SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-K/A No. 1
(For Year Ended December 31, 2000)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
WIDEPOINT CORPORATION
--------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 000-23967 52-2040275
---------------------------- ------------ -------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
One Mid-America Plaza
Oakbrook Terrace, Illinois 60181
----------------------------------------- -----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (630) 645-0003
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The undersigned registrant hereby amends its Annual Report on Form 10-K
for the year ended December 31, 2000, to include the information called for by
the following items, as set forth in the pages attached hereto:
Part III. Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
WIDEPOINT CORPORATION
By: /s/ James T. McCubbin
-------------------------
James T. McCubbin
Vice President, Secretary
and Treasurer
Date: May 15, 2001
WIDEPOINT CORPORATION
AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000
As provided in the Notification of Late Filing on Form 12b-25 as filed by
WidePoint Corporation ("WidePoint" or the "Company") on April 30, 2001, the
definitive proxy soliciting material relating to the 2001 Annual Meeting of
Stockholders of the Company will be filed later than April 30, 2001. Therefore,
the information called for by Part III of the Company's Form 10-K for the year
ended December 31, 2000 is included in this Amendment No. 1 to such Form 10-K.
PART III OF FORM 10-K FOR YEAR
ENDED DECEMBER 31, 2000
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT.
The following sets forth information regarding the directors, executive
officers and certain significant employees of the Company:
POSITION WITH BECAME
NAME THE COMPANY AGE DIRECTOR
---- ----------- --- --------
Melvin A. McCubbin Chairman of the 76 1998
Board of Directors
Michael C. Higgins President, Chief Executive 55 1996
Officer and Director
James T. McCubbin Vice President, Chief 36 1998
Financial Officer,
Secretary, Treasurer
and Director
Steve L. Komar Director 58 1997
James M. Ritter Director 56 1999
G.W. Norman Wareham Director 47 1997
Mark Mirabile Vice President of Sales 38 ---
and Marketing
Ron Hilicki Vice President of 38 ---
Consulting Services
2
Melvin A. McCubbin has been a director of the Company since May 5, 1998
and he presently serves as the Chairman of the Board of Directors. Mr. McCubbin
formerly served as the Corporate Vice President and Chief Financial Officer of
Martin Marietta Corporation (now know as Lockheed Martin), a position from which
he retired in December 1989 after being employed for over 30 years with that
corporation in numerous financial, operational and executive management
positions. After retiring from Martin Marietta Corporation, Mr. McCubbin served
as a director of Integrated Microcomputer Systems, Inc. from March 1990 through
December 1995. Since January 1996, Mr. McCubbin has been a financial and
management consultant. Mr. McCubbin earned a Juris Doctor Degree from the
University of Maryland and a Bachelor of Science Degree in Accounting and
Finance from the University of Maryland. Mr. McCubbin is also an attorney-member
of the Maryland Bar Association.
Michael C. Higgins has served as a director and the President and Chief
Executive Officer of the Company since December 1997. Prior to that time, Mr.
Higgins served as a director and the President of ZMAX Corporation, a Nevada
corporation and a predecessor to the Company ("Old ZMAX") from December 1996 to
December 1997. Mr. Higgins also served as a director and the President of
Century Services, Inc. ("CSI"), a subsidiary of the Company that Mr. Higgins
co-founded in December 1995. Prior to founding CSI, from 1993 to 1996, Mr.
Higgins was a Vice President of Integrated Microcomputer Systems, Inc., a
software reengineering company. Mr. Higgins had held various management
positions at AT&T, Martin Marietta Corporation, and Anstec, Inc. Mr. Higgins
earned an M.B.A. Degree from Xavier University and a Bachelor of Science Degree
in Engineering from the United States Military Academy at West Point.
James T. McCubbin has served as a director and Secretary and Treasurer of
the Company since November 1998. Since August 1998, Mr. McCubbin has also served
as the Company's Vice President and Chief Financial Officer. Prior to that time,
from December 1997 to August 1998, Mr. McCubbin served as the Vice President,
Controller, Assistant Secretary and Treasurer of the Company. Prior to his
employment with the Company in November 1997, Mr. McCubbin held various
financial management positions with a wide range of companies. Mr. McCubbin is a
graduate of the University of Maryland with a Bachelor of Science Degree in
Finance and a Masters Degree in International Management. Mr. McCubbin is the
son of Melvin A. McCubbin, the Chairman of the Board of Directors of the
Company.
Steve L. Komar has served as a Director of the Company since its merger
with Old ZMAX in December 1997. Since June 2000, Mr. Komar has served as a
founding partner in C-III
3
Holdings, a development stage financial services company. From 1991 to June
2000, Mr. Komar served as Group Executive Vice President of Fiserv, Inc., a
company which provides advanced data processing services and related products to
the financial industry. Mr. Komar is a graduate of the City University of New
York with a Bachelor of Science Degree in Accounting and holds a Masters Degree
in Finance from Pace University.
James M. Ritter has served as a director of the Company since December
1999. Mr. Ritter is the retired Corporate Headquarters Chief Information Officer
for Lockheed Martin Corporation. Prior to his retirement in February 2001, Mr.
Ritter was employed at Lockheed Martin Corporation for over 32 years in various
positions involving high level IT strategic planning and implementation,
e-commerce development, integrated financial systems, and large-scale
distributed systems.
G.W. Norman Wareham has served as a director of the Company since its
merger with Old ZMAX in December 1997. Mr. Wareham served as the Company's Vice
President, Secretary and Chief Financial Officer from September 1996 until
August 1998. Mr. Wareham is President of Wareham Management Ltd. and provides
management consulting and accounting services to Canadian and American public
companies. Mr. Wareham is a certified general accountant and has been engaged in
the public practice of accounting for over 20 years.
Mark Mirabile currently serves as the Vice President of Sales and
Marketing for the Company. Prior to that time, from November 1992 to May 2000,
Mr. Mirabile served as the Vice President of Eclipse Information Systems, Inc.
("Eclipse"), a wholly-owned subsidiary of the Company. Mr. Mirabile was a
co-founder of Eclipse prior to its acquisition by the Company in December 1998.
Mr. Mirabile has over 19 years experience in information technology at both the
executive and technical levels. He has an Associates Degree in Applied
Science-Accounting from Daley Community College in Chicago.
Ron Hilicki currently serves as the Vice President of Consulting Services
for the Company. Prior to that time, from September 1997 to May 2000, Mr.
Hilicki served as a consultant with Eclipse. Mr. Hilicki has over 15 years of
business and information systems experience, with a specialization in the
development of distributed, e-business and decision support applications. In May
2000, Mr. Hilicki became responsible for directing the Company's software
application development efforts. Prior to joining Eclipse in September 1997, Mr.
Hilicki held a number of business and IT management positions at ITT, W.W.
Grainger and UOP/Allied Signal. Mr. Hilicki has a Bachelor of Arts Degree in
Economics from Northwestern University and a
4
Masters of Business Management Degree from the Kellogg Graduate School of
Management at Northwestern University.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the annual salary
(column c) and bonus (column d) paid and options granted (column g) during each
of the past three years to the Company's Chief Executive Officer and the other
executive officers of the Company whose annual salary and bonus in 2000 exceeded
$100,000.
5
Summary Compensation Table
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Long-Term Compensation
-------------------------------------------
Annual Compensation Awards Payouts
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(a) (b) (c) (d) (e) (f) (g) (h)
Other Annual Restricted Stock LTIP
Name and Principal Year Salary Bonus Compensation1 Award(s) Options Payouts
Position ($) ($) ($) $ (#)2 ($)
--------------------------------------------------------------------------------------------------------------------
Michael C. Higgins 2000 $220,106 $171,000 $-0- $-0- -0- $ -0-
President & Chief 1999 $214,327 $118,750 $-0- -0- 200,000 $ -0-
Executive Officer 1998 $177,885 $ -0- $-0- -0- -0- $ -0-
--------------------------------------------------------------------------------------------------------------------
Joseph Yeh 2000 $ 66,786 $114,950 $-0- $-0- -0- $ -0-
Senior Vice President 1999 $156,327 $ 55,000 $-0- -0- 75,000 $ -0-
-Technology of CSI 3 1998 $136,875 $ -0- $-0- -0- -0- $ -0-
--------------------------------------------------------------------------------------------------------------------
James McCubbin 2000 $136,855 $ 92,400 $-0- $-0- -0- $ -0-
Vice President & Chief 1999 $126,596 $ 58,000 $-0- $-0- 150,000 $ -0-
Financial Officer 1998 $ 84,944 $ -0- $-0- $-0- 150,000 $ -0-
====================================================================================================================
Mark Mirabile 2000 $131,250 $ 9,750 $-0- $-0- 45,000 $ -0-
Vice President 1999 $126,389 $ 27,909 $-0- $-0- 20,000 $ -0-
Sales & Marketing4 1998 $116,357 $ -0- $-0- $-0- 60,000 $ -0-
====================================================================================================================
Ron Hilicki 2000 $132,443 $ 13,219 $-0- $-0- 30,000 $ -0-
Vice President 1999 $106,944 $ 13,648 $-0- $-0- -0- $ -0-
Consulting Services 5 1998 $113,113 $ 39,138 $-0- $-0- -0- $ -0-
====================================================================================================================
-----------------------
1 Does not report the approximate cost to the Company of an automobile
allowance furnished to the above persons, which amounts do not exceed the
lesser of either $50,000 or 10% of the total of the person's annual salary
and bonuses for 2000.
2 Reports the number of shares underlying options granted during each of the
respective years.
3 Mr. Yeh resigned from the Company in June 2000.
4 Mr. Mirabile was appointed Vice President of Sales and Marketing of the
Company in May 2000.
5 Mr. Hilicki was appointed Vice President of Consulting Services in May
2000.
The following Option Grants Table sets forth, for each of the named
executive officers, information regarding individual grants of options granted
in 2000 and their potential realizable value. Information regarding individual
option grants includes the number of options granted, the percentage of total
grants to employees represented by each grant, the per-share exercise price
6
and the expiration date. The potential realizable value of the options are based
on assumed annual 0%, 5% and 10% rates of stock price appreciation over the term
of the option.
Option Grants Table
------------------------------------------------------------------------------------------------- ----------------------------------
Potential Realizable Value at
Assumed
Individual Grants Annual Rates of Stock Price
Appreciation for Option Term4
------------------- ----------------- -------------------------- ------------------ ------------- --------- ------------ -----------
% of Total Options
Options Granted Granted to Employees in
(#)1 Fiscal Exercise Expiration
Name Year2 Price($/SH)3 Date 0% 5% 10%
------------------- ----------------- -------------------------- ------------------ ------------- --------- ------------ -----------
Mark Mirabile 45,000 17% $2.56 2/9/2010 $0 $63,513 $156,436
Ron Hilicki 30,000 12% $2.38 1/2/2010 $0 $39,365 $ 96,957
=================== ================= ========================== ================== ============= ========= ============ ===========
--------------------
1 The reported options were granted by the Company to the named executive
officers under the Company's 1997 Stock Option Plan and become exercisable
upon the achievement by the executive officer of certain annual
performance criteria set each year by the Compensation Committee of the
Company's Board of Directors.
2 Based on options for a total of 260,000 shares granted to all employees in
2000.
3 The exercise price is equal to the fair market value on the date of grant
of the option.
4 The potential realizable values shown in the columns are net of the option
exercise price. These amounts assume annual compounded rates of stock
price appreciation of 0%, 5%, and 10% from the date of grant to the option
expiration date, a term of ten years. These rates have been set by the
U.S. Securities and Exchange Commission and are not intended to forecast
future appreciation, if any, of the Company's Common Stock. Actual gains,
if any, on stock option exercises are dependent on several factors
including the future performance of the Company's Common Stock, overall
stock market conditions, and the optionee's continued employment through
the vesting period. The amounts reflected in this table may not actually
be realized.
7
The following Option Exercises and Year-End Value Table is set forth
herein because it sets forth, for each of the named executive officers,
information regarding the number and value of unexercised options at December
31, 2000. No options were exercised by such persons during 2000.
Aggregate Option Exercises and Fiscal Year-End Option Value Table
--------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of Unexercised Options Value of Unexercised
at FY-End (#) 1 In-The-Money Options at
Number of FY-End ($)
Shares Acquired on
Name Exercise Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable 2
--------------------------------------------------------------------------------------------------------------------
Michael C. Higgins -0- -0- 205,000/32,500 3 $0 / $0
====================================================================================================================
Joseph Yeh -0- -0- 0/0 4 $0 / $0
====================================================================================================================
James McCubbin -0- -0- 95,000/205,000 5 $0 / $0
====================================================================================================================
Mark Mirabile -0- -0- 10,800/125,000 6 $0 / $0
====================================================================================================================
Ron Hilicki -0- -0- 0/30,0007 $0 / $0
====================================================================================================================
1 The reported options were granted by the Company to the named executive
officer.
2 Market value of underlying shares at December 31, 2000, minus the exercise
price.
3 The above-reported options entitle Mr. Higgins to purchase from the
Company (i) 337,500 shares at a price of $5.75 per share through April 17,
2007 under an option granted on April 17, 1997, of which 205,000 shares
are currently exercisable, and (ii) 200,000 shares at a price of $2.45 per
share through June 15, 2009 under an option granted on June 15, 1999, of
which no shares are currently exercisable. The remaining portions of such
options will become exercisable in the event Mr. Higgins achieves certain
performance criteria set by the committee which administers the Company's
1997 Incentive Stock Plan.
4 Mr. Yeh resigned from the Company in June 2000 and as a result all of his
options have terminated.
5 The above-reported options entitle Mr. McCubbin to purchase from the
Company (i) 125,000 shares at a price of $6.00 per share through March 12,
2008 under an option granted on March 12, 1998, of which 95,000 shares are
currently exercisable, (ii) 25,000 shares at a price of $2.69 per share
through October 1, 2008 under an option granted on October 1, 1998, of
which no shares are currently exercisable, and (iii) 200,000 shares at a
price of
8
$2.45 per share through June 15, 2009 under an option granted on June 15,
1999, of which no shares are currently exercisable. The remaining portions
of such options will become exercisable in the event Mr. McCubbin achieves
certain performance criteria set by the committee which administers the
Company's 1997 Incentive Stock Plan.
6 The above-reported options entitle Mr. Mirabile to purchase from the
Company (i) 60,000 shares at a price of $3.69 per share through December
14, 2008 under an option granted on December 14, 1998, of which 10,800
shares are currently exercisable, (ii) 20,000 shares at a price of $2.06
per share through December 1, 2009 under an option granted on December 1,
1999, of which no shares are currently exercisable, and (iii) 45,000
shares at a price of $2.56 per share through February 9, 2010 under an
option granted on February 9, 2000, of which no shares are currently
exercisable.
7 The above-reported options entitle Mr. Hilicki to purchase from the
Company (i) 30,000 shares at a price of $2.38 per share through January 3,
2010 under an option granted on January 3, 2000, of which no shares are
currently exercisable.
No Long-Term Incentive Plan Awards Table is set forth herein because no
long-term incentive plan awards were made to the above-named executive officers
during 2000.
Employment Agreements and Arrangements
On September 1, 1999, the Company entered into employment agreements with
each of Michael C. Higgins and James T. McCubbin for Mr. Higgins to continue to
serve as President and Chief Executive Officer of the Company and for Mr.
McCubbin to continue to serve as the Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company. These agreements provide that Mr.
Higgins' base salary was to be $225,000 for 1999 and Mr. McCubbin's base salary
was to be $140,000 for 1999, with each executive's salary to be thereafter
determined by the Company's Compensation Committee. During the year 2000, the
Compensation Committee did not grant an increase in the base salary of Mr.
Higgins or Mr. McCubbin. The agreements each provide for a bonus to be paid to
the executive of up to 100% of his base salary upon the achievement of
performance criteria including gross revenue and earnings targets, which
criteria will be adjusted each year by the Compensation Committee. If the
performance goals are not met or if the executive is no longer employed by the
Company
9
(unless for cause), the bonus may be paid at the discretion of the Compensation
Committee. Each agreement is for a term of four years ending on September 1,
2003, and is terminable by the executive upon 60 days notice to the Company and
by the Company on notice to the executive. Each agreement contains
non-competition, non-solicitation and non-disclosure provisions restricting the
executive from employment with any competing business, soliciting or diverting
Company employees and customers to a competing business or disclosing the
Company's proprietary information to third parties during the term of the
agreement. Each agreement also contains a provision under which the executive
has agreed to refrain from competing with the Company or soliciting its
employees for a period of 12 months after the termination of his employment with
the Company in consideration for the payment by the Company to the executive of
an amount in cash equal to his base salary and cash bonus received for the
one-year period immediately preceding the date of his termination, with such
cash amount to be paid to the executive in 12 equal monthly installment payments
as of the first day of each month during the 12-month period immediately
following the date of termination of his employment.
On June 18, 1997, CSI entered into an employment agreement with Joseph Yeh
as CSI's Senior Vice President - Technology, which employment agreement replaced
Mr. Yeh's prior consulting agreement with the Company. The employment agreement
was for a three year term and expired on January 1, 2000. The agreement provided
for a bonus of up to 100% of base salary upon the achievement of performance
criteria including gross revenue and earnings targets, which criteria could be
adjusted each year by the Compensation Committee. If the performance goals were
not met or if Mr. Yeh was no longer employed by the Company (unless for cause),
the bonus could have been paid at the discretion of the Compensation Committee.
The agreement contained non-competition, non-solicitation and non-disclosure
provisions restricting Mr. Yeh from employment with any competing business,
soliciting or diverting Company employees and customers to a competing business
or disclosing the Company's proprietary information to third parties during the
term of the agreement and for up to two years thereafter.
On December 14 1998, the Company entered into an employment agreement with
Mark Mirabile, Vice President of Sales and Marketing for the Company. The
employment agreement was for a three year term and will expire on December 14,
2001. The agreement provides for a base salary of at least $130,000 plus a bonus
of up to 30% of his annual gross salary bonus and an automobile expense in the
amount of $500 per month.
10
Compensation Committee Report on Executive Compensation
The Compensation Committee consists entirely of non-employee directors and
determines the compensation paid to the Chief Executive Officer and the other
executive officers and consultants of the Company. The Compensation Committee
believes that for the Company to be successful long-term and for it to increase
stockholder value it must be able to hire, retain, adequately compensate and
financially motivate talented and ambitious executives. The Compensation
Committee attempts to reward executives for both individual achievement and
overall Company success.
Executive compensation is made up of three components:
Base Salary. An executive's base salary is initially determined by
considering the executive's level of responsibility, prior experience and
compensation history. Published salaries of executives in similar positions at
other companies of comparable size (sales and/or number of employees) is also
considered in establishing base salary.
Stock Options. In 1997, the Company adopted the 1997 Incentive Stock Plan
to provide stock option awards to certain executives of the Company and its
subsidiaries. The Compensation Committee believes that the granting of stock
options is directly linked to increased executive commitment and motivation and
to the long-term success of the Company. The Compensation Committee awards stock
options to certain executives of the Company and its subsidiaries. The
Compensation Committee uses both subjective appraisals of the executive's
performance and the Company's performance and financial success during the
previous year to determine option grants.
Bonus. The Company has also implemented an executive bonus program for
certain of its executives. Such bonuses are based, in part, on the Company's
financial performance during the previous fiscal year including achievement of
gross revenue and net income targets. In addition, objective individual measures
of performance compared to the individual's business unit profit performance may
be considered. A subjective rating of the executive's personal performance may
also be considered. Bonuses may be paid in cash or Company Common Stock or a
combination of cash and Company Common Stock. Bonuses are typically linked to a
percentage of base salary.
11
The Compensation Committee recommended to the Board of Directors and the
Board of Directors approved a compensation package for the Company's President
and Chief Executive Officer, Michael Higgins, and the Company's Vice President
and Chief Financial Officer, James McCubbin, that included a base salary of
approximately $225,000 in 2000 for Mr. Higgins and approximately $140,000 in
2000 for Mr. McCubbin plus a possible bonus of up to 100% of the base salary.
Receipt of the bonus is subject to the Company's achievement of certain
performance criteria, including gross revenue and net income targets. If the
performance criteria are not achieved or the executive is no longer employed by
the Company (other than for cause termination), a bonus may be awarded in the
discretion of the Compensation Committee.
In determining the 2000 compensation packages for these executive
officers, the Compensation Committee considered that Mr. Higgins was a founder
of the Company, the experience and compensation history of each individual and
compensation packages awarded to similar executives of other similarly situated
companies, to the extent such information could be learned. The Compensation
Committee also relied on competitive industry statistics and other industry
comparison data. The Compensation Committee ensured that the incentive bonus
compensation is only paid if the performance targets are met and the Company is
in a sound financial position.
Exceptions to the general principles stated above are made when the
Compensation Committee deems them appropriate and in the best interests of
stockholders. The Compensation Committee regularly considers other forms of
compensation and modifications of its present policies, and will make changes as
it deems appropriate. The competitive opportunities to which the Company's
executives are exposed frequently come from private companies or divisions of
large companies, for which published compensation data is often unavailable and,
therefore, the Compensation Committee's information about such opportunities is
often anecdotal.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
establishes a limit on the deductibility of annual compensation for certain
executive officers that exceeds $1,000,000 per year unless certain requirements
are met. The Company does not anticipate that any employee will exceed such
$1,000,000 cap in the near future but will consider whether any necessary
adjustments are appropriate if it becomes likely that any executive officer's
compensation may exceed the $1,000,000 limit.
12
Compensation Committee
Steve L. Komar
G.W. Norman Wareham
Melvin A. McCubbin
The foregoing Compensation Committee report shall not be deemed to be
filed with the Securities and Exchange Commission for purposes of the Securities
Exchange Act of 1934 (the "1934 Act"), nor shall such report be deemed to be
incorporated by reference in any past or subsequent filing by the Company under
the 1934 Act or the Securities Act of 1933, as amended (the "1933 Act").
Stock Options
1997 Stock Incentive Plan. In May 1997, the Board of Directors adopted,
and in December 1997 the stockholders of the Company approved, the Company's
1997 Stock Incentive Plan (the "Incentive Plan"), which provides for the award
of a variety of equity-based incentives, including stock awards, stock options,
stock appreciation rights, phantom shares, performance unit appreciation rights
and dividend equivalents (collectively, "Stock Incentives"). The Incentive Plan
is administered by a committee, which is presently comprised of Steve L. Komar,
G.W. Norman Wareham and Melvin A. McCubbin, and provides for the grant of Stock
Incentives officers, key employees and consultants of the Company to purchase up
to an aggregate of 3,000,000 shares of Common Stock at not less than 100% of
fair market value on the date granted. The vesting and exercisability of any
Stock Incentives granted under the Incentive Plan is subject to the
determination of and criteria set by the committee. As of May 11, 2001, options
to purchase a total of 2,646,500 shares of Common Stock under the Incentive
Plan, at prices ranging from $0.17 to $5.75 per share, were outstanding, of
which options to purchase 810,800 shares were presently exercisable.
1997 Directors Formula Stock Option Plan. In May 1997, the Board of
Directors adopted, and in December 1997 the stockholders of the Company
approved, the Company's 1997 Directors Formula Stock Option Plan (the "Director
Plan"). Other than Messrs. Komar, Wareham, Ritter, and McCubbin, directors of
the Company who are not employed by the Company and who do not perform services
for the Company are eligible to receive options under the Director Plan. The
Director Plan is administered by a committee which presently consists of Michael
Higgins and Melvin A. McCubbin. Options become exercisable when vested and
expire ten years after the date of grant, subject to such shorter period
13
as may be provided in the agreement. A total of 140,000 shares of Common Stock
are reserved for possible issuance upon the exercise of options under the
Director Plan.
On December 1, 1999, a stock option to purchase 12,000 shares of Common
Stock was granted under the terms of the Director Plan to an eligible director.
The exercise price of that option was $2.06 per share. The option vests
immediately as to 8,000 shares of Common Stock and vests in an additional 2,000
shares after the completion of the first year of continued service to the
Company and an additional 2,000 shares after the completion of the second year
of continued service to the Company.
On December 10, 1998, the Board of Directors amended the Director Plan to
allow for grants of stock options to non-employee directors with vesting
schedules as may be determined by the committee which administers the Director
Plan. On December 10, 1998, options for 10,000 shares of Common Stock were
granted to each of Messrs. Komar and Wareham in recognition of their exemplary
service to the Company. These options vested immediately with respect to all the
shares underlying the options.
As of May 11, 2001, options to purchase a total of 80,000 shares of Common
Stock had been granted under the Director Plan, at prices ranging from $2.06 to
$14.06 per share, of which options to purchase 78,000 shares were vested and
presently exercisable.
Other Director Options
On March 24, 1998, a non-qualified stock option to purchase 6,000 shares
of Company Common Stock was granted to each of Ted Fine, Steve L. Komar, G.W.
Norman Wareham and Ed Yourdan. The exercise price of each of these options was
$7.66 per share, being the fair market value of the Common Stock on the date of
grant, with 2,000 shares vesting immediately at that time and with the remaining
4,000 shares vesting at the rate of 2,000 shares for each year of service
thereafter by each such director. As a result of the retirement of each of
Messrs. Fine and Yourdan in November 1998, they had until November 1999 to
exercise these options to purchase 4,000 shares each at the exercise price of
$7.66 per share. Such options expired in November 1999 without being exercised
by either person.
14
On November 2, 1998, Melvin A. McCubbin was granted an option under the
Incentive Plan as a consultant to the Company to purchase 100,000 shares of
Common Stock at an exercise price of $2.94 per share, being the market price of
the Common Stock on the date of grant, with 25% of the shares underlying that
option vesting immediately upon grant and the balance of the shares vesting one
year from the date of grant.
Directors' Fees
Directors who are not officers or employees of the Company receive an
annual fee of $12,000.
Other Information
On January 1, 1998, the Company entered into a consulting agreement with
Melvin A. McCubbin for financial and managerial consulting services on a
month-to-month basis for a consulting fee of $4,000 per month plus reimbursement
of out-of-pocket expenses. This consulting agreement may be terminated at any
time upon 30 days notice. On, June 1, 2000, this Consulting agreement was
terminated.
All of the Company's consulting agreements with its consultants are
terminable by the Company on notice and contain non-competition,
non-solicitation and non-disclosure provisions restricting the consultant from
engaging in any similar services for any competing business, soliciting or
diverting Company employees and clients to any competing business, or disclosing
the Company's intellectual property to third parties during the term of the
agreement and for two years thereafter.
STOCK PERFORMANCE CHART
The following chart compares the cumulative total stockholder return for
the Common Stock of the Company (and its predecessors) with the NASDAQ Stock
market (U.S.) Index and the NASDAQ Computer & Data Processing Industry Index
since December 31, 1994.
15
[OBJECT OMITTED]
=========================================================================================================
1995 1996 1997 1998 1999 2000
---------------------------------------------------------------------------------------------------------
ZMAX Corporation $100.00 $655.00 $272.50 $145.00 $ 87.52 $ 6.24
---------------------------------------------------------------------------------------------------------
NASDAQ (U.S.) Index 100.00 $123.03 150.68 212.46 394.82 237.37
---------------------------------------------------------------------------------------------------------
NASDAQ C&DP Index 100.00 123.41 151.61 270.52 594.39 274.91
=========================================================================================================
The foregoing Stock Performance Chart shall not be deemed to be filed with
the Securities and Exchange Commission for purposes of the 1934 Act, nor shall
such material be deemed to be incorporated by reference in any past or
subsequent filing by the Company under the 1934 Act or the 1933 Act.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL STOCKHOLDERS
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The following table sets forth the number of shares of Common Stock
beneficially owned as of December 31, 2000 by: (i) each person known by the
Company to be the beneficial owner of 5% or more of such class of securities,
(ii) each director of the Company and (iii) all directors and officers of the
Company as a group.
Number of Percent of
Directors, Nominees Shares of Outstanding
and 5% Stockholders Common Stock(1) Common Stock(1)
Michael C. Higgins (2)...... 1,717,000 13.2%
Michael S. Cannon (3)....... 1,046,730 7.7%
Steve L. Komar (4).......... 28,000 0.2%
G.W. Norman Wareham (5)..... 28,000 0.2%
Melvin A. McCubbin (6)...... 112,000 0.9%
James T. McCubbin (7)....... 95,000 0.7%
Francis T. Schultz (8)...... 735,405 5.5%
James M. Ritter (9)......... 11,500 0.1%
Mark Mirabile (10).......... 280,500 2.0%
Ron Hilicki (11)............ 20,517 0.2%
All directors and
officers as a group
(8 persons) (12)............ 2,292,517 17.7%
(1) Assumes in the case of each stockholder listed in the above list that all
presently exercisable warrants or options held by such stockholder were fully
exercised by such stockholder, without the exercise of any warrants or options
held by any other stockholders.
(2) Includes (i) a stock option granted on March 13, 1998, to Mr. Higgins under
the Incentive Plan to purchase 205,000 shares of stock at $5.75 and excludes
132,500 still remaining under the original grant of 337,500 shares of Common
Stock at $5.75 per share, which option is not presently exercisable and (ii) a
stock option granted on June 15, 1999, to Mr. Higgins under the Incentive Plan
to purchase 200,000 shares of Common Stock at
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$2.45 per share, which option is not presently exercisable. These options will
become exercisable in an amount and to the extent that the Company achieves
certain performance criteria as set annually by the committee which administers
the Incentive Plan.
(3) The address of Mr. Cannon is PMB 422, 12179 South Apopka Vineland Road,
Orlando, Florida.
(4) Includes (i) 14,000 shares of Common Stock that may be purchased by Mr.
Komar from the Company at a price of $14.06 per share until May 20, 2007,
pursuant to a stock option granted to him on May 20, 1997 under the Director
Plan, (ii) 6,000 shares of Common Stock that may be purchased by Mr. Komar from
the Company at a price of $7.66 per share until March 24, 2008, pursuant to a
stock option granted to him on March 24, 1998 under the Director Plan, and (iii)
10,000 shares of Common Stock that may be purchased by Mr. Komar from the
Company at a price of $3.97 per share until December 10, 2008, pursuant to a
stock option granted to him on December 10, 1998 under the Director Plan.
(5) Includes (i) 14,000 shares of Common Stock that may be purchased by Mr.
Wareham from the Company at a price of $14.06 per share until May 20, 2007,
pursuant to a stock option granted to him on May 20, 1997 under the Director
Plan, (ii) 6,000 shares of Common Stock that may be purchased by Mr. Wareham
from the Company at a price of $7.66 per share until March 24, 2008, pursuant to
a stock option granted to him on March 24, 1998 under the Director Plan, and
(iii) 10,000 shares of Common Stock that may be purchased by Mr. Wareham from
the Company at a price of $3.97 per share until December 10, 2008, pursuant to a
stock option granted to him on December 10, 1998 under the Director Plan
(6) Includes (i) 10,000 shares of Common Stock that may be purchased by Melvin
McCubbin from the Company at a price of $5.28 per share until May 5, 2008,
pursuant to a stock option granted to him on May 5, 1998 under the Director
Plan, and (ii) 100,00 shares of Common Stock that may be purchased by Mr.
McCubbin from the Company at a price of $2.94 per share until November 1, 2008,
pursuant to a stock option granted to him on November 1, 1998 under the
Incentive Plan. Does not include (i) 2,000 shares of Common Stock that my be
purchased by Mr. McCubbin from the Company at a price of $5.28 per share until
May 5, 2008, pursuant to the stock option granted to him on May 5, 1998, with
such shares vesting on May 5, 2000, (ii) 30,000 shares of Common Stock that may
be purchased by Mr. McCubbin from the Company at a price of $6.00 per share
pursuant to a stock option granted to him on
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March 12, 1998, (iii) 25,000 shares of Common Stock that may be purchased by Mr.
McCubbin from the Company at a price of $2.69per share until October 1,, 2008,
pursuant to the stock option granted to him on October 1, 1998, with such shares
vesting on October 1, 2005 or by the earlier vesting by the compensation
committee, and (iv) 150,000 shares of Common Stock that may be purchased by Mr.
McCubbin from the Company at a price of $2.45 per share until June 15, 2009,
pursuant to the stock granted to him on June 15, 1999, with such shares vesting
on June 15, 2006 or by the earlier vesting by the compensation committee.
(7) Includes (i) 95,000 shares of Common Stock that may be purchased by James
McCubbin from the Company at a price of $6.00 per share until March 12, 2008,
pursuant to a stock option granted to him on March 12, 1998 under the Incentive
Plan. Does not include (i) 30,000 shares of Common Stock that may be purchased
by James McCubbin from the Company at a price of $6.00 per share pursuant to a
stock option granted to him on March 12, 1998, (ii) 25,000 shares of Common
Stock that may be purchased by James McCubbin from the Company at a price of
$2.69 per share until October 1, 2008, pursuant to the stock option granted to
him on October 1, 1998, with such shares vesting on October 1, 2005 or by the
earlier vesting by the compensation committee, and (iii) 150,000 shares of
Common Stock that may be purchased by James McCubbin from the Company at a price
of $2.45 per share until June 15, 2009, pursuant to the stock granted to him on
June 15, 1999, with such shares vesting on June 15, 2006 or by the earlier
vesting by the compensation committee.
(8) Includes (i) 709,705 shares of Common Stock issued to Francis Schultz in
connection with the Company's prior acquisition of Eclipse, of which 141,630
shares have no restrictions and the remaining shares of 568,075 restricted per
an employment agreement. Mr. Schultz's address is 20760 Watson Road, White
Pigeon, Michigan 49099.
(9) Includes (i) 1,500 shares of Common Stock owned directly by Mr. Ritter and
(ii) 10,000 shares of Common Stock that may be purchased by Mr. Ritter from the
Company at a price of $2.06 per share until December 1, 2009, pursuant to a
stock option granted to him on December 1, 1999 under the Director Plan. Does
not include (i) 2,000 shares of Common Stock that may be purchased by Mr. Ritter
from the Company at a price of $2.06 until December 1, 2009 pursuant to a stock
option granted to him on December 1, 1999, with such shares vesting on December
1, 2001.
(10) Includes (i) 270,000 shares of Common Stock issued to Mr. Mirabile in
connection with the Company's prior acquisition of
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Eclipse, of which 180,000 shares have no restrictions and the remaining 90,000
shares are restricted pursuant to the terms of such acquisition, and (ii)
includes 10,500 shares of Common Stock that may be purchased by Mark Mirabile
from the Company at a price of $3.69 per share until December 14, 2008, pursuant
to a stock option granted to him on December 14, 1998 under the Incentive Plan.
Does not include (i) 49,500 shares of Common Stock that may be purchased by Mark
Mirabile from the Company at a price of $3.69 per share pursuant to a stock
option granted to him on December 14, 1998, (ii) 20,000 shares of Common Stock
that may be purchased by Mark Mirabile from the Company at a price of $2.06 per
share until December 1, 2009, pursuant to the stock option granted to him on
December 1, 1999, with such shares vesting on December 1, 2006 or by the earlier
vesting by the compensation committee, and (iii) 45,000 shares of Common Stock
that may be purchased by Mark Mirabile from the Company at a price of $2.56 per
share until February 9, 2010, pursuant to the stock granted to him on February
9, 2000, with such shares vesting on February 9, 2007 or by the earlier vesting
by the compensation committee.
(11) Includes (i) 20,517 shares of Common Stock issued to Mr. Hilicki in
connection with the Company's prior acquisition of Eclipse, of which 11,724
shares have no restrictions and the remaining 8,793 shares are restricted
pursuant to the terms of such acquisition.
(12) Includes the shares referred to as included in notes (2), (4), (5), (6),
(7), (9), (10) and (11) above. Does not include the shares referred to as not
included in notes (2), (4), (5), (6), (7), (9), (10) and (11) above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There have been no transactions, or series of similar transactions, since
the beginning of the Company's last fiscal year, or any currently proposed
transactions, or series of similar transactions, greater than $60,000, to which
the Company or any of its subsidiaries were a party involving any of the
directors, executive officers, control persons, more than 5% security holder
known to the registrant, or member of the immediate family of any of the
foregoing persons.
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