Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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the
Registrant þ
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¨ Preliminary
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¨ Soliciting
Material Pursuant to §240.14a-12
ENERGY
COMPOSITES CORPORATION
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(4) and
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We
cordially invite you to the 2009 Annual Meeting of Stockholders (“Annual
Meeting”) of Energy Composites Corporation (“we,”“us,” or
“our”). The meeting is at 10:00 a.m., Central Daylight Saving Time,
on Tuesday, June 2, 2009, at the Hotel Mead & Conference Center located at
451 East Grand Avenue, Wisconsin Rapids,
Wisconsin54495.
At the
Annual Meeting, you will be asked to vote on the following matters:
(1) The
election of the Board of Directors consisting of five Directors to serve for one
year and until the election and qualification of their successors;
(2) Ratification
of the appointment of Carver Moquist & O’Connor, LLC as our independent
registered public accounting firm for 2009;
(3) Approval
of the Energy Composites Corporation Employee Stock Purchase Plan;
and
(4) Transaction
of such other matters as may properly come before the Annual Meeting or any
adjournments and postponements thereof.
Common
stockholders of record at the close of business on April 30, 2009 are entitled
to notice of, and to vote at, the Annual Meeting.
Important
Notice Regarding the Availability of Proxy Materials
for
the Stockholder Meeting To be Held on June 2, 2009.
The Proxy
Statement and our Annual Report to Stockholders for the year ended December 31,2008 that accompany this Notice are available for viewing via the Internet at
www.vfnotice.com/energycomposites.
YOUR
VOTE IS IMPORTANT
We
urge you to read the accompanying proxy statement carefully. Whether
or not you plan to attend the Annual Meeting, please take time to vote as soon
as possible by completing and mailing the enclosed proxy card. No
postage is required if mailed in the United States.
The Board
of Directors of Energy Composites Corporation (“we,”“us,”“our,” or the
“Company”) is soliciting proxies for the 2009 Annual Meeting of Stockholders
(“Annual Meeting”). This proxy statement and the accompanying proxy
card contain information about the items you will vote on at the Annual
Meeting. We began mailing these documents to stockholders on or about
May 5, 2009.
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING
How to
Vote
There are
two ways you may vote, as explained in the detailed instructions on your proxy
card. You may vote by completing and returning your proxy card in the
enclosed envelope. You may also vote in person by attending the
Annual Meeting. Please see the enclosed proxy card for more detailed
information on how to vote your shares.
Reduce Mailing
Costs
If you
share the same last name with other stockholders living in your household, you
can help us reduce printing and mailing costs by electing to receive only one
copy of our annual report and proxy statement. Please see “Questions
and Answers About the Meeting and Voting” below for more information about
“householding.”
Other Matters Related to the
Meeting
Only
matters brought before the Annual Meeting in accordance with our Amended and
Restated Bylaws will be considered. Aside from the items listed above
in the Notice of Annual Meeting, we do not know of any other matters that will
be presented at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment, the proxy holders
will vote them in accordance with their best judgment.
Questions and Answers about
the Meeting and Voting
Who
may vote and how many votes do I have?
Common
stockholders of record at the close of business on April 30, 2009 may
vote. As of that date there were outstanding and entitled to vote
42,070,585 shares of our common stock. For each matter presented for
a vote, you have one vote for each share you own.
How
do proxies work?
The Board
of Directors is asking for your proxy. Giving your proxy means you
authorize the persons named as proxies to vote your shares at the Annual Meeting
in the manner you direct. You may vote for all, some or none of our
director nominees. If you sign and return the proxy card but do not
specify how to vote, the persons named as proxies will vote your shares as
follows: (1) “FOR” our
director nominees; (2) “FOR” ratification and
confirmation of Carver Moquist & O’Connor, LLC as our independent registered
public accounting firm for 2009; and (3) “FOR” the proposed approval of
the Energy Composites Corporation Employee Stock Purchase Plan. We do
not expect any other items to be presented at the Annual Meeting; however, your
proxy will give discretionary authority to the persons named as proxies to vote
on any other matters that may be properly brought before the Annual
Meeting.
What
does it mean if I receive more than one proxy card?
You may
receive more than one proxy card depending on how you hold your shares and how
your shares are registered. If you hold shares through someone else,
such as a bank or broker, you may also receive proxy materials from them asking
how you want to vote. You will also receive one proxy card for all
shares of common stock held in or credited to your name on our stockholder list
as of the record date.
2
If you
receive more than one proxy card, we encourage you to complete and return all
proxy cards delivered to you to vote all shares registered to you.
Can
I change my vote?
You can
revoke a proxy before the time for voting at the Annual Meeting in several ways:
(1) by mailing a revised proxy card with a more recent date than the prior proxy
(we must receive the revised proxy card before the Annual Meeting to be
effective); (2) by notifying our Company Secretary in writing that you are
revoking your proxy; and (3) you may also revoke your proxy by voting in person
at the Annual Meeting.
Who
can attend the Annual Meeting?
All
stockholders who owned shares at the close of business on April 30, 2009, or
their duly appointed proxies, may attend the Annual Meeting. Each
stockholder may be accompanied by one guest. Registration will begin
at 9:00 a.m., and seating will begin at 9:30 a.m. If you attend, you
may be asked to present valid picture identification, such as a driver’s license
or passport.
Please
note that if you hold your shares in “street name” (through a broker or other
nominee), you will need to bring a copy of a brokerage statement reflecting your
stock ownership on April 30, 2009 and check-in at the registration table at the
Annual Meeting.
What
constitutes a “quorum” for the Annual Meeting?
A quorum
is necessary to conduct business at the Annual Meeting. A quorum
requires the presence, in person or by proxy, of the holders of a majority of
the outstanding shares entitled to vote at the Annual Meeting. We
count broker “non-votes” and abstentions as present for purposes of determining
whether a quorum is present at the Annual Meeting.
What
is a broker “non-vote”?
If a
broker holds your shares in street name and you fail to provide voting
instructions to your broker, the broker has the discretion to vote your shares
on routine matters, such as director elections and ratification of auditors, but
not on non-routine matters, such as the proposed approval of the Energy
Composites Corporation Employee Stock Purchase Plan, or stockholder
proposals. Broker “non-votes” on non-routine matters occur when you
fail to provide voting instructions to your broker for shares you hold through
your broker. As explained below (see, “How many votes are needed?”),
broker “non-votes” do not count as votes cast. As a consequence, it
is important that you provide voting instructions to your broker for shares you
hold through your broker.
How
many votes are needed?
A
plurality of the votes cast at the Annual Meeting is required to elect
directors. This means that the Director nominee with the most votes
for a particular slot is elected for that slot. You may vote “FOR” or “WITHHELD” with respect to the
election of directors. Only votes “for” or “withheld” are counted in
determining whether a plurality has been cast in favor of a
Director. Abstentions are not counted for purposes of the election of
Directors.
For all
matters to be voted upon at the Annual Meeting other than election of directors,
the affirmative vote of a majority of the shares present and entitled to vote on
that matter, in person or by proxy, at the Annual Meeting is necessary for
approval. For these matters, abstentions have the same effect as a
vote “against” the proposals.
Who
pays for the solicitation of proxies?
We pay
the cost of soliciting proxies. We do not plan to retain a
professional proxy solicitor for this Annual Meeting. In addition to
the use of the mail, proxies may be solicited personally or by telephone or
electronic media by our employees. We will reimburse brokerage firms
and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for sending proxy materials to stockholders.
3
What
is “householding”?
Householding
is a procedure that permits us, with your prior permission, to send a single set
of our annual report and proxy statement to any household at which two or more
stockholders reside. Each stockholder will continue to receive a
separate proxy card for voting and attendance purposes. Householding
reduces the volume of duplicate information you receive, as well as our
expenses.
BENEFICIAL
OWNERSHIP AND OTHER
MATTERS
The
following table sets forth certain information regarding beneficial ownership of
our common stock on April 30, 2009 by each person who is known by us to own
beneficially more than 5% of the outstanding shares of common stock and our current directors and
executive officers.
To
our knowledge, except as set forth in the footnotes to this table and
subject to applicable community property laws, it is anticipated that each
person named in the table will have sole voting and investment power with
respect to the shares set forth opposite such person’s
name.
(2)
Based
on 42,070,585 shares of common stock outstanding as of April 30,2009.
(3)
Jamie
Lee Mancl and Jennifer Lynn Mancl are married and share the voting and
investment power associated with the 24,000,000 shares of common stock
they own.
(4)
Includes
744,596 shares of common stock held by ECC Investment Partners LLC and
730,000 shares of common stock issuable upon exercise of
warrants.
(5)
Includes
153,206 shares of common stock held by Jay-Mar Road Professional Court
LLC, 41,069 shares of common stock held by F&R Property, LLC, and
240,000 shares of common stock issuable upon exercise of
warrants.
(6)
Includes
40,000 shares of common stock issuable upon exercise of
warrants.
(7)
Includes
10,000 shares of common stock issuable upon exercise of warrants and
10,000 shares of common stock issuable upon conversion of convertible
debentures.
(8)
Includes
1,020,000 shares of common stock issuable upon exercise of warrants and
10,000 convertible shares of common stock issuable upon conversion of
convertible debentures.
Changes in
Control
As of
October 14, 2008, we completed a reverse acquisition of Advanced Fiberglass
Technologies, Inc. (“AFT”). The completion of the reverse acquisition
effected a change of control. Pursuant to the reverse acquisition, we
issued 28,750,000 shares of our common stock to AFT’s stockholders or
approximately 72% of the then issued and outstanding common stock after the
cancellation of 21,750,000 shares held by Diana L. Hassan, our
4
former
officer and sole director. Thus, AFT’s stockholders gained voting
control and elected our current slate of directors and officers, who now
beneficially own 62.9% of our outstanding common stock. Jamie Mancl
and Jennifer Mancl hold a majority of the outstanding shares of common stock and
have voting control over all matters presented to the stockholders for a
vote. As a result of the reverse acquisition, we now own 100% of the
outstanding common stock of AFT.
Interests of Directors and
Officers in Matters to be Acted Upon
Other
than the election of the nominated directors, no director or officer, or
associate of any director or officer or any other person will receive extra or
special benefit from the matters described herein which is not shared on a pro
rata basis by all other holders of securities of the same class in accordance
with their respective interests. If approved by our stockholders, our
officers and certain of our directors that are employees will be eligible to
participate in our Employee Stock Purchase Plan on the same terms and conditions
as all of our eligible employees and will not receive any extra or special
benefit by participating in such plan that is not shared by each plan
participant.
5
ITEM
1. ELECTION OF DIRECTORS
The first
item to be acted upon at the Annual Meeting is the election of five directors to
our Board of Directors. Each of the persons elected will serve a term
of one year and until the election and qualification of his or her
successor. We are not aware of any material proceedings to which any
of the nominee directors, or any associate of any such director, is a party
adverse to us or has a material interest adverse to us or to any of our
subsidiaries. Each nominee has consented to being named as a nominee
and to serve if elected.
Director
candidates are nominated by the Board of Directors, as we do not believe that it
is necessary to have a separate Nominating Committee. To date, it has
not been necessary to engage a third party search firm to assist in identifying
suitable candidates for directors. The Board of Directors believes
that our existing Board members and executive management have sufficient
networks of business contacts to form a suitable candidate pool from which
nominees may be identified in the future.
If any
Director nominee named in this proxy statement shall become unable or decline to
serve (an event which the Board does not anticipate), the persons named as
proxies will have discretionary authority to vote for a substitute nominee named
by the Board of Directors, if the Board of Directors determines to fill such
nominee’s position.
Unless
authorization is withheld, the enclosed proxy, when properly signed and
returned, will be voted “FOR” the election as directors
of all of the nominees listed in this proxy statement.
The
Board of Directors unanimously recommends that you vote “FOR” each nominee
director.
Nominees for Director to be
Elected
Name
Age
Current Position with
Company
Samuel
W. Fairchild
55
Chief
Executive Officer and Director
Jamie
Lee Mancl
36
President
and Director
Jennifer
Lynn Mancl
34
Vice
President and Director
Daniel
P. Wergin
67
Director
Thomas
J. Klismith
50
Director
The
nominees for election as directors have provided the following information about
themselves:
Samuel
W. Fairchild. Mr. Fairchild has served as our director and
Chief Executive Officer since October 2008. Mr. Fairchild has served
as a director of Advanced Fiberglass Technologies, Inc. (“AFT”) since April
2008. Previously, he served as Chief Executive Officer and Director
of Tower Tech Holdings (TWRT), the predecessor to Broadwind Energy (BWEN), from
2006 – 2007, where he led the growth in market capitalization from $40 million
to nearly $1 billion through process restructuring, market repositioning,
capital formation and responsive corporate governance. Mr. Fairchild
has been the President of the Tadpole Group, an investment portfolio-holding
company focused on harvesting value from transformation, since August
2004. He has also been Managing Director of Theseus Capital Partners,
an investment advisory firm, since August 2004. Prior to founding
Theseus in 2004, Mr. Fairchild co-led the Global Government, Transport &
Infrastructure Group of PA Consulting Group, a role he assumed in 1999 as a
result of PA’s acquisition of GKMG Consulting Services, a strategic consulting
firm he founded in 1992. During that period, he also served as
“shadow CEO” of Air New Zealand following the demise of its wholly-owned
subsidiary, Ansett Airlines, where he led the Crown’s acquisition of most of the
outstanding shares and the comprehensive turnaround of the
airline. He has also served in the White House as senior advisor to
President Reagan and Vice President Bush for transportation policy, and was
George Bush’s Acting Assistant Secretary of Transportation for Policy and
International Affairs. Following his government service, Mr.
Fairchild was a member of the management group at the Carlyle Group, where he
helped to establish BDM International’s transportation group before BDM was sold
to TRW, Inc. Since May 1996, Mr. Fairchild has been the Chairman of
the Board of Schiphol North America, the owner of JFK’s $1.4 billion Terminal
Four and the international arm of Amsterdam Airport’s Schiphol
Group.
6
Jamie
Lee Mancl. Mr. Mancl has served as our President and as a
director since October 2008. Mr. Mancl has served as President and a
director of AFT since its inception in January 2005. From 1995 to
January 2005, he operated M&W Fiberglass, LLC (“M&W”), the predecessor
company to AFT. Mr. Mancl is the sole owner of M&W. He
is also the owner of Fiberglass Piping & Fitting Company (“FPF”), a firm he
founded in 2006 which he continues operate. Mr. Mancl has an
extensive background managing success in the composites
industry. From 1989 to 1995, he served in various management
positions at Industrial Fiberglass. Mr. Mancl has a successful track
record managing the day-to-day operations of a growing composites fabricator,
and is an industry-recognized expert in composites.
Jennifer
Lynn Mancl. Mrs. Mancl has been our Vice President and a
director since October 2008. Mrs. Mancl has served as Vice President
of AFT since its inception in January 2005 and as a director since April 2008,
where she has been responsible for all administrative processes, marketing and
external affairs. From 1998 to 2003, Mrs. Mancl worked for Stora Enso
North Amerca, where she gained plant floor experience in the pulp and paper
industry as well as considerable experience in purchasing and
negotiations. In 2002, Mrs. Mancl earned a B.A. degree in Business
Administration and Marketing from Lakeland College in Wisconsin.
Daniel
P. Wergin. Mr. Wergin has served as our director since October
2008. He has also served as a director of AFT since April 2008,
following his resignation from the Board of Broadwind Energy
(BWEN). Mr. Wergin was a founder of Broadwind’s predecessor company,
Tower Tech Holdings (TWRT), and that company’s first Chief Financial
Officer. He has also been the President of Choice, Inc., a real
estate investment and development company based in Manitowoc, Wisconsin, since
1970. Mr. Wergin has specialized in real estate development, leasing,
and 1031 exchanges. He has been a member of the National Association
of Realtors and its Certified Commercial Investment Division since
1975.
Thomas
J. Klismith. Mr. Klismith has served as our director since
October 2008. He has also served as a director of AFT since April
2008. Mr. Klismith has been a Certified Public Accountant since 1984
and in 1988 he founded Klismith Accounting & Tax Group, which provides
accounting, tax planning, software consulting and financial advisory services to
individuals and businesses in central Wisconsin. Mr. Klismith has
significant experience in tax planning and preparation, financial reporting,
business budgeting and forecasting, financial, estate and retirement planning
and business consulting. Mr. Klismith is a member of both the
American and Wisconsin Institutes of Certified Public Accountants.
Jamie Lee
Mancl is married to Jennifer Lynn Mancl. Other than the Mancls, there
are no family relationships between any of our nominee
directors. During the last five years, none of the nominee directors
has (i) had any bankruptcy petition filed by or against any business of which
such person was an officer; (ii) had any conviction in a criminal proceeding or
been subject to a pending criminal proceeding (excluding traffic violations and
other minor offenses); (iii) been subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his or her
involvement in any type of business, securities or banking activities; or (iv)
been found by a court of competent jurisdiction (in a civil action), the SEC or
the Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law.
Board of Directors’
Responsibilities and Committees
The Board
of Directors’ primary responsibility is to seek to maximize long-term
stockholder value. The Board of Directors selects our management,
monitors management and Company performance, and provides advice and counsel to
management. Among other things, the Board of Directors regularly
reviews our business strategy and approves our budget. In fulfilling
the Board of Directors’ responsibilities, non-employee directors have full
access to our management, external auditors and outside advisers.
We are
still in the process of organizing and formalizing the processes of our Board of
Directors. Our operating business, AFT, was a private
closely-held corporation prior to the reverse acquisition and, as such, we
did not have established corporate governance policies, procedures and charters
in place. We still do not have separate audit, nominating,
compensation or any other special committees at this time. All board
decisions are considered and voted upon by the entire Board of Directors,
including matters traditionally assigned to audit, nominating and compensation
committees. We intend to establish separate committees and are
considering expanding our Board of
7
Directors
to add more independent directors. As a first step in the process of
establishing corporate governance policies and procedures, our Board of
Directors adopted a code of ethics of members of our management on April 14,2009. We will provide a copy of our code of ethics to any person
without charge, upon request for such copy being mailed to our Corporate
Secretary at 4400 Commerce Drive, Wisconsin Rapids,
Wisconsin54494.
Board Meetings and Annual
Meeting Attendance
Since
completing the acquisition of AFT, our Board of Directors typically meets at
least once per month for regularly scheduled meetings, and special meetings are
scheduled when required. The Board of Directors held three meetings
in 2008. Thomas Klismith and Jennifer Mancl each missed one Board of
Directors’ meeting in 2008. The Board of directors has adopted a
policy that all directors must attend at least 80% of all regularly scheduled
Board of Directors’ meetings and at least 70% of all special Board of Directors’
meetings. Although we have no formal policy relating to directors’
attendance at the Annual Meeting, we encourage all our directors to attend the
Annual Meeting and reimburse expenses associated with attendance.
Director
Compensation
None of
our directors received any compensation for their services as directors in
2008. We have adopted a director compensation package for
2009. Each director will receive a $30,000 restricted stock grant per
year plus $500 cash for each board meeting attended. We also
reimburse our directors for actual reasonable expenses incurred in attending
each meeting. In addition, each chairperson of a committee will
receive a $15,000 restricted stock grant per year. All restricted
stock will be paid to the directors in arrears for the previous year of
service.
The
following table sets forth information regarding the remuneration of some of our
directors during 2008. The compensation of our remaining directors is
disclosed in the Summary Compensation Table under the heading “Executive
Compensation.”
Director
Compensation Table
Name
Fees
Earned or Paid in Cash
Stock
Awards
Option
Awards
All
Other Compensation
Total
($)
($)
($)
($)
($)
Jennifer
Lynn Mancl
40,000
-
-
1,200
(1)
41,200
Daniel
P. Wergin
-
-
-
-
-
Thomas
J. Klismith (2)
-
-
-
-
-
(1)
Jennifer
Mancl serves as our Vice President and receives compensation in that
capacity. Other compensation for Mrs. Mancl during 2008
consisted of $1,200 in Simple IRA
contributions.
(2)
Mr.
Klismith did not earn any compensation for his services as a director
during 2008. However, Mr. Klismith’s firm, Klismith Accounting
and Tax Group, was paid $45,795 in 2008 for accounting, tax and business
consulting services rendered to our Company and AFT during that
period.
Conflicts of Interest and
Related Party Transactions
Our
officers and directors are now and may in the future become stockholders,
officers or directors of other companies that may be engaged in business
activities similar to those conducted by us. Accordingly, direct
conflicts of interest may arise in the future with respect to such individuals
acting on our behalf or other entities. Moreover, additional
conflicts of interest may arise with respect to opportunities which come to the
attention of such individuals in the performance of their duties or
otherwise. Although we do not currently have a right of first refusal
pertaining to opportunities that come to management’s attention insofar as such
opportunities may relate to our business operations, we have established a
conflict of interest policy intended to ensure timely disclosure and avoidance
of activities and relationships that conflict with the interests of the
Company.
Our
officers and directors are subject to the restriction that all opportunities
contemplated by our business plan which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to our Company. A breach of
this requirement will be a breach of the fiduciary duties of the officer or
director.
8
All
future affiliated transactions will be made or entered into on terms that are no
less favorable to us than those that can be obtained from any unaffiliated third
party. A majority of the independent, disinterested members of our
board of directors will approve future affiliated transactions.
Jamie L.
and Jennifer L. Mancl. Mr. Mancl owns 100% of M&W, which
owned and leased our manufacturing plant to us in 2007 and 2008. On
December 31, 2008, we exercised our option to purchase the manufacturing
facility we were leasing from M&W for a purchase price of
$4,500,000. The purchase price for the facility was paid in the form
of: (i) an assumption of the industrial revenue bonds and note related to the
building and land; (ii) cash at closing in the amount of $500,000; and (iii) the
balance ($1,045,328) in the form of a promissory note bearing interest at an
annual fixed rate of 4.775% which was determined using the twelve-month LIBOR as
of December 31, 2008 (2.025%) plus 2.75%, payable in quarterly installments of
principal and interest amortized over not more than 15 years with the unpaid
principal balance due not later than December 15, 2015. The assumed
debt consisted of all obligations of M&W under the bond agreement and
promissory notes related to the plant and its equipment. As of
December 31, 2008, the amount of the assumed debt of the industrial revenue
bonds was $2,879,672.
In
addition to the $4,500,000 purchase price paid on December 31, 2008, we paid
total rent to M&W of $420,000 during 2008 pursuant to the lease of the
manufacturing plant. In 2007, we paid $178,000 in rent to
M&W. After deductions for depreciation, interest and other
expenses, M&W’s net profit from the lease during 2008 and 2007 was
$160,455 and $107,191, respectively.
Mr. Mancl
also owns 100% of FPF, which is a distributor of imported fiberglass piping and
fitting products. We purchase products from FPF from time to time for
use in the manufacture of our products. During 2008 and 2007, we
purchased products from FPF totaling $150,604 and $143,448,
respectively. FPF’s gross profit on these purchases was $24,153 and
$35,165 during 2008 and 2007, respectively. Our board of directors
has reviewed the related party transactions with FPF and determined it is in its
best interest to continue to purchase products from FPF given their high
quality, the limited availability of such products from other suppliers at a
competitive price and the costs to produce or import comparable
products. On October 13, 2008, AFT entered into a Purchase and Supply
Agreement with FPF pursuant to which AFT may purchase fiberglass piping and
fitting products at FPF’s net direct cost. The Purchase and Supply
Agreement was filed as an exhibit to our Current Report on Form 8-K filed
October 17, 2008.
M&W
Fiberglass, LLC. Prior to the acquisition of the manufacturing
facility on December 31, 2008, we were co-borrowers with M&W, Jamie Mancl
and Jennifer Mancl under a Bond Agreement with the City of Wisconsin Rapids and
Nekoosa Port Edwards State Bank (“Bank”) pursuant to which tax-exempt industrial
revenue bonds in the amount of $4,000,000 were issued by the City (“IRB Debt”),
$3,000,000 of which was used for the purpose of financing the construction of
the manufacturing facility owned by M&W and leased to us and $1,000,000 of
which was used for the purpose of financing the acquisition of equipment owned
by us and installed at the facility. As part of the purchase of the
manufacturing facility, we executed an assignment and assumption agreement
whereby M&W and the Mancls are no longer obligated under the IRB
Debt.
Fiberglass
Piping & Fitting Company. During 2008 and 2007, FPF
operated its business out of the same manufacturing facility that we leased from
M&W (and now own). FPF occupied approximately 1,000 square feet
of the facility on a rent free basis. The value of the space provided
during 2008 and 2007 based on the rental payments made by us to M&W was
approximately $4,800 and $1,707. As of November 1, 2008, FPF has
moved its operations to an offsite location.
During
2007 and 2008, FPF obtained debt financing from the Bank to buy inventory that
was secured, in part, by AFT guarantees and assets. As of October 9,2008, AFT has been released by the Bank as guarantor and its assets no longer
serve as collateral for FPF’s debts.
9
Klismith
Accounting and Tax Group. Thomas J. Klismith has provided tax,
accounting, and business consulting services to us for several
years. The following table sets forth payments made and amounts owed
to Mr. Klismith’s firm during the years ending and as of December 31, 2008 and
2007:
Convertible
Debentures and Warrants. During 2008, we conducted a private
offering of units consisting of (i) a 3-year, 6% convertible debenture with a
conversion price of $2.50 per share, and (ii) a number of warrants exercisable
into shares of the Company’s common stock equal to the number of shares issuable
upon conversion of the principal amount of the Debentures. Each
Warrant is exercisable into shares of common stock for a term of 3 years at
$5.00 per share. Samuel W. Fairchild, Thomas J. Klismith, Daniel P.
Wergin, and Jeffrey S. Keuntjes all participated in our private placement of
debentures and warrants. The following table details the
participation in the private placement by these individuals:
Name
Debentures Purchased
Warrants Purchased
Samuel
W. Fairchild (1)
$1,825,000
730,000
Thomas
J. Klismith (2)
$600,000
240,000
Daniel
P. Wergin
$100,000
40,000
Jeffrey
S. Keuntjes
$25,000
10,000
(1)
All
of the purchases were made through ECC Investment Partners LLC, a company
controlled by Mr. Fairchild.
(2)
$375,000
was purchased by Jay-Mar Road Professional Court LLC, $100,000 was
purchased by F&R Property, LLC, and $125,000 was purchased directly by
Mr. Klismith. Mr. Klismith controls both Jay-Mar Road
Professional Court LLC and F&R Property,
LLC.
Of the
four officers and directors that participated in the offering, only Jeffrey S.
Keuntjes continues to hold a Debenture. All the others converted
their Debentures into shares of our common stock in December 2008.
Director
Independence
The Board
of Directors has determined that the following members of the Board are
independent under the applicable listing standards of the NASDAQ Stock Market:
Daniel P. Wergin and Thomas J. Klismith. In assessing the
independence of the directors, the Board considers any transactions,
relationships and arrangements between our Company and our independent directors
or their affiliated companies. This review is based primarily on
responses of the directors to questions in a director and officer questionnaire
regarding employment, business, familial, compensation and other relationships
with our Company or our management. In reviewing Mr. Klismith’s
independence, the Board of Directors considered services rendered to our Company
by Mr. Klismith’s accounting firm, as described further under “Conflicts of
Interest and Related Party Transactions” herein. There were no other
transactions, relationships or arrangements between our Company and any of the
independent directors or the independent directors’ affiliated companies that
came to the attention of the Board during our review of the independence of
directors that warranted additional review.
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our executive officers and directors to file with the Securities and
Exchange Commission (“SEC”) initial reports of ownership and reports of changes
in ownership of our common stock. Executive officers and directors
are required to furnish us with copies of all Section 16(a) reports they
file. Based solely on a review of the copies of such forms furnished
to us, we believe that our executive officers and directors complied with all
Section 16(a) filing requirements applicable to them during 2008, except for a
Form 4 filing due on December 4, 2008 for 150,000 shares purchased by Daniel
Wergin, a director, on December 2, 2008. Mr. Wergin filed a Form 5 on
February 17, 2009 to report the purchase of the shares.
10
Director
Indemnification
Under the
corporate laws of the State of Nevada and our Articles of Incorporation, we
have broad powers to indemnify our directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the “Securities Act”). Our Bylaws also
provide for mandatory indemnification of our directors and executive officers,
and permissive indemnification of our employees and agents, to the fullest
extent permissible under Nevada law. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling our Company pursuant to the foregoing
provisions, we have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Stockholder
Communications
Stockholders
who wish to communicate directly with our Board of Directors should write
to:
Information
relating to our non-director executive officers is as follows:
Name
Age
Current Position with
Company
Jeffrey
S. Keuntjes
44
Vice
President - Finance
Kenneth
A. Iwinski
46
General
Counsel and
Secretary
The
executive officers have provided the following information about
themselves:
Jeffrey
S. Keuntjes– Vice President - Finance. Mr. Keuntjes has served
as our Vice President - Finance since January 2009, and was our Controller since
October 2008. He was Controller of AFT since June 2007 and continues
to serve as Chief Financial Officer of AFT. From 2001 to June 2007,
he served as a Senior Business Analyst for Domtar Industries, a pulp and paper
manufacturer in Wisconsin. Mr. Keuntjes’ background includes 19 years
of progressively more responsible financial management responsibilities
including several international assignments with Trane Company. Mr. Keuntjes is
a member of the Institute of Management Accountants, has earned CSOX
certification from the Sarbanes-Oxley Institute and holds BA and MBA degrees
from the University of Wisconsin, Madison.
Kenneth
A. Iwinski – General Counsel and Secretary. Mr. Iwinski has
served as our General Counsel and Secretary since October 2008 and has been
General Counsel and Secretary of AFT since April 2008. From May 2007
until April 2008, Mr. Iwinski was involved in the private practice of
law. From September 2006 to May 2007, he served as Managing Member
and Counsel for Sun Prairie Solutions Group, LLC, an early stage aseptic
manufacturing business focused on providing national production and distribution
of functional beverages through a joint venture with a global branded food
company. From 1998 to September 2006, Mr. Iwinski served as Vice
President - Legal and Secretary for Northland Cranberries, Inc., a publicly
traded and vertically integrated food production, processing and sales
business. From 1992 until he joined Northland, Mr. Iwinski was an
attorney with the business law firm of Meissner Tierney Fisher & Nichols,
S.C., in Milwaukee, Wisconsin. In addition to his comprehensive
business law experience, Mr. Iwinski has significant experience in human
resources, corporate governance, compliance and risk management.
The term
of office of each officer ends at the next annual meeting of our board of
directors, expected to take place immediately after the next annual meeting of
stockholders, or when such officer’s successor is elected and
qualified. The Board of Directors expects that it will elect the
current officers (including those also currently serving as directors) to return
to their positions as officers of our Company until the next annual meeting of
stockholders.
11
We are
not aware of any material proceedings to which any of the non-director executive
officers, or any associate of any such officer, is a party adverse to us or has
a material interest adverse to us or to any of our
subsidiaries. There are no family relationships between any of our
non-director executive officers. During the last five years, none of
the non-director officers has (i) had any bankruptcy petition filed by or
against any business of which such person was an officer; (ii) had any
conviction in a criminal proceeding or been subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (iii) been
subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or (iv) been found by a court of competent
jurisdiction (in a civil action), the SEC or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law.
Executive
Compensation
The
following table sets forth information regarding the remuneration of our chief
executive officer and our executive officers that earned in excess of
$100,000 per annum during any part of the last two completed fiscal
years:
Summary
Compensation Table
Name
and Principal Position
Fiscal
Year
Salary
($)
Bonus
($)
Option
Awards
($)
All
Other Compensation
($)
Total
($)
Samuel
Fairchild,
Chief
Executive Officer and Director
2008
-
-
-
-
-
2007
-
-
-
-
-
Jamie
Mancl,
President
and Director
2008
$89,945
-
-
11,387
(1)
$101,332
2007
$78,946
-
-
21,182
(2)
$100,128
(1)
Other
compensation for Mr. Mancl during 2008 includes: (i) $8,262 paid for
health insurance; (ii) $500 health savings account contribution; and (iii)
$2,625 Simple IRA contribution. Other income during 2008
excludes $1,493,628 consisting of: (i) $160,455 of net profit to M&W
from the lease of the manufacturing facility to our Company; (ii) $24,153
of gross profit to FPF from the sale of fiberglass piping and fitting
products to our Company; (iii) $4,800 representing the value of space
within our manufacturing facility which was occupied by FPF on a rent free
basis during 2008; and (iv) $1,304,220 gain from the sale of manufacturing
plant to AFT.
(2)
Other
compensation for Mr. Mancl during 2007 includes: (i) $13,791 paid for
health insurance; (ii) $5,000 health savings account contribution; and
(iii) $2,391 Simple IRA contribution. Other income during 2007
excludes $187,087 consisting of: (i) $107,191 of net profit to M&W
from the lease of the manufacturing facility to AFT; (ii) $35,165 of gross
profit to FPF from the sale of fiberglass piping and fitting products to
AFT; (iii) $1,707 representing the value of space within the AFT
manufacturing facility which is occupied by FPF on a rent free basis; and
(iv) $43,024 of pass-through income attributable to Mr. Mancl during 2007
as a result of his ownership and the S-Corporation status of
AFT.
We do not
have any outstanding unexercised options or equity incentive
awards.
12
ITEM
2. RATIFICATION OF INDEPENDENT AUDITORS
The
second item to be acted upon at the Annual Meeting is the ratification of the
Board of Directors’ selection of our independent registered public accounting
firm.
The Board
of Directors has appointed Carver Moquist & O’Connor, LLC (“Carver Moquist”)
as our independent registered public accounting firm to examine our financial
statements for the current fiscal year ending December 31, 2009 and to perform
other appropriate accounting services. Carver Moquist has served as
our independent registered public accounting firm since October 23, 2008, and
has no relationship with us other than that arising from their employment as our
independent registered public accounting firm.
On
October 23, 2008, we dismissed Kyle L. Tingle, CPA, LLC (“Tingle”) as our
independent registered public accounting firm, effective
immediately.
Tingle’s
audit reports on our financial statements as of and for the years ended December31, 2007 and 2006 did not contain any adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope, or accounting
principles, except a separate paragraph stating:
“The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has limited operations and has no established
source of revenue. This raises substantial doubt about its ability to
continue as a going concern. Management’s plan in regard to these
matters is also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.”
In
connection with Tingle’s audits for the years ended December 31, 2007 and 2006,
there have been no disagreements with Tingle on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to Tingle’s satisfaction, would have caused
Tingle to make reference in connection with their opinion to the subject matter
of the disagreement, or “reportable events” as defined in Regulation S-K, Item
304(a)(1)(v).
On
October 23, 2008, we engaged Carver Moquist to audit our financial statements
for the year ending December 31, 2008. During the two most recent
years and through the date hereof, we have not consulted with Carver Moquist
regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, and neither a written report nor
oral advice was provided to us that Carver Moquist concluded was an important
factor considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was the subject of either a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K or the related
instructions thereto) or a reportable event.
While we
are not required to do so, we are submitting the appointment of Carver Moquist
to serve as our independent registered public accounting firm for the fiscal
year ending December 31, 2009 for ratification in order to ascertain the views
of our stockholders on this appointment. If the appointment is not
ratified, the Board of Directors will reconsider its selection.
Fees paid
to Tingle during the last two years were as follows:
2008
2007
Audit
Fees
$
1,800
$
1,650
Audit-Related
Fees
—
—
Tax
Fees
—
300
All
Other Fees
—
—
Total
Fees
$
1,800
$
1,950
13
Fees paid
to Carver Moquist during 2008 were as follows:
2008
Audit
Fees (1)
$
93,680
Audit-Related
Fees (2)
57,446
Tax
Fees
—
All
Other Fees
—
Total
Fees
$
151,126
(1)
The
amount billed to us for professional services related to the audit of our
annual financial statements as of December 31, 2008 and included our
quarterly report on Form 10-Q as of September 31,
2008.
(2)
This
amount was billed to us for professional services provided primarily in
connection with the Definitive Information Statement on Schedule 14C we
filed in connection with the reverse acquisition of
AFT.
The Board
of Directors has considered whether the provision of the non-audit services
described above by an external auditor is compatible with maintaining the
auditor’s independence, and determined that these non-audit services are
compatible with the required independence. The Board of Directors
pre-approves all services to be provided to our Company by the independent
auditors. This includes the pre-approval of (i) all audit services,
and (ii) any significant (i.e., not de minimis) non-audit
services. Before granting any approval, the Board of Directors gives
due consideration to whether approval of the proposed service will have a
detrimental impact on the auditor’s independence. All services
provided by and fees paid to our independent auditors in 2008 and 2007 were
pre-approved by the Board of Directors.
Representatives
of Carver Moquist will be present at the Annual Meeting, will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from stockholders.
The Board of Directors recommends a
vote “FOR” the ratification of Carver Moquist as our independent registered
public accounting firm. The affirmative vote of a majority of
the shares of our common stock present in person or by proxy and entitled to
vote at the Annual Meeting is required to ratify the appointment of Carver
Moquist as our independent registered public accounting firm.
14
ITEM
3. EMPLOYEE STOCK PURCHASE PLAN
The third
item to be acted upon at the Annual Meeting is the approval of the Energy
Composites Corporation Employee Stock Purchase Plan (the “Plan”), adopted on
April 14, 2009 by the Board of Directors. The Board of Directors’
adoption of the Plan is subject to approval by the stockholders at the Annual
Meeting.
We are
establishing the Plan to encourage and facilitate the purchase of shares of our
common stock by our employees by offering our shares at a discount to the market
price. The shares will be purchased by employees using accumulated
payroll deductions. The acquisition of shares of our common stock by
employees allows us to offer additional incentives to employees and to attract
and retain key personnel for the continued pursuit of our strategic
plans. This Plan is consistent with our philosophy of placing equity
in the hands of employees in an effort to further instill stockholder
considerations and values in the actions of our employees.
Summary of the
Plan
The
following summary of the material features of the Plan is qualified in its
entirety by reference to the full text of the Plan, which is set out in Appendix
A to this Proxy Statement. Capitalized terms not identified
herein shall have the meanings prescribed to them in the Plan.
Administration. The
Plan will be administered by a Committee appointed by the Board of Directors or
directly by the Board of Directors (the “Committee”). The Committee
will have the discretionary power to construe, administer and interpret the
Plan; to prescribe, amend and rescind administrative rules relating to the Plan;
to set the provisions which will determine an employee’s ability to participate
in the Plan and to take all other actions that are necessary or appropriate for
administration of the Plan. The Committee’s interpretations, rules
and actions are final and binding.
Eligibility
and Participation. Enrollment in the Plan is extended to all
eligible employees. All our employees (including officers) are
eligible to participate in the Plan if: (i) their customary employment is for
more than 20 hours per week and five months per calendar year; and (ii) they
have been an employee for at least three consecutive months. No
employee will be eligible under the Plan if participation in the Plan is
prohibited by the law of any country that has jurisdiction over that employee or
if compliance with the laws of the foreign jurisdiction would cause the Plan to
violate Section 423 of the Code.
Participation
in the Plan is voluntary and is dependent on each eligible employee’s election
to participate and his or her determination as to the level of payroll
deductions. Accordingly, future purchases under the Plan are not
determinable and it is not possible at this time to determine or indicate the
number, names or positions of employees who will be provided with the
opportunity to participate in the Plan or the number of shares of common stock
which may be purchased by any employee under the Plan.
A Plan
participant may withdraw at any time and receive a refund of all payroll
deductions accumulated through the withdrawal date. A withdrawn
participant may re-enroll in the Plan at the beginning of the next offering
period.
Common
Shares Subject to the Plan. The maximum number of shares of
common stock that may be purchased under the Plan is 1,000,000 shares of common
stock, subject to adjustment for stock splits, stock dividends, or other
increases or decreases in outstanding common stock effected without
consideration. The common stock to be sold under the Plan may be
either authorized but unissued shares or treasury shares.
In the
event of any merger, consolidation, transfer of all or substantially of our
assets, or liquidation and dissolution of our Company (other than one in which
we are the surviving corporation or in which the surviving corporation assumes
and continues the Plan), the funds then accumulated under the Plan shall
immediately be used to purchase shares under the Plan prior to such
event.
Purchases
under the Plan. Each participant may contribute to the Plan by
making payroll deductions of not less than $10 per pay period. The
Committee may establish a maximum dollar amount or percentage that participants
may deduct from payroll. In no event will a participant be allowed to
purchase stock with a fair market
15
value of
more than $25,000 in any calendar year. A participant’s payroll
deduction authorization will remain in effect for successive purchase periods
unless terminated. Participants may change their contributions at any
time; however, the new payroll deduction election will take effect at the
commencement of the next offering period.
On June
30 and December 31 of each year, each participant will purchase up to that
number of shares of common stock purchasable during the six-month period
beginning on January 1 and July 1 of such year. The purchase price of
common stock under the Plan will be equal to the lower of 85% of the fair market
value of the shares on the first or last trading day of the six-month offering
period. The number of shares of common stock a participant purchases
on each purchase date is determined by dividing the total amount of payroll
deductions withheld from the participant’s compensation by the purchase price;
provided, however, that not more than 5,000 shares of common stock may be
purchased during any offering period.
Limitations
on Participation. No participant may purchase common stock
under the Plan if, after such purchase, the employee owns stock possessing five
percent or more of the total combined voting power or value of all classes of
our stock. No participant may purchase common stock with a fair
market value in excess of $25,000 in any calendar year under the
Plan. “Fair market value” means the closing sales price (or the
closing bid, if no sales were reported) as reported by the stock exchange (or
market on which our common stock is then traded or quoted) on the date on which
shares are to be purchased, or, if the market is closed on such date, the
trading day immediately prior thereto.
If the
aggregate purchase of shares of common stock during an offering period exceeds
the maximum aggregate number available under the Plan, then, a pro rata
allocation of the shares of common stock available will be made.
Book
Entry of Shares, Custodian, Withdrawal of Shares. As soon as
practicable after each purchase date, the Committee will apply the shares of
common stock purchased in book entry form to each participant’s account held by
a custodian selected by the Committee. The Committee may require that
shares be retained with the custodian for a designated period of time to permit
tracking of disqualifying dispositions (as defined by Code Section 423 and the
associated rules and regulations) of the shares. After the custodial
holding period established by the Committee, participants may direct the
custodian, subject to applicable securities laws, to deliver to the participant
all or part of the shares held by the custodian in his or her account to the
participant.
Rights
Not Transferable. The rights or interests of any participant
in the Plan, or in any common stock or cash to which he or she may be entitled
under the Plan, are not transferable by voluntary or involuntary assignment or
by operation of law, or by any other manner other than by will or the laws of
descent and distribution. If a participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or interest under the
Plan, other than by will or the laws of descent and distribution, the act will
be treated as an automatic withdrawal from the Plan.
Termination,
Change of Employment Status, Leaves of Absence,
Death. Termination of a participant’s employment for any
reason, including disability or death, or the failure of the participant to
remain continuously employed by the Company for at least 20 hours per week, will
terminate his or her participation in the Plan immediately. The
payroll deductions credited to the participant’s account will be returned to him
or her or, in the case of death, to the person or persons entitled thereto as
provided in the Plan.
Approved
leaves of absence will not terminate participation in the Plan. Plan
participation shall be immediately terminated for employees that do not return
to work immediately after an approved leave of absence. Plan
participation will terminate 90 days after an employee goes on leave, unless a
contract or law guarantees such employee’s right to return to work after the
90th
day of leave.
Amendment
and Termination of the Plan. The Board of Directors has the
authority to amend or terminate the Plan, except that no such action may
increase the number of shares available under the Plan without first obtaining
stockholder approval. Unless sooner terminated, the Plan will
terminate 10 years after its approval by the stockholders.
16
Upon
termination of the Plan, the Board of Directors will terminate payroll
deductions and refund all amounts contributed by participants or refund all
amounts after the purchase of common stock.
Federal Income Tax
Consequences
The
following is a brief summary of certain of the United States federal income tax
consequences relating to the Plan based on federal income tax laws currently in
effect. This summary applies to the Plan as normally operated and is
not intended to provide or supplement tax advice to eligible
employees. The summary contains general statements based on current
United States federal income tax statutes, regulations and currently available
interpretations thereof. This summary is not intended to be
exhaustive and does not describe state, local or foreign tax consequences or the
effect, if any, of gift, estate and inheritance taxes. The Plan is
not qualified under Section 401(a) of the Code. The Plan, and the
right of Participants to make purchases thereunder, is intended to qualify under
the provisions of Code Section 423.
United
States Federal Income Tax Consequences to Participants. A
participant’s payroll deductions to purchase shares of our common stock are made
on an after-tax basis. There is currently no federal income tax
liability to the participant when shares of our common stock are purchased
pursuant to the Plan. However, the participant may incur federal
income tax liability upon disposition (including by way of gift) of the shares
acquired under the Plan. The participant’s United States federal
income tax liability will depend on whether the disposition is a qualifying
disposition or a disqualifying disposition (as these terms are defined by Code
Section 423 and the associated rules and regulations) as described
below.
If a
qualifying disposition of the shares is made by the participant (i.e., a
disposition that occurs two years after the first day of the offering period in
which the shares were purchased), or in the event of death (whenever occurring)
while owning the shares, the participant will recognize in the year of
disposition (or, if earlier, the year of the participant’s death) ordinary
income in an amount equal to the lesser of (i) the excess of the fair market
value of the shares at the time of disposition (or death) over the amount paid
for the shares under the Plan or (ii) 15% of the fair market value of the shares
at the date of grant (the beginning of the applicable offering
period). Upon the sale of the shares, any amount realized in excess
of the ordinary income recognized by the participant will be taxed to the
participant as a long-term capital gain. If the shares are sold at
less than the purchase price, then there will be no ordinary
income. Instead, the participant will have a long-term capital loss
equal to the difference between the sales price and the purchase price paid
under the Plan.
If a
disqualifying disposition of the shares is made by the participant (i.e., a
disposition, other than by reason of death, that occurs before two years after
the first day of the offering period in which the shares were purchased), the
participant generally will recognize ordinary income in the year of disposition
in an amount equal to any excess of the fair market value of the shares at the
date of purchase over the purchase price paid for the shares under the Plan
(even if no gain is realized on the sale or if a gratuitous transfer is
made). Any further gain (or loss) realized by the participant
generally will be taxed as short-term or long-term capital gain (or loss)
depending on the holding period.
United
States Federal Income Tax Consequences to our Company. In
general, we are not entitled to a deduction for amounts taxed to a
participant. Our Company will be entitled to a deduction only if the
participant makes a disqualifying disposition of any shares purchased under the
Plan. In such case, we can deduct as a compensation expense the
amount that is ordinary income to the participant provided that, among other
things, (i) the amount meets the test of reasonableness, is an ordinary and
necessary business expense and is not an “excess parachute payment” within the
meaning of Section 280G of the Code, (ii) any applicable reporting obligations
are satisfied, and (iii) the one million dollar limitation of Section 162(m) of
the Code is not exceeded (if applicable).
Our Board unanimously recommends a
vote “FOR” the proposal to approve and adopt the Energy Composites Corporation
Employee Stock Purchase Plan. Approval of the Plan requires
the affirmative vote of a majority of the shares of our common stock present in
person or by proxy and entitled to vote at the Annual Meeting.
17
ADDITIONAL
INFORMATION
Stockholder
Proposals
The 2010
Annual Meeting of Stockholders is scheduled to be held on June 1,2010. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may
present proper proposals for inclusion in our proxy statement and for
consideration at the next annual meeting of stockholders by submitting their
proposals to our Company Secretary in a timely manner. In order to be
included in the proxy statement for the 2010 Annual Meeting of Stockholders,
stockholder proposals must be received by our Company Secretary no earlier than
February 2, 2010 and no later than March 4, 2010, and must otherwise comply with
the requirements of our Bylaws and Rule 14a-8. No such stockholder
proposals have been received for the 2009 Annual Meeting of
Stockholders.
If a
stockholder who has notified the Company Secretary of his intention to present a
proposal at an annual meeting does not appear or send a qualified representative
to present his proposal at such meeting, the proposal will not be presented for
a vote at such meeting.
Stockholder Nominations of
Directors
If a
stockholder wishes to nominate an individual as a candidate for election to the
Board of Directors, the stockholder must submit a proper and timely nomination
to the Company Secretary. In order to nominate a director for the
2010 Annual Meeting of Stockholders, stockholder nominations must be received by
our Company Secretary no earlier than February 2, 2010 and no later than March4, 2010. No such stockholder nominations have been received for the
2009 Annual Meeting of Stockholders.
A proper
stockholder nomination for director must include the following
information:
1.
Nominee
Information:
a.
The
name, age, business address and residence address of each
nominee.
b.
The
principal occupation or employment of each
nominee.
c.
The
class and number of Company shares which are beneficially owned by each
nominee on the date of such stockholder’s
notice.
d.
Any
other information relating to each nominee that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act, or any successor statute thereto (including, without
limitation, each nominee’s written consent to being named in the proxy
statement as a nominee and to serving as a director if
elected).
2.
Nominating
Stockholder Information:
a.
The
name and address, as they appear on the Company’s books, of the nominating
stockholder and any other stockholders known by such stockholder to be
supporting each nominee.
b.
The
class and number of Company shares which are beneficially owned by the
nominating stockholder on the date of such stockholder’s
notice.
c.
A
representation that the stockholder is a holder of record of Company stock
entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the
notice.
3.
Related
Agreements and Understandings:
a.
A
description of all arrangements or understandings between the nominating
stockholder and each nominee and other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to
be made by the nominating
stockholder.
If a
stockholder who has notified the Company Secretary of his intention to make a
nomination at an annual meeting does not appear or send a qualified
representative to make his nomination at such meeting, the nominee will not be
included on the ballot distributed at the meeting.
18
Annual Report to
Stockholders
Our
Annual Report on Form 10-K for the year ended December 31, 2008 accompanies this
proxy statement and is also available for viewing on the Internet at
www.vfnotice.com/energycomposites. The Annual Report contains
financial statements audited by Carver Moquist, our independent registered
public accounting firm. The Annual Report is not to be considered as
a part of the proxy solicitation material or as having been incorporated by
reference. If requested, we will provide you copies of any exhibits
to the Form 10-K upon the payment of a fee covering our reasonable expenses in
furnishing the exhibits. You can request exhibits to the Form 10-K by
writing to our Company Secretary at Energy Composites Corporation, 4400 Commerce
Drive, Wisconsin Rapids, Wisconsin54494.
Questions
If you
have any questions or need more information about the annual meeting, write
to:
The
purpose of the Plan is to secure for the Company and its stockholders the
benefits of the incentive inherent in the ownership of Stock by current and
future Eligible Employees and to provide such Eligible Employees with an
opportunity to increase their proprietary interest in the success of the Company
by purchasing Stock from the Company on favorable terms and to pay for such
purchases through payroll deductions. The Plan is intended to qualify
as an “employee stock purchase plan” under section 423 of the Code and
shall be administered, interpreted and construed in accordance with such
provisions.
SECTION
2. ADMINISTRATION OF THE PLAN.
(a) Authority. The Plan
shall be administered by the Committee.
(b) Responsibilities. The
Committee shall have full authority to construe, interpret and apply the terms
of the Plan, determine eligibility, make decisions relating to the operation of
the Plan and resolve any claims arising under the Plan. The Committee
may adopt such rules, guidelines and forms as it deems necessary or appropriate
to implement and administer the Plan. The Committee’s determinations
under the Plan shall be final and binding on all persons. The Company
shall pay all costs of administration of the Plan.
SECTION
3. ENROLLMENT AND PARTICIPATION.
(a) Offering
Periods. During the term of the Plan, two Offering Periods
shall commence in each calendar year. The Offering Periods shall
consist of the six-month periods commencing on each January 1 and July
1. Notwithstanding the foregoing, the first Offering Period under the
Plan will commence on the day on which a registration statement under the Act
with respect to Stock to be purchased hereunder shall be effective and end on
the earlier of the next June 30 or December 31 thereafter.
(b) Accumulation
Periods. An Accumulation Period shall run concurrent with each
Offering Period.
(c) Enrollment. Any
individual who, on the day preceding the first day of an Offering Period,
qualifies as an Eligible Employee may elect to become a Participant in the Plan
for such Offering Period by executing the enrollment form prescribed for this
purpose by the Committee. The enrollment form shall be filed with the
Company at the designated location, or with the designated person, before the
start date of such Offering Period.
(d) Duration of
Participation. Once enrolled in the Plan, a Participant shall
continue to participate in the Plan until he or she ceases to be an Eligible
Employee, withdraws from the Plan under Section 5(a) or reaches the end of
the Accumulation Period in which his or her employee contributions were
discontinued under Section 8(b). A Participant who withdrew from
the Plan under Section 5(a) may again become a Participant, if he or she
then is an Eligible Employee, by following the procedure described in Subsection
(c) above. A Participant whose employee contributions were
discontinued automatically under Section 8(b) shall automatically resume
participation at the beginning of the earliest Accumulation Period ending in the
next calendar year, if he or she then is an Eligible Employee.
(e) Applicable Offering
Period. For purposes of calculating the Purchase Price under
Section 7(b), the applicable Offering Period shall be determined as
follows:
(i) Once
a Participant is enrolled in the Plan for an Offering Period, such Offering
Period shall continue to apply to him or her until the earliest of (A) the
end of such Offering Period, (B) the end of his or her participation under
Subsection (d) above or (C) re-enrollment for a subsequent Offering
Period under Paragraph (ii) below.
(ii) When
a Participant reaches the end of an Offering Period but his or her participation
is to continue, then such Participant shall automatically be re-enrolled for the
Offering Period that commences immediately
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after the
end of the prior Offering Period.
SECTION
4. EMPLOYEE CONTRIBUTIONS.
(a) Frequency of Payroll
Deductions. A Participant may purchase shares of Stock under
the Plan solely by means of payroll deductions. Payroll deductions,
as designated by the Participant pursuant to Subsection (b) below, shall
occur on each payday during participation in the Plan.
(b) Amount of Payroll
Deductions. An Eligible Employee shall designate on the
enrollment form the portion of his or her Compensation that he or she elects to
have withheld for the purchase of Stock, but not less than $10 for each pay
period. The Committee may determine, in its sole discretion, to
establish a maximum dollar amount or percentage of Compensation Participants may
authorize for payroll deductions during any Accumulation Period or calendar
year. Any such limit established by the Committee shall apply to all
Participants and meet the requirements of Section 423 of the Code.
(c) Changes in Payroll
Deductions. If a Participant wishes to change the rate of
payroll deductions, he or she may do so by filing a new enrollment form with the
Company at the designated location, or with the designated person, at any
time. The new payroll deduction rate shall be effective for the next
Offering Period.
(d) Tax
Withholding. Payroll deductions under the Plan are subject to
income and employment tax withholding. By executing an enrollment
form, each Participant agrees that such income and employment tax withholding
may be deducted from other Compensation of the Participant.
SECTION
5. WITHDRAWAL FROM THE PLAN.
(a) Withdrawal. A
Participant may elect to withdraw from the Plan by filing the prescribed form
with the Company at the designated location, or with the designated person, at
any time before the last day of an Accumulation Period. As soon as
reasonably practicable thereafter, payroll deductions shall cease and the entire
amount credited to the Participant’s Plan Account shall be refunded to him or
her in cash, without interest. No partial withdrawals shall be
permitted.
(b) Re-Enrollment After
Withdrawal. A former Participant who has withdrawn from the
Plan shall not be a Participant until he or she re-enrolls in the Plan under
Section 3(c). Re-enrollment may be effective only at the
commencement of an Offering Period.
SECTION
6. CHANGE IN EMPLOYMENT STATUS.
(a) Termination of
Employment. Termination of employment as an Eligible Employee
for any reason, including death, shall be treated as an automatic withdrawal
from the Plan under Section 5(a). A transfer from one
Participating Company to another shall not be treated as a termination of
employment.
(b) Change in Employment
Status. If a Participant’s customary employment drops
below five months per calendar year or less than 20 hours per week, such change
in employment status shall be treated as an automatic withdrawal from the Plan
under Section 5(a).
(c) Leave of
Absence. For purposes of the Plan, employment shall not be
deemed to terminate when the Participant goes on a military leave, a sick leave
or another bona
fide leave of absence, if the leave was approved by the Participating
Company in writing. Employment, however, shall be deemed to terminate
90 days after the Participant goes on a leave, unless a contract or statute
guarantees his or her right to return to work. Employment shall be
deemed to terminate in any event when the approved leave ends, unless the
Participant immediately returns to work.
(d) Death. In the event
of the Participant’s death, the amount credited to his or her Plan Account shall
be paid to a beneficiary designated by him or her for this purpose on the
prescribed form or, if none, to the Participant’s estate. Such form
shall be valid only if it was filed with the Company at the designated location,
or with the designated person, before the Participant’s death.
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SECTION
7. PLAN ACCOUNTS AND PURCHASE OF SHARES.
(a) Plan Accounts. The
Company shall maintain a Plan Account on its books in the name of each
Participant. Whenever an amount is deducted from the Participant’s
Compensation under the Plan, such amount shall be credited to the Participant’s
Plan Account. Amounts credited to Plan Accounts shall not be trust
funds and may be commingled with the Participating Company’s general assets and
used for or applied to any corporate purpose. No interest shall
accrue on the amounts deducted from a Participant’s Compensation or credited to
Plan Accounts.
(b) Purchase Price. The
Purchase Price for each share of Stock purchased at the close of an Accumulation
Period shall be the lower of:
(i) 85%
of the Fair Market Value of such share on the first trading day in such
Accumulation Period; or
(ii) 85%
of the Fair Market Value of such share on the last trading day in such
Accumulation Period.
(c) Number of Shares
Purchased. As of the last day of each Accumulation Period,
each Participant shall be deemed to have elected to purchase the number of
shares of Stock calculated in accordance with this Subsection (c), unless
the Participant has previously elected to withdraw from the Plan in accordance
with Section 5(a). The amount then in the Participant’s Plan
Account shall be divided by the Purchase Price, and the number of shares that
results shall be purchased from the Company with the funds in the Participant’s
Plan Account. The foregoing notwithstanding, no Participant shall
purchase more than 5,000 shares of Stock with respect to any Offering Period nor
the amounts of Stock set forth in Sections 8(b) and 13(a). The
Committee may determine with respect to all Participants that any fractional
share, as calculated under this Subsection (c), shall be (i) rounded down
to the next lower whole share or (ii) credited as a fractional
share. In the event any fractional share is rounded down to the next lower
whole share, the amount of the Participant’s Plan Account that is not sufficient
to purchase a whole share shall be retained in the Plan Account for the next
Accumulation Period unless the Participant has previously elected to withdraw
from the Plan in accordance with Section 5(a).
(d) Available Shares
Insufficient. In the event that the aggregate number of shares
that all Participants elect to purchase during an Accumulation Period exceeds
the maximum number of shares remaining available for issuance under
Section 13(a), then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.
(e) Issuance of
Stock. A Participant in the Plan initially will hold his or
her shares in book entry form through an agent designated by the
Committee. As soon as reasonably practicable after the close of the
applicable Accumulation Period, the Company shall deliver the purchased shares
to the agent designated by the Committee to hold shares for
Participants. The Committee may establish a Designating Agent Holding
Period to permit the tracking of disqualified dispositions of purchased
shares. A Participant may, after the expiration of the Designated
Agent Holding Period, request that the agent deliver to him or her a certificate
for the shares held for his or her account.
(f) Unused Cash
Balances. Except as provided in Section 7(c), an amount
remaining in the Participant’s Plan Account at the end of an Accumulation Period
shall be refunded to the Participant in cash, without interest.
(g) Stockholder
Approval. Any other provision of the Plan notwithstanding, no
shares of Stock shall be purchased under the Plan unless and until the Company’s
stockholders have approved the adoption of the Plan.
SECTION
8. LIMITATIONS ON STOCK OWNERSHIP.
(a) Five Percent
Limit. Any other provision of the Plan notwithstanding, no
Participant shall be
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granted a
right to purchase Stock under the Plan if such Participant, immediately after
his or her election to purchase such Stock, would own stock possessing more than
5% of the total combined voting power or value of all classes of stock of the
Company or any parent or Subsidiary of the Company. For purposes of
this Subsection (a), the following rules shall apply:
(i) Ownership
of stock shall be determined after applying the attribution rules of
section 424(d) of the Code;
(ii) Each
Participant shall be deemed to own any stock that he or she has a right or
option to purchase under this or any other plan; and
(iii) Each
Participant shall be deemed to have the right to purchase 5,000 shares of Stock
under this Plan with respect to each Offering Period.
(b) Dollar Limit. Any
other provision of the Plan notwithstanding, no Participant shall purchase Stock
with a Fair Market Value in excess of $25,000 during any calendar year (under
this Plan and all other employee stock purchase plans of the Company or any
parent or Subsidiary of the Company). For purposes of this
Subsection (b), the Fair Market Value of Stock shall be determined in each
case as of the beginning of the Offering Period in which such Stock is
purchased. Employee stock purchase plans not described in
section 423 of the Code shall be disregarded. If a Participant
is precluded by this Subsection (b) from purchasing additional Stock under
the Plan, then his or her employee contributions shall automatically be
discontinued and shall resume at the beginning of the earliest Accumulation
Period ending in the next calendar year (if he or she then is an Eligible
Employee). The limitations set forth in this Subsection are in
addition to any other limitation the Committee may establish from time to
time.
SECTION
9. RIGHTS NOT TRANSFERABLE.
The
rights of any Participant under the Plan, or any Participant’s interest in any
Stock or moneys to which he or she may be entitled under the Plan, shall not be
transferable by voluntary or involuntary assignment or by operation of law, or
in any other manner other than by beneficiary designation or the laws of descent
and distribution. If a Participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or interest under the
Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 5(a).
SECTION
10. NO RIGHTS AS AN EMPLOYEE.
Nothing
in the Plan or in any right granted under the Plan shall confer upon the
Participant any right to continue in the employ of a Participating Company for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Participating Companies or of the Participant, which
rights are hereby expressly reserved by each, to terminate his or her employment
at any time and for any reason, with or without cause.
SECTION
11. NO RIGHTS AS A STOCKHOLDER.
A
Participant shall have no rights as a stockholder with respect to any shares of
Stock that he or she may have a right to purchase under the Plan until such
shares have been purchased on the last day of the applicable Accumulation
Period and are delivered to the agent designated by the
Committee.
SECTION
12. SECURITIES LAW REQUIREMENTS.
Shares of
Stock shall not be issued under the Plan unless a registration statement under
the Act with respect to such shares shall be effective and the issuance and
delivery of such shares otherwise comply with (or are exempt from) all
applicable requirements of law, including without limitation the Act, the rules
and regulations promulgated thereunder, state securities laws and regulations,
and the regulations of any stock exchange or other securities market on which
the Company’s securities may then be traded.
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SECTION
13. STOCK OFFERED UNDER THE PLAN.
(a) Authorized
Shares. The number of shares of Stock available for purchase
under the Plan shall be 1,000,000 (subject to adjustment pursuant to this
Section 13). Stock subject to the Plan may be shares now or
hereafter authorized but unissued, treasury shares, or both.
(b) Anti-Dilution
Adjustments. Subject to any required action by the
stockholders of the Company and the 5,000-share limitation described in Section
7(c), the aggregate number of shares of Stock offered under the Plan and
the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification, or any other
increase or decrease in the number of shares of Stock effected without receipt
or payment of consideration by the Company.
(c) Reorganizations. Any
other provision of the Plan notwithstanding, immediately prior to the effective
time of a Corporate Reorganization, the Offering Period and Accumulation Period
then in progress shall terminate and shares shall be purchased pursuant to
Section 7, unless the Plan is continued or assumed by the surviving
corporation or its parent corporation. The Plan shall in no event be
construed to restrict in any way the Company’s right to undertake a dissolution,
liquidation, merger, consolidation or other reorganization.
SECTION
14. AMENDMENT, SUSPENSION OR TERMINATION.
(a) Amendment. The
Board may at any time and without notice amend the Plan in any respect;
provided, however, that no amendment shall be made without the approval of the
stockholders of Company to increase the aggregate number of shares of Stock
which may be issued under the Plan (other than as provided in Section 13)
or for which stockholder approval is required under applicable tax, securities
or other laws.
(b) Suspension or
Termination. The Plan and all rights of Participants under any
offering hereunder may be terminated or suspended at any time and without notice
at the discretion of the Board. Upon any suspension or termination of the
Plan, all amounts in Plan Accounts shall in the sole discretion of the Committee
be either (i) refunded to Participants in total or (ii) refunded to Participants
to the extent not used to purchase Stock. Such suspension or
termination may be made without the approval of the stockholders of the Company
or the consent of any Participant.
SECTION
15. REPORTS AND NOTICES.
(a) Statements. Statements
of account shall be provided to Participants at least annually, which statements
shall set forth the amounts deducted from a Participant’s Compensation, the
Purchase Price for Stock purchased under the Plan on the last day of each
Accumulation Period, the number of shares of Stock purchased under the Plan on
the last day of each Accumulation Period and such other information as the
Committee may deem appropriate.
(b) Notices. All
notices or other communications by an Eligible Employee or Participant to a
Participating Company under or in connection with the Plan shall be deemed given
when received by the Participating Company at the location, or by the person,
designated by the Participating Company.
SECTION
16. TERM OF PLAN.
The Plan
shall continue in effect for a term of ten (10) years following the date of
adoption by the Board, unless sooner terminated pursuant to Section
14.
SECTION
17. DEFINITIONS.
(a)“Act” means the Securities Act
of 1933, as amended.
(b) “Accumulation Period” means the period during
which contributions may be made by Participants toward the purchase of Stock
under the Plan, as determined pursuant to Section 3(b).
A-5
(c) “Board” means the Board of Directors
of the Company, as constituted from time to time.
(d) “Code” means the Internal Revenue
Code of 1986, as amended.
(e) “Committee” means the Board or, to the
extent permitted by law, such committee consisting exclusively of one or more
officers or directors of the Company as may be appointed by the Board from time
to time. Nothing herein shall be construed as obligating the Board to
delegate authority under the Plan, and the Board may at any time rescind the
authority delegated to a committee appointed hereunder or appoint a new
committee.
(f) “Company” means Energy Composites
Corporation, a Nevada corporation.
(g) “Compensation” means (i) the total
compensation paid in cash to a Participant by a Participating Company, including
salaries, wages, bonuses, incentive compensation, commissions, overtime pay and
shift premiums, plus (ii) any pre-tax contributions made by the Participant
under section 401(k) or 125 of the Code. “Compensation” shall exclude
all non-cash items, moving or relocation allowances, cost-of-living equalization
payments, car allowances, tuition reimbursements, imputed income attributable to
cars or life insurance, severance pay, fringe benefits, contributions or
benefits received under employee benefit plans, income attributable to the
exercise of stock options, and similar items. The Committee shall
determine whether a particular item is included in Compensation.
(h) “Corporate Reorganization” means:
(i)
The
consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization (other than one in
which the Company is the surviving entity);
or
(ii)
The
sale, transfer or other disposition of all or substantially all of the
Company’s assets or the complete liquidation or dissolution of the
Company.
(i)“Designating Agent Holding
Period” means a reasonable period of time that purchased shares of
Stock must be retained by an agent designated by the Committee to hold shares of
Stock in book entry form on behalf of Participants in order to permit the
tracking of disqualified dispositions of Stock.
(j) “Eligible Employee” means any employee of a
Participating Company who meets both of the following requirements:
(i)
His
or her customary employment is for more than five months per calendar year
and for more than 20 hours per week;
and
(ii)
He
or she has been an employee of a Participating Company for not less than
three consecutive months.
The
foregoing notwithstanding, an individual shall not be considered an Eligible
Employee if his or her participation in the Plan is prohibited by the law of any
country which has jurisdiction over him or her or if compliance with the laws of
the foreign jurisdiction would cause the Plan to violate the requirement of
section 423 of the Code.
(k) “Exchange Act” means the Securities
Exchange Act of 1934, as amended.
(l) “Fair Market Value” means the market price of
Stock, determined by the Committee as follows:
(i)
If
the Stock was traded on The Nasdaq National Market or the Over-the-Counter
Bulletin Board on the date in question, then the Fair Market Value shall
be equal to the last-transaction price quoted for such date by such
quotation service;
(ii)
If
the Stock was traded on a stock exchange on the date in question, then the
Fair Market
A-6
Value
shall be equal to the closing price reported by the applicable composite
transactions report for such date;
or
(iii)
If
none of the foregoing provisions is applicable, then the Fair Market Value
shall be determined by the Committee in good faith on such basis as it
deems appropriate.
Whenever
possible, the determination of Fair Market Value by the Committee shall be based
on the prices reported in The Wall Street
Journal or as reported directly to the Company by The Nasdaq National
Market, the Over-the-Counter Bulletin Board or a stock exchange. Such
determination shall be conclusive and binding on all persons.
(m) “Offering Period” means the period with
respect to which the right to purchase Stock may be granted under the Plan, as
determined pursuant to Section 3(a).
(n) “Participant” means an Eligible Employee
who elects to participate in the Plan, as provided in
Section 3(c).
(o) “Participating Company” means (i) the Company
and (ii) each present or future Subsidiary of the Company.
(p) “Plan” means this Energy Composites
Corporation Employee Stock Purchase Plan, as it may be amended from time to
time.
(q) “Plan Account” means the account
established for each Participant pursuant to Section 7(a).
(r) “Purchase Price” means the price at which
Participants may purchase Stock under the Plan, as determined pursuant to
Section 7(b).
(s) “Stock” means the $0.001 par value
common stock of the Company.
(t) “Subsidiary” means a “subsidiary
corporation” as defined under Section 424(f) of the Code.
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Dates Referenced Herein and Documents Incorporated by Reference
