SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
----------
WIDEPOINT CORPORATION
(Name of Registrant as Specified in its Charter)
----------
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[Logo]
WIDEPOINT CORPORATION
One Lincoln Centre, Suite 1100
Oakbrook Terrace, Illinois 60181
November 17, 2003
Dear Stockholder:
We are pleased to invite you to attend our Annual Meeting of Stockholders.
This year it will be held on Thursday, December 18, 2003, at 10:00 a.m., local
time, at the Company's offices located at One Lincoln Centre, Suite 1100,
Oakbrook Terrace, Illinois 60181. The primary business of the meeting will be to
elect a director and to ratify the selection of independent accountants.
A Notice of the Annual Meeting and the Proxy Statement follow. You will
also find enclosed a proxy card. We invite you to attend the meeting in person,
but if this is not feasible, we think it advisable for you to be represented by
proxy. Therefore, if you cannot attend the meeting, we urge you to sign the
enclosed proxy card and mail it promptly in the return-addressed,
postage-prepaid envelope provided for your convenience.
Sincerely,
/s/ Steve L. Komar
------------------
Steve L. Komar
Chairman of the Board and
Chief Executive Officer
WIDEPOINT CORPORATION
One Lincoln Centre, Suite 1100
Oakbrook Terrace, Illinois 60181
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
Notice is hereby given that the Annual Meeting of Stockholders of Widepoint
Corporation, a Delaware corporation (the "Company"), will be held at the
Company's offices, located at One Lincoln Centre, Suite 1100, Oakbrook Terrace,
Illinois 60181 on Thursday, December 18, 2003, at 10:00 a.m., local time, for
the following purposes:
1. To elect one person as a Class III director of the Company to serve
for a three-year period until the Annual Meeting of Stockholders in
the year 2006; and
2. To ratify the selection of Grant Thornton, LLP as the independent
accountants for the Company for the current fiscal year; and
3. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on November 12, 2003
are entitled to notice of, and to vote at, the Annual Meeting.
By order of the Board of Directors,
/s/ James T. McCubbin
---------------------
James T. McCubbin
Secretary
November 17, 2003
YOUR VOTE IS IMPORTANT
Please date, sign and promptly return the enclosed proxy so that your shares may
be voted in accordance with your wishes.
Mail the proxy to us in the enclosed envelope, which requires no postage if
mailed in the United States.
The giving of the proxy does not affect your right to vote in person should you
attend the meeting.
WIDEPOINT CORPORATION
One Lincoln Centre, Suite 1100
Oakbrook Terrace, Illinois 60181
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Widepoint Corporation, a Delaware corporation ("WDPT"
or the "Company"), of proxies of stockholders to be voted at the Annual Meeting
of Stockholders to be held at the Company's offices, located at One Lincoln
Centre, Suite 1100, Oakbrook Terrace, Illinios 60181 at 10:00 a.m., local time,
on Thursday, December 18, 2003, and any and all adjournments thereof.
Any stockholder executing a proxy retains the right to revoke it at any
time prior to its being exercised by giving notice to the Secretary of the
Company.
This Proxy Statement and the accompanying proxy are being mailed or given
to stockholders of the Company on or about November 17, 2003.
VOTING SECURITIES
As of November 5, 2003, a total of 15,579,913 shares of common stock of the
Company, par value $.001 per share ("Common Stock"), which is the only class of
voting securities of the Company, were issued and outstanding. All holders of
record of the Common Stock as of the close of business on November 12, 2003, are
entitled to one vote for each share held at the Annual Meeting, or any
adjournment thereof, upon the matters listed in the Notice of Annual Meeting.
Cumulative voting is not permitted.
Shares of Common Stock represented by proxy will be voted according to the
instructions, if any, given in the proxy. Unless otherwise instructed, the
person or persons named in the proxy will vote (1) FOR the election of the
nominee for director listed herein (or their substitutes in the event any of the
nominees is unavailable for election); (2) FOR the ratification of the selection
of Grant Thornton LLP as the independent accountants for the Company for the
current fiscal year; and (3) in their discretion, with respect to such other
business as may properly come before the meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed by the Company for the meeting. The number
of shares represented at the meeting in person or by proxy will determine
whether or not a quorum is present. The inspectors of election will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any matter submitted to the stockholders for a vote. If a broker
indicates on the Proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote by the inspectors of election with
respect to that matter.
The cost of soliciting proxies will be borne by the Company. Proxies may be
solicited by directors, officers, regular employees or other agents of the
Company in person or by telephone.
PROPOSAL ONE -- ELECTION OF DIRECTORS
The Company's Board of Directors is classified into the following three
classes of directors, with approximately one-third of the directors serving in
each such class of directors and with one class of directors being elected at
each annual meeting of stockholders of the Company to serve for a term of three
years or until their successors are elected and take office as provided below:
CLASS I -- TERM EXPIRES AT THE 2004 ANNUAL MEETING OF STOCKHOLDERS
Mark F. Mirabile
G. W. Norman Wareham
CLASS II -- TERM EXPIRES AT THE 2005 ANNUAL MEETING OF STOCKHOLDERS
Steve L. Komar
James T. McCubbin
CLASS III -- TERM EXPIRES AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS
James Ritter
The Bylaws of the Company provide that the Board of Directors will
determine the number of directors to serve on the Board. The Company's Board of
Directors presently consists of five members. The five members of the Company's
Board of Directors are identified above, with Mark Mirabile having been
appointed by the Board of Directors to fill the vacancy for the remaining term
of the Class I directorship which resulted after the resignation of Michael
Higgins.
Proxies will be voted at the Annual Meeting, unless authority is withheld,
FOR the election of the persons named below who currently are directors of the
Company. The Company does not contemplate that the persons named below will be
unable or will decline to serve; however, if any such nominee is unable or
declines to serve, the persons named in the accompanying proxy will vote for a
substitute, or substitutes, in their discretion. The following table sets forth
information regarding the nominees:
POSITION WITH BECAME
NAME THE COMPANY AGE DIRECTOR
---- ----------- --- --------
James Ritter ............ Director 59 1999
James M. Ritter has served as a director of the Company since December 1999
and Assistant Secretary since December 2002. Mr. Ritter is the retired Corporate
Headquarters Chief Information Officer of Lockheed Martin Corporation. Prior to
his retirement in February 2001, Mr. Ritter was employed at Lockheed Martin
Corporation for over 32 years in various positions involving high level IT
strategic planning and implementation, e-commerce development, integrated
financial systems, and large-scale distributed systems.
MANAGEMENT RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE ABOVE NOMINEE
AS A DIRECTOR OF THE COMPANY.
The Board of Directors has an Audit and Finance Committee, which conducted
four meetings during 2002 and presently consists of Steve L. Komar, G.W. Norman
Wareham and James Ritter. Mr. Komar is a director and also serves as the Chief
Executive Officer of the Company. Mr. Wareham and Mr. Ritter are independent,
non-employee directors. The Audit and Finance Committee is responsible for
meeting with the Company's independent accountants to review the proposed scope
of the annual audit of the Company's books and records, reviewing the findings
of the independent accountants upon completion of the annual audit, and
reporting to the Board of Directors with respect thereto. All of the members of
the Audit Committee are considered by the Board to be financially literate and
at least two, Mr. Wareham and Mr. Komar, are considered by the Board to have
accounting or related financial management expertise.
2
Financial Statement Review.
The Audit Committee has: (a) reviewed and discussed the audited financial
statements with the management of the Company; (b) discussed with the Company's
independent auditors, Grant Thornton LLP, the matters required to be discussed
by Statement on Auditing Standards No. 61; (c) received from the Company's
independent auditors the written disclosures and the letter required by
Independence Standard Board Standard No. 1, and has discussed with the Company's
independent auditors their independence; and (d) based on the review and
discussions referred to in clauses (a), (b) and (c) above, recommended to the
Board that the audited financial statements be included in the Company's Annual
Report on Form 10-K for fiscal year 2002 for filing with the Securities and
Exchange Commission.
Independent Auditors.
The Company's Board of Directors appointed the accounting firm of Grant
Thornton LLP to serve as the Company's independent accountants for the fiscal
years ending December 31, 2002 and 2001. During the year ended December 31, 2000
Arthur Andersen LLP acted as the Company's independent accountants. Upon the
recommendation of the Audit Committee, the Board has selected Grant Thornton LLP
as the Company's independent auditor for fiscal year 2002.
Audit Fees
The Company paid Grant Thornton LLP approximately $32,000 in audit and
review fees for fiscal year 2002.
Financial Information Systems Design and Implementation Fees
The Company did not pay Grant Thornton LLP any financial information
systems design and implementation fees for fiscal year 2002.
All Other Fees
The Company did not pay Grant Thornton LLP any nonaudit fees for fiscal
year 2002.
Audit Committee Composition
The foregoing report is submitted by the members of the Audit Committee:
G.W. Norman Wareham (Chairman), James Ritter, and Steve L. Komar.
The Board of Directors also has a Compensation Committee, which conducted
two meetings during 2002, presently consists of G.W. Norman Wareham, Steve L.
Komar and James Ritter, and is responsible for advising the Board on matters
relating to the compensation of officers and key employees and certain of the
Company's employee benefit plans. The Board of Directors also has a Nominating
Committee, which conducted one meeting during 2002, presently consists of Steve
L. Komar, and James Ritter and is responsible for advising the Board on matters
relating to the identification of nominees to the Board of Directors. The Board
of Directors met four times during 2002. Each incumbent director attended at
least 75% of the aggregate number of meetings of the Board and committee(s) on
which he served while he was a director and committee member during 2002.
COMPENSATION AND RELATED MATTTERS
The following Summary Compensation Table sets forth the annual salary
(column c) and bonus (column d) paid and options granted (column g) during each
of the past three years to executive officers of the Company at December 31,
2002 whose annual salary and bonus in 2002 exceeded $100,000.
3
Summary Compensation Table
Long-Term Compensation
---------------------------
Annual Compensation Awards Payouts
-------------------------------------- --------------------------- --------
(a) (b) (c) (d) (e) (f) (g) (h)
Other Annual Restricted LTIP
Salary Bonus Compensation Stock Award(s) Options Payouts
Name and Principal Position Year ($) ($) ($) (1) $ (#) (2) ($)
--------------------------- ------ ----------- ----------- -------------- ---------------- ---------- --------
James McCubbin .............. 2002 $119,000 $ -0- $-0- $-0- $ -0- $-0-
Vice President & Chief 2001 $134,302 $ -0- $-0- $-0- 500,000 $-0-
Financial Officer 2000 $136,855 $92,400 $-0- $-0- $ -0- $-0-
Mark Mirabile ............... 2002 $119,000 $ -0- $-0- $-0- $ -0- $-0-
Vice President & Chief 2001 $133,681 $ -0- $-0- $-0- 500,000 $-0-
Operations Officer 2000 $131,250 $ 9,750 $-0- $-0- 45,000 $-0-
------------
(1) Does not report the approximate cost to the Company of an automobile
allowance furnished to the above persons, which amounts do not exceed the
lesser of either $50,000 or 10% of the total of the person's annual salary
and bonuses for 2002.
(2) Reports the number of shares underlying options granted during each of the
respective years.
The following Option Grants Table sets forth, for each of the named
executive officers, information regarding individual grants of options granted
in 2002 and their potential realizable value. Information regarding individual
option grants includes the number of options granted, the percentage of total
grants to employees represented by each grant, the per-share exercise price and
the expiration date. The potential realizable value of the options are based on
assumed annual 0%, 5% and 10% rates of stock price appreciation over the term of
the option.
Option Grants Table
Individual Grants Potential Realizable
----------------------- Value at Assumed
% of Total Annual Rates of
Options Stock Price
Granted to Appreciation for
Options Employees Exercise Option Term (4)
Granted in Fiscal Price Expiration ---------------------------------
Name (#) (1) Year (2) ($/SH) (3) Date 0% 5% 10%
---- --------- ----------- ------------ ----------- ---- ---------- ----------
Steve Komar ......... 500,000 81% $0.07 7/7/2012 $0 $17,778 $36,123
------------
(1) The reported options were granted by the Company to the named executive
officers under the Company's 1997 Stock Option Plan and become exercisable
and may be accelerated upon the achievement by the executive officer of
certain annual performance criteria set each year by the Compensation
Committee of the Company's Board of Directors.
(2) Based on options for a total of 620,000 shares granted to all employees in
2002.
(3) The exercise price is equal to the fair market value on the date of grant
of the option.
(4) The potential realizable values shown in the columns are net of the option
exercise price. These amounts assume annual compounded rates of stock price
appreciation of 0%, 5%, and 10% from the date of grant to the option
expiration date, a term of ten years. These rates have been set by the U.S.
Securities and Exchange Commission and are not intended to forecast future
appreciation, if any, of the Company's Common Stock. Actual gains, if any,
on stock option exercises are dependent on several factors including the
future performance of the Company's Common Stock, overall stock market
conditions, and the optionee's continued employment through the vesting
period. The amounts reflected in this table may not actually be realized.
The following Option Exercises and Year-End Value Table is set forth herein
because it sets forth, for each of the named executive officers, information
regarding the number and value of unexercised options at December 31, 2002. No
options were exercised by such persons during 2002.
4
Aggregate Option Exercises and Fiscal Year-End Option Value Table
(a) (b) (c) (d) (e)
Number of Value Number of Unexercised Value of Unexercised
Shares Acquired Realized Options at FY-End (#) (1) In-The-Money Options at FY-End ($)
Name on Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable (2)
---- ----------------- ---------- --------------------------- -----------------------------------
Steve Komar .......... -0- -0- 328,000/200,000(3) $22,960/$14,000
James McCubbin ....... -0- -0- 301,000/200,000(4) $0/$0
Mark Mirabile ........ -0- -0- 301,000/200,000(5) $0/$0
------------
(1) The reported options were granted by the Company to the named executive
officer.
(2) Market value of underlying shares at December 31, 2002, minus the exercise
price.
(3) The above-reported options entitle Mr. Komar to purchase from the Company
(i) 300,000 shares of Common Stock at a price of $0.07 per share through
July 7, 2012, pursuant to a stock option granted to him on July 7, 2002
under the Incentive Plan, (ii) 200,000 shares of Common Stock at a price of
$0.07 per share through July 7, 2012, under an option granted on July 7,
2002, with such shares vesting at a rate of 100,000 shares annually through
January 2, 2004, or by the earlier vesting by the compensation committee,
(iii) 12,000 shares of Common Stock that may be purchased by Mr. Komar from
the Company at a price of $14.06 per share until May 20, 2007, pursuant to
a stock option granted to him on May 20, 1997 under the Director Plan, (iv)
6,000 shares of Common Stock that may be purchased by Mr. Komar from the
Company at a price of $7.66 per share until March 24, 2008, pursuant to a
stock option granted to him on March 24, 1998 under the Director Plan, and
(v) 10,000 shares of Common Stock that may be purchased by Mr. Komar from
the Company at a price of $3.97 per share until December 10, 2008, pursuant
to a stock option granted to him on December 10, 1998 under the Director
Plan.
(4) The above-reported options entitle Mr. McCubbin to purchase from the
Company (i) 1,000 shares of Common Stock at a price of $1.35 per share
through July 3, 2010 under an option granted on July 3, 2000, of which
1,000 shares are currently exercisable, (ii) 300,000 shares of Common Stock
at a price of $0.17 per share through January 2, 2011, pursuant to a stock
option granted to him on January 2, 2001 under the Incentive Plan, and
(iii) 200,000 shares of Common Stock at a price of $0.17 per share through
January 2, 2011, under an option granted on January 2, 2001, with such
shares vesting 100,000 shares of Common Stock annually through January 2,
2004 or by the earlier vesting by the compensation committee.
(5) The above-reported options entitle Mr. Mirabile to purchase from the
Company (i) 1,000 shares of Common Stock shares at a price of $1.35 per
share through July 3, 2010 under an option granted on July 3, 2000, of
which 1,000 shares of Common Stock are currently exercisable, (ii) 300,000
Shares of Common Stock at a price of $0.17 per share through January 2,
2011, pursuant to a stock option granted to him on January 2, 2001 under
the Incentive Plan, and (iii) 200,000 shares of Common Stock at a price of
$0.17 per share through January 2, 2011, under an option granted on January
2, 2001, with such shares vesting 100,000 shares of Common Stock annually
through January 2, 2004 or by the earlier vesting by the compensation
committee.
No Long-Term Incentive Plan Awards Table is set forth herein because no
long-term incentive plan awards were made to the above-named executive officers
during 2002.
Employment Agreements and Arrangements
On July 1, 2002, the Company entered into an employment agreement with
Steve Komar, Chief Executive Officer for the Company. The employment agreement
continued through July 1, 2003 with five renewable one-year options, and was
renewed and continues through July 1, 2004. The agreement provides for (1) a
home office/ automobile expense allowance of $500 per month to cover such
expenses incurred in conection with Company business; (2) a phone allowance of
$100 per month to cover such expenses incurred in connection with Company
business; (3) reimbursement for additional actual business expenses consistent
with the Company's existing policies that have been incurred for the benefit of
the Company; (4) paid medical and other benefits consistent with the Company's
existing policies with respect to key executives of the Company, as such
policies may be
5
amended from time to time in the future; and (5) performance incentive bonuses
as may be granted annually at the discretion of the Compensation Committee of
the Board of Directors.
On September 1, 1999, the Company entered into employment agreements with
each of Michael C. Higgins and James T. McCubbin. Mr. Higgins resigned his
position with the Company on December 31, 2001. Mr. Higgins entered into a
separation agreement that amended and superseded his employment agreement with
the Company upon his resignation. The separation agreement contained
non-competition, non-solicitation and non-disclosure provisions restricting Mr.
Higgins from employment with any competing business, soliciting or diverting
Company employees and customers to a competing business, soliciting or diverting
Company employees and customers to a competing business or disclosing the
Company's proprietary information to third parties during the term of the
separation agreement. The separation agreement provided for a single payment of
$95,625 by the Company to Mr. Higgins, representing six (6) months salary at his
then current pay rate of $191,250 per annum and the Company paid benefits for
six (6) months from his date of resignation in consideration for, among other
things, the early termination of Mr. Higgins' employment agreement. In October
2001, Mr. McCubbin volunteered to reduce his current pay rate from $140,000 per
annum to $119,000 per annum with an office expense allowance of $500 per month.
In July of 2002, the Company entered into a new employment agreement with Mr.
McCubbin that continues his current base pay rate of $119,000 per annum with an
office expense allowance of $500.00 through July 2003 with five renewable
one-year options. The employment agreement was renewed through July 2004.
On December 14 1998, the Company entered into an employment agreement with
Mark Mirabile, Vice President of Sales and Marketing for the Company. The
employment agreement was for a three year term and expired on December 14, 2001.
The agreement provided for a base salary of at least $130,000 plus a bonus of up
to 30% of his annual gross salary bonus and an automobile expense in the amount
of $500 per month. Mr. Mirabile voluntarily reduced his pay rate to $119,000 per
annum and an automobile expense allowance in the amount of $500 per month. In
July 2002, the Company entered into a new employment agreement with Mr. Mirabile
that continues his current base pay rate of $119,000 per annum with an
automobile allowance of $500.00 through July 2003 with five renewable one-year
options. The employment agreement was renewed through July 2004.
Compensation Committee Report on Executive Compensation
The Compensation Committee consists of Steve L. Komar, G.W. Norman Wareham
and James Ritter. The Compensation Committee determines the compensation paid to
the Chief Executive Officer and the other executive officers and consultants of
the Company. Mr Komar, who is currently serving as the Chief Executive Officer
of the Company, does not participate in the determination by the Committee of
the compensation paid to the Chief Executive Officer. The Compensation Committee
believes that for the Company to be successful long-term and for the Company to
increase stockholder value, the Company must be able to hire, retain, adequately
compensate and financially motivate talented and ambitious executives. The
Compensation Committee attempts to reward executives for both individual
achievement and overall Company success.
Executive compensation is made up of three components:
Base Salary. An executive's base salary is initially determined by
considering the executive's level of responsibility, prior experience and
compensation history. Published salaries of executives in similar positions at
other companies of comparable size (sales and/or number of employees) is also
considered in establishing base salary.
Stock Options. In 1997, the Company adopted the 1997 Incentive Stock Plan
to provide stock option awards to certain executives of the Company and its
subsidiaries. The Compensation Committee believes that the granting of stock
options is directly linked to increased executive commitment and motivation and
to the long-term success of the Company. The Compensation Committee awards stock
options to certain executives of the Company and its subsidiaries. Mr Komar, who
is currently serving as the Chief Executive Officer of the Company, does not
participate in the determination by the Committee of any stock options to be
granted to the Chief Executive Officer. The Compensation Committee uses both
subjective appraisals of the executive's
6
performance and the Company's performance and financial success during the
previous year to determine option grants.
Bonus. The Company has also implemented an executive bonus program for
certain of its executives. Such bonuses are based, in part, on the Company's
financial performance during the previous fiscal year including achievement of
gross revenue and net income targets. In addition, objective individual measures
of performance compared to the individual's business unit profit performance may
be considered. A subjective rating of the executive's personal performance may
also be considered. Bonuses may be paid in cash or Company Common Stock or a
combination of cash and Company Common Stock. Bonuses are typically linked to a
percentage of base salary.
In early 2002, the Compensation Committee recommended to the Board of
Directors and the Board of Directors approved a compensation package for the
Company's Chief Operations Officer, Mark Mirabile, and the Company's Vice
President and Chief Financial Officer, James McCubbin, that included a base
salary of approximately $119,000 in 2002 for both Mr. Mirabile and Mr. McCubbin,
plus a possible bonus for each of them of up to 100% of their base salary, which
represented a decrease in the base salary for both such persons since 1999 due
to the declining revenues of the Company. Mr. Mirabile and Mr. McCubbin both
voluntarily reduced their base salaries in October 2001 to approximately
$119,000 per annum. Receipt of the bonus is subject to the Company's achievement
of certain performance criteria, including gross revenue and net income targets.
If the performance criteria are not achieved or the executive is no longer
employed by the Company (other than for cause termination), a bonus may be
awarded in the discretion of the Compensation Committee. No bonuses were awarded
in 2002.
In determining the 2002 compensation packages for these executive officers,
the Compensation Committee considered that the Company was conserving its cash
and reducing its costs and expenses in response to declining revenues.
Exceptions to the general principles stated above can be made when the
Compensation Committee deems them appropriate and in the best interests of
stockholders. The Compensation Committee regularly considers other forms of
compensation and modifications of its present policies, and will make changes as
it deems appropriate. The competitive opportunities to which the Company's
executives are exposed frequently come from private companies or divisions of
large companies, for which published compensation data is often unavailable and,
therefore, the Compensation Committee's information about such opportunities is
often anecdotal.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
establishes a limit on the deductibility of annual compensation for certain
executive officers that exceeds $1,000,000 per year unless certain requirements
are met. The Company does not anticipate that any employee will exceed such
$1,000,000 cap in the near future but will consider whether any necessary
adjustments are appropriate if it becomes likely that any executive officer's
compensation may exceed the $1,000,000 limit.
Compensation Committee
Steve L. Komar
G. W. Norman Wareham
James Ritter
The foregoing Compensation Committee report shall not be deemed to be filed
with the Securities and Exchange Commission for purposes of the Securities
Exchange Act of 1934 (the "1934 Act"), nor shall such report be deemed to be
incorporated by reference in any past or subsequent filing by the Company under
the 1934 Act or the Securities Act of 1933, as amended (the "1933 Act").
7
Stock Options
1997 Stock Incentive Plan. In May 1997, the Board of Directors adopted, and
in December 1997 the stockholders of the Company approved, the Company's 1997
Stock Incentive Plan (the "Incentive Plan"), which provides for the award of a
variety of equity-based incentives, including stock awards, stock options, stock
appreciation rights, phantom shares, performance unit appreciation rights and
dividend equivalents (collectively, "Stock Incentives"). The Incentive Plan is
administered by a committee, which is presently comprised of Steve L. Komar,
G.W. Norman Wareham and James Ritter, and provides for the grant of Stock
Incentives officers, key employees and consultants of the Company to purchase up
to an aggregate of 3,000,000 shares of Common Stock at not less than 100% of
fair market value on the date granted; provided, however that Mr. Komar, who is
currently serving as the Chief Executive Officer of the Company, does not
participate in the determination by the committee of any Stock Incentives to be
granted to the Chief Executive Officer. The vesting and exercisability of any
Stock Incentives granted under the Incentive Plan is subject to the
determination of and criteria set by the committee. As of November 6, 2003,
options to purchase a total of 1,816,000 shares of Common Stock under the
Incentive Plan, at prices ranging from $0.07 to $1.35 per share, were
outstanding, of which options to purchase 1,025,673 shares were presently
exercisable.
1997 Directors Formula Stock Option Plan. In May 1997, the Board of
Directors adopted, and in December 1997 the stockholders of the Company
approved, the Company's 1997 Directors Formula Stock Option Plan (the "Director
Plan"). Other than Messrs. Komar, Wareham, and Ritter, directors of the Company
who are not employed by the Company and who do not perform services for the
Company are eligible to receive options under the Director Plan.
The Director Plan is administered by a committee which presently consists
of Messrs. Komar and McCubbin. Options become exercisable when vested and expire
ten years after the date of grant, subject to such shorter period as may be
provided in the agreement. A total of 140,000 shares of Common Stock are
reserved for possible issuance upon the exercise of options under the Director
Plan. As of December 31, 2002, options to purchase a total of 68,000 shares of
Common Stock had been granted under the Director Plan, at prices ranging from
$2.06 to $14.06 per share, of which options to purchase 68,000 shares were
vested and presently exercisable.
Directors' Fees
Directors who are not officers or employees of the Company receive an
annual fee of $12,000.
8
AUDIT COMMITTEE REPORT
Overview
The Board of Directors has an Audit and Finance Committee, which conducted
four meetings during 2001 and presently consists of Steve L. Komar, G.W. Norman
Wareham and James Ritter. Mr. Komar is a director and also serves as the Chief
Executive Officer of the Company. Mr. Wareham and Mr. Ritter are independent,
non-employee directors. The Audit and Finance Committee is responsible for
meeting with the Company's independent accountants to review the proposed scope
of the annual audit of the Company's books and records, reviewing the findings
of the independent accountants upon completion of the annual audit, and
reporting to the Board of Directors with respect thereto. All of the members of
the Audit Committee are considered by the Board to be financially literate and
at least two, Mr. Wareham and Mr. Komar, are considered by the Board to have
accounting or related financial management expertise.
Financial Statement Review.
The Audit Committee has: a reviewed and discussed the audited financial
statements with the management of the Company; (b) discussed with the Company's
independent auditors, Grant Thornton LLP, the matters required to be discussed
by Statement on Auditing Standards No. 61; (c) received from the Company's
independent auditors the written disclosures and the letter required by
Independence Standard Board Standard No. 1, and has discussed with the Company's
independent auditors their independence; and (d) based on the review and
discussions referred to in clauses (a), (b) and (c) above, recommended to the
Board that the audited financial statements be included in the Company's Annual
Report on Form 10-K for fiscal year 2001 for filing with the Securities and
Exchange Commission.
Independent Auditors.
The Company's Board of Director's appointed the accounting firm of Grant
Thornton LLP to serve as the Company's independent accountants for the fiscal
year ending December 31, 2001. During the years ended December 31, 2000 and 1999
Arthur Andersen LLP acted as the firm's independent accountants. Upon the
recommendation of the Audit Committee, the Board has selected Grant Thornton LLP
as the Company's independent auditor for fiscal year 2002.
Audit Fees
The Company paid Arthur Andersen LLP approximately $6,500 in review fees
for fiscal year 2001 and paid Grant Thornton LLP approximately $41,000 in audit
and review fees for the same period.
Financial Information Systems Design and Implementation Fees
The Company did not pay Arthur Andersen LLP or Grant Thornton LLP any
financial information systems design and implementation fees for fiscal year
2001.
All Other Fees
The Company did not pay Arthur Andersen LLP or Grant Thornton LLP any
nonaudit fees for fiscal year 2001.
Audit Committee Composition
The foregoing report is submitted by the members of the Audit Committee as
of the Record Date: G.W. Norman Wareham (Chairman), James Ritter, and Steve L.
Komar.
9
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned as of December 31, 2002 by: (i) each person known by the
Company to be the beneficial owner of 5% or more of such class of securities,
(ii) each director of the Company and (iii) all directors and officers of the
Company as a group.
Number of Percent of
Directors, Nominees Shares of Outstanding
and 5% Stockholders Common Stock (1) Common Stock (1)
------------------- ---------------- ----------------
Michael C. Higgins (2) .............. 1,588,000 10.2%
Michael S. Cannon (3) ............... 1,046,730 7.4%
Steve L. Komar (4) .................. 1,193,000 5.7%
G.W. Norman Wareham (5) ............. 28,000 0.1%
James T. McCubbin (6) ............... 1,166,000 7.5%
James M. Ritter (7) ................. 13,500 0.1%
Mark Mirabile (8) ................... 1,436,000 9.2%
All directors and officers as a group
(5 persons) (9) .................... 3,836,500 24.6%
------------
(1) Assumes in the case of each stockholder listed in the above list that all
presently exercisable warrants or options held by such stockholder were
fully exercised by such stockholder, without the exercise of any warrants
or options held by any other stockholders. The address of Mr. Higgins is
12408 Rivers Edge Drive, Potomac, Maryland 20854.
(2) Includes (i) a stock option granted on December 31, 2001, to Mr. Higgins
under the Incentive Plan to purchase 100,000 shares of stock at $0.17 until
December 31, 2002.
(3) Mr. Cannon died in November 2001. The address of Mr. Cannon prior to his
death was PMB 422, 12179 South Apopka Vineland Road, Orlando, Florida.
(4) Includes (i) 865,000 shares of Common Stock purchased by Mr. Komar from the
Company on July 8, 2002 in a private transaction without registration under
the Securities Act of 1933, pursuant to the private offering exemption
under Section 4(2) thereof, (ii) 300,000 shares of Common Stock at a price
of $0.07 per share through July 7, 2012, pursuant to a stock option granted
to him on July 7, 2002 under the Incentive Plan, (iii) 200,000 shares of
Common Stock with such shares vesting at a price of $0.07 per share through
July 7, 2012, under an option granted on July 7, 2002, with such shares
vesting 100,000 shares annually through January 2, 2004, or by the earlier
vesting by the compensation committee, (iv) 12,000 shares of Common Stock
that may be purchased by Mr. Komar from the Company at a price of $14.06
per share until May 20, 2007, pursuant to a stock option granted to him on
May 20, 1997 under the Director Plan, (v) 6,000 shares of Common Stock that
may be purchased by Mr. Komar from the Company at a price of $7.66 per
share until March 24, 2008, pursuant to a stock option granted to him on
March 24, 1998 under the Director Plan, and (vi) 10,000 shares of Common
Stock that may be purchased by Mr. Komar from the Company at a price of
$3.97 per share until December 10, 2008, pursuant to a stock option granted
to him on December 10, 1998 under the Director Plan.
(5) Includes (i) 12,000 shares of Common Stock that may be purchased by Mr.
Wareham from the Company at a price of $14.06 per share until May 20, 2007,
pursuant to a stock option granted to him on May 20, 1997 under the
Director Plan, (ii) 6,000 shares of Common Stock that may be purchased by
Mr. Wareham from the Company at a price of $7.66 per share until March 24,
2008, pursuant to a stockoption granted to him on March 24, 1998 under the
Director Plan, and (iii) 10,000 shares of Common Stock that may be
purchased by Mr. Wareham from the Company at a price of $3.97 per share
until December 10, 2008, pursuant to a stock option granted to him on
December 10, 1998 under the Director Plan
(6) Includes (i) 865,000 shares of Common Stock purchased by Mr. McCubbin from
the Company on July 8, 2002 in a private transaction without registration
under the Securities Act of 1933, pursuant to the private offering
exemption under Section 4(2) thereof, (ii) 300,000 shares of Common Stock
that may be purchased by Mr. McCubbin from the Company at a price of $0.17
per share until January 2, 2011, pursuant to a stock option granted to him
on January 2, 2001, and (iii) includes 1,000 shares of Common Stock that
may be
10
purchased by Mr. McCubbin from the Company at a price of $1.35 per share
until July 3, 2010, pursuant to a stock option granted to him on July 3,
2000. Does not include (i) 200,000 shares of Common Stock that may be
purchased by Mr. McCubbin from the Company at a price of $0.17 per share
pursuant to a stock option granted to him on January 2, 2001, with such
shares vesting annually through January 2, 2004 or by the earlier vesting
by the Compensation Committee.
(7) Includes (i) 1,500 shares of Common Stock owned directly by Mr. Ritter and
(ii) 12,000 shares of Common Stock that may be purchased by Mr. Ritter from
the Company at a price of $2.06 per share until December 1, 2009, pursuant
to a stock option granted to him on December 1, 1999 under the Director
Plan. 1, 1999, with such shares vesting on December 1, 2001.
(8) Includes (i) 865,000 shares of Common Stock purchased by Mr. Mirabile from
the Company on July 8, 2002 in a private transaction without registration
under the Securities Act of 1933, pursuant to the private offering
exemption under Section 4(2) thereof, (ii) 270,000 shares of Common Stock
issued to Mr. Mirabile in connection with the Company's prior acquisition
of Eclipse, (iii) includes 300,000 shares of Common Stock that may be
purchased by Mr. Mirabile from the Company at a price of $0.17 per share
until January 2, 2011, pursuant to a stock option granted to him on January
2, 2001, and (iv) includes 1,000 shares of Common Stock that may be
purchased by Mr. Mirabile from the Company at a price of $1.35 per share
until July 3, 2010, pursuant to a stock option granted to him on July 3,
2000. Does not include (i) 200,000 shares of Common Stock that may be
purchased by Mr. Mirabile from the Company at a price of $0.17 per share
pursuant to a stock option granted to him on January 2, 2001, with such
shares vesting annually through January 2, 2004 or by the earlier vesting
by the Compensation Committee.
(9) Includes the shares referred to as included in notes (2), (4), (5), (6),
(7), and (8) above. Does not include the shares referred to as not included
in notes (3), (6), and (8) above.
11
STOCK PERFORMANCE CHART
The following chart compares the cumulative total stockholder return for
the Common Stock of the Company (and its predecessors) with the NASDAQ Stock
market (U.S.) Index, the NASDAQ Computer & Data Processing Industry Index, the
Russell 2000, and the RDG Technology Composite since December 31, 1997. The
Company in an effort to provide a more relevant comparative return has included
the Russell 2000 and the RDG Technology Composite.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG WIDEPOINT CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX, THE RUSSELL 2000 INDEX,
THE NASDAQ COMPUTER & DATA PROCESSING INDEX AND
THE RDG TECHNOLOGY COMPOSITE INDEX
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
12/97 12/98 12/99 12/00 12/01 12/02
WidePoint Corporation $100.00 $ 53.21 $ 32.12 $ 2.29 $ 1.83 $ 2.20
NASDAQ (U.S.) Index 100.00 140.99 261.48 157.42 124.89 86.34
NASDAQ C&DP Index 100.00 178.39 392.44 180.62 145.44 100.29
Russell 2000 100.00 97.45 118.17 114.60 117.45 93.39
RDG Technology Composite 100.00 176.09 348.88 216.36 158.21 93.38
*$100 invested on 12/31/97 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
1997 1998 1999 2000 2001 2002
------------ ------------ ------------ ----------- ----------- -----------
WidePoint Corporation ............. $100.00 $ 53.21 $ 32.12 $ 2.29 $ 1.83 $ 2.20
NASDAQ (U.S.) Index ............... 100.00 140.99 261.48 157.42 124.89 86.34
NASDAQ C&DP Index ................. 100.00 178.39 392.44 180.62 145.44 100.29
Russell 2000 ...................... 100.00 97.45 118.17 114.60 117.45 93.39
RDG Technology Composite .......... 100.00 176.09 348.88 216.36 158.21 93.38
The foregoing Stock Performance Chart shall not be deemed to be filed with the
Securities and Exchange Commission for purposes of the 1934 Act, nor shall such
material be deemed to be incorporated by reference in any past or subsequent
filing by the Company under the 1934 Act or the 1933 Act.
12
PROPOSAL TWO -- INDEPENDENT ACCOUNTANTS
The Company's Board of Directors has appointed the accounting firm of Grant
Thornton LLP to serve as the Company's independent accountants for the current
fiscal year ending December 31, 2003. The firm was retained during 2001 as part
of a bid process to replace the Company's prior Independent Accountants, Arthur
Andersen, LLP. They have performed their duties efficiently and professionally
since their appointment. Grant Thornton is highly regarded in its field and has
a thorough understanding of the Company's business. A resolution will be
presented at the Annual Meeting to ratify the appointment by the Company's Board
of Directors of Grant Thornton, LLP to serve as the Company's independent public
accountants for the current fiscal year. A majority vote is required for
ratification. A representative of Grant Thornton, LLP will be present at the
Annual Meeting to answer any questions concerning the Company's financial
statements and to make a statement if he desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF AUDITORS.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
securities ownership and changes in such ownership with the Securities and
Exchange Commission. Statements of Changes in Beneficial Ownership of Securities
on Form 4 are required to be filed before the end of the second business day
following the day on which the change in beneficial ownership occurred. The
Company believes that all reports of securities ownership and changes in such
ownership required to be filed during 2002 were timely filed.
2003 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2003 Annual
Meeting, which presently is expected to be held in May 2003, must be received by
the Secretary of the Company, One Lincoln Centre, Suite 1100 Oakbrook Terrace,
Illinois 60181, no later than January 15, 2004, in order for them to be
considered for inclusion in the 2004 Proxy Statement. A shareholder desiring to
submit a proposal to be voted on at next year's Annual Meeting, but not desiring
to have such proposal included in next year's proxy statement relating to that
meeting, should submit such proposal to the Company by February 28, 2004 (i.e.,
at least 45 days prior to the expected date of the mailing of the proxy
statement). Failure to comply with that advance notice requirement will permit
management to use its discretionary voting authority if and when the proposal is
raised at the Annual Meeting without having had a discussion of the proposal in
the proxy statement.
OTHER MATTERS
Management is not aware of any other matters to be considered at the Annual
Meeting. If any other matters properly come before the Meeting, the persons
named in the enclosed Proxy will vote said Proxy in accordance with their
discretion.
By Order of the Board of Directors
WIDEPOINT CORPORATION
/s/ James T. McCubbin
---------------------
James T. McCubbin
Secretary
November 17, 2003
13
PROXY
WIDEPOINT CORPORATION
One Lincoln Centre, Suite 1100
Oakbrook Terrace, Illinois 60181
This proxy is solicited by the Board of Directors for the ANNUAL MEETING OF
STOCKHOLDERS of WidePoint Corporation, a Delaware corporation (the "Company"),
on December 18, 2003, 10:00 a.m., local time.
The undersigned appoints James McCubbin and Steve Komar, and each of them,
a proxy of the undersigned, with full power of substitution, to vote all shares
of Common Stock, par value $.001 per share, of the Company which the undersigned
is entitled to vote at the Annual Meeting of Stockholders to be held on December
18, 2003, or at any adjournment thereof, with all powers the undersigned would
have if personally present.
--------------------------------------------------------------------------------
Please mark your votes as indicated in [X]
this example
The Board of Directors recommends voting FOR the following proposals:
1. To Elect Director WITHHOLD James Ritter
FOR the nominee AUTHORITY
Listed to the right to vote for the
(except as marked to the nominee listed to the (INSTRUCTION: To withhold authority for the nominee, write that nominee's
contrary) right name on the space provided below). _______________________________________
[_] [_]
2. Proposal to ratify the selection of Grant 3. In their discretion the Proxies are authorized to vote upon such other
Thornton, LLP as the independent business as properly may come before the meeting.
accountants for the Company for the current
fiscal year.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_] [_]
Sign exactly as your name appears hereon. When signing in a representative or
fiduciary capacity, indicate title. If shares are held jointly, each holder
should sign.
Date _______________________________, 2003
__________________________________________
__________________________________________
Signature of Stockholder(s)
THE SHARES WILL BE VOTED AS DIRECTED ABOVE, AND WITH RESPECT TO OTHER MATTERS OF
BUSINESS PROPERLY BEFORE THE MEETING AS THE PROXIES SHALL DECIDE. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 and 2.