SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
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 (Amendment No. )
Filed
by
the Registrant [X]
Filed
by
a Party other than the Registrant [_]
Check
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appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the
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[X]
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Definitive
Proxy Statement
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Commission
Only (as permitted
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[_]
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Definitive
Additional Materials
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by
Rule 14a-6(e)(2))
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[_]
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Soliciting
Material Pursuant to
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Rule
14a-11(c) or Rule 14a-12
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TELKONET,
INC.
(Name
of
Registrant as Specified In Its Charter)
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of Filing Fee (Check the appropriate box):
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[X]
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fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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of each class of securities to which transaction
applies:
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Aggregate
number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed
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to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee
is
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and state how it was determined):
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Schedule or Registration Statement No.:
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Telkonet,
Inc.
20374
Seneca Meadows Parkway
Germantown,
Maryland 20876-7004
_________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
the
Stockholders:
The
2005
Annual Meeting of Stockholders of Telkonet, Inc. will be held
at
The
Hampton Inn Germantown, located at 20260 Goldenrod Lane,
Germantown,
Maryland
20876, on Friday, December 9, 2005, at 3:00 p.m., local time, for
the
following
purposes:
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1.
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To
elect seven (7) directors, each to serve until the next annual meeting
of
stockholders and until his successor has been elected and
qualified;
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2.
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To
ratify the appointment of independent accountants for 2005;
and
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3.
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To
transact such other business as may properly come before the meeting
or
any adjournment or postponement
thereof.
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Only
stockholders of record at the close of business on October 17, 2005, are
entitled to notice of, and to vote at, the meeting or any adjournment or
postponement thereof.
All
stockholders are cordially invited to attend the meeting in person. However,
to
assure your representation at the meeting, we urge you to complete, sign,
date
and return the enclosed proxy card in the enclosed envelope as promptly as
possible.
| By order of the Board of Directors, | ||
| /s/ Ronald W. Pickett | ||
| Ronald W. Pickett | ||
| Chief Executive Officer | ||
Dated:
November 7, 2005
YOUR
VOTE
IS IMPORTANT.
PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IMMEDIATELY,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
Telkonet,
Inc.
20374
Seneca Meadows Parkway
Germantown,
Maryland 20876-7004
PROXY
STATEMENT
This
proxy
statement is furnished in connection with the solicitation of proxies by
and on
behalf of the Board of Directors of Telkonet, Inc. for use at Telkonet's
2005
Annual Meeting of Stockholders, to be held at The Hampton Inn Germantown,
located at 20260 Goldenrod Lane, Germantown, Maryland 20876, on Friday, December
9, 2005, at 3:00 p.m., local time, and at any adjournment or postponement
of the
annual meeting. This proxy statement, the accompanying proxy card and Telkonet's
Annual Report to Stockholders for the fiscal year ended December 31, 2004
are
first being sent to stockholders on or about November 7, 2005.
The
solicitation of proxies is made by and on behalf of Telkonet's Board of
Directors. The cost of the solicitation of proxies will be borne by Telkonet.
In
addition to solicitation of proxies by mail, employees of Telkonet or its
affiliates may solicit proxies by telephone or facsimile.
The
Board of
Directors has fixed the close of business on October 17, 2005 as the record
date
for determining the holders of shares of common stock who are entitled to
notice
of, and to vote at, the annual meeting. At the close of business on October
17,
2005, Telkonet had outstanding 44,893,908 shares of common stock, par value
$0.001 per share. Each stockholder is entitled to one vote per share of
Telkonet's common stock registered in such stockholder's name on Telkonet's
books as of the close of business on October 17, 2005.
Shares
of
common stock represented by properly executed proxies received at or prior
to
the annual meeting that have not been revoked will be voted at the annual
meeting in accordance with the instructions indicated on the proxies.
Stockholders are requested to complete, sign, date and promptly return the
enclosed proxy card in the enclosed postage-prepaid envelope to ensure that
their shares are voted. If the enclosed proxy is signed and returned, the
shares
represented thereby will be voted in accordance with any specification made
therein by the stockholder. In the absence of any such specification, the
shares
will be voted to elect each of the director nominees set forth under "Election
of Directors" below and for the proposal set forth under "Ratification of
Appointment of Independent Public Accountants," and in the discretion of
management on any other matter which may properly come before the annual
meeting.
Any
proxy
given pursuant to this solicitation may be revoked by the person giving it
at
any time before it is voted. Attendance at the annual meeting will not, in
and
of itself, revoke a proxy. Proxies may be revoked by:
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·
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Filing
with the Secretary of Telkonet, at or before the taking of the
vote at the
annual meeting, a written notice of revocation dated later than
the
proxy;
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·
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Executing
a later dated proxy relating to the same shares of common stock
and
delivering it to the Secretary of Telkonet, including by facsimile,
before
the taking of the vote at the annual meeting;
or
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·
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Attending
the annual meeting and voting in
person.
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Any written revocation or subsequent proxy should be sent so as to be delivered to Telkonet, Inc., 20374 Seneca Meadows Parkway, Germantown, Maryland 20876, Attention: Corporate Secretary, or hand delivered to the Secretary of Telkonet or his representative at or before the taking of the vote at the annual meeting.
1
If
the annual
meeting is postponed or adjourned, proxies given pursuant to this solicitation
will be utilized at any subsequent reconvening of the annual meeting, except
for
any proxies that previously have been revoked or withdrawn effectively, and
notwithstanding that proxies may have been effectively voted on the same
or any
other matter previously.
Telkonet's
bylaws provide that the holders of a majority of the outstanding Telkonet
shares, present in person or by proxy, will constitute a quorum, and that
the
affirmative vote of a majority of the shares represented at the annual meeting
and constituting a quorum is required for approval of any proposal brought
before the annual meeting, unless a greater proportion or number of votes
is
required by law or by Telkonet's certificate of incorporation or bylaws.
The
election of directors will require the affirmative vote of a majority of
the
shares present at the annual meeting and constituting a quorum. Abstentions
and
broker non-votes will be deemed present for purposes of constituting a quorum
and will have the same legal effect as a vote "against" each nominee for
the
Board of Directors and all proposals presented at the annual meeting.
ITEM
1. ELECTION OF DIRECTORS
Telkonet's
bylaws establish the number of directors at not less than three members.
Pursuant to the bylaws, the Board of Directors may increase or decrease the
number of members of the Board of Directors. The Board of Directors has
established the number of directors at seven. Following the recent death
of one
of its directors, David Grimes, the Board of Directors appointed Seth Blumenfeld
to serve the remainder of Mr. Grimes' term and Mr. Blumenfeld is also a nominee
for director at the annual meeting. At the annual meeting, the shares
represented by properly executed proxies, unless otherwise specified, will
be
voted for the election of the seven nominees named herein, each to serve
until
the next annual meeting and until his successor is duly elected and qualified.
Proxies cannot be voted for more than seven nominees.
If
for any
reason any of the nominees is not a candidate when the election occurs (which
is
not expected), the Board of Directors expects that proxies will be voted
for the
election of a substitute nominee designated by the Board of Directors. The
following information is furnished concerning each nominee for election as
a
director.
The
affirmative vote of a majority of the shares of Telkonet's common stock
represented at the annual meeting, either in person or by proxy, is required
to
elect the following nominees as Telkonet directors.
THE
BOARD
OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS
VOTE FOR
THE
ELECTION OF EACH NOMINEE.
Nominees
For Election At The Annual Meeting
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Director
Name
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Age
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Position
With Telkonet
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Director
Since
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Warren
V. Musser
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78
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Chairman
of the Board
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2003
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Ronald
W. Pickett
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58
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President,
Chief Executive
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2003
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Officer
& Director
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Stephen
L. Sadle
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59
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Senior
Vice President & Director
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2000
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Thomas
C. Lynch
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63
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Director
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2003
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James
L. Peeler
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71
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Director
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2004
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Thomas
M. Hall
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53
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Director
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2004
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Seth
D. Blumenfeld
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63
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Director
|
2005
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2
WARREN
V.
MUSSER, Chairman of the Board of Directors, has taken over 50 companies public
during his distinguished and successful career as an entrepreneur, and Mr.
Musser is the founder and Chairman Emeritus of Safeguard Scientifics, Inc.
(a
high-tech venture capital company, formerly Safeguard Industries, Inc.).
Mr.
Musser is currently the Managing Director, The Musser Group (a business
consulting firm) and Founder & President, Musser and Company, Inc. (an
investment banking firm). In addition, Mr. Musser is a Director of Internet
Capital Group, Inc. (a business-to-business venture capital company), and
Mr.
Musser is a Director and Vice Chairman of Nutri/System, Inc. (a weight
management company) and Co-Chairman of Eastern Technology Council (a business
advisory firm). Mr. Musser serves on a variety of civic, educational and
charitable boards of directors, and serves as vice president of development,
Cradle of Liberty Council, Boy Scouts of America; vice chairman of The Eastern
Technology Council; and chairman of the Pennsylvania Partnership on Economic
Education.
RONALD
W.
PICKETT, Director and Chief Executive Officer, fostered the development of
Telkonet since 1999 and President since January of 2003, fostered the
development of Telkonet since 1999 as Telkonet's principal investor and
co-founder. He also was the founder, and for twenty years served as Chairman
of
the Board of Directors and President, of Medical Advisory Systems, Inc. (a
company providing international medical services and pharmaceutical
distribution) until its merger with Digital Angel Corporation (AMEX: "DOC")
in
March 2002. A graduate of Gordon College, Mr. Pickett has engaged in various
entrepreneurial activities for 35 years.
STEPHEN
L.
SADLE, Director and Senior Vice President, is a co-founder of Telkonet. From
1999 until he joined Telkonet in 2000, Mr. Sadle served as Senior Vice President
and General Sales Manager of Internos (a provider of web-based vertical extranet
applications). From 1986 until 1999, Mr. Sadle was Vice President of Business
Development and Sales for the Driggs Corporation, a major heavy and
infrastructure contracting firm interfacing with government and the private
sectors. From 1970 until 1986, Mr. Sadle was President of a successful
infrastructure construction and development company in the Washington, D.C.
metropolitan area.
THOMAS
C.
LYNCH, Director, is Senior Vice President and Director of The Staubach Company's
Federal Sector (a real estate management and advisory services firm) in the
Washington, D.C. area. Mr. Lynch joined The Staubach Company in November
2002
after six years as Senior Vice President at Safeguard Scientifics, Inc. (NYSE:
SFE) (a high-tech venture capital company). While at Safeguard, he served
nearly
two years as President and Chief Operating Officer at CompuCom Systems, a
Safeguard subsidiary. After a 31-year career of naval service, Mr. Lynch
retired
in the rank of Rear Admiral. Mr. Lynch's naval service included Chief, Navy
Legislative Affairs, command of the Eisenhower Battle Group during Operation
Desert Shield, Superintendent of the United States Naval Academy from 1991
to
1994 and Director of the Navy Staff in the Pentagon from 1994 to 1995. Mr.
Lynch
presently serves as a Director of Pennsylvania Eastern Technology Council,
Armed
Forces Benefit Association, Catholic Leadership Institute, National Center
for
the American Revolution at Valley Forge, and Mikros Systems.
3
JAMES
L.
PEELER, Director, was a founder and member of the board of Digital
Communications Corporation (DCC), which evolved into Hughes Network Systems
(HNS), a provider of global broadband, satellite, and wireless communications
products for home and business, such as DirecTV and DIRECWAY. Mr. Peeler
retired
as Executive Vice President of Operations in 1999 after 27 years of service
and
is presently a member of the Advisory Council to Hughes Network Systems.
Mr.
Peeler also served on the Board of Directors of Hughes Software Systems (HSS).
Prior to the founding of DCC, he was Vice President of Engineering for
Washington Technological Associates (WTA) (a satellite communications
development company), where he was instrumental in the development of rocket
and
satellite communications and instrumentation equipment. Mr. Peeler received
a
bachelor of science degree in electrical engineering from Auburn
University.
DR.
THOMAS M.
HALL, Director, is the Managing Member of Marrell Enterprises LLC (a company
that specializes in international business development). Dr. Hall serves
on the
board of directors of Coris International SA (a Paris-based insurance services
company with subsidiaries in 36 countries). For 12 years (until 2002), Dr.
Hall
was the Chief Executive Officer of Medical Advisory Systems, Inc. (a company
providing international medical services and pharmaceutical distribution).
Dr.
Hall holds a bachelor of science and a medical degree from the George Washington
University and a master of international management degree from the University
of Maryland.
SETH
BLUMENFELD, Director, served as President of International Services for MCI
International (a provider of telecommunication services) from 1998 until
his
retirement in January of 2005. Mr. Blumenfeld was President and Chief Operating
Officer of several of MCI's international subsidiaries from 1984 to 1998.
Blumenfeld earned his Doctorate Jurisprudence from Fordham University Law
School
in 1965. He practiced law on Wall Street prior to serving as infantry captain
for the U.S. Army in Vietnam. From 1976 through 1978, Blumenfeld lived in
Japan.
Blumenfeld's involvement on professional boards and community associations
have
included Executive Committee member of the United States Council for
International Business, Member of the Board of Directors of the United States
Telecommunications Training Institute, Member of the State Department Advisory
Council on International Communications and Information Policy, Member of
the
University of Colorado Institute for International Business Board of Advisors,
Member of the American Graduate School of International Management (Thunderbird)
Board of Advisors, Member of the Advisory Board of Visitors to Fordham
University School of Law, and honorary Chairman of the Connecticut Association
of Children with Learning Disabilities.
Meetings
Of The Board Of Directors
The
Board of
Directors held four meetings in 2004, which each member of the Board of
Directors attended, and each member of the Board of Directors attended at
least
75 percent of the meetings of the Board of Directors and the committees of
which
he was a member. Telkonet has not established a formal policy requiring director
attendance at all Board meetings, but the Company expects each director to
attend such meetings, absent unusual circumstances. Telkonet expects its
directors to attend the Annual Meeting of Stockholders (which is usually
held
the same day as a meeting of the Board of Directors), and all of the Telkonet's
directors attended the 2004 Annual Meeting of Stockholders.
Code
Of Ethics
The
Board has
approved, and Telkonet has adopted, a Code of Ethics that applies to all
directors, officers and employees of Telkonet. This Code of Ethics was included
as an Exhibit to Telkonet's Form 10-KSB filed with the Securities and Exchange
Commission on March 30, 2004.
4
Independent
Directors
The
Board has
determined that Dr. Hall and each of Messrs. Lynch, Musser and Peeler are
"independent directors" within the meaning of the American Stock Exchange
("AMEX") listing standards.
Committees
Of The Board Of Directors
The
Board has
an Audit Committee and a Compensation Committee, but the Board does not
presently have a Nominating Committee because the Board does not feel a
Nominating Committee is necessary due to the Board's nomination procedures
in
effect as described below.
Director
Nominations
Although
Telkonet does not maintain a standing Nominating Committee, nominees for
election as directors are considered and nominated by a majority of Telkonet's
independent directors in accordance with the AMEX listing standards.
"Independence" for these purposes is determined in accordance with Section
121(A) of the AMEX Rules and Rule 10A-3 under the Securities Exchange Act
of
1934. Since Telkonet does not maintain a standing Nominating Committee, it
has
not adopted a formal Nominating Committee charter.
When
considering potential candidates for election to Telkonet's Board of Directors,
the independent directors evaluate various criteria, including, but not limited
to, each candidate's business and professional skills, experience serving
as
management or on the board of directors of companies such as Telkonet, financial
literacy and personal integrity in judgment. Candidates for vacant board
seats
will be considered if they are able to read and understand fundamental financial
statements; have no identified conflicts of interest; have not been convicted
in
a criminal proceeding other than traffic violations during the five years
before
the date of selection; and are willing to comply with Telkonet's Code of
Ethics.
One or more directors must have requisite financial expertise to qualify
as an
"audit committee financial expert " as defined by Item 401 of Regulation
S-B
promulgated under the Securities Exchange Act of 1934. The independent directors
reserve the right to modify these minimum qualifications from time to time.
Exceptional candidates who do not meet all of these criteria may still be
considered.
The
independent directors review the qualifications and backgrounds of the
directors, as well as the overall composition of the Board from time to time.
In
the case of any candidate for a vacant Board seat, the independent directors
will consider whether such candidate meets the applicable independence standards
and the level of the candidate's financial expertise. Any new candidates
will be
interviewed by the independent directors, and the full Board will approve
the
final nominations. The Chairman of the Board, acting on behalf of the full
Board, will extend the formal invitation to become a nominee of the Board
of
Directors.
Stockholders
may nominate director candidates for consideration by the Board of Directors
by
writing to the Chairman and providing to the Chairman the candidate's name,
biographical data and qualifications, including five-year employment history
with employer names and a description of the employer's business; whether
such
individual can read and understand fundamental financial statements; other
board
memberships (if any); and such other information as is reasonably available
and
sufficient to enable the Board to evaluate the minimum qualifications described
above. The submission must be accompanied by the written consent of the
individual to stand for election if nominated by the Board of Directors and
to
serve if elected by the stockholders. If a stockholder nominee is eligible,
and
if the nomination is proper, the independent directors then will deliberate
and
make a decision as to whether the candidate will be submitted to Telkonet's
stockholders for a vote. The Board will not change the manner in which it
evaluates candidates, including the applicable minimum criteria set forth
above,
based on whether the candidate was recommended by a stockholder.
5
Stockholders
can communicate directly with the Board, with any Committee of the Board,
or
specified directors by writing to E. Barry Smith, Telkonet's Chief Financial
Officer, or by calling Mr. Smith at (240) 912-1800. All communications will
be
reviewed by management and then forwarded to the appropriate director,
directors, committee or to the full Board.
Audit
Committee
The
Audit
Committee is currently comprised of Messrs. Lynch and Peeler and Dr. Hall.
Telkonet's Board of Directors has determined that Dr. Hall and each of Messrs.
Lynch and Peeler is an "audit committee financial expert" as defined by Item
401
of Regulation S-B promulgated under the Securities Exchange Act of 1934.
The
Board of Directors also has determined that Dr. Hall and each of Messrs.
Lynch
and Peeler are "independent" as such term is defined in Section 121(A) of
the
AMEX Rules and Rule 10A-3 promulgated under the Securities Exchange Act of
1934.
The
Audit
Committee recommends annually to the Board of Directors the selection of
independent auditors for each fiscal year, confirms and assures their
independence and approves the fees and other compensation to be paid to the
auditors. The Audit Committee recommends to the Board the advisability of
having
the independent auditors make specified studies and reports as to auditing
matters, accounting procedures, tax or other matters. The Audit Committee
also
reviews, prior to its filing with the SEC, Telkonet's Form 10-KSB and annual
report to stockholders. The Audit Committee provides an open avenue of
communication among the independent auditors, management and the Board of
Directors and will review any significant disagreement among management and
the
independent auditors in connection with the preparation of any of Telkonet's
financial statements. The Audit Committee reviews, with Telkonet's legal
counsel, legal and regulatory matters that may have a significant impact
on
Telkonet's financial statements. The Audit Committee held three meetings
in 2004
and all members of the Audit Committee were in attendance at each
meeting.
The
Board of
Directors has adopted an Audit Committee Charter, which was ratified by the
stockholders at the 2004 Annual Meeting of Stockholders. A copy of the Audit
Committee charter was filed as Appendix A to Telkonet's proxy statement for
the
2004 Annual Meeting of Stockholders.
Directors'
Compensation
Telkonet
reimburses non-management directors for costs and expenses in connection
with
their attendance and participation at Board of Directors meetings and for
other
travel expenses incurred on Telkonet's behalf. Telkonet compensates each
non-management director (excluding Mr. Musser): $4,000 per month, 10,000
vested
stock options per quarter and $1,000 for each committee meeting of the Board
of
Directors such director attends, except that Mr. Musser, as Chairman of the
Board of Directors, is compensated $8,333 per month (consisting of monthly
payments in the amount of $4,000, which payments are consistent with the
monthly
payments made to the other non-management directors, and $4,333.33 per month,
which payments are in lieu of the 10,000 vested stock options per quarter
and
$1,000 for each committee meeting that the other non-management directors
receive). Payments to Mr. Musser for Board services are made to The Musser
Group
pursuant to a consulting agreement described below under the heading "Certain
Relationships and Related Transactions."
6
Executive
Officers
The
following table furnishes the information concerning Telkonet's executive
officers as of October 24, 2005.
|
Name
|
Age
|
Title
|
|
Ronald
W. Pickett
|
58
|
Chief
Executive Officer
|
|
E.
Barry Smith
|
55
|
Chief
Financial Officer
|
|
Stephen
L. Sadle
|
59
|
Senior
Vice President
|
|
James
Landry
|
50
|
Chief
Technology Officer
|
E.
BARRY
SMITH, Chief Financial Officer of Telkonet since February of 2003, is a CPA
and
senior financial executive with diversified experience in both public and
private companies. From September 1987 to February of 2003, Mr. Smith was
employed as a financial partner to, or retained as a consultant with, Safeguard
Scientifics or its subsidiary companies. Mr. Smith's background also includes
big-four public accounting experience with the accounting firm of Deloitte
&
Touche. Mr. Smith's experience also includes serving as Vice President of
Finance and Administration for US Golf Management (a public/private golf
course
and restaurant management company), Vice President of Finance for International
Communications Research (a market research & database services company) and
Treasurer for The Chilton Company (a publishing company).
JAMES
F.
LANDRY, Chief Technology Officer since May 2004, also served as Vice President
of Engineering from September 2001 until May 2004. Before joining Telkonet,
Mr.
Landry was a Senior Member of 3Com Technical Staff since 1994. Mr. Landry
has
over 20 years' experience in developing communications hardware for the
enterprise/carrier market with 3Com, U.S. Robotics, Penril Datacomm and Data
General. While at 3Com/US Robotics, he was responsible for the development
of
the entire xDSL product line as well as a number of modems and interface
cards.
At Penril, he served as the product development leader for the Series 1544
multiplexer/channel bank and at Data General he was technical leader of system
integration for ISDN, WAN. Mr. Landry brings a wealth of practical design
leadership and a solid history of delivering products to the marketplace.
Mr.
Landry holds four U.S. patents.
ITEM
2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT
PUBLIC ACCOUNTANTS
Russell,
Bedford, Stefanou and Mirchandani, LLP served as Telkonet's independent public
accountants in 2004 and is expected to be retained to do so in 2005. The
Board
of Directors has directed that management submit the selection of Russell,
Bedford, Stefanou and Mirchandani, LLP for ratification by the stockholders
at
the annual meeting. A representative of Russell, Bedford, Stefanou and
Mirchandani, LLP is expected to be present at the annual meeting and will
have
an opportunity to make a statement, should the representative desire to do
so,
and will be available to respond to appropriate questions.
Stockholder
ratification of the selection of Russell, Bedford, Stefanou and Mirchandani,
LLP
as Telkonet's independent public accountants is not required. However, the
Board
of Directors is submitting the selection of Russell, Bedford, Stefanou and
Mirchandani, LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders do not ratify the selection, the
Audit
Committee will reconsider whether to retain the firm. In such event, the
Audit
Committee may retain Russell, Bedford, Stefanou and Mirchandani, LLP,
notwithstanding the fact that the stockholders did not ratify the selection,
or
select another accounting firm without re-submitting the matter to the
stockholders. Even if the selection is ratified, the Audit Committee reserves
the right in its discretion to select a different accounting firm at any
time
during the year if it determines that such a change would be in the best
interests of Telkonet and its stockholders.
The
affirmative vote of a majority of the shares of Telkonet's common stock
represented at the annual meeting, either in person or by proxy, is required
to
ratify the appointment of Telkonet's independent public accountants.
THE
BOARD
OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE
FOR
THIS
PROPOSAL.
7
OTHER
MATTERS
The
Board
of Directors is not aware of any other matter that may be presented for action
at the annual meeting. If any other matter comes before the annual meeting,
the
persons named in the enclosed proxy will vote the proxy with respect thereto
in
accordance with their best judgment, pursuant to the discretionary authority
granted by the proxy.
SECURITY
OWNERSHIP OF MANAGEMENT
AND
CERTAIN BENEFICIAL OWNERS
The
following tables set forth, as of September 30, 2005, the number of shares
of
Telkonet's common stock beneficially owned by each director and by each
executive officer of Telkonet named in the Summary Compensation Table and
by all
directors and executive officers as a group. As of September 30, 2005, to
the
knowledge of Telkonet, no person other than Stephen L. Sadle, Telkonet's
Senior
Vice President, beneficially owned more than 5.0% of the outstanding shares
of
Telkonet common stock.
|
Beneficial
Owner (1)
|
Shares
Beneficially Owned
|
Percent
Of Class
|
|
Directors
& Executive Officers
|
||
|
Seth
D. Blumenfeld
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
20,000(2)
|
*
|
|
David
Grimes
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
1,650,405(3)
|
3.6%
|
|
Thomas
M. Hall
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
652,790(4)
|
1.5%
|
|
James
Landry
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
384,200(5)
|
9%
|
|
Thomas
C. Lynch
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
90,000(6)
|
*
|
|
Warren
V. Musser
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
2,235,027(7)
|
4.8%
|
|
James
L. Peeler
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
70,000(8)
|
*
|
|
Ronald
W. Pickett
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
2,136,205
|
4.8%
|
|
Stephen
L. Sadle
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
4,389,514(9)
|
9.6%
|
|
E.
Barry Smith
|
||
|
20374
Seneca Meadows Parkway
|
||
|
Germantown,
Maryland 20876
|
505,579(10)
|
1.1%
|
|
All
Directors and Executive Officers
|
||
|
as
a Group (10 persons)
|
12,133,720
|
24.4%
|
_____________
|
*
|
Less
than 1.0%
|
|
(1)
|
Unless
otherwise indicated, each person has sole voting power and sole
investment
power with respect to all common stock set forth opposite such
person's
name, subject to applicable community property and similar
laws.
|
|
(2)
|
Includes
stock issuable under Mr. Blumenfeld's consulting agreement, dated
July 1,
2005.
|
|
(3)
|
Includes
options exercisable within 60 days to purchase 900,000 shares of
Telkonet
common stock at $1.00 per share. The options were fully vested
upon Mr.
Grimes' death and are exercisable by his estate or beneficiaries
within 12
months from the date of his death.
|
|
(4)
|
Includes
options exercisable within 60 days to purchase 70,000 shares of
Telkonet
common stock at $3.45 per share.
|
|
(5)
|
Includes
options exercisable within 60 days to purchase 250,000 and 50,000
shares
of Telkonet common stock at $1.00 and $3.45 per share,
respectively.
|
|
(6)
|
Includes
options exercisable within 60 days to purchase 20,000 and 70,000
shares of
Telkonet common stock at $2.00 and $3.45 per share,
respectively.
|
|
(7)
|
Includes
options exercisable within 60 days to purchase 2,000,000 shares
of
Telkonet common stock at $1.00 per share.
|
|
(8)
|
Includes
options exercisable within 60 days to purchase 70,000 shares of
Telkonet
common stock at $3.45 per share.
|
|
(9)
|
Includes
options exercisable within 60 days to purchase 900,000 shares of
Telkonet
common stock at $1.00 per share.
|
|
(10)
|
Includes
options exercisable within 60 days to purchase 472,000 shares of
Telkonet
common stock at $1.00 per share.
|
8
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the annual and long-term
compensation for services in all capacities to Telkonet for the fiscal year
ended December 31, 2004 for Telkonet's Chief Executive Officer and each of
the
three most highly compensated executive officers other than the Chief Executive
Officer who were serving as executive officers as of the end of the last
completed fiscal year.
SUMMARY
COMPENSATION TABLE
|
|
|
Annual
Compensation
|
Long-Term
Compensation
|
|||||
|
|
|
|
|
|
Awards
|
Payouts
|
||
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Annual
|
Restricted
|
Securities
|
|
All
Other
|
|
|
|
|
|
Compen-
|
Stock
|
Underlying
|
LTIP
|
Compen-
|
|
Name
and
|
|
Salary
|
Bonus
|
sation
|
Award(s)
|
Options/SARs
|
Payouts
|
sation
|
|
Principal
Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
(#)
|
($)
|
($)
|
|
Ronald
W. Pickett,
|
2004
|
$100,089
|
$0
|
$0
|
107,779(l)
|
0
|
$0
|
$0
|
|
Chief
Executive
|
2003
|
$
91,538
|
$0
|
$0
|
64,469
|
0
|
$0
|
$0
|
|
Officer
|
2002
|
$0
|
$0
|
$0
|
0
|
0
|
$0
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
E.
Barry Smith,
|
2004
|
$171,983
|
$15,000
|
$0
|
0
|
0
|
$0
|
$0
|
|
Chief
Financial
|
2003
|
$115,539
|
$0
|
$0
|
0
|
500,000
|
$0
|
$0
|
|
Officer
|
2002
|
$0
|
$0
|
$0
|
0
|
0
|
$0
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
L. Sadle,
|
2004
|
$171,983
|
$6,538
|
$0
|
0
|
0
|
$0
|
$0
|
|
Senior
Vice
|
2003
|
$130,000
|
$0
|
$0
|
0
|
900,000
|
$0
|
$0
|
|
President
|
2002
|
$130,000
|
$0
|
$0
|
0
|
0
|
$0
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
James
Landry
|
2004
|
$172,514
|
$15,000
|
$0
|
0
|
250,000
|
$0
|
$0
|
|
Chief
Technology
|
2003
|
$160,000
|
$10,000
|
$0
|
0
|
100,000
|
$0
|
$0
|
|
Officer
|
2002
|
$116,000
|
$0
|
$0
|
0
|
225,000
|
$0
|
$0
|
(1)
Grants of 3,000 shares of the Company's common stock were awarded to Mr.
Pickett
each month during 2003 and 2004. Mr. Pickett has deferred the receipt of
his
2004 shares although the value of such shares is reflected in this table.
The
number of restricted shares held by Mr. Pickett at December 31, 2004, was
72,000, and the aggregate value of these restricted shares of common stock
as of
December 31, 2004, was $400,420. No dividends are payable on the shares of
common stock.
9
Option/SAR
Grants
The
following
table sets forth information concerning stock options granted in the fiscal
year
ended December 31, 2004, to the persons listed in the Summary Compensation
Table.
|
Number
of
|
Percent
of Total
|
||||
|
Securities
|
Options/SARs
|
Grant
Date
|
|||
|
Underlying
|
Granted
to
|
Exercise
or
|
Present
|
||
|
Options/SARs
|
Employees
in
|
Base
Price
|
Expiration
|
Value
|
|
|
Name
|
Granted
|
Fiscal
Year
|
($/SH)
|
Date
|
$
(1)
|
|
Ronald
W. Pickett
|
0
|
0
|
n/a
|
n/a
|
|
|
|
|
||||
|
E.
Barry Smith
|
0
|
0
|
n/a
|
n/a
|
|
|
|
|
|
|||
|
Stephen
L. Sadle
|
0
|
0
|
n/a
|
n/a
|
|
|
|
|
||||
|
James
Landry
|
250,000(2)
|
12.0%
|
$3.45
|
04/2014
|
550,000
|
_____________________
|
(1)
|
The
estimated value of options granted during the year ended December
31, 2004
was determined using the Black-Scholes option pricing model and
the
following assumptions: estimated life of five years, a risk-free
interest
rate of 3.50%, a dividend yield of 0% and volatility of
76%.
|
|
(2)
|
These
shares vest quarterly over five years beginning May 1,
2004.
|
Aggregated
Option/SAR Exercises
The
following table summarizes information relating to stock option exercises
during
the year ended December 31, 2004 by those persons listed in the Summary
Compensation Table.
Aggregate
Option Exercises in 2004 and
Option
Values as of December 31, 2004
|
|
|
|
Number
of Securities Underlying
Unexercised Options at December 31, 2004 (#) |
Value
of Unexercised
In-the-Money Options at December 31, 2004 ($)(1) |
||
|
Shares
|
||||||
|
Acquired
|
Value
|
|||||
|
On
|
Realized
|
|||||
|
Name
|
Exercise
(#)
|
($)
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|
Ronald
W. Pickett
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
||||||
|
E.
Barry Smith
|
28,000
|
89,350
|
305,333
|
166,667
|
$1,368,000
|
$747,000
|
|
|
||||||
|
Stephen
L. Sadle
|
0
|
0
|
600,000
|
300,000
|
$2,688,000
|
$1,344,000
|
|
|
||||||
|
James
Landry
|
100,000
|
350,000
|
208,333
|
291,667
|
$933,000
|
$694,000
|
_________________
|
(1)
|
Based
on a stock price of $5.48, which was the average of the high asked
and low
bid prices reported on December 31,
2004.
|
10
Compensation
Plans
Except
for
the Telkonet, Inc. Amended and Restated Stock Incentive Plan ("Stock Incentive
Plan"), Telkonet does not maintain or administer any compensation plans for
the
benefit of its officers, directors or employees. Telkonet maintains and
administers the Stock Incentive Plan to advance the interests of Telkonet
by
encouraging and enabling acquisition of a financial interest in Telkonet
by its
officers, directors, consultants and key personnel. The Stock Incentive Plan
is
intended to aid Telkonet in attracting and retaining key employees, to stimulate
the efforts of such personnel and to strengthen their desire to remain with
Telkonet. The Stock Incentive Plan was adopted by the Board of Directors
on
April 24, 2002 and approved by Telkonet's stockholders in July 2002 at the
annual meeting of stockholders. The Stock Incentive Plan was amended by the
Board of Directors on June 23, 2003 to increase the number of shares of Telkonet
common stock subject to the Stock Incentive Plan from 7,000,000 to 15,000,000
shares. The Stock Incentive Plan may be administered by the Board of Directors
or a committee designated by the Board of Directors which, if designated,
would
have full power and authority to determine when and to whom awards will be
granted and the type, amount, form of payment and other terms and conditions
of
each award, consistent with the provisions of the Stock Incentive
Plan.
Employment
Contracts And Termination Of Employment Arrangements
Stephen
L.
Sadle, Senior Vice President, is employed pursuant to an employment agreement
for a three-year term that commenced January 18, 2003 and provides for an
annual
salary of $130,000 and bonuses and benefits based upon Telkonet's internal
policies. Mr. Sadle's annual salary was increased to $171,872 in 2004 and
he
received a bonus of $6,538.
Ronald
W.
Pickett, President and Chief Executive Officer, is employed pursuant to an
employment agreement for an unspecified term that commenced January 30, 2003,
and provides for an annual salary $100,000, 3,000 shares of Telkonet's common
stock per month for each month of his employment, and bonuses and benefits
based
upon Telkonet's internal policies. Mr. Pickett's annual salary was increased
to
$102,340 in 2004.
E.
Barry
Smith, Chief Financial Officer, is employed pursuant to an employment agreement
for a one-year term, which is renewable annually, that commenced February
17,
2003 and provides for an annual salary of $130,000 and bonuses and benefits
based upon Telkonet's internal policies. Mr. Smith's annual salary was increased
to $171,872 in 2004 and he received a bonus of $15,000 in 2004.
In
addition,
under the Stock Incentive Plan, stock options are periodically granted to
employees at the discretion of the Board of Directors. Executives of Telkonet
are eligible to receive stock option grants based upon individual performance
and the performance of Telkonet as a whole.
Performance
Graph
Set
forth
below is a line graph comparing the cumulative total return on Telkonet's
Common
Stock against the cumulative total return of the Market Index for the American
Stock Exchange (U.S.) ("AMEX") and for a peer group "Communications Services,
NEC" for the period beginning August 15, 2002 and each fiscal year ending
December 31 thereafter through the fiscal year ended December 31, 2004. Because
Telkonet's common stock was not widely traded prior to August 15, 2002, the
graph does not show the total return on Telkonet's common stock prior to
August
15, 2002. The total returns assume $100 invested on August 15, 2002 with
reinvestment of dividends.
11
"Communications
Services, NEC" is a custom peer group selected by Telkonet from certain
companies, in the same Standard Industrial Classification Code category,
Communication Services, Not Otherwise Classified" as Telkonet. The companies
comprising this peer group are: ACT Teleconferencing, Inc., Advance Nanotech,
Inc., American Tower Corp, ARC Wireless Solutions, Asia Satellite Telecomm,
Brasil Telecom SA, Champion Cmmnctn Service, Crown Castle Intl. Corp, Datameg
Corp, Diagnostic Corp of America, Enclaves Group, Inc., Endavo Media &
Comm., Entertainment Is Us, Inc., Fullnet Communications, Genesys SA ADR,
Hungarian Tel & Cable CP, Impsat Fiber Networks IN, Incentra Solutions,
Inc., Inphonic Incorporated, Intac International Inc., Internal Hydro Internatl,
MDU Communications, Medialink Worldwide, Inc., Metro One Telecomm, Inc.,
Midland
International CP, Network Installation CP, Newport International, Nighthawk
Systems, NWH, Inc., PC-Tel Incorporated, Premiere Global Services, Raindance
Communications, Research In Motion Ltd., Reward Enterprises, Inc., Roaming
Messenger, Inc., Skyterra Communication, Technest Holdings, Inc., Telecom
Italia
SPA ADR, Telecom Italia SPA CL A, USIP.Com, Inc., Valcom, Inc., Vitalstream
Holdings, VSUS Technologies, Webex Communications, Wireless Facilities, Inc.,
Worldgate Communications, WPCS International Inc., and XFONE, Inc.
12
Compensation
Committee Interlocks and Insider Participation
During
the
fiscal year ended December 31, 2004, Telkonet did not have a Compensation
Committee. Messrs. Lynch, and Peeler and Dr. Hall, all of the independent
members of Telkonet's Board of Directors, fulfilled the functions of a
Compensation Committee. None of these individuals was, or has been, an officer
or employee of Telkonet or any of its subsidiaries, nor does any of these
individuals have a relationship that would constitute an interlocking
relationship with executive officers or directors of Telkonet or another
entity.
The Board of Directors nominated and approved a Compensation Committee which
consisted of Messrs. Musser and Lynch and Dr. Hall in September
2005.
Report
of the Compensation Committee
Notwithstanding
anything to the contrary set forth in any of Telkonet's previous filings
under
the Securities Act of 1933 or the Exchange Act that might incorporate future
filings or this proxy statement, the following report shall not be deemed
to be
incorporated by reference into any such filings. In addition, the following
report shall not be deemed to be "soliciting material" or "filed" with the
SEC.
The
base
salary, bonus, benefits and other compensation payable to Telkonet's executive
officers for the year ended December 31, 2004 were fixed under written
employment agreements (except for Mr. Landry, who does not have an employment
agreement) described above under the heading Employment Contracts and
Termination of Employment Arrangements.
Prior
to
establishing Mr. Pickett's compensation pursuant to his employment agreement
(as
well as the compensation of the other executive officers), the Board of
Directors reviewed compensation recommendations prepared by Telkonet's human
resources director, which recommendations provide information regarding
compensation at the tenth to fiftieth percentiles in peer companies. The
Board
of Directors believes that Mr. Pickett's executive compensation is commensurate
with his peers in comparable companies. In 2004, the Telkonet Board of Directors
determined to increase Mr. Pickett's compensation from approximately $92,000
to
$101,000 to give effect to a one-time adjustment for company-paid medical
benefits in accordance with Mr. Pickett's employment agreement. Thereafter,
all
employees, including Mr. Pickett, are required to pay 25% of their respective
medical premiums as part of a cost containment initiative.
Messrs.
Lynch
and Peeler and Dr. Hall have the power to administer the Amended and Restated
Stock Incentive Plan, which stock options may be granted to officers, directors,
employees, advisors and consultants who render services to Telkonet. For
the
fiscal year ended December 31, 2004, no awards were made to the executive
officers pursuant to the Amended and Restated Stock Incentive Plan, except
that
Mr. Pickett, pursuant to the terms of his employment agreement, was awarded
3,000 restricted shares of Telkonet's common stock per month which vest
immediately, and Mr. Landry received an stock option award to purchase 250,000
shares of Telkonet's common stock, based on his years of contribution to
the
development of Telkonet's technology and his promotion to the position of
Telkonet's Chief Technology Officer.
By,
Thomas
M.
Hall
Thomas
C.
Lynch
James
L.
Peeler
13
REPORT
OF
THE AUDIT COMMITTEE
Notwithstanding
anything to the contrary set forth in any of Telkonet's previous filings
under
the Securities Act of 1933 or the Securities Exchange Act of 1934 that might
incorporate future filings or this proxy statement, the following report
shall
not be deemed to be incorporated by reference into any such filings. In
addition, the following report shall not be deemed to be "soliciting material"
or "filed" with the SEC.
The
Audit
Committee for the year ended December 31, 2004, whose members are identified
below, has reviewed and discussed the audited financial statements as of
and for
the year ended December 31, 2004 with Telkonet's management and has discussed
the matters required to be discussed by SAS 61 with Telkonet's independent
auditors. The Audit Committee has also received the written disclosures and
the
letter from Telkonet's independent auditors required by Independent Standards
Board Standard No. 1 and has discussed with the independent auditors the
independent auditors' independence. Based upon its review of the foregoing
materials and its discussions with Telkonet's management and independent
auditors, the Audit Committee recommended to the Board of Directors that
the
audited financial statements be included in Telkonet's Annual Report on Form
10-KSB for the year ended December 31, 2004. The Audit Committee also considered
whether the provision of other non-audit services by the independent auditor
to
Telkonet is compatible with maintaining the independence of the independent
auditor and concluded that the independence of the independent auditor is
not
compromised by the provision of such services.
The
Audit
Committee has a written charter which was adopted by the Board of Directors
on
October 3, 2003, a copy of which was filed as Appendix A to Telkonet's proxy
statement for the 2004 Annual Meeting of Stockholders. The Audit Committee
has
established procedures for the receipt, retention and treatment of any
complaints received by Telkonet regarding accounting, internal accounting
controls or auditing matters and the confidential, anonymous submission by
Telkonet's employees of any concerns regarding questionable accounting or
auditing matters.
By
the
Audit Committee.
Thomas
M.
Hall
Thomas
C.
Lynch
James
L.
Peeler
Audit
Fees
The
aggregate
fees billed to Telkonet by its principal accountant for professional services
rendered for the audit of Telkonet's annual financial statements for the
fiscal
years ended December 31, 2004 and 2003, and the reviews of the financial
statements included in Telkonet's Forms 10-QSB for the periods ending March
31,
2004 and 2003, June 30, 2004 and 2003, and September 30, 2004 and 2003, were
$63,875 for 2004 and $53,925 for 2003.
Audit-Related
Fees
During
the
fiscal years ended December 31, 2004 and 2003, the aggregate fees billed
to
Telkonet by its principal accountant for assurance and related services that
were reasonably related to the performance of the audit or review of Telkonet's
financial statements and not reported under the caption "Audit Fees" were
$23,900 and $0, respectively. Audit-related fees consist of fees billed for
the
following: audit committee meetings, Sarbanes-Oxley review and general business
discussions.
14
Tax
Fees
During
the
fiscal years ended December 31, 2004 and 2003, the aggregate fees billed
to
Telkonet by its principal accountant for tax compliance, tax advice and tax
planning were $5,000 and $3,000, respectively. Fees paid were for the
preparation and filing of federal and state income tax returns.
All
Other Fees
During
the
fiscal years ended December 31, 2004 and 2003, no fees were billed to Telkonet
by its principal accountant for products and services provided by the principal
account and not reported under the captions "Audit Fees," "Audit-Related
Fees"
and "Tax Fees."
The
Audit
Committee Charter requires the Audit Committee to approve the fees and other
compensation to be paid to the independent accountant, and, in practice,
the
Audit Committee pre-approves, all audit and permissible non-audit services
provided by the independent accountants. These services may include audit
services, audit-related services, tax services and other services.
Section
16(a) Beneficial Ownership Reporting Compliance
Pursuant
to
Section 16(a) of the Exchange Act, Telkonet's directors, executive officers
and
any person holding ten percent or more of its common stock are required to
report their beneficial ownership and any changes therein to the United States
Securities and Exchange Commission and to furnish Telkonet with copies of
all
forms filed pursuant to Section 16(a). Specific due dates for these reports
have
been established and Telkonet is required to report herein any failure to
file
such reports by those due dates. To Telkonet's knowledge, based solely on
review
of the copies of such reports furnished to Telkonet, during the fiscal year
ended December 31, 2004, or with respect to such fiscal year, all Section
16(a)
filing requirements applicable to its executive officers, directors and ten
percent beneficial owners were met.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
In
September
2003, Telkonet entered into a consulting agreement (renewable annually) with
The
Musser Group to compensate Mr. Musser in the annual amount of $100,000 for
his
services to Telkonet as a director. Mr. Musser, Chairman of the Board of
Directors, is the sole principal of The Musser Group, which is currently
owned
by Mr. Musser's wife.
On
July 1,
2005, Mr. Blumenfeld was retained as an international consultant to Telkonet
pursuant to a Professional Services Agreement between Telkonet and Mr.
Blumenfeld. Pursuant to the terms of the agreement, Mr. Blumenfeld received
10,000 shares of Telkonet stock upon execution of the agreement, 10,000 shares
of Telkonet stock per quarter for the first year (for a total 50,000 shares
in
the first year) and 5,000 shares of Telkonet stock per quarter thereafter
plus a
five percent (5%) commission (payable in cash or Telkonet stock) on
international sales generated by him with gross margins of 50% or greater.
The
stock awarded to Mr. Blumenfeld pursuant to the agreement is restricted stock.
The agreement has a one year term, which is renewable annually upon both
parties' agreement.
15
Brokers
and
other persons holding Telkonet's common stock in their names, or in the names
of
a nominee, will be requested to forward this proxy statement and the
accompanying materials to the beneficial owners of the common stock and to
obtain proxies, and Telkonet will defray reasonable expenses incurred in
forwarding such material.
Telkonet's
Annual Report to Stockholders, including audited financial statements and
schedules, accompanies this proxy statement. Upon
the written request of a holder of shares as of the record date, Telkonet
will,
without charge, provide a copy of Telkonet's Form 10-KSB for the year ended
December 31, 2004. Such written requests shall be sent to 20374 Seneca Meadows
Parkway, Germantown, Maryland 20876-7004. Attn: Chief Financial
Officer.
STOCKHOLDER
PROPOSALS
Telkonet
intends to hold its 2006 Annual Meeting of Stockholders in June of 2006.
Stockholders may submit written proposals to be considered for stockholder
action at Telkonet's 2006 Annual Meeting of Stockholders. To be eligible
for
inclusion in Telkonet's Proxy Statement for the 2006 Annual Meeting, stockholder
proposals must be received by Telkonet by February 1, 2006 and must otherwise
comply with applicable Securities and Exchange Commission regulations and
Telkonet's Bylaws. Stockholder proposals should be addressed to Telkonet
at
20374 Seneca Meadows Parkway, Germantown, Maryland 20876-7004, Attention:
Corporate Secretary. In addition, if a stockholder intends to present a proposal
at Telkonet's 2006 Annual Meeting of Stockholders without the inclusion of
the
proposal in Telkonet's proxy materials and written notice of the proposal
is not
received by Telkonet on or before April 17, 2006, proxies solicited by the
Board
of Directors for the 2006 annual meeting will confer discretionary authority
to
vote on the proposal if presented at the meeting. Telkonet reserves the right
to
reject, rule out of order or take other appropriate action with respect to
any
proposal that does not comply with these and other applicable requirements.
|
By
order of the Board of Directors,
/s/ Ronald W. Pickett Ronald W. Pickett Chief Executive Officer |
||
16
TELKONET,
INC.
The
Annual Meeting of the Stockholders of Telkonet, Inc. will be held on
Friday,
December
9, 2005, at 3:00 p.m., local time, at The Hampton Inn Germantown, located
at
20260 Goldenrod Lane, Germantown, Maryland 20876.
|
1.
|
ELECTION
OF DIRECTORS - Nominees:
|
| 01-Seth Blumenfeld | 02-Thomas M. Hall | 03-Thomas C. Lynch |
| 04-Warren V. Musser | 05-James L. Peeler | 06-Ronald W. Pickett |
| 07-Stephen L. Sadle |
|
[ _]
FOR all nominees
[ _]
WITHHELD as to all nominees
[ _]
FOR all nominees
except
vote withheld from the following
nominee(s):_____________________________________
|
|
2.
|
RATIFICATION
OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS
|
| [ _] FOR | [ _] AGAINST | [ _] ABSTAIN |
|
3.
|
IN
THEIR DISCRETION, TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING
|
cut
here
| SEE REVERSE SIDE |
SEE
REVERSE
SIDE
|
(CONTINUED
AND TO BE SIGNED ON REVERSE
SIDE)
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TELKONET, INC.
FOR
USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
FRIDAY,
DECEMBER 9, 2005, AND ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
The
undersigned, being a stockholder of TELKONET, INC. (“TELKONET”), hereby
authorizes E. Barry Smith and Stephen L. Sadle , and each of them, with
the full
power of substitution, to represent the undersigned at the Annual Meeting
of
Stockholders of Telkonet to be held at The Hampton Inn Germantown, located
at
20260 Goldenrod Lane, Germantown, Maryland 20876, on Friday,
December
9, 2005 at 3:00 p.m., local time, and at any adjournment or postponement
thereof, with respect to all votes that the undersigned would be entitled
to
cast, if then personally present, as appears on the reverse side of this
proxy.
In
their
discretion, the proxies are authorized to vote with respect to matters
incident
to the conduct of the meeting and upon such other matters as may properly
come
before the meeting. This proxy may be revoked at any time before it is
exercised.
Shares
of
the Common Stock of Telkonet will be voted as specified. If
no specification is made, shares will be voted FOR the nominees for director
named on the reverse side, FOR ratification of the appointment of the
independent accountants and IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES
as
to any other matter which may properly come before the annual
meeting.
The
undersigned hereby acknowledges receipt of a Notice of Annual Meeting
of
Stockholders of Telkonet, Inc. called for Friday, December 9, 2005,
and a Proxy
Statement for the Meeting prior to the signing of this proxy.
____________________________________________
Dated: ______,
2005
____________________________________________
Dated: ______,
2005
Please
sign exactly as your name(s) appears(s) on this proxy. When signing
in a
representative capacity, please give title .
PLEASE
MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
cut
here
YOUR
VOTE IS IMPORTANT
VOTE
TODAY IN ONE OF TWO WAYS:
|
1.
|
VOTE
BY INTERNET:
|
|
Log-on
to www.votestock.com
|
|
|
Enter
your control number printed below
|
|
|
Vote
your proxy by checking the appropriate boxes
|
|
|
Click
on “Accept Vote”
|
|
OR
| 2. |
VOTE
BY MAIL: If
you do not wish to vote by Internet, please complete, sign,
date and
return the above proxy card in the pre-paid envelope provided.
|
YOUR
CONTROL NUMBER IS:
|
You
may vote by Internet 24 hours a day, 7 days a week.
Your
Internet vote authorizes the named proxies to vote in the
same manner as
if you
marked,
signed and returned your proxy
card.
|