_X_SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)
Filed by the Registrant ____|X|
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_____|_| Preliminary Proxy Statement
_____|X| Definitive Proxy Statement
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|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
|_| 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 240.14a-11c or
240.14a-12
Developed Technology Resource, Inc., a Minnesota CorporationDEVELOPED TECHNOLOGY RESOURCE, INC.
(Name of Registrant as Specified In Itsin its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
__X__:
|X| No fee required.
_____required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
O-11.
1.0-11.
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2.(2) Aggregate number of securities to which transaction applies:
3.(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set(Set forth the amount on which the
filing fee is calculated and state how it was determined):
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_____|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1.(1) Amount Previously Paid:
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DEVELOPED TECHNOLOGY RESOURCE, INC.
7300 Metro Blvd.SOUTHPOINT OFFICE CENTER
1650 WEST 82ND STREET
BLOOMINGTON, MN 55431
(952) 881-4105
June 16, 2003
Dear Shareholder:
You are cordially invited to attend the Company's Annual Meeting of
Shareholders to be held at 10:00 a.m., Suite 550
Edina, Minnesota 55439
(ph: 952-820-0022)
_____________________on Monday, July 14, 2003, at Southpoint
Office Center (ground floor conference room), 1650 West 82nd Street,
Bloomington, MN 55431.
The agenda includes proposals to:
o elect three directors,
o amend the Articles of Incorporation to increase the number of
authorized shares and change the Company's name,
o amend the bylaws to create two classes of directors, one of which will
serve for a term ending in 2007, and
o adopt a stock option plan.
Following the formal business of the meeting, we will report on the affairs
of the Company and respond to questions of general interest to shareholders.
We look forward to greeting personally those of you who are able to be
present at the meeting. However, whether or not you plan to attend, it is
important that your shares be represented, regardless of the number of shares
which you hold. Accordingly, you are requested to sign and date the enclosed
proxy and mail it in the envelope provided at your earliest convenience.
Very truly yours,
Stephen C. Roberts, M.D.
Chairman and Chief Executive Officer
DEVELOPED TECHNOLOGY RESOURCE, INC.
SOUTHPOINT OFFICE CENTER
1650 WEST 82ND STREET
BLOOMINGTON, MN 55431
(952) 881-4105
_________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 27, 2000TO BE HELD JULY 14, 2003
_________________________________________
To the Shareholders of Developed Technology Resource, Inc.:
The Annual Meeting of the Shareholders of Developed Technology Resource, Inc.
(the "Company" or "DTR"), will be held on Tuesday, June 27, 2000,Monday, July 14, 2003, at 10:00 a.m. CDT,, at
the One
CorporateSouthpoint Office Center 7300 Metro Boulevard, Suite 160, Edina,
Minnesota 55439,(ground floor conference room), 1650 West 82nd Street,
Bloomington, MN 55431, for the following purposes:
1.(1) To fix the number of directors at three and to elect three directorsdirectors.
(2) To amend the Articles of Incorporation of the Company.
2.To ratifyCompany to increase the
appointmentauthorized shares of KPMG LLPcommon stock from 3,333,334 to 50,000,000 and to
increase the authorized shares of undesignated capital stock from
1,666,667 to 10,000,000.
(3) To amend the Articles of Incorporation of the Company to change the
Company's name to GelStat Corporation.
(4) To act upon a proposal to adopt the 2003 Incentive Plan and to reserve
1,200,000 shares of common stock for issuance under the Plan.
(5) To act upon a proposal to amend the Bylaws of the Company to create
two classes of directors and to designate Peter L. Hauser as independent auditors.
3.the sole
Class I director with a term expiring in 2007.
(6) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors hasWe have fixed the close of business on May 8, 2000,June 10, 2003 as the record date for
the determination of shareholders entitled to receive notice of and to vote at
the Annual Meeting and to
receive notice thereof. TheMeeting. Our transfer books of the Company will not be closed.
A PROXY STATEMENT AND FORM OF PROXY ARE ENCLOSED.
SHAREHOLDERS ARE REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
ENCLOSED ENVELOPE IN THE UNITED STATES. IT IS IMPORTANT THAT
PROXIES BE RETURNED PROMPTLY WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING IN PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY
REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY DESIRE.Whether or not you expect to be present personally at the Annual Meeting,
please complete, date, sign, and return the accompanying Proxy in the enclosed,
self-addressed envelope at your earliest convenience. This will insure your
participation in the decisions to be made by the shareholders. We sincerely hope
that all shareholders who can attend the Annual Meeting will do so.
By Order of the Board of Directors
/s/ LeAnn H. Davis
LeAnn H. DavisJune 16, 2003 Stephen C. Roberts
Secretary
and Chief Financial
Officer
Edina, Minnesota U.S.A.
April 27, 2000
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed
proxy, date and sign it, and return it in the envelope provided,
which is addressed for your convenience.
PLEASE MAIL YOUR PROXY PROMPTLY
TABLE OF CONTENTS
GENERAL INFORMATION............................................................1
RECORD DATE AND VOTING.........................................................1
RECOMMENDATIONS OF THE BOARD OF DIRECTORS......................................2
PRINCIPAL SHAREHOLDERS AND OWNERSHIP OF MANAGEMENT.............................3
PROPOSAL 1 - ELECTION OF DIRECTORS.............................................4
MANAGEMENT.....................................................................5
EXECUTIVE COMPENSATION.........................................................7
AUDIT COMMITTEE REPORT........................................................10
PROPOSALS 2 AND 3 - AMENDMENT OF ARTICLES OF INCORPORATION....................11
PROPOSAL 4 - ADOPTION OF 2003 INCENTIVE PLAN..................................13
PROPOSAL 5 - AMENDMENTS TO BYLAWS.............................................19
INDEPENDENT AUDITORS..........................................................19
PROPOSALS FOR FISCAL 2003 ANNUAL MEETING......................................20
ACCESS TO OTHER INFORMATION...................................................21
APPENDIX A - AMENDMENT TO ARTICLES OF INCORPORATION
APPENDIX B - 2003 INCENTIVE PLAN
APPENDIX C - AMENDMENTS TO BYLAWS
APPENDIX D - AUDIT COMMITTEE CHARTER
DEVELOPED TECHNOLOGY RESOURCE, INC.
7300 Metro Blvd., Suite 550
Edina, Minnesota 55439
TelephoneSOUTHPOINT OFFICE CENTER
1650 WEST 82ND STREET
BLOOMINGTON, MN 55431
(952) 820-0022
_____________________
PROXY STATEMENT
for the Annual Meeting of Shareholders
June 27, 2000
_____________________881-4105
___________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 14, 2003
__________________________________
GENERAL INFORMATION
This proxy statement is furnished to shareholders by the Board of Directors
of Developed Technology Resource, Inc. (the "Company") for solicitation of
proxies for use at the Annual Meeting of Shareholders on Monday, July 14, 2003,
to be held on Tuesday, June 27, 2000,at Southpoint Office Center (ground floor conference room), 1650 West
82nd Street, Bloomington, MN 55431, at 10:00 a.m. CDT, at the One Corporate Center, 7300 Metro
Boulevard, Suite 160, Edina, Minnesota 55439,, and at all adjournments
thereof, forthereof. The purposes of the purposesmeeting and the matters to be acted upon are set
forth in the attachedpreceding Notice of Annual Meeting of Shareholders. Shareholders may revoke proxiesWe are not
currently aware of any other matters which will come before exercise by
submitting a subsequently dated proxy or by voting in person at
the Annual Meeting. Unless a shareholder gives contrary
instructions on the proxy card, proxies will be voted at the
meeting to elect as directors the three nominees listed thereon.
This proxy statement and the enclosed proxy are being mailed to
the shareholders of Developed Technology Resource, Inc. on or
about May 26, 2000.
The Company will be providing without charge to each
stockholder ameeting.
A copy of our report on Form 10-KSB for the fiscal year ended December 31,
1999, including2002 is enclosed for your information. It is not a part of the consolidatedproxy
solicitation material. The Report describes the financial statements, filed with
the Securities and Exchange Commission, and this proxy in May
2000. If a stockholder requests copiescondition of any exhibits of such
Form 10-KSB, the
Company may require the paymentas of a fee
covering its reasonable expenses. A written request should be
addressedDecember 31, 2002.
We have asked brokerage houses and other custodians, nominees and
fiduciaries to the Company at the address shown above.
The cost of solicitingsend proxies including their preparation,
assembly, and mailing, will be borne by the Company. In addition
to the solicitation of proxies by use of the U.S. Postal Service,
certain officers and regular employees who will receive no extra
compensation for their services may solicit proxies in person or
by telephone or facsimile. The Company may reimburse brokerage
firms and others for expenses in forwarding solicitation
materialsproxy material to the beneficial owners of our
Common Stock.
OUTSTANDING SHARESStock and we will reimburse them for their expenses in so doing. To
ensure adequate representation at the meeting, our officers, agents and
employees may communicate with shareholders, banks, brokerage houses and others
by telephone, facsimile, or in person to request that proxies be furnished. We
will bear all expenses incurred in connection with this solicitation.
RECORD DATE AND VOTING
RIGHTS
AtWe have fixed June 10, 2003, as the record date for the determination of
shareholders entitled to receive notice of and to vote at the Annual Meeting. As
of the close of business on April 27, 2000, there were
outstanding 930,820the record date, 2,560,885 shares of our Common
Stock, par value $.01 per share, which is the only outstanding class of stock of the
Company.were outstanding. Each share is entitled to one
vote. As provided invote on each proposal to be presented to the Articles of Incorporation of the Company, theremeeting. There is no right of
cumulative voting. All matters being voted upon by the
shareholders require a majority vote of the shares represented at
the Annual Meeting either in person or by proxy. The presence at the Annual Meeting in person or by proxy of
the holders of a majority of the outstanding shares of the
Company'sour Common Stock entitled
to vote constitutes a quorum for the transaction of business. Shares voted as abstentions on any
matter (orAll matters listed
in the Notice of Annual Meeting require the affirmative vote of a "withhold authority" vote as to directors) will be
counted asmajority of
the shares present at the Annual Meeting either in person or by proxy, and
entitled to vote on that matter (but in no event less than a majority of a
quorum, or 26% of the shares issued and outstanding).
HOW TO VOTE
By signing and returning the enclosed proxy card, you will be
giving your proxy to our Board of Directors and authorizing them
to vote your shares.
HOW YOUR PROXY WILL BE VOTED
Unless revoked, all properly executed proxies will be voted as
specified. Proxies that are signed but that lack any
specification will, subject to the following, be voted FOR each
nominee and FOR each other proposal described in this proxy
statement. If any other matters properly come before the Annual
Meeting, or if any of the persons named to serve as directors
should decline or be unable to serve, the persons named in the
proxy will vote in accordance with their discretion.
HOW TO REVOKE YOUR PROXY
You have the power to revoke your proxy at any time before the
convening of the Annual Meeting. Revocations of proxy will be
honored if received by us, at the Company, addressed to the
attention of Stephen C. Roberts, Chief Executive Officer, on or
before July 11, 2003. In addition, on the day of the meeting,
prior to the convening thereof, revocations may be delivered to
the tellers who will be seated at the door of the meeting room.
ABSTENTIONS
If you abstain from voting as to any matter, your shares shall be
deemed present at the meeting for purposes of determining a
quorum and for purposes of calculating the vote with respect to
such matter, but willshall not be deemed to have been voted in favor
of such matter. Abstentions, therefore, as to any proposal will
have the same effect as votes against such proposal.
BROKER NON-VOTES
If a broker submitsturns in a "non-vote" proxy, that
indicatesindicating a lack of
voting instruction by the beneficial holder of the shares and a
lack of discretionary authority on the part of the broker does not have discretionary authority to vote certain shares
on a particular matter, thosethen the shares covered by such non-vote
proxy will be counted asconsidered present at the meeting for purposes of
determining a quorum but will not be considered present and entitled to votebe represented
at the meeting for purposes of calculating the vote with respect torequired for
approval of such matter.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF EACH NOMINEE FOR
DIRECTOR NAMED IN THIS PROXY STATEMENT, FOR THE AMENDMENTS TO THE ARTICLES OF
INCORPORATION, FOR THE ADOPTION OF THE 2003 INCENTIVE PLAN, AND FOR THE
AMENDMENT TO THE BYLAWS.
2
PRINCIPAL SHAREHOLDERS AND OWNERSHIP OF MANAGEMENT OWNERSHIP
The following table contains informationsets forth as of April 27,
2000, concerningJune 10, 2003 the record and
beneficial ownership of the Company's Common Stock held by persons(i) each person who is known by us
to be the Company to beneficially ownbeneficial owner of more than 5% of our common stock; (ii) each of the
Common Stock, bycurrent directors (who also comprise all nominees for election as director);
(iii) each director, by eachcurrent executive officer namedand the Named Executive Officer (as defined
in the Summary Compensation Table,"EXECUTIVE COMPENSATION"); and by(iv) all currentof our executive officers and
nominated directors and executive officers as a group.
SharesSecurities reported as beneficially owned"beneficially owned" include those for(a) securities which
the named personsperson may exercise voting power or investment power, alone or with
others, and all shares owned by persons having sole voting and
investment power over such shares unless otherwise noted. The
number of shares reported as beneficially owned by each person as
of April 27, 2000, includes(b) the number of shares that suchwhich the named person has the right to
acquire within 60sixty (60) days after June 10, 2003.
Number of that date, such as
through the exercise of stock options or warrants that are
exercisable within that period.
Amount and NatureShares
Name and Address of of Beneficial OwnerOwned Percentage
Beneficial Owner Owned(A)
Vladimir Drits 71,835 (1) 6.5%
11901 Meadow Lane West
Minnetonka, MN 55305
Erlan Sagadiev 130,000 (2) 11.8%
7300 Metro Blvd, Suite 550
Edina, MN 55439
Roger W. Schnobrich (B) 35,700(3) 3.3%
222 South Ninth Street
Suite 3200
Minneapolis, MN 55402
John P. Hupp (B), (C) 148,800 (4) 13.5%
7300 Metro Blvd, Suite 550
Edina, MN 55439------------------------------------------------------------------------
Peter L. Hauser (B) 41,000 (5) 3.7%
2820 IDS Tower
Minneapolis,A, B 106,000 (1) 4.1
c/o GelStat Corp.
Southpoint Office Center
1650 West 82nd Street, Suite 1040
Bloomington, MN 55402
Beneficial Owners of 5% or 427,335 38.8%
more, Officers55431
Erlan Sagadiev 136,000 5.3
244 Furmanova Street, #55
Almaty, Kazakhstan
Stephen C. Roberts, M.D. A, B, C 740,398 (2) 26.6
c/o GelStat Corp.
Southpoint Office Center
1650 West 82nd Street, Suite 1040
Bloomington, MN 55431
James W. Higgins C 220,730 8.6
c/o GelStat Corp.
Southpoint Office Center
1650 West 82nd Street, Suite 1040
Bloomington, MN 55431
Russell W. Mitchell A, B, C 728,407 28.4
c/o GelStat Corp.
Southpoint Office Center
1650 West 82nd Street, Suite 1040
Bloomington, MN 55431
LeAnn Hitchcock 40,000 1.6
c/o GelStat Corp.
Southpoint Office Center
1650 West 82nd Street, Suite 1040
Bloomington, MN 55431
3
All executive officers and Directors1,795,535 (2) 65.8
current directors as a group All current directors and 225,500 20.5%
officers(4
persons)
______________________
* indicates ownership of less than 1%.
(A) Currently a director.
(B) Nominee for election as a group
(3 people)
(A)director.
(C) Executive officer.
(D) The total number of shares outstanding assumingfor purposes of calculation of any
given individual's percentage ownership assumes the exercise of all
currently exercisable and vested options and warrants held by all executive officers, current directors, and holders
of 5% or more of the Company's issued and outstanding Common
Stock is 1,100,320 shares.such person.
Does not assume the exercise of any other options orand warrants.
(B) Designates a Director of the Company.
(C) Designates an Executive Officer of the Company.
(1) Includes 23,335 shares of Common Stock gifted by Mr. Drits
to his spouse and children.
(2) Includes 90,000 shares held by DTR as collateral for Mr.
Sagadiev's $82,500 loan outstanding on the balance owed for his
purchase of 125,000 shares at $1.22 per share.
(3) Includes presently exercisable options for the purchase of
15,000 shares at $1.50 per share and 5,000 shares at $3.00 issued
under the terms of the 1997 Outside Directors Stock Option Plan.
(4) Includes presently exercisable options for the purchase of
124,500 shares at $1.22 per share and 20,000 shares at $1.37 per
share.
(5) Includes 6,000 shares held in IRA for the benefit of Mr. Hauser.
(2) Includes presently exercisable options for the purchase218,005 shares of 5,000 sharescommon stock which may be purchased by Stephen
Roberts pursuant to exercise of a warrant at $3.00 issued under the terms of the 1997
Outside Directors Stock Option Plan.$.45 per share. The warrant
expires on January 12, 2008.
PROPOSAL 1
----------
ELECTION OF DIRECTORS
TheOur Bylaws of the Company provide that the number of directors shall be as fixed from time to time by
resolution of the shareholders subjector the Board of Directors. The current number of
members of the Board of Directors is three. If Proposal 5 is adopted at the
annual meeting, Peter L. Hauser will be designated a Class I director and will
serve for a term ending in 2007. All other directors will be Class II directors
and will serve a term ending with the next annual meeting (approximately one
year), as in the past. The three (3) persons designated by the Board of
Directors as nominees for election are Peter L. Hauser, Stephen C. Roberts, and
Russell W. Mitchell. All of the nominees are currently members of the Board of
Directors of the Company.
In the event any nominee should be unavailable to increasestand for election at the
time of the Annual Meeting, the proxies may be voted for a substitute nominee
selected by the Board of Directors.
The Boardfollowing information about the nominees was supplied by the nominees:
Stephen C. Roberts, M.D., Chief Executive Officer, Chairman
-----------------------------------------------------------
Dr. Roberts is authorizeda founder of GelStat Corp., which was acquired by the
Company in April 2003. He presently serves as CEO and Chairman of the Company.
Prior to fill vacancies resulting from
increasesforming the Company he was employed by The Oak Ridge Financial Group,
Inc. (formerly Equity Securities Trading Co., Inc.). Prior to that, he was
President of Naturewell, Inc., which was engaged primarily in the sizeresearch and
development of nutraceutical products intended for a variety of conditions,
including migraine headaches and allergies. Dr. Roberts previously founded
AmTech Scientific, Inc., which was engaged in the development and
commercialization of a number of rapid diagnostic tests, including a unique test
for the detection of active tuberculosis. While at AmTech Scientific, Dr.
Roberts acted as Chief Executive
4
Officer and also oversaw product development and FDA submissions. AmTech
Scientific was subsequently acquired by La Jolla Diagnostics. Prior to that, Dr.
Roberts was a Partner and Principal at Maven, Inc., a Minneapolis investment
banking firm. Dr. Roberts received his medical degree from the University
Minnesota, Minneapolis, and received a B.A. from St. Olaf College in Northfield,
Minnesota, having majored in Chemistry and Biology.
Russell W. Mitchell, President, Director of Sales and Marketing
---------------------------------------------------------------
Mr. Mitchell presently serves as President and Director of the Board or otherwise. Currently there
are three directors.
The BoardCompany.
Concurrent with his role at the Company, he is President of DirectorsMitchell Health
Technologies, Inc. (MHT), which he founded in 1994. MHT now has nominated for electionproducts in
48,000 retail locations nationwide, and specializes in the Directors named below. Eachmarketing and
distribution of non-prescription drugs and nutritional supplements. As President
of MHT, he has been a pioneer in establishing the nominees is currentlymarketing value of clinical
trials to demonstrate the effectiveness of OTC remedies.
Peter L. Hauser
---------------
Peter L. Hauser has been a director of the Company whose current term expires at the Annual
Meeting. Unless authoritysince October 1993.
Since 1977 through April 2003, he was employed by The Oak Ridge Financial Group,
Inc. (formerly Equity Securities Trading Co., Inc.), a Minneapolis-based
brokerage firm, where he was a vice president and principal. Mr. Hauser is
withheld, the proxies will be voted
FOR these nominees to serve as directors until the next Annual
Meeting of Shareholders and until their successors are elected
and have been qualified. If any one of the nominees is unable to
serve ascurrently an account executive associated with Feltl & Company, a
director by reason of death, incapacity or other
unexpected occurrence, the proxies will be voted for such
substitute nominee as is selected by the Board of Directors, but
in no event will proxies be voted for more than three nominees.
The Board of Directors is unaware of any reason why the nominees
would not be available for election or, if elected, would not be
able to serve.
Officers and DirectorsMinneapolis-based brokerage firm.
MANAGEMENT
The following table sets forth the current and proposed directors and executive officers of the
Company, their ages and positions with the Company as of April 27, 2000:
Name Age PositionMay 1, 2003:
NAME AGE POSITION
---- --- --------
Peter L. Hauser(1)Hauser (1)(2) 5962 Director
RogerStephen C. Roberts, M.D. 42 Chief Executive Officer,
Director
Russell W. 70 Director
Schnobrich(1)(2)
John P. Hupp 40 Director,Mitchell 42 President, CEO
LeAnn H. Davis 30 Chief Financial
Officer
Corporate
SecretaryJames W. Higgins 42 Executive Vice President
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Each nominee, if elected, will serve until the Annual
MeetingBiographical information about Messrs. Hauser, Roberts, and Mitchell is set
forth under Proposal 1, Election of Shareholders in the year 2001 and until a successor
has been elected and duly qualified or until the director's
earlier resignation or removal.Directors. The following information was
supplied by Mr. Hauser has been a directorHiggins.
5
Jim Higgins, Executive Vice President
-------------------------------------
Mr. Higgins presently serves as Executive Vice President of the Company since October
1993. Since 1977, he has been employed by Equity Securities
Trading Co., Inc., a Minneapolis-based brokerage firm, and is
currently a vice president and principal.
Mr. Schnobrich has been a director of the Company since
October 1993.Company. He
is a partner with Hinshaw & Culbertson, a
Minneapolis law firm which servesconcurrently serving as legal counsel to the
Company. Until 1997, he was an owner and attorney with Popham,
Haik, Schnobrich & Kaufman, Ltd., a Minneapolis-based law firm
which he co-founded in 1960. He also serves as a director of
Rochester Medical Corporation, a company that develops,
manufactures and markets improved, latex free, disposable
urological catheters.
Mr. Hupp has been the Company's President since June 1995,
and a director since April 1996. He was Corporate Secretary from
July 1994 until September 1997, and was Director of Legal Affairs
from July 1993 to June 1995. From June 1992 until June 1993, Mr.
Hupp wasExecutive Vice President of Magellan International Ltd., which marketed
on-line and hard copy informationMitchell Health
Technologies, a leading master broker of OTC products, where he is responsible
for a Russian information
company. From March to June 1992, he served as Of Counsel for
the law firmmanaging all channels of Hale & Dorr, establishing the firm's Moscow
office. His work included negotiating and establishing joint
ventures for clients. From September 1990 to January 1992,retail distribution. Mr. Hupp was Senior Project Manager and Corporate CounselHiggins has held his
position with Management Partnership International, Ltd. (MPI). Prior to his
work at MPI, Mr. Hupp was a trial lawyer for the firm of
Bollinger & Ruberry and Pretzel & Stouffer in Chicago for six
years. Mr. Hupp received a J.D. Degree from the University of
Illinois College of Law and B.A. degrees in Russian Area Studies
and Political Science. Mr. Hupp has intensive language training
from the Leningrad State University in St. Petersburg, Russia.
LeAnn H. Davis, CPA was employed by the Company as the
Controller on July 7, 1997 and on September 25, 1997 was named
Chief Financial Officer and Corporate Secretary.MHT since 2000. Prior to joining MHT, Mr. Higgins spent 15 years
with the Company, Ms. Davis was CFOAC Nielsen Co., where he handled accounts for some of Galaxythe most
prominent consumer product companies in America, including Kraft Foods Company in
Orlando, Florida from December 1995 to June 1997. From 1994 to
1995, she was a senior auditor for Coopers and Lybrand LLP in
Orlando, FL. From 1992 to 1994, she worked for the local public
accounting firm of Pricher and Company in Orlando as a senior
auditor and tax accountant. Prior to 1992, Ms. Davis worked for
Arthur Andersen LLP as a staff auditor. Ms. Davis obtained a BS
in Business Administration and a BS in Accounting from Palm Beach
Atlantic College in West Palm Beach, Florida in May 1990, and a
Masters in Accounting from Florida State University, Tallahassee,
Florida in August 1991.Good
Humor Breyers Ice Cream.
Each Executive Officerexecutive officer of the Company is elected or appointed by the Board
of Directors of the Company and holds office until a successor is elected, or
until the earlier of death, resignation or removal.
To the knowledge of the Company, no executive officer or director of the
Company is a party adverse to the Company or has material interest adverse to
the Company in any legal proceeding.
The information given in this Proxy Statement concerning the
Directors is based upon statements made or confirmed to the
Company by or on behalf of such Directors, except to the extent
that such information appears in its records.
The Board of Directors recommends a vote FOR each nominee
for election to the Board of Directors.
Meetings of the Board and CommitteesMEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four formal meetings during 19992002 and adopted
certain resolutions by written minutes of action. All directors attended all of
the formal meetings of the Board and the committees on which they served.
The Board of Directors has two standing committees; an audit committee and
a compensation committee. All directors attended
all of the formal meetings.
The Audit Committee is responsible for reviewing the services rendered by
the Company's independent auditors and the accounting standards and principles
followed by the Company. The Audit Committee held one meeting during 1999,2002, which
was attended by all Committee members. See "AUDIT COMMITTEE REPORT" in this
proxy statement.
The Compensation Committee is responsible for making recommendations to the
Board of Directors regarding the salaries and compensation of the Company's
executive officers. The Compensation Committee met four
timesdid not meet during fiscal 1999.
Certain Transactions2002
as there were no employees.
The law firm of Hinshaw & Culbertson provides legal services
to the Company. Roger Schnobrich, a directorsole member of the Company,Audit and Compensation Committees for fiscal 2003 is
a partner in the firm.
On December 3, 1998, SXD, DTR's wholly-owned subsidiary,
entered into an 8%, $600,000, unsecured, convertible promissory
note with Hyperport International (Hyperport). In addition to
the note, the SXD received warrants to purchase up to 60,000
shares of Hyperport's common stock at an exercise price of $10
per share. This loan was offered as part of a $1.2 million
bridge financing deal that was being administered by Equity
Securities Investments Inc. (Equity Securities). Peter L. Hauser, one of DTR's current directors,who is the Vice-President of Equity
Securities. In addition to the bridge financing, Equity
Securities was working with Hyperport as its agent to raise
additional financing through a private placement. This
relationship expired November 1999 and there is no current
commitment to renew. During 1999, the Company wrote down its
investment in this unaffiliated company to zero since there is
no guarantee as to when or if Hyperport will be able to repay
the loan. However, DTR is currently restructuring its loan and
is hopeful that it will recover the current balance of $649,288,
including interest, at a future date.
On February 1, 2000, Erlan Sagadiev exercised his right to
125,000 shares of the Company's common stock. He paid the
Company $70,000 and gave the Company a promissory note bearing
interest at 4.87% per annum for the balance owed of $82,500. The
principal and interest are due in five equal installments
beginning February 2001 and each year thereafter. This note is
secured by 90,000 of the exercised shares.only independent, non-employee director.
COMPLIANCE WITH SECTION 16(a)16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10 percent of the registered class of
the Company's equity securities to file reports of ownership on Forms 3, 4, and
5 with the SEC. Officers, directors and greater than 10 percent shareholders are
required by SEC regulation to furnish the Company with copies of all Forms 3, 4,
and 5 they file.
Based upon the Company's review of the copies of such forms and reports it
has received from certain reporting persons that they were not required to file Forms 5
for the year ended December 31, 1999,2002, the Company believes that all of its
executive officers, directors and greater than 10% beneficial owners complied
with all filing requirements applicable to them with respect to transactions
during 1999.2002.
6
CODE OF ETHICS
Effective June 2, 2003, the Company has adopted a code of ethics applicable
to all personnel and a code of ethics applicable only to its chief executive
officer and senior financial officers. Copies are available at no charge by
request to the Company in writing, to the attention of Stephen Roberts, CEO.
Additionally, the code for the chief executive officer and senior financial
officers will be filed with the Securities and Exchange Commission.
EXECUTIVE COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the cash and noncashnon-cash compensation for years
ended December 31, 19992002, 2001 and 1998, the two-
month transition period ended December 31, 1997, and the year
ended October 31, 19972000 awarded to or earned by the Company's
chief executive officer in fiscal 2002 (the "Named Executive Officer"). No other
officer received compensation in excess of $100,000 in fiscal 2002.
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------- Long-Term
Other Annual Compensation
Fiscal Salary Bonus Compensation Awards/Options
Name and Principal Position Year Ended ($) ($) ($) (#)
- --------------------------------------------------------------------------------------------------
LeAnn C. Hitchcock, 2002 -- -- $21,750 10,000(2)
President, CEO & CFO(1)
2001 -- -- $18,000 10,000(2)
2000 $70,000 -- 2,100 30,000(2)
(1) In addition to her role as Chief Executive Officer:
Summary Compensation Table
Annual Compensation Long-Term
Other Compensation
Fiscal Salary Bonus Annual Awards/Options
NameFinancial Officer, Ms. Hitchcock was named
CEO and Principal Year ($) Compensation
Position Ended _($)___ ___ ___($)____ ____(#)____
John P. Hupp, 1999 $110,000 none $3,300(2) none
President CEO(1)
1998 $ 95,000 $16,000 $2,850(2) none
2-month $ 15,000 none none none
1997
1997 $ 87,500 none none none
(1)Mr. Huppfrom January 2001. Since January 1, 2001, she worked as
an independent contractor on an hourly basis as needed for $75 per hour.
The amounts reflected in 2001 and 2002 reflect these contractual wages. Ms.
Hitchcock resigned as President, CEO and CFO effective April 30, 2003 in
connection with the Company's acquisition of GelStat Corp. Stephen C.
Roberts became CEO and CFO of the Company and Russell W. Mitchell became
President on June 16, 1995. Beginning June
15, 1993, asof the Company's DirectorCompany upon completion of Legal Affairs, Mr.
Hupp began to receive a full-time salary of $5,000 per month.
Effective June 16, 1995, upon assuming the position of
President, his salary was increased to $6,250 per month.
Effective January 1997, his salary was increased to $7,500
per month; and effective October 1998, his salary was
increased to $9,167 per month.such acquisition.
(2)In 1998, On November 26, 2002, the Board issued a warrant to purchase 10,000 shares
to Ms. Hitchcock at $0.70 per share. In November 2001, the Board issued an
option to purchase 10,000 shares to Ms. Hitchcock at the then market price
of Directors voted$0.90 per share. In December 2000, the Board issued an option to
contribute uppurchase 30,000 shares to 3%
overMs Hitchcock at the employees' base salary to their respective Sar/Sep
retirement account.
Aggregated Option Exercises: Last Fiscal Year and Fiscal Year-End
Option Valuesthen market price of $.625
per share.
AGGREGATED OPTION EXERCISES: LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table summarizes for the named executive
officersNamed Executive Officer the number
of stock options exercised during the year ended December 31, 1999,2002, the
aggregate dollar value realized upon exercise, the total number of unexercised
options held at December 31, 19992002 and the aggregate dollar value of in-the-money
unexercised options held at December 31, 1999.2002. Value realized upon exercise is
the difference between the fair market value of the underlying stock on the
exercise date and the exercise price of the option. Value of Unexercised
In-the-Money Options at year-
endyear-end is the difference between its exercise price
and the fair market value of the underlying stock on December 31, 19992002, which
was $1.125$1.30 per share.
Aggregated Option Exercises7
AGGREGATED OPTION EXERCISES IN FISCAL 2002 AND FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------------------------
Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Name and Acquired on Value December 31, 2002 (#) December 31, 2002 ($)
Principal Position Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------ -------- -------- ----------- ------------- ----------- -------------
LeAnn Hitchcock(1) -- -- 10,000 None $6,000 None
President, CEO & CFO
(1) Consists of a warrant for 10,000 shares issued in Fiscal 1999November 2002 exercisable
at $0.70 per share through November 25, 2007.
COMPENSATION AGREEMENTS OF OFFICERS
The Company has entered into employment agreements with its three current
executive officers, Messrs. Roberts (CEO and Fiscal Year-End Option Values
Number of Value of Unexercised
NameCFO), Mitchell (President), and
Unexercised In-the-Money Options
Principal Shares Value Options at at
Position Acquired Realized December 31, 1999 December 31, 1999 ($
on Exercise Exercisable Unexercisable Exercisable Unexercisable
John P. None None 150,000 100,000 $0 $0
Hupp(1),
President, CEO
(1) Includes 250,000 options granted under September 30, 1996
employment agreement.
Employment AgreementsHiggins (Executive Vice President). Each agreement is terminable upon notice by
either party. Annual salary amounts are $96,000 for Messrs. Roberts and
Mitchell, and $72,000 for Mr. Hupp's original employmentHiggins. Mr. Higgins' salary will be increased to
$96,000 if certain milestones are attained. Each officer has also entered into
an agreement dated June 1, 1995
was amended on September 30, 1996 and then amended and restated
on October 1, 1998. The new employment agreementwhich provides for compensationconfidentiality of $110,000 per yearCompany information,
assignment of his inventions to the Company, and standard employee benefitsno competition with the Company
during the employment term expiring September 30, 2001. In
addition, Mr. Hupp or his successors will receive salary and
benefits for a twelve-month period upon total death or disability
of Mr. Hupp or if the Company terminates the Agreement without
cause. Under terms of the Agreement, Mr. Hupp will devote his
best efforts to the performance of his duties, and agrees to
certain restrictions related to participation in activities felt
to conflict with the best interests of the Company.
On January 13, 2000, the Board of Directors agreed to amend
Mr. Hupp's employment agreement to reduce his current number of
stock options from 250,000 to 207,500, to grant him 40,000 new
stock options at the fair market value of $1.37, and to offer him
the option of a non-interest bearing loan to purchase these
options in the event that he is terminated without cause.
Compensation of Directors
No director who is also an employee of the Company received
any additional compensation for services as a director.two years thereafter.
COMPENSATION OF DIRECTORS
The non-employee directors of the Company include Messrs.in fiscal 2003 were Peter Hauser,
Roger Schnobrich and Schnobrich.John Hupp. In October 2002, the Board issued options to
purchase 10,000 shares to each of them for their services over the past several
years. During 1999,2002, non-employee directors received no cash or other
compensation for their services as a director or committee member.
However, theyPeter L. Hauser, who is currently the sole non-employee director, will
receive the following compensation during his up coming term as a director
(assuming his election at the Annual Meeting):
o $12,000 per year in cash, paid in equal quarterly installments
o $500 for each received 5,000audit committee meeting and each compensation committee
meeting
o 5-year non-qualified options to acquire Common Stock of the Company,
issued under the 2003 Incentive Plan (assuming approval of the Plan by
the shareholders at the Annual Meeting) as follows:
# Shares Grant Date Price
-------- ---------- -----
50,000 Upon election as a director
in 2003
10,000 Annually, as of January 31 Average of bid and asked
prices in preceding calendar
month
8
Each director is reimbursed by the Company for his actual out-of-pocket
expenses for telephone, travel, and miscellaneous items incurred on behalf of
the Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 302A.521, Minnesota Statutes, the Company is required to
indemnify its directors, officers, employees, and agents against liability under
certain circumstances, including liability under the Securities Act of 1933, as
amended (the "Act"). The Company's Bylaws contain substantially similar
provisions and, in addition, specifically authorize adoption of agreements for
indemnification to the extent permitted by statute and purchase of insurance to
meet the Company's indemnification obligation. The general effect of such
provisions is to relieve the directors and officers of the Company from personal
liability that may be imposed for certain acts performed in their capacity as
directors or officers of the Company, except where such persons have not acted
in good faith.
As permitted under Minnesota Statutes, the Articles of Incorporation of the
Company provide that directors shall have no personal liability to the Company
or to its shareholders for monetary damages arising from breach of the
director's duty of care in the affairs of the Company. Minnesota Statutes do not
permit elimination of liability for breach of a director's duty of loyalty to
the Company or with respect to certain enumerated matters, including payment of
illegal dividends, acts not in good faith, and acts resulting in improper
personal benefit to the director.
CERTAIN TRANSACTIONS
On February 1, 2000, Erlan Sagadiev, a former employee, exercised his right
under an option to purchase 125,000 shares of the Company's Common Stock. He
paid the Company $70,000 and gave the Company a non-recourse promissory note
bearing interest at 4.87% per annum for the balance owed of $82,500. The
principal and interest are due in five equal installments beginning February
2001 and each year thereafter. This note is secured by 90,000 of the exercised
shares. In February 2003, the remaining principal balance of $52,457 was paid in
full.
On February 2, 2001, the Company's former president exercised his right to
purchase 247,500 shares of the Company's Common Stock underand gave the termsCompany a
non-recourse promissory note for $310,750. This note bears interest at the rate
of 5% per annum, is due in four equal annual installments beginning December 31,
2003, and is secured by all the shares exercised. On April 30, 2003, the Company
redeemed 142,700 of these shares at $1.50 per share, thereby reducing the note
balance to $96,700. The former president then paid the balance of the 1997 Outside
Director's Stock Option Plannote, plus
the outstanding $20,863 of accrued interest, for their services during 1999.
These options were issued at an exercise price of $3 per share
which was the market price on the dateremaining 104,800 shares.
In April 2001, two members of the grant. Mr.
Schnobrich is an attorney with Hinshaw & Culbertson, which serves
as counsel forBoard of Directors exercised options to
purchase a total of 30,000 shares of Common Stock by giving the Company and which receives payment$41,875
in cash. In April 2003, Peter L. Hauser, a director, exercised an option to
purchase 10,000 shares of legal
fees for such services.
It isCommon Stock by paying the Company $7,000 in cash.
On April 6, 2001, LeAnn Hitchcock, the Company's intention to issue to each outside
director anchief financial officer
and current president, exercised her option for 5,000on 30,000 shares of the Company's
Common Stock, each year under termsand gave the Company a non-recourse promissory note for $18,750.
The note was immediately offset by $13,000 in back wages that was owed from
2000, leaving a balance of $5,750. This note, which was secured by the shares,
bore interest at the rate of 5% per annum and was due in four equal installments
beginning April 6, 2003. This note was paid in full by December 31, 2001.
9
On November 17, 2001, the Board of Directors agreed to borrow money from
the Company's chief financial officer to have funds available for working
capital. The funds received would be unsecured and bear interest at 12%.
Additionally, the Board also agreed to issue 10,000 stock options at the market
price of $.90 per share. By December 31, 2001, the Company borrowed $4,067 from
the chief financial officer. In January 2002, the Company borrowed an additional
$2,750. In April 2002, the Company repaid approximately $7,000 including
principal and interest on all amounts received.
The Company has an agreement with Mitchell Health Technologies, Inc.
("MHT"), a corporation owned and controlled by Russell W. Mitchell and James W.
Higgins (executive officers and, as to Mr. Mitchell, a director of the 1997 Outside Director's Stock Option
PlanCompany)
for sublease of office space and services, and for marketing and promotions. The
Company pays its proportionate share of lease and administrative costs under
MHT's office lease agreement. The Company does not pay for MHT's marketing and
promotions services unless certain benchmarks are attained. Maximum compensation
to MHT under the agreement for marketing and promotions is $75,000. The
agreement is terminable upon 30 days' notice by either party (10 days' notice in
the event of a default), and if not terminated, expires in September 2012.
EQUITY COMPENSATION PLANS
The following table describes the Company's compensation plans under which
the Company's common stock are authorized for issuance as of December 31, 2002:
EQUITY COMPENSATION PLAN INFORMATION TABLE
(a) (b) (c)
Plan Category Number of Weighted-average Number of
securities to be exercise price securities
issued upon of outstanding remaining
exercise of options, available for
outstanding warrants and future issuance
options, warrants rights under equity
and rights compensation
plans (excluding
securities
reflected in
column (a))
Equity compensation plans
approved by security holders 55,000 $ 1.19 212,500
Equity compensation plans not
approved by security holders -- -- N/A
------------------------------
Total 55,000 $ 1.19
==============================
AUDIT COMMITTEE REPORT
The Audit Committee of our Board of Directors is currently composed of one
independent director, as required by the listing standards of the BBX. During
the fiscal year ended December 31, 2002, the members of the Committee were Peter
L. Hauser (Chair) and Roger Schnobrich.
The Committee currently operates under a written charter adopted by the
Board on June 2, 2003, a copy of which is included in this proxy statement as
Appendix D. The Committee selects the Company's independent accountants.
Management is responsible for the Company's internal controls and the financial
reporting process; the independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally
10
accepted auditing standards and for issuing a report thereon. The Committee's
responsibility is to monitor and oversee these processes. In this context, the
Committee has met and held discussions with management and the independent
accountants.
The Committee has received from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees," and has
discussed with the auditors any relationships that may impact their electionobjectivity
and independence, and has satisfied itself as to the auditors' independence.
The Committee has discussed with management, the internal auditors and the
independent auditors the quality and adequacy of the Company's internal controls
and the internal audit function's organization, responsibilities, budget and
staffing. The Committee has also reviewed with the independent auditors their
audit plans, audit scope, and identification of audit risks.
In addition, the Committee has discussed and reviewed with the independent
auditors all communications required by generally accepted accounting standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
Based upon the Committee's discussion with management and the independent
accountants, the Committee's review of the representation of management, and the
report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited financial statements
in the Company's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission for the year ended December 31, 2002.
Members of the Audit Committee:
Peter L. Hauser
Roger Schnobrich
PROPOSALS 2 AND 3
-----------------
AMENDMENT OF ARTICLES OF INCORPORATION
A copy of the proposed amendment to the Articles of Incorporation is
included in this proxy statement as Appendix A.
CHANGE OF NAME
The proposed change of name of the Company to "GelStat Corporation" is
intended to reflect the Company's new business following acquisition of GelStat
Corp. on April 30, 2003.
INCREASE IN AUTHORIZED CAPITAL
Currently, the Company's Articles of Incorporation (the "Articles")
authorize the issuance of 3,333,334 shares of Common Stock and 1,666,667 shares
of undesignated stock. As of May 1, 2003,
11
2,560,885 shares of Common Stock were issued and outstanding and an aggregate of
298,005 shares were reserved for issuance. No other classes of stock are issued
or outstanding or reserved for issuance.
On June 2, 2003, the Board approved an increase in the authorized number of
shares of Common Stock from 3,333,334 to 50,000,000 and an increase in the
authorized undesignated stock from 1,666,667 to 10,000,000. Such amendment will
not take effect unless approved by the shareholders. The Company has no current
plans to issue any additional shares of Common Stock or to create or issue any
securities from the undesignated stock.
The Board believes that it is necessary and desirable to increase the
number of shares of capital stock and to allow the Board of Directors to
establish one or more series of voting stock to give the Board additional
flexibility to raise equity capital, reserve additional shares of Common Stock
for issuance under employee benefit plans, and make acquisitions through the use
of Common Stock and/or other classes of stock. The Board believes that adoption
of the proposed amendments is desirable to avoid the delay and expense
associated with a special shareholders' meeting in the future for the purpose of
authorizing such changes if the Company decides to use its shares for one or
more of such previously mentioned purposes. No additional action or
authorization by the Company's shareholders would be necessary prior to the
issuance of such additional shares, unless required by applicable law or
regulation.
POSSIBLE EFFECTS OF INCREASE IN AUTHORIZED CAPITAL
Although the Board of Directors has no present plans to do so, authorized
and unissued Common Stock and undesignated stock could be issued in one or more
transactions with terms, provisions and rights which would make more difficult
and, therefore, less likely, a takeover of the Company. Any such issuance of
additional shares could have the effect of diluting the earnings per share and
book value per share of existing shares of common stock, and such additional
shares could be used to dilute the share ownership of persons seeking to obtain
control of the Company.
One effect of the adoption of the Proposal, therefore, could be to
discourage unsolicited takeover attempts and to limit the possibility of change
of control of the Company. By potentially discouraging initiation of any such
unsolicited takeover attempt, the proposed amendments may limit the opportunity
for the Company's shareholders to dispose of their shares at the higher price
generally available in takeover attempts or that may be available under a merger
proposal. Adoption of the Proposal may also have the effect of permitting the
Company's current management to retain its position and place it in a better
position to resist changes that shareholders may wish to make if they are
dissatisfied with the conduct of the Company's business.
The Proposal does not arise from any current effort to change the
composition of the Board of Directors, gain control of the Company, or organize
a proxy contest, and neither proposal is being presented as, nor is it part of,
a plan to adopt a series of anti-takeover measures.
The Board of Directors does not currently contemplate adopting, or
recommending to the shareholders for their adoption, any further amendments to
the Company's Articles that would affect the ability of third parties to take
over or change control of the Company or which might be considered anti-takeover
devices. However, the Board and its financial and legal advisers are aware that
a number of corporations have adopted special "shareholders' rights plans" or
"poison pills" with a view toward creating significant defensive mechanisms
against the possibilities of hostile takeover actions. Whether or not the
proposed amendment to the Articles is adopted by shareholders, the Board could
determine to implement a shareholders' rights plan in the future.
12
Certain provisions of Minnesota Statutes, Chapter 302A could also have the
effect of discouraging certain attempts to acquire the Company, including a
hostile takeover, or remove incumbent management even if some or a majority of
the Company's shareholders were to deem such an attempt to be in their best
interest, including an attempt that might result in the payment of a premium
over the market price for the shares of Common Stock held by the Company's
shareholders. None of these provisions will be changed by the proposed amendment
to the Articles.
PROPOSAL 4
----------
ADOPTION OF 2003 INCENTIVE PLAN
GENERAL INFORMATION
The Board of Directors believes that the Company's policy of encouraging
stock ownership by certain of its employees and members of the Board of
Directors through the granting of restricted stock awards, stock options and
other sorts of stock-based compensation has been and will be a significant
factor in its growth and success by enhancing the Company's ability to retain
and attract qualified employees and directors.
In June 2003, the Board of Directors of the Company adopted the 2003
Incentive Plan (the "2003 Plan") and reserved 1,200,000 shares of Common Stock
for issuance under the 2003 Plan. The 2003 Plan will be implemented only if
approved by the shareholders at the annual meeting.
ADMINISTRATION
The option2003 Plan is administered by a committee (the "Committee") of the
Board. Until determined otherwise by the Board of Directors, the Committee will
vest equally overbe comprised of the calendar year.entire Board of Directors. The Committee has the authority:
(i) to establish rules for the administration of the 2003 Plan; (ii) to select
the participants in the 2003 Plan; (iii) to determine the types of grants and
awards and the number of shares covered; (iv) to set the terms and conditions of
such grants and awards; and (v) to determine under what circumstances grants and
awards may be canceled or suspended. Determination and interpretations with
respect to the 2003 Plan are in the sole discretion of the Committee, whose
determination and interpretations are binding on all interested parties.
TYPES OF AWARDS
Options granted under the 1997 Outside Directors Stock
Option2003 Plan are notmay be either "incentive" options
intended to qualify for favorable tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or non-qualified options.
Awards granted under the 2003 Plan may be stock appreciation rights ("SARs"),
restricted stock or performance awards, as defined in the 2003 Plan. Incentive
stock options may be granted to any full or part-time employee of the Company or
any of its present and future subsidiary corporations. Options which do not
qualify as incentive stock options, as describedwell as SARs, restricted stock or
performance awards under the 2003 Plan may be granted to both employees and
non-employees who provide services to the Company (including consultants and
members of the Board of Directors). As of June 10, 2003, less than 10 persons
are eligible to participate in the 2003 Plan. Messrs. Roberts, Mitchell, and
Higgins (CEO/CFO, president, and executive vice president, respectively) will
not be granted any options unless the terms of such options are approved by
shareholders who are not officers, directors, or holders of more than 10% of the
Company's stock.
13
Under the terms of the 2003 Plan, incentive stock options may not exceed
ten years in duration and must be granted at a price not less than 100% of the
fair market value of the Company's stock on the day the option is granted,
except that incentive stock options granted to persons owing 10% or more of the
Company's stock must be granted at an option price which is at least 110% of
fair market value and may not exceed five years in duration. Further, the
aggregate fair market value (determined as of the time the option is granted) of
stock covered by all incentive stock options which are first exercisable by an
individual in any year may not exceed $100,000. The term of options granted
under the 2003 Plan which do not qualify as incentive stock options may not
exceed more than 15 years from the date of granting of such option. The price
for options and awards which do not qualify as incentive stock options may be
more or less than the fair market value of the Common Stock on the date of grant
or award. The Committee may grant options that are exercisable in full at any
time or from time to time or in installments or upon the occurrence of specified
events. Incentive stock options may not be transferred by the optionee except by
will or the laws of descent and distribution. The agreements relating to options
will contain restrictions on when an optionee may exercise options following
termination of employment with the Company or a subsidiary.
Under the 2003 Plan, the Committee may also grant SARs which shall confer
on the holder a right to receive, upon exercise, the excess of (i) the fair
market value of each share subject to the SAR on the date of exercise over (ii)
the grant price of the right as specified by the Committee, which shall not be
less than the fair market value of a share of Common Stock on the date of grant
of the SAR (or, if the Committee so determines, in the case of any SAR granted
in substitution for another award, on the date of grant of such other award).
Subject to the terms of the 2003 Plan and any applicable award agreement, the
grant price, term, methods of exercise, methods of settlement, and any other
terms and conditions of any SAR shall be as determined by the Committee. The
Committee may impose such conditions or restrictions on the exercise of any SAR
as it may deem appropriate.
The Committee is also authorized to grant awards of restricted stock. Each
restricted stock award granted under the 2003 Plan shall be for a number of
shares determined by the Committee. The Committee, in its discretion, may
establish performance, continued employment, vesting, or other conditions that
must be satisfied in order for the restrictions to lapse. The Committee, in its
discretion, may waive any restriction applicable to all or any portion of the
shares subject to an outstanding restricted stock award.
The Committee is authorized to grant such other stock-based awards
(including performance awards) that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, shares of
Common Stock (including, without limitation, securities convertible into such
shares), as are deemed by the Committee to be consistent with the purposes of
the 2003 Plan. Performance awards provide the holder with rights valued as
determined by the Committee and payable to, or exercisable by, the holder, in
whole or in part, upon achievement of such performance goals during such
performance periods as the Committee may establish. Subject to the terms of the
2003 Plan and any applicable award agreement, the Committee, in its discretion,
may determine the terms and conditions of other stock-based awards.
TRANSFERABILITY OF STOCK
The resale of shares acquired upon receipt or exercise of options or awards
is generally not restricted by the terms of the 2003 Plan. However, resales will
be restricted under the Securities Act of 1933, as amended (the "1933 Act")
unless the shares are registered under the 1933 Act or the transaction is exempt
from registration. The Company intends to register the shares under the 1933
Act.
14
FEDERAL INCOME TAX MATTERS
The following is a general summary of the Company's understanding of the
federal income tax consequences of the 2003 Plan.
Incentive Stock Options. Options under the 2003 Plan granted to employees
may be "incentive stock options" within the meaning of Section 422 of the Code.
In order to qualify as an incentive stock option, an option must meet certain
conditions specified in the Code. The Company believes that under currently
applicable provisions of the Code, if shares of Common Stock are acquired
pursuant to the exercise of incentive stock options, then:
o At the time of exercise of the option, no income will be realized by
the optionholder for purposes of the regular income tax. However, for
purposes of the alternative minimum tax (the "AMT"), the option will
be treated as an option which does not qualify as an incentive stock
option. Accordingly, for purposes of the AMT, the optionholder will
recognize ordinary income in the amount by which the fair market value
of the Common Stock at the time of exercise exceeds the option price.
Furthermore, the recognition of such AMT income may not alter the
amount of income to be recognized for purposes of the regular income
tax at the time the Common Stock acquired upon exercise of an
incentive stock option is sold or otherwise disposed of. As a result,
an optionholder who has a substantial amount of AMT income upon
exercise of an option in relation to his or her taxable income from
wages and other sources may be subject to the AMT in the year the
option is exercised. Each optionholder should consult his or her own
tax counsel regarding the effect of the AMT and the desirability of
selling or otherwise disposing of shares of Common Stock acquired
pursuant to the exercise of an incentive stock option in the same
calendar year in which such shares were acquired to avoid having the
AMT apply in the year the option is exercised and the regular tax
apply in the year the Common Stock acquired thereby is sold or
otherwise disposed of. Each optionholder should also consult with his
or her own tax counsel regarding the benefit which may be available
from the tax credit for a prior year's AMT liability provided for in
Section 53 of the Code.
o If Common Stock is sold or otherwise disposed of more than two years
from the date an option was granted to the optionholder and more than
one year after the transfer of any shares of Common Stock to such
optionholder upon the exercise of such option, then the difference
between the option price paid for the shares and the sale price will
result in long-term capital gain or loss to the optionholder if, as
usually is the case, the Common Stock is a capital asset in the hands
of the optionholder, and no deduction will be allowed to the Company
for federal income tax purposes in connection with the grant or
exercise of such option.
o If Common Stock is sold or otherwise disposed of before the holding
period described above is satisfied, then the optionholder will
recognize ordinary income at the time of the disposition in an amount
equal to the lesser of (a) the difference between the option price and
the fair market value of the shares at the time the option is
exercised, and (b) the difference between the option price and the
amount realized upon the disposition of the shares. Such optionholder
will recognize short-term or long-term capital gain to the extent of
any excess of the amount realized upon the disposition of the shares
over the fair market value of the shares upon exercise of the option,
and the Company will be allowed a tax deduction at the time and in the
amount of the ordinary income recognized by the optionholder if and to
the extent such amount satisfies the general rules concerning
deductibility of compensation. The
15
Company may also be required to withhold income tax upon the amount of
ordinary income recognized by the optionholder.
An acceleration of the exercisability of options upon a "change of control"
of the Company as provided in certain option agreements may result in more than
$100,000 of incentive stock options becoming exercisable for the first time
during a single calendar year. In that event, all or some of the incentive stock
options in question would become non-qualified (non-incentive) stock options.
Other Options. Some options granted under the 2003 Plan are not intended to
qualify as incentive stock options under Section 422 of the Code. The Company
believes that under currently applicable provisions of the Code:
o The non-incentive stock options do not have a "readily ascertainable
fair market value" within the meaning of Section 83 of the Code and
the regulations issued thereunder. Accordingly, at the time an option
is granted, the optionholder will not recognize any taxable income.
Upon the exercise of the option, the optionholder will recognize
ordinary income in the amount by which the fair market value of the
Common Stock at such time exceeds the option price.
o The Company will be allowed an income tax deduction in the amount
that, and for its taxable year in which, the optionholder recognizes
ordinary income, to the extent such amount satisfies the general rules
concerning deductibility of compensation. The Company will be required
to withhold or otherwise collect income tax upon such amount as
required under Sections 83 and 3402 of the Code.
o The optionholder's original tax basis in the shares received will be
equal to the sum of the option exercise price for the shares plus the
amount which the optionholder is required to recognize as income as a
result of the exercise of the option.
o When an optionholder sells shares acquired by the exercise of such a
non-incentive option, the difference between the amount received and
the adjusted tax basis of the shares will be gain or loss.
o An optionholder's holding period for shares acquired by exercising
such an option, for purposes of determining whether any capital gain
or loss on their subsequent sale is long-term or short-term, shall
begin at the time of the exercise of the option.
Restricted Stock Awards. The tax consequences of the grant and vesting of
restricted stock awards are also generally governed by Section 83 of the Code.
Common Stock of the Company issued pursuant to a restricted stock award is
intended to be non-vested property within the meaning of Section 83 and the
regulations promulgated thereunder. The Company believes that Common Stock
issued to its employees pursuant to a restricted stock award is subject to a
substantial risk of forfeiture as required by the Code and the regulations for
treatment as non-vested property.
Except as noted below, no income will be realized by a grantee, and the
Company will not be entitled to any deduction, with respect to an award of
restricted stock until the transfer prohibitions on the award have lapsed. At
that time, the employee will be deemed to have received compensation taxable as
ordinary income and the Company will be entitled to a corresponding deduction
equal to the sum of any cash received, plus the fair market value on the day
such
16
prohibitions lapse with respect to the shares. The employee's tax basis for any
shares received will be the fair market value on the day such prohibitions
lapse. An employee who receives an award of restrictive stock may irrevocably
elect under Section 83(b) of the Internal Revenue Code to report ordinary income
in an amount equal to the fair market value of the stock on the date of grant.
If such an election is made, no income would be recognized at the time the
restrictions lapse and the tax basis for such shares (for purposes of
determining the amount of any gain or loss realized on the subsequent sale of
such shares) would be the fair market value on the date of grant of the stock.
However, under current regulations of the Internal Revenue Service, if an
employee makes such an election and subsequently all or part of the shares are
forfeited under the terms and conditions set by the Committee at the date of
grant, the employee will not be entitled to a deduction.
If a Section 83(b) election is not made, appreciation in the value of the
Common Stock during the period of time the Common Stock is subject to
restrictions under the terms of the restricted stock award will be recognized as
ordinary income when those restrictions lapse. If the election is made,
appreciation in the value of the Common Stock during the period of time they are
subject to restrictions will generally be recognized as capital gain only when
the restrictions lapse and the Common Stock is sold or otherwise disposed of by
the grantee.
At the end of the restricted period, the grantee of a restricted stock
award generally will be able to sell, exchange or otherwise dispose of the
Common Stock issued to such grantee, subject to restrictions on transfer of
unregistered securities under the Securities Act of 1933 and applicable state
securities laws. The holding period for shares acquired pursuant to a restricted
stock award, for purposes of determining whether any capital gain or loss on
their subsequent sale is long-term or short-term, shall begin when the grantee
recognizes ordinary income.
Subject to the general rules concerning deductibility of compensation, the
Company will be allowed an income tax deduction in the amount that, and for its
taxable year in which, the grantee recognizes ordinary income pursuant to a
restricted stock award, but only if the Company withholds income tax upon such
amount as required under Section 3402 of the Code. RELATIONSHIP OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTSDividends received by the
grantee before the end of the restricted period will be taxed as ordinary income
to the grantee and will also be deductible by the Company subject to the
foregoing general rules concerning compensation.
Stock Appreciation Rights. The tax consequences of the grant of an SAR are
also generally governed by Section 83 of the Code. At the time an SAR is
granted, the holder of the SAR will not recognize any taxable income. At the
time of exercise of an SAR, the holder will recognize ordinary income equal to
the cash or the fair market value of the shares of Common Stock received at such
time. The holder of the SAR will have a basis in any shares received equal to
the fair market value thereof at the time the holder recognizes ordinary income
as a result of exercising the SAR, and any additional gain recognized on a
subsequent sale or exchange of the shares will not be compensation income but
will qualify as a capital gain, if, as usually is the case, the shares are a
capital asset in the hands of the holder. The holding period for shares acquired
by exercising an SAR, for purposes of determining whether any capital gain or
loss on their subsequent sale is long-term and short-term, shall begin at the
time of the exercise of the SAR.
At the time of exercise of an SAR, the holder will report as ordinary
income the amount of cash received and the fair market value of any common stock
which is issued. The Company will be entitled to take a deduction for such
amount at the time of actual payment. A recipient of a performance award will
not recognize any taxable income at the time of grant. When the award is paid,
in cash or in common stock, the grantee will recognize ordinary compensation
income in an amount equal to the cash and the fair market value of the common
stock received (which fair market value will be the employee's tax basis for the
shares) and the Company will generally be entitled to a deduction for such
amount.
17
Subject to the general rules concerning deductibility of compensation, the
Company will be allowed an income tax deduction in the amount that, and for its
taxable year in which, the holder of an SAR recognizes ordinary income upon the
exercise of an SAR, but only if the Company withholds income tax upon such
amount as required under Section 3402 of the Code.
Performance Awards. The tax consequences of the grant and any payment with
respect to a performance award are also governed by Section 83 of the Code. At
the time a performance award is granted, the recipient will not recognize any
taxable income. At the time a performance award matures, the holder will
recognize ordinary income equal to the cash or fair market value of the shares
of Common Stock received at such time, unless the holder is a person subject to
Section 16(b) of the 1934 Act. The holder will have a basis in any shares
received equal to the fair market value thereof at the time the holder
recognizes ordinary income as a result of the maturity of a performance award,
and any additional gain recognized on a subsequent sale or exchange of the
shares will not be compensation income but will qualify as a capital gain if, as
usually is the case, the Common Stock is a capital asset in the hands of the
holder. The holding period for shares acquired upon maturity of a performance
award, for purposes of determining whether any capital gain or loss on their
subsequent sale is long-term or short-term, shall begin upon the maturity
thereof.
Subject to the general rules concerning deductibility of compensation, the
Company will be allowed an income tax deduction in the amount that, and for its
taxable year in which, the holder recognizes ordinary income upon the maturity
of a performance award, but only if the Company withholds income tax upon such
amount as required under Section 3402 of the Code.
Other Stock-Based Awards. The 2003 Plan also authorizes other stock-based
awards, the terms of which are not specified. The federal income tax
consequences to both recipients and the Company from the grant and exercise of
such other stock-based awards will depend on the terms thereof.
Change of Control. Payments or other benefits resulting from awards,
including acceleration of the exercisability of options granted under the 2003
Plan as a result of "change of control" provisions in award agreements, may be
compensatory payments which are contingent on a change of control and when made
to certain defined individuals (such as the Company's executive officers) may be
deemed to be "parachute payments" within the meaning of Section 2806 of the
Code. Section 2806 of the Code provides that if "parachute payments" to an
individual equal or exceed three times such individual's "base amount" (average
annual compensation over the five taxable years preceding the taxable year in
which the change of control occurs), the excess of such "parachute payments"
over such individual's "base amount" will (a) not be deductible by the Company
and (b) be subject to an excise tax payable by the individual. Each holder of an
award should consult his or her own tax advisor regarding his or her tax
liability upon a change of control of the Company.
PLAN BENEFITS
Grants of options and awards under the 2003 Plan are discretionary.
Accordingly, it is not possible for us to identify the recipients or specify the
amounts to be received by any recipient. However, see "EXECUTIVE COMPENSATION -
Compensation of Directors" for a description of options which we have agreed to
grant to Peter L. Hauser, a non-employee director. In general, the Board of
Directors, selectsas the independent certified
public accountantsCommittee administering the 2003 Plan, will seek
recommendations from management (as to non-executive employees) and from the
Compensation Committee of the Board (as to executive employees) concerning the
recipients of grants and awards, the appropriate amounts and types of awards,
and the terms of exercise. Grants and awards may be made annually, or more
frequently in the case of new hires, promotions, or other special circumstances.
In general, the Committee's
18
compensation policy includes stock incentives for executive management as a
significant component of total compensation.
Messrs. Roberts, Mitchell, and Higgins (CEO, president, and executive vice
president, respectively) will not be granted any options unless the terms of
such options are approved by shareholders who are not officers, directors, or
holders of more than 10% of the Company's stock.
A copy of the 2003 Plan is attached to this Proxy Statement as Appendix B.
PROPOSAL 5
----------
AMENDMENTS TO BYLAWS
The Company each year. Theand GelStat agreed in connection with the Company's acquisition
of GelStat that Peter L. Hauser or his designee would serve on the Board of
Directors selectedof the firmCompany until 2007 as a representative of the pre-acquisition
DTR shareholders.
The proposed amendments to the Bylaws creates the special class of one
director (Class I), initially Peter L. Hauser. Mr. Hauser shall appoint his
replacement in the event he is unable or unwilling to continue to serve. All
other directors will be Class II directors and will serve a one-year term (i.e.
no change from current practice).
The text of each section proposed to be amended is set forth in Appendix C
to this Proxy Statement.
The previous owners of GelStat, who own in the aggregate 60% of the
Company, have entered into an agreement to vote their shares for this amendment
and for the election of Peter Hauser to the 4-year term in Class I.
INDEPENDENT AUDITORS
CHANGE OF AUDITORS IN FISCAL 2002
On June 27, 2002, KPMG LLP, the principal independent accountants
previously engaged by the Company to conduct an audit of its accounts for more
than the past two years, resigned as the Company's auditors. The resignation of
KPMG LLP to audit the Company's
consolidated financial statements for the year ended December 31,
1999 and 2000.
Representatives of KPMG LLP will attend the Annual Meeting,
may make a statement if they so desire, and will be available to
respond to appropriate questions. If possible, such questions
should be submitted in writing to the Company at least 10 days
prior to the Annual Meeting, at 7300 Metro Blvd, Suite 550,
Edina, Minnesota 55439, Attention: Mr. John P. Hupp, President.
On October 21, 1999, Developed Technology Resource, Inc.
dismissed Deloitte & Touche LLP, the principal accountant
previously engaged to audit the registrant's consolidated
financial statements for the year ended December 31, 1998, the
two-month transition period ended December 31, 1997 and the
fiscal year ended October 31, 1997, as its independent certified
public accountant. Deloitte & Touche LLP's report on the
financial statements for the year ended December 31, 1998 and the
two-month transition period ended December 31, 1997 contained a
paragraph expressing doubt over the Company's ability to continue
as a going concern but was not modified as to audit scopesought, recommended or accounting principles. Deloitte & Touche LLP's report onapproved by the financial statements forAudit Committee or Board
of Directors of the fiscal year ended October 31, 1997
does not contain an adverse opinion or disclaimer of opinion, and
was not modified as to uncertainty, audit scope, or accounting
principles.Company.
In connection with the audit foraudits of the two fiscal yearyears ended OctoberDecember 31,
19972001, and the subsequent interim period through October 21, 1999,June 27, 2002, (i) there have
beenwere no
disagreements with Deloitte & ToucheKPMG LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,procedures, which
disagreements if not resolved to thetheir satisfaction of Deloitte & Touche LLP would have caused them to
make reference theretowith their opinion to the subject matter of the disagreement, and
(ii) there were no reportable events, as defined in theirItem 304(a)(1)(v) of
Regulation S-K of the U.S. Securities and Exchange Commission.
The audit reports of KPMG LLP on the consolidated financial statements of
Developed Technology Resource, Inc. as of and for the years ended December 31,
2001 and 2000, did not contain any adverse or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles, except as follows:
19
KPMG LLP's independent auditors' report on the consolidated financial
statements for such period.the Company as of and for the year ended December 31, 2000,
contained a separate paragraph stating that "the Company has a shareholders'
deficit and has suffered recurring losses from operations that raise substantial
doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty." Management's plans in regard to these matters are
described in Note 2 to the Company's financial statements included in the
Company's annual report on form 10-KSB for the year ended December 31, 2000.
AUDITOR FOR FISCAL 2002
On October 21, 1999, KPMGAugust 12, 2002, the Company engaged Gallogly, Fernandez and Riley, LLP
was appointed as the
registrant's new independent accountant("GFR"), with offices in Orlando, Florida, to audit the registrant'sDTR's consolidated financial
statements. During the past fiscal year
and through October 21, 1999, the registrant hasstatements for 2002. Prior to August 12, 2002, DTR did not prior to
engaging the new accountant, consulted the new accountantconsult with GFR
regarding the application of accounting principles to a specific or contemplated
transaction, or regarding the type of audit opinion that might be rendered on the
registrant's consolidated
financial statements.
OTHER BUSINESS
Management knowsstatements, or regarding any other matter.
FEES PAID TO AUDITORS FOR FISCAL 2002
During 2002, the Company accrued or paid $33,050 for audit services of KPMG
LLP and Gallogly, Fernandez & Riley, LLP, including its quarterly reviews and
year-end audit fee. No leased personnel were utilized by GFR or KPMG in
connection with any audit services provided to us. Neither GFR nor KPMG rendered
any professional services related to financial information systems design and
implementation in fiscal 2002. The were no other mattersfees billed by GFR for nonaudit
related services rendered to the Company during fiscal 2002, including fees for
tax related services.
PROPOSALS FOR FISCAL 2003 ANNUAL MEETING
We currently anticipate that the next annual meeting, for the fiscal year
ending December 31, 2003 (the "2003 Annual Meeting"), will be presented
for consideration at the meeting.held on or around
July 15, 2004. If any other matter properly
comes before the meeting, proxies will be voted in accordance
with the best judgment of the person or persons acting under
them.
PROPOSALS FOR 2000 ANNUAL MEETING
Shareholders who intendyou wish to submit proposalsa proposal for inclusion in the Company's 2001 Proxy Statementproxy
statement and Proxyproxy for shareholder action at the 20012003 Annual Meeting, you must
do so by sending the proposal and supporting statements, if any, to the Company at its
corporate officesus no later
than February 26, 2001.20, 2004.
In addition, pursuant to the rules of the Securities and Exchange
Commission, proxies solicited by our management for the 2003 Annual Meeting may
grant management the authority to vote in its discretion on any proposal to be
submitted by a shareholder otherwise than through inclusion in the proxy
statement for the 2003 Annual Meeting, unless we have received notice of the
shareholder proposal on or before May 5, 2004.
ACCESS TO OTHER INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"). Therefore, the Company files periodic
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Such reports, proxy statements, and other
information may be obtained by visiting the Public Reference Room of the SEC at
450 Fifth Street, NW, Washington, DC 20549 or by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically. The Company
currently does not have a corporate website.
20
By Order of the Board of Directors
/s/ LeAnn H. Davis
LeAnn H. Davis
Chief Financial Officer andStephen C. Roberts Secretary
April 27, 2000Dated: June 16, 2003
Bloomington, Minnesota
A COPY OF OUR ANNUAL REPORT ON FORM 10-KSB IS ENCLOSED. AN ADDITIONAL COPY
(WITHOUT EXHIBITS) WILL BE SENT WITHOUT CHARGE TO ANY SHAREHOLDER REQUESTING IT
IN WRITING FROM: DEVELOPED TECHNOLOGY RESOURCE, INC.
Annual Meeting, C/O GELSTAT CORP.,
ATTENTION: STEPHEN C. ROBERTS, CEO, SOUTHPOINT OFFICE CENTER, 1650 WEST 82ND
STREET, SUITE 1040, BLOOMINGTON, MINNESOTA 55431.
21
APPENDIX A
AMENDMENTS TO ARTICLES
STATE OF MINNESOTA
OFFICE OF THE SECRETARY OF STATE
AMENDMENT OF
ARTICLES OF INCORPORATION
OF
DEVELOPED TECHNOLOGY RESOURCE, INC.
Pursuant to the provisions of ShareholdersMinnesota Statutes Section 302A.135, the
following Amendment to the Articles of Incorporation of Developed Technology
Resource, Inc., a Minnesota corporation, was approved and adopted pursuant to
Minnesota Statutes Chapter 302A.
Section 1.1 of Article 1 and Section 2.1 of Article 2 of the Articles of
Incorporation of the Corporation, as amended to date, is hereby amended and
restated in entirety as follows:
Article 1 - June 27, 2000Name
----------------
1.1) The name of the corporation shall be GelStat Corporation.
Article 2 - Registered Office
-----------------------------
2.1) The location and post office address of the registered office of the
corporation shall be Southpoint Office Center, 1650 West 82nd Street, Suite
1040, Bloomington, MN 55431.
Section 5.1 of Article 5 of the Articles of Incorporation of the
Corporation, as amended to date, is hereby amended and restated in entirety to
read as follows:
5.1 The corporation has the authority to issue sixty million (60,000,000)
shares, which shall have a par value of $.01 per share, and which shall consist
of 50,000,000 shares of Common Stock and 10,000,000 shares of Undesignated
Stock. The Board of Directors of the corporation is authorized to establish from
the Undesignated Stock, by resolution adopted and filed in the manner provided
by law, one or more classes or series of shares, to designate each such class or
series (which may include but is not limited to designation as additional Common
Stock), and to fix the relative rights and preferences of each such class or
series.
Except as specifically amended, as set forth above, the Articles are
unchanged.
APPENDIX B
GELSTAT CORP.
2003 INCENTIVE PLAN
1. DEFINED TERMS
Exhibit A, which is incorporated by reference, defines the terms used in
the Plan.
2. IN GENERAL
The Plan has been established to advance the interests of the Company by
giving selected Employees, directors and other persons (including both
individuals and entities) who provide services to the Company or its Affiliates
equity-based or cash incentives through the grant of Awards.
3. ADMINISTRATION
a. The Administrator has discretionary authority, subject only to the
express provisions of the Plan, to interpret the Plan; determine eligibility for
and grant Awards; determine, modify or waive the terms and conditions of any
Award; prescribe forms, rules and procedures (which it may modify or waive); and
otherwise do all things necessary to carry out the purposes of the Plan.
b. Once an Award has been communicated in writing to a Participant, the
Administrator may not, without the Participant's consent, alter the terms of the
Award so as to affect adversely the Participant's rights under the Award, unless
the Administrator expressly reserved the right to do so in writing at the time
of such communication.
c. The Administrator may delegate to senior management the authority to
grant Awards, other than Awards to any member of senior management.
4. SHARES SUBJECT TO THE PLAN
A total of 1,200,000 shares of Stock have been reserved for issuance under
the Plan. The following shares of Stock will also be available for future
grants:
a. shares of Stock remaining under an Award that terminates without having
been exercised in full (in the case of an Award requiring exercise by a
Participant for delivery of Stock);
b. shares of Stock subject to an Award, where cash is delivered to a
Participant in lieu of such shares;
c. shares of Restricted Stock that are forfeited to the Company;
d. shares of Stock tendered by a Participant to the Company as payment upon
exercise of an Award; and
e. shares of Stock held back by the Company, or tendered by a Participant
to the Company, in satisfaction of tax withholding requirements.
Stock delivered under the Plan may be authorized but unissued Stock or
previously issued Stock acquired by the Company. No fractional shares of Stock
will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key Employees,
directors and other individuals or entities providing services to the Company or
its Affiliates who, in the opinion of the Administrator, are in a position to
make a significant contribution to the success of the Company and its
Affiliates. Eligibility for ISOs is further limited to those individuals whose
employment status would qualify them for the tax treatment described in Sections
421 and 422 of the Code.
6. RULES APPLICABLE TO AWARDS
a. ALL AWARDS
(1) PERFORMANCE OBJECTIVES. Where rights under an Award depend in
whole or in part on attainment of performance objectives, actions by the
Company that have an effect, however material, on such performance
objectives or on the likelihood that they will be achieved will not be
deemed an amendment or alteration of the Award unless accomplished by a
change in the express terms of the Award.
(2) ALTERNATIVE SETTLEMENT. The Company retains the right at any time
to extinguish rights under an Award in exchange for payment in cash, Stock
or other property on such terms as the Administrator determines, provided
the holder of the Award consents to such exchange.
(3) TRANSFERABILITY OF AWARDS. Except as the Administrator otherwise
expressly provides, Awards (other than an Award in the form of an outright
transfer of cash or Unrestricted Stock) may not be transferred other than
by will or by the laws of descent and distribution. During a Participant's
lifetime an Award requiring exercise may be exercised only by the
Participant (or in the event of the Participant's incapacity, the person or
persons legally appointed to act on the Participant's behalf).
(4) VESTING, ETC. The Administrator may determine the time or times at
which an Award will vest (i.e., become free of forfeiture restrictions) or
become exercisable. Unless the Administrator expressly provides otherwise,
an Award requiring exercise will cease to be exercisable, and all other
Awards to the extent not already fully vested will be forfeited,
immediately upon the cessation (for any reason, including death) of the
Participant's employment or other service relationship with the Company and
its Affiliates.
(5) TAXES. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need
not, hold back shares of Stock from an Award or permit a Participant to
tender previously owned shares of Stock in satisfaction of tax withholding
requirements. In addition, the Administrator shall have the authority, at
the time of grant of an Award or at any time thereafter, to approve a tax
bonus to the Participant to be paid upon exercise or receipt of the Award.
The Administrator shall have full authority in its absolute discretion to
determine the amount of any such tax bonus and the terms and conditions
affecting its vesting and payment.
(6) DIVIDEND EQUIVALENTS, ETC. The Administrator, in its discretion,
may provide for the payment of amounts in lieu of cash dividends or other
cash distributions with respect to Stock subject to an Award.
(7) RIGHTS LIMITED. Nothing in the Plan shall be construed as giving
any person the right to continued employment or service with the Company or
its Affiliates, or any rights as a shareholder except as to shares of Stock
actually issued under the Plan. The loss of existing or potential profit in
Awards will not constitute an element of damages in the event of
termination of employment or service for any reason, even if the
termination is in violation of an obligation of the Company or Affiliate to
the Participant.
(8) VALUATION. For all valuation purposes under the Plan, the fair
market value of the Stock shall be as reasonably determined by the
Administrator. If on any valuation date the Stock is not traded on an
established securities market, the Administrator shall make a good faith
attempt to ascertain or establish a fair market value, and in connection
therewith shall take such action as it deems necessary or advisable.
(9) INTERPRETATION. The Administrator shall have plenary authority to
interpret the Plan and any such interpretation shall be final and
conclusive, subject to review and reversal by the Board.
b. AWARDS REQUIRING EXERCISE
(1) TIME AND MANNER OF EXERCISE. Unless the Administrator expressly
provides otherwise, (a) an Award requiring exercise by the holder will not
be deemed to have been exercised until the Administrator receives a written
notice of exercise (in form acceptable to the Administrator) signed by the
appropriate person and accompanied by any payment required under the Award;
and (b) if the Award is exercised by any person other than the Participant,
the Administrator may require satisfactory evidence that the person
exercising the Award has the right to do so.
(2) PAYMENT OF EXERCISE PRICE, IF ANY. Where the exercise of an Award
is to be accompanied by payment, the Administrator may determine the
required or permitted forms of payment either at or after the time of the
Award, subject to the following: (a) unless the Administrator expressly
provides otherwise, all payments will be by cash or check acceptable to the
Administrator; and (b) where shares of Stock issued
under an Award are part of an original issue of shares, the Award shall
require an exercise price equal to at least the par value of such shares.
(3) RELOAD AWARDS. The Administrator may provide that upon the
exercise of an Award, either by payment of cash or (if permitted under
Section 6.b.(2) above) through the tender of previously owned shares of
Stock, the Participant or other person exercising the Award will
automatically receive a new Award of like kind covering a number of shares
of Stock equal to the number of shares of Stock for which the first Award
was exercised.
(4) ISOS. No ISO may be granted under the Plan after _____________,
2012, but ISOs previously granted may extend beyond that date.
(5) TERM. Each Award and all rights and obligations thereunder shall
expire on the date determined by the Administrator, as specified in the
Award agreement; provided, that the term of an ISO may not extend more than
ten (10) years from the date of grant and the term of options which do not
qualify as ISOs may not extend more than fifteen (15) years from the date
of grant. The Administrator shall be under no duty to provide terms of like
duration for Awards granted under the Plan.
c. AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in return for
either (i) services determined by the Administrator to have a value not less
than the par value of the awarded shares of Stock, or (ii) cash or other
property having a value not less than the par value of the awarded shares of
Stock plus such additional amounts (if any) as the Administrator may determine
payable in such combination and type of cash, other property (of any kind) or
services as the Administrator may determine.
7. EFFECT OF CERTAIN TRANSACTIONS
a. MERGERS, ETC.
In the event of (i) a consolidation or merger in which the Company is not
the surviving corporation or which results in the acquisition of a majority of
the Company's then outstanding voting common stock by a single person or entity
or by a group of persons and/or entities acting in concert, (ii) a sale or
transfer of all or substantially all the Company's assets, or (iii) a
dissolution or liquidation of the Company (any of the foregoing, a "covered
transaction"), all outstanding Awards requiring exercise will cease to be
exercisable, and all other Awards to the extent not fully vested (including
Awards subject to performance conditions not yet satisfied or determined) will
be forfeited, as of the effective time of the covered transaction; provided,
however, that immediately prior to the consummation of such covered transaction
the vesting or exercisability of Awards shall be accelerated unless, in the case
of any Award, the Administrator provides for one or more substitute or
replacement awards from, or the assumption of the existing Award by, the
acquiring entity (if any) or its affiliates.
The Administrator may provide in the case of any Award that the provisions
of the preceding paragraph shall also apply to (i) mergers or consolidations
involving the Company that
do not constitute a covered transaction, or (ii) other transactions, not
constituting a covered transaction, that involve the acquisition of the
Company's outstanding Stock.
b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) BASIC ADJUSTMENT PROVISIONS. In the event of a stock dividend,
stock split or combination of shares, recapitalization or other change in
the Company's capital structure, the Administrator will make appropriate
adjustments to the maximum number of shares that may be delivered under the
Plan under Section 4, and will also make appropriate adjustments to the
number and kind of shares of stock or securities subject to Awards then
outstanding or subsequently granted, any exercise prices relating to Awards
and any other provision of Awards affected by such change.
(2) CERTAIN OTHER ADJUSTMENTS. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into
account distributions to common stockholders other than stock dividends or
normal cash dividends, mergers, consolidations, acquisitions, dispositions
or similar corporate transactions, or any other event, if the Administrator
determines that adjustments are appropriate to avoid distortion in the
operation of the Plan and to preserve the value of Awards made hereunder.
(3) CONTINUING APPLICATION OF PLAN TERMS. References in the Plan to
shares of Stock shall be construed to include any stock or securities
resulting from an adjustment pursuant to Section 7.b. (1) or 7.b. (2)
above.
8. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove any restriction from shares of Stock previously
delivered under the Plan until (a) the Company's counsel has approved all legal
matters in connection with the issuance and delivery of such shares, (b) the
shares to be delivered have been listed or authorized to be listed on any stock
exchange or quotation system on which the stock is then traded, and (c) all
conditions of the Award have been satisfied or waived. If the sale of Stock has
not been registered under the Securities Act of 1933, as amended, the Company
may require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act. The Company may require that certificates evidencing
Stock issued under the Plan bear an appropriate legend reflecting any
restriction on transfer applicable to such Stock.
9. AMENDMENT AND TERMINATION
Subject to Section 3b., the Board or the Administrator may at any time or
times amend the Plan or any outstanding Award for any purpose which may at the
time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards; provided, that (except to the extent expressly
required or permitted by the Plan) no such amendment will, without the approval
of the stockholders of the Company, effectuate a change for which stockholder
approval is required in order for the Plan to continue to qualify under Section
422 of the Code.
10. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any way
affect the Company's right to award a person bonuses or other compensation in
addition to Awards under the Plan.
11. GOVERNING LAW
The Plan shall be construed in accordance with the laws of the State of
Minnesota.
EXHIBIT A
DEFINITION OF TERMS
-------------------
The following terms, when used in the Plan, shall have the meanings and be
subject to the provisions set forth below:
ADMINISTRATOR: The Committee, if one has been appointed; otherwise the
Board.
AFFILIATE: Any corporation or other entity owning, directly or indirectly,
50% or more of the outstanding Stock of the Company, or in which the Company or
any such corporation or other entity owns, directly or indirectly, 50% of the
outstanding capital stock (determined by aggregate voting rights) or other
voting interests.
AWARD: Any of the following:
a. Options ("Stock Options") entitling the recipient to acquire shares
of Stock upon payment of the exercise price.
(i) Each Stock Option, except as otherwise expressly provided by
the Committee, will have an exercise price equal to the fair market
value of the Stock subject to the option, determined as of the date of
grant.
(ii) Notwithstanding any other provision of the Plan, any Stock
Option which is intended to be an ISO (A) shall have an exercise price
equal to or greater than the fair market value of the Stock subject to
the option, determined as of the date of grant, and (B) shall have a
duration of ten (10) years or less.
(iii) Notwithstanding any other provision in the Plan, if at the
time an option is otherwise to be granted pursuant to the Plan the
optionee owns directly or indirectly (within the meaning of Section
424(d) of the Code) securities of the Company possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporations, if any
(within the meaning of Section 422(b)(6) of the Code), then (A) any
ISO granted to such optionee shall satisfy the requirements of Section
422(c)(5) of the Code, (B) the option price shall be not less than
110% of the fair market value of the Stock as of the date of grant,
and (C) such option by its terms shall not be exercisable after the
expiration of five (5) years from the date of grant.
(iv) The Administrator will determine the medium in which the
exercise price is to be paid, the duration of the option, the time or
times at which an option will become exercisable, provisions for
continuation (if any) of option rights following termination of the
Participant's employment with the Company and its Affiliates, and all
other terms of the Stock Option.
(v) No Stock Option awarded under the Plan will be an ISO unless
the Administrator expressly provides for ISO treatment.
b. Rights ("SARs") entitling the holder to receive all or a portion of
any increase in value of a stated number of shares of Stock above a stated
base price, payable in cash or Stock, as the Administrator determines.
c. Stock subject to restrictions ("Restricted Stock") under the Plan
requiring that such Stock be redelivered to the Company if specified
conditions are not satisfied. The conditions to be satisfied in connection
with any Award of Restricted Stock, the terms on which such Stock must be
redelivered to the Company, the purchase price of such Stock, and all other
terms shall be determined by the Administrator.
d. Stock not subject to any restrictions under the Plan ("Unrestricted
Stock").
e. A promise to deliver Stock or other securities in the future on
such terms and conditions as the Administrator determines.
f. Securities (other than Stock Options) that are convertible into or
exchangeable for Stock on such terms and conditions as the Administrator
determines.
g. Cash bonuses tied to performance criteria as described at (viii)
below ("Cash Performance Awards").
h. Awards described in any of (a) through (g) above where the right to
exercisability, vesting or full enjoyment of the Award is conditioned in
whole or in part on the satisfaction of specific performance criteria
("Performance Awards").
In the case of a Performance Award, the Administrator shall in writing
establish a specific performance goal or goals (based solely on one or more
performance criteria or a combination of performance criteria) no later
than 90 days after the commencement of the period of service to which the
performance relates. Performance criteria may include, but are not limited
to, the following (determined either on a consolidated basis or, as the
context permits, on a divisional, subsidiary, line of business or
geographical basis or in combinations thereof): (i) sales; revenues;
assets; expenses; earnings before or after deduction for all or any portion
of interest, taxes, depreciation or amortization, whether or not on a
continuing operations or an aggregate or per share basis; return on equity,
investment, capital or assets; gross margin; inventory level or turns; one
or more operating ratios; borrowing levels, leverage ratios or credit
rating; market share; capital expenditures; cash flow; stock price;
stockholder return; or other objective operating contributions; or (ii)
acquisitions and divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split-ups and the like; reorganizations;
recapitalizations, restructurings, financings (issuance of debt or equity)
and refinancings; or other transactions that involve a change in the equity
ownership of the Company. Prior to payment of any Performance Award, the
Administrator shall certify whether the performance goal has been attained
and such determination shall be final and conclusive. If the performance
goal with respect to any such Award is not attained, no other Award shall
be provided in substitution of the Performance Award.
i. Grants of cash, or loans, made in connection with other Awards in
order to help defray in whole or in part the economic cost (including tax
cost) of the Award to the
Participant. The terms of any such grant or loan shall be determined by the
Administrator.
Awards may be combined in the Administrator's discretion.
BOARD: The Board of Directors of the Company.
CODE: The U.S. Internal Revenue Code of 1986 as from time to time amended
and in effect, or any to time in effect.
COMMITTEE: A committee of the Board comprised solely of two or more
directors. The Committee may delegate ministerial tasks to such persons
(including Employees) as it deems appropriate.
COMPANY: GelStat Corp.
EMPLOYEE: Any person who is employed (full-time or part-time) by the
Company or an Affiliate.
ISO: A Stock Option intended to be an "incentive stock option" within the
meaning of Section 422 of the Code.
PARTICIPANT: An Employee, director or other person providing services to
the Company or its Affiliates who is granted an Award under the Plan.
PLAN: The 2003 Incentive Plan of the Company as from time to time amended
and in effect.
STOCK: Common stock of the Company, par value $.001 per share.
APPENDIX C
PROPOSED BYLAW AMENDMENTS
Restate Section 3.2 in entirety as follows:
3.2) Number, Qualifications, and Term of Office. The number of
directors which shall constitute the whole Board of Directors shall be
fixed from time to time by resolution of the shareholders, subject to
increase by resolution of the Board of Directors. Directors must be natural
persons but need not be shareholders. Each director shall be elected at the
annual meeting of shareholders, except as provided for in this Section and
in Section 3.11 of this Article. Unless a fixed term not exceeding five (5)
years is set, each of the directors shall hold office for an indefinite
term until the next annual meeting of shareholders and thereafter until his
successor shall have been duly elected and qualified, or until he shall
resign, or shall have been removed as provided by Minnesota Statutes,
Section 302A.223.
Until April 15, 2007, the Board shall be divided into two classes.
Class I shall have one director who shall serve for a term ending with the
first election of directors after April 15, 2007. Peter L. Hauser, a member
of the Board of Directors at the date of this amendment, shall serve as the
initial Class I director. Vacancies in the Class I directorship shall be
filled by appointment by Peter L. Hauser or, if Peter L. Hauser is unable
to make such appointment due to death or incapacity, by Roger Schnobrich, a
former director and a current shareholder. A Class I director may be
removed only "for cause" by a vote of 80% of each class of the outstanding
voting stock. Until April 15, 2007, all other directors shall be designated
Class II directors. The number of Class II directors, their terms of
service, and the filling of any vacancies in Class II shall be governed by
the provisions of these Bylaws which are not specific to the Class I
director.
Add a new, additional paragraph to the end of Section 10.1 as follows:
Until April 15, 2007, the Board of Directors shall not have authority
to amend Section 3.2 to eliminate the Class I director, to increase the
number of Class I directors to more than one, to lengthen or shorten the
4-year term of the Class I director, or to change the procedures for
appointment of the Class I director. Such authority is reserved to the
shareholders, who must approve any such amendment by the affirmative vote
of 80% of each class of voting securities issued and outstanding.
ADOPTED ___________, 2003
APPENDIX D
GELSTAT CORPORATION
AUDIT COMMITTEE CHARTER
Objective
- ---------
The audit committee of the board of directors of GelStat shall use its best
efforts to ensure the independence of the company's independent accountants, the
integrity of management, and the adequacy of disclosure to the company's
shareholders, potential shareholders, and the investment community.
Members
- -------
The audit committee shall be appointed annually by the board of directors, with
its chairman (if any) to be selected by the committee. The committee shall have
at least one member. Each member must also be a member of the board of
directors. A Director Is "Independent" If He/She Is An "Independent Director" As
Defined In The Rules Of The BBX, And Any Other Exchange On Which The Company's
Securities Are Listed.
In selecting members of the audit committee, the board shall give consideration
to each nominee's capacity to serve, business experience, knowledge of GelStat
operations, finance, accounting, and auditing, facility in obtaining information
by inquiry, and commitment and available time.
Each member shall have the ability to read and understand fundamental financial
statements, and at least one member shall be an "audit committee financial
expert" as defined in the rules of the Securities and Exchange Commission.
The committee shall annually elect one of its members as chairperson. The
chairperson shall schedule meetings, preside over meetings, and report to the
board.
Vacancies on the committee shall be filled by the board of directors.
Meetings
- --------
The committee shall meet a minimum of two times per year and as scheduled by the
committee chairman. A majority of members (at least 2 of 3) shall constitute a
quorum. Each member shall be entitled to one vote. At the request of the
committee, meetings may be held with members of management or the company's
internal accounting staff or representatives of the company's independent
accountants or consultants. The committee shall prepare and preserve written
minutes of its meetings. The committee may appoint a committee member or a
non-committee member as secretary. The committee may take action by conference
telephone call, which shall constitute a meeting, or by written action signed by
all members.
The activities and findings of the committee and minutes of committee meetings
shall be made available to each member of the board.
Authority
- ---------
The committee shall have unrestricted access to the company's personnel and
records and will be given the resources to discharge its duties. The committee
shall have the authority to engage independent counsel and other advisors, as it
deems necessary, to carry out its duties. The committee may conduct
investigations into significant matters brought to its attention during the
conduct of its duties and may retain persons having special competence as
necessary. The committee shall have the sole authority and responsibility to
select, evaluate, and, where appropriate, replace the outside auditors. The
committee also has the sole authority and responsibility to approve any
significant non-audit relationship with the independent auditors.
Responsibility
- --------------
While the fundamental responsibility for the company's financial statements and
disclosures rests with management and the independent auditor, the audit
committee must review:
o major issues regarding accounting principles and financial statement
presentations, including any significant changes in the company's
selection or application of accounting principles, and major issues as
to the adequacy of the company's internal controls and any special
audit steps adopted in light of material control deficiencies;
o analyses prepared by management and/or the independent auditor setting
forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the financial
statements;
o the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial statements of the
company; and
o earnings press releases (paying particular attention to any use of
"pro forma," or "adjusted" non-GAAP, information), as well as
financial information and earnings guidance provided to analysts and
rating agencies.
o establish procedures for (1) the receipt, retention, and treatment of
complaints received by the company regarding accounting, internal
accounting controls, or auditing matters; and (2) the confidential,
anonymous submission by employees of the company of concerns regarding
questionable accounting or auditing matters.
The audit committee shall have such other responsibilities as may be designated
to it from time to time by the board of directors. In addition, the audit
committee shall annually review and
2
assess the adequacy of its Charter and recommend to the board of directors any
modifications in its duties and responsibilities.
Operations
- ----------
The audit committee shall:
o Assist board oversight of (1) the integrity of the company's financial
statements, (2) the company's compliance with legal and regulatory
requirements, (3) the independent auditor's qualifications and
independence, and (4) the performance of the company's independent
auditors.
o Prepare the report that SEC rules require be included in the company's
annual proxy statement.
o Retain and terminate the company's independent auditors (subject, if
applicable, to shareholder ratification).
o At least annually, obtain and review a report by the independent
auditor describing: such firm's internal quality-control procedures;
any material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues; and (to assess the auditor's independence) all relationships
between the independent auditor and the company. The audit committee
should present its conclusions with respect to the independent auditor
to the full board
o Discuss the annual audited financial statements and quarterly
financial statements with management and the independent auditor,
including the company's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
o Discuss earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies. The audit
committee's responsibility to discuss earnings releases as well as
financial information and earnings guidance may be done generally
(i.e., discussion of the types of information to be disclosed and the
type of presentation to be made). [The audit committee need not
discuss in advance each earnings release or each instance in which the
company may provide earnings guidance.]
o As appropriate, obtain advice and assistance from outside legal,
accounting or other advisors.
o Discuss policies with respect to risk assessment and risk management.
The audit committee should analyze the company's major financial risk
exposures and discuss with management the steps management has taken
to monitor and control such exposures. The audit committee is not
required to be the sole body responsible for risk assessment and
management.
3
o Periodically meet separately with management, with personnel
responsible for the internal preparation of financial reports and
records, and with independent auditors.
o Review with the independent auditor any audit problems or difficulties
and management's response. Among the items the audit committee may
want to review with the auditor are: any accounting adjustments that
were noted or proposed by the auditor but were "passed" (as immaterial
or otherwise); any communications between the audit team and the audit
firm's national office respecting auditing or accounting issues
presented by the engagement; and any "management" or "internal
control" letter issued, or proposed to be issued, by the audit firm to
the company. The review should also include discussion of the
responsibilities, budget and staffing of the company's internal
financial functions.
o Set clear hiring policies for employees or former employees of the
independent auditors which shall comply in all respects with the rules
of the Securities and Exchange Commission concerning independence of
auditors and similar rules of any stock exchange on which the
company's securities are listed.
o Report regularly to the board of directors. The audit committee should
review with the full board any issues that arise with respect to the
quality or integrity of the company's financial statements, the
company's compliance with legal or regulatory requirements, the
performance and independence of the company's independent auditors, or
the performance of the internal financial accounting.
o Annually evaluate the performance of the audit committee.
o Review, discuss and report to the board of directors concerning
changes, if any, made or proposed by the government, accounting
profession, or the company relating to accounting principles and their
applications that could materially affect the company.
o Review, discuss and report to the board of directors concerning
significant issues reviewed by legal counsel concerning litigation,
contingencies, claims, or assessments.
o Review, discuss and report to the board of directors concerning
significant adjustments proposed by the independent accountants.
o Inquire of the independent accountants as to whether there have been
any disagreements with management which, if not satisfactorily
resolved, would have caused them to issue a nonstandard report on the
company's financial statements.
o Review unusual reporting issues prior to the issuance of any press
release on financial results.
o Advise the independent accountants and members of the internal
accounting staff that they may communicate directly with any member of
the committee on a confidential basis.
4
Internal Accounting Controls
- ----------------------------
The committee shall undertake such review as it deems necessary to ensure that
there exists an effective system of internal accounting controls. Without
limitation and as it deems appropriate, the committee shall:
o Meet privately with the independent accountants and appropriate
members of the company's financial staff to discuss pertinent matters.
o Review with the chief financial officer the activities, organizational
structure, and qualifications of the internal financial staff.
o Inquire of the chief financial officer and independent accountants the
extent to which their planned audit scope can be relied on to detect
material weaknesses in internal controls or the occurrence of
fraudulent financial reporting.
Corporate Compliance
- --------------------
The committee shall conduct such review as it deems necessary to ensure that the
company is maintaining effective controls against employee conflict of interest
and fraud and is in reasonable compliance with related laws. Without limitation
and as it deems appropriate, the committee shall:
o Review management's program to monitor compliance with the company's
code of conduct and the Foreign Corrupt Practices Act.
o Review significant related party transactions.
o Review the policies and procedures in effect for the review of officer
expenses and purchases.
o Review periodically the impact of significant accounting or reporting
developments that may affect the company.
o Review any legal matters that could have a significant impact on the
company's financial statements.
o If necessary, institute special investigations and, if appropriate,
hire special counsel or experts to assist.
Qualified Legal Compliance Committee
- ------------------------------------
The committee shall be the company's "qualified legal compliance committee" as
defined in the rules of the Securities and Exchange Commission. In this
capacity, the committee shall:
5
o Adopt written procedures for the confidential receipt, retention and
consideration of any report of a material violation of federal
securities laws, breach of fiduciary duty or similar violations by the
company or any officer, director, employee or agent of the company.
o Inform the company's chief legal officer and chief executive officer
of any report of evidence of a material violation.
o Determine whether an investigation is necessary regarding any report
of evidence of a material violation by the company, its officers,
directors, employees or agents and, if it determines an investigation
is necessary or appropriate:
o Notify the full board of directors;
o Initiate an investigation, which may be conducted either by the
chief legal officer (or the equivalent thereof) or by outside
attorneys; and
o Retain such additional expert personnel as the committee deems
necessary.
o At the conclusion of any such investigation:
o Recommend, by majority vote, that the company implement an
appropriate response to evidence of a material violation;
o Inform the chief legal officer and the chief executive officer
(or the equivalents thereof) and the board of directors of the
results of any such investigation and the appropriate remedial
measures to be adopted; and
o Acting by majority vote, take all other appropriate action,
including the notification of the Securities and Exchange
Commission in the event that the company fails in any material
respect to implement an appropriate response that the qualified
legal compliance committee has recommended.
Miscellaneous
- -------------
As to other related matters, without limitation and as it deems appropriate, the
committee shall:
o Discuss with the independent accountants the quality of the company's
financial and accounting personnel and any relevant recommendations
that the independent accountants may have, including those in their
"Report to Management."
o Review the extent of nonaudit services provided by the independent
accountants in relation to the objectivity needed in the audit.
o Evaluate the cooperation received by the independent accountants
during their audit examination, including the access to all requested
records, data, and information and elicit the comments of management
regarding the responsiveness of the independent accountants to the
company's needs.
6
o Request from outside auditors a formal written statement regarding all
relationships between the outside auditors and the company.
o Maintain an active dialogue with the outside auditors regarding any
undisclosed relations or services that could affect the objectivity
and independence of the outside auditors.
o Take, or recommend that the board of directors take, appropriate
action to oversee the outside auditors' independence.
DEVELOPED TECHNOLOGY RESOURCE, INC.
SOUTHPOINT OFFICE CENTER
1650 WEST 82ND STREET
BLOOMINGTON, MN 55431
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSDIRECTORS.
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated June 16, 2003, hereby appoints John P. Hupp or his
appointeeeach of Stephen C. Roberts and
Peter L. Hauser as proxy, of the undersigned, with full power of substitution, for and in the nameto vote all of the
undersigned, to
representshares of Common Stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of Developed Technology
Resource, Inc., to be held at the One
Corporate Center, 7300 Metro Boulevard, Suite 160, Edina,
Minnesota 55439on Monday, July 14, 2003 at 10:00 a.m. CDT on Tuesday, June 27, 2000, andat Southpoint
Office Center (ground floor conference room), 1650 West 82nd Street,
Bloomington, MN 55431, or at any adjournmentsadjournment thereof, upon any and to vote all shares of stock of
said Company standing inmatters
which may properly be brought before the name of the undersigned, as
designated below, withmeeting or adjournment thereof, hereby
revoking all the powers which the undersigned would
possess if personally at such meetings.former proxies.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR EACH NOMINEE, FOR THE ADOPTION OF PROPOSALS 2, 3, AND 4, AND IN THE
DISCRETION OF THE PROXY HOLDER ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
SEE REVERSE FOR VOTING INSTRUCTIONS.
PLEASE DETACH HERE
1. Election of Directors duly 01 Stephen C. Roberts
nominated: 02 Russell W. Mitchell
03 Peter L. Hauser
John
P. Hupp, and Roger W. Schnobrich.
_______ FOR _______ WITHHELD[ ] FOR ALL _______ WITHHELDNOMINEES
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE FOLLOWING ONLY
(Write the nominee's name in space below):NUMBER(S) OF THE NOMINEE(S) IN THE SPACE PROVIDED BELOW.)
________________________________________________________________
2. RatificationAmendment of the appointmentArticles of KPMG LLP as independent
auditors forIncorporation of the current fiscal year.
_______Company to increase the
authorized shares of common stock from 3,333,334 to 50,000,000 and the
authorized undesignated stock from 1,666,667 to 10,000,000.
[ ] FOR _______[ ] AGAINST [ ] ABSTAIN
3. Amendment of the Articles of Incorporation to change the name of the
Company to GelStat Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Adoption of 2003 Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Amendment to Bylaws.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. The authority of Directors to vote, in theirhis discretion, on all other business that may
properly come before the meeting.
_______[ ] GRANTED _______[ ] WITHHELD
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
GIVEN FOR VOTING ON THE MATTERS ABOVE, THIS PROXY WILL BE VOTED
FOR item 1, electing all duly nominated Directors as listed, FOR
item 2, ratifying independent auditors, and GRANTED for item 2,
grantingI will / will not attend the Directors authority to vote in their discretion on
all other business coming before the meeting. Shareholders who
are present at the meeting may withdraw their Proxy and vote in
person if they so desire. The undersigned has received the proxy
statement dated April 27, 2000.
Dated _____________, 2000 ______________ ________________
Signature Print Name
Dated _____________, 2000 ______________ _______________
Signature Print Name
Please signAnnual Meeting.
Address change? Mark Box [ ]
Indicate changes below:
PLEASE SIGN exactly as name(s) appear(s) on this Proxy. Ifname appears below. When shares are registered in more than one name, the signatures of
all persons are required. A corporationheld by joint
tenants, both should sign in its full
corporate name by a duly authorized officer, stating their title.
Trustees, guardians, executors and administrators should sign in
their official capacity, giving theirsign. If signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or authorized officer. If partnership,
please sign in partnership name by an authorized person.
Please check as appropriate:
__ I DO plan on attending the Annual MeetingDated: ____________________, 2003 ________________________________________
Name (Print)
No. of Shareholders.
__ I DO NOT plan on attending the Annual MeetingShares: _______________ No. of Shareholders.Shares: _______________
_________________________________ ________________________________________
Signature of Shareholder Signature of Shareholder (if jointly owned)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY This Proxy may also be returned via facsimile to (952) 820-0011.USING THE ENCLOSED
ENVELOPE.