UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 ss.240.14a-12
PROFILE TECHNOLGIES, 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:
PROFILE TECHNOLOGIES, INC.
2 Park Avenue, Suite 201
Manhasset, New York 11030
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NOTICE OF 2006 ANNUAL MEETING OF STOCKHOLDERS
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The Annual Meeting of Stockholders (the "Annual Meeting") of Profile
Technologies, Inc. (the "Company") will be held at 10:00 a.m., local time, on
Monday, November 13, 2006, at the offices of McGuireWoods LLP, located at 1345
Avenue of the Americas, Seventh Floor, New York, New York, 10105, for the
following purposes:
1. To elect a Board of Directors consisting of four persons to serve for
a term of one year (until the next annual meeting of the stockholders)
or until their respective successors are elected and have been
qualified.
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized common shares from 25,000,000 to
35,000,000.
3. To approve amendments to the Company's 1999 Stock Plan to increase the
maximum period of time for which stock options are exercisable from
five years to ten years and to increase the aggregate number of shares
of common stock which may be issued pursuant to the 1999 Stock Plan
from 500,000 to 3,500,000.
4. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
The Board of Directors (the "Board") has fixed September 22, 2006 as the
record date (the "Record Date") for determining the stockholders of the Company
entitled to notice of, and to vote at, the Annual Meeting and any adjournment of
the Annual Meeting. The transfer books of the Company will not be closed, but
only stockholders of the Company of record on such date will be entitled to
notice of, and to vote at, the Annual Meeting or any adjournment of the Annual
Meeting.
Stockholders are cordially invited to attend the meeting in person. Whether
or not you plan to attend the meeting in person, please complete, sign and date
the accompanying proxy card as promptly as possible and return the proxy card to
the Company in the enclosed envelope. No additional postage is required if the
envelope is mailed in the United States. The giving of a proxy will not affect
your right to vote in person if you attend the meeting and will assure that your
shares are voted if you are unable to attend.
By Order of the Board of Directors
/s/ Henry E. Gemino
---------------------------
Henry E. Gemino
Chief Executive Officer
October 15, 2006
PROFILE TECHNOLOGIES, INC.
2 Park Avenue, Suite 201
Manhasset, New York 11030
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DEFINITIVE PROXY STATEMENT
2006 ANNUAL MEETING OF STOCKHOLDERS
November 13, 2006
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INTRODUCTION
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board") of Profile Technologies, Inc., a Delaware corporation (the
"Company"), to be voted at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the offices of McGuireWoods LLP, 1345 Avenue of the
Americas, Seventh Floor, New York, New York, 10105, at 10:00 a.m. local time on
Monday, November 13, 2006, and at any and all adjournments of the Annual
Meeting.
The proxy statement and the enclosed proxy card are first being mailed to
our stockholders of the Company (the "Stockholders") on or about October 17,
2006.
The Company anticipates that the Stockholders will consider and vote upon
the following matters at the Annual Meeting:
1. To elect four persons as directors each to serve a term of one year
(until the next annual meeting of Stockholders) or until their
respective successors are elected and have been qualified.
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized common shares from 25,000,000 to
35,000,000.
3. To approve amendments to the Company's 1999 Stock Plan to increase the
maximum period of time for which stock options are exercisable from
five years to ten years and to increase the aggregate number of shares
of common stock which may be issued pursuant to the 1999 Stock Plan
from 500,000 to 3,500,000.
4. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
VOTING OF PROXIES
Shares are represented by proxies set forth in properly signed and returned
proxy cards in substantially the form of Appendix C to this Proxy Statement.
Unless subsequently revoked, proxies will be voted at the Annual Meeting in
accordance with the instructions marked on the proxy card. If a proxy card is
signed and returned without indicating any voting instructions, the shares
represented by the proxy will be voted FOR approval of the proposals stated in
this proxy statement, and in the discretion of the holders of the proxies on
other matters that may properly come before the Annual Meeting.
If you have executed and delivered a proxy card, you may revoke your proxy
at any time before it is voted by attending the Annual Meeting and voting in
person, by giving the Company written notice of revocation of the proxy, or by
submitting a signed proxy card bearing a later date. To revoke the prior proxy,
the notice of revocation or later proxy card must be received by the Company
before the vote of Stockholders at the Annual Meeting. Unless you vote at the
Annual Meeting or take other action, your attendance at the Annual Meeting will
not revoke your proxy.
VOTING PROCEDURES
The Company's state of incorporation is Delaware. Under Delaware law and
the Company's bylaws, the holders of a majority of the outstanding shares of the
common stock (the "Common Stock") of the Company entitled to vote constitute a
quorum at any meeting of stockholders. Votes cast by proxy or in person at the
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Annual Meeting will be counted by the inspector of elections appointed by the
Company. The inspector of elections will treat shares of Common Stock
represented by proxies that reflect abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. Under
Delaware law and the Company's bylaws, directors are elected by a plurality of
the votes cast by the holders of shares entitled to vote at a meeting at which a
quorum is present. Therefore, Proposal 1 will be adopted if a plurality of the
shares present at the Annual Meeting in person or by proxy vote to elect the
directors nominated for election at the Annual Meeting. Other matters are
approved if affirmative votes cast by the holders of the shares entitled to vote
at a meeting at which a quorum is present exceed the number of votes opposing
the action, unless Delaware law or the Company's Certificate of Incorporation or
bylaws require a greater number of affirmative votes or voting by classes.
Proposal 3 will be adopted if a majority of the shares of common stock present
at the Annual Meeting vote "For" Proposal 3 and a quorum is present. Abstentions
and broker non-votes have no effect and will be disregarded.
Under the General Business Law of the State of Delaware, the affirmative
vote of the holders of a majority of the issued and outstanding shares of common
stock of the Company is required to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of common stock.
Therefore, to be approved, Proposal 2 must receive "For" votes from a majority
of the shares of common stock on the record date of the Annual Meeting. If
Stockholders select "Abstain" on their proxy cards for Proposal 2, or if
Stockholders attend the Annual Meeting and abstain from voting, it will have the
same effect as an "Against" vote for Proposal 2.
All of the officers and directors have informed the Company that they
intend to vote in favor of the proposals to be considered for the vote of the
Stockholders at the Annual Meeting.
VOTING SECURITIES
The Board has fixed the close of business on September 22, 2006 as the
record date (the "Record Date") for determining the Stockholders entitled to
receive notice of, and to vote at, the Annual Meeting. At the close of business
on the Record Date, there were 12,456,445 issued and outstanding shares of
Common Stock entitled to vote at the Annual Meeting, held by approximately 1,050
Stockholders. As of the Record Date, the only outstanding voting security of the
Company is Common Stock. As a Stockholder as of the Record Date, you are
entitled to one vote for each share held on each matter properly submitted at
the Annual Meeting.
4
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PROPOSAL 1
ELECTION OF DIRECTORS
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Four nominees are standing for election as directors on the Board to hold
office until the next annual meeting of Stockholders is held and their
successors are duly elected and qualified. All of the nominees are current
directors of the Company standing for re-election and were previously elected by
the Stockholders. If one or more of the nominees is unable to serve, or for good
cause will not serve at the time of the Annual Meeting, the shares represented
by the proxies solicited by the Board will be voted for the other nominees and
for any substitute nominee(s) designated by the Board. As of the date of this
proxy statement, the Board has no reason to believe that any of the nominees
named will be unable or unwilling to serve. In the election of directors, those
nominees receiving the greatest number of votes shall be elected, even if such
votes do not constitute a majority. Certain information regarding each nominee
follows. Each nominee has consented to being named in the proxy statement and to
serve if elected.
INFORMATION ON DIRECTORS AND NOMINEES
The directors nominated for election at the Annual Meeting are as follows:
DIRECTOR
NAME AND AGE AGE PRINCIPAL OCCUPATION SINCE
--------------------------------------- -------------------------------------------------------------------------
Henry E. Gemino 55 Chief Executive Officer, Chief Financial Officer, 1988
Profile Technologies, Inc.
Murphy Evans 74 President, Profile Technologies, Inc. 1995
Charles Christenson 76 Professor Emeritus 1999
Harvard Graduate School of Business Administration
William A. Krivsky 79 Chairman, President and CEO, Keyson Airways Corp. and 2000
Keyson Enterprises, Inc.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES.
Henry E. Gemino. Mr. Gemino a co-founder of the Company, has served as a
director and the Chief Financial Officer of the Company since 1988. From 1988
through October 2000, he served as Executive Vice President and Chief Operating
Officer of the Company. Since October 2000, he has served as Chief Executive
Officer of the Company.
Murphy Evans. Since 1995 Mr. Evans has served as President and a director
of the Company. Mr. Evans also serves as the President of L & S Holding Co., a
family-owned holding company that is engaged in several different businesses and
as President and Director of Falco Enterprises, Inc., Arran Corporation, Spring
Hill Homes, Inc. and Spring Hill Water Co., none of which are reporting
companies under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Mr. Evans received an AB degree in history from Princeton University in
1954 and an MBA degree from the Harvard Graduate School of Business
Administration in 1958.
William A. Krivsky. Mr. Krivsky holds a Doctorate of Science from MIT and
was previously President of Velcro Industries N.V., Executive Vice President of
Bird Corporation, President of Compo Industries and Group Vice President of
Certaineed Corporation (now part of Paris-based St. Gobain Industries). Since
2004 he has served as Chairman, President and CEO of Keyson Airways Corp, and
since 1977 has been Chairman, President and CEO of Keyson Enterprises Inc. (a
privately held diversified business). He is also director of Cognex Corporation,
a reporting company under the Exchange Act, and Hitchiner Manufacturing Company,
Inc.
Charles Christenson. Professor Christenson has been a director of the
Company since 1999. He is the Royal Little Professor of Business Administration,
Emeritus, at the Graduate School of Business Administration at Harvard
University and served as faculty chairman of both the MBA and Doctoral Programs.
He received his B.Sc. degree in Industrial and Labor Relations from Cornell
University in 1952, his MBA degree with high distinction from Harvard University
in 1954 and his DBA degree in Managerial Economics from Harvard University in
1961. While on leave of absence from the Harvard University faculty, he also
5
served as Deputy to the Assistant Secretary of the Air Force (Financial
Management) during the Kennedy Administration. He is a member of the American
Association for the Advancement of Science. Professor Christenson has also
authored or co-authored a number of books and articles on quantitative methods,
management control and philosophy of science. Professor Christenson served as a
director of KENETECH Corporation from 1981-2001 and also serves as a director of
Boston Baroque, Inc., a not-for-profit organization performing and recording
music of the Baroque and Classical periods.
There are no family relationships among the directors. There are no
arrangements or understandings between any director and any other person,
pursuant to which any director was elected.
DIRECTOR COMPENSATION
The Company pays to all non-employee directors a director's fee in the
amount of $1,000 per month. Directors are entitled to participate in, and have
been issued options under, the Company's 1999 Stock Plan. The Company also
reimburses directors for any actual expenses incurred to attend meetings of the
Board.
Due to the Company's critical need for cash, the Company has deferred all
payments owed to the directors for directors' fees until the Company has
sufficient resources to pay such fees. As of June 30, 2006, the Company owed
$104,000 in deferred directors' fees. On March 18, 2002, the Board approved a
conversion right on all directors' fees deferred as of March 18, 2002 (the
"Directors' Conversion Right"). Pursuant to the Directors' Conversion Right,
directors may elect to convert $1.00 of directors' fees owed to them as of March
18, 2002 for an option to purchase two shares of the Company's common stock, at
an exercise price of $1.00 per share for a term of five years. As of June 30,
2006, deferred directors' fees subject to the Directors' Conversion Right were
$9,000, resulting in the potential issuance of 18,000 options under the terms
described above. To date, none of the directors have elected to exercise their
Directors' Conversion Right.
BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended June 30, 2006, the Board held a total of seven
meetings. All members of the Board attended at least 75% of all meetings of the
Board and all meetings held by all committees of the Board on which he served.
Audit Committee.
The Board maintains an Audit Committee composed of William Krivsky and
Charles Christenson. The principal functions of the Audit Committee are to
monitor the Company's financial reporting process and internal control system,
to review and appraise the audit efforts of the Company's independent
accountants and the internal audit function, to provide a means of communication
among the independent accountants, financial and senior management, the internal
audit function, and the Board, and to communicate with the Company's independent
accountants outside of the presence of management, when necessary. The Audit
Committee is also responsible for all matters set forth in its written charter,
a copy of which was attached as Appendix B to the Company's proxy statement for
the 2004 annual meeting. The Audit Committee held four meetings during the
fiscal year ended June 30, 2006.
The Board has determined that based on his experience and knowledge in
financial and auditing matters Dr. Christenson is an "audit committee financial
expert" as defined by Securities and Exchange Commission ("SEC") rules. Both Dr.
Christenson and Mr. Krivsky meet the standards of independence under the
applicable National Association of Securities Dealers ("NASD") listing
standards.
Under the Company's Audit Committee Charter, the Audit Committee is
required to pre-approve all auditing services and permissible non-audit
services, including related fees and terms, to be performed for the Company by
its independent auditor, subject to the de minimus exceptions for non-audit
services described under the Securities Exchange Act of 1934 (the "Exchange
Act") which are approved by the Audit Committee prior to the completion of the
audit.
6
Compensation Committee.
The Board has a Compensation Committee composed of Murphy Evans and William
Krivsky. The principle functions of the Compensation Committee are to establish
overall compensation policies for the Company and to review the recommendations
submitted by the Company's management. The Compensation Committee did not hold
any meetings during the year ended June 30, 2006.
Nominating Committee.
The Board does not have a standing nominating committee. The Company does
not maintain a policy for considering nominees. The Board must consist of at
least two independent directors. Director nominees are recommended, reviewed and
approved by the entire Board. The Board believes that this process is
appropriate due to the relatively small number of directors on the Board and the
opportunity to benefit from a variety of opinions and perspectives in
determining director nominees by involving the full Board.
While the Board is solely responsible for the selection and nomination of
directors, the Board may consider nominees recommended by Stockholders as it
deems appropriate. Stockholders who wish to recommend a nominee should send
nominations to the Company's Chief Executive Officer, Henry E. Gemino, 2 Park
Avenue, Suite 201, Manhasset, New York, 11030 that include all information
relating to such person that is required to be disclosed in solicitations of
proxies for the election of directors. The recommendation must be accompanied by
a written consent of the individual to stand for election if nominated by the
Board and to serve if elected by the Stockholders. Stockholder Communications to
the Board.
The Board has established a process for Stockholders to communicate with
members of the Board. If you would like to contact the Board you can do so by
forwarding your concern, question or complaint to the Company's Chief Executive
Officer, Henry E. Gemino, 2 Park Avenue, Suite 201, Manhasset, New York, 11030.
Legal Proceedings.
There are no material proceedings to which any director, officer, or
affiliate of the issuer, any owner of record or beneficially of more than five
percent of any class of voting securities of the small business issuer, or
security holder, is a party adverse to the small business issuer or has a
material interest adverse to the small business issuer.
7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
----------------------------------------
The following table sets forth certain information as of September 22, 2006
by (i) all persons who are known to the Company to beneficially own more than 5%
of the outstanding shares of the Company's common stock, and (ii) by each
director, director nominee, and executive officer and (iii) by all executive
officers and directors as a group:
Amount of Common Percent
Name and Address of Beneficial Owner Positions and Offices Held Stock Ownership(1) of Class(1)
----------------------------------------- ---------------------------------- -------------------- ------------
Henry E. Gemino Chief Executive Officer, Chief 1,618,765(2) 13.00 %
5 Strickland Place Financial Officer, Director
Manhasset, NY 11030
Murphy Evans
204 Railroad Street
P.O. Box 688 President,Director 5,551,668(3) 44.57 %
Laurinburg, NC 28532
Philip L. Jones
203 Beaver Road Chief Operating Officer,
Sewickley, PA 15143 Executive Vice President 322,572(4) 2.59 %
Charles Christenson
1 Chauncy Lane
Cambridge, MA 02238 Director 410,666(5) 3.30 %
William A. Krivsky
117 Perimeter Road
Nashua, NH 06063 Director 315,000(6) 2.53 %
Gale D. Burnett
9191 Northwood Rd.
Lynden, WA 98264 Stockholder 938,000(7) 7.53 %
All Directors and Officers as a Group
(5 persons) 8,218,671(8) 65.98 %
(1) Calculated pursuant to rule 13d-3(d) of the Exchange Act. Beneficial
ownership is calculated based on 12,456,445 shares of Common Stock issued
and outstanding on a fully diluted basis as of September 22, 2006. Unless
otherwise stated below, each such person has sole voting and investment
power with respect to all such shares. Under Rule 13d-3(d) of the Exchange
Act, shares not outstanding which are subject to options, warrants, rights
or conversion privileges exercisable within 60 days are deemed outstanding
for the purpose of calculating the number and percentage owned by such
person, but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) Includes 6,000 shares held by the wife of Mr. Gemino, includes warrants to
purchase 408,332 shares of the Company's common stock, 5,000 of which are
held by the wife of Mr. Gemino, and options to purchase 730,000 shares of
the Company's common stock, 50,000 of which are held by the wife of Mr.
Gemino.
(3) Includes 30,000 shares held by the wife of Mr. Evans, 391,667 shares held
in the name of Falco Enterprises, Inc., a company controlled by Mr. Evans,
230,500 shares held by L&S Holding Co., a company controlled by Mr. Evans,
and 210,000 shares held by Arran Corporation, a company controlled by Mr.
Evans. Also includes warrants to purchase 2,663,334 shares of the Company's
8
common stock, 346,667 of which are held in the name of Falco Enterprises,
Inc., 215,000 in the name of L&S Holding Co., and 210,000 in the name of
Arran Corporation. Also includes options to purchase 300,000 shares of the
Company's common stock.
(4) Includes warrants to purchase 14,286 shares of the Company's common stock
and options to purchase 285,000 shares of the Company's common stock.
(5) Includes warrants to purchase 70,833 shares of the Company's common stock
and options to purchase 315,000 shares of the Company's common stock.
(6) Consists entirely of options to purchase the Company's common stock.
(7) Includes 578,000 shares held by the wife of Mr. Burnett. Also includes
warrants to purchase 110,000 shares of the Company's common stock and
options to purchase 250,000 shares of the Company's common stock.
(8) Assumes exercise of all warrants and options owned by all officers and
directors.
EXECUTIVE OFFICERS OF THE COMPANY
Certain information regarding the executive officers of the Company
follows:
Name Age Position Held With Company
---- --- --------------------------
Henry E. Gemino 55 Chief Executive Officer, Chief Financial Officer
Murphy Evans 74 Chairman and President
Philip L. Jones 64 Executive Vice President and Chief Operating Officer
Philip L. Jones has been serving as Executive Vice President and Chief
Operating Officer since September, 2001. For one year previous to his employment
by the Company, he provided energy consulting services to certain utility
companies. Prior to that, Mr. Jones served in various capacities with
Consolidated Natural Gas Company, a large integrated energy company, for more
than 30 years, including six years as Vice President for Marketing with CNG's
exploration and production subsidiary, CNG Producing Company. He received his
law degree from West Virginia College of Law in 1967 and his B.A. from Princeton
University in 1964. Mr. Jones was a Captain in the U.S. Army, 142nd JAG
Detachment.
There are no family relationships among the executive officers. There are
no arrangements or understandings between any officers and any other person,
pursuant to which any officer was selected.
EXECUTIVE COMPENSATION
Employment Contracts.
None of the executive officers of the Company are employed pursuant to
employment contracts.
Cash Compensation.
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and the highest paid executive officers of
the Company as of the end of the Company's last fiscal year ended June 30, 2006
whose salary and bonus for such period in all capacities in which the executive
officer served exceeded $100,000.
9
Summary Compensation Table
Other Restricted RLTIP
Name and Principal Annual Stock Options/SA Payouts All Other
Position Year Salary($) Bonus($) Compensation($) Award(s)$ (#) ($) Compensation($)
-------- ---- --------- -------- --------------- --------- ------ -------- --------------
Henry E. Gemino, 2006 $120,000(1),(2) $5,000 0 0 50,000 0 0
Chief Executive
Officer and Chief
Financial Officer
2005 $120,000(1),(2) 0 0 0 600,000 0 0
2004 $120,000(1),(2) 0 0 0 20,000 0 0
(1) Due to the Company's need for cash, the Company has deferred compensation
owed to certain officers of the Company. Such amounts will continue to be
deferred until the Company has sufficient resources to pay such amounts
owed. On March 18, 2002, the Board approved a conversion right on all
deferred wages due to officers as of March 18, 2002 (the "Officers'
Conversion Right"). Pursuant to the Officers' Conversion Right, officers
may elect to convert $1.00 of compensation owed to them as of March 18,
2002 for an option to purchase two shares of the Company's common stock, at
an exercise price of $1.00 per share for a term of five years. Pursuant to
the Officers' Conversion Right, as of June 30, 2006, the Company owed Mr.
Gemino $11,500, resulting in the potential issuance of 23,000 options under
the Officers' Conversion Right terms described above. To date, Mr. Gemino
has not elected to exercise his Officers' Conversion Right.
(2) During each of the three fiscal years ended June 30, 2006, 2005, and 2004,
the Company deferred payments of $0, $86,700, and $66,000, respectively, of
the $120,000 base salary owed to Henry E. Gemino. As of June 30, 2006 total
deferred compensation owed to Mr. Gemino was $185,600.
Option Grants in the Last Fiscal Year
The following table sets forth information regarding stock options granted
during the fiscal year ended June 30, 2006 to each of the executive officers of
the Company.
Percent Of Total
No. Of Securities Options Granted Exercise Of Market Price
Name Underlying Options To Employees In Base Price Base Expiration
And Position Granted Fiscal Year ($/Share) ($/Share)(1) Date
------------ ------------------ ----------------- ------------ ------------ ----------
Henry E. Gemino 50,000 14.3% $1.21 $1.10 12-12-2015
Chief Executive Officer and
Chief Financial Officer
Murphy Evans 50,000 14.3% $1.21 $1.10 12-12-2015
President
Philip L. Jones 50,000 14.3% $1.12 $1.10 12-12-2015
Executive Vice President and
Chief Operating Officer
(1) The market price is based on the market value ($1.10) of the Company's
common stock as of the close of business on December 12, 2005, the date of
the grant.
10
Option Exercises and Holdings
The following table sets forth information regarding stock options
exercised during the fiscal year ended June 30, 2006 by each of the named
executive officers and the value of the unexercised options held by these
individuals as of June 30, 2006, based on the per share market value ($0.95) of
the Company's common stock on June 30, 2006, the last day during the fiscal year
ended June 30, 2006 that trades in the Company's common stock were reported on
the OTC Bulletin Board.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Options/SAR Values:
Number of Number of Securities Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired On Value at Fiscal Year-End at Fiscal Year-End(1) ($)
Name Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
----- -------- ------------ ------------------------- -------------------------
Henry E. Gemino --- --- 680,000 / 0 (2) $ 9,000 / $ 0
Murphy Evans --- --- 300,000 / 0 (3) $ 9,000 / $ 0
Philip L. Jones --- --- 285,000 / 0 (4) $ 5,000 / $ 0
(1) The value calculations are based on $0.95 per share, the fair market value
of the underlying shares of the Company's common stock at year-end (June
30, 2006, the last day of the fiscal year on which the Company's stock was
traded) less the exercise price for the shares.
(2) Consists of the following options: (A) 10,000 options at $0.55 per share,
expiring in December 2007, (B) 20,000 options at $0.70 per share, expiring
in December 2008, (C) 600,000 options at $1.16 per share, expiring in
February 2015, and (D) 50,000 options at $1.21 per share, expiring in
December 2015.
(3) Consists of the following options: (A) 20,000 options at $1.05 per share,
expiring in November 2006, (B) 10,000 options at $0.55 per share, expiring
in December 2007, (C) 20,000 options at $0.70 per share, expiring in
December 2008, (D) 200,000 options at $1.16 per share, expiring in February
2015, and (E) 50,000 options at $1.21 per share, expiring in December 2015.
(4) Consists of the following options: (A) 15,000 options at $1.05 per share,
expiring in November 2006, (B) 20,000 options at $0.70 per share, expiring
in December 2008, (C) 200,000 options at $1.16 per share, expiring in
February 2015, and (D) 50,000 options at $1.12 per share, expiring in
December 2015.
11
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PROPOSAL 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
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The Board is proposing an amendment to Paragraph 4 of the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock, par value $0.001 per share, of the Company from 25,000,000 shares
of common stock to 35,000,000 shares of common stock (the "Amendment") for
approval by the Stockholders. A copy of the form of the Amendment is attached to
this proxy statement as Appendix A.
The Board believes that the flexibility provided by the increase in the
authorized shares of common stock, which will permit the Board, in its
discretion, to issue or reserve additional shares of common stock without the
delay or expense of a meeting of Stockholders, is in the best interests of the
Company and the Stockholders. Shares of common stock may be used for general
corporate purposes, including possible financing activities. Possible financing
activities might include raising additional capital funds through offerings of
shares of the common stock. The Board has no current plan, understanding or
arrangement to issue any of the additional shares of common stock.
The issuance of any additional shares of common stock may have the effect
of diluting the percentage of stock ownership, book value and voting rights of
the present holders of the common stock. The increase in the authorized common
stock of the Company also may have the effect of discouraging attempts to take
over control of the Company, as additional shares of common stock could be
issued to dilute the stock ownership and voting power of, or increase the cost
to, a party seeking to obtain control of the Company. The Amendment is not being
proposed in response to any known effort or threat to acquire control of the
Company and is not part of a plan by management to adopt a series of amendments
to the Company's Certificate of Incorporation and Bylaws having an anti-takeover
effect.
Holders of the Company's common stock are entitled to one vote for each
share held on all matters submitted to a Stockholder vote. Holders of common
stock do not have cumulative voting rights. Therefore, holders of a majority of
the shares of common stock voting for the election of directors can elect all of
the directors. Holders of the common stock representing a majority of the voting
power of the capital stock issued, outstanding and entitled to vote, represented
in person or by proxy, are necessary to constitute a quorum at any meeting of
Stockholders. A vote by the holders of a majority of the outstanding shares of
common stock is required to effectuate certain fundamental corporate changes
such as liquidation, merger or an amendment to the articles of incorporation.
Holders of common stock are entitled to share in all dividends that the
Board, in its discretion, declares from legally available funds. In the event of
a liquidation, dissolution or winding up, each outstanding share entitles its
holder to participate pro rata in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having
preference over the common stock. Holders of the common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to the common stock.
The Board adopted the Amendment on July 18, 2006 and is seeking approval by
the Stockholders through this proxy solicitation.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT.
12
--------------------------------------------------------------------------------
PROPOSAL 3
AMENDMENT TO THE 1999 STOCK PLAN
--------------------------------------------------------------------------------
The Board is proposing amendments to Paragraph 3(c) and Paragraph 4 of the
Company's 1999 Stock Plan (the "Plan") to increase the period of time for which
stock options are exercisable from a period of five years to ten years from the
date of grant and to increase the aggregate number of shares of common stock
which may be issued pursuant to the Plan from 500,000 to 3,500,000 (the "Plan
Amendment") for approval by the Stockholders. A copy of the form of the Plan
Amendment is attached to this proxy statement as Appendix B.
The Board believes that increasing the period of time for which stock
options are exercisable provides the stock option holder with increased
flexibility of when they may exercise their stock options and that the option
holder will continue to be motivated to work in the best efforts of the Company
in order to meet business objectives.
The Board believes that increasing the aggregate number of shares of common
stock which may be issued pursuant to the Plan will permit the Board, in its
discretion, to make additional grants of stock options without the delay or
expense of a meeting of Stockholders, and is in the best interests of the
Company and the Stockholders. Stock options may be granted as compensation to
consultants for performance of services or in recognition of the ongoing efforts
by employees, executives and Board members.
The issuance of any additional stock options may have the effect of
diluting the percentage of stock ownership, book value and voting rights of the
present holders of the common stock. The increase in the number of stock options
authorized for grant may also have the effect of discouraging attempts to take
over control of the Company, as additional shares of common stock could be
issued to dilute the stock ownership and voting power of, or increase the cost
to, a party seeking to obtain control of the Company. The Plan Amendment is not
being proposed in response to any known effort or threat to acquire control of
the Company.
The Board adopted the Plan Amendment on August 17, 2006 and is seeking
approval by the Stockholders through this proxy solicitation. Each of the
directors and executive officers of the Company is eligible to participate in,
and receive awards through the Plan.
Description of the 1999 Stock Plan
On November 16, 1998, the Stockholders approved and adopted the Profile
Technologies, Inc. 1999 Stock Plan (the "1999 Stock Plan"). The 1999 Stock Plan
is intended to promote the interests of the Company by attracting and retaining
exceptional employees, consultants, and directors (collectively referred to as
the "Participants"), and enabling such Participants to participate in the
long-term growth and financial success of the Company. Under the 1999 Stock
Plan, the Board may grant stock options, which are intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Incentive Stock Options"), non-qualified stock options
(the "Non-Qualified Stock Options"), stock rights (the "Stock Rights"), and
stock appreciation rights ("SARs") (the Incentive Stock Options, the
Non-Qualified Stock Options, the Stock Rights, and the SARs are collectively
referred to as "Incentive Awards").
The 1999 Stock Plan reserved a total of 500,000 shares of the Company's
common stock for issuance thereunder. If an Incentive Award granted under the
1999 Stock Plan expires, terminates, is unexercised or is forfeited, or if any
shares are surrendered to us in connection with an Incentive Award, the shares
subject to such award and the surrendered shares will become available for
further awards under the 1999 Stock Plan. The amendment to the 1999 Stock Plan
will increase the number of shares of common stock reserved for issuance under
the 1999 Stock Plan from 500,000 to 3,500,000.
The following is a description of the material provisions of the 1999 Stock
Plan. The description of the 1999 Stock Plan is qualified in its entirety by
reference to the complete 1999 Stock Plan document, attached as Exhibit 10.9 to
our Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004, filed
with the SEC on October 12, 2004.
13
Administration
--------------
Under the 1999 Stock Plan, the Board is authorized to appoint a committee,
consisting of not less than three directors, to administer the 1999 Stock Plan.
In the absence of such committee's appointment, the Board will administer the
1999 Stock Plan. The Board has the discretion to determine from time to time the
Participants to whom options or other stock rights shall be granted, the number
of shares of common stock to be optioned to each, the time when such options or
stock rights shall become exercisable, and the conditions, if any, which must be
met before exercise.
Stock Options
-------------
The price of the common stock offered to optionees may be set by the Board,
but must be at least 100% of the fair market value of such stock on the date of
grant. If at the time an Incentive Stock Option is granted, the optionee owns
more than 10% of the total combined voting power of all classes of the Company's
stock, the option price for any Incentive Stock Option must be at least 110% of
fair market value.
The Board may determine the term of each stock option granted, which term
may not exceed five years from the date of grant. The amendment to the 1999
Stock Plan to be voted on by the Stockholders at the Annual Meeting would allow
the Board to grant stock options with a term of up to 10 years.
An Incentive Stock Option may not be exercised prior to the expiration of
six months after its grant for up to 100% of the total shares included, except
that the Board may impose any restriction that it chooses on the time of
exercise if the Board believes that such restrictions are in the best interests
of the Company. No Incentive Stock Option granted under the 1999 Stock Plan may
be exercised until all Incentive Stock Options previously granted to the
optionee to purchase shares of the Company's common stock have been exercised in
full or have expired.
No employee eligible to participate in the 1999 Stock Plan shall be granted
Incentive Stock Options which are exercisable during any one calendar year to
the extent that the fair market value of such shares (determined at the time of
the grant of the Option) exceeds $100,000. No employee shall be given the
opportunity to exercise Incentive Stock Options granted under the 1999 Stock
Plan with respect to shares valued in excess of $100,000 in any calendar year
except and to the extent that such options shall have accumulated over a period
in excess of one year.
No shares of common stock will be issued or delivered to an optionee until
the Company receives full payment of the option exercise price. The number of
shares of Common Stock deliverable with respect to each payment of the option
exercise price is subject to appropriate adjustment upon any stock split or
combination of shares, or upon any stock dividend. Upon the occurrence of any
corporate merger, consolidation, sale of all or substantially all of the
Company's assets, or other reorganization, or a liquidation, any optionee
holding an outstanding option, regardless of the current status of its
exercisability, is entitled to exercise his option in whole or in part and to
receive upon the exercise those shares, securities, assets, or payment which the
optionee would have received if the optionee had exercised the option prior to
such occurrence and had been a stockholder of the Company with respect to such
common stock.
Stock Appreciation Rights
-------------------------
SARs may be granted under the 1999 Stock Plan. A SAR is a right to receive
the excess of the fair market value of a share of the Company's common stock on
the date on which a SAR is exercised over the price provided for in a
Non-Qualified Option granted in connection with the SAR. A SAR only exists along
with a Non-Qualified Option right, and is immediately forfeited if the related
Non-Qualified Option right is exercised. The Board may determine whether the
optionee's SARs will be paid in cash or common stock or some combination
thereof.
The Board also determines, including at the time of exercise, the maximum
amount of cash or common stock which may be paid upon exercise of any SAR in any
year; provided, however, that all such amounts shall be paid in full no later
than the end of the year immediately following the year in which the optionee
exercised such SARs.
14
Indemnification
---------------
Members of the Board of Directors are indemnified by the Company under the
1999 Stock Plan for any act or omission in connection with the 1999 Stock Plan
or any option granted thereunder.
Duration, Amendment and Termination
-----------------------------------
The Board may suspend or terminate the 1999 Stock Plan without Stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1999 Stock Plan will terminate on November 16, 2008. The Board
may also amend the 1999 Stock Plan at any time. No change may be made that
increases the total number of shares of common stock reserved for issuance under
the 1999 Stock Plan unless such change is authorized by our Stockholders. A
termination or amendment of the 1999 Stock Plan will not, without the consent of
the Participant, adversely affect a Participant's rights under a previously
granted Incentive Award.
Transferability of Awards
-------------------------
Incentive Awards shall not be transferable except by will or by the laws of
descent and distribution.
Tax Withholding Information
---------------------------
Each Participant agrees, as a condition of receiving an Incentive Award
payable in the form of common stock, to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment to the Company of, the
aggregate minimum amount of federal, state, local, and foreign income, payroll,
and other taxes that the Company is required to withhold in connection with the
grant, vesting, or exercise of any Incentive Award (the "Applicable Withholding
Taxes"). Under the terms of the 1999 Stock Plan, a recipient of an Incentive
Award under the 1999 Stock Plan may elect to satisfy the Applicable Withholding
Taxes by (i) making a cash payment or authorizing additional withholding from
cash compensation, (ii) delivering shares of common stock for which the
stockholder has good title, free and clear of all liens and encumbrances, or
(iii) having the Company retain that number of shares of common stock (valued at
fair market value of common stock as of such date, as determined by the Board)
that would satisfy all or a specified portion of the Applicable Withholding
Taxes.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN AMENDMENT.
15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September, 1988, at the time Gale D. Burnett, a beneficial stockholder
of more than 10% of the Company's common stock, first transferred certain
technology, know-how and patent rights to the Company, a royalty interest of 4%
of all pre-tax profits derived from the technology and know-how transferred was
granted to Northwood Enterprises, Inc., a family-owned company controlled by Mr.
Burnett. Northwoods Enterprises subsequently assigned such royalty interest back
to Mr. Burnett. On April 8, 1996, Mr. Burnett assigned 2% of this royalty
interest to certain stockholders of the Company, 1 1/4% of which was assigned to
Henry Gemino, currently the Chief Executive Officer and Chief Financial Officer,
and a director of the Company. This royalty arrangement also applies to all
future patent rights and technology developed by Mr. Burnett and assigned to the
Company. To date, no royalty payments have been made or earned under the above
described arrangement.
OTHER MATTERS TO BE VOTED UPON
As of the date of this proxy statement, the Board does not know of or
anticipate that any other matters will be brought before the Stockholders at the
Annual Meeting. If, however, any other matters not mentioned in the proxy
statement are properly brought before the Stockholders at the Annual Meeting,
the persons appointed as proxies will have the discretion to vote or act in
accordance with their best judgment.
SECTION 16(a): BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act of 1934, the executive
officers and directors of the Company in addition to any person who owns more
than 10% of the common stock of the Company are required to report their
ownership of the common stock of the Company and changes to such ownership with
the SEC. Based on a review of such reports and information provided to the
Company, the Company believes that during the most recent fiscal year the
executive officers and directors of the Company have complied with applicable
filing requirements under Section 16(a) except that Mr. Evans failed to file
three reports in connection with three transactions during the fiscal year ended
June 30, 2006. As of the date of this definitive proxy statement, Mr. Evans has
filed the appropriate reports with the SEC.
INDEPENDENT PUBLIC ACCOUNTANTS
On November 4, 2004, the Company dismissed KPMG LLP ("KPMG") as its
independent accountant. The decision to change independent accountants was
approved by the Company's Audit Committee and Board of Directors. During the
audits of the Company's fiscal years ended June 30, 2004 and 2003 and through
November 4, 2004, the Company had no disagreements with KPMG on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
KPMG, would have caused it to make reference to the subject matter of such
disagreements in its report on the financial statements of the Company for such
period. During the Company's two fiscal years ended June 30, 2004 and 2003 and
through November 4, 2004, the Company had no reportable events under Item
304(a)(1)(iv) of Regulation S-B, except as discussed in the next paragraph
below.
During the audit for the year-ended June 30, 2004, KPMG advised the
Company's Audit Committee that they identified one material weakness in the
Company's internal controls. The material weakness identified related to the
accounting and financial reporting for the non-payment of interest on the
convertible debt, causing certain of the notes to be in default as of June 30,
2004. The accounting for this default is included in the Company's financial
statements for the year-ended June 30, 2004. The Company has implemented
processes and procedures to review debt agreements, on a quarterly basis, to
ensure that the Company is in compliance with the terms of its debt instruments
and covenants. In instances of non-compliance, the Company will take the
necessary actions to remedy the non-compliance and consider the impact of any
non-compliance in the reporting of the Company's financial statements.
The audit reports of KPMG on the financial statements of the Company as of
and for each of the fiscal years ended June 30, 2004 and 2003 did not contain
any adverse opinion or a disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope or accounting principles, except as
follows:
16
KPMG's report on the financial statements of the Company as of and for the
years ended June 30, 2004 and 2003, contained a separate paragraph stating that
"the Company has incurred net losses since inception and has a working capital
deficit at June 30, 2004 that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty."
On November 4, 2004, the Board selected Peterson Sullivan PLLC ("Peterson
Sullivan") as the independent certified public accountants. Peterson Sullivan
was the Company's independent certified public accountant for the fiscal year
ended June 30, 2006. The Board has selected Peterson Sullivan as the independent
certified public accountants to audit the financial statements of the Company
for its fiscal year ended June 30, 2007. To the knowledge of management, neither
such firm nor any of its members has any direct or material indirect financial
interest in the Company nor any connection with the Company in any capacity
otherwise than as independent accountants.
A representative of Peterson Sullivan will be present via telephone at the
Annual Meeting to respond to appropriate questions from Stockholders and will
have an opportunity to make a statement if he or she chooses to do so.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fiscal Year 2006 Fiscal Year 2005
---------------- ----------------
Audit Fees(1) $35,400 $33,500
Audit-related Fees 0 0
Tax Fees 0 0
All Other Fees 0 0
TOTAL $35,400 $33,500
(1) For professional services rendered by Peterson Sullivan and for the audits
of the Company's annual financial statements and the review of financial
statements included in the Company's Forms 10-QSB and 10-KSB.
Generally, the Audit Committee must approve all audit and non-audit
services to be provided to the Company. The Audit Committee may implement
policies and procedures by which such services are approved other than by the
full Committee, but has not yet done so.
The Audit Committee approved 100% of the Audit Fees for the years ended
June 30, 2006 and June 30, 2005.
The Audit Committee shall not approve non-audit services that the Audit
Committee believes may impair the independence of the independent registered
public accounting firm. As of the date of the approval of the Audit Committee
Charter, permissible non-audit services include any professional services
(including tax services), that are not prohibited services as described below,
provided to the Company by the independent registered public accounting firm,
other than those provided to the Company in connection with an audit or a review
of the financial statements of the Company. Permissible non-audit services may
not include: (i) bookkeeping or other services related to the accounting records
or financial statements of the Company; (ii) financial information systems
design and implementation; (iii) appraisal or valuation services, fairness
opinions or contribution-in-kind reports; (iv) actuarial services (v) internal
audit outsourcing services; (vi) management functions or human resources; (vii)
broker or dealer, investment adviser or investment banking services; (viii)
legal services and expert services unrelated to the audit; and (ix) any other
service the Public Company Accounting Oversight Board determines, by regulation,
is impermissible.
Pre-approval by the Audit Committee of any permissible non-audit services
is not required so long as the aggregate amount of all such permissible
non-audit services provided to the Company constitutes not more than 5% of the
total amount of revenues paid to the Company's independent registered public
accounting firm during the fiscal year in which the permissible non-audit
services are provided to the Company.
17
AUDIT COMMITTEE REPORT
As set forth in its charter, the Audit Committee assists the Board by
reviewing financial reports we provide to governmental bodies or the public,
monitoring the adequacy of our internal controls regarding finance and
accounting, reviewing our auditing, accounting, and financial reporting
processes generally, and verifying the independence of our independent auditors.
All auditors employed or engaged by us report directly to the Audit Committee.
To fulfill its responsibilities, the Audit Committee recommends the selection of
auditors and reviews reports of auditors and examiners, as well as management's
responses to such reports, to ensure the effectiveness of internal controls and
the implementation of remedial action. The Audit Committee also recommends to
the Board whether to include the audited financial statements in our Annual
Report and Form 10-KSB.
In discharging its responsibility, the Audit Committee has reviewed and
discussed the Company's audited financial statements with management. The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Audit Committee has received the written disclosures and letter
from the Company's independent auditors as required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and has discussed with the independent
auditors their independence.
The Audit Committee has reviewed and discussed our audited financial
statements as of and for the year ended June 30, 2006, with management and the
independent auditors. Management has the responsibility for preparation of our
financial statements, and the independent auditors have the responsibility for
examination of those statements. Based on this review of the financial
statements, discussions with management and the independent auditors, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in our Annual Report and Form 10-KSB for the year ended
June 30, 2006, for filing with the SEC.
Audit Committee
William Krivsky
Charles Christenson
STOCKHOLDER PROPOSALS
Stockholders who wish to include a proposal in the Company's proxy
statement for the 2007 annual meeting must deliver a written copy of their
proposal to the Company's principal executive offices no later than June 30,
2007. Proposals must comply with the SEC proxy rules relating to stockholder
proposals to be included in the Company's proxy materials. Except for
stockholder proposals to be included in the Company's proxy statement, the
deadline for nominations for director or other proposals made by a Stockholder
is five days before the date of the 2007 Annual Meeting. Proposals should be
directed to Henry E. Gemino, Chief Executive Officer, Profile Technologies,
Inc., 2 Park Avenue, Suite 201, Manhasset, New York 11030.
ANNUAL REPORT ON FORM 10-KSB; DELIVERY TO STOCKHOLDERS SHARING ADDRESS
The Company is providing Stockholders with a copy of its Annual Report on
Form 10-KSB for the fiscal year ended June 30, 2006 simultaneously with delivery
of this proxy statement. You may obtain additional copies of the Annual Report,
without charge, by writing to Henry E. Gemino, Chief Executive Officer, Profile
Technologies, Inc., 2 Park Avenue, Suite 201, Manhasset, New York 11030.
The Company is delivering only one proxy statement and Annual Report to
multiple Stockholders sharing an address unless the Company has received
contrary instructions from one or more of the Stockholders. The Company will
promptly deliver upon written or oral request a separate copy of this proxy
statement or the Annual Report to a Stockholder at a shared address to which a
18
single copy was sent. If you are a Stockholder residing at a shared address and
would like to request an additional copy of the proxy statement or Annual Report
now or with respect to future mailings (or to request to receive only one copy
of the proxy statement or Annual Report if you are currently receiving multiple
copies), please send your request to our Chief Executive Officer at the address
noted above.
FINANCIAL INFORMATION
We hereby incorporate by reference our Annual Report on Form 10-KSB for the
fiscal year ended June 30, 2006 included with this Proxy Statement.
COST OF SOLICITATION
The Company will bear the cost of solicitation of proxies, including
expenses in connection with the preparation and mailing of this proxy statement.
The Company will solicit primarily through the mail, and the Company's officers,
directors, and employees may solicit by personal interview, telephone,
facsimile, or e-mail proxies. These people will not receive additional
compensation for such solicitations, but the Company may reimburse them for
their reasonable out-of-pocket expenses.
Stockholders are requested to complete, sign, and date the accompanying
proxy card and promptly return it to the Company's transfer agent, Continental
Stock Transfer & Trust Company, in the enclosed addressed, postage paid
envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Henry E. Gemino
----------------------------------
Henry E. Gemino
Chief Executive Officer
October 15, 2006
19
APPENDIX A
----------
AMENDMENT TO CERTIFICATE OF INCORPORATION OF
PROFILE TECHNOLOGIES, INC. INCREASING NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
Profile Technologies, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Profile Technologies,
Inc. resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of the Corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that Paragraph 4 of the Company's Certificate of Incorporation
shall be deleted in its entirety and replaced with the following:
The total number of shares of stock which the corporation shall have
the authority to issue is 35,000,000 shares of common stock, $0.001
par value.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of the Corporation was duly called
and held upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 243 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Profile Technologies, Inc. has caused this
certificate to be signed by Philip L. Jones, its Secretary, this 18th day of
July, 2006.
PROFILE TECHNOLOGIES, INC.
/s/ Philip L. Jones
------------------------------------
Philip L. Jones
Secretary
20
APPENDIX B
----------
FIRST AMENDMENT
TO THE
PROFILE TECHNOLOGIES, INC. 1999 STOCK PLAN
This First Amendment to the Profile Technologies, Inc. (the "Company") 1999
Stock Plan (the "Plan") is effective as of August 17, 2006. The Plan shall be
amended as follows:
1. Paragraph 3(c) of the Plan is hereby amended by deleting Paragraph 3(c)
in its entirety and replacing it with the following:
"c. The Option shall be exercisable for such period of time as is to
be determined by the Committee. If no such determination is made by the
Committee, the Options shall be exercisable for a period of 10 years from
the date of grant."
2. Paragraph 4 of the Plan is hereby amended by deleting such paragraph in
its entirety and replacing it with the following:
"4. Stock. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock or shares of Common Stock
reacquired by the Company in any manner. The aggregate number of shares of
Common Stock which may be issued pursuant to the plan is 3,500,000, subject
to adjustment as provided in Paragraph 15. Any such shares may be issued as
ISOs, Non-Qualified Options or Awards, or to persons or entities making
Purchases, provided that the number of shares so issued does not exceed the
total aggregate number of shares issuable under the Plan, as adjusted. If
any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, or if the Company shall reacquire any
unvested shares issued pursuant to Awards or Purchases, the unpurchased
shares subject to such Options and any unvested shares so reacquired by the
Company shall again be available for grants of Stock Rights under the
Plan."
3. In all respects not amended, the Plan is hereby ratified and confirmed.
4. Pursuant to Paragraph 17 of the Plan, this amendment shall not be
effective unless approved by the Company's stockholders within 12 months of the
date hereof; if the Company has not received approval of its stockholders by
August 16, 2007 for the amendments set forth herein, all options granted by the
Company's board of directors pursuant to this amendment shall be deemed to be
non-qualified stock options granted outside the Plan.
To record this First Amendment to the Profile Technologies, Inc. 1999 Stock
Plan, as set forth herein, the board of directors of the Company has caused the
undersigned authorized officer of the Company to execute this document as of the
date first written above.
PROFILE TECHNOLOGIES, INC.
/s/ Philip L. Jones
------------------------------------
Philip L. Jones
Secretary
21
APPENDIX C
----------
DEFINITIVE PROXY CARD
Profile Technologies, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
I, the undersigned stockholder of Profile Technologies, Inc. (the "Company"), do
hereby nominate, constitute and appoint Henry E. Gemino, my true and lawful
proxy and attorney with full power of substitution for me and in my name, place
and stead, to represent and vote all of the common stock, par value $0.001 per
share, of the Company, held in my name on its books as of September 22, 2006, at
the Annual Meeting of Stockholders to be held on Monday, November 13, 2006, as
directed herein.
PROPOSAL 1. Election of the following Directors:
[ ] FOR all nominees listed below (except [ ] WITHHOLD Authority to vote
as marked to the contrary below) for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the name(s) of such nominee(s) below.)
Henry E. Gemino
-----------------------------
Murphy Evans
-----------------------------
William A. Krivsky
-----------------------------
Charles Christenson
-----------------------------
-----==-------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES.
--------------------------------------------------------------------------------
PROPOSAL 2. Adoption of the Amendment to the Company's Certificate of
Incorporation increasing the authorized shares of common stock from 25,000,000
to 35,000,000:
[ ] FOR adoption of the Amendment [ ] AGAINST Authority to vote for
adoption of Amendment
[ ] ABSTAIN
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION INCREASING THE
AUTHORIZED SHARES OF COMMON STOCK FROM 25,000,000 TO 35,000,000.
--------------------------------------------------------------------------------
PROPOSAL 3. Adoption of the Amendment to the Company's 1999 Stock Plan to
increase the period of time for which stock options are exercisable from a
period of five years to ten years and to increase the aggregate number of shares
of common stock which may be issued pursuant to the 1999 Stock Plan from 500,000
to 3,500,000:
[ ] FOR adoption of the Plan Amendment [ ] AGAINST Authority to vote for
adoption of Plan Amendment
[ ] ABSTAIN
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ADOPTION
OF THE 1999 STOCK PLAN AMENDMENTS
TO INCREASE THE MAXIMUM PERIOD OF TIME FOR WHICH STOCK OPTIONS ARE
EXERCISABLE FROM FIVE YEARS TO TEN YEARS AND TO INCREASE THE AGGREGATE
NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE ISSUED PURSUANT TO THE 1999
STOCK PLAN FROM 500,000 TO 3,500,000.
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In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting of Stockholders.
IMPORTANT: PLEASE SIGN AND DATE ON REVERSE
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, the proxy will
be voted FOR Proposal 1, FOR Proposal 2, and FOR Proposal 3. Should any other
matter requiring a vote of the stockholders arise, the proxy named above is
authorized to vote in accordance with his best judgment in the interest of the
Company.
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IMPORTANT: Please sign exactly as your name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign the full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ADDRESSED ENVELOPE OR OTHERWISE TO Continental Stock Transfer & Trust Company,
17 Battery Place, New York, New York 10004. IF YOU DO NOT SIGN AND RETURN A
PROXY OR ATTEND THE MEETING AND VOTE, YOUR SHARES CANNOT BE VOTED.
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Date
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Signature
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Signature (if jointly held)
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Print Name(s) Here
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