SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| 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-11(c) or Rule 14a-12
CyPost Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
CYPOST CORPORATION
1281 West Georgia Street, Suite 900
Vancouver, British Columbia
January 14, 2002
To Our Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of CyPost Corporation (the "Company"). The Annual Meeting will be
held at 2:00 p.m., local time, on January 29, 2002, at the offices of Kaplan
Gottbetter & Levenson, LLP, 630 Third Avenue, New York, NY 10017.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented at the Annual Meeting.
Included with the Proxy Statement are copies of the Company's Annual
Report on Form 10-KSB, excluding exhibits, for the fiscal year ended December
31, 2000 (the "Form 10-KSB") and Quarterly Report on Form 10-QSB, excluding
exhibits, for the fiscal quarter ended September 30, 2001 (the "Form 10-QSB").
We encourage you to read the Form 10-KSB and Form 10-QSB. They include
information on the Company's operations, markets, products and services, as well
as the Company's December 31, 2001 audited financial statements (see Form
10BKSB) and September 30, 2001 reviewed financial statements (see Form 10-QSB).
It is important that your shares be represented at this meeting to assure
the presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your stock represented by completing, signing, dating and
returning your proxy in the enclosed envelope as soon as possible. Unless
revoked by you prior to the time it is voted, your stock will be voted in
accordance with the instructions you have given in your proxy. Returning the
proxy does not deprive you of your right to attend the meeting and to vote your
shares in person for the matters acted upon at the meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Sandra Lynn Warren
Sandra Lynn Warren
President, Treasurer, Secretary and Director
CYPOST CORPORATION
1281 West Georgia Street, Suite 900
Vancouver, British Columbia V6E3J7
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders (the "Meeting") of CyPost Corporation,
a Delaware corporation (the "Company"), will be held at the offices of Kaplan
Gottbetter & Levenson, LLP, 630 Third Avenue, New York, NY 10017 on January 29,
2002, at 2:00 p.m. local time, for the following purposes:
(1) To elect three (3) directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified;
(2) To approve an amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of the Company's common stock
from 30,000,000 to 200,000,000 shares;
(3) To approve an amendment to the Company's Certificate of Incorporation
granting the Company's board of directors the authority to adopt one or
more shareholder rights plans, rights agreements or other forms of "poison
pills" in the future without further shareholder approval.
(4) To ratify the appointment of Good Swartz Brown & Berns LLP as independent
auditors for the year ended December 31, 2001;
(5) To approve an amendment to the Company's By-Laws providing for the board
of directors to consist of a minimum of three (3) persons and a maximum of
seven (7) persons; and
(6) To transact such other business as may properly come before the Meeting.
Holders of Common Stock $.001 par value, of record, at the close of
business on December 31, 2001 are entitled to notice of and to vote at the
Meeting, and at any continuation or adjournment thereof. A complete list of such
stockholders will be open to the examination of any stockholder at the Company's
principal executive offices at 1281 West Georgia Street, Suite 900, Vancouver,
British Columbia V6E3J7 for a period of 10 days prior to the Meeting and on the
day of the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER
OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL ENSURE A QUORUM
AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY
BE REVOKED BY THE STOCKHOLDER GRANTING SUCH PROXY AT ANY TIME BEFORE IT IS
VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
/s/ Sandra Lynn Warren
Sandra Lynn Warren
President, Treasurer, Secretary and Director
Vancouver, British Columbia
January 14, 2002
CYPOST CORPORATION
1281 West Georgia Street, Suite 900
Vancouver, British Columbia V6E3J7
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of CyPost Corporation (the "Company") of proxies to be
voted at the Annual Meeting of Stockholders of the Company to be held on January
29, 2002 (the "Meeting") at 2:00 p.m., local time, and at any continuation or
adjournment thereof. Holders of record of common stock, $0.001 par value
("Common Stock") as of the close of business on December 31, 2001, will be
entitled to notice of and to vote at the Meeting and any continuation or
adjournment thereof. As of that date, there were 23,189,525 shares of Common
Stock issued and outstanding and entitled to vote. This Proxy Statement, the
accompanying proxy, the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2000 and the Company's Quarterly Report on Form 10-QSB
for the fiscal quarter ended September 30, 2001will be mailed to stockholders on
or about January 14, 2002.
Each share of Common Stock is entitled to one vote on any matter presented
at the Meeting. Shares of Common Stock may not be voted cumulatively. If proxies
in the accompanying form are properly executed and returned, the shares of
Common Stock represented thereby will be voted in the manner specified therein.
If not otherwise specified, the shares of Common Stock represented by the
proxies will be voted (i) FOR the election of the three (3) nominees named below
as Directors, (ii) FOR the approval of a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock to 200,000,000; (iii) FOR the approval of a proposal to amend the
Company's Certificate of Incorporation granting the Company's board of directors
the authority to adopt one or more shareholder rights plans, rights agreements
or other forms of "poison pills" in the future without further shareholder
approval; (iv) FOR the ratification of the appointment of Good Swartz Brown &
Berns LLP as independent auditors for the year ended December 31, 2001, (v) FOR
the approval of a proposal to amend the Company's By-Laws to require that the
board of directors consist of a minimum of three (3) and a maximum of seven (7)
directors, and (vi) in the discretion of the person named in the enclosed form
of proxy, on any other proposals which may properly come before the Meeting or
any continuation or adjournment thereof. Any Stockholder who has submitted a
proxy may revoke it at any time before it is voted, by written notice addressed
to and received by the Secretary of the Company, by submitting a duly executed
proxy bearing a later date or by electing to vote in person at the Meeting. The
mere presence at the Meeting of the person executing a proxy does not, however,
revoke the proxy.
The expense of printing and mailing proxy material will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by directors, officers, and other employees of the Company by personal
interview, telephone, or facsimile. No additional compensation will be paid for
such solicitation. The Company will request brokers and nominees who hold shares
of Common Stock in their names to furnish proxy material to beneficial owners of
the shares.
The presence, in person or by proxy, of holders of shares of Common Stock
having a majority of the votes entitled to be cast at the Meeting shall
constitute a quorum. The affirmative vote by the
1
holders of a plurality of the shares of Common Stock cast at the Meeting is
required for the election of Directors, provided a quorum is present in person
or by proxy. The affirmative vote of the holders of a majority of the Company's
outstanding shares of Common Stock is required for the approval of the proposed
amendments to the Company's Certificate of Incorporation. Provided a quorum is
present in person or by proxy, all other actions proposed herein may be taken
upon the affirmative vote of Stockholders possessing a majority of the shares
present or represented and entitled to vote at the Meeting. Abstentions and
broker non-votes are included in the shares present at the Meeting for purposes
of determining whether a quorum is present. Abstentions are counted as a vote
against for purposes of determining whether a proposal is approved. Broker
non-votes are not counted as shares present and entitled to be voted with
respect to the matter on which the broker has expressly not voted. Thus, broker
non-votes will not affect the outcome of any of the matters being voted upon at
the meeting, expect for the proposed amendments to the Company's Certificate of
Incorporation. Generally, broker non-votes occur when shares held by a broker
for a beneficial owner are not voted with respect to a particular proposal
because (i) the broker has not received voting instructions from the beneficial
owner, and (ii) the broker lacks discretionary voting power to vote such shares.
This Proxy Statement, together with the related Proxy Card, Notice of
Annual Meeting, the Company's Annual Report on Form 10-KSB, excluding exhibits,
for the fiscal year ended December 31, 2000 (including audited financial
statements for the fiscal year ended December 31, 2000) and the Company's
Quarterly Report on Form 10-QSB, excluding exhibits, for the fiscal quarter
ended September 30, 2001 (including reviewed financial statements for the
quarter ended September 30, 2001) are being mailed to all Stockholders of record
as of the close of business on December 31, 2001. All of these materials are
referred to as the "Proxy Materials". In addition, the Company has provided
brokers, dealers, banks, voting trustees and their nominees, at the Company's
expense, with additional copies of the Proxy Materials so that such record
holders could mail such materials to beneficial owners on or about January 14,
2002.
PROPOSAL NO.1
ELECTION OF DIRECTORS
At the Meeting, three (3) directors are to be elected (which number shall
constitute the entire Board of Directors of the Company) to hold office until
the next Annual Meeting of Stockholders and until their successors shall have
been duly elected and qualified, or until their earlier resignation or removal.
It is the intention of the persons named in the enclosed form of proxy to
vote the stock represented thereby, unless otherwise specified in the proxy, for
the election as Directors of the persons whose names and biographies appear
below. Two of the three nominees, James T. Johnson and Sandra Lynn Warren are
incumbent directors. Javan Khazali is also being nominated for election to the
board. In the event any of the nominees should become unavailable or unable to
serve as a Director, it is intended that votes will be cast for a substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe that the nominees named will be unable to serve if elected.
Each nominee has consented to being named in this Proxy Statement and to serve
if elected.
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Required Vote
Directors are elected by a plurality of votes cast. Abstentions withheld
and broker non-votes are not counted towards a nominee's total.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF EACH OF THE NOMINATED DIRECTORS.
The principal occupations and business experience, for at least the past five
years, of each nominated Director is as follows:
James T. Johnston
Mr. Johnston, 60, joined our Board of Directors on January 17, 2000. Mr.
Johnston is, and has been, a licensed pilot for Canadian Airlines, now known as
Air Canada, for 35 years and an airline captain for 29 years. Mr. Johnston has
been active in representing the airline pilot's union in a number of capacities
and has been involved in several high-level contract negotiations.
Sandra Lynn Warren
Mrs. Warren, 35, has been with the Company for more than three years and
joined our Board of Directors on October 12, 2001. On October 30, 2001, Mrs.
Warren was appointed as our president, treasurer and principal financial
officer. She has a diverse background in office and administrative management.
Mrs. Warren has worked in administration and accounting in a variety of
industries including print media, hospitality and group insurance. Mrs. Warren's
responsibilities include handling internal accounting matters, overseeing our
SEC filings, interacting with our legal counsel and independent accountants, and
serving as our contact person for dealings involving the listing and sale of our
stock.
Javan Khazali
Mr. Khazali, 38, joined the Company in July of 2001 as Vice President of
Administration. With extensive experience in the services sector, Mr. Khazali is
responsible for the development and continuing management of our business and
training programs, including human resources. Prior to joining us, he held
various management positions including (i) Operation Manager for 10 high-end
chain restaurants in the U.S. and Canada, (ii) Director of Operations for nine
restaurants where he was responsible for supervision of 300 plus employees, and
(iii) most recently as Managing Partner of two local restaurants where he was
responsible for supervision of 45 employees. Mr. Khazali is an active
philanthropist, supporting local community initiatives including Family
Services, and Face the World Foundation, and resides in the Greater Vancouver
area.
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Compensation of Directors
Except as set forth herein, during the fiscal year ended December 31,
2000, members of the Company's Board received no compensation for serving as
Board members. On August 1, 2000, directors Carl Whitehead, Robert Sendoh and
Tom Johnston each received 75,000 restricted shares of our common stock in
consideration of their services as directors.
Committees and Meetings of the Board
The Company's Board of Directors has the authority to designate from among
its members an executive committee and one or more other committees. During the
fiscal year ended December 31, 2000 ("Fiscal 2000"), no such committees were in
existence. During Fiscal 2000, there were nine (9) meetings of the Board of
Directors. Each meeting was attended by all directors serving as such at the
time of the respective meetings. The Board of Directors also acted by unanimous
written consent on numerous other occasions.
EXECUTIVE OFFICERS AND DIRECTORS
The following table identifies the current executive officers, directors
and director nominees of the Company:
Name Age Capacities in Which Served
---- --- --------------------------
James T. Johnson 60 Chairman
Robert Sendoh 51 Director
Sandra Lynn Warren 35 President, Treasurer, Secretary, Chief
Financial Officer and Director
Javan Khazali 38 Vice President - Administration
None of the Company's executive officers is related to any other executive
officer or to any Director of the Company. Executive officers of the Company are
elected by the Board of Directors and serve until their successors are duly
elected and qualified.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid by the Company during each of the fiscal years ended December
31, 2000, December 31, 1999 and December 31, 1998, to all persons that served as
the Company's chief executive officer at any time
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during the fiscal year ended December 31, 2000. No executive officers received
compensation in excess of $100,000 during the fiscal year ended December 31,
2000.
Annual Compensation Long-Term Compensation
--------------------------------------------- -----------------------------------------------
Fiscal Year All
Name and Principal Ended Other Options/ Restricted LTIP Other
Position December 31 Salary Bonus Compensation SARs Stock Awards Payouts Compensation
-------- ----------- ------ ----- ------------ ---- ------------ ------- ------------
Robert Sendoh, Chief 2000 $44,115 0 0 0 75,000 (3) 0 0
Executive Officer, 1999 82,795 0 0 0 0 0 0
Chairman (1) 1998 0 0 0 0 0 0 0
Steven M. Berry, 2000 $5,207 0 0 0 0 0 0
Chief Executive 1999 120,000 0 0 0 600,000 (4) 0 0
Officer, President (2) 1998 0 0 0 0 0 0 0
(1) Mr. Sendoh served as our chief executive officer from January 17, 2000
through August 31, 2000.
(2) Mr. Berry served as our chief executive officer from January 4, 1999 until
January 17, 2000.
(3) Represents shares received for serving as a director during 2000.
(4) These shares are one of the subjects of a litigation between Mr. Berry and
us. See Certain Relationships and Related Transactions.
Stock Options
There were no grants of stock options to either of the named executive
officers in fiscal year 2000 or at any other time.
Employment Agreements
Mr. Berry has not been employed by the Company in any capacity since
January 17, 2000. Mr. Sendoh currently serves as one of our directors but is not
an employee of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the only class of stock entitled to vote at
the Meeting. Only stockholders of record as of the closing of business on
December 31, 2001 (the "Record Date") are entitled to receive notice of and to
vote at the 2001 Annual Meeting of Stockholders. As of the Record Date, there
were approximately 101 holders of record of the Company's Common Stock, and the
Company had outstanding 23,189,525 shares of its Common Stock. Each outstanding
share is entitled to one (1) vote at the Meeting. The following table sets forth
certain information, as of the Record Date, with respect to holdings of the
Company's Common Stock by (i) each person known by the Company to be the
beneficial owner of more than 5% of the total number of shares of Common Stock
outstanding as of such date, (ii) each of the Company's directors (which
includes all nominees), and executive officers, and (iii) all directors and
executive officers as a group. Except as otherwise indicated, the named
beneficial owner owns all shares indicated directly.
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Amount and Nature of Percentage
Name and Address of Beneficial Owner Beneficial Ownership of Class
------------------------------------ -------------------- --------
Robert Sendoh ................................ 355,000 1.53%
1281 West Georgia Street
Suite 900
Vancouver, BC V6E 3J7
James T. Johnston ............................ 206,000(1) .89%
1281 West Georgia Street
Suite 900
Vancouver, BC V6E 3J7
Sandra Lynn Warren ........................... 20,000 .08%
1281 West Georgia Street
Suite 900
Vancouver, BC V6E 3J7
Javan Khazali ................................ 41,000 .17%
1281 West Georgia Street
Suite 900
Vancouver, BC V6E 3J7
Kelly Shane Montalban ........................ 2,116,957(2) 9.13%
P.O. Box 700
Lions Bay, BC V0N 2E0
All executive officers and directors 622,000 2.68%
as a group (4 persons)......................
----------
(1) Includes 25,000 shares owned by Mr. Johnston's wife and an aggregate of
75,000 shares owned in trust for Mr. Johnston's three daughters.
(2) Includes 7,500 shares owned by Mr. Montalban's wife and 7,500 shares owned
in trust for Mr. Montalban's daughter.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who beneficially own more than
10% of our common stock, to file reports of beneficial ownership and changes in
beneficial ownership of our securities with the SEC on Forms 3 (Initial
Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial
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Ownership of Securities and 5 (Annual Statement of Beneficial Ownership of
Securities). Directors, executive officers and beneficial owners of more than
10% of our common stock are required by SEC regulations to furnish us with
copies of all Section 16(a) forms that they file. Except as otherwise set forth
herein, based solely on our review of the copies of such forms furnished to us,
or written representations that no reports were required, we believe that for
the period from January 1, 2000 through December 31, 2000, all directors,
executive officers and greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them. However, Robert Sendoh was
late in filing one Form 4; Robert Adams was late in filing one Form 3; Carl
Whitehead was late in filing one Form 4, James T. Johnston was late in filing
one Form 3 and one Form 4; Tami Allan was late in filing one Form 3; and Kelly
Shane Montalban was late in filing seven Forms 4. We do not believe that Blue
Heron Venture Fund Ltd, a 10% beneficial owner during Fiscal 2000, filed any
Forms 3 or Forms 4.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Andersen") were our independent certifying
accountants for the fiscal year ended December 31, 1999. On October 24, 2000 we
terminated that firm's appointment and subsequently engaged Hollander, Lumer &
Co., LLP ("HL") as our certifying accountants for the fiscal year ending
December 31, 2000. As the result of a March 28, 2001 merger, the accounting firm
of Good Swartz Brown & Berns LLP ("GSBB") succeeded to the business of HL. The
termination of Andersen and appointment of HL was approved by our board of
directors. Prior to their appointment, we did not consult with GSBB, with
respect to any accounting or other matters.
The report of Andersen on our financial statements for the fiscal year
ended December 31, 1999 contained no adverse opinion or disclaimer of opinion,
nor was it qualified or modified as to uncertainty, audit scope or accounting
principle except that the report was modified with respect to our ability to
continue as a going concern.
In connection with their audit for the fiscal year ended December 31, 1999
and during the subsequent interim period preceding their dismissal, there were
no disagreements between us and Andersen on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to their satisfaction, would have caused
Andersen to make reference to the subject matter of the disagreement in
connection with their report.
In connection with their audit for the fiscal year ended December 31, 1999
and during the subsequent interim period preceding their dismissal, Andersen did
not advise us that:
o internal controls necessary for us to develop reliable financial
statements did not exist;
o information had come to their attention that led them to no longer
be able to rely on our management's representations or made them
unwilling to be associated with the financial statements prepared by
our management;
7
o there was a need to expand significantly the scope of their audit,
or that information had come to their attention during such time
periods that if further investigated might: (i) materially impact
the fairness or reliability of either a previously issued audit
report or the underlying financial statement; or the financial
statements issued or to be issued covering the fiscal periods
subsequent to the date of the most recent financial statements
covered by an audit report, or (ii) cause it to be unwilling to rely
on our management's representations or be associated with our
financial statements;
o information had come to their attention that they had concluded
materially impacted the fairness or reliability of either (i) their
audit report or the underlying financial statements, or (ii) the
financial statements issued or to be issued covering the fiscal
periods subsequent to the date of the financial statements covered
by their audit report.
A representatives of GSBB is expected to be present at the annual meeting.
Audit Fees
The aggregate fees charged to us for professional services rendered for
the audit of our financial statements for the fiscal year ended December 31,
2000 and the review of our financial statements for the fiscal quarters ended
March 31, 2001, June 30, 2001 and September 30, 2001 were approximately
$150,000.
Financial Information System Design and Implementation Fees
No fees were charged to us by our principal accountant for financial
information system design and implementation with respect to the fiscal year
ended December 31, 2000.
All Other Fees
No fees were charged to us by our principal accountant with respect to the
fiscal year ended December 31, 2000 other than those disclosed herein under the
caption "Audit Fees."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the period February 9, 1999 through June 18, 2001, we obtained most
of our financing through Blue Heron Venture Fund Ltd., ("Blue Heron"). The loans
were made under agreements pursuant to which we could borrow up to $16,000,000
in unsecured loans from Blue Heron. Effective June 18, 2001 Blue Heron withdrew
this credit facility. All of the loans were evidenced by convertible demand
notes (the "Blue Heron Demand Notes") which bore interest at 8% per annum, were
payable on demand and were convertible into shares of our common stock at Blue
Heron's option. On June 18, 2001, all outstanding Blue Heron Demand Notes were
cancelled and subsequently replaced by notes that were issued to the
shareholders of Blue Heron and its fund manager. These notes were cancelled on
September 20, 2001, in connection with our settlement of
8
a lawsuit against a principal shareholder for violations of Section 16(b) of the
Securities Exchange Act of 1934, as amended, as more fully described below. On
August 16, 1999, $1,000,000 aggregate principal amount of Blue Heron Demand
Notes were converted into 1,500,000 shares of common stock, at a conversion
price of $0.67 per share. On November 24, 1999, an aggregate additional
principal amount of $3,000,000 of Blue Heron Demand Notes were converted into an
additional 3,000,000 shares of common stock, at conversion price of $1.00 per
share. During the fiscal year ended December 31, 2000, we borrowed an additional
$1,210,000 from Blue Heron, resulting in an aggregate outstanding principal
amount of the loans of $2,085,000 as at December 31, 2000. We did not borrow any
additional funds from Blue Heron subsequent to December 31, 2000.
During the fiscal year ended December 31, 2000, we borrowed an aggregate
of $125,000 from Pacific Gate Capital Corporation ("Pacific Gate"), a
corporation owned by Kelly Shane Montalban, a principal shareholder of ours.
$25,000 of this amount was outstanding on September 20, 2001, at which time,
pursuant to the settlement of a lawsuit by us against Mr. Montalban, the loan
was paid in full.
On March 31, 2000, we commenced suit in the Supreme Court of British
Columbia, Action #S001822, Vancouver Registry against Tia Berry (the "Tia
Action"), the wife of Steven Berry ("Berry"), our former president and chief
financial officer. In the Tia Action, we claim $42,516 (CDN) from Tia Berry on
account of monies paid to her by us which she was not entitled to receive. Tia
Berry has filed a Statement of Defense in the Tia Action in which she alleges
that the payments which she received from us were to reimburse her for business
expenses which she had charged to her credit cards on behalf of Berry. The Tia
Action has not yet been set for trial. On April 4, 2000, Berry Commenced an
action in the Supreme Court of the State of New York, County of New York (Index
No. 601448/2000), against us and Continental Stock Transfer & Trust Company
("Continental"), (the "New York Action"). In the New York Action, Berry claimed
damages for alleged conversion, fraud, breach of contract and breach of
fiduciary duty all arising from the alleged wrongful Stop Transfer Order which
the Company placed relating to 75,000 shares of the Company's common stock
registered in Berry's name and our cancellation of a further 600,000 shares (the
"Contingent Shares"). The complaint in the New York Action claims damages in
excess of $3,000,000 with the precise amount to be determined at trial. Berry
received the 600,000 Contingent Shares upon condition that he would remain in
our employ as chief executive officer for at least two years. Berry commenced
his employment with us on January 4, 1999, and resigned his employment with us
on January 17, 2000. Following Berry's resignation, we attempted to have a Stop
Transfer Order issued with respect to the 75,000 shares registered in Berry's
name and cancel the 600,000 Contingent Shares. The Stop Transfer Order was not
effective and Berry subsequently sold the 75,000 shares.
On May 19, 2000 CyPost and ePost Innovations, Inc., a subsidiary of ours
commenced suit in the Supreme Court of British Columbia, Action #S002798,
Vancouver Registry, against Berry and his wife, Tia Berry (the "BC Action"). In
the BC Action, we are seeking an order directing Berry to return the 600,000
Contingent Shares to us for cancellation for an order entitling us to cancel the
same on the basis that Berry did not fulfill the employment conditions which
were the condition precedent to his becoming the beneficial owner of the
Contingent Shares. In the BC Action, we are also claiming at least Cdn$800,000
from Berry on account of breach of fiduciary duty, negligence,
9
breach of statutory duties and breach of contract arising from Berry's failure
to properly carry out his employment responsibilities. In the BC Action, we are
also claiming Cdn$34,013 from Berry and Tia Berry on account of conspiracy to
defraud and injure us and ePost Innovations by causing certain personal expenses
to be paid by us rather than by Berry and Tia Berry personally. We are also
claiming punitive and exemplary damages from Berry and Tia Berry in the BC
Action.
On May 25, 2000, we moved in the New York Action for an order dismissing
the action against us for lack of jurisdiction, or in the alternative, on the
basis of forum non conveniens. On September 5, 2000, the court dismissed the New
York Action on forum non conveniens grounds, subject to our making certain
stipulations in the New York Action. Those stipulations have been made and the
appeal period in the New York Action has expired without Berry or any other
party appealing the September 5, 2000 order. The issues raised by Berry and us
in the New York Action will be litigated in the BC Action together with the
further issues raised by us in the BC Action. We feel that Berry's claims in the
New York Action were without merit and that we will be successful in obtaining
an order declaring that Berry's 600,000 Contingent Shares be cancelled and
further entitling us to substantial damages, although no assurance can be given
that this will be the case. We intend to vigorously purse our position in all
respects.
On December 21, 2000, Berry and Tia Berry commenced suit in the Supreme
Court of British Columbia, Action #S006790 Vancouver Registry, against us, ePost
Innovations, Kelly Shane Montalban, J. Thomas W. Johnston, Carl Whitehead and
Robert Sendoh (the "Berry Action"). Statements of Defense have been filed on
behalf of us and the other defendants. The Plaintiffs in the Berry Action allege
that the Tia Action, the BC Action, and the action by Kelly Shane Montalban
(Supreme Court of British Columbia, Action #S002147, Vancouver Registry),
against Berry for specific performance of an option agreement (the "Montalban
Action"), collectively, amount to an abuse of process, malicious prosecution,
unlawful interference with the Plaintiff's economic rights or were commenced
pursuant to a civil conspiracy to injure the Plaintiffs. In the Berry Action,
the Plaintiffs seek a declaration that Berry is entitled to the 600,000
Contingent Shares and claim unspecified damages which are estimated at
Cdn$2,000,000 based on the Statement of Claim. They also claim punitive or
aggravated damages and costs. We believe that the allegations in the Berry
Action are without merit. We intend to defend them vigorously.
It is expected that the Tia Action, the BC Action and the Berry Action
will be consolidated for the purposes of trial due to the fact that there are
numerous issues of fact and law which are common to all of these actions. We
believe that trial will likely take place in the fall of 2002. A loss by us of
the claim against us for monetary damages would have a material adverse effect
on our future results of operations, financial condition and liquidity; however,
we do not expect to lose this action and believe, additionally, that we will be
able to negotiate reasonable payment terms should we lose this suit.
On January 10, 2001, we issued an option to purchase 1,000,000 shares of
our common stock to Robert Adams, who, at such time, was serving as our
president and chief operating officer, secretary and treasurer. On that date, we
also issued an option to purchase 125,000 shares of our common stock to Tami
Allan, who, at such time, was serving as our vice president of North American
operations. The exercise price of each option was $.10 per share and vested over
time.
10
The options were issued pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
for transactions by an issuer not involving a public offering. Mr. Adams and Ms.
Allan are no longer employees of the Company. Their options have been terminated
for cause.
On June 15, 2001 we filed a Summons and Complaint against Kelly Shane
Montalban in the United States District Court for the Southern District of New
York (CyPost Corp. v. Kelly Shane Montalban, Civ. 5447). The Complaint alleged
that, between September 1999 and June 15, 2001 (the "Recovery Period"), Mr.
Montalban, and persons whose ownership of our common stock was attributable to
Mr. Montalban, made numerous purchases and sales of our common stock in
violation of the short swing profit recovery provisions of Section 16(b) of the
Securities Exchange Act of 1934, as amended. ("Section 16(b)"). Section 16(b)
imposes strict liability on corporate insiders, including principal stockholders
such as Mr. Montalban, for engaging in short swing trading activities (a sale
and purchase or purchase and sale occurring within any six (6) month period)
without regard to whether true profits were realized by the insider from such
trading activities. During the Recovery Period, Mr. Montalban made numerous
purchases and sales of our common stock in violation of Section 16(b). Although
we were not of the belief that Mr. Montalban made any of such purchases and
sales based on his possession of non-public information, we were nonetheless
required by the strict liability provisions of Section 16(b) to seek recovery
from Mr. Montalban. We ultimately determined that the amount of short swing
profits realized by Mr. Montalban and those persons whose purchases and sales
within the Recovery Period were attributable to Mr. Montalban was $2,498,449.46
(the "Recovery Amount"). Mr. Montalban cooperated fully with our investigation
and subsequently agreed to make payment in full on the Recovery Amount. Pursuant
thereto, on September 20, 2001 we entered into a Settlement Agreement with Mr.
Montalban pursuant to which he paid part of the Recovery Amount by delivery to
us for cancellation, on September 20, 2001, various promissory notes of ours on
which we owed an aggregate of $2,344,788.24 in principal and $44,450.27 in
interest or a total of $2,389,238.51. The notes delivered for cancellation
included a note which had been assigned to Mr. Montalban by the holder to
satisfy an obligation of the holder to Mr. Montalban, notes which had been
purchased by Mr. Montalban from various individuals known by Mr. Montalban, and
a note held by Pacific Gate Capital Corporation, a corporation owned by Mr.
Montalban. The balance of the Recovery Amount was paid by Mr. Montalban through
his issuance to us of a five (5) year, 5% promissory note, dated September 20,
2001, in the principal amount of $109,210.95. In consideration of Mr.
Montalban's execution of the Settlement Agreement and payment of the Recovery
Amount, on October 9, 2001 we voluntarily dismissed our action against Mr.
Montalban.
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY's
CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES
On November 23, 2001, the Board authorized an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock, par value $.001 per share ("Common Stock" ), from 30,000,000 to
200,000,000. The stockholders are being asked to
11
approve this proposed amendment. As of December 31, 2001,23,189,525 shares of
Common Stock were issued and outstanding.
Required Vote
The approval of the adoption of this amendment to the Company's
Certificate of Incorporation requires the affirmative vote of the holders of a
majority of the outstanding shares of the Company's Common Stock. Abstentions
and broker non-votes are not affirmative votes and therefore will have the same
effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION PROVIDED IN PROPOSAL NO. 2.
The Board believes that the proposed increase is desirable so that, as the
need may arise, the Company will have more flexibility to issue shares of Common
Stock without the expense and delay of a special stockholders= meeting in
connection with possible future stock dividends or stock splits, equity
financings, future opportunities for expanding the business through investments
or acquisitions, management incentive and employee benefit plans and for other
general corporate purposes.
Authorized but unissued shares of the Company's Common Stock may be issued
at such times, for such purposes and for such consideration as the Board of
Directors may determine to be appropriate without further authority from the
Company's stockholders, except as otherwise required by applicable law.
The increase in authorized Common Stock will not have any immediate effect
on the rights of existing stockholders. However, the Board will have the
authority to issue authorized Common Stock without requiring future stockholder
approval of such issuances, except as may be required by applicable law. To the
extent that additional authorized shares are issued in the future, they will
decrease the existing stockholders= percentage equity ownership and, depending
upon the price at which they are issued, could be dilutive to the existing
stockholders. The holders of Common Stock have no preemptive rights.
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could be issued
(within the limits imposed by applicable law) in one or more transactions which
would make a change in control of the Company more difficult, and therefore less
likely. Any such issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of outstanding shares of common
Stock, and such additional shares could be used to dilute the stock ownership or
voting rights of a person seeking to obtain control of the Company.
12
PROPOSAL NO. 3
AMENDMENT TO THE COMPANY's CERTIFICATE OF
INCORPORATION GRANTING BOARD OF DIRECTORS
RIGHT TO ADOPT SHAREHOLDER RIGHTS PLANS, RIGHTS
AGREEMENTS OR OTHER FORMS OF "POISON PILLS"
On November 29, 2001 the Board authorized an amendment to the Company's
Certificate of Incorporation to grant the Board the authority to adopt one or
more shareholder rights plans, rights agreements or other forms of "poison
pills" in the future without further shareholder approval. The Stockholders are
being asked to approve this proposed amendment. This Proposal 3 may have the
effect of discouraging or thwarting unwanted takeovers of the Company.
Required Vote
The approval of the adoption of this amendment to the Company's
Certificate of Incorporation requires the affirmative vote of the holders of a
majority of the outstanding shares of the Company's Common Stock. Abstentions
and broker non-votes are not affirmative votes and therefore will have the same
effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION PROVIDED IN PROPOSAL NO. 3.
The purpose of a shareholder rights plan or rights agreement commonly
referred to as a "poison pill" is to protect shareholders against certain
abusive takeover practices. It is intended to allow the Board adequate time and
flexibility to negotiate on behalf of the stockholders and enhance the Board's
ability to negotiate the highest possible bid from a potential acquiror, develop
alternatives which may better maximize stockholder values, preserve the long
term value of the Company for the stockholders, and ensure that all stockholders
are treated fairly and equally. A poison pill is not intended to prevent a
takeover on terms that are fair and equitable to all stockholders, nor is it
designed as a deterrent to a stockholder's initiation of a proxy contest.
Further, it does not change the fiduciary standards to be followed by the Board
in responding to a takeover bid.
The Board may, pursuant to the terms of a poison pill, redeem the poison
pill security to permit an acquisition that it determines, in the exercise of
its fiduciary duties, adequately reflects the value of the Company and to be in
the best interests of all stockholders. Moreover, numerous companies with
existing poison pill plans have received unsolicited offers and have redeemed
their rights after their directors were satisfied that the offer, as negotiated
by the target company's board of directors, adequately reflected the underlying
value of the company and was fair and equitable to all stockholders. Thus,
experience indicates that poison pill plans do not prevent companies from being
acquired at prices that are fair and adequate to stockholders. Opponents of such
rights plans or rights agreements argue that they injure shareholders by
reducing management accountability and adversely affecting shareholder value.
Such opponents contend that poison pills are adopted to entrench current
management in office.
13
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has, subject to stockholder
approval, retained Good Swartz Brown & Berns LLP as independent auditors of the
Company for the fiscal year ended December 31, 2001. The Board of Directors
expects that a representative of Good Swartz Brown & Berns LLP will be present
at the Annual Meeting, will be given an opportunity to make a statement at the
meeting if he desires to do so and will be available to respond to appropriate
questions.
Required Vote
The ratification of the selection of Good Swartz Brown & Berns LLP
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present or represented and entitled to vote at the Meeting.
Abstentions and broker non-votes will be counted as present for proposes of
determining whether a quorum is present. Broker non-votes will not be treated as
entitled to vote on this matter at the meeting. Abstentions are not affirmative
votes and therefore will have the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GOOD SWARTZ BROWN & BERNS LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001.
PROPOSAL NO. 5
AMENDMENT OF BY-LAWS
The Board of Directors has proposed that the Company's By-Laws be amended
to require the Board to consist of a minimum of three (3) persons and a maximum
of seven (7) persons. The By-Laws presently provide that the size of the Board
can be determined by a vote of a majority of the entire Board or by the
Shareholders of the Company. The existing provision makes no reference to a
minimum or maximum size for the board. The purpose of the amendment to the
Company's By-Laws is to ensure that the Board always consist of a number of
Directors that can direct the Company with maximum efficiency.
Required Vote
The approval of the adoption of the amendment to the Company's By-Laws
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present or represented and entitled to vote at the meeting.
Abstentions and broker non-votes will be counted as present for purposes of
determining whether a quorum is present. Broker non-votes will not be treated as
14
entitled to vote on this matter at the meeting. Abstentions are not affirmative
votes and therefore will have the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE
COMPANY's BY-LAWS AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL
NO. 5.
STOCKHOLDER PROPOSALS
Stockholders who wish to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 2002 Annual Meeting of
Stockholders must advise the Secretary of the Company of such proposals in
writing by March 15, 2002.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors, officers and other
employees of the Company who will not be specially compensated for these
services. The Company will also request that brokers, nominees, custodians and
other fiduciaries forward soliciting materials to the beneficial owners of
shares held of record by such brokers, nominees, custodians and other
fiduciaries.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.
CYPOST CORPORATION WILL FURNISH, WITHOUT CHARGE, THOSE PORTIONS OF ITS REPORT ON
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2000, AND REPORT ON FORM 10-QSB FOR
THE FISCAL QUARTER ENDED SEPTEMBER 30, 2001, NOT SUPPLIED HEREWITH, TO ANY
STOCKHOLDER OF RECORD ON DECEMBER 31, 2001 AND TO EACH BENEFICIAL STOCKHOLDER ON
THAT DATE UPON WRITTEN REQUEST MADE TO THE SECRETARY OF THE COMPANY BY SUCH
STOCKHOLDER. A REASONABLE FEE FOR PHOTOCOPYING CHARGES
15
WILL BE IMPOSED ON ANY MATERIALS SO REQUESTED. THESE MATERIALS ARE ALSO PUBLICLY
AVAILABLE FOR INSPECTION (AND DOWNLOAD) FROM THE OFFICIAL WEB SITE OF THE U.S.
SECURITIES AND EXCHANGE COMMISSION FOUND AT WWW.SEC.GOV. PARTIES INTERESTED IN
INSPECTING THESE MATERIALS SHOULD CLICK AND SEARCH IN THE "EDGAR" DATABASE UNDER
"CYPOST".
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE
IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
/s/ Sandra Lynn Warren
Sandra Lynn Warren
President, Secretary, Treasurer and Director
16
CY POST CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JANUARY 29, 2002
The undersigned hereby appoints Sandra Lynn Warren, with power of substitution,
as proxy to represent the undersigned at the Annual Meeting of stockholders of
CyPost Corporation to be held on the 29th day of January, 2002 at 2:00 p.m.,
local time at the offices of Kaplan Gottbetter & Levenson, LLP, 630 Third
Avenue, New York, New York 10017 and at any adjournments thereof, upon the
matters set forth below and described in the notice and proxy statement for said
meeting, copies of which have been received by the undersigned; and, in her
discretion, upon all other matters which may come before the meeting. Without
otherwise limiting the general authorization hereby given, said attorney is
instructed to vote, as follows, the number of shares the undersigned would be
entitled to vote if personally present, on the matters set forth below.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY WILL BE
VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR THE
THREE NOMINEES FOR ELECTION AS DIRECTORS, FOR THE RATIFICATION OF THE
APPOINTMENT OF GOOD SWARTZ BROWN & BERNS LLP, FOR THE PROPOSAL TO AMEND THE
COMPANY's CERTIFICATE OF INCORPORATION TO INCREASE THE COMPANY's AUTHORIZED
CAPITALIZATION; FOR THE PROPOSAL TO AMEND THE COMPANY's CERTIFICATE OF
INCORPORATION TO GRANT THE BOARD AUTHORITY TO ADOPT SHAREHOLDER RIGHTS PLANS,
RIGHTS AGREEMENTS OR OTHER FORMS OF POISON PILLS; AND FOR THE PROPOSAL TO AMEND
THE COMPANY's BY-LAWS.
(1) To elect three (3) Directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified. The three nominees are:
Sandra Lynn Warren James T. Johnston Javan Khazali
INSTRUCTIONB TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
(2) To approve a proposal to amend the Company's Certificate of Incorporation
to increase the number of authorized common shares from 30,000,000 to
200,000,000.
/ / FOR / / AGAINST / / ABSTAIN
(3) To approve a proposal to amend the Company's Certificate of Incorporation
to grant the board of directors authority to adopt shareholder rights
plans, rights agreements or other forms of poison pills.
/ / FOR / / AGAINST / / ABSTAIN
(4) To approve the engagement of the accounting firm of Good Swartz Brown &
Berns LLP, as independent public accountants of the Company for the fiscal
year ended December 31, 2001.
/ / FOR / / AGAINST / / ABSTAIN
(5) To approve a proposal to amend the Company's By-Laws.
/ / FOR / / AGAINST / / ABSTAIN
(6) In her discretion, upon such other matters as may properly come before the
meeting.
/ / AUTHORIZED / / NOT AUTHORIZED
The shares represented by this proxy will be voted in accordance with the
specifications made by the undersigned herein.
Please mark, sign, date and return this proxy in the enclosed envelope as soon
as possible, even though you plan to attend this meeting. To help our
preparations for the meeting, please check here if you plan to attend: |_|
Please sign exactly as your name or names appear on your CyPost Corporation
stock certificate. If the shares are issued in the names of two or more persons,
all such persons should sign the proxy. A proxy executed by a corporation should
be signed in its name by its authorized officers. Executors, administrators,
trustees, and partners should indicate their positions when signing.
__________________________ Date: __________, 2002
__________________________ Date: __________, 2002
__________________________ Date: __________, 2002
If your address has changed, please note new address below.
Address:
______________________________
______________________________
______________________________