PEN INTERCONNECT, INC.
2351 South 2300 West
Salt Lake City, Utah 84119
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Information Statement
This information statement is provided by the Board of Directors of Pen
Interconnect, Inc., a Utah corporation (the "Company"), in connection with
stockholder approval by written consent ratifying the actions of the Board of
Directors in issuing warrants to acquire 1,000,000 shares of Common Stock to
certain lenders.
The foregoing action has been effected by written consents (the
"Consents") executed by the holders of an aggregate of 51% of the Company's
outstanding Common Stock. In accordance with the regulations of the Securities
and Exchange Commission (the "Commission"), the Consents will be effective 20
days following the mailing of this information statement.
The warrants were issued from January through April 1997 to 15
individuals and entities (the "lenders") who loaned an aggregate of $1,000,000
to the Company. The warrants are exercisable at $2.00 per share and expire on
the tenth anniversary of their issuance. The loans are repayable after six
months. If a loan is not repaid when due, the number of shares issuable pursuant
to the lender's warrants doubles. If the loan is not repaid within 30 days of
maturity the exercise price for the warrants decreases to $1.00 per share. If a
loan becomes more than 60 days overdue the exercise price becomes equal to the
lesser of $1.00 per share and the greater of $.55 per share or 75% of the
average closing bid price of the Company's Common Stock during the 15 trading
days immediately preceding the date of exercise (the "Market Price"). If a loan
becomes more than 60 days overdue and the Company's stock is not listed on
Nasdaq, the exercise price becomes equal to the lesser of $1.00 per share and
75% of the Market Price. As of July 31, 1997, loans with a principal amount of
$775,000 remain outstanding. The Company has filed a registration statement to
register the sale of shares of Common Stock issuable on exercise of the
warrants.
Considerations
In general the Company's Certificate of Incorporation authorizes the
Board of Directors to create and issue securities convertible into Common Stock
without shareholder approval. However, the corporate governance rules which
apply to companies listed on the Nasdaq National Market System provide that a
company may not without shareholder approval in any transaction issue at less
than the greater of market value or book value a number of shares equal to more
than 20% of the number of shares of common stock then outstanding. Although the
matter is not free from doubt,
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the Company believes that it is the position of Nasdaq that the Company is
required to take into account all shares which are issuable on exercise of the
warrants even if it is improbable that the warrants will be exercised because
the exercise price of the warrants is greater than the recent market price of
the Common Stock. Although the exercise price of the warrants is greater than
the market price of the Common Stock, it is arguably less than the Company's per
share book value. Therefore the Company has obtained the Consents approving the
issuance of the warrants in order to satisfy the Nasdaq rules.
Vote Required
Under Utah law, the affirmative vote of a majority of the votes eligible to
be cast at a meeting of shareholders is required to approve the authorization of
the issuance of the warrants. The Consents satisfy this requirement.
Dated: Salt Lake City, Utah
September 29, 1997
By Order of the Board of Directors
/s/ Dennis C. Ellis
Dennis C. Ellis
Secretary
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