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:
|X| Preliminary proxy statement |_| Confidential, for Use of the
|_| Definitive proxy statement Commission Only (as
|_| Definitive additional materials permitted by Rule 14a-6(e)(2))
|_| Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
ATLANTIC TECHNOLOGY VENTURES, INC.
(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)(4) 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:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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ATLANTIC TECHNOLOGY VENTURES, INC.
150 BROADWAY
SUITE 1009
NEW YORK, NEW YORK 10038
November __, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders
of Atlantic Technology Ventures, Inc. ("Atlantic") to be held at 10:00 a.m. New
York time on December 18, 2000, at the offices of Kramer Levin Naftalis &
Frankel LLP, at 919 Third Avenue, 40th Floor, New York, New York 10022, for vote
on the following proposals:
1. To ratify and approve the Series B preferred stock financing of up to
$3,000,000 with Excalibur Limited Partnership and BH Capital
Investments, L.P. and the potential issuance in connection therewith of
20% or more of our outstanding common stock or voting power before
issuance of the Series B preferred stock.
2. To approve the amendment of the certificate of designations,
preferences and rights of Series A convertible preferred stock to
subordinate the rights of the Series A preferred stock to the rights of
the Series B preferred stock with respect to dividend rights and rights
upon liquidation, winding up, or dissolution.
3. To transact such other business as may properly come before the special
meeting or any adjournments or postponements of the special meeting.
Only Atlantic's stockholders of record at the close of business on
October 27, 2000, are entitled to notice of, and entitled to vote at, the
special meeting and at any adjournments or postponements of the special meeting.
These proposals are described in the enclosed proxy statement.
Atlantic's board of directors has unanimously approved each of these proposals
and recommends that you vote in favor of each of them.
Whether or not you plan to attend, to assure that you are represented
at the special meeting, please read carefully the accompanying proxy statement,
which describes the matters to be voted upon, and complete, sign, date the
enclosed proxy card and return it in the reply envelope provided. If you receive
more than one proxy card because your shares are registered in different names
and addresses, please return each of them to ensure that all your shares are
voted. If you hold your shares of Atlantic in street name and decide to attend
the special meeting and vote your shares in person, please notify your broker to
obtain a ballot so that you may vote your shares. If you are a holder of record
of Atlantic shares and submit the enclosed proxy card and then vote by ballot,
your proxy vote will be revoked automatically and only your vote by ballot will
be counted. Your prompt return of your proxy card will assist us in preparing
for the special meeting.
We look forward to seeing you at the special meeting.
By Order of the Board of Directors,
Frederic P. Zotos, Esq.
President
New York, New York
November __, 2000
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ATLANTIC TECHNOLOGY VENTURES, INC.
150 Broadway
Suite 1009
New York, New York 10038
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 18, 2000
General Information for Stockholders
We are soliciting proxies on behalf of the board of directors of
Atlantic Technology Ventures, Inc., a Delaware corporation ("Atlantic"), for use
at the special meeting of stockholders to be held at 10:00 a.m. New York time on
Monday, December 18, 2000, at the offices of Kramer Levin Naftalis & Frankel
LLP, at 919 Third Avenue, 40th Floor, New York, New York 10022, and at any
adjournment.
This proxy statement and the enclosed proxy card were first mailed to
the stockholders entitled to vote at the special meeting on or about November
__, 2000.
Record Date and Voting
The specific proposals to be considered and acted upon at the special
meeting are described in detail in this proxy statement. Stockholders of record
at the close of business on October 27, 2000, are entitled to notice of, and to
vote at, the special meeting. As of the close of business on that date, there
were outstanding and entitled to vote 6,088,713 shares of Atlantic's common
stock, par value $0.001 per share (the "common stock"), and 362,728 shares of
Atlantic's Series A convertible preferred stock, par value $0.001 per share (the
"Series A preferred stock"). Each holder of common stock is entitled to one vote
for each share of common stock held by that stockholder on the record date. Each
holder of Series A preferred stock is entitled to one vote for each share of
common stock into which that holder's shares of Series A preferred stock were
convertible as of the record date. As of the record date, each share of Series A
preferred stock was convertible into 3.27 shares of common stock, and as a class
the Series A preferred stock is entitled to an aggregate of 1,186,120 votes.
At the special meeting, all holders of shares of common stock and
Series A preferred stock will be asked to vote on proposals 1, 2 and 3. In
addition, pursuant to the Delaware General Corporation Law, the holders of
shares of Series A preferred stock will also vote as a separate class with
respect to proposal 2. The affirmative vote of a majority of the shares of
Atlantic's common stock and Series A preferred stock, voting together, present
in person or represented by proxy and entitled to vote at the special meeting of
stockholders at which a quorum is present, is required in order to approve each
of proposals 1 and 2. In addition, the affirmative vote of a majority of the
shares of Series A Preferred Stock, voting separately as a class, present in
person or represented by proxy and entitled to vote at the special meeting of
stockholders at which a quorum is present, is required in order for proposal 2
to be adopted.
If a choice as to the matters coming before the special meeting has
been specified by a stockholder on a returned proxy card, the shares will be
voted accordingly. If no choice is specified, the shares will be voted in favor
of proposals 1 and 2 described in the notice of special meeting and in this
proxy statement.
Abstentions and broker non-votes (that is, a proxy card submitted by a
broker or nominee that specifically indicates the lack of discretionary
authority to vote on the proposals) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions
will have the same effect as negative votes, whereas broker non-votes will not
be counted for purposes of determining whether a proposal has been approved or
not.
To ensure that your shares are voted at the special meeting, please
complete, date, and sign the enclosed proxy card and return it in the
accompanying postage-prepaid, return envelope as soon as possible.
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Revocability of Proxies
Any stockholder giving a proxy pursuant to this solicitation may revoke
it at any time prior to its exercise. A stockholder of record may revoke that
proxy by filing with the Secretary of Atlantic at its principal executive
offices at 150 Broadway, Suite 1009, New York, New York 10038, a duly executed
proxy card bearing a later date or by attending the special meeting and voting
that stockholder's shares in person. Persons who hold Atlantic shares in street
name may revoke their proxy by contacting their broker to obtain a legal ballot
and filing that ballot bearing a later date with the Secretary of Atlantic at
its principal executive offices or by attending the special meeting and voting
that ballot in person.
Solicitation
We will pay the cost and expenses of soliciting proxies. In addition to
soliciting proxies by mail, some of our directors, officers, and regular
employees, without extra compensation, may solicit proxies personally or by
telephone or other electronic means. We have retained the services of Georgeson
Shareholder Communications, Inc., at a cost of $8,000 plus reasonable
out-of-pocket expenses, to help solicit proxies. We may also request brokerage
firms, nominees, custodian, or fiduciaries to forward soliciting material to
beneficial owners of shares held of record.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Background
On September 28, 2000, we entered into a convertible preferred stock
and warrants purchase agreement (the "Purchase Agreement") with Excalibur
Limited Partnership and BH Capital Investments, L.P. (together, the "Investors")
pursuant to which we agreed to sell, and the Investors agreed to purchase for
$3,000,000 shares of our Series B preferred stock and warrants exercisable for
201,000 shares of our common stock (those warrants, "Investor Warrants"). At the
first closing, which occurred on September 28, 2000, for a $2,000,000 purchase
price we issued to the Investors 689,656 shares of Series B preferred stock and
Investor Warrants to purchase 134,000 shares of common stock. Of these, half the
shares of Series B preferred stock and Investor Warrants exercisable for half
the shares of common stock are being held in escrow, pending approval by
Atlantic's stockholders of the proposals to be voted on at the special meeting.
At the second closing we will, for a $1,000,000 purchase price, issue to the
Investors further shares of Series B preferred stock (the number of shares being
a function of the market price) and Investor Warrants to purchase a further
67,000 shares of common stock. The Investors' obligation in connection with the
second closing are subject to certain conditions.
We needed to enter into this transaction to ensure that we met, as of
September 30, 2000, the "net tangible assets" requirement of the Marketplace
Rules of the Nasdaq SmallCap Market. Our failure to satisfy this requirement
would in all likelihood have resulted in Nasdaq commencing delisting proceedings
against us. We explored all alternative forms of financing and concluded that
this transaction was our best option. We were unable to seek Stockholder
approval prior to entering into this transaction, as the delay involved would
have resulted in our failing to meet the "net tangible assets" requirement as of
September 30, 2000.
As part of the Purchase Agreement we have agreed to obtain stockholder
approval of the two proposals described herein.
There follows a summary description of the material terms of the
Purchase Agreement, the certificate of designations, preferences and rights of
the Series B convertible preferred stock (the "Series B Certificate of
Designations"), and the other instruments and agreements executed in connection
with the transactions with the Investors. For complete details of the
transactions with the Investors, refer to the text of those instruments and
agreements, a copy of each of which is attached as an exhibit to our Quarterly
Report on Form 10-QSB for the period ended September 30, 2000, filed with the
Securities and Exchange Commission on November 14, 2000.
Purchase Agreement
Pursuant to the Purchase Agreement, we agreed to sell to the
Investors, and the Investors agreed to purchase, in the aggregate up to
$3,000,000 of Series B preferred stock of Atlantic and the Investor Warrants. On
September 28, 2000, the initial closing date, we sold to the Investors an
aggregate of $2,000,000 of Series B
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preferred stock and Investor Warrants to purchase 134,000 shares of common
stock, but $1,000,000 of the purchase price, together with half of the purchased
shares of Series B preferred stock and Investor Warrants to purchase 67,000
shares of common stock, are being held in escrow pursuant to the terms of an
escrow agreement between Atlantic and the Investors (the "Escrow Agreement"). On
the second closing date, if it occurs, we will sell to the Investors an
aggregate of $1,000,000 of Series B preferred stock of Atlantic and Investor
Warrants to purchase 67,000 shares of common stock. The purchase price with
respect to the issuance and sale of Series B preferred stock was on the first
closing date and will be on the second closing date, if any, the market price,
which is defined as the average closing bid price of the common stock on the
Nasdaq SmallCap Market during the five-trading-day period ending on the trading
day immediately prior to the closing date for which the market price is to be
determined, but the purchase price at the first closing was capped at $3.00 per
share.
Both Atlantic and the Investors satisfied prior to the initial closing
date, and must satisfy prior to the second closing date, several conditions
pursuant to the Purchase Agreement. The obligations of the Investors at the
second closing are subject to our satisfaction of several additional conditions,
at or before the second closing date. These conditions include, but are not
limited to, the filing and effectiveness of a registration statement pursuant to
the Registration Rights Agreement, described below, and our gaining stockholder
approval of the matters to be voted on at the special meeting.
Additionally, in certain circumstances the Investors may require that
we repurchase any of their shares of Series B preferred stock and shares of
common stock issued upon conversion of their shares of Series B preferred stock
or exercise of Investor Warrants. The Investors are entitled to exercise this
right upon occurrence of a Repurchase Event, as defined in the Purchase
Agreement. Repurchase Events include but are not limited to (1) our failure to
file a registration statement within 45 days after the closing to which it
relates; (2) our failure to obtain effectiveness with the SEC of a registration
statement within 120 days after the closing to which it relates; and (3) after
the effective date of the registration statement, the inability for 30 or more
days (whether or not consecutive) of any holder of the purchased securities to
sell those securities pursuant to the registration statement, but only if that
inability is attributable, directly or indirectly, to any action or omission on
our part. The repurchase right gives each Investor the right, at the Investor's
option, to require us to repurchase three days after the investor gives Atlantic
a repurchase notice all or any portion of that Investor's shares of Series B
preferred stock and shares of common stock issued upon conversion of its shares
of Series B preferred stock or exercise of its Investor Warrants for an
aggregate amount equal to the greater of (a) 125% of the aggregate purchase
price and exercise price, as the case may be, paid for the securities to be
repurchased and (b) the market price on the repurchase date of any shares of
common stock being repurchased.
Escrow Agreement
Pursuant to the Escrow Agreement, half of the shares of Series B
preferred stock and half of the Investor Warrants issued at the first closing
are being held in escrow, as is $1,000,000 of the $2,000,000 purchase price. The
escrow amount will be released to us upon stockholder approval by December 27,
2000, of the proposals to be voted on at the special meeting and written
confirmation that Atlantic has not received a delisting notice nor has there
occurred a trading suspension, except that with respect to $200,000 of the
escrow amount there is a further condition to release, namely that the market
price on the date of stockholder approval be $3.00 or more. If these conditions
are not met, the escrow amount will be returned to the Investors, with interest,
and the escrowed securities will be returned to us for cancellation. If they are
met, the escrow securities will be released to the Investors and the escrow
amount will be released to Atlantic.
Registration Rights Agreement
In connection with the Purchase Agreement, we agreed to file with the
SEC a separate registration statement on Form S-3 covering the resale of all of
the shares of common stock issued or issuable in connection with each closing.
Any such registration statement must register for resale at least that number of
shares of common stock equal to 200% of the number of shares of common stock
initially issuable upon conversion of the preferred stock. We are required to
use our best efforts to have each registration statement declared effective by
the SEC as soon as practicable, but in no event later than 90 days after the
applicable closing date.
In compliance with our obligation to prepare and file a registration
statement on Form S-3 after the first closing, on October 31, 2000, we filed a
registration statement on Form S-3 covering the resale of 200% of all of the
shares of common stock issued or issuable in connection with the first closing,
amounting to 1,647,312 shares in total.
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Investor Warrants
The exercise price of the Investor Warrants is equal to 110% of the
lower of (1) the market price on the issue date and (2) the market price 180
days after the applicable closing date. Each Investor Warrant may be exercised
any time during the five years from the date of granting. The Stock Purchase
Warrants provide that the Investor Warrants may not be exercised if doing so
would result in our issuing a number of shares of common stock in excess of the
limit imposed by the Nasdaq Marketplace Rules.
Series B Preferred Stock Certificate of Designation
Atlantic's certificate of incorporation grants the board of directors
discretion in creating and authorizing series of preferred stock and issuing
shares of those series. In accordance with this discretion, pursuant to the
Purchase Agreement, we created a new series of preferred stock designated as
Series B preferred stock, and filed the Series B Certificate of Designations. A
summary of the rights and privileges of the holders of Series B preferred stock
follows:
Voting Rights
Except as otherwise expressly provided in the Series B Certificate of
Designations, or as required by law, each holder of shares of Series B preferred
stock is entitled to the number of votes equal to the number of shares of common
stock into which those shares of Series B preferred stock could then be
converted, and has voting rights and powers equal to the voting rights and
powers of the common stock (voting together with the common stock, except as
otherwise expressly provided in the Series B Certificate of Designations or as
required by law), and is entitled to notice of any stockholders' meeting in
accordance with Atlantic's bylaws. Fractional votes will not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares of common stock into which shares of Series B
preferred stock held by each holder could be converted) will be reduced to the
nearest whole number. Holders of the Series B preferred stock also enjoy
additional protective provisions regarding voting rights, pursuant to Section
5(b) of the Series B Certificate of Designations.
Rank
Subject to approval of proposal 2 to amend the Series A Certificate of
Designations to subordinate the rights of the Series A preferred stock to the
rights of the Series B preferred stock as set forth in the Series B Certificate
of Designations, the Series B preferred stock will, with respect to dividend
rights and with respect to rights upon liquidation, winding up or dissolution,
rank senior and prior in right to the Series A preferred stock, the common
stock, and any other equity interests in Atlantic that by their terms rank
junior to the Series B preferred stock.
Dividends
The holders of the Series B preferred stock will be entitled to receive
cumulative annual dividends at an annual rate per share equal to 8% of the
original purchase price paid per share for the Series B preferred stock, which
amount will be subject to adjustment upon the occurrence of a stock split,
combination, reclassification or other similar event involving the Series B
Preferred Stock (that amount, the "Quarterly Dividend Amount"), payable on a
quarterly basis after the date on which such share of the Series B preferred
stock was issued, with the Quarterly Dividend Amount for the first quarter being
prorated. These accrued dividends are also payable upon any conversion or
redemption of the shares of Series B preferred stock. Atlantic, at its option,
must pay each dividend either in cash or in shares of Series B preferred stock
(with the shares of common stock issuable upon conversion thereof being
registered for resale under the Securities Act) valued at 85% of the two lowest
consecutive closing bid prices of the common stock during the 20 trading days
prior to the applicable dividend date. These dividends will be deemed to accrue
on the Series B preferred stock and be cumulative, whether or not earned or
declared and whether or not there are profits, surplus, or other funds of
Atlantic legally available for the payment of dividends.
With respect to the declaration of dividends, other than in shares of
Atlantic capital stock, the holders of Series B preferred stock will be entitled
to participate with the Series A preferred stock, common stock or other
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junior securities in any declaration, payment and setting apart of dividends,
other than in common stock, and receive, before any dividends will be declared
and paid upon or set aside for the Series A preferred stock, common stock, or
other junior securities, the same dividends or distributions, on an as-converted
basis, as are proposed to be distributed to the holders of the Series A
preferred stock, common stock or other junior securities, in addition to the
Series B dividends set forth above. Each share of Series B preferred stock will
be treated for purposes of this participation as being equal to the number of
shares of common stock (which may be a fraction) into which that share could
then be converted.
Conversion
The Series B preferred stock is convertible, at the holder's option,
into shares of common stock. The conversion rate for the Series B preferred
stock is equal to the price per share paid for the Series B preferred stock
divided by the conversion price in effect at the time of conversion. The
conversion price is the lower of (x) $3.00, (y) the market price, and (z) the
average of the two lowest closing bid prices on the principal market of the
common stock out of the 15 trading days immediately prior to conversion, which
will be adjusted proportionately for any reorganizations, reclassifications,
stock splits, stock dividends, reverse stock splits and similar events.
The conversion price will be reduced by an additional 5% if the common
stock is not listed on either the Nasdaq SmallCap Market or Nasdaq National
Market on that date, and in no event will the conversion price be lower than the
Floor Price, if any. The Floor Price means $1.50 for the conversion of a share
of Series B preferred stock effected during the 12 months following the
applicable issue date for that share, subject to adjustment as follows:
o If the conversion price is below the Floor Price for 30 calendar
days at any time after the issue date for that share, then the Floor
Price will thereafter equal $1.00 (but in no event for longer than
12 months following the applicable issue date).
o The conversion price will be reduced by 15% and will not be subject
to the Floor Price if any of the following events occurs:
(a) for any period of five consecutive trading days there is no
closing bid price of the common stock;
(b) the common stock ceases to be listed for trading on any of the
NYSE, the AMEX, the Nasdaq National Market or the Nasdaq
SmallCap Market; or
(c) A. Joseph Rudick resigns as Chief Executive Officer or
Frederic P. Zotos resigns as President of Atlantic (or the
employment of either of them terminates as a result of death
or disability).
o The conversion price will not be subject to the Floor Price and will
be as otherwise calculated pursuant to the Series B Certificate of
Designations if any of the following events occur:
(a) Bausch & Lomb Surgical ("B&L") fails to file before January
31, 2001, an application with the U.S. Food and Drug
Administration (the "FDA") seeking approval to market our
Catarex technology;
(b) the FDA does not grant final approval on or before June 1,
2001, to B&L to market the Catarex technology; or
(c) we fail to secure by December 27, 2000, the stockholder
approvals to be voted on at the special meeting.
The Series B preferred stock conversion rate from time to time in
effect will be subject to adjustment, as described in Section 7 of the Series B
Certificate of Designations.
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Additionally, the Series B Certificate of Designations provides that
the Investors may convert only those shares of Series B preferred stock that
would not result in our issuing a number of shares of common stock in excess of
the limit imposed by the Marketplace Rules.
Liquidation Rights
Subject to approval of proposal 2 at the special meeting, upon the
liquidation, dissolution, or winding up of Atlantic or sale, transfer, or other
disposition of all or substantially all of the assets of Atlantic, or a merger
or consolidation of Atlantic into an entity not controlled by the stockholders
of Atlantic, each holder of Series B preferred stock then outstanding must be
paid, out of the assets of Atlantic available for distribution to its
stockholders, before any payment may be made in respect of the Series A
preferred stock or common stock, an amount equal to the purchase price paid per
share of Series B preferred stock pursuant to the Purchase Agreement, plus all
accrued dividends that are then unpaid for each share of Series B preferred
stock then held by them, subject to appropriate adjustment in the event of any
stock dividend, stock split, combination, or other similar recapitalization
affecting such shares.
Redemption
So long as a registration statement covering the resale of the common
stock issued or issuable upon conversion of the Series B preferred stock is
effective (but only for so long as such registration statement is required to
remain effective), at any time after September 28, 2002, at the option of
Atlantic, and upon at least 30 days' written notice to the holders of Series B
preferred stock, Atlantic may redeem some or all of the outstanding shares of
Series B preferred stock, at a redemption price equal to the greater of (1) 125%
of the original price paid per share of Series B preferred stock, plus all
accrued but unpaid dividends thereon and (2) an amount equal to the product of
(a) the number of shares of common stock then issuable to the Investors upon
conversion of the Series B preferred stock being redeemed and (b) the market
price on the date of redemption. Holders of the Series B preferred stock will be
entitled to convert their shares of Series B preferred stock into common stock
during the 30-day notice period.
PROPOSAL 1
APPROVAL OF THE ISSUANCE OF COMMON STOCK (OR SECURITIES CONVERTIBLE INTO COMMON
STOCK) UPON CONVERSION OF SERIES B PREFERRED STOCK AND EXERCISE OF WARRANTS
At the special meeting, our stockholders will be asked to ratify and
approve the Series B preferred stock financing of up to $3,000,000 with
Excalibur Limited Partnership and BH Capital Investments, L.P. and the potential
issuance in connection therewith of 20% or more of our outstanding common stock
or voting power before issuance of the Series B preferred stock.
The Marketplace Rules of the Nasdaq SmallCap Market specify that
stockholder approval is required for any plan or arrangement to issue common
stock (or securities convertible into or exercisable for common stock) equal to
20% or more of the common stock, or 20% or more of the voting power, outstanding
before the issuance for less than the greater of book or market value of the
common stock. The number of shares of common stock that would be issued on
conversion of shares of Series B preferred stock or exercise of the Investor
Warrants is a function of the future market price of our common stock.
Consequently, conversion of shares of Series B preferred stock (those currently
outstanding and those that we have agreed to issue to the Investors, as well as
those issued to the Investors as payment-in-kind dividends) and exercise of
Investor Warrants could result in our issuing a number of shares equal to more
than 20% of the common stock outstanding before the issuance of the Series B
preferred stock (at either the first or second closing).
Given this possibility, we agreed in the Purchase Agreement that we
would seek stockholder approval of issuances of the Series B preferred stock and
the Investor Warrants to the extent those issuances could result in the issuance
of more than 20% of the common stock outstanding immediately prior to issuance
of the Series B preferred stock at the first or second closing.
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Possible Effects of the Transactions with the Investors
Dilution
Conversion of shares of Series B preferred stock will dilute your
ownership interest in Atlantic. If this proposal is approved and we issue
securities equal to 20% or more of our common stock, the dilution will be
significant. Furthermore, public resales of common stock following conversion of
the Series B preferred stock and exercise of the Investor Warrants likely would
depress the market price of the common stock. Even prior to the time of actual
conversions or exercises and public resales, the market "overhang" resulting
from the mere existence of Atlantic's obligation to honor conversions of the
Series B preferred stock and exercise of the Investor Warrants could depress the
market price of the common stock. Even if this proposal is not approved, and,
accordingly, we are not able to issue more than 19.99% of our common stock upon
conversion of the Series B preferred stock and exercise of the Investor
Warrants, common stockholders will experience dilution upon conversion of the
Series B preferred stock and exercise of the Investor Warrants up to that limit.
Increased Potential for Short Sales
Downward pressure on the market price of the common stock that likely
would result from sales of common stock issued on conversion of the Series B
preferred stock, the exercise of the Investor Warrants, and Atlantic's other
convertible securities could encourage short sales of common stock by the
holders of the Series B preferred stock or others. Material amounts of such
short selling could place further downward pressure on the market price of the
common stock.
Limited Effect of Restrictions on Conversions
Even though the holders of the Series B preferred stock are, pursuant
to the Series B Certificate of Designations, prohibited from converting their
preferred stock into more than 9.99% of the outstanding common stock following
such conversion, this restriction does not prevent them from either waiving that
limitation or converting and selling some of their Series B preferred stock
holding and thereafter converting the rest or another significant portion of
their holding. In this way, individual holders of Series B preferred stock could
sell more than 9.99% of the outstanding common stock in a relatively short time
while never holding more than 9.99% at any given time.
Effect of Failure to Obtain Stockholder Approval
If the stockholders fail to approve this proposal 1, the Investors
would be able to receive upon conversion of the Series B preferred stock and
exercise of the Investor Warrants no more than 19.99% of the common stock
outstanding as of the date of issuance of the Series B preferred stock and
Investor Warrants. As a result, we would have failed to fulfill a condition to
the second closing agreed upon in the Purchase Agreement, and therefore the
Investors would no longer be committed to invest at the second closing, subject
to further conditions, an additional $1,000,000. If the stockholders fail to
approve either this proposal 1 or proposal 2, the Investors will also be
entitled to have returned to them the $1,000,000 held in escrow from the initial
closing. We will need additional funds in order to meet the "net tangible
assets" requirement of $2,000,000 of the Marketplace Rules as of December 31,
2000 to avoid delisting, and it is likely that our only source of additional
funds would be the funds being held in escrow. Therefore, without stockholder
approval of either proposal 1 or proposal 2 it is likely that Atlantic's common
stock will be delisted from the Nasdaq SmallCap Market. Upon delisting,
Atlantic's common stock would experience a decline in share price and liquidity,
and the Investors could seek to have us repurchase their Atlantic shares.
Finally, as partial relief for breach of the Purchase Agreement (which remedy
would not be exclusive of any other remedies available at law or in equity), we
would be required to pay to each Investor per month pro rated for partial months
until stockholder approval is obtained an amount in cash per share equal to 2.5%
of the aggregate price paid for the Series B preferred stock and Investor
Warrants under the Purchase Agreement. If not timely made, these payments would
bear interest at the rate of 2.5% per month (pro rated for partial months) until
paid in full.
We believe that the failure to obtain stockholder approval for this
proposal will likely have a material adverse effect on Atlantic's financial
condition. We therefore believe that it is in the best interests of Atlantic and
its stockholders that you vote in favor of this proposal.
7
<PAGE>
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the shares of Atlantic's common
stock and Series A preferred stock, voting together as a class, present in
person or represented by proxy and entitled to vote at the special meeting of
stockholders at which a quorum is present, is required to approve this proposal.
Our board of directors recommends that Atlantic's shareholders vote
"for" ratification and approval of the preferred stock financing of up to
$3,000,000 with Excalibur Limited Partnership and BH Capital Investments, L.P.
and the potential issuance in connection therewith of 20% or more of our
outstanding common stock or voting power before issuance of the Series B
preferred stock.
PROPOSAL 2
AMENDMENT OF THE CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK
Purpose
One of the closing conditions of the Purchase Agreement is that we
amend the certificate of incorporation to amend terms of the Series A
Certificate of Designations to subordinate the rights of the Series A preferred
stock of Atlantic to the rights of the Series B preferred stock with respect to
dividend rights and rights upon liquidation, winding up, or dissolution. The
proposed certificate of amendment to the Series A Certificate of Designations is
attached as Annex A.
It is standard for the rights of a series of preferred stock to be
subordinated to the rights of subsequently issued series of preferred stock is
common. Additionally, we intend to retain any future earnings to finance the
growth and development of our business, and therefore do not expect to pay any
cash dividends in the foreseeable future.
Given our need for additional financing from the Investors to avoid
delisting from the Nasdaq SmallCap Market, we believed it was in the best
interests of Atlantic and its stockholders that we agree to propose to
stockholders these amendments of the Series A Certificate of Designations.
Any time prior to the filing of the certificate of amendment with the
Secretary of State of the State of Delaware we may without further action elect
not to do so.
Effect of Failure to Obtain Stockholder Approval
If the stockholders fail to approve either proposal 1 or this proposal
2, the Investors will be entitled to have returned to them the $1,000,000 held
in escrow from the first closing. To avoid delisting, we will need additional
funds in order to meet the requirement of the Marketplace Rules that we have
"net tangible assets" of $2,000,000 as of December 31, 2000, and it is likely
that our only source of additional funds would be the funds being held in
escrow. Therefore, without stockholder approval of either proposal 1 or proposal
2 it is likely that our common stock will be delisted from the Nasdaq SmallCap
Market. Upon delisting, Atlantic's common stock would experience a decline in
share price and liquidity, and the Investors could seek to have us repurchase
their Atlantic shares. Finally, as partial relief for breach of the Purchase
Agreement (which remedy would not be exclusive of any other remedies available
at law or in equity), we would be required to pay to each Investor per month
(pro rated for partial months) until stockholder approval is obtained an amount
in cash per share equal to 2.5% of the aggregate price paid by the Investors for
the Series B preferred stock and Investor Warrants under the Purchase Agreement.
If not timely made, these payments will bear interest at the rate of 2.5% per
month (pro rated for partial months) until paid in full.
We believe that the failure to obtain stockholder approval for this
proposal will likely have a material adverse effect on Atlantic's financial
condition. We therefore believe that it is in the best interests of Atlantic and
its stockholders that you vote in favor of this proposal.
8
<PAGE>
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the shares of our common stock
and Series A preferred stock, voting together as a class, present in person or
represented by proxy and entitled to vote at the special meeting of stockholders
at which a quorum is present is required to approve this proposal. In addition,
the affirmative vote of a majority of the shares of Series A preferred stock,
voting separately, present in person or represented by proxy and entitled to
vote at the special meeting of stockholders at which a quorum is present, is
required to approve this proposal.
Our board of directors recommends that the stockholders vote "FOR"
approval of the amendment of the certificate of incorporation to amend the terms
of the Series A Certificate of Designations.
OTHER BUSINESS
As of the date of this proxy statement, the only business that we
intend to present and know that others will present at the special meeting is
that described in this proxy statement. If any other matter is properly brought
before the special meeting or any adjournments thereof, it is the intention of
the persons named in the accompanying form of proxy to vote the proxy on those
matters in accordance with their judgment.
THE BOARD OF DIRECTORS
Dated: November __, 2000
9
<PAGE>
PROXY CARD
ATLANTIC TECHNOLOGY VENTURES, INC.
Special meeting of STOCKholders
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned stockholder of Atlantic Technology Ventures, Inc.
("Atlantic") hereby revokes all previous proxies, acknowledges receipt of the
notice of special meeting of stockholders to be held on December 18, 2000, and
the related proxy statement, and appoints Frederic A. Zotos and Nicholas J.
Rossettos, and each of them, as proxies of the undersigned, with full power of
substitution to vote all shares of Atlantic's common stock that the undersigned
is entitled to vote at a special meeting of stockholders to be held at Kramer
Levin Naftalis & Frankel LLP, at 919 Third Avenue, 40th Floor, New York, New
York 10022, on December 18, 2000, at 10:00 a.m., New York time, and at any
adjournments thereof. The shares represented by the proxy may only be voted in
the manner specified below.
1. To ratify and approve the Series B preferred stock financing of up to
$3,000,000 with Excalibur Limited Partnership and BH Capital
Investments, L.P. and the potential issuance in connection therewith of
20% or more of our outstanding common stock or voting power before
issuance of the Series B preferred stock.
FOR |_| AGAINST |_| ABSTAIN |_|
2. To approve the amendment of the certificate of designations,
preferences and rights of Series A convertible preferred stock to
subordinate the rights of the Series A preferred stock to the rights of
the Series B preferred stock with respect to dividend rights and rights
upon liquidation, winding up, or dissolution.
FOR |_| AGAINST |_| ABSTAIN |_|
3. To transact such other business as may properly come before the special
meeting and any adjournment or adjournments thereof.
FOR |_| AGAINST |_| ABSTAIN |_|
The board of directors recommends you vote "FOR" the above proposals.
This proxy when properly executed will be voted in the manner directed
above. In the absence of direction for any of the above proposals, this proxy
will be voted "FOR" those proposals.
(Continued on the other side.)
<PAGE>
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please print the shareholder name exactly as it appears on this proxy.
If the shares are registered in more than one name, the signature of each person
in whose name the shares are registered is required. A corporation should sign
in its full corporate name, with a duly authorized officer signing on behalf of
the corporation and stating his or her title. Trustees, guardians, executors,
and administrators should sign in their official capacity, giving their full
title as such. A partnership should sign in its partnership name, with an
authorized person signing on behalf of the partnership.
Dated: ____________, 2000
----------------------------------------
(Print Name)
----------------------------------------
(Authorized Signature)
I plan to attend the special meeting in person:
|_| Yes
|_| No
