SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Solicitation Material Pursuant to Rule 14a-11(c) or rule 14a-12
VICOM INCORPORATED
----------------------------------------------------
(Name of Registrant As Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------
2) Aggregate number of securities to which transaction applies:
-----------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
----------------------
5) Total fee paid:
-------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------
(2) Form, Schedule or Registration Statement No.:
--------------
(3) Filing Party:
-----------------
(4) Date Filed:
VICOM
INCORPORATED
9449 SCIENCE CENTER DRIVE
NEW HOPE, MINNESOTA 55428
--------------------------------------------------------------------------------
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 2004
--------------------------------------------------------------------------------
The Annual Meeting of the Shareholders of VICOM, Incorporated ("Vicom" or
"the Company") will be held at the Radisson Hotel, 3131 Campus Drive, Plymouth,
Minnesota 55441 on June 17, 2004, at 3:00 p.m. Minneapolis time, for the
following purposes, as more fully described in the accompanying Proxy Statement.
1. To elect eight Directors for a term of one year.
2. To approve an amendment to Vicom's 1999 Employee Stock Compensation
Plan to increase the total number of common stock shares reserved
for awards to employees under the Plan from 1.8 million to 4.3
million.
3. To approve an amendment to Vicom's 2000 Non-Employee Director Stock
Compensation Plan to increase the total number of common stock
shares reserved for awards to Directors under the Plan from 300,000
to 800,000.
4. To approve an amendment to Vicom's bylaws to lower the percentage of
Vicom's outstanding common shares needed to achieve a quorum for a
shareholder meeting from 50.1% to 34%.
5. To approve an amendment to the Company's Articles of Incorporation
to change the Company's name from VICOM, Incorporated to Multiband
Corporation.
6. To approve an amendment to Vicom's Articles of Incorporation to
increase the authorized number of Vicom common shares from 50
million to 100 million.
7. To ratify the election of Virchow, Krause & Company, LLP as
independent auditors of the Company for fiscal year 2003.
8. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only Shareholders of record at the close of business April 22, 2004 will
be entitled to receive notice of and vote at the meeting. The Company's Board of
Directors recommends a vote in favor of all the proposals.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy as promptly as possible in the
postage-paid envelope enclosed for that purpose. Returning your proxy will help
the Company ensure a quorum and avoid the additional expense of duplicate proxy
solicitations. Any shareholder attending the meeting may vote in person even if
he or she has returned the proxy.
By Order of the Board of Directors
Steven Bell
Secretary
1
VICOM, INCORPORATED
9449 SCIENCE CENTER DRIVE
NEW HOPE, MINNESOTA 55428
--------------------------------------------------------------------------------
PROXY STATEMENT
--------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 17, 2004
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
The mailing address of the principal corporate office of the Company is
9449 Science Center Drive, New Hope, MN 55428. This Proxy Statement and the form
of proxy, which is enclosed, are being mailed to the Company's shareholders
commencing on or about May 20, 2004.
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of the Company. All shares of common stock
represented by properly executed proxies, unless such proxies have previously
been revoked, will be voted in accordance with the direction of the proxies. If
no direction is indicated, the shares will be voted in accordance with the
direction of the proxies. If any others matters are properly presented at the
meeting for action, including a question of adjourning the meeting from time to
time, the persons named in the proxies and acting thereunder will have
discretion to vote on such matters in accordance with their best judgement.
When stock is in the name of more than one person, each such person must
sign the proxy. If the shareholder is a corporation, an executive or other
authorized officer must sign the proxy in the name of such corporation. If
signed as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment must be
furnished.
A shareholder executing and returning a proxy has the power to revoke it
at any time before it is voted. A shareholder who wishes to revoke a proxy can
do so by executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company prior to the vote at the Annual
Meeting, by written notice of revocation received by the Secretary prior to the
vote at the Annual Meeting, or by appearing in person at the Annual Meeting and
voting in person the shares to which the proxy relates.
In addition to the use of the mail, proxies may be solicited by personal
interview, telephone and telegram by the Directors, officers and regular
employees of the Company. Such persons will receive no additional compensation
for such services. Arrangements will also be made with certain brokerage firms
and certain other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of common stock held of record
by such persons, and such brokers, custodians, nominees and fiduciaries will be
reimbursed by the Company for their reasonable out-of-pocket expenses incurred
by them in connection therewith. All expenses incurred in connection with this
solicitation will be borne by the Company.
The Company is including with this Proxy Statement its Annual Report to
shareholders for the year ended December 31, 2003, which includes a copy of the
Company's Form 10-K registration as amended, as filed with the Securities and
Exchange Commission. Shareholders may receive, without charge, additional copies
of the Form 10-K, as amended, by writing to Vicom, Incorporated at its principal
corporate office.
The presence at the Annual Meeting in person or by proxy of the holders of
a majority of the outstanding shares of the Company's common stock entitled to
vote shall constitute a quorum for the transaction of business. If a broker
returns a "non-vote" proxy, indicating a lack of voting instructions by the
beneficial holder of the shares and a lack of discretionary authority on the
part of the broker to vote on a particular matter, then the shares covered by
such non-vote shall be deemed present at the meeting for purposes of determining
a quorum but shall not be deemed to be represented at the meeting for purposes
of calculating the vote required for approval of such matter. If a shareholder
abstains from voting as to any matter, then the shares held by such shareholder
shall be deemed present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to such matter, but shall not
be deemed to have been voted in favor of such matter. An abstention as to any
proposal will therefore have the same effect as a vote against the proposal.
2
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on April 22, 2004
(the "Record Date") will be entitled to vote at this meeting. On the Record
Date, there were 22,291,599 shares of common stock issued and outstanding. Each
holder of common stock is entitled to one vote, exercisable in person or by
proxy, for each share of common stock held of record on the Record Date. The
affirmative vote of holders of a majority of shares of common stock outstanding
on the Record Date is required for approval of the proposals to be voted upon at
the Annual Meeting.
The following table sets forth certain information as of April 22, 2004
with respect to each person known by the Company to be the beneficial owner of
more than 5 percent of its common stock, each Director of the Company, and all
officers and Directors of the Company as a group. Except as indicated, each of
the persons listed in the following table has sole voting and investment power
with respect to the shares set forth opposite his name.
NUMBER OF SHARES(1) PERCENT OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIALLY OWNED SHARES OUTSTANDING
------------------------------------- ------------------ ------------------
Steven Bell 589,063(2) 1.1%
9449 Science Center Drive
New Hope, MN 55428
Frank Bennett 89,600(3) Less than 1%
301 Carlson Parkway - Suite 120
Minnetonka, Minnesota 55305
Jonathan Dodge 70,100(4) Less than 1%
715 Florida Avenue South - Suite 402
Golden Valley, MN 55426
David Ekman 1,751,583(5) 7.8%
2000 44th Street SW
Fargo, ND 58103
Eugene Harris 19,000(6) Less than 1%
225 South Meramec - Suite 722
St. Louis, MO 63105
James L. Mandel 464,133(7) 2.0%
9449 Science Center Drive
New Hope, MN 55428
Donald Miller 1,369,686(8) 5.9%
1924 Cocoplum Way
Naples, FL 34105
David Weiss 122,726(9) Less than 1%
10829 Olive Blvd.
Suite 203
St. Louis, MO 63141
All Directors and executive officers as a group
(eight persons) 4,475,891 18.4%
------------------------------
(1) The percentages are calculated on the basis of 22,291,599 shares of Vicom
common stock outstanding. Shares of common stock not outstanding but deemed
beneficially owned by virtue of the individual's right to acquire them as of
April 22, 2004 or within 60 days of such date are treated as outstanding
when determining the number of shares beneficially owned by each person and
the group and the percent of the class owned by each individual and the
group. Unless otherwise indicated, each person named or included in the
group has sole vesting and investment power with respect to the shares of
common stock set forth opposite his or her name. Unless otherwise indicated,
the information in the table does not include any stock options and / or
warrants outstanding that cannot be exercised within 60 days of April 22,
2004.
(2) Includes vested options to acquire 35,500 shares of common stock. Mr. Bell's
Beneficial Ownership does include 31,250 shares of common stock owned by his
spouse as to which Mr. Bell disclaims his beneficial ownership.
(3) Includes vested options to purchase 69,600 shares of common stock.
(4) Includes vested options to acquire 69,600 shares of common stock.
(5) Includes vested options to purchase 150,500 shares of common stock.
(6) Mr. Harris's beneficial ownership does include 19,000 shares owned by his
spouse as to which Mr. Harris disclaims his beneficial ownership.
(7) Includes vested options to purchase 300,500 shares of common stock.
(8) Includes warrants and vested options to purchase 878,700 shares of common
stock.
(9) Includes vested options to purchase 69,600 shares of common stock.
3
The Nominating Committee has nominated eight persons for election at the
2004 Annual Meeting as Directors for a one-year term expiring at the 2005 Annual
Meeting. The Directors will hold office for the term for which elected and will
serve until their successors have been duly elected and qualified.
It is intended that votes will be cast pursuant to the enclosed proxy for
the election of the nominees in the table below, except for those proxies that
withhold such authority. In the event that any of the nominees of the Company is
unable or declines to serve as a Director at the time of the Annual Meeting, the
proxy will be voted for the election of such other individual as the Nominating
Committee shall designate in the place of such nominee. Management has no reason
to believe that any of the nominees will not be a candidate or will be unable to
serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW.
INFORMATION ABOUT NOMINEES
The following information has been furnished to the Company by the respective
nominees for Director.
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
Steven Bell............... 45 President & CFO, Vicom Incorporated 1994
Frank Bennett............. 47 President, Artesian Capital 2002
Jonathan Dodge......... 53 Partner, Dodge & Fox C.P.A. Firm 1997
David Ekman............... 43 Chief Information Officer, Corporate Technologies USA, Inc. 1999
Eugene Harris............. 39 Shareholder, Eidelman, Finger, Harris & Co. 2004
James L. Mandel........... 47 Chief Executive Officer, Vicom, Incorporated 1998
Donald Miller............ 64 Chairman, Vicom, Incorporated 2001
David Weiss............... 41 Principal, Rangeline Capital, LLC 2002
STEVEN BELL was general counsel and Vice President of the Company from June 1985
through October 1994, at which time he became Chief Financial Officer. He was
also named President in July 1997. He is a graduate of the William Mitchell
College of Law.
FRANK BENNETT has been a Director of Vicom, Incorporated since 2002 and is
currently a member of the Audit Committee. Mr. Bennett is President of Artesian
Management, Inc., which manages Artesian Capital, a private equity investment
firm based in Minneapolis. Artesian Capital invests in companies in the
communications, consumer, financial services and health care industries. Prior
to founding Artesian Capital in 1989, he was a Vice President of Mayfield
Corporation, and a Vice President of Corporate Finance of Piper Jaffray &
Hopwood and a Vice President of Piper Jaffray Ventures, Inc. He is currently a
director of Fairfax Financial Holdings Limited, Odyssey Re Holdings Corp.,
Vicom, Inc., Northbridge Financial Corporation and Crum & Forster Holdings, Inc.
Mr. Bennett currently serves on the boards of several non-profit organizations
including the Social Enterprise Fund, American Federation of Arts, St. David's
Child Development and Family Services, PACER Center and Wayzata Community
Church. Mr. Bennett, a graduate of the University of Oregon, lives with his wife
and five children in Long Lake, MN.
JONATHAN DODGE has been the Senior Partner of the C.P.A. firm of Dodge & Fox
since its inception in March 1997. Prior to that, he was a partner in the CPA
firm of Misukanis and Dodge from 1992 to March 1997. Mr. Dodge is a member of
both the AICPA and the Minnesota Society of CPA's.
DAVID EKMAN is Chief Information Officer of Corporate Technologies, USA, Inc., a
wholly owned subsidiary of Vicom. He has worked continuously in the computer
business since 1981, initially as a franchisee of Computerland, a personal
computer dealer and subsequently from 1996 to December 1999 as President of
Ekman, Inc., a value-added computer reseller and the predecessor company to
Corporate Technologies, USA, Inc.
EUGENE HARRIS is a Vice President and major shareholder of Eidelman, Finger,
Harris & Co., a St. Louis based registered investment advisor. He has been with
Eidelman, Finger, Harris & Co. since 1994. Prior to joining Eidelman, Finger,
Harris & Co., Mr. Harris held positions in general management and new business
development for the Monsanto Company from 1990-1994. He also was an Associate
Consultant with Bain and Co. from 1996-1998. Mr. Harris received a B.S. in
4
Industrial Engineering from Stanford University in 1996 and an M.S. in
Management from the Sloan School of Management at the Massachusetts Institute of
Technology in 1990. He is a Chartered Financial Analyst and a member of the
Financial Analysts Federation. Mr. Harris was appointed to Vicom's Board of
Directors in April 2004.
JAMES MANDEL has been the Chief Executive Officer and a Director of the Company
since October 1, 1998. From October 1991 to October 1996, he was Vice President
of Systems for Grand Casinos, Inc., where his duties included managing the
design, development, installation and on-going maintenance for the 2,000 room,
$507 million Stratosphere Hotel, Casino and Tower in Las Vegas. Mr. Mandel also
managed the systems development of Grand Casino Mille Lacs, in Onamia,
Minnesota, Grand Casino Hinckley in Hinckley, Minnesota and six other casinos
nationwide. He also serves as Chairman of the Board of CorVu Corporation and is
a trustee of the Boys and Girls Club of Minneapolis.
DONALD MILLER worked for Schwan's enterprises between 1962 and 2001, primarily
as Chief Financial Officer. He is currently employed by Schwan's as Special
Assistant to the CEO. He was appointed to Vicom's Board of Directors in
September 2001 and was elected Chairman of the Board in April 2002. Mr. Miller
is also Chairman of Vicom's Audit Committee.
DAVID WEISS has been a Director of Vicom since 2002. He is currently Managing
Principal for Rangeline Capital, LLC, a real estate investment banking company.
Prior to forming Rangeline in 2002, Mr. Weiss was Managing Director for the St.
Louis office of Northland/Marquette Capital Group.
The Company knows of no arrangements or understandings between a Director or
nominee and any other person pursuant to which any person has been selected as a
Director or nominee. There is no family relationship between any of the
nominees, Directors or executive officers of the company.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board has determined that a majority of its members are "independent" as
defined by the listing standards of the NASDAQ Stock Market. The independent
Directors are Messrs. Frank Bennett, Jonathan Dodge, Eugene Harris, Donald
Miller and David Weiss.
The Board of Directors met four times on a regular basis in 2003. As permitted
by Minnesota Law, the Board of Directors also acted from time to time during
2003 by unanimous written consent in lieu of conducting formal meetings. Last
year, there were four such actions and accompanying Board Resolutions passed.
The Board has designated an audit committee consisting of Jonathan Dodge, Donald
Miller and Frank Bennett. The Board also designated a compensation committee
consisting of Frank Bennett and David Weiss.
Shareholder communication with the Board
Our Board welcomes your questions and comments. If you would like to communicate
directly to our Board, or if you have a concern related to the Company's
business ethics or conduct, financial statements, accounting practices or
internal controls, then you may contact our website via www.multibandusa.com,
section Investor Relations. All communications will be forwarded to our audit
committee.
Directors' attendance at Annual Meetings can provide shareholders with an
opportunity to communicate with directors about issues affecting the Company.
The Company does not have a policy regarding director attendance, but all
directors are encouraged to attend the Annual Meeting of Shareholders. Six of
our directors attended our Annual Meeting in 2003.
AUDIT COMMITTEE
Our audit committee:
o recommends to our Board of Directors the independent auditors to conduct
the annual audit of our books and records;
o reviews the proposed scope and results of the audit;
o approves the audit fees to be paid;
5
o reviews accounting and financial controls with the independent public
accountants and our financial and accounting staff; and
o reviews and approves transactions between us and our Directors, officers
and affiliates.
Our audit committee has a formal charter that is an exhibit to our most recent
annual report on Form 10K.
Our audit committee met four times during 2003. The Audit Committee is comprised
entirely of individuals who meet the independence and financial literacy
requirements of NASDAQ listing standards. Our Board has determined that all
three members qualify as an "audit committee financial expert" independent from
management as defined by Item 401(h)(2) of Regulation S-K under the Securities
Act of 1933, as amended. Vicom acknowledges that the designation of the members
of the audit committee as financial experts does not impose on them any duties,
obligations or liability that are greater than the duties, obligations and
liability imposed on them as a member of the audit committee and the Board of
Directors in the absence of such designation.
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee assists the Board in fulfilling its responsibility for
oversight of the quality and integrity of the accounting, auditing, and
financial reporting practices of the Company. During the year ended December 31,
2003, the Committee met four times, and Donald Miller, as the Audit Committee
chair and representative of the Audit Committee, discussed the interim financial
information contained in quarterly earnings announcement with the Company's
Chief Financial Officer and the Company's independent auditors prior to public
release.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may affect their objectivity
and independence and satisfied itself as to the auditors' independence. The
Audit Committee also discussed with management and the independent auditors the
quality and adequacy of the Company's internal controls. The Audit Committee
reviewed with both the independent auditors their audit plans, audit scope, and
identification of audit risks.
The Audit Committee discussed and reviewed with the Company's independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, both with and without management
present, discussed and reviewed the results of the independent auditors'
examination of the Company's financial statements. The Audit Committee reviewed
the audited consolidated financial statements of the Company as of and for the
fiscal year ended December 31, 2003 with management and the independent
auditors. Management has the responsibility for the preparation of the Company's
consolidated financial statements and the Company's independent auditors have
the responsibility for the examination of those statements.
Based on the review referred to above and discussions with management and
the independent auditors, the Audit Committee recommended to the Board of
Directors that the Company's audited consolidated financial statements be
included in its Annual Report on Form 10-K for the fiscal year ended December
31, 2003 for filing with the Securities and Exchange Commission. The Audit
Committee also recommended the reappointment, subject to shareholder approval,
of the independent auditors and the Board of Directors concurred in such
recommendation.
COMPENSATION COMMITTEE
Our compensation committee
o reviews and recommends the compensation arrangements for management,
including the compensation for our chief executive officer; and
o establishes and reviews general compensation policies with the objective
to attract and retain superior talent, to reward individual performance
and to achieve our financial goals.
6
Our compensation committee met four times during 2003. The compensation
committee is comprised entirely of Directors who meet the independence
requirements of the NASDAQ listing standards.
NOMINATING COMMITTEE
The Nominating Committee (the "Nominating Committee") was formed by our Board in
April 2004 and consists of Frank Bennett and David Weiss. The Nominating
Committee's duties include adopting criteria for recommending candidates for
election or re-election to our Board and its committees, considering issues and
making recommendations considering the size and composition of our Board. The
Nominating Committee will also consider nominees for Director suggested by
shareholders in written submissions to the Company's Secretary.
The Nominating Committee met in April 2004 to decide upon the nominees for
Director at the Annual Meeting.
DIRECTOR NOMINATION PROCEDURES
DIRECTOR MANAGER QUALIFICATIONS. The Company's Nominating Committee has
established policies for the desired attributes of our Board as a whole. The
Board will seek to ensure that a majority of its members are independent as
defined in the NASDAQ listing standards. Each member of our Board must possess
the individual qualities of integrity and accountability, informed judgment,
financial literacy, high performance standards and must be committed to
representing the long-term interests of the Company and the shareholders. In
addition, Directors must be committed to devoting the time and effort necessary
to be responsible and productive members of our Board. Our Board values
diversity, in its broadest sense, reflecting, but not limited to, profession,
geography, gender, ethnicity, skills and experience.
IDENTIFYING AND EVALUATING NOMINEES. The Nominating Committee regularly
assesses the appropriate number of Directors comprising our Board, and whether
any vacancies on our Board are expected due to retirement or otherwise. The
Nominating Committee may consider those factors it deems appropriate in
evaluating Director candidates including judgment, skill, diversity, strength of
character, experience with businesses and organizations comparable in size or
scope to the Company, experience and skill relative to other Board members, and
specialized knowledge or experience. Depending upon the current needs of our
Board, certain factors may be weighed more or less heavily by the Nominating
Committee. In considering candidates for our Board, the Nominating Committee
evaluates the entirety of each candidate's credentials and, other than the
eligibility requirements established by the Nominating Committee, does not have
any specific minimum qualifications that must be met by a nominee. The
Nominating Committee considers candidates for the Board from any reasonable
source, including current Board members, shareholders, professional search firms
or other persons. The Nominating Committee does not evaluate candidates
differently based on who has made the recommendation. The Nominating Committee
has the authority under its charter to hire and pay a fee to consultants or
search firms to assist in the process of identifying and evaluating candidates.
CHARTER OF THE NOMINATING COMMITTEE. A copy of the charter of the
Nominating Committee is available on our website at www.multibandusa.com.
EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
remuneration paid by the Company to its executive officers whose aggregate cash
and cash-equivalent remuneration approximated or exceeded $100,000 during the
Company's last three fiscal years ending December 31, 2003.
7
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
NAME AND PRINCIPAL YEAR SALARY BONUS OTHER RESTRICTED SECURITIES LTIP ALL OTHER
POSITION ($) ($) ANNUAL STOCK UNDERLYING PAYOUTS COMPENSATION
COMPENSATION AWARD(S) OPTIONS/ ($) ($)
($) ($) SARS
(#)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
AWARDS PAYOUTS
------ -------
James L. Mandel 2003 $250,727 $125,000 -0- -0- 300,000 -0- -0-
Chief Executive Officer 2002 $149,874 $100,000 -0- -0- -0 -0- -0-
2001 $131,346 -0- -0- 500 -0- -0-
Steven Bell 2003 $120,484 -0- -0- -0- 50,000 -0- -0-
Chief Financial Officer 2002 $99,014 -0- -0- -0- 10,500 -0- -0-
2001 $108,365 -0- -0- -0- 500 -0- -0-
Dave Ekman 2003 $111,154 -0- -0- -0- -0- -0- -0-
Chief Information Officer 2002 $93,695 -0- -0- -0- -0- -0- -0-
2001 $100,614 -0- -0- -0- 500 -0- -0-
DIRECTORS FEES
There were no cash fees paid to Directors in 2003. Outside Directors
receive a stock option of 30,000 shares at market price upon joining the Vicom
Board. Additional awards or options to Directors are determined by the Board's
Compensation Committee.
8
PERFORMANCE GRAPH
The following performance graph compares cumulative total shareholder
returns on the Company's common stock over the last five fiscal years, ended
December 31, 2003, with The NASDAQ Stock Market (U.S. Companies) Index and other
leading industry indices, assuming initial investment of $100 at the beginning
of the period and the reinvestment of all dividends.
[BAR CHART]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG VICOM, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE RUSSELL 2000 INDEX, THE NASDAQ TELECOMMUNICATIONS INDEX
AND THE S & P TELECOMMUNICATIONS SERVICES INDEX
VICOM INC
Cumulative Total Return
12/98 3/99 6/99 9/99 12/99
VICOM, INC 100.00 137.50 133.33 113.33 266.67
NASDAQ STOCK MARKET (U.S.) 100.00 112.89 122.95 129.70 192.89
RUSSELL 2000 100.00 94.58 109.28 102.37 121.26
NASDAQ TELECOMMUNICATIONS 100.00 135.38 143.61 149.22 252.16
S & P TELECOMMUNICATION SERVICES 100.00 103.37 117.15 108.61 119.14
12/98 3/00 6/00 9/00 12/00 3/01 6/01 9/01
VICOM, INC 558.33 387.53 400.00 300.00 265.60 200.00 103.33
NASDAQ STOCK MARKET (U.S.) 224.09 196.93 184.03 124.95 86.46 83.08 76.01
RUSSELL 2000 129.85 124.94 126.32 117.59 109.94 125.76 99.53
NASDAQ TELECOMMUNICATIONS 270.97 204.16 171.67 103.40 76.97 81.29 48.89
S & P TELECOMMUNICATION SERVICES 117.52 101.17 90.14 72.90 72.32 70.98 71.18
12/98 12/01 3/02 6/02 9/02 12/02 3/03
VICOM, INC 114.67 91.33 66.67 40.00 60.00 70.00
NASDAQ STOCK MARKET (U.S.) 67.09 67.69 70.91 66.48 61.75 55.56
RUSSELL 2000 120.52 125.32 114.85 90.27 95.83 91.53
NASDAQ TELECOMMUNICATIONS 63.59 53.47 38.33 35.26 45.31 51.49
S & P TELECOMMUNICATION SERVICES 63.97 54.04 41.41 30.62 42.15 36.07
12/98 6/03 9/03 12/03
VICOM, INC 140.00 110.67 82.00
NASDAQ STOCK MARKET (U.S.) 67.52 75.14 85.04
RUSSELL 2000 112.97 123.22 141.11
NASDAQ TELECOMMUNICATIONS 65.51 67.13 78.49
S & P TELECOMMUNICATION SERVICES 43.87 39.80 45.14
[END BARCHART]
COMPARISON OF FIVE YEAR - CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
VICOM, INCORPORATED
PREPARED BY THE RESEARCH DATAGROUP, INC.
VICOM INC.
12/99 12/00 12/01 12/02 12/03
VICOM, INCORPORATED 800.00 900.00 344.00 180.00 82.00
NASDAQ STOCK MARKET (U.S.) 261.49 157.77 125.16 86.53 85.04
RUSSELL 2000 118.17 114.60 117.45 93.39 141.11
NASDAQ TELECOMMUNICATIONS 295.01 125.74 84.16 38.77 78.49
CHASE H & Q COMMUNICATIONS 462.05 293.82 136.84
S & P COMMUNICATION SERVICES 181.54 111.08 97.48 64.23 45.14
9
STOCK OPTION GRANTS DURING 2003
The following table provides information regarding stock options granted
during fiscal 2003 to the named executive officers in the Summary Compensation
Table.
Potential Realizable Value at
Number of Percent of Assumed Annual Rates of Stock
Securities Total Options Price Appreciation for Option
Underlying Granted to Exercise or Term(1)
Options Employees in Base Price Expiration -----------------------------
Name Granted (#) Fiscal Year (%) ($/Share) Date 5% 10%
---- ----------- --------------- --------- ---- -- ---
James L. Mandel 300,000 46.3 $1.50 1/8/2013 -0- $258,092
Steven M. Bell 50,000 7.7 $1.10 1/8/2013 $19,115 $ 63,015
Dave Ekman -0- -0- - - - -
------------
(1) The "potential realizable value" shown represents the potential gains based
on annual compound stock price appreciation of 5% and 10% from the date of
grant through the full option terms, net of exercise price, but before
taxes associated with exercise. The amounts represent certain assumed rates
of appreciation only, based on the Securities and Exchange Commission
rules. Actual gains, if any, on stock option exercises are dependent on the
future performance of the common stock, overall market conditions and the
option holders, continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved and do not
reflect the Company's estimate of future stock price growth.
Each option represents the right to purchase one share of common stock.
The options shown in this table are all non-qualified stock options. To the
extent not already exercisable, the options generally become exercisable in the
event of a merger in which Vicom is not the surviving corporation, a transfer of
all shares of stock of Vicom, a sale of substantially all the assets, or a
dissolution or liquidation, of Vicom.
AGGREGATED OPTION EXERCISES IN 2003 AND YEAR END OPTION VALUES
The following table provides information as to options exercised by the
named executive officers in the Summary Compensation Table during fiscal 2003
and the number and value of options at December 31, 2003.
SHARES
ACQUIRED VALUE (1)
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2003 DECEMBER 31, 2003
----------------- -----------------
James L. Mandel............ -0- -0- 450,500 -0- $94,500 $0
Steven M. Bell............. -0- -0- 57,166 3,334 $6,500 $0
David Ekman................ -0- -0- 150,500 -0- $0 $0
(1) Value is calculated on the basis of the difference between the option
exercise price and $1.23, the fair market value of the Company's common
stock at December 31, 2003 as quoted on the NASDAQ, multiplied by the
number of shares underlying the option.
OTHER COMPENSATION AND LONG-TERM INCENTIVE PLANS
The Company has no long-term incentive plans and issued no long-term
incentive awards during 2003.
The Company has an employment agreement with Mr. Steven Bell,
President, for the term beginning January 2002 and expiring December 2004. Mr.
Bell's compensation is not directly tied to the Company's performance. The
agreement states that annual base salary for Mr. Bell will be between $125,000
and $135,000 per year. Other key provisions of the contract include an agreement
by Mr. Bell to keep confidential information secret both during and after
employment by the Company and covenants not to compete with the Company for one
year from the date of termination of employment. The contract also provides Mr.
Bell with 75,000 stock options at market price, vested over a three year period.
10
The Company maintains key man life insurance policies in the amount of
$1,000,000 each on the lives of Steven Bell and Marvin Frieman, former Director.
The Company is the beneficiary of these policies and has adopted a plan to pay
fifty percent of all life insurance proceeds to the spouse or surviving children
of each such individual.
The Company also has a three year employment agreement, from January
2002 to December 2004, with James L. Mandel, Chief Executive Officer, the terms
of which involve an annual base salary of $200,000 and a stock option of 300,000
shares at $1.50 per share, vested over a three year period. Mr. Mandel's job
responsibilities involve developing company business plans, developing expansion
and growth opportunities and directing other executive officers.
PREFERRED STOCK
In December 1998, Vicom issued 2,550 shares of Class A Preferred for
$23,638 and 37,550 shares of Class B Preferred for $359,893. The Class B
Preferred was offered to certain note holders at a conversion rate of $10.00 per
share of Class B Preferred. Each share of Class A Preferred and Class B
Preferred is non-voting (except as otherwise required by law) and convertible
into five shares of common stock, subject to adjustment in certain
circumstances. Each holder of a share of Class A Preferred or Class B Preferred
has a five-year warrant to purchase one share of common stock at $3.00 per
share, subject to adjustment. During 2001, Vicom issued 67,655 shares of Class A
Preferred for $676,556.
In June 2000, Vicom issued 80,500 shares of Class C Preferred for
$805,000. The Class C Preferred was offered to certain note holders at a
conversion rate of $10.00 a share. In September 2000, Vicom issued an additional
72,810 shares of Class C Preferred for $728,100. Each share of Class C Preferred
is non-voting (except as otherwise required by law) and convertible into two
shares of Vicom common stock, subject to adjustment in certain circumstances.
In November 2000, Vicom issued 72,500 shares of Class D Preferred for
$490,332. The Class D Preferred was sold to eight accredited investors at $10.00
per share. Each share of Class D Preferred is non-voting (except as otherwise
required by law) and convertible into two and one-half shares of Vicom common
stock, subject to adjustment in certain circumstances.
In the second quarter of 2002, Preferred Class D stocks were redeemed;
$100,000 converted to common stock, and $300,000 converted to a Note Payable.
In the fourth quarter of 2002, Vicom issued 70,000 shares of Class E
Preferred for $700,000, with $600,000 related to conversion of a note payable
from a Director of the Company into Preferred Stock.
In the first quarter of 2003, $72,000 worth of Class C Preferred Stock
was issued to an officer of the Company in a conversion of accounts payable.
Also in the first quarter of 2003, $76,500 worth of Class E Preferred Stock was
issued to a member of the Board for his purchase of Multiband assets.
In the third quarter of 2003 $25,000 worth of Class B Preferred Stock
was purchased by an accredited investor.
In addition, during 2003 $133,100 worth of Class C Preferred Stock was
redeemed.
The holders of the Class A Preferred, Class B Preferred, Class C
Preferred, Class D Preferred and Class E Preferred (collectively, "Preferred
Stock") are entitled to receive, as and when declared by the Board, out of the
assets of the Company legally available for payment thereof, cumulative cash
dividends calculated based on the $10.00 per share stated value of the Preferred
Stock. The per annum dividend rate is eight percent (8%) for the Class A
Preferred and ten percent (10%) for the Class B Preferred and Class C Preferred,
fourteen percent (14%) for the Class D Preferred and fifteen percent (15%) in
the Class E Preferred, to be paid in kind. Dividends on the Class A Preferred,
Class C Preferred and Class D Preferred are payable quarterly on March 31, June
30, September 30, and December 31 of each year. Dividends on the Class B
Preferred are payable monthly on the first day of each calendar month. Dividends
on the Preferred Stock accrue cumulatively on a daily basis until the Preferred
Stock is redeemed or converted.
11
In the event of any liquidation, dissolution or winding up of Vicom,
the holders of the Class A Preferred and Class B Preferred will be entitled to
receive a liquidation preference of $10.50 per share, and the holders of the
Class C Preferred, Class D Preferred and Class E Preferred will be entitled to
receive a liquidation preference of $10.00 per share, each subject to
adjustment. Any liquidation preference shall be payable out of any net assets of
Vicom remaining after payment or provision for payment of the debts and other
liabilities of Vicom.
Vicom may redeem the Preferred Stock, in whole or in part, at a
redemption price of $10.50 per share for the Class A Preferred and the Class B
Preferred and $10.00 per share for the Class C Preferred, Class D Preferred and
Class E Preferred (subject to adjustment, plus any earned and unpaid dividends)
on not less than thirty days' notice to the holders of the Preferred Stock,
provided that the closing bid price of the common stock exceeds $4.00 per share
(subject to adjustment) for any ten consecutive trading days prior to such
notice. Upon Vicom's call for redemption, the holders of the Preferred Stock
called for redemption will have the option to convert each share of Preferred
Stock into shares of common stock until the close of business on the date fixed
for redemption, unless extended by Vicom in its sole discretion. Preferred Stock
not so converted will be redeemed. No holder of Preferred Stock can require
Vicom to redeem his or her shares.
RELATED PARTY TRANSACTIONS
The following is a summary of all significant related party
transactions for the three years ended December 31, 2003.
Rangeline Capital is an entity managed and co-owned by David Weiss,
Director. In 2002 and 2003, Rangeline made equipment purchases from the Company.
In both years, those purchases comprised less than 5% of Company annual
revenues.
Vicom and its subsidiaries lease principal offices located at 2000 44th
Street SW, Fargo, ND 58013 and 9449 Science Center Drive, New Hope, Minnesota
55428. The Fargo office lease expires in 2017 and covers approximately 22,500
square feet. The Fargo base rent ranges from $21,577 to $24,360 per month. The
New Hope office lease expires in 2006 and covers approximately 47,000 square
feet. The New Hope base rent ranges from $16,000 to $17,653 per month. Both the
New Hope and main Fargo leases have provisions that call for the tenants to pay
net operating expenses, including property taxes, related to the facilities.
Both offices have office, warehouse and training facilities. The main Fargo
property is owned in part by David Ekman. The New Hope property was owned
jointly by Steven Bell and Marvin Frieman prior to its sale in August, 2003 to
an independent third party.
Interest and dividend expense paid by Vicom to related parties was
approximately $225,966 in 2003, $228,000 in 2002 and $3,000 in 2001. Related
parties include the Company's Chairman, Chief Executive Officer, President and
the President's mother.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that directors, certain
officers of the Company and ten percent shareholders file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the "SEC")
as to the Company's securities beneficially owned by them. Such persons are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and any written representations referred to in Item 405(b)(2)(i) of
Regulation S-K stating that no Forms 5 were required, the Company believes that,
during fiscal year 2003, all Section 16(a) filing requirements applicable to the
Company's officers, directors and ten percent shareholders were complied with.
2. AMENDMENT TO EMPLOYEE 1999 STOCK COMPENSATION PLAN
The Company's Board of Directors is recommending and seeking
shareholder approval of an amendment to its 1999 Stock Compensation Plan related
to employee stock options. The total number of shares of stock reserved for
awards to employees under the Plan is 1.8 million shares. The Company is seeking
to change the total number of stock shares reserved under the plan to 4.3
million shares.
12
The purpose of the plan is to promote the interest of the Company and
its shareholders by providing employees of the company with an opportunity to
receive a proprietary interest in the Company and thereby develop a stronger
incentive to contribute to the Company's continued success and growth. The plan
is administered by a Committee of the Board of Directors. Awards pursuant to the
1999 plan may be in the form of either a restricted stock grant, which means
that stock issued will vest over a three year vesting period, or stock options.
Options granted under the Plan may be either "incentive" stock options
within the meaning of Section 422 of the Internal Revenue Code ("IRC") or
"nonqualified" stock options that do not qualify for special tax treatment under
the IRC. No incentive stock option may be granted with a per share exercise
price less than the fair market value of a share of the Company's common stock
on the date the option is granted; in the case of any shareholder owning 10
percent or more of the common stock to whom an incentive stock option has been
granted under the Plan, the exercise price thereof is required to be not less
than 110 percent of the fair market value of the common stock on the date the
option is granted. Options are not transferable. An optionee, or his or her
personal representative, may exercise his or her option for a period of ninety
(90) days following termination of employment, disability or death. The term of
each option, which is fixed by the Committee, may not exceed 10 years from the
date the option is granted, or 5 years in the case of incentive stock options
granted to shareholder owing 10 percent or more of the common stock to whom
options have been granted. Options may be made exercisable in whole or in
installments as determined by the Committee or Board. The Committee or Board may
cancel an option of an employee who has been terminated for cause or takes
employment with a competitor. The closing sale price of a share of the Company's
common stock was $1.96 on April 22, 2004.
Federal Income Tax Matters
Options. Incentive stock options granted under the 1999 plan are
intended to qualify for favorable tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended. Under Section 422, an optionee
recognizes no taxable income when the option is granted. Further, the optionee
generally will not recognize any taxable income when the option is exercised if
he or she has at all times from the date of the option's grant until three
months before the date of exercise been an employee of the Company. The Company
ordinarily is not entitled to any income tax deduction upon the grant or
exercise of an incentive stock option. Certain other favorable tax consequences
may be available to the optionee if he or she does not dispose of the shares
acquired upon the exercise of an incentive stock option for a period of two
years from the granting of the option and one year from the receipt of the
shares.
Under present law, an optionee will not realize any taxable income on
the date a nonqualified option is granted pursuant to the 1999 plan. Upon
exercise of the option, however, the optionee must recognize, in the year of
exercise, ordinary income equal to the difference between the option price and
the fair market value of the Company's common stock on the date of exercise.
Upon the sale of the shares, any resulting gain or loss will be treated as
capital gain or loss. The Company will receive an income tax deduction in its
fiscal year in which nonqualified options are exercised equal to the amount of
ordinary income recognized by those optionees exercising options, and must
withhold income and other employment related taxes on such ordinary income.
Restricted Stock Awards. Generally, no income is taxable to the
recipient of a restricted stock award in the year the award is granted. Instead,
the recipient will recognize compensation taxable as ordinary income equal to
the fair market value of the shares in the year in which the transfer
restrictions lapse. Alternatively, if a recipient makes a "Section 83(b)"
election, the recipient will, in the year that the restricted stock award is
granted, recognize compensation taxable as ordinary income equal to the fair
market value of the shares on the date of the award. The Company normally will
receive a deduction equal to the amount of compensation the recipient is
required to recognize as ordinary taxable income, and must comply with
applicable tax withholding requirements.
3. AMENDMENT TO 2000 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
The Company's Board of Directors is recommending and seeking
shareholder approval of an amendment to its 2000 Non-Employee Director Stock
Compensation Plan. The total number of shares reserved for awards under the Plan
is 300,000 shares. The Company is seeking to change the total number of stock
shares reserved under the plan to 800,000 shares.
13
The purpose of the 2000 Directors' Plan is to enable the Company,
through the grant of non-qualified stock options to non-employee ("outside")
Directors of the Company, to attract and retain highly-qualified outside
Directors and, by providing them with such a stock-based incentive, to motivate
them to promote the best interests of the Company and its shareholders. For the
purposes of the Plan, outside Directors are Directors who, at the time of
granting of options under the Plan, are not and for the prior twelve months have
not been employees of the Company or any of its subsidiaries.
All grants will provide for an exercise price equal to 100% of the fair
market value of a Share at the date of the grant. Options will become
exercisable approximately one year after date of grant and will expire ten years
after date of grant, subject to earlier exercise and termination in certain
circumstances. If an outside Director ceases to be a Director due to death, any
of his outstanding options that have not yet become exercisable will accelerate,
and all of his outstanding Options will remain exercisable for various specified
periods of time up to a maximum of approximately one year. If an outside
Director ceases to be a Director due to disability, all of his or her
outstanding options not fully vested will immediately terminate, and those that
are fully vested will remain exercisable for various specified periods of time
up to a maximum of approximately one year. If an outside Director ceases to be a
Director for any other reason, all of his or her outstanding options not fully
vested will immediately terminate, and those that are fully vested will remain
exercisable for 90 days.
The closing sale price of a share of the Company's common stock was $1.96 on
April 22, 2004.
Federal Income Tax Matters
Under present law, an optionee will not realize any taxable income on
the date a nonqualified option is granted pursuant to the 2000 Directors' Plan.
Upon exercise of the option, however, the optionee must recognize, in the year
of exercise, ordinary income equal to the difference between the option price
and the fair market value of the Company's common stock on the date of exercise.
Upon the sale of the shares, any resulting gain or loss will be treated as
capital gain or loss. The Company will receive an income tax deduction in its
fiscal year in which nonqualified options are exercised equal to the amount of
ordinary income recognized by those optionees exercising options, and must
withhold income and other employment related taxes on such ordinary income.
14
Equity Compensation Plan Information
The following table provides information as of December 31, 2003 about
the Company's equity compensation plans.
-------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE NUMBER OF SECURITIES REMAINING
ISSUED UPON EXERCISE OF EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE UNDER
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EQUITY COMPENSATION PLANS (EXCLUDING
WARRANTS AND RIGHTS WARRANTS AND RIGHTS SECURITIES REFLECTED IN COLUMN (A))
-------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
-------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 2,500,000 $1.81 842,568
approved by security
holders
-------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 0 0 0
not approved by security
holders (1)
-------------------------------------------------------------------------------------------------------------------------
TOTAL 2,500,000 $1.81 842,568
-------------------------------------------------------------------------------------------------------------------------
* The Company's Board has the authority to grant options and warrants to
purchase shares of the Company's common stock outside of any equity compensation
plans approved by security holders.
4. AMENDMENT TO COMPANY'S BYLAWS TO LOWER THE REQUIREMENTS FOR A QUORUM
The Company's current bylaws Section 2.04 require a majority of the
votes of the company's outstanding shares of common stock present or present by
proxy to lawfully hold an annual meeting quorum and pass any proposal related
thereto. The Company's Board of Directors is recommending and seeking
shareholder approval to change the Company's bylaws provision to lower the
requirements for an annual meeting quorum to 34% of the common shares
outstanding present or present by proxy, which is a standard permitted under
NASDAQ rules.
The purpose behind this requested amendment is to make it easier for
the Company to obtain a quorum for shareholder meetings and to take actions at
those meetings. The Company believes official corporate business that requires
shareholder approval can be conducted more efficiently with this Amendment to
the Company bylaws.
5. APPROVAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION CHANGE THE
COMPANY'S NAME FROM VICOM, INCORPORATED TO MULTIBAND CORPORATION
The Board of Directors is recommending and seeking shareholder approval
of an amendment to the Company's articles of incorporation to change its name
from VICOM, Incorporated to Multiband Corporation.
The purpose of this requested amendment is to present consistent
nomenclature and name branding to the marketplace. The Company in 2003 already
changed the name of its largest subsidiary to Multiband. The Company, in all its
advertising and marketing efforts, utilizes and promotes the name Multiband.
Upon approval of the amendment, the Company will promptly make the
necessary filings with all governmental and regulatory authorities concerned.
6. APPROVAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF VICOM COMMON SHARES FROM 50 MILLION TO 100 MILLION
The Board of Directors proposes that the Company amend its Articles of
Incorporation to increase the total number of authorized shares from 50,000,000
to 100,000,000. As of the Record Date, the total number of outstanding shares of
stock was 22, 291,500 shares of common stock and 239,681 shares of Preferred
Stock.
15
REASONS FOR THE AMENDMENT
An increase in the total number of authorized shares will provide the
shares needed for employee stock plans and convertible securities that are
currently outstanding, as well as additional shares of common stock for
potential growth in the Company. With the increased authorized common stock, the
Company would have greater flexibility in structuring possible future financings
and acquisitions and meeting other corporate needs which might arise. The
Company has no current commitments or plans for the issuance of common stock
other than in connection with our stock option plans and convertible securities.
As of April 22, 2004, the number of authorized common shares reserved for
issuance under our stock option and employee stock purchase plans is 2.5
million, upon exercise of outstanding warrants is 7,124.438 shares, upon vesting
of outstanding restricted stock is 10,144 shares, upon conversion of outstanding
preferred stock (described above, page 11) is 1,055,155 shares and upon
conversion from a note payable is 988,960 shares. Said note payable is listed as
an exhibit to the Company's Form 8K filed on December 16, 2003. If this proposal
is approved by the shareholders, almost 66 million authorized shares would be
unreserved and available for future issuances.
The Company may use additional shares to (partially) finance potential
acquisitions. In addition, the Company may consider conducting an equity
offering to raise capital or reduce existing debt. Future issuances of common
stock may have a significant dilutive effect on the equity interests of current
shareholders.
Approval of an increase in the authorized number of shares of common
stock generally empowers the directors of the Company to issue additional shares
of common stock without giving notice to the shareholders or obtaining their
approval, except in certain circumstances such as in connection with the
adoption of certain employee benefit plans or the issuance of private equity
that is subject to the applicable NASDAQ shareholder approval rules. The NASDAQ
rules generally require us to obtain shareholder approval for issuances of
common stock in connection with (i) the acquisition of another company if an
officer, director or significant shareholder has a 5% or greater interest (or a
10% interest collectively) or the issuance or potential issuance of stock will
be equal to 20% or more of the outstanding shares or voting power before the
issuance, (ii) the sale of common stock in a private transaction if the sale is
equal to 20% or more of the outstanding common stock or voting power and is sold
for less than the greater of book or market value of the stock, (iii) the
issuance of common stock that results in a change of control or (iv) the
adoption of certain stock option or purchase plans or other equity compensation
arrangements.
The Company's proposal to increase the authorized number of shares of
common stock is not submitted in response to any accumulation of stock or
threatened takeover. However, the increase in authorized common stock could,
under certain circumstances, be construed as having an anti-takeover effect by,
for example, diluting the stock ownership of shareholders and possibly making it
more difficult to effect a change in the composition of the Board of Directors
through the removal or addition of directors, or to accomplish a given
transaction that may be in the shareholders' interests. Further, the dilutive
effect may limit the participation of shareholders in a merger or similar
business combination, whether or not management favors such transaction. Except
as noted below, the Company does not have any provisions in its governing
documents that have an anti-takeover effect nor does it have plans to
subsequently implement measures having anti-takeover effects.
The Company's Articles of Incorporation authorize the issuance of stock
and authorize the Board of Directors to establish by resolution different
classes or series of shares and fix the rights and preferences of such shares.
In the event of a proposed merger, tender offer or other attempt to gain control
of the Company of which the Board does not approve, the Board could create an
additional series of preferred stock with rights and preferences that could
impede the completion of such a transaction and issue such preferred stock to
persons who would support the Board in opposing the transaction. The Board does
not intend to issue any additional shares of preferred stock except on terms
that the Board deems to be in the best interests of the Company and its then
existing shareholders.
7. INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee had selected Virchow, Krause & Company, LLP, to
audit the financial statements of the Company for the last fiscal year ended
December 31, 2003. Virchow, Krause has audited the Company's financial
statements annually since 2001. Although it is not required to do so, the Board
wishes to submit the selection of Virchow, Krause to the shareholders for
ratification. In the event that a majority of the votes cast are against the
ratification, the Audit Committee will reconsider its selection.
16
FEES BILLED TO THE COMPANY BY VIRCHOW, KRAUSE & COMPANY, LLP DURING
FISCAL 2003
The following table details the fees paid to Virchow Krause for the
years ended December 31, 2003 and 2002.
2003 2002
---- ----
Audit Fees $60,929 $66,181
Audit-Related Fees 2,150 (1) 750 (1)
Tax Fees 15,000 (2) 11,750 (2)
All Other Fees 1,705 (3) 155 (3)
--------- -----------
Total $79,784 $78,836
========= ===========
(1) Fees related to review of Form S-3 Filings
(2) Fees related to VICOM corporate income tax filings
(3) Fees related to miscellaneous research projects
The Company's Audit committee consists of Frank Bennett, Jonathan Dodge
and Donald Miller. All three are considered audit committee financial experts
independent from managers. The Company's current audit committee charter has
been filed as exhibit to the annual report of the Company on Form 10-K that was
filed for the fiscal year ended on December 31, 2003. The audit committee is
responsible for engaging the audit firm and fees related to their services.
The policy of the Company's audit committee is to review and
pre-approve both audit and non-audit services to be provided by the independent
auditors (other than with de minimis exceptions permitted by the Sarbanes-Oxley
Act of 2002). This duty may be delegated to one or more designated members of
the audit committee with such approval reported to the committee at its next
regularly scheduled meeting. Approval of non-audit services shall be disclosed
to investors in periodic reports required by section 13(a) of the Securities
Exchange Act of 1934. Approximately 95 % of the fees paid to Virchow Krause were
pre-approved by the audit committee.
No services in connection with appraisal or valuations services,
fairness opinions or contribution-in-kind reports were rendered by Virchow
Krause. Furthermore, no work of Virchow Krause with respect to its services
rendered to the Company was performed by anyone other than Virchow Krause.
It is expected that a representative of Virchow, Krause & Company, LLP
will be present at this meeting. The representative will have an opportunity to
make a statement and will be available to respond to appropriate questions.
8. OTHER MATTERS
The management of the Company is unaware of any other matters that are
to be presented for action at the meeting. Should any other matter come before
the meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
SHAREHOLDERS PROPOSALS
Proposals of shareholders of the Company intended to be presented by
such shareholders at the Company's 2005 Annual Meeting of Shareholders must be
received by the Company no later than December 30, 2004, in order that they may
be considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
Also, if a shareholder proposal intended to be presented at the 2005
Annual Meeting but not included in the Company's proxy statement and proxy is
received by the Company after March 15, 2005, then management named in the
Company's proxy form for the 2005 Annual Meeting will have discretionary
authority to vote shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials.
Date: May, 2004 By Order of the Board of Directors
Steve Bell
Secretary
17
VICOM, INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, JUNE 17, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be voted on
the matters set forth on this form as directed by the shareholder, but if no
direction is made in the space provided, it will be voted FOR the election of
all nominees to the Board of Directors, and FOR the ratification of all
proposals submitted herewith to Vicom shareholders.
The undersigned, a shareholder of Vicom, Incorporated (the "Company") hereby
appoints James Mandel and Steven Bell, and each of them individually, as
proxies, with full power of substitution, to vote on behalf of the undersigned
the number of shares the undersigned is then entitled to vote, at the Annual
Meeting of the Shareholders of Vicom, Incorporated to be held at the Radisson
Hotel, 3131 Campus Drive, Plymouth, Minnesota 55441 on June 17, 2004 at 3:00
p.m., and any adjournments or postponements thereof upon matters set forth
below, with all the powers which the undersigned would possess if personally
present.
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to Vicom, Incorporated, c/o Steven Bell, 9449 Science
Center Drive, New Hope, Minnesota 55428.
1. Election of Directors: [ ] For all nominees listed below (except as marked to
the contrary below)
01 Steven Bell 02 Frank Bennett 03 Jonathan Dodge
04 David Ekman 05 Eugene Harris 06 James Mandel
07 Donald Miller 08 David Weiss
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE WRITE
THE NUMBER(S) OF THE NOMINEE(S) IN THE SPACE PROVIDED.) _______________________
2. To approve an amendment to Vicom's 1999 Employee Stock Compensation Plan
to increase the total number of stock shares reserved for awards to
employees under the Plan from 1.8 million to 4.3 million.
[ ] For [ ] Against [ ] Abstain
3. To approve an amendment to Vicom's 2000 Non-Employee Director Stock
Compensation Plan to increase the total number of stock shares reserved
for awards to Directors under the Plan from 300,000 to 800,000.
[ ] For [ ] Against [ ] Abstain
4. To approve an amendment to Vicom's bylaws to lower the percentage of the
outstanding shares needed to achieve a quorum for a shareholder meeting
from 50.1% to 34%.
[ ] For [ ] Against [ ] Abstain
5. To approve an amendment to the Company's Articles of Incorporation to
change the Company's name from VICOM, Incorporated to Multiband
Corporation.
[ ] For [ ] Against [ ] Abstain
6. To approve an amendment to Vicom's Articles of Incorporation to increase
the authorized number of Vicom shares from 50 million to 100 million.
[ ] For [ ] Against [ ] Abstain
7. To ratify the election of Virchow, Krause & Company, LLP as independent
auditors of the Company for Fiscal Year 2003.
[ ] For [ ] Against [ ] Abstain
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ALL PROPOSALS CONTAINED IN
THIS PROXY.
Address Change? Mark Box / / The undersigned hereby revokes all previous proxies relating to the
Indicate changes below: shares covered hereby and acknowledge receipt of the Notice
and Proxy Statement relating to the Annual Meeting.
Dated: , 2004
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Signature(s) in Box
(SHAREHOLDERS MUST SIGN EXACTLY AS THE NAME APPEARS AT LEFT,
WHEN SIGNED AS A CORPORATE OFFICER, EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, ETC., PLEASE GIVE FULL TITLE AS SUCH. BOTH
JOINT TENNANTS MUST SIGN.)
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