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¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(6)(2))
þ Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Under Rule 14a-12
FIRSTWAVE TECHNOLOGIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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¨ 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 fees was paid previously. Identify the previous filing by registration statement number or the form or schedule and the date of its filing.
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Sincerely yours, Richard T. Brock Chairman and Chief Executive Officer |
(1) | To elect one director to the Company’s Board of Directors, to serve a one-year term, or until his successor is elected and qualified; |
(2) | To approve the Company’s 2005 Stock Incentive Plan; |
(3) | To ratify the appointment of Cherry, Bekaert & Holland, L.L.P. as the Company’s independent public accountants for the year ending December 31, 2005; and |
(4) | To transact such other business as may properly come before the Annual Meeting. |
By order of the Company’s Board of Directors, Richard T. Brock Chairman and Chief Executive Officer |
May 6, 2005
Q: | What am I voting on? |
A: | You are being asked to vote on two proposals: You will be asked to: |
Q: | Who is entitled to vote? |
A: | Holders of record of our common stock and holders of our Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock, each on an as-if-converted basis, as of the close of business on March 22, 2005, the Record Date, are entitled to vote on the matters listed on the proxy card to be voted no at the Annual Meeting. |
Q: | How many shares can be voted? |
A: | At the Record Date of March 22, 2005, shareholders were entitled to cast approximately 3,593,656 votes at the Annual Meeting, as set forth in the table below. Each share of common stock entitles the holder to one vote for each matter to be voted upon at the Annual Meeting. The holders of our preferred stock generally vote on an as-if-converted basis together with the holders of our common stock and are entitled to cast one vote for each share of common stock into which the preferred stock is convertible for each matter to be voted upon at the Annual Meeting. The Company does not have cumulative voting. |
Shares Outstanding | Votes Entitled | ||||
Class | March 22, 2005 | to be Cast | |||
Common Stock | 2,695,177 | 2,695,177 | |||
Series A Preferred | 10,000 | 161,812 | |||
Series B Preferred | 7,020 | 86,667 | |||
Series C Preferred | 10,000 | 416,667 | |||
Series D Preferred | 7,000 | 233,333 | |||
Total Votes Entitled to be Cast | 2,729,197 | 3,593,656 |
Q: | How do I vote? |
A: | Complete, sign and return your proxy card to the Company’s transfer agent, American Stock transfer & Trust Company, by mail to the attention of Joe Wolf, 59 Maiden Lane, New York, NY 10038, by fax to American Stock Transfer Attn: Joe Wolf at 718-921-8116, or by email to jwolf@amstock.com. If you return your signed proxy card but do not indicate how you wish to vote, your shares will be voted FOR the proposals described in this Proxy Statement. You may also attend the meeting in person and vote. However, even if you plan to attend the Annual Meeting, we ask that you sign and return a proxy card. If you then attend the Annual Meeting, you may cast your vote in person, which will automatically revoke your proxy. If your shares are held beneficially through a broker, financial institution or other holder of record and you wish to vote your shares in person at the Annual Meeting, you must present a letter from the holder of record confirming your ownership of the shares you intend to vote as of March 22, 2005. If your shares are held beneficially, but you do not intend to vote your shares in person at the Annual Meeting, you should complete and return any proxy materials sent to you by the holder of a record so your shares may be voted by the holder of record in accordance with your wishes. |
Q: | What if I change my mind after I return my proxy? |
A: | You may revoke your proxy and change your vote at any time before the Annual Meeting. You may do this by signing and sending to the Company’s outside counsel, James Walker IV, of Morris, Manning & Martin LLP, 1600 Atlanta Financial Center, 3343 Peachtree Road, NE, Atlanta, GA 30326-1044, a written dated document stating that the proxy is revoked or by sending to the Company another proxy with a later date than the one you want to revoke, or by voting in person at the Annual Meeting. |
Q: | Who will count the votes? |
A: | The Chairman of the Board of Directors will select an inspector(s) of the election for our Annual Meeting. The inspector(s) will ascertain the number of shares outstanding and the voting power of the shares, determine the shares represented at the Annual Meeting to determine whether or not a quorum is represented, determine the validity of proxies and ballots, count all votes and determine the results of the voting. The inspector(s) will deliver a written report after the Annual Meeting. |
Q: | What constitutes a quorum? |
A: | There must be a quorum for the Annual Meeting to be held. A quorum is a majority of the voting power of the outstanding shares on the Record Date. To have shares counted towards the quorum, shareholders with the power to vote the Company’s shares may be present at the Annual Meeting or represented by proxy. If you submit a properly executed proxy card, even if you abstain from voting, then you will be considered present for determining whether or not a quorum is represented. |
Q: | How are abstentions and broker non-votes treated? |
A: | Broker non-votes, or proxies submitted by brokers as holders of record on behalf of their customers to abstain or that do not indicate how to vote on a proposal, are counted toward the shares represented for purposes of a quorum. However, broker non-votes and abstentions are not counted in the tally of votes FOR or AGAINST the proposal. As a result, broker non-votes and abstentions will have no effect on the proposal except to the extent they assist in constituting a quorum. |
Q: | What happens if the Annual Meeting is postponed or adjourned? |
A: | The persons named as proxies may propose one or more adjournments or postponements of the Annual Meeting for any reason, including to permit the further solicitation of proxies. Any adjournment or postponement would require the affirmative vote by the holders of a majority of the voting shares represented at the Annual Meeting. If any subsequent reconvening of the meeting is held within 11 months of the original Annual Meeting date, all proxies received by the Company will be voted in the same manner as they would have been voted at the original meeting. However, as described above, you may revoke your proxy and change your vote at any time before the reconvened meeting. |
Q: | How many votes are required to approve the proposals? |
A: | The proposals will be deemed approved by the shareholders as follows: |
Proposal 1 - Directors are elected by a plurality of the votes, which means that the nominee who receives the highest number of votes FOR will be elected as director. |
Proposal 2 - The Company’s 2005 Stock Incentive Plan must be approved by the holders of shares representing a majority of the votes duly cast on this proposal. |
Proposal 3 - Ratification of the appointment of Cherry, Bekaert & Holland, L.L.P. as the Company’s independent public accountants requires an affirmative vote from the holders of shares representing a majority of the votes duly cast on this proposal. Insufficient numbers of votes in favor of ratification will not change the appointment of Cherry, Bekaert & Holland, L.L.P. as the Company’s independent public accountants for the year. However, it will serve to inform the Board as to the shareholders’ preferences. |
Q: | Who is paying for this proxy solicitation? |
A: | We are paying the cost of soliciting proxies. In addition to mailing these materials, our officers, directors and employees will solicit proxies, either personally or by telephone or facsimile. They will not be paid specifically for this solicitation activity, but may be reimbursed for out-of-pocket expenses incurred in connection with the solicitation. |
We also intend to reimburse brokers, financial institutions, custodians, nominees and fiduciaries who are holders of record of Company shares for their reasonable expenses in forwarding these materials to the beneficial owners of those shares. Furthermore, we may engage a firm to help solicit proxies. The extent to which we and our proxy solicitation firm must solicit proxies depends entirely upon how soon proxy cards are returned. Please send in your proxy cards immediately. |
Q: | Where can I find more information about Firstwave? |
A: | We are subject to the information requirements of the Securities Exchange Act of 1934, as amended, and are required to file reports, proxy statements and other information with the Securities and Exchange Commission. You may inspect and copy our reports, proxy statements and other publicly available information at the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W. Washington, D.C. 20549 at the prescribed rates. The Commission maintains a world wide web site on the internet athttp://www.sec.gov that contains reports, proxies, information statements, and registration statements and other information filed with the Commission through the EDGAR system. Our common stock is traded on the Nasdaq SmallCap Market (Symbol: FSTW), and our reports, proxy statements and other information can also be inspected at the offices of Nasdaq Operations, 1735 K Street, NW Washington, D.C. 20006. |
Class | Length of Service | Directors | Age | Current Term Expires | Current Position with Company |
Class II | initial term - two year service | Alan I. Rothenberg | May 2005 | Chair, Compensation Committee Member, Audit Committee, Corporate Governance & Nominating Committee | |
Vincent J. Dooley | May 2005 | Member, Compensation Committee, Corporate Governance & Nominating Committee | |||
Class III | initial term - three year service | Richard T. Brock | May 2006 | Chairman of the Board | |
Roger A. Baab | May 2006 | Chair, Corporate Governance & Nominating CommitteeMember, Audit Committee | |||
Class I | three year service | John N. Spencer, Jr | May 2007 | Chair, Audit Committeeand Audit Committee Financial ExpertMember, Compensation Committee |
The Committee identifies and evaluates nominees based on the skills, experience, areas of expertise and industry, knowledge of each candidate and the needs of the Company: |
1. | Annual retainer of $10,000 payable in common stock of the Company at the market price as of the date of the Company’s annual shareholders’ meeting. If a director joins the Board in between annual meeting dates, the annual retainer is pro-rated accordingly. In 2004, each share of the Company’s common stock paid to directors as an annual retainer had a market price of $2.24 pre share. |
2. | A fee of $5,000 for each day on which he was physically present at a Board meeting. |
3. | A fee of $1,250 for Committee Meetings held outside of regularly scheduled Board meetings at which the director was physically present. |
4. | A fee of $5,000 for the Chairman of the Audit Committee. |
Stock Awards | ||||
Name of Director | Aggregate Cash Payment | No. and Class of Shares | Value per Share | Other Compensation |
Roger A. Babb | $20,000.00 | 4,464 | $2.24 | *$30,000 |
Vincent J. Dooley | $15,000.00 | 372 4,464 | $5.59 (initial grant) $2.24 | *$10,000 |
Alan I. Rothenberg | $15,000.00 | 4,464 | $2.24 | *$10,000 |
John N. Spencer | $29,869.86 | 4,464 | $2.24 | *$30,000 |
Officer’s Name | Age | Title |
Richard T. Brock | 57 | Chief Executive Officer, Chairman of the Board |
David R. Simmons * | 49 | President and Chief Operating Officer |
Judith A. Vitale | 50 | Senior Vice President and Chief Financial Officer |
Jeffrey L. Longoria | 44 | Senior Vice President of Sales |
Joseph L. Longoria ** | 45 | Senior Vice President of Development and Services |
Amount | ||||||
and Nature | ||||||
of Beneficial | Percent | |||||
Name of Beneficial Owner | Ownership | of Class | ||||
Richard T. Brock …………………………………………. | 962,233 | (1) | 26.8% | |||
David R. Simmons(9)……………………………………… | 58,794 | (2) | 1.6% | |||
Jeffrey L. Longoria ……………………………………….. | 43,776 | (3) | 1.2% | |||
Judith A. Vitale …………………………………………… | 36,484 | (4) | 1.0% | |||
Roger A. Babb …………………………………………… | 23,911 | (5) | * | |||
Alan I. Rothenberg………………………………………. | 10,659 | (6) | * | |||
Joseph L. Longoria(10)…………………………………… | 8,091 | * | ||||
John N. Spencer, Jr.…………………………………..….. | 7,201 | (7) | * | |||
Vincent J. Dooley.…………………………………..…..... | 6,711 | (7) | * | |||
All directors and executive officers as a group (9 persons) | 1,157,860 | (8) | 32.3% |
(1) | Includes 123,418 shares subject to options exercisable and 640,207 shares that may be acquired upon conversion of preferred stock on or before May 21, 2005. |
(2) | Includes 48,794 shares subject to options exercisable and 10,000 shares that may be acquired upon conversion of preferred stockon or before May 21, 2005. |
(3) | Includes 25,685 shares subject to options exercisable on or before May 21, 2005. |
(4) | Includes 36,481 shares subject to options exercisable on or before May 21, 2005. |
(5) | Includes 11,252 shares subject to options exercisable on or before May 21, 2005. |
(6) | Includes 3,334 shares subject to options exercisable on or before May 21, 2005. |
(7) | Includes 1,875 shares subject to options exercisable on or before May 21, 2005. |
(8) | Includes 252,714 shares subject to options exercisable and 650,207 shares that may be acquired upon conversion of preferred stock on or before May 21, 2005. |
(9) | Mr. Simmons resigned from the Company on March 22, 2005. |
(10) | Mr. Joseph Longoria resigned from the Company on December 31, 2004. |
THE COMPENSATION COMMITTEE | |
OF THE BOARD OF DIRECTORS | |
Vincent J. Dooley | |
John N. Spencer, Jr. | |
Alan I. Rothenberg, Chairman | |
Annual Compensation | Long Term | All Other | ||||||||||
Compensation(1) | Compensation(2) | |||||||||||
$ | $ | Other Annual | Securities Underlying Options | |||||||||
Name and Position | Year | Salary | Bonus | Compensation(3) | (#) | ($) | ||||||
Richard T. Brock Chairman and CEO | 2004 2003 2002 | 67,083 270,000 250,000 | - - 235,022 | - - - | 100,000 17,000 13,334 | 3,209 4,186 3,411 | ||||||
David R. Simmons(4) President and COO | 2004 2003 2002 | 200,833 240,625 46,173 | - - 10,000 | - - - | 47,000 57,000 25,000 | 3,012 3,600 263 | ||||||
Judith A. Vitale Sr. VP & CFO | 2004 2003 2002 | 169,375 180,000 170,000 | - - 64,631 | - - - | 36,000 15,000 11,999 | 3,596 3,600 48,628 | ||||||
Jeffrey L. Longoria(5) Sr. VP of Sales | 2004 2003 | 164,375 125,000 | 97,991 | - - | 36,000 25,000 | 450 - | ||||||
Joseph L. Longoria(5) (6) Sr. VP of Development & Services | 2004 2003 | 179,875 125,000 | - 109,631 | - - | 36,000 25,000 | 1,885 |
(1) | The Company did not award any restricted stock or other long-term incentives other than stock options during 2002, 2003 or 2004 to its officers. Accordingly, columns relating to such awards have been omitted. |
(2) | Includes Company matching contributions to the indicated person’s 401 (k) plan account, any benefit coverage, and income realized from the exercise and sale of stock options. |
(3) | Information with respect to certain perquisites and other personal benefits awarded to the named executive officers has been omitted because in each case, the aggregate value of these items is less than the lesser of $50,000 or 10% of the executive’s annual salary and bonus for the years reported above. |
(4) | Mr. Simmons resigned from the Company on March 22, 2005. |
(5) | Both Messrs. Jeffrey Longoria and Joseph Longoria joined the Company as executive officers on March 3, 2003, under one-year employment agreements that entitled them to certain company benefits for performance of specified duties. Each was also entitled to certain deferred bonus payments, which equaled $97,991 for both Jeffrey Longoria and Joseph Longoria, which were paid in 2003. An additional $11,640 was paid to Mr. Joseph Longoria under a 2003 compensation plan. The employment agreements expired on March 3, 2004 and were not been renewed. |
(6) | Mr. Joseph Longoria resigned from the Company on December 31, 2004. |
Potential Realizable | ||||||||||||
Value at Assumed | ||||||||||||
Individual Grants | Annual Rates of | |||||||||||
No. of | % of Total | Stock Price | ||||||||||
Securities | Options | Exercise | Appreciation for | |||||||||
Underlying | Granted to | or Base | Option Term | |||||||||
Options | Employees | Price | Date of | 5% | 10% | |||||||
Name | Granted | during Year | ($)/Share | Expiration | ($) | ($) | ||||||
Richard T. Brock | 100,000 | (1) | 32.84 | 2.84 | 06/04/2014 | 178,606 | 452,622 | |||||
David R. Simmons | (3) | 35,000 | (2) | 11.49 | 5.37 | 02/24/2014 | 118,201 | 299,544 | ||||
12,000 | (1) | 3.94 | 2.45 | 06/23/2014 | 18,490 | 46,856 | ||||||
Judith A. Vitale | 30,000 | (2) | 9.85 | 5.37 | 02/24/2014 | 101,315 | 256,752 | |||||
6,000 | (1) | 1.97 | 2.45 | 06/23/2014 | 9,245 | 23,428 | ||||||
Jeffrey L. Longoria | 30,000 | (2) | 9.85 | 5.37 | 02/24/2014 | 101,315 | 256,752 | |||||
6,000 | (1) | 1.97 | 2.45 | 06/23/2014 | 9,245 | 23,428 | ||||||
Joseph L. Longoria | (4) | 30,000 | (2) | 9.85 | 5.37 | 02/24/2014 | 101,315 | 256,752 | ||||
6,000 | (1) | 1.97 | 2.45 | 06/23/2014 | 9,245 | 23,428 |
Value of Unexercised | ||||||||
Shares | Number of | In-the-Money Options | ||||||
Acquired on | Value | Unexercised Options | at Year End(1) | |||||
Exercise | Received | at Year-End (#) | $ | |||||
Name | # | $ | Exercisable | Unexercisable | Exercisable | Unexercisable | ||
Richard T. Brock | - | - | 121,064 | 13,354 | 1,487 | 495 | ||
David R. Simmons(2) | - | - | 38,294 | 90,706 | - | - | ||
Judith A. Vitale | - | - | 25,044 | 43,937 | 1,148 | 574 | ||
Jeffrey L. Longoria | - | - | 15,685 | 45,315 | - | - | ||
Joseph L. Longoria(3) | - | - | 15,685 | - | - | - |
(1) | Value of Unexercised In-the-Money Options at December 31, 2004 is calculated as follows: Per Share Closing SalePrice onDecember 31, 2004 less Per Share Exercise Price times the Number of Shares Subject to Unexercised Options. The per shareprice on December 31, 2003 was $2.33. |
(2) | Mr. Simmons resigned from the Company on March 22, 2005. |
(3) | Mr. Joseph Longoria resigned from the Company on December 31, 2004. |
THE AUDIT COMMITTEE | |
OF THE BOARD OF DIRECTORS | |
Roger A. Babb | |
Alan I. Rothenberg | |
John N. Spencer, Jr., Chairman |
2004 | 2003 | ||||||
Audit fees | (1) | $ | 67,747 | $ | 49,018 | ||
Audit Related Fees | (2) | - | 26,219 | ||||
Tax Fees | (3) | 15,528 | 27,452 | ||||
All Other Fees | - | - | |||||
Total | $ | 83,275 | $ | 102,689 |
· | correspondence mailed to 2859 Paces Ferry Road, Suite 1000, Atlanta, Georgia 30339 Attn: Richard T. Brock |
· | email to Richard Brock, Chairman of the Board atrbrock@firstwave.net |
· | telephone at 770-431-1200 |
BY ORDER OF THE BOARD OF DIRECTORS | |
Richard T. Brock | |
Chairman and Chief Executive Officer | |
· | An understanding of financial statements and generally accepted accounting principles. |
· | An ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves. |
· | Experience preparing, auditing, analyzing or evaluating financial statements that present a level of complexity of accounting issues that are generally comparable to the issues that can reasonably be expected to be raised in the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities. |
· | An understanding of internal controls and procedures for financial reporting. |
· | An understanding of audit committee functions. |
· | Have authority to select, hire, and terminate the Company’s independent auditors who will report directly to the Audit Committee. |
· | Oversee the resolution of any disagreements between management and the independent auditors regarding financial reporting. |
· | Approve all fees and other terms of the audit engagement with the Company’s independent auditors. |
· | Set clear hiring policies for employees or former employees of the independent auditors that meet the SEC regulations and stock exchange listing standards. |
· | Review management’s assertion on its assessment of the effectiveness of internal controls and the independent auditors’ report on management’s assertion. |
· | Receive any attorneys’ reports of evidence of a material violation of securities laws or breaches of fiduciary duty. |
· | Approve any non-audit projects with the independent auditors resulting in fees in excess of $5000. |
· | Assist the Board in evaluating the performance of the independent auditors. |
· | Oversee the independence of the independent auditors. |
· | Obtain and review at least annually a written report from the independent auditors that describes the relationship between the independent auditors and the Company, and discuss with the independent auditors any services that may impact the objectivity and independence of the auditors. |
· | Review findings noted by the independent auditors in the course of performing their audit and related procedures. |
· | Meet with the independent auditors without any members of management being present as it determines necessary to discuss matters that the Audit Committee and/or the independent auditors believe should be discussed. |
· | Evaluate significant accounting and reporting issues identified in any analyses prepared by management or the independent auditors or otherwise identified in the course of the Committee’s review of the Company’s financial statements and discussions with its auditors with due consideration of their impact on the Company’s financial statements. |
· | Review with management and the independent auditors new accounting pronouncements and the adoption and/or changes of material accounting principles and practices to be followed when preparing the financial statements of the Company. |
· | Inquire as to whether the independent auditors have any concerns regarding the possibility of significant accounting or reporting risks or exposures, the appropriateness and quality of significant accounting treatments and whether there has been any aggressive creativity in any such treatments, any business transactions that may affect the fair presentation of the Company’ financial condition or results of operations, or any material weaknesses in the Company’s internal control systems. |
· | Discuss with independent auditors alternative accounting policies and practices within GAAP related to material items that have been discussed with management, including the ramifications of the use of alternative treatments. |
· | Manage the receipt, retention and treatment of any complaints received by the Company regarding accounting, internal accounting controls, or auditing matters. |
· | Manage the confidential submission by employees of the Company of any concerns regarding questionable accounting or auditing matters. |
· | Review and recommend the types of information to be disclosed in earnings press releases and in financial information and earnings guidance provided to analysts and agencies. |
· | Review significant financial reporting matters to be disclosed in any SEC filings. |
· | Review with the independent auditors their proposed audit scope and approach. |
· | Evaluate management’s handling of any proposed audit adjustments identified by the independent auditors. |
· | Review any legal matters that could have a significant impact on the Company’s financial statements. |
· | Meet with management and the independent auditors to review the annual financial statements, related notes and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) prior to filing or other public release, and to be included in the Company’s Annual Report on Form 10-K, and inquire whether such financial statements and related notes are prepared in accordance with GAAP and, together with such MD&A, are consistent with the information known to Committee members. |
· | Meet with management and the independent auditors to review the interim financial statements, any related notes, and the related MD&A prior to filing or other public release, and to be included in the Company’s Report on Form 10-Q, and inquire whether such interim financial statements and any related notes are prepared in accordance with GAAP and, together with such MD&A, are consistent with the information known to Committee members. |
· | Review and approve the Audit Committee report required to be included in the Company’s annual proxy statement. |
· | Review the Company’s Code of Business Conduct and Ethics and recommend any proposed changes to the Board for approval. |
· | Initiate special investigations into matters within the Audit Committee’s scope of responsibilities, if deemed appropriate, or as delegated by the Board of Directors. |
· | Research any matter brought to its attention within the scope of its duties, with the power to retain outside counsel for this purpose if appropriate, in its judgment. |
· | Perform such other functions as assigned by the Board of Directors. |
· | Have the authority to hire independent experts, lawyers, and other advisors to assist the Audit Committee in connection with its responsibilities. |
· | Review its performance and reassess the adequacy of its Charter annually and recommend any proposed changes to the Board for approval. |
ÿ FOR the nominee listed below (except as indicated otherwise below) | ÿ WITHHOLD AUTHORITY to vote for the nominee listed below |
ÿ FOR | ÿ AGAINST | ÿ ABSTAIN |
ÿ FOR | ÿ AGAINST | ÿ ABSTAIN |
Dated________________, 2005 | __________________________ |
Signature | |
__________________________ | |
Signature (if held jointly) | |
Title of authority (if applicable) |