sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
| | Preliminary Proxy Statement
| | Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to ss. 240.14a-12
NEW CENTURY EQUITY HOLDINGS CORP.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(i) Title of each class of securities to which transaction applies
--------------------------------------------------------------------------------
(ii) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(iii) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
--------------------------------------------------------------------------------
(iv) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(v) Total fee paid
| | Fee paid previously with preliminary materials.
| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
NEW CENTURY
EQUITY HOLDINGS
April 30, 2007
Dear Stockholder:
You are cordially invited to attend the 2007 Annual Meeting of Stockholders (the
"Annual Meeting") of New Century Equity Holdings Corp. (the "Company"). The
Annual Meeting will be held on June 6, 2007, at 10:00 a.m. local time, at the
Company's offices located at 200 Crescent Court, Suite 1400, Dallas, Texas, or
at any adjournment or postponement thereof.
This year, you are being asked to act upon (i) the election of one (1) director
to serve until the 2009 Annual Meeting of Stockholders and until his successor
is duly elected and qualified and two (2) directors to serve until the 2010
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified, (ii) the ratification of the appointment of Burton
McCumber & Cortez, L.L.P. as our independent accountants for fiscal 2007 and
(iii) any other matter that may properly come before the Annual Meeting or any
adjournment or postponement thereof. These matters are discussed in greater
detail in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN AND WHETHER OR NOT YOU EXPECT TO BE
PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. RETURNING THE PROXY CARD WILL NOT
DEPRIVE YOU OF YOUR RIGHT TO ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON.
IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
On behalf of the Board of Directors, I would like to express our appreciation
for your continued interest in our Company. We look forward to seeing you at the
Annual Meeting.
Sincerely,
/S/ Mark E. Schwarz
----------------------
Mark E. Schwarz
CHAIRMAN OF THE BOARD
NEW CENTURY EQUITY HOLDINGS CORP.
200 CRESCENT COURT, SUITE 1400
DALLAS, TEXAS 75201
(214) 661-7488
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of Stockholders (the
"Annual Meeting") of New Century Equity Holdings Corp. (the "Company") will be
held on June 6, 2007, at 10:00 a.m., local time, at the Company's offices
located at 200 Crescent Court, Suite 1400, Dallas, Texas, or at any adjournment
or postponement thereof to consider and vote on the following matters described
in the accompanying Proxy Statement:
1. To elect one (1) director to hold office until the 2009 Annual
Meeting of Stockholders and until his successor is duly elected and
qualified and two (2) directors to hold office until the 2010 Annual
Meeting of Stockholders and until his successor is duly elected and
qualified;
2. To ratify the appointment of Burton McCumber & Cortez, L.L.P. as the
Company's independent public accountants for fiscal 2007; and
3. To act upon any other matter that may properly come before the
Annual Meeting or any adjournment thereof. The Board of Directors of
the Company is presently unaware of any other business to be
presented to a vote of the stockholders at the Annual Meeting or any
adjournment or postponement thereof.
The Board of Directors of the Company has fixed the close of business on
April 23, 2007 as the record date (the "Record Date") for determining
stockholders entitled to notice of and to vote at the Annual Meeting. A complete
list of the stockholders entitled to vote at the Annual Meeting will be
maintained and available for inspection at the Company's principal executive
offices at 200 Crescent Court, Suite 1400, Dallas, Texas 75201 during ordinary
business hours for a period of ten (10) days prior to the Annual Meeting. The
list will be open for the examination by any stockholder for any purpose germane
to the Annual Meeting during this time. The list will be produced at the time
and place of the Annual Meeting and will be open during the whole time thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. WE URGE
YOU TO PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE.
ANY STOCKHOLDER GIVING A PROXY MAY REVOKE IT AT ANY TIME BEFORE THE PROXY IS
VOTED BY GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY, BY
SUBMITTING A LATER-DATED PROXY, OR BY ATTENDING THE ANNUAL MEETING AND VOTING IN
PERSON.
By Order of the Board of Directors
/s/ Steven J. Pully
-----------------------------------
Steven J. Pully
CHIEF EXECUTIVE OFFICER
Dated: April 30, 2007
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE THAT IS PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES OF AMERICA.
2
NEW CENTURY EQUITY HOLDINGS CORP.
200 CRESCENT COURT, SUITE 1400
DALLAS, TEXAS 75201
----------------------------------------
PROXY STATEMENT
-----------------------------------------
INTRODUCTION
This Proxy Statement is being provided to the stockholders of New Century
Equity Holdings Corp., a Delaware corporation (the "Company", "we," "our" or
"us"), in connection with the solicitation of proxies by the Board of Directors
for use at the 2007 Annual Meeting of Stockholders or any adjournment thereof
(the "Annual Meeting") to be held on June 6, 2007, at 10:00 a.m., local time, at
the Company's offices located at 200 Crescent Court, Suite 1400, Dallas, Texas,
or at any adjournment or postponement thereof, for the purposes set forth in the
foregoing Notice of Annual Meeting of Stockholders. Properly executed proxies
received in time for the Annual Meeting will be voted.
At the Annual Meeting, stockholders will be asked to act upon (i) the
election of one (1) director to serve until the 2009 Annual Meeting of
Stockholders and until his successor has been elected and qualified and two (2)
directors to serve until the 2010 Annual Meeting of Stockholders and until their
respective successors have been elected and qualified, (ii) the ratification of
the appointment of Burton McCumber & Cortez, L.L.P. as our independent public
accountants for fiscal 2007 and (iii) any other matter that may properly come
before the Annual Meeting or any adjournment or postponement thereof. The
mailing address of the Company's principal executive offices is 200 Crescent
Court, Suite 1400, Dallas, Texas 75201.
THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2006 IS
BEING FURNISHED WITH THIS PROXY STATEMENT AND PROXY CARD, WHICH ARE BEING MAILED
ON OR ABOUT MAY 1, 2007 TO THE HOLDERS OF RECORD OF SHARES OF COMMON STOCK, $.01
PAR VALUE, OF THE COMPANY (THE "COMMON STOCK"), ON THE RECORD DATE (AS DEFINED
BELOW). THE ANNUAL REPORT ON FORM 10-K DOES NOT CONSTITUTE A PART OF THIS PROXY
STATEMENT.
RECORD DATE AND VOTING SECURITIES
The securities of the Company entitled to vote at the Annual Meeting
consist of shares of Common Stock. At the close of business on April 23, 2007,
the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting (the "Record Date"), there were 53,883,872 outstanding
shares of Common Stock.
QUORUM AND VOTING REQUIREMENTS
A majority of the outstanding shares of Common Stock entitled to vote as
of the Record Date must be present in person or represented by proxy at the
Annual Meeting in order to hold the meeting and conduct business. This presence
is called a quorum. Your shares will be counted as present at the Annual Meeting
if you are present and vote in person at the Annual Meeting or if you have
1
properly submitted a proxy card. Abstentions and broker non-votes (which are
described below) will be considered to be shares present at the Annual Meeting
for purposes of a quorum.
The holders of record of Common Stock (the "Common Stockholders") on the
Record Date will be entitled to one (1) vote per share.
ABSTENTIONS AND BROKER NON-VOTES
The effect of abstentions (i.e., if you or your broker marks "ABSTAIN" on
a proxy card) and broker non-votes on the counting of votes for each proposal is
described below. Broker non-votes occur when shares held by a broker for a
beneficial owner are not voted with respect to a particular proposal because (1)
the broker does not receive voting instructions from the beneficial owner, and
(2) the broker lacks discretionary authority to vote the shares. Banks and
brokers cannot vote on their clients' behalf on "non-routine" proposals. For
purposes of determining broker non-votes, proposals (i) and (ii) described above
are considered routine proposals. For the purpose of determining whether
stockholders have approved a matter, abstentions are treated as shares present
or represented and voting. Broker non-votes are not counted or deemed to be
present or represented for the purpose of determining whether stockholders have
approved a matter, though they are counted toward the presence of a quorum as
discussed above.
REQUIRED VOTES
The Common Stockholders are entitled to elect three (3) directors at the
Annual Meeting. A plurality of the total votes cast by the stockholders entitled
to vote is required for the election of such directors, meaning that the three
nominees who receive the most votes will be elected. Holders of Common Stock
shall be entitled to one (1) vote per share on the election of such directors.
For the ratification of the appointment of the public accountants to be
approved, the favorable vote of a majority of shares present and entitled to
vote thereon is required. Abstentions count for quorum purposes and will have
the same effect as a vote against the proposal to ratify the appointment of the
auditors.
VOTING OF PROXIES
Stockholders whose shares are registered in their own names may vote by
mailing a completed Proxy Card. To vote by mailing a Proxy Card, please
complete, date and sign the accompanying Proxy Card and promptly return it in
the enclosed envelope or otherwise mail it to the Company. Properly executed
Proxy Cards received in time for the Annual Meeting will be voted. Stockholders
are urged to specify their choices on the Proxy Card, but if no choice is
specified, eligible shares will be voted FOR the election of the director
nominees named in this Proxy Statement and FOR the ratification of the
appointment of Burton McCumber & Cortez, L.L.P. as our independent public
accountants for fiscal 2007. As of the date of this Proxy Statement, management
of the Company knows of no other matters that are likely to be brought before
the Annual Meeting. However, if any other matters should properly come before
the Annual Meeting, the persons named in the enclosed Proxy Card will have
discretionary authority to vote such Proxy Card in accordance with their best
judgment on such matters. Any stockholder giving a proxy may revoke it at any
time before the proxy is voted by giving written notice of revocation to the
Secretary of the Company, by submitting a later-dated proxy, or by attending the
Annual Meeting and voting in person.
2
ATTENDANCE AT THE ANNUAL MEETING
If your shares are held by a bank, broker or other intermediary and you
plan to attend the Annual Meeting, please send written notification to New
Century Equity Holdings Corp., 200 Crescent Court, Suite 1400, Dallas, Texas
75201 and enclose evidence of your ownership (such as a letter from the bank,
broker or intermediary confirming your ownership or a bank or brokerage firm
account statement). The names of all those planning to attend will be placed on
an admission list held at the registration desk at the entrance to the meeting.
RIGHTS OF FORMER PREFERRED STOCKHOLDERS
Newcastle Partners, L.P. ("Newcastle") previously owned 4.8 million shares
of Series A Convertible Preferred Stock (the "Series A Preferred Stock"), which
it acquired from the Company for $5.0 million in June 2004 (the "Newcastle
Transaction"). The Certificate of Designations of the Series A Preferred Stock
provides that, so long as any shares of Series A Preferred Stock remain
outstanding, among other things, (1) the Company's Board of Directors is
prohibited from exceeding four members, and (2) the holders of the Series A
Preferred Stock have the right to elect two directors to the Company's Board of
Directors. Newcastle converted all of the Series A Preferred Stock into Common
Stock on July 3, 2006 and accordingly no longer has any special voting rights or
privileges in respect of the election of directors to the Board of Directors or
other matters that are subject to a vote of the Company's stockholders.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to beneficial ownership as of the Record Date of the Company's
voting securities by (i) all persons who are beneficial owners of five percent
(5%) or more of the Company's voting securities, (ii) each director of the
Company, (iii) the Named Executive Officers, and (iv) all directors and
executive officers as a group.
As of the Record Date, 53,883,872 shares of the Common Stock were
outstanding. For purposes of this Proxy Statement, beneficial ownership is
defined in accordance with the rules of the SEC. The persons listed have sole
voting power and sole dispositive power with respect to all shares set forth in
the table unless otherwise specified in the footnotes to the table. Unless
otherwise indicated, the address of each beneficial owner listed in the table is
c/o New Century Equity Holdings Corp., 200 Crescent Court, Suite 1400, Dallas,
Texas 75201.
Information with respect to beneficial ownership of the persons and
entities named in the table below is based upon information furnished by them to
the Company or contained in filings made with the SEC.
Common Stock
---------------------------
Name of Beneficial Owner Shares %(1)
------------------------------------ ------------- -----
5% SECURITY HOLDERS
Newcastle Partners, L.P. 19,380,768(2) 36.0%
NAMED EXECUTIVE OFFICERS AND
DIRECTORS
Mark E. Schwarz 19,480,768(3) 36.1%
Steven J. Pully 150,000(4) *
John Murray 50,000(5) *
James Risher 90,000(6) *
1900 Eastwood Road, Suite 11
Wilmington, NC 28403
Jonathan Bren 0 0%
767 5th Avenue, 23rd Floor
New York, NY 10153
All directors and executive officers
as a group (five persons) 19,770,768(7) 36.4%
-------------------------
* Less than 1%
4
(1) Percentage ownership is based on 53,883,872 shares of Common Stock
outstanding as of the Record Date. With the exception of shares that may
be acquired by employees pursuant to the Company's 401(k) retirement plan,
a person is deemed to be the beneficial owner of Common Stock that can be
acquired within 60 days after the Record Date upon exercise of options.
Each beneficial owner's percentage ownership of Common Stock is determined
by assuming that options that are held by such person, but not those held
by any other person, and that are exercisable or convertible within 60
days of the Record Date have been exercised or converted.
(2) Represents securities held by Newcastle as disclosed in a Schedule 13D/A
filed by Newcastle with the SEC on April 10, 2006, including 19,230,768
shares of Common Stock issued by the Company upon conversion of 4,807,692
shares of Series A Convertible Preferred Stock on July 3, 2006. Newcastle
Capital Management, L.P. ("Newcastle Management") as the general partner
of Newcastle, may be deemed to beneficially own the securities
beneficially owned by Newcastle. Newcastle Capital Group, L.L.C.
("Newcastle Capital"), as the general partner of Newcastle Management,
which in turn is the general partner of Newcastle, may be deemed to
beneficially own the securities beneficially owned by Newcastle. Mark E.
Schwarz, as the managing member of Newcastle Capital, the general partner
of Newcastle Management, which in turn is the general partner of
Newcastle, may also be deemed to beneficially own the securities
beneficially owned by Newcastle. Each of Newcastle Management, Newcastle
Capital and Mr. Schwarz disclaims beneficial ownership of the securities
beneficially owned by Newcastle except to the extent of their pecuniary
interest therein.
(3) Consists of 100,000 shares of Common Stock issuable upon the exercise of
options within 60 days of the Record Date and the 19,380,768 shares of
Common Stock beneficially owned by Newcastle of which Mr. Schwarz may also
be deemed to beneficially own by virtue of his power to vote and dispose
of such shares. Mr. Schwarz disclaims beneficial ownership of the
19,380,768 shares of Common Stock beneficially owned by Newcastle except
to the extent of his pecuniary interest therein.
(4) Consists of shares of Common Stock issuable upon the exercise of options
within 60 days of the Record Date. Mr. Pully is the President of Newcastle
Management. Mr. Pully disclaims beneficial ownership of the 19,380,768
shares of Common Stock beneficially owned by Newcastle.
(5) Consists of shares of Common Stock issuable upon the exercise of options
within 60 days of the Record Date. Mr. Murray is the Chief Financial
Officer of Newcastle Management. Mr. Murray disclaims beneficial ownership
of the 19,380,768 shares of Common Stock beneficially owned by Newcastle.
(6) Consists of shares of Common Stock issuable upon the exercise of options
within 60 days of the Record Date.
(7) Consists of securities beneficially owned by the directors and executive
officers named in the security ownership table.
5
PROPOSAL 1
ELECTION OF DIRECTORS
There are currently four (4) directors serving on the Board of Directors
consisting of (i) Mark E. Schwarz and Steven J. Pully, representatives of the
former holder of the Series A Preferred Stock, and (ii) James Risher and
Jonathan Bren, both independent directors.
The Amended and Restated Certificate of Incorporation of the Company (the
"Charter") and the Amended and Restated By-Laws of the Company (the "By-Laws")
provide that the directors, other than those who may be elected by the holders
of any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified into three classes, as nearly
equal in number as possible, serving staggered three-year terms. The Certificate
of Designations of the Series A Preferred Stock provided holders with the
contractual right to elect two directors to annual terms and limited the number
of directors serving on the Board of Directors to a maximum of four.
As a result of the conversion of all the shares of Series A Preferred
Stock by Newcastle into Common Stock on July 3, 2006, the term of office of
Messrs. Schwarz and Pully expires at the Annual Meeting. As a Class I director,
Mr. Bren's term expires at the Annual Meeting. Mr. Risher is a Class II director
whose term expires at the 2008 Annual Meeting of Stockholders and until his
successor shall be duly elected and qualified.
In order to comply with the requirement in the Charter and By-Laws that
the directors be classified into three classes as nearly equal in number as
possible, the Board of Directors has nominated (i) Mr. Pully as a Class III
director who, if elected, shall serve for a term expiring at the 2009 Annual
Meeting of Stockholders and until his successor has been duly elected and
qualified and (ii) Messrs. Schwarz and Bren as Class I directors who, if
elected, shall serve for a term expiring at the 2010 Annual Meeting of
Stockholders and until their respective successors shall have been duly elected
and qualified.
Unless otherwise specified, all of the Proxies received will be voted in
favor of the election of Messrs. Schwarz, Pully and Bren. Management has no
reason to believe that any of the director nominees will be unable or unwilling
to serve as directors, if elected. Should any of Messrs. Schwarz, Pully or Bren
not remain a candidate for election at the date of the Annual Meeting, the
Proxies may be voted for a substitute nominee or nominees selected by the Board
of Directors.
NOMINEES FOR ELECTION BY THE COMMON STOCKHOLDERS AT THE ANNUAL MEETING
Position with Director
Name Age Class Company Since
---- --- ----- ------- -----
Mark E. Schwarz 46 I Chairman of the Board June 2004
Steven J. Pully 47 III Director, Chief June 2004
Executive Officer and
Secretary
Jonathan Bren 46 I Director June 2005
6
There are no family relationships between any two directors or executive
officers.
MARK E. SCHWARZ has served as Chairman of the Board of the Company since
June 18, 2004 as a result of the Newcastle Transaction. He has served as the
general partner, directly or through entities which he controls, of Newcastle, a
private investment firm, since 1993. Mr. Schwarz has served as Chairman of the
Board of Hallmark Financial Services, Inc., a property and casualty insurance
company, since October 2001 and was its Chief Executive Officer from January
2003 to August 2006. He currently serves as Chairman of the Boards of Bell
Industries, Inc., a computer systems integrator, and Pizza Inn, Inc., a
franchisor and food and supply distributor, and a director of (i) Nashua
Corporation, a specialty paper, label and printing supplies manufacturer and
(ii) SL Industries, Inc., a power and data quality products manufacturer.
STEVEN J. PULLY has served as a director, Chief Executive Officer and
Secretary of the Company since June 18, 2004 as a result of the Newcastle
Transaction. Mr. Pully has served as the President of Newcastle Management, the
general partner of Newcastle, since January 2003 and has been with Newcastle
since December 2001. From 2003 to 2004, he also served as Chief Executive
Officer of privately-held Pinnacle Frames and Accents, Inc., a domestic picture
frame manufacturer. Prior to joining Newcastle Management, from 2000 to 2001,
Mr. Pully served as a managing director in the investment banking department of
Banc of America Securities, Inc. and from 1997 to 2000 he was a member of the
investment banking department of Bear Stearns where he became a senior managing
director in 1999. Mr. Pully is a director of Pizza Inn, Inc., a franchisor and
operator of pizza restaurants. Mr. Pully is a CPA, a member of the Texas Bar and
is also a CFA charterholder.
JONATHAN BREN serves as the Global Managing Partner of Bren Ventures
L.L.C., an entity he formed in January of 2005 to make strategic investments in
early stage hedge fund managers. From July 1998 to December 2004, Mr. Bren was a
partner of Hunt Financial Ventures, L.P., which made strategic investments in
early stage and emerging hedge fund managers and also made direct investments
into other hedge fund operations. He also served as President of HFV Investments
Inc., a broker dealer affiliated with Hunt Financial Ventures, L.P. During the
fifteen years prior to joining Hunt Financial Ventures, L.P., Mr. Bren worked
for a series of asset management, investment banking and merchant banking
organizations.
DIRECTOR WITH TERM EXPIRING AT 2008 ANNUAL MEETING OF STOCKHOLDERS:
Position with Director
Name Age Class Company Since
---- --- ----- ------- -----
James A. Risher 64 II Director June 2004
JAMES A. RISHER has served as a director of the Company since October
2004. Mr. Risher has been the Managing Partner of Lumina Group, LLC, a
private company engaged in the business of consulting and investing in small
7
and mid-size companies, since 1998. Mr. Risher has served as the Chief
Executive Officer and president of Del Global Technologies Corporation ("Del
Global"), a leader in medical imaging and power electronics, since September
2006. Mr. Risher was appointed interim Chief Executive Officer of Del Global
in August 2006. In addition, Mr. Risher has served as a director of Del
Global since June 2004. From February 2001 to May 2002, Mr. Risher served as
Chairman and Chief Executive Officer of BlueStar Battery Systems
International, Inc. ("BlueStar"), a Canadian public company that is an
e-commerce distributor of electrical and electronic products to selected
automotive aftermarket segments and targeted industrial markets. From 1986
to 1998, Mr. Risher served as a director, Chief Executive Officer and
President of Exide Electronics Group, Inc. ("Exide"), a global leader in the
uninterruptible power supply industry. He also served as Chairman of Exide
from December 1997 to July 1998. Mr. Risher currently serves as a director of
SL Industries, Inc., a power and data quality products manufacturer.
REQUIRED VOTE
A plurality of the votes cast is required for the election of the
Company's directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE DIRECTOR NOMINEES
PROPOSAL II
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Burton McCumber & Cortez, L.L.P. to serve as the
Company's independent public accountants. Although it is not required to do so,
the Board is submitting to stockholders for ratification the selection of Burton
McCumber & Cortez, L.L.P. as the Company's independent public accountants for
the year ending December 31, 2007. Such ratification of the selection of Burton
McCumber & Cortez, L.L.P. will require the affirmative vote of the holders of a
majority of the shares of Common Stock entitled to vote thereon and represented
at the Annual Meeting. A representative of Burton McCumber & Cortez, L.L.P. will
not be present at the Annual Meeting.
Aggregate fees for professional services rendered to the Company by Burton
McCumber & Cortez, L.L.P. for the years ended December 31, 2006 and December 31,
2005 were as follows:
2006 2005
------- -------
Audit .................................. $96,672 $87,996
Audit Related .......................... 0 0
Tax .................................... 0 0
Other .................................. 0 0
======= =======
Total ................................ $96,672 $87,996
8
AUDIT FEES
The aggregate fees billed by Burton McCumber & Cortez, L.L.P. for
professional services required for the audit of the Company's annual financial
statements on Form 10-K and the review of the interim financial statements
included in the Company's Forms 10-Q were $96,672 and $87,996 for fiscal years
2006 and 2005, respectively.
AUDIT-RELATED FEES
The Company did not engage or pay Burton McCumber & Cortez, L.L.P. for
assurance and related services related to the performance of the audit of the
Company's annual financial statements or the review of the interim financial
statements included in the Company's Forms 10-Q for fiscal years 2006 and 2005.
TAX FEES
The Company did not engage or pay Burton McCumber & Cortez, L.L.P. for
professional services relating to tax compliance, tax advice or tax planning in
fiscal years 2006 and 2005.
ALL OTHER FEES
The Company did not engage or pay Burton McCumber & Cortez, L.L.P. for
additional services, other than the services described above, in fiscal years
2006 and 2005.
PRE-APPROVAL POLICIES AND PROCEDURES
All audit and non-audit services to be performed by the Company's
independent auditors must be approved in advance by the Audit Committee.
Consistent with applicable law, limited amounts of services, other than audit,
review or attest services, may be approved by one or more members of the Audit
Committee pursuant to authority delegated by the Audit Committee, provided each
such approved service is reported to the full Audit Committee at its next
meeting.
All of the engagements and fees for the Company's fiscal year ended
December 31, 2006 were approved by the Audit Committee. In connection with the
audit of the Company's financial statements for the fiscal year ended December
31, 2006, Burton McCumber & Cortez, L.L.P. only used full-time, permanent
employees.
The Audit Committee has considered whether the provision by Burton
McCumber & Cortez, L.L.P. of the services covered by the fees other than the
audit fees is compatible with maintaining Burton McCumber & Cortez, L.L.P.'s
independence and believes that it is compatible.
REQUIRED VOTE
The approval of the proposal to ratify the appointment of Burton McCumber
& Cortez, L.L.P. requires the affirmative vote of a majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF BURTON MCCUMBER & CORTEZ, L.L.P. FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2007
9
CORPORATE GOVERNANCE
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of its Board of
Directors. The Board of Directors held one special meeting and took action on
three occasions by unanimous written consent during 2006. Each of the directors
of the Company attended at least 75% of the aggregate of the total number of
meetings of the Board of Directors (held during the period for which he has been
a director) and the total number of meetings held by all committees of the Board
of Directors on which he served (during the periods that he served) during 2006.
Each director is expected to make reasonable efforts to attend meetings of the
Board of Directors, meeting of the committees of which such director is a member
and the Annual Meetings of Stockholders. Two of the Company's directors were
present at the previous Annual Meeting of Stockholders. The Board of Directors
currently has an Audit Committee and a Compensation Committee but does not have
a Nominating Committee. It is the intention of the Board of Directors to
establish a Nominating Committee, consisting solely of independent directors.
The Board of Directors also had a Special Litigation Committee that investigated
claims by an alleged stockholder described in more detail in the section
entitled "Legal Proceedings." The Special Litigation Committee was dissolved on
June 23, 2006 upon the settlement of the claims.
AUDIT COMMITTEE
The Audit Committee is currently comprised of James Risher, who is not an
employee of the Company or any of its subsidiaries. The Audit Committee is only
comprised of one director although the Charter of the Audit Committee provides
that at least three directors shall serve as members of the Audit Committee. The
Audit Committee meets with the independent auditors and management
representatives, recommends to the Board of Directors appointment of independent
auditors, approves the scope of audits and other services to be performed by the
independent auditors, considers whether the performance of any professional
services by the auditors other than services provided in connection with the
audit function could impair the independence of the auditors and reviews the
results of audits and the accounting principles applied in financial reporting
and financial and operational controls. The independent auditors have
unrestricted access to the Audit Committee and vice versa. The Board of
Directors has determined that James Risher satisfies the "audit committee
financial expert" criteria established by the SEC. The Audit Committee held four
meetings during the fiscal year ended December 31, 2006. James Risher is an
independent director, as independence is defined in Rule 4200(a)(15) of the NASD
listing standards. The Board of Directors has adopted a written Charter of the
Audit Committee which is attached as Appendix A to the Company's definitive
proxy statement on Schedule 14A filed with the SEC on May 2, 2005. The Charter
of the Audit Committee is not available in the Company's website.
COMPENSATION COMMITTEE
The Compensation Committee is comprised of Jonathan Bren, who is not an
employee of the Company or any of its subsidiaries. Mr. Bren is an independent
director, as independence is defined in Rule 4200(a)(15) of the NASD listing
standards. The Compensation Committee's functions include making recommendations
10
to the Board of Directors on policies and procedures relating to compensation
and employee stock and other benefit plans of key executives and approval of
individual salary adjustments and stock awards. The Compensation Committee did
not meet during fiscal year ended December 31, 2006. The Compensation Committee
does not have a charter.
CODE OF CONDUCT AND ETHICS
The Company has adopted a code of conduct and ethics (the "Code") that
applies to all directors, officers and employees. The Code is reasonably
designed to deter wrongdoing and promote (i) honest and ethical conduct,
including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships, (ii) full, fair, accurate,
timely and understandable disclosure in reports and documents filed with, or
submitted to, the SEC and in other public communications made by the Company,
(iii) compliance with applicable governmental laws, rules and regulations, (iv)
the prompt internal reporting of violations of the Code to appropriate persons
identified in the Code, and (v) accountability for adherence to the Code.
Amendments to the Code and any grant of a waiver from a provision of the Code
requiring disclosure under applicable SEC rules will be disclosed in a Current
Report on Form 8-K. The Code is filed as Exhibit 14.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2003.
NOMINATION OF DIRECTORS
Currently, the Board of Directors does not have a Nominating Committee.
The independent directors of the Board serve such function of a nomination
committee and the Board of Directors may formalize their designation as such in
the future. While the Company also at the current time does not have a charter
governing the nomination of directors and the Company does not have policies
with regard to consideration of director candidates recommended by the Company's
stockholders, it is the Board of Directors' intention to adopt a charter
outlining the qualifications for director candidates, as well as policies with
regard to consideration of director candidates by the stockholders of the
Company. Provided that director candidates meet the delineated qualifications
and the nominations are submittted timely pursuant to the Company's Bylaws. The
Board of Directors does not anticipate that the Nomination Committee will
differentiate evaluating nominees for directors based on their source.
The independent directors of the Board of Directors identify prospective
candidates to serve as directors by reviewing candidates' credentials and
qualifications, and interviewing prospective candidates before submitting their
respective names to the Board of Directors. Each of the independent directors of
the Board of Directors that serve the function of the Nominating Committee meet
the criteria for being "independent" set forth under Section 4200(a)(15) of
Nasdaq's listing standards.
The independent directors of the Board of Directors consider
recommendations for director nominees from a wide variety of sources, including
members of the Company's Board of Directors, business contacts, community
leaders, other third-party sources and members of management. The independent
directors of the Board of Directors also consider stockholders' recommendations
for director nominees that are properly received in accordance with the
procedures for contacting directors described in this Proxy Statement.
11
The Board of Directors believes that all of its directors should have the
highest personal integrity and have a record of exceptional ability and
judgment. The Board of Directors also believes that its directors should ideally
reflect a mix of experience and other qualifications. There is no firm
requirement of minimum qualifications or skills that candidates must possess.
The independent directors of the Board of Directors evaluate director candidates
based on a number of qualifications, including their independence, judgment,
leadership ability, expertise in the industry, experience developing and
analyzing business strategies, financial literacy, risk management skills, and,
for incumbent directors, his or her past performance.
The independent directors of the Board of Directors initially evaluate a
prospective nominee on the basis of his or her resume and other background
information that has been made available to the Board of Directors. An
independent director of the Board of Directors will contact for further review
and interview those candidates who the independent directors of the Board of
Directors believe are qualified, who may fulfill a specific Board of Directors
need and who would otherwise best make a contribution to the Board of Directors.
If, after further discussions with the candidate, and other review and
consideration as necessary, the independent directors of the Board of Directors
believe that they have identified a qualified candidate, they will consider
nominating the candidate for election as a director.
DIRECTOR INDEPENDENCE
Annually, as well as in connection with the election or appointment of a
new director to the Board of Directors, the Company's Board of Directors
considers the business and charitable relationships between it and each
non-employee director to determine compliance with the NASD listing standards
for independent directors. Based on that review, the Board of Directors has
determined that Messrs. Bren and Risher are independent under Rule 4200(a)(15)
of the NASD listing standards.
OTHER EXECUTIVE OFFICERS
In addition to Mr. Pully, the only other Executive Officer of the Company
is John Murray, whose biographical information is set forth below:
JOHN MURRAY (Age 38) has served as the Chief Financial Officer of the
Company since June 18, 2004. Mr. Murray has served as the Chief Financial
Officer of Newcastle Management, the general partner of Newcastle, since January
2003. From January 1998 until June 2001, Mr. Murray served as a partner at Speer
& Murray, Ltd., a Dallas-based accounting firm. From October 1991 until November
1995, Mr. Murray served as an accountant with Ernst & Young, LLP. Mr. Murray has
been a Certified Public Accountant since January 1992.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's directors, executive officers and
persons who own more than 10% of a registered class of the Company's equity
securities file with the SEC initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
Directors, executive officers and greater than 10% stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
12
To the Company's knowledge, based solely on a review of the copies of the
Section 16(a) reports furnished to the Company and written representations that
no other reports were required during the fiscal year ended December 31, 2006,
there was compliance with all Section 16(a) filing requirements applicable to
its directors, executive officers and greater than 10% stockholders.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee consists of one independent director appointed
by the Board of Directors. The Compensation Committee's functions include making
recommendations to the Board of Directors on policies and procedures relating to
compensation and employee stock and other benefit plans of key executives and
approval of individual salary adjustments and stock awards. The Compensation
Committee does not have a charter. During fiscal year 2006, although there were
two executive officers of the Company, Steven J. Pully and John Murray, only Mr.
Pully receives an annual salary from the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVE
The Company's compensation program is designed to reward its officers
consistent with an individual's performance and efforts on behalf of the
Company. The Company recognizes that its success depends, in large part, on
leadership with the skills, commitment and motivation necessary to successfully
manage the Company and execute on its business plan of identifying strategic
acquisitions that enhance shareholder value.
Although the Company's current annual compensation program is narrowly
focused - consisting of a cash salary and 401K matching contributions for Mr.
Pully - the Company is in a position to structure a more comprehensive
compensation program in the future as circumstances warrant. The Company
recognizes the importance of maintaining sound principles for the development
and administration of compensation and benefit programs. The Compensation
Committee expects that if and when the Company expands its business and
additional individuals are hired, the Company will modify its compensation
program accordingly.
DETERMINATION OF COMPENSATION AWARDS
The Compensation Committee is provided with the primary authority to
determine and recommend to the Board of Directors the compensation awards
available to the Company's executive officers. Each named executive officer, in
turn, participates in an annual performance review with the Board of Directors
to provide input about their contributions to the Company's business for the
period being assessed. Pursuant to the Settlement (as more fully described in
the section entitled "Legal Proceedings"), the Company agreed to certain
limitation on cash compensation of employees other than Mr. Pully until such
time as the Company acquires a revenue generating business. Mr. Murray continues
to be eligible for equity grants and other benefits from the Company.
13
COMPENSATION BENCHMARKING AND PEER GROUP
The Compensation Committee seeks to take into account input from the other
independent member of the Board of Directors and publicly available data
relating to the compensation practices and policies of other companies within
and outside the Company's industry. The Company benchmarks its executive
compensation against the median compensation (both at a total cash compensation
level and long-term incentive level) paid by peer group companies. While
benchmarking may not always be appropriate as a stand-alone tool for setting
compensation due to the aspects of the Company's business and objectives that
may be unique to it, the Company generally believes that gathering this
information is an important part of its compensation-related decision-making
process.
The Company recognizes that to attract, retain and motivate key
individuals, such as the named executive officers, the Compensation Committee
may determine that it is in the Company's best interests to negotiate total
compensation packages with its executive management that may deviate from the
general principle of targeting total compensation at the median level for the
peer group. Actual pay for each named executive officer is determined around
this structure, driven by the performance of the executive over time, as well as
the Company's annual performance.
ELEMENTS OF COMPENSATION PROGRAM
The Company's total current compensation program consists of the following
elements:
o Base salary;
o Long-term equity grants; and
o Retirement benefits.
BASE SALARY. The Company's goal is to establish a salary sufficient to
motivate and retain its leadership. Factors considered in establishing the
salary level of Mr. Pully - the only salaried employee of the Company - include
a review of the individual's performance, an accounting of the Company's
performance, the scope of Mr. Pully's responsibility, the experience level
necessary for his position and certain peer group executive compensation
information. The Company has access to information from independent salary
surveys, broken out by position, to assist in this analysis. The foregoing
factors will apply in the event that the Company determines it necessary and
appropriate to pay other officers a base salary, including Mr. Murray.
LONG-TERM EQUITY GRANTS. The Company believes that an officer's ownership
in the Company aligns the officer's interests with the Company's interests.
Accordingly, the Company has in place the New Century Equity Holdings Corp. 1996
Employee Comprehensive Stock Plan (the "Employee Stock Plan"), which provides
for grants of incentive stock options, non-qualified stock options and
restricted stock. The Employee Stock Plan grants broad authority to the
Compensation Committee to grant options or award restricted shares to full-time
employees and officers of the Company and its subsidiaries (a total of two (2)
eligible individuals at December 31, 2006), to determine the number of shares
14
subject to options or awards and to provide for the appropriate periods and
methods of exercise and requirements regarding the vesting of options and awards
of restricted shares. The purpose of the Plan is to encourage and enable
employees of the Company to hold a personal financial interest in the Company,
to incentivize the Company's success, and to promote the continued service of
employees. Options are issued to the employees for a term of ten years. The
Company does not necessarily make equity grants on an annual basis if existing
holdings of officers are viewed as satisfactorily aligning the officer's
interests with the Company's interests, and accordingly did not make any long
term equity grants in the year ended December 31, 2006.
RETIREMENT BENEFITS. The Company's primary retirement benefit consists of
participation in the New Century Equity Holdings Corp. 401(k) Retirement Plan
(the "401(k) Retirement Plan"). Participation in the 401(k) Retirement Plan is
available to employees of the Company who are 21 years of age and who have
completed six months of service during which they worked at least 500 hours. The
401K Retirement Plan provides that participants may make voluntary salary
deferral contributions, on a pre-tax basis, of between 1% and 15% of their base
compensation in the form of voluntary payroll deductions up to a maximum amount
as indexed for cost-of-living adjustments. The Company may from time to time
make additional discretionary contributions at the sole discretion of the
Company's Board of Directors. The discretionary contributions, if any, are
allocated to participants' accounts based on a discretionary percentage of the
participants' respective salary deferrals.
SUMMARY COMPENSATION TABLE
The Summary Compensation Table and following table show the cash and
non-cash compensation awarded to or earned by our executive officers for the
last three fiscal years. Other than the individuals named below, we did not have
any other executive officers during fiscal year 2006. Columns have been omitted
from the table when there has been no compensation awarded to, earned by or paid
to any of the executive officers required to be reported in that column.
All Other
Name and Option Compensation
Principal Position Year Salary ($) Bonus ($) Awards ($)(1) ($) Total ($)
------------------ ---- ---------- --------- ------------- ------------- ---------
Steven J. Pully 2006 $150,000 -- -- $ 7,500(2) $157,500
Chief 2005 $150,000 -- $ 7,500(2) $157,500
Executive Officer 2004 $ 81,346 $ 38,145 $ 3,229(2) $122,720
John Murray 2006 -- -- -- -- --
Chief 2005 -- -- -- -- --
Financial Officer 2004 -- -- $ 12,715 -- $ 12,175
(1) The methodology and assumptions used in the valuation of stock option
awards are included in Note 9 to the Company's financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2006.
15
(2) Represents 401(k) Retirement Plan contributions made on behalf of Mr.
Pully.
GRANTS OF PLAN BASED AWARDS TABLE
There were no grants of equity and non-equity plan-based awards to the
Company's executive officers during the year ended December 31, 2006.
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
All of our employees are employed at will and do not have employment,
severance or change in control agreements.
Mr. Murray does not receive salary compensation at the current time for
his day-to-day services to the Company. Pursuant to the Settlement (as more
fully described under the section entitled "Legal Proceedings"), the Company
agreed to certain limitations on cash compensation of employees other than Mr.
Pully until such time as the Company acquires a revenue generating business. In
addition, Mr. Murray continues to be eligible for equity grants and other
benefits from the Company.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The Company has no plans or other arrangements in respect of remuneration
received or that may be received by our executive officers to compensate such
officers in the event of termination of employment (as a result of resignation,
retirement or change in control) or other events following a change in control.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE
The following table shows the unexercised stock options held at the end of
fiscal year 2006 by the executive officers named in the Summary Compensation
Table. Columns have been omitted from the table where there are no outstanding
equity awards required to be reported in that column.
Option Awards
-------------------------------------------------------------------------------------------
Number of Securities Number of Securities
Unexercised Underlying Underlying Unexercised Option Option
Name Options (#) Exercisable Options (#) Unexercisable Exercise Price ($) Expiration Date
---- ----------------------- ------------------------- ------------------ ---------------
Steven J. Pully 100,000 50,000(1) $ .28 6-18-14
Chief
Executive Officer
John Murray 33,333 16,667(2) $ .28 6-18-14
Chief
Financial Officer
(1) Option grants become exercisable on June 18, 2007.
(2) Option grants become exercisable on June 18, 2007.
16
EQUITY COMPENSATION PLAN INFORMATION
-------------------------------------------------------------------------------
Plan Category Number of Weighted Number of securities
securities to average remaining available
be issued upon exercise for future issuance
exercise of price of under equity
outstanding outstanding compensation plans
options, options, (excluding securities
warrants and warrants and reflected in column
rights rights (A))
(A) (B) (C)
-------------------------------------------------------------------------------
Equity compensation 975,000 $ 4.30 13,583,802
plans approved by
security holders
-------------------------------------------------------------------------------
Equity compensation 0 N/A N/A
plans not approved by
security holders
-------------------------------------------------------------------------------
Total 975,000 $ 4.30 13,583,802
-------------------------------------------------------------------------------
OPTION EXERCISES AND STOCK VESTED TABLE
There were no option exercises during the year ended December 31, 2006 by
any of the executive officers named in the Summary Compensation Table.
Additionally, no stock awards were issued or outstanding during the year ended
December 31, 2006.
PENSION BENEFITS TABLE
The Company does not provide pension benefits to any of its executive
officers.
NONQUALIFIED DEFERRED COMPENSATION TABLE
The Company does not provide non-qualified deferred compensation to any of
its executive officers.
COMPENSATION OF DIRECTORS
A total of 1,300,000 shares of Common Stock are subject to the Company's
1996 Non-Employee Director Plan (the "Director Plan"). In November of 2002, the
Board of Directors revised the Director Plan to reflect the following (effective
with the Board of Directors meetings held in 2003): each non-employee director
of the Company will be entitled to annual compensation consisting of $28,000 or
stock options to purchase 100,000 shares of Common Stock. As an alternative,
each non-employee director may elect a combination of stock and options. For the
fiscal year 2006, Mr. Schwarz, Mr. Risher and Mr. Bren each elected to receive
their annual compensation all in cash.
Compensation for services performed during fiscal year 2006 is shown in
the table below. For each quarterly Board meeting not attended by a non-employee
director, twenty-five percent (25%) of such annual compensation (both cash and
stock options) will be forfeited.
17
Fees Earned All Other
or Paid in Option Compensation
Name Cash ($) Awards ($) ($) Total ($)
---- ----------- ---------- ------------ --------
Mark E. Schwarz $28,000 0 0 $28,000
Steven J. Pully $ 0 0 0 $ 0
Jonathan Bren $28,000 0 0 $28,000
James A. Risher $28,000 0 0 $28,000
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jonathan Bren was the sole member of the Compensation Committee during the
fiscal year ended December 31, 2006. There are no compensation committee
interlocks as such term is defined in the Exchange Act.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K,
and based on the review and discussion, the Compensation Committee recommended
to the Board of Directors that the Compensation Discussion and Analysis be
included in this Proxy Statement.
Compensation Committee of the Board of Directors
Jonathan Bren
THE ABOVE REPORT OF THE COMPENSATION COMMITTEE SHALL NOT BE DEEMED INCORPORATED
BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THAT WE
SPECIFICALLY INCORPORATE THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE
BE DEEMED FILED UNDER THE SECURITIES ACT OR THE EXCHANGE ACT.
AUDIT COMMITTEE REPORT
GENERAL
The Audit Committee currently consists of one director who is independent
as defined in the listing standards of Nasdaq. A brief description of the
responsibilities of the Audit Committee is set forth above under the heading
"CORPORATE GOVERNANCE - Audit Committee."
The Audit Committee has reviewed and discussed the Company's audited
financial statements for the year ended December 31, 2006 with management of the
Company. The Audit Committee has discussed with Burton McCumber & Cortez,
L.L.P., the Company's independent accountants for the year ended December 31,
2006, the matters required to be discussed by the Statement on Audit Standards
No. 61, as amended. The Audit Committee has also received the written
disclosures and the letter from Burton McCumber & Cortez, L.L.P. required by
Independence Standards Board Standard No. 1 (Independent Standards Board No. 1,
Independence Discussions with Audit Committees), and has discussed with Burton
McCumber & Cortez, L.L.P. its independence.
18
Based on the review and the discussions referred to above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2006 for filing with the SEC.
During the year ended December 31, 2006, the Audit Committee approved in
advance any and all audit services, including the audit engagement fees and
terms, and non-audit services provided to the Company by its independent
auditors (subject to the de minimus exception for non-audit services contained
in Section 10A(i)(1)(B) of the Exchange Act). The independent auditors and the
Company's management are required to periodically report to the Audit Committee
the extent of services provided by the independent auditors and the fees
associated with these services.
The Audit Committee has forwarded this report on its activities with
respect to its oversight responsibilities during the year ended December 31,
2006. The report is not deemed to be "soliciting material" or to be "filed" with
the SEC or subject to the SEC's proxy rules or to the liabilities of Section 18
of the Exchange Act, and the report shall not be deemed incorporated by
reference into any prior or subsequent filing by the Company under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference to such filing.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
JAMES RISHER
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors of the Company reviews all relationships and
transactions in which the Company and our directors and executive officers or
their immediate family members are participants to determine whether such
persons have a direct or indirect material interest. The Board of Directors is
primarily responsible for the development and implementation of processes and
controls to obtain information from the directors and executive officers with
respect to related person transactions and for then determining, based on the
facts and circumstances, whether the Company or a related person has a direct or
indirect material interest in the transaction. As required under SEC rules,
transactions that are determined to be directly or indirectly material to the
Company or a related person are disclosed in the Company's proxy statement. In
addition, the Audit Committee reviews and approves or ratifies any related
person transaction that is required to be disclosed. In the course of its review
and approval or ratification of a related party transaction to be disclosed, the
Audit Committee considers: (i) the nature of the related person's interest in
the transaction; (ii) the material terms of the transaction, including, without
limitation, the amount and type of transaction; (iii) the importance of the
transaction to the related person; (iv) the importance of the transaction to the
Company; (v) whether the transaction would impair the judgment of a director or
executive officer to act in the best interest of the Company; and (vi) any other
matters the committee deems appropriate.
Any member of the Board of Directors who is a related person with respect
to a transaction under review may not participate in the deliberations or vote
respecting approval or ratification of the transaction, provided, however, that
such director may be counted in determining the presence of a quorum at a
meeting of the committee that considers the transaction.
In June 2004, when Newcastle acquired the Series A Preferred Stock, Mark
Schwarz, Chief Executive Officer and Chairman of Newcastle Management, Steven J.
Pully, President of Newcastle Management, and John Murray, Chief Financial
Officer of Newcastle Management, assumed positions as Chairman of the Board,
Chief Executive Officer and Chief Financial Officer, respectively, of the
Company. Mr. Pully receives an annual salary of $150,000 as Chief Executive
Officer of the Company. Newcastle Management is the general partner of
Newcastle, which owns 19,380,768 shares of Common Stock of the Company.
The Company's corporate headquarters are currently located at 200 Crescent
Court, Suite 1400, Dallas, Texas 75201, which are also the offices of Newcastle
Management. Pursuant to an oral agreement, the Company previously occupied a
portion of Newcastle Management's space on a month-to-month basis at no charge,
and received accounting and administrative services from employees of Newcastle
Management at no charge. Pursuant to a services agreement entered into between
the parties on October 1, 2006, the Company occupies a portion of Newcastle
Management's space on a month-to-month basis at $2,500 per month.
20
PROCEDURES FOR CONTACTING DIRECTORS
The Board of Directors has established a process for stockholders to send
communications to the Board of Directors. Stockholders may communicate with the
Board of Directors generally or a specific director at any time by writing to:
Corporate Secretary, New Century Equity Holdings Corp., 200 Crescent Court,
Suite 1400, Dallas, Texas 75201. The Corporate Secretary reviews all messages
received, and forwards any message that reasonably appears to be a communication
from a stockholder about a matter of stockholder interest that is intended for
communication to the Board of Directors. Communications are sent as soon as
practicable to the director to whom they are addressed, or if addressed to the
Board of Directors generally, to the Chairman of the Board. Because other
appropriate avenues of communication exist for matters that are not of
stockholder interest, such as general business complaints or employee
grievances, communications that do not relate to matters of stockholder interest
are not forwarded to the Board of Directors. The Corporate Secretary has the
right, but not the obligation, to forward such other communications to
appropriate channels within the Company.
21
LEGAL PROCEEDINGS
On August 11, 2004, Craig Davis, allegedly a stockholder of the Company,
filed a lawsuit in the Chancery Court of New Castle County, Delaware (the
"Lawsuit"). The Lawsuit asserted direct claims, and also derivative claims on
the Company's behalf, against five former and three current directors of the
Company. On April 13, 2006, the Company announced that it reached an agreement
with all of the parties to the Lawsuit to settle all claims relating thereto
(the "Settlement"). On June 23, 2006, the Chancery Court approved the
Settlement, and on July 25, 2006, the Settlement became final and
non-appealable. As part of the Settlement, the Company set up a fund (the
"Settlement Fund"), which was distributed to stockholders of record as of July
28, 2006, with a payment date of August 11, 2006. The portion of the Settlement
Fund distributed to stockholders pursuant to the Settlement was $2,270,017 or
approximately $.04 per common share on a fully diluted basis, provided that any
Common Stock held by defendants in the Lawsuit who were formerly directors of
the Company would not be entitled to any distribution from the Settlement Fund.
The total Settlement proceeds of $3,200,000 were funded by the Company's
insurance carrier and by Parris H. Holmes, Jr., the Company's former Chief
Executive Officer, who contributed $150,000. Also included in the total
Settlement proceeds is $600,000 of reimbursement for legal and professional fees
paid to the Company by its insurance carrier and subsequently contributed by the
Company to the Settlement Fund. As part of the Settlement, the Company and the
other defendants in the Lawsuit agreed not to oppose the request for fees and
expenses by counsel to the plaintiff of $929,813. Under the Settlement, the
plaintiff, the Company and the other defendants (including Mr. Holmes) also
agreed to certain mutual releases.
In connection with the resolution of the Lawsuit, the Company ceased
funding of legal and professional fees of the current and former director
defendants. The funding of legal and professional fees was made pursuant to
indemnification arrangements that were in place during the respective terms of
each of the defendants. We have met the $500,000 retention as stipulated in our
directors' and officers' liability insurance policy. The directors' and
officers' liability insurance policy carries a maximum coverage limit of
$5,000,000. We are currently negotiating a settlement with the insurance carrier
with respect to remaining reimbursement amounts. We are vigorously pursuing
enforcement of our rights under the policy. Nonpayment of the claim for
reimbursement of legal and professional fees could have a material adverse
effect on the results of operations of the Company. The Settlement does not
preclude us from seeking reimbursement of legal and professional fees up to the
amount remaining within the policy limit.
The Settlement provides that, if the Company has not acquired a business
that generates revenues by the date of March 1, 2007, the plaintiff in the
Lawsuit maintains the right to pursue a claim to liquidate the Company. This
custodian claim was one of several claims asserted in the Lawsuit. Even if such
a claim is elected to be pursued, there is no assurance that it will be
successful. In addition, the Company believes that it has preserved its right to
assert that its investment in ACP Investments L.P. (d/b/a Ascendant Capital
Partners), as more fully described in its Annual Report on Form 10-K for the
year ended December 31, 2006, meets the foregoing requirement to acquire a
business.
Pursuant to the sale of 4,807,692 newly issued shares of the Series A
Preferred Stock to Newcastle on June 18, 2004, the Company agreed to indemnify
Newcastle from any liability, loss or damage, together with all costs and
expenses related thereto that the Company may suffer which arises out of affairs
22
of the Company, its Board of Directors or employees prior to the closing of the
Newcastle Transaction. The Company's obligation to indemnify may be satisfied at
the option of the purchaser by issuing additional Series A Preferred Stock to
the purchaser, modifying the conversion price of the Series A Preferred Stock, a
payment of cash or a redemption of Series A Preferred Stock or a combination of
the foregoing. On July 3, 2006, Newcastle converted its Series A Preferred Stock
into 19,230,768 shares of the Common Stock.
On December 12, 2005, the Company received a letter from the SEC, based on
a review of the Company's Form 10-K filed for the year ended December 31, 2004,
requesting that the Company provide a written explanation as to whether the
Company is an "investment company" (as such term is defined in the Investment
Company Act of 1940). The Company provided a written response to the SEC, dated
January 12, 2006, stating the reasons why it believes it is not an "investment
company". The Company has provided certain confirmatory information requested by
the SEC. In the event the SEC or a court took the position that the Company is
an investment company, the Company's failure to register as an investment
company would not only raise the possibility of an enforcement or other legal
action by the SEC and potential fines and penalties, but also could threaten the
validity of corporate actions and contracts entered into by the Company during
the period it was deemed to be an unregistered investment company, among other
remedies.
During February 2006, the Company entered into an agreement with a former
employee to settle a dispute over a severance agreement the employee had entered
into with the Company. The severance agreement, which was executed by former
management, provided for a payment of approximately $98,000 upon the occurrence
of certain events. The Company paid approximately $85,000 to settle all claims
associated with the severance agreement.
During May 2006, the Company entered into an agreement to settle a dispute
with a law firm that had previously been hired by the Company. In accordance
with the terms of the agreement, the Company received a refund of legal and
professional fees of $125,000 during May 2006.
PROPOSALS FOR THE 2008 ANNUAL MEETING
REQUIREMENTS FOR STOCKHOLDER PROPOSALS TO BE CONSIDERED FOR INCLUSION IN THE
COMPANY'S PROXY MATERIALS
Stockholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act
("Rule 14a-8"), and intended to be presented at the Company's 2008 Annual
Meeting of Stockholders, must be received by the Company and addressed to the
Corporate Secretary at 200 Crescent Court, Suite 1400, Dallas, Texas 75201, no
later than January 1, 2008 to be considered for inclusion in the Company's proxy
materials for that meeting.
REQUIREMENTS FOR STOCKHOLDER PROPOSALS OUTSIDE THE SCOPE OF RULE 14A-8
A stockholder may present a proposal for consideration at the 2008 Annual
Meeting of Stockholders by providing written notice in a timely manner to the
Secretary of the Company setting forth the following information: a brief
description of the proposal to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting; the name and address
23
of the stockholder making the proposal; the class and number of shares of the
Company which are beneficially owned by the stockholder and a representation
that the stockholder intends to appear in person or by proxy at the meeting to
introduce the proposal or proposals specified in the notice. To be timely,
notice must be received by the Company (a) in the case of an annual meeting, not
less than 120 days prior to the date of the Company's proxy materials for the
previous year's annual meeting, or (b) in the case of a special meeting, not
less than the close of business on the seventh day following the day on which
notice of such meeting is first given to stockholders. No business shall be
conducted at a meeting except business brought before the annual meeting in
accordance with the procedures set forth above. If the Chairman or other officer
presiding at a meeting determines that the stockholder proposal was not properly
brought before such meeting, such proposal will not be introduced at such
meeting.
REQUIREMENTS FOR STOCKHOLDER NOMINATIONS OF DIRECTORS
The advance notification procedures that stockholders must follow in order
to nominate directors (the "Nomination Procedure"), set forth in Section 8.3 of
the Charter and Section 3.16 of the By-Laws, provides that only persons who are
nominated by or at the direction of the Board of Directors, or by a stockholder
who has given timely prior written notice to the Secretary of the Company prior
to the meeting at which directors are to be elected will be eligible for
election as directors. To be timely, notice must be received by the Company (a)
in the case of an annual meeting, not less than 90 days prior to the annual
meeting, or (b) in the case of a special meeting, not later than the seventh day
following the day on which notice of such meeting is first given to
stockholders.
Under the Nomination Procedure, notice to the Company from a stockholder
who proposes to nominate a person or persons at a meeting for election as a
director must contain certain information, including the name and address of the
stockholder who intends to make the nomination and the person to be nominated, a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy to nominate the person, a description of all arrangements or
understandings between the stockholder and each nominee and any other person
pursuant to which the nomination is to be made, such other information regarding
each nominee as would be required to be included in a proxy statement filed
pursuant to the Proxy Rules of the SEC had the nominee been nominated by the
Board of Directors and the consent of such nominee to serve as a director if so
elected. If the Chairman presiding at the meeting determines that a person was
not nominated in accordance with the Nomination Procedure, such person will not
be eligible for election as a director.
24
ANNUAL REPORT
ANY STOCKHOLDER OF THE COMPANY MAY OBTAIN WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2006
(WITHOUT EXHIBITS), INCLUDING THE COMPANY'S CERTIFIED FINANCIAL STATEMENTS, AS
FILED WITH THE SEC, BY WRITING TO THE CORPORATE SECRETARY, NEW CENTURY EQUITY
HOLDINGS CORP., 200 CRESCENT COURT, SUITE 1400, DALLAS TEXAS 75201.
OTHER MATTERS
As of the date of this Proxy Statement, management does not intend to
present any other items of business and is not aware of any matters to be
presented for action at the Annual Meeting other than those described above.
However, if any other matters should come before the Annual Meeting, it is the
intention of the persons named as proxies in the accompanying Proxy Card to vote
in accordance with their best judgment on such matters.
EXPENSES OF SOLICITATION
The cost of preparing, assembling and mailing this Proxy Statement is
being paid by the Company. In addition to solicitation by mail, Company
directors, officers and employees may solicit proxies by telephone or other
means of communication. Arrangements will also be made with brokerage firms and
other custodians, nominees and fiduciaries that hold the voting securities of
record for the forwarding of solicitation materials to the beneficial owners
thereof. The Company will reimburse such brokers, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection
therewith.
By order of the Board of Directors,
/s/ Steven J. Pully
-----------------------------------
Steven J. Pully
SECRETARY
April 30, 2007
25
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NEW CENTURY EQUITY HOLDINGS CORP.
Annual Meeting of Stockholders
June 6, 2007
The undersigned, a stockholder of New Century Equity Holdings Corp., a
Delaware corporation (the "Company"), does hereby appoint Mark E. Schwarz and
Steven J. Pully, and each of them, the true and lawful attorneys and proxies
with full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the 2007 Annual
Meeting of Stockholders of the Company to be held at the offices of the Company
located at 200 Crescent Court, Suite 1400, Dallas, Texas, on June 6, 2007 at
10:00 a.m., local time, or at any adjournment or adjournments thereof.
The undersigned hereby instructs said proxies or their substitutes.
Please mark your vote like this /X/
ELECTION OF DIRECTORS:
The election of Steven J. Pully to the Board of Directors, to serve
until the 2009 Annual Meeting of Stockholders and until his successor is duly
elected and shall qualify and the election of Mark E. Schwarz and Jonathan Bren
to the Board of Directors, to serve until the 2010 Annual Meeting of
Stockholders and until their respective successors are duly elected and shall
qualify.
WITHHOLD AUTHORITY
FOR ALL TO VOTE FOR ALL
NOMINEES _____ NOMINEES _____ _________________________________
TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, PRINT
NAME ABOVE.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The ratification of the appointment of Burton McCumber & Cortez,
L.L.P. as the independent public accountants of the Company for the fiscal year
ending December 31, 2007.
FOR / / AGAINST / / ABSTAIN / /
DISCRETIONARY AUTHORITY:
In their discretion, the proxies are authorized to vote upon such
other and further business as may properly come before the meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED ON THE OTHER SIDE.)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE GIVEN.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS NAMED HEREIN AND FOR THE RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS.
The undersigned hereby revokes any proxy or proxies heretofore given, and
ratifies and confirms that all the proxies appointed hereby, or any of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: _______________________, 2007
_____________________________ (L.S.)
_____________________________ (L.S.)
Signature(s)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE INDICATE THE
CAPACITY IN WHICH SIGNING. WHEN SIGNING AS JOINT TENANTS, ALL PARTIES IN THE
JOINT TENANCY SHOULD SIGN. WHEN A PROXY IS GIVEN BY A CORPORATION, IT SHOULD BE
SIGNED WITH FULL CORPORATE NAME BY A DULY AUTHORIZED OFFICER.
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED FOR THIS
PURPOSE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.