UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. __)
Filed by
the Registrant
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a Party other than the Registrant
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Pernix
Group
,
Inc.
(Name of
Registrant
as
Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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Per
unit price or other underlying value of transaction computed pursuant to
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filing.
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Pernix
Group, Inc.
860
Parkview Blvd.
Lombard,
Illinois 60148
Notice
of Annual Meeting of Stockholders
To
be held June 3, 2010
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Stockholders of Pernix Group, Inc., a
Delaware corporation (the “Company”), will be held on June 3, 2010 at 11:00 a.m.
local time, at our corporate offices located at 860 Parkview Blvd., Lombard,
Illinois 60148 for the following purposes:
1.
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To
elect seven nominees to the Board of Directors of the
Company;
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2.
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To
ratify the selection of Reznick Group as the Company’s independent auditor
for 2010;
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3.
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To
consider and vote upon a proposal to amend our Restated Certificate of
Incorporation to effect a reverse stock split of our outstanding common
stock at an exchange ratio between and including one-for-10 to one-for-15
or any amount in between one-for-10 and one-for-15 and to authorize our
Board of Directors to implement the reverse stock split at any time prior
to the 2011 Annual Meeting of stockholders by filing an amendment to our
Restated Certificate of
Incorporation;
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4.
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To
consider and vote upon a proposal to approve a quasi-reorganization to
eliminate the Company’s accumulated deficit with an equal and
corresponding decrease in the Company’s paid in capital
account;
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5.
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To
transact such other business as may properly come before the
meeting.
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Stockholders
of record at the close of business on April 29, 2010 are entitled to notice of
and to vote at this meeting and any continuations or adjournments
thereof. For ten days prior to the meeting, a complete list of
stockholders entitled to vote at the meeting will be available for examination
by any stockholder for any purpose germane to the meeting during ordinary
business hours at the Company’s offices located at 860 Parkview Blvd., Lombard,
Illinois 60148.
Whether
or not you plan to attend the meeting, we urge you to sign, date and return the
enclosed Proxy Card so that as many shares as possible may be represented at the
meeting.
The vote
of every stockholder is important and your cooperation in promptly returning
your executed Proxy Card will be appreciated. Each Proxy Card is
revocable and will not affect your right to vote in person in the event that you
decide to attend the meeting.
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By
Order of the Board of Directors,
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Nidal
Z. Zayed
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Chief
Executive Officer & President
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Lombard,
Illinois
Dated:
May 10, 2010
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Pernix
Group, Inc.
860
Parkview Blvd.
Lombard,
Illinois 60148
_______________________________________
PROXY
STATEMENT
_______________________________________
2010
ANNUAL MEETING OF STOCKHOLDERS
This
Proxy Statement is furnished in connection with the solicitation by the Board of
Directors of Pernix Group, Inc., a Delaware corporation (the “Company” or
“Registrant”), of Proxies for use at the Annual Meeting of Stockholders (the
“Annual Meeting”) to be held on June 3, 2010, or any postponement or adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. This Proxy Statement and accompanying Proxy Card are
first being sent to stockholders on or about May 12, 2010.
Revocability
of Proxies
Any
stockholder who executes and returns a Proxy Card may revoke the same at any
time before it is exercised by filing with the Secretary of the Company written
notice of such revocation or duly executed Proxy Card bearing a later date, or
by attending the Annual Meeting and electing to vote in
person. Attendance at the Annual Meeting will not in and of itself
constitute revocation of a Proxy Card.
Record
Date
Stockholders
of record at the close of business on April 29, 2010 (the “Record Date”) are
entitled to notice of and to vote at the Annual Meeting. On the
Record Date, 140,881,235 shares of the Company’s common stock were issued and
outstanding.
Voting
and Solicitation
All
shares represented by valid Proxy Cards received prior to the Annual Meeting
will be voted and, where a stockholder specifies by means of the Proxy Card a
choice with respect to any matter to be acted upon, the shares will be voted in
accordance with the specifications so made. If no instructions are
given on the executed Proxy Card, the Proxy Card will be voted in favor of the
proposals described and also in the discretion of such Proxies with respect to
any other proposal that may properly come before the Annual Meeting, including a
motion to adjourn the Annual Meeting to another time or place (including for the
purpose of solicitation of additional Proxies). The Company’s Bylaws
provide that a majority of the shares entitled to vote, whether present in
person or represented by Proxy Card, shall constitute a quorum for the
transaction of business at the Annual Meeting. Votes for and against,
abstentions and “broker non-votes” will each be counted as present for purposes
of determining the presence of a quorum. “Broker non-votes” are shares held by
brokers that are present, but not voted because the brokers were prohibited from
exercising discretionary authority or otherwise. Broker non-votes
will have no effect on the vote for directors or on the vote to ratify the
selection of Reznick Group as our independent auditor, but will have the same
effect as votes against other proposals
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Only
stockholders of record at the close of business the Record Date, are entitled to
notice of and to vote at the Annual Meeting. On the Record Date there
were 200,000,000 shares of Common Stock authorized and 140,881,235 issued and
outstanding. Each stockholder shall have one vote for every share of
Common Stock registered in the stockholder’s name on the Record
Date.
Pursuant
to the Bylaws and policies of the Company, in advance of the Annual Meeting the
management of the Company will appoint an independent Inspector of Elections to
supervise the voting of shares for the Annual Meeting. The Inspector
will decide all questions respecting the qualification of voters, the validity
of the Proxy Cards and the acceptance or rejection of votes. The
Inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of Inspector with strict
impartiality and according to the best of his or her ability.
The
election of directors shall be determined by a plurality of votes cast by the
common stockholders. The ratification of the selection of auditors
and the approval of the quasi-reorganization will be determined by a majority of
those entitled to vote and who are present, in person or by proxy, at the Annual
Meeting. The approval of the reverse stock split will require
affirmative vote of a majority of the outstanding shares of Common
Stock.
The cost
of soliciting proxies will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the
Company’s directors, officers and regular employers, without additional
compensation, personally or by telephone or telecopy.
Security
Ownership of Management and Certain Beneficial Owners
The
following table contains information as of December 31, 2009, regarding the
ownership of the Common Stock of the Company by: (i) all persons who, to
the knowledge of the Company, were the beneficial owners of 5% or more of the
outstanding shares of Common Stock of the Company, (ii) each director and
director nominee of the Company, (iii) the Chief Executive Officer and the
one other most highly compensated executive officer of the Company whose salary
and bonus for the fiscal year ended December 31, 2009, exceeded $100,000,
and (iv) all executive officers and directors of the Company as a
group:
Name
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Amount
and
Nature
of
Beneficial
Ownership
(1)
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Percent
of
Common
Stock
Outstanding
(2)
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SHBC
and Affiliated Companies
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135,188,567
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96.9
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%
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Max
Engler(3)
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95,000
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*
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Ibrahim
Ibrahim
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55,000
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*
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Jeffrey
Adams
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46,000
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*
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Ralph
Beck
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45,000
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*
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Trudy
Clark
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—
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*
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Carl
Smith
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—
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*
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Nidal
Z. Zayed
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—
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*
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Greg
Grosvenor
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—
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*
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All
Executive Officers and Directors as a Group (8 Persons)
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241,000
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0.2
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%
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(1)
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Except
as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community
property laws where applicable. Amounts include 45,000 options
that are exercisable within 60 days of the date of this proxy statement
held by each of Messrs. Engler, Ibrahim, Adams, and Beck for a total of
180,000 options.
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(2)
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Calculated
on the basis of 139,574,567 shares of Common Stock outstanding as of
December 31, 2009. This number of shares outstanding
excludes 45,000 options that were exercisable within 60 days of the date
of this Proxy Statement held by Messrs. Engler, Ibrahim, Adams, and Beck,
for a total of 180,000 options. None of the options were
exercised and the Company did not incur any expenses associated with these
options.
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(3)
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Max
Engler serves as a director for Litra Holding, A.G. Litra
Holding owns directly 495,000 shares of Pernix Group, Inc. common
stock. Based upon information provided by Litra Holding, A.G.,
the Company does not consider these shares to be beneficially owned by
Mr. Engler.
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Shown
below is information as of December 31, 2009, with respect to the shares of
Common Stock that may be issued under the Company’s equity compensation
plans:
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Number
of shares to be
issued
upon exercise
of
outstanding options
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Weighted
average
exercise
price of
outstanding
options
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Number
of shares
remaining
available
for
future issuance
under
equity
compensation
plans
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Equity
compensation plans approved by shareholders
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180,000
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(1)
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1.25
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975,000
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(2)
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(1)
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Includes
the number of shares that may be issued upon the exercise of outstanding
options to purchase shares of Common Stock under the Company’s stock
option plans.
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(2)
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Includes
shares available for future issuance under the Company’s stock option
plans, excluding shares quantified under Column
1.
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Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a)
of the Securities Exchange Act of 1934 may require an issuer’s executive
officers, directors and persons who beneficially own more than 10% of the
Company’s Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission
(“SEC”). If required, such persons must furnish the Company with
copies of all Section 16(a) forms filed by such persons.
The
Company has determined that its executive officers, directors and more than 10%
stockholders are not required to make such filings under applicable
regulations.
PROPOSALS TO BE PRESENTED AT
2010 ANNUAL MEETING
ITEM
1.
NOMINATION AND ELECTION OF
DIRECTORS
The
Company currently has a seven-member Board of Directors. The nominees
for election at the 2010 Annual Meeting are:
Ralph
Beck
Jeffrey
Adams
Trudy
Clark
Max
Engler
Ibrahim
Ibrahim
Carl
Smith
Nidal Z.
Zayed
Certain
information with respect to their ages and background is set forth
below.
The Board of
Directors unanimously recommends a vote “FOR” each of the nominees named
above. Our majority stockholders, Ernil Continental SA, Halbrad Group
Ltd., Sayed Hamid Behbehani & Sons, Co., W.L.L. and related parties (the
“Majority Stockholders”), have indicated that they will vote in favor of these
nominees.
Each
nominee will hold office for a period of one year or until the director’s term
expires or until a successor is elected and qualified, unless the director
resigns or his or her office becomes vacant by death, removal, or other cause in
accordance with the Bylaws of the Company.
It is
intended that votes pursuant to the Proxy Cards will be cast for the named
nominees. The persons named in the accompanying form of Proxy Card
will vote the shares represented thereby for the nominees. Management
knows of no reason why any of these nominees should be unable or unwilling to
serve. However, if any nominee(s) should for any reason be unable or
unwilling to serve, the Proxy Cards will be voted for the election of such other
person(s) for the office of director as the Board may recommend in the place of
such nominee(s).
The
Company and the Majority Stockholders are parties to a Special Security
Agreement with the United States government. That Special Security
Agreement establishes certain criteria for the qualifications of director that
the United States Government requires for the Company to hold a Facility
Security Clearance. These criteria include that certain directors be U.S.
Citizens, hold or be eligible to hold Personnel Security Clearances and be
otherwise approved by the United States Government. All nominees meet such
criteria, and any replacement nominees will be required to meet these
criteria.
If a
quorum is present and voting, the seven nominees receiving the highest number of
votes by the common stockholders will be elected for the ensuing one-year
term.
Pernix
Group, Inc. was formed in 1994 and incorporated in Delaware in
2001. It is the parent corporation of Telesource CNMI, Inc., which
was incorporated in the Commonwealth of Northern Mariana Islands in 1996,
Telesource (Fiji), Ltd., which was incorporated in the Republic of Fiji in 2000,
and TRANSRADIO SenderSysteme Berlin, A.G., which was incorporated in the Federal
Republic of Germany in 2001.
Our Board
believes that each Director should bring experience and skills significantly in
excess of basic qualifications under the Special Security Agreement discussed
above, and that collectively the Board should possess significant experience and
strong skill sets in the areas of most significance to the
Company.
As a
company with international projects, including complex construction and
infrastructure projects, and also as one publicly traded on the OTC Bulletin
Board, our Board believes that our Directors should collectively possess
strength in the following experiences, qualifications, attributes and skills
(though it is not necessary, nor expected, that every Director will possess
strengths with respect to each of these traits):
Our Board
considers the qualifications of our current Directors and the collective
competencies of our Board on an annual basis, prior to considering the nominees
to be submitted to the stockholders for approval at the next annual stockholders
meeting. The Board believes that our current Directors, all of whom
have been nominated for re-election at the 2010 Annual Stockholders Meeting,
individually and collectively possess the experience, qualifications, attributes
and skills necessary for our Board to fulfill its obligations and assist the
Company in achieving its business objectives. In particular:
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All of
our current board members have held senior positions in the principal business
areas of the Company. Five of our seven directors are or have been
senior executives in companies or industries related to the Company’s business
operations. In addition, the other two directors have held senior
command and leadership positions in the federal government, a principal client
of the Company, in agencies related to the Company’s business.
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Our
Chairman has been involved in the international construction and engineering
industry since 1965 and our CEO has been a senior executive with the Company
since 1996, providing them with significant executive management and
leadership skills.
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Several
of our directors also serve, or have recently served, as directors of other
companies, providing them with corporate governance and leadership experience
and skills.
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All of
our Directors possess substantial financial skills gained through their
business experiences, and one of our directors having been determined to be an
“audit committee financial expert,” as those terms are defined by the
SEC.
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Two of
our Directors have been reviewed and approved by the United States government,
in accordance with the Company’s Special Security Agreement, in order to
ensure compliance with the terms of the Agreement and oversee the Company’s
efforts to safeguard and control classified information in the possession of
the Company.
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At
least one of our Directors possesses extensive experience and strong skills
with respect to each of the other disciplines most important to our Company’s
growth and success, including strategic planning, crisis and risk management,
executive compensation, information technology, and international
business.
In
addition to these skills, our Board believes that good corporate governance, and
the ability of a Board to fulfill its fiduciary duties, is directly correlated
with other traits such as sound judgment, independence in fact and in mindset,
collegiality, trust, respect, confidentiality and integrity. Our
Board expects the boardroom to be a place where vigorous debate of the key
issues confronting the Company takes place, and where all Directors feel
comfortable expressing viewpoints which may differ from those of other
Directors, but such debates should be conducted in a respectful manner in which
each Director feels that his or her viewpoint has received fair
consideration. Our Board also believes that a boardroom atmosphere
that promotes consensus decision making whenever feasible is a strong
contributor to good corporate governance. In selecting nominees to
stand for election to the Board, our Board views these traits as being of equal
importance to skills listed above. Our Board believes that its
present members each individually possess these traits and that in combination
this results in a Board that acts consistent with corporate governance best
practices and which fulfills its fiduciary duties. Our Board
carefully considers how a potential new nominee will impact Board collegiality,
trust and respect, and the boardroom atmosphere, as part of the nomination
process.
Our Board
believes that each of our current Directors (who are also the nominees for
election at our 2010 Annual Shareholders Meeting) individually possess the
particular experiences, qualifications, attributes and skills that make him or
her exceptionally well qualified to serve on our Board, as follows:
Name
and Age;
Years
Served as Director
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Principal
Occupation for Past Five Years; Other Directorships
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Ralph
Beck
Age
71
Chairman
of the Board
Director
since 1999
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Mr.
Beck brings to the Board particular strength with respect to leadership
skills, international business, construction and related financing, crisis
management skills, strategic planning skills and corporate governance
skills. Mr. Beck was a principal of Global Construction
Solutions, L.L.C. From 1994 to 1998, Mr. Beck served as the President
of Kajima Construction Services, Inc., the North American general
building construction subsidiary of Kajima Corporation, a Japanese global
engineering and construction firm. From 1965 to 1994, Mr. Beck was
with the Turner Corporation, an international engineering and construction
firm. Mr. Beck served as the chairman of the board for Turner Steiner
International from 1987 to 1994, and as a senior vice president for Turner
Corporation.
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Jeffrey
Adams
Age
67
Director
Since 1999
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Mr.
Adams brings to the Board particular strength with respect to construction
and engineering, international marketing and business, strategic planning
and corporate governance skills. Mr. Adams is an
electrical engineer trained in the United Kingdom. From 1978 to
1986, Mr. Adams served as the Marketing Director of Babcock
Industries and Electrical Group of Companies. In 1986,
Mr. Adams became an independent international sales marketing
consultant. From 1987 to present, Mr. Adams is the General
Manager for Trafex Ltd., an engineering supplies company serving the
Middle East.
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Trudy
Clark
Age
61
Director
Since 2007
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Major
General (Ret.) Clark brings to the Board particular strength with respect
to leadership skills, crisis management skills, and strategic planning
skills, as well as significant insight into procurement activities with
the U.S. government and management and oversight of classified
projects. General Clark has over twenty years of experience in
innovative delivery of support services at worldwide locations in units of
60-2000 members and budgets from $1 million - $2.9
billion. General Clark is an experienced leader with
exceptional organizational and facilities management skills; she has
served as the Deputy Director for the Defense Threat Reduction Agency,
working to direct approximately 4,000 government and contractor personnel
at 30 locations worldwide and conducting international and homeland
security exercises for the Department of Defense. Additionally
while serving as the Chief Information Officer and Director for Command,
Control, Communications and Computers, US Strategic Command, General Clark
supported the government and contractors to develop software, lifecycle
management and strategic planning for modernization of over $5 billion of
nuclear decision support systems. General Clark has a Masters
in Guidance and Counseling from Troy State University in
Alabama.
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Max
Engler
Age
60
Director
Since 1997
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Mr.
Engler brings to the Board particular strength with regard to leadership
skills, international business and financial management and reporting
skills, and corporate governance skills. From 1988 to present
Mr. Engler has been an independent Financial Consultant and is also
on the Board of Directors of various companies in Switzerland and abroad.
From 1984 to 1988 Mr. Engler headed the Private Banking desk (Middle
East and Far East) of Bank Leu as Vice President. He is a director of
Computhink Incorporated, Belmoral S.A., Computhink Ltd., Telesource CNMI
Inc., Retsa Development Inc., FSD Holdings PLC, Litra Holdings AG, Linos
Consulting AG, Trafex Ltd., R.C.W. Enterprises S.A., and TransRadio
SenderSysteme Berlin AG.
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Ibrahim
M. Ibrahim
Age
62
Director
Since 1999
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Mr.
Ibrahim brings to the Board particular strength with regard to financial
skills, international business skills and corporate governance
skills. Mr. Ibrahim has been with the Al Ahli Bank of
Kuwait in the commercial lending area since 2002. He was Head
of International Banking for Commercial Bank of Kuwait from 2001 through
2002 and the Head of International Banking for The Gulf Bank K.S.C. in
Kuwait from 1986 to 2001. Mr. Ibrahim served as the
Vice-President and Head of Credit and Marketing for the First National
Bank of Chicago for the Middle East region from 1984 to 1986, and he also
served as the Vice-President and General Manager of Continental Illinois
Bahrain Branch from 1969 to 1984. Mr. Ibrahim received his
M.B.A. in International Business from De Paul University, his M.S. in
Taxation and Islamic Law from the University of Alexandria and his B.A. in
Accounting from the University of Alexandria.
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Carl
Smith
Age
61
Director
Since 2007
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Mr.
Smith brings to the Board particular strength with regard to leadership
skills, crisis management skills, and strategic planning skills, as well
as significant insight into the Company’s obligations with the U.S.
government and for the management and oversight of classified
projects. Mr. Smith, a graduate of the University of
Hawaii, obtained his Juris Doctorate at University of California Law
School and has over thirty years of experience in government contracting,
defense acquisition, international agreements, telecommunication
regulations, information security and is an expert in Cyber
Law/Information Assurance, Fiscal Law, FOIA, Privacy Act and the Ethics in
Government Act. Mr. Smith served as the General Counsel
for the Defense Information Systems Agency, offering advice and guidance
to the Agency Director and the Senior Executive Team on a full spectrum of
legal issues, including government contracting. While serving
as the Chief Regulatory Counsel-Telecommunications for the Department of
Defense, Mr. Smith was responsible for advising the Office of Science
and Technology Policy and the Assistant Secretary of Defense in
Telecommunication Regulatory matters that affected national security,
emergency preparedness as well as the Department of Defense’s commercial
interests. He is a member of the Hawaiian and D.C. Bar
Associations.
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Nidal
Zayed
Age
49
Director
Since 1998
Chief
Executive Officer & President since 2005
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Mr.
Zayed, as our Chief Executive Officer is the executive most knowledgeable
about, and with the primary responsibility for the success of, our
Company’s strategies and operations. He brings to our Board the
critical link between management and our Board, enabling our Board to
perform its oversight function with the benefit of management’s
perspective on the business. Independently, Mr. Zayed also
brings to the Board particular strengths in all of the executive
management skills needed for his position. Mr. Zayed, Chief
Executive Officer & President, joined the Company in
January 1996. He is also engaged in the practice of
law. He received a law degree from Loyola University School of
Law in 1985 and a B.A. in Accounting from Loyola University of Chicago in
1982.
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Independence
All
directors serving in 2009 and all nominees for director, except Mr. Zayed, are
independent under the applicable independence rules from the NASDAQ listing
standards, which the Company has adopted as the Company’s standards for
independence. The Board also determined that members of the
Compensation Committee meet all applicable independence tests of the NASDAQ
listing standards, Securities and Exchange Commission, and Internal Revenue
Service.
Compensation
of the Board
Each
non-officer director received $20,000 as annual cash compensation for service on
the Board of Directors for 2009. General Clark, Mr. Beck and Mr. Smith
received an additional $1,500 for their participation on the Company’s
Government Security Committee. All directors are reimbursed for
travel and other related expenses incurred in attending Board and committee
meetings. The following table sets forth the fees paid in cash to our
non-employee Directors for Board service during 2009 (they received no other
compensation for such services):
Name
|
|
Fees
paid in Cash
|
|
|
Total
|
|
Ralph
Beck
|
|
$
|
21,500
|
|
|
$
|
21,500
|
|
Jeffrey
Adams
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Trudy
Clark
|
|
$
|
21,500
|
|
|
$
|
21,500
|
|
Max
Engler
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Ibrahim
M. Ibrahim
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Carl
Smith
|
|
$
|
21,500
|
|
|
$
|
21,500
|
|
Board
Leadership
Mr.
Zayed serves as our Chief Executive Officer and Mr. Beck serves as our Chairman
of the Board. We believe the separation of the positions of CEO and
Chairman of the Board promotes an independent Board with a strong oversight
function that fosters accountability of management.
Our
management devotes significant attention to enterprise risk management, and our
Board is actively engaged in the oversight of this activity, both at the full
Board and at the Board committee level. The Company’s enterprise risk
management is an integrated effort to identify, assess, and manage risks that
may affect the Company’s ability to achieve its strategic and operating
objectives. Our Chief Executive Officer and our other executive
officers actively participate in Board and committee discussions about
risk. We believe the separation of the positions of CEO and Chairman
of the Board enhances our risk oversight activity. Our Directors are
authorized to contact company officers and employees directly, without going
through our Chief Executive Officer or another officer, and Company employees
are empowered to bring concerns to our Board.
Board
of Directors Meetings and Committees
The Board
met five times in 2009. No Director attended less than 75% of the
aggregate number of meetings of the Board of Directors and the Committees on
which they served during the period for which they were a
Director. The Company has a Government Security Committee, a
Compensation Committee and an Executive Committee. The Company
formerly had an Audit Committee, which was discontinued during
2005. The full Board has assumed the responsibilities of the Audit
Committee. The Board of Directors has determined that Max Engler is
an “audit committee financial expert” as defined in the rules of the
SEC. The Board has reviewed and discussed the audited financial
statements with management and the Company’s independent auditors for the fiscal
years ended December 31, 2009 and 2008 as well as each quarterly report for all
of 2009 and the quarter ended March 31, 2010. The Board discussed
with the independent auditors the maters required to be discussed by the
statement on Auditing Standards No. 61, as amended, as adopted by the Public
Company Accounting Oversight Board. The Board has received the
written disclosures and the letter from the independent accountant required by
applicable requirements of the PCAOB regarding the independent accountant’s
communications with the Board concerning independence, and has discussed with
the independent account the independent accountant’s
independence. Based on the above-mentioned review and discussions
with management and the independent registered public accountants, the Board
recommended that our company’s audited financial statements be included in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2009, for
filing with the Securities and Exchange Commission.
Compensation
Committee
Ralph
Beck
Jeffrey
Adams
Carl
Smith
The
Compensation Committee establishes rates of salary, bonuses, profit sharing
contributions, grants of stock options, retirement and other compensation for
all directors and officers of the Company and for such other people as the Board
may designate. The Compensation Committee does not have a
charter. All of the members of this Committee are “disinterested
persons” under the provisions of Rule 16b-3 adopted under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). The
Compensation Committee’s primary responsibility is to formulate and maintain the
compensation program of the Company in order to develop and retain (and attract,
when necessary) people important to the Company’s performance. This
Committee specifically acts to evaluate the performance and set the total
compensation for the executive officers of the Company, including the CEO, in
accordance with Company guidelines. This Committee has delegated to
the CEO the power to set compensation for the non-executive
officers. The Compensation Committee met in December of
2009.
Executive
Committee
Max
Engler
Ibrahim
Ibrahim
Nidal
Zayed
The
Executive Committee’s responsibility is to review all large projects and
long-term financing of long-term projects. Members of the Executive
Committee do not receive any meeting fees or other compensation for their
service on the Committee. The Executive Committee did not meet in
2009.
Government Security
Committee
Ralph
Beck
Trudy
Clark
Carl
Smith
Nidal
Zayed
The
Government Security Committee’s responsibility is to ensure compliance with the
terms of the Company’s Special Security Agreement with the United States
government and that policies and procedures are established and maintained to
ensure the safeguard and control of all classified information and controlled
but unclassified information in the possession of the
Company. Non-officer directors of the Government Security Committee
receive an additional $1,500 for their service on the Committee. The
Government Security Committee met 8 times in 2009.
Additional
Information on Nominations for Directors
The
Company does not have a standing nominating committee. Each director
participates in decisions relating to making the Company’s nominations for
directors. The Board of Directors believes that, considering the size
of the Company and the Board of Directors, nominating decisions can be
effectively made on a case-by-case basis and there is no need for the added
formality of a nominating committee. Additionally, the Board of
Directors believes that it is not appropriate to have a standing nominating
committee because the Majority Stockholders own 96.9% of the voting power of the
Company and thereby have the power to choose all directors of the
Company.
The Board
of Directors does not have an express policy with regard to the consideration of
any director candidates recommended by our stockholders because the Board
believes that it can adequately evaluate any such nominees on a case-by-case
basis. The Board will consider stockholder-recommended candidates
under the same criteria as internally generated candidates. Any
stockholder wishing to submit such a recommendation should do so in writing
addressed to Pernix Group, Inc., 860 Parkview Blvd., Lombard, Illinois 60148,
Attention: Corporate Secretary. See “Stockholder Proposals” below in
this Proxy Statement for information regarding procedures that must be followed
by shareholders in order to nominate directors at the 2011 annual
meeting. The Company does not have a policy for the consideration of
diversity in identifying nominees for director.
The
Company and the Majority Stockholders are parties to a Special Security
Agreement with the United States government. That Special Security
Agreement establishes certain criteria for the qualifications of
directors. All nominees shall meet such criteria. Beyond
these criteria, the Board does not currently have additional minimum criteria
for nominees, although substantial relevant business and industry experience
would generally be considered important qualifying criteria, as would the
ability to attend and prepare for board, committee and stockholder
meetings. Any candidate must state in advance his or her willingness
and interest in serving on our Board and its Committees.
The
Company does not have a policy regarding the attendance of directors at annual
meetings of stockholders. One Director attended the 2009 Annual
Meeting of Stockholders.
Executive
Officers
Name
and Age;
Years
Served as Executive Officer
|
|
Principal
Occupation for Past Five Years; Other
Directorships
|
|
|
|
Nidal
Zayed
Age
49
Director
Since 1998
Chief
Executive Officer since 2005
|
|
Nidal
Zayed, President & Chief Executive Officer, joined Pernix Group
in January 1996. He is also engaged in the practice of law. He
received a law degree from Loyola University School of Law in 1985 and a
B.A. in Accounting from Loyola University of Chicago in
1982
|
|
|
|
Greg
Grosvenor
Age
58
Chief
Financial Officer Since August, 2005
|
|
Mr. Grosvenor has
been Pernix Group’s Vice President and Chief Financial Officer since
August 2005. Mr. Grosvenor is responsible for all SEC reporting, tax
compliance, strategic financial planning and human resources at its
corporate headquarters. He is also responsible for all financial
operations including reporting and tax matters in the company’s
international subsidiaries. Mr. Grosvenor has more than sixteen years of
CFO experience with include both private and publicly traded companies.
Mr. Grosvenor has worked with investment firms such as William Blair
Capital to restructure and sell one of their portfolio companies. In
addition, he completed debt restructuring and funding in the hundreds of
millions of dollars for the Metropolitan Pier and Exposition Authority. He
also worked at the parent holding company of Hyatt Corporation for six
years where he was responsible for the financial oversight
and reporting of over 30 companies. He was a member of the team
that spun off Galileo from United Airlines and worked at Anixter Bros. in
various financial and accounting roles. He began his career working with
the international audit firm of PriceWaterhouse Coopers. He obtained his
CPA in Illinois and graduated from Loyola University in
Chicago.
|
Executive
Compensation and Other Matters
The
following table sets forth a summary of compensation paid to the persons who
served as the Chief Executive Officer and any other executive officers as of
December 31, 2009, whose salary and bonus exceeded $100,000 for the fiscal
year ended December 31, 2009:
Name
and
Principal
Position
|
|
Year
|
|
Salary
(1)
|
|
|
Bonus
|
|
|
All
Other Annual
Compensation(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nidal
Zayed
|
|
2009
|
|
$
|
275,000
|
|
|
$
|
-
|
|
|
$
|
24,622
|
|
Chief
Executive Officer & President
|
|
2008
|
|
$
|
275,000
|
|
|
$
|
-
|
|
|
$
|
24,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg
Grosvenor
|
|
2009
|
|
$
|
170,000
|
|
|
$
|
-
|
|
|
$
|
18,963
|
|
Vice-President
& Chief Financial Officer
|
|
2008
|
|
$
|
170,000
|
|
|
$
|
-
|
|
|
$
|
19,307
|
|
(1)
|
Includes
salary paid by the Company before any salary reduction for contributions
to the Company’s 401(k) Savings
Plan.
|
(2)
|
Pernix
Group provided a vehicle to Mr. Zayed at a cost of $11,502 in 2009
and 2008. The Company provided Mr. Zayed with health
insurance for him and his family at a cost of $13,120 in 2009 and $13,254
in 2008. The Company provided health insurance to
Mr. Grosvenor and his family of $18,963 in 2009 and $19,307 in
2008.
|
As of
December 31, 2009 there were no stock options outstanding to any persons
other than non-employee directors.
Certain
Relationships and Related Transactions
Our Board
of Directors reviews and approves all transactions, arrangements or
relationships with us in which any Director, executive officer or shareholder
who owns more than 5% of our common stock (including immediate family members of
Directors and executive officers and any entities owned or controlled by any of
the above) has a direct or indirect material interest, which involve $10,000 or
more and are not generally available to all of our employees, other than
ordinary course Director or employee compensation arrangements or a transaction
with another company at which the related person is a Director or owner of less
than a 5% equity interest. In reviewing the related-party
transactions, the Board of Directors will consider primarily the following
factors: (1) the extent of the related person’s interest in the
transaction, (2) the availability of other sources of comparable products
and services, (3) whether the terms of the transaction are no less
favorable than terms generally available in unaffiliated transactions under like
circumstances, (4) the benefits to us, and (5) the aggregate value of
the transaction. No member of the Board with an interest in a
related-party transaction will participate in the decision-making process
regarding that transaction. The Committee also will review any
relationships with family members of 5% shareholders to the extent such matters
are brought to the Committee’s attention.
The
Company paid Computhink, Inc. $84,660 in 2009 for rent, and certain office
services. The Company shares office space with Computhink in its
Lombard, Illinois office. Director Max Engler is also a director of
Computhink.
Independent
Public Accountants and Audit Fees Summary
The
following disclosure was provided in the10-K filed with the SEC on
March 30, 2010. LJ Soldinger LLC (“Soldinger”), the
Company’s
former
independent
auditor (see Item 2 below), has previously reviewed the disclosure contained
below and had no disagreement with the relevant portions of the
disclosure.
The Board
pre-approves all audit services and permitted non-audit services (including the
fees and terms thereof) to be performed for the Company by its independent
registered accountants, Reznick Group P.C. (“Reznick”). Reznick
became the new independent registered accountants in April 2009. The
following table presents fees for professional services rendered by Soldinger,
the former independent registered accountants, and by Reznick for the respective
periods indicated:
SERVICES
PERFORMED
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Audit
Fees (Note 1)
|
|
$
|
183,000
|
|
|
$
|
235,000
|
|
Audit-Related
Fees (Note 2)
|
|
|
32,138
|
|
|
|
5,000
|
|
Tax
Fees (Note 3)
|
|
|
19,000
|
|
|
|
17,000
|
|
All
Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
Fees
|
|
$
|
234,138
|
|
|
$
|
257,000
|
|
NOTES TO
PRECEDING TABLE
1.
|
Audit
fees represent fees billed for professional services provided in
connection with the audit of our annual financial statements, reviews of
our quarterly financial statements, audit services provided in connection
with statutory and regulatory filings for those years and audit services
provided in connection with securities registration and/or other issues
resulting from that process.
|
2.
|
Audit-related
fees represent fees billed primarily for assurance and related services
reasonably related to the performance of the audit or reviews of our
financial statements.
|
3.
|
Tax
fees principally represent fees billed for tax
preparation.
|
ITEM
2.
PROPOSAL
TO RATIFY REZNICK GROUP
AS THE COMPANY’S INDEPENDENT
AUDIT FIRM
Change in
Independent Accountant
.
The following disclosure was
provided in a current report, filed with the SEC on April 14, 2009 on Form
8-K. Soldinger has previously reviewed this disclosure and provided
the Company with a letter addressed to the Securities and Exchange Commission
stating that it had reviewed the disclosure and had no disagreement with the
relevant portions of the disclosure, pursuant to the requirements of Item 304(a)
of Regulations S-K.
On April
8, 2009, LJ Soldinger Associates LLC (“Soldinger”) was dismissed as the
Registrant’s independent registered public accounting firm. The
decision to dismiss Soldinger was approved by the Registrant’s Board of
Directors. Soldinger’s report on the Registrant’s consolidated
financial statements for the years ended December 31, 2008, and 2007 did not
contain an adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles
During
the Registrant’s fiscal year ended December 31, 2008 and 2007, and during the
period from January 1, 2009 until April 8, 2009, there were no disagreements
with Soldinger on any matter of accounting principles or practices, financial
statement disclosures, or auditing scope or procedure, which disagreements, if
not resolved to Soldinger’s satisfaction, would have caused Soldinger to make
reference thereto in their report.
On April
8, 2009, the Registrant engaged a PCAOB registered accounting firm Reznick Group
(“Reznick”), Certified Public Accountants, as the Registrant’s independent
registered public accounting firm. The decision to appoint Reznick
was approved by the Registrant’s Board of Directors. Prior to
engaging the new accountant, the Registrant did not consult with Reznick during
the fiscal years ended December 31, 2008 and December 31, 2007 and the
subsequent interim period preceding their engagement on April 8, 2009, regarding
application of accounting principles to any contemplated or completed
transactions nor the type of audit opinion that might be rendered on the
Registrant’s financial statements, and neither written nor oral advice was
provided that would be an important factor considered by the Registrant in
reaching a decision as to an accounting, auditing or financial reporting
issue.
The
Registrant has requested Soldinger to review the disclosures contained herein
and has provided Soldinger the opportunity to furnish the Registrant with a
letter addressed to the Commission containing any new information, clarification
of the Registrant’s expression of Soldinger’s views, or the respects in which
Soldinger does not agree with the statements contained herein. Soldinger has
reviewed the disclosure contained herein and has provided to the Registrant a
letter addressed to the Securities and Exchange Commission stating that it has
reviewed the disclosure provided in this Current Report and has no disagreement
with the relevant portions of this disclosure, pursuant to the requirements of
Item 304(a)(3) of Regulation S-K.
Recommendation for
2010
.
The Board
of Directors has selected Reznick to serve as our independent registered public
accounting firm to audit our financial statements for 2010. Our Board
of Directors recommends ratification of the appointment of Reznick.
The
selection of Reznick as our independent registered public accounting firm is not
required to be submitted to a vote of the stockholders for
ratification. The Sarbanes-Oxley Act of 2002 requires that the Board
of Directors be directly responsible for the appointment, compensation, and
oversight of our independent auditors. Our Board of Directors is
submitting the selection to the stockholders for ratification as a matter of
good corporate governance practice. If the stockholders fail to vote
on an advisory basis in favor of the selection, the Board of Directors will
reconsider whether to retain Reznick, and may retain that firm or another firm
without re-submitting the matter to our stockholders. Even if the
stockholders ratify the selection, the Board of Directors may, at its
discretion, direct the selection of a different independent registered public
accounting firm at any time during the year if it determines that such a change
would be in our best interests and the best interests of our
stockholders.
A
representative of Reznick is expected to be present at our Annual Meeting and
will have an opportunity to make a statement if he or she desires to do
so. Additionally, this representative will be available to answer
appropriate questions that you may have regarding Reznick’s examination of our
consolidated financial statements for 2009.
The Board of Directors unanimously
recommends a vote to ratify the engagement of Reznick as the Company’s
independent registered public accounting firm, as described
above. Our Majority Stockholders have indicated that they will vote
in favor of this proposal.
ITEM
3
APPROVAL
OF AMENDMENT TO THE
RESTATED
CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK
SPLIT
Our Board
of Directors has considered, deemed advisable, adopted a resolution approving,
and recommends to our stockholders for their approval a series of proposed
amendments to our Restated Certificate of Incorporation to authorize the Board
to effect a reverse stock split for the purpose of increasing the per share
market price of our common stock in order to encourage investor interest in the
Company and to promote greater liquidity for our stockholders. Under
the proposed amendment, an exchange ratio between and including one-for-ten
(1:10) and one-for-fifteen (1:15) would be implemented for the Company’s issued
and outstanding shares. In other words, if the Company was then to
proceed with the reverse stock split with an exchange ratio of one-for-ten, each
stockholder would receive one share of the Company’s common stock in exchange
for every ten shares of common stock that they presently own. If
approved by the stockholders, the Board would have the discretion until the date
of the 2011 Annual Meeting of Stockholders to (a) decide whether or not to
implement a reverse stock split and (b) if so, decide the number of whole shares
of common stock, between and including ten and fifteen that will be combined,
exchanged and converted into one share of common stock.
The Board
believes that stockholder approval of selected exchange ratios within an
exchange ratio (as opposed to approval of a specified exchange ratio) would
provide the Board with maximum flexibility to achieve the purposes of the
reverse stock split and, therefore, is in the best interests of the Company and
our stockholders. The Board would determine the actual timing for
implementation of the reverse stock split based on its evaluation as to when
such action would be most advantageous to the Company and its
stockholders. Furthermore, notwithstanding stockholder approval, the
Board also would have the discretion not to implement the reverse stock
split. If the Board were not to implement the reverse stock split by
the date of the 2011 Annual Meeting of Stockholders, stockholder approval would
again be required prior to implementing any reverse stock split
thereafter.
If the
Board were to elect to implement the reverse stock split, the Board will set the
exchange ratio within the range approved by the stockholders. The
Board would base such a determination on the then-current trading price of our
common stock and the advice of our financial advisors, among other
considerations.
The form
of the Amendment to the Restated Certificate of Incorporation that would be
filed with the Secretary of State of Delaware to effect the Reverse Stock Split
is set forth in Appendix A to this Proxy Statement; provided, however,
that such text is subject to amendment to include changes as may be
required by the office of the Secretary of State of the State of Delaware and as
our Board of Directors deems necessary and advisable to effect the reverse stock
split. If our stockholders approve the reverse stock split and
following such approval the Board determines that the reverse stock split is in
the best interests of the Company and our stockholders, we would accordingly
file the Amendment.
Certain
of the Company’s officers and Directors have an interest in this reverse stock
split as a result of their ownership of shares of common stock of the Company,
as set forth in the section entitled “
Security Ownership of Certain
Beneficial Owners and Management
.”
Purpose
of the Reverse Stock Split
Our Board
of Directors recommends the reverse stock split for a number of reasons,
including the following:
-
Increase in Market Price and
Eligible Investors.
The Board believes that the reverse
stock split is the most effective means of increasing the per share market
price of our common stock. This may potentially increase eligible
investors.
-
Increase in Investor
Interest.
The Board also believes that a higher per share
market price of our common stock could encourage increased investor interest
in the Company’s common stock and possibly promote greater liquidity for our
stockholders.
The Board
believes that the current low per share price of the common stock has had a
negative effect on the marketability of the common stock. The Board
believes that there are several reasons for this effect. For example,
analysts and brokers may have policies that discourage them from following or
recommending companies with lower stock prices. Because of trading
volatility that often is associated with lower-priced stocks, many brokerage
houses and institutional investors have adopted internal policies and practices
that may prohibit or discourage them from investing in such stocks or
recommending them to their customers. Some of these policies and
practices may also function to make the processing of trades in lower-priced
stocks economically unattractive to the brokers. In a similar manner,
broker commissions on lower-priced stocks also generally represent a higher
percentage of the stock price than commissions on higher-priced
stocks. So, the current share price of the common stock can result in
an individual stockholder paying transaction costs, such as commissions, that
constitute a higher percentage of their total value than would be the case if
the share price of the common stock were higher. Finally,
analysts at brokerage firms may not monitor the trading activity or provide
coverage for lower-priced stocks.
Possibility
that the Reverse Stock Split Will Not Achieve the Desired Effects and Other
Possible Consequences
Stockholders
should carefully note that the effect of the reverse stock split on the market
price of our common stock cannot be accurately predicted. The
proposed reverse stock split may not increase the Company’s price over the
long-term, which would prevent the Company from realizing some of the
anticipated benefits of the reverse stock split. The proposed reverse
stock split may decrease the liquidity of the Company’s stock.
There is
no assurance that the price for shares of the common stock after the reverse
stock split will rise in proportion to the reduction in number of shares of
common stock outstanding resulting from the reverse stock split. The
market price of the Company’s common stock may be based on other factors that
may be unrelated to the number of shares outstanding, including the Company’s
future performance and the current ownership of a majority of the Company’s
shares by the Majority Stockholders.
There is
no assurance that any increase to the per share price of the common stock after
the reverse stock split will be maintained for any period of
time. Further, even if an increased share price can be maintained,
there also is no guarantee that the increased share price will achieve the
desired results that have been outlined above.
Board
Discretion to Implement the Reverse Stock Split
If our
stockholders approve the reverse stock split at the Annual Meeting, we will
effect the reverse stock split, if at all, only if our Board of Directors
determines that the reverse stock split (with an exchange ratio determined by
the Board as described above) is in the best interests of the Company and our
stockholders at the time of such determination. The Board will base
such determination on the advice of our financial advisors and certain other
factors, including considerations as to existing and expected marketability and
liquidity of our common stock, prevailing market conditions and the likely
effect on the market price of our common stock. Notwithstanding
approval of the reverse stock split by the stockholders, the Board may, in its
sole discretion, abandon the effort to reverse stock split and amend the
Restated Certificate of Incorporation prior to the effectiveness of any such
reverse stock split and/or filing with the Delaware Secretary of State as
permitted under Section 242(c) of the Delaware General Corporation
law. If the Board fails to implement the reverse stock split by the
date of the 2011 Annual Meeting of Stockholders, further stockholder approval
would be required prior to implementing any reverse stock split.
Effect
of the Reverse Stock Split
Reduction of Shares Held by
Individual Shareholders.
After the effective date of the
proposed reverse stock split, each stockholder will own fewer shares of common
stock. However, the proposed stock split will affect all stockholders
uniformly and will not affect any stockholder’s percentage ownership interest in
the Company, except to the extent that the reverse stock split results in any
stockholders owning a fractional share as described below and/or owning less
than 100 post reverse-split shares. Proportionate voting rights and
other rights and preferences of the holders of the Company’s common stock will
not be affected by the proposed reverse stock split (other than as described
below for fractional shares and owners of less than 100 post reverse-split
shares). The number of stockholders of record will not be affected by
the proposed reverse stock split.
Authorized But Unissued
Shares.
The reverse stock split will have the effect of
increasing the number of authorized but unissued shares of common stock in the
Company because no proportional adjustment will be made to the total number of
authorized shares. For example, based on the approximate 140,881,235
shares of common stock outstanding at this time, a one-for-ten reverse stock
split would reduce the number of common shares outstanding to approximately
14,088,124 million shares. But, the number of authorized shares of
common stock would remain at 200 million. Future issuances of such
authorized but unissued shares could have the effect of diluting the earnings
per share and book value per share, as well as the stock ownership and voting
rights, of the currently outstanding shares of our common stock. We
do not have any plan, commitment, arrangement, understanding, or agreement
regarding the issuance of common stock after the reverse stock
split.
Stock Plans and
Options.
Currently, there are 180,000 outstanding unexercised
stock options previously granted to non-employee directors. To
maintain the intent of the grants to those non-employee directors, the reverse
stock split will proportionately reduce the number of shares available in the
grant according to the ratio for the reverse stock split (i.e., one-for-ten to
one-for-fifteen in an amount set by the Board) and proportionately increase the
exercise price of the grant by the same ratio. For example, in a
one-for-ten reverse stock split, a grant of 45,000 shares at $1.00 per share
exercise price would have the following effects – the number of shares would be
reduced by a factor of 10 to 4,500 shares, and the exercise price would increase
by a factor of 10 to $10.00 per share. The number of shares
authorized for issuance under equity compensation plans, but not granted, would
also decrease proportionately pursuant to the reverse stock split.
Effective
Date of the Reverse Stock Split
The
proposed reverse stock split would become effective at the close of business
(i.e., 5:00 p.m. local time) on the date of filing of a Certificate of Amendment
to the Restated Certificate of Incorporation with the office of the Secretary of
State for the State of Delaware. On the effective date, shares of
common stock issued and outstanding immediately prior thereto will be combined
and converted, automatically and without any action on the part of the
stockholders, into new shares of common stock in accordance with the reverse
stock split ratio determined and approved by the Board within the limits set
forth in this proposal.
Round-Up
for Fractional Shares and to a Round Lot Holding
Implementation
of the reverse stock split will result in some stockholders holding less than a
whole share of our common stock (a “fractional share’). Similarly,
some stockholders may be reduced to holdings of less than a “round lot” of 100
shares. The reverse stock split would be authorized to provide that:
a) all fractional shares as a result of the split shall automatically be rounded
up to the next whole share, and b) all holders who would beneficially own fewer
than 100 total shares following the reverse stock split shall automatically be
rounded up to a lot of 100 shares. For example, in a one-for-ten
reverse stock split, a holder of 155 pre-reverse stock split common shares would
have 15.5 post-reverse split common shares. That holder would be
rounded up a) to the next whole share as well as b) to a lot of 100 shares (a
total round up of 84.5 shares).
If you
hold common stock as both a registered record holder (i.e., individually in your
own name with our transfer agent) and through a broker, bank or other
institution (i.e., through a “street name”), each individual account will be
rounded up to the next whole share, but all of your holdings among such accounts
will be aggregated for the purpose of rounding up to meet the total of 100
shares.
Based on
the Board’s review of the current distribution of shares among our stockholders,
this rounding up of fractional shares to the next whole share and rounding up
shareholders who own fewer than 100 shares to 100 shares would result in an
insignificant change in the proportionate holdings and voting power of the
stockholders.
Exchange
of Stock Certificates
As soon
as practical after the effective date, stockholders will be notified that the
reverse stock split has been effected.
The
Company’s transfer agent will act as exchange agent for the purposes of
implementing the exchange of stock certificates for record holders (i.e.,
stockholders who hold their shares directly in their own name and not through a
broker). Record holders of pre-reverse split shares will be asked to
surrender to the exchange agent certificates representing pre-reverse split
shares in exchange for a book entry with the transfer agent or certificates
representing post-reverse split shares in accordance with the procedures to be
set forth in a letter of transmittal to be sent by the Company through its
transfer agent. No new certificates will be issued to a stockholder
until such stockholder has surrendered such stockholder’s outstanding
certificate(s) together with the properly completed and executed letter of
transmittal to the exchange agent.
STOCKHOLDERS
OF RECORD SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) UNLESS AND UNTIL
SPECIFICALLY REQUESTED TO DO SO.
STOCKHOLDERS
OF RECORD ALSO SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL FORM.
For
beneficial owners of pre-reverse split shares (i.e., stockholders who held their
shares through a broker or other institutional investor), your broker will make
the appropriate adjustment to the number of shares held in your account
following the effective date of the reverse stock split.
Each
certificate representing shares of common stock issued in conjunction with the
reverse stock split will continue to bear any legends restricting transfer of
such shares that were borne by the surrendered certificates representing shares
of stock.
Accounting
Consequences
The par
value per share of the Company’s common stock will remain unchanged at $0.01 per
share after the reverse stock split. As a result, on the effective
date of the reverse stock split, the stated capital on the Company’s
consolidated balance sheet attributable to common stock will be reduced and the
additional paid-in capital account will be increased by the amount by which the
stated capital is reduced. Per share net income or loss will be
increased because there will be fewer shares of the Company’s common stock
outstanding. The impact of the reverse stock split will be applied to
the Company’s financial statements retrospectively. The Company does
not anticipate that any other material accounting consequences, including
changes to the amount of stock–based compensation expense to be recognized in
any period, will arise as a result of the reverse stock split.
No
Appraisal Rights
Under the
Delaware General Corporation Law, the Company’s stockholders are not entitled to
dissenter’s rights with respect to the proposed amendment to the Restated
Certificate of Incorporation to effect the reverse stock split.
Certain
Federal Income Tax Consequences
The
following is a summary of some important tax considerations of the proposed
reverse stock split. It only addresses stockholders who hold the
pre-reverse split shares and post-reverse split shares as capital
assets. It does not purport to be complete and does not address
stockholders subject to special rules or treatment under any tax
laws. This discussion is based on the Internal Revenue Code of 1986,
as amended, existing treasury regulations and current administrative rulings and
court decisions, all of which are subject to change, possibly with retroactive
effect and to differing interpretations. We have not requested any
ruling from the Internal Revenue Service or opinion of tax counsel with respect
to the matters described herein, and there is no assurance that the Internal
Revenue Service would agree with the conclusions set forth in this
discussion.
ALL
STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT, INCUDING THE APPLICABILITY OF
ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, OR ANY CHANGES TO APPLICABLE TAX
LAWS.
Tax Consequences to the
Company.
We do not expect to recognize any gain or loss solely
as a result of the reverse stock split.
Tax Consequences to Stockholders
Generally.
A stockholder who receives an even number of shares
of our common stock as a result of the reverse stock split should recognize no
gain or loss. A stockholder who receives a “round up” from a
fractional share to a whole share and/or from a lot less than 100 shares to 100
shares may have a tax event based on the value of the “rounded up” shares
provided to the stockholder. The Company believes such tax event will
be minimal or insignificant for most stockholders.
Stockholder’s Basis in Shares
Received Upon the Reverse Stock Split.
The
aggregate tax basis of the shares of our common stock that a stockholder holds
following the reverse stock split will equal the stockholder’s aggregate basis
in the common stock he or she held immediately prior to the reverse stock split,
as well as any basis attributable to a “rounding up” of fractional shares or
from a lot of less than 100 shares to 100 shares.
The
Board of Directors recommends that you vote “FOR” the proposal to approve
amendments to our Restated Certificate of Incorporation to authorize the Board
of Directors to effect the reverse stock split, as described
above. Our Majority Stockholders have indicated that they will vote
in favor of this proposal.
ITEM
4.
PROPOSAL TO APPROVE A
QUASI-REORGANIZATION
The Board
of Directors has adopted a resolution recommending that the stockholders approve
a quasi-reorganization (the “Reorganization”) of the Company’s financial
statements to eliminate its accumulated deficit. The Reorganization
will occur at date to be determined in the future and most likely at December
31, 2010. The Reorganization will be dependent upon several factors
including the approval of the stockholders, approval of the Securities Exchange
Commission, approval if necessary of the Secretary of State of Delaware, and
also, but not limited to:
The
Company believes that a substantial positive change in business environment has
occurred through the change and improvements in management in recent years,
increased construction bidding, and the acquisition of TransRadio in December
2009.
In a
quasi-reorganization, a company will restate the carrying amount of its assets
and liabilities to their fair market value and establish a new retained earnings
account as of the effective date of the
quasi-reorganization. As an example of the anticipated impact
of the Reorganization, the following table presents what the impact would have
been to the Company’s equity balances if the Reorganization had occurred as of
January 1, 2010.
|
|
January
1, 2010
Before
a Quasi
Reorganization
|
|
|
January
1, 2010
After
a Quasi
Reorganization
|
|
Common
Stock
|
|
$
|
1,396
|
|
|
$
|
1,396
|
|
Additional
Paid in Capital
|
|
|
73,692
|
|
|
|
7,057
|
|
Accumulated
deficit
|
|
|
(66,031
|
)
|
|
|
-
|
|
Accumulated
comprehensive loss
|
|
|
(604
|
)
|
|
|
-
|
|
Total
Pernix Group, Inc. and
Subsidiaries
stockholders equity
|
|
$
|
8,453
|
|
|
$
|
8,453
|
|
A
quasi-reorganization is an accounting readjustment that eliminates the
accumulated deficit and accumulated comprehensive loss with a corresponding and
equal decrease in additional paid in capital. The Board believes that
the size of the accumulated loss will limit the Company’s flexibility in future
revenue opportunities as well as impede the Company’s growth by limiting certain
actions that may be in the best interest of the Company and its
stockholders.
Upon
implementation of the Reorganization, the Company must comply with other
disclosure and accounting regulations including:
The Board
believes that the majority of the accumulated deficit was generated by the prior
management team during a period from inception of the Company through
2007. The Board believes that the Company’s new management team,
strategy and restructuring of systems and practices should be measured based
upon the new activities that the Company has embarked upon and not be hindered
by the results and activities of the former management team.
The Board of Directors unanimously
recommends a vote “FOR” the approval of the implementation of a
Quasi-Reorganization as described above. Our Majority Stockholders
have indicated that they will vote in favor of this
proposal.
STOCKHOLDER
PROPOSALS
TO BE PRESENTED AT 2011
ANNUAL MEETING
The rules
promulgated by the SEC under the Securities Exchange Act of 1934 entitle a
Company stockholder to require the Company to include a stockholder proposal in
the proxy materials distributed by the Company. However, those SEC
rules do not require the Company to include in its proxy materials any
nomination for election to the Board (or any other office with the Company) or
impose other limitations on the content of a stockholder proposal, and those
rules also contain eligibility, timeliness, and other requirements (including
the requirement that the proponent must have continuously held at least $2,000
in market value or 1% of the Company’s Common Stock for at least one year before
the proposal is submitted by the proponent).
To be
considered as satisfying the timeliness requirement of the Company’s Bylaw
provisions and the SEC rules in connection with the proxy materials to be
distributed by the Company with respect to the 2011 Annual Meeting, stockholder
proposals must be
received
by
the Corporate Secretary, Pernix Group, Inc., 860 Parkview Blvd.,
Lombard, Illinois, 60148,
not
later than February 26, 2011
.
FORM 10-K ANNUAL
REPORT
Any
stockholder who desires an additional copy of the Company’s 2009 Annual Report
on Form 10-K filed with the Securities and Exchange Commission may obtain a copy
(excluding exhibits) without charge by addressing a request to the Corporate
Secretary, Pernix Group, Inc., 860 Parkview Blvd., Lombard, Illinois,
60148.
STOCKHOLDER COMMUNICATIONS
WITH BOARD
Stockholders
may contact the Company’s Board of Directors as a group or an individual
director by sending written correspondence to the following address: Board of
Directors, Attn: Corporate Secretary, Pernix Group, Inc., 860 Parkview Blvd.,
Lombard, Illinois, 60148. Stockholders should clearly specify in each
communication the name of the individual or group of directors to whom the
communication is addressed.
TRANSACTION OF OTHER
BUSINESS
As of the
date of this Proxy Statement, the only business that management intends to
present or knows that others will present at the Annual Meeting has been
included within this Proxy Statement. If any other matter or matters
are properly brought before the Annual Meeting, or any adjournment thereof, it
is the intention of the persons named in the accompanying form of Proxy Card to
vote the Proxy Card on such matters in accordance with their best
judgment.
|
|
By
Order of the Board of Directors,
|
|
|
|
|
|
|
|
|
|
Lombard,
Illinois
|
|
Nidal
Z. Zayed
|
|
Dated:
May 12, 2010
|
|
Chief
Executive Officer & President
|
|
APPENDIX
A
STATE
OF DELAWARE
CERTIFICATE
OF AMENDMENT TO THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
PERNIX GROUP, INC.
Pernix
Group, Inc. (the “Corporation”), a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify that:
First
, that the Board of
Directors for the Corporation duly adopted a resolution setting forth a proposed
amendment to the Restated Certificate of Incorporation of the Corporation to
combine each
[__
*
]
shares of the Corporation’s
common stock issued and outstanding into one share of the Corporation’s common
stock, declaring said amendment to be advisable and putting the matter before
the stockholders for consideration thereof.
Second
, that thereafter, by
affirmative vote of the holders of a majority of the outstanding shares of the
Corporation’s common stock, pursuant to Article I, Section 8 of the
Corporation’s By-Laws and Section 228 of Delaware’s General Corporation Law, the
following resolution to the Corporation’s Certificate of Incorporation was voted
upon in favor of amendment:
Resolved
, that Article FOURTH
of the Corporation’s Restated Certificate of Incorporation is amended to add a
new Section (4), which will read as follows:
“(4)
Combination and Reverse Stock
Split
. Upon the filing and effectiveness of this amendment to this
corporation’s Restated Certificate of Incorporation (the “Effective Time”)
pursuant to Delaware law, each
[__
*
]
shares of
common stock issued and outstanding immediately prior to the Effective Time
shall be combined into one validly issued, fully paid and nonassessable share of
common stock, without any action by the holder thereof. This
corporation will not issue fractional shares of common stock in connection with
the combination; instead, each fractional share that would otherwise result from
the combination shall be rounded up to one whole share of common
stock. Further, if any shareholder who was a shareholder of the
Corporation immediately prior to the Effective Time would otherwise beneficially
own less than 100 shares of common stock as a result of the combination after
the Effective Time, the number of shares of common stock to be issued to such
shareholder will automatically be rounded up and increased so that such
shareholder will hold 100 shares of common stock following the
combination. Each certificate representing shares of common stock
outstanding as of the Effective Time will thereafter represent that
corresponding number of post-combination shares. Each person holding
a certificate or certificates representing shares of common stock as of the
Effective Time shall receive, upon surrender of such certificate or
certificates, a new certificate or certificates evidencing and representing the
number of shares of common stock to which such person is entitled as a result of
the combination. The combination shall not increase, decrease, or
otherwise affect the authorized capital stock of this corporation as described
in this Article FOURTH.”
In
witness whereof, the Corporation has caused this Certificate of Amendment to be
signed this ___ day of June, 2010.
______________________
Nidal Z.
Zayed
President
& CEO
*
|
Stockholders
are being asked to approve the combination of any number of our pre-split
common stock between and including ten and fifteen into one share of our
post-split common stock. The Certificate of Amendment filed
with the Secretary of State of the State of Delaware will include the
actual exchange ratio determined by our Board. The Board may
also elect not to effect the Reverse Stock Split, in which case this
amendment will be abandoned. In accordance with the resolution
to be adopted by the shareholders, we will not implement any amendment
providing for an exchange ratio outside the range described in this Proxy
Statement.
|
CORPORATE
OFFICE
Pernix
Group, Inc.
860
Parkview Boulevard
Lombard,
Illinois 60148
U.S.A.
P:
630-620-4787
F:
630-620-4753
www.PernixGroup.com
info@pernixgroup.com
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