SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
WidePoint Corporation
--------------------------------------------------------------------------------
(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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
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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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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date filed:
[WIDEPOINT LOGO]
WIDEPOINT CORPORATION
One Lincoln Centre, Suite 1100
Oakbrook Terrace, Illinois 60181
November 13, 2002
Dear Stockholder:
We are pleased to invite you to attend our Annual Meeting of Stockholders.
This year it will be held on Monday, December 16, 2002, at 10:00 a.m., local
time, at the Washington, D.C. offices of Foley and Lardner, located at 3000 K
Street N.W., Suite 500, Washington, D.C. 20007. The primary business of the
meeting will be to elect directors and to ratify the selection of independent
accountants.
A Notice of the Annual Meeting and the Proxy Statement follow. You will
also find enclosed a proxy card. We invite you to attend the meeting in person,
but if this is not feasible, we think it advisable for you to be represented by
proxy. Therefore, if you cannot attend the meeting, we urge you to sign the
enclosed proxy card and mail it promptly in the return-addressed,
postage-prepaid envelope provided for your convenience.
Sincerely,
Steve L. Komar
Chairman of the Board and
Chief Executive Officer
WIDEPOINT CORPORATION
One Lincoln Centre, Suite 1100
Oakbrook Terrace, Illinois 60181
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
Notice is hereby given that the Annual Meeting of Stockholders of
Widepoint Corporation, a Delaware corporation (the "Company"), will be held at
the Washington D.C. offices of Foley and Lardner, located at 3000 K Street,
N.W., Suite 500, Washington, D.C. 20007 on Monday, December 16, 2002, at 10:00
a.m., local time, for the following purposes:
1. To elect two persons as Class II directors of the Company to
serve for a three-year period until the Annual Meeting of
Stockholders in the year 2005; and
2. To ratify the selection of Grant Thornton, LLP as the
independent accountants for the Company for the current fiscal
year; and
3. To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on November 8,
2002 are entitled to notice of, and to vote at, the Annual Meeting.
By order of the Board of Directors,
James T. McCubbin
Secretary
November 13, 2002
YOUR VOTE IS IMPORTANT
Please date, sign and promptly return the enclosed proxy so that your shares may
be voted in accordance with your wishes.
Mail the proxy to us in the enclosed envelope, which requires no postage if
mailed in the United States.
The giving of the proxy does not affect your right to vote in person should you
attend the meeting.
2
WIDEPOINT Corporation
One Lincoln Centre, Suite 1100
Oakbrook Terrace, Illinois 60181
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Widepoint Corporation, a Delaware corporation
("WDPT" or the "Company"), of proxies of stockholders to be voted at the Annual
Meeting of Stockholders to be held Washington, D.C. offices of Foley and
Lardner, located at 3000 K Street, N.W., Suite 500, Washington, D.C. 20007 at
10:00 a.m., local time, on Monday December 16, 2002, and any and all
adjournments thereof.
Any stockholder executing a proxy retains the right to revoke it at any
time prior to its being exercised by giving notice to the Secretary of the
Company.
This Proxy Statement and the accompanying proxy are being mailed or
given to stockholders of the Company on or about November 13, 2002.
VOTING SECURITIES
As of November 8, 2002, a total of 15,579,913 shares of common stock of
the Company, par value $.001 per share ("Common Stock"), which is the only class
of voting securities of the Company, were issued and outstanding. All holders of
record of the Common Stock as of the close of business on November 8, 2002, are
entitled to one vote for each share held at the Annual Meeting, or any
adjournment thereof, upon the matters listed in the Notice of Annual Meeting.
Cumulative voting is not permitted.
Shares of Common Stock represented by proxy will be voted according to
the instructions, if any, given in the proxy. Unless otherwise instructed, the
person or persons named in the proxy will vote (1) FOR the election of the two
nominees for director listed herein (or their substitutes in the event any of
the nominees is unavailable for election); (2) FOR the ratification of the
selection of Grant Thornton LLP as the independent accountants for the Company
for the current fiscal year; and (3) in their discretion, with respect to such
other business as may properly come before the meeting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed by the Company for the
meeting. The number of shares represented at the meeting in person or by proxy
will determine whether or not a quorum is present. The inspectors of election
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for purposes of
determining the approval of any matter submitted to the stockholders for a vote.
If a broker indicates on the Proxy that it does not have discretionary authority
as to
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certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote by the inspectors of election with
respect to that matter.
The cost of soliciting proxies will be borne by the Company. Proxies
may be solicited by directors, officers, regular employees or other agents of
the Company in person or by telephone.
PROPOSAL ONE - ELECTION OF DIRECTORS
The Company's Board of Directors is classified into the following three
classes of directors, with approximately one-third of the directors serving in
each such class of directors and with one class of directors being elected at
each annual meeting of stockholders of the Company to serve for a term of three
years or until their successors are elected and take office as provided below:
CLASS I - TERM EXPIRES AT THE 2004 ANNUAL MEETING OF STOCKHOLDERS
Mark F. Mirabile
G.W. Norman Wareham
CLASS II - TERM EXPIRES AT THE 2002 ANNUAL MEETING OF STOCKHOLDERS
Steve L. Komar
James T. McCubbin
CLASS III - TERM EXPIRES AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS
James Ritter
The Bylaws of the Company provide that the Board of Directors will
determine the number of directors to serve on the Board. The Company's Board of
Directors presently consists of five members. The five members of the Company's
Board of Directors are identified above, with Mark Mirabile having been
appointed by the Board of Directors to fill the vacancy for the remaining term
of the Class I directorship which resulted after the resignation of Michael
Higgins.
Proxies will be voted at the Annual Meeting, unless authority is
withheld, FOR the election of the persons named below who currently are
directors of the Company. The Company does not contemplate that the persons
named below will be unable or will decline to serve; however, if any such
nominee is unable or declines to serve, the persons named in the accompanying
proxy will vote for a substitute, or substitutes, in their discretion. The
following table sets forth information regarding the nominees:
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POSITION WITH BECAME
NAME THE COMPANY AGE DIRECTOR
James T. McCubbin Director 38 1998
Steve L. Komar Director 60 1997
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.
Steve L. Komar has served as a director of the Company since December
1997 and following the death of Melvin A. "Mac" McCubbin in October 2001, Mr.
Komar became Chairman of the Board of Directors. Since the resignation of
Michael Higgins in December 2001, Mr. Komar has also served as the Chief
Executive Officer of the Company. From June 2000 until December 2001, Mr. Komar
served as a founding partner in C-III 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.
MANAGEMENT RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE ABOVE
NOMINEE AS A DIRECTOR OF THE COMPANY.
The Board of Directors has an Audit and Finance Committee, which
conducted four meetings during 2001 and presently consists of Steve L. Komar,
G.W. Norman Wareham and James Ritter. The Audit and Finance Committee is
responsible for meeting with the Company's independent accountants to review the
proposed scope of the annual audit of the Company's books and records, reviewing
the findings of the independent accountants upon completion of the annual audit,
and reporting to the Board of Directors with respect thereto. The Board of
Directors also has a Compensation Committee, which conducted two meetings during
2001, presently consists of G.W. Norman Wareham, Steve L. Komar and James
Ritter, and is responsible for advising the Board on matters relating to the
compensation of officers and key employees and certain of the Company's employee
benefit plans. The Board of Directors also has a Nominating Committee, which
conducted one meeting during 2001, presently consists of Steve L. Komar, and
James Ritter and is responsible for advising the Board on matters relating to
the identification of nominees to the Board of Directors. The Board of Directors
met twelve times during 2001. Each incumbent director attended at least 75% of
the
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aggregate number of meetings of the Board and committee(s) on which he served
while he was a director and committee member during 2001.
COMPENSATION AND RELATED MATTTERS
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 2001 exceeded $100,000.
The following table does not reflect decreases in compensation which certain of
the following named persons voluntarily agreed to in the latter part of the year
2001, which information will be set forth in next year's proxy statement.
=====================================================================================================================
Summary Compensation Table
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Long-Term Compensation
-------------------------------------------
Annual Compensation Awards Payouts
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(a) (b) (c) (d) (e) (f) (g) (h)
Other Annual Restricted Stock LTIP
Name and Principal Year Salary Bonus Compensation (1) Award(s) Options Payouts
Position ($) ($) ($) $ (#) (2) ($)
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Michael C. Higgins 2001 $216,025 $ -0- $-0- $-0- 100,000 $ -0-
Former President and 2000 $220,106 $171,000 $-0- $-0- -0- $ -0-
Chief Executive 1999 $214,327 $118,750 $-0- $-0- 200,000 $ -0-
Officer (3)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
James McCubbin 2001 $134,302 $ -0- $-0- $-0- 500,000 $ -0-
Vice President & Chief 2000 $136,855 $ 92,400 $-0- $-0- -0- $ -0-
Financial Officer 1999 $126,596 $ 58,000 $-0- $-0- 150,000 $ -0-
=====================================================================================================================
Mark Mirabile 2001 $133,681 $ -0- $-0- $-0- 500,000 $ -0-
Vice President & Chief 2000 $131,250 $ 9,750 $-0- $-0- 45,000 $ -0-
Operations Officer (4) 1999 $126,389 $ 27,909 $-0- $-0- 20,000 $ -0-
=====================================================================================================================
Ron Hilicki 2001 $133,681 $ -0- $-0- $-0- 500,000 $ -0-
Vice President 2000 $132,443 $ 13,219 $-0- $-0- 30,000 $ -0-
Consulting Services (5) 1999 $106,944 $ 13,684 $-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 $50,000 or 10% of the total of the person's annual salary
and bonuses for 2001.
2 Reports the number of shares underlying options granted during each of the
respective years.
3 Mr. Higgins resigned from the Company in December 2001.
4 Mr. Mirabile was appointed Vice President of Sales and Marketing of the
Company in May 2000. He assumed the duties of Vice President and Chief
Operations Officer in April 2001.
5 Mr. Hilicki was appointed Vice President of Consulting Services in May
2000 and resigned from the Company in September 2002.
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The following Option Grants Table sets forth, for each of the named executive
officers, information regarding individual grants of options granted in 2001 and
their potential realizable value. Information regarding individual option grants
includes the number of options granted, the percentage of total grants to
employees represented by each grant, the per-share exercise price and the
expiration date. The potential realizable value of the options are based on
assumed annual 0%, 5% and 10% rates of stock price appreciation over the term of
the option.
======================================================================================================================
Option Grants Table
---------------------------------------------------------------------------------- -----------------------------------
Potential Realizable Value at
Assumed
Individual Grants Annual Rates of Stock Price
Appreciation for Option Term4
-------------------- ---------- -------------------- -------------- -------------- ----------- ----------- -----------
% of Total Options
Options Granted to
Granted Employees in Fiscal Exercise Expiration
Name (#)1 Year2 Price($/SH)3 Date 0% 5% 10%
-------------------- ---------- -------------------- -------------- -------------- ----------- ----------- -----------
Michael Higgins 100,000 6% $0.17 12/31/2002 $0 $11,320 $ 28,687
James McCubbin 500,000 32% $0.17 1/3/2011 $0 $53,456 $ 135,468
Mark Mirabile 500,000 32% $0.17 1/3/2011 $0 $53,456 $ 135,468
Ron Hilicki 500,000 32% $0.17 1/3/2011 $0 $53,456 $ 135,468
==================== ========== ==================== ============== ============== =========== =========== ===========
____________________
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 and
may be accelerated 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 1,742,000 shares granted to all employees in
2001.
3 The exercise price is equal to the fair market value on the date of grant of
the option, with the exception of the exercise price for the option granted to
Mr. Higgins in December 2001, which exercise price was set above the fair market
value of that option on the date of grant.
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, 2001. No options were exercised by such persons during 2001.
=======================================================================================================================
Aggregate Option Exercises and Fiscal Year-End Option Value Table
-----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of Value of
Unexercised Unexercised
Options In-The-Money
Number of at FY-End (#) 1 Options at
Shares FY-End ($)
Acquired on Value
Name Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable 2
-----------------------------------------------------------------------------------------------------------------------
Michael C. Higgins -0- -0- 306,000 /132,500 3 $0 / $0
=======================================================================================================================
James McCubbin -0- -0- 201,000/300,0004 $0 / $0
=======================================================================================================================
Mark Mirabile -0- -0- 101,000/400,0005 $0 / $0
=======================================================================================================================
Ron Hilicki -0- -0- 101,000/400,0006 $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, 2001, minus the exercise
price.
3 Mr. Higgins resigned from the Company in December 2001. The above-reported
options entitle Mr. Higgins to purchase from the Company: (i) 337,500 shares of
common stock at a price of $5.75 per share through March 31, 2002 under an
option granted to him on April 17, 1997, of which 205,000 shares are currently
exercisable; (ii) 200,000 shares of common stock at a price of $2.45 per share
through March 31, 2002 under an option granted to him on June 15, 1999, of which
no shares are currently exercisable; (iii) 1,000 shares of common stock at a
price of $1.35 per share through March 31, 2002 under an option granted to him
July 3, 2000, of which 1,000 shares are currently exercisable; and (iv) 100,000
shares of common stock at a price of $0.17 per share through December 31, 2002
under an option granted December 31, 2001, of which 100,000 shares are currently
exercisable.
4 The above-reported options entitle Mr. McCubbin to purchase from the Company:
(i) 1,000 shares of common stock at a price of $1.35 per share through July 3,
2010 under an option granted to him on July 3, 2000, of which 1,000 shares are
currently exercisable; (ii) 200,000 shares of common stock at a price of $0.17
per share through January 2, 2011, pursuant to a stock option granted to him on
January 2, 2001, of which 200,000 shares are currently exercisable; and (iii)
300,000 shares of common stock at a price of
8
$0.17 per share through January 2, 2011, under an option granted to him on
January 2, 2001, of which no shares are currently exercisable.
5 The above-reported options entitle Mr. Mirabile to purchase from the Company:
(i) 1,000 shares of common stock at a price of $1.35 per share through July 3,
2010 under an option granted to him on July 3, 2000, of which 1,000 shares are
currently exercisable; (ii) 100,000 shares of common stock at a price of $0.17
per share through January 2, 2011, pursuant to a stock option granted to him on
January 2, 2001, of which 100,000 shares are currently exercisable; and (iii)
400,000 shares of common stock at a price of $0.17 per share through January 2,
2011, under an option granted to him on January 2, 2001, of which no shares are
currently exercisable.
6 Mr. Hilicki resigned from the Company in September 2002. The above-reported
options entitle Mr. Hilicki to purchase from the Company: (i) 1,000 shares of
common stock at a price of $1.35 per share through July 3, 2010 under an option
granted to him on July 3, 2000, of which 1,000 shares are currently exercisable;
(ii) 100,000 shares of common stock at a price of $0.17 per share through
January 2, 2011, pursuant to a stock option granted to him on January 2, 2001,
of which 100,000 shares are currently exercisable; and (iii) 400,000 shares of
common stock at a price of $0.17 per share through January 2, 2011, under an
option granted to him on January 2, 2001, 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 2001.
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 (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
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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.
Mr. Higgins resigned his position with the Company on December 31, 2001. Mr.
Higgins entered into a separation agreement that amended and superseded his
employment agreement with the Company upon his resignation. The separation
agreement contained non-competition, non-solicitation and non-disclosure
provisions restricting Mr. Higgins from employment with any competing business,
soliciting or diverting Company employees and customers to a 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 separation agreement. The separation agreement provided for a single
payment of $95,625 by the Company to Mr. Higgins, representing six (6) months
salary at his then current pay rate of $191,250 per annum and the Company paid
benefits for six (6) months from his date of resignation in consideration for,
among other things, the early termination of Mr. Higgins' employment agreement.
In October 2001, Mr. McCubbin volunteered to reduce his current pay rate from
$140,000 per annum to $119,000 per annum with an office expense allowance of
$500 per month. In July of 2002, the Company entered into a new employment
agreement with Mr. McCubbin that continues his current base pay rate of $119,000
per annum with an office expense allowance of $500.00 through July 2003 with
five renewable one-year options.
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 expired on December 14, 2001.
The agreement provided 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. Mr. Mirabile voluntarily reduced his pay rate to $119,000 per
annum and an automobile expense allowance in the amount of $500 per month. In
July 2002, the Company entered into a new employment agreement with Mr. Mirabile
that continues his current base pay rate of $119,000 per annum with an
automobile allowance of $500.00 through July 2003 with five renewable one-year
options.
Compensation Committee Report on Executive Compensation
The Compensation Committee consists of Steve L. Komar, G.W. Norman
Wareham and James Ritter. The Compensation Committee determines the compensation
paid to the Chief Executive Officer and the other executive officers and
consultants of the Company. Mr Komar,who is currently serving as the Chief
Executive Officer of the Company, does not participate in the determination by
the Committee of the
10
compensation paid to the Chief Executive Officer. The Compensation Committee
believes that for the Company to be successful long-term and for the Company to
increase stockholder value, the Company 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. Mr Komar,who
is currently serving as the Chief Executive Officer of the Company, does not
participate in the determination by the Committee of any stock options to be
granted to the Chief Executive Officer. 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.
In early 2001, the Compensation Committee recommended to the Board of
Directors and the Board of Directors approved a compensation package for the
Company's then 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 2001 for Mr. Higgins and
approximately $140,000 in 2001 for Mr. McCubbin ,plus a possible bonus for each
of them of up to 100% of their base salary, which represented no increase in the
base salary for either such person since 1999 due to the declining revenues of
the Company . Mr. Higgins voluntarily reduced his base salary in October 2001 to
approximately $191,250 per annum and Mr. McCubbin voluntarily reduced his base
salary in October 2001 to approximately $119,000 per annum. Mr. Higgins
subsequently resigned from the
11
Company in December 2001. 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. No bonuses were
awarded in 2001.
In determining the 2001 compensation packages for these executive
officers, the Compensation Committee considered that the Company was conserving
its cash and reducing its costs and expenses in response to declining revenues.
Exceptions to the general principles stated above can be 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.
Compensation Committee
Steve L. Komar
G.W. Norman Wareham
James Ritter
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,
12
which is presently comprised of Steve L. Komar, G.W. Norman Wareham and James
Ritter, 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; provided, however that Mr. Komar, who is currently serving as the Chief
Executive Officer of the Company, does not participate in the determination by
the committee of any Stock Incentives to be granted to the Chief Executive
Officer. 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 November 8, 2002, options to purchase a total of 2,315,000
shares of Common Stock under the Incentive Plan, at prices ranging from $0.07 to
$1.35 per share, were outstanding, of which options to purchase 1,270,200 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, and Ritter, 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 Messrs. Komar and McCubbin. Options become exercisable when vested
and expire ten years after the date of grant, subject to such shorter period 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. As of November 8, 2002, options to purchase a total of 68,000 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 68,000 shares were
vested and presently exercisable.
Directors' Fees
Directors who are not officers or employees of the Company receive an
annual fee of $12,000.
AUDIT COMMITTEE REPORT
Overview
The Board of Directors has an Audit and Finance Committee, which
conducted four meetings during 2001 and presently consists of Steve L. Komar,
G.W. Norman Wareham and James Ritter. Mr. Komar is a director and also serves as
the Chief Executive Officer of the Company. Mr. Wareham and Mr. Ritter are
independent, non-employee directors. The Audit and Finance Committee is
responsible for meeting with the Company's independent accountants to review the
proposed scope of the annual audit of the Company's books and records, reviewing
the findings of the independent accountants upon completion of the annual audit,
and reporting to the Board of Directors
13
with respect thereto. All of the members of the Audit Committee are considered
by the Board to be financially literate and at least two, Mr. Wareham and Mr.
Komar, are considered by the Board to have accounting or related financial
management expertise.
Financial Statement Review.
The Audit Committee has: (a reviewed and discussed the audited
financial statements with the management of the Company; (b) discussed with the
Company's independent auditors, Grant Thornton LLP, the matters required to be
discussed by Statement on Auditing Standards No. 61; (c) received from the
Company's independent auditors the written disclosures and the letter required
by Independence Standard Board Standard No. 1, and has discussed with the
Company's independent auditors their independence; and (d) based on the review
and discussions referred to in clauses (a), (b) and (c) above, recommended to
the Board that the audited financial statements be included in the Company's
Annual Report on Form 10-K for fiscal year 2001 for filing with the Securities
and Exchange Commission.
Independent Auditors.
The Company's Board of Director's appointed the accounting firm of
Grant Thornton LLP to serve as the Company's independent accountants for the
fiscal year ending December 31, 2001. During the years ended December 31, 2000
and 1999 Arthur Andersen LLP acted as the firm's independent accountants. Upon
the recommendation of the Audit Committee, the Board has selected Grant Thornton
LLP as the Company's independent auditor for fiscal year 2002.
Audit Fees
The Company paid Arthur Andersen LLP approximately $6,500 in review
fees for fiscal year 2001 and paid Grant Thornton LLP approximately $41,000 in
audit and review fees for the same period.
Financial Information Systems Design and Implementation Fees
The Company did not pay Arthur Andersen LLP or Grant Thornton LLP any
financial information systems design and implementation fees for fiscal year
2001.
All Other Fees
The Company did not pay Arthur Andersen LLP or Grant Thornton LLP any
nonaudit fees for fiscal year 2001.
Audit Committee Composition
The foregoing report is submitted by the members of the Audit Committee
as of the Record Date: G.W. Norman Wareham (Chairman), James Ritter, and Steve
L. Komar.
14
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned as of December 31, 2001 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) 1,806,000 13.9%
Michael S. Cannon (3) 1,046,730 8.1%
Steve L. Komar (4) 28,000 0.2%
G.W. Norman Wareham (5) 28,000 0.2%
James T. McCubbin (6) 201,000 1.5%
James M. Ritter (7) 13,500 0.1%
Mark Mirabile (8) 281,000 2.2%
Ron Hilicki (9) 121,517 1.0%
All directors and
officers as a group
(7 persons) (10)..... 2,479,017 19.1%
(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 common stock at an exercise
price of $5.75 per share until March 31, 2002, but does not include 132,500
shares still remaining under such option which are not presently exercisable;
(ii) excludes a stock option granted on June 15, 1999, to Mr. Higgins under the
Incentive Plan to purchase 200,000 shares of Common Stock at $2.45 per share,
which option is not presently exercisable; (iii) a stock option granted on July
3, 2000 under the Incentive Plan to purchase 1,000 shares of stock at $1.35 per
share, which option is presently exercisable until March 31, 2002; and (iv) a
stock option granted on December 31, 2001, to Mr. Higgins under the Incentive
Plan to purchase 100,000 shares of stock at $0.17 per share, which is presently
exercisable until December 31, 2002.
15
(3) Mr. Cannon died in November 2001. The address of Mr. Cannon prior to his
death was PMB 422, 12179 South Apopka Vineland Road, Orlando, Florida.
(4) Includes (i) 12,000 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. Does
not include 865,000 shares owned directly by Mr. Komar which he purchased from
the Company on July 8, 2002.
(5) Includes (i) 12,000 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) 200,000 shares of Common Stock that may be purchased by Mr.
McCubbin from the Company at a price of $0.17 per share until January 2, 2011,
pursuant to a stock option granted to him on January 2, 2001; and (ii) includes
1,000 shares of Common Stock that may be purchased by Mr. McCubbin from the
Company at a price of $1.35 per share until July 3, 2010, pursuant to a stock
option granted to him on July 3, 2000. Does not include (i) 300,000 shares of
Common Stock that may be purchased by Mr. McCubbin from the Company at a price
of $0.17 per share pursuant to a stock option granted to him on January 2, 2001,
which shares are not currently exercisable; nor (ii) 865,000 shares owned
directly by Mr. McCubbin which he purchased from the Company on July 8, 2002.
(7) Includes (i) 1,500 shares of Common Stock owned directly by Mr. Ritter and
(ii) 12,000 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. 1,
1999, with such shares vesting on December 1, 2001.
(8) Includes (i) 270,000 shares of Common Stock issued to Mr. Mirabile in
connection with the Company's prior acquisition of Eclipse, of which 180,000
shares have no restrictions and the remaining 90,000 shares are restricted
pursuant to the terms of such acquisition; (ii) 100,000 shares of Common Stock
that may be purchased by Mr. Mirabile from the Company at a price of $0.17 per
share until January 2, 2011, pursuant to a stock
16
option granted to him on January 2, 2001; and (iii) 1,000 shares of Common Stock
that may be purchased by Mr. Mirabile from the Company at a price of $1.35 per
share until July 3, 2010, pursuant to a stock option granted to him on July 3,
2000. Does not include (i) 400,000 shares of Common Stock that may be purchased
by Mr. Mirabile from the Company at a price of $0.17 per share pursuant to a
stock option granted to him on January 2, 2001, which shares are not currently
exercisable; nor (ii) 865,000 shares owned directly by Mr. Mirabile which he
purchased from the Company on July 8, 2002.
(9) 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 , (ii) includes 100,000 shares of
Common Stock that may be purchased by Mr. Hilicki from the Company at a price of
$0.17 per share until January 2, 2011, pursuant to a stock option granted to him
on January 2, 2001, and (iii) includes 1,000 shares of Common Stock that may be
purchased by Mr. Hilicki from the Company at a price of $1.35 per share until
July 3, 2010, pursuant to a stock option granted to him on July 3, 2000. Does
not include (i) 400,000 shares of Common Stock that may be purchased by Mr.
Hilicki from the Company at a price of $0.17 per share pursuant to a stock
option granted to him on January 2, 2001, which shares are not currently
exercisable.
(10) Includes the shares referred to as included in notes (2), (4), (5), (6),
(7), (8), and (9) above. Does not include the shares referred to as not included
in notes (2), (6), (8), and (9) above.
17
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, 1996.
[OBJECT OMITTED]
=========================================================================================================
1996 1997 1998 1999 2000 2001
---------------------------------------------------------------------------------------------------------
WidePoint Corporation $100.00 $ 41.60 $ 22.14 $ 13.36 $ .95 $ .76
---------------------------------------------------------------------------------------------------------
NASDAQ (U.S.) Index 100.00 122.48 172.68 320.89 193.01 153.15
---------------------------------------------------------------------------------------------------------
NASDAQ C&DP Index 100.00 122.87 219.20 481.81 221.85 178.69
=========================================================================================================
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.
18
PROPOSAL TWO - INDEPENDENT ACCOUNTANTS
The Company's Board of Directors has appointed the accounting firm of
Grant Thornton LLP to serve as the Company's independent accountants for the
current fiscal year ending December 31, 2002. The firm was retained during 2001
as part of a bid process to replace the Company's prior Independent Accountants,
Arthur Andersen, LLP. Grant Thornton is highly regarded in its field and has a
thorough understanding of the Company's business. A resolution will be presented
at the Annual Meeting to ratify the appointment by the Company's Board of
Directors of Grant Thornton, LLP to serve as the Company's independent public
accountants for the current fiscal year. A majority vote is required for
ratification. A representative of Grant Thornton, LLP will be present at the
Annual Meeting to answer any questions concerning the Company's financial
statements and to make a statement if he desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF
THE RATIFICATION OF AUDITORS.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
securities ownership and changes in such ownership with the Securities and
Exchange Commission. Statements of Changes of Beneficial Ownership of Securities
on Form 4 are required to be filed by the tenth day of the month following the
month during which the change in beneficial ownership of securities occurred.
The Company believes that all reports of securities ownership and changes in
such ownership required to be filed during 2001.
2002 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2003 Annual
Meeting, which presently is expected to be held in May 2003, must be received by
the Secretary of the Company, One Lincoln Centre, Illinois 60181, no later than
January 15, 2003, in order for them to be considered for inclusion in the 2003
Proxy Statement. A shareholder desiring to submit a proposal to be voted on at
next year's Annual Meeting, but not desiring to have such proposal included in
next year's proxy statement relating to that meeting, should submit such
proposal to the Company by February 28, 2003 (i.e., at least 45 days prior to
the expected date of the mailing of the proxy statement). Failure to comply with
that advance notice requirement will permit management to use its discretionary
voting authority if and when the proposal is raised at the Annual Meeting
without having had a discussion of the proposal in the proxy statement.
19
OTHER MATTERS
Management is not aware of any other matters to be considered at the
Annual Meeting. If any other matters properly come before the Meeting, the
persons named in the enclosed Proxy will vote said Proxy in accordance with
their discretion.
By Order of the Board of
Directors
WIDEPOINT CORPORATION
James T. McCubbin
Secretary
November 13, 2002
20
PROXY
WIDEPOINT CORPORATION
One Mid America Plaze, Suite 403
Oakbrook Terrance, Illinois 60181
This proxy is solicited by the Board of Directors for the ANNUAL
MEETING OF STOCKHOLDERS of WidePoint Corporation, a Delaware corporation (the
"Company"), on December 16, 2002, 10:00 a.m., local time.
The undersigned appoints Thomas L. James, Esq. and James Ritter, and
each of them, a proxy of the undersigned, with full power of substitution, to
vote all shares of Common Stock, par value $.001 per share, of the Company which
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held on December 16, 2002, or at any adjournment thereof, with all powers the
undersigned would have if personally present.
The Board of Directors recommends Please mark your votes as
voting FOR the following proposals: indicated in this example
[ ]
1. To Elect Director WITHHOLD STEVE L. KOMAR
FOR the nominees AUTHORITY JAMES T. MCCUBBIN
Listed to the right to vote for the
(except as marked to the nominee listed to (INSTRUCTION: To withhold
contrary) the right authority for the nominee, write
[ ] [ ] that nominee's name on the
space provided below).
_______________________________
2. Proposal to ratify the selection 3. In their discretion the Proxies
of Grant Thornton, LLP as the are authorized to vote upon
independent accountants for the such other business as properly
current fiscal year. may come before the meeting.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
Sign exactly as your name appears
hereon. When signing in a representative
or fiduciary capacity, indicate title.
If shares are held jointly, each holder
should sign.
Date _____________________________, 2002
________________________________________
________________________________________
Signature of Stockholder(s)
THE SHARES WILL BE VOTED AS DIRECTED
ABOVE, AND WITH RESPECT TO OTHER MATTERS
OF BUSINESS PROPERLY BEFORE THE MEETING
AS THE PROXIES SHALL DECIDE. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 and 2.