. The Loan Agreement provides for advances to be limited to
(i) 80% of Eligible Accounts plus, in ComVest’s sole discretion, (ii) 40% of
Eligible Inventory, minus (iii) such reserves as ComVest may establish from time
to time in its discretion. As of June 30, 2009 the borrowing base was
$1,385,000.
In
connection with the Credit Facility, the Company issued a Revolving Credit Note
(the “Credit Note”) on December 21, 2007 payable to ComVest in the principal
amount of $1,000,000, initially bearing interest at a rate per annum equal to
the greater of (a) the prime rate, as announced by Citibank, N.A. from time to
time, plus two percent (2%), or (b) nine and one-half percent (9.5%). The
applicable interest rate will be increased by four hundred (400) basis points
during the continuance of any event of default under the Loan Agreement.
Interest is computed on the daily unpaid principal balance and is payable
monthly in arrears on the first day of each calendar month commencing
January 1, 2008. Interest is also payable upon maturity or
acceleration of the Credit Note. On February 10, 2009, the interest
rate was increased from 9.5% to 11% in connection with a waiver the Company
received for violating one of the debt covenants at December 31,
2008 (discussed below).
During
the Company’s fourth fiscal quarter of 2008, the Company drew down $500,000 of
the Credit Facility, and drew down the remaining $500,000 during the first and
second fiscal quarter of 2009. As a result, as of June 30, 2009, the
outstanding principal due on the credit facility was $1,000,000, and as of June
30, 2009, the entire credit facility had been drawn down. As of June
30, 2009, the Company has not yet repaid any principal. As described
above, this loan currently bears interest at a rate of 9.5%. During
fiscal 2008, the Company paid $2,045 in interest payments, and during fiscal
2009, the Company paid $117,281 including fees of $27,000.
Term Loan and Convertible
Term Note. In addition to the Credit Facility, ComVest
extended a Term Loan, evidenced by a Convertible Term Note (the “Term Note”)
issued on December 21, 2007, in the principal amount of $5,000,000. The Term
Loan was a one-time loan, and unlike the Credit Facility, the principal amount
is not available for re-borrowing. The Term Note bears interest at a
rate of eleven percent (11%) per annum, except that during the continuance of
any event of default, the interest rate will be increased to sixteen percent
(16%).
Initially,
the Term Note was payable in 23 equal monthly installments of $208,333.33 each,
payable on first day of each calendar month commencing January 1, 2009, through
November 1, 2010, with the balance due on November 30, 2010. The
amortization schedule was subsequently modified, and was delayed for one
year so that payments will commence on January 1, 2010, pursuant to an amendment
of the Loan Agreement during the quarter ended June 30, 2008 (see
below).
The
number of shares issuable upon conversion of the Term Note and the conversion
price may be proportionately adjusted in the event of any stock dividend,
distribution, stock split, stock combination, stock consolidation,
recapitalization or reclassification or similar transaction. In
addition, the number of conversion shares, and/or the conversion price may be
adjusted in the event of certain sales or issuances of shares of the Company’s
common stock, or securities entitling any person to acquire shares of common
stock, at any time while the Term Note is outstanding, at an effective price per
share which is less than the then-effective conversion price of the Term
Note. The principal and interest payable on the Term Note was initially
convertible into shares of the Company’s common stock at the option of ComVest,
at an initial conversion price of $1.50 per share. On July 3, 2008, the
conversion price was reduced to approximately $1.49 per share following the
Company’s subsequent issuance of shares of common stock and warrants at an
effectively lower price. Consequently, the number of shares issuable
upon conversion of the principal amount of the Term Note was increased to
3,361,345 shares from 3,333,333 shares. The Company also may require conversion
of the principal and interest under certain circumstances.
Since
December 21, 2007, the principal amount due on the Term Note has been
$5,000,000. As of June 30, 2009, the Company has not yet repaid any principal.
As described above, this loan currently bears interest at a rate of 11%. During
fiscal 2009 and 2008, the Company paid $842,000 and $290,278, respectively, in
interest payments.
Warrants. In connection with the
Loan Agreement, the Company issued warrants to ComVest to purchase the following
amounts of shares of the Company’s common stock, exercisable after December 21,
2007 and expiring December 31, 2013: a) warrants to purchase 1,000,000 shares of
common stock at an initial exercise price of $0.3125 per share; b)
warrants to purchase 2,000,000 shares of common stock at an initial exercise
price of $0.39 per share; and c) warrants to purchase 2,083,333 shares of the
Company’s common stock at an initial exercise price of $0.3625 per
share. The warrants also contain a cashless exercise
feature. The number of shares of common stock issuable upon exercise
of the warrants, and/or the applicable exercise prices, may be
proportionately adjusted in the event of any stock dividend, distribution, stock
split, stock combination, stock consolidation, recapitalization or
reclassification or similar transaction. In addition, the number of shares
issuable upon exercise of the warrants, and/or the applicable exercise
prices may be adjusted, at any time while the warrants are outstanding, in the
event of certain issuances of shares of the Company’s common stock, or
securities entitling any person to acquire shares of the Company’s common stock,
at an effective price per share which is less than the then-effective exercise
prices of the warrants.
The
exercise prices for 3,000,000 of these warrants were subsequently modified in
connection with waivers the Company received for violations of one of the debt
covenants, as discussed further below.
Debt
Covenants. The Loan Agreement contains customary affirmative
and negative covenants, including:
(a) Maximum
limits for capital expenditures of $600,000 per fiscal year;
(b) Limitation
on future borrowings, other than in certain circumstances, including to finance
capital expenditures;
(c) Limitation
on guaranteeing any obligation, except for obligations in the ordinary course of
business and obligations of the Company’s wholly owned subsidiaries incurred in
the ordinary course of business;
(d) Limitation
on entering Sales-Leaseback Transactions with respect to the sale or transfer of
property used or useful in the Company’s business operations;
(e) Limitation
on acquiring securities or making loans;
(f) Limitation
on acquiring real property;
(g) Limitation
on selling assets of the Company or permitting any reduction in the Company’s
ultimate ownership position of any subsidiary;
(h) Limitation
on paying dividends;
(i) Limitation
on selling any accounts receivable; and
(j) Requiring
that, at the end of any quarter of any fiscal year, the ratio of (a) Earnings
Before Interest, Depreciation, and Amortization (“EBIDA”) minus capital
expenditures incurred to maintain or replace capital assets, to (b) debt service
(all interest and principal payments), for the four (4) consecutive quarters
then ended, to be not less than 1.25 to 1.00 (the “EBIDA Ratio
Covenant”).
The Loan
Agreement is collateralized by a pledge of all of the Company’s assets and the
stock of the Company’s subsidiaries.
Amendments to Loan Agreement
and Waivers for Violations of Certain Covenants. Subsequent to
March 31, 2008, the Company notified ComVest that the Company had incurred a
loss of $1,897,000 for the three-month period ending March 31, 2008, and as a
result, the Company had a ratio of EBIDA to debt service of (4.41):1.00,
therefore violating the EBIDA Ratio Covenant described above. ComVest
agreed to grant the Company a waiver for the violation of this loan
covenant. On May 15, 2008, the Company and ComVest entered into
a Waiver and Amendment pursuant to which ComVest granted the waiver, and, in
consideration therefor, the Company reduced the exercise price for 1,000,000
warrants issued to ComVest in connection with the Loan Agreement from $0.3125
per share to $0.11 per share, and recognized the incremental fair value of the
modified warrants of $24,000 as additional interest expense. As
a result of ComVest granting this waiver, the Company was not in violation
of any loan covenants at March 31, 2008.
Subsequent
to June 30, 2008, the Company advised ComVest that the Company had incurred
a loss of $11,664,000 for the six-month period ending June 30, 2008, and that as
a result had again violated the EBIDA Ratio Covenant with an EBIDA to debt
service ratio of (2.26):1.00. ComVest agreed to provide the Company
with another waiver. In connection therewith, the Company and ComVest
entered into a letter agreement amending the Loan Agreement (the “September 23,
2008 Waiver and Amendment”) and modifying the EBIDA Ratio Covenant.
Pursuant to the September 23, 2008 Waiver and Amendment, the EBIDA Ratio
Covenant was waived for the quarter ending September 30, 2008 and was reduced to
0.62:100 from 1.25:1.00 for the quarter ended December 31,
2008. Additionally, the EBIDA Ratio Covenant was reset for future quarters
to 0.71:1.00 for the four quarters ended March 31, 2009; 0.50:1.00 for the four
quarters ended June 30, 2009; and 1.25:1.00 for the four quarters ended
September 30, 2009 and thereafter. Additionally, ComVest agreed to
delay the commencement of the loan amortization related to the Term Note for one
year, from January 1, 2009 to January 1, 2010. In consideration for
these modifications, the Company reduced the exercise price related to 2,000,000
warrants issued to ComVest in connection with the Loan Agreement from $0.39 to
$0.11. The incremental fair value of the modified warrants is
$15,000, which was recorded as an additional debt discount and is being
amortized over the remaining life of the term loan pursuant to EITF 96-19,
“Debtor's Accounting for a Modification or Exchange of Debt
Instruments.” As a result of these amendments, the Company was not in
violation of any loan covenants at June 30, 2008.
Subsequent
to the end of the quarter ended December 31, 2008, the Company advised ComVest
that it had incurred a net loss of $5,349,000 for the six-month period
ended December 31, 2008, and that as a result, the Company’s ratio of EBIDA to
debt service was (1.41):1.00 in violation of the amended EBIDA Ratio
Covenant. ComVest agreed to extend an additional waiver of this
covenant, which was granted on February 10, 2009, under a Waiver and Amendment
#2 letter agreement (the “February 10, 2009 Waiver and
Amendment”). In consideration for the waiver, the Company agreed to
increase the interest rate on the $1,000,000 Credit Facility from 9.5% to
11%. As a result of ComVest granting this waiver, the Company was not in
violation of any loan covenants at December 31, 2008. If the Company restores
compliance with the EBIDA Ratio Covenant as of the close of any quarter ending
on or after March 31, 2009, then the annual interest rate will be restored to
9.5%, effective as of the first day of the calendar month next succeeding the
Company’s demonstrated quarter-end compliance with such covenant. Pursuant to a
waiver and amendment, the annual interest rate was be restored to 9.5% as the
Company became compliant with the covenant as of the close of the quarter ending
on March 31, 2009. Following such modification, the Company is in compliance
with the loan covenants, and accordingly, the interest rate on the Credit
Facility was decreased from 11% to 9.5%, effective April 1, 2009.
After
obtaining the above-described waivers, the Company is not in violation of the
loan covenants at June 30, 2009.
Commonwealth
Associates LP
The
Company has engaged Commonwealth Associates LP (“Commonwealth”) as its
consultant and exclusive merger and acquisitions advisor pursuant to a
Consulting Agreement dated June 3, 2008 (the “Consulting Agreement”).
Commonwealth and ComVest are entities that are under common control. The
Consulting Agreement is for an initial term of 24 months, and provides that
Commonwealth will (i) be issued warrants to purchase up to 3,000,000 shares of
the Company’s common stock, which will be exercisable for 5 years at a price of
$0.30 per share, or the effective price for the Company’s shares resulting from
the sale of approximately 28,631,622 shares of ADNW’s common stock with respect
to which Commonwealth may act as placement agent, whichever is lower, and will
contain anti-dilution protection and a cashless exercise feature with respect to
one-half of the warrants; (ii) receive $15,000 per month for 18 months for
its advisory services beginning June 3, 2008 and (iii) receive a fee in
connection with an M&A transaction equal to 5% of the aggregate
consideration paid or received by the Company.
On July
3, 2008, the Company issued to Commonwealth warrants to purchase an aggregate of
1,000,000 shares of the Company’s common stock as compensation for work
performed in connection with the Company’s sale on July 3, 2008 of the 5,231,622
shares of ADNW common stock that it owned, which is further described in
footnote 10 on page F-27. The warrants are currently exercisable at an exercise
price of $0.30 per share and expire on July 3, 2013. Additionally, during the
year ended June 30, 2009, the Company paid $45,000 to Commonwealth, and recorded
a liability for unpaid fees of $135,000.
On August
3, 2009, the Company amended the financial advisory agreement and agreed to pay
Commonwealth $35,000 in August, and $25,000 in September and October of 2009, in
full satisfaction of the $135,000 liability (See note 12 to the financial
statements).
On
December 31, 2009, the Company issued to Commonwealth, in settlement of a
contract, warrants to purchase an aggregate of 700,000 shares of the Company’s
common stock. The warrants are exercisable at $0.08 per share and
expire on December 31, 2014.
Director
Independence
Our
determination of independence of directors is made using the definition of
“independent director” contained in Rule 5605(a)(2) of the Marketplace Rules of
the NASDAQ Stock Market (“NASDAQ”) , even though such definitions do not
currently apply to us because we are not listed on NASDAQ. We have determined
that Dwight B. Mamanteo, Marcus Wohlrab, Frederick Wasserman and Gerald
Czarnecki are “independent” within the meaning of such rules. Michael
Jamieson is not “independent” under these rules, due to his position as our
Interim Chief Executive Officer.
COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the
securities laws of the United States, our directors, executive (and certain
other) officers, and any persons holding ten percent or more of our Common Stock
must report on their ownership of the Common Stock and any changes in that
ownership to the Securities and Exchange Commission. Specific due dates for
these reports have been established. During the fiscal year ended June 30, 2009,
we believe that all reports required to be filed by such persons pursuant to
Section 16(a) were filed on a timely basis.
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal
No. 2)
KMJ CORBIN & COMPANY LLP
(“KMJ Corbin”) has served as our
independent auditors since June 30, 2006 and has been appointed by the Audit
Committee of the Board of Directors to continue as our independent auditors for
the fiscal year ending June 30, 2010.
At the
Annual Meeting, the shareholders will vote on a proposal to ratify this
selection of the auditors. If this ratification is not approved by the
affirmative vote of a majority of the shares present at the Annual Meeting, in
person or by proxy, and voting on the matter, the Board will reconsider its
selection of auditors.
KMJ
Corbin has no interest, financial or otherwise, in our Company. We do not
currently expect a representative of KMJ Corbin to physically attend the
Annual Meeting, however, it is anticipated that a KMJ Corbin representative will
be available to participate in the Annual Meeting via telephone in the event he
or she wishes to make a statement, or in order to respond to appropriate
questions.
On
February 14, 2006, our previous independent accountants, Donahue
Associates, LLC (“Donahue”) resigned as our accountant. Donahue prepared a
report dated March 25, 2005 on our financial statements for the fiscal year
ended December 31, 2004 and 2003. The report did not contain an adverse opinion
or disclaimer of opinion and was not modified as to audit scope or accounting
principles. The report did contain an uncertainly about our ability to continue
as a going concern without obtaining additional funding. There were no
disagreements with Donahue on any matter of accounting principles, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
Donahue’s satisfaction, would have caused it to make reference to the subject
matter of the disagreement in connection with its report. As a result, the
Board of Directors approved the appointment of KMJ Corbin as our independent
registered public accounting firm.
The
following table presents aggregate fees for professional services rendered by
our principal independent registered public accounting firm, KMJ Corbin for the
audit of our annual consolidated financial statements for the fiscal year ended
June 30, 2009 and 2008.
|
|
For the Year Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
Audit
fees(1)
|
|
$ |
175,000 |
|
|
$ |
153,000 |
|
Audit- related
fees(2)
|
|
|
56,400 |
|
|
|
79,000 |
|
Tax
fees(3)
|
|
|
11,900 |
|
|
|
– |
|
All
other fees
|
|
|
– |
|
|
|
– |
|
Total
fees
|
|
$ |
243,300 |
|
|
$ |
232,000 |
|
(1)
|
Audit
fees are comprised of annual audit fees and quarterly review
fees.
|
(2)
|
Audit-related
fees for fiscal years 2009 and 2008 are comprised of consent fees and work
on registration statements and fees related to the restatements of the
fiscal 2007 quarterly reports that were filed in fiscal
2008.
|
(3)
|
Tax
fees are comprised of tax compliance, preparation and consultation
fees.
|
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The
Audit Committee pre-approves all audit and non-audit services provided by the
independent auditors prior to the engagement of the independent auditors with
respect to such services. The Chairman of the Audit Committee has been delegated
the authority by the Committee to pre-approve interim services by the
independent auditors other than the annual audit. The Chairman must report all
such pre-approvals to the entire Audit Committee at the next Committee
meeting
At
the Annual Meeting a vote will be taken on a proposal to ratify the selection of
KMJ Corbin as our independent auditors for the fiscal year ending June 30,
2010.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION
OF KMJ CORBIN AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
JUNE 30, 2010.
APPROVAL
OF NAME CHANGE
(Proposal
No. 3)
The Board
of Directors of the Company has approved an amendment to the Company’s
Certificate of Incorporation (the “Certificate of Amendment”) to change the name
of the Company from “Aftersoft Group, Inc.” to “MAM Software Group, Inc.” (the
“Name Change”). As approved by the Board of Directors, the Name Change will not
become effective until the stockholders approve the filing of the Certificate of
Amendment and the Certificate of Amendment is filed with the Secretary of State
of the State of Delaware. It is currently anticipated that the
Certificate of Amendment will be filed as soon as practicable after stockholder
approval is received.
If the
stockholders approve this proposal, Article FIRST of the Company’s Certificate
of Incorporation will be amended to read in its entirety as
follows:
“The name
of the Corporation is “MAM Software Group, Inc.”.
The Board
of Directors believes that the Name Change is in the Company’s best interests
because the proposed name, “MAM Software Group, Inc.”, more accurately reflects
the Company’s current operations.
Adoption
of the Name Change proposal requires the affirmative vote of the holders of a
majority of the shares present at the Annual Meeting, in person or by proxy, and
voting on the matter.
At
the Annual Meeting a vote will be taken on a proposal to approve the Name
Change.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE CHANGE OF THE COMPANY’S NAME
FROM “AFTERSOFT GROUP, INC.” TO “MAM SOFTWARE GROUP, INC.”
AUDIT
COMMITTEE REPORT
The following Report of the Audit
Committee (the “Audit Report”) does not constitute soliciting material and
should not be deemed filed or incorporated by reference into any other Company
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent the Company specifically incorporates this Audit Report by
reference therein.
Role of the Audit
Committee
The Audit
Committee’s primary responsibilities fall into three broad
categories:
First,
the Committee is charged with monitoring the preparation of quarterly and annual
financial reports by the Company’s management, including discussions with
management and the Company’s outside auditors about draft annual financial
statements and key accounting and reporting matters;
Second,
the Committee is responsible for matters concerning the relationship between the
Company and its outside auditors, including recommending their appointment or
removal; reviewing the scope of their audit services and related fees, as well
as any other services being provided to the Company; and determining whether the
outside auditors are independent (based in part on the annual letter provided to
the Company pursuant to Independence Standards Board Standard No. 1);
and
Third,
the Committee reviews financial reporting, policies, procedures, and internal
controls of the Company.
The
Committee has implemented procedures to ensure that during the course of each
fiscal year it devotes the attention that it deems necessary or appropriate to
each of the matters assigned to it under the Committee’s charter. In overseeing
the preparation of the Company’s financial statements, the Committee met with
management and the Company’s outside auditors, including meetings with the
Company’s outside auditors without management present, to review and discuss all
financial statements prior to their issuance and to discuss significant
accounting issues. Management advised the Committee that all financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee discussed the statements with both management and
the outside auditors. The Committee’s review included discussion with the
outside auditors of matters required to be discussed pursuant to Statement on
Auditing Standards No. 61 (Communication with Audit
Committees).
With
respect to the Company’s outside auditors, the Committee, among other things,
discussed with KMJ Corbin & Company LLP matters relating to its
independence, including the disclosures made to the Committee as required by the
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees).
Recommendations of the Audit
Committee. In reliance on the reviews and discussions referred to above,
the Committee recommended to the Board that the Board approve the inclusion of
the Company’s audited financial statements in the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2009, for filing with the
SEC.
This
report has been furnished by the Audit Committee of the Board of
Directors.
Frederick
Wasserman, Chair
Dwight B.
Mamanteo
W. Austin
Lewis IV
Gerald M.
Czarnecki
STOCKHOLDER
PROPOSALS FOR 2011 ANNUAL MEETING
It is
contemplated that the next Annual Meeting of Stockholders will be held on or
about April 21, 2011. Stockholders may submit proposals on matters appropriate
for stockholder action at annual meetings in accordance with the rules and
regulations adopted by the Securities and Exchange Commission. Any
proposal which an eligible stockholder desires to have included in our proxy
statement and presented at the 2011 Annual Meeting of Stockholders will be
included in our proxy statement and related proxy card if it is received by us a
reasonable time before we begin to print and send our proxy materials and if it
complies with Securities and Exchange Commission rules regarding inclusion
of proposals in proxy statements. In order to avoid controversy as to the date
on which we receive a proposal, it is suggested that any stockholder who wishes
to submit a proposal submit such proposal by Certified Mail, Return Receipt
Requested.
Other
deadlines apply to the submission of stockholder proposals for the 2011 Annual
Meeting that are not required to be included in our proxy statement under
Securities and Exchange Commission rules. With respect to these stockholder
proposals for the 2011 Annual Meeting, a stockholder’s notice must be received
by us a reasonable time before we begin to print and send our proxy materials.
The form of proxy distributed by the Board of Directors for such meeting will
confer discretionary authority to vote on any such proposal not received by such
date. If any such proposal is received by such date, the proxy statement for the
meeting will provide advice on the nature of the matter and how we intend to
exercise our discretion to vote on each such matter if it is presented at that
meeting.
EXPENSES
AND SOLICITATION
We will
bear the costs of printing and mailing proxies. In addition to soliciting
stockholders by mail or through our regular employees, we may request banks,
brokers and other custodians, nominees and fiduciaries to solicit their
customers who have shares of our Common Stock registered in the name of a
nominee and, if so, will reimburse such banks, brokers and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket costs. Solicitation
by our officers and employees may also be made of some stockholders following
the original solicitation.
OTHER
BUSINESS
The Board
of Directors knows of no other items that are likely to be brought before the
meeting except those that are set forth in the foregoing Notice of Annual
Meeting of Stockholders. If any other matters properly come before the meeting,
the persons designated on the enclosed proxy will vote in accordance with their
judgment on such matters.
ADDITIONAL
INFORMATION
We are
subject to the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, and in accordance therewith, we file periodic reports,
documents and other information with the SEC relating to our business, financial
statements and other matters. Such reports and other information may be
inspected and are available for copying at the offices of the SEC, 100 F Street,
N.E., Washington, D.C. 20549 or may be accessed at www.sec.gov. Information
regarding the operation of the public reference rooms may be obtained by calling
the SEC at 1-800-SEC-0330. You are encouraged to review the Annual Report on
Form 10-K mailed along with these proxy materials, together with any subsequent
information we filed or will file with the SEC and other publicly available
information. A copy of any public filing is also available, at no charge,
by contacting our legal counsel, Gersten, Savage LLP, Attn: David E. Danovitch,
Esq. at 212-752-9700.
*************
It is
important that the proxies be returned promptly and that your shares be
represented. Stockholders are urged to mark, date, execute, and promptly return
the accompanying proxy card.
March
11, 2010
|
By
Order of the Board of Directors,
|
|
|
|
/s/
MICHAEL JAMIESON
|
|
|
MICHAEL
JAMIESON
|
|
Interim
Chief Executive
Officer
|
ANNUAL
MEETING OF STOCKHOLDERS OF
AFTERSOFT
GROUP, INC.
APRIL 21,
2010
Please
mark, date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible
Please
detach and mail in the envelope provided
MARK,
DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE
IN BLUE OR BLACK INK AS SHOWN HERE x
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL PROPOSALS.
1. Election
of Directors
¨
FOR ALL
NOMINEES ¨ Michael
Jamieson
¨ Dwight B.
Mamanteo
¨ Marcus
Wohlrab
¨ Frederick
Wasserman
¨ Gerald M.
Czarnecki
¨ W. Austin
Lewis IV
¨ WITHHOLD
AUTHORITY
FOR ALL NOMINEES
¨
FOR ALL EXCEPT
(See Instruction below)
-----------------------------------------------------------------------
INSTRUCTION:
To withhold authority to vote for any individual nominee(s), mark “FOR ALL
EXCEPT” and write the name of the nominee you wish to withhold authority
in the box below.
-----------------------------------------------------------------------
To
change the address on your account, please
check ¨
the
box at right and indicate your new address in the
space
above. Please note that changes to the registered
name(s)
on the account may be submitted via this method.
-----------------------------------------------------------------------
|
|
2. To
consider and act upon a proposal to ratify the Board’s selection of KMJ CORBIN & COMPANY LLP
as the Company’s independent auditors for the fiscal year ending
June 30, 2010.
¨ FOR THE
PROPOSAL
¨ AGAINST
THE PROPOSAL
-----------------------------------------------------------------------
3. To
consider and act upon a proposal to amend the Company’s Certificate of
Incorporation to change the Company’s name to “MAM Software Group,
Inc.”
¨ FOR THE
PROPOSAL
¨ AGAINST
THE PROPOSAL
-----------------------------------------------------------------------
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS MADE, THE PROXY SHALL BE VOTED FOR THE ELECTION OF THE
LISTED NOMINEES AS DIRECTORS, FOR THE RATIFICATION OF
KMJ CORBIN & COMPANY LLP AS THE COMPANY’S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2010, FOR THE CHANGE OF THE
COMPANY’S NAME TO “MAM SOFTWARE GROUP, INC.” AND, IN THE CASE OF OTHER
MATTERS THAT LEGALLY COME BEFORE THE MEETING, AS SAID ATTORNEY(S) MAY DEEM
ADVISABLE.
-----------------------------------------------------------------------
PLEASE
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS ON
APRIL 21, 2010 AT 10:00 A.M. (EASTERN STANDARD TIME) AT THE OFFICES OF
O2MEDIA, INC., 2001 WEST SAMPLE ROAD, SUITE 101, POMPANO BEACH, FLORIDA
33064 ¨
|
Signature of Stockholder _____________ Date: ______
|
|
Signature of Stockholder _______________ Date:_______
|
Note: This
proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name
by a duly authorized officer, giving full title as such. If signer is
a partnership, please sign in partnership name by an authorized
person.
AFTERSOFT
GROUP, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 21, 2010
Revoking
all prior proxies, the undersigned, a stockholder of AFTERSOFT GROUP, INC. (the
“Company”), hereby appoints Michael Jamieson and Gerry Czarnecki or either of
them, as attorneys and agents of the undersigned, with full power of
substitution, to vote all of the shares of the Company’s Common Stock, par value
$0.0001 per share (“Common Stock”), owned by the undersigned at the Annual
Meeting of Stockholders of the Company to be held on April 21, 2010 at the
offices of O2Media, Inc., 2001 West Sample Road, Suite 101, Pompano Beach,
Florida 33064, at 10:00 a.m. Eastern Standard Time, and at any adjournment
thereof, as fully and effectively as the undersigned could do if personally
present and voting, hereby approving, ratifying, and confirming all that said
attorney and agent or his substitute may lawfully do in place of the undersigned
as indicated on the reverse.
IMPORTANT: SIGNATURE
REQUIRED ON THE REVERSE SIDE