UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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
TARPON INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
James W. Bradshaw, Chief Executive Officer
(Name of Person(s) Filing Proxy Statement)
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.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) 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):
4) Proposed maximum aggregate value of transaction:
5) 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:
TARPON INDUSTRIES, INC.
2420 Wills Street
Marysville, Michigan 48040
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
TO BE HELD
AT 12 NOON LOCAL TIME ON OCTOBER 18, 2007
To the Shareholders of TARPON INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Shareholders (the
"Meeting") of TARPON INDUSTRIES, INC. (the "Company") will be held on October
18, 2007 (the "Meeting Date"), at 12 noon local time at the Thomas Edison Inn,
500 Thomas Edison Parkway, Port Huron, Michigan for the following purposes:
1. To approve the issuance of shares ("Financing Shares") in connection with
(a) a private placement offering of the Company's debt (the "Bridge Loan")
which has been consummated and which requires the issuance of shares of
common stock and may require additional shares of common stock, and (b) a
credit facility (the "Loan Agreement") which has been consummated, which
includes warrants that may require the issuance of common stock;
2. To approve an amendment to our Amended and Restated Articles of
Incorporation to increase the authorized common stock, no par value, from
30,000,000 shares of common stock to 100,000,000 shares of common stock;
3. To re-elect James W. Bradshaw as a Class I director to serve for a term of
three years;
4. To ratify the appointment of Rehmann Robson as the Company's registered
independent public accounting firm for the fiscal year ending December 31,
2007;
5. To transact such other business as may properly come before the Meeting and
any adjournment or postponement thereof.
Our Board of Directors has fixed the close of business on August 24, 2007
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting, and only holders of record of shares of the
Company's common stock at the close of business on that day will be entitled to
vote. The stock transfer books of the Company will not be closed.
A complete list of shareholders entitled to vote at the Meeting shall be
available at the offices of the Company during ordinary business hours from
August 24, 2007 until the Meeting Date for examination by any shareholder for
any purpose relevant to the Meeting. This list will also be available at the
Meeting.
All shareholders are cordially invited to attend the Meeting in person.
However, whether or not you expect to be present at the Meeting, you are urged
to mark, sign, date and return the enclosed Proxy, which is solicited by our
Board of Directors, as promptly as possible in the postage-prepaid envelope
provided to ensure your representation and the presence of a quorum at the
Meeting. The shares represented by the Proxy will be voted according to your
specified response. The Proxy is revocable and will not affect your right to
vote in person in the event you attend the Meeting.
By Order of the Board of Directors
James W. Bradshaw, Chief Executive Officer
Marysville, Michigan
September 12, 2007
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING. BY DOING SO, YOU MAY SAVE TARPON INDUSTRIES, INC. THE EXPENSE OF
A SECOND MAILING. IF YOU LATER DECIDE TO REVOKE YOUR PROXY FOR ANY REASON, YOU
MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
TARPON INDUSTRIES, INC.
2420 Wills Street
Marysville, Michigan 48040
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 12 NOON LOCAL TIME ON OCTOBER 18, 2007
This Proxy Statement is being furnished to the shareholders of TARPON
INDUSTRIES, INC. ("we", "us", "Tarpon" or the "Company") in connection with the
solicitation of proxies by our Board of Directors of the Company for use at the
Annual Meeting of Shareholders (the "Meeting") to be held on October 18, 2007
(the "Meeting Date"), at 12 noon local time at the Thomas Edison Inn, 500 Thomas
Edison Parkway, Port Huron, Michigan, and at any adjournment thereof. The Board
of Directors has set August 24, 2007, at the close of business, as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of and to vote at the Meeting. This Proxy Statement and the accompanying
form of Proxy were first sent to shareholders on or about September 12, 2007.
A form of Proxy for use at the Meeting accompanies this Proxy Statement. You may
ensure your representation at the Meeting by completing, signing, dating and
promptly returning the enclosed Proxy in the return envelope, with postage
prepaid, which has been provided for your convenience.
You may revoke your Proxy at any time before it is actually voted at the Meeting
by giving notice of revocation in writing to the Secretary of the Company or by
attending the Meeting and giving notice of revocation in person. You may also
change your vote by either executing and returning to the Company a later-dated
form of Proxy or voting in person at the Meeting. Attendance at the Meeting, in
and of itself, will not constitute a revocation of your Proxy.
The entire cost of preparing, printing and mailing this Proxy Statement and the
Proxies solicited hereby will be borne by the Company. It is anticipated that
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such costs will be approximately $25,000. Such amount is believed to be the
customary amount expended for a solicitation relating to matters of the type
described in this Proxy Statement.
The shares entitled to vote at the Meeting consist of shares of common stock, no
par value per share (the "Common stock"), with each share entitling the holder
of record to one vote. As of the Record Date, there were 10,470,654 shares of
Common stock outstanding. A quorum for the Meeting is a majority of the
outstanding shares of common stock and, therefore, the holders of a majority of
the outstanding shares of common stock must be represented in person or by proxy
in order to achieve a quorum to vote on all matters. Shares of common stock
represented by properly executed Proxies that are received by the Company prior
to the Meeting will be counted toward the establishment of a quorum for the
Meeting. The shares of common stock represented by properly executed Proxies
that are received prior to the Meeting will be voted in accordance with your
directions as to:
1. To approve the issuance of shares ("Financing Shares") in connection
with (a) a private placement offering of the Company's debt (the
"Bridge Loan") which has been consummated and which requires the
issuance of shares of common stock and that may require the issuance
of additional shares of common stock and (b) a credit facility (the
"Loan Agreement") which has been consummated, which includes warrants
that may require the issuance of common stock;
2. To approve an amendment to our Amended and Restated Articles of
Incorporation to increase the authorized common stock, no par value,
from 30,000,000 shares of common stock to 100,000,000 shares of common
stock;
3. To re-elect James W. Bradshaw as a Class I director to serve for a
term of three years;
4. To ratify the appointment of Rehmann Robson as the Company's
registered independent public accounting firm for the fiscal year
ending December 31, 2007;
5. To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
In the absence of direction, the shares of common stock represented by the
Proxies will be voted "For" these proposals. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" PROPOSALS 1, 2, 3 AND 4, AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors
James W. Bradshaw, Chief Executive Officer
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Proxy Statement, and the documents to which we refer you in this Proxy
Statement, contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements appear in a number of places in this Proxy Statement and
include statements regarding our intent, belief and current expectations with
respect to, among other things, the expected completion and timing of the
proposed Transaction, the use of proceeds from the proposed Transaction, and
other information related to the transactions contemplated under the offering
documents. The words "anticipate", "believe", "expect", "forecast", "guidance",
"intend", "may", "plan", "project", "will" and other similar expressions
generally identify forward-looking statements. While these forward-looking
statements and the related assumptions are made in good faith and reflect our
current judgment regarding the proposed Transaction and the other transactions
contemplated under the offering documents as well as the direction of our
business, actual results will almost always vary, sometimes materially, from any
estimates, predictions, projections, assumptions or other future performance
suggested herein. These statements are based upon a number of assumptions and
estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond our control and reflect future business
decisions which are subject to change. Some of these assumptions inevitably will
not materialize, and unanticipated events will occur which will affect our
results. Some important factors (but not necessarily all factors) that could
negatively affect our revenues, growth strategies, future profitability and
operating results, or that otherwise could cause actual results to differ
materially from those expressed in or implied by any forward-looking statement,
include the following:
o changes in business and economic conditions and other adverse conditions in
our markets;
o increased competition;
o increased cost of materials; and
o our ability to successfully implement our acquisition and other strategies.
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QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT
The following questions and answers address briefly some issues you may have
regarding the Meeting, the Bridge Loan and the Loan Agreement; the amendment to
our Amended and Restated Articles of Incorporation; the re-election of a Class I
directors and the appointment of our registered independent public accounting
firm. These questions and answers may not address all questions that may be
important to you as a shareholder of Tarpon. Please refer to the more detailed
information contained elsewhere in this proxy statement and the documents
referred to or incorporated by reference in this proxy statement.
Why am I receiving these materials?
We have sent you this Proxy Statement and the enclosed Proxy because the Board
of Directors of Tarpon is soliciting your proxy to vote at the Meeting. You are
invited to attend the Meeting to vote on the proposals described in this Proxy
Statement. However, you do not need to attend the Meeting to vote your shares of
common stock. Instead, you may complete, sign and return the enclosed Proxy.
We intend to mail this Proxy Statement and accompanying Proxy on or about
September 12, 2007 to all stockholders of record entitled to vote at the
Meeting. We urge you to vote your shares, either by attending the Meeting or
completing the enclosed Proxy.
What am I voting on?
There are four matters scheduled for a vote at the special meeting, and there
may be other matters brought before the meeting:
1. To approve the issuance of shares ("Financing Shares") in connection
with (a) a private placement offering of the Company's debt (the
"Bridge Loan") which has been consummated and which requires the
issuance of shares of common stock and that may require the issuance
of additional shares of common stock and (b) a credit facility (the
"Loan Agreement") which has been consummated, which includes warrants
that may require the issuance of common stock;
2. To approve an amendment to our Amended and Restated Articles of
Incorporation to increase the authorized common stock, no par value,
from 30,000,000 shares of common stock to 100,000,000 shares of common
stock;
3. To re-elect James W. Bradshaw as a Class I director to serve for a
term of three years;
4. To ratify the appointment of Rehmann Robson as the Company's
registered independent public accounting firm for the fiscal year
ending December 31, 2007;
5. To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
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Why are we seeking shareholder approval for the issuance of shares of common
stock?
We are subject to the rules of The American Stock Exchange ("AMEX"), where our
common stock is listed. These rules require us to obtain shareholder approval
for any issuance or sale of common stock, or securities convertible into or
exercisable for common stock, that is (i) equal to 20% or more of our
outstanding common stock before such issuance or sale and (ii) which is being
made at a price per share less than the greater of book value or market value at
the time of such issuance or sale.
What shares of common stock may be issued in connection with the Bridge Loan and
the Loan Agreement and the Accounts Payable Agreement?
A more detailed description of these arrangements is included under Proposal I.
In summary:
(a) The Bridge Loan requires the issuance of 2,613,285 shares of common
stock and may entail the issuance of a substantial amount of additional shares
common stock, which require shareholder approval under the American Stock
Exchange Company Guide ("AMEX Guide"); and
(b) The Loan Agreement includes warrants to purchase an aggregate of
4,600,000 shares of common stock which require shareholder approval under the
AMEX Guide.
Will the issuance of the Financing Shares dilute our existing shareholders'
percentage ownership of the Company?
Our shareholders will incur immediate and substantial dilution of their
percentage ownership in the Company if the Financing Shares are issued. The
obligation to issue Financing Shares will also trigger anti-dilution provisions
in certain agreements we have, which will cause the potential issuance of
substantial additional shares of our common stock. Presently, 10,470,654 shares
of our common stock are issued and outstanding, and there were options to
purchase approximately 700,000 shares of our Common Stock, and warrants and
convertible securities to purchase approximately 5,300,000 shares of our Common
Stock, including the effect of anti-dilution provisions of existing warrants
(which may be subject to further increase), exclusive of the securities which
are the subject of Proposal 1. Assuming issuance of all of the Financing Shares
(as more fully described herein), some of which may not be issued, approximately
21,344,000 shares of our common stock will be issued and outstanding, and there
will be options to purchase approximately 700,000 shares of our Common Stock and
warrants and convertible securities to purchase approximately 10,600,000 shares
of our common stock including the effect of anti-dilution provisions of existing
warrants (which may be subject to further increase), representing an increase of
approximately 103% in the number of outstanding shares of our common stock and
an increase of approximately 98% in the number of fully diluted shares of our
common stock.
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Why am I being requested in Proposal 2 to approve an amendment to our Articles
of Incorporation?
Our existing Articles of Incorporation, as amended, authorize a total of
30,000,000 shares of common stock. We have already issued 10,470,654 shares and
have commitments to issue up to an additional approximately 22,173,285 shares, a
total of approximately 32,643,939 shares, including the Financing Shares which
exceeds our authorized common stock. We will need other authorized shares for
future transactions.
Why am I being asked in Proposal 3 to approve the re-election of James W.
Bradshaw as a director?
Mr. Bradshaw became Chief Executive Officer and a Class I director in 2006. The
Company has a staggered Board of Directors; including Class I, Class II and
Class III, each of which has a term of three years, and 2007 is the expiration
year of the term for Class I directors, consisting solely of Mr. Bradshaw.
Who can vote at the Annual Meeting?
Only shareholders of record at the close of business on August 24, 2007 will be
entitled to vote at the Annual Meeting. At the close of business on the Record
Date, there were 10,470,654 shares of common stock outstanding and entitled to
vote.
Shareholder of Record: Shares Registered in Your Name
If at the close of business on the Record Date your shares were registered
directly in your name with our transfer agent, American Stock Transfer & Trust
Company, then you are a shareholder of record. As a shareholder of record, you
may vote in person at the meeting or vote by proxy. Whether or not you plan to
attend the Meeting, we urge you to complete and return the enclosed Proxy to
ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If at the close of business on the Record Date, your shares were held in an
account at a brokerage firm, bank, dealer, or other similar organization, then
you are the beneficial owner of such shares held in street name, and these proxy
materials are being forwarded to you by that organization. The organization
holding your account is considered the shareholder of record for purposes of
voting at the Meeting. As a beneficial owner, you have the right to direct your
broker or other agent on how to vote the shares in your account. You are also
invited to attend the Meeting. However, since you are not the shareholder of
record, you may not vote your shares in person at the Meeting unless you request
and obtain a Proxy from your broker or other agent.
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How do I vote?
For each of the other matters to be voted on, you may vote "For" or "Against" or
abstain from voting. The procedures for voting are as follows:
Shareholder of Record: Shares Registered in Your Name
If you are a shareholder of record, you may vote in person at the Meeting or
vote using the enclosed Proxy. Whether or not you plan to attend the Meeting, we
urge you to vote by Proxy to ensure your vote is counted. You may still attend
the Meeting and vote in person if you have already voted by Proxy.
o To vote using the Proxy, simply complete, sign and date the enclosed Proxy
and return it promptly in the envelope provided. If you return your signed
Proxy to us before the Meeting, we will vote your shares as you direct.
o To vote in person, come to the Meeting, and we will give you a ballot when
you arrive.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your broker,
bank or other agent, you should have received a Proxy and voting instructions
with this Proxy Statement from that organization rather than from us. Simply
complete and mail the Proxy to ensure that your vote is counted.
To vote in person at the Meeting, you must obtain a valid Proxy from your
broker, bank or other agent. Follow the instructions from your broker or bank
included with these proxy materials or contact your broker or bank to request a
Proxy.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common
stock you own as of August 24, 2007.
What if I return a Proxy but do not make specific choices?
If you return a signed and dated proxy card without marking any voting
selections, your shares will be voted "For" all of the matters described in this
Proxy Statement. If any other matter is properly presented at the meeting, your
Proxy votes will vote your shares using his best judgment.
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What does it mean if I receive more than one Proxy?
If you receive more than one Proxy, your shares are registered in more than one
name or are registered in different accounts. Please complete, sign and return
each Proxy to ensure that all of your shares are voted.
Can I change my vote after submitting my Proxy?
Yes. You can revoke your Proxy at any time before the final vote at the Meeting.
You may revoke your Proxy in any one of three ways:
o You may submit another properly completed Proxy with a later date.
o You may send a written notice that you are revoking your Proxy to Tarpon's
Corporate Secretary at 2420 Wills Street, Marysville, MI 48040.
o You may attend the Meeting and vote in person. Simply attending the Meeting
will not, by itself, revoke your Proxy.
How are votes counted?
Votes will be counted by the inspector of election appointed for the Meeting,
who will separately count "For" and "Against" votes, abstentions and broker
non-votes. Abstentions will not be counted towards the vote total for each
proposal. Broker non-votes are counted towards a quorum. Please see the more
detailed description of the effect of broker non-votes on specific proposals in
the answer to "How many votes are needed to approve each proposal?" below.
How many votes are needed to approve each proposal?
o To be approved, Proposals 1, 3, 4 and 5 must receive more "For" votes than
"Against" votes. In determining whether this proposal has received the
requisite number of "For" votes, abstentions and broker non-votes will be
disregarded.
o To be approved, Proposal 2 must receive "For" votes from a majority of the
shares outstanding on the Record Date. If you abstain from voting, it will
have the same effect as an "Against" vote. Broker non-votes will have the
same effect as an "Against" vote.
What is the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. A quorum will be
present if at least a majority of the outstanding shares are represented by
shareholders present at the Meeting or by Proxy. On August 24, 2007 the record
date, there were 10,470,654 shares outstanding and entitled to vote. As a result
at least 5,235,328 of these shares must be represented by stockholders present
at the meeting or by proxy to have a quorum.
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Your shares will be counted towards the quorum if you submit a valid Proxy or
vote at the Meeting. Abstentions and broker non-votes will also be counted
towards the quorum requirement. If there is no quorum, a majority of the votes
present at the meeting may adjourn the meeting to another date without notice.
How can I find out the results of the voting at the Meeting?
Preliminary voting results will be announced at the Meeting and announced
promptly following the Meeting in a press release. The final voting results will
be set forth in a Current Report on Form 8-K filed with the Securities and
Exchange Commission ("SEC").
Who is paying for this Proxy solicitation?
We will pay for the entire cost of soliciting Proxies. In addition to this Proxy
Statement, our directors, officers and other employees may also solicit Proxies
in person, by telephone or by other means of communication. Directors, officers
and other employees will not be paid any additional compensation for soliciting
proxies. We may also reimburse brokerage firms, banks and other agents for the
cost of forwarding proxy materials to beneficial owners.
PROPOSAL 1
TO APPROVE THE ISSUANCE OF SHARES ("FINANCING SHARES") IN CONNECTION WITH (A) A
PRIVATE PLACEMENT OFFERING OF THE COMPANY'S DEBT (THE "BRIDGE LOAN") WHICH HAS
BEEN CONSUMMATED AND WHICH REQUIRES THE ISSUANCE OF SHARES OF COMMON STOCK AND
MAY REQUIRE THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK AND (B) A CREDIT
FACILITY (THE "LOAN AGREEMENT") WHICH HAS BEEN CONSUMMATED, WHICH INCLUDES
WARRANTS THAT MAY REQUIRE THE ISSUANCE OF COMMON STOCK.
In the second quarter of 2007, the Company recognized the need to restructure
its financing to:
(a) obtain bridge financing in addition to the private placement of common
stock which had been concluded, most likely in the form of debt due to
the Company's low stock price; and
(b) replace its existing senior lender with the holder of its junior debts
Laurus Master Fund, Ltd. ("Laurus"), since the Company required terms
more favorable to it then it had been able to obtain from its then
commercial bank lender.
Private Placement
As a first step, on or about June 14, 2007, the Company entered into a financing
agreement (the "Financing Agreement") with High Capital Funding, LLC ("HCF"), as
the lead investor for a group of investors who would purchase a maximum
$1,700,000 of units ("Units"), consisting of bridge notes ("Bridge Notes") and
one and one half (1 1/2) shares of common stock. By early July 2007, all of the
Units had been subscribed and paid for. The Financing Agreement provides for a
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variety of issuances of common stock, all of which are regulated under the
American Stock Exchange Company Guide ("AMEX Guide"). The AMEX Guide requires
the approval of shareholders for the issuance of shares of common stock which
are to be issued at the lesser of fair market value or net book value, when such
shares are in excess of 20% of the number of shares of common stock then issued
and outstanding. All of the shares described below, except as indicated, which
are or may be issued in connection with the Financing Agreement meet such
criteria, and are therefore subject to shareholder approval in order for the
Company to remain in compliance with the terms of the AMEX Guide.
(a) Bridge Note Shares. In accordance with the Financing Agreement, the
total of 2,550,000 shares of common stock ("Bridge Note Shares") are to be
issued in connection with the sale of the Bridge Notes without separate payment.
The American Stock Exchange has approved for listing 1,700,000 of such shares
and accordingly, approval is sought hereby for the issuance of an additional
850,000 Bridge Note Shares.
(b) Document Preparation Shares. The Financing Agreement calls for the
issuance of a total of 63,285 shares of common stock ("Document Preparation
Shares") to defray the cost of document preparation relating to the Financing
Agreement. The American Stock Exchange has approved for listing 40,000 of such
shares and accordingly approval is sought for the issuance of an additional
23,285 Document Preparation Shares.
(c) Note Extension Shares. The Bridge Notes are due at the earlier of
December 17, 2007 or three (3) business days after the closing of a public
offering including gross proceeds of more than $6,000,000 (the "Public
Offering"). Upon the written request of the Company, HCF has the right to extend
the maturity date of the Bridge Notes for six one-month periods in consideration
of the issuance of one-quarter (1/4) share of common stock for each month of
extension for each dollar of indebtedness ("Note Extension Shares"). Assuming
the full six months of extensions are requested and granted, there would be
required to be issued, without separate consideration, a total of 2,550,000 Note
Extension Shares and approval is hereby sought for the same.
(d) Late Payment Shares. If there is a Public Offering, which is concluded,
and the Bridge Notes are not paid within three (3) business days thereafter, the
holders thereof shall be entitled to one-quarter (1/4) share of common stock for
each dollar loaned for each one month of such delay ("Late Payment Shares").
Assuming that such delay continues for a period of six months, and although the
Company does not believe that the same would occur, there would be a requirement
to issue an additional 2,550,000 Late Payment Shares and approval is hereby
sought for the same.
(e) Conversion Shares. The Financing Agreement provides that if a Public
Offering is not concluded by December 17, 2007 the holders of Bridge Notes will
thereafter have the right to convert the same into common stock at 80% of the
closing bid price of the common stock ("Conversion Shares") on a securities
exchange for the last five (5) trading days before the date of conversion and if
the shares are not traded on a securities exchange at the average closing bid
for the last five (5) trading days before the conversion or $.35 per share,
whatever is less. Assuming a price of $.35, the conversion of all of the Bridge
Notes would result in the issuance of an additional approximately 4,857,143
Conversion Shares. Approval is hereby sought however, not for such amount, but
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for the amount calculated in accordance with the above provision, which may be
in excess of 4,857,143 shares.
It should be noted that as of the present time, the only shares that the Company
is bound to issue for which approval is being sought are 850,000 Bridge Note
Shares and 23,285 Document Preparation Shares. However, if the Company does not
obtain authorization from shareholders for the other potential issuances
described above, it will have adverse consequences to it under the Financing
Agreement including an increase of the effective interest rate under the Bridge
Notes to 24% per annum. Accordingly, approval is requested for the issuance of
850,000 Bridge Note Shares, 23,285 Document Preparation Shares, 2,550,000 Note
Extension Shares, 2,550,000 Late Payment Shares and all of the Conversion
Shares, should any of the same be required to be issued.
The foregoing description of the Financing Agreement and related documents is
merely a summary and is not intended to be complete. Shareholders are encouraged
to read the Financing Agreement and related documents in their entirety. Such
documents are available at no cost to shareholders online at www.sec.gov or upon
written request to the Company.
Loan Agreement
As a second step in the financial restructuring of the Company, the Company has
entered into agreements with Laurus Master Fund, Ltd. ("Laurus") to have Laurus
become its new senior secured lender, replacing LaSalle Bank and its affiliates.
As a result, on August 9, 2007, Laurus advanced funds to the Company to pay off
the Company's obligations to LaSalle. The Laurus financing has a term of two
years and a present maximum of $13,500,000.
Under the Laurus agreements, and as partial consideration to make the loans to
the Company, the Company has granted two warrants to Laurus, each for the
purchase of 2,300,000 shares of common stock (a total of 4,600,000). The
purchase price under the first warrant is $.01 per share and the purchase price
under the second warrant is $.25. Given the excise prices of these warrants,
shareholder approval is required under the AMEX Guide, and approval is hereby
sought for the issuance of a total of 4,600,000 shares on the terms described
above.
The warrants referred to above are not exercisable until the earlier of approval
of the issuance of the underlying shares by the Company's shareholders or
December 1, 2007. Should these not be approved, the warrants will nevertheless
become exercisable although the exercise by Laurus or another holder could
result in the termination of the listing of the Company's shares by AMEX. In
addition, if our shareholders fail to give approval, two $1,700,000 term notes
held by Laurus (a total of $3,400,000) would become due on December 1, 2007
rather than on their stated maturity dates of August 9, 2008 and August 9, 2009,
respectively. The foregoing would be adverse consequence of the failure of the
Company to obtain approval of the issuance of the shares underlying the Laurus
warrants.
The foregoing description of the Laurus agreements and related documents is
merely a summary and is not intended to be complete. Shareholders are encouraged
to read the Laurus agreements and related documents in their entirety. Such
documents are available at no cost to shareholders online at www.sec.gov or upon
written request to the Company.
11
Financial Statements, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and other information
We hereby incorporate by reference (a) the Financial Statements and the notes
thereto contained in our Form 10-K for the fiscal year-ended December 31, 2006,
which includes our Management's Discussion and Analysis of Financial Condition
and Results of Operations, and (b) our quarterly report on Form 10-Q for the
quarter and six months-ended June 30, 2007. We will provide, without charge, to
each person to whom a Proxy Statement is delivered, upon written or oral request
of such person and by first class mail or other equally prompt means within one
business day of receipt of such request, a copy of any and all of the
information that has been incorporated by reference in the Proxy Statement. To
obtain such copies, please contact Ms. Rebecca Ludy, at Tarpon Industries, Inc.,
2420 Wills Street, Marysville, MI 48040, (810) 364-7421.
For more information about the Company, please see our other 1934 Act reports
filed with the SEC, copies of which can be found at www.sec.gov.
Reason for Shareholder Approval
The Company's common stock is listed on AMEX. Under applicable AMEX rules,
because the transactions described in Proposal 1 involve the issuance and/or
potential issuance of more than 20% of the Company's then outstanding common
stock below the greater of book and market value shareholder approval of the
issuance of the Financing Shares is required. We are seeking such approval in
order to comply with the AMEX Guide and in an effort to maintain the listing of
the Company's common stock on the American Stock Exchange.
Consequence of Non-Approval of the Financing Shares
If the issuance of the Financing Shares is not approved, the Company may
experience substantially higher interest rates on the Bridge Notes and a
requirement under the terms of the Financing Agreement that the Common Stock be
delisted from the American Stock Exchange. In addition, the Company may be in
default under the Loan Agreement, all of which will likely have a materially
adverse effect on the Company.
Dissenters' Rights
The Michigan Business Corporation Act provides shareholders with dissenter's
rights in certain limited situations. However, in the case of the issuance of
Financing Shares, shareholders are not provided dissenter's rights by the
Michigan Business Corporation Act.
Required Vote
To be approved, Proposal 1 must receive more "For" votes than "Against" votes.
In determining whether this proposal has received the requisite number of "For"
votes, abstentions and broker non-votes will be disregarded and will have no
effect on the outcome of the vote.
12
We have conditioned approval of Proposal 1 on approval of Proposal 2. If
Proposal 2 is not approved, Proposal 1 cannot be fully implemented.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 1.
13
PROPOSAL 2
TO APPROVE AN AMENDMENT TO OUR AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK, NO PAR VALUE, FROM
30,000,000 SHARES OF COMMON STOCK TO 100,000,000 SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to shareholder approval, an
amendment to our Amended and Restated Articles of Incorporation dated November
1, 2004 (the "Articles of Incorporation"), as thereafter amended, to increase
the authorized number of shares of common stock from 30,000,000 shares of common
stock, no par value, to 100,000,000 shares of common stock, no par value. The
Board of Directors adopted this amendment in order to ensure that the Company
would have sufficient common stock to meet our current and anticipated
obligations and for additional future issuances.
At the present time, there are 30,000,000 shares of common stock which are
authorized. The present issuance of, and commitments for, such authorized number
of shares is as follows:
(a) Issued and outstanding - 10,470,654 shares
(b) Stock Options - approximately 700,000 shares
(c) Exercise of presently outstanding warrants and convertible securities
-approximately 21,473,285 shares (including the Financing Shares and
adjustment of other warrants and convertible securities to reflect the
Financing Shares)
totaling 32,643,939 shares, which exceeds our authorized common stock.
In addition, we expect to need substantial additional shares for sale in an
underwritten public offering, of which there can be no assurance, and we may
need additional shares for other financing or acquisition purposes in amounts we
can not presently determine.
Beyond such amounts, although our Board of Directors has no other immediate and
specific plans to issue the additional shares of common stock, it desires to
have the shares available to enable us to have a sufficient number of shares and
to provide flexibility to use common stock for business and financial purposes
in the future. The additional shares may be used for various purposes without
further stockholder approval, except to the extent required by applicable
American Stock Exchange rules. These purposes may include raising capital,
establishing strategic relationships with other companies, expanding our
business or product lines through the acquisition of other businesses or
products, and other purposes.
The additional shares of common stock that would become available for issuance
if the proposal is adopted could also be used by us to oppose a hostile takeover
attempt or to delay or prevent changes in control or management of the Company.
14
For example, without further stockholder approval, our Board of Directors could
strategically sell shares of common stock in a private transaction to purchasers
who would oppose a takeover or favor the current Board of Directors. Although
this proposal to increase the authorized common stock has been prompted by the
business and financial considerations described herein and not by the threat of
any hostile takeover attempt shareholders should be aware that approval of this
Proposal 2 could facilitate future efforts by us to deter or prevent changes in
control, including transactions in which the stockholders might otherwise
receive a premium for their shares over then current market prices.
If the amendment is adopted, it will become effective upon the filing of an
amendment to the Articles of Incorporation with the Secretary of State of the
State of Michigan.
The text of the proposed amendment is as follows:
Article III
The total authorized shares:
1. Common Shares 100,000,000
Preferred Shares 2,000,000
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
Preferred Shares. The Board of Directors may cause the corporation to
issue Preferred Shares in one or more series, each series to bear a
distinctive designation and to have such relative rights and
preferences as shall be prescribed by resolution of the Board. Such
resolutions, when filed, shall constitute amendments to these Amended
and Restated Articles of Incorporation.
Required Vote
To be approved, Proposal 2 must receive "For" votes from a majority of the
shares outstanding on the record date. If you abstain from voting, it will have
the same effect as an "Against" vote. Broker non-votes will have the same effect
as an "Against" vote.
If Proposal 2 is not approved by our shareholders, we will be unable to fully
implement Proposal 1, even if it is approved by our shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 2.
15
PROPOSAL 3
TO RE-ELECT JAMES W. BRADSHAW AS A CLASS I DIRECTOR TO SERVE FOR A TERM OF THREE
YEARS
Nominee For Director
One (1) Class I director is to be elected by a plurality of the votes cast at
the Meeting, to hold office until 2010 or until his successor is duly elected
and qualified. The person named below has been nominated for re-election as a
director. Unless otherwise directed, the persons named in the accompanying Proxy
have advised the Company that it is their intention to vote for the election of
the persons named below as directors.
James W. Bradshaw - Class I
The Company believes that this nominee will be able to serve. If this nominee
becomes unable or unwilling to serve, proxies may be voted for the election of
such person as the Board of Directors determines.
Share Ownership Of Directors, Officers And Certain Beneficial Owners
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock as of August 24, 2007, based on
information obtained from the persons named below, by (i) each person known to
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each executive officer and director of the Company since the
beginning of the last fiscal year, (iii) all officers and directors of the
Company as a group and (iv) all beneficial owners as a group:
Percentage of
Name of Amount and Nature of Common Stock
Beneficial Owner Beneficial Ownership Owned (1)
---------------------------------------------------------------------------
James W. Bradshaw 24,830 (2) *
Patrick Hook 26,667 (3) *
Michael A. Ard 14,420 (4) *
Tracy L. Shellabarger 44,489 (5) *
Frank Gesuale 10,000 (6)
Neil T. Anderson 1,290,453 (7) 14.3%
All Directors and Officers as a
group (5 Persons) 120,406 (8) *
-----------------------------
|
* Less than 1%
16
(1) Based on 10,470,654 common shares outstanding as of August 24, 2007.
(2) Includes options to purchase 16,6667 shares of Common Stock that Mr.
Bradshaw has the right to acquire within 60 days of August 24, 2007. Does
not include options to purchase 233,333 common shares which are not
exercisable within 60 days of August 24, 2007.
(3) Includes 26,667 common shares that Mr. Hook has the right to acquire within
60 days of August 24, 2007. Does not include 123,333 common shares which
are not exercisable within 60 days of August 24, 2007.
(4) Includes 10,000 common shares that Mr. Ard has the right to acquire within
60 days of August 24, 2007.
(5) Includes 10,000 common shares that Mr. Shellabarger has the right to
acquire within 60 days of August 24, 2007.
(6) Includes 10,000 common shares that Mr. Gesuale has the right to acquire
within 60 days of August 24, 2007.
(7) Based solely on a report on Schedule 13G, as amended, filed with the
Securities and Exchange Commission by Neil T. Anderson.
(8) Includes 73,334 common shares that all executive officers and directors as
a group have the right to acquire within 60 days of August 24, 2007.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than ten percent of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than ten-percent shareholders are required by Securities and Exchange Commission
regulation to furnish us with copies of all Section 16(a) reports they file.
Information Regarding Officers and Directors
The following table sets forth the names and ages of our directors and executive
officers and the positions they hold with us as of the date hereof. There are no
family relationships among any directors or executive officers of the Company.
17
Name Age Position
---- --- --------
James W. Bradshaw 55 Chief Executive Officer, Chairman of
the Board of Directors (Class I),
Secretary
Patrick J. Hook 40 President, Chief Operating Officer
Michael A. Ard 49 Director (Class III)
Tracy L. Shellabarger 49 Director (Class III)
Frank Gesuale 61 Director (Class II)
|
James W. Bradshaw. Mr. Bradshaw joined us in 2005 as Vice President of
Mechanical Tubing, based at Steelbank and became Chief Executive Officer in
April 2006. Prior to joining us, Mr. Bradshaw was a consultant with Greybrooke &
Associates, Inc. From 2002 to 2003, he was President and General Manager for
International Technical Coating, Inc., a steel wire manufacturing company with
130 employees and customers including Home Depot and Lowes. From 1992 to 1997,
Mr. Bradshaw was President and Chief Operating Officer of American Tube and
Pipe, a $120 million steel pipe and tubing company which was purchased by Tyco
International Ltd. in 1997. Earlier in his career, he served as General Manager
for Wheatland Tube Company, and President of Reeves Southeastern Corporation.
Patrick J. Hook. Mr. Hook has served as our President and Chief Operating
Officer since February 2005. Mr. Hook served as Operations Manager for
Copperweld, Inc., Chicago Division, a steel tubing manufacturer, from September
2001 to February 2005. In this capacity, Mr. Hook was responsible for all
operating activities for the Chicago and Bedford Park divisions of Copperweld.
From March 2001 to September 2001, Mr. Hook served as Plant Manager of
Copperweld's Birmingham Division. From November 1999 to March 2001, Mr. Hook
reported directly to the Copperweld U. S. Structural Division Vice President. In
this capacity, Mr. Hook was responsible for integrating the operations of four
U.S. Structural Steel Tubing Divisions that were acquired through acquisition.
From August 1997 through October 1999, Mr. Hook was the Plant Manager of LTV
Corporation - Youngstown Division, a steel manufacturer. Mr. Hook's previous
experience includes several positions of increasing responsibilities in the
engineering and operating arenas while employed with LTV Steel at the Indiana
Harbor Works Division. Mr. Hook received a B.S. in mechanical engineering from
Michigan Technological University and is a graduate of the University of
Michigan Executive Manufacturing Program. Mr. Hook is a member of the Tube and
Pipe Association, International and of the Tube and Pipe Producing Technology
Council.
Michael A. Ard. Mr. Ard has served as our Class III director and as EWCO's
director since October 2004. He has served as Director of Sales and Marketing,
Storage Condo Division, of Aardex Corporation, a commercial real estate
developer, since March 2003. He served as Western Area Sales Manager of LiDCO
Limited, a start-up medical device manufacturer and distributor, from August
2001 to August 2002. He served as Director of Global Marketing, from June 1998
to July 2001, and as U.S. Area Manager, from February 1996 to June 1998, of
Deltex Medical Group, a start-up cardiac monitor manufacturer and distributor.
18
Mr. Ard received a B.S. degree in broadcast communications from the University
of Florida.
Tracy L. Shellabarger. Mr. Shellabarger joined our Board of Directors as a
Class III director in January 2006. From 1994 to 2004, Mr. Shellabarger served
as Chief Financial Officer for Steel Dynamics, Inc., a publicly traded steel
manufacturer. During his tenure at Steel Dynamics, Mr. Shellabarger led its
finance, accounting, tax, insurance, and legal efforts, spearheading the initial
public offering and driving sales to more than $2 billion. Prior to his role
with Steel Dynamics, from 1987 to 2004, Mr. Shellabarger served as Controller of
a division of Nucor Corporation, a Fortune 400 steel manufacturer. He also spent
more than seven years with former "Big 8" accounting firm Touche Ross & Company
as a tax manager. Mr. Shellabarger earned a Bachelor of Science Degree in
Accounting from the University of North Carolina, Chapel Hill, and is a
certified public accountant (CPA) and member of the AICPA.
Frank Gesuale. Mr. Gesuale, has extensive experience in general management,
finance and sales and marketing, particularly in the steel, fabrication and
construction industries. From 1992 until 2004, he led his own management
company, GreyBrooke & Associates LLC, which provided direction, support and
financial sources for emerging growth and under-performing companies. Since
2004, Mr. Gesuale has worked for Sunwest Mortgage LLC, which is active in
residential and commercial real estate finance. Prior to 1992, Mr. Gesuale, was
chief operating officer and a board member of Southwest Financial Systems, where
he was responsible for sales, finance, marketing, strategic planning and third
party support, and was instrumental in completing a complex financial and
organizational restructuring. Mr. Gesuale has also served as chief financial
officer and a member of the board of directors of Rossborough Manufacturing Inc,
a producer of metallurgical additives and equipment for primary domestic steel
companies in the United States and Canada. He began his career with Westinghouse
Electric, where he served as a controller of a $200 million Systems Furniture
Business.
Meetings and Committees of the Board of Directors
During the year ended December 31, 2006, our Board of Directors held 12
meetings. Our Board of Directors has determined that Mr. Ard, Mr. Shellabarger
and Mr. Gesuale, who was elected a director on May 14, 2007, are independent as
"independence" is defined in the American Stock Exchange's listing standards, as
those standards have been modified or supplemented.
Audit Committee
Our Board of Directors has established a separately-designated, standing
Audit Committee that consists of three directors and is established for the
purpose of overseeing our accounting and financial reporting processes and
audits of our financial statements. Mr. Ard, Mr. Shellabarger and Mr. Gesuale
are the current members of this committee.
The Audit Committee is scheduled to meet at least quarterly and:
o is directly responsible for the appointment, compensation, retention
and oversight of the work of our independent public accounting firm,
19
o approves the engagement of our independent public accounting firm to
render audit or non-audit services before the services begin; this
pre-approval authority may be delegated to one or more members of the
Audit Committee,
o takes, or recommends that the full Board takes, appropriate action to
oversee the independence of our independent public accounting firm,
o reviews audit and other reports from our independent public accounting
firm and provides it with access to report on any and all appropriate
matters,
o reviews and discusses the audited financial statements and the matters
required to be discussed by SAS 61 with management and the independent
accountants,
o recommends to the Board whether the audited financial statements
should be included in our Annual Report on Form 10-K,
o reviews with management and the independent accountants the quarterly
financial information before we file our Form 10-Qs,
o discusses with management and the independent accountants the quality
and adequacy of our internal controls,
o establishes procedures for (1) the receipt, retention, and treatment
of complaints received by us regarding accounting, internal accounting
controls, or auditing matters, and (2) confidential, anonymous
submission by our employees of concerns regarding questionable
accounting or auditing matters,
o reviews related party transactions required to be disclosed in our
proxy statement for potential conflict of interest situations and
approves all such transactions, and
o discusses with management the status of pending litigation as it
pertains to the financial statements and disclosure and other areas of
oversight as the committee deems appropriate.
During the year ended December 31, 2006, our Audit Committee held 6 meetings.
Audit Committee Financial Expert
Our Board of Directors has determined that Tracy L. Shellabarger, who
serves on our Audit Committee, is a financial expert and meets the criteria for
independence, as described in the Securities and Exchange Act of 1934, as
amended.
Compensation Committee
Our Board of Directors has a standing Compensation Committee which consists
of three directors. Mr. Ard, Mr. Shellabarger and Mr. Gesuale are the current
members of this committee. Each of Mr. Ard, Mr. Shellabarger and Mr. Gesuale are
"independent" as such term is defined in the American Stock Exchange's listing
20
standards, as those standards have been modified or supplemented. The
Compensation Committee makes recommendations to the Board of Directors with
respect to compensation arrangements and plans for our senior management,
officers and directors, and administers our 2005 Stock Option Plan. During the
year ended December 31, 2006, the Compensation Committee held no meetings.
Nominating Committee
Our Board of Directors has a standing Nominating Committee which consists
of three directors. Mr. Ard, Mr. Shellabarger and Mr. Gesuale are the current
members of this committee. The Nominating Committee identifies individuals to
become Board members and selects, or recommends for the Board's selection,
director nominees to be presented for shareholder approval at the annual meeting
of shareholders or to fill any vacancies. During the year ended December 31,
2006, the Nominating Committee held no meetings.
The Nominating Committee's policy is to consider any director candidates
recommended by shareholders. Such recommendations must be made pursuant to
timely notice in writing to our Secretary, at Tarpon Industries, Inc., 2420
Wills Street, Marysville, Michigan 48040. To be timely, the notice must be
received at our offices at least 120 days before the anniversary of the mailing
of our proxy statement relating to the previous Annual Meeting of Shareholders.
The notice must set forth (1) with respect to the director candidate, among
other things, information about the candidate's name, age, principal occupation
or employment, shares owned, independence, other boards on which the candidate
serves, transactions, relationships, arrangements and understandings between the
candidate and us and between the candidate and the shareholder giving the
notice, and any other information relating to the candidate that we would be
required to disclose in our proxy statement, and (2) with respect to the
shareholder giving the notice, among other things, information about the
shareholder's name, address, shares owned and the period they have been held.
The Nominating Committee has not established specific, minimum
qualifications for recommended nominees or specific qualities or skills for one
or more of our directors to possess. The Nominating Committee uses a subjective
process for identifying and evaluating nominees for director, based on the
information available to, and the subjective judgment of, the members of the
Nominating Committee and our then current needs, although the committee does not
believe there would be any difference in the manner in which it evaluates
nominees based on whether the nominee is recommended by a shareholder.
Historically, our directors have been existing directors, associates of our
founder or an owner of a business we acquired.
Code of Business Conduct and Ethics
We adopted a Code of Business Conduct and Ethics in October 2004 that
applies to all of our employees, officers and directors, including our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Our Code of Business
Conduct and Ethics contains written standards that we believe are reasonably
designed to deter wrongdoing and to promote (1) honest and ethical conduct,
including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships, (2) full, fair, accurate,
timely, and understandable disclosure in reports and documents that we file
21
with, or submit to, the Securities and Exchange Commissions and in other public
communications we make, (3) compliance with applicable governmental laws, rules
and regulations, (4) the prompt internal reporting of violations of the code to
an appropriate person or persons named in the code, and (5) accountability for
adherence to the code made to our Secretary at Tarpon Industries, Inc., 2420
Wills Street, Marysville, Michigan 48040.
Executive Compensation
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements of our named
executive officers for 2006 should be read together with the compensation tables
and related disclosures set forth below.
The primary objectives of our board of directors with respect to executive
compensation are to attract and retain the best possible executive talent, to
tie annual and long-term cash and stock incentives to achievement of measurable
corporate and individual performance objectives, to be affordable within the
context of our operating expense model, to be fairly and equitably administered
and to reflect our values. Overall, the total compensation opportunity is
intended to create an executive compensation program that is based on comparable
public companies and any other considerations that we deem to be relevant.
Compensation Components
Base Salary. Base salaries for our executives are established based on the scope
of their responsibilities, taking into account competitive market compensation
paid by other companies for similar positions. Generally, we believe that
executive base salaries should be in the range of salaries for executives in
similar positions and with similar responsibilities at comparable companies in
line with our compensation philosophy. Base salaries are reviewed by our
compensation committee annually, and take into account individual
responsibilities, performance and experience.
Annual Bonus. In addition to base salaries, we believe performance-based cash
bonuses are important in providing incentives to achieve corporate goals. Cash
bonuses are intended to reward individual performance during the year and can
therefore be highly variable from year to year. The goals for our executive
officers are communicated to them after being determined by our board of
directors. In 2007, the goals will be established by the compensation committee.
Our compensation committee has not yet determined the corporate performance
goals it will apply in determining our executive officers' bonuses for 2007.
Long-Term Incentive Program. We believe that long-term performance is achieved
through an ownership culture that encourages long-term performance by our
executive officers through our grants of stock-based awards. Our long-term
equity incentive compensation is currently exclusively in the form of stock
options to acquire our common stock, issued in conjunction with our Amended and
Restated 2004 Stock Option Plan (the "Stock Option Plan"). Our equity incentive
22
plan was established to provide our employees, including our executive officers,
with incentives to help align those employees' incentives with the interests of
our stockholders. We have granted awards to our employees primarily through our
Stock Option Plan. In 2006, certain of our named executive officers were granted
options pursuant to our Stock Option Plan in the amounts indicated in the
section below entitled "Grants of Plan Based Awards."
In the past, our practice has been to review annually equity awards to existing
employees, including our executive officers, and make additional awards if
appropriate. With respect to newly hired employees, including executive
officers, we typically grant options upon the commencement of employment or at
the first meeting of the board of directors following such employee's hire date.
Like our other pay components, we intend that the annual aggregate value of
these awards will be set in line with that of comparable companies.
In 2006, we granted options to purchase a total of 510,000 shares, as follows:
250,000 to James W. Bradshaw, our Chief Executive Officer, 110,000 to Patrick
Hook, our President, and 150,000 to J. Stanley Baumgartner, our former Chief
Financial Officer. Our board of directors does not apply a rigid formula in
allocating stock options to executive officers as a group or to any particular
executive officer. Instead, our board of directors exercises its judgment and
discretion and considers, among other things, the role and responsibility of the
executive officer, competitive factors, the amount of stock-based equity
compensation already held by the executive officer, the non-equity compensation
received by the executive officer and the total number of options to be granted
to all participants during the year. The number of stock options granted to each
named executive officer is set forth in the "Grants of Plan-Based Awards Table."
The value of such grants, as determined in accordance with FAS 123(R) for each
individual named executive officer is set forth in the column "Option Awards" in
the "Summary Compensation Table."
We do not have specific share retention and ownership guidelines for our
executive officers.
Stock Appreciation Rights. To date no stock appreciation rights have been
awarded to any of our executive officers. However, our compensation committee,
in its discretion, may in the future elect to make such grants to our executive
officers if it deems it advisable.
Restricted Stock Grants or Awards. We did not grant restricted stock or
restricted stock awards to any of our executive officers in the year ended
December 31, 2006. However, our compensation committee, in its discretion, may
in the future elect to make such grants to our executive officers if it deems it
advisable.
Other Compensation. All of our executive officers may participate in our health
programs, such as medical and dental coverage, and our 401(k) programs.
The compensation committee, which is comprised solely of "outside directors" as
defined for purposes of Section 162(m) of the Internal Revenue Code, may elect
to adopt plans or programs providing for additional benefits if the compensation
committee determines that doing so is in our best interests.
23
Stock Ownership Guidelines. We have not currently adopted stock ownership
guidelines. We may implement guidelines regarding the issuance of new stock
option awards in the future in order to assure that our officers are
appropriately incentivized.
Equity Incentive Plan
Amended and Restated 2004 Stock Option Plan
Our board of directors adopted the Stock Option Plan, which was amended and
restated in 2007 and approved by our shareholders at a meeting held on February
12, 2007.
Awards. The Stock Option Plan provides for the grant of incentive stock options
and non-qualified stock options (collectively, "stock awards"), all of which may
be granted to employees (including officers), directors, and consultants;
provided, however, that incentive stock options may only be granted to
employees.
Share Reserve. The aggregate number of shares of our common stock that may be
issued pursuant to stock awards under the Stock Option Plan (including incentive
stock options) is 1,000,000 shares.
Administration. Subject to the terms of the Stock Option Plan, our compensation
committee determines recipients, dates of grant, the numbers and types of stock
awards to be granted, and the terms and conditions of the stock awards,
including the period of their exercisability and vesting. Subject to the
limitations set forth below, the compensation committee will also determine the
exercise price of stock options granted.
Stock Options. Incentive and non-qualified stock options are granted pursuant to
incentive and non-qualified stock option agreements adopted by the compensation
committee. The compensation committee determines the exercise price for a stock
option, within the terms and conditions of the Stock Option Plan, provided that
the exercise price of an incentive stock option cannot be less than 100% of the
fair market value of our common stock on the date of grant and the exercise
price of a non-qualified stock option cannot be less than 85% of the fair market
value of our common stock on the date of grant. All stock options granted under
the Stock Option Plan vest at the rate specified by the compensation committee.
The compensation committee determines the term of stock options granted under
the Stock Option Plan, up to a maximum of ten years (except in the case of
incentive stock options granted to any person who, at the time of grant, owns or
is deemed to own stock possessing more than 10% of our total combined voting
power or that of any of our affiliates, in which case the term of the incentive
stock option must not exceed five years). Unless the terms of an optionee's
stock option agreement provide otherwise, if an optionee's relationship with us,
or any of our affiliates, ceases for any reason other than disability or death
or for cause, the optionee may exercise any vested stock options for a period of
three months following the cessation of service. If an optionee's service
relationship with us, or any of our affiliates, ceases due to disability or
death, the optionee or a beneficiary may exercise any vested options for a
period of 12 months from the date of death or disability. In no event, however,
24
may a stock option be exercised beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the
exercise of a stock option will be determined by the compensation committee and
may include (a) cash or check, (b) the tender of common stock previously owned
by the optionee, and (c) other legal consideration approved by the plan
administrator.
Unless the compensation committee provides otherwise, stock options generally
are not transferable except by will or the laws of descent and distribution, and
in the case of non-qualified stock options, pursuant to certain trusts or by
gift to certain family members.
Changes to Capital Structure. In the event that there is a change in our capital
structure, such as a stock split, appropriate adjustments will be made to (i)
the number of shares reserved under the Stock Option Plan, (ii) the maximum
number of options that can be granted in a fiscal year, and (iii) the number of
shares and exercise price, if applicable, of all outstanding stock awards.
401(k) Plan
We maintain a defined contribution employee retirement plan, or 401(k) plan, for
our employees. Our executive officers are also eligible to participate in the
401(k) plan on the same basis as our other employees. The 401(k) plan is
intended to qualify as a tax-qualified plan under Section 401(k) of the Internal
Revenue Code. The 401(k) plan provides that each participant may contribute up
to 15% of his or her pre-tax compensation, up to the statutory limit, which is
$15,500 for calendar year 2007. Participants that are 50 years or older can also
make "catch-up" contributions, which in calendar year 2007 may be up to an
additional $5,000 above the statutory limit.
Under the 401(k) plan, each participant is fully vested in his or her deferred
salary contributions, when contributed. We do not make matching contributions.
Participant contributions are held and invested by the plan's trustee.
Summary Compensation Table
The following table sets forth information regarding compensation earned by
our Chief Executive Officer, our Chief Financial Officer and certain other
executive officers during the year ended December 31, 2006:
25
Non-Equity
Incentive Change
Plan in All Other
Stock Option Compen- Pension Compen-
Name and Principal Position Year Salary Bonus Awards Awards sation Value sation Total
-----------------------------------------------------------------------------------------------------------------------------------
James W. Bradshaw, Chief 2006 183,077 0 40,000 126,000
Executive Officer (1) 349,077
Patrick J. Hook, President 2006 204,231 39,600 243,831
2005 186,798 30,331 121,200 404 338,733
J. Peter Farquhar, Former 2006 202,634 0 0 0 202,634
Chairman of the Board, Chief
Executive Officer and Secretary 2005 224,122 - 181,800 5,457(6) 411,379
(until February 2005) President
(2) 2004 21,333 0 0 22,000(6) 43,333
J. Stanley Baumgartner, Jr., 2006 91,781 0 56,800 70,000 0 218,581
Former Chief Financial Officer
(3)
John A. Mayfield, Former Chief 2006 50,481 0 0 0 50,481
Financial Officer (4)
James T. House, Former Chief 2006 105,116 0 0 0 105,116
Financial Officer
2005 157,370 25,000 121,200 153,179 (7) 456,749
2004 58,301 - - - 58,301
Gary D. Lewis, former Chairman 2004 82,306 0 0 563,900(8) 646,206
of the Board, President and
Chief Executive Officer (until
April 2004)(5)
Charles A. Vanella, former 2004 119,922 0 0 227,692(9) 347,614
President and Chief Executive
Officer (April to August 2004);
President and Chief Executive
Officer of EWCO
|
(1) Mr. Bradshaw became our Chief Executive Officer in April 2006.
(2) Mr. Farquhar became our Chief Executive Officer in August 2004 and
ceased to act as such on April 23, 2006. The compensation shown in the
table for fiscal 2004 represents compensation paid to him in all
capacities in 2004. The compensation shown in the table for fiscal
2006 represents compensation for 2006 services rendered plus payments
received in connection with Mr. Farquhar's Termination Agreement.
26
(3) Mr. Baumgartner became our Chief Financial Officer in June 2006
serving until December 18, 2006.
(4) Mr. Mayfield became our Chief Financial officer in November 2005
serving until March 2006.
(5) Mr. Lewis resigned as our Chairman of the Board, President, Treasurer,
Chief Executive Officer and as one of our directors in April 2004
effective upon the acquisition of EWCO and we entered into a
Management Consulting Agreement with Bainbridge Advisors, Inc. at the
same time. Mr. Lewis is the President, Chief Executive Officer and
majority owner of Bainbridge, which we currently retain for
acquisition and other consulting services. See "Compensation Committee
Interlocks and Insider Participation" for a description of our
Management Consulting Agreement with Bainbridge. We also paid Mr.
Lewis $350,000 for his services to us in 2002 and $45,390 for his
services to us in 2001 and reimbursed him for automobile lease
payments and excess mileage charges in the amount of $11,140 in 2004,
$9,552 in 2003 and $8,987 in 2002.
(6) Amounts for 2004 for Mr. Farquhar, represent $12,000 in director fees
paid him prior to his employment as CEO and we issued 2,000 of our
common shares to Mr. Farquhar in February 2005 in payment for $10,000
of consulting services he rendered to us in 2004 before he became our
Chief Executive Officer. Amounts for 2005 for Mr. Farquhar represent
$3,000 for director fees paid to him prior to his employment as CEO
and $2,457 for 401(K) plan Company matched amounts.
(7) Mr. House resigned as CFO in December 2005. The amount of $150,650
represents severance and consulting compensation as part of his
termination agreement. The remaining amount of $2,529 represents
401(K) matched amounts from the Company.
(8) Amounts for 2004 for Mr. Lewis include an aggregate of $563,900
payable to Mr. Lewis under the Management Consulting Agreement with
Bainbridge Advisors, Inc., including retainers, success fees in
connection with our acquisitions of EWCO and Steelbank (which are
payable in installments), and reimbursement of legal fees, insurance
costs and other fees and expenses, but not including the stock option
granted to designees of Bainbridge.
(9) Amounts for 2004 for Mr. Vanella, include an aggregate of $225,427
payable under a Termination Agreement with Mr. Vanella, and $2,265 in
matching contributions paid by us into our 401(k) plan.
Compensation Committee Interlocks and Insider Participation
During fiscal 2006 J. Peter Farquhar served as one of the members of our
Compensation Committee. He was replaced on the Committee by Tracy Shellabarger
in February 2006. Mr. Farquhar did not participate in any Committee decisions
regarding his own compensation.
27
None of our directors had any other relationship with us requiring disclosure by
us pursuant to Securities and Exchange Commission rules regarding disclosure of
related-party transactions.
In April 2004, we entered into a Management Consulting Agreement (subsequently
amended on April 15, 2005 and December 8, 2005) with Bainbridge Advisors, Inc.,
an advisory firm primarily owned by Gary D. Lewis, our former Chairman of the
Board, President and Chief Executive Officer. Mr. Lewis is the President, Chief
Executive Officer and majority owner of Bainbridge. Mr. Lewis founded Tarpon,
then known as Wall St. Acquisitions, Inc., and served as its Chairman of the
Board and Chief Executive Officer and as one of its directors from its inception
in January 2002 until the closing of our initial acquisition, EWCO, in April
2004 and served as its President from January 2003 until April 2004. He had been
primarily responsible for implementing our business strategy, including
identifying the EWCO, Haines Road and Steelbank acquisitions.
The initial term of the initial Management Consulting Agreement expired April 7,
2007 (subsequently extended on December 8, 2005 for an additional one year term
commencing April 7, 2007) and has not been extended. Pursuant to the agreement,
Bainbridge, primarily through Gary D. Lewis, provided consulting services for us
concerning the integration of the EWCO, Haines Road and Steelbank acquisitions,
the further development and implementation of our business and financing plans
and strategy, our expansion and acquisition plans and other areas, all to the
extent we and Bainbridge mutually agreed. Tarpon was required to pay the
advisory and transaction fees even if it did not use Bainbridge for the allotted
hours under the agreement.
In exchange for Bainbridge's consulting services, we paid Bainbridge (1) $15,000
a month, increased to $20,000 a month effective April 2005, (2) all reasonable
expenses incurred by Bainbridge in connection with the agreement, including (a)
fees and expenses of legal counsel retained at our direction, (b) legal fees up
to $7,500 in connection with preparing the agreement, (c) out-of-pocket costs
incurred in performing the agreement, and (d) up to $5,000 a year for
professional liability errors and omissions insurance relating to Bainbridge's
services, (3) 4% of the total consideration paid in an acquisition approved by
our board, with a minimum of $200,000 and a maximum of $300,000 for each
transaction, provided that the $300,000 maximum shall be increased by 0.2% of
the enterprise value of any transaction, but only to the extent that such
transaction exceeds $50,000,000, (4) a stock option to Bainbridge or its
designees to purchase 110,000 common shares at an exercise price of $5.50 per
share, which was granted to Gary D. Lewis and his son in February 2005, and (5)
a one-time payment of $50,000 in consideration of certain advisory services
rendered to the Company that were not originally contemplated by the parties.
The success fee was generally paid over 12 months after closing, except that the
fee for the EWCO, Haines Road and Steelbank acquisitions, totaling $600,000, are
payable $22,222 a month until the February 17, 2005 closing of our initial
public offering, when the remaining amount will be paid equally over the period
ending 24 months from the closing. To the extent payments exceeded $60,000 a
month, the excess was deferred until the next month in which it could be paid
and not exceed $60,000 a month.
We have also agreed to indemnify Gary D. Lewis, obtain additional directors and
officers insurance coverage and reimburse him for legal fees incurred, all in
connection with certain services performed by Mr. Lewis in his capacity as one
28
of our former officers. We expect the legal fees and additional insurance
premiums paid by us to be approximately $11,130.
Grants of Plan Based Awards
All options granted to our named executive officers in 2006 are non-qualified
stock options. The exercise price per share of each option granted to our named
executive officers was determined in good faith by our board of directors on the
date of the grant. All of the stock options granted to our named executive
officers in 2006 were granted under our Stock Option Plan.
The following table sets forth certain information regarding grants of
plan-based awards to our named executive officers for the fiscal year ended
December 31, 2006:
29
Grants of Plan-Based Awards
Estimated Future Payouts Under Estimated Future All Other All Other
Non-Equity Incentive Plan Payouts Under Equity Stock Option
Awards Incentive Plan Awards Awards(1): Awards:
----------------------------- --------------------- ---------- ---------
Grant
Date Fair
Number of Number of Exercise of Value of
Shares of Securities Base Price Stock and
Stock or Underlying of Option Options
Name Date Threshold Target Maximum Threshold Target Maximum Units Options Awards Awards
----------------- -------- --------- ------ ------- --------- ------ ------- --------- ---------- ----------- ---------
James W. Bradshaw 04/26/06 - - - - - - 16,326 50,000 2.45 54,000
10/12/06 - - - - - - - 200,000 0.88 72,000
J. Peter Farquhar - - - - - - - - - - -
Patrick Hook - - - - - - - 110,000 0.88 39,600
J. Stanley 06/26/06 - - - - - - 40,000 40,000 1.75 30,400
Baumgartner, Jr. 10/12/06 - - - - - - - 110,000 0.88 39,600
John A. Mayfield - - - - - - - - - - -
|
30
Outstanding Equity Awards At 2006 Fiscal Year-End
The following table sets forth certain information regarding equity awards
granted to our named executive officers outstanding as of December 31, 2006:
Option Awards Stock Awards
Equity Incentive
Incentive Plan
Plan Awards:
Market Awards: Market
Value Number or Payout
Equity of of Value of
Incentive Shared Unearned Unearned
Plan Numbers or Shares, Shares,
Number of Number of Awards: of Shares Units of Units, or Units or
Securities Securities Number of or Units Stock Other Other
Underlying Underlying Securities of Stock That Rights Rights
Name and Unexercised Unexercised Underlying Option Option That Have That Have That
Principal Options Options Unearned Exercise Expiration Have Note Not Not Have Not
Position Exercisable Unexercisable Options Price Date Vested Vested Vested Vested
-------------------------------------------------------------------------------------------------------------------------------
James W. 0 50,000 0 2.45 04/26/16 - - - -
Bradshaw, 0 200,000 0 0.88 10/12/16
Chief
Executive
Officer
J. Peter 26,667 33,333(1) 0 5.50 02/17/15 - - - -
Farquhar,
Chief
Executive
Officer
Patrick Hook, 13,333 26,667 0 5.50 02/17/15 - - - -
President 110,000 0 0.88 10/12/16
J. Stanley 0 40,000(2) 0 1.75 06/26/16 40,000(2) 0 0 0
Baumgartner, 110,000(2) 0.88 10/12/06
Jr., Chief
Financial
Officer
John A. 0 40,000(3) 0 5.50 11/14/15 - - - -
Mayfield,
Chief
Financial
Officer
James T. House 0 40,000 (4) 0 5.50 2/17/15 - - - -
|
(1) On February 17, 2005, Mr. Farquhar was granted an option to purchase 50,000
shares of Common Stock which was to vest ratably on February 17, 2006,
February 17, 2007, and February 17, 2008. Mr. Farquhar resigned in April of
2006; as a result, only one-third of the option to purchase 50,000 shares
31
vested and Mr. Farquhar forfeited the balance. Mr. Farquhar also received
an option to purchase 10,000 shares of Common Stock on February 17, 2005 in
connection with his service as a director for the Company. This option
vested upon issuance.
(2) On June 26, 2006, Mr. Baumgartner was granted an option to purchase 40,000
shares of Common Stock and 40,000 shares of Common Stock. Both the option
and the stock issuance were subject to a vesting schedule, which provided
for vesting ratably on June 26, 2007, June 26, 2008 and June 26, 2009. At
the time Mr. Baumgartner resigned in December 2006, no part of the option
or the stock grant had vested and he has forfeited rights to both.
(3) Mr. Mayfield resigned prior to the vesting of any of his stock options,
which were forfeited.
(4) Mr. House resigned prior to the vesting of any of his stock options, which
were forfeited.
Option Exercises and Stock Vested
No options were exercised by our named executive officers in 2006.
Pension Benefits
We do not currently maintain qualified or non-qualified defined benefit plans.
Non-qualified Deferred Compensation
We do not currently maintain non-qualified defined contribution plans or other
deferred compensation plans.
Employee Agreements and Potential Payments Upon Termination or Change in Control
The following summaries set forth the employment agreements and potential
payments payable to our executive officers upon termination of employment or a
change in control of us under their current employment agreements and our other
compensation programs.
James W. Bradshaw. We entered into an employment agreement with James W.
Bradshaw on April 26, 2005, which provides for a term of two years and then
continues from year to year unless terminated by either party. Mr. Bradshaw's
base salary is $200,000 per year. Mr. Bradshaw received $20,000 of our common
stock as of the date of commencement of the employment agreement and an option
to purchase 50,000 shares of common stock under our Stock Option Plan. Mr.
Bradshaw is eligible to participate in all fringe benefits offered by us,
including, without limitation, major medical and dental insurance and a 401(k)
plan. If Mr. Bradshaw's employment agreement is terminated due to his death or
disability, or for cause, Mr. Bradshaw shall be entitled only to reimbursement
of expenses, unpaid compensation actually earned and accrued, and
indemnification. If Mr. Bradshaw is terminated without cause, he shall be
entitled to severance equal to aggregate compensation paid to him during the
preceding 12 months, plus medical and dental benefits for such period. Mr.
32
Bradshaw has agreed not to compete with us for a period of 1 year following
termination of his employment with us.
Patrick J. Hook. In February 2005, we entered into an employment agreement with
Patrick J. Hook, pursuant to which he is employed as our President and Chief
Operating Officer beginning February 2005, or in such other position as the
board of directors determines, for a period ending February, 2008, which term
will automatically renew for one additional year unless either party gives the
other at least 180 days notice of termination. Mr. Hook's annual salary is
currently $210,000, which may be increased by the board of directors. We also
paid him a bonus of $30,331, equal to the lost bonus for 2004 from his former
employer. Pursuant to this agreement, effective at the February 17, 2005 closing
date of our initial public offering, we granted Mr. Hook an option to purchase
40,000 common shares exercisable at $5.50 a share, 110% of our initial public
offering price. Mr. Hook is also entitled to participate in any bonus plan
established by the Compensation Committee of the board of directors. Mr. Hook is
entitled to various fringe benefits under the agreement, including a $750 a
month car allowance, a cell phone, four weeks of vacation, reimbursement for
books and tuition for an M.B.A. program and one year of salary and benefits if
his employment under the agreement is terminated without cause. Mr. Hook has
agreed not to compete with us during specified periods following the termination
of his employment.
J. Stanley Baumgartner, Jr. We entered into an employment agreement with J.
Stanley Baumgartner, Jr. as of June 7, 2006 to be Chief Financial Officer, the
term of which began on June 26, 2006. Mr. Baumgartner's employment agreement
provides for a term of 2 years. Mr. Baumgartner's annual base salary was
$175,000 and he was eligible for bonuses at the discretion of the Board of
Directors. Mr. Baumgartner was issued 40,000 shares of our common stock upon the
commencement of his employment and has also been granted an option to purchase
40,000 shares of our common stock, vesting in 3 equal annual installments at an
exercise price of $1.75. On November 27, 2006 Mr. Baumgartner advised us that he
would be resigning. He indicated that he had received an unsolicited offer and
had accepted a position in New England and desired to return his family to that
area. We and Mr. Baumgartner agreed to a December 18, 2006 termination date of
his employment. Mr. Baumgartner indicated that after termination, he would
remain available to consult with us, our advisors and our current and potential
investors, without charge, until we retain a successor.
J. Peter Farquhar. On January 12, 2005, we entered into an employment agreement
with J. Peter Farquhar effective as of August 20, 2004, pursuant to which he was
employed as our Chairman of the Board, Chief Executive Officer and Secretary for
a period to end on January 12, 2007 or his earlier death, disability or
termination for cause. Mr. Farquhar's annual salary was $100,000, but the
portion due for the period from August 20, 2004 to January 12, 2005 was deferred
until after the February 17, 2005 closing of our initial public offering.
Pursuant to this agreement, effective at the February 17, 2005 closing date of
our initial public offering, we granted Mr. Farquhar an option to purchase
50,000 common shares exercisable at $5.50 a share, 110% of our initial public
offering price. Mr. Farquhar was entitled to various fringe benefits under the
agreement, including $5,000,000 of directors and officers liability insurance.
He was also entitled to an amount equal to his one-year aggregate compensation
and medical and dental benefits if his employment under the agreement is
terminated without cause. If his employment is terminated within six months
after a change in control, he is entitled to two times annual aggregate
compensation and medical and dental benefits for 24 months. In April of 2005,
33
Mr. Farquhar agreed to devote all of his business time to the Company, and as a
result, in April 2005, we amended and restated Mr. Farquhar's employment
agreement to appropriately compensate him for his increased commitment to the
Company. Under the amended and restated employment agreement, Mr. Farquhar
continued to be entitled to all of the rights under his original employment
agreement, except that (1) the agreement was amended provided that upon
expiration, it would renew on the same terms and conditions unless either party
provides the other party with 180 days' written notice of termination, (2) Mr.
Farquhar's annual salary was increased to $250,000, effective as of the date of
such amended and restated employment agreement, (3) Mr. Farquhar was entitled to
receive a discretionary bonus of up to 50% of his salary, as determined by the
Compensation Committee, (4) Mr. Farquhar was entitled to certain additional
fringe benefits under the amended and restated agreement, including a $750 a
month allowance for automobile expenses and four weeks of paid vacation, (5) Mr.
Farquhar had the right to terminate the employment agreement for good reason, in
which case he would be entitled to severance payments equal to his aggregate
salary and benefits for one year, and (6) in the event that that the Company or
its subsidiaries consummated a transaction in which they acquire 100% of the
outstanding common stock or substantially all of the assets of a Company, the
Company was required to pay Mr. Farquhar's membership initiation fee, annual
dues and monthly membership fees at country club, subject to certain
limitations. In addition, Mr. Farquhar's covenant not to compete was amended to
provided that he would not engage in activity that is reasonably likely to
compete with the Company or its subsidiaries and he agreed not to be employed
by, consult with, or have any interest in, any entity which conducts a business
in which the Company or its subsidiaries were engaged during the term of his
employment agreement. On April 23, 2006, J. Peter Farquhar, then our Chief
Executive Officer, ceased to act as such. On April 26, 2006, we and Mr. Farquhar
entered into a Termination Agreement. The Termination Agreement provides that
Mr. Farquhar's compensation, partially at a reduced level, will continue until
January 31, 2007 and that he will render consulting services until such date. We
agreed to continue our indemnification obligations to Mr. Farquhar as set forth
in the Termination Agreement and Mr. Farquhar provided us a release.
John A. Mayfield. In November 2005, we entered into an employment agreement with
John A. Mayfield, pursuant to which he was employed as our Chief Financial
Officer beginning December 2005, for a period to end December 2008, subject to
an automatic one-year renewal of termination. Mr. Mayfield's annual salary was
$175,000, and an annual bonus of up to 50% of the annual base compensation.
Pursuant to this agreement, we granted Mr. Mayfield an option to purchase 40,000
common shares exercisable at $5.50 a share, 110% of our initial public offering
price. Mr. Mayfield was also entitled to participate in any bonus plan
established by the Compensation Committee of the Board of Directors. Mr.
Mayfield was entitled to various fringe benefits under the agreement, including
a $500 a month car allowance, a cell phone, four weeks of vacation, and one year
of salary and benefits if his employment under the agreement was terminated
without cause. Mr. Mayfield has agreed not to compete with us during specified
periods following the termination of his employment. Mr. Mayfield resigned
effective upon the filing of our Report on Form 10-K for the fiscal year ended
December 31, 2005.
James T. House. On July 8, 2004, we entered into an employment agreement with
James T. House, pursuant to which he was employed as our Chief Financial Officer
beginning August 2004, for a period to end July 8, 2007. Mr. House's annual
salary was $160,000, Pursuant to this agreement, effective at the February 17,
2005 closing date of our initial public offering, we granted Mr. House an option
34
to purchase 40,000 common shares exercisable at $5.50 a share, 110% of our
initial public offering price. Pursuant to the agreement, we also paid Mr. House
a $25,000 signing bonus on the February 17, 2005 closing date of our initial
public offering and agreed that he was entitled to participate in any bonus plan
established by the Compensation Committee of the board of directors. Mr. House
was entitled to various fringe benefits under the agreement, including a $500 a
month car allowance and one year of salary if his employment under the agreement
was terminated without cause. Mr. House has agreed not to compete with us during
specified periods following the termination of his employment. This agreement
was terminated on December 30, 2005 and Mr. House became a consultant until
April 15, 2006 at a fee of $13,333 per month.
Charles A. Vanella. In April 2004 and in connection with our acquisition of
EWCO, we entered into an employment agreement with Charles A. Vanella, pursuant
to which he was employed as our President and Chief Executive Officer. In August
2004, we entered into a Termination Agreement with Mr. Vanella, pursuant to
which he resigned from all of his positions with us, agreed to render consulting
services to us for one year, agreed to a release of claims, agreed to keep our
information confidential and agreed not to compete with us for a period of two
years following the termination of his consultation. Mr. Vanella's compensation
under the agreement includes (1) payment of $100,000 a year for two years, (2)
payment for his current health insurance coverage for 18 months, (3) payment of
his country club dues for 2004 and 2005, up to $5,000 a year, and (4) continued
use of his truck and payment of premiums for insurance on his truck. In December
of 2004, as part of an extension of the promissory note made by EWCO in favor of
Mr. Vanella, we agreed to pay up to approximately $9,000 of legal fees incurred
by Mr. Vanella in connection with his separation from the Company and agreed to
pay the approximately $24,500 balance owing on a truck and transfer title to the
truck to him in approximately two years.
Non-Employee Director Compensation
The following table sets forth a summary of the compensation we paid to our
non-employee directors in 2006. We do not expect this policy to change in 2007.
Change in
Non- Pension
Fees Stock Value and
Earned Incentive Nonqualified All
or Plan Deferred other
Paid Stock Option Compen- Compensation Compen-
Name Cash Awards Awards sation Earnings sation Total
---- ---- ------ ------ --------- ------------ ------- -----
James W. Bradshaw (1) 8,000 - - - -
J. Peter Farquhar (1) - 10,000 -
Tracy Shellaberger 8,000 10,000 - - -
Michael A. Ard - 10,000 - - -
Gerald Stein (2) - 10,000 - - -
Dr. Robert Pry (2) - 10,000 - - -
|
(1) James W. Bradshaw replaced J. Peter Farquhar on our board of directors in
April 2006.
35
(2) Gerald Stein replaced Dr. Robert Pry on our board of directors in October
2006 and Frank Gesuale replaced Gerald Stein on our board of Directors in May
2007.
On February 6, 2006, the board of directors adopted, the Outside Director
Compensation Plan (the "Plan"). The purpose of the Plan is to enable us to
adequately compensate our outside directors by providing such individuals with a
combination of cash compensation and equity-based long-term incentive
compensation awards.
Principal Provisions of the Plan
The following summary of the Plan, as adopted by the Board of Directors and
approved by shareholders on February 12, 2007, is qualified by reference to the
full text of the Plan.
Director Compensation Plan
----------------------------------- -------------------------- ---------------------------------
Name and Position Dollar Value ($) Number of Units
----------------------------------- -------------------------- ---------------------------------
----------------------------------- -------------------------- ---------------------------------
Non-Employee Directors
----------------------------------- -------------------------- ---------------------------------
On election Options to purchase 10,000
shares of the Company's
common stock, vested
immediately and exercisable for
a period of ten years, with an
exercise price of 100% of
market value at the date of issue
----------------------------------- -------------------------- ---------------------------------
Monthly Cash retainer of $1,000
----------------------------------- -------------------------- ---------------------------------
May 31 of each year For directors in good standing
for the current and previous
year, a stock grant of $8,000 of
the Company's common stock
at the current market price
----------------------------------- -------------------------- ---------------------------------
Per in person Board $1,000
meeting
----------------------------------- -------------------------- ---------------------------------
Per telephone conference $250
----------------------------------- -------------------------- ---------------------------------
For special projects Fee to be agreed to an
requested by the Board approved by the Board
----------------------------------- -------------------------- ---------------------------------
Committee Chairs $500 and $1,000 for the
Audit Committee Chair
----------------------------------- -------------------------- ---------------------------------
Employee Directors May 31 of each year, for
directors in good standing for
the current and previous year,
stock grant of $8,000 of
Company common stock at
current market price as of May
31 of that year
----------------------------------- -------------------------- ---------------------------------
|
36
Administration
The Plan may be administered by the board of directors or the compensation
committee. The Board of Directors and the Compensation Committee, in their
respective roles, are referred to as the "Granting Authority". The Granting
Authority designates the persons to be granted awards from among those eligible
and the type and amount of awards to be granted and has authority to interpret
the Plan, adopt, alter and repeal administrative regulations, and determine and
amend the terms of awards.
Eligibility
Awards under the Plan may only be made to outside directors
(non-employees). Outside directors are automatically granted cash compensation
and common stock pursuant to the terms specified in the Plan.
Automatic awards to outside directors
The Plan provides for the automatic grant of cash compensation and common
stock to outside directors on the terms provided above.
Stockholder approval of compensation paid to an employee Director.
In connection with his promotion to Chief Executive Officer of the Company,
we issued Mr. James W. Bradshaw 8,163 shares of our Common Stock. The American
Stock Exchange Rules require shareholder approval when issuing equity to certain
employees. However, equity issuances to certain employees in connection with
their hiring by the Company are exempt from this rule. As Mr. Bradshaw was
previously employed by the Company in a different position, this issuance was
not exempt from shareholder approval. Therefore, we sought and received
shareholders approval of this issuance to Mr. Bradshaw at a meeting held on
February 12, 2007.
Limitations on directors' liability and indemnification agreements
As permitted by Michigan law, we have adopted provisions in our amended and
restated certificate of incorporation that limit or eliminate the personal
liability of directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting on behalf of the
corporation, a director exercise an informed business judgment based on all
material information reasonably available to him or her. Consequently, a
director will not be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability for:
o any breach of the director's duty of loyalty to us or our stockholders;
o any act or omission not in good faith or that involves intentional
misconduct or a knowing violation of law;
37
o any act related to unlawful stock repurchases or redemptions or payments
of dividends; or
o any transaction from which the director derived an improper personal
benefit.
These limitations of liability do not limit or eliminate our rights or any
stockholder's rights to seek non-monetary relief, such as injunctive relief or
rescission. These provisions will not alter a director's liability under federal
securities laws.
As permitted by Michigan law, our bylaws also provide that:
o we will indemnify our directors and executive officers, subject to
certain exceptions, and may indemnify our other officers, employees and
agents, to the fullest extent permitted by law;
o subject to certain exceptions, we will advance expenses to our directors
and executive officers in connection with a legal proceeding to the fullest
extent permitted by law; and
o the rights provided in our bylaws are not exclusive.
The limitation of liability and indemnification provisions in our amended and
restated certificate of incorporation and bylaws may discourage stockholders
from bringing a lawsuit against our directors and officers for breach of their
fiduciary duty. They may also reduce the likelihood of derivative litigation
against our directors and officers, even though an action, if successful, might
benefit us and other stockholders. Further, a stockholder's investment may be
adversely affected to the extent that we pay the costs of settlement and damage
awards against directors and officers as required by these indemnification
provisions. Currently, there is no pending litigation or proceeding involving
any of our directors, officers or employees for which indemnification is sought,
and we are not aware of any threatened litigation that may result in claims for
indemnification.
Market For Common Equity And Related Shareholder Matters
Our common shares have traded on the American Stock Exchange under the trading
symbol "TPO" since February 14, 2005 There was no public trading market for our
common shares before February 14, 2005.
The outstanding shares of Common Stock are held by approximately shareholders
in total and approximately 65 shareholders of record as of August 1, 2007.
The following table sets forth, for the period indicated, the high and low sales
prices for our common shares as reported by the American Stock Exchange.
High Low
----------------- ------- -----------------
Fiscal Year Ended December 31, 2006
First Quarter $ 3.25 $ 2.05
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High Low
----------------- ------- -----------------
Second Quarter $ 2.96 $ 1.24
Third Quarter $ 2.35 $ 1.10
Fourth Quarter $ 1.29 $ 0.75
High Low
----------------- ------- -----------------
Fiscal Year Ended December 31, 2005
First Quarter (2/14/05 to 3/31/05) $ 5.99 $ 4.61
Second Quarter $ 5.65 $ 3.30
Third Quarter $ 5.20 $ 3.19
Fourth Quarter $ 4.35 $ 2.15
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The Company has paid no dividends on its Common Stock for the last two years.
The Company's lender restricts the payment of dividends on the Company's Common
Stock. The Company does not expect to pay dividends on Common Stock in the
future.
Transfer Agent And Registrar
The transfer agent and registrar for the Common Stock is American Stock Transfer
& Trust Company, Inc., 59 Maiden Lane, New York, New
York 10038.
Required Vote
To be approved, Proposal 3 must receive more "For" votes than "Against" votes.
In determining whether this proposal has received the requisite number of "For"
votes, broker votes will be included "For" and abstentions will be disregarded
and will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 3.
PROPOSAL 4
TO RATIFY THE APPOINTMENT OF REHMANN ROBSON AS THE COMPANY'S
REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2007
39
Subject to ratification by the stockholders, the Board of Directors has
appointed Rehmann Robson as the Company's registered independent public
accounting firm to audit the 2007 financial statements for the fiscal year
ending December 31, 2006. This will be the second year that Rehmann Robson will
be performing the audit. Grant Thornton was appointed for the year ended
December 31, 2006 but resigned in October 2006.
Representatives of the firm of Rehmann Robson are expected to be present at the
Meeting and will have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions relating only to the
financial statements for fiscal 2006.
Audit Fees
The following represents all amounts billed to the Company for the professional
services of Rehmann Robson rendered during fiscal years 2006:
Year Ended December 31, 2006
Audit Fees(1) $595,929
Audit-Related Fees -
Tax Fees $2,000
All Other Fees $16,000
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(1) Consists of fees for the audit of our annual financial statements and
review of interim financial statements.
In accordance with Section 10A(i) of the Exchange Act, before Rehmann
Robson is engaged by us to render audit or non-audit services, the engagement is
approved by our Audit Committee. None of the audit-related, tax and other
services described in the table above were approved by the Audit Committee
pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
Rehmann Robson's fees for the 2007 audit and the three preceding quarterly
reviews are estimated to be approximately $550,000.
Audit Committee Report
Our Audit Committee has:
o reviewed and discussed our audited financial statements for the year
ended December 31, 2006 with our management;
40
o discussed with Rehmann Robson the matters required to be discussed by
SAS 61 (Codification of Statements on Auditing Standards, AU 380), as
it has been modified or supplemented;
o received the written disclosures and the letter from Rehmann Robson
required by Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committees), as it has been modified or supplemented; and
o discussed with Rehmann Robson the independence of such firm.
Based on the review and discussions described above in this paragraph, our
Audit Committee recommended to our Board of Directors that the audited financial
statements for the year ended December 31, 2006 be included in our Annual Report
on Form 10-K for the year ended December 31, 2006 for filing with the Securities
and Exchange Commission.
Management is responsible for the Company's financial reporting process
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. The Company's independent auditors are responsible for
auditing those financial statements. Our responsibility is to monitor and review
these processes. It is not the Audit Committees' duty or responsibility to
conduct auditing or accounting reviews or procedures. The Audit Committee are
not employees of the Company and we may not be, and may not represent themselves
to be or to serve as, accountants or auditors by profession or experts in the
field of accounting or auditing. Therefore, the Audit Committee has relied,
without independent verification, on management's representation that the
financial statements have been prepared with integrity and objectivity and in
conformity with accounting principles generally accepted in the United States of
America and on the representations of the independent auditors included in their
report on the Company's financial statements. The Audit Committees' oversight
does not provide us with an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
policies, or appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committees' considerations and discussions with
management and the independent auditors do not assure that the Company's
financial statements are presented in accordance with generally accepted
accounting principles, that the audit of our Company's financial statements has
been carried out in accordance with generally accepted auditing standards or
that our Company's independent accountants are in fact "independent."
Michael A. Ard
Tracy L. Shellabarger
Required Vote
To be approved, Proposal 4 must receive more "For" votes than "Against" votes.
In determining whether this proposal has received the requisite number of "For"
votes, broker votes will be included "For" and abstentions will be disregarded
and will have no effect on the outcome of the vote.
41
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 4
Annual Report On Form 10-K
An annual report on Form 10-K for the year ending December 31, 2006, and is
being mailed to all shareholders of record as of the Record Date, at the
Company's cost.
Quarterly Reports on Form 10-Q
Quarterly reports on Form 10-Q as filed for the quarters ended March 31, 2007
and June 30, 2007, containing financial and other information about the Company
for such period is available at no cost to shareholders online at www.sec.gov or
upon written request to the Company.
Other Matters
Management does not know of any other matters which are likely to be brought
before the Meeting. However, in the event that any other matters properly come
before the Meeting, including, but not limited to any proposals made by
stockholders, the persons named in the enclosed proxy will vote the proxy in
accordance with their best judgment. Under the Company's By-laws, advance notice
is required for nomination of directors and for certain business to be brought
before an annual meeting of stockholders of the Company. Such advance notice
must generally be received by the Company not less than 50 days nor more than 75
days prior to the date of such meeting. A copy of the Company's By-laws
specifying the advance notice requirements will be furnished to any stockholder
upon written request to the Secretary of the Company.
Solicitation Of Proxies
The cost of preparing, assembling and mailing this Proxy Statement, the Notice
of Meeting, and the enclosed proxy card will be borne by the Company.
In addition to the solicitation of proxies by use of the mails, the Company may
utilize the services of its officers and regular employees (who will receive no
compensation in addition to their regular salaries) to solicit proxies
personally, by telephone and telecopy. The Company has requested banks, brokers
and other custodians, nominees, and fiduciaries to forward copies of the proxy
material to their principals and to request authority for the execution of
proxies, and will reimburse such persons for their expenses in so doing.
42
Shareholders Proposals
Any shareholder of the Company who wishes to present a proposal to be considered
at the 2008 Annual Meeting of Stockholders of the Company and who wishes to have
such proposal presented in the Company's proxy statement for such meeting must
deliver such proposal in writing to the Company at 2420 Wills Street,
Marysville, Michigan 48040, Attention: Corporate Secretary, on or before
December 31, 2007.
Under applicable rules of the SEC, all proposals submitted after December 31,
2007 shall be considered untimely. In order to curtail controversy as to the
date on which the proposal was received by the Company, it is suggested that
proponents submit their proposals by certified mail, return receipt requested.
By Order of the Board of Directors
James W. Bradshaw, Chief Executive Officer
Marysville, Michigan
Dated: September 12, 2007
43
TARPON INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints James W.
Bradshaw and Patrick Hook, proxies with power of substitution to each, for and
in the name of the undersigned to vote all of the shares of Common Stock of
Tarpon Industries, Inc. (the "Company"), held of record by the undersigned on
August 24, 2007, which the undersigned would be entitled to vote if present at
the Annual Meeting of Stockholders of the Company to be held on October 18, 2007
at 12:00 noon at the Thomas Edison Inn, 500 Thomas Edison Parkway, Port Huron,
Michigan, and any adjournments thereof, upon the matters set forth in the Notice
of Annual Meeting.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
TARPON INDUSTRIES, INC.
October 18, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 and 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE
FOR AGAINST ABSTAIN
1. To approve the issuance of shares [ ] [ ] [ ]
("Financing Shares") in connection with (a)
a private placement offering of the Company's
debt (the "Bridge Loan") which has been con-
summated and which requires the issuance of
shares of common stock and that may require
the issuance of additional shares of common
stock and (b) a credit facility (the "Loan
Agreement") which has been consummated,
which includes warrants that may require the
issuance of common stock.
2. To approve an amendment to our [ ] [ ] [ ]
Amended and Restated Articles of Incorporation
to increase the authorized common stock, no par
value, from 30,000,000 shares of common stock
to 100,000,000 shares of common stock.
3. To re-elect James W. Bradshaw as [ ] [ ] [ ]
a Class I director to serve for a term of
three years.
4. To ratify the appointment of Rehmann [ ] [ ] [ ]
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Robson as the Company's registered independent
public accounting firm for the fiscal year ending
December 31, 2007
5. To transact such other business as may [ ] [ ] [ ]
properly come before the meeting and any
adjournment or postponement thereof.
The undersigned acknowledges receipt of the Proxy Statement.
[ ]
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may note be submitted via this method
Signature of Date: _________ Signature of Date: _________
Stockholder ___________ Stockholder __________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name by
authorized person.
Tarpon (AMEX:TPO)
過去 株価チャート
から 5 2024 まで 6 2024
Tarpon (AMEX:TPO)
過去 株価チャート
から 6 2023 まで 6 2024
