PRELIMINARY COPY
SAC TECHNOLOGIES, INC.
4444 WEST 76TH STREET
SUITE 600
EDINA, MINNESOTA 55435
April _, 1999
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
(the "Meeting") of SAC Technologies, Inc. (the "Company") which will be held at
the offices of the Company at 4620 South Valley View Boulevard, Suite A1, Las
Vegas, Nevada, 89103, on May 7, 1999, at 10:00 A.M. P.S.T. Your Board of
Directors and management look forward to personally greeting those stockholders
able to attend.
At the Meeting, stockholders will be asked to approve an amendment to
the Company's Amended and Restated Articles of Incorporation ("Articles of
Incorporation") authorizing 5,000,000 shares of preferred stock, par value $.01
per share, which may be issued by the Company in the future in series with such
rights, preferences and designations as determined by the Board of Directors
without further stockholder action. No other business will be considered at the
Meeting.
Your Board of Directors recommends a vote FOR the approval of the
amendment to the Company's Articles of Incorporation to authorize the Company to
issue 5,000,000 shares of preferred stock, par value $.01 per share.
Regardless of the number of shares you own or whether you plan to
attend, it is important that your shares be represented and voted at the
Meeting. You are requested to sign, date and mail the enclosed proxy promptly.
We wish to thank our stockholders for their participation and support.
Sincerely,
--------------------------------------------
Barry M. Wendt
Chairman of the Board
and Chief Executive Officer
<PAGE>
PRELIMINARY COPY
SAC TECHNOLOGIES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 1999
To the Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of SAC Technologies, Inc. (the "Company") will be held at the offices
of the Company at 4620 South Valley View Boulevard, Suite A1, Las Vegas, Nevada,
89103, on May 7, 1999, at 10:00 A.M. P.S.T. for the following purpose:
To authorize an amendment to the Company's Amended and Restated
Articles of Incorporation ("Articles of Incorporation") authorizing 5,000,000
shares of preferred stock, par value $.01 per share, which may be issued by the
Company in the future in series with such rights, preferences and designations
as determined by the Board of Directors without further stockholder action. No
other business will be considered at the Meeting.
Only stockholders of record as of the close of business on April 5,
1999 will be entitled to vote at the Meeting and any adjournment(s) or
postponement(s) thereof.
All stockholders are cordially invited to attend the Meeting. However,
to assure your representation at the Meeting, you are urged to complete, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose.
By Order of the Board of Directors,
----------------------------------------------
Barry M. Wendt
Chairman of the Board and
Chief Executive Officer
Edina, Minnesota
April __, 1999
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO SIGN, DATE AND PROMPTLY
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
PRELIMINARY COPY
SAC TECHNOLOGIES, INC.
4444 WEST 76TH STREET, SUITE 600
EDINA, MINNESOTA 55435
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
SAC Technologies, Inc. (the "Company") to be voted at a Special Meeting of
Stockholders (the "Meeting") of the Company to be held at the offices of the
Company at 4620 South Valley View Boulevard, Suite A1, Las Vegas, Nevada, 89103,
on May 7, 1999, at 10:00 A.M. P.S.T., and at any adjournment(s) or
postponement(s) thereof for the purposes set forth in the accompanying Notice of
Special Meeting of Stockholders. The proxy solicitation materials were mailed on
or about April __, 1999 to all stockholders entitled to vote at the Meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on April 5, 1999 (the
"Record Date") are entitled to notice of and to vote at the Meeting, and at any
adjournment(s) or postponement(s) thereof. At the Record Date, 7,536,867 shares
of common stock, $.01 par value per share, were issued and outstanding.
REVOCABILITY OF PROXIES
The execution of a proxy will not affect a stockholder's right to
attend the Meeting and vote in person. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before the vote
at the Meeting by filing with the Chief Financial Officer of the Company either
(i) a written notice of revocation; (ii) a proxy bearing a later date than the
most recently submitted proxy; or (iii) by attendance at the Meeting and voting
in person. Attendance at the Meeting will not, by itself, revoke a proxy.
The mailing address of the Company's executive office is 4444 West 76th
Street, Suite 600, Edina, Minnesota, 55435.
VOTING AND SOLICITATION
Each share of Common Stock is entitled to one vote. The affirmative
vote of a majority of the outstanding shares of Common Stock is required to
approve the amendment to the Company's Amended and Restated Articles of
Incorporation ("Articles of Incorporation") authorizing 5,000,000 shares of
preferred stock, par value $.01 per share ("Preferred Stock"), which may be
issued by the Company in the future in series with such rights, preferences and
designations as determined by the Board of Directors without further stockholder
action. No other business will be considered at the Meeting.
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Proxies which are validly executed by stockholders and which are
received by the Company no later than the business day preceding the Meeting
will be voted in accordance with the instructions contained thereon. If no
instructions are given, the proxy will be voted in accordance with the
recommendations of the Board of Directors. For the reasons set forth in more
detail in the Proxy Statement, the Board of Directors recommends a vote FOR the
approval of the amendment to the Company's Articles of Incorporation authorizing
5,000,000 shares of Preferred Stock.
The cost of this proxy solicitation will be borne by the Company. In
addition to the use of mail, proxies may be solicited in person or by telephone
by employees of the Company without additional compensation. The Company will
reimburse brokers and other persons holding stock in their names or in the names
of nominees for their expenses incurred in sending proxy material to principals
and obtaining their proxies.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company's bylaws (the "Bylaws") provide that the stockholders
holding a majority of the shares entitled to vote on the Record Date must be
present in person or represented by proxy at the Meeting in order to constitute
a quorum for the transaction of business. Abstentions and broker non-votes will
be counted for the purpose of determining a quorum but will not be counted in
the vote regarding the approval of the amendment to the Company's Articles of
Incorporation.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 5, 1999, information with
respect to the securities holdings of all persons which the Company, pursuant to
filings with the Securities and Exchange Commission, has reason to believe may
be deemed the beneficial owners of more than five percent (5%) of the Company's
outstanding Common Stock. Also set forth in the table is the beneficial
ownership of all shares of the Company's outstanding stock, as of such date, of
all officers and directors, individually and as a group.
COMMON STOCK
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<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(1)
- ------------------------------------ ----------------- -----------
<S> <C> <C>
Barry M. Wendt
4444 West 76th Street, Suite 600 1,237,800 16.4%
Edina, MN 55435
Richard T. Fiskum
4444 West 76th Street, Suite 600 1,237,500 16.4%
Edina, MN 55435
Gary E. Wendt
4620 S. Valley View Blvd., Suite A1 405,000 5.4%
Las Vegas, NV 89103
Benedict A. Wittig
4444 West 76th Street, Suite 600 1,237,500 16.4%
Edina, MN 55435
Ronald A. Burgmeier
4620 S. Valley View Blvd., Suite A1 10,000(2) *
Las Vegas, NV 89103
Lonnie L. Hammargren
4318 Ridgecrest Drive -- --
Las Vegas, NV 89121
Byron G. Ellingson
175 Seymour Avenue S.E. 56,000(3) *
Minneapolis, MN 55414
All officers and directors as a group
(7) persons 4,183,800 55.1%
</TABLE>
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* Less than 1%.
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(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and, accordingly, may include
securities owned by or for, among others, the spouse and/or minor
children of an individual and any other relative who has the same home
as such individual, as well as, other securities as to which the
individual has or shares voting or investment power or which each
person has the right to acquire within 60 days through the exercise of
options or otherwise. Based on 7,536,867 outstanding shares of Common
Stock on April 5, 1999.
(2) Consists of shares issuable upon exercise of options.
(3) Includes 50,000 shares issuable upon exercise of warrants.
MATERIAL ESCROW ARRANGEMENTS; LOCK-UP.
In connection with the Company's initial public offering, on February
7, 1997, Richard T. Fiskum entered into an escrow agreement with the
Commissioner of Securities of the State of Minnesota (the "Escrow Agreement")
pursuant to which Mr. Fiskum placed 618,750 (1,237,000 post-split) shares of
Common Stock into escrow (the "Escrow Shares"). The shares shall be held in
escrow for the lesser of (i) three (3) years from the date of the Escrow
Agreement; or (ii) until the Company demonstrates annual net earnings after
taxes and excluding extraordinary items for two (2) consecutive years after the
initial public offering, of at least five percent (5%) on an amount determined
by multiplying the total number of outstanding shares of the Company by the
average price per share paid by the public investors. The Commissioner has the
authority to terminate the escrow at an earlier date. As a condition to their
release from escrow, Mr. Fiskum must demonstrate that none of the Escrow Shares
have been sold or transferred. In the event of any transfer of the Escrow Shares
by Mr. Fiskum, the transferee must agree to place such shares into escrow
subject to the terms of the Escrow Agreement
Concurrent with the execution of the Escrow Agreement, Mr. Fiskum,
Barry M. Wendt, Gary E. Wendt and Benedict A. Wittig entered into an agreement
(the "Agreement") regarding all shares of Company Common Stock owned
beneficially by such stockholders. Until the termination of the Escrow
Agreement, the Agreement prohibits such stockholders from selling, pledging,
hypothecating or otherwise transferring any shares beneficially owned by such
person or granting, or agreeing to sell or grant, options, rights or warrants
with respect to such shares without the prior written consent of all of the
other parties to the Agreement.
PROPOSAL 1
The Company's Board of Directors has adopted and determined to submit
to the stockholders of the Company, a resolution to amend the Company's Articles
of Incorporation to authorize 5,000,000 shares of Preferred Stock, which may be
issued by the Company in the future in series with such rights, preferences and
designations as determined by the Board of Directors without further stockholder
action. A true and correct copy of the proposed amendment (the "Amendment") is
attached hereto as Exhibit "A." The statements made in this Proxy Statement
regarding the Amendment should be read in conjunction with and are qualified in
their entirety by reference to Exhibit "A." Upon filing of appropriate documents
to effect the authorization of the issuance of the Preferred Stock, including
the amendment to the Company's Articles of Incorporation, the Amendment will be
effective.
The Company is currently authorized to issue 20,000,000 shares of
Common Stock, $.01 par value per share, of which 7,472,367 were outstanding on
the Record Date. The Articles of Incorporation do not authorize the Company to
issue preferred stock. Your Board of Directors believes it is advisable and in
the best interest of the Company to authorize the issuance of Preferred Stock
for the principal reason of providing the Company with greater flexibility in
financing the continued operations of the Company.
Flexibility in Corporate Finance Issues. The Company is a development
stage company involved in developing biometric technology and applications. As
set forth in the Company's filings with the Securities and Exchange Commission
("SEC"), the Company is currently in need of substantial additional capital to
fund the continuing operation of its business in order to commercialize its
technology and products. Your Board of Directors believes that authorizing the
Company to issue Preferred Stock will provide the Company with a capital
structure better suited to meet the Company's short and long-term capital needs.
At this time, in order to raise capital, the Company must either issue
additional shares of common stock or debt instruments. Accordingly, any investor
seeking rights or preferences different than those of the Company's common stock
has no choice other than to purchase a debt instrument. During June of 1998, the
Company was forced to structure what could have been a convertible preferred
stock issuance into a convertible debenture. As a result, the Company incurred
approximately $2.5 million of additional indebtedness which has reduced the net
worth of the Company and substantially contributed to the Company no longer
satisfying the standards required to maintain its listing on the Nasdaq SmallCap
Market. If the Amendment is approved by the Company's stockholders, the Company
intends to negotiate with the holder of the convertible debenture regarding its
conversion into convertible preferred stock. As of the date hereof, the Company
has commenced initial discussions with the holder of the debenture regarding
such a conversion. Although there can be no assurance that the
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<PAGE>
Company will be successful in negotiating such a conversion on terms acceptable
to the Company, if at all, your Board of Directors believes that it is the best
interest of the Company to have the ability to effectuate such conversion. This
will not be possible unless the Amendment is approved.
In more recent months, the Company has been engaged in an effort to
raise capital principally from accredited and institutional investors. The
Company believes that the unavailability of preferred stock has had and will
continue to have a negative impact on the Company's capital raising efforts.
Although your Board of Directors believes that having the ability to offer
Preferred Stock as an alternative to a debt instrument or common stock will
greatly enhance the flexibility of the Company in its continued capital raising
efforts, there can be no assurance that the Company will be able to raise such
financing on terms acceptable to the Company, if at all.
The Amendment grants the Board of Directors the authority to issue
shares of Preferred Stock in any number of series or subseries with such rights
(including voting and dividends), preferences and designations as it deems
necessary or advisable without any action by the Company's stockholders. See
Exhibit A. This is commonly referred to as "blank check" preferred stock which
is available to and utilized by many public companies to satisfy their
continuing capital requirements. Having the authority to create an equity
instrument with any number of provisions provides for the greatest possible
flexibility in financing the future operations of the Company. For example,
blank check preferred stock permits the Company to negotiate the precise terms
of an equity investment by simply creating a new series of Preferred Stock
without incurring the cost and delay in obtaining stockholder approval. This
will not only provide the Company with the greatest flexibility in taking
advantage of market conditions, but also put the Company in a better position to
effectively negotiate with and satisfy the precise financial criteria of any
investor in a timely manner.
Important Additional Considerations. As described in more detail below,
the Amendment may have certain negative effects on the rights of the Company's
common stockholders.
Approval of the Amendment will empower the Company's Board of
Directors, without stockholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights which could adversely effect the
voting power or other rights of the holders of the Company's common stock.
Specifically, the Company will be in a position to issue securities which would
grant to the holders thereof preferences or priorities over the holders of the
Company's common stock with respect to, among other matters, liquidation or
dividends. This could result in holders of common stock receiving less in the
event of a liquidation, dissolution or other winding up of the Company and
reduce the amount of funds, if any, available for dividends on common stock.
In addition, Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. This could have the effect of discouraging bids for the
Company even if such bid represents a premium over the Company's then existing
trading price and thereby prevent stockholders from receiving the maximum value
for their shares. For example, preferred stock is typically utilized in rights
plans, commonly referred to as "poison pills," which have been utilized to
discourage delay or prevent a change in control transactions.
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<PAGE>
VOTE REQUIRED FOR APPROVAL
Under applicable Minnesota law and the Articles of Incorporation,
approval of the Amendment requires the affirmative vote of at least a majority
of the outstanding shares of Common Stock voting together as a single class. An
abstention or failure to vote on this proposal is not an affirmative vote and
will, therefore, have the same effect as a negative vote on this proposal at the
Meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION TO AUTHORIZE
5,000,000 SHARES OF PREFERRED STOCK.
6
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
The Company held its 1998 Annual Meeting of Stockholders on June 19,
1998 and mailed a proxy statement relating to such meeting on or about May 8,
1998. The Company intends to hold its 1999 Annual Meeting of Stockholders within
30 days of June 19, 1999. Accordingly, in order for proposals of stockholders to
be considered for inclusion in the proxy statement and form of proxy relating to
the Company's 1999 Annual Meeting of Stockholders, such proposals were required
to have been received by the Company no later than on or about January 8, 1999.
As of the date hereof, the Company has not received any such proposals.
By Order of the Board of Directors
------------------------------------
Barry M. Wendt
Chairman of the Board and
Chief Executive Officer
Dated: April __, 1999
7
<PAGE>
EXHIBIT "A"
FORM OF ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SAC TECHNOLOGIES, INC.
The undersigned, desiring to amend the Amended and Restated
Articles of Incorporation of SAC Technologies, Inc., a Minnesota corporation,
pursuant to Minnesota Statutes Chapter 302A, DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is SAC Technologies, Inc.
SECOND: The following amendment to the Amended and Restated
Articles of Incorporation of SAC Technologies, Inc.
was adopted:
"3.2 The Corporation is authorized to issue capital
stock to the extent of: five million (5,000,000)
shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock"). The board of directors of
the Corporation shall have the authority to issue
shares of Preferred Stock in series and to fix by
resolution the designations, powers, preferences,
rights and the qualifications, limitations, or
restrictions in respect of any such series or
subseries."
THIRD: That the aforesaid amendment has been approved in
accordance with the Minnesota Statutes Chapter 302A.
FOURTH: That this amendment shall become effective upon the
filing of these Articles of Amendment with the
Secretary of State of the State of Minnesota.
I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am subject
to the penalties of perjury as set forth in section 609.48 as if I had signed
this amendment under oath.
SAC TECHNOLOGIES, INC.
By:
----------------------------------
Barry M. Wendt
Chief Executive Officer
2
<PAGE>
PRELIMINARY COPY
SAC TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barry M. Wendt and Gary E. Wendt and
each of them proxies with power to appoint a substitute and hereby authorizes
either of them to represent and to vote all shares of Common Stock of SAC
Technologies, Inc. held of record by the undersigned on April 5, 1999 at the
Special Meeting of Stockholders of SAC Technologies, Inc. to be held on May 7,
1999 and at any adjournments or postponements thereof, and to vote as directed
on the reverse side of this form.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX (SEE
REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD
SEE REVERSE SIDE
<PAGE>
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<S> <C> <C> <C> <C>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE APPROVAL OF AN AMENDMENT TO SAC TECHNOLOGIES, INC.'S ARTICLES OF INCORPORATION AUTHORIZING 5,000,000 SHARES OF PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
1. Proposal 1
Approval of Amendment to SAC Technologies, Inc.'s Amended and FOR WITHHELD
Restated Articles of Incorporation Authorizing 5,000,000 Shares
of Preferred Stock, Par Value $.01 Per Share. [ ] [ ]
PLEASE SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE REQUIRED IF MAILED IN THE UNITED
STATES.
NOTE: Please sign name(s) exactly as printed
hereon.
Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
SIGNATURE(S)_________________________________________________
_______________________________________________________,1999
DATE
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