Table of Contents
UNITED
STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
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SCHEDULE 14A INFORMATION
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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
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Filed by the Registrant
x
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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x
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Preliminary Proxy Statement
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o
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Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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o
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Definitive Proxy Statement
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o
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Definitive Additional Materials
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o
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Soliciting Material Pursuant to
§240.14a-12
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CLST
HOLDINGS, INC.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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x
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No fee required.
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o
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to
which transaction applies:
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(2)
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Aggregate number of securities to
which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum aggregate value of
transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary
materials.
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Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date
of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration
Statement No.:
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Table
of Contents
PRELIMINARY
COPY SUBJECT TO COMPLETION
CLST HOLDINGS, INC.
formerly CellStar Corporation
17304 Preston Road, Dominion Plaza, Suite 420
Dallas, Texas 75252
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held October 27, 2009
To our stockholders:
You
are cordially invited to attend our Annual Meeting of Stockholders to be held
at the Hilton Dallas Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas, on October 27,
2009 at 10:00 a.m. Dallas, Texas time, for the following purposes:
a)
To elect
to the Board of Directors one Class I director for two years (the
remaining term of the Class I Directors), and one Class II director
for a term of three years, and in each case until his successor is duly elected
and qualified, or until his earlier death, resignation or removal;
b)
To
ratify the appointment of Whitley Penn LLP as our independent registered public
accountants for the year ending November 30, 2009;
c)
To
ratify our Amended and Restated 2008
Long Term Incentive Plan;
d)
To consider and act upon five stockholder
proposals, if properly presented at the Annual Meeting or any adjournment(s) or
postponement(s) thereof; and
e)
To
transact such other business as may properly come before the Annual Meeting or
any adjournment(s) or postponement(s) thereof.
The
accompanying proxy statement contains information regarding, and a more
complete description of, the items of business to be considered at the meeting.
The close of business on September 25, 2009 has been fixed as the record
date for the determination of our stockholders entitled to receive notice of,
and to vote at, the meeting or any adjournment(s) or postponement(s) thereof.
You
are cordially invited and urged to attend the meeting. Whether or not you plan
on attending the meeting, we ask that you sign and date the accompanying
WHITE
proxy card and return it promptly in the enclosed
self-addressed envelope. If you attend the meeting, you may vote in person, if
you wish, whether or not you have returned your proxy. In any event, you may
revoke your proxy at any time before it is exercised.
Please note that David Sandberg, Red Oak Partners, LLC (
Red Oak Partners
), Red Oak Fund, LP
(
Red Oak Fund
), Pinnacle Partners,
LLC (
Pinnacle Partners
), Pinnacle
Fund, LLLP (
Pinnacle Fund
) and Bear
Market Opportunity Fund, L.P. (
Bear Fund,
together with Mr. Sandberg, Red Oak Partners, Red Oak Fund, Pinnacle
Partners, Pinnacle Fund and Bear Fund, the
Red
Oak Group
) has given notice of its intention to nominate its
own slate of two directors for election to our Board of Directors and submit
certain stockholder proposals at the upcoming Annual Meeting and may solicit
proxies for the matters it intends to bring to the Annual Meeting. You may
receive proxy solicitation materials from the Red Oak Group including an
opposition proxy statement and proxy card. Their proposals seek to request the
Board to complete the dissolution approved at the stockholder meeting held in 2007;
advise the Board that the stockholders do not approve of the transaction
purportedly entered into as of November 10, 2008 whereby CLST Asset I,
LLC, a wholly owned indirect subsidiary of the Company, entered into a purchase
agreement to acquire the outstanding equity interest in FCC Investment Trust I
and request the directors to take any available and appropriate actions;
disapprove the 2008 long term incentive plan adopted by the Board and request
the Board not to issue any additional share grants or option grants
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under such plan and request that the directors rescind their approval
of such plan; advise the Board that the stockholders disapprove of the
transaction purportedly entered into as of December 12, 2008 pursuant to
which CLST Asset Trust II, an indirect wholly owned subsidiary of the Company,
entered into a purchase agreement to acquire certain receivables on or before February 28,
2009 and request the directors to take any available and appropriate actions;
and advise the Board that the stockholders disapprove of the transaction
purportedly entered into as of February 13, 2009 whereby CLST Asset III, LLC,
an indirect wholly owned subsidiary of the Company, purchased certain
receivables, installment contracts and related assets owned by Fair Finance
Company and request the directors to take any available and appropriate
actions.
The Board of
Directors is deeply committed to the Company, its stockholders and enhancing
stockholder value. In the Board of Directors opinion, based on the reasons set
forth in the accompanying proxy statement in the discussions of both the Boards
proposals and the Red Oak Groups proposals, the Red Oak Groups proposals are
not in the best interests of our
stockholders. The Board of
Directors believes that its nominees are well-qualified to manage the Company
in the stockholders best interests and believes that a vote at the Annual
Meeting in favor of the election of the Boards nominees, in favor of
ratification of the appointment of the Companys independent registered public
accountants and in favor of ratification of the Companys Amended and Restated
2008 Long Term incentive Plan is in the best interests of our
stockholders.
OUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION OF THE BOARDS
NOMINEES NAMED ON THE ENCLOSED WHITE PROXY CARD,
FOR
THE RATIFICATION OF
THE APPOINTMENT OF WHITLEY PENN LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS FOR THE YEAR ENDING NOVEMBER 30, 2009,
FOR
THE RATIFICATION
OF OUR AMENDED AND RESTATED 2008 LONG TERM INCENTIVE PLAN, AND
AGAINST
THE RED OAK GROUPS PROPOSALS, INCLUDED AS PROPOSALS No. 4 THROUGH No. 8
IN THIS PROXY STATEMENT, AND URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD
SENT TO YOU BY THE RED OAK GROUP.
If
you have previously signed a proxy card sent to you by the Red Oak Group, you
can change your vote and vote for our Board of Directors nominees by using the
enclosed
WHITE
proxy card to vote by signing, dating and
returning the enclosed
WHITE
proxy card in the postage-paid envelope
provided, or, if you hold your shares in street name (i.e., your shares are
held in the name of a bank, broker or other nominee), you may vote by Internet
or by telephone. Only the latest dated proxy you submit will be counted. Please
note that the enclosed
WHITE
proxy card also includes the proposals that
the Red Oak Group has notified us it intends to bring before the Annual
Meeting. Therefore, our enclosed
WHITE
proxy card provides you with the ability to
vote For or Against or Abstain from voting for any proposals made by the Red Oak Group, as
well as to vote For our director nominees and other matters.
If
you need assistance voting your shares, contact:
Morrow &
Co., LLC.
470 West Avenue
Stamford, CT 06902
(800) 607-0088
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By Order of our Board of Directors
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Timothy S. Durham,
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Secretary
and Chairman
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Dallas, Texas
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,
2009
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Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting of Stockholders to be held October
27, 2009: This proxy statement, our 2008
Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for the first
and second quarters of 2009 are available at
http://bnymellon.mobular.net/bnymellon/clhi.
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PRELIMINARY COPY SUBJECT TO COMPLETION
CLST HOLDINGS, INC.
17304 Preston Road,
Dominion Plaza, Suite 420
Dallas,
Texas 75252
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 27, 2009
GENERAL
INFORMATION
Our Board of Directors
(sometimes referred to herein as the
Board
)
hereby solicits your proxy for use at our Annual Meeting of Stockholders to be
held at Hilton Dallas Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas, on October 27,
2009 at 10:00 a.m. Dallas, Texas time, and any adjournment(s) thereof.
This proxy statement, along with the accompanying notice of Annual Meeting,
summarizes the purposes of the Annual Meeting and the information that you need
to know to vote at the Annual Meeting.
This solicitation may be made in person or by mail, telephone, or telecopy
on behalf of our directors, who will receive no extra compensation for
participating in this solicitation. We have hired Morrow & Co., LLC to
distribute and solicit proxies, and we will pay the entire cost of this
solicitation. We expect to mail this proxy statement and the enclosed form of
proxy, together with our Annual Report on Form 10-K and our Quarterly
Reports on Form 10-Q for the first and second quarters of 2009, to our
stockholders on or about
,
2009.
If you have previously signed a proxy card sent to
you by the Red Oak Group, you can change your vote and vote for our Board of
Directors nominees by using the enclosed
WHITE
proxy card to vote by signing, dating and
returning the enclosed
WHITE
proxy card in the postage-paid envelope
provided, or, if you hold your shares in street name (i.e., your shares are
held in the name of a bank, broker or other nominee), you may vote by Internet
or by telephone. Only the latest dated proxy you submit will be counted. Please
note that the enclosed
WHITE
proxy card also includes the proposals that
the Red Oak Group has notified us it intends to bring before the Annual
Meeting. Therefore, our enclosed
WHITE
proxy card provides you with the ability to
vote For or Against or Abstain from voting for any proposals made by the Red Oak Group, as
well as to vote For our director nominees and other matters.
We are not responsible for the accuracy and
completeness of any information provided by or relating to the Red Oak Group
and its nominees for director contained in any proxy solicitation or other
materials filed or disseminated by, or on behalf of, the Red Oak Group or any
other proposals or statements that the Red Oak Group or its affiliates may
otherwise make. The Red Oak Group
chooses which stockholders receive their proxy solicitation materials. Our materials
are being made available to all stockholders.
In order to obtain directions to attend the Annual Meeting of
Stockholders, please call Robert Kaiser, Chief Executive Officer, at
(972) 267-0500.
For information on how to vote in person at the
Annual Meeting of Stockholders, please see the section entitled Information
Regarding the Meeting and Voting
below.
Unless the context indicates otherwise,
CLST, we, us, our or the Company means CLST Holdings, Inc. and
all of our direct and indirect subsidiaries on a consolidated basis.
CERTAIN BACKGROUND
INFORMATION
Introduction.
We believe our Board has
served our stockholders well over the last few years. In 2007, after the sale
of our United States and Miami-based Latin American operations (the
U.S. Sale
), one of our directors, Mr. Durham,
initiated several actions in an effort to make the Board more accountable with
respect to implementing the plan of dissolution and conducting the Companys
business generally, including filing a proxy statement and nominating
directors. Mr. Kaiser, a current director and nominee who was also a
director at that time, supported Mr. Durhams
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efforts and aligned
himself with Mr. Durham as a director nominee. While continuing to wind-down the Companys
historical business (the
Wind Down
),
our Board distributed cash dividends to stockholders totaling $2.10 per share,
or a cumulative total distribution of $43.2 million, and has acted to minimize
expenses, collect significant amounts of cash, and maximize returns on the
Companys cash assets. Also, as more fully described below, our Board
discovered that the Company has $125 million in net operating loss carryforwards
(
NOLs
), which potentially have
significant value to the Company and which the Board has sought to protect and
make use of for the benefit of our stockholders. Furthermore, while conducting
the Wind Down activities with minimal staff, the Company has nevertheless
continued to maintain its efforts to comply with the Companys reporting
requirements under the Securities Exchange Act of 1934, as amended (the
Exchange Act
). Below is a
description of some of the Boards achievements since August 2007.
Distributed
Cash to Stockholders
.
In furtherance of the plan of dissolution adopted by
the stockholders in March 2007, on July 19, 2007 the Company paid a
cash dividend of $1.50 per share to its stockholders. This was followed on November 1,
2007 by an additional $.60 per share dividend, declared by our Board, for a
cumulative total distribution of $43.2 million. After carefully considering the
Companys cash position and known and contingent liabilities, and upon the
advice of the Companys outside counsel, the Board determined that this was the
maximum amount that should be distributed before resolving more of the
Companys liabilities, in order to avoid exposing its stockholders and the
Board to potential personal liability. The amount and timing of any additional
distributions to stockholders in connection with the liquidation and
dissolution of the Company are subject to uncertainties and depend in part on
the resolution of certain contingencies more fully described in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission (the
SEC
) on March 2, 2009 and
other filings with the SEC.
Collected
Cash
.
Our Board has worked diligently during the Wind Down
to collect amounts of cash owed to the Company during the Wind Down. On October 4, 2007, we collected $7.6
million from an escrow account related to the U.S. Sale. This collection was a
critical factor in our Boards decision to make the $.60 per share distribution
to stockholders on November 1, 2007. Also, in January 2008, we
collected from the purchasers of those operations an additional $3.2 million in
post-closing working capital adjustments and $1.4 million upon resolution in
favor of the Company of indemnity claims made by the purchasers. The total
post-closing amount our Board collected from the purchasers of the U.S. Sale
was $12.2 million.
In addition, we have
collected more than $2.5 million in cash to date during the Wind Down from
other efforts, including approximately $694,000 from the purchasers of our
Colombia and Peru operations related to transactions in 2002 and 2004,
collected throughout 2007, 2008 and 2009; approximately $914,000 in federal
income tax refunds in 2008; approximately $712,000 in insurance refunds in
2008; and approximately $216,000 in other tax refunds in
2008
and 2009.
We have also initiated
arbitration proceedings to collect up to $1.7 million that we believe is owed
to the Company from the 2007 sale of our Mexico operations. The arbitration is
currently scheduled for October 2009.
Continued
Wind Down Activities
.
We are working steadily to complete a long list of
actions necessary to complete the Wind Down of our historical business in an
orderly fashion. Completing the Wind
Down is a cumbersome task that requires many steps and may take a significant
amount of time. These steps include dissolving numerous subsidiaries, resolving
pending litigation and completing various regulatory filings and other
requirements. We cannot predict how long, how time-consuming or how costly
resolution of the litigation matters will be. To date, we have completed and
filed final sales tax returns and franchise tax returns for most of our
entities. We have also completed the requirements to withdraw most of our
entities from doing business in multiple state jurisdictions in the U.S.
Furthermore, we are continuing to dissolve our foreign and domestic
subsidiaries pursuant to the plan of dissolution. However, in order to protect
the Companys cash and other assets from any actual or potential liabilities of
the Companys direct and indirect subsidiaries, we will not dissolve our
inactive direct or indirect domestic or foreign subsidiaries until the actual
and contingent liabilities of each such
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subsidiary have been
resolved or contingency reserves have been set aside sufficient to pay or make
reasonable provision to pay all such subsidiarys claims and obligations in
accordance with applicable law. In
addition, in certain jurisdictions, the dissolution process is an extended one.
We completed the dissolution of our subsidiaries in
the United Kingdom and Guatemala in February 2008 and March 2009,
respectively, and of CLST-NAC Fulfillment, Ltd., a Texas limited partnership
and indirect subsidiary of the Company, in September 2009. Furthermore, we completed the merger of CLST
Fulfillment, Inc., a Delaware corporation, into its parent, National Auto
Center, Inc., a Delaware corporation and our wholly owned subsidiary,
effective September 10, 2009. In addition we have made demands on the
purchaser of our former Colombian subsidiary for the documents needed to divest
our remaining minority interest in that subsidiary. Further, we have submitted documents to
several governmental authorities in El Salvador as required to dissolve our dormant
entity in El Salvador. For our Netherlands subsidiary, we have collected VAT
tax refunds and are in the process of preparing tax returns that are required
to complete the dissolution process.
There are a number of actions required by governmental
regulations in order to dissolve our Philippines subsidiary, and we have made
substantial progress toward its dissolution. We obtained a Formal Entry of
Judgment in two longstanding lawsuits.
We have also settled a claim for 1999 withholding tax and obtained a
determination from the Bureau of Internal Revenue that no taxes are owed on a
2004 transaction. We are now completing
audits that are required to be submitted for regulatory approval prior to
dissolution, and have taken various other actions required by the Bureau of
Internal Revenue and the Philippines Securities and Exchange Commission.
During the Wind Down, we
have continuously worked to resolve all known and contingent liabilities. We
continue our efforts to resolve a $14.2 million historical liability recorded
on the Companys balance sheet. It is
our position that the Company may not be liable for this amount, and management
is working to resolve it. Ultimately, it
may be necessary to obtain a court order to resolve the uncertainties
surrounding this recorded liability. The Board believes that pending a
settlement with the counterparty on this liability or a court order, another
distribution to stockholders would be inconsistent with its fiduciary duties.
Discovered
NOLs and Protected Company Cash
.
In a detailed review of the Companys financial
statements and historical operations, the Board discovered that as of the end
of 2008, the Company had $125 million in NOLs, which the Company could use to
offset potential future income tax liability. We have experienced and continue
to experience operating losses, and under the Internal Revenue Code and rules promulgated
by the Internal Revenue Service, we may carry forward these losses in certain
circumstances to offset any current and future earnings and thus reduce our
federal income tax liability, subject to certain requirements and restrictions.
As more fully described in our Annual Report on Form 10-K filed with the
SEC on March 2, 2009
,
we adopted a
stockholder rights plan (the
Rights Plan
)
and declared a dividend of one preferred share purchase right for each
outstanding share of Common Stock of the Company to protect this asset of the
Company. The dividend was paid to our stockholders of record as of February 16,
2009. Our Board adopted the Rights Plan
in an effort to protect stockholder value by
attempting
to protect against a possible limitation on our ability to use our NOLs to
reduce potential future federal income tax obligations. To the extent that the
NOLs do not otherwise become limited, we believe that we will be able to carry
forward a significant amount of NOLs, and therefore these NOLs could be a
substantial asset to us. However, if we experience an Ownership Change, as
defined in Section 382 of the Internal Revenue Code, our ability to use
the NOLs will be substantially limited, and the timing of the usage of the NOLs
could be substantially delayed, which could therefore significantly impair the
value of that asset. The Rights Plan is intended to act as a deterrent to any
person or group acquiring 4.9% or more of our outstanding Common Stock without
our approval. Stockholders who owned 4.9% or more of our outstanding Common
Stock as of the close of business on February 16, 2009 did not trigger the
Rights Plan and will not so long as they do not (i) acquire any additional
shares of Common Stock or (ii) fall under 4.9% ownership of Common Stock
and then re-acquire 4.9% or more of the Common Stock. Thus, unless the Red Oak Group acquires the
beneficial ownership of additional shares, their position as a stockholder
holding more than 4.9% will not trigger the Rights Plan. If an Ownership
Change had occurred as a result of the Red Oak Group tender offer, then our
NOLs would be impaired. For example, if the $14.2 million historical liability
mentioned above was resolved in our favor, we believe we could use the NOLs to
offset approximately $4.8 million in tax liability that would result from the
forgiveness of debt. If we had not put in place the Rights Plan, the NOLs could
have been impaired, which could have cost the Company significant tax liability
upon the resolution of this historical liability.
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The Board acted decisively
to protect and grow the Companys cash assets during the U.S. banking crisis in
2008, first by timely moving the Companys cash to fully insured financial
instruments, and second by acquiring portfolios of receivables. The financial instruments earned minimal
interest and generated very low rates of return. In light of the significant
value of our NOLs and the extended timeframe that may be required to complete
the dissolution of the Company, the Board sought out strategic alternatives for
the use of the Companys cash that could earn higher returns than demand
deposits or bank instruments.
Acting on the opportunity
to offset income against the NOLs, from November 2008 through February 2009,
our Board authorized three transactions to purchase portfolios of receivables
with an aggregate outstanding principal balance as of May 31, 2009 of
$48.5 million. The income from the portfolios can be offset against our NOLs,
which results in tax-free income to the Company. In two of these transactions,
the Company was able to minimize and leverage the amount of cash needed to
acquire the portfolio assets through credit facilities that provide
non-recourse borrowings, thus protecting the Companys remaining cash and other
assets. In the third investment, the Company was able to leverage its invested
funds by negotiating seller financing equal to approximately 24% of the
purchase price of the assets acquired.
We expect that it will take several years to implement
the plan of dissolution because of the lengthy process of obtaining sufficient
information regarding all of our liabilities to pay and appropriately provide
for them as required under the plan of dissolution. Given this and the time necessary to complete the
governmental requirements for dissolution, our Board focused on ways to
preserve the value of the Companys cash and other assets pursuant to Section 3
of the plan of dissolution. Section 3 of the plan of dissolution
states that we may not engage in any business activities except to the extent
necessary to preserve the value of the Companys assets, wind up the Companys affairs,
and distribute the Companys assets. As further described above under Certain
Background InformationIntroduction, our Board determined to acquire several portfolios
of receivables with the intention of generating a higher rate of return on our
assets than we were receiving on our cash and cash equivalent balances which
were held in money market accounts or short term certificates of deposit,
earning approximately 1% (current interest rates are now close to 0%).
Our Board believed that each of these acquisitions would provide a better
investment return for our stockholders and better preserves the value of our
assets when compared to the low interest rates available on our cash
investments and other investment alternatives. We believe that the market
for our portfolios has recently worsened. However, we do believe that if
needed, our portfolio assets could be sold, if properly marketed, within the
timeframe necessary to complete the winding down of our Company prior to final
dissolution of our Company but our Board believes that such action at this time
would not be in the best interest of our Company or our stockholders.
Complied
with SEC Reporting and Minimized Expenses
.
Our Board has continued
to maintain its efforts to comply with the Companys reporting requirements
under the Exchange Act. Compliance with the reporting requirements, which
requires substantial amounts of time and effort, was achieved with minimal
staff, comprised of only two full-time employees and one part-time employee.
Maintained
Stockholder Liquidity
.
When a company files a certificate of dissolution,
Delaware law requires that its stock transfer books be closed, meaning that
stockholders may no longer sell their shares. Filing a certificate of
dissolution early in the dissolution process may result in stockholders having
an investment that they cannot easily sell or value for a longer time than
would be the case if the certificate of dissolution is filed later in the
winding up process. Our Board has not filed a certificate of dissolution for
several reasons, including its desire to maintain our stockholders ability to
sell and value their investment for as long as possible under the
circumstances.
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Limited
Expenses
.
Our Board has also acted
prudently to minimize expenses during the Wind Down. In addition to other actions, the Company
realized significant savings by the reduction of Mr. Kaisers annual
compensation, as an executive officer, to 30% of the amount of his previous
annual compensation prior to the U.S. Sale. Also, our management negotiated a
favorable lease for office space and moved the Companys offices out of an
expensive temporary suite arrangement to its current office. The Company now
conducts its operations with only two full-time employees, including Mr. Kaiser,
and one part-time employee.
2008 Annual Meeting of Stockholders.
We did not hold an annual meeting of
stockholders in 2008. Within a month of the completion of the 2007 Annual
Meeting, the Companys management resigned, leaving Mr. Kaiser and the
other new Board members the task of managing the Company, including assessing
the Companys assets and liabilities as part of the process of implementing the
Companys plan of dissolution. During
the first half of the year, the Company was engaged in litigation relating to
resolving its liabilities to its former Chief Executive Officer and preference
litigation involving a former customer. Both
of these matters were resolved which is a necessary step as the Company
implements the plan of dissolution. In
addition, the Company initiated an international arbitration proceeding against
the purchaser of its Mexico operations and commenced negotiations with the
purchaser of its Columbian subsidiary as part of its efforts to realize on its
assets, including claims it has against third parties. Subsequently the matter with respect to the
purchaser of the Columbian subsidiary has been resolved and the arbitration
proceeding against the purchaser of the Mexico operations is currently
scheduled to occur in October 2009.
During the same time period, the Companys professionals, at the request
of the Board, were reviewing the Companys NOLs for the purpose of accurately
assessing their size and utility to the Company. In order to hold a meeting in August of
2008, the Company would have had to announce a meeting in late May or
early June. During that period however,
the Companys professionals were actively investigating the size and utility of
the Companys NOLs and pursuing claims against the purchasers of its Columbian
and Mexican operations. Thus, because
the Companys professionals had not yet completed, to the Boards satisfaction,
the investigations regarding the NOLs, and because the Company had substantial
matters open regarding the value of other assets and claims it had against the
purchasers of its Columbian and Mexican operation, the Board was reluctant to
schedule an annual meeting for August of 2008. Additionally, the world economy was suffering
enormous dislocations in August and September 2008, which continued
through the end of the year. Therefore, the Board determined to wait to hold
the annual meeting of stockholders until 2009, at which time there would
hopefully be more clarity about the world economy, and the Companys
stockholders would have had available to them the Companys Annual Report on Form 10-K
for the fiscal year ended November 30, 2008.
Qualifications
of Current Board and Nominees.
We believe our nominees, Mr. Kaiser,
a current director, and Patrick ODonnell, are well-suited by qualification and
experience to serve on our Board for each nominees term and that their
election will assist our Board in managing the Company in the best interests of
the stockholders. Our directors, including
our nominees, have over 50 years combined experience in managing public
companies.
In contrast, the Red Oak Groups nominees, David
Sandberg and Charles Bernard, have little or no experiences in managing public
companies. Mr. Sandberg has only recently joined the boards of three
public companies in April, June and August 2009. We have no information to suggest that Mr. Bernard
has experience serving as an officer or director of a public company. As
described below under Litigation with the Red Oak Group, we have filed suit
against the Red Oak Group, which includes Mr. Sandberg, Pinnacle Partners,
Pinnacle Fund and other entities, for various securities violations. Mr. Bernard
is the Manager of White Peaks Holdings LLC, which is a manager of Pinnacle
Partners, the general partner of Pinnacle Fund. Also, White Peaks Holdings LLC
is a manager of Pinnacle Capital, LLC, the investment advisor of Pinnacle Fund.
The Company believes that the Red Oak Groups alleged violations of the federal
securities laws are relevant to the qualifications of the Red Oak Groups
nominees to serve as directors. The Company also believes that the Red Oak
Group nominees for director have no significant experience with publicly held
companies and no knowledge or expertise that would qualify them to manage the
affairs of the Company. For the past
several years, David Sandberg has managed and owned interests in portfolio
management and hedge fund companies.
According to public filings, Mr. Sandberg has served as a director
of one public company since April 2009, as director of another public
company since June 1, 2009, and was recently elected to serve as a
director of Forgent Networks, Inc. d/b/a Asure Software on August 28,
2009. We have not received from the Red Oak Group any information to suggest
that Charles Bernard has experience serving as an officer or director of a
public company. Further, the violations of the federal securities laws alleged
in our Federal Court Action (as described below under Litigation with the Red Oak
Group) demonstrate disregard by the Red Oak Group for the best interests of
the Company and its stockholders. Based
upon the foregoing, the Company believes that the Red Oak Group nominees are
not qualified to lead the Company in a manner that is in the best interests of
the Company and its stockholders.
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Intentions of the Red Oak Group.
As further described below under Litigation with the Red Oak Group, the
Red Oak Group has stated that it intends to nominate and seek to elect its own
slate of two directors, David Sandberg and Charles Bernard, to our Board of
Directors and submit certain stockholder proposals at the upcoming
Annual
Meeting and may solicit proxies for the matters it intends to bring to the
Annual Meeting. The Red Oak Group
beneficially owned 4,561,554 shares of our common stock as of February 13,
2009, according to the Red Oak Groups Schedule 13D filed with the SEC,
representing approximately 19.05% of our outstanding common stock as of the
record date.
At the date of this proxy statement, the Red Oak Group
has indicated that it intends to solicit proxies from stockholders for the
election of its proposed nominees, and the Company believes it intends to do so
without filing a proxy statement with the SEC. If the Red Oak Group proceeds to
solicit proxies, the Board recommends that you do
NOT
return any proxy card delivered by the Red Oak Group or otherwise vote as
recommended by the Red Oak Group.
Based on information in the Red Oak Groups securities
filings and statements made by the Red Oak Group to the Company, the Board
believes that the Red Oak Groups true intention is to gain control of the
Company, and the Company has taken the positionin both the State Court Action
and the Federal Court Actionthat the Red Oak Groups actions in pursuit of that
objective have been in violation of federal securities laws. The Red Oak Group has failed to appropriately
disclose its intentions for the Company in the event its nominees are elected
to the Board or it otherwise obtains control of the Company.
If any or all of the Red Oak Groups nominees are
elected to our Board at the Annual Meeting, there can be no guaranty that our Chief
Executive Officer, Mr. Kaiser, would remain with the Company to continue
to lead the dissolution process and the management of the portfolios. Mr. Kaiser
has over seven years of experience in working with the Company, and thus has a
valuable knowledge of the Company and its history. If the Red Oak Groups nominees win the
upcoming election, they may seek to
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have the Company
hire other professionals and executive officers and thus not have the benefit
of working with professionals who have a history with and in-depth
understanding of the Company.
Litigation with
the Red Oak Group.
The following is a discussion of certain
events relating to the Red Oak Group that have occurred through the date of
this proxy statement.
In December 2008, the
Red Oak Group approached our Board of Directors about its interest in making a
minority investment in the Company and obtaining control of the Company. Our
Board responded by suggesting that the Red Oak Group and the Company discuss
the Red Oak Groups desire to make a minority investment and obtain control
after the Company had filed its annual report with the SEC and made its results
of operations available to stockholders.
On January 15, 2009, the Red Oak Group acquired 5,000 shares of our
common stock in secondary market and privately negotiated transactions. On or about January 30, 2009, the Red
Oak Group requested that the Company provide a stockholder list and security
position listings which it said it would use to make a tender offer. On February 3, 2009, the Red Oak Group
announced its plan to commence a tender offer to acquire up to 70% of our
outstanding shares of common stock at $0.25 per share. On February 5, 2009, we adopted a
stockholder rights plan which became effective on February 16, 2009. Stating as its reason the Companys Rights
Plan, the Red Oak Group announced on February 9, 2009 that it had
abandoned its intention to make a tender offer.
Nevertheless, the Red Oak Group continued through February 13, 2009
to acquire shares of our common stock in the secondary market and privately
negotiated transactions resulting in its beneficial ownership of 4,561,554
shares of our common stock, according to the Red Oak Groups Schedule 13D filed
with the SEC, representing approximately
19.05%
of our outstanding common stock as of the
record date. The Red Oak Group made its purchases of our common stock in open-market
and privately negotiated transactions, and not by means of tender offer
materials filed with the SEC. The Company alleges in the Federal Court
Action discussed below that by doing so, the Red Oak Group unlawfully deprived
our stockholders of the benefits of federal law regulating tender offers and
such accumulations of common stock. Among the consequences of this course of
action is that the Company and third parties were unable to make competing,
superior proposals to stockholders, and stockholders were deprived of the information
that complying with federal tender offer rules requires they receive.
On February 13,
2009, we filed a lawsuit in the United States District Court for the Northern
District of Texas against Red Oak Fund, L.P., Red Oak Partners, LLC, and David
Sandberg (the
Federal Court Action
). Our Original Complaint and Application for
Injunctive Relief alleges that Red Oak Fund, L.P., Red Oak Partners, LLC, and
David Sandberg have engaged in numerous violations of federal securities laws
in making purchases of our common stock and sought to enjoin any future
unlawful purchases of our stock by them, their agents, and persons or entities
acting in concert with them. We believe the Red Oak Group violated federal
securities laws as follows:
(i)
violating Rule 14(e)-5
of the Exchange Act by not truly abandoning its tender offer and instead
directly or indirectly purchasing or arranging to purchase shares not in
connection with its tender offer and without complying with the procedural,
disclosure and anti-fraud requirements applicable to tender offers regulated
under Section 14 of the Exchange Act;
(ii)
violating Exchange Act Rule 14d-5(f) by
failing to return the Companys stockholder list, which we provided to Red Oak
upon its request, and by using such list for a purpose other than in connection
with the dissemination of tender offer materials in connection with its tender
offer;
(iii)
violating Exchange Act Rule 14(d)-10
by purchasing shares pursuant to its tender offer at varying prices rather than
paying consideration for securities tendered in the tender offer at the highest
consideration paid to any stockholder for securities tendered; and
(iv)
violating Section 13(d) of
the Exchange Act by not timely filing a Schedule 13D and disclosing the
information required therein.
On March 2, 2009,
certain members of the Red Oak Group and Jeffrey S. Jones (
Jones
) filed a derivative lawsuit
against Robert A. Kaiser, Timothy S. Durham and David Tornek in the 134th
District Court of Dallas County, Texas (the
State
Court Action
). The petition alleges that Messrs. Kaiser,
Durham, and Tornek entered into self-dealing transactions at the expense of the
Company and its stockholders and violated their fiduciary duties
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of loyalty, independence,
due care, good faith, and fair dealing. The petition asks the Court to
order, among other things, a rescission of the alleged self-interested
transactions by Messrs. Kaiser, Durham, and Tornek; an award of
compensatory and punitive damages; the removal of Messrs. Kaiser, Durham
and Tornek from the Board; and that the Company hold an Annual Meeting of
stockholders, or that the Company appoint a conservator to oversee and
implement the dissolution plan approved by stockholders in 2007.
On March 13, 2009,
we announced that we would hold our Annual Meeting of Stockholders on May 22,
2009 in Dallas, Texas and that the close of business on April 2, 2009
would be the record date for the determination of stockholders entitled to
receive notice of, and to vote at, the Annual Meeting or any adjournments or
postponements thereof.
On March 18, 2009,
the Red Oak Group sent a letter to us demanding to inspect and copy certain of
our books and records. We have taken the
position that the Red Oak Group has not complied with state law requirements
applicable to stockholders seeking such information.
On March 19, 2009, the Red Oak Group sent a
letter to us stating its intention to put forth several precatory proposals
including stockholder votes for: approval to proceed with the 2007
shareholder-approved plan of dissolution; approval of the November 10,
2008 transaction whereby CLST Asset I, LLC, a wholly owned subsidiary of CLST
Financo, Inc., which is one of CLSTs direct, wholly owned subsidiaries,
entered into a purchase agreement to acquire all of the outstanding equity
interests of FCC Investment Trust 1 from a third party for approximately $41.0
million; approval of the 2008 Long Term Incentive Plan pursuant to which
Directors approved the new issuance to themselves of up to 20 million shares of
common stock, or just over 97% of the common stock outstanding at the time this
plan was approved; approval of the December 12, 2008 transaction whereby
CLST Asset Trust II, a newly formed trust wholly owned by CLST Asset II, LLC, a
wholly owned subsidiary of CLST Financo, Inc. entered into a purchase
agreement, effective as of December 10, 2008, to acquire (i) on or
before February 28, 2009 receivables of at least $2 million, subject to
certain limitations and (ii) from time to time certain other receivables,
installment sales contracts and related assets; and approval of the February 13,
2009 transaction whereby CLST Asset III, LLC, a newly formed, wholly owned
subsidiary of CLST Financo, Inc., which is one of CLSTs direct, wholly
owned subsidiaries, purchased certain receivables, installment sales contracts
and related assets owned by Fair Finance Company, which is partly owned by
Timothy S. Durham, an officer and director of CLST. On the same day, the Red
Oak Group sent a letter to us stating its intention to nominate a slate of
directors to our Board of Directors.
On April 6, 2009, we notified the Red Oak Group
that our Board rejected the Red Oak Groups nominations for Class I and Class II
seats, as the nominations were not in accordance with our certificate of
incorporation. In addition, we also
rejected the Red Oak Groups proposals because they were not proper in form or
substance under Federal and state law to come before an Annual Meeting. We offered to discuss the Red Oak Groups
concerns, director nominations and stockholder proposals provided that (1) the
Red Oak Group and the Company enter into a confidentiality and standstill
agreement, (2) the Red Oak Group appropriately make publicly available
disclosures regarding its rapid accumulation of the Companys shares and its
intentions to acquire control of the Company that are required by the federal
securities laws, including in a Report on Schedule 13D, and (3) the Red
Oak Group not vote the shares it acquired in violation of applicable law,
including the tender offer rules and other rules regulating such
accumulation of shares under the federal securities laws, at the Annual
Meeting.
On April 6, 2009, we
filed our First Amended Complaint and Application for Injunctive Relief in the
Federal Court Action against defendants Red Oak Fund, L.P., Red Oak Partners,
LLC, David Sandberg, Pinnacle Partners, LLC, Pinnacle Fund LLLP, and Bear
Market Opportunity Fund, L.P. alleging the same and other violations of federal
securities laws, including:
(i)
filing a materially false and misleading
Schedule 13D and failing to amend the same after delivering to the Company a
Notice of Director Nominations and proposal for business at the Annual Meeting;
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(ii)
violating Section 14(d) of the
Exchange Act by engaging in fraudulent, deceptive and manipulative acts in
connection with its tender offer by failing to abide by Section 14(d)s
timing requirements and by failing to make required filings with the SEC; and
(iii)
that any attempt to solicit proxies from our
stockholders with respect to director nominations or notice of business would
be misleading in light of the defendants illegal activities in accumulating
Company stock.
Through this lawsuit, we
seek to obtain various declaratory judgments that the defendants have failed to
comply with federal securities laws and to enjoin the defendants from, among
other things, further violating federal securities laws and from voting any and
all shares or proxies acquired in violation of such laws. Also on April 6, 2009, because, among
other reasons, we do not expect the litigation, which bears directly upon our
Annual Meeting of stockholders, to be resolved for some months, our Board
postponed the Annual Meeting of stockholders previously scheduled for May 22,
2009 until September 25, 2009. On August 14, 2009, our Board again
postponed the Annual Meeting of stockholders from September 25, 2009 to October 27,
2009.
On April 15, 2009,
the Red Oak Group submitted another letter to the Company, providing additional
information regarding the stockholder proposals it intends to bring before the
Annual Meeting and revising those proposals to: request the Board to complete
the dissolution approved at the stockholder meeting held in 2007; advise the
Board that the stockholders do not approve of the transaction purportedly
entered into as of November 10, 2008 whereby CLST Asset I, LLC, a wholly
owned indirect subsidiary of the Company, entered into a purchase agreement to
acquire the outstanding equity interest in FCC Investment Trust I and request
the directors to take any available and appropriate actions; disapprove the
2008 long term incentive plan adopted by the Board and request the Board not to
issue any additional share grants or option grants under such plan and request
that the directors rescind their approval of such plan; advise the Board that
the stockholders disapprove of the transaction purportedly entered into as of December 12,
2008 pursuant to which CLST Asset Trust II, an indirect wholly owned subsidiary
of the corporation, entered into a purchase agreement to acquire certain
receivables on or before February 28, 2009 and request the directors to
take any available and appropriate actions; and advise the Board that the
stockholders disapprove of the transaction purportedly entered into as of February 13,
2009 whereby CLST Asset III, LLC, an indirect wholly owned subsidiary of the
Company purchased certain receivables, installment contracts and related assets
owned by Fair Finance Company and request the directors to take any available
and appropriate actions.
On April 30, 2009, the Red Oak Group and Jones
amended their petition in the State Court Action. In addition to the relief already requested,
the petition seeks to compel the Company to hold its 2008 and 2009 annual
stockholders meetings within sixty days; to enjoin Messrs. Kaiser,
Durham, and Tornek from any interference or hindrance of such meetings or the
election of directors; to enjoin Messrs. Kaiser, Durham, and Tornek from
voting any shares of stock acquired in the alleged self-interested
transactions; and to appoint a special master.
On June 3, 2009 and again on June 12, 2009, pursuant to court
order, Red Oak Partners, LLC, Pinnacle Fund, LLLP, Red Oak Fund, LP, and
Jeffrey S. Jones amended their petition in the State Court Action to, among
other things, remove Bear Market Opportunity Fund, L.P. as a plaintiff and add
Red Oak Fund, L.P. as a plaintiff.
Discovery is ongoing in both the Federal Court Action and State Court
Action.
On May 5, 2009, the
Red Oak Group and Jones filed a motion in the State Court Action seeking to
compel the Company to hold its 2008 and 2009 stockholders meetings on June 30,
2009 and to appoint a special master and requested an expedited hearing on
both. Hearings were held on May 8,
2009 and May 29, 2009, but no ruling was reached.
On July 24, 2009, we filed our Brief in Support
of Application for Preliminary Injunction in the Federal Court Action. The Red Oak Group filed its Opposition on August 7,
2009, and we filed our Reply Brief in Support on August 14, 2009. Our Application for Preliminary Injunction
remains pending before the Court.
On August 24, 2009,
the Red Oak Group resubmitted its director nomination letter and its letter
stating its intention to put forth the stockholder proposals, as mentioned in
the March 19, 2009 and April 15, 2009 letters.
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On August 25, 2009, the Court in the State Court
Action set an evidentiary hearing on Plaintiffs Application for Temporary
Injunction, which had yet to be filed, for October 78, 2009. Plaintiffs request for injunctive relief
concerns Messrs. Kaiser, Durham, and Tornek voting any shares of stock
acquired in the alleged self-interested transactions. Plaintiffs Application for Temporary
Injunction was filed on September 15, 2009; Defendants response must be
filed by September 29, 2009; and (c) Plaintiffs reply must be filed
by October 2, 2009.
On August 28, 2009,
the parties to the State Court Action executed a Stipulation Regarding the
Companys Annual Meeting of Stockholders (
Stipulation
). The Court approved the Stipulation the same
day and entered an Order identical to the Stipulations terms. Pursuant to the Stipulation, absent a
determination by the Court of good cause shown, the Company must hold its
annual stockholders meeting for the election of one Class I director and
one Class II director and consideration of any properly submitted
proposals that are proper subjects for consideration at an annual meeting of a
Delaware corporation on October 27, 2009, with a record date for that meeting
of September 25, 2009. Good cause
for delaying the Annual Meeting beyond October 27, 2009 and
correspondingly amending the September 25, 2009 record date, includes
among other things, situations where reasonable delay is necessary: (1) for
the Board to avoid breaching any of their fiduciary duties to the Company or
the Companys stockholders; (2) to assure compliance with the Companys
certificate of incorporation and bylaws; (3) for the Company or the Board
to comply with state or federal law; or (4) to assure compliance with any
order of any court or regulatory authority having jurisdiction over the Company
or members of its Board.
We received a letter dated September 22, 2009 from the
Red Oak Group seeking, pursuant to Section 220 of the Delaware General
Corporation Law, to inspect the books and records of the Company, including a
stockholder list as of the record date. The letter states that the purpose of
such request is to enable the Red Oak Group to solicit proxies to elect
directors at the 2009 Annual Meeting and to communicate with stockholders.
The Company has expended
a significant amount of management time and resources in connection with
Federal Court Action and the State Court Action. The Company has had settlement
discussions with certain of the plaintiffs regarding the Federal Court Action
and the State Court Action. The Company may have further settlement
discussions in the future. No assurance can be given that any settlement
agreement could be reached if the Company undertakes further discussions or if
a settlement agreement is entered into that the terms of any such settlement
would not have a material adverse effect on the Company, its financial position
or its results of operations.
THE COMPANY ENCOURAGES YOU TO VOTE FOR ITS NOMINEES,
FOR RATIFICATION OF THE APPOINTMENT OF ITS INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS AND FOR RATIFICATION OF THE COMPANYS AMENDED AND RESTATED 2008
LONG TERM INCENTIVE PLAN.
If you
sign and return a proxy card sent by the Red Oak Group, you will not be
supporting our nominees. The only way to support the qualified individuals
nominated by our Board is to vote FOR our nominees using the enclosed
WHITE
proxy card. If you have previously signed a proxy card
sent to you by the Red Oak Group, you can change your vote and vote for our
nominees by using the enclosed
WHITE
proxy
card to vote by signing, dating and returning the enclosed
WHITE
proxy card in the postage-paid envelope provided, or, if you hold your shares
in street name (i.e., your shares are held in the name of a bank, broker or
other nominee), you may vote by Internet or by telephone. Only the latest dated
proxy card you submit will be counted. Please note that the enclosed
WHITE
proxy card also includes the proposals that the Red
Oak Group has notified us it intends to bring before the Annual Meeting.
Therefore, our enclosed
WHITE
proxy
card provides you with the ability to vote For or Against or Abstain from
voting for any proposals made by the Red Oak Group, as well as to vote For
our director nominees and other matters.
INFORMATION REGARDING
THE
MEETING AND VOTING
Annual Report.
Enclosed is our Annual Report on Form 10-K for
the year ended November 30, 2008, including our audited financial
statements, as well as our Quarterly Reports on Form 10-Q for the first and
second quarters of 2009. Such Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q do not form any part of the material for the solicitation
of proxies.
10
Table
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Shares
Outstanding and Voting Rights.
Our voting
securities are shares of our common stock, each share of which entitles the
holder thereof to one vote on each matter properly brought before the meeting.
Only stockholders of record at the close of business on September 25, 2009
are entitled to notice of, and to vote at, the meeting and any adjournment(s) thereof.
As of the record date, there were outstanding and entitled to vote 23,949,282
shares of our common stock. We will have a list of stockholders available for
inspection for at least ten days prior to the Annual Meeting at our principal
executive offices and at the Annual Meeting.
Quorum and Required Vote.
Quorum
.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of our common stock entitled to vote is necessary to
constitute a quorum at the meeting. Votes marked For the nominees for
director or votes that are withheld for such nominees will be counted as shares
present and entitled to vote in connection with the determination of whether a
quorum exists. Votes marked For or Against the ratification of the
appointment of the independent registered public accountants will also be
counted as shares present and entitled to vote in connection with the
determination of whether a quorum exists. If a quorum is not present or
represented at the meeting, no action may be taken at the meeting, and the
stockholders entitled to vote thereat, present in person or represented by
proxy, have the power to adjourn the meeting from time to time,
by majority vote of those present,
without notice
other than an announcement at the meeting, until a quorum is present or
represented. At any such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally notified. The independent inspector of election
appointed for the Annual Meeting will determine the number of shares of our
common stock present at the meeting, determine the validity of proxies and
ballots, determine whether a quorum is present and count all votes and ballots.
If the
Red Oak Group solicits proxies for use at the annual meeting, then all of the
proposals on the meeting agenda will be non-routine matters and brokerage
firms cannot vote on such matters absent voting instructions from their
clients. Thus, all shares as to which brokers do not receive any instructions
to vote will not be represented at the meeting for quorum purposes or voted.
See Broker Non-Votes below for more information.
Required
Vote
.
Cumulative voting is not
permitted in the election of our directors. On all matters (including election
of directors) submitted to a vote of the stockholders at the meeting or any
adjournment(s) or postponement(s) thereof, each holder of our common
stock will be entitled to one vote for each share of our common stock owned of
record by such stockholder at the close of business on September 25, 2009.
Proxies
in the accompanying form that are properly executed and returned and that are
not revoked will be voted at the meeting and any adjournment(s) or
postponement(s) thereof and will be voted in accordance with the instructions
thereon. Any proxy upon which no instructions have been indicated with respect
to a specified matter will be voted according to the recommendations of our
Board of Directors, which are contained in this proxy statement. Our Board of
Directors knows of no matters to be presented for consideration at the meeting,
other than the election of directors, the ratification of the appointment of
Whitley Penn LLP as our independent registered public
accountants
for the year ending November 30,
2009,
the ratification of the Companys Amended and
Restated 2008 Long Term Incentive Plan,
and the matters that the Red Oak Group has notified us that it intends to
propose at the Annual Meeting, which are also included herein. If other matters
properly come before the meeting or any adjournment(s) or postponement(s) thereof,
the persons named in the accompanying proxy will vote such proxy in accordance
with their judgment on any such matters. The persons named in the accompanying
proxy may also, if they believe it advisable, vote such proxy to adjourn the
meeting from time to time.
If a
quorum is present, directors are elected by a plurality of the votes cast, in
person or by proxy. This means that for Proposal No. 1 the nominees will
be elected if they receive more affirmative votes than any other nominee for
the same position. If more than two nominees are properly presented to the
stockholders at the Annual Meeting, the two nominees receiving the highest
number of affirmative votes of the shares which are present or
11
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represented by proxy at
the Annual Meeting and entitled to vote for the election of directors will be
elected to our Board. Votes marked For a nominee will be counted in favor of
that nominee. Votes Withheld from a nominee have no effect on the vote since
a plurality of the votes cast at the Annual Meeting is required for the
election, or reelection, of each nominee. An abstention may not be specified
with respect to the election of nominees.
The affirmative vote of the
holders of a majority of the shares of our common stock present or represented
by proxy and voting at the
Annual Meeting
is required to
approve
Proposals No. 2
and No. 3, the ratification of the selection of our independent registered
public accountants and ratification of the Companys Amended and
Restated 2008 Long Term Incentive Plan,
and to
disapprove
Proposals No. 4, No. 5, No. 6, No. 7
and No. 8, proposals that have been submitted by the Red Oak Group
. An abstention
specified for Proposals No. 2 through 8 will be counted as present for
purposes of determining whether a quorum is present but
will not be voted on that item.
Accordingly, an Abstention will have the effect of a vote Against
Proposals No. 2
through 8
.
Broker Non-Votes
.
Under the rules that govern brokers who have
record ownership of shares that they hold in street name for their clients
who are the beneficial owners of the shares, brokers have the discretion to
vote such shares on discretionary, or routine, matters, such as uncontested
director elections and the ratification of independent registered public
accounting firms, but not on non-discretionary, or non-routine, matters, such
as contested director elections or stockholder proposals. Broker non-votes
generally occur when shares held by a broker nominee for a beneficial owner are
not voted with respect to a proposal because the broker nominee has not
received voting instructions from the beneficial owner and lacks discretionary
authority to vote the shares.
For brokerage
accounts that are sent proxy materials by the Red Oak Group, all items on the
proxy card will be considered non-routine matters. Therefore, if the Red Oak Group
pursues its contested solicitation and you hold your shares in street name
but you do not provide voting instructions to your broker, your broker may not
be able to vote on your behalf without your specific instructions. Due to this
possibility, we strongly encourage you to provide your broker, bank or nominee
with specific voting instructions to ensure that your shares are properly voted
on your behalf. You should vote your shares by following the instructions
provided on the
WHITE
voting instruction form and returning your
WHITE
voting instruction form to your broker
to ensure that your shares are voted on your behalf. If there is no contested election, and you do
not provide voting instructions to your broker, your broker may vote your shares
in its discretion as to routine matters, which would include the uncontested
election of directors and the ratification of the appointment of Whitley Penn
LLP as our independent registered public accountants for the year ending November 30,
2009.
Questions and Answers About the
Meeting and Voting.
1.
What is the purpose of holding
this meeting?
We are holding the Annual
Meeting to elect directors, to ratify the appointment of Whitley Penn LLP as
our independent registered public accountants for the year ending November 30,
2009, to ratify the Companys Amended and Restated 2008 Long Term Incentive
Plan, and to provide our stockholders a chance to vote against the Red Oak
Groups proposals, which are included in this Proxy Statement as Proposals No. 4
through No. 8. Our Board of Directors nominated and unanimously approved
our director nominees. If any other matters requiring a stockholder vote
properly come before the meeting, those stockholders present at the meeting and
the proxies who have been appointed by our stockholders will vote as they think
appropriate.
Please note that the Red
Oak Group has given notice of its intention to nominate its own slate of two
directors for election to our Board of Directors and submit certain precatory
stockholder proposals at the upcoming Annual Meeting and may solicit proxies
for the matters it intends to bring to the Annual Meeting. You may receive
proxy solicitation materials from the Red Oak Group including an opposition
proxy statement and proxy card. Their proposals seek to: request the Board to
complete the dissolution approved at the stockholder meeting held in 2007;
advise the Board that the stockholders do not approve of the transaction
purportedly entered into as of November 10, 2008 whereby CLST Asset I,
LLC, a wholly owned indirect subsidiary of the Company, entered into a purchase
agreement to acquire the outstanding equity interest in FCC Investment Trust I
and request the directors to take any available and appropriate actions;
disapprove the 2008 long term incentive plan adopted by the Board and request
the Board not to issue any additional share grants or option grants under such
plan and request that the directors rescind their approval of such plan; advise
the Board that the stockholders disapprove of the transaction purportedly
entered into as of December 12, 2008 pursuant to which CLST Asset Trust
II, an indirect wholly owned subsidiary
12
Table of Contents
of the corporation,
entered into a purchase agreement to acquire certain receivables on or before February 28,
2009 and request the directors to take any available and appropriate actions;
and advise the Board that the stockholders disapprove of the transaction
purportedly entered into as of February 13, 2009 whereby CLST Asset III,
LLC, an indirect wholly owned subsidiary of the Company purchased certain
receivables, installment contracts and related assets owned by Fair Finance Company
and request the directors to take any available and appropriate actions.
The Board of Directors is deeply committed to the
Company, its stockholders and enhancing stockholder value. In the Board of
Directors opinion, based on the reasons set forth in this proxy statement in
the discussions of both the Boards proposals and the Red Oak Groups
proposals, the Red Oak Groups proposals are not in the best interests of our
stockholders.
The Board of Directors believes that its nominees are well-qualified to manage
the Company in the stockholders best interests and believes that a vote at the
Annual Meeting in favor of the election of these nominees, in favor of
ratification of the appointment of the Companys independent registered public
accountants and in favor of ratification of the Companys Amended and Restated
2008 Long Term Incentive Plan is in the best interests of our stockholders.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE
ELECTION OF THE BOARDS NOMINEES NAMED ON THE ENCLOSED WHITE PROXY CARD,
FOR
THE RATIFICATION OF THE APPOINTMENT OF WHITLEY PENN LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS FOR THE YEAR ENDING NOVEMBER 30, 2009,
FOR
THE RATIFICATION OF OUR AMENDED AND RESTATED 2008 LONG TERM INCENTIVE PLAN, AND
AGAINST
THE RED OAK GROUPS PROPOSALS, INCLUDED AS PROPOSALS No. 4
THROUGH No. 8 IN THIS PROXY STATEMENT, AND URGES YOU NOT TO SIGN OR RETURN
ANY PROXY CARD SENT TO YOU BY THE RED OAK GROUP.
2.
What is a proxy and how does the
proxy process operate?
The proxy process is the
means by which corporate stockholders can exercise their rights to vote for the
election of directors and other corporate proposals. A proxy is your legal
designation of another person to vote the stock you own. The people that you
designate to vote your shares are called proxies. Beverly Scherffius and
Juliana Cordero have been designated as proxies for the Annual Meeting. The
term proxy also refers to the written document or proxy card that you sign
to authorize those persons to vote your shares.
Stockholders may vote by
returning a proxy card, or, if a stockholder holds its shares in street name,
by Internet or telephone, without having to attend the stockholder meeting in
person. By executing the proxy card, you authorize the above-named individual
to act as your proxy to vote your shares in the manner that you specify. The
proxy voting mechanism is vitally important to us. In order for us to obtain
the necessary stockholder approval of proposals, a quorum of stockholders
must be represented at the meeting. The presence, in person or by proxy, of
holders of a majority of the voting power of all outstanding shares of common
stock entitled to vote at our Annual Meeting are necessary to constitute a
quorum at the Annual Meeting. Since few stockholders can spend the time or
money to attend stockholder meetings in person, voting by proxy is necessary to
obtain a quorum and complete the stockholder vote.
3.
How can I access the
proxy materials over the Internet?
Pursuant to new rules promulgated by the
SEC
we have elected to provide access to
these proxy statement materials (which includes this proxy statement, a proxy
card, our Annual Report on Form 10-K for the year ended November 30,
2008 and our Quarterly Reports on Form 10-Q for the first and second quarters
of 2009) both by sending you this full set of proxy statement materials,
including a proxy card, and by notifying you of the availability of such
materials on the Internet. Your proxy card will contain instructions on how to
view our proxy materials for the Annual Meeting on the Internet. Our proxy
materials are also available at http://bnymellon.mobular.net/bnymellon/clhi.
4.
How can I obtain copies of CLST
Holdings Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
other available information about CLST Holdings?
We are furnishing with this proxy statement copies of
our 2008 Annual Report on Form 10-K, which includes our financial
statements and our Quarterly Reports on Form 10-Q for the first and second
quarters of 2009. Stockholders may request copies of our 2008 Annual Report on Form 10-K
and our Quarterly Reports on Form 10-Q for the first and second quarters of
2009 at no
13
Table of Contents
charge by sending a
written request to Robert A. Kaiser, Chief Executive Officer, CLST Holdings, Inc.,
at 17304 Preston Road, Dominion Plaza, Suite 420
Dallas, Texas
75252
.
We are required to file annual, quarterly and current
reports, proxy statements and other information with the Securities and
Exchange Commission, or the SEC. You may read any materials we file with the
SEC free of charge at the SECs Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. Copies of all or any part of these documents may
be obtained from such office upon the payment of the fees prescribed by the
SEC. The public may obtain information on the operation of the public reference
room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is
www.sec.gov
. This proxy statement, our
2008 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for
the first and second quarters of 2009, including all exhibits thereto, have
been filed electronically with the SEC. Our web site is
www.clstholdings.com
.
No information from this web site is incorporated by reference herein. You may
also obtain copies of our annual, quarterly and current reports, proxy
statements and certain other information filed with the SEC, as well as
amendments thereto, free of charge from our web site. We also post our Charters
of the Audit Committee, the Nominating Committee and the Compensation Committee
as well as our Business Ethics Policy on our web site. These documents are
available free of charge to any stockholder upon request.
5.
What is a proxy statement?
The proxy statement is a
disclosure document in which we furnish you with important information to
assist you in deciding whether to authorize the proxy to vote on your behalf.
6.
What is the difference between a
stockholder of record and a stockholder who holds stock in street name?
If your shares are
registered in your name with our transfer agent, BNY Mellon Shareowner
Services, you are a stockholder of record with respect to those shares. As a
stockholder of record, you have the right to grant your voting proxy directly
to us or to a third party, or to vote in person at the meeting.
If you are the beneficial
owner of shares and they are held in the name of your broker, bank or other
nominee, then your shares are held in street name. Your broker, bank or other
nominee, as the record holder of your shares, is required to vote those shares
in accordance with your instructions. If you beneficially own shares in street
name, these proxy materials are being forwarded to you together with a voting
instruction card on behalf of your broker, bank or other nominee. As the
beneficial owner, you have the right to direct your broker, bank or nominee how
to vote and you are also invited to attend the Annual Meeting. Your broker,
bank or nominee has enclosed or provided voting instructions for you to use in
directing the broker, bank or other nominee how to vote your shares. Since a
beneficial owner in street name is not the stockholder of record, you may not
vote these shares in person at the meeting unless you obtain a legal proxy
from the broker, bank or other nominee that holds your shares, giving you the
right to vote the shares at the meeting.
7.
What is the record date and what
does it mean?
The record date for the
Annual Meeting is September 25, 2009. The record date is established by
our Board of Directors as required by Delaware law. Owners of record of our
common stock at the close of business on the record date are entitled to
receive notice of the meeting and vote at the meeting and any adjournments or
postponements of the meeting.
8.
What different methods can I use
to vote?
Whether you plan to
attend the Annual Meeting or not, we urge you to vote by proxy. Voting by proxy
will not affect your right to attend the Annual Meeting. If you are a
registered stockholder, that is your shares are registered directly in your
name through our stock transfer agent, or you have stock certificates, you may
vote:
·
By mail.
Please sign, date and mail the enclosed
WHITE
proxy card in the enclosed postage prepaid envelope.
Your proxy will be voted in accordance with your instructions. If you sign the
proxy card but do not specify how you want your shares voted, they will be
voted as recommended by our Board of Directors.
14
Table of Contents
·
In person at the meeting.
If you attend the Annual Meeting, you
may deliver your completed
WHITE
proxy
card in person or you may vote by completing a ballot, which will be available
at the Annual Meeting.
If your shares are held
in street name (held in the name of a bank, broker or other nominee), you must
provide the bank, broker or other nominee with instructions on how to vote your
shares. You may vote as follows:
·
By Internet or telephone.
Follow the instructions you receive from
your broker to vote by Internet or telephone.
·
By mail.
You will receive instructions from your
broker or other nominee explaining how to vote your shares.
·
In person at the meeting.
Contact the broker or other nominee who
holds your shares to obtain a legal proxy from the broker or other nominee and
bring it with you to the meeting. You will not be able to vote at the meeting
unless you have a legal proxy. You will also need to sign and submit a ballot
in order to have your vote counted.
9.
What is the effect of not voting?
The effect of not voting
depends on how you own your shares. If you own shares as a registered holder,
rather than through a broker or nominee, your unvoted shares will not be
represented at the meeting and will not count toward the quorum requirement.
Assuming a quorum is obtained, your unvoted shares will not affect whether the
proposal is approved or rejected. If the Red Oak Group solicits proxies for use
at the annual meeting, then all of the proposals on the meeting agenda will be
non-routine matters and brokerage firms cannot vote on such matters absent
voting instructions from their clients. Thus, all shares as to which brokers do
not receive any instructions to vote will not be represented at the meeting for
quorum purposes or voted. See Broker Non-Votes above for more information.
10.
If I do not vote, will my broker
vote for me and how will broker non-votes and abstentions be counted?
Under the rules that
govern brokers who have record ownership of shares that they hold in street
name for their clients who are the beneficial owners of the shares, brokers
have the discretion to vote such shares on discretionary, or routine, matters
but not on non-discretionary, or non-routine, matters. Broker non-votes
generally occur when shares held by a broker nominee for a beneficial owner are
not voted with respect to a proposal because the broker nominee has not
received voting instructions from the beneficial owner and lacks discretionary
authority to vote the shares. Brokers normally have discretion to vote on
routine matters, such as uncontested director elections and the ratification of
independent registered public accounting firms, but not on non-routine matters,
such as contested director elections or stockholder proposals.
For brokerage accounts
that are sent proxy materials by the Red Oak Group, all items on the proxy card
will be considered non-routine matters. Therefore, if the Red Oak Group pursues
its contested solicitation and you hold your shares in street name but you do
not provide voting instructions to your broker, your broker may not be able to
vote on your behalf without your specific instructions. Due to this
possibility, we strongly encourage you to provide your broker, bank or nominee
with specific voting instructions to ensure that your shares are properly voted
on your behalf. You should vote your shares by following the instructions
provided on the
WHITE
voting instruction form and
returning your
WHITE
voting instruction form to
your broker to ensure that your shares are voted on your behalf. If there is no contested election, and you do
not provide voting instructions to your broker, your broker may vote your shares
in its discretion as to routine matters, which would include the uncontested
election of directors and the ratification of the appointment of Whitley Penn
LLP as our independent registered public accountants for the year ending November 30,
2009.
We urge you to provide
instructions to your broker so that your votes may be counted on these
important matters. You should vote your shares by following the instructions
provided on the
WHITE
voting instruction form
15
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and returning your
WHITE
voting instruction form to your broker to ensure that
your shares are voted on your behalf.
11.
What do I do if I receive more
than one proxy statement?
If you received more than
one proxy statement from the Company, your shares are probably registered in
names that are not identical or are held in more than one account. Please vote
each
WHITE
proxy card you received.
As previously noted, the
Red Oak Group provided notice that it intends to nominate its own slate of two
nominees for election as directors at the Annual Meeting and submit certain
other business to the Annual Meeting and may solicit proxies for use at the
Annual Meeting. As a result, you may receive proxy cards from the Red Oak Group
in addition to the
WHITE
proxy
cards from us. To ensure stockholders have our latest proxy information and
materials to vote, our Board of Directors expects to conduct multiple mailings
prior to the date of the Annual Meeting, each of which will include a
WHITE
proxy card regardless of whether or not you have
previously voted. Only the latest dated proxy card you vote will be counted.
OUR BOARD OF DIRECTORS STRONGLY URGES YOU NOT TO SIGN OR RETURN ANY
PROXY CARD SENT TO YOU BY THE RED OAK GROUP
. Even if you have
previously signed a proxy card sent by the Red Oak Group, you have the right to
change your vote by re-voting by signing, dating and returning the enclosed
WHITE
proxy card in the postage-paid envelope provided, or,
if you hold your shares in street name (i.e., your shares are held in the
name of a bank, broker or other nominee), you may vote by Internet or by
telephone. A later dated proxy submitted to the Red Oak Group would also revoke
a prior proxy granted to us. Only the
latest dated proxy card you vote will be counted. Please note that the enclosed
WHITE
proxy card also includes the
proposals that the Red Oak Group has notified us it intends to bring before the
Annual Meeting. Therefore, our enclosed
WHITE
proxy
card provides you with the ability to vote For or Against or Abstain from
voting for any proposals made by the Red Oak Group, as well as to vote For
our director nominees and other matters.
We are not responsible
for the accuracy and completeness of any information provided by or relating to
the Red Oak Group and its nominees for director contained in any proxy
solicitation or other materials filed or disseminated by, or on behalf of, the
Red Oak Group or any other proposals or statements that the Red Oak Group or
its affiliates may otherwise make. The
Red Oak Group chooses which stockholders receive their proxy solicitation
materials.
12.
How can I revoke or change my
proxy?
You may revoke your proxy
and change your vote at any time before the proxy has been exercised at the
Annual Meeting. If you are a registered holder, your proxy can be revoked in
several ways: (a) by timely delivery of a written revocation delivered to
the corporate secretary; (b) by submitting another valid proxy as
instructed above bearing a later date; or (c) by attending the meeting in
person and voting by ballot. If your shares are held in street name by a broker
or nominee, you must contact your broker or nominee in order to revoke your
proxy, but generally, you may change your vote by submitting new voting
instructions to your broker or nominee, or, if you have obtained a legal proxy
from your broker or nominee giving you the right to vote your shares, by
attending the meeting and voting in person.
If you
have previously signed a proxy card sent to you by the Red Oak Group, you can
change your vote and vote for our nominees by using the enclosed
WHITE
proxy card to vote by signing, dating
and returning the enclosed
WHITE
proxy card in the postage-paid envelope provided, or,
if you hold your shares in street name (i.e., your shares are held in
the name of a bank, broker or other nominee), you may vote by Internet or by
telephone
. Only the latest dated proxy you submit, in
whatever form, will be counted. Please note that the enclosed
WHITE
proxy card also includes the proposals
that the Red Oak Group has notified us it intends to bring before the Annual
Meeting. Therefore, our enclosed
WHITE
proxy card provides you with the ability
to vote For or Against
or Abstain from voting for
any proposals made by the Red Oak Group,
as well as to vote For our director nominees
and other matters
.
16
Table
of Contents
13.
Who counts the votes?
We have retained a representative of
to serve as an independent inspector of election to receive
and tabulate the proxies and to certify the results.
14.
Who will solicit proxies on behalf of the Board?
Annex B to this proxy statement, entitled Information
Concerning Participants in the Solicitation of Proxies by CLST Holdings, Inc.,
together with the table in this proxy statement under Certain Stockholders,
sets forth certain information relating to the Companys directors, the
Companys director nominees, and the Companys current executive officers, who
are deemed participants in the Boards solicitation of proxies in connection with
the 2009 Annual Meeting under the applicable rules of the SEC.
Additionally, the Board has retained Morrow & Co., LLC (
Morrow
), 470 West Ave., Stamford,
CT 06902, to assist us in the solicitation of proxies for a fee of up to
$67,500 plus out-of-pocket expenses. Morrow expects that approximately 25 of
its employees will assist in the solicitation.
15.
What are my voting choices when
voting for Proposals No. 1 through No. 8, and what votes are needed
for these proposals?
With regard to the
election of directors, Proposal No. 1, you may cast your vote in favor of
or withhold your vote for each nominee. In accordance with our bylaws and
Delaware law, the nominees who receive a plurality of the votes cast by
stockholders present, in person or by proxy, at the Annual Meeting and entitled
to vote, up to the number of directors to be elected, will be elected as
directors. If more than two nominees are properly presented to the stockholders
at the Annual Meeting, the two nominees receiving the highest number of
affirmative votes of the shares which are present or represented by proxy at
the Annual Meeting and entitled to vote for the election of directors will be
elected to our Board. Stockholders may not cumulate votes in the election of
directors. Votes marked FOR all nominees will be counted in favor of all
nominees, except to the extent the proxy withholds authority to vote for a
specified nominee. Votes that are withheld will be excluded entirely from the
vote and will have no effect. An abstention may not be specified with respect
to the election of the nominees.
As
previously noted, the Red Oak Group has given notice of its intention to
nominate its own slate of two directors for election to our Board of Directors
and submit certain other stockholder proposals at the upcoming
Annual Meeting
and may solicit proxies for the matters it intends to bring to the Annual
Meeting
. You may
receive proxy solicitation materials from the Red Oak Group.
A
broker is entitled to vote shares held for a beneficial owner on routine
matters, such as the ratification of the appointment of
a companys
independent registered public accounting firm, without instructions from the
beneficial owner of those shares. On the other hand, a broker may not be
entitled to vote shares held for a beneficial owner on certain non-routine
items, such as contested director elections, absent instructions from the
beneficial owners of such shares. For brokerage accounts that are sent proxy
materials by the Red Oak Group, all items on the proxy card will be considered
non-routine matters. Thus, if you do not give your broker specific
instructions, your shares will not be voted on Proposals No. 1 through No. 8.
We urge you to provide instructions to your broker so that your votes may be
counted on these matters. You should vote your shares by following the
instructions provided on the
WHITE
voting
instruction card and returning your
WHITE
voting
instruction card to your broker to ensure that your shares are voted on your
behalf.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR
THE ELECTION OF THE BOARDS NOMINEES NAMED ON THE ENCLOSED WHITE PROXY CARD AND
URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY
THE RED OAK GROUP.
With regard to Proposals No. 2
through No. 8, you may cast your vote in favor of, against or abstain from
voting for these proposals. Ratification requires the affirmative vote of the
majority of the shares of our common stock present or represented and entitled
to vote on the matter at the Annual Meeting. Votes marked For will be counted
in favor of the proposal. Votes marked Against will be counted against the
proposal. An abstention specified for Proposals No. 2 through No. 8
will be counted as present for purposes of determining whether a
17
Table
of Contents
quorum is present but
will not be voted on that item. Accordingly, an Abstention will have the
effect of a vote Against Proposals No. 2 through No. 8. Unless
otherwise instructed, the enclosed proxy will be voted For
ratification of
the appointment of Whitley Penn LLP, For ratification of the Companys
Amended and Restated 2008 Long Term Incentive Plan, and Against Proposals No. 4
through No. 8, which were submitted by the Red Oak Group.
OUR BOARD
RECOMMENDS A VOTE FOR THE RATIFICATION OF WHITLEY PENN LLP, FOR RATIFICATION OF
THE COMPANYS AMENDED AND RESTATED 2008 LONG TERM INCENTIVE PLAN, AND AGAINST
THE RED OAK GROUPS PROPOSALS, INCLUDED IN THIS PROXY STATEMENT AS PROPOSALS
NO. 2 THROUGH NO. 8.
16.
What is the deadline to propose
actions for inclusion in our proxy statement for our 2010 Annual Meeting?
Any stockholder of
ours meeting certain minimum stock ownership and holding period requirements
may present a proposal to be included in our proxy statement for action at the
Annual Meeting of stockholders to be held in 2010 pursuant to Rule 14a-8
of the Exchange Act. Such stockholder must deliver such proposal to our
corporate
secretary at CLST Holdings, Inc., at 17304 Preston Road, Dominion Plaza, Suite 420 Dallas, Texas 75252,
no later than June 29, 2010.
Stockholder proposals to
be presented at our 2010 Annual Meeting of stockholders that are not to be
included in our proxy statement, including nominees for our Board of Directors,
must be received by us no later than 60 days prior to such Annual Meeting, in
accordance with the procedures set forth in our Amended and Restated
Certificate of Incorporation, as amended; except that, should less than 70
days notice or public disclosure of the date such meeting be given or made to
stockholders, such proposal, in order to be timely, must be received no later
than close of business on the tenth day following the date on which such notice
is mailed or such public disclosure is made. See Corporate Governance
Nominating Committee below for more information on nominees proposed by
stockholders.
18
Table
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CERTAIN STOCKHOLDERS
The
following table sets forth certain information regarding beneficial ownership
of our common stock as of the record date or such other date indicated in the
footnotes below by (a) each person who is known by us to be the beneficial
owner of more than 5% of the outstanding shares of our common stock, (b) each
of our directors and nominees for director, (c) each of our executive
officers named in the Summary Compensation Table below under Executive
Compensation, and (d) all of our executive officers and directors as a
group. Unless otherwise indicated, we believe that each person or entity named
below has sole voting and investment power with respect to all shares shown as
beneficially owned by such person or entity, subject to community property laws
where applicable and the information set forth in the footnotes to the table
below.
Name and
Address of Beneficial Owner
|
|
Amount and Nature
of Beneficial Ownership
|
|
Percent
of Class(1)
|
|
Michael A. Roth and Brian J. Stark
c/o Stark Investments
3600 South Lake Drive
St. Francis, Wisconsin 53235
|
|
3,267,254
|
(2)
|
13.6
|
%
|
David Sandberg c/o Red Oak Partners, LLC
145 Fourth Avenue, Suite 15A
New York, NY 10003
|
|
4,561,554
|
(3)
|
19.0
|
%
|
Timothy S. Durham
|
|
3,474,471
|
(4)
|
14.5
|
%
|
Robert A. Kaiser
|
|
640,413
|
(5)
|
2.7
|
%
|
David Tornek
|
|
932,323
|
(6)
|
3.9
|
%
|
Patrick ODonnell
|
|
400,000
|
(7)
|
1.7
|
%
|
|
|
|
|
|
|
Directors and
executive officers as a group
|
|
5,047,207
|
|
21.0
|
%
|
(1)
Based on 23,949,282 shares of our common
stock outstanding as of the record date.
(2)
Based on an amended Schedule 13G filed
with the SEC on February 14, 2007 by Michael A. Roth and Brian J. Stark,
filing as joint filers pursuant to Rule 13d-1(k) under the Exchange
Act. Mr. Roth and Mr. Stark reported shared voting and dispositive
power with respect to all shares shown as beneficially owned in such filing.
The 3,267,254 shares of common stock and percentage ownership represent the
combined indirect holdings of Michael A. Roth and Brian J. Stark. All of the
foregoing represents an aggregate of 3,267,254 shares of common stock held
directly by Stark Master Fund Ltd. (
Stark
).
The Reporting Persons are the Managing Members of Stark Offshore Management LLC
(
Stark Offshore
), which serves as
the investment manager of Stark. Through Stark Offshore, Michael A. Roth and
Brian J. Stark share voting and dispositive power over all of the foregoing
shares.
(3)
Based on a Schedule 13D filed with
the SEC on February 18, 2009, as amended by Amendment #1 to the Schedule
13D filed with the SEC on March 4, 2009 and Amendment #2 to the Schedule
13D filed with the SEC on April 28, 2009, by David Sandberg, David
Sandberg, Red Oak Partners, Red Oak Fund, Pinnacle Partners, Pinnacle Fund and
Bear Fund. Each of the filers reported shared voting and dispositive power with
respect to all shares shown as beneficially owned in such filing. Red Oak
Partners, and therefore Mr. Sandberg, managing member of Red Oak Partners,
beneficially owns 4,561,554 shares of common stock. Red Oak Fund is controlled
by Red Oak Partners. Red Oak Partners manages Bear Fund and makes its
investment decisions. Pinnacle Fund is controlled by Pinnacle Partners, which
is controlled by Red Oak Partners. Therefore, Red Oak Partners may be deemed to
beneficially own (i) the 3,341,106 shares of common stock held by Red Oak
Fund, (ii) the 960,448 shares of common stock beneficially owned by
Pinnacle Partners through Pinnacle Fund, and (iii) the 260,000 shares of
common stock held by Bear Fund. Please refer to Legal Proceedings below for
more information regarding a lawsuit we filed against Red Oak Partners on
19
Table of Contents
February 13, 2009 and a derivative lawsuit filed
by Red Oak Partners against
Messrs. Kaiser, Durham and Tornek
on
March 2, 2009.
(4)
Includes a restricted stock grant,
100,000 shares of which vested on December 1, 2008, and the remaining
200,000 of which vest in two equal annual installments on December 1, 2009
and December 1, 2010. Also, this amount includes 1,969,077 shares of
common stock based upon the Schedule 13D filed with the SEC on February 27,
2009, by Mr. Durham, DC Investments, LLC, an Indiana limited liability
company (
DC Investments
), Fair
Holdings, Inc., an Ohio corporation and wholly owned subsidiary of DC
Investments (
Fair Holdings
) and Fair
Finance Company, an Ohio corporation (
Fair
). Mr. Durham
is the managing member of DC Investments, the Chairman of the Board of
Directors of Fair Holdings and the Chief Executive Office and a member of the
Board of Directors of Fair, and therefore, Durham may be deemed to beneficially
own the 1,969,077 shares of common stock held by Fair. Mr. Durham reported
shared voting and dispositive power with respect to such 1,969,077 shares.
(5)
Includes 73,676 shares held in a
partnership controlled by Mr. Kaiser and his wife, as well as a restricted
stock grant, 100,000 shares of which vested on December 1, 2008, and the
remaining 200,000 of which vest in two equal annual installments on December 1,
2009 and December 1, 2010. Also includes options to purchase 130,000
shares of common stock, 80,000 of which expire on December 12, 2011 and
50,000 of which expire on January 22, 2013. Also includes 12,990 shares of
common stock acquired in a privately negotiated purchase on September 23, 2009.
(6)
Includes a restricted stock grant,
100,000 shares of which vested on March 5, 2009, and the remaining 200,000
of which vest in two equal annual installments on March 5, 2010 and March 5,
2011. Also includes 30,000 shares of common stock acquired in open market
purchases on September 17, 2009, and 418,003 shares of common stock acquired in
a privately negotiated purchase on September 24, 2009.
(7)
Consists solely of shares of common
stock.
20
Table of Contents
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board of
Directors is divided into three classes, being divided as equally as possible
with each class having a term of three years. Each year the term of office of
one class expires. The term of Class I directors, which currently consists
of one director, expired last year, and the term of Class II directors,
which currently consists of one vacancy, expires this year. Our Board of
Directors has nominated Robert A. Kaiser for reelection as a Class I
director at the Annual Meeting. Mr. Kaiser, if reelected, will continue to
hold office for the remaining term of the Class I directors until the
Annual Meeting of stockholders in 2011, and until his successor is duly elected
and qualified, or until his earlier death, resignation or removal. Our Board of
Directors has also nominated Patrick ODonnell for election as a Class II
director at the Annual Meeting. Mr. ODonnell,
if elected, will hold office as a Class II director until the Annual
Meeting of stockholders in 2012, and until his successor is duly elected and
qualified, or until his earlier death, resignation or removal. Each nominee has consented to being named in
this proxy statement and to serving as a director if elected. The seat for Class II
directors was made vacant when our Class II director, Manoj Rajegowda,
tendered his resignation from the Board of Directors on February 24, 2009.
Mr. Rajegowdas letter of resignation is attached as Exhibit 99.1 to
our Annual Report on Form 10-K for the year ended November 30, 2008,
filed with the SEC on March 2, 2009. See Resignation of Director below
for more information.
Should any nominee for director be unable (or, for
good cause, unwilling) to serve on the Board of Directors, the proxies will be
voted for the election, in his stead, of such other person as our Board of
Directors may recommend; alternatively, our Board of Directors may reduce the
number of directors to be elected. We have no reason to believe that any
nominee named above will be unwilling or unable to serve. If a quorum is
present, directors are elected by a plurality of the votes cast, in person or
by proxy. This means that the nominees will be re-elected if they receive more
affirmative votes than any other nominee for the same position. If more than
two nominees are properly presented to the stockholders at the Annual Meeting,
the two nominees receiving the highest number of affirmative votes of the
shares which are present or represented by proxy at the Annual Meeting and entitled
to vote for the election of directors will be elected to our Board. Votes marked For a nominee will be counted
in favor of that nominee. Votes Withheld from a nominee have no effect on the
vote since a plurality of the votes cast at the Annual Meeting is required for
the re-election of each nominee. Stockholders may not abstain from voting with
respect to the election of directors. Stockholders may not cumulate their votes
with respect to the election of directors.
The
Board of Directors
recommends that you
vote FOR each nominee for director.
Please note that the Red Oak Group has given notice of
its intention to nominate its own slate of two directors, David Sandberg and
Charles Bernard, for election to our Board of Directors at the upcoming
Annual Meeting
. You may receive proxy solicitation
materials from the Red Oak Group including an opposition proxy statement and
proxy card. Our Board of Directors reviewed the Red Oak Groups notice of its
intention to nominate two directors, reviewed available information concerning
the Red Oak Groups nominees, prior public pronouncements of the individuals
and their communications with us and examined their qualifications based upon
the needs of the Company at this time. The full Board of Directors determined
not to nominate the Red Oak Groups nominees because, based on the discussion
set forth under Certain Background Information
Qualifications of Current
Board and Nominees above,
it does not believe that election of the Red Oak Groups nominees is
in the best interests of the Company or its stockholders. The Board of
Directors believes that its nominees are well-qualified to manage the Company
in the stockholders best interests, believes that a vote in favor of the
election of its nominees at the
Annual Meeting
is in the best interests of the
stockholders and recommends a vote FOR the election of such nominees. As described in detail below, our nominees
have considerable professional and business expertise. The recommendation of
our Board of Directors is based on its carefully considered judgment that the
experience, record and qualifications of our nominees make them the best
candidates to serve on our Board of Directors.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR THE ELECTION OF THE BOARDS NOMINEES AND URGES YOU NOT TO SIGN OR
RETURN ANY PROXY CARD SENT TO YOU BY THE RED OAK GROUP.
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If you have
previously signed a proxy card sent to you by the Red Oak Group, you can change
your vote and vote for our Board of Directors nominees by using the enclosed
WHITE
proxy card to vote by signing, dating
and returning the enclosed
WHITE
proxy card in the postage-paid envelope provided, or,
if you hold your shares in street name (i.e., your shares are held in the
name of a bank, broker or other nominee), you may vote by Internet or by
telephone. Only the latest dated proxy you submit will be counted. Please note
that the enclosed
WHITE
proxy card also includes the proposals that the Red
Oak Group has notified us it intends to bring before the Annual Meeting.
Therefore, our enclosed
WHITE
proxy card provides you with the ability to vote
For or Against or Abstain from voting for any proposals made by the Red
Oak Group, as well as to vote For our director nominees.
The following sets
forth information regarding the nominees, and the remaining directors who will
continue in office after the Annual Meeting, including proposed committee
memberships.
Name
|
|
Age
|
|
Director
Since
|
|
Class
|
|
Position(s) Held
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Kaiser
|
|
55
|
|
May 2, 2005
|
|
Class I Director
|
|
Director, Chief Executive Officer, President, Chief
Financial Officer and Treasurer; Member of Executive Committee,
Nominating
Committee and
Audit
Committee
|
|
Timothy S. Durham
|
|
46
|
|
August 7, 2007
|
|
Class III Director
|
|
Director, Chairman and Secretary; Member of
Executive Committee,
Nominating Committee,
Audit Committee and Compensation
Committee
|
|
David Tornek
|
|
48
|
|
January 16, 2009
|
|
Class III Director
|
|
Director, Member of Executive Committee, Chairman of
Nominating Committee, Chairman of Compensation Committee and Chairman of
Audit Committee
|
|
Patrick ODonnell
|
|
48
|
|
n/a
|
|
Class II Director
|
|
n/a
|
|
Robert A. Kaiser, 55,
currently serves as a Class I director and as Chief Executive Officer,
President, Chief Financial Officer and Treasurer, which positions he was
elected to on September 25, 2007. Mr. Kaisers primary business
address is the Companys address. Mr. Kaiser has served as a director of
the Company since May 2, 2005 and also previously served as Chairman of
the Board of Directors of the Company from May 2, 2005 until his
resignation on April 17, 2007 and again from August 7, 2007 until September 11,
2009. Mr. Kaiser was subsequently elected to the Board of Directors on August 7,
2007, and was to have served a one-year term; however, because the Company did
not have an Annual Meeting of stockholders in 2008, he has continued to serve
as director. Mr. Kaiser also served as Senior Vice President and Chief
Financial Officer of the Company from December 21, 2001 until October 2,
2003, when the Board of Directors named him President and Chief Operating
Officer of the Company, which he served as until March 30, 2007, when he
resigned in connection with the completion of the sale of substantially all of
the Companys assets. Mr. Kaiser was also promoted to Chief Executive
Officer on May 1, 2004, with which he served consecutively as President and
Chief Operating Officer until March 30, 2007. Mr. Kaiser also serves
as a member of the board of directors and audit committee chairman for RBC Life
Sciences and has served in such capacities since September 2008.
Timothy S. Durham, 46, is
currently serving a three-year term as a Class III director and was
elected as Secretary of the Company on August 7, 2007 and as Chairman of
the Board on September 11, 2009. Mr. Durham is the Chairman and Chief
Executive Officer of Obsidian Enterprises, Inc. (
Obsidian
),
a private holding company that invests in small and mid cap companies in basic
industries such as manufacturing and transportation. Mr. Durhams primary
business address is 111 Monument
Circle, Suite 3680, Indianapolis, Indiana 46204. As Chief Executive
Officer of Obsidian, Mr. Durham is responsible for strategic direction and
financial issues. Mr. Durham also serves as Chairman of Fair Holdings, Inc.
(
Fair Holdings
), a financial
services company, where his responsibilities include strategic direction and
financial issues. He has held such positions with Obsidian and Fair Holdings
for more than five years. Mr. Durham also serves as a director of National
Lampoon, Inc. and has done so since 2002.
David Tornek, 48
,
is currently serving as a Class III director of the
Company and was elected as Chairman of the Companys Audit Committee,
Nominating Committee and Compensation Committee on September 11, 2009. Mr. Tornek
is currently Owner/Operator of Touch Catering, Kosher Touch Catering, and Meat
Market Miami Steakhouse, all Miami area restaurants and catering
companies. Mr. Torneks primary
business address is
17304
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Preston Road, Dallas, Texas 75252
. Prior to his work in the food services
industry, Mr. Tornek worked as Chief Financial Officer and Chief Operating
Officer of Century Management Group from 1995 to 2004. Mr. Tornek received
a B.S. in accounting from Metropolitan State College in 1983. Mr. Tornek
also serves as a director of National Lampoon, Inc. and has done so since December 22,
2008.
Patrick ODonnell, 48, is a nominee for Class II
Director. Mr. ODonnell spends the majority of his time as Managing Member
for a private family partnership, Ripples LLC, which invests in small and mid
cap companies predominantly in the technology, finance and energy sectors.
Mr. ODonnells
primary business address is 10713 S. Tripp Ct., Oak Lawn, Illinois 60453.
He is also currently Managing Member of
three companies: P.A.T Enterprises LLC, a technology and management consulting
firm; Fair Deal Credit LLC, a consumer credit and investment firm (and which is
not related to Fair Finance Company); and Pharos LLC, an iphone applications
development company. In 2004 Mr. ODonnell spent the majority of the year
providing pro bono work that involved advising the Mayor of the City of Chicago
on various technology management issues. Prior to the fall of 2003, Mr. ODonnell
was at UBS Investment Bank, where he served as the Chief Information Officer
and a member of its Management Board. He was at UBS Investment Bank, and
its predecessors, from 1989 through 2003, where he served on numerous senior
management and corporate governance bodies, helping to drive the operational
and strategic direction of the firm. UBS Investment Bank is a wholly
owned subsidiary of UBS, a large, globally diversified financial services
company, headquartered in Switzerland.
We do
not maintain key man insurance on the life of any of our officers. The loss or
interruption of the continued full-time service of our executive officers and
key employees could have a material adverse impact on our business. Our inability to retain such necessary
personnel could also have a material adverse effect on us.
No
family relationships exist among our officers or directors. Except as indicated
above, no director of ours is a director of any company with a class of
securities registered pursuant to Section 12 of the Exchange Act, or
subject to the requirements of Section 15(d) of the Exchange Act or
any company registered as an investment company under the Investment Company
Act of 1940.
Resignation of Director.
On February 24,
2009, our director and member of our Audit Committee, Manoj Rajegowda, tendered
his resignation as a member of our Board of Directors, effective immediately,
and, as a result, effectively resigned from our Audit Committee. Mr. Rajegowda
notified us of his resignation through a letter from his counsel, Richards,
Layton, & Finger P.A. A copy of Mr. Rajegowdas letter is
attached as Exhibit 99.1 to our Annual Report on Form 10-K for the
year ended November 30, 2008.
In his resignation
letter, Mr. Rajegowdas counsel gives, as the reason for his clients
resignation:
. . . the fact that [Mr. Rajegowda has] been
isolated from any meaningful decision making role as a director, and in light
of the fact that the Company has determined to proceed in a manner which he
considers to be antithetical to the expressed wishes of the majority of
stockholders . . .
We
discuss and respond to Mr. Rajegowdas reasons for his resignation below.
In addition to
providing reasons for his resignation, Mr. Rajegowda made a variety of
allegations about our corporate governance and the conduct of our management.
Among other things, in his letter, Mr. Rajegowda:
·
Alleges that he was not properly notified
of a transaction effective February 13, 2009 between us and Fair, James
Cochran and Timothy Durham;
·
Alleges that the transaction with Fair, Mr. Cochran
and Mr. Durham was not properly approved;
·
States that we have failed to provide him
with minutes of meetings of the Board of Directors and that we have not
submitted draft minutes to the Board of Directors for comments and a vote;
·
Alleges that the Board of Directors has
determined to abandon our plan of dissolution; and
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·
Alleges that the Boards attempts to
continue the business of the Company in the face of a shareholders vote in
favor of a prompt liquidation puts the interest of the Board ahead of the
interests of the shareholders.
On February 3,
2009, the Board of Directors, by a vote of 3 to 1, with Mr. Rajegowda
voting against, created an Executive Committee of the Board of Directors,
having all of the authority of the Board of Directors, including all of the
authority that the Board of Directors had as a committee of the whole when
serving as a committee of the Board of Directors (such as the Audit Committee).
Our Board of Directors took this action because members of the Board of
Directors, other than Mr. Rajegowda, had become concerned that Mr. Rajegowda
was unable, because of conflicts of interest between the interests of his
employer, MC Investments, and his duties as a member of our Board of Directors,
to perform his duties to our stockholders, or to maintain the confidentiality
of our confidential information. Members of our Board of Directors were
specifically concerned that Mr. Rajegowda was sharing our confidential
information with his employer. In addition, Mr. Rajegowda indicated to the
Board of Directors that he was unwilling, under any circumstances, to consider
certain classes of transactions that might be presented to us. In order to
maintain our ability to conduct our business in the best interests of our
stockholders, without the concern that Mr. Rajegowdas conflicts of
interest would adversely affect our decision making, and to assure the
confidentiality of our confidential information, the Board of Directors, with Mr. Rajegowda
voting against, decided to create an Executive Committee of the Board of
Directors, exercising all of the authority and power of the Board of Directors,
including all of the authority of the Board of Directors when it is sitting as
a committee of the whole.
As stated in our
2008 Annual Report on Form 10-K, we disagree with Mr. Rajegowdas
allegations, and do not believe that they are supported by the facts. Mr. Rajegowda
is correct when he says that he has not been provided with copies of minutes of
meetings. However, we do not believe that Mr. Rajegowda has requested
copies of those minutes, or requested that minutes of meetings be reviewed and
voted upon. Our normal process does not include the vote that Mr. Rajegowda
refers to. We do not believe that Mr. Rajegowda objected to our normal
process while he was a member of the Board of Directors.
We are not sure
what Mr. Rajegowda is referring to when he says that the Board of
Directors has determined to proceed in a manner which he considers to be
antithetical to the expressed wishes of the majority of stockholders.
Although, from the remainder of the letter, it would appear that he believes
that the Board of Directors has decided to abandon our plan of dissolution, our
Board of Directors has not made that decision, nor has the Executive Committee
of our Board of Directors. We have continued to wind up aspects of our businesses,
including dissolving of some of our subsidiaries and continuing to try to
collect our remaining non cash assets. In addition, we have continued to review
our liabilities and seek to satisfy or resolve those that we can in a favorable
manner. See Item 1, Business 2008 Business of our 2008 Annual Report on Form 10-K
for further discussion with respect to our activities in this regard. We are
doing this so that we can satisfy or provide for our liabilities as required by
our plan of dissolution and applicable law. We do not now have, and do not
believe that we will have in the immediate future, sufficient information
regarding all of our liabilities to pay or appropriately provide for them as
required by our plan of dissolution and applicable law. We expect that fully
implementing our plan of dissolution may require several years. Our Board of
Directors may in the future elect to abandon the plan of dissolution. The plan
of dissolution reserves that right to the Board of Directors. If the Board of Directors
abandons the plan of dissolution, it will do so only after determining that
doing so would be in the best interest of our stockholders. The Board of
Directors expects to review the plan of dissolution in the near future, and to
consider whether it is in the best interest of the stockholders to abandon the
plan. See Item 1, Business Plan of Dissolution of our 2008 Annual Report on
Form 10-K for further discussion regarding our plan of dissolution.
Finally, we note
that, consistent with the concerns of members of our Board of Directors, Mr. Rajegowda
was subject to conflicts of interest as a result of his employment by MC
Investments, the letter from Mr. Rajegowdas counsel submitting his
resignation concluded by reserving Mr. Rajegowdas and MC Investments
rights against the Company and members of the Board of Directors relating to a
transaction approved by the Executive Committee of the Board of Directors
between us and Fair, James Cochran and Timothy Durham. Mr. Durham is a
member of our Board of Directors and serves as Chairman, and Fair is a company
controlled by Mr. Durham.
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CORPORATE GOVERNANCE
Director Independence.
Our Board of
Directors has adopted the independence standards of The NASDAQ Stock Market, Inc.,
or NASDAQ, as its independence standards (the NASDAQ Stadards). Our Board of
Directors has determined that our current nominees, Mr. Tornek and Mr. ODonnell,
qualify as independent directors and that Messrs. Durham and Kaiser are
not independent directors.
In determining the
independence of Mr. Tornek, our Board of Directors considered the fact
that both Messrs. Durham and Tornek serve on the Board of Directors of
National Lampoon, Inc.
and concluded that this relationship would not impair Mr. Torneks
ability to remain independent as a director on our Board of Directors. In determining the independence of Mr. ODonnell,
our Board of Directors considered the fact that Messrs. ODonnell and
Durham once entered into a joint filing agreement, subsequently filed a
Schedule 13D with respect to securities of the Company with the SEC on February 23,
2006, and thereafter terminated the joint filing agreement on August 15,
2007, and our Board concluded that this relationship would not impair Mr. ODonnells
ability to remain independent as a director on our Board of Directors, should
he be elected.
Mr. Durham serves on the Executive Committee, Audit
Committee, Compensation Committee, and Nominating Committee of our Board of
Directors, but does not qualify as independent under the NASDAQ independence
standards for such committees. Mr. Kaiser serves on the Executive Committee,
Audit Committee and Nominating Committee of our Board of Directors but does not
qualify as independent under the NASDAQ independence standards for such
committees.
Board
Meetings and Attendance.
We are managed
under the direction of our Board of Directors. As of November 30, 2008, we
had three directors, including two non-employee directors Robert A. Kaiser,
Timothy S. Durham and Manoj Rajegowda. During the year ended November 30,
2008, there were no changes to our Board of Directors. Subsequently, on January 16,
2009, the Board of Directors increased the size of the Board of Directors from
three members to four members and appointed Mr. David Tornek to fill the
vacancy as a Class III director to hold office for the remaining term of
the Class III directors until the Annual Meeting of stockholders in 2010
and until his successor is duly elected and qualified. Mr. Tornek was
appointed by the Board to serve as Chairman of the Audit Committee, the
Nominating Committee and the Compensation Committee on
September 11,
2009
. On February 24,
2009, Mr. Rajegowda tendered his resignation from the Board of Directors. Mr. Rajegowdas
letter of resignation is attached as Exhibit 99.1 to our Annual Report on Form 10-K
for the year ended November 30, 2008, filed with the SEC on March 2,
2009. We strongly encourage all members of the Board of Directors to attend
Annual Meetings each year. For the most recent Annual Meeting held on July 31,
2007, four directors were in attendance; the only director not to attend was Da
Hsuan Feng.
Our Board of
Directors is divided into three classes of directors and each class serves a
three year term. Our Board of Directors had only two regular committees, the
Audit Committee and the Executive Committee, until
September 11, 2009
, when it formed an Audit Committee, a
Compensation Committee, and a Nominating Committee, none of which have met as
of the date of this proxy statement. During the 2008 Fiscal Year, the Board of
Directors met 15 times and the Audit Committee met two times. The Executive
Committee was formed in February 2009 and has met three time(s) as of
the date of this proxy statement. No director attended (whether in person,
telephonically, or by written consent) less than 75% of all meetings held
during the period of time he or she served as director during the 2008 Fiscal
Year.
Executive Committee
The Executive
Committee was established by the Board on February 3, 2009 and currently
consists of Messrs. Kaiser, Durham and Tornek. The Executive Committee has all
authority of the Board, including all of the authority the Board had as a
committee of the whole when serving as a committee of the Board (such as the
Audit Committee).
Nominating Committee.
Since August of 2007, the Board has not had a
separately functioning Nominating Committee, and, during this period, our entire Board of Directors performed the functions of a Nominating
Committee. In this capacity, the Board
of Directors did not develop specific,
minimum qualifications to be met by a committee-recommended director, nor did
it specify a particular set of qualities or skills that one or more directors
needed to possess, other than the need for an audit committee financial
expert. However, as of September 11,
2009, our Board of Directors
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has formed a Nominating Committee consisting of Messrs. Durham,
Kaiser, and Tornek, with Mr. Tornek serving as chair. The Nominating
Committees charter can be accessed at
www.clstholdings.com/corpdocs.asp
.
Previously
the Board considered, and now as of
September 11, 2009 the Nominating Committee
considers, nominees proposed by stockholders in accordance with guidelines for
such consideration set forth in our Amended and Restated Certificate of
Incorporation dated as of April 27, 1995, our Bylaws and any applicable rules and
regulations of the SEC. A copy of our charter and Bylaws is available from our
Chief Executive Officer upon written request. Requests or proposals should be
directed to Robert Kaiser, Chief Executive Officer, CLST Holdings, Inc.,
17304 Preston Road, Dominion Plaza, Suite 420 Dallas, Texas 75252. Article II, Section 7 of our Bylaws provides
that persons nominated by stockholders are eligible for election as directors
only if nominated in accordance with the following procedures. Such nominations
shall be made pursuant to timely notice in writing to our Corporate Secretary.
To be timely, a stockholders notice must be delivered to or mailed and
received at our principal executive offices at CLST Holdings, Inc.,
17304 Preston Road, Dominion Plaza, Suite 420 Dallas, Texas 75252 not less than 60 days prior to the
meeting of the stockholders called for the election of directors; provided,
however, in the event that less than 70 days notice or prior public disclosure
of the date the meeting is given or made to stockholders, such written notice
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure of the date of the meeting was made, whichever occurs
first. Such stockholders notice to the
Corporate Secretary must set forth (a) as to the stockholder proposing to
nominate a person for election or re-election as director, (i) the name,
business address and residence address of the stockholder who intends to make
the nomination and (ii) a representation that the stockholder is a holder
of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice,
and (b) as to the nominee, (i) the name, age, business and resident
addresses, and principal occupation or employment of each nominee; (ii) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (iii) any other information relating to the nominee that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Regulation 14A under the Exchange Act; (iv) any other information that is or would be required to be
disclosed in a Schedule 13D promulgated under the Exchange Act, regardless of whether such person would
otherwise be required to file a Schedule 13D and (v) the consent of each
nominee to serve as a director of the Company if so elected.
The Nominating Committee considers, at a minimum, the following factors
in recommending to the Board potential new Board members, or the continued
service of existing members:
1. the members/potential members demonstrated character, judgment,
relevant business, functional and industry experience, and degree of acumen;
2. whether the member/potential member assists in achieving a Board that
represents an appropriate mix of background and specialized experience;
3. the members/potential members independence, as defined in the Nasdaq
Standards;
4. whether the member/potential member would be considered a financial
expert or financially literate as described in Nasdaq Standards, legislation
or NASDAQ Audit Committee guidelines;
5. the extent of the members/potential members business experience,
technical expertise, or specialized skills or experience;
6. whether the member/potential member, by virtue of particular
experience relevant to the Companys current or future business, will add
specific value as a Board member; and
7. any factors related to the ability and willingness of a new member to
serve, or an existing member to continue his/her service.
Previously
the Board did not use, and as of
September 11, 2009 the Nominating Committee
does not use, the services of any third-party search firm to assist in the
identification or evaluation of candidates. The Nominating
26
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Committee may engage a third party to provide such
services in the future, as it deems necessary or appropriate at the time in
question. Previously the Board determined the required selection criteria and
qualifications of director nominees based upon the Companys needs at the time
nominees are considered; going forward, the Nominating Committee will serve
this role. A candidate must possess the ability to apply good business judgment
and must be in a position to properly exercise his or her duties of loyalty and
care. Candidates should also exhibit proven leadership capabilities, high
integrity and experience with a high level of responsibility within their
chosen fields, and have the ability to quickly understand complex principles
of, but not limited to, business and finance. Just as the Board has done in the
past, the Nominating Committee
will consider these criteria for nominees identified by its committee members,
by stockholders, or through some other source. When current Nominating
Committee members are considered for
nomination for reelection, the Nominating Committee also takes into consideration their prior
contributions, performance and meeting attendance records.
As the Board has done in the past, the
Nominating Committee will conduct a process of making a preliminary assessment of each
proposed nominee based upon resume and biographical information, an indication
of the individuals willingness to serve and other background information. This
information will be evaluated against the criteria set forth above as well as
the Companys specific needs at that time. Based upon a preliminary assessment
of the candidates, those who appear best suited to meet our needs may be
invited to participate in a series of interviews, which are used for further
evaluation. The Nominating Committee uses the same process for evaluating all nominees, regardless of the
original source of the recommendation.
Our current nominees,
Mr. Kaiser and Mr. ODonnell, were nominated by our Board.
Our Board determined not to nominate the Red Oak Groups nominees. As stated
above under Certain Background Information, our Board believes that its
nominees are better qualified to lead the Company than the Red Oak Group
nominees.
Audit Committee.
Until
September 11, 2009, all members of our Board of
Directors served as members of our Audit Committee, and beginning with the
formation of our Executive Committee on February 3, 2009, all members of
our Executive Committee served as members of our Audit Committee. However, as
of September 11, 2009, our Board of Directors has formed an Audit
Committee consisting of Messrs. Durham, Kaiser and Tornek, with Mr. Tornek
serving as chair. Our Audit Committee currently includes one independent member
of our Board of Directors, Mr. Tornek, as such independence is defined
under the NASDAQ Standards. Mr. Tornek also serves as the audit committee
financial expert, as such term is defined in Item 407(d)(5) of
Regulation S-K. The Audit Committees
charter can be accessed at
www.clstholdings.com/corpdocs.asp
.
The
primary purpose of the Audit Committee is to oversee the accounting and
financial reporting processes of the Company and the audits of the financial
statements of the Company. In fulfilling its oversight duties, the Audit
Committee shall have the following responsibilities:
·
Inquiring of management, the internal auditor and the independent
registered public accountants about significant risks or exposures and
assessing the steps management has taken to minimize such risk to the Company.
·
Considering with management and the independent registered public
accountants the rationale for employing audit firms other than the principal
independent registered public accountants.
·
Considering and reviewing with management, the independent registered
public accountants and the internal auditor: the adequacy of the Companys
internal controls and disclosure controls and procedures, including the
adequacy of controls and security for management information systems and other
information technology, and any related significant findings and
recommendations of the independent registered public accountants and internal
audit together with managements responses thereto.
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·
Reviewing filings with the SEC and other published documents containing
the Companys financial statements and considering whether the information
contained in these documents is consistent with the information contained in
the financial statements.
·
Reviewing the Companys policies relating to compliance with laws and
regulations; the Companys code of conduct; ethics; officers expense accounts,
perquisites, and use of corporate assets; conflict of interest and the
investigation of misconduct or fraud.
·
Determining the extent to which the planned audit scope of the internal
auditor and independent registered public accountants can be relied on to
detect fraud.
·
Reviewing legal and regulatory matters that may have a material impact
on the financial statements, the Companys related compliance policies and
programs and reports received from regulators.
·
Reporting actions of the Audit Committee to the Board of Directors with
such recommendations as the Audit Committee may deem appropriate.
·
Providing a report of the Audit Committees activities to the Board at
regular intervals.
·
Reviewing and approving all related-party transactions, or designate a
comparable body of the Board of Directors to review and approve all related-party
transactions.
·
Performing such other functions as set forth in the Audit Committees
charter.
Compensation Committee.
Since August of 2007,
the Board has not had a separately functioning Compensation Committee, and
during this period our entire Board of Directors performed the functions of a
Compensation Committee, with compensation payable to our executive officers
being determined by our Board of Directors as a group. Robert A. Kaiser was,
and continues to be, our only director who receives compensation as an
executive officer. However, as of September 11,
2009, our Board of Directors has formed a Compensation Committee consisting of Messrs. Durham
and Tornek, with Mr. Tornek serving as chair. The Compensation Committees
charter can be accessed at
www.clstholdings.com/corpdocs.asp.
The Compensation
Committee serves the Board of Directors and is subject to their control and
direction. The Board may, however, at its discretion, delegate authority to the
Chairman of the Compensation Committee to approve specific actions that fall
within established program guidelines approved by the Board or the Compensation
Committee or to other officers of the Company to approve specific actions
within such guidelines as permitted by this Charter, the Companys charter and
bylaws, and applicable law.
The Compensation
Committee has the authority, acting alone, to retain special legal, accounting,
human resources, or other consultants to advise the Committee on the
performance of its duties. The Compensation Committee may request that any
officer or employee of the Company or the Companys outside counsel or
independent
registered public accountants
attend a meeting of the Compensation Committee or meet
with any member of, or consultant to, the Compensation Committee. The
Compensation Committee shall have the authority to delegate responsibility for
the day-to-day administration of executive compensation payable to the officers
of the Company.
Stockholder Communications with the Board of
Directors.
We and our
Board of Directors welcome communications from our stockholders. Stockholders who wish to
communicate with the Board of Directors, or one or more specified directors, may send an appropriately addressed
letter to the Chairman of the Board of Directors, CLST Holdings, Inc., 17304 Preston Road, Dominion Plaza, Suite 420
Dallas, Texas 75252. The mailing
envelope should contain a clear notation indicating that the enclosed letter is
a Stockholder-Board Communication. All such letters should identify the
author as a security holder, and, if the author desires for the communication
to be forwarded to the entire Board of Directors or one or more specified
28
Table of Contents
directors,
the author should so request, in which case the Chairman will arrange for it to
be so forwarded unless the communication is irrelevant or improper. Concerns
relating to accounting, internal control over financial reporting or auditing
matters will be immediately brought to the attention of the Chairman of the
Audit Committee.
Code of Ethics.
We
have established a Code of Ethics for our chief executive officer, senior
finance officers and all other employees. A current copy of this code is
available on our web site at
www.clstholdings.com
. If we amend the Code of Ethics or grant
a waiver of a provision of the Code of Ethics, we will disclose such amendment
or waiver on our website within four business days following such amendment or
waiver. Such information will remain available on our website for at least
twelve months following the date of such disclosure.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Review, Approval or Ratification of Transactions with Related Persons.
Our Board of
Directors recognizes that related party transactions present a heightened risk
of conflicts of interest and/or improper valuation (or the perception thereof)
and therefore has adopted a policy within our Business Ethics Policy which
shall be followed in connection with all related party transactions involving
the Company. Our Business Ethics Policy can be found at our Internet website at
www.clstholdings.com
. Under this
policy, any Related Party Transaction shall be consummated or shall continue
only if:
1.
the Audit Committee shall approve or
ratify such transaction in accordance with the guidelines set forth in the
policy and if the transaction is on terms comparable to those that could be
obtained in arms length dealings with an unrelated thirty party;
2.
the transaction is approved by the
disinterested members of the Board of Directors; or
3.
the transaction involves compensation
approved by the Companys Compensation Committee.
For these purposes, a Related Party is:
·
a senior officer (which shall include at a minimum each vice president
and Section 16 officer) or director of the Company
·
a stockholder owning in excess of five percent of the Company (or its
controlled affiliates)
·
a person who is an immediate family member of a senior officer or
director
·
an entity which is owned or controlled by someone listed in 1, 2 or 3
above, or an entity in which someone listed in 1, 2 or 3 above has a
substantial ownership interest or control of such entity.
For these purposes, a Related Party Transaction is a transaction
between the Company and any Related Party (including any transactions requiring
disclosure under Item 404 of Regulation S-K under the Exchange Act), other
than:
·
transactions available to all employees generally
·
transactions involving less than $5,000 when aggregated with all
similar transactions.
The Board of Directors
has determined that the Audit Committee of the Board of Directors is best
suited to review and approve Related Party Transactions. Accordingly, at each
calendar years first regularly scheduled Audit Committee meeting, management
shall recommend Related Party Transactions to be entered into by the Company
for that calendar year, including the proposed aggregate value of such transactions
if applicable. After review, the Audit Committee shall approve or disapprove
such transactions and at each subsequently scheduled meeting, management shall
update the Audit Committee as to any material change to those proposed
transactions.
In the event management
recommends any further Related Party Transactions subsequent to the first
calendar year meeting, such transactions may be presented to the Audit
Committee for approval or preliminarily
29
Table of Contents
entered into by
management subject to ratification by the Committee; provided, that if
ratification shall not be forthcoming, management shall make all reasonable efforts
to cancel or annul such transaction.
The Board of Directors
recognizes that situations exist where a significant opportunity may be
presented to management or a member of the Board of Directors that may equally
be available to the Company, either directly or via referral. Before such
opportunity may be consummated by a Related Party (other than an otherwise
unaffiliated 5% stockholder), such opportunity shall be presented to the Board
of Directors of the Company for consideration.
All
Related Party Transactions are to be disclosed in the Companys applicable
filings as required by the Securities Act of 1933, as amended (the
Securities Act
) and the Exchange
Act, and related rules. Furthermore, all Related Party Transactions shall be
disclosed to the Audit Committee of the Board of Directors and any material
Related Party Transaction shall be disclosed to the full Board of Directors.
Further, management shall assure that all Related Party Transactions are
approved in accordance with any requirements of the Companys financing
agreements.
Related Party Transactions.
CLST Asset I, LLC
On November 10,
2008, we, through CLST Asset I, LLC, a wholly owned subsidiary of CLST Financo, Inc.
(
Financo
),
which is one of our direct, wholly owned subsidiaries, entered into a purchase
agreement to acquire all of the outstanding equity interests of FCC Investment
Trust I (the
Trust
)
from a third party for approximately $41.0 million (the
Trust
Purchase Agreement
).
Our acquisition of the Trust was financed by approximately $6.1 million of cash
on hand and by a non-recourse, term loan of approximately $34.9 million by
Fortress Credit Co LLC (
Fortress
),
an affiliate of the seller of the Trust, pursuant to the terms and conditions
set forth in the credit agreement, dated November 10, 2008, among the
Trust, Fortress, FCC Finance, LLC (
FCC
), as
the initial servicer, Lyon Financial Services, Inc. (d/b/a U.S. Bank
Portfolio Services), as the backup servicer, and U.S. Bank National
Association, as the collateral custodian (the
Trust Credit Agreement
).
Pursuant to the Trust Credit
Agreement, Fair Finance Company, an Ohio corporation (
Fair
) may become the servicer if and only if there
occurs an event of a default by the then current servicer and only if Fair is
not then in default either as a borrower or as a servicer under any credit
facility to which Fortress or any of its affiliates is a party and no change of
control of Fair has occurred.
Timothy S. Durham, an officer, director
and stockholder of the Company, is Chief Executive Officer and Director of Fair
and is also a majority stockholder of Fair.
As of the date of this
proxy statement, FCC continues to be the servicer of the CLST Asset I
portfolio, and the Company is not aware that the servicer is in default under
the Trust Credit Agreement. Because Fair
is not currently acting as the servicer of CLST Asset I and Fair could only
become a servicer upon certain defaults by the current servicer, it is not
currently anticipated that Fair will have a direct or indirect material
interest in the Trust Credit Agreement.
The servicing fee payable to the servicer in any given year under the
Trust Credit Agreement is based upon a service fee rate of 1.5% and the
aggregate outstanding receivable balance.
CLST Asset III, LLC
Effective February 13,
2009, we, through CLST Asset III, LLC (
CLST
Asset III
), a newly formed, wholly owned subsidiary of Financo,
which is one of our direct, wholly owned subsidiaries, purchased certain
receivables, installment sales contracts and related assets owned by
Fair
, James F. Cochran, Chairman and Director
of Fair, and by Timothy S. Durham, Chief Executive Officer and Director of Fair
and an officer, director and stockholder of our Company (the
Fair
Purchase Agreement
). Messrs. Durham
and Cochran own all of the outstanding equity of Fair. In return for assets
acquired under the Fair Purchase Agreement, CLST Asset III paid the sellers
total consideration of $3,594,354 as follows:
(1)
cash in the amount of $1,797,178 of which $1,417,737
was paid to Fair, $325,440 was paid to Mr. Durham and $54,000 was paid to Mr. Cochran,
30
Table of Contents
(2)
2,496,077 newly issued shares of our common stock at a
price of $0.36 per share, of which 1,969,077 shares of Common Stock were issued
to Fair, 452,000 shares of Common Stock were issued to Mr. Durham and
75,000 shares of Common Stock were issued to Mr. Cochran and
(3)
six promissory notes (the
Notes
) issued by CLST Asset III in an aggregate
original stated principal amount of $898,588, of which two promissory notes in
an aggregate original principal amount of $708,868 were issued to Fair, two
promissory notes in an aggregate original principal amount of $162,720 were
issued to Mr. Durham and two promissory notes in an aggregate original
principal amount of $27,000 were issued to Mr. Cochran.
We received a
fairness opinion of Business Valuation Advisors (
BVA
) stating that BVA is of the opinion that the
consideration paid by us pursuant to the Fair Purchase Agreement is fair, from
a financial point of view, to our nonaffiliated stockholders. A copy of
the fairness opinion was filed as an exhibit to our Current Report on Form 8-K
filed with the SEC on February 20, 2009. The shares of Common Stock
were issued by us in a transaction exempt from registration pursuant to Section 4(2) of
the Securities Act. As additional inducement for CLST Asset III to enter
into the Fair Purchase Agreement, Fair agreed to use its best efforts to
facilitate negotiations to add CLST Asset III or one of its affiliates as a
co-borrower under one of Fairs existing lines of credit with access to at
least $15,000,000 of credit for our own purposes. To date we have not been
added as a co-borrower.
Substantially all
of the assets acquired by CLST Asset III are in one of two portfolios.
Portfolio A is a mixed pool of receivables from several asset classes,
including health and fitness club memberships, resort memberships, receivables
associated with campgrounds and timeshares, in-home food sales and services,
buyers clubs, delivered products and home improvements and tuitions.
Portfolio B is made up entirely of receivables related to the sale of tanning
bed products. At least initially, Fair will continue to act as servicer
for these receivables. Fair will receive no additional consideration for
acting as servicer.
As of February 13,
2009, the portfolios of receivables acquired pursuant to the Fair Purchase
Agreement collectively consisted of approximately 3,000 accounts with an
aggregate outstanding balance of approximately $3,709,500 and an average
outstanding balance per account of approximately $1,015 for Portfolio A and
approximately $5,740 for Portfolio B. As of February 13, 2009, the
weighted average interest rate of the portfolios exceeded 18%. The
sellers are required to repurchase any accounts, for the outstanding balance
(at the time of repurchase) of such account plus interest accrued thereon, that
do not satisfy certain specified eligibility requirements set out in the Fair
Purchase Agreement. Additionally, each of the sellers is required to
jointly and severally pay CLST Asset III, up to the aggregate stated principal
amount of the Notes issued to such seller, the outstanding balance of any
receivable that becomes a defaulted receivable within the parameters of the
Fair Purchase Agreement.
The Notes issued
by CLST Asset III in favor of the sellers are full-recourse with respect to CLST
Asset III and are unsecured. The three Notes relating to Portfolio A (the
Portfolio A Notes
)
are payable in 11 quarterly installments, each consisting of equal principal
payments, plus all interest accrued through such payment date at a rate of 4.0%
plus the LIBOR Rate (as defined in the Portfolio A Notes). The three
Notes relating to Portfolio B (the
Portfolio
B Notes
) are payable in 21 quarterly installments,
each consisting of equal principal
payments, plus all interest accrued through such payment date at a rate of 4.0%
plus the LIBOR Rate (as defined in the Portfolio B Notes).
For the six months
ended May 31, 2009, Fair remitted to CLST Asset III approximately
$707,000.
During the second quarter of 2009 we began
implementing the servicing, collection and other procedures relating to
management of CLST Asset III contemplated by the agreements between us and the
servicer of the portfolio. The implementation of those procedures required
several meetings with the servicer and was not fully complete in the second
quarter of 2009. We expect the reporting, collection and other procedures
contemplated in our agreements with the servicer to be fully implemented during
the third quarter of 2009 and do not foresee any difficulties in doing so. As
previously mentioned, Fair is the servicer of the CLST Asset III portfolio and
is an affiliate of Mr. Durham.
31
Table of Contents
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of
the Exchange Act requires our directors and executive officers, and persons who
own more than 10% of a registered class of our equity securities, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission, or the SEC. Such persons are required by
SEC regulation to furnish us with copies of all Section 16(a) forms
they file.
Based solely on our review of the copies of such forms
received by us with respect to 2008, or written representations from certain
reporting persons, we believe that all filing requirements applicable to our
directors, executive officers and persons who own more than 10% of a registered
class of our equity securities have been complied with during fiscal 2008.
However, subsequent to fiscal 2008, the Red Oak Group, which reported it was
the beneficial owner of 4,561,554 shares of our common stock in a
Schedule 13D filed with the SEC on February 18, 2009, as amended by
an Amended Schedule 13D filed with the SEC on March 4, 2009, did not
timely file a Form 4 with respect to acquisitions of our stock on February 10,
2009, February 11, 2009, February 12, 2009 and February 13,
2009. Please refer to Certain Background Information Litigation with the Red
Oak Group above for more information regarding a lawsuit we filed against the
Red Oak Group on February 13, 2009 and a derivative lawsuit filed by the
Red Oak Group against Messrs. Kaiser, Durham and Tornek on March 2,
2009. Also subsequent to fiscal 2008, Mr. Tornek, one of our directors, did not
timely file a Form 4 with respect to acquisitions of our stock on September 17,
2009.
32
Table of Contents
EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table sets forth certain information
regarding compensation earned by all individuals serving as our Chief Executive
Officer during fiscal year 2008 and our two most highly compensated executive
officers (other than the Chief Executive Officer) who served as executive
officers during fiscal year 2008 (the
Named Executive Officers
),
for each of the last two fiscal years.
Name and Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)(4)
|
|
Option
Awards
($)(4)
|
|
Nonequity
incentive
plan
compensation
($)
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
All other
compensation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Kaiser, Chief Financial Officer and Chief Executive Officer (1)
|
|
2008
|
|
$
|
240,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,000
|
(2)
|
$
|
261,000
|
|
|
|
2007
|
|
$
|
295,250
|
|
|
|
$
|
627,500
|
(1)
|
$
|
5,300
|
|
N/A
|
|
N/A
|
|
$
|
3,823,500
|
(3)
|
$
|
4,751,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Mr. Kaiser served as President and
Chief Executive Officer until March 30, 2007, when he resigned in
connection with the completion of sale of the Companys United States and
Miami-based Latin American operations. Mr. Kaiser served as Chairman of
the Board of Directors until April 17, 2007 and again from August 7,
2007 until September 11, 2009. Mr. Kaiser was subsequently reelected
as Chief Executive Officer and elected as Chief Financial Officer on September 25,
2007.
(2)
Includes Board of Director Fees of
$21,000.
(3)
Includes Company matching contributions
to Mr. Kaisers 401(k) plan of $11,250, Change of Control payments in
2007 of $3.6 million and Board of Director Fees of $25,792. On August 28,
2007, the Board of Directors authorized the retention of Mr. Kaiser as a
consultant to the Company for the sum of $20,000 per month, on a month-to-month
basis, terminable at will by either party. For the year ended November 30,
2007, Mr. Kaiser received $84,000 in consultant payments. As of January 1,
2008, Mr. Kaiser became an employee of the Company.
(4)
The amounts reported in the Stock Awards
and Option Awards columns reflect the dollar amount, without any reduction for
risk of forfeiture, recognized for financial reporting purposes for the fiscal
year ended November 30, 2008 and 2007 of awards of stock options and
restricted stock or restricted stock units to the Named Executive Officer,
calculated in accordance with the provisions of Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment (
SFAS 123(R)
), and were
calculated using certain assumptions, as set forth in footnote 1 to our audited
financial statements for the fiscal year ended November 30, 2008 and 2007,
included herein. These amounts include amounts from awards granted in and prior
to 2006.
33
Table of Contents
Outstanding Equity Awards at Fiscal
Year End November 30, 2008.
The following
table provides information concerning unexercised options, stock that has not
vested and equity incentive plan awards for each of the Named Executive
Officers as of November 30, 2008.
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
securities
underlying
unexercised
options (#)
exercisable
|
|
Number of
securities
underlying
unexercised
options (#)
unexercisable
|
|
Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options (#)
|
|
Option
exercise
price ($)
|
|
Option
expiration
date
|
|
Number
of shares
or units
of stock
that have
not vested
(#)
|
|
Market
value of
shares of
units of
stock
that have
not
vested ($)
|
|
Equity
incentive
plan
awards:
Number of
unearned
shares,
units or
other
rights that
have not
vested (#)
|
|
Equity
incentive plan
awards:
Market or
payout value
of unearned
shares, units
or other rights
that have not
vested
|
|
Robert
A. Kaiser, Chief Financial Officer and Chief Executive Officer
|
|
80,000
|
(1)
|
|
|
|
|
$
|
4.60
|
|
12/21/2011
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(1)
|
|
|
|
|
$
|
5.45
|
|
1/22/2013
|
|
|
|
|
|
|
|
|
|
(1)
The Companys former 1993 Plan terminated
on December 3, 2003. However, Mr. Kaiser currently has exercisable
options that were granted under the 1993 Plan Mr. Kaiser was granted
options Plan to purchase 80,000 shares of the Companys common stock on December 12,
2001, and 50,000 shares of the Companys common stock on January 22, 2003.
Each of these options vested with respect to 25% of the shares covered thereby
on each of the first four anniversaries of the date of grant and expires ten
years following the date of grant. The exercise price of each option was equal
to the fair market value of the common stock on the date of grant.
Compensation
of Executive Officers.
Employment
Contracts and Termination of Employment and Change in Control Arrangements.
The Company
maintained an employment agreement with Mr. Kaiser (the
Agreement
) prior to March 30,
2007. In connection with the sale of the Companys United States and
Miami-based Latin American operations, the related sale agreement required as a
condition of closing that the Company pay all amounts due Mr. Kaiser under
his Agreement with the Company, including payments due as a result of a change
in control of the Company resulting from the sale. To receive those payments, Mr. Kaisers
employment with the Company had to be terminated. Although Mr. Kaiser
would have preferred to remain as Chief Executive Officer and President of the
Company after the closing until he believed he had fulfilled the
responsibilities of those positions, he agreed to resign on March 30,
2007, so that the closing could be completed. Mr. Kaiser continued to
serve on the Board of Directors throughout 2007, including after his election
to the Board of Directors on August 7, 2007. On August 7, 2007, Mr. Kaiser
was appointed Chairman of the Board and served until September 11, 2009,
at which time Timothy S. Durham was appointed Chairman of the Board. On August 28,
2007, the Board of Directors authorized the retention of Mr. Kaiser as a
consultant to the Company for a sum of $20,000 a month on a month-to-month
basis, terminable at will by either party. On September 25, 2007, in
addition to his duties as Chairman, he was appointed Chief Executive Officer,
Chief Financial Officer, and Treasurer. As of January 1, 2008, Mr. Kaiser
is now an employee of the Company and receives $20,000 per month.
Compensation
of Directors.
The following table
provides information concerning compensation of the Companys directors for the
fiscal year ended November 30, 2008. All compensation received by Mr. Kaiser
for fiscal 2008 that is as a result of his membership on the Board of Directors
is reflected in the Summary Compensation Table above.
34
Table of Contents
Name
|
|
Fees
earned or
paid in
cash ($)
|
|
Stock
awards
($)
|
|
Option
awards
($)
|
|
Non-equity
incentive plan
compensation
($)
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
All other
compensation
($)
|
|
Total ($)
|
|
Timothy S. Durham
|
|
$
|
17,750
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
|
$
|
17,750
|
|
Manoj Rajegowda (1)
|
|
$
|
17,250
|
|
|
|
|
|
N/A
|
|
N/A
|
|
|
|
$
|
17,250
|
|
(1)
On February 24, 2009, our director and member of
our Audit Committee, Manoj Rajegowda, tendered his resignation as a member of
our Board of Directors, effective immediately.
Historically, we
issued shares of restricted stock to our employees and executive officers
pursuant to our 2003 Long-Term Incentive Plan (the
2003
Plan
). The number of shares to be granted under the 2003 Plan
was determined by the Board of Directors at the time of the grant based upon
the pool of shares then available for grant. The awarded shares vested at the
rate of 33
1
/
3
%
per year on each anniversary date of grant and were subject to such other terms
and conditions as may be contained in the form of restricted stock award
agreement generally used by the Company at the time of grant. From November 30,
2006 until September 25, 2007, each non-employee director who was then
serving as such received a grant of 4,500 shares of restricted stock. At a
meeting of the Board of Directors on September 25, 2007, the Board of
Directors unanimously resolved to terminate the Companys 2003 Plan due to the
reduction in the Companys workforce. As a result of the termination of the 2003
Plan, all outstanding options to purchase the equity securities of the Company
issued thereunder were terminated as well. Therefore, there are currently no
outstanding options to purchase the Companys securities under the 2003 Plan.
Furthermore, no options or restricted stock were granted to directors during
fiscal year 2008.
Subsequent to fiscal 2008, on December 1, 2008,
our Board of Directors approved the Companys 2008 Long Term Incentive Plan.
Effective September 11, 2009, the Board amended and restated the 2008 Long
Term Incentive Plan to decrease the number of shares of common stock of the
Company that may be issued under the 2008 Long Term Incentive Plan from
20,000,000 to 2,000,000. In Proposal No. 3 of this proxy statement, the
Board seeks the ratification of our stockholders of the 2008 Long Term
Incentive Plan, as amended and restated, and in Proposal No. 5, the Board
requests stockholders to vote against the Red Oak Groups proposal to disapprove
the 2008 Long Term Incentive Plan. As amended and restated, the 2008 Long Term
Incentive Plan, which is administered by the Board of Directors, permits the
grant of restricted stock, stock options and other stock-based awards to
employees, officer, directors, consultants and advisors of the Company and its
subsidiaries. The 2008 Plan provides that the administrator of the plan may
determine the terms and conditions applicable to each award, and each award
will be evidenced by a stock option agreement or restricted stock agreement.
The 2008 Plan will terminate on December 1, 2018.
In addition, on December 1,
2008 our Board of Directors approved the grant of 300,000 shares of restricted
stock to each of Timothy S. Durham, Robert A. Kaiser and Manoj Rajegowda.
Subsequently, on February 24, 2009, Mr. Rajegowda forfeited all stock
issuances provided to him during the course of his Board of Directors
membership in connection with his resignation from the Board of Directors. Of
each restricted stock grant, 100,000 shares vested on the date of grant, and the
remaining 200,000 of the shares vest in two equal annual installments on each
anniversary of the date of grant. The restricted stock becomes 100% vested
if any of the following occurs: (i) the participants death or (ii) the
disability of the Participant while employed or engaged as a director or
consultant by the Company. On March 5, 2009, our Board of Directors
approved the grant of 300,000 shares of restricted stock to David Tornek, of
which 100,000 shares vested on the date of grant, and the remaining 200,000 of
the shares vest in two equal annual installments on each anniversary of the
date of grant.
Each of our
directors receives an annual retainer of $10,000. In addition, each director
receives $750 per Board of Directors meeting that he is present or $500 if he
participates telephonically.
All directors of
the Company are entitled to reimbursement of their reasonable out-of-pocket
expenses in connection with their travel to, and attendance at, meetings of the
Board of Directors or committees thereof. There were no other arrangements
pursuant to which any director was compensated for any service provided as a
director during fiscal 2008, other than as set forth above.
35
Table of Contents
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
We are asking the stockholders to ratify the Audit
Committees appointment of Whitley Penn LLP as our independent registered
public accountants for the fiscal year ending November 30, 2009. Whitley
Penn LLP is a registered public accounting firm with the Public Accounting
Oversight Board (
PCAOB
), as required by the
Sarbanes-Oxley Act of 2002 and the rules of the PCAOB. Although
ratification of the appointment of the independent registered public
accountants is not required by law, the Audit Committee and the Board of
Directors believe that stockholders should be given the opportunity to express
their views on the subject. In the event the stockholders fail to ratify the
appointment, the Audit Committee will reconsider this appointment. Ultimately,
the Audit Committee retains full discretion and will make all determinations
with respect to the appointment of independent registered public accountants,
whether or not the Companys stockholders ratify the appointment. Even if the
appointment is ratified, the Audit Committee, in its discretion, may direct the
appointment of different independent registered public accountants at any time
during the year if the Audit Committee determines that such a change would be
in the Companys and its stockholders best interests.
Ratification requires the affirmative vote of the
majority of the shares of the Companys common stock present or represented and
entitled to vote on the matter at the Annual Meeting. Unless otherwise
instructed, the enclosed proxy will be voted
FOR
ratification of the appointment of Whitley Penn LLP.
Representatives of
Whitley Penn LLP
will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions from stockholders.
Effective August 31, 2007, the Audit Committee
engaged Whitley Penn LLP as our
principal independent registered public accountants following the resignation
of Grant Thornton LLP, as more fully described below.
Resignation
of Grant Thornton LLP.
As disclosed in our Form 8-K
filed with the SEC on September 4, 2007, we received a letter from Grant
Thornton LLP (
Grant Thornton
) on August 28,
2007 stating that Grant Thornton resigned as the independent registered public
accounting firm of CLST Holdings, Inc.
Grant Thorntons reports
on our consolidated financial statements for each of the fiscal years ended November 30,
2006 and 2005 did not contain an adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years
ended November 30, 2006 and 2005 and through August 28, 2007, there
were no disagreements with Grant Thornton on any matter of accounting principle
or practice, financial statement disclosure or auditing scope or procedure
that, if not resolved to Grant Thorntons satisfaction, would have caused them
to make references to the subject matter in connection with their reports of
our consolidated financial statements for such periods.
During the fiscal years
ended November 30, 2006 and 2005 and through August 28, 2007, there
were no reportable events within the meaning of Item 304(a)(1)(v) of
Regulations S-K, except for the material weaknesses in internal control
over financial reporting described in the following paragraph.
In our Annual Report on Form 10-K
for the year ended November 30, 2005, we reported that we had the
following material weaknesses in our internal controls:
·
Lack of sufficient awareness
and formal communication of accounting policies and procedures, resulting in
the inconsistent application of and adherence to corporate policies; and
·
Lack of timeliness and
precision of the review of detailed account reconciliations and supporting
documentation in the North American and Corporate segments that encompass the
consolidation and financial reporting process.
36
Table of Contents
Grant Thorntons report
on the Companys internal control over financial reporting stated that based on
the effect of these material weaknesses on the achievement of the objectives of
the control criteria, we had not maintained effective internal control over
financial reporting as of November 30, 2005.
We filed a letter from Grant Thornton dated August 30,
2007, addressed to the SEC, stating their agreement with the above statements,
in a Current Report on Form 8-K dated September 4, 2007.
Engagement
of Whitley Penn LLP.
As further disclosed in
our Form 8-K filed with the SEC on September 4, 2007, on August 31,
2007 we engaged Whitley Penn LLP (
Whitley Penn
)
as our new principal independent registered public accounting firm to audit our
financial statements for the fiscal year ended November 30, 2007. The
decision to engage Whitley Penn was approved by our Board of Directors. On the
same date, Whitley Penn advised the Company that it was accepting the position
as the Companys new principal independent registered public accounting firm
for the year ending November 30, 2007.
During the fiscal years
ended November 30, 2006 and 2005 and through August 31, 2007, we did
not consult with Whitley Penn regarding (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on our financial statements; or (ii) any
matter that was either the subject of a disagreement or reportable event per
Item 304(a)(2)(ii) of Regulation S-K.
Fees to Independent Registered Public Accounting
Firm for Fiscal 2008 and 2007.
The following
table summarizes the fees billed by Whitley Penn LLP for services rendered
during the fiscal years ended November 30, 2008 and November 30, 2007
(in thousands).
|
|
2008
|
|
2007
|
|
Audit
Fees(1)
|
|
$
|
115
|
|
$
|
139
|
|
Audit-Related
Fees(2)
|
|
18
|
|
26
|
|
Tax
Fees(3)
|
|
9
|
|
2
|
|
All
Other Fees(4)
|
|
25
|
|
|
|
TOTAL
|
|
$
|
167
|
|
$
|
167
|
|
(1)
Audit Fees includes fees and expenses
billed for the audit of the Companys annual financial statements and review of
financial statements included in the Companys quarterly reports on Form 10-Q,
and other regulatory filings.
(2)
Audit-Related Fees includes fees billed
for services that are related to the performance of the audit or review of the
Companys financial statements (which are not reported above under the caption Audit
Fees). For fiscal 2007 and 2008, the amount relates to an audit of the Companys
401k plan.
(3)
Tax fees relate to various tax planning
consultations.
(4)
Other fees in 2008 relate to the
Companys acquisition of FCC Investment Trust I.
The Audit Committee has
considered whether the provision of non-audit services by Whitley Penn is
compatible with maintaining the principal accountants independence, and has
determined that it is. The Audit Committee has sole authority to engage and
determine the compensation of the Companys independent registered public
accountants. Pre-approval by the Audit Committee is required for any engagement
of Whitley Penn, subject to certain de minimis exceptions. Annually, the Audit
Committee pre-approves services to be provided by Whitley Penn.
All of the services described herein were approved by the
Audit Committee pursuant to its pre-approval policies.
37
Table of Contents
None of the hours expended
on the independent registered public accounting firms engagement to audit our
financial statements for the most recent fiscal year were attributed to work
performed by persons other than the independent registered public accounting
firms full-time permanent employees.
The
Board of Directors
recommends that you
vote FOR ratification of the appointment
of Whitley Penn LLP as the Companys independent
registered public accountants
.
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
The
Audit Committee does not prepare financial statements or attest to their
accuracy. The preparation, presentation and integrity of the Companys
financial reports are the responsibility of management. Whitley Penn
LLP, the Companys independent
registered public accountants
for 2008, are responsible for auditing
the Companys financial statements in accordance with standards of the Public
Company Accounting Oversight Board (United States) and expressing an opinion on
their conformity to accounting principles generally accepted in the United
States of America.
In
performance of its oversight function, the Audit Committee reviewed and
discussed the audited financial statements of the Company with management and
the independent
registered public accountants
. It also provided oversight of the
independent
registered public accountants
, the Companys internal audit function
and the Companys disclosure controls and procedures and internal control over
financial reporting. In performing these duties, the Audit Committee met a
total of two times during fiscal 2008 with management and the independent
registered
public accountants
,
and internal audit representatives attended one of those meetings.
The
Audit Committee reviewed the written disclosures and the letter from Whitley Penn
LLP required by Public Company Accounting Oversight Board Ethics and
Independence Rule 3526, Communications with Audit Committees Concerning
Independence. The Audit Committee also discussed with management, internal
audit and the independent
registered public accountants
the quality and adequacy of the Companys
disclosure controls and procedures and internal control over financial
reporting and the audit scope and plans for audits performed by internal audit
and the independent
registered public accountants
.
The
Audit Committee discussed with the independent
registered public
accountants
all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as adopted by
the Public Company Accounting Oversight Board in Rule 3200T, as amended by
Statement 90, as well as other regulations and standards (Audit Committee
Communications) and, with and without management present, discussed and
reviewed the results of the independent
registered public
accountants
examination of the financial statements. The Audit Committee also discussed
with internal audit and management significant items that resulted from
internal audit examinations.
Based
on the reviews and discussions referred to above with management and the
independent
registered public accountants
, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Companys Annual Report on Form 10-K for the year ended November 30,
2008.
|
AUDIT COMMITTEE
|
|
|
|
Timothy S.
Durham
|
|
Robert A. Kaiser
|
|
David Tornek
|
38
Table of Contents
PROPOSAL NO. 3
RATIFICATION
OF THE COMPANYS
AMENDED AND
RESTATED 2008 LONG TERM INCENTIVE
PLAN
We are seeking
ratification of the Companys Amended and Restated 2008 Long Term Incentive
Plan (the
2008 Plan
) by our
stockholders. The effectiveness of our 2008 Plan is not subject to stockholder
approval. The following discussion is qualified in its entirety by the full
text of our 2008 Plan, a copy of which is attached as
Annex A
to these
proxy materials.
On December 1, 2008, our Board of Directors
approved the 2008 Long Term Incentive Plan. The 2008 Plan has a term of 10
years and is administered by our Board, unless and until the Board delegates
administration to a committee of the Board. Initially, the 2008 Long Term
Incentive Plan provided that the aggregate number of shares of common stock of
the Company that could be issued under the 2008 Long Term Incentive Plan was
20,000,000 shares. However, effective September 11, 2009, our Board
amended and restated the 2008 Long Term Incentive Plan to reduce the aggregate
number of shares of common stock of the Company that may be issued under the
2008 Plan from 20,000,000 shares to 2,000,000 shares. You are being asked to
ratify the Amended and Restated 2008 Long Term Incentive Plan.
Awards
under the 2008 Plan.
Pursuant to the 2008
Plan, the Board may grant to eligible recipients, which include all employees,
officer, directors, consultants and advisors of the Company and its
subsidiaries, awards of restricted stock, stock options and other stock-based
awards. Restricted Stock is an award of the Companys common stock that is
subject to conditions or terms such as vesting, continuous employment or
service for a period of time, or the satisfaction of designated performance
goals or criteria. Such terms and conditions will be determined by the Board.
We have two employees, two officers and currently three directors who are
eligible to receive awards under the 2008 Plan. After the Annual Meeting, we
will have four directors who are eligible to receive awards under the 2008
Plan.
Awards of options have
varying terms, as determined by the Board. The price for each share of Common
Stock purchased pursuant to the options is determined by the Board on the date
of grant. The exercise price per share is the fair market value of our Common
Stock on the date of grant (or if the grant is for incentive stock options for
an employee who is a 10% stockholder, 110% of fair market value on the date of
grant). Payment for stock options can be made by check payable to the Company,
by a promissory note, through a brokers sale, or with any combination of the
foregoing.
Termination
of Relationship with Company.
If a recipients
employment, director or consulting arrangement with the Company is terminated,
such recipient may exercise any award within such period of time ending on the
earlier of (1) the date three months following the date of termination (or
such other period as may be specified by the Board in the award agreement), but
only to the extent such award was exercisable immediately prior to such termination
or (2) the expiration of the term of the award. However, if the recipients
employment, director or consulting arrangement with the Company is terminated
voluntarily by the recipient or is terminated by the Company for cause (as
defined in the 2008 Plan or in any other written employment, director or
consulting agreement between the recipient and the Company), all awards held by
the recipient shall terminate as of the date of termination (whether or not
vested) unless otherwise determined by the Board.
Acceleration
of Vesting and Other Terms.
The Board may provide
that any options shall become immediately exercisable in full or in part, that
any restricted stock awards shall be free of some or all restrictions, or that
any other stock-based awards may become exercisable in full or in part or free
of some or all restrictions or conditions, or otherwise realizable in full or
in part. In the event of the acceleration of the one or more outstanding
options, the Board may provide, as a condition to exercising such options, that
the common stock or other substituted consideration, including cash, as to
which
39
Table of Contents
exercisability has been
accelerated shall be restricted and subject to forfeiture back to the Company
upon termination of employment or other relationship.
Amendment
of the 2008 Plan.
The Board may amend the
2008 Plan but an amendment shall not be effective unless it is approved by the
Companys stockholders to the extent such approval is necessary by law or under
securities exchange listing requirements. The 2008 Plan provides that at the
time of such amendment, the Board shall determine, upon advice from counsel,
whether such amendment will be contingent on stockholder approval.
Federal Income Tax
Consequences
.
The following is a discussion of certain United States
federal income tax consequences that may arise with respect to the Plan. The discussion is not a complete analysis of
all federal income tax consequences, and does not cover all specific
transactions which may occur. The
discussion is limited to United States persons who hold their shares as capital
assets, however additional rules may apply to certain United States
persons that are not discussed herein.
Incentive Stock Options.
A recipient of an incentive stock option should not
recognize compensation income either upon the grant of the option or upon its
exercise (unless the recipient is subject to the alternative minimum tax). If
the recipient holds the stock acquired upon exercise of an incentive stock
option (the ISO Shares) for more than one year after the date the option was
exercised and for more than two years after the date the option was granted,
the recipient generally will recognize long-term capital gain or loss upon the
disposition of such ISO Shares. This gain or loss would be equal to the
difference between the amount realized upon the disposition of the ISO Shares
and the exercise price.
If the recipient disposes of ISO Shares prior to the
expiration of either required holding period described above, the gain
recognized upon such disposition should be treated as compensation to the
recipient, and would be subject to federal income taxation at ordinary rates,
up to the difference between the fair market value of the ISO Shares on the
date of exercise (or the amount realized on a sale of such shares, if less) and
the option exercise price. Any additional gain above and beyond such amount
should be treated as capital gain, and may be long-term capital gain depending
upon the length of time the ISO Shares were held by the recipient.
Non-Qualified Stock Options.
A recipient of a non-qualified stock option should not
recognize any taxable income at the time a non-qualified stock option is
granted, or upon its vesting. Upon exercise of a non-qualified stock option,
however, the gain recognized upon such disposition should be treated as
compensation to the recipient, and would be subject to federal income taxation
at ordinary rates, up to the difference between the fair market value of the
shares on the date of exercise and the option exercise price. Upon resale of the shares by the recipient,
any subsequent appreciation or depreciation in the value of the shares should
be treated as capital gain or loss.
Restricted Stock.
A recipient should generally not recognize any taxable
income at the time restricted stock is granted.
Instead, upon vesting of such restricted stock, the recipient would in
include in income as compensation the fair market value of such stock, reduced
by any amount paid for such stock. Any future appreciation with respect to such
stock would be capital in nature, with a holding period for long-term capital
gain purposes beginning on the date of vesting.
A recipient may elect under section 83(b) of the Internal Revenue
Code to have such compensation income recognized at the time he or she
initially receives the restricted stock, based on the then fair market value of
the stock. The ultimate disposition of
such stock, including a forfeiture, would result in a capital gain or loss to
the recipient, and the holding period for such stock for long-term capital gain
purposes would start as of the date the 83(b) election was made.
40
Table of Contents
Upon the recognition of compensation income by a
recipient who is an employee, as set forth above, the Company is required to
withhold FICA, Medicare, and federal income taxes. Additionally, with respect
to non-employee recipients, certain withholding obligations on the part of the
Company may apply.
Awards made to recipients under the Plan may be subject
to other federal income taxes, such as the alternative minimum tax, as well as
state and local taxes. The Company will
comply with all withholding requirements whether for federal, state or local
purposes.
The Company should be entitled to a federal income tax
deduction with respect to all amounts treated by recipients as compensation
income, as set forth above,
provided
that,
among other things, such amount is reasonable, is an ordinary and necessary
business expense, is not an excess parachute payment within the meaning of Section 280G
of the Code and is not disallowed by the $1 million limitation on certain
executive compensation under Section 162(m) of the Code. Section 162(m) denies a deduction
to any publicly-held corporation for compensation paid to a covered employee
in a taxable year to the extent that the compensation paid to such an employee
exceeds $1 million. It is possible that compensation attributable to awards
under the Plan, when combined with all other types of compensation received by
a covered employee from the Company, may cause this limitation to be exceeded
in any particular year. The deduction to
the Company, if available, would be available in the same year in which the
recipient recognizes income for federal income tax purposes.
Section 409A of the Code imposes additional tax
and interest charges on recipients who receive certain deferred compensation
that does not meet the requirements of Section 409A. It is intended that
awards under the Plan meet the requirements of Section 409A, but no
assurance can be made in this regard.
Issuances
under our Plans.
Our former 1993 Long-Term
Incentive Plan (the
1993
Plan
) terminated on December 3, 2003. However, as
disclosed in our Annual Report on Form 10-K, filed with the SEC on March 2,
2009, Mr. Kaiser currently has exercisable options that were granted under
the 1993 Plan. At a meeting of the Board of Directors on September 25,
2007, our Board unanimously resolved to terminate our 2003 Long-Term Incentive
Plan (the
2003 Plan
)
due to the reduction in the Companys workforce. As a result of the termination
of the 2003 Plan, all outstanding options to purchase the equity securities of
the Company issued thereunder were terminated as well. Therefore, there are no
currently outstanding options to purchase the Companys securities under the
2003 Plan.
Our 2008 Long Term Incentive Plan was adopted by the
Board on December 1, 2008, and subsequently amended and restated on September 11,
2009 to decrease the number of shares of common stock of the Company that may
be issued under the 2008 Plan from 20,000,000 to 2,000,000. On December 1,
2008, our Board approved the grant of 300,000 shares of restricted stock to
each of Timothy S. Durham, Robert A. Kaiser and Manoj Rajegowda. Of each restricted
stock grant, 100,000 shares vested on the date of grant and the remaining
200,000 of the shares vest in two equal annual installments on each anniversary
of the date of grant. Subsequently, on February 24, 2009, Mr. Rajegowda
forfeited all stock issuances provided to him during the course of his Board
membership in connection with his resignation from the Board. Subsequently on March 5,
2009, our Board approved the grant of 300,000 shares of restricted stock to
David Tornek. Of each restricted stock grant, 100,000 shares vested on the date
of grant and the remaining 200,000 of the shares vest in two equal annual
installments on each anniversary of the date of grant. Other than the
restricted stock issued to our directors, the Company has not granted any
options or other awards under the 2008 Plan.
41
Table of Contents
The following table
provides the number of securities to be issued upon the exercise of outstanding
options, warrants and rights under our 2008 Plan and as of September 11,
2009:
Equity Compensation Plan Information
Plan Category
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
|
|
Weighted-
average exercise
price of outstanding
options, warrants and
rights
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security
holders
|
|
130,000
|
|
$
|
4.93
|
|
0
|
|
Equity compensation plans not approved by security
holders
|
|
None
|
|
n/a
|
|
1,400,000
|
|
Total
|
|
130,000
|
|
$
|
4.93
|
|
0
|
|
The following table sets
forth, as of the Record Date, the number of shares of restricted stock received
or to be received by each of our named executive officers, all current
executive officers as a group, all current directors who are not executive
officers as a group, and all employees, including our current officers who are
not executive officers, as a group:
Name
|
|
Dollar
Value ($) (1)
|
|
Number
of Shares of Restricted
Stock Received or
To Be Received
|
|
Robert
A. Kaiser, Chief Executive Officer, President, Chief Financial Officer and
Treasurer
|
|
$
|
39,000
|
|
300,000
|
|
All
current executive officers, as a group
|
|
$
|
78,000
|
|
600,000
|
|
All
current directors who are not executive officers, as a group
|
|
$
|
39,000
|
|
300,000
|
|
All
employees, including all current officers who are not executive officers, as
a group
|
|
N/A
|
|
N/A
|
|
(1)
Based on
a
closing sale price of $0.13
as reported on
the OTC market on September 10, 2009.
The Board of Directors recommends that you vote FOR
the ratification of our
Amended and Restated 2008 Long Term Incentive Plan.
42
Table of
Contents
THE RED OAK GROUP PROPOSALS
A
letter from the Red Oak Group dated August 24, 2009 (the
Red Oak Group Letter
), which states that the Red Oak Fund
beneficially owns 3,341,106 shares of our Common Stock, notified us that it
intends to submit certain proposals for stockholder vote at the Annual Meeting.
We have included the Red Oak Group proposals as Proposals No. 4 through No. 8
in this proxy statement in order to provide our stockholders with the ability
to vote For or Against or abstain from voting for any proposals made by the
Red Oak Group, as well as to vote For our director nominees and other
matters.
STOCKHOLDER
PROPOSAL NO. 4
STOCKHOLDER PROPOSAL REGARDING
COMPLETION OF DISSOLUTION
In
the Red Oak Group Letter, the Red Oak Group notified us that it intends to
submit the following proposal for stockholder vote at the Annual Meeting.
RESOLVED, that the stockholders hereby request the board of directors to
complete the dissolution approved at the stockholder meeting held in 2007.
The
Board
of Directors
recommends that you vote AGAINST
this proposal.
Though not required to do so, we are submitting this
stockholder proposal from the Red Oak
Group to our stockholders to allow our stockholders the chance to vote
on such proposal while still voting for our director nominees and other
matters.
Although the Company has
consistently disclosed that the plan of dissolution can be amended, modified or
abandoned by the Board, it still has no plan to do so. Further, the Company has
consistently disclosed, that in fulfilling its fiduciary duties, the Board
would give careful consideration to the strategic alternatives available to the
Company, with a view to maximizing stockholder value. Among other matters, the Company has
consistently disclosed that (1) the Board has been reviewing potential
acquisitions and the value of the Companys tax assets, (2) if the Board
determines that it is in the best interest of the Company to pursue an
acquisition, it will likely pursue a debt financing or equity issuance in order
to finance such acquisition, (3) it is unlikely the Board of Directors
will make any further distributions to the Companys stockholders under the plan
of dissolution while it considers the strategic alternatives available to the
Company and (4) it is possible that the Board of Directors will, in the
exercise of its fiduciary duty, elect to abandon the plan of dissolution for a
strategic alternative that it believes will maximize stockholder value. The Board believes that it is in the best
interest of the Company and its stockholders for the Company to proceed
carefully in assessing contingent liabilities and dissolving its international
subsidiaries in an orderly fashion. The Board has determined that it will
continue to determine and quantify its contingent liabilities and dissolve
entities in an orderly fashion and wait to file the certificate of dissolution
as allowed under the plan of dissolution and Delaware law. The Board has determined that, for these
reasons, filing the certificate of dissolution at this time would not be in the
best interest of the Company and its stockholders.
We expect that it will take
several years to implement the plan of dissolution because of the lengthy
process of obtaining sufficient information regarding all of our liabilities to
pay and appropriately provide for them as required under the plan of
dissolution. Given this and the time
necessary to complete the governmental requirements for dissolution, our Board
focused on ways to preserve the value of the Companys cash and other assets
pursuant to Section 3 of the plan of dissolution. Section 3 of the plan of dissolution states
that we may not engage in any business activities except to the extent
necessary to preserve the value of the Companys assets, wind up the Companys
affairs, and distribute the Companys assets.
As further described above under Certain Background
InformationIntroduction, our Board determined to acquire several portfolios
of receivables with the intention of generating a higher rate of return on our
assets than we were receiving on our cash and cash equivalent balances which
were held in money market accounts or short term certificates of deposit,
earning approximately 1% (current interest rates are now close to 0%). Our Board believed that each of these acquisitions
would provide a better investment return for our stockholders and better
preserves the value of our assets when compared to the low interest rates
available on our cash investments and other investment alternatives. We believe that the market for our portfolios
has recently worsened. However, we do believe that if needed, our portfolio
assets could be sold, if properly marketed, within the timeframe necessary to
complete the winding down of our Company prior to final dissolution of our
Company but our Board believes that such action at this time would not be in
the best interest of our Company or our stockholders.
43
Table of Contents
Therefore, we recommend that you vote Against this
Proposal No. 4.
STOCKHOLDER
PROPOSAL NO. 5
STOCKHOLDER PROPOSAL REGARDING
2008 LONG TERM INCENTIVE PLAN
In
the Red Oak Group Letter, the Red Oak Group notified us that it intends to
submit the following proposal for stockholder vote at the Annual Meeting.
RESOLVED, that the stockholders hereby disapprove the 2008 long term
incentive plan adopted by the board of directors and request the board of
directors not to issue any additional share grants or option grants under such
plan and request that the directors rescind their approval of such plan.
The
Board
of Directors
recommends that you vote AGAINST
this proposal.
Though not required to do so, we are submitting this
stockholder proposal from the Red Oak
Group to our stockholders to allow our stockholders the chance to vote
on such proposal while still voting for our director nominees and other
matters.
The
description of the 2008 Plan under Proposal No. 3 above is hereby
incorporated by reference. As described under Proposal No. 3, our Board
amended and restated the
2008 Long Term Incentive Plan to decrease the number of shares of common
stock authorized under the 2008 Long Term Incentive Plan from 20,000,000 to 2,000,000 and is seeking ratification
of the Amended and Restated 2008 Long Term Incentive Plan. Therefore, we recommend that you vote
Against this Proposal No. 5 and For Proposal No. 3.
If a negative vote results, we will not take
any action with respect to this Proposal.
STOCKHOLDER
PROPOSAL NO. 6
STOCKHOLDER
PROPOSAL REGARDING NOVEMBER 10, 2008 TRANSACTION
In
the Red Oak Group Letter, the Red Oak Group notified us that it intends to
submit the following proposal for stockholder vote at the Annual Meeting.
RESOLVED, that the stockholders hereby advise the board of directors
that they do not approve of the transaction purportedly entered into as of November 10,
2008 whereby CLST Asset I, LLC, a wholly owned indirect subsidiary of the
Company, entered into a purchase agreement to acquire the outstanding equity
interest in FCC Investment Trust I and request the directors to take any
available and appropriate action.
The
Board
of Directors
recommends that you vote AGAINST
this proposal.
Though not required to do so, we are submitting this
stockholder proposal from the Red Oak
Group to our stockholders to allow our stockholders the chance to vote
on such proposal while still voting for our director nominees and other
matters.
We expect that it will take
several years to implement the plan of dissolution because of the lengthy
process of obtaining sufficient information regarding all of our liabilities to
pay and appropriately provide for them as required under the plan of
dissolution. Given this and the time
necessary to complete the governmental requirements for dissolution, our Board
focused on ways to preserve the value of the Companys cash and other assets
pursuant to Section 3 of the plan of dissolution. Section 3 of the plan of dissolution states
that we may not engage in any business activities except to the extent
necessary to preserve the value of the Companys assets, wind up the Companys
affairs, and distribute the Companys assets.
As further described above under Certain Background
InformationIntroduction, our Board determined to acquire several portfolios
of receivables with the intention of generating a higher rate of return on our
assets than we were receiving on our cash and cash equivalent balances which
were held in money market accounts or short term certificates of deposit,
earning approximately 1% (current interest rates are now close to 0%). Our Board believed that each of these
acquisitions would provide a better investment return for our stockholders and
better preserves the value of our assets when compared to the low interest
rates available on our cash investments and other investment alternatives. We believe that the market for our portfolios
has recently worsened. However, we do believe that if needed, our portfolio
assets could be sold, if properly marketed, within the timeframe necessary to
complete the winding down of our Company prior to final dissolution of our
Company but our Board believes that such action at this time would not be in
the best interest of our Company or our stockholders.
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Furthermore,
it is unclear why the Red Oak Group claims in this proposal that the
transaction was purportedly entered into, as the transaction was definitively
entered into. It is also unclear what action the Red Oak Group views as
available and appropriate if our stockholders vote for this proposal. For all
of these reasons, we recommend that you vote Against this Proposal No. 6.
If a negative vote results, we will not take
any action with respect to this Proposal.
STOCKHOLDER
PROPOSAL NO. 7
STOCKHOLDER PROPOSAL REGARDING
DECEMBER 12, 2008 TRANSACTION
In
the Red Oak Group Letter, the Red Oak Group notified us that it intends to
submit the following proposal for stockholder vote at the Annual Meeting.
RESOLVED, that the stockholders hereby advise the board of directors
that they disapprove of the transaction purportedly entered into as of December 12,
2008 pursuant to which CLST Asset Trust II, an indirect wholly owned subsidiary
of the corporation, entered into a purchase agreement to acquire certain
receivables on or before February 28, 2009 and request the directors to
take any available and appropriate actions.
The
Board
of Directors
recommends that you vote AGAINST
this proposal.
Though not required to do so, we are submitting this
stockholder proposal from the Red Oak
Group to our stockholders to allow our stockholders the chance to vote
on such proposal while still voting for our director nominees and other
matters.
We expect that it will take
several years to implement the plan of dissolution because of the lengthy
process of obtaining sufficient information regarding all of our liabilities to
pay and appropriately provide for them as required under the plan of
dissolution. Given this and the time
necessary to complete the governmental requirements for dissolution, our Board
focused on ways to preserve the value of the Companys cash and other assets
pursuant to Section 3 of the plan of dissolution. Section 3 of the plan of dissolution states
that we may not engage in any business activities except to the extent
necessary to preserve the value of the Companys assets, wind up the Companys
affairs, and distribute the Companys assets.
As further described above under Certain Background
InformationIntroduction, our Board determined to acquire several portfolios
of receivables with the intention of generating a higher rate of return on our
assets than we were receiving on our cash and cash equivalent balances which
were held in money market accounts or short term certificates of deposit,
earning approximately 1% (current interest rates are now close to 0%). Our Board believed that each of these
acquisitions would provide a better investment return for our stockholders and
better preserves the value of our assets when compared to the low interest
rates available on our cash investments and other investment alternatives. We believe that the market for our portfolios
has recently worsened. However, we do believe that if needed, our portfolio
assets could be sold, if properly marketed, within the timeframe necessary to
complete the winding down of our Company prior to final dissolution of our
Company but our Board believes that such action at this time would not be in
the best interest of our Company or our stockholders.
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Furthermore,
it is unclear why the Red Oak Group claims in this proposal that the
transaction was purportedly entered into, as the transaction was definitively
entered into. It is also unclear what action the Red Oak Group views as
available and appropriate if our stockholders vote for this proposal. For all
of these reasons, we recommend that you vote Against this Proposal No. 7.
If a negative vote results, we will not take
any action with respect to this Proposal.
STOCKHOLDER
PROPOSAL NO. 8
STOCKHOLDER PROPOSAL REGARDING
FEBRUARY 13, 2009 TRANSACTION
In
the Red Oak Group Letter, the Red Oak Group notified us that it intends to
submit the following proposal for stockholder vote at the Annual Meeting.
RESOLVED, that the stockholders advise the board of directors that they
do not approve of the transaction purportedly entered into as of February 13,
2009 whereby CLST Asset III, LLC, an indirect wholly owned subsidiary of the
Company purchased certain receivables, installment contracts and related assets
owned by Fair Finance Company and request the directors to take any available
and appropriate actions.
The
Board
of Directors
recommends that you vote AGAINST
this proposal.
Though not required to do so, we are submitting this
stockholder proposal from the Red Oak Group to our stockholders to allow our
stockholders the chance to vote on such proposal while still voting for our
director nominees and other matters.
We expect that it will take
several years to implement the plan of dissolution because of the lengthy
process of obtaining sufficient information regarding all of our liabilities to
pay and appropriately provide for them as required under the plan of
dissolution. Given this and the time
necessary to complete the governmental requirements for dissolution, our Board
focused on ways to preserve the value of the Companys cash and other assets
pursuant to Section 3 of the plan of dissolution. Section 3 of the plan of dissolution states
that we may not engage in any business activities except to the extent
necessary to preserve the value of the Companys assets, wind up the Companys
affairs, and distribute the Companys assets.
As further described above under Certain Background
InformationIntroduction, our Board determined to acquire several portfolios
of receivables with the intention of generating a higher rate of return on our
assets than we were receiving on our cash and cash equivalent balances which
were held in money market accounts or short term certificates of deposit,
earning approximately 1% (current interest rates are now close to 0%). Our Board believed that each of these
acquisitions would provide a better investment return for our stockholders and
better preserves the value of our assets when compared to the low interest
rates available on our cash investments and other investment alternatives. We believe that the market for our portfolios
has recently worsened. However, we do believe that if needed, our portfolio
assets could be sold, if properly marketed, within the timeframe necessary to
complete the winding down of our Company prior to final dissolution of our
Company but our Board believes that such action at this time would not be in
the best interest of our Company or our stockholders.
Furthermore, it is unclear why the Red Oak Group
claims in this proposal that the transaction was purportedly entered into, as
the transaction was definitively entered into. It is also unclear what action
the Red Oak Group views as available and appropriate if our stockholders vote
for this proposal. For all of these reasons, we recommend that you vote
Against this Proposal No. 7.
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If a negative vote results, we will not take any
action with respect to this Proposal.
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STOCKHOLDER
PROPOSALS
Any stockholder of
ours meeting certain minimum stock ownership and holding period requirements
may present a proposal to be included in our proxy statement for action at the
Annual Meeting of stockholders to be held in 2010 pursuant to Rule 14a-8
of the Exchange Act. Such stockholder must deliver such proposal to our
secretary at our executive offices no later than June 29, 2010.
Stockholder
proposals to be presented at our 2010 Annual Meeting of stockholders that are
not to be included in our proxy statement must be received by us no later than
60 days prior to such Annual Meeting, in accordance with the procedures set
forth in our Amended and Restated Certificate of Incorporation, as amended;
except that, should less than 70 days notice or public disclosure of the date
such meeting be given or made to stockholders, such proposal, in order to be
timely, must be received no later than close of business on the tenth day
following the date on which such notice is mailed or such public disclosure is
made.
INCORPORATION
BY REFERENCE
With respect to
any future filings with the SEC into which this proxy statement is incorporated
by reference, the material under the heading Report of the Audit Committee of
the Board of Directors will not be incorporated into such future filings.
COST OF
SOLICITATION
We will bear the cost of the solicitation of proxies.
In addition to mail and e-mail, proxies may be solicited personally or by
telephone or facsimile, by our employees without additional compensation. We
will reimburse brokers and other persons holding stock in their names, or in
the names of nominees, for their expenses for forwarding proxy materials to
principals and beneficial owners and obtaining their proxies. As a result of
the potential proxy solicitation by the Red Oak Group, we may incur additional
costs in connection with our solicitation of proxies. We have hired Morrow &
Co., LLC (Morrow), 470 West Ave., Stamford, CT 06902 to assist us in the
solicitation of proxies for a fee of up to $67,500 plus out-of-pocket expenses.
Morrow expects that approximately 25 of its employees will assist in the
solicitation. Our expenses related to the solicitation of proxies from
stockholder
s this year will exceed those normally
spent for an Annual Meeting of
stockholder
s. Such costs are expected to aggregate
approximately $67,500. These additional solicitation costs are expected to
include the fee payable to our proxy solicitor; fees of outside counsel to
advise the Company in connection with a contested solicitation of proxies;
increased mailing costs, such as the costs of additional mailings of
solicitation material to
stockholder
s, including printing costs, mailing costs and the
reimbursement of reasonable expenses of banks, brokerage houses and other
agents incurred in forwarding solicitation materials to beneficial owners of our
common stock, as described above; and possibly the costs of retaining an
independent inspector of election. To date, we have incurred approximately
$32,500 of these solicitation costs.
HOUSEHOLDING
As permitted by
the Exchange Act, some brokers and other nominee record holders may deliver
only one copy of this proxy statement to stockholders residing at the same
address, unless such stockholders have notified the Company or their brokers or
other nominee record holders of their desire to receive multiple copies of the
proxy statement. Upon oral or written request, we will promptly deliver a
separate copy of the proxy statement to any stockholder residing at an address
to which only one copy was mailed. Stockholders residing at the same address
and currently receiving only one copy of the proxy statement may contact their
respective brokers or other nominee record holders or the Company to request
multiple copies in the future, and stockholders residing at the same address
and currently receiving multiple copies of the proxy statement may contact
their respective brokers or other nominee record holders or the Company to
request a single copy in the future. In any event, if you did not receive an
individual copy of this proxy statement or our annual report, we will send a
copy upon written request. All such requests of the Company should be sent to:
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CLST
Holdings, Inc.
17304 Preston Road, Dominion Plaza, Suite 420
Dallas, Texas 75252
Attention:
Chief Executive Officer
Phone:
(972) 267-0500
ADDITIONAL
INFORMATION AVAILABLE
Accompanying this proxy statement are copies of our
2008 Annual Report on Form 10-K and our Quarterly Reports on
Form 10-Q for the first and second quarters of 2009. The Annual Report and
Quarterly Reports do not form any part of the materials for the solicitation of
proxies.
Upon written request of any stockholder, we will
furnish copies of the Form 10-K and Forms 10-Q, as filed with the SEC,
including the financial statements and schedules thereto.
The
written request should be sent to our Secretary at our principal executive
office. The written request must state that as of the close of business on the
record date, the person making the request was a record owner or beneficial
owner of our capital stock.
OTHER
MATTERS
Our Board of
Directors does not intend to bring any other matters before the meeting and
does not know of any matters that will be brought before the meeting by others.
However, if any other matters properly come before the meeting, the persons
named in the accompanying proxy will vote the proxies in accordance with their
judgment on such matters.
By Order of our Board of Directors
Robert A. Kaiser,
Chief Executive Officer
Dallas, Texas
,
2009
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ANNEX A
CLST HOLDINGS, INC.
AMENDED AND RESTATED
2008 LONG TERM INCENTIVE
PLAN
CLST
Holdings, Inc., a Delaware corporation, sets forth herein the terms of its
Amended and Restated 2008 Long Term Incentive Plan (the
Plan
) as follows:
1.
Purpose and Eligibility
The purpose of the
Plan is to provide stock options and other equity interests in the Company
(each an
Award
) to employees, officers, directors, consultants, and
advisors of the Company and its subsidiaries, all of whom are eligible to
receive Awards under the Plan. Any
person to whom an Award has been granted under the Plan is referred to herein
as a
Participant
. Additional
definitions are set forth in
Section 8(a)
.
2.
Administration
a.
Administration by Board of Directors
.
The Plan will be administered by the Board of Directors of the Company
(the
Board
) unless and until the Board delegates administration to a
committee of the Board, as provided in
Section 2(b)
. The Board, in its sole discretion, shall have
the authority to grant and amend Awards, to adopt, amend, and repeal
rules relating to the Plan, and to interpret and correct the provisions of
the Plan and any Award. All decisions by
the Board shall be final and binding on all interested persons. Neither the
Company nor any member of the Board shall be liable for any action or
determination relating to the Plan.
b.
Appointment of Committees
.
To the extent permitted by applicable law, the Board may delegate any or
all of its powers under the Plan to one or more committees or subcommittees of
the Board. All references in the Plan to
the Board shall mean such committee or the Board. The provisions of this paragraph shall not
amend or limit the applicability of any agreement to which the Company may be
subject pursuant to which it has agreed to limit the grant of Awards, or
subject the grant of Awards to the approval of persons other than the Board.
c.
Delegation to Executive Officers
.
To the extent permitted by applicable law, the Board may delegate to one
or more executive officers of the Company the power to grant Awards and
exercise such other powers under the Plan as the Board may determine,
provided that
the Board shall fix the
maximum number of Awards to be granted and the maximum number of shares
issuable to any one Participant pursuant to Awards granted by such executive
officers.
3.
Stock Available for Awards
a.
Number of Shares
. Subject to
adjustment under
Section 3(b)
, the aggregate number of shares of
Common Stock of the Company (the
Common Stock
) that may be issued
pursuant to the Plan is 2,000,000 shares.
If any Award expires, or is terminated, surrendered or forfeited, in
whole or in part, the unissued Common Stock covered by such Award shall again
be available for the grant of Awards under the Plan. If shares of Common Stock issued pursuant to
the Plan are repurchased by, or are surrendered to, the Company at no more than
cost, such shares of Common Stock shall again be available for the grant of
Awards under the Plan;
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provided,
however,
that the
cumulative number of such shares that may be so reissued under the Plan will
not exceed 20,000,000, subject to adjustment under
Section 3(b)
.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
b.
Adjustment to Common Stock
.
In the event of any stock split, stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off, split-up, or other similar change in
capitalization or event, (i) the number and class of securities available for
Awards under the Plan and any per-Participant share limit, (ii) the number
and class of securities, vesting schedule and exercise price per share of
Common Stock subject to each outstanding Award, (iii) the repurchase price
per security subject to repurchase; and (iv) the terms of each other
outstanding stock-based Award shall be adjusted by the Board (or substituted
Awards may be made) in an equitable manner; provided, however, that any
fractional shares resulting from any such adjustment shall be eliminated. If
Section 7(e)(i)
applies
for any event, this
Section 3(b)
shall not be applicable.
4.
Stock Options
a.
General
. The Board may
grant options to purchase Common Stock (each, an
Option
) and determine
the number of shares of Common Stock to be covered by each Option, the exercise
price of each Option, and the conditions and limitations applicable to the
exercise of each Option and the Common Stock issued upon the exercise of each
Option, including vesting provisions, repurchase provisions and restrictions
relating to applicable federal or state securities laws, as it considers
advisable. Without limiting the
generality of the foregoing, the Board may make the exercise of any option
subject to an agreement by the holder thereof to be a party to any other
agreement, including an agreement not to engage in competition with the Company
following the Date of Termination.
b.
Incentive Stock Options
. An Option
that the Board intends to be an incentive stock option as defined in
Section 422 of the Code (an
Incentive Stock Option
) shall be
granted only to employees of the Company and shall be subject to and shall be
construed consistently with the requirements of Section 422 of the
Code. The Board and the Company shall
have no liability if an Option or any part thereof that is intended to be an
Incentive Stock Option does not qualify as such. An Option or any part thereof
that does not qualify as an Incentive Stock Option is referred to herein as a
Nonstatutory
Stock Option
. If an Option is designated as an Incentive Stock Option, to
the extent that such Option (together with all Incentive Stock Options granted
to the Option holder under the Plan and all other stock option plans of the
Company and its parent and subsidiaries) becomes exercisable for the first time
during any calendar year for shares having a Fair Market Value greater than
$100,000, the portion of each such Incentive Stock Option that exceeds such
amount will be treated as a Nonstatutory Stock Option.
c.
Exercise Price
. The Board
shall establish the exercise price (or determine the method by which the
exercise price shall be determined) at the time each Option is granted and
specify it in the applicable option agreement;
provided
that, the per share exercise price shall not be less than the per share Fair
Market Value of the Common Stock on the date the Option is
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granted (or 110% of Fair
Market Value on the date of grant in the case of an Incentive Stock Option
granted to an employee who is a 10% stockholder).
d.
Duration of Options
. Each Option
shall be exercisable at such times and subject to such terms and conditions as
the Board may specify in the applicable option agreement,
provided
that, in the case of an Incentive
Stock Option, the Option shall not be exercisable following the tenth
anniversary of the date of grant of such Option (or the fifth anniversary of
the date of grant in the case of an Incentive Stock Option granted to an
employee who is a 10% stockholder).
e.
Exercise of Option
. Options may
be exercised only by delivery to the Company of a written notice of exercise
signed by the proper person together with payment in full as specified in
Section 4(f)
for
the number of shares for which the Option is exercised.
f.
Payment Upon Exercise
. Common Stock
purchased upon the exercise of an Option shall be paid for by one or any
combination of the following forms of payment:
(i)
by check payable to the order of the Company;
(ii)
except as otherwise explicitly provided in the
applicable option agreement, and only if the Common Stock is then publicly
traded, delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price; or
(iii)
to the extent explicitly provided in the applicable
option agreement, by (x) subject to pre-approval of the Board for any
officer, director of 10% shareholder, delivery of shares of Common Stock owned
by the Participant valued at Fair Market Value, (y) delivery of a
promissory note of the Participant to the Company (and delivery to the Company
by the Participant of a check in an amount equal to the par value of the shares
purchased),
provided
that the foregoing is not
prohibited pursuant to Section 13(k) of the Securities Exchange Act
of 1934, as amended, or (z) payment of such other lawful consideration as
the Board may determine,
provided
that
such form of payment does constitute a deferral of compensation within the
meaning of Section 409A or otherwise cause the Option to be subject to the
requirements of Section 409A.
5.
Restricted Stock
a.
Grants
. The Board may
grant Awards entitling recipients to acquire shares of Common Stock, subject to
delivery to the Company by the Participant of cash or other lawful
consideration in an amount at least equal to the par value of the shares
purchased (each, a
Restricted Stock Award
).
b.
Terms and Conditions
. The Board shall determine the terms and conditions
of any such Restricted Stock Award. Any
stock certificates issued in respect of a Restricted Stock Award shall be
registered in the name of the Participant and, unless otherwise determined by
the Board, deposited by the Participant, together with a stock power endorsed
in blank, with the
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Company (or its
designee). After the expiration of the applicable
restriction periods, the Company (or such designee) shall deliver the
certificates no longer subject to such restrictions to the Participant or, if
the Participant has died, to the beneficiary designated by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participants death (the
Designated Beneficiary
). In the absence of an effective designation by
a Participant, Designated Beneficiary shall mean the Participants estate.
6.
Other Stock-Based Awards
The Board shall
have the right to grant other Awards based upon the Common Stock having such
terms and conditions as the Board may determine, including, without limitation,
the grant of shares based upon certain conditions, the grant of securities convertible
into Common Stock and the grant of stock appreciation rights, phantom stock
awards or stock units.
7.
General Provisions Applicable to Awards
a.
Transferability of Awards
.
Except as the Board may otherwise determine or provide in an Award, Awards
shall not be sold, assigned, transferred, pledged or otherwise encumbered by
the person to whom they are granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution, and, during the life of
the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
b.
Forfeiture of Awards
. Unless otherwise determined by the Board, upon
termination of a Participants employment or director or consulting arrangement
between Participant and the Company, such Participant may exercise any Award
within such period of time ending on the earlier of (1) the date three
months following the Date of Termination (or such other period as may be
specified by the Board in an Award Agreement), but only to the extent such
Award was exercisable immediately prior to such termination or (2) the
expiration of the term of the Award.
Notwithstanding the foregoing, if the Participants employment or
director or consulting arrangement with the Company is terminated voluntarily
by Participant or if terminated by the Company for Cause, all Awards held by
the Participant shall terminate as of the Date of Termination (whether or not
vested) unless otherwise determined by the Board.
c.
Documentation
. Each Award
under the Plan shall be evidenced by a written instrument in such form as the
Board shall determine or as executed by an officer of the Company pursuant to
authority delegated by the Board. Each
Award may contain terms and conditions in addition to those set forth in the
Plan
provided that
such terms and
conditions do not contravene the provisions of the Plan.
d.
Board Discretion
. The terms of
each type of Award need not be identical, and the Board need not treat
Participants uniformly.
e.
Acquisition of the Company
.
(i)
Consequences of an Acquisition
. Upon the consummation of an
Acquisition, the Board or the board of directors of the surviving or acquiring
entity (as used in this
Section 7(e)(i)
, also the
Board
),
shall, as to outstanding Awards (on the
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same basis or on different bases as the Board shall
specify), make appropriate provision for the continuation of such Awards
by the Company or the assumption of such Awards by the surviving or acquiring
entity and by substituting on an equitable basis for the shares then subject to
such Awards either (a) the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition,
(b) shares of stock of the surviving or acquiring corporation or
(c) such other securities or other consideration as the Board deems
appropriate, the Fair Market Value of which shall not materially differ from
the Fair Market Value of the shares of Common Stock subject to such Awards
immediately preceding the Acquisition. In
addition to or in lieu of the foregoing, with respect to outstanding Options,
the Board may, on the same basis or on different bases as the Board
shall specify, upon written notice to the
affected Participants, provide that one or more Options then outstanding must
be exercised, in whole or in part, within a specified number of days of the
date of such notice, at the end of which period such Options shall terminate,
or provide that one or more Options then outstanding, in whole or in part,
shall be terminated in exchange for a cash payment equal to the excess of the
Fair Market Value for the shares subject to such Options over the exercise
price thereof;
provided, however,
that before
terminating any portion of an Option that is not vested or exercisable (other
than in exchange for a cash payment), the Board must first accelerate in full
the exercisability of the portion that is to be terminated. Unless otherwise determined by the Board (on
the same basis or on different bases as the Board shall specify), any
repurchase rights or other rights of the Company that relate to an Option or
other Award shall continue to apply to consideration, including cash, that has
been substituted, assumed or amended for an Option or other Award pursuant to
this paragraph. The Company may hold in
escrow all or any portion of any such consideration in order to effectuate any
continuing restrictions.
(ii)
Assumption of Options Upon Certain Events
.
In connection with a merger or consolidation of an entity with the
Company or the acquisition by the Company of property or stock of an entity,
the Board may grant Awards under the Plan in substitution for stock and
stock-based awards issued by such entity or an affiliate thereof. The substitute Awards shall be granted on such
terms and conditions as the Board considers appropriate in the circumstances.
f.
Amendment of Awards
. The Board may
amend, modify or terminate any outstanding Award including, but not limited to,
substituting therefor another Award of the same or a different type, changing
the date of exercise or realization, and converting an Incentive Stock Option
to a Nonstatutory Stock Option,
provided
that
(1) the Participants consent to such action shall be
required unless the Board determines that the action, taking into account any
related action, would not materially and adversely affect the Participant and
(2) such action does not cause an Award to be subject to Section 409A
that was not previously subject to Section 409A or otherwise constitute an
impermissible acceleration or change in time and form of payment under
Section 409A.
g.
Section 83(b) Election
.
The Board may provide in an Award that the Award is conditioned upon the
Participant making or refraining from making an election with respect to the
Award under Section 83(b) of the Code. If a Participant makes an
election pursuant to
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Section 83(b) of
the Code concerning an Award, the Participant shall be required to file
promptly a copy of such election with the Company.
h.
Adjustment of Awards upon the Occurrence of Certain
Unusual or Non-recurring Events
. The Board may
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in
Section 3(b)
hereof)
affecting the Company or the financial statements of the Company or of changes
in applicable laws, regulations or accounting principles, whenever the Board
determines that such adjustments are appropriate in order to prevent unintended
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan,
provided
that such action does not cause an Award to be subject to Section 409A
that was not previously subject to Section 409A or otherwise constitute an
impermissible acceleration or change in time and form of payment under
Section 409A. The determination of
the Board as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.
i.
Taxes
. Each
Participant shall pay to the Company, or make provisions satisfactory to the
Company for payment of, any taxes required by law to be withheld in connection
with Awards to such Participant no later than the date of the event creating
the tax liability. The Board may allow
Participants to satisfy such tax obligations in whole or in part by
transferring shares of Common Stock, including shares retained from the Award
creating the tax obligation, valued at their Fair Market Value. The Company is
authorized to withhold from any Award granted or to be settled, any delivery of
Common Stock in connection with an Award, any other payment relating to an Award
or any payroll or other payment to a Participant amounts of withholding and
other taxes due or potentially payable in connection with any transaction
involving an Award, and to take such other action as the Board may deem
advisable to enable the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include
authority to withhold or receive Common Stock or other property and to make
cash payments in respect thereof in satisfaction of a Participants tax
obligations.
j.
Conditions on Delivery of Stock
.
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove restrictions from shares previously delivered
under the Plan until (i) all conditions of the Award have been met or
removed to the satisfaction of the Company, (ii) in the opinion of the
Companys counsel, all other legal matters in connection with the issuance and
delivery of such shares have been satisfied, including any applicable
securities laws and any applicable stock exchange or stock market
rules and regulations, (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws,
rules or regulations, and (iv) if the Company shall have more than
twenty record stockholders, until such time as the Common Stock shall be listed
for trading on the New York Stock Exchange or the NASDAQ Stock Exchange or a
successor thereto.
k.
Restrictive Legends
. In order to
reflect the restrictions on transfer of Common Stock issued pursuant to any
Award, the stock certificates for Common Stock will be endorsed with the
following legend:
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THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE FEDERAL SECURITIES LAWS OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT
UPON SUCH REGISTRATION OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
AND/OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY
TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION
OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS AND
ANY RULES OR REGULATIONS PROMULGATED THEREUNDER. ADDITIONALLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO, AND SUCH SECURITIES MAY BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF ONLY IN COMPLIANCE WITH, THE TERMS AND
PROVISIONS OF THE COMPANYS 2008 LONG TERM INCENTIVE PLAN, AND IN THE
ASSOCIATED AWARD AGREEMENT. A COPY OF THE PLAN AND SUCH AWARD AGREEMENT
MAY BE OBTAINED FROM THE COMPANY.
l.
Acceleration
. The Board may
at any time provide that any Options shall become immediately exercisable in
full or in part, that any Restricted Stock Awards shall be free of some or all
restrictions, or that any other stock-based Awards may become exercisable in
full or in part or free of some or all restrictions or conditions, or otherwise
realizable in full or in part, as the case may be, despite the fact that the
foregoing actions may (i) cause the application of Sections 280G and 4999
of the Code if a change in control of the Company occurs, or
(ii) disqualify all or part of the Option as an Incentive Stock Option;
provided
,
however
,
that no such acceleration shall cause an Award to be subject to
Section 409A that was not previously subject to Section 409A or
otherwise constitute an impermissible acceleration or change in time and form
of payment under Section 409A. In the event of the acceleration of the
exercisability of one or more outstanding Options, including pursuant to
Section 7(e)(i)
,
the Board may provide, as a condition of full exercisability of any or all such
Options, that the Common Stock or other substituted consideration, including
cash, as to which exercisability has been accelerated shall be restricted and
subject to forfeiture back to the Company at the option of the Company at the
cost thereof upon termination of employment or other relationship, with the
timing and other terms of the vesting of such restricted stock or other
consideration being equivalent to the timing and other terms of the superseded
exercise schedule of the related Option.
8.
Miscellaneous
.
a.
Definitions
.
(i)
Acquisition
means: (x) the sale of the Company by merger in
which the stockholders of the Company in their capacity as such no longer own a
majority of the outstanding equity securities of the Company (or its
successor); (y) any sale of all or substantially all of the assets or
capital stock of the Company (other than in a spin-off or similar transaction);
or (z) any other acquisition of the business of the Company, as determined
by the Board.
(ii)
Affiliate
of any party hereto means any
person controlling, controlled by or under common control with such party.
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(iii)
Cause
means (x) as such term is defined
in any written employment, director or consulting agreement between a
Participant and the Company, and (y) if no such agreement is effective as
of the relevant time, (A) Participants repeated failure to substantially
perform the principal duties and obligations of Participants position with the
Company, as determined by a Disinterested Majority, (B) any act of
personal dishonesty by Participant in connection with his responsibilities with
respect to the Company, as determined by a Disinterested Majority,
(C) conviction of Participant of a felony or a crime of moral turpitude,
or conviction of any other crime that results in an adverse effect on the
Companys business or business reputation (or a plea of
nolo
contendere
to any of the foregoing), or (D) a willful act by
Participant, whether in connection with his employment or otherwise, which
constitutes misconduct and that can reasonably be expected to have an adverse
effect of the Company business or its business reputation. Cause does not include Disability or death
of a Participant.
(iv)
Code
means the Internal Revenue Code of 1986,
as amended, and any regulations promulgated thereunder.
(v)
Company
, means CLST Holdings, Inc., a Delaware
corporation, and for purposes of eligibility under the Plan, shall include any
present or future subsidiary corporations of CLST Holdings, Inc., as
defined in Section 424(f) of the Code, and any present or future
parent corporation of CLST Holdings, Inc., as defined in
Section 424(e) of the Code.
For purposes of Awards other than Incentive Stock Options, the term
Company
shall include any other business venture in which the Company has a direct or
indirect significant interest, as determined by the Board in its sole
discretion.
(vi)
Date of Termination
means (i) as such
term is defined in any written employment or director or consulting agreement
between Participant and the Company, or (ii) if no such agreement is
effective as of the relevant time, (A) if the Participants employment or
director or consulting arrangement is terminated by his death, the date of his
death, (B) if the Participants employment or director or consulting
arrangement is terminated by a Disability the date the Disability is determined
or (C) if the Participants employment or director or consulting
arrangement is terminated for any other reason by the Participant or the
Company, the date on which a notice of termination is delivered by the Company
or the Participant to the other, or if a later effective date of termination is
set forth therein, the earlier of such stated effective date and 14 days after
the date such notice of termination is delivered.
(vii)
Disability
means (i) as such term is
defined in any written employment or director or consulting agreement between a
Participant and the Company, or (ii) if no such agreement is effective as
of the relevant time, the Participants inability to perform the duties and
obligations he was employed or engaged to fulfill and discharge, with or
without reasonable accommodation, for a period of 180 consecutive days due to
mental or physical incapacity as determined by a physician selected by the
Participant or its insurers and acceptable to the Participant or the Participants
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
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(viii)
Disinterested Majority
means a majority of
the Board after excluding a Participant whose actions or conduct is being
reviewed by the Board if such Participant is then a member of the Board, and
any member of such Participants family then serving on the Board.
(ix)
employee
for purposes of eligibility under
the Plan (but not for purposes of
Section 4(b)
) shall include a
person to whom an offer of employment has been extended by the Company.
(x)
Fair Market Value
of a share of Common Stock
on any day shall mean (i) if the Companys Common Stock is traded on a
national securities exchange or is quoted on a market established by the
National Association of Securities Dealers, Inc. Automated Quotation
(NASDAQ), then the closing price; (ii) if the Companys Common Stock is
not traded on a securities exchange or on a NASDAQ market, but is traded in the
over-the-counter market or on the pink sheets, then the average of the
closing bid and ask prices reported for such day;
provided
,
however
,
that if clauses (i) and (ii) of this subparagraph are inapplicable,
or if no trades have been made or no quotes are available for such day, the
Fair Market Value of a share of Common Stock shall be determined by the Board
through the reasonable application of a reasonable valuation method that is
consistent with applicable regulations adopted by the Treasury Department
relating to stock options and Section 409A of the Code.
(xi)
Section 409A
means section 409A of the
Code and the regulations promulgated thereunder.
b.
Compliance With Laws and Obligations
.
The Company shall not be obligated to issue or deliver Common Stock in
connection with any Award or take any other action under the Plan in a
transaction subject to the restriction requirements of the Securities Act of
1933, as amended, or any other federal or state securities law, any requirement
under any listing agreement between the Company and any national securities
exchange or automated quotation system or any other law, regulation or
contractual obligation of the Company until the Company is satisfied that such
laws, regulations, and other obligations of the Company have been complied with
in full. Certificates representing
shares of Common Stock issued under the Plan will be subject to such
stop-transfer orders and other restrictions as may be applicable under such
laws, regulations and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
c.
Inability to Obtain Authority
. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Companys counsel to be necessary to the lawful issuance and sale
of any shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained.
d.
Investment Representations
. The Board may require any person
receiving Awards pursuant to this Plan to represent and warrant in writing that
the person is acquiring the shares for investment and without any present
intention to sell or distribute such shares.
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e.
No Right to Employment or Other Status
.
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
continued employment, engagement or any other relationship with the Company. The Company expressly reserves the right at
any time to dismiss or otherwise terminate its relationship with a Participant
free from any liability or claim under the Plan.
f.
No Rights as Stockholder
.
Subject to the provisions of the applicable Award, no Participant or
Designated Beneficiary shall have any rights as a stockholder with respect to
any shares of Common Stock to be distributed with respect to an Award until
becoming the record holder thereof.
g.
Ratification of Actions
. By accepting any Award or other benefit under the
Plan, each Participant and each person claiming under or through each
Participant shall be conclusively deemed to have indicated his or her
acceptance and ratification of, and consent to, any action taken under the Plan
by the Board.
h.
Effective Date and Term of Plan
.
The Plan shall become effective on the date on which it is adopted by
the Board. No Awards shall be granted
under the Plan after the completion of ten years from the date on which the
Plan was adopted by the Board, but Awards previously granted may extend beyond
that date.
i.
Amendment of Plan
. The Board may
amend, suspend, or terminate the Plan or any portion thereof at any time
, provided
that (1) such action does
not cause an Award to be subject to Section 409A that was not previously
subject to Section 409A or otherwise constitute an impermissible
acceleration or change in time and form of payment under Section 409A and
(2) no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary to satisfy any
applicable law or any securities exchange listing requirements. At the time of such amendment, the Board
shall determine, upon advice from counsel, whether such amendment will be contingent
on stockholder approval.
j.
Nonexclusivity of the Plan
.
Neither the adoption of the Plan by the Board nor its submission to the
stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board to adopt such other compensatory
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
k.
No Fractional Shares
. No fractional
shares of Common Stock shall be issued or delivered pursuant to the Plan or any
Award. The Board shall determine whether
cash, other Awards, or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
l.
Code Section 409A
. The Plan is
intended to comply with the requirements of Section 409A, without
triggering the imposition of any tax penalty thereunder. To the extent necessary or advisable, the
Board may amend the Plan or any Award to delete any conflicting provisions and
to add such other provisions as are required to fully comply with the
applicable provisions of Section 409A and any other legislative or
regulatory requirements applicable to the Plan.
Notwithstanding any provision of this Plan or Award to the contrary, if
all or any portion
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of the payments and/or
benefits under this or Award are determined to be nonqualified deferred
compensation subject to Section 409A, and the Company determines that the
holder of an Award is a specified employee as defined in
Section 409A(a)(2)(B)(i) of the Code and the final regulations
promulgated thereunder (the Treasury Regulations) and other guidance issued
thereunder, then such payments and/or benefits (or portion thereof) shall
commence no earlier than the first day of the seventh month following an Award
holders termination of employment (with the first such payment being a lump
sum equal to the aggregate payments and/or benefits the Award holder would have
received during such six-month period if no such payment delay had been
imposed.) For purposes of this
Section 8(l), termination of employment shall mean Executives
separation from service, as defined in Section 1.409A-1(h) of the
Treasury Regulations, including the default presumptions thereunder. Wherever payments to which this paragraph
applies are to be made in installments, each such installment shall be deemed
to be a separate payment for purposes of Section 409A.
m.
Governing Law
.
The provisions of the Plan and all Awards made hereunder shall be
governed by and interpreted in accordance with the laws of Delaware, without
regard to any applicable conflicts of law.
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ANNEX B
INFORMATION CONCERNING PARTICIPANTS IN THE
SOLICITATION
OF PROXIES BY CLST HOLDINGS, INC.
Under applicable SEC rules,
members of the Companys Board of Directors, the Boards nominees, and the
current executive officers of the Company are deemed to be participants with
respect to the Companys solicitation of proxies in connection with its 2009
Annual Meeting of Stockholders. Additionally, the following are deemed
associates of the participants: (i) any corporation or organization
(other than the Company or a majority-owned subsidiary of the Company) in which
a participant is an officer or a partner or is (directly or indirectly) the
beneficial owner of 10 percent or more of any class of equity securities;
(ii) any trust or estate in which a participant has a substantial
beneficial interest or as to which a participant serves as a trustee or other
fiduciary; and (iii) any relative or spouse, or relative of that spouse,
who has the same home as a participant or is a director or officer of the
Company or of any parent or subsidiary of the Company. Certain information
about the persons who are deemed participants and their associates is
provided below.
Directors,
Director Nominees and Executive Officers
The names and principal
occupations of the Companys directors, director nominees and executive
officers who are deemed participants in the Companys solicitation are set
forth in Proposal No. 1 under the Election of Directors section of the proxy
statement. The mailing address of the Companys directors and director nominees
is c/o CLST Holdings, 17304 Preston Road, Dominion Plaza, Suite 420,
Dallas, Texas 75252.
Information
Regarding Ownership of the Companys Securities by Participants
Except as described in this Annex
B or the proxy statement, none of the participants listed in the section of
this Annex titled Directors, Director
Nominees and Executive Officers owns any of the Companys securities of
record that they do not own beneficially, nor do any associates of the
participants own any securities of the Company beneficially or of record. The
number of shares of the Companys common stock held by directors, director
nominees and the current executive officers as of the close of business on
September 25, 2009
, is set forth
in the Certain Stockholders section of the proxy statement.
Miscellaneous
Information Concerning Participants
Except as described in this
Annex B or the proxy statement, no participant has purchased or sold securities
of the Company within the past two years, nor engaged in any transaction with
respect to personal ownership of securities of the Company other than grants or
forfeitures of restricted stock and options or warrants pursuant to Companys
equity-based compensation plans or employment agreements.
No part of the purchase
price or market value of any of the shares specified in the Information Regarding Ownership of the
Companys Securities by Participants section of this Annex B is
represented by funds borrowed or otherwise obtained for the purpose of
acquiring or holding such securities by such participant.
Except as described in this Annex
B or the proxy statement, no participant or associate of any participant is, or
within the past year was, a party to any contract, arrangement or understanding
with any person with respect to any securities of the Company.
Except as described in the
proxy statement, neither any participant, nor any of their respective
associates, is either a party to any transaction or series of transactions
since the beginning of fiscal year 2008, or has knowledge of any currently
proposed transaction or series of proposed transactions, (1) to which the
Company was or is to be a party, (2) in which the amount involved exceeds
$120,000, and (3) in which any participant or associate of any participant
had, or will have, a direct or indirect material interest.
Except
as described in the proxy statement, no participant or associate of any
participant has entered into any agreement or understanding with any person
with respect to any future employment by the
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Company or any of its
affiliates or with respect to any future transactions to which the Company or
any of its affiliates will or may be a party.
B-2
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90732 CLST
Holdings, Inc. Proxy Card Proof 5a 09/21/09 15:10 59000 FOLD AND DETACH
HERE YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. To vote by mail, mark, sign
and date your proxy card and return it in the enclosed postage-paid envelope.
CLST HOLDINGS, INC. Signature Signature Date NOTE: Please sign as name
appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
Please mark your votes as indicated in this example X The Board of Directors
recommends that the stockholders vote FOR each of the nominees listed below,
FOR Proposals No. 2 and No. 3, and AGAINST Proposals No. 4 through No. 8.
Please review carefully the Proxy Statement delivered with this Proxy. FOR
AGAINST ABSTAIN FOR AGAINST ABSTAIN 1. Election of directors: (i) Robert A.
Kaiser as the Class I director for a term of one year; and (ii) Patrick
ODonnell as the Class II director for a term of two years; and in each case,
until their successors are elected and qualified. (INSTRUCTIONS: To withhold
authority to vote for any individual nominee, mark the Exceptions box above
and write that nominees name in the space provided below.) *Exceptions 2. To
ratify the appointment of Whitley Penn LLP as our independent registered
public accountants for the year ending November 30, 2009: 3. To ratify the
Companys Amended and Restated 2008 Long Term Incentive Plan: 4. Shareholder
proposal regarding completion of dissolution: 5. Shareholder proposal
regarding 2008 Long Term Incentive Plan: 6. Shareholder proposal regarding
November 10, 2008 transaction: 7. Shareholder proposal regarding December 12,
2008 transaction: 8. Shareholder proposal regarding February 13, 2008
transaction: Mark Here for Address Change or Comments SEE REVERSE FOR all
nominees listed above (except as marked to the contrary below) *EXCEPTION
WITHHOLD AUTHORITY to vote for all nominees listed above k159886:90732 CLST
Holdings, Inc. PC 5a 9/21/09 3:10 PM Page 1
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90732 CLST
Holdings, Inc. Proxy Card Proof 5a 09/21/09 15:10 59000 Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting
of Stockholders of CLST Holdings, Inc. to be held October 27, 2009: The proxy
materials are available at http://bnymellon.mobular.net/bnymellon/clhi.
Please date, sign and mail your proxy card in the envelope provided as soon
as possible. PROXY CLST HOLDINGS, INC. 17304 Preston Road, Dominion Plaza,
Suite 420 Dallas, Texas 75252 This Proxy is Solicited on Behalf of the Board of
Directors. The undersigned stockholder(s) of CLST Holdings, Inc., a Delaware
corporation (the Company), hereby revokes all prior proxies and appoints
Beverly Scherffius and Juliana Cordero attorneys-in-fact and proxies of the
undersigned, with full power of substitution, to represent and to vote all
shares of common stock of the Company that the undersigned is entitled to
vote at the Annual Meeting of Stockholders to be held at the Hilton Dallas
Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas, on Tuesday, October 27,
2009, at 10:00 a.m., Dallas time, and at any adjournments or postponements
thereof. This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted FOR each of the nominees listed below, FOR the approval
of Proposals No. 2 and No. 3 and AGAINST the approval of Proposals No. 4
through No. 8. PLEASE MARK, SIGN, DATE AND RETURN THE WHITE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE. Address Change/Comments (Mark the
corresponding box on the reverse side) BNY MELLON SHAREOWNER SERVICES P.O.
BOX 3550 SOUTH HACKENSACK, NJ 07606-9250 Choose MLinkSM for fast, easy and
secure 24/7 online access to your future proxy materials, investment plan
statements, tax documents and more. Simply log on to Investor ServiceDirect®
at www.bnymellon.com/shareowner/isd where step-by-step instructions will
prompt you through enrollment. FOLD AND DETACH HERE (Continued and to be
marked, dated and signed, on the other side) k159886:90732 CLST Holdings,
Inc. PC 5a 9/21/09 3:10 PM Page 2
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