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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
METRETEK TECHNOLOGIES, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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: ________________________________________________________
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METRETEK TECHNOLOGIES, INC.
303 EAST 17TH AVENUE
SUITE 660
DENVER, COLORADO 80203
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2005
To the Stockholders of
Metretek Technologies, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Metretek Technologies, Inc., a Delaware corporation (the
"Company"), will be held at The Warwick Hotel, 1776 Grant Street, Denver,
Colorado, on Monday, June 6, 2005 at 9:00 a.m., local time, for the following
purposes:
1. To elect two directors, each to serve for a term of three years and
until his successor is duly elected and qualified;
2. To ratify the appointment of Hein & Associates LLP as the Company's
independent registered public accounting firm for the fiscal year
ending December 31, 2005; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only holders of record of the Company's Common Stock as of the close of
business on April 26, 2005 are entitled to notice of and to vote at the Annual
Meeting and at any adjournments or postponements thereof.
By Order of the Board of Directors,
Gary J. Zuiderveen
Secretary
Denver, Colorado
May 3, 2005
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. HOWEVER,
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE REQUESTED TO SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED
STAMPED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING AND SO DESIRE, YOU MAY REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
METRETEK TECHNOLOGIES, INC.
303 EAST 17TH AVENUE
SUITE 660
DENVER, COLORADO 80203
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2005
GENERAL SOLICITATION AND VOTING INFORMATION
PROXY SOLICITATION
This Proxy Statement is being furnished to the holders of Common Stock,
par value $.01 per share (the "Common Stock"), of Metretek Technologies, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board" or the "Board of
Directors") for use at the Annual Meeting of Stockholders of the Company to be
held at The Warwick Hotel, 1776 Grant Street, Denver, Colorado, on Monday, June
6, 2005 at 9:00 a.m., local time, and at any adjournments or postponements
thereof (the "Annual Meeting"), for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. This Proxy Statement, the accompanying
proxy card and the Notice of Annual Meeting of Stockholders are being first
mailed to stockholders on or about May 3, 2005.
The solicitation of proxies will initially be made by mail and may
thereafter be made in person or by mail, telephone, facsimile, electronic
communication or other means of communication by the directors, officers and
regular employees of the Company for no additional or special compensation. In
addition, brokerage houses, banks, nominees, trustees, custodians and other
fiduciaries will be requested by the Company to forward proxy solicitation
materials for shares of Common Stock held of record by them to the beneficial
owners of such shares, and such fiduciaries will, upon request, be reimbursed by
the Company for their reasonable out-of-pocket expenses incurred in connection
therewith. The cost of the solicitation of proxies for use at the Annual Meeting
will be borne by the Company.
VOTING RIGHTS AND PROCEDURES
Only holders of record of the Company's Common Stock as of the close of
business on April 26, 2005 (the "Record Date") are entitled to notice of and to
vote at the Annual Meeting. As of the close of business on the Record Date,
12,258,782 shares of Common Stock of the Company were issued and outstanding.
Each share of Common Stock outstanding on the Record Date entitles the holder
thereof to one vote on each matter to be voted upon at the Annual Meeting. The
presence, in person or by proxy, at the Annual Meeting of the holders of a
majority of the shares of Common Stock outstanding as of the Record Date is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting.
The directors will be elected by a plurality of the votes cast by the
holders of shares of Common Stock present, in person or by proxy, and entitled
to vote at the Annual Meeting. The affirmative vote of the holders of a majority
of the shares of Common Stock present, in person or by proxy, and entitled to
vote at the Annual Meeting is required to ratify the appointment of Hein &
Associates LLP as the Company's independent registered public accounting firm
for the fiscal year ending December 31, 2005 (the "Auditors Proposal").
Abstentions and "broker non-votes" (shares held of record by brokers or
nominees for a beneficial owner which are not voted on a particular matter
because the broker or nominee has not received voting instructions from the
beneficial owner of such shares and the broker or nominee does not have
discretionary voting authority with respect to that matter) will be treated as
present for purposes of determining the presence of a quorum for the transaction
of business at the Annual Meeting. Abstentions on a matter will be treated as
present on such matter and, accordingly, (i) will have no effect on the outcome
of the election of directors, and (ii) will have the same effect as votes
"AGAINST" the Auditors Proposal. Broker non-votes on a matter will not be
treated as present on such matter and, accordingly, will have no effect on the
outcome of the election of directors or the Auditors Proposal.
If a proxy card is properly signed and returned to the Company at or prior
to the Annual Meeting, unless subsequently properly revoked, the shares
represented by that proxy card will be voted at the Annual Meeting in accordance
with the instructions specified thereon. If a proxy card is properly signed and
returned to the Company at or prior to the Annual Meeting without voting
1
instructions, it will be voted (i) "FOR" the election as directors of the
persons named herein as the nominees, and (ii) "FOR" the Auditors Proposal. If
any other matters are properly presented at the Annual Meeting or any
adjournments or postponements thereof, the persons appointed as proxies in the
proxy card will have the discretionary authority to vote or act thereon in
accordance with their best judgment.
A stockholder may revoke a proxy at any time before it is exercised, by
delivering to the Secretary of the Company a written notice of revocation, by
delivering a properly signed proxy bearing a later date, or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not
in and of itself constitute the revocation of a proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 26, 2005 (except
as otherwise noted) by:
- each person who is known by the Company to beneficially own 5% or
more of the outstanding shares of the Company's Common Stock;
- each director and nominee for director of the Company;
- each of the Named Executive Officers (as defined in "Executive
Compensation" below); and
- all directors and executive officers of the Company as a group.
SHARES OF COMMON STOCK (1)
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NAME OF BENEFICIAL OWNER NUMBER PERCENT (2)
------------------------ --------- -----------
DDJ Capital Management, LLC (3)................................. 2,057,938 15.9
141 Linden Street, Suite 4
Wellesley, Massachusetts 02482
Gruber & McBaine Capital Management, LLC (4).................... 1,172,612 9.5
50 Osgood Place, Penthouse
San Francisco, CA 94133
Special Situations Funds (5).................................... 960,328 7.6
153 East 53rd Street
New York, New York 10022
Sidney Hinton (6)............................................... 744,101 6.0
General Motors Trust Company, as trustee for GMAM
Investment Funds Trust II (7)............................... 685,976 5.5
767 Fifth Avenue
New York, New York 10153
W. Phillip Marcum (8)........................................... 498,301 4.0
A. Bradley Gabbard (9).......................................... 410,285 3.3
Anthony D. Pell (10)............................................ 166,564 1.3
Basil M. Briggs (11)............................................ 137,138 1.1
Kevin P. Collins (12)........................................... 118,165 0.9
Gary J. Zuiderveen (13)......................................... 47,132 0.4
John Bernard (14)............................................... 23,768 0.2
Thomas R. Kellogg (15).......................................... 100,000 0.8
All directors and executive officers
as a group (8 persons)(16)............................. 2,145,454 16.2
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(1) For purposes of this table, the "Number" and the "Percent" of shares of
Common Stock beneficially owned is determined in accordance with Rule
13d-3 promulgated by the Securities and Exchange Commission ("SEC") under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
such information is not necessarily indicative of beneficial ownership for
any other purpose. Under Rule 13d-3, beneficial ownership includes any
shares as to which the beneficial owner has sole or shared voting power or
investment power and any shares that the beneficial owner has the right to
acquire within 60 days of April 26, 2005 through the exercise of any stock
option,
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warrant or other right to acquire shares of Common Stock. In addition,
such shares are deemed to be outstanding in calculating the percent
beneficially owned by such beneficial owner, but are not deemed to be
outstanding in determining the percent beneficially owned by any other
beneficial owner. Unless otherwise indicated in these notes, each
beneficial owner has sole voting and investment power (or shares such
power with his spouse) with respect to the shares shown as beneficially
owned, subject to community property laws where applicable.
(2) The percent of class is based upon 12,258,782 shares of Common Stock
outstanding as of April 26, 2005.
(3) Information based, in part, on Amendment No. 6 to Schedule 13D filed with
the SEC on December 16, 2004, by DDJ Capital Management, LLC ("DDJ"), B
III-A Capital Partners, L.P. ("B III-A Capital Partners") and GP III-A,
LLC ("GP III-A"), indicating beneficial ownership as of December 9, 2004.
Information also based, in part, on Amendment No. 3 to Schedule 13G filed
with the SEC on February 16, 2005 by General Motors Trust Company, as
trustee for GMAM Investment Funds Trust II ("GMAM") and General Motors
Investment Management Corporation ("GMIMCO"), indicating beneficial
ownership as of December 31, 2004. GP III-A is the general partner of, and
DDJ is the investment manager for, B III-A Capital Partners. DDJ is the
investment advisor to the DDJ Canadian High Yield Fund. DDJ is an
investment manager for GMAM. Includes 221,497 shares of Common Stock held
by B III-A Capital Partners, 664,484 shares of Common Stock held by DDJ
Canadian High Yield Fund, and 442,998 shares of Common Stock held by GMAM.
Also includes 728,969 shares of Common Stock that may be acquired upon the
exercise of currently exercisable warrants, of which warrants to purchase
121,497 shares are owned by B III-A Capital Partners, warrants to purchase
364,484 shares are owned by DDJ Canadian High Yield Fund, and warrants to
purchase 242,988 shares are owned by GMAM.
(4) Information based, in part, upon Schedule 13G filed with the SEC on
February 14, 2005 by Gruber & McBaine Capital Management, LLC ("GMCM"),
Jon D. Gruber, J. Patterson McBaine, Eric B. Swergold, J. Lynn Rose and
Lagunitas Partners LP ("Lagunitas"), indicating beneficial ownership as of
December 31, 2004. GMCM is the manager of Gruber & McBaine International
("GMI") and the general partner of Lagunitas, an investment limited
partnership. Messrs. Gruber and McBaine are the managers, controlling
persons and portfolio managers of GMCM and have voting control and
investment discretion over the securities held by Lagunitas and GMI.
Lagunitas is an investment limited partnership of which GMCM is the
general partner. GMCM, Messrs. Gruber, McBaine and Swergold and Ms. Rose
constitute a group within the meaning of Rule 13d-5(b). Lagunitas is not a
member of any group and disclaims beneficial ownership of the securities
with respect to its ownership is reposited. Includes 161,289 shares of
Common Stock that may be acquired upon the exercise of currently
exercisable warrants, of which warrants to purchase 112,903 shares of
Common Stock are held by Lagunitas, warrants to purchase 29,032 shares of
Common Stock held by GMI, warrants to purchase 9,671 shares of Common
Stock are held by Mr. Gruber, and warrants to purchase 9,671 shares of
Common Stock are held by Mr. McBaine.
(5) Information based, in part, upon Amendment No. 3 to Schedule 13G filed
with the SEC on February 11, 2005 by Austin W. Marxe and David M.
Greenhouse, indicating beneficial ownership as of December 31, 2004. MGP
Advisors Limited Partnership ("MGP") is the general partner of the Special
Situations Fund III, L.P. AWM Investment Company, Inc. ("AWM") is the
general partner of MGP and the general partner of and investment adviser
to the Special Situations Cayman Fund, L.P. SST Advisers, L.L.C. ("SSTA")
is the general partner of and investment adviser to the Special Situations
Technology Fund, L.P. and the Special Situations Technology Fund II, L.P.
MG Advisers, L.L.C. ("MG") is the general partner of and investment
adviser to the Special Situations Private Equity Fund, L.P. Messrs. Marxe
and Greenhouse are the principal owners of MGP, AWM, SSTA and MG. Through
their control of MGP, AWM, SSTA and MG, Messers. Marxe and Greenhouse
share voting and investment control over the portfolio securities of each
of the funds referenced in this note. Includes 198,308 shares of Common
Stock held are held by the Special Situations Fund III, 120,522 shares of
Common Stock held by the Special Situations Private Equity Fund, 15,365
shares of Common Stock held by the Special Situations Technology Fund,
80,187 shares of Common Stock held by the Special Situations Technology
Fund II and 65,782 shares of Common Stock held by the Special Situations
Cayman Fund. Also includes 480,164 shares of Common Stock that may be
acquired upon the exercise of currently exercisable warrants, of which
warrants to purchase 198,308 shares are owned by the Special Situations
Fund III, warrants to purchase 120,522 shares are owned by the Special
Situations Private Equity Fund, warrants to purchase 15,365 shares are
owned by the Special Situations Technology Fund, warrants to purchase
80,187 shares are owned by the Special Situations Technology Fund II and
warrants to purchase 65,782 shares are owned by the Special Situations
Cayman Fund.
(6) Includes 145,000 shares that may be acquired by Mr. Hinton upon the
exercise of currently exercisable stock options. Also include 10,000
restricted shares that are subject to risk of forfeiture prior to vesting.
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(7) See note (3) above. These holdings are included in the holdings of DDJ
Capital Management, LLC.
(8) Includes 266,667 shares that may be acquired by Mr. Marcum upon the
exercise of currently exercisable stock options. Also include 33,333
restricted shares that are subject to risk of forfeiture prior to vesting.
(9) Includes 4,187 shares owned by immediate family members of Mr. Gabbard and
255,833 shares that may be acquired by Mr. Gabbard upon the exercise of
currently exercisable stock options. Also include 16,666 restricted shares
that are subject to risk of forfeiture prior to vesting.
(10) Includes 2,937 shares held by Mr. Pell's wife. Also includes 113,415
shares that may be acquired by Mr. Pell upon the exercise of currently
exercisable stock options.
(11) Includes 9,500 shares owned by Mr. Briggs' wife and 10,000 shares owned by
a family trust of which Mr. Briggs is a trustee. Also includes 8,186
shares that may be acquired by Mr. Briggs upon the exercise of currently
exercisable stock options.
(12) Includes 115,915 shares that may be acquired by Mr. Collins upon the
exercise of currently exercisable stock options.
(13) Includes 37,334 shares that may be acquired by Mr. Zuiderveen upon the
exercise of currently exercisable stock options.
(14) Includes 22,875 shares that may be acquired by Mr. Bernard upon the
exercise of currently exercisable stock options.
(15) Mr. Kellogg's employment with the Company terminated effective October 6,
2004. Includes 100,000 shares that may be acquired by Mr. Kellogg upon the
exercise of currently exercisable stock options.
(16) Includes 965,225 shares that may be acquired upon the exercise of
currently exercisable stock options. Also includes 59,999 restricted
shares that are subject to risk of forfeiture prior to vesting. See note
notes (7) through (14).
4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of five members
divided into three classes, designated Class I, Class II and Class III, with
members of each class serving staggered three year terms. Each director serves
in office until the expiration of his term and until his successor is duly
elected and qualified, or until his earlier death, resignation or removal. In
the future, any new members added to the Board of Directors will be distributed
among the three classes so that, as nearly as possible, each class will consist
of an equal number of directors.
All directors are elected by the holders of the Common Stock. The holders
of the Company's Series B Preferred Stock, par value $.01 per share ("Series B
Preferred Stock"), voting separately as a class, had the right to elect one
member to serve on the Company's Board of Directors until the Series B Preferred
Stock was redeemed in December 2004. Pursuant to that right of designation,
Kevin P. Collins had been serving as a director of the Company. In December
2004, after the Series B Preferred Stock was redeemed, the Board of Directors
appointed Mr. Collins to continue to serve on the Board, as a Class II Director.
The term of the Class II directors expires at the Annual Meeting. Two
Class II directors are to be elected at the Annual Meeting, each to serve for a
term of three years and until his successor is duly elected and qualified. On
the recommendation of the Nominating and Corporate Governance Committee, the
Board of Directors has nominated A. Bradley Gabbard and Kevin P. Collins to be
re-elected as Class II directors. All other directors will continue in office
until the expiration of their respective terms, as indicated below, and until
their respective successors are duly elected and qualified.
The Class II directors will be elected by a plurality of the votes cast by
the holders of shares of Common Stock present, in person or by proxy, and
entitled to vote at the Annual Meeting. If properly signed and returned to the
Company at or prior to the Annual Meeting, the accompanying proxy card will be
voted "FOR" the election of the nominees listed below, unless contrary
instructions are specified. Although the Board of Directors has no reason to
believe that either of the nominees listed below will decline or be unable to
serve as a director, should that occur, the persons appointed as proxies in the
accompanying proxy card intend to vote, unless the number of nominees or
directors is reduced by the Board of Directors, for such other nominee as the
Board of Directors may designate, on the recommendation of the Nominating and
Corporate Governance Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
AS DIRECTORS OF THE PERSONS LISTED BELOW AS "NOMINEES". PROXY CARDS SIGNED AND
TIMELY RETURNED TO THE COMPANY WILL BE SO VOTED, UNLESS CONTRARY INSTRUCTIONS
ARE SPECIFIED THEREON.
NOMINEES
CLASS II - TERM EXPIRES IN 2008
A. BRADLEY GABBARD, 50, a founder of the Company, has served as an
executive officer and director of the Company since its incorporation in April
1991. He has served as the Executive Vice President of the Company since July
1993 and the Chief Financial Officer and Treasurer of the Company since August
1996 and from April 1991 until July 1993. He also serves as the Chief Financial
Officer of each of the Company's subsidiaries. Mr. Gabbard also served as the
Secretary of the Company from May 2000 until April 2001, and as the Vice
President and the Secretary of the Company from April 1991 through July 1993.
KEVIN P. COLLINS, 54, has served as a director of the Company since March
2000. Mr. Collins has been a Managing Member of The Old Hill Company LLC, which
provides corporate financial and advisory services, since 1997. From 1992 to
1997, he served as a principal of JHP Enterprises, Ltd., and from 1985 to 1992
he served as Senior Vice President of DG Investment Bank, Ltd., both of which
were engaged in providing corporate finance and advisory services. Mr. Collins
also serves as a director of Key Energy Services, Inc., an oilfield service
provider; The Penn Traffic Company, a food retailer; London Fog Industries,
Inc., an outerwear designer and distributor; Malden Mills Industries, Inc., a
synthetic fleece manufacturer; Mail Contractors of America Inc., a trucking
company; and Deluxe Pattern, Inc., a designer of automotive components. Mr.
Collins is a Chartered Financial Analyst.
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CONTINUING DIRECTORS
CLASS I - TERM EXPIRES IN 2007
W. PHILLIP MARCUM, 61, a founder of the Company, has served as the
Chairman of the Board, President, Chief Executive Officer and a director of the
Company since its incorporation in April 1991. He also serves as the Chairman of
each of the Company's subsidiaries. Mr. Marcum also serves on the board of
directors of Key Energy Services, Inc.
BASIL M. BRIGGS, 69, has served as a director of the Company since June
1991. He has been an attorney in the Detroit, Michigan area since 1961,
practicing law with Cox, Hodgman & Giarmarco, P.C., since January 1997. Mr.
Briggs was of counsel with Miro, Weiner & Kramer, P.C., from 1987 through 1996.
He was the President of Briggs & Williams, P.C., Attorneys at Law, from its
formation in 1977 through 1986. Mr. Briggs was the Secretary of Patrick
Petroleum Company ("Patrick Petroleum"), an oil and gas company, from 1984, and
a director of Patrick Petroleum from 1970, until Patrick Petroleum was acquired
by Goodrich Petroleum Company ("Goodrich Petroleum"), an oil and gas company, in
August 1995. From August 1995 until June 2000, he served as a director of
Goodrich Petroleum.
CLASS III - TERM EXPIRES IN 2006
ANTHONY D. PELL, 66, has served as a director of the Company since June
1994. Mr. Pell is the President, Chief Executive Officer and a co-owner of
Pelican Investment Management, an investor advisory firm that he co-founded in
November 2001. Mr. Pell is a director of Rochdale Investment Management, Inc. He
was the President and a co-owner of Pell, Rudman & Co., an investment advisory
firm, from 1981 until 1993, when it was acquired by United Asset Management
Company, and he continued to serve as an employee until June 1995. Mr. Pell was
a director of Metretek, Incorporated ("Metretek Florida") until it was acquired
by the Company in March 1994. Mr. Pell was associated with the law firm of
Coudert Brothers from 1966 to 1968 and with the law firm of Cadwalder,
Wickersham and Taft from 1968 to 1972, specializing in estate and tax planning.
In 1972, Mr. Pell joined Boston Company Financial Strategies, Inc. as a Vice
President and was appointed a Senior Vice President in 1975.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and certain other key employees of the Company and
its subsidiaries are as follows:
W. PHILLIP MARCUM, 61, a founder of the Company, has served as the
Chairman of the Board, President, Chief Executive Officer and a director of the
Company since April 1991. He also serves as the Chairman of each of the
Company's subsidiaries.
A. BRADLEY GABBARD, 50, a founder of the Company, has served as an
executive officer and director of the Company since its incorporation in April
1991. He has served as the Executive Vice President of the Company since July
1993 and as the Chief Financial Officer and Treasurer of the Company since
August 1996 and from April 1991 until July 1993. He also serves as the Chief
Financial Officer of each of the Company's subsidiaries. Mr. Gabbard also served
as the Secretary of the Company from May 2000 until April 2001, and as the Vice
President and the Secretary of the Company from April 1991 through July 1993.
GARY J. ZUIDERVEEN, 46, has served as the Vice President of the Company
since April 2005 and as the Controller, Principal Accounting Officer and
Secretary of the Company since April 2001. He previously served as the
Controller of the Company from May 1994 until May 2000 and as the Secretary and
Principal Accounting Officer of the Company from August 1996 until May 2000. He
also serves in one or more of the capacities of Controller, Principal Accounting
Officer or Secretary of the subsidiaries of the Company. From June 1992 until
May 1994, Mr. Zuiderveen was the General Accounting Manager at the University
Corporation for Atmospheric Research in Boulder, Colorado. From 1983 until June
1992, Mr. Zuiderveen was employed in the Denver, Colorado office of Deloitte &
Touche LLP, providing accounting and auditing services to clients primarily in
the manufacturing and financial services industries and serving in the firm's
national office accounting research department.
JOHN BERNARD, 50, has served as the President and Chief Executive Officer
and a director of Southern Flow Companies, Inc. ("Southern Flow"), a
wholly-owned subsidiary of the Company, since December 1, 2004. Mr. Bernard has
served in various managerial capacities since joining Southern Flow in 1988,
including serving as the Vice President and General Manager of Southern Flow
from June 1998 through November 2004.
6
SIDNEY HINTON, 42, has served as the President and Chief Executive Officer
and a director of PowerSecure, Inc. ("PowerSecure"), a wholly-owned subsidiary
of the Company, since its incorporation in September 2000. He also served as the
President and Chief Executive Officer of PowerSpring, Inc., a wholly-owned
subsidiary of the Company, from May 2000 until January 2001. From February 2000
until May 2000, Mr. Hinton was an Executive-in-Residence with Carousel Capital,
a private equity firm. From February 1999 until December 1999, he was the Vice
President of Market Planning and Research for Carolina Power & Light (now known
as Progress Energy). From August 1997 until December 1998, Mr. Hinton was the
President and Chief Executive Officer of IllumElex Lighting Company, a national
lighting company. From 1982 until 1997, Mr. Hinton was employed in several
positions with Southern Company and Georgia Power Company.
CORPORATE GOVERNANCE
The Company's Board of Directors believes that good corporate governance
principles and practices provide an important framework to ensure that the
Company is managed for the long-term benefit of its stockholders. The Board of
Directors has adopted a set of Corporate Governance Guidelines, which are
intended to formalize the corporate governance practices to which the Company
adheres through its Board of Directors and committees of the Board. The Board of
Directors continually reviews its corporate governance practices in light of
changes and developments in laws and regulations, including the Sarbanes-Oxley
Act of 2002, the rules and regulations of the SEC and relevant stock market
listing standards and other requirements, as well as best practices recommended
by recognized authorities. The Company's Corporate Governance Guidelines are
available at the Company's website at www.metretek.com under "Investor Info --
Corporate Governance."
DIRECTOR INDEPENDENCE
Under its Corporate Governance Guidelines, the Company has established a
policy that a majority of the members of the Board of Directors must be
"independent." In order to assist it in making determinations of director
independence, the Board of Directors has adopted a formal set of categorical
standards (the "Standards of Director Independence"), based upon the meaning of
independent directors under applicable law, SEC rules and regulations (including
Rule 10A-3 under the Exchange Act) and relevant stock market listing standards.
Although the Company's Common Stock is currently traded on the OTC Bulletin
Board, the Board of Directors currently utilizes the definition of independent
directors set forth in the listing standards of the American Stock Exchange in
evaluating the independence of its members.
Under the Standards of Director Independence, a director of the Company
will only be considered independent if the Board of Directors affirmatively
determines that the director has no direct or indirect material relationship
with the Company, other than in his capacity as a director. In making such
determinations, the Board of Directors considers all relevant facts and
circumstances. The Standards of Director Independence provide that a director
will not be considered independent if he has any of these relationships:
- Employment. The director is or has been an employee, or has an
immediate family member who is or has been an executive officer, of
the Company at any time during the past three years.
- Compensation. The director or an immediate family member of the
director has received more than $60,000 in direct compensation from
the Company during any 12-month period within the past three years,
other than Board and committee fees.
- Affiliation with the Company's Independent Registered Public
Accounting Firm.
- The director or an immediate family member of the director is
a current partner of a firm that is the Company's current
independent registered public accounting firm.
- The director is a current employee of the Company's current
independent registered public accounting firm.
- An immediate family member of the director is a current
employee of the Company's current independent registered
public accounting firm and participates in that firm's audit,
assurance or tax compliance practice (excluding tax planning).
- The director or an immediate family member of the director was
within the past three years, but is no longer, a partner or
employee of a firm that is the Company's current independent
registered public accounting firm and personally worked on the
Company's audit within that time.
7
- Interlocking Relationships. The director or an immediate family
member of the director is, or has been within the past three years,
employed as an executive officer of another company for which any of
the Company's present executive officers at the same time serves or
served on that company's compensation committee.
- Business Transactions. The director or an immediate family member of
the director is an employee, executive officer, partner (other than
a limited partner) or significant equity holder of an organization
that has made payments to, or received payments from, the Company
for property or services in an amount which, in any of the past
three fiscal years, exceeds the greater of $200,000 or 5% of such
other organization's consolidated gross revenues for that year
(other than those arising solely from investments in the Company's
securities or payments under non-discretionary charitable
contribution matching programs).
- Indebtedness. The director is an executive officer, partner, member
or significant equity holder of another company that is indebted to
the Company, or to which the Company is indebted, and the total
amount of indebtedness exceeds 2% of the total consolidated assets
of such other company.
- Charitable Contributions. Within the past three years, the director
was an executive officer, trustee or director of a foundation,
university or other non-profit or charitable organization receiving
grants, endowments or other contributions from the Company that
exceeded the greater of $1.0 million or 2% of such charitable
organization's consolidated gross revenues in any single fiscal
year.
In addition, in order to be independent under the Standards of Director
Independence, a member of the Audit Committee cannot be an affiliated person of
the Company or any of its subsidiaries and cannot accept or receive directly or
indirectly any consulting, advisory or other compensatory fees from the Company
or any of its subsidiaries, other than (i) in his capacity as a member of the
Board of Directors or a committee of the Board, and (ii) fixed amounts of
compensation under a retirement plan (including deferred compensation) for prior
services with the Company (provided that such compensation is not contingent in
any way on continued service with the Company).
Based upon these Standards of Director Independence, the Board of
Directors has determined that of its five current members, each of its three
non-management members (Basil M. Briggs, Anthony D. Pell and Kevin P. Collins)
is independent. Accordingly, a majority of the members of the Board of Directors
is independent.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors meets regularly throughout the year and holds
special meetings and acts by unanimous written consent whenever circumstances
require. The Board of Directors held a total of 13 meetings during 2004. During
2004, each director attended more than 85% of the total number of meetings of
the Board of Directors and of the committees of the Board of Directors on which
he served, and the average attendance of all directors at all Board and
committee meetings exceeded 95%.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established a standing Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee. The
membership of each committee and its functions, duties and responsibilities are
discussed below. Each of the committees operates under a written charter adopted
by, and from time to time amended by, the Board of Directors. These committee
charters are available on the Company's website at www.metretek.com under
"Investor Info -- Corporate Governance."
AUDIT COMMITTEE
The Board of Directors has established an Audit Committee in accordance
with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee
are Anthony D. Pell (Chairman), Basil M. Briggs and Kevin P. Collins. The Board
of Directors has determined that each member of the Audit Committee is
independent under the Board's Standards of Director Independence, under the
listing standards of the American Stock Exchange applicable to members of an
audit committee and under Rule 10A-3 under the Exchange Act. The Board of
Directors has also determined that each member of the Audit Committee is able to
read and understand fundamental financial statements and qualifies as an "audit
committee financial expert", as that term is defined in Item 401(h) of
Regulation S-K under the Exchange Act. The Audit Committee met seven times
during 2004.
8
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight and monitoring responsibilities relating to:
- the integrity of the Company's financial statements;
- the Company's auditing, accounting and financial reporting processes
generally;
- the Company's system of internal control over financial reporting
and disclosure controls and procedures
- the independent registered public accounting firm, including its
engagement, compensation, qualifications, independence and
performance; and
- the Company's compliance with legal and regulatory requirements.
The Audit Committee's duties and responsibilities include:
- reviewing and discussing with management and the Company's
independent registered public accounting firm the annual audited and
quarterly unaudited consolidated financial statements of the
Company;
- determining whether to recommend to the Board of Directors that the
Company's annual consolidated financial statements be included in
the Company's Annual Report on Form 10-K;
- appointing and, when appropriate, terminating the independent
registered public accounting firm;
- reviewing and pre-approving the nature, scope and fee arrangements
of the annual audit and non-audit services of the Company's
independent registered public accounting firm;
- reviewing the independence of the Company's independent registered
public accounting firm;
- reviewing the scope and the results of the annual audit of the
Company's consolidated financial statements by the Company's
independent registered public accounting firm;
- reviewing and discussing with management, the Company's internal
accountants and the Company's independent registered public
accounting firm the Company's accounting and financial reporting
practices and procedures and the adequacy and effectiveness of the
Company's system of internal controls;
- preparing the report required by the rules of the SEC to be included
in the Company's proxy statement for its annual meeting of
stockholders;
- reviewing any transaction that involves a potential conflict of
interest;
- adopting procedures for the receipt, retention and treatment of
employee concerns and complaints regarding accounting, internal
controls or auditing matters; and
- providing other assistance to the Board of Directors, as requested,
with respect to the financial, accounting and reporting practices of
the Company.
The Audit Committee performs its functions and responsibilities under a
formal written charter adopted by the Board of Directors. A copy of the Audit
Committee Charter, as amended and restated by the Board of Directors on March
24, 2005, is attached to this Proxy Statement as Annex A and is available on the
Company's website at www.metretek.com under "Investor Info -- Corporate
Governance." The Report of the Audit Committee begins on page 26 of this Proxy
Statement.
COMPENSATION COMMITTEE
The Board of Directors has established a Compensation Committee. The
members of the Compensation Committee are Basil M. Briggs (Chairman), Anthony D.
Pell and Kevin P. Collins. The Board of Directors has determined that each
member of the Compensation Committee is independent under the Board's Standards
of Director Independence and under the listing standards of the American Stock
Exchange. The Compensation Committee met six times during 2004.
9
The primary purposes of the Compensation Committee are to review and
approve the compensation of the Company's executive officers and to oversee the
Company's compensation plans and policies generally. The Compensation
Committee's duties and responsibilities include:
- reviewing and approving the compensation of executive officers,
including the Company's chief executive officer;
- approving employment agreements for executive officers;
- reviewing and approving the compensation of directors;
- assisting the Board of Directors in administering and recommending
changes to the Company's stock and incentive compensation plans and
programs; and
- preparing an annual report on executive compensation for inclusion
in the Company's annual proxy statement.
The Compensation Committee performs its functions and responsibilities
under a formal written charter adopted by the Board of Directors. A copy of the
Compensation Committee Charter, as amended and restated by the Board of
Directors on April 25, 2005, is available on the Company's website at
www.metretek.com under "Investor Info -- Corporate Governance." The Report of
the Compensation Committee begins on page 21 of this Proxy Statement.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Board of Directors has established a Nominating and Corporate
Governance Committee. The members of the Nominating and Corporate Governance
Committee are Kevin P. Collins (Chairman), Basil M. Briggs and Anthony D. Pell.
The Board of Directors has determined that each member of the Nominating and
Corporate Governance Committee is independent under the Board's Standards of
Director Independence and under the listing standards of the American Stock
Exchange. The Nominating and Corporate Governance Committee met one time during
2004.
The principal duties of the Nominating and Corporate Governance Committee
are:
- identifying individuals qualified to become members of the Board of
Directors;
- recommending qualified individuals for nomination to the Board of
Directors;
- assessing and advising the Board of Directors with respect to its
size, composition, procedures and committees; and
- reviewing and evaluating the Company's Corporate Governance
Guidelines and principles and recommending to the Board of Directors
any changes to such procedures that it deems necessary.
Other specific duties and responsibilities of the Nominating and Corporate
Governance Committee include:
- developing and applying qualifications for Board membership;
- monitoring and recommending to the Board committee functions;
- recommending Board committee assignments; and
- reviewing governance-related stockholder proposals and recommending
Board responses.
The Nominating and Corporate Governance Committee recommended each of the
directors currently standing for re-election at the Annual Meeting, which
recommendation was unanimously approved by the Board of Directors.
The Nominating and Corporate Governance Committee performs its functions
and responsibilities under a formal written charter adopted by the Board of
Directors. A copy of the Nominating and Corporate Governance Committee Charter,
as amended and restated by the Board of Directors on April 25, 2005, is
available on the Company's website at www.metretek.com under "Investor Info --
Corporate Governance."
10
EXECUTIVE SESSIONS
Executive sessions of non-management directors, without any management
directors or other members of management being present, are held at least twice
a year, and more often if such directors deem appropriate. The sessions are
scheduled and chaired by the Chairman of the Nominating and Corporate Governance
Committee. Any non-management director can request that additional executive
sessions be scheduled.
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS OF STOCKHOLDERS
The Board of Directors expects all directors to attend each annual meeting
of stockholders, except where the failure to attend is due to unavoidable or
unforeseeable circumstances. All members of the Board of Directors attended the
2004 Annual Meeting of Stockholders.
NOMINATIONS OF DIRECTORS
IDENTIFYING AND EVALUATING NOMINEES FOR DIRECTOR
The Nominating and Corporate Governance Committee utilizes a variety of
methods for identifying and evaluating nominees for director. In selecting
candidates for nomination at an annual meeting of the Company's stockholders,
the Nominating and Corporate Governance Committee begins by determining whether
the incumbent directors whose terms expire at that meeting desire and are
qualified to continue their service on the Board. The Nominating and Corporate
Governance Committee believes that the continuing service of qualified
incumbents promotes stability and continuity in the Board room, giving the
Company the benefit of the familiarity and insight into the Company's affairs
that its directors have accumulated during their tenure, while contributing to
the Board's ability to work as a collective body. Accordingly, it is the policy
of the Nominating and Corporate Governance Committee, absent special
circumstances, to nominate qualified incumbent directors who continue to satisfy
the criteria for membership on the Board, and who the Nominating and Corporate
Governance Committee believes will continue to make important contributions to
the Board and who consent to stand for reelection, to continue their service on
the Board.
If there are Board positions for which the Nominating and Corporate
Governance Committee will not be re-nominating a qualified incumbent, the
Nominating and Corporate Governance Committee will consider recommendations for
director nominees from a wide variety of sources, including Board members,
management, business contacts, professional search firms, stockholders and other
appropriate sources. In evaluating such recommendations, the Nominating and
Corporate Governance Committee seeks to achieve a balance of knowledge,
experience and capability on the Board of Directors and to address the criteria
for membership set forth below under " -- Qualifications of Nominees for
Director". Candidates recommended by the Nominating and Corporate Governance
Committee are subject to approval by the Board of Directors. Each nominee for
election to the Board of Directors at the Annual Meeting previously served as a
director of the Company.
QUALIFICATIONS OF NOMINEES FOR DIRECTOR
The Nominating and Corporate Governance Committee is responsible for
reviewing with the Board of Directors the requisite skills and characteristics
of new Board candidates in the context of the current composition of the Board,
the operating requirements of the Company and the long-term interests of the
Company's stockholders. The Nominating and Corporate Governance Committee has
established criteria and qualifications that candidates for membership on the
Board of Directors must possess. Except in limited and exceptional
circumstances, each candidate to serve on the Board of Directors of the Company
should have the following qualifications:
- A reputation for high personal and professional integrity, strong
moral character and adherence to high ethical standards and the
values of the Company.
- The absence of any conflict of interest (whether due to a business
or personal relationship) or legal impediment to, or restriction on,
the nominee serving as a director, and no other interests that would
materially impair his ability to (i) exercise independent judgment,
or (ii) otherwise discharge the fiduciary duties owed as a director
to the Company and its stockholders.
- Holds or has held a recognized position of leadership in his
community or his field of endeavor, and has demonstrated high levels
of achievement in his community or his field.
11
- Business acumen and experience, inquisitiveness, strong analytical
skills and the ability to exercise sound business judgment and
common sense in matters that relate to the current and long-term
objectives of the Company.
- A general level of expertise and experience in the Company's
business areas.
- The ability to read and understand basic financial statements and
other financial information pertaining to the Company.
- A commitment to understanding the Company and its business, industry
and strategic objectives.
- The availability and a commitment to devote adequate time to the
Board and its committees and the ability to generally fulfill all
responsibilities as a director of the Company, including to
regularly attend and participate in meetings of the Board, Board
committees and stockholders, in light of the number of other company
boards on which the candidate serves and his other personal and
professional commitments.
- The willingness and ability to represent fairly and to act in the
interests of all stockholders of the Company rather than the
interests of any particular stockholder, special interest group or
other constituency.
- For prospective non-employee directors, independence under SEC and
applicable stock exchange rules and regulations.
- The willingness to accept the nomination to serve as a director of
the Company.
The Nominating and Corporate Governance Committee will also consider the
following additional factors in connection with its evaluation of each
prospective nominee:
- Whether the prospective nominee will foster a diversity of skills,
experiences and backgrounds on the Board.
- Whether the prospective nominee possesses the requisite education,
training and experience to qualify as "financially literate" or as
an "audit committee financial expert" under applicable SEC and stock
exchange rules.
- For incumbent directors standing for re-election, the incumbent
director's performance during his term, including the number of
meetings attended, the level of participation, and overall
contribution to the Company.
- The composition of the Board and whether the prospective nominee
will add to or complement the Board's existing strengths.
Notwithstanding the foregoing requirements, from time to time the
Nominating and Corporate Governance Committee may identify certain other skills
or attributes as being particularly desirable to help meet specific Board needs
that have arisen.
NOMINATIONS BY STOCKHOLDERS
The policy of the Nominating and Corporate Governance Committee is to
consider properly submitted written nominations from stockholders for nominees
for director. In general, persons properly recommended by stockholders as
nominees for director are evaluated on the same basis as candidates recommended
by other sources. Any such nominations made by stockholders must be submitted in
compliance with the requirements for stockholder nominations set forth in the
By-Laws of the Company, which requirements are summarized below under
"Stockholder Proposals," and should include the following:
- The name and address of the stockholder making the nomination and
the number of shares of the Company's Common Stock which are owned
beneficially and of record by such stockholder;
- The nominee's name, age, address, number of shares of Common Stock
owned beneficially and of record, principal occupation, employment,
background, experience, education and qualifications for Board
membership; and
12
- All other information relating to such nominee that is required to
be disclosed pursuant to Regulation 14A under the Exchange Act
(including such person's written consent to be named in the proxy
statement as a nominee and to serving as a director if elected).
Nominations by stockholders for director candidates must be addressed to:
Metretek Technologies, Inc.
303 East 17th Avenue, Suite 660
Denver, Colorado 80203
Attn: Corporate Secretary
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Any stockholder who wishes to communicate directly with the Board of
Directors, any committee of the Board or any specific director may do so by
directing a written request addressed to such director or directors in care of
the Company's Corporate Secretary at the Company's principal executive offices.
Communications directed to members of the Board will be forwarded to the
intended Board members, unless such communication is deemed unduly hostile,
threatening, illegal or otherwise unnecessary or inappropriate to forward, in
which case the Corporate Secretary has the authority to discard the
communication or to take appropriate action regarding such communication.
CODES OF ETHICS
The Company has adopted two codes of ethics, each designed to encourage
its directors, officers and employees to act with the highest level of
integrity. These codes are available on the Company's website at
www.metretek.com under "Investor Info -- Corporate Governance."
The Company has adopted the Metretek Technologies, Inc. Code of Ethics for
Principal Executive Officer and Senior Financial Officers, which is a code of
ethics that applies to its Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer and other senior finance organization employees.
The purpose of this Code of Ethics is to deter wrongdoing and to promote, among
other things, honest and ethical conduct and to ensure to the greatest possible
extent that the business of the Company is conducted in a consistently legal and
ethical manner
The Company has also adopted the Metretek Technologies, Inc. Code of
Business Conduct and Ethics, which is a code of conduct that applies to all of
its directors, officers and employees. Under the Code of Business Conduct and
Ethics, each officer, director and employee is required to maintain a commitment
to high standards of business conduct and ethics. The Code of Business Conduct
and Ethics covers many areas of professional conduct, including conflicts of
interest, protection of confidential information, and strict adherence to laws
and regulations applicable to the conduct of the Company's business. Directors,
officers and employees are required to report any conduct that they believe in
good faith to be an actual or apparent violation of the Code of Business Conduct
and Ethics.
If the Company makes any amendment to, or grants any waiver from a
provision of, either code of conduct with respect to any director, executive
officer or senior financial officer, it will disclose the nature of such
amendment or waiver on its website, in a Current Report on Form 8-K or both.
The Company also has adopted procedures to receive, retain and treat
complaints regarding accounting, internal accounting controls or auditing
matters and to allow for the confidential and anonymous submission by employees
of concerns regarding questionable accounting or auditing matters.
AVAILABILITY OF CORPORATE GOVERNANCE DOCUMENTS
The Company's Corporate Governance Guidelines, Board committee charters
and codes of ethics are available on the Company's website at www.metretek.com
under "Investor Info -- Corporate Governance." In addition, the Company will
provide a copy of any of these corporate governance documents without charge
upon written request addressed to the Company at Metretek Technologies, Inc.,
303 East 17th Avenue, Suite 660, Denver, Colorado, 80203, attention: Corporate
Secretary.
13
COMPENSATION OF DIRECTORS
Directors who are also officers or employees of the Company or its
subsidiaries do not receive any additional compensation for serving on the Board
of Directors or its committees. All directors are reimbursed for their
out-of-pocket costs of attending meetings of the Board of Directors and its
committees. Commencing April 1, 2005, directors who are not also officers or
employees of the Company or its subsidiaries ("Non-Employee Directors") began
receiving a monthly retainer of $2,500 for their service on the Board of
Directors and committees of the Board, including attending meetings. Prior
thereto, Non-Employee Directors received a monthly retainer of $2,000.
Non-Employee Directors also receive stock options under the Company's 1998
Stock Incentive Plan, as amended and restated (the "1998 Stock Incentive Plan").
Under the formula for these options to Non-Employee Directors, each person who
is first elected or appointed to serve as a Non-Employee Director is
automatically granted an option to purchase 5,000 shares of Common Stock. In
addition, on the date of the annual meeting of stockholders each year commencing
this year, each Non-Employee Director who has served on the Board for at least
six months is automatically granted options to purchase a number of shares of
Common Stock equal to the annual retainer for that year divided by the fair
market value of the Common Stock on the date of grant. Previously, each
Non-Employee Director received on annual grant of options to purchase 2,500
shares of Common Stock. All annual options granted to Non-Employee Directors:
- are non-qualified stock options;
- vest and become exercisable immediately upon grant;
- are exercisable at a price equal to the fair market value of the
Common Stock on the date of grant (based on the last sale price of
the Common Stock as reported on its principal trading market,
currently the OTC Bulletin Board); and
- have a term of ten years, subject to earlier termination in the
event of the Non-Employee Director's death or the termination of
service on the Board, in which events the options remain exercisable
for one year after a Non-Employee Director dies and for that number
of years after a Non-Employee Director leaves the Board of Directors
(for any reason other than death or removal for cause) equal to the
number of full or partial years that the Non-Employee Director
served as a director, but not beyond the original ten year term of
the option.
Any other option granted to a director may contain different terms at the
discretion of the Board of Directors. As of April 26, 2005, options to purchase
337,511 shares of Common Stock were outstanding to the Company's current
Non-Employee Directors, at exercise prices ranging from $0.46 to $17.38 per
share.
14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the total compensation that the Company
paid or accrued for services rendered to the Company in all capacities during
the last three fiscal years by its Chief Executive Officer, by its four other
most highly compensated executive officers (based on total salary and bonus)
serving as of the end of the fiscal year ended December 31, 2004 ("fiscal
2004"), and by one other former executive officer of the Company who would have
been included if he had still been an executive officer at the end of fiscal
2004 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------
AWARDS
ANNUAL COMPENSATION(1) --------------------------
--------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING ALL OTHER
ANNUAL STOCK AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION ($)(2) (#)(3) ($)(4)
--------------------------- ---- --------- -------- ------------ ------ ------ ------
W. Phillip Marcum.................... 2004 $ 311,615 $50,000(5) $60,500(6) $ 110,000 50,000
Chairman of the Board, 2003 295,000 0 0 0 0 $ 7,638
President and Chief 2002 295,000 0 0 0 0 7,138
Executive Officer 6,471
A. Bradley Gabbard................... 2004 191,346 55,000(5) 30,250(6) 55,000 25,000
Executive Vice 2003 175,000 75,000 0 0 0 7,638
President and Chief 2002 175,000 0 0 0 0 7,117
Financial Officer 6,314
Sidney Hinton (7).................... 2004 253,850 104,186(8) 18,150(6) 33,000 0 7,638
President and CEO, 2003 250,000 117,341(8) 0 0 0 7,138
PowerSecure
John Bernard (9)..................... 2004 112,098 8,000 0 0 25,000 4,547
President and CEO,
Southern Flow
Gary J. Zuiderveen (10).............. 2004 96,154 10,000 0 0 0 3,982
Vice President, Controller 2003 92,692 15,000 0 0 0 3,925
and Principal
Accounting Officer
Thomas R. Kellogg (11)............... 2004 126,538 0 0 0 0 214,984(12)
Former President and 2003 175,000 21,354 0 0 0 5,990
CEO, Metretek Florida
--------------------
(1) Excludes perquisites and other personal benefits, if any, which were less
than the lesser of $50,000 or 10% of the total annual salary and bonus
reported for each Named Executive Officer.
(2) The dollar value of the restricted stock awards during fiscal 2004 is
calculated by multiplying the total number of restricted shares by $2.20,
the closing sale price of the Company's Common Stock on July 15, 2004, the
date of the awards, as reported on the OTC Bulletin Board. These dollar
values do not reflect any adjustment for risk of forfeiture or for
restrictions on transferability. All shares of restricted stock vest in
three equal annual installments, commencing on January 1, 2005, subject to
the executive remaining employed with the Company on the vesting dates,
and further subject to immediate vesting upon a change in control. All
awards of restricted stock were made under the Company's 1998 Stock
Incentive Plan.
As of December 31, 2004, based on $2.40, the closing sale price of the
Company's Common Stock on such date as reported on the OTC Bulletin Board,
Mr. Marcum held 50,000 unvested shares of restricted stock valued at
$120,000, Mr. Gabbard held 25,000 unvested shares of restricted stock
valued at $60,000, and Mr. Hinton held 15,000 unvested shares of
restricted stock
15
valued at $36,000. The executive enjoys all the benefits of ownership of
unvested shares of restricted stock, including the right to vote the
shares and to receive any dividends and other distributions with respect
to the shares on the same terms as any other shares of Common Stock, other
than the right to transfer or dispose of the shares.
(3) All options vest in three equal annual installments, commencing on the
grant date, subject to immediate vesting upon a change in control of the
Company. As of December 31, 2004, one-third of such options were vested.
(4) Amounts paid or accrued on behalf of the Named Executive Officers in
fiscal 2004 in this column include the following:
Group Long-Term
Term Life Disability
401(k) Insurance Insurance
Name Matching Premiums Premiums
---- -------- -------- --------
W. Phillip Marcum....... $6,500 $ 882 $256
A. Bradley Gabbard...... 6,500 882 256
Sidney Hinton .......... 6,500 882 256
John Bernard............ 3,603 688 256
Gary Zuiderveen......... 3,185 541 256
Thomas R. Kellogg....... 4,241 360 367
(5) Includes a signing bonus paid in connection with the amended and restated
employment agreements of $50,000 for Mr. Marcum and $25,000 for Mr.
Gabbard.
(6) Reflects a tax "gross-up" payment intended to reimburse the executive for
taxes payable with respect to the restricted stock grant.
(7) Became an executive officer during fiscal 2003. Compensation includes all
amounts paid or accrued for the entire fiscal 2003.
(8) Bonus resulting from the bonus formula based upon PowerSecure's cash flow
from operations, as provided in Mr. Hinton's employment agreement. See
"--Employment Agreements, Change in Control and Termination of Employment
Arrangements and Other Compensation Arrangements" below.
(9) Appointed as the President and Chief Executive Officer of Southern Flow on
December 1, 2004. Compensation includes all amounts paid or accrued for
the entire fiscal 2004.
(10) Fiscal 2003 was the first year his total salary and bonus exceeded
$100,000.
(11) His employment with the Company terminated effective October 6, 2004.
(12) Includes severance payments, pursuant to his employment agreement, in the
amount of $204,167, payable over the 12 month period after his
termination. See "--Employment Agreements, Change in Control and
Termination of Employment Arrangements and Other Compensation
Arrangements" below.
16
STOCK OPTION GRANTS
The following table sets forth certain information with respect to stock
options granted during fiscal 2004 to the Named Executive Officers. The Company
did not grant any stock appreciation rights, alone or in tandem with stock
options, during fiscal 2004.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL POTENTIAL REALIZABLE VALUE
UNDERLYING OPTIONS GRANTED EXERCISE AT ASSUMED ANNUAL RATES OF
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION STOCK PRICE APPRECIATION
(#)(1) FISCAL YEAR (2) ($/SH)(3) DATE (4) FOR OPTION TERM($)(5)
------ --------------- --------- -------- ---------------------
NAME 5%($) 10%($)
---- ----- ------
W. Phillip Marcum .......... 50,000(4) 13.1% $ 3.06 7/14/14 $ 96,222
$243,836
A. Bradley Gabbard ......... 25,000(4) 6.5% 3.06 7/14/14 48,111 121,918
Sidney Hinton .............. - - - - - -
John Bernard ............... 25,000(4) 6.5% 3.06 9/23/14 48,111 121,918
Gary Zuiderveen ............ - - - - - -
Thomas R. Kellogg .......... - - - - - -
--------------------
(1) These options are incentive stock options granted under the Company's 1998
Stock Incentive Plan, have ten year terms and vest in three equal annual
installments, commencing on the grant date, subject to immediate vesting
upon a change in control.
(2) Based upon options to purchase an aggregate of 382,000 shares of Common
Stock granted to employees during fiscal 2004.
(3) The exercise price of these options is equal to or greater than the fair
market value of the Common Stock on the date of grant, based upon the last
sale price of the Common Stock on such date as reported on the OTC
Bulletin Board.
(4) These options may terminate before their terms expire due to the
termination of the optionee's employment or the optionee's disability or
death.
(5) The dollar amounts in these columns set forth the hypothetical gains that
could be achieved for the respective option grants, assuming that the
market price of the Company's Common Stock appreciates in value from the
date of grant through the term of the options at the annualized rates of
5% and 10%, respectively, contained in the table, which rates are
specified by SEC rules and do not represent the Company's estimate or
projection of the future appreciation of the price of the Company's Common
Stock. There is no assurance that the rates of appreciation set forth in
this table can be achieved or that the amounts reflected will be received
by the optionees. In addition, the potential realizable value set forth in
these columns is net of the option exercise price but before taxes
associated with any exercise. Actual gains, if any, on option exercises
will be dependent on, among other things, the timing of such exercises and
the future performance of the Common Stock.
17
STOCK OPTION EXERCISES AND VALUES
The following table sets forth information with respect to stock options
held by the Named Executive Officers on December 31, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE AT FISCAL YEAR-END(#) FISCAL YEAR-END ($)(2)
ON REALIZED ------------------------------- ----------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------ ----------- ------------- ----------- -------------
W. Phillip Marcum.... - - 266,667 33,333 $ 200,000 $ 0
A. Bradley Gabbard... - - 245,833 16,667 190,000 0
Sidney Hinton........ - - 145,000 - 112,500 0
John Bernard......... - - 22,875 21,334 9,150 4,200
Gary J. Zuiderveen... 2,000 $ 2,100 29,000 - 20,000 0
Thomas R. Kellogg.... - - 100,000 - 90,000 0
---------------
(1) For purposes of this table, the value realized is calculated based upon
the excess of the closing sale price of the Company's Common Stock on the
date of exercise as reported on the OTC Bulletin Board, over the exercise
price of the option, and does not necessarily indicate that the optionee
sold the shares of Common Stock acquired up the exercise, or if sold, the
proceeds realized by the optionee upon such sale.
(2) For purposes of this table and in accordance with SEC rules, the value of
unexercised in-the-money options is calculated based upon the excess, if
any, of $2.40, the closing sale price of the Company's Common Stock on
December 31, 2004 as reported on the OTC Bulletin Board, and the exercise
price of the option. An option is "in-the-money" if the fair market value
of the underlying shares of Common Stock exceeds the exercise price of the
option. However, the actual value, if any, that an optionee may realize
upon exercise of a stock option will be dependent upon the future
performance of the Company's Common Stock and the optionee's continued
employment through the vesting period.
EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
ARRANGEMENTS AND OTHER COMPENSATION ARRANGEMENTS
W. Phillip Marcum and A. Bradley Gabbard. On November 1, 2004, the Company
entered into amended and restated employment agreements with W. Phillip Marcum,
its Chairman of the Board, President and Chief Executive Officer, and A. Bradley
Gabbard, its Executive Vice President and Chief Financial Officer. These amended
and restated employment agreements set forth the basic terms of employment for
each executive.
Under these employment agreements, the employment terms of Messrs. Marcum
and Gabbard continue through December 31, 2006 and will be automatically
extended for successive one-year periods, unless either the Company or the
executive gives six months prior written notice of termination. The base
salaries under these employment agreements, which are subject to annual upward
adjustments at the discretion of the Board of Directors, are currently set at
$325,000 for Mr. Marcum and $200,000 for Mr. Gabbard. In addition to the base
salary, the employment agreements provide, among other things, for standard
benefits commensurate with the management levels involved. The employment
agreements also contain certain restrictions on each executive's ability to
compete, use of confidential information and use of inventions and other
intellectual property.
18
Generally, the employment agreements with Messrs. Marcum and Gabbard
provide that if the executive's employment is terminated by the Company for
"cause" (as defined in the employment agreements) or as a result of the
executive's death or disability, the executive will be entitled to receive an
amount equal to his base salary through the effective date of termination, and
all other amounts to which the executive may be entitled under his employment
agreement though the effective date of termination. If the employment period
expires without being renewed, or if the executive is terminated by the Company
without cause, or if the executive resigns voluntarily, then the executive is
entitled to receive severance payments equal to three times annual base salary,
payable at a 50% rate over six years, for Mr. Marcum, and one and equal to
one-half times annual base salary, payable at a 100% rate over 18 months, for
Mr. Gabbard, based on his base salary at the rate in effect upon termination,
and continued participation in all the Company's insurance plans for such
additional period.
The employment agreements also include change in control provisions
designed to provide for continuity of management in the event the Company
undergoes a change in control. If within three years after a "change in
control", the officer is terminated by the Company for any reason other than for
cause, or if the executive terminates his employment for "good reason" (as such
terms are defined in the employment agreements), then the executive is entitled
to receive a lump-sum severance payment equal to three times, for Mr. Marcum,
and one and one-half times, for Mr. Gabbard, the amount of his then base salary,
together with certain other payments and benefits, including continued
participation in all the Company's insurance plans for a period of three years
for Mr. Marcum and one and one-half years for Mr. Gabbard. Under these
employment agreements, a change in control will be deemed to have occurred only
if:
- any person or group becomes the beneficial owner of 50% or more of
the Company's Common Stock;
- a majority of the current members of the Board of Directors are
replaced, unless the election of any new director is approved by a
two-thirds vote of the current (or properly approved successor)
directors;
- the Company approves a merger, consolidation, reorganization or
combination (other than one in which the Company's voting securities
outstanding immediately prior thereto continue to represent more
than 50% of its total voting power or of the surviving corporation
following such a transaction and the Company's directors continue to
represent a majority of the Company's directors or of the surviving
corporation following such transaction); or
- the Company approves a sale of all or substantially all of its
assets.
The employment agreements also provide for the Company to establish an
incentive compensation fund, to be administered by the Compensation Committee,
to provide for incentive compensation to be paid to each officer or employee
(including Messrs. Marcum and Gabbard) deemed by the Compensation Committee to
have made a substantial contribution to the Company in the event of a change of
control of the Company or of the sale of substantially all of its assets or
similar transactions. The total amount of incentive compensation from the fund
available for distribution will be determined by a formula based on the amount
by which the fair market value per share of the Common Stock exceeds $10.08,
multiplied by a factor ranging from 10-20% depending upon the ratio of the fair
market value to $10.08. In the case of the sale of a significant subsidiary or
substantially all of the assets of a significant subsidiary, a similar pro rata
distribution is required.
Sidney Hinton. Effective January 1, 2003, PowerSecure entered into an
employment and non-competition agreement with Sidney Hinton, the President and
Chief Executive Officer of PowerSecure, a wholly-owned subsidiary of the
Company. Mr. Hinton's employment agreement is for a term of three years, and is
renewable for additional one-year renewal periods when the term expires, unless
either PowerSecure or Mr. Hinton gives 30 days prior written notice of
termination.
The base salary under Mr. Hinton's employment agreement is currently set
at $262,500, subject to annual upward adjustments at the discretion of the Board
of Directors of PowerSecure. In addition to the base salary, Mr. Hinton's
employment agreement provides, among other things, for standard benefits
commensurate with the management level involved, and an annual bonus of 7% of
PowerSecure's cash flow from operations. If Mr. Hinton's employment is
terminated without cause, or due to the expiration of the employment term or any
renewal period, then Mr. Hinton will be entitled to receive a severance payment
in the amount of one year's base salary, payable over the subsequent year. Mr.
Hinton's employment agreement also contains a one-year non-competition covenant,
which becomes two years if Mr. Hinton voluntarily resigns or is terminated by
PowerSecure for cause, and certain restrictions on Mr. Hinton's use of
confidential information and use of inventions and other intellectual property.
Mr. Hinton's employment agreement also includes a change in control provision
designed to provide for continuity of management in the event the Company or
PowerSecure undergoes a change in control. The employment agreement provides
that if within three years after a change in control, Mr. Hinton is terminated
by the Company for any reason other than for "cause", or if Mr. Hinton
terminates his employment for "good reason" (as such terms
19
are defined in the employment agreement), then Mr. Hinton is entitled to receive
a lump-sum severance payment equal to one year's then base salary, together with
certain other payments and benefits, including continued participation in all
the Company's insurance plans for a period of one year.
During 2003, PowerSecure issued approximately 14% of its outstanding
common stock to its employees, including approximately 7% of its common stock to
Mr. Hinton. In November 2004, the Company issued 950,000 shares of Company
Common Stock to those PowerSecure employees, including 485,401 shares of Company
Common Stock to Mr. Hinton on the same terms as to all other PowerSecure
employee-shareholders, in exchange for their PowerSecure shares. See "Certain
Relationships and Related Transactions." As a result of that stock exchange,
PowerSecure has become a wholly-owned subsidiary of the Company.
Thomas R. Kellogg. In June 2002, Metretek Florida entered into an
employment and non-competition agreement with Thomas R. Kellogg, the President
and Chief Executive Officer of Metretek Florida, a wholly-owned subsidiary of
the Company, from that time through the date of his termination. Mr. Kellogg's
employment agreement was for an initial term of one year, renewable for
additional one-year renewal periods. Mr. Kellogg resigned effective October 6,
2004. In connection with his resignation, Mr. Kellogg entered into a termination
agreement and mutual release with the Company, providing for the termination of
his employment with the Company, a one year severance equal to his annual base
salary in accordance with his employment agreement, payment of accrued but
unpaid bonuses and vacation time, and an extension of his stock options to
remain exercisable for two years after the termination date.
The base salary under Mr. Kellogg's employment agreement was set at
$175,000. In addition to the base salary, Mr. Kellogg's employment agreement
provided, among other things, for standard benefits commensurate with the
management level involved, a bonus of 7% of Metretek Florida's cash flow from
operations, options to purchase 100,000 shares of the Company's Common Stock at
$1.50 per share. Mr. Kellogg's employment agreement also provided for incentive
compensation in the event of a sale of the core business of Metretek Florida,
consisting generally of all Metretek Florida business other than the contract
manufacturing business. Mr. Kellogg's employment agreement also contained a
one-year non-compete covenant and certain restrictions on Mr. Kellogg's use of
confidential information and use of inventions and other intellectual property.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Basil M. Briggs, Chairman, Anthony D. Pell and Kevin P. Collins. No member of
the Compensation Committee is or has ever been an officer or employee of the
Company or any of its subsidiaries. No executive officer of the Company serves
as a member of the board of directors or of the compensation committee of any
other entity that has one or more executive officers serving as a member of the
Board of Directors or of the Compensation Committee of the Company.
20
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing and administering the compensation program and policies for the
Company's executive officers. The Compensation Committee approves all
compensation paid to the Company's executive officers, and also oversees the
administration by the Board of Directors of the Company's stock plans under
which stock option grants and direct stock issuances may be made to executive
officers.
The Compensation Committee consists of three members of the Board of
Directors. Each member of the Compensation Committee is independent under the
Standards of Director Independence adopted by the Board of Directors and the
current listing standards of the American Stock Exchange (which are currently
utilized by the Board of Directors for determining independence although the
Company's Common Stock is currently traded on the OTC Bulletin Board). The
Compensation Committee operates under a formal written charter, which was
amended and restated by the Board of Directors on April 25, 2005.
EXECUTIVE COMPENSATION POLICY
The Company's executive compensation policy is based on the belief that
competitive compensation is essential to attract, retain, motivate and reward
highly qualified and industrious executives. The Company's executive
compensation program is intended to accomplish the following purposes:
- attract and retain highly talented and productive executive
officers,
- provide incentives and rewards for superior performance by the
Company's executive officers, and
- align the interests of executive officers with the interests of the
Company's stockholders.
To achieve these objectives, the Compensation Committee has designed an
executive compensation program that consists of four basic components:
- base salary,
- short-term incentive compensation in the form of annual cash
bonuses,
- long-term incentive compensation in the form of stock options and
restricted stock, and
- general benefit programs.
COMPONENTS OF EXECUTIVE COMPENSATION
The Compensation Committee reviews the Company's executive compensation
program through the application of the subjective business judgment of each of
its members and through an informal survey of executive compensation programs of
peer companies. The Compensation Committee does not generally use a quantitative
method or mathematical formula to set the elements of compensation for a
particular executive officer. The Compensation Committee uses discretion and
considers all elements of an executive's compensation package when setting each
portion of compensation, based upon corporate performance and individual
initiatives and performance. The principal factors that the Compensation
Committee considered with respect to each executive officer's compensation
package for fiscal 2004 are summarized below. The Compensation Committee may,
however, in its discretion apply entirely different factors with respect to
executive compensation for future years.
Base Salary
The base salary for each of the Company's executive officers is
subjectively determined primarily on the basis of the following factors:
experience, personal performance, contribution to Company performance, level of
responsibility, duties and functions, breadth of knowledge, salary levels in
effect for comparable positions within and without the Company's industry and
internal base salary comparability considerations. These base salaries are
reviewed annually and may be adjusted in the discretion of the Compensation
Committee, based upon the factors discussed in the previous sentence, as well as
upon individual
21
performance during the previous fiscal year, changes in the duties,
responsibilities and functions of the executive officer, general changes in the
compensation peer group in which the Company competes for executive talent, and
the Company's financial performance generally. The relative weight given to each
of these factors differs from individual to individual, as the Compensation
Committee deems appropriate.
Annual Cash Bonuses
For fiscal 2004, the Company granted cash bonuses to all its executive
officers. Except for the bonus paid to Mr. Hinton, which was based upon the cash
flow from operations of PowerSecure in accordance with the terms of his
employment agreement, these bonuses were paid on a discretionary basis, as
determined by the Compensation Committee. Factors considered by the Compensation
Committee in determining discretionary annual cash bonuses are personal
performance, Company performance, level of responsibility and the Company's
achievement of performance goals, as well as many of the same factors considered
by the Compensation Committee and discussed above when it reviews and sets base
salaries, except with a greater focus on the prior fiscal year.
In March 2005, the Board of Directors, upon the recommendation of the
Compensation Committee adopted an Executive Incentive Compensation Plan, which
provides for annual bonuses to officers and key employees of the Company in such
target amounts and based on such factors, such as individual performance and
Company performance goals, as annually determined by the Compensation Committee.
For fiscal 2005, the Company's Chief Executive Officer and Chief Financial
Officer are eligible to receive cash bonuses under the Executive Incentive
Compensation Plan from a bonus pool that will be based upon the Company
achieving certain goals pertaining to net income from continuing operations
(before bonus payments) in fiscal 2005.
Long-Term Incentive Compensation
Long-term incentives are provided through grants of stock options and
restricted stock under the Company's 1998 Stock Incentive Plan. The grants are
designed to align the interests of executive officers with those of stockholders
and to provide each executive with a significant incentive to manage the Company
from the perspective of an owner with an equity stake in the Company.
Each stock option grant allows the executive officer to acquire shares of
Common Stock at a fixed price per share (typically, and never less than, the
closing stock price of the Common Stock on the date of grant) for a fixed period
(usually ten years). Each option generally becomes exercisable in installments
over a period of years (customarily two to four years), contingent upon the
executive officer's continued employment with the Company. Accordingly, the
stock option grant will provide a return to the executive officer only if the
executive officer remains employed by the Company during the vesting period, and
then only if the market price of the underlying Common Stock appreciates.
The number of shares subject to each stock option grant is subjectively
determined by the Compensation Committee primarily related to the executive
officer's anticipated contributions to the Company's future success, a level
intended to create a meaningful opportunity for stock ownership based on the
executive officer's current position with the Company, the size of comparable
awards made to individuals in similar positions within the industry, the
individual's potential for increased responsibility and promotion over the
option term and the individual's personal performance in recent periods. The
Compensation Committee also considers the number of unvested stock options held
by the executive officer in order to maintain an appropriate level of equity
incentive for that individual. However, the Compensation Committee does not
adhere to any specific guidelines as to the relative stock option holdings of
the Company's executive officers. The Company granted options to purchase a
total of 100,000 shares of Common Stock to three executive officers during
fiscal 2004.
In fiscal 2004, the Company commenced granting restricted stock to its
executive officers, granting 90,000 restricted shares to three executive
officers. Under these grants, the restricted shares were granted subject to risk
of forfeiture upon termination prior to vesting, which will occur through the
end of fiscal 2006. The Compensation Committee also authorized paying these
executive officers a "gross up" bonus equal to the amount of anticipated taxes
on the grant. The Compensation Committee intends to continue to grant restricted
shares more frequently in the future, as it determines appropriate under the
circumstances. These grants will be in the discretion of the Compensation
Committee, based upon many of the same factors that it considers for stock
option grants.
General Benefits
Executive officers are eligible to participate in medical, life and
benefit programs generally available to employees.
22
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of W. Phillip Marcum, the Company's President and Chief
Executive Officer, is reviewed annually in accordance with the factors discussed
above. During fiscal 2004, Mr. Marcum's employment agreement, which was in a
one-year renewal period, was amended and restated to, among other things, extend
his employment term through December 31, 2006. Also in connection with this
extension, and as a reward for the improvement of the Company's long-term
financial condition and future prospects, Mr. Marcum's base salary was increased
from $295,000 to $325,000, the first increase in his base salary since 2000, and
the Compensation Committee awarded Mr. Marcum a $50,000 "signing" bonus, options
to purchase 50,000 shares of Common Stock and 50,000 restricted shares. These
compensation actions were taken by the Compensation Committee after deliberation
based on its opinion of the critical importance of Mr. Marcum to the future
success of the Company and its stockholders, and the level and value of Mr.
Marcum's duties and responsibilities. The Compensation Committee believes that
Mr. Marcum has continued to provide strong leadership for the Company through
its ongoing restructuring to address business challenges, and has implemented
important steps that position the Company to be successful in the near future
and build long-term value for its stockholders.
LIMITATIONS ON TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION UNDER SECTION 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for certain compensation in excess
of $1 million paid to a company's chief executive officer and the four other
most highly compensated executive officers. However, qualified performance-based
compensation will not be subject to the deduction limit if certain requirements
are met.
The Compensation Committee has not awarded in the past, and does not
expect to award during fiscal 2005, compensation to any of the Company's
executive officers in excess of the $1 million limit per executive officer. The
Company intends to structure long-term incentive compensation granted to its
executive officers through grants of stock options and restricted stock under
the Company's stock plans in a manner that is intended to avoid disallowance of
deductions under Section 162(m). In the event that the Compensation Committee
considers approving salary or bonus compensation in the future that could exceed
the $1 million deductibility threshold, the Compensation Committee will consider
what actions, if any, should be taken to make such compensation deductible.
The Board of Directors and the Compensation Committee reserve the
authority to award non-deductible compensation in such circumstances as they
deem appropriate. In addition, because of ambiguities and uncertainties as to
the application and interpretation of Section 162(m) and the regulations issued
thereunder, no assurance can be given, notwithstanding the Company's efforts,
that compensation intended to satisfy the requirements of deductibility under
Section 162(m) will in fact do so.
CONCLUSION
Through the Company's compensation programs, a significant portion of the
Company's executive compensation is linked directly to individual and Company
performance in pursuance of strategic goals as well as stock price appreciation.
The Compensation Committee believes that the Company's executive compensation
policies and programs promote the best interests of the Company and enhance
stockholder value. The Compensation Committee will continue to monitor and
evaluate the overall effectiveness of these programs.
Compensation Committee
Basil M. Briggs, Chairman
Anthony D. Pell
Kevin P. Collins
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2004, the Marcum Gas Transmission, Inc. ("MGT"), a wholly-owned
subsidiary of the Company, though Conquest Acquisition Company, LLC (which is a
majority-owned subsidiary of MGT), purchased performance shares and preferred
shares in Marcum Midstream 1995-2 Business Trust, of which MGT is the managing
trustee, from Odessa Exploration Incorporated, a subsidiary of Key Energy
Services, Inc. ("Key Energy"), for an aggregate purchase price of $454,000. W.
Phillip Marcum, the Chairman of the Board, President and Chief Executive Officer
of the Company, and Kevin P. Collins, a member of the Board of Directors of the
Company, are also members of the board of directors of Key Energy. The
transaction was approved by the Audit Committee, of which Mr. Collins is a
member but abstained from voting, as being on terms no less favorable to the
Company than could be obtained from an independent party.
On November 22, 2004, the Company issued 950,000 shares of the Company's
Common Stock in exchange for the minority 13.9% interest in PowerSecure, a
subsidiary of the Company, owned by the employee-shareholders of PowerSecure.
The issuance was made pursuant to Stock Purchase Agreements ("Purchase
Agreements"), dated as of September 10, 2004, between the Company and the
employee-shareholders of PowerSecure. A total of 485,401 shares of the Company's
Common Stock were issued to Sidney Hinton, the President of PowerSecure, in
exchange for his PowerSecure shares on the same terms as the shares of Common
Stock of the Company were issued to the other PowerSecure employee-shareholders.
During fiscal 2004, Mr. Hinton's son was employed by PowerSecure in a
sales and administrative capacity and received total compensation, including
salary and bonus, of $53,154 for fiscal 2004 and received two stock option
grants for a total of 10,000 shares of Common Stock at an exercise price of
$3.06 per share.
The Company has entered into indemnification agreements with each of its
directors and certain of its executive officers. These agreements require the
Company to indemnify such persons against certain liabilities that may arise
against them by reason of their status or service as officers or directors of
the Company, to the fullest extent permitted by Delaware law, to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified. The Company maintains an insurance policy covering its
officers and directors under which the insurer has agreed to pay the amount of
any claim made against the Company's officers or directors that such officers or
directors may otherwise be required to pay or for which the Company is required
to indemnify such officers and directors, subject to certain exclusions and
conditions, up to policy limits.
Any material transaction between the Company or its subsidiaries and any
related party must be approved by the Audit Committee, which is comprised solely
of independent directors.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AUDITORS PROPOSAL
The Audit Committee of the Board of Directors of the Company has appointed
Hein & Associates LLP ("Hein") to serve as the Company's independent registered
public accounting firm for the fiscal year ending December 31, 2005.
On September 30, 2004, the Company engaged Hein to serve as its
independent registered public accounting firm and dismissed Deloitte & Touche
LLP ("Deloitte"). The change in independent registered public accounting firms
was approved by the Audit Committee of the Board of Directors and reported on a
Current Report on Form 8-K, as amended, dated September 30, 2004. Deloitte
audited the Company's consolidated financial statements as of and for fiscal
2003 and for all prior fiscal years, and Hein audited the Company's consolidated
financial statements as of and for fiscal 2004.
The audit reports of Deloitte on the Company's consolidated financial
statements as of and for fiscal 2003 and fiscal 2002 did not contain an adverse
opinion or disclaimer of opinion, and such audit reports were not qualified or
modified as to any uncertainty, audit scope or accounting practice, except that
Deloitte's independent auditor's report on the Company's consolidated financial
statements for fiscal 2002 contained an explanatory paragraph relating to a
change in method of accounting for goodwill and other intangible assets with
infinite lives as required by Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets," which was effective January 1,
2002, and to a change in the Company's method of accounting for contracts from
the completed-contract method to the percentage-of-completion method.
24
During fiscal 2002 and fiscal 2003 and subsequent interim periods through
the date the Company changed independent registered public accounting firms,
there were no disagreements between the Company and Deloitte on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Deloitte, would have caused Deloitte to make reference to the subject matter of
the disagreement in connection with its report. In addition, during those same
periods, no reportable events, as defined in Item 304(a)(1)(v) of Regulation
S-K, occurred, and the Company did not consult with Hein regarding the
application of accounting principles to a specific transaction, either completed
or proposed, or the type of audit opinion that might be rendered on the
Company's consolidated financial statements, or any other matters or reportable
events as set forth in Item 304(a)(2) of Regulation S-K.
Stockholder ratification of the appointment of Hein as the Company's
independent registered public accounting firm is not required by the Company's
By-Laws or any other applicable legal requirement. However, the Audit Committee
is submitting the appointment of Hein to the stockholders for ratification as a
matter of good corporate practice. If the stockholders fail to ratify the
appointment, then the Audit Committee will reconsider the appointment. Even if
the appointment is ratified by the stockholders, the Audit Committee may, in its
discretion, appoint a different independent registered public accounting firm
for the fiscal year ending December 31, 2005 at any time during the year if it
determines that such a change would be in the best interests of the Company and
its stockholders.
One or more representatives of Hein are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and are expected to be available to respond to appropriate questions.
FEES BILLED TO THE COMPANY BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
The aggregate fees for professional services rendered to the Company by
Deloitte in fiscal 2003 and in fiscal 2004 prior to its dismissal and for
professional services rendered by Hein in fiscal 2004 after its engagement were
as follows:
FISCAL 2004 FEES
---------------- FISCAL 2003 FEES
HEIN DELOITTE DELOITTE
---- -------- --------
Audit Fees (1) ......................... $100,000 $ 20,000 $139,000
Audit - Related Fees (2) ............... 16,939 21,683 0
Tax Fees (3) ........................... 20,295 0 0
All Other Fees ......................... 0 0 0
-------- -------- --------
Total ........................... $137,234 $ 41,683 $139,000
======== ======== ========
----------------
(1) "Audit Fees" represents fees billed for professional services rendered for
the audit of the Company's consolidated annual financial statements and
for the reviews of the Company's consolidated interim financial statements
included in the Company's Quarterly Reports on Form 10-Q.
(2) "Audit-Related Fees" represents fees billed for professional services
rendered by Deloitte in fiscal 2004 in connection with two registration
statements filed by the Company with the Securities and Exchange
Commission in connection with a private placement transaction, and for
professional services rendered by Hein during fiscal 2004 relating to the
audit of the Company's 401(k) plan and the audit of MM 1995-2, an
unconsolidated affiliate.
(3) "Tax Fees" represents fees billed for professional services rendered by
Hein for tax compliance, tax advice and tax planning for the Company and
for MM 1995-2 during fiscal 2004.
The Audit Committee has determined that the provision of non-audit
services by Hein in fiscal 2004 was compatible with maintaining its
independence. Deloitte did not provide any non-audit services during fiscal
2003.
PRE-APPROVAL POLICY AND PROCEDURES
The Audit Committee has adopted a policy that requires the Audit Committee
to pre-approve all audit and non-audit services to be provided by the
independent registered public accounting firm. The Audit Committee may delegate
this pre-approval authority to one or more of its members, and that member must
report any decisions to the Audit Committee at the
25
next scheduled meeting. In accordance with this pre-approval policy, all
professional services provided by the Company's independent registered public
accounting firms during fiscal 2004 were pre-approved by the Audit Committee.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock present, in person or by proxy, and entitled to vote at the Annual Meeting
is required to ratify the appointment by the Audit Committee of the Board of
Directors of Hein as the Company's independent registered public accounting firm
for the fiscal year ending December 31, 2005.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THAT STOCKHOLDERS
VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF HEIN AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2005. PROXY CARDS SIGNED AND TIMELY RETURNED TO THE COMPANY WILL BE
SO VOTED, UNLESS CONTRARY INSTRUCTIONS ARE SPECIFIED THEREON.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors of the Company consists of
three members of the Board of Directors. Each member of the Audit Committee is
independent under the Standards of Director Independence adopted by the Board of
Directors and the current listing standards of the American Stock Exchange
(which are currently utilized by the Board of Directors for determining
independence although its Common Stock is currently traded on the OTC Bulletin
Board). The Audit Committee operates under a formal written charter, which was
amended and restated by the Board of Directors on March 24, 2005. The Audit
Committee reviews and assesses the adequacy of its charter on an annual basis.
The Company's management is responsible for the preparation, presentation
and integrity of the Company's financial statements and for establishing and
maintaining the integrity of the Company's accounting and financial reporting
processes, including its system of internal controls, the audit process, and the
process for monitoring compliance with laws and regulations and ethical business
standards. The Company's independent registered public accounting firm is
responsible for performing an independent audit of the Company's annual
consolidated financial statements in accordance with generally accepted auditing
standards, and expressing an opinion and issuing a report as to the conformity
of such financial statements with generally accepted accounting principles. The
role of the Audit Committee is to assist the Board of Directors in fulfilling
its responsibilities to monitor and oversee the quality and integrity of these
financial reporting processes. Additionally, the Audit Committee has the sole
authority to appoint, retain and fix the compensation of the independent
registered public accounting firm and for the prior approval of the nature and
scope of and the fee arrangements for audit and permitted non-audit services by
the independent registered public accounting firm.
In discharging its oversight responsibilities, the Audit Committee has
reviewed, and has met and held discussions with management and with Hein &
Associates LLP ("Hein"), the Company's independent registered public accounting
firm, regarding the Company's audited consolidated financial statements for the
fiscal year ended December 31, 2004. The Audit Committee has also discussed with
Hein the matters required to be discussed by Statement on Auditing Standards No.
61, Communication with Audit Committees, as modified or supplemented. The Audit
Committee has met with Hein, with and without management present, to discuss and
review the results of their examination of the Company's financial statements
and their evaluation of the Company's internal controls and the overall quality,
not just the acceptability, of the Company's financial reports and accounting
principles. The Audit Committee has also considered and discussed with
management and Hein other areas of oversight relating to the financial reporting
and audit process that the Audit Committee determined appropriate.
In addition, the Audit Committee has received from Hein the written
disclosures and the letter required by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees, as modified or supplemented.
The Audit Committee has discussed with Hein their independence from the Company
and its management and has considered the compatibility of non-audit services
performed by Hein with their independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of Directors
approved, that the audited consolidated financial statements of the Company be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 for filing with the Securities and Exchange Commission.
26
In addition, the Audit Committee has appointed Hein as the Company's
independent registered public accounting firm for the fiscal year ending
December 31, 2005, and recommends that stockholders ratify that appointment.
The members of the Audit Committee are not professional accountants or
members of a registered public accounting firm, and as specified in its charter
it is not the duty of the Audit Committee to prepare financial statements, to
plan or conduct audits or to determine that the Company's consolidated financial
statements are complete and accurate and in accordance with generally accepted
accounting principles. In discharging its duties, the Audit Committee has relied
on (i) management's representation that the annual consolidated financial
statements of the Company were prepared with integrity and objectivity and in
accordance with generally accepted accounting principles, and (ii) the report of
the Company's independent registered public accounting firm with respect to such
financial statements.
Audit Committee
Anthony D. Pell, Chairman
Basil M. Briggs
Kevin P. Collins
27
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return for
the five year period ended December 31, 2004 on the Company's Common Stock with
the Nasdaq Stock Market (U.S.) Index (the "Nasdaq U.S. Index") and the S&P 500
Oil & Gas Equipment and Service Index. The measurement dates are the last
trading day of each of the Company's fiscal years in the five year period. The
graph assumes that $100 was invested on December 31, 1999 in the Common Stock of
the Company, the Nasdaq U.S. Index and the S&P 500 Oil & Gas Equipment and
Services Index, and that any dividends were reinvested. The stock price
performance shown on the following graph is historical and not necessarily
indicative of future stock price performance.
[PERFORMANCE GRAPH]
12/31/99 12/29/00 12/31/01 12/31/02 12/31/03 12/31/04
-------- -------- -------- -------- -------- --------
METRETEK TECHNOLOGIES, INC. $ 100.00 21.05 12.84 5.47 30.32 55.79
NASDAQ U.S. INDEX $ 100.00 60.31 47.84 33.07 49.45 53.81
S&P 500 OIL & GAS EQUIPMENT AND SERVICES
INDEX $ 100.00 134.01 89.20 78.96 98.49 129.88
28
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement is incorporated by reference into
any other filing by the Company under the Securities Act 1933, as amended, or
the Exchange Act, the sections of this Proxy Statement entitled "Report of the
Compensation Committee on Executive Compensation," "Report of the Audit
Committee" (to the extent permitted by the rules of the SEC) and "Performance
Graph" will not be deemed incorporated, unless specifically provided otherwise
in such filing. In addition, information contained on or connected to the
Company's website is not incorporated by reference into this Proxy Statement and
should not be considered part of this Proxy Statement or incorporated into any
other filing that the Company makes with the SEC.
ANNUAL REPORT
THE COMPANY'S 2004 ANNUAL REPORT TO STOCKHOLDERS, WHICH CONTAINS THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
AND INCLUDES THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL
2004, ACCOMPANIES THIS PROXY STATEMENT BUT IS NOT A PART OF THIS PROXY STATEMENT
OR THE COMPANY'S PROXY SOLICITATION MATERIALS. THE COMPANY WILL PROVIDE, WITHOUT
CHARGE, ADDITIONAL COPIES (WITHOUT EXHIBITS) OF ITS 2004 ANNUAL REPORT TO ANY
STOCKHOLDER UPON RECEIPT OF A WRITTEN REQUEST, ADDRESSED TO METRETEK
TECHNOLOGIES, INC., 303 EAST 17TH AVENUE, SUITE 660, DENVER, COLORADO 80203,
ATTENTION: CORPORATE SECRETARY.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and executive officers, and beneficial owners of more than 10% of the
outstanding Common Stock, to file with the SEC initial reports of ownership on
Form 3 and reports of changes in ownership on Form 4 or Form 5, and to furnish
the Company with copies of all such reports that they file. Based solely upon
its review of the copies of such forms received by the Company, the Company
believes that, during fiscal 2003, all reports required by Section 16(a) to be
filed by such persons were timely filed, except for one report of one
transaction by Mr. Pell and one report of one transaction by Mr. Hinton, which
reports were inadvertently filed late.
STOCKHOLDER PROPOSALS
Stockholders of the Company may submit proper proposals for consideration
at the Company's annual meetings of stockholders by submitting their proposals
in writing to the Company in a timely manner and otherwise in compliance with
federal and state laws and regulations and the Company's By-Laws.
PROPOSALS TO BE INCLUDED IN THE COMPANY'S PROXY MATERIALS
In order to be considered for inclusion in the Company's proxy materials
for the 2006 annual meeting of stockholders, stockholder proposals must be
received by the Secretary of the Company on or before January 4, 2006, and must
otherwise comply with the requirements of Rule 14a-8 of the Exchange Act ("Rule
14a-8"). The timely submission of a stockholder proposal does not guarantee that
it will be included in the Company's proxy materials for the 2006 annual
meeting.
OTHER PROPOSALS AND NOMINATIONS
The Company's By-Laws establish advance notice procedures that
stockholders must follow in order to nominate directors or to bring other
business before an annual meeting of stockholders that will not be included in
the Company's proxy materials pursuant to Rule 14a-8. These advance notice
procedures require that, among other things, notice of a director nomination or
other business must be submitted in writing to the Secretary of the Company and
received not less than 45 days nor more than 150 days prior to the anniversary
of the date on which the Company first mailed its proxy materials for the prior
annual meeting, unless the date of the annual meeting is changed by more than 30
days from the anniversary of the date of the prior annual meeting. For director
nominations or other business to be properly brought before the 2006 annual
meeting, a stockholder must deliver written notice to the Secretary of the
Company no sooner than December 5, 2005 and no later than March 19, 2006.
However, if the date of the 2006 annual meeting is changed by more than 30 days
from the date of the 2005 annual meeting, then the notice must be received not
later than the later of 75 days before the date of the 2006 annual meeting or 10
days following the date on which public announcement of the date of the 2006
annual meeting is first made.
The notice must contain the information specified in the By-Laws
concerning the matters to be brought before such annual meeting and concerning
the stockholder proposing such matters, including the name, address, number of
shares beneficially owned and any material interest of the stockholder making
the proposal. Notice of a director nomination must include information on
various matters regarding the nominee, including the nominee's name, age,
business and residence addresses, principal occupation and security holdings and
any arrangements between the stockholder and the nominee. Notice of other
business must include a
29
description of the proposed business, the reasons therefor and other specified
matters. A copy of the relevant provisions of the Company's By-Laws may be
obtained by a stockholder, without charge, upon written request to the Secretary
of the Company.
NOTICE AND OTHER INFORMATION
All notices of nominations and proposals by stockholders, whether or not
to be included in the Company's proxy materials, must be sent to Metretek
Technologies, Inc., 303 East 17th Avenue, Suite 660, Denver, Colorado 80203,
attention: Corporate Secretary. Any stockholder proposal must also comply with
all other applicable provisions of the Company's Second Restated Corporate
Certificate of Incorporation and By-Laws, the Exchange Act (including the rules
and regulations thereunder), and Delaware law. The Company reserves the right to
reject, rule out of order or take other appropriate action with respect to any
proposal or nomination that does not comply with these and other applicable
requirements. If the Company does not exclude the proposal, then the persons
appointed as proxies in the proxy card solicited by the Board of Directors of
the Company for the 2006 annual meeting may exercise discretionary voting
authority to vote in accordance with their best judgment on any such proposal
submitted outside of Rule 14a-8.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matters to be presented at the Annual Meeting. However, if any other
matters are properly presented at the Annual Meeting, the persons appointed as
proxies in the accompanying proxy card will have the discretionary authority to
vote the shares represented by the proxy card in accordance with their best
judgment.
By Order of the Board of Directors
Gary J. Zuiderveen
Secretary
May 3, 2005
Denver, Colorado
30
ANNEX A
METRETEK TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
AMENDED AND RESTATED AS OF MARCH 24, 2005
PURPOSE
The purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Metretek Technologies, Inc., a Delaware Company (the
"Company"), is to assist the Board in fulfilling its oversight responsibilities
with respect to (i) the quality and integrity of the Company's financial
statements; (ii) the Company's system of internal control over financial
reporting and disclosure controls and procedures; (iii) the quality and
integrity of the Company's auditing, accounting and financial reporting
processes generally; (iv) the Company's independent registered public accounting
firm ("independent auditors"), including its engagement, compensation,
qualifications, independence and performance; and (v) the Company's compliance
with legal and regulatory requirements. In addition, the Committee shall prepare
annually the report required by the rules of the Securities and Exchange
Commission ("SEC") to be included in the Company's proxy statement for its
annual meeting of stockholders.
STRUCTURE AND MEMBERSHIP
1. Number. The Committee shall consist of at least three members of the
Board, with the exact number to be fixed from time to time by the Board.
2. Independence, Financial Literacy and Other Qualifications. Each member
of the Committee shall meet the independence, expertise and other requirements
of (i) Section 10A(m) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) all applicable rules, regulations and requirements
promulgated by the SEC, and (iii) all applicable rules, regulations and other
requirements of any stock exchange or stock market on which the Company's
securities are from time to time listed or traded, as may be in effect from time
to time (the "Applicable Exchange Requirements").
Each member of the Committee shall be (i) free from any relationship that,
in the opinion of the Board, may interfere with the exercise of his independent
judgment as a member of the Committee or his independence from management and
the Company, and (ii) able to read and understand fundamental financial
statements, or become able to so within a reasonable period of time after his
appointment to the Committee. At least one member of the Committee shall, in the
judgment of the Board, be an "audit committee financial expert," as such term is
defined by the SEC and by Applicable Exchange Requirements, and at least one
member of the Committee (who may also serve as the audit committee financial
expert) shall, in the judgment of the Board, have accounting or related
financial management expertise, experience or sophistication as is required by
Applicable Exchange Requirements. No member of the Committee shall have
participated in the preparation of the financial statements of the Company for
the three years preceding service served on the Committee.
Notwithstanding the foregoing, if permitted under the Applicable Exchange
Requirements, one director who is not a current officer or employee (or an
immediate family member of such officer or employee) of the Company, but who is
nonetheless not "independent" for the purposes of the Applicable Exchange
Requirements, may serve in the Committee for no more than two years, if the
Board determines, under exceptional and limited circumstances, that membership
on the Committee by the director is required by the best interests of the
Company and its stockholders, and the Board discloses, in the Company's next
annual proxy statement subsequent to such determination, the nature of the
relationship and the reasons for that determination. Such person must satisfy
the independence requirements set forth in Section 10A(m)(3) of the Exchange
Act, and may not chair the Committee. The use of this "exceptional and limited
circumstances" exception, as well as the nature of the individual's relationship
to the company and the basis for the board's determination, shall be disclosed
in the annual proxy statement.
In addition, and subject to Applicable Exchange Requirements, if a member
of the Committee ceases to be independent for reasons outside the member's
reasonable control, his membership on the Committee may continue until the
earlier of the Company's next annual shareholders' meeting or one year from the
occurrence of the event that caused the failure to qualify as independent. If
the Company is not already relying on this provision, and falls out of
compliance with the requirements regarding Committee composition due to a single
vacancy on the Committee, then the Company will have until the earlier of the
next annual shareholders' meeting or one year from the occurrence of the event
that caused the failure to comply with this requirement and subject to
Applicable Exchange Requirements. The Company shall provide notice to any
applicable stock exchange or stock
A-1
market immediately upon learning of the event or circumstance that caused the
non-compliance, if it expects to rely on either of these provisions for a cure
period.
3. Selection, Removal and Vacancies. The members of the Committee shall be
appointed annually by the Board and shall serve until their respective
successors are duly appointed, or until their earlier death, resignation or
removal. Members of the Committee may be removed by the Board at any time, with
or without cause, and shall be deemed to be automatically removed if they fail
to meet the requirements and qualifications set forth in this Charter. Vacancies
on the Committee shall be filled by the Board.
4. Chairman. The Chairman of the Committee shall be appointed by the
Board, provided that if the Board fails to make such appointment, then the
members of the Committee may elect a Chairman of the Committee by majority vote
of the members of the Committee.
5. Subcommittees. The Committee may form and delegate authority to one or
more subcommittees as it deems appropriate from time to time. Each such
subcommittee shall consist of one or more members of the Committee. Any such
subcommittee shall be formed and operate in compliance with any Applicable
Exchange Requirements.
6. Compensation. The compensation of Committee members shall be as
determined by the Board. No member of the Committee may accept, directly or
indirectly, any compensation from the Company, other than fees paid for services
as a member of the Board or a committee of the Board.
MEETINGS AND PROCEDURES
1. Frequency of Meetings. The Committee shall meet (in person or by
telephone) as often as it deems necessary or appropriate in order to perform its
responsibilities, but not less than quarterly. The Committee shall meet
periodically with management, the internal accountants and the independent
auditors in separate executive sessions to discuss any matters that the
Committee or any of these groups believe should be discussed privately. The
Committee shall meet quarterly with the independent auditors and management to
review the Company's quarterly financial statements, and the matters required to
be discussed by Statement on Auditing Standards ("SAS") No. 61, prior to the
filing of the Quarterly Report on Form 10-Q or prior to the release of earnings
reports.
2. Meeting Formalities. A majority of the members of the Committee shall
constitute a quorum for a meeting. When a quorum is present, the act of a
majority of the members of the Committee present at a meeting shall constitute
the act of the Committee. The Committee may take actions by unanimous written
consent of its members in lieu of a meeting. The Chairman of the Board, the
Chief Executive Officer of the Company (if different), the Chairman of the
Committee, the Board, any two members of the Committee, or the Chief Financial
Officer of the Company may call meetings of the Committee. The Committee shall
maintain written minutes of its meetings, which minutes will be filed with the
minutes of the meetings of the Board.
3. Taking Action by Unanimous Written Consents in Lieu of Meetings. The
Committee may take actions by unanimous written consent of its members in lieu
of a meeting.
4. Rules of Procedure. The Committee may from time to time establish and
modify its own rules of procedure, provided such rules are consistent with this
Charter.
5. Reports to Board. The Committee shall provide regular reports to the
Board with respect to its meetings.
6. Attendance of Company Representatives. The Committee may request that
any director, officer or employee of the Company, or any other persons whose
advice and counsel are sought by the Committee, such as the Company's outside
counsel or independent auditors, attend any meeting of the Committee or meet
with any members of, or consultants to or advisors of, the Committee.
7. Charter. The Committee shall annually review and reassess the adequacy
of this Charter and recommend any proposed changes to the Board for approval.
AUTHORITY AND RESOURCES
1. Generally. The Committee shall have the resources and authority
appropriate to discharge its duties and responsibilities.
A-2
2. Access to Company Property. The Committee shall have full access to all
Company books, records, facilities, personnel and outside advisors.
3. Independent Advisors. The Committee shall have the authority, without
further action by the Board, to engage to retain independent legal counsel,
accounting or other consultants or experts as it deems necessary or appropriate
to advise the Committee and to assist the Committee in the fulfillment of its
responsibilities and duties, at the Company's expense. The Committee may also
utilize the services of the Company's regular counsel and other advisors to the
Company. The Company shall provide for appropriate funding, as determined by the
Committee, for payment of compensation to any advisors engaged by the Committee.
4. Investigations. The Committee shall have the power to conduct or
authorize investigations into any matters within the Committee's scope of
responsibilities. The Committee shall be empowered, without further action by
the Board, to retain independent counsel, accountants or other advisors as the
Committee deems necessary or appropriate to advise the Committee and to assist
the Committee in any investigation or in the performance of its functions and
duties, at the Company's expense. The Committee shall have full access to all
Company books, records, facilities, personnel and outside advisors.
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Committee shall:
A. FINANCIAL STATEMENTS AND DISCLOSURE
1. Review and discuss with management, the internal accountants
and the independent auditors (i) the Company's audited annual
financial statements, including the related notes thereto,
(ii) the independent auditors' report thereon, and (iii) the
Company's disclosures with respect thereto under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", and recommend to the Board whether the annual
financial statements of the Company should be included in the
Company's Annual Report on Form 10-K, prior to filing the
Annual Report on Form 10-K and publicly releasing annual
earnings.
2. Review and discuss with management, the internal accountants
and the independent auditors the Company's quarterly financial
statements, including the related notes thereto, and the
Company's disclosures with respect thereto under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", prior to filing the Quarterly Report on Form 10-Q
and publicly releasing quarterly earnings.
3. Review and discuss with management the Company's earnings
press releases, including the use of "pro forma" or "adjusted"
non-GAAP financial information and earnings guidance, prior to
public disclosure thereof.
4. Review and discuss with management, the internal accountants
and the independent auditors, and the Company's counsel, as
appropriate, any legal and regulatory matters that may have a
material impact on the Company's financial statements.
5. Review and discuss with management, the internal accountants
and the independent auditors any significant financial
reporting issues and judgments made in connection with the
preparation of the Company's financial statements including
any significant changes in the selection or application of
accounting principles.
6. Review and discuss with management, the internal accountants
and the independent auditors any off-balance sheet
transactions, special purpose entities and transactions with
affiliated companies.
B. INDEPENDENT AUDITORS
1. Have the sole authority and responsibility for the
appointment, setting of compensation and other engagement
terms, oversight and evaluation of performance and, where
appropriate, termination and replacement of the independent
auditors.
2. Have the sole authority and responsibility to pre-approve all
audit and permissible non-audit services to be provided to the
Company by the independent auditors, including the fees and
terms of all audit and non-audit services (except for
permitted de minimus non-audit services) by the independent
A-3
auditors, in each case as may be permissible and compatible
with the independence of the independent auditors.
3. Meet with the independent auditors prior to the audit to
discuss the planning and staffing of the audit.
4. Evaluate the performance of the independent auditors.
5. Review and discuss with management, the internal accountants
and the independent auditors (i) any significant risk
exposures and the steps management has taken to monitor and
control such exposures, including the Company's risk
assessment and risk management policies, and (ii) any
significant audit findings identified by the independent
auditors.
6. Be available during the course of the audit or at other times
discuss any matters that might affect the financial
statements, internal controls or other financial aspects of
the operations of the Company.
7. Receive copies of the annual comments from the independent
auditors on accounting procedures and systems of control,
subsequent to the completion of the audit, and review with the
independent auditors any questions, comments or suggestions
they may have relating to the internal controls, accounting
practices or procedures of the Company.
8. On an annual basis, obtain from and review with the
independent auditors written disclosure delineating all
relationships between the independent auditors and the Company
and its affiliates and their potential impact on independence,
including the written disclosure and letter required by
Independence Standards Board ("ISB") Standard No. 1, as it may
be modified or supplemented, and discuss with the independent
auditors any relationships or services disclosed in this
letter that may impact their independence.
9. On an annual basis, obtain from and review with the
independent auditors a report regarding: (i) the independent
auditors' internal quality control procedures, (ii) any
material issues raised by the most recent quality control
review, or peer review, of the independent auditors, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years respecting one or
more independent audits carried out by the independent
auditors, and (iii) any steps taken to deal with any such
issues.
10. Inform the independent auditors that they are ultimately
accountable to the Committee.
11. Periodically discuss with the independent auditors out of the
presence of management the Company's internal controls,
including their recommendations, if any, for improvements in
the Company's internal controls and the implementation of such
recommendations, the fullness and accuracy of the Company's
financial statement and the other matters required to be
discussed by SAS No. 61, as it may be modified or
supplemented, and information that would be required to be
disclosed by generally accounting auditing standards ("GAAS").
12. Recommend to the Board policies for the hiring by the Company
of any employees or former employees of the independent
auditors.
13. Oversee the rotation of the lead audit partner as and when
that rotation is required to occur and consider whether, in
order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the independent
auditors on a regular basis.
C. INTERNAL CONTROLS AND PROCESSES
1. Review and discuss with the independent auditors, the internal
accountants and management (i) the adequacy of the Company's
system of internal controls and the process designed to ensure
compliance with SEC reporting requirements and with other
applicable laws and regulations, (ii) any special steps
adopted in light of material control deficiencies, and (iii)
policies and procedures with respect to internal auditing and
financial and accounting controls.
2. Review and discuss with management, the internal accountants
and the independent auditors the Company's report on internal
control over financial reporting and the independent auditor's
attestation
A-4
of the report prior to the filing of the Company's Annual
Report on Form 10-K, when such requirement becomes applicable
to the Company.
3. Meet at least annually with the Company's management and the
independent auditors in separate executive sessions to discuss
any matters that the Committee or each of these groups
believes should be discussed confidentially.
4. In consultation with the independent auditors, review the
integrity and quality of the Company's financial reporting
processes, both internal and external, and the independent
auditor's perception of the Company's financial and accounting
personnel.
5. Consider the independent auditors' judgments about the quality
and appropriateness of the Company's accounting principles as
applied and significant judgments affecting its financial
reporting.
6. Review and attempt to resolve any significant disagreement
among management and the independent auditors in connection
with the preparation of the financial statements.
7. Consider and recommend to the Board, if appropriate, major
changes to the Company's financial reporting, auditing and
accounting principles and practices as suggested by the
independent auditors or management.
8. Review with the independent auditors and management the extent
to which changes or improvements in financial or accounting
practices, as approved by the Committee, have been
implemented.
9. Review the certifications filed with or furnished to the SEC
by the Company's Chief Executive Officer and Chief Financial
Officer, and discuss and address (i) any significant
deficiencies in the design or operation of internal controls
which could adversely affect the Company's ability to record,
process, summarize and report financial data, and (ii) any
fraud, whether or not material, that involved management or
other employees who have a significant role in internal
controls.
10. Review and, as the Committee deems appropriate, discuss with
the independent auditors and management (i) the appointment
and performance of the principal accounting officer, (ii) the
significant reports to management prepared by the internal
accounting staff, and management's responses thereto, and
(iii) the internal accounting staff responsibilities, budget
and staffing and any recommended changes in the planned scope
of the internal audit.
D. OTHER RESPONSIBILITIES
1. Prepare, in accordance with the rules and regulations
promulgated by the SEC and applicable thereto, the Committee's
Report for inclusion in the Company's proxy statement for its
annual meeting of stockholders, and state therein whether,
based on its review and discussions, the Committee recommended
to the Board that the Company's audited financial statements
be included in the Company's Annual Report on Form 10-K for
the last fiscal year.
2. Conduct or authorize investigations into any matters within
its scope of responsibilities and utilizing the assistance of
independent counsel, accountants, or others as it may, in its
sole discretion, determine to be advisable.
3. Establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls and auditing matters,
and (ii) the confidential, anonymous submission by employees
of the Company of concerns regarding questionable accounting
or auditing matters.
4. Perform any other activities consistent with this Charter, the
Company's By-Laws and applicable law, as the Committee or the
Board deems necessary or appropriate.
LIMITATIONS ON RESPONSIBILITY AND DUTIES
The Committee's responsibility is oversight. The Company's management is
responsible for the preparation, presentation and integrity of the Company's
financial statements. The Company's independent auditors are responsible for
planning and conducting an annual audit of the Company's annual financial
statements, expressing an opinion as to the
A-5
conformity of such annual financial statements with generally accepted
accounting principles ("GAAP") and reviewing the Company's quarterly financial
statements. While the Committee has the responsibilities and duties set forth in
this Charter, its members are not auditors or certifiers of the Company's
financial statements, and it is not the duty of the Committee (i) to prepare
financial statements, (ii) to plan or conduct audits, or (iii) to determine that
the Company's financial statements are complete and accurate and in accordance
with GAAP and other applicable rules and regulations, which are the
responsibility of the Company's management and independent auditors. The members
of the Committee are entitled to rely, to the fullest extent permitted by law,
on the integrity of those persons within and outside the Company from whom he or
she receives information, and the accuracy of the financial and other
information provided to the Committee by such persons.
A-6
PROXY -- METRETEK TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 6, 2005
The undersigned stockholder of Metretek Technologies, Inc., a Delaware
corporation (the "Company"), hereby appoints W. Phillip Marcum and A. Bradley
Gabbard, or either of them, with full power and substitution, as proxy or
proxies of the undersigned, to represent the undersigned, and to exercise all
the powers that the undersigned would have if personally present to act and to
vote all of the shares of the Company that the undersigned is entitled to vote,
at the Annual Meeting of Stockholders of the Company (the "Annual Meeting")
called to be held on Monday, June 6, 2005, at 9:00 a.m. at The Warwick Hotel,
1776 Grant Street, Denver, Colorado, and at any adjournments or postponements
thereof, as indicated on the reverse.
The shares represented by this proxy card when properly executed will be voted
as specified. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR ITEMS 1
AND 2 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF. All proxies previously given are hereby revoked. Receipt
of the accompanying Proxy Statement is hereby acknowledged.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
A. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING NOMINEES:
1. To elect two (2) directors of the Company, each to serve for a term of
three years and until his successor is duly elected and qualified.
A. Bradley Gabbard [ ] FOR [ ] WITHHOLD
Kevin P. Collins [ ] FOR [ ] WITHHOLD
B. ISSUE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
2. To ratify the appointment of Hein & Associates LLP as the Company's
independent registered public accounting firm for the fiscal year ending
December 31, 2005.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to take action and to vote
upon such other business as may properly come before the Annual Meeting or
any adjournments or postponements thereof.
Please check this box if you are planning to attend the Annual Meeting of
Stockholders. [ ]
C. AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
INSTRUCTIONS: Please sign exactly as your name appears on the label above and
return this proxy card promptly in the accompanying envelope. When shares are
held by joint tenants, both should sign. When shares are held in the name of a
corporation, partnership, limited liability company or other entity, please sign
the full entity name by an authorized officer, partner, manager, member or other
authorized person. When signing as attorney, executor, administrator, trustee,
guardian or in any other representative capacity, please give your full title as
such.
Signature 1 -- Please keep signature within the box Signature 2 -- Please keep signature within the box Date(mm/dd/yy)
[ ] [ ] [ ]